Enterprise Reports Results for Second Quarter 2024

Business Wire 30-Jul-2024 6:00 AM

Enterprise Products Partners L.P. ("Enterprise") (NYSE:EPD) today announced its financial results for the three and six months ended June 30, 2024.

Enterprise reported net income attributable to common unitholders of $1.4 billion, or $0.64 per unit on a fully diluted basis, for the second quarter of 2024, a 12 percent increase compared to $1.3 billion, or $0.57 per unit on a fully diluted basis, for the second quarter of 2023.

Distributable Cash Flow ("DCF") was $1.8 billion for the second quarter of 2024, compared to $1.7 billion for the second quarter of 2023. Distributions declared with respect to the second quarter of 2024 increased 5 percent to $0.525 per common unit, or $2.10 per common unit annualized, compared to distributions declared for the second quarter of 2023. DCF provided 1.6 times coverage of the distribution declared for the second quarter of this year, and Enterprise retained $661 million of DCF.

Enterprise repurchased approximately $40 million of its common units on the open market in the second quarter of 2024. Including these purchases, the partnership has utilized 50 percent of its authorized $2.0 billion common unit buyback program.

Adjusted cash flow from operations ("Adjusted CFFO") was $2.1 billion for the second quarter of 2024, compared to $1.9 billion for the second quarter of 2023. Adjusted CFFO was $8.4 billion for the twelve months ended June 30, 2024. Enterprise's payout ratio, comprised of distributions to common unitholders and partnership common unit buybacks, for the twelve months ended June 30, 2024, was 55 percent of Adjusted CFFO.

Total capital investments were $1.3 billion in the second quarter of 2024, which included $1.0 billion for growth capital projects and $245 million of sustaining capital expenditures. Organic growth capital investments are expected to be in the range of $3.5 billion to $3.75 billion in 2024 and $3.25 billion to $3.75 billion in 2025. Sustaining capital expenditures are expected to be approximately $600 million in 2024. The approximately $50 million increase in expected sustaining capital expenditures for 2024 is primarily related to higher capital costs associated with the major turnaround at the PDH 1 facility, which was completed in June 2024.

Total debt principal outstanding at June 30, 2024 was $30.6 billion, including $2.3 billion of junior subordinated notes to which the debt rating agencies ascribe partial equity content. At June 30, 2024, Enterprise had consolidated liquidity of approximately $3.4 billion, comprised of available borrowing capacity under its revolving credit facilities and unrestricted cash on hand.

Conference Call to Discuss Second Quarter 2024 Earnings

Enterprise will host a conference call today to discuss second quarter 2024 earnings. The call will be webcast live beginning at 9:00 a.m. CT and may be accessed by visiting the partnership's website at www.enterpriseproducts.com.

Second Quarter 2024 Financial Highlights

Second Quarter 2024 Volume Highlights

"Enterprise reported a solid second quarter in terms of both volumes and cash flow generated by our integrated midstream system," said A. J. "Jim" Teague, co-chief executive officer of Enterprise's general partner. "Even though the second quarter is typically our seasonally weakest quarter, the partnership handled a near record 12.6 million BPD of equivalent pipeline volumes and 2.2 million BPD of marine terminal volumes, as well as record fee-based natural gas processing, NGL pipeline and NGL fractionation volumes. Our total equivalent pipeline volumes and marine terminal volumes increased by 5 percent and 18 percent, respectively, compared to the second quarter of 2023."

"Our investments in infrastructure to support growth in the Permian Basin were visible both volumetrically and financially in our NGL Pipeline & Services segment during the second quarter. This segment reported a 19 percent increase in gross operating margin compared to the second quarter of last year primarily attributable to four new natural gas processing plants in the Permian Basin and our 12^th NGL fractionator at our Mont Belvieu area complex that began operations over the past twelve months. In addition, we benefited from improvements in natural gas processing margins compared to last year. Our Natural Gas Pipelines & Services segment reported a 23 percent increase in gross operating margin versus the same quarter in 2023 largely due to higher transportation revenues and marketing margins associated with the wider price spreads between the Waha hub and other market hubs," said Teague.

"This operating performance led to a 12 percent increase in earnings per common unit on a fully diluted basis, an 11 percent increase in adjusted cash flow from operations and a 5 percent increase in our cash distribution per unit for the second quarter of 2024, compared to the second quarter of 2023. The year 2024 will mark our 26^th consecutive year of distribution growth. In addition, the partnership has $6.7 billion of fee-based growth projects under construction that provide visibility to future earnings and cash flow growth," said Teague.

"We completed a comprehensive turnaround of our PDH 1 plant during the second quarter. We expect this work will result in greater reliability and higher utilization rates. Since PDH 1 returned to service in late June, it has operated above its nameplate capacity. Upon completion of the PDH 1 turnaround, we elected to promptly begin the planned turnaround of PDH 2 given scheduling efficiencies and availability of manpower and equipment. We expect PDH 2 to return to service in August. I would like to thank our Mont Belvieu team and supporting service providers for their efforts on these turnarounds," said Teague.

Review of Second Quarter 2024 Results

Total gross operating margin was $2.4 billion for the second quarter of 2024, an 11 percent increase compared to $2.2 billion for the second quarter of 2023.

NGL Pipelines & Services – Gross operating margin from the NGL Pipelines & Services segment was $1.3 billion for the second quarter of 2024 compared to $1.1 billion for the second quarter of 2023.

Gross operating margin from the natural gas processing business and related NGL marketing activities was $386 million for the second quarter of 2024, an increase of 25 percent compared to $310 million for the second quarter of 2023. Total fee-based natural gas processing volumes increased 837 MMcf/d, or 15 percent, to a record 6.5 Bcf/d in the second quarter of 2024, compared to the second quarter of 2023. Total equity NGL-equivalent production volumes were 217 MBPD and 173 MBPD in the second quarters of 2024 and 2023, respectively. The following highlights summarize selected variances within this business, with results for the second quarter of 2024 as compared to the second quarter of 2023:

• Gross operating margin from Permian natural gas processing facilities, including the Midland and Delaware Basin assets, increased $81 million primarily attributable to the addition of four natural gas processing plants that went into service during the last twelve months. These plants contributed to higher fee-based processing volumes and higher equity NGL-equivalent volumes for the Midland and Delaware Basin assets. These assets also benefited from higher average processing margins, primarily due to the impact of hedging. Midland Basin fee-based processing volumes increased 342 MMcf/d stemming from the addition of the Poseidon and Leonidas natural gas processing trains, which were placed in service in July 2023 and late March 2024, respectively. Midland Basin equity NGL-equivalent production volumes increased 23 MBPD. Delaware Basin fee-based processing volumes increased 359 MMcf/d benefiting from the addition of the Mentone 2 and Mentone 3 processing trains, which were placed in service in October 2023 and late March 2024, respectively. Delaware Basin equity NGL-equivalent production volumes increased 3 MBPD.
• Gross operating margin from South Texas natural gas processing facilities increased $16 million primarily due to higher average processing margins, higher fee-based processing volumes, and lower operating costs. South Texas fee-based processing volumes increased 153 MMcf/d. Equity NGL-equivalent production volumes were essentially flat.
• Gross operating margin from Rockies natural gas processing facilities increased $6 million primarily due to higher fee-based processing volumes, which increased 256 MMcf/d, and higher equity NGL-equivalent volumes, which increased 9 MBPD.
• Gross operating margin from NGL marketing activities decreased $34 million primarily due to lower average sales margins, partially offset by higher sales volumes.

Gross operating margin from the NGL pipelines and storage business was $701 million for the second quarter of 2024, an increase of $103 million compared to the second quarter of 2023. Total NGL pipeline transportation volumes were a record 4.3 million BPD in the second quarter of 2024, a 9 percent increase over the second quarter of 2023. Total NGL marine terminal volumes increased 15 percent, or 111 MBPD, to 876 MBPD for the second quarter of 2024, compared to the second quarter in 2023. The following highlights summarize selected variances within this business, with results for the second quarter of 2024 as compared to the second quarter of 2023:

• On a combined basis, the pipelines serving the Permian and Rocky Mountain regions reported a $21 million increase in gross operating margin. This includes the Mid-America, Seminole, Shin Oak, and Chaparral NGL pipeline systems. The variance was primarily driven by a 179 MBPD, net to our interest, increase in transportation volumes and higher average transportation fees.
• Eastern ethane pipelines, which include the ATEX and Aegis pipelines, reported a $21 million increase in gross operating margin largely due to higher transportation revenues. Eastern ethane pipeline volumes decreased 48 MBPD.
• Gross operating margin from the Enterprise Hydrocarbons Terminal ("EHT") increased $18 million primarily due to a 72 MBPD increase in LPG export volumes and higher average loading fees. Gross operating margin from the Morgan's Point Ethane Export Terminal increased $4 million primarily due to a 39 MBPD increase in export volumes. Gross operating margin from the Houston Ship Channel Pipeline System increased $9 million in connection with a 139 MBPD increase in transportation volumes.
• Gross operating margin from the Mont Belvieu area storage complex increased $18 million primarily due to higher storage revenues.

Gross operating margin from the NGL fractionation business was $238 million for the second quarter of 2024 compared to $202 million for the second quarter of 2023. Total NGL fractionation volumes increased 253 MBPD to a record 1.6 million BPD for the second quarter of 2024, compared to the second quarter of 2023. The following highlights summarize selected variances within this business, with results for the second quarter of 2024 as compared to the second quarter of 2023:

• Gross operating margin from our Mont Belvieu area NGL fractionation complex increased $25 million primarily due to a 216 MBPD, net to our interest, increase in fractionation volumes, partially offset by higher operating costs. The increase in volume and gross operating margin was primarily due to the addition of the 12^th NGL fractionator at this facility, which was placed in service in July 2023. Fractionation volumes also benefited from the acquisition of the remaining 25 percent equity interest in EF78 LLC in February 2024.

Crude Oil Pipelines & Services – Gross operating margin from the Crude Oil Pipelines & Services segment was $417 million for the second quarter of 2024 compared to $422 million for the second quarter of 2023. Gross operating margin for the second quarter of 2024 includes non-cash, MTM gains of $8 million related to hedging activities compared to non-cash, MTM losses of $7 million in the second quarter of 2023. Total crude oil pipeline transportation volumes were 2.5 million BPD in the second quarter of 2024 compared to 2.4 million BPD for the second quarter of 2023. Total crude oil marine terminal volumes were 977 MBPD this quarter, a 163 MBPD increase compared to the second quarter of 2023. The following highlights summarize selected variances within this segment, with results for the second quarter of 2024 as compared to the second quarter of 2023:

• Gross operating margin from crude oil activities at EHT increased $8 million primarily due to higher loading revenues. Crude oil marine terminal volumes increased 138 MBPD.
• Gross operating margin from the Midland-to-ECHO system and related business activities increased $4 million. Transportation volumes, net to our interest, increased 153 MBPD primarily due to our acquisition of the remaining 20 percent equity interest in Whitethorn Pipeline Company LLC in February of 2024.
• On a combined basis, our Texas in-basin crude oil pipelines, terminals and other marketing activities reported a $23 million decrease in gross operating margin primarily due to lower average sales margins and transportation fees, partially offset by higher sales volumes. Transportation volumes, net to our interest, increased 14 MBPD.

Natural Gas Pipelines & Services – Gross operating margin for the Natural Gas Pipelines & Services segment was $293 million for the second quarter of 2024 compared to $238 million for the second quarter of 2023. Total natural gas transportation volumes were 18.3 TBtus/d in both the second quarters of 2024 and 2023. The following highlights summarize selected variances within this segment, with results for the second quarter of 2024 as compared to the second quarter of 2023:

• Gross operating margin from the Texas Intrastate System increased $36 million primarily due to higher capacity reservation and transportation revenues, partially offset by higher operating costs. Transportation volumes decreased 294 BBtus/d.
• Gross operating margin from our natural gas marketing business increased $24 million primarily due to higher average sales margins.
• Permian natural gas gathering, including Delaware Basin and Midland Basin Gathering Systems, reported a combined $5 million increase in gross operating margin primarily due to an 831 BBtus/d increase in gathering volumes, partially offset by higher operating costs.
• Gross operating margin from Haynesville Gathering decreased $11 million primarily due to lower transportation volumes and revenues. Transportation volumes decreased 168 BBtus/d.

Petrochemical & Refined Products Services – Gross operating margin for the Petrochemical & Refined Products Services segment was $392 million for the second quarter of 2024 compared to $383 million for the second quarter of 2023. Total segment pipeline transportation volumes were 946 MBPD in the second quarter 2024 compared to 837 MBPD in the second quarter of 2023. Total marine terminal volumes were 338 MBPD in the second quarter of 2024 compared to 283 MBPD for the second quarter of 2023. The following highlights summarize selected variances within this segment, with results for the second quarter of 2024 as compared to the second quarter of 2023:

• Gross operating margin from our octane enhancement and related plant operations increased $14 million primarily due to higher sales volumes and revenues.
• Propylene production and related activities reported a $6 million increase in gross operating margin. Our propylene production facilities reported higher propylene processing revenues and higher average sales margins that were partially offset by lower propylene sales volumes and higher operating costs. Total propylene and associated by-product production volumes were 96 MBPD, net to our interest, a 12 MBPD increase. This increase was driven by contributions from the PDH 2 facility, which was placed in service in July 2023, and higher operating rates at our propylene splitters which experienced 57 days of downtime in the second quarter of 2023. The increases were partially offset by lower production at our PDH 1 facility which was down for 79 days during the second quarter of 2024 for planned maintenance.
• Gross operating margin from our refined products pipelines and related activities decreased $8 million primarily due to lower average sales margins and lower fee-based revenues at our Beaumont terminal facility.

Use of Non-GAAP Financial Measures

This press release and accompanying schedules include the non-GAAP financial measures of total gross operating margin, Adjusted CFFO, FCF, Adjusted FCF, DCF, Operational DCF and Adjusted EBITDA. The accompanying schedules provide definitions of these non-GAAP financial measures and reconciliations to their most directly comparable financial measure calculated and presented in accordance with GAAP. Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, operating income, net cash flow provided by operating activities or any other measure of financial performance calculated and presented in accordance with GAAP. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies because they may not calculate such measures in the same manner as we do.

Company Information and Use of Forward-Looking Statements

Enterprise Products Partners L.P. is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products and petrochemicals. Services include: natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage and marine terminals; crude oil gathering, transportation, storage and marine terminals; petrochemical and refined products transportation, storage and marine terminals; and a marine transportation business that operates on key U.S. inland and intracoastal waterway systems. The partnership's assets currently include more than 50,000 miles of pipelines; over 300 million barrels of storage capacity for NGLs, crude oil, petrochemicals and refined products; and 14 billion cubic feet of natural gas storage capacity.

This press release includes forward-looking statements. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve certain risks and uncertainties, such as the partnership's expectations regarding future results, capital expenditures, project completions, liquidity and financial market conditions. These risks and uncertainties include, among other things, insufficient cash from operations, adverse market conditions, governmental regulations and other factors discussed in Enterprise's filings with the U.S. Securities and Exchange Commission. If any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those expected. The partnership disclaims any intention or obligation to update publicly or reverse such statements, whether as a result of new information, future events or otherwise.

The weighted-average indicative market price for NGLs (based on prices for such products at Mont Belvieu, Texas, which is the primary industry hub for domestic NGL production) was $0.59 per gallon during the second quarter of 2024 versus $0.55 per gallon during the second quarter of 2023. Fluctuations in our consolidated revenues and cost of sales amounts are explained in large part by changes in energy commodity prices. An increase in our consolidated marketing revenues due to higher energy commodity sales prices may not result in an increase in gross operating margin or cash available for distribution, since our consolidated cost of sales amounts would also be expected to increase due to comparable increases in the purchase prices of the underlying energy commodities. The same type of relationship would be true in the case of lower energy commodity sales prices and purchase costs.

FCF is a non-GAAP measure of how much cash a business generates after accounting for capital expenditures such as plants or pipelines. Additionally, Adjusted FCF is a non-GAAP measure of how much cash a business generates, excluding the net effect of changes in operating accounts, after accounting for capital expenditures. We believe that FCF is important to traditional investors since it reflects the amount of cash available for reducing debt, investing in additional capital projects and/or paying distributions. We believe that Adjusted FCF is also important to traditional investors for the same reasons as FCF, without regard for fluctuations caused by timing of when amounts earned or incurred were collected, received or paid from period to period. Since we partner with other companies to fund certain capital projects of our consolidated subsidiaries, our determination of FCF and Adjusted FCF appropriately reflect the amount of cash contributed from and distributed to noncontrolling interests.

Adjusted CFFO is a non-GAAP measure that represents net cash flow provided by operating activities before the net effect of changes in operating accounts. We believe that it is important to consider this non-GAAP measure as it can often be a better way to measure the amount of cash generated from our operations that can be used to fund our capital investments or return value to our investors through cash distributions and buybacks, without regard for fluctuations caused by timing of when amounts earned or incurred were collected, received or paid from period to period.

DCF is an important non-GAAP liquidity measure for our common unitholders since it serves as an indicator of our success in providing a cash return on investment. Specifically, this liquidity measure indicates to investors whether or not we are generating cash flows at a level that can sustain or support an increase in our quarterly cash distributions. DCF is also a quantitative standard used by the investment community with respect to publicly traded partnerships because the value of a partnership unit is, in part, measured by its yield, which is based on the amount of cash distributions a partnership can pay to a common unitholder.

Operational DCF, which is defined as DCF excluding the impact of proceeds from asset sales and other matters and monetization of interest rate derivative instruments, is a supplemental non-GAAP liquidity measure that quantifies the portion of cash available for distribution to common unitholders that was generated from our normal operations. We believe that it is important to consider this non-GAAP measure as it provides an enhanced perspective of our assets' ability to generate cash flows without regard for certain items that do not reflect our core operations.

The GAAP measure most directly comparable to DCF and Operational DCF is net cash flow provided by operating activities.

Adjusted EBITDA is commonly used as a supplemental financial measure by our management and external users of our financial statements, such as investors, commercial banks, research analysts and rating agencies, to assess the financial performance of our assets without regard to financing methods, capital structures or historical cost basis; the ability of our assets to generate cash sufficient to pay interest and support our indebtedness; and the viability of projects and the overall rates of return on alternative investment opportunities.

Since Adjusted EBITDA excludes some, but not all, items that affect net income or loss and because these measures may vary among other companies, the Adjusted EBITDA data presented in this press release may not be comparable to similarly titled measures of other companies. The GAAP measure most directly comparable to Adjusted EBITDA is net cash flow provided by operating activities.

We evaluate segment performance based on our financial measure of gross operating margin. Gross operating margin is an important performance measure of the core profitability of our operations and forms the basis of our internal financial reporting. We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results.

The term "total gross operating margin" represents GAAP operating income exclusive of (i) depreciation, amortization and accretion expenses (excluding amortization of major maintenance costs for reaction-based plants), (ii) impairment charges, (iii) gains and losses attributable to asset sales and related matters, and (iv) general and administrative costs. Total gross operating margin includes equity in the earnings of unconsolidated affiliates, but is exclusive of other income and expense transactions, income taxes, the cumulative effect of changes in accounting principles and extraordinary charges. Total gross operating margin is presented on a 100 percent basis before any allocation of earnings to noncontrolling interests. The GAAP financial measure most directly comparable to total gross operating margin is operating income.

Total gross operating margin excludes amounts attributable to shipper make-up rights as described in footnote (6) to Exhibit A of this press release.

The following table summarizes the non-cash mark-to-market gains (losses) for the periods indicated:

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