Q2 2026 Enterprise Products Partners LP Earnings Call
Speaker #1: Patients. There will be a question-and-answer session. To ask a question during the session, you will need to press star, 11, on your telephone. To remove yourself from the queue, you may press star, 11, again.
Speaker #1: I would now like to hand the call over to Joe Theriac, VP of Finance and Investor Relations. Please go ahead.
Speaker #2: Thanks, Latif. Good morning, and welcome to the Enterprise Products Partners conference call to discuss Q2 2026 earnings. Our speakers today will be Co-Chief Executive Officers of Enterprise's general partner, Jim Teague, and Randy Fowler.
Speaker #1: Thank you for standing by, and PRODUCTS PARTNERS L.P.'s second quarter 2026 earnings conference call. Currently, all participants are in a listen-only mode. After the speakers' presentations, there will be a question-and-answer session.
Speaker #2: Other members of our senior management team are also in attendance for the call today. During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, based on the beliefs of the company as well as assumptions made by and information currently available to Enterprise's management team.
Speaker #1: To ask a question during the session, you will need to press *11 on your telephone. To remove yourself from the queue, you may press *11 again.
Speaker #2: Although management believes that the expectations reflected in such forward-looking statements are reasonable, they can give no assurance that such expectations will prove to be correct.
Speaker #1: I would now like to hand the call over to Joe Thiriac, VP of Finance and Investor Relations. Please go ahead.
Speaker #2: Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call.
Speaker #2: Thanks, Latif. Good morning, and welcome to the Enterprise Products Partners conference call to discuss second quarter 2026 earnings. Our speakers today will be Co-Chief Executive Officers of Enterprise's general partner, Jim Teague and Randy Fowler.
Speaker #2: And with that, I'll turn it over to Jim.
Speaker #3: Thank you, Joe, and good morning, everyone. Enterprise reported strong volumes, earnings, and cash flow for the Q2. These results were driven by strong global demand for U.S.
Speaker #2: Other members of our senior management team are also in attendance for the call today. During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, based on the beliefs of the company, as well as assumptions made by and information currently available to Enterprise's management team.
Speaker #3: energy, which was particularly strong during April and May. Our export facilities, pipelines, storage assets, and fractionation complexes worked together to provide our customers with reliable access to both domestic and international markets.
Speaker #2: Although management believes that the expectations reflected in such forward-looking statements are reasonable, they can give no assurance that such expectations will prove to be correct.
Speaker #2: Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call.
Speaker #3: Our teams responded exceptionally well to the elevated demand levels. In the Q2, we generated a record $2.8 billion of EBITDA, a 17% increase over the Q2 of last year, and that provided one-time coverage of our distributions.
Speaker #2: And with that, I'll turn it over to Jim.
Speaker #3: Thank you, Joe, and good morning, everyone. ENTERPRISE reported strong volumes, earnings, and cash flow for the second quarter. These results were driven by strong global demand for U.S.
Speaker #3: We handled record pipeline and marine terminal volumes during the Q2. Total pipeline volumes were up 8%, and our marine terminals were up an outstanding 33% compared to the Q2 of last year.
Speaker #3: energy, which was particularly strong during April and May. Our export facilities pipelines storage assets and fractionation complexes worked together to provide our customers with reliable access to both domestic and international markets.
Speaker #3: We moved 14.7 million barrels a day of oil equivalent. I remember being ecstatic when that was 10 million barrels a day. Now we're knocking on the door of 15.
Speaker #3: Our teams responded exceptionally well to the elevated demand levels. In the second quarter, we generated a record $2.8 billion of EBITDA, a 17% increase over the second quarter of last year, and that provided one-time coverage of our distributions.
Speaker #3: And we've moved 2.8 million barrels per day across our docks. Yeah, I think it's important that we recognize our engineering and operations teams for their outstanding execution during the Q2.
Speaker #3: We handled record pipeline and marine terminal volumes during the quarter. Total pipeline volumes were up 8%, and our marine terminals were up an outstanding 33% compared to the second quarter of last year.
Speaker #3: Their efforts enabled Enterprise to accelerate construction activities and begin commissioning the expansion of our Nature's River NGL Marine Terminal ahead of schedule. The team demonstrated exceptional responsiveness and operational excellence while meeting customer strong customer demand and maintaining the high standards of safety and reliability.
Speaker #3: We moved 14.7 million barrels a day of oil equivalent. I remember being ecstatic when that was 10 million barrels a day. Now we're knocking on the door of 15.
Speaker #3: And we moved 2.8 million barrels per day across our docks. Yeah, I think it's important that we recognize our engineering and operations teams for their outstanding execution during the quarter.
Speaker #3: That defines Enterprise. Natural gas processing, inlet volumes increased to 8.1 billion cubic feet a day. And the Permian we saw a 14% increase over the Q2 of last year, bringing our total inlet volume in the basin to 4.3 billion cubic feet a day, reflecting continued growth in producer activity across both basins.
Speaker #3: Their efforts enabled ENTERPRISE to accelerate construction activities and begin commissioning the expansion of our Nature's River NGL Marine Terminal ahead of schedule. The team demonstrated exceptional responsiveness and operational excellence while meeting customer strong customer demand and maintaining the high standards of safety and reliability that define ENTERPRISE.
Speaker #3: To support this growth, we recently approved the construction of Plant 11, a new 300 million a day natural gas processing plant in the basin, and Plant 13, a new 300 million a day plant in the Delaware.
Speaker #3: Natural gas processing inlet volumes increased to 8.1 billion cubic feet per day. In the Permian, we saw a 14% increase over the second quarter of last year, bringing our total inlet volume in the basin to 4.3 billion cubic feet per day, reflecting continued growth in producer activity across both basins.
Speaker #3: Beyond providing additional processing activity for our upstream customers, these plants will supply incremental Y-grade volumes into our basin, into our Bahia and Sheno pipeline systems.
Speaker #3: Those systems are currently operating at 86% of capacity. Those volumes would then move through our NGL value chain, supporting additional throughput across our fractionation storage and export assets.
Speaker #3: To support this growth, we recently approved the construction of Plant 11, a new 300 million a day natural gas processing plant in the basin and Plant 13, a new 300 million a day plant in the Delaware.
Speaker #3: We also approved the construction of Fact 15, a new 150,000 barrel per day facility, located in Mount Bellevue. We expect Delaware Plant 13 will be placed into service in the Q3 of 2028, Plant 11 in the Midland Basin, in the Q1 of 2029, and Fact 15 in the Q1 of 2028.
Speaker #3: Beyond providing additional processing activity for our upstream customers, these plants will supply incremental Y-grade volumes into our basin into our Bahia and Sheno pipeline systems.
Speaker #3: Those systems are currently operating at 86% of capacity. Those volumes would then move through our NGL value chain supporting additional throughput across our fractionation storage and export assets.
Speaker #3: These are exactly the type of projects that create value throughout our system and generate attractive long-term returns. One of the themes that continue to shape energy markets today is the growing importance of reliability and flexibility.
Speaker #3: We also approved the construction of Pack 15, a new 150,000 barrel per day facility, located in Mount Bellevue. We expect Delaware Plant 13 will be placed into service in the third quarter of 2028, Plant 11 in the Midland Basin in the first quarter of 2029, and Pack 15 in the first quarter of 2028.
Speaker #3: Global energy markets remain highly dynamic, and international demand patterns continue to be volatile. Rather than attempting to predict every market movement, we continue to focus on what we do best.
Speaker #3: Optimizing our assets around changing conditions: our network of assets provide connectivity to the world from the wellhead, to domestic and in-markets. They are a well-positioned to capture value across multiple points along our vast value chain.
Speaker #3: These are exactly the types of projects that create value throughout our system and generate attractive long-term returns. One of the themes that continues to shape energy markets today is the growing importance of reliability and flexibility.
Speaker #3: That flexibility continues to be one of Enterprise's greatest competitive advantages. Looking ahead, next major project schedule for completion: schedule for completion is our LPG export terminal expansion on the Houston Ship Channel.
Speaker #3: Global energy markets remain highly dynamic, and international demand patterns continue to be volatile. Rather than attempting to predict every market movement, we continue to focus on what we do best.
Speaker #3: That should be in service by the end of this year. We're excited about the opportunities this will create. As global demand for U.S. hydrocarbons continues to grow, our outlook remains very constructive.
Speaker #3: Optimizing our assets around changing conditions. Our network of assets provides connectivity to the world from the wellhead to domestic and in-markets. They are well positioned to capture value across multiple points along our vast value chain.
Speaker #3: Demand for U.S. energy natural gas liquids petrochemical feedstock export services continues to support utilization across our system. Combined with a strong balance sheet, substantial retained cash flow, and a disciplined capital program, we're well-positioned for growth.
Speaker #3: That flexibility continues to be one of ENTERPRISE's greatest competitive advantages. Looking ahead, next major project schedule for completion schedule for completion is our LPG export terminal expansion on the Houston Ship Channel.
Speaker #3: And finally, I think it's important to thank our employees for an outstanding quarter. Their commitment to safety, operational excellence, customer service, and execution continues to drive our success, and that is yours, Randy.
Speaker #3: That should be in service by the end of this year. We're excited about the opportunities this will create. As global demand for U.S. hydrocarbons continues to grow, our outlook remains very constructive.
Speaker #3: Demand for U.S. energy, natural gas liquids, and petrochemical feedstock export services continues to support utilization across our system. Combined with a strong balance sheet, substantial retained cash flow, and a disciplined capital program, we're well-positioned for growth.
Speaker #1: Okay. Thank you, Jim. Good morning, everyone. Starting with cash flow, the partnership's adjusted cash flow from operations—which is our cash flow from operating activities before changes in working capital—increased 19% to a record $2.5 billion.
Speaker #1: For the Q2 of 2026, compared to $2.1 billion for the same quarter last year. We increased our declared distribution to $56 per common unit for the Q2 of '26, which is a 2.8% increase over the distribution declared for the same quarter in 2025.
Speaker #3: And finally, I think it's important to thank our employees for an outstanding quarter. Their commitment to safety, operational excellence, customer service, and execution continues to drive our success, and that is yours, Randy.
Speaker #1: The distribution will be paid August 14 to common unit holders of record as of the close of business on July 31. The partnership repurchased 159 million dollars of its common units during the Q2 of '26 and 275 million for the first 6 months of the year.
Speaker #2: Okay. Thank you, Jim. Good morning, everyone. Starting with cash flow, the partnership's adjusted cash flow from operations, which is our cash flow from operating activities before changes in working capital, increased 19% to a record $2.5 billion for the second quarter of 2026, compared to $2.1 billion for the same quarter last year.
Speaker #1: Total repurchases for the last 12 months were 404 million, bringing the cumulative utilization of our $5 billion buyback program to 34%. In addition to buybacks, our distribution reinvestment plan and employee unit purchase plan purchased a combined $1 million common units on the open market for $40 million during the quarter.
Speaker #2: We increased our declared distribution to 56 cents per common unit for the second quarter of '26, which is a 2.8% increase over the distribution declared for the same quarter in 2025.
Speaker #2: This distribution will be paid August 14th to common unit holders of record as of the close of business on July 31st. The partnership repurchased $159 million of its common units during the second quarter of '26, and $275 million for the first six months of the year.
Speaker #1: For the 12-month ending June 30, 2026, Enterprise paid out approximately $4.8 billion in distributions to limited partners. Combined with the $404 million of buybacks over the same period, Enterprise's total return was 5.2 billion dollars resulting in a payout ratio of adjusted cash flow from operations of 56%.
Speaker #2: Total repurchases for the last 12 months were 404 million, bringing the cumulative utilization of our 5 billion dollar buyback program to 34%. In addition to buybacks, our distribution reinvestment plan and employee unit purchase plan purchased a combined 1 million common units on the open market for 40 million dollars during the quarter.
Speaker #1: Total capital investments were $1.2 billion in the Q2 of '26, which included $1 billion of growth capital projects and 140 million dollars of sustaining capital expenditures.
Speaker #1: We currently believe our expected range of growth capital expenditures for 2026 will net to $2.9 to $3.4 billion after applying approximately $600 million in proceeds from asset sales we already received.
Speaker #2: For the 12 months ending June, Enterprise paid out approximately $4.8 billion in distributions to limited partners. Combined with the $404 million of buybacks over the same period, Enterprise's total return was $5.2 billion, resulting in a payout ratio of adjusted cash flow from operations of 56%.
Speaker #1: The increase in 2026 capital investment since the beginning of the year primarily reflects the initial spending on long lead items for the 11th natural gas processing plant in the Midland Basin, the 13th natural gas processing plant in the Delaware Basin, as well as NGL Fact 15 in Mount Bellevue, and capital for natural gas gathering, compression, and power generation facilities to support our growth in the Permian Basin.
Speaker #2: Total capital investments were $1.2 billion in the second quarter of '26, which included $1 billion of growth capital projects and $140 million of sustaining capital expenditures.
Speaker #2: We currently believe our expected range of growth capital expenditures for 2026 will net to $2.9 to $3.4 billion, after applying approximately $600 million in proceeds from asset sales we already received.
Speaker #1: For 2027, we expect our growth capital expenditures to be in the $3 billion area. Sustaining capital expenditures for 2026 are expected to be approximately $600 million.
Speaker #2: The increase in 2026 capital investment since the beginning of the year primarily reflects the initial spending on long-lead items for the 11th natural gas processing plant in the Midland Basin, the 13th natural gas processing plant in the Delaware Basin, as well as NGL Pack 15 in Mount Bellevue, and capital for natural gas gathering, compression, and power generation facilities to support our growth in the Permian Basin.
Speaker #1: On both the Q4 2025 and Q1 2026 earnings calls, we stated that discretionary cash flow for '26 had the potential to be in the $1 billion area.
Speaker #1: Even though our estimate for growth capital expenditures for '26 has increased by over $700 million, as a result of investments sanctioned since the beginning of the year we still believe discretionary free cash flow for '26 has the potential to approach the $1 billion area.
Speaker #2: For 2027, we expect our growth capital expenditures to be in the 3 billion dollar area. Sustaining capital expenditures for 2026 are are expected to be approximately 600 million.
Speaker #1: Our total debt principal outstanding was approximately $33.5 billion at the end of the quarter, assuming the final maturity date for our hybrids, the weighted average life of our debt portfolio, is approximately 17 years.
Speaker #2: On both the fourth quarter 2025 and first quarter 2026 earnings calls, we stated that discretionary cash flow for '26 had the potential to be in the 1 billion dollar area.
Speaker #1: Our weighted average cost of debt was $4.7% and approximately $97% of our debt was fixed rate. At the end of the quarter, our consolidated liquidity was approximately $4 billion, including availability under our credit facilities and unrestricted cash on hand.
Speaker #2: Even though our estimate for growth capital expenditures for '26 has increased by over 700 million dollars as a result of investments sanctioned since the beginning of the year we still flow for '26 has the potential to approach the 1 billion dollar area.
Speaker #1: Recently, we closed on an incremental $1 billion short-term credit facility, which brings total liquidity to approximately $5 billion. We elected to add this incremental $1 billion of credit capacity due to the ongoing volatility in commodity prices and the impacts higher commodity prices may have on our need for working capital.
Speaker #2: Our total debt principal outstanding was approximately 33.5 billion at the end of the quarter, assuming the final maturity date for our hybrids the weighted average life of our debt portfolio is approximately 17 years.
Speaker #2: Our weighted average cost of debt was 4.7% and approximately 97% of our debt was fixed rate. At the end of the quarter, our consolidated liquidity was approximately 4 billion dollars including availability under our credit facilities and unrestricted cash on hand.
Speaker #1: At the end of the quarter, our consolidated leverage ratio decreased to our 3.0 target on a net basis after adjusting debt for the partial equity treatment of the hybrid debt.
Speaker #1: And also reduced by our partnership's unrestricted cash on hand. Our leverage target remains at 3 times plus or minus 0.25. Joe, before we turn it over to you, Jim, I guess we need to address the elephant in the room.
Speaker #2: Recently, we closed on an incremental 1 billion dollar short-term credit facility which brings total liquidity to approximately 5 billion dollars. We elected to add this incremental 1 billion dollars of credit capacity due to the ongoing volatility in commodity prices and the impacts higher commodity prices may have on our need for working capital.
Speaker #2: You're talking about my retirement?
Speaker #1: Yes, sir.
Speaker #2: Yeah, you know, I've always said at Enterprise retirement is 100 or death, whichever comes first. Well, I'm not 100, and I'm not dead. But at 81, 50 years in this business, 22 at Dow, 28 at Enterprise, it comes a time when you have to turn it over to the next generation.
Speaker #2: At the end of the quarter, our consolidated leverage ratio decreased to our 3.0 target on a net basis after adjusting debt for the partial equity treatment of the hybrid hybrid debt.
Speaker #2: And also reduced by our partnership's unrestricted cash on hand. Our leverage target remains at 3.0 times, plus or minus 0.25. Joe, before we turn it over to you, Jim, I guess we need to address the elephant in the room.
Speaker #2: And we've got some unbelievable talent in this company. What I think I'm going to miss most is the interaction with the people, even with Tug.
Speaker #3: You're talking about my retirement?
Speaker #2: And we just have some special people here. I've known Randy for 20 we worked with him for 28 years. The last 5 is co-CEOs.
Speaker #2: Yes, sir.
Speaker #3: Yeah. You know, I've always said at ENTERPRISE, retirement is 100 or death, whichever comes first. Well, I'm not 100 and I'm not dead. But at 81, 50 years in this business—22 at Dow, 28 at ENTERPRISE—it comes a time when you have to turn it over to the next generation.
Speaker #2: I think we've been a hell of a team. And I'll miss working with him. But it's been unbelievably rewarding to be with a company that, when Randy and I were first here at an Enterprise value of $1.8 billion, and now is over $120 billion, it's been a hell of a ride.
Speaker #3: And we've got some unbelievable talent in this company. What I think I'm going to miss most is the interaction with the people, even with Tug.
Speaker #2: And the last thing I'll miss is all the poking Rhonda does at me. Throughout the day. And hopefully, Randy picks that mantle up too.
Speaker #3: And we just have some special people here. I've known Randy for 20 we worked with him for 28 years. The last five is co-CEOs.
Speaker #2: Back to you, Joe.
Speaker #1: All right. Thank you, Jim. And Latif, with that, we're ready to open up the call for questions.
Speaker #3: I think we’ve been a hell of a team, and I’ll miss working with him. But it’s been unbelievably rewarding to be with a company that, when Randy and I were first here, had an enterprise value of $1.8 billion, and now is over $120 billion. It’s been a hell of a ride.
Speaker #3: Thank you. As a reminder to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again.
Speaker #3: Please limit yourself to one question and one follow-up or two questions to allow everyone the opportunity to participate. Please stand by while we compile the Q&A roster.
Speaker #3: And the last thing I'll miss is all the poking Randy does at me. Throughout the day. And hopefully, Randy picks that mantle up too.
Speaker #3: Our first question comes from the line of Jean and Salisbury of B of A. Your line is open, Jean.
Speaker #3: Back to you, Joe.
Speaker #1: Thank you, Jim. And Latif, with that, we're ready to open up the call for questions.
Speaker #4: Hi, good morning. Congrats to you, Jim, on your retirement. I hope you get to drink some really nice whiskeys with your newfound time. And thank you for all the help over the years.
Speaker #4: Thank you. As a reminder, to ask a question, you will need to press star-one-one on your telephone. To remove yourself from the queue, you may press star-one-one again.
Speaker #2: Thank you, Jean Anne.
Speaker #4: So my question is probably for Corey or Tug, but LPG lifting rates have fallen, as you've brought on Netches River. Did this surprise you?
Speaker #4: Please limit yourself to one question and one follow-up or two questions to allow everyone the opportunity to participate. Please stand by while we compile the Q&A roster.
Speaker #4: A lot is obviously going on in the market at the same time, but I guess my question is, is LPG export capacity already overbuilt?
Speaker #4: And as my follow-up and a related vein, would you expect to see the 300 KBD expansion that you're coming that's coming on later in the year be more fully utilized since it's more take or pay?
Speaker #4: Our first question comes from the line of Jean and Salisbury of B of A. Your line is open, Jean.
Speaker #4: Thank you.
Speaker #5: Hi, good morning. Congrats to you, Jim, on your retirement. I hope you get to drink some really nice whiskies with your newfound time. And thank you for all the help over the years.
Speaker #1: Hey, Jean Anne. This is Tyler Cott. I will take that one. Yeah, you're correct. There's a fair amount of export capacity that's come online and will be coming online including our project and some other projects in the market over the next 12 to 18 months.
Speaker #3: Thank you, Jean Ann.
Speaker #5: So my question is probably for Corey or Tug, but, you know, LPG lifting rates have fallen as you've brought on Netches River. Did this surprise you?
Speaker #1: And obviously, it'll take the market a little bit of time to absorb that capacity. So we may see a period of time where we have less volatility in terminal fees and just overall lower rates than we've seen the last couple of years.
Speaker #5: A lot has obviously going on in the market at the same time, but I guess my question is is LPG export capacity already overbuilt?
Speaker #1: From our standpoint, we've been very intentional about contracting our capacity. So REHT expansion and really all of our system-wide capacity around LPG export, as we've said, we're about 90% contracted.
Speaker #5: And as my follow-up and a related vein, would you expect to see the 300 KBD expansion that you're coming that's coming on later in the year be more fully utilized since it's since it's more take or pay?
Speaker #1: So we have relatively limited exposure to that scenario. So we feel good about where we're at given how things look the next couple of years.
Speaker #5: Thank you.
Speaker #2: Hey, Jean Ann. This is Tyler Cott. I will take that one. Yeah, you're correct. There's a fair amount of export capacity that's come online and will be coming online including our project and some other projects in the market over the next 12 to 18 months.
Speaker #2: And, Jean, this is Tug. I'll just add that at NRT, as additional ethane volumes come online and BLECs get delivered, that capacity will hopefully ramp up to ethane transitioning propane
Speaker #2: And obviously, it'll take the market a little bit of time to absorb absorb that capacity. So we may see a period of time where we have less volatility in terminal fees and and, you know, just overall lower rates than we've seen the last couple years.
Speaker #4: That makes sense. Thank you.
Speaker #3: Thank you. Our next question comes from the line of Spiro Dounis of City. Your line is open, Spiro.
Speaker #2: From our standpoint, we've been very intentional about contracting our capacity. So REHT expansion and really all of our system-wide capacity around LPG export, as we've said, we're about 90% contracted.
Speaker #5: Thanks, Operator. Good morning, team. Jim wanted to send my congrats as well on the upcoming retirement. First question, maybe just starting with a fundamental one.
Speaker #2: So we have relatively limited exposure to that scenario. So we we feel good about where we're at given how things look the next couple of years.
Speaker #5: If we go back to your fundamentals update earlier this year, you suggested a meaningful amount of natural gas and NGLs were being curtailed behind the system just due to Wahoo prices.
Speaker #1: And Jean Ann, this is Tug. I'll just add that at NRT, as additional ethane volumes come online and BLECs get delivered, that capacity will hopefully ramp up to ethane, transitioning propane DHT.
Speaker #5: Obviously, those pipelines are coming online now. So curious, do you have a sense for how much of that curtailed volume has come back to the market?
Speaker #5: What's still left to come? And maybe what that means for your 27 outlook?
Speaker #5: That makes sense. Thank you.
Speaker #1: Yeah, this is Corey. When we look at our forecast, I would say that our forecast really hasn't changed all that much. Looking at producer cadence, not a lot has changed for the large publics.
Speaker #4: Thank you. Our next question comes from the line of Spiro Dunis of City. Your line is open, Spiro.
Speaker #6: Thanks, operator. Good morning, team. Jim wanted to send my congrats as well on the upcoming retirement. First question, maybe just starting with a fundamental one.
Speaker #1: I'd say the privates have come online a little bit more given some of the price volatility that we've seen. That has brought some natural gas that the pipelines have come up a little bit faster than I think the market expected.
Speaker #6: If we go back to your fundamentals update earlier this year, you suggested a meaningful amount of natural gas and NGLs were being curtailed behind the system just due to Waha prices.
Speaker #1: So we've had some pretty strong Wahoo prices as time goes on. I think we're going to end up filling those pipes with gas that comes online.
Speaker #6: Obviously, those pipelines are coming online now. So curious, give a sense for how much of that curtailed volume has come back to the market.
Speaker #1: As we get some of that choke back gas that I had spoken about earlier in the year, to show up and then also some of these gasier benches.
Speaker #6: What's still left to come? And and maybe what that means for your 27 outlook?
Speaker #1: Over time, we'll start to fill pipeline capacity.
Speaker #2: Yeah, this is Corey. When we look at our forecast, I would say that our forecast really hasn't changed all that much. Looking at producer cadence, not a lot has changed for the large publics.
Speaker #5: Great. Thanks, Corey. Second one, maybe just going to CapEx specifically around 2027. Curious how much of that $3 billion is sanctioned versus potential? And to the extent there's still more left to fill there, should we assume it's largely sort of natural downstream extensions, more maybe more export, or could it be something else?
Speaker #2: I'd say the privates have come online a little bit more, given some of the price volatility that we've seen. That had brought some natural gas, and the pipelines have come up a little bit faster than I think the market expected.
Speaker #5: And maybe more broadly, should we think about that $3 billion as a new baseline for growth CapEx, or are you still anchoring to that $2 to $2.5 billion longer term?
Speaker #2: So, we've had some pretty strong Waha prices. As time goes on, I think we're going to end up filling those pipes with gas that comes online.
Speaker #2: As we get some of that choke-back gas that I had spoken about earlier in the year to show up at benches, over time we'll start to fill pipeline capacity.
Speaker #2: Spiro, this is Randy. I think in the near term, the $3 billion may be the new level. And some of it is just the pace of growth that we continue to see in the Permian.
Speaker #2: And what we need there in terms of when we think about natural gas gathering, but also compression and power gen, it seems like especially in the Delaware, whatever you're going to build, you got to bring your own power with you.
Speaker #6: Great. Thanks, Corey. Second one, maybe just going to CAPEX specifically around 2027. Curious how much of that 3 billion is is sanctioned versus potential.
Speaker #6: And to the extent there's still more left to fill there, should we assume it's largely sort of natural downstream extensions, more frac maybe more export or or could it be something else?
Speaker #2: So I think that increases levels as well. As far as when we look out into 2027 of that $3 billion, probably 80% plus is probably already spoken for just with the projects that we've sanctioned and have announced.
Speaker #6: And maybe that $3 billion is a new baseline for growth CAPEX, or are you still anchoring to that $2 to $2.5 billion longer term?
Speaker #3: Spiro, this is Randy. I think in the near term, the 3 billion may be the new level. And some of it is just the pace of growth that we continue to see in the Permian.
Speaker #5: Great. I'll leave it there. Thanks, Randy.
Speaker #3: Thank you. Our next question comes from the line of John McKay. Of Goldman Sachs, your line is open, John.
Speaker #3: And what we need there in terms of, when we think about natural gas gathering, but also compression and power gen, it seems like, especially in the Delaware, whatever you're going to build, you've got to bring your own power with you.
Speaker #6: Hey, team. Thank you for the time and congrats from us as well, Jim. I want to go back to Spiro's first comment on the Wahoo picture.
Speaker #3: So I think that helps—that increases levels as well. As far as when we look out into 2027, of that $3 billion, you know, probably 80% plus is probably already spoken for just with the projects that we've sanctioned and have announced.
Speaker #6: More specifically, you've been talking about kind of two BCF a day potential fluff production when these pipes come. Could you frame up for us just from an operator perspective what that actually looks like?
Speaker #6: Are these existing wells being choked back? Are these maybe wells that have been completed but not actually turned in line yet? And maybe more specifically, what these producers might be looking for from a Wahoo price or something else perspective to really bring those volumes on?
Speaker #6: Great. I'll leave it there. Thanks, Randy.
Speaker #4: Thank you. Our next question comes from the line of John McKay. Of Goldman Sachs, your line is open, John.
Speaker #7: Good evening.
Speaker #7: Hey, team. Thank you for the time and congrats from us as well. Jim, I want to go back to Spiro's first comment on the Wahaha picture.
Speaker #8: Hey there. It's Natalie Gayden. When we were estimating the amount of gas shut in, it was a combination of what producers we knew were shut in.
Speaker #7: You know, more specifically, you've been talking about kind of 2 BCF a day potential flush production when these pipes come. Could you frame up for us just from an operator perspective what that actually looks like?
Speaker #8: It's typically the higher GOR producers, better exposed to Wahoo. And so as that gas comes back online and you ask the question had it not been fracked, etc., a lot of it had just been choked back.
Speaker #7: Are these existing wells being choked back? Are these maybe wells that have been completed but not actually turned in line yet? And maybe, more specifically, what are these producers looking for from a Waha price or something else perspective to really bring those volumes on?
Speaker #8: But I would say that as that volume comes back online, we see that as more positive long term than the short term volatility that's created through spreads.
Speaker #8: Not all producers need a positive Wahoo gas price to bring that $2 BCF a day online. They need a healthy gas price, a healthy Wahoo gas price that are still exposed to Wahoo.
Speaker #3: Good evening.
Speaker #5: Hey there. It's Natalie Gayden. When we were estimating the amount of gas shut in, it it was a combination of what producers we knew were shut in.
Speaker #2: And we benefit.
Speaker #5: It's typically the higher GOR producers, better exposed to Wahaha. And so as that gas comes back online and you actually you asked the question how then have it not been fracked, etc., a lot of it had just been choked back.
Speaker #8: We benefit in processing margins. When that's true, we benefit in spread value.
Speaker #2: We benefit with our equity gas production we have. So it's all good.
Speaker #5: But I would say that as that volume comes back online, we see that as more positive long term than you know the short term volatility that's created through spreads.
Speaker #6: Yeah, absolutely. That makes a lot of sense. And maybe just taking some of those latter comments certainly a second quarter benefited from some of these spreads.
Speaker #6: Just curious, your outlook for the back half of the year or into '27, your ability to kind of keep holding some of those, whether it's been through hedging it out or maybe the kind of market environment staying constructive, maybe just walk us through the next couple of quarters on a couple of those fronts.
Speaker #5: I not all producers need a positive Wahaha gas price to bring that 2 BCF a day online. They need a healthy gas price, a healthy Wahaha gas price that are still exposed to Wahaha.
Speaker #3: And we benefit.
Speaker #6: Thanks.
Speaker #5: We benefit in processing margins. When that's true, we benefit in spread value.
Speaker #2: Yeah, I probably won't speak to the next couple of quarters. What I can highlight is what we saw in the second quarter. So during the months of April and May, we saw an acute global demand for US energy.
Speaker #1: Great. We we benefit with our our equity gas production we have. So it's all good.
Speaker #2: There was a significant demand pull across the barrel crude LPG, ethane, and oil fins via our docks. We saw this in the form of additional volume and higher margin.
Speaker #7: Yeah, absolutely. That that makes a lot of sense. And maybe just taking some of those latter comments, you know, certainly second quarter benefited from some of these spreads.
Speaker #2: And for the quarter, it resulted in around $200 million associated with that global need for energy. So if you break that $200 million down, let's call it a third NGO, a third crude, and then a third petrochemicals and others.
Speaker #7: Just curious, you know, your outlook for the back half of the year or into 27, you know, your ability to kind of keep holding some of those whether it's been through hedging it out or maybe the kind of market environment staying constructive, maybe just walk us through the next couple of quarters on a couple of those fronts.
Speaker #2: So if you look at today, those cash, those strong cash differentials have largely normalized. And the next couple of quarters, and then when does the stride open?
Speaker #7: Thanks.
Speaker #1: Yeah, this is Doug. I probably won't speak to the next couple of quarters. What I can highlight is what we saw in the second quarter.
Speaker #1: So you know, during the months of April and May, we saw an acute global demand for US energy. There was a significant demand pull across the barrel crude LPG, ethane, and oil fins via our docks.
Speaker #2: Yeah. And look, I mean, we've spoken to it in the past, time and time again, but if volatility is there, the team will execute on it.
Speaker #2: And we've proven it time and time again.
Speaker #1: We saw this in the form of additional volume and higher margin. And for the quarter, it resulted in around 200 million dollars associated with that global need for energy.
Speaker #6: Thank you for the time.
Speaker #3: Thank you. Our next question. Comes from the line of Jefferies, your line is open, Julien.
Speaker #1: So if you break that 200 million dollars down, it's called a third NGL, a third crude, and then a third petrochemicals and others. So if you look at at today, those cash, those strong cash differentials have largely normalized.
Speaker #4: Hi, good morning. This is Andrew on for Julien. And thank you for the time. And Jim, congrats on the retirement. Just two quick questions from my front.
Speaker #7: And understood.
Speaker #3: And the next couple of quarters, and then when does the stride open?
Speaker #4: The first one being, we're seeing a sequentially stronger quarter in crude. I think both from a volume metric and a per-barrel margin standpoint. Can you maybe kind of unpack a bit more in terms of how much of that is driven by equity barrels that are benefiting from the current crude volatility versus how much of that is long-term contracts?
Speaker #1: Yeah. And look, I mean, we we've spoken to it in the past, time and time again, but if volatility is there, the team will execute on it.
Speaker #1: And and we've proven it time and time again.
Speaker #7: Thank you for the time.
Speaker #4: Thank you. Our next question. Comes from the line of Julian Domolind Smith of Jefferies. Your line is open, Julian.
Speaker #4: And maybe an extension of that, how much extra barrels with the extra barrels moving from Midland to Echo 1 to Midland to Echo 2, how much of that how have the recontracting conversation been on the spare capacity on Midland to Echo 1?
Speaker #8: Hi. Good morning. This is Andrew on for Julian. And thank you for the time and, Jim, congrats on the retirement. Just two quick questions from my front.
Speaker #4: Thank you.
Speaker #2: Yeah, this is I'll try to give you a little color on it, but if you look at the crude numbers at a high level, we benefited from higher Midland to Houston's pipeline spreads, and we also benefited from higher margins we able to charge across the dock.
Speaker #8: You know, the first one being, you know, we're seeing a sequentially stronger quarter in crude. I think both from a volume metric and a per barrel margin standpoint.
Speaker #8: Can you maybe kind of like unpack a bit more in terms of how much of that is driven by, you know, equity barrels that are benefiting from the current, you know, crude volatility versus how much of that is, you know, long term contracts?
Speaker #2: Due to that strong cash premiums, and then on the contracting side, Jay and his team have done an amazing job continuing to remain highly contracted on our Midland to Echo system.
Speaker #8: And maybe an extension of that, like how much extra barrels, you know, with the extra barrels moving from Midland to Echo 1 to, you know, Midland to Echo 2, how much of that, you know, how how how have the recontracting conversation been on the spare capacity on Midland to Echo 1?
Speaker #2: Continuing to get additional contracts.
Speaker #4: Yep, that's very clear. And I guess the second question I have is just we've talked about a better outlook at the Permian from a gas perspective.
Speaker #4: Has that kind of changed your expectation around potentially recontracting the volumes on ATEX around volume metrically as well as from a margin standpoint? And maybe can you help frame your latest perspective on the magnitude of exposure here?
Speaker #8: Thank you.
Speaker #1: Yeah, this is Doug. I'll try to give you a little color on it, but if you look at the crude numbers at a high level, we benefited from higher Midland to Houston's pipeline spreads, and we also benefited from higher margins we able to charge across the dock.
Speaker #4: Thank you.
Speaker #1: Due to that strong cash premiums, and then on the contracting side, Jay and his team have done an amazing job continuing to remain highly contracted on our Midland to Echo system.
Speaker #2: Yeah, Andrew, this is Justin Kleider. On ATEX, it's still a dynamic conversation with our shipper customers. Really just evaluating on a high level what's the highest and best use of the pipe.
Speaker #1: And continuing to get additional contracts.
Speaker #2: But let's also not hide from the fact that the tariffs in place today often exceed the value of the product that it moves. So there's going to be some degree of a rate reset.
Speaker #8: Yep. Well, that that's very clear. And I guess the second question I have is just, you know, we've talked about, you know, you know, a better outlook at the Permian from a gas perspective.
Speaker #8: Has that kind of changed your expectation around potentially recontracting the volumes on ATEX, you know, around volumetrically as well as, you know, from a margin standpoint?
Speaker #2: And we're just working with our customers to figure out what's the best and highest use of the pipeline, what gives them the most low assurance that they desire.
Speaker #8: And maybe can you help, like, you know, frame your latest perspective on the magnitude of exposure here? Thank you.
Speaker #2: And so we're engaging those discussions. So more to come as that unfolds.
Speaker #4: No, very clear. Thank you very much.
Speaker #1: Yeah, Andrew, this is Justin Pleiter. On ATEX, you know, it's still a dynamic conversation with our shipper customers. Really just evaluating on a high level what's the highest and best use of the pipe.
Speaker #3: Thank you. Our next question comes from the line of Keith Stanley. Of Wolf Research, please go ahead, Keith.
Speaker #1: But let's also not hide from the fact that the tariffs in place today often exceed the value of the product that it moves. So there's going to be some degree of a rate reset.
Speaker #5: Hi, good morning. Randy, wanted to start by clarifying your free cash flow commentary for the year. So you raised the capex by 600 to 800 million.
Speaker #1: And we're just working with our customers to figure out what's the best and highest use of the pipeline, what gives them the the most low assurance that they desire.
Speaker #5: You said you still expect free cash flow to approach a billion. So free cash flow is only slightly lower than last quarter. Is that just simply much higher EBITDA than you previously expected, or are there any other items like working capital or other items that are driving that?
Speaker #1: And so we're engaging those discussions. So more to come is that unfolds.
Speaker #8: No, very clear. Thank you very much.
Speaker #2: Yeah, Keith, we really don't include working capital in that when we think about discretionary free cash flow because working capital is going to swing around with commodity prices.
Speaker #4: Thank you. Our next question comes from the line of Keith Stanley of Wolf Research. Please go ahead, Keith.
Speaker #2: And also what opportunities are there from a contango standpoint. It really comes into the two moving pieces are really EBITDA and growth capex. And if you look, the while we've seen that, again, over 700 million dollars increase in growth capex, just because of excellent project opportunities, at the same time, our cash flow is up that much.
Speaker #9: Hi. Good morning. Randy, I wanted to start by clarifying your free cash flow commentary for the year. So you you raised the capex by 600 to 800 million.
Speaker #9: You said you still expect free cash flow to approach a billion. So free cash flow is only slightly lower than last quarter. Is that just simply much higher EBITDA than you previously expected, or are there any other items like working capital or or other items that are driving that?
Speaker #2: EBITDA is up that much. So which basically almost offset all the we've seen in growth capex.
Speaker #3: Yeah, Keith, we really don't include working capital in that when we think about discretionary free cash flow because working capital is going to swing around when commodity prices.
Speaker #5: Great. Okay. That's a big number. Second question, so you're building now five Permian plants at one time. I think you're historical cadence was more like two at a time.
Speaker #3: And also, what opportunities are there from a contango standpoint? It really comes down to two moving pieces, which are really EBITDA and growth CapEx.
Speaker #5: Would you characterize the driver of that as a faster growth outlook for the basin, or are you having more commercial success and winning market share?
Speaker #3: And if you look, while we've seen, you know, again, over $700 million increase in growth capex just because of excellent project opportunities, at the same time, our cash flow is up that much.
Speaker #5: And what do you expect as a plant kind of run rate cadence from here?
Speaker #6: This is Natalie Gayden. I would expect trending closer to two is probably the right answer. And of course, as producers, change their whether it be their cadence or maybe they hit higher GOR zones, that obviously changes our assumptions.
Speaker #3: EBITDA is up that much, which basically almost offset all that we've seen in growth capex.
Speaker #9: Great. Okay. That's that's a big number. Second question, you're so you're building now five Permian plants at one time. I think you're historical cadence was more like two at a time.
Speaker #6: But five in the next, let's just call it three years because one starts up in 4Q2026, puts us at around a 1.7 per year cadence.
Speaker #9: Would you characterize the driver of that as as a faster growth outlook for the basin, or are you having more commercial success and winning market share?
Speaker #6: And then we haven't even talked about anything in 29 yet.
Speaker #5: Okay. So more of a heightened period right now and then back to two per year, after that?
Speaker #9: And and what what do you expect as a plant kind of run rate cadence from here?
Speaker #2: Yeah, Keith, I think one thing to note, since 2022, we've probably been increasing our capacity by CAGR of 15%. And then it really, if you look at from the end of '25 to the end of '28, we're going to be growing it by about 11%.
Speaker #2: This is Natalie Gayden. I would expect trending closer to two is probably the right answer. And of course, as producers change their whether it be their cadence or maybe they hit higher GOR zones, that obviously changes our our assumptions.
Speaker #2: And just like you saw this quarter, second quarter this year versus second quarter last year, our Permian inlet volumes were up 14%. So this is a I mean, again, this just as Jim said earlier in his comments, just coming in and bringing more of that inlet, extracting each one of the plants, extracts 45,000 barrels a day of liquids that flows into Shin Oak and Bahia.
Speaker #2: But five in the next let's just call it three years because one starts up in 4Q2026, puts us at around a 1.7 per year cadence.
Speaker #2: And then we haven't even talked about anything in 29 yet.
Speaker #9: Okay. So, more of a heightened period right now, and then back to two per year after that.
Speaker #2: And right into our frac complex. And then into our downstream assets, beyond the frac. So really, good positive development.
Speaker #3: Yeah, Keith, I think one thing to note, you know, since 2022, we've probably been increasing our capacity by CAGR of 15%. And then if really, if you look at from the end of '25 to the end of '28, we're going to be growing it by about 11%.
Speaker #5: Thank you.
Speaker #3: Thank you. Our next question, comes from the line of Theresa Chen. Of Barclays, please go ahead, Theresa.
Speaker #3: And just like you saw this quarter—second quarter this year versus second quarter last year—our Permian inlet volumes were up 14%. So this is, I mean, this again, just as Jim said earlier in his comments, you know, just coming in and bringing more of that inlet, you know, extracting—each one of the plants extracts 45,000 barrels a day of liquids that flow into Shin Oak and Bahia and right into our Frac complex.
Speaker #7: Hi. I want to go back to the export topic and looking past the recent volatility on export ARBs. But focusing more on the long-term greater strategic reliance on US energy exports in general.
Speaker #7: Are you seeing much by the way of changes in customer behavior contracting activity or interest from individual customers that have not come across your commercial footprint before?
Speaker #3: And then into our downstream assets, beyond the frac. So really, you know, good, good positive development.
Speaker #9: Thank you.
Speaker #4: Thank you. Our next question. Comes from the line of Theresa Chen of Barclays. Please go ahead, Theresa.
Speaker #7: Any color around that would be helpful.
Speaker #2: Hey, Theresa, Tyler Cott. Yes, I think we said last time we had strong interest before this conflict and we still have very strong interest.
Speaker #10: Hi. I want to go back to the export topic, looking past the recent volatility on export ARBs, but focusing more on the long-term, greater strategic reliance on US energy exports in general.
Speaker #2: But to your point, there has been a bit of increased interest from countries that maybe were typically a little bit more dependent on the Middle East looking to ship some of their long-term supply sourcing to the US.
Speaker #2: That's a function of that exposure and just the fact that US exports are growing and we're clearing to some new markets as well.
Speaker #10: Are you seeing much by the way of changes in customer behavior contracting activity or interest from individual customers that have not come across your commercial footprint before?
Speaker #7: Got it. And with the multiple refined products infrastructure assets under development and maybe closer to FID than not across your competitors, how does this change your view of product flows on both refined products within your footprint, but also the heavier molecules within the NGL footprint between Gold Coast, Midcon, and your region, the Rockies?
Speaker #10: Any color around that would be helpful.
Speaker #1: Hey, Theresa, Tyler Cott. Yes, I think we said last time we had strong interest before this conflict and we we still have very strong interest.
Speaker #1: But to your point, there has been a bit of increased interest from countries that maybe were typically a little bit more dependent on the Middle East, looking to shift some of their long-term supply sourcing to the US.
Speaker #1: That's a function of that exposure and just the fact that US exports are growing and, you know, we're we're clearing to some new markets as well.
Speaker #2: Theresa, this is Justin. I'll take the product side of that question. I mean, I think in general, you look at our TE system, we move products from the Gulf Coast up into the Midcon and Chicago.
Speaker #10: Got it. And with the multiple refined products infrastructure assets under development and maybe closer to FID than not across your competitors, how does this change your view of product flows on both refined products within your footprint, but also the heavier molecules within the NGL footprint between Gold Coast, Midcon, and your region, the Rockies?
Speaker #2: So the trend there has been as the Midcon has gotten weaker, that volumes have on that system have continued to get pushed further south.
Speaker #2: And so anything that debottlenecks or clears the overhang in that Midcon and Chicago area with the projects currently under development, I think our system is going to benefit from.
Speaker #2: So directionally, we want to see prices support more product movements from the Gulf Coast to further inland markets.
Speaker #7: Thank you.
Speaker #1: Theresa, this is Justin. I'll take the I'll take the product side of that question. I mean, I think in general that that, you know, you look at our TE system, we move products from the Gulf Coast up into the Midcon and Chicago.
Speaker #3: Thank you. Our next question. Comes from the line of Gabe Dowd. Of Truist, Gabe, your line is open.
Speaker #1: So you know, the trend there has been as the Midcon has gotten weaker, that that volumes have on that system have continued to get pushed further south.
Speaker #4: Thanks, operator. Morning, everyone. And Jim, congrats to you as well. We hope we can maybe just curious to get an update on the sour gas.
Speaker #1: And so, anything that debottlenecks or clears the overhang in that Midcon and Chicago area with the projects currently under development, I think our system is going to benefit from.
Speaker #4: Side of things, looks like you're drilling your third AGI well. Currently, which should bring treating capacity to 750 million a day. Are you seeing any incremental growth opportunities beyond that on the sour gas side?
Speaker #1: So directionally, we want to see prices support more product movements from the Gulf Coast to further inland markets.
Speaker #6: This is Natalie Gayden. I'd say demand has remained strong. I'd say the system was essentially full prior to bringing train foreign to service. We have turned 500 construction, as you know, we have third AGI well underway.
Speaker #10: Thank you.
Speaker #4: Thank you. Our next question comes from the line of Gabe Dowd of Truist. Gabe, your line is open.
Speaker #6: And we're currently evaluating train six. Mainly because producer activity and interest continue to build there. So given that, I would expect that volumes and margins continue to grow.
Speaker #11: Thanks, operator. Morning, everyone. And Jim, congrats to you as well. I was hoping we could maybe—just curious to get an update on the sour gas.
Speaker #4: Got it. Thanks, Natalie. And then I guess just as a follow-up, last quarter, you had quantified that the EBITDA uplift in '26 or the outperformance.
Speaker #11: Side of things, looks like you're drilling your third AGI well. Currently, we should bring treating capacity to 750 million a day. Are you seeing any incremental growth opportunities beyond that on the sour gas side?
Speaker #4: So given the strength year-to-date, could we maybe just get an update on the thoughts around the EBITDA outperformance this year and how we should think about the trajectory into 2027?
Speaker #2: This is Natalie Gayden. I'd say the demand has remained strong. I'd say the system was essentially full prior to bringing train four into service.
Speaker #4: Thanks, everyone.
Speaker #2: Okay. Yeah. We were we talked about this really on the first quarter call. And I think Jim introduced the word modest, we were really expecting modest EBITDA growth from 2025 into 2026.
Speaker #2: We have train 5 under construction. As you know, we have third AGI well underway. And we're currently evaluating train six. And mainly because producer activity and interest continue to build there.
Speaker #2: So, given that, I would expect that volumes and margins continue to grow.
Speaker #2: But that expectation was really on a oversupplied energy market with benign pricing. Obviously, this conflict in the Middle East added a lot of volatility, and as Tug spoke, a lot of demand for US energy.
Speaker #11: Got it. Thanks, Natalie. And then I guess just as a follow-up, last quarter, you had quantified that the EBITDA uplift in in '26 or the outperformance.
Speaker #11: So given the strength year-to-date, could we maybe just get an update on the thoughts around the EBITDA outperformance this year and how how we should think about the trajectory into 2027?
Speaker #2: Really, any comment about 2026 and 2027, we would need a crystal ball of what happens with this conflict going forward. So really hard to come in and really come in and I guess try to predict or speculate on what it might be.
Speaker #11: Thanks, everyone.
Speaker #3: Okay. Yeah. You know, we were you know, we talked about this really on the first quarter call. You know, and I and I think Jim introduced the word modest.
Speaker #3: We were really expecting modest EBITDA growth from 2025 into 2026. But that that expectation was really on a oversupplied energy market with benign pricing.
Speaker #2: Again, when I go back to the comment that we made at the beginning of the year was modest EBITDA growth this year and that was really just going to be volume growth going across our system.
Speaker #3: Obviously, this this conflict in the Middle East added a lot of volatility as and as Tug spoke, you know, a lot of a lot of demand for US energy.
Speaker #2: And then into what we said going from, again, 25 into '27, we saw the potential for 10% area growth in EBITDA. And again, that was largely as a result of more volumes coming on through the system, whether it was volumes coming into new assets, or whether it was coming in we had done a acquisition of OxyRock system that we really weren't seeing any volumes.
Speaker #3: You know, really any comment about 2026 and 2027, I need you know, we would need a crystal ball of what happens with this conflict going forward.
Speaker #3: So really hard to come in and and and really come in and and I I guess try to predict or speculate on what it might be.
Speaker #3: Again, when I go back to, you know, the comment that we made at the beginning of the year was modest EBITDA growth this year and and that was really just going to be volume growth going across our system.
Speaker #2: Since the acquisition through the end of this year, we'll be picking up volumes at the beginning of 2027 on that. So that also helps.
Speaker #2: So really, we weren't really coming in when we said modest in '26 with a potential of 10% up in '27. That was, again, not any margin or benefit from commodity prices.
Speaker #3: And then, into what we said, going from, again, '25 into '27, we saw the potential for 10% area growth in EBITDA. And again, that was largely as a result of more volumes coming on through the system, whether it was volumes coming into new assets, or whether it was coming in— you know, we had done an acquisition of the OxyRock system that we really weren't seeing any volumes since the acquisition through the end of this year.
Speaker #2: That was strictly volume. So I think that's still where our thoughts are. As far as that trajectory and then any volatility or incremental demand across the dock or any optimization opportunities that we have, is really on top of that.
Speaker #2: Long-winded answer, but that was a difficult question.
Speaker #4: Yeah. No, totally. Thanks, Randy. Understand. It's a difficult to predict at this point, but appreciate the thoughts. Thanks a lot.
Speaker #3: We'll be picking up volumes at the beginning of 2027 on that. So that also helps. So really, you know, we weren't really coming in when we said modest in '26 with a potential of 10% up in '27.
Speaker #3: Thank you. Our next question. Comes from the line of Jeremy Tonet. Of JP Morgan. Your line is open, Jeremy.
Speaker #3: That was, again, not any margin or benefit from commodity prices. That was strictly volume. So, and I think that's still where our thoughts are.
Speaker #5: Hi, good morning. And Jim, wishing you the best in retirement. We have appreciated your perspectives over the years.
Speaker #3: As far as that trajectory and then any volatility or incremental demand across the dock or any optimization opportunities that we we have, there's really on top of that.
Speaker #2: Thank you, Jeremy.
Speaker #5: Just wanted to turn back to the Permian and Waha, if I could, pricing there. Turning positive, I guess, and staying positive for a bit here.
Speaker #3: That was a long-winded answer, but it was a difficult question.
Speaker #5: Just wondering, I guess, how long you see this persisting Waha positive territory. It seems like there's a lot of gas that is ready to be connected.
Speaker #11: Yeah. No, no, totally. Thanks, Randy. I understand it's a difficult to to predict at this point, but appreciate the thoughts. Thanks a lot.
Speaker #5: So just kind of curious how you think that plays out. And then if I look out further, I guess, when do you see constraints in the basins emerging after the latest after the current round of pipeline additions?
Speaker #4: Thank you. Our next question. Comes from the line of Jeremy Tonette of JPMorgan. Your line is open, Jeremy.
Speaker #5: Does the industry need another pipe in '29 or '30, or how do you think about that?
Speaker #5: Hi, good morning. And Jim, wishing you the best in retirement. We have appreciated your perspectives over the years.
Speaker #3: Thank you, Jeremy.
Speaker #6: I'll start. This is Natalie Gayden. Maybe Tyler can chime in. I don't think we try to predict Waha price, but we probably could see Waha tighten again before '27 as some of that shedding gas returns and some backloaded production comes online.
Speaker #5: Just wanted to turn back to the Permian and Waha, if I could, pricing there. Turning positive, I guess, and staying positive for a bit here.
Speaker #5: Just wondering, I guess, how long you see this persisting—Waha positive territory. It seems like there's a lot of gas, you know, that is ready to be connected.
Speaker #6: But again, we'd rather see a healthy Waha that supports our producers. Economics, volume growth, and some of that long-term infrastructure development for us because sustained volumes growing across our integrated system is really more valuable than short-term outside basis dislocations.
Speaker #5: So just kind of curious how you think that plays out. And then if I look out further, I guess, when do you see you know, constraints in the basins emerging after the latest after the current round of pipeline additions?
Speaker #4: Yeah, I think there's obviously a lot of gas in the Permian and the pricing will reflect how the infrastructure comes to market and the timing and probably will continue to be a little bit of volatility.
Speaker #5: Does the industry need another pipe in ’29 or ’30, or how do you think about that?
Speaker #2: I'll I'll start. This is Natalie Gayden. Maybe Tyler can chime in. And I don't think we try to predict Waha price, but we probably could see Waha tighten again before '27 as some of that shedding gas returns and some backloaded production comes online.
Speaker #5: Got it. And I guess as far as future expansion, when do you see the need for that?
Speaker #6: I didn't catch that. The what expansion?
Speaker #5: Future egress needs out of the Permian post kind of like the current announcement of pipes. Would it be needed for '29 or '30?
Speaker #2: But again, we'd rather see a healthy Waha that supports our producers economics, volume growth, and some of that long-term infrastructure development for us because sustained volumes growing across our integrated system is really more valuable than short-term outside basis dislocations.
Speaker #6: Yeah, I think that's depends on your belief of your wet gas forecast. It's our belief that higher GORs are absolutely true. So it really depends on the producer community and what zones they decide to drill and where they put the rig, allocate the rigs to.
Speaker #11: Yeah. I think there's obviously a lot of gas in the Permian and, you know, the the pricing will reflect how the infrastructure comes to market and the timing and probably will continue to be a little bit of volatility.
Speaker #5: Got it. And I guess as far as future expansion, what when do you see the need for that?
Speaker #6: So yes, I do think another pipe gets built that hasn't been announced.
Speaker #5: And just curious, I guess, PDH operations, how that it seems like is running better this quarter and how it looks in third quarter so far.
Speaker #2: I didn't catch that. The what expansion?
Speaker #5: Future egress needs out of the Permian post kind of like the current announcement of pipes. Would it be needed for '29 or '30?
Speaker #2: This is Graham out for a second quarter. Was a good run for us on the PDHs and PDH2 ran at design conditions throughout the quarter, had a good run on the PDH1.
Speaker #2: Yeah. I think that's depends on your belief of your wet gas forecast. It's our belief that higher GORs are absolutely true. So it really depends on the producer community and what zones they decide to drill and where they put the rig allocate the rigs to.
Speaker #2: One minor issue on PDH1 in the second quarter. As far as the third quarter outlook, we did have issues in July where PDH2 was down at its backup and running.
Speaker #2: And PDH1 is running stable. I expect that for the quarter.
Speaker #2: So yes, I do think another pipe gets built that hasn't been announced.
Speaker #5: Got it. Thank you. I'll leave it there.
Speaker #5: And just curious, I guess, PDH operations, how that it seems like is running better this quarter and how it looks in third quarter so far.
Speaker #3: Thank you. Our next question. Comes from the line of AJ O'Donnell. Of CPH. Please go ahead, AJ.
Speaker #6: This is Graham out for the second quarter. Was a a good run for us on the on the PDHs and PDH2 ran at design conditions throughout the out the quarter.
Speaker #7: Hey, good morning, everyone. And congrats on your retirement, Jim. Most of my questions have been asked already, but I do have one. This might just be directed at Natalie.
Speaker #6: Had a good run on the PDH1. One minor issue on PDH1 in the second quarter. As far as the third quarter outlook, we did have an issue in July where PDH2 was down.
Speaker #7: Looking at natural gas processing volumes of 8.1 BCF this quarter, they were up slightly like 4% year over year, even as the Permian inlet grew 14%.
Speaker #6: It is back up and running. And PDH1 is running stable. I expect that for the quarter.
Speaker #7: The relative to kind of Q1, they were down a little bit. So I was just wondering if you could provide some additional context on maybe what's going on as far as processing volumes outside of the Permian and how you expect those to look over the rest of the year.
Speaker #5: Got it. Thank you. I'll leave it there.
Speaker #4: Thank you. Our next question. Comes from the line of AJ O'Donnell of CPH, please go ahead, AJ.
Speaker #6: I would say if your question is volumes outside of the Permian, I would say relatively muted. If that's even a word. Growth in the processing capacity in the Permian is still slightly tight, but there's a significant amount of processing capacity coming online in the basin, not just with our projects, but with some of our competitors.
Speaker #7: Hey, good morning, everyone, and congrats on your retirement, Jim. Most of my questions have been asked already, but I do have one. This might just be directed at Natalie.
Speaker #7: Looking at natural gas processing volumes of 8.1 Bcf this quarter, they were up slightly—about 4% year over year—even as the Permian inlet grew 14%.
Speaker #6: As mentioned, there is quite a bit of shedding gas due to Waha price. That was spread across the basin. So I think if some of that returns, you'll see some of ours and likely some of other people's.
Speaker #7: Relative to Q1, they were down a little bit. So I was just wondering if you could provide some additional context on maybe what's going on as far as processing.
Speaker #7: Volumes outside of the Permian and how you expect those to look over the rest of the year.
Speaker #6: Come back online and through our plants.
Speaker #7: And hey, good food. Don't you think we're pretty just steady?
Speaker #6: I always call Eagleford pretty steady, Eddie. There's ebbs and flows, of course, but typically it is a very stable basin.
Speaker #2: I would say, if your question is volumes outside of the Permian, I would say relatively muted—if that's even a word. Growth in the processing capacity in the Permian is still slightly tight, but there's a significant amount of processing capacity coming online in the basin, not just with our projects but with some of our competitors.
Speaker #7: Okay. Thanks for the detail, Natalie.
Speaker #3: Thank you. Our next question. Comes from the line of Manav Gupta. Of UBS. Please go ahead, Manav.
Speaker #2: As mentioned, there is quite a bit of shedding gas due to Waha price. That was spread across the basin. So I think if some of that returns, you'll see some of ours in likely some of other people's.
Speaker #8: Good morning. You are somewhat unique because you're one of the biggest exporters of ethane. Can you talk a little bit about what you're seeing out there in terms of VLACs availability, that ramp, and that how that increases your ability to export even more ethane to the global markets given the disruptions we are seeing on NAFTA side.
Speaker #2: Come back online and through our plants.
Speaker #3: And Hazelford, don't you think we're pretty just steady?
Speaker #2: I always call Eagle Ford pretty steady Eddie. There are ebbs and flows, of course, but typically it is a very stable basin.
Speaker #8: This could be something a major tailwind going ahead if you could talk a little bit about it.
Speaker #4: I'm Manav. This is Tyler Cott. Yeah, you're right. There's a pretty big uptick in VLACs coming to the market. A few more this year and quite a bit more next year.
Speaker #7: Okay. Thanks for the detail, Natalie.
Speaker #4: And you should see our volumes correlate pretty strongly to those VLACs coming online as our customers get their vessels and begin lifting on the contracts that we've executed against our capacity.
Speaker #4: Thank you. Our next question comes from the line of Manav Gupta of UBS. Please go ahead, Manav.
Speaker #5: Good morning. You are somewhat unique because you're one of the biggest exporters of ethane. Can you talk a little bit about what you're seeing out there in terms of VLACs availability, that ramp, and that how that increases your ability to export even more ethane to the global markets given the disruptions we are seeing on NAFTA side.
Speaker #4: There's certainly more demand out there beyond our capacity. And so we're in conversations with a lot of different people and a lot of different parts of the world that are seeing what you're talking about with the attractiveness of US ethane.
Speaker #8: Perfect. Given the demand growth from both sides of power as well as LNG, you're starting seeing people say, "Look, Hinzle would become more of a core basin besides the Permian and the Marcellus." And you have a lot of leverage in that basin.
Speaker #5: This could be something a major tailwind going ahead if you could talk a little bit about it.
Speaker #6: I'm Manav. This is Tyler Cod. Yeah, you're right. There's a a pretty big uptick in VLACs coming to the market. A few more this year and quite a quite a bit more next year.
Speaker #8: Can you talk a little bit about your leverage to the Hinzle basin? What you see in terms of growth and if the Hinzle does become a much more of a core basin, how does it benefit your company?
Speaker #6: And you should see our volumes correlate pretty strongly to those VLACs coming online as our customers get their vessels and and begin lifting on the contracts that we've executed against our capacity.
Speaker #6: I think I got your question. Are you really asking for what we see for the Hinzle?
Speaker #8: That's right.
Speaker #6: There's certainly more demand out there beyond our capacity. And so we're in conversations with, you know, a lot of different people and a lot of different parts of the world that are are seeing what you're talking about with the attractiveness of US ethane.
Speaker #6: I think the Hinzle to us, as you know, is a dry gas basin. It really depends it's very price dependent. One trick pony, and yes, we will see peaks when that basin steps in for the market on residue know that Permian is a growing gas at the speed of light.
Speaker #5: Perfect. Given the demand growth from both sides—power as well as LNG—you’re starting to see people say, “Look, Haynesville will become more of a core basin, besides the Permian and the Marcellus.” And you have a lot of leverage in that basin.
Speaker #5: Can you talk a little bit about your leverage to the Hazel basin? What you see in terms of growth and if the Hazel does become a much more of a core basin, how does it benefit your company?
Speaker #6: And so I think you just see Hinzle be the swing basin it has always been.
Speaker #7: So hey, this is Randy. One thing I would add is in our Louisiana and Trost State system, where the Hinzle extension we're just seeing continue to see large demand for that pipe and that pipe sold out.
Speaker #2: I I think I got your question. Are are you really asking for what we see for the Haynesville?
Speaker #5: That's right.
Speaker #2: I think the Haynesville, to us, as you know, is a dry gas basin. It really depends—it's very price-dependent. It's kind of a one-trick pony, and yes, we will see peaks when that basin steps in for the market on residue supply.
Speaker #7: And then the same thing for if you would the lateral that goes down to Gillis to serve the LNG markets. That's running college between 800 and a billion cubic feet a day.
Speaker #7: And that's sold out. So again, seeing good demand pull across that interstate system, but as Natalie said, Hinzle is going to be really price dependent.
Speaker #2: But we also know that Permian is growing gas at the speed of light. And so, I think you just see Haynesville be the swing basin it has always been.
Speaker #5: Yeah. Manav, one thing I'll add. This is Corey. We have seen production growth for natural gas in the Hinzle slowly creep its way up over the year.
Speaker #5: We're getting pretty close to 16 BCF. And if that trend continues, I think our forecast is pretty online. So it's very constructive what the producers are doing in the Hinzle right now.
Speaker #3: Yeah. So, hey, this is Randy. One thing I would add is, in our Louisiana and Tristate system, with the Haynesville extension, we're just seeing—continue to see large demand for that pipe, and that pipe is sold out.
Speaker #8: Thank you, Corey. Thank you, Randy.
Speaker #3: And then the same thing for if you would the lateral that goes down to Gillis to serve the LNG markets. That's running, call it, between 800 and a billion cubic feet a day.
Speaker #3: Thank you. I would now like to turn the conference back to Joe Theriac for closing remarks. Sir.
Speaker #9: Thanks, Latif. And thank you to our participants for joining us today. That concludes our remarks. Have a good day.
Speaker #3: And that's sold out. So again, seeing good demand pull across that intrastate system. But as Natalie said, you know, Haynesville is going to be really price-dependent.
Speaker #5: Yeah. Manav, one thing I'll add. This is Corey. We have seen production growth for natural gas in the Haynesville slowly creep its way up over the year.
Speaker #5: We're getting pretty close to 16 Bcf. And if that trend continues, I think our forecast is pretty on line. So it's very constructive what the producers are doing in the Haynesville right now.
Speaker #5: Thank you, Corey. Thank you, Randy.
Speaker #4: Thank you. I would now like to turn the conference back to Joe Theriac for closing remarks. Sir?
Speaker #8: joining us today. That concludes our remarks. Have a good day.
