Greetings. Welcome to Energy Transfer Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Tom Long. You may begin.

Thank you, operator. Good afternoon, everyone, and welcome to the Energy Transfer fourth quarter 2020 earnings call, and thank you for joining us today. 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 our 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 21-E of the Securities Exchange Act of 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 detail in our Annual Report or Form 10-K for the year-ended December 31, 2020, which we expect to be filed in the next several days. I’ll also refer to adjusted EBITDA, distributable cash flow or DCF, and distribution coverage ratio, all of which are non-GAAP financial measures. You’ll find a reconciliation of our non-GAAP measures on our website. I'll start with our recent announcement. We were excited to announce that we have entered into a definitive merger agreement to acquire Enable Midstream Partners in a credit accretive all-equity transaction valued at $7.2 billion. The transaction is expected to be immediately accretive to free cash flow post distributions, have a positive impact on our credit metrics and add significant fee-based cash flows from fixed fee contracts. Under the terms of the merger agreement, Enable unitholders will receive 0.8595 ET common units for each Enable unit and exchange ratio representing an at-the-market transaction based on the 10-day VWAP of ET and Enable common units on February 12, 2021. In addition, each outstanding Enable’s Series A preferred unit will be exchanged for 0.0265 Series G…

At this time, we will be conducting a question-and-answer session. [Operator Instructions] One moment please, while we pole for questions. Our first question is from Jeremy Tonet with JPMorgan. Please proceed with your question.

Hi, good afternoon.

Good afternoon.

I hope that everyone is well with weather and everything happening in Texas. Just wanted to get kind of a broader portfolio question out there with regards to – the higher commodity prices would seem to potentially induce greater producer activity. And just wondering, how your producer conversations might have been evolving recently on that front with higher commodity prices there? And then just wondering as well, the recent weather, if that – if you see any kind of lingering impacts in the quarter just if you could walk through how you think that could be an offset there?

You bet, I can take that, Tom. Certainly, the last four or five days has hopefully opened up the reality of the necessity of natural gas for electric generation for our country and especially here in Texas and Oklahoma and surrounding states. Yes, commodity prices had continued - have grown over the last two or three months, crude oil has continued to increase. We've got a higher demand, a lot of the vaccines everything over the country. But what this really does, what's happened over the last four or five days, I mean, if, for example, if you ask Oklahoma, would you guys wish I had more gas, because they can't run – they can’t generate enough electricity to - similar to Texas to provide the necessary electricity to run homes and for the LDCs to provide gas to their residential. So it's a tough situation. But we already had seen the corner kind of turning with some of our producers. Some of them have said things publicly, some of them haven't said it publicly how they're going to increase kind of their spending in light of crude oil increases. And no doubt what's transpired over the last few days, we're going to see an increase in gas prices. We've been at kind of historical levels for the last number of years above the five-year average and storage, for example. And we don't know where it's going to end up when it does settles after all this, but it'll be hard to believe it's not going to be at a lower level, it's been a long time. So heaven forbid, if another cold front hits in a week or two because there’s - storage is going to be running at very low level. So the value of oil and gas is going to do nothing but increase, we believe, we do believe this is going to help producers to go out and bring their ducks on and start bringing more rigs in like they've kind of been doing over the last four or five months. So as I start out saying, this has really opened my eyes, I think of the country of the necessity of oil and gas and especially natural gas in this instance to provide fuel for our electric generation facilities throughout the country really.

Certainly highlights the value of hydrocarbons there, as you said. Maybe shifting gears a little bit. In the press release this morning, I think, ET had mentioned the $100 million of annual run rate cost and efficiency synergies. And talked about, I guess, connecting now the Anadarko footprint to the Gulf Coast – your Gulf Coast footprint there. I was just wondering if you could expand a lot more on the map. The synergies you see there on the map, it looks like it lines up nicely, but just hoping for some more color would be helpful? Thanks.

So – yes.

Yes, Jerry. Go ahead, Mackie. Go ahead.

Well, I was going to let you kind of talk about the $100 million of synergies. But if you're talking about just the commercial synergies, gosh, we haven't really even began to evaluate and fully appreciate what we're going to recognize from this acquisition. It's an absolutely incredible acquisition at a very unique time when I just said the necessity for natural gas is going to nothing but grow not only in this country, but around the world. And these assets are the most significant assets in the State of Oklahoma and throughout the Ark-La-Tex, they fit very well with our assets. And everybody knows there's large pipeline that brings rich gas down into the fourth basin that delivers into our processing plants and then feeds into our downstream pipelines. There's a lot of opportunities over in Western Oklahoma and Texas, Panhandle where we can create significant efficiency between these assets. There's large intrastate pipelines that feed across the State and into Bennington that connect into our interstate pipelines. And then we have significant synergies from Carthage and throughout Louisiana. And we have some new opportunities with MRT and in new deliveries to the north. So, as I mentioned, we really haven't totally quantified from a commercial standpoint. What all is going to happen with this and all the benefits that we're going to see. But - and there's a lot from commercial, I mean, I'm sorry from competitive standpoint we won't really talk about, but we certainly will also have the ability to move natural gas liquids from the tailgate a lot of these Enable plants into our NGL system to feed down to Mont Belvieu to keep our fracs for many years to come.

Exciting, exciting news for us.

Great. Thanks for that and wishing the best to all of you and your families.

You too.

And our next question is from Shneur Gershuni with UBS. Please proceed with your question.

Hi. Good afternoon, everyone. Glad to see you're all warm and well. Maybe just to clarify your response to Jeremy's question before I jump into my two. So the $100 million in synergies is cost-related and, Mackie, you're seeing incremental commercial revenue-type opportunities that you haven't actually put on paper yet? Is that the correct answer?

That's correct.

Okay, perfect. Awesome. Just starting off with, with guidance here. I was wondering if I'm not sure if it's an accurate term question here. But if you can talk around – talk about the sensitivities around achieving potentially the high end of your guidance, billion dollars? Is that really just driven based on commodity prices in spreads? Or is there some flex in your guidance volumetrically or elsewhere that would allow you to achieve the high end of your guidance?

Well, Tom, I can start from a commercial perspective and I've kind of alluded to that earlier. We did see volumes kind of struggle, especially in Eagle Ford and few other areas, as we went through the fourth quarter of 2020. However, we started to kind of see the light at the end of the tunnel, and we started to see rigs start moving in throughout last year. And we as we've entered into 2021, there has been some public statements made, where producers have announced they're going to increase their capital budget, not a lot, but some. And then we've had conversations with a bunch of producers that are now anticipating spending more than what they've even made public. Of course, we can't share that. But anyway, there's a lot of optimism because of what's happening to the markets and the demand growing and the value of oil and gas increasing that we are very confident that drilling is going to pick up. In addition to that, we are excited about our NGL projects. We have a lot of that in our budget. However, we are going to be able to squeeze out even more volume out of both our Marcus Hook facility and out of Nederland. So we're very optimistic on being able to really capitalize and maximize our ability to export around the world out of those significant terminals. So we really see some upside there. And then we've also, of course, seen some upside just over the last four or five days, we've seen some, when you the one thing that everybody's recognizing I've already said, we all know on this call how important fossil fuels are for this country in this world. But what's really important to is to be able to get the fossil…

Thank you for the thorough answer there. And maybe a follow up question with respect to the Enable transaction. I recognize that most of the rating agencies today you have basically opined kind of unchanged as to where it stands. You noted in your prepared remarks and in the slide deck that it's supposed to be leveraged accretive. Just wondering on the margin if you can comment about what was the feedback from the agencies, does the larger sized Energy Transfer, improve your standing with the agencies? Does the dilution of the potential DAPL outcome help you at all the fact that you're going to have a higher regulated percentage of earnings? Just kind of curious on how the transaction was perceived? Even if we can see specifically a change announced today, does it move the chains up the field at all? I'm just wondering if you can speculate about this.

Yes, we did have very good conversations with all three of them, I think you touched upon the fact that all three have put out little reports on this. And I think it's fair to say that it was slightly positive, I think the analogy you used, kind of moving the change down the field a little bit. Clearly, all the stuff that Mackie just covered of how excited we are about the additional opportunities we're looking at, we were very conservative and how we really looked at this. We think that as we get in and bring more of the commercial teams, over the fence, operation teams et cetera. And move further into this, that we're going to be able to get back with the agencies of, possibly even improved type numbers. But right now, we feel like the $100 million was right down the middle of the fairway, likewise we are looking for more but the agencies it was, I think, very good discussions with all three.

Perfect. Thank you very much. And definitely stay safe and stay warm in this weather.

Thank you.

You too.

Our next question is from Christine Cho with Barclays. Please proceed with your question.

Thank you. Good evening. Maybe if I could start-off with the Enable deal. Would you say that the deal has more commercial synergies on the gas side or the NGL side from a financial perspective? And you noted fractionation and exports, in the press release is an opportunity. But could there also be NGL takeaway? And would there be like, what would be the timing? Would any of that be immediate or do you have to wait for third-party contracts?

This is Mackie again. I'll start with that, Tom. Well, there is certainly some confidentiality, issues with statements we can make around contracts, of course, and all that kind of stuff. But I'll start with gas, there is significant gas opportunities there, as we've already talked about, just with how their pipelines feed into our pipelines, both upstream and downstream, where we can actually utilize plants up in the fourth base and more efficiently in the pipelines more efficiently. So a lot of upside around the natural gas side and the gas gathering side. As far as the NGL side. More of the opportunities that we see or down the road a little bit as contracts roll-off. But as they do, we'll be able to connect the dots so to speak to where we can move those barrels down into our significant Lone Star system where we have a 30 inch that runs out of fourth basin area all the way down Mont Belvieu. So we'll be able to bring significant volumes, not only from in the Enable cryos, but also from other cryos. And so we really see the NGL side more of a big benefit several years down the road, and then extending for many years after that. Whereas the natural gas to gas gathering the processing and the natural gas side is more immediate benefits and synergies that we see.

Okay, that's great. And then actually, if I can move on to DAPL, does that status conference hearing need to happen in order for the District Court to make a decision? I wasn't sure if the two were independent of each other or not. And how does it work at the Army Corps? If they need to tell the court what their action is going to be? Who necessarily decides it within the Army Corps? Is it the chief or is there someone else or is there some sort of committee? Any insight into that process would be helpful?

Tom Mason?

Yes, Tom Mason, General Counsel. With respect to your first question, it's unclear whether the two are dependent on each other. The judge could rule on the injunction motion without having the status conference, I think he probably wants to wait until that conference or after for various reasons. And so it just little bit hard to predict. But I would say that there's more likely he would wait until after that status conference, even, some period after that. So he may not rule for a long time we still know. On the second question, it's clear as to what who's making the decision. So the Army Corps, I think we they've been very professional throughout the last five years of our dealings with them. And they, if left alone from political interference, I think we will continue to make good decisions as they proceed.

Okay, thank you.

Our next question is from Michael Blum from Wells Fargo. Please proceed with your question.

Thanks. Good evening everyone. Hope everyone's doing well. Maybe just to stay on, on Dakota Access and the Army Corps. Do you know if the Army Corps under the new administration is going to incorporate climate change analysis into the EIS? And if so, is that factored into your timeline that you provide it for when you think EIS gets completed?

This time Tom Mason again. We really don't know and obviously, the Biden administration is put out a deck of orders to talk about agencies evaluating climate change in the number of decision making. I don't know this will affect the EIS process, at all. It's too early to tell on that.

Okay, and then just have a quick question on the Enable transaction. Are you contemplating possibly rationalizing any processing capacity in the Mid-continent? It seems like there's a lot of excess capacity there. And then sort of related to that perhaps, with this transaction, do you see anything as non-core that you might look to monetize some assets?

Michael, this is Tom, I'll run with this. And Mackie, if you want to add something. As we went through this process, we saw these assets as actually is very complimentary. So I can say that we have that mapping identified as far as divestitures, whether it be for, or even identified as non-core as we say here right now.

Great, thank you.

Thank you.

Our next question is from Jean Ann Salisbury with Bernstein, please, proceed with your question.

Okay. I'm glad that you guys all have power. One on the Enable deal, as the bucking crew gathering system already moving down DAPL or would those be new volumes for DAPL?

I don't know, I'm not 100% sure. All of that's moving us. I think the vast majority of it is, but I'm not sure if 100% of it is.

Okay, that makes sense. And then just wanted to dig a little bit more about some of the major assumptions and the 2021 guide. So I guess most importantly, are there any kind of numbers that you could give around what you're expecting for U.S. crude production growth or Permian crude production growth year-on-year to just kind of level set versus other people's guidance?

And I'm sorry, the question is, what's our projections for Permian crude growth?

Yes or U.S. growth from 2020 to 2021 that drives your guidance?

Yes, we're pretty conservative. When you look at kind of across the board on that right now, for example, the Permian crudes around for 4.1 million-ish, maybe a little more than that. We don't expect it to get more than about 4.4 million barrels a day by the end of the year. But there's a lot of good things happening. For example, if you look at just a year ago, if you look at the floating crude around the world, there was about 90 million barrels. In July of last year, there was 230 million barrels, and now we're back down to about 90 million barrels. As we keep saying earlier on this call, we're very optimistic about the turnaround in the market growth. So we do think that pricing will increase production. As far as total U.S. growth, I don't know I don't really have an estimate on that. Other than probably a summer type growth where it might be a 2% or 3% type number.

Okay, that makes sense. And then just a couple other assumptions in the 2021 guide. Is DAPL expansion in there?

Yes, DAPL is included. Absolutely.

And then last, DAPL expansion?

Yes.

Okay, great. And then last one is on have you received all of the Bakken crude MBC and flex payments from kind of earlier this year, or did some of those go into 2021 guidance?

No, none of those are rolled over. Yes, we will get on all those in 2020.

Okay, perfect. Thank you so much.

Next question is from Michael Lapides with Goldman Sachs. Please proceed with your question.

Hi, guys, actually, a couple of questions. First of all, on crude spreads are obviously de-minimis right now in a lot of different places. But just curious in the other businesses, especially given what's happening gas over the last four or five days, where do you see potential dramatic changes relative to what you realized in 2020, in terms of optimization revenues, whether up or down?

Well, it’s Mackie again. As I mentioned earlier, because of the nature of our assets, and how we operate them and where they're located, especially our storage facilities, we feel very fortunate to be able to have gas in storage at a time when it's needed in a big way and to be able to come out at whatever the market prices are at that time. And unfortunately, from that standpoint, prices are really strong, they're kind of at historical levels, especially as you get up into Oklahoma and we've heard prices, over $1,200 a MCF up there. But anyway, in Texas alone, our assets are doing exceptionally well. At tough time we hate what's going on around the country in this state. But we're doing everything we possibly can to pull gas out of storage and deliver it to the power plants into the LDCs. And also to find gas, Waha or Carthage bring as much as we can in off Tiger and other pipelines to feed our need here in the state. Because we're really short of gas because so much gas is shut in from the producers, especially out in West Texas. From a financial standpoint, we're doing pretty well, because of the nature of our assets, where they sit and how we're able to perform in this type of situation.

Got it. And then you all have talked in the -- and you put out the release last week about kind of the increased attention on kind of alternative energy of renewable energy related. And I can understand pretty quickly what your competitive advantage or how you would utilize existing assets for things like renewable diesel or renewable natural gas? What is your competitive advantage to do more traditional renewables like wind or solar? Like, what do you bring in that table necessarily that other potential developers of that can't bring themselves?

Yes. So on the first part of your question, I guess the point you're making is with our inter and interstate systems, we are able to move around renewables because yes, okay, we have LDCs that are asking for today on interstates, but not a lot. I mean, a wind, we're struggling with wind quite honestly, it's hard for us to figure out how to make that work. And we're not going to do anything that doesn't make good economic sense for unitholders. Solar is different if we can go out and acquire solar in areas where there's a lot of sunshine, like out in West Texas and, and also in other parts of Texas, we'll certainly do that. Because when we were doing it, we're a large consumer of electricity throughout the country, but especially in Texas and when you can build in a solar priced, very inexpensive supply of electricity. It just makes sense. So that's really our fit. I don't know if we'll ever get involved as far as investing in a solar project because the returns are so much, there's so much less than what we can achieve with other opportunities we have. But we certainly will support solar projects that will provide us with 10, 15 years of what we believe to be very inexpensive power.

Got it. Thank you guys. Much appreciated.

Our next question is from Keith Stanley with Wolfe Research. Please proceed with your question.

Hi, thanks. First, just wanted to confirm there's no lockup period or anything on the unit CenterPoint and OGE will receive in the transaction.

That is correct, Keith.

Okay, great. And the 2021 guidance so you reference the lower crude spreads and contract expirations as a driver for the year. Do you expect that to continue to be a driver in 2022 and beyond or are we most of the way there now on Permian crude margins kind of resetting to market conditions.

Yes, I think where the spreads have kind of fallen to now it's about as low as they can go. As we've mentioned on prior calls and conversations, so we're doing a lot to figure out a way to make as much of the value stream as we can all the way from the wellheads out in New Mexico and West Texas, all the way to the refineries up and in the main continent, by utilizing our permit express assets and our Mid Valley assets. So, we are believing that we're kind of at the bottom as far as the spreads go, but we also are continue to work with others to evaluate things that we could possibly do together. And we're looking at converting some of our assets, our crude assets to other uses, that would be more profitable and more efficient for our company. But yes, we've kind of seen it, get about as bad as they can get, and you're down to not much spread across the state, but we're doing everything we can to take advantage of that. In fact, we've kind of got a new team, that's, that's heading that up. It's running our crew group and very pleased on just the early results, just this year, where we've increased our cross-haul, fairly significantly from where we kind of ended up in the fourth quarter of next year. There's a lot of crude companies out there battling for the crude that is available out in the Permian Basin, we're probably a 1 million, 1.5 million barrels less out there than where we thought we'd be a year and a half ago. And there's more capacity built, of course, significantly more than it was a year and a half ago. So we're all scrambling for less barrels, but there's no company that can take the barrel, so many different places, like we can. So we feel like we've got to get advantage and we're going to take advantage of that.

Thanks for that color. If I could sneak in one other quick one and appreciate the commentary on the company doing pretty well through this unfortunate event in Texas. On the electricity side, just a curious question, do you typically buy power in Texas at spot market rates or are you more on fixed rate type contracts for your electricity needs?

With a variety, in fact, fortunately, we have quite a bit of our megawatts hedged, which has been extremely fortunate today, during the last four or five days, and then we have a variety of different ways we do buy a lot on a day-to-day basis. And we do have some packages bought for different terms. So it's kind of a myriad of different ways we buy it.

Thank you.

And our next question is from Pearce Hammond with Simmons Energy. Please proceed with your question.

Yes, good afternoon, and thanks for taking my question. Investor sentiment, specifically EMT investors. It's kind of moved away from the scoop stack play in Oklahoma and toward the Permian over the past few years. And so as it pertains to the Enable acquisition, what gets you comfortable with the scoop stack assets and continued producer activity on those assets over the longer term or essentially, what do you think investors not fully understand or appreciate about the Enable assets? Thank you.

Tom you want to take that.

Yes. Mackie. I think the bottom line, the way we look at it is the reserves are there. So if we see something like what happened during the pandemic in the whole country's hit, certainly that will flow down a lot quicker than, say the Permian Basin. But as we see commodity prices recover, and especially the levels that we have now, where we see natural gas prices, not going just higher the rest of this year because of what's happened in the calendar reality of the demand for natural gas, but there's going to be growing demand for natural gas around the world. I mean, it's the cleanest, best way to fuel enormous amounts of electricity. And it's just going to be something that we are very optimistic, and our big believers is going to be a big growth area for the world, including the U.S. of course, and the reserves are there. I mean, the reserves are in this scoop and in the stack, they're in Oklahoma base and they're over by the Panhandle and as long as commodity prices stay up, and at reasonable levels, we think that's an area where rig will move backhanding and grow production for many years to come. It doesn't take a lot of rigs, I'm sure Enable has said this and we'll say, it doesn't take a lot of rigs on their system to provide volume growth for their system. So if we get back any kind of type of normality of where we were a year and a half ago, we're going to see tremendous growth through those assets. So, we're very excited about owning these in the future because of the need for natural gas and oil, in our opinion for many years to come.

Well, thank you Mackie. Appreciate it.

You bet.

Operator, the last of our questions. Well, it looks like maybe we lost the operator. I'll go ahead for those that are still on and we're still connected. Thank all of you for your support. We thank you for joining us today. And we clearly look forward to talking to you about a lot of the exciting stuff that we have happening and of course that will continue to file our S4 just as soon as possible and have more information to be able to share with you. Thanks, everyone. Stay safe, stay warm.