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.