Good day, everyone, and welcome to the PAA and PAGP Fourth Quarter and Full Year 2020 Earnings Call. Today's conference is being recorded. Thank you, Tilara. Good afternoon, and welcome to Plains All American's fourth quarter and full year 2020 earnings conference call. Today's slide presentation, which contains a good deal of supplementary information, is posted on the Investor Relations News and Events section of our website at plainsallamerican.com, where audio replay will also be available following our call today. Later this evening, we plan to post our earnings package to the Investor kit section of our IR website, which will include today's transcript and other reference materials. Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided on Slide 2 of today's presentation. A condensed consolidated balance sheet for PAGP and other reference materials are located in the appendix. Today's call will be hosted by Willie Chiang, Chairman and Chief Executive Officer; and Al Swanson, Executive Vice President and Chief Financial Officer. Additionally, Harry Pefanis, President and Chief Commercial Officer; Chris Chandler, Executive Vice President and Chief Operating Officer; Jeremy Goebel, Executive Vice President Commercial; and Chris Herbold, Senior Vice President and Chief Accounting Officer, along with other members of our senior management team, are available for the Q&A portion of today's call. With that, I will now turn the call over to Willie.

Thank you, Roy. Hello, everyone, and thank you for joining us. This afternoon, we reported fourth quarter and full year 2020 results, each of which were largely in line with our expectations. We also furnished full year guidance for 2021. Al will discuss the results and guidance in more detail during his portion of the call. So let me start off with a few comments on the progress we made in 2020 and our positioning going forward. As we all appreciate, the challenges in 2020 were very significant. I'm thankful for and very proud of our team, who've demonstrated strength and resilience and worked to overcome obstacles and focused on what we could control. As a result, we accelerated several key initiatives, two of which I want to highlight. First, we have fully embraced our company-wide transition to efficiency mode, focusing on streamlining the organization, reducing costs, and optimizing all aspects of our business. Second, we have positioned ourselves to generate meaningful positive free cash flow after distributions. We implemented actions that improved our 2020 positioning by roughly $1 billion and expect to have strong positive free cash flow after distributions in 2021 and beyond. The collective result of these activities allowed us to activate a balanced equity repurchase program that aligns with our priorities of reducing leverage, improving our investment-grade credit metrics, and returning capital to equity holders.

Thanks, Willie. During my portion of the call, I will review our fourth quarter and full year results, current capitalization, liquidity and leverage metrics, and provide additional color with respect to our outlook for 2021. As shown on Slide 7, fourth quarter fee-based adjusted EBITDA of $555 million was slightly above our expectations. Transportation segment results were in line with our expectations but decreased compared to third quarter 2020, driven primarily by MVC deficiencies billed and collected in the third quarter related to volume deficiencies from the second and third quarters. Facility segment results exceeded our expectations, primarily due to higher-than-expected activity and revenues at our Cushing terminal and certain other facilities, and were in line with third quarter 2020, effectively offsetting the impact of asset sales completed late in the year. Fourth quarter Supply and Logistics results of $4 million were below expectations and primarily driven by the impact of warmer seasonal temperatures on our NGL sales activities and less favorable margins on Canadian crude oil activities. Moving to our capitalization and liquidity, a summary of key metrics is provided on Slide 8. Our long-term debt to adjusted EBITDA ratio is 3.7 times, which is above our target range of 3 times to 3.5 times, and reinforces the rationale for debt reduction to remain a top priority within our capital allocation framework. Additionally, we exited the year with total committed liquidity of $2.2 billion, and we do not expect to access the capital markets for the foreseeable future. Let me share some additional comments on our 2021 guidance, which is summarized on Slide 9. Our fee-based adjusted EBITDA guidance of plus or minus $2.1 billion reflects a 2% decrease relative to the preliminary guidance we shared in November and incorporates the anticipated impact of a $150 million increase to our 2021 asset sales target, an additional reduction in our investment capital program, and refined expectations based on our current outlook for 2021. Additional segment-level discussion is provided on this slide, which recaps notable variances to our 2020 results. With respect to our S&L guidance, this highlights our expectation for the continuation of challenging market conditions to limit margin-based opportunities in the future. As Willie noted, we forecast free cash flow after distributions, including targeted asset sales proceeds, to be more than $1 billion, slightly above our November estimate due to the increase of our 2021 asset sales target by $150 million to a total of $750 million. Our top priority continues to be maximizing free cash flow after distributions and allocating capital in a balanced and disciplined manner with the intent to reduce debt and prudently return cash to equity holders over time. We remain focused on disciplined capital management and with the prerequisite of high-return must-do, no regrets for every incremental dollar invested.

Thank you, Al. Our goals for 2021 are outlined on Slide 11. We remain very focused on the long-term positioning of our business, which is built upon our continuous diligence of operating safely, reliably, and responsibly; generating meaningful multiyear free cash flow after distributions; strengthening our balance sheet and financial flexibility while prudently returning cash to equity holders; and continuing to advance our sustainability program and disclosures. We believe hydrocarbons will remain a key part of the energy equation going forward, and we have confidence in the innovation of our industry, our PAA team, and the flexibility of our assets to meet the evolving energy landscape. Energy infrastructure is and will remain the critical link between energy supply and demand, and we believe in the long-term sustainability of our assets, operations, and cash flow. Thank you for your interest and support of Plains. We look forward to providing you with more updates on our continued progress. With that, I'll turn the call over to Roy, who will lead us into Q&A.

Thanks, Willie. I'd mention that a recap of today's call is located on Slide 12. As we enter the Q&A session, please limit yourself to one question and one follow-up question, and then return to the queue if you have additional follow-ups. This will allow us to address the top questions from as many participants as practical in our available time this evening. Additionally, our Investor Relations team plans to be available throughout the week to address additional questions. We're now ready to open the call to questions.

Just wanted to dig in a little bit more, if I could, on the fee-based guidance for '21 coming down a little bit here. Appreciate a portion of it probably is coming from a bit more asset sales, but still seems like that's not the full bridge there. And if I think about when you guys gave guidance last quarter, if anything, the environment has probably somewhat improved with WTI moving up the way that it has and maybe at the margin producer is expecting a little bit more production. Granted that wouldn't materialize until later in the year, but I guess we were just thinking there could be more upward bias than downward bias to the guidance here. So just wondering if there's any other moving pieces we should be thinking about?

Al, why don't you take that?

Yes. I'll take a shot at that, Jeremy. Asset sales are clearly a part of it, as well as our CapEx reduction and some of the optimization around the CapEx program coming down, as well as just differentials out of the Permian that make movements, both North to Cushing and to the challenges. So we've dialed that into our thinking, as well as just activity through some of our facilities and utilization of some of our facilities on the crude and the NGL side.

Jeremy, this is Jeremy Goebel. One thing to add, there's a significant component there. As Al mentioned, optimization of capital. We've worked on eliminating additional capital by descoping projects, and that's a significant component on the pipeline side. But that's really deferred revenue and not lost revenue opportunity. So we worked on those components. That's the biggest driver in the capital reduction and also revenue from a net free cash flow basis, you're neutral to positive. And longer term, we haven't lost the revenue-generating opportunity.

And Jeremy, one more thing that I'll ask Jeremy Goebel to comment on, our premise for the Permian really, even though in the higher price environment, our belief is that there's going to be more discipline from the producers in bringing free cash back to their shareholders or taking debt down. So our forecast is really a modest growth of production, flat to modest growth in the Permian, probably not to the extent of what the flat price infers based on history.

That's correct. This is Jeremy again. For 2021, our view is modest growth of 100,000 to 200,000 barrels a day this year, with larger public companies sticking to a reinvestment recycle ratio of 60% to 75%, which has trended down as prices have increased. We haven't seen significant rate increases to drive additional production growth. This will ultimately place upstream companies in a much healthier position going into 2022, assuming prices remain stable. It may result in more moderated growth compared to pre-pandemic levels, but it could also allow for more consistent and predictable growth. Everyone involved in production is being cautious about adding new production until demand returns and OPEC barrels come back to the market. Once those two conditions are met, I think we'll see a more favorable environment for activity and healthier balance sheets. Smaller E&Ps and some under-levered private companies are starting to position themselves ahead of this, but not enough to make a significant impact in 2021. This is particularly true for the Permian, while the rest of the basins are largely flat to slightly declining, even with higher spot prices. So while this perspective may seem conservative, it's important to consider that any rig additions now affect production 6 to 9 months later; anything happening in the current period will influence the latter half of the year. We're optimistic going into 2022, but understandably cautious until demand and OPEC barrels return to more moderated levels.

And maybe kind of just shifting gears a bit here. With the move in propane, as we've seen it, we were thinking there could be more kind of upside bias to S&L here, but it didn't look like there was much showed up this quarter, not to be expected, but even in the first quarter, it doesn't look like necessarily it's making a big impact there. And just wanted to get to the core of the NGL business and is that something that you guys still think of as a core business? Or is that something that maybe someone else could derive more value from, just as you think about coring up your business, paying down debt and increasing returns to shareholders over time?

Jeremy?

Jeremy, this is Jeremy again. Warmer weather persisted through the fourth quarter and even January. It's not just into the last couple of weeks, where you saw the markets we sell into are largely the Midwest and the Northeast. So as those inventories drop, basis improve, we'll capture more opportunities. But some of that could be pushing into later in the year as the cold has just started. So the more persistent this is, the cold weather and more likely you'll see draws to more normalized propane in those regions and could just push the opportunity out until later in the year. But we're certainly paying attention to it. It is a core business. It's a large business for us, and we're going to continue to optimize around it. Yes, there were some large backwardation, but that was largely driven by Gulf Coast pulls and not necessarily pulls in the Northeast.

This is Harry. I'd also add. What you saw last year, especially with the inventories in Canada, was when you got into that market in sort of the spring of last year, April, May, even in early summer, June, decreased demand, inventories as well in Canada, we actually ended the year with higher than normal inventories in Canada. So that also impacts the margins to generate out of that business. And we have seen a run-up in NGL prices into this year. But also keep in mind, we treat it a little bit like a manufacturing business, and we do hedge. So we don't sit there and just take spot prices all day long. So you have to factor that into your thinking, too; just because near-term prices pop doesn't mean that we are exposed. Likewise, if they decline, we typically have production against it.

Next, we'll move to Shneur Gershuni with UBS.

Just wondering if we can revisit the guidance responses to Jeremy's questions. The acceleration, if I understand, if you can sort of square this for me a little bit, is partially due to asset sales. You also said that there's going to be less capital and mentioned optimization as part of it. But I mean the CapEx is only down about $80 million, if I read it correctly, in your slides. I was wondering if you can expand on a little bit, are you saying that you're more conservative than you were in November? I'm just trying to understand, like if you can get into a little bit more detail about what's changed? And then secondly, given the S&L is going to be a lot lower than last year, is there going to be a working capital release that comes with that?

Yes, this is Willie. Let me start and others can join in. One important point I want to emphasize is that when we talk about embracing efficiency and maximizing cash flow, that is precisely what we're doing. For example, Jeremy Goebel mentioned that regarding capital expenditures and volume commitments, we managed to save on certain capital expenditures by delaying some cash flow while keeping the net present value neutral. This is one of the factors contributing to the reduced capital expenditures. Additionally, this approach has led to improved discussions with producers and a better understanding of our expectations. Would anyone else like to add to that?

I believe your question was about working capital release with less S&L. This is Jeremy Goebel. I think that will occur throughout the year as the markets shift into backwardation. At some point, we will take positions off opportunistically, which will facilitate a release of short-term debt or working capital. We are being opportunistic about it.

Okay, great. And as a follow-up question, in your appendix in today's slides, you've got an investor FAQ, you specifically addressed federal lands. I was just wondering if you can expand on the federal lands exposure? I think during the last call, you had said it was about 20%, but it's not listed on the slide here. I was wondering if you can sort of talk to what you think your exposure is if the current drilling pause or permit pause lasts for more than a couple of years?

Jeremy, do you want to take that?

Yes, this is Jeremy Goebel. I would say that we are currently in a wait-and-see mode. From a producer's perspective, consistent with previous comments, there is an expectation that producers will eventually be able to develop their existing leases. It appears that new leases are unlikely. We need more clarity regarding land and right-of-way issues in various areas. It is possible that obtaining permits could take longer. However, I don't believe that people have given up on New Mexico; there is still significant opportunity there. This situation might affect us by reducing capital and potentially impacting production, but it still falls within the 15% to 20% range in terms of total dedication. Many producers in New Mexico also have inventory in Texas, which is favorable given the higher gas and crude prices. Therefore, I don't think we can definitively say that Plains will experience a 15% to 20% loss in New Mexico. It's more accurate to say there may be a shift towards more state land in Texas. Many of the same producers in New Mexico also possess substantial inventory that would be profitable on the Texas side. Thus, the loss in New Mexico should be viewed in a broader context, as it's not a total loss for Plains.

We'll move to Michael Blum with Wells Fargo.

I wanted to ask about the decision to continue allocating some of the excess cash flow to buybacks, particularly in light of the lowered EBITDA guidance and the potential pressure on the balance sheet. Why not use all your free cash flow to reduce leverage this year and wait for a rebound?

I'll make a comment, and Al can add to it. I'm glad you brought up free cash flow because when we think about EBITDA, it ultimately translates into cash. Considering the asset sales we had this year, it's a significant part of our capital allocation, and we believe we can maintain a balanced approach for both equity holders and continue to reduce debt. Al?

Yes. And Michael, as we mentioned in the commentary, our primary focus will be on debt reduction, 75% or more, again, with the vast majority of what we expect in our guidance upcoming from asset sales, we're going to recognize that we're probably going to have to allocate more against debt reduction this year. And so, we're very much focused on that, but we also want to be able to support our equity as well. And so, again, leverage, valuation of our shares as we go throughout the year, outlook of the business, what oil prices are doing, what producer activities are, although they'll get dialed in, there is no just prescribed formula or approach. So we're going to try to balance all of that. But again, just to be clear, our focus will be to reduce debt and make sure we manage our leverage, but we also want to support our equity.

Great. I appreciate that. My second question is about the increase in the asset sale target. Should we assume that you have contemplated selling additional assets, rather than expecting better pricing on the existing asset sales you were targeting?

I would say, Michael, that we have increased confidence in our ability to execute what we had considered. I will leave it at that for now.

Next, we'll move to Keith Stanley with Wolfe Research.

I wanted to follow up on the last question regarding the asset sales. Can you provide more details on the progress made so far and where you currently stand in the process? This target involves significant dollars. Should we assume you're in active discussions now, or are you still primarily focused on identified assets? Additionally, what are your thoughts on the timing for executing this throughout the year?

Jeremy?

This is Jeremy. I'd say year-to-date, we've closed $20 million in asset sales, which those assets generated close to $2 million annually of EBITDA. The rest are in various stages, whether it's in big grounds kicking off the process, but all sale processes are underway. So that should give you a sense for timing. So there's nothing that we haven't began marketing yet, because it's all things that are actively in the market and in discussions with counterparties.

Okay, great. A follow-up question, a separate one. Can you just give an update on where you are in the permitting process for the Diamond expansion project? Are there any key permits you still need for that one? I'm not sure if you've broken ground yet, just an update on the process and timeline?

Keith, I'll let Chris Chandler handle that one.

Keith, this is Chris Chandler. So we've secured all of the environmental permits that we need for the Diamond expansion project, and those are federal, state, and local permits—everything that's needed to begin construction there. All long lead equipment and pipe has been ordered. We've secured 95% of the right-of-way. We're targeting to begin construction in the second quarter of this year and still are targeting to have the line in service by the end of the year. I will note that we're taking some time to continue our engagement in the community. We've met with elected officials. We’ve met with local businesses and community leaders all along the route. And ultimately, we're looking forward to safely and responsibly building and operating a pipeline that will be a long-term benefit to the region.

Next, we'll move on to Colton Bean with Tudor, Pickering, Holt & Co.

So just a follow-up on the discussion around Q1 EBITDA guidance, looks like it's just shy of $500 million. Can you frame to what degree the step down is driven by the fee-based business versus potentially a negative result in S&L? And then I guess as a follow-on, Q1 traditionally a seasonally stronger quarter due to NGL marketing margins. So what factors should we be watching to drive that ramp back to hit the full year guide in the other quarters?

Yes. I'll take a shot at it. It's a large piece of it is related to the fee-based. We aren't necessarily assuming a strong S&L quarter as well. But there's a number of things that add the differentials in the market for moving barrels out of the Permian, whether it's to Cushing or to the . We've modeled some impacts relative to refinery turnarounds. Again, we've had on our gathering systems, we have some producer forecasts that have been revised down for the first quarter, not necessarily an impact for the whole year. Some of the terminals, some of the utilization and throughput, where we've seen positive impacts this year, we're not necessarily forecasting that those continue. MVC timing on pipes have a bit of it as well, as well as just some natural timing on operating expenses. So no one particular item, but the large piece of it is a result of the two fee-based segments.

Got it. And then just to follow-up on Jeremy's comments around producers potentially reallocating from New Mexico to Texas, if federal permits aren't forthcoming. Is there a material variance in infrastructure positioning between the two regions of the basin, thinking in terms of potential CapEx impacts if producers were to shift their longer-term allocation plans?

This is Jeremy. In New Mexico, we primarily focus on wellhead gathering, while in Texas, much of our operations involve central gathering. In the Midland area, there are a few wellhead connections, but most of our Texas operations are linked to existing batteries and facilities. This means that while it might not significantly reduce capital expenditures in Texas, the tariffs remain relatively comparable between the two regions.

Next, we'll move to Jean Ann Salisbury with Bernstein.

Your segment EBITDA for facilities next year is expected to be $0.42 per barrel, which is lower than it has been in recent years. I noticed on Slide 9 that there is mention of lower utilization at NGL and crude storage facilities. Could you explain what is causing this and whether it is likely to remain at this lower level?

Part of this is driven by market structure. The steep contango and backwardation in the NGL and crude sectors limit storage opportunities. This is contributing to the current situation. However, as we approach seasonal norms with NGLs and the winter-summer spreads, we might see some recovery. Ultimately, we are evaluating the current market structure, and right now, we are experiencing significant backwardation.

What happens is some of the facilities aren't as fully utilized because of backwardation.

It could be from crude or it could be pure storage, yes.

I want to highlight that some of the asset sales have influenced the business mix, particularly the LA terminals we sold in the fourth quarter of 2020. This has slightly altered our business mix on a per-unit basis.

Just to follow-up on that, I thought that most of your crude storage was like, as you call it, operational and didn't move too much between contango and backwardation. So is this just kind of on the margins, what does move even though most of it is operational?

On the NGL side, we are seeing more exposure to seasonal spreads. There has been less contracting on the crude side for our large facilities contracted by Parsley. We do have some operational contracts that we can pursue opportunistically when the market experiences steep contango like last year. This gives us the flexibility to make more available. Last year, due to steep contango, we were able to capitalize on more opportunities. However, the business mix for our contracted large facilities hasn't changed; the opportunistic moves on the crude side were primarily from last year. Currently, the seasonal spreads for NGL are beginning.

Got it. That's really helpful. And then just as a very quick follow-up, if DAPL does end up having to shut down, what's the availability of your Bakken rail terminal to start loading ASAP?

Jean Ann, this is Jeremy again. I would view that as a secondary impact relative to the other exposures we have, right? If you look at our Wascana and Bakken North assets that should move barrels out of the Williston, if you look at our past peak from Guernsey South that connects into the pipeline to Cushing from Platteville, those would be substantially larger impacts, and that's readily available now.

But we will be able to rail too.

Yes, if you will. But I think the impact would be substantially larger on the pipeline side.

And Jean Ann, this is Willie. One comment I would make is that what we all seek is regulatory certainty when we have permits, and we are watching this very carefully. But as Jeremy talked about, we do have a flexible system. In all of our regions, if there are disruptions, we should be able to adapt and adjust to ensure we get barrels to market and capture some value there.

We'll move next to Michael Lapides with Goldman Sachs.

I hate to beat the dead horse here on guidance, but I'm going to try to be pretty specific. I don't know if you all can. How much higher would the EBITDA guidance have been if you weren't forecasting the $750 million of asset sales? How much do those asset sales, the ones you've not completed, impact what guidance would have been?

I'm not sure we can comment on that, Michael. I mean, you could apply just a round number of multiple to it to get an order of magnitude, but I don't think we're ready to disclose that.

But you might be somewhere in the range of 7 to 10 times directionally. I'm not going to be too far off from that.

Michael, this is Jeremy. I just don't want to disclose anything that could impact valuation of the current processes. Please understand those are confidential, and we don't want to guide in any way on the asset sales and the potential impact. So I hope you can appreciate that.

This may help a little bit as well. Everything we've been discussing regarding guidance shows that in November, we were $50 million higher on what we thought our preliminary guidance for transport or fee-based revenue would be. Currently, with the information we've shared, we're flat or slightly up, and I would say it's a fairly measured approach. When I consider our current position, sometimes the headlines suggest that everything is resolved, but there is still significant uncertainty ahead. Therefore, our cautious stance on where we believe things are heading is actually wise. Much of what we are examining will take shape later in the year, as Jeremy Goebel mentioned. I just want to clarify this as people assess our outlook for the year. It is a measured approach with certainly less impact expected in the first part of the year. If there is an upside, it is likely to occur in the latter half of the year. Hopefully, that helps.

No, super helpful. And then one follow-up. Just curious, how are you guys thinking about the Canada business and how it fits in strategically to the broader portfolio?

Jeremy?

This is Jeremy. So, the Canadian business, we spent the better part of the last year integrating that system from an executive side, all the way through to operations, and we continue to see more opportunities to optimize around that business and further integrate into the U.S. business. I think we're really excited about those opportunities and view that as a core asset and a business that we've been working around to better understand and more commercially align with how we operate and manage here in the United States. So, I think that integration process is underway, and we look forward to continuing to work with as a group to get there.

Next, we'll move to Ujjwal Pradhan with Bank of America.

Thanks for taking my question. I appreciate the color so far on guidance. Just wanted to go back on some of the comments you made around the CapEx coming from rationalization, while keeping the cash flow NPV neutral. Are you able to comment where you made the CapEx reductions in that particular regard? And whether this could limit Plains' operating leverage if we see stronger recovery and growth than you are anticipating?

Yes. Ujjwal, this is Willie. We don't want to share the specifics of any one contract, but you did bring up operating leverage. I will tell you, again, as you go into this, our mission was to stay ahead of the production side. And so when you think about our system, I know I've shared this before with folks, in the Permian, we had roughly 5 million tariff barrels or barrel capacity, 2 in gathering, 2 in intra-basin, 1 in long haul. And we've built that out over the last number of years. So when you think about operating leverage that we have in the Permian specifically, there's a significant amount of operating leverage that we do have that we'd be able to take advantage of. We're kind of in efficiency mode now. We're trying to consolidate, save power, drag-reducing agent balancing, all those kinds of things. But if there are barrels that need to be moved, that's one of the reasons we've made the strong statement about. We have a very flexible system with a lot of optionality that gives us the opportunity to work with either shippers or partners to be able to optimize.

Ujjwal, this is Jeremy. To summarize, what you're hearing Willie say is that the reduced capital does not affect our capacity in any way. We can utilize the flexibility and commercial structure of our business to achieve the same results for our customers without spending any capital. This is purely optimization.

And a follow-up on the federal lands issue. Could you share any comments based on your conversations with producer customers on this issue, if you have them? Have they already started thinking about adjusting their activity, given the evolving opposition to federal lands drilling here?

Ujjwal, this is Jeremy. I want to mention that everyone is waiting to understand the rules of engagement, and it's too early to discuss that. The conversations with the producers are ongoing, and we are preparing for a connection that will occur in November, as we have the necessary right-of-way. Therefore, there should be minimal impact on this year's plan. It is possible that some locations may end up with drilling permits behind existing pads that already have right-of-way. Overall, there is a sense of waiting among everyone to see what the rules of engagement will be before assessing any impacts. However, many current impacts are related to the fourth quarter of this year and next year. While everyone is eager for answers now, no one has a complete understanding of the rules yet. Once they are known, we will provide an update on the expected impact.

And I think we're still in that transition. We've got people just getting into appointed positions. And there's a lot of discussion on the producer side that calls on their positions with permitting backlogs. I think I would just leave it at that at this point. And frankly, it's another reason why we have our measured approach as we think about our fee-based numbers for 2021.

And we'll move next to Gabe Moreen with Mizuho.

Two quick ones. Can you just remind me to what extent the Capline reversal economics and contractual backing is contingent at all or not at all on the Line 3 expansion coming into service?

Jeremy?

Gabe, this is Jeremy. It's not contingent upon the Line 3 expansion.

I have a question about ESG since it seems like you're releasing a report later this year. Are you evaluating any smaller investments, such as renewables, to potentially power some of your pipelines? I'm curious if that's something currently on your agenda.

Yes, Gabe, this is Willie. Perhaps Chris Chandler can provide some details. We are examining various aspects of ESG and sustainability. First and foremost, it's essential to operate a reliable business, and I appreciate our organization's ongoing improvements in safety and environmental impact. However, the process of moving different products will take longer to decide or develop. When it comes to purchasing renewable fuel and renewable energy, it is certainly part of our strategy, but the economics must be favorable for us. Chris?

Yes, this is Chris Chandler. I'll just note that we've evaluated a number of opportunities to purchase renewable power under long-term contracts or help underwrite or support facilities behind our meters like solar wind and battery. To-date, they haven't met our investment thresholds. But I will say they are getting more competitive as time goes on. So there's a potential to make some of those investments out in the future. The other thing I'll note that efficiency goes along perfectly with the goals of reducing emissions and having a lower carbon footprint. So we are always working on efficiency for that reason and for the cost benefits of doing that. So whether that's reducing the number of generators we use and hooking up to permanent utility power, optimizing our pipelines with drag-reducing agent or how many pump stations we operate or the use of variable frequency drives or what pressure we operate at or whether we operate at full flow for 10 hours or half flow for 20 hours, we're doing all those things all the time. And those have all contributed to a portion of the cost reduction we've been able to achieve. So we're looking at that each and every day.

And Gabe, I think you'll see more about this in our report that we'll release later this year regarding our strategy. It's really about addressing Scope 1 and Scope 2 emissions, trying to quantify them, and ensuring we have solid data before making any commitments. We're committed to working through this process, and I ask for your patience until we share more later this year.

We'll move next to Spiro Dounis with Credit Suisse.

Well, Willie, you mentioned optimizing assets late last year. You did an asset swap of sorts, and that was fairly well received. Curious how you're thinking about that opportunity set to do similar transactions this year? And are there any specific assets that you've identified, I guess, yet that could make sense to do something similar?

We have several initiatives in the works that we aren't ready to disclose publicly just yet. I’ve discussed this a lot because it’s crucial for us to focus on rationalization. In my earlier comments, I mentioned the need for a reset. There’s significant spare capacity to consider, and we’re actively collaborating with potential partners to explore ways to achieve some rationalization and improve capital efficiency. We’ll provide more information on this in the future, but I cannot specify a timeline at this moment.

No, totally fine. Follow-up to some of the comments made earlier around marrying some of what you said around the 1Q guidance and then Jeremy's comments about ending the year, kind of strong and setting up for a good 2022. And I guess, if you look at the 1Q guidance, you talked about a 23% sort of full-year weighting. You guys have also said that sales are going to be back-half weighted. And so I guess the simple way I thought about it is I would have thought the first part of the year would have been maybe a higher percentage of EBITDA because asset sales within. You just mentioned that the type of current volume seems to be setting up for a stronger 2022. So are you guys contemplating a strong end of the year? And is there an exit rate on volumes that you could share?

The only number I'll share is that we discussed the Permian, and it could be 100 to 200 higher than the beginning, depending on various factors. But that is really a key driver of the Permian volumes we might see.

As we discussed, the increased inventories in Canada for the NGL side will lead to a different sales profile this year compared to previous years. We started the year with elevated inventory levels, and now those levels have risen further. We have more product available for sale, and with the cold weather arriving now, it's possible that some sales could be pushed to the later part of the year. A significant portion of this is related to adjusting the timing of NGL sales from the fourth quarter of last year and the first quarter of this year into later periods.

I would like to add that we are anticipating some growth in our Transportation segment, although it is not growing as significantly as it has in previous years. We expect to see quarter-over-quarter growth in the Transportation segment this year. Most of our asset sales are expected to come from our Facilities segment.

And one last thing, this is Jeremy. The Wink to Webster project will begin in the latter part of the year as well. Once it starts contributing, it will really help, and while the pipeline has started up with some interim service now, the actual commitments don’t kick in until the latter part of the year.

We'll move next to Tristan Richardson with Truist Securities.

I appreciate all the comments in helping us understand the guide. I guess I'm just thinking about the price signal the producers are seeing today. You mentioned your customers are reticent to change plans. But can you talk about what you're hearing from customers around what conditions we would need to see for producers to come out of maintenance mode?

Yes, this is Jeremy. I believe I mentioned this earlier. The current prices have increased due to significant production being taken off the market by OPEC. The challenge is if U.S. producers decide to add more rigs and increase production while demand remains slow or if OPEC reintroduces barrels, that could shift the balance again. We need to wait for demand to recover, as we indicated earlier this year, forecasting an increase from now until the end of 2022, with about half of that returning this year. It's about how to reactivate production. People seem cautious about making moves right now, and frankly, it’s not a bad decision for them to maintain their financial health during this period. More activity may happen once conditions improve.

And that does conclude our question-and-answer session at this time. I'll turn the conference back over to our speakers for any final or additional comments.

Thanks. This is Willie. I want to share a few closing thoughts. We received many great questions today, and I want to reiterate my perspective on the situation. There are some positive signs emerging, but there's still uncertainty. We've discussed our cautious approach and how we are monitoring volumes. The key takeaway from this call is our commitment to efficiency and optimizing our operations and portfolio, aiming to strengthen our position. Being in a commodity business means that being a low-cost, reliable supplier is crucial for success. We've also provided insights into our financial strategy, focusing on maximizing free cash flow. We've put ourselves in a position to generate significant free cash flow moving forward, excluding asset sales, which also allow us to accelerate deleveraging. We believe this balanced approach to deleveraging and returning value to shareholders and unitholders is the right path ahead. We are cautiously optimistic about the future, as oil prices remain stable. However, we are aware that the industry is carefully navigating responses to price fluctuations to avoid creating more issues. The entire sector is progressing, but it still faces uncertainty as we work through the recovery of global demand and address the challenges posed by COVID. Thank you for your patience today, and we look forward to our next conversation. Thank you.

Thank you Tilara. I appreciate you hosting today, and thank you, each of our investors and analysts for joining. This will end our call today. Thank you.

You are very welcome. That does conclude our conference call, everyone. Thank you for your participation. You may now disconnect.