EPD | Q4 2024

The content provided on this website, including any communications, posts, videos, social media interactions, and other materials, is for informational and educational purposes only. It should not be considered as financial or investment advice. Read our full disclaimer here.

Links

• Link to Transcript

• Link to Presentation

Overview

• Non-GAAP EPS of $0.74 beats by $0.04.

• Revenue of $14.2B (-2.9% Y/Y) beats by $70M.

Takeaways

Enterprise Products Partners (EPD) closed out 2024 with strong financial performance, reporting $9.9 billion in EBITDA and $7.8 billion in distributable cash flow (DCF), resulting in a solid 1.7x coverage ratio.

The company retained $3.2 billion in excess DCF—nearly a record—and continued its disciplined approach to capital allocation.

Net income for the quarter came in at $1.6 billion, or $0.74 per common unit, resulting in a slight increase from the previous year. Cash flow from operations was also up 4% year-over-year, reaching $2.3 billion.

EPD also raised its quarterly distribution to $0.535 per unit, a 4% increase over Q4 2023, with total shareholder returns—including buybacks—amounting to $4.8 billion for the year, representing a 55% payout ratio.

The company remained active on the buyback front, repurchasing 2.1 million units in Q4 and 7.6 million for the full year, totaling $219 million spent on buybacks. Employees have also shown confidence in the company and have some skin in the game, with nearly half participating in EPD’s unit purchase plan.

The topic of buybacks also came up in the Q&A session, and management hinted at the potential for more repurchases in the coming years.

By 2026, excess DCF could reach $3.5 to $3.6 billion, with about $1 billion to $1.1 billion available for buybacks and debt retirement after covering growth capital spending.

While EPD remains committed to distributions, it’s clear that share repurchases will continue to be a meaningful part of capital returns.

In addition to its commitment to unitholder returns, EPD continued investing heavily in its infrastructure, spending $5.5 billion in 2024—$3.9 billion on organic growth projects, $945 million on the Pinon Midstream acquisition, and $667 million on sustaining capital.

On the balance sheet side, EPD ended the year with $32.2 billion in debt, a weighted average cost of 4.7%, and 98% of its debt at fixed rates. The company’s leverage ratio stood at 3.1x, well within its long-term target range of 2.75x to 3.25x.

Looking ahead, growth capital expenditures for 2025 are projected between $4 billion and $4.5 billion, with a focus on expanding sour gas gathering and treating projects in the Delaware Basin.

Operationally, EPD moved an impressive 12.9 million barrels of oil equivalent per day in 2024, with Q4 volumes reaching 13.6 million. The company exported over 70 million barrels of hydrocarbons in December alone, with a big goal of hitting 100 million barrels per month by 2027.

The Permian remains a focal point, with two new gas processing plants completed in late 2024 and two more expected in 2025. Other key expansion projects include the Bahia NGL pipeline, Frac 14, and additional ethane and ethylene terminal capacity at Morgan’s Point.

One of the more heated discussions on the call revolved around SPOT (Sea Port Oil Terminal), Enterprise’s offshore crude export project.

Co-CEO Jim Teague didn’t mince words when criticizing the years-long permitting process, describing it as a bureaucratic nightmare that ultimately cost the company an anchor customer. Despite holding the only U.S. license to construct such a terminal, EPD has struggled to gain traction in commercializing the project due to shifting crude export dynamics.

While crude shipments to Asia were once expected to dominate, U.S. exports to Europe have doubled in response to the Russia-Ukraine conflict, reducing the immediate need for a VLCC-focused terminal like SPOT.

Teague made it clear that EPD isn’t going to build the project on speculation, saying the company will move forward only if it secures the right volume commitments and financial terms.

---