Q2 2020 Enterprise Products Partners LP Earnings Call

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Time, all participants are in listen only mode. After the secret presentation. There will be a question and answer session to ask a question during the session. Please press star one of your telephone.

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Deeper cabin. Please go ahead.

Hello, Good morning, and welcome to the Enterprise products Partners Conference call to discuss second quarter earnings. Our speakers today will be co chief executive officers of enterprises General partner, Jim Teague, Randy Fowler.

Other members of our senior management team are also on attendance and will assist on the call today.

During this call we will make forward looking statements within the meaning of section 21 E O. The Securities Exchange Act of 1934 based on the beliefs or the company as well as assumptions made by an information currently available the enterprise management change.

Although management believes that the expectations reflected in such forward looking statements are reasonable you 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 and any forward looking statements made during this call.

And with that I'll turn the call over to Jim.

Randy.

I've said at the beginning of the last call we were talking about first quarter earnings.

Well I, Oh, I thought it while it was supposed to be an earnings call I thought it was going to be a kobin call. It and that's what it turns out to be.

So sticking with that theme I guess today, we're going to tell your co. Good story.

The second quarter 2020, we reported EBITDA of $2 billion compared to 2.1 for the same quarter last year.

<unk> or do you see up I think you saw the press release was 1.6 times coverage and year to date, we've retained $1.2 billion.

And something else. We're quite proud of is this is the best first half safety performance that we've ever had it in a room at enterprise.

Given what we've all gone through as you would expect our volumes were down as a result of the pandemic and the oil price crash, but they are quickly improving.

With all of the events our results for the second quarter highlight the diverse diversification of our system the quality of our customers.

Cost control and the responsiveness from our assets and our employees during what was probably the most challenging quarter of my career.

Our profits were protected by strong base of from customer obligations and the natural hedge we have and our storage and marketing activities, which enabled us to or largely offset the weakness in our natural gas gathering and processing and petrochemical businesses.

The banks or we're in the commodity service business for us both on the supply and demand side of the equation, we transport store upgrade and buy and sell multiple energy commodities.

Because we're so tightly integrated we have a lot of tools at our disposal.

When the markets say store crude we can when the markets as store diesel, but give me LPG, we convert wells and do so when the market same store wide great. We store Y grade. In addition, our people and our systems have a strong history of performing no matter the type of crisis and our back.

On sheet always has the dry powder to move quickly we usually get the question of how much our results are nonrecurring.

It's the same question, we got one Katrina bleed through South, Louisiana, and literally knocked out every plant. We have arco was down for months as was pro mix minutes and Neptune demand came back before indigenous supply and we make more money with our west to east pipelines than if those plants had been running so it was nonres.

Card.

We got that question during Hurricane Ike in 2008, which went right over Mont Belvieu, we had mel bit Mount Belvieu up before producers could even get their suppliers back up.

Quick question and Hurricane Harvey in 2017, when production never stopped but virtually all of our customers quit taking in some cases for months, we never interrupted a single contract customer.

The best like what we are going through now and the opportunities they present.

Maybe labeled as nonrecurring.

But our performance on our results are recurring regardless of the environment.

We outlined in today's earnings release released the petrochemical and refined products service segment was particularly hit hard due to the decrease in demand for those products. However, we might remain encouraged by the efforts of most companies to reopen their economies.

In addition to being one of the largest refine products consumers in the world. The US is also substantial exported refined products, especially the last Latin America.

You all know during the second quarter refining utilization rates bottomed in April, which negatively impacted our propylene and octane enhancement businesses do or due to lower feedstock availability and a decrease in international demand currently the refining industry has recovered to near 80 per se hitches facility.

They did and improvement in both propylene and octane enhancement.

On the production side, our natural gas gathering and processing were impacted by low prices and some shut in production.

While those shut ins were not insignificant for the most part they were relatively short lived in volumes on our system are recovering we've made substantial progress and deferring and reducing capital by $1 billion and we continued to discuss JV opportunities, which could further reduce our capital in addition.

Graham in his folks have reduced 2020, sustaining capex by $100 million that said, we have some important projects coming online over the next few months in the third quarter, our 11th Fractionator and the Echo second of linked to web site or expected online and in the fourth quarter weeks.

Back to complete our rich gas pipeline to Cup Carthage added the be at Mont Belvieu and complete a strategic ethylene tank and pipeline build out.

We continue to make strides in our petrochemical segment, which we have always described as an extension of our NGL, Brett and franchise and our value chain.

Because we are probably the only route midstream thats fairly big in the petrochemical midstream space, it's easy to under estimate the long term strategic importance with what we're doing.

Rather than being a feedstock stored olefin industry with a handful of players.

United States, especially in ethylene as quickly moved into being the worlds incremental supplier. This is really no different than what has happened in LPG over the last 10 years, where the US has moved from being an importer to supplying over 75% of the world's demand growth in short to meet the world's growing.

Demand for primary petrochemical products enterprise built the world's first open access.

For polymer grade propylene.

Now we have developed first for ethylene. These hubs are transforming how ethylene and propylene markets transact and will create a true market place.

For the world's primary petrochemical producers consumers and traders. These hubs provide the centrals for any patient market reliable supplies price transparency and access to domestic and global markets in June we loaded a record sized ethylene cargo of 44 million pounds.

Then in July we successfully loaded combination cargoes of Ngls and olefins over the same vessel, including the simultaneous loading the propane and polymer grade propylene into separate compartments on to be LGC at our ship channel facility as well as a simultaneous loading of.

Ethane and ethylene owner, but vessel at our Morgan's point facility.

Both vessels, where the first export cargoes of their kind from the US co loading olefins on larger vessels with Ngls allows for more efficient you use of dock capacity, but it also provides signet significant freight benefits to petrochemical export customers.

I thought I'd also spend a minute to talk about what we're doing to keep our business running while keeping our people say.

We started out the quarter with much of our headquarter staff working from home, but over the last few weeks, we've been gradually bringing our headquarters personnel back into the office and are essentially staffed at this point fully staffed in addition to helping our employees understand social distancing. We also now required.

Based coverings at all times in our office, it's an adjustment, but we have adjusted and thanks to our people taking personal responsibility both in and out of the office our cat IYR, Our case count has been minimal I.

Ill sincerely want to thank our people for their flexibility there adjustments and Theres sacrifices and I'd also like to give a shout out to our operations and commercial folks that were not able to work from home plan. Some pipelines don't run themselves. There's no such thing is a home base control center and the.

Collaboration between our commercial people that we ask to be here I ask might be to solve that we told to be here when a long way to achieving those results.

I guess and finally I'd just like to say that I think we've got the best employees in the business and I think their performance this quarter.

Reflects that and I just wanted to know how much they're appreciated Randy thanks, Jim Good morning.

I'll start with the income statement for the second quarter net income attributable to limited partners for the second quarter 2020 was $1 billion for 47 cents per unit on a fully diluted basis. This compares to 55 cents per unit for the second quarter of 2019.

Net income for the second quarter of 2020 included $51 million or two cents per unit of the expense related to an increase in the deferred tax liability associated with the OTI A holdings Corporation, we acquired from Mark forward and balls in March 2020.

Thing in the settlement of the liquidity option agreement related to our acquisition of all taking back in 2014.

Moving on to cash flows cash flow from operations was 1.2 billion for the second quarter 2020, compared to 2 billion for the second quarter 2019 changes in operating accounts for think of it as working capital accounted for approximately $660 million or 80.

Personally of the 842 million dollar decrease in cash flow from operations between the two periods, we used working capital to fund our marketing and contango activities. During the quarter. We currently expect this usage to peak during the third quarter 2020.

Excluding changes in working capital accounts.

Cash flow from operations for the second quarter 2020 was about 10% lower than the second quarter of last year. The change in distributable cash flow between the two periods mirrors, the us with a decrease of approximately 8.4%.

Free cash flow, which we defined as cash flow from operations less investing at Tiet cash used in investing activities plus contributions from our joint venture partners was $305 million for the quarter, which again was reduced by our use of working capital free cash.

Cash flow was $2.7 billion for the 12 months ended June 2020, which was 27% higher than the comparable trailing 12 months ending in June of last year.

We define payout ratio is that some of cash distributions and buybacks as a percent of cash flow from operations our payout ratio.

It was 83% for the second quarter of 2020, which is an inflated percentage due to our use of.

Cash flow for operations used for working capital purposes for the trailing 12 months it was 62%.

We declared our distribution of 44 to have cents per unit with respect to the second quarter on July 7th and it will be paid August 12. This distribution represents a 1.1% increase when compared to the same quarter of 2019 and is flat to the prior to quarter.

As we stated on our first quarter call given the uncertainty of the macroeconomic backdrop, our board will continue to evaluate our distribution growth quarter by quarter in 2020.

Additionally, apds distribution reinvestment plan and employee unit purchase plan purchased a combined 1.9 million NPD units in the open market during the second quarter, which rivals the purchase activity of our typical institutional investor.

Moving on to capital expenditures, we have recently placed approximately $150 million of assets into service in the second quarter and have another 6.6 billion of projects under construction and underwritten Bob long term contracts our capital investments were 900.

10 million during the second quarter, which includes $74 million for sustaining capital expenditures, we still anticipate spending between two and a happened $3 billion in growth capital projects for this year and approximately 300 million for sustaining capital expenditures.

For 21 and for 2021 in 2022, we currently anticipate growth capital investments to be approximately 2.3 billion and 1 billion respectively.

This is an aggregate 700 million dollar reduction from guidance, we provided for 2021 and 2022 at the end of the first quarter. The changes were largely attributable to the indefinite deferral of several expansion projects of which some of the largest we're at our Houston.

Ship channel facility.

We continue to engage with industry participants.

Regarding potential joint ventures, or sanction projects, but the pace of these discussions have slowed.

Due to.

I would not team.

Our capital expenditure forecast excludes our proposed spot offshore crude oil terminal that is subject to government approvals. Currently we do not expect to recede. These approvals in 2020.

Moving on to capitalization, our total debt principal outstanding was approximately $30 billion at June 32020.

Assuming the first call date for our hybrids. The average life of our debt portfolio was almost 16 years, assuming the final maturity date for the hybrids.

The average life with almost 20 years, our effective average cost of debt is 4.5%.

Adjusted EBITDA for the trailing 12 months ended June 32020 was $8 billion and our consolidated leverage ratio was 3.4 times after adjusting debt for the partial equity credit for the hybrid debt securities.

And also further reduced unrestricted cash our consolidated liquidity was approximately $7.3 billion at June 30 in crude including availability under our existing credit facility and approximately 1.3 billion of unrestricted cash on hand.

Finally, before we open it up for Q and I want to mention that we also announced this morning in a separate press release.

That our 2019 2000 twinning sustainability report, which reflects our lightest environmental social and governance disclosure is currently available on our website.

We have also initiated the annual review process with the independent sustainability rating providers and believe our disclosures and initiatives, which are described in this comprehensive 104 page report will be reflected and updated scores we believe our stakeholders.

We will find these efforts beneficial.

We thank our customers community leaders banks debt and equity investors and board members for their participation in our sustainability survey that drove the outline for this report with that Randy I think we can open it up for questions.

Okay, Sydney, we're ready to take questions from our listeners.

Certainly.

Minders ask a question you'll need to Chris Darwan on your telecom.

Question. Please press the pound.

The interest of time.

Limit yourself to one question one follow up please.

Once again.

Yes.

First question.

Comes from the line Jeremy Tonet with JP Morgan Your line is open.

Hi, good morning, good morning.

Just wanted to start off with the question maybe Tony could answer that just you guys had talked about patient recovery being slower and maybe in extending into 2021.

Wondering if you could provide a bit more details I guess and how you see that you now transpiring and how the impact you across I guess your different business line.

You will want to talk about that production side or the demand side Jeremy.

If you have both will take both.

Yes, so obviously we had this.

Shut in terms of price crashing chaos, and we think about a million in half and I'll just you'd crews in crude as an example may going have to 1.8 million barrels came off the market.

Im kind of a numbers kind of person not real visual but if you look at how that production has come back. It's it's probably one of the steepest these I've ever seen in statistics.

So.

Yes, we recovered a substantial amount of it we think that maybe 300000 barrels will lag.

And but with that said you can't deny given the amount of declines shales have.

That momentum has changed and there's a fair amount and ground to be picked up.

So.

That's the reality.

When we look at Y grade coming into our system. For example, those numbers are really strong and I'll, let I'll, let Brent address that but when we get up to 2025 is we see it today.

We'll be down from where we were before and it's not because momentum doesn't pick back up look we think that we were at about 1100 50 completions a month in February and we think that as we get into 2022.

That will be at around 950, okay, and probably completing the best of the best Wells, So thats whats in our forecast today.

And so when you when you get out to 2025 there'll be some smaller bombs in what we said most side before but Brent you want to talk about what's going on in our business in that regard in what you're seeing the one thing. We have seen is just the resiliency of of the Permian and part of its just what's going on out there than part of its how we have contracted but.

If you look at our Y grade receipts for June if you look at Y grade receipts for July.

Those are both records for enterprise and if you look at our Y grade inventories.

There are no all time highs so.

In terms of how we've contracted in terms of what we're seeing come now the Permian the fractionation.

Volumes that we have access to.

Those of bounce, but quite nicely.

On the demand side gasolines, not really I mean, it's off its off 10% to 15% depend on what numbers you look at diesel the same.

And again thats to be expected, so we think about going forward.

What what the data shows is Latin America, and we are large exporting pump our country to Latin America is waking backup.

Moving away from being in shutdown in largely that think about Mexico, and Brazil. So that's a positive and we're hoping that as we work off inventories will put our refineries back to work.

Right.

That's very helpful. Thanks, and on the pet Chem side as far as demand there any trends that we should be thinking about with.

Lpgs and tech.

Yeah. Jeremy This is Chris standpoint, we saw at the at the beginning of the pandemic, So and March April timeframe.

Lower demands on the durables D. The single use actually was was pretty resilient, we saw pretty good demand.

We're starting to see.

Gradual improvement in demand for the durables and of course single use is still pretty good.

The fact that our ethylene export dock is sold out also says something about the demand for ethylene.

That's very helpful. Thanks, and one last one if I could just with regard to arbitrage opportunities.

That.

You've seen so far kind of the nonrecurring recurring earnings that you've got in.

That really boosted this quarter what type of opportunities DCF in the third quarter here I guess with contango, we're happy with.

Delayed.

Realization of those profits just trying to I think to that a bit more.

Thanks, Jeremy what we said last call as we thought we'd be at $5 million to $600 million and spread.

I think they're probably Sam for the year, we'll be at the upper end of that range.

Very helpful. Thank you very much.

Thank you and our next question.

Your line.

Good morning domain fundamental bear case on enterprise is expected margin compression and the NGL business now that everything looks over built for the medium term.

Anything that you can provide to address these fears of AG King Chrysler basically in NGL pipelines Frac and exports.

I think.

I understand the quick stance.

Yes, So gene and your question is as we think about margin compression in them and I assume you're talking about.

About as as people re contract on midstream assets is that is that we rented.

I think it's a little bit more than that I think people usually talked about for asset I think it's really the whole chain of NGL pipeline Bracken exports. It seems like now there's too much capacity and people are concerned that you can see a similar phenomenon. So let me see and create.

Yes.

When contracts come up that you would see.

I think declines.

I think gene and what you're saying.

Kind of make sense I think you have to take a look at.

At what to what a company has to work with if you look at.

It's why we emphasize petrochemicals and.

And.

My opening comments because.

Because that gives us a heck of a lot more longer of the value chain to leverage.

So we it's about what are you having to leverage and and quality one part of it for that value chain might be under some stress. The total won't be is that fair Brent yen and you had another point to make so so you know in our situation.

Yes, maybe but we've got a value chain that we're going to leverage and were now.

I will give them what they want where they are hot button is were collect what we need that the rest of the value chain.

But I think there is some offset gene and what we're seeing on ethane as an offset on volumes both for pipelines and for fractionation.

You know I hear what you're saying from an industry standpoint, I'll repeat myself I think we've done a heck of a job contracting.

Thank you contract in each contract with matters in this environment and we'll stay about about other commodities as well if you look at our LPG export facility. It's in a very very good position in terms of the contracts we have in place and.

If you look at the balance of this year do you look at the following couple of years run a very very good spot and then ultimately if theres supplies starts going down.

You look at what we have built Mont Belvieu and the pricing points that we have you know I fundamentally believe that the downstream assets that we have a does pricing points benefit. So there are some offsets in this environment.

Hi, Thanks.

Secondly that bundled chain, you think will kind of.

Better in different outcome.

No worries concrete pipeline more broadly.

I think it I think it always has.

Great. Thanks, that's all for any.

Thank you.

Question comes.

Suntrust. Your line is open.

Hey, good morning, guys.

Could you talk about your prepared comments about the JV opportunities for reducing capital you noticed that.

Process has been elongated due to the pandemic.

The six potential jvs still in play the you noted on the last call.

Or can you give us a general update there.

I think on the last call. We said that we were pretty engaged with three of those six and not the guess what.

What I can say today as we're probably pretty engaged for one of those three it's not that you're not in discussions with the others, but it's like Randy said in this environment nobody everybody's just kind of pull into horns, and so we're discussing some jay days with some some of our larger projects, but I wouldn't say.

They were highly engaged with the with.

More than one, but we are highly engaged with one.

That's helpful. And then just quick follow up.

Frame, how we should think about maybe the largest components of that 2021.

2 billion dollar outlook.

Whether it be.

Each to all our Midland Echo for and does this number presume joint ventures or is this more like an eight eight type of budget.

It is sitting around yeah interest and this is Randy. This is of the 2.3 billion is assuming no joint venture.

And if you would two thirds of that 2.3 billion are really three projects nets of PDH to Midland Deco for crude oil pipeline and the Gillis natural gas pipeline.

Great. Thank you guys very much.

Thank you and our next question comes from being with Tudor Pickering. Your line is open.

Thank you noted in the press release, the process volumes and back to 88% in March levels, and Ngls were nearly at parity on the inlet volumes side can you provide a bit more detail as to the mix across your footprint and then on Ngls is then outperformance relative to gas is that primarily increased extraction.

Yes.

We'll take that.

Then on the in terms of the mix so why Greg.

This is Brian Colton, but.

Thank you.

I'd say.

Ethanes, probably increased about 4%, maybe 5% across our system.

And then in terms of just the whole volume metric and I'm not sure understood. The question, but were you're seeing.

The growth come from is obviously in the Permian and I think you'll see in July as some.

Some very robust volume should come from that from that area.

Okay, Yes, and that was mainly the focus of the first point is when you look at you kind of the four primary footprints for you guys what would that recovery look like on it my days and basis.

I mean.

We're not we're not seeing a whole lot I mean, eagleford has been fairly flat theres people talking about putting rigs or certain company. That's looking to deploy some capital there that were involved with.

But I'd say.

No in the Rockies, you're seeing ethane recoveries.

Pick up out there.

And then obviously in the Permian just in terms of aggressively bid on contracting and just a bounce back in volumes were seeing the bulk of.

Of the benefits out there another area, but the cut to the chases Permian century right, yes, Sir.

Understood.

And then just on the uptick the 2022 capital budget now down to 1 billion can you frame what that might look like if you were to strip out the PDH to spend or and simpler terms. If you remove the major projects what that run rate might be.

Continent be less [laughter].

Yeah, I mean, you're probably you're probably not going on the door 500 million.

All right Thats helpful. Appreciate it.

Thank you.

Next question comes from the line.

Product with Bank of America. Your line is open.

Thank you good morning, everybody. Thanks for taking my question here.

A quick follow up on the fourth question on the potential JV growth capital project could you maybe high level disclosed what are the parameters of your negotiations, there and who would be or preferred JV partners.

Yes.

Yes.

Thank you.

Of typically weight.

They either bring.

They bring more than money.

They've got to bring throughput.

I got to bring uptake typically is how others are the kind of people, we do joint ventures with does that answer your question.

I get that Doug.

That's helpful and trends.

So to the parameters.

What you're negotiating or.

Within the project, how you plan to Florida.

Well the interest can you comment on that.

I understand you could you could you repeat that question I'm sorry.

Sorry.

Could you maybe discuss.

What you are considering when it comes through the negotiations.

Maybe.

Simply put.

The sort of bigger projects that you have on the backlog, which ones how would you rank them in terms of which ones you would one Doe partners to get involved in.

Oh, well tell you what we wouldn't want them getting involved in that so.

The Churchhouse, which I think is probably our storage system in Mont Belvieu I don't think we have a problem, we'll get them having them involved in summer bar.

So some of the less strategic things that may be feed the system, but that's about it that specific and thats about all we're gonna site.

Got it.

Thanks for that.

And.

Follow up.

And.

Election this year.

Would you be able to share some thoughts on.

Hi, you're watching the elections and the recent.

Movements, there and maybe if you could share perspective.

We're going to impact and or benefit to BBB overall MLP fit.

In terms of corporate taxes as well as energy.

Restructure proposals.

Okay. So this is Randy I guess tusa season, the political rhetoric.

And I don't know how much you can really with some of the proposals that are being put out in the public domain.

I'd frankly, I don't know how focused you can you had all those at this point in time again, because it is you know everyone isn't campaign mode.

I think with the with the deficits that the country is running up.

It looks like you know income taxes tax rates for both individuals and corporations or going to go up.

And perhaps substantially.

So.

The honest this year, we really not spent any time coming in and looking at MLP versus C. Corp analysis, we've been too focused on executing and just given where the uncertainty in the environment in the volatility in the environment.

Frankly, we're pretty content with our current MLP structure.

And as far as policy is going as far as what's been proposed you know I go back a little bit and use the analogy of the of the US a highway Trust fund.

Was created to not team 56.

And it's taxes on motor gasoline and diesel to come in and fund road construction and road bike since the last time the tax.

On diesel and gasoline was raised to fund that Trust fund was 1993.

Since 2008.

Trust Fund has been running deficits and no one in Congress via to a Republican or Democrat administration has been willing to go up on the end raise the tax on motor gasoline and diesel because they get more the impact on individuals and they did not want impact.

On businesses in some of the things that are being contemplated in some of these policies that were hearing this campaign rhetoric, which substantially increased the cost of energy both on individuals and companies. So it's really hard to see if if if if the powers that be wouldn't even.

Increase.

The price on gasoline how some of these large proposals can come in to be executed.

Got it thanks for that.

Thank you enter next question comes on line of.

Gershuni Your line is open.

Hi, good morning, everyone good to hear everyone as well.

Yes, maybe to start off.

Jim in your prepared remarks, you sort of talked about how the marketing it's spread business is effectively.

A natural hedge for for the business opportunities pop up with with dislocations and so forth.

I was just wondering if you can sort of give us your thoughts on how this on how the trends play out for for the balance at this year in what I mean by that is no spread opportunities start to recede over the next.

Couple of quarters, but at the same time, you have they shut ins coming back base business starts to move higher.

Is the trend of the base business recovering stronger than the.

I guess subsiding of the marketing opportunities is there a scenario, where we're threeq can be higher than Q2, without giving specific guidance, but just sort of talking about the trends, which ones, which is the stronger trend right now or is the natural hedge going to reverse itself and in sort of keep us running flat scenario.

Yes. Good question there thanks.

Personally.

You get dislocations and you get spreads when you have the debts. So when crude prices ball invariably will see contango I mean thats been the way it's men.

If those spreads aren't there than in my mind, our pipelines are probably a lot more throughput than we have today. So.

Yes.

That's kind of way assay it in terms of I'm, probably a little more.

Bullish than Tony is in terms of recovery I think.

Personally think demands going to recover sooner than probably Tony Thanks is going to recover and I think you're going to get a price signal next year on hydrocarbons that.

And some things back home. So that's that's what I see.

Okay.

And maybe a follow up.

Good question here, just sticking with the theme of dislocations.

Obviously, you've been very opportunistic take advantage in that market.

On dislocation to capture spreads within hydrocarbons for your your base business itself.

What I think about Lpds unit price do you see similar dislocations in in your stock price right now.

For example, you're you're down today with with the result to put out.

Do you see an opportunity to use the excess cash generated from.

The strong marketing proceeds lower capex budget to potentially accelerate or increase your your buyback target.

Take advantage of the dislocations within your stock price ammonia at ran to answer that but individually theres a number others that have accelerated our buyback program.

Yeah.

Sure I think that that just as I've mentioned that really the this year.

We're we're really coming in and and.

Going quarter by quarter as we consider.

Cash distribution growth to our investors and.

Spending capital on buybacks falls in that same category.

So again, we'll come in and take a look at it quarter by quarter, we had come in and allocated.

Approximately 2% of cash flow from operations to go towards buybacks, we done that.

What will come in and look for opportunities for the remainder of the year to see how we would want to come in and and.

If we're going to if we're going to return more capital to investors would that be in the form of distributions or or a buyback so more to come on that.

Okay. So it's fair to conclude that the 2% targeted got a hard line. It's something that you can go above and that you would look at 975 yield it's probably being very opportunistic.

Uh huh.

Sure. It's yeah. It was it was approximately 2% is what we said but.

We will come in and take a look at it quarter by quarter. Some of this we'd like to get you know as Tony described Theres still some uncertainty up out there as far as coming in and how the economy reopens, we just like to get a little bit more visibility.

On what we see for the the business environment.

All right that that sounds great. Appreciate the time I want to keep it to just two questions.

Have a great on safety.

Thank you.

Thank you and our next question comes from Justin Jenkins with Raymond James Your line is open.

Hi, Good morning, everyone, I guess I'd like to start to on 20.8 growth spending Randy I think you covered a bit of of the further out outlook for 21 22, but is it more timing at that point in terms of the range of bend left for 2020 or at some of that dependent on JV. Okay.

It's the range that we give for 2020, the two and a half billion to three 3 billion is largely just timing on how how we see.

Cash.

Actually the.

Go out the door.

Okay.

And then you also mentioned that if that working capital to at peak in Threeq Q in terms of usage do you have a magnitude nine for that and then maybe give us the of how quick that cash put back in the door as at the tailwind thereafter.

Yeah.

Probably could see you know another call at another.

Three to 500 million dollar increase in working capital between now and the end of the third quarter.

And then I think it would just work off over from the third quarter, probably work off of typically you've got a good bit of working capital deployed I mean, just arc and our typical business you have a good bit of working capital deployed.

Over the fourth quarter. So I think you would see ultimately that that from that peak in the third quarter, you probably see it worked off largely by the end of the first quarter next year.

Got it thanks.

Sydney.

Yes, Thank you and our next question comes from the line.

She's Stanley with Wolfe Research your line is now open.

Hi, Good morning, just following up on the last question. If your working capital is still increasing in Q3 should we assume that then means some of the contango marketing type opportunities could be even greater in the future than what we saw in Q2 in future quarters.

No I think it's just some of it is just a carryover to what we put on.

I think when what Jim.

Well, Jim alluded to that we think we may be as far as total spread opportunities be in the upper end of that 600 million dollar range really sort of see that split 50, 51st half of your second half of the year.

But but.

You still have.

Just with some of the positions that we put on.

You can have working capital creep with those.

Positions.

Okay. That's helpful and then going going back to last quarter I thought the messaging was was pretty strong from the company that they weren't acquisitions you were interested in.

With I guess with the dust settling some white here.

What's your view on the merits of of acquiring companies are assets and synergies I mean, the one thing that striking is.

You guys can issue 10 year debt right now it's under 2% interest rates. So just any updated thoughts on on how you're thinking about that.

It goes.

I'd say.

I'd say, we've got the same answer is the first quarter yeah.

Yes. Good. Thank you heard that one that's where I think we are too where.

Well, we look at opportunities that come across.

Frankly, there's we've not seen you know as far as Teaser's coming in we frankly have not seen much in the way of Teaser's come across the last three or three or four months and.

One.

Certainly not anything compelling so I think right now we're just focused on continuing to execute with a with the business that we have them and go from there, but I mean, we're open to come in and look at opportunities.

But it really needs to be a good fit probably what would be more likely would come in and b of a bolt on top opportunity and.

But again really haven't seen anything develop on that front.

Interesting. Thank you.

Thank you and our next question comes from the line of pure salmon.

The energy your line is open.

Hi, good morning, and thanks for taking my questions just to two questions on the same subject. The first one is what are your views on us.

NGL export capacity do you see more opportunities to grow your NGL export business and then the second question is overall it seems that us NGL exports have a better outlook than us crude exports do you think that is a fair statement.

This is Jim.

But Tony and Brent, which I man I think the world needs Us LPG.

And.

As as lifestyles improve in other parts of the world.

In many cases LPG is what.

Great hedge that improvement you got Anita.

Data speaks for itself Jamie exactly right you look at what happened in high for the endemic in Brent.

Well you blown away by the demand at our GAAP absolutely.

Right the record type numbers and what you know.

It wouldn't be too quick to write off crude oil exports. We book Richard seemed quite a lot we've seen a pickup in crude exports and I thought we had a record weak because of country at one point yeah. A couple of weeks ago. Thankfully, we've we've started going back to a to the high as.

We're seeing just a different interests and the slate you know I'm the lighter there's a there's vigor demand for west, Texas lie there some bigger demand for the Eagle Ford type barrel.

As is people have have a bit on motor gasoline.

And we're seeing those go to Asia, or mostly Korea, and some Latin America.

But on the LPG side, you know I think we're in a good spot is enterprise you know we have project out there that we can't expand when the time is right to expand.

I'm not sure from a capacity standpoint, it needs to be expanded.

Any time soon but certainly we have we have a project. That's that's a that's a low capital project that we can execute on.

Great. Thank you for your responses.

The city. This is Randy we have time for one more question and then we'll if you would give the replay information certainly.

Question comes from the line of Michael Blum with Wells Fargo. Your line is open.

Thanks, Good morning, everyone.

Just two quick ones for me so just to stay on the LPG export topic.

It seems like your volumes are holding up here at least the beginning of the first half.

The second half of 2020 can you just give your kind of talk about what you're seeing are you seeing any drop off as some of these countries come out of locked down or are you still seeing strength, there and LPG export volumes and if so what do you what he thinks driving it.

Yes, I think we still see hi, Michael I think we still see strength I think what's driving is what we talked about a while ago.

Huh.

I think we're seeing a lot of PDH demand over in Asia.

I think just in terms of how we contracted Michael you not.

Hey, this humbly, but I think we'll probably be toward the end to see any kind of drop off I mean, we have just in terms of our supply position in terms of over the pricing point in terms of how aggressive that we've contracted out for this year in the next couple of years I'm worried a good position to kind of maintain these type of levels.

Thank you are seeing us export.

Todd around 18 million barrels a month of Lpgs and.

Hey, that's a good sticky those are those are sticky numbers, what's interesting Michael is whenever we do get a cancellation, we've been pretty successful in backfilling hit with the spot. So the appetite is there.

Okay, great that's.

Makes less sense.

My second question I think it's probably for Randy.

You referenced the sort of that target payout ratio number that you're now reference referring to a bit.

I've kind of like a long term target for where do you want that to sort of settled out overtime or are you thinking about that way.

Oh, Mike why don't I don't think we developed our thoughts that far along on on setting a long term target some of it.

Some of your your.

Your balance to that would be what what kind of growth opportunities do you see so.

We've really not come in and so I don't any any long term targets I mean, we do come in and compare.

How how we're doing compared to the market and a.

I think were when we come in and look at the market and put the various sectors of the S&P 500 on the page I think we're amongst the.

Now to top three.

Of the of the sector. So we think were.

And it's by nature being an MLP that whole thing with an MLP is you have a high payout ratio and so I think we comp pretty well against the market.

Great. Thanks, everyone appreciate it.

[laughter].

Okay Sydney.

We do you want to give the replay information certainly.

You may dial in at one 808, 592, 056 or 4045373 406 with the access code 166 second 154.

To access the replay information.

I would now like to turn the call.

Back to Randy Burkhalter for any further remarks.

Okay, well that concludes our remarks today and I'd like to thank everyone for joining us and have a good day. Thank you Goodbye now.

Ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a great day.

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Ladies and gentlemen, thank you for standing by and welcome to the second quarter Enterprise products partners earnings call.

Time, all participants are in listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During this session. Please press star one on your telephone.

Please be advised today's conference in New York.

If you require any further assistance. Please press star zero I'd now like to hand, the conference over to your speaker.

Randy Burkhalter. Please go ahead.

Hello, Good morning, and welcome to the Enterprise products Partners Conference call to discuss second quarter earnings how speakers today will be co chief executive officers of enterprise, a general partner, Jim Teague It rained power.

Other members of our senior management team are also attendance and will assist on the call today.

During this call we will make forward looking statements within the meaning of section 21 to eat all the Securities Exchange Act of not doing 30 core based on the boys. So the company as well as assumptions made by an information currently available in enterprise management change.

Although management believes that the expectations reflected in such forward looking statements are reasonable you 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 any forward looking statements made during this call.

With that I'll turn the call over to Jim.

Randy.

I said at the beginning of the last call when we're talking about first quarter earnings.

Well I, Oh, I thought it well is supposed to be an earnings call I thought it was gonna be a co but call it and that's what it turned out to be.

So sticking with that theme I guess today, we're going to tell your co the story.

The second quarter 2020, we reported EBITDA of $2 billion compared to 2.1 for the same quarter last year.

<unk> or do you see up I think you saw in the press release was 1.6 times coverage and year to date, we've retained $1.2 billion.

And something else. We're quite proud of is this is the best first half safety performance that we've ever had it in a room at enterprise.

Given what we've all gone through as you would expect our volumes were down as a result of the pandemic and the oil price crashed but they are quickly improving.

With all of the events or results for the second quarter highlight the diverse diversification of our system the quality of our customers cost control and the responsiveness from our assets and our employees during what was probably the most challenging quarter of my career.

Our profits were protected by strong base affirmed customer obligations and the lateral edge, we have and our storage and marketing activities, which enabled us to or largely offset the weakness and our natural gas gathering and processing and petrochemical businesses [noise].

The banks are we're in the commodity service business for us both on the supply and demand side of the equation, we transport store upgrade and buy and sell multiple energy commodities.

Because we're so tightly integrated we have a lot of tools at our disposal.

On the market size store crude we can when the markets as store diesel, but give me LPG, we couldn't Bert wells and do so when the market same store wide right. We store Y grade. In addition, our people and our systems have a strong history of performing no matter the type of crisis and our bank.

And she always has the dry powder to move quickly we usually get the question of how much our results are nonrecurring.

It's the same question, we got one Katrina blew through South, Louisiana and literally knocked out every plant. We had arco was down for months as was broad mix medicine Neptune demand came back before indigenous supply and we make more money with our west to east pipelines.

Those plants had been running so it was nonrecurring.

We got that question during Hurricane Ike in 2008, which went right over Mont Belvieu wed malbec, Mont Belvieu up before producers could be even get their supplies tobacco.

Quick question and Hurricane Harbor in 2017, when production never stopped but virtually all of our customers quit taking in some cases for months, we never interrupted a single contract customer.

The best like what we are going through now and the opportunities they present.

Maybe labeled as nonrecurring.

But our performance on our results are recurring regardless of the environment.

We outlined in today's earnings release, the petrochemical and refined products service segment was particularly hit hard due to the decrease in demand for those products Airbar, we might remain encouraged by the efforts of most companies to reopen their economies.

In addition to being one of the largest refine products consumers in the World US is also substantial exporter of refined products, especially the last Latin America.

You all know during the second quarter refining utilization right bottomed in April.

Negatively impacted our propylene and octane enhancement businesses due due to lower feedstock availability and a decrease in international demand.

Only the refining industry has recovered to near 80% hitches facilitated an improvement in both propylene and octane enhancement.

On the production side, our natural gas gathering and processing were impacted by low prices and some shut in production.

While those slipped shut ins were not insignificant for the most part there were relatively short lived in volumes on our system are recovering we've made substantial progress and deferring and reducing capital by billion dollars and we continued to discuss JV opportunities, which could further reduce our capital in addition.

Ram in his folks have reduced 2020, sustaining capex a $100 million that said, we have some important projects coming online over the next few months and the third quarter, our 11th Fractionator and the Echo second of went to web site or expected online and in the fourth quarter, we expect.

Back to complete our rich gas pipeline to Cup Carthage added the be at Mont Belvieu and complete a strategic ethylene tank and pipeline build out.

We continue to make strides in our petrochemical segment, which we have always described as an extension of our NGL, Brett franchise and our value chain.

Because we are probably the only route midstream that's fairly big in the petrochemical midstream space, it's easy to under estimate the long term strategic importance of what we're doing.

Rather than being feedstock starved olefin industry with a handful of players.

Got it states, especially in ethylene as quickly moved into being the world incremental supplier. This is really no different than what has happened then LPG over the last 10 years or the U.S. This move from being an importer to supplying over 75% of the world's demand growth in short to meet the world's growing to.

And for primary petrochemical products Enterprise go the world's first open access.

For polymer grade propylene.

Now we have developed burst hub for ethylene. These hubs are transforming how ethylene and propylene markets transact and will create a true market place.

Well the world's primary petrochemical producers consumers and traders. These hubs provide the central for any efficient market reliable supplies price transparency and access to domestic and global markets. In June we will we loaded a record sized ethylene cargo of 44 million pounds.

Then in July we successfully loaded combination cargoes of Ngls and olefins on the same vessel, including the simultaneous loading the propane and polymer grade propylene into separate compartments ought to be LGC at our ship channel facility as well as a simultaneous loading of.

Ethane and ethylene on a vessel at our Morgan's point facility.

Vessels, where the first export cargoes of their kind from the us coal loading olefins on larger vessels with Ngls allows for more efficient use of dock capacity, but it also provides significant significant freight benefits to petrochemical export customers.

I thought I'd also spend a minute to talk about what we're doing to keep our business running while keeping our people say.

We started out the quarter with much of our headquarter staff working from home, but over the last few weeks, we've been gradually bringing our headquarters personnel back into the office and are essentially staffed at this point fully staffed in addition to helping our employees understand social distancing. We also now required.

Nice coverings at all times in our office, it's an adjustment we have adjusted and thanks to our people taking personal responsibility both in and out of the office arc, Our case count has been minimal.

Ill sincerely want to thank our people for their flexibility there adjustments and their sacrifices and I'd also like to give a shout out to our operations and commercial folks that were not able to work on plan. Some pipelines don't run themselves. There's no such thing is a home based control center and the.

Collaboration between our commercial people that we ask to be here I ask might be to solve that we told to be here when a long way to achieving those results.

I guess and finally I'd just like to say that I think we've got the best employees in the business and I think their performance this quarter.

Reflects that and I just want to know how much they're appreciated Randy thanks, Jim Good morning.

I'll start with the income statement for the second quarter net income attributable to limited partners for the second quarter 2020 was $1 billion for 47 cents per unit on a fully diluted basis. This compares to 55 cents per unit for the second quarter of 2019.

Net income for the second quarter 2020 included $51 million or two cents per unit of the expense related to an increase in the deferred tax liability associated with the OTI A holdings Corporation, we acquired for more forward and balls in March 2020.

In the settlement of the liquidity option agreement related to our acquisition of all taking back in 2014.

Moving on to cash flows cash flow from operations was 1.2 billion for the second quarter 2020, compared to 2 billion for the second quarter 2019 changes in operating accounts or think of it as working capital accounted for approximately $660 million or 80.

Per se.

842 million dollar decrease in cash flow from operations between the two periods, we used working capital to fund our marketing and contango activities. During the quarter. We currently expect this usage to peak during the third quarter 2020.

Excluding any changes in working capital accounts.

Cash flow from operations for the second quarter 2020 was about 10% lower than the second quarter of last year.

The change in distributable cash flow between the two periods mirrors, the us with a decrease of approximately 8.4%.

Free cash flow, which we defined as cash flow from operations less investing at cash used in investing activities plus contributions from our joint venture partners was $305 million for the quarter, which again was reduced by our use of working capital.

Free cash flow was $2.7 billion for the 12 months ended June 2020, which was 27% higher than the comparable trailing 12 months ending in June of last year.

We define payout ratio is that some of cash distributions and buybacks as a percent of cash flow from operations our payout ratio.

It was 83% for the second quarter of 2020, which is an inflated percentage due to our use of.

Cash flow for operations used for working capital purposes for the trailing 12 months it was 62%.

We declared our distribution of 44 to have sets per unit with respect to the second quarter on July 7th and it will be paid August 12. This distribution represents a 1.1% increase when compared to the same quarter 2019 and is flat to the prior two quarters.

As we stated on our first quarter call given the uncertainty of the macroeconomic backdrop, our board will continue to evaluate our distribution growth quarter by quarter in 2014.

Additionally, apds distribution reinvestment plan and employee unit purchase plan.

Purchased a combined 1.9 billion NPD units in the open market during the second quarter, which Rob as the purchase activity of our typical institutional investor.

Moving on to capital expenditures, we have recently placed approximately $150 million of assets into service in the second quarter and have another 6.6 billion of projects under construction and underwritten Bob long term contracts.

Our capital investments for 910 million during the second quarter, which includes $74 million for sustaining capital expenditures, we still anticipate spending between two and a happened $3 billion in growth capital projects for this year and approximately 300 million for sustaining capital.

Expenditures.

For 21 and for 2021 in 2022, we currently anticipate growth capital investments to be approximately 2.3 billion and 1 billion respectively.

This is an aggregate 700 million dollar reduction from guidance, we provided for 2021 and 2022 at the end of the first quarter. The changes were largely attributable to the indefinite deferral of several expansion projects of which some of the largest.

We're at our Houston ship channel facility.

We continue to engage with industry participants.

Regarding potential joint ventures, or sanction projects, but the pace of these discussions have slowed.

Due to.

Overnight team.

Our capital expenditure forecast excludes our proposed spot offshore crude oil terminal that is subject to government approvals. Currently we do not expect to receive these approvals in 2020.

Moving on to capitalization, our total debt principal outstanding was approximately $30 billion at June 32020.

Assuming the first call date for our hybrids. The average life of our debt portfolio was almost 16 years, assuming the final maturity date for the hybrids.

The average life was almost 20 years, our effective average cost of debt is 4.5%.

Adjusted EBITDA for the trailing 12 months ended June 32020 was $8 billion and our consolidated leverage ratio was 3.4 times after adjusting debt for the partial equity credit for the hybrid debt securities.

And also further reduced by unrestricted cash our consolidated liquidity was approximately $7.3 billion at June 30, incruse, including availability under our existing credit facility and approximately 1.3 billion of unrestricted cash on hand.

Finally, before we open it up for Q and I want to mention that we also announced this morning in a separate press release.

That our 2019 2020 sustainability report, which reflects our lightest environmental social and governance disclosures.

Currently available on our website.

We have also initiated the annual review process with the independent sustainability rating providers and believe our disclosures and initiatives, which are described in this comprehensive 104 page report will be reflected and updated scores we believe our stakeholders.

We'll find these efforts beneficial.

We thank our customers community leaders banks debt and equity investors and board members for their participation in our sustainability survey that drove the outline for this report was that Randy I think we can open it up for questions.

Okay, Sydney, we're ready to take questions from our listeners.

Certainly.

Reminder, to ask a question Chris Star one on your telecom.

Question. Please press the pound.

The interest of time.

Limit yourself to one question one follow up please.

Once again star one question.

First question.

Comes from the line of Jeremy Tonet with JP Morgan Your line is open.

Hi, good morning, good morning.

Just wanted to start off with a question maybe Tony could answer that just you guys had talked about patient recovery being slower and maybe in extending into 2021.

Wondering if you could provide a bit more details I guess and how you see that transpiring and how that impacts you across I guess your different business line.

You don't want talk about that production side or the demand side Jeremy.

If you have both will take both.

Yes, so obviously we had this.

Shut in dozens of price crash in chaos, and we think about a million in half and I'll just you'd crews in crude as an example may and have to 1.8 million barrels came off the market.

Im kind of a numbers kind of person not real visual but if you look at how that production has come back it's.

Probably one of the steepest d.'s I've never seen in statistics.

So.

Yes, we recovered a substantial amount of it we think that maybe 300000 barrels will land.

And but.

With that said you can't deny given the amount declines with the shelves have.

That momentum has changed and there's a fair amount of ground to be picked up.

So.

That's the reality.

When we look at Y grade coming into our system. For example, those numbers are really strong and I'll, let I'll, let Brent address that but when we get up to 2025 is we see it today.

We'll be down from where we were before and it's not because momentum doesn't pick back up look we think that we were at about 1100 50 completions a month in February and we think that as we get into 2022.

That will be at around 950, okay, and probably completing the best of the best Wells. So thats whats in our Port question Doug.

And so when you when you get out to 2025 there'll be some smaller bombs in what we said most side before but Brent you want to talk about what's going on in our business in that regard and what you're seeing the one thing. We have seen is just the resiliency of of the Permian and part of its just what's going on out there than part of its how we have contracted but.

If you look at our Y grade receipts for June if look at a lower grade receipts for July.

Those are both records for enterprise and if you look at our wide right inventories.

There are no all time highs so.

Terms of how we've contracted in terms of what we're seeing from another Permian the fractionation.

Volumes that we have access to.

Those of bounced back quite nicely.

On the demand side gasoline is not really I mean, it's off its off 10% to 15% depend on what numbers you look at diesel the same.

And again thats to be expected, so we think about going forward.

What the data shows is Latin America, and we are large exporting from country to Latin America is waking backup.

Moving away from being shutdown and largely that think about Mexico, and Brazil, So perhaps some positive and we're hoping that as we work off inventories will put our refineries back to work.

Right.

That's very helpful. Thanks, and on the pet Chem side as far as demand there any trends that we should be thinking about with Peck lpgs and Pat.

Yeah. Jeremy This is Chris data, we saw at the at the beginning of the Pandemics and March April timeframe.

Lower demands on the durables.

The single use actually was was pretty resilient, we saw pretty good demand.

We're starting to see.

Gradual improvement in demand for the durables and of course single use is still pretty good.

The fact that ethylene export dock is sold out also says something about the demand for ethylene.

That's very helpful. Thanks, and one last one if I could just with regard to arbitrage opportunities.

That you've seen so far kind of the nonrecurring recurring earnings that you've got in.

That really boosted this quarter what type of opportunities DCF in the third quarter here I guess fit with contango, we're happy with.

Delayed.

Realization of those profits just trying to think through that a bit more.

Thanks, Jeremy what we said last call as we thought wed be at $5 million to $600 million and spread.

I think they're probably say and for the year, we'll be at upper end of that range.

Very helpful. Thank you very much.

Thank you and our next question.

Sorry.

Your line.

Good morning domain fundamental barricades and enterprise is expected margin compression in the NGL business now that everything looks over built for the medium term.

Anything that you can provide address these here's the that price or basically and NGL pipelines frac and export Sydney really helpful.

I think quit.

And the quick stance.

Yes, So gene and your question is as we think about margin compression in them and I assume you're talking about.

About as as people re contract on midstream assets is that is that we've got it.

I think it's a little bit more than that I think people usually talk about frac that I think it's really the whole chain of NGL pipeline frac in exports. It seems like now there's too much capacity.

Concerned that you can see a similar phenomenon, so what we see and create.

Yes.

When contracts come up that you at CN.

I think.

I think Jean Ann.

What you're saying.

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Kind of makes sense. Thank you have to take a look at.

And what to.

The company has to work with if you look at that's why we emphasize petrochemicals and.

And.

My opening comments because.

Because that gives us a heck of a lot more longer of the value chain to leverage.

So we it's about what are you having to leverage and and why one part of it for that value chain may be under some stress. The total won't be is that fair Brent.

And you had another point to make so so.

No and our situation.

Yes, maybe but we've got to value chain that we're going to leverage and more.

I will give them what they walk where there are hot button is were collect what we need that the rest of the value chain.

Okay, I think there's some offset gene and what we're seeing on ethane as an offset on volumes both for pipelines and for fractionation.

You know I hear what you're saying from an industry standpoint, I'll repeat myself I think we've done a heck of a job contracting.

Thanks, how you contracted new contract with matters in this environment.

Hey about about other commodities as well if you look at our LPG export facility. It's in a very very good position in terms of the contracts we have in place and.

And if you looked at the balance of this year. If you look at the following a couple of years run a very very good spot and then ultimately if theres supplies starts going down.

You look at what we have built Mont belvieu and the pricing points that we.

Fundamentally believe that the downstream assets that we have a does pricing points benefit. So there are some offsets in this environment.

Hi, Thanks, so effectively that bundled chain.

Well kind of give you a better and.

No worries concrete pipeline more broadly.

I think it I think it always has.

Great.

That's all.

Thank you and our next question comes from the line.

Suntrust. Your line is open.

Hey, good morning, guys.

Could you talk about your prepared comments about the JV opportunities for reducing capital you noticed that.

Process has been elongated due to the pandemic.

The six potential jvs still in play the you noted on the last call.

Can you give us a general update there.

I think on the last call. We said that we were pretty engaged with three of those six and not to guess what what I can say today as we're probably pretty engaged for one of those three it's not that you're not in discussions with the others, but it's like Randy said in this environment Nobody everybody is just kind.

To pull into Orange and so we're discussing some Jay days, what some some of our larger projects, but I wouldn't say, we're highly engaged with up with.

More than one, but we are highly engaged with one.

That's helpful. And then just quick follow up.

Frame, how we should think about maybe the largest components of that 2021.

2 billion dollar outlook.

Whether it be.

Each to our Midland Echo for and does this number presume joint ventures or is this more like an eight eight type of budget.

Yes. It in that ran yes. Kristen. This is Randy this is of the 2.3 billion is assuming no joint venture.

And if you would two thirds of that 2.3 billion.

Our really three projects that's of PDH to Midland Echo for crude oil pipeline and the Gillis natural gas pipeline.

Great. Thank you guys very much.

Okay.

Thank you and our next question comes from being with Tudor Pickering. Your line is open.

Thank you noted in the press release, the process volumes and back to 88% of March levels, and Ngls were nearly imparity on the inlet volumes side can you provide a bit more detail as to that the mix across your footprint and then on Ngls is then outperformance relative to gas is that primarily increased extraction.

Yes.

Well take that.

And then on in terms of the mix so why Greg.

This is Brian Colton, but.

Thanks.

I'd say.

Ethanes, probably increased about 4%, maybe 5% across our system.

And then in terms of just the whole volume metric and I'm not sure understood. The question, but were you're saying.

The growth come from is obviously in the Permian and I think you'll see in July as some.

Some very robust volume should come from the from that area.

Okay, Yes, and that was mainly the focus of the first point is when you look at Canada for primary footprints for you guys.

What would that recovery look like.

By basin basis.

I mean.

We're not we're not seeing a whole lot in Eagle Ford has been fairly flat theres people talking about putting rigs or certain.

Today, that's looking to deploy some capital there we're involved with.

But I'd say.

In the Rockies, you're seeing ethane recoveries.

Pick up out there.

And then obviously in the Permian just in terms of aggressively bid on contracting and just a bounce back and volumes were seeing the bulk of.

Of the benefits after another cut to the chased the Permian centric right, yes, Sir.

Understood.

And then just on the uptick the 2022 capital budget now down to 1 billion can you frame what that might look like if you were to strip out the PDH to spend or and simpler terms. If you remove the major projects what that run rate might be.

Continent be less.

Yes, I mean, you, probably you're probably not going on the door 500 million.

All right Thats helpful. Appreciate it.

Thank you and our next question comes from the line.

Well.

Product with Bank of America. Your line is open.

Thank you good morning, everyone. Thanks for taking my question here first a quick follow up on the question on the potential JV growth capital project.

Could you maybe high level disclosed what are the parameters of your negotiations there and we would be or preferred JV partners.

Yes.

Yes.

Thank you.

Typically.

They either bring.

And they bring more than money.

They've got to bring throughput are they got to bring uptake typically is now as are the kind of people. We do joint ventures with does that answer your question.

I get that Doug Thats helpful and trumped up.

The parameters.

What you're negotiating or.

Within the project, how you plan to Florida.

Well the interest can you comment on that.

Right I understand you could you could you repeat that question I'm sorry.

Sorry.

Could you maybe discuss.

What you are considering when it comes through the negotiations.

Maybe.

It is simply put.

The bigger projects that you have on the backlog, which was how would you rank them in terms of note, which was viewed wando partners to get involved in.

Well I'll tell you what we wouldn't want them getting involved in thats.

The Churchhouse, which I think is probably our storage system in Mont Belvieu I don't think we have a problem, we'll get them having them involved in summer bar.

So some of the less strategic things that may be paid the system, but that's about it that's been uptick and thats about all we're going to say.

Got it.

Thanks for that.

The.

Follow up.

And.

Election this year.

Would you be able to share some thoughts on.

Hi, you're watching the elections and the recent.

Movement, there and maybe if you could share perspective.

Potentially impact and or benefit to BBB overall MLP Steve.

Corporate taxes as well as energy.

Capture proposals.

Okay. This is Randy I guess two is the season the political rhetoric.

And.

I don't know how much you can really with some of the proposals that are being put out in the public domain.

Frankly, I don't know how focused you can you at all those at this point in time again, because it is everyone isn't campaign mode.

I think with the with the deficits that the country is running up.

It looks like.

Income taxes tax rates for both individuals and corporations or going to go up.

And perhaps substantially.

So.

The honest this year, we really not spent any time coming in and looking at MLP versus C. Corp analysis, we've been through focused on executing and just given where the uncertainty in the environment in the volatility in the environment.

Frankly, we're pretty content with our current MLP structure.

And as far as policy is going as far as what's been proposed.

I'll go back a little bit and use the analogy of the of the us.

Highway Trust fund it was created to not saying 56.

And it's taxes on motor gasoline and diesel to come in and fund road construction and road maintenance the last time the tax.

On diesel and gasoline was raised to fund that Trust fund was 1993.

Since 2008.

The Trust fund has been running deficits and no one in Congress via to a Republican or Democrat administration has been willing to go up on the and raise the tax on motor gasoline and diesel because they did more the impact on individuals and they did not want impact.

On businesses in some of the things that are being contemplated in some of these policies that were hearing this campaign rhetoric, which substantially increased the cost of energy.

Both on individuals and companies. So it's really hard to see if if if if the powers that be wouldn't even increase.

The price on gasoline how some of these large proposals can come in to be executed.

Got it thanks for that.

Thank you enter next question comes from the line of.

Gershuni Your line is open.

Hi, good morning, everyone good to hear everyone as well.

Yes, maybe to start off.

Jim in your prepared remarks, you sort of talked about how the marketing and spread business is effectively.

A natural hedge for for the business opportunities pop up.

Dislocations and show for it I was just wondering if you can sort of give us your thoughts on how this on how the trends play out for for the balance at this year.

And what I mean by that is no.

Right opportunity start to recede over the next.

A couple of quarters, but at the same time, you have they shut ins coming back base business starts to move higher.

Is the trend of the base business recovering stronger than the.

I guess subsiding of the marketing opportunities is there a scenario where we're at threeq can be higher than Q2, without giving specific guidance, but just sort of talking about the trends, which ones, which is the stronger trend right now or is the natural hedge going to reverse itself in sort of keep us running flat scenario.

Good question Sarah Thanks.

Personally.

You get dislocations and you get spreads when you have the debts. So when crude prices fall invariably will say contango I mean thats been the way it's men.

If those spreads aren't there than in my mind, our pipelines are probably a lot more throughput than we have today. So.

Yes.

Thats kind of way assay it in terms of I'm, probably a little more.

Bullish then Tony is in terms of recovery I think.

Personally think demands going to recover sooner than probably Tony Thanks is going to recover and I think youre going to get a price signal next year on hydrocarbons that.

And some things back home. So that's that's what I see.

Okay.

And maybe a follow up.

Question here, just sticking with the theme of dislocations.

Obviously, you've been very opportunistic take advantage of that market.

Dislocation to capture spreads within hydrocarbons for your base business itself.

What I think about Lpds unit price do you see similar dislocations in your stock price right now.

For example, you're down today with with the result to put out.

Do you see an opportunity to use the excess cash generated from.

The strong marketing proceeds lower capex budget to potentially accelerate or increase your your buyback target.

To take advantage of the dislocations within your stock price.

Randy answer that but individually theres, a number of us that accelerated our buyback program.

Yeah.

Sure I think that that just as I mentioned that really the this year.

Where we're really coming in and and.

Going quarter by quarter as we consider.

Cash distribution growth to our investors and.

Spending capital on buybacks falls in that same category.

So again, we'll come in and take a look at it quarter by quarter, we had come in and allocated.

Approximately 2% of cash flow from operations to go towards buybacks, we done that.

What will come in and look for opportunities for the remainder of the year to see how we would want to come in and and.

If we're going to if we're going to return more capital to investors, whether it'd be in the form of distributions or or a buyback so more to come on that.

Okay. So it's fair to conclude that that 2% target is not a hard line. It's something that you can go above and that you would look at 975 yield it's probably being very opportunistic.

Hi.

Generic it's yes. It was it was approximately 2% is what we said but.

We will come in and take a look at it quarter by quarter. Some of this we'd like to get you know as Tony described Theres still some uncertainty up out there as far as coming in and how the economy reopens, we just like to get a little bit more visibility.

On our what we see for the the business environment.

All right that that sounds great. Appreciate the time I want to keep it to just two questions.

Have a great Allstate day.

Thank you.

Thank you and our next question comes from Justin Jenkins with Raymond James Your line is open.

Hi, Good morning, everyone, I guess I'd like to start to on 2020 growth spending right. Randy I think you covered a bit of of that further out outlook for 21 22, but is it more timing at that point in terms of the range of bend left for 2020 or at some of that dependent on JV outcome.

It's the range that we give for 2020, the two and a half billion to three 3 billion is largely just timing on how how we see.

Cash.

Actually the.

Go out the door.

Okay.

And then you also mentioned that if that working capital to at peak in Threeq Q in terms of usage do you have a magnitude and mine for that and then maybe give us.

Of how quick that cash put back in the door as the tailwind thereafter.

Yeah.

Probably could see.

Another call at another.

Three to 500 million dollar increase and working capital between now and the end of the third quarter.

And then I think it would just work off over from the third quarter, probably work off of typically you've got a good bit of working capital deployed I mean, just arc and our typical business you have a good bit of working capital deployed.

Over the fourth quarter. So I think you would see ultimately that that from that peak in the third quarter, you probably see it worked off largely by the end of the first quarter next year.

Got it thanks.

Sydney.

Yes, Thank you and our next question comes from the line.

Stanley with Wolfe Research your line is now open.

Hi, Good morning, just following up on the last question. If your working capital is still increasing in Q3 should we assume that then means some of the contango marketing type opportunities could be even greater in the future than what we saw in Q2 in future quarters.

No I think it's just some of it is just a carryover to what we put on.

I think when what Jim.

Well, Jim alluded to that we think we may be as far as total spread opportunities be in the upper end of that 600 million dollar range really sort of see that split 50, 51st half of your second half of the year.

But but.

You still have.

Just with some of the positions that we put on.

You can have working capital creep with those.

Positions.

Okay. That's helpful and then.

Going back to last quarter I thought the messaging was was pretty strong from a company that they weren't acquisitions you were interested in.

I guess with the dust settling some wide here.

What's your view on the merits of of acquiring companies are assets and synergies I mean, the one thing that striking is you guys can issue 10 year debt right now it under 2% interest rates. So just any updated thoughts on on how you're thinking about that.

It goes.

I'd say.

I'd say, we've got the same answer is the first quarter.

Yes. Good. Thank you heard that one that's where I think we are too where.

Well, we look at opportunities that come across.

Frankly, there's we've not seen as far as Teaser's coming on we frankly have not seen much in the way of Teaser's come across the last three or three or four months and.

One.

Certainly not anything compelling so I think right now we're just focused on continuing to execute with a with the business that we have them and.

From there, but I mean, we're open to come in and look at opportunities.

But it really needs to be a good fit probably what would be more likely would come in and b of a bolt on top opportunity and.

But again really haven't seen anything develop on that front.

Interesting. Thank you.

Thank you and our next question comes from the line of Putamen.

MS Energy your line is open.

Hi, good morning, and thanks for taking my questions just to two questions on the same subject. The first one is what are your views on us.

NGL export capacity do you see more opportunities to grow your NGL export business and then the second question is overall it seems that us NGL exports have a better outlook than us crude exports do you think that is a fair statement.

This Jim.

But Tony and Brent.

And I think the world needs Us LPG.

And.

As lifestyles improve in other parts of the world.

In many cases LPG is what.

[music].

Creates that improvement you've got Anita.

The data speaks for itself Jamie exactly right you look at what happened in highest as a pandemic.

Brent.

Are you blown away by the demand at our GAAP absolutely.

Right the rather type numbers.

You know.

Me too quick to write off crude oil exports, we Richard seemed quite a lot we've seen a pickup in crude exports.

We had a record weak because of between one point, yeah, a couple weeks ago thankfully.

Started going back to a to the high as.

We're seeing just a different interests in the slate you know the lighter.

Theres bigger demand for West, Texas, why there is some bigger demand for the Eagle Ford type barrel.

As is people have have a bit on motor gasoline.

And we're seeing those go to Asia, mostly Korea, and some Latin America.

But on the LPG side, you know I think we're in a good spot is enterprise we have project out there that we can expand when the time is right to expand.

I'm not sure from a capacity standpoint, it needs to be expanded.

Any time soon but certainly we have we've ever project. That's that's a that's a low capital project that we can execute on.

Great. Thank you for your responses.

Bill City. This is Randy we have time for one more question and then we'll have you would give the replay information certainly.

Question comes from the line of Michael Blum with Wells Fargo. Your line is open.

Thanks, Good morning, everyone.

Just two quick ones for me so just to stay on the LPG export topic.

It seems like your volumes are holding up here at least the beginning of the first half.

The second half of 2020 can you just give you kind of talk about what you're seeing are you seeing any drop off as some of these countries come out of locked down or are you still seeing strength, there and LPG export volumes and if so what do you think is driving it.

I think we still see hi, Michael I think we still see strength I think what's driving is what we talked about a while ago.

Okay. Appreciate a lot of PDH demand.

Over in Asia.

I think just in terms of how we contracted Michael.

Say it as humbly, but I think we'll probably be toward the end to see any kind of drop off I mean, we have just in terms of our supply position in terms of over the pricing point in terms of how aggressive that we've contracted out for this year in the next couple of years I'm worried a good position to kind of maintain these type of levels I think you're seeing.

Export.

Todd around 18 million barrels a month of Lpgs and.

I'd say that's a good sticky those are those are sticky numbers, what's interesting Michael is whenever we do get a cancellation we've been pretty successful then back filling it with a spot so the appetite is there.

Okay, Great Thats.

That makes less sense.

My second question I think it's probably for Randy.

You referenced the sort of that target payout ratio number that you're now reference referring to a bit.

I've kind of like a long term target for where you want that to sort of settle out overtime are you thinking about that way.

Oh, Mike why don't I don't think we developed our thoughts that far along on on setting a long term target some of it.

Some of your your.

Your balance to that would be what what kind of growth opportunities do you see so.

We've really not come in and so I don't any any long term targets I mean, we do come in and compare.

How how we're doing compared to the market and.

I think were when we come in and look at the market and put the various sectors of the S&P 500 on the page.

I think we're amongst the.

Two top three.

Of the of the sector. So we think were.

And it's by nature being an MLP the whole thing with an MLP as you have a high payout ratio and so I think we caught up pretty well against the market.

Great. Thanks, everyone appreciate it.

Okay Sydney.

Do you want to give the replay information.

You May dial one 880, 592, 056, or 4045373 406 with the access code 166.

Five four.

Access the replay information.

I would now like to turn the call.

Back to Randy Burkhalter for any further remarks.

Okay, well that concludes our remarks today and I'd like to thank everyone for joining us and have a good day. Thank you Goodbye now.

Ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a great day.