Ladies and gentlemen, thank you for standing by and welcome to the Second Quarter Enterprise Products Partner Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker, Randy Burkhalter. Please go ahead.

Good morning and welcome to the Enterprise Products Partners conference call to discuss second quarter earnings. Our speakers today will be Co-Chief Executive Officers of Enterprise’s General Partner, Jim Teague and Randy Fowler. Other members of our senior management team are also in attendance and will assist on the call today. During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, based on the beliefs of the Company as well as assumptions made by and information currently available to Enterprise’s management team. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in any forward-looking statements that may be made during this call. And with that, I will turn the call over to Jim.

Thank you Randy. I said at the beginning of the last call, when we were talking about first quarter earnings, while it was supposed to be an earnings call, I thought it was going to be a COVID call, and that is what it turned out to be. So sticking with that theme, I guess today, we are going to tell you our COVID story. For the second quarter of 2020, we reported EBITDA of $2 billion compared to $2.1 billion for the same quarter last year. Our DCF I think you saw the press release was 1.6 times coverage and year-to-date we have retained $1.2 billion and something else we are quite proud of is, this is the best first half safety performance that we have ever had at Enterprise. Given what we have all gone through, as you would expect, our volumes were down as a result of the pandemic and the oil price crash, but they are quickly improving. With all of the events, our results for the second quarter highlighted diversification of our system, the quality of our customers, cost control and the responsiveness of our assets and our employees during what was probably the most challenging quarter of my career. Our profits were protected by a strong base of firm customer obligations and the natural edge we have and our storage and marketing activities, which enabled us to largely offset the weakness in our natural gas gathering and processing and petrochemical businesses. The facts are, we are in the commodity service business. For us, both on the supply and demand side of the equation. We transport, store, upgrade and buy and sell multiple energy commodities. Because we are so tightly integrated, we have a lot of tools at our disposal. When the market says store…

Thanks, Jim. Good morning. I will start with the income statement for the second quarter. Net income attributable to limited partners for the second quarter of 2020 was $1 billion or $0.47 per unit on a fully diluted basis. This compares to $0.55 per unit for the second quarter of 2019. Net income for the second quarter of 2020 included $51 million or $0.02 per unit of expense related to an increase in the deferred tax liability associated with the OTA Holdings Corporation we acquired from Marquard & Bahls in March, 2020 and the settlement of a liquidity option agreement related to our acquisition of Oiltanking back in 2014. Moving on to cash flows. Cash flow from operations was $1.2 billion for the second quarter of 2020, compared to $2 billion for the second quarter of 2019. Changes in operating accounts or think of it as working capital, accounted for approximately $660 million or 80% of the $842 million decrease in cash flow from operations between the two periods. We used working capital to fund our marketing and contango activities, during the quarter. We currently expect this usage to peak during the third quarter of 2020. Excluding changes in working capital accounts, cash flow from operations for the second quarter of 2020 was about 10% lower than the second quarter of last year. The change in distributable cash flow between the two periods, mirrors this with a decrease of approximately 8.4%. Free cash flow, which we define as cash flow from operations, less cash used in investing activities, plus contributions from our joint venture partners was $305 million for the quarter, which again was reduced by our use of working capital. Free cash flow was $2.7 billion for the 12-months ended June, 2020, which was 27% higher than the comparable…

Okay, Sidney, we are ready to take questions from our listeners.

[Operator Instructions] Our first question comes from the line of Jeremy Tonet with JP Morgan. Your line is open.

Just wanted to start off with the question and maybe Tony could answer best just you guys had talked about pace of recovery being slower and maybe extending into 2021. I was wondering if you could provide a bit more details, I guess, in how you see that transpiring and how that impacts you across, I guess your different business lines.

You want to talk about the production side or the demand side. Jeremy.

If you have both, we will take both.

Yes. So, obviously we had this shut in because of the price crash and chaos, and we think about a million and a half, and I will just use crude as an example of 1.5 to 1.8 million barrels came off the market. I’m kind of a numbers kind of person, not real visual, but if you look at how that production has come back, it is probably one of the steepest V’s I’ve ever seen in statistics. So yes, we have recovered a substantial amount of it. We think that maybe 300,000 barrels will lag. And but with that said, you can’t deny given the amount of declines that the shales have that momentum has changed and there is a fair amount of ground to be picked up. So, that is the reality. When we look at Y-grade coming into our system. For example, those numbers are really strong and I will let Brent address that. But when we get out to 2025 as we see it today, we will be down from where we were before, and it is not because momentum doesn’t pick back up. Look, we think that we were at about 1,150 completions a month in February, and we think that as we get into 2022, that we will be at around 950. Okay. And probably completing the best of the best wells that is what is in our forecast for today. And so, when you get out to 2025, there’ll be some smaller volumes than what we said before. But, Brent do you want to talk about what is going on in our business in that regard and what you are saying?

Yes. The one thing we have seen is just the resiliency of the Permian and part of it is just what is going on out there and part of it is how we have contracted. But, if you look at our Y-grade receipts for June, if you look at our Y-grade receipts for July, those are both records for Enterprise. And if you look at a Y-grade inventories they are at all time highs. So, in terms of how we have contracted and in terms of what we are seeing coming out of the Permian, the fractionation volumes that we have access to, those have bounced back quite nicely.

On the demand side, gasoline is not really - I mean, it is off 10% to 15%, depending on what numbers you look at. Diesel is the same. And again, that is to be expected. So, if we think about going forward, what the data shows is Latin America and we are a large exporting country to Latin America, is waking back up. Moving away from being shut down and largely I think about Mexico and Brazil. So, that is a positive and we are hoping that as we work off inventories, we will put our refineries back to work.

That is very helpful. Thanks. And on the petchem side, as far as the demand there. Any trends that we should be think with LPGs and petchem? Christopher D’Anna: Yes, Jeremy. This is Chris D’Anna. We saw at the beginning of the pandemic, so in March, April timeframe, lower demands on the durables. The single use actually was pretty resilient. We saw pretty good demand. We are starting to see a gradual improvement in demand for the durables. And of course single use is still pretty good.

The fact that our ethylene export dock is sold out also sets up in the back the demand for ethylene.

That is very helpful. Thanks. And one last one, if I could. Just with regards to arbitrage opportunities that you have seen so far, kind of the nonrecurring recurring earnings that you have gotten and that really boosted this quarter. What type of opportunities do you see in the third quarter here, I guess with contango, what have you delayed realization of those profits. Just trying to think through that a bit more.

I think, Jeremy, what we said last call is we thought we’d be at $500 million, $600 million in spread and I think we are probably saying for the year, we will be at the upper end of that range.

Very helpful. Thank you very much.

Thank you. And our next question comes from Jean Ann Salisbury with Bernstein. Your line is open.

Good morning. The main fundamental bear case on Enterprise is expected margin compression in the NGL business. Now that everything looks overbuilt for the medium-term. Anything that you can provide to address these areas of current price war basically, and NGL pipelines and frac and exports will be really helpful.

Yes. Jean Ann. Your question is, as we think about margin compression and I’m going to assume you are talking about as people re-contract on midstream assets. Is that where you are headed?

I think it is a little bit more than that. I think people usually talk about fracs, but I think it is really the whole chain of NGL pipelines, frac and exports. It seems like now there is too much capacity. And so people are concerned that you could see a similar phenomenon to what we see in crude, which is - when contracts come up that you would see massive declines.

I think what you are saying kind of make sense, I think you have to take a look at what a company has to work with. I emphasized petrochemicals in my opening comments because that gives us a heck of a lot more longer of the value chain to leverage, so it is about what are you having to leverage? And while one part of that value chain may be under some stress, the total won’t be. Is that fair Brent?

Yes. A – James Teague: And you had another point to make. So, in our situation, yes, maybe, but we’ve got a value chain that we are going to leverage and we’ll give them what they want, where the hot button is. We’ll collect what we need at the rest of the value chain.

I think there is some offset Jean Ann, and what we are seeing on ethane, is an offset on volumes, both for pipelines and for fractionation. I hear what you are saying from an industry standpoint and I will repeat myself. I think we have done a heck of a job contracting. I think how you contract and who you contract with matters in this environment. And we will say that about other commodities as well. If you look at our LPG export facility, it is in a very, very good position in terms of the contracts we have in place. And if you look at the balance of this year and you look at the following couple of years, we are in a very, very good spot. Then ultimately if supply starts going down, you look at what we have built in Mont Belvieu and the pricing points that we have. You know, I fundamentally believe that the downstream assets that we have at those pricing points benefit. So there are some offsets in this environment.

That makes sense. So effectively the bundled chain you think will kind of give you a better and different outcome than the worry on crude pipelines more broadly.

I think it always has.

Great. Thanks that is all for me.

Thank you. And our next question comes from the line of Tristan Richardson with SunTrust. Your line is open.

Hey, good morning guys. Could you talk about your prepared comments about the JV opportunities for reducing capital? You noted that that process has been elongated due to the pandemic. Are the six potential JVs still in play that you noted on the last call or can you just give us a general update there.

Yes, I think on the last call, we said that we were pretty engaged with three of those six. And not to guess, but what I could say today is we are probably pretty engaged with one of those three. It is not that you are not in discussions with the others, but it is like Randy said in this environment, everybody’s just kind of pulling their horns in. So we are discussing some JVs with some of our larger projects. But I wouldn’t say we are highly engaged with more than one. But we are highly engaged with one.

That is helpful and then just a quick follow-up. Could you just help frame how we should think about maybe the largest components of the 2021 $2 billion outlook? Whether it be, PDH-2 or Midland-to-ECHO 4 and does this number presume joint ventures or is this more like an 8x type of budget?

Yes Tristan this is Randy. The $2.3 billion is assuming no joint ventures. And if you would, two-thirds of that $2.3 billion are really three projects, and that is PDH 2, Midland-to-ECHO 4 crude oil pipeline and the Gillis natural gas pipeline.

Great. Thank you guys very much.

Thank you. And our next question comes from Colton Bean with Tudor Pickering. Your line is open.

So you noted in the press release the process volumes were back to 88% of March levels and NGLs were nearly at parity. On the inlet volume side, can you provide a bit more detail as to the mix across your footprint? And then on NGLs, is that outperformance relative to gas? Is that primarily increased extraction?

Who wants to take that?

This is Brent, Colton but, I think I would just say ethane has probably increased about 4%, maybe 5% across our system. And then in terms of just the whole volume metric and I’m not sure I understood the question. But where you are seeing the growth come from is obviously in Permian and I think you’ll see in July some very robust volumes that come from that area.

And that was mainly the focus of the first point. It was just when you look at kind of the four primary footprints for you guys, what would that recovery look like on a by basin basis?

We are not seeing a whole lot. I mean, Eagle Ford has been fairly flat. There’s people talking about putting up rigs. There’s a certain company, that is looking to deploy some capital there that we are involved with. But I would say in the Rockies, you are seeing ethane recoveries pick up out there. And then obviously in the Permian just in terms of how aggressive we have been on contracting and just the bounce back in volumes, we are seeing the bulk of the benefits out there in that area.

But to cut to the chase, it is Permian centric, right?

Yes, sir.

Understood. And then just on the updates to the 2022 capital budget, now down to $1 billion. Can you frame what that might look like if you were to strip out the PDH 2 spend or in simpler terms, if you remove the major projects, what that run rate might be?

It would be less. Yes. I mean, you are probably knocking on the door of $500 million.

Got it. Alright. That is helpful. I appreciate it.

Thank you. And our next question comes from the line of Ujjwal Pradhan with Bank of America. Your line is open.

Thank you. Good morning, everyone. Thanks for taking my questions here. Firstly, a quick follow up on Tristan’s question on the potential JVs on growth capital projects. Could you maybe high level discuss, what are the parameters of your negotiations there and who would be your preferred JV partners?

Typically they bring more than money. They have got to bring throughput or they got to bring offtake. Typically those are the kind of people we do joint ventures with. Does that answer your question?

I guess that does. That is helpful. And in terms of sort of the parameters of what you are negotiating or within the project, how you plan to sort of sell the interest. Can you comment on that?

Could you repeat that question? I’m sorry.

Sorry. Could you maybe discuss, what you are considering when it comes to the negotiations? Maybe simply put, some of the bigger projects that you have on the backlog, which ones, how would you rank them in terms of which ones you would want the partners to get involved in?

Well, I’ll tell you what we wouldn’t want them getting involved in, that is the church house, which I think is probably our storage system in Mont Bellevue. I don’t think we have a problem with having them involved in some of our - some of the less strategic things that maybe feed the system but that is about it, that’s about all we are going to say.

Got it. Thanks for that. And a follow-up on elections this year. Would you be able to share some thoughts on how you are watching the elections and the recent movements there, and maybe if you could share your perspective on potential impacts and/or benefits to EPD, as well as the overall MLP space in terms of corporate taxes, as well as energy infrastructure proposals.

Okay. This is Randy, I guess it is the season political rhetoric, and I don’t know how much you can really - with some of the proposals that are being put out in the public domain. Frankly, I don’t know how focused you can get all of those at this point in time, and again, because everyone is in campaign mode. I think with the deficits that the country is running up, it looks like, income taxes, tax rates for both individuals and corporations are going to go up and perhaps substantially. So to be honest, this year, we’ve really not spent any time coming in and looking at an MLP versus C-corp analysis. We have been too focused on executing, and just given where the uncertainty in the environment and the volatility in the environment, frankly, we are pretty content with our current MLP structure. And as far as policy is going, as far as what has been proposed, I go back a little bit and use the analogy of the U.S. Highway Trust Fund. You know, it was created in 1956 and its taxes on motor gasoline and diesel to come in and fund road construction and road maintenance. The last time the tax on diesel and gasoline was raised to fund that Trust Fund was 1993. Since 2008, the Trust Fund has been running deficits and no one in Congress, be it a Republican or Democrat administration has been willing to go up and raise the tax on motor gasoline and diesel because they didn’t want the impact on individuals and they did not want impact on businesses. And some of the things that are being contemplated in some of these policies that we hear in this campaign would substantially increase the cost for the energy of both on individuals and companies. So, it is really hard to see if the powers that be wouldn’t even increase the price on gasoline, how some of these large proposals can come in and be executed.

Got it. Thanks for that.

Thank you. And our next question comes from the line of Shneur Gershuni with UBS. Your line is open.

Hi good morning, everyone. Good to hear everyone as well. Maybe to start off, Jim in your prepared remarks, you sort of talked about how the marketing and spread businesses is effectively a natural hedge for the business, opportunities pop up with dislocations and so forth. I was just wondering if you can sort of give us your thoughts on how the trends play out for the balance of this year? And what I mean by that is, spread opportunities start to recede over the next couple of quarters, but at the same time, you have the shut-ins coming back, base business starts to move higher. Is the trend of the base business recovering stronger than the, I guess, subsiding of the marketing opportunities? Is there a scenario where Q3 can be higher than Q2 without getting like specific guidance? Just sort of talking about the trends, which is the stronger trend right now, or is the natural hedge going to reverse itself and sort of keep us in a running flat scenario?

Yes. It is a good question Shneur. I think personally, you get dislocations and you get spreads when you have events. So when crude prices fall invariably, we will see contango – I mean, it’s been the way it has been. If those spreads are there then in my mind, our pipelines are probably a lot more throughput than we have today. So that is kind of way I see it. I’m probably a little more bullish than Tony is in terms of recovery. I think, I personally think demand is going to recover sooner than, probably Tony thinks it is going to recover. And I think you are going to get a price signal next year on hydrocarbons that turn some things back on. So, that is what I see.

Okay. And maybe a follow-up question here. Just sticking with the theme of dislocations. Obviously, you have been very opportunistic to take advantage of the market on dislocations to capture spreads within hydrocarbons for your base business itself. When I think about EPD’s unit price, do you see similar dislocations in your stock price right now? For example, you are down today with the results that you have put out. And do you see an opportunity to use the excess cash generated from the strong marketing proceeds, lower CapEx budget to potentially accelerate or increase your buyback target to take advantage of these dislocations within your stock price?

I’m going to let Randy answer that but individually there’s a number of us that have accelerated our buyback program.

Shneur I think that just as I mentioned, that really this year we are really coming in and going quarter-by-quarter, as we consider cash distribution growth to our investors and spending capital on buybacks falls in that same category. So again, we will come in and take a look at it quarter-by-quarter. We had come in and allocated approximately 2% of cash flow from operations to go towards buybacks. We have done that. We will come in and look for opportunities for the remainder of the year to see how we would want to come in. And if we are going to return more capital to investors, whether that would be in the form of distributions or buybacks, so more to come on that.

Okay. And so it is fair to conclude that the 2% target is not a hard line. It is something that you can go above and that you would look at a 9.75% yield as probably being very opportunistic?

You know Shenur, yes it was approximately 2% is what we said, but we will come in and take a look at it quarter-by-quarter. Some of this we would like to get as Tony described. There is still some uncertainty out there as far as coming in and how the economy reopens, we just like to get a little bit more visibility on what we see for the business environment.

Alright. That sounds great. I appreciate time, I want to keep it to just two questions. Have great and safe day.

Thank you.

Thank you. Next question comes from Justin Jenkins with Raymond James. Your line is open.

Hi morning, everyone. I guess I would like to start on 2020 growth spending. Randy, I think you covered a bit of the further outlook for ’21, ‘22, but is it more timing at this point in terms of the range of spend less for 2020 or is some of that dependent on JV outcomes?

It is the range that we give for 2020, the $2.5 billion to $3 billion is largely just timing on how we see cash leave, go out the door.

Okay. That makes sense. And then you also mentioned that you expect working capital to peak in 3Q in terms of usage. Do you have a magnitude in mind for that? And then maybe give us a sense of how quick that cash comes back in the door as a tailwind thereafter?

Yes. Probably you could see call it another $300 million to $500 million increase in working capital between now and the end of the third quarter. And then I think it would just, work off over - from the third quarter, probably work off - typically you have got a good bit of working capital deployed. I mean, just in our typical business, you have a good bit of working capital deployed over the fourth quarter. So I think you would see ultimately from that peak in the third quarter, you probably see it worked off largely by the end of the first quarter of next year.

Got it. Thanks Randy.

And our next question comes from the line of Keith Stanley with Wolfe Research. Your line is now open.

Hi, good morning. Just following up on the last question, if your working capital is still increasing in Q3, should we assume that means some of the contango marketing type opportunities could be even greater in the future than what we saw in Q2 in future quarters?

No. I think some of it is just a carry over to what we put on. I think what Jim alluded to that we think we may be as far as total spread opportunities be in the upper end of that $600 million range, really sort of see that split 50/50 first half of the year, second half of the year. But, you still have, just with some of the positions that we put on, you can have working capital creep with those positions.

Okay. That is helpful. And then going back to last quarter, I thought the messaging was pretty strong from the company that there weren’t acquisitions you were interested in. I guess, with the dust settling somewhat here. What is your view on the merits of acquiring companies or assets and synergies? I mean, the one thing that is striking is, you guys could issue 10-year debt right now at under 2% interest rate, so just any updated thoughts on how you are thinking about that?

I would say, we’ve got the same answer as the first quarter.

Keith I think you heard that one, that is where I think we are too. We look at opportunities that come across. Frankly, we have not seen as far as teasers coming in. We frankly have not seen much in the way of teasers come across the last three or four months, and certainly not anything compelling. So, I think right now we are just focused on continuing to execute with the business that we have and go from there. But I mean, we are open to come in and look at opportunities. But it really needs to be a good fit, probably what would be more likely would come in and be a bolt-on type opportunity. But again, really haven’t seen anything develop on that front.

Interesting. Thank you.

Thank you. Our next question comes from line of Pearce Hammond with Simmons Energy. Your line is open.

Good morning, and thanks for taking my questions. Just two questions on the same subject. The first one is what are your views on U.S. NGL export capacity? Do you see more opportunities to grow your NGL export business? And then the second question is, overall, it seems that U.S. NGL exports have a better outlook than U.S. crude exports. Do you think that is a fair statement?

This is Jim. But Tony and Brent chime in, I think the world needs U.S. LPG and as lifestyles improve in other parts of the world, in many cases LPG is what creates that improvement. Do you have anything to add?

Data speaks for itself Jim. You are exactly right. You look at what happened in the height of the pandemic, Brent were you blown away by the demand?

Absolutely. Record type numbers.

You know I wouldn’t be too quick to write off crude oil exports. We have seen quite a lot. We have seen a pick up in crude exports. I thought we had a record week as a country at one point.

A couple of weeks ago I think we started going back to the highs. We’re seeing just a different interest in the slate, the lighter. There is a bigger demand for West Texas light. There is a bigger demand for the Eagle Ford type barrel as people have the bid on motor gasoline and we are seeing those go to Asia, mostly Korea and some Latin America. But on the LPG side, I think we are in a good spot as Enterprise. You know, we have a project out there that we can expand when the time is right to expand. I’m not sure from a capacity standpoint, it needs to be expanded anytime soon, but certainly we have a project that is a low capital project that we can execute on.

Thank you for your responses.

This is Randy. We have time for one more question. And then if you would give the replay information.

Certainly. Our last question comes from the line of Michael Blum with Wells Fargo. Your line is open.

Thanks. Good morning everyone. Just two quick ones for me, so just to stay on the LPG export topic, it seems like your volumes are holding up here at least in the beginning of the first half of - the second half of 2020. Can you just give your, kind of, talk about what you are seeing? Are you seeing any drop off as some of these countries come out of lockdown or are you still seeing strength there in LPG export volumes? And if so, what do you think is driving it?

Hi Michael, I think we still see strength. I think what is driving it is what we talked about a while ago.

I think we are seeing a lot of PDH demand over in Asia. I think just in terms of how we contracted Michael, I say this humbly, but I think we will probably be toward the end to see any kind of drop off. I mean, we have just in terms of our supply position, in terms of the pricing point in terms of how aggressive that we have contracted out for this year and the next couple of years. We are in a good position to kind of maintain these type of levels. I think you are seeing us export, call it around 18 million barrels a month of LPGs. And I would say that’s sticky. Those are sticky numbers.

What is interesting Michael is whenever we do get a cancellation, we have been pretty successful in back filling it with the supply. So the appetite is there.

Okay, great. That makes a lot of sense. My second I think is probably for Randy, you referenced the target payout ratio number that you are now referring to a bit. Do you have kind of like a long-term target for where you want that to sort of settle out overtime? Or are you thinking about it that way?

Michael, I don’t think we have developed our thoughts that far along on setting a long-term target. Some of your balance to that would be what kind of growth opportunities do you see? So, we have really not come in and settled on any long-term targets. I mean, we do come in and compare how we are doing compared to the market and I think when we are coming in and look at the market and across the various sectors of the S&P 500 on the page, I think we are amongst the top two, top three of the sector. And it is by nature being an MLP, the whole thing with an MLP is you have a high payout ratio and so I think we comp pretty well against the market.

Great. Thanks everyone. I appreciate it.

Okay, Sidney. Do you want to give the replay information?

Certainly. You may dial in at 1800-859-2056 or 404-537-3406, with the access code 1667154 to access the replay information. I would now like to turn the call back to Randy Burkhalter for any further remarks.

Okay. That concludes our remarks today and I would like to thank everyone for joining us and have a good day. Thank you and good-bye now.

Okay. Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect. Everyone have a great day.