Good day, and welcome to the Energy Transfer Q2 2024 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 would now like to turn the conference over to Tom Long, Co-CEO. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. And welcome to Energy Transfer's second quarter 2024 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 a reminder, our earnings release contains a thorough MD&A that goes through the segment results in detail, and we encourage everyone to look at the release as well as the slides posted to our website to gain a full understanding of the quarter and our growth opportunities. 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 on our Form 10-Q for the quarter ended June 30, 2024, which we expect to file tomorrow, August the 8th. I'll also refer to adjusted EBITDA and distributable cash flow or DCF, both of which are non-GAAP financial measures. You will find a reconciliation of our non-GAAP measures on our website. I'll start today by going over our financial results. For the second quarter of 2024, we generated adjusted EBITDA of $3.76 billion, compared to $3.1 billion for the second quarter of 2023. This number includes over $80 million of transaction expenses. Absent these transaction costs, adjusted EBITDA would have been over $3.8 billion. We had record volumes through our crude oil and NGL pipelines, as well as record NGL exports. We also saw strong performance from our NGL fractionators and our refined products pipelines and terminals. DCF attributable to the partners of Energy Transfer, as adjusted, was $2 billion compared to $1.6 billion for the second quarter of 2023. For the six months of 2024, we spent approximately $1 billion on organic growth capital, primarily in the midstream and NGL and Refined Products segments, excluding SUN and USA compression CapEx. Now turning to our results by segment for the second quarter, let's start with NGL and Refined Products. Adjusted EBITDA was $1.07 billion, compared to $837 million for the second quarter of 2023. The increase was primarily due to growth across our transportation, fractionation, and terminal operations including records in both Mariner East and Permian Pipeline volumes, as well as NGL exports. In addition, we had higher gains from the optimization of hedged NGL inventory. For Midstream, adjusted EBITDA was $693 million, compared to $579 million for the second quarter of 2023. The increase was primarily due to the addition of the Crestwood assets as well as higher volumes in the Permian Basin. For our Crude Oil segment, adjusted EBITDA was $801 million compared to $674 million for the second quarter of 2023. The increase was primarily due to record crude oil transportation throughput and an increase in our total crude oil exports, which were up 11%, as well as the acquisitions of the Lotus and Crestwood assets in May and November of 2023 respectively. Excluding these acquisitions, adjusted EBITDA and Crude Oil transportation volumes on our base business increased 4% and 8% respectively. In our Interstate segment, adjusted EBITDA was $392 million compared to $441 million for the second quarter of 2023. During the quarter, we saw higher contracted volumes on Trunk Line, Pebble, Gulf Run, and MRT. This was offset by lower operational gas sales, maintenance project costs of $12 million, as well as a $35 million reduction in revenue for shipper refunds related to our Pebble rate case. For the Intrastate segment, adjusted EBITDA was $328 million, compared to $216 million in the second quarter of last year. The increase was primarily due to approximately $75 million of increased gains related to pipeline optimization opportunities, as well as favorable storage optimization opportunities. In July 2024, Energy Transfer completed the acquisition of WTG, which provides Energy Transfer with increased access to growing supplies of natural gas and NGL volumes and enhances our Permian operations and downstream businesses. Integration of the combined assets is underway, and we are really excited about the great customer base and the growing gas supply behind this asset. Since closing the transaction, the $200 million cubic foot per day Red Lake 3 processing plant was placed into service. We expect volumes to ramp up quickly as more residue takeaway becomes available. Also in July 2024, Energy Transfer and Sunoco LP announced the formation of a joint venture combining the respective crude oil and produced water gathering assets in the Permian Basin. This is another exciting opportunity that highlights the creativity and optionality our family of partnerships brings to the table when we work together to expand our market and service offerings for our customers. Now turning to our growth projects and starting with our Nederland and Marcus Hook export terminals. Construction of the expansions to our NGL export capacity at Nederland continues to progress, and we remain on schedule for anticipated service in Mid-2025 for the initial phases of the project. At our Marcus Hook terminal, construction continues to rest on the first phase of an optimization project. Turning to Lone Star Express, our 90,000 barrels per day expansion project remains on schedule to be in service in 2026, bringing our total capacity of NGL transportation to over 1 million barrels per day out of the Permian Basin. We recently approved our ninth fractionator at Mont Belvieu; frac 9 will have a design capacity of 165,000 barrels per day and is expected to be in service in Q4 of 2026. This will bring our total fractionation capacity at Mont Belvieu to more than 1.3 million barrels per day. In addition, we recently placed a previously unutilized 2 million barrel butane storage well back into service, bringing our current NGL storage capacity at Mont Belvieu to approximately 62 million barrels. Now taking a look at our Permian processing expansions, construction continues on upgrades to our existing processing facilities, which will add approximately 200 million cubic feet per day of processing capacity in West Texas. In June, we announced plans to construct the 200 million cubic feet per day Badger processing plant in the Permian Basin. This plant, which is expected to be in service in Mid-2025, will utilize an idle plant that is to be relocated to the Delaware Basin, which will help save capital versus building a new plant. In North Louisiana, we placed trains one and two of our Ajax treating facility into service in July. These trains have a combined treating capacity of approximately 300 million cubic feet per day. For a brief update on our opportunities around power generation, with forecasts for electricity demand growth becoming increasingly positive and the need for grid reliability becoming progressively more important, it is clear that natural gas will play a significant role in helping meet this demand. Given Energy Transfer’s extensive interstate and intrastate natural gas pipeline footprint, we believe we are extremely well positioned to benefit from the anticipated rise in natural gas needs. We currently serve gas-fired power plants in 15 states with approximately 185 plants served via direct or indirect connections throughout these states and we have recently signed deals across our systems to provide gas loads of over 500,000 MMBtus per day. In addition, as mentioned last quarter, we have approved the construction of eight 10 megawatt natural gas-fired electric generation facilities to support the Partnership’s operations in Texas. We continue to expect these facilities to go into service throughout 2025 and 2026. These facilities are expected to increase system reliability for Energy Transfer and for our customers. We also continue to make progress on the development of several other growth projects including our Warrior, Blue Marlin offshore project, Lake Charles LNG, a carbon capture and sequestration project with Capture Point and blue ammonia hubs at Lake Charles and Nederland. We look forward to providing more updates on these projects as customer discussions advance and we bring them closer to FID. Looking ahead at our 2024 organic growth capital guidance, we now expect 2024 growth capital expenditures to be approximately $3.1 billion, which will be spent primarily in the NGL, refined products, and midstream segments. The primary driver of the increases from our previous guidance of $2.9 billion is the addition of growth capital related to WTG and quicker returning projects in the Crude Oil segment related to the Crestwood acquisition. Now turning to our adjusted EBITDA guidance. We are raising our 2024 adjusted EBITDA guidance to be between $15.3 billion to $15.5 billion, compared to our prior guidance range of $15 billion to $15.3 billion. Our 2024 guidance has been updated to include our acquisition of WTG, which closed on July 15th, and outperformance in the base business even with over $100 million of transaction costs also included within our full-year guidance. We continue to be excited about our business and the demand for our products and services both domestically and internationally. We're in a strong position to help meet this demand with strategic optimization and expansion projects that enhance our existing asset base and generate attractive returns. We expect to maintain the flexibility to balance organic growth opportunities with further leverage reduction maintaining our targeted distribution growth rates and increasing equity returns to our unit holders. In addition, we are pleased to see that in June, Moody's upgraded our senior unsecured credit rating to double A2, which further demonstrates the strides that we have made to strengthen our balance sheet and financial position. This concludes our prepared remarks. Operator, please open the line up for our first question.

Please open the line for our first question.

Hi, good afternoon.

Good afternoon, Jeremy.

Just wanted to start off if I could, appreciate the color on the call, but as it relates to WTG with a month in the books, I was just wondering if you could talk a bit more I guess, and what you see as far as the commercial opportunities there and similarly, with the JV with SUN and NuStar just wondering what new opportunities that you see in front of you post these deals?

Hey Jeremy, this is Mackie. I’ll start with the first one. We're very excited about WTG. As you just said, we're barely almost a month into it. We still have a lot of rocks to turn over, but we couldn’t be more excited not only about the asset itself and its very creditworthy producers that are supporting that long-term large acreage dedications, and all that discuss and support the Cryo business. But what’s even more exciting to us is that we don’t even put in our numbers when we do acquisitions like this to really feed into our residue business, our downstream residue business as well as Lone Star NGL transport and fractionation business. So we're just getting our arms around it. We're very excited about the enormous growth in that part of the Midland Basin that we have had little exposure to on the gas side. So we're very excited and looking forward to a lot of good things coming out of that acquisition. With NuStar, we’re excited about that too. Joe Kim has done an incredible job growing Sunoco. They’ve been in different areas and they're evolving kind of entire areas. The pipeline side and we welcome a really good partnership with them right now, and JC Nolan has done really well moving diesel from the Gulf Coast to West Texas. We've got some deals with them up in the Northeast on transporting our refined products and a lot of stuff going on. With the great partners, we look very much forward to what we're going to do with them and that JV. Once again, new news, we're getting our arms around that. But the bottom line is that's going to be a lot better for both our partnerships than just one-on-one; it's going to add up to a lot more than three or four on what we're already seeing providing a lot of benefits to the producers out there as we team up, but also a lot of downstream value for both our partnerships. So we're excited about both of them.

Got it. That’s very helpful. Thank you and just want to pivot to the Permian itself, if I could, curious how you guys see the egress situation right now across the three different hydrocarbon chains and the need for incremental takeaway, do you still see more discussion with Warrior at this point? And how do you think about the Crude Oil takeaway side as well?

I’ll begin with Crude Oil. Currently, there isn’t much activity regarding Crude Oil. We believe that significant growth is necessary to utilize existing resources. We think any potential issues are likely a year or two away from our perspective, but we will monitor the situation closely. Regarding Warrior, we’ve received inquiries both from within the company and externally concerning the impact of the recent announcement at Warrior. In summary, the effect is negligible. Most of our current and prospective customers over the next 60 to 90 days are not interested in sourcing their gas from South Texas or the markets tied to this project. This situation isn’t hindering our progress. While we have discussed this regularly, momentum continues to build. There is a large market to the east, across Texas and other regions, which excites us about Warrior's prospects. I would be disappointed if we don’t announce a Final Investment Decision by our next earnings call. We are making substantial efforts in that direction, and if we do make that announcement, the capacity will be fully subscribed. We don’t intend to risk overbuilding in that area, but we believe there are still many years of gas and oil growth available in that basin. Lastly, regarding NGLs, we are not concerned about external factors affecting them. We will construct the necessary pipelines to transport NGLs from that region to fulfill our customer contracts.

Got it. That's very helpful. Thank you for that.

Okay.

Hey, good morning, good afternoon. Thanks for the time. I wanted to and you touched on a couple of these drivers, but maybe just a little more on the underlying business performance for the guidance update. Maybe just a little more color there and kind of how that looks for the back half of the year?

Yeah John, this is Tom. I’ll start and then Mackie can add more on. As we said in the prepared remarks, we feel very good about the base business and that's the reason why we've been able to bring it up in addition to the acquisitions, not just the WTG. So when you really look at it, I think the optimization group, a lot of the stuff we've been able to do, we just continue to be able to see additional benefits as we look out over the year. But no, it was great to be able to continue to walk the guidance up for the year, even in this commodity environment because as you know, we get a lot of extra pop when natural gas prices are higher, et cetera, but even with that we're able to continue to extract good value out of the optimization group.

And then if we’re - thanks for that. If we're looking at the CapEx side, obviously talking about WTG as a bit of a new growth platform to your point on the Midland side. Maybe if you could just frame up how you're thinking about your broader CapEx look over the next couple years now the footprint is bigger, now that you’ve kind of pulled into some of the NuStar assets as well. How that should trend versus your two to three you’ve talked about in the past?

That’s actually a very, very good question. As you know, we just now closed on some of these transactions and we are working through it right now. So, we'll, as usual, come out with our 2025 guidance whenever we get to the fourth quarter earnings release and at that time, we will be able to scrub kind of the normal runrate. But you absolutely nailed it. With our growth and our scale and with everything we're doing, let us scrub that a little bit more. So we won't just give you the 2025 number. We will also kind of give you that ongoing runrate. But as of right now, we've always had that $2 billion to $3 billion. If anything it'll be probably at that $3 billion. But let us do some more work on that before giving any official long-term runrate.

Okay. That makes sense. Appreciate the time. Thank you.

Yeah. Thank you.

Hi, good afternoon. First just wanted to ask on M&A. Most of your recent deals including WTG and then buying G&P businesses and leveraging the NGLs. Is that still the main focus for future M&A? Or could you broaden it out? And then, with the JV with SUN could that partnership potentially play a role in M&A or is the JV exclusively about optimizing the existing assets?

Yeah, I will start with the end of that question, yeah right now the way that is structured the JV in the Midland basin is not to go out and acquire. That’s not to say that if there are some gathering assets or other assets in that area that fall kind of within that AMI that we wouldn't approach that together, and that’s certainly in our agreement with them. But right now, the main focus is really developing out those systems together and achieve as much of the upside that we can't downstream of that partnership with our other businesses and further downstream revenues.

Yeah, and listen, I'll chime in here. This is Tom kind of the first part of your question just in general where we focus. First off, we still felt like consolidation is going to occur in the Midstream similar to what is happening in the Midstream and when you see how diversified we are across all the commodities, we go all the way from the wellhead to the water to our export facilities. We're looking really pretty much across the board. We wouldn't want to dial into any specific area, but the way you asked the question was actually very good, just like what Mackie said on the WTG. We are able to extract a lot of benefits downstream. When we, let's say get into the gathering and processing, it's across all the commodities. It's not tied to any one commodity. So, we think that we still have a lot of opportunities there and we're going to continue to evaluate those opportunities.

Thanks for that. Second question with HH moving to NGL service out of the Bakken, has that impacted discussions on recontracting Dakota Access at all? How are you thinking about recontracting on Dakota Access in terms of the timing and terms you're looking for?

Yeah, Keith, this is Mackie. I would summarize where we are. We are the primary pipeline choice as we transport over 50% of the barrels out of the Bakken. We have the capacity to move significantly more if there is growth, and it's already proven to be advantageous for us. With 60,000 to 80,000 barrels leaving the basin now, we will seek additional options because we believe we will continue to handle the majority of the barrels from that region. We anticipate that we will extend some of our existing agreements, but we are not particularly concerned for the reasons I mentioned. We provide great flexibility by connecting to Mid-Continent refineries and extending all the way to the Gulf Coast, including the Beaumont and Houston areas. Our flexibility and options for producers are unmatched. We are in a strong position and are very confident that we will keep Dakota Access operating at healthy spreads for many years.

Thank you.

Thank you. And the next question comes from Theresa Chen with Barclays.

Good afternoon. Going back to the comments related to downstream synergies following the formation of the Permian JV with SUN. Can you talk about what timeframe the long-haul pipeline commitments rollover from the legacy NuStar gathering system for the barrels that are not already on your long-haul system?

Yeah, Theresa, this is Mackie again. Most of the business that NuStar has now Sunoco in our JV is just gathering. So it's gathering that basin and it's delivered to pipelines like Energy Transfer or other competing pipelines in the area. So that JV is a large area of the AMI that encompasses Energy Transfer's old gathering business in the Permian Basin but does not include any of the downstream pipelines, for example that go to Nederland or up to Cushing. So that’s where we’re going to work very closely with NuStar, I mean, sorry with Sunoco as part of that JV but that just confined to the gathering part of that business.

Right, I meant to ask where the barrels that are not committed onto Permian Express, when can you roll them on to Permian Express over the next few years?

I’d answer it like this; we're probably gathering 1.5 million barrels and we can move less than that out of it. So we don't have any necessarily dedicated barrels from any particular area other than shippers that have taken space on our pipeline systems. So right now, really couldn't say what exact molecules will come from this JV may feed into our downstream business. We kind of take it as a whole. Also, there's different qualities of oil, whether it's WTL or WTI to consider. So there is a lot more kind of thought process going into this, but at the end of the day this JV the business of gathering will continue to feed our downstream business both to Nederland and to our Houston terminal, as well as one day hopefully to our Blue Marlin project.

Got it. And can you just provide us some incremental detail on the marketing strengths in the NGLs and Refined Products segment this quarter? What drove that, and how much of that is repeatable?

Yes Theresa, hi this is Dylan. The NGL marketing line items have a lot of activities going into them. Various optimizations in the Gulf Coast and the Northeast. Over the last quarter, we really saw great performance from the Gulf Coast NGL group. It had a really strong quarter. And it's really comparing back to the second quarter last year when we did have an LCM write down on hedged inventory. Additionally, we also had some strong margins from both the butane and gasoline blending businesses in the Northeast.

Thank you.

Thank you. And the next question comes from Spiro Dounis with Citi.

Thanks everyone. Afternoon team. First question actually wanted to ask you guys about your global growth ambitions. I know in the past you've talked about an NGL Panama pipeline. And recently your name is sort of mentioned alongside another South American oil and gas project. And so I respect the amount able to talk about projects specifics, but just curious do you have ambitions to grow on a global level and is that something that you do under the MLP structure?

Yes, this is Tom. That's the quick answer. We think it's the right thing to do for our partnership here. It makes a lot of sense with all that we've built out across all the commodities. So we continue to evaluate various opportunities. When you look across the globe, I will tell you that we will always be very careful with any risk. As we look at these, we'll make sure they're good fits for us that we can bring a lot of value. But we're well aware of the risks - country risks that come along with each of these. And it's, but we once again think that we've got the right team to be able to extract value when you look out globally. But we will, like I said, it'll be credit risk, country risk, et cetera. And when you get involved with some of these various companies that are in these other countries, you can do a lot of stuff with them globally when you look at it. So we will continue at least to evaluate but be very thorough in our evaluation.

Got it. Helpful, Tom. And maybe to switch gears back domestically. This power demand or power gen demand piece just kind of really snuck up on a lot of the market here and it sounds like you all have a few irons in the fire even on the data center side. So, just curious you get frame for us how you're thinking about the timing of when some of these projects starts to show up in earnings? And maybe as we think about the scope and size are we talking about Greenfield expansions here Brownfield? Just help us understand the opportunity in front of you.

Yeah, this is Mackie and I'm actually not going to answer your question at first, because I do want to make a statement. I thought about this and we're preparing Bill Bergen's team did a great job of summarizing some of our competitors and their earnings call and how they did and I find it interesting to think back about it. We’ve got competitors that talk about the whole business, which is the vast majority of what they do. And they talk about their NGL and oil business, which is the vast majority of their business, and what a blessing and how fortunate we are as a partnership with such great employees running this business. The breadth of our pipeline system, our terminal, and our storage throughout the US. I mean, we're so well positioned to meet the demand growth across the board for natural gas and other commodities. So we feel very fortunate and we're going to take advantage of that. So in answering to your question, we keep talking here about transition for years, and in the last four years transitioned well. I guess, everybody's kind of seeing the truth. The transition is that we're about to transition into untold demand for natural gas. For that case also for natural gas liquids internationally. So, as I just mentioned, nobody is better positioned for us other than Eastern Seaboard. If you look at our pipeline intrastate and interstate networks you look at it, we have over 233 BCF of storage along all of our systems to really meet the demands. We're situated very well to meet all the uphand demand. You mentioned data centers. Yes, we're in four, five different states in discussions with multiple data centers of different sizes. Some of them or many of them want to put generation on site and needing as much as two or three hundred thousand CEP for each one. So, it’s an enormous opportunity for us. As I mentioned, we're very advantageous in many areas to capture a lot of this business, as well as for the power plant demand for natural gas. We see that going up astronomically, we think we could increase the demand here for electricity over the next six to eight years, about 30,000 or 40,000 megawatts at least. Here just in Texas and that goes to other states with similar type needs. Once again, we are very well positioned, and then you add on top of that, I mean, we've got population growth in Florida, in Texas, Bahamas all these gas utilities that will be feeding. And we want our business, you've got Blue Mont just what we're working with Long with a handful of folks. If it comes to fruition, the majority of that, we're looking at between one and two BCF of natural gas deliveries at our terminals close to our terminals for blue ammonia, and then you throw in crypto and on and on. So yeah, we're very bullish. I know that was a longwinded answer to your question, but we couldn't be more excited about the transfer, I mean natural gas demand growth and how we're going to be able to take advantage of that with our broad system.

That's great color, Mackie. I'll leave it there. Thanks so much.

Thank you. And the next question comes from Michael Blum of Wells Fargo.

Thanks. Good afternoon, everyone. I want to go back to Kinder Morgan's double H conversion announcement. Wondering if you could possibly participate in this project in any way either, offshoring or Downstream of double H, and if you could remind us on the contract terms of the NGL balance you have from the Crestwood acquisition?

Yeah, that's a good question, Michael because that's really where we see a couple of benefits. But one of them is we are chasing a couple of pretty big deals and we've got available capacity that’s already sitting and waiting for us, the processing capacity with the Crestwood asset. We do intend to fill that and now there's competition. When you have a monopoly it's hard to get a good net back price for your producer for your business and that’s changing. So we're excited and intrigued that Kinder is doing this. It's kind of something more like we do. So we love that and like I said, it's not going to hurt our feelings at the maybe sixty to eighty thousand more barrels looking for a home on our Dakota Access. Now, downstream, we certainly are in discussions and we love and feel like we probably will see some of those barrels at a minimum at our frac, but we're just in early discussions and certainly see that as another potential upside for what Kinder is doing. But mainly we like what's going on up the Basin and what it will do for our own assets up there.

Okay. Perfect thanks for that. And then, just wanted to get your latest thoughts on what's happening in the Haynesville, North of Louisiana. Obviously has been the usual challenges, but some of that sort of now transpired. So just wanted to get your latest thoughts there.

Okay, yeah, Marcellus, Utica, and Haynesville, tough areas over the last quarter. A lot of lean gas, lot of drilling slowing down, and even some shut-ins, so we've seen those two basins in Haynesville especially come off what 2 to 2.5 BCF just into the end of last year. We are seeing it start to recover as prices start to recover. The enormous reserves in North Louisiana we have multiple 42 inches pipes running through North Louisiana actually three. We got a Gulf run extension to the South. We have the ability to increase the capacity on that relatively easy. We’ve got a lot of potential to grow there and so does the industry when you're talking about the issues in Louisiana, I'll touch on those real quick. We are in a lawsuit with one company, but from a high level there were three companies that were looking for I think it was 150 or 160 crossings of our pipelines and we deal with this every day. Whether it's other top-line companies or utility companies, or electric companies or whatever, it's a normal part of our business. But what happened was with two of these pipeline companies, we needed technical data. We needed to work with them on where they cross and how they are going to impact their or route, our first route, how they maybe going to adversely affect our safety, our employees. So it's important to us to have answers to our questions like we always ask and get and two of the pipelines worked with us. We have one pipeline that has rejected or refused to provide that technical data, and all we're doing is protecting our rights and we’ll continue to – as a partnership and we'll see kind of how all that plays out.

Got it. Thank you.

Thank you. And this concludes our question and answer session. I would like to return the floor to Tom Long for any closing comments.

All right, we definitely appreciate you all joining us. I do want to add one more comment here at the end. We do get a lot of inbound. I'm going to go back to the global question a little bit here. We have a lot of hard assets second to none across this country, but another significant asset we just – we mentioned occasionally, but can't ever mention - emphasize enough is the team and human resource side of the team. This, all the inbounds that we get globally is a huge, huge complement to the second to none team that we have. Operations team, BD team. I think it's recognized globally and that's the reason a lot of inbounds do come to us. We take it as, like I said, a massive complement that our name is used out there a lot. But anyway, one I wanted to make sure I got that in. But thank all of you – all for joining us and we look forward to talking with all of you with any follow-up questions. Thanks.

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