Enterprise Products Partners L.P. Q3 FY2025 earnings call

• Recognized the upcoming retirement of Tony Chovanec, a key figure at Enterprise for nearly 2 decades. - Third quarter results: adjusted EBITDA $2.4B, distributable cash flow $1.8B, 1.5x coverage, retained $635M DCF. - Frac 14 in service, Bahia pipeline and Seminole pipeline conversion to come online, adding capacity to NGL and crude oil pipelines. - PDH plants: PDH 1 at 95% nameplate, PDH 2 resuming operations after turnaround. - Announced a $3 billion increase to the buyback program, taking it to $5 billion. - Declared a distribution of $0.545 per common unit for the third quarter, a 3.8% increase over the prior year. - Expect inflection point in discretionary free cash flow in 2026 after completing large investments. - Organic growth capital expenditures expected to return to mid-cycle range of $2-2.5 billion per year.

Adjusted EBITDA for the third quarter was $2.4 billion, generating $1.8 billion of distributable cash flow with 1.5x coverage and retaining $635 million of DCF. PDH 1 averaged 95% of nameplate, and PDH 2 resumed operations after a third quarter turnaround. The company reported net income attributable to common unitholders of $1.3 billion or $0.61 per common unit on a fully diluted basis for the third quarter. Adjusted cash flow from operations was $2.1 billion for the third quarter.

• Expect an inflection point in discretionary free cash flow in 2026 as major projects are completed. - Organic growth capital expenditures to return to mid-cycle range of approximately $2 billion to $2.5 billion per year. - Board approved an increase in the common unit buyback program to $5 billion, with $3.6 billion in capacity.

Q: So there are lots of Permian gas pipelines coming on next year in the basin. Do you think that that's going to drive producers to produce more gas at the margin? And do you consider that to be a constraint?

A: The Permian Basin is an oil basin first and foremost. More gas pipelines and NGL transportation is healthy for producers and the basin.

Q: As LPG exports ramp, I've gotten this question a lot from people, but do you see Asia rezcom and petchem demand as sort of an unlimited sync for all that LPG? Or is there going to potentially require extreme price pressure on global propane to make it flow?

A: Rezcom demand is growing internationally and petrochemical due to lightening of the petrochemical feed slate. Growth is tied to supply. U.S. will export what's needed to balance the market and price will adjust.

Q: On the upsized buyback authorization, would you all talk about or just provide more details on the capital allocation outlook for the next couple of years. What do you see at this point as a steady-state run rate for CapEx? And do you expect to buy back stock on a more ratable basis given the visibility in free cash flow growth? Or will it be more opportunistic and dependent on market dynamics?

A: Organic growth CapEx expected in $2-2.5 billion range. Free cash flow to be split between buybacks and debt paydown. Buybacks to have component of programmatic and opportunistic.

Q: DINO's announced plans yesterday to potentially move up to 150,000 barrels per day of refined products, primarily from its own refineries from PADD 4 to PADD 5, could this lead to better utilization and/or marketing opportunities on your Texas Western product system that recently went into service and ramped? How do you see this evolving?

A: The Texas Western system runs a unique corridor direct to Salt Lake. To the extent Salt Lake gets net shorter, beneficiary. Overall product system benefits from Mid-Continent pricing being at a premium to the Gulf.

Q: You're signaling here an inflection point. You've completed a big capital build-out phase and now you're kind of pivoting to some more cash return to shareholders. How much of this is just your view that the macro is less constructive with oil prices lower, drilling slowing, et cetera? Or is it just a function that you think like your system is built out, you're still expecting that growth, but you just have ample capacity?

A: It's a function of large projects. CapEx has flexed up and come back to mid-cycle range.

Q: You talked a little bit about some of these projects coming on maybe a little later than hoped. Could you just give us a general target, $6 billion of projects coming on between now and next couple of quarters. When would you expect those all generally all else equal to be fully ramped?

A: Bahia will be on at the end of November/start of December, Frac 14 is up and running, PDH 2 is resuming, Neches River Terminal ramping, first train by middle of next year, second train shortly after.

Q: Previous remarks have touched upon the potential for not a major step-up in '26 organic growth CapEx, but maybe point to the high end, if anything. In that case, curious where in the value chain you see the most attractive opportunities for organic growth? And if you could just expand upon that a little bit.

A: Not through rebuilding gas processing plants, appetite for exports is stunning. Processing plants expansion, gathering system growth.

Q: I thought you sounded more optimistic than previously on the PDH issues now being behind you. So am I hearing that right? And can you talk a little more to what gives you confidence after this turnaround that you're more or less in the clear going forward?

A: On PDH 2, new operating procedures and modifications made. PDH 1 had high run rate with minor issues. Optimistic about PDH run rates increasing in 2026.

Q: On your Permian NGL pipelines, can you remind us the business model that you guys pursue here? So is it -- you're primarily transporting NGLs produced at your own plants on your Permian NGL pipelines? Or is there any meaningful amount of third-party NGL volume that you move on your Permian pipes today?

A: Portfolio of all of the above, primarily rooted in volumes from own gathering and processing facilities. 2/3 of volume in 2025 from own facilities, expected to continue.

Q: For the third consecutive quarter, we saw lower implied volumes on the LPG side. I was just wondering if you guys could provide maybe a little bit more detail on kind of what's going on there, if there's anything to unpack.

A: Minor maintenance and cargoes rolling month-to-month. Demand is still strong.

Q: We're starting to see propane inventories notch new records here. Curious what your view is on the latest for the domestic propane market and maybe if there are any read-throughs on tailwinds for your storage business and/or marketing opportunities you're looking out over the short to medium term?

A: Contango presents opportunities, storage assets to monetize, potential arbitrage across water.

Q: On August 6, you announced acquisition of some assets from Oxy. What -- how is the integration of those assets going? And the best acquisitions are one which always come with some organic growth opportunity. So if you could highlight the organic growth opportunities on these assets, maybe Athena? What else can be done to further get more revenue and EBITDA out of these assets?

A: Asset acquisition is strategic, bolts on seamlessly to existing footprint. Unlocks incremental revenues, development is constructive.

Q: You guys did a very smart deal and got in the Permian sour gas opportunity with Pinon. The price was great. How is that opportunity developing along? And are you seeing more producers willing to go in that part of Eddy and Lea County because the gas, oil ratios are favorable, drill for more gas, but then -- sorry, more oil and then get this nasty gas. So how is this Permian sour gas opportunity evolving for you after that announcement of that deal?

A: Pinon is attractive. Temporary pacing gap with producers working through development hurdles. Train 4 coming online next summer, trains 5 and 6 behind it.

Q: Looking at the Permian more broadly, there's a lot of announced egress capacity slated to come online over the next, call it, few years. Just wondering what you make of it considering your currently outlined growth expectations for the basin. Is there a chance that some of these projects get sidelined? Or maybe conversely, do you think there is a chance that Permian growth actually accelerates to meet the announced build-out?

A: Next year, 4.5 Bcf a day coming online. It's an oil basin, gassier benches not being drilled due to multi-bench development. Takeaways are better for producers.