Q4 2019 Earnings Call

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Ladies and gentlemen, please continue to hold your conference call will begin momentarily.

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Ladies and gentlemen, thank you for standing by and welcome to the Q4 2019 Enterprise products Partners LP earnings Conference call.

At this time all participants on the listen only mode. After the speaker presentation. There will be a question and answer session. The ask a question during the session you would need to press star one on your telephone.

Please be advised that today's conference is being recorded.

If you require any further assistance please press star zero I.

I'd now like to hand, the conference over to you a speaker today, Randy Burkhalter, Vice President of Investor Relations. Thank you. Please go ahead Sir.

Okay. Thank you Jim Good morning, everyone and welcome to the a enterprise products Partners conference call to discuss fourth quarter 2019, Arnie I.

Our speakers today will be GMT, and Randy Fowler, Chief executive officers or by Enterprises General partner.

Other members of our senior management team are also in attendance for the call today.

During this call we will make forward looking statements within the meaning of section 21. He of the Securities Exchange Act of 1934 based on the believes that the company as well as assumptions made by and information currently available to enterprises management team.

Although management believes that the expectations reflected in such forward looking statements are reasonable they can give no assurance that such expectations will prove to be correct.

Please refer to our latest filings with the FCC for a list of factors that may cause actual results to differ materially from doesn't the forward looking statements made during this call and so that I'll turn it over to Jim. Thank you Randy.

Frankie Valli into four seasons back in the day had a song Oh, what at night to paraphrase were 2019 is concerned Oh, what a year and.

Enterprise reported record net income.

For the full year 2019 up $4.6 billion or to do dollars nine cents a unit, that's a 10% increase from 2008.

DCF increased 11% a record 6.6 billion and provided 1.7 times coverage.

We retain $2.7 billion a DCF.

24% increase compared to 2018.

The record cash flow, we generated in 2019 allowed us to increase the distribution paid our partners for the 21st consecutive year.

Oh, so funding the equity portion of our growth capital investments.

We get again completed 2019 with a lot of financial flexibility in a very strong balance sheet.

In addition to the financial highlights we ended the decade would record performance in 2019 with all of our business segments reporting increased results, including 28 operating and financial records.

We said 13 operational records, including almost 2 million barrels per day of Marine terminal export volumes 6.7 million barrels a day of liquid transportation volumes and 10.4 million barrels of oil equivalents per day total system transportation volumes.

During 2019 enterprise completed construction and began service on approximately $5.4 billion of capital projects, including two and a half billion that were completed in the fourth quarter.

In addition, we have another $7.7 billion or projects underway.

Substantially all of 2019 <unk> major projects were completed on time and on budget and.

In addition, weird this in discussions with potential JV partners in projects that beat our downstream value chain.

Like to give a shout out to operations pork successfully commissioning.

<unk> major new assets from late September to be into the fourth quarter.

LPG export expansion Ibdh meant on gas processing plant.

Panola Bulldog gas processing plant in phase one of our ethylene export terminal.

Frankly, we should have built the panola Bulldog point out five years ago. My bad. We finally did that build it it's flow and its hewlett, beating our panola pipeline and our Mont Belvieu complex. What we didn't have five years ago was is complete and and large gathering system.

The minutes, we have today.

Supporting that project at a that gas plant is a gathering system that goes from northwest, Louisiana, The deep East Texas.

Our ethylene export project was not a project I embraced in the beginning.

Bringing in navigator is a joint venture partner got me over the hump, but I think Chris, Indiana and his team along with the navigator team went on a mission to prove me wrong.

They are on the verge of X executing that contract that will result in a sign being hung on that terminal that says sold out.

Men town is our latest addition to our Permian processing system in tone is fully contracted with one of the largest producers in the Delaware basin.

A few words about gathering and processing there essentially two types of gathering and processing contracts that we enter into it.

The first is demand they or said another way take or pay contracts, where a producer commits to a volume at a fee that is paid whether the volume is there is delivered or not.

The second type is an acreage dedication and that's where producer dedicates everything he produces permitted to find acreage up to a set.

Maximum daily quantity and that are empty Q.

And that that's the that's the amount that we have to provide services car.

If the producer does not meet that maximum daily quantity threshold than we have the right to reduce the m. DQ weight and and sell that capacity to on another producer.

In many cases, even though the MD Q is reduced the acreage dedication remains the same way.

We've had some underperformance at our Orla complex and consequently have reduced the M.M.D. Q of at least one producer.

Natalie Gaiden in a little more team have success, Billy backfill that capacity with a long term 300 million a day take or pay contract with a large investment grade producer.

These type of Clawback options allow us to.

To maximize the use of our capacity and in this case that for cage capital as much as two years.

Our ibdh startup in December .

Started up in December as result, our beef plant and our high purity isobutylene plants are running at capacity and ARINC anchor customers, taking their contracted volume.

Because there's a ramp for ankle anchor customer we have spot volumes itself.

I was somewhat concerned about placing those volumes, but again, Chris and his team prove me wrong as there's been a healthy appetite from the refining industry.

Our LPG export expansion was up and running throughout the third quarter, we've contracted that terminal to a targeted level and three efficient scheduling and been able to increase our dr. utilization to share in a wider spread internationally.

The first half of next year, we expect to have for crude oil pipelines out of the Permian.

One of these pipelines M E three.

It's a 36 inch pipeline. We are building that then upon completion of construction will be jointly owned by M. Two eatery, and we and went to Webster.

We will own and as an undivided joint interest 29% of willing to Webster.

The project should be complete tire Echo terminal by August and to Webster by the end of the year.

I don't expect more than two to 300000 barrels a day to blow until the Webster leg is complete.

You think about nm those four pipelines would just our contracted volumes and a zero terminal value.

They will deliver a mid teen hour or to enterprise. Our upsides are the additional fees, we collect for storage and for exports and any marketing activities.

PDH two is underway the construction, we have a high quality petrochemical customer as they anchor our in an hour in negotiations for the remaining capacity and potentially a joint venture partner.

We were one of the largest producers of PGP in the world and it's a world that has shortened PD PGP. Once PDH. Two is up we will produce more than 11 billion pounds a year appropriately.

So.

2019 was a record year now when she didn't know that enterprise, we celebrated for about an hour and a half but for turning our attention to 2020.

New your opposes challenge new challenges and headwinds.

Those headwinds are primarily spreads from white hot or the Gulf coast and natural gas.

Good continent to Mount Bellevue, and liquids and Midland to Houston in crude while there were spreads they're not as robust as they were last year.

That said, we expect spreads to the water to grow and LPG and crude oil and petrochemicals and we have assets that we put into service in 2019 that we'll have a full year earnings.

Well, our folks have forecast that the spreads we had in 2019 on the assets that produced those spreads.

It would be down $500 million I look at our footprint and I see other opportunities backwardation contango cross product as I said to the water on all hydrocarbons, we have our GP to PGP, we have normal butane to ice would be a data we have product upgrades and the list goes on.

I've been here, a long time and when I look at our system I see a system that in my 20 years has always delivered above our contracted piece. It's never the same asset. It is the same integrated system. So I expect 2020 to be a strong year, it's hard to set new records.

Every year, but with our people and our footprint I'd be real careful betting against us and now I'm going to look at a Chris weight and let him shutter as I've got unscripted comments to make.

We issued a press release. This morning that we were going to co CEO structure with Randy sharing this title with me frankly, Oh, we're doing as formalizing, how we've always run the company Randy and I will be a route will remain a part of the office of the chairman with Rand in Hank Bachmann and we will also stay owned.

The board.

Andy and I don't compete with each other we complement each other.

Trulia team and we've been together for over 20 years. So we are friends and we respect what each other brings to the table.

The other announcements, we made today or senior management team that is accomplished with complementary skills.

They truly work as a team.

I don't see Chris our Chief commercial officer has one of the best value mind I've ever seen any so damn tali has a presence.

Graham Bank couldn't our Chief operating officer is on top of operations and engineering, such that we sleep well at night.

Daniel bumps has some commercial time he ran our regulated business.

Makes him one of the more well rounded people we've ever had to run our accounting group and other responsibilities taking.

Also had initiative, even though it wasn't required to get as SCPA once he took that job.

Krish nearly has a style that is disarming and a work ethic second to none.

Bob Sanders, well, Bob is 40 years with us and he's our go to guys. He knows where where every piece of steel is not mentioned was Tony Shivani as bill. So much credibility that everyone wants is groups forecast and we have penny we have John Jordan.

Let me tell you what this is not.

Enterprise has never been a job for me, it's a calling.

This is not a transition to jim's quite and retirement as far as I'm concerned I'm not going anywhere and as good as a deal and as excited as I am about our future I'm really not convinced that my runway in as long as randy's.

That is it may there's no one I'd rather share. This title we had been a print Randy Ballard and with that I'll turn it over to our co CEO Randy Fowler.

Thank you Jim and good morning, everyone.

Let me start with some of the income statement items for the fourth quarter net income attributable to limited partners for the fourth quarter 2019 was $1.1 billion or 50 cents per unit on a fully diluted basis.

Net income for the fourth quarter.

2019 included a non cash impairment and related charges of approximately $82 million. This was primarily related to our investment in the centennial liquids pipeline.

We are Cohen with marathon the fourth quarter 2019 also included noncash mark to market losses of 25 million together. These non cash charges of were approximately.

Bob sits on a fully diluted unit net income for 2018 included noncash impairment in related charges of approximately 29 million in a noncash mark to market gain of 237 million or a combined 10 cents per per fully diluted unit. Excluding these non cash items Gpus.

For the fourth quarter of 2019 increased.

13% compared to the same period in 2018.

Moving on to cash flows cash flows from operations was $1.7 billion for the fourth quarter 2019 versus 1.9 billion for the fourth quarter 2018, excluding changes in working capital accounts cash flow from operations for the fourth quarter of 2019.

He was 11% higher than the fourth quarter 2018.

Free cash flow, which we defined is.

I would use of the Bloomberg definition.

Cash flow from operations minus investing activities and then we add back joint venture contributions or contributions from.

Joint venture partners was 2.5 billion for the full year, 2019, which was 24% higher band free cash flow for 2018.

We define payout ratio as the sum of cash dividends distributions and buybacks as a percent of cash flow from operations.

Our payout ratio was approximately 58% for the fourth quarter of 2019 and 59% for the full year for the full year 2019 for context on how we compare to the broader equity markets I refer to page five of the supplemental slides that we.

Posted that based on the information available to us for the nine months of 2019.

Enterprises, 59% payout ratio is the fourth highest compared to the median payout ratios for the S&P 500 intention of its industry sectors, we exclude its financial sector due to its volatility in outliers.

In terms of distributions and dividends only enterprise ranked in the top fiftyth percentile of all S&P, 504% of cash flow returned to equity investors in terms of total payout ratio enterprise ranked in the 41st percentile of all.

S&P 500 companies.

Our our total capital investments for the fourth quarter of 2019 were $1.2 billion, including 1.1 billion of growth capital investments and 93 million of sustaining capital expenditures.

Total investments for 2019 were $4.7 billion, which includes 4.3 billion of growth capital investments, which is reduced to 3.7 billion. After subtracting contributions from our JV partners sustaining capex for 2019.

Was 325 million.

For 2020, we currently expect our growth capital expenditures will be in the range of $3 billion to $4 billion and sustaining capital expenditures will be approximately $400 million for 2021. We currently expect growth capital expenditures will be in the range of $2 billion to $3 billion.

One of our most important goals it continues to be capital discipline.

And I'll also add the lower Capex in 2021 that we currently see would lead to higher free cash flow, which would provide the.

Provide the potential for us to consider larger buybacks.

In terms of capitalization, our consolidated liquidity was $4.9 billion at December 31, 2019, which included available borrowing capacity under our credit facilities and unrestricted cash of about $300 million.

Adjusted EBITDA for the trailing 12 months ended December 31, 2019 was $8.1 billion and our consolidated leverage was 3.25 times after adjusting.

For the partial equity credit that we received for the hybrid debt securities by the rating agencies and also reduced by unrestricted cash if we normalize adjusted EBITDA for $500 million of spread opportunities in 2019, we believe will wider than normal we estimate that are.

Our leverage ratio would have been 3.5 times for 2019, which is at the midpoint of our range for our targeted leverage.

On January six we priced an aggregate $3 billion of senior unsecured notes.

Comprised of $1 billion of 10 year notes at a 2.8% coupon.

A billion dollars of 31 year notes at 3.7% and $1 billion, a 40 year notes at 3.95%, we'd like to say thank you for to the strong support from our fixed income investors.

After adjusting for the proceeds from our 3 billion dollar notes offering and the maturity of $500 million of five in a quarter percent notes tomorrow, our total debt principal outstanding would be approximately $30 billion.

Assuming the first call date of the hybrids. The average maturity of our debt portfolio was 16.3 years, assuming the final maturity date of the hybrids. The average life of our debt portfolio is 20.4 years.

Our effective average cost of debt is 4.5%.

When looking at our capital needs for 2020, we have 1.5 billion of total debt maturing, including the 500 million that matures tomorrow.

That leaves the remaining 1.5 billion a proceeds from the debt offering available to fund approximately 50% of our $3 billion to $4 billion of growth capital expenditures for 2020.

Moving on to distribution payments and the distribution reinvestment plan.

Our distribution declared with respect to the fourth quarter of 2019.

Is 44, and a half cents per unit and we will be paid February 12.

This distribution represents a 2.3% increase when compared to the same quarter of 2018.

As mentioned in the press release. This morning based on current expectations, we plan to recommend to our board.

To continue our quarter of the.

Penny per unit per quarter increase.

To our quarterly distribution rate for 2020. This would result in aggregate distributions declared with respect to 2020 of one dollar 1.805 cents per unit that compares to 1.765 cents per unit for 2019.

We also intend to use approximately 2% of our 2020 cash flow from operations to buy back our common units during 2020.

Using 2019 as as a base. These proposed distribution increases and the unit buybacks would result in about a 5.6% increase in the amount of capital that.

We're returning to limited partners in 2020 compared to 29 teen of which 60% of this increase is through buybacks.

If we were successful in retaining our spread income in 2020 at 2019 levels into free cash flow is higher.

One of the things that we can also considers again the potential for higher buybacks.

Beginning with our August 2019 distribution payment the delivery of common units under the dividend distribution reinvestment plan and our employee unit purchase program are satisfied through open market purchases instead of issuance of common units.

Affiliates of our general partner purchased approximately 2.2 million units in the open market.

For $58 million in December in total during the fourth quarter between open market purchases by the distribution reinvestment plan, our employee plan and affiliates of our general partner approximately $95 million or 3.6 million NPD units were purchased.

The open market.

Affiliates of our general partner have also expressed their intention to continue buying NPD units in the open market in 2020 on an opportunistic basis.

The last thing I'll cover today is the liquidity our liquidity option agreement related to our acquisition of Oiltanking partners in 2014.

This agreement was filed with the FCC on August one 2014.

And I refer you to that document for more detail.

More cord and balls, we'll I'll call him and B.

And it's interesting oiltanking through a US corporation named all Tanking Holdings, which I will call OTI Ed.

Okay.

Owns 50 owns the 54.8 million Tpd units that were issued as consideration in the transaction.

Our estimates OTI eight currently has a deferred tax liability of approximately $500 million associated.

With those units.

Under the terms of the liquidity option agreement MB has the option to put 100% of the common stock.

Okay to enterprise within a 90 day period commencing February 120 20.

We fully expect mm b to exercise its option.

It is enterprises option to purchase the common stock of OTI, a with any combination the PD common units for cash.

The price of the EPG units is based on the 10 day.

The way up.

Immediately prior to the exercise date.

With regard to the effect.

On Lpds unit count upon completion.

Of the transaction.

Okay, Hey would be consolidated into NPD and the NPD D units owned by OTI.

Would be treated as treasury units with any cash payments between MPD and OTI a eliminated in consolidation.

For illustrative purposes, if OTI, a still owns 54.8 million Tpd units and enterprise settled the acquisition of the common stock of OTI, a by issuing 54.8 million EDI units.

I would not have any impact to our current outstanding unit count, giving up given the offsetting nature of these new units issued to MB with a 54.8 million MPD treasury units held by OTI.

Currently we have not made a decision regarding how we will settle the purchase of OTI, a common stock if and when it's put to us under the liquidity option agreement, we will need to see what the 10 day Vwap is at the time of the exercise.

Frankly, a price based on a 10 day vwap without a discount may not provide a great deal of incentive for a large cash component.

Finally, since 2014, we have been accruing a liquidity option liability.

The primary purpose of accruing this liability was to estimate OTI A's deferred tax liability that we modest soon.

At December 31, 2019, the liquidity option liability accrued on Apds balance sheet was approximately $510 million.

At the closing of the acquisition of OTI, a common stock we would eliminate the liquidity option liability on apds balance sheet and replace it with the OTI a deferred tax liability any difference between the two would be a noncash adjustment recorded to the income statement.

Generally OTI A's deferred tax liability.

I would continue to be deferred.

And not be triggered unless we sold the PD common units owned by OTI yesterday, and we have no plans to do that.

Once the transaction is completed we currently estimate the cash income taxes incurred at OTI.

Related to the taxable income allocated to 54.8 million Tpd units owned by.

I will range from zero to $20 million per year, and we believe in 2020.

It would be zero.

With that Randy I think we're ready to open it up for questions. Okay, do and we're ready to take questions from up from our audience.

Thank you Sir.

As a reminder to ask a question you would need to press Star one was your telephone.

Your your question press the pound key.

Due to the essence of time, we ask that you. Please limit yourselves to one question and one follow up.

Please standby, while we compiled acuity roster.

I show our first question comes from Sunni Gershuni.

Yes. Please go ahead.

Hi, Good morning, everyone I was going to say congratulations on the promotions, but I'm going to say congratulations on answering the calling.

Just two quick questions here.

Just two quick questions here I am going to avoid the do all tanking question I'll leave that for for later bye.

I was wondering if we can start off with the crude segment.

Obviously, the the segment has been one of the beneficiaries of tight spreads you sort of talked about the leverage ratio being 325 versus 350, a few if you exit out.

With the capacity coming online some of the frothy opportunities have come out and we view the new for Q or the four key result, this kind of the new run rate level.

From there to build organic growth or or said differently.

Is the unit margin run rate in Fourq, you kind of what we should be thinking on the go forward basis.

Yes sure.

I wouldn't necessarily use fourth quarter as a run rate because we'll have additional volumes that will be flowing under if you would our AR.

Our interest in the linked the Webster project that would start in the second half of this year.

And then also with what we're expecting on under.

That would flow in Midland Echo for in 2021 is we continue to see an increase in.

In crude volumes going into the pipe. So some of that to the extent that we're benefiting from some spread opportunities that and when we saw spreads contract that would be an offset but again, we're looking at pretty good volume growth over the next couple of years flow into those pipes.

Jim as it as a matter of fact.

We signed the contract last night with a pretty big producer.

Brent 675000 barrels a day.

With an associated Dod mail so.

With this in pretty good pretty strong contracts to support those pipes.

Okay that that that makes total sense and then maybe if we can just shift over to the LPG export site. I was wondering if you can talk about the status of the contracting type market. At this point right. Now are you able to use the strength of the market.

In place.

Contract terms that are even longer in nature than typical and at higher rates typically like if you can sort of talk about what it would be like to negotiate a three year contract today versus let's say a year ago. When it would be like two to contracted for your type contract.

To be at a higher rate and would you would it be now for four years or even five years, just wondering in sort of talked about how it's changed dynamic contract.

We.

We're fully contracted for next year.

By definition and by design, we chose to.

Do shorter terms.

Because these were lower we had a targeted level, we chose to lease some available for spot, which frankly was a good thing.

And we think as time goes on and volumes growth, having adding one to two year contracts. At these we were getting is a smart thing because we think those spreads will widen overtime as volumes grow breadth.

I think the fees that we have out there right now on fees that were talking to customers. The fact that matters. Those fees worked for us and why that worked for us because we have expansions and brownfield projects that frankly.

Very attractive returns for what we invested over the last call. It you know decades.

So.

Theres the opportunities for enterprise to participate is we're going to contract such that we're comfortable operationally that we can satisfy all the contracts with customers.

And of Graham and his team exceeded expectations and that creates opportunities in spot basis in terms of doing to your three year for your type contracts. That's a matter is the levels that were doing them right now.

I think our customers both domestically and internationally and frankly enterprise are very happy with those numbers.

Yeah.

Alright.

Thats It for me because there Mike.

Very much guys and congratulations.

Thank you. Our next question comes from Colton Bean from Tudor Pickering Holt. Please go ahead.

Morning.

I wanted to follow up discussed in the buybacks I think you mentioned cash from ops comes in stronger than 2019, you see upside there.

It could result in a higher buyback level are you still thinking about that.

The the incremental cash flow or would basically be anything over and above.

Okay, Culton I'm sorry, the volume was really low could you repeat your question.

Yes, sorry about that just trying to understand on the discussion around buybacks I think you mentioned that you're at currently thinking about 2% of cash flow from operations and if you come in higher than that number, particularly higher than you rent in 2019, you could see the buyback number move higher are you still thinking it would be 2% in aggregate floor.

All right basically anything over and above 2019 might be directed towards buybacks.

I think.

Going into 2020, our thought is.

You know that we did that would use approximately 2% of the cash flow from operations and some of that is as Jim mentioned, we forecast is some of those spread opportunities not continuing into 2020. If we saw some of those opportunities continue into 2020, then that's what would give us potential.

Total come in and think about doing additional buyback.

Okay, and so the right way to interpret that is if you had say all 500 million shared back up it would be 2% of the 500 million.

Oh I called I don't know, we would be the that.

I don't know, if we would come in and be that that limited on it.

Understood.

And just to follow up on generics questions around LPG thinking a little bit more short term in nature here and thank you you all have highlighted the gross capacity versus kind of a typical operating rate is there any any opportunities you all see maybe in Q on Q2 here to get that operating rate closer to gross capacity.

I mean, not all this is Brian I mean, there's.

No better about it can take you don't feel better about in Threeq human are saying, so we can't control, whether it's something to have risen channel or fog or things of that nature that.

Likely first quarter notes its little tough, but how should we look it's never going to be 100% ships got to move it just I mean, it's just not the most efficient movement.

But in terms of trying to get above 70, 75 to the 80 type number you know there's things. So we can do that we have control over you guys. You hear us talk about using some of our offsite crude terminals to enhance that it's about trying to optimize around the channels. So we can move vessels between docs. So.

So.

Take.

Typically is things come up enterprise gets better and better and we start moving to more and more volume.

I'm just trying to set your expectations of what you can see and I think.

I think if are doing somewhere Graham and probably the 80% type number that's a pretty that's a pretty good.

Operational mode for us for that type of facility, but we continue to challenge ourselves to get that last increment out every every day and we'll see the results over time.

Yeah I'll jump in I don't think anybody has a utilization rate. We have I spent a lot of time at another company on another career and we never came close to the utilization rate that we have it enterprise, we focus on keeping that refrigeration units running.

All the time and I forget Bob what is our utilization on that refrigeration units you have any idea I don't have it off the top my head completely but it it's going to be in the upper Eightys and we use we use our labor. It's we make sure that we got shifted sitting there and just in this come up with some creative contracting ideas that that work up.

Actively for us.

Thank you.

Our next question comes from Spiro Dounis from Credit Suisse. Please go ahead.

Hi, good morning, everyone.

Starting with the Capex guidance for 21 that $2 billion to $3 billion range could you guys give a sense of what ultimately is going to drive you to that higher LOE into that range and it looks like spot.

Is not included in that overall backlog is is that the main driver and how should we think about the impact that could happen 21.

Yes.

Yes.

You're correct that the the offshore terminal is not included in that.

The.

That that's still in the application phase in the approval phase would mirror ad.

And frankly, we don't look for.

Earliest.

Did that.

Project to be approved by morale is probably the second half of.

This year.

We have.

And then on on spot I could.

I still think we could be in the range at $2 billion to $3 billion in.

In 2021, even with spot because I think we've we've also had some discussions as far as with joint venture partners around spot. So I think we would still be in that two to 3 billion, even even with spot included in that number and with spot.

I think in order to get people own spot I think we're going to they're going alone equity Brent.

We're not driven to own 100% of spot. If you think about it our value lies upstream of spot a lot of our value and it wouldn't bother me for us not on more than 40% of spot in the final analysis.

Got it so very helpful.

Then just on weight to Webster keep me, probably little more color on why you decided to move forward under the you Jay I structure and anymore specifics on the mechanics basically had is tied into our current system and just lastly on that any sort of capital avoidance you can sort of expect as a result of this.

Well, it's a pipe in a pipe.

We do our own scheduling way there's no.

Partners have no idea those barrels around that bye.

Other than turn in valves, we operate the thing just like we do our other pipelines and it's when you look at in on a per barrel basis is pretty pretty cheap.

Pipeline, Brent I think I'd add on that as you know wants undivided interest our pipe within a pipe.

You look at.

How enterprise Optimizes ask somebody is just a lot easier for us to optimize something that is 100% owned by enterprise. So that was a thought behind that you know.

And competitive writing to obviously there is economies of scale, when you're building and pipe that big and then when you're building upon.

And just have an enterprise to deal with in terms of how we go about our daily business Thats why it makes sense for us.

Got it appreciate the color thanks, everyone.

Thank you next question comes from Tristan Richardson from Suntrust. Please go ahead.

Hey, good morning, guys appreciate the context and perspective on slide five as it relates to pay out as it relates to returning cash in the way you normally define that target for repurchases. This morning.

Can you share your thoughts on defining this repurchase target on a regular basis, whether it be annually or otherwise.

The.

Well.

You know tourist and were.

To a degree you know, we're we're entering into a two and a new phase two would agree.

And with the again in 2000.

2020, we've got we have the $3 billion to $4 billion the growth Capex.

The.

Then when we come in and look at 2021 at two to 3 billion.

Given that our leverage is in the middle of our target range.

And if if we come in and again.

The organic projects that we have we like.

We're going to be very capital disciplined in here, but we're entering in a phase that if we if our leverage is where we're if we're comfortable with it being and we continue to see the asset the business performed the way it does growth capex in that two to 3 billion dollar range not only will we have.

Free cash flow as as we define it but then we will also have additional cash flow just when when you come in and you even after you subtract.

Dividends, so we really enter into a whole new period, a flexibility and where will we have the potential if we don't see.

Compelling.

Organic opportunities then you know into balance sheet is where we like it I think that comes back to that you're looking to come in return more capital to partners.

Helpful. Thank you and then just a follow up question just on on Chanel may have missed in the prepared comments, but talking about volume sequentially in the quarter and and how we should think about kind of general trajectory there.

Doug on take it and then I'll jump in.

Sure this is talking handling.

With respect to shut out it's part of our entire system in the Permian integrates with our Mapel system. Our seminal pipelines are SAP rail pipeline. So there's some seasonality associated with the volumes.

For example, Conway to Mont Belvieu could impact was on Sunoco what that said.

Men tones online, we're seeing higher volumes.

President never seen around 300000 barrels a day.

And we've also been successful and getting some additional contracts recently and we're in discussions with multiple parties right now on more contracts. So.

When it keeps moving forward and get it bolt.

How much influence and up 300, a bit so we're pulling 300, a day and thats without alpine high doing what we expected it to do and I spoke in my script about up.

Some underperformance in Orla.

We have backfill that as I said in my script.

Supply you can have more full processing plants, and we're going to have pulled processing plants on a go forward basis. In addition, tugs and some negotiations with people to.

To get third party movements on that pipe.

Thank you guys very much.

Thank you. My next question comes from Gene and Salisbury from Bernstein. Please go ahead.

Good morning, just one for me and a lot of Frac capacity coming online in the first half of this year can you just gave us the latest have what you're seeing on and pressure on re contracting rates because of that.

Zach do you want to you'd want to freeze up are you on take it.

So far as Dan.

Still a good appetite and we go and look at all of our contracts one or we don't have a whole lot of contracts rolling off first did period of time.

But even when we go hand in Tulsa producers I think the market is normalized I think weaver and it did have an abnormal market for 2018, and 2019 and the market is normalize on contract rates normalizing on term, but we still see how the appetite for free.

Research and take out freshness.

Hello.

We have more than full.

So your overflow in Louisiana, we're slowing in Louisiana overflow into storage.

Every frac to in our portfolio Stifel.

We're not too concerned at this point.

Well and that's okay. Thank you.

Thank you next question comes from Christine Cho from Barclays. Please go ahead.

Good morning, I'd like to extend my congrats everyone on then integration.

Starting with.

Capex opportunity post 2021, what do you see the opportunity for spending being just as an industry. We seem like we're going to be while capacitized sign factional Shannon LPG export price for the next couple of years after fourth quarter and this year, especially if production.

This fall and listen to me over Capacitized on paneling and.

So beyond that bought project or the opportunities just more bolt on or does it increasingly become our pets handling that.

We think bed Cam is a bolt on.

Christine but.

In terms of slowing production.

What a Tony tells us is.

What is five to 750000 barrels a day of growth.

Routing and none in 2020 gross well, yes, obviously slowing but production this not slow.

When we take a long term look currently let's let's say at the 2025 years.

We expect production to continue to go, particularly the Permian basin. It is to stand out in the United States I'm, having a hard time with 500 to 750000 barrels a day man slow growth frankly, but in terms of where we go from here, we like primary petrochemicals, so PDH too we like.

We've got one heck of a anchor customer, we like creating I petrochemical midstream service business, meaning storage and pipelines in both ethylene and propylene.

We like our export position, we think that grows and we're doing things as you know to expand.

Expand that so.

That's what I see us.

I don't see any big acquisitions or anything like that unless some.

Hi license deal comes along but I see us continuing to go downstream and we using that as leveraged to do more upstream.

Okay helpful. Thanks.

And then I know there were a lot of questions on the LPG exports I actually have a question on the ethane exports and demand out there we don't seem to get that much variability and the ethane export volume, even when ethane pricing move pretty low. So it is fair to say that the markets abroad.

And our underwriting as much as accurate as much I think if possible and therefore to slow increase care more facilities that can take ethane feedstock not to be built.

Yes, I think it's fair to say that at some point to point.

Commodity and you know what people have to spend to receive it is not small dollars to ship. It is not small dollars. So I think it evolves. We said when we put that project in that this was not going to be like LPG is going to be a point to point milk run type of the deal and that.

That's what it is in order to grow that we have a lot of people talking to us, but they've got to spend money to be able to receive it.

In that context, do you think that like just given all the dynamics that LPG exports increased pretty constrained that like I think account nothing negative this year.

Well if it does we're going to like a lot of money, but.

I don't think so personally.

Okay, great. Thank you.

Thank you. Our next question comes from Jeremy Tonet from JP Morgan. Please go ahead.

Hi, Good morning. This Charlie first question just on project timing I noticed frac tenant 11 slipped a bit also didn't see eightx extension on them or just wanted your thoughts there.

Justin.

Our Zack.

Yes, we did see and slipped slightly I think we had a pretty aggressive scheduled to start with.

But from an impact to enterprise.

We are still taking all the product service contracted for 10 and 11.

We've got a best in class storage facility and so those are all that why that is going there and our producers don't even know.

So once they get up both will frac it all out of stores.

And HAE attacks.

Yes, we're still move this is Todd we're still moving forward baytex expansions going to be sometime in 2022 early 2022.

Okay, and then some buybacks when thinking about the 2% or is this before after working capital changes just thinking about.

Newer projects coming to service that impacting operating accounts.

When when we think about it and when you when you look at sort of when we take it in context.

As far as when we compare to the other other S&P sectors. It is the gap term.

Cash flow from operations and so it is after working capital changes, but working capital changes can be quite positive too.

Okay, Great and then sorry, one last one and I know you guys get the question a lot just your thoughts on C Corp conversion on just getting kind of the price reaction. We saw last December on after the conference and the commentary there.

Yeah really no no updated thoughts around that at this point in time, you know something that we continue continue to look at but really no update on dissolved.

Okay. Thank you.

Thank you. Our next question comes from Pearce Hammond from Simmons Energy. Please go ahead.

Good morning, and thanks for taking my questions. My first question that you've discussed the possibility of redirecting Midland to echo to back to NGL service and just curious with the latest was on that.

The latest is it stay and encourage service for there's the perceptible future, but we have the option to always yes kind of a need option. We can take it adequate service from putting NGL service and then Rintega that NGL service, but it back and grid service.

What's called an option in Brent.

Great and then as a follow up one theme during the Q4 earnings season, thus far spend weakness in the global chemical sector and just just curious if you're experiencing that in your petrochemical segment and what's your outlook is for the segment for 2020.

Yes.

Hi, This is Chris Danna overall, our demand still remains fairly strong, which we've seen some weakness at the end to fourth quarter and our export volumes to Europe .

But even that demand is picking back up again.

Great. Thank you.

Thank you.

Our next question comes from Keith family from Wolfe Research. Please go ahead.

Hi, good morning.

First just wanted to revisit this sources and uses of cash for 2020. So you mentioned the 3 billion dollar debt offering during the half maturities and then you said there the remaining billion and a half could fund about 50% of growth Capex give or take.

It seemed like I think 2019, you did at least two and a half billion a DCF above the distribution.

So just it seems like you're going to excess cash on the balance sheet above what's needed to fund capex. This year. So can you just talk about how you would look to deploy that you wait and see how capex shakes out would you pay down debt or just how you're thinking about that.

A key right now we're just seeing how the year progresses.

It again, we've got three.

$3 billion to $4 billion of gross growth Capex and even if you come in and you'd say, we're at the midpoint of that range of three and a half billion a growth Capex you divide that.

Multiply that by 50% that's 1.75, so that would totally consume the remaining proceeds from the debt deal then we would be coming in and using.

Either.

Again cash flow from operations.

Or borrowings under our credit facility to come in and fund the remainder.

Okay I was it just seems like cash flow from operations and the remaining portion of the debt funding is going to be more than you need for Capex. In 2020 is that how you see it looking out right now.

[music].

Yes.

If we were getting early into the year.

Yeah, when we may exceed that coming some of that want one of the reasons, we're talking about coming in and do news and 2% of the cash flow from operations for buyback.

Okay, Great and then.

Apologies for this I'm not sure I'm fully understanding the Midland Echo three so Jim I think you said it wouldn't run more than two to 300000, a day before wink to Webster started subs I just want to clarified any three is still a separate pipeline or expansion projects for you that distinct from when to west there at this point.

The three is a part a week to Webster as an undivided joint interest so it's a pipe and a pipe.

Okay. So there is no incremental capacity that you guys are separately, adding in 2020. It's just you are now partners on linked to Webster, that's exactly right great. Thank you very much.

Thank you.

Our next question comes from Oswald Proton from Bank of America. Please go ahead.

Good morning, everyone. Thanks for taking my question two quick ones first funded fit more clarity on the buyback cat and today sued reconsider the guidance as more of a programmatic.

Perhaps on a quarterly basis or will it be opportunities.

Turning to stick like last year.

Again, I mean, what were all were intending to do this year is intending to use 2% of cash flow from operations the to come in and do buybacks now, we'll we'll do that opportunistically during the year.

[music].

So I don't know if you want to say, we're going to be opportunistically programmatic or programmatically opportunistic.

Yes.

Yes, that's what we're intending to they've.

Got it got it and another quick one I remember last year, when we had to be constrained in the Permian and you're moving quite a bit of spot volumes. I think you mentioned the cost of using DRA, where as high as $2 per barrel has that.

Abated now that there's been more capacity.

Moving to bounce in the Permian.

I think we're still using some VR edge rent a gram we're still we're still using that we've learned to optimize it in our we can get that incremental that last $2 was in the last incremental barrel and we watch that vary we watch that very closely on some things you're not going into dollars an hour. We're not doing $2 now I think what are the things that Brent.

In Japan.

We're going to have four pipelines out of there.

When we optimize those four pipelines, we would probably move being 1.3.

Point 4 million barrels a day Brent.

That's that's optimizing it so you're getting the lowest cost possible, but if you if the lift that spreads there, but he probably take that to 1.8 million barrels a day at a cost season. They are at that assume some of those and service because just like everybody else I mean, we have our cost of what the next tranche tranche is.

Got it thanks that helps.

Thank you.

Our next question comes from Michael the PTC from Goldman Sachs. Please go ahead.

Hey, guys. Thanks for taking my question congrats everybody on a executive announcements.

I hate to ask this one but because it's obviously very unfortunate very scary globally, but are you seeing in January at all in impacting the export markets, yet for either crude or Ngls, given what's going on in China.

How it's impacting business and how it's impacting demand the China can you just kind of talk about what you've seen over the last couple of weeks and how you think about the range of impacts on including on on your guidance levels for now and your outlook levels for how you're thinking about 2020.

Yeah. This is this is Brent so quick answer is we haven't seen an impact in terms of volumes, we haven't seen an impact in terms of fees at the dock.

And you know whether its freight what rates or whether it's the us I mean, there's things that happen.

I think that what you'll see on our system. It's no different when we picked out tranches to move from Midland to Houston.

People that are the most cost efficient are going to move the volumes and so.

People, who are the least cost efficient start turning off or start decreasing volumes and we'll look at different markets and looked at different operators and look at different lack of integration of one owner and my guess is those are the ones, who are probably going experienced that sort of situation first.

In the ones that are most cost efficient, we'll continue to move to volumes.

Got it. Thank you one quick follow up in the quarter, you've talked about Midland to Echo line, a little bit in the release can you just give a little more detail in terms of kind of what's happening on the pricing our tariff side there.

Relative to the prior quarter of prior year.

I mean, it's this is Brent again I'm going in terms of tariff I'll I mean, it's it's not a whole lot different than the last question on them.

The volumes I won't change I mean that pipeline has been whole every single day.

[music].

In terms of how the economics work on that my personal opinion, nothing ship owners win because things get less efficient from a shipping perspective, but ultimately its consumers or the producers of the of the of the a product that ultimately bear that cost.

Got it thanks, guys much appreciated and now I will have a follow up offline.

Thanks.

Hi, Bill and this is Randy Burkhalter are worked we have time for one more question things.

Sure. Thank you Sir our last question comes from the Nilo Juvane from BMO capital markets. Please go ahead.

Good morning. Thank you for squeezing me in one question of clarity here.

How are you guys thinking about the buyback relative to the 2% of.

CFO , if you take out the Oh thinking.

Units in cash versus equity does that change that calculus.

Yeah, I mean in our mind that would be good plan.

You can come in and say that's applying some of the buyback of against the against the <unk> against the OTI.

Okay.

And our mind you to the extent that we use cash consideration.

On the OTI, a transaction that essentially would be a buyback.

Gotcha.

That's it for me thank you.

Thank you know him if he would you give our listeners the replay information for.

Sure. Thank you Sir this call is available for replay starting today the thirtyth at one PM through February 6th at 11 59 pm.

To access the replay you will need to dial one 800, 585, Athree six seven and enter the replay code nine Fivenine six 106 again to dial in number is 800 585.

367 replay code 90 596 106.

Thank you we'd like to thank everyone for joining us today in that ends the comp.

Good day.

Thank you ladies and gentlemen, just conclude today's conference call. Thank you for participating you may now disconnect.

[noise].

[music].

[music].

[music].

Ladies and gentlemen, thank you for standing by welcome to the Q4 2019 Enterprise products Partners LP earnings Conference call.

At this time all participants on the listen only mode. After the speaker presentation, there will be a question and answer session.

Ask a question during the session you would need to press star one on your telephone.

Please be advised that today's conference is being recorded.

Did you require any further assistance please press star zero.

The conference over to your speaker today.

Our culture, Vice President of Investor Relations. Thank you. Please go ahead Sir.

Okay. Thank you Dylan.

Good morning, everyone and welcome to the Enterprise products Partners conference call to discuss fourth quarter 2000 Latinos.

Speakers today will be GMT, and Randy Guiler, Chief Executive officers of enterprises General partner.

Other members of our senior management team are also on attendance for the call today.

On this call we will make forward looking statements within the meaning of section 21.

Securities and exchange Oh lighting 34.

Based on the beliefs or the company as well as assumptions made by and information currently available enterprises management team.

Although management believes that the expectations reflected in such forward looking statements are reasonable they can give no assurance that such expectations will prove to be correct.

Please refer to our latest filings with the FCC for a list of factors that may cause actual results to differ materially from those on a forward looking statements made during this call.

With that I'll turn it over to Jim Thank you Randy.

Frankie Valli out of the four seasons back and that I had a song Oh, what at night to paraphrase were 2019 has concern Oh, what a year.

Enterprise reported record net income.

For the full year, 2019 up $4.6 billion or to $2.09 a unit, that's a 10% increase from 2008.

Do you see up increased 11% a record 6.6 billion and provided 1.7 times coverage.

We retain $2.7 billion a DCF.

24% increase compared to 2000 and I think.

The record cash flow, we generated in 2019 allowed us to increase the distribution paid our partners for the 21st consecutive year.

Oh self funding the equity portion of our growth capital investments.

We get again completed 2019 with a lot of financial flexibility.

Very strong balance sheet.

In addition to the financial highlights we ended the decade would record performance in 2019 with all of our business segments reporting increased results.

Including 28 operating and financial records.

We said 13 operational records, including almost 2 million barrels per day of Marine terminal export volumes 6.7 million barrels a day of liquid transportation volumes and 10.4 million barrels of oil equivalent per day total system transportation volumes.

During 2019 enterprise completed construction and began service on approximately $5.4 billion of capital projects, including two and a half billion that were completed in the fourth quarter.

In addition, we have another $7.7 billion or projects underway substantially all of 2019 <unk> major projects were completed on time and on budget.

In addition, where this in discussions with potential JV partners and projects that beat our downstream value chain.

Like to give a shout out to operations pork successfully commissioning.

The major new assets from late September to the into the fourth quarter.

LPG export expansion Ibdh meant on gas processing plant.

Our panola Bulldog gas processing plant.

As one of our ethylene export terminal.

Actually we should have built the panola bulldog quite a five years ago My bad.

Finally did that build it it's full and its beating our panola pipeline at our Mont Belvieu complex. What we didn't have five years ago was is complete and and large gathering system. As we have today supporting that project a that gas plant is again.

Weathering system that goes for northwest, Louisiana, The DPC, Texas.

Our ethylene export project was not a project I embraced in the beginning.

Bringing in navigators, a joint venture partner got me over the hump, but I think Chris Deanna and his team along with the navigator attained what on a mission to prove me wrong.

They are on the verge of excess executing that contract that will result in a sign being on them that terminal that says sold out.

Men town is our latest addition to our Permian processing system men tone is fully contracted with one of the largest producers in the Delaware basin.

A few words about gathering and processing there essentially two types of gathering and processing contracts that we enter into it.

The first is the manthey or said another way take or pay contracts, where a producer commits to a volume at a fee that is paid whether the volume as there is delivered or not.

The second type as an acreage dedication and that's where producer dedicates everything you producers from been defined acreage up to set a maximum daily quantity and that arc MD Q.

And that that's the that's the amount that we have to provide services car.

If the producer does not meet that maximum daily quantity threshold.

We have the right to reduce the m. DQ weight and and sell that capacity to 'em another producer.

In many cases, even though the m. DQ is reduced <unk> acreage dedication remains the same.

We've had some underperformance at our Orla complex and consequently have reduced the M.M. DQ of at least one producer.

Natalie Gaiden in a little more team have success really backfill that capacity.

With a long term 300 million a day take or pay contract with a large investment grade producer.

These type of Clawback options allow Ah.

To maximize the use of our capacity and in this case that Burke <unk> capital as much as two years.

I'd be de I'd start up in December so.

Started up in December as result, our base plant and our high purity Isobutylene plants are running at capacity and our anchor customers taking their contracted volume.

Because there's a ramp for ankle anchor customer we have spot volumes itself.

I was somewhat concerned about placing those volumes, but again, Chris and his team prove me wrong as there's been a healthy appetite from the refining industry.

Our LPG export expansion was up and running throughout the third quarter, we have contracted that terminal to a targeted level and three patient scheduling had been able to increase our dock utilization to share in a wider spread internationally.

The first half of next year, we expect to have for crude oil pipelines out of the Permian.

One of these pipelines M E three.

There's a 36 inch pipeline we're building.

That does upon completion of construction will be jointly owned by M to eat rate and we and went to Webster.

We will own and as an undivided joined <unk> interest 29% of winter Webster.

The project should be complete tire Echo terminal by August and to Webster by the end to the year.

I don't expect more than two to 300000 barrels a day to blow until the Webster leg is complete.

Think about nm those four pipelines would just our contracted volume and a zero terminal value.

I will deliver a mid teen our our to enterprise. Our upsides are the additional fees, we collect for storage and for exports and any marketing activities.

PDH two is underway the construction, we have a high quality petrochemical customer as they anchor our <unk> an hour in negotiations for the remaining capacity and potentially a joint venture partner.

We are one of the largest producers PGP in the world and its world that has shortened PD PGP. Once PDH. Two is up we will produce more than 11 billion pounds a year.

Appropriately.

So.

2019 was a record year now when she didn't know that enterprise. We celebrated are about an hour and I have put forth turning our attention to 2020.

New your opposes shall and new challenges and headwinds.

Those headwinds are primarily spreads from water the Gulf coast and natural gas.

Had gotten that the Mount Bellevue and liquids and Midland to Houston in crude while there were spreads they're not as robust as they were last year.

That said, we expect spreads to the water to grow and LPG and crude oil and petrochemicals and we have assets that we put into service in 29 team that will have a full year earnings.

Well, our folks a forecast that the spreads we had in 2019 on the assets that produce those spreads.

It would be down $500 million I look at our footprint I see other opportunities backwardation contango Ross product as I said to the water on all hydrocarbons, we have our GP to PGP, we have normal butane to ice and be a data we have product upgrades and the list goes up.

I've been here a long time, when I look at our system I see a system that in my 20 years has always delivered above our contracted piece. It's never the same asset. It is the same integrated system. So I expect 2020 to be a strong here.

It's hard to set new records every year, but with our people and our footprint I'd be real careful betting against us and now I'm going to look at a Chris weight and let him shutter as I've got scripted comments to make.

We issued a press release this morning that we're going to a co CEO structure with Randy sharing this title with me frankly, all we're doing as formalizing how we've always run the company Randy and I will be up route will remain a part of the opposite the chairman with Rand and Hank Bachmann and we will also sale.

The board.

Randy and I don't compete with each other we complement each other.

Truly obtain and we've been together for over 20 years. So we are friends and we respect what each other brings to the table.

The other announcements, we made today or senior management team that is accomplished with complementary skills.

They truly work as a team.

Let's see Chris our Chief commercial officer has one of the best value mind I've ever say.

Okay. So damn tali has a presence.

Graham Bank couldn't our Chief operating officer is on top of operations and engineering, such that we sleep well at night.

Daniel Bops has some commercial time he ran our regulated business.

Next in one of the more well rounded people we've ever had to run our accounting group and other responsibilities taking.

Also had the initiative, even though it wasn't required to get as CBVA once he took that job.

Chris Nellie has a style that is disarming and a work ethic second to none.

Bob Sanders, well, Bob is 40 years with us and he's our go to guys. He knows where where every piece of steel is not mentioned was tarnish evolving as bill. So much credibility that everyone wants is groups forecast and we have penny we have John Jordan.

Let me tell you what this is not.

Enterprise has never been a job for me, it's a calling.

This is not a transition to jim's rich quite and retirement as far as I'm concerned I'm not going anywhere and as good as a deal and as excited as I am about our future I'm really not convinced that my runway isn't as long as randy's.

That is it may there's no one I'd rather share this title with than a friend, Randy Ballard and with that I'll turn it over to our co CEO Randy Fowler.

Thank you Jim and good morning, everyone.

Let me start with some of the income statement items for the fourth quarter net income attributable to limited partners for the fourth quarter 2019 was $1.1 billion or 50 cents per unit on a fully diluted basis.

Net income for the fourth quarter.

2014 included a non cash impairment and related charges of approximately $82 million. This was primarily related to our investment in the centennial liquids pipeline.

We are Cologne with marathon the fourth quarter 2019 also included noncash mark to market losses of 25 million to.

Together these non cash charges.

Were approximately.

Offsets on a fully diluted unit net income for 2018 included noncash impairment in related charges of approximately 29 million in a noncash mark to market gain of 237 million or a combined 10 cents per per fully diluted unit. Excluding these non cash items GPU for.

Fourth quarter of 2019 increased.

13% compared to the same period in 2018.

Moving on to cash flows cash flows from operations was $1.7 billion for the fourth quarter 2019 versus 1.9 billion for the fourth quarter 2018, excluding changes in working capital accounts cash flow from operations for the fourth quarter of 2019.

I mean was 11% higher than the fourth quarter 2018.

Free cash flow, which we defined is.

I would use the Bloomberg definition.

Cash flow from operations modest investing activities and then we add back joint venture contributions are contributions from.

I would venture partners was 2.5 billion for the full year, 2019, which was 24% higher band free cash flow for 2018.

We define payout ratio as the sum of cash dividends distributions and buybacks as a percent of cash flow from operations.

Our payout ratio was approximately 58% for the fourth quarter of 2019 and 59% for the full year for the full year 2019.

For context on how we compare to the broader equity markets are refer to page five of the supplemental slides that we posted.

Based on the information available to us for the nine months of 2019.

Oh prices, 59% payout ratio is the fourth highest compared to the median payout ratios for the S&P 500 intention of its industry sectors, we exclude its financial sector due to its volatility in outliers.

In terms of distributions and dividends only enterprise ranked in the top fiftyth percentile of all S&P, 504% of cash flow returned to equity investors in terms of total payout ratio enterprise right in the 41st percentile of all.

S&P 500 companies.

Our our total capital investments for the fourth quarter 2019 were $1.2 billion, including 1.1 billion of growth capital investments and 93 million of sustaining capital expenditures.

Total investments for 2019 were $4.7 billion, which includes 4.3 billion of growth capital investments, which is reduced to 3.7 billion. After subtracting contributions from our JV partners sustaining capex for 2019.

Was 325 million.

For 2020, we currently expect our growth capital expenditures will be in the range of $3 billion to $4 billion and sustaining capital expenditures will be approximately $400 million for 2021. We currently expect growth capital expenditures will be in the range of $2 billion to $3 billion.

One of our most important goals continues to be capital discipline.

I'd also add the lower Capex in 2021 that we currently see would lead to higher free cash flow, which would provide the.

Provide the potential for us to consider larger buybacks.

In terms of capitalization, our consolidated liquidity was $4.9 billion at December 31, 2019, which included available borrowing capacity under our credit facilities and unrestricted cash of about $300 million a.

Adjusted EBITDA for the trailing 12 months ended December 31, 2019 was $8.1 billion and our consolidated leverage was 3.25 times after adjusting.

For the partial equity credit that we received for the hybrid debt securities by the rating agencies and also reduced by unrestricted cash if we normalize adjusted EBITDA for $500 million of spread opportunities in 2019.

We believe were wider than normal we estimate that our leverage ratio would have been 3.5 times for 2019, which is at the midpoint of our range for our targeted leverage.

On January six we priced an aggregate $3 billion of senior unsecured notes.

Comprised of $1 billion of 10 year notes at a 2.8% coupon.

The $1 billion of 31 year notes at 3.7% and $1 billion of 40 year notes at 3.95%, we'd like to say thank you for to the strong support from our fixed income investors.

After adjusting for the proceeds from our 3 billion dollar notes offering and the maturity of $500 million five in a quarter percent notes.

Tomorrow, our total debt principal outstanding would be approximately $30 billion.

Assuming the first call date of the hybrids the average maturity of our debt portfolio was 16.3 years.

Assuming the final maturity date of the hybrids the average life of our debt portfolio is 20.4 years.

Our effective average cost of debt is 4.5%.

When looking at our capital needs for 2020, we have 1.5 billion of total debt maturing, including the 500 million that matures tomorrow that leaves the remaining 1.5 billion a proceeds from the debt offering available to fund approximately 50% of our $3 billion to $4 billion.

Growth capital expenditures for 2020.

Moving on to distribution payments and the distribution reinvestment plan.

Our distribution declared with respect to the fourth quarter of 2019.

Is 44, and a half cents per unit and we will be paid February 12. This distribution represents a 2.3% increase when compared to the same quarter of 2018.

As mentioned in the press release. This morning based on current expectations, we plan to recommend to our board.

To continue our quarter of a.

Penny per unit per quarter increase.

Our quarterly distribution rate for 2020. This would result in aggregate distributions declared with respect to 2020 of one dollar 1.805 cents per unit that compares to 1.765 cents per unit for 2019.

We also intend to use approximately 2% of our 2020 cash flow from operations to buyback our common units during 2020.

Using 2019 as as a base. These proposed distribution increases and the unit buybacks would result in about a 5.6% increase in the amount of capital that.

We're returning to limited partners in 2020, compared to 2019 of which 60% of this increase is through buybacks.

If we're successful in retaining our spread income in 2020 at 2019 levels and if free cash flow is higher.

One of the things that we can also considers again the potential for our buybacks.

Beginning with our August 2019 distribution payment the delivery of common units under the dividend distribution reinvestment plan and our employee unit purchase program are satisfied through open market purchases instead of issuance of common units.

Affiliates of our general partner purchased approximately 2.2 million units in the open market.

For $58 million in December .

In total during the fourth quarter between open market purchases by the distribution reinvestment plan, our employee plan and affiliates of our general partner approximately $95 million or 3.6 million NPD units were purchased in the open market affiliates of our general partner have also.

Xpress their intention to continue buying NPD units in the open market in 2020 or opportunistic basis.

The last thing I'll cover today is the liquidity our liquidity option agreement related to our acquisition of Oiltanking partners in 2014.

This agreement was filed with the FCC on August one 2014.

And I refer you to that document for more detail.

Mark hard and balls, we'll I'll call him and B.

And it's interesting oiltanking through a US corporation named all Tanking Holdings, which I will call OTI.

Okay.

Owns 50 owns the 54.8 million CPD units that were issued as consideration in the transaction.

Our estimates OTI, a currently has a deferred tax liability of approximately $500 million associated.

With those units.

Under the terms of the liquidity option agreement MB has the option to put 100% of the common stock.

Okay.

Enterprise within a 90 day period commencing February 120 20.

We fully expect mm b to exercise its option.

It is enterprises option to purchase the common stock of OTI, a with any combination the PD common units or cash.

The price of the NPD units is based on the 10 day.

The way up.

Immediately prior to the exercise date.

With regard to the effect.

On Elpida unit count upon completion of the transaction.

Oh, hey would be consolidated into EPG.

And the NPD D units owned by OTI would be treated as treasury units.

Any cash payments between NPD and OTI a eliminated in consolidation.

For illustrative purposes, if OTI, a still owns 54.8 million PPD units and enterprise settled the acquisition of the common stock of OTI, a by issuing 54.8 million EBITA units.

It would not have any impact to our current outstanding unit count, giving up given the offsetting nature of the new units issued to NV with a 54.8 million.

The treasury units held by OTI.

Currently we have not made a decision regarding how we will settle the purchase of OTI, a common stock if and when it's put to us under the liquidity option agreement.

We will need to see what the 10 day Vwap is at the time of the exercise.

Frankly, a price based on a 10 day.

Without a discount may not provide a great deal of incentive for a large cash component.

Finally, since 2014, we have been accruing a liquidity option liability.

The primary purpose of accruing this liability was to estimate OTI A's deferred tax liability that we modest soon.

At December 31, 2019, the liquidity option liability accrued on Apds balance sheet was approximately $510 million.

At the closing of the acquisition of OTI, a common stock we would eliminate the liquidity option liability on apds balance sheet and replace it with the OTI a deferred tax liability any difference between the two would be a noncash adjustment recorded to the income statement.

Generally OTI A's deferred tax liability.

Would continue to be deferred.

And not be triggered unless we sold the NPD common units owned by OTA yesterday, and we have no plans to do that.

Once the transaction is completed we currently estimate the cash income taxes incurred it OTI.

Related to the taxable income allocated to 54.8 million Tpd units owned by today will range from zero to $20 million per year, and we believe in 2020.

It would be zero with that Randy I think we're ready to open it up for questions.

And we're ready to take questions from from our audience.

Thank you Sir.

As a reminder to ask a question you would need to press star one your telephone.

How are your question press the pound.

Due to the essence of time, we ask that you. Please limit yourselves to one question and one follow up.

Please standby, while we compile the Q and a roster.

I sure first question comes from Sunni Gershuni.

Yes. Please go ahead.

Hi, Good morning, everyone I was going to say congratulations on the promotions, but I'm going to say congratulations on answering the calling.

Just two quick questions here.

Two quick questions here I am going to avoid the the oil tanking question I'll leave that for later bye.

I was wondering if we can start off with the crude segment.

Obviously, the the segment has been one of the beneficiaries of tight spreads you sort of talked about.

The leverage ratio being 325 versus 350, if you if you exit out.

With the capacity coming online some of the frothy opportunities have come out and we view the new for Q or the Fourq to resolve this kind of the new run rate level.

From there to build organic growth or or said differently.

Is the unit margin run rate in Fourq, you kind of what we should be thinking on the go forward basis.

Yes sure up.

I wouldn't necessarily use fourth quarter as a run rate because we'll have additional volumes that will be flowing under if you would our our of our interest in the linked the Webster project that would start in the second half of this year.

And then also with what we're expecting on under.

That would flow in Midland Echo for in 2021 is we continue to see an increase in.

In crude volumes go into the pipe. So some of that to the extent that we're benefiting from some spread opportunities that and when we saw spreads contract that would be an offset but again, we're looking at pretty good volume growth over the next couple of years flow into those pipes.

Jim as a matter of fact, we.

We signed the contract last night, where that pretty big producer.

Brent 675000 barrels a day.

With an associated Dod mail so.

Was there some pretty good pretty strong contracts to support those pipes.

Okay that that that makes total sense and then maybe if we can just shift over to the LPG exports site.

I was wondering if you can talk about the.

Status of the contracting type market at this point right now are you able to use the strength of the market.

But in place.

Contract terms that are even longer in nature than typical and at higher rates typically give you can sort of talk about what it would be like to negotiate a three year contract today versus let's say a year ago, what it would be like too.

Contracted for your type contract.

Would it be at a higher rate.

Would it be now for four years or even five years, just wondering sort of talked about how it's changed dynamic contract.

We.

We're fully contracted for next year.

By definition and by design, we chose to.

Do shorter terms because the fees were lower we had a targeted level.

We chose to lease some available for spot, which frankly was a good thing.

And we think as time goes on and volumes growth, having having one to two year contracts that these we were getting is a smart thing because we think those spreads were widened over time as volumes grow breadth.

I think the fees that we have out there right now on fees that were talking to customers. The fact that matters those fees worked for us.

And why that works for us because we have expansions and brownfield projects that frankly.

Very attractive returns for what we invested over the last call it.

Yes.

So.

The opportunities for enterprise to participate is we're going to contracts such that we're comfortable operationally that we can satisfy all the contracts with customers and.

Graham and his team exceeded expectations and that creates opportunities in spot basis.

In terms of doing to your three year for your type contracts. So it's a matter as the levels that were doing them right now.

Hi, thank our customers, both domestically and internationally and frankly enterprise are very happy with those numbers.

Alright.

Thats. It for me because were my question. Thank you very much guys and congratulations.

Thank you. Our next question comes from Colton Bean from Tudor Pickering Holt. Please go ahead.

Morning.

The follow up in the discussion the buybacks I think you mentioned cash from ops comes in stronger than 29 team you see upside there that could result in a higher buyback level are you still thinking about that.

The incremental cash flow or would basically be anything over and above.

Okay, Culton I'm sorry, the volume was really low could you repeat your question.

Sorry about that just trying to understand on the discussion around buybacks I think you mentioned that you're at currently thinking about 2% of cash flow from operations and if you come in higher than that number, particularly higher than you were at in 2019, you could see the buyback number move higher are you still thinking it would be 2% in aggregate.

Or basically anything over and above 2019 might be directed towards buybacks.

I think.

Going into 2020, our thought is.

That we did that would use approximately 2% of the cash flow from operations.

In some of that is as Jim mentioned, we forecast as some of those spread opportunities not continuing into 2020. If we saw some of those opportunities continue into 2020, then that's what would give us potential to come in and think about doing additional buyback.

Okay, and so the right way to interpret that is if you had say all 500 million showed backup.

2% of the 500 million.

Called I don't know, we would be the that.

I don't know, if we would come in and be that that limited on it.

Understood.

And just to follow up on generics questions around LPG thinking a little bit more short term in nature here and thank you you all have highlighted the gross capacity versus kind of a typical operating rate.

Is there any any opportunities you all see maybe in Q1 Q2 here to get that operating rate closer to gross capacity.

I mean, not all this is Brian I mean, there's.

No better about it can take you don't feel better about in Threeq you Im understanding so we can't control, whether it's something to have risen channel or for other things of that nature that.

Frankly first quarter nodes as well, but how should we look it's never going to be 100% ships got to move it just I mean, it's just not the most efficient movement.

But in terms of trying to get above 70, 75 to the 80 type number.

First thing so we can do that we have control over you guys euros talk about using some of our offsite crude terminals to enhance that thats about trying to optimize around the channels. So we can move vessels between docs. So.

Thank you.

Please things come up enterprise gets better and better and we start moving to more and more volume.

I'm just trying to set your expectations of what you can see and I think.

Thank you for doing somewhere Graham and probably 80% type number that's a pretty that's a pretty good.

Operational mode for us for that type of facility, but we continue to challenge ourselves to get that last increment out every day every day and we'll see the results over time.

Yes, I'll jump in I don't think anybody has the utilization rate we have.

I spent a lot of time at another company on another career and we never came close to the utilization rate that we have at enterprise, we focus on keeping that refrigeration you that running all the time and I forget Bob what is our utilization on that refrigeration, yet and you have any idea I don't have it off the top.

I had completely but it it's going to be in the upper Eightys and we use we use our labor. It's we make sure that we got shifted sitting there and just in has come up with some creative contracting ideas.

That work effectively for us.

Thank you.

Our next question comes from Spiro Dounis from Credit Suisse. Please go ahead.

Hey, good morning, everyone.

Starting with the Capex guidance for 21, Thats you to $3 billion range can you guys give a sense of what ultimately is going to drive you to the higher LOE into that range and it looks like spot is not included in that overall backlog is that the main driver and how should we think about the impact that could happen 21.

Yes.

You're correct that the the offshore terminal is not included in that.

The.

That that's still in the application phase in the approval phase would mirror ad.

And frankly, we don't look for.

The earliest.

Did that.

Project to be approved by Marat as probably the second half of.

This year.

We have and then on on spot I could.

I still think we could be in the range in $2 billion to $3 billion in.

In 2021, even with spot because I think we've we've also had some discussions as far as with joint venture partners around spot. So I think we would still be in that two to 3 billion, even even with spot included in that number and with spot.

I think the in order to get people on spot I think youre going to they're going to alone equity Brent.

And.

We're not driven to own a 100% of spot. If you think about it our value lies upstream of spot a lot of our value and it wouldn't bother me for us not on more than 40% of spot in the final analysis.

Got it sounds very helpful.

And then just on ways to Webster can you maybe for a little more color on why you decided to move forward on in the UK structure and any more specifics on the mechanics basically had is tied into our current system and just lastly on that any sort of capital avoidance you can sort of expect as a result this.

Well, it's a pipe and a pipe so we do our own scheduling way there's no.

Other partners have no idea is barrels around that bye.

Other than turn in valves, we operate the thing just like we do our other pipelines.

And it's when you look at in on a per barrel basis is pretty pretty cheap.

Pipeline Brent you have all thing I'd add on that as I want to sit on the bottom I want to address our pipeline of pipe.

If you look at.

How enterprise Optimizes ask somebody is just a lot easier for us to optimize something that is 100% owned by enterprise. So that was a thought behind that.

No that's inherent competitive right, obviously, there's economies of scale on your building in pipe.

And then when you're building.

And just have an enterprise to deal with in terms of how we go about our family business Thats why it makes sense for us.

Got it appreciate the color thanks, everyone.

Thank you next question comes from Tristan Richardson from Suntrust. Please go ahead.

Hey, good morning, guys appreciate the context and perspective on slide five as it relates to payout.

As it relates to returning cash in the way you normally defined target for repurchases. This morning.

Can you share your thoughts on defining this repurchase target on a regular basis, whether it be annually or otherwise.

Well.

Tourist and were.

To a degree where we're entering into two and a new phase two would agree.

And with.

Again in 2000.

2020, we've got we have the $3 billion to $4 billion of growth Capex.

The.

Then when we come in and look at 2021 at two to 3 billion.

Given that our leverage is in the middle of our target range.

And if if we come in and again.

The organic projects that we have we like.

We're going to be very capital disciplined in here, but we're entering a phase that if we if our leverage is where we're if we're comfortable with it being and we continue to see that half of the business performed the way it does growth capex in that two to 3 billion dollar range not only will we have free.

Cash flow as as we define it but then we will also have additional cash flow just when when you come in and you even after you subtract.

Dividends, so we really enter into a whole new period of flexibility and where will we have the potential if we don't see compelling.

Organic opportunities then and the balance sheet is where we like it I think that comes back to that you're looking to come in returning more capital to partners.

Helpful. Thank you and then just a follow up question just on on Chanel.

May have missed in the prepared comments, but down about volumes sequentially in the quarter and how we should think about kind of general trajectory there.

Doug on ticket and then I'll jump in.

Hi, this is.

Talking handling.

With respect to shut out it's part of our entire system in the Permian integrates with our Mapel system. Our seminal pipelines are SAP rail pipeline. So there's some seasonality associated with the volumes.

For example, Conway to Mont Belvieu could impact was on some of what that said.

Men tones online, we're seeing higher volumes.

Presently were sent around 300000 barrels a day.

And we've also been successful and getting some additional contracts recently and we're in discussions with multiple parties right now on more contracts. So.

Going to keep driving according to the bolt.

How much you've blown option on 300 that that's what we're pulling 300 today and thats without alpine high.

What we expected it to do and I spoke in my script about up.

Some underperformance and Orla.

We have backfill that as I said in my script best supply you can have artful processing plants, and we're going to have both processing plants on a go forward basis. In addition tons in some negotiations with people to.

To get third party movements on that pipe.

Thank you guys very much.

Thank you next question comes from Gene and Salisbury from Bernstein. Please go ahead.

Good morning, just one for me and a lot of Frac capacity coming online in the first half of this year can you just get asked the latest have what you're seeing and pressure on re contracting rates because of that.

Zach do want to you'd want to freeze up are you on take it.

So far is then.

Still a good appetite.

Oh and look at all of our contracts one or we don't have a whole lot of contracts roll. It offers did period of time.

But even when we go in and TBSA producers I think the market is normalized I think we were in a bit of abnormal market for 2018, and 2019 and market is normalize on contract rates normalizing on term, but we still see how the appetite for.

Users and take out stressed this.

Hello.

We are more than four.

So your overflow in Louisiana, we're slowing in Louisiana overflow into storage.

Every frac to in our portfolios for that and we're not too concerned at this point.

Well and I talked me. Thank you.

Thank you next question comes from Christine Cho from Barclays. Please go ahead.

Good morning, I'd like to extend my congrats everyone on the Union mission.

Starting with.

Capex opportunity post 2021, what do you see the opportunities for spending being.

Just as an industry, we seem like we are going to be while capacitized time factional Shannon LPG export price for the next couple of years after fourth quarter this year, especially if production.

Well and we seem to me over Capacitized on Penny per annum.

No beyond the bought project or the opportunities just more bolt on or does it increasingly become more Pac 10 oriented.

Well, we think bed Cam is about.

Christine.

But.

In terms of slowing production.

What a Tony tells us is.

What is five to 750000 barrels a day of growth.

Routing and none in 2020 gross well, yes, obviously slowing but production this not slow.

When we take a long term look currently let's let's say up to 2025 years.

We expect production to continue to go particularly in the Permian Basin. It is the stand out in United States I'm, having a hard time with 500 to 750000 barrels a day and then slow growth frankly, but in terms of where we go from here, we like primary petrochemicals, so PDH too we like.

We've got one heck of a anchor customer, we like creating a petrochemical midstream service.

Business, meaning storage and pipelines and both ethylene and propylene.

We like our export position, we think that grows and we're doing things as you know to expand.

Expand that so.

That's what I see us.

I don't see any big acquisitions or anything like that unless some.

Hi license deal comes along but I see us continuing to go downstream and we using that as leverage to do more upstream.

Okay helpful. Thanks.

And then I know there were a lot of questions on the LPG exports I actually had a question on the ethane exports and demand out there we don't seem to get that much variability.

The ethane export volume, even when ethane pricing move pretty low so is it fair to say that the markets abroad are absorbing as much as effort as much as Dan Hi, Paul and therefore to seeing increased caremark facilities that can take ethane feedstock must be belt.

I think it's fair to say that at some point to point.

Commodity and you know what people have to spend to receive it is not small dollars to ship. It is not small dollars.

So I think it evolves, we said when we put that project in that this was not going to be like LPG is going be a point to point milk run type of the deal and that's what it is in order to grow that we have a lot of people talking to us, but they've got to spend money to be able to receive it.

In that context.

You think that like just given all the dynamics that LPG export seems pretty constrained that like I think account nothing negative this year.

Well if it does we're going to like a lot of money, but.

I don't think so personally.

Okay, great. Thank you.

Thank you.

Next question comes from Jeremy Tonet from JP Morgan. Please go ahead.

Hi, Good morning this Charlie.

First question just on project timing I notice Frac tenant 11 slipped a bit also didn't see eightx expansion. There are just wanted your thoughts there.

Justin.

Our Zack.

Yes, we did see and slipped slightly I think we had a pretty aggressive scheduled to start with.

But from an impact to enterprise.

We are still taking all the product service contracted for 10 and 11.

We've got to best in class storage facility.

So those are all that why that is going there and our producers don't even know.

So once they get up both will frac it all out of stores.

And that hey, thanks.

Yeah. We're still move this is Todd we're still moving forward baytex expansions going to be sometime in 2022 early 2022.

Okay, and then some buybacks when thinking about the 2%.

Just before after working capital changes just thinking about.

Newer projects coming to service that impacting operating accounts.

When when we think about it and when you when you look at sort of when we ticketing context.

As far as when we compare to the other other S&P sectors. It is the gap term.

Cash flow from operations and so it is after working capital changes but.

Working capital changes can be quite positive.

Okay, Great and then sorry, one last one and I know you guys get the question a lot just your thoughts on C Corp conversion, just getting kind of the price reaction. We saw last December after the conference and the commentary there.

Yes, really no no updated thoughts around that at this point in time something that we continue continue to look at but really no update on the evolves.

Okay. Thank you.

Thank you. Our next question comes from Pearce Hammond from Simmons Energy. Please go ahead.

Good morning, and thanks for taking my questions. My first question that you've discussed the possibility of redirecting Midland to echo to back to NGL service and just curious with the latest was on that.

Latest his day and encourage service for the foreseeable future, but we have the option to always yes kind of a need option. We can take it out accrued service from put in NGL service, and then Rintega that NGL service, but it back and grid service.

It's called an option in Brent.

Hello.

Great and then as a follow up one theme during the Q4 earnings season, thus far spent weakness in the global chemical sector and just just curious if you're experiencing that in your petrochemical segment and what's your outlook is for the segment for 2020.

Yes.

This is Chris down overall, our demand still remains fairly strong, which we've seen some weakness at the end of fourth quarter and our export volumes to Europe , but but that demand is picking back up again.

Great. Thank you.

Thank you.

Our next question comes from keeps family from Wolfe Research. Please go ahead.

Hi, good morning.

First just wanted to revisit this sources and uses of cash for 2020. So you mentioned the 3 billion dollar debt offering billion and a half maturities and then you said the remaining billion and a half could fund about 50% of growth Capex give or take.

It seems like I think 2019, you did at least two and a half billion of DCF above the distribution.

So just it seems like you are going to excess cash on the balance sheet above what's needed to fund capex. This year. So can you just talk about how you would look to deploy that you wait and see how capex shakes out would you pay down debt or just how you're thinking about that.

Keith right now, we're just seeing how the year progresses.

But again, we've got.

$3 billion to $4 billion of growth growth Capex and even if you come in and you say, we're at the midpoint of that range of three and a half billion a growth Capex you divide that.

Multiply that by 50% that's 1.75, so that would totally consume the remaining proceeds from the debt deal than we would be coming in and using.

Either.

Again cash flow from operations or borrowings under our credit facility to come in and fund the reminder.

Okay I was it just seems like cash flow from operations and the remaining portion of the debt funding is going to be more and then you need for Capex in 2020 is that how you see it looking out right now.

[music].

Yes, Hi, Keith if we're getting early into the year.

Yes, we may exceed that coming some of that one of the reasons, we're talking about coming in into news and 2% of the cash flow from operations for buyback.

Okay, Great and then.

Apologies for this I'm not sure I'm fully understanding the Midland Echo three so Jim I think you said it wouldn't run more than two to 300000, a day before wink to Webster starts ups I just want to clarify any three is still a separate pipeline or expansion projects for you that distinct from when to Webster at this point.

The three is a part a week to Webster as an undivided joint interest.

It's a pipe and a pipe.

Okay. So theres no incremental capacity that you guys are separately, adding in 2020. It's just you are now partners on when to Webster.

Exactly right.

Great. Thank you very much.

Thank you.

Next question comes from Oswald prop Honda from Bank of America. Please go ahead.

Good morning, everyone. Thanks for taking my question two quick ones first just wanted a bit more clarity on the buyback guidance today sued reconsider the guidance as more of a programmatic, perhaps on a quarterly basis or will it be opportunities.

Opportunistic like last year.

Again, I mean, what we're all were intending to do this year is intending to use 2% of cash flow from operations.

To come in and do buybacks now, we'll we'll do that opportunistically during the year.

So I don't know if you want to say, we're going to be opportunistically programmatic or programmatically opportunistic.

Yes, that's what we're intending to the.

Got it got it.

And.

Another quick one I remember last year, when we had the constrained in the Permian and you're moving quite a bit of spot volumes. I think you mentioned that the cost of using DRA, where as high as $2 per barrel has that.

Abated now that there's been more capacity.

Moving to battles in the Permian.

I think we're still using some VR edge rent a gram we're still we're still using that we've learned to optimize it are we can get that incremental that last $2 was in the last incremental barrel and we watch that vary we watch that very closely on some things.

$2 are not doing $2 now I think what are the things that Brent can jump in.

We're gonna have four pipelines out of there.

When we optimize those four pipelines, we would probably move being 1.3.

4 million barrels a day Brent.

That's optimizing it so you're getting the lowest cost possible, but if you.

Lift of spreads there probably take that to 1.8 million barrels a day at a cost season. They are at that assume some of those and service, but yes, just like everybody else I mean, we have our cost of what the next tranche tranche is.

Got it thanks that helps.

Thank you.

Our next question comes from Michael the Pvs from Goldman Sachs. Please go ahead.

Hey, guys. Thanks for taking my question and congrats everybody I'll, then executive announcements.

He asked this one but because that's obviously very unfortunate very scary globally, but are you seeing in January at all in impacting the export markets, yet breather crude or Ngls, given what's going on in China, and how it's impacting business and how it's impacting demand.

China can you just kind of talk about what you've seen over the last couple of weeks and how you think about the range of the impacts on including on on your guidance levels for.

Look levels for how you're thinking about 2020.

Yeah. This is this is Brent so quick answer is we haven't seen an impact in terms of volumes, we haven't seen an impact in terms of fees of dock.

And whether its freight what rates are weather.

Yes, I mean, there's things that happen.

Thanks.

What you'll see on our system, it's no different when we picked out traunches to move from Midland to Houston.

People that are the most cost efficient are going to move the volumes. So.

People are the least cost efficient start turning off or start decreasing volumes and we'll look at different markets and looked at different operators and look at different lack of integration of one owner and my guess is those are the ones, who are probably going to experience that sort of situation first.

And the ones that are most cost efficient, we'll continue to move to volumes.

Got it. Thank you one quick follow up in the quarter, you talked about Midland to Echo line, a little bit in the release can you just give a little more detail in terms of kind of what's happening on pricing our tariff side, there relative to the prior quarter of prior year.

And it's this is Bryan again, I'm going in terms of tariff I mean, it's it's not a whole lot different than the last question I mean.

The volumes I won't change I mean that pipeline than whole every single day.

In terms of how the economics work on that my personal opinion, I think ship owners, when because things get less efficient from a shipment perspective, but ultimately its consumers or the producers of of of the product, but ultimately bear that cost.

Got it thanks, guys much appreciated and now I will obviously follow up offline.

Thanks.

And this is Randy Burkhalter work, we have time for one more question brings.

Sure. Thank you Sir our last question comes from Danilo Juvane from BMO capital markets. Please go ahead.

Good morning. Thank you for squeezing me in one question of clarity here.

How are you guys thinking about the buyback relative to the 2% of.

CFO , if you take out the all thinking.

Units in cash versus equity does that change.

Got you.

Yeah, I mean in our mind that would be good plan.

You can come in and so thats applying some of the buyback of against the.

Since the against the OTI.

Okay.

And our mind you to the extent that we use cash consideration.

On the OTI, a transaction that essentially would be a buyback.

Gotcha.

That's it from me thank you.

Thank you know him if he would you give our listeners the replay information for.

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Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participation you may now disconnect.