ENTERPRISE PRODUCTS PARTNERS L.P. SCOTIA HOWARD WEIL ENERGY CONFERENCE March 27, 2019 Randy Fowler President and Chief Financial Officer
KEY INVESTMENT CONSIDERATIONS One of the largest midstream energy companies • Integrated system enables EPD to reduce impact of cyclical commodity swings • Large supply aggregator and access to domestic and international markets…
EPD: NATURAL GAS, NGLs, CRUDE OIL, PETROCHEMICALS AND REFINED PRODUCTS Gross operating margin (“GOM”) is how we measure the performance of our business segments. See reconciliations for closest GAAP comparison. NGL 53% Crude 21%…
EPD’S INTEGRATED MIDSTREAM VALUE CHAIN Earning Fees at Each Link N Gasoline Iso-Butane Propane NGL Fractionation Storage Gas Processing Natural Gas Pipelines Storage Crude Oil Pipelines Crude Oil Refining Refined Products…
FINANCIAL UPDATE
GROSS OPERATING MARGIN BRIDGE 2017 to 2018 New assets include Midland to ECHO, PDH, and Permian gas processing & gathering Existing assets (excluding gas plants) with operating leverage increased ?$5MM or more and did not have…
CONSISTENT FINANCIAL RESULTS THROUGH BUSINESS CYCLES (1) Total gross operating margin and distributable cash flow represent reported amounts. For a reconciliation of these amounts to their nearest GAAP counterparts, see “Non-GAAP…
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 0 20 40 60 80 100 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ROIC WTI Crude DELIVERED CONSISTENT RETURNS ON CAPITAL “Structured For and Executing…
FUNDING GROWTH WITH FINANCIAL DISCIPLINE (1) Proforma includes full year EBITDA for Oiltanking 3.5x 3.8x 4.2x 4.4x 4.1x 3.5x 3.3x 3.5x 3.7x 3.9x 4.1x 4.3x 4.5x 4.7x $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0…
TRANSITIONING TO A TRADITIONAL FINANCIAL MODEL 2-year transition period (2018 and 2019); ahead of schedule Continued distribution growth Self-fund equity portion of capital investments Target debt to normalized EBITDA leverage of…
MIDSTREAM ENERGY FUNDAMENTALS
MACRO ENERGY THEMES Near Term 1–3 Years • Production growth rates may be tempered slightly from previous trajectories • DUCs, especially in the Permian, continue to grow indicative of tightness in completion services and concerns…
DUCS: ?68% OF ALL DUCS ARE IN PERMIAN, EAGLE FORD AND HAYNESVILLE Source: EIA - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Drilled Uncompleted Wells All Others Haynesville Eagle Ford Permian
U.S. OIL AND GAS SUPPLIES GROWING FAST 6 10 12 14 16 - 4 8 12 16 20 2012 2018 2020 2022 2025 Oil & Condensate Production (MMBPD) 69 79 92 101 110 - 20 40 60 80 100 120 2012 2018 2020 2022 2025 Dry…
U.S. PROJECTED TO BECOME A MAJOR CRUDE EXPORTER Sources: EIA and EPD Fundamentals 0 2 4 6 8 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2014–2017 actual exports – EIA 2018+ – EPD Fundamentals MMBPD US Prod -…
ASIA – ABOUT HALF OF LPG IS IMPORTED Currently ?40% from U.S. A large portion of this demand is consumer-oriented and relatively inelastic • Between 2012 and 2017, Chinese and Indian LPG demand grew at 17% and 8% CAGR, respectively •…
GLOBAL DEMAND FOR PETROCHEMICALS EXPECTED TO REMAIN STRONG Sources: IMF,IEA, Bloomberg and EPD Fundamentals 100 200 300 400 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Billion Lb IEA: Petchems are set to account for…
GROWTH PROJECTS UPDATE
WE CONTINUE TO GROW $5.1B of Major Capital Projects Under Construction Midland–to–ECHO I & II pipelines: commitments expected to ramp to >730 MBPD end of 2021 Shin Oak pipeline: expected to ramp to 550 MBPD in 4Q 2019 Aegis ethane…
PERMIAN EXPANSION PROJECTS >$6 Billion of Capital Investments...more to come NGL Projects Crude Oil Projects South Eddy and Waha Gas Plants added 350 MMcf/d Orla Gas Plant and related gathering • 2 processing trains (Orla I and II)…
ENTERPRISE’S PERMIAN CRUDE PIPELINE From Permian Supply Hub to Multiple Markets Two parallel pipeline systems from Midland to ECHO: • Existing 418-mile, 24” pipeline from Midland to ECHO currently at 575 MBPD; expected to increase to…
PROPOSED SEA PORT OIL TERMINAL (SPOT) 2 MMBPD of Export Capacity New Terminal Offshore Export Terminal EHSC SEALY 36” Existing EPD Pipeline Proposed Onshore Pipeline Proposed Offshore Pipeline *Design, location, and other…
LPG EXPORT TERMINAL EXPANSION Expected 2nd Half of 2019 5 8 A c r e s Capacity expected to increase 175 MBPD or 5 MMBbls/month • >30% expansion Brings total export capacity to ?700 MBPD, or 21 MMBbls/month Timeline expected 3Q…
iBDH The “Other” DeHydrogenation Project • 25% will fill Enterprise’s HPIB capacity for lubricants, additives and rubber, all on a feedstock cost-plus basis • 25% will fill Enterprise’s MTBE capacity into the export motor gasoline…
MORE GROWTH ON THE HORIZON Potential Opportunities Producer driven projects • Additional gas processing plants • Increase crude pipeline capacity from Permian Basin • Add natural gas, NGL and other crude pipeline capacity • Expand…
Market Capitalization: ?$60B Enterprise Value: ?$87B Daily Trading Value: ?$162MM As of January 30, 2019 2019 $1.765/unit FY distributions 3.5x Target Leverage(1) $2.5–$2.9B Net Growth CAPEX Reduced by $645MM potential…
APPENDIX & NON-GAAP RECONCILIATIONS
2018: RECORD RESULTS – OPERATIONS Driven by Strong Fundamentals and New Assets 2017 2018 Change Total NGL, crude oil, petrochemical and refined product pipeline transportation volumes (MBPD): 5,780 6,282 +8.7% Equivalents pipeline…
Self-funded the equity component of $4.2 billion in growth capex (a year earlier than anticipated) Cash Flow From Operations was $6.1 billion in 2018, a 31% increase over 2017 • Provided a payout ratio of 62% with respect to 2018…
STRENGTHENING DEBT PORTFOLIO Extending Maturities Without Increasing Costs 12.6% 9.4% 29.0% 49.0% 3 Year 5 Year 10 Year 30+ Year Average Maturity – Years Cost of Debt 99% Fixed Rate Debt(1) (at December 2018) 14.9 16.2 17.3…
Charter (CHTR) BB+ Netflix (NFLX) BB - Facebook (FB) 0% Amazon (AMZN) 0% Microsoft (MSFT) AAA Johnson (JNJ) AAA Kraft (KHC) 216% Qualcomm (QCOM) 141% Allstate (ALL) $32B Halliburton (HAL) $27B Ford (F) 6.9x General Motors (GM)…
GROWTH CAPITAL PROJECTS 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 2020+ NGL Pipeline & Services Mont Belvieu Frac 9 – 85 MBPD Done Orla gas plants – 900 MMcf/d and related P/L ( I & II in service, III 2Q 2019) Done ? Aegis ethane pipeline…
ENTERPRISE EXPORT CAPACITY Linking U.S. Supplies to Global Demand Mont Belvieu Texas City Freeport / Jones Creek Beaumont West Beaumont East ECHO Sealy Docks NGLs Refined Products Crude Oil ENTERPRISE ASSETS Morgan’s Point…
NGL Petchem & Ref. Products EPD Crude Exports HURRICANE HARVEY ENTERPRISE EXPORTS EXPECTED TO CONTINUE TO INCREASE Sources: Waterborne (IHS), EPD Fundamentals and EPD Distribution Schedules, including estimate MBPD
NATURAL GAS GATHERING & PROCESSING Limiting the Commodity Exposure (1) Gross operating margin (“GOM”) presented for NG Gathering and NG Processing are components of total GOM amounts reported for our Natural Gas Pipelines & Services and…
MONT BELVIEU FRACTIONATION CAPACITY This chart measures total supply vs. Mont Belvieu Frac capacity and does not consider available capacity in Louisiana, South Texas or at Conway Source: IEA and EPD Fundamentals published Aug. 2018…
BUTANE TO BUTYLENE VALUE CHAIN Existing DeHydro Unit (with MTBE Unit) has been in operation for 24 years There continues to be very high growth in isobutylene derivative markets • As the isobutylene market demand has grown…
ENTERPRISE ETHYLENE SYSTEM Under Development • Cavern capacity 600 million lbs. • Cavern In / Out delivery rates expandable up to 420,000 lbs. per hour • 8 industry pipelines within half mile of Enterprise storage header • Additional…
ENTERPRISE CME / NYMEX HOUSTON WTI FUTURES CONTRACT Meeting customer demands: Specifications are reflective of Midland crude and provide a consistent, quality barrel of crude oil • 40 –44 API • 0.275% sulfur • 4 ppm nickel • 4…
RIG COUNTS: 58% OF RIGS ARE IN PERMIAN, EAGLE FORD AND HAYNESVILLE Source: Baker Hughes 0 200 400 600 800 1,000 1,200 Baker Hughes Rig Counts All Others Haynesville Eagle Ford Permian
INDIA + ASIA: 52% OF ALL U.S. GULF COAST NGL EXPORTS! Source: Waterborne 2018 USGC Exported C2: 47 MMB C3: 286 MMB C4: 51 MMB Europe: 8% of U.S. NGL Exports C2: 16 MMB C3: 14 MMB C4: 2 MMB Far East Asia: 43% of U.S. NGL…
Company Capacity Billion lb/year Ethane Capacity (MBPD) Ethane Capacity Cumulative (MBPD) Estimated Completion Date Location Occidental Chemical / Mexichem 1.2 40 Operational Ingleside, TX Chevron Phillips Chemical 3.3 90…
ETHANE TO POLYETHYLENE MARGINS STRONG Sources: Hodson, EIA and EPD Fundamentals Exports New Builds New Builds HDPE + LDPE is ?60% of production Production incl. rejected ethane Indicative U.S. Ethylene Cracker Profit Margin by…
IEA EXPECTS NATURAL GAS TO HELP REDUCE CO2 EMISSIONS AT THE EXPENSE OF COAL AND OIL Reality is that the world needs fossil fuels. Natural gas is expected to play a central role in reducing CO2 emissions. Natural gas is needed to…
POWER GENERATION FROM SHALE NATURAL GAS AND RENEWABLES HAS LED TO LOWER CO2 EMMISSIONS Source: EIA 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 0 500 1,000 1,500 2,000 2,500 3,000 3,500 Total Emissions in Million Metric…
SHALE PRODUCED LPG AND NATURAL GAS SUPPORT EMERGING ECONOMIES WITH CLEANER FUELS Without access to cleaner fuels, poorer nations use wood and exacerbate deforestation and soil erosion problems. More over, propane for example emits 35%…
U.S. LPG...CHANGING LIVES AROUND THE WORLD In China’s Coal Country, a Ban Brings Blue Skies and Cold Homes (New York Times – February 10, 2018) https://www.nytimes.com/2018/02/10/world/asia/chinacoal-smog-pollution.html A graveyard…
NGLS PRODUCE ADVANCED MATERIALS FOR MAKING LIGHTER CARS AND PLANES A large portion of NGLs (about 35% ) are consumed as a feedstock for producing plastics and chemicals, which are used in everyday life. Advanced plastics and coatings…
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) PRIORITIES Governance and Oversight: • The Governance Committee oversees implementation of policies related to environmental protection, transportation compliance, health & safety policies,…
ESG PRIORITIES (continued) Environmental Stewardship Principles: Continuous monitoring of environmental data, allowing us to anticipate and prevent issues. Internal monitoring systems allow us to track operational and emissions data,…
TOTAL GROSS OPERATING MARGIN 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…
ADJUSTED EBITDA 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 ratings agencies to…
DISTRIBUTABLE CASH FLOW Distributable cash flow is an important non-GAAP financial measure for our limited partners since it serves as an indicator of our success in providing a cash return on investment. Specifically, this financial…
FREE CASH FLOW Free cash flow is a measure of how much cash a business generates after accounting for capital expenditures such as plants or pipelines. We believe that free cash flow is important to traditional investors since it…
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