ENTERPRISE PRODUCTS PARTNERS L.P. SECOND QUARTER 2020 EARNINGS SUPPORT SLIDES
July 29, 2020
Forward-Looking Statements
This presentation contains forward-looking statements based on the beliefs of the company, as well as assumptions made by, and information currently available to our management team (including information published by third parties). When used in this presentation, words such as "anticipate," "project," "expect," "plan," "seek," "goal," "estimate," "forecast," "intend," "could," "should," "would," "will," "believe," "may," "scheduled," "potential" and similar expressions and statements regarding our plans and objectives for future operations, are intended to identify forward-looking statements.
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. You should not put undue reliance on any forward-looking statements, which speak only as of their dates. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expected, including insufficient cash from operations, adverse market conditions, governmental regulations, the possibility that tax or other costs or difficulties related thereto will be greater than expected, the impact of competition and other risk factors discussed in our latest filings with the Securities and Exchange Commission.
All forward-looking statements attributable to Enterprise or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained herein, in such filings and in our future periodic reports filed with the Securities and Exchange Commission. Except as required by law, we do not intend to update or revise our forward- looking statements, whether as a result of new information, future events or otherwise.
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Qualifying Statements
- This supplemental package of earnings support slides provides highlights of major variances for the quarter.
- This data should be read in conjunction with the information contained in the earnings release for the second quarter of 2020 and our second quarter SEC Form 10-Q (when filed), which provide a more comprehensive description of the changes between the relevant periods.
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Indicative Attribution of Gross Operating Margin
Slides 9-11 attribute gross operating margin (GOM) among fee-based,commodity-based and differential-based business activities. Most activities fit easily into one category; however, the classification of certain activities involves an element of subjectivity. The classifications reflected in the following slides represent what we currently believe is the most logical fit of our business activities into the categories described below, based on the underlying fee or pricing characteristics applicable thereto.
These classifications may be subject to change in the event that management's estimates or assumptions underlying such classifications are revised or updated. In addition, our attribution of GOM into the categories described below may not be comparable to similar classifications by other companies because such companies may use different estimates and assumptions than we do in defining such categories or otherwise calculating such attributions.
Three categories of GOM:
- Fee-based: Pipeline transportation fees and tariffs, NGL and propylene fractionation fees, storage capacity reservation and throughput fees, export terminal fees, marine and trucking fees, fee-based natural gas processing arrangements, isomerization and dehydrogenation fees, demand and deficiency fees, and similar activities that are predominantly fee-oriented.
- Commodity-based:Percentage-of-liquids and percentage-of-proceeds natural gas processing arrangements, certain condensate sales, gathering revenues on our San Juan natural gas pipeline system, and similar activities that have commodity price exposure.
- Differential-based: Certain business activities where earnings are generated based on price differentials or spreads between locations, time periods and products in excess of any related fees, tariffs and other expenses.
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Enterprise 2020 Financial Outlook
Capital Expenditure Updates
- 2020 Growth Capital Forecast: ≈$2.5-$3 billion
- Currently forecasting 2021 and 2022 growth capital of ≈$2.3 billion and $1 billion, respectively*
- Based on sanctioned projects to date
- Continuing to negotiate JV opportunities which could further reduce growth capital expenditures
- Continue to invest in quality projects
- Supported by high quality customers, long-termfee-based contracts
- 2020 sustaining capital expenditures: $300 million
Maintain and Protect Balance Sheet
- Leverage(1) 3.5x target area; 12 months ended June 30, 2020 was 3.4x
- Liquidity: $7.3 billion comprised of available credit capacity and unrestricted cash
Returning Capital to Investors
- Distribution declared with respect to 2Q 2020 was held flat to 1Q 2020 at $0.445/unit payment
- Plan to re-evaluate quarterly
- CFFO Payout Ratio(1): 83% for 2Q 2020 and 62% for TTM 2Q 2020
* Excludes SPOT export terminal, which is pending permit approval
(1) See definitions
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Durable Cash Flows | ||||||||||||||||||||
Through Business Cycles | CFFO per Unit & Distribution per Unit | |||||||||||||||||||
Gross Operating Margin and DCF | $100 | |||||||||||||||||||
$160 | $2,500 | $90 | $2.96 | $2.96 | ||||||||||||||||
$140 | $80 | $2.80 | ||||||||||||||||||
$2,000 | ||||||||||||||||||||
$120 | $70 | $2.20 | ||||||||||||||||||
$2.10 | $2.17 | |||||||||||||||||||
$60 | $1.92 | $2.00$1.95 | ||||||||||||||||||
$100 | $1,500 | |||||||||||||||||||
$/Bbl | $/Bbl | $40 | $1.22 | $1.21 | $1.61 | |||||||||||||||
$80 | $50 | $1.59 | $1.56$1.47 | |||||||||||||||||
$60 | $1,000 | |||||||||||||||||||
$30 | $0.56$0.73 | |||||||||||||||||||
$40 | ||||||||||||||||||||
$500 | $20 | |||||||||||||||||||
$0.77 | $0.85 | $0.91 | $0.97 | $1.04 | $1.10 | $1.16 | $1.22 | $1.29 | $1.37 | $1.45 | $1.53 | $1.61 | $1.68 | $1.73 | $1.77 | $1.78 | ||||
$20 | $10 | |||||||||||||||||||
$0 | $- | $0 |
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$-
$/unit
WTI Crude EPD Gross Operating Margin EPD DCF w/o Non Recurring
Returns on Invested Capital
$100 | 12.9% | 13.3% | 13.1% | 13.3% | |||||||||||||
$80 | 10.5% | 11.8% | 10.8% | 11.4% | 11.2% | 11.6% | 12.5% | 11.0% | 10.2% | 10.7% | 12.6% | 12.5% | |||||
$/Bbl | $60 | ||||||||||||||||
$40 | |||||||||||||||||
$20 | |||||||||||||||||
$0 | |||||||||||||||||
ROIC | WTI Crude | ||
© All Rights Reserved. Enterprise Products Partners L.P. |
14.0% | Distribution per unit | CFFO Per Unit | WTI Crude | ||
12.0% | • Delivered consistent results | ||||
10.0% | throughout cycles which has | ||||
8.0% | supported distribution growth and | ||||
built a margin of safety through | |||||
6.0% | |||||
excess coverage | |||||
4.0% | |||||
• Generated Returns on Invested | |||||
2.0% | |||||
0.0% | Capital of 12% on average since 2005 | ||||
enterpriseproducts.com | Page 6 |
Capital Updates
≈$6.6B of Major Capital Projects Under Construction*
Natural Gas | Liquids |
Natural | Gas |
Crude Oil
Products
Refined
Petchem &
Highlighted Major Capital Projects | Forecast In-Service | 1Q 20 | 2Q 20 | 3Q 20 4Q 20 2021+ | |||
Mont Belvieu Area Fractionators 10 & 11 | 1Q 2020 & 3Q 2020 | In-Serv | √ | ||||
Texas Express & Front Range Expansions | 2Q 2020 | In-Serv | |||||
EHT LPG & PGP Export Expansion (refrigeration) | On Hold | ------ | |||||
C5 Hydrotreater | 2021+ | √ | |||||
Natural Gas Pipeline to Carthage (Panola related) | 4Q 2020 | √ | |||||
Gillis Lateral & Acadian Haynesville Expansion | 4Q 2021 | √ | |||||
Permian Gathering & Residue Lines | 2021+ | √ | |||||
Permian Gathering & Condensate Projects | 1Q 2020 | In-Serv | |||||
Midland-to-ECHO 3 Pipeline | 3Q 2020 | √ | |||||
EHT Dock 1A Layberth & Expansion | 2Q 2020 & On Hold | In-Serv | ------ | ||||
EFS Projects & Other Tank Projects | 2Q-3Q 2020 | In-Serv | √ | ||||
Midland & ECHO Tank Expansions (support M2E3) | 1Q 2021 | √ | |||||
Midland-to-ECHO 4 Pipeline | 2H 2021 | √ | |||||
Mont Belvieu Area DIB 2 | 3Q 2020 | √ | |||||
Ethylene Export Expansion (tank) & Ethylene Pipelines | 4Q 2020 | √ | |||||
PDH 2 Facility | 2Q 2023 | √ | |||||
Total Major Capital Placed In-Service ($ Billions) | $0.5 | $0.2 | Total Under | ||||
Construction | |||||||
Total Major Capital In-Service Forecast ($ Billions)* | $1.4 | $0.5 | $4.7 | $6.6 |
*Excludes SPOT export terminal, which is pending permit approval
Note: The table above includes a selection of highlighted projects, and may not represent the entirety of projects included in the monetary sums
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Gross Operating Margin Bridge
$ in MMs | 2Q 2020 vs. 2Q 2019 | 2Q 2020 vs. 1Q 2020 |
2Q 2019 | Non-Cash | New & | Existing | Legacy | Other Asset | 2Q 2020 | 1Q 2020 | Non-Cash | New & | Existing | Legacy Gas | Other Asset | 2Q 2020 |
GOM | MTM | Expanded | Assets with | Gas Plants Changes offset | GOM | GOM | MTM | Expanded | Assets with | Plants | Changes offset | GOM | |
Change | Assets | Operating | by Marketing | Change | Assets | Operating | by Marketing | ||||||
Leverage | Leverage |
Details:
- Non-cashmark-to-market ("MTM") changes are a function of the hedging of crude oil, natural gas, natural gas liquids ("NGL") and refined products price differentials between locations, time periods and products; this hedging is associated with marketing activities related to certain of our pipeline, storage and plant facilities
- 2Q 2020 was a gain of $62MM, 2Q 2019 was a loss of $13MM and 1Q 2020 was a gain of $30MM
- New and expanded assets are those which have been placed in-service or expanded in the past 12 months; these include Texas Express & Front Range expansions, Orla & Mentone gas processing & related gathering, NGL fractionation, LPG export capacity expansion, Midland-to-ECHO 2, ethylene export facility, & iBDH, among others
- Existing assets (excluding natural gas processing plants) with operating leverage are those that increased >$1MM vs. the comparable period and did not have a contractual ramp or expansion
- Indicative processing spreads (Mont Belvieu NGL vs. Henry Hub natural gas) were $0.17/gal for 2Q 2020 vs. $0.19/gal for 1Q 2020 and $0.25/gal for 2Q 2019
Total gross operating margin is a Non-GAAP measure. For a reconciliation of these amounts to their nearest GAAP counterparts, see "Non-GAAP Financial Measures" on our website.
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Indicative Attribution of Gross Operating Margin
Gross Operating Margin in $Billions
$9.0
$8.0
$7.0
$6.0
$5.0
$4.0
$3.0
$2.0
$1.0
$0.0
$8.3B | ||||
$7.3B | 10% | |||
4% | ||||
8% | ||||
6% | ||||
$5.2B | $5.7B | |||
6% | ||||
5% | 5% | |||
4% | ||||
$4.0B | ||||
86% | 9% | |||
86% | 3% | |||
89% | fee-based | |||
91% | fee-based |
fee-based | fee-based | 88% |
fee-based |
2016 | 2017 | 2018 | 2019 | 1H 2020 | |||
Fee-Based | Commodity Price-Based | Differential-Based | |||||
Total gross operating margin is a Non-GAAP measure. For a reconciliation of these amounts to their nearest GAAP counterparts, see "Non-GAAP Financial Measures" on our website. Excludes non-cash MTM results for respective periods
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Indicative Attribution of Segment GOM: 1H 2020
(4) % Breakout of GOM
100% | |||
9% | 10% | 15% | 10% |
4% | 2% | ||
80% | 9% |
60%
40% | 91% | 86% | 76% | 88% |
fee-based | fee-based | fee-based | ||
fee-based | ||||
20% |
0% | |||||||||
NGL Segment (1) | Crude Segment | Natural Gas Segment(2) | Petchem & Refined(3) | ||||||
Products Segment | |||||||||
Fee-Based | Commodity Price-Based | Differential-Based | |||||||
Based on Gross Operating Margin
- Differential-basedmay include: marketing transactions such as spot exports, location differentials, or commodity differentials, and keepwhole gas processing agreements. Commodity-based may include: percent of liquids and percentage of proceeds gas processing agreements
- San Juan gathering generates commodity sensitive earnings, while natural gas marketing includes Waha to Carthage and Waha to Houston transportation differentials
- Largest differential contribution was from propylene fractionation and refined products marketing
- The above figures exclude non-cash MTM results for the segments
Total gross operating margin is a Non-GAAP measure. For a reconciliation of these amounts to their nearest GAAP counterparts, see "Non-GAAP Financial Measures" on our website.
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Indicative Attribution of GOM for Select Businesses
$600 | Natural Gas Processing GOM |
$0.50 |
$500 | $500 | $0.40 | |||||||||||||||
$Millions | $400 | $356 | Spread | ||||||||||||||
$0.30 | |||||||||||||||||
$300 | |||||||||||||||||
GOM in | $244 | $0.20 | Price | ||||||||||||||
$200 | $169 | ||||||||||||||||
57% | 70% | $0.10 | |||||||||||||||
$100 | |||||||||||||||||
81% | 68% | $50 | |||||||||||||||
$0 | 100% | $0.00 | |||||||||||||||
1H 2020(1) | |||||||||||||||||
2016 | 2017 | 2018 | 2019 | ||||||||||||||
Fee | POP & POL | Keepwhole | Indicative Processing Spreads ($/Gal) | ||||||||||||||
$500 | Propylene Activities GOM & Related Spreads | $0.80 | Octane Enhancement, HPIB, iBDH GOM & Related Spreads | ||||||||||||||
$463 | $445 | $180 | $166 | $1.20 | |||||||||||||
$450 | |||||||||||||||||
$0.70 | $160 | ||||||||||||||||
$154 | |||||||||||||||||
$1.00 | |||||||||||||||||
$400 | $140 | ||||||||||||||||
$0.60 | |||||||||||||||||
$350 | $123 | ||||||||||||||||
GOM in $Millions | GOM in $Millions | $120 | $0.80 | ||||||||||||||
$300 | $0.50 | Price Spread | $106 | Price Spread | |||||||||||||
$100 | |||||||||||||||||
$250 | $0.40 | $0.60 | |||||||||||||||
$212 | $222 | $80 | |||||||||||||||
$200 | $0.30 | ||||||||||||||||
74% | 79% | $169 | |||||||||||||||
$60 | $0.40 | ||||||||||||||||
$150 | $42 | 62% | |||||||||||||||
$0.20 | 61% | ||||||||||||||||
$100 | $40 | ||||||||||||||||
55% | 57% | $0.20 | |||||||||||||||
70% | 69% | 87% | |||||||||||||||
$0.10 | |||||||||||||||||
$50 | $20 | ||||||||||||||||
60% | |||||||||||||||||
$0 | $0.00 | ||||||||||||||||
$0 | $0.00 | ||||||||||||||||
2016 | 2017 | 2018 | 2019 | 1H 2020 | 2016 | 2017 | 2018 | 2019 | 1H 2020 | ||||||||
Fee | Non-Fee | Spread PGP vs RGP ($/Gal) | Fee | Non-Fee | Spread RBOB vs Butane ($/Gal) |
The above figures exclude non-cash MTM results for the segments
- Commodity exposed earnings were offset by negative hedging impacts
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SEGMENT
GROSS OPERATING MARGIN VARIANCE 2Q 2020 VS. 2Q 2019
NGL Segment 2Q 2020 vs. 2Q 2019
Gross Operating Margin Bridge
$ in MMs
$4
2Q 2019 | Non-Cash | Mont Belvieu | EHT Export | Permian Gas | South Texas | South LA & | Legacy Gas | Other | 2Q 2020 |
GOM | MTM Change | Area | Terminal & | Plants | Pipelines | LouTex Pipelines | Plants | Changes | GOM |
Fractionators | Related Pipeline |
Details:
- Non-cashMTM activity resulted in a gain of $36MM in 2Q 2020 compared to a loss of less than $1MM in 2Q 2019
- Mont Belvieu area fractionators increased primarily due to higher volumes of 166 MBPD; Frac 10 began operations in March 2020
- EHT terminal increased due to a 99 MBPD increase in export volumes associated with the 3Q 2019 LPG export expansion
- Permian gas plants were lower primarily due to unfavorable impacts from hedging
- South Texas pipelines were lower primarily due to lower capacity fees from an affiliate pipeline
- South Louisiana and LouTex pipelines were lower primarily due to a combined 120 MBPD decrease in volumes
- Legacy gas plants were lower primarily from lower margin related earnings, including hedging. Indicative processing margins decreased $0.08 compared to 2Q 2019
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Crude Oil Segment 2Q 2020 vs. 2Q 2019
Gross Operating Margin Bridge
$ in MMs
($4)
2Q 2019 | Non-Cash | Marketing | ECHO | South Texas & | Midland-to-ECHO | Other | 2Q 2020 |
GOM | MTM Change | (excl. MTM | Terminal | Eagle Ford Pipelines | System | Changes | GOM |
& M2E1) | (excl. MTM) |
Details:
- Non-cashMTM activity resulted in a gain of $8MM in 2Q 2020 compared to a loss of $15MM in 2Q 2019
- Marketing activities (excl. MTM and Midland-to-ECHO 1) increased primarily due to higher margins associated with contango opportunities and regional price spreads
- ECHO terminal decreased primarily due to a benefit recognized from a settlement in 2Q 2019
- South Texas and Eagle Ford pipelines are lower primarily due to a combined 101 MBPD reduction in volume
- Midland-to-ECHOsystem decreased primarily due to lower associated marketing activities
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Natural Gas Segment 2Q 2020 vs. 2Q 2019
Gross Operating Margin Bridge
$ in MMs
2Q 2019 | Non-Cash | Texas Intrastate | Natural Gas | Acadian Gas | Other | 2Q 2020 |
GOM | MTM Change | System | Marketing | System | Changes | GOM |
Details:
- Non-cashMTM activity resulted in a loss of $4MM in 2Q 2020 compared to an immaterial for 2Q 2019
- Texas Intrastate system decreased primarily due to lower capacity reservation fees
- Natural Gas Marketing (excluding MTM) decreased primarily due to lower average sales margins from regional price spreads across Texas
- Acadian Gas system decreased due to lower capacity reservation fees and a $11MM benefit from a legal settlement in 2Q 2019
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Petrochemical & Ref. Products Segment 2Q 2020 vs. 2Q 2019
Gross Operating Margin Bridge
$ in MMs
$192
2Q 2019 | Non-Cash | Propylene | iBDH, Octane | TE Products | Butane | Other | 2Q 2020 | |
GOM | MTM Change | Production | Enhancement | Pipeline & Related | Isomerization & | Changes | GOM | |
Details: | & HPIB | Terminals | Related DIBs | |||||
- Non-cashMTM activity resulted in a gain of $22MM in 2Q 2020 compared to a gain of $2MM in 2Q 2019
- Propylene production volumes decreased 17 MBPD from the splitter units and 14 MBPD from PDH 1; PDH 1 experienced 46 days of downtime in 2Q 2020 for unplanned maintenance
- Octane enhancement facility decreased primarily due to lower sales volumes and higher operating expenses; iBDH facility began operations in December 2019 partially offsetting the decline
- TE Products decreased due to lower interstate transportation volumes related to weaker refined products terminal demand
- Mont Belvieu area Isoms decreased primarily due to lower average sales prices and a 41 MBPD decrease in production volumes
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SEGMENT
GROSS OPERATING MARGIN VARIANCE 2Q 2020 VS. 1Q 2020
NGL Segment 2Q 2020 vs. 1Q 2020
Gross Operating Margin Bridge
GOM | MTM Change | Area | LouTex | Eagle Ford | Terminals, | Plants | (excl. MTM) | Changes | GOM |
Fractionators | Pipelines | Pipelines | Seminole & | ||||||
Chaparral |
Details:
- Non-cashMTM activity resulted in a gain of $36MM in 2Q 2020 compared to a loss of $12MM in 1Q 2020
- Mont Belvieu area fractionators increased primarily due to Frac 10, which began operations in March 2020
- South Louisiana and LouTex pipelines were primarily lower due to a combined 113 MBPD decrease in volumes
- South Texas pipelines were primarily lower due to lower volumes of 46 MBPD and lower deficiency fees
- MAPL and related terminals, Seminole & Chaparral were lower due to a combined 32 MBPD decrease in pipeline volumes.
- Legacy gas plants were lower primarily from margin related activities, including hedging; indicative processing margins decreased $0.02 per MMBtu compared to 1Q 2020
- Marketing (excluding MTM) decreased primarily due to a 41 MBPD decrease in NGL export terminal volumes
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Crude Oil Segment 2Q 2020 vs. 1Q 2020
Gross Operating Margin Bridge
$ in MMs
GOM | MTM Change | (excl. MTM) | Terminal | Eagle Ford Pipelines | Changes | GOM |
Details:
- Non-cashMTM activity resulted in a gain of $8MM in 2Q 2020 compared to a gain of $11MM for 1Q 2020
- Marketing activities (excl. MTM and Midland-to-ECHO 1) increased primarily due to higher margins from using uncontracted storage capacity for contango opportunities and regional price spreads
- EHT export terminal increased primarily due to lower operating costs
- South Texas and Eagle Ford pipelines are lower primarily due to a combined 157 MBPD reduction in volume
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Natural Gas Segment 2Q 2020 vs. 1Q 2020
Gross Operating Margin Bridge
$ in MMs
($15)
GOM | MTM Change | Pipeline | System | Changes | GOM |
Details:
- Non-cashMTM activity resulted in a loss of $4MM in 2Q 2020 compared to a gain of $29MM in 1Q 2020
- Texas Intrastate pipeline decreased primarily due to a volume decrease of 537Btu/d
- Acadian gas system decreased primarily due to lower capacity fees received on the Haynesville extension pipeline
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Petrochemical & Ref. Products Segment 2Q 2020 vs. 1Q 2020
Gross Operating Margin Bridge
$ in MMs
($21)
GOM | MTM Change | Export Terminal & | Pipeline & Related | Enhancement | Production | GOM |
Related Activities | Terminals | & HPIB |
Details:
- Non-cashMTM activity resulted in a gain of $22MM in 2Q 2020 compared to a gain of $2MM in 1Q 2020
- Ethylene activities increased primarily due to the export facility which began operations in 1Q 2020
- TE Products decreased primarily due to a 41 MBPD reduction in refined products interstate and NGL volumes
- Octane enhancement facility decreased primarily due to lower sales volumes and higher operating expenses. iBDH facility began operations December 2019 partially offsetting the decline
- Propylene production decreased primarily due to the PDH 1 facility being down for 46 days of unplanned maintenance in 2Q 2020
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Definitions
- Return on Invested Capital ("ROIC") is calculated by dividing non-GAAP gross operating margin for the assets (the numerator) by the average historical cost of the underlying assets (the denominator). The average historical cost includes fixed assets, investments in unconsolidated affiliates, intangible assets and goodwill. Like gross operating margin, the historical cost amounts used in determining ROIC are before depreciation and amortization and reflect the original purchase or construction cost.
- Operational Distributable Cash Flow ("DCF") represents DCF excluding proceeds from asset sales and property damage insurance claims and net receipts / payments from the monetization of interest rate derivative instruments.
- Distributable Cash Flow ("DCF") per Unit is determined by dividing DCF for a period by the average number of fully diluted common units outstanding for that period.
- Net Cash Flows Provided by Operating Activities ("CFFO") represents the GAAP financial measure "Net cash flows provided by operating activities".
- CFFO Payout Ratio is calculated as trailing 12 months distributions + distribution equivalent rights + buybacks per share divided by the trailing 12 months cash flow from operations.
- Leverage is defined as debt divided by adjusted EBITDA.
- Adjusted EBITDA is adjusted earnings before interest, taxes, depreciation and amortization.
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Enterprise Products Partners LP published this content on 29 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 July 2020 10:40:04 UTC
