Energy Transfer Q2 2026 Earnings Call - Raised Full-Year Guidance on Record Volumes and Accelerated Permian Growth

Conference Moderator: Good day, and welcome to Energy Transfer’s Q2 2026 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference host by pressing the star key followed by 0. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note, this event is being recorded. I’d now like to turn the conference over to Tom Long, CEO. Please go ahead.

Tom Long, CEO, Energy Transfer: Thank you, operator, and good morning everyone, and welcome to the Energy Transfer second quarter 2026 earnings call. I’m also joined today by Mackie McCrea, Dylan Bramhall, 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 morning. As a reminder, our earnings release contains an update to guidance and a thorough MD&A that goes through the segment results in detail. 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 details in our Form 10-Q for the quarter ended June 30, 2026, which we expect to file later this week. I’ll also refer to adjusted EBITDA and distributable cash flow, or DCF, both of which are non-GAAP financial measures. You’ll find a reconciliation of our non-GAAP measures on our website. Let’s start today with going over our financial results for the second quarter of 2026. We generated adjusted EBITDA of approximately $5.1 billion compared to approximately $3.9 billion for the second quarter of last year. DCF attributable to the partners of Energy Transfer, as adjusted, was approximately $2.6 billion compared to approximately $2.0 billion for the second quarter of 2025.

These results were supported by strong performance in all of our business segments, including record midstream gathering volumes, NGL transportation volumes, NGL export volumes, and crude oil transportation volumes for the quarter. For the first half of 2026, we spent approximately $2.6 billion on organic growth capital in the intrastate, midstream, NGL refined products, and interstate segments, excluding SUN and USA Compression CapEx. Turning to our 2026 adjusted EBITDA guidance. Given our continued strong performance in the second quarter across all of our segments, we now expect our full year adjusted EBITDA to range between $18.8 billion and $19.1 billion, which is up approximately a half a billion dollars at the midpoint compared to our guidance range provided on last quarter’s earnings call. Let’s go to the organic capital guidance.

We now expect our 2026 organic growth capital expenditures to be between $5.6 billion and $5.9 billion, excluding SUN and USAC. Our growth capital spend remains aligned with the major themes driving our business today, including the increasing demand for natural gas and natural gas infrastructure to support the growing needs for power generation, growth in the Permian, and the growing global demand for natural gas and natural gas liquids. As a reminder, the majority of these growth projects are contracted under long-term commitments and expected to generate mid-teen returns and considerable earnings growth over the next decade or more. Beyond these projects, we have a significant backlog of opportunities that are expected to support future growth. Now turning to our results by segment for the second quarter, I will start with NGL and refined products.

Adjusted EBITDA was approximately $1.3 billion, compared to approximately $1.0 billion for the second quarter of 2025. This increase included record exports out of both our Nederland and Marcus Hook terminals in the second quarter, in part driven by new chilling capacity placed into service last year at Nederland. We saw record throughput across our NGL pipelines related to higher Y-grade and NGL throughput, as well as higher throughput at our Mont Belvieu fractionators. Results for the second quarter also included an increase of $212 million from higher premiums from the sale of NGLs for both export and domestic supply, as well as increased margins from our product optimization and blending operations. This also included gains related to our NGL refined products inventory hedges, $27 million of which we anticipate will be offset in the fourth quarter of this year.

For Midstream, adjusted EBITDA was approximately $884 million compared to approximately $768 million for the second quarter of 2025. This was due to record volumes in the Permian Basin, which increased 5% as a result of new processing placed into service and improved plant utilization. We saw an approximate $88 million increase due to higher NGL prices compared to last year. For our Crude Oil segment, adjusted EBITDA was approximately $834 million, compared to approximately $732 million for the second quarter of 2025. During the quarter, we saw continued growth across several of our crude pipelines, terminals, and gathering systems. Results also included an increase of $106 million related to favorable market conditions, including pipeline and export arbitrage, higher crude oil prices, and Strategic Petroleum Reserve activity at our Nederland Terminal.

As a reminder, in the first quarter of this year, we had a benefit of approximately $60 million related to our crude inventory value that was offset by hedge losses in the second quarter. In the Interstate Natural Gas Segment, adjusted EBITDA was approximately $481 million compared to approximately $470 million for the second quarter of 2025. This increase was primarily due to increased parking, storage, and liquids revenue, as well as higher contracted volumes and utilization on several of our pipelines, including Panhandle Eastern, Transwestern, and Florida Gas Transmission. For our Intrastate Natural Gas Segment, adjusted EBITDA was approximately $377 million compared to approximately $284 million in the second quarter of 2025. This was primarily due to an increase of approximately $113 million from wider basis differentials, as well as an increase of approximately $17 million from early volumes during the commissioning of the Hugh Brinson Pipeline.

This quarter’s results once again demonstrate the quality of Energy Transfer’s asset base and unique operating model, and further strengthen our belief that the market fundamentally underappreciates the value of our business. Turning to an update on some of our major growth projects and starting with the natural gas side of our business, we are pleased to announce that our Hugh Brinson Pipeline is now in commercial service, with progress being made toward placing the full phase 1 capacity of 1.5 Bcf per day in service. Hugh Brinson shipper contracts are coming online in stages based upon the contractually specified effective date in each agreement. We anticipate that Hugh Brinson will be capable of flowing the full phase 1 capacity by September 1st of 2026, assuming pipeline commissioning activities continue to progress as scheduled.

We continue to expect phase 2, which includes additional downstream compression, to be in service in the first quarter of 2027 and to come in under budget. In addition, during the second quarter, we completed another 14-mile lateral off the Hugh Brinson Pipeline in Abilene, Texas, and is now ready for service. During the quarter, we also entered into an agreement with Crusoe to construct the facilities required to provide natural gas to support previously announced 900-megawatt expansion at the AI Factory campus in Abilene, Texas. Separately, we expect to see additional growth opportunities materialize in the region. Next, we’re making good progress on our Desert Southwest Pipeline project. Burke recently completed six in-person and two virtual scoping meetings along the proposed pipeline route throughout Texas, New Mexico, and Arizona.

In addition, as a continuation of our comprehensive stakeholder engagement program, our teams continue to actively engage with elected officials, county leadership, landowners, and associated communities along the route, with discussions remaining very positive. On our last call, we announced the Springerville Lateral, which is an approximately 120-mile extension of our existing Transwestern Pipeline and is expected to be in service in the fourth quarter of 2029. This 30-inch pipeline will have a capacity of approximately 625 million cubic feet per day and extend south to natural gas power generation that is expected to replace two coal-fired plants. We have now locked in pipe and compression costs, and outreach is underway with tribal, state, and federal stakeholders. In Oklahoma, the first of our four connections to serve new power plant loads went into service earlier this year.

The next two are ready for service, with the remaining expected to be in service in the fourth quarter of 2028. In total, these will provide approximately 300 million cubic feet per day of new demand growth. In addition, we are finalizing negotiations to serve approximately 250 million cubic feet per day of new power plant demand in Oklahoma. Overall, we’re now seeing interest from customers in increasing the commitments that they had previously made for our natural gas services to large data centers and power plants at or near these sites. This includes two customers in Texas who recently added a combined 100 million cubic foot per day to their contracts. We expect this trend to not only continue, but grow in scale.

We’re highly confident in our ability to reach FID on many more of these types of opportunities and remain in advanced negotiations with customers to provide significant volumes associated with our natural gas business in Texas, Oklahoma, Arkansas, Louisiana, Ohio, Illinois, and many other states along our pipeline network. Now looking at the Permian processing expansions. Our Mustang Draw I plant was placed into service in June, and we are already running near capacity for our Midland Basin processing complex. We continue to expect our Mustang Draw II plant to be in service in the fourth quarter of this year. Looking at our liquids business, in June, we announced approximately 240,000 barrel per day ethane export expansion at our Nederland Terminal to meet additional customer demand. The project will also provide an incremental 55,000 barrels per day of LPG capacity.

In addition, we’ll be expanding our Mont Belvieu to Nederland pipeline system to service the increased refrigeration capacity and two additional NGL ship docks. The project is expected to be placed into service in stages beginning in 2028, with the docks expected to be in service in mid-2029. 100% of the ethane export capacity has been committed under long-term agreements running into the 2040s, and 80% of these volumes are expected to be delivered to markets in Asia that are outside of China. Growth capital for the project is expected to be slightly over $1 billion, and this 2026 capital expenditure was previously included in our growth capital guidance.

In the second quarter, we completed upgrades to our Lone Star Express NGL pipeline, which provides more than 90,000 barrels per day of incremental Permian NGL takeaway capacity on the pipeline system and led to record Y-grade volumes out of the Permian for the second quarter. As a result of our total deliverability into Mont Belvieu, is now more than 1.3 million barrels per day, and our Permian NGL takeaway pipelines are currently approximately 95% utilized. Also, in the second quarter, we signed long-term transportation and/or fractionation agreements for upwards of approximately 300,000 barrels per day on our Y-grade assets that extend into the 2030s. At Mont Belvieu, our fractionators remained fully utilized in the second quarter. We expect volumes on our new Frac IX to ramp up quickly upon its anticipated in-service late this year.

Results for the second quarter were better than expected, with market volatility contributing to significant upside, in addition to the record volumes and strong base business performance. As we have previously said, additional upside to our forecast is expected to be dependent upon the duration and impact of market disruptions. Our business is uniquely positioned to capture these benefits should they continue. We continue to expect the ramp-up of Mustang Draw, Hugh Brinson, and other projects to contribute to additional growth in 2026. With Hugh Brinson now capable of commercial service and the full phase 1 expected to be ready ahead of schedule, we expect it to provide significant future upsides and further establish Energy Transfer’s natural gas pipeline business as the premier option for customers seeking dependable natural gas supply.

With a large slate of growth projects under construction, we are extremely focused on project execution, as evidenced by Hugh Brinson. Completing these projects safely, on time, and on budget remains among our top priorities. We also remain very focused on capital discipline, targeting a long-term annual distribution growth rate of 3%-5%, and maintaining our leverage targets of four to four and a half times EBITDA. Our unmatched connectivity allows us to move energy from every major supply basin to major trading hubs, power plants, data centers, city gates, industrial complexes, and other downstream markets throughout the U.S., as well as to international markets through our export terminals. This concludes our prepared remarks. Operator, please open the line up for our first question.

Conference Moderator: Yes, thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star then two. At this time, we pause momentarily to assemble the roster. Today’s first question comes from Theresa Chen with Barclays.

Theresa Chen, Analyst, Barclays: Good morning, and thank you for taking my questions. First, I’d like to congratulate Mackie on his retirement. Thank you, Mackie, for your many years of leadership. Looking at the fundamentals, if you wouldn’t mind elaborating more on the drivers of the volumetric outperformance demonstrated across your segments in second quarter, and how this outperformance helps frame the expectations into 2027 or second half of 2026 as well as 2027+, taking into account recent commentary from producer customers. As we think about the remainder of this year, going back to Tom’s comments about the factors that could drive the low to high end of guidance, can we get more color on the impact and duration of these market disruptions, and which key variables are you looking at as you determine the effect of these disruptions on the remainder of your year?

Dylan Bramhall, Senior Management, Energy Transfer: Thanks, Teresa. This is Dylan. Let me try to address all that by taking us back and looking at the full first half of the year. As most of you know, we increased guidance in the first quarter by $750 million, and that was really related to approximately $600 million in Q1 results and $150 million from just stronger performance that we saw continuing through the balance of the year on our business. In this quarter, we’re increasing another $550 million. Majority of this is strong beats across almost all segments this quarter. Midstream, Intrastate, Crude were all about $100 million, roughly beats, and NGL, over $200 million, as we really saw just strong activity across the board on the NGLs, everything from stronger export and domestic sales, higher fees across the docks, stronger blending margins.

This is all setting up for a stronger second half of the year. When we look at the plan, we expect the base business to remain strong. We expect volumes to pick up and grow across all our segments as we go through the back half of the year. We have a number of projects obviously coming online here that are going to help drive this. The early start to Hugh Brinson is super important to us. Very pleased to get that coming online as we are, and looking at that coming online early and under budget, which we think is really important because you need to remember, this is the same team, these are the same folks that are going to be working on Desert Southwest. We think this is a great precursor to what we’re going to deliver on that project as well.

Those contracts, those are going to step up here as we go through the balance of the year. We’re really going to see the majority of that impact really starting January 1st as we get to all the phase 1 contracts will be kicked in by then. Mustang Draw I and II. Mustang Draw I is on. We’re hitting new records in the Permian almost daily there as we really push these assets to full. We’ll see that impact through the balance of the year. That’ll flow through also into our NGL volumes. Mustang Draw II will come on late in the year. We’ll expect that to fill up very quickly, but pretty limited impact to 2026. That’ll be a big 2027 push, same way as the Hugh Brinson Pipeline. Frac IX additionally, late this year.

Once again, we expect that to start filling up pretty quickly when that comes online, but it’s happening late in the year, so limited 2026 impact there. When you look at all these, the base business is strong. Expect that to continue through. Going over to the volatility we’ve seen, the wider spreads, the higher commodity prices that we all saw happen through Q1 and Q2. We don’t really have much of that in our plan for the back half of the year. The more of this that continues to play out, I think, is setting us up to where with some of this volatility, we can very easily achieve that high end of the guidance range.

Theresa Chen, Analyst, Barclays: Okay. Thank you so much for that.

Mackie McCrea, Senior Management, Energy Transfer: Hey, this is Mackie, Theresa.

Theresa Chen, Analyst, Barclays: Please.

Mackie McCrea, Senior Management, Energy Transfer: Hey, Theresa, I’m sorry to interrupt. This is Mackie. Thanks for your nice comments. Let me summarize a little bit what he just said. First half of this year shows the extreme benefit and value that our assets have in every condition. Our ability to move gas through our intra-interstate pipelines, west to east to west, from all major hubs. Our ability to chill less ethane, more ethane, more propane, more butane. I think what happened, of course, the war had a lot to do with it. There’s always weather variables, whatever. I think it really showed the diversity of our assets and our ability to pivot and benefit from whatever’s happening, either domestically or internationally, in a big way. I think our assets and our people proved that the first half of this year.

Theresa Chen, Analyst, Barclays: Thank you. Just to clarify, Dylan, in relation to the commodity price environment, the volatility that we’ve seen over the past few months, is the takeaway that without a significant uptick in volatility, your revised guidance is very achievable? If we were to see this volatility persist or tick higher, that would be additive to the updated range?

Dylan Bramhall, Senior Management, Energy Transfer: Yes. Absolutely.

Theresa Chen, Analyst, Barclays: Great. Turning to your dry gas assets. Great to see the progress on Hugh Brinson phase one really coming in ahead of your own expectations, it sounds like. Can you provide some more color on how Desert Southwest is progressing, including permitting and overall project execution? How has that development process progressed relative to your own expectations? As you think about maximizing the value of that corridor in general, what opportunities exist to add incremental demand through laterals, power generation connections, data center load, and so on off of Desert Southwest and Transwestern over time?

Mackie McCrea, Senior Management, Energy Transfer: Hey, Theresa, it’s Mackie again. We were excited about Hugh Brinson, and we’re equally as excited about DSW. It’s going to be a game changer, especially for that part of the world. It remains to be seen how much new markets developed. Even yesterday, we had a call from a utility in southern New Mexico wanting to tie to us, so we’ll see kind of the upside through New Mexico. There’s enormous growth in the Phoenix area and in Arizona. Grant and his team have done a great job on government relations, getting out in front of this to all stakeholders, all constituents, whether it’s the indigenous folks, which are many different in that state, and then all the both local and state and federal agencies. We’re on top of that on a day-to-day basis.

As far as our expectations, we’re probably a little ahead of our expectations on survey permission and on making progress on getting this pipeline built. Everything is going exceptionally well. As everybody knows, the steel was ordered a long time ago. The compression was ordered a long time ago. We’ve got the same team, as Dylan mentioned with Mike, and what his team has done on Hugh Brinson. We expect the same on DSW. It’s going to be a great benefit for our assets, for our partnership, for the southwest portion of the United States, and we’re very excited and expect to bring that on time in the latter part of 2029.

Theresa Chen, Analyst, Barclays: Thank you.

Conference Moderator: Thank you. The next question is Jean Ann Salisbury with Bank of America.

Jean Ann Salisbury, Analyst, Bank of America: Hi, good morning. Are you surprised that Waha basis has narrowed so quickly? Do you believe that there’s still stranded gas in the Permian waiting to come online? Again, congrats on getting Hugh Brinson online early.

Mackie McCrea, Senior Management, Energy Transfer: Yeah. I think it goes without saying that Waha’s been hurting and producers have been hurting. They’ve been hurting for quite a while, and everything’s been bottled up there. Boy, Hugh Brinson has unleashed it. I know there’s another pipeline also that’s coming online, if not already. Common sense, when you have all of a sudden a Bcf growing to maybe 4.5 Bcf by the first quarter of next year, things are going to get better, and that’s already proven itself. This is not unexpected. It probably has narrowed quicker than we thought, which goes to the second part of your question. There’s a lot of pent-up volume, a lot of shut-in gas, a lot of ducts to bring online, and producers have been holding back. This is really going to unleash production in a big way.

Oil for sure, on the gas front and the NGL front, volumes are going to grow exponentially. Who knows? If we can really fill up 4.5 Bcf in the next year, we’ll see. We’re very excited about bringing that on, and I know our customers are as well.

Jean Ann Salisbury, Analyst, Bank of America: Very clear. Thank you. Congrats on the recent ethane export expansion. Can you talk about how you expect that capacity to ramp? I know you talked about when the docks are coming in, but are there other limiters like VLEC builds or just the time for the international ethane crackers to come online? I don’t know if there’s a new international ethane crackers, but any more you can give on how you expect that to ramp would be helpful.

Adam, Senior Management, Energy Transfer: Hey. Yeah, this is Adam. We’ve timed it to where we expect the unit to start up in mid 2028 and then continue to ramp through mid 2029. That coincides with what our expectation is from our customer, which these are new build crackers. There will be a ramp reflective of them bringing two units online.

Jean Ann Salisbury, Analyst, Bank of America: Very clear. Thanks, Adam, congrats to you, Mackie.

Adam, Senior Management, Energy Transfer: Thank you.

Conference Moderator: Thank you. The next question comes from Keith Stanley with Wolfe Research.

Keith Stanley, Analyst, Wolfe Research: Hi, good morning. There’s a reference in the release to expecting new gas pipeline announcements later this year for power customers. Are you referring to larger backbone type projects you’re making progress on or more laterals for data center demand?

Mackie McCrea, Senior Management, Energy Transfer: All the above. We’ve got numerous opportunities. Some of y’all are aware of, some you’re not, on laterals that are less than 15 or 20 miles, some just a few miles. Yes, we are working on another at least one large intrastate pipeline, we’re also working on another interstate pipeline. We’re a little premature to talk about that. Very optimistic we’ll get those to the finish line, hopefully we can talk more about those in November.

Keith Stanley, Analyst, Wolfe Research: Okay, great. Second question. The Green Chile project for Project Jupiter for Oracle, is the plan now to reroute around the New Mexico state lands? Looking forward for Desert Southwest, can you talk about regulatory strategy for New Mexico and how the process for Desert Southwest should be different than what we saw with Green Chile?

Adam, Senior Management, Energy Transfer: Hey, Keith, this is Adam. I’ll take the first half and let Mackie jump in on the second half. On Green Chile, without getting into specifics, we’ve been very focused on that project and won’t go through exactly kind of what the process from here on is. We do and have been working with both the FERC and the BLM and all the stakeholders that are involved and are very confident that they understand the importance of these data center projects and the importance on the ability to execute through the regulatory process to be able to bring these projects, which are very important to our industry and the country online. We’re in constant communication with them and are very confident that this pipeline will be put into service and will be ultimately successful.

Mackie McCrea, Senior Management, Energy Transfer: Yeah, I’ll answer the second part of that. The answer is no. We don’t anticipate any similar type challenges on DSW. Primarily what the issue is, it’s a data center. As we know in this country, for years and years, there’s been all these false beliefs about climate change and the world’s coming to an end. A lot of those same environmental activists are also shifting over, and now they’re trying to stop data centers. It’s kind of become a four-letter word. We think Oracle has done a much better job of getting out the facts of how these are closed loop systems. They’re not using near as much water as being advertised. In this particular case, they’ve actually gone to Bloom Energy, which is a lot less emissions. This, we believe, is much more of a data center focused kind of protest activity.

As Adam just said, we’re confident we’re going to get there. Maybe delayed a little bit from where we first anticipated, we’re going to get there. As I said, DSW’s moving along very well.

Keith Stanley, Analyst, Wolfe Research: Very helpful. Thank you.

Conference Moderator: Thank you. The next question comes in Jeremy Tonet with J.P. Morgan.

Jeremy Tonet, Analyst, J.P. Morgan: Hi, good morning.

Adam, Senior Management, Energy Transfer: Morning.

Mackie McCrea, Senior Management, Energy Transfer: Good morning.

Jeremy Tonet, Analyst, J.P. Morgan: Mackie, wishing you the best of luck in retirement. Appreciate all your perspectives over the years. Just wanted to go back to the Permian a little bit more, if we could. As it relates to Hugh Brinson too, if you could just help us think through, I guess, the rate of ramp there. Just trying to think of when that’s going to be fully capable.

Mackie McCrea, Senior Management, Energy Transfer: Yes. We really haven’t changed phase II. We still anticipate being on probably mid-first quarter. Maybe as late as March 1st, but it could go sooner. Like I said, Mike and his team have done such a great job. We don’t put anything past them being early, but right now, kind of mid-second quarter. I mean, I’m sorry, mid-first quarter.

Jeremy Tonet, Analyst, J.P. Morgan: This could take commissioning flows in the fourth quarter, early, like what we’ve seen with the phase I?

Mackie McCrea, Senior Management, Energy Transfer: Well, the last phase is predominantly compression. As we get that in, we’ll be starting the commissioning very likely sometime in the latter part of January, early part of February.

Jeremy Tonet, Analyst, J.P. Morgan: Got it. That’s helpful. Thanks. Just one last one, if I could. With regards to incremental Permian egress needs, how do you see things unfolding at this point as far as when the basin would need more egress? Where do you think that gas wants to go, and how’s ET’s strategy there?

Mackie McCrea, Senior Management, Energy Transfer: What a great question for us. Where does it want to go? You can’t really ask a lot of companies that because they don’t have the ability to get it to where people want it to go. A lot of the customers on Hugh Brinson Pipeline are actually Florida customers. We’ll take volume to wherever our customers, our shippers want it to go, and we have such a vast capability to that, of taking it from the Permian Basin, moving it to Phoenix, as we just talked about, moving it to South Texas, moving it to the Dallas-Fort Worth area, to Carthage, East Texas, of course, to Katy Houston Ship Channel. We have enormous capabilities of moving it west to east, as we’ve alluded.

We also have a great capacity to move from east to west, which some of our customers, especially power plants and data centers, are wanting to source theirs from Katy and Carthage, which we can do and nobody else really can. We’re set up very well in Texas and likewise in Louisiana and going east. We have the enormous capability of taking an MMBtu from a field in southwestern Pennsylvania and delivering it to a customer on the coast of Louisiana or even to Florida. The answer to that question is we will move volume and move MMBtus wherever the customers want it to go.

Jeremy Tonet, Analyst, J.P. Morgan: Got it. That’s very helpful. Thank you.

Conference Moderator: Thank you. The next question comes in from Jacki Torres with Goldman Sachs.

Jacki Torres, Analyst, Goldman Sachs: Hi. Thank you so much for the time. First, you pointed to some NGL recontracting into the 2030s. I was wondering if you could remind us what your recontracting exposure is for the remainder through the end of the decade. Are you seeing downward pressure on rates, or has the expected influx of gas and those associated NGL volumes impacted market pricing or created some type of more balance in the supply-demand dynamics?

Adam, Senior Management, Energy Transfer: Yeah. Hey, this is Adam. We’re extremely that we made year to date on recontracting our Y-grade business out of the Permian. We mentioned in our prepared remarks, in the last quarter, we signed 300,000 barrels a day of Y-grade deals, and this plus what we’re expecting out of the growth in our midstream segment coming from our affiliates, we feel like puts us in a really great position through the balance of the decade on our Y-grade business, where we now can kind of turn our focus towards expansion at Mont Belvieu and looking at things like potential new fracs, additional new ethane exports, given that our Y-grade business really is what feeds the beast. The second part of your question, or first part around rates. We are recontracting at market rates, and there has been more capacity brought online.

We do believe that we’ve seen the bottom of those rates and that we expect going forward that all additional contracting will be at higher rates.

Jacki Torres, Analyst, Goldman Sachs: Got it. Appreciate that color. I guess sticking on recontracting, Enbridge did note a rerouting of MLO2, which does require capacity elsewhere relative to DAPL. Do you see other opportunities to leverage this asset with other projects being contemplated in Canada? How does the 250 of open capacity kind of impact your conversations for recontracting on that pipeline from here?

Adam, Senior Management, Energy Transfer: Yeah. This is Adam again. I’ll start. We still are believers in MLO2, we still think that project, as envisioned and as presented to the market, is ultimately going to win the day. I think what maybe we underappreciated was the regulatory complexity that’s going on within Canada right now. We’re kind of looking towards the back half of the year to get some more clarity as those Canadian producers are in what feels like rather complex negotiations between them and the government, we’ve got USMCA coming up. At the end of the day, DAPL is steel in the ground. MLO2 is a very executable project. As far as pivoting to what we’re focused on DAPL, we’re in conversations with all the Bakken producers, and we’re encouraged by how those are going.

We’re really re-envisioning how the DAPL ecosystem is going to be used going forward. Like I said, ultimately, we think MLO2 comes back into that mix. Don’t forget that we previously announced the Southern Illinois Connector project, which moves 100,000 barrels a day of Canadian heavy for 15 years on the ECHO line. The work that we’re doing to expand the ECHO line and to be able to facilitate that product movement allows us a lot more flexibility out of Patoka to the Gulf Coast to enable us to move PADD 2 volumes to PADD 3 volumes. We expect to be able to optimize those flows and to capture incremental commercial opportunities through that Patoka South business.

Jacki Torres, Analyst, Goldman Sachs: Great. Thank you so much. Congrats, Mackie.

Mackie McCrea, Senior Management, Energy Transfer: Thank you.

Conference Moderator: Thank you. Thank you. Next for the customer, Manav Gupta with UBS.

Manav Gupta, Analyst, UBS: Congrats on a good quarter and the guidance raise. I quickly wanted to ask you about the Haynesville Shale. There’s a clear resurgence over there, some M&A activity also. You also have some very strong Haynesville assets in the form of Both Tiger and Gulf Run. Can you talk about ET’s leverage to the resurgence in Haynesville Shale that we’re seeing out there?

Mackie McCrea, Senior Management, Energy Transfer: In Haynesville. This is Mackie again. Haynesville, as everybody knows, lives and dies on gas. Oil has nothing to do with it. When we saw it peak out at 17.5 or so Bcf a number of years ago and fall off to 14, that’s why. It’s coming back. I think we, and probably most of the industry, are very bullish on gas prices as you look out three or four years and beyond. Ton of reserves in the Haynesville. We’re extremely well-situated with all of our pipes. We actually have four 42-inch pipes that run through Northern Louisiana. A lot of those cases, we’re selling some of that capacity out at really good rates. It’s a flexible system. We actually moved some gas from Perryville back into the marketplace and down Gulf Run to the south.

We’re very well-positioned with any kind of volume growth, and we think we’re going to continue to see volume growth in the Haynesville for years to come.

Manav Gupta, Analyst, UBS: Thank you. My quick follow-up is a little bit of a more of a macro. You remain very confident of the incremental nat gas demand. There’s a little bit of a bearish thesis out there that gas turbines are taking longer to get delivered, permits are getting delayed. From your initial comments, it appears that everything is actually intact, and the demand for nat gas for power remains incredibly strong. Can you just comment a little bit about that? Thank you.

Adam, Senior Management, Energy Transfer: This is Adam. We’re just not seeing the slowdown. Yes, we hear kind of the same things about permit delays and about some of these data centers getting delayed in building out. We alluded to it in our prepared remarks. One of the trends that we’re seeing, and we think is really great for us and for the industry, is that in areas that these data centers are being built, they’re now expanding in those same areas. These are areas which are friendly, like Abilene and with the Stargate 1 project, and then the Stargate Project immediately adjacent in Shackelford County. We expect more growth to happen in areas like that. You’ve seen the Meta announcement in Louisiana, where they are increasing the capacity which they’re building for their data center in an area that is obviously welcoming them. We don’t really see the slowdown.

We do see some of the companies pivoting and looking more to where they’re already building, and they’re already welcome versus new greenfield sites.

Mackie McCrea, Senior Management, Energy Transfer: This is Mackie. Let me add a little bit to that.

Manav Gupta, Analyst, UBS: Yes.

Mackie McCrea, Senior Management, Energy Transfer: I’m going to add a little bit to that. If you look at some of the projections, we’re now seeing in LNG demand growing to early 2030s, 2031 to 2036 Bcf. That’s about a 16 Bcf growth. We know what’s going on in our systems with power plant growth as well as industrial growth. We’re chasing markets like steel companies, two steel companies in two different states. There’s a lot of industry, even in Oklahoma that we’re chasing. It’s not just demand for power plants, it’s demand for LNG, it’s demand for population growth in the south. It’s demand for commercial business. I mean, it’s everything, and it’s hard not to be bullish on natural gas growth over the next 10 or 15 years.

Manav Gupta, Analyst, UBS: Thank you so much.

Conference Moderator: Thank you. The next question comes from Julien Dumoulin-Smith with Jefferies.

Andrew (on for Julien Dumoulin-Smith), Analyst, Jefferies: Hi, good morning. This is Andrew on for Julien, thank you for taking the question. Maybe just two on my front. One, with the data center interest that we’re seeing kind of in the Texas DFW corridor region, also with the potential grid interconnection delays that we’re also seeing really as recent as last week with the legislative hearings. Can you maybe kind of speak to the opportunity set that you guys are seeing in that region, just given the connectivity that you have with Hugh Brinson? Maybe more specifically, can you speak to kind of how are you seeing the competitive dynamic in that state? Kind of what differentiate you guys versus competitors, and do you expect that competitive dynamic could potentially deteriorate your return profile for these projects? Thank you.

Mackie McCrea, Senior Management, Energy Transfer: This is Mackie. Adam may add some. We said it before, a couple of years ago, when data centers kind of started taking off, we looked at the maps, and then we looked at where a lot of the proposed data centers were going, and they were right on top of our pipelines. For one thing, we’re just fortunate that we own so many big inch pipes that traverse through much of the U.S., especially the South. We have a distinct advantage. For example, Abilene has really grown, and we think it’ll grow into something very special from a market standpoint. We just happen to have a 42-inch pipeline being built right by Abilene as all that kicked off.

Some of it, we’re just fortunate with assets are, but also we have great teams that are able to go in and negotiate great deals for our partnership. We use it a lot, the unparalleled, unmatched capability of selling firm gas to these, because not only do we have big inch pipe coming from multiple areas and multiple basins, even within Texas, but we also have backed it up with storage. We have 237 Bcf of storage in six states in the U.S. Much of that is in the South. We have enormous capabilities in very tough volatile times to keep the gas flowing, which is critical to these data centers.

As regard to any legislation, all that stuff, one thing that we’ve done, and I’m not aware of, maybe correct me with Adam here, but if not all, the vast majority of the power plant data centers we do are behind the meter. It really doesn’t have anything to do with all this noise about if there’s these 2,000 requests for interconnection on ERCOT, for example, in Texas. Kind of irrelevant to our customers because they’re not connecting to the grid. They’re behind the meter. They’re going to provide their own electricity. They’re not going to bother anybody or any other customers, which is a lot of the noise that’s out there.

Tom Long, CEO, Energy Transfer: Most, if not all, of what we’re chasing are behind the meter power plants for the data centers that we’re sending gas to, that’s really not going to be an issue for a lot of the customers.

Andrew (on for Julien Dumoulin-Smith), Analyst, Jefferies: Got you. Exactly. Thank you. Very clear. I guess as a follow-up, on your growth CapEx outlook, can you maybe speak to the level of visibility that you guys have in potentially sustaining the current, let’s say, mid to higher $5 billion of run rate growth CapEx, but at the same time maintaining that same internal return threshold that you guys have? I think in extension, from a natural gas perspective, can you maybe speak to the geographic regions besides the more obvious ones in Texas, Arizona, and Florida that you’re seeing more constructive commercial discussions in? Thank you.

Tom Long, CEO, Energy Transfer: Yeah. Listen, I’ll start off here, Andrew. It’s a very good question. As you can see from all of our conversations today, as well as all the other ones we’ve been having with you, we have a lot of opportunities here. It’s a great place to be where we are right now, to be able to see good high-returning projects as we look out. If you take not only the ones that we’ve announced and we’re talking about, but also what we call the shadow projects that are sitting out there, they’re just right on the cusp of getting to FID. I think you can see the $5.6 billion-$5.9 billion that we have for this year.

If you looked at all the way through 2029, we have enough visibility that we expect that number to stay in that $5 billion, $5 billion plus all the way out through 2029. I think you had a pretty broad question there, I think, as far as more on some of the geographic et cetera, I’ll turn that over to look over toward Dylan a little bit here.

Dylan Bramhall, Senior Management, Energy Transfer: Yeah. Let me touch on the I think you’re kind of touching on returns there. I think when we look at this opportunity set, we’re not by any means lowering our return threshold. In fact, I think when we look at these projects, our return threshold’s probably going up because the opportunity set is just so great. These are excellent projects. They’re primarily demand-driven, we’re building for customers to suit their needs. There’s no forcing projects in. It’s just such a great opportunity set, there’s no deterioration in the returns here. I think as Tom just said, we see this $5 billion plus number going through the end of the decade here, at the same strong returns that we’re seeing right now.

Adam, Senior Management, Energy Transfer: This is Adam. I’ll just touch on the geographies that we’re seeing these opportunities in, which really is all of them, but that where our footprint is. Specifically Texas, Oklahoma, Arkansas, Louisiana, Ohio, Illinois, as well as Florida. We’re continuing to see opportunities on the natural gas side across all of these states. Specific to data centers, there are certain states that are more friendly than others, and we certainly see more activity there. Like Mackie mentioned in one of his previous answers, a lot of this is reindustrialization too, with factories onshoring here in the U.S. We are seeing a lot of that. We’re seeing a lot of expansions, and all those things need natural gas, and need reliable, clean natural gas, and need the flexibility that our system can offer.

Andrew (on for Julien Dumoulin-Smith), Analyst, Jefferies: Got you. Very clear. Thank you very much.

Conference Moderator: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Tom Long for any closing comments.

Tom Long, CEO, Energy Transfer: Thank you once again for all of you joining us today. As you can see, we’ve had a great quarter, great year, and a very bright outlook as we look out. We really appreciate it. Thank you all. We look forward to the follow-up questions you have. Bye.

Conference Moderator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.