Energy Transfer Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 1, 2023

There are 11 speakers on the call.

Operator

Good day, and welcome to Energy Transfer Third Quarter 2023 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the call over to Mr.

Operator

Tom Long, Co CEO of Energy Transfer. Please go ahead.

Speaker 1

Thank you, operator, and good afternoon, everyone. Welcome to the Energy Transfer 3rd Quarter 2023 Earnings Call. I'm also joined today by Mackie McCree and other members of the senior management team who are here to help answer your questions after our prepared remarks. Hopefully, you saw the press release we issued earlier this afternoon as well as the slides posted to our website. We will be making forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.

Speaker 1

These statements are based upon our current beliefs as well as certain assumptions and information currently available to us and are discussed in more details in our Form 10 Q for the quarter ended September 30, 2023, which we expect to file tomorrow, November 2. I'll also refer to adjusted EBITDA and distributable cash flow or DCF, both of which are non GAAP financial measures. You'll find a reconciliation of our non GAAP financial measures on our website. We will start today by going over our financial results for the Q3 of 2023. We generated adjusted EBITDA of $3,500,000,000

Speaker 2

compared to

Speaker 1

$3,100,000,000 for the Q3 of 2022. In our base business, we had strong performance across our operations, Including record volumes through our NGL pipelines, fractionators and NGL and refined products terminals, as well as record volumes in our Crude segment. In addition, volumes in our intrastate and midstream segments Remained near records. ECF attributable to the partners of Energy Transfer as adjusted was $2,000,000,000 compared to $1,600,000,000 for the Q3 of 2022. This resulted in excess cash flow after distributions of $1,000,000,000 On October 20th, we announced a quarterly cash distribution of $0.3125 per common unit or $1.25 on an annualized basis.

Speaker 1

This distribution represents an increase from the $0.265 in the Q3 of 2022. In August, Energy Transfer senior unsecured credit rating Was upgraded by S and P to BBB with a stable outlook. We are pleased to have this 3rd party recognition of all the hard work That we have done over the last several years and as we have placed significant focus on our balance sheet and leverage reduction. As of September 30, 2023, the total available liquidity under our revolving credit facility Was approximately $2,120,000,000 During the Q3 of 2023, we spent $418,000,000 on organic growth capital. And in October, we completed the sale of $4,000,000,000 of aggregate principal amount of senior notes and use the proceeds to repay borrowings on our revolving credit facility and prefunded 2024 maturities.

Speaker 1

Now turning to our results by segment for the Q3, starting with NGL and Refined Products. Adjusted EBITDA was $1,100,000,000 compared to $634,000,000 for the Q3 of 2022. This was primarily due to strong performances across our transportation, Storage, Terminal and Fractionation Operations. We also saw strong contributions From our optimization of hedged NGL and refined products inventories, where we recorded $107,000,000 in marketing margin compared to a loss of $126,000,000 in the Q3 of last year. NGL transportation volumes On our wholly owned and joint venture pipelines increased 14% to a record 2,200,000 barrels per day compared to 1,900,000 barrels per day for the same period last year.

Speaker 1

This increase was primarily due to higher volumes from the Permian region And on our NGL pipelines that delivered into our Nederland terminal as well as on the Mariner East pipeline system. Average fractionated volumes increased 9% to a record 1,000,000 barrels per day compared to 940,000 barrels per day for the same period last year. Total NGL export volumes grew more than 20% over the Q3 of 2022, Setting a new partnership record. This was primarily driven by increased international demand for NGLs. Through the 1st 9 months of this year, we loaded more than 47,000,000 barrels of ethane out of Nederland and approximately 21,000,000 barrels of ethane out of Marcus Hook.

Speaker 1

In total, we continue to export more NGLs than any other company During the Q3 and maintained an approximately 20% market share of worldwide NGL exports As well as nearly 40% of U. S. Exports. For Midstream, adjusted EBITDA was 631,000,000 compared to $868,000,000 for the Q3 of 2022. We saw near record throughput again this quarter, which was the result of growth in the majority of our operating regions.

Speaker 1

The strong volume growth was more than offset by significantly lower natural gas and NGL prices. Gathered gas volumes increased 4% to 19,800,000 MMBtus per day compared to 19,100,000 MMBtus per day for the same period last year. For our crude oil segment, Adjusted EBITDA was $706,000,000 compared to $461,000,000 for the Q3 of 2022. This was primarily due to higher volumes on several of our pipelines as well as the acquisition of the LOTUS assets in May of this year. In addition, G and A expenses decreased $126,000,000 as a result of one time charge related to the resolution of a legal matter in the prior period.

Speaker 1

Crude oil transportation volumes were a Record 5,600,000 barrels per day compared to 4,600,000 barrels per day for the same period last year. This was a result of higher volumes on our Texas pipeline systems, the Bakken pipeline as well as the acquisition of the Lotus assets in May of this year. In our Interstates segment, adjusted EBITDA was $491,000,000 compared to $409,000,000 in the Q3 of 2022. This increase was primarily due to placing the Gulf Run pipeline Into service in December of 2022 as well as higher contracted volumes and interruptible utilization on several of our wholly owned and joint venture pipelines. Volumes increased 15% over the same period last year Due to the Gulf Run pipeline being placed into service as well as higher utilization on many of our interstate pipelines, Including Transwestern, Rover, Panhandle and Trunkline.

Speaker 1

We continue to fully utilize Zone 1 capacity on Gulf Run And we are also maximizing deliveries into our Trunkline pipeline from Zone 2. And for our intrastate segment, adjusted EBITDA was $244,000,000 compared to $301,000,000 in the Q3 of last year. Benefits from favorable storage optimization and new contracts on our Texas and Haynesville pipelines As well as lower operating expenses were more than offset by decreases resulting from lower spreads across our intrastate pipeline network And lower natural gas pricing. Now turning to our acquisition of Crestwood Equity Partners, Which we announced in August of this year. As many of you have probably seen, earlier this week Crestwood unitholders to approve the merger between Energy Transfer and Crestwood.

Speaker 1

The acquisition is expected to be immediately accretive to DCF per unit Upon closing, in addition, this transaction will extend Energy Transfer's position in the value chain deeper into the Williston And Delaware basins, while also providing entry into the Powder River Basin. These assets are expected to complement Energy Transfer's downstream Fractionation capacity at Mont Belvieu as well as its hydrocarbon export capabilities from both our Nederland and Marcus Hook terminals. We also expect benefits within our NGL and Refined Products and Crude Oil Businesses with the addition Strategically located storage and terminal assets. We now expect the acquisition to close on November 3rd, And we expect to achieve approximately $40,000,000 in annual cost synergies before additional anticipated benefits from financial in commercial synergies. Turning to our growth projects and starting with our Nederland and Marcus Hook export terminals.

Speaker 1

September October were our best months ever across our NGL export terminals and these terminals continue to benefit from increased demand both in the U. S. As well as from international customers. Earlier this year, we FID an expansion to our NGL export capacity at Nederland in order to address the growing demand, we expect this expansion, which is projected to cost approximately $1,250,000,000 To add up to 250,000 barrels per day of export capacity. The project is expected to be in service in mid-twenty 25 and will give us flexibility to load various products based upon customer demand.

Speaker 1

Construction is underway and we look forward to providing more on this expansion as it progresses. We also continue to pursue an optimization project at our Marcus Hook terminal That we project would add incremental ethane refrigeration and storage capacity. At Mont Belvieu, We placed Frac 8 into service in August, which brought our total Mont Belvieu fractionation capacity to over 1.15 1,000,000 barrels per day. As a result, in October, throughput at our fractionators reached an all time high. Out in the Delaware Basin, we have placed 200,000,000 cubic foot per day processing plants into service since December of 2022, and we now have a total of 8200000000 Cubic Foot Per Day Processing Plants Operating in the Delaware Basin.

Speaker 1

Our plant remains near record highs, and we continue contemplate the necessity and potential timing of adding another processing plant in the Permian Basin, while considering Any available new capacity that we acquire via the Crestwood acquisition. Next, an update on our Lake Charles LNG project. We continue to see significant interest in our LNG capacity from U. S. Producers And International Markets.

Speaker 1

We are in negotiations with several significant equity partners that are ultimately targeting Retaining an interest of approximately 20% for energy transfer. These potential equity partners are also interested in substantial Volumes of LNG offtake. We are in negotiations to finalize our EPC contract and we are receiving tremendous support From domestic and international customers, community stakeholders and other interested constituents Who are actively encouraging the Department of Energy to approve our pending export authorization application on an expedited basis. And now for an update on a few other projects on the carbon capture and sequestration front. We are continuing to make progress With Capture Point, this project entails the capture of CO2 from our treating plants in North Louisiana And the construction of a pipeline to a sequestration site in Central Louisiana.

Speaker 1

We are continuing to work with OXY to develop a CCS project in Lake Charles, Louisiana area. This would include the construction of a CO2 pipeline connecting Our industrial facilities to OXY's proposed sequestration site. On the blue ammonia front, we are working with several companies to Evaluate the feasibility of ammonia projects that would include significant natural gas supply opportunities, deepwater dock access And other infrastructure services on existing energy transfer property near our Lake Charles and Nederland facilities. Additionally, we are working on CCS projects related to our processing plants and treating facilities in South Texas and West Texas, And we are evaluating other CO2 pipeline projects that would connect CO2 emitters to CO2 sequestration sites in the Houston Ship Channel Corridor. Finally, we are evaluating the use of some of our existing 250,000 acres of land in Virginia, West Virginia and Kentucky for wind, solar, forestry, carbon credits and other uses.

Speaker 1

The Virginia Department of Energy He has spent considerable time and effort evaluating a variety of projects on 65,000 acres located in Southwest Virginia. Now looking at our growth capital spend for the 9 months ended September 30, 2023, Energy Transfer spent $1,200,000,000 on organic growth projects, primarily in the Midstream and NGL and Refined Products segments, excluding Sun and USA Compression CapEx. For full year 2023, we expect growth capital expenditures to come in slightly below our previously announced guidance of $2,000,000,000 including growth capital related to Crestwood. Looking ahead, we continue to evaluate a number of other potential growth projects that we hope to bring to FID. We expect to provide our 2024 growth capital outlook on our Q4 earnings call.

Speaker 1

However, as we look forward To our potential backlog of high returning growth projects, we continue to expect our long term annual growth capital run rate to be approximately $2,000,000,000 to $3,000,000,000 Now for adjusted EBITDA guidance. For the full year 2023, we now expect our adjusted EBITDA to be between $13,500,000,000 And $13,600,000,000 including 2 months of Crestwood. We continue to see strong Volumes and stable cash flows throughout our business segments with recently completed growth projects contributing several records In the Q3. Looking ahead, we are excited to close on the acquisition of Crestwood later this week. We look forward to working with the new Crestwood employees as we integrate these new assets into our Energy Transfer franchise.

Speaker 1

We believe the combination of these businesses will present strategic commercial opportunities and efficiencies. We expect the newly acquired Crestwood assets as well as the growth projects completed throughout this year to additional opportunities and positive momentum for the rest of this year and going into next year. We will continue to pursue strategic optimization and expansion projects that enhance our existing asset base, generate attractive returns and meet the growing demand for our products and services. Our financial position remains strong And we remain committed to our targeted annual distribution growth rate, which we will continue to balance with leverage reduction, Increasing equity returns and maintaining sufficient cash flows to pursue growth opportunities. This concludes our prepared remarks.

Speaker 1

Operator, please open the line up for our first question.

Operator

Thank you. First question will be from Jeremy Tye of JPMorgan. Please go ahead.

Speaker 2

Hi, good afternoon. Hey, Jeremy.

Speaker 3

Just want to start off, if I could. If you could just provide a high level thoughts for us as the platform sits now After a number of acquisitions and projects, what type of organic growth level do you see innate in your business? What type of EBITDA growth for your base business And also at the same time, I guess, how does this impact your capital allocation philosophy? I think there's a somewhat newer slide in the deck there Maybe allude to buybacks potential there or distribution increases as well. So just wondering if you could update us on these fronts?

Speaker 2

Yes, for sure, Jeremy, and good afternoon to you. Listen, we've put out the guidance of that $2,000,000,000 to $3,000,000,000 a year, And we still have at least a mid teen type returns or high teen type returns. So you can kind of see the growth rate from there. We're going to stay with that 3% to 5% growth rate on the distributions. At this time, Clearly, we talk about that at every single Board meeting.

Speaker 2

So that's kind of the math, I think on the growth that You can see now remember, we still have the kind of the 85%, 15% Fixed versus floating. Now it's moved into more of ninety-ten just because the commodity prices are lower. So That scales around based upon where those prices are from that standpoint. So when you factor all that in and then all the other optimization opportunities We will definitely jump on when those opportunities present themselves. I think you can kind of Look at that type of growth rate.

Speaker 2

But I will say that we're going to stay with our normal schedule, meaning that with the 4th quarter earnings results, We will update the 2024 EBITDA guidance, adjusted EBITDA guidance with you. And the second part, Jeremy, did you want to just talk about the unitholder buyback? Was that the second part of your question there?

Speaker 3

Yes. Overall capital allocation, I guess, and thoughts in light of what you talked about for organic opportunities.

Speaker 2

Yes. Well, it's the capital allocation is real consistent with what we've been saying for a while, which we're Continue to focus on the balance sheet and it's a great place to be as you start approaching the low end of our 4 to 4.5 times Leverage targets. So I think when you continue to look out and you look at all these growth projects, you look at the distribution growth That we're looking at the unit holder buyback clearly remains as an option that we'll look at. You're probably going to look at being at the very low end of that range, if not a 3 handle on it, the upper 3 before You could start seeing opportunistically starting to buyback units, but that's the way that you should probably look at that.

Speaker 3

Got it. That's helpful there. Thanks. And then just want to, I guess, Shipped gears a little bit towards the Permian. Just wondering if you could provide us thoughts.

Speaker 3

I think you touched on a bit in your prepared remarks as far as Growth opportunities there, but just wondering how you see that, I guess, scaling over time, particularly as it relates to the NGL Business and opportunities along that value chain. It seems like the NGL and Products business had a quite a nice step up this quarter and just wondering if you could highlight a bit more of what was happening there?

Speaker 4

Yes, Jeremy, this is Mackie. What an exciting area. You look at the consolidation that's going on upstream, a lot of that, of course, is around the bigger deals in the Permian Basin. And as you know, most on this call, nobody is better positioned to capitalize that than inter transfer from every standpoint, from gathering, processing, NGL takeaway, intra interstate pipeline takeaway, and group takeaway. And so it all kind of begins upstream with our G and P group And our NGL team working to purchase not only those barrels from our affiliate, but also barrels from others out in that basin.

Speaker 4

And we Couldn't be more excited and well positioned to meet the growth out there and it kind of feeds into our entire partnership revenue stream When you take all that downstream and then ultimately fracking in a lot of it, of course, hitting our export markets now. So what an incredible Area of the world that we've heavily invested in and we see it paying off for many years to come.

Speaker 3

And if I could just follow-up real quick on that, I guess, on the other side of the NGL Equation, just how much demand do you see materializing? How that impacts pricing for NGL? Do you see kind of the LPGs continuing to price to export? Or just Any broader thoughts on NGL supply demand dynamics and impact on NGL pricing?

Speaker 4

It's hard to over exaggerate the Ethane and more importantly, the LPG growth. Assets cannot be built quick enough in the U. S. To meet the international demand or by no style PDHs that are being built in Asia, especially in China. There's a lot of ethane crackers that are being built.

Speaker 4

So You really can't build quick enough, but we're being very prudent. We've announced our Flexport project that's under budget, on track. We expect to have that in service by the Q3 of 'twenty five. We're close to fully selling that out and we're analyzing another expansion. It would be a much less Expensive expansion and a much less cost per barrel to expand more.

Speaker 4

So we're going to continue to make sure that all of the gas We're gathering processing that we have a home for all those liquids. So we're looking ahead and we see significant growth In our NGL business, especially our export business, both on the Gulf Coast and at Marcus Hook once again for many years to come.

Speaker 3

Got it. Makes sense. It seems to certainly build momentum for your Panama initiatives there. Thank you for the color. I'll leave it there.

Speaker 2

Thanks.

Operator

Thank you. Next question will be from Spiro Dounis of Citi. Please go ahead.

Speaker 5

Thanks, operator. Good morning, sorry, afternoon, guys. Just want to go back to one of Jeremy's questions actually. And Tom, fully respect that you're not In position to provide 2024 guidance yet, but maybe just looking at the S-four filing from Crestwood as we look to 2024, I know it's not guidance, but some of those pro form a numbers seem to indicate you guys would be approaching $15,000,000,000 in EBITDA next year on a combined basis. And so Pretty meaningful step up from 2023.

Speaker 5

So just wondering qualitatively or however you see fit, maybe help us bridge from 2023 to those Ask for numbers and I mean what parts of the business could be driving that upside?

Speaker 2

Yes. No, listen, it's great to be talking about a number that has a 15 analog. So let's start with that. When you look at that S-four, remember that those were estimates. We take our estimates very seriously When we file these things obviously.

Speaker 2

And we are still in the process of Finishing up the 2024 budget numbers, etcetera, which all go into the guidance. And that's the reason we'll always wait till that 4th quarter to come out with the very best numbers that we can. But listen, Spiro, we sure hope we hit these numbers. It would be great even if we came out with something more. But let us get through that before we put out any type of official guidance on that.

Speaker 2

We're so excited about everything we're seeing at this stage. With closing on the transaction on Friday, it's going to give us now the To even start digging deeper into the other synergies that we didn't make in any of the estimates, Especially the commercial synergies. So let us get through the close on Friday, and we're going to be very excited to be able Talk about what the 24 numbers should look like. But yes, what a great place to be to be up You know, the earnings numbers this high, so.

Speaker 5

Yes. No, no, fair enough. And we'll do our best to stay patient. One quick follow-up once again going back to capital return. Just as we think about the distribution growth, you're on this sort of nice cadence now that's become else you're really focused on?

Speaker 2

Well, the leverage is within our target. So I wouldn't want to necessarily guide you toward that, That 4 to 4.5, you can already see that we got the one upgrade from S and D like we mentioned. And the other 2 have us on a positive outlook We're going to continue to work with them to get that those up to that mid kind of that BBB level. So, I think the other component we always look at is we're always looking out at the Coverage ratio, making sure that we're staying in a good solid range there. But As much as any, we're also looking at it at a lot of the growth opportunities.

Speaker 2

So the usual capital allocation debates that you have, Any company has here and that's what we're going to evaluate. But it's not a matter of looking at any one single Point in time, it is a matter of looking out with the best crystal ball we have over the next 3, 4, 5 years. So We try to make decisions here that we stick with without kind of jumping up and down or moving around with them.

Speaker 5

Got it. I'll leave it there, Tom. Thanks for the time.

Speaker 2

Thank you.

Operator

Thank you. Next question will be from Michael Blum of Wells Fargo. Please go ahead.

Speaker 6

Hey, thanks. Good afternoon, everyone. I wanted to ask on CapEx, both in terms of this year, just what exactly is driving The reduction there, slight reduction. And then for next year, if I recall correctly, your last update, I know you said your long term run rate, you think is $2,000,000,000 to $3,000,000,000 But I think at least as of last update, you said you don't even have $2,000,000,000 of committed projects yet for Just wanted to get the latest update on where that stands as well.

Speaker 2

Yes, Michael, good afternoon. As far as the first part of your question, I would say that we continued to work on Some very, very good projects. Some of that's going to be a big metal bit of timing, but even with that, I want to be careful using that word because it doesn't mean that 2024s You don't necessarily going to go up, but that blends straight into the second part of your question. If you really kind of look at that $2,000,000,000 to 3,000,000,000 You could use $750,000,000 a year that are just kind of those growth capital projects that Well connects, all the other great projects we have that are good high returning projects that Help with the utilization, optimization of our system overall, especially with the M and A that we've been so successful on. A lot of these projects Fall kind of in that category of that first $750,000,000 I will say that with some of the stuff that we've talked about, I know Mackie has Talked about here is that those are the other projects that aren't necessarily to FID.

Speaker 2

So we can't say that we've got All of that filled in right now by any means. The other $2,000,000,000 or so from that standpoint, we're continuing to work on them. I We feel good about a lot of the projects. So it's once again, it's probably the $750,000,000 and then We'll be talking more about the other projects as we get them to FID. The one that we did highlight in the prepared remarks, course was

Speaker 6

Flexport. Got it. Okay, that helps. Thank you. And then, it sounds like a Pretty encouraging update on Lake Charles.

Speaker 6

So I guess what I'm wondering is what would be the earliest Timeframe from your perspective where you think Lake Charles could actually get to FID and then in service?

Speaker 4

Hey, Mike. This is Mackie. Tough question in that we've got a lot of balls in the air. We've covered it pretty well with Tom's remarks, we're sitting in a really good position. We really need to get the DOE to extend the permit.

Speaker 4

We think they will. We've got, as we've said, a lot of folks involved behind the scenes trying to make that happen, including other countries, other Businesses in other countries, but we're just keeping our head down pushing. We don't really have a lot of estimates. We are hopeful that we'll have some with DOE by Sometime kind of mid Q1, we're pushing and others are also pushing them to maybe do that sooner, but we don't know. It's a regulatory agency that we're working closely with And hope to make that happen sooner than later.

Speaker 4

But in the meantime, Tom Mason and his team are working hard back over there now, trying to finalize a lot of these Contracts and agreements around equity as well as new LNG off tickers. And so it's hard to kind of predict that, but Everything went exceptionally well. The Q2 could be a possibility, but we'll see how things go over the next 3 or 4 months.

Speaker 6

Great. Thank you.

Operator

Thank you. Next question will be from Brian Reynolds of UBS. Please go ahead.

Speaker 7

Hi, good morning, everyone. Maybe to follow-up on some CapEx questions as it relates to the Permian natural gas egress. It seems like we could be seeing the last brownfield expansion get contracted here over the near future. But beyond that, it seems like we need a larger pipe, of which Warrior still exists out there. So kind of just as it relates to the Warrior project At this juncture, has the scope or size of the project changed or evolved since you started marketing the project a few years ago, Just to perhaps meet specific customer needs and to get the project to ultimately FID?

Speaker 7

Thanks.

Speaker 4

Yes, Brian, this is Mackie again. We actually started really aggressively marking this 1st part of this year, but we are Pushing hard. As we've mentioned, we've got about 25% already signed up. We're working on another couple of several other Shippers that would bring us to about 60% or 65%, but we're going to be pretty careful on this. We're very careful like we always are.

Speaker 4

We're going to be prudent. We're not going to move forward with FID until we have a substantial amount of that capacity sold out. And it also It will feed into not only markets that we're already connected to with our intrastate network, but also we'll have a lot of kind of momentum if Some of these other LNG projects get to FID. So we're kind of like a lot of these big projects working on, they're just taking time. We see Brad, other than a few days or weeks where it blows out a little bit, the spreads are very tight.

Speaker 4

There's not a lot of paint right now at Waha for the most part. Think that's going to get really difficult as we go into 'twenty four until the next pipeline is built. So we do think we'll pick up more momentum and we're going to push hard. And kind of similar to my comments around LNG, we hope to maybe get to FID on Warrior sometime maybe in the Q2 of next year.

Speaker 7

Great. Super helpful. And maybe to just touch on the M and A for the year with Crestwood and Lotus coming into the fold here. Can you just maybe talk about how some of these acquisitions have maybe perhaps helped defer some capital? I know Crestwood has some Permian processing capacity and I think you alluded to And the prepared remarks that some of that excess processing capacity might be able to defer a processing plant a little bit.

Speaker 7

So how should we think about processing capacity for For 2024, 2025, do we need to see another new build coming in next year? Or could we see some capital get deferred into the following year as it relates to maybe the crude side LOTUS or Crestwood on the NGL and processing side? Thanks.

Speaker 4

Yes, this is Mackie again. Yes, we as you can understand, we haven't been able to really dig in to the Crestwood assets We don't close officially till Friday. But from a high level, we certainly recognize some capacity that's available really in all regions, both in the Bakken and the Powder As well as in the Delaware, we are constantly evaluating when is the next time to kick off the next cryo to make sure we meet our obligations as we sign Producers, but clearly, we believe that this is going to give us some time to defer that decision. We were thinking have to make that decision kind of Q1 of next year, whether we're going to start kick off another plant that's probably going to push it back at least 3 to 6 months. So we'll see Kind of as we fully are able to analyze and look at these assets and see how they logistically blend in, but we're pretty Confident that a minimum is going to delay building a new cryo at least some period of

Speaker 1

time. Great.

Operator

Thank you. Next question will be from Jeanine Salisbury of Bernstein. Please go ahead.

Speaker 8

Hi. There's a lot of new NGL pipes Gateway to whether that contractual duration wise and does it drive more interest in inorganic opportunities in the basin?

Speaker 4

Yes. This is Mackie again. We have noticed that there's a lot of top lines announced here in the last couple of days. What we try to do as a partnership is not really worry about what others are announcing or what others are building. We kind of focus on what do we need to build to Accommodate our customers and to meet the demand growth of those that we're working with.

Speaker 4

And we are very well positioned right Now we move about a third of every barrel of NGL that's produced in the Permian Basin. We have the ability to move 100,000 plus more barrels, we can add pumps and move probably in the neighborhood of 250,000 more barrels. So we've got some kind of dry powder Our dry capacity available capacity, we'll be able to expand on. So I think any kind of considerations or determinations From us, probably a year or longer away on even contemplating another pipeline. We're positioned pretty well To move everything we've signed up in addition to more growth than we expect from our GMP business.

Speaker 8

Great. That makes sense. To be clear, I'm certainly not pushing you to expand Lonestar, but that's super helpful. And for your Nederland NGL export expansion, I know that you're talking to a lot of ethane counterparties, But it seems like you haven't quite, signed the contracts yet. Is there a way to think about it that given how tight LPG export capacity is, It will probably start mostly as LPG and then as your ethane contracts eventually get signed and kick in, a greater share will become ethane?

Speaker 4

Yes. I think I would answer it this way. We are in constant dialogue and negotiations across the board. We have Probably at least 140,000 barrels of ethane customers that we're negotiating with right now, of which some prefer Marcus Hooks, some the Gulf Coast We'll have the ability to kind of swing the volume between either one. But clearly, LPG is also in high demand.

Speaker 4

And so We're there's not a shortage of international customers, and we're very excited, as we've said earlier, That we're not only very well positioned to meet that, but also very well positioned to meet the growth 2 years from now and beyond. So We do think space is going to get pretty tight. As you can see by our results, we're moving more volume. We're hitting records in almost Every aspect of our NGL business, including our export, and we're seeing the margins widen. And we think we'll see that over the next Couple of years and then we'll have new contracts lined up to come online when our Flexport.

Speaker 4

So we're pretty excited. We got in this Export business a little later than most of our competitors, certainly the our biggest competitor. And we've kind of Have gone from nowhere to the leading exporter in the world, and we're proud of that, proud of our commercial team who's done all these deals, proud of our E and C team have built these assets so quickly. We're proud of our operating team led by Greg McElwain, who runs these systems efficiently and Reliably and more importantly, safely. So we are very proud of our team and what we've done over the last 5 or This year is to kind of start from nowhere to grow to where we're at today and we have such a bright future on the assets that we are building now and the contracts that we have in.

Speaker 8

Great. I'll leave it there. Thank you.

Operator

Thank you. Next question will be from John McKay of

Speaker 9

Thanks for the time. Maybe just taking that last piece, I mean, you talked about exports probably being The tightest part of the value chain for you right now, at least that's what we're picking up on. But I guess if you're looking across The kind of broader ET and kind of ET combined Crestwood footprint right now, where else are you seeing relative tightness and A call on the market, you guys or others to add incremental capacity. Is it the Haynesville? Is it more on processing in the Permian?

Speaker 9

Just curious Thoughts overall if we're looking maybe beyond export?

Speaker 4

Yes. Let me just hit every region real quickly to kind of address, I hope, your question in the So you start in the Northeast, we're positioned incredibly well. On any kind of product growth up there, whether it's ethane or LPG, we are The only outlet with our Mariner franchise. So we call it dry powder, available capacity, whatever you want to call it, we are ready to capture any kind of growth up there. And then As you come further south, we mentioned that we've got the ability to grow our transport volumes from the Permian Basin fairly significantly.

Speaker 4

We're expanding our Flexport Fairly significantly and we haven't really hit on this on this call, but there is a lot of gas in North Louisiana. Yes, it slowed down a little bit with gas prices Here in the last 2 or 3 months, we think it's going to pick back up as prices have improved and will continue to improve. There's enormous reserves there. On top of that, we have multiple intrastate and intrastate pipelines that feed into East Texas and North Louisiana. And so we're very optimistic on Our Gulf Run expansion, we can add compression and add a DCF a day, but we think it's much more likely that we will Enough to loop our existing Gulf Run Zone 2 pipeline, especially aligned with LNG, If we get that FID, but we see that as a certainly a huge growth area for us on a large pipeline project somewhere in the future, Along with what we've already talked about our Warrior project and other areas.

Speaker 4

So depending on where The area is we're either situate very well to grow with next no capital or we have such an excellent position to Aggregate volumes to support a project like Gulf Run, an expansion project like Gulf Run.

Speaker 9

That's clear. Thank you. Maybe just Following up, if we think about 2023 guidance overall, can you just maybe a quick breakdown of how much of the step up was Crestwood versus kind of underlying Business outperformance and maybe if you're touching on the Gulf Run contributions, 3rd quarter interstate Was particularly strong. The 3rd quarter organic gas overall was pretty strong, particularly for kind of a shoulder season. Is this a clean new run rate from here?

Speaker 9

Are there any kind of one offs in there? Thanks.

Speaker 2

Yes. No, listen, I think the best way to look at that as far as the guidance goes in the split Between the two is, the guidance we had coming into this quarter that we provided at the end of the second quarter was $13,100,000,000 to $2,400,000,000 as you know. As you really looked at the new numbers we gave, you can probably say that the Existing business was right at the top end of that range and the rest of it would be Crestwood, but Crestwood would be net transaction cost. So that's what we're currently expecting right now. Still maybe some moving pieces As we get into the Q4, we feel pretty good about the 13.5 to 13.6.

Speaker 9

That's clear. I appreciate it.

Operator

Thank you. Next question will be from Neil Mitra of Bank of America. Please go ahead.

Speaker 10

Hi, good afternoon. Thanks for taking my questions. Firstly, it seems Cushing inventories are extremely low right now. So wanted to understand how your Centurion flows and your overall LOTUS acquisition was able to materialize on this dynamic in the 3rd quarter?

Speaker 4

Yes, you bet. This is Mackie again. Yes, to do a shout out to Chris Hefty and his team and what they've done over the last 2 years, it's just been As you look at Enable and kind of what it's done over the last year and a half and the synergies that we found and the same with WEX. And Lotus, same thing. We continue to look at significant commercial synergies around blending.

Speaker 4

As we have made an announcement, we are looping pipes so that we can move more volume to benefit when the spread blows out between Midland and Cushing. So we're slowly positioning ourselves to become a much bigger player to be able to move volumes between the Cushing and Midland areas as well as, of course, to the Gulf Coast to our Houston and Nederland Terminal. And I think likewise, we're going to see with Crestwood a lot of the same Synergy. So we're pretty excited about our ability to buy these assets at the values we're able to buy at. They're great Standalone companies and assets and then once we blend them in, like your question with LOTUS, we're finding significant synergies that we didn't recognize As we're presenting these acquisitions.

Speaker 10

Got it. And then my second question, you've Had a lot of success building Permian to Mexico natural gas pipelines And it seems like the utilizations on Comanche Trail and Trans Pecos are picking up and you have a competitor looking to build a pipeline to the border as Well, with some of the West Coast LNG demand and increased industrial demand in West Mexico, Are you seeing any appetite for pipeline expansions down to the border or possibly participating And a new project to move gas to Mexico?

Speaker 4

This is Mackie again. No, we're not pursuing anything right now. As you mentioned, we are ramping up our 2 pipelines out in West Texas that we deliver either directly into Mexico or into other larger diameter pipelines, but no, we don't have anything on the drawing board. Yes, we are aware of some proposed pipelines out of the Waha area heading west, but we are involved in any of those projects at this time.

Speaker 1

Okay, great. Thank you very much.

Operator

Thank you. Final question will come from Gayemarin of Mizuho. Please go ahead. Sort of the uplift in pricing on your interstate gas pipelines and storage, It seems like if I'm reading it right, some of the outlook may be accelerating.

Speaker 6

Can you just talk about sort

Operator

of how you feel your position rate case outcomes aside and what what extent that's still going to be wind at your backs going forward into 2024?

Speaker 4

Hey, Gabe, this is Mackie, and I apologize. We started hearing about halfway through your question. Sorry.

Speaker 6

Okay. Can you hear me now, Mackie?

Speaker 4

Yes.

Speaker 6

Okay, great. I was just going to say to what extent repricing your interstate gas pipeline and storage capacity is going to be wind at your backs in 2024? Seems like some of that is accelerating as we progress through 2023?

Speaker 4

Yes. Years ago, this wasn't fun to talk It is now. When you look at the value, for example, on MEP or on Tiger or on Gulf Run or even on Sesh, We're seeing growing, growing demand on all of those assets, KeyW. I mean, just pick an asset and most of what we're doing right now is either at tariff or close to Sure. The demand is there.

Speaker 4

A lot of the gas throughout this country is trying to find its way to the Gulf Coast. We're very well positioned to benefit from that with all the pipelines I just mentioned in others, so we don't really unlike years past, we might have had some concern when contracts were terminating of what we could do with that available I mean Tiger is a very example. I mean Tiger was about half empty with spreads down to $0.05 or $0.06 and now we're running it full At much bigger spread. And so we're pretty excited about any available capacity. Once it comes out from the contract, we think worst We'll go over it.

Speaker 4

Similar, if not higher rates than we already are at unless we're already at tariff.

Operator

Thanks, Mike. Thank you. That concludes our question and answer session. I'd like to turn the call back over to Mr. Tom Long for closing remarks.

Speaker 2

Once again, thank all of you for joining us today. We greatly appreciate all your And we look forward to talking to you in the near future.

Operator

Thank you. That concludes our conference today. Thank you for attending. You may now disconnect.

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Earnings Conference Call
Energy Transfer Q3 2023
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