Good morning. My name is Fiya and I will be the conference operator today. At this time, I would like to welcome everyone to the Enterprise Products Partners L.P. Q1 2018 Earnings Conference 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. At this time, I would like to turn the conference over to Mr. Randy Burkhalter. Please go ahead sir.

Thank you, Fiya. Good morning everyone and welcome to the Enterprise Products Partners conference call to discuss first quarter 2018 earnings. Our speakers today will be Jim Teague, Chief Executive Officer of Enterprises' General Partner; and he will be followed by 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 made during this call. And with that, I'll turn it over to Jim.

Thank you, Randy. Our business performed exceptionally well in the first quarter including records net income, gross operating margin and adjusted EBITDA. Excluding proceeds from asset sales distributable cash flow was also a record. Record NGL and marine terminal volumes increased crude oil pipeline transportation and marine terminal volumes and higher natural gas pipeline transportation volumes led to three of our four business segments reporting higher results compared to first quarter of last year. These results are allowing us to consistently grow our profits, gross our distributions, plus make substantial headway towards equity self funding. With a comfortable 1.5 times distribution coverage we retained over $450 million to put back in our future growth and Enterprise is probably timed to quit thinking downturn. Today's results continued to prove that our future has really never looked brighter. In the first quarter we were still in the ramp-up phase for two of our largest projects; our PDH plant and the Midland to ECHO crude oil pipeline. Both projects have now officially been put into service. On April 16, we announced that our Midland to ECHO crude pipeline moved into full service with an expanded capacity of up to 575,000 barrels per day. Supporting the Midland to Echo pipeline are several strategic supply aggregation projects including the new 140 mile pipeline from Loving County, Texas to Midland that is expected in service this quarter. Recent extreme basis differentials for Midland have been a significant source of attention. Pipeline, rail and trucking capacity out of the Permian appears to be very tight for at least the next year and with no significant additional takeaway expected until the second half of 2019 the timing of our new pipeline couldn't have been better. In that regard, our press release notes a large non-cash mark-to-market charge for…

Thank you, Jim and good morning everyone. I'd like to echo Jim's enthusiasm. We are pleased with our record operational and financial performance. While our first and fourth quarters are typically seasonally strong periods, our operational and financial performance over the last several quarters demonstrates Enterprise is uniquely positioned integrated midstream system. We continue to benefit from increasing supply of domestic hydrocarbons and strong demand from both domestic and global markets. The fundamentals surrounding our business are strong we are excited about the prospect for continuing growth. I will now review a few income statement items for the first quarter, reiterate our expectations for growth and sustaining capital expenditures for 2018 and wrap up with an overview of our balance sheet metrics and equity funding objectives. Starting with the income statement items, net income attributable to limited partners for the fourth quarter of 2018 was $901 million or $0.41 per unit on a fully diluted basis compared to $761 million or $0.36 per unit on a fully diluted basis for the first quarter of 2017. We recognized a non-cash $37 million gain in the first quarter of 2018 or $0.02 per fully diluted unit attributable to the March 29, 2018 step acquisition of the remaining 50% equity interest in our 150 million cubic feet per day Delaware basin gas processing plant located in Reeves County Texas. The purchase price for this ownership interest was $150 million. We also recognized a total of $140 million non-cash mark-to-market loss during the fourth quarter of 2018 primarily due to the Midland to Houston and Midland to Cushing basis hedges. Depreciation, amortization and accretion expenses were $18 million higher compared to the same quarter of 2017 due to the Midland to ECHO pipeline and a few smaller capital projects being placed into service since…

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

[Operator Instructions] The first question will come from Jeremy Tonet with JPMorgan.

Good morning. Congrats on the strong quarter there. I was wondering for the Midland pipe how are you able to expand it to 575, was this drag reducing agents, is this the final level of expansion or could this be pushed further?

It was primarily due to drag reducing agent and very little additional upside over what we've announced.

Great, thanks for that, and then just want to go a bit more as far as the growth projects in the future, you guys seem to be having a lot of conversations, but just want to see a bit more, you know this could be what part of your business this could be, is it more in the downstream petrochemical side, is it more on the Permian side, are there other areas that you see growth, anything that you can share with us there?

I think the answer to your question is, yes.

Okay, we'll wait for that then, thank you.

The next question will come from Tristan Richardson with SunTrust Robinson.

Hey, good morning guys. Just curious in terms of the CapEx outlook for this year seems to be up a little bit, just pull forward from current projects that are on plan?

Hey Tristan, it's Bryan. Some of the movement is partially because of the acquisitions that we've already announced with the one I mentioned in the script with respect to the Delaware basin gas facility as well as if you recall we also purchased some land on the ship channel. So those acquisitions and then you've also had a little bit of scope changes with some existing projects which have expanded the spending on those projects. But let me be clear, that's not a cost of run but fleet expansion of those existing projects.

Thanks Bryan, that's helpful and then just in terms of you guys have talked a little bit recently about anticipating early expansions on that, just curious sort of what the factors are that are influencing decisions on the initial capacity design for Chinook.

We're seeing more volume. We're building more plants. Tony, you got anything, I mean that's a yes and so would have been pleased with how much people are wanting to move. I mean people get nervous about takeaway and the Permian.

I would say, you know, the Delaware basin part of the Permian really, really continues to exceed and that's a large region for the one for capacity. Anything to add Tug?

Yes, that's exactly what the customer wants. We're seeing very strong interest in it.

Fair enough, I appreciate it. Thank you guys very much.

Thank you.

The next question will come from Chris Sighinolfi with Jefferies.

Good Morning, Chris. Are you there?

Chris, your line is open.

Oh I'm sorry, hello guys. Can you hear me now?

Hey Chris, yes.

Hey, sorry about that. Good morning. Most of the discussion around Enterprise's export activity has centered on the Ship Channel, Belmont and Corpus [ph], but I did see an industry article last week suggesting you guys had a VLCC in Texas City. I thought the draft there was too shallow to permit that caliber vessel, so just curious what you are working on in Texas City any color will be helpful?

Sure, this is Jim. You know first of all, all the press talks about his Enterprise's Texas City Dock and he is really not Enterprise's Texas City Dock, it is Seaways Texas City Dock which is a joint venture between Enterprise and Enbridge and we work closely on those Seaways docks at Texas City and Freeport. So if I was [indiscernible] I'd get a little airtight and see and an Enterprises Texas City Dock. So Al mentioned it is Enbridge is a partner in that. The only thing we did is we want to see what's possible. So we brought our VLCC in. We didn’t load anything on it. All we're doing is taking measurements and seeing if the load arm is working. We are evaluating the information we got so far preliminarily it looks good. You are right about the draft. The concept would be we'd load a loitering vessel and follow up it will probably be a VLCC out and transload it pretty simple concept we think. But we think it may grow legs.

So just to understand Jim, so load partial load the vessel at the dock then ferry it out and then fully load it offshore?

Yes, we can probably get 1.1 million or 1.2 million barrels on it and then we would have a [indiscernible] vessel load it say at the Houston Ship Channel and then follow each other out and transload. Frankly, right now we just seeing physically does it work then we'll take a look at the economics and we're talking to some people that are in that business to see if we can put legs to this, kind of a neat concept.

Yes, it's not part of what I had been considering before. We heard some other peers talk about offshore activity, but not the sort of hybrid option you are talking about, that's interesting. Separately Jim, I had a question on the Midland to Echo pipeline. I hadn’t realized there was a 20% outstanding option on that line, probably just an oversight on my part. But I'm curious if any of the other in-flight [ph] expansions include ownership options from third parties which are paying attention to?

On that pipeline Jeremy?

This is Jeremy. Chris, on that, you mean on Midland-to-Sealy?

Yes Midland-to-Sealy, I hadn’t realized that we got options so I was just curious, I guess two questions, one is, is $200 million roughly the proportional cost of construction and two, are there other assets that you are building that I should pay or we should pay attention to, to have buy in options here by shippers or third-party?

Yes, you know what I'm going to do is I'll throw you back to how this company was built. We've got a number of joint ventures, everything from fractionators to gas plants to [indiscernible] and in every case they brought more than money, they brought production or they brought op-tech. So if you see us it would include a joint venture partner, you can bet he is bringing a lot more than money and it supports our entire value chain. I'm not going to comment as to whether or not what we're doing that we haven’t announced yet.

And Chris, this is Bryan, as far as the proportional, yes that it representative of the proportional cost.

Okay, great. Thank a lot for taking my questions this morning guys and congrats on a great quarter.

The next question will come from Shneur Gershuni with UBS.

Hi, good morning guys. Just a first off before getting my questions, I just want to confirm something that you said to Tristan earlier about NGLs versus crude lines. Are you saying that customers are actually shifted and more worried about NGL capacity now and that's why you're not looking at converting the NGL line?

We didn’t say we weren’t looking at converting an NGL. I think we clearly have said we're taking a hard look at that and we expect that. Frankly, I think we will do it, but I'm not sure what the timing will be.

Great, got it. Okay, and just sort of shifting a little bit here, I think Bryan had walked through why the CapEx numbers were up a little bit this year, but I was wondering where you are seeing incremental growth opportunities and how large that could be and I ask that against the context of last year you had lowered your distribution growth rate to be self-funded, but you've just put up a 1.5 times covered quarter and you've got a lot of retained DCF. Do we get back on to a higher growth plane going forward?

Yes, Shneur, this is Randy. I guess the first thing is the largest component to getting to self funding from an equity standpoint was EBITDA expansion. If you would, the moderating the distribution growth was a very small part of it and so yes, so I mean we're expecting the performance in the first quarter didn’t necessarily surprise us. And so with that, as far as growth prospects, you know I think we were continuing to see good conversations around projects on the demand side, but now you're seeing more projects on the supply side as well and I'd really say some of these growth opportunities really get all four segments.

So would it be fair to say that you weren’t surprised by the performance in the fourth quarter that you would expect those type of metrics to continue throughout the year?

Let's not get ahead of ourselves Shneur. I think I'd go back to what Bryan said, is our strongest quarters are our first quarters and fourth quarters and just seasonally.

Okay, fair enough. And one final question here, you know with, you know I recognize that you had said at the time when the FERC first put out their decision not a material impact to Enterprise, but I wonder if it sort of restarted the conversation about corporate structure for Enterprise. Many have opined recently that checking the box would not necessarily impact too many unitholders and at the same time given your CapEx spend and ability to expense it, there wouldn't be much of a tax expectation going forward. Has that conversation restarted or are you thinking about it or talking about it internally?

I don’t think any more so than what we had been in the past. I mean we look at it periodically. You know it's a big step and right now we don't see anything that's compelling, that leads us to come in and check the box. When we come in and look at valuations and things of that nature, there is not anything differentiator between an MLP and a seacorp from that perspective. So right now I mean we continue to monitor all data evaluation from time to time, but no development on that front.

Great, thank you very much guys. I appreciate the color.

The next question will come from Colton Bean with Tudor Pickering Holt.

Good morning. I just want to take it back over to Midland-to-Sealy. With the 30,000 barrels or so of unhedged, uncontracted capacity are you comfortable with that exposure or would you also consider further hedging if the forward curve widens out again?

We always consider everything Colton and we just, I'm not going to signal commercially what we're going to do.

Got it and then just in terms of Gulf Coast LPG it looks like the industry moved nearly million barrels a day out of docks in Q1, pretty close to nameplate there. So can you just remind us of your optimization activity around the cold storage and what maybe a timeline would be to reach that 35% capacity increase?

You got a good memory, you must have been at the Analyst Conference. We're working that right now. I think frankly, I think we have, Bob is not here, I think we have a couple or three options that we're looking at, so that's one of them. I think what we're going to find is we've got a pretty inexpensive expansion capability. It is just which one do we pick and what you mentioned is one of them.

Okay, so likely leaving the dock loading rates as in just how to optimize or max those out?

We could increase the loading rates.

Understood, okay. And then just a final one, so on the fee-based processing looked like volumes were effectively flat quarter-over-quarter, but you should have had a bit of a tailwind then there from South Eddy. So can you just walk us through some of the moving pieces in the different regions?

This is Brad. You know we still, we see our Delaware basin continuing to ramp up. There has been a little bit of a lag from our producers and what we've seen as far as our initial schedule, but that volume is still showing up a little bit late. And then in the Eagle Ford volumes continue to grow and same thing up in the Rockies in [indiscernible] region, so we're flat and I think it just balances out somewhat a little bit later than normal, somewhat little better than we anticipated.

Got it, all right, well thank you very much guys.

The next question will come from Brian Zarahn with Mizuho.

Good morning. And on the subject of exports, things like crude exports exceeded NGL exports for the first time on your system, so is that trend continuing in April?

Yes, this is Brent. April the trend continues. We'll see what happens down the road. We're starting to see, we had some cancellations in the first quarter, but it was more positive just around crude oil. But going forward as the volumes on Midland-to-Sealy increased, obviously our belief is that this will have to be exported and we just have to work on the next project to find more supply for crude oil.

And then sticking on the Permian any update on potential gas pipe project?

This is Brad again. We continue to evaluate it. I'll echo what Jim and Bryan said, you know, we're talking to producers, we're talking to potential partners, so we're doing everything it takes to try to figure out if we're going to make this things fly a notch.

Last one from me, given the projects here looking to add to your backlog is $3 billion still a reasonable estimate for CapEx next year?

This is Bryan. As far as where we're looking at, yes.

Thanks Bryan.

The next question will come from Matthew Phillips with Guggenheim.

Good morning guys. A followup on the crude hedging program that you all initiated, I mean that the recovery there would we expect to see that evenly spread kind of through the lifespan of that through 2019, how should we view that?

Daniel, you got that?

I do Jim. This is Daniel Boss. If you look at the total recognized loss during the first quarter on that program and then combined that with what was recognized through December of 2017, we expect about $118 million to reverse in the second through fourth quarter of 2018 and additional of $40 million to reverse in 2019.

Got it and then on the NGL conversion, once you have sufficient commercial interest how long will that take from when you decide until when it's in service?

Less than a year.

Got it. Okay. That's all from me. Thank you.

The next question will come from Darren Horowitz with Raymond James.

Good morning guys. Jim, my first question with a lot of the new crackers expected to start up, let's just say into May and even into June if they get pushed back a little bit, what’s your in-house view on regional not paying that back, you know is there the opportunity if we can soak up some of that rejected ethane and ethane prices get up to about $0.30 a gallon by the middle of this year and maybe build from there hypothetically on pace to exit in that mid $0.30 range, do you guys foresee some regional arbitrage opportunities happening and what do you think that could mean from an opportunistic process and perspective for you?

It took you long enough to get on the phone Darren. Rich, you want to take a shot?

I mean in terms of ethane prices, what you're seeing is some competition for the pipe and so when you see some straight up barrels up in Conway that leads to potentially some ethane that may not get in the pipe which lessens supply, I think it's fairly well known that frac space is tight right now and we haven't seen that for a while. So I can create a bullish case for ethane, I don't think it's a long term bullish case. I think it's probably more of a short term bullish case and then once you see pipelines come online the frac space starting to lighting up is the fracs come online, then I think maybe things get back to normal, but certainly in the short term there's going to be a pipe for frac one space.

Okay.

I think what he just said is, yes we see arbitrage opportunity, so is that what you said Brent?

Yes, I said in more words though.

Okay, I got it and then Jim, just kind of a big picture more hypothetical question. It seems like this trade war issue or both tariff issue with the U.S. and China continues getting kicked around and recently there's been more discussion talking about what that could do with regard to U.S. propane exports and any thoughts on possibly an issue with we’re making our long term binding contracts and if that happens then that could discount barrels to find other markets and maybe the Chinese demand could be met by a bit up of Mideast barrels possibly depressing U.S. product and leaving it stuck at the dock, how do you navigate all this mess, how do you think it plays out?

First of all, I get out of the table position in the corner of my office. I'm not worried about it Darren. Yes, first of all there have been no tariffs imposed. We don't have a single contract, no we got one contract with a Chinese company I think and if it happens product close adjust, there is a demand for LPG and it's not just China, it's Korea, it’s India just and all this stuff going, so I don't worry that okay China won’t import our propane. Well, they're going to import somebody’s propane which is going to leave somebody else needing propane.

Yes, maybe the better way to think about it is the physical product or price to move?

Yes.

Okay and then finally from me Bryan just one quick housekeeping question. And I guess we can do the math in reverse, but what's the aggregate value of the Midland to ECHO hedges and more importantly what's the timing and magnitude as to when that gets settled between now and the end of 2019?

I’m going to let Daniel answer that?

So Darren, the aggregate value is $156 million that we've recognized through March and like I mentioned before, if you look at that on the way it rolls off about $118 million rolls off for the balance of this year and then $38 million for 2019. Now that implies or these valuations are as of March 31, so there is - as spreads continue to widen in April we continue to see additional losses that materialized. So you might see additional losses in April and in the second quarter, but that would just lead to even larger reversals to be upside from that period going forward.

Okay, thanks.

The next question will come from Keith Stanley with Wolfe Research.

Hi, good morning. Just a quick one on PDH, should we expect another material step-up in Q2 or were you already getting most of the run rate contribution in Q1?

Yes, you should see another step-up in Q2 because really we were operating at around 60% of capacity for February and March and now we’re starting out the second quarter where we are approximately 84% in April.

Okay, great. And just a quick clarification as well and we’re discussing all these sort of mark to market impacts around the Midland to Sealy hedges, all of this is stripped out of EBITDA and DCF, so it is not really impacting those headline numbers, right?

Keith that is absolutely correct.

Great, thank you.

The next question will come from Barrett Blaschke with MUFG Securities.

Hey guys. Just with the ramp up that we saw in petrochemical, I know a lot of this is PDH, but how much of it is just pure commodity sensitivity in that business line and what else is going on that is pushing that?

You mean in our petrochemicals?

Yes.

Yes, you know, one of the things, every pound we produce off the PDH is a bridge pound, we don’t have to sell. Those bridge pounds were not great deals for us. So every time we produce a pound of the PDH we sell a pound off the splitters that is quite a bit more than we were selling at par. Does that help Barrett?

Yes, that helps. Thank you.

The next question is from Vikram Bagri with Citi.

Good morning guys. I have one more question on hedging, can you talk about the extent of hedging on the Basin pipeline and what the average hedged price is, anything you can share on that front, we understand the hedging on [indiscernible] but anything you can talk about on this pipeline [ph] question?

I won’t talk in volumes, but we have had some basin pipelines space out.

Okay. And any hedge price or average hedge price on that pipeline?

I can't understand it. Did you ask if there was a fixed price on that?

Okay, yes.

It’s done at various levels, I mean I don’t have the number right in front of me what the weighted average is, but it’s obviously less than where the market is today.

Okay, okay. And the second question I have was on the Seaway pipeline, any update on that in DRAs on this dock?

Seaway pipeline hedges?

No DRA on Seaway?

DRAs on Seaway pipeline system?

So that's a monthly optimization exercise we look at running DRA versus one in horsepower, sorry Vikram [ph] but that's just an optimization exercise.

Vik, can you pick your phone up because we are on speaker we can’t hear you.

We can’t hear you very well, it is not clear.

I apologize, I’m in a conference room. So I am going to try to speak loudly, I understand that Seaway Pipeline system can be expanded by 100,000 barrels a day, that was my understanding from your Analyst Day, if that is still the case can you expand it by 100,000 barrels a day by adding DRAs?

I’m not, we can do a little bit but I don’t know about where the 100,000 barrels a day number came from. This is Graham.

Somebody missed - maybe there was ships passing in the night, but I don’t remember us saying that we are expanding it 100,000 barrels a day.

Okay, I can follow up offline. Thank you very much.

The next question will come from Michael Blum with Wells Fargo.

Hi, good morning everyone. I just want to go back to your original comments on the ethylene margins and just make sure I understand. So your view is basically that it’s a temporary issue in that globally there will be enough demand to absorb all the great products as you have a big ramp up in supply in the Gulf Coast, can you just go back over that?

Yes, I'm going to turn it over to Tony in a minute, Michael, but our fundamental as we look forward and we do that I tell Tony all the time is wrong, but it’s trend is right and what we see in ethylene derivatives and propylene derivatives over the next few years is a pretty strong growth in demand.

Yes, and I think to Jim’s point earlier, for some reason the industry has decided to focus on ethane to ethylene margins, but that is not the end game and really not where the focus should be because that is not where petrochemicals stop.

Now if you’re a merchant producer of ethylene and I think there are two plants in this country that are totally merchant producers, you're probably sweating right now, but if you are a Dow or an Exxon Chemical you are looking at ethane to polyethylene margins of $0.50 bound Tony?

Yes.

Yes and not bad.

Okay, that is helpful. Thank you, my second question is, I guess just in light of some of the issues in the Northeast with NGL takeaway on the mariner systems, have you seen any renewed interest in shippers looking to maybe rejuvenate that project and trying to get an Atax or another project to move NGL straight done to the Gulf Coast?

I wish I could say yes Michael, but I can’t.

Okay. Thank you very much guys.

The next question will come from Dennis Coleman with Bank of America Merrill Lynch.

That is Dennis Coleman, thanks everyone. Just one quick question, mine have mostly been hit, but Bryan could you tell us what was the drip in employee purchases for the quarter?

For the first quarter inclusive of the Duncan family’s participation, it was $177 million.

So excluding I guess the Duncan participation is that a good run rate for the rest of the year?

It would appear so, yes.

Okay, so I guess just sort of backing into how the strength of the retained earnings not likely to need the public markets at all even for an ATM this year?

Not at all, that's correct. And Dennis, we haven't touched on the ATM since the first week of July in 2017.

Perfect. Okay, that's it from me. Thanks.

The next question is a followup from Chris Sighinolfi with Jefferies.

Chris, are you there?

Chris, your line is open.

Hi guys. All my questions were answered sorry about that.

Okay. Fiya, I want to give our listeners the replay information and [indiscernible] I appreciate it.

Ladies and gentlemen today's conference call will be available for replay beginning today at approximately 12 PM Eastern Standard Time. If you would like to dial into the replay that number is 855-859-2056 or 404-537-3406. Please enter conference id number 6796419.

Thank Fiya and thanks everyone for joining us today for our conference call and have a good day. Good bye now.

Ladies and gentlemen, thank you for participating in today's conference call. You may now disconnect.