Enterprise Products Partners LP executives said the company emerged from the depths of 2020 relatively unscathed, producing profits and upbeat about both the year ahead and long-term prospects.
The executives during a conference call Wednesday to discuss fourth quarter and full-year 2020 results, noted they are optimistic despite the change of power in Washington, DC, that likely portends mounting policy efforts to transition the United States from fossil fuels to renewable sources of energy.
President Biden, who took office in January, campaigned on a $2 trillion infrastructure and clean energy plan to address climate change. He is targeting a carbon-free power sector by 2035 and a carbon-neutral economy by 2050.
“Obviously, policy proposals from this new administration have been supportive of renewables,” Enterprise’s Jim Teague, co-CEO of the general partner, said during the earnings call. However, “the cleaner energy feature does not mean a world without fossil fuels. The reality is nothing could be further from the truth.”
He said global energy needs are bound to far exceed what renewables could realistically meet, leaving governments around the world to choose between oil and gas or energy shortages and related poverty.
“I hate the word transition,” Teague said. “Regardless, the notion of energy transition often implies shifting away from traditional hydrocarbons. But we still believe an all-of-the-above approach will be required to meet the world’s growing energy needs. A more prosperous and sustainable future for all people will require traditional sources of oil and gas” for decades to come.
“U.S. oil and gas and petrochemicals are making a difference, not just in the U.S. but around the world,” he said. “As there is nothing to replace these products, without plentiful, reliable and low-cost fossil fuels, the world would be in a very different place. It would be one that is less advanced, much less prosperous, have much shorter life expectancies.”
Teague and co-CEO Randy Fowler pointed to the Houston-based midstream giant’s fourth quarter and 2020 results as evidence. Despite the severe economic blow created by the coronavirus pandemic, Enterprise generated $6.4 billion of distributable cash flow for 2020, down only 3% from the company record set a year earlier.
Natural gas liquids (NGL) held even with year-earlier levels. While other segments dipped some, the management team sees new momentum building alongside coronavirus vaccine distribution programs early this year.
“We’re encouraged by the signs of a rebound in the global economy that we see through strong domestic and international demand for NGLs, ethylene and propylene — the continuing recovery in the demand for refined products,” Teague said. While “there are still uncertainties and headwinds as we begin this year, we’ve been very outspoken about the potential for significant price appreciation as soon as the second half of this year, and we’re not alone in that analysis, with most energy banks and consultants seeing the same thing.”
The company’s transported volumes of NGL, oil, refined products and petrochemicals totaled 6.5 million b/d in 4Q2020, down from 6.9 million b/d in the year-ago period. Gross operating margin from the NGL pipelines and services segment was flat year/year at $1.1 billion for the quarter, while gross operating margin for oil pipelines and services increased $12 million to $428 million.
The natural gas pipelines and services unit saw gross operating margin fall to $226 million from $238 million, with total natural gas transportation volumes dipping slightly to 13.7 trillion Btu/d from 13.8 trillion Btu/d a year earlier.
The petrochemical and refined products services segment posted a 27% year/year increase in gross operating margin to $297 million, with total segment pipeline transportation volumes rising 19% to 867,000 b/d from the prior-year quarter.
Enterprise posted a 4Q2020 profit of $337.3 million (15 cents/share), after an impairment cost of $800 million on the value of its assets. That compared with net income of $1.1 billion (50 cents) a year earlier. Fourth quarter revenue was $7 billion, down from $8 billion a year earlier.
For the year, the company earned $3.8 billion ($171/share) compared with a $4.6 billion profit in 2019 ($2.09). Annual revenue declined to $27.2 billion from $32.8 billion in 2019.
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