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    EPD
    Earnings call· Dec 2024(Q4 FY24)

    ENTERPRISE PRODUCTS PARTNERS Q4 FY24 earnings call EPD

    Feb 4, 2025 Source

    Executive summary

    Enterprise Products Partners L.P. Q4 FY24 — Strong Operational Performance and Export Growth

    Enterprise Products Partners delivered robust Q4 FY24 results, driven by strong operational performance and record volumes, while advancing strategic growth projects and returning capital to unitholders. The company is focused on expanding its export capabilities and capitalizing on Permian growth, though it faces headwinds from permitting delays for the SPOT project and an oversupplied global petrochemical market. Management remains committed to capital discipline and mid-single-digit cash flow growth.

    Highlights

    5

    • Achieved $9.9 billion in EBITDA for FY24 and $2.3 billion in adjusted cash flow from operations for Q4 2024, up 4% YoY.

    • Increased Q4 2024 common unit distribution by 4% to $0.535 per unit.

    • Moved a record 13.6 million barrels of oil equivalent per day in Q4 2024 and exported 2.1 million barrels per day of liquid hydrocarbons.

    • Completed the acquisition of Piñon Midstream for $949 million and advanced multiple organic growth projects.

    • Set a goal to export over 100 million barrels of hydrocarbons per month by 2027, already 75% of the way there.

    Concerns

    3

    • The SPOT deepwater port project faces significant delays due to federal bureaucracy, leading to an anchor customer opting out and current lack of commercial traction.

    • The petrochemical segment is currently oversupplied globally, with PDH 1 experiencing a mechanical issue and PDH 2 a design issue limiting run rates.

    • Increased competition in LPG exports could erode dock FOB values, though the company plans to remain competitive on fees.

    Guidance & targets

    10
    CategoryTargetConfidence
    Growth capital expenditures
    $4 billion to $4.5 billion
    high materiality
    High
    Growth capital expenditures
    $2 billion to $2.5 billion
    high materiality
    High
    Sustaining capital expenditures
    approximately $525 million
    medium materiality
    High
    Consolidated leverage ratio
    3x plus or minus 0.25
    high materiality
    High
    Cash flow growth
    mid-single-digit
    high materiality
    Medium
    Hydrocarbon export volume
    over 100 million barrels a month
    high materiality
    High
    PDH utilization rates
    upper 90%
    medium materiality
    Medium
    Bahia NGL pipeline utilization
    60% full
    medium materiality
    High
    Excess distributable cash flow
    $3.5 billion - $3.6 billion
    high materiality
    Medium
    Excess distributable cash flow after growth capex
    $1 billion - $1.1 billion
    high materiality
    Medium

    Operational metrics

    31
    Adjusted EBITDA
    $9.9 billion
    FY24

    Full year 2024 Adjusted EBITDA.

    Adjusted EBITDA
    $2.6 billion
    Q4 FY24

    Fourth quarter 2024 Adjusted EBITDA.

    Net income attributable to common unitholders
    $1.6 billionup 3% YoY
    Q4 FY24

    Reported net income for the quarter.

    Diluted EPS
    $0.74up from $0.72 YoY
    Q4 FY24

    Diluted earnings per common unit.

    Distribution per common unit
    $0.535up 4% YoY
    Q4 FY24

    Declared distribution for the quarter.

    Common unit repurchases
    $63 million
    Q4 FY24

    Purchases on the open market.

    Common unit repurchases
    $219 million
    FY24

    Total purchases for the full year.

    Cumulative common unit repurchases
    $1.1 billion
    Since program inception

    Total purchases under the buyback program.

    Total capital return
    $4.8 billion
    FY24

    Combined distributions and buybacks.

    Payout ratio
    55%
    FY24

    Total capital return as a percentage of cash flow.

    Total capital investments
    $2 billion
    Q4 FY24

    Total capital investments for the quarter.

    Total capital investments
    $5.5 billion
    FY24

    Total capital investments for the full year.

    Total debt principal outstanding
    $32.2 billion
    As of Dec 31, 2024

    Total debt principal outstanding at year-end.

    Weighted average cost of debt
    4.7%
    As of Dec 31, 2024
    Fixed rate debt
    98%
    As of Dec 31, 2024
    Consolidated liquidity
    $4.8 billion
    As of Dec 31, 2024
    Consolidated leverage ratio (net)
    3.1x
    As of Dec 31, 2024

    Ended the year with this leverage ratio.

    Total production volume moved
    12.9 million
    FY24 average

    Average daily volume moved for the full year.

    Total production volume moved
    13.6 million
    Q4 FY24

    Daily volume moved in the fourth quarter.

    Liquid hydrocarbons exported
    2.1 million
    Q4 FY24

    Daily liquid hydrocarbons loaded for export against term commitments.

    Hydrocarbons exported
    70 million
    December

    Total hydrocarbons exported in December.

    Ethane export base capacity
    540,000
    Current

    Base capacity for ethane exports, fully contracted.

    Ethane export expansion capacity
    300,000
    Expansion

    Expansion capacity at the Ship Channel terminal.

    LPG expansion contracted
    85%
    Current

    Percentage of LPG expansion capacity already contracted.

    PDH incremental EBITDA potential
    $200 million
    FY25

    Potential incremental EBITDA contribution from PDH plants in 2025.

    Employee unit purchase plan participation
    almost half
    Current

    Percentage of employees participating in the plan.

    Employee unit purchase plan purchases
    $188 million
    FY24

    Total purchases for 2024.

    Employee unit purchase plan purchases
    $48 million
    Q4 FY24

    Purchases during the fourth quarter.

    Weighted average life of debt portfolio
    18 years
    As of Dec 31, 2024
    Data center projects in queue
    20
    Current

    Number of data center projects in the queue on the Texas side and their potential demand.

    Power plant projects for data centers
    15
    Current

    Number of potential power plant projects that may feed data centers in Texas.

    Industry KPIs

    1
    MetricValueDetails
    FCF shareholder distributions$3.2 billionUSD

    Deals & partnerships

    5
    Piñon MidstreamAcquisition of sour gas gathering and treating assets in the Delaware Basin.$945 million

    Acquisition completed in Q4 2024, with $949 million recorded in Q4 capital investments.

    Midland ECHO 1 crude oil pipeline JV partnerAcquisition of joint venture interest in the Midland ECHO 1 crude oil pipeline.

    Acquired JV interest during 2024 and early 2025.

    Fractionators JV partnerAcquisition of joint venture interest in the seventh and eighth fractionators.

    Acquired JV interest during 2024 and early 2025.

    Southeast Asian petrochemical companySizable ethane offtake contract.

    Signed recently within the last 2-3 weeks, with a plant in Vietnam.

    Asian customerExpansion of an existing ethane contract.

    Expanding an existing contract in Asia.

    Capital programs

    10
    Piñon Midstream Acquisitionclosed$945 million
    Period spend: $949 million
    Start: 2024

    Benefit: Sour gas gathering and treating, natural gas gathering and compression in Delaware Basin

    Acquisition completed in Q4 2024. Noteworthy support from producer customers led to fine-tuning 2025 growth capex.

    Permian Gas Processing Plantsunderway
    Start: 2024

    Benefit: 4 total plants (2 completed 2024/early 2025, 2 more in 2025)

    Two plants completed in 2024 and early 2025, with two more to be added in 2025.

    Bahia NGL Pipelineunderway

    Benefit: NGL transportation

    Expected to be added in 2025, with 60% utilization by 2026.

    Frac 14underway

    Benefit: NGL fractionation

    Expected to be added in 2025.

    Neches River NGL Export (Phase 1)underway

    Benefit: NGL export capacity

    First phase of NGL export expansion on the Neches River expected in 2025.

    Morgan's Point Ethane and Ethylene Terminal Expansionsunderway

    Benefit: Ethane and ethylene export capacity

    Expansions expected in 2025.

    Octane Enhancement Plant Turnaroundplanned
    Period spend: approximately $525 million

    Included in 2025 sustaining capital expenditures.

    Sour Gas Gathering and Treating Projects (Delaware Basin)underway
    Start: 2025

    Benefit: Expanded sour gas handling capacity

    New opportunities identified, contributing to the fine-tuned 2025 growth capex range. Includes permitting a third AGI well and expanding two existing AGI wells.

    Natural Gas Gathering and Compression Projects (Delaware Basin)underway
    Start: 2025

    Benefit: Expanded natural gas handling capacity

    Additional projects identified, contributing to the fine-tuned 2025 growth capex range.

    Morgan's Point Flex Expansioncompleted

    Benefit: Ethane and ethylene export capability

    Construction finished at the end of December 2024, now in service.

    Risks & headwinds

    6
    SPOT Project Permitting Delays and Commercialization ChallengesOngoing

    Over 5 years for license, 30,000 pages in final submission, 80,000 comments addressed; anchor customer opted out.

    Mitigation: Continuing to promote SPOT as the only company with a license to construct, highlighting cost advantages. Will proceed if volumes, fees, and terms are met within a reasonable timeframe.

    Global Petrochemical OversupplyNear-term

    Globally, the market is oversupplied.

    Mitigation: Expect moderate domestic improvement; potential for cracker shutdowns elsewhere due to advantaged ethane feedstock, which would help rationalize the market.

    PDH Operational IssuesOngoing

    PDH 1 mechanical issue, PDH 2 design issue limiting rates.

    Mitigation: Working to resolve mechanical issue on PDH 1 and design issue with licensor on PDH 2; long-term target is upper 90% utilization.

    Increased LPG Export CompetitionThis year and next year

    New industry capacity coming online will start to erode healthy dock FOB values.

    Mitigation: Enterprise has lower expansion capital costs (less than 1/3 of greenfield) and is committed to offering more favorable fees to customers to maintain its LPG export franchise.

    Permit Reform UncertaintyOngoing

    Skepticism about permit reform in D.C.

    Mitigation: The lack of permit reform makes existing infrastructure more valuable.

    Haynesville Gas Price SensitivityNext year

    Growth in the Haynesville basin is driven by gas price.

    Mitigation: Updating Haynesville forecast for potential, acknowledging gas price as a key driver.

    What to watch in Q1 FY25

    5

    PDH 1 & 2 Utilization Rates

    Next quarter
    CurrentLimited by mechanical (PDH 1) and design (PDH 2) issues
    TargetIncreased run rates, moving towards upper 90% utilization

    Why it matters

    Improved utilization of PDH plants is key to realizing their full EBITDA potential and improving petrochemical segment performance.

    PDH 2, we're working through a design issue with our licensor that has the rates, the rate is currently limited. We expect to get that resolved and our long-term target is to have those operating in the upper 90% of utilization.

    Q&A highlights

    7

    What are the key drivers for 2025 growth, and is the Q4 2024 performance a good baseline?

    Management expects mid-single-digit cash flow growth for 2025, with larger projects coming online in the second half of the year. Industry fundamentals are strong.

    “Yes, Spiro, I'll go back to what we said on our Investor Day call a year ago that really we think near term, we've got the potential for, call it, mid-single-digit cash flow growth over the near to intermediate term.”

    asked by Spiro Dounis · answered by W. Fowler

    2 min read6 chapters

    Detailed Narrative

    01

    Permian Growth and Infrastructure Expansion

    Enterprise continues to see robust growth in Permian natural gas and NGL production, exceeding expectations. The company completed two processing plants in the Permian in 2024 and early 2025, with two more planned for 2025. This expansion supports the 'wellhead to water' strategy, flowing liquids from processing plants through downstream pipelines and fractionators to export docks.

    02

    SPOT Project Challenges and Export Strategy

    The proposed SPOT deepwater port project has faced significant permitting delays, taking over five years to secure a license to construct. This bureaucratic process led to an anchor customer opting out. Despite the challenges, Enterprise remains committed to growing exports, with current expansion projects at Neches River, Morgan's Point, and the main Ship Channel terminal, aiming for over 100 million barrels of hydrocarbons exported per month by 2027.

    03

    Petrochemical Segment Performance and Outlook

    The petrochemical segment is currently experiencing global oversupply, though domestic customers anticipate moderate improvement. The company's PDH 1 facility is addressing a mechanical issue, while PDH 2 is working through a design issue with its licensor, both limiting current run rates. Long-term, Enterprise targets upper 90% utilization for its PDH plants, with contracts structured on a toll-based, cost-plus model.

    04

    Capital Allocation and Shareholder Returns

    For 2024, Enterprise returned $4.8 billion to unitholders through $4.6 billion in cash distributions and $219 million in common unit repurchases. The company's payout ratio was 55%. Management projects $1 billion to $1.1 billion of excess distributable cash flow in 2026, after fully funding growth capital expenditures, which will be available for buybacks and debt retirement.

    05

    M&A Landscape and Strategic Focus

    Enterprise remains active in evaluating asset packages, with the Piñon Midstream acquisition in 2024 being a key example. The company sees more value in asset purchases that fit its system compared to public company M&A, which is viewed as more challenging for driving cash flow per unit growth. The focus is on opportunities that enhance its integrated value chain.

    06

    Data Center Demand in Texas

    The company is actively monitoring the emerging demand from data centers in Texas, noting approximately 20 data center projects in the queue that could represent over 2 Bcf/d of natural gas demand. While only about 15% of these projects are showing progress, Enterprise is prepared to leverage its intrastate pipeline capacity to serve these new loads where feasible.

    AI-generated summary of the company’s earnings call. Not investment advice.