Enterprise Products Partners L.P. (EPD) Q1 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the first quarter 2020 earnings conference call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Randy Burkhalter, Vice President of Investor Relations. Sir, the floor is yours.

Thank you Tina. Good morning everyone and welcome to the Enterprise Products Partners conference call to discuss first quarter earnings for 2020. Our speakers today will be Co-Chief Executive Officers of our General Partner, Jim Teague and Randy Fowler. There are other members of our senior management team in attendance today for the call. During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities 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 these 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 will turn the call over to Jim.

Thank you Randy. We had a record year in 2019 and our first quarter results show that last year's momentum carried into the first quarter. We reported net income of $1.4 billion or $0.61 a unit representing a 7% increase from the same quarter in 2019. Distributable cash flow totaled $1.6 billion and provided 1.6 times coverage and we retained $574 million of DCF. Then in March, everyone's world turned upside down as we were invaded by an invisible enemy, Coronavirus, officially COVID-19. This is not the first time in my lifetime that we have been invaded by an invisible enemy. I remember, as a little boy the most feared disease of the 20th century, polio. It was a highly contagious virus. It struck without warning. It paralyzed and it killed. It put people in something called an iron lung to support their breathing. People who got polio were isolated from others, quarantined, if you would. My mom, who was a registered nurse, caught polio. I remember standing outside the hospital with my little brothers and my dad so we could see her through a window. Mitigation steps were taken. Swimming pools and movie theaters were closed. We weren't allowed to go to public playgrounds. In effect, we practiced our own kind of social distancing. What I don't remember is shutting down the entire economy and 30 million people losing their jobs in one month. Just as polio was defeated, so will COVID-19, this too shall pass. It starts with changing our behavior as we have done. I have learned what social distancing is, and my hands have never been as clean as they are. As this pandemic spread, our primary objective was the safety of our people. Our secondary objective was the continuity of our business. 80% of our headquarters’ people are working remotely from home. Zoom meetings are being held routinely throughout the day and throughout the company. And as I understand it, there has been a lot of Zoom happy hours after work. So even though our folks are working remotely, through technology and alcohol at happy hours, team work continues to be a part of our culture, a part of our DNA. We immediately staffed half our pipeline control people at our backup location in San Antonio. So, we are operating our pipelines out of two locations to make sure that we always have an eye on our pipe and our plants. Many of our larger facilities went to seven-on seven-off to allow for social distancing. Those of us that remained in our headquarters were disciplined in distancing and hygiene. Further, Purell has become a valuable commodity at Enterprise. I have been through many cycles in my life, but I have never seen anything like what we are going through now. Demand literally fell off a cliff in March, seems like it was overnight. As demand cratered, our good buddies Russia and Saudi Arabia piled on by pumping an additional 4 million barrels a day of crude oil into the market and the result was what no one would have ever guessed, negative price crude oil. At Enterprise, we immediately adjusted to this reality. Our operations people have gone into a managed cost mode. Our commercial groups have reduced CapEx from almost $4 billion in 2020 to $2.5 billion , $1 billion of which has already been spent. Six potential joint ventures are being negotiated, which could further reduce CapEx. In our businesses, our LPG exports continue to be virtually sold out. In fact, May with a little luck could be a record month. Three NGO wells at Mont Belvieu have been converted to refined products. Tanks have been converted to crude oil services. Our people have found places to store crude oil that two months ago we didn't even know existed. To enhance our financial flexibility, we did a $1 billion credit facility to bring our liquidity to almost $8 billion. All of this and much more is being done to succeed in this environment. Chaos leads to inefficient markets, which leads to volatility. We don't fear volatility. We embrace it and inefficient markets work to our strength. Some of our businesses are steady as a rock. Our NGL fractionators are full and will remain so. And our NGL pipelines, overall, haven't seen a downturn. Our Permian crude oil pipelines are fully contracted, and Seaway is virtually full. Our petrochemical business is challenged as motor gasoline demand has fallen and refinery runs have been cut. Once refinery runs improve, so will our petrochemicals. Natural gas throughput on our Texas and Louisiana intrastate pipelines have been full. While our natural gas processing has suffered, this is a business that I believe has potential upside in the second half of the year. Opportunities around our assets are abundant. Our storages work as wait and go, as there is contango on every hydrocarbon, and we have even seen some cases of backwardation and there are location differentials around our pipelines. It's anyone's guess as to when the economy will open and things return to normal. During this time, our people are driven to continue to perform to deliver the results that create the value they have always delivered. I will give a personal perspective. As a young naval officer in an attack helicopter squadron in the Mekong Delta, Vietnam, I took a great deal of pride that I was part of a special fraternity. It took a long time to have that feeling again. But I have that same kind of pride today being a part of this fraternity. At Enterprise, everyone understands the mission and understands their role in accomplishing the mission. The mission, add value. How we add value may change, but we always add value. In closing, we want every member of the Enterprise family to know how much we appreciate all that you do. You are this company's greatest asset. You are what makes this a special fraternity. And with that, I will turn the call over to Randy.

Thank you Jim, and good morning everyone. I would like to remind you that our first quarter earnings support slides are posted on our website for your reference. Starting with income statement items for the first quarter, as Jim mentioned, net income attributable to limited partners for the first quarter 2020 was $1.4 billion or $0.61 per unit on a fully diluted basis. Net income for the first quarter included $187 million or $0.08 per unit benefit in deferred tax expense associated with the settlement of the liquidity option on March 5 in subsequent accounting for a related deferred tax liability. Moving on to cash flows. Cash flow from operations was $2 billion for the first quarter of 2020 compared to $1.2 billion for the first quarter of 2019. Excluding changes in working capital accounts, cash flow from operations for the first quarter of 2020 was 3% lower than the first quarter of last year. Free cash flow for the first quarter of 2020, which we define as cash flow from operations minus investing activities plus any contributions from non-controlling interest, was $916 million. Free cash flow was $3.4 billion for the last 12 months ended March 2020, which was 78% higher than the $1.9 billion reported for the last 12 months ending March 2019. We define payout ratio as the sum of cash distributions and buybacks as a percent of cash flow from operations. Our payout ratio was approximately 56% for the first quarter of 2020 cash flow from operations. In January, we provided guidance that we expected to increase our distribution related to the first quarter of 2020 by 0.25% to $0.4475 per unit. Given the economic sudden stop and uncertainty related to Coronavirus, we thought it was prudent to hold our distribution flat at $0.445. It will be paid on May 12. This distribution represents a 1.7% increase when compared to the same quarter of 2019. Given the current macroeconomic backdrop, it will be delivered and our Board will evaluate our distribution growth quarterly in 2020. With respect to buybacks, we purchased $140 million of common units during the first quarter of 2020, substantially all prior to the COVID-19 outbreak, which is 6.4 million unit reduction. Additionally EPD's distribution reinvestment plan and the employee unit purchase plan purchased a total of 1.4 million EPD units in the open market in the first quarter and affiliates of our general partner purchased approximately 1.5 million units in the open market during the first quarter of 2020. Now moving on capital expenditures. As Jim mentioned, we effectively reduced 2020 capital expenditures by $1.1 billion in our initial review. We now anticipate spending between $2.5 billion and $3 billion in growth capital projects this year. We currently expect growth capital investments for 2021 and 2022 to be approximately $2.5 billion and $1.5 billion, respectively, based solely on sanctioned projects already approved. As Jim also mentioned, we are currently in negotiations on joint ventures, which could lead to a further reduction in growth capital expenditures for 2020, 2021 and 2022. We currently expect sustaining capital expenditures for 2020 to be approximately $300 million, which is a $100 million reduction from previous guidance. Total capital investments in the first quarter of 2020 were $1.1 billion, which includes $69 million of sustaining capital expenditures. Turning to capitalization. Our total debt principal outstanding was approximately $30 billion as of March 31, 2020. Assuming the first call date of our hybrids and as well as the final maturity date, the average life of our debt portfolio is 16.1 years and 20.2 years, respectively. Our average effective cost of debt is 4.5%. As mentioned on our last quarterly call, we completed our issuance of 10-year, 31-year and 40-year notes in January 2020. The aggregate amount of that issuance was $3 billion. We are very appreciative for the continued strong support from our term debt investors in this offering. Currently we do not expect to have the need to return to the debt capital markets in 2020. Adjusted EBITDA for the trailing 12-months ended March 31, 2020 was $8.1 billion and our net consolidated leverage ratio was 3.3 times after adjusting debt for partial equity credit in the hybrid debt securities given by the rating agencies and further reduced for unrestricted cash. Our consolidated liability was approximately $7 billion at March 31, 2020, including availability under our existing credit facilities and approximately $2 billion of unrestricted cash on hand. As of today, our liquidity is approximately $8 billion with additional liquidity provided by the new 364-day facility entered into on April 3. We are grateful for the support and responsiveness of our bank group in providing us additional flexibility during this time. We anticipate elevated uses of working capital in the near term for contango opportunities. Regarding our cash balance, our only remaining debt maturity in 2020 is a $1 billion maturity of 5.2% notes due in September. I would like to thank our employees, many of who were challenged to work from home while maintaining their same level of productivity. I would like to thank them for their efforts not only in our business continuity but also in the comprehensive SOX testing at our accounting controls and processes that attest the earnings we announce today and the 10-Q that will be filed on May 8. I want to take a minute to speak to the durability of our business as we see it currently. Our top 200 customers represented 96% of 2019 revenues. 78% of the revenues from our top 200 customers were comprised of investment-grade customers or those backed by letter of credit. This is based on public debt ratings through April 23, 2020. So it takes into consideration three of our formally investment-grade customers that have become high-yield fallen angels in the past few weeks. Only 11% of the revenues from our top 200 customers represented independent E&P companies. Our earnings are typically 80% to 90% fee-based depending on the commodity price and spread environment. When we break down the fee-based areas, we compartmentalize those into three broad categories. The first, take-or-pay or minimum volume commitments, which comprise 45% to 55% of our fee-based earnings. Second, durable fee earnings which we think of as storage throughput and wholesale residential deliveries make up another 20% to 30%. Fee earnings with more volumetric exposures such as wellhead dedication and certain demand base volumes make up the balance. Even within our volumetric based earnings, we have a high degree of competence in a lot of the earnings capture given the many ways our commercial and operational teams have hustled to keep our assets full such as repurposing storage and pipeline assets. Finally, I would like to iterate our financial objectives as to defend and maintain our distribution, our strong balance sheet and our debt rate, maintain ample liquidity and continue to high grade and invest in projects underwritten by high credit quality customers, long term fee-based contracts and underpinned by solid long term fundamentals. Before I turn the call over to Randy, we would like to thank our long-term investors for their feedback, confidence and support through these volatile times. To all of you and your families, stay safe.

Okay. Tina, this is Randy. We are ready to take questions from listeners. But before we do, I would like to remind them that please just limit your questions to one question and one follow-up. Okay. Tina, thank you.

[Operator Instructions]. Thank you. And our first question comes from the line of Shneur Gershuni. Please go ahead.

Good morning everyone.

Good morning.

Maybe to start off here, and I do appreciate all the comments that you made in the prepared remarks, but I was wondering if you can talk about the current environment as when I say current, I mean with respect April versus let’s say February, how things are going from a volumetric perspective on your traditional fee-based and pops business? I am not specifically talking about the spread differential business, but how are things going with respect to that business, as there’s been accelerated rig declines and talks of shut-ins and so forth? How materially worse do you think volumes are going to be in the second quarter if they are consistent with where they are today, let's say?

Well, this is Jim. I think I’ve said in my prepared remarks, so far our, for example, our LPG export facility is pretty full, Brent, and it has been. I think I said that our crude oil pipelines, if you look at our crude oil pipelines out of the Permian, do we expect some downturn in production? Yes. But those crude oil pipelines, I think we have 1.5 million half barrels a day of contracts, Brent. They are all take-or-pay contracts and they all have associated dock deals. Some of them storage deals that are all take-or-pay, and as Randy said, they are all investment-grade. From an NGL perspective, we are seeing on the supply side, we are seeing some slight downturns, but on the demand side we are seeing increases. Where I think we are probably most challenged right now is our petrochemicals as refinery runs have been cut. But I see upside on that as refinery runs increase. I think our petrochemical business in the second half will do a hell of a lot better than it's doing now. Brent, you have got anything else?

No. I think you hit it. I mean on the flow side, we will have a record month for LPGs in April. We will have close to record in May, maybe a little bit less than April. And as we go out further, you could see some effects on production declines. But in the end, our dock space is over 90% contracted for LPGs and crude oil for take-or-pay. So, we haven't seen big drop-offs yet. I think maybe on the G&P side, we will see some volume decline on that side. But in terms of the customers that we deal with, if you look at the barrels that are going to be cut out, the barrel that's the highest cost to produce will be first. The second barrel that will probably get cut out is that the highest cost to get to market. And then the third will be some sort of a quality issue. So, if you look at our system and our customer base, I think we are, I don't want to say we will be the last ones to see reduction in volume, but I think they are pretty well positioned in terms of our customer base to keep on producing it at some sort of level.

That makes perfect sense. Really appreciate the color there. Maybe as a follow-up, in your prepared remarks, you talked about an attempt to reduce expenses and you also talked about keeping the distribution flat. Just kind of thinking that on a go-forward basis, are you able to handicap how sizable your O&M and G&A expense reductions to be on a go-forward basis? And does the commentary about keeping the distribution flat also remove the objective about a 2% buyback target from CFFO as well too or is that still in place?

Yes. Shneur, on the buyback target, the company bought back $140 million worth of units in the first quarter. And if we use last year's cash flow from operations as a guide, 2% of that number was about $130 million, $140 million. So, I think we have pretty much addressed that. I think for a long time, the way we return capital to investors is consistent distribution growth. And again this year, we added the additional component of doing the buybacks. But I think right now, there is just too much uncertainty at this point in time with this economic sudden stop and how long does the effects of this Coronavirus last on the broader economy and energy demand. So, I think we will take a look quarterly as the Board meets and see how the business performs.

Any comments on the costs?

What did you say?

Comments on the cost, G&A.

Well, our folks Graham Bacon back in operations is focused on reducing OpEx and sustaining CapEx. And I think I don't know how to answer the fact that we are hyper focused on cost and we are hyper focused on CapEx. So, I don't have an answer to it other than that.

Okay. Perfect. Thank you very much and remember to stay safe and stay sane.

Thank you.

Thank you.

And your next question comes from Christine Cho with Barclays. Please go ahead.

Good morning. Thanks for all the color. If I could start with exports, can you just remind us how you are contracted on the export side for crude, LPG, ethane, and ethylene relative to the capacities? How much above the MVCs are the volumes currently? And I know you guys have also historically said that you pay a deficiency -- or the customers have to pay a deficiency charge if they don't pick up the volumes or they cancel. How much lower is that rate relative to if they were to pick up the volume?

Christine, this is Brent Secrest. So, on a high level for LPGs, the contracts and as you go out further in time, this percentage goes down slightly. But on the LPGs side, over 90% are take-or-pay. If for some reason, the vessel doesn't show up, there is a payment that's made to Enterprise that is essentially an offset to what it would be for us to operate and recover our variable costs. So, there is kind of a fixed reservation. There is a reservation component and then there is a -- if they do show up with the vessel, there is a variable component that offsets our variable costs, and that varies contract-by-contract and term-by-term. On the crude side, again the volume is over 90%. The duration on our crude contracts is actually longer than the LPG side and that component is take-or-pay, and there is no sort of offset. It is take-or-pay whether the vessel shows up or does not show up, the fee is essentially the same. On the ethylene side, I am looking at Chris D'Anna next to me. All those, I think it's almost on 100%, 90% to 100%, Chris, that are being contracted as take-or-pay?

That's correct Brent. 95% of our capacity has been contracted as take-or-pay. And it's set up similar to how NGLs, where there is a fee and there is a component that is basically the variable cost if they don't show up, the take-or-pay basically keeps us whole on the fee.

When it comes to exports, I would let Jim or Randy correct me, but from a variability to our earnings as it relates to exports, it's essentially what you are talking about as some sort of, call it, walk up opportunity we would have on volume. It's pretty much set in stone.

Okay. Thank you. That's really helpful, and maybe if can just follow up to Shneur's question about the cost, how do we think about what sort of cost savings we could potentially see in the event of a prolonged return? Midstream assets seem to just generally be a high fixed cost business. And so, the more notable cost savings seems to come from shutting down processing plants or non-Mont Belvieu frac facilities or maybe a pump station on a pipeline to better optimize the system, but is there anything else we should be thinking about just beyond the standard G&A cuts?

This is Graham. We look at all aspects of how we operate our systems in terms of overall cost reduction. As Jim said, we are hyper focused on variable cost reduction, whether it be how much power we use for a pump station operation. If there is declining volumes from fixed cost. So we have a number of strategies that we use to reduce and extend our maintenance cost. We have a strong focus on reliability and predictive maintenance. And we use those tools and all the things we have got help us to really run our cost and manage those costs. And we don't put a lot of targets out there. But certainly, I think from a standpoint, where we are looking sustainable, we can go 10% or lower for some period of time.

Thank you.

And Christine, our travel and entertainment expenses are down too.

And our next question comes from Tristan Richardson with SunTrust. Please go ahead.

Hi. Good morning guys. Just curious, can you talk conceptually about the range of CapEx for 2021 seemingly unchanged from where you talk about general opportunity set in any given year? I mean the deferrals you saw in 2020 or the deferrals you made in 2020 pushed into 2021 that's keeping that elevated? Or is it just to say that the project outlook for 2021 is largely unchanged from where you see in any given normal year?

Why don't you start, I will jump in.

Yes. Tristan, pretty much it was a combination of things because we had some projects that the capital expenditures were deferred. So yes, some moved from 2020 into 2021. But we had some that were indefinitely deferred, so they dropped out of 2020 and 2021. So it was a little bit of a combination of both.

Helpful. Thank you. And then maybe just conceptually at a high level, could you about a CapEx floor for Enterprise? Where CapEx could be in any given year? Where only the most critical and essential projects are go ahead? Or what that could look like in any given year?

Yes. Tristan, we are in a pretty unusual time right now. I would say, if we think about base level of opportunities, it seems like invariably, we have opportunities to come in and debottleneck the system or come in and reduce costs. And they can be $10 million, $25 million, $50 million to throw. And all of a sudden, in a whole year, it adds up to $250 million to $500 million. So we have those type opportunities. As we think of things right now on the horizon, we don't see a lot of opportunities facing from the upstream side of our customer base, but we could very well see some opportunities on the downstream side and on the demand pull side as well. So I think as you are thinking about it, probably something in the $1 billion, $1.5 billion opportunity from a growth CapEx is a good base level.

Helpful. Thank you guys very much.

Your next question is from T.J. Schultz with RBC Capital Markets. Please go ahead.

Hi. Good morning. You talked about finding new storage capacity throughout your system. How much available crude storage capacity or what percentage of your capacity is not contracted that's available for contango?

More than I thought. Brent, take it.

Yes. I mean that's fairly sensitive in my opinion. So in terms how we are going to contract this stuff, there is a chance for us to have some opportunities long term with people that it's probably not going to be a different approach than how we did some of our crude oil pipelines as there is some short term opportunity and if it made sense for us and it made sense for the customer, we did long term deals on the pipeline side of the Permian. So what may have not looked so great early on, looks pretty good now in the case of storage. It's a balance, frankly, of us trying to secure long term deals and then take advantage of the opportunity. But in terms of specific numbers, I will just echo Jim. You take hard look to your business and you get a lot of people involved and you find things that frankly you forgot about. And we have been pleasantly surprised with how much crude oil storage that we have access to.

Refer back to my script notes, we take our storage as worth its weight in gold.

And T.J., I think one other thing that we talk, it was just three months ago, feels like it's three years ago when we had our fourth quarter earnings call. We talked about in 2019, we had what we would call outsized spread capture in 2019 that we thought it maybe $500 million to $600 million of that would not repeat in 2020. We have the potential to come in and have that kind of number again in 2020.

That's a good answer.

Okay. Good. Thanks for that. Just on the follow-up for JVs. I think you mentioned six potential JVs are in discussion right now. Have those conversations, just given what's happened in the market, have those shifted, accelerated, slowed down at this point? And are you talking to more strategic or financial partners? Thanks.

Well, first of all, we are talking to strategic partners. And secondly, yes, we are in discussions with six. I would say three of those are highly engaged.

Okay. Thank you very much.

Our next question comes from Pearce Hammond with Simmons Energy. Please go ahead.

Good morning and thanks for taking my questions. And Jim, I appreciate your prepared remarks. That was really interesting. My first question pertains to force majeure. Are you experiencing any force majeure calls on take-or-pay contracts? And assuming we fill full oil storage and producers have no place to ship the crude, could that be a reason that they call for a force majeure?

We would call that a price majeure and that's not in our contracts. We have looked at all our contracts and we feel pretty comfortable that we are not going to have any issue with force majeures as it relates to price.

Okay. Thank you for that. And then my follow-up is, what is your outlook for U.S. oil and LPG exports over the next two years? And could you see a situation whereby some of your oil export capacity gets repurposed to LPG exports?

I will take a shot and then Brent and Tony might follow-up. Yes, I think in our LPG export facility, I feel pretty good about that for this year. I don't know who the hell can answer you on crude oil. Fortunately, we have got a most of our crude deals are take-or-pay at the dog. Brent, I think you said 90%. But it really boils down to when does this economy come back? Now, in terms of storage, I just fundamentally don't believe that you fill up storage. Something always happens that creates an outlet or stops production. I think Brent, we have seen here recently, we were exporting what, a million barrels a day of crude plus before this and then all of a sudden everything stopped. But now, I think we are getting calls and starting to do some deals on crude exports.

Yes, I mean if you look at first quarter, we are on pace to track the same numbers as second quarter. But you know, if there is this is pace to be made and I understand it that production declines, then by default, I would say that crude exports are going to decline. I just think a lot of this crude exports are walk-up opportunities for other terminals. I would think that if people have take-or-pay contracts with us, I don't think you will see a big impact on volumes on our side and certainly not going to see a big impact on dollars on our side. In the case of trying to reconvert crude LPG, I think that sounds much simpler than it is. I mean it's essentially a dock is what you gain. And if crude oil production declines, you are going to make the assumption that NGL production will go with it. Now you may see different basins that return that aren't crude-centric. So I would think along those lines. There may be a resurgence in some of those basins that maybe value or have NGLs and gas. So I think there's some opportunity there for us.

Okay. Thank you very much.

Your next question comes from Jean Ann Salisbury with Bernstein. Please go ahead.

Good morning. I just wanted to follow-up on the major CapEx in 2021 and beyond. As someone noted before, it looks like a lot of it has been deferred and I think that that's what the blue check market means. I am just wondering if that some of the bigger ticket items like PDH 2 and Midland-to-ECHO 4, we should think of it as still being cancelable if you choose to do so? Or if there are just major penalties for doing that?

Yes. Both of those projects are underwritten with long term contracts. So in our mind, not cancelable.

Okay. Fair enough. And then I think on May 5 that Texas RRC will decide about whether there is a Texas cut. Would this impact take-or-pay contracts?

The answer to that is no. And I don't believe for a minute they are going to do anything in terms of prorationing production.

Okay. Very clear. That's all for me. Thank you.

Our next question comes from Keith Stanley with Wolfe Research. Please go ahead.

Hi. Good morning. Just a follow-up on the $1 billion CapEx cut for this year. It seems like the major sort of capital projects are only delayed really slightly and the isom was canceled. So how much of the $1 billion of changes to kind of the major projects you guys lay out versus just the environment less need for well connects and smaller things on the margin that you are able to pull out of the budget?

Yes. And I am sorry. Could you repeat your question one more time?

The $1 billion CapEx cut. I am wondering how much of that is from the major projects you lay out in your slides, which are really only delayed slightly versus other things just in the environment where you could have fewer well connects and just smaller projects that normally support producer growth?

Yes. I would say, a significant amount of it was attributable to the larger projects. If you would, there was a bucket of other projects that may have accounted for $200 million, $300 million.

Okay. That's helpful. Second question, just on the C-Corp question. I am just curious how recent events have impacted your thought process which obviously the sector selling off very hard, closed-end fund issues, but then I guess on the other side you have federal deficits really kind of exploding here. Just any updated thoughts on how you think about the C-Corp question given what's happened in the world over the past few months?

Yes. I will be honest. Really that hasn't been our priority is to come in and evaluate MLP versus C-Corp here the last few weeks. It's really about executing on the business in these uncertain times and getting us positioned from a liquidity standpoint and to take advantage of funding some of these contango opportunities. I think you hit on some key things there. I mean, it seems like invariably you can have some investor turnover. I think MLPs had our fair share of it here over the last six weeks. But if I come in and I think you hit on a key point, I think everybody is going to pay more in income taxes including C-Corps going down the roads. We will see what happens there. Somebody has got to pay the tab for all these $1 trillion stimulus packages. But also I think frankly what surprised me was some of the volatility and the C-Corp names that we saw some of those names just plummet. But we have not gone into a deep dive or any kind of reevaluation.

I think what he just said is, we have been too damn busy.

Makes sense. Thank you.

Our next question comes from Spiro Dounis with Credit Suisse. Please go ahead.

Hi. Good morning everyone. Just want to start off on strategy. You all have been slightly more aggressive or taking a slightly more aggressive approach leading into this downturn and if we are focused on capturing more market share, Jim, earlier you mentioned embracing volatility. So just curious, has anything really changed or does anything change that approach? And do you actually see an ability here to accelerate market share capture in this environment, either organically or through M&A?

I guess, it was hard to understand the question.

Yes. You guys. Sorry, go ahead. Go ahead, Randy.

Yes. If you could repeat your question one more time, maybe just a little bit louder?

No problem. So you guys have been fairly aggressive leading into this. It sounds like you were trying to capture market share, getting really competitive on pricing and some re-contracting to attract more customers. So just curious in this environment, you just sort of bolster everything up. Does that change at all? Jim, you had mentioned embracing volatility here. So just curious, do you go out there with the same aggressive approach and try and capture more of that market share? And is there an organic path there? Or do you see some opportunities here on the M&A side to actually pick up some assets?

Yes. I don't think there is an M&A that we would look at right now. And yes, I think we talked about on our LPG export dock. If you go and compete with us, you better be willing to get down and dirty. And we contracted that dock out. I think we kept a couple of spots a month. And then in terms of embracing volatility, we have got a 20-year track record of creating value. And sometimes that comes in different forms. I am not sure how much credit we get for it. But when we say embrace volatility, we have benefited from crude falling on the floor, refined products, LPG. We have a footprint that lends itself to having opportunities that in normal circumstances aren't there. And that's been the case through hurricanes and financial meltdowns and now through Coronavirus.

Understood. And just going back to the potential for future CapEx cuts as it relates to joint ventures. One maybe specifically focused around Midland-to-ECHO 3 and the connection there Wink to Webster. I guess my understanding there is that pipeline is some of the steel has been ordered already, some of it is actually in the ground and I imagine that one falls into a largely underwritten asset that moves forward. I am just curious what maybe options you have there around changing the scope or size? Are there options available to you? And then obviously you guys also have some idle pipelines or some pipeline optionality to move volumes there instead. Are those some of the things that are being discussed right now?

Yes. We can reduce CapEx by entering into joint ventures on assets that are in virtually every one of our businesses, none of which touches the assets.

All right. Thank you everyone.

Your next question is from Gabe Moreen with Mizuho. Please go ahead.

Hi. Good morning everyone. Just had a couple of follow-up questions on the potential joint ventures. One is really on use of proceeds there. Is it fair to say that that's strictly going to deleveraging at this point? Or could there be some other form of capital to return? And then also depending on which JVs are you able to get going, can you talk about whether or not some of the projects would go from, I guess, to what's shaded in blue to actually I mean being accelerated, if you are potentially able to get something going commercially depending on the terms?

Yes. Gabe, on the first part, I think any use of proceeds that we had, whether it would be incremental areas where we may see additional room to reduce CapEx in 2020 or if there was any proceeds from any JV opportunities, it would really just come in and go to delevering. At this point in time, again, any other return on capital, be it through distribution growth or be it through incremental buyback, really we need to get more visibility of what the macroeconomic backdrop looks like and what the demand for energy looks like before we make any other decisions on that. And Gabe, what was the second part of your question?

Yes. It was just on whether some of the JVs that you are negotiating for some of those projects which you have shaded in blue, which you have deferred. So depending on how the JV works out, could those potentially be brought, I mean, I guess brought back --

Yes. And Gabe on that one, that's where Jim said, with these discussions, it's for assets across all four segments.

Okay. And then Randy, I just had one follow-up in terms of the marketing opportunities you talked about and the working capital draw. I don't know if you care to talk about how large that working capital usage might be. I realize that's sort of a dynamic number. And then also, can you just talk about maybe the cadence of when you might recognize those marketing earnings in 2020? I assume it's the back half type of the year recognition.

Yes. I will let Jim or Brent hit the timing of the earnings. I think the one benefit from low commodity prices is it doesn't take a lot of working capital to execute on contango.

Yes. I think we are going to see, in the past, we have had some rather large contango opportunities at $16, $17 crude oil. The working capital is a hell of a lot less. And the way we do in contango, by and large is where do you get the biggest spread. I mean I think it's probably going to be throughout the year. Brent?

Yes. Certain commodities we have targeted closer to the front. And other commodities, frankly, we have kind of spread it out based on liquidity and some other things. But I think for the balance of the year, you are going to see these numbers show up month-by-month.

Got it. Thanks guys.

And your next question is from Ujjwal Pradhan with Bank of America.

Good morning everyone. This is Ujjwal. Thanks for taking my question. First one, just following up on your earlier comments around share repurchase. So maybe to ask the question a little differently, how do you view the appropriate distribution yield on your units in the current environment? And how that informs your buyback program beyond the plan to repurchase 2% of 2020 cash flow from operations?

Yes. As far as the distribution growth question goes, we have been public since 1998 and we have provided distribution growth in every year since our IPO. So that's been one of our objectives over time is to provide consistent distribution growth. And so that's been important, it was over time. But you may have asked the question a different way, I am probably going to go back to the same answer. Given the uncertainty, again, this economic sudden stop that we have had on a global basis, it's historic. And just there is a lot of uncertainty of how the next three months, six months are going to progress. And I think we just need to have more visibility of how that's going to progress before we make any decisions about returning any additional capital above what we are doing now to investors at this point. I think this is a point where you really come in and protect your balance sheet, protect your debt rating, come in and protect your liquidity. And we have got a lot of good opportunities that our assets set us up for. And right now we are in execution mode big time over the next three, six, nine months.

Thank you. I appreciate your thoughts there. And my second question is regarding your PE reversal, the partial reversal plan. Can you discuss how that came about despite Cushing already filling up rapidly? And what sort of uplift you expect from that reversal?

Brent?

Yes. This is Brent Secrest. That basically came about because you guys saw what was going on in the market and there was a flight to storage. And that was the open access storage and frankly that was where people were buying crude oil, whether that was financially or what have you. We look at our customer base and our Permian producers and our Eagle Ford producers ultimately wanted access to market. And some of them approached us to figure out if that could still be reversed. Graham Bacon and his team figured it out how to do it very cost efficiently and quickly. There was a lot of things still in place. So that was the thought behind that. And it just led to another optimization opportunity on our side and also a solution for our customers.

Tina, this is Randy Burkhalter. Given the fact we have got calls coming up after ours and I apologize for anybody in the queue that couldn't get in, but we are going to take one more question before we end our call today.

Thank you. Your next question comes from Colton Bean with Tudor Pickering & Holt. Please go ahead.

Thanks. I will keep it brief here. So just to circle back to LPG exports, I think you all noted that May was shaping up to be a record month. Any detail in terms of where those cargos are headed or preliminary discussions around June?

I think they are by and large going to Asia, South America. I doubt if anything and I don't think anything is going to Europe that I know of.

It's mainly things that are geographically advantaged. I would say the one big area of uptick that we saw was India and Indonesia. But certainly, India had an increase on what they were bringing in.

Got it. Appreciate that. And then, Brent, maybe just to follow-up on some of your comments there around when and why we would see production curtailed. As you look across your system, is it really South Texas and the Permian that you would expect to be most exposed? Or are there any other maybe more nuanced regions that have rich gas exposure that you are keeping an eye on?

I would say Delaware Basin light. You saw with differentials did out there. That became challenged for a little while. Eagle Ford condensate as certain buyers stepped away from the market. And then frankly, I see some opportunities that are going to offset that. And whether that's the Rockies or potentially Haynesville, some of those areas I think are going to have a resurgence.

Okay. I will leave it there. I appreciate the time.

Okay. Tina, before we end the call, would you give our listeners the replay information. And then let me just say thank you again for joining us today. And from Enterprise, we are going to go ahead and get off the call. And again, if you could give the replay information. Thank you.

On a replay information, you may dial (1800)-859-2056, access code 9879389. That does conclude our conference for today. Thank you for your participation. You may all disconnect.