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spk04: Good day and welcome to the OneOak first quarter 2023 earnings conference call and webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Andrew Ziola, VP of Investor Relations. Please go ahead.
spk06: Thank you, Chad, and welcome to OneOak's first quarter 2023 earnings call. We issued our earnings release and presentation after the markets closed yesterday, and those materials are on our website. After our prepared remarks, management will be available to take your questions. Statements made during this call that might include One Oaks expectations or predictions should be considered forward-looking statements and are covered by the safe harbor provision of the Securities Acts of 1933 and 1934. Actual results could differ materially from those projected in forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings. Just a reminder for Q&A, we ask that you limit yourself to one question and one quick follow-up in order to fit in as many of you as we can. With that, I'll turn the call over to Pierce Norton, President and Chief Executive Officer.
spk08: Thanks, Andrew. Good morning, everyone, and thank you for joining us. On today's call is Walt Hulse, our Chief Financial Officer and Executive Vice President, Investor Relations and Corporate Development. and Kevin Burdick, the Executive Vice President and Chief Commercial Officer. Also available to answer your questions are Sheridan Swords, Senior Vice President, Natural Gas Liquids and Natural Gas Gathering and Processing, and Chuck Kelly, Senior Vice President, Natural Gas Pipelines. Yesterday, we announced first quarter 2023 earnings and affirmed our full year 2023 financial guidance. Strong first quarter results were supported by continued earnings growth in each of our businesses, with higher natural gas processed and natural gas liquids volumes providing a solid start to the year. Producer activity continues to drive new volume to our assets, and recent conversations with customers point to additional activity through the remainder of the year. Fruit prices well above break-even economics in the basins, where we operate in continued strong demand for US energy support, a constructive outlook for 2023. We provide midstream services to some of the largest, most well-capitalized producers in the US, helping contribute to our history of earning stability and growth despite commodity prices. We continue to evaluate infrastructure and the needs of these customers so that we can provide added capacity or services aligned with their growth. The successful completion of our DEMEX Lake III natural gas processing plant and MB5 fractionator projects provide additional system capacity and resiliency and are examples of our continued focus on organic growth aligned with our customers' needs. We remain financially well positioned with significant balance sheet strength and flexibility to support continued growth. Our capital allocation priorities remain consistent, with One Oak's unique ability to identify and execute on high return organic growth opportunities setting us apart. With that, I'll turn the call over to Walt for a discussion of our financial performance.
spk09: Thank you, Pierce. One Oaks first quarter 2023 net income totaled $1.05 billion, or $2.34 per share, and adjusted EBITDA for the period totaled $1.72 billion. As we discussed on our last call, we booked the gain related to the Medford insurance settlement in the first quarter, resulting in a net increase in operating income and adjusted EBITDA of $733 million. This reflects the insurance settlement gain of $779 million, offset partially by $46 million of third-party fractionation costs incurred during the first quarter. We expect third-party fractionation costs to remain around this level, with the potential to decrease through the remainder of the year as our MB5 fractionator ramps up. Excluding the Medford impact, net income increased 24% year-over-year and adjusted EBITDA increased 14% over the same period, benefiting from increased NGL and natural gas processed volumes, higher average fee rates, and higher natural gas storage rates. We ended the first quarter with a higher inventory of unfractionated NGLs primarily due to the timing of the MB5 fractionator being placed in service, and expect to recognize approximately $12 million over the second and third quarters as that inventory is fractionated and sold. In April, Moody's upgraded 1Oaks credit rating to BAA2 from BAA3, recognizing our significant deleveraging, conservative financial policy, and consistent strong operating and financial governance. Our net debt to EBITDA remains below our long-term target of three and a half times, and we had $680 million of cash and equivalents as of March 31. Our cash balance is primarily made up of highly liquid government and treasury money market funds and deposit fully insured by the FDIC. We've reduced our total debt net debt by more than $1 billion compared with the first quarter of 2022. In February 2023, we redeemed $425 million of 5% notes due September 2023. And we recently announced a June redemption of $500 million of 7.5% notes due September 2023, both with cash on hand. As Pierce mentioned, we affirmed our financial guidance expectations in yesterday's earnings release. With our strong first quarter performance and positive outlook for the remainder of the year, our confidence remains high in achieving our financial guidance. I'll now turn the call over to Kevin for a commercial update.
spk07: Thank you, Walt. Let's start with our natural gas liquid segment. First quarter, 2023 NGL volumes increased both year over year, and compared with the fourth quarter 2022 with higher producer activity levels driving increased C3 plus or propane plus volumes on our system. Permian Basin volumes saw the largest increase up 17% compared with the first quarter 2022 and 14% compared with the fourth quarter 2022. We continue to have success contracting additional volumes in the basin and connected one new third-party natural gas processing plant during the first quarter. Permian producer activity remains strong, and we continue to consider incremental expansions on our West Texas NGL system to accommodate increasing volumes. Volumes in the Rocky Mountain region increased during the first quarter compared with the same period last year, and decreased slightly compared with the fourth quarter 2022. The decrease was driven entirely by reduced ethane recovery as our propane plus volumes increased sequentially. We expect volumes to continue to grow in the spring and summer months. In the mid-continent region, consistent producer activity in the stack and scoop continues to drive NGL volumes on our system. Raw feed throughput volumes increased compared with the fourth quarter 2022, driven primarily by higher ethane recovery. Regarding the macroethane environment, we expect domestic petrochemical utilization rates to continue to improve as we move through 2023. With lower sustained natural gas pricing, and lower ethane inventory levels, driving improved ethane economics and volumes across our system. Through the remainder of the year, we continue to expect that the Permian Basin will stay at high levels of ethane recovery, the Mid-Continent will be in partial recovery, and that we will have opportunities for incentivized recovery in the Rocky Mountain region. In April, we completed our 125,000 barrel per day MB5 fractionator in Mont Bellevue. With MB5 now fully operational, our system-wide fractionation capacity is nearly 900,000 barrels per day. The added capacity will be used to accommodate volume growth and reduce third-party fractionation needs. We remain on track to complete our MB6 fractionator in the first quarter 2025. In the natural gas gathering and processing segment, first quarter processed volumes averaged more than 2.1 billion cubic feet per day, an 11% increase compared with the first quarter 2022. In the Rocky Mountain region, Processed volumes averaged nearly 1.4 billion cubic feet per day during the first quarter and have recently reached more than 1.5 BCF per day. We connected nearly 150 wells in the region during the quarter, compared with approximately 90 connections in the first quarter 2022, a more than 60% increase. Well connections in the region are currently on pace to exceed our guidance midpoint of 500 for the year. There are currently approximately 40 rigs and 23 completion crews operating in the basin with 20 rigs and approximately half of the completion crews on our dedicated acreage. We continue to expect additional rigs entering the region as we exit winter. In the mid-continent region, First quarter processed volumes averaged more than 750 million cubic feet per day, a 27% increase year over year. We connected 11 wells in the region during the first quarter, compared with six in the first quarter 2022, and are on track to be within our guidance of 45 to 55 connections. There are currently more than 50 rigs and 11 completion crews operating in the region with 10 rigs on our dedicated acreage. Despite weakness in natural gas prices, we continue to see strong activity in the higher crude and NGL rich producing areas of the region where producers are focusing their drilling. In the natural gas pipeline segment, strong first quarter results continue to benefit from farm transportation services and the demand for natural gas storage. We are on track to complete an expansion of our natural gas storage capabilities in Oklahoma in the second quarter, allowing us to utilize and subscribe an additional 4 billion cubic feet of our existing storage capacity. We have subscribed 100% of this incremental capacity through 2027, and 90% through 2029. We continue to evaluate the Saguaro Connector Pipeline, a potential intrastate pipeline project that would provide natural gas transportation to the US and Mexico border for ultimate delivery to an export facility on the west coast of Mexico. There continue to be positive developments related to the potential LNG export project And we still expect to make a final investment decision on that One Oak pipeline in mid 2023. Pierce, that concludes my remarks.
spk08: Thank you, Walt and Kevin. As you both have highlighted, One Oak is well positioned for another year of strong financial and operational performance. We continue to execute on high return organic growth projects and remain intentional. and discipline in looking for additional opportunities to add value for our business and our stakeholders. Demand for our products and services remains robust, and we're continually looking for opportunities to enhance the vital services we provide for our customers. Our employees take pride in our position as a leading midstream operator, maintaining our focus on operational reliability, safety, and environmental responsibility. As part of our core values, a focus on safety and environmental performance is at the core of our business, and we're proud of the cultures we've built around these key areas. 2023 is not only a year of continued financial progress, but also a year to continue our commitment to responsible operations, emissions reduction projects, and our continued pursuit of a zero-incident culture. With that, operator, we're now ready for questions.
spk04: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset 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 2. We ask that you please limit yourself to one question and one follow-up. If you have additional questions, you may reenter the question queue. At this time, we will pause momentarily to assemble our roster. And the first question will be from Brian Reynolds from UBS. Please go ahead.
spk02: Hi. Good morning, everyone. Maybe to start off on the third-party FRAC fees, the original guidance stipulates roughly, you know, a quarter billion in costs for all of 23, but 1Q trended better than expected. And now with MB5 up and running, you know, kind of curious if you can give us an updated view on how we should see third-party frack fees trending going forward and into next year. Thanks.
spk09: Well, Brian, as we said in the remarks, we expect that $46 million level to be viewed as kind of a run rate going forward with the potential for us to do better as we bring up MB5 throughout the balance of the year.
spk02: Great, thanks. And as a follow-up, maybe just to touch on BAC and activity levels, you know, we're off to a strong start this year with weather helping out in 1Q. You know, given, you know, One Oak has completed roughly a third of its Rockies Well Connects in 1Q, I was wondering if we should expect a slowdown in activity from producers or if we continue to see, you know, similar activities going, similar activity going forward. Thanks.
spk07: Yeah, Brian, this is Kevin. I think we see similar activity levels, if not a little bit stronger. Now we did, if you remember in the fourth quarter, we were a little light on our connections and said that just timing had slipped some of those into the first quarter, so that was part. But the activity levels with 20 to 20 plus rigs on our acreage and that looking to be consistent, if not growing moving forward, I don't see the activity level slowing down. That's why we think, you know, right now we're with those tailwinds looking that we'd be ahead of our midpoint of the guidance for the WellConnex.
spk02: Great. Appreciate it. I'll leave it there. Thanks.
spk04: And the next question will be from Jeremy Toney from J.P. Morgan. Please go ahead.
spk13: Hi. Good morning.
spk08: Morning, Jeremy.
spk13: Just want to dial into the Bakken a little bit more if I could. That was helpful with the 1.5 BCF per day volume number that you provide there. But just wondering on the NGL side itself, I think we saw the Bakken NGLs tick down a little bit quarter over quarter, but the rates went up a little bit quarter over quarter. Just wondering, I guess, you know, where you see that now, how you think about NGL volumes trending and kind of like the ethane extraction economics at this point?
spk14: So Jeremy, this is Sheridan. What I would tell you is that, as we said in the remarks, the decrease in volume quarter over quarter was due to less ethane that we incentivized in the first quarter versus the fourth quarter. And actually our C3 plus volume on the NGL system was up quarter over quarter. So we still see good growth, good trajectory of growth going through 2023. And with low gas prices right now, and we think that ethane is really the preferred feedstock in the petrochemicals, we will have plenty of opportunity to incentivize ethane out of the block and going forward as well.
spk13: Got it. That's helpful. Thanks. And just wanted to kind of pivot, you know, with the insurance proceeds, obviously a lot of capacity on the balance sheet, and thinking about where that could be deployed going forward between growth or buybacks or what have you, and just Any update thoughts, I guess, as far as incremental West Texas LPG looping or other extensions of the value chain, such as LPG export facility in the Houston Ship Channel?
spk09: Well, I'll start out with the first part of it and kick it over to the other guys for the West Texas part of it. Jeremy, you're absolutely right. Our balance sheet is in stellar shape at this point, and it does give us quite a bit of flexibility. Our priorities haven't changed at all. Our first priority is to find very high return projects that we can grow our business. You know, our debt reduction has kind of achieved the goals that we were looking for, and that, you know, does create our flexibility for further dividend increases and potentially even stock buybacks over time. But that is our list of priorities, and as I said, you know, High return growth projects, they're at the top of the list, and that's a good segue into West Texas LPG.
spk07: Jeremy, it's Kevin. As we think about, like we said in the remarks, the Permian volumes have been strong for us. We've seen nice growth there. So clearly we're continuing to evaluate and we'll stay ahead of any capacity needs we had through our looping of of West Texas LPG. So I will stay on top of that and won't get caught short capacity.
spk13: Got it. That's helpful. Thank you.
spk04: And the next question will be from Michael Blum from Wells Fargo. Please go ahead.
spk15: Thanks. Good morning, everyone. Wanted to ask on the SWARO pipeline project around contracting. What percent of the pipeline do you need to be contracted to move forward, and what's sort of an average length of contract that you're looking for?
spk07: Well, Michael, it's Kevin. As we think about SWARO, we'll look at that project from an integrated perspective. I mean, you've got the contracts with the LNG facility, the potential pipeline in Mexico, and then our potential pipeline. So all those are related. At the end of the day, the off-takers are the ones that will be looking for the transportation out of Waha. So that's the way we're thinking about that. Not ready to talk about any contract terms or rates or anything like that yet. Still early in the process, but we are taking the steps forward and continue to move it forward. Hopefully we'll be in a position to announce something mid-year.
spk15: Okay, great. So just maybe a follow-up on that, since mid-year is fast approaching here. If you do go forward with the project, would that result in some increase in 2023 CAPEX? And then just generally, when would the CAPEX for the project be spent?
spk07: Well, that will all depend on when we would announce something. But again, not ready to talk about any specific capital that might hit because we're still unsure when it might be FID.
spk15: All right, thank you.
spk04: And our next question is from Tristan Richardson from Scotiabank. Please go ahead.
spk16: Hey, good morning, guys. Kevin, appreciate your comments on the Permian. Obviously, you've got production growth there as well as adding a new plant, a third-party plant, but you also talked about contracting additional volumes. Can you kind of talk about that environment, whether these are medium, long-term deals, just kind of what that environment looks like and how that may have contributed to the first quarter?
spk07: Well, I think a lot of the volumes that we've seen on our system are pretty growing volumes on contracts that may have been put in place several years ago, you know, back when, you know, even pre-COVID. But we also have seen opportunities to go contract new volumes, and Sheridan, you want to talk about some of the things we've seen there?
spk14: Yeah, I mean, obviously volume is growing well in the Permian Basin, and as we have a lot of relationship with producers out there and processors that we've been able to get our first year, if not a little bit more of the volume that's come up. So we've had good luck contracting new volume. A lot of that is coming through existing plants on our system or the potential for new plants as we look into the board. But we think we have a compelling story out there to be highly competitive in a very competitive area, and we are seeing some success. I appreciate it, Sheridan.
spk16: And then maybe just the obligatory high-low question, you know, obviously strong results in the first quarter. just thinking about the full year outlook, some of the conditions necessary to hit the high end versus what might need to happen to see the low end occur.
spk08: Tristan, this is Pierce. I think you all have picked up on the fact that we're coming out of first quarter with some really, really strong tailwinds, and that actually is a very positive move for us a lot of times. During the first quarter, we're trying to explain kind of the different trajectories that we have. But we really, really like the trajectory that we're on now. And we've affirmed our guidance range. And, you know, stay tuned for the quarters to come. Appreciate it. Thank you, guys.
spk04: And the next question is from Teresa Chen from Barclays. Please go ahead.
spk01: Hi, thank you for taking my questions. Within the GMP segment, can you talk about the fee escalation that I think kind of just totally steps up in the second quarter now that we're a month and change through it, how that's trending now and how that gets to your guidance within the fee range?
spk07: Teresa, it's Kevin. On the fee rate, again, that's going to move around on a couple of factors. One is just various contract mix as new volume comes on the system every quarter. And then the others is the contract escalators that kick in. So we've said historically and previously that in GNP segments, Um, that's typically occurs in the spring. Um, so you're just seeing just the minor moves like that, or just contract mix moving around from quarter to quarter.
spk01: Okay. And then in terms of the third party Fraxy, so understand that you have downside from the 46 million per quarter as you utilize some of the, um, space on MV5. But as some of your competitors are also bringing on additional frack capacity, that can have it this year and into next year, would you expect that the spot fee will also weaken to some extent? So is there further downside even in addition to you being able to use MB-5?
spk14: I think that is the potential as we look out into 2024. A lot of what we did in 2023, we have contracted it at a certain rate. But as we get into 2024, or for some reason we would need a little bit more in 2023, we're definitely seeing spot frac rates are a lot lower than they were six months ago, and we predict that will continue into 2024. So we could see some additional downside or upside, as it would be for us, on lower third-party frac fees.
spk01: Thank you.
spk04: The next question is from Spiro Donis from Citi. Please go ahead.
spk17: Thanks, Emperor. Good morning, guys. First question, I actually want to talk about Oak Creek. You talked about keeping pace with customer needs, and I acknowledge this question is probably a bit on the early side, but just given the WellConnect outlook, potential breathtaking recovery, GORs increasing over the next year or so, when is it sort of time to start thinking about an Oak Creek expansion? How are you guys thinking about some of the capital needs and timing that will go into that?
spk08: I think I'll kind of give a high-level thing, throw it to Kevin here, but I can tell you that we've said before that we're not going to get caught short on capacity. So as your question of when is it start time to thinking about it, we're thinking about it. So I'll let Kevin kind of fill in the blanks there.
spk07: Yeah, we are with the strength we've seen recently and even going back to last year with the activity levels and the producer, the rigs that were there. Um, but particularly now, as we move into Q1 and seeing what we have seen from the producers, we're definitely taking steps that go already taking steps necessary to ensure that we've got the capacity when we need it.
spk17: Great. That's a helpful color. Uh, second question kind of outside the quarter as well, but over the last two years or so, even before that, we sort of seen you lean more into more utility like businesses. These storage expansions, now the potential Suaro pipeline, more take-or-pay style. Is that part of kind of a larger plan to introduce even more earning stability into the platform? And how should we think about maybe other avenues where you can continue to grow there?
spk08: Well, the short answer to that is yes. This is Pierce. You know, but those things are really driven by customer demands as well. But we definitely are looking for those opportunities as that's part of the intentionality of, you know, the diversification, you know, into those more, you know, stable earnings type areas in the inner footprint. So the short answer is yes.
spk17: Understood. Appreciate the color. That's all I have, guys. Thank you.
spk04: And the next question will be from Jean Ann Salisbury from Bernstein. Please go ahead.
spk00: Hi, good morning. I just have one, another one on the cigar connector. I guess my understanding is that inside Mexico pipelines have, I don't want to use the word disaster, but have generally been very, very far delayed and not successful. How does OneOak and how do investors get confidence that if you build another pipeline to the border that the rest of it will be on time?
spk07: I think, Gina, and this is Kevin, I think the way I would answer that is, I mean, obviously, as we come to a decision to FID or not, that will be, we're factoring in what's going on with the full aspect of the pipeline. And I think it's safe to say, you know us, we'll do the things we need to do from our contractual position to mitigate that risk as much as we possibly can.
spk00: That makes sense. Thank you for taking my question.
spk04: And thank you. The next question is from Neil Dingman from Truist. Please go ahead.
spk11: Hi, Mornell. Thanks for the time. My first question is just on the contract structure. I'm just wondering, you know, maybe in the type of volatile commodity tape we're in now, could you remind me, I don't think it's changed much, but I just want to make sure I've got this, what percent of this year's earnings you expect to be fee-based? And I'm just wondering, do you all have availability, I don't know, in any of these contracts to potentially walk them up the remainder of the year?
spk07: Just overall, we said we're 90% fee-based and 10% commodity exposed. And then you think about the GNP business with our POP contracts where some of the direct commodity exposure occurs, we're well hedged in 2023. So that even reduces that commodity exposure further. So really, when you just look at it on an earnings perspective, it's a small percentage that we have in direct commodity exposure.
spk11: Perfect. Okay. And then my second, just on the Rocky Mountain Map Gas GMP, you did have a nice step up last quarter on the total there. I'm just wondering if you remind me, how should we think about the expected cadence the remainder of the year? I see that I forget what slide I'm looking at here, but obviously the guide you've got for the year still. We're now already at the low side, but you've got pretty good range. I'm just wondering how – is there pretty good step-ups we should think about?
spk07: You're talking about the gathering and processing the volumes? Correct, correct. From the Rocky Mountain region? Yes, sir. Okay. I mean, yeah, the first quarter you were at the low end, and if you go to the – we referenced we had breached here – Recently, 1.5 BCF, so we definitely think there's ramp, and that's one of the tailwinds Pierce mentioned is where we sit today from a Bakken or Rockies volume perspective, we're in really good shape.
spk11: Great to hear. Thank you all.
spk04: And the next question is from Neil Mitra from Bank of America. Please go ahead.
spk03: Hi, good morning. Thanks for taking my question. A lot has been answered. So I wanted to go a little bit beyond the quarter and with the Medford proceeds and what seems to be a strong 23, it seems like your leverage levels are trending well below kind of the 3.5 times target. So when you think about that a little bit longer term, Do you plan to stay lower like some of your peers, or are you thinking more about dividend increases, repurchases, or possible acquisitions, and just in terms of how you plan to think about the mix?
spk09: Sure. Neil, this is Walt. Well, if you back out the gain from the Medford settlement, We're right around 3.4 times. So, yes, we're through 3.5, but we're not meaningfully below it at this point. We are not concerned if that trend is lower. If we don't have investment opportunities alike, it probably would trend lower in the short term. But we continue to look at attractive opportunities. We've spoken a little bit about the The increases we're seeing in the various basins and some of the expansion plans that we might need to do on some of the pipes and the like. So those are very, very high return types of projects, and that's where we'd like to be first. And then we have flexibility for other capital return, you know, now that we're down and achieve these goals.
spk03: Got it. And then second question. I know you've seen a lot of stickiness in terms of the rigs on your activity. But now that just we've seen crude fall below $70 twice this year, how do you see the producer activity given that a lot of publics have budgeted around $70 if we stay in this environment over, you know, intermediate to longer term?
spk07: Well, Neil, this is Kevin. I haven't had a lot of time to talk to our customers over the last couple days, but what I would say, you're right, the rigs have been very sticky. I like that word. As prices, if you rewind, rigs really started coming back to the Bakken in earnest as prices moved through $50, $55. That's when we started seeing the stickiness. Now, when it ran up to $110, You know, rigs didn't necessarily follow, but then as the prices came back down, they didn't go away either. So we still feel very good. It's not a matter of that's still well above break-evens. Producers are still generating a tremendous amount of cash flow, even at the prices we're seeing on the tape right now. So that would give me a lot of confidence that we're going to continue to see that stickiness, even in this type of environment.
spk08: And the only thing I'd add to that, Mrs. Pierce, is I get the opportunity to go around and meet with these heads of many of these exploration and production companies, and they take a really long-term view. So it's not just what is the price today. Yes, the price has fallen off crude the last couple of days, but they're taking a long-term view of what they think crude is going to do over time. Because until they get the rigs drilled out there, drilled, wells producing, you know, you don't have the opportunity to capture, you know, whatever price it is out there. So they really take a long-term view, and it seems to be a very wide path that they look at now as far as a range of prices that they don't really get emotional and go either up or down. They stay very steady.
spk03: Okay, great. I appreciate the call.
spk04: And the next question will come from Subal from Seaport Global Securities. Please go ahead.
spk10: Yes, hi. Good morning, everybody, and thanks for the clarity on the call. So I wanted to start off on Bakken. I think there has been some chatter in the E&P community about well productivity. So I was curious, you know, if you could talk about, you know, in the past you've talked about close to 400 wells per year to maintain your gas volumes. I was curious if that number has changed in your view based on some of the recent results. It also seems like gas to oil ratio have tundered down recently.
spk07: This is Kevin. There was a couple questions in there. One is on well productivity, and we really have not seen a degradation at all in the well productivity. We've There has been a little bit of movement with the strong prices to different areas of the play. So we've seen some changes a little bit in potentially the gas to oil ratio, but nothing that would cause us concern to think that wells are getting less productive. If anything, producers, if they're drilling in the same areas, the technology continues to improve, and we've seen strong results. So we don't have any concerns at this point on what's going on with well productivity or the GORs.
spk10: Okay. And then my follow-up was on your natural gas pipeline segment. Seems like a pretty strong Q1, and even if The remainder of the year turns out to be similar to last year. I think you would exceed that guidance. So I was just curious, is there any one-time items in Q1 which helped the gas pipelines?
spk05: Sunil, this is Chuck. Now, Q1 was a solid quarter for us in all regards. Our storage revenues were higher. Obviously, we had some gas sales that we were able to pick up in the quarter like we typically do. first quarter. So there wasn't a single outlier that generated that performance. So balance of the year, you know, we expect to be, you know, at or above our midpoint and looking forward to see what opportunities come about this summer.
spk10: Got it. Thanks for that.
spk04: Thank you. And the next question will be from Colton Bean from Tudor Pickering in Holt. Please go ahead.
spk12: Just a quick follow-up in Saguaro. It looks like the proposed 48-inch diameter would offer plenty of capacity over and above the proposed LNG export send-out. Can you speak to how you scope that project and what opportunities you might be tracking downstream apart from LNG?
spk07: Colton, this is Kevin. Well, we're just lining up again with what's going on with the possible export facility. So as we just back up from there and what they're talking about building in Mexico and what we would need to build for the border crossing, that's what we're looking at right now. But not ready to talk about any other opportunities or so forth. But there's potential plans for the LNG facility for additional trains. And so we scoped the pipe kind of in what they were looking for.
spk12: Understood.
spk04: Thank you. And the next question is from Craig Shear from Toohey Brothers. Please go ahead.
spk18: Good morning. Just a couple quick ones. So the Permian NGL unit rates were shown at about $0.06 versus over $0.06 in the fourth quarter. Wondering if there's any detail or trend there. Could you remind us roughly on the increments that you can increase Elk Creek with additional pumping and what kind of capex that would incrementally run?
spk07: Craig, I'll take the last one and then let Sheridan talk about the fee rates. On the Elk Creek expansion, as Pierce alluded to, Yes, it's adding pumps up and down the pipe. So that would be the scope of the project. We haven't talked to any specifics on what that would cost. But, again, we're not going to get cut short of capacity, and we're already taking the steps necessary to hopefully bring that forward.
spk14: Craig, this is Sheridan on the air.
spk18: I'm sorry, could you quickly just elaborate how quickly or soon that can be done? It's pretty efficient stuff, right? So can you do it well under a year once the decision's made, or how quickly can you roll that out?
spk07: That, again, we're still working through. That's the steps we're taking is understand exactly what that would be, working with power companies, working with pump providers and things like that. So we've Those are the types of steps we're taking to ultimately come up with how long it might take. But yeah, it's not like building a brand new pipeline start to finish.
spk08: The only thing I'd add to that is the thing to remember on that as it relates to capital is these are very high return projects. So whatever the number is, when we announce that, hey, we're going to do this, just be assured that it's a very high return project.
spk18: Understood. And those Permian NGL unit rates?
spk14: Yeah, Craig, this is Sheridan. I mean, we always see a little bit of escalation or changing up and down in our fee rates. It all depends on where the volume's coming from. And one of the biggest things that it drives at is if we're getting a little bit more volume from a transport-only contract versus a TNF contract, or as that mixes a little bit, it's going to play with that rate just slightly, and you're just seeing just a little bit of a slight change. I mean, it's just noise. It's really immaterial. It's just kind of contract mix.
spk18: Got it. So no trend going on there, just bouncing around?
spk14: No trends. There's no trends going on.
spk04: Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Andrew Ziola for any closing remarks.
spk06: Well, thank you all for joining us today. Our quiet period for the second quarter starts when we close our books in July and extends until we release earnings in early August. We'll provide details for that conference call at a later date. Thank you all and have a good day.
spk04: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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