Enterprise Products Partners Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 1, 2023

There are 18 speakers on the call.

Operator

Day and thank you for standing by. Welcome to the Enterprise Products Partners LP Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that this conference is being recorded. I would now like to hand the conference over to Randy Burkhalter, Vice President of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, Norma, and good morning, everyone, and welcome to the Enterprise Products conference call Today to discuss Q2 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. During this call, we will make forward looking statements within the meaning of 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 A list of factors that may cause actual results to differ materially from those in the forward looking statements that may be made during the call today.

Speaker 1

And so with that, I'll turn it over to Jim.

Operator

Thank

Speaker 2

you, Randy. Today, we reported adjusted EBITDA of $2,200,000 for the Q2 of 2023 compared to $2,400,000,000 for the Q2 of 2022 $2,300,000 for the Q1 of 2023. We generated $1,700,000,000 of DCF, Providing 1.6 times coverage, Enterprise retained $639,000,000 of DCF in the 2nd quarter, And we've retained $1,500,000,000 year to date. We had resilient financial results despite the impact of lower prices for crude, natural gas, NGLs and petrochemicals. Our profits were negatively impacted by weaker Processing margins for the 1st part of the year.

Speaker 2

Our Petrochemical Service segment continued to perform In spite of the low price and lower margin environment, during the quarter, we established 6 operational records, Including our natural gas pipeline volumes, NGL fractionation volumes and 11,900,000 barrels of Oil equivalent of total pipeline volumes. We're also extremely proud of the fact that with the increase In our distribution last quarter, we crossed the threshold of 25 consecutive years of distribution growth, Literally unheard of in the midstream industry. This is truly exceptional milestone across all industries. Most importantly, a real tribute to the core principles laid out from our very beginnings that Randa continues to prioritize today. Moving to growth capital.

Speaker 2

We started the Q2 with $6,100,000,000 of major growth projects under construction. We have since completed Construction owned 4 major growth projects that will provide new sources of cash. We have an additional 4,100,000,000 Under construction, completed major projects during the Q2 and early July include a 400,000,000 cubic foot a day expansion of the Haynesville extension of the Acadian natural gas pipeline system, which is sold out. Our Poseidon Cryogenic Natural Gas processing plant, which is our 6th processing plant in the Midland Basin, which is sold out. Our 19th NGL fractionator, which is sold out and our PDH2 plant In Chambers County, which is sold out and ramping up currently between 65% 70% and climbing.

Speaker 2

The 3 remaining natural gas processing plants we have under construction in the Permian Basin will go into service in late 'twenty three and early 'twenty 1 in Midland and 1 in Delaware. And the first phase of the Texas Western Products pipeline will be put into service in December. When we complete the next 3 Permian plants, we will have 16 processing plants in the Permian With the capability to process 3.8 BCA a day of natural gas and extract more than 520,000 barrels a day of NGLs, all destined for additional value added services in our Gulf Coast NGL systems. Meanwhile, downstream of the Permian, we have major expansion is underway for ethane, ethylene, polymer grade propane propylene and LPG, Expanding and upgrading our export capacity at the Ship Channel at Morgan's Point and at Beaumont. Our new export projects are designed with an emphasis on flexibility and reliability centered around highly integrated footprint with multiproduct capabilities.

Speaker 2

Even as the world works its way through a significant petrochemical downturn, U. S. NGOs and opens continue to get a lot of attention from petrochemicals focused on feedstock diversity and Advantage Prices. In addition to multiple long term export contracts we recently signed, We are also in discussions with counterparties from several countries for substantial amounts of additional natural gas liquids And Olefin Exports. This level of customer interest is what supports further expansion of our export capabilities.

Speaker 2

A wide gas to crude spread gives the petrochemical industry a feedstock advantage that is proving both durable and permanent. As Randy has heard me say a 1000000 times, I grew up in that business and I've lived through more than a few cycles. Only the strong prosper through times like these and U. S. NGL feedstocks sourced from shale oil and gas are again proving their growing importance.

Speaker 2

The durability of U. S. Shells is evident in ever increasing U. S. Boards of crude, natural gas, natural gas liquids and in exports of petrochemicals in various forms.

Speaker 2

In July, enterprise crude oil exports will exceed a record 30,000,000 barrels. Oil and Gas has faced commodity price headwinds, especially compared to the premiums of last year When crude averaged over $100 a barrel during the 1st 6 months of 2022, we see no reason that crude should have been trading at the low levels of the last few months. In early June, OPEC Plus announced they were extending their reductions into 2024. On top of that, the Saudis announced they would unilaterally cut an additional 1,100,000 barrels a day of production In July August, we have the option to extend these cuts as needed. Meanwhile, waterborne data confirms Russia's exports are coming down.

Speaker 2

Inventories of crude and refined products, both in the U. S. And globally, remain very low, While OPEC Plus continues to demonstrate, they are committed to price stability. Even though industrial demand continues to lag, Consumer demand is strong, especially in developed nations. Crude oil supply demand fundamentals continue to indicate We're in store for much tighter balances for the remainder of the year and in 2024.

Speaker 2

And with that, I turn it over to Randy. Okay.

Speaker 3

Thank you, Jim, and good morning, everyone. Starting with the income statement, net income attributable to common unitholders for the 2nd Quarter of 2023 was $1,300,000,000 or $0.57 per common unit on a fully diluted basis. This compares to $1,400,000,000 or $0.64 per common unit for the Q2 of last year. Adjusted cash flow from operations or we call it adjusted CFFO, which is cash flow from operating activities Before changes in working capital was $1,900,000,000 for the Q2 of this year compared to $2,100,000,000 for the Q2 of 2022. As Jim mentioned, 2023 marks our 25th consecutive year of distribution growth.

Speaker 3

We declared a distribution of $0.50 For common units for the Q2 of 2023, which is a 5.3% increase over the distribution declared for the Q2 of last year and a 2% increase over the distribution that we declared last quarter. This distribution will be paid August 14 to common holders of record as of close of business July 31. In the second quarter, we purchased 2,900,000 common units For the quarter, at a total cost of $75,000,000 For the first half of the year, unit purchases totaled approximately 3 point 1,000,000 common units for a total purchase price of approximately $92,000,000 Inclusive of these purchases, we have now utilized 41 percent of the authorized $2,000,000,000 buyback program. In addition, our distribution reinvestment plan and our employee unit purchase plan purchased an approximately 2,000,000 common units on the open market for a total purchase price of approximately $51,000,000 and that was also during the Q2. For the 12 months ending June 30, 2023, Enterprise paid out approximately $4,200,000,000 in distributions to limited partners.

Speaker 3

These distributions combined with 30 $7,000,000 in buybacks for this period result in Enterprise having a payout ratio of adjusted cash flow from operations 50 7 percent and a ratio of payout for adjusted free cash flow of 86%. Total capital investments in the Q2 of 2023 were $784,000,000 which included $683,000,000 for growth capital projects and $101,000,000 of sustaining capital expenditures. As Jim noted, we have $4,100,000,000 of major growth projects Under construction, dollars 1,100,000,000 of which are expected to begin service in the remainder of 2023. We continue to expect our growth capital expenditures for 2023 will be in the range of $2,400,000,000 to $2,800,000,000 depending on any incremental system expansions and timing. We continue to expect sustaining capital expenditures for 2023 will be approximately $400,000,000 Turning to capitalization.

Speaker 3

Our total debt principal outstanding was approximately $28,900,000,000 as of June 30. Assuming the final maturity date for our hybrids, The weighted average life of our debt portfolio was 20 years. Our weighted average cost of debt is 4.6% And at June 30, approximately 97% of our debt was fixed rate. Our consolidated liquidity at quarter end was approximately $4,000,000,000 And that includes both availability under our credit facilities and unrestricted cash. For the 12 months ended June 30, 2023, Our adjusted EBITDA was $9,100,000,000 This compares to $8,800,000,000 for the trailing 12 months ending June 30, 2022.

Speaker 3

We ended the quarter with a consolidated leverage ratio of 3.0x on a net basis after adjusting debt For the partial equity treatment of our hybrid debt and reduced by the Partnership's unrestricted cash on hand. As a reminder, our leverage target remains 3 times plus or minus 0.25. So if you would 2.75 to 3 And a quarter time, so we're right in the middle of that range. And with that, Randy, I think we can open it up for questions.

Speaker 1

Okay. Thank you, Randy. Norman, we're ready to open it up Questions from our listeners. And I would like to remind our listeners to restrict your questions please to the one question and one follow-up question. And I'll take it from you can go ahead and take it from there, Norman.

Operator

Thank you. Please stand by while we can file the Q and A roster. One moment for our first question. Our first question comes from the line of Theresa Chen with Barclays. Your line is now open.

Speaker 4

Hi. I'd love to get your sense On the Q3 outlook and beyond, just given the recent action we saw in NGL pricing and ethane in particular, Would you be able to comment on this? And what do you expect pricing to do as the quarter progresses? And how does this split with Your ability to earn outsized margins along your integrated NGL value chain as well as potentially achieve the $9,300,000,000

Speaker 2

Yes, this is Jim. I think we feel pretty constructive on the second half of the year. If we look at our processing margins, Natalie, they're better than they they've been moving up. That's right. Okay.

Speaker 2

And in terms of outsized spreads, My experience is you can't predict them, but they're always there. And I think we might see more opportunity in the second

Speaker 4

Thank you. And then on the petchem front, can you just comment on what you're seeing as far as Demand goes and the ramp up of PDH utilization and or underutilization on the ethylene production side.

Speaker 2

Chris, you got it? Where is Chris?

Speaker 5

Yes, Therese. This is Chris, Dana. On the petchem side, overall demand, Non durables, we're seeing healthy exports, whether it's in the form of pellets or whether it's in the form of ethylene across our dock, which remains full. On the durable side, we've seen numbers increasing over the last 4 months, but it really hasn't Translated to higher overall demand. So as we talk to customers, what originally was going to be a strong 2nd half is probably pushed out maybe 6 months or so.

Speaker 5

And then on the MTBE It's really a business that's driven by normal RBOB and octane that remains strong. So There was a lot in your question. PDH, it's ramping up. As it ramps up, we're sold out all the way up To the maximum nameplate, and so we'll continue to see that perform.

Speaker 4

Thank you.

Operator

Thank you. One moment for our next question please. Our next question comes from the line of Tristan Richardson with Scotiabank. Your line is now open.

Speaker 6

Hey, good morning guys. Just curious, Jim, you mentioned discussions with new international customers that maybe you haven't had relationships with before in the past. Should we think of these Incremental customers is largely around filling export expansions currently underway or would these potential relationships be for Further expansion to your export capacity down the road.

Speaker 2

We signed that contract, Tubb, yesterday. Okay. You're about ready to execute it. The one that we're going to execute, I think we had one large one. I think it was 200,000 barrels a day that we You did recently, and we're in discussions with at least 2 more, Todd?

Speaker 2

4 more. And our guys are headed to Asia for an extended trip here not too long. So I guess it's both, what we've built and what we expect to sign.

Speaker 6

Helpful. Thanks, Jim. And then maybe Randy, just curious as we've now seen PH come online and FRAC 12 commission, as well as a processing plant. I know it's too early to talk about 2024 capital, but just thinking about the potential for This elevated spend for these large and critical projects kind of coming to a conclusion in 2023 such 24% could be lower than 23%?

Speaker 3

Yes. Tristan, on that, certainly getting PDH 2 completed. That was a big capital project. But when we come in and see the opportunities just in and around our system, I think frankly, we're going to be in that $2,000,000 $2,500,000,000 range for the next 2 to 3 years. And some of that, I'll have to say that 2% to 2.5% really is still excluding spot, which is still going through the licensing Process, but tell you what, we're just seeing a lot of good activity, a lot of good growth opportunities across the system.

Speaker 6

Appreciate it. Thank you guys very much.

Operator

Thank you. One moment for our next question please. Our next question comes from the line of Spiro Dounis with Citi. Your line is now open.

Speaker 7

Thanks, operator. Good morning, everybody. I actually want to go back to that a little bit if we could Capital allocation, so I guess on my math, I think you still have you guys generating about 10% to 15% of operating cash flow that's sort of unspoken for Over the next few years, you can spot in there as well. So just curious to get your latest thoughts on preferred ways to allocate that capital given your leverage levels are really already at sector lows.

Speaker 3

Yes, Spiro. I think it comes back to really what you've seen out of this the last 2 or 3 years is sort of all the above. Certainly, in the last year, year and a half, we picked back up on the cadence of our distribution growth. So we're and again, that seems like the most direct way to return capital to our partners is through distribution bumps. But I think we'll continue to come in and sort of use all of the above.

Speaker 7

Yes, fair enough. Second question on Shin Oak. And Jim, I'll preface this question with, I know you're going to expand Shin Oak at some point, but I also know you've talked about Short term bridging solutions to get there. Just curious if you guys have any updated thoughts on that?

Speaker 2

Yes. I got a lot of thoughts on that, Kaswira. I was in a 2 hour meeting yesterday with Brent and Justin. So you can imagine what it's like spending 2 hours with Brent and Looking at all of our options, all of our options. And our options could be we'll add another line called What are we calling that Bahia?

Speaker 2

Or we could partially loop Shin Oak and take Seminole out of NGL Service. The bottom line is we have to have more takeaway out of the Permian. And I guess I've got to have another 2 or 3 hours with Justin and Brent. We'll come up with a solution.

Speaker 7

Sounds good. Appreciate the color guys. Thanks again.

Operator

Thank you. One moment for our next question please. Our next question comes from the line of Jeremy Tonet with JPMorgan Securities. Your line is now open.

Speaker 8

Hi, good morning. Good morning. Just wanted to start off with Some of the NGL dynamics as you talked about before, I think you mentioned how the ethane prices have been volatile as of late. And just wondering if you see that as kind of logistics constraints given heat in Texas or otherwise and I guess Future outlook for ethane and propane prices at this point given the volatility that we've seen recently?

Speaker 2

Brent?

Speaker 9

On ethane, I think what you saw last month is when nominations were due for ethane recoveries, The forward curve probably said not to recover. So you saw a bunch of ethane get rejected in the Permian Basin. Couple that with some operational issues on various plants across the entire basin, there was some frac rates that were lower than normal And that made ethane very, very tight. I think if you look out forward, I think some of that volatility It's going to suppress and I think we get back to probably more of a normal type ratio between ethane and natural gas, but there was A culmination of factors that caused that.

Speaker 2

Graham, turn on your mic. We always talk We worry about plants going down in the winter. What's 103? Temperature

Speaker 3

Certainly, there's some challenges with that, but I wouldn't say it's been a material impact on our operating rates. We generally design for those conditions. What about others? I can't speak for others.

Speaker 2

That's what I'm trying to get you to.

Speaker 9

And then just real quick on propane, when you look at just overall global demand, I think we've had 4 PDH plants I'm up in China. So far this year, there's 11 other PDH plants scheduled to come online for the balance of this year.

Speaker 2

This Probuane is that all in.

Speaker 9

I mean if you say 100% capacity factor that's another 250,000 barrels a day. Those plants aren't running at those higher rates, but call it 65% to 70%. It'll certainly put another bid under propane, just a matter of how fast production comes online.

Speaker 7

Got it. That's helpful.

Speaker 9

I would hope that we've seen the bottom on propane. That's my hope.

Speaker 2

If not, it will still price to export, right? That's right.

Speaker 8

Got it. That's helpful. Thanks. And just as we look going forward here, we keep seeing enterprises leverage dipping down Below 3. And just wondering if that trend continues, what should we expect at that point?

Speaker 8

Leverage just continues to Decline or I think $2,000,000,000 to $2,500,000,000 of CapEx next year, could that increase or just any other thoughts in general on capital allocation?

Speaker 3

Yes, Jeremy, again, we're sort of in the middle of our range at 3.0 times. And I think, again, the Aim is really bringing in some good commercial opportunities. We think growth CapEx would be $2,000,000,000 $2,500,000,000 And again, as I mentioned earlier, that is And so I think we would just like to develop see it develop. As far as returning capital, like I said, we picked up the pace on distribution growth, Still doing some buybacks. Balance sheet is in great shape.

Speaker 3

And Jeremy, I guess, just staying in a position that A lot of opportunities come along and we just want to be in a good position to execute on.

Speaker 8

Got it. That's helpful. Thank you.

Operator

Thank you. One moment for our next question please. Our next question comes from the line of Jean Ann Salisbury with Bernstein. Your line is now open.

Speaker 10

Hi, good morning. Has the scope Changed a bit for the Beaumont export terminal. It looks like from the slides you're adding propane exports there.

Speaker 2

You're pretty observant, Jimmy Nann. Go ahead, Tug.

Speaker 5

All right. So yes, the scope has changed

Speaker 9

on that. We previously announced 120,000 barrel a day ethane train at Beaumont. And now what we're doing is we're proceeding with that train in addition to a 1 180,000 barrel a day ethane train that can also do up to 360,000 barrels a day of propane. So we're not Adding any additional ethane only capacity, we're adding what we like to call it flex capacity. We're doing that in lieu Of our REF IV expansion and we're opting for a much smaller capital project at our Ship Channel facility to increase our butane loading rates and allow for fully refrigerated PGP.

Speaker 2

So Jean Ann, in my script, I said multiproduct and flexibility. That's what so Tug can go to somebody and say, look, you can take 3 tanks of ethane and a tank of ethylene Or you can take 3 tanks of methane and a tank of propane or vice versa. So We're trying to get fix it where those things will always be full, but not necessarily of the same product.

Speaker 9

Butane, propylene, ethane, ethylene, you name it.

Speaker 10

Interesting. Thank you. And then is the Acadian expansion running full already? And maybe more broadly in your opinion, is Haynesville just

Speaker 11

Julie Ann, this is Natalie. Haynesville for us, Our Canadian extension is full. Gas continues to produce in the even on our gathering We're getting more and more gas every day.

Speaker 10

Great. Thanks. That's all for me.

Operator

Our next question comes from the line of Colton Bean with TPH and Company. Your line is now open.

Speaker 12

Good morning. So just shifting back to the backlog, on the expected 24 growth capital range, Randy, I think you outlined the $2,000,000,000 to $2,500,000,000 Currently, improved projects look to be closer to 1.4. So can you just characterize the type of projects that you're expecting to reach FID on? And the hurdles you would need to clear to move those projects into the official backlog?

Speaker 3

Yes. Culp, Brent, you want to take some of this because you sit on the front line

Speaker 9

of it. Yes. I mean, just to generalize this, Colton, I think everything's going to be centered around the Permian Basin. So whether that's an NGL pipe solution, whether that's processing plants or whether that's an additional fractionator, It's going to be all centered around Permian production growth.

Speaker 12

Got it. So effectively all centered on the oil supply chain. Makes sense. And then on the operations side, it looks like Midland processing earnings were relatively flat Q on Q Despite the lower NGL pricing, so have we effectively reached fee floors for the acquired system at this point?

Speaker 2

Yes.

Speaker 13

Perfect. Thank you.

Operator

Thank you. One moment for our next question please. Our next question comes from the line of Keith Stanley with Wolfe Research. Your line is now open.

Speaker 13

Hi, good morning. Wanted to start on SPA. Just any update on commercial momentum and remaining permitting process And how soon you could conceivably get to an FID on that project?

Speaker 2

I think we should have our license to construct, Graham, in September, October?

Speaker 3

Yes. That's where it's trending right now. Everything's going well Right now, in the licensing stage, and we're expecting in the next within the next few months.

Speaker 2

In terms of I mean, we're traveling the world on spot. We have a laser focus On getting customers on spot, and I think we will. And I believe we'll end up building it.

Speaker 13

Okay. And that could be by next year even to be starting construction on that, do you think?

Speaker 2

Well, if Tug and Brent would get off their rear end and get to Asia and see everybody, it would probably be sooner rather than later. But We're going to commercialize this thing and we've got meetings. Brent and I are going to Europe Later this month, Brent? September. In September.

Speaker 2

And the focus is on spot. We're pulling out all Thanks to get it done.

Speaker 13

Okay. Thanks for that. And second question is just on the year overall. So The project $9,300,000,000 target for EBITDA, you did $4,500,000 in the first half. But As you pointed out a lot, you have a lot of major projects starting up, commodities are improving.

Speaker 13

Just any updated thoughts on how you're feeling on that target, things That need to go right, areas where you may have cushion, etcetera.

Speaker 2

I say this every time. That's not guidance, but it's a goal. And we reward all of our employees Once if we hit that goal and somebody asked on one earnings call, have we ever had a goal that we didn't meet? We're bound and determined that our employees are going to be rewarded by meeting 9.3 Go. What's going to help us, I think, is if you talk to Tony, I mean, crude prices, I don't know what they're doing today, Tony, but They've been up $10 in the last, what,

Speaker 3

30 days.

Speaker 2

The balances are tight. All of our plants are full. The key and Graham knows this, I think the key is

Speaker 12

Thank you.

Operator

Thank you. One moment for our next question, please. Our next question comes from the line of Brian Reynolds with UBS. Your line is now open.

Speaker 14

Hi, good morning everyone. Just Talk on the crude business, it seems to be finding its footing in terms of margin opportunity for the first time since COVID. So curious if you could just Opiant on whether you're seeing incremental barrels and opportunity come back to Houston as Corpus remains full and if we continue to see green shoots into the back half of twenty twenty three? Thanks.

Speaker 2

And thank you. In my script, what I said is we set a record for loading crude on the ships in the month of July. Thank you, Tony. And yes, Brent, I think you're seeing barrels move Good morning, George Houston.

Speaker 9

Yes, Matthew.

Speaker 2

And Brent, before we answer that, but also talk about our quality improvements Across the system,

Speaker 9

I think fundamentally, we believe in Tony's production numbers as we go forward. We do think that the Corpus pipelines are full. We think what we've done on our system as it relates to quality has brought more interest. And I do think we speak to our customers, they want a bigger and bigger position in Houston. So I think over time and the other piece on this is not all pipelines are Credit equal.

Speaker 9

There's other pipelines that go to Houston or go to Beaumont that are more challenged than our integrated crude pipelines. So I think we're going to be the beneficiaries going forward.

Speaker 2

HOU helps. HOU helps. And David Brent.

Speaker 9

Yes. I mean just the HOU being able to deliver and data Brent and what we've done on our system, you're seeing the open interest on that Contract continued to go up. We've sent records in the last couple of weeks on daily traded volume. I think ICE had a press release recently, I went through some of those details, but all this just put together lends itself to more interest in trying to get to Houston on our pipelines.

Speaker 2

I'm not supposed to ask questions, but I will anyway. Where's Jay? How many of your cargoes have met dated Brent specs?

Speaker 3

Yes. Since we implemented the new quality specification mimicking the plat spec we've met, every one of our export cargoes have met

Speaker 2

that specification since we adopted it in May.

Speaker 14

Great. Thanks for all the color. And maybe to just touch a little bit on M and A. Commentary coming out of the Analyst Day made it seem like it was coming or attractive for enterprise, But with nothing year to date and EPD continuing to maintain its high bar for returns, just kind of curious if you could just give A forward looking update on potential M and A appetite or whether other uses of capital could impact the use of M and A going forward? Thanks.

Speaker 2

One of the things about building plants is you could build them where you want them. And that's what I love about building all these plants in the Permian, and we're probably not through, building a fractionator where you want it. So it's my color, but Randy is the one you should ask.

Speaker 3

Yes. It makes me want to go back and reread our transcripts from the Analyst Day. I didn't know we were that bullish on M

Speaker 9

and A.

Speaker 3

But, yes, again, we'll take a look at opportunities that come up. We're on every banker's Rolodex. So we get an opportunity to take a look and but I can't say that we're predisposed To come in and jump on M and A, if it makes sense, good return on capital and if it fits the system dovetails in. I think that's one Discipline that we've had over the years, it's not building a collection of assets, but coming in and actually ties in and bolt onto our system and Provides downstream or upstream opportunities. We'll continue to look at that.

Speaker 14

All makes sense. Appreciate the color. Thanks.

Operator

One moment for our next question please. Our next question comes from the line of Michael Blum with Wells Fargo. Your line is now open.

Speaker 15

Thank you. Good morning, everyone. I wanted to go back to, I think in the opening comments you touched on this a little bit, but I want to ask just specifically How you're seeing China demand right now as

Speaker 2

it relates to NGLs and where you think that's headed?

Speaker 9

Yes, Michael, this is Brent. If you look at and let's take LPGs first, it came from our terminal. In Q1, that number was 24% of our volumes went to China. 2nd quarter, we averaged 38 So when we go back and talk about those PDH plants, I think that's some effect right there. And then when you go to ethane, 1st quarter was about 33%, 2nd quarter 26% went to China.

Speaker 9

With what TUG has been doing on ethane contracts, I think you'll That number go up of what's going to China.

Speaker 15

Okay, got it. And then just have like a broad question on drilling activity. Are there any regions you'd highlight where you're just seeing a change In either rig activity or messaging from producers either up or down.

Speaker 3

Yes. This is Tony, Michael. We're in the middle of earnings season and producers are reporting. But if you look at think Exxon, think Chevron, Diamondback reported Everybody is saying the same thing. They continue to see drilling and completion efficiencies And not by a little.

Speaker 3

They are seeing cost mitigation And predicting, depending on where they are in the value chain, some amount of even deflation on costs, so better returns. When you look at the longer laterals are key to what they're doing, cube development. I mean, the producer continues To get even more and more efficient. So we look at it all the time. We talk about it.

Speaker 3

We talk about it with each of our producers. It's been difficult to look at the EIA numbers and try to figure out what production is doing, but I can tell you that We're on target per our own numbers to be in the 500000 to 700000 barrel a day range increase year end to year end. And watch what the producers are saying during the Q2. No one has a bad story. Everybody is very, very upbeat.

Speaker 3

And on top of that, I guess last but not least, Our own calculation are DUCs, so they continue to grow. So not only are things going well for them, but they're building significant amount of headroom. Haynesville. Haynesville rigs, let's look at completions there. Completions frac crews in the Haynesville Went from, call it, 15 to 18 down at a 0.7.

Speaker 3

They're back up to around 14 And if you look at the forward curve, the forward curve says Haynesville drillers should keep drilling that they have value there. So It is the world is now watching it as that variable basin in the United States for natural gas production. If you go I'm just going to use some generic numbers. It can go up 2 Bcf or it can go down 2 Bcf. That's a 4 Bcf swing over in about an 18 month period.

Speaker 3

That's what you've seen through the cycles in Haynesville.

Speaker 15

Perfect. Thank you.

Operator

Thank you. One moment for our next question please. Our next question comes from the line of Neal Dingmann with Chrous Securities. Your line is now open.

Speaker 16

Good morning, all. Thanks for the time. My first question is on Permian processing margins given Waha pricing. I'm just wondering How do you see the margins going forward including the impact from your fee floors?

Speaker 2

We think they will be better in the second half. It worked great in the first half. Is that fair?

Speaker 9

It's fair. I think the trend, if you model out the forward curve, which is a good thing On the percent that hits the floor, it gets a lot less.

Speaker 16

Okay. And then, second, just on the marine exports, including LPG and ethane. I think you all previously mentioned strong demand. And Jim, I think you even mentioned, I It was around 240,000 barrels a day of new contracts. Is this still expectations?

Speaker 16

Are you seeing kind of production continue to grow in this area?

Speaker 2

I think, if you look at what we're doing, it kind of tells you what we believe. What we're doing is expanding our ability to export across the hydrocarbons chain. So yes, we believe Tony, if Tony is wrong, hell,

Operator

Thank you. One moment for our next question. Our next question comes from the line of Neil Mitra with Bank of America. Your line is now open.

Speaker 17

Hi, thanks for taking my question. I wanted to ask your exposure to spot ethane prices. Were you able to sell spot ethane out of maybe some of your purity storage in Mont Belvieu to downstream players and Benefit from that and conversely, did you have any downstream obligations like possibly being short On Morgan's point, because of outages, just wanted to see how that would kind of play out for 3Q now that we have a full month with

Speaker 2

One of the most valuable assets we have is our storage. And yes, we were able to take advantage The volatility on that thing. And no, we will have no issues with being short at Morgan's Point or anywhere else.

Speaker 17

Great. And then second question, we started the year off in the Q1 with very Hi, LPG exports. And I know we're seasonally weaker in the second quarter. When does that seasonality start Pickup so that it's a benefit again for the second half of the year?

Speaker 2

Right. Let's let Todd take it. But I mean, what's our export volume? Yes. We're going

Speaker 9

to be a little bit Soft

Speaker 3

in the month of August. What do you

Speaker 2

call soft, 18,000,000 barrels? Yes, right around there. I don't call that soft.

Speaker 9

But around September, we're fully Looked up and then I'll just note as well that we are seeing dock margins increase specifically in the month of August September forward.

Speaker 8

Okay. Thank you.

Operator

Thank you. I'm currently showing no further questions at this time. I'd like to hand the conference back over to Mr. Randy Burkhalter for closing remarks.

Speaker 1

Thank you, Norma. I think that covers it pretty well. I don't have any closing remarks. I'd just like to thank everybody for joining us today and for our call and have a good day. Goodbye now.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful

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Earnings Conference Call
Enterprise Products Partners Q2 2023
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