Energy Transfer LP (NYSE:ET) Q3 2024 Earnings Call Transcript

Energy Transfer LP (NYSE:ET) Q3 2024 Earnings Call Transcript November 6, 2024

Energy Transfer LP misses on earnings expectations. Reported EPS is $0.32 EPS, expectations were $0.3307.

Operator: Hello, and welcome to the Energy Transfer’s Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the call to Tom Long. Please go ahead.

Thomas Long: Thank you, operator, and good afternoon, everyone, and welcome to the Energy Transfer Third Quarter 2024 Earnings Call. I’m also joined today by Mackie McCrea and other members of the senior management team who are going to be able to help answer your questions after our prepared remarks. Hopefully, you saw the press release we issued earlier this afternoon. As a reminder, our earnings release contains a thorough MD&A that goes through the segment results in detail, and we encourage everyone to look at their release as well as the slides posted to our website to gain a full understanding of the quarter and our growth opportunities. Also as a reminder, we will be making forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.

These statements are based upon our current beliefs as well as certain assumptions and information currently available to us and are discussed in more detail in our Form 10-Q for the quarter ended September 30, 2024, which we expect to file tomorrow, November 7. 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 measures on our website. Let’s start with the financial results. For the third quarter of 2024, we generated adjusted EBITDA of $3.96 billion. compared to $3.54 billion for the third quarter of 2023. We had record volumes through our crude oil midstream gathering and NGL pipelines as well as through our NGL fractionators.

In addition, we saw strong crude and NGL exports during the quarter and increased volumes through our refined products pipelines. DCF attributable to the partners of Energy Transfer, as adjusted, was $1.99 billion, consistent with the third quarter of last year. And for the first 9 months of 2024, we spent approximately $1.7 billion on organic growth capital, primarily in the Midstream and NGL and refined products segments, excluding SUN and USA Compression CapEx. Now turning results by segment for the third quarter. We’ll start with NGL and Refined Products. Adjusted EBITDA was $1.01 billion compared to $1.08 billion for the third quarter of 2023. This was primarily due to growth across our Mariner East pipeline operations as well as strong NGL exports which were offset by lower gains from the optimization of hedged NGL inventory as we recognized over $100 million in gains in the third quarter of last year compared to $30 million this year.

For Midstream, adjusted EBITDA was $816 million compared to $631 million for the third quarter of 2023. The increase was primarily due to higher volumes in the Permian Basin and Eagle Ford as well as the addition of the Crestwood and WTG assets in November 2023 and July 2024, respectively. In addition, during the quarter, we recognized $70 million in proceeds from a onetime business interruption claim. For the Crude Oil segment, adjusted EBITDA was $768 million compared to $706 million for the third quarter of 2023. The increase was primarily due to record crude oil transportation throughput, higher crude oil exports, which were up 49%, the recently formed Permian joint venture with SUN as well as the acquisition of the Crestwood and WTG assets.

Excluding these acquisitions, crude oil transportation throughput on our base business increased 4%. For the interstate natural gas segment, adjusted EBITDA was $460 million compared to $491 million for the third quarter of 2023. During the quarter, we saw higher demand on Panhandle, Trunkline and Gulf Run. This was offset by lower IT utilization in dry gas areas due to the lower gas prices and weaker spreads. Additionally, we had higher operating expenses primarily due to a onetime benefit recorded in the third quarter of 2023 that reduced operating expenses and increased maintenance project costs. And for the intrastate natural gas segment, adjusted EBITDA was $329 million compared to $244 million in the third quarter of last year. The increase was primarily due to approximately $100 million of increased gains related to pipeline optimization opportunities.

Turning to our recently completed acquisition of WTG which enhances our Permian Basin operations and downstream businesses. Integration of the combined assets is underway, and we have recently approved several projects that are expected to enhance reliability, reduce losses and improve the overall efficiencies of the system for our customers. Also in July, Energy Transfer and Sunoco LP announced the formation of a joint venture combining their respective crude oil and produced water gathering assets in the Permian Basin. We’re making good progress on integrating the combined systems and are executing on synergies and growth opportunities that will drive additional value while expanding our market and service offerings for our customers. No turning to our 2024 organic growth capital guidance and our 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. At our Nederland Terminal, construction of the expansions to our NGL export capacity continues to progress. and the project remains on schedule for an anticipated in-service for the initial phase in mid-2025. At Mont Belvieu, as mentioned on our last call, we have approved our ninth fractionator, which will have a design capacity of 165,000 barrels per day and is expected to be in service in Q4 of 2026. This will bring our total fractionation capacity at Mont Belvieu to more than 1.3 million barrels per day. Taking a look at our Permian processing expansions. We recently completed the 50 million cubic foot per day upgrade to our Orla East processing plant.

And construction continues on upgrades to three other processing facilities, which will add incremental processing capacity in West Texas of approximately 150 million cubic feet per day. Additionally, construction of the 200 million cubic feet per day Badger processing plant in the Permian Basin is underway. As a reminder, this plant, which is expected to be in service in mid-2025, will utilize an idle plant that is being relocated to the Delaware Basin. Looking at our crude assets, we recently completed construction of a 30-mile pipeline to add a direct connection from Midland to our pipeline that flows from the Permian Basin to Cushing. As a result, we are now able to transport approximately 100,000 barrels per day of crude oil from our terminals in Midland, Texas to our terminal in Cushing, Oklahoma.

For a brief update around power generation opportunities. With forecasted AI and data center growth creating rising electrical needs, and the necessity for grid reliability becoming increasingly important, it is clear that natural gas will play a significant role in helping meet this demand. Given Energy Transfer’s extensive interstate and intrastate natural gas pipeline footprint, we are the best positioned to capitalize on the anticipated rise in natural gas demand for AI data centers, natural gas power plants and industrial and onshore manufacturing for decades to come. We have never seen this level of activity from a demand pull standpoint and these opportunities are truly spread across our natural gas footprint from Arizona to Florida and from Texas to Michigan.

We currently serve gas-fired power plants in 15 states with approximately 185 plants served via direct or indirect connections throughout these states, and our opportunities have only increased since our last call. We have had requests to connect to approximately 45 power plants that we do not currently serve in 11 states that in aggregate could consume gas loads up to 6 Bcf per day. In addition, we have had requests from over 40 prospective data centers in 10 states. These data centers in aggregate could consume gas loads up to 10 Bcf per day. Some of these may be behind the electric meter for reliability purposes. Many of these developers are still working to determine optimal locations and are seeking information on pipeline proximity and cost to connect.

In addition to support our own operations and increase system reliability for Energy Transfer and our customers in Texas, we have started construction on eight 10-megawatt natural gas-fired electric generation facilities. The first of these facilities is expected to be in service in the first quarter of next year, with the remainder expected to be in service throughout 2025 and 2026. We also continue to make progress on the development of several other growth projects, including our Lone Star pipe optimizations, Warrior, Blue Marlin offshore oil project like Charles LNG, a carbon capture and sequestration project with CapturePoint, and Blue Ammonia hubs at Lake Charles and Nederland. We look forward to providing more updates on these projects as customer discussions advance, and we bring them closer to FID.

Looking at EBITDA guidance. We continue to expect 2024 adjusted EBITDA to be between $15.3 billion to $15.5 billion. Our results reflect the strength of our assets and the benefit of having a diverse geographic footprint and multiple product offerings. We remain excited about our business and the demand for these products and our services, both domestically and internationally. We have seen a wide range of estimates for new power demand and the broad consensus suggests that natural gas fuel power demand will increase significantly in the future. We are already seeing increasing power needs across several of our natural gas pipelines driven by AI, data center and power plant growth. Given our extensive natural gas pipeline network, particularly in Texas and Oklahoma, we believe that Energy Transfer is one of the best positioned companies in the industry to help meet this demand.

We also continue to maintain a strong liquidity position with a balance sheet that allows the flexibility to fund organic growth opportunities while also further reducing our leverage, maintaining our targeted distribution growth rate and increasing equity returns to our unitholders. This now concludes our prepared remarks. Operator, please open the line up for our first question.

Q&A Session

Operator: Thank you very much. [Operator Instructions] Today’s first question comes from Jeremy Tonet with JPMorgan.

Jeremy Tonet: This Slide 5, as you laid out here, it seems pretty interesting, and thank you for all the details on the call. 45 plants, 6 bcf a number of other demand pull sounds pretty sizable here. And so granted that there’s a lot uncertain at this point still. But when do you think this could start entering the plan? How could this impact the ET growth outlook? And how much operating leverage do you see the system having to this trend?

Marshall McCrea: Jimmy, this is Mackie. Certainly a question we anticipated. We’ve heard for 4 years how we’re transitioning out of fossil fuels. And very clearly, we’re going in a different direction. And even the liberals have figured out that we’re transitioning into more natural gas and more natural gas liquids. So we feel very fortunate as a partnership looking at our assets throughout the United States, we can benefit with our footprint as described on the page that you referenced. So we’re — for the last 4 or 5 years, we’ve been chasing every possible power plant or a large gas consumer on any of our pipelines. This is kind of just a follow-up to that with this all of a sudden rush to build data centers and additional power plants.

So we’re way ahead of the curve. We are very excited about the opportunities this is going to create for our partnership throughout multiple states in the South and through the Midwest with our ability to move large volumes to these pipelines and our access to our own storage for immediate delivery to power plants where those services are necessary. We just are very excited about the future. In Tom’s prepared remarks, we showed we’re chasing like 16 Bcf. Do we expect to get that? No. But do we expect to get our fair share of that throughout these assets. And kind of a last comment on that. I was with the team last week, and we were looking through this. And it’s ironic. It’s almost crazy where a lot of these power plants and data centers are being potentially positioned are within 2 or 3 miles of our pipeline.

It’s almost like they had already come to us first and we’re the most optimum places to our assets, whether they’re close to cities or close to our storage facility. So we’re really excited about where most of these data centers and power plants are going in close proximity to our system and our team is well prepared and down the road in a lot of negotiations to take advantage of those opportunities.

Jeremy Tonet: Got it. Makes sense. Certainly seems like affordable and reliable natural gas is appealing. Wanted to move along, I guess, I think there was an announcement regarding a South Mississippi Pipeline open season there. And just wondering, I guess, what type of expansions do you see off the system going forward? And how could that impact, I guess, your growth CapEx outlook going forward within your capital allocation parameters?

Marshall McCrea: Yes, Jeremy, this is Mackie again. That’s another project that’s needed kind of desperately over the next 4 or 5 years. The growth in natural gas demand on the East Coast and Florida is just enormous, and it’s going up by the day because of population, everything else. And so we do have an open season out there. We have a tremendous response, a lot of interest, the forward curve from kind of Perryville area to Florida are enormous. So we’re very excited of that. It’s way premature on kind of timing of how that will go and the capital involved, but we do see an opportunity there, and we think there’s a real possibility, we’ll be a part of that growth.

Jeremy Tonet: Got it. And just one last quick one, if I could. It seemed like Diamondback was talking a bit about your partnership on their call recently here and just wondering what that means for Permian egress as you see it, it seems like Warrior, they outlined quite the case for the need there. Just wondering, do you see this being a sooner rather than later event with an FID here?

Marshall McCrea: Yes. Yes, I know I said on the last call that I’d be disappointed if we didn’t announce it. We’re certainly not on this call, going to announce FID, but I won’t say we’re disappointed. We’ve made tremendous progress. We are very likely, within weeks, getting to FID. We’re not there yet, but we’ve made a lot of strides. It’s a unique pipeline in that it is producer push to a certain degree, but it’s also a market pull. So it’s both directions needed. It ties into — I was trying to describe this. Most of you all probably know our system well. But if you think about energy intrastate system in Texas. It’s almost like a hand that extends out of the fourth basin, where we have a pipeline, 36-inch going to Northeast Texas, connected to multiple 42-inch pipes.

We had two 42 inches going to cartage or our intrastate markets as well as interstate pipelines there. We also have two of our own pipelines. We have a 42-inch that goes down to Southeast, kind of Port Arthur, Texas, where we tie to — or tied to interstate pipelines as well as Golden Pass and Sempra and just a lot of upside there, and of course, 42 and 36 that ultimately goes to Katy and the Houston Ship Channel. And of course, we have pipelines — our Houston pipeline system that goes to Agua Dulce. So we’re so uniquely set up to take advantage of offering the most flexibility to all of these markets. What we’re missing is years ago when we built the first, second, third 42 and 36-inch pipes on the fourth Basin, we anticipated that basin being at 8 9,10 Bcf by now.

Well with what happened just population growth there and really what happened was all these other shelves that became more profitable and made more sense for producers, it slowed down dramatically. So we had a lot of idle — not idle, a lot of underused capacity. We’re using all these pipes, but we’ve got capacity unutilized. And so water is exciting and that it’s going to be a great project for us, but it’s also going to benefit from this underutilized capacity to go to all these points I just described. And so we hope to be to FID, if it’s not days in the coming weeks, we actually have already locked in an option to purchase steel. So we know that price for the majority of the steel. We feel good about that. And we’re kind of structuring this where we anticipate announcing it when we get to FID, if we do, and it will be a good project with a good rate of return, where we’ll have the ability to add compression in the future, a significant amount to move 700,000, 800,000 more than what we anticipated initially, and the reason that’s important, that’s why we’ll feed all these new power plants that are coming on, all these new data centers that are happening.

So it’s an important project for us, and we do intend to get it to the finish line.

Jeremy Tonet: That’s great to hear. Sounds like a lot of operating leverage across the system.

Operator: The next question comes from Jean Ann Salisbury with Bank of America.

Jean Ann Salisbury: With the lifting of the LNG permit band assuming possibly more imminent, can you just remind us of the status of Lake Charles on EPC contracts, et cetera?

Marshall McCrea: Well, I’m looking at Tom Mason and he’s assured me and his team that once Trump elected, and we get some rational, reasonable people running this country that we will get that to FID. So we’re very excited about that. We’ve still got a lot of work to do. We’ve got partners we’ll need to bring in the course financing, but we do have a lot of momentum. We hope to announce some significant new markets that we’ve signed up by the end of the year. We’ve got a good EPC contract executed, and we’re very optimistic that what happened yesterday is going to really help that and many other parts of our business to move forward. So yes, we’re very bullish on getting LNG to finish line.

Jean Ann Salisbury: And then one more on Slide 5. Can you comment on the potential to expand Transwestern to the West. Could you do that with just compression? Or would it be a pretty significant looping project to meet that demand?

Marshall McCrea: Yes. What a great question. Everybody is kind of focused going east, and there — it’s probably likely there’s going to be a need going west and I’ll kind of leave it at that for this point. But to answer your question more directly, not a lot we can do to significantly increase from an efficiency standpoint, the volumes going we’re pretty maxed out when you look at kind of how the contracts are structured where our compression is, we can’t move a whole lot more, but we certainly think there’s some potential for projects to move more gas to the west at some point.

Operator: The next question is from Manav Gupta with UBS.

Manav Gupta: It’s been a quarter since you completed the acquisition of WTG. And I’m just trying to understand how is that integration going? Do the assets meet your expectations? And also, could you provide us an update on the SUN JV? How are things progressing over there?

Marshall McCrea: Yes. This is Mackie again. Gosh, WTG was a great acquisition. We’re so excited about it. We identified some issues that we knew we would have to deal with when we closed, and we started dealing with those. We have running some other issues around the existing plants and even the plant that was built as we were closing. We’re working through those issues, and like I said, we’re so bullish. We have incredible amount of just high-quality acreage, hundreds of thousands of acres dedicated to those assets. And on top of that, we have hundreds of thousands of acres that are top leased that right now are going to somebody else, but in future years will come to us. So what a great asset just stand alone from a GMP perspective.

But then when you add on the — what it’s going to do for our NGL and downstream business there as well as feeding into our pipelines. We’re very excited about what that acquisition is going to do for our partnership. And then jumping over to Sunoco, I don’t know how many of you guys follow them, but listened to their call this morning, and Joe Kim and Karl Fails, most guys have done an unbelievable job with that partnership. They — not only the mass amount of distribution on fine products but also the terminals, not only here, but in Europe, they’re just doing a an incredible job and NuStar put them into a much bigger way in the midstream business. And what a perfect fit for us. We have a pretty extensive system throughout the Permian Basin, but coincidentally, we just didn’t have a big presence in Howard County in Dawson and some of those counties where the new store assets were.

So it was just a perfect situation to form a JV that kind of benefited in three ways. One, where we can offer a really good service to those producers. And then two, where we can benefit from a classic case of kind of 1 plus 1 is more than 2. This is one of those situations. We’ve already identified numerous blending opportunities, lending the third parties, exchanging barrels, feeding our downstream pipeline system. So we’re very excited about the progress we made on the integration, and we’re also excited about the growth opportunities that we’re seeing in those assets and Sunoco is already great partners with us. They’re partners on the JC Nolan line, moving diesel from Houston to the Permian Basin. And so we look forward to growing this partnership with them and excited to be a part of it.

Operator: The next question comes from Theresa Chen with Barclays.

Theresa Chen: Maybe first, on the data center and natural gas infrastructure theme feeding that demand. I think one question is of magnitude, how much of the 16 Bcf per day that you will eventually realize. But — another question would be one of returns. Can you talk about how those types of projects and the returns could potentially compare to what’s in your existing backlog today? And just the competitive dynamics that have developed given the incremental competition from many peers.

Marshall McCrea: You bet. This is Mackie again. Yes, I guess the way we answer that question is we don’t look at it any differently. We’ve got IRR, rate of return hurdles that we look to meet on all of our projects that make sense. We also look for other synergistic revenues that are tied to our projects. But as far as the competitive aspect to your question, gosh, we sit in a great spot. If you could just look at where we’re looking at some of these significant data centers, especially in the Dallas-Fort Worth area, there’s just nobody that can provide the service that we can for the price that we can. We’ve got big diameter pipe, especially if we can get Warrior to finish line. That’s going to be a huge influx of the Permian Basin supply.

We have unparalleled ability to get move gas around the state from our storage facilities. We have massive storage and ability to increase our storage in the DFW area as well as down around Houston. So, yes, there’s going to be a lot of competition. As I said earlier, do we expect to get 16 Bcf? No. We do expect to get our fair share. And in Texas, a considerable part of that as well as we’re optimistic in other states. And so we think we will look to achieve the same return hurdles that we do on all of our projects, and we’re quite confident that we’ll be able to do that on a pretty significant volume.

Theresa Chen: Got it. And in terms of spending for this year, it looks like your growth capital budget decreased by $200 million even though there’s a new bullet point within Midstream, the new Delaware processing plant. So have you added a project decreased spending? What are the moving parts there, please?

Dylan Bramhall: Yes. Theresa, this is Dylan. There’s a couple of buckets really when we’re looking at that total cost decrease. First of all, we’ve got a number of projects that are coming in at lower cost here. I think we’re — the DMC team is doing a great job there on in stuff constructive, but we do have some reduced costs. Secondly, we have several projects. Well, we’re always adding stuff. We have several that we’ve either reduce scopes or had outright cancellations really due to return hurdles not being met. We’re being disciplined on those. And then third, there are some smaller amounts that have been pushed out and deferred into next year.

Operator: The next question comes from Keith Stanley with Wolfe Research.

Keith Stanley: Wanted to start on the Flexport LPG export project. You referenced an initial phase in mid-2025. When would the full 250,000 barrels a day of capacity be online? And then can you just remind us how contracted the facility is and how much spot exposure you might have to the arb spread?

Marshall McCrea: You bet. This is Mackie again. Once again, we are on track for the third quarter. We need it for all the products that are coming in. We’re excited about that. It’s a little bit difficult to exactly answer that question because it is 250,000 barrels a day. But as we continue to fully contract the facility there may be a little bit more ethane or a little bit less ethane depending on the LPG contracts and also the ethylene part of it. But for the most part, we expect it to be fully contracted. Typically, these aren’t 7- to 10-year agreements, they’re 3- to 5-year agreements, but we not only expect to be fully contracted, the international demand for ethane and LPG continues to grow through the roof with all the PDHs built throughout the world, especially in China, and there’s just an insatiable demand for LPG all over the world.

And so we are trying to stay ahead of that. We’re very bullish on what we’re doing at Nederland, and we will definitely be expanding beyond what we’re doing today.

Keith Stanley: Second question, just the guidance for the year on EBITDA was maintained. The high end of the range would imply that EBITDA will be down quarter-over-quarter in Q4? Are there any headwinds to be mindful of for Q4 besides the insurance gain item in Midstream?

Thomas Long: Short answer is no. Keith. We don’t have any headwinds going into the quarter. But as you know, we’re always fairly conservative as to how we forecast out and the guidance numbers we put out there. So here’s the two items that I would put back at you. Number one, we don’t have anything baked in for optimization that could possibly occur during the quarter. So we’ll see how — as we get through the end of December, what may present itself. But the second item is really around the natural gas spreads across Texas. And right now, we’re staying pretty conservative as we look out. But a few differing views based upon how those spreads move up and down, and they can be pretty volatile. But even if you look at the month of October, you can see they stayed pretty strong. So once again, that’s another upside. So if you take those two items in, you can see that we will clearly be at the top end of that range, depending on what view you have.

Operator: The next question is from Gabe Moreen with Mizuho.

Gabriel Moreen: Just had a quick question on cadence of additional processing capacity announcements. I know you’ve got a couple of plants set here for ’25 in expansions. Some of your competitors are now already in the back half of ’26 though, in terms of announcing additions. I’m just curious how things stand in the Q where you think you’ll be announcing a new stuff and the extent you feel you need to kind of get ahead of the curve here in announcing plans for ’26.

Marshall McCrea: Yes. Gabe, this is Mackie again. Yes, we’ve already announced a course Badger that’s under construction and will be online next year. We just brought on Red Lake 3 kind of getting that lined out as we speak. We’ve got Red Lake 4 coming on in the second quarter of next year. We’ve got another project that’s not fully to FID, but close called Mustang Draw, which will be in the Midland Basin to try to stay ahead of the growth behind WTG and other Midland growth. We’re also looking at another plant in the Delaware. We’re still in the process of increasing our capacity in Red Bluff and other plants in West Texas, where we are just adding compression and increased capacity fairly significantly. So we don’t really pay attention or worry about what others are announcing.

We’re just worried about what we’ve contracted and stand ahead of that, and we have a consistent pipeline of what we’ve already announced and what we see in the future with just phenomenal continued growth out of the Permian Basin that just keeps giving. And with the new Barnett and Woodford type plays that are kind of being discovered in the Central Basin, we just continue to be, I guess, very fortunate to have such a big asset base in that basin.

Gabriel Moreen: And maybe if I can follow up also, just in terms of exposure to gas prices, and I think some of the volume declines we’ve seen in the Haynesville year-on-year and things like that. I’m just wondering to what extent you’re embedding in guidance for the back half of this year or even thinking about into next year, some sort of recovery in volumes in places like the Haynesville that may have been impacted by dry gas prices.

Dylan Bramhall: Yes. Let me try to answer that, and I don’t do a very good job. Tom will tell me. But it’s funny. We always feel very fortunate when we look at our assets because we are by far the most diversified pipeline company in the U.S. by far. And so if our crude division is hurt a little bit, it seems like our NGLs picks up vice versa. And it was interesting as we were looking at these numbers preparing for this really over the last several months and looking at the results, even within our pipeline segments, if you look at — you just referred to some residue areas, if you — lean residue areas, if you look at, for example, our interstate pipelines, yes, we were down significantly. I think it was around 900,000 a day on Tiger and Rover together.

But then you look at Panhandle and you look at Trunkline, we’re up over 1.1 Bcf. So even embedded in our pipeline segments, we have offsetting gains that will offset some tough times. So where we have more of our lean gas — residue gas that comes from our rich areas, we performed very well. Yes, we’ve had some tightening of spreads on Rover and Tiger, but we see those coming back. In fact, we just recently signed another long-term deal on Rover, a 10-year deal, significant volume. We’re in the open season right now. There’s enormous reserves that we all know in the Haynesville, we have no worries whatsoever that Tiger and Gulf Run for the future will begin to grow again and remain full for many years to come. A lot of that going further downstream.

So we feel very hedged, I guess, is the word on the way our pipelines are set up. And where we struggle a little bit or where our producers struggle a little bit, we’re making it up in other areas of our pipeline business.

Operator: The next question comes from Michael Blum with Wells Fargo.

Michael Blum: I wanted to go back to the Slide 5 with all the growing demand that you’re seeing on the natural gas side. I guess given all this percolating gas demand, how does that fit in with your CapEx spending framework of, I think, $2 billion to $3 billion per year? Do you think that given all these opportunities that could possibly trend higher over time?

Dylan Bramhall: Yes, Michael, this is Dylan again. Good question. I think as we’ve discussed the $2 billion to $3 billion. If you look at the slides we put out recently, we’ve called it illustrative, but we have started talking about a $2.5 billion to $3.5 billion run rate, and that’s really just the result of just getting bigger as a company and bigger more opportunities and a number of acquisitions we’ve done recently that have added to the footprint. But — and the additional cash flow that clearly supports a capital spend like that. But even within that, as we look out, we talk about some of these bigger projects that we’re looking at, such as a Warrior the spend on those can be lumpy as they work. And so even though that’s kind of an illustrative framework, we can be below or above that in any given year based on timing.

Michael Blum: Great. And then I just wanted to ask on Slide 7, you list the Sabina 1 pipeline as a proposed project. I’m wondering if you could talk about the scope of that project and where you are in the process?

Marshall McCrea: Yes, Michael, this is Mackie. We bought the Sabina assets a while back. We — Sabina 2, we will bring on service first quarter of next year, excited about that. We anticipated a number of barrels to make that a good project for us. We actually are close to closing twice that amount of barrels. So that’s a natural gasoline project that we’re very excited about. And what came with that asset was also Sabina 1, which gets us across the ship channel over to some crackers. And we’re chasing a number of opportunities there. So we still got some work to do. to fully benefit from what that pipeline can offer our partnership, but we’re very excited about what’s happening on Sabina 2 and the revenues that will start flowing in the first quarter of next year.

Operator: The next question comes from Zackery Van Everen with TPH.

Zackery Van Everen: Just one on the Permian. We saw Matterhorn come online recently, and it’s been flowing about, call it, 1.5 Bcf a day. I was curious if when that came online, you guys saw a production jump on the gas side on your Permian system? Or do we think most of that gas flowing right now is just shifting from other pipes?

Marshall McCrea: This is Mackie. It’s a great question. In fact, we didn’t even though there was that much gas flowing on it. So that’s news to us. We thought it was significantly less than that. But yes, for example, WTG, we are flowing gas off of those assets into Matterhorn. But other than that, as far as our assets go, we don’t have direct access to it. So most of that gas is flowing through our own assets.

Zackery Van Everen: Got you. And then maybe going back to Warrior, it sounds like you’re very close. Interesting that you note that, some of it will be a supply push, some demand pull. Based on conversations and contracting, do you have an idea of what that mix will be? And then is there a possibility that some of this gas connects into that South Mississippi project from Carthage and goes all the way over to that market?

Marshall McCrea: It’s Mackie again. Yes. I guess we wouldn’t get the specifics exactly where all that’s going. I guess I would answer your question this way. It’s weighted a little bit heavier towards market pool than it is on producer push. But a lot of our customers will have the option. For example, if they’re taking their gas to Carthage, yes, they’ll have the ability to go through our Gulf Run or Tiger system into a project that we’re looking at from a Perryville East. So it certainly could potentially feed that. But right now, our customers are kind of pulling in different directions going east, and we’ll fill up a lot of our assets, both intrastate and interstate.

Operator: The next question comes from John Mackay with Goldman Sachs.

John Mackay: I wanted to maybe, again, just go back to Slide 5, like everyone else. Can you break this down a little bit for us maybe on what could be an inter-state opportunity versus what could come in the Texas intrastates. And I guess kind of the crux of what I’m thinking here is maybe time lines because we can obviously get it online a little faster probably in Texas than elsewhere. Just trying to frame up what that breakdown could look like.

Dylan Bramhall: Yes, I can answer that. There are so many projects that are out there, so many data centers and so many power plants even unrelated to data centers that we’re chasing. It’s probably a fair statement that we can move quicker and other companies can move quicker in Texas when looking at some of these other states. However, if you look at Arizona and some of the opportunities there around data centers, those could move fairly quickly. And then you look at some even up in the Midwest, there’s some opportunities that may move fairly quickly as well. However, Texas certainly is probably the lead for us and where we’re — how far along we are with signing [indiscernible] agreements and actually showing cost and prices to some of those projects.

And as I mentioned earlier, Texas, we have a little bit better ability to feed some of that out of our storage facilities, which some of these power plants are really going to be — that support the data centers are really going to be peaker units. They’re going to be pulling off the grid and then pulling gas if the grid goes down, but kind of long-winded answer to we agree with you that probably these opportunities will move a little bit quicker in Texas. But gosh, there’s a lot of companies chasing all over our assets, and some of them may come quicker than we realize today.

John Mackay: I appreciate that. And maybe just second one for me. Could you just give us an update post the WTG acquisition, how you’re thinking about your Permian NGL position in terms of what your capacity is going to be versus what you guys can flow from your own plants?

Marshall McCrea: Yes, great question. We’re in the process of expanding our cross haul capacity on our Lone Star NGL line as we speak, and that should be completed, I believe, sometime middle of next year. and we’re in good shape with what we’ve already signed up and what we’re anticipating from WTG. But clearly, over the next 2 or 3 years, we see the volumes continue to grow, we will be looking at whether it’s adding additional pumps or some type of pipeline looping because at some point, we will exceed the capacity which whenever dream would come so quickly years ago when we built all these 24 and 30-inch pipes. But right now, we’re sitting pretty good, at least for the next 2 or 3 years to accommodate the contracts that we have today and what we kind of foresee on our assets over the next year or 2.

Operator: Thank you. This concludes our question-and-answer session. I would now like to turn the call back to Tom Long for closing remarks.

Marshall McCrea: Before we do that, this is Mackie. I was hoping somebody would ask a question about there’s probably people in this room that are uncomfortable that I’m talking right now. But we had questions on an earlier call about the election. And I don’t know what you guys think about it, but gosh, what an incredible refreshing, shocking result over the last 24 hours. This industry has gone through a lot over the last 4 years. And not only is this administration that is sensationalized and has misinformed and has through climate change fear mongering have really tried to influence Americans. And it’s incredibly refreshing to see what happened 24 hours ago that Americans have woken up and at least the majority of Americans, more than half, recognized what was happening.

And with this country, we have started with the constitution, the greatest document ever built the start of the country, and we have laws. And I believe that that’s what this election is saying to the world and to this country is that the majority of Americans still believe in our country. They still believe that we should have law and order. They still believe that if you want to come to this country, it’s a simple process. You just go through the legal process and you can enter. But when you have an administration that is, for all practical purposes, doing everything they can to allow tens of millions of people to come into this country over the last 4 years. When many of them probably are coming in are good people that just won’t be an American dream, but look what’s come with them.

Look at all the drugs and the games and everything, and they’re doing it for one reason for political power and just how insane and how sick is that at one of our parties is so enraged for political power they are willing to create safety issues for our country. So anyway, parlay that into the oil and gas industry and just the attack that we’ve had in the last 4 years, what a breadth of fresh air the Trump administration is going to bring. I mean, we all believe that we need to be regulated. We’re not arguing that we don’t need to be regulated. But what we’re asking for is reasonable, not onerous regulation that can be done in a matter of a few years, instead of years and hundreds of not billions of dollars of getting projects in line. And then worse, when you get them in line, we’re asking that the agencies trying to bully companies and allow the projects they have permits to go forward.

I mean there are statutes that require permits to be done with certain periods of times that aren’t being honored that are being ignored by these agencies. So we are so excited about what’s happened in the last 24 days. We’re excited for this country. We’re excited for the world really for the international market that needs our LNG in the developing world that underbid world that’s developing that needs our LPG. So what an incredible turn of events what’s happened and especially for our partnership. I mean, we were talking this morning, we’ve been blessed and fortunate over the last year with the Kelcy’s leadership and direction, all the great employees that we have an incredible assets that we have. We just in such a wonderful spot, but we believe that what happened yesterday, Energy Transfer has an incredible future for the next 3 or 4 years and many years to come.

So we’re very grateful and thankful and God is good. Things happen and it’s time to heal our land and get back to where this all started years ago.

Unknown Executive: Thank you all for joining us. We look forward to talking to you. Bye, bye.

Operator: The conference has now concluded. Thank you for your participation. You may now disconnect your lines.