Energy Transfer Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 2, 2023

There are 10 speakers on the call.

Operator

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

Operator

Please go ahead.

Speaker 1

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

Speaker 1

These statements are based upon our current beliefs as well as certain assumptions and information currently available to us and are discussed in more details in our Form 10 Q for the quarter ended June 30, 2023, which we expect to file tomorrow, August 3. 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 today by going over our financial results for the Q2 of 2023. We generated adjusted EBITDA of 3 point $1,200,000,000 compared to $3,230,000,000 for the Q2 of 2022.

Speaker 1

In our base business, we had strong performance from our operations, which delivered record volumes across our intrastate and midstream segments As well as through our NGL pipelines and NGL and refined products terminals, including record NGL volumes exported Our volume growth was more than offset by Significantly lower quarterly average natural gas and NGL prices, which declined 70% 45%, respectively, Over the Q2 of last year, DCF attributable to the partners of Energy Transfer as adjusted Was $1,550,000,000 compared to $1,880,000,000 for the Q2 of 2022. This resulted in excess cash flow after distributions of $579,000,000 On July 25, we announced a quarterly cash distribution of $0.31 per common unit or $1.24 on an annualized basis. This distribution represents an increase from $0.23 paid in the Q2 of 2022. We continue to target a 3% to 5 Annual distribution growth rate while balancing our leverage reduction, increasing equity returns and maintaining sufficient cash flow to invest And our incredible backlog of growth opportunities. As of June 30, 2023, the total Available liquidity under our revolving credit facilities was approximately $2,360,000,000 Now turning to results by segment for the Q2.

Speaker 1

I'll start with NGL and Refined Products. Adjusted EBITDA was $837,000,000 Compared to $763,000,000 for the same period last year. This increase was primarily due to higher transportation storage And Terminal Services margins related to increased volumes and higher rates. Partially offsetting this $51,000,000 negative impact due to timing of the recognition of gains on hedged NGL inventory during the current period. We expect to fully realize the offsetting gains over the next two quarters.

Speaker 1

Adjusting for this non cash timing matter Around hedging, adjusted EBITDA for the 2nd quarter would have been $888,000,000 NGL transportation volumes on our wholly owned and joint venture pipelines increased 13% to a record 2,200,000 barrels per day compared to 1,900,000 barrels per day for the same period last year. This increase was primarily due to higher volumes from the Permian region And on our NGL pipelines that deliver into our Needle and Terminal as well as on the Mariner East pipeline system. Average fractionated volumes increased 5% to a record 989,000 barrels per day compared to 938,000 barrels per day for the Q2 of 2022. For the month of April, Throughput averaged over 1,000,000 barrels per day, which was a new monthly record. NGL export volumes grew 15% over the Q2 of 2022, driven by record NGL exports Out of both our Nederland and Marcus Hook terminals, this was primarily driven by the second tranche of satellites contract going into effect On July 1, 2022, as well as increased international demand for natural gas liquids.

Speaker 1

Year to date, We have loaded more than 30,000,000 barrels of ethane out of Nederland and we are also exporting record volumes of ethane out of Marcus Hook. In total, we continue to export more NGLs than any other company and maintain approximately 20% market share of worldwide NGL exports as well as nearly 40% of U. S. Exports. For Midstream, adjusted EBITDA was $579,000,000 compared to $903,000,000 for the Q2 of 2022.

Speaker 1

We saw record throughput as a result of growth in the majority of our operating regions. The strong volume growth Was more than offset by significantly lower natural gas and natural gas liquids prices as well as increased operating expenses. Gathered gas volumes increased 8% to 19,800,000 MMBtus per day compared 18,300,000 MMBtus per day for the same period last year. For our Crude Oil segment, Adjusted EBITDA was $674,000,000 compared to $562,000,000 for the same period last year. This was primarily due to higher volumes on several of our pipelines, increased throughput at our Gulf Coast and Permian terminals, as well as the acquisition of the LOTUS assets in May of this year.

Speaker 1

Crude oil transportation volumes were a record 5,300,000 barrels per day Compared to 4,300,000 barrels per day for the same period last year, this was a result of higher volumes on our Texas pipeline systems, The Bakken pipeline and the Bayou Bridge pipeline as well as the acquisition of the Lotus assets in May of this year. Excluding the LOTUS assets, crude oil volumes were still up approximately 10% compared to the same period last year, which was also a record. Integration of the LOTUS assets is going as planned and we continue to discover additional commercial synergies that are in excess of our original forecast. In our Interstates segment, adjusted EBITDA was $441,000,000 compared to $397,000,000 for the Q2 of 2022. This increase was primarily due to higher contracted volumes and rates On several of our wholly owned and joint venture pipelines as well as placing the Gulf Run pipeline into service in December of 2022, Volumes increased 17% over the same period last year due to the Gulf Run pipeline being placed into service As well as higher utilization on many of our intrastate pipelines, including Transwestern, Tiger, Pebble and Trunkline.

Speaker 1

For our intrastate segment, adjusted EBITDA was $216,000,000 compared to $218,000,000 in the Q2 of last year. Benefits from new contracts in Texas and the Haynesville As well as lower operating expenses were offset by decreases in retained fuel revenues resulting from lower natural gas prices and fewer pipeline optimization opportunities. Utilization on our EOIT and rig systems Increased due to higher demand for gas takeaway and increased production in the Haynesville shale. Now turning to our growth projects and we'll start with our Lake Charles LNG project. In May of 2022, we received an extension from FERC The deadline for the completion of the construction of Lake Charles LNG facility to December of 2028 And in June 2022, we applied to the DOE for an extension of the DOE's deadline for the commencement of exports.

Speaker 1

As many of you are now aware, in April of this year, the DOE denied our request for this extension. And in June, the DOE denied our request for rehearing of this decision. We have had discussions with the DOE subsequent to this decision and we believe the best path forward With the DOE is to file an application for a new export authorization. We expect to file this application in August And during the DOE's review of this application, we intend to continue to work with our existing customers, Prospective equity investors and other stakeholders to progress the development of this project. In this regard, in July, We entered into 3 non binding HOAs related to the long term LNG offtake from this project for an aggregate of 3.6 1,000,000 metric tons per annum.

Speaker 1

1 of the HOAs is with Chesapeake and Gunvor for 1,000,000 metric tons per annum. A second HOA is with EQT for 1,000,000 metric tons per annum and the 3rd HOA is with a Japanese customer for 1.6 The HOAs are subject to negotiation and execution of definitive agreements. Now turning to our Nederland and Marcus Hook export terminals. These terminals continue to benefit from increased demand both in the U. S.

Speaker 1

As well as from international We remain bullish that there will be significant long term growth in international demand for ethane and LPG products as we are well positioned to benefit from that demand. Last quarter, we FID ed an expansion to our NGL export capacity at Nederland In order to address this demand, we expect this expansion, which is projected to cost approximately $1,250,000,000 to add up 250,000 barrels per day of export capacity. This project is expected to be in service in mid-twenty 25 and will give us flexibility to load various products based upon customer demand. We look forward to providing more specifics on this expansion in the near future. We also continue to pursue FID on an optimization project at our Marcus Hook terminal that would add incremental ethane refrigeration and storage At Mont Belvieu, we expect frac 8 to be mechanically complete in the next couple of weeks, which would put it into full service around September 1.

Speaker 1

This addition will bring our total Mont Belvieu fractionation capacity to over 1,150,000 barrels per day. Out in the Delaware Basin, we placed our 200,000,000 cubic foot per day GrayWolf processing plant into service in December of 2022. And in June, we placed the Bear plant into service, which is our 8200000000 Cubic Foot Per Day processing plant in the Delaware Basin. These plants are supported by new commitments and growth from our existing customers. In addition, we continue to evaluate the necessity and potential timing of adding another processing plant in the Permian Basin.

Speaker 1

Turning to the Gulf Run pipeline, which we placed into service in December of 2022. Gulf Run provides Natural gas transportation between our upstream pipeline network and from the Haynesville shale for delivery to the Gulf Coast, Connecting some of the most prolific natural gas producing regions in the United States with the LNG export market as well as many markets along the Gulf Coast. We Long term customer volume commitments through Zone 2, which are being delivered into our Trunkline pipeline. We have very limited available capacity in the near term and are fully subscribed beginning January of 2025. As a result, we are in discussions to add approximately 1 Bcf of capacity via compression, which will require minimal capital investment.

Speaker 1

Depending on demand, we also have the ability to loop the system to another approximately 2 Bcf of capacity. On the alternative energy front, we continue to make progress on our carbon capture and storage project with Capture Point That is related to our North Louisiana treating plants. An application for a Class 6 permit for this Sequestration site was filed by Capture Point with the EPA in June of last year. Also, we are working with Oxy related to its Magnolia Hub in Allen Parish, Louisiana, north of the Lake Charles Industrial Complex. We are working together to obtain long term commitments of CO2 from industrial customers in the Lake Charles, Louisiana area.

Speaker 1

If this project reaches FID, Energy Transfer would construct a CO2 pipeline to connect the customers Oxy sequestration site in Allen Parish, Louisiana. We are also continuing to have discussions with third parties related to the development of ammonia at sites along the Gulf Coast where we have docks with deepwater access. Now looking at our growth capital spend for the 6 months ended June 30, 2023, Energy Transfer spent $794,000,000 on organic growth projects, primarily in the Midstream NGL and Refined Products and Interstate segments, excluding Sun and USA Compression CapEx. For full year 2023, we continue to expect growth capital expenditures to be approximately $2,000,000,000 which will be spent primarily in the Midstream NGL Refined Products, Interstate and Crude segments. As a reminder, this capital outlook includes the NGL export expansion projects at Nederland as well as the expenditures related to the Lotus acquisition.

Speaker 1

A significant amount of our 2023 growth capital spend is comprised of projects that are already online or are expected to be online and contributing cash flow before the end of this year at very attractive returns, including Frac 8, the Bayer processing plant and new treating capacity in the Haynesville. Additionally, we We continue to evaluate a number of other potential growth projects that we hope to bring to FID. As we look forward to this potential backlog of high returning growth projects, We now expect our long term annual growth capital run rate to be approximately $2,000,000,000 to $3,000,000,000 Now for our adjusted EBITDA guidance. As we get further into the year, We now expect our 2023 adjusted EBITDA to be approximately $13,100,000,000 to $13,400,000,000 which Slightly tightens our range, while keeping the midpoint the same. As a reminder, with the current forward curve for commodity prices and spreads, Our guidance does not assume the same upside benefits from pricing and spreads that we experienced in 2022.

Speaker 1

Our base business continues to perform well, generating strong volumes and providing stable cash flows, which demonstrates our ability to operate We remain bullish about the future of our industry and the growing worldwide demand for all of our products And our assets are strategically positioned to take advantage of new growth opportunities to meet this demand. As such, we continue to pursue Our financial position remains strong and we remain committed to our targeted distribution growth rates and the lower end of our leverage target, which we continue to balance while maintaining significant free cash flow for growth. This concludes our prepared remarks. Operator, please open the line up for our first question.

Operator

Thank you. We will now begin the question and answer session. Our first question comes from Spiro Dounis from Citi. Please go ahead.

Speaker 2

Thanks, operator. Good afternoon, everybody. Guys, first question maybe just go to Lake Charles quickly, 2 part question there. So one, do you have any sense On the DOE timing at this point to approve a new non FDA authorization. And Tom, I want to make sure I heard you correctly.

Speaker 2

I believe you mentioned Working with equity investors on the project, have you actually identified potential equity counterparties yet or was that just more of a general statement?

Speaker 3

Yes, this is Max. Let me start and Tom Mason may add to it. Yes, for confidentiality reasons, we can't talk about who our equity Maybe we can say that we have 2 very significant partners at a minimum. 1 is one step up We're a large amount of the equity as well as a lot of the offtake. And I'll just make a quick comment.

Speaker 3

We've worked pretty hard on Project, we slowed down during the pandemic. Tom Mason and his team did a great job picking this back up when Ukraine war started. We Tremendous momentum signed up a lot, 8000000 or 9000000 tons, developed relationships all around the world, really good relationships. A lot of those folks I've met over the last 3 or 4 months that really believe in our project and then low and behold DOE cut the legs out from under us, kind of by surprise Without us even expecting it, so we're kind of regearing. We've spent a great deal of time with the DOE over the last several weeks.

Speaker 3

We have a real important meeting next week with them, And we're being optimistic that they'll work with us to expeditiously go down this new path that we're going down to try to get Next quarter authorization approved by them. But in the meantime, as Tom said, we are continuing to work with not only existing customers, but with new customers. And As I said, we have some equity partners that really believe in this project and we'll be excited to have them part of the team as we work diligently toward

Speaker 2

Great. That's helpful color, Mackie. Thanks for that. The second one is going to switch gears a bit here, but In thinking about Techem, I think it was maybe 2 quarters ago, it sounded like you were hoping to be able to be in a position to announce something later in 2023, but it also sounded market dependent. Basically, I think sort of looking for things to get better, and I guess we haven't seen that yet.

Speaker 2

So just curious where are you in that process? How much is that delayed and maybe new sort of timing on thinking about an announcement there?

Speaker 3

Yes. I'll give a little background first. We're talking about that earlier today. Nederland is such a gem for any partnership, but especially for ours. If you look at what Stetsz at Nederland, in all of our connectivity to all the refineries, we actually are connected to over 25% of refining capacity From that area in South Texas, we have the ability to move large volumes of feedstocks to that facility.

Speaker 3

We've got 4 pipelines from Mont Belvieu with ethane propane butane and natural gasoline that can feed a petchem facility. And as I just mentioned, There's a lot of belief over the next 5 or 10 years by some that there's going to be an issue with getting finding a home for gasoline components, Which would also feed could be very good feedstocks for our petchem project. And then you add that to our ability to deliver Ethylene propylene downstream of this project as well as the export markets. We couldn't be more excited. This is a very unique world class facility And we have an extreme amount of interest.

Speaker 3

We are focused with 1 equity partner today, is very interested in a significant portion of ownership And also a significant portion of takeaway capacity. They actually have assembled a very large team working with us. And at the appropriate time, we'll be able to talk more about it. But yes, Just like a lot of our projects, it is going to take time. It's a very unique cracker like nothing else in the world, not only because of what it can crack What it can do, but also logistically for the advantages it has over any of the crackers.

Speaker 3

So we're very excited about it. And we have a great team Led by Raj and others working on that project and we do believe at some point in the road we'll get FID, but it is going to be down the roadways.

Speaker 2

Great. Helpful color. Thanks for that, Maggie. Thanks, everybody.

Speaker 4

You bet.

Operator

The next question comes from Jeremy Jonette from JPMorgan, please go ahead.

Speaker 5

Hi, good afternoon.

Speaker 3

Good afternoon.

Speaker 5

Just want to pick up with I think some of the comments towards the end there with regards to capital allocation priorities. And now that the leverage has come in a bit, just wondering how you balance, I guess, capital at this point, be it distribution growth seems like Consolidation of foot right now. At the same time, buybacks has been topical in the industry. So just wondering if you could kind of walk us through the latest thoughts on capital allocation.

Speaker 4

Yes, Jeremy, this is Tom. Still a very, very good question. Always appreciate it. As you know, we have focused on the debt. We're very, very obviously pleased to have it down Into our 4, kind of 4.5 range, kind of at the top of it.

Speaker 4

So we'll continue to look at moving down maybe towards the lower end of that, Like we mentioned in the prepared remarks, but moving on past the debt side of the balance sheet side of it, We're going to continue to focus on a lot of the projects that we've talked about here. I know we've got a fantastic team It's coming up with a lot of really, really good investment opportunities that continue to expand the great footprint that we've built. And we're just very excited about a lot of these and excited about the returns that we're getting on them. So you're going to see us continue to do that. But the distribution growth is the other piece of it.

Speaker 4

Moving on to that one, we put out that guidance of 3% to 5%, and we feel very good Each quarter as each quarter goes by as to where we are on that. So we're going to continue to allocate toward that. The unit buybacks Still remain on the radar screen, but I will say that right now we're continuing to focus on investing The company, as well as the balance sheet, and of course, the distribution growth we've given back to our equities. I do want to go ahead and expand a little bit on one other item you brought up in there and that was the M and A side of it. We do still remain Very optimistic that you're going to see consolidation in the midstream space and that's something that We feel like we're very, very good at it.

Speaker 4

You can see from all the acquisitions that we've done, we can always make them very accretive. And they've got us to where we are today as well as within the organic growth projects that come along with each one of these. So we're going to continue to stay very focused On that side of it and allocate a lot of time for that piece of it too.

Speaker 5

Got it. That's helpful. Thanks. And maybe picking up with that, some of the recent acquisitions be it Lotus So even looking back at Enable, if you could kind of walk us through synergy capture, where it stands now versus expectations at that time? Just Curious how things have materialized.

Speaker 4

Okay. Listen, why don't you let me start with that a little bit, especially on the cost side and then Mackie has got a lot of great things to talk about there. So if you look at really both of those, we'll start with the Enable one. That one just continues To exceed anything that we ever expected on that. So even if you go back to the S-four and you look at what forecast we had in there, We're significantly higher, a good probably 40% or 50% higher than what we were anticipating.

Speaker 4

And a lot of that was some of that was cost synergies, but there was a lot of commercial synergies That are now we're seeing every day as we continue to work through that. And once again, Mackie will expand on that. But I'll comment a little bit on the LOTUS. Obviously, staying disciplined in the same way we did with Enable as to what we're transacting on these Acquisitions, at what level we're transacting at, they work for us. They're accretive and they're deleveraging.

Speaker 4

And likewise on that one, we have achieved every bit of the cost savings that we were anticipating on that. But likewise, That one is still new. We just closed in May, but we're still seeing a lot of opportunities on that one also. And Mackie, I'll hand off if you want to add anything more On the commercial side on both of those.

Speaker 3

Okay. Yes. Chris Hefty and his team have done an unbelievable job. Those acquisitions that Tom just talked about it, it's been incredible. Tom hit on a little bit Enable, we keep finding things.

Speaker 3

We were able to move volumes out of Louisiana through Enable down Some of our East Texas assets and just a lot of things that we're finding, they're very beneficial. Our WEX acquisition, it is what it is. We bought it at a great multiple and it's proven out that, that multiple are better. So we're very pleased with that one. And then Lotus, gosh, we've just closed it and our Crude team gets excited every week about something new, some new, routes, some new blending opportunities, some new additions that we can add to move More throughput on some areas we didn't think about.

Speaker 3

So as we as I just mentioned, what great acquisitions that will End up paying off a lot more than we anticipated when we purchased.

Speaker 4

And Jeremy, I'd like to just add real quick. When you have the Very, very strong talent we do internally. The more tools you can provide to them, it is just truly amazing what we find out of each one of

Speaker 5

Got it. That's helpful. Thank you.

Speaker 3

Thank you.

Speaker 4

Thank you.

Operator

The next question comes from Brian Reynolds from UBS. Please go ahead.

Speaker 6

Hi, good afternoon everyone. Maybe to start off on the long term annual Capital run rate growth CapEx run rate of $2,000,000,000 to $3,000,000,000 I was curious if you could just touch a little bit more perhaps on what these projects

Speaker 3

Okay. This is Mackie again. Yes, we've got a lot of Things already in the works that we've already got FID on or moving forward on. And then as we've talked about some of these and there's a lot of other opportunities that we're chasing, We certainly are looking at some renewable opportunities. For example, Capture Point, as we talked about in the opening remarks, will be a great project for us, not just because It will be transporting sequestering CO2, but it also helps us with our upstream contracts on treating and transportation.

Speaker 3

So there's Added benefits to that and then some of the other projects that we're looking at will also be contributors. But from a capital perspective, It will be pretty minimal compared to a lot of these other projects that we're working on that we've already committed to and a lot of the ones that we think will get The FID over the coming 6 months to 12 month period.

Speaker 5

And you know, the

Speaker 4

only other thing I would add to this, as you know, we do continue to work We'll look at and spend more time on more of these downstream projects like what Mackie has mentioned. But we are spending some time On the international front, likewise, and looking at various projects.

Speaker 6

Great. Thanks. And maybe to follow-up on Lake Charles LNG. A lot of HOAs signed during the quarter with some notable E and P counterparties You know that I've previously voiced interest in equity ownership in an LNG facility. So just given the tight existing timeline that you We're just kind of curious if there's any change in tone or capital structure in your view for Lake Charles in terms of appetite for

Speaker 3

Yes, this is Mackie. Nothing has really changed there. We kind of have a target of around 25% equity ownership. That hasn't changed. We won't really talk about who the equity partners potentially are.

Speaker 3

I mentioned a few without naming them, but yes, there's more than that. There are some producers that And so there's a wide range as we kind of consummate some of the bigger equity Commitments, then we'll go to whatever remaining commitments that we need to attain that kind of 75% of Partners in the project, so nothing has changed as far as our strategy around Lake Charles.

Speaker 6

Great. Super helpful. I'll leave it there. Thanks.

Operator

The next question comes from Jean Salisbury from Bernstein. Please go ahead.

Speaker 7

Hi. I think you may have more exposure to lower gas price in your midstream segment than I had realized. Can you give any more color on how that exposure works? If there's floors, if you hedge out gas price, is it as simple as if gas price goes back up next year, that segment will improve?

Speaker 4

Yes, Jean, this is Tom. The natural gas prices, that's correct. The sensitivity is there, especially in the midstream, but we want to make sure we add in there the ethane component That's included in there. So when you start looking at where those prices were going on the liquid side, That likewise is rolled into that impact. And that's the reason even in our materials that we put out, we put in that Kind of 5% to 10% of sensitivities related to commodity prices.

Speaker 4

We use spreads at 0% to kind of 5%. But you're seeing us really kind of stay in line with that. I do think it's worth noting that when you do get down to a certain level That you are able to kind of have floors on some of the contracts That provide kind of a downside protection on these things. But once again, when you get with the whole decisions We make on all the processing we do, when to reject as far as ethane rejection goes and When we extract, but it's really based upon not just the natural gas prices, but the ethane prices also, liquids prices.

Speaker 7

Got it. Okay. And then just the latest on the Upsea potential, and if you've kind of had Any interest from investors that can't own MLPs that they'd be interested in the FC?

Speaker 4

Yes. No, you bet. We do continue to spend time on that and evaluate it. We haven't advanced it to market type studies or anything else, but We do have various discussions with banks, etcetera, on views On the market side of it, but we're a lot of the time is really spent on the structuring also. We wanted to we want to make sure that we get this thing structured in a way that It's a win win for all.

Speaker 4

So we're continuing to look at that. So it's clearly on the radar screen, Something we're going to continue to move forward, move down the field, so to speak, and kind Come out at the right time. That makes sense.

Speaker 7

Great. Thanks. That's all for me.

Speaker 4

Thank you.

Operator

The next question comes from Keith Stanley from Wolfe Research. Please go ahead.

Speaker 8

Hi, thank you. Maybe starting with Gulf Run and the compression expansion project. Can you talk to what customers are saying on the timing of needing more takeaway? And I guess could that project move forward as soon as this year or the needs there that quickly or the Haynesville needs more time to recover?

Speaker 3

Yes, this is Mackie. No, we don't expect to get to FID on expansion on Gulf Run. As Tom said in the opening remarks, our team has done a great job on selling out the capacity by January of 'twenty five. As he mentioned, we're sold out on 1.65 Bcf on the Zone 2 portion of Gulf Run. But no, we'll remain in negotiations.

Speaker 3

A lot of that depends on some of the LNG facilities to get to FID. A lot of it there will depend on some Commitments that we're looking at further downstream on markets along the Gulf Coast, even as far away as Florida. And then also there's some producer push On a lot of that to get down to markets, either off trunk line or potentially even off at GT. So we're still a ways away from that, We'll remain discussions and there's a great deal of interest to move more volume of course from the growing Haynesville and other areas down to the Gulf Coast.

Speaker 8

Okay. Great. And second question, I just wanted to follow-up on the $2,000,000,000 to $3,000,000,000 long term CapEx run rate. It's obviously very manageable within cash flows for the company, but it's a little higher than what you've spent. You did $2,000,000,000 And targeting $2,000,000,000 for this year.

Speaker 8

So can you just give some big picture comments on why you'd expect CapEx to potentially go a little higher In the future, and does that reflect bigger projects? Does that reflect I think Tom you mentioned looking a little more at international, just How you're thinking about that and spending potentially going up a little?

Speaker 4

You bet. And like I say, Very good question here on this. When you really look at the scale of Energy Transfer now, the size and then you start looking at all the projects that Mackie previously mentioned, with the existing footprint we have, but also continuing to move downstream with some of the other Petchem, international, so when you really start looking at all that, we do not have projects That are specifically identified within that. This is a number that we're just using based upon the share size that we've become, start running over $13,000,000,000 a year. So don't have really a whole lot more description at this Other than just kind of guiding you toward all the various projects that we have on the drawing board, so to speak.

Speaker 3

Let me add, if I could, one thing is that we are going to be pretty disappointed if we're not pushing against that $3,000,000,000 because the projects that we're chasing are really good rates of return and everything that we're chasing has synergistic revenues, Not part of the IRRs, both upstream and downstream in many cases. So from the standpoint from a commercial perspective, I'm going to be disappointed if we If our team doesn't push closer to $3,000,000,000 or even more at the greatest return that we're targeting. Thank you.

Operator

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

Speaker 3

Thanks. Good afternoon, everyone. Yes, I wanted to ask about the We have a little pullback of the Marcus Hook Because location up there, a lot of those barrels stay locally. However, we are able to take a lot of what flows and take it to much higher price market from Margin standpoint, but certainly in the South, we remain very optimistic. We're already seeing volumes stronger next month Then we saw here in July, so we remain very bullish, not only in the next quarter or 2, but bullish long term.

Speaker 3

There is a Significant growth on really everything we do for natural gas, for natural gas liquids and even gosh, we're talking about oil today. There was more oil consumed in the world last quarter than there ever been. So this runaway from oil and the slowdown in oil sure isn't happening. If anything, it's increasing. So That was a long winded answer to we remain very bullish.

Speaker 4

Great. Thank you.

Operator

The next question comes from Neel Mitra from Bank of America. Please go ahead.

Speaker 9

Hi, thanks for taking my question. First question, you obviously have some very capable upstream assets that can be Manded with Gulf Run and Trunkline. Are you looking at expanding those separately from the Lake Charles decision? In other words, if you were to twin those pipelines for other facilities, would you still be able to manage to get the gas down to Lake Charles in an

Speaker 3

Yes, this is Mackie again. Our team is looking to move as much gas through our pipeline network and expand our network to whatever markets there are. So yes, simultaneously With making sure that we will have the pipeline and volume support for LNG once it gets to FID, We also have teams working daily on delivering to other LNG facilities and to other markets, everywhere, not only the Gulf Coast, but wherever anybody is looking So yes, we'll continue to chase markets and look to expand the Gulf Run, truck line, other assets to meet any demands that are out there

Speaker 9

Great. And then for the follow-up, just on your commentary around M and A, Can you be a little bit more specific? Do you have a preference for asset packages versus corporate M and A? Any specific commodities? And then how would you look at your leverage profile?

Speaker 9

Would you look to go above 4.5 times temporarily if there was something that was attractive or would that be kind of the governor that you wouldn't want

Speaker 4

Yes. Listen, When we look at these various transactions, whether it be on the company side or whether it be on an asset Acquisition, either one of them. We always evaluate how the connectivity is to our current assets. And some of it could be moving maybe a little bit further downstream with value add. But A lot of it we always evaluate as to the connectivity so that we can get more commercial synergies with the footprint we have.

Speaker 4

And when you start looking at this across all the commodities, natural gas, natural gas liquids and the crude oil, you can see How we built the franchise here that we have, in being able to take product from wellhead all the way through Export Facilities. So we're going to continue to look at them on that basis as to where the value comes in. So let's go to the metrics, which is the second part, which really relates to the first part of my question too, I mean, answer that I just gave you on that piece of it. And that is The accretion piece of it, and that's how we're able to be able to go in with a lot of these and get the accretion is because of the connectivity and what we're able to do with the product all the way downstream. And so when we will We'll kind of walk through these and evaluate them.

Speaker 4

We're careful. We're disciplined in how we look at these various commercial synergies, But we have a great team that is able to extract a lot out. But the other component besides just accretion to it, DCF per unit basis It's the leverage. That's the other piece of it. And you'll see with the transactions we're doing, we will always evaluate these things as to what is the combination of Equity and cash that we use.

Speaker 4

So we don't have intention of going back above from a leverage standpoint. And we think we've got a great currency to be able to work with here. But most importantly, we've got a great team that's able to go in and

Speaker 9

Okay, great. Thank you very much.

Operator

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

Speaker 3

Hi, this is Mackie real quick before Tom closes out. I was Think about it. We're meeting with Bill Berg and our team kind of in preparation for this and they made some great points is that and everybody knows this, I believe. But Tom mentioned this earlier, we believe we have the best team running any midstream in the United States top bar and a lot of them are sitting in this room. We think we have the best base of business, a very strong base with record volumes in several segments every quarter.

Speaker 3

We're delivering on the projects that we're building with Gulf Run and GrayWolf at the end of last year. And then of course, we just brought on Baer. We're having Once again, with Chris Heptey's great efforts around M and A. We've got Lotus really kind of kicking in and then we've got the frac going on. That combined with strong cash flow stability, our disciplined M and A strategy, we are incredibly well positioned So if you can't tell in our voices, we are very excited about where we sit, the assets that we have throughout the country and what the future holds for our partnership and really for our So we're pretty excited if you can't tell in our voices.

Speaker 4

No, I think that's a wrap, Mackie. Thank you. Appreciate it.

Operator

Conference has now concluded. Thank you for attending today's presentation. You may now

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Earnings Conference Call
Energy Transfer Q2 2023
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