Q2 2022 Enterprise Products Partners LP Earnings Call

August 3, 2022

Okay.

Question, Gerry, especially going to press star one one on your telephone. Please be advised that today's conference is being recorded and now I would now like to turn conference over to your speaker today, Randy Burkhalter, Vice President Investor Relations. Please go ahead. Thank.

Thank you Victor.

Good morning, everyone and welcome to the Enterprise products Partners Conference call to discuss second quarter earnings. Our speakers today will be co chief executive officers of Enterprise's General partner, Jim and Randy Fowler other members of our senior management team are also in attendance for this call today.

During the call we will make forward looking statements within the meaning of section 21 E of the Securities Exchange Act of 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 are reasonable it can give no assurance that such expectations will prove to ultimately be correct.

Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially.

Those in the forward looking statements made during this call and with that I'll turn the call over to Jim. Thank.

Thank you Randy.

Today, we reported record adjusted EBITDA of $2 4 billion.

Second quarter.

And that was driven primarily by higher margins in our octane enhancement business.

Our natural gas processing margins and contributions from the Midland Basin assets, We recently acquired.

And those assets continue to significantly exceed our expectations with.

We generated a record $2 billion of DCF, excluding proceeds from asset sales, providing one nine times coverage.

We retained a $174 million of DCF for the quarter, taking us to $1 8 million for the first six months.

We achieved 11 financial records for operating records more details outlined in the press release in short.

Good quarter.

In this environment, we're not having any trouble keeping our systems for.

Permian processing plants are running at capacity, we have two processing plants under construction one in the Delaware into Midland and.

And we've approved two more one in each of those basins.

This build out is complete we will have 15 processing plants.

In the Permian, producing 530000 barrels a day of liquids, which will take us to 36 processing plants as a company producing over 900000 barrels a day.

We also recently approved a project that expands our Shin oak NGL pipeline by 275000 barrels a day and this is done through partial looping.

We now have powerful options as it relates to takeaway per Ngls out of the Permian.

We can close those loops again a lot of capacity.

Or we can put something on hold back into NGL service.

We can do both.

These projects do not change the capex guidance that we have communicated in the past.

As we announced at Analyst day, we're also expanding our systems in the haynesville over and above the Gillis lateral we put into service last year.

Our two and a half a bcf a day haynesville system is unique.

It's not only reaches into the supply area.

But it ties into interstate and LNG corridors, but its corridors, but it also reaches enter the lucrative Mississippi River industrial.

Order, which is hungry for gas.

We have a significant operations in key basins that consistently represent 65% to 75% of the rigs running in the U S.

We've always focused not just on supply, but also markets.

We export 2 million barrels a day of crude oil Ngls.

<unk> products and petrochemicals, we started building this export position over 25 years ago.

And their leader upbeat negotiating team when we did that was a lady named Randall Duncan.

That trend continues with the major export expansions, we have underway for both ethane and ethylene.

In addition, this last Friday, our spot project reached an important milestone with the Fas pis, but the terminal, but in the federal registry.

I think it was in the Wall Street Journal I read that the past three years, we've gone from pandemic depend ammonium when Russia invaded Ukraine in late February no. One was really surprised instead the surprise to most is that the conflicts like it's going to last a while.

Other supply surprise to most is the magnitude of the impact. This war is having on both energy and agriculture.

We're all coming to grips with the fact that many things we took for granted they've changed we haven't suddenly realize.

Just in time World, we live in and how quickly prices shoot up when something breaks.

We're also learnings for some of US re learnings about inflation, how strong an insidious. It is most of our young people have never experienced inflation in.

Energy is.

Billy responsible for over 50% of inflation as it is involved in every aspect of our lives add to that the high cost of food and the increasing cost of housing.

U S energy independence system now more valuable than ever it is clear that Russia has a stranglehold on Europe , and Russia, and China appear to be aligned and policies that are indirect conflict with western.

Fortunately the U S.

<unk>, an abundant energy resource. It is the fact that our crude oil Ngls and LNG cargoes are the only short cycle resources.

World has lift we have tremendous hydrocarbons potential, but unfortunately it has wandered in the current political climate that is intent on restricting its development.

Appalachia alone.

Over 25 Bcf a day of production upside that's more than what Europe imports from Russia. However, this potential is unattainable.

By economics of resource, but massive amounts of laws and regulations that are vague at best and consistently applied and consistently in addition to being the only short cycle resource the world as our energy is environmentally superior.

It's much cleaner because it comes from shale and as Bruce produced here in the U S under environmental and safety standards that are second to none.

Not an oil and gas versus renewable debate has so many.

Make it out debate enterprises view has always been.

We are absolutely going to need it.

And what most call energy transition is actually going to be badly needed energy additions that will take place gradually oil.

Oil and gas will be in high demand for decades people, who say otherwise are either extremely naive or have their own agenda demonizing fossil fuels oberth restrictions on investments and massive layers of regulation that are designed to keep it in the ground will only create chaos in the form of.

Ever increasing shortages and high prices.

We need to learn from the mistakes of our friends in Europe , and avoid risky dependent on unreliable or unrig friendly suppliers for our oil and gas ARPA, the materials and equipment needed for cleaner energy ran.

Randy will go into.

It's more.

Proposed mention legislation is not everything do oil and gas community wanted but the same will be set by the green movement.

It appears to try to strike a balance between clean energy incentives and recognition that continued development of fossil fuels is needed to ensure energy security and energy reliability.

Randy.

Alright, Thank you Jim good morning.

Starting with second quarter income statement items net income a trip attributable to common unit holders for the second quarter of 2022 was a record $1 4 billion or <unk> 64 per unit on a fully diluted basis. This compares to $1 1 billion or <unk> 50 per <unk>.

Common unit for the second quarter of last year.

Turning to cash flows adjusted cash flow from operations, which is cash flow.

From operations before changes in working capital was $2 $1 billion for the second quarter.

As a 23% increase compared to $1 7 billion generated for the second quarter of last year.

Moving on to <unk>.

Distributions and buybacks, we declared a distribution of <unk> 47, and a half cents per common unit with respect to the second quarter of 2022. This is five 6% higher than the distribution that we declared for the second quarter of last year.

This distribution will be paid.

Next week on August 12 to common unit holders of record as of the close of business on July 29.

During the quarter, we also repurchased approximately one 4 million common units at a cost of $35 million.

For the 12 months ended June 30, we returned over $4 billion of distributions to limited partners and $235 million of buybacks.

So for the last 12 months, our payout ratio.

Compared to adjusted cash flow from operations was 56% and our payout ratio of adjusted free cash flow after excluding.

The acquisition the $3 $2 billion acquisition of an avatar midstream was a payout ratio of 72%.

Turning to capital investments total capital investments for the quarter.

$383 million, which includes $301 million of organic growth projects and $82 million of sustaining capital expenditures cash.

Capital investments for the first six months of the year were $3 9 billion, which includes $3 2 billion for the <unk> acquisition 576 million invested in growth capital projects and $157 million for sustaining capital.

As Jim detailed earlier this morning, we announced three new projects in the Permian Basin, two new 300 million cubic feet, a day natural gas processing plants.

275000 barrel a day expansion of our NGL pipeline system with these projects we now expect.

2022.

Growth capital investments to be approximately $1 6 billion and sustaining capital expenditures to be approximately $350 million for.

For 2023, we currently expect that our growth capital spending will be $2 billion.

Our total debt principal outstanding at the end of the quarter was $29 $1 billion, assuming the final maturity date for the hybrids. The average life of our debt portfolio is approximately 21 years.

Our weighted average cost of debt is four 4% and at June 30, approximately 97% of our debt was fixed rate.

Our consolidated liquidity at the end of the quarter was $4 $1 billion and this includes availability under our credit facilities and $231 million of unrestricted cash on hand.

Adjusted EBITDA was.

<unk> eight $8 billion for the 12 months ended June 32022, which that yields a consolidated leverage ratio of three one times after adjusting debt for the partial equity credit treatment of our hybrid debt and also reduced by the partnership's unrestricted cash on hand.

On August 1st we provided notice of our intention to redeem $350 million of the $700 million of junior subordinated notes D.

With a redemption date of August 31, 2022. These hybrid notes that were originally issued in August 2017 are redeemable on or after August 16.

These notes have a fixed rate coupon of four 875% for the first five years, and then become floating at LIBOR plus call. It 3% beginning August 16th.

Based on current floating rates.

Indicative spot floating rate for this note will now jump to five 8%, making these notes one of our highest cost debt issues.

And really our only issue that is redeemable without a premium.

Given the forecast that the fed will increase floating rates by at least another 1% or more we elected to redeem half of this issuance now using cash on hand, and commercial paper to fund the redemption.

During these notes receive 50% equity credit from the rating agencies, and Louisville or redeeming the entire $700 million of the notes, we decided to redeem half of the notes at this time and in addition, we plan to Opportunistically buy back up to $300 million of ETE common units.

Over the remainder of the year.

Our common units or a more expensive cost of equity versus the cost of the equity embedded into hybrids.

In regard to the proposed inflation reduction Act overall, we have received positive feedback from our customers, especially with regard to the availability of federal leases for oil and gas drilling.

Further in our efforts to commercialize a carbon sequestration system with Oxy. We believe the proposed changes to the 45 acute credits could be a game changer for post combustion of meeting customers.

The.

It was harder to come in or more of a challenge to come in and commercialize the carbon sequestration projects and attract these customers when the existing 45 key program was only paying $50 per metric ton and had no direct pay option.

Randy I think we can open it up for questions. Okay. Thank you Victor we are ready to take questions from our participants.

Sounds good as a reminder to ask a question.

Press Star one one on your telephone once again Thats Star one one please Sam Bob Kuhn.

Hey, Ross.

Our first question comes from the line of Jeremy Tonet from Jpmorgan. Your line is open.

Hi, good morning.

Good morning.

Just wanted to pick up maybe on that last bit there with regards to carbon capture and 45 Q, if the bill coming through as advertise lifting it to lifting at higher there.

Just curious what type of timeline do you think things could happen could things be developed would this happen in Louisiana.

For Texas, given Louisiana appears on the verge of gaining classics, while privacy by the end of the year just trying to scope out what this opportunity set could look like for enterprise over time.

Hi, Jeremy this is Kerry Weaver.

I don't think.

It matters, whether it's Texas, or Louisiana or announced with Oxy is in Texas and.

Thank the relationship and working with the EPA can bring a project <unk>.

Fruition at the same time line.

Louisiana, if they gain primacy and I think we have received very positive feedback from customers as we've been discussing the project with them and the complementary collaboration with oxy. So our goal is to be ready to deploy the project as soon as they are ready and we think this new legislation will be very encouraging.

To bring those decisions and those timelines sooner.

Got it that's helpful. There and then just wanted to touch base real quick on the Quest four 9 billion of EBITDA. It seems like if you print quarters like this one that should be pretty easy to attain.

Wondering any updated thoughts there.

Okay.

I don't think its easy to attain Jeremy we're just halfway through the year end.

My role around here is to worry about everything so I'm not I'm not I'm.

I'm not having anybody at this point.

Thank you and our next question comes from the line of Brian <unk> from UBS. Your line is open.

Good morning, everyone.

Just to follow up on some of the Jeremy's comments on U S projects <unk> has a lot of <unk>.

Opportunities in front of it in terms of large scale projects, including <unk> the potential for the Cracker and then in addition, the spot export project, assuming regulatory certainty over the coming back half of the year.

Assuming we get the inflation reduction act passed as it stands I'm curious if management could just talk about how it's thinking about priority of projects and perhaps timing of pursuing some of these large scale projects looking forward.

First of all we're not looking at building the cracker.

You put a press release out that youre not looking at it and next thing you know it's on the front page of the Houston Chronicle business Flex.

Yeah.

We have we have got it.

As for spot.

Put in the federal registry, but we still got another comment period to go and I'm looking for Bob.

Still got another comment period to go well what are we 60 plus thousand comments to date and another 90 day comment period or something like that 45 day comment period from last Friday, so it should be over by September 12.

Last public meeting will be on August 23rd.

And well in excess of 60000 comments Jeff.

Once we get through this.

How many will have then you got to sift through those.

So.

I think we've got it.

If we get this thing by the end of the year I think we'd be lucky.

Uh huh.

It depends on it depends on the environment at the time, we get it in.

Customer base, we can get as to where it fits in the priority list.

Great appreciate the color.

And then maybe just to pivot to capital allocation.

You are looking to exit 'twenty, two and 'twenty three well below the three five target.

Given the distribution rate this quarter and a small buyback just curious if you could provide some incremental color on how we should be thinking about preferences for return of capital as we head into the back half of 'twenty and into 'twenty three.

Also given just higher inflation et cetera.

Yes, Brian .

Really our thoughts are still coming in and take all of the above approach and.

I think thats reflected by what we're doing on these colonies.

Part of this hybrid note issues.

It's really it's not the highest coupon, but it's near the highest coupon that we have within the other the other side of it is we're looking to come in and buy back up to 320.

$350 million of equity between now and the end of the year or two so a balanced approach between buybacks and debt reduction I think the other thing in.

Again I think this was represented what we did.

2021.

We came in in returning cash.

And really have been self sufficient and funding our growth capex, but the other thing we had coming into the year as we almost.

We had quite a bit of cash on hand.

And that enabled us to come in and.

Fund a substantial amount of our acquisition of an Abbott house midstream with cash and gives us the flexibility that is a reminder, that we could come in and just use commercial pipeline. So.

Again, I think coming in and retaining cash for balance sheet flexibility.

<unk> paid off and how we came in and were able to capture opportunities that we didn't come in and stressed the balance sheet by coming in and doing an acquisition. So.

I don't think Youll see much change for US you did see us coming in also this time in bump the distribution five 6% compared to last year. So again. Thank you.

Coming in and <unk> has taken on all of the above approach.

Great I appreciate the commentary and enjoy the rest of your day.

Yeah.

Thank you. Our next question comes from from Theresa Chen from Barclays.

Your line is open good morning.

Yes.

Tim I wanted to go back to your comments earlier about the need for incremental NGL takeaway out of the Permian and your expansion at Okay and can you just help us understand the puts and takes to it.

Relative economics Schnepp expansion persist.

Thanks, Simon I'll back into NGL service.

For the looping on Shin Oak.

Permitting in place.

Multiple wine right of way like you still have to get through some of that.

Justin you want to take it.

Which one.

Yes, I'll take it.

Yes so.

To Jim's point.

The expansion was clearly supported by the growth in the Permian, where sand supported by our G&P expansions and I think what really drove the decision in this direction was just preserving that that optionality of what we do with some of those.

<unk> options that we have.

There's a lot of production growth that we expect coming out of the out of the basin in the next three to five years, so that preserving that the value of a potential similar conversion for a later decision made drove us to make this decision.

Yeah. This is Tony I want to add something to that Teresa.

Between now and 2027.

Yes.

Can you hear me.

Now in 2027, we estimate that the liquids out of the Permian basin to grow about 1 million barrels a day.

If you look at what they've grown year to date and you can't find these numbers in anything because as reported.

And any other commercial reporters do it if only reported through April we think Ngls have grown already 125000 barrels a day of natural gas is about 900, maybe even a little more.

Those are big numbers, but I will tell you that you've heard on these calls before it's what we're seeing on our systems.

You're seeing it in the basis marketing natural gas and Youre seeing it in our Fracs.

Our plants, which is the reason for this announcement this morning of customers backing all of that.

So getting to putting some numbers behind what Justin said, that's how we see it.

Thank you and maybe as a.

A follow up to that Tony in light of that.

For the basis for the Baja basis.

Indicating that we may face a dire situation for residue gas takeaway to your point about incremental growth.

So if we do face that situation in first half of 2023 can you remind us how much ink.

Incremental I think recovery you think is realistic out of the basin and in general how do you expect the industry to work through that.

Let's talk about basis first if you've watched the basis.

Whether you watch it on ice are two brokers next summer has moved up to a modest $2. It wasn't long ago that that was modest dollar amount is $1 20. So that tells you the pressure.

The producer community is seeing from just incremental supplies realm.

Relative to ethane.

Somebody.

How much ethane being rejected in the Permian its I don't think of it.

It's probably somewhere around 200 250000 barrels a day.

It depends on the month.

Well I mean is that wider basis.

Once you extract ethane because it is the Btu, yes sure absolutely everything.

Everything you can.

To get your gas out because you're protecting your oil barrels.

But then a credit situation for NGL pipelines, and so thats, how the market will balance.

Theresa. Thank you. Thanks for your question. Thank you yes.

Yes.

Thank you. Our next question comes from the line of coastal <unk>.

TP HC.

Go ahead your line is open.

Good morning, it looks like total spend increased about $900 million, so between 2022 and 'twenty three.

Is that solely attributable to the new processing capacity and then if so are you seeing any material price pressures or alternatively are you having to build more gathering relative to what was required for the previous round of plants.

Yes.

I'll take the first part of that and then I'll, let Graham handle as far as what we're seeing.

As far as any cost creep on existing projects.

No. What we had said earlier was call it $1 $5 billion or so of growth projects for 2023, and now we've seen that grow to about $2 billion and that's really just reflective of some of these project announcements that we had this morning.

No.

In terms of on the project cost increases we are seeing some increases, particularly the latter half of the.

For the year I think we were pretty solid earlier in the earlier in the year.

We've seen the cost isn't cost increases anywhere from 10% to 15% depending on the type of material used in the project. We are starting to see some softening in some markets, particularly particularly.

Particularly steel seems to be turning around although labor markets youre going to still be still be strong and have some upward pressure on cost as we go forward.

2023.

As far as budget and status of our largest.

As far as as far as the PVH PVH too.

Still on track.

On time on budget all of our cost are effectively locked in at the time, we did that did that project. So we don't really see any escalation on PTH too.

And then maybe Randy just a clarify on the approved projects specifically for 2023 going from something that maybe close to $1 billion, maybe closer to $108 nine today that accurate.

We were estimating I think.

Back at our Investor Day back in March we said that our expectation was that.

Growth Capex would be in the one $5 billion to $2 billion area.

<unk>.

And then again some of that was going to move from they were projects under development.

And now you are just coming in and seeing some of those projects being announced.

Understood.

Then maybe shifting over to Frac margins and I think Q4, and Q1 had a pretty significant increase looks like you all reported nearly five cents a gallon and then this quarter had a bit of a pullback closer to Q3 levels.

I guess just moving forward do you characterize Q2 as more indicative of what you are looking at in the back half of the year. It could we see a bit of a rebound there.

And are you really say a natural gas processing margins.

Specifically on the your fractionation fleet I think you guys reported 201 or so after this quarter.

Fractionation specifically.

And I think Q4, and Q1 had a pretty pretty impressive margins there on a unit basis. So just looking at your unit margins for fractionation, specifically not not frac spread on the processing side.

Who wants to take that second one.

Yes. This is <unk> I think on a go forward basis for the remainder of this year I think it looks more like this last quarter.

Couple of things that happen.

Power costs have gone up and also.

The blending at the Fracs is also compressed.

I think Q4 and Q1 were higher.

A higher than normal.

Okay and on the on the power side is most of that pass through are you.

Retaining some of that exposure on at the EBIT level.

It's sort of a pass through.

We have a little bit of exposure to it.

And then just how much we have hedged relative to that exposure as well.

Got it I appreciate that.

Thank you. Our next question comes from the line of Chase Mulvehill from Bank of America Securities. Your line is open.

I think this may be me.

Morning, everybody.

So I guess.

Thinking about <unk> and the natural gas processing and NGL marketing business, obviously, you inherited a lot more commodity exposure when you acquired an albatross.

So really I guess, maybe a couple of questions around this is really kind of one I don't know if you can kind of help us understand that.

<unk> sensitivities within the natural gas processing and NGL marketing business.

And then also talk a little bit about the Wahhab basis, I think somebody mentioned it earlier.

But have you hedged that do you have a lot of risk around that.

So just kind of help us understand whatever risk you may or may not have.

If wahhab basis does blow out.

Some point next year.

Okay.

Jeff This is Jim.

One of the reasons, we bought <unk>.

Frankly, we wanted that commodity exposure given our.

Fairly bullish sentiment.

What was the other part of the question.

I think the only place we're looking at.

<unk> basis.

Yes.

Think we probably have.

300 million a day of exposure.

That's on purpose and I don't think we've hedged any of that because I'm aware of.

Sure.

Okay Alright.

Unrelated follow up there's a lot of talk on the call today about retiring debt.

And obviously interest rates continue to move higher.

So when we think about your target is three 5% leverage ratio.

Is there is there.

Any chance that you think about lowering that at some point if interest rates continue to kind of rise over the next year or two.

So I think we're at this point, we're still comfortable with the three and a half times debt to EBITDA, plus or minus a quarter either side. So 325 to $3 75, I think one of the key there is that again at the end of the quarter, 97% of that debt was fixed.

And the average life was 21 years, so our exposure to.

Floating debt and increased interest costs are are really really low.

When preparing for this environment for a dozen years.

Okay, Alright, perfect I'll turn it back over thanks, everybody.

Okay.

Thank you for your next question.

Our next question comes from line of Jean Ann Salisbury from Bernstein. Your line is open.

Hey, good morning, I, just have one and year to date.

<unk> crude pipes to corpus has been flowing at very high utilization.

Higher than that is going to Houston can you comment on the drivers of this and if you expect this to kind of stay around until the Houston ship channel has expanded or maybe Scott.

Hey, Jamie this is Bryan.

I think theres been a lot more crude exports from corpus.

That's starting to change but.

It's a function of.

The pipeline capacity, that's pointed that direction minus the local demand there and everything else is going to head to the water. It's a function of the pipeline capacity, that's pointed that direction minus the local demand there and everything else is going to head to the water.

They can load larger ships than us that can do it at higher rates.

<unk> seen some flows change as wafer west sort of started up as more barrels were pointed toward Houston cultural pointed towards Houston.

Theyre, taking pumps and pipes in corpus are taken from others, but ultimately I think once spot goes forward that will change the flow patterns for crude oil are sports.

Great. Thanks, that's all for me.

Thank you Omar for next question.

Our next question comes from the line of Neal Dingmann from choice Youre line is open.

Good morning. This is Danny <unk> on in for Neal Dingmann.

First question, maybe it might be too simplistic, but why not just buy.

Units back given the.

Current roughly.

7.13% yield versus your filing this morning, suggesting.

Barry Jensen.

Notes that at roughly 6% yield.

Yeah, It really just taken a balanced approach.

We're coming in and the way we're thinking about it is we are redeeming $350 million of debt and were redeeming $350 million of.

Common units.

So.

Coming in and redeeming $350 million of the hybrids is not a levering event, we're buying the units back as a levering event, but again, it's still all of the above balanced approach.

Okay, great great. Thank you then now except for me.

Thank you Mark for our next question.

Our next question comes from the line of Michael Blum from Wells Fargo. Your line is open.

Thank you and good morning, everyone.

I wanted to just put a finer point on the discussion around the distribution. So clearly if you look at the last I think at least two years maybe longer.

Don one increase in the fourth quarter. Obviously, this is sort of a new or out of pattern. So I. Just wanted to understand is this a new pattern or is this a one time event as a step change in growth rate I, just want to make sure I understand that better.

Yes.

Michael.

The board comes in and takes a look at the distribution rate.

Quarter.

I want to say, we went through a period call. It 2017.

2021, where we're really our 2020 really where we were coming in and trying to make a shift in our financial model and the old model was where you finance.

A substantial amount of your.

Growth capital expenditures in.

In the capital markets.

Good reliance on the equity capital markets.

The pivot that we began to make in 2017 was to come in and be more self sufficient and coming in and funding our growth capital investments and so that was we're more deliberate on distribution growth and I think thats paid off.

This year I think one of the differences in this year and then we've worked through the pandemic to pandemic question, Mark, but the business has performed very well.

We came in earlier this year and.

Made an attractive acquisition and that we talked about that being accretive so that provided us an opportunity to come in and boost the.

Mid year increase in the distribution and in light of what was going on from an inflation standpoint, we thought it made sense to do.

Year boost.

I don't know if this is necessarily going to change what we do go going forward, but we take a look at it every quarter, but we thought it was appropriate.

This quarter to go ahead, and do a mid year bump.

Okay, great that makes sense thanks for that.

Also just one kind of a macro question Jimmy now in your opening comments.

You referenced inflation higher interest rates higher commodity prices. My question is are you seeing any signs of weakness in demand across your business segments.

Due to these factors I know thats kind of open ended question, but I'm basically just kind of probing to see if we're seeing any signs of economic weakness.

Tony I was with some cut.

Customer last mile.

It has a number of convenience stores and is read as in.

They've got more I've got more data than you can say grace over.

And as rates go I would say it wasn't seeing that much you've seen some but not that much.

At the service station Tony If you look at the data, it's Yo Yo did a little bit and we were down a small amount call it 5%, but when you when you listen to scrub called that was about a million barrels, but when you listen to the calls for somebody like Valero and PBF.

They're definitive that wholesale demand is right not just for diesel both for gasoline to some kind of.

In the crack spread and it is kind of reflected in the crack spread.

You see some weakness in some of the olefins markets.

That's a lean is overproduced now and those plants are.

Economic run cuts you see.

PVH is going down in China, but I would tell you the flip side to that for enterprise and Brent tell me, if I'm wrong, but if we don't export ethylene we're going to export ethane.

And for our ethane terminal has been phenomenal.

Record numbers, especially.

<unk>.

This month and I think what we'll see going forward if you look across.

Our ethane exports.

A record number in July if you looked across our LPG dock, it's incredibly strong we talked about crude exports, but.

It's.

On the export docks, it's really picked up the last couple of months Michael.

Also this is Jim Tony spoke to over producing ethylene that hurts the merchant player.

Integrated is still making money ethane to polyethylene.

You know Michael the World is short <unk> and a good way for the world and because of the natural gas situation a good way for them to get more MB to us is an ethane propane and butane. So it's just the facts.

Great. Thanks for all that I appreciate it.

Thank you and one for our next question.

Our next.

Comes from the line of Keith Stanley from Wolfe Research. Your line is open.

Hi, Good morning, I had two questions on the good results with the second quarter.

First on NGL marketing it was it was up about $50 million Q2 versus Q1.

Pretty high number I, usually think of NGL marketing is a little weaker seasonally in Q2, so anything in particular driving the strength in marketing there.

One of the things is a lot of what marketing does is fixed fee.

All of the exports I think Brendan.

LPG.

Those contracts are held by marketing I'm not sure about ethane I think those are two.

And I am not sure about ethylene Chris is that held about marketing.

No it's in pet Chem Okay.

Okay.

You look at some of the structural things that were going on the market between first quarter and second quarter.

Especially on the NGL side.

For the second quarter was so strong.

Okay.

And then <unk>.

Similar question on processing, so obviously, a very strong Q2 number there.

Headline Frac spreads, which you usually look at for enterprise, where we're down in Q2.

So not sure if theres a lag effect there or is it just navi toss us more.

And Youre just seeing so much strength there.

Kind of overwhelming.

And bringing processing.

Yes, Keith I think part of it is we only had <unk> from February 22nd or so in the first quarter.

And then we got a full contribution from from novel House in the second quarter, but it does have a fee base floor.

Ballpark I want to say from a commodity.

Exposure again, it's got a fee base floor, but we probably picked up an incremental 22000 barrels a day of Ngls, another three or 4000 barrels a day of condensate and probably 75 to 80 million cubic feet a day of natural gas exposure for that really provided some uplift.

Got it thank you.

Victor we have time for one more question. Please.

All right our last question one moment.

Our last question comes from the line of each sale.

Asset management your line is open.

Steve Your line is open.

He might be on mute.

Alright, well go to the next person.

Our next question comes from the line of Michael.

Michael and Lapidus from Goldman Sachs. Your line is open.

Hey, guys congrats on a good quarter and thank you for taking my question.

<unk> when I think about the asset portfolio of <unk>.

You are the big dominant player in crude and NGL exports, one of the places where youre not the end.

Bolt in the LNG business.

Just curious is that simply due to the fact that others moved much quicker than you guys.

Because you don't think it's an attractive business.

Or is it just the valuation and call just curious about how you think about longer term your role in kind of the export of natural gas in the U S are from nila.

And Carl will be focused on crude petrochemicals and natural gas liquids.

<unk> I think.

If anything we missed the boat on LNG.

And.

Okay.

The quicker part I don't know about the quicker part I think that was.

On election that we made and if we sort of go back in the history books.

It was really LNG imports and we were not a believer in LNG imports and we.

We just felt like the U S was going to have a good resource basin.

U S LNG would be the first one to turn off as far as imports and it was really the importers.

That really became the exporters when their import business model fell apart.

And they had first mover advantage to come in and convert.

LNG exporters and when they were there because they already had.

Some capital and they already had some equipment. So it was very easy for them to come in and do conversions. So really it was or not being involved in the LNG imports.

To a degree put us at a disadvantage compared to those incumbents.

We are involved in delivering delivering gas to two export facilities.

Gillis lateral and I think if I'm not mistaken horror our expansion will be have the capability.

Got it.

We love our position, we love our position exporting Ngls crude oil and petrochemicals and not what.

I've said in my script, we're exporting just over 2 million barrels a day, that's not too bad.

Okay.

We are ready to in the call and so with that the company will sign offs and we'd like to thank everybody for joining us and Victor if you would give our participants the replay information.

Awesome. Thank you that's it.

Awesome. Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Have a great day.

The conference will begin shortly to raise your hand during Q&A you can dial one one.

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Okay.

Yes.

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Okay.

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Okay.

[music].

Good day, and thank you for standing by and welcome to the Enterprise products Partners second quarter 2022 conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question answer session. Chad a question during the session going to press Star one one on your telephone please be advised that today.

This conference is being recorded and now I would now like to turn conference over to your Speaker today, Randy Burkhalter, Vice President Investor Relations. Please go ahead. Thank.

Thank you Victor.

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

During the call we will make forward looking statements within the meaning of section 21 E of the Securities and Exchange Act 1934 based on the beliefs of the company as well as assumptions made by and information currently available to Enterprise's management team.

Management believes that the expectations reflected in such forward looking statements are reasonable it can give no assurance that such expectations will prove to ultimately 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 the forward looking statements made during this call and with that I'll turn the call over to Jim.

Thank you Randy.

Today, we reported record adjusted EBITDA of $2 4 billion for the second quarter.

That was driven primarily by higher margins in our octane enhancement business.

Our natural gas processing margins and contributions from the Midland Basin assets, We recently acquired.

And those assets continue to significantly exceed our expectations.

Generated a record $2 billion of DCF, excluding proceeds from asset sales, providing one nine times coverage.

<unk> $974 million of DCF for the quarter, taking us to $1 8 million for the first six months.

We achieved 11 financial records in four operating records more details outlined in the press release in short it was a good quarter.

In this environment, we're not having any trouble keep keeping our systems for our Permian processing plants are running at capacity, we have two processing plants under construction one in the Delaware one in the Midland.

And we've approved two more one in each of those basins.

When this build out is complete we will have 15 processing labs.

In the Permian, producing 530000 barrels a day of liquids, which will take us to 36 processing plants as a company producing over 900000 barrels a day.

We also recently approved a project that expands our Shin oak NGL pipeline by 275000 barrels a day and this is done through partial looping.

We now have powerful options as it relates to takeaway per Ngls out of the Permian.

We can close those loops again a lot of capacity.

We can put something on hold back into NGL service or we can do both.

These projects do not change the capex guidance that we have communicated in the past.

As we announced at Analyst day, we're also expanding our systems in the haynesville over and above the Gillis lateral we put into service last year.

Our two and a half a bcf a day haynesville system is unique it's.

Not only reaches into the supply area, but.

But it ties into interstate and LNG corridors, but its corridors, but it also reaches enter the lucrative Mississippi River industrial.

Order, which is hungry for gas.

We have a significant operations in key basins that consistently represent 65% to 75% of the rigs running in the U S.

We've always focused not just on supply, but also markets.

We export 2 million barrels a day of crude oil Ngls and refined products and petrochemicals. We started building this export position over 25 years ago.

And the leader of the negotiating team when we did that was a lady named Randall Duncan.

That trend continues with the major export expansions, we have underway for both ethane and ethylene.

In addition, this last Friday, our spot project reached an important milestone with the Fas.

Yes, but the terminal, but in the federal registry.

I think it was in the Wall Street Journal I read that the past three years, we've gone from pandemic depend ammonium on Russia invaded Ukraine in late February no. One was really surprised instead the surprise to most is that the conflicts like it's going to last a while.

Other supply surprise to most is the magnitude of the impact. This war is having on both energy and agriculture.

We're all coming to grips with the fact that many things we took for granted that changed we haven't suddenly realize.

Sort of just in time World, we live in and how quickly prices shoot up when something breaks.

We're also learnings for some of US re learning about inflation, how strong an insidious. It is most of our young people have never experienced inflation in.

Energy is.

Billy responsible for over 50% of inflation as it is involved in every aspect of our lives add to that the high cost of food and the increasing cost of housing.

Energy independence is now more valuable than ever it is clear that Russia has a stranglehold on Europe , and Russia, and China appear to be aligned and policies that are indirect conflict with western values.

Fortunately the U S. As an abundant energy resource. It is the fact that our crude oil Ngls and LNG cargoes are the only short cycle resources.

The world has lift.

We have tremendous hydrocarbon potential but unfortunately it has wandered in the current political climate that is intent on restricting its development.

Appalachia alone has over 25 Bcf a day of production upside that's more than what Europe imports from Russia. However, this potential is unattainable.

The economics of resource, but massive amounts of laws and regulations that are vague at best and consistently applied and consistently in addition to being the only short cycle resource the world as our energy is environmentally superior much cleaner because it comes from.

And as Bruce produced here in the U S under environmental and safety standards that are second to none.

Not an oil and gas versus renewable debate has so many make.

Make it out debate enterprises view has always been.

We are absolutely going to need it all.

And what most call energy transition is actually going to be badly needed energy additions that will take place gradually oil.

Ever increasing shortages and high prices.

We need to learn from the mistakes of via <unk> in Europe , and avoid risky dependent on unreliable or unrig friendly suppliers for our oil and gas ARPA, the materials and equipment needed for cleaner energy.

Randy will go into this more but the proposed mentioned legislation is not everything but the oil and gas community wanted but the same will be set by the green movement. It appears to try to strike a balance between clean energy incentives and recognition that continued development of parcel.

Fuels as needed to ensure energy security and energy reliability.

Thanks.

Alright, Thank you Jim good morning.

Starting with second quarter income statement items net income a true attributable to common unit holders for the second quarter of 2022 was a record $1 4 billion or <unk> 64 per unit on a fully diluted basis. This compares to $1 1 billion or <unk> 50 per common.

Unit for the second quarter of last year.

Turning to cash flows adjusted cash flow from operations, which is cash flow from operations before changes in working capital was $2 $1 billion for the second quarter. This is a 23% increase compared to $1 7 billion generated for the second.

Order of last year.

Moving on to <unk>.

This distribution will be paid.

Next week on August 12 to common unit holders of record as of the close of business on July 29.

During the quarter, we also repurchased approximately one 4 million common units at a cost of $35 million.

For the 12 months ended June 30, we returned over $4 billion of distributions to limited partners and $235 million of buybacks.

So for the last 12 months, our payout ratio.

Compared to adjusted cash flow from operations was 56% and our payout ratio of adjusted free cash flow after excluding.

The acquisition of $3 $2 billion acquisition of an avatar midstream was a payout ratio of 72%.

Turning to capital investments total capital investments for the quarter.

$383 million, which includes $301 million of organic growth projects and $82 million of sustaining capital expenditures.

Capital investments for the first six months of the year were $3 9 billion, which includes $3 2 billion for the <unk> acquisition $576 million invested in growth capital projects and $157 million for sustaining capital.

As Jim detailed earlier this morning, we announced three new projects in the Permian Basin, two new 300 million cubic feet, a day natural gas processing plants, and a 275000 barrel a day expansion of our NGL pipeline system with these projects we now expect.

2022.

Growth capital investments to be approximately $1 6 billion and sustaining capital expenditures to be approximately $350 million.

For 2023, we currently expect that our growth capital spending will be $2 billion.

Our total debt principal outstanding at the end of the quarter was $29 $1 billion, assuming the final maturity date for the hybrids. The average life of our debt portfolio is approximately 21 years.

Our weighted average cost of debt is four 4% and at June 30, approximately 97% of our debt was fixed rate.

Our consolidated liquidity at the end of the quarter was $4 $1 billion and this includes availability under our credit facilities and $231 million of unrestricted cash on hand.

Adjusted EBITDA was.

On August 1st we provided notice of our intention to redeem $350 million of the $700 million of junior subordinated notes D. With a redemption date of August 31, 2022. These hybrid notes that were originally issued.

In August 2017 are redeemable on or after August 16.

These notes have a fixed rate coupon of four 875% for the first five years, and then become floating at LIBOR plus call. It 3% beginning August 16th.

Based on current floating rates.

Indicative spot floating rate for this note will now jump to five 8%, making these notes one of our highest cost debt issues.

And really our only issue that is redeemable without a premium.

<unk>. These notes receive 50% equity credit from the rating agencies, and Louisville or redeeming the entire $700 million of the notes, we decided to redeem half of the notes at this time and in addition, we plan to Opportunistically buy back up to $300 million of ETE common units.

Over the remainder of the year.

Our common units or a more expensive cost of equity versus the cost of the equity embedded into hybrids.

The.

It was harder to come in or more of a challenge to come in and commercialize the carbon sequestration projects and attract these customers when the existing 45 acute program was only paying $50 per metric ton and had no direct pay option.

Randy I think we can open it up for questions. Okay. Thank you Victor we are ready to take questions from our participants.

Sounds good as a reminder to ask a question you need to press Star one one on your telephone once again Thats Star one one please stand, though probably for the Q&A roster.

Our first question comes from the line of Jeremy Tonet from Jpmorgan. Your line is open.

Hi, good morning.

Good morning.

Just wanted to pick up maybe on that last bit there with regards to carbon capture them 45, Q, if the bill coming through as advertise lifting and lifting at higher there.

Just curious what type of timeline do you think things could happen could things be developed would this happen in Louisiana.

Award, Texas, given Louisiana appears on the verge of gaining classics, while primacy by the end of the year just trying to scope out what this opportunity set could look like for enterprise over time.

Hi, Jeremy this is Cary lever.

I don't think.

It matters, whether it's Texas, or Louisiana or announced with Oxy is in Texas, and I think the relationship and working with the EPA can bring a project.

Kept fruition at the same time line.

Louisiana, if they gain privacy and I think we have received very positive feedback from customers as we've been discussing the project with them and the complementary collaboration with oxy. So our goal is to be ready to deploy the project as soon as they are ready and we think this new legislation will be very encouraging.

And to bring those decisions and those timelines sooner.

Uh huh.

I don't think its easy to attain Jeremy we're just halfway through the year end.

My role around here is to worry about everything so I'm not I'm not we're not.

And anybody at this point.

Thank you.

Next question comes from the line of Brian <unk> from UBS. Your line is open.

Good morning, everyone.

Just to follow up on some of Jeremy's comments on U S projects <unk> has a lot of.

The opportunities in front of it in terms of large scale projects, including <unk> the potential for the Cracker and then in addition, the spot export project, assuming regulatory certainty over the coming back half of the year.

And when we get the inflation reduction act passed as it stands.

The management could you just talk about how it's thinking about priority of projects and perhaps timing of pursuing some of these large scale projects looking forward.

So we're not looking at building the cracker.

You put a press release out that youre not looking at it and next thing you know it's on the front page of the Houston Chronicle business Flex.

Uh huh.

Yeah.

We have.

We have got it.

For spot.

Put in the federal registry, but we still got another comment period to go and Im looking for Bob.

Got another comment period to go well what are we 60 plus thousand comments to date and another 90 day comment period or something like that 45 day comment period from last Friday, so it should be over by September 12.

<unk>.

Last public meeting will be on August 23rd.

That's well in excess of 60000 comments Joe.

Once we get through this that knows how many will have then you've got to sift through those.

So.

I think we've got it.

We get this thing by the end of the year I think we'd be lucky.

It depends on it depends on the environment at the time, we get it and.

What kind of customer base, we can get as to where it fits in the priority list.

Great appreciate the color and then maybe just to pivot to <unk>.

Capital allocation you are looking to exit 'twenty, two and 'twenty three well below the three five target.

Given the distribution rate this quarter and a small buyback just curious if you could provide some incremental color on how we should be thinking about preferences to return of capital as we head into the back half of 'twenty, two and into 'twenty three.

Also given just higher inflation et cetera.

Yes, Brian .

Really our thoughts are still coming in and take all of the above approach and.

I think thats reflected by what we're doing on these colonies.

Part of those hybrid note issue I mean, it's it's really it's not the highest coupon, but it's near the highest coupon that we have within the other the other side of it is we're looking to come in and buy back up to 320.

$350 million of equity between now and the end of the year to have a balanced approach between buybacks and debt reduction I think the other thing in.

Again I think this was represented what we did in 2021 as we came in and retain cash.

And really have been self sufficient and funding our growth capex, but the other thing we had coming into the year as we almost.

We had quite a bit of cash on hand, and that enabled us to come in and.

Fund.

A substantial amount of our acquisition of an Abbott house midstream with cash and gives us the flexibility that the remainder that we could come in and just use commercial paper.

No.

Again, I think coming in and retaining cash for balance sheet flexibility.

<unk> paid off and how we came in and were able to capture opportunities that we didn't come in and stressed the balance sheet by coming in and doing an acquisition. So.

I don't think Youll see much change for us.

You did see us coming in also this time in bump the distribution five 6% compared to last year. So again I think he still coming in and see us taking on all of the above approach.

Great I appreciate the commentary and enjoy the rest of your day.

Thank you. Our next question comes from from Theresa Chen from Barclays.

Your line is open good morning.

Tim I wanted to go back to your comments earlier about the need for incremental NGL takeaway out of the Permian and your expansion at <unk>.

And can you just help us understand the puts and takes to it.

Relative economics.

Expansion versus.

Thanks terminal back into NGL service.

For the looping on Shin Oak.

Permitting in place.

Multiple wine right of way like do you still have to get through some of that.

Justin you want to take it.

Brent, which one of them.

I'll take it.

Yes, so I think to Jim's point the expansion was clearly supported by.

The growth in the Permian that we are seeing supported by our G&P expansions and I think what really drove the decision in this direction that was just preserving that that optionality of what we do with some of those repurposing options that we have.

There's a lot of production growth that we expect coming out of the out of the basin over the next three to five years, so that preserving that the value of.

Potential Seminole conversion for a later decision made drove us to make this decision.

Yeah. This is Tony I want to add something to that Teresa.

Between now and 2027.

<unk>.

Can you hear me.

Now in 2027, we estimate that liquids out of the Permian basin to grow about 1 million barrels a day.

If you look at what they've grown year to date and you can't find these numbers in anything because yes as reported.

May and any other commercial reporters do it if only reported through April we think Ngls have grown already a 125000 barrels a day of natural gas is about 900, maybe even a little more.

Those are big numbers, but I'll have to tell you that you've heard on these calls before it's what we're seeing on our systems.

You're seeing it in the basis marketing natural gas and Youre seeing it in our Fracs initiated our plans, which is the reason for this announcement this morning of customers backing all of that.

So get into putting some numbers behind what Justin said, that's how we see it.

Thank you and maybe.

As a follow up to that Tony.

Right.

For the basis for the fourth Baja basis, and indicating that we may face a dire situation for residue gas takeaway to your point about incremental Nat gas growth.

So if we do face a situation in the first half of 2023 can you remind us how much.

Incremental I think recovery you think is realistic out of the basin and in general how do you expect the industry to work through that.

Let's talk about basis first if you've watched the basis.

What do you watch it on ice are two brokers next summer has moved up to a modest $2. It wasn't long ago that that was modest dollar minus $1 20. So that tells you the pressure.

The producer community is seeing from just incremental supplies.

Relative to ethane.

Somebody.

How much ethane things being rejected in the Permian its I don't think of it.

It's probably somewhere around 200 250000 barrels a day.

On the month.

Well it means that wider basis.

Once you extract ethane because it is the Btu, yes sure absolutely everything.

Everything you can.

To get your gas out because you're protecting your oil barrels.

But they're not critical situation for NGL pipelines, and so thats, how the market will balance.

Theresa Thank you.

To your question yes.

Yes.

Thank you. Our next question comes from the line of coastal <unk>.

TP HC.

Go ahead your line is open.

Good morning, it looks like total spend increased by about 900 million or so between 2022 and 'twenty three.

Okay.

I'll take the first part of that and then I'll, let Graham handle as far as what we're seeing.

As far as any cost creep on existing projects, but what.

What we had said earlier was call it $1 $5 billion or so of growth projects for 2023 and <unk>.

Now we've seen that grow to about $2 billion and that's really just reflective of some of these project announcements that we had this morning.

<unk>.

No.

In terms of the project cost increases we are seeing some increases, particularly the latter half of.

The year I think we were pretty solid earlier in the earlier in the year.

We've seen that causes cost increases anywhere from 10% to 15% depending on the type of material used in the project. We are starting to see some softening in some markets, particularly particularly.

Particularly steel seems to be turning around although labor markets youre going to still be still be strong and have some upward pressure on cost as we go forward into 2023.

As far as budget and status of our largest.

As far as as far as PVH PVH too.

<unk> on track.

On time on budget all of our cost are effectively locked in at the time, we did that did that project. So we don't really see any escalation on PTH too.

And then maybe Randy just to clarify on the approved projects specifically after 2023 going from something that maybe close to $1 billion.

Maybe closer to $108 nine today that accurate.

We were estimating I think.

Back at our Investor Day back in March we said that our expectation was that.

Growth Capex would be in the one $5 billion to $2 billion area.

<unk>.

And then again some of that was going to move from they were projects under development.

And now you are just coming in and seeing some of those projects being announced.

Understood.

Maybe shifting over to Frac margins and I think Q4, and Q1 had a pretty significant increase looks like you all reported nearly five cents a gallon in that this quarter had a bit of a pullback closer to Q3 levels.

I guess just moving forward do you characterize Q2 as more indicative of what Youre looking at in the back half of the year. It could we see a bit of a rebound there.

And are you really say in natural gas processing margins. What you revise you specifically on the fractionation fleet I think you guys reported 201 or so for this quarter and fractionation specifically.

And I think Q4, and Q1 had a pretty pretty impressive margins there on a unit basis. So just looking at your unit margins for fractionation, specifically not not frac spread on the processing side.

Who wants to take that second one target.

Yes. This is <unk> I think on a go forward basis for the remainder of this year I think it looks more like this last quarter.

Things have happened.

Power costs have gone up and also.

The blending that the Fracs is also compressed.

I think Q4 and Q1 were <unk>.

Higher than normal.

Okay and on the on the power side is most of that pass through where you are retaining some of that exposure on at the EBIT level.

It's sort of a pass through.

We have a little bit of exposure to it.

And then just how much we have hedged relative to that exposure as well.

Got it I appreciate that.

Thank you. Our next question comes from the line of Chase Mulvehill from Bank of America Securities. Your line is open.

Hey.

This may have been me.

Good morning, everybody.

So I guess thinking.

Thinking about <unk> and the natural gas processing and NGL marketing business, obviously, you inherited a lot more commodity exposure when you acquired an albatross.

So really I guess, maybe a couple of questions around this is really kind of one I don't know if you can kind of help us understand the commodity sensitivities within the natural gas processing and NGL marketing business.

Then also talk a little bit about the Wahhab basis, I think somebody mentioned it earlier.

But have you hedged that do you have a lot of risk around that I mean, so just kind of help us understand whatever risk you may or may not have.

Wahhab basis does blow out at some point next year.

Okay.

Jeff This is Jim.

One of the reasons, we bought <unk>.

Frankly, we wanted that commodity exposure given our.

Fairly bullish sentiment.

<unk>.

What was the other part of the question.

I think the only place.

Looking at <unk>.

Well our basis home exposure do we have.

We probably have.

300 million a day of exposure.

That's on purpose and I don't think we've hedged any of that I'm aware of.

Yeah.

Okay Alright.

Unrelated follow up there's a lot of talk on the call today about retiring debt.

And obviously interest rates continue to move higher.

So when we think about your target is three 5% leverage ratio.

Is there is there.

Any chance that you think about lowering that at some point if interest rates continue to kind of rise over the next year or two.

And the average life was 21 years, so our exposure to.

Floating debt and increased interest costs are are really really low.

When preparing for this environment for a dozen years.

Okay, Alright, perfect I'll turn it back over thanks, everybody.

Okay.

Thank you for your next question.

Our next question comes from the line of Gene and sounds very from Bernstein. Your line is open.

Hey, good morning, I, just have one and year to date.

<unk> crude pipes to corpus has been flying at very high utilization.

Higher than that is going to Houston can you comment on the drivers of this and if you expect this to kind of stay around until the Houston ship channel has expanded or maybe spot.

Jean Ann this is Brad.

I think theres been a lot more crude exports from corpus.

That's starting to change but.

It's a function of the pipeline capacity, that's pointed that direction minus the local demand there and everything else is going to head to the water. It's a function of the pipeline capacity, that's pointed that direction minus the local demand there and everything else is going to head to the water.

They can load larger ships than us that can do it at higher rates.

<unk> seen some flows change is linked to west sort of started up as more barrels were pointed toward Houston social pointed towards Houston.

Theyre, taking pumps and pipes in corpus are taken from others, but ultimately I think one's spot goes forward that will change the flow patterns for crude oil are sports.

Great. Thanks, that's all for me.

Thank you Omar for next question.

Our next question comes from the line of Neal Dingmann from choice. Your line is open.

Good morning. This is Danny <unk> on in for Neal Dingmann.

First question, maybe it might be too simplistic, but why not just buy.

Units back given the.

Current roughly.

7.13% yield versus your filing this morning, suggesting.

Mary Jensen.

The notes that at roughly 6% yield.

Yes, it's really just taken a balanced approach I mean, we're coming in and the way. We're thinking about it is we are redeeming $350 million of debt more redeeming $350 million of our common units.

So coming in and redeeming $350 million of the hybrids is not a levering event.

We're buying the units back is a levering event, but again, it's still all of the above balanced approach.

Okay, great great. Thank you and then separately.

Thank you on my next question.

Our next question comes from the line of Michael Blum from Wells Fargo. Your line is open.

Thank you and good morning, everyone.

I just wanted to just put a finer point on the discussion around the distribution. So clearly if you look at the last I think at least two years maybe longer.

Don one increase in the fourth quarter. Obviously, this is sort of a new or out of pattern. So just wanted to understand is this a new pattern or is this a one time event as a step change in growth rate I, just want to make sure I understand that better.

Yes.

Michael.

The board comes in and takes a look at the distribution rate every quarter.

I want to say, we went through a period call. It 2017.

2021, where we're really our 2020 really where we were coming in and trying to make a shift in our financial model and the old model was where you finance.

A substantial amount of your.

Growth capital expenditures in.

In the capital markets.

With a pretty good reliance on the equity capital markets.

The pivot that we began to make in 2017 was to come in and be more self sufficient and coming in and funding our growth capital investments and so that was we were more deliberate on distribution growth and I think thats paid off.

This year I think one of the differences in this year.

And then we work through the pandemic to pandemic question, Mark, but the business has performed very well.

We came in earlier this year and.

Made into attractive acquisition and that we talked about that being accretive so that provided us an opportunity to come in and boost the.

Mid year.

The increase in the distribution and in light of what was going on from an inflation standpoint, we thought it makes sense to do.

Mid year boost.

I don't know if this is necessarily going to change what we do go going forward, but we take a look at it every quarter, but we thought it was appropriate.

This quarter to go ahead, and do a mid year bump.

Okay, great that makes sense thanks for that.

Also just one had kind of a macro question Jimmy now in your opening comments you.

You referenced inflation higher interest rates higher commodity prices. My question is are you seeing any signs of weakness in demand across your business segments.

Due to these factors I know that's kind of like a open ended question, but I'm basically just kind of probing to see if we're seeing any signs of economic weakness there.

Tony I was with some <unk>.

Customer last mile.

It has a number of convenience stores and is read as in.

They've got more I've got more data than you can say grace over and is right. We would say it wasn't seeing that much you've seen some but not much after that.

Service station Donnie Yeah. If you look at the data, it's Yo Yo did a little bit.

We're down a small amount call it 5%, but when you when you listen to scrub called that was about a million barrels, but when you listen to the calls for somebody like Valero and PBF.

They are there definitive that wholesale demand issue right.

Just for diesel for gasoline to some kind of reflected in the crack spread and it is kind of reflected in the crack spread.

You see some weakness in some of the olefins markets.

That's the lien is overproduced now and those plants are.

Economic run cuts you see.

PVH is going down in China, but I would tell you the flip side to that for enterprise and Brent tell me, if I'm wrong, but if we don't export ethylene we're going to export ethane.

And for our ethane terminal has been phenomenal.

Record numbers, especially.

<unk>.

This month and I think what we'll see going forward if you looked across.

Our ethane exports.

Did a record number in July .

Across our LPG dock, it's incredibly strong we talked about crude exports, but.

On the export docks, it's really picked up the last couple of months Michael.

Also this is Jim Tony spoke to over producing ethylene that hurts the merchant player.

Integrated is still making money ethane to polyethylene.

You know Michael the World is short <unk> and a good way for the world and because of the natural gas situation a good way for them to get more Mb to use as an ethane propane and butane. So it's just the facts.

Great. Thanks for all that I appreciate it.

Thank you Omar and for our next question.

Our next question comes from the line of Keith Stanley from Wolfe Research. Your line is open.

Hi, Good morning, I had two questions on the good results with the second quarter.

First on NGL marketing it was it was up about $50 million Q2 versus Q1.

Pretty high number I, usually think of NGL marketing is a little weaker seasonally in Q2, so anything in particular driving the strength in marketing there.

One of the things is a lot of what marketing does is fixed fee.

All of the exports I think Brendan.

LPG.

Those contracts are held by marketing I'm not sure about ethane I think those are two.

And I am not sure about ethylene Chris is that held about marketing.

Okay.

You look at some of the structural things that were going on in the market between first quarter and second quarter.

Especially on the NGL side.

For the second quarter was so strong.

Okay.

And then <unk>.

Question on processing, so obviously, a very strong Q2 number there.

Headline Frac spreads, which you usually look at for enterprise, where we're down in Q2.

So not sure if theres a lag effect there or is it just navi toss us more.

And Youre just seeing so much strength there.

Kind of overwhelming.

And bringing processing.

Yes, Keith I think part of it is we only had <unk> from February 22nd or so in the first quarter.

And then we got a full contribution from from northern pass in the second quarter, but it does have a fee base floor.

Ballpark I want to say from a commodity.

Got it thank you.

Victor we have time for one more question. Please.

Our last question one moment.

Our last question comes from the line of each sale.

Asset management your line is open.

Steve Your line is open.

He might be on mute.

Okay.

All right, we'll go to the next person.

Our next question comes from the line of Michael <unk> from Goldman Sachs. Your line is open.

Hey, guys congrats on a good quarter and thank you for taking my question a.

A longer term one when I think about the asset portfolio.

You are the big dominant player in crude and NGL exports one of the places where you're not involved in the LNG business.

Just curious is that simply due to that fact that others moved much quicker than you guys.

Because you don't think its an attractive business.

Or is it just the valuation and call just curious about how you think about longer term your role in kind of the export of natural gas in the U S or from Nila.

And Carl will be focused on crude petrochemicals and natural gas liquids.

Monthly I think.

If anything we missed the boat on LNG.

Yes.

And.

On the on the quicker part I don't know about the quicker part I think that was.

On election that we made and if we sort of go back in the history books.

It was really LNG imports and we were not a believer in LNG imports.

<unk>.

We just felt like the U S was going to have a good resource basin.

U S LNG would be the first one to turn off as far as imports and it was really the importers.

That really became the exporters when their import business models fell apart.

And they had first mover advantage to come in and convert.

LNG exporters and when they were there because they already had.

Capital and they already had some equipment. So it was very easy for them to come in and do conversions. So really it was or not being involved in the LNG imports that too.

To a degree put us at a disadvantage compared to those incumbents.

Yes.

We are involved in delivering delivering gas to two export facilities.

This lateral and I think if I'm not mistaken horror our expansion will be empty capability.

Got it.

We love our position.

We love our position exporting Ngls crude oil and petrochemicals and not what I said in my script. We're exporting just over 2 million barrels a day, that's not too bad.

Okay.

Thank you were ready to in the call and so with that the company will sign offs and we'd like to thank everybody for joining us and Victor if you would give our participants the replay information.

Thank you.

Awesome. Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Have a great day.

Q2 2022 Enterprise Products Partners LP Earnings Call

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