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EnLink Midstream(ENLC) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Q4 2023 adjusted EBITDA was $351 million, and full-year 2023 adjusted EBITDA reached $1.35 billion, marking a 5% growth over the prior year [12] - Free cash flow after distributions for 2023 was nearly $250 million, driven by strong cash flow generation and lower capital expenditures [12] - The company forecasts 2024 adjusted EBITDA of $1.36 billion at the midpoint of its guidance range, with free cash flow after distributions expected to increase to $290 million [5] - The leverage ratio stood at 3.3x at the end of Q4 2023, with the company maintaining investment-grade ratings from Fitch and a positive outlook from S&P [31] Business Line Performance - Permian: Segment profit for Q4 2023 was $105.9 million, with gathered volumes up 6% sequentially and 23% year-over-year [18] - Oklahoma: Segment profit for Q4 2023 was $112 million, growing 1% sequentially and 7% year-over-year [19] - Louisiana: Segment profit for Q4 2023 was $103.6 million, growing 10% sequentially and 2% year-over-year [28] - North Texas: Segment profit for Q4 2023 was $68.6 million, declining 2% sequentially and 10% year-over-year [26] Market Performance - The Permian and Louisiana segments are expected to drive growth in 2024, with the Permian forecasted to grow 15% and Louisiana 7% [38] - Oklahoma and North Texas are expected to see flat volumes and declining segment profits due to contractual rate resets and conservative volume assumptions [39][40] Strategic Direction and Industry Competition - The company is focusing on expanding its CO2 transportation solutions with ExxonMobil, targeting industrial facilities along the Gulf Coast that emit over 215 million metric tons of CO2 annually [6] - EnLink is also evaluating opportunities to expand its natural gas storage capacity in Louisiana, with potential to increase capacity by 9 Bcf [17] - The company is committed to capital-efficient projects and has a strong pipeline of debottlenecking projects in Louisiana, which are expected to provide attractive economics [16] Management Commentary on Operating Environment and Future Outlook - Management highlighted the resilience of the business despite volatile commodity prices, with strong activity in the Permian and Louisiana driving growth [12][43] - The company remains bullish on long-term natural gas demand, particularly in Oklahoma and North Texas, despite short-term challenges [42] - EnLink is optimistic about the growth potential in the CO2 transportation and carbon capture market, with ongoing discussions with ExxonMobil and other partners [47][69] Other Important Information - The company completed the sale of noncore Ohio River Valley assets for $70 million, representing a multiple of approximately 6x EBITDA [25] - EnLink has repurchased approximately 9% of its common units outstanding since late 2021, with a $200 million repurchase program authorized for 2024 [34][61] Q&A Session Summary Question: Update on Pecan Island project prioritization and capital spending - The company is reassessing the Pecan Island project's near-term role, with other projects potentially being prioritized [8][55] - Most capital spending on Pecan Island has been on permitting and right-of-way acquisition, with future spending paused until an optimized solution is identified [45] Question: Permian growth cadence and asset base - Growth in the Permian is expected to shift from the Midland to the Delaware side, with the Tiger II plant coming online in Q2 2024 [48] - The Matterhorn project, treated as an equity method investment, is expected to be operational in Q3 2024 [48] Question: CO2 transportation and competitive positioning - EnLink is exploring opportunities to expand CO2 transportation beyond the Mississippi River corridor, leveraging its existing infrastructure and expertise [56][63] - The company expects the CO2 business to grow beyond the initial $300 million EBITDA opportunity identified earlier [77] Question: Contract renewals and rate resets in Louisiana - The company is seeing success in renewing contracts at higher rates, with an estimated $20 million uplift in 2024 and further upside in 2025 [15][82] Question: Natural gas storage expansion in Louisiana - EnLink is evaluating brownfield and greenfield projects to expand natural gas storage capacity, with initial engineering studies indicating potential for an additional 9 Bcf [86] - Most capital expenditures for storage expansion are expected in 2025 and beyond, with 2024 focused on engineering and permitting [87]