Q1 2021 Enterprise Products Partners LP Earnings Call

[music].

Good day and welcome to the Q1, 2021 enterprise products conference call.

At this time all participants are in a listen only mode.

After the Speakers' remarks, there will be a question and answer session.

I'll ask a question during this session. Please press star one on your telephone keypad.

Be advised that today's conference is being recorded.

I would now like to hand, the conference over to Randy Burkhalter VP of Investor Relations. Please go ahead Sir.

Thank you Christie.

Good morning, everyone and welcome to the enterprise products partners call to discuss first quarter 'twenty one earnings as.

Speakers today will be co chief executive officers of enterprise as a general partner, Jim Teague and Randy Fowler.

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

During the call we will make forward looking statements within the meaning of section 21 E of the Securities and Exchange Act nights from 34 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 can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in a forward looking statements made during this call.

That I will turn the call over to Jim.

Sure Randy.

A business has continued to perform extremely well during the first quarter.

We reported a $2.2 billion a adjusted EBITDA.

Distributable cash with cash flow was $1 7 billion.

And a.

A one to one eight times coverage and we retired 700 million from East coast.

Net numbers deeper.

We couldn't be prouder of our people.

Time, and time again, whether they're faced with a financial crisis.

Over 50 inches of rain from Hurricane Harvey at Mont Belvieu.

A combination pandemic global price war that was immediately followed a record Gulf coast Hurricane season, or a historic winter storm that shuts down virtually the entire state.

Our people prepare adjust when needed and they execute and make things happen and put that we we are extremely grateful.

Relative to the winter storm forecasters did a great job of calling for a major even historic event at least a weekend a us advance.

As a storm developed every county in Texas as you know it was under a winter storm warning.

And suppliers across the state and affected the entire energy value chain.

It impacted much of the generating capacity across the state at one point, even some of our nuclear in spite of what you've heard in the press, Texas ended up counting on natural gas as wind generation dropped to near zero at the height of the storm a.

Our people prepared backing our pipelines buying extra gas to prepare per pretty solid scheduling our assets from staging themselves in hotels and on costs at our plants most of our Texas assets, including our assets at Mont Belvieu on the ship channel were offline at the height of the storm mostly intentionally.

As we work to make better use of available through deep rejection bypass from plant shutdowns, we saw a natural gas to electricity generators natural gas utilities and industrial customers to assist them in meeting their needs our gas business, which includes pipelines gas storage.

Small gas storage and gas marketing is integral to what we do in many of our other businesses, but it's nowhere near the size of say, a kinder Morgan or energy transfer.

During the freeze our natural gas team, including the commercial gas control, a gas marketing and schedulers worked tirelessly day.

A new to start preparing long before the temperatures drop and they worked around the clock for days to deal with a problems and the opportunities and it shows in our results as to power. Our people took proactive steps to minimize our exposure to $9000 a megawatt hour per hour through participation in the ERCOT.

A large program, which redeploy as industrial power supplies to human needs and by voluntary shedding a significant amount of loans.

The day, Texas, and Louisiana Gulf Coast, petrochemical plants, and refineries have completed repairs and had been increased rates with both industries. Realizing some of the best margins we have ever seen.

As we emerge from COVID-19 related Lockdowns global demand continues to improve for crude Ngls primary petrochemicals and refined products diesel demand actually exceeds pre COVID-19 norms and much of a world.

And gasoline demand is picking up already exceeding 2019 levels in some countries.

Downtown Houston is far from fully occupied.

Traffic in this city has at times already back to what some term is awful.

The first time in my life, I think traffic jams are beautiful.

Since April 22020, we've been outspoken about while we felt all price oil prices would go up dramatically well economic recoveries aren't uniform. When you look at the world's largest economies demand has moved up and all indications are that even Europe isn't far behind move.

Moving on to capital, we continue to expect our growth capital investments for 'twenty, one to be $1 6 billion and another 440 million for sustaining capital.

The rest a 'twenty one we continue to be on schedule to compete.

The expansion of our Acadian gas system to <unk>, Louisiana, which serves LNG markets. The expansion of our ethane ethylene and propylene pipeline systems and the construction of our natural gasoline hotter trader.

Growth capital and 22 and 23.

<unk> currently sanctioned is $800 million and $400 million respectively.

Good day did capital commitments largely around our PTH two plant expected online in 2023.

We know that we're in the show me state for this project because of the difficulties we had in our first PD H I will tell you I have a high level a competence.

<unk> two will be highly successful and will generate consistent cash flow.

As to PTH, one we recently completed a 46 day turnaround it.

It was on time and it was under budget the restart when exactly as planned and a unit is operating above designed capacity.

Sometimes I read reports that made me think investors are worried that we're running out a projects and then the next report a pick up makes me think investors worried that we're going to spend a dollar.

We have never been afraid of opportunity, but we definitely respect this part of a cycle and our expectation for returns on new projects moving forward.

Going forward.

I think you should probably think about our capital run rate is somewhere between one five and $2 billion.

I hear a lot about energy evolution.

We don't say transition.

We're thinking of things like hydrogen and carbon capture utilization and storage not just as threats, but as potential opportunities.

Angie Murray, our senior Vice President of Technology services has taken on additional responsibilities around a deep technical analysis, a low carbon technologies currently under discussion.

Over the last two years Angie and her team have worked closely with operations in a big data team identifying several areas to significantly cut our operating in some case our capital costs.

We are finding is these are not one time hits.

To be thought of as continual improvement.

In addition to those responsibilities and juice role has been expanded to include a focus on evolutionary technology.

For a lower carbon opportunities we have to have a strong technical focus on these opportunities.

For example per hydrogen outside of the rather large presence we have today through a petrochemical assets.

<unk> evolutionary technologies team that's a mouthful.

As a leading the initiative to research and analyze where we might go next and applications, but things like transportation and storage.

Interest team is also responsible for helping us understand the technology behind sequestering.

Our own cash.

Carbon.

In addition.

A hydrogen and carbon capture there are other new low carbon areas that could be a fit for example, as a member of the alliance to end plastic waste. We are clearly interested in the different technologies used to recycle plastics and what opportunities might exist for enterprise and handling the result.

<unk> per.

Products.

As to new initiatives, we always have commercially sensitive things we're working on.

But most of the things we're working on expand and in some cases converts what we already have.

In terms of product upgrade and Repurposing underutilized assets.

And in a manner that gives our customers new markets. Some of these initiatives even fit the definition of energy evolution.

However profit profitability will always be a prerequisite things are never tip, a typical but what else would come typical is regardless of the environment enterprise people perform.

Round work for our performance today was created five to 10 years ago.

And what we will become in five to 10 years is being created a day.

A natural extension of our value chain in five to 10 years could very well be things like hydrogen transportation in storey storage or sequestering carbon and transporting storing and upgrading the by products produced from recycled plastics, while nothing is off the table.

And for fossil fuel and its derivatives will continue to grow and that will remain our foundation and with that Randy you got it okay. Thank you Jim good morning, everyone.

A starting off with the income statement.

As far as on the first quarter net income attributable to a common unit holders for the first quarter. A 2021 was $1 $3 billion or <unk> 61 per unit on a fully diluted basis. This compares to $1 4 billion or <unk> 61 per unit on a fully diluted basis for the first quarter of 2020.

Net income for the first quarter of this year was reduced by a noncash asset impairment charge of approximately $66 million or <unk> <unk> per fully diluted unit.

The impairment charges were largely related to our legacy coal seam natural gas gathering system in valve already treating facility in the San Juan Basin that was held for sale at the end of the quarter.

Notably net income for the first quarter of 2020 included a $187 million or 8%.

Benefit from deferred income tax benefits.

Moving on to cash flows cash flow from operations was $2 billion for both the first quarters, a 'twenty, one and 'twenty free cash flow for the 12 months ending March 2021 that is cash flow from operations less.

Cash used for investing activities.

Netting out any contribution from our <unk>.

<unk> partners was $3 1 billion. This compares to $3 4 billion for the comparable trailing 12 months with.

We generated over $350 million, a discretionary free cash flow in the first quarter, that's a cash flow from operations minus capital investments and also modest.

Cash distributions to partners. We believe we remain on track to be discretionary free cash flow positive for the entire year we.

We declared a distribution a 45 cents with respect to the first quarter to be paid on May 12. This distribution represents a one 1% increase compared with a first quarter of 2020, while we settled $14 million of unit purchases a unit repurchases in early January.

These were associated with open market purchases in the month of December and that really just a settlement of them, we did not execute any new.

Additional unit purchases in the first quarter of 2021.

A PDF distribution reinvestment plan and employee unit purchase plan purchased a combined $33 million of Apd units.

The open market during the first quarter. This was equivalent to about $1 6 million a beta units purchased off the open market, our payout ratio, which we define as the sum of cash distributions and buybacks as a percent of our cash flow from operations over the trailing 12 months was 68% as of March <unk>.

First 2021, as we said on our earnings call in February while we currently expect to generate discretionary free cash flow for 2021, our first priority is financial flexibility until we get better visibility on regulatory energy and tax policies of this news.

Ministration and Congress, we believe it would be premature to provide any distribution growth and buyback guidance at this time.

A price has a long history of reciprocal responsibly returning capital to limited partners. It continues to be one of our primary financial objectives and has been since our IPO and in fact since our IPO. We have returned approximately $40 billion of capital to our limited partners.

<unk> $4 2 billion in 2020.

Moving on to capitalization.

Our total debt principal outstanding was approximately $29 billion at the end of the first quarter, assuming the first call date for our hybrids or the final maturity date for the hybrids. The average life of our debt portfolio is 16, seven years and 21 years, respectively are effective.

Average cost of debt is four 4% and.

In the first quarter, we repaid 132 5 billion a maturing senior notes using the remaining proceeds from our August 2020, senior notes offering and proceeds from the issuance of short term.

Notes under our commercial paper program.

Adjusted EBITDA for the first quarter of 'twenty, one was $2 $2 billion and $8 3 billion for the 12 months ended with a first quarter. Our consolidated leverage was three three times after adjusting debt for the partial equity.

Credit given by the on the hybrid securities given by the rating agencies and further reduced for unrestricted cash. This was at the lower end of our leverage target of three five times, plus or minus a quarter or.

Our target leverage range of three and a quarter to 375 times. Our consolidated liquidity was approximately $5 1 billion at the end of the quarter that includes availability under our existing credit facilities and approximately $229 million of unrestricted cash on hand at this time, we do not.

Foresee the need to access the debt capital markets in 'twenty. One however, depending on market conditions, we may elect to approach the debt capital markets. Later this year to pre fund, our 2022 maturities and with that Randy I think we can open up a question.

Thank you Randy Christie, we are ready to take questions from our audience.

Before you do that let me remind our listeners that Q.

Would you please limit your questions to one question and one follow up question.

Thank you Christie go ahead.

Certainly and as a reminder to ask a question press Star then the number one on your telephone keypad.

And your first question is from Jeremy Tonet of J P. Morgan.

Hi, good morning.

Morning.

Recognize it's probably kind of a complex question with our <unk>, but just wanted to know if you guys could provide any color as far as net net what type of benefit you saw from the storm during the quarter and then just to isolate kind of base business trends I guess, how you see volumes recovering not recovering at this point.

Yes.

Yes.

Yes, Jeremy.

Look Chris I think around $250 million.

Did that answer did that answer Jeremy.

Just a base business day and outside of that do you still see a kind of recovering at this point or just trying to call you out to that absolutely. We see a recovering if you listen to my script.

We're bullish.

I mean, you think about crude oil since April of last year has got a blip embraer $100 a barrel.

From a from a from a negative 37 print.

Got it yes.

Goldman saying $80 in the third quarter.

Okay.

Got it got it and maybe just a quick one on energy evolution.

Just wondering.

Or at least a carbon capture right now if you see the 45 queues being kind of sufficient policy to make projects economics, such as gas processing, there and what other opportunities could this breed I mean could you have.

They're utilized Permian pipelines move <unk> from the Gulf coast into the Permian for injection, there and kind of tightening takeaway market just trying to think of what's possible here, yes, I think everything's possible, Jeremy we're not taking anything off the table, what we have done.

As we read everybody's going to net whatever.

Past my lifetime.

As we got a take a step back and that's why.

And he has taken a lead on just looking at a per technology associated with all of these different possibilities and understanding the technology and then working with our people in other parts of a company like a commercial groups on our operations growth.

How does that fit here.

Hello.

Our own carbon at Mont Belvieu, and sequester day to be quite a it would be a nice thing grant.

Quite a bit yes.

Yes, nothing really to elaborate more on what Jim said, we're still evaluating all of our pipelines all of our opportunities.

Everything's on the table and a really just got a focused effort on it now coordinated throughout the organization.

Got it great I'll leave it there thank you.

Thank you. Your next question is from Christine Cho of Barclays.

Good morning. Good morning, you can you give us an update on your outlook for great traction overall and specifically in the Permian.

How that has evolved over the last couple of months, especially with a big surge in private activity in that part a bank Permian how that shapes your volume and price outlook for the rest of this year and maybe next year and also curious to the competition for getting the barrels from a lot of these private producers most of which seem to have only one break operating in my guesses day.

Have much contracted from the midstream perspective, but any color would be helpful.

Okay. This is Tony I'll take the first part a and Brent may.

On a second part.

Permian volumes like everything else, it's hard to look at the latest EIA reports.

Make too much sense of it but a long and the short of it is if you look at Frac crews in the Permian They are back to about almost 80% of their own.

They're all time highs okay.

The facts are the Permian leading everything.

The challenge there is in every other basin, if we think about oil is lagging.

Yes.

It's really all about Permian.

So where we are as we originally said at our analyst meeting we thought that we would have somewhere short of a 100000 barrels December.

Year end 'twenty to 'twenty, one of increase across the United States.

We think that number at this point is low it's probably closer to 250 in the year.

2021, alright.

We also said that.

We thought in 'twenty, two and 23 that we'd have about a million and a half barrels a production increase across the United States.

And it's hard to say is that going to happen in 'twenty, two or is it going to happen in 'twenty three a year quarters.

A few if you add that all up that's a $1 8 million barrels a day a incremental crude over a three year period with a very much loaded in 'twenty, two and 'twenty three that's a.

A pretty good run rate and it's very much dominated by the Permian basin and.

And Brent.

Asking you how you think the private share.

Bring in how their contract.

From our side.

We've seen these guys very active.

At this point really it comes down to a geography and where your assets are.

I would venture a guess we've done more deals with private in the last nine months and we're probably a good over the last nine years, we're not big capital projects.

Fill up pipeline capacity that Philip processing capacity on a crude side Theres. Some production is close to our lives a good news from gathering deals with them, but.

Yes.

A lot of stuff is acreage dedication, but we feel very good about the activity and where that's going to end up.

Got it that's really helpful.

And then.

Earlier. This year you guys mentioned that you still expect you expect to capture.

$5 million to $600 million of Ma.

Margin from outsized spread opportunities and marketing with a first quarter out of a delay and I think.

Jeremy a question you said $250 million from weather impact.

Is that is a 500, a 600 million still something you are comfortable with and where should we expect the remainder to come from in the remaining quarters.

I'll start and then I'll, let somebody else jump in this Jim.

No I'm not comfortable with five or $600 million I think we might be approaching net now so I think it could likely be a little more than that.

What do you think Randy.

Kristine because a little bit I go back to something Jim said really I believe you said it on our fourth quarter call of 2020 on our fourth quarter call a 2019 that over the last few years we've.

What we call.

Outsized spreads a range 500 $800 million.

And I think his comment was we seem to always find a way to come in and capture opportunity.

The way this year is shaping up.

And what we what we see I think we may get to that would be back in that same range again.

This year as well.

Great. Thank you.

Thank you. Your next question is from Jean Ann Salisbury of Bernstein.

Hey, good morning.

At a 100% track utilization at the end of last year should we expect another crack at a pretty good.

Ann.

Jean Ann This is Brad that's not in our plants.

Alright.

You guys have a weighted.

Third party products or something I guess, if you go over here.

If you look at our system and how we optimize our system a what the variable costs are for us to go access additional capacity. The economics are hard to justify a per new frac for enterprise.

Net.

Uh huh.

And I think you recently estimated getting approval from the spot terminal and a third quarter a this year.

Would you need to see some of the rebound I think that Tony just talked about in a previous question like what do you need to see volume going.

Getting a key continue to pursue that or Youre happy with the project as it is.

Do you get the approval.

Need to either a downturn.

This is Jim I think we're happy with where it is we're also in discussions with some some other companies is to coming in as a joint venture partners with a surprise.

It may if we didn't do that.

Great. That's it for me thank you.

Thank you. Your next question is from Tristan Richardson of true Securities.

Hi, Good morning, guys just a bit.

The production commentary, Tony and Brian discussed in that the downstream demand recovery Youre seeing.

Does this put us on a path for a a stronger 2022, even despite sort of a non recurring margin capture we saw in the first quarter.

Yes, I'll start out yes, I think I think we're pretty bullish.

I think Tony said it best.

We've always had debate between Tony and I have always been more bullish and he is and.

Non recurring or whatever we call it and Randy just said that when you do it every year wise it nonrecurring it just happened somewhere else.

Gas marketing as NGL marketing, it's not contango is backwardation, we seem to have a footprint that lends itself. When there are issues we have opportunities.

That's helpful. And then just you talked about some of the carbon capture hydrogen renewable gas opportunities should we think a the one $5 billion to $2 billion, a high level, a sort of annual spend as including some of these more energy evolution oriented projects your technologies.

Or would a project that comes in under that sort of umbrella be incremental to that annual number.

The annual number is all inclusive.

Thank you guys appreciate it.

Yeah.

Yeah.

Thank you. Your next question is from Shneur <unk> of UBS.

Hi, good morning, everyone.

Yes.

Tim It was very good to hear about the initiatives that youre embarking upon and Andrew his new responsibilities, maybe a follow up to <unk> question here. So when I sort of thinking about enterprise in terms of Capex, you have $800 million for 2022.

And you gave the one $5 billion to $2 billion longer term number.

If I understood <unk> question correctly.

Some of that May include some of these evolutionary opportunities can.

Can we assume that's going to be the case for the 'twenty two calendar year.

How far down the path are we in terms of Andrew's new responsibilities are there any technologies in particular that are.

In the later innings that would get us closer to that by being whether it's hydrogen or whether it's carbon capture I'm. Just wondering if you can give us a little color on that.

Now this is Graham.

We're still identifying what those projects are always our first opportunity is to really take a low hanging fruit and utilize existing assets and minimize the capital and get a.

A big Bang for the Buck with the assets that we have over the longer term will develop probably a more extensive projects as a technology improves and becomes economical.

At this point, we're really looking at how do we capture.

The biggest benefit with the assets that we have.

Yes.

We produced a much hydrogen Graham a $150 million, a 150 million to 50 million a day. So so we use 40 40 50 million a day something like that where we're looking to use more of that we're looking at technology that allows us to really use that a lot more of that at our Mont Belvieu facility. It's a big Bang for the Buck on a emissions, but it doesn't cost us.

A lot a capital those are the types of projects that we're really trying to move forward with as quickly as possible. So if we can optimize what we have within our own system and been ready day, Bob to see what are the commercial low opportunities might a bought from net carbon capture if we can sequester our own carbon what what other opportunities evolve.

From that we're not going to announce a C O two pipeline out of a Permian today.

Who knows down the road.

Now that makes for a makes a lot of sense.

The color there and maybe as a kind of a follow up on kind of your current existing business.

I was wondering if we and I'm not sure. If this is a gym or 'twenty question here, but it can we talk about the kind of where you see the direction for hydrocarbons right. Now we have upstream companies that are looking to be disciplined with respect to with.

With respect to growth so kind of more muted.

At the same time, you have changing consumption patterns, whether its energy transition or whether it's just.

A mute post pandemic.

As exports the path that you see forward to spot given enterprise an opportunity to kind of optimize your asset footprint.

When you move crude to spot add more LPG and ethane export capacity in the channel.

Do you consider exporting refined products I was just wondering if you can opine on that.

If you can.

I'll take it.

The forecast.

Energy economist of late.

Many of them a large portion of them are showing a USB bet that the world would be back to a 100 million barrels by the end of 2021.

You see it in diesel consumption, just because of the amount of money. There is pent up demand and now youre seeing it in gasoline comment Jim made in his script glad to hear you say that because that is that is the case around this town.

While downtown is somewhat sparse, it's amazing it's traffic levels. So there are no cars.

On the on a car lots for sale around Houston, I mean, there are some but.

There's a tremendous shortage people have money I don't know if you've noticed but the savings rate in United States has doubled.

Those are those are a meaningful stats.

Then we look at a news we see what's going on in India.

Which is.

Not real positive for India, but look at the end of the day.

The U S and others are pitching in to get vaccine to India Europe is going to catch up we just look at the world and we look at the change in GDP from 2000, 22021, and the potential for 2022, there is no way to deny the numbers theyre very meaningful.

So do I think that hydrocarbon demand in the world, we're going to see all time highest probably in 2022 could well happen.

I'll say a.

I'd be surprised if it didn't.

Randy you feel differently.

Yes.

A little bit will come in and.

Yeah.

Again, it's a little bit of a theme that we talk about is you still have 3 billion people almost 40% of the world living in energy poverty, meaning cooking with.

Not having access to clean cooking, so either cooking with.

<unk> coal are cooking with wood and leading to a four 5 million deaths a year within home pollution.

<unk>.

There is still a.

Huge need just to improve human life and I think we've seen it over the last hundred years that nothing is improve human lives better than the products that come from natural gas and oil production.

And I think relative to exports I'm going to start a little bit of net them on hand over to Brent but.

Or do you think let's think a long term net regarding where you think U S is going to go as far as electric vehicles and hybrids.

Certainly we're going to have more of them, we're going to have efficiency standards on a gasoline.

We're going to do more from an industrial standpoint here, but I don't talk to as many foreign customers as Brent does but the message is always the same we see them and we see them on zoom calls, we're seeing them in person now and day.

They want to know that we believe that U S. Producer is in it to win it long term I think Thats. A question is I mean do you believe that the U S is going to increase.

Production on a crude ngls and as a their economics for them to do that.

And then at that point, if you believe that you believe demand here in this country is staying flat to declining then what's the most efficient and effective way to get to the water.

When you look at the projects that we have that we've talked about in the past.

You guys talk about spot that's the most efficient way to get crude oil to the water.

Some contractual issues that exist right now, but those will go away.

That project is more strategic to our upstream system and Thats why we like it.

On the NGL side, we still believe in NGL production, a it frankly, a has the price to export.

So theres different ways that once these things happen that we can optimize the system.

Great perfect really appreciate the expanded discussion. Thank you very much that's all from me today.

Okay.

Thank you. Your next question is from Michael Blum of Wells Fargo.

Thanks, Good morning, everyone.

Just maybe staying on the exports for a minute I wonder if you can give us any kind of a real time look into what youre seeing in terms of LP.

LPG export demand in light of the surge in COVID-19 cases in India.

What do we export a yes.

This month.

$316 million.

It's around there.

So it's not it's not what you saw this a Brian it's not what you saw in fourth quarter nurse and balancing going on right now I don't know if it's much. It's it's a demand there a long term, but if you look at just a wood prices have done on propane first quarter 'twenty was 37 fourth quarter was 57.

First quarter 'twenty, one it was <unk> 90 <unk>.

Markets work and you saw the backwardation and some of the LPG markets and so I think you saw some deferrals or you got some cancellations and then ultimately this is how this is going to balance until production.

Starts doing what Tony just talked about a pass.

So we've seen some drop off in India, but certainly China has been able to step up and help.

So that GAAP.

Got it.

My second question.

Really relates to a pipeline capacity rationalization, you talked a bit about that at your analyst day and I'm wondering if you could tell us are there any discussions going on behind the scenes within the industry to make this happen.

Do you think it's just something that's going to be very difficult because there's just too many hurdles to actually achieving it yourselves or for the industry, you're talking about repurposing pipelines.

Pipeline rationalization, however, it could get done.

Youre, referring to some a brent comments over the last earnings call.

Correct.

Yes.

I hesitate to have a brent speak for himself.

We're looking at Repurposing per share.

I think youll see more of that.

What Brent was saying last quarter as you say it Brian.

Some of these guys that are going to have problems.

A look at pipelines that don't have contracts somebody asked about cotwo repurpose something that looks like a good projects. If you don't have contracts and you are exposed to an art from from a market to another market that's a fairly flat.

All of the Permian capacity is a very competitive regardless of the commodity.

And no different than.

Net other companies enterprise tries to figure out the most efficient ways to move Ngls and crude oil on a system.

And we have we have a similar pipeline that's in crude service and we have an NGL pipeline that frankly.

We only owned two thirds of so theres different ways that we can as enterprise.

Try to rationalize and optimize our capacity to the benefit of enterprise.

As far as the others I assume they're doing the same thing.

Greg Youre contracts on crude oil to go up to 28.

Other countries are still out there.

Yeah.

Yes.

Thank you. Your next question is from Keith Stanley of Wolfe Research.

Hi, good morning.

Wanted to ask on capital allocation and Randy you said again that you wanted flexibility on redeploying free cash flow early in a year and highlighted just uncertainty on federal policies, including I think you said tax policies.

Can you just elaborate on what you're mainly focused on and a new administrations.

Infrastructure and related tax plan or any other potential policy changes you're focused on for a capital allocation.

Keith when you when you come in and you look at what's been introduced thus far this year and.

One of those things you've got to look at the newspaper every day to keep in touch.

And the last 100 years, there's really been three big moves and tax policy and that was the new deal. It was the Reagan era.

Next a policy and now as we emerge into the bond in Europe. This is like the third.

The third major tax swing.

That we've seen in a 100 years and so I think we're paying attention to see.

Which of these proposals actually.

Make it into legislation and then actually get passed.

I think we'll be a lot smarter three months six months from now than we are today and we think it's just a.

Responsible.

<unk> come in and focus on financial flexibility and.

And again, we'll be a lot smarter here in three to six months.

Okay, I guess I'm, just curious like from a Tac being an MLP just how youre thinking are you thinking of a tax policy changes could affect you directly or just any further thoughts on the tax piece of that yes, Keith honestly, we've got a 180 of possibilities out there.

<unk> got this.

Finance, our energy future Act, which is a bipartisan legislation thats been introduced on the house and the Senate that is actually taking the MLP the existing MLP tax law and really expanding the scope of it to.

To bring in new activities as qualified earnings such as.

Handling.

Some of this green or blue hydrogen.

Coming in and.

Being able to get into renewables, whether it's wind or solar.

And some of these other activities so I actually would be broadening the scope of what qualifies as earnings for an MLP.

On the other side of the equation.

There's been a proposal that came out a Senate finance committee. It is non bipartisan it as partisan.

And I think it's actually legislation thats been introduced at least a couple of times before.

And but never win anywhere and with that one.

It would come in and take a.

Business activities that handle fossil fuels, so what we do today.

And you would no longer be qualified for pass through treatment and you would be taxed as a C Corp. So really there is.

The range of possibilities as a 180 degrees in here.

I think we will be spending a good bit a time up in.

In D C.

Some of the legislation is just sort of counter to what some of the objectives that you hear or whether the again this.

Coming in in <unk> and.

Taking a.

Traditional mlps, and then making them subject to taxation soy goes counter to.

What we're trying to do.

With that finance, our energy future active sort of counter to that.

So what a counter to the infrastructure build to that.

Here with a.

With a package trying to promote infrastructure, but it seems like it's countered infrastructure and finally, the last thing it seems like it might be counter to is this whole pivot to Asia.

One of the reasons, we've been able to as a country I think.

We're able to pivot to Asia is the.

The energy security that the United States has in that we're not relying on the middle East. So some of them some of what we're seeing out there on the tax front is there seems to be some inconsistency on some of the proposals, but I don't think this will be a active year in D C.

Thank you that's very helpful color.

Second question.

I guess it is kind of summing up some of the earlier questions, but last quarter you guys for the first time indicated 2021, EBITDA could be kind of flattish versus 2020, you had a pretty good Q1 with some storm benefits.

Pretty positive tone on the macro environment and on marketing potential.

A differentials for this year.

Is it fair to assume 21 EBITDA at this point now now tracking better than 2020, or just any rough sense of how to think about a year.

Yes, Keith.

Really I think we'll just stick with our guidance, we'll let you guys model it up.

We don't provide formal guidance not really looking to start on this call but.

Sure.

You you do a great job as well with some of your peers. So we'll pass on that.

Okay. Thank you.

Hum.

Thank you. Your next question is from Michael Lapides of Goldman Sachs.

Hey, guys. Thanks for taking my question, it's actually a little bit of a follow on on thinking about PC and legislation. Just curious I mean Congress was pretty divided few people think a 28% tax rate happens most thing it's a it's a.

A lower number than that.

But it's also.

18 months out from the next election, and a very divided Congress.

Long day wait right.

Like we may have uncertainty for a long time.

Installation is hard when youre thinking about capital allocation at what point do you say.

We start ramping a process because to be blunt D C.

D C may take some time.

Yes.

I hear you on that but it seems like this as well.

Let's just say this is a noteworthy congress and a noteworthy time.

And.

We've got the luxury that we can come in and ask.

I think if we come in and we see.

Good capital projects, we're going to allocate our capital there, but but to come in and say anything beyond that I think we'd like to see what.

See what tax policy looks like so and again.

I think in three to six months will be a lot smarter.

Got it Okay and then one last question just curious.

If you move forward with spot how should we think I mean, given the fact I don't know where we're exporting as a nationwide two and a half to $3 5 million barrels a day, just depending what week, we're looking at.

And we have a lot more capacity than what we're actually exporting how do you think that ripples through the broader supply and demand matrix.

For those who for existing export facilities, including some of your own.

Thanks, Tom.

Contracts matter.

That's going to take some time.

<unk>.

But.

That project has a long runway.

But.

I mean, there's no question the crude export capacity is overbuilt, but I do think it will do at the most efficient way.

That'll do it the most economic way and frankly, when you look at who's producing crude oil amount, it's more it's larger type companies.

At the end of the day I do believe they want to deal with larger companies on the service side.

And they do want a do it the most efficient way.

Got it. Thank you guys much appreciate it.

Yes.

Thank you. Your next question is from Michael Cusumano of Heikkinen energy.

Hey, good morning, I wanted to first talk about the propylene business.

Hopefully from practices that are doing really well.

Can you just maybe talk about.

Your expectations for that business for the rest of the year and maybe your outlook on on spreads also for the rest between 'twenty one.

Chris Young ticket.

Sure.

Outside of spreads that we've seen over.

Over the last several months really a result of the hurricanes in the winter free So we think things got a normalize here.

But we're bullish overall the need for primary petrochemicals and it goes to the same story as LPG just.

The improving quality of life around the world.

Got it Okay, and then as a follow up I wanted to talk about that a $1 6 billion Capex number.

Is there anything youre looking at for 2021 that can move that higher any any risk to that number.

Jim I don't think so.

Okay perfect.

Thank you I appreciate it.

Okay.

Thank you. Your next question is from Christine Cho of Barclays.

Hi, I just had a follow up on the response to one of your earlier questions.

You mentioned the possibility of Repurposing, a pipe Castillo to service, but I was under the impression that this is pretty difficult to get with a liquids pipeline may be possible with a gas pipeline.

Since the CRT pipelines require secret pipelines and a lot more compression.

So curious as to your thoughts here on how capital intensive such a compression could be yes.

Yes, Christine we're just using it as an example.

We agree with you I think ground.

Yes.

Pipelines come in all shapes and forms and some are suitable for a conversion to C. O two and some art and we have some that are a christine.

That's.

We're not making any announcements.

Alright, right I just was curious as to you know.

A lot.

How that would work in actuality, okay, great. Thanks.

Christy This is Randy if there's no other questions I think we can go and give our listeners the.

A playback information.

And then also wanted to thank everyone for joining us today.

Have a good day. Thank you.

And ladies and gentlemen to access a replay of today's call. You may dial 805, 858, $3 67, and reference I'd number 306898 again that number is 805, 8583, 67 and reference I D.

A 3068988. This does conclude today's conference call you may now disconnect.

Yeah.

Okay.

Okay.

Yes.

[music].

[music].

[music].

Good day and welcome to the Q1, 2021 enterprise products conference call.

At this time all participants are in a listen only mode.

After the Speakers' remarks, there will be a question and answer session.

To ask a question during this session. Please press star one on your telephone keypad.

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

I would now like to hand, the conference over to Randy Burkhalter VP of Investor Relations. Please go ahead Sir.

Thank you Christy.

Good morning, everyone and welcome to the enterprise products partners call to discuss first quarter 'twenty one earnings.

Seekers today will be co chief executive officers, a enterprise's general partner, Jim Teague and Randy Fowler.

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

During the call we will make forward looking statements within the meaning of section 21 E of the Securities and Exchange Act like a 34 based on the beliefs of a company as well as assumptions made by and information currently available to enterprises management team.

Although management believes that the expectations reflected in such forward looking statements a reasonable can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in a forward looking statements made during this call.

That I will turn the call over to Jim. Thank you Randy.

A business has continued to perform extremely well during the first quarter.

We reported a $2.2 billion a adjusted EBITDA distributable cash with cash flow was one 7 billion.

And.

118 times coverage and we retired 700 million from that is can we get it.

A number a steeper.

We couldnt be prouder of our people.

Time, and time again, whether they're faced with a financial crisis over 50 inches of rain from Hurricane Harvey at Mont Belvieu.

A combination pandemic global price war that was immediately followed by.

A record Gulf Coast Hurricane season.

A historic winter storm that shuts down virtually the entire state of our people prepare adjust when needed and they execute and make things happen and then put that we we are extremely grateful relative.

Relative to the winter storm forecasters did a great job a calling for a major even historic E band at least a weekend as advanced as.

A storm developed every county in Texas as you know it was under a winter storm warning.

And suppliers across the state and affected the entire energy value chain.

It impacted much of a generating capacity across the state at one point, even some of our nuclear in spite of what you earn in the press, Texas ended up counting on natural gas as wind generation dropped to near zero at the height of the storm a.

People prepared backing our pipelines buying extra gas to prepare per pretty solid scheduling our assets and staging themselves in a hotel and on cuts at our plants most of our Texas assets, including our assets at Mont Belvieu on the ship channel were offline at the height of the storm mostly intentionally.

As we work to make better use of available through a deep rejection bypass from plant shutdowns, we saw a natural gas to electricity generators natural gas utilities and industrial customers to assist them in meeting their needs our gas business, which includes pipelines gas storage.

Small gas storage and gas marketing is integral to what we do in many of our other businesses, but it's nowhere near the size of say a kinder Morgan our energy transfer.

During the freeze our natural gas team, including the commercial gas control, a gas marketing and schedulers worked tirelessly day.

A new to start preparing long before the temperatures drop and they worked around the clock for days to deal with a problems and the opportunities and it shows in our results as to power. Our people took proactive steps to minimize our exposure to $9000 a megawatt hour per hour through participation in ERCOT.

A large program, which redeploy as industrial power supplies to human needs and by voluntary shedding a significant amount of loans.

The day, Texas, and Louisiana Gulf Coast, petrochemical plants, and refineries have completed repairs and they've increased rates with both industries. Realizing some of the best margins we have ever seen.

As we emerge from COVID-19 related Lockdowns global demand continues to improve per crude Ngls primary petrochemicals and refined products diesel demand actually exceeds pre COVID-19 norms and much of a world and gasoline demand is picking up a already exceeding 2019 levels in some key.

Entries down.

Downtown Houston is far from fully occupied.

Traffic in this city has at times already back to what some term is awful.

But the first time in my life.

Thank traffic jams are beautiful.

Since April 22020, we've been outspoken about while we felt all price oil prices would go up dramatically well economic recoveries arent uniform. When you look at the world's largest economies demand has moved up and all indications are that even Europe isn't far behind move.

Moving on to capital, we continue to expect our growth capital investments for 'twenty, one to be $1 6 billion and another hot blooded and 40 million for sustaining capital.

The rest a 'twenty one we continue to be on scheduled.

<unk> the expansion of our Acadian gas system to Gillis, Louisiana, which serves LNG markets. The expansion of our ethane ethylene and propylene pipeline systems and the construction of our natural gasoline hotter trader.

The growth capital in 'twenty, two and twenty-three from projects currently sanctioned as $800 million and $400 million respectively.

David capital commitments largely around our <unk> two plant is expected online in 2023.

We know that we're in the show me state for this project because of the difficulties we had in our first PD H I will tell you I have a high level a competence that eth too will be highly successful and will generate consistent cash flow.

As to PD H, one we recently completed a 46 day turnaround it.

It was on time and it was under budget the restart when exactly as planned and a unit is operating above design capacity.

Sometimes I read reports that made me think investors are worried that we're running out a projects and then the next report a pickup makes me think and burst theres a worried that we're going to spend a dollar.

We have never been afraid of opportunity, but we definitely respect this part of a cycle that our expectation for returns on new projects moving forward.

Going forward.

I think you should probably think about our capital run rate is somewhere between one five and $2 billion.

I hear a lot about energy evolution note that we don't say transition.

We're thinking of things like hydrogen and carbon capture utilization and storage not just just threats, but as potential opportunities.

And Jim Murray Senior Vice President of Technology services has taken on additional responsibilities around a deep technical analysis of a low carbon technologies currently under discussion.

Over the last two years Angie and her team have worked closely with operations in a big data team identifying several areas to significantly cut our operating in some case our capital costs.

We're finding is these are not one time hits.

But to be thought of as continual improvement.

In addition to those responsibilities and juice role has been expanded to constitute to include a focus on evolutionary technology.

For a lower carbon opportunities we have to have a strong technical focus from these opportunities.

For example per hydrogen outside of the rather large presence we have today through a petrochemical assets.

Angie, it's evolutionary technologies team that's a mouthful.

He is leading the initiative to research and analyze where we might go next and applications for things like transportation and storage.

And just team is also responsible for helping us understand the technology behind sequestering.

Our own.

Carbon.

In addition.

To a hydrogen and carbon capture there are other new low carbon areas that could be a fit for example, as a member of the alliance to end plastic waste. We are clearly interested in the different technologies used to recycle plastics and what opportunities might exist for enterprise and handling the.

<unk>.

Products.

As to new initiatives, we always have commercially sensitive things we're working on.

But most of the things we're working on expanding in some cases converts what we already have.

Think in terms of product upgrade and Repurposing underutilized assets done in a manner that gives our customers new markets. Some of these initiatives even fit the definition of energy evolution.

However.

Profitability will always be a prerequisite things are never tip, a typical but what else would come typical is regardless of the environment enterprise people perform.

The groundwork for our performance today was created five to 10 years ago, and what we will become in five to 10 years is being created a day.

A natural extension of our value chain in five to 10 years could very well be things like hydrogen transportation and story.

Storage or sequestering carbon and transporting storing a upgrading the by products produced from recycled plastics, while nothing is off the table demand for fossil fuels and its derivatives will continue to grow and that will remain our foundation and would that Randy you got it okay.

Jim Good morning, everyone.

Starting off with the income statement.

As far as on the first quarter net income attributable to a common unit holders for the first quarter of 2021 was $1 $3 billion or <unk> 61 per unit on a fully diluted basis.

This compares to $1 4 billion or <unk> 61 per unit on a fully diluted basis for the first quarter of 2020 net income for the first quarter of this year was reduced by a noncash asset impairment charge of approximately $66 million or <unk> per fully diluted unit.

The impairment charges were largely related to our legacy coal seam natural gas gathering system in valve already treating facility in the San Juan Basin that was held for sale at the end of the quarter.

Notably net income for the first quarter of 2020 included a $187 million or eight cent a burner.

Benefit from deferred income tax benefits.

Moving on to cash flows cash flow from operations was $2 billion for both the first quarters, a 'twenty, one and 'twenty free cash flow for the 12 months ending March 2021 that is cash flow from operations less cash.

Cash used for investing activities net.

Adding out any contribution from our <unk>.

<unk> partners was $3 1 billion. This compares to $3 4 billion for the comparable trailing 12 months with.

We generated over $350 million, a discretionary free cash flow in the first quarter, that's cash flow from operations minus capital investments and also minus cash.

Cash distributions to partners. We believe we remain on track to be discretionary free cash flow positive for the entire year we.

We declared a distribution a 45 cents with respect to the first quarter to be paid on May 12. This distribution represents a one 1% increase compared to the first quarter of 2020, while we settled $14 million of unit purchases a unit repurchases in early January.

These were associated with open market purchases in the month of December and that really just a settlement of them, we did not execute any new.

Additional unit purchases.

In the first quarter a 2021.

[noise] Apd's distribution reinvestment plan and employee unit purchase plan purchased a combined $33 million a V. P D units in.

In the open market during the first quarter. This was equivalent to about $1 6 million <unk> units purchased off the open market, our payout ratio, which we define as the sum of cash distributions and buybacks as a percent of our cash flow from operations over the trailing 12 months was 68% as of March.

31st 2021, as we said on our earnings call in February while we currently expect to generate discretionary free cash flow for 2021, our first priority is financial flexibility until we get better visibility on regulatory energy and tax policies of this new.

Ministration and Congress, we believe it would be premature to provide any distribution growth and buyback guidance at this time.

Enterprise has a long history of receivable responsibly, returning capital to limited partners. It continues to be one of our primary financial objectives and has been since our IPO and in fact since our IPO. We have returned approximately $40 billion of capital to our limited partners Inc.

<unk> $4 2 billion in 2020.

Moving on to capitalization.

Total debt principal outstanding was approximately $29 billion at the end of the first quarter, assuming the first call date for our hybrids or the final maturity date for the hybrids. The average life of our debt portfolio is 16, seven years and 21 years, respectively. Our effective average.

Cost of debt is four 4%.

In the first quarter, we repaid 132 5 billion a maturing senior notes using the remaining proceeds from our August 2020, senior notes offering and proceeds from the issuance of short term.

Notes under our commercial paper program.

Adjusted EBITDA for the first quarter of 'twenty, one was $2 $2 billion and $8 3 billion for the 12 months ended with a first quarter. Our consolidated leverage was three three times after adjusting debt for the partial equity.

Credit given by the on the hybrid securities given by the rating agencies and further reduced for unrestricted cash. This was at the lower end of our leverage target of three five times, plus or minus a quarter or.

Our target leverage range of three and a quarter to 375 times. Our consolidated liquidity was approximately $5 1 billion at the end of the quarter that includes availability under our existing credit facilities and approximately $229 million of unrestricted cash on hand at this time, we do not.

Foresee the need to access the debt capital markets in 'twenty. One however, depending on market conditions, we may elect to approach the debt capital markets. Later this year to pre fund, our 2022 maturities and with that Randy I think we can open up a question. Thank you Randy Christie, we are ready to take questions from our audience.

Before you do that let me remind our listeners that Q.

If you would a please limit your questions to one question and one follow up question.

Thank you Kristen go ahead.

Certainly and as a reminder to ask a question press Star then the number one on your telephone keypad.

And your first question is from Jeremy Tonet of JP Morgan.

Hi, good morning.

Morning.

I recognize it's probably kind of a complex question with our <unk>, but just wanted to know if you guys could provide any color as far as net net what type of benefits. You saw you saw from the storm during the quarter and then just to isolate kind of base business trends I guess, you know how you see volumes recovering not recovering at this point.

Yes.

Yes.

Yes, Jeremy.

Look Chris I think around 200 and pick a million yes.

Did that answer did that answer Jeremy.

Just the base business day and outside of that do you still see a kind of recovering at this point or just trying to get to that absolutely. We see a recovery if you listen to my script.

We're bullish.

I mean, you think about crude oil since April of last year, It's got a blip embraer $100 a barrel.

From a from a third from negative 37 print.

Got it.

Goldman saying $80 a in the third quarter.

Okay.

Got it got a and maybe just a quick one on energy evolution.

Just wondering is it.

Relates to carbon capture right now if you see the 45 accused being kind of sufficient policy to make projects economics, such as gas processing, there and what other opportunities could this breed I mean could you have.

They're utilized Permian pipelines move <unk> from the Gulf coast into the Permian for injection, there and kind of tightening takeaway market just trying to think of what's possible here I think everything's possible, Jeremy we're not taking anything off the table, what we have done.

As a way.

We've read everybody's going to net whatever.

Yeah.

On a pass my lifetime, what we've decided is we got a take a step back and that's why.

<unk> taken a lead on just looking at a per technology associated with all of these different possibilities and understanding the technology and then working with our people in other parts of a company like a commercial groups on our operations growth.

How does that fit here.

Hello.

Captured our own carbon at Mont Belvieu and sequester date, a big quite a it would be a nice thing grant.

Quite a bit yes.

Yes, nothing really to elaborate more on what Jim said, we're still evaluating all of our pipelines all of our opportunities.

Three things on the table and a really just got a focused effort on it now a coordinated throughout the organization.

Got it great I'll leave it there thank you.

Thank you. Your next question is from Christine Cho of Barclays.

Good morning. Good morning, you can you give us an update on your outlook for great traction overall and specifically in the Permian.

How that has evolved over the last couple of months, especially with a big surge in pilot activity in that part a bank Permian how that shapes your volume and price outlook for the rest of this year and maybe next year and also curious to the competition for getting to that from a lot of these private producers most of which seem to have only one break operating and my guess is day.

Have much contracted from a midstream perspective, but any color would be helpful.

Okay. This is Tony I'll take the first part a and then Brent.

On a second part.

Permian volumes like everything else, it's hard to look at the latest EIA reports.

Make too much sense of it but a long in the short of it is if you look at Frac crews in the Permian there back to about almost 80% of their of their all time highs okay.

The facts are the Permian leading everything.

The challenge there is in every other basin, if we think about the oil is lagging.

Yes.

It's really all about Permian.

So where we are as we originally said at our analyst meeting we thought that we would have somewhere short of a 100000 barrels December.

Year end 'twenty to 'twenty, one of increase across the United States.

I think that number at this point is low it's probably closer to 250 in the year 2021, alright.

We also said that we thought in 'twenty, two and 23 that we'd have about a million and a half barrels a production increase across the United States.

So if you and it's hard to say is that going to happen in 'twenty, two or is it going to happen in 2003 quarters very difficult with a few if you add that all up that's $1 8 million barrels a day a incremental crude over a three year period with a very much loaded in 2002 and 'twenty three.

It's a pretty good run rate and it's very much dominated by the Permian basin.

And Brent I'll ask you how you think the private share.

And how their contract.

From our side.

We've seen these guys very active at.

At this point really it comes down to a geography and where your assets are.

I would venture a guess we've done more deals with private in the last nine months and we're probably a good over the last nine years are not big capital projects per se.

Fill a pipeline capacity to fill a processing capacity on a crude side theres. Some production was close to our lives a good news from gathering deals with them, but.

No.

In slaughter stuff is acreage dedication, but we feel very good about their activity and where that's going to end up.

Got it that's really helpful.

And then you know.

Earlier. This year you guys mentioned that you still expect you expect to capture a five to 600 million a margin from outsized spread opportunities in marketing with the first quarter out of a delay and I think a J.

Jeremy a question you said $250 million from weather impact.

Is that is that 500, a 600 million still something you're comfortable with and where should we expect a remainder should come from in the remaining quarters.

I'll start and then I'll, let somebody else jump in this Jim.

No I'm not comfortable with five or $600 million I think we might be approaching that now so I think it could likely be a little more than that.

When you think Randy.

Yeah, Kristine because a little bit I go back to something Jim said.

Really I believe you said it on our fourth quarter call of 2020 on our fourth quarter call a 2019 that over the last few years.

What we call.

Outsized spreads a range 500 $800 million and I think his comment was we seem to always find a way to come in and capture opportunity.

The way this year is shaping up.

And what we what we see I think we may get to that would be back in that same range again.

This year as well.

Great. Thank you.

Sure.

Thank you. Your next question is from Jean Ann Salisbury of Bernstein.

Hey, good morning.

At a 100% utilization at the end of last year should we expect another crack at a pretty thin.

Jean Ann this is Brad.

That's not in our plants.

Alright.

You guys have a way to send it to a third party products or something I guess, if you go over here.

You look at our system and how we optimize our system and what the variable costs are for us to go access additional capacity. The economics are hard to justify a per new frac for enterprise.

Got it.

And I think you a recently estimated getting approval from the spot terminal and a third quarter a this year.

Would you need to see some of the rebound I think that Tony just talked about in a previous question like what do you need a key volume.

Getting a key continue to pursue that or Youre happy with a project as it is.

You get the approval and you would need to see there a downturn.

This is Jim I think we're happy with where it is we're also in discussions with some some other companies is to coming in as a joint venture partners in a wouldn't surprise me if we didn't do that.

Great. That's all for me thank you.

Thank you. Your next question is from Tristan Richardson of true Securities.

Hi, Good morning, guys just a bit.

Net production commentary, Tony and Brian discussed in that the downstream demand recovery Youre seeing.

Does this put us on a path for a a stronger 2022, even despite sort of a non recurring margin capture we saw in the first quarter.

Yeah, I'll start off yes, I think I think we're pretty bullish.

I think Tony said it best.

We've always had debate between Tony and I have always been more bullish and he is in a.

Non recurring or whatever we call it and Randy just said when you do it every year wise it nonrecurring it just happened somewhere else.

Gas marketing as NGL marketing, it's not a contango and backwardation, we seem to have a footprint that lends itself a when there are issues we have opportunities.

That's helpful and then.

You've talked about some of the carbon capture hydrogen renewable gas opportunities should we think of the one $5 billion to $2 billion, a high level, a sort of annual spend as including some of these more energy evolution oriented projects your technologies or what a project that comes in under that sort of umbrella be incremental.

To that annual number.

Thanks, a annual number is all inclusive.

Thank you guys appreciate it.

Yeah.

Thank you. Your next question is from Shneur <unk> of UBS.

Hi, good morning, everyone.

Tim It was very good to hear about the initiatives that you're embarking upon and Andrew's new responsibilities, maybe a follow up to <unk> question here. So when I sort of thinking about enterprise in terms of a <unk> capex you have $800 million for 2022.

And you gave the one $5 billion to $2 billion longer term number.

If I understood <unk> question correctly.

Some of that May include some of these evolutionary opportunities.

Can we assume that's going to be the case for the 'twenty two calendar year.

How far down the path are we in terms of Andrew's new responsibilities are there any technologies in particular that are in the later innings that would get us closer to that by being whether it's hydrogen or whether it's carbon capture I'm. Just wondering if you can give us a little color on that.

Now this is Graham.

We're still identifying what those projects are always our first opportunity is to really take a low hanging fruit and utilize existing assets and minimize the capital and get a.

A big Bang for the Buck with the assets that we have over the longer term will develop probably more extensive projects as a technology improves and becomes economical. So at this point, we're really looking at how do we capture.

The biggest benefit with the assets that we have.

Yes.

We produce how much hydrogen grant a 150 million a at a $150 million currently a $2 million a day. So so we use 40 40 50 million a day something like that that we're looking to use more of that we're looking at technology that allows us to really use that a lot more of that at our Mont Belvieu facility. It's a big Bang for the Buck on a emissions, but it doesn't cost us.

A lot a capital those are the type of projects that we're really trying to move.

Moving forward with as quickly as possible. So if we can optimize what we have within our own system and then let it evolved to see what are the commercial opportunities might a bought from net carbon capture if we can sequester our own carbon what what other opportunities evolved from that we're not going to announce a C O two pipeline out of a Permian.

Today, but who knows down the road.

Now that makes for a.

It takes a lot of a sense I appreciate the color there and maybe it's kind of a follow up on kind of your current existing business.

I was wondering if we and I'm not sure. If this is a gym or 'twenty question here, but it can we talk about the kind of where you see the direction for hydrocarbons right. Now we have upstream companies that are looking to be disciplined with respect to with respect to growth so kind of more muted at.

At the same time, you have changing consumption patterns, whether its energy transition or whether it's just a can.

Mutes post pandemic.

As exports the path that you see forward to spot given enterprise an opportunity to kind of optimize your asset footprint.

Have you moved crude to spot add more LPG and ethane export capacity in the channel.

Do you consider exporting refined products I was just wondering if you can opine on that.

If he can.

I'll take it.

The forecast.

Energy economist of late.

Many of them a large portion of them are showing a USB bet that the world will be back to a 100 million barrels by the end of 2021.

You see it in diesel consumption, just because of the amount of money. There is pent up demand and now youre seeing it in gasoline comment Jim made in his script glad to hear you say that because that that is that is the case around this town.

While downtown is somewhat sparse it's amazing it's traffic levels there are no cars.

On the on a car lots for sale around Houston I mean, there are some but there is a.

Tremendous shortage people have money I don't know if you've noticed but the savings rate in the United States has doubled.

Those are those are a meaningful stance. So then we look at a news we see what's going on in India.

Which is not real positive for India, but look at the end of the day.

The U S and others are pitching in to get vaccine to India Europe is going to catch up we just look at the world and we look at the change in GDP from 2000, 22021, and the potential for 2022, there is no way to deny the numbers theyre very meaningful.

So do I think that hydrocarbon demand in the world, we're going to see all time highs probably in 2022 could well happen.

I'll I'll say I'd be surprised if it didn't.

Randy you feel differently.

Yes.

A little bit will come in and.

Yeah.

Again, it's a little bit of a theme that we talk about is you still have 3 billion people.

Those 40% of the world living in energy poverty, meaning cooking with with not having access to clean cooking, so either cooking with.

Charcoal or cooking with wood and leading to a four 5 million deaths a year within home pollution.

No.

There's still a.

Huge need just to improve human life, and I think we've seen it.

Over the last hundred years that nothing is improve human lives better than the products that come from natural gas and oil production.

And I think relative to exports I'm on a start a little bit of net I'm on hand over to Brent but.

Where do you think let's think a long term net regarding where you think U S is going to go as far as electric vehicles and hybrids.

Certainly we're going to have more of them, we're going to have efficiency standards on a gasoline.

We're going to do more from an industrial standpoint here, but I don't talk to as many foreign customers as Brent.

But the message is always the same we see them and we see them on zoom calls, we're seeing in person now and.

They want to know that we believe the U S producer is in it to win it long term and I think that's a question is I mean do you believe that the U S is going to increase.

Production on a crude Ngls and is there a their economics for them to do that.

And then at that point, if you believe that you believe demand here in this country is staying flat to declining then what's the most efficient and effective way to get to the water.

So when you look at the projects that we have that we've talked about in the past.

You guys talk about spot that's the most efficient way to get crude oil to the water now there are some.

Rational issues that exist right now, but those will go away.

And that project is more strategic to our upstream system and that's why we liked it.

On the NGL side, we still believe in NGL production, a it frankly it has to price to export.

So theres different ways that once these things happen that we can optimize the system.

Great perfect really appreciate the expanded discussion. Thank you very much and Thats all from me today.

Yes.

Thank you. Your next question is from Michael Blum of Wells Fargo.

Sure.

Thanks, Good morning, everyone.

Just maybe staying on the exports for a minute I wonder if you can give us any kind of a real time look into what youre seeing in terms of LP.

LPG export demand in light of the surge in COVID-19 cases in India.

Okay.

Where do we export this month.

$16 million.

It's around there.

So it's not it's not what you saw this a Brian it's not what you saw in fourth quarter nurse and balancing going on right now I don't know if it's much it's it's.

A demand there a long term, but if you look at just what prices have done on propane per.

A quarter of 'twenty was 37 fourth quarter it was 57.

First quarter 'twenty one it was 90, so markets work and you saw the backwardation and some of the LPG markets and so I think you saw some deferrals or you've got some cancellations and then ultimately this is how this is going to balance until production.

Of course doing what Tony just talked about in the past.

So we are seeing some drop off in India, but certainly China has been able a step up and help fill that gap.

Got it.

My second question.

Really relates to a pipeline capacity rationalization, you talked a bit about that.

Your analyst day, and I'm wondering if you could tell us are there any discussions going on behind the scenes within the industry to make this happen.

Do you think it's just something that's going to be very difficult because there's just too many hurdles to actually achieving it either yourselves or for the industry.

Talking about Repurposing pipelines pipeline rationalization, however, it could get done.

Sure.

You referred to some a Brent comments over the last earnings call.

Correct.

Yes.

Does it take to have Brent speak for himself.

[laughter].

We're looking at Repurposing per share.

Youll see more of that.

What Brent was saying last quarter is due to say it.

These guys that are going to have problems, maybe if you look a pipeline. So don't have contracts you know if somebody ask about cotwo repurpose something that looks like a good projects. If you don't have contracts and you are exposed to and are from from a market to another market Thats a fairly flat.

All of the Permian capacity is a very competitive regardless of the commodity.

No different.

That other companies enterprise tries to figure out the most efficient ways to move Ngls and crude oil on a system.

We have we have a similar a pipeline that's in crude service and we have an NGL pipeline that frankly.

We only own two thirds of so theres different ways that we can as enterprise.

Try to rationalize and optimize our capacity to the benefit of enterprise.

As far as the others I assume they are doing the same thing.

Greg your contracts on crude oil to go up to 28.

There comes a scale out there.

Thank you. Your next question is from Keith Stanley of Wolfe Research.

Hi, good morning.

Wanted to ask on capital allocation and Randy you said again that you wanted flexibility on redeploying free cash flow early in a year and highlighted just uncertainty on federal policies, including I think you said a tax policies can can you just elaborate on what you're mainly focused on and a new administrations.

Infrastructure and related tax plan or any other potential policy changes you're focused on for a capital allocation.

In a case when you when you come in and you look at what's been introduced thus far this year in <unk>.

One of those things you're going to look at the newspaper every day to keep in touch.

And the last 100 years, there's really been three big moves and tax policy and that was the new deal. It was the Reagan era.

Tax policy and now as we emerge into the bond in Europe. This is like the third.

The third major tax swing.

That we've seen in a 100 years and so I think we're paying attention to see.

Which of these proposals actually.

Make it into legislation and then actually get past and I think will be a lot smarter a three months six months from now than we are today and we think it's just a.

Responsible.

What's coming in and focus on financial flexibility and.

And again, we'll be a lot smarter here in three to six months.

Okay, I guess I'm, just curious like from a Tac being an MLP just how you're thinking are you thinking a tax policy changes could affect you directly or just any further thoughts on the tax piece of that yes, Keith honestly, we've got a $1 eight a yield possibilities out there you've got this.

<unk>.

A finance our energy future Act, which has bipartisan legislation that's been introduced on the house and the Senate.

Is actually taking existing.

The existing MLP tax law, and really expanding the scope of it.

To bring in new activities as qualified earnings such as.

Handling.

Some of this green or blue hydrogen.

Coming in in a.

Being able to get into renewables, whether it's wind or solar.

And some of these other activities so I actually would be broadening the scope of what qualifies as earnings for an MLP.

The other side of the equation.

There's been a proposal that came out a Senate finance committee it is not bipartisan it as partisan.

I think it's actually legislation thats been introduced at least a couple of times before.

And but never win anywhere and with that one.

It would come in and take.

Business activities that handle fossil fuels, so what we do today.

And you would no longer be qualified for pass through treatment and you would be taxed as a C Corp. So really there is the.

The range of possibilities as a 180 degrees in here.

I don't think we will be spending a good bit a time up in.

In D C.

Some of the legislation is just sort of counter to what some of the objectives that you hear or whether the again this.

Coming in and taking.

Traditional mlps, and then making them subject to taxation soy goes counter to that.

What we're trying to do.

With that finance, our energy future active sort of counter to that.

It's sort of counter to the infrastructure build to that.

Here with a.

With a package trying to promote infrastructure, but it seems like it's countered infrastructure and finally, the last thing it seems like it might be counter to is this whole pivot to Asia.

One of the reasons, we've been able to as a country I think.

Our able to pivot to Asia is the.

The energy security that the United States has in that we're not relying on the middle East. So some of them some of what we're seeing out there on the tax front is there seems to be some inconsistency on some of the proposals, but I don't think this will be a active year in D C.

Thank you that's very helpful color.

Second question, just I guess it is kind of summing up some of the earlier questions, but last quarter you guys for the first time indicated 2021, EBITDA could be kind of flattish versus 2020, you had a pretty good Q1 with some storm benefits.

Pretty positive tone on the macro environment and on marketing potential deferral.

Differentials for this year.

Is it fair to assume 21 EBITDA at this point now now tracking better than 2020, or just any rough sense, how to think about the year.

Yes, Keith.

Really I think we'll just stick with our guidance, we'll let you guys model it up.

We don't provide formal guidance not really looking to start on this call but.

A.

You you do a great job as well with some of your peers. So we'll pass on that.

Okay. Thank you.

Hum.

Your next question is from Michael Lapides of Goldman Sachs.

Hey, guys. Thanks for taking my question, it's actually a little bit of a follow on on thinking about PC and legislation. Just curious I mean Congress was pretty divided few people think that 28% tax rate happens most thing it's a it's a.

A lower number than that.

But it's also for <unk>.

18 months out from the next election, and a very divided Congress how long do you wait right like we may have uncertainty for a long time.

Relation is hard when youre thinking about capital allocation at what point do you say.

We start ramping a process because to be blunt D C.

D C may take some time.

Yeah.

A year you on that but it seems like this is a.

Let's just say this is a noteworthy congress sent a noteworthy time.

And.

We've got the luxury that we can come in in a.

I think if we come in and we see.

Good capital projects, we're going to allocate our capital there, but but to come in and say anything beyond that I think we'd like to see what.

See what tax policy looks like so and again.

I think in three to six months will be a lot smarter.

Got it Okay and then one last question just curious.

If you move forward with spot how should we think I mean, given the fact, we're exporting as a nationwide two and a half to $3 5 million barrels a day, just depending what week, we're looking at.

And we have a lot more capacity than what we're actually exporting how do you think that ripples through the broader supply and demand matrix.

For those who for existing export facilities, including somebody right.

Thank a con.

Contracts matter.

That's kind a takes some time.

<unk>.

But that project has a long runway.

But.

I mean, there's no question the crude export capacity is overbuilt, but a do you think it will do at the most efficient way.

That'll do it the most economic way and frankly, when you look at who's producing crude oil now and it's more it's larger type companies.

At the end of the day I do believe they want to deal with larger companies on the service side.

And I do want a do it the most efficient way.

Got it. Thank you guys much appreciate it.

Thank you. Your next question is from Michael Cusumano of Heikkinen energy.

Hey, good morning, I wanted to first talk about the propylene business.

Per plane from products seem to be doing really well.

Can you just maybe talk about.

Your expectations for that business from the rest of the year and maybe a year and your outlooks on on spreads also for the rest between 'twenty one.

Chris you're on ticket.

Sure.

Outside of spreads that we've seen over.

Over the last several months really a result of the hurricanes in the winter free So we think things got a normalize here.

But we're bullish overall the need for primary petrochemicals and it goes to the same story as LPG.

The improving quality of life around the world.

Got it Okay, and then as a follow up I wanted to talk about that a $1 6 billion Capex number.

Is there anything youre looking at for 2021 that can move that higher any any risk to that number.

Jim I don't think so.

Okay perfect.

Thank you I appreciate it.

Thank you. Your next question is from Christine Cho of Barclays.

Hi, I just had a follow up on the response to one of your earlier questions.

You mentioned the possibility of Repurposing, a pipe Castillo to service, but I was under the impression that this is pretty difficult to get with a liquids pipeline and it may be possible with a gas pipeline.

Since the CRT pipelines require secret pipelines and a lot more compression.

So curious as to your thoughts here on how capital intensive such a compression.

Good day, yes.

Yes, Christine we're just using it as an example.

We agree with you I think ground.

Yes.

Pipelines come in all shapes and forms and some are suitable for a conversion to C. O two and some art and hope we have some that are interesting.

That's.

We're not making any announcements.

Alright, right I just was curious as cash.

How that would work in actuality right okay, great. Thanks.

Christy This is Randy if there's no other questions I think we can go and give our listeners the.

Playback information.

And then also wanted to thank everyone for joining us today.

Have a good day. Thank you.

And ladies and gentlemen to access a replay of today's call. You may dial 805, 8583, 67 and reference I'd number 3068988 again that number is 805, 8583, 67 and reference I D.

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