01—Abstract
Summary
Summary of the 10-K filed February 28, 2024. Cited figures are marked; the original filing is the authoritative source.
Enterprise Products Partners L.P.
(NYSE: EPD) reported a solid 2023 with net income attributable to common unitholders of $5.53 billiona, up from $5.49 billion in 2022, and operating income of $6.93 billion. Consolidated revenues fell about 15% to $49.7 billion, driven almost entirely by lower marketing prices for NGLs, natural gas and petrochemicals, while total non-GAAP gross operating margin rose to $9.40 billion from $9.31 billion. Distributable cash flow was $7.60 billion, covering the $2.005 per-unit annual distribution about 1.73x, and the Partnership's distribution rate was raised to $0.515 per quarter for Q4 2023.
Growth is the main investment story. The company placed $3.5 billionb of growth projects into service in 2023, including PDH 2, Frac 12, the Poseidon Midland Basin processing train and a second Mentone train. It has about $6.8 billion of growth projects scheduled through the first half of 2026, and expects 2024 capital investments of $3.8 to $4.3 billion, including $3.25 to $3.75 billion of growth spending.
Balance sheet strength is supported by A-/A3/A- credit ratings, $3.9 billionc of consolidated liquidity and a $2.0 billion senior notes issuance in January 2024. Key risks include commodity price volatility, particularly weak natural gas and NGL pricing outlook, rising debt of roughly $29 billion principal, and the partnership's structure, in which EPCO-affiliated owners hold about 32.4% of common units and control the general partner. Lower deficiency revenues on the EFS and South Texas crude systems and lower NGL marketing margins weighed on segment results.
02—Key points
Key Highlights
- Operating income of $6.93 billion in 2023, essentially flat versus $6.91 billion in 2022, while revenues declined about 15% to $49.7 billion on lower commodity prices.
- Non-GAAP total gross operating margin increased to $9.40 billion from $9.31 billion, led by Crude Oil Pipelines & Services (+$52 million) and Petrochemical & Refined Products Services (+$177 million), partly offset by NGL Pipelines & Services (down $244 million).
- Distributable cash flow of $7.60 billion and a 1.73x distribution coverage ratio; the quarterly distribution was increased to $0.515 per unit ($2.06 annualized).
- Growth capital investment of $2.84 billion in 2023, with $3.5 billion of projects placed into service and about $6.8 billion scheduled for completion by mid-2026, including Frac 14, Bahia NGL Pipeline and the Neches River export facility.
- Net cash from operating activities of $7.57 billion, down $470 million, mainly due to working capital used in marketing activities.
- Strong liquidity of $3.9 billion, investment-grade ratings (A-, A3, A-), and 96.4% fixed-rate debt at a 4.6% weighted-average cost, with $2.0 billion of new senior notes issued in January 2024.
- Concentration risk: Vitol accounted for 15.8% of 2023 consolidated revenues, and EPCO-affiliated entities own about 32.4% of common units and control the general partner.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Enterprise Products Partners L.P. kept $0.11.
- Revenue$49.72B100.0%
- Cost of revenue−$37.02B74.5%
- Gross profit$12.69B25.5%
- Operating costs−$5.76B11.6%
- Operating income$6.93B13.9%
- Interest, other & tax−$1.40B2.8%
- Net income$5.53B11.1%
Where FY2023 revenue went
$49.72B- Cost of revenue: $37.02B, 74% of revenue
- Net income: $5.53B, 11% of revenue
- Operating costs: $5.76B, 12% of revenue
- Interest, other & tax: $1.40B, 2.8% of revenue
Kept 11% as net incomeNet income $5.53B · 11%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 28, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $49.72B$58.19B | −14.6% |
| Cost of Revenue | $37.02B$45.84B | −19.2% |
| Gross Profit | $12.69B$12.35B | +2.8% |
| Operating Expenses | $43.25B$51.74B | −16.4% |
| Operating Income | $6.93B$6.91B | +0.3% |
| Interest Expense | $1.27B$1.24B | +2.0% |
| Net Income | $5.53B$5.49B | +0.8% |
| Shares Outstanding (Diluted) | 2.19B2.20B | −0.2% |
05—Questions
Frequently Asked Questions
Is the distribution to common unitholders covered by cash flow?
Yes. Distributable cash flow was $7.60 billion in 2023 against total cash distributions of about $4.39 billion attributable to the year, a 1.73x coverage ratio, down from 1.85x in 2022. The company retained about $3.2 billion of DCF after distributions, which it used for capital investment and debt reduction.
Why did revenue fall so sharply in 2023 if profitability held up?
Most of the $8.5 billion revenue decline came from lower average sales prices for NGLs, natural gas and petrochemicals, which reduced marketing revenues and the matching cost of sales. Cost of sales fell $8.8 billion, so the decline is largely pass-through and did not materially affect gross operating margin.
What are the main growth projects driving future earnings?
Growth is concentrated in Permian Basin infrastructure, including the Leonidas and Orion Midland Basin processing trains, Mentone processing expansions, the 550-mile Bahia NGL Pipeline (first half of 2025), and Frac 14. The company is also expanding LPG and ethylene export capacity at its Houston Ship Channel terminals and building the Texas Western Products System. Management expects 2024 growth capital of $3.25 to $3.75 billion.
What risks could affect the partnership's ability to pay distributions?
Key risks include commodity price swings and ethane rejection, weaker natural gas fundamentals, higher interest costs on roughly $29 billion of debt (96% fixed-rate), construction cost overruns, regulatory rate challenges at FERC, and cyber-attacks. The partnership also has limited unitholder voting rights, and the general partner can reallocate costs and resolve conflicts of interest in its own favor.
06—Continue