Tuesday, May 2, 2023

Enterprise Products Partners - Q1 2023

Enterprise Products Partners L.P. (EPD, previously) reported results this morning. Highlights from the results and conference call

  • Enterprise reported net income attributable to common unitholders of $1.4 billion, or $0.63 per unit on a fully diluted basis, for the first quarter of 2023, compared to $1.3 billion, or $0.59 per unit on a fully diluted basis, for the first quarter of 2022.
  • Distributable Cash Flow ("DCF") increased 5.5 percent to $1.9 billion for the first quarter of 2023 compared to $1.8 billion for the first quarter of 2022. 
  • Distributions declared with respect to the first quarter of 2023 increased 5.4 percent to $0.49 per common unit, or $1.96 per common unit annualized, compared to distributions declared for the first quarter of 2022. DCF provided 1.8 times coverage of the distribution declared with regard to the first quarter of 2023. Enterprise retained $863 million of DCF for the first quarter of 2023.
  • Enterprise reported a solid first quarter as we benefited from record pipeline transportation and fee-based natural gas processing volumes and near record marine terminal volumes. In March, our marine terminals handled a record 2.3 million barrels per day of NGL, crude oil, refined products and petrochemical exports.
  • Across our integrated system we continue to see crude oil, natural gas and NGL production growth from the Permian Basin. Lower natural gas prices, however, are beginning to temper activity and growth in dry natural gas plays such as the Haynesville and Eagle Ford. 
  • For the 12 months ending March 31st, 2023, Enterprise paid out approximately $4.2 billion of distributions to limited partners. In addition, we also repurchased $267 million of common units off the open market. As a result, our payout ratio of adjusted cash flow from operations was 55% for this period and our payout ratio of adjusted free cash flow was 75% for this 12-month period.

The current market capitalization of Enterprise is $56 billion and the enterprise value is $86 billion. This quarter's $1.9 billion of distributable cash flow annualizes to $7.6 billion (compared with $7.8 billion for all of last year) which implies a shareholder yield of 13.6% on the current market capitalization. Units are trading for 10 times this quarter's (annualized) net income. The actual distribution ($1.96 per unit annualized) is a 7.6% yield on the current unit price.


CP said...

Comparison of Q1 2023 vs Q1 2020/2019:

2023: $12.4B
2020: $7.5
2019: $8.5

Net income
2023: $1.39B
2020: $1.35
2019: $1.26

Unit count:
2023: 2,174,508,951
2020: 2,240,607,595
2019: 2,188,560,672

Net income / unit
2023: $0.63
2020: $0.61
2019: $0.57

Cash from operations
2023: $1.58B
2020: $2.01
2019: $1.16

2023: $0.73
2020: $0.90
2019: $0.53

NI+depreciation-Capex (FCF)
2023: $1.35
2020: $0.81
2019: $0.61

NI+depreciation-Capex (FCF) / unit
2023: $0.62
2020: $0.36
2019: $0.28

Total liabilities less current assets:
2023: $29.7B
2020: $28.4
2019: $28

Q1 2023 10-Q

Q1 2020 10-Q

Q1 2019 10-Q

CP said...

It's nice to see the huge increase in "net income plus depreciation less capital expenditure per unit" over the four years from 2019 through 2023: from $0.28 in Q1 2019 to $0.62 in 2023.

That measure should be a good proxy for the cash that the business will be able to use to distribute to unitholders and buy back units (shareholder returns).

The current unit price is about $26, so in theory the 62 cents, on an annualized basis, could support a 9.5% unitholder return.

Four years ago, the units were trading for more like $29. That was only a 3.9% implied yield.

The reason we looked at "total liabilities less current assets" is to make sure that the company has not just been borrowing to pay the distribution.

Note that the First Trust MLP and Energy Income Fund (FEI) has EPD as its largest holding (10.9%) That closed end fund is trading for a 16.4% discount to NAV.

Midstream companies seem much more attractively priced than tobacco companies.