Oneok Inc (OKE) — Q1 2025 Earnings Call Transcript

Thanks, Mike. Good morning, and thank you for joining us. On today's call is Walter Hulse, the Chief Financial Officer, Treasurer and Executive Vice President, Investor Relations and Corporate Development; and Sheridan Swords, our Executive Vice President and Chief Commercial Officer. Also on the call are Kevin Burdick, the Executive Vice President Chief Enterprise Service Officer; and Randy Lentz, Executive Vice President and Chief Operating Officer. Yesterday, we announced our first quarter results, highlighting the performance of our integrated systems and a disciplined growth strategy. These results were driven by our dedicated employees. Results for the quarter were in line with our first quarter expectations, and we affirmed our 2025 financial guidance and 2026 outlook, both of which were originally provided in late February. As we've exited the winter, volumes across our system have ramped up significantly, providing momentum for additional growth through the remainder of the year. We're also entering what is typically our strongest two quarters for refined products demand in the second and third quarters. We continue to execute on acquisition-related synergies, which combined with the completion of organic growth projects and the demand for our services will continue to support earnings growth throughout the remainder of the year and beyond. We're approaching full completion of several organic growth projects, including the West Texas NGL pipeline expansion out of the Permian Basin and the Elk Creek pipeline expansion out of the Rocky Mountain region. Additionally, a number of key synergy-related projects are nearing completion, which we expect will provide a tailwind to earnings for the second half of 2025 and into 2026. One of these projects is the connection of the Easton Energy NGL assets with our Gulf Coast infrastructure. Sheridan will talk more about the strategic benefits of our synergy projects during his commercial update. As we've entered the second quarter, we're gaining momentum into the back half of 2025 with volumes ramping up across our systems and many smaller scale, high-return synergy projects coming online. While there is much to be excited about at ONEOK, we also recognize that we're operating in an environment with a number of evolving macroeconomic market variables. We closely monitor a range of macroeconomic indicators, including commodity prices, producer activity, inflationary trends and regulatory developments, and we remain focused on navigating appropriately to shifts that could affect the markets that we serve. ONEOK's business is not completely immune to volatility. We believe that ONEOK is structured to perform through various cycles and is in a position to continue delivering value. First, our outlook is very different today than even two years ago. We've been intentional about adding scale, demand-pull markets, geographic diversification and fully integrating our systems. Our integrated and diversified footprint across multiple products and geographies positions us well to manage through periods of uncertainty. Second, we have a unique and attractive earnings catalyst related to acquisition synergies that are not tied directly to production volume growth. Some of these catalysts include blending services, liquids blending, maximizing volumes from acquired systems through our downstream assets and capturing efficiencies on newly integrated assets. Third, our strategically positioned assets are in some of the most productive U.S. shale basins. We're connected with some of the largest and most well-capitalized producers in the U.S. with decades of proven reserves to provide stable and growing supply to our systems. They make informed decisions, supported by data and experience. And finally, we remain committed to our strong balance sheet and investment-grade credit ratings, which provides significant financial flexibility. Our commitment to capital discipline and focus on return on investments is embedded in our business strategy. So while we monitor near-term market dynamics closely, the strength of our businesses lies in our geographic diversity, integrated footprint, innovative employees, and strong commercial relationships, all of which provide long-term value. I'll now turn it over to Walt and Sheridan to provide their financial and commercial updates. Walt?

Thank you, Pierce. First quarter 2025 net income attributable to ONEOK totaled $636 million or $1.04 per share. We reported first quarter adjusted EBITDA of $1.78 billion or $1.81 billion, excluding transaction costs, which is comparable to how we provided financial guidance. Results were driven primarily by a full quarter of adjusted EBITDA from EnLink and Medallion as well as higher year-over-year NGL and natural gas processing volumes in the Rocky Mountain region. These results were partially offset by the absence of earnings in 2025 from the Interstate pipeline assets divested on December 31, 2024. The proceeds of these sales were used to accelerate deleveraging of our balance sheet. The acquired EnLink and Medallion assets contributed nearly $450 million during the first quarter. As we progress on the integration of these businesses, we continue to identify and realize synergies with $250 million of total incremental synergies expected in 2025. We've added a new slide into our earnings presentation which was released yesterday along with first quarter results, Slide 5 in the deck. It shows the expected earnings power of our combined companies as compared with each company's stand-alone five-year planned prior to the closing of these acquisitions. Over the coming years, we anticipate our consolidated EBITDA will meaningfully outperform some of the individual company forecasts. This further growth is primarily driven by synergies and growth projects made possible by commercial alignment, operational efficiencies, scale, and disciplined capital execution. When looking at this slide, it's important to recognize that 2024 results include earnings from the divested assets and years '25 forward exclude assets EBITDA and those assets EBITDA in the forecast. We continue to demonstrate our commitment to balance sheet strength, ending the quarter with no borrowings outstanding under our $3.5 billion facility and more than $140 million in cash. In March, we repaid $250 million of senior notes at maturity with cash on hand as we have with our last five maturities. And we continue to expect leverage to trend towards our target of 3.5x in 2026. Before I turn it over to Sheridan, I'd like to reiterate Pierce's comments on the current environment. From a financial perspective, we are constantly evaluating how external factors contribute to our results. Our 2025 financial guidance provided in late February, which we affirmed yesterday reflects what we believe is a balanced and realistic outlook given current market conditions. The first quarter was in line with our internal company forecast, and we expect that the combination of seasonal refined product demand, volume growth coming from the winter months, completed capital projects, and additional synergies will increase our results in the coming quarters. In addition to these earning catalysts, we remain disciplined in our approach to capital allocation and cost management. If we were to see a prolonged or material shift in the economic environment, we would not hesitate to adjust our capital plans or re-prioritize investments to maintain our financial flexibility and our commitment to a strong balance sheet as we've previously demonstrated. I'll now turn the call over to Sheridan for a commercial update.

Thank you, Walt. Beginning with the Natural Gas Liquids segment. First quarter NGL volumes increased 4% year-over-year driven by a 15% increase in the Rocky Mountain region and an 8% increase in the Gulf Coast Permian volume. Rocky Mountain region volumes increased year-over-year, in line with our expectations. We continue to see volumes ramp up on our system as we've exited winter, and volumes are currently averaging nearly 480,000 barrels per day in April. In the Mid-Continent, seasonal weather combined with less ethane on our system during the quarter resulted in lower volumes. In April, we are averaging more than 540,000 barrels per day with warm weather, more ethane recovery, and growth in Oklahoma. As a reminder, all EnLink NGL volumes from the Mid-Continent region were transported previously on our system prior to the acquisition. In the Gulf Coast Permian region, volumes increased year-over-year and compared with the fourth quarter of 2024, with the 436,000 barrels per day of volume in the region during the quarter, nearly 100,000 barrels per day was attributable to EnLink volume not previously counted on our system. Raw feed throughput in the region was impacted by winter weather during the quarter, particularly the extreme cold snap in February and lower levels of ethane recovery. In April, Gulf Coast premium NGL volumes averaged more than 500,000 barrels per day with improved weather, and we anticipate additional volumes to ramp up over the next few quarters from both ONEOK natural gas processing plants and third-party volume commitments on our system. We also continue to strategically pursue commercial synergies across our system, such as linking our Mont Belvieu and Conway NGL fractionation and storage infrastructure to our expansive Houston and Mid-Continent area refined product assets. These critical connections are expected to be completed in the second half of the year, increasing contributions from the future integration of these strategic systems. Expected NGL growth across our system supports our strategic Texas City LPG export joint venture. This wellhead-to-water strategy will provide customers with a fully integrated solution for their products. Already today, we have more than enough propane on our system to fill our capacity on the dock, which is slated to be completed in early 2028. Moving on to the refined product and crude segment. First quarter refined product volumes were nearly unchanged year-over-year highlighting the continued consistency of this business. With gasoline and diesel demand typically lower in the first quarter, we expect increased volumes in the coming months as we see higher demand from agriculture activity and summer travel season. We have already seen an increase in crude oil volumes on our system as a result of our adding gathering infrastructure. First quarter 2025 Midland crude gathered volumes were up more than 20% year-over-year, which includes both the EnLink and Medallion systems. We expect additional volumes to be directed to our long-haul pipeline throughout the year as we continue to fill gathering capacity and complete system connections. Moving on to the natural gas gathering and processing segment. Through recent acquisitions, we've extended our gathering and processing assets into the strategic and growing Permian Basin and added assets in the Mid-Con. We've added 1.7 Bcf per day of processing capacity in the Permian and more than doubled our processing capacity in the Mid-Continent. In the Permian Basin, we currently have 16 active rigs on our dedicated acreage. This activity level and the opportunities we see on the horizon are expected to fuel our existing processing capacity. In the Midland, we are relocating a 150 million cubic feet per day plant from North Texas. And in the Delaware, we have expansion projects at existing processing facilities. These projects provide a path to growth as we take steps to develop additional infrastructure in both the Midland and Delaware Basins. We are excited about the long-term potential in this region and the opportunities that we've seen in the short time since closing the acquisition. In the Mid-Continent, both our legacy ONEOK and recently acquired assets performed well. As we now have had a quarter of operations with a much larger position in Oklahoma, we are confident in the opportunities we have to expand our services for customers and to capture synergies from operating as one integrated system. There are 14 rigs on our dedicated acreage in Oklahoma and a number of projects underway to connect and optimize these assets in the region. Mid-Continent region processing volumes are averaging more than 2.4 Bcf per day in April. Rocky Mountain region processing volumes averaged nearly 1.6 Bcf per day in the first quarter of 2025, slightly lower than the fourth quarter due to normal winter weather effects. As we enter spring, volumes have begun ramping with April volume averaging nearly 1.7 Bcf per day in the region. In the Williston Basin, there are 15 rigs on our dedicated acreage. Volume in this region continues to benefit from increasing efficiencies that expand the basin's core acreage and from longer laterals drilled. In 2025, we expect 3-mile laterals to make up more than 35% of our wells connected. When looking at producers across our operations, portfolios, and economics are unique to every operator and depend on many variables and the basins where we operate, many of our customers are among the lowest cost operators in North America with breakevens below current price levels. Based on recent conversations, we are not seeing any meaningful shift in drilling or completion activity. In the Natural Gas Pipelines segment, our assets remain well positioned to benefit from increasing natural gas demand. We've been engaged in active negotiations across our system related to power demand for data centers in Oklahoma and Texas as well as LNG, ammonia, and industrial demand along the Mississippi River Industrial corridor. Our Oklahoma natural gas storage expansion project was recently completed and will be fully in service next month, adding an additional 4 Bcf of working storage capacity, which is 80% committed with third-party contracts. We are also underway on our Jefferson Island storage hub expansion project in Louisiana, which will increase storage capacity by approximately 8.5 Bcf and will be completed in two phases with the first expected in 2028 and the second in 2029. This project is fully subscribed by third-party commitments. Pierce, that concludes my remarks.

Thank you, Sheridan. As we close today's call, I want to acknowledge the dynamic environment we're operating in. Despite the external noise, long-term fundamentals of our business remain strong, and we're well positioned for continued growth. Ultimately, the strength of our integrated assets, our understanding of the markets we serve, and our proven ability to adapt give us confidence in the durability of our outlook. What gives me additional confidence is our people. The dedication and innovation of our employees are the driving force behind everything that we accomplish. Their unwavering commitment to safety, innovation, and operational excellence continues to position ONEOK for long-term success. We remain focused on optimizing our existing assets, expanding strategically in high growth areas like the Permian Basin, and leveraging our integrated footprint to meet the rising demand for midstream infrastructure here in the United States. Operator, we're now ready for questions.

Hi, good morning.

Good morning, Jeremy.

Good morning, Jeremy.

Thanks for the color on the call today. I was wondering if you might be able to expand a little bit more on the synergies, and I guess the forward outlook. There's a lot of uncertainty in the market. But from what you see right now for the balance of '25 not really just hitting the guide there, but really the commentary on 2026 appears unchanged as far as strong growth there. I'm just wondering if you could elaborate a bit more maybe on what you see there, synergy capture that gives you the confidence to stick with that at this point?

Well, I'll start here, and I'll let Sheridan and Walt fill in. But with what we're looking at with the LNG exports, all the construction that's going on in the Gulf Coast, adding as much as 10 Bcf in the next five years, with AI data centers increasing probably anywhere from 3 Bcf to 8 Bcf a day. We understand where those opportunities are, and many of them are in our areas. And so there are some drivers out there that are kind of outside of the economics and the macroeconomics. So I think that the global demand for LNG and LPGs, we think is going to continue. And so far, everybody that we talk to hasn't given us any indication to materially deviate from that.

Jeremy, I want to emphasize that many of our synergy projects do not rely on volume. We have numerous initiatives aimed at improving our efficiency in blending normal butane and refined products as we integrate our NGL infrastructure with our byproduct infrastructure, particularly in the Gulf Coast following our Easton acquisition and in the Mid-Continent region later this year. These projects will be fueled by demand for refined products. As we observe an increase in volume, it tends to lead to lower prices for crude oil and other commodities, which in turn boosts demand for our refined product systems. This trend is unaffected by the current pricing environment. Additionally, we anticipate some efficiency synergies, even at this volume, particularly in midstream operations like gathering and processing. As we transition gas to more efficient processing plants that yield greater NGL output, as well as enhance our crude gathering systems in the Permian, we will be able to utilize more of that crude oil on our long-haul pipelines, which are already part of our existing system. This is why we are confident in our synergy potential, regardless of the pricing conditions.

Hey, Jeremy, the only thing I would add to that is that we do continue to see procurement opportunities, our increased buying is going to continue to give us opportunities to lower costs as we see contracts roll off for various services here over the course of the next several years. So we're focused on making sure that we capture those as well.

Got it. That's helpful. Thank you. And then maybe just shifting a little bit to producer conversations here. We've seen reports of producers asking for meaningful concessions for midstreamers and just wondering, I guess, how your producer customer conversations go with regards to that? And I guess, could there be the potential for win-win solutions? Or just any color there would be great.

Let me begin by addressing this, Jeremy, and then I'll pass it to Sheridan. I've been discussing with other service providers involved in well drilling and production completion. In our conversations, it seems that E&P companies are primarily focused on these areas first because they are more closely aligned with the immediate needs of drilling and well completion. This is likely one of their main priorities. Now, I'll hand it over to Sheridan to discuss re-contracting or details related to these contracts.

Jeremy, what I would say in any environment when our contracts come up with our producers, we are always looking for areas where we have win-win and that's the whole bundling aspect that we have touted in some of these synergy projects or what we are going to bring in these other acquisitions. We're looking at where can we add value to them, and where can they add value to us? It's a very constructive conversation. Those conversations that are going on right now are no different than those that have been going on for a period of time. And our indications from our customers, as they still see value in what we bring to them in different areas, and they are looking for that to stretch across the whole value chain. So it really fits into what we're trying to do with these acquisitions and our bundling strategy.

Got it. That's helpful. I'll leave it there. Thanks.

Hi, this is Doug Irwin on for Spiro. Maybe just to start with the LPG export project. Just curious if and how the potential for tariffs on LPGs has impacted your approach for commercializing this project moving forward?

Yes. This is Sheridan. It has not really impacted our project at all or even our contracting approach. One thing you got to look at with LPG is, as we've said many times, it is a byproduct that needs to clear to the international market. It will make it happen. As you see, even as prices have moved up and down or threats, and you've seen our LPG exports be fairly steady for that period of time. Well, there's no increased demand in domestic growth. So all that has to be exported, and that product needs to clear to be able to continue to get the gas and the crude oil out of the basin. So we have not seen any impact on LPG exports or any change, nor on our contract strategies.

Okay. Great. That's helpful. And my follow-up, maybe just on the macro environment. Just curious if we see crude go into a steep contango here. How should we think about potential storage tailwinds across your system?

Yes, we have significant crude oil storage capacity within our system, and entering a contango market would present a strong opportunity to store that product in the front month for future sales. Therefore, in that scenario, we would experience benefits from our on-system storage.

Good morning. Well, I wanted to go back to your comments about protecting the balance sheet in the event of further macro deterioration. Would your CapEx plans in place for the near to medium term, how much can you flex down if things get worse?

Well, Theresa, I would say that we've lived in that head scenario a couple of times over the last 10 years. Clearly, that was something that had to take place in 2020. And I think we demonstrated a very significant ability to flex our capital program. Clearly, your routine growth, which is often driven by producer activity will come off kind of naturally if activity slows, we won't be spending a portion. And that's about $1 billion of our annual capital that can be flexed. And then the longer term, larger projects. As in 2020, we actually put some of those on hold and then spent the money to do that properly so that as the market came back, we were able to restart those projects and meet our customer demand. We will look at across all of our projects, those that are critical to continuing to deliver on the plan will be executed in due course. So we look at everything today. We don't see it an environment where that's necessary. But we did want to highlight that we did it back in 2016. We did it in 2020. So if we see a macro outlook or global demand destruction. We're in a position to know how to manage the balance sheet and protect it as we've done in the past.

Thank you. Regarding synergies and the 2025 guidance, Sheridan, you provided valuable insight on why things are weighted towards the second half of the year and the various income streams that will come into play. At this point, how much progress do you believe has already been made now that we are past April? Is a significant portion still dependent on execution by the producers for the rest of the year?

A significant portion of the synergies we anticipate for 2025 is already in progress in various forms. We are engaging in some capital projects, particularly involving EnLink and Medallion, as we work on integrating the two systems. This integration is in progress but requires time and cannot be completed immediately. Some synergies related to the Medallion acquisition have already been accounted for in 2023, and while we expect more capital investment is needed, we aim to bring these online by the midpoint of 2026. Specifically, we are connecting the NGL system with the refined product system on the Gulf Coast, which we plan to complete in the latter half of this year. This has been a project we've been working on for over a year and is expected to have a significant impact. We are also integrating the NGL system in the Mid-Continent region. All these initiatives are in progress, and we are confident about the synergies we will achieve in 2025. We continue to identify additional synergies as we unify the two systems, and we anticipate seeing more developments later this year. Overall, we are increasingly confident in our synergies for 2025.

And Theresa, this is Pierce. So maybe I would add to that is when we did the Magellan acquisition and even EnLink and Medallion, one of the things that's common to all three is the synergies are in our control. When we talked about batching, blending, bundling, those are all things that we have control of and we're not waiting on a contract to be signed or buying to show up. It's mainly interconnects that we had to make. But it takes like Sheridan has said, takes time to make those interconnects and then we're continuing to do those throughout the year. But the majority of these things are definitely within our control.

Yes, and the thing that I would add to that, Theresa, is that we've only now operated fully controlling the EnLink system since February 1 effectively. As we've looked at some of our cost opportunities, I'll give you an example, property insurance, there was a scenario where we were able to add the EnLink business and Medallion business to our program and pretty much save close to 100% of the cost of those two entities were spending in the past. That all started on April 1. So you start to see those things roll in. And as we look at various other expenditures where we're able to consolidate, we picked those up at the point in time that those new contracts start. So that will start to fold in throughout the year as we move forward.

Thank you.

Thanks. Good morning everyone. I had a couple of questions on the Bakken. Obviously, the data showed some recovery in volumes, but you're not quite back to pre-wildfire level. So just wondering how you're seeing the rest of the year trending. And I recognize now that Bakken is a smaller piece of the overall pie, but how much Bakken growth do you need to hit your full year guidance?

Michael, this is Sheridan. As we mentioned earlier, we only need a small, low single-digit growth to achieve our guidance, and all indicators suggest that we will meet or possibly exceed that target. Things are looking positive as we move forward. A lot will be revealed in the coming weeks. We're experiencing solid performance, and our confidence is bolstered by the fact that we're emerging strongly from winter. Although it's April and many areas are in full spring, it's still early spring in the Bakken. As we progress into May, we expect to see additional improvements arising from winter-related issues, which will provide great momentum for the rest of the year. This timeline is what drives our confidence in our projected volumes for the year, as it is every year. We generally need to observe the situation after winter and how it develops going forward, and that's when we gain our confidence. We're comfortable with our current position.

Okay. Thanks for that, Sheridan. And then as I think about ethane recovery in the Bakken, how sensitive is that to market pricing? So like if we see a prolonged kind of weakness, for example, would that have an impact? Or is it really just the ethane that's getting recovered there? Is it really just a heat rate concern on Northern Border, it's not really driven by pricing? Thanks.

Right now, our operations are significantly influenced by pricing because we aim to recover ethane and take advantage of the natural gas spread in the Bakken to ethane in Mont Belvieu. If we were to face a complete rejection, it would likely lead to a heat rate situation for some of that volume on Northern Border. However, if ethane gas prices in Mont Belvieu decline, we will experience some impact. We can reduce that volume, which helps the market, and shift it back into Northern Border when necessary. This flexibility in managing our ethane play is beneficial, allowing us to determine when to bring it in and what value we can extract from it. Looking ahead, we have already secured some of this volume, so any changes will still allow us to recover a portion that we need. Additionally, considering the situation in China, there have been movements to relax tariffs on ethane imports for their crackers since they need U.S. ethane. As a result, I believe we will continue to see strong demand for ethane for the remainder of the year.

Hi, good morning. I just have one just kind of a follow-on to Michael's. NGL volumes seemed light across the board in the first quarter. So I really appreciated Sheridan's discussions around how it compared to your internal projections. And how things are picking up in April on the NGL volume front. I did just want to ask if there was more ethane rejection in the Mid-Con or Bakken or anything like that than you had sort of anticipated, which would potentially impact the rest of the year? Or if that is basically kind of what you had already forecast for the first quarter?

What I would say is that the fourth quarter results were in line with our expectations. When we provided guidance at the end of February, we already had two months of data, so we had a clear understanding of what the first quarter would look like. The level of ethane rejection we experienced in the first quarter across our entire system was consistent with our forecasts. We anticipated this because we had a good idea of what to expect. As is typical during the summer months when gas prices decline, we're now seeing an increase in ethane recovery. This trend is expected to continue throughout the year. Our perspective on ethane remains consistent with our stance in previous years, with the Permian primarily achieving complete ethane recovery. There may be fluctuations, but overall, it should remain high. In the Mid-Continent, recovery will vary, while in the Rockies, we anticipate limited recovery unless we take measures to capture the ethane linked to the natural gas to ethane spread, which we've been addressing throughout the year.

Hi guys, I actually just wanted to focus on Slide 5, a very interesting slide, but some of us are slightly visually challenged. So help us understand the slide a little better. Are you trying to imply that by combining these four companies, there is about additional $1.3 billion of incremental EBITDA realizable by 2027. Can you help us walk through this slide? There's a lot of very good information on here.

Yes, that's exactly the punch line there as you get out into 2027. What we wanted to do is go back and give a base. So if you look at the projections that were there at the time of the acquisitions and then we layer the synergies and growth projects. And we wanted to put both of those in because a great example of that is the refined products pipeline expansion out to Denver. Is that a synergy? Or is that really a growth opportunity that presented itself as we brought these two companies together. Either way, it's going to be a great contributor as we look forward. So we wanted to couple those together and show you how that will build over time. Because as Sheridan spent time talking today, we're just now getting in a position to get some of those Magellan synergies where we had to spend some capital to connect the system. And there will be some of those with EnLink and Medallion. Hopefully they'll come in a little bit quicker because they're a little bit smaller in scale as to what needs to happen. But we wanted to give you a view of how we see those playing forward, so that as you think about a longer-term growth rate, you can understand what we think some of those opportunities are.

Perfect. My quick follow-up here is it looks like the weather was working against you in 1Q. And I know it's difficult to quantify, but I'm just trying to understand the opportunity cost of the lost revenue or EBITDA if the weather was not a major headwind as it looks like it was in the first quarter?

Well, I think that clearly, if we hadn't had the weather, there would have been an opportunity for more EBITDA. But I would say that no matter what happens, you're always going to have weather in North Dakota in the first quarter. So we clearly plan for that, and that is part of our expectations when we do our forecasting, in the very few periods where we've had some warmer weather up there, so we surely have taken advantage of it and made some good money on those opportunities. But by and large, we're going to be impacted by weather every first quarter. And then we get a little bit of it back there in the fourth quarter as well. So we really look at how we come out of that in the spring and jump forward into the second and third quarter where we really get to see the uplift in the market activity.

Thank you so much.

Hi, good morning. So you've had a lot of confidence on the call on the 2025 outlook and good details on recovery this spring. Would you say even with Q1 that as of now, you're still tracking to the midpoint of the 2025 EBITDA guidance generally?

Yes. I would say that we were firm in guidance just as we gave it in February, it was the same where we would end up. So we are in line, affirming financial guidance as it was given in February.

Okay. Great. I had another follow-up on Slide 5, and I want to just make sure I'm understanding the data point for 2027. So you're pointing to $870 million of synergies and growth uplifts in '26 and then $1.3 billion in '27. So that's over $400 million of year-over-year upside in 2027. And I think that's on top of growth in the stand-alone business outlooks as well. I just want to make sure I'm understanding that right, as far as the upside you see in '27.

Yes. I think that's a good highlight of where we start to see some of the stair-step functions when we bring on new projects from a growth standpoint. And why we wanted to highlight that, that's both synergies, which may be a little bit more linear. And then when you add in growth projects, they tend to be lumpier stair step you up when you bring that on and can start to be what it is. Clearly, as we move from '26 to '27, we'll be bringing on some projects that are underway right now and enjoy the benefit from that '27 and forward.

Good morning everyone. I just wanted to go back to the Permian volume guidance. Thinking about the current asset footprint and 1.7 Bcf of capacity. Just wondering if you could elaborate a little bit more about how you envision that volume kind of the cadence stepping up the rest of the year. How much of the volume growth do you think there could be from inefficiencies that you could capture on the system? Or is it just the volume growth entirely driven by new well connects?

Yes, this is Sheridan. The volume growth will mainly come from new well connections. Previously, we didn't have a gathering and processing presence in the Permian before acquiring the EnLink system. What we're experiencing now is overall growth moving forward, and I provided some current numbers that give us confidence in our future outlook. Additionally, in the Delaware, we have several quick expansion opportunities currently in progress that will help us absorb some of the volume growth as we continue to advance. I'm seeing increased activity in the Permian, which will fill our assets, with much of this growth expected by the end of the year from these expansions.

Okay. Great. Then maybe if I just shift to refined products. I was wondering if you could spend a little bit of time talking about the blending business. Spreads between the butane and RBOB seem to be wider than they were relative to Q4. And I know that there's more that goes into that business, such as logistical costs and differentials. I was hoping that maybe you could explain the Q1 results. And maybe if we're getting ourselves into a situation like we did in 2024 or like you did in 2024, where you kind of saw an unseasonal uptick in Q2 product margins?

Yes. The same strategy that we had in 2024, the spring 2024 is the same strategy we have going on around that 2025 where we saw opportunities to sell store product and instead of selling in the current month that we've blended the product to go ahead and forward sell that in that month out forward into 2Q and beyond. And we will see some added benefit as we get into the second and third quarter from that strategy. I think that's your question.

Yes, hi. Good morning folks and thanks on the color on the call. So I just wanted to start off by clarifying some comments, which was made in the prepared remarks with regard to the LPG export dock facilities. So are you indicating that the amount of volumes that you need to fill up your facilities is something that you're already moving on your systems? But I guess, with third-party export docks, did I get that right?

Yes. We produce enough propane now to more than fill that dock capacity. Now we are selling that product into the open market today, whether it be an enterprise, whether it be a target, whether it be in energy transfer. And we know just by supply and demand balances that some of that product has to be going across their dock, but we are not selling into our dock, but when our dock comes up, we will take that product that we were selling into the open market that was making it across somebody else's dock. That product will be shifted away from their docks and be put on our dock. The natural gas pipeline segment has performed exceptionally well in the first quarter, which is typical due to meeting demand across the system. We expect this strength to continue throughout the year. We will be bringing online additional storage next month, increasing our capacity by 4 Bcf, which is already 80% contracted. The remaining 20% will be allocated for operational storage and potential opportunities for parking loans that may arise. Natural gas pipelines are indeed thriving, and as we look ahead, we are actively engaging in discussions related to demand, particularly in Louisiana. A significant focus is on the industrial corridor, which has become a key area for us, and we are in the final stages of securing demand from industrial clients there. Although this segment is our smallest, it is poised for a successful year.