Elvira Scotto

Elvira Scotto asked about the potential for further margin improvement or uptime driven by Archrock's technology investments (telemetry, big data, AI), inquiring about the stage of these initiatives and future AI applications. She also asked if there's any change in customers' preference for insourcing versus outsourcing compression services.

Answer

Brad Childers, President and Chief Executive Officer, outlined three goals for technology investments: improving customer uptime and service quality, empowering mechanics with better tools and information, and driving profitability. He believes there's still more to come, especially in enhancing customer experience. Archrock is deploying AI to provide mechanics with better information and to analyze telemetry data for actionable insights, and is exploring additional sensor technologies. Mr. Childers stated that there has been no shift in the insourcing/outsourcing dynamic, as customer decisions are primarily driven by capital availability, allocation, and buy-lease analysis, which continue to favor outsourcing for long-term assets.

Elvira Scotto asked about the potential for further margin improvement or uptime from Archrock's technology investments (telemetry, big data, AI) and what stage of development these initiatives are in. She also inquired if Archrock is observing any changes in customers' desire to insource versus outsource compression services.

Answer

Brad Childers, President and Chief Executive Officer, outlined three goals for technology: improved customer uptime/service quality, better tools for mechanics, and increased profitability. He believes there's more to come, especially in enhancing customer experience, deploying AI for mechanics' information and machine analytics, and exploring new sensor technologies, viewing it as a continuous improvement exercise. Mr. Childers stated that Archrock has not seen a change in the insourcing/outsourcing dynamic, as customer decisions are primarily driven by capital availability, allocation, and buy-lease analysis, which continue to favor significant outsourcing.

Elvira Scotto asked about growth trends in basins outside the Permian, their percentage of Archrock's fleet, and how they might evolve with increased LNG export capacity, including potential impacts on pricing and costs. She also inquired about the potential for future asset sales across Archrock's portfolio and how current Cat engine lead times compare to previous quarters.

Answer

President and CEO Brad Childers noted that 60% of growth remains tied to the Permian, with incremental growth in Haynesville, Rockies, and Marcellus. He expects LNG expansion to be primarily supported by Haynesville, Permian, and Eagle Ford. Mr. Childers stated that asset sales are a consistent part of the business, averaging over $95 million annually in the past five years, with a range of $40 million to $90 million. He also recalled that Cat engine lead times were around 42 weeks six months ago, increasing to the current 60 weeks.

Elvira Scotto asked about growth trends in basins other than the Permian, particularly how they are evolving with increased LNG export capacity and potential impacts on pricing, costs, or economic dynamics. She also inquired about the potential for future asset sales across Archrock's portfolio and how the 60-week lead time for CAT engines compares to three or six months prior.

Answer

Brad Childers (President and CEO) stated that 60% of Archrock's growth remains tied to the Permian, but incremental growth is seen in the Haynesville, Rockies, and Marcellus, which are being reactivated. He expects LNG expansion to be primarily supported by the Haynesville, Permian, and Eagle Ford, with the Northeast seeing growth for data center demand. Childers noted that high utilization means other plays must compete with Permian returns to attract CapEx. Regarding asset sales, he indicated an average of over $95 million annually over the past five years, with a range of $40 million to $90 million, as a prudent approach to keeping the fleet fresh. He recalled CAT engine lead times were around 42 weeks six months prior, now at 60 weeks.

Elvira Scotto asked about the greatest M&A opportunities (terminal vs. fuel distribution), whether there's a gating item or ceiling on M&A, and the potential for more substantial acquisitions. She also inquired about the team's confidence in the Parkland synergy target and the possibility of exceeding it, given Sunoco's track record.

Answer

Joe Kim, President and Chief Executive Officer, stated that M&A opportunities exist across all segments (midstream, fuel distribution) and geographies, driven by capital discipline and choosing the best projects. He clarified that the $500 million bolt-on M&A is a baseline, not a ceiling, and doesn't include larger opportunistic acquisitions, emphasizing ample opportunities in fragmented markets and the advantage of scale. Karl Fails, Chief Operating Officer, expressed high confidence in the Parkland synergy target, noting that past history suggests they will exceed it, with a focus on quick delivery of the $125 million in 2026, supported by the strong base business and key metrics like leverage and DCF per LP unit.

Elvira Scotto asked about Sunoco's confidence in achieving its Parkland synergy target, given its track record of exceeding synergy targets in past acquisitions, and whether there's potential to exceed the current target.

Answer

Karl Fails, Chief Operating Officer, expressed strong excitement about the Parkland acquisition and indicated that Sunoco's historical performance suggests a high likelihood of exceeding synergy targets. He emphasized the focus on rapid synergy delivery, with $125 million expected in 2026 and a higher run rate by year-end. He also highlighted the importance of the base business's strength and sustainability, affirming confidence in the 2026 guidance and beyond, comparing Parkland to the successful NuStar acquisition.

Elvira Scotto asked about Energy Transfer's projected annual growth capital expenditure over the next few years, given the new growth projects and significant opportunity set. She also inquired about what is required to reach Final Investment Decision (FID) on the project with Enbridge.

Answer

Co-CEO Mackie McCrea indicated that while specific multi-year CapEx guidance is not provided, the strong pipeline of projects suggests it will remain robust. CFO Dylan Bramhall added that the company's focus is on maintaining leverage targets, with strong growth from assets coming online creating more debt capacity. Dylan Bramhall also stated that Energy Transfer is ready with design systems for the Enbridge project and is in the commercialization phase, engaging in productive discussions with Canadian customers.

Elvira Scotto asked about the expected annual growth capital expenditure over the next few years, considering the new growth projects and opportunities. She also requested an update on the requirements to reach Final Investment Decision (FID) for the project with Enbridge.

Answer

Co-CEO Mackie McCrea and CFO Dylan Bramhall indicated that while specific multi-year CapEx guidance is not provided, they expect annual growth capital to remain strong, governed by leverage targets and increased debt capacity from new assets. CFO Dylan Bramhall stated that Energy Transfer is ready with design systems for the Enbridge project, and the remaining work is in the commercialization phase, involving discussions with Canadian customers.

Elvira Scotto sought more specific details on the 2026 guidance, asking what volumes from Salamanca and Shenandoah, as well as the eight additional tieback wells, are embedded in the 15%-20% offshore guidance. She also asked about the maintenance CapEx impact related to the marine dry-docking schedule and the potential for incremental inland barge utilization from increased heavy crude runs by refineries.

Answer

CEO Grant Sims reiterated that the 15%-20% guidance is based on producer customer information and is intended to be conservative, with potential for overperformance being a timing issue rather than a fundamental value concern. He confirmed that 2026 would be a heavier maintenance capital year due to dry-dockings, estimating a $15 million-$20 million increase in maintenance CapEx. Regarding inland barge utilization, Mr. Sims noted that utilization is already high, and increased heavy crude runs (from Venezuela, Gulf of Mexico, Canada) are expected to drive up demand for intermediate black oil transport, leading to higher day rates through 2026 and into 2027.

Elvira Scotto sought more detailed information on the 2026 guidance for the offshore segment, specifically regarding Salamanca and Shenandoah volumes, and whether the eight additional tieback wells at legacy facilities are included in the 15%-20% guidance range. She also asked about the maintenance capital expenditure impact from the planned dry dockings and the potential for incremental inland barge utilization driven by increased heavy crude runs by refineries.

Answer

CEO Grant Sims reiterated confidence in meeting or exceeding the 15%-20% guidance based on producer discussions, emphasizing that any underperformance would be a timing issue, not a fundamental value degradation. Regarding dry dockings, Mr. Sims confirmed that 2026 would be a heavier maintenance capital year than 2025, estimating a $15 million-$20 million increase in maintenance CapEx. For inland barge utilization, he noted that utilization is already high (close to 100%) and anticipates being able to increase day rates as the total black oil pool and intermediate refined products increase due to more heavy crude runs from various sources.

Elvira Scotto of RBC Capital Markets requested elaboration on recent trends in the Marine Transportation segment, the timeline for achieving leverage targets, the balance between shareholder returns and deleveraging, and confidence in hitting the low end of 2025 EBITDA guidance.

Answer

CEO Grant Sims explained that while the inland marine market was 'sloppy' in Q2, it has improved, with utilization over 98%. The bluewater market has seen some temporary softness due to equipment relocation to the Gulf Coast, but fundamentals remain strong with 97% utilization. On leverage, he reiterated a focus on debt reduction but suggested a modest distribution increase could be considered for Q4 2025. Regarding guidance, Sims expressed confidence in hitting the low end but noted it's still early in the ramp-up of the new offshore fields.

Elvira Scotto of RBC Capital Markets requested more detail on the confidence in resolving offshore producer issues, the crude price point that might impact producer activity, the target leverage ratio for distribution growth, and the day rates needed to spur new marine vessel construction.

Answer

CEO Grant Sims expressed confidence in the Q2/Q3 resolution timeline, citing public statements from operators like Murphy who have rigs on location performing workovers. He stated that producer activity is unlikely to be affected by lower prices due to high fixed costs. Sims reiterated a long-term target leverage ratio of around 4x before more meaningful distribution growth and noted that marine day rates would likely need to rise 30-40% to incentivize new builds.

Elvira Scotto of RBC Capital Markets questioned the confidence in avoiding future offshore operational issues and asked when to expect less volatility. She also requested details on the production challenges at the Westvaco soda ash facility and the timeline for remediation efforts.

Answer

CEO Grant Sims characterized the offshore problems as a highly unusual 'calamitous coincident of things,' suggesting a normalized quarterly margin of $90M-$95M before new projects come online. At the Westvaco facility, he cited issues like conveyor belt failures and mine shaft structural problems. Sims emphasized that the company is 'sprinting' to implement process changes and cost reductions by year-end to 'hit the ground running in 2025'.

Elvira Scotto requested additional commentary on new growth projects in the Marcellus, including producer customer feedback and the expected ramp-up of Harmon Creek III. She also asked about MPLX's capital allocation strategy, specifically expectations for leverage and distribution coverage in 2026 and 2027, and how CapEx might evolve given the company's larger EBITDA base and organic growth opportunities.

Answer

President and CEO Maryann Mannen highlighted the Marcellus project's importance for long-term egress, including compression, pipelines, and well connections. EVP of Operations Gregory Floerke detailed Harmon Creek III's role in the 97% utilized Marcellus system, expecting it to ramp up on a normal timeframe. VP and Controller C. Kristopher Hagedorn reiterated the unchanged capital allocation philosophy (maintenance, distribution, growth, buybacks), projecting distribution coverage to remain above 1.3x and leverage below 4.0x through 2027, and noted that CapEx would need to grow over time to support mid-teens returns on a larger EBITDA base.

Elvira Scotto asked about MPLX's progress in pruning less strategic assets through portfolio optimization to free up capital for growth. She also inquired how recent upstream community consolidation affects MPLX's growth outlook for supply-push assets and recontracting strategy. Additionally, she asked for commentary on new Marcellus growth projects, producer customer feedback, and the expected ramp of Harmon Creek III. She also sought clarification on capital allocation, leverage, distribution coverage expectations for 2026-2027, and the future trajectory of organic CapEx.

Answer

Maryann Mannen (President and CEO) stated MPLX continuously evaluates all assets for portfolio alignment, confirming continued divestment of assets where other owners might have different growth views to invest in Permian and Marcellus. She indicated no immediate risk to contract renegotiation from recent upstream consolidation. Regarding Marcellus, she described the project as a long-term, mid-teens return investment crucial for producer egress. Gregory Floerke (EVP of Operations) added that Harmon Creek III, tied into the nearly full Marcellus system (97% utilization), is expected to ramp and fill on a normal timeframe due to strong demand. C. Kristopher Hagedorn (VP and Controller) outlined the capital allocation philosophy, projecting coverage not below 1.3x annually and leverage not exceeding 4.0x for 2026-2027, noting that CapEx would need to grow over time to support the expanding EBITDA base and maintain mid-teens returns.

Elvira Scotto asked about the 6 GW figure for power innovation in the company's presentations, inquiring if it represents the total addressable market or if more is possible, and what the gating factors are for expanding beyond that. She also asked about the ability to continue expanding Transco, what portion of the $14 billion project opportunities represents Transco, and how competitive those projects are, including how much Williams expects to win.

Answer

President and CEO Chad Zamarin stated that there is definitely more market than 6 GW for power innovation, but the figure reflects managing the pace of investment, quality of counterparties and projects, strategic advantage, and disciplined capital allocation. He also emphasized the company's focus on deliverability and staffing. COO Larry Larsen noted that Transco's expandability is 'fairly unlimited,' with new supply creating more options. He indicated that the majority of the $14 billion project backlog is along the Transco Corridor, with some opportunities out west. Mr. Zamarin described Transco as the country's largest natural gas highway system, making it incredibly competitive, and expects Williams to win more than its fair share of opportunities.

Elvira Scotto of RBC Capital Markets, LLC asked for clarification on the "six gigawatts" figure mentioned in Williams' presentations regarding power innovation, inquiring if this represents the total addressable market or if the company could pursue more, and what the gating factors might be for further expansion. She also questioned the ability to continue expanding Transco, what portion of the $14 billion project opportunities represents Transco, and how competitive these projects are, including Williams' reasonable win rate.

Answer

President and CEO Chad Zamarin explained that the six gigawatts figure reflects a manageable level of investment based on balancing pace, counterparty quality, project quality, and strategic advantages across Williams' footprint, while ensuring the team can deliver. COO Larry Larsen stated that Transco's expandability is "fairly unlimited" due to continuous capacity expansion options and new supply points. He noted that the majority of the project backlog is along the Transco Corridor, driven by robust demand in the Southeast and Gulf regions, and that Transco remains "incredibly competitive," allowing Williams to expect to win more than its fair share of opportunities.

Elvira Scotto from RBC Capital Markets asked about the impact of recent US-EU trade discussions on LNG demand and what factors could accelerate the construction timeline for the CP2 project.

Answer

CEO Michael Sabel described current LNG demand as 'fantastic' and the 'best we've seen in ten years,' which supports the company's expansion plans to exceed 100 MTPA around 2030. For CP2 acceleration, he highlighted key advantages: being 98% engineered at FID, extensive pre-FID procurement with two trains already built, and the team's deep experience, with CP2's first trains being the 55th and 56th the company has commissioned.

Elvira Scotto of RBC Capital Markets asked how recent US-EU trade discussions have impacted LNG demand and how Venture Global is positioned to capitalize on it. She also inquired about the key factors that could potentially accelerate the construction timeline for CP2.

Answer

CEO Michael Sabel described demand as "fantastic," the best in a decade, and expressed optimism this will support contracting for future phases, enabling their goal of over 100 MTPA by 2030. To accelerate CP2, he cited being 98% engineered at FID, massive pre-FID procurement (with two trains already built), and the team's extensive experience (CP2's first trains are the 55th and 56th for the company), allowing for rapid on-site assembly once foundations are ready.

Elvira Scotto questioned the potential for cost increases at the CP2 project, particularly around labor, and inquired about the competitive environment for offtake rates and fees.

Answer

CEO Mike Sabel acknowledged the challenging inflationary environment but emphasized Venture Global's strong position due to its factory-based manufacturing model, which reduces on-site labor needs. He stated that while the ability to raise contract prices is currently limited, the market allows for execution at very profitable levels, and any macro cost challenges represent an opportunity to gain a competitive advantage.

Elvira Scotto from RBC Capital Markets asked for details on the expected ramp-up of the North Loving II plant, given the strategic shift away from pre-securing full offload capacity. She also inquired about capital allocation priorities between organic growth and bolt-on acquisitions, particularly for future growth in New Mexico.

Answer

SVP of Commercial, Jonathon VandenBrand, stated that with North Loving I at full capacity and strong underlying contracts, WES expects significant volumes for North Loving II on day one. President and CEO Oscar Brown added that M&A must compete with high-return organic projects, making the company selective. He sees significant organic opportunity in New Mexico but remains open to bolt-ons that meet their strict criteria.

Elvira Scotto of RBC Capital Markets asked for details on where the company is seeing the greatest increase in demand for its compression services, particularly regarding incremental demand from natural gas-producing basins.

Answer

President & CEO Clint Green responded that RFQs (requests for quotes) have notably increased in dry gas basins, while demand in the Permian remains strong. He added that the company is seeing an increase in bid rates for both large station projects and smaller horsepower units in gassier areas, indicating broad-based demand growth.

Elvira Scotto inquired about which oil and gas producing basins are showing the greatest increase in demand for compression services, with a specific interest in incremental demand from natural gas-focused regions.

Answer

President and CEO Clint Green responded that requests for quotes (RFQs) have notably increased in dry gas basins, while demand in the Permian has remained stable. He mentioned that producers are gaining confidence for 2026, with contract awards expected between September and November. Green also highlighted a rise in bid activity for both large compression stations and smaller horsepower units in gassier areas.