Thank you for standing by, and welcome to the Enterprise Products Partners First Quarter 2024 Earnings Conference Call. [Operator Instructions] And now I'd like to introduce your host for today's program, Libby Strait Senior Director of Investor Relations. Please go ahead.

Good morning. Welcome to the Enterprise Products Partners conference call to discuss first quarter 2024 earnings. Our speakers today will be Co-Chief Executive Officers of Enterprise's General Partner, Jim Teague and Randy Fowler. Other members of our senior management team are also in attendance 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 will turn it over to you Jim.

Thank you, Libby. We have a war in Europe, favor in the Middle East. We've got student mobs occupying Elite university campuses. -- had a former President being tried for crimes and courts up and down the East Coast, chaos wins. In many ways, what's going on today reminds me of the 1960s. We had a war in Asia called a Vietnam war. We had student antiwar demonstrators occupying campuses throughout the country. And while no President was on trial, one was chased from running for a second term. And on top of all that now, like in 1968, we find that the DNC will hold its convention in Chicago. For those of you too young to know what that means, I suggest you Google 1968 Chicago convention. But with all this chaos, there is a constant today that should bring calm to investors' concerns in this volatile world. Enterprise continues to deliver -- month after month, quarter after quarter and year after year and first quarter was no exception. Our total gross operating margin for the quarter -- first quarter was $2.5 billion, a 7% increase compared to the first quarter of last year. Earnings growth for the first quarter was primarily driven by contributions from new assets placed into service during the second half of last year, along with a 17% increase in net marine terminal volumes attributable to continued strength in global demand for U.S. energy and higher sales volumes and margins in our Octane Enhancement business. Our system transported 12.3 million barrels a day of crude oil equivalent, that being NGLs, crude oil, petrochemicals, refined products and natural gas. We generated $1.9 billion in DCF during the quarter, providing a 1.7x coverage which supported a 5% increase in cash distributions to partners compared to the same quarter last year. We retained $786 million of DCF. Randy, you're going to get into more color on all this, right?

Right.

During the quarter, we expanded our Permian natural gas processing infrastructure with the start of our Leonidas plant in the Midland Basin and our Mentone 3 plant in the Delaware Basin. Each of these plants has capacity to process more than 300 million cubic feet a day of natural gas and extract over 40,000 barrels a day of NGLs. We currently have 3 additional 300 million a day plants under construction in the Delaware and 1 in the Midland Basin, along with our Bahia NGL pipeline and Frac 14, which is really our 13th fractionator, but we're not going to call it 13, we call it 14. Our plants and the systems that support them are essentially pull on the first day of service. With the completion of the 3 processing plants under construction, we will have a total of 19 Permian processing plants capable of producing 675,000 barrels a day of NGLs, beating our NGL systems, including one of the world's largest NGL export capacities. We also began service on Phase 1 of our Texas Western products pipeline system in March, successfully connecting Gulf Coast refined products to end markets in the Permian Basin, with additional Phase II destinations in the Albuquerque and Grand Junction markets expected in the second and early third quarters. At the beginning of the month, we received the deepwater port license or a SPOT project. This is one of the most significant milestones to date in the development of SPOT. We put out a press release on April 9 discussing the project and highlighting the accomplishment of the enterprise team that worked tirelessly for over 5 years, tirelessly for over 5 years to obtain the license. I think SPOT's going to be a valuable and highly strategic addition to our asset base as we continue with commercialization. Last week, the EIA reported that the U.S. exported a record 12.1 million barrels a day of liquids, that being crude oil, refined products and natural gas liquids to a world, hungry for our reliable resources that's priced by free market. To put that in perspective, the number was $3.6 million in 2014 and less than $2 million in 2010. Demand for growing U.S. liquids has been and will continue to be primarily in emerging markets. Enterprise will continue to play a key role. We export around 70 million barrels a month of liquids and have an initiative to reach 100 million barrels a month, which does not include SPOT -- we're a significant player in the export market, and we expect our growth is going to continue to grow. Randy?

Okay. Thank you, Jim. Good morning, everyone. Starting with first quarter income statement items. Net income attributable to common unitholders for the first quarter of 2024 increased 5% to $1.5 billion or $0.66 per common unit on a fully diluted basis compared to $1.4 billion or $0.63 per common unit for the first quarter of 2023. Turning to cash flow. Adjusted cash flow from operations, which is cash flow from operating activities before changes in working capital increased 6% to $2.1 billion for the first quarter of 2024 compared to $2 billion for the first quarter of last year. We declared a distribution of $0.515 per common unit for the first quarter of 2024. As Jim mentioned, this is a 5.1% increase over the distribution declared with regard to the first quarter of 2023. The distribution will be paid May 14 to common unitholders of record as of the close of business today. In the first quarter, the partnership purchased approximately 1.4 million common units of the open market for $40 million, total purchases for the 12 months ending March 31 were $211 million or approximately 8 million enterprise common units, bringing total purchases under our buyback program to approximately $960 million. In addition to buybacks, our distribution reinvestment plan and employee unit purchase plan purchased a combined 6.5 million common units on the open market for $172 million during the last 12 months, including 1.6 million common units on the open market for $43 million during the first quarter of 2024. For the 12 months ended March 31, 2024, Enterprise paid out approximately $4.4 billion in distributions to limited partners combined with the $211 million of common unit repurchases across the same time period. Enterprise's payout ratio of adjusted cash flow from operations was 56% for that 12-month period.…

Thank you. Operator, we are ready to open the call for questions from our participants. If you could please remind them of instructions to ask the questions.

[Operator Instructions] Our first question comes from the line of Theresa Chen from Barclays.

First, congratulations on obtaining the deepwater port license for SPOT. I'm sure that was a labor of love over the past 5 years. Can you provide us an update on the commercialization progress and since you perceived the license earlier this month? And also, can you help us think about how much CapEx would the project require and over what period that would be spent?

Yes, I'll talk to the CapEx. First of all, it's not what was in the there's article by a long shot, and we typically don't share with people what our CapEx is. I'll turn it over to Brent to answer the other question.

I mean the commercialization, Theresa, is still ongoing, I'd say, for the most part, it's positive. We're spending a lot of time on the road. We expect to have 2 contracts by the end of, call it, next month. And then we're in ongoing discussions with other counterparties to commercialize that. But the mindset is we're not going to move forward on that project until we have the contracts to support that project.

And then turning to your onshore activities. Can you provide an update on the status of the Texas Western products project so far after the initial phase and began service? And what are the key gating factors from here in until Phase I brought online? And what should we look for?

Yes. This is Tug Hanley speaking. I'll turn it over to Justin on the future activities. But as current status goes, we have 2 terminals online in West Texas. We just loaded over 50 trucks yesterday. It seems like every single day, we're setting a new record on volumes loaded. And as far as the margins we're getting, those have met our expectations, or they are currently exceeding them. And then you want to talk about just having Justin Kleiderer online?

Yes, I'd say Theresa, this is Justin Kleiderer. Just thinking about Phase 2 being Albuquerque and Grand Junction. As Jim had said in his comments, we feel good. We're on the verge of commissioning Albuquerque as we speak. So in the second quarter rolling into early third quarter to get that Phase II seems to be pretty good timing.

Thank you.

One moment for our next question. And our next question comes from the line of Tristan Richardson from Scotiabank.

Could you talk about -- a little bit about just the projects you added in the quarter on the Midland side, no new dedications, are these with existing customers? Or are these new customers just primarily in the Delaware versus the Midland? And then should this support plants that are already currently under construction? Or is this gathering projects that could support future new plant sanctions?

This is Natalie Gayden, -- the new dedications that the gathering expansions in the Delaware and in Midland are supported by new acreage dedication, some existing customers, some new customers. Those gathering expansions feed the new plant that we've built. This morning, I was looking, we're over 91% of our plant capacity full. So a combo of everything.

That's helpful. And then just thinking about on the crude side, you saw seminal move back into NGL service. Just thinking about the crude volumes in the quarter, were you just seeing increased utilization on the existing infrastructure there? Can you talk about maybe the use of DRA to sort of squeeze better utilization out of your existing plants with seminal lines with seminal moving in...

Yes. Tristan, this is Jay Bany. Yes, I mean, we do a combination and optimization really both for DRA and power. With 2 going out of service, you saw a modest increase in variable cost, but it was near negligible just in the optimization...

Thank you.

One moment for our next question. And our next question comes from the line of Spiro Dounis from Citi.

Maybe if we could just go back to exports. Jim, once you talked about getting to that 100 million barrels a month without SPOT. And I guess I'm just curious if you could just maybe dive into that a little bit more and provide a little bit more color on how you think you can do that. And now with SPOT potentially moving forward, curious where that goal goes from here, especially when you consider the ability to free up some of that LPG capacity as well?

Spiro, I had a dream one night that we got to 100 million barrels. So I made it an initiative. If you're going to get to 100 million barrels, you're going to get it because you've got a great supply position. So some of the things Natalie is talking about is building your supply position, and we know what it takes to get to that number and what we need to do from a supply perspective. And I don't think -- I don't think Zach, I don't think we have to spend a heck of a lot of money on -- or Jay, on our ship channel or any of our docs in order to handle that my... Bob.

Not over what we've already committed to.

So it's all about supply, Spiro.

Got it. Appreciate that. Second question, maybe just going to some of the prices we're seeing on Waha. Obviously, a lot of volatility there recently and into the second quarter. It looks like maybe you got some benefit from those negative prices in the first quarter. But I imagine at this rate, second quarter impact could even bigger. Maybe just remind us again some of the exposure you've got there and open capacity to benefit from that.

This is Tug Hanley. So it's puts and takes. So from the negative gas price perspective, we are seeing lower prices, obviously, for our equity volumes. However, on the positives of the lower gas price, we're seeing wider margins on C2 to gas, so that's higher KF margins for us. They're over $0.22 a gallon and that means a couple of things for us specifically, higher ethane recoveries across the systems, so we're seeing record pipeline volumes. And then on the gas transport position, we have around 375 million a day that we can participate in, bringing Waha down to the Gulf Coast, which is the premium market versus the Waha negative price.

Great. I'll leave it there, helpful as always.

Thank you. One moment for our next question. And our next question comes from the line of Keith Stanley from Wolfe Research.

Just a follow-up on SPOT. So you said you hope to have 2 contracts soon working on others. What's the soonest do you think you can get to an FID kind of a bull case and a base case on that project? Just a sense of how long it could take?

Keith, it's Brent. I think we'd like to target before the end of this year to go forward on that project.

Okay. Okay. Second question. The stock's lagged a bit recently. Your yield plus growth sort of proposition is very high. How are you thinking about the return on stock buybacks versus the returns you get on growth investments? Is that spread narrowing a lot in your eyes or growth projects still a lot more accretive than what you can do with buybacks?

Keith, over the last 3 or 4 years, I mean, the stock prices ebbed and flowed just with the overall volatility in the energy sector in the space. So I mean, it comes and goes. I think we try to keep an all-above approach. And when we see it attractive to do buybacks, we do that. But it's been measured, call it, $200 million, $250 million a year, and I expect it to stay in that area. Our growth CapEx, our projects that were coming in are attractive returns on capital that actually grow our business and serve our customers. So yes, I mean, we take a look at it, but you don't make allocation of capital issue, allocation of capital decisions day by day, depending on where the stock price is. So we've got a longer-term view than that.

Thank you.

One moment for our next question. And our next question comes from the line of Zack Van Everen from TPH & Company.

Sorry on liquids marketing, really propane specifically. We've seen domestic storage and production based on the weekly EA data come in pretty high. I was just curious on your expectations for domestic prices on the propane side? And do you see this widening the spreads to the international markets? And then on that, can you just remind us of the sensitivity and exposure you guys have to that spread?

Yes. Tug Hanley speaking. I'll just comment on the international market. So it's -- the barrel here in the U.S. have to price the clear across the water. So we are seeing lower freight prices, which are leading to higher SPOT export opportunities for us. We're seeing some of those opportunities in the low single-digit numbers materialize. So that's been a benefit to us in that aspect.

And I think overall, and Zach, it's Brent. -- propane is going to be constrained here domestically until new export capacity comes online. And so call that next year, you could probably see storage values start widening out because that's the only place could go at this point. I think it's probably good for some of our other assets or our customers around PDH. But once you get out until next year and the years beyond, we think the appetite for LPGs is there across the world. We think freight is going to be there. So at some point in time, it's going to come back to the U.S. producer and for them to catch up to align with the export capacity, the freight and the overall global demand.

Got it. That makes sense. I appreciate that. And then moving to Wink to Webster. I saw no doubt that you guys might have some downtime at the beginning of Q2. I was curious, one, if you can comment on that and 2, if you can move those volumes to another asset like Midland to L1 and just the overall impact there.

Yes, Zach, this is Jay. Yes, so we went out this past week to notify our shippers of downtime in June, starting the first. It's estimated around 10 days. And look, until we get actual nominations come in, call it, mid-May, it's kind of hard to figure out how that's going to impact our customer base.

Perfect fact. All I had...

Thank you One moment for our next question. And our next question comes from the line of John Mackay from Goldman Sachs.

I wanted to maybe just stay in the Permian. I'd be curious to get an update from you guys on how activity levels are trending so far this year versus your base case and fully understand that producers are not making decisions based on the gas price. But I would just be curious if you're seeing this weak Waha and kind of gas takeaway issues in the near term affect overall activity levels?

This is Tony. Essentially, you've seen no effect from the weak natural gas prices. If you -- and we show the slide often so that people understand it. If you look at what drives the economics of the producers in the Permian, it's not natural gas. And you're -- what we've seen in natural gas prices is not going to cause people to shut in or even throttle back oil related to natural gas at this point. We haven't seen it. And I guess proof is a little bit in the pudding, if you go and look at -- everybody has different rig counts. But if you go and look at rig counts in the Permian since the first of the year, they're steady as they can be. Actually, same can be said for the Eagle Ford, you see rig counts down in the Haynesville and you see them down some of the Appalachia but not in your oily basins.

All right. That's fair. Maybe just shifting pitches, Octane was pretty strong. Maybe just give us a quick read on how you'd expect that to kind of roll out the rest of the year? And maybe on the other side, where we could expect kind of the PDH contributions to unfold as well.

John, this is Chris D'Anna. On the octane enhancement side, we benefited probably 80% of the improved performance was due to volumes and higher volumes and higher fees. And then we also had a favorable hedge performance. And I guess, looking forward, if you look at the forward curve for normal Bob, it shows pretty steady. So we have, at least for the second quarter, $1.80 spread. And just a reminder for the biggest contributor for octane enhancement is our MTBE, which is made up of normal RBOB and what we call uplift, which is just the market price and really the difference between the normal RBOB spread and the market price. To your second question on PDH, we're expecting when PDH1 and then with the return of PDH2 after our outage in June that both of those assets are contributing back to their full amount.

Thank you, one moment for our next question. And our next question comes from the line of Neel Mitra from Bank of America.

I wanted to ask about the activity within the first quarter. I think it was kind of universally accepted in the Permian that the first quarter would have a little bit of a lag versus the fourth quarter of '23. Just wanted to hear your insights of what you saw in terms of weather activity coming back. And if you could kind of delineate where you're seeing some hotspots in production within the Permian and where you're seeing some lagging versus your initial expectations?

This is Brent. Relative to our first quarter, there was definitely an impact because of weather in the Midland Basin processing side. Our Delaware processing plants held up very well. On the Midland side, we had some downtime and it probably extended gram for 10 days at some point. But that's the reason there's probably an effect on volumes. But to Natalie's point, in terms of what we see as we go forward, and we have a morning supply meeting that you guys are well aware of, it's routine for every day that Natalie comes in to report our processing volumes. That's up every single day.

So is it fair to say that there's been a lot of flush production in Keno in the April time frame after the first quarter?

Natalie, I mean we saw the increase, our big jump on our side once our new plants came up.

Yes. Once our new plants came up, we had some producers that, as you know, don't have acreage dedications rather they just swing from we won market share. So we -- for example, when Minton2 came up, we were immediately full. So I don't know if I'd call it flush production from being down after the winter storm rather than just continue on pace coming back up after the cold weather event.

Got it. And if I could sneak one more in there. It seemed like the PGP RGP spreads were especially strong in the first quarter. I was wondering how that contributed to the first quarter results, and if you see that as an ongoing trend for the rest of the year.

Yes, this is Chris again. The RGP/PGP spreads were wide for the first quarter. And you probably saw in the write-up, we had some operational issues on both our PDH and our splitters. So there were some puts and takes there. And again, I think looking forward, we see the contribution from our PDH plants running that that's going to help with our overall margin.

Operator, we have time for one more question.

Certainly one moment then for our final question. And our final question for today comes from the line of Neil Dingmann from Truist Securities.

Guys just -- my question is on future capital allocation. I'm just wondering, you all boosted the -- it looks like 2025 CapEx a bit based on opportunities out there. I'm just wondering, do you all have -- when you look at future years, let's just consider 2025 sort of a bogey or level for both shareholder return and projects. Just wondering how we should think about the balance between the 2 as you start looking at 25 and 26.

Yes. Neal, -- what we had talked about at Analyst Day here a few weeks ago was really from a combination of distributions and buybacks sort of operating in that 55% to 60% of adjusted cash flow from operations. We've sort of been in that zone since 2021. And that's sort of what we foresee here for the next few years as well. As far as organic growth CapEx, again, seeing a lot of opportunities in the Permian and also what that -- the downstream benefits that come with that increased supply as it goes through our value chain. And now with getting the license for SPOT, we'll be hustling to come in and get it contracted. So I think we still come back with a bogey of what we put out in 2026, and that's early, is $2 billion, $2.5 billion, of which only $800 million of that is currently approved projects. So we've got some room to fill that up, including coming in and with SPOT. We're successful in getting that underwritten SPOT is really a 3-year construction cycle on that. And so anyway, I think that would help come in and address that $2 billion, $2.5 billion of organic growth CapEx.

No, that makes sense. And just a quick follow-up. I want to keep it just on the buybacks. Just any your thoughts on, is that sort of this overall just earnings and cash flow keep ramping up. Just thoughts on would you do anything different with the buybacks or how that sort of factors in.

Yes. Neal, I think we'll have more flexibility on buybacks. And again, we look to be opportunistic with it. So I mean, you've seen us do $200 million or $300 million here over the last few years. I mean if there was a market dislocation, we've got the flexibility to do more. And then certainly, here in 2024 and 2025, we're looking at growth CapEx in the $3.25 billion to $3.75 billion range. I think once you get back out to 2026, 2027. And if we're in a more of what I would say, normalized CapEx range, $2 billion, $2.5 billion, then we'll have a lot more flexibility to do buy back then as well.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Libby Strait for any further remarks.

Thank you, everyone, for joining us today. That concludes our remarks. Have a good day.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.