Enterprise Products Partners L.P.

Ladies and gentlemen, thank you for standing by and welcome to the Q4 2021 Enterprise Product Partners Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to turn the conference over to your speaker for today, Randy Burkhalter, Vice President, Investor Relations. You may begin.

Thank you, Dwanda. Good morning, everyone, and welcome to the Enterprise Products Partners conference call to discuss fourth quarter and year-end 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 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 enterprise's 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, particularly from those in the forward-looking statements made during this call. And so with that, I'll turn it over to Jim now. Thank you, Randy.

We reported net income attributable to common unit holders for 2021 of $4.6 billion, or $2.10 per unit, compared to $3.8 billion, or $1.71 per unit, on a fully diluted basis. for 2020. Cash flow from operations was $8.5 billion for 21 compared to $5.9 billion for 2020. Both 21 and 20 were impacted by large changes in working capital and opposite directions brought about by significant storage opportunities. We generated $6.6 billion of DCF in 21 compared to 6.4 in 2020. We had 1.7 times coverage We retained $2.6 billion of DCF in 2021 and head into 2022 with significant financial flexibility. We also increased our distribution again in 2021 to $1.81.5 per common unit, making this the 23rd consecutive year of distribution growth since our IPO in 1998. In addition, 2021 marked another year of records for Enterprise, including 12 financial records and five operating records. Our NGL pipelines and services and natural gas pipelines and services segments set gross operating margin records. We've also been focused on growing our petrochemicals and refined product services segment, which had a record gross operating margin of $1.4 billion for 2021, with a huge contribution in petrochemicals, where gross operating margin exceeded $1 billion for 2021. We set five operational performance records in 21, including record ethane marine volumes, record natural gas transportation volumes, record refined products and petrochemical transportation volumes, record propylene production volumes, and record propylene production volumes. We also finished 2021 with a solid fourth quarter, reporting total gross operating margin of $2.1 billion. Our quarterly results were driven by another strong quarter from petrochemicals, higher natural gas processing margins, an increase in equity NGL production, the continuing recovery in crude oil pipeline volumes to near pre-COVID levels, and record natural gas pipeline volumes. As to CapEx, our growth capital spending in 2021 was $1.8 billion, with approximately $2.2 billion of major projects currently under construction. The largest projects put into service in 2021 include a C5 hydrotreater at Montbellevue, and we added pipeline capacity to move ethane from Montbellevue to Beaumont, another project to provide feedstocks to the growing Gulf Coast petrochemicals. In our natural gas services group, our Gillis lateral and Acadian-Hainesville expansion were put into service in December of 21. These projects moved growing volumes from Hainesville down to the LNG corridor in South Louisiana. In our petrochemical segment, we completed our ethylene export terminal and ethylene storage and pipelines. Our second PDH remains on budget and on schedule for in-service the first half of 2023. Our project team has done an outstanding job to ensure supply chain issues would not impact project schedule, and Graham and his team are happy to report that almost all major equipment is now on site, significantly de-risking any major equipment issues. We were also excited to announce the agreement to acquire Navitas Midstream. Navitas gives us an attractive entry point for our natural gas processing and NGL businesses in the Midland Basin. We anticipate closing this acquisition in the first quarter of 2022, subject to customary regulatory approvals. Navitas plans for the construction of another natural gas processing plant, which would also provide us additional organic growth. Last year, we have announced that we have joined forces with Magellan and ICE to promote a U.S. Gulf Coast futures crude oil contract. Early indications are that the contract is going to be well received. As ICE announced last week, that the contract traded well over 1 million barrels a day in just the first few days of trading. We're excited about what this contract means, not just for the U.S. producer, but for the global oil industry. We learned the hard way in April of 2020. that the perils that come with a futures contract that doesn't have adequate physical infrastructure. The ICE Midland WTI AGC futures contract has access to 14 ship docks in the Houston area, providing significant direct access for exports. In addition, Enterprise and Magellan's combined distribution systems offer access to approximately 150 million barrels of total crude oil storage capacity, and 4.5 million barrels of refining capacity. As we finish up 21 and move into 22, I'd also like to highlight the momentum from our evolutionary technology team. This team, led by Angie Murray, and from a commercial perspective, Kerry Weaver, is home to bright and creative people. We have a number of initiatives underway with major players in each segment of the energy value chain. In addition to working on lower carbon opportunities in areas like hydrogen, carbon sequestration, circular plastics, and renewable fuels, this team and our big data group constantly have a number of important projects underway using the billions of pieces of data that Enterprise has in order to improve the reliability of our systems and optimize these systems every day. For enterprise, in addition to supplying the developing world with the cleaner fuels it needs today, these teams are on a path to developing lower carbon projects that both complement our systems and are profitable. We would not have thrown the amount of horsepower into these initiatives if we didn't believe in their potential and profitability for our company. We had our best year ever for safety in 2021. There's no doubt in my mind that our employees truly care about one another and the communities where we operate. As we said in the press release, we are extremely proud and grateful for the teamwork and contribution of our 7,000 employees to enterprises financial operating and safety performance in 2021. Over the last two years, COVID-19 has whipsawed the global economy, including the U.S. energy sector. As always is the case, our people responded. In 2021, it was their efforts that enabled three of our four business segments to report record earnings that resulted in our company posting record gross operating margin, cash flow from operations, and free cash flow. Regardless of the situation, whether it's a freeze that shuts down the entire state, the world going into a dark hole caused by a global pandemic are the complete opposite in 2021 when demand and prices for our products and services soared. Our people proved to be creative and determined. We want to thank each and every one of them for yet another outstanding performance in 2021. Today Randy and I are largely going to focus on 21 results, and you'll probably have a lot of questions about 2022. But before we get to Randy, I'll finish with our thoughts on the changing sentiments around oil and gas. For some time now, the sentiment towards all traditional forms of energy, especially in political circles, has been very negative. Many said that the world should pull the plug on traditional energy as soon as possible and completely devote our capital and efforts toward renewable energy. Without a doubt, this was always naive. The world now realizes that an overnight transition to renewable sources of energy is not at all possible, as evidenced by the rapid development of various global crises, including high natural gas and LNG prices, high crude oil prices, and not seen since 2014 and runaway inflation not seen for about 40 years. Europe is starved for gas and is faced with heat or eat, while Russia, with its major oil and gas supplier, is amassing troops on the Ukraine border. Try as you may, it's hard to blame these crises on the pandemic. Over one-third of the world lives in energy poverty, mainly in developing countries. Europe's energy policies have now made energy poverty a reality in first world countries. As an oil analyst said, energy is the economy. We in the United States live in a country of plenty. We are a rich nation with a high quality of life, a creative culture, now also blessed with abundant energy. Maybe that has distorted our thinking about the situation in other countries or regions. People who don't want developing nations to have what we have are either in denial, hypocrites, or both. At Enterprise, we've been outspoken that it's going to take all of the above, not for a few years, but for decades to come. Look to comments made by a variety of sources, everyone from the IEA to the head of Saudi Aramco, members of the European Union, and even the U.S. Energy Secretary. Ultimately, they all message the same thing. Investment in oil and gas needs to ramp up sharply in order to revive the badly needed baseload traditional sources of energy that will be needed alongside low-carbon fuels and green energy to meet the world's growing demand. At Enterprise, we've never seen supplying energy to meet growing needs as two competing paths We're going to remain focused on supplying the world with the clean, low-cost, and reliable fuels it needs today, while also playing a role, an important part, in developing lower carbon alternatives. I think I've said enough, Randy. How about you?