Enterprise Products Partners L.P.

Good day, and thank you for stopping by. Welcome to the Enterprise Products Partners LP second quarter 2021 earnings conference call. At this time, all participants are in listening mode. At the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that 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 today, Randy Burkhalter, Vice President of Investor Relations. Please go ahead.

Thank you, Shannon. Good morning and welcome, everyone, to the Enterprise Products Partners Conference call to discuss second quarter 2021 earnings. Our speakers today will be Co-Chief Executive Officers of Enterprises General Partner Jim Teague and Randy Fowler. Other members of our senior management team are also in attendance for 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 an information currently available to 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 the four looking statements made during this call. And with that, I'll turn it over to Jim. Thank you, Randy.

Our business has continued to perform extremely well during the second quarter. We reported over $2 billion of EBITDA for the second quarter. our distributable cash flow was 1.6 times coverage. Cash flow from operations for the second quarter was $2 billion, which more than fully funded both our CapEx and our distributions. So as we sit halfway through the year, our distributable cash flow totaled $3.3 billion, providing $1.35 billion in retained cash. Second quarter results reflect the ongoing recovery in demand for hydrocarbons, as the global economy continues to reopen from COVID lockdowns. Our liquids pipelines transported 6.4 million barrels a day in the second quarter. Our natural gas pipelines transported 4.2 billion BTUs a day for the second quarter. That equaled 2019 volumes. Summing it all up, in crude oil equivalent, we transported 10.2 million barrels a day. Our fractionation volumes remain strong, added near record at 1.2 million barrels a day. Our propylene production for the second quarter of 2021 was a record 113,000 barrels a day. And liquid volumes handled by our marine terminals for the second quarter were 1.6 million barrels a day, which continues to lag pre-pandemic first quarter 20 performance 2 million barrels a day, primarily due to the weakness in crude oil exports. Really, this would be expected as strong prices, backward-dated markets, and lower inventories are pushing, are signaling that volume needs to stay at home, at least for now. In short, it shows that markets work. This time last year, we were slipping deeper into the COVID pandemic. It looked and felt like a black hole to some, but By this time last year, we had already returned to our headquarters office in what was virtually an empty downtown Houston. We set protocols. We started wearing masks before they were mandated. We put plexiglass around our cubicles. We insisted on keeping our distance. And we had hand sanitizers all over the building. But I really think it was a competitive advantage being back because we worked as a team. We moved products for our customers and our producers. We were buying and selling. We were arming the system and collecting on steep contango in about every product we touch. We were determined in the middle of the pandemic to make money, not make excuses. You fast forward to today, and the environment and sentiment are completely different. In the second quarter, crude averaged $28 a barrel, and as we all know, traded severely negative on April 20, 2020. Almost overnight, rig counts dropped from 800 to less than 250. Producers shut in significant amounts of production, and the Texas Railroad Commission held an online hearing on mandatory proration. that was attended by 35,000 people worldwide. I gave testimony to this hearing, and I was very straightforward and probably wouldn't have been as much so had I known we had 35,000 people listening. Today, WTI sits at $72. Natural gas has more than doubled from $1.75 to around $4. Rig counts have returned to 500 and growing. Producers are self-financing their capital, paying down debt and returning funds to their shareholders. Just to give you an idea for a couple of key products, we won't go through all of them. This time last year, ethane was selling at 18 cents a gallon. Today, it's 33. Propane moved from 35 cents. Today, it's, what, $1.09 print? Even with natural gas prices up, though, our gross processing spreads... and the Permian in particular have gone from around 22 cents to 50 cents a gallon. Responding to significantly increasing demand, wholesale gasoline has moved from 75 cents to $2. It was as low as 50 cents in March of last year. And refining utilization has moved from an anemic 70% at the low to over 90%. Crude and product inventories have gone from a hard-to-imagine 3.6 billion barrels at least 600 million barrels overstocked to below normal levels of 2.8 billion and continuing to fall. Economies are recovering and demand for virtually everything is increasing worldwide, pressuring supply chains. While our cash flows are markedly different, largely because of the movement of all commodities from steep contango into backwardation, Our businesses and our employees prove time and time again that they will perform regardless of the environment or today in what feels like something like hyper-growth. While the press release has a lot of details, I'll boil it this way. During last year's collapse, we leaned hard on our marketing teams, and we said at the time our storage was worth its weight in gold as we took advantage of steep contango, arming the system, coupled with a significant cost cutting by our operations. This year, with prices and volumes up considerably, our assets are who's leading the way, with significant increases in volume for gathering and processing, pipeline transportation, and exports in what I'll generally describe as fairly steady. Moving to an update on capital, we expect our growth capital for 2021 to be 1.7. We haven't changed, I don't think, Randy. For the rest of 21, we continue to be on schedule to complete our Acadian gas system to Gillis, the expansion of our ethylene and propylene pipeline systems, and the construction of our natural gasoline hydrate treater. Our growth capex in 22 and 23 projects currently sanctioned is $800 million and $400 million respectively. But we expect these to increase as some of the projects under developer development are sanctioned. The long-dated capital is largely around our PDH2. We couldn't be more pleased with the market fundamentals and momentum that we see in our petrochemicals business. The reopening of global economies has caused a surge in demand for propylene due to high demand from durables, which has caused the refinery grade to polymer grade spread to widen from 15 cents a pound historically to 40 cents a pound. Our petrochemicals and refined products segment contributed five out of the total six financial and operational records. The strong performance of our petrochemicals business was led by our propylene segment, which offset lower results from our octane enhancement due to a planned turnaround. Our Mount Bellevue propylene splitters achieved record throughput of 98% of nameplates. with strong margins, and our PDH plan operated at an average of 112% of nameplate following the planned maintenance in the first quarter. Finally, we recently closed on a transaction acquiring the ethylene storage business from NOVA. This transaction, although didn't take a lot of cash, is meaningful in that it is yet another milestone in the development of our petrochemical hubs, which is a key in furthering our petrochemical growth strategy. We feel very good about our strong position and our momentum in the midstream petrochemical space. We're pleased with how our assets and our people performed again last quarter. We have been outspoken about why we have been bullish on prices for well over a year and have been preparing accordingly. The global inventory excesses that came with the global pandemic have for the most part been exhausted. And it's nice to see both supply and demand participating in what we believe will be a very strong extended recovery cycle. We expect continued upside in demand, both in the U.S. and globally, and appropriate production increases from a healthy U.S. ENB industry. With that, Randy.