ENTERPRISE PRODUCTS PARTNERS L.P. EPD

Enterprise Products Partners reported record adjusted EBITDA of $2.4 billion and DCF of $2.0 billion for Q1 FY25, with a strong 1.7x coverage. The company moved 13.2 million barrels of oil equivalent per day and 2 million barrels per day of liquid hydrocarbon exports, achieving 5 operational records. These results were achieved despite 63 days of unplanned maintenance at the PDH 1 facility, which is now back online and running above nameplate capacity.

The company anticipates bringing several key projects online in the latter half of 2025, including two gas processing plants in the Permian (Delaware and Midland Basins) in Q3, the Bahia NGL pipeline in Q4, Frac 14 at Mont Belvieu in Q3, and the first phase of NGL exports on the Neches River in Q4. Enhancements to the ethane and ethylene terminal at Morgan's Point are also expected in Q4. Management expects these projects, particularly the processing plants and Frac 14, to ramp up quickly and be near full utilization upon commissioning due to existing contracts and strong Permian production outlook.

Enterprise's fundamental update projects Permian black oil production to remain flat through 2027 under a $60 WTI scenario, while rich natural gas is expected to grow by 1.3 to 1.5 Bcf/day, leading to significant NGL growth. The company's gathering and processing business is primarily supported by large, sophisticated producers focused on the Permian. Enterprise connected over 1,000 wells in 2024 and expects a similar number in 2025, with activity heavily weighted towards the second half^⚖️ of the year.

Despite China's tariffs on LPG (excluding ethane and ethylene), Enterprise has not observed disruptions in its export volumes. The company has limited direct exposure to China, with international counterparties navigating trade flows. Management highlighted that the market is rerouting barrels, and while there's a general demand slowdown internationally, price adjustments will ensure barrels clear by displacing other products like naphtha. The company's Houston Ship Channel expansion is noted as the most capital-efficient for increasing export capacity.

Enterprise declared a Q1 FY25 distribution of $0.535 per common unit, a 3.9% increase year-over-year. The partnership repurchased 1.8 million common units for $60 million in Q1 FY25, bringing total buybacks under the program to $1.2 billion. Total capital returned to unitholders (distributions + buybacks) for the 12 months ending March 31, 2025, was $4.9 billion, representing a 56% payout ratio of adjusted cash flow from operations. The company anticipates a significant increase in excess distributable cash flow in 2026 as growth CapEx tapers.

Both PDH plants are currently operating well, with PDH 1 running above nameplate capacity after resolving mechanical issues. The company has converted 20% of its propylene production to fee-based contracts, reducing volatility from splitter margins. MTBE octane spreads have been weaker year-to-date but are expected to widen in the latter half of the year with the summer driving season. The segment's performance is expected to improve with stable plant operations.