Enterprise Products Partners Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 2, 2023

There are 19 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Q1 2023 Enterprise Products Partners LP 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 today's conference is being recorded. I would now like to hand the conference over to your speaker today, Randy Burkhalter, VP of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, Gigi, and welcome, everyone. Good morning, and welcome to the Enterprise Products Partners conference Call to discuss Q1 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 21E of the Securities and 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.

Speaker 1

Although management believes that the expectations reflected in such forward looking statements are reasonable, They 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 so with that, I'll turn the call over to Jim.

Speaker 2

Thank you, Randy. Today, we announced Enterprise off to another good start for the year. We reported Adjusted EBITDA of $2,300,000,000 for the Q1 of 'twenty three. We generated $1,900,000,000 of distributable flat cash flow, Providing 1.8 times coverage, we retained $863,000,000 of DCF for the Q1. We reported 7 operating records and 1 financial record in the quarter, mostly related to our pipeline activities and export volumes We had record pipeline and fee based natural gas processing volumes, Record NGL marine terminal volumes and near record total marine terminal volumes.

Speaker 2

In March alone, our Marine Hotline Terminals loaded over 70,000,000 barrels NGLs, Crude Oil, Refined Products and Petrochemicals for export. Our NGL and Natural Gas Pipeline businesses as well as our natural gas marketing and octane enhancement activities also reported strong increases and gross operating margin compared to the Q1 last year. We also saw strong margins in our refined products business offset by lower volumes in our propylene business where PDH-one was down for 24 days during the Q1 for planned maintenance. We remain on schedule to put approximately $3,800,000,000 of major projects in service this year. In the Q2, we will commission PDH-two and the expansion of the Acadian Gas Pipeline System.

Speaker 2

In the second half of the year, we will complete our 19th NGL fractionator, 2 natural gas processing plants in the Permian and put the first phase of the Texas Western Products pipeline in service. We are running essentially full across all our assets with the exception of the Rockies. We have significant expansions in our ethane, Ethylene, propylene and LPG systems. We are upgrading export capacity and adding geographic diversity To our ethane export assets with positions at Morgan's Point and now Beaumont and expanding our LPG and propylene capacity at our Houston Ship Channel facility. Our ethylene export facility has been full since day 1 And we're expanding that by 50%.

Speaker 2

Ethane exports have moved from being only consumed by a handful of niche players And point to point movements, significant growth in demand by several petrochemicals In Asia, Europe and the Americas, we recently completed new ethane export contracts that add 240,000 barrels a day with multiple counterparties. On spot, We received our record of decision this past November and expect to get other permits in our license in the second half of the year. We are way ahead of other applicants and we know what it takes to get a record of decision. 2 buoys and a motorboat to hook up to a ship won't cut it. We will have a 20 fourseven man platform, fiber combustion and 2 pipelines that provide the ability to load multiple grades of crude oil and also able to evacuate those lines during hurricane.

Speaker 2

This is the time is on our side as we commercialize this project as we don't think it's needed until 2027. While the Q2 can be our weakest seasonally, we remain constructive on global market fundamentals Even though the forward curve doesn't reflect that, in addition to low global inventories, We also note that OPEC Plus seems to be intent on managing global balances. On the demand side, expectations for most consultants range from 1,400,000 to 2,000,000 barrels a day Global demand growth in 2023. OPEC plus economists say they are standing by their forecast 2,300,000 barrels a day demand growth by the end of 2023. From our perspective, that sounds rich, although The last 5 weeks, U.

Speaker 2

S. Crude inventories have drawn 20,000,000 barrels. Countering these bullish fundamentals or Concerns about the global economies with central banks continuing to signal additional rate increases Time inflation. Meanwhile, while the Chinese continue to ramp up travel in a huge way, Their industrial manufacturing surprised to the downside when their PMI turned negative yesterday. Regardless of the near term mix signals, which continue to signal a range bound market near term, for us, It's very hard to make a bearish call for oil in the medium to long term.

Speaker 2

And it's hard for us To be too constructive on natural gas, a wide gas to crude spread gives U. S. Petrochemicals a Structural feedstock advantage that in our view is permanent. Case in point is the current operating environment Where the U. S.

Speaker 2

Ethylene industry is the only region that has been consistently profitable, while the rest of the world Have been very selective in what they crack and how they operate. Single use plastics are doing good. They're profitable, while durables have their challenges and their headwinds. Meanwhile, the U. S.

Speaker 2

Refining industry is one of the most competitive And technologically capable in the world. In short, we expect U. S. Production to continue to grow. We do expect demand at our docks will likewise continue to grow.

Speaker 2

If you want to know where we're going, Look at what we're doing. We continue to expand our ability to export hydrocarbons out of the U. S. To points all over the world where it's needed. With that, I'll turn it over to Randy.

Speaker 3

Thank you, Jim, and good morning, everyone. Starting with income statement items, net income attributable to common unitholders for the Q1 of 2023 increased 7.3 percent to $1,400,000,000 or $0.63 per common unit on a fully diluted basis. This compares to $1,300,000,000 or $0.59 per common unit for the Q1 of 2022. Adjusted cash flow from operations or adjusted CFFO, which is cash flow from operating activities Before changes in working capital was $2,000,000,000 for both the 1st quarters of 2023 2022. We declared a distribution of $0.49 per common unit for the Q1 of 2023, which is 5 0.4% higher than the distribution declared for the Q1 of the prior year.

Speaker 3

This distribution will be paid May 12 The common unitholders of record as of close of business on April 28. As we mentioned on our February earnings call, We will evaluate another increase mid year. In March, we repurchased approximately 683,000 common units At an average price of $24.89 per unit on a for a total cost of approximately $17,000,000 In addition, on a combined basis, our DRIP and employee unit purchase program purchased Another 1,700,000 common units on the open market during the quarter. For the 12 months ending March 31, 2023, Enterprise paid out approximately $4,200,000,000 of distributions to limited partners. In addition, We also repurchased $267,000,000 of common units off the open market.

Speaker 3

As a result, Our payout ratio of adjusted cash flow from operations was 55% for this period And our payout ratio of adjusted free cash flow was 75% for this 12 month period. Total capital investments in the Q1 of 2023 were $654,000,000 which included $570,000,000 for organic growth capital projects and $84,000,000 of sustaining capital expenditures. Our major growth projects that are sanctioned and under construction remains unchanged at $6,100,000,000 We currently expect our 2023 growth capital expenditures will be in the range of $2,400,000,000 to 2,800,000,000 which includes possible expenditures associated with projects under development and not yet sanctioned. Frankly, I have a hard time seeing us get to the upper end of this range. The changes to our CapEx ranges For 2023 2024 since our recent Analyst Day, our projects under development, which are substantially comprised of potential expansions of our Permian gathering and processing systems and our NGL distribution system, including exports.

Speaker 3

None of this creep is associated with cost overruns or delays. We expect 2023 sustaining capital expenditures will be approximately $400,000,000 Our total debt principal outstanding was approximately $28,900,000,000 at the end of the quarter. Assuming the final maturity of our hybrids, the weighted average life of our debt portfolio was approximately 20 years. Our weighted average cost of debt is 4.6%. At March 31, approximately 97% of our debt was fixed Right.

Speaker 3

Our consolidated liquidity was approximately $4,000,000,000 at the end of the first quarter, which includes $3,900,000,000 of availability under Our credit facilities and $76,000,000 of unrestricted cash on hand. In March 2023, we entered into a new $1,500,000,000 3.64 day revolving credit agreement and a new $2,700,000,000 Revolving multi year agreement that matures in March 2028. These agreements replaced our prior credit facilities. For the 12 months ended March 31, 2023, our adjusted EBITDA increased 11.7% to $9,400,000,000 compared to our trailing 12 months as of March 31, 2022. We ended the quarter with A consolidated leverage ratio of 3.0 on a net basis after adjusting debt for the partial equity treatment of our hybrid debt and reduced by the partners unrestricted cash on hand.

Speaker 3

Earlier this year, We announced a lower leverage target of 3.0 times plus or minus a quarter or in a range from 2.75 times to 3.25 times. This change in financial policy, our lower leverage, Along with an established track record of growing stable fee based cash flows and strong credit metrics We've resulted in Standard and Poor's upgrading our senior unsecured credit rating to A- with a stable outlook. We are appreciative of this recognition as the only A- rated midstream energy company. With that, Randy, we can open it up for questions.

Speaker 1

Okay. Excuse me. Thank you, Randy. Gigi, I would like to remind our listeners that when they ask questions to

Operator

Our first question comes from the line of Spiro Dounis from Citi.

Speaker 4

Thanks, operator. Good morning, guys. First question on petchem, was particularly strong this quarter at least relative to what we had expected. And I know in the past you'd all talked about Maybe a 6 to 9 month period or a lag on inventories getting worked down globally before that really started to tighten. And so I'm just curious, Jim, I know you mentioned the weaker than expected PMI, but is something happening maybe sooner than you all had expected or are we still sort of waiting to see that Destocking effect take place later in the year.

Speaker 2

I'll let Chris Deanna answer you.

Speaker 5

Spiro, yes, I think what really happened in this first Quarter is that, it was more of a supply shortage than stronger demand. I mean, we had decent demand just coming off of the Q4, it was really weak, but ultimately it was reduced supply from a couple of PDHs being offline.

Speaker 4

Got it. Okay, that's helpful, Chris. Second question, just turning to Shin Oak. I know you all were sort of looking at Potential alternatives there to expanding that pipeline. Just curious if you can give us an update there on maybe what some of the potential alternatives could be and how you're thinking about the timing Make a decision there.

Speaker 2

I probably don't want to tell you what the alternatives are, but I will tell you, we're trying To be capital disciplined and in the course of trying to do that, I guess we've kind of confused people, but we will loop Shin Oak. If we can find Some options that defer that capital, then we'll probably do that. But make no mistake, Our intent is we are going to Luke's Shunhoke. And we've got a deadline on and there's a deadline on the Permit that we're going to have to be aware of.

Speaker 4

Got it. Understood. That's all I had today guys.

Speaker 2

Does that clear

Speaker 4

It does. I always appreciate your color. Crystal clear. Thanks again, guys.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Jean Ann Salisbury from Bernstein. Jean?

Speaker 6

Hi, good morning. NGL marketing has been falling in recent quarters and was quite low in this quarter. Can you talk through the drivers of this and if

Speaker 2

Lower commodity prices, but where is just Doug?

Speaker 7

I think if you look at What we did last quarter in 2022, the Q1 of 2022, I think we had some very good opportunities In that quarter with our storage program that we didn't have in the market this quarter, commodity prices probably have a little bit to do with it, but there was just probably some opportunities last year that we didn't see this year.

Speaker 6

Okay. That makes sense. And then kind of a broader question. Once the Houston Ship Channel is expanded, Does Enterprise Think forecast Houston crude prices trading at least at parity to Corpus or maybe even at premium?

Speaker 2

Who wants to take that? Your Tony or

Speaker 7

So there's a couple of things we're doing Jean Ann and

Speaker 2

Talk about the Jean Ann mentions it in her write up. Talk about Jean Ann says that the pipelines corpus are full.

Speaker 7

Yes. So Matt, we're getting incremental barrels. We're getting some incremental barrels Month over month and I just say if the state Permian grows 40,000 to 50,000 barrels a month that we're getting our fair share on the Houston Destin pipelines. There are some premiums that happen at Corpus on the docks. I wouldn't say those premiums are that much higher, and I wouldn't say that They're day in and day out.

Speaker 7

I think what you're seeing us doing on our system, G and E, and as we've implemented a new quality program.

Speaker 2

Yes, there

Speaker 8

it is.

Speaker 7

And So if you look at the quality of crude oil that we're getting right now across our docks, it's the best quality that we've seen since We've been up in operation and I think it compares with anything that Corpus can offer. So I think some of that is going to be equalized. Some of the freight advantages We'll have to overcome, but I think over time, if you look at where our program is going on crude oil, I think that We're going to eventually get there.

Speaker 2

And what was your objective in changing the model? Why did we change quality, Mark?

Speaker 7

I mean, we did it for a couple of reasons. But I mean, one thing is we listen to our customers. We listen to our customers both on the production side, we listen to it, Listen to them on the refinery side here in Houston and then also our export customers. But If you started going through the program on what we identified, there's probably a couple of folks out there that we're trying to do A little bit too much aggressive blending and we've effectively eliminated them and done a lot more routine testing in terms of maintaining The quality that we can offer these customers downstream. And ultimately that's going to achieve higher prices.

Speaker 6

That's super helpful, Brian, as always. Thank you so much and thanks for taking my question.

Speaker 7

Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Brian Reynolds from UBS.

Speaker 9

Hi, good morning everyone. Maybe just to talk on distribution outlook and expectations. We've seen enterprise raise kind of in that 1% to 5% range over the since 2018. Looking forward with leverage below 3 times and free cash flow, Still hovering around $1,000,000,000 after dividends in the next few years. Kind of curious if we could see that DPU growth rate go above 5% or perhaps a little more CapEx Yes.

Speaker 3

Hey, Brian, this is Randy. Yes, thanks for the question. I think coming in and really looking at a range of 1% to 5% and going back to 2018, I would probably differ in my perspective of how I would look at it because from 2017 through, call it, 20 2021, we were really in a mode of transitioning from more of an external funding model to now more of an internal funding model. And so that we were very measured on what we did in distribution growth to be able to Grow into that internally funded model. Since that point in time, I would really say since over the last couple of years, 2 years, We have grown more in the range of, call it, 4% to 6%.

Speaker 3

And like I said, we'll come in, as I Mentioned in the prepared remarks, we'll come in and discuss with the Board here middle of this year as far as what we want to do for the rest of this year on distribution growth. And again, we've demonstrated Good EBITDA growth. Jim mentioned $3,800,000,000 worth of projects going into service for the remainder of the year. That gives us Good cash flow growth that will support distribution growth down the road. And I really hate to come in and get more granular than that because I don't want to usurp Our Board or front runner Board.

Speaker 3

But I think we'll look to continue to come in and provide distribution growth And buybacks for that matter as far as getting capital back to investors.

Speaker 9

Great. Appreciate it. We'll wait for that mid year And then as my follow-up question, I'll take the CapEx question. Projects under development have increased by $1,000,000,000 for $23,000,000 and $24,000,000 You talked about in your prepared remarks that you see limited ability to get to the high end of that range. So kind of curious if you can just talk about Perhaps some of the projects in the hopper and then within the existing CapEx backlog, was there any CapEx inflation or perhaps pull forward of CapEx Into 2023 2024 that we should be thinking about?

Speaker 9

Thanks.

Speaker 3

Yes. I'll take the first part of the question. There was not any Cost of any overruns or delays on projects. In fact, Graham and his engineering team have done a great job of delivering projects On time and more often than not, slightly under budget. And really, The change that we've had since Analyst Day are more projects that we've I guess we've got A good bit of confidence in and we included them in the range, but they're still subject to being completely underwritten through commercial Contracts and rather not elaborate into much detail.

Speaker 3

We'll just come in and go back in. And again, What I said in prepared remarks, and a lot of it is what we talked about at our Analyst Day, where we're seeing most of the opportunities for growth Our gathering and processing in the Permian broadly. It is also in our NGL distribution system, including Export Facility. So just seeing a lot of demand on that front.

Speaker 9

Great. I'll leave it there. Enjoy the rest of your morning everyone.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Michael Blum from Wells Fargo.

Speaker 8

Thanks. Good morning, everyone.

Speaker 10

I wanted to ask

Speaker 8

about Marine export, particularly LPG and SA, and it came in really strong this quarter.

Speaker 10

Just I

Speaker 8

want to get your color on the market, what demand looks like and do you think these levels are sustainable from here? Thanks.

Speaker 2

Doug, do you want to take that?

Speaker 7

Yes. No, this is Doug. Yes. We did definitely see strong demand this last quarter and we're going to expect to continue to see that demand really comes down to Production is continuing to grow. It's still a supply push and the barrels still having a price to clear across the water.

Speaker 2

Michael, I was I've been surprised pleasantly so at how Well, we've done on our ethane exports, and I'm surprised that we're able to do 240,000 barrels a day

Speaker 8

Very good. That's all I have today. Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Tristan Richardson from Scotiabank.

Speaker 5

Hi, good morning guys. Could you talk a little bit about PDH2 and overall in the petchem segment? How should we think maybe about that fee based mix pro form a once that asset comes online relative to the sort of 70 ish percent fee based We typically see in that segment.

Speaker 2

I think this one's 100% fee based, didn't it, Chris? That's correct. So It's 100% fee based with all creditworthy customers and we always Graham is sitting to my left. They always Come in, we can do more than whatever the nameplate is. So we'll probably have some extra pounds to play with.

Speaker 5

Great. And then maybe just on EHT export expansion, could you talk a little bit about the mix of products you're seeing? I mean, You talked a lot about Refrigeration at Analyst Day and I think you highlighted that, that expansion could be 120 a day. Should we think of it as pretty fungible across products or primarily focused on LPG? And then could the scope change for that project, just given sort of the strength you're seeing across the dock indicated by the Q1?

Speaker 7

Yes, this is Brent. So I think in terms of where it stands right now, it's propane, butane and some propylene, Slide to come on the second half of twenty twenty five. We continue to look, Tristan, that Is there another project there, but it's all under evaluation, but right now it's slated to come on the second half of twenty twenty five.

Speaker 10

And I just

Speaker 7

want to correct the number. You said 120,000 barrels a day are LPG export expansion to north of 170,000 barrels a day.

Speaker 5

Got it. Helpful.

Speaker 2

And we're talking about The ship channel widening is what you might explain that. Bob, can you explain what you get out of the ship

Speaker 11

So when Project 11 is complete on the widening, which we expect By the end of 'twenty four, Q1 of 'twenty five, it will add 4 to 5 hours of daylight And most of the products we deal with are daylight restricted. So that's easily an incremental 15% to 20% additional cargoes that can come in If needs be.

Speaker 2

Which means to you and Zach, you sell out your refrigeration now

Operator

Our next question comes from the line of Chase Mulvehill from Bank of America.

Speaker 10

Hey, good morning everybody. I guess a lot of ground has been covered, but can I ask on Processing margins in the Permian and kind of relative to your fee floors? Obviously, Waha is seeing a lot of pressure. So we kind of at Those fee force for Waha at this point. And then also just an update on kind of how you're thinking about, I think it's 400 MCF a day of latent capacity on your Texas intrastate pipelines.

Speaker 10

Just how you're thinking about that, still holding it open We're contracting it up and updates on kind of how you see Permian natural gas egress between the Brownfield additions and when Matterhorn comes online?

Speaker 2

Natalie and Tug.

Speaker 12

I'll answer the fee floor question. Post Navitas, the Q1 of 'twenty three, We did hit more fee floors than I guess the end of 2022, but less volume is being subject to the fee floors. So I'd call it 75% of the volume and it's not very far under the fee for us. So long story short, there's probably upside the rest of the year.

Speaker 7

This is Doug on the pipeline capacity question. We still have open pipeline capacity. We are utilizing every day as marketing, but Just like every decision here at Enterprise, there's an opportunity to work with Natalie for a long term contract opportunity. We'll evaluate that or

Speaker 2

We feel like it's the right time, we will contract that capacity.

Speaker 10

Okay, great. Makes sense. An unrelated follow-up on Octane enhancement, you're still generating some nice Gross operating margin there and really some nice non fee gross operating margin is RBOB and butane spreads are still wide. So I'd be curious kind of your thoughts on how you see these spreads playing out the rest of 2023 and how much you have hedged at this point?

Speaker 7

So we have right now, I think that octane enhancement is about 75% hedged. We feel pretty good about where those margins are going to be. There was an earlier question about LPG pricing. And I think as you see this production come on, you look at the ability for propane and butane to go find markets, I could see that being somewhat challenged And that's to the benefit of our octane enhancement program. Are we going to see as good a margins that we saw from the MTB uplift that we saw earlier this year?

Speaker 7

Probably not, It's still very good business for us.

Speaker 10

Okay, perfect. I'll turn it back over. Appreciate it.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Jeremy Tonet from JPMorgan Securities LLC.

Speaker 13

Hi, good morning.

Speaker 7

Good morning.

Speaker 10

Just wanted to kind of pick up a

Speaker 13

bit, I guess, on the Permian and natural gas. There's been some conversation out there with GOR ratios increasing. And just wondering if you could talk about what your experience or thoughts are there and how you see that, I guess, kind of impacting basin production as a whole?

Speaker 14

Yes. Jeremy, this is Tony.

Speaker 13

And takeaway dynamics, sorry.

Speaker 10

Okay. Go ahead.

Speaker 13

All right.

Speaker 14

Yes. QRs, when we looked at the basin holistically, are absolutely going up. It's largely driven By the preponderance of drilling in the more gassy areas and think Delaware Basin, compared to, say, the Midland Basin. So there's no question that The GORs are going up and that's how midstreams are contracting and that's what producers are doing. Producers look at their portfolio, they look at what they plan to drill.

Speaker 14

And Gas GORs, the decline over time, oil declines faster than natural gas does. So that impacts the long term outlook in this regard.

Speaker 2

Does that mean you have less crude?

Speaker 14

Jim, one note, does that mean you have less crude? Yes. And I think there's a misconception, thanks for that Jim, That we don't have the amount of crude that we had before because GORs and that's absolutely is not the fact. And you can look at our forecast, Which we stand by. You have a lot of both.

Speaker 14

That's the bottom line. You have a lot of crude. There's been no change in those curves as we forecast. You have a lot of very rich gas. So the answer is, it doesn't mean less crude.

Speaker 14

And ultimately, this is not a bad story. It's not a bad story for enterprise. It's a great story.

Speaker 13

Got it. That's very helpful there. And then just wanted to kind of come back to the LPG and Ken Seiden, you've touched on this a few different times across the call, but just wanted to see, I guess, what patterns you're seeing over the balance of the year. LPG exports, is that kind of One time in nature and surprise, do you see this strength continuing? People are concerned about a recession?

Speaker 13

How do you see LPG exports in petchem, I guess kind of being impacted by these trends looking forward?

Speaker 2

I think and I'll hand it to Brent, but OPG has got a price to export, period. And price creates demand And it's going to have to price to export and there will be demand for it, Brent?

Speaker 7

Yes. I mean, the only thing I'd add, So that's our fundamental belief. And it will have to go fight to maintain some sort of margin. If there's some sort of issue, Obviously, at Enterprise, we have a pretty good shock absorber, which is our storage footprint. And if he can play this out, Because there's another question about LPG export.

Speaker 7

So and why we're expanding our export capacity is because the market needs it. And if you look at infrastructure bottlenecks, our belief is that as The production comes online, it will price to export, but at some point, the export capacity isn't going to be there. And that's an opportunity for folks like Enterprise to participate in that market. And if you go out even further When you look at the overall demand, especially what's coming out of China with PDHs, there's going to be a period of time in there in 2025, 2026, 2027 timeframe where the U. S.

Speaker 7

Producer has to catch up to the overall capacity and the overall demand. But all this is going to be healthy for the system.

Speaker 13

Great. Thank you very much.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Colton Bean from Tudor, Pickering, Holt and Company.

Speaker 15

Good morning. Randy, coming back to Brian's question from a different angle. Do you all view leverage as more of an output or are you intent on managing towards the target range? Meaning, are there any items you view as a balancing mechanism, whether that be Distribution growth, buybacks, CapEx, would you let leverage drift below the range in any given year?

Speaker 3

Colton, the range that we have out there, I think is A sufficient range for us for the foreseeable future It really comes in and gives us a lot of flexibility to come in and fund organic growth. If we see A surge in organic growth projects, I think it gives us the flexibility to handle that, stay in the range. I think it gives us The flexibility to come in and if we see an acquisition opportunity that we want to use Cash or incurred debt for, I think it gives us plenty of flexibility to do that as well as come in and continue to distribution growth and buyback. So I know I'm not Probably answering the question the way you wanted it to, but that range of 2.75 to 3.25 gives us a lot of flexibility. And When we get all these new growth capital projects coming online and again, we've got a lot under construction now And I think we'll see more of that EBITDA, certainly full year of that EBITDA show up in 2024, 2025.

Speaker 3

And then I think at that point in time, we'll reassess.

Speaker 15

Okay. And so it sounds like for the near term, Expecting to stay within that range. And the question was more angled towards it seems like you guys are more likely to break the bottom end than the top end. And so just If we'd see a ramp in distribution growth or buybacks, if it looks like you all were drifting into, call it, mid-2s or even low-2s?

Speaker 3

Collin, I just hate to get the cart ahead of the horse. Let us get there first. And then and let us see what the situation Let us see what the situation looks like when that prevails and I think we're going to do the responsible thing once we get to that point.

Speaker 15

That's perfect. And then maybe shifting over to gathering. So I think there's a $25,000,000 step up in the Rocky Mountain region called out. From What we were saying, it looked like regional pricing was actually down specifically in the San Juan,

Speaker 16

which I think is where

Speaker 15

you have those gathering fees index. So I guess, Can you explain kind of what the uplift was there quarter on quarter?

Speaker 3

Yes. Really, I think What we were seeing was really for a period of time, I think especially January, we really saw strong natural gas prices More driven by California, both up in the Rockies and in the San Juan. Tony, I don't know if you

Speaker 14

I completely agree. Phenomenal prices Definitely an outlier. And that's because utilities just want to prepare and say we have to have the gas.

Speaker 15

Great. Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Theresa Chen from Barclays.

Speaker 16

Good morning. I wanted to touch on the near term demand outlook for U. S. LPG exports a bit more. Going back to your comments about the Chinese PDH unit, what are you seeing in terms of the pace and ramp of them?

Speaker 16

And do you think there could be an incremental bid for U. S. Cargoes later on this year due to lower LPG exports from Saudi Arabia and Qatar?

Speaker 7

I'm sorry, Theresa, what was the first part of that question?

Operator

Chinese PDH unit ramp.

Speaker 7

Yes, I mean, so I think you're seeing quite a few, PDHs come online this year. You'll see some next year and then obviously the year after. I don't know if the run rates are going to be sustainable in terms of what they're doing right now. I think they're doing probably around 70%. There'll be some opportunities for LPG exports.

Speaker 7

I think the overall propane consumption is only going to increase. I just don't know if those run rates over there in China are going to be able to be maintained. If you look at our opportunities, we have the availability of some spots. Those will probably get filled up, but it's not a ton. It's probably 2 or 3 spots a month, Tug, that we have available, right?

Speaker 2

We it still goes back to the gas to crude spread as to how much those PDH is run. And as we said in our script, we're still we can't make a bearish case medium to long term On crude prices, we can't we're not constructive on natural gas. So inherent net gas to crude spread ought to be

Speaker 16

Thank you. And the second part of the question related to U. S. LPG cargo is potentially getting a bid due to OPEC production cuts.

Speaker 2

By definition, I think if they cut crude, they cut LPG, Tommy.

Speaker 14

They do. But just Theresa, they're not Huge LPG Exporters anyway, and they've been really outspoken that at least for now, Incremental barrels, whether they're up or down, will affect internal consumption. So They're just another balancing item in a market where barrels are pricing to get consumed.

Speaker 10

Got it.

Speaker 14

It's just not we don't see it as a big factor.

Speaker 16

Understood. And Brent, going back to your comments about Infrastructure bottlenecks on the LPG export front down the line eventually. Where do you think the export constraint will come about? Is it dock space? Is it refrigged capacity?

Speaker 16

Is it tonnage? What does that look like?

Speaker 7

I mean, I think it's refrigged capacity. That's where it starts to begin with. And I don't if you look at what the industry is doing right now, we're running at pretty high rates. The dock piece is easily or easier to solve, but on the front end, I would probably say it's going to be refreshed

Operator

Thank you. One moment for our next question. Our next question comes from the line of Keith Stanley from Wolfe Research.

Speaker 17

Hi, good morning. I wanted to start with a follow-up on CapEx. So You're at about $2,500,000,000 this year. I think potential spend for next year $2,000,000,000 to $2,500,000,000 A couple of years ago, I think the company talked to $1,500,000,000 to $2,000,000,000 is somewhat of a run rate for CapEx. So should we think of 2023 2024 as Elevated CapEx years or is the run rate now higher just as the company continues to grow?

Speaker 3

Keith, I just yes, the opportunities are there. Yes, just good opportunities at the time. What 20 6 and 20 7 looks like, we'll let you know when we get closer to that point. But right now, we just see a lot of good Opportunities both on the upstream side and the downstream side.

Speaker 2

We're bringing on $3,800,000,000 worth of major projects this year. You take our PDH2 plant, our fractionator, Acadian expansion, those will all be full on day 1.

Speaker 17

Thanks for that. So second question, just You rolled out the Project 9.3 last quarter. Any at a high level, any areas of the business that are going better than planned, any lighter than planned? Just any High level comments on progress towards that internal target?

Speaker 2

We probably we have probably petrochemicals, so we're over planned. So Other than I can't think of anything other than the Rockies and I guess our Eagle Ford crude pipeline As we're hustling that, so other than that, Zach, you got anything going on?

Speaker 14

No. I haven't called on a few

Speaker 2

slides, That's something we need to call out.

Speaker 7

I think segment by segment, we're pretty close to where we planned.

Speaker 4

Okay. Thank you.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Neal Dingmann from Truist.

Speaker 10

Good morning, gentlemen. Thanks for

Speaker 18

taking my questions. My first is on shareholder return. I'm just wondering, given how strong your financial position continues to be with over $4,000,000,000 liquidity. I'm just wondering what factors go into the decision on the unit repurchase on a go forward?

Speaker 3

Yes, Neil, good morning. And yes, Neil, it really I guess we had talked that The buyback program is still more in more of an opportunistic program right now. And I guess good news, bad news is frankly in the Q1, we didn't see a lot of good opportunities. When we in the month of March, I think around the Silicon Valley Bank failure, there was more volatility in the market And the units were under pressure and we saw good value and we came in and executed then. Just our window wasn't Long enough, we would like to have bought more, but the units rallied pretty quickly on the heels of that.

Speaker 18

That's great to hear. And then my second question on Petrochem specifically. Looks like the propylene side was Slightly down, just largely I think more mostly just on the planned maintenance. So I'm just wondering, can you remind me of any major planned maintenance for the remainder of the year specifically for That propylene production facilities.

Speaker 12

Rem, you got any?

Speaker 3

We've currently got a couple of splitters and down for a planned maintenance after that.

Speaker 2

We got a couple of splitters down right now for planned maintenance, but after that I think we're done for the year.

Speaker 5

And the splitter turnarounds, they're not going to they're not material to any financials?

Operator

Thank you. At this time, there are no further questions. I would now like to turn the conference Back over to Randy Burkhalter for closing remarks.

Speaker 1

Thank you, Gigi. That concludes our call today, everyone, and we'd like to thank our Listeners for joining us today and have a great rest of your day and goodbye for now.

Operator

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

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Earnings Conference Call
Enterprise Products Partners Q1 2023
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