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 today's event is being recorded. I now like to turn the conference over to, Tom Long. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to the Energy Transfer’s second quarter 2023 earnings call. I'm also joined today by Mackie McCrea 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. 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 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. I'd like to start today by going over our financial results for the second quarter of 2023. We generated adjusted EBITDA of $3.12 billion, compared to $3.23 billion for the second quarter of 2022. 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 out of our Nederland and Marcus Hook terminals. Our volume growth was more than offset by significantly lower quarterly average natural gas and NGL prices, which declined 70% and 45% respectively over the second quarter of last year. DCF available to the partners of Energy Transfer as adjusted was $1.55 billion, compared to $1.88 billion for the second quarter of 2022. This resulted in excess cash flow after distributions of $579 million. 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 second quarter 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 in our incredible backlog of growth opportunities. As of June 30, 2023, the total available liquidity under our revolving credit facilities was approximately $2.36 billion. Now turning to results by segment for the second quarter, I'll start with NGL and refined products. Adjusted EBITDA was $837 million, compared to $763 million 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 with a $51 million negative impact due to the 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. Adjusting for this non-cash timing matter around hedging, adjusted EBITDA for the second quarter would have been $888 million. NGL transportation volumes on our wholly-owned and joint venture pipelines increased 13% to a record 2.2 million barrels per day, compared to 1.9 million 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 Nederland 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 second quarter of 2022. For the month of April, throughput averaged over 1 million barrels per day, which was a new monthly record. NGL export volumes grew 15% over the second quarter 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. Year-to-date, we have loaded more than 30 million 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 million, compared to $903 million for the second quarter of 2022. 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 19.8 million MMBtus per day compared to 18.3 million MMBtus per day for the same period last year. For our crude oil segment, adjusted EBITDA was $674 million, compared to $562 million 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. Crude oil transportation volumes were a record 5.3 million barrels per day, compared to 4.3 million 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 interstate segment, adjusted EBITDA was $441 million, compared to $397 million for the second quarter 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 interstate pipelines, including Transwestern, Tiger, Pebble, and Trunkline. For our Intrastate segment, adjusted EBITDA was $216 million, compared to $218 million in the second quarter 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 of 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. 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 three non-binding HOAs related to the long term LNG offtake from this project for an aggregate of 3.6 million metric tons per annum. One of the HOAs is with Chesapeake and Gunvor for 1 million metric tons per annum. A second HOA is with EQT for 1 million metric tonnes per annum. And the third HOA is with a Japanese customer for 1.6 metric tons per annum. 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. as well as from international customers. We remain optimistic 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 $1.25 billion, to add up to 250,000 barrels per day of export capacity. This project is expected to be in service in mid-2025 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 capacity. At Mont Belview, we expect frac 8 to be mechanically complete in the next couple of weeks, which would put it into full service around September 1. This addition will bring our total Mont Belview fractionation capacity to over 1.15 million barrels per day. Out in the Delaware basin, we placed our 200 million cubic foot per day Grey Wolf processing plant into service in December of 2022. And in June, we placed the Bear plant into service, which is our eighth 200 million 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. 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 continue to utilize a significant portion of Zone 1 capacity on Gulf Run. And during the second quarter, we added additional 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. 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. If this project reaches FID, Energy Transfer would construct a CO2 pipeline to connect the customers to Oxy sequestration site in Allen Parish, Louisiana. We are also continuing to have discussions with third parties related to the development of ammonia facilities at sites along the Gulf Coast, where we have docks with deepwater access. Now looking at our growth capital spend for the six months ended June 30, 2023. Energy Transfer spent $794 million 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 billion, 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 expenditures related to the Lotus acquisition. 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 A, the Bear processing plant, and new treating capacity in the Haynesville. Additionally, 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 billion to $3 billion. Now for our adjusted EBITDA guidance. As we get further into the year, we now expect our 2023 adjusted EBITDA to be approximately $13.1 billion to $13.4 billion, 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. Our base business continues to perform well, generating strong volumes and providing stable cash flows, which demonstrates our ability to operate through a volatile macro environment. We remain optimistic 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 strategic optimization and expansion projects that enhance our existing asset base and generate attractive returns. 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 lineup for our first question.

Our first question comes from Spiro Dounis from Citi. Please proceed.

Guys, first question, maybe just go to Lake Charles quickly. Two-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. 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?

Yes, this is Mackie. Let me start, and Tom may add to it. Yes, for confidentiality reasons, we can't talk about who our equity partners are. Maybe we can say that we have two very significant partners at a minimum, one that wants to step up for a large amount of the equity as well as a lot of the offtake. And I'll just make a quick comment. We've worked pretty hard on this project. We slowed down during the pandemic. Mason and his team did a great job picking this back up when the Ukraine war started. We had tremendous momentum, signed up a lot, 8 million or 9 million tonnes developed relationships all around the world, really good relationships. A lot of those folks I've met over the last three or four months that really believe in our project, and then lowering the whole DOE cut the legs out from under us kind of by surprise without us even expecting it. So we kind of read it. We've spent a great deal of time with the DOE over the last several weeks. We have a real important meeting next week with them, and we're being optimistic that they'll work with us to exponentially go down this new path that we're going down to try to get an export 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 towards FID.

Great. That's helpful color, Mackie. Second one is going to switch gears a bit here, but just in thinking about TTM. I think it was maybe two quarters ago, it sounded like you were hoping to be able to announce something later in '23, 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. So just curious, where are you in that process? How much is that delayed and maybe new sort of timing? I'm thinking about an announcement there?

I'll provide some background first. Nederland is a valuable asset for any partnership, especially for us. The connectivity from Nederland allows us to access over 25% of the refining capacity in South Texas. We can transport large quantities of feedstocks to this facility, utilizing four pipelines from Mont Belvieu carrying ethane, propane, butane, and natural gasoline that supply the petrochemical facility. Additionally, there's a growing belief that within the next 5 to 10 years, there might be challenges in securing a market for gasoline components, which could also serve as valuable feedstocks for our petrochemical project. Coupled with our ability to supply ethylene and propylene downstream from this initiative, along with export market opportunities, we are very enthusiastic. This facility is truly one-of-a-kind, and interest in it is extremely high. We are currently collaborating with one equity partner interested in a significant ownership stake and takeaway capacity. They have mobilized a large team to work with us, and we will provide more details at the right time. However, like many of our projects, this will take time. This cracker is unique compared to others, not only in its capabilities but also in its logistical advantages. We are thrilled about the potential, and our excellent team, led by Raj and others, is dedicated to this project. We are optimistic that we will reach a final investment decision eventually, but it will take some time.

The next question comes from Jeremy Tonet from JPMorgan. Please go ahead.

Hi, good afternoon. 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 it's a focus there, but also kind of tuck-in M&A has been something that ET has done over time. And it seems like there might be larger industry consolidation of foot right now. At the same time, buybacks have been topical in the industry. So just wondering if you could kind of walk us through the latest thoughts on capital allocation?

Yes, Jeremy, this is Tom. Thank you for the excellent question. We have been concentrating on reducing our debt and are pleased to have it in the 4 to 4.5 range. We aim to lower it further as mentioned in the prepared remarks. Beyond debt management, we will continue focusing on various projects we have discussed, supported by our fantastic team that is identifying compelling investment opportunities to enhance our established footprint. We are excited about these opportunities and the returns they bring. Additionally, we have provided guidance for distribution growth at 3% to 5%, and we feel confident about achieving this as each quarter progresses. Unit buybacks are still on our agenda, but at this time, our priority is to invest in the company, manage the balance sheet, and ensure distribution growth to benefit our shareholders. Regarding M&A, we remain optimistic about potential consolidation in the midstream sector, where we excel. Our history of accretive acquisitions has contributed significantly to our current position, along with the organic growth projects that accompany them. We will maintain our focus on this area and dedicate time to it.

Got it. That's helpful. And maybe picking up with that, some of the recent acquisitions, be it Lotus or 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.

Okay. Let me start by discussing the cost side, and then Mackie will share additional insights. Looking specifically at the Enable acquisition, it has consistently exceeded our expectations. If you refer back to the S4, our forecasts were considerably lower, by about 40% or 50%, compared to what we are currently experiencing. This improvement can be attributed to both cost and commercial synergies that we are recognizing on a daily basis. Mackie will elaborate further on this. Regarding the Lotus acquisition, we are maintaining our disciplined approach like we did with Enable, paying attention to the transaction levels we are working with. These acquisitions are beneficial and contribute positively to our financial position. We have achieved all the anticipated cost savings from Lotus, but since it is still recent—having closed in May—we are also uncovering numerous opportunities there. Mackie, would you like to add anything about the commercial aspects of both acquisitions?

Okay. Yes. Chris Hefty and his team have done an unbelievable job. Those acquisitions that Tom just talked about have been incredible. Tom hit on a little bit, Enable. We keep finding things. We were able to move volumes out of Louisiana to Enable down to some of our East Texas assets and just a lot of things that we're finding that are very beneficial. Our WEX acquisition, it is what it is. We bought it at a great multiple, and it's proven out at that multiple or better. So we're very pleased with that one. And then Lotus, gosh, we've just closed it in to where 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. So as I just mentioned, what great acquisitions that will end up paying off a lot more than we anticipated when we purchased them.

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 these.

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

Hi, good afternoon everyone. Maybe to start off on the long-term annual capital run rate, growth CapEx run rate of $2 billion to $3 billion. I was curious if you could just touch a little bit more perhaps on what these projects could look like, differentiating between perhaps traditional midstream-based business opportunities versus some of these low carbon opportunities that you discussed, LNG, CCUS transport and ammonia? Thanks.

Okay. It's Mackie again. Yes, we've got a lot of things already in the works that we've already got FID on. We're 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, CapturePoint. As we talked about in the opening remarks, it 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. 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 to FID over the coming six months and 12-month period.

And the only other thing I would add to this, as you know, we do continue to work or 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 in looking at various projects.

Great. Thanks. And maybe to follow up on Lake Charles LNG. A lot of HOAs signed during the quarter were some notable E&P counterparties that have previously voiced interest in equity ownership in an LNG facility. So just given the tight existing timeline that you currently have with the DOE, I was 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 ET to perhaps own incremental equity and ownership perhaps than a few months ago, just given the fast pace of HOAs that have been signed over the past few weeks. Thanks.

Yes, this is Mackie. No, nothing has really changed there. We kind of have a target of around 25% of equity ownership. That hasn't changed. We won't really talk about who the equity partners potentially are. I mentioned a few without naming them, but yes, there are more than that. There are some producers that expressed interest. 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.

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

I think you may have more exposure to lower gas prices 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 prices? Is it as simple as if gas prices go back up next year, that segment will improve?

Yes. Jean Ann, 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 has 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. 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 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.

Got it. Okay. And then just the latest on the up sea potential. And if you've kind of had any interest from investors that count on MLPs that they'd be interested in the up sea?

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, et cetera, on views on the market side of it. Where a lot of the time is really spent on the structuring also. We want to make sure that we get this thing structured in a way that is a win-win for all. 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 of come out at the right time that makes sense.

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

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? Are the needs there that quickly? Or the Haynesville needs more time to recover?

Yes, this is Mackie. No, we don't expect to get the FID on expansion on Gulf Run. As Tom said in the opening remarks, our team has done a great job of selling out the capacity by January of '25. 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. A lot of that depends on some of the LNG facilities to get to FID. A lot of it 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 Trunkline or potentially even off FGT. So we're still a way away from that, but 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.

I just wanted to follow up on the expected long-term capital expenditure run rate of $2 billion to $3 billion. While this amount is manageable within the company's cash flows, it is higher than your previous spending, with $2 billion spent last year and a similar target for this year. Could you provide some insights on why you anticipate capital expenditures might increase in the future? Will this be due to larger projects or perhaps a greater focus on international opportunities? I would appreciate your thoughts on this potential increase in spending.

You bet. And like I say, a 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 sheer size that we've become, start running over $13 billion a year. So don't have really a whole lot more description at this point, other than just kind of guiding you toward all the various projects that we have on the drawing board, so to speak.

Let me add that we would be quite disappointed if we don't reach close to $3 billion, as the projects we are pursuing offer really good rates of return. Everything we are targeting has synergistic revenues, which are not included in the internal rates of return, both upstream and downstream in many cases. From a commercial standpoint, I will be disappointed if our team does not get closer to $3 billion or even exceed that amount while aiming for the highest returns we are targeting.

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

Thanks, good afternoon everyone. Yes, I wanted to ask about the recent spike in ethane prices. There's definitely been some issues with processing efficiencies and fractionation facilities being impacted. So just wonder if you can just, a, were any of your facilities impacted by the extreme heat we've seen in the South? And then, b, should we think of this as an event that you probably benefited from? Or could this be a drag on Q3?

Mike, this is Mackie. There's been a lot of discussion around this situation that caught us by surprise because it really didn’t affect us at all. We are one of the few companies in the U.S. that manages the majority of our frac products, so we remain optimistic. That’s why we’re increasing our export capabilities. We looked into it further, and RVM had a solid article on the topic. It seems to be a mix of several factors. RVM indicated some points you mentioned, noting that cryos are having trouble with heat and production as well. We've experienced quite high temperatures, which have caused a 2% to 3% impact. Frac challenges are a bit worse, around a 5% to 7% effect, based on our observations and those of others. There's also a shortage of inventory that isn’t well tracked, and rumors about severe inventory shortages circulated. Many companies, unlike us, faced rejections. It takes time for them to recover and find a way to get product to Mont Belvieu, which took a few days. Additionally, we've heard that some crackers were selling their ethane due to falling prices, leading to a brief spike in ethane prices. This situation had no impact on us or our customers, and it was a combination of various factors occurring over a short time.

Okay. Good. No, that's helpful. And then I wanted to ask about LPG and ethane exports. It seems like your volumes are still very strong through the first half of the year. What are you expecting for the balance of the year on both LPG and ethane volumes? If you could just speak generally to what you're seeing in those end markets right now.

Yes, it's Mackie here. Looking ahead, we are currently in negotiations regarding a potential demand for over 500,000 barrels of ethane that may come online within the next three to four years. Of that total, around 150 to 180 barrels are highly likely to be contracted. There is a significant demand for ethane. Regarding propane, many propane dehydrogenation plants are being built, with five or six already completed in China, and about twelve more planned. This indicates strong demand for propane and ongoing construction in that area. We are optimistic about the future; this is why we are expanding as quickly as possible and are positive about increasing volumes, particularly at Nederland. There may be some pullback at Marcus Hook due to its location, as many of those barrels remain local, but we are able to channel much of the flow to higher-priced markets, thus enhancing margins. Overall, we continue to have a positive outlook, as next month's volumes already appear stronger than in July. Our optimism extends beyond the next couple of quarters into the long term, as we see significant growth across all aspects of natural gas liquids. Additionally, we noted that last quarter saw the highest global oil consumption ever recorded, indicating that while there is a shift away from oil, its consumption continues to rise. In short, we remain very confident in our prospects.

The next question comes from Neel Mitra from Bank of America.

First question, you obviously have some very capable upstream assets that can be expanded 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 gaps down to Lake Charles in an efficient way so that both sets of projects can work?

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 in the Gulf Coast, but where anybody is looking for gas. So yes, we'll continue to chase markets and look to expand the Gulf Run, Trunkline, and other assets to meet any demands that are out there that we end up contracting.

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

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. 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. And when you start looking at this across all the commodities, natural gas, natural gas liquids, and crude oil, you can see how we've built the franchise here that we have and 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 on the 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 kind of walk through these and evaluate them, 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 from that. But the other component, besides just accretion to a DCF per unit basis, is 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. 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 extract the value as we walk through the integration of our acquisitions.

Okay, great. Thank you very much.

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

This is Mackie before Tom wraps up. I wanted to mention that during our preparation meeting with Bill Berg and our team, some excellent points were raised. As everyone likely knows, and as Tom mentioned earlier, we believe we have the best team in the midstream sector in the United States, and many of them are here with us today. We are confident that we have a strong core business, achieving record volumes in multiple segments each quarter. We are successfully executing on the projects we initiated, such as Gulf Run and Gray Wolf at the end of last year, and we've recently brought on Bear. Thanks to Chris Hefty's outstanding work in M&A, Lotus is gaining momentum, and we also have the frac operation underway. Coupled with our strong cash flow stability and disciplined M&A strategy, we are in an excellent position for growth. If it's not apparent from our voices, we're truly excited about our current standing, the assets we possess across the country, and the future prospects for our partnership and the industry as a whole. So, as you can tell, we're quite excited.

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

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.