01—Abstract
Summary
Summary of the 10-K filed February 28, 2022. Cited figures are marked; the original filing is the authoritative source.
Enterprise Products Partners L.P.
(NYSE: EPD) reported a strong 2021 for its Form 10-K filed February 28, 2022. Consolidated revenues rose to $40.81 billiona from $27.20 billion, driven mainly by higher commodity prices in marketing activities. Operating income increased to $6.10 billion from $5.04 billion, and net income attributable to common unitholders was $4.63 billion, up from $3.77 billion.
Total segment gross operating margin (non-GAAP) was $8.51 billionb, up about 4% from $8.19 billion, led by Petrochemical & Refined Products (+25%) and Natural Gas Pipelines (+25%), partly offset by lower Crude Oil Pipelines margin (down 16%). Winter Storms Uri and Viola in February 2021 contributed favorable margins in marketing, while Hurricane Ida reduced margin by an estimated $34 million in the second half of the year. Cash flow strengthened considerably.
Operating cash flow was $8.51 billionc versus $5.89 billion, and non-GAAP free cash flow was $6.30 billion versus $2.67 billion, reflecting lower growth capital spending ($2.22 billion in capital expenditures versus $3.29 billion in 2020). Distributable cash flow was $6.61 billion, covering the $3.99 billion of common unit distributions at a 1.66x coverage ratio. The quarterly distribution was raised to $0.465 per unit ($1.86 annualized) for Q4 2021.
Liquidity stood at $7.32 billiond, and the company carries investment-grade ratings of BBB+/Baa1/BBB+. Looking ahead, management expects 2022 capital investments of about $1.9 billion (including $1.5 billion of growth capital), and a $3.25 billion cash acquisition of Navitas Midstream closed on February 17, 2022, funded with commercial paper and cash.
Key watch items include total debt of roughly $29.8 billion principal, the PDH 2 facility scheduled for Q2 2023, pending SPOT offshore terminal approval, and ongoing FERC index changes. The 2019 buyback program had $1.52 billion of remaining capacity at year-end.
02—Key points
Key Highlights
- Revenue rose 50% to $40.8 billion and operating income rose 21% to $6.1 billion, largely driven by higher NGL, crude, and petrochemical marketing prices rather than volume growth.
- Net income attributable to common unitholders increased to $4.63 billion ($2.10 diluted EPU) from $3.77 billion ($1.71) in 2020, which included $1.1 billion of 2020 impairments and goodwill write-downs.
- Operating cash flow of $8.51 billion and free cash flow of $6.30 billion (versus $2.67 billion in 2020) reflect a sharp reduction in growth capex and strong working capital release.
- Distribution coverage of 1.66x on DCF of $6.61 billion, with the Q4 2021 distribution raised 3.3% to $0.465 per unit.
- Petrochemical & Refined Products gross operating margin increased 25% to $1.36 billion, driven by PDH 1 and propylene fractionation margins; Crude Oil margin fell 16% to $1.68 billion on weaker marketing spreads.
- Major 2022 commitments include the $3.25 billion Navitas Midstream acquisition (closed Feb 2022) and roughly $1.9 billion of planned capex, with PDH 2 slated for Q2 2023.
- Balance sheet remains investment grade with $7.32 billion liquidity and $29.8 billion of principal debt; the company also has a material $27.2 billion of guaranteed senior notes at the parent level.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Enterprise Products Partners L.P. kept $0.11.
- Revenue$40.81B100.0%
- Cost of revenue−$29.89B73.2%
- Gross profit$10.92B26.8%
- Operating costs−$4.82B11.8%
- Operating income$6.10B15.0%
- Interest, other & tax−$1.47B3.6%
- Net income$4.63B11.4%
Where FY2021 revenue went
$40.81B- Cost of revenue: $29.89B, 73% of revenue
- Net income: $4.63B, 11% of revenue
- Operating costs: $4.82B, 12% of revenue
- Interest, other & tax: $1.47B, 3.6% of revenue
Kept 11% as net incomeNet income $4.63B · 11%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 28, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $40.81B$27.20B | +50.0% |
| Cost of Revenue | $29.89B$16.72B | +78.7% |
| Gross Profit | $10.92B$10.48B | +4.2% |
| Operating Expenses | $35.29B$22.59B | +56.2% |
| Operating Income | $6.10B$5.04B | +21.2% |
| Interest Expense | $1.28B$1.29B | −0.3% |
| Net Income | $4.63B$3.77B | +22.8% |
| Shares Outstanding (Diluted) | 2.20B2.20B | 0.0% |
05—Questions
Frequently Asked Questions
Why did revenue rise so sharply in 2021, and does that translate into higher profit?
Revenue increased $13.6 billion, mainly from $13.0 billion higher marketing revenues, reflecting higher average sales prices for NGLs, natural gas, crude oil and petrochemicals. Because cost of sales rose by a similar amount, the revenue increase did not translate proportionally into profit. Gross operating margin, which excludes most of this pass-through commodity effect, grew a more modest 4% on a segment basis.
Is the distribution safe, and how much cash is retained?
Distributable cash flow of $6.61 billion covered common distributions of $3.99 billion by 1.66x, retaining about $2.62 billion for capital investment, debt reduction and buybacks. The Q4 2021 distribution of $0.465 per unit was increased from $0.45, and management says future increases will be evaluated quarterly in light of economic conditions. Risk factors note that distributions are not guaranteed and depend on cash flows, reserves and debt covenants.
How leveraged is the company and what debt maturities should investors watch?
Consolidated principal debt was $29.8 billion at year-end 2021, with a weighted-average maturity of about 20.7 years. Scheduled principal maturities are $1.4 billion in 2022, $1.25 billion in 2023 and $0.85 billion in 2024. Management reported investment-grade ratings of BBB+ (S&P), Baa1 (Moody's) and BBB+ (Fitch), and the company was in compliance with financial covenants at year-end.
What are the main growth projects and capital plans for 2022 and beyond?
Management expects 2022 capital investments of about $1.9 billion, including $1.5 billion of growth projects and $350 million of sustaining capex, excluding the proposed SPOT terminal. About $2.2 billion of growth projects are scheduled for completion by end-2023, including PDH 2 in Q2 2023. The Navitas acquisition for $3.25 billion closed in February 2022 and adds about 1,750 miles of pipeline and over 1.0 Bcf/d of processing capacity.
What are the key risks highlighted in the filing?
Key risks include commodity price and volume volatility, COVID-19 demand effects, competition for supply, and rising interest rates on floating-rate debt and refinancing. Regulatory risk is significant, including FERC index changes (PPI minus 0.21% from March 2022) that may reduce rates on some pipelines, and potential environmental, climate and pipeline safety costs. The filing also notes that the company's partnership structure limits unitholder voting rights, and that the general partner is controlled by the Duncan family affiliates, who own about 32.3% of common units.
06—Continue