Energy Transfer LP

Good day and welcome to the Energy Transfer LP First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

...and anticipated in service in mid-2025 for the initial phases of the project. And as mentioned on our last call, we are also building new refrigerated storage at Nederland, which is expected to increase our butane storage capacity by 33% and double our propane storage capacity. This will further increase our ability to keep customers' ships loaded on time and give us the ability to more than fully optimize our export capabilities. We expect the total combined cost of these two projects to be approximately $1.5 billion. At our Marcus Hook terminal, construction continues on the first phase of an optimization project that would add incremental ethane refrigeration and storage capacity. On our Lone Star NGL pipelines, we recently FID'd two projects that will de-bottleneck our West Texas Gateway and Lone Star Express pipelines. On the Gateway Pipeline, a de-bottlenecking project is underway that will allow us to fully utilize our interest on the EPIC Pipeline and optimize our deliveries from the Delaware Basin into the Gateway Pipeline for deliveries into Mont Bellevue. These upgrades are expected to be completed in 2025. As a reminder, this undivided interest was acquired as part of the Crestwood Acquisition And it's just one of the several synergy projects we are working on. And on the Lone Star Express, we are completing upgrades that are expected to provide more than 90,000 barrels per day of incremental Permian NGL takeaway capacity upon its anticipated in-service in 2026. The combined project costs are expected to be approximately $125 million. Upon completion of these two projects, Our total deliverability in the Mont Bellevue is expected to increase to more than 1.3 million barrels per day. As we mentioned on our last call in early 2024, we closed on the acquisition of two pipelines, the Sabina 1 pipeline from Mont Bellevue to the Houston Ship Channel and the Sabina 2 pipeline from Mont Bellevue to our Needland Terminal. We recently commenced the conversion of the Sabina 2 pipeline provide additional natural gasoline service between our Mont Bellevue NGL complex and our Nederland storage and export terminal. This project, which we anticipate will be in service in 2025, is expected to increase the capacity from 25,000 barrels per day to approximately 70,000 barrels per day. In addition, discussions are ongoing to provide transportation for potentially multiple products on the Sabina One pipeline that extends from Mont Bellevue to the Houston Ship Channel. As a reminder, in addition to the incremental processing capacity acquired through the Crestwood acquisition, we are expanding our processing capacity at several of our existing processing plants. In total, we are moving forward with upgrades to add approximately 200 million cubic feet per day of processing capacity in West Texas. In addition, we recently completed upgrades in South Texas that added approximately 60 million cubic feet per day. These upgrades can be completed at more favorable capital cost when compared to building a new processing plant. Also, we continue to increase optionality and improve reliability along our pipeline systems. At the end of 2023, we completed a backhaul project on our trunk line pipeline. The project added an incremental 400,000 MCF per day of southern flow capacity on the pipeline system at very efficient capital cost. Looking at our crude oil assets, we're adding a direct connection from Midland to our pipeline that flows from the Permian Basin to Cushing. The construction of this approximately 30-mile pipeline continues, and upon its anticipated completion in the fourth quarter of this year, It is expected to be able to transport approximately 100,000 barrels per day of crude from our terminals in Midland, Texas to our terminal in Cushing, Oklahoma. We also continue to develop our proposed Blue Marlin offshore project, and we are hoping to receive the draft EIS this quarter. As a reminder, in November of 2023, we announced a Heads of Agreement, or HOA, with Total Energies for crude offtake. and additional customers remain very engaged and interested in our project, recognizing the value of fully loading VLCCs and the reduced execution risk that comes with repurposing existing underutilized assets. Now for an update on Lake Charles LNG project. As we discussed on our last earnings call in January of this year, the Biden administration imposed a moratorium on the approval of LNG exports while the Department of Energy conducts studies to determine whether LNG exports are in the public interest. The Biden administration stated that these studies would focus on the cumulative impact of LNG export on climate change, U.S. natural gas prices, and the impact of LNG facilities on local communities. We remain optimistic that the DOE studies will continue to support DOE export authorizations, particularly for LNG projects that have lower Scope 1 and Scope 2 emissions profiles, like Lake Charles, and so we continue to believe that Lake Charles LNG will receive a DOE export authorization in due course. As such, Lake Charles LNG continues to pursue the development of the project. In this regard, Lake Charles LNG is in discussions with LNG offtake customers for the remaining unsold offtake volumes necessary to take FID. Lake Charles LNG remains extremely thankful for the continued support of its existing LNG customers. And for a brief update on other projects, Energy Transfer has approved eight 10-megawatt natural gas-fired electric generation facilities to support the partnership's operations in Texas. We expect these facilities to go into service throughout 2025 and 2026. On the blue ammonia front, we continue to develop an ammonia hub concept at Lake Charles, Louisiana, and Nederland, Texas, where we have deep water access at our existing facilities. This hub concept would allow us to provide critical infrastructure services to several blue ammonia facilities, including natural gas supply, CO2 transportation to third-party sequestration sites, ammonia storage, and deep water marine loading facilities. This hub concept is expected to promote economies of scale and efficiencies as compared to individual stand-alone blue ammonia projects, and the market response to this approach has been favorable. Yesterday, we entered into an agreement with Capture Point that commits CO2 from our treating facilities in northern Louisiana to the capture and sequestration project being jointly developed by Capture Point and energy transfer. Now looking ahead at our 2024 organic growth capital guidance. With the addition of several new growth projects, we now expect 2024 growth capital expenditures to be approximately $2.9 billion, which will be spent primarily in the NGL and refined products and midstream segments. This has been revised from our previous guidance for approximately $2.5 billion to include newly approved debottlenecking projects on our Lone Star Express and Gateway NGL pipelines, the Sabina 2 pipe conversion, optimization work at Mont Bellevue, backhaul, looping, and compression projects on FGT, new power generation facilities, as well as additional processing plant optimization in the Permian, and gathering system build-outs and compression projects in the midstream segment. We continue to expect our long-term annual growth capital run rate to be approximately $2 to $3 billion. Now turning to our adjusted EBITDA guidance, we are raising our 2024 adjusted EBITDA guidance to be between $15 billion to $15.3 billion, compared to our prior guidance range of $14.5 to $14.8 billion. Our 2024 guidance has been updated to include earnings related to Sunoco's acquisition of the NuStar assets, which closed May 3rd. As we look at our first quarter performance and bring the NuStar assets into the family, we continue to be excited about 2024 and are comfortable that we can deliver on our plan despite various market headwinds like lower gas prices and production curtailments that have impacted midstream volumes. Overall, worldwide demand for crude oil, natural gas, natural gas liquids, and refined products remains strong, as does demand for our products and services. We will continue to position ourselves to meet this demand by strategically targeting optimization and expansion projects that enhance our existing asset base and generate attractive returns. We also continue to pursue synergy opportunities around recently acquired assets, with several projects underway, including the optimization of processing capacity in West Texas and NGL pipeline takeaway capacity from the Delaware Basin. Our financial position continues to be stronger than any time in energy transfer's history, which we believe will provide us with the continued flexibility to balance pursuing new growth opportunities, further leverage reduction, maintaining our targeted distribution growth rate, and increasing equity returns to our unit holders. That concludes our prepared remarks, operator. Please open the line up for the first question.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you were using a speakerphone, please pick up your hands up before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. As a reminder, please limit to asking only one question and one follow-up question. At this time, we will pause momentarily to assemble our roster. The first question comes from Jeremy Tenette with JP Morgan. Please go ahead.

Hi, good afternoon. Hey, Jeremy.

Good afternoon.

Just wanted to start off with regards to Crestwood. Now that the acquisition has been under your belt for a little bit here, I'm wondering if you could update us a little bit more. You talked about the synergy capture a bit before, but just what you see now as far as the impact and what you see, I guess, for potential synergies across commercial, cost savings, what have you. Just curious for your latest thoughts there.

Yes. Jeremy, I'll go ahead and start. We still feel very good about the $80 million on the cost synergy side that we said we would be able to achieve, and that's going well. Then I'm looking over at Mackie who will comment on the commercial side of it.

Yeah. Jeremy, every time that we go and acquire somebody, we always have anticipated synergies, and then we just dig stuff up and find things. Once again, we're doing that with Crestwood. Some that we can talk about, for example, in the – Permian Basin, they've got some idle capacity that we'll be able to utilize sooner than later to delay any kind of expansions we may need out there. There's also some things going on up in the Bakken that we can't really elaborate on, but very significant opportunities up there to help not only fill up some of their available iron out, but available processing capacity, but also bringing fairly significant more barrels into Dakota access. And there's others we can go out of river, other areas, but we're very excited.

about what we've seen early and look forward to really benefiting from some of these synergies we've already recommended.

Great. Thank you for that. And I appreciate the guidance update reflects the Sun acquisition of NuSTAR there. But if I just want to kind of parse through that a little bit more, and see how the base business for ETs proceeding versus guidance provided before. How would you describe, I guess, the outlook at this point versus before, if it's similar or if anything has changed?

Similar is going to be the short answer. You know, we had the $14.5 to $14.8 billion. We're including in an incremental $500 million just for that portion of the year for Sunoco. So that's what you're seeing at this time with where we are in the process. Sunoco team has done a great job, and they'll be probably updating that number a little bit more as we go forward. But right now, $500 million is the number that we're using.

Got it. That's helpful. Just the last one, if I could. I think you talked about the potential for ink.

Increasing equity returns and just wondering if you could comment a bit more on what you meant there You know there's obviously two as far as just the overall equity Jeremy if I understand you correctly equity equity returns meaning that we continue to bump the distributions, but Don't ever want to say that we're not focused on unit buybacks when we we get to the right right place from a leverage standpoint, and what I mean is when we're kind of looking at it, the forecast will be opportunistic there.

Very helpful. I'll leave it there. Thanks.

Our next question comes from Spiro Donis with Citi. Please go ahead.

Thanks, operator. Afternoon, everybody. Maybe to start with some of the new projects and the CapEx update, Mackie, your team has clearly been busy over the last quarter with all those additions. Curious now, just given you're sort of higher into the range of $3 billion at this point in the year, anything that could sort of tip us over that that's in the hopper? Are you contemplating that in that new range? Thinking about projects like Blue Marlin, Warrior, Gulf Front Expansion, anything to kind of point you to that that can get us over that?

Yeah, this is Mackie. everything that we have in right now is what we're going to do. Next 30, 60, 90 days, we may make significant progress in some of the things we're working for, but the things that we announced recently, the additional $400 million are things that we have approved here recently that we've kicked off. Several of those will actually come online later this year. All of them will come online within two years or earlier. We're adding more capital, but we're also going to see revenues much quicker than

of course, a lot of our projects. Got it. It's helpful.

And I just want to go to the slides. One sort of pointed to new opportunities you're evaluating on the power plant side to connect into new and existing power plants. Curious if you could expand on that and what that could mean in terms of scope. Is that sort of interstate pipeline expansions? And then are we also talking about brownfield or even greenfield storage expansions?

Yeah, I tell you, it's kind of a first small step for us. But as everybody is aware, certainly in Texas and throughout many states, the grids are in jeopardy, very cold or hot weather. So we're doing what we can to help support that. But really, the driver behind what we're doing on adding these 10 megawatt at a time facilities is, number one, reliability. It's to make sure that when we have glitches off the grid, especially out in West Texas where those are not uncommon, that we can keep our facilities running. In addition to that, it also will help grid security. For example, we'll be able to, in the kind of URI type or cold weather type circumstances, when ERCOT asks us to get off the grid, we'll be able to get off the grid, keep our plants running reliably, and allow that excess energy that we're not going off the grid to benefit producers, for example, upstream that might have issues with losing electricity. So we think what we're doing are kind of small steps that we'll grow into to help make our system, our assets much more reliable, the grid more stable. In addition to that, we won't go into this in great detail, but there's also a lot of revenue benefits from LAR and ancillary services that we'll be able to provide with this added generation. So we're pretty excited about it. It's kind of small stuff right now, but it makes a lot of sense for our partnerships.

Great. I'll leave it there for today. Thank you, gentlemen.

Our next question comes from Keith Stanley with Wolf Research. Please go ahead.

Hi. Good afternoon. Wanted to go back to the interstate gas sales and the strong results there. Is there any more detail you can give on the optimization opportunities you saw that drove the $250 million gain? And then, relatedly, just any updates on how much capacity you have available to benefit from Permian differentials this year, and anything on the Warrior project as well. Thanks.

Okay. Let me start with the end of that.

So on Warrior, our team continues to work. One thing we are doing, we're going to be very disciplined and prudent We're not going to run out and announce a project unless we feel good about all of our capacity sold long term. So we're not going to run out in an FID warrior when we have capacity on our existing system that we're still terming up. So we're working hard. The positive LNG has impacted a little bit with some of the bigger customers that we're working with. However, there remains, as everybody in this call probably knows, a strong interest in another pipeline, probably by mid-2021. to late 2026. We're very optimistic that we will be the next pipeline to come out of West Texas, and we'll continue to work hard to get that finish line when it makes sense. As far as the spread across Texas, it kind of varies from month to month, but it's certainly north of 300,000 a day of MCF a day that we have available that are benefiting from these widespread, you know, we sure hate to see prices do what they're doing at Waha, but that's what happens when you have capacity constraints, which we have right now out of the Permian. And so there is a pipeline coming on later in the year that will alleviate a lot of that, but certainly the way we're positioned is very well to take advantage of that type of spread for our customer's benefit as well as for our own benefits. As far as the intrastate revenue, it's what we've built. We feel extremely fortunate with the assets we have throughout the U.S., but especially in Texas, and then the team we have that's operating those assets, where really cold weather times or really volatile times, even really hot weather, we have the ability to create a lot of revenue by peak hourly sales or putting some storage positions on, moving gas from west to east, even back home. There's just a lot of things we can do with our massive intrastate pipeline network in Texas area. And so, you know, we see this every year. We see it most winters, May time, and summers where we're able to capture kind of some unexpected revenue that will always be there at very volatile times at some level.

Appreciate the detailed answer. Second question on just on M&A and how you're thinking about things and so, you know, and thinking about it from the lens of energy transfer and then obviously you have Sun as well, which I know is an independent company, but there's a fair amount of overlap now in some of the assets and business mix between ET and Sun. So how do you think about M&A going forward and kind of what types of acquisitions or assets make more sense at the ET level versus the Sun level and any differentiation there?

Yeah, listen, that's – obviously a very very very good question we spent a lot of time within energy transfer strategizing here i will uh you know i think i will start off saying that we still feel like consolidation makes sense in the midstream space so just at the at the 50 000 foot answer to your question we still fully intend on evaluating various opportunities as as we look out so We're not going to slow down on that front. Now, as far as what we look at, it's going to be always trying to look at those things that feed all the way downstream. We always like to talk about how we go from wellhead to the water, and we do it across all the commodities. So you can see our strategy as we look at this stuff and what assets we look at as to how it feeds all the way through the value chain when we make these acquisitions. And it gives us great opportunities for commercial synergies when we do that, as well as the cost synergies. Now, I guess as to the last part of your question about the energy transfer versus Sunoco, clearly the Sunoco team has done a fantastic job on this new start. Couldn't be more excited about that asset base coming into the family here. So what you'll see is this. You'll see that they're in kind of the wholesale fuel distribution, terminal business, et cetera. And you're right. There's going to be some overlap. And in those instances, we'll look at ways on a combined basis of what we can do. But Sunoco is going to continue to make those kind of acquisitions. This is really their first big public company transaction. They've made a lot of other asset acquisitions. But it's clearly something that's very relevant. very accretive to them and it's, you know, very good for the family from that standpoint. And I'm going to look across the table to Mackie and give him a chance to add in a little bit more even on the latest new star acquisition and some of the

optimizations we might be looking at here so you bet yeah and I want to elaborate much more on what Sun said or anybody that follows them they kind of explained that I you know we're excited for them they are kind of stepping up and kind of growing up a little bit in one regard as far as different type of assets and there are some assets that overlap we think there's a real benefit and potentially partner up with them so we are in discussions of possibly doing that and If opportunities arise that are very beneficial and accretive to both of our partnerships, as we do with other JVs, we look forward to catching those opportunities as time moves forward.

Thank you. Did that answer all your questions there? It sure did. Thanks. Okay.

Our next question comes from Manav Gupta with UBS. Please go ahead.

Hi, a quick question as it relates to your slide six. When we look at 2024 CapEx, 80% of that is between NGL, refined products, and midstream. And I know it's still early, but with your crystal ball, if you look at 2025, do you believe this mix could change significantly in the next year where other segments could get more CapEx? Like any view over there would be very helpful. Thank you.

Yeah, I can start with that. I guess looking at it right now, nothing jumps out that would change it significantly. However, you walk through some hypotheticals, let's just say everything, the pause gets lifted, for example, on LNG. We intend to own maybe 20%, 25% of that. That could start earlier. That's probably not likely, but it just kind of depends on a warrior. Does it pick up later in the year, sooner or later? So there's a lot of different variables and negotiations going on and even permitting issues with the government. So I think the high-level answer to that, that kind of spin rate wrong right now, at least through 2025, that's pretty consistent. But we've got a number of projects that I just alluded to in different segments that might begin quicker than others, and that would, of course, skew it one way or the other.

Thank you. A quick follow-up. At Marcus Hook, I think on the last quarter call, you spoke about construction of the first phase of optimized appreciation project that could add ethane refrigeration and storage capacity. Is there any update on that one? Thank you.

No update. We're excited about that phase, and we're diligently moving through that phase. We will be adding ethane storage and we are excited about the future of our export facilities and capabilities and revenues out of Marcus Hook for many years to come.

Thank you for taking my questions.

Our next question comes from Michael Blum with Wells Fargo. Please go ahead.

Thanks. Good afternoon, everyone. I wanted to ask, go back to the the eight 10-megawatt gas-fired power plants you announced for Texas. Just to clarify, are these basically peaker plants? Are you going to supply them with your own gas? And how do we think about return on investor capital for an investment like this?

Hey, Mackie. Yeah, we will provide the natural gas for these with our own facilities. As I mentioned, the two main drivers here are reliability, number one, for our assets, keep our plants running, keep the gas flowing, and number two, to benefit the grid. In our economics, we don't expect necessarily to run these a lot. There's almost 9,000 hours in a year where we have run economics running about 1,300, which we think will be significantly lower than what they will run, and that meets our rates of return hurdle. That has no anomalies in it in regards to like a URI type situation or any kind of cold weather or any kind of huge run-up in power prices or any benefits from ancillary services or LAR and things like that. So like I said, we're not putting these in to try to create significant returns, but it very likely could create a lot better returns than what we're projecting, but we're really building these for reliability of our assets in the grid.

Okay, got it. Thank you for that. And then just a follow-up on the Warrior potential project. Just to clarify, if you want to have this in service by 2026, when do you need to get FID on that?

Pretty quick. No, probably by, we typically, you know, I say typically, a lot of changes over the last three or four years, but If we're able to get FID hypothetically, for example, by late third quarter, early fourth quarter, we believe we'll have it in by the end of 26 at the latest.

Great. Thank you.

Our next question comes from Teresa Chen with Barclays. Please go ahead.

Good afternoon. Follow-up question related to the M&A topic. Related to your comment about wanting that wellhead-to-water strategy, so pro forma the new star assets in the family, you now have an expansive crude oil system, Permian to Cushing, Permian to Nederland, and a sizable Corpus Christi export facility. So the long-haul movement between Permian and Corpus Christi, is that a natural area where you might want to fill your portfolio?

Sure. I mean, anywhere we can... connect the dots from where producers want to go to the best markets. We want to be in that market. We certainly, over the years, have been focused on bringing as many barrels as possible from Bakken, from Midland, from Cushing, to our Nederland and Houston assets to benefit those, as well as our downstream pipes with Bayou Bridge and our VLCC project. But certainly, if there are any assets for sale that can move more crude, for example, from Midland down to Corpus. We'll always look at those. But remember, those are new start assets. And so they're the ones that will be chasing those opportunities wherever we might fit in, where it might make sense and they want to talk to us about. We're certainly open to that.

But that's probably a better new start question related to Corpus.

Got it. And looking at the Dakota Access Recontracting Outlook and all the way through Bayou Bridge, Just taking into account TMX now being online, shipping not just WCS West, but also Syncrude, which seemingly has indirectly compressed Bakken dips given the connection to Mainline. What is your outlook for DAPL recontracting coming up in a couple of years and balanced with the incremental barrels that you're getting from Crestwood?

Yeah, we love Bakken. We love what we've done out of there. proud of the role we've played to get barrels out of such a great basin to refineries in the Midwest and the Gulf Coast. So it's been a great asset for us. It's funny, through the years, there's times when we have recontracting concerns on different assets, and that's just not one of them. We think long-term, you know, there's blips from time to time. We think long-term, it is the premier optimum outlet for producers. The best way to get your production to, as I mentioned, Patoka and into many of the mid-continent refineries, as well as to refineries around Port Arthur and Houston, and then, of course, into Bayou Bridge, all the way over into Lake Charles and the St. James refineries. And then you add on our BLCC project. So it's an asset that we're not really concerned if there's companies that aren't willing to roll it over for a long period of time or a period of time that makes sense to us. We may go year at a time. We don't have a lot of concern. We think that basin is going to be very stable for the next five to ten years. We don't see massive growth, but as long as oil prices remain fairly strong, we do see, like I mentioned, stable, kind of consistent flows out of there. We do believe we're the best option for producers, and so we'll engage with anybody that wants to roll over.

We're already talking to some of them, but it's certainly not something we usually sleep on. Thank you so much.

Our next question comes from John McKay with Goldman Sachs. Please go ahead.

Hey, thanks for the time this afternoon. Maybe just to take one more at the power plant side. Yeah, I guess curious, are you guys operating any small plants now or have you in the past? And then if I think about this potential capacity you're adding, it's I guess relatively small versus what ET probably consumes overall. So do you think there's room for you guys to expand this number over time, and should we think of this as maybe kind of a first look on a kind of set of projects from here?

Yeah, John. In fact, I thought I said it earlier. I probably didn't make it clear enough. Yes, these are first steps. There's grid problems all over the country, and Texas is no exception. A lot of people are moving in Texas, a lot of data centers, A lot of AI data centers, crypto miners are still coming in, industrial growth. I mean, it's just, we're so optimistic on, you know, for natural gas fire generation. So it's something that we will continue to look at and we will, it'll be highly unlikely that we don't announce more of these as each quarter goes on. But we are, you know, we will be the operator of these. As I mentioned earlier, these aren't peaking units. They are units that are very good heat rates. So they're very efficient and provide very well-priced megawatt cost when we run them. And so this is just kind of the first step, and we're excited about where this may take us, especially in some areas, for example, maybe at Montbellevue, where we think there's a real opportunity there, and then some other of our bigger cryo complexes around the state. So it's an area that we will continue to grow.

I appreciate that detail. Maybe just zooming out or moving over a little bit, can you spend a minute maybe just talking about the Blue Ammonia Hub, maybe kind of what your role in that could look like, what kind of pieces of that value chain you'd want to own versus maybe having a partner come in and kind of run it with you?

Yeah. We keep talking about how excited we are for all of our fossil fuel business, especially natural gas. incremental in so many things, and certainly with ammonia production. So right now, probably a little bit higher priority, a little bit more focus is in the Lake Charles area. We've got a lot of momentum with some very significant players that really know what they're doing. We're approaching this very similar to our LNG project and our potential pet chem, in that we don't want to be big owners of ammonia. Do we want to operate? Yes. We'll retain the ownership of some level, very likely or possible. But what really drives us is, to give an example, one of these ammonia plants will deliver approximately 120,000 to 130,000 MCF a day. At Lake Charles, we're looking at anywhere from maybe five to seven over a certain period of time. So it's not insignificant natural gas transportation revenue. In addition to that, we'll have storage revenue. We'll have terminal revenue. We'll be able to load it there at Lake Charles. We see enormous growth for ammonia. Everybody probably knows that fertilizer is to feed the people of the world. It's going to do nothing but grow, depending on the experts, 2% to 4% over the next 10 or 15 years. And now you've got this power side of it and fuel side of it where ships are being built to burn ammonia as their fuel. You've got bunkering for ammonia. And then you've got in South Korea and Japan and other places where ammonia is going to be blended with coal for fuel. So there's a big – it's another big plus for NuStar and the ammonia pipeline they bought. We see a big future in ammonia, and it's interesting from an ET standpoint, as I just said. It really helps facilitate our natural gas transportation business as well. So we're very excited about where that's headed, and we'll do the same thing, we hope, as well in Nederland.

Appreciate all the detail. Thank you.

Our next question comes from Elvira Escoto with RBC Capital Markets. Please go ahead.

Hey, good afternoon, everyone. Can you talk a little bit about what you're seeing, producer activity in the Hainesville? Looks like there was some decline on your system. Also, what you're seeing relative to what's embedded in your original expectations or your guidance, and then how you see that activity trending the rest of the year?

Yeah, this is Mackie again. Certainly lean plays throughout the U.S., Marcell, Utica in the northeast, parts of Oklahoma and Texas and east Texas, and certainly Hainesville. We've seen a slowdown. There's no ifs, ands, or buts. When prices fall to about $50, $60 at Henry Hub, it puts a lot of pressure on producers. So, yes, we've seen it fall off fairly significantly in the U.S., Northern Hainesville. For our interstate group, though, I got to get a shout out in that our volumes grew. And so, yes, we've got to be more aggressive. Our margins tightened, but we did a good job on our inter and intrastates in North Louisiana. But yeah, as far as our GMP business, we have seen it fall off. However, if you look at kind of what's happening, we saw a peak about six months ago with LNG exports of almost 15 BCF. That's now down around 12 BCF. There's another LNG facility coming on, I believe, in June or July. So we can see a growth. We start seeing demand like we believe we will overseas in Europe and elsewhere. And the heat picks up this summer. We can see demand jump up by five or six BCF overnight. And so you see these declines in Hainesville and other areas you're not going to be able to ramp up those that quickly. So we see pricing out the rest of this year, I think, getting as high as $350 or $360 by the end of the year. We think that possibly could be moved up, that we could see higher prices mid to latter part of summer with a hot summer, and if the LNG demand really picks up like we think it will. But, yes, no doubt about it, that's been a tough recorder on some of the lean areas, and Hainesville is one of them.

Okay, great. That's super helpful. And then just going back to your slide aid and, you know, the comments that you made about, you know, the 8, 10-megawatt gas-fired electric generation facilities, you also then talked about kind of data centers. So I'm curious, you know – Are you having any conversations with some of these data centers or maybe some of the utilities regarding, you know, incremental capacity or potential expansion opportunities? Or how do you think about that part of the equation longer term?

Yes, we are. We are all VIVA. We're in conversations with anybody that wants to gas up our systems. A quick little story here. So two or three years ago, we started a strategy program. an agenda that anything within 10 miles of any of our intra or interstate pipelines, we need to go connect. And a lot of that was focused on power plants. So we've been doing that for a while. Our team, Beth Hickey and her team have done an excellent job of connecting to plants, of extending agreements we have to power plants. But that also rolls over into, you know, a lot of other opportunities. And so we're looking at laying a pipeline to a large chip. manufacturer in Texas, and as well as that, we will. We're believers like everybody else. The data centers and especially around AI, it's going to happen. Whether that means over the next five or eight years, it's going to go by three BCF demand of gas-generated electricity or eight BCF, we don't know. We just know it's going up. So in combination with population growth, as I mentioned earlier, industry growth, ammonia growth, all the AI data centers, et cetera, power plant growth. We're talking to probably seven or eight different power plants at least on fairly significant natural gas fire generation expansions in Texas, a handful in Oklahoma as well. So it's just that common theme that Tom and I keep talking about during this call is that The demand for natural gas is going to do nothing but go up for many years to come, and we're excited that we have the assets that we believe will benefit the most from those opportunities.

That's great to hear. Thank you very much.

Our next question comes from Zach Van Everen with Tudor Pickering and Holt & Co. Please go ahead.

Perfect. Thanks for taking my question, guys. Maybe just circling back on that last one on the data center side, I know you guys have probably one of the larger interest state footprints between the Permian and call it Dallas. We've seen a lot of development and talks of development for the data centers in that area. Just curious on what is your ability to expand some of those interest state pipes to maybe feed more of that power demand, whether it's in Dallas or Houston or other states?

Well, that kind of coincides a little bit with what I just said. We really have made it. our jobs to go to connect to every possible gas-generating power plant in every state that we operate in. And we certainly have done that and have tremendous capability of doing more of that in Texas. We're already connected to approximately 55% to 60% of the power plants in Texas, either directly or indirectly. We have very strategically located storage facilities both in North Texas and near Dallas, and also near BAML, because a lot of these AI, unlike the crypto miners, who a lot of times are making a lot of money off selling their electricity and not running their computers, AI can't do that. I think everybody knows it's got to have reliable, so it can't rely on renewables. So, yes, if we need to tie additional power plants to provide that electricity to help meet all the demands in the Dallas-Fort Worth area, including AI expansion, we'll certainly be a part of that. Look at our assets. I mean, there's nobody, as you just mentioned, that's even close to being able to provide the services we can, especially for those types of markets.

Perfect. That makes sense. And then maybe switching to Blue Marlin, you know, if you guys were able to get the favorable EIS study as well as the permit, do you have a timeframe for when that would be commercially in operation?

I guess... I would say it like this, is that we believe that once we receive the draft EIS, that we're hopeful and confident that within a year we'll get our permit and our license. We're making certain assumptions of things that might happen in November. But certainly we are – the great thing about our project is, unlike our competitors, it's a brownfield project. I mean, we have a pipe already – a lot of it already in the ground or in the seas. And so we have a huge advantage there. We have a pretty good deal for cost of some of our competitors. We think we're significantly less than that. We have the kind of unique ability to move barrels from different basins that some of our competitors can't to feed that project. So we're very optimistic. But anyway, to finish the answer to your question, just to say hypothetically by second, third quarter of next year, we're ready to go. I believe we're looking at two and a half, three years. Yeah, about two and a half to three years before it would actually go into service.

Perfect. Thank you so much.

This concludes our question and answer session. I would like to turn the conference back over to Tom Long for any closing remarks.

Once again, we appreciate all of you joining us today. Thank you for your support, and we really look forward to any follow-up questions that you all have in addressing those.

Thank you all.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.