Earnings Transcript for DCP - Q1 Fiscal Year 2022

Mike Fullman: Thank you. Good morning, and welcome to the DCP Midstream first quarter 2022 earnings call. Today's call is being webcast, and I encourage those listening on the phone to view the supporting slides, which are available on our website at dcpmidstream.com. Before we begin, I'd like to point out that our discussion today includes forward-looking statements. Actual results may differ due to certain risk factors that affect our business. Please review the second slide in the deck that describes our use of forward-looking statements, and for a complete listing of the risk factors, please refer to the partnership's latest SEC filings. We will also use various non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measure in schedules in the appendix section of the slides. Wouter van Kempen, CEO, and Sean O'Brien, CFO, will be our speakers today. And after their remarks, we'll take your questions. With that, I'll turn the call over to Wouter.

Wouter van Kempen: Thank you, Mike. Good morning everyone. We appreciate you joining us. On today's call we'll look at our Q1 financial performance, highlighting the earnings power of the diversify DCP business model and reviewing the significant progress we've made towards strengthening our balance sheet. Before getting into our quarterly results, I'd like to briefly touch on the macro environment, impacting the energy industry today. On our fourth quarter call, I highlighted the constructive environment projected to benefit DCP, which included producers’ commitment to capital discipline and a strengthening demand for our product and services as the world reopened from COVID-19 restrictions. These factors supported our 2022 outlook for moderate growth, favorable commodity pricing and strong cash generation. Since that goal world events brought a stark reminder of the role that U.S. oil and gas industry plays in meeting global energy demand and providing energy security. This increased focus supports the long-term outlook for U.S. production, which will benefit our customers and DCP like. As we turn to our Q1 results, I'm proud to announce that for adjusted EBITDA, DCF and excess free cash, we reported record quarterly results. For the quarter, we realized adjusted EBITDA of $436 million and DCF of $337 million and our excess free cash, which we define as free cash after paying our distributions and funding our growth capital program was approximately a quarter billion dollars. This performance has enabled us to continue our delevering effort and achieve investment grade balance sheet metrics, closing the quarter at 3.3 times. Well ahead of our internal timeline sets up well for a second half distribution race. This fast start exceeds where we expect it to be at this point and builds great momentum as we continue through the year. And for that reason, coupled with continued favorable fundamentals and pricing outlook, I’m pleased to announce that we expect to significantly exceed our 2022 full year guidance for adjusted EBITDA, DCF and excess free cash. And with that, I'll turn it over to Sean to give us further insight into our financial results.

Sean O'Brien: Thanks, Wouter. And good morning, everyone. On Slide 4, I'll walk you through the key drivers that led to our record first quarter performance with DCF up 54% and adjusted EBITDA of 32% versus last quarter. On our fourth quarter call, I outlined a series of trends we expected as we enter 2022, and I'm pleased to report that the business capitalized during the quarter to deliver very strong results that exceeded our initial expectations. In line with our comments from the last quarter call, the favorable commodity environment proved to be a strong tailwind as our GMP business benefited greatly from commodity pricing and a strengthened hedge book, which resulted in a $45 million improvement quarter-over-quarter. Additionally, our logistics business performed extremely well as we optimized our gas storage business, taking full advantage of the strong natural gas markets we saw in early January. And as expected our cash distributions from our joint ventures were up significantly in Q1 as Q4 distributions were dampened by the timing of ad valorem taxes. Lastly, we saw a normalization of our cost and capital expenditures placing us in line with our 2022 outlook and moving from our traditionally higher weighted Q4 spend. These strong results more than offset the impact that winter weather had on our G&P volumes and asset performance across a couple of our key regions. Despite the slow start on volumes, we are starting to see favor signs in our G&P businesses as exit rates strengthened in the Midcon and south regions and the DJ and Permian recovered from Q1 weather. Our business is performing well and I'm pleased with how we're set up for the rest of the year as the commodity outlook remains very strong. If the current forward curve holds up, we could potentially see $200 million plus of upside to our original full year midpoint guidance, putting us well above the high end of our adjust EBITDA range. So we move to Slide 5, I like to provide a summary of our Q1 financial position. Starting with earnings mix. We are currently sitting at 83% fee and hedge for 2022 providing consistent, stable cash flow and also leaving us significant upside as our portfolio takes advantage of the strong current fundamentals. And while we're comfortable with our current 2022 hedge book levels, we are capitalizing on the current market and adding hedges in 2023 and 2024 at very attractive pricing levels. From an excess free cash flow perspective, we saw greater than 100% increase quarter-over-quarter, which allowed us to continue prioritizing debt reduction. While the commodity environment significantly benefited margins, we experienced higher working capital needs associated with our hedge book. However, we expect that to improve over the remainder of the year. All in, we reduced our absolute debt by roughly a $100 million in Q1 and closed the quarter with leverage at 3.3 times, which has our balance sheet in line with investment grade metrics as we continue to build momentum with the rating agencies. In closing this record quarter is a testament to the strength of the DCP business model. Over the years, we've taken very deliberate actions to prioritize debt reduction, leverage our DCP 2.0 digital transformation to reset our cost structure, diversify our earnings mix by extending our value chain and increasing fee based earnings, all while exercising capital discipline. These deliberate, strategic actions allow DCP to successfully navigate the historic volatility we've seen over the last couple of years, while continuing to drive earnings growth, regardless of the commodity price environment. We have a proven track record of execution and our assets continue to prove their earnings power. Now I'll pass it back to Wouter to discuss our outlook.

Wouter van Kempen: Thanks, Sean. As we move to Slide 6, I'll highlight the success we've had executing our financial strategy that has both strengthened our balance sheet and given us significant financial flexibility as we move forward. Almost two years ago we outlined a plan to create a balance sheet resilient in all commodity cycles, targeting 3.5 times mid-cycle leverage. On this slide, you can see the great progress we've made towards this goal by rapidly reducing our leverage almost a full turn over the course of the past years, going from 4.2 times in Q2 last year to 3.3 times as we exit Q1. With our optimistic outlook for 2022, we plan to continue strengthening our balance sheet through a combination of earnings growth and focused debt reduction. First, from an earnings perspective our diversified and balanced portfolio has performed extremely well, setting us up to deliver significant year-over-year earnings growth in excess of the high end of our financial guidance ranges. And at the same time from a de-leveraging perspective we plan to continue utilizing excess free cash to significantly reduce our absolute debt which should have us on track to and the year well below 3 times leverage. Together our debt reduction focus and strong earnings platform provide us the financial flexibility we've been targeting, which creates significant optionality to address our capital allocation priorities, including

Q - Spiro Dounis: Thanks operator. Good morning guys. I want to start with guidance and the outlook if we can. Obviously you pointed to the $200 million of upside here just, just on commodity, but, I guess we think about all the other variables, volume, costs, maybe optimization and marketing opportunities. I guess I'm curious when we look at that midpoint and just forget about the commodity for a second, do you have any sense yet, so far in the year how those other variables are trending? In other words, could we be above the midpoint just on those factors as well?

Sean O'Brien: Yes. Spiro, this is Sean. Absolutely, and we did the $200 million plus because with there's commodity, obviously there's volatility in the commodity potentially depending on what forward you use, but it's looking very, very strong at the moment. But there's also if you think about the quarter we got off to a really strong start. The GMP outside of the weather we very solid. You look at the L&M business, really strong quarter. Storage had a great quarter. The pipelines had a great quarter. So a couple of things maybe to answer your question directly. We gave that as a guide, it's kind of a low point to be honest. I mean, and I think you're thinking about it, right? If you just get the commodity you're going to be at that level, but we think there's some upside on, we have volumes in there, volumes are directly tied to the original guidance we gave back in February. We think that still holds, but maybe there's a little upside there. Producers are still being very disciplined but we think potentially there could be something there. We shifted into ethane recovery late in Q1, third party ethane recovery. I think that's a potential upside as you think about the rest of the year. So the base business and I think you're right, we don't want people to lose that perform very, very well in Q1. And we think we're set up not only because of the commodity, but for all those factors I mentioned for a really strong second half of the year.

Wouter van Kempen: Yes. Spiro, it's Wonter. Maybe to add a couple of things to what Sean mentioned. If you take commodity for this quarter out, you would still be at a record quarter, unlike we beat EBITDA 12% over consensus, DCF 25% over consensus. But again that's not all commodity driven. The base business is performing really, really well. I think we have a really good outlook. The way we internally look at this is we've done a lot of work over the last five years or so to set the business up for what we believe is a commodity super cycle that is going to come up here over the next number of quarters and years. Think about their DCP transformation, the Digital 2.0 transformation we started that in 2016, that was about taking cost out but right sizing the business. Making sure that we can run through more of our – through our plants in a very capital efficient way. Lean manufacturing, capital discipline being supply long capacity short, and all of that combined with the balance sheet that we have right now really sets us up very, very nice to take care of that commodity upside that we do have in our business. So we like how – how things are set up. We're very excited. I very appreciative of what the DCP team has done and how we continue to set ourselves up, and I really think in this commodity super cycle we can unlock the earnings power of the enterprise.

Spiro Dounis: Got it. It's a helpful color. Thanks guys on that. The second one, just turning to bolt-ons and M&A in general, you guys have sort of mentioned the potential to do bolt-ons I think in the last few quarters. And so curious if there's anything you guys are moving closer to on that front, do you want to hit some leverage targets first? And when we think about the types of assets or the location of those assets, what should we be thinking about there?

Wouter van Kempen: Yes. So there definitely I would say additional activity that you see in the marketplace from assets that are coming to market. I think it's predominantly different driven by PE companies. There's a lot of – lot of PE companies that kind of started in the 2015, 2016, 2017, 2018 time period that obviously couldn't exit during 2020 and 2021. And I think a lot of those are seeing an opportunity to exit now. There's over a dozen kind of assets that are on the block right now, that are in the market space. We're looking at anything and everything. We're going to take a really hard look at things, at the same time we're going to be tremendously disciplined; just doing M&A for the sake of M&A absolutely is not that that something that makes sense. So we will look at it and say, hey, how does it fit with our overall business? How does it fit with our thought of being ultimately well add to water type of type of company? How does it fit with, in the DJ basin, in the Permian those are two kind of cornerstone asset bases obviously, and if we can do something there that makes a lot of sense at a good value. It's something that you want to consider. At the same time you're not going to do M&A for the sake of M&A. So it's hard to say, is something imminent or other stuff I obviously cannot comment on that in any way [indiscernible]. But if there's something that makes a lot of sense, then I think you got to take a look at it.

Spiro Dounis: Great. Helpful as always. Thanks for the time guys.

Sean O'Brien: Thanks Spiro.

Wouter van Kempen: Thank you.

Operator: Our next question comes from Michael Blum with Wells Fargo. Your line is open.

Michael Blum: Thanks. Good morning everyone. Wanted to drill down a little bit more on the volume outlook. So I think as you mentioned, I think Sean you mentioned that you're still seeing capital discipline from the producers yet. You also made a comment earlier, maybe Wouter made that comment about the changes in the global market, and clearly there's a call on U.S. production. So just curious how you see that all shaking out in terms of how production plays out, and maybe if you have any color by basin that would be great too? Thanks.

Sean O'Brien: Yes. And maybe I can start overall, Michael, around what we're seeing we can talk a little bit about what we're obviously talking to producers very frequently in this environment. So going forward I refer back to what I said in February, areas like the Delaware basin and the DJ producers are still – there was growth baked in. If you listen to what they're saying on their calls, they're probably still in line with that type of growth. And as we talk to some producers there is a little bit of a timeframe on the big guys, even if they decided to go and get some additional rigs going, that would take some time that would hit later. So for the remainder of this year, it feels to me that we are still what I'm seeing – we're still in line with that original guidance was 5% to 7% growth in areas like the Delaware and the DJ and I would say that that's still the case as we sit here today. Maybe with some slight additional upside in terms of what some of the global economic factors you're talking about. And a potential upside for us and Wouter highlighted it in his remarks is this Midland basin you're seeing a lot of activity in the Midland basin. We have assets there. One of the interesting things about the Midland basin is that we have some capacity that we can utilize. We've been very good in some of these other areas of getting our capacity at higher levels and utilizing offload. So that could be some upside that actually started pre-some of the global unrest, but you're seeing some of that maybe accelerate. Mid-continent and areas like the Eagle Ford in south, although we're very excited about the exit rates they hung in really well. We're not expecting a ton of growth in those areas, but we're keeping an eye on those two regions, but again still probably slightly better than what we – what I would've given back in February. And maybe the biggest upside that we see is the pipelines with some third-party volume growth; we're seeing the potential for obviously some additional volumes on Sand and Southern Hills probably mostly directed towards Sand. And then as I mentioned a big upside for the company is the fact that we're starting to see more recovery, due to some demand issues and at times the time spread is driving it. So I think the pipelines definitely could outperform this year. They definitely outperformed in Q1. Producers again holding the line, the big guys staying relatively disciplined but we'll keep an eye on it, Michael, I think, we're looking at our product replacement. We're looking at our growth capital, which is modest but if we see any trends obviously we'll let you know in the next call, but so far so good.

Michael Blum: Great. I appreciate all that. That's all I have today.

Sean O'Brien: Thanks.

Operator: Our next question comes from Gabe Moreen with Mizuho. Your line is open.

Gabe Moreen: Hey, good morning guys. If I can ask about, I think it looks like the commitment to paying off the $0.5 billion maturity next year out of excess cash flow. Can you talk about weighing that versus other opportunities for capital to return? And if I'm maybe hearing correctly on this call, it seems like there's a further drive to de-leveraging even maybe relative to before. A, is that related to investment grade, and then I'm also getting to investment grade, and then b, Wouter, I'm just wondering how you're defining mid-cycle at this point. Whether I guess it's still the $70 a barrel [indiscernible] gas for the 3.5 times leverage target?

Wouter van Kempen: Yes. Gabe why don't I started with, I might – yes, I would like to – personally I would like to take that $0.5 billion out next year out of excess free cash flow. And I think it's important that in an environment like this, which is a high cycle environment that you deleverage a company on an absolute basis, and you don't just deleverage a company by growing EBITDA, unlike we've all been through these cycles. Sean and I have been through these cycles for over a decade together now and just getting – just getting your leverage down via growing EBITDA but not reducing absolute debt. I don't think is the right thing in a high cycle environment like you're sitting here today. Black Swans seem to always happen in our industry. The very definition and nature of a Black Swan is that you don't know when it happens and how it happens, but you got to be ready for it. So I think this is an absolute opportune time to make sure that you get that balance sheet absolutely, right. We're not running the company for this quarter and next quarter. We're running this company for next year, for the next five years and for the next decade. And you want to sure to set it up, so therefore for us taking this opportunity over this time to get the balance sheet correct, absolutely important. I think the rating agencies are going to follow suit. Like I think we are investment grade rated metrics already. We have reduced our leverage almost by a full point in just 12 years by full turn in 12 months – in a full turn here. And we're going to be well below [indiscernible] here at the end. So to your question of, well, what, how do you define mid-cycle? I think it's hard to do that. I don't think $8.50 natural gas and $110 crude is mid-cycle. Something that's probably more in the 60s range on crude, $4 range, $3.5, $4 for natural gas, something like that probably feels a little bit better. I think the good thing from a timing point of view; Gabe is we're going to be there really, really quickly. We're going to be at the end of the year. We're going to be well below [indiscernible] probably somewhere in the mid-2s. And that gives you an unbelievable amount of flexibility. I think we're set up well for a distribution increase in the second half. We've been talking about that for the last couple of quarters. I think you have more flexibility around, around growth, around M&A, around potentially doing something with the common or with the preferred. And I think that's where we want to be. We want to be in a place where the balance sheet is rock solid really, really strong, and you have all that flexibility and we're going to be there very, very quickly based upon the quarter that we showed you here today, as well as the outlook for the remainder of the year.

Gabe Moreen: Thanks Wouter. And then maybe as a follow up if I could, can you just, I think Sean mentioned about some of the working capital needs with collateral for the hedges. I don't know where things stand in terms of the marketing. How much working capital using at 8.50 [ph] gas either. So I'm just curious about, talking about where the – how much might be locked up in OCF versus DCF, if you will for the quarter? And then also bigger picture, whether that matters at all for capital to return, and how you're operating the business in a higher price commodity environment?

Sean O'Brien: Yes. Gabe, this is Sean. In terms of, it mattering we keep an eye on it. Obviously there are a lot of benefits and some temporary constraints that happen when you see gas double in price in a short period of time. So I mentioned, we talked about it last year, collateral because we do run a balanced book, and I think that's important. You heard Wouter talk about investment grade. It's not just your metrics, it's the – are you running – how consistent are your cash flows, ours have been massively consistent. What's your diversity of your assets? We have massive diversity across portfolios. And do you have the value chain, different types of revenue streams and we do. But one of the things that we are monitoring, it's not an issue, is the increase in working capital. That's one of the outcrops of the high commodity environment. So, you will see that it was in my written remarks. We did see that uptick. You're right. It's probably predominantly tied to the gas move. We've got plenty of liquidity. I think I mentioned that we termed out our facility, our $1.4 billion facility, by the way, we also tied that to some ESG metrics. We're proud of that. So we have a plenty of liquidity. Couple other things that the team has done pretty interesting, you can hedge multiple ways. Gabe, we use obviously some something like ice which does require collateral, we're using banks more and more. We like that gives business to people that support us. And the collateral requirements are much more diminished when you are using utilizing banks to hedge. But it's very manageable. And I think to be specific, we saw an uptick in Q1 versus last year on the collateral requirements, obviously with commodity running. But we still de levered almost a $100 million in Q1. So obviously we still have plenty of excess free cash flow after we're done dealing with collateral requirements. The last thing I would tell you is when we model the remainder of the year, if you think about when a lot of those hedges were put in place, Gabe, the lower priced hedges that were put on two years ago, three years ago, roll off, a bunch of them roll off in Q2. And then a significant portion rolls off by the end of the year. So as you're putting hedges on, you're putting them on at higher prices, just because the environment is strengthening. So something we're monitoring it's not something that I worry about, it's temporary. It should remedy itself in a big way by the end of the year. And we have plenty of liquidity to address it.

Wouter van Kempen: Yes, I think the other thing is that just to make sure to add to what Sean said, I'm like, we still have a good chunk of open commodity positions. So yes, there is a downside to $8 natural gas as it pertains to your working capital needs in your hedge book. But we're also clearing a tremendous amount of volume in our POPs at $8 natural gas, which is pretty attractive. So, all in all, it's a good problem to have, but we obviously got to watch that working capital need.

Gabe Moreen: Thanks guys. Just, so to be clear, leverage probably would've been 3

Wouter van Kempen: That's a fair statement.

Gabe Moreen: Okay. Got it. Thanks guys.

Wouter van Kempen: Thanks

Operator: [Operator Instructions] Then one, our next question comes from Miko Cusumano with Pickering Energy Partners. Your line is open.

Miko Cusumano: Hey, good morning guys.

Wouter van Kempen: Good morning.

Miko Cusumano: Given the weather impacts on first quarter volumes, can you give us an indication maybe on where 1Q exit was or maybe just what the impacts were by basin? So we can get a sense of where we're looking heading into 2Q?

Sean O'Brien: Yes, so the biggest impacts were tied to the north. I mean, we saw a lot of weather in the DJ basin and again, that was in February. So, the north had recovered pretty significantly, if you're thinking of exits coming out of Q1, we were not quite, probably back where we thought we'd be. And then the Permian saw some weather. And I think the mid-continent had a little bit as well. And it took a little bit longer, I think, to get the Permian back up and running. But as we sit here today, we had given that 5% to 7% increase in growth in those two particular areas we're back on track for that 5% to 7% growth. So we kind of held the line a little bit in Q1 versus growing. So I think it may even been in our written remarks, there was a little bit of a delay whether, pushed back that growth that we were expecting to occur in Q1. And it's now pushed into Q2, but as people had to shut in and take some time to get volumes back on line. Areas like the mid-continent and the Eagle Ford less impactful for the most part. And we saw those kind of hanging in much closer to where we thought when we gave guidance in February. And again, as I mentioned, the exit rates out of those areas, we were pretty pleased with coming out of the south and the Midcontinent. So back on track probably held the line more versus growing, and we expect that growth now to start occurring. And we're seeing some pretty good signs, early into Q2 so far.

Miko Cusumano: Okay, great, Sean, thanks. And then quick follow-up on the sensitivity that you give, is there any variability that I have to consider as commodities run to the levels that we are at today like, we’re not mark-to-market, I get north of $300 million increase versus the $200 plus that all lay out. So I'm just trying to wonder is that a linear sensitivity, or is there any headwinds that I need to consider?

Sean O'Brien: It's generally linear. I mean, it’s a couple things to consider. We give those sensitivities, they are very strong sensitivities. Wouter mentioned him and I been doing this for over a decade. We've been giving those sensitivities for over a decade and if I stress test them back over time, they worked very, very well. Clearly depending on the day you use, you can come up with much more – I want to make sure people understand, we said $200 million plus that's going to depend on what day you're using what forward you're using. I think if I used yesterday's forward, we are significantly above much closer to the numbers that you had. The only thing I will tell you that can change and we've never really modified the sensitivities would be if you had a massive sale, some assets that changed your open position or you had a big acquisition that brought assets in. But aside from that, they have worked really, really well over the years. And I think you're right. I mean, on certain days, it's worth much more than the $200. Again that's why we highlighted $200 plus.

Wouter van Kempen: Yes, I think Miko here's the interesting thing, correct? It's always, hey, who has curved the use and when do you use it? If you look at natural gas alone, last Friday, natural gas was at $750 and yesterday were at $870 for natural gas. That's a $1.20. So think about that radical movement Miko. We haven't really seen moves like that for a long, long time. So it all depends on, hey, when do you take that curve? And whose curve do you use, obviously. But you are absolutely right. If you kind of look at where you are at the spot right now at $825 on natural gas, that $200 plus number that we gave you is significantly higher than that.

Miko Cusumano: Got it. Well, thank you. It's a helpful color. I appreciate it.

Wouter van Kempen: Thank you Miko.

Operator: Our next question comes from James Carreker with U.S. Capital Advisors. Your line is open.

James Carreker.: Hi, thanks for the question, guys. Just wanted to follow-up on the announcement with the DJ offload capacity. I guess how long does that set you guys up for? Are you thinking about in terms of your volume growth, does it delay the time that you would need to think about putting new facilities into service? Any other just thoughts broadly about that announcement?

Wouter van Kempen: Yes. Why, if I take on that one. James, I think what’s nice about this kind of DJ, our systems are chalker block full. So we're in a really great position. Our producer customers are seeing some nice growth in a reasonable rate kind of going forward, but we are surrounded in the DJ Basin with a number of mid streamers that do have open capacity. So this is a really just prime example of where you can use a supply long capacity, short strategy where it still works. Unlike gathering and processing is really a real estate business. So you can be in a certain zip code and things are tight and you can go move 50 miles over and there's open capacity somewhere. This is a good example of where we can do a, not even a low capital. This is a zero capital, a $100 million a day addition that we have where we can make sure that our producer customers can continue to grow where we don't over build and build for the sake of building. And what it gives? It gives us more runway to kind of think about, hey, how is the basin going to develop? We are going to invest a decent number in gathering infrastructure in the DJ Basin to make sure that we can move all of this gas. We are still continuing to work and look over the horizon and say, do we need to build another plant in the DJ Basin? So our engineering teams, our commercial teams are all working together. We don't produce our customers to look at that. That plant is still a bit away. But this gives us tremendous amount of flexibility of zero capital favorable terms. Remember that, we probably have almost a full plant now that we're using and offloading where we didn't have to spend a dollar of capital. The residue gas goes into our pipeline, the NGLs go into our pipeline, and then we make a nice margin over and above the processing fee that we're paying. So it really is a win, win, win. And we're going to continue to look at further out the needs to potentially build a plant. And that would be pretty exciting. And like, that's the business that we're in.

James Carreker.: Yes, appreciate that color. And then maybe just following up a comment you made about potentially expanding GCX. Is that something that you guys would need in order to facilitate your own volumes? And can you also just broadly talk about how you guys are positioned for Permian gas takeaway and what is the contract status for some of your own pipelines out of the Permian?

Wouter van Kempen: Yes. So, we are very well set up for our own equity gas between GCX and our ownership in GCX and the capacity that we took on GCX our Guadalupe pipeline that we have. So we are tremendously well set up and so we like the position that we are in for equity gas. As it pertains to Gulf Coast Express, hey, over the next kind of couple of weeks, we hope to go out, win an open season. There's definitely a lot of interest in the marketplace. I think the good thing about GCX is you don't have to go through a lot of right away. There's not a lot of uncertainty. It's a fairly quick-to-market solution. So we're going to run that open season. And then as part of that open season, we're going to see how much interest there is. So far, it seems like there's a good chunk of interest in the marketplace. And then as a partner, we will have to evaluate an investment opportunity. Do we like to actually own more of that GCX? I would say in general we like the asset, it's a great strategic fit with our asset based it's fee based, it complements the portfolio. So I think GCX set up very well, great that we have a project like GCX and a couple other ones like that, where we can give producers residue takeaway capacity, fairly speedy versus new builds, because that is what the Permian needs. The Permian does need takeaway. And I think we're in a prime position to offer that to our producer customers. And from our equity gas position, we are in a really good place today already, and for the next number of years.

James Carreker.: Got you. And then any update on how, how well contracted Guadalupe is, I guess, over the next couple of years?

Sean O'Brien: Yes, we took it James coming out of Uri last year there was a great opportunity, obviously for people came in for demand, right to contract out. So we did contract took, took advantage of that. We were able to contact or contract out Guadalupe over the next five years. We always take a very long view approach on our contracts there. So it's fairly well contracted up. It's similar to the company in terms of the overview. A lot of, fee based contracts set in place with some upside. I think, as you go out four years it starts to open up even more four years and beyond. And already we're seeing interest in continuing to fill some of that. But over the next few years, we're in great shape, fairly well contracted with some upside if there's some disruptions that we're able to take advantage of.

James Carreker.: Got it. Thanks for the color.

Sean O'Brien: Thanks, James.

Operator: This concludes the question-and-answer session. I'd like to turn the call over to Mike Fullman for any closing remarks.

Mike Fullman: Thank you all for joining us today. If you have any other follow-up questions, please feel free to reach out. Thanks.

Operator: This concludes today's program. You may now disconnect. Everyone, have a great day.