Enterprise Products Partners L.P.

Ladies and gentlemen, thank you for standing by, and welcome to the second quarter Enterprise Product Partner Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, please press star 1 on your telephone. Please be advised today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker, Randy Burkhardt. Please go ahead.

Good morning and welcome to the Enterprise Products Partners conference call to discuss second quarter earnings. Our speakers today will be co-chief executive officers of Enterprise's general partner, Jim Teague and Randy Fowler. Other members of our senior management team are also in attendance and will assist on the call today. During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 based on the beliefs of the company, as well as assumptions made by and information currently available to the enterprises management team. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in any forward-looking statements made during this call. And with that, I'll turn the call over to Jim. Thank you, Randy. I said at the beginning of the last call, we were talking about first quarter earnings. While it was supposed to be an earnings call, I thought it was going to be a COVID call, and that's what it turned out to be. So sticking with that theme, I guess today we're going to tell you our COVID story. For the second quarter of 2020, we reported EBITDA of $2 billion compared to 2.1 for the same quarter last year. Our DCF, I think you saw in the press release, was 1.6 times coverage. And year-to-date, we've retained $1.2 billion. And something else we're quite proud of is this is the best first-half safety performance that we've ever had at Enterprise. Given what we've all gone through, as you would expect, our volumes were down as a result of the pandemic and the oil price crash. But they are quickly improving. With all of the events, our results for the second quarter highlight the diversification of our system, the quality of our customers, cost control, and the responsiveness of our assets and our employees during what was probably the most challenging quarter of my career. Our profits were protected by a strong base of firm customer obligations and the natural edge we have and our storage and marketing activities, which enabled us to largely offset the weakness in our natural gas gathering and processing and petrochemical businesses. The facts are we are in the commodity service business, for us both on the supply and demand side of the equation. We transport, store, upgrade, and buy and sell multiple energy commodities. Because we're so tightly integrated, we have a lot of tools at our disposal. When the market says store crude, we can. When the market says store diesel but give me LPG, we convert wells and do so. When the market says store Y-grade, we store Y-grade. In addition, our people and our systems have a strong history of performing, no matter the type of crisis. Our balance sheet always has the dry powder to move quickly. we usually get the question of how much our results are non-recurring. It's the same question we got when Katrina blew through south Louisiana and literally knocked out every plant we had. Narco was down for months, as was Promix, Menace, and Neptune. Demand came back before indigenous supply, and we made more money with our west to east pipelines than if those plants had been running. So it was non-recurring. We got that question during Hurricane Ike in 2008, which went right over Maubelview. We had Maubelview up before producers could even get their supplies back on. Got that question in Hurricane Harvey in 2017 when production never stopped, but virtually all of our customers quit taking, in some cases for months, and we never interrupted a single contract customer. Events like what we are going through now and the opportunities they present may be labeled as non-recurring, but our performance and our results are recurring, regardless of the environment. We outlined in today's earnings release that petrochemical and refined product service segment was particularly hit hard due to the decrease in demand for those products. However, we might remain encouraged by the efforts of most companies to reopen their economies. In addition to being one of the largest refined products consumers in the world, the U.S. is also a substantial exporter of refined products, especially to Latin America. As you all know, during the second quarter, refining utilization rates bottomed in April, which negatively impacted our propylene and octane enhancement businesses due to lower feedstock availability and a decrease in international demand. Currently, the refining industry has recovered to near 80%, which has facilitated an improvement in both propylene and octane enhancement. On the production side, our natural gas gathering and processing were impacted by low prices and some shut-in production. While those shut-ins were not insignificant, for the most part, they were relatively short-lived, and volumes on our system are recovering. We've made substantial progress in deferring and reducing capital by a billion dollars, and we continue to discuss JV opportunities, which could further reduce our capital. In addition, Graham and his folks have reduced 2020 sustaining CapEx by $100 million. That said, we have some important projects coming online over the next few months. In the third quarter, our 11th fractionator and the echo segment of Wink to Webster are expected online. And in the fourth quarter, we expect to complete our rich gas pipeline to Carthage, add a DIV at Montbellevue, and complete a strategic ethylene tank and pipeline build-out. We continue to make strides in our petrochemical segment, which we have always described as an extension of of our NGO franchise and our value chain. Because we are probably the only midstream that's fairly big in the petrochemical midstream space, it's easy to underestimate the long-term strategic importance of what we're doing. Rather than being a feedstock-starved olefin industry with a handful of players, the United States, especially in ethylene, has quickly moved into being the world's incremental supplier. This is really no different than what has happened in LPG over the last 10 years, where the U.S. has moved from being an importer to supplying over 75% of the world's demand growth. In short, to meet the world's growing demand for primary petrochemical products, Enterprise built the world's first open-access hub for polymer-grade propylene. Now we have developed the first hub for ethylene. These hubs are transforming how ethylene and propylene markets transact, and will create a true marketplace for the world's primary petrochemical producers, consumers, and traders. These hubs provide the essentials for an efficient market, reliable supplies, price transparency, and access to domestic and global markets. In June, we loaded a record-sized ethylene cargo of 44 million pounds. Then in July, we successfully loaded combination cargos of NGLs and olefins on the same vessel, including the simultaneous loading of propane and polymer-grade propylene into separate compartments on the BLGC at our ship channel facility, as well as a simultaneous loading of ethane and ethylene on a vessel at our Morgan's Point facility. Both vessels were the first export cargos of their kind from the U.S., Co-loading olefins on larger vessels with NGLs allows for more efficient use of dock capacity, but it also provides significant freight benefits to petrochemical export customers. I thought I'd also spend a minute to talk about what we're doing to keep our business running while keeping our people safe. We started out the quarter with much of our headquarters staff working from home, But over the last few weeks, we've been gradually bringing our headquarters personnel back into the office, and they're essentially staffed at this point, fully staffed. In addition to helping our employees understand social distancing, we also now require face coverings at all times in our office. It's an adjustment, but we have adjusted. And thanks to our people taking personal responsibility both in and out of the office, our case count has been minimal. I sincerely want to thank our people for their flexibility, their adjustments, and their sacrifices. And I'd also like to give a shout-out to our operations and commercial folks that were not able to work from home. Plants and pipelines don't run themselves. There's no such thing as a home-based control center. And the collaboration between our commercial people that we ask to be here – went a long way to achieving those results. I guess finally, I'd just like to say that I think we've got the best employees in the business, and I think their performance this quarter reflects that, and I just want them to know how much they're appreciated. Randy? Thanks, Jim.

Good morning. I'll start with the income statement for the second quarter, net income attributable to limited partners. For the second quarter, 2020 was $1 billion, or 47 cents per unit on a fully diluted basis. This compares to 55 cents per unit for the second quarter of 2019. Net income for the second quarter of 2020 included $51 million, or 2 cents per unit, of the expense related to an increase in the deferred tax liability associated with with the OTA Holdings Corporation we acquired from Marquardt and Falls in March 2020 in the settlement of the liquidity option agreement related to our acquisition of oil tanking back in 2014. Moving on to cash flows, cash flow from operations was $1.2 billion for the second quarter of 2020 compared to $2 billion for the second quarter of 2019. Changes in operating accounts, or think of it as working capital, accounted for approximately $660 million, or 80% of the $842 million decrease in cash flow from operations between the two periods. We used working capital to fund our marketing and contango activities during the quarter. We currently expect this usage to peak during the third quarter of 2020. Excluding changes in working capital accounts, cash flow from operations for the second quarter of 2020 was about 10% lower than the second quarter of last year. The change in distributable cash flow between the two periods mirrors this with a decrease of approximately 8.4%. Free cash flow, which we define as cash flow from operations, less cash used in investing activities, plus contributions from our joint venture partners, was $305 million for the quarter, which again was reduced by our use of working capital. Free cash flow was $2.7 billion for the 12 months ended June 2020, which was 27% higher than the comparable trailing 12 months ending in June of last year. We defined payout ratio as the sum of cash distributions and buybacks as a percent of cash flow from operations. Our payout ratio was 83% for the second quarter of 2020, which is an inflated percentage due to our use of cash flow from operations used for working capital purposes. For the trailing 12 months, it was 62%. We declared our distribution of 44.5 cents per unit with respect to the second quarter on July 7th, and it will be paid August 12th. This distribution represents a 1.1% increase when compared to the same quarter of 2019 and is flat to the prior two quarters. As we stated on our first quarter call, given the uncertainty of the macroeconomic backdrop, our board will continue to evaluate our distribution growth quarter by quarter in 2020. Additionally, EPD's distribution reinvestment plan and employee unit purchase plan purchased a combined 1.9 million EPD units in the open market during the second quarter, which rivals the purchase activity of our typical institutional investor. Moving on to capital expenditures, We have recently placed approximately $150 million of assets into service in the second quarter and have another $6.6 billion of projects under construction and underwritten by long-term contracts. Our capital investments were $910 million during the second quarter, which includes $74 million for sustaining capital expenditures. We still anticipate spending between $2.5 and $3 billion in growth capital projects for this year and approximately $300 million for sustaining capital expenditures. For 2021 and 2022, we currently anticipate growth capital investments to be approximately $2.3 billion and $1 billion, respectively. This is an aggregate $700 million reduction from guidance we provided for 2021 and 2022 at the end of the first quarter. The changes were largely attributable to the indefinite deferral of several expansion projects, of which some of the largest were at our Houston Ship Channel facility. We continue to engage with industry participants regarding potential joint ventures or sanctioned projects. but the pace of these discussions have slowed due to COVID-19. Our capital expenditure forecast excludes our proposed spot offshore crude oil terminal that is subject to government approvals. Currently, we do not expect to receive these approvals in 2020. Moving on to capitalization, our total debt principal outstanding was approximately $30 billion at June 30, 2020. Assuming the first call date for our hybrids, the average life of our debt portfolio was almost 16 years. Assuming the final maturity date for the hybrids, the average life was almost 20 years. Our effective average cost of debt is 4.5%. Adjusted EBITDA for the trailing 12 months ended June 30, 2020 was $8 billion, and our consolidated leverage ratio was 3.4 times after adjusting debt for the partial equity credit for the hybrid debt securities, and also further reduced by unrestricted cash. Our consolidated liquidity was approximately $7.3 billion at June 30, including availability under our existing credit facilities and approximately $1.3 billion of unrestricted cash on hand. Finally, before we open it up for Q&A, I want to mention that that we also announced this morning in a separate press release that our 2019-2020 sustainability report, which reflects our latest environmental, social, and governance disclosures, is currently available on our website. We have also initiated the annual review process with the independent sustainability rating providers and believe our disclosures and initiatives which are described in this comprehensive 104-page report, will be reflected in updated scores. We believe our stakeholders will find these efforts beneficial. We thank our customers, community leaders, banks, debt and equity investors, and board members for their participation in our sustainability survey that drove the outline for this report. With that, Randy, I think we can open it up for questions.

Okay, Sydney, we're ready to take questions from our listeners.

Certainly. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To answer your question, please press the pound key. With the interest of time, we ask that you limit yourself to one question and one follow-up, please. Once again, that's star 1 to ask a question. And our first question comes from the line of Jeremy Tonet with J.P. Morgan. Your line is open.

Hi, good morning. Good morning. Good morning. Just wanted to start off with a question maybe Tony could answer best. You guys had talked about patient recovery being slower and maybe extending into 2021. I was wondering if you could provide a bit more details, I guess, on how you see that, you know, transpiring and how that impacts you across, I guess, your different business lines.

You want to talk about the production side or the demand side, Jeremy?

If you have both, we'll take both.

Yeah. So... Obviously, we had this shut-in because of the price crash and chaos, and we think about a million and a half, and I'll just use crude as an example, a million and a half to 1.8 million barrels came off the market. I'm kind of a numbers kind of person, not real visual, but if you look at how that production has come back, it's probably one of the steepest Vs I've ever seen in statistics. So... Yeah, we've recovered a substantial amount of it. We think that maybe 300,000 barrels will lag. But with that said, you can't deny, given the amount of declines that the shales have, that momentum has changed, and there's a fair amount of ground to be picked up. So that's the reality. When we look at Y grade coming into our system, for example, those numbers are really strong. And I'll let Brent address that. But when we get out to 2025, as we see it today, we'll be down from where we were before. And it's not because momentum doesn't pick back up. Look, we think that we were at about 1,150 completions a month in February. And we think that as we get into 2022, that we'll be at around – 950, okay, and probably completing the best of the best wells. That's what's in our forecast today. And so when you get out to 2025, there'll be some smaller volumes than what we said before. But Brent, do you want to talk about what's going on in our business in that regard and what you're seeing?

Yeah, the one thing we have seen is just the resiliency of the Permian, and part of it's just what's going on out there, and part of it's how we've contracted. But If you look at our Y-grade receipts for June, if you look at our Y-grade receipts for July, those are both records for Enterprise. And if you look at our Y-grade inventories, they're at, you know, all-time highs. So in terms of how we've contracted, in terms of what we're seeing coming out of the Permian, the fractionation volumes that we have access to, those have bounced back quite nicely.

On the demand side, gasoline's not really, I mean, it's off, it's off 10 to 15%, depending on what numbers you look at. Diesel's the same. And again, that's to be expected. So if we think about going forward, what the data shows is Latin America, and we are a large exporting country to Latin America, is waking back up, moving away from being shut down, and largely that, think about Mexico and Brazil. So that's a positive, and we're hoping that as we work off inventories, we'll put our refined risk back to work.

That's very helpful. Thanks. And on the pet chem side, as far as demand there, any trends that we should be thinking about with LPGs and pet chems?

Yeah, Jeremy, this is Chris Stanna. We saw at the At the beginning of the pandemic, so in March-April timeframe, lower demands on the durables. The single-use actually was pretty resilient. We saw pretty good demand. We're starting to see gradual improvement in demand for the durables. And, of course, single-use is still pretty good.

The fact that our ethylene export dock is sold out also says something about the demand for ethylene.

That's very helpful. Thanks. And one last one, if I could, just with regards to arbitrage opportunities that you've seen so far, kind of the non-recurring, recurring earnings that you've gotten that really boosted this quarter. What type of opportunities do you see in the third quarter here, I guess, with Contango, what have you, and, you know, delayed realization of those profits, just trying to think through that a bit more?

I think, Jeremy, what we said last call is we thought we'd be at $500 million to $600 million spread. And I think they're probably saying for the year we'll be at the upper end of that range. Very helpful. Thank you very much.

Thank you. And our next question comes from the line of Jean Ann Salisbury with Brenstein.

Your line is open. Good morning. The main fundamental bear case on enterprise is expected margin compression in the NGL business now that everything looks overbuilt for the medium term. Anything that you can provide to address these fears of a coming price war, basically, in NGL pipelines, PRAC, and exports would be really helpful.

I didn't get the question. Did you understand the question? It won't stay answered.

Yeah, so, Jeananne, your question is, as we think about margin compression, and I'm going to assume you're talking about as people recontract on midstream assets. Is that where you're headed?

I think it's a little bit more than that. I think people usually talk about FRAC, but I think it's really the whole chain of NGL pipeline FRAC and exports. It seems like now there's too much capacity, and so people are concerned that you could see a similar phenomenon to what we see in crude, which is that, yeah, when contracts come up, that you would see massive declines.

I think, Jean-Anne, what you're saying – kind of makes sense. I think you have to take a look at what a company has to work with. That's why I emphasize petrochemicals in my opening comments, because that gives us a heck of a lot longer of a value chain to leverage. So it's about what are you having to leverage. And while one part of that value chain may be under some stress, the total won't be. Is that fair, Brent?

Yeah.

And you had another point to make. So, you know, in our situation, yeah, maybe, but we've got a value chain that we're going to leverage and we're – You know, we'll give them what they want, where their hot button is, and we'll collect what we need, and it's the rest of the value chain.

I think there is some offset, Gene, and what we're seeing on ethane is an offset on volumes, both for pipelines and for fractionation. You know, I hear what you're saying from an industry standpoint. I'll repeat myself. I think we've done a heck of a job contracting. I think how you contract and who you contract with matters in this environment. And we'll say that about other commodities as well. If you look at our LPG export facility, it's in a very, very good position in terms of the contracts we have in place. And if you look at the balance for this year and you look at the following couple years, we're in a very, very good spot. And then ultimately, if supply starts going down, You know, you look at what we have built in Montbellevue and the pricing points that we have, you know, I fundamentally believe that the downstream assets that we have at those pricing points benefit. So there are some offsets in this environment.

So effectively the bundled chain you think will kind of give you a better and different outcome than the word on crude pipelines more broadly?

I think it always has.

Great. Thanks. That's all for me.

Thank you. And our next question comes from the line of Tristan Richardson with SunTrust. Your line is open.

Hey, good morning, guys. Could you talk about your prepared comments about the JV opportunities for reducing capital? You noticed that that process has been elongated due to the pandemic. Are the six potential JVs still in play that you noted on the last call? or can you just give us a general update there?

Yeah, I think on the last call we said that we were pretty engaged with three of those six. And guess what I could say today is we're probably pretty engaged with one of those three. It's not that you're not in discussions with the others, but it's like Randy said, in this environment, everybody's just kind of pulling their horns in. So we're discussing some JVs with some of our larger projects, but I wouldn't say we're highly engaged with more than one, but we are highly engaged with one.

That's helpful. And then just a quick follow-up. Could you frame how we should think about maybe the largest components of the 2021 $2 billion outlook, whether it be PDH-2 or Midland ECHO-4? And does this number presume joint ventures, or is this more like an 8-8 type of budget?

Yeah, Tristan, this is Randy. Yeah, the $2.3 billion is assuming no joint ventures. And if you would, two-thirds of that $2.3 billion are really three projects, and that's PDH-2, Midland ECHO-4, crude oil pipeline, and the Gillis natural gas pipeline. Great.

Thank you guys very much.

Thank you. And our next question comes from Colton Bean with Tudor Pickering. Your line is open.

So you noted in the press release the process volumes were back to 88% of March levels and NGLs were nearly at parity. On the inlet volume side, can you provide a bit more detail as to the mix across your footprint? And then on NGLs, is that outperformance relative to gas? Is that primarily increased extraction?

Who wants to take that? In terms of the mix of wire grade, this is Brent Colton, but I think I'd say – Ethane's probably increased about 4%, maybe 5% across our system. And then in terms of just the whole volumetric, and I'm not sure I understood the question, but where you're seeing the growth come from is obviously in the Permian, and I think you'll see in July some very robust volumes that come from that area. Okay.

Yeah, and that was mainly the focus of the first point is just when you look at kind of the four primary footprints for you guys, what would that recovery look like on a bi-basin basis?

We're not seeing a whole lot. I mean, Eagleford's been fairly flat. There's people talking about putting rigs. There's a certain company that's looking to deploy some capital there that we're involved with. But I'd say, you know, in the Rockies, you're seeing that thing, recoveries, pickup out there. And then, obviously, in the Permian, just in terms of how aggressive we've been on contracting and just the bounce back in volumes, we're seeing the bulk of the benefits out there in that area.

But the cut to the chase is Permian-centric, right?

Yes, sir.

Understood. Thank you.

And then just on the update to the 2022 capital budget, you know, now down to $1 billion, can you frame what that might look like if you were to strip out the PDH-2 spend or, in simpler terms, if you remove the major projects, what that run rate might be?

Colton, it'd be less. Yeah, I mean, you know, you're probably knocking on the door of $500 million.

All right, that's helpful. Appreciate it.

Thank you. And our next question comes from the line of Ujwal Pradhan with Bank of America. Your line is open.

Thank you. Good morning, everyone. Thanks for taking my question here. Firstly, a quick follow-up on Kristen's question on the potential JVs on growth capital projects. Could you maybe high-level discuss, you know, what are the parameters of your negotiations there and, Who would be your preferred JD partners?

Typically, they either bring more than money. They've got to bring throughput, or they've got to bring off-tech, typically, as are the kind of people we do joint ventures with. Does that answer your question?

I guess that does. That's helpful. And in terms of sort of the parameters of, you know, what you're negotiating or within the project, how you plan to sort of sell the interest, can you comment on that?

Could you repeat that question? I'm sorry.

Sorry. Could you maybe discuss, you know, what you are considering when it comes to the negotiations? Maybe simply put, you know, some of the bigger projects that you have on the backlog, you know, which ones, how do you rank them in terms of, you know, which ones you would want the partners to get involved in?

Well, I'll tell you what we wouldn't want them getting involved in. That's... the church house, which I think is probably our storage system in my belly. I don't think we have a problem getting, uh, having them involved in some of our, um, uh, some of, some of the less strategic things that maybe feed the system, but it's about it. That's about the, that's about all we're going to say.

Got it. Um, thanks for that. And, uh, follow up, um, on, uh, elections this year, um, you know, would you be able to share some thoughts on how you're watching the elections and the recent movements there? And maybe if you could share your perspective on potential impacts and or benefits to EPD as well as the overall MLB space in terms of corporate taxes as well as energy infrastructure proposals.

Okay. This is Randy. I guess this is the season of political rhetoric. And I don't know how much you can really, with some of the proposals that are being put out in the public domain, frankly, I don't know how focused you can get on those at this point in time. Again, because everyone is in campaign mode. I think with the deficits that the country is running up, it looks like income taxes, tax rates, for both individuals and corporations are going to go up, and perhaps substantially. So, you know, to be honest, this year we've really not spent any time coming in and looking at an MLP versus C-Corp analysis. We've been too focused on executing, and just given with the uncertainty in the environment and the volatility in the environment – Frankly, we're pretty content with our current MLP structure. And as far as policy is going, as far as what's been proposed, you know, I go back a little bit and use the analogy of the U.S. Highway Trust Fund. You know, it was created in 1956, and its taxes on motor gasoline and diesel were to come in and fund road construction and road maintenance. The last time the tax on diesel and gasoline was raised to fund that trust fund was 1993. Since 2008, the trust fund has been running deficits, and no one in Congress, be it a Republican or a Democrat administration, has been willing to go up and raise the tax on motor gasoline and diesel because they didn't want the impact on individuals and they did not want impact on businesses. And some of the things that are being contemplated in some of these policies that we hear in this campaign rhetoric would substantially increase the cost of energy both on individuals and companies. So it's really hard to see if the powers that be wouldn't even increase the price on gasoline, how some of these large proposals can come in and be executed.

Got it. Thanks for that.

Thank you. And our next question comes from a line of . Your line is open.

Hi. Good morning, everyone. Good to hear everyone is well. Maybe to start off, Jim, in your prepared remarks, you sort of talked about how the marketing-inscribed business is effectively a natural hedge for the business. Opportunities pop up with dislocations and so forth. I was just wondering if you can sort of give us your thoughts on how the trends play out for the balance of this year. And what I mean by that is, you know, spread opportunities start to recede over the next couple of quarters, but at the same time you have the shut-ins coming back, base business starts to move higher. Is the trend of the base business recovering stronger than the, I guess, subsiding of the marketing opportunities? You know, is there a scenario where 3Q can be higher than Q2 without getting, like, specific guidance? But just sort of talking about the trends, which is the stronger trend right now, or is the natural hedge going to reverse itself and sort of keep us in a running flat scenario?

Yeah, that's a good question, Shanier. I think, personally, I mean, you get dislocations and you get spreads. when you have events. So when quick prices fall, invariably we'll see contango. I mean, it's been the way it's been. If those spreads aren't there, then in my mind, our pipelines are probably a lot more throughput than we have today. So that's kind of the way I see it in terms of I'm probably a little more bullish than Tony is. In terms of recovery, I personally think demand is going to recover sooner than probably Tony thinks it's going to recover. And I think you're going to get a price signal next year on hydrocarbons that turns some things back on. So that's what I see.

Okay. And maybe as a follow-up question here, just sticking with the theme of dislocations, You know, obviously you've been very opportunistic to take advantage of the market on dislocations to capture spreads within hydrocarbons for your base business itself. When I think about EPD's unit price, do you see similar dislocations in your stock price right now? You know, for example, you're down today with the results that you put out. And do you see an opportunity to use the excess cash generated from, you know, the strong marketing proceeds, lower cap ex-budget, to potentially accelerate or increase your buyback target to take advantage of these dislocations within your stock price?

I'm going to let Randy answer that, but individually there's a number of us that have accelerated our buyback program.

Yeah. Shamir, I think that just as I mentioned that really this year's We're really coming in and going quarter by quarter as we consider cash distribution growth to our investors. And spending capital on buybacks falls in that same category. So, again, we'll come in and take a look at it quarter by quarter. You know, we had come in and allocated – approximately 2% of cash flow from operations to go towards buybacks. We've done that. You know, we'll come in and look for opportunities for the remainder of the year to see how we would want to come in and if we're going to return more capital to investors, whether that be in the form of distributions or buybacks. So more to come on that.

Okay, so it's fair to conclude that the 2% target is not a hard line. It's something that you can go above and that you would look at a 975 yield as probably being very opportunistic?

You know, Shadir, it's, you know, yeah, it was approximately 2% is what we said, but, you know, we'll come in and take a look at it quarter by quarter. You know, some of this we'd like to get You know, as Tony described, there's still some uncertainty out there as far as coming in and how the economy reopens. We'd just like to get a little bit more visibility on what we see for the business environment.

All right. That sounds great. I appreciate the time. I want to keep it to just two questions. Have a great and safe day. Thank you.

Thank you. And our next question comes from Justin Jenkins with Raymond James. Your line is open.

Hi, morning, everyone. I guess I'd like to start on 2020 growth spending. Randy, I think you covered a bit of the further outlook for 21-22, but is it more timing at this point in terms of the range of spend left for 2020 or is some of that dependent on JV outcomes too?

The range that we give for 2020, the $2.5 billion to $3 billion, is largely just timing on how we see cash go out the door.

Okay. That makes sense. And then you also mentioned that you expect working capital to peak in 3Q in terms of usage. Do you have a magnitude in mind for that? Yes. Maybe give us a sense of how quick that cash comes back in the door as a tailwind thereafter.

Yeah, probably could see, you know, another – call it another $300 million to $500 million increase in working capital between now and the end of the third quarter. And then I think it would just, you know, work off over – you know, from the third quarter probably work off – Typically, you've got a good bit of working capital deployed. I mean, in our typical business, you have a good bit of working capital deployed over the fourth quarter. So I think you would see ultimately that from that peak in the third quarter, you'd probably see it worked off largely by the end of the first quarter next year. Got it. Thanks, Randy.

Yes, thank you. And our next question comes from the line of Q Stanley with Wolf Research. Your line is now open.

Hi, good morning. Just following up on the last question, if your working capital is still increasing in Q3, should we assume that that means some of the contango marketing type opportunities could be even greater in the future than what we saw in Q2 in future quarters? Yes.

No, I think some of it is just a carryover to what we've put on. You know, I think what Jim alluded to, that we think we may be as far as total spread opportunities be in the upper end of that $600 million range, really sort of see that split 50-50 first half of the year, second half of the year. But you still have just with some of the positions that we've put on, you can have working capital creep with those positions.

Okay. That's helpful. Going back to last quarter, I thought the messaging was pretty strong from the company that there weren't acquisitions you were interested in. I guess with the dust settling somewhat here, what's your view on the merits of acquiring companies or assets and synergies? The one thing that's striking is You guys could issue 10-year debt right now at under 2% interest rates. So just any updated thoughts on how you're thinking about that?

I'd say we've got the same answer as the first quarter.

Yeah. Keith, I think you heard that one. That's where I think we are, too. You know, we're – You know, we look at opportunities that come across. You know, frankly, we've not seen, you know, as far as teasers coming in, we frankly have not seen much in the way of teasers come across the last three or four months. And, you know, and certainly not anything compelling. So I think right now we're just, you know, focused on continuing to execute with the with the business that we have and go from there. But, I mean, we're open to come in and look at opportunities, but it really needs to be a good fit. Probably what would be more likely would come in and be a bolt-on type opportunity. But, again, really haven't seen anything develop on that front.

Interesting. Thank you.

Thank you. And our next question comes from the line of Pierce Hammond with Simmons Energy. Your line is open.

Good morning, and thanks for taking my questions. Just two questions on the same subject. The first one is, what are your views on U.S. NGL export capacity, and do you see more opportunities to grow your NGL export business? And then the second question is, overall it seems that U.S. NGL exports have a better outlook than U.S. crude exports. Do you think that is a fair statement?

This is Jim. Tony and Brent chime in. I think the world needs U.S. LPG. And, you know, as lifestyles improve in other parts of the world, in many cases, LPG is what creates that improvement. You got any thoughts?

The data speaks for itself, Jim. You're exactly right. You look at what happened in the height of the pandemic. Brent, were you blown away by the demand that I got?

Absolutely. record-type numbers.

You know, I wouldn't be too quick to write off crude oil exports. We've seen quite a lot. We've seen a pickup in crude exports, and I thought we had a record week as a country at one point.

Yeah, a couple weeks ago, I think we started going back to the highs. We're seeing just a different interest in the slate. You know, the lighter, there's a Bigger demand for West Texas Light. There's bigger demand for the Eagle Fruit type barrel. As people have a bid on motor gasoline, and we're seeing those go to Asia, mostly Korea and some Latin America. But on the LPG side, you know, I think we're in a good spot as Enterprise. You know, we have a project out there that we can expand when the time is right to expand. I'm not sure from a capacity standpoint it needs to be expanded anytime soon, but certainly we have a project that's a low-capital project that we can execute on.

Great. Thank you for your responses.

Sydney, this is Randy. We have time for one more question, and then we'll, if you would, give the replay information.

Certainly. Our last question comes from the line of Michael Bloom with Wells Fargo. Your line is open.

Thanks. Good morning, everyone. Just two quick ones for me. So just to stay on the LPG export topic, it seems like your volumes are holding up here, at least in the beginning of the first half of the second half of 2020. Can you just kind of talk about what you're seeing? Are you seeing any drop-off as some of these countries come out of lockdown, or are you still seeing strength there in LPG export volumes? And if so, what do you think is driving it?

I think we still – hi, Michael. I think we still see strength. I think what's driving is what we talked about a while ago.

I think we're seeing a lot of PDH demand over in Asia. I think just in terms of how we contracted, Michael, you know – Hey, that's humbly, but I think we'll probably be toward the end to see any kind of drop-off. I mean, we have, just in terms of our supply position, in terms of the pricing point, in terms of how aggressive that we've contracted out for this year and the next couple years, we're in a good position to kind of maintain these type of levels. You know, I think you're seeing this export caught around 18 million barrels a month of LPGs, and... I think that's sticky. Those are sticky numbers.

What's interesting, Michael, is whenever we do get a cancellation, we've been pretty successful in backfilling it with a spot. So the appetite is there.

Okay, great. That makes a lot of sense. My second question I think is probably for Randy. You referenced sort of that target payout ratio number that you're now referring to a bit. Do you have kind of like a long-term target for where you want that to sort of settle out over time, or are you thinking about it that way?

Oh, Michael, I don't think we've developed our thoughts that far along on setting a long-term target. Some of your balance to that would be, you know, what kind of growth opportunities do you see? So we've really not come in and set any long-term targets. I mean, we do come in and compare how we're doing compared to the market. And, you know, I think we're, you know, when we come in and look at the market and put the various sectors of the S&P 500 on the page, I think we're amongst the, you know, top two, top three sectors. of the sector. So we think we're, you know, and it's by nature being an MLP, the whole thing with an MLP is you have a high payout ratio. And so I think we cop pretty well against the market.

Great. Thanks, everyone. Appreciate it.

Okay, Sydney, do you want to give the replay information?

Certainly. You can dial in at 1-800- 859-2056 or 404-537-3406 with the access code 1667154 to access the replay information. I would now like to turn the call back to Randy Berthalter for any further remarks.

Okay, well that concludes our remarks today and I'd like to thank everyone for joining us and have a good day. Thank you and goodbye now.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a great day.