01—Abstract
Summary
Summary of the 10-K filed February 28, 2023. Cited figures are marked; the original filing is the authoritative source.
Enterprise Products Partners L.P.
(NYSE: EPD) reported record-level 2022 results driven by its integrated midstream network. Revenues rose to $58.2 billiona (from $40.8 billion) and net income attributable to common unitholders reached $5.5 billion (from $4.6 billion), largely due to higher marketing revenues and a $805 million increase in operating income. Total non-GAAP gross operating margin grew to $9.3 billion from $8.6 billion, led by NGL Pipelines & Services (up to $5.1 billion from $4.3 billion), which benefited from the Navitas Midstream acquisition ($3.2 billion, February 2022) and stronger processing margins.
Distributable cash flow rose to $7.75 billionb, covering distributions 1.85 times, and the quarterly distribution was raised to $0.49 per common unit. Balance sheet and liquidity are solid. EPO's senior unsecured debt is rated investment grade (BBB+/Baa1/BBB+), with $4.1 billion of consolidated liquidity and 96.2% of debt at fixed rates (weighted average cost 4.5%).
Total debt principal is $28.6 billionc, with $1.7 billion maturing in 2023. Management plans 2023 capital investments of $2.7 to $2.9 billion, including $2.3 to $2.5 billion of growth projects, and has about $5.8 billion of growth projects scheduled through 2025. Key risks include commodity price volatility, rising interest rates, regulatory rate indexing at the FERC, and project execution, along with the pending Sea Port Oil Terminal (SPOT) license and the EPCO-affiliated ownership concentration (about 32.4% of common units).
02—Key points
Key Highlights
- Revenue of $58.2 billion (up 43% year over year), driven mainly by higher NGL, crude oil and natural gas marketing prices and volumes.
- Total non-GAAP gross operating margin of $9.3 billion, up 9% from $8.6 billion; NGL Pipelines & Services segment margin rose 19% to $5.1 billion.
- Net income attributable to common unitholders of $5.5 billion ($2.50 per unit), up from $4.6 billion ($2.10 diluted per unit in 2021).
- Distributable cash flow of $7.75 billion and a distribution coverage ratio of 1.85x; quarterly distribution raised to $0.49 per unit ($1.96 annualized).
- Acquired Navitas Midstream for $3.2 billion in February 2022, adding the Midland Basin System (about 1.0 Bcf/d of processing capacity and 1,750 miles of pipeline).
- Capital investments of $2.7 to $2.9 billion expected for 2023, with approximately $5.8 billion of growth projects scheduled through 2025, including PDH 2 and Frac XII.
- Investment-grade credit ratings maintained, $4.1 billion of consolidated liquidity, and $1.25 billion of notes maturing in March 2023 (partly addressed by January 2023 issuance of $1.75 billion senior notes).
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Enterprise Products Partners L.P. kept $0.09.
- Revenue$58.19B100.0%
- Cost of revenue−$45.84B78.8%
- Gross profit$12.35B21.2%
- Operating costs−$5.44B9.4%
- Operating income$6.91B11.9%
- Interest, other & tax−$1.42B2.4%
- Net income$5.49B9.4%
Where FY2022 revenue went
$58.19B- Cost of revenue: $45.84B, 79% of revenue
- Net income: $5.49B, 9.4% of revenue
- Operating costs: $5.44B, 9.4% of revenue
- Interest, other & tax: $1.42B, 2.4% of revenue
Kept 9.4% as net incomeNet income $5.49B · 9.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 28, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $58.19B$40.81B | +42.6% |
| Cost of Revenue | $45.84B$29.89B | +53.4% |
| Gross Profit | $12.35B$10.92B | +13.1% |
| Operating Expenses | $51.74B$35.29B | +46.6% |
| Operating Income | $6.91B$6.10B | +13.2% |
| Interest Expense | $1.24B$1.28B | −3.0% |
| Net Income | $5.49B$4.63B | +18.4% |
| Shares Outstanding (Diluted) | 2.20B2.20B | −0.2% |
05—Questions
Frequently Asked Questions
How did Enterprise's profitability change in 2022 and what drove it?
Net income attributable to common unitholders rose to $5.49 billion from $4.63 billion. The increase came mainly from higher NGL processing margins, the Navitas Midstream acquisition, and strong octane enhancement and Permian NGL results, partly offset by lower Natural Gas marketing margins and reduced EFS Midstream deficiency revenues.
Is the distribution safe and is it covered by cash flow?
Yes, based on 2022 results. Distributable cash flow was $7.75 billion against cash distributions of about $4.18 billion, giving a 1.85x coverage ratio. Management also retained roughly $3.6 billion of DCF after distributions. Note that the partnership agreement requires distributions of available cash, so future coverage depends on commodity prices and capital spending.
What are the main debt and refinancing risks?
Total debt principal was $28.6 billion, with a weighted-average maturity of about 20 years and 96.2% fixed-rate. Near-term maturities are modest ($1.7 billion in 2023). The main risk is rising interest rates on the $1.1 billion of variable-rate debt and any refinancing at higher rates, though the company issued $1.75 billion of notes in January 2023 and holds $4.0 billion of undrawn revolver capacity.
What growth projects could drive future earnings?
Key projects include PDH 2 (expected Q2 2023), the Poseidon and Mentone II gas processing plants, Frac XII (Q3 2023), the Shin Oak NGL pipeline expansion (first half 2025), the Morgan's Point ethylene export expansion, and the Orange County ethane export terminal (2025). The Sea Port Oil Terminal (SPOT) received a favorable Record of Decision in November 2022, but final licensing and an investment decision remain pending.
What are the main risks specific to this ownership structure?
EPCO and affiliates own about 32.4% of common units and control the general partner, so unitholders have limited voting rights and cannot practically remove the general partner. Conflicts of interest may be resolved in favor of the general partner or affiliates, and the partnership has no employees, relying on EPCO under an administrative services agreement.
06—Continue