Enterprise Products Partners L.P. (NYSE:EPD) Q1 2024 Earnings Call Transcript April 30, 2024
Enterprise Products Partners L.P. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by. Welcome to the Enterprise Products Partners First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, today’s program is being recorded. And now, I’d like to introduce your host for today’s program, Libby Strait, Senior Director of Investor Relations. Please go ahead.
Libby Strait: Good morning. Welcome to the Enterprise Product Partners conference call to discuss first quarter 2024 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 Exchange Act of 1934 based on the beliefs of the company as well as assumptions made by and information currently available to Enterprise’s management team. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct.
Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. With that, I will turn it over to Jim.
Jim Teague: Thank you, Libby. We have a war in Europe. We have a war in the Middle East. We have student mobs occupying elite university campuses and a former President being trialed for crimes in courts up and down the East Coast, chaos reigns. In many ways what’s going on today reminds me of the 1960s. We had a war in Asia called the Vietnam War let student anti-war demonstrators occupying campuses throughout the country and while no President was on trial one was chased from running for a second term. And on top of all that now, like in 1968, we find that the DNC will hold its convention in Chicago. For those of you too young to know what that means, I suggest you Google 1968 Chicago Convention. But with all this chaos, there is a constant today that should bring calm to Investors concerns in this volatile world.
Enterprise continues to deliver month-after-month, quarter-after-quarter and year-after-year and first quarter was no exception. Our total gross operating margin for the quarter – first quarter was $2.5 billion, a 7% increase compared to the first quarter of last year. Our earnings growth for the first quarter was primarily driven by contributions from new assets placed into service during the second half of last year, along with the 17% increase in net marine terminal volumes attributable to continued strength in global demand for U.S. energy and higher sales volumes and margins in our octane enhancement business Our system transported 12.3 million barrels a day of crude oil equivalent that being NGLs, crude oils – crude oil, petrochemicals refined products and natural gas.
We generated 1.9 billion in DCF during the quarter, providing a 1.7x coverage was supported a 5% increase in cash distributions to partners compared to the same quarter last year. We retained $786 million in DCF. Randy, you are going to get into more color on all this right. During the quarter, we expanded our Permian natural gas processing infrastructure with the start of our Leonidas plant in the Midland Basin and our Mentone 3 plant in the Delaware Basin. Each of these plants has supply capacity to process more than 300 million cubic feet a day on natural gas and extract over 40,000 barrels a day of NGLs. We currently have three additional 300 million a day plants under construction due in the Delaware and one in the Midland basin, along with our Bahia NGL pipeline and Frac #14, which is really our 13th fractionator, but we are not going to call it 13 we call it 14.
Our plants and the systems that support them are essentially full on the first day of service. With the completion of the three processing plants under construction, we will have a total of 19 Permian processing plants capable of producing 675,000 barrels a day of NGLs beating our NGL systems, including one of the world’s largest NGL export capacities. We also begin service on Phase 1 of our Texas Western products pipeline system in March, successfully connecting Gulf Coast refined products to end markets in the Permian Basin, with additional Phase 2 destinations in the Albuquerque and Grand Junction markets expected in the second and early third quarters. At the beginning of the month, we received the deepwater port license for our Spot Project.
This is one of the most significant milestones to-date of the development of Spot. We put out a press release on April 9 discussing the project and highlighting the accomplishment of the Enterprise team that worked tirelessly for over 5 years, tirelessly for over 5 years to obtain the license. I think Spot is going to be a valuable and highly strategic addition to our asset base as we continue with commercialization. As with the EIA reported that the U.S. exported a record 12.1 million barrels a day of liquids that being crude oil, refined products and natural gas liquids, the world is hungry for our reliable and plentiful resources, that’s priced by pre-market. To put that in perspective, the number was 3.6 million in 2014 and less than 10.2 million in 2010.
Demand for growing U.S. liquids has been and will continue to be primarily in emerging markets. Enterprise will continue to play a key role. We export around 70 million barrels a month of liquids and have an initiative to reach 100 million barrels a month, which does not include Spot. We are a significant player in the export market and we expect our growth is going to continue to grow. Randy?
Randy Fowler: Thank you, Jim. Good morning, everyone. Starting with first quarter income statement items, net income attributable to common unitholders for the first quarter of 2024 increased 5% to $1.5 billion or $0.66 per common unit on a fully diluted basis compared to $1.4 billion or $0.63 per common unit for the first quarter of 2023. Turning to cash flow, adjusted cash flow from operations, which is cash flow from operating activities before changes in working capital increase 6% to $2.1 billion for the first quarter of 2024 compared to $2 billion for the first quarter of last year. We declared a distribution of $0.515 per common unit for the first quarter of 2024. As Jim mentioned, this is a 5.1% increase over the distribution declared with regard to the first quarter of 2023.
The distribution will be paid May 14 to common unitholders of record as of the close of business today. In the first quarter, the Partnership purchased approximately 1.4 million common units off the open market for $40 million. Total purchases for the 12 months ending March 31 were $211 million or approximately 8 million Enterprise common units bringing total purchases under our buyback program to approximately $960 million. In addition to buybacks, our distribution reinvestment plan and employee unit purchase plan purchased a combined 6.5 million common units on the open market for $172 million during the last 12 months, including 1.6 million common units on the open market for $43 million during the first quarter of 2024. For the 12 months ended March 31, 2024, Enterprise paid out approximately $4.4 billion in distributions to limited partners combined with the $211 million of common unit repurchases across the same time period.
Enterprise’s payout ratio of adjusted cash flow from operations was 56% for that 12-month period. Total capital investments in the first quarter were $1.1 billion, which included $875 million for growth capital projects and $180 million for sustaining CapEx. We expect growth capital expenditures for 2024 and 2025 to be in the range of $3.25 billion to $3.75 billion. We continue to estimate 2024 sustaining capital expenditures to be approximately $550 million, which includes planned turnarounds at both of our PDH plants, our iBDH facility and high-purity isobutylene facility. As previously mentioned, these scheduled turnarounds typically occur every 3 to 4 years. At this time, we expect the PDH turnaround to be completed in May 2024. We plan to begin addressing the issues on the fourth reactor within PDH 2 in June.
Our total debt principal outstanding was approximately $29.7 billion as of March 31, 2024. Assuming the final maturity date for our hybrids, the weighted average life of our debt portfolio is approximately 19 years. Our weighted average cost of debt is 4.7%. At March 31, approximately 98% of our debt was fixed rate. Our consolidated liquidity was approximately $4.5 billion at the end of the first quarter, including availability under our credit facilities and unrestricted cash on hand. Our adjusted EBITDA for the first quarter was $2.5 billion and $9.5 billion for the trailing 12 months. As of March 31, 2024, our consolidated leverage ratio was 3.0x on a net basis after adjusting debt for the partial equity treatment of our hybrid debt and reducing the debt outstanding by the Partnership’s unrestricted cash on hand.
As a reminder, our leverage target remains 3.0x plus or minus 0.25x. And with that, Libby, I think we can open it up for questions.
Libby Strait: Thank you. Operator, we are ready to open the call for questions from our participants, if you could please remind them of instructions to ask the question.
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