Yahoo Finance Energy Transfer LP (ET) (Q1 2024) Earnings Call Transcript Highlights: Strong Performance and ...
Adjusted EBITDA: $3.9 billion in Q1 2024, up from $3.4 billion in Q1 2023.
Distributable Cash Flow (DCF): $2.4 billion in Q1 2024, increased from $2 billion in Q1 2023.
Quarterly Cash Distribution: $0.3175 per common unit, a 3.3% increase from Q1 2023.
Excess Cash Flow: Approximately $1.3 billion after distributions.
Organic Growth Capital Expenditure: Approximately $460 million in Q1 2024, mainly in Midstream and NGL and refined products segments.
NGL and Refined Products Segment EBITDA: $989 million in Q1 2024, up from $939 million in Q1 2023.
Midstream Segment EBITDA: $696 million in Q1 2024, increased from $641 million in Q1 2023.
Crude Oil Segment EBITDA: $848 million in Q1 2024, significantly up from $526 million in Q1 2023.
Interstate Segment EBITDA: $483 million in Q1 2024, down from $536 million in Q1 2023.
Intrastate Segment EBITDA: $438 million in Q1 2024, up from $409 million in Q1 2023.
2024 Organic Growth Capital Guidance: Revised to approximately $2.9 billion from previous $2.5 billion.
2024 Adjusted EBITDA Guidance: Raised to $15 billion to $15.3 billion from previous $14.5 billion to $14.8 billion.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Energy Transfer LP reported a significant increase in adjusted EBITDA to $3.9 billion in Q1 2024 from $3.4 billion in Q1 2023.
Record volumes were achieved through the company's crude pipelines, contributing to strong overall performance.
The company announced a quarterly cash distribution increase to $0.3175 per common unit, up 3.3% from the previous year.
Energy Transfer's credit rating was upgraded by Fitch to BBB with a stable outlook, following a similar upgrade by S&P in 2023.
Strategic acquisitions and organic growth projects are underway, including expansions at Nederland and Marcus Hook terminals, enhancing future capacity and flexibility.
Negative Points
Lower operational sales and unplanned maintenance projects impacted the Interstate segment, with adjusted EBITDA falling to $483 million from $536 million in Q1 2023.
The company noted a $40 million benefit related to favorable timing on gains associated with hedged inventory in the crude oil segment, which is expected to reverse in Q2.
Despite growth in NGL and refined products, the segment faced challenges from lower gains on hedged NGL inventory compared to the previous year.
The intrastate segment's gains of approximately $250 million related to pipeline optimization opportunities are not expected to repeat throughout the remainder of the year.
Energy Transfer faces ongoing market headwinds such as lower gas prices and production curtailments that have impacted midstream volumes.
Q & A Highlights
Q: Could you update us on the impact and potential synergies from the Crestwood acquisition, particularly in terms of commercial cost savings? A: Thomas E. Long, Co-CEO & Director of LE GP, LLC, mentioned that the $80 million cost synergy target is on track. Marshall S. McCrea, Co-CEO & Director of LE GP, LLC, added that unexpected synergies have been identified, particularly in the Permian Basin and Bakken, which include utilizing idle capacity and increasing processing capacity, thus potentially bringing more barrels through the Dakota Access.
Q: How is the base business for ET proceeding versus previous guidance, especially considering the Sun acquisition of NuStar? A: Marshall S. McCrea explained that the base business outlook remains similar to previous forecasts, with an incremental $500 million expected from the Sunoco acquisition for part of the year.
Q: Could you elaborate on the potential for increasing equity returns? A: Thomas E. Long highlighted that while the focus remains on increasing distributions, they are also considering unit buybacks as a method to enhance equity returns once leverage targets are met.
Q: Can you provide updates on new projects and the CapEx outlook, especially considering the recent increase to $3 billion? A: Marshall S. McCrea confirmed that all planned projects are included in the updated CapEx, with several expected to come online within two years, providing quicker revenue streams.
Q: Could you discuss new opportunities in connecting to new and existing power plants and the potential scope of these projects? A: Marshall S. McCrea indicated that ET is exploring opportunities to connect more power plants to its network, particularly in Texas, to support grid stability and leverage ancillary revenue opportunities.
Q: What details can you provide about the optimization opportunities that drove the $250 million gain in the interstate gas sales? A: Marshall S. McCrea described various strategies employed by ET to optimize revenue during volatile times, including peak hourly sales and strategic gas movements across Texas, leveraging their extensive intrastate pipeline network.
Q: How are you approaching M&A strategy, particularly in differentiating between ET and Sunoco's roles? A: Thomas E. Long emphasized ongoing interest in midstream space consolidation and strategic acquisitions that enhance the value chain from wellhead to water. He noted that Sunoco would continue to pursue acquisitions in line with its focus on wholesale fuel distribution and terminals.
Q: What is the status of the Marcus Hook optimization project for adding ethane refrigeration and storage capacity? A: Marshall S. McCrea confirmed that the project is progressing as planned, enhancing ET's export capabilities and flexibility at Marcus Hook.
Q: Regarding the 8-10 megawatt gas-fired power plants announced for Texas, can you clarify if these are peaker plants and discuss the expected return on invested capital? A: Marshall S. McCrea clarified that these are not peaker plants but are efficient units intended primarily for reliability and grid support. He indicated that the economic projections are conservative and could potentially yield higher returns under certain grid conditions.
Q: Can you provide a timeline for the potential commercial operation of the Blue Marlin project if favorable EIS and permits are received? A: Marshall S. McCrea suggested that, assuming permits are received by mid-next year, the project could be operational within 2.5 to 3 years, benefiting from its brownfield nature which significantly reduces construction timelines and costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
