Enterprise Products Partners LP (EPD) 2016 Q1 法說會逐字稿

Good morning. My name is Ginger and I will be your conference operator today. At this time, I would like to welcome everyone to the Enterprise Products Partners first-quarter 2016 earnings conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

Mr. Randy Burkhalter, you may begin your conference.

Thank you Ginger. Good morning and welcome, everyone, to the Enterprise Products Partners first-quarter 2016 earnings call. Our speakers today will be Jim Teague, Chief Executive Officer of Enterprise's General Partner, and Bryan Bulawa, Chief Financial Officer. Other members of our senior management team are also in attendance for the call today.

During this call, we will make forward-looking statements within the meaning of Section 21-E of the Securities and Exchange Act of 1934. This is 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, 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 the forward-looking statements made during this call.

With that, I'll turn the call over to Jim.

Thank you Randy. Today we reported gross operating margin of $1.3 billion compared to $1.3 billion for the same quarter last year. This led to distributable cash flow of $1.1 billion compared to $1 billion for the same quarter last year. Distributable cash flow provided a solid 1.3 times coverage for the $0.395 per-unit distribution we declared for first quarter 2016, which was a 5.3% increase over the first quarter of 2015. This was our 56th distribution increase since Enterprise's IPO in 1998 and our 47th consecutive quarterly increase. In other words, we had another pretty good quarter in a pretty tough market environment.

Before we discuss our operating and capital updates, I thought it worthwhile to take a minute to look at some historical data. Two years ago, in the first quarter of 2014, oil prices were $98 a barrel, natural gas was $4.75, ethane was $0.35 a gallon, propane was $1.30, processing margins were over $0.60 a gallon, and Enterprise reported 1.6 times coverage. One year later, in the first quarter of 2015, oil had dropped by 50% to $48 a barrel, natural gas was $3.00, ethane was $0.19 a gallon, propane had fallen to $0.53 a gallon, processing margins had fallen to $0.25 a gallon, and we delivered 1.4 times coverage.

Last quarter, oil prices were as low as $26, natural gas was around $2.00, ethane was $0.16 a gallon, propane $0.39 a gallon, processing margins were less than $0.20 a gallon, and Enterprise delivered a 1.3 times coverage.

This hasn't been easy and we don't take these coverage ratios for granted. However, our results do continue to show that our business model is effective, that we remain extremely focused on our costs, and that our people are creative and hard-working.

While distributions and coverage continue to be met or exceeded, many of the drivers in our earnings have changed over the last three years. New assets are continually coming online and ramping up, commodity prices have obviously changed, and flows around the country and around the world have changed over the last three years.

For example, this quarter, our contracted volumes were down. However, our throughput from incremental volumes were up.

While processing margins are down fairly dramatically because of depressed prices, the value of storage assets has increased substantially. Three years ago, you could not find a spare crude oil truck or a driver. Today we are reassigning many of our crude drivers in order to move LPG truck volumes from stranded locations. The point of this is it's a few examples of the complementing synergies that one finds in our integrated system.

Gross operating margin for our NGL Pipelines & Services segment increased $89 million to $784 million for the first quarter of 2016 compared to the first quarter of last year. These numbers reflect the ramp up of new assets, including ATEX, Aegis, Front Range and Texas Express, but these numbers also reflect our success in being very aggressive and adding incremental volumes by using the strength of our value chain.

Our NGL export volumes were up substantially, reflecting the new LPG assets we put in service in December, and our fractionation volumes increased 5% to 836,000 barrels a day from 798,000 barrels a day in the first quarter of 2015. That fractionation increase is evidence of our using the strength of our value chain to bring incremental volumes. That's one place we realize those results.

Gross operating margin from our Crude Oil Pipelines & Services segment was $202 million for the first quarter of 2016 compared to $214 million for the first quarter of 2015. Total crude oil pipeline volumes were 1.4 million barrels per day for both the first quarter of 2016 and the first quarter of 2015. The lower earnings were a result of declining contract throughput that flat volume will result of using the strength of our value chain for incremental throughput.

Enterprise's Natural Gas Pipelines & Services segment reported gross operating margin of $178 million for the first quarter of 2016 compared to $205 million for the first quarter of 2015. Natural gas transportation volumes were 11.9 Bcf a day for the first quarter of 2016 compared to 12.5 Bcf a day for the first quarter of last year. So our volumes are down 5%. Our earnings are down 14%. It's the same story as we told in our crude oil segment.

Our Petrochemical volumes and profits were down slightly as a result of an extended outage we had at our BEF Octane Enhancement facility during most of the first quarter but primarily it's a result of lower margins. Our Petrochemical segment was enhanced by things like increased propylene export volumes. The BEF facility is now up and running at full capacity. We don't expect any additional downtime in 2016.

Moving on to capital projects, we completed $300 million of projects in the first quarter, and expect to place about $2.5 billion of project in service in 2016. These include 2 natural gas processing plants and related infrastructure in the Permian Basin, one of which, our South Eddy Plant is in the commissioning mode as we speak. Our ethane export terminal will be online during the third quarter, and additional crude oil storage is being put into service in the Houston and Beaumont areas. We also have $4.2 billion of growth projects scheduled to be completed in 2017 and 2018, our two largest projects being the PDH plant which we expect to bring online early next year and our Midland to Sealy crude oil pipeline system expected to be in service by the middle of 2018. The Aegis pipeline is complete and volumes will be ramping up through 2019.

I'm going to ad lib. It has all the lawyers worried. We talk about, when we put a processing plant in, we get the benefits of that processing plant throughout our value chain. When we put a demand pull project in like Aegis, we get the benefits upstream all the way to our processing plants.

Finally, I'll take a minute just to talk about prices and this is probably worth what you are paying for it. Almost all the experts have been saying that we've seen the bottom for oil prices and that prices in general should be on an upward move. We believe the fundamentals point in that direction. Both the US and producers in other parts of the world appear destined to have declining production, and declining production because of the current prices, but also current US rig counts. Economists are predicting 1 million to 1.5 million barrels a day increase in global demand for 2016, and that's on top of last year's 1.6 million barrels a day demand growth.

For natural gas, outside of the fact that we just had one of the warmest winters on record, all signs also point to price improvement as literal step changes in demand are coming. US LNG facilities come online steadily between now and 2020. Gas-fired power plant demand increases continue, and industrial load continues to grow all in the face of gas rig counts that are less than 90 in the US, considerably past any historic lows.

For liquids, NGL prices are influenced by oil, and with ample export capacity, ample shipping, and a wave of new ethylene plants coming online, we don't see that changing. Said simply, if you are bullish oil, you have to be at least as bullish on natural gas liquids. Thus the fundamentals for oil, natural gas and all the NGL products look constructive.

Hydrocarbon demand continues to grow, production continues to fall, which points to improved pricing. However, we will continue to be creative and aggressive to keep our systems full. Margins are down. In a low-margin environment, integration is key to making money, thus integrating a leading supply position with market-oriented assets and aggressively using the full strength of our value chain remains key to both our profitability and our growth.

With that, I'll turn it over to Bryan.

Thank you Jim. I will cover a few additional income items for the quarter as well as provide an overview of our capitalization. But before doing so, I'd like to reiterate comments I've made over the past several quarters about revenue.

The changes in revenue and operating costs and expenses are largely influenced by the changes in commodity prices and are not necessarily good indicators of the partnership's performance. Accordingly, while revenue was down 33% for the first quarter of 2016 when compared to the same period in 2015, our associated costs and expenses were also down 37%.

We believe gross operating margin is a better performance based metric, which was, as Jim mentioned, $1.3 billion for both the first quarter of 2016 and 2015. With that said, net income attributable to Limited Partners for the first quarter of 2016 was $661 million or $0.32 per unit on a fully diluted basis, compared to $636 million, or, again, $0.32 per unit on a fully diluted basis for the first quarter of 2015.

Depreciation, amortization and accretion expense and operating costs and expenses increased $13 million this quarter compared to the same quarter last year primarily due to new assets put into service and the EFS Midstream assets that we acquired in July of last year, which, on a combined basis, contributed $36 million to the increase in D&A expense. Partially offsetting this increase was a $23 million decrease in D&A from the sale of our offshore business in July of last year.

G&A expenses decreased 11% primarily due to lower legal and employee compensation expenses. Total capital spending in the first quarter of 2016 was $1.1 billion, including $59 million for sustained capital expenditures. As Jim mentioned earlier, we completed $300 million of organic growth projects this quarter and we are on schedule to begin commercial service on over $2 billion of growth projects during the remainder of 2016.

We expect organic growth capital expenditures for 2016 to be approximately $2.8 billion and sustaining capital expenditures to come in around $275 million this year. This number excludes the final $1 billion installment payment for last year's EFS Midstream acquisition which is scheduled to be paid on or before July 1 of this year.

At March 31, 2016, our total debt principal outstanding was $22.9 billion and the average life of our debt portfolio was 17.1 years and our effective average cost of debt was 4.6%.

Adjusted EBITDA for the 12 months ended March 31, 2016 was $5.3 billion and our consolidated leverage ratio of net debt to adjusted EBITDA was 4.2 times after adjusting for 50% equity treatment for the hybrid securities ascribed at issuance by the rating agencies. In early April, we issued an aggregate of $1.25 billion to senior unsecured notes across 5-, 11-, and 30-year tenors in an offering that generated over $6 billion of investor demand.

Additionally, and importantly, the rating agencies reaffirmed our BBB+ and BAA1 investment-grade ratings and stable outlook for the new issuance.

Through April this year, we have raised approximately $1.6 billion in net equity proceeds through our distribution reinvestment program, employee unit purchase program, and our at-the-market or ATM equity program. Included in these proceeds is an aggregate $200 million investment in EPD common units from affiliates of privately held Enterprise Products Company. This includes $100 million through the distribution reinvestment program and another $100 million through the ATM program, which was one of several reverse inquiries executed through our ATM program this year. Taking into account the equity issued under the ATM program that settled after March 31, our pro forma leverage ratio at March 31, 2016 would have been 4.1 times.

We had consolidated liquidity of $3.6 billion at March 31, 2016, which included available borrowing capacity under our credit facilities and unrestricted cash. Currently, our consolidated liquidity is approximately $5.1 billion, which reflects our aforementioned capital markets activity in April.

We remain committed to maintaining a low and competitive overall cost of capital. To that end, our issuance of new long-term debt and equity capital so far this year, when combined with the $229 million of retained distributable cash flow in the first quarter, resulted in a 60/40 split of equity and debt with a spot weighted average cost of capital of approximately 4.9%.

Before turning the call back over to Randy for Q&A, we would like to thank our debt and equity investors for their continued and demonstrated support. Randy?

Thank you Bryan. Ginger, we are ready for Q&A. Before you open it up for Q&A, I'd like to ask our listeners to please limit your questions to one question and one follow-up question so that more people will have the opportunity to ask questions. So with that, Ginger, we can open it up.

(Operator Instructions). Brian Gamble, Simmons & Company.

Good morning guys. I wanted to touch on the NGL segment if I could. Great quarter across the board, particularly on the pipe side. I guess you put some assets in place that are benefiting you there. As we look forward for the rest of the year, given some of the new assets that are now contributing and given the current market conditions, should we expect some semblance of the same sort of seasonality that we generally expect in Q2 and Q3, or does that become a little bit more isolated than it would have in normal market conditions?

This is Jim. The second quarter is typically our weakest quarter. So hopefully, in answer to your question, do we expect seasonality, hopefully not. We are going to do everything in our power to deliver the same kind of results we have been. But in answer to your question, second quarter is typically our weakest quarter.

And then as a follow-up to that, the benefits that we saw year-over-year, new assets and the like, this was specifically on the pipeline side, were those fully implemented in Q1 or are we going to continue to see -- you mentioned the Aegis benefit as we continue through the next several years. But is there any immediate bump in Q2 from some of the assets, or was that mostly a Q1 fully implemented number?

Randy, what kind of ramp do we have the balance of the year on those?

We've ramped that volume up for the year, so we don't have another ramp until 2017.

Okay. But I think you heard him Brian. The reality is though the thing didn't come on until December. So what we get this year we didn't have last year.

Great Jim. I appreciate it.

And I think ATEX, we had a ramp on ATEX at the first of the year, so -- and then we are working hard to see what we can do to get incremental volumes down at ATEX.

That's helpful. Thank you.

Brandon Blossman, Tudor, Pickering, Holt.

Good morning gentlemen. Let's see, first question. Equity NGL production looked particularly good this quarter. One, how much of an upside surprise was that versus what you guys were thinking at the analyst day? And then two, can you kind of quantify the contribution of incremental recovery of ethane out of the Rockies?

This is Bill. I think the equity NGL production numbers you see, and particularly the fluctuations in them, are the discretionary ethane that we have the right but not the obligation to recover whether it's in the Rockies or whether it's in South Texas. And we just I think saw a little bit stronger margins than we thought as the quarter went on, and that gave us the opportunity on a variable cost basis to recover quite a bit more ethane, particularly in the Rockies. We continue to do so in South Texas and the ability to hedge a little bit of that going forward as well.

Typically, when we see a margin that's moved up like ethane did in the last couple of months, we'll put hedges on to lock it in and produce it.

Would you expect that to carry forward through the balance of 2016?

In this market, I don't have a clue. If we see it, we're going to grab it.

Fair enough. Okay. And then a higher level related question, somewhat related. Rig count is lower than I think anybody expected today versus two or three months ago, expectations obviously going to have an impact on NGL production as we move through 2016 into 2017. Any change in the playbook relative to a higher level of NGL production as we move forward over the next 12 months in terms of capturing incremental market share in order to keep the pipes full?

This is Tony. Obviously, rig counts for both gas and oil are low. They are not at our low case that we presented at the analyst meeting but very, very weak. We also see and other people see increase in liquids prices, NGL prices, because of demand. So I'll go out on a limb and say I think, during the second quarter, we are probably going to see rig counts bottom. And longer-term, you don't have to look out too much longer term for significant demand growing for NGL. So we'd expect to see some increase on the crude side, but particularly on the gas side. Gas rigs now are at less than 90. That's a very low number.

Agreed. Thank you for that color, Tony.

Jeremy Tonet, JPMorgan.

Good morning. It's actually Andy here for Jeremy. Congratulations on the solid result.

Regarding the Eagle Ford area, I think you and some of your competitors have reported more subdued results lately, certainly on a year-over-year basis. Can you lend some insight into the opportunity for Enterprise to gain market share over the near term and longer term versus some smaller, less integrated competitors in the Eagle Ford?

We can give you a little color on that. We're probably not going to give you all the color you want, because we are not going to share it with people. But we are pretty aggressive in going out and grabbing incremental volumes, like I said, using the strength of our value chain, be that in natural gas processing, or gathering or crude oil. And we see that working in two ways.

Number one, you get more volume through your system. You may not make as much money as you made in the first quarter of 2014 when anybody could make money, but you're making more money than anyone else. The other thing it does for you is it puts you in a position as contracts roll off to be able to renew more contracts and get more market share.

And as far as the Eagle Ford is concerned, Tony?

As far as Eagle Ford is concerned, volumes are beginning to roll over. Obviously, the whole industry knows that. But we also think going forward, as NGL volume demand grows, that the Eagle Ford would be the first volumes that you turn back on. It's really good rock. The manufacturing process is set up very well there by very established producers, and it couldn't sit in a better place relative to serve market almost instantaneously.

Great. And the natural follow-up to that question more broadly, would Enterprise seek to be more of a consolidator in this type of environment? Are the prices right for that, or do you see a bigger opportunity to just steal competitor volumes by leveraging the integrated platform?

I think one leads to the other.

Great. Thank you.

Darren Horowitz, Raymond James.

Hey guys. Good morning. Jim, the first question for you. Just within the context of your discussion around commodity prices, when we are thinking about the opportunities to commercialize that ethylene export facility and you are thinking about the timing and magnitude of all this ethylene productive capacity hitting the Gulf Coast theoretically at the same point in time when we could have higher sustained composite NGL prices, how real do you think the concern is throughout the market of compressed Gulf Coast ethylene margins? And more importantly, how is that being factored into your discussions with customers, whether or not it's an ethylene or even polyethylene export facility?

We won't have a polyethylene export facility. We are getting some traction. I don't know if we'll pull it off Darren, but we are getting some traction on an ethylene export. R.B. says he's going to do it, so now he's got his bonus riding on it. We'll see.

In terms of ethylene, if you are a merchant marketer of ethylene, I think you're going to have some pretty difficult margins to deal with. If you are a big derivative player, then you're going to be looking at ethane to polyethylene. And you're asking a Midstream guy to comment on ethylene, but yes, I don't see anything slowing down in terms of these things being built, and I don't know that they're all going to run at full rates, but I think you're going to be exporting ethylene before it's all said and done. There was another thought. Tony, I appreciate it.

The thing I'd like to add to that is you've got to realize the US is still advantaged on ethylene.

It's a crude to gas play.

It's a crude to gas play. And you know that we have had for a number of years now a view on natural gas that the US has all they can use and much, much more for years to come. So the US has some fundamental advantages, but it's going to be hard for other places around the world to overcome. That's our view.

Tony, if I could, just as my follow-up, switch gears a little bit to the thoughts on ramping crude oil and condensate export opportunities from this point. We've seen a big step up in volumes across the dock. Maybe they've moved from a 150,000 to 165,000 barrels a day or better. Is the split still the way you all are thinking about it, kind of two-thirds/one-third crude versus condensate? More importantly, how do you think that trends into the back half of 2016, especially with depressed Eagle Ford differentials? And do you have the infrastructure across the dock to continue to handle more volume?

I think the two-thirds/one-third sounds about right on the split, and what we see going forward. I think, at present, we have plenty of dock capacity to handle more volume.

We can handle a lot of volume without spending a penny.

Jim, do think you could give me a little bit of insight in terms of margins per barrel on every physical barrel that clears the dock?

We are making a lot more on LPG than we are crude and condensate. How's that?

I appreciate it. Thank you very much.

Shneur Gershuni, UBS.

Good morning guys. Just a quick bunch of follow-up questions here really from some of the earlier questions. But going back to the crude discussion before, I was wondering if you can sort of expand on the nature of the competitive environment. Should we expect margins to degrade further from here as it becomes a dog eat dog kind of scenario and you hopefully come out on top, or do we think that things stabilize from here at this stage?

I almost think they have degraded about as far as they can.

We are talking about -- in our comments we mentioned that we think -- I hope we are right -- we think that prices have bottomed. And price improvement does not mean instantaneous throughput growth. So I think it's going to be pretty competitive for the near term, but -- and what we do in an environment like this, like we said earlier, and I guess it's the theme of this call, we are going to use every bit of the strength of our value chain. This is a supply driven business, so you want to have the supply. Ultimately, if you do that, when things improve, you're going to regain your margins.

And so is this basically an environment where we are basically looking at declining volumes? Spreads between hubs are tight and so you are effectively -- if you are able to maintain or increase your volumes even if margins maintain themselves and somebody else is effectively in that a loser -- is that sort of the way to think about it?

I don't like to think of anybody as a loser. I just like to think of us as a winner.

Okay. Fair enough. In response to the questions earlier about ethane rejection reversal and the opportunities, I believe you did mention that the Eagle Ford is something that benefits. Can you talk about the benefit throughout the entire Enterprise value chain? Will you see a material uplift if we saw a complete reversal of ethane? And then secondly, is there an opportunity to do an expansion on some of your assets to bring more of the ethane down maybe from the Marcellus?

The answer to your last question is yes, but it's not necessarily from -- we can from the Marcellus, but we could bring more ethane on in South Texas in particular with a little bit of money. So I don't remember -- I'm going to ask Randy to chime in on this, but it isn't bad if our margin based business is a bigger percentage of our total.

We take it all day long.

Is it a material uplift from -- if you just sort of look at your stand-alone business as it is today without any of the CapEx projects coming on, and you get a complete reversal of ethane, are we talking about 2% or 3% pickup in EBITDA, or are we talking something in the nature of 10%?

Just because we've grown the fee-based part of the business so much, I would think it would be probably something in the order of maybe 5% could be the higher part of the band.

Okay. And one final question if I may. LPG export is definitely a big theme for you guys this quarter. You've added some new capacity. Can you talk about the impact of your new facility on the spot market in terms of cargoes leaving the US and so forth? There were some comments recently about one of the VLGC owners that cargoes leaving the US are up big time and some of them are actually going to Asia. I was just wondering if you can talk about the depth of the markets, some color on where you're sending it to, and if you think this market continues to expand over the next year or so.

I'll take a shot at it and then I'll see if Joseph or Tug has got anything to say. I think, historically, most of our cargoes went to Central and South America. Joseph, I think we see more going into Asia?

Yes, we are. We saw about 55% of our cargoes in the first quarter this year go to the Far East. So that's a growth of about 7% over the same time period last year.

Okay. And when you're talking to the shippers and so forth, do you expect this business to expand materially over the next year, or generally are we kind of at the level that we're going to be at for the next little while?

I think LPG is going to price to export. You've probably got more capacity export than you've got LPG. So I don't know how you could expand a heck of a lot further. Joseph?

So far, the Asian appetite for LPG has been considerable and willing to take the barrels of capacity that we have. So I think the Far East and the Asian market is going to continue to be the growth market that we see, and I don't think that's stopping.

Great. Thank you very much guys. Thank you for the color.

In thinking about your question a little bit more on margin expansion, it would probably be in the 5% to 10% range.

5% to 10%? Great.

Yes, of EBITDA.

Kristina Kazarian, Deutsche Bank.

Hey guys. So, a quick update on some of the assets that are coming online. So, I know we said $300 million in growth projects completed during 1Q and $2.2 billion during the remainder of the year. But can you guys give me some color on what I should be watching for all these projects and, more importantly, how I should be thinking about time frame for realizing the full cash flow benefit that you guys are expecting from like these all-in $2.5 billion of projects?

Brent? South Eddy, it's coming up as we speak. What will it be running at two months from now?

Right near capacity.

The main projects that Jim had mentioned were the two Delaware Basin, Permian Basin gas processing plants and those are coming on and should come on relatively full. And so that would be midyear, and then you've got the ethane export facility. Now, that will be a little bit of a ramp. So the full benefit really won't be until 2017, but there will be a benefit this year.

Okay, perfect. And then my follow on, and I promise I'll limit it to two, is when we are talking -- you talk a little bit about Eagle Ford and some of the other regional volume trends, but you guys mentioned in the press release and in the beginning of the comments and lower volumes on certain crude and gas pipes. What specifically were you guys referring to here?

This is Randy. With respect to the crude, it was more in South Texas around the Eagle Ford. In the gas, to a degree just really had the impact of just depletion on some systems, small in San Juan, up in the Rockies, and then to a lesser degree in Haynesville as well. And then also you had the impact of warmer weather on the Texas system.

Perfect. Thanks guys. Nice job on the quarter.

Ted Durbin, Goldman Sachs.

Good morning. It looks like the growth capital guidance now is right at $2.8 billion. I think you have been at $2.5 billion to $2.8 billion before. Just walk us through what is that a function of? Is it higher spending on the PDH that I think you alluded to, or are there some other projects maybe in there that got sanctioned during the quarter?

This is Randy. I think really it's just a combination of -- the biggest pieces were PDH, the expectation of the Midland to Sealy pipeline being pushed a year, and then there may have been a couple of small projects that were sanctioned.

So, I guess coming to that, as we look at the rolloff of the ethane spend and the PDH spend, is it fair to think that 2017 CapEx, based on what you've got announced, should be down year-over-year versus 2016, realizing you don't have guidance out yet?

We are not providing guidance, but I think you're making a fair assumption.

That's assuming we don't do any other projects, which has always been the case.

And then just on the financing side, very active on the ATM year-to-date. Again, is it fair to say you are pretty close to your fulfilling your equity needs, or there will be more to be done assuming that the project backlog is what it is?

Really the combination of our retained distributable cash and issuance to the regular way ATM and the reverse inquiries that we received on the ATM got us ahead of our needs for this year, certainly. It puts us in a position where our needs are really relatively modest the rest of the way. And of course, it will be dependent upon whether we do develop some additional investment opportunities, and of course on the level of excess distributable cash flow.

Just picking up on that last point Bryan made, when you come in and you think about it in terms of growth CapEx, our retained distributable cash flow for the first quarter almost funded 25% of our growth CapEx. So, that provided us a lot of flexibility.

Sure, fair enough. And when you're thinking about that, you're also incorporating the $1 billion Eagle Ford payment, right, in terms of your EFS?

Yes.

Great. Okay. I'll leave it at that. Thanks.

Faisel Khan, Citigroup.

Good morning guys. On the NGL fractionation volumes, it looks like you were up, volumes were up, but it looks like gross margin was flat year-over-year. So I just want to make sure I understand sort of what's going on in that part of the business.

I think that was more the impact of blending, not as much blending opportunity as what we saw a year ago.

When you say blending, this is -- you're talking about at the actual fractionator itself or somewhere in a terminal -- in the LPG terminals?

I think the volumes are up because we are covering more ethane. The blending opportunity is in the fractionator, you leave a certain amount of ethane in the propane, for example. And the value between -- the spread between the ethane and the propane was much less than it had been.

Okay, understood. And then as we look out -- sorry, going back to the comments you said around ATEX, you said that you are working on the expansion, or you've got enough commitments on the expansion? I'm trying to understand some of the comments around that, and also if you could comment on Centennial as well.

What we are saying is we are not working on an expansion at this point. We were speaking to the ramp and the volume under our current commitments.

As far as Centennial is concerned, we continue to work with our partners. It's kind of difficult to get a producer to step up for a long-term -- long-dated demand fee deal. So I think it's a good project but I think it's going to take a while to come to fruition.

Got you. Great. Thanks for the time.

Danilo Juvane, BMO Capital.

(technical difficulty) at all interested, how do you think about M&A specifically acquiring an entity that has a long-haul pipeline?

I think part of your question got cut off. Do you mind repeating that?

Yes. So Jim mentioned the strong natural gas fundamentals. I was asking as to whether you guys are interested in M&A, in particular natural gas long-haul pipelines.

I guess we are interested in anything we can get at the right value. But the reality is we've been pretty disciplined in the past in that it has to fit what we already have. So, we are not interested in something just because it's available. We would be interested in things that fit us strategically and add to our value chain.

Fair enough. A quick follow-up. Within your Natural Gas Pipeline segment, what are your expectations for volumes from the balance of 2016?

This is Brad. Across the Permian, flat to rising obviously. Eagle Ford, we expect that to continue to decline even though we've done a great job of our aggressive approach in hulling volumes. Same thing short-term in the Haynesville, a little bit of decline but seeing a lot of activity out there and expect to grow in the coming months.

Thanks. That's it for me. Thank you.

John Edwards, Credit Suisse.

Good morning everybody. Just following up on the equity needs question that Ted was asking, you recently filed a shelf, fairly large. Any read through we should be thinking about that?

This is Bryan. The filing is nothing more than routine. The availability under our current registration statement has fallen below $500 million, so that limits our capital flexibility and necessitated the need to file for the recharge. Nothing more than that.

Okay. My other questions have been asked. Thank you.

Chris Sighinolfi, Jefferies.

Good morning Jim. Thanks for the time. I just want to follow up quickly on -- Shneur had asked an earlier question about margins, and so I just wanted to clarify. Specifically with regard to LPG export, I think, last quarter's release, you had spoken about a $12 million uplift in margin, gross margin, and attributed that to the increased LPG volumes which we know were about 45,000 barrels a day. Today's release spoke about $37 million of year-on-year increase, and attributed that to the export margins -- or export volumes, which we know is about 200,000 barrels a day. So it kind of speaks to a margin compression unless there's other factors. And so I'm just wondering where I went wrong in that. And then as it pertains to adding contracts in the out years and years -- I know you guys have been very successful in adding to the tail on your contract book. How do we think about the activity levels there and what the margin profile of that activity looks like just given the capacity utilization factor on US stocks?

I'll answer the second part of your question and I'll leave the other to somebody else because I don't know. We have been pretty aggressive in trying to extend our contracts. And Joseph, I'd say we've done a pretty good job. We recently signed three large Asian contracts, and we are going to be pretty aggressive. We are going to do whatever we have to do but our job is to keep it full.

Chris, we may have to fall back up with you on the other one. Without going to the press release right now, I daresay we probably have primarily in front of that margin contribution from the NGL export facility. So we can follow back up with you on the detail.

Okay. So Randy, but if I understood the earlier comment, what you were trying to make clear I think in response to Shneur is the activity levels now are -- or the contract levels now are consistent with what you have historically realized or -- ?

We've still contracted full through 2019, Joseph?

Yes, we are over 95% full in 2018 and we are seeing levels a little bit lower in 2019.

Hang on just a second. We have contracts going out to 2022?

2024.

2024. And we are in constant discussions to expand those contracts. We have contracts that are a year at a time that we know the guys are going to come back after year after year. One of the things that we benefit from having been doing this so long is we've got pretty strong relationships and we very jealously guard those relationships. Worst case, we're going to get last look.

Jim, I appreciate that. And I think what I am trying to grapple with and I think investors are as well is, with regard to that, just given the fact that, for all intents and purposes, that LPG export market was a duopoly for a couple years with just you and Targa having significant frac volume in the Gulf Coast and then being leaders on the export side. And now we've had a number of new entrants and so we are a little long capacity for a while. And so I think people are just wondering not about the volume, but about the margin on that volume. Is that remaining?

We used to get $0.14, $0.15 a gallon, and we enjoyed a duopoly. But we are not going to get $0.14, $0.15 a gallon, or $0.12 or $0.13 a gallon. By definition, you are going to see -- you're going to see some things change in the future. But it's not just the fact that you have an export dock and a refrigerated tank or refrigeration. You've got to have the whole ball of wax. You've got to have the storage; you've got to have the fractionators; you've got to have ample low ethane propane supply.

So when I look at the total of our advantages, I think we're going to do very well. I'm not going to tell you that we are going to hold the kind of margins we've had in the past but we're going to make it up with volume. And the fact is spot cargoes today are selling for less than they did this time last year.

Okay, great. I really appreciate the added color.

Poe Fratt, D.A. Davidson.

Good morning. Just a couple of nitpicky ones. On the liquidity increase, I think you indicated that right now liquidity is about $5.3 billion. It was $3.8 billion at the end of the quarter.

$5.1 billion

Could you help me reconcile the increase in liquidity over the last 30 days?

Sure. It's $5.1 billion, and then with the -- really if you go to our filing, our 8-K filing, for the -- that updated you on our issuance of equity, we had significant volume. And I'm sure you saw this. I think you even may have wrote on it on April 1, that was inclusive of a reverse that we had. And then of course we raised $1.25 billion of debt. So that's how you get there to the $5.1 billion.

Do you have a cash number at the end of the quarter?

Just a second while we are looking for it.

Okay. Then you indicate that on the Natural Gas Pipeline side, gross margin was up $55 million, and you list a heck of a lot of different pipelines that might've contributed to that. Was there any particular one that contributed more? And then, in past quarters, you've broken out the ATEX gross margin, and I was just hoping that you might break it out again for this quarter.

We'll follow up on the latter half of your question with you. And then on the cash, it was $161 million.

Great. Thank you so much.

Michael Blum, Wells Fargo.

Good morning everyone. Just a quick question, this is for Bryan. At your investor conference, you talked about peaking at 4.5 times debt to EBITDA this year roughly, if I remember correctly. Given all the equity you've raised in the first quarter, is that still the trend we should be seeing peak at 4.5 and then it will come down from there, or do you think that peak is going to be lower?

I think you're still -- the peak is probably still -- and you know how we are a little bit conservative -- but probably keeping in the 4.5 times area, if you will, as far as a peak.

Okay. And then the second question, just I hate to keep harping on LPG exports, but kind of a broad question that is maybe for Tony. How are you thinking about how US, total US LPG exports will trend into 2017 and 2018? Because there is certainly some thought out there that you're going to see just the totals decline with supply coming off, and maybe more demand from a normal winter next year, realizing that you are contracted so it doesn't really directly affect you in the near term. But I just wanted to get your view on how you think that looks.

I think that the propane markets globally are some of the most liquid transparent markets in the world that I know of. And they have more than one way to balance. They have petrochemicals the balance, and of course here in the US we have exports. So, on the margin, that's how US propane is going to trade. You have to realize that we are exporting as much propane in the US as we are consuming today, so it is a very big part of the equation. Personally, unless you see GDPs collapse around the world, I don't see any significant weakness in that market. Joseph, do you have anything to add?

No I don't.

I hope that helps.

Okay. Thank you very much guys.

T.J. Schultz, RBC Capital Markets.

Great, thanks. Just thinking about the next wave of projects that you all discussed at the investor day, you talked already about the ethylene export, maybe just on the potential iBDH number 2 project that was discussed, it sounded like contracts were potentially near complete. Just any update on that project?

We are looking at midsummer that we expect to have contracts complete, and be going for approval.

Okay, great. Thanks.

That is all the time we have for questions today. Randy, do you have any closing remarks?

No, I don't. If you would please give our listeners the replay information and then we will -- you can go ahead and end the call.

The replay will be made available today around 12 Central time going through May 5, 2016 at 11 PM Eastern time. The replay number is 1-800-585-8367. And you must enter the conference ID number to enter the call. The conference ID is 92708595.

Thank you Ginger. That ends the call today. Thank you for joining us. Have a good day.

This concludes today's conference call. Thank you for participating. At this time, you may now disconnect.