Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Enterprise Products Partners LP (EPD, Financial) reported adjusted EBITDA of $2.4 billion, up from $2.2 billion in the same quarter last year.
- The company generated $1.8 billion of distributable cash flow with a coverage ratio of 1.6 times for the quarter.
- Record volumes in natural gas processing and NGL pipeline and fractionation were achieved.
- Investments in the Permian Basin led to a 19% increase in gross operating margin for the NGL Pipeline and Services segment.
- The Natural Gas Pipelines & Services segment saw a 23% increase in gross operating margin due to higher transportation revenues and marketing margins.
Negative Points
- The PDH plants have been a headwind throughout the year, requiring extensive turnaround efforts.
- Sustaining capital expenditures for 2024 are elevated, now estimated at $600 million, up from $550 million.
- Total debt principal outstanding was approximately $30.6 billion, with a weighted average cost of debt at 4.7%.
- The company has significant exposure to volatile Waha gas prices, which can impact marketing margins.
- Capital investments for growth projects remain high, with expected expenditures of $3.5 billion to $3.75 billion for 2024 and 2025.
Q & A Highlights
Q: Can you help us think about what inning we are in terms of LPG export expansion buildup for the industry? And across your system, how much more brownfield capacity expansions do you have left?
A: The market is calling for additional capacity. We announced an expansion this morning, and we are around 85%-90% contracted of our existing and expansion capacity. We have additional opportunities to execute brownfield expansions using existing infrastructure.
Q: Can you refresh us on what you're seeing for end market demand as you continue to expand LPG export capacity? Are you seeing a lot of incremental demand coming from China?
A: Demand is robust across the board. Currently, around 43% of our LPG exports go to China, 21% to the Americas, and 13% to Europe. The demand equation is crucial, and the barrel has to clear to the US and be priced accordingly.
Q: Can you discuss Enterprise's role within industry consolidation and your thoughts on recent midstream asset acquisitions?
A: Our focus is on returns on capital and growing cash flow per unit. We have seen good opportunities and returns from organic growth and selective acquisitions like the Navitas deal. Strategically, any acquisition must fit with our existing assets.
Q: How are you addressing power instability in Texas, especially with the ERCOT market issues?
A: We are hedging power through purchase of power generation and evaluating other options. We work closely with power providers to determine if grid power is acceptable or if we need backup power or other sources, depending on the location.
Q: Can you give an update on the Bahia project and how you see utilization ramping as it comes online? Also, your updated thoughts on the base case for Seminole based on supply growth?
A: Bahia is on track from a timing perspective, underpinned by our G&P platform. We have connectivity to third-party plants and optionality for potential conversions. Seminole is a prime candidate for repurposing, and those NGLs will feed into Bahia.
Q: Is the Houston LPG export project a sign of more demand for Phase 2 at the Neches River project to be all ethane instead of a mix of ethane and propane?
A: Yes, it maintains the flexibility of the Neches River facility to do LPG, but as the VLEC order book gets delivered, it will be in ethane service long-term. The facility is 100% contracted, and we have additional debottlenecking projects for more capacity.
Q: Can you talk about the CapEx creep in 2024 and whether it could repeat in 2025?
A: We did not see significant CapEx creep in 2024. We modified the range, but the upper part remains $3.75 billion. For 2025, we still feel good about a range of $3.25 billion to $3.75 billion.
Q: When will PDH 2 be running at full rates after it comes online in August?
A: We expect PDH 2 to be running at full rates by September.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
