Good day, and welcome to the Energy Transfer Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Tom Long, Co-Chief Executive Officer. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone, and welcome to the Energy Transfer fourth 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 segments' results in detail, and we encourage everyone to take a 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 beliefs as well as certain assumptions and information currently available to us and are discussed in more details in our Form 10-K for the year ended December 31, 2024, which we expect to file this Friday, February 14. 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. Let's start today by going over the financial results for the full year 2024. Adjusted EBITDA was $15.5 billion, which came in at the high end of our 2024 guidance range. This was up 13% over 2023 and was a partnership record. DCF attributable to the partners of Energy Transfer, as adjusted, was $8.4 billion, which was up 10% over 2023 and was also a partnership record. Operationally, we moved record volumes across our interstate, midstream, NGL and crude segments for the year ended 2024. In addition, we exported a record amount of total NGLs out of…

Thank you. [Operator Instructions] And the first question will come from Theresa Chen with Barclays. Please go ahead.

Good afternoon and thank you for taking my question. Pretty significant uptick in the growth outlook as far as project backlog goes. Can you talk about the returns that you're seeing? Have they evolved or changed at all, with these incremental projects?

Yes. Theresa, hello, this is Mackie. Nothing's really changed over the last couple years. We are always kind of targeting, depending on the project, kind of that mid-teen to upper teen rate of return. A lot of that depends on how much synergistic benefits up and down, but that's kind of the range that we look at on these projects, kind of the mid to upper teens.

Okay. And related to your intrastate project, Hugh Brinson, interesting that you put Abilene as a marker as one of the towns that the pipeline runs directly through. Any reason for that that you want to articulate on? And just a look on the backlog of these kinds of demand pull projects for that pipeline that could push forward the second phase?

Yes. Let me start out first saying how excited we are without that project. It's been a while since we built a 42-inch. For years we were building one back every month we were building a new pipeline, it seemed like, but we're very excited about that. The producers in the Permian Basin need it desperately. We've seen 10 Bcf of growth over the last four or five years out of that basin. We think we'll go up another six to seven over the next four or five years. So what a shot and arm for them. And then, the market pull, it's significant not only in Texas, but other parts of the Southeast that our systems will ultimately feed into. So we're extremely excited about that. But it is interesting your question. Even preparing for this call, I got to think about you look at where many of the data centers are going. Especially in Texas, but also throughout the Southwest, Southeast and up the Midwest. And it's almost as if Energy Transfer was working years ago to figure out, where the best spots are for these data centers, because if you look at them, the vast majority of them are within several miles of our pipeline. So we feel extremely fortunate. All these assets that we build, all these pipelines that we built for the purpose of moving products from point A to point B. We really never envisioned there'd be this kind of power plant demand growth, both for data centers and others that are just right on top of significant part of our pipeline. So yeah, Abilene's had a little press with Stargate. We do see that as highly potential project for us. We are very well positioned to provide whatever is necessary there, and we have our team working on that as well as Tom talked about, numerous data center, and power plant projects throughout the U.S.

Thank you.

The next question will come from Keith Stanley with Wolfe Research. Please go ahead.

Hi, good afternoon. Wanted to start on the $5 billion growth CapEx for this year. Does that include any meaningful unsanctioned projects, we may not know about? And then for the midstream piece, $1.6 billion is more than you've spent in the past several years. Can you just give a little more detail on projects, or where you're investing more than prior years in midstream?

Yes, this is Mackie again. Hi Keith. You know the $5 billion, those were projects we've sanctioned, they're moving forward, great rate of returns. We're very, very, very excited about that. And when you look at what's driving a lot of that is midstream. I mean midstream is kind of the, call it the heart. It's what starts everything. It's where we gather and process and treat, compress and then put it into our system. It goes through our cryos, and then the residue goes into our intra/interstate pipeline networks. And of course the NGLs go into Lone Star and feed all that, and then all of our crude business as well. So it's a very viable important part and segment of our partnership. And when you look at Mustang Draw, you look at these improvements we're making very inexpensively to some of the trials we already have by increasing capacity. And we got Badger coming on as well this year. You know that's what's driving this. There's just an insatiable need for more cryogenic processing plants in the Permian basin, and we are so well positioned to benefit from that across our entire enterprise, including all of our downstream assets.

Thanks for that. If I could pivot to the CloudBurst announcement, wanted to confirm this is going to go to supporting a new gas-fired power plant, not an existing plant. And then can you talk about the ramp that you foresee for the project? Should we assume this starts somewhat small, and then you eventually ramp to the 450 million cubic feet a day or how should we think about it?

Yes, that question is, excuse me, is that very germane in the sense that every single data center we're talking to is a little bit different? It has a little nuance to it. So this one particular that you're asking about, they're very experienced. Their executive team has, I believe they're advertising over 150 years in data centers in U.S. and Europe. We're very pleased to be partnered up with them on this one. They have significant contacts with the tenants or some of the owners. As you all know who many of these are, we are very optimistic they will get this to the finish line, but it is something that they'll have to scale up. They do believe that they very likely could get as high as 450,000 a day. That's why they secured that amount of supply. And we'll know a lot more, and that's how we possibly could know a lot more by the end of the next quarter, but we'll see. And we'll continue to work closely with them and other developers. But we're very excited about this first project. We're learning a lot about data centers. Data centers are learning a lot about the natural gas business, and how critical it is to what they're doing. And man, we couldn't be more pleased and excited about this new business, because as I mentioned earlier and we said in our open remarks. There's no company in the United States that is close to as well positioned to provide natural gas supply to many of these data centers, especially in Texas and Oklahoma and Louisiana.

Thank you.

The next question will come from Jeremy Tonet with JPMorgan. Please go ahead.

Hi, good afternoon.

Good afternoon.

Good afternoon.

Just wanted to follow-up on the last one. CloudBurst here. It seems like you have a lot of confidence in this project overall, having PR-ed it, and just wondering if you could talk a bit more on how to quantify, I guess, how you see the TAM. What you expect for win rate, or just any way to frame with numbers, I guess, what this could mean for Energy Transfer?

Okay. Well, we'll go as deep as we can considering we do have an MD&A. But one thing we've learned is there's five critical things for these data centers. And the most important ones are energy. And so for example, this will not only be tied to ERCOT, of course, will be tied to us with significant gas supply, backed up by storage for natural gas-fired generation. They're also going to have diesel-powered backup generation. They're going to have backup battery. So power is critical to these projects. And this particular company has a significant amount of expertise, as I just mentioned, and they also have a very proprietary software system in, because one of the most important variables is access to high-bandwidth optical fibers and kind of with low latency, I guess, it is what it is. And there's not 1,000 places in the U.S. or certainly in Texas that fit all those variables, where you have a reliable energy supply, where you have plenty of water for cooling, where you have plenty of land, and where you have a bunch of redundancy. And so this fits so well with our assets, and talk to them and kind of their expectations, as they go to the primary 10 that they're chasing, just kind of a little bit more transparency. They do believe that some of these turbines for this site, are already ordered in an inventory. That could move this a lot quicker than what we have said. And so, we're optimistic that we've - on this particular one, we've aligned ourselves with a very strong company that knows what the heck they are doing. With a lot of contacts out in the industry around data centers. And we are optimistic that they will ramp this up. Whether they go all of the way up to 450 or 350 remains to be seen, but we believe this will be a very successful project.

Got it. Makes sense. And I just want to, I guess, follow-up with some of the comments on the prior call ending. And just wondering with the new administration in place for a bit here and new policies being rolled out. Just wondering if you could share how that impacts, I guess, what you see as your opportunity set items such as Lake Charles or others? Just any thoughts there would be great? Thanks.

Yes, my goodness. How wonderful is life after this election, when we have a President and an administration that loves this country that fully recognizes, how blessed we are with not only fossil fuel resources, but a lot of resources, a lot of resources that are needed in renewable push. And we have a business man that built his career on trading, doing deals, negotiating, employing. Creating numerous jobs throughout all the businesses he's been associated with, and what an incredible excitement we have around this administration, of what it's going to do to mitigate just overwhelming regulation on all these assets, to streamline regulations to where, yes, we're going to have regulations, but be sensible about it. Put it where it's not - it doesn't take a great deal of time. And can get products and can get resources and get energy, to not only our domestic and our U.S. customers and population, but also to the international markets. So yes, needless to say the Energy Transfer, and our executive team and the vast majority of our employees, are very excited about what's happening. And we think it's going to be huge for our industry, huge for our partnership, and huge for this country in the world.

Got it. Any other updates on Lake Charles, I guess?

Sure. In fact, we have a team over in London right now. I had some really good reports back. So as everybody knows, there are two things we're kind of waiting for is, to get a good, solid contract at the price that works, and get that snowball going. We did that with Chevron back, I believe, late November, early December. They're actually in the adequate of hours now. I had lunch with them last week. They do believe we have the best project, and there pushing others to really take a close look, if they aren't already looking at a project. We have got over 20 million tons we're negotiating with. We have a really strong equity partner that we're now in negotiations with for a considerable amount of equity. So the stars are kind of lining. I mean we've got a lot of work to do. We're not going to undersell that. But we do have a project that's in an excellent location with pipeline infrastructure, much of which is already there with a great terminal, with tanks that are already there, with this brownfield project. So we're very excited about it. We're going to push hard, and we certainly hope to get to FID sometime probably in the fourth quarter of this year.

Got it. Thank you.

The next question will come from Manav Gupta with Credit Suisse. Please go ahead.

Hi, it's Manav with UBS. A quick question. When you look at all the power demand, whether it's data center or it's coal to natural gas, or even the incremental natural gas demand associated with LNG, using your crystal ball, how much do you think the natural gas demand could grow in the next five or seven years?

This is Mackie again. It's all across the board. You look at some of our peers, you look at some of the companies that do studies on this, it's hard to predict. We've done this ourselves internally, because at the end of the day, what matters most to us is how much of that market we capture. And we believe over the next 18 to 24 months that we'll capture between 3 and 4 Bcf. That may sound aggressive, but we're chasing right now about 150 power plants, about half of, which are either new power plants and/or as we mentioned, coal-fired retirements that are going into it, and then about half of those are maybe a little more are data centers. So this isn't just data center driven. This is electricity needs for growing populations, growing industry even ammonia facilities, et cetera. So we're extremely well positioned, to capture whatever the growth is, but we've certainly seen numbers north of 10 or 12 Bcf. But we don't know where it's going to go. We just know it's going to be big, and we're going to play a big role in that growth.

Perfect. My quick follow-up here and this is more of investors asking us, you're obviously talking to a number of data centers. You already got a lot of success with CloudBurst. Did the DeepSeek announcement in any shape or form break that momentum? Or it just was something, which did not even impact the level of discussions you were having and those discussions continue?

Yes, this is Mackie again. So the way we'd answer that is, of course, initially it did the first day or so, we saw NVIDIA pretty hard. But no, I think the answer to that in collective conversation with all the developers, we're talking to and some of the tenants. We don't see that as a threat. It's certainly competition, and it kind of wakes up a lot of what's going on here in the U.S. But gosh, you're comparing a communist kind of type run country that, whatever kind of data center AI they may come with, we know is not going to be factual. We know they're going to have reality and facts that, either they don't answer, or that or bias or whatever. So it is America. I think we'll do a better job of this and talking with CloudBurst and some of the others that we're talking about. They don't see this. In fact, some of them have described this as a positive for different reasons, some of it being waking us up, like waking the U.S. up to stay on top of this, and being the leader in AI development.

Thank you so much.

The next question will come from Spiro Dounis with Citi. Please go ahead.

Thanks, operator. Afternoon guys. I wanted to start with capital return. Seems like for a while, you were getting a little bit closer to potentially doing more on the buyback side. But obviously, the equity has been strong. And of course, with CapEx. Now it seems like it's crowding some of that out. At the same time, Tom, you pointed to 5% EBITDA growth year-over-year at the midpoint. So curious, is all that kind of collectively point you towards maybe accelerating distribution growth more towards that 5% versus 3%? And if not, we think you're waiting to see to accelerate there?

Yes. Well, like I always like to say that's a good question and a good dialogue, to have around here is, when you start talking about how large our growth is going to be. But we're still kind of staying with that 3% to 5%. And I think with all these projects we're talking about, don't mind saying, we'd love to see that moving up to the higher end of that range. I think that's fair to say. But let's go back to the capital allocation a little bit. We always had the balance sheet, in other words, the debt paydown. And then second, we looked at the distribution growth, and then we looked at the growth capital, with those buybacks in there. We still have all four of those on the radar screen. But with this - all these great projects that we've been talking about today. You can see that right now, it makes a lot of sense to - for the long-term to continue to strengthen the footprint that, we have and the asset base we have. So we are very, very excited with what we have in front of us and absolutely. The distribution growth is definitely very key here.

Right. Great. And then second question, still on the theme, just maybe focusing more on the CapEx here. M&A, something you've been active in the last few years. Just curious where that stands in light of the $5 billion of CapEx. I guess if you look back and put CapEx and M&A together, that 5% doesn't look so high anymore. And so just curious if there's room to layer in more M&A here, or $5 billion is kind of as comfortable as you're at right now?

Let's start with the first part of the M&A. M&A is clearly a very key part of our growth strategy here. It absolutely has helped us get to where we are right now on, a lot of these growth projects that we're doing, and a lot of the stuff that we're looking at. So the strategy has worked well for us, and we're going to continue to focus on it. As far as the number of targets, you can see that it's getting fewer and fewer of us. But we still think that consolidation makes sense in the midstream space, and we're going to be a player in it. And let's kind of go back to the second part, I think, on the $5 billion. I guess I would best answer that that, look at that as a 2025 $5 billion. It's - I can't sit here and say right now that we've got in the Q, to continue to look out if that number is $5 billion. But if it is with these kind of returns, we will surely keep looking at that. But in fairness, it's not one that we're right now putting any guidance out on. So we're going to continue the strategy here of both the M&A, and the organic growth projects. And we think we're - go ahead and get a good complement in for the team we have across the board, integration is abilities are second to none. We do a great job of getting these integrated quickly, and start looking at all the opportunities that, we find once we integrate them. So the M&A once again, still plays a big role in our growth as we look out.

Great. I'll leave it there. Thanks, Tom.

Thank you.

The next question will come from Jean Ann Salisbury with Bank of America. Please go ahead.

Hi. There are more competitors really making investments to grow in the Permian NGL kind of pipeline, frac and export space. There's a ton of NGL pipeline capacity coming on this year. There was more LPG export capacity recently announced by a new entrant, is this space getting too crowded? And are you worried about returns falling in the segment over the next few years? And I guess as a follow-up, does there need to be more consolidation among the NGL integrated in your view, to stop that from happening?

Let me start with the second part, and I'll now start - this is Mackie again. Yes, we're always going to see competition, of course, and we certainly don't dwell on to worry about what our competitors are doing, or what their rates of return, on what risk they might be taking. We focus on our customers, our producers, our markets and then build assets to fit the services they're asking for. So we feel very good about everything we've announced. We feel very good about slowly ramping up and filling up every asset that we have, whether it's cryos or NGL pipelines. We certainly look at that very closely so that we stay ahead of it. If we see a year or two down the road, we're going to run into capacity problems, we certainly addressed that and you'll see that from time-to-time. But new projects, yes, there's a new LPG project. I guess it's a Texas City that's going to be built in four or five years, not really concerning, because one of the advantages that we have and we've had it kind of - since we started this company years ago, is that once we build assets, and we're able to provide some interim service for somebody that wants that particular product, for example, we can build on that. So for example, as some of these new LPG facilities are being built over the next four or five years, we'll be negotiating and having pretty long extensions added to the existing business we add, and new business that we develop over the next three to four years. So may not be a lot of market available for some of these projects that are coming online in '28, '29, because a lot of that's under contract. But once again, we don't worry about what they're doing. We worry about our business, our returns, taking care of our customers and growing this partnership, as we have consistently for the last many years.

Yes. I'll chime in quickly on the second part of your question as far as the consolidation. I think you're asking around the natural gas liquids, when we're looking at various opportunities and what fits the beauty of once Energy Transfer, once again, is we're -- we participate across all the commodities, natural gas, natural gas liquids and crude oil. And don't mind telling you that when we look at this stuff, we do - as far as M&A goes, we do look across all the commodities when we do it, because of the fact that we can consolidate these things, and find a lot of opportunities. So yes, is the short answer to your question on the consolidation in the NGL space.

Great. Thanks a lot for that color. I'll leave it there.

The next question will come from Michael Blum with Wells Fargo. Please go ahead.

Thank you. Good afternoon, everyone. I wanted to go back to the data center strategy conversation. First question is really how much - when you look at the opportunity set how much do you expect to be front of the meter versus behind the meter?

Great question. And we're - depending on the customer walking through that now. For example, we've got actually one customer that intends to tie to ERCOT pretty large customer in the DFW area, but they will have 100% backup generation in the event they lose ERCOT power. In that situation, as all the data centers we have such an advantage, because of our big inch pipe multiple big inch pipes in North Texas, and our access to a significant amount of storage. So that's one example. This one we're talking about now is behind the meter. But I would say probably weighing it, it's going to be more of behind-the-meter where the natural gas power generation, will be the primary source of electricity, with a lot of redundant other sources of backup power, but that will be. I would say, the majority of them will be that type of project.

Great. That's helpful. And then I guess for - behind the meter, is this CloudBurst deal representative of the size of deals that you're seeing on average? And would you consider also building the power, the electric generation component of a project if that opportunity presents itself?

I'll start with the second half. How we answer those questions is, there's nothing that someone would ask us that we won't look at. So is that our line of business? Do we want to go build power plants, not really what we do other than the ones that we've announced publicly, because they make sense from a reliability for our assets in critical areas, and when we have a shortage of electricity. So yes, if someone came to ask us, and it was a project that we've got our arms around it made sense, had a great rate of return, met the hurdles. We provide the natural gas may even help out with our electricity team of marketing any excess power, sure, we'll look at that. As far as typical, hard to say. I would say this is pretty representative. It might be kind of the high end, if they really do approach two gigawatts. We certainly are chasing a number of them significantly less than that. But I think probably a pretty good range, is kind of the 600 megawatts to 1.2 gigawatts, is probably a pretty good range. There are some outliers smaller than that, and even larger than two gigawatts. So that's probably a fair representation of kind of in the fair way, with a lot of them.

Great, appreciate it.

The next question will come from Gabe Moreen with Mizuho. Please go ahead.

Hey, good afternoon everyone. Can I ask about some of the buckets for 2025 guidance and you've got the commodity bucket, and the spread sliver as well. Can you just maybe talk within those, I think NGL prices and nat gas prices, clearly, it's much better this year than last. Maybe what the delta is in your guidance versus last year? And then, to what extent that may or may not be offset by Waha basis compressing going into '25?

Yes. Gabe, so when we look at the guidance for this year, like always, we're looking out over the forward curves, and we're using those to really set the basis there. So that's the base commodity price assumptions. And so, I think as you alluded to, one of the headwinds is that Waha basis. If we look out over the curves here, we don't see nearly the basis that we saw last year. Now obviously, that going into our guide gives us some upside, if things do get tight through the year and those spreads blow out. That obviously pushes up there to the higher end of the range then.

Thanks Dylan. And then maybe if I can ask about an update on the South Mississippi product and where that might stand?

Yes, you bet. We had a really good open season. There have been a couple of other projects announced. So fortunately, the primary markets that we're targeting. We have nothing new with those projects. So we are very bullish on that project happening at some point. It's not something that's going to be overnight. We do have significant customers that are willing to step in today for material volumes. However, we don't have the kind of commitments to get us to FID. There's other projects, other things that we're working on that, will feed that project, but we are very optimistic that, that project is much needed, significant market pull in the Southeast that will do nothing, but grow like a lot of the markets in the South. And we're very optimistic that, that will start to pick up momentum certainly, by the mid to the last half of this year.

Great. Thanks Mackie.

The last question will come from Jackie Koletas with Goldman Sachs. Please go ahead.

Hi, good afternoon. Thank you for the time. Just starting on the - could you walk through more of the drivers or puts and takes that are better in guidance for '25. How much of that guide includes implied synergies, or optimizations of recently acquired assets, the potential WPG acquisition potentially starting to flow more meaningfully into NGLs, et cetera?

Yes. So as we look out over the guide for this year, I think a couple of things to hit on. This will include the full year of WTG, so we got about extra six months of that. We do have some downstream synergies from that, although I don't think they don't materially ramp up here on the downstream synergies throughout '25. I think that's more as we get down in '26 and beyond that we really see the material ramp-up in those downstream synergies. But we'll get obviously the full year impact there in midstream. We'll also pick up the full year, an extra four months of NuStar that will come through our investment in Sunoco. A couple of other of the big drivers here. We'll have Flexport coming on here in the back half of the year. So that will start to contribute and really meaningfully ramp up, as we get into the fourth quarter here. So with growth projects like that coming on along with some additional Permian processing, I think within the full year number, you will see that really start to accelerate through the end of the year in the fourth quarter, as these projects come on.

Got it. And just one last one on going back to Lake Charles, you still have these SPAs from in 2019, 2020, how do you think about the rate of those contracts, given that we're in a new cost regime and potentially going about restructuring those with your customers? Any color there?

Yes, we don't like those prices. So yes, we are renegotiating those. With the 8 million or 9 million tons we had negotiated. We are in negotiations with every one of those. To my knowledge, not one of those has backed out yet. Everybody understands what - how costs have risen and we are in continued negotiations with those, to renegotiate their fees as well as, as I mentioned earlier, numerous other customers that are more in today's pricing realm of what works for our projects.

Great. Thanks so much. That's it for me.

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

It's Mackie. I must make one quick comment. I just want to say, because we got a lot of our E&C guys in here, our operating team and even preparing for this and kind of looking at Kelcy's leadership over all these years, what we've built, how you sit and look at our pipeline, you look at our assets throughout the U.S. how incredible is - I know you all follow us and a lot of our peers. But you know, I thought about, I woke up this morning thinking, golly, what if I was looking at a map, it just had a bunch of crude pipelines on it. Or I was looking at a map that had a bunch of interstate gas pipelines that run across the Eastern Seaboard or et cetera, et cetera. And I know you all appreciate it. But man, what a diverse group of assets that complement each other in so many ways throughout all of the major basins in the U.S. and how fun it is to kind of be the lead commercial guy for this partnership. Man it's a lot of fun, and we appreciate everything everybody does on this call to support us.

Definitely. Thank all of you for joining us today, and we look forward to any follow-up questions. Thank you, everyone.

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