Enterprise Products Partners L.P. (EPD) Q4 2017 Earnings Report, Transcript and Summary

Good morning. My name is Amy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Enterprise Products Partners Q4 2017 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Mr. Randy Burkhalter, you may begin your conference.

Thank you, Amy. Good morning everyone and welcome to the Enterprise Products Partners conference call to discuss earnings for the fourth quarter. Our speakers today will be Jim Teague, Chief Executive Officer of Enterprises' General Partner; and Bryan Bulawa, Chief Financial Officer. 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 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 the forward-looking statements that may be made during this call. And with that, I'll turn it over to Jim Teague.

Okay, thank you, Andy. As we said in this morning's press release, our businesses continued to perform well in 2017 and frankly throughout the turmoil over the last three years. With higher crude oil prices, production of oil and gas in the U.S. is growing dramatically meanwhile demand globally continues to exceed expectations. The downturn that started in 2014 has been painful, but it did have a silver lining. The downturn taught the market a lesson about the staying of the U.S. oil and gas industry, abandon, short cycle, highly reliable supplies, price for about three markets and made possible by workforce who produced from rock that was previously thought to be worthless. As indicated by record liquid pipeline volumes and record marine terminal volumes, the amount of this new production that's in our pipes and our plants and moving across our docks is continually growing. Given our size, our reach, and our business model, we have significant operating leverage across all our systems to handle growing production, serve new markets and handle the significant increases we're seeing in exports. In addition, we have a number of our long lead-time projects coming online and several new initiatives that are under construction. For 2017, Enterprise reported a 10% increase in operating income to $3.9 billion. Gross operating margin for 2017 increased 8% to a record $5.7 billion from 5.2 billion in 2016. Net cash flow provided by operating activities for 2017 increased 14% to $4.6 billion from $4.1 billion. Distributable cash flow, excluding proceeds from asset sales increased 10% to a record 4.5 billion in 2017 from 4.1 billion in 2016. We retained $860 million of distributable cash flow in 2017 to reinvest. It's been a long time since we reported record "financial and operating" results like these. Actually, the last time was in January 2015 when we were reporting 2014 results at much higher commodity prices. During 2017, Enterprise completed construction and either began service or commissioning on projects representing $4.5 million. In the fourth quarter, we began limited service on our Midland-Sealy pipeline, moving one grade of crude from the Permian Basin to the Houston refining and export market. This pipeline is expected to be in full service in the second quarter after we complete construction of pump stations and storage facilities. We're operating our PDH facility, which has been running and producing polymer-grade propylene. We expect commissioning activities to last another month. Other major growth projects completed in 2017 included an expansion of our ATEX ethane pipeline, expansion of propylene pipeline infrastructure on the Gulf Coast, and expansion of our refined products and crude oil marine terminals in Beaumont. In addition, we have another $5.5 billion of growth projects under construction. In the Permian Basin, we're scheduled to bring on two natural gas processing plants at our Orla Complex in the Delaware Basin this year, one in the second quarter and the other in the third quarter, but our Midland-to-Sealy crude oil pipeline system in full service and continue working on our third Orla plant which is scheduled to be put into service in 2019. When you look at the map of our systems, you couldn't have put the Permian Basin in a better place. It's close to all assets all along the Gulf Coast and literally in the fairway of many of our natural gas and natural gas liquids assets. We're finding opportunities to connect the dots around our assets including expanding existing assets, converting assets and building new projects like our Orla processing complex, Shin Oak and Midland-to-Sealy crude line. We're not done finding opportunities in what is now the world's hottest basin. As to Mont Belvieu and petrochemicals, we will soon be putting our ninth NGL fractionator in services and we're expanding our NGL crude oil and refined products storage facilities. Our iBDH is under construction with completion expected in 2019. After this plant will help built excess capacity in our high-purity isobutylene and MTBE plants which will allows us to upgrade more NGLs in the higher value products. The other half of this capacity is committed to an investment grade customer through a 15-year fee based contract on a feedstock plus cost basis. Also in petrochemicals, we've begun building an ethylene logistics system to support the nearly 50% increase in ethylene capacity, we’re seeing on the Gulf Coast. Like we've seen in natural gas, NGLs and crude oil, petrochemical expansions of this magnitude don’t come without opportunities for Enterprise. We’re converting a storage cavern to a high capacity ethylene salt dome well at Mont Belvieu, which is expected to begin service in the first quarter of 2019. This system will be designed around the eight ethylene pipelines that are within a half a mile of our storage system. We also announced this morning that we’ve entered into a 50-50 joint venture to build new ethylene export facility around the Gulf Coast that will have the capacity to export 1 million tons of ethylene per year. These new ethylene assets leverage and extent our existing NGL and petrochemical systems and we believe are the beginning of the Gulf Coast ethylene distribution system. While the folks don’t realize that by 2021 just the state of Texas will be the largest producer of ethylene from steam cracking in the world and that’s not counting what is happening across the broader in Louisiana. That’s in our backyard and the resulting rapid growth in ethylene combined with increased international demand for markets like Asia, creates an ideal scenario in which markets are brought can diversify their supply towards cost advantage U.S. feedstocks. And finally some comments on exports. With the continuing increases in production, more and more products are being exported. Our Midland-to-Sealy pipeline has delivered initial volumes to the Huston area and as predicted, we're seeing most of this crude being exported. Obviously, the same can be said for NGL including ethylene for petrochemicals and refined products. Our dock activity is increased by approximately 50% in the last year. We expect continued increases in market share for the hydrocarbons from our dock. We mentioned in our press release that our success in 2017 and frankly everyday would not have been possible without the daily creativity and hassle by our folks, of our team of over 6,700 employees. And 2017 and this is something we're quite proud of, in 2017 Enterprise had the best safety performance ever with a total recordable rate of 0.41 and a loss time rate of 0.17. This is because of the hard work and diligence of all of our folks in Enterprise. Sincere thanks to the entire Enterprise team for 2017 and the bright future that you continue to give our company. We feel pretty good about 2018 and our longer term opportunities. With that, I will turn it over to Bryan.

Thank you, Jim, and good morning everyone. I would like to eco Jim's earlier comments that we're very pleased with our record operational and financial performance. Our operational DCF per unit or if you will which excludes asset sales, insurance proceeds and monetization interest rate derivative was $2.05 per unit for 2017, this compares favorably to the same metric in 2016 of $1.93 per unit and approaches DCF per unit levels enjoyed prior to the most recent commodity cycle downturn or again if you will 2014. Before diving further into our discussion, one of the most popular topics during our recent investor calls and meetings relates to the expected impact associated with tax reform. The Tax Cuts and Jobs Act passed by Congress in December 2017 appropriately preserves the favorable tax attributes for master limited partnerships and encourages MLPs to continue investing in infrastructure growth opportunities, which contributes to U.S. job and GDP growth. Having said that, I'll review a few income statement items for the fourth quarter, provide expectations for our growth and sustaining capital expenditures for 2018, and wrap up with an overview of our balance sheet metrics and equity funding objectives. Starting with income statement items, net income attributable to limited partners for the fourth quarter of 2017 was $774 million or $0.36 per unit on a fully diluted basis compared to $659 million or $0.31 per unit on a fully diluted basis for the fourth quarter of 2016. Net income attributable to limited partners and fully diluted earnings per unit for the four quarters of 2017 and 2016 include non cash impairment charges of approximately $15 million and $24 million or a $0.01 per unit for both quarters respectively. Depreciation, amortization and accretion expenses were $21 million higher when compared to the same quarter of 2016, due to assets being placed into service such our Midland-to-Sealy crude oil pipeline, which began interim service in November, our Morgan's Point Ethane Export Terminal, the Azure asset acquisition and a number of expansions. Total capital spending in the fourth quarter of 2017 was a $1 billion including $80 million for sustaining capital expenditures. For the full year of 2017, we invested $3.4 billion for growth capital projects and acquisitions including the $191 million we paid in connection with the Azure acquisition and $244 million for sustaining capital expenditures. For 2018, we currently expect to invest approximately $3 billion for growth capital expenditures, and approximately $325 million for sustaining capital expenditures. Moving to our balance sheet. At December 31, 2017, our total debt principal outstanding was $24.8 billion. The average life of our debt portfolio was 13.9 years assuming the first call day for our hybrids and our effective average cost of debt was 4.6%. Approximately 87% of our debt outstanding is fixed rate, thereby insulating our debt portfolio in a rising interest rate environment. Adjusted EBITDA for the 12 months ended December 31, 2017 was $5.6 billion and our consolidated leverage ratio was 4.1 times after adjusting debt for the partial equity treatment of the hybrid debt securities by the rating agencies and further reduced for cash and cash equivalents. Working capital requirements remained elevated by approximately $700 million or 0.1 times leverage with self liquidating short-term marketing opportunities along with higher inventory levels attributed to the continuing effects of Hurricane Harvey. When further applying the pro forma impact of our contracted growth projects, under construction during the quarter namely PDH and Midland-to-Sealy, our leverage ratio would have been 3.75 -- 3.7 times. Our consolidated liquidity was approximately $3.7 billion at December 31, 2017, which included available borrowing capacity and our credit facilities unrestricted cash. With respect to the upcoming distribution which we paid next week on February 7th, Enterprise Products Company and certain of its affiliates plan to reinvest an aggregate of a $100 million in EPD common units to the partnerships distribution reinvestment program. This continuing level supports from our general partner will further reduce our external equity funding needs for 2018. This year represents the 20th year since our IPO and with this latest investment the Duncan family support of our partnership through purchases at EPD common unit, contribution of assets and waiver of distributions tolls over $2.5 billion. Finally, during the 2017, we funded through excess distributable cash flow or retain earnings approximately 55% of our equity funding requirements attributed to 2017 growth capital investments. We anticipate this level to continue to rise in 2018 and to reach a self-funding equity model in 2019 with $2.5 billion to $3 billion growth capital investment profile, while preserving our targeted leverage objective of 3.75 to 4 times. And with that, I will turn the call back over to Randy.

Thank you, Bryan. Amy, we're ready to take questions now from our listeners.

At this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question comes from the line of TJ Schultz with RBC Capital Markets. TJ, your line open.

I think just first on the ethylene export terminal. To reach FID, you mentioned, you need acceptable arrangements with local tax authority. Does that just procedural? Or if you could expand, what still needs to get done to reach FID? And any reason, it would not be at Morgan's Point?

The reason it wouldn’t be at Morgan's Point, as when get tax abatement is better somewhere else and there is another location, we could put at that.

Just on Shin Oak, the volumes from converted pipe. Does it move over at the start up for Shin Oak and then beyond the volumes you get from the Orla additions? What traction are you getting on adding other customers? And is there any change to your initial design capacity I think at $250,000 barrels a day?

I fully expect that we will have to bring it on at more than $250,000 barrels a day and we have been in positive discussions with several people.

Your next question comes from the line of Tom Abrams with Morgan Stanley. Tom, Your line is open.

I want to understand a little better about the mix on the Midland-to-Sealy, Midland-to-ECHO in as much as you've got uncommitted tariff volumes that might decline and committed flow coming out to it. Will that impact the EBITDA temporarily at all in the next couple of quarters?

I think when you look at -- this is Brent Secrest. If you look at the walk-up rate and where the margin is currently for the first quarter, and if you extrapolate that over the rest of the calendar year, you will see volumes increase and the per barrel fee decrease. But I want to say there is a major delta between the dollars.

The other one -- a couple of long ball questions, one is -- actually one might be somewhat short term, in as much as the capacity on Midland-to-Sealy is filling up faster than some might have thought and as a lot of people hunting around for additional barrels to put on new pipe. Can you -- are you in a position perhaps to do something earlier than your NGL conversion idea after Shin Oak? I mean literally, could you have either expansion in Midland-to-Sealy or yet participate in another project in a couple of years?

I mean we can wrap Midland-to-Sealy beyond what our initially capacity is going to be relatively easy with just pump stations. So I think we'd say, I mean, we can do that and we can use DRA, which is fairly inexpensive. So, yes, there's upside there. I am not sure exactly what.

And then a couple of the long ball questions are, if you're hearing anything tentatively about additional pet-chem facilities on the Gulf Coast?

Yes. Tony believes there's a second wave coming. We have companies in here whose name I can't hardly pronounce, pretty routinely talking about wanting to evaluate, putting the ethylene plants in the U.S. Tony?

Absolutely. And with the plentiful ethylene that we have and that number growing especially when you look at the Delaware Basin, people understand this. So, if they're coming I believe.

Yes, one other things and it gets back to our ethane export also, it's a big -- when crude oil goes up natural gas doesn't, it makes this heck of lot more attractive than it was this time last year.

Are you moving the timing of that wave forward?

It's hard for us to predict when these folks are going to have FID. So, it really is -- these plants take a while to come on and people to plan for them. But at the end of the day, the macro look is that people are coming in the U.S. to make ethylene because ethylene supplies are so plentiful.

Lastly, I stopped wondering. When you get to 2018 in your self-funding, what happens next with assuming DCF per unit keeps growing? What do you do with that extra coverage? What are the priorities?

I think we'll wait till 2019 and see what the opportunities look like at that point in time, to come in and speculate on that now is a little bit premature.

Your next question comes from the line of Darren Horowitz with Raymond James. Darren, your line is open.

Jim, my first question on the petrochemical value chain specifically on propane versus propylene, if we end up tracking towards 32 million or 33 million barrels of propane at inventory exiting March, obviously that's below five year lows and that supports higher propane prices. Does that mean for you guys the way you look at it? Do you have more of an opportunity to arb the propane price curve? Or the arbitrage, what could be and even wider propane to polymer-grade propylene spread? And then that kind of legs me into my next point that means the "commissioning activity" on the PDH could actually capitalize on that before that it ends up entering commercial service. How does the math work for you?

I think you've answered your own question, Darren.

I guess I just wanted to hear you say that, Jim.

Randy, you want to take again, R.B.?

For every pound that we produced in PDH while we're commissioning is sold to our customers as we go. So, we're selling PGP right now on propane basis.

Why do you think that spread, R.B. could get over the next couple of months?

I don’t think I'm the right person to speculate on that.

Okay, and then just one quick housekeeping question for Bryan. As it relates to contango opportunities across the commodities, let's just generically call it. How much do you guys have out on the working facility currently?

Well, we -- our working capital facility really is -- we have $5.5 billion of credit facilities. So, the -- what we have outstanding or what we had at December 31 was about a 1 billion dollars of working capital associated with short-term marketing opportunities as well as some elevated inventory levels again some of the effects -- the ongoing effects of Hurricane Harvey.

Everything is backward today. So we either have contango rolling off or we're taking advantage of backwardation which is bringing money in.

And from a short-term prospective with regard to that 1 billion that's out on the facility, how much of that do you expect to be mark-to-market in 1Q?

Well, Darren, it's always -- it's dangerous territory because markets shift. But currently it's -- we decline some September to December by about $300 million. And I think we will see that pull back by at least that amount from now to the end of March.

There was a decent amount just in the commissioning of Midland-to-Sealy and as contracts roll on, you will see some of those crude working with inventories roll off.

Your next question comes from the line of Brian Zarahn with Mizuho. Brian, your line is open.

Follow-up on Midland-to-Sealy. Can you give estimate of how much additional capacity could be added to DRA and pump stations? And how long would you estimate it would take to add additional pump stations?

I don’t think we need additional pump stations. We wouldn't need additional pump stations, just DRA. And it's somewhere between what that 20 and 550.

A little bit more than that.

Okay, let's call it 550,000 barrels a day.

Okay. And then just switching to NGL. As of today, how do you see the ethane uplift opportunity on your system with the crackers making progress coming online?

Brian, this is Tony. We publish a slide as to how we see ethylene balances, west of Appalachia, and we think that drives ethylene prices. So, I don’t want to tell you that we think ethylene is going to blow out. Obviously, you could have periods of volatility. We acknowledge on our slide. There would be time where I think could be tight and people could be reaching into storage or going to other products. But at the end of the day, especially with the new production forecast, we're not finished with it yet. But incremental ethane volumes, we're not predicting that you're going to have a big blow out in ethane prices.

Probably, if you're in the Permian or the Eagle Ford, you're going to see. I mean it's going to be transportation related and it's going to be the appetite that petrochemicals have for ethane. If they have an appetite then you're going to see higher margins, the close you're to the marketplace. So at the Permian and the Eagle Ford, you're going to get in -- it's going to be -- you're going to enjoy it, if you further await, it's going to be marginal.

I guess on the -- not so much on the price side and the volume side in your system. You're optimistic this year about upside, processing volumes, transportation frac volumes, related to ethane recovery?

This is Brent. If you look across our portfolio and our expectation of the ethane and the Y-grade, I mean it's quite healthy in terms of the increasing volumes. I think where the margins are right now, it makes sense for people to recover ethane.

Your next question comes from the line of Ted Durbin with Goldman Sachs. Ted, your line is open.

So, PDH just coming back there, still in commissioning, just feels like continue to push out a little bit for rate. What's happening with -- why we're not at full commercial service? And then, can you speak to -- are you actually producing non-spec product now? Is there any kind of earnings contribution in the quarters from that? Or where is all that product going?

We've produced non-spec product. These things are -- these are really big plants, and it's not unexpected. That commissioning takes a little longer. How you're going to do is look back at now in petro logistics and see that. We expected that, but yes we've been -- are gradually ramping up, and we've been producing on-spec propylene. Graham, you got anything else there?

I mean we've been producing on-spec propylene at capacity, as we go through this, there's certain amount of activities in terms of conditioning the catalyst that requires to do some different things. But overall the plant is up and running and we're just taking through the normal steps of commissioning right now.

And then as you're in the commissioning phase I think there was a thought that you might be able to run a bit of a nameplate. Is that still potentially on the cards on the plants? Or what's your view there?

Ted, we'd just like to get to nameplate right now and hold it there. We would hope it's like every other enterprise plant that's built. We currently have excess capacity, but we're not selling it yet.

And then just I think I heard the quick comments on tax reform, but I know one of your -- one of the questions we've got and you've thought about over the years is, the ultimate corporate structure for Enterprise and one of the uncertainties there was what happened with tax reform. So you have that behind us now. Just love your thoughts on whether you -- do you think you're in the right corporate structure as you think about access to capital, M&A rather other strategic ideas?

Ted, this is Randy. I think where we are I think we still feel like the MLP structure works for us as far as access to capital is concerned. Access to equity capital at a reasonable price, we'll continue to monitor, frankly, how the capital values midstream C Corps versus midstream MLPs. Frankly, we haven't seen a lot of difference over the last couple of years, but frankly there was a lot of noise in the space whether you're a C Corp or MLP over the last three years. So, I think we will continue to monitor that and see what develops on the front. But that’s forever election, so it/s not to be taken lightly and we will continue to come and evaluate. But we think we got good access to capital now.

Your next question comes from the line of Colton Bean with Tudor Pickering. Colton, your line is open.

So just on the ethylene export project, this U.S. pet-chem producers who are long ethylene relative to their polyethylene. So do you think there is potential to add at the current level of commitment, so you're comfortable with where they sit today?

We think we're going to add to the current level commitments.

Any sense as to where we sit versus capacity.

Excuse me.

Just in terms of commitments versus capacity any comments there?

No, enough to make it accretive.

Understood. And just switching gears on the LPG export side of things, looks like the spread between U.S. and global pricing is widened out a bit, presumably tied to the naphtha linkage, but shipping rates are still relatively muted. Any sense as to where the margin is occurring whether that'd on the terminal side of things or just off-take or trading margins?

This is Brent talking. I think that we’re seeing the traders are struggling with it, the gas or taking across the water or struggling with it. So the folks who did the take or pay trembling fees, this are the ones that are probably making money these markets. When these contracts were started, it was a different deal, those where the guys making most of the money and the trembling guys who are just making the state of fee, but it's definitely swung the other way.

Your next question comes from the line of Jean Ann Salisbury of Bernstein. Jean Ann, your line is open.

I just want to make sure, I'm thinking about Midland-Sealy, right. You've averaged 333,000 over the fourth quarter, but started up in November. Does this mean that you're running at close to 500 in November and December? And if so, is it higher than nameplate because you're not blending and it will come down once you will blending infrastructure is in?

I don't think we were running at 500 in any point in time.

Yes, Jean, I think part of it is with the pipeline the base capacity before we did pump, added pump stations was 300,000 barrels a day, so pretty much when you bring up a pipe it's coming up. And so, obviously, there wasn’t that much of our ramp in November into December.

So does that mean that in October you had some line fill in and some number that were included there?

I think the numbers are, if you look at the days that crude was flowing on the pipeline, we averaged 330,000 barrels a day.

Okay got it, but not necessary over the entire fourth quarter?

That’s right.

Okay perfect. And then, are you currently marketing the volumes on the NGLs to create conversion pipeline from the Permian? It sounds like there might be significant downward pressure on rates from newly FID pipelines like EPIC and Cactus 2 or at least that is with the EMPs are saying. So I was just wondering, if you could say what you're seeing in the market place?

So, I think your color on rates. I mean there is a lot of competition for crude pipelines right now, and you guys can read the announcements.

About NGLs.

You guys can read the announcements just like we can, but we're still pursuing the conversion of the NGL line. We've got talking to a handful of customers who value have not -- essentially their own pipeline and their own quality of crude oil. So that project we're still pushing forward on it.

But in general as a point of statement, we should expect the next wave of crude pipelines that FID to be materially lower rates than what they're now?

I would say so.

Your next question comes from the line of Jeremy Tonet with JPMorgan. Jeremy, your line is open.

Just wanted to come back to Midland-to-Sealy here and want to make sure I had you comment straight as far as what the ultimate size of pipeline could be. It sounds like it is on track for 450 right now but adding DRA could bring it to 550 and then pumps could bring it bigger, or could you just help clarify that for me what the ultimate potential size Midland-to-Sealy could reach if market demand is there?

Right now, we've got the capacity to go in the 540-550 range, there's a few other studies that we can do to tweak it that we might be able to get slightly higher than that, but we haven't completed those. Yes, those are underway.

So that'd be just be pumping -- adding order pumping could maybe get a little bit more than that?

It's just some optimization of equipment that's involved, that we didn't have any installation that we're taking a look at. We just haven’t published a number on that yet.

And then for the earnings capacity of the pipe right now, it was just over 60 million contribution and that was only part of a quarter, it seems like there was some benefit there with the spread. And just wondering, if you could help us think about what the normalized earnings power this asset has just so that we don't kind of get ahead of ourselves as far as our estimates are concerned? And then, the 36 million uplift in South Texas and Eagle Ford, I was just wondering if you could kind of parse out, how much was Midland-to-Sealy related versus maybe other drivers, so we can just better model what's happening in the segment?

Jeremy, I'll take the first part of that on Midland-to-Sealy, Midland-to-ECHO, I think that if you would that $60 million, $65 million for the quarter from the modeling standpoint that's probably a good run rate over time, again it'll -- as we bring it up in the service that will move around but that's probably a good run rate. On the Eagle Ford, if you could repeat your question on the Eagle Ford?

It seems like there was a 36 million uplift in the quarter in South Texas in the Eagle Ford on the crude side there and it seems like there was some knock-on effect from the Midland-to-Sealy pipe. That's what I was reading in the press release. So I was just wondering, if you could add a little bit more color to that?

That's exactly -- that was all, I'd say almost all of that was Midland-to-Sealy related for those volumes to go on Rancho II. It's not significantly increased in the Eagle Ford by any stretch.

And then one last one if I could, it looked like the fee-based nat gas processing volumes ticked down a little bit in the quarter. I was just wondering, if from looking quarter-over-quarter there, I was just wondering if that's kind of any seasonality or shift to kind of commodity sensitive or anything else that you can help us with there?

Biggest driver there was South Eddy fire. South Eddy was down for 5 to 6 weeks and that was a big driver in the quarter for the delta.

Your next question comes from the line of Keith Stanley with Wolfe Research. Keith, your line is open.

Just wanted to first circle back on equity needs for this year, so CapEx going a little higher here just curious if you think it's still possible to only need the DRIP this year, based on the current plan?

Keith, this is Brian. There is several factors that it's depended upon, certainly the ultimate size as you side with respect to our growth capital which is at 3 billion today, and we certainly hope more opportunities come our way and that grows. We're also -- in our assumptions, we talked about this last quarter we have modest assumptions around the participation in the distribution reinvestment program. It certainly will be depended on the timing around PDH coming fully online as well as Midland-to-Sealy or Midland-to-ECHO performing as we anticipate and the two Orla trains that are coming on this year. So, there is lot of moving parts. But having said all that with the potential shifts and those factors, still anticipate our external equity needs to be very like.

Okay great and one follow up just on the Q4 results. Obviously, a lot of strength across the businesses overall, but the NGL and crude marketing businesses continue to see some pressure here. Can you just give a little more color on what's going on there?

This is Brent. On the NGL side, you've seen a compression of spreads and we've talked before in the past that we're somewhat resilient to decrease commodity prices because of our storage presence. So, there is a lot of contango opportunity that marketing gets to realize, but as the market gives backward, barrels start to flow down pipes, they don’t stay in storage and that limits our opportunity. Crude oil, you've seen some compression on spreads. I feel that things are getting better especially from a crude purchasing side. But just overall, storage is one of our plays and storage and contango opportunities are somewhat limited right now.

Is it fair to say, we like it better, when our pipes are full then when there're contango opportunities, Brent?

That’s right. So I think as Enterprise, when barrels to flow and gone through assets, that’s a good thing for us, But from a marketing side, we're probably more there to help them, when that’s not happening.

Your next question comes from the line of Michael Blum with Wells Fargo. Michael, your line is open.

Just two quick ones from me. One, just a point of clarification on PDH, when this year do you expect to be a fully up and running?

I think we said in the earnings script that we will think by the end of February, things rather would be come in along, that’s our plan.

Okay, and then the second question is, can you give us your thoughts on Front Range Pipeline expansion? If it seems like the NGL market in the DJ is getting or could get tight, and just want to get your thoughts on, if that’s possible and if so. What were the dynamics B2B to make you go ahead with that?

Do you want to take it, Tug?

No.

You want to me take it. Good, you don't know the answer, right. Michael, yes, we can expand that pipeline, we're looking at expanding that pipeline and we've got producers on that pipeline that are working with us to make that happen.

You think that's a 2018 event?

Early 2019.

Early 2019, Tug says.

Your next question comes from the line of Becca Followill with U.S. Capital. Becca, your line is open.

One question left that hasn't been asked, on ATM program, anything done in the quarter on that?

None.

Your next question comes from the line of Nick Raza with Citi. Nick, your line is open.

Just turning to the Permian real quick. Do you still have an interest in building your natural gas pipeline down to Agua Dulce? Could you just give your views for recent projects have been announced?

This is Jim. Yes, we still have an interest whether we can get traction on it, is a different thing and we've brushed it off here recently and frankly we're taking a look at it. I think ultimately personally I look to Tony and Brent, I the second pipeline is going to be required out of there, whether it's to Agua Dulce or Katy or where. But there will be a second pipeline needed. Tony?

No question. No question at all.

And what do you think the spread needs to be roughly to sort of entice a midstream company to FID a project, after all the projects that have been announced in FIDs right now have come through?

You're talking about on the natural gas pipeline?

Yes.

I see the natural gas pipeline has been a way to produce crude oil. So I am not sure it's just the spread of natural gas. I think it has to do with their ability to produce crude. Tony?

I agree and I'll tell you, if you look at the spreads today it'll sort of take your breath away as far as what basis is trading at well over a dollar. And then that basis market assumes that a pipe is going to be built and then it still is over $0.50 for as long as you can look it. So, the market saying another pipe is needed and will be built.

This is Brad. I will echo what Jim and Tony said, in a lot of the conversations we have with producers, it seems as that the first way get -- take capacity on that pipeline, but there're a lot of people out there that are still trying to understand what their long term plan and how much capacity that they're really going to need.

And then just to switch gears a little bit on the Northeast side. Any updates you can provide us on Centennial and what your thoughts are of that going forward?

I wish we had updates on Centennial, but right now we don't.

Your next question comes from the line of Dennis Coleman with Bank of America. Dennis, your line is open.

I'd just I guess to dig a little bit more into the export facility that you announced today. Obviously, you didn't include any capital estimates, but I wondered if you might just talk broadly or if there's anything you might say as to directionally what those would be. I mean is the -- would the ethane facility be an example or something that we could look to sort of estimate that number?

I doubt it.

Really, around the ethylene refrigeration and storage facility, really, you're talking pretty normal capital dollars.

[Operator Instructions] Your next question comes from Kristina Kazarian with Credit Suisse. Kristina, your line is open.

Thanks for the update on timing around Frac 9. I was wondering if you could talk a little more around demand supporting or timeframe for potential Frac 10 that we announced last time at the Analyst Day, last year, and we got another Analyst Day upcoming or may be even 11, thoughts on that.

Well, we have it permit it, we can build it and I think if we're successful of what we're doing in Shin Oak, I think its strong possibility that we would build it. I would expect it would probably there is sometime after 2019.

And then a follow-on as well. Could you just talk a little bit more on the NGL opportunity, especially on the export side? I mean you guys have supplied in there that keep you -- in your deck that keeps talking about tight capacity after 2019. Would you mind us talking a bit more about that trend as well and opportunities there?

Kristina, this is Tony. It's just a matter of supply and demand and as we see supply grow, we've been really outspoken and it's really not rocket science. That demand in the U.S. really isn't going to go great deal. So, it has to price tags for it. And we all model and have pretty good idea what the export facilities capacity are today and that's why we published the slide that we publish that shows export capacities going to be added. When we publish again, the gap is going to be even bigger because the NGL number will be up.

This is Brent. Like Tony said, if you believe in the production numbers and especially if you believe in the Permian Basin then that barrel has to go somewhere. And so, probably, there will be a period of time where it can be handled in storage. But in some point, the price will get to a level when that price will increase demand and that barrel will move across the water.

So Tony, do you expect production growth to exceed export -- today's export capability?

The answer to that is absolutely.

Thank you, guys.

I’ll add one thing to that. One of the other things, we've had -- it's amazing how crude gas gives people an appetite. We talk about LPG, but we're beginning to get a lot of interest in ethylene exports and that’s driven primarily by that gas to crude spread or the price of naphtha in Asia or whatever.

Your next question comes from the line of Danilo Juvane from BMO Capital. Danilo, your line is open.

Amy, this is Randy. We have time for one more, so you've announced and this will be our last one.

Okay.

Actually, all the questions have been answered already.

Okay. Amy, would you give our listeners the playback information. Please.

Certainly, thank you for participating in today's conference call. The call will be available beginning at 2 PM Eastern Today through 11:59 PM Eastern on February 7, 2017. The conference ID number for the replay is 49822183. Again, the conference number for the replay is 49822183. The number to dial in for replay is 1-800-585-8367 or 1-404-537-3406.

Thank you, Amy. Thank you all for joining us today and have a good day. Goodbye now.

This concludes today's conference call. You may now disconnect.