ENTERPRISE PRODUCTS PARTNERS Q1 FY26 earnings call EPD

Enterprise generated $2.7B of adjusted EBITDA in a seasonally short quarter, up 10% YoY, with 1.8x DCF coverage. Assets brought online over the past year continued to ramp: the Bahia NGL pipeline, fractionator 14 (full on day 1), and three Permian natural gas processing plants (essentially full by mid-quarter). Bahia and Shin Oak as a combined system are running at 80% of a combined 1.2 million barrels/day of capacity. The addition of Midtown West 2 in the Delaware Basin set a new gas-processing record, alongside multiple first-quarter volumetric operating records across the system.

Management entered 2026 expecting steady production growth, oversupplied markets, and benign commodity prices — an outlook that has clearly changed. The Iran conflict and restricted Strait of Hormuz flows have constrained an estimated 12-15 million barrels/day of crude, refined products, LPG and petrochemical supply (~500 million barrels/month, ~720 million barrels over 60 days). U.S. petrochemical margins improved dramatically: ethane-to-ethylene cracking margins moved from ~$0.07/lb to $0.23/lb and the ethylene-to-polyethylene spread from $0.20/lb to over $0.45/lb. China's PDHs are running at less than 50% of capacity and Asian petrochemicals are destocking inventories. Management sees strong demand persisting through the remainder of 2026 and possibly into 2027, with earliest Strait normalization estimated around July before repair of damaged facilities.

Q1 export dock volumes averaged ~70 million barrels/month, with more than 88 million barrels scheduled to load in April. Crude terminals are benefiting from SPR barrels directed to international markets — Q4 crude exports were up 70k bbl/d, Q1 added another ~70k with SPR barrels, and Q2 could exceed 1 million bbl/d. Ethane and LPG customers continue to line up at docks, and ethylene exports have run high — roughly 3 million barrels this month. Management emphasized the strategic shift to being a 'hydrocarbon dock' offering ethylene, propylene, LPG and ethane flexibility rather than a single-product terminal.

Q1 net income to common was $1.5B ($0.68/unit, +6% YoY) and adjusted CFO rose 10% to $2.3B. The declared distribution of $0.55/unit (+2.8% YoY) keeps Enterprise on track for 28 consecutive years of growth. Over the trailing 12 months it returned ~$5.1B to equity investors (93%/~$4.8B as distributions, ~$356M via buybacks), a 57% payout ratio of adjusted CFO, and has returned over $63B since its 1998 IPO. Total debt principal was ~$34.2B with a ~17-year weighted average life, 4.7% weighted average cost, and ~95% fixed; liquidity was ~$3.3B. Net leverage improved to 3.2x, temporarily elevated by new-asset debt (Bahia, Port Neches, Occidental acquisition) whose EBITDA has not yet entered the trailing-12-month figure.

The downstream stack contributed strongly with record product flows, strong margins and high PDH utilization. PDH 2 has run much better and more consistently since its turnaround last year, and PDH 1 reliability has improved through multi-year investment, per the Belvieu team. On octane enhancement — which delivered north of $400M of gross margin in 2022/2023 per an analyst — the Oleflex unit is just coming out of a turnaround, limiting full capacity near-term, but management expects strength through the quarter.

Despite the supply shock, U.S. producers are staying disciplined — some private/independent operators are discussing pulling cadence forward and modest incremental gathering-system growth over the last three months, but the majors are holding. Management flagged that the futures/paper market does not accurately reflect the tighter physical market (e.g., strong physical premiums in dated Brent) and expects the forward curve to drift up over time^⏳ toward physical reality, even with an eventual resolution in the Strait.