Enterprise Products Partners L.P. (EPD) on Q3 2022 Results - Earnings Call Transcript
Operator: Hello. Thank you for standing by. Welcome to the Third Quarter 2022 Enterprise Products Partners L.P. Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation there will be a question-and-answer session. Please be advised that todayâs conference may be recorded. I would now like to hand the conference over to your speaker today, Randy Burkhalter, Vice President Investor Relations. Please go ahead.
Randy Burkhalter: Thank you, Josh. And good morning, everyone and welcome to the Enterprise Products Partners conference call to discuss third quarter 2022 earnings. Our speakers today will be Co-Chief Executive Officers of Enterpriseâs general partner, Jim Teague and Randy Fowler. Other members of our senior management team are also in attendance for the call today. During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 based on the beliefs of the Company as well as assumptions made by and information currently available to Enterpriseâs management team. Although, management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. And so, with that, Iâll turn it over to Jim.
Jim Teague: Thank you, Randy. Today, we reported exceptional results for the latest quarter. We reported adjusted EBITDA of $2.3 billion for the quarter. We also generated $1.9 billion distributable cash flow, providing 1.8 times coverage. We retained $826 million in DCF, taking us to $2.6 billion for the first nine months. We achieved six operating records, including transporting the record 11.3 million barrels per day of oil equivalent in the form of NGLs, crude oil, natural gas, refined products and petrochemicals. We transported a record of 17.5 trillion Btus per day of natural gas. We also set quarterly volumetric records for NGL fractionation, ethane exports, butane isomerization and fee-based natural gas liquids. Just a minute. Iâve lost my place. And I wonât tell you who I am. Earnings from our Midland Basin natural gas gathering and processing business and higher gross operating margins from our natural gas processing, octane enhancement and natural gas pipeline businesses were particularly exceptional for the quarter. Today, uncertainties in the global economic environment are weighing on the petrochemical industry, where sluggish demand is leading to reduced runs and destocking. There are some serious concerns about recession, especially in Europe, where the question isnât whether they go into recession, but about the depth and length of the downturn. Meanwhile, on the other side of the globe, Chinaâs GDP has taken a nosedive from double-digit growth over the past number of years to low single digits at best. Thinking back on my career, first with Dow bow and hear in Enterprise, I canât count the number of downturns Iâve been through. At Dow, the downturns were always painful, but here in Enterprise they always bring opportunity. In the current environment, while itâs -- while the uncertainties are real, the certainty that Enterprise will always deliver is real too. Moving to CapEx, year-to-date growth CapEx excluding our Midland Basin acquisition totaled $973 million and our current expectation for growth capital for 2022 and 2023 remains in the $1.5 billion to $2 billion. We currently have $5.5 billion of organic growth projects under construction and we look forward to bringing our PDH 2 plant, our Frac 12, one plant each in the Midland and Delaware Basins and our TW product system on line in 2023. Weâre back on the -- weâve been traveling domestically since end of 2020, and now we are back on the road traveling internationally. And we are welcome in every country we visit. Brent and some of his folks just spent three weeks traveling across Asia from Japan to Korea to Singapore to Asia, -- I mean India, and I joined them for some meetings in the last week of their trip. In the middle of a prolonged war in Europe, and the outright weaponization of energy by Putin, a global energy and food crisis and inflation worldwide, our country is better positioned than any other, thanks to our abundance of both, energy and agricultural products. Notwithstanding that abundance, the critically low inventories of distillate in the Northeast United States were self-inflicted and could have been completely avoided by temporarily waiving the Jones Act. And our travels executives in other countries no longer ask about the size of U.S. energy resources. They donât ask about where we think price is headed, or if we feel U.S. supplies will be competitive. Instead, in most meetings, we are asked if our politicians have a clue about the realities of the worldâs immediate and longer term needs to U.S. energy. Unfortunately, with a rhetoric that comes from our government and inaction on badly needed permitting reform for pipelines, transmission, infrastructure and mining probably answers that question. Our government needs to understand that rhetoric matters. The United Nations has stated that there is a direct correlation between energy consumption per capita and quality of life. Much of Indiaâs population lives in poverty. One of Indiaâs most senior executives reminded me in our meeting that they have access to ample supplies of coal. And without access to U.S. resources, they are going to use any and all available resources to raise the standard of living for their people. Global coal consumption is predicted to hit an all-time high in 2022. And thatâs a trend that could continue as Russia natural gas stays shut in. Meanwhile, back in touch with reality, Europe recently declared both, natural gas and nuclear energy as clean energy, resources that will be needed for years to come and Asia continues to make no bones about their long-term appetite for U.S. energy. We at Enterprise have been emphatic that itâs going to take all of the above in order to meet the worldâs growing energy needs. Thatâs why in addition to traditional midstream services, weâre also focused on investments in lower carbon projects, like carbon capture and sequestration, and providing blue ammonia into export markets. U.S. hydrocarbons remain badly needed to support countries who live in poverty -- energy poverty, and to support our closest friends or allies in Europe who are in energy crisis. We currently export about 60 million barrels of oil equivalent every month. Itâs clear that the world wants and needs much more of what we have. Weâre back on the road traveling domestically, internationally. Weâre growing existing relationships and developing new ones and new opportunities. Sorry. I lost my place, Randy.
Randy Fowler: All right. Thank you, Jim. Good morning, everyone. Starting with the third quarter income statement, net income attributable to common unitholders for the third quarter of 2022 was $1.4 billion or $0.60 per common unit on a fully diluted basis. This compares to $1.2 billion or $0.52 per unit for the third quarter of 2021. Adjusted cash flow from operations, which is net cash flow before operating activities before -- adjusted cash flow from operations is our cash flow from operating activities before changes in working capital. For the third quarter of this year it was $2 billion. This is a 13% increase compared to $1.7 billion generated for the third quarter of last year. We declared a distribution of $0.475 per common unit for the third quarter of 2022, which is 5.6% higher than the distribution declared for the third quarter of last year. This distribution will be paid on November 14th to common unitholders of record as of the close of business on October 31st. During the third quarter, we repurchased approximately 3.9 million common units at a cost of $95 million. For the first three quarters of this year, we repurchased approximately 5.3 million common units for $130 million. We plan to resume our program to opportunistically buy back up to 350 million of units in the near term. For the 12 months ended September 30, we paid over $4.1 billion of distributions to limited partners and bought back $255 million of common units in the open market. For this period, Enterpriseâs payout ratio of adjusted cash flow from operations was 56% and our payout ratio of the adjusted free cash flow, if you exclude the $3.2 billion Navitas Midstream acquisition, was 70%. In addition, during the third quarter and the first nine months of this year, approximately 1.5 million common units and 4.7 million common units, respectively, were purchased on the open market by our distribution reinvestment and employee unit purchase plans. Total capital investments in the third quarter were $474 million, which includes $397 million for organic growth capital projects and 77 million for sustaining capital expenditures. Capital investments for the first nine months of 2022 were $4.4 billion, which included the $3.2 billion acquisition of Navitas Midstream, $973 million invested for organic growth capital projects and $234 million for sustaining capital expenditures. Our total growth projects under construction remains unchanged from last quarter at $5.5 billion. We continue to expect our total 2022 growth capital expenditures to be approximately $1.6 billion and sustaining CapEx to be approximately $350 million. For 2023, we currently expect growth capital investments will be approximately $2.0 billion. Our total debt principal outstanding was $29.5 billion as of September 30, 2022. Assuming the final maturity date for our hybrid notes, the weighted average life of our debt portfolio is approximately 20 years. Our weighted average cost of debt is 4.4%. At September 30th, approximately 93% of our debt was fixed rate. Earlier this year, we retired $1.4 billion of senior notes and redeemed $350 million of variable rate hybrid notes, using a mix of cash proceeds from a note issuance in September 2021, and commercial paper. Our consolidated liquidity was approximately $3.3 billion at September 30th, including availability under our credit facilities and unrestricted cash on hand. With regard to near-term debt maturities, we have $1.25 billion of senior notes maturing in March of 2023. We expect our free cash flow generation and liquidity position will provide ample flexibility regarding the refinancing of these notes. Adjusted EBITDA was $9 billion for the 12 months ended September 30, 2022. Our consolidated leverage ratio was 3.26 times on a gross basis. And if you net out the partial equity treatment for the hybrid notes and reduce debt by unrestricted cash on hand, that number on a net basis was 3.1 times. Given the coordinated efforts by global central banks to increase interest rates to temper inflation and the likelihood of a global recession and just general volatility, we believe that it is prudent to remain at the lower end of our targeted leverage range of 3.25 and 3.75 times EBITDA. Lastly, we published our 2022 sustainability report in September. We encourage you to visit our website and review our discussion on the vital role of U.S. fossil fuels in supporting the pillars of modern civilization and providing a pathway for a better life for 2.5 billion who still live in energy poverty. With that, Randy, I think we can open it up for questions.
Randy Burkhalter: Josh, weâre ready to take questions from our listeners. I would like to remind everyone to please restrict your questions to one question and one follow-up please. Go ahead, Josh.
Operator: Thank you. Our first question comes from Michael Blum with Wells Fargo.
Michael Blum: Thanks. Good morning, everyone. I wanted to ask about Permian growth heading into 2023. You had some comments last week from the majors. Obviously youâve got tight gas takeaway. Do you see that all impacting the pace of growth into â23 on the oil side and the gas side, I guess, for the Permian?
Tony Chovanec: Yes. Michael, this is Tony. When we went into this year and at our analyst meeting, we said, given the momentum we have, we thought that year-end 2021 to year-end â23 hard to call, which year it would land in, weâd be up to -- and Iâm just going with the oil, 1.5 million barrels of increase. Clearly, and you referenced what the majors said, Iâll use Chevron as an example, sort of as a poster child. The supply chain issues in the oilfield and labor issues are not minor. And so, if you look at what Chevron said, they are guiding to the low-end of their production target, particularly as we get to year-end 2022. That said, weâve got 60 rig increase in the Permian Basin year-to-date. And if you think about what those rigs look like, compared to call it 2019 or 2020, there is some efficiency, some 30% greater, this is not a small number. So, if I were to guess right now, okay, because itâs hard. Yesterday, the August numbers came out from EIA for what itâs worth, and they showed an 100,000 barrel a day increase between July and August. So, I would tell you that I think we are probably an increase -- and that puts us year-to-date increase of between 350,000 third-party 400,000 barrels, depending on which numbers you look at. So, Iâm comfortable saying that we are probably going to increase 500,000 to 600,000 barrels in 2022 for the whole U.S. and in 2023 600,000 to 800,000 barrels. So, when you add the two together, 1.2 million to 1.4 million -- and we will address that at the Analyst Meeting again next year, but weâre very comfortable in that range.
Michael Blum: Great. Thanks for that, Tony. I guess, a related question, clearly, Waha has been -- price has been really -- really weak lately. Curious if you could just speak to how much open gas pipeline capacity you have to capture those spreads and basically how much of that youâve already hedged? Thanks.
Brent Secrest: Michael, this is Brent Secrest. If you look at Enterpriseâs capacity as it relates to Waha to Gulf Coast markets, we are between 350 million and 400 million a day of open capacity, or just call it outright capacity for Enterprise. And as it stands right now, none of thatâs hedged for next year.
Michael Blum: Great. Thanks so much.
Operator: Our next question comes from Jeremy Tonet with JPMorgan. You may proceed.
Jeremy Tonet: Hi. Good morning. Just wanted to kind of pivot to the petchem business, if you could. And weâve seen a lot of commentary of the petchems talking about lower operating rates. And it looks like we are headed for a bit of a down cycle here. And you touched on the opening remarks, but just wanted to get a bit more color on what that could mean for EPD specifically here. I think weâve talked about in the past, maybe this looks like kind of a six to nine-month destocking cycle. Is that still how you see it? And if so, I guess, how would that impact EPD? Do you see like a big step down in petchem services next year or how should we frame the range of outcomes?
Jim Teague: Let me -- Chris, I want to take a shot and give it to you. We donât have the spreads between RGP and PGP that we had last year. Saying that the spreads we have today are more like what we have traditionally seen. Our octane enhancement business has done well. Weâve got that hedged 75% for next year, good numbers. And then donât forget, weâre bringing on PDH 2 next year. And then our ethylene and propylene distribution and export and storage facilities are going strong and growing. You want to -- I personally think, yes, itâs going to be -- propylene itâs going to be softer. But I still think weâre going to do pretty good.
Chris DâAnna: Yes. If you look at how weâve built our splitter business over the years, itâs midstream services where we have a 50% of our margin is fee-based, 25% of our margin is fee-based with the exposure to the spread when it blows out. And certainly thatâs what youâve seen over the last year and a half. And then the last 25% is market expose. So, I think over the next six to nine months, we continue to see weakness in destocking. Weâre going to see kind of reversion to what our historical split or profits have been. PDH 2, weâll add to that.
Jeremy Tonet: Got it. Thatâs helpful. Thanks. And just wanted to see I guess within this context of how you think about capital allocation here, it seems like we have a bit of choppiness in the credit markets and investors still looking for greater return of capital on the equity side. And just wondering how you think that all shakes out within this background?
Randy Fowler: Yes. Jeremy, this is Randy. Good morning. Jeremy, I think youâll continue to see us sort of all the above and try to do a combination of distribution growth and buybacks, where it makes sense, again, opportunistically. And then, I think weâre in good shape. Weâve managed our debt maturities very well. We really came in and issued longer term debt. So, our maturity ladder, we donât have big maturities in any of the years coming up. So, I think weâre in good shape going into 2023 to handle that maturity when it comes due.
Jeremy Tonet: Got it. And as far as the return of capital to investors, buybacks versus dividend distributions, any change in thought, givenâ¦
Randy Fowler : No change on thought. 2022 marks our 24th year in a row for distribution growth, and we think next year, itâll be 25 years in distribution growth, so. But still, weâll come in and do all the above.
Chris Nelly: Jeremy, this is Chris Nelly. The one thing that I would add there is that in talking to a lot of investors given the inflationary environment theyâre in, we really appreciate the 5.6% distribution growth year-over-year. Thatâs helpful to a lot of our individual unitholders.
Operator: Our next question comes from Jean Ann Salisbury with Bernstein.
Jean Ann Salisbury: Just building on Jeremyâs question again about Dow saying that theyâre going to cut polyethylene production by 10% to 15% here. Can you kind of just higher level give us your thoughts on what that means for U.S. ethane production and NGL prices? And if it could kind of touch some other parts of your business like LPG exports or discretionary ethane, that maybe people donât necessarily expect to be so petchem related?
Jim Teague: Iâll start and then throw it to Brent and Chris, Jean Ann. Iâm going to go to LPG exports. Weâre bold, arenât we, Brent? So, every month, on ethane exports, we have seen us go no less than 5 million barrels a month Iâm thinking and up to 7 million barrels a month. So, I think where ethylene and propylene are concerned, to the extent they go lower, I think it opens up export opportunities, more for ethylene and propylene. So, I think those export knocks grow in value as prices go down.
Brent Secrest: Jean Ann on ethane in terms of recoveries, if domestic demand is down, itâs still pretty strong. Tony, itâs around 1.9â¦
Tony Chovanec: Correct.
Brent Secrest: â¦barrels a day. So, itâs still hanging in there. But ultimately, thereâs going to be a lot of ethane recovered out of the Permian Basin. Thatâs going to help our Permian Basin NGL lines. On the discretionary ethane, so when you look at Rockies and some other more challenged basins in terms of distance. Thatâs the barrel thatâs going to be on margin, probably for next year. If you look at Enterprise on the ethane business, on the downstream side, I would say thereâs probably about 90% of our business thatâs take or pay type contracts. So think of the ethane dock and Aegis and ATEX and those type of businesses, all thatâs fairly well from a revenue standpoint on solid ground. And then ultimately on LPGs, what weâve always said is LPGs going to have to price in to get to go clear across the water. So, weâre heavily contracted, we do probably have some open spots when we look in the next year. That will be probably -- have some -- we'll wait and see what happens. But weâll have some opportunity across our facilities.
Jean Ann Salisbury : And then just following up on one of your comments there. Youâd kind of said before that as gas prices widened in Waha, you might start to see like material ethane opportunity, like more ethane being recovered there, maybe 100,000 barrels even. I was just wondering if now that youâre seeing gas price widen, if that ethane is showing up?
Brent Secrest: Absolutely. If you look across Enterprise, runs their system, whatâs going on doesnât probably affect us as much as it does affect third-party processors. But youâre definitely seeing the effects of it. This month, you saw it toward the end of last month, and we expect to see it probably for the balance of 2023.
Jim Teague: Jean Ann, one more thing. Iâm absolutely convinced that some of what we export is being burned, especially in Asia. In fact, I know one company that is when you can land ethane cheaper than LNG, Tony?
Tony Chovanec: Absolutely.
Operator: Our next question comes from Michael Lapides with Goldman Sachs.
Michael Lapides: Iâm just curious, worldâs changed a ton in the last six or nine months, just the cycle. Credit markets starting to get a little choppy out there, especially for some of the smaller entities public or private. Just curious is the M&A landscape, has that yet become more attractive? I know you just did Navitas, but that was kind of before the credit markets got choppy. Just curious how you are thinking about the opportunity to use the balance sheet to gobble up assets?
Jim Teague: Iâm thinking that we are building two more plants in the Midland Basin and two more plants in the Delaware Basin, and thatâs a more efficient use of capital than going to pay a lot of money. We like the Navitas deal. Itâs done real well. But it wasnât only a good deal, it was a strategic fit. And what bothers some of us, at least me, is Iâve been through a number of second requests and I donât see anything we could buy and require second request.
Michael Lapides: Got it. In other words, sellers havenât gotten to a point, either due to leverage or anything else, where pricing has come down a lot in the market?
Randy Fowler: Yes. Michael, I think itâs more, again, expanding what Jim was saying is really, we just see a lot of organic growth opportunities right now. And when we came in and leading up to the Navitas transaction, we did a pretty deep dive of all the -- at least in the G&P world as far as what the opportunities were. And by far, Navitas checked all the boxes for us. And as Jim said, itâs -- the transition has gone well. The fit has been great. We didnât have anything in the Midland. And we have been very pleased with it. We continue to look at opportunities, but right now, we are just seeing returns on capital on organic growth.
Michael Lapides: Got it. Thank you, guys. Much appreciate it.
Operator: Thank you. One moment for questions. Our next question comes from Brian Reynolds with UBS. You may proceed.
Brian Reynolds: Hi. Good morning, everyone. Maybe just to start on the moving pieces in â23 CapEx. It seems like Shin Oak has gotten pushed to the first half of â25 from â24. Kind of curious if you can talk about just the moving pieces in CapEx, whatâs potentially still under development and what ultimately could provide some upside or downside to that â23 CapEx number of roughly $2 billion?
Randy Fowler: Brian, this is Randy. I think where we are with 2023 at $2 billion, really itâs hard to see that moving materially higher. We are -- as far as on the only large project thatâs out there that we are looking for more clarity is our offshore crude oil export facility, and we are still waiting on permits there. But even with that, itâs hard to see -- as we sit here today, hard to see that number move materially.
Brian Reynolds: Great. And just a quick follow-up. Is there any fundamental change of view with Shin Oak expansion being pushed back a year?
Justin Kleiderer: Yes. This is Justin Kleiderer. I donât think it changes our fundamental view. I think we have a little bit more time to pull the trigger on expansion, we still have the scoped expansion ready to go. We are just spending a little bit more time trying to understand whatâs appropriate for what the market needs and when it needs it.
Brian Reynolds: Great. Thatâs super helpful. And then maybe just as a broader question, while â23 E&P budgets havenât been formalized, curious if you could just talk about Permian producer customers, what theyâre looking at and how theyâre thinking about â23, just given the expected nat gas tightness, public and private, looking at â23 a little bit differently. Do you see flaring, coming back, materially in â23 or do you think thatâs kind of a thing of the past? And then we could just see more lumpy volumes, while we navigate that nat gas tightness? Thanks.
Tony Chovanec: Brian, Iâll start out. This is Tony. I made the comment at the beginning of this call. If you look at whatâs happened to Permian rig counts, itâs not small. So, there is a significant amount of momentum in the Permian. We hear it from publics and privates alike. And quoted some numbers this morning, what we think and how the numbers end up. Could things slow it down, flaring on gas? We go to a lot of things. But, itâs hard to kill this kind of momentum. And Brent, Iâll let you spend a lot of time with producers talk about privates and big privates in public and how you see it.
Brent Secrest: Brian, I think, when you look at the bigger privates, they still have a fairly robust growth plan. I heard some of the earnings calls last week from some of the larger players in the Permian. And they were a little bit more tempered than what we had heard. But the bigger public company is, more growth that they were talking about. But if you look at our system in the Midland Basin and recognize that we have some of its timing and capital projects, but if you look at our growth on the natural gas side and processing side, itâs probably about 23% growth from â22 to â23. On the Delaware Basin side, itâs going to be probably call it 7% to 10%. Thatâs probably a little bit late our timing on our plants. And when you look at what producers are looking at, even if, where gas prices are in 2023, I didnât check it before I came in here, but weâre still around a $3 type number where producers can hedge. And the whole scheme of things that the crude is going to drive somewhere between 85% and 87% of the economics. What the gift that producers were given, when they were able to achieve $4 or $5 type gas prices thatâs what it was. It was a gift. I donât think it changes the mentality in terms of where Waha is trading at, because again, itâs still a pretty healthy number for 2023.
Operator: Our next question comes from Theresa Chen with Barclays.
Theresa Chen: Tony, I wanted to ask you for an update on how much ethane do you think is still currently being rejected in the Permian from I think the last update was 200,000 to 250,000 barrels per day, and how much can realistically come out?
Tony Chovanec: Yes. That number changes from day-to-day. Iâll pass it to Tug or Brent. But when I say it changes from day-to-day, I mean, it changes from day-to-day. I would think that that rejection number is less because of whatâs happened to gas but gas moves. Itâs really unbelievable what happens...
Brent Secrest: Thereâs probably some older plants out there that canât recover as much as the newer type plants. I would think everything that canât be recovered is probably getting recovered. Tug, do you have a volumetric number, what we think is not being recovered, because it probably canât?
Tug Hanley: If you look at the Waha spread, right now thereâs a very healthy incentives obviously for every single plant that canât recover to recover. But as far as older plants and why itâs probably 50,000 to 75,000 barrels a day that cannot be recovered due to older technology.
Jim Teague: And the spreads they have, I canât imagine anybody purposely rejecting...
Theresa Chen: And looking to the petchem side of things. Iâm curious to hear your view on your customers in the international markets. Granted from a U.S. perspective is capacity utilization is down here, making the feedstocks cheaper, exports make a lot of sense. But as we look at the international markets and we also are hearing about Far East and European facilities, curtailing production and some prolonged their maintenance because of these poor margin outlooks. And as we think about Europe potentially sending elevated amounts of naphtha to that Singapore market and as a competing feedstock. What does that mean for U.S. Gulf Coast exports of petchem feedstocks internationally?
Chris DâAnna: This is Chris DâAnna. I guess, globally, the whole petchem segment is weak right now. And so what thatâs meant to us over the last several months is that our ethylene export dock says has been full. And some months, a product goes to Europe, some months it goes to Asia. And I think all these -- all the petrochemical plants over there are trying to balance out and find the right optimum level to run. But I think the short answer for us is that it means our dock is full, at least for ethylene. And for propylene, weâve had imports at times weâve had export at times. So, itâs really creating some opportunities for us.
Jim Teague: Iâve said earlier that ethane docks can stay full and that LPG docks can stay full.
Theresa Chen: Got it. Thank you.
Jim Teague: Notwithstanding the weakness, weâve been visiting, like I said in my script, weâve been traveling internationally and weâve been visiting among -- countries. But weâve been visiting with the companies that want to build petrochemical complexes. And our goal is to export ethane to them.
Operator: Our next question comes from Chase Mulvehill with Bank of America.
Chase Mulvehill: I guess, I want to follow-up on some of the Permian growth expectations. I think you talked about -- Brent I think he said 600,000 to 800,000 barrels a day of -- I think that was U.S. growth for next year. So I guess what would that translate into Permian growth? And then, what about residue gas growth, if youâre going to grow, whatâs the equivalent kind of residue gas growth on that â23 number?
Tony Chovanec: Itâs very, very weighted towards the Permian. Any other increases when we look at oil are relatively small. So, think Permian, I donât have that split out in front of me, but think Permian. Relative to NGL growth, just a walk -- yes. Relative to residue for every million barrels, think about 3 Bs of gas from a drive standpoint. Thatâs said -- go ahead, sir. The gas, both on the Midland side and on the Delaware side, I mean, the oil is getting a little gassier. That didnât mean there is less oil, it just means there is more gas, which is the reason you see us building more plants. That does put producers in a box for 2023 for takeaway at Waha.
Chase Mulvehill: Yes. I guess that was my follow-up question is, how quickly do you think that 1.1 B fills once a PHP and Whistler, those expansions come on line kind of late 3Q or early 4Q. And the follow-up to that would be, do you still have 350 to 400 m a day open for the first half of â24 for the FT?
Brent Secrest: Iâll answer the second question. This is Brent. But, itâs still open in â24. Ultimately, those pipelines canât come on probably fast enough. I think in the daily market, when it comes to Waha, I think we saw it last week and prior to that, when things are this tight, itâs going to be -- and something goes down, itâs going to be incredibly challenging. I donât think thatâs the last that weâve seen negative gas prices in Waha.
Unidentified Company Representative: Or if something goes up, being the wind blows hard.
Chase Mulvehill: Yes, absolutely already. Iâll turn it back over. Thanks, guys.
Operator: Thank you. One moment for questions. Our next question comes from Neal Dingmann with Truist. You may proceed.
Neal Dingmann: Good morning, guys. My first question just on your upcoming projects specifically, when looking to all those projects listed on page 6, I know youâre talking to some of your other midstream and upstream guys that are seeing typical supply chain issues and other various delays out there. Iâm just wondering, could you guys give just general comments? You have a lot of fantastic projects coming on, here starting first half of next year. And Iâm just wondering if you can give a sense of you feel pretty good about those projects. I mean, obviously, there is a large number of coming on. Maybe itâs just overall color you could give on that.
Graham Bacon: Yes. This is Graham. Bottom line is we feel real good about these projects. I mean, there are a few still remaining supply chain issues, primarily around electrical gear. I think, weâve mitigated almost every one of those issues on these projects. So, going forward, we feel really good about execution of these -- of the projects that we have on the list.
Randy Fowler: Graham, do you want to give a little color on PDH 2?
Graham Bacon: Yes. Just in light of Randy mentioned PDH 2, still scheduled for mechanical completion in the second quarter of next year. We are looking at -- I think the execution is going very well, looking at coming in under our forecast on that particular project. We are really excited about that. Our teams did a great job back in 2020 mitigating a lot of the supply chain issues that arose during the pandemic. And even through all of that, we are still on schedule and maybe a little bit ahead of budget.
Operator: Thank you. One moment for questions. Our next question comes from Keith Stanley with Wolfe Research. You may proceed.
Keith Stanley: Hi. Thank you. Thatâs good news on PDH 2. I just wanted to clarify on the buybacks. Is the plan still to repurchase the up to 350 million specifically in the second half of the year, or is it more open ended on the timeline for completing that?
Randy Fowler: Yes, it could spill over into next year. Because, again, weâre looking to come in and do this opportunistically. And, again, weâll see what the market gives us, a lot of noise out there with the Fed. But, -- yes, so I mean, weâll see if we can get it done by year-end. If not, weâll spill over into next year.
Keith Stanley: Got it. And then just a quick one on the EFS, the Eagle Ford crude contract. The impact in the third quarter, should we think of that as kind of an ongoing impact, so just annualize that number going forward?
Randy Fowler: So if you look at that contract -- and thatâs the life of lease contract. So, what we lost on that is deficiencies. So, weâre still going to get some fees associated with how much production goes up. If you look at the producer around that contract, they have pretty healthy growth plans. So, as more volume comes on in â23 and â24, and theyâve shared their growth plans with us, youâre going to see some offset. So I would think that this quarter is probably the worst quarter in terms of impact. If you look at by the end of -- toward the end of the year, weâll probably make up about 25% of what we lost, and then that number will go up as we go forward.
Randy Burkhalter: Josh, this is Randy. We have time for one more question.
Operator: Our last question comes from Colton Bean with TPH and Company.
Colton Bean: Just one on my end, the natural gas segment had a pretty significant step up in earnings this quarter, but it didnât look like that was marketing weighted? Can you just walk us through the changes in the intrastate business and whether thatâs a sustainable run rate heading into 2023?
Unidentified Company Representative : Are you asking specifically about our Texas Intrastate System?
Colton Bean: The natural gas segment broadly, but based on the release, it looks like the intrastate was responsible for most of the uplift. So yes, just any changes there?
Unidentified Company Representative: So, weâve gotten increased demand or increased contracts from -- volumes from power providers -- also upgraded some of our transport contracts from Waha as well.
Randy Fowler: I think if you look across our whole natural gas segment and you could go from Haynesville or anywhere around the Permian, youâre going to see increases probably every month as we go forward, Colton. Thatâs a pretty healthy business right now.
Operator:
Randy Burkhalter: Okay. Josh, this is Randy. That would end our call today. And weâd like to thank everyone for joining us for our call. And have a good day. Thank you very much. Good bye.
Operator: Thank you. This concludes todayâs conference call. Thank you for participating. You may now disconnect.