Energy Transfer LP

NYSE:ET

Earnings Call Analysis

Energy Transfer's Growth and Expansion Highlights

Energy Transfer reports a strong third quarter in 2023 with adjusted EBITDA up to $3.5 billion from $3.1 billion in the same quarter last year and distributable cash flow (DCF) rising from $1.6 billion to $2 billion. Their success is fueled by record volumes across the NGL, crude, and midstream segments, with dividend distribution per unit increased to $0.3125, up from $0.2650 previously. The company's investment in growth continues, with $418 million spent on organic capital projects and a significant acquisition of Crestwood Equity Partners providing entry into new regions and expected cost synergies of $40 million annually. Key expansion projects, such as at the Nederland terminal, are underway to enhance export capacity by 250,000 barrels per day by mid-2025, costing approximately $1.25 billion.

Strengthening Financial Performance and Growth

The company exhibited a considerable increase in its financial robustness, underlined by an adjusted EBITDA of $3.5 billion in the third quarter, up from $3.1 billion in the previous quarter, and a Distributed Cash Flow (DCF) of $2 billion, a significant increase from the $1.6 billion reported in the third quarter of 2022. This positive trend allowed an excess cash flow of $1 billion after distributions, evidencing strong profitability and liquidity.

Enhanced Investor Returns

Shareholders saw a boost in returns, with the company raising its quarterly cash distribution to $0.3125 per common unit, marking an increase from the $0.2650 issued in the third quarter of 2022. Such actions reflect a firm's thriving operations and commitment to returning value to its investors.

Credit Rating and Balance Sheet Optimization

The company's focus on balance sheet fortification yielded a tangible outcome, with S&P upgrading its credit rating to BBB stable outlook. Additionally, a healthy liquidity status was achieved, supported by available liquidity under the revolving credit facility amounting to approximately $2.12 billion.

Operational Highlights and Expansion

Operationally, the company advanced across several metrics. Notably, Natural Gas Liquids (NGL) transportation volumes and export volumes grew by 14% and more than 20%, respectively, underscoring a robust demand scenario. Furthermore, crude oil transportation volumes hit a record, highlighting the strength and capacity of the company’s infrastructure assets.

Strategic Acquisitions and Synergies

The approved merger with Crestwood is set to be immediately accretive to DCF per unit upon closing, indicating accretive financial metrics post-acquisition. The company anticipates not only $40 million in annual cost synergies but also additional benefits across its NGL, refined products, and crude oil businesses due to strategic integration measures.

Investment in Export Capacity Amid Growing Demand

Addressing growing market demand, the company plans to expand export capacity at Nederland, with an infusion of $1.25 billion to bolster capacity by up to 250,000 barrels per day, expected to be operational in mid-2025. This strategic move is poised to enhance the company's competitive standing in the international market.

Future Outlook and Guidance

The company's guidance for full-year 2023 adjusted EBITDA is projected to be between $13.5 billion and $13.6 billion, encapsulating its expectations for continued solid performance bolstered by recent growth projects and the Crestwood acquisition. With an eye toward sustained growth, anticipated future capital expenditures are approximated at $2 billion annually.

Earnings Call Transcript 2023-Q3

[Operator]

Good day, and welcome to Energy Transfer Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I'd like to turn the call over to Mr. Tom Long, Co-CEO of Energy Transfer. Please go ahead.

[Thomas Long, executive]

Thank you, operator, and good afternoon, everyone. Welcome to the Energy Transfer third quarter 2023 earnings call. I'm also joined today by Mackie McCrea and other members of the senior management team who are here to help answer your questions after our prepared remarks.

Hopefully, you saw the press release we issued earlier this afternoon as well as the slides posted to our website. As a reminder, we will be making forward-looking statements within the meaning of Section 21E of the Securities Exchange Act from 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 September 30, 2023, which we expect to file tomorrow, November 2.

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 financial measures on our website. We will start today by going over our financial results for the third quarter of 2023. We generated adjusted EBITDA of $3.5 billion compared to $3.1 billion for the third quarter of 2022.

In our base business, we had strong performance across our operations, including record volumes through our NGL pipelines, fractionators and NGL and refined products terminals as well as record volumes in our crude segment. In addition, volumes in our intrastate and midstream segments remained near records. DCF attributable to the partners of Energy Transfer, as adjusted, was $2 billion compared to $1.6 billion for the third quarter of 2022. This resulted in excess cash flow after distributions of $1 billion.

On October 20th, we announced a quarterly cash distribution of $0.3125 per common unit or $1.25 on an annualized basis. This distribution represents an increase from the $0.265 in the third quarter of 2022.

In August, Energy Transfer senior unsecured credit rating was upgraded by S&P to BBB with a stable outlook. We are pleased to have this third-party recognition of all the hard work that we have done over the last several years and as we have placed significant focus on our balance sheet and leverage reduction. As of September 30, 2023, the total available liquidity under our revolving credit facility was approximately $2.12 billion. During the third quarter of 2023, we spent $418 million on organic growth capital. And in October, we completed the sale of $4 billion of aggregate principal amount of senior notes and used the proceeds to repay borrowings on our revolving credit facility and prefunded 2024 maturities.

Now turning to our results by segment for the third quarter, starting with NGL and refined products, adjusted EBITDA was $1.1 billion compared to $634 million for the third quarter of 2022. This was primarily due to strong performances across our transportation, storage, terminal and fractionation operations. We also saw strong contributions from our optimization of hedged NGL refined products inventories, where we recorded $107 million in marketing margin compared to a loss of $126 million in the third quarter of last year. NGL transportation volumes on our wholly owned and joint venture pipelines increased 14% to a record 2.2 million barrels per day compared to 1.9 million barrels per day for the same period last year. This increase was primarily due to higher volumes from the Permian region and on our NGL pipelines that delivered into our Nederland terminal as well as on the Mariner East pipeline system. Average fractionated volumes increased 9% to a record 1 million barrels per day compared to 940,000 barrels per day for the same period last year. Total NGL export volumes grew more than 20% over the third quarter of 2022, setting a new partnership record. This was primarily driven by increased international demand for NGLs. Through the first 9 months of this year, we loaded more than 47 million barrels of ethane out of Nederland and approximately 21 million barrels of ethane out of Marcus Hook. In total, we continue to export more NGLs than any other company during the third quarter and maintained an approximately 20% market share of worldwide NGL exports as well as nearly 40% of U.S. exports. For midstream, adjusted EBITDA was $631 million compared to $868 million for the third quarter of 2022. We saw near record throughput again this quarter, which was the result of growth in the majority of our operating regions. The strong volume growth was more than offset by significantly lower natural gas and NGL prices. Gathered gas volumes increased 4% to 19.8 million MMBtus per day compared to 19.1 million MMBtus per day for the same period last year.

For our crude oil segment, adjusted EBITDA was $706 million compared to $461 million for the third quarter of 2022. This was primarily due to higher volumes on several of our pipelines as well as the acquisition of the LOTUS assets in May of this year.

In addition, G&A expenses decreased $126 million as a result of onetime charge related to the resolution of a legal matter in the prior period. Crude oil transportation volumes were a record 5.6 million barrels per day compared to 4.6 million barrels per day for the same period last year. This was a result of higher volumes on our Texas pipeline systems the Bakken pipeline as well as the acquisition of the LOTUS assets in May of this year.

In our Interstate segment, adjusted EBITDA was $491 million compared to $409 million in the third quarter of 2022. This increase was primarily due to placing the Gulf Run pipeline into service in December of 2022 as well as higher contracted volumes and interruptible utilization on several of our wholly owned and joint venture pipelines. Volumes increased 15% over the same period last year due to the Gulf Run pipeline being placed into service as well as higher utilization of many of our interstate pipelines, including Transwestern, Rover, Panhandle and Trunkline. We continue to fully utilize Zone 1 capacity on Gulf Run, and we are also maximizing deliveries into our Trunkline pipeline from Zone 2. And for our intrastate segment, adjusted EBITDA was $244 million compared to $301 million in the third quarter of last year. Benefits from favorable storage optimization and new contracts on our Texas and Haynesville pipelines as well as lower operating expenses were more than offset by decreases resulting from lower spreads across our intrastate pipeline network and lower natural gas pricing.

Now turning to our acquisition of Crestwood Equity Partners, which we announced in August of this year. As many of you have probably seen earlier this week, Crestwood unitholders voted to approve the merger between Energy Transfer and Crestwood. The acquisition is expected to be immediately accretive to DCF per unit upon closing.

In addition, this transaction will extend Energy Transfer's position in the value chain deeper into the Williston and Delaware basins, while also providing entry into the Powder River Basin. These assets are expected to complement Energy Transfer's downstream fractionation capacity at Mont Belvieu as well as its hydrocarbon export capabilities from both our Nederland and Marcus Hook terminals. We also expect benefits within our NGL and refined products and crude oil businesses with the addition of strategically located storage and terminal assets. We now expect the acquisition to close on November 3, and we expect to achieve approximately $40 million in annual cost synergies before additional anticipated benefits from financial and commercial synergies.

Turning to our growth projects and starting with our Nederland and Marcus export terminals. September and October were our best months ever across our NGL export terminals and these terminals continue to benefit from increased demand, both in the U.S. as well as from international customers. Earlier this year, we FID-ed an expansion to our NGL export capacity at Nederland in order to address the growing demand. We expect this expansion, which is projected to cost approximately $1.25 billion to add up to 250,000 barrels per day of export capacity. The project is expected to be in service in mid-2025 and will give us flexibility to load various products based upon customer demand. Construction is underway, and we look forward to providing more specifics on this expansion as it progresses. We also continue to pursue an optimization project at our Marcus Hook terminal that we project would add incremental ethane refrigeration and storage capacity.

At Mont Belvieu, we placed [ frac 8 ] into service in August, which brought our total Mont Belvieu fractionation capacity to over 1.15 million barrels per day as a result, in October, throughput at our fractionators reached an all-time high.

Out in the Delaware Basin, we have placed 200 million cubic foot per day processing plants into service since December of 2022, and we now have a total of 8, 200 million cubic foot per day processing plants operating in the Delaware Basin.

Our plan remains near record highs, and we continue to contemplate the necessity and potential timing of adding another processing plant in the Permian Basin while considering any available new capacity that we acquired via the Crestwood acquisition.

Next, an update on our Lake Charles LNG project. We continue to see significant interest in our LNG capacity from U.S. producers and international markets. We are in negotiations with several significant equity partners and are ultimately targeting retaining an interest of approximately 20% for Energy Transfer. These potential equity partners are also interested in substantial volumes of LNG offtake. We are in negotiations to finalize our EPC contract, and we are receiving tremendous support from domestic and international customers, community stakeholders and other interested constituents who are actively encouraging the Department of Energy to approve our pending export authorization application on an expedited basis.

And now for an update on a few other projects. On the carbon capture and sequestration front, we are continuing to make progress with Capture Point. This project entails the capture of CO2 from our treating plants in North Louisiana and the construction of a pipeline to a sequestration site in Site Louisiana. We are continuing to work with Oxy to develop a CCS project in Lake Charles, Louisiana area. This would include the construction of a CO2 pipeline connecting our industrial facilities to Oxy's proposed sequestration site.

On the blue ammonia front, we are working with several companies to evaluate the feasibility of ammonia projects that would include significant natural gas supply opportunities deepwater dock access and other infrastructure services on existing energy transfer property near our Lake Charles and Nederland facilities. Additionally, we are working on CCS projects related to our processing plants and treating facilities in South Texas and West Texas, and we are evaluating other CO2 pipeline projects that would connect CO2 emitters to CO2 sequestration sites in the Houston Ship Channel corridor.

Finally, we are evaluating the use of some of our existing 250,000 acres of land in Virginia, West Virginia and Kentucky for wind, solar, forestry, carbon credits and other uses. The Virginia Department of Energy has spent considerable time and effort evaluating a variety of projects on 65,000 acres located in Southwest Virginia.

Now looking at our growth capital spend for the 9 months ended September 30, 2023, Energy Transfer spent $1.2 billion on organic growth projects, primarily in the Midstream and NGL and refined products segments, excluding SUN and USA Compression CapEx.

For full year 2023, we expect growth capital expenditures to come in slightly below our previously announced guidance of $2 billion, including growth capital related to Crestwood.

Looking ahead, we continue to evaluate a number of other potential growth projects that we hope to bring to FID. We expect to provide our 2024 growth capital outlook our fourth quarter earnings call. However, as we look forward to our potential backlog of high-returning growth projects, we continue to expect our long-term annual growth capital run rate to be approximately $2 billion to $3 billion.

Now for adjusted EBITDA guidance. For the full year 2023, we now expect our adjusted EBITDA to be between $13.5 billion and $13.6 billion including 2 months of Crestwood. We continue to see strong volumes and stable cash flows throughout our business segments with recently completed growth projects contributing several records in the third quarter.

Looking ahead, we are excited to close on the acquisition of Crestwood later this week. We look forward to working with the new Crestwood employees as we integrate these new assets into our energy transfer franchise. We believe the combination of these businesses will present strategic commercial opportunities and efficiencies. We expect the newly acquired Crestwood assets as well as the growth projects completed throughout this year to provide additional opportunities and positive momentum for the rest of this year and going into next year. We will continue to pursue strategic optimization and expansion projects that enhance our existing asset base, generate attractive returns and meet the growing demand for our products and services. Our financial position remains strong, and we remain committed to our targeted annual distribution growth rate, which we will continue to balance with leverage reduction increasing equity returns and maintaining sufficient cash flows to pursue growth opportunities.

This concludes our prepared remarks. Operator, please open the line up for our first question.[Operator Instructions] First question will be from Jeremy Tonet today of JPMorgan.

[Jeremy Tonet, analyst]

Just wanted to start off, if I could. If you could just provide a high-level thoughts for us as the platform sits now after a number of acquisitions and projects, what type of organic growth level do you see at in your business? What type of EBITDA growth for your base business do you see? And also at the same time, I guess, how does this impact your capital allocation philosophy? I think there's somewhat newer slide in the deck there that maybe alludes to buybacks, potential there or distribution increases as well. So just wondering if you could update us on these fronts.

[Thomas Long, executive]

For sure, Jeremy. Listen, we've put out the guidance of that $2 billion to $3 billion a year. And we still have at least a mid-teen type returns or high IT type returns. So you can kind of see the growth rate from there. We're going to stay with that a 3% to 5% growth rate on the distributions at this time. Clearly, we talk about that at every single board meeting. So that's kind of the math. I think on the growth that you can see. Now remember, we still have the kind of the 85%, 15% fixed versus floating. Now it's moved into more of 90-10 just because the commodity prices are lower. So that scales around based upon where those prices are from that standpoint. So when you factor all that in and then all the other optimization opportunities that we will definitely jump on when those opportunities present themselves. I think you can kind of look at that type of growth rate. But I will say that we're going to stay with our normal schedule, meaning that with the fourth quarter earnings results, we will update the 2024 EBITDA guidance, adjusted EBITDA guidance with you. And the second part, Jeremy, did you want to just talk about the unitholder buyback? Was that the second part of your question there?

[Jeremy Tonet, analyst]

Yes, overall capital allocation, I guess, and thoughts in light of what you talked about for organic opportunities.

[Thomas Long, executive]

Yes. Well, it's -- the capital allocation is really consistent with what we've been saying for a while. In other words, we're going to continue to focus on the balance sheet. And it's a great place to be as you start approaching the low end of our 4 to 4.5x leverage target. So I think when you continue to look out and you look at all of these growth projects, you look at the distribution growth that we're looking at that the unitholder buyback clearly remains as an option that we'll look at. You're probably going to look at being at the very low end of that range, if not if not a 3 handle on it, the upper 3 before you could start seeing opportunistically starting to buy back units. But that's the way that you should probably look at that.

[Jeremy Tonet, analyst]

Got it. That's helpful. And then I just want to, I guess, shift gears a little bit towards the Permian. Just wondering if you could provide us, so I think you touched on a bit in your prepared remarks as far as growth opportunities there. But just wondering how you see that, I guess, scaling over time, particularly as it relates to the NGL business and opportunities along that value chain. It seems like the NGL and products business had quite a nice step-up this quarter. And just wondering if you could highlight a bit more of what was happening there.

[Marshall McCrea, executive]

Yes, Jeremy, this is Mackie. What an exciting area you look at the consolidation that's going on upstream. A lot of that, of course, is around the bigger deals in the Permian Basin. And as you know, most on this call, nobody is better positioned to capitalize that and in transfer from every standpoint from gathering, processing NGL takeaway intra interstate pipeline takeaway improve takeaway. And so it all kind of begins upstream with our G&P group and our NGL team working to purchase not only those barrels from our affiliate, but also barrels from others out in that basin. And we couldn't be more excited and well positioned to meet the growth out there. and it kind of feeds into our entire partnership revenue stream when you take all that downstream and then ultimately frac and a lot of its course hitting our export markets now. So an incredible area of the world that we've heavily invested in, and we see it paying off for many years to come.

[Jeremy Tonet, analyst]

And if I could just follow up real quick on that, I guess, on the other side of the NGL equation, just how much demand you see materializing how that impacts pricing for NGLs as you see kind of the LPG is continuing to price to export, or just any broader thoughts on NGL supply-demand dynamics and impact on NGL pricing?

[Marshall McCrea, executive]

It's hard to overexaggerate the ethane and more importantly, the LPG growth. Assets cannot be built quick enough in the U.S. to meet the international demand or by knows about all the PDHs that are being built in Asia, especially in China, there's a lot of ethane crackers that are being built. So you really can't build quick enough, but we've been very prudent. We've announced our Flexport project. It's Flexport project that's under budget on track. We have that in service by the third quarter of '25. We're close to fully selling that out, and we're analyzing another expansion. It would be a much less expensive expansion and a much less cost per barrel to expand more. So we're going to continue to make sure that all of the gas that we're gathering and processing that we have a home for all those liquids. So we're looking ahead and we see significant growth in our NGL business, especially in our export business, both on the Gulf Coast and Marcus Hook, once again, for many years to come.

[Operator]

Next question will be from Spiro Dounis of Citi.

[Spiro Dounis, analyst]

Just want to go back to one of Jeremy's questions actually. And Tom, fully respect that you're not in a position to provide '21 guidance yet, but maybe just looking at the S4 filing from Crestwood as we look to 2024. I know it's not guidance, but some of those pro forma numbers seem to indicate you guys would be approaching $15 billion in EBITDA next year on a combined basis. And so a pretty meaningful step up in 2023. So just wondering qualitatively or however you see fit, maybe help us bridge from 2023 to those S4 numbers? And I mean, what parts of the business could be driving that upside?

[Thomas Long, executive]

Yes; no, listen, it's great to be talking about a number that has a 15 [Indiscernible]. So let's start with that. When you look at that S4, remember that those were estimates, we take our estimates very seriously when we file these things, obviously. And we are still in the process of finishing up the 2024 budget numbers, et cetera, which all go into the guidance. And that's the reason we'll always wait until that fourth quarter to come out with the very best numbers that we can. But listen, Spiro, we sure hope we hit these numbers. It would be great even if we came out with something more. But let us skip through that before we put out any type of official guidance on that. We're so excited about everything we're seeing at this stage with closing on the transaction on Friday, it's going to give us now the opportunity to even start digging deeper into the other synergies that we didn't make in any of the estimates, especially the commercial synergies. So let us get through the close on Friday, and we're going to be very excited to be able to talk about what the '24 numbers should look like. But yes, what a great place to be to be up to the earnings numbers this high.

[Spiro Dounis, analyst]

Yes. No, no. Fair enough, and we'll do our best to stay patient. One quick follow-up once again going back to capital return. Just as we think about the distribution growth, you're on the sort of nice cadence now that's become predictable, and you talked about the 3% to 5% range. I guess I'm just curious, what would you need to see to flex towards the higher end of that range? Is that a function of getting leverage lower, or is it something else you're really focused on?

[Thomas Long, executive]

Well, the leverage is within our target. So I wouldn't want to necessarily guide you toward that 4% to 4.5%. You can already see that we got the 1 upgrade from S&P, like we mentioned, and the other 2 have us on a positive outlook, and we're going to continue to work with them to get that -- those up to that mid- kind of that BBB level. So I think the other component we always look at is we're always looking out at the coverage ratio, making sure that we're staying in a good solid range there. But as much as any, we're also looking at a lot of the growth opportunities. So the usual capital allocation debates that you have any company has here, and that's what we're going to evaluate. But it's not a matter of looking at any 1 single point in time. It is a matter of looking out with the best crystal ball we have over the next 3, 4, 5 years. So we try to make decisions here that that we stick with without kind of jumping up and down or moving around with them.

[Operator]

Next question from Michael Blum of Wells Fargo.

[Michael Blum, analyst]

Wanted to ask on CapEx, both in terms of this year? Just what exactly is driving the reduction there, slight reduction? And then for next year, if I recall correctly, your last update, I know you said a long-term run rate, you think, is $2 billion to $3 billion, but I think at least as of last update, you said you don't even have $2 billion of committed projects yet for '24. So just wanted to get the latest update on where that stands as well.

[Thomas Long, executive]

Yes, Michael, good afternoon. As far as the first part of your question, I would say that we continue to work on some very, very good projects. Some of that's going to be a bit of timing. But even with that, I want to be careful using that word because it doesn't mean that 2024 necessarily going to go up. But that blend straight into the second part of your question. If you really kind of look at that $2 billion to $3 billion, you could use $750 million a year that are just kind of those growth capital projects that well connects, all the other great projects we have that are good, high-returning projects that help with the utilization, optimization of our system overall, especially with the M&A that we've been so successful on a lot of these projects fall kind of in that category of that of that first $750 million. I will say that with some of the stuff that we've talked about, I know Mackie has talked about here is that those are the other projects that aren't necessarily to FID. So we can't say that we've got all of that field in right now by any means, the other $2 billion or so from that standpoint, we'll continue to work on them. I think we feel good about a lot of the projects. So it's -- once again, it's probably the $750 million, and then we'll be talking more about the other projects as we get them to FID, the one that we did highlight in the prepared remarks, of course, was Flexport.

[Michael Blum, analyst]

Got it. Okay. That helps. And then it sounds like a pretty encoring update on Lake Charles. So I guess what I'm wondering is what would be the earliest time frame from your perspective where you think Lake Charles could actually get to FID and then in service.

[Marshall McCrea, executive]

Mike, this is Mackie. A tough question in that. We've got a lot of balls in the air. We've covered it pretty well with Tom's remarks. We're sitting in a really good position. We really need to get the DOE to extend the permit. We think they will. We've got, as we've said, a lot of folks involved behind the scenes, trying to make that happen, including other countries and other businesses and other countries. But we're just keeping our head down pushing. We don't really have a lot of estimates. We are hopeful that we'll have some from the DOE by sometime kind of mid-first quarter were pushing and others are also pushing them to maybe do that sooner, but we don't know. It's a regulatory agency that we're working closely with and hope to make that happen sooner than later. But in the meantime, Tom Mason and his team are working hard in fact over there now, trying to finalize a lot of these contracts and agreements around equity as well as new LNG offtakers. And so it's hard to kind of predict that. But everything went exceptionally well. The second quarter could be a possible building, but we'll see how things go over the next 3 or 4 months.

[Operator]

Next question will be from Brian Reynolds, UBS.

[Brian Reynolds, analyst]

Maybe to follow up on some CapEx questions as it relates to the Permian natural gas egress. It seems like we could be seeing the last brownfield expansion get contracted here over the near future. But beyond that, it seems like we need a larger pipe, which Warrior still exist out there. So kind of just as it relates to Warrior projects at this juncture, has the scope or size of the project changed or evolved since you started marketing the project a few years ago, just to perhaps meet specific customer needs and to get the project ultimately FID.

[Marshall McCrea, executive]

Yes, Brian, this is Mackie again. We actually started really aggressively marketing this first part of this year. But we are pushing hard. As we've mentioned, we've got about 25% already signed up. We're working on another -- several other shippers that would bring us to about 60% or 65%, but we're going to be pretty careful in this. We're very comfortable, like we always are going to be prudent. We're not going to move forward with on FID until we have a substantial amount of that capacity sold out. And it also will feed into not only markets that we're already connected to with our intrastate network, but also we'll have a lot of kind of momentum if some of these other LNG products get projects get to FID. So we're kind of like a lot of these big projects we're working on, they're just taking time. We see spreads other than a few days or weeks where it blows out a little bit. The spreads are very tight. There's not a lot of pain right now at Waha for the most part, we think that's going to get really difficult as we go into '24 until the next pipeline is built. So we do think we'll pick up more momentum, and we're going to push hard and and kind of similar to my comments around LNG. We hope to maybe get the FID on Warrior sometime maybe in the second quarter of next year.

[Brian Reynolds, analyst]

Great. Super helpful. And maybe just touch on the M&A for the year with Crestwood and LOTUS coming into the fold here. Can you just maybe talk about how some of these acquisitions have maybe perhaps help defer some capital? I know Crestwood has some Permian processing capacity. And I think you alluded to in the prepared remarks that some of that excess processing capacity might be able to defer a processing plant a little bit. So how should we think about processing capacity for '24 or '25? Do we need to see another new build come into next year? Or could we see some capital get deferred into the following year as it relates to maybe the crude side LOTUS or Crestwood on the NGL processing side?

[Marshall McCrea, executive]

Yes, this is Mackie again. Yes, we -- as you can understand, we haven't been able to really dig into the Crestwood assets yet. We don't close officially until Friday. But from a high level, we certainly recognize some capacity that's available really in all regions, both in the Bakken and the Powder as well as in the Delaware. We are constantly evaluating when is the next time to kick off the next cryo to make sure we meet our obligations as we sign up producers, but clearly, we believe that this is going to give us some time to defer that decision. We were thinking we're going to make that decision kind of the first quarter of next year, whether we're going to start kick off another plant that's probably going to push it back at least 3 to 6 months. So we'll see kind of as we fully are able to analyze and look at these assets and see how they logistically blend in, but we're pretty confident that the minimum is going to delay building a new trial at least some period of time.

[Operator]

That question will be from Jean Salsberry, Bernstein.

[Jean Ann Salisbury, analyst]

There's a lot of new NGL pipes coming to the Permian in 2025. I think ET is actually the only main company not doing an expansion. How well positioned are Lonestar and West Texas gateway to weather that contractual duration-wise? And does it drive more interest in inorganic opportunities in the basin?

[Marshall McCrea, executive]

Yes, Dan, this is Mackie again. We have noticed that. There's a lot of top lines announced here even in the last couple of days. But what we try to do as a partnership is not really worry about what others are announcing what others are building. We kind of focus on what do we need to be to accommodate our customers and to meet the demand growth of those that we're working with. And we are very well positioned right now. We move about 1/3 of every barrel of NGL that's produced in the Permian Basin. We have the ability to move 100-plus thousand more barrels. We can add pumps and move probably in the neighborhood of 250,000 more barrels. So we've got some kind of drop over or drive capacity, available capacity we'll be able to expand on. So I think any kind of considerations or determinations from us for probably a year or longer way even contemplating another pipeline, and we're positioned pretty well to move everything we signed up in addition to more growth that we expect from our G&P business.

[Jean Ann Salisbury, analyst]

Great. That makes sense. To be clear, I'm certainly not pushing you to expand Loanstar. But that's super helpful. And for your Nederland NGL export expansion, I know that you're talking to a lot of ethane counterparties, but it seems like you haven't quite send the contracts yet. Is the right way to think about it that given how tight LPG export capacity is, it will probably start mostly as LPG. And then as your ethane contracts eventually get signed and kicked in a greater share will become ethane.

[Marshall McCrea, executive]

Yes. I think I would answer it this way. We are in constant dialogue in negotiations across the board. We have probably at least 140,000 barrels of ethane customers that we're negotiating with right now, of which some prefer Marcus Hook on the Gulf Coast will have the ability to kind of swing the volume between either one, but clearly, LPG is also in high demand. And so we're -- there's not a shortage of international customers, and we're very excited. As we've said earlier, that we're not only very well positioned to meet that, but also very well positioned to meet the growth 2 years from now and beyond. So we do think space is going to get pretty tight, as you can see by our results, we're moving more volume. We're hitting records in almost every aspect of our NGL business, including our export, and we're seeing the margins widening. We think we'll see that over the next couple of years, and then we'll have new contracts lined up to come online in our Flexport. So we're pretty excited. We got in this export business a little later than most of our competitors. Certainly, the -- our biggest competitor, we've kind of have gone from nowhere to the leading exporter in the world. And we're proud of that, proud of commercial team done all these deals, proud of our E&C team who build these assets so quickly proud of our operating team led by Greg Michelin, who runs these systems efficiently and reliably and more importantly, safely. So we are very proud of our team and what we've done over the last 5 or 6 years to kind of start from nowhere to grow to where we're at today, and we have such a bright future on the assets that we are building now and the contracts that we have.

[Operator]

Next question will be from John Mackay of Goldman Sachs.

[John Mackay, analyst]

Maybe just taking that last piece, I mean, talked about exports probably being the tightest part of the value chain for you right now, at least that's what we're picking up on. But I guess if you're looking across the kind of broader ET kind of ET combined Crestwood footprint right now, where else are you seeing relative tightness and a call on the market you guys or others to add incremental capacity. Is it the Haynesville? Is it more on processing in the Permian? Just curious your thoughts overall if we're looking maybe beyond export.

[Marshall McCrea, executive]

Yes. Let me just hit every region real quickly to kind of address, I hope your question. And -- so you start in the Northeast, we're positioned incredibly well on any kind of product growth up there, whether it's ethane or LPG, we are kind of the only outlet with our mere franchise. So we call it drop powder or available capacity, whatever you want to call it, we are ready to capture any kind of growth up there. And then as you come further south, we mentioned that we've got the ability to grow our transport volumes from the Permian Basin fairly significantly. We're expanding our Flexport fairly significantly. And we haven't really hit on this on this call, but there's a lot of gas in North Louisiana. Yes, it slowed down a little bit with gas prices here in the last 2 or 3 months, we think it's going to pick back up as prices have improved and will continue to improve, there's enormous reserves there. But on top of that, we have multiple intrastate and interstate pipelines that feed into East Texas and North Louisiana. So we're very optimistic on our golf run expansion we can add compression and add a Bcf a day, but we think it's much more likely that we will sign up enough to loop our existing Gulf Run Zone 2 pipeline especially aligned with LNG, we get that FID, but we see that as certainly a huge growth area for us on a large pipeline project somewhere in the future. along with what we've already talked about, our Warrior project and other areas. So depending on where the area is, we're either situated very well to grow with next no capital or we have such an excellent position to aggregate volumes to support a project like Gulf Run, an expansion project like Gulf.

[John Mackay, analyst]

That's clear. Maybe just following up. If we're thinking about '23 guidance overall, can you just maybe a quick breakdown of how much of the step-up was Crestwood versus kind of underlying business out performance. And maybe if you're touching on the Gulf Run contributions, third quarter interstate was particularly strong. Gas overall was pretty strong. particularly for kind of a shoulder season. Is this a clean new run rate from here? Are there any kind of one-offs in there?

[Marshall McCrea, executive]

Yes. No, listen, I think the best way to look at that as far as the guidance goes and the split between the 2 is the guidance we had coming into this quarter that we provided in the second quarter was $13.1 billion to $13.4 billion, as you know. As you really looked at the new numbers we gave, you can probably say that the existing business was right at the top end of that range. And the rest of it would be Crestwood, but Freswood would be net of transaction costs. So that's what we're currently expecting right now, still maybe some moving pieces as we get into the fourth quarter, but we feel pretty good about the 13.5% to 13.6% it.

[Operator]

Next question will be from Nell Mitra Bank of America.

[Indraneel Mitra, analyst]

Firstly, it seems that Cushing inventories are extremely low right now. So I wanted to understand how your centurion flows and your overall Lotus acquisition was able to materialize on this dynamic in the third quarter?

[Marshall McCrea, executive]

Yes, you bet. This is Mackie again. Yes, due to a shout-out Chris Hefty and his team, and what they've done over the last 2 years. You've just been phenomenal. You look at Enable and kind of what it's done over the last 1.5 years and the synergies that we found and the same with [ WEX ] and a lot the same thing. We continue to look at significant commercial synergies around blending as we have made an announcement, we are looping pipe so that we can move more volume to benefit when the spread blows out between Midland and Cushing. So we're slowly positioning ourselves to become a much bigger player to be able to move volumes between the Cushing and Midland areas as well as, of course, to the Gulf Coast to our Houston and Nederland terminal. And I think likewise, we're going to see with Crestwood a lot of the same synergies. So we're pretty excited about our ability to buy these assets at the the values we're able to buy at, they're great stand-alone companies and assets. And then once we blend them in, like your question with Lotus, we're finding significant synergies that we didn't recognize as we're pursuing these acquisitions.

[Indraneel Mitra, analyst]

Got it. And then my second question, you've had a lot of success building Permian to Mexico natural gas pipelines, and it seems like the utilization on Comanche Trail and [ TransPecos ] are picking up, and you have a competitor looking to build a pipeline to the border as well. With some of the West Coast LNG demand, it increased industrial demand in West Mexico, are you seeing any appetite pipeline expansions down to the border or possibly participating in a new project to move gas to Mexico.

[Marshall McCrea, executive]

This is Mackie. No, we're not pursuing anything right now. As you mentioned, we are ramping up our 2 pipelines out in West Texas that deliver to Mexico. We still have quite a bit of capacity to fill up. to fully utilize those pipelines. We have some pipelines in South Texas that we deliver either directly into Mexico or into other larger diameter pipelines. But no, we don't have anything on the drawing board. Yes, we are aware of some proposed pipelines out of the [ Waha ] area and [Indiscernible] West, but we are involved in any of those projects at this time.

[Operator]

Thank you. Final question will come from Gabe Moreen of Mizuho.

[Gabriel Moreen, analyst]

Sort of the uplift in pricing on your interstate gas pipelines and storage. It seems like if I'm reading it right, some of the lot may be accelerating, can you just talk about sort of how you feel your position rate case outcomes aside and to what extent that's still going to be winded to your backs going forward in 2024.

[Marshall McCrea, executive]

Gabe, this is Mackie, and I apologize. You're -- we started hearing about halfway through your question, sorry.

[Gabriel Moreen, analyst]

Okay. Can you hear me now, Mackie?

[Marshall McCrea, executive]

Yes.

[Gabriel Moreen, analyst]

Okay. Great. I was just going to say to what extent repricing your interstate gas pipeline and storage capacity is going to be winded back in 2024. It seems like some of that is accelerating as we progress through '23.

[Marshall McCrea, executive]

Yes. Years ago, this wasn't fun to talk about. It is now. When you look at the value, for example, on the MEP, or on Tiger on Gulf front or even on Sash, we're seeing growing, growing demand on all of those assets, [Indiscernible]. I mean just pick an asset. And most of what we're doing right now is either at tariff or close to tariff. The demand is there. A lot of the gas throughout this country is trying to find its way to the Gulf Coast. We're very well positioned to benefit from that with all the pipelines I just mentioned in others. So we don't really -- unlike years past, we might have had some concern in contracts were terminating of what we could do with that available capacity. I mean, Tiger is a great example of Tiger was about half empty with spreads down to $0.05 or $0.06, and now we're running it full at much bigger spread. And so we're pretty excited about any available capacity once it comes out in a contract, we think worst case will rollover it somewhere, if not higher rates than we already are at unless we're already at tariff.

[Operator]

That concludes our question-and-answer session. I'd like to turn the call back over to Mr. Tom Long for closing remarks.

[Thomas Long, executive]

Once again, thank all of you for joining us today. We greatly appreciate all your support, and we look forward to talking to you in the near future.

[Operator]

Thank you. That concludes our conference today. Thank you for attending. You may now disconnect.