Enterprise Products Partners LP (EPD) is boosting capital expenditures (capex) for 2019 after reporting record net income during a solid first quarter that included a new high of 900,000 b/d in crude oil volumes from its marine terminals, management said Wednesday.
Capital investments this year are expected to be $3.4-3.8 billion, with another $350 million for sustaining capital expenditures. The new budget represents an increase of about $250 million from its most recent projections, with almost 60% in projects that cost $10 million or less.
“Frankly, that's normally where we get our best returns on capital are from those smaller projects,” CFO Randy Fowler said on a call to discuss first quarter earnings.
The record crude volumes from marine terminals occurred despite the temporary closure of the Houston Ship Channel, first in February because of thick fog and again in March following a petrochemical fire.
“With Permian crude oil volumes forecast to increase by approximately 700,000 b/d this year, we believe substantially all of this increase in volumes will be destined for international markets,” CEO Jim Teague said.
Separately, the company chief noted that despite recent weakness at the Waha hub in the Permian, it had not seen any impact from shut-in gas relative to its processing volumes.
In addition to crude growth, EPD also expects around 300,000 b/d of new ethane demand from ethylene facilities on the Gulf Coast that are forecast to begin operations this year. During the quarter, the midstreamer finished converting the Seminole natural gas liquids (NGL) pipeline to crude service, bringing that project and the Shin Oak NGL pipeline online ahead of schedule.
Shin Oak, brought into service in February, is flowing more than 200,000 b/d, but with the addition of pumps throughout the rest of the year, EPD expects another 100,000 b/d by the end of September.
“Note that given its location interconnects, we will always have flexibility to convert this pipeline back to NGL service depending on pipeline supply-demand balances for crude oil and NGLs in the future,” Teague said.
Through April, EPD had placed almost $2 billion of growth capital projects into service. The company has another $5 billion of assets under construction, with most ($3.5 billion) set to be in service by the end of the year. Those projects include a third train at the Orla gas processing complex in the Permian, expected online by March 2020, a 10th NGL fractionator and an isobutane dehydrogenation plant at the company’s Mont Belvieu complex.
EPD’s other projects under development include crude, natural gas, NGL and petrochemical pipelines, gas processing plants in the Permian, a second propane dehydration facility and a Texas deepwater oil port.
On the crude side, EPD recently filed regulatory permits to build another system from West Texas, which would be called Midland Echo 3. Teague said EPD is receiving interest from customers “who value Enterprise’s ability to provide flow and quality assurance and market choices on our integrated system.”
The integrated system would join with EPD’s pipeline storage Houston distribution system and marine terminals, “safeguarding quality for both producers and end-users by way of uninterrupted delivery.” If successful, it would give the company “a lot of flexibility to convert Midland to Echo to back-end NGL service should demand be supportive,” Teague said.
EPD reported first quarter net income of $1.3 billion (57 cents/share) versus $901 million (41 cents) in the first quarter of 2018. Distributable cash flow increased 18% to a record $1.6 billion, while free cash flow rose 89% to $1.9 billion for the 12 months ending March 31.