Q1 2025 Earnings Call Transcript

Good day, everyone, and welcome to the First Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. We've also note today's event is being recorded. At this time, I'd like to turn the floor over to Megan Patterson. Ma'am please go ahead.

Thank you, Jamie, and welcome to ONEOK's first quarter 2025 earnings call. We issued our earnings release and presentation after the markets closed yesterday, and those materials are on our website. After our prepared remarks, management will be available to take your questions. Statements made during this call that might include ONEOK's expectations or predictions should be considered forward-looking statements and are covered by the safe harbor provision of the Securities Act of 1933 and 1934. Actual results could differ materially from those projected in forward-looking statements.

For a discussion of the factors that could cause actual results to differ, please refer to our SEC filings. Just a reminder for Q&A that we ask you to limit yourself to one question and one follow-up to fit in as many of you as we can. With that, I'll turn the call over to Pierce Norton, President and Chief Executive Officer. Pierce?

Thanks, Mike. Good morning, and thank you for joining us. On today's call is Walter Hulse, the Chief Financial Officer, Treasurer and Executive Vice President, Investor Relations and Corporate Development; and Sheridan Swords, our Executive Vice President and Chief Commercial Officer. Also on the call are Kevin Burdick, the Executive Vice President Chief Enterprise Service Officer; and Randy Lentz, Executive Vice President and Chief Operating Officer.

Yesterday, we announced our first quarter results, highlighting the performance of our integrated systems and a disciplined growth strategy. These results were driven by our dedicated employees. Results for the quarter were in line with our first quarter expectations, and we affirmed our 2025 financial guidance and 2026 outlook, both of which were originally provided in late February. As we've exited the winter, volumes across our system have wrapped up significantly, providing momentum for additional growth through the remainder of the year.

We're also entering what is typically our strongest two quarters for the refined products demand in the second and third quarters. We continue to execute on acquisition-related synergies, which combined with the completion of organic growth projects and the demand for our services will continue to support earnings growth throughout the remainder of the year and beyond. We're approaching full completion of several organic growth projects, including the West Texas NGL pipeline expansion out of the Permian Basin and the Elk Creek pipeline expansion out of the Rocky Mountain region. Additionally, a number of key synergy-related projects are nearing completion, which we expect will provide a tailwind to earnings for the second half of 2025 and into 2026. One of these projects is the connection of the Easton Energy NGL assets with our Gulf Coast infrastructure.

Sheridan will talk more about the strategic benefits of our synergy projects during his commercial update. As we've entered the second quarter, we're gaining momentum into the back half of 2025 with volumes ramping up across our systems and many smaller scale, high-return synergy projects coming online. While there is much to be excited about at ONEOK, we also recognize that we're operating in an environment with a number of evolving macroeconomic market varies. We closely monitor a range of macroeconomic indicators, including commodity prices, producer activity, inflationary trends and regulatory developments, and we remain focused on navigating appropriately to shifts that could affect the markets that we serve.

ONEOK business is completely immune to volatility. We believe that ONEOK is structured to perform through various cycles and is in a position to continue delivering value. First, on outlook is very different today than even two years ago. We've been intentional about adding scale, demand-pull markets, geographic diversification and fully integrating our systems.

Our integrated and diversified footprint across multiple products and geographies positions us well to manage through periods of uncertainty. Second, we have a unique and attractive earnings catalyst related to acquisition synergies that are not tied directly to production volume growth. Some of these catalysts include bumming services, liquids blending, maximizing volumes from acquired systems through our downstream assets and capturing efficiencies on newly integrated assets. Third, our strategically positioned assets in some of the most productive U.S. shale basins.

We're connected with some of the largest and most well-capitalized producers in the U.S. with decades of proven reserves to provide stable and growing supply to our systems. They make informed decisions, supported by data and experience. And finally, we remain committed to our strong balance sheet and investment-grade credit ratings, which provides significant financial flexibility. Our commitment to capital discipline and focus our return investments is embedded into our business strategy.

So while we monitor near-term market dynamics closely, the strength of our businesses lie in our geographic diversity, integrated footprint, innovative employees and strong commercial relationships, all of which provide long-term value. I'll now turn it over to Walt and Sheridan to provide their financial and commercial updates. Walt?

Thank you, Pierce. First quarter 2025 net income attributable to ONEOK totaled $636 million or $1.04 per share. We reported first quarter adjusted EBITDA of $1.78 billion or $1.81 billion, excluding transaction costs, which is comparable to how we provided financial guidance. Results were driven primarily by a full quarter of adjusted EBITDA from EnLink and Medallion as well as higher year-over-year NGL and natural gas processing volumes in the Rocky Mountain region.

These results were partially offset by the absence of earnings in 2025 from the Interstate pipeline assets divested on December 31, 2024. The proceeds of these sales were used to accelerate deleveraging of our balance sheet. The acquired EnLink and Medallion assets contributed nearly $450 million during the first quarter. As we progress on the integration of these businesses, we continue to identify and realize synergies with $250 million of total incremental synergies expected in 2025. We've added a new slide into our earnings presentation which was released yesterday along with first quarter results, Slide 5 in the deck.

It shows the expected earnings power of our combined companies as compared with each company's stand-alone five-year planned prior to the closing of these acquisitions. Over the coming years, we anticipate our consolidated EBITDA will meaningfully outperform some of the individual company forecasts. This further growth is primarily driven by synergies and growth projects made possible by commercial alignment, operational efficiencies, scale and disciplined capital execution. When looking at this slide, it's important to recognize that 2024 results include earnings from the divested assets and years '25 forward exclude assets EBITDA and those assets EBITDA in the forecast.

We continue to demonstrate our commitment to balance sheet strength, ending the quarter with no borrowings outstanding under our $3.5 billion facility and more than $140 million in cash. In March, we repaid $250 million of senior notes at maturity with cash on hand as we have with our last five maturities. And we continue to expect leverage to trend towards our target of 3.5x in 2026. Before I turn it over to Sheridan, I'd like to reiterate Pierce's comments on the current environment. From a financial perspective, we are constantly evaluating how external factors contribute to our results.

Our 2025 financial guidance provided in late February, which we affirmed yesterday reflects what we believe is a balanced and realistic outlook given current market conditions. The first quarter was in line with our internal company forecast, and we expect that the combination of seasonal refined product demand, volume growth coming from the winter months, completed capital projects and additional synergies will increase our results in the coming quarters. In addition to these earning catalysts, we remain disciplined in our approach to capital allocation and cost management. If we were to see a prolonged or material shift in the economic environment, we would not hesitate to adjust our capital plans or re-prioritize investments to maintain our financial flexibility and our commitment to a strong balance sheet as we've previously demonstrated.

I'll now turn the call over to Sheridan for a commercial update.

Thank you, Walt. Beginning with the Natural Gas Liquids segment. First quarter NGL volumes increased 4% year-over-year driven by a 15% increase in the Rocky Mountain region and an 8% increase in the Gulf Coast Permian volume. Rocky Mountain region volumes increased year-over-year, in line with our expectations.

We continue to see volumes ramp up on our system as we've exited winter, and volumes are currently averaging nearly 480,000 barrels per day in April. In the Mid-Continent, seasonal weather combined with less ethane on our system during the quarter resulted in lower volumes. In April, we are averaging more than 540,000 barrels per day with warm weather, more ethane recovery and growth in Oklahoma. As a reminder, all EnLink NGL volumes from the Mid-Continent region was transported previously on our system prior to the acquisition.

In the Gulf Coast Permian region, volumes increased year-over-year and compared with the fourth quarter 2024 of the 436,000 barrels per day of volume in the region during the quarter nearly 100,000 barrels per day was attributable to EnLink volume not previously counted on our system. Raw feed throughput in the region was impacted by winter weather during the quarter, particularly the extreme cold snap in February and lower levels that they recover. In April, Gulf Coast premium NGL volumes is averaging more than 500,000 barrels per day with improved weather, and we anticipate additional volumes to ramp up over the next few quarters from both ONEOK natural gas processing plants and third-party volume commitments on our system.

We also continue to strategically pursue commercial synergies across our system, such as linking our Mont Belvieu and Conway NGL fractionation and storage infrastructure to our expansive Houston and Mid-Continent area refined product assets. These critical connections are expected to be completed in the second half of the year, increasing contributions from the future integration of these strategic systems. Expected NGL growth across our system supports our strategic Texas City LPG export joint venture. This wellhead-to-water strategy will provide customers us with a fully integrated solution for their products.

Already today, we have more than enough propane on our system to fill our capacity on the dock, which is slated to be completed in early 2028. Moving on to the Refined Product and Crude segment. First quarter refined product volumes were nearly unchanged year-over-year highlighting the continued consistency of this business. With gasoline and diesel demand typically lower in the first quarter, we expect increased volumes in the coming months as we see higher demand from agriculture activity and summer travel season. We have already seen an increase in crude oil volumes on our system as a result of our adding gathering infrastructure.

First quarter 2025 Midland crude gathered volumes were up more than 20% year-over-year, which includes both the EnLink and Medallion systems. We expect additional volumes to be directed to our long-haul pipeline throughout the year as we continue to fill gathering capacity and complete system connections. Moving on to the natural gas gathering and processing segment. Through recent acquisitions, we've extended our gathering and processing assets into the strategic and growing Permian Basin and added assets in the Mid-Con.

We've added 1.7 Bcf per day of processing capacity in the Permian and more than doubled our processing capacity in the Mid-Continent. In the Permian Basin, we currently have 16 active rigs on our dedicated acreage. This activity level and the opportunities we see on the horizon are expected to fuel our existing processing capacity. In the Midland, we are relocating 150 million cubic feet per day plant from North Texas.

And in the Delaware, we have expansion projects at existing processing facilities. These projects provide a path to growth as we take steps to develop additional infrastructure in both the Midland and Delaware Basins. We are excited about the long-term potential in this region and the opportunities that we've seen in the short time since closing the acquisition. In the Mid-Continent, both our legacy ONEOK and recently acquired assets performed well.

As we now have had a quarter of operations with a much larger position in Oklahoma, we are confident in the opportunities we have to expand our services for customers and to capture synergies from operating as one integrated system. There are 14 rigs on our dedicated acreage in Oklahoma and a number of projects underway to connect and optimize these assets in the region. Mid-Continent region processing volumes are averaging more than 2.4 Bcf per day in April. Rocky Mountain region processing volumes averaged nearly 1.6 Bcf per day in the first quarter of 2025. slightly lower than the fourth quarter due to normal winter weather effects.

As we enter spring, volumes have begun ramping with April volume averaging nearly 1.7 Bcf per day in the region. And the Williston Basin, there are 15 rigs on our dedicated acreage. Volume in this region continues to benefit from increasing efficiencies that expand the basin's core acreage and from longer laterals drilled. In 2025, we expect 3-mile laterals to make up more than 35% of our wells connected.

When looking at producers across our operations, portfolios, and economics are unique to every operator and depend on many variables, and the basins where we operate, many of our customers are among the lowest cost operators in North America with breakevens below current price levels. Based on recent conversations, we are not seeing any meaningful shift in drilling or completion activity. In the Natural Gas Pipelines segment, our assets remain well positioned to benefit from increasing natural gas demand. We've been engaged in active negotiations across our system related to power demand for data centers in Oklahoma and Texas as well as LNG ammonia and in industrial demand along the Mississippi River Industrial corridor [ph].

Our Oklahoma and natural gas storage expansion project was recently completed and will be fully in service next month, adding an additional 4 Bcf of working storage capacity, which is 80% committed with third-party contracts. We are also underway on our Jefferson Island storage hub expansion project in Louisiana, which will increase storage capacity by approximately 8.5 Bcf and will complete -- be completed in two phases with the first expected in 2028 and the second in 2029. This project is fully subscribed by third-party commitments. Pierce, that concludes my remark.

Thank you, Sheridan. As we close today's call, I want to acknowledge the dynamic environment we're operating in. Despite the external noise, long-term fundamentals of our business remain strong, and we're well positioned for continued growth. Ultimately, the strength of our integrated assets, our understanding of the markets we serve and our proven ability to adapt give us confidence in the durability of our outlook.

What gives me additional confidence is our people. The dedication and innovation of our employees are the driving force behind everything that we accomplish. Their unwavering commitment to safety, innovation, and operational excellence continues to position ONEOK for long-term success. We remain focused on optimizing our existing assets, expanding strategically in high growth areas like the Permian Basin and leveraging our integrated footprint to meet the rising demand of midstream infrastructure here in the United States.

Operator, we're now ready for questions.

And ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions]. Our first question today comes from Jeremy Tonet from JPMorgan. Please go ahead with your question.

Hi, good morning.

Good morning, Jeremy.

Good morning, Jeremy.

Thanks for the color on the call today. I was wondering if you might be able to expand a little bit more on the synergies, and I guess the forward outlook. There's a lot of uncertainty in the market. But from what you see right now, for the balance of '25 not really just hitting the guide there, but really the commentary on 2026 appears unchanged as far as strong growth there.

I'm just wondering if you could elaborate a bit more maybe on what you see there, synergy capture that gives you the confidence to stick with that at this point?

Well, I'll start here, and I'll let Sheridan and Will fill in. But with what we're looking at with the LNG exports, all the construction that's going on in the Gulf Coast, adding as much as 10 Bcf in the next five years with AI data centers increasing probably anywhere from 3 Bcf to 8 Bcf a day. We understand where those opportunities are, and many of them are in our areas. And so there's some drivers out there that are kind of outside some of the economics and the macroeconomics.

So I think that the global demand for LNG and LPGs, we think is going to continue. And so far, everybody that we talk to hasn't given us any indication to materially deviate from that.

Jeremy, the other thing I would add is a lot of our synergy projects are not dependent on volume. We have a lot of projects where we are becoming more efficient at blending normal butane and refined products as we connect our NGL infrastructure into our byproduct infrastructure, both in the Gulf Coast with our Easton acquisition and that coming on later this year and in the Mid-Continent. They're going to be driven by demand on the refined product system. And as we see volume, our prices go down on for crude oil and for other commodities, we actually see demand come up on the refined product systems.

So that is independent of the price environment we continue to see. And then some of our synergies that we're looking at or synergies we're looking at like in the mid top and then gathering processing, there are efficiency synergies that we are going to get even at this volume. But what we're going to get it as we move gas to more efficient processing plants that produce more NGLs or and also in the Permian on our crude gathering systems, where we're going to be able to -- as we continue to fill that capacity, we'll be able to put more of that crude oil on our long-haul pipe snatch crude oil already on our system.

So that's what gives us an any environment, any pricing environment, gives us confidence in what the synergies we have for.

Hey, Jeremy, the only thing I would add to that is that we do continue to see procurement opportunities, our increased buying is going to continue to give us opportunities to lower costs as we see contracts roll off for various services here over the course of the next several years. So we're focused on making sure that we capture those as well.

Got it. That's helpful. Thank you. And then maybe just shifting a little bit to producer conversations here. We've seen reports of producers asking for meaningful concessions for mid streamers and just wondering, I guess, how you're producer customer conversations go with regards to that? And I guess, could there be the potential for win-win solutions? Or just any color there would be great.

So I'll -- let me start with this one, too, Jeremy, and I'll throw it to Sheridan, but I've had the opportunity to have some discussions with mainly the other service providers that actually service the well drilling and the production completion. And when we talk to them, that's where I think the E&P companies are kind of focused on first, because those are more in line with what's going to happen immediately with drilling and in the completion of the wells. So I think that's probably one of their first focus areas, and then I'll let Sheridan kind of talk to you about re-contracting or whatever on these contracts.

Jeremy, what I would say in any environment when our contracts come up with our producers, we are always looking for areas that we have win-win and that's the whole bundling aspect that we have touted in some of these synergy projects or what we going to bring another these other acquisitions and we're looking at where can we add value to them and where can they add value to us? It's a very constructive conversation. Those conversations that are going on right now are no different that have been going on for a period of time. And our indications from our customers as they still see value in what we bring to them in different areas, and they are looking for that to stretch across the whole value chain.

So it's really -- it really fits into what we're trying to do with these acquisitions with our bundling strategy.

Got it. That's helpful. I'll leave it there. Thanks.

Our next question comes from Spiro Dounis from Citi. Please go ahead with your question.

Hi, this is Doug Irwin on for Spiro. Maybe just to start with the LPG export project. Just curious if and how the potential for tariffs on LPGs has impacted your approach for commercializing this project moving forward?

Yes. This is Sheridan. It has not really impacted our project at all or even our contracting approach. One thing you got to look at with LPG is, as we've said many times, it is a byproduct it needs to clear to the international market.

It will make it happen. As you see even as prices have moved up and down or threats and you've seen our LPG exports be fairly steady for that period of time. Well, there's no increased demand in domestic growth. So all that has to be exported, and that product needs to clear to be able to continue to get the gas and the crude oil out of the basin.

So we have not seen any impact to LPG exports or any change nor on our contract strategies.

Okay. Great. That's helpful. And my follow-up, maybe just on the macro environment. Just curious if we see crude to go into a steep contango here. How should we think about potential storage tailwinds across your system?

Yes. We have a lot of crude oil storage in -- across our system, and we would have into a contango market. We would have a great opportunity to be able to store that product in the front month to be able to sell it out forward. So yes, there would be -- on that aspect by itself, we would have some tailwinds with storage, if you went to a contango with our on-system storage.

Great. I'll leave it there. Thanks.

Our next question comes from Theresa Chen from Barclays. Please go ahead with your question.

Good morning. Well, I wanted to go back to your comments about protecting the balance sheet in the event of further macro deterioration. Would your CapEx plans in place for the near to medium term, how much can you flex down if things get worse?

Well, Theresa, I would say that we've lived at head scenario a couple of times over the last 10 years. Clearly, that was something that had to take place in 2020. And I think we demonstrated a very significant ability to flex our capital program. Clearly, your routine growth, which is often driven by producer activity will come off kind of naturally if activity slows, we won't be spending a portion. And that's about $1 billion of our annual capital that can be flexed.

And then the longer term, larger projects. As in 2020, we actually put some of those on hold and then spend the money to do that properly so that as the market came back, we were able to restart those projects and meet our customer demand. We will look at across all of our projects, those that are critical to continuing to deliver on the plan will be executed in due course. So we look at everything today.

We don't see it an environment where that's necessary. But we did want to highlight that we did it back in 2016. We did it in 2020. So if we see a macro outlook or global demand destruction. We're in a position to know how to manage the balance sheet and protect it as we've done in the past.

Thank you. And on the subject of synergies and the 2025 guidance, Sheridan, I know you gave a lot of very interesting color on why things are second half weighted and the different streams of income -- incremental earnings that will come to fruition. At this juncture, how much would you say is already underway now that we're through April? Or is there still a significant component that is still subject to execution either by one over by producers for the remainder of the year?

What I would tell you is a substantial amount of the synergies we have in 2025 are underway in one form or the other. We're having to do some a little bit of capital projects, especially with some of the EnLink and Medallion. We need to connect the two systems together. They're being connected.

That takes a little bit of time to do that. It can't happen overnight. And then some of the -- obviously, we've already counted some of the synergies that are being from the Medallion acquisition in 2023 that we have already said that it was going to take a little bit more capital build and it would be bringing them on in midpoint of 2026. And I mentioned those the ones down on the Gulf Coast, we're tying the NGL system into the refined product system. That's going to be done later second half of this year.

That's a project we've been working on for a little over a year, that's going to have a pretty big impact and also tying in the NGL system in Mid-Continent. Those things are all underway. That's what we're going to get a lot of it going forward, and that's why we get confidence there's still -- obviously, we have other ones that we continue to find as we get the two systems together that we're adding to the list that we may also see some later coming on later this year. as we go forward. But me, we have a higher confidence in our synergies for 2025.

And Theresa, this is Pierce. So maybe that I would add to that is when we did the Magellan acquisition and even EnLink and Medallion, one of the things that's common to all three is the synergies are in our control. When we talked about batching, blending, bundling, those are all things that we have control of, and we're not waiting on a contract to be signed or buying to show up. It's mainly interconnects that we had to make.

But it takes like Sheridan have said, takes time to make those interconnects and then we're continuing to do those throughout the year. But the majority of these things are definitely within our control.

Yes, and the thing that I would add to that, Theresa, is that we've only now operated fully controlling the EnLink system since February 1, effectively. As we've looked at some of our cost opportunities, I'll give you an example, property insurance, there was a scenario where we were able to add the EnLink business and Medallion business to our program and pretty much save close to 100% of the cost of those two entities were spending in the past. That all started on April 1. So you start to see those things roll in. And as we look at various other expenditures where we're able to consolidate, we picked those up at the point in time that those new contracts start.

So that will start to fold in throughout the year as we move forward.

Thank you.

Our next question comes from Michael Blum from Wells Fargo. Please go ahead with your question.

Thanks. Good morning everyone. I had a couple of questions on the Bakken. Obviously, the data showed some recovery in volumes, but you're not quite back to pre-wildfire level. So just wondering how you're seeing the rest of the year trending. And I recognize now that Bakken is a smaller piece of the overall pie, but how much Bakken growth do you need to hit your full year guidance?

Michael, this is Sheridan. As we said before, we just need a small, low single-digit growth and meet our guidance and everything is pointing that that we will definitely be there if not exceed that number. It is looking good at this time as we go forward. A lot is going to tell us.

We're seeing good -- and what gives us a lot of confidence is we're coming strong out of the winter. Even though it's April and a lot of places is full Spring. It's just early Spring in the Bakken. As we continue to go forward.

So we get into May, also, we'll see how we anticipate even more will be coming out due to winter issues, and that will give us a great momentum into the rest of the year, and that's what gives us really our confidence of what our volume for the year is going to be it is every year. Every year, we kind of need to wait until we come out of winter and what it looks like going forward. And when we start getting in that, that's where we get our confidence. We're comfortable with where we're sitting.

Okay. Thanks for that, Sheridan. And then as I think about ethane recovery in the Bakken, how sensitive is that to market pricing? So like if we see a prolonged kind of weakness, for example, would that have an impact? Or is it really just the ethane that's getting recovered there? Is it really just a heat rate concern on Northern Border, it's not really driven by pricing? Thanks.

Really, right now, what we're doing is more affected by pricing because we've had a price level that's in there that it says that we want to recover the ethane and be able to capture the natural gas spread in the Bakken to ethane in Mont Belvieu. If we would have a complete full rejection, you would probably end up getting into a heat rate on for some of that volume on Northern Border right now. But obviously, if there's a downturn on ethane gas prices in Mont Belvieu, we'll have a little bit of an impact on that. But then we can pull that volume back off, which pulls it off in the market what helps the market a little bit and put it into Northern Border than we had to.

And that's why we like about that ethane play that we have up that we're very flexible when we bring it in and when we don't bring it in and what value we have. Now we have been able to, as we look forward, we've been able to walk some of that in already. So we already have some of that already pre-locked in. So even if we had some changes, we'd still be able to recover a portion of that volume, I think we needed to.

But as you have heard today, they are -- as we think about China and that macro, you've already seen that trying to relax the tariffs on ethane going into their crackers over there. Because, frankly, they need the United States ethane. That's what it's been running on there. They're getting directly from our side.

So I think we're going to continue to see the demand for ethane to side for the rest of the year.

Thank you.

Our next question comes from Jean Salisbury from Bank of America. Please go ahead with your question.

Hi, good morning. I just have one just kind of a follow-on to Michaels. NGL volumes seemed light across the board in the first quarter. So I really appreciated Sheridan's discussions around how it compared to your internal projections.

And how things are picking up in April on the NGL volume front. I did just want to ask if there was more ethane rejection in the Mid-Con or Bakken or anything like that than you had sort of anticipated, which would potentially impact the rest of the year? Or if that is basically kind of what you had already forecast for the first quarter?

Well, what I would say is it's what we had anticipated for the fourth quarter because when we gave you guidance at the end of February, we already had two months in the book. So we had a very good idea of what the first quarter was going to look like. Yes. So the amount of ethane rejection in the first quarter across our entire system is right in line with what we expected or what we put into our guidance because we knew what it was going to be.

As we are -- obviously, we're seeing more ethane recovery now as we typically do in the summer months when gas prices go down. And we don't see as much the high price on gas prices related to the other commodities. And so ethane recovery across the board is up on our systems, and we anticipate that's going to be throughout the year. And we still have the same point of view on ethane that we had almost every year is that the Permian, for the most part is going to be in complete ethane recovered.

Sometimes it changes, but this can be complete ethane recovery. The Mid-Continent is going to be in and out at different times. And then the Rockies has gone to notionally be out unless we want to bring some man to capture that ethane that the natural gas to ethane spread, which we have done throughout the year.

Okay, great. That is all from me. Thank you, Sheridan.

Our next question comes from Manav Gupta from UBS. Please go ahead with your question.

Hi guys, I actually just wanted to focus on Slide 5, a very interesting slide, but some of us are slightly visually challenged. So help us understand the slide a little better. Are you trying to imply that by combining these four companies, there is about additional $1.3 billion of incremental EBITDA realizable by 2027. Can you help us walk through this slide. There's a lot of very good information on here.

Yes, that's exactly the punch line there as you get out into 2027. What we wanted to do is go back and give a base. So if you look at the projections that were there, at the time of the acquisitions and then we layer the synergies and growth projects. And we wanted to put both of those in because a great example of that is the refined products pipeline expansion out to Denver. Is that a synergy?

Or is that really a growth opportunity that presented itself as we brought these two companies together. Either way, it's going to be a great contributor as we look going forward. So we wanted to couple those together and show you how that will build over time. Because as Sheridan spent time you're talking today, we're just now getting in a position to get some of those Magellan synergies where we had to spend some capital to connect the system.

And there will be some of those with EnLink and Medallion. Hopefully, they'll come in a little bit quicker because they're a little bit smaller in scale as to what needs to happen. But we wanted to give you a view of how we see those playing forward, so that as you think about a longer-term growth rate, you can understand what we think some of those opportunities are.

Perfect. My quick follow-up here is it looks like the weather was working against you in 1Q. And I know it's difficult to quantify, but I'm just trying to understand the opportunity cost of the lost revenue or EBITDA if the weather was not a major headwind as it looks like it was in the first quarter?

Well, I think that clearly, if we hadn't had the weather, there would have been an opportunity for more EBITDA. But I would say that no matter what happens, you're always going to have weather in North Dakota in the first quarter. So we clearly plan for that, and that is part of our expectations when we do our forecasting, in the very few periods where we've had some warmer weather up there, so we surely have taken advantage of it and made some good money on those opportunities. But by and large, we're going to be impacted by weather every first quarter.

And then we get a little bit of it back there in the fourth quarter as well. So we really look at how we come out of that in the spring and jump forward into the second and third quarter where we really get to see the uplift in the market activity.

Thank you so much.

Our next question comes from Keith Stanley from Wolfe Research. Please go ahead with your question.

Hi, good morning. So you've had a lot of confidence on the call on the 2025 outlook and good details on recovery this spring. Would you say even with Q1 that as of now, you're still tracking to the midpoint of the 2025 EBITDA guidance generally?

Yes. I would say that we were a firm guidance just as we gave it in February, was the same where we would end up. So we are in line, affirming financial guidance as it was given in February.

Okay. Great. I had another follow-up on Slide 5, and I want to just make sure I'm understanding the data point for 2027. So you're pointing to $870 million of synergies and growth uplifts in '26 and then $1.3 billion in '27. So that's over $400 million of year-over-year upside in 2027. And I think that's on top of growth in the stand-alone business outlooks as well. I just want to make sure I'm understanding that right, as far as the upside you see in '27.

Yes. I think that's a good highlight of where we start to see some of the stair step functions when we bring on new projects from a growth standpoint. And why we wanted to highlight that, that's both synergies, which may be a little bit more linear. And then when you add in growth projects, they tend to be lumpier stair step you up when you bring that on and can start to be what it so.

Clearly, as we move from '26 to '27, we'll be bringing on some projects that are underway right now and enjoy the benefit of that '27 and forward.

Thank you.

Our next question comes from AJ O'Donnell from TPH. Please go ahead with your question.

Good morning everyone. I just wanted to go back to the Permian volume guidance. Thinking what the current asset footprint and 1.7 Bcf of capacity. Just wondering if you could elaborate a little bit more about how you envision that volume kind of the cadence stepping up the rest of the year.

How much of the volume growth do you think there could be from inefficiencies that you could capture on the system? Or is it just the volume growth entirely driven by new well connects?

Yes, this is Sheridan. Yes, that volume growth is really going to be more driven by new well connections. I mean, we did not have any G&P presence in the Permian before we bought the EnLink system as we get in there. So what we're seeing now is just overall growth what's going forward, and I gave you some numbers of where we are today.

So that's given us confidence of where we're going to end up. And then we also talked about we have in the Delaware, we have some quick expansion opportunities out there that are underway now that we could be able to -- we're putting in place, we'll be able to absorb some of that as we continue to go forward. But we are seeing the activity level in the Permian as I stated in my remarks that are going to fill our assets and a lot of it is going to be by the end of the year in these expansions.

Okay. Great. Then maybe if I just shift to refined products. I was wondering if you could spend a little bit of time talking about the blending business.

Spreads between the butane and RBOB seem to be wider than they were relative to Q4. And I know that there's more that goes into that business, such as like logistical costs and differentials. I was hoping that maybe you could explain the Q1 results. And maybe if we're getting ourselves into a situation like we did in 2024 or like you did in 2024, where you kind of saw an unseasonal uptick in Q2 product margins?

Yes. We -- the same strategy that we had in 2024, the spring 2024 is the same strategy we have going on around that 2025 where we saw opportunities to sell store product and instead of selling in the current month that we've blended the product to go ahead and forward sell that in that month out forward into 2Q and beyond. And we will see some added benefit as we get into the second and third quarter from that strategy. I think that's your question.

Yes, that was. Appreciate the color. Thank you.

Our next question comes from Sunil Sibal from Seaport Global Securities. Please go ahead with your question.

Yes, hi. Good morning folks and thanks on the color on the call. So I just wanted to start off by clarifying some comments, which was made in the prepared remarks with regard to the LPG export dock facilities. So are you indicating that the amount of volumes that you need to fill up your facilities is something that you're already moving on your systems.

But I guess, with third-party export docks, did I get that right?

Yes. We produce enough propane now to more than fill that dock capacity. Now we are selling that that product into the open market today, whether it be an enterprise, whether it be a target, whether be it in energy transfer. And we know just by supply and demand balances that some of that product has to be going across their dock, but we are not selling into crops or dock, but when our dock comes up, we will take that product that we were selling into the open market that [indiscernible] was making it across somebody else's dock.

That product will be shifted away from their docks and be put on our dock.

Understood. Thanks for that. And then on the gas pipeline business, it seems like you had a pretty solid start, although you had some divestitures in that business. And then you also talked about few gas storage extension projects that are kicking in now.

So I was curious when I look at how you performed in the first quarter versus your full-year guidance, is -- am I missing something that you seem to be on a pretty good track to exceed the full-year EBITDA guidance in that segment?

Yes. I mean the natural gas pipeline segment has done really well in the first quarter, which typically we see it do well in the first quarter, obviously, with meeting demand and everything on the system. And also, we see good strength through the rest of the year. We mentioned that we're bringing on will come up next month or 4 Bcf of storage.

That is coming online that 80% of its already subscribed that other 20% will be used for operational storage or we need to see an opportunity to do some parking loans out there as well that we've seen from time-to-time going forward. But you're right, natural gas pipelines are performing well. And then as we look forward, we are, as I mentioned in some active discussions with some demand, a lot of Louisiana. Some of those are on the industrial corridor, as we said before, that is a really hot area for us that we are on the last stage to get some demand signed up from industrials out there.

So we -- it's our smallest segment, but it's going to have a good year.

Thanks for that.

And ladies and gentlemen, with that, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Megan Patterson for any closing remarks.

Thank you, Jamie. Our prior period for the second quarter starts when we close our books in July and extends until we release earnings in early August. We'll provide details for the conference call at a later date. Our IR team is available throughout the day for any follow-up. Thank you all for joining, and have a good day.

And ladies and gentlemen, with that, we'll conclude today's presentation. We thank you for joining. You may now disconnect your lines.