Q4 2020 Enterprise Products Partners LP Earnings Call
[music].
Good morning, and east and extra and that would be a conference operator today at this time I would like to welcome everyone to the enterprise products partners fourth quarter earnings call.
All lines have been placed on mute to prevent any background noise and if you guys.
Remarks, there'll be a question and answer session. As a reminder, this conference is being recorded.
Is there a Randy Burkhalter, Vice President Investor Relations will begin your conference. Please go ahead Sir.
Thank you Dexter and good morning, everyone and welcome to the Enterprise products Partners Conference call to discuss fourth quarter 2020 earnings our speakers today will be co chief executive officers of Enterprise's General partner Jim Teague.
And Randy Fowler.
Other members of our senior management team are also a attendance for the call today.
In this call we will make forward looking statements within the meaning of section 21 E. Other Securities and Exchange Act and 1934 based on the beliefs of the company as well as assumptions made by and information currently available to Enterprise's management team.
Although management believes that the expectations reflected in such forward looking statements a reasonable it can give no assurance that such expectations will prove to be correct.
Please refer to a latest filings with the SEC for a list of factors that may cause actual results to differ materially from those and the forward looking statements made during a call.
And with that I'll turn it over to Jim.
Thank you Randy.
As we said in this morning's press release, our business has continued and performed well throughout 2020.
We reported net income attributable to common unit holders for 2020, a $3 8 billion.
A $1 71 per unit.
Compared to $4 6 billion or $2 nine per unit on a fully diluted basis for net 2019.
Net income for 'twenty, and 'twenty was reduced by a noncash asset impairment charges of approximately $891 million, which Randy is going to address this.
Distributable cash flow was $6 4 billion for 'twenty and 'twenty compared to $6 six for 2019 D.
DCF per that at one six times coverage and we retained two and a half billion dollars M D C up and.
And 2020 to reinvest and the partnership.
We completed 2020 with significant financial flexibility and a strong balance sheet.
We really are proud of enterprise as employees for their dedication and perseverance and responding to the challenges and in 'twenty and 'twenty caused by the coronavirus pandemic.
The diversification of our businesses across multiple commodities and <unk>.
<unk> of our transportation and storage assets, the depth of our marketing activities and our cost control efforts enabled us to generate a.
Distributable cash flow just 3% shy of the record DCF, we are and in 2019.
We were able to self fund over 75% or a $3 billion of growth capital a year.
This is a performance.
Supported our 22nd consecutive year a distribution growth.
There's a lot to be proud of for a model our folks.
We are proud of how they consistently use good judgment and both their work and personal lives as enterprise was one of the first work from work companies and the energy space.
There is no way a results would have been what they were in 2020 with or without the power of teamwork that takes place when we're all in our offices on the same schedule and pulling and the same direction.
We don't believe you can zoom your way to prosperity.
We are optimistic that the combination of the vaccine and more stimulus will lead to be world emerging from this economic sudden stop and 2021.
And we're encouraged by the signs of a rebound and the global economy that we see through a strong domestic and international demand for Ngls, ethylene and propylene and the continuing recovery and the demand for refined products.
There are still uncertainties and headwinds as we begin this year.
We've been very outspoken about the potential for significant price appreciation.
Soon as a second half of this year and we're not alone and that analysis with most energy banks and consultant Sydney seeking the same thing.
Long term the world with this growing population of 8 billion people, including billions living and energy poverty is evolving and we will continue to evolve with it.
We have a successful track record of using technology to become more efficient.
And expanding and Repurposing, our assets to adapt to changes and energy market fundamentals. We believe we are in a position a financial strength to continue to prosper through this period.
Our objectives today are consistent with those when we went public and 1998.
Building a company that has staying power per the long term by protecting a strong balance sheet investing and growth projects with attractive returns and responsibly returning capital to a limited partners, including through distributions that have never been cut.
Close to $4 billion, a major growth projects into service in 2000, and we are.
$3 $6 billion a projects under construction that will come into service over the next two years, we put into service. In 2020 include two fractionator at Mont Belvieu, our Midland to Echo three pipeline and petrochemical projects related to ethylene and propylene and logistics store.
<unk> and export capabilities.
We developed a capability to Colo ethane and ethylene on the same ship at Morgan's point and propane and propylene on a <unk> at our ship channel facilities I don't know a anyone that has those capabilities.
And it's coming in service in 'twenty and 'twenty. One include a CPAP hydro treater, and Mount Belvieu and our Acadian.
Give us a lateral which will move approximately one bcf a day, a natural gas and to growing LNG markets and a Louisiana and our petrochemical sector are PTH two facility remains on schedule and on budget come online and the second quarter, a 2023 and we have several other pet Chem <unk>.
<unk> is expected to be placed and service next year.
We continue to focus on cost control and total we have reduced our planned growth capital expenditures for 2020 and 2021 by over one 5 billion.
The response to changing industry conditions, and we wanted to give a special shout out to operations per substantially managing our costs for 2020 enterprise overall operating costs were down approximately $400 million versus budget and our sustaining capex for 2020.
Approximately $100 million.
Lower than budget all of this without sacrificing safety or.
Reliability.
Finally, I want to take a moment to address the change and administrations.
Reading the news one might think that the sun setting on oil and gas and.
Enterprise has been around since 1968, and we have successfully grown our business through many administrations.
Obviously policy proposals from this new administration have been supportive or a renewables.
Cleaner energy future does not mean, a world without fossil fuels. The reality is nothing could be further from the truth, while the notion of energy transition.
And I hate the word transition, but regardless with the notion of energy transition and often imply a shifting away from traditional hydrocarbons, we still believe and Alibaba approach would be required to meet the world's growing energy needs a.
More prosperous and sustainable future for all people will require a traditional sources of oil and gas.
And that the U S provides and numerous forms of renewables to debt neither world's poor nations access to the abundant low cost energy that we have frankly is to tell them you can't have what I have and you cant afford quota.
U S oil and gas and petrochemicals are making a difference not just in the U S but around the world.
There is nothing to replace these products without plentiful reliable and low cost fossil fuels world would be a very different place.
Would be one that is less advanced much less prosperous.
Much shorter life, expectancies, and frankly would be more polluted.
Consider India or 100 million homes have been converted from burning wood dung and co to LPG.
Our power that is being generated from natural gas exported from the U S versus the alternative of coal.
Talk to these people and the other.
Really understand what U S hydrocarbon production is done for them.
The more politicians try to limit production to a more price bullish again.
Im sure someone on this call will ask how the cancellation of the Keystone pipeline and will affect our seaway throughput.
And it may have a positive effect.
But it doesn't make that stroke and right and.
<unk> security as a north American issue.
And limiting supply only makes Russia, OPEC and Iran, richer and more powerful.
And it is saying to the 3 billion people on this planet that live and energy poverty that U S politicians don't care about their quality of life.
Stepping off my Soapbox and shown through our results for 2020, our asset base and our people have demonstrated that our business model and sustained cycles.
Even one as severe as this pandemic.
We are committed that enterprise will be here and a 100 years cross screen through whatever hurdles there might be and with that I'll turn the call over to Randy Fowler.
Thank you Jim and good morning, everyone I'll start by reviewing some fourth quarter income statement items.
Net income attributable to common unit holders for the fourth quarter, a 2020 was $337 million or <unk> <unk> per unit on a fully diluted basis.
Compared to $1 1 billion or a <unk> 50 per unit for the fourth quarter a 2019.
Net income for the fourth quarters of 2020, and 2019 were reduced by noncash asset impairment and related charges of approximately $800 million or <unk> 36 per unit for the fourth quarter of 2020, and $82 million or <unk> <unk> per unit for the fourth quarter of 2000 and.
<unk> and <unk>.
<unk> charges recorded in 2020 were primarily for goodwill associated with the partnerships and natural gas pipelines and services segment and for a certain long lived assets, including those associated with our marine business that is our barge and push boat business and natural gas gathering and processing facilities.
Moving on to cash flows cash flow from operations.
And was.
Was one $6 billion for the fourth quarter, a 2020 compared to $1 7 billion for the fourth quarter of 2019 on a full year basis cash flow from operations was $5 9 billion and $6 5 billion for 2020, and 2019, respectively cash flow from operations.
For 2020, and 2019 were both reduced by $768 million and $457 million, respectively for cash used for working capital.
Free cash flow for 2020, which we define as cash flow from operations minus investing activities less distributions to non controlling interest was $2 $7 billion for the year, which is an 8% increase compared to free cash flow for 2019.
Our payout ratio, which we define as the sum of cash distributions and buybacks as a percent of cash flow from operations was 70% for 2020, 67% from distributions and distribution equivalent rights and another 3% from common unit buybacks.
We declared a distribution a 45 with regard to the fourth quarter, which will be paid February 11th.
This distribution represents a $1 one per cent increase versus fourth quarter 2019, 2020 marked our 22nd year of consecutive annual distribution increases.
During the fourth quarter of 2020, we bought back $26 million or $1 3 million common units at an average price of $19 62.
This brought our.
Total repurchases for 2000 $20 million to $200 million or.
Or $9 7 million units under our buyback program.
Additionally, enterprises distribution reinvestment plan and employee unit purchase plan and purchased a combined $33 million or $1 8 million common <unk> units and the open market during the fourth quarter and for the full year. These programs.
Repurchased $137 million or approximately 7 million common units on the open market.
While we currently expect to generate discretionary free cash flow beginning in the second half of 2021 and.
And what we define as discretionary free cash flow as cash flow and excess of capital investments and distributions given the many uncertainties as we entered the year. We believe it would be premature to provide distribution growth and buyback guidance at this time.
We will continue to think of buybacks is opportunistic as opposed to programmatic or formulaic.
For 2021 and 2022, we currently anticipate growth capital investments to be approximately $1 6 billion and 800 million respectively.
These figures are based on sanction capital projects and exclude the growth capital investments related to our proposed spot offshore crude oil terminal that is pending government approvals, while we have several projects and the development phase. We currently do not expect our 2021 growth.
Capital expenditures to exceed $2 billion, even if some of these projects are underwritten and sanctioned this year.
We currently expect sustaining capital expenditures for 2021 to be approximately $440 million, which includes $115 million a expenditures associated with scheduled turnarounds.
Of our PTH.
Propane dehydrogenation facility and our octane enhancement facilities.
Turning to capitalization, our total debt principal outstanding was approximately $30 billion as of December 31, and 2020, assuming the first call date for our hybrids and and the maturity date, the average life of our.
The debt portfolio was 16 three years and again based on final maturity 'twenty four years, respectively. Our effective average cost of debt is four 4% adjusted EBITDA for 2020 was $8 $1 billion and our consolidated leverage ratio was three <unk>.
Five times after adjusting debt for the equity treatment of the hybrid debt securities and also reducing debt for cash on hand unrestricted cash on hand, our consolidated liquidity was approximately $6 $1 billion at year end, including availability under our existing <unk>.
Facilities and approximately $1 1 billion of unrestricted cash on hand, much as this cash on hand was sourced from our $1 $25 billion debt offering that we did in August 2020.
Going into 2020, we believed it was responsible to raise capital through debt offerings, well in advance of our needs to fund maturing debt and capital expenditures.
We issued a total of $4 25 billion and debt and 2000 $23 billion and January offering and $1 25 billion and our August offering our maturities in 2020 were only $1 $5 billion as a result throughout most of 2020, including at year end.
We carried more than a $1 billion of unrestricted cash on our balance sheet to provide liquidity and addition to our bank credit facilities. This compares with our historical practice of maintaining unrestricted cash balance.
$200 million to $300 million.
In 2021, we have a total of 1.325 billion of notes maturing. These maturities will ultimately be satisfied with unrestricted cash on the balance sheet.
Largely from our $1 25 billion August 22020 debt offering.
And 2021 cash flow from operations at this time, we do not foresee the need to access the debt capital markets and 2021, however, depending on market conditions and other factors, we may elect to approach the debt capital markets in 2021 to fund our 2022.
Debt maturities.
And turning to upcoming.
Vince and before we turn it over to questions. We want to remind everyone that we have to virtual events that will take place on February 22nd and February 23rd on the 22nd we will feature a the discussion of ESG and other related topics and the 23rd we will focus on traditional analyst day.
Topics the webcast will be available through our website starting at eight a M central time, both days with.
And with Speaker sessions.
<unk> followed by a live Q&A on each day with that Randy I think we're ready for questions. Okay. Thank you Randy Dexter, we're ready to take questions from our listeners.
Thank you very much.
And there to ask a question and will need to grasp or one on a california can be drawing a question right the pound key.
And that's our one two assay pressure and we will limit to one question and one follow up question per participant.
Standby and combine a Q&A rock.
Your first question comes from the line of Jeremy Tonet. Your line is open.
Hi, good morning, good morning.
Just wanted to start off on the supply side, if I could and maybe this is a question for Tony and Jim here and just wondering what your latest thoughts are given produce a conversations on the outlook for supply growth from what we can see it looks like the Permian will continue to grow other basins could decline and the Permian kind of take share here just wondering what your thoughts are.
For a supply GMP supply going forward and also with federal land issues, there kind of a encroaching on the Permian thoughts on that and how this all kind of impact ETD.
Jeremy we're going to we're going to produce a new supply forecast at the analyst day.
But the long and the short of it is if you look at what public producers are saying and what they're telling us they plan on remaining flat and 2021 and in a flat.
That being now most of them couch, it as where they exited 2020 and where they plan on X <unk> and 'twenty, one and you are correct that the Permian is going to be the lion's share of EBITDA of the activity.
That said, we are seeing some increase in and activity and production and Eagle Ford that we'd like to see.
And then I guess, then I'll move to the federal acreage comment and.
It's early on to estimate and Brent and May want to May want to chime in it's early on to this pronouncement from the buy and administration.
Kind of two weeks into it but when we look at the Permian acreage and we back up and look at what we consider active acreage.
Nearly 15 million acres.
Only about 12% of that as we as we gauge it is on federal land.
And on net federal land and Theres, some approximately 2000 permits probably more as we speak and six or 700 ducks.
What we're hearing from producers.
Thank Brent and.
Let me know if you feel differently, some and some are actually speeding up.
Most are saying at this point no change and I would say a few if any at this point and set them laying a rig or two down.
Because they're well permitted they saw that it might come in and.
And that's where they're headed.
And Theres a lot a political pushback. This is big for the state a new Mexico.
And so.
Stay tuned, but when we look at it Holistically. This is how we feel right.
Brian did I Miss anything no I think you covered a Tony.
In terms of some green shoots we are seeing some private guys be more active out there.
With.
And with put more rigs and play.
And when we talk to our customers.
And I talked a simple answers, we don't know what's going to happen, but we've talked to our customers. It feels like they have a timeline to go ahead and execute.
Permits that they have and it's not it's not a rush to go out there and get it done.
So.
It's kind of a case by case basis, depending on the producer, but I haven't sensed annick from talking to our customers.
Got it that's helpful. Thanks, and maybe kind of building off that <unk>.
While the impact as you see it for 2021 here.
Wondering if you're a couple that with I guess, the turnarounds and the pet Chem segment.
Does this mean that you expect 2021 EBITDA would step down from 2020 are there any other kind of a big moving pieces, there we should be thinking about.
Yes, Jeremy.
I would say.
I think.
Based on what we see thus far we think we can.
Hold it flat.
And.
And could it be soft a $100 million $200 million could be but I'll tell you what.
Never doubt.
And the resolve of this organization to come in and capture opportunities. So we'll see I think we're in good shape going into the year.
That's very helpful. I'll stop there. Thank you.
Okay.
Your next question comes from the line and to call a and B from Tudor Pickering, and thank you Josh and ask.
I ask a question.
Good morning, So was that a total capital down nearly 40% for this upcoming year and leverage effectively at your long term target can you just update us and how youre thinking about payout ratio for 2021.
Yes.
And I'd really refer back to the comments that I had and the conference call script, I think we do expect to start generating discretionary free cash flow and the second half of the year a good bit of our Capex is skewed more towards the beginning of the year.
And we think we will be.
Discretionary.
Free cash flow positive at this point and time.
And we really don't want to provide any guidance on payout or a big payouts still going to be pretty lofty I mean, just given where our.
Our distribution is since the distribution makes up a <unk>.
Substantial amount of the cash that we return to our investors. So it's still going to be fairly high just based on that so as far as what we do on buyback I think we'd like to get a little bit farther into the year again, a lot of uncertainties as we enter the beginning of this year and we'd just like to get better visibility before we provide any.
And so on that front.
And and Randy just a follow up on that do you see any benefit to go and materially below that three five times leverage target.
We said three five times.
And.
Our definition of three five times area is three five plus or minus a quarter turn so that's our target that we've been talking about that being our target for two or three years now and we're still comfortable with that range.
Understood.
And then just on the propylene operations with a spread between PGP and RVP widening further year to date and any potential for the fracs to offset the PTH downtime here with Q1 upcoming.
Chris you want to answer.
Yes, with a <unk>.
Spreads the way they are obviously, we are running as hard as we can so.
Okay.
I think we're expecting to do as much as we can with that yes. This is Jim.
The spreads are wide, but we don't have exposure to.
The total I think we've got exposure and about 30% of our capacity that spread so to the extent, we have exposure will benefit I'm not sure.
How much it will make a.
I appreciate that and just a quick final one.
Clean storage capacity I don't think that was online until almost the end of December can you just update us and what you've seen there and how youre expecting and exports to turn it over the course of the year I appreciate it.
I'll start a tab was actually online that the prior year, but we finished our storage tank at the at the export terminal at the end of the year.
And we are operating at pretty high rates before the tank was and service.
And having that just allows us to optimize stock loadings and a loaded a higher rates. So really at this point, we have contracts in place.
But it's really going to be determined by the profit global arbitrage.
So now we're sold out.
With some opportunity for spot business.
Yeah.
Your next question comes from the line of economy from capital One Securities. Your line is open.
Hey, good morning, guys.
I just wanted to maybe go into a little bit and a release you talked about analyzing a renewable project opportunities. So just wanted to get a feel for maybe what you are looking at and how that would fit with a business.
Yes, it wasn't really renewable opportunities what we said we've got some growth projects that we're looking at debt if you would consistent with.
With the energy evolution, not necessarily specifically renewable projects.
Okay got it and I appreciate that can you maybe go into a little bit more detail on what those projects would be.
Not really.
Okay fair enough.
And.
And second question would be I believe you mentioned that your growth Capex could move a little bit higher to around $2 billion. This year.
Any more details around what would push you to that upper end.
The previous question.
Alright fair enough thanks, guys.
Yes.
We have a question from Jean Ann Salisbury from Bernstein.
Your line is open.
Hi, good morning.
And the U S is at record levels, and frankly more ethane storage and then.
And can you comment on if that's mostly your inventory and perhaps your view on and if this heightened orange book camp and ethane prices and 2021.
Great.
Yes, I mean, we're seeing.
We saw ethane storage peak and the fourth quarter, and we're seeing a roll off as a.
Sure.
Attackers came back online.
And I was a little bit of a challenge during the fourth quarter as ethane to trying to clean up.
I think a bit.
We're fundamentally bullish a lot of things as a relates to hydrocarbons.
I think in terms of the outright price on ethane and I still think you have to have some sort of baseline gas call.
But if you look and how this market balances with demand and supply on ethane.
And if you look at a demand coming online and you hear what Tony says about supply from talking to our customers Ulf.
Ultimately ethane and Youre seeing it happen and we've seen a half in the last several weeks ethane.
Cash to work and go to work.
Price to get back into the NGL stream, so whether that means come coming from further away or whether that means that.
That people have to adjust prices in a Permian basin.
We believe that these markets need to balance and.
I think fundamentally we're probably I don't know a red.
Average reported Jeanine and I don't know, if we're going to see some numbers that we've.
And I had read from you.
A too much back, but I think we're a line that were fairly bullish ethane.
Okay. That's helpful.
And Asia propylene prices are quite high for much of a December and January can you comment. If you are able to capture a material amount of marketing margin. There are a bit most of that go to the second and company.
I think.
One of you.
The.
This is Brent again.
We have a massive presence and ngls so.
Price goes to work and Ngls I think it's fair to assume that somehow enterprise participated in a.
Okay got it thanks, a lot right that's a pretty.
Your next question comes from the line of Peter Harmer.
Harman from Siemens.
Your line is open.
Yes, Thank you and good morning, Thanks for taking my questions. My first question is what are your expectations for crude oil export volumes for 2021, and what are the puts and takes around that view.
Okay, we're going to keep this as the Brent secret share grant.
Yes.
And I've got to Europe, and so that you get other area.
I mean, so if you look at our volumes and.
I can speak specifically to enterprise.
Our volumes for crude exports have gone down.
And so the pandemic has taught us a lot of things and one thing that has taught us.
Something that we've preached over the last several years as a houston truly as a market and.
And I understand and I see the numbers too that there's a lot a barrel has gone out of corpus.
Recognize the factors wants to try and leaves a station and Midland and a hedge to corpus and it has to go to the water.
While we offer and Houston is truly a market and.
And the domestic price that our customers achieve and Houston.
Higher than a price and they can achieve on the water and.
And that's the reason they have elected to not take a barrel across the water now is enterprise from a profitability standpoint.
I have to say, we're somewhat agnostic to it.
And can provide the service we have no problem, providing a service like a domestic price and Houston is higher than corpus. So.
At some point and the market's going to require a that barrel to go across the water and once the global market and each that barrel.
Right now our customers are achieving a higher netback and Houston.
Yes.
And so you can see the volume decline, but when it comes to a revenue frankly.
Our revenue stays flat and we'll continue to stay flat for quite some time.
And then when we have to export frankly, theres additional expenses that you undertake from export it.
Okay. That's super helpful. Thank you and then my follow up is can you elaborate on the drivers of the current strength and the NGL market and how sustainable you think those are for 2021 and following up on some of the earlier questions.
Yes. This is Jonathan Klein and I mean, I think it's all it's all a chemical driven I mean, the demand for plastics as a function of what we've been experiencing throughout 2020, I think we expect to continue and that support and the entire NGL value chain.
Sure.
What about your exports to Asia.
And on the export front, we continue to seem to set records on volume every quarter. It did and the fourth quarter as well and I think we expect volumes to remain robust through 'twenty one.
Okay. Thank you very much.
Your next question comes from day Lang and from Michael Blum from Wells Fargo.
Alright and that is open.
Thanks, Good morning, everyone.
And I wanted to get your your.
Thoughts on what's been going on at the Panama Canal, and how that impacts or could impact and the future.
LPG movements kind, a more on a long term basis.
Yes, that's adjusted again I'll take a stab at it.
I think what you saw and what you continue to see with congestion will could potentially change trade flows.
However, I don't think that we expect it to materially do so and which that would impact volumes across.
Gulf Coast docks at the end of the day.
Barrels need declare the demand needs it and they'll continue to pay the price to get it there.
Got it. Thank you and then do you have a alignment a press release debt.
And your growth I guess is to source, 25% of your power from renewable sources by 2025 can you just elaborate a little bit on that is that primarily replacing compressors along the pipelines or are there other areas, where you think youre going to a source of that power.
Yes.
Power sourcing is from a wide variety of areas over the over the last number of years think about 10 years, plus we've been growing more and more to electrical electrical drivers and a new facilities, but power is really sourced both from opportunistic.
Being able to go out and acquire a solar power as well as the ERCOT grid provides a significant amount of renewable power.
Great. Thank you so much.
We have a question from Shneur <unk> from UBS. Your line is open.
Hi, good morning, everyone.
And I wanted to start off with a question on the Permian.
There's been a lot of talk over the last year and a half a show about the Permian overbuild thesis and I.
Just wondering if I can get your broader thoughts on it.
The industry really discussing it correctly.
And I'm kind of wondering along the lines of how we look at the egress out of the Permian.
Is there a way to think about it in terms of egress to Cushing versus E. Brexit demand centers you were just talking about how great. Houston is kind of a demand center for a market and.
As we sort of think about it over time, when when pipelines come up to a re contracted and so forth.
Is there going to be a different price for a pipeline that.
Evacuate crude to Houston, and corpus and to the demand centers versus towards Cushing and should there should there be kind of a dual market that sort of a merchant's overtime and.
And just kind of thinking about your thoughts on how that entirely plays itself out.
This is Jim.
Branch pointing his finger to me.
And I got more high points and Ham so Brent do you want to answer that question.
And I think what we're seeing flow into Cushing and you guys can see the arbs between Midland and the overcapacity built.
Coming out of Midland.
No.
I think there is some barrels that this refinery complexes are going to want to go from Midland to Cushing. If you look at volumes and what they have done month over month and continue to go down.
Much like most areas and this country.
I would say there is too much pipeline capacity going to Cushing.
That pipeline capacity gets rationalized and.
And how it gets repurposed for what direction a flows that remains to be seen.
A.
As far as Corpus and Houston.
I would argue hey, they all work great when barrels are flowing and going straight to the water and there is no decision to make and.
And that work and Theres a bunch of players that worked 15 months ago.
But speak to the magnitude you're building.
So I mean in terms of what we offered a Houston in terms of the refining capacity.
The access to hear from pipeline connectivity. If you look at the amount of storage of the Houston Gulf Coast versus Corpus, we're talking hundreds of millions of capacity they can.
A weather storms like we saw in 2020 versus what they offer a corpus when youre looking grades.
And what people can do a different grades with the export customers want a different grades and if you look at.
And frankly.
Our announcement last week with Magellan.
And working on a pricing point.
<unk> frankly for everybody who works for producers a should work for refiners and should work for consumers and.
And a factors transparency for people to go out and conduct our business long term and whether thats a hedge if a buyer whether thats a hedge that they sell and then they can decide to execute on that are they taken across the water or not but they don't have to take it across the water. They can go sell it back and the market at the Arb doesn't work.
Versus other ports, where frankly, you have vessels floating around out there and we're hoping to phone rang so because they once that phone range and say hey, I need you then.
Frankly, the people while they have to do is go beat the price a Midland and I think that gets all that for a while.
Okay, Okay, so bottom line.
And the evacuation to the Gulf coast should be more valuable than the evacuation to Cushing.
This is going to work over time as contracts roll off I mean, you got some sticky contracts that people have.
And markets evolve over time and people learn lessons.
In terms of our presence on barrels going from Midland to Cushing is very very small.
But you can sit there and probably look a pipeline flows that are going from Midland to Cushing and say.
And that is something that is incredibly overbuilt.
Yeah.
Got it okay perfect and.
And maybe to pivot a little bit here.
Andy in your prepared remarks, you had mentioned the word.
You don't want to use the word programmatic and I definitely appreciate.
And not wanting to say that with respect to buybacks, but you do have a targeted a 2% of CFO flow, which is kind of a programmatic in nature.
Enterprise did buy back 3% of their stock last year have there been any internal discussions around raising that target to five or even 10% before green lighting growth capital and and it's part of the larger discussion around buybacks, just given where your debt is trading at any thoughts on tolerating a quarter turn extra leg.
<unk> just use the opportunity to take out some units given where they're trading and it would help obviously reduce the.
And the distribution claim.
Claim on cash flows I think you put in your slides at 67% just wondering if you can give us a and expanded discussion on that on your thought process there.
Yes.
<unk> I'll put that statement and theyre about opportunistic versus programmatic just a head off this question and I guess it didn't work.
You asked a number of them there.
2% target that we talked about for buybacks was really with respect to 2020.
Coming in this year again.
We're getting into new territory and the second half of this year as far as I mean, what we what we see now.
Based on current expectations, where it will be discretionary free cash flow positive and.
And we just come back and this has really been.
2020, and even coming in here to 2021 has been a very.
Very dynamic environment with a lot of uncertainties and book you can you can go down the list a sort of what the uncertainties are as we enter into this year and.
We're just not at a place we think it's premature to come in and provide any guidance on what we're going to do with a.
And with returning capital buybacks or distributions.
Distributions at this point and time.
The distribution that we announced in January I don't think that should have been a surprise to anybody we've been increasing distributions 22 years in a row. So.
And that shouldn't have been surprised and we talked about trying to keep.
A purchase power priority on our distribution, we don't have a lot of inflation.
But we wanted to come in and.
Go ahead and bump the distribution, but when it comes to the buyback, we just like to get a little bit more visibility for 'twenty one.
Alright that makes sense I appreciate the color today guys. Thank you very much and stay safe.
Okay.
We have a cash loan from Keith Stanley from Wolfe Research. Your line is open.
Hi, Good morning wanted to follow up on the 2021 outlook. So in the past you've alluded to I think 500 to 600 million and sort of outsized spread market based opportunities was Permian crude spreads and 19 contango trades and 'twenty.
And I'm wondering how you think about kind of what we're seeing and NGL and pet Chem markets, So far and Q1 and if this is potentially the next thing to backfill.
And what you saw in 2020 on contango and tying that into I think earlier I just want to confirm you made a comment about 2021, maybe being flattish overall for 2020, just how all that ties together.
Yes, Randy said is going to be flat and I endorse that and it makes just and cloud or a nervous so we'll turn it over to him.
Yes, Justin.
You hit on.
What I'm about to say for the reasons that I must say it which is the.
The opportunities that we see are certainly going to be different in the past and most certainly going to be different and then 2020, but I think we firmly believe that theyre going to be there it could be on Ngls and pet Cam like you alluded to I think we feel I feel good about the opportunity set there but.
The future holds opportunities that we can't forecast, but we do forecast and it would be there so.
We're geared up to meet <unk> target.
Great and just one cleanup item so just thinking about the working capital and I wouldn't normally ask this but it's kind of a large so.
You referenced that it was over 700 million use of cash and 2020 for working capital items. It was almost $500 million and 2019, so thats thats over a $1 billion.
And I'm, assuming that's just related to a greater storage and marketing, but when would you expect to get this cash back and just how should we think about that going forward.
Yes, Keith this is Chris Nelly.
A lot of that working capital use is just if you look at the forward curve should be coming back over the next couple of quarters, but again a.
Going back to what Justin just a stated that a lot of that is can be dependent upon what market opportunities are out there.
And what working capital utilization, we will then be as a result, so again those are those are self liquidating short term deals that have high returns.
Thanks.
Your next question comes from what I and you show up on a from Bank of America. Your line is open.
Good morning, everyone. Thanks for taking my question.
And I just wanted to ask first on debt.
And the growth projects that are going to service in 2021, and you noted in the press release.
Would you talk about the cost associated with these with respected a 'twenty one budget and perhaps a return expectations and part of the three projects and the press release.
Yeah, we typically don't.
Talk about capital cost of specific projects I will say this that.
The projects that are coming online.
All on.
On time on budget.
We also don't talk about returns of of specific projects a little bit for the same reason that we don't come in and we're not we're a reluctance to talk about projects under development as we've got a lot of competitors on these calls and we just assume not to get into too much detail.
We in the earning support slides.
We do provide a.
A list of projects under development.
And what pace.
Alright.
Got it.
And I see it and PT six my question was about.
Each of these projects sort of how much do they contribute to that trade.
'twenty 'twenty, one budget versus PD, it's true.
Which I know is a big ticket item and the budget is still.
Bear with me and just a minute.
Yes.
You come in and you look at debt.
The $1 6 billion that we expect to invest and capital projects and.
2021, probably the PTH two represents about a third of it.
Got it.
That's helpful. Thanks for that and a quick follow up with regards to the planned increasing and renewable power uses could you comment on whether that would be neutral to your current power costs or a reduction to it.
Could you repeat the question please.
The.
The cost of the additional renewable power usage.
Will that be neutral to your current power costs or a reduction to it.
And it will be neutral to our current power costs.
Got it thank you.
Your next question comes from the line of Michael <unk> from Goldman Sachs. Your line is open.
Hey, guys. Thank you for taking my question.
Actually a a couple.
Several that are short term kind, a 2021 focus and then one longer term one on 2021 can you talk about the cadence of Capex during the year, meaning is it very front end loaded and when I think about the bill fix a growth Capex. That's the first question and the second is the $400 million or so of cost savings that you really.
And 2020.
Does some of that come back in 2021, so when you refer to a flattish EBITDA is there a cost pressure or are there incremental opex savings and then the last one is probably for Brent and or Tony when Wink to Webster fully comes online how do you think that impacts the battle between Houston and corpus for crude and crude.
Exports.
Okay, and Mark I'll take that first one probably the as far as Capex.
There is a little bit more and the first half of the year compared to the second half, but but not a lot.
And Brian.
As far as the.
As far as the operating cost a big driver for us and <unk>.
2021, compared to 2020 and will be the turnarounds that we have primarily at PVH and.
B.
And so that's kind of an outlier compared to 22020.
And 2020, we did a lot a focus on cost we've got some of our base cost structure structure down Hartford supply chain.
And negotiations.
And that enabled us to a lower cost. We are also very focused very much on data and data is driving how we manage our cost a lot on our power utilization and one area.
Those are going to be a sustainable cost crackup frac optimization and sometimes when we look at when we look at cost savings, we really look and overall value, sometimes particularly on the optimization of our fractionator, we're using a lot of data to drive that and sometimes thats cost reduction and sometimes it's just overall value.
Value optimization, but I feel I feel good about going into 2021, and our cost management that we did in 2020 and we'll continue that on in 2021.
This is Brian and I think when a wink to Webster, it's up right, but it's going to continue to ramp up.
For the next several months and so we've seen this before.
Corpus pipelines came on to barrels from Houston.
You look at the people involved with Wink to Webster, there, obviously, we're going to take barrels from the from from.
Pipelines, a go to corpus and.
No.
And all those stuff when the tide starts rolling out, we'll find out who has contracts and who doesn't what's what's sticky and what's not so.
I would expect barrels to decrease that a flow into corpus and rollover to wink to Webster there might be some pipelines that frankly don't have contracts that are going to Houston and that they may take from from those pipelines. So.
We've seen this happened over the last couple of years, so whats your pipeline, which a contract position.
To Jim's question, and what's our contract position and a broad most of all is going to go into this analyst meeting but.
We've got about 1 million barrels a day a committed contracts for crude oil that last.
Caught off the 2028 and beyond so it's hard for me to say that we're going to have a bunch a discretionary barrels until until the Permian basin recovers and.
It's going to take years, but a few.
And when it comes to weathering a storm will be okay.
Do you think there is an opportunity for people to other owners or even yourself to repurpose pipe.
And if so.
Kind of a hope hopefully tightened a crude pipeline market and if so what kind of opportunities are out there do you see the NGL pipe market getting tighter as well or do you think thats adds oversupplied as the crude side.
A fundamentally believe that capacity has to be rationalized and there's different ways to do that and you can be repurposed or inefficient operators and frankly figure out something else to do.
Those assets shut down.
But the industry as a whole has to probably a figure this out.
As far as the details that we look at we're not going to go into it but I think it's naive to assume that we don't look at figuring out how to solve some of these capacity issues that are.
And a market.
Got it. Thank you guys much appreciate it and.
And extra we have time for one more question.
And my audience.
And last question comes from <unk> Siegel from Eagle asset management you're.
A line is open.
Thank you and good morning, everybody.
My question really relates to growth and.
And the underlying premise I think of most of the questions today.
Goes back to what.
Given sort of the.
Laid out debt debt.
Net fossil appeals are going to disappear and so.
So it's more playing defense and playing offense.
So the question really relates to how do you folks think about the long term.
<unk> for growth.
How much operating leverage is there right now.
And what are the longer term opt.
Opportunities perhaps debt.
And that you see going forward and.
And I could just one editorial real quick and in terms of leverage and stock buybacks.
And I totally appreciate and she knows.
A question, but the other aspect of that is that.
You lever up.
You have to live with the with the consequences and I think being.
And being conservative headset, and really held you and and pretty good position for a very long time.
Thanks, guys.
Thanks, Dave.
Is this Jim.
I'm not sure we can spell a difference.
We're always on the offense.
And we're working on some pretty exciting projects recognizing that.
We need to be a little you know we need to be responsible about it.
But we're looking at some pretty exciting things and.
Okay.
It takes years and the Permian I am a firm believer.
And net price.
<unk> all ills.
And Tony is bullish.
And hydrocarbon prices and the future, but not as bullish as volume.
And prices creates a clock.
And I think youre going to say I'm a I'm.
I'm, a believer and the Permian and I'm, a believer and the Eagle Ford If you have federal land issues, and new Mexico and I forgot.
L. A a position and Eagle Ford might be rigs go down there. So I feel pretty good about things and I feel good about the things we're working on that we said earlier, we're not going to talk about.
Yes.
Yes.
I appreciate your and your comment on that.
If you come back in and you look at the midstream over time.
We went through a couple of periods, where whether it was.
Whether it was and investor driven or whether it was.
General partners without a yard driven.
And it was distribution growth distribution growth distribution growth and you heard the request for that and you saw a lot of that.
And.
And a little bit.
We were conservative and that we tried to do something that would again, we're trying to build a partnership that's durable for the long term and and a little bit of a tortoise and Haier and you had a lot a midstream companies that got too far out over their skis on distribution growth and <unk>.
<unk> seen them come back in and cut and.
And a little bit when we think about returning capital. We're again, we're trying to build a durable partnership.
We have a proven track record of returning capital back to our investors on a 70% last year and.
But I think we're going to be deliberate and what we do and again a lot of uncertainties and.
And we will continue to return.
Capital to our investors, but the other thing I think with some of the mantra that you hear on buyback buyback buyback.
These companies, but a watch out and you get too aggressive on buybacks and that can come in and bought you and the future too. So that's a little bit while we're being deliberate and but I. Appreciate your I appreciate your comment.
Thanks, guys.
Thank you Lee.
That ends our call today, and a management team here and enterprise really thank you for joining us we're going to leave the call now to extra would you. Please give our listeners the replay information and thank you all again for joining us.
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