Q1 2020 Earnings Call
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Ladies and gentlemen, today's call is scheduled to begin shortly until that time. Your life will again be placed on these calls thank you for your patience.
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Ladies and gentlemen, thank you for standing by and welcome to the first quarter Twentytwenty earnings Conference call.
At this time all participant lines are in English only node.
The speakers presentation, there will be a question and answer session to ask a question. During this session. You want me to press Star one on your telephone we ask that you limit your questions to one question plus the follow up question.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Randy Burkhalter, Vice President of Investor Relations, Sir the floor is yours.
Thank you Jane.
Good morning, everyone and welcome to the Enterprise products Partners Conference call to discuss first quarter earnings for 2020.
Oh speakers today will be tote, chief executive officers or general partner, Jim Ci and Randy Fowler.
The or other members of our senior management team and attendance today for the call.
During this call we will make forward looking statements within the meaning of section 21 that you have the securities Exchange 1934 based on the believes that the company as well as assumptions made by and information currently available in that process management and.
Although management believes that these expectations reflected in such forward looking statements are reasonable.
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 in the forward looking statements that may be made during this call with that I'll turn the call. The Jim Thank you Andy.
We had a record year in 2019.
And our first quarter results show that last years momentum.
Carried into the first quarter.
We reported net income of $1.4 billion were 61 cents again, representing a 7% increase from the same quarter in 2019.
Distributable cash flow totaled 1.6 billion and provided 1.6 times coverage.
And we retains $574 million a DC yeah.
Then in March everyone's world turned upside down as we were invited by an invisible enemy Corona buyers for peacefully co Goodnight team.
This is not the first time in my lifetime that we've been invaded Bart invisible enemy.
I remember is a little boy the most feared disease of the Twentyth century polio.
It was a highly contagious virus.
Without warning.
Paralyzed in it killed it but people in something called an iron lung to support their breathing.
Equally we got polio were isolated for mothers quarantine new P. would.
My mom, who was a registered nurse call polio.
I remember standing outside the hospital with my Little brothers and my Dad, So we could see or through a window.
Mitigation steps were taken.
Swimming pools and movie theatres were close we weren't allowed to go to public playground and effect, we practiced our own kind of social distancing.
What I don't remember you're shutting down the entire economy.
And 30 minute million people, losing their jobs in one month.
Just as polio was defeated so we'll cobot 19.
Just to show pass.
It's works with changing our behavior is we've done I've learned what social distancing is my hands I've never been as clean as they are.
As this a pandemic spread.
Our primary objective was the safety of our people.
Our secondary objective was the <unk> continuity of our business.
80% of our headquarters people are working remotely from home.
Zoom meetings are being held routinely throughout the day and throughout the company.
And as I understand that there's been a lot of zoom happy hours after work.
So even though our folks are working remotely through.
Through technology.
And alcohol and happy hours in work continues to be a part of our culture, a part of idea at night.
We immediately stepped half our pipeline control people at our backup location and San Antonia.
So we're we're operating our pipeline inside of two locations to make sure that we always have an eye on our pipe and our plans.
Many of our larger facilities went to seven on seven off to allow for social distancing.
Those of US that remained at our headquarters were disciplined and distancing.
And hygiene.
Are there your rail has become a valuable commodity and enterprise.
I've been through many cycles in my life.
But I've never seen anything like what we're going through now.
Demand literally fell off a cliff in March seems like it was overnight.
As demand cratered are good buddies rush in Saudi Arabia pile them by public an additional 4 million barrels a day of crude or enter the market and the result was what no one would have ever guess negative price crude oil.
It enterprise, we immediately adjusted to this reality.
Our operations people that have gone into a managed cost mode.
Our commercial groups have reduced capex from almost 4 billion in 2020 to two and a half million a billion of which has already been spent.
Six potential joint ventures are being negotiated which could further reduced capex.
And our businesses are beat our LPG exports continue to be virtually sold out.
Back in May with little look could be a record month.
Three NGL wells at Mont Bellevue have been converted to refine products.
Tanks have been converted to crude oil services are people that down places to store crude oil the two months ago, we didn't even know existed.
To enhance our financial flexibility with it a billion dollar credit facility to bring our liquidity to almost $8 billion.
All of this and much more is being done to succeed in this environment.
Chaos leads to inefficient markets, which leads to volatility.
We don't fear Valentin.
Volatility we embrace it.
And inefficient markets worked our strength.
Some of our businesses are steady isn't what rock.
Our NGL fractionator, well and will remain so and our NGL pipelines overall haven't seen a downturn.
Our Permian crude oil pipelines are fully contracted and see way is virtually full.
Our petrochemical business is challenged as motor gasoline demand has fallen in refinery runs have been cut.
Once refinery runs improve so will our petrochemicals.
Natural gas throughput on our Texas, and Louisiana Intrastate pipelines have been bull, while our natural gas processing has suffered this is a business that I believe has potential upside in the second half of the year.
Opportunities around our assets or abundant.
Our storage is worked its way Didnt go because there is contango in every hydrocarbon and we've even seen some cases backwardation and they're all location differentials around our pipelines.
It's anyone's guess as to when the economy will open in things returned to normal.
During this time, our people are driven to continue to perform to deliver the real results that create the value theyve always deliver.
I'll give a personal perspective.
As a young Naval officer.
And then at tax helicopter squadron and the meat called Delta Vietnam.
I took a great deal of pride that I was part of a special fraternity.
It took a long time to have that feeling again.
But I have that same kind of pride today being a part of this fraternity.
At enterprise, everyone understands the mission.
And understands their role in accomplishing the mission.
The mission.
Add value.
How we add value may change, but we always add value.
In closing we won't every member of the enterprise family.
To know how much we appreciate all that you do.
You are this companys greatest asset you are what makes this a special fraternity and with that I'll turn the call over to Randy.
Thank you Jim and good morning, everyone.
I'd like to remind remind you that our first quarter earnings support slides are posted on our website for your reference.
Starting with income statement items for the first quarter as Jim mentioned net income attributable to limited partners for the first quarter 2020 was $1.4 billion or 61 cents per unit on a fully diluted basis net income for the first quarter included a $187 million or.
Sent per unit benefit in deferred taxes expense associated with the settlement of the liquidity option on March 15 in subsequent accounting for related deferred tax liability.
Moving on to cash flows cash flow from operations was $2 billion for the first quarter of 2020 compared to 1.2 billion for the first quarter 2019, excluding changes in working capital accounts cash flow from operations for the first quarter.
2020 was 3% lower than the first quarter of last year.
Free cash flow for the first quarter, 2020, which we defined as cash flow from operations.
Minus investing activity plus any contribution from non controlling interest was $916 billion.
Free cash flow was 3.4 billion.
For the last 12 months ended March 2020, which was 78% higher than the $1.9 billion reported for the last 12 months ending March 2019.
We define payout ratio is in some of cash distributions and buybacks as a percent of cash flow from operations. Our payout ratio was approximately 56% for the first quarter of 2020 cash flow from operations.
In January we provided guidance that we expected to increase our distribution related to the first quarter 2025 quarter percent to 44 in three quarters of cent per unit.
Given the economic sudden stop and uncertainty related to Corona virus, we thought it was prudent to hold our distribution flat at 44 and a half since it will be paid on May 12. This distribution represents a 1.7% increase when compared to the same quarter of 2019, given the current macro.
Economic backdrop, we will be deliberate and our board will evaluate our distribution growth quarterly in 2020.
With respect to buybacks, we purchased $140 million of common units during the first quarter 2020 substantially all prior to the Cobot 19 outbreak, which is up 6.4 million unit reduction.
Additionally, NPD.
MPD distribution reinvestment plan and the employee unit purchase plan purchased a total of 1.4 million PPD units in the open market in the first quarter and affiliates of our general partner purchased approximately 1.5 million units in the open market during the first quarter 2012.
Now moving on to capital expenditures as Jim mentioned, we effectively reduced 2020 capital expenditures by $1.1 billion in our initial review, we now anticipate spending between two and a half and 3 billion in growth capital projects. This year, we currently expect Rocap.
Total investments for 2021, and 2022 to be approximately two and a half bill again, and 1.5 billion, respectively based solely on sanction projects already approved.
As Jim also mentioned, we're currently in negotiations on joint ventures, which could lead to refer further reduction in gross capital expenditures for 2020, 2021 and 2022.
We currently expect sustaining capital expenditures for 2020 to be approximately $300 million, which is a 100 million dollar reduction from previous guidance total capital investments in the first quarter 2020 were $1.1 billion, which includes 69 million of sustaining.
Capital expenditures.
Turning to capitalization, our total debt principal outstanding was approximately $30 billion as of March 31, 2020, assuming the first call date of our hybrids and as well as the final maturity date. The average life of our debt portfolio is 16.1 years and.
20.2 years, respectively, our average effective.
Cost of debt is 4.5%.
As as mentioned on our last quarterly call. We completed our issuance of 10 year 31 year and 40 year notes in January 2020 of the aggregate amount of that issuance was $3 billion. We're very appreciative for the continued strong support from our term debt.
Bastards in this offering.
Currently we do not expect.
Have the need to return to the debt capital markets in 2020.
Adjusted EBITDA for the trailing 12 months ended March 31, 2020 was $8.1 billion and our net consolidated leverage ratio was 3.3 times after adjusting debt for partial equity credit.
In the hybrid debt securities given by the rating agencies and further reduced four and restricted cash.
Our consolidated liability was approximately $7 billion at March 31, 2020, including availability under our existing credit facilities and approximately $2 billion of on restricted cash on hand as of today, our liquidity is approximately $8 billion with additional liquidity.
Provided by the New 364 day facility entered into on April 3rd we are grateful for the support and responsiveness of our bank group, providing us additional flexibility. During this time, we ate we anticipate elevated uses of working capital in the near term for contango opportunities.
Regarding our cash balance our only remaining debt maturity in 2020 is a 1 billion dollar maturity of 5.2% notes due in September.
I'd like to thank our employees many of who were challenge to work from home, while maintaining their same level of productivity like to thank them for their efforts not only in our business content continuity, but also in the comprehensive Sox testing and our accounting controls and processes.
To test the earnings we announced today and the 10-Q that will be filed on May.
I want to take a minute to speak to the durability of our business as we see currently.
Our top 200 customers represented 96% of 2019 revenues.
78% of the revenues from our top 200 customers were comprised of investment grade customers are those back bilateral credit. This is based on published debt ratings through April 23rd 2020. So it takes into consideration three of our former.
Early investment grade customers that have become high yield fallen angels in the past few weeks only 11% of the revenues from our cop 200 customers represented independent Pnp companies.
Our earnings are typically 80% to 90% fee based depending on the commodity price and spread environment. When we break down the fee based areas, we compartmentalize those into three broad categories.
First take or pay for minimum volume commitments, which comprise 45% to 55% of our fee based earnings second durable fee earnings, which we think of is storage throughput and.
Wholesale deliveries a wholesale residential deliveries make up another 20% to 30%.
See earnings would more volume metric exposure, such as wellhead dedication and certain demand base volumes make up the balance even within our volume metric based earnings we have a high degree of confidence and a lot of the earnings capture given the many ways our commercial and operational teams have household to keep our assets full.
All such as repurchasing storage and pipeline assets.
Finally, I'd like to integrate our financial objectives as to defend and maintain our distribution, our strong balance sheet and our debt right.
Maintain ample liquidity and continue to high grade and invest in projects underwritten by high high credit quality customers long term fee based contracts and underpinned by solid long term fundamentals before I turn the call over to Randy we would like to time, our long term investors for their fleet.
That confidence and support for these volatile times. So all of you families sites.
Okay. Tina this is Randy we're ready to take.
Questions from a listeners, but before would be I'd like to remind them that please just limit your questions to one question and one follow up okay. Tina Thank you.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question first the county and please limit your questions to one question and one follow up question. Thank you.
And our first question comes from the line of Shneur Gershuni.
Please go ahead good morning, everyone.
Maybe.
Maybe to start off here and do appreciate all the comments that you made in the in the prepared remarks, but I was wondering if you can talk about the current environment as when I say, Kurt I mean with respect to April versus versus let's say February.
Helpings are going from a volume metric perspective.
On your traditional fee based in Pops business, not specifically talking about this this spread differential business, but hello, how are things going with respect to that business.
You know as Theres been accelerated.
Big declines in talks of shut ins and so forth.
Hey, how materially worse do you think volumes are going to be.
In the second quarter, if they are consistent with where they are today, let's say.
Okay well.
This is Jim.
I think I've said in my prepared remarks, so far are for example, our LPG export facility.
Is pretty full Brent.
And.
And there has been.
I think I've said that our crude oil pipelines to look at our crude oil pipelines out of the Permian.
We expect some downturn in production yes.
As crude oil pipelines I think we have a million have barrels a day of contracts, Brent theyre, all take or pay contracts and.
They all have associated Doug deals some of them storage deals that are all take or pay and as Randy said, they're all investment grade.
From an NGL perspective, we are seeing from the supply side, we're seeing some slight downturns, but on the demand side, we're seeing in.
Increases.
We're I think we're probably most challenged right now is our petrochemicals as refinery runs have been cut but I see upside on that as refinery runs increase I think our petrochemical get business in the second as.
We'll do it will do a hell of a lot better than its doing that Brent you got anything else.
No. Thank you I think you hit it I mean on the on the flow side, we'll have a record month for Lpgs in April.
I have closed a record and may maybe a little bit less than April and as we go out further.
So you could see some effects on production declines, but it's in the end.
Doc spot Doc spaces over 90% contracted for LPG Asian.
Crude oil for take or pay.
So we haven't seen big drop offs yet.
I think maybe on the on the GMP side, we'll see some volume decline on that side, but in terms of of the customers that we deal with if you looked at the barrels they're going to be cut out.
The barrel, that's the highest cost producer will be one.
Second barrel that we'll probably get cut out is that the highest cost to get to market and then the third will be some sort of a have a quality issues. So if you looked at our system.
And our customer base I think were I don't want to say will be the last ones to see reduction volume but.
Thanks are pretty well position in terms of our customer base to keep on producing good.
Some sort of level.
Now that that makes perfect sense really appreciate the color there maybe as a follow up in your prepared remarks, you talked about.
And attempt to reduce expenses and you also talked about keeping the distribution flat.
Just kind of thinking that on a go forward basis.
Are you able to handicap, how sizable your your OEM cdna expense reductions could be on a go forward basis and does the commentary about keeping the distributions flat.
Also removed the objective about a 2% buyback target from CFO as well too or is that still in place.
Mission or on the on the.
Buyback target Weve, the company bought back $140 million worth of units in the first quarter.
And you know if we use last year's cash flow from operations as a guide 2% of that number was about 100 130 $140 million, Bob I think weve.
Pretty much addressed that I think.
For a long time are the way we returned capital to investors is consistent distribution growth and again. This this year we added the.
The additional component of doing the buybacks, but I think right now there's just too much uncertainty.
This point in time with this economic sudden stopping and how long do this.
The effects of this corona virus last on the overall economy and energy demand. So I think we'll take will take a look.
Quarterly as the board meets and see how the business performed.
In comments on the cost.
What itself on the cost the cost DNA.
Well.
Our folks are folks Ram banking operations is.
Is focused on reducing opex and sustaining capex and I think.
I think we I don't know how does that answer. The fact that we are hyper focused on cost and were hyper focused on capex I don't know how to answer it other than that.
Okay perfect. Thank you very much and remember the stay safe and Stacy.
Thank you. Thank you.
And your next question comes from Christine Cho with Barclays. Please. Please go ahead.
Good morning, Thanks for all the color.
If I could start with on export.
Just remind us how your contracted on the export side for crude LPG ethane and ethylene.
Relative to the capacity.
How much of the MD fees are the volume currently and I know you Guy and also historically said that you pay a deficient or the customers have to pay the efficiency charges. They don't pick up the volumes are they cancel how much lower at that rate relative to if they want to pick up the volumes.
This thing this is Brad Seacrest.
So on a high level for LPG is the contracts and as you go out further and time this percentage goes down slightly but.
On the LPG side 90 over 90% are take or pay.
If for some reason the vessel Doesnt show up.
There's there's a payment thats made to enterprise.
That is essentially an offset to what it would be for us to operate and recover our variable costs. So theres kind of a fixed reservation.
There's a there's a reservation component and then there's a if they do show, but the vessel theres a variable component that offsets our variable costs.
And that various contract by contract in term of term.
On the crude side again, the volume is over 90%.
The duration on our crude contracts is actually longer than the LPG side.
And that component is take or pay and there is no sort of offset is take or pay whether the vessel shows up or does not show up to fee is essentially the same.
On the ethylene side I'm looking at Christiana next to me.
All those I think it's almost on a percent 90% to 100% Chris that are being contracted as take or pay that's correct. Janet 95% of our capacity has been has been contracted to take or pay and it's set up similar to how Ngls, where where there's a C.
And there is a component that is basically the variable cost if they if they don't show up to take or pay takes basically keeps us hole on the policy when it comes to export side and I'll, let Jim and Randy.
Correct me, but from a variability.
To our earnings as it relates to exports, it's essentially what you're talking about as some sort of call. It walkup opportunity. We would have on volume mix, it's pretty much set in stone.
Thank you that's really helpful.
And maybe if I can just follow up fasteners question about the cost.
How do I think about what sort of cost savings, we could potentially be an event about around return.
Midstream asset thing to generally be hi, thanks, Todd.
So then more notable cost saving seem to come from shutting down processing plants are non Mont Belvieu fact facilities or maybe a conversation on a pipeline.
Optimized dumb, but is there anything else, we should be thinking about gen beyond the standard Gionee cod.
This is Graham we looked at all aspects of how we operate our systems in terms of overall cost reduction.
As Jeff said were hyper focused on variable cost reduction or whether it be heavily how much power we use for pump station operation. If there is declining volumes from fixed.
Fixed cost only have number strategies that we that we used to reduce our.
Reducing extend our maintenance cost.
We have strong focus on.
I'll focus on reliability and predictive maintenance and we use those tools.
All the things we've got.
Help us to to really.
Run those run our cost.
And manage those manage those costs and ill will put a lot of targets out there, but certainly on.
From a standpoint, where we are looking sustainable.
We can go 10% or lower for some period of time.
Thank you.
And Kristina travel and entertainment expenses are down to.
Okay.
Okay.
And our next question comes from Kristen Richardson with Suntrust. Please go ahead.
Hey, Good morning, guys. Just curious can you talk conceptually about the range of Capex for for 2021, seemingly kind of unchanged from where you talk about sort of general opportunity set in any given year.
The deferrals you saw in 20 or the deferrals you made in 20.
Sort of pushed into 2021, it's keeping that elevated or.
Or is it just to say that the project outlook for 2021 is largely unchanged from where you see.
In any given normal year.
You why don't you start I'll jump in yeah, Kristen pretty much it was a combination of things because we had some some projects.
That the capital expenditures were deferred so give some move from 2020 into 2021.
But we had some that were.
Definitely deferred so they dropped out of 2020 and 2021, so a little bit of a combination above.
Helpful. Thank you and then I mean, maybe just conceptually at a high level can you talk about a capex floor for enterprise.
Capex could be in any given year, where only the most critical and essential projects or go ahead or.
Yes.
What that could look like in any given year.
Interesting.
We're where a pretty unusual time right now.
I'd tell you if we if we think about base level of opportunities. It seems like invariably we have opportunities to come in and de bottleneck the system or do some.
Two.
Some opportunities to debottleneck, the system or come in and reduce costs and.
They can be 10 million 25, $50 million, a throw and all of sudden in a whole year. It adds up to 250 to 500 million dollar. So we have those top opportunities.
As we think of things right now we're on the horizon, we don't see.
A lot opportunity sites and from the upstream side of our customer base, but we did very well see some opportunities on the on the downstream side and on the demand pull side as well so I think as you're thinking about it probably something in the billion billion in a half 1.5 billion opportunity from a growth Capex is.
The good base level.
Helpful. Thank you guys very much.
[laughter].
Your next question is from TJ Schultz with RBC capital markets. Please go ahead.
Hey, good morning.
You talked about finding new.
Storage capacity throughout your system, how much available crude storage capacity or what percent of your capacity has not contracted that's available for contango.
More than I thought.
Brent take it at all I mean, that's that's that's fairly sensitive in my opinion.
So in terms of how we're going to contract this stuff.
Is there is a chance for for us to have some opportunities long term with people and it's probably not going to be a different.
Approach than we did some of our crude oil pipelines as there was some short term opportunity and if it made sense for us and it made sense. The customer we did long term deals on the pipeline sought out of the Permian So but may have.
Outlets so great early on looks pretty good now in the case a storage, it's a balanced frankly of us trying to secure long term deals and.
And then take advantage of the opportunity, but in terms of specific numbers.
I'll just echo Jim.
You take a hard look at your business and you get a lot of people involved and you find things that frankly, you forgot about and we've been pleasantly surprised with how much crude oil storage that we have access to.
Refer back to my script notes, we think our storage is worth its weight and gold.
And.
One other thing that we talk.
One way just three months ago feels like it was three years ago. When we had our first quarter, our fourth quarter earnings call, we talked about in 2019.
Had what we would call.
Outsize spread capture in 2019 that we thought that maybe $500 million to $600 million of that would not repeat in 2020, we have the potential to come in and have that comment number again 2020.
Okay. Good thanks for that.
Just on the follow up for Jvs I think you mentioned six potential jvs are in discussion right now have those.
Conversations just.
Given what's happened in the market had those shifted accelerated slowed down.
At this point and are you talking to more strategic or financial partners. Thanks.
Well first of all we're talking to strategic partners.
And secondly, yes were in discussions with six said say three of those are highly engaged.
Okay. Thank you very much.
Our next question comes from Pearce Hammond with Simmons Energy. Please go ahead.
Good morning, and thanks for taking my questions and Jim I. Appreciate your prepared remarks, so it's really interesting.
My first question pertains to force mature are you experiencing any force Ms. Your calls.
Take or pay contract contracts and assuming we fill for oil storage storage and producers have no place to ship the crude.
That would be a reason that they call for a force for sure.
And we would call that a price Ms. Your and that's not in our contracts we've looked at all our contracts we feel pretty comfortable.
Okay.
That we're not going to have any issue would force matures as it relates to Pete into price.
Okay. Thank you for that and then my follow up it's what does your outlook for us oral and LPG exports over the next two years and could you see a situation whereby some of your oil export capacity gets re purpose to LPG exports.
I'll take a shot.
Tony My follow up.
I think and.
Our LPG export facility I feel pretty good about.
About that for this year.
I don't know who the Hell can answer you on crude oil.
Fortunately, we've got a lot of most of our crude deals are take or pay at the dot Brent I think you said, 90% but.
But it really boils down to one dsix this economy come back out in terms of.
Storage and I, just fundamentally don't believe that you Philip storage something always happens that.
That that creates an outlet our stops production.
We.
Thanks, Brent we have seen here recently I mean, we we're exporting what a million barrels a day accrued plus before this and then all of a sudden everything stuff that I think we're getting calls and starting to do some deals on crude exports.
Yeah, I mean were if you look at first quarter.
We're on.
Pace to track kind of the same numbers as second quarter, but.
If there is taste to be made and I understand it that production declines than kind of by default I would say that the crude exports are going to decline I just take a lot of those crude exports or kind of walked up opportunities for other terminals.
I would think that if a people have take or pay contracts with us I will I don't think you'll see a big impact on volumes on our side.
Certainly not Garcia big impact on dollars on our side.
In the case of trying to reconvert crude LPG.
I mean, thats I think that sounds much simpler than than it is I mean, it's essentially a doctor's what you gain.
And if crude oil production declines are going to make the assumption that NGL production will go with it I may see different basins returns that are crudes centric. So I would think along those lines or maybe a resurgence of some of those basins that maybe value or have been jails and gas. So I think there's some opportunity there for us.
Okay. Thank you very much.
[music].
Your next question comes from Gene and Salisbury with Bernstein. Please go ahead.
Good morning, I, just wanted to follow up on the major Capex totaled 2021 and beyond.
As noted before it looks like a lot of it has been deferred and and I think thats at the play technically I am just wondering if that's not the bigger ticket items like PDH and commitment to Echopark, how we should think of it is now being cancelled all.
James today, so our Eric major cannot be doing that.
Yes, both of both of those projects are our underwritten with long term contracts. So.
So on and our mine in our mind not cancelable.
And so bubble.
Okay and fair.
And then I think I missed that that Texas or see well decide whether to Texas Tech.
This impact take or pay contract.
The answer to that has no. It I don't believe for a minute, they're going to do anything in terms of pro rationing productions.
Okay.
Thats, helping me thank you.
Our next question comes from Keith Stanley with Wolfe Research. Please go ahead.
Hi, good morning.
Just a follow up on the billion dollars Capex cut for this year. It seems like the major sort of capital projects are only delayed really slightly and the ice on was was cancelled.
So how how much of that billion dollars as changes to kind of the major projects you guys laid out versus just the environment less need for well connects and smaller things on the margin that you're able to pull out of the budget.
Yes.
[noise] winslet.
Yeah.
Im sorry could you repeat your question one more time.
The 1 billion dollar Capex cut I'm, just I'm wondering how much of that is from the major projects you lay out in your slides, which are really only delayed slightly.
Versus other things just in the environment, where you have fewer well connects and just smaller projects that normally support producer growth.
Yeah, I'd say it was ambitious.
Yes, I would say.
A significant amount of it was attributable to the larger projects there there was.
If you would there there was a bucket of other projects of that.
It may have accounted for 200 300 million dollar.
Okay. That's helpful.
Second question just I'm on the C Corp question I'm, just curious how recent events have impacted your thought process with.
So the sector sign off very hard.
Closed end fund issues, but then I guess on the other side, yet federal deficits really kind of exploding here just any updated thoughts on on how you think about the C Corps.
Good question, given what's happened in the world over the past few months.
Yeah I'll be honest.
Really that hasn't been our priority is to come in and evaluate MLP versus the core period last few weeks, it's really about.
Executing on the business in these uncertain times and get enough, so getting getting getting us position from a liquidity standpoint, and take advantage of funding some of these contango opportunities.
I think you hit on some some key things there I mean youve. It seems like invariably you had you can have some investor turnover I think MLP has had our fair share of it here the last six weeks.
But if I come in and.
I think you hit on a key point I think.
Everybody's going to pay more in income taxes, including support is going down the road that we'll see what happens. They are these somebody's got to pay the tab for all these trillion dollar stimulus packages.
And then but also I think frankly, what surprised me.
Some of the volatility and the C Corp names.
That we solve some of those names that just placement.
So, but we have not gone into a deep.
Deep dive or any kind of reevaluation.
I think what you just said as we've been to them business right.
Makes sense. Thank you.
Our next question comes from Spiro Dounis with Credit Suisse. Please go ahead.
And when you have one plus set up on strategy you all had been slightly more aggressive or taking the playing more aggressive approach leading into the downturn and we're focused on capturing market share and Jim earlier, you mentioned embracing volatility.
Okay. If anything really change does anything change that approach you actually seen ability year, you accelerate market share capture in this environment either organically or through M&A.
I guess.
It's hard to understand the question.
Okay.
Yes, you guys that I'm sorry go ahead, Kevin if you could repeat your question one more time, maybe just a little bit louder.
No problem. So you guys have been fairly aggressively into this is sound like you were trying to capture market share getting really competitive on pricing in some re contracting to attract more customers. Just curious in this environment just sort of bolster everything up does that change at all Jim you had mentioned embracing volatility has just curious do you go out there at the same aggressive approach and trying.
Capture more their market share and is that is there an organic path there or do you see some opportunities here on the M&A side, it's actually pick up some assets now I don't think theres any amat M&A that we're looking at that we would look at right now.
And yeah, I think we talked about on LPG export that can be going compete with US you better be willing to get down in dirty and Lee we contracted that dock out I think we kept a couple of spots or spot. So a month and then in terms of embracing volatility.
You know, we've got a 20 year track record.
A return of creating value and sometimes it comes in different forms I'm not sure how much credit we get part, but when we say embrace volatility.
You know weve benefited from a.
Korean fallen on the floor a refined products.
LPG, we we have a footprint that lends itself to.
Having opportunities that at normal circumstances aren't there and that's been the case through Hurricanes and.
Financial.
Downs and now through Corona virus.
Understood and just going back to the potential for future Capex cuts as it relates to joint ventures, one maybe specifically focus around Midland to Echo three and the connection there I went to Webster. It's my understanding there's that pipeline is it some of those deals in order to ready some of its actually in ground and I imagine that one falls into largely under.
Britain asset that moves forward, but just curious what maybe options you have there around changing the scope or size.
Other options available to you and then obviously you guys also have some idle pipelines there some pipeline optionality to move volumes. There. Instead are there is some of the things that are being discussed right now.
Well, we can yeah, we can reduce capex by entering into joint ventures.
The assets that are in virtually every one of our businesses, none of which touch the church OS.
All right thank everyone.
Your next question is from Gabe Moreen with Mizuho. Please go ahead.
Good morning, everyone. Just had a couple of follow up questions on the joint the potential joint ventures, one is.
Well on use of proceeds there is it fair to say that that's strictly going to de leveraging at this point or could there be other some other form of capital to return.
Then also depending on which jvs or anyone.
Okay going can you talk about.
Whether or not some other projects would go from I guess.
What's shaded in blue today actually.
Accelerated if you're potentially able to get something going commercially.
Depending on the terms.
Yeah gave on the first part I think any any use of proceeds that we had.
Whether it would be.
Incremental.
Areas, where we may see additional room to reduce capex in 2020.
Or if there was any any.
Proceeds from many JV opportunities it would really just going to come in and go to de levering.
At this point in time again, any any other return of capital the be it through distribution growth or the it through incremental buyback really we need to get more visibility of what the macroeconomic backdrop looks like import.
Demand for energy looks like before we make any other decisions on that.
And gave what was what was the second part of your question. Yeah. I was just on whether some of the JV industry negotiating or for some of those projects, which you shaded in blue would shoot for it so depending on how the JV works out could those potential fraud, I mean, I guess from here.
Yes, and gave on that one thats, where Jim said with these.
Discussions it's for assets across all four segments.
Okay.
And then Randy I just had one follow up on terms of the marketing opportunities you talked about and the working capital draw.
You care to talk about how large that working capital usage might be I realize that's sort of a dynamic number.
And then also can you just talked about maybe the cadence and when you might recognize those marketing earnings in 2020, I assume it's a back half type of year, Oh option, Yes, I'll, let Jim or Brent has hit the timing of the of the earnings I think the the one the one benefit from low commodity prices is it doesn't.
Take a lot of working capital to execute on contango, Yeah, I think we're going to say we've had some in the past we've had some rather large contango opportunities in all at 16 $17 crude oil.
The working capital as a hell of a lot less and the way we're up due in contango by and large is where where do you get the biggest spread I mean, maybe I think it's probably going to be throughout the year Brent.
Yeah, I had certain commodities weve.
Targeted closer to the fraud and other commodities sprinkled, which we've done a spread out based on liquidity and some other things but.
I think to the balance of the year, you're going to Cds use numbers show a month by month.
Got it thanks guys.
And your next question is from.
This will <unk> with bank of America.
Good morning, everyone. This is well thanks for taking my question.
First one just following up on your earlier comments around.
Share repurchases.
Maybe to ask the question a little differently, how do you view appropriate distribution within your units in the current environment and how would that be Florence.
Buyback program beyond the thanks to repurchase 2%.
20 trading cash flow from operations.
Yes, you know.
We have been public since as far as the distribution growth question goes we've been public since 1998, and we provided distribution growth and every year since our IPO. So that's been one of our objectives over time is to provide a consistent distribution growth at.
And.
So that's that's been important there was overtime.
And but I, but I'll I'll you may have asked the question a different way I'm, probably going to go back to the same answer given given the uncertainty again.
This this economic certain stopped that we've had on a global basis okay.
Historic and and just there's a lot of uncertainty of how the next three.
Three months six months are going to progress and I think we just need to have more visibility of how that's going to progress before we make any decisions about.
Returning any additional capital.
What we're doing now.
To to investors at this point I think this is this is a point, where you really come in and and protect your balance sheet protect you debt rating come in and protect your liquidity and we've got it we've got a lot of good opportunities.
That our assets set us up for and right now we are in execution mode Big time over the next 369 months.
Thank you appreciate your thoughts there and my second question is regarding your the reversal.
Partially diversion reversal plan can you discuss how that came about despite cushing already coming up rapidly.
And.
Are you, what's sort of uplift you expect them that reversal.
Right. Yeah. This is this is Brent secrecy that basically came about because you know you guys saw was going on the market and there was a flight to storage.
And that was the open access storage and frankly that was where people are buying crude oil whether that was financially or what have you.
We look at our customer base and our Permian producers.
And our Eagle for producers ultimately wanted access to market and some of them approached us to figure out if that could still be reversed a grand bake. It his team figured out how to do it very cost efficiently and quickly there was lot of things still in place. So that was that was the thought behind that.
And it just led to another optimization opportunity on our side and also a solution for our customers.
Jim.
Yes.
Tina reduces Randy Burkhalter, given the fact, we got calls coming up that tires in and I apologize for anybody in the queue that didn't get and but we're going to take one more question before we and our call today.
Thank you. Your next question comes from Colton Bean with Tudor Pickering Holt.
Please go ahead.
Thanks for the keep a brief here so just to circle back to LPG exports of thank you all noted that.
They were shaping up to be a record record month any detail in terms of where those cargoes are headed are preliminary discussions around June.
I think there by and large go into Asia, and South America that if anythings and that I don't think anything's going into Europe that Noah.
Yes, it's mainly things that are geographically advantage I'd say, the one big area of uptick that we saw was India and Indonesia.
But certainly India or they had an increase on what they were bringing in.
Got it appreciate that and then maybe just a follow up on some of your comments there around when and why you would see production curtailed as you look across your system as it really south, Texas and the Permian that you would expect to be most exposed or are there any other.
Maybe more nuanced regions that have rich gas exposure. The are you keeping an eye on.
I would I'd say, Delaware, Delaware Basin Light you know you saw what would differentials good out there that became challenge for little while.
Eagleford condensate is certain buyers stepped away from the market.
And then I see some frankly, I see some opportunities, they're going to offset that and whether that's the Rockies.
Or potentially a haynesville.
Some of those areas I think there are going to have a resurgence.
Yeah I'll leave it there appreciate that.
Okay. Tina before we end the call would you give out listeners the replay information and then let me just say thank you again for joining us today and from enterprise, we're going to go ahead and then.
Yes.
Get off the call and then it again, if you could give the replay information. Thank you.
[noise] Tina.
[laughter].
Well I know replay information you may dial one eight.
Hundred 859 to 056 access code.
Night 879389.
That does conclude conference for today. Thank you for your participation you may now disconnect.
Okay.
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