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BAML Energy Credit Conference – Enterprise Products Partners LP

Enterprise Products Partners LP · Jun 5, 2019 · 68 slides

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Slides

  1. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 1
  2. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 2
    KEY CREDIT HIGHLIGHTS 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 provides…
  3. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 3
    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 50% Crude 25%…
  4. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 4
    Ethane Natural Gas Natural Gas Pipelines Storage Storage Natural Gas Pipelines NGL Exports Barges Crude Oil Propylene Splitters / PDH Belvieu Fuels Butane Isom NGL Pipelines MTBE Export / Barges Chemical Market It’s…
  5. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 5
  6. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 6
    EPD FINANCIAL PERFORMANCE Key ingredients in these results can be summed up in one word: “Teamwork” Adjusted EBITDA(1) ($Billions) DCF as reported (1) ($Billions) Coverage Ratio (unadjusted) (pre-price collapse) 2014 $5.3 $4.1…
  7. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 7
    GROSS OPERATING MARGIN BRIDGE Details: Non-cash mark to market (“MTM”) changes are a function of the hedging of crude oil, natural gas and natural gas liquids (“NGL”) price differentials between regional markets. This hedging is…
  8. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 8
    82% 80% 80% 4% 5% 9% 5% 10% 13% 11% 15% 0% 20% 40% 60% 80% 100% NGL Segment Crude Segment Natural Gas Segment Petchem & Refined Products Segment % Breakout of GOM Fee-Based Commodity Price-Based Differential-Based (1)…
  9. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 9
    INDICATIVE ATTRIBUTION OF GROSS OPERATING MARGIN 91% 89% 86% 83% 6% 5% 6% 5% 5% 6% 8% 12% $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 2016 2017 2018 1Q2019 Gross Operating Margin in $Billions Fee-Based Commodity…
  10. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 10
    INDICATIVE ATTRIBUTION OF GOM FOR SELECT BUSINESSES 81% 68% 57% 65% $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0 $100 $200 $300 $400 $500 $600 2016 2017 2018 1Q 2019 Price Spread GOM in $Millions Natural Gas…
  11. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 11
    10.5% 11.8% 10.8% 11.4% 11.2% 11.6% 12.9% 13.3% 13.1% 12.5% 11.0% 10.2% 10.7% 13.0% 14.0% 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…
  12. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 12
    2.67 1.5x $2.16 1.3x $2.77 1.6x $2.09 64% $2.20 65% $1.99 76% $1.94 84% $2.16 78% $2.80 62% $2.32 73% $2.76 63% $- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $- $20 $40 $60 $80 $100 $120 2013 2014 2015 2016…
  13. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 13
    QCOM 62% LLY 49% MSFT AAA JNJ AAA KHC 216% QCOM 122% MSFT $950B AMZN $927B NFLX 90.0x CHTR 51.7x MA 31.8x PYPL 31.4x Price / Earnings Price / Cash Flow Total Return Rating Payout Ratio vs. S&P 100 Market Cap. EPD:…
  14. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 14
    EPD COMPARES WELL AGAINST UTILITIES USING CONVENTIONAL METRICS vs. Utilities Market Cap. Price / Earnings Price / Cash Flow Total Return Rating Payout Ratio NEE $90B AWK 29.6x AWK 14.6x AES 38% ES A+ D 68% DUK $64B NEE…
  15. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 15
    vs. S&P Energy Market Cap. Price / Earnings Price / Cash Flow Total Return Rating Payout Ratio FTI 123% CVX $230B NBL 286x NOV 15.0x COG 13% CVX AA OKE 67% XOM $325B HES 382x FTI 17.2x KMI 26% XOM AA+ PXD 2% HP $6B HFC…
  16. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 16
    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 94% Fixed Rate Debt (at March 2019) 14.9 16.2 17.3 17.7…
  17. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 17
    FUNDING GROWTH WITH FINANCIAL DISCIPLINE (1) Proforma includes full year EBITDA for Oiltanking. (2) Reduced for expected cash contributions of approximately $625 million from non-controlling interests in Shin Oak NGL pipeline and the…
  18. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 18
    Market Capitalization: ?$62B Enterprise Value: ?$89B Daily Trading Value : (last 3 months) ?$100MM As of May 9, 2019 Highest credit rating in midstream energy space: BBB+ / Baa1 TTM March 2019 Leverage(1): 3.4x reported 20…
  19. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 19
  20. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 20
    U.S. Production Demand for U.S. Production – 2025 PRODUCT DOMESTIC MARKET INTERNATIONAL MARKET Ethane (?50% of NGL barrel*) *Assumes full recovery Domestic Demand: >65% New crackers could consume ?1 MMBPD of ethane U..S. crackers…
  21. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 21
    ETHANE TO POLYETHYLENE MARGINS STRONG Sources: Hodson, EIA and EPD Fundamentals New Builds New Builds HDPE + LDPE is ?60% of production Production incl. rejected ethane Indicative U.S. Ethylene Cracker Profit Margin by Feedstock…
  22. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 22
    A MIDLAND BARREL PRODUCES ONLY 12% MORE LIGHT ENDS THAN A BRENT BARREL Light shale oil is easier to refine and contains less ‘bottom-of-the-barrel’ material. This makes a perfect fit for the ‘Refining + Petchem’ complexes commonly…
  23. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 23
    LIGHT CRUDE OIL: STACKING UP THE DISTILLATE, GASOLINE AND PETCHEM COMPONENTS ?60% Diesel and Heavier ?40% Naphtha Produces: 40% of Ethylene yearly growth 48% of Propylene yearly growth Equals to IEA Mogas yearly growth +5,000…
  24. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 24
    U.S. CRUDE EXPORTS: ON OUR WAY TO BEING THE GLOBAL POWERHOUSE Crude exports were ?2 MMBPD in 2018 per EIA EPD expects exports to reach 8 MMBPD in 2025, mostly light, low sulfur crude oil Sources: EIA and EPD Fundamentals 0 2 4 6…
  25. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 25
    LPG DOCK CAPACITY EXPANSIONS WILL BE REQUIRED TO MEET DEMAND 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 MBPD LPG Domestic Demand Actual…
  26. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 26
    U.S. SHALE RESPONSIBLE FOR VIRTUALLY ALL GLOBAL LPG GROWTH IN THE LAST DECADE 0 200 400 600 800 1,000 1,200 2010 2012 2014 2016 2018 2010 2012 2014 2016 2018 2010 2012 2014 2016 2018 2010 2012 2014 2016 2018…
  27. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 27
    GLOBAL LPG BALANCES 2018–2025 Demand Growth Expected to Exceed U.S. Supplies IEA: global LPG demand was ?9 MMBPD in 2018 and grew at 4.0% CAGR between 2013 and 2018 Conservatively, we assume future demand grows at 3% CAGR between 2018…
  28. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 28
    PLASTICS: FASTEST GROWTH, PAST AND FUTURE Source: IEA GDP 3.0% Oil 1.5% Ethylene 3.3% Propylene 4.2% 10 Year Global Compounded Annual Growth Rates (CAGR) Production Growth for Selected Bulk Materials and GDP IEA: demand for…
  29. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 29
    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…
  30. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 30
  31. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 31
    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…
  32. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 32
    ENTERPRISE HOUSTON SHIP CHANNEL The U.S. Premier Hydrocarbon Export Facility C R U D E , N G L s & P R O D U C T S • Crude Oil • Condensate • Natural Gasoline (C5+) • Refinery Grade Propylene (RGP) • Refinery Grade Butane (RGB) •…
  33. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 33
    ENTERPRISE EXPORTS EXPECTED TO CONTINUE TO INCREASE Sources: Waterborne (IHS), EPD Fundamentals and EPD Distribution Schedules, including estimates 682 336 927 0 500 1,000 1,500 2,000 2,500 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18…
  34. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 34
    2018 USGC CRUDE EXPORTS ?663 MMBbls ENTERPRISE USGC EXPORTS 203 MMBbls (31%)
  35. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 35
    ASIA: >50% OF ALL U.S. GULF COAST NGL EXPORTS AND GROWING
  36. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 36
    HOUSTON VS. CORPUS CHRISTI AREA Market vs. Destination Houston Area Corpus Christi Supply 5 MMBPD (Growing to 8 MMBPD) 1.4 MMBPD Refiner Demand 4.4 MMBPD 0.8 MMBPD # Local Refiners 12 3 Average Refiner Distillation Unit Capacity…
  37. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 37
  38. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 38
    WE CONTINUE TO INVEST AND GROW ?$5.0B of Major Capital Projects Under Construction Aegis ethane pipeline: expected ramp to 362 MBPD in 2019 Shin Oak pipeline began partial operations February 2019 and capacity expected to ramp to 550…
  39. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 39
    QUALITY OF CAPITAL INVESTMENTS Customer Strength and Durability of Cash Flows Capital Investments: Volume Weighted Capital Investments: Customer Ratings by Volume Contract Length A- to AA- 35.2% BBB- to BBB+ 43.0% BB- to BB+…
  40. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 40
    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)…
  41. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 41
    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…
  42. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 42
    OFFSHORE CRUDE OIL EXPORT TERMINAL >5 MMBPD Supply, 2 MMBPD Export Capacity Note: Design, location and other technical information shown in this presentation is preliminary and subject to change. New Terminal Offshore Terminal SEALY…
  43. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 43
    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…
  44. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 44
    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…
  45. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 45
    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 •…
  46. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 46
    MORE GROWTH ON THE HORIZON Potential $5–$10 Billion of Opportunities Producer driven projects • Additional gas processing plants • Increase crude pipeline capacity from Permian Basin • Add natural gas, NGL and other crude pipeline…
  47. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 47
    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…
  48. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 48
    POWER GENERATION FROM SHALE NATURAL GAS AND RENEWABLES HAS LED TO LOWER CO2 EMISSIONS 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…
  49. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 49
    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%…
  50. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 50
    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…
  51. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 51
    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…
  52. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 52
    ?95% OF PLASTIC IN THE WORLD\'S OCEANS ORIGINATE FROM JUST 10 RIVERS 95% Of Plastic Polluting The World’s Oceans Comes From These 10 Rivers Data Source: Schmidt – Export of Plastic Debris by Rivers into the Sea (2017) Consumer…
  53. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 53
    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 •…
  54. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 54
    ESG PRIORITIES (continued) Environmental Stewardship Principles: Continuous monitoring of environmental data, allows us to anticipate and prevent issues. Utilize systems to track operational and emissions data, and identify…
  55. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 55
    TOTAL DIRECT EMISSIONS AND ECONOMIC INTENSITY 46.8% 44.3% 36.1% 21.3% 4.6% 0% 10% 20% 30% 40% 50% Total Petrochemical Facilities Volumes Total NGL Fractionation Volumes Total Liquid Pipeline Volumes Total Fee-based…
  56. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 56
    EPD HAS ADDED ASSETS WITHOUT INCREASING CARBON INTENSITY(3) 18.9 16.7 18.3 17.4 14.3 15.5 15.4 0.0 4.0 8.0 12.0 16.0 20.0 2011 2012 2013 2014 2015 2016 2017 Natural Gas Processing CO2e Emissions/Bbl(1) MT CO2e per MBbl of…
  57. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 57
  58. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 58
  59. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 59
    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…
  60. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 60
    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…
  61. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 61
    MTBV Fractionation (MBPD) Current / 2021 MTBV Storage (MMB) Current Supply Pipelines (MBPD) Current / 2021 Industry Total 2,800 / 4,300 ?250 ?5,100 / 5,800 EPD Owned 760 / 1,100 ?130 ?1,700 / 1,800 EPD ACCESS TO Y-GRADE IN MONT…
  62. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 62
    DEFINITIONS Return on Invested Capital (“ROIC”) is calculated by dividing non-GAAP gross operating margin for the assets (the numerator) by the average historical cost of the underlying assets (the denominator). The average historical…
  63. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 63
    DEFINITIONS – ESG 1. Indirect Emission (subpart NN): 40 CFR Part 98 Subpart NN – Suppliers of Natural Gas and Natural Gas Liquids: Natural gas liquids fractionators are installations that fractionate NGLs into their constituent liquid…
  64. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 64
  65. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 65
    DISTRIBUTABLE CASH FLOW We measure cash available for distribution by reference to distributable cash flow (“DCF”). DCF is a quantitative standard used by the investment community for evaluating publicly traded partnerships since the…
  66. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 66
    GROSS OPERATING MARGIN We evaluate segment performance based on our financial measure of gross operating margin (“GOM”). GOM is an important performance measure of the core profitability of our operations and forms the basis of our…
  67. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 67
    FREE CASH FLOW Free cash flow (“FCF”) is a traditional cash flow metric that is widely used by investors and other participants in the financial community. In general, FCF is a measure of how much cash flow a business generates during a…
  68. BAML Energy Credit Conference – Enterprise Products Partners LP – slide 68
    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 rating agencies, to assess…

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