Enterprise Reports First Quarter 2022 Earnings
HOUSTON–(BUSINESS WIRE)–Enterprise Products Partners L.P. (“Enterprise”) (NYSE: EPD) today announced its financial results for the three months ended March 31, 2022.
Enterprise reported net income attributable to common unitholders of $1.3 billion, or $0.59 per unit on a fully diluted basis, for the first quarter of 2022, compared to $1.3 billion, or $0.61 per unit on a fully diluted basis, for the first quarter of 2021. Net income for the first quarters of 2022 and 2021 was reduced by non-cash, asset impairment charges of approximately $14 million, or $0.01 per fully diluted unit, and $66 million, or $0.03 per fully diluted unit, respectively.
Distributable Cash Flow (“DCF”) was a record $1.8 billion for the first quarter of 2022 compared to $1.7 billion for the first quarter of 2021. Distributions declared with respect to the first quarter of 2022 increased 3.3 percent to $0.465 per unit, or $1.86 per unit annualized, compared to distributions declared for the first quarter of last year. DCF provided 1.8 times coverage of the distribution declared with regard to the first quarter of 2022. Enterprise retained $814 million of DCF for the first quarter of 2022.
Adjusted cash flow from operations (“Adjusted CFFO”), which is defined as net cash flow provided by operating activities before the net effect of changes in operating accounts, was $2.0 billion for the first quarter of 2022 compared to $1.9 billion for the first quarter of 2021. Enterprise’s payout ratio, comprised of distributions to common unitholders and partnership unit buybacks, for the twelve months ended March 31, 2022 was 58 percent of Adjusted CFFO. Adjusted Free Cash Flow (“Adjusted FCF”) for the twelve months ended March 31, 2022 was $2.1 billion. After excluding $3.2 billion used for the acquisition of Navitas Midstream Partners, LLC (“Navitas Midstream”), the partnership’s payout ratio of Adjusted FCF for this period was 80 percent.
First Quarter 2022 Highlights
|
|
Three Months Ended |
|||||
|
|
2022 |
2021 |
||||
|
($ in millions, except per unit amounts) |
|
|
||||
|
Operating income |
$ |
1,666 |
|
$ |
1,695 |
|
|
Net income (1) |
$ |
1,331 |
|
$ |
1,363 |
|
|
Fully diluted earnings per common unit (1) |
$ |
0.59 |
|
$ |
0.61 |
|
|
CFFO (2) |
$ |
2,145 |
|
$ |
2,023 |
|
|
Total gross operating margin (3) |
$ |
2,258 |
|
$ |
2,323 |
|
|
Adjusted EBITDA (3) |
$ |
2,257 |
|
$ |
2,246 |
|
|
Adjusted CFFO (3) |
$ |
1,954 |
|
$ |
1,924 |
|
|
Adjusted FCF (3) |
$ |
(1,427 |
) |
$ |
1,349 |
|
|
DCF (3) |
$ |
1,837 |
|
$ |
1,737 |
|
| (1) |
Net income and fully diluted earnings per common unit for the first quarter of 2022 and 2021 include non-cash asset impairment and related charges of approximately $14 million, or $0.01 per unit, and $66 million, or $0.03 per unit, respectively. |
|
|
(2) |
Cash flow from operations (“CFFO”) includes the impact of the timing of cash receipts and payments related to operations. For the first quarters of 2022 and 2021, the net effect of changes in operating accounts, which are a component of CFFO, were net increases of $191 million and $99 million, respectively. |
|
|
(3) |
Total gross operating margin, adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), Adjusted CFFO, Adjusted FCF and DCF are non-generally accepted accounting principle (“non-GAAP”) financial measures that are defined and reconciled later in this press release. |
- Gross operating margin, operating income and net income attributable to common unitholders included non-cash, mark-to-market (“MTM”) losses on financial instruments used in our commodity hedging activities of $42 million for the first quarter of 2022, compared to non-cash, MTM gains of $16 million for the first quarter of 2021.
- Capital investments were $3.6 billion during the first quarter of 2022, which included $3.2 billion for the acquisition of Navitas Midstream, $275 million for growth capital projects and $75 million of sustaining capital expenditures.
|
First Quarter 2022 Volume Highlights |
Three Months Ended |
|
|
|
2022 |
2021 |
|
NGL, crude oil, refined products & petrochemical pipeline volumes (million BPD) |
6.5 |
6.0 |
|
Marine terminal volumes (million BPD) |
1.6 |
1.5 |
|
Natural gas pipeline volumes (TBtus/d) |
16.4 |
13.7 |
|
NGL fractionation volumes (MBPD) |
1,317 |
1,190 |
|
Propylene plant production volumes (MBPD) |
105 |
83 |
|
Fee-based natural gas processing volumes (Bcf/d) |
4.9 |
4.0 |
|
Equity NGL production volumes (MBPD) |
155 |
162 |
As used in this press release, “NGL” means natural gas liquids, “LPG” means liquefied petroleum gas, “BPD” means barrels per day, “MBPD” means thousand barrels per day, “MMcf/d” means million cubic feet per day, “Bcf/d” means billion cubic feet per day, “BBtus/d” means billion British thermal units per day and “TBtus/d” means trillion British thermal units per day.
“Enterprise reported strong financial results for the first quarter of 2022,” said A. J. “Jim” Teague, co-chief executive officer of Enterprise’s general partner. “The first quarter of 2021 had mixed results across our business segments due to the widespread impacts of winter storms Uri and Viola, as well as downtime for planned maintenance at our PDH 1 facility and octane enhancement facility. Our record Adjusted EBITDA of $2.3 billion in the first quarter of 2022 was driven by our petrochemical and refined products services segment, higher natural gas processing margins, and gross operating margin attributable to the Navitas Midstream acquisition, which was completed on February 17, 2022.”
“We also reported record DCF of $1.8 billion for the first quarter of 2022 that provided 1.8 times coverage of our quarterly distribution. We retained $814 million of DCF during the first quarter that was available to fully fund $275 million of growth capital expenditures and partially repay borrowings used to finance our acquisition of Navitas Midstream,” stated Teague.
“Enterprise has $4.6 billion of organic growth projects under construction, including seven capital efficient projects that were introduced at our investor day presentation in April,” said Teague. “These projects are:
- a natural gas processing plant in the Midland Basin,
- a natural gas processing plant in the Delaware Basin,
- the 12th NGL fractionator in Chambers County, Texas,
- a 400 MMcf/d expansion of our Acadian Gas System connecting Haynesville Shale natural gas production to industrial and LNG demand in South Louisiana,
- expansion of our ethane marine export terminal,
- expansion of our ethylene marine export terminal, and
- repurposing segments of Chaparral and MAPL pipelines and new construction to form the Texas Western Products System to support underserved refined products markets in West Texas, New Mexico, Colorado and Utah.”
Review of First Quarter 2022 Results
Enterprise reported total gross operating margin of $2.3 billion for both the first quarters of 2022 and 2021. Below is a review of each business segment’s performance for the first quarter of 2022.
NGL Pipelines & Services – Gross operating margin from the NGL Pipelines & Services segment increased 13 percent to a record $1.2 billion for the first quarter of 2022 from $1.1 billion for the first quarter of 2021.
Gross operating margin from Enterprise’s natural gas processing business and related NGL marketing activities increased 41 percent to $415 million for the first quarter of 2022 from $294 million for the first quarter of 2021. Included in gross operating margin for the first quarters of 2022 and 2021 were non-cash, MTM losses related to hedging activities of $19 million and non-cash, MTM gains of $37 million, respectively.
Gross operating margin from Enterprise’s natural gas processing facilities increased $229 million this quarter compared to the first quarter of 2021, primarily due to higher average processing margins (including the impacts of hedging). Included in these results is $60 million of condensate sales during the period that are reflected in the results of the Delaware Basin processing plants, which prior to the third quarter of 2021 were included in our Natural Gas Pipelines and Services, in order to align these revenues with their associated costs. The partnership’s Midland Basin natural gas processing business, which was acquired as part of the acquisition of Navitas Midstream in February 2022, contributed $42 million to the quarterly increase in gross operating margin.
Indicative NGL prices for the first quarter of 2022 increased 56 percent to $0.95 per gallon compared to the first quarter of 2021. Total fee-based processing volumes were 4.9 Bcf/d in the first quarter of 2022 compared to 4.0 Bcf/d in the first quarter of 2021. Equity NGL production was 155 MBPD this quarter compared to 162 MBPD for the same quarter last year. The acquisition of Navitas Midstream added 854 MMcf/d of fee-based processing volumes and 19 MBPD of equity NGL production following the acquisition date.
Gross operating margin from Enterprise’s NGL marketing activities decreased $108 million, primarily due to lower average sales margins and volumes, which accounted for a $56 million decrease, and an additional $56 million decrease in non-cash, MTM earnings.
Gross operating margin from the partnership’s NGL pipelines and storage business was $566 million for the first quarter of 2022 compared to $627 million for the first quarter of 2021. NGL pipeline transportation volumes were 3.6 million BPD this quarter compared to 3.3 million BPD in the first quarter of last year.
A number of Enterprise’s NGL pipelines, including the Mid-America and Seminole NGL Pipeline Systems, Chaparral NGL Pipeline and Shin Oak NGL Pipeline, serve the Permian Basin and Rocky Mountain regions. On a combined basis, gross operating margin from these pipelines decreased a net $26 million compared to the first quarter of 2021, primarily due to lower average transportation fees and deficiency fees, including the impacts of certain contracts associated with the Rocky Mountain pipeline segment of the Mid-America Pipeline System that terminated in September 2021. These decreases in gross operating margin were offset by an increase in transportation volumes of 249 MBPD, net to our interest.
Gross operating margin from Enterprise Hydrocarbons Terminal (“EHT”) decreased $27 million for the first quarter of 2022 compared to the same quarter last year, primarily due to lower average export fees. LPG export volumes at EHT decreased 18 MBPD. The partnership’s Morgan’s Point Ethane Terminal reported a $12 million increase in gross operating margin for the first quarter of 2022 compared to the same quarter last year, primarily due to higher average export fees. Ethane export volumes increased 8 MBPD to 161 MBPD in the first quarter of 2022. In total, the partnership’s NGL marine terminal volumes were 642 MBPD for the first quarter of 2022 compared to 652 MBPD for the first quarter of 2021.
Gross operating margin from Enterprise’s NGL fractionation business increased 48 percent, or $79 million to $244 million for the first quarter of 2022. NGL fractionation volumes increased to 1.3 million BPD for the first quarter this year from 1.2 million BPD for the first quarter last year.
The partnership’s NGL fractionation complex in Chambers County, Texas generated a $54 million increase in gross operating margin for the first quarter of 2022 compared to the same quarter last year, primarily due to a 121 MBPD increase in fractionation volumes, net to the partnership’s interest, and higher ancillary service revenues. These increases in gross operating margin were partially offset by higher utility and other operating costs.
An increase in fractionation volumes and ancillary service revenues led to an $8 million increase in gross operating margin for our Hobbs fractionator for the first quarter of 2022 compared to the same quarter last year. The partnership’s natural gasoline hydrotreater located at its Chambers County complex, which was placed into service in October 2021 generated gross operating margin of $7 million during the first quarter of this year.
Crude Oil Pipelines & Services – Gross operating margin from the partnership’s Crude Oil Pipelines & Services segment was $415 million for the first quarter of 2022 compared to $400 million for the first quarter of 2021. Gross operating margin includes non-cash, MTM losses related to hedging activities of $31 million in the first quarter of 2022 and $1 million in the first quarter of 2021. Total crude oil pipeline transportation volumes were 2.2 million BPD for the first quarter of 2022 compared to 1.9 million BPD for the first quarter of 2021. Total crude oil marine terminal volumes were 796 MBPD this quarter compared to 572 MBPD for the first quarter of last year.
Gross operating margin from Enterprise’s Midland-to-ECHO Pipeline System and related marketing activities increased a combined $22 million for the first quarter of 2022 versus the first quarter of 2021, primarily due to a 166 MBPD, net to our interest, increase in transportation volumes. The partnership’s West Texas Crude Oil Pipeline System reported a $16 million increase in gross operating margin for the first quarter of 2022 compared to the same quarter last year, primarily due to higher transportation volumes of 110 MBPD.
Gross operating margin from the partnership’s Midland and ECHO terminals increased a combined $21 million for the first quarter of this year compared to the first quarter of 2021, primarily due to lower operating costs and higher ancillary service revenues.
Gross operating margin from other crude oil marketing activities decreased $21 million for the first quarter of 2022 compared to the same quarter last year, primarily due to higher non-cash, MTM losses during the first quarter of 2022.
Natural Gas Pipelines & Services – Gross operating margin for the Natural Gas Pipelines & Services segment was $220 million for the first quarter of 2022 compared to $535 million for the first quarter of 2021. Total natural gas transportation volumes increased 20 percent to a record 16.4 TBtus/d for the first quarter of 2022 from 13.7 TBtus/d for the first quarter of 2021.
Gross operating margin from natural gas marketing activities decreased $316 million for the first quarter of 2022 compared to the first quarter of 2021. Included in the results for the first quarter of 2021 were sales of natural gas, including natural gas made available due to the temporary closures of our Texas-based facilities during the February 2021 winter storms.
Enterprise’s Delaware Basin Gathering System reported a $23 million decrease in gross operating margin for the first quarter of 2022 compared to the same quarter last year, primarily due to condensate sales during the period that is now being included in our Delaware Basin gas processing plant results. The partnership’s Midland Basin Gathering System, which was acquired as part of the acquisition of Navitas Midstream in February 2022, generated gross operating margin of $6 million following the acquisition date.
Gross operating margin from the Acadian Gas System and Haynesville Gathering System increased a combined $4 million, primarily due to higher transportation volumes. Transportation volumes on a combined basis increased 793 BBtus/d, primarily due to the Gillis Lateral Pipeline, which went into service in December 2021.
Petrochemical & Refined Products Services – Gross operating margin for the Petrochemical & Refined Products Services segment increased 44 percent, to $404 million for the first quarter of 2022 from $282 million for the first quarter of 2021. Gross operating margin includes non-cash, MTM gains related to hedging activities of $10 million in the first quarter of 2022 and losses of $18 million in the first quarter of 2021. Total segment pipeline transportation volumes were 745 MBPD this quarter compared to 749 MBPD for the first quarter of last year. Refined products and petrochemical marine terminal volumes were 208 MBPD for the first quarter of 2022 compared to 266 MBPD for the same quarter in 2021.
Gross operating margin from the partnership’s propylene production and related activities increased $64 million for the first quarter of 2022 compared to the same quarter last year, primarily due to higher sales volumes and average margins, partially offset by higher operating costs and lower average processing fees. Total propylene production volumes increased to 105 MBPD this quarter from 83 MBPD for the first quarter of 2021. The PDH facility was down for 46 days for a planned turnaround during the first quarter of 2021.
Gross operating margin from the partnership’s octane enhancement and related plant operations increased $44 million for the first quarter of 2022 compared to the same quarter in 2021, primarily due to higher sales volumes. The increase in sales volumes was primarily due to 16 days of downtime for planned turnarounds during the first quarter of 2021, which were completed in May 2021 for the octane enhancement plant and January 2021 for the High Purity Isobutylene facility.
Enterprise’s ethylene exports and related activities generated a $26 million increase in gross operating margin for the first quarter of 2022 compared to the first quarter of 2021. Gross operating margin from the ethylene export terminal increased $15 million primarily due to a 16 MBPD, net to our interest, increase in export volumes. Gross operating margin from the partnership’s ethylene storage, pipeline and related marketing activities increased $11 million for the first quarter of 2022 compared to the first quarter of last year, primarily due to higher transportation volumes of 45 MBPD, net to our interest, and higher storage fees.
Gross operating margin from the partnership’s refined products pipelines and related activities decreased $31 million for the first quarter of this year compared to the first quarter of 2021. Refined products marketing activities generated a $36 million decrease in gross operating margin for the first quarter of 2022 compared to the same quarter last year primarily due to lower average sales margins, partially offset by higher MTM earnings.
Capitalization
Total debt principal outstanding at March 31, 2022 was $29.8 billion, including $2.6 billion of junior subordinated notes, to which the debt rating agencies ascribe partial equity content. At March 31, 2022, the average maturity of our consolidated debt obligations was approximately 21 years and is comprised of approximately 95 percent fixed rate debt. At March 31, 2022, Enterprise had consolidated liquidity of approximately $3.9 billion, comprised of unrestricted cash on hand, available borrowing capacity under its revolving credit facilities and availability under the $500 million delayed draw term loan. With respect to the term loan, we elected not to borrow any amount under this facility before the 60-day delayed draw period ended on April 30th, at which point the term loan terminated automatically.
Capital Investments
Total capital investments were $3.6 billion in the first quarter of 2022, which included $3.2 billion used for the acquisition of Navitas Midstream, $275 million for organic growth capital projects and $75 million of sustaining capital expenditures.
Our current expectation for organic growth capital investments for 2022 is approximately $1.5 billion. These estimates do not include capital investments associated with Enterprise’s proposed deepwater Seaport Oil Terminal (“SPOT”), which remains subject to governmental approval. We currently expect sustaining capital expenditures to be approximately $350 million for 2022.
Conference Call to Discuss First Quarter 2022 Earnings
Enterprise will host a conference call today to discuss first quarter 2022 earnings. The call will be broadcast live over the Internet beginning at 9:00 a.m. CT and may be accessed by visiting the partnership’s website at www.enterpriseproducts.com.
Use of Non-GAAP Financial Measures
This press release and accompanying schedules include the non-GAAP financial measures of total gross operating margin, Adjusted CFFO, free cash flow (“FCF”), Adjusted FCF, DCF and Adjusted EBITDA. The accompanying schedules provide definitions of these non-GAAP financial measures and reconciliations to their most directly comparable financial measure calculated and presented in accordance with GAAP. Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, operating income, net cash flow provided by operating activities or any other measure of financial performance calculated and presented in accordance with GAAP. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies because they may not calculate such measures in the same manner as we do.
Company Information and Use of Forward-Looking Statements
Enterprise Products Partners L.P. is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products and petrochemicals. Services include: natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage and marine terminals; crude oil gathering, transportation, storage and marine terminals; petrochemical and refined products transportation, storage, and marine terminals and related services; and a marine transportation business that operates on key United States inland and intracoastal waterway systems. The partnership’s assets include more than 50,000 miles of pipelines; over 260 million barrels of storage capacity for NGLs, crude oil, refined products and petrochemicals; and 14 Bcf of natural gas storage capacity.
This press release includes forward-looking statements. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve certain risks and uncertainties, such as the partnership’s expectations regarding future results, capital expenditures, project completions, liquidity and financial market conditions. These risks and uncertainties include, among other things, direct and indirect effects of the COVID-19 pandemic, insufficient cash from operations, adverse market conditions, governmental regulations and other factors discussed in Enterprise’s filings with the U.S. Securities and Exchange Commission. If any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those expected. The partnership disclaims any intention or obligation to update publicly or reverse such statements, whether as a result of new information, future events or otherwise.
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Enterprise Products Partners L.P. |
Exhibit A |
|||||||||
|
Condensed Statements of Consolidated Operations – UNAUDITED |
||||||||||
|
($ in millions, except per unit amounts) |
|
|
||||||||
|
|
For the Three Months |
For the Twelve |
||||||||
|
|
2022 |
2021 |
2022 |
|||||||
|
Revenues |
$ |
13,008 |
|
$ |
9,155 |
|
$ |
44,660 |
|
|
|
Costs and expenses: |
|
|
|
|||||||
|
Operating costs and expenses |
|
11,397 |
|
|
7,553 |
|
|
38,922 |
|
|
|
General and administrative costs |
|
62 |
|
|
56 |
|
|
215 |
|
|
|
Total costs and expenses |
|
11,459 |
|
|
7,609 |
|
|
39,137 |
|
|
|
Equity in income of unconsolidated affiliates |
|
117 |
|
|
149 |
|
|
551 |
|
|
|
Operating income |
|
1,666 |
|
|
1,695 |
|
|
6,074 |
|
|
|
Other income (expense): |
|
|
|
|||||||
|
Interest expense |
|
(319 |
) |
|
(323 |
) |
|
(1,279 |
) |
|
|
Other, net |
|
3 |
|
|
1 |
|
|
7 |
|
|
|
Total other expense, net |
|
(316 |
) |
|
(322 |
) |
|
(1,272 |
) |
|
|
Income before income taxes |
|
1,350 |
|
|
1,373 |
|
|
4,802 |
|
|
|
Provision for income taxes |
|
(19 |
) |
|
(10 |
) |
|
(79 |
) |
|
|
Net income |
|
1,331 |
|
|
1,363 |
|
|
4,723 |
|
|
|
Net income attributable to noncontrolling interests |
|
(34 |
) |
|
(21 |
) |
|
(130 |
) |
|
|
Net income attributable to preferred units |
|
(1 |
) |
|
(1 |
) |
|
(4 |
) |
|
|
Net income attributable to common unitholders |
$ |
1,296 |
|
$ |
1,341 |
|
$ |
4,589 |
|
|
|
Per common unit data (fully diluted): |
|
|
|
|||||||
|
Earnings per common unit |
$ |
0.59 |
|
$ |
0.61 |
|
$ |
2.08 |
|
|
|
Average common units outstanding (in millions) |
|
2,199 |
|
|
2,203 |
|
|
2,202 |
|
|
|
|
|
|
|
|||||||
|
Supplemental financial data: |
|
|
|
|||||||
|
Net cash flow provided by operating activities |
$ |
2,145 |
|
$ |
2,023 |
|
$ |
8,635 |
|
|
|
Cash flows used in investing activities |
$ |
3,532 |
|
$ |
657 |
|
$ |
5,010 |
|
|
|
Cash flows used in financing activities |
$ |
1,125 |
|
$ |
2,190 |
|
$ |
3,506 |
|
|
|
Total debt principal outstanding at end of period |
$ |
29,801 |
|
$ |
28,936 |
|
$ |
29,801 |
|
|
|
|
|
|
|
|||||||
|
Non-GAAP Distributable Cash Flow (1) |
$ |
1,837 |
|
$ |
1,737 |
|
$ |
6,708 |
|
|
|
Non-GAAP Adjusted EBITDA (2) |
$ |
2,257 |
|
$ |
2,246 |
|
$ |
8,392 |
|
|
|
Non-GAAP Adjusted Cash flow from operations (3) |
$ |
1,954 |
|
$ |
1,924 |
|
$ |
7,177 |
|
|
|
Non-GAAP Free Cash Flow (4) |
$ |
(1,427 |
) |
$ |
1,349 |
|
$ |
3,520 |
|
|
|
Non-GAAP Adjusted Free Cash Flow (4) |
$ |
(1,618 |
) |
$ |
1,250 |
|
$ |
2,062 |
|
|
|
Gross operating margin by segment: |
|
|
|
|||||||
|
NGL Pipelines & Services |
$ |
1,225 |
|
$ |
1,086 |
|
$ |
4,455 |
|
|
|
Crude Oil Pipelines & Services |
|
415 |
|
|
400 |
|
|
1,695 |
|
|
|
Natural Gas Pipelines & Services |
|
220 |
|
|
535 |
|
|
840 |
|
|
|
Petrochemical & Refined Products Services |
|
404 |
|
|
282 |
|
|
1,479 |
|
|
|
Total segment gross operating margin (5) |
|
2,264 |
|
|
2,303 |
|
|
8,469 |
|
|
|
Net adjustment for shipper make-up rights (6) |
|
(6 |
) |
|
20 |
|
|
27 |
|
|
|
Non-GAAP total gross operating margin (7) |
$ |
2,258 |
|
$ |
2,323 |
|
$ |
8,496 |
|
|
Contacts
Randy Burkhalter, Vice President, Investor Relations, (713) 381-6812
Rick Rainey, Vice President, Media Relations, (713) 381-3635
