10-QPeriod: Q1 FY2020

ENTERPRISE PRODUCTS PARTNERS L.P. Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 8, 2020For Securities:EPDEPDU

Summary

Enterprise Products Partners L.P. (EPD) reported its first quarter 2020 results, showing a net income of $1.35 billion, or $0.61 per unit, an increase from the prior year's $1.26 billion, or $0.57 per unit. This growth was driven by strong performance in its NGL Pipelines & Services segment, which saw a significant increase in gross operating margin, bolstered by higher LPG export volumes and contributions from expansion projects. The company also benefited from the settlement of a liquidity option, which resulted in a one-time tax benefit that boosted net income. Despite a challenging macroeconomic environment marked by the COVID-19 pandemic and volatile energy prices, EPD maintained a strong liquidity position. The company generated substantial operating cash flow, reduced its capital expenditures slightly year-over-year, and managed its debt effectively, including issuing $3.0 billion in senior notes. Management expressed confidence in its ability to navigate the current economic conditions due to its predominantly fee-based business model, strong customer base, and disciplined capital allocation, including a 1.7% increase in its quarterly cash distribution to $0.4450 per unit.

Financial Highlights

44 data points
Beta

Revenue

$7.48B

35.5% Gross Margin

Net Income

$1.35B

18.0% Net Margin

Total Assets

$62.27B

Cash & Equivalents

$2.03B

Free Cash Flow

$932.70M

Financial Statements
Beta
Revenue$7.48B
Cost of Revenue$4.82B
Gross Profit$2.66B
Operating Expenses$6.12B
Operating Income$1.51B
Interest Expense$317.50M
Net Income$1.35B
Shares Outstanding (Diluted)2.20B

Key Highlights

  • 1Net income increased to $1.35 billion in Q1 2020, up from $1.26 billion in Q1 2019, with earnings per unit rising to $0.61 from $0.57.
  • 2Total revenues decreased to $7.48 billion from $8.54 billion, primarily due to lower marketing revenues, especially in crude oil and natural gas.
  • 3Gross operating margin for NGL Pipelines & Services increased by 8.6% year-over-year, driven by higher LPG export volumes and pipeline expansions.
  • 4The company settled a liquidity option in March 2020, acquiring OTA and realizing a non-cash benefit of $187.2 million related to the associated deferred tax liability.
  • 5EPD issued $3.0 billion in senior notes in January 2020 to manage its debt and fund general corporate purposes.
  • 6The company maintained strong liquidity, ending the quarter with $7.0 billion in consolidated liquidity, including $2.0 billion in cash.
  • 7The quarterly cash distribution was increased by 1.7% to $0.4450 per unit, reflecting management's confidence in its financial position.

Frequently Asked Questions

The primary driver of EPD's earnings growth was the strong performance of its NGL Pipelines & Services segment, which saw increased gross operating margin. This was supported by higher export volumes, particularly LPG, and contributions from recently completed expansion projects within the segment. Additionally, a one-time tax benefit from the settlement of a liquidity option also contributed positively to net income.

The macroeconomic environment, characterized by the COVID-19 pandemic and a significant oil price shock, led to a decrease in total revenues, primarily due to lower marketing revenues for crude oil and natural gas. However, EPD's predominantly fee-based business model and take-or-pay contracts helped mitigate the impact on its overall profitability and cash flow generation.

EPD maintained a strong liquidity position at the end of Q1 2020, with $7.0 billion in consolidated liquidity, including $2.0 billion in cash on hand. The company also enhanced its liquidity by entering into a new $1.0 billion revolving credit agreement in April 2020. EPD managed its debt effectively, including issuing $3.0 billion in senior notes in January 2020, which helped repay upcoming maturities and provided funds for general corporate purposes. The company indicated it does not anticipate needing to access capital markets again until 2021.

Yes, EPD repurchased approximately 6.4 million common units for $140.1 million under its 2019 Buyback Program during the first quarter of 2020. The company also declared a quarterly cash distribution of $0.4450 per unit, a 1.7% increase over the prior year's first quarter distribution. Management will evaluate future distributions quarterly in light of current economic conditions.