Enterprise Products Partners L.P.
Q2 2020 Earnings Call Transcript

Published: 29 Jul 2020

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the Second Quarter Enterprise Products Partner Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker, Randy Burkhalter. Please go ahead.

[Randy Burkhalter:]

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 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 materially from those in any forward-looking statements that may be made during this call. And with that, I will turn the call over to Jim.

[James Teague:]

Thank you Randy. I said at the beginning of the last call, when 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 is what it turned out to be. So sticking with that theme, I guess today, we are going to tell you our COVID story. For the second quarter of 2020, we reported EBITDA of $2 billion compared to $2.1 billion for the same quarter last year. Our BCF I think you saw the press release was 1.6 times coverage and year-to-date we have retained $1.2 billion and something else we are quite proud of is, this is the best first half safety performance that we have ever had at Enterprise. Given what we have 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 highlighted 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 transports, store, upgrade and buy and sell multiple energy commodities. Because we are so tightly integrated, we have a lot of tools at our disposal. On the market say store crude we can. When the market says store diesel, but give me LPG, we convert wells and do some. When the market say store wide grade, we store wide grade. In addition, our people and our systems have a strong history of performing, no matter the type of crisis and our balance sheet always has the dry powder to move quickly. We usually get the question of how much results are non-recurring, and it is the same question we got when Katrina blew through South Louisiana and literally knocked out every plant we had. Arco was down for months as was Promix, Minise and Neptune. Demand came back before indigenous supply and we made more money with our West 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 Mont Belvieu. We had Mont Belvieu before producers could even get their supplies of outcome. Got the question in hurricane Harvey in 2017, when production never stopped, but virtually all of our customers were 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 had 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 the 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 recover to near 80% which has facilitated and improvements in both propylene and octane enhancements. 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 in insignificant for the most part they were relatively short lived and volumes on our system are recovering. We have 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 [indiscernible] expected online. And in the fourth quarter, we expect to complete our rich gas pipeline cartage add a DIB at Mont Bellevue and complete a strategic ethylene tank and pipeline build out. We continue to make strides in our petrochemical segments, which we have always described as an extension of our NGL franchise and our value chain, because we are probably the only midstream that is fairly big in the petrochemical midstream space. It is easy to underestimate the long-term strategic importance of what we are 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 supply 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 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 these essential for an efficient market, reliable supplies, price, transparency, and access to domestic and global markets. In June, we loaded a record size ethylene cargo of 44 million pounds. Then in July, we successfully loaded combination cargoes 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 the simultaneous loading of ethane and ethylene on the vessel at our Morgan’s Port facility. Both vessels where the first export cargoes of their kind of 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 would also spend a minute to talk about what we are 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 have 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 is 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 would also like to give a shot out to our operations and commercial folks that were not able to work-from-home, plans and pipelines don’t run themselves, there is no such thing as a home based control center and the collaboration between our commercial people that we ask to be here, or ask might be too soft - that we told to be here went a long way to achieving those results. I guess, finally, I would just like to say that, I think we have 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 are appreciate it. Randy.

[Randall Fowler:]

Thanks, Jim. Good morning. I will start with the income statement for the second quarter. Net income attributable to limited partners for the second quarter of 2020 was $1 billion or $0.47 per unit on a fully diluted basis. This compares to $0.55 per unit for the second quarter of 2019. Net income for the second quarter of 2020 included $51 million or $0.02 per unit of expense related to an increase in the deferred tax liability associated with the OTA Holdings Corporation we acquired from [indiscernible] in March, 2020 in the settlement of a liquidity option agreement related to our acquisition of old 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 feet 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 define 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 $0.445 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 with the same quarter of 2019 and is flat to the prior two quarters. As we stated our first quarter call, given the uncertainty of the macroeconomic backdrop, our Board will continue to evaluate our distribution growth quarter-by-quarter in 2018. Additionally, EPPs distribution reinvestment plan and employee unit purchase plan purchased a combined 1.9 million EPP units in the open markets during the second quarter, which rivals the purchase activity of our typical institutional investors. 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 long-term contracts. Our capital investments were $910 million during the second quarter, which include $74 million for sustaining capital expenditures. We still anticipate spending between $2.5 billion and $3 billion in growth capital projects for this year and traditionally $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 facility and approximately 1.3 billion of unrestricted cash on hand. Finally, before we open it up for Q&A, I want to mention that we also announced this morning in a separate press release that are 2019, 2020 sustainability report, which reflects our lightest environmental, social and governance disclosures is currently available on our website. We have also initiated the annual review process with the independent sustainability writing 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.

[James Teague:]

With that Randy, I think we can open it up for questions.

[Randall Fowler:]

Okay, Sidney, we are ready to take questions from our listeners.

[Operator:]

[Operator Instructions] Our first question comes from the line of Jeremy Tonet with JP Morgan. Your line is open.

[Jeremy Tonet:]

Just wanted to start off with the question and maybe Tony could answer best just you guys had talked about, patient recovery being slower and maybe an extending into 2021. I was wondering if you could provide a bit more details, I guess, in how you see that transpiring and how the impact you across, I guess your different business lines.

[Anthony Chovanec:]

You want to talk about the production side or the demand side. Jeremy.

[Jeremy Tonet:]

If you have both, we will take both.

[Anthony Chovanec:]

Yes. So, obviously we had shut in because of the price crash and chaos, and we think about a million and a half, and I will just use crude as an example of 1.5 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 is probably one of the steepest I’ve ever seen in statistics. So, we have recovered a substantial amount of it. We think that maybe 300,000 barrels will lag. And but with that said, you can’t deny given the amount of decline such shells have that momentum has changed and there is a fair amount of ground to be picked up. So, that is the reality. When we look at wide grade coming into our system. For example, those numbers are really strong and I will let Brent address that. But when we get out to 2025 as we see it today, we will be down from where we were before, and it is 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 will be at around 950. Okay. And probably completing the best of the best wells that is what is in our forecast for today. And so, when you get out to 2025, there’ll be some smaller volumes in what we said before. But, Brent do you want to talk about what is going on in our business in that regard and what you are saying?

[Brent Secrest:]

Yes. The one thing we have seen is just the resiliency of the Permian and part of it is just what is going on out there and part of it is how we have contracted. But, if you look at our wide grade receipts for June, if you look at our wide grade receipts for July, those are both records for Enterprise. And if you look at a wide grade inventories they are at all time highs. So, terms of how we have contracted and in terms of what we are seeing to come out of the Permian, the fractionation volumes that we have access to, those have bounced back quite nicely.

[Anthony Chovanec:]

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

[Jeremy Tonet:]

That is very helpful. Thanks. And on the petchem side, as far as the demand there. Any trends that we should be think with LPGs in petchem?

[Christopher D’Anna:]

Yes, Jeremy. This is Chris D’Anna. We saw 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 are starting to see a gradual improvement in demand for the durables. And of course single use is still pretty good.

[Randall Fowler:]

The fact that our ethylene export dock is sold out also sets up in the back the demand for ethylene.

[Jeremy Tonet:]

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

[James Teague:]

Thanks Jeremy. What we said last call is we thought we’d be back at $6 million, $7 million for it and I think we are probably staying for the year, we will be at the upper end of that range.

[Jeremy Tonet:]

Very helpful. Thank you very much.

[Operator:]

Thank you. And our next question comes from Jean Ann Salisbury with Bernstein. Your line is open.

[Jean Ann Salisbury:]

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 areas of current price war basically, and NGL pipelines and frac and exports will be really helpful.

[Randall Fowler:]

Yes. Jean Ann. Your question is, as we think about margin compression and then I see you are talking about as people re-contract on midstream assets. Is that where you are headed?

[Jean Ann Salisbury:]

I think it is a little bit more than that. I think people usually talk about for an accident. I think it is really the whole chain of NGL pipelines, frac and exports. It seems like now there is too much capacity. And so people are concerned that you could see a similar phenomenon to what we see increase, which is - when contracts come up that you would see - decline.

[James Teague:]

I think what you are saying kind of make sense, I think you have to take a look at what a company has to work with. I emphasize petrochemicals in my opening comments because that gives us a heck of a lot more longer of the value chain to leverage, so it is about what are you having to leverage? And while one part of for that value chain may be under some stress. The total won’t be. Is that fair Brent?

[Brent Secrest:]

Yes. And you had another point to make. So, in our situation, yes, maybe, but we got a value chain that we are going to leverage and we are giving what they want where their hot button is we collect what we need at the rest of the value chain.

[Christopher D’Anna:]

I think there is some offset Jean Ann and what we are seeing on ethane, is an offset on volumes, both for pipelines and for fractionation. I hear what you are saying from an industry standpoint and I will repeat myself. I think we have done a heck of a job contracting. I think how you contract and who you contract with matters in this environment. And we will say that about other commodities as well. If you look at our LPG export facility, it is in a very, very good position in terms of the contracts we have in place. And if you look at the balance of this year and you look at the following couple of years, we are in a very, very good spot. Then ultimately if there is supplies starts going down, you look at what we have built Mont Belvieu and the pricing point 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.

[Jean Ann Salisbury:]

Thanks. So effectively the bundle chain you think will kind of give you a better and different outcome then one on your pipeline more broadly.

[James Teague:]

I think it always has.

[Jean Ann Salisbury:]

Great. Thanks that is all for me.

[Operator:]

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

[Tristan Richardson:]

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.

[James Teague:]

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

[Tristan Richardson:]

That is helpful and then just a quick follow-up. Sub-frame, how we should think about maybe the largest components of the 2021 $2 billion outlook? Whether it be, PDH-2 or Midland-to-ECHO four and does this number presume joint ventures or is this more like an 88 type of budget?

[Randall Fowler:]

Yes Tristan this is Randy. 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 is PDH 2 to Midland-to-ECHO 4, crude oil pipeline and the Gilas natural gas pipeline.

[Tristan Richardson:]

Great. Thank you guys very much.

[Operator:]

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

[Colton Bean:]

So you noted in the press release the process lines are back to 88% of March levels in NGL and near the parody. 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?

[James Teague:]

Who want to take that?

[Brent Secrest:]

This is Brent, Colton but, I think I would just say ethane is probably increased about 4%, maybe 5% across our system. And then in terms of just the whole volume metric and I’m not sure I understood the question. But where you are seeing the growth come from is obviously in Permian and I think you’ll see in July some very robust volumes that come from that area.

[Colton Bean:]

And that was mainly the focus of the first point as when you look at kind of the four primary footprints for you guys, what would that recovery look like on a by basin basis?

[Brent Secrest:]

We are not seeing a whole lot. I mean, Eagle Ford has been fairly flat. There is people talking about putting rigs or to certain company, that is looking to deploy some capital there that we are involved with. But I would say in the Rockies, you are seeing ethane recoveries pick up out there. And then obviously in the Permian just in terms of how aggressive we have been on contracting and just the bounce back in volumes, we are seeing the bulk of the benefits out there in that area.

[Colton Bean:]

But compared to the change in the Permian centric, right?

[Brent Secrest:]

Yes, sir.

[Colton Bean:]

Understood. And then just on the updates to the 2022 capital budget, now down to $1 billion. Can you find 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?

[James Teague:]

That would be less. Yes. I mean, you are probably knocking on the door of $500 million.

[Colton Bean:]

Got it. Alright. That is helpful. I appreciate it.

[Operator:]

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

[Ujjwal Pradhan:]

Thank you. Good morning, everyone. Thanks for taking my questions here. Firstly, a quick follow up on Christ question on the potential JV on growth capital project. Could you maybe high level discuss, what are the parameters of your negotiation there and who would be your preferred JV partners?

[Christopher D’Anna:]

Typically they bring more than money. They have got to bring throughput or they got to bring off tech. Typically those are the kind of people we did you run ventures with. Does that answer your question?

[Ujjwal Pradhan:]

I guess that does. That is helpful. And in terms of sort of the parameters of what you are negotiating or within the project, how you plan to sort of sell the interest. Can you comment on that?

[James Teague:]

Could you repeat that question? I’m sorry.

[Ujjwal Pradhan:]

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

[James Teague:]

Well, I would tell you what, we wouldn’t want them getting involved in that is the church house, which I think is probably our storage system in Mont Bellevue. I don’t think we have a problem with having them involved in some of our - some of the less strategic things that maybe feed the system but that is about it, that is what all we are going to say.

[Ujjwal Pradhan:]

Got it. Thanks for that. And follow-up on elections this year. Would you be able to share some thoughts on how you are 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 MLP space entrance of corporate taxes, as well as LNG infrastructure proposals.

[Randall Fowler:]

Okay. This is Randy, I guess it is the season political rhetoric, and 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 all of those at this point in time, and 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 to be honest, this year, we really don’t spend any time coming in and looking at an MLP versus [C-corp] (Ph) analysis, we have been too focused on executing and just given where the uncertainty in the environment and the volatility in the environment. Frankly, we are pretty continuous with our current MLP structure. And as far as policy is going, as far as what has been proposed, 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 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 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 would substantially increase the cost for the energy of both on individuals and companies. So, it is really hard to see if the powers that beat wouldn’t even increase the price on gasoline, how some of these large proposals can come in and be executed.

[Ujjwal Pradhan:]

Got it. Thanks for that.

[Operator:]

Thank you. And our next question comes from the line of Shneur Gershuni [UBS]. Your line is open.

[Shneur Gershuni:]

Hi good morning, everyone. Good to hear everyone as well. Maybe to start off, Jim in your prepared remarks, you sort of talked about how the marketing is in businesses 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, 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? Is there a scenario where Q3 can be higher than Q2 without getting like specific guidance? 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?

[James Teague:]

Yes. It is a good question Shneur. Personally, you get this locations and you get spreads when you have the dense. So when crude prices fall and there we will see contango maintenance in a way it has been. If those spreads are impaired then in my mind, our pipelines would probably a lot more throughput than we have today. So that is kind of way I see it. I’m probably a little more bullish than Tony is in terms of recovery. I think I personally think demand is going to recover sooner than, probably Tony thinks it is going to recover. And I think you are going to get a price signal next year on hydrocarbons that turn some things back home. So, that is what I see.

[Shneur Gershuni:]

Okay. And maybe a follow-up question here. Just sticking with the theme of dislocation. Obviously, you have been very opportunity to take advantage of the market on dislocations to capture spreads within hydrocarbons for your base business itself. What I think about EPDs unit price, do you see similar dislocations in your stock price right now? For example, you are down today with the results that you have put out. And do you see an opportunity to use the excess cash generated from the strong marketing proceeds, lower CapEx budget to potentially accelerate or increase your buyback target to take advantage of these dislocations within your stock price?

[James Teague:]

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

[Randall Fowler:]

Shneur I think that just as I mention that really this year we are really coming in and go in 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 will come in and take a look at it quarter by quarter. We have had come in and allocated approximately 2% of cash flow from operations to go towards bypasses. We have done that. We will come in and look for opportunities for the remainder of the year to see how we would love to come in. And if we are going to return more capital to investors, whether that would be in the form of distributions or buybacks, so more to come on that.

[Shneur Gershuni:]

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

[Randall Fowler:]

You know Shenur, yes it was approximately 2% is what we said, but we will come in and take a look at it quarter by quarter. Some of this we would like to get as Tony described. There is still some uncertainty out there as far as coming in and how the economy reopens, we just like to get a little bit more visibility on what we see for the business environment.

[Shneur Gershuni:]

Alright. That sounds great. I appreciate time, I want to keep it to just two questions. Have great and safe day.

[James Teague:]

Thank you.

[Operator:]

Thank you. Next question comes from Justin Jenkins with Raymond James. Your line is open.

[Justin Jenkins:]

Hi morning, everyone. I guess I would like to start on 2020 growth spending for Randy. I think you covered a bit of the further out outlook for 2122, but is it more timing at this point in terms of the range of spend less for 2020 or if some of that dependent on JV outcomes?

[Randall Fowler:]

It is the range that we give for 2020, the 2.5 billion to three billion is largely just timing on how we see cash leads go out the door.

[Justin Jenkins:]

Okay. That makes sense. And then you also mentioned that you expect working capital in 3Q in terms of usage. Did they have a magnitude in mind for that? And then I think of how quick that cash was back in the door as a tailwind thereafter?

[Randall Fowler:]

Yes. Probably you could see 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, work off over - from the third quarter, probably work off - typically you have got a good bit of working capital deployed to make a typical business. You have a good bit of working capital deployed over the fourth quarter. So I think you would see ultimately from that peak in the third quarter, you probably see it worked off largely by the end of the first quarter of next year.

[Justin Jenkins:]

Got it. Thanks Randy.

[Operator:]

And our next question comes from the line of Keith Stanley with Wolfe Research. Your line is now open.

[Keith Stanley:]

Hi, good morning. Just following up on the last question, if your working capital is still increasing in Q3, should we assume 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?

[Randall Fowler:]

No. I think some of it is just a carry over to what we put on. I think what Jim alluded to that we think we may be as far as total spread opportunities, dig 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 put on, you can have working capital creep with those positions.

[Keith Stanley:]

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

[Randall Fowler:]

I would say, we get the same answer in first quarter.

[James Teague:]

Keith I think heard that one, that is where I think we are too. We look at opportunities that come across. Frankly, we have not seen 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 certainly not anything compelling. So, I think right now we are just focused on continuing to execute with the business that we have and go from there. But I mean, we are 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.

[Keith Stanley:]

Interesting. Thank you.

[Operator:]

Thank you. Our next question comes from line of Pearce Hammond with Simmons Energy. Your line is open.

[Pearce Hammond:]

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? Do you see more opportunities to grow your NGL export business? And then the second question is, overall, it seems that you said NGL better outlook than U.S. crude exports. Do you think that is a fair statement?

[James Teague:]

This is Jim. But Tony and Brent chime in, I think the world needs you as LPG and as lifestyles improve in other parts of the world, in many cases LPG creates that improvement. Do you have anything to add.

[Anthony Chovanec:]

Data speaks for itself Jim. You are exactly right. You look at what happened installed hype of the pandemic, Brent were you blown away by the demand?

[Brent Secrest:]

Absolutely right to type numbers.

[James Teague:]

You know I wouldn’t be too quick to write off crude oil exports. We have seen quite a lot. We have picked up in crude exports. I thought we had a record week as a country at one point.

[Brent Secrest:]

A couple of weeks ago I think we started going back to the highs, first thing just a different interest in the late lighter, there is a, there is a bigger demand for West Texas. There is a bigger demand for the Eagle Ford type barrel as people have a bid on loader gasoline and we are seeing those goods to Asia mostly Korea and some Latin America. But on the LPG side, I think we are 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 is a low capital project that we can execute on.

[Pearce Hammond:]

Thank you for your responses.

[Randall Fowler:]

This is Randy. We have time for one more question. And then if you would give the replay information.

[Operator:]

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

[Michael Blum:]

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 I think the beginning of the first half of - the second half of 2020. Can you just give your, kind of, talk about what you are 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?

[James Teague:]

Hi Michael, I think we still see strength. I think what is driving is what we talked about a while ago.

[Brent Secrest:]

I think we are seeing a lot of PDH demand over in Asia. I think just in terms of how we contracted Michael, I say this humbly, but I think we will 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 have contracted out for this year and the next couple of years. We are in a good position to kind of maintain these type of levels. I think you are seeing export total around 18 million barrels a month of LPGs. And I would say that sticky. Those are sticky numbers.

[James Teague:]

What is interesting Michael is whenever we do get a cancellation, we have been pretty successful in back filling it with the spot. So the appetite is there.

[Michael Blum:]

Okay, great. That makes a lot of sense. My second I think is probably for Randy, you referenced the target payout ratio number that you are 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 overtime? Or are you thinking about that way?

[Randall Fowler:]

Michael, I don’t we have developed our thoughts that far along on setting a long-term target. Some of your balance to that would be what kind of growth opportunities do you see? So, we have really not come in and said any long-term targets. I mean, we do come in and compare how we are doing compared to the market and I think when we are coming in and look at the market and across the various sectors of the S&P 500 on the Page, I think we are amongst top two, top three of the sectors. And it is by nature being an MLP the whole thing within MLP is you have a high pay-off ratio and so I think we caught pretty well against the market.

[Michael Blum:]

Great. Thanks everyone. I appreciate it.

[James Teague:]

Okay, Sidney. Do you want to give the replay information?

[Operator:]

Certainly. You may dial in at 1800-859-2056 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 Burkhalter for any further remarks.

[Randy Burkhalter:]

Okay. That concludes our remarks today and I would like to thank everyone for joining us and have a good day. Thank you and good-bye now.

[Operator:]

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