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HomeInvestmentEnterprise Merchandise Companions (EPD) Q2 2022 Earnings Name Transcript

Enterprise Merchandise Companions (EPD) Q2 2022 Earnings Name Transcript


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Enterprise Merchandise Companions (EPD -0.68%)
Q2 2022 Earnings Name
Aug 03, 2022, 10:00 a.m. ET

Contents:

  • Ready Remarks
  • Questions and Solutions
  • Name Members

Ready Remarks:

Operator

Good day, and thanks for standing by. Welcome to the Enterprise Merchandise Companions second quarter 2022 convention name. [Operator instructions] Please be suggested that at present’s convention is being recorded. And now I’d now like handy the convention over to your speaker at present, Randy Burkhalter, vice chairman, investor relations.

Please go forward.

Randy BurkhalterVice President, Investor Relations

Thanks, Victor. Good morning, everybody, and welcome to the Enterprise Merchandise Companions convention name to debate second quarter earnings. Our audio system at present shall be co-chief govt officers of Enterprise’s Normal Companion, Jim Teague and Randy Fowler. Different members of our senior administration staff are additionally in attendance for this name at present.

In the course of the name, we are going to make forward-looking statements throughout the that means of Part 21E of the Securities and Alternate Act of 1934 based mostly on the beliefs of the corporate, in addition to assumptions made, through the knowledge at the moment accessible to Enterprise’s administration staff. Though administration believes that the expectations mirrored in such forward-looking statements are affordable, it may give no assurance that such expectations will show to finally be right. Please confer with our newest filings with the SEC for a listing of things which will trigger precise outcomes to vary materially from these within the forward-looking statements made throughout this name. And with that, I will flip the decision over to Jim.

Jim TeagueDirector and Co-Chief Govt Officer

Thanks, Randy. As we speak, we reported file adjusted EBITDA of $2.4 billion for the second quarter, and that was pushed primarily by greater margins in our octane enhancement enterprise, greater pure fuel processing margins and contributions from the Midland Basin property we not too long ago acquired. These property proceed to considerably exceed our expectations. We generated a file $2 billion of DCF, excluding proceeds from asset gross sales, offering 1.9 occasions protection.

We retained $974 million of DCF for the quarter, taking us to $1.8 billion for the primary six months. We achieved 11 monetary information and 4 working information and extra particulars outlined within the press launch. In brief, it was a superb quarter. On this surroundings, we’re not having any bother protecting our programs full.

Our Permian processing crops are operating at capability. We’ve two processing crops underneath building, one within the Delaware, one within the Midland, and we have accredited two extra, one in every of these basins. When this build-out is full, we’ll have 15 processing crops within the Permian, producing 530,000 barrels a day of liquids, which can take us to 36 processing crops as an organization, producing over 900,000 barrels a day. We additionally not too long ago accredited a challenge that expands our Shin Oak NGL pipeline by 275,000 barrels a day, and that is completed by partial looping.

We now have highly effective choices because it pertains to takeaway for NGLs out of the Permian. We are able to shut these loops to achieve a number of capability or we will put Seminole again into NGL service or we will do each. These initiatives don’t change the capex steerage that now we have communicated up to now. As we introduced at analyst day, we’re additionally increasing our programs within the Haynesville over and above the Gillis Lateral we put into service final 12 months.

Our 2.5 Bcf a day Haynesville system is exclusive. It not solely reaches into the provision space, but it surely ties into interstate and LNG quarters but it surely’s quarters, but it surely additionally reaches into the profitable Mississippi River Industrial Hall, which is hungry for fuel. We’ve vital operations in key basins that constantly represents 65% to 75% of the rigs operating within the U.S. We have at all times centered not simply on provide but additionally markets.

As we speak, we export 2 million barrels a day of crude oil, NGLs, refined merchandise and petrochemicals. We began constructing this export place over 25 years in the past. And the chief of the negotiating staff once we did that was the girl named Randa Duncan. That development continues with the most important export expansions now we have underway for each ethane and ethylene.

As well as, this final Friday, our spot challenge reached an essential milestone with the FEIS for the terminal put within the federal registry. I feel it was within the Wall Road Journal I learn that the previous three years, we have gone from pandemic to pandemonium. When Russia invaded Ukraine in late February, nobody was actually stunned. As a substitute, the shock to most is that the battle appears to be like like it is going to final some time.

The opposite shock to most is the magnitude of the affect this struggle is having on each power and agriculture. We’re all coming to grips with the truth that many issues we took with no consideration have modified. We’ve abruptly realized that what a just-in-time world we dwell in and the way shortly costs shoot up when one thing breaks. We’re additionally learnings for a few of us relearning about inflation, how sturdy and insidious it’s.

Most of our younger individuals have by no means skilled inflation. Vitality is reportedly chargeable for over 50% of inflation as it’s concerned in each side of our lives. Add to that, the excessive value of meals and the rising value of housing. U.S.

power independence is now extra worthwhile than ever. It’s clear that Russia has a stranglehold on Europe, and Russia and China seem like aligned in insurance policies which might be in direct battle with Western values. Happily, the U.S. has an considerable power useful resource.

It’s a proven fact that our crude oil, NGLs and LNG cargoes are the one short-cycle assets the world has left. We’ve great hydrocarbons potential, however sadly, it’s squandered within the present political local weather that’s intent on proscribing its growth. Appalachia alone has over 25 Bcf a day of manufacturing upside. That is greater than what Europe imports from Russia.

Nevertheless, this potential is unattainable, not by economics or useful resource, however by large quantities of legal guidelines and rules which might be imprecise at finest and constantly utilized and constantly. Along with being the one short-cycle useful resource the world has, our power is environmentally superior. It is a lot cleaner as a result of it comes from Shell and is produced right here within the U.S. underneath environmental and security requirements which might be second to none.

It is not an oil and fuel versus renewable debate as so many make it out to be. Enterprise’s view has at all times been, and we’re completely going to wish all of it and what most name power transition is definitely going to be badly wanted power additions that can happen steadily. Oil and fuel shall be in excessive demand for many years. Individuals who say in any other case are both extraordinarily naive or have their very own agenda.

Demonizing fossil fuels over restrictions on investments and big layers of regulation which might be designed to maintain it within the floor will solely create chaos within the type of ever-increasing shortages and excessive costs. We have to be taught from the errors of our associates in Europe and keep away from dangerous dependence on unreliable or unfriendly suppliers for our oil and fuel or for the supplies and gear wanted for cleaner power. Randy will go into this extra, however the proposed talked about laws will not be all the things the oil and fuel neighborhood needed, however the identical shall be mentioned by the inexperienced motion. It seems to attempt to strike a stability between clear power incentives and recognition that continued growth of fossil fuels is required to make sure power safety and power reliability.

Randy?

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

All proper. Thanks, Jim. Good morning. Beginning with second quarter revenue assertion gadgets.

Internet revenue attributable to widespread unitholders for the second quarter of 2022 was a file $1.4 billion or $0.64 per unit on a totally diluted foundation. This compares to $1.1 billion or $0.50 per widespread unit for the second quarter of final 12 months. Turning to money flows. Adjusted money circulate from operations, which is money circulate from operations earlier than adjustments in working capital, was $2.1 billion for the second quarter.

It is a 23% improve in comparison with $1.7 billion generated for the second quarter of final 12 months. Transferring on to distributions and buybacks. We declared a distribution of $0.475 per widespread unit with respect to the second quarter of 2022. That is 5.6% greater than the distribution that we declared for the second quarter of final 12 months.

This distribution shall be paid subsequent week on August 12 to widespread unitholders of file as of the shut of enterprise on July 29. In the course of the quarter, we additionally repurchased roughly 1.4 million widespread models at a value of $35 million. For the 12 months ended June 30, we returned over $4 billion of distributions to restricted companions and $235 million of buybacks. So for the final 12 months, our payout ratio in comparison with adjusted money circulate from operations was 56%, and our payout ratio of adjusted free money circulate after excluding the acquisition, the $3.2 billion acquisition of Navitas Midstream, was a payout ratio of 72%.

Turning to capital investments. Whole capital investments for the quarter have been $383 million, which incorporates $301 million of natural development initiatives and $82 million of sustaining capital expenditures. Capital investments for the primary six months of the 12 months have been $3.9 billion, which incorporates $3.2 billion for the Navitas acquisition, $576 million invested in development capital initiatives and $157 million for sustaining capital. As Jim detailed earlier this morning, we introduced three new initiatives within the Permian Basin, two new 300 million cubic toes a day pure fuel processing crops and a 275,000 barrel a day growth of our NGL pipeline system.

With these initiatives, we now count on 2022 development capital investments to be roughly $1.6 billion and sustaining capital expenditures to be roughly $350 million. For 2023, we at the moment count on that our development capital spending shall be $2 billion. Our whole debt principal excellent on the finish of the quarter was $29.1 billion. Assuming the ultimate maturity date for the hybrids, the common lifetime of our debt portfolio is roughly 21 years.

Our weighted common value of debt is 4.4%. And at June 30, roughly 97% of our debt was mounted charge. Our consolidated liquidity on the finish of the quarter was $4.1 billion, and this consists of availability underneath our credit score services and $231 million of unrestricted money readily available. Adjusted EBITDA was $8.8 billion for the 12 months ended June 30, 2022, which internet yields a consolidated leverage ratio of three.1 occasions after adjusting debt for the partial fairness credit score therapy of our hybrid debt and likewise lowered by the partnership’s unrestricted money readily available.

On August 1, we supplied discover of our intention to redeem $350 million of the $700 million of junior subordinated notes D with a redemption date of August 31, 2022. These hybrid notes that have been initially issued in August 2017 are redeemable on or after August 16. These notes have a hard and fast charge coupon of 4.875% for the primary 5 years after which develop into floating at LIBOR plus, name it, 3% starting August 16. Based mostly on present floating charges, the indicative spot floating charge for this notice will now leap to five.8%, making these notes one in every of our highest value debt points and actually our solely problem that’s redeemable with out a premium.

Given the forecast that the fed will improve floating charges by no less than one other 1% or extra, we elected to redeem half of this issuance now utilizing money readily available and industrial paper to fund the redemption. Contemplating these notes obtained 50% fairness credit score from the score businesses and Lowell redeeming the complete $700 million of the notes, we determined to redeem half of the notes right now. And as well as, we plan to opportunistically purchase again as much as $300 million of EPD widespread models over the rest of the 12 months. Our widespread models are a dearer value of fairness versus the price of the fairness embedded within the hybrids.

In regard to the proposed Inflation Discount Act, general, now we have obtained constructive suggestions from our clients, particularly with regard to the provision of federal leases for oil and fuel drilling. Additional, in our efforts to commercialize a carbon sequestration system with Oxy, we imagine the proposed adjustments to the 45Q credit could possibly be a recreation changer for post-combustion emitting clients. It was more durable to come back in or extra of a problem to come back in and commercialize the carbon sequestration initiatives and entice these clients when the present 45Q program was solely paying $50 per metric ton and had no direct pay choices. With that, Randy, I feel we will open it up for questions.

Randy BurkhalterVice President, Investor Relations

OK. Thanks, Randy. Victor, we’re able to take questions from our individuals.

Questions & Solutions:

Operator

Sounds good. [Operator instructions] Our first query comes from the road of Jeremy Tonet from J.P. Morgan. Your line is open.

Jeremy TonetJ.P. Morgan — Analyst

Hello. Good morning.

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

Good morning.

Jeremy TonetJ.P. Morgan — Analyst

Simply wish to choose up perhaps on that final bit there with reference to carbon seize and 45Q, if the invoice comes by as marketed lifting it to — lifting it greater there. Simply curious, what kind of time line do you assume issues may occur? May issues be developed? Would this occur in Louisiana earlier than Texas, given Louisiana friends on the verge of gaining classics nicely primacy by the tip of the 12 months? Simply attempting to scope out what this chance set may appear like for enterprise over time.

Carrie WeaverVice President, Business, Evolutionary Know-how

Hello, Jeremy. That is Carrie Weaver. I do not assume it issues whether or not it is Texas or Louisiana or announcement with Oxy in Texas. And I feel the connection and dealing with the EPA can deliver a challenge to fruition on the identical time line as in Louisiana, in the event that they achieve primacy.

And I feel now we have obtained very constructive suggestions from clients as we have been discussing the challenge with them and the complementary collaboration with Oxy. So our objective is to be able to deploy the challenge as quickly as they’re prepared, and we expect this new laws shall be very encouraging to deliver these choices in these time traces sooner.

Jeremy TonetJ.P. Morgan — Analyst

Acquired it. That is useful there. After which simply needed to the touch base actual fast on the Quest for $9 billion of EBITDA. It looks like in the event you print quarters like this one, that needs to be fairly simple to realize, however simply questioning any up to date ideas there?

Jim TeagueDirector and Co-Chief Govt Officer

I do not assume it is easy to realize, Jeremy. We’re simply midway by the 12 months. And my function round right here is to fret about all the things. So I am not high-fiving anyone at this level.

Operator

Thanks. Our subsequent query come from the road of Brian Reynolds from UBS. Your line is open.

Brian ReynoldsUBS — Analyst

Good morning, everybody. Simply to observe up on a few of Jeremy’s feedback on CCUS challenge. EPD has a number of alternatives in entrance of it by way of large-scale initiatives, together with CCUS, the potential for the cracker after which as well as, the spot export challenge, assuming regulatory certainty over the approaching again half of the 12 months. Assuming we get the Inflation Discount Act cross because it stands, I used to be curious if administration may simply speak about the way it’s interested by precedence of initiatives and maybe timing of pursuing a few of these large-scale initiatives trying ahead? Thanks.

Jim TeagueDirector and Co-Chief Govt Officer

To begin with, we’re not constructing a cracker. You set a press launch out that you just’re not it. The subsequent factor you understand it is on the entrance web page of the Houston Chronicle enterprise part. Sure, now we have gotten the FEIS for spot put in federal registry.

However we nonetheless acquired one other remark interval to go. And I am in search of Bob. We have nonetheless acquired one other remark interval to go, what are we 60-plus thousand feedback thus far and one other 90-day remark interval or one thing like that?

Bob SandersGovt Vice President, Asset Optimization

It is a 45-day remark interval from final Friday. So it needs to be over by September 12. Final public assembly shall be on August 23. And we’re nicely in extra of 60,000 feedback, Jim.

Jim TeagueDirector and Co-Chief Govt Officer

So as soon as we get by this, God is aware of what number of we’ll have . Then you definately acquired to slide by these. So I feel we have got it away — if we get this factor by the tip of the 12 months, I feel we might be fortunate. It is dependent upon the surroundings on the time we get it and how much buyer base we will get as to the place it matches within the precedence listing.

Brian ReynoldsUBS — Analyst

Nice. Recognize the colour. After which perhaps simply to pivot to capital allocation. You are trying to exit ’22 and ’23 nicely beneath the three.5% goal.

Given the distribution increase this quarter and the small buyback, simply curious in the event you may present some incremental colour on how we needs to be interested by preferences for return of capital as we head into the again half of ’22 and into ’23, additionally given simply greater inflation, and many others.?

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

Sure, Brian, actually, our ideas are nonetheless to come back in and take of all the above method. And that is — I feel that is mirrored by what we’re doing on these name them these a part of this hybrid notice problem. I imply it is actually — it is not the best coupon, but it surely’s close to the best coupon debt now we have however then the opposite aspect of it’s we’re trying to are available and purchase again as much as $325 million, $350 million of fairness between now and the tip of the 12 months, too. So a balanced method between buybacks and debt discount.

I feel the opposite factor, and — sure, I feel this was represented what we did in 2021 is we got here in and retained money and actually have been self-sufficient in funding our development capex. However the different factor we had coming into the 12 months is we virtually — we had fairly a bit of money readily available and that enabled us to come back in and fund a considerable quantity of our acquisition of Navitas Midstream with money and gave us the flexibleness that the rest that we may are available and simply use industrial paper. So once more, I feel coming in and retaining money for stability sheet flexibility paid off in how we got here in and have been in a position to seize alternatives that we did not are available and stress the stability sheet by coming in and doing an acquisition. So I do not assume you will see a lot change for us.

You probably did see us are available additionally this time and bumped the distribution 5.6% in comparison with final 12 months. So once more, I feel you continue to are available and see us taking an all the above method.

Jeremy TonetJ.P. Morgan — Analyst

Nice. I admire the commentary, and luxuriate in the remainder of your day. Thanks.

Operator

Our subsequent query will come from Theresa Chen from Barclays. Your line is open.

Theresa ChenBarclays — Analyst

Good morning. Jim, I needed to return to your feedback earlier in regards to the want for incremental NGL takeaway out of the Permian and your FID’d growth of Chinook at present. Are you able to simply assist us perceive the places and takes as to the relative economics of the Chinook growth versus placing Seminole again into NGL service? And for the looping on Chinook, do you have got the allowing in place for a number of line of proper of manner? Or do you continue to need to get by a few of that?

Jim TeagueDirector and Co-Chief Govt Officer

Nicely, Justin, do you wish to take it or Randy, which one?

Randy BurkhalterVice President, Investor Relations

Sure. I will take it. So I feel, to Jim’s level, the growth was — is clearly supported by the expansion within the Permian that we’re seeing, supported by our G&P expansions. And I feel what actually drove the choice on this path was simply preserving that optionality of what we do with a few of these repurposing choices that now we have.

There’s a number of manufacturing development that we count on popping out of the basin within the subsequent three to 5 years in order that preserving that the worth of a possible Seminole conversion for a later resolution made — drove us to make this resolution.

Tony ChovanecVice President, Fundamentals and Provide Appraisal

That is Tony. I wish to add one thing to that, Theresa. Between now and 2027 — are you able to hear me?

Theresa ChenBarclays — Analyst

Sure.

Tony ChovanecVice President, Fundamentals and Provide Appraisal

Between now and 2027, we estimate that liquids out of the Permian Basin to develop about 1 million barrels a day. If you happen to have a look at what they’ve grown 12 months thus far, and you may’t discover these numbers in something as a result of EIA has reported Could and another industrial reporters that do it have solely reported by April. We predict NGLs have grown already 125,000 barrels a day. Pure fuel is about 900, perhaps even slightly extra.

These are large numbers. However I will need to let you know that you’ve got heard on these calls earlier than, it is what we’re seeing on our programs. You are seeing it within the foundation market in pure fuel, and also you’re seeing it in our fracks, and you’ve got seen it in our crops, which is the explanation for this announcement this morning, the client is backing all that. So attending to placing some numbers behind what Justin mentioned, that is how we see it.

Theresa ChenBarclays — Analyst

And perhaps as a follow-up to that, Tony. In mild of the Ahead foundation, for the Ahead Waha foundation, indicating that we could face a dire scenario for residue fuel takeaway to your level about incremental internet fuel development. So if we do face that scenario within the first half of 2023, are you able to remind us how a lot incremental ethane restoration you assume is lifelike out of the basin? And generally, how do you count on the business to work by this?

Tony ChovanecVice President, Fundamentals and Provide Appraisal

Let’s speak about foundation first. If you happen to’ve watched the idea or whether or not you watched it on ICE or by brokers, subsequent summer season has moved as much as a minus $2. It wasn’t way back that that was minus $1, minus $1.20. In order that tells you the stress that the producer neighborhood is seeing from simply incremental provides.

Relative to ethane, anyone how a lot ethane we expect is being rejected within the Permian. I do not assume it is —

Brent SecrestGovt Vice President and Chief Business Officer

It is in all probability someplace round 200,000, 250,000 barrels a day. It is dependent upon the month, Permian.

Jim TeagueDirector and Co-Chief Govt Officer

Is that wider foundation, which you extract ethane as a result of it’s a Btu.

Tony ChovanecVice President, Fundamentals and Provide Appraisal

Sure, certain, completely. You are able to do all the things you possibly can to get your fuel out since you’re defending your oil barrels.

Brent SecrestGovt Vice President and Chief Business Officer

However then that creates a scenario for NGL pipelines. And in order that’s how that market will stability.

Tony ChovanecVice President, Fundamentals and Provide Appraisal

Theresa, did that reply your query?

Theresa ChenBarclays — Analyst

Thanks. Sure.

Operator

Our subsequent query will come from the road of Colton Bean from TPHC. Go forward. Your line is open.

Colton BeanTudor, Pickering, Holt and Firm — Analyst

Good morning. It appears to be like like whole spend elevated by about $900 million or so between 2022 and ’23. Is that solely attributable to the brand new processing in Chinook capability? After which in that case, are you seeing any materials value pressures? Or alternatively, are you having to construct extra gathering relative to what was required for the earlier spherical of crops?

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

Colton, I will take the primary a part of that, after which I will let Graham deal with so far as what we’re seeing so far as any value creep on current initiatives. However what we had mentioned earlier was, name it, $1.5 billion or so of development initiatives for 2023. And now we have seen that develop to about $2 billion, and that is actually simply reflective of a few of these challenge bulletins that we had this morning.

Graham BaconGovt Vice President and Chief Working Officer

By way of — on the challenge value will increase, we’re seeing some will increase, notably within the latter half of the 12 months. I feel we have been fairly strong earlier within the 12 months. We have seen value will increase wherever from 10% to fifteen% relying on the kind of materials used within the challenge. We’re beginning to see some softening in some markets, notably metal appears to be turning round.

Though labor markets are going to nonetheless be sturdy and have some upward stress on value as we go ahead into 2023.

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

And Graham, so far as funds and standing of our largest challenge, PDH 2.

Graham BaconGovt Vice President and Chief Working Officer

Sure, so far as PDH 2, we’re nonetheless on observe, on time, on funds. All of our prices have been successfully locked in on the time we did that challenge. So we do not actually see any escalation on PDH 2.

Colton BeanTudor, Pickering, Holt and Firm — Analyst

Acquired it. And perhaps, Randy, simply to make clear on the accredited challenge particularly for 2023 going from one thing which may be near $1 billion as much as perhaps nearer to $1.8 billion, $1.9 billion at present. Is that correct?

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

We have been estimating — I feel we — again at our Investor Day again in March, we mentioned that our expectation was that the expansion capex can be within the $1.5 billion to $2 billion space. After which once more, a few of that was going to maneuver from — there have been initiatives underneath growth. And now you are simply coming in and seeing a few of these initiatives being introduced.

Colton BeanTudor, Pickering, Holt and Firm — Analyst

Understood. And perhaps shifting over to frack margins, I feel This autumn and Q1 had a fairly vital improve. It appears to be like such as you all reported practically $0.05 a gallon. After which this quarter had a little bit of a pullback nearer to Q3 ranges.

So I assume simply shifting ahead, would you characterize Q2 as extra indicative of what you are within the again half of the 12 months? Or may we see a little bit of a rebound there?

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

Hey, Colton, are you actually saying pure fuel processing margins, is that what you are reporting.

Colton BeanTudor, Pickering, Holt and Firm — Analyst

Particularly on the — now your fractionation fleet, I feel you guys reported 201 or so for this quarter in fractionation particularly. And I feel This autumn and Q1 had a fairly spectacular margins there on a unit foundation. So simply your unit margins for fractionation, particularly not frack unfold on the processing aspect?

Jim TeagueDirector and Co-Chief Govt Officer

Who needs to take that?

Brent SecrestGovt Vice President and Chief Business Officer

Zach, you wish to take it?

Zach StraitVice President, Unregulated NGL Business

Sure. That is Zach. I feel on a go-forward foundation for the rest of this 12 months, I feel it appears to be like extra like this final quarter. A few issues have occurred.

Energy prices have gone up and likewise the mixing on the fracks can be compressed. I feel This autumn and Q1 have been greater than regular.

Colton BeanTudor, Pickering, Holt and Firm — Analyst

OK. And on the facility aspect, is most of that pass-through or are you retaining a few of that publicity on on the EPD degree?

Zach StraitVice President, Unregulated NGL Business

It is form of a pass-through. We’ve slightly little bit of publicity to it after which simply how a lot now we have hedged relative to that publicity as nicely.

Colton BeanTudor, Pickering, Holt and Firm — Analyst

Acquired it. Recognize it.

Operator

Thanks. Our subsequent query comes from the road of Chase Mulvehill from Financial institution of America Securities. Your line is open.

Chase MulvehillFinancial institution of America Merrill Lynch — Analyst

Hey, I feel this will have been me. Good morning, everyone. so I assume interested by Navitas and the pure fuel processing and NGL advertising enterprise, clearly, you inherited much more commodity publicity while you acquired Navitas. So actually, I assume perhaps a few questions round that is actually sort of one.

I do not know in the event you can sort of assist us perceive the commodity sensitivities throughout the pure fuel processing and NGL advertising enterprise? After which additionally discuss slightly bit in regards to the Waha foundation. I feel anyone talked about it earlier, however have you ever hedged that? Do you have got a number of threat round that? I imply — so simply sort of assist us perceive no matter threat you could or could not have if Waha foundation does blow out sooner or later subsequent 12 months?

Jim TeagueDirector and Co-Chief Govt Officer

Chase, that is Jim. One of many causes we purchased Navitas is, frankly, we needed that commodity publicity given our pretty bullish sentiment. And what was the opposite a part of the query? I feel the one place — —

Brent SecrestGovt Vice President and Chief Business Officer

Waha foundation, how a lot publicity do you have got.

Jim TeagueDirector and Co-Chief Govt Officer

I feel we in all probability have 300 million a day of publicity, and that is on goal, and I do not assume we have hedged any of that that I am conscious of. It is good.

Chase MulvehillFinancial institution of America Merrill Lynch — Analyst

OK. All proper. un-related follow-up. There’s a number of discuss on the decision at present about retiring debt.

And clearly, rates of interest proceed to maneuver greater. So once we take into consideration your focused 3.5% leverage ratio, is there any probability that you concentrate on decreasing that sooner or later if rates of interest proceed to sort of rise over the subsequent 12 months or two?

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

Chase, I feel we’re — at this level, we’re nonetheless comfy with the three.5 occasions debt to EBITDA, plus or minus 1 / 4, both aspect, so 3.25% to three.75%. I feel one of many keys there may be that, once more, on the finish of the quarter, 97% of that debt was mounted and the common life was 21 years. So our publicity to floating debt and elevated curiosity prices are actually, actually low. We have been making ready for this surroundings for a dozen years.

Chase MulvehillFinancial institution of America Merrill Lynch — Analyst

OK, good. I will flip it again over. Thanks, everyone.

Operator

Thanks. One second for our subsequent query. Our subsequent query come from the road of Jean Ann Salisbury from Bernstein. Your line is open.

Jean Ann SalisburyAllianceBernstein — Analyst

Hello. Good morning. I simply have one. Yr thus far, Permian crude pipes to Corpus have been flowing at very excessive utilization, a lot greater than these going to Houston.

Are you able to touch upon the drivers of this? And in the event you count on this to sort of keep round till the Houston Ship Channel has expanded or perhaps spot begins?

Brent SecrestGovt Vice President and Chief Business Officer

Hey, Jean Ann, that is Brent. I feel there’s been much more crude exports in Corpus, and I feel that is beginning to change. But it surely’s a operate of the pipeline capability that is one in every of that path, minus the native demand there and all the things else goes to go to the water. They’ll load bigger ships than us.

They’ll do it at greater charges. I feel you’ve got seen some flows change as Wink Webster has began up as extra barrels are pointed towards Houston — additionally pointed towards Houston. They’re taken from some pipes in Corpus are taken from others. However finally, I feel as soon as spot goes ahead, that can change the circulate patterns for crude oil exports.

Jean Ann SalisburyAllianceBernstein — Analyst

Nice. Thanks. That is all for me.

Operator

Thanks. One second for our subsequent query. Our subsequent query will come from the road of Neal Dingmann from Truist. Your line is open.

Unknown speakerTruist Securities — Analyst

Good morning. That is Danny Pregno in for Neal Dingmann. First query, perhaps it may be too simplistic, however why not simply purchase models again given the present roughly 7.13% yield versus your submitting this morning suggesting the redemption of the notes that had a roughly 6% yield?

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

Sure. It is actually simply taking a balanced method. I imply, we’re coming in and the way in which we’re interested by it’s we’re redeeming $350 million of debt, and we’re redeeming $350 million of widespread models. And coming in and redeeming $350 million of the hybrids will not be a levering occasion the place shopping for the models again is a levering occasion.

However once more, it is simply nonetheless all the above balanced method.

Unknown speakerTruist Securities — Analyst

OK, nice, nice Thanks. That is all from me.

Operator

Thanks. One second for our subsequent query. Our subsequent query comes from the road of Michael Blum from Wells Fargo. Your line is open.

Michael BlumWells Fargo Securities — Analyst

Thanks. Good morning, everybody. I simply needed to only put a finer level on the dialogue across the distribution. So clearly, in the event you have a look at the final, I feel, no less than two years, perhaps longer, you’ve got completed one improve within the fourth quarter.

Clearly, that is form of a brand new or out of sample. So I simply wish to perceive, is that this a brand new sample? Or is that this a one-time occasion? Is it a step change in development charge? Simply wish to be sure that I perceive that higher.

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

Sure, I imply, Michael, the Board is available in and takes a have a look at the distribution charge each quarter. I wish to say we went by a interval, name it, 2017 to 2021 the place we have been — or 2020, actually, the place we have been coming in and attempting to make a shift in a monetary mannequin. And the outdated mannequin was the place you fiscal a considerable quantity of your development capital expenditures within the capital markets with a fairly good reliance on the fairness capital markets. And the pivot that we started to make in 2017 was to come back in and be extra self-sufficient and coming in and funding our development capital investments.

And in order that was — we have been extra deliberate on distribution development, and I feel that is paid off. This 12 months, I feel — one of many variations on this 12 months, we have — after which we work by the pandemic — pandemic query mark. However the enterprise has carried out very nicely. We got here in earlier this 12 months and made a beautiful acquisition and that we talked about that being accretive.

In order that supplied us a possibility to come back in and increase the — do a midyear improve within the distribution. And in mild of what was happening from an inflation standpoint, we thought it made sense to do a midyear increase. I do not know if that is essentially going to vary what we do going ahead. However we check out it each quarter, however we thought it was applicable this quarter to go forward and do a midyear bump.

Michael BlumWells Fargo Securities — Analyst

OK, nice. That is sensible. Additionally only one, I’ve sort of a macro query, Jim, in your opening feedback, you referenced inflation, greater rates of interest, greater commodity costs. My query is, are you seeing any indicators of weak spot in demand throughout what you are promoting segments on account of these elements? I do know that is sort of like an open-ended query, however I am mainly simply sort of probing to see if we’re seeing any indicators of financial weak spot that —

Jim TeagueDirector and Co-Chief Govt Officer

I used to be with some buyer final night time who has quite a few comfort shops and his learn is and I acquired extra knowledge on than you possibly can say [inaudible] and his learn and say he wasn’t seeing that a lot — he has seen some, however not that a lot on the service station, Tony?

Tony ChovanecVice President, Fundamentals and Provide Appraisal

Sure. If you happen to have a look at the information, it is little bit in — we have been down a small quantity, name it, 5%. However while you take heed to the scope known as , that was about 1 million barrels. However while you take heed to the calls from anyone like Valero and PBF, they’re definitive that their wholesale demand is nice, not simply reducible for gasoline, too.

So —

Jim TeagueDirector and Co-Chief Govt Officer

And it is mirrored within the crack unfold, is not it?

Tony ChovanecVice President, Fundamentals and Provide Appraisal

It’s sort of mirrored in crack unfold. You see some weak spot in a number of the olefins markets. Ethylene is overproduced now, and people crops are taking financial run cuts. You see PDHs taking place in China.

However I’ll let you know the flip aspect to that for Enterprise and Brent, inform me if I am fallacious, but when we do not export ethylene, we will export ethane. The demand for our ethane terminal has been phenomenal.

Brent SecrestGovt Vice President and Chief Business Officer

Sure. We’re seeing file numbers, particularly this month, and I feel what we’ll see going ahead. If you happen to look throughout our ethane exports, we did a file quantity in July. If you happen to look throughout our LPG dock, it’s extremely sturdy.

We talked about crude exports, but it surely’s — on the export docks, it is actually picked up the final couple of months, Michael.

Jim TeagueDirector and Co-Chief Govt Officer

Additionally, that is Jim. Tony spoke to overproducing ethylene. That hurts the service provider participant. The combine continues to be creating wealth ethane to polyethylene.

Tony ChovanecVice President, Fundamentals and Provide Appraisal

Michael, the world is brief MMBtus and a great way for the world and due to the pure fuel scenario, a great way for them to get extra MMBtus is in ethane, propane, and butane. So it is simply the details.

Michael BlumWells Fargo Securities — Analyst

Nice. Thanks for all that. Recognize it.

Operator

Thanks. One second for our subsequent query. Our subsequent query comes from the road of Keith Stanley from Wolfe Analysis. Your line is open.

Keith StanleyWolfe Analysis — Analyst

Hello. Good morning. I had two questions on the nice outcomes with the second quarter. First, on NGL advertising, it was up about $50 million Q2 versus Q1.

It is a fairly excessive quantity. I often assume NGL advertising is slightly weaker seasonally in Q2. So something particularly driving the power in advertising there?

Jim TeagueDirector and Co-Chief Govt Officer

One of many issues is a number of what advertising does is mounted price. All the exports of, I consider LPG. These contracts are held by advertising. And I am undecided about ethane.

I feel these are too. And I am undecided about ethylene. Chris, is that true about advertising?

Chris NellyGovt Vice President, Finance Sustainability and Treasurer

Massive affect, Tim.

Brent SecrestGovt Vice President and Chief Business Officer

If you happen to have a look at a number of the structural issues that have been happening out there between first quarter and second quarter, particularly on the NGL aspect, that is why the second quarter was so sturdy.

Keith StanleyWolfe Analysis — Analyst

OK. After which related query on processing. So clearly, a really sturdy Q2 quantity there. Headline frack spreads, which you often have a look at for Enterprise have been down in Q2.

So undecided if there is a lag impact there? Or is it simply Navitas is extra POP and also you’re simply seeing a lot power there that is sort of overwhelming and bringing processing up?

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

Sure. Keith, I feel a part of it’s we solely had Navitas from February 22 or so within the first quarter. After which we acquired a full contribution from Navitas within the second quarter. But it surely does have a fee-based ground ballpark, I wish to say, from a commodity publicity.

Once more, it is acquired a fee-based ground, however we in all probability picked up an incremental 22,000 barrels a day of NGLs, one other 3,000 or 4,000 barrels a day of condensate and possibly 75 million, 80 million cubic toes a day of pure fuel publicity. So that basically supplied some uplift.

Keith StanleyWolfe Analysis — Analyst

Acquired it. Thanks.

Randy BurkhalterVice President, Investor Relations

Victor, now we have time for yet one more query, please.

Operator

All proper. Our final query, one second. Our final query will come from the road of Yves Siegel from Siegel Asset Administration. Your line is open.

Yves, your line is open. You may be on mute. All proper. We’ll go to the subsequent particular person.

Our subsequent query comes from the road of Michael Lapides from Goldman Sachs. Your line is open.

Michael LapidesGoldman Sachs — Analyst

Hey, guys. Congrats on a superb quarter, and thanks for taking my questions. Actually a longer-term one. Once I take into consideration the asset portfolio of EPD, you’re the large dominant participant in crude and NGL exports.

One of many locations the place you are not likely concerned in is within the LNG enterprise. Simply curious, is that merely on account of the truth that others moved a lot faster than you guys did. Is that since you do not assume it is a beautiful enterprise? Or is it only a valuation in name? Simply inquisitive about how you concentrate on long run, your function in sort of the export of pure fuel within the U.S. or from the U.S.?

Jim TeagueDirector and Co-Chief Govt Officer

I feel our function shall be centered on crude, petrochemicals, and pure fuel liquids. Remotely, I feel we — if something, we have missed the boat on LNG.

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

Sure. And — on the faster half, I do not know in regards to the faster half. I feel that was an election that we made. And if we form of return within the historical past books, it was actually LNG imports, and we weren’t a believer in LNG imports.

And we simply felt just like the U.S. was going to have a superb useful resource base and U.S. LNG can be the primary one to show off, so far as imports. And it was actually the importers that basically turned the exporters when their import enterprise mannequin fell aside.

They usually had first mover benefit to come back in and convert to LNG exporters after which they have been there as a result of they already had some capital, they usually already had some gear. So it was very simple for them to come back in and do conversion. So actually, it was — our not being concerned within the LNG imports that to a level, put us at an obstacle in comparison with these incumbents.

Michael LapidesGoldman Sachs — Analyst

Thanks, guys.

Jim TeagueDirector and Co-Chief Govt Officer

We’re concerned in delivering fuel to export services, Gillis Lateral. And I feel if I am not mistaken, our growth shall be on the functionality. We love our place exporting NGLs, crude oil and petrochemicals. And I mentioned in my script, we’re exporting simply over 2 million barrels a day, that is not too dangerous.

Randy BurkhalterVice President, Investor Relations

OK. Victor, we’re prepared to finish the decision. And so with that, the corporate will log off and wish to thank everyone for becoming a member of us. And Victor, in the event you would give our individuals the replay data.

Operator

[Operator signoff]

Length: 0 minutes

Name individuals:

Randy BurkhalterVice President, Investor Relations

Jim TeagueDirector and Co-Chief Govt Officer

Randy FowlerDirector, Co-Chief Govt Officer, and Chief Monetary Officer

Jeremy TonetJ.P. Morgan — Analyst

Carrie WeaverVice President, Business, Evolutionary Know-how

Brian ReynoldsUBS — Analyst

Bob SandersGovt Vice President, Asset Optimization

Theresa ChenBarclays — Analyst

Tony ChovanecVice President, Fundamentals and Provide Appraisal

Brent SecrestGovt Vice President and Chief Business Officer

Colton BeanTudor, Pickering, Holt and Firm — Analyst

Graham BaconGovt Vice President and Chief Working Officer

Zach StraitVice President, Unregulated NGL Business

Chase MulvehillFinancial institution of America Merrill Lynch — Analyst

Jean Ann SalisburyAllianceBernstein — Analyst

Unknown speakerTruist Securities — Analyst

Michael BlumWells Fargo Securities — Analyst

Keith StanleyWolfe Analysis — Analyst

Chris NellyGovt Vice President, Finance Sustainability and Treasurer

Michael LapidesGoldman Sachs — Analyst

Extra EPD evaluation

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