Enterprise Products to Ramp Down Capex as Company Prepares for Post-COVID World

Researched by Industrial Info Resources (Sugar Land, Texas)--When an analyst asked executives from Enterprise Products Partners LP (NYSE:EPD) (Houston, Texas) whether they were concerned about possible overcapacity in the company's midstream business, particularly with regard to natural gas liquids (NGLs), Co-Chief Executive Officer Jim Teague pointed to the diverse nature of Enterprises' undertakings across several segments of the midstream business as providing the company with the flexibility and resiliency it needs to be sustainable in the oil and gas and petrochemicals sectors that have been greatly affected by the COVID-19 pandemic and lower prices.

Enterprise's footprint spans not just oil and gas transmission, but also petrochemicals, fractionation and terminals. Nevertheless, the company is stepping down planned capital expenditures (capex) in coming years as it completes underway projects and prepares for a post-COVID world.

In the company's recent earnings conference call, Teague said that Enterprise's volumes were down as a result of the pandemic but are quickly improving. Teague said Enterprise's petrochemical and refined products segments had been hit particularly hard due to decreased demand.

Upstream segments are faring better. Teague said, "On the production side, our natural gas gathering and processing were impacted by low prices and some shut-in production. While those shut-ins were not insignificant, for the most part, they were relatively short-lived, and volumes on our system are recovering."

While Enterprise has faced some delays on projects due to COVID-19, the company is on its way to completing several projects later this year. Among these is the Midland-to-ECHO 3 segment of the Wink-to-Webster crude oil pipeline in Texas, a joint venture with Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas), Plains All American Pipeline LP (NYSE:PAA) (Houston) and MPLX (NYSE:MPLX) (Findlay, Ohio), among others. Teague said the company is expected to complete the segment of the pipeline in the third quarter. Construction began earlier this year. For more information, see Industrial Info's project report.

Also planned to come online in the third quarter is an eleventh NGL fractionator at the company's complex in Mont Belvieu, Texas. The unit will provide 150,000 barrels per day (BBL/d) of capacity, bringing total fractionation capacity to 1.1 million BBL/d. However, construction on a twelfth fractionator has been delayed due to the pandemic, and completion is expected next year. Construction on both units began last summer, with S&B Engineers and Constructors Limited (Houston) providing engineering, procurement and construction services. For more information, see Industrial Info's project reports on Fractionator 11 and Fractionator 12.

One of Enterprise's biggest projects is underway at Mont Belvieu: a second propane dehydrogenation (PDH) train. The unit will use 35,000 BBL/d of propane as feedstock and will double Enterprise's existing PDH capacity to 3.3 billion pounds per year. Construction began earlier this year and is expected to be completed in 2023. For more information, see Industrial Info's project report.

Among Enterprise's accomplishments in the just-passed quarter was loading a record-size ethylene cargo of 44 million pounds in June. At its Morgan's Point facility in La Porte, Texas, Enterprise simultaneously loaded ethane and ethylene on the same vessel, which Teague said was the first export cargo of its kind from the U.S. He said, "Co-loading olefins on larger vessels with NGLs allows for more efficient use of dock capacity, but it also provides significant freight benefits to petrochemical export customers." Enterprise seems intent in maintaining a foothold in its export segment and is in the planning stage for a third ethane refrigeration train at Morgan's Point, which has a loading capacity of 5,000 barrels per hour. The train would increase loading capacity by 50%. Construction could kick off next summer, for completion in 2022. For more information, see Industrial Info's project report.

Despite these underway and planned projects, Enterprise is stepping down capex for 2021 and 2022. The company's other co-chief executive officer and chief financial officer, Randy Fowler, said the company's capital investments for the second quarter were $910 million, which included $74 million for sustaining capital expenditures. Enterprise expects to spend $2.5 billion to $3 billion in growth capital projects this year and approximately $300 million for sustaining capital expenditures. Fowler said 2021 growth capex in 2021 is expected to be $2.3 billion, followed by approximately $1 billion in 2022. This is an aggregate $700 million reduction from the company's first-quarter guidance for those years.

Enterprise reported net income of $1.04 billion in second-quarter 2020, compared with $1.22 billion in the prior-year quarter.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.