Q4 2022 Enterprise Products Partners LP Earnings Call

February 1, 2023

The conference will begin shortly to raising Malawi Johan during Q&A, you can dial star one one.

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The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.

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Yeah.

Okay.

Good day, and thank you for standing by.

Welcome to the Q4 2022 enterprise products Partners L. P earnings conference call.

All participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one one on your telephone.

You will then hear an automated message advising your hand is raised.

Withdraw your question. Please press star one one again.

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

It is now my pleasure to introduce vice President of Investor Relations Randy Burkhalter.

Thank you Andrew.

Good morning, everyone and welcome to the Enterprise products Partners conference call to discuss fourth quarter 'twenty two earnings our speakers today will be co chief executive officers of Enterprise's General partner, Jim Teague and Randy Fowler.

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

During this call we will make forward looking statements within the meaning of section 21 E.

And 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 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 GMT.

Thank you Randy.

At our analyst meeting last year, we ended the meeting with all senior management, including Miranda onto the front to take questions.

Becca Followill at the time with U S capital Advisors ask me, what I would like to see in our future.

My answer was I was tired debates I would like to see a man, meaning that I was tired of our adjusted EBITDA starting with an eight.

I'd like to see it start with non.

Some folks took that as guidance, which it wasn't.

At the time I didn't think was possible.

Once we return to the office I was visiting with tug Hanley kicking around the idea of creating a company wide goal of Atlanta.

Doug said lets call. It project nine so it was immediately appointed chairman of the project initiatives.

That was doing about 12, others to lead the effort one of whom Rick Riney.

Implemented an internal communications campaign.

And maintain our focus on project.

Without the year with a poster themed around the starship enterprise.

<unk> that we can boldly go where enterprises never gone before.

Tug Hanley bet on Ganja group ban and Daniel Boss introduced the initiative.

Companywide webcast.

Starship enterprise posters were sent to locations throughout the company.

Glass was if we made $9 million adjusted EBITDA every.

Every employee up to and including senior directors would receive 3000.

And if we exceeded nine three they would receive 5000.

It was made clear that there would be no safety shortcuts and.

Very proud to report today that our core values for safety were reinforced in 'twenty two.

With another year of our best year ever for safety performance.

The 303 total recordable incident rate.

Also we had zero lost time injuries, and our trucking division, where they logged something around 20 million miles for the year.

We also emphasize that to achieve project and we would not defer maintenance.

Pipeline integrity, mechanical inter integrity or anything we would ordinarily do in other words, no smoke and mirrors.

Our message was that no matter your job you can always do it better.

Through Webcasts town halls, and safety meetings, we encouraged our employees to come up with ideas that would help real realized SaaS a project that we.

We ask them to share ideas and success stories.

We received almost 200 success stories that resulted in something around $280 million toward project NAND success, a couple of examples as we maximized MTBE production.

Blending nice lead arena.

And to the ether Max increasing MTBE production by a couple of thousand barrels a day.

Distribution operations commercial and our big data group.

Work to find a way to adjust fractionation set points.

Kris throughput at our Mont Belvieu complex.

Project nine Gabe every enterprise employee common go to boldly go where enterprises never gone before.

There are folks that listen in on this call and there is a number of these.

Through your hard work creativity, finding ways to do your job better and teamwork, we made nine $309 billion.

Adjusted EBITDA.

Every employee up to and including seeing senior director.

We received a $5000.

We had so much fun with this we decided we're going to have project nine three for 2023.

Again don't take it as guidance as nothing is automatic but especially in this environment.

As to numbers, we generated $7 8 billion of distributable cash flow in 2022 compared to $6 6 billion.

In 'twenty, one providing one nine times coverage, we retained three 6 billion in DCF, which compares to $2 6 billion. In 2021, you said 13 financial Records in 10 operating records in 2012 operating results record results included record.

Pipeline transportation.

And export total NGL Marine terminal volumes fee based natural gas processing and natural gas pipeline transportation in our petrochemical sector, we set operating records in propylene production.

<unk> processing and octane enhancement and barrels of oil equivalent per day enterprise transported a record $11 2 million barrels a day of oil equivalent equivalent in 2022.

Major growth capital and 23 in addition to our second PVH, we have for gas processing plants under construction in the Permian.

We are constructing our <unk> fractionator and Chambers County, and we have expansions in both ethane and ethylene export facility.

2022 was another volatile year with crude trading as high as 120 and as low as 17.

Nymex natural gas traded between $9 50 and.

And $3 50.

Natural gas liquids also was no stranger to volatility.

<unk> traded between 70 cents, a gallon and 25 cents, a gallon and propane traded between $1 60 and 60.

For 2023, we are constructive on crude oil, but that's much less well natural gas.

Hawaii gas to crude spread should lead to U S petrochemicals, having a very large cost advantage globally.

On the on the supply side to start with the fact that volumes from the strategic Petroleum reserve provided a whopping 240 million barrels slug of supplies and to go global markets. Most of it from the U S. Those barrels are not going to be here in 2023.

China seems to be opened.

Estimates Chinese demand will be up by 1 million barrels a day to 16 million by June this accounts for one half of the expected global oil demand growth.

I also expect demand at a record of nearly a 102 million barrels a day this year.

Three fourths of the growth in non OECD countries, which is just fine with us.

Yes, we do have a nice real estate position Humber water.

One thing we believe there will be continued volatility in 2023, but our experiences volatility leads to opportunities with that I will turn it over to Randy.

Alright, Thank you Tim good morning, everyone.

Starting off with the income statement.

Fourth quarter net income attributable to common unit holders.

Was $1 $4 billion or 65 cents per common unit on a fully diluted basis. This compares to $1 billion or <unk> 47 per common unit for the fourth quarter of 2021.

Adjusted cash flow from operations, which is cash flow.

From operating activities before changes in working capital was $2 $1 billion for the fourth quarter of 2022. This was a 16% increase compared to $1 8 billion generated for the fourth quarter of.

2021.

We declared a distribution of <unk> 49 per common unit for the fourth quarter of 'twenty, two which is.

4% higher than the distribution declared for the fourth quarter of the prior year.

The distribution will be paid February 14th to common unit holders of record as of close of business on January 31.

We will evaluate another increase in the distribution mid year in 2023.

During the fourth quarter, we repurchased approximately $4 9 million common units at a cost of $120 million for the entire year, we purchased a total of 10.

3 million common units for $250 million. In addition on a combined basis, our dividend reinvestment plan and employee unit purchase plan purchased one 7 million and $6 4 million common units during the fourth quarter and for the full.

Euro 2022, respectively.

For 2022, we paid approximately $4 1 billion of distributions to limited partners.

Together with our buybacks for 2022 enterprises payout ratio of adjusted cash flow from operations was 54% and our payout ratio of adjusted free cash flow was 71%. If you exclude the $3 $2 billion investment in the acquisition Avatar.

Midstream.

Now turning to.

Capital investments total capital investments in the fourth quarter of 2022 were 763 million, which included $465 million for organic growth capital projects $160 million for purchases of pipelines and related assets and 138.

Sustaining capital expenditures.

During the quarter, we purchased approximately 580 miles of existing pipeline and related assets that enables us to cost effectively optimize and expand our NGL and petrochemical pipeline system on the upper Texas Gulf Coast.

Total capital expenditures in 2022 or $5 $2 billion, which included $3 4 billion for the acquisition of <unk> and the purchase of the 580 miles of pipelines.

One $4 billion for investment in organic growth capital expenditures and $372 million of sustaining capex.

Last quarter, we had estimated $1 6 billion of organic growth capital investments in 2022, however, approximately $200 million of this investment slipped into 2023.

Our major growth capital projects under construction grew from $5 $5 billion last quarter to five $8 billion for the additional 300 million.

Our projects under construction are really attributable to expansions in the scope of our new ethane ethylene export facility.

And Debottlenecking gathering systems in the Permian.

As a result of the $200 million of Capex slipping from 2022 into 2023.

The above additional opportunities in the Permian. We currently expect our 2023 growth capital expenditures to be approximately in the range of two three to $2 $5 billion and sustaining capital expenditures are expected to be approximately $400 million.

Our total debt principal outstanding was $28 6 billion as of December 31, 2022. During 2022, we reduced the principal amount of our debt outstanding by $1 $3 billion, assuming the final maturity date of our hybrids the weighted average life of our debt portfolio is approximately.

<unk> 20 years, our weighted average cost of debt is four 5% and.

And at December 31, approximately 96% of our debt was fixed rate Arkansas.

Our consolidated liquidity was approximately $4 $1 billion at year end and this includes availability under our credit facilities and unrestricted cash on hand.

In January we issued $1 75 billion of senior notes comprised of $750 million of three year notes at a coupon of 5.05% and $1 billion of 10 year notes at a 535% coupon. We are appreciative of the strong continued support of our debt <unk>.

<unk>.

And this offering we do not expect to return to the capital markets in 2023.

Adjusted EBITDA was $9 3 billion.

For 2022.

And our consolidated leverage ratio was two nine times on a net basis after adjusting debt for the partial equity treatment of our hybrid debt and also reducing by the partnership's unrestricted cash on hand.

As Jim noted in the earnings release, we expect to achieve a major financial milestone in 2023 that is 25 consecutive years of distribution growth.

As we looked at the financial attributes of the 65 companies that comprise the dividend aristocrats. These are the bluest of the blue chips. Some have over 60 consecutive years of dividend growth.

The overwhelming majority had debt to EBITDA leverage ratios of less than three times, three <unk> times and almost half were below two times.

To support our financial goals to responsibly grow the partnership and provide our limited partners with a growing and resilient stream of cash distributions over the long term. We believe we have entered into a new era.

Which it is wise to have a stronger balance sheet than historical norms in the energy industry.

We are seeing our customers in the E&P refining and petrochemical sector do likewise.

As a result, we are lowering our target.

Leverage ratio.

From three five times to 3.0 times, plus or minus a quarter of a turn.

That is a range from 275 times to 325 times and as we noted earlier our leverage for 2022. We ended at two nine times. So we're in good shape with regard to this new target.

We would be willing to temporarily take our leverage ratio above this target zone, if necessary to complete an acquisition or an organic growth project that is strategic to the partnership. We believe this lower leverage target will be welcomed by our long term oriented investors, who value distribution growth and stability we are.

Also believe as more generalist investors consider income producing investments in infrastructure. The combination of enterprises avoidance of double taxation and our history of distribution growth coverage and lower leverage will make apd attractive and.

They also start to consider <unk> among the blue chips with that Randy I think we can open it up for questions. Thank you Randy Andrew we are ready to take questions from our participants I'd like to remind everyone to please limit your questions to one question and one follow up. Thank you go ahead, Andrew certainly as a reminder to ask a question.

Please press star one one on your telephone and wait for your name to be announced.

Draw. Your question. Please press Star one one again please.

Standby, while we compile the Q&A roster.

And our first question comes from the line of TJ Schultz with RBC capital markets.

Great Good morning, everybody.

First question just on the 580 miles of pipeline and related assets that you purchased last quarter. It seems like a good price paid for that if you could just provide some.

And more color on what you were able to purchase how those assets will be integrated into your <unk>.

And if there is any capex allocated to that in 2023 that may be driving part of the.

Higher growth capital Chris.

Kristen Zac.

I guess first off this is Chris Dan on the capital.

<unk> increase or what hasn't increased as a result of that.

Secondly that these pipelines.

And a valuable corridor, which is going to allow us to optimize both our NGL business and our pet Chem business and provide other opportunities.

Yeah.

This is Jack.

On the NGL side I think.

Look at the price, we paid versus the optionality of that.

This is describing I think it made sense for us.

Let me say a few capital Chris on one of your projects.

Yes, it also save some.

The other projects fairly small capital it saved us.

Pretty significant amount of capital in that project.

Okay great.

I guess the follow up just a general question on capital allocation.

Clearly continuing to maintain plenty of flexibility.

A strong balance sheet with target debt leverage.

Sure and you're already sit there so.

Yes.

Trying to see and do you anticipate any shift to more guests.

Distribution growth is there any more intent on finding some of these acquisition opportunities like you did on the upper Gulf coast or.

How do you share buybacks fallen there thanks.

Yes.

Jay.

Yes, I think.

Between <unk> avatars to deal and then these two deals that we did at the end of.

2022.

We are interested in.

Asset acquisition opportunities that make sense that can come in and bolt on to our system and get good returns on capital that way.

That's where the lower leverage gives us flexibility to come in and do these cash.

Cash transactions.

To do that I think over the last.

Call. It the last 18 months we've shown.

We've sort of completed that pivot to go from an externally funded model to an internally funded model and we had slowed distribution growth there for about three years or so and over the last call. It 18 months, we've taken that distribution growth back up to about 5% area.

So we have increased the pace of distributions and then the buybacks. We continue to do that Opportunistically. So we feel like we're in good shape to execute on opportunities that come to us.

In 2023 2024.

So we feel like we're sort of checking the box of returning capital in all of the above and also maintaining lower leverage at the same time.

Thank you.

And our next question comes from the line of Colton Bean with Tpa <unk> company.

Good morning, So just on project 93, I appreciate the distinction that its an internal goal and not guidance, but two questions there.

First for Jim has the team ever missed an internal goal and then secondly.

Yeah.

Sure.

I don't see any.

Level comments as to how you achieve that mark it seems like commodity margins may be a bit of a headwind, but then you have some sizable projects entering service throughout the year.

I don't think we've ever set a goal like this before.

The bank Apollo well far beyond the catalyst to it.

We achieved it through everybody doing what they're supposed to be doing an attention to detail our employees worked their butts off the desk.

And frankly, it created a lot of excitement you had those posters up effort, where you'd go within enterprise and Warner truck drivers asking you how we do it on project not in you know you've got.

You've got some excitement.

Project 93, we figured I can nine three.

2022 was quite an achievement so we'd use that to start.

2023.

And I don't remember the last time, we missed on our internal goals.

You just guaranteed guidance.

Yeah.

Alright, and then maybe just a couple of questions on processing. So I think first the Midland assets were down about $50 million versus Q3.

Any indication as to whether we're at or closer to the fee floors for <unk> now and then second keep hold pretty strong margins. Despite very high Rockies gas prices. So just.

Curious if that was hedge related or any other comments there.

Natalie can you answer that.

Yes, Colton I'll do my best.

Midland down slightly and volume.

Remember there was a.

I'll call. It a Christmas winter event, where there were some production loss in the sale just a little bit there was a little bit longer to get produces a longer to get back up around that time.

<unk> kept the Rockies out to be quite honest high a high gas prices are pretty good so I would watch out for the Rockies.

We've hit the peak for maybe once or twice.

<unk> has been really also so.

Processing margins.

And a little bit, but there are some offsets or some headwind or tailwind that come from that.

Got it so it sounds like on the Rockies the higher priced concerning drilling activity may be offsetting that.

Replacement costs, there for the keep whole contracts.

Yeah, that's a fair assessment.

Thank you.

And our next question comes from the line of Harry Mateer with Barclays.

Hey, good morning, guys.

Randy follow up follow up question on the on the new leverage target. So historically.

The sense I've gotten from you is that you prefer the flexibility of being in the trophy ratings category.

But.

Our leverage policy as a policy so.

For the question.

Given the rating agency upgrade targets are generally around three times up into low single as is that something you guys are now would be.

Open to and potentially welcome.

Yes.

I'm sorry.

This one over to Chris.

Thanks Randy.

I appreciate the question from our perspective.

Despite the lower leverage target, we are still very comfortable at a high triple B rating.

From our standpoint, what we don't want to do is have the agencies upgrade is two and a minus in that.

Moves the flexibility for us to be.

Aggressive when it comes to external M&A opportunities because what we don't want to do is whipsaw, the fixed income investor from a high triple from a excuse me a minus rating to a high triple B rating. So we want to maintain that consistency. So we're very comfortable maintaining.

The triple B plus rating across the three agencies.

And I think one other thing the agencies look at on that minus threshold is also looking at your cash distribution payout with with regard to net income and I think thats just because we've returned so much capital to our investors through distributions I think that may be a little bit harder through.

First overcome so as Chris said, we're pretty pleased with the triple B plus rating and ample flexibility.

Okay, Great and I guess the follow up to that is just any any sort of guardrails you can give us I know you mentioned you'd be comfortable taking leverage up higher for.

For opportunities but.

Any sense, you could like frame that out for us in terms of how.

Hi on a temporary basis over what sort of time period, if you look to bring leverage down.

Yes, Harry I'll be honest I can't envision a scenario, where we would come in and take leverage up to a level that would threaten our triple B plus rating.

And I think if you hurry.

Again. This is Chris if you look back a year ago to <unk> acquisition, I think within that first quarter.

That's $3 billion acquisition bumped leverage up.

A quarter of a turn.

And then it quickly came back down.

Got it alright very helpful. Thank you.

Thank you.

And our next question comes from the line of Jean Ann Salisbury with Bernstein.

Hi, Good morning, My first one is probably for Tony curious about your internal view as NGL pricing versus create and how long do you anticipate it will take if we ever get their return to the historical range of Ngls versus credit.

What's the historical range.

I guess what.

For propane I think historically, maybe 55% to 60% something like that.

Okay.

Propane is going to price itself to go.

No.

The end of the day, the international markets are going to decide that.

I'll, let bren weigh in but we think you'll see more activity out of China.

And.

So there is there is support for that number.

As we head into 'twenty three as I say I think there is.

Going to be some lag jinan.

I think China has got five PVH plants coming on this year.

The plants they have existing currently are not running at full capacity.

So as.

China reopening occurs.

It's just going to take some time to work off some of the inventories over there and once that economy gets back up and running.

Theres enough dock capacity.

In the U S.

You could potentially see a rebound in LPG.

China is going to take some time.

But you think that we're at the trough here.

I mean, assuming this reopening is.

Going to be consistent and Theres, no stops and starts and.

I would like to think that the trajectory is up on a percent of crude versus.

Thank you.

And then.

All of that Permian crude production estimates have come down.

Six months I would say pretty much across the board at the Midland to Houston price spread is kind of also come in.

Scott and mark difficult patch to customers in this environment.

Yeah.

But I think ultimately when you talk about spot and so like.

I think this is going to lay out as forecast for our Investor day in <unk>.

Still think when it comes to volume we have we have a bullish view of Permian volumes.

And then the question is do you believe in the U S. Producer do you think that volumes are going to increase specifically or the Permian basin.

And the next question is.

Do you believe that domestic demand is going to decline.

Then ultimately if you believe the crude production is coming online is going to have to find its way to Houston because for the most part just corpus pipes are full.

And then you've got to think about the most environmentally friendly the most efficient way and the most cost effective way to export those barrels to help them clear.

In terms of the timing on spot, but one that could potentially come online our conversations with customers. It's still frankly, a project with this market needs.

And we've had good conversations on.

We're in the process of.

A lot of meetings and a lot of trips, but I'd say overall, it's been positive.

Great. That's all for me. Thank you for taking my question.

Thank you.

And our next question comes from the line of Theresa Chen with Barclays.

Good morning, it's actually like to follow up on <unk> question related to spot.

As youre working through the process of getting.

In addition, all our other anchor shipper, how do you view the demand side of things and if you have like a demand basis.

Paul anchor shipper, because I believe a lot of the large refining complex is in Asia that were previously under contemplation or taking on credit congratulate Mort Urals at this point and that's that flow routes does that threaten the outlook for spot.

I think I think ultimately.

Talk about LPG should talk about LNG.

This barrels going to price to export and so from.

The routes that it takes.

May be different.

Probably at one point in time.

Theresa I would've thought that.

We would have seen more global type customers, but I do think.

There's going to be some producer push behind us I do think we're going to have potentially some traders involved with this project in terms of the advantages on freight the playing that game.

But I think our view on global crude demand is probably more aligned with Exxon and BP and we think that demand is going to be out there and it's going to be out there for a fairly long time and ultimately we think a lot of crude oil has to come from this country to satisfy that demand.

It's with our lighter barrels, it's really a perfect fit for the integration that you see now in the in the large refineries in Asia.

That are integrated with pet Chem operations.

I mean, if you look at the amount of Vlccs that are coming from the Gulf coast for North of 30, a month today.

There's a lot to share between markets between the corpus market and also the eastern market.

Number is going to go up.

Got it. Thank you and then shifting gears a bit can you just give us an update on your exposure to Baja basis.

And capacity on the Texas intrastate business.

And your outlook on that this year as well as the outlook for ethane economics versus protection from the Permian.

Yes.

The exposure Hasnt changed since our Investor day, So I think we're just probably shy of $401.

Natalie.

It has compressed over the last several months.

You go back to Tony's forecasts were still fairly bullish on volumes.

There has been a new pipeline that the.

Came back online.

Some compression, but ultimately we think it's going to be extremely volatile.

We do think ethane is going to have to price to be recovered out of the Permian basin.

If you look at that market, it's not a whole lot different than the LNG market the old gas infrastructure in the U S is very very fragile and when something happens out there.

A lot of volatility and I think we're going to embrace that volatility as we go forward.

Thank you.

And our next question comes from the line of.

Neel Mitra with Bank of America.

Your line is now open.

Hi can you hear me.

Yes, we can.

Okay great.

I wanted to touch on.

NGL fractionation.

Fees and volumes on a year over year basis.

It seems like the market is tighter just with Medford and a lack of frac coming online.

Until mid 2023.

Can you talk about the contributing factors outages.

What's driving fees and where you see the market right now.

This is <unk>.

So.

When Medford went down no doubt, we saw an increase in spot fractionation fees.

<unk>.

Had some cooler weather, which helps with the fractionator is run rates.

You also had Phillips come online with the fractionator, so we've seen that market kind of cool down.

We also see a lot of capacity coming online this year, which I think the market needs.

And then as far as our results.

Obviously I had some unplanned downtime.

We had the vast majority of the down quarter on quarter was due actually to commodity prices and blending.

And then some slightly slightly lower fees on average but.

Nearly as significant as the blending.

Going forward.

Really excited about Frac 12, I can say pretty confidently that frac.

<unk> full on day one.

Got it.

As a follow up.

Looking at the kind of the propylene markets right now.

That's that looks like the tough one with the PGP RVP spreads.

It looks like we're at the trough.

In Q4 can you kind of talk about how fast do you see that recovering and then.

In terms of PD HQ when it comes online.

How do you look at the volume outlook for for that in terms of like dispatch stack.

Once you have that online versus the fractionator and PTH one.

Hi, This is christina thank as far as the RG <unk> spread and we saw throughout last year that tightening a bit.

We've seen that widen out a little bit but first the first.

Month of the year and really it's more of a supply issue than demand and ultimately for that spread to remain wide, we need we need propylene derivative demand to be strong.

So China, China can play a part in that but we see that a little bit further out maybe second half of the year.

And.

A big part of that is direct.

Covid propylene goes into.

Durables and we saw that accelerate throughout COVID-19 the demand for those durable so.

It's probably second half of this year before we see that demand return.

What about polyethylene.

Polyethylene demand has strengthened quite a bit and talking to customers.

From where we were last year at the end of December .

Exports grew quite a bit in one of our customers told us that.

December was.

The highest month of polyethylene exports that they had seen in five years.

I guess just going back to your.

PTH two question.

PTH two is 100% subscribed so.

That's going to be.

Day, one full.

Okay great.

For the color.

Sure.

Thank you.

And our next question comes from the line of Jeremy Tonet with J P. Morgan.

Hi, good morning.

Got it.

It's been touched on a few different ways already but just wanted to bring it all together with regards to just economic conditions out there potential impending recession and.

And just wondering specifically as it relates to here.

Pet Chem business, how you see that bearing in this environment.

I think there's some concern in the marketplace on that so just wondering if you could walk us through the level of cash flow stability or other offsets that you see in there.

That business line also do you have any planned downtime for any of those facilities.

23.

Yes. This is Christina again, I guess are our pet Chem business is predominantly fee based.

Yes, what we saw last year was as spreads were wider than normal we were able to capture.

Because of the way we structure our contracts, we were able to capture part of that.

Looking for 'twenty, three we on our octane business, where about 75% hedged at a pretty good spread.

And then we expect it.

Sure.

The earnings for our propylene sputters and PVH to be pretty consistent.

Got it that's very helpful. Thanks, and maybe just one last one if I could as it relates to capital out there enterprise clearly has a fortress balance sheet relative to others in this space and it seems like you can afford to be opportunistic.

If the right opportunity comes.

How do you view the current I guess market out there as far as potentially acquiring assets private or what have you.

Is there anything any other part of the portfolio that you would look to kind of round out through M&A.

Given our position in the Midland Basin was important to us.

And it's proved to be.

Pretty successful I think.

Randy Fowler always says price matters.

And our price does matter I can't.

Yeah.

I think we're at a position right now that.

If there is anything out there it's got to be pretty damn strategic price get introduced.

Okay.

Got it I'll leave it there thanks.

Yeah.

Thank you.

And our next question comes from Michael Blum with Wells Fargo.

Yeah.

Thanks, Good morning, everyone.

Wanted to go back to natural gas for a moment.

With the exception, maybe putting the wahaha aside which I think we all understand can you maybe just talk through the puts and takes on how this lower natural gas.

Price environment will impact your business this year.

Yes.

No.

You said it Michael there is a lot of puts and takes.

Lower pricing, obviously affects our equity gas and that's probably around 100 million a day.

<unk>.

But if you look at our total gas burn and you equate to equate our power consumption.

And you want to call that natural gas.

To watch.

<unk>.

At different price levels, we get imbalanced in the higher price was probably some knock on benefits to us.

But theres a lot of pass throughs associated with this price.

That would be go.

While the equity gas at the highest number just wait and catch these low numbers, but we've run a fairly balanced portfolio.

There's not.

As Jim said, it's fairly balanced.

Okay.

Last thing I'll say Michael is that.

When you look at throughput and U S petrochemical industry and you look at low gas and high crude I mean, theres a lot of benefits for our pipeline system. Okay.

Okay got it.

Thanks for that.

Just had one other question really about distribution growth in 2023 and beyond really so you. Obviously you raised the rate of growth in 2022. So I'm just wondering is that a new.

Run rate is there a reasonable range to think about going forward and then.

Kind of related to that.

Are you going are you going to be going to like a one increase per year type of model.

Michael I guess, we did two increases in 2022.

We said, we will come in and take another look at it.

At the middle of this year.

Really don't want to come in and put out a marker.

Expected distribution growth is going to be it will come in and take a look at it mid year.

Certainly we pivoted off the the slower right that we saw there as we went from a internal funding.

External funding model to an internal funding model, so you've seen that.

The growth bounce back up into the 5% area.

And what will come in and evaluated.

As we do every quarter.

Alright, Thank you very much.

Thank you.

And our next question comes from the line of Brian rentals with UBS.

Hi, good morning, everyone.

We continue to hear discussions on higher <unk> in the Permian along with just continued discussion on parent child interactions I'm.

Curious if you could just discuss if youre seeing higher <unk> and higher parent child interaction that perhaps changing.

The upside on associated gas production in the Permian going forward, yes.

The answer is we are continuing to see higher <unk>.

Not surprising look put it simplistically oil declines faster than natural gas and shale basins. So.

We've modeled it.

And we projected in our projections relative to parent child I'll tell you, how we feel about it as a midstream company and watching all the rhetoric around it we think parent child is a good thing not a bad thing and producers are learning more and more every day about it.

And obviously producers are getting larger in scale.

We think when we redid the different rags that parent child is a bad thing it absolutely is a good thing. It's it's how you get the most out of the reservoir. So frankly, we don't sit up at night.

The producers and we see a lot of them.

And have a lot of talks with them in their conference room or things that we're doing with them.

I have to tell you I don't think any of the major producers are losing any sleep over it either.

Brent we dissipate.

Dead on.

Great I appreciate all that color.

Maybe to touch briefly on this future growth.

Projects post the quarterly results it seems like free cash flow profile is keeping pace with the recent rise in growth Capex.

Given slide six in the presentation is largely unchanged.

If you could provide a little color into what they were seeing new projects I E processing plants or our PVH III, perhaps in the future or is the rising capex really just a function of maybe upsizing of existing projects I E ethane exports or perhaps Shin oak.

Yes.

I think our ethane and ethylene export expansions are pretty key we see.

We're going to see a lot more demand for those products going forward, our ethylene export is chockablock full in.

Our ethane exports are growing so I like those were building four processing plants and.

In the Permian two in the Delaware two in the Midland Basin, and probably all have Zach streets, knocking on the door wanting to do the 14th fractionator, because we're not going to do 30.

So.

But on a lot of our projects there is a knock on effect.

That we get out of those projects so.

I can't think beyond where we are.

I would probably add in.

Also cost efficient debottlenecking in the gathering.

We just picked up 580 miles of pipe how much money.

160 $160 million in really key corridors.

Kind of bolt on deals we will do all day long.

As to PVH three.

I'll throw Christiana Adama opposite walks in with PVH.

Okay.

And as one astute analyst put it.

It takes money to make money.

Great.

I'll leave it that makes sense.

Thanks.

Thank you.

And our next.

Question comes from the line of Neal Dingmann with truest.

Good morning, guys. Thanks for the time, Mike. My question is also on the petrochemical refined segment, specifically could you give me an idea of whether the your sales volume expectations remainder of the year for your Chambers County propylene facility any more downtime expected there and then maybe secondly, just is that PVH two facility in Texas Western.

System is still on pace for next quarter and later this year respectively.

I think.

I think Texas Western is toward the end of the year Grant.

Come on in stages.

Okay.

Okay, and PVH to us mid year, yes.

Thank you.

Yes, and just in terms of.

Of sales, we expect those to be pretty stable its really.

A function of refinery grade propylene supply coming out of the refineries and what they run rates are and so looking at looking at <unk> today.

Its pretty profitable for them to run so I would expect that to continue.

Sounds good thanks Frank.

Thank you one moment please.

And our next question comes from the line of John Mccain with Goldman Sachs.

Hey, everyone. Thanks for the time, maybe just going back to the Permian I guess theres a bit of a debate last quarter on just the pace of growth going forward.

Shin oak kind of pushed to the right fell out of that I guess just be curious if you could update us there on again when you think.

Sure now it might be needed and now you have the early 25 in the deck, but maybe just puts and takes on that timing in your general view on kind of NGL growth beyond this year out of the Permian.

Yes. This is Justin Clare I'll speak to timing I think we still feel good about that first half of 'twenty five there's probably room for it to be accelerated given its two years from now.

And in the meantime, we've got we've got various amounts of options to create incremental capacity if it.

That first half 'twenty five doesn't prove early enough and we can accelerate it. So we feel good at least for the next couple of years. So we've got enough capacity and then beyond that we'll continue to evaluate what what projects are needed to make sure that we have enough capacity to onboard.

Relative to normal.

Relative to Permian production on just everybody knows the EIA reported yesterday growth in crude from year end.

20, <unk> to two <unk>.

November of 741000 barrels that was down from what they reported in October .

So I know that we hear different things and everybody looks at their own acreage in any capture one numbers, but.

Sure.

For lack of a better term needs are what the EIA calls actuals, we go back and we we.

Gage our numbers to them. So we take a look back in our own models.

Directionally these numbers are correct.

And.

Almost all of it.

I'll use that term loosely but comes out of the Permian basin has liquids associated with it.

No change in the trend for us relative to what the production profile out of the Permian Basin.

I appreciate that thanks for that.

One quick one should be easy pay just remind us or are we done with the Eagle Ford contract roll offs, and maybe give me an.

Date on what Youre thinking about it based on overall.

We had a major producer tell us were in the second inning of a nine inning game in the Eagle Ford.

<unk>.

The Permian just kind of dwarfs everything.

We are we.

We had some our contracts and the ones. We did have some roll off but we renegotiated a lot of those and ended up with a life of lease dedications, which.

We kind of like it seems like its becoming I asked Tony is becoming kind of like the haynesville, It's regional players.

And Thats, where they are and thats, where theyre going to drill, but we havent forgotten by a long shot.

And our assets remain very full in the Eagle Ford.

Be a fair statement.

Emily.

Yes, so processing certainly much smaller than the last two years for sure <unk> got capacity, but the contract roll offs are over I would like to thank everything that we add incrementally it's going to be beneficial.

From a profitability standpoint.

Okay.

That's great appreciate the time with us.

Okay. Andrew This is Randy I think our time is up for today and so just wanted to thank all our participants for joining us for our call.

And with that we will be terminating our ending the call and thank you.

Good day.

<unk>.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.

The conference will begin shortly to raise and lower Johan during Q&A you can dial one one.

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Good day and thank you for standing by welcome to the Q4 2022 Enterprise products Partners LP earnings Conference call.

All participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Ask a question during this session you will need to press star one one on your telephone you will.

Then here an automated message advising your hand is raised to withdraw your question. Please press star one one again please.

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

It is now my pleasure to introduce vice President of Investor Relations Randy Burkhalter.

Thank you Andrew.

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

During this call we will make forward looking statements within the meaning of section 21 E.

And 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 be correct.

Thank you Randy.

In our analyst meeting last year, we ended the meeting with all senior management, including Miranda onto the front to take questions.

Becca Followill at the time with U S capital Advisors ask me, what I would like to see it in our future.

My answer was I was tired debates I would like to see a man, meaning that I was tired of our adjusted EBITDA starting more than eight I would like to see it start with and then some folks took that as guidance, which it wasn't as at the time I didn't think was possible.

Once we return to the office I was visiting with tug Hanley kicking around the idea of creating a company wide goal of Atlanta.

Doug said lets call. It project nine so it was immediately appointed chairman of the projects and initiatives.

Doug was doing by 12, others to lead the effort one of whom Rick rainy.

Implemented an internal communications campaign.

And maintain our focus on project.

Out the year with a poster themed around the starship enterprise.

<unk> that we can boldly go where enterprises never gone before.

Annually.

<unk> group and Daniel Boss introduced the initiative.

Companywide webcast.

Starship enterprise posters were sent to locations throughout the company.

Glass, whereas if we made $9 million adjusted EBITDA every.

Every employee up to and including senior directors would receive 3000.

If we exceeded nine three they would receive 5000.

It was made clear that there would be no safety shortcuts and.

Very proud to report today that our core values safety were reinforced in 'twenty two with another year of above our best year ever for safety.

Formats, where the 303 total recordable incident rate.

Also we had zero lost time injuries, and our trucking division, where they load something around 20 million miles for the year.

We also emphasize that to achieve project and we would not defer maintenance.

Pipeline integrity, mechanical inter integrity or anything we would ordinarily do in other words, no smoke and mirrors.

Our message was that no matter your job you can always do it better.

Through Webcasts town halls and safety.

We encouraged our employees to come up with ideas that would help real realized SaaS a project.

We ask them to sheer ideas and success stories.

We received almost 200 success stories that.

Resulted in something around $280 million towards project NAND success, a couple of examples as we maximized MTBE production.

Blending lead arena.

And to the ether Max increasing MTBE production by a couple of thousand barrels a day.

Distribution operations commercial and our big data group.

Work to find a way to adjust fractionation said points.

Kris throughput at our Mont Belvieu complex.

Project nine Gabe every enterprise employee common go to boldly go where enterprise has never gone before.

There are folks that listen in on this call when there is a number.

Through your hard work creativity, finding ways to do your job better and teamwork, we made $9 $309 billion.

Adjusted EBITDA.

Every employee up to and including seeing senior director will be receiving $5000.

We had so much fun with this we decided.

We're going to have project nine three for 2023.

Again don't take it as guidance.

Nothing is automatic especially in this environment.

As the numbers, we generated $7 8 billion of distributable cash flow in 2020 days compared to $6 6 billion.

In 'twenty, one providing one nine times coverage, we retained three 6 billion in DCF, which compares to $2 6 billion. In 2021, We said 13 financial Records and operating records in 'twenty two.

Operating results record results included records and NGL pipeline transportation ethane export total NGL Marine terminal volumes fee based natural gas processing and natural gas pipeline transportation.

Petrochemical sector, we set operating records in propylene production.

<unk> processing and octane enhancement and barrels of oil equivalent per day enterprise transported a record $11 2 million barrels a day of oil equivalent equivalent in 2022.

The major growth capital and 23 in addition to our second PTH, we have for gas processing plants under construction in the Permian.

We are constructing our <unk> fractionator and Chambers County, and we have expansions in both ethane and ethylene export facility.

2022 was another volatile year with crude trading as high as 120 and as low as 17.

Nymex natural gas traded between $9 50.

And $3 50.

Natural gas liquids also was no stranger to volatility.

<unk> traded between 70 cents, a gallon and 25 cents, a gallon and propane traded between $1 60 and 60.

For 2023 were constructive on crude oil.

That's much less well natural gas.

Wide gas to crude spread should lead to U S petrochemicals, having a very large cost advantage globally.

On the on the supply side to start with the fact that volumes from the strategic Petroleum reserve.

Not at a whopping 240 million barrels slug of supplies and to go global markets. Most of it from the U S. Those barrels are not going to be here in 2023.

China seems to be opened.

Estimates Chinese demand will be up about 1 million barrels a day to 16 million by June this accounts for one half of the expected global oil demand growth.

I also expect demand hit a record of nearly a 102 million barrels a day this year.

Three fourths of the growth in non OECD countries, which is just fine with us.

Yes, we do have a nice real estate position Humber Lauder.

One thing we believe there will be continued volatility in 2023, but our experiences volatility leads to opportunities with that I will turn it over to Ron.

Alright, Thank you Tim good morning, everyone.

Starting off with the income statement.

Fourth quarter net income attributable to common unit holders.

Does $1 $4 billion or 65 cents per common unit on a fully diluted basis. This compares to $1 billion were <unk> 47 per common unit for the fourth quarter of 2021.

Adjusted cash flow from operations, which is cash flow.

From operating activities before changes in working capital was $2 $1 billion for the fourth quarter of 2022. This is a 16% increase compared to $1 8 billion generated for the fourth quarter of.

2021.

We declared a distribution of <unk> 49 per common unit for the fourth quarter of 'twenty, two which is up.

4% higher than the distribution declared for the fourth quarter of the prior year.

The distribution will be paid February 14th to common unit holders of record as of close of business on January 31.

We will evaluate another increase in the distribution mid year in 2023.

During the fourth quarter, we repurchased approximately $4 9 million common units at a cost of $120 million for the entire year. We purchased a total of $10 2 million common units for $250 million. In addition on a combined basis, our dividend reinvestment plan.

And employee unit purchase plan purchased $1 7 million and $6 4 million common units during the fourth quarter and for the full year 2022, respectively.

For 2022, we paid approximately 4 billion of distributions to limited partners.

Midstream.

Now turning to.

Of sustaining capital expenditures.

Total capital expenditures in 2022, or $5 2 billion, which included $3 4 billion for the acquisition of <unk> and the purchase of the 580 miles of pipelines.

One $4 billion for investment in organic growth capital expenditures and $372 million of sustaining capex.

Last quarter, we had estimated $1 6 billion of organic growth capital investments in 2022, however, approximately $200 million of this investment slipped into 2023.

Our major growth capital projects under construction grew from $5 $5 billion last quarter to $5 8 billion for the.

Additional $300 million.

Our projects under construction are really attributable to expansions in the scope of our new ethane ethylene export facility and Debottlenecking, our gathering systems in the Permian.

As a result of the $200 million of Capex slipping from 2022 into 2023.

The above additional opportunities in the Permian. We currently expect our 2023 growth capital expenditures to be approximately in the range of $2 3 million to $2 $5 billion and sustaining capital expenditures are expected to be approximately $400 million.

<unk> 20 years, our weighted average cost of debt is four 5%.

And at December 31, approximately 96% of our debt was fixed rate Arkansas.

Our consolidated liquidity was approximately $4 $1 billion at year end and this includes availability under our credit facilities and unrestricted cash on hand.

In January we issued $1 75 billion of senior notes comprised of 750 million of three year notes at a coupon of 5.05% and $1 billion of 10 year notes at a 535% coupon. We are appreciative of the strong continued support of our debt <unk>.

<unk>.

And this offering we do not expect to return to the capital markets in 2023.

Adjusted EBITDA was $9 3 billion.

For 2022.

As Jim noted earlier.

The earnings release, we expect to achieve a major financial milestone in 2023 that is 25 consecutive years of distribution growth.

As we looked at the financial attributes of the 65 companies that comprise the dividend aristocrats. These through the bluest of the Blue chips. Some have over 60 consecutive years of dividend growth.

The overwhelming majority had debt to EBITDA leverage ratios of less than three times, three <unk> times and almost half were below two tanks to.

Which it is wise to have a stronger balance sheet than historical norms in the energy industry.

We are seeing our customers in the E&P refining and petrochemical sector do likewise.

As a result, we are lowering our target.

Leverage ratio from three five times to 3.0 times, plus or minus a quarter of a turn.

That is a range from 275 times to 325 times and as we noted earlier our leverage for 2022. We ended at two nine times. So we're in good shape with regard to this new target.

We would be willing to temporarily take our leverage ratio above this target zone, if necessary to complete an acquisition or organic growth projects that are strategic to the partnership.

We believe this lower leverage target will be welcomed by our long term oriented investors, who value distribution growth and stability.

We also believe as more generalist investors consider income producing investments in infrastructure. The combination of enterprises avoidance of double taxation and our history of distribution growth coverage and lower leverage will make apd attractive and they may also start to consider <unk> among them.

The blue chips with that Randy I think we can open it up for questions. Thank you Randy Andrew we are ready to take questions from our participants I would like to remind everyone to please limit your questions to one question and one follow up. Thank you go ahead, Andrew certainly as a reminder to ask a question. Please press star one.

One on your telephone and wait for your name to be announced to withdraw your question. Please press star one one again.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of T J Schultz with RBC capital markets.

Great Good morning, everybody.

First question just on the 580 miles of pipeline and related assets that you purchased last quarter.

Seems like a good price paid for that if you can just provide some.

And more color on what you were able to purchase how those assets will be integrated into your <unk>.

System, and if theres any capex allocated to that in 2023 that may be driving part of the <unk>.

Higher growth capital.

Chris.

I guess first off this is Chris Dan on the capital.

Won't increase or what hasn't increased as a result of that.

Secondly that these pipelines are.

Evaluable corridor, which is going to allow us to optimize.

Our NGL business, and our pet Chem business and provide other opportunities.

Yeah.

This is zack on.

On the on the NGL side I think.

Look at the price, we paid versus the Optionality of that Chris has described it I think it made sense for us.

Thank you Sandy capital, Chris on one of your projects.

Yes, it also save some.

One of the other projects.

Small capital it saved us.

Pretty significant amount of capital on that project.

Okay great.

I guess the follow ups just a general question on capital allocation, you guys clearly continuing to maintain plenty of flexibility.

Our strong balance sheet with target debt leverage.

Lower and you're already sit there so.

I'm just.

Trying to see and do you anticipate any shift to more.

Distribution growth is there any more intent on finding some of these acquisition opportunities like you did on the upper Gulf coast or.

How do you share buybacks fallen there thanks.

Yes.

Jay.

Yes, I think.

Between been avatars deal and then these two deals that we did at the end of.

2022.

We are interested in.

Asset acquisition opportunities that make sense that can come in and bolt onto our system and get good returns on capital that way.

And that's where the lower leverage gives us flexibility to come in and do these.

Cash.

Cash transactions.

To do that.

I think over the last.

Call. It the last 18 months we've shown.

We've sort of completed that pivot to go from an externally funded model to an internally funded model.

We had slowed distribution growth there for about three years or so and over the last call. It 18 months, we've taken that distribution growth back up to about 5% area.

So we have increased the pace of distributions and then the buybacks. We continue to do that Opportunistically. So we feel like we're in good shape to execute on opportunities that come to us in.

In 2023 2024.

So we feel like we're sort of checking the box of return on capital and all of the above and also maintaining lower leverage at the same time.

Thank you.

And our next question comes from the line of Colton Bean with Tpa <unk> company.

Good morning, So just on project 93, I appreciate the distinction that its an internal goal and not guidance, but two questions there.

First for Jim has the team ever missed an internal goal and then secondly.

Yeah.

I don't see any high.

High level comments as to how you achieve that mark it seems like commodity margins may be a bit of a headwind, but then you have some sizable projects entering service throughout the year.

Okay.

I don't think we've ever said I go like this before.

Thanks to back upon the world far beyond the catalyst to it.

<unk>.

We achieved it through everybody doing what theyre supposed to be doing an attention to detail. Our employees worked their butts off the desk and frankly, it created a lot of excitement.

Those posters up effort, where you'd go within enterprise and Warner truck drivers asking you how we do it on project now and you know you've got a.

You've got some excitement.

Project nine three we figured I can nine three in two.

<unk> 2022 was quite an achievement so would use that to start.

2023.

And I don't remember the last time, we missed on our internal goals.

Now you just guaranteed guidance.

Yeah.

Alright, and then maybe just a couple of questions on processing. So I think first the Midland assets were down about $50 million versus Q3.

Any indication as to whether we're at or closer to the fee floors for <unk> now and then second keep hold pretty strong margins. Despite very high Rockies gas prices. So just curious if that was hedge related or any other comments there.

Natalie can be answered there.

Yes, and I'll do my best.

Midland down slightly and volume.

Remember there is a.

I'll call. It a Christmas winter event, where there was some production loss in the sale just a little bit.

A little bit longer to get produces a longer to get back up around that time, I wouldnt count the Rockies out to be quite honest, hi, Hi, Def prices are pretty good so I would watch out for the Rockies.

We've hit the peak for maybe once or twice.

But Ron has been really volatile so.

Anyway, some processing margins flow down a little bit, but there are some offsets or some headwind or tailwind that come from that.

Got it so it sounds like on the Rockies, the higher priced <unk> drilling activity may be offsetting that.

The replacement costs, there for the keep whole contracts.

Yes, that's a fair assessment.

Thank you.

And our next question comes from the line of Harry Mateer with Barclays.

Hey, good morning, guys.

R&D follow up follow up question on the on the new leverage target. So historically.

The sense I've gotten from you is that you prefer the flexibility of being in the trophy ratings category.

But.

Our leverage policy as a policy so it begs the question.

Given the rating agency upgrade targets are generally around three times up into low single as is that something you guys are now would be both.

And then two and then potentially welcome.

Yes.

Harry I'm Cindy.

This one over to Chris.

Thanks Randy.

I appreciate the question from our perspective.

Despite the lower leverage target, we're still very comfortable at a high triple B rating.

From our standpoint, what we don't want to do is have the agencies upgrade is to an a minus and that removes the flexibility for us to be.

Aggressive when it comes to external M&A opportunities because what we don't want to do is whipsaw the fixed income investor from a high triple from excuse me a minus rating to a high triple B rating. So we want to maintain that consistency. So we're very comfortable maintaining.

The triple B plus rating across the three agencies.

And I hear you and I think one other thing the agencies look at on that minus threshold is also looking at your cash distribution payout with with regard to net income and I think thats just because we've returned so much capital to our investors through distributions I think that might be a little bit harder.

First overcome so as Chris said, we're pretty pleased with the triple B plus rating and ample flexibility.

Okay, Great and I guess the follow up to that is just any any sort of guardrails you can give us I know you mentioned you'd be comfortable taking leverage up higher for.

For opportunities but.

Any sense, you could like frame that out for us in terms of how high on a temporary basis over what sort of time period, you would look to bring leverage down.

Yes, I'll be honest I can't envision a scenario, where we would come in and take leverage up to a level that would threaten our triple B plus rating.

And I think if you.

Here again this is Chris if you look back a year ago to <unk> acquisition, I think within that first quarter.

$3 billion acquisition bump leverage.

A quarter of a turn.

And then quickly came back down.

Got it alright very helpful. Thank you.

Thank you.

And our next question comes from the line of Jean Ann Salisbury with Bernstein.

Hi, Good morning, My first one is probably for Tony curious about your internal view of NGL pricing versus crude and how long do you anticipate it will take if we ever get their return to the historical range of Ngls versus grade.

What's the historical range.

I guess I appreciate.

For propane I think historically, maybe 55% to 60% something like that.

Okay.

Propane is going to price itself to go so at the end of the day the international markets are going to decide that.

I'll, let bren weigh in but we think you'll see more activity out of China.

And.

So there is there is support for that number.

So as we head into 'twenty three as I say I think there's going to be some lag jinan.

China's got five PVH plants coming on this year.

The plants they have existing currently are not running at full capacity.

So is.

China reopening occurs.

It's just going to take some time to work off some of the inventories over there and once that economy gets back up and running.

There's enough dock capacity.

The U S. Then you could potentially see a rebound in LPG.

Tom I'm, just going to take some time.

But you think that we're at the trough here.

I mean, assuming this reopening is.

Going to be consistent and Theres no stops and starts in.

I would like to think that the.

<unk> is up on a percent of crude versus.

Thank you.

And then.

Permian crude production estimates have come down.

Last six months.

That's across the board.

Midland to Houston price spread is kind of also come in.

Despite a more difficult patch to customers in this environment.

But I think ultimately when you talk about spot and select.

I think Todd who is going to lay out his forecast for it in our Investor day in <unk>.

Still think when it comes to volume we have we have a bullish view of Permian volumes.

<unk> do you believe in the U S producer and do you think that volumes are going to increase specifically or the Permian basin.

And the next question is.

Do you believe that domestic demand is going to decline.

And then ultimately if you believe the crude production is coming online it's going to have to find its way to Houston because for the most parts is corpus pipes are full and then you got to think about the most environmentally friendly the most efficient way.

The most cost effective way to export those barrels to help them clear.

In terms of the timing on spot.

Potentially come online our conversations with customers.

Still frankly, a project that this market needs.

And we've had good conversations.

In the process of.

A lot of meetings and a lot of trips, but I'd say overall, it's been positive.

Great. That's all for me. Thank you for taking my question.

Thank you and our.

Our next question comes from the line of Theresa Chen with Barclays.

Good morning.

I would like to follow up on Jean Ann's question related to spot.

As youre working through the process of getting.

In addition, all our other anchor shipper.

How do you view the demand side of things and if you have like a demand basis.

Paul anchor shipper, because I believe a lot of need large refining complex is in Asia that were previously under contemplation or taking on credit congratulate Mort Urals at this point.

Hello routes does that threaten the outlook for spot.

I think I think ultimately.

Talking about LPG has talked about LNG.

This barrels going to price to export so from.

The routes that it takes.

May be different.

Probably at one point in time.

300, <unk> I would've thought that.

We would have seen more global type customers, but I do think.

There's going to be some producer push behind us I do think we're going to have potentially some traders involved with this project in terms of the advantages on freight playing that game.

But I think our view on global crude demand is probably more aligned with Exxon and BP and we think that demand is going to be out there and it's going to be out there for a fairly long time.

Ultimately, we think a lot of crude oil has to come from this country to satisfy that demand.

It's with our lighter barrels, it's really a perfect fit for the integration that you see now in the large refineries in Asia.

That are integrated with pet Chem operations.

Well if you look at the amount of Vlccs that are coming from the Gulf coast for North of 30, a month today.

There's a lot to share between markets between the corpus market and also the eastern market.

Number is going to go up.

Got it. Thank you and then shifting gears a bit and can you just give us an update on your exposure to Baja basis.

Open capacity on the Texas intrastate business.

And your outlook on that this year as well as the outlook for ethane economics recovery versus protection from the Permian.

Yes.

The exposure Hasnt changed since our Investor day, So I think we're just probably shy of $401.

Natalie.

It has compressed over the last several months.

You go back to Tony's forecasts were still fairly bullish on volumes.

There has been a new pipeline that the.

Came back online so that added some compression, but ultimately we think it's going to be extremely volatile.

We do think ethane is going to have to price to be recovered on the Permian basin.

If you look at that market, it's not a whole lot different in the LNG market the old gas infrastructure in the U S is very very fragile and when something happens out there.

There's a lot of volatility and I think we're going to embrace that volatility as we go forward.

Thank you.

Okay.

And our next question comes from the line of.

Yes.

Neel Mitra with Bank of America.

Yes.

Your line is now open.

Hi can you hear me.

Yes, we can.

Okay great.

I wanted to touch on.

NGL fractionation.

Fees and volumes on a year over year basis.

It seems like the market is tighter just with Medford and a lack of frac coming online.

Until mid 2023.

Can you talk about the contributing factors outages.

What's driving fees and where you see the market right now.

This is <unk>.

So.

When Medford went down no doubt, we saw an increase in spot fractionation fees.

Do you sense.

Had some cooler weather, which helps with the fractionator is run rates.

You also had Phillips come online with the fractionator, so we've seen that market kind of cool down.

You also see a lot of capacity coming online this year, which I think the market needs.

And then as far as our results.

Obviously I had some unplanned downtime.

We had the vast majority of the down quarter.

Quarter on quarter was due actually to commodity prices and blending and then some slightly slightly lower fees on average, but it wasn't nearly as significant as the blending.

Going forward really excited about Frac 12, I can say pretty confidently that fresh air would be full on day one.

Got it.

As a follow up.

Looking at the kind of the propylene markets right now.

That's that looks like the tough one with the PGP RVP spreads.

It looks like we're at the trough.

In Q4 can you kind of talk about how fast do you see that recovering and then.

In terms of PTH two when it comes online.

How do you look at the volume outlook for for that in terms of like dispatch stack.

Once you have that online versus the fractionator and PTH one.

Hi, This is christina thank as far as the RG <unk> spread and we saw throughout last year that tightening a bit.

We've seen that widen out a little bit but first the first.

Month of the year in <unk>.

Really its more of a supply issue than demand and ultimately for that spread to remain wide, we need we need propylene derivative demand to be strong.

So China, China can play a part in that but we see that a little bit further out maybe second half of the year.

A big part of that is there during COVID-19 propylene goes into durables.

Durables and we saw that accelerate throughout COVID-19 the demand for those durable so.

Thank.

Second half of this year before we see that demand return.

Todd.

About polyethylene.

Polyethylene demand has strengthened quite a bit and talking to customers.

From where we were last year at the end of December .

Exports grew quite a bit in one of our customers told us that.

December was.

Our highest month of polyethylene exports that they've seen in five years.

I guess just going back to your.

Youre PTH two question.

PTH two is 100% subscribed so.

That's going to be.

Day, one full.

Okay great.

Thanks for the color.

Thank you.

And our next question comes from the line of Jeremy Tonet with Jpmorgan.

Hi, good morning.

Morning.

It's been touched on a few different ways already but just wanted to bring it altogether with regards to just economic conditions out there potential pending recession.

And just wondering specifically as it relates to here.

Cam business, how you see that bearing in this environment.

I think there's some concern in the marketplace on that so just wondering if you could walk us through the level of cash flow stability or other offsets that you see in.

That business line also do you have any planned downtime for any of those facilities.

And 'twenty three.

Yes. This is Christina again.

Yes.

Our <unk> business is predominantly fee based.

And what we saw last year.

As spreads were wider than normal we were able to capture.

Because of the way we structure our contracts, we were able to capture part of that.

Looking at for 2003, we on our octane business, where about 75% hedged at a pretty good spread.

And then we expect.

Okay.

Earnings for our propylene splitters and PVH to be pretty consistent.

I guess market out there as far as potentially acquiring assets private or what have you.

Is there anything any other part of the portfolio that you would look to kind of round out through M&A.

Given our position in the Midland Basin was important to us.

And it's proved to be.

Pretty successful I think Randy Fowler.

<unk> price matters.

And our price does matter I can't.

Yes.

I think we're at a position right now that.

If there is anything out there.

B pretty damn strategic press get interested.

Okay.

Got it I'll leave it there thanks.

Yeah.

Thank you.

And our next question comes from Michael Blum with Wells Fargo.

Yeah.

Thanks, Good morning, everyone.

Wanted to go back to natural gas for a moment with the exception, maybe putting the Oaxaca aside which I think we all understand can you maybe just talk through the puts and takes on how this lower natural gas.

Rice environment will impact your business this year.

Yes.

Sure.

You said it Michael there is a lot of puts and takes.

<unk>.

Lower pricing, obviously affects our equity gas and that's probably around 100 million a day.

<unk>.

But if you look at our total gas burn and you equate to equate our power consumption.

And you want to call that natural gas.

Yes.

To watch.

At different price levels, we get imbalanced in the higher price was probably some knock on benefits to us.

But theres a lot of pass throughs associated with this price.

And that would be go.

While the equity gas at the highest number just wait and catch these low numbers, but we brought a fairly balanced portfolio.

There's not a.

As Jim said, it's fairly balanced.

Okay.

Yes.

The last thing I'll say Michael is that.

When you look at throughput and U S petrochemical industry and you look at low gas and high crude I mean, theres a lot of benefits for our pipeline system.

Okay got it.

Thanks for that.

Just had one other question really about distribution growth in 2023 and beyond really so you. Obviously you raised the rate of growth in 2022. So I'm just wondering is that a new.

Run rate is there.

A reasonable range to think about going forward and then.

Kind of related to that.

Are you going are you going to be growing kind of like a one increase per year type of model.

Yes.

Michael I guess, we did two increases in 2022.

We said, we will come in and take another look at it.

At the middle of this year.

Really don't want to come in and put out a marker.

Expected distribution growth is going to be we'll come in and take a look at it mid year.

Certainly we pivoted off the the slower rate that we saw there as we went from a internal funding extra.

External funding model to an internal funding model, so you've seen that.

The growth bounce back up into the 5% area.

And what will come in and evaluate it as we as we do every quarter.

Alright, Thank you very much.

Thank you.

And our next question comes from the line of Brian rentals with UBS.

Hi, good morning, everyone.

We continue to hear discussions on higher <unk> in the Permian along with just continued discussion on parent child interactions I'm.

Curious if you could just discuss if youre seeing higher <unk> and higher parent child interaction that perhaps changing.

The upside on associated gas production in the Permian going forward. Thanks, Yes.

The answer is we are continuing to see higher <unk>.

Not surprising look put it simplistically oil declines faster than natural gas and shale basins. So.

We've modeled it.

And obviously producers are getting larger in scale.

We think when we redid the different rags that parent child is a bad thing it absolutely is a good thing. It's it's how you get the most out of the reservoir. So frankly, we don't sit up at night.

The producers and we see a lot of them.

And have a lot of talks with them in their conference room or things that we're doing with them.

I have to tell you I don't think any major producers, who are losing any sleep over it either.

Brent you dissipate.

Dead on.

Great I appreciate all that color.

Maybe to touch briefly on this future growth.

Projects post the quarterly results it seems like free cash flow profile is keeping pace with the recent rise in growth Capex.

Given slide six in the presentation is largely unchanged.

If you could provide a little color into what they were seeing new projects I E processing plants or our PVH III, perhaps in the future or the rising capex really just a function of maybe upsizing of existing projects I E ethane exports or perhaps chinook.

Yes.

I think our ethane and ethylene export expansions are pretty key we see.

We're going to see a lot more demand for those products going forward alright, ethylene export is chockablock full in.

Our ethane exports are growing so I like those were building four processing plants and.

In the Permian two in the Delaware two in the Midland Basin, and probably all have Zach Strait, knocking on the door wanting to do the <unk>.

<unk> thousand 14th Fractionator, because we're not going to do 13.

Yes.

But on a lot of our projects there is a knock on effect.

That we get out of those projects so.

I can't think beyond where we are.

And probably add in.

Some cost efficient debottlenecking in the gathering.

Yes, we just picked up 580 miles of pipe how much money 160 $160 million in really key corridors.

Those kind of bolt on deals we will do all day long.

As to <unk> three.

I'll throw Christiana out of my opposite the walks in with PDT.

And as Juan astute analyst put it.

It takes money to make money.

Great I'll leave it that makes sense enjoy the rest of your day.

Thank you.

And our next question comes from the line of Neal Dingmann with truest.

Good morning, guys. Thanks for the time, Mike. My question is also on the petrochemical refined segment, specifically could you give me an idea.

Sales volume expectations remainder of the year for your Chambers County, Propylene facility you wonder any more downtime expected there and then maybe secondly, just is that PVH two facility in Texas Western system is still on pace for next quarter and later this year respectively.

I think.

I think Texas Western is towards the end of the year Grant.

We make them on in stages.

Parts of it.

Okay, and PVH to us mid year, yes.

At year.

Yes, Neal and just in terms of.

<unk> sales, we expect those to be pretty stable its really.

A function of refinery grade propylene supply coming out of the refineries and what they run rates are and so looking at looking at cracks today.

Its pretty profitable for them to run so I would expect that to continue.

Sounds good thanks, Mike.

Yeah.

Thank you one moment please.

And our next question comes from the line of John Mccain with Goldman Sachs.

Hey, everyone. Thanks for the time, maybe just going back to the Permian, We had I guess theres a bit of a dip.

Last quarter on just the pace of growth going forward.

Shin oak kind of pushed to the right fell out of that I guess just be curious if you can update us there on again when do you think.

Sure now it might be needed and now you have the early 25 in the deck, but maybe just puts and takes.

On that timing in your general view on kind of NGL growth beyond this year out of the Permian.

Yes. This is Justin Clare I'll speak to timing I think we still feel good about that first half of 'twenty five there's probably room for it to be accelerated given its two years from now.

In the meantime, we've got we've got various massive options to create incremental capacity if at that first half 'twenty five doesn't prove early enough and we can accelerate it. So we feel good at least for the next couple of years. So we've got enough capacity and then beyond that we'll continue to evaluate what what projects are needed to make sure that we have enough capacity to onboard.

Relative to <unk>.

But.

Relative to Permian production on just everybody knows the EIA reported yesterday growth in crude from year end.

'twenty one to year two.

November of 741000 barrels that was down from what they reported in October .

So I know that we hear different things and everybody looks at their own acreage in any caps your own numbers, but.

Sure.

For lack of a better term needs are what the EIA calls actuals, we go back and we.

We.

Gage our numbers to them. So we take a look back in our own models.

Directionally these numbers are correct.

And.

Almost all of it.

I'll use that term loosely but comes out of the Permian basin has liquids associated with it.

No change in the trend for us relative to what the production profile out of the Permian Basin.

I appreciate that thanks for that.

One quick one should be easy can you just remind us or are we done with the Eagle Ford contract roll offs, and maybe give me an update on what youre thinking about it based on overall.

We had a major producer tell us were in the second inning of a nine inning game in the Eagle Ford.

The Permian just kind of dwarfs everything, but we are.

We had our contracts.

We did have some roll off but we renegotiated a lot of those and ended up with a life of lease dedications, which.

We're kind of like it seems like its becoming I asked Tony is becoming kind of like the haynesville, It's regional players.

And Thats, where they are and thats, where theyre going to drill, but we havent forgotten the Eagle Ford shut in.

Our assets remain very full in the Eagle Ford.

That'd be a fair statement.

Emily.

Yes, so processing certainly much fuller than the last two years for sure <unk> got capacity, but the contract Rollouts are over I would like to thank everything that we add incremental is going to be beneficial.

From a profitability standpoint.

Okay.

That's great appreciate the time with us.

Okay. Andrew This is Randy I think our time is up for today and so just wanted to thank all our participants for joining us for our call.

And with that we will be terminating our ending the call and thank you.

Good day.

Yes.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.

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