OREANDA-NEWS. Enterprise Products Partners L.P. (“Enterprise”) (NYSE: EPD) today announced its financial results for the three months ended March 31, 2016.

       

First Quarter 2016 Highlights

      
       

 

    

Three months ended
March 31,
      2016     2015
($ in millions, except per unit amounts)            
Operating income     $ 916     $ 896
Net income (1)     $ 670     $ 651
Fully diluted earnings per unit (1)     $ 0.32     $ 0.32
Net cash flow provided by operating activities (2)     $ 900     $ 954
Gross operating margin (3)     $ 1,319     $ 1,334
Adjusted EBITDA (3)     $ 1,327     $ 1,326
Distributable cash flow (3)     $ 1,054     $ 1,030
(1)  

Net income and fully diluted earnings per unit for the first quarters of 2016 and 2015 included non-cash impairment charges of approximately $2 million, or less than $0.01 per unit, and $33 million, or $0.02 per unit, respectively.
(2)  

Net cash flow provided by operating activities includes the impact of the timing of cash receipts and payments related to operations. For the first quarters of 2016 and 2015, the net effect of changes in operating accounts, which are a component of net cash flow provided by operating activities, were reductions of $186 million and $139 million, respectively.
(3)  

Gross operating margin, adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and distributable cash flow are non-generally accepted accounting principle (“non-GAAP”) financial measures that are defined and reconciled later in this press release.
     
  • Net income for the first quarter of 2016 was $670 million compared to $651 million for the first quarter of 2015. On a fully diluted basis, net income attributable to limited partners for both the first quarters of 2016 and 2015 was $0.32 per unit. The first quarters of 2016 and 2015 included non-cash asset impairment charges of $2 million, or less than $0.01 per unit, and $33 million, or $0.02 per unit, respectively.
  • Enterprise increased its cash distribution with respect to the first quarter of 2016 by 5.3 percent to $0.395 per unit compared to the distribution paid with respect to the first quarter of 2015. This distribution will be paid on May 6, 2016 to unitholders of record as of the close of business on April 29, 2016.
  • Enterprise generated distributable cash flow of $1.1 billion for the first quarter of 2016, which provided 1.3 times coverage of the $0.395 per unit distribution. The partnership retained $229 million of distributable cash flow for the first quarter of 2016, providing financial flexibility to fund growth capital projects, reduce debt and decrease the need to issue additional equity.
  • Enterprise’s total onshore natural gas liquid (“NGL”), crude oil, refined products and petrochemical pipeline volumes for the first quarter of 2016 increased 14 percent to a record 5.2 million barrels per day (“BPD”). Total NGL, crude oil, refined products and petrochemical marine terminal loading and unloading volumes were 1.3 million BPD for the first quarter of 2016 compared to 1.2 million BPD for the first quarter of 2015. Total onshore natural gas pipeline volumes were 11.9 trillion British thermal units per day (“TBtud”) for the first quarter of 2016 compared to 12.5 TBtud for the first quarter of 2015. NGL fractionation volumes for the first quarter of 2016 increased 5 percent to 836 thousand barrels per day (“MBPD”) from 798 MBPD in the first quarter of 2015. Fee-based natural gas processing volumes were 4.8 billion cubic feet per day (“Bcf/d”) for both the first quarters of 2016 and 2015, while equity NGL production increased 8 percent to 145 MBPD in the first quarter of 2016 compared to the first quarter of 2015.
  • Enterprise made capital investments of approximately $1.1 billion during the first quarter of 2016, including $59 million of sustaining capital expenditures.
  • Affiliates of Enterprise’s general partner and Enterprise Products Company (collectively “EPCO”) purchased $200 million of Enterprise common units in the first quarter of 2016 comprised of approximately $100 million through the partnership’s at-the-market equity issuance program in January 2016, and $100 million through the partnership’s distribution reinvestment program in February 2016. EPCO stated that it will evaluate the possible purchase of additional common units during 2016 to further support Enterprise’s growth.

“Enterprise’s diversified and integrated business model enabled us to successfully navigate the ongoing challenges for the energy industry in the first quarter of 2016,” stated Jim Teague, chief executive officer of Enterprise’s general partner. “We are pleased to report gross operating margin of $1.3 billion in the first quarter of 2016. We generated $1.1 billion of distributable cash flow, which provided 1.3 times coverage of the distribution declared with respect to the first quarter of 2016,” continued Teague. “Our results were driven by increases in gross operating margin attributable to record NGL pipeline and LPG export volumes, the EFS Midstream acquisition, and newly constructed assets that largely offset lower earnings from our commodity and spread sensitive businesses, the sale of our offshore business and lower volumes on certain crude oil and natural gas pipelines. Overall, total onshore liquid pipeline and marine terminal volumes increased 12 percent to a record 6.5 million barrels per day in the first quarter of 2016 compared to the same quarter of last year.”

“We successfully completed $300 million of organic growth projects in the first quarter of 2016 and are on schedule to complete and begin commercial service on another $2.2 billion of growth projects during the remainder of 2016. This includes two natural gas processing plants and related infrastructure serving the Permian basin; our ethane export terminal on the Houston Ship Channel; and additional crude oil storage infrastructure in the Houston and Beaumont areas. We have a total of $4.2 billion of growth projects scheduled to be completed in 2017 and 2018. Our commercial team continues to progress on several projects that are still in the development phase,” said Teague.

“Through the first four months of this year, we raised a substantial amount of the capital required to fund our capital needs for 2016. We raised approximately $1.6 billion through the issuance of common units and $1.25 billion through a notes offering. In the first quarter, we continued to balance our financial objectives of providing our partners with moderate distribution growth (a 5.3 percent increase compared to the first quarter of 2015), while retaining $229 million of distributable cash flow in the partnership to provide financial flexibility and partially fund our growth capital program,” stated Teague.

Review of First Quarter 2016 Results

Operating income for the first quarter of 2016 was $916 million compared to $896 million for the first quarter of 2015. We evaluate segment performance based on the non-GAAP financial measure of gross operating margin. In total, gross operating margin was $1.3 billion for both the first quarters of 2016 and 2015.

NGL Pipelines & Services – Gross operating margin for the NGL Pipelines & Services segment increased 13 percent to $784 million for the first quarter of 2016 from $695 million for the first quarter of 2015.

Enterprise’s natural gas processing and related NGL marketing business generated gross operating margin of $234 million for the first quarter of 2016 compared to $240 million for the first quarter of 2015. Gross operating margin from the partnership’s natural gas processing plants decreased approximately $43 million primarily due to lower processing margins. Partially offsetting this decline was a $37 million increase in gross operating margin from Enterprise’s NGL marketing business, which benefited from an increase in LPG export terminaling volumes. Enterprise’s natural gas processing plants reported fee-based processing volumes of 4.8 Bcf/d in both the first quarters of 2016 and 2015. Enterprise’s equity NGL production increased 8 percent to 145 MBPD for the first quarter of 2016, primarily due to higher recoveries of ethane by the partnership’s processing plants in the Rockies.

Gross operating margin from the partnership’s NGL pipelines and storage business increased $98 million, or 30 percent, to $427 million for the first quarter of 2016 compared to the first quarter of last year. A combined 313 MBPD increase in NGL transportation volumes from the partnership’s ATEX and Aegis ethane pipelines; Mid-America, Seminole and South Texas NGL pipeline systems; Texas Express & Front Range Pipelines; and Lou-Tex NGL Pipeline led to an aggregate $55 million increase in gross operating margin from these pipelines. The third and final segment of the Aegis Ethane Pipeline was completed in December 2015.

The partnership’s LPG import/export terminal on the Houston Ship Channel and related pipeline reported a $34 million increase in gross operating margin for the first quarter of 2016 compared to the first quarter of 2015 primarily due to a 197 MBPD increase in export loading volumes. The loading capacity of the LPG export terminal increased from 7.5 million to 9 million barrels per month in April 2015, and further to 16 million barrels per month in January 2016.

NGL pipeline transportation volumes were a record 3.0 million BPD for the first quarter of 2016 compared to 2.4 million BPD for the same quarter of 2015. The partnership’s total NGL marine terminal loading and unloading volumes were a record 456 MBPD for the first quarter of 2016 compared to 263 MBPD for the first quarter of 2015.

Enterprise’s NGL fractionation business reported gross operating margin of $123 million for the first quarter of 2016 compared to $127 million for the first quarter of 2015. The decrease was primarily due to lower revenues from product blending and other fees at the partnership’s Mont Belvieu fractionators. Total fractionation volumes increased 5 percent to 836 MBPD for the first quarter of 2016 from 798 MBPD in the first quarter of 2015.

Crude Oil Pipelines & Services – Gross operating margin from the partnership’s Crude Oil Pipelines & Services segment was $202 million for the first quarter of 2016 compared to $214 million for the first quarter of 2015. Total crude oil pipeline volumes were 1.4 million BPD for both the first quarters of 2016 and 2015. Total crude oil marine terminal loading and unloading volumes decreased to 479 MBPD in the first quarter of 2016 from 644 MBPD for the first quarter of 2015, primarily due to lower imports.

The EFS Midstream assets, which were acquired effective July 1, 2015, contributed $53 million of gross operating margin in the first quarter of 2016. Gross operating margin attributable to Enterprise’s ownership in the Seaway Crude Pipeline increased $11 million in the first quarter of 2016 compared to the same quarter in 2015 primarily due to the recognition of previously deferred revenues as a result of the Federal Energy Regulatory Commission’s (“FERC”) rulings in February 2016 regarding Seaway’s uncommitted rates. Net to our interest, volumes on the Seaway Pipeline System increased 3 percent to 581 MBPD for the first quarter of 2016.

Gross operating margin from the Houston Ship Channel crude oil terminal increased $10 million in the first quarter of 2016 compared to the first quarter of 2015, primarily due to a 44 MBPD increase in loading volumes, and higher revenues from 1.2 million barrels of new storage capacity placed into service in fourth quarter 2015. Enterprise’s Eagle Ford joint venture pipeline and ECHO crude oil terminal reported a combined $13 million increase in gross operating margin for the first quarter of 2016 compared to the first quarter of 2015.

Enterprise’s South Texas Crude Oil Pipeline System reported a $24 million decrease in gross operating margin for the first quarter of 2016 compared to the first quarter of 2015 due to lower volumes and fees. Pipeline volumes decreased by 76 MBPD, or 24 percent, to 238 MBPD for the first quarter of 2016 compared to the same quarter of last year.

Gross operating margin from Enterprise’s crude oil marketing and related activities decreased $70 million in the first quarter of 2016 compared to the first quarter of 2015, primarily attributable to lower sales margins as well as $13 million of non-cash, mark-to-market losses on financial instruments related to blending activities. As a result of lower crude oil prices, regional price spreads were less than the costs incurred by our marketing business, such as transportation costs on the Seaway pipeline. Enterprise’s crude oil marketing business has contracted for 75 MBPD of firm capacity on Seaway of which 25 MBPD of capacity terminates June 1, 2017 and the remaining 50 MBPD terminates February 1, 2018. Sales margins on Seaway-related capacity were $31 million lower in first quarter 2016 compared to first quarter 2015.

Natural Gas Pipelines & Services – Enterprise’s Natural Gas Pipelines & Services segment reported gross operating margin of $178 million for the first quarter of 2016 compared to $205 million for the first quarter of 2015. Total natural gas transportation volumes were 11.9 TBtud for the first quarter of 2016 compared to 12.5 TBtud for the first quarter of last year.

The Texas Intrastate system reported gross operating margin of $85 million for the first quarter of 2016 compared to $94 million for the first quarter of 2015. Natural gas pipeline volumes for this system were 4.9 TBtud for the first quarter of 2016 compared to 5.2 TBtud for the first quarter of last year.

The Acadian Gas and Piceance Basin Gathering systems reported a combined $7 million decrease in gross operating margin for the first quarter of 2016 compared to the same quarter of last year, primarily due to lower fees. Gross operating margin for the San Juan Gathering system decreased by $6 million for the first quarter of 2016 compared to the first quarter of 2015 primarily due to a 98 BBtus/d decrease in gathering volumes and lower gathering fees, which are indexed to regional natural gas prices.

Petrochemical & Refined Products Services – Gross operating margin for the Petrochemical & Refined Products Services segment was $155 million for the first quarter of 2016 compared to $175 million for the first quarter of 2015. Total segment pipeline transportation volumes increased 15 percent to a record 852 MBPD for the first quarter of 2016 from 738 MBPD for the same quarter of 2015.

The partnership’s propylene business reported gross operating margin of $52 million for the first quarter of 2016 compared to $64 million for the first quarter of 2015. The decrease was primarily due to lower sales margins. Propylene fractionation volumes were 69 MBPD for the first quarter of 2016 compared to 74 MBPD for the same quarter of 2015.

Enterprise’s refined products pipelines and related services business reported gross operating margin of $87 million for the first quarter of 2016 compared to $86 million for the first quarter of 2015. Total refined products and petrochemical marine terminal loading and unloading volumes increased 7 percent to 347 MBPD for the first quarter of 2016 compared to 324 MBPD for the first quarter of last year.

Gross operating margin for Enterprise’s octane enhancement and high-purity isobutylene business decreased $11 million to a net loss of $10 million for the first quarter of 2016, primarily due to lower sales margins and volumes. The partnership’s octane enhancement facility was out of service for extended periods during the first quarters of 2016 and 2015 for major maintenance. Total plant production volumes were 10 MBPD for the first quarter of 2016 compared to 8 MBPD for the same quarter of 2015.

Gross operating margin for Enterprise’s butane isomerization and related operations increased to $16 million for the first quarter of 2016 from $7 million for the first quarter of 2015, primarily due to higher volumes. Butane isomerization volumes increased 77 percent to 110 MBPD for the first quarter of 2016 from 62 MBPD for the same quarter of 2015.

Offshore Pipelines & Services – Enterprise closed on the sale of its offshore Gulf of Mexico business July 24, 2015. As a result, the partnership had no contribution to gross operating margin from these assets in the first quarter of 2016 compared to $46 million for the first quarter of 2015.

Capitalization

Total debt principal outstanding at March 31, 2016 was $22.9 billion, including $1.5 billion of junior subordinated notes to which the nationally recognized debt rating agencies ascribe partial equity content. At March 31, 2016, Enterprise had consolidated liquidity of approximately $3.6 billion, which was comprised of unrestricted cash on hand and available borrowing capacity under our revolving credit facilities.

Total capital spending in the first quarter of 2016 was $1.1 billion, which includes $59 million of sustaining capital expenditures. For 2016, we expect to invest approximately $2.8 billion for growth capital projects, $1 billion for the final installment payment for the purchase of EFS Midstream and approximately $275 million for sustaining capital expenditures.