Enterprise Products Partners L.P. (EPD)

EPD 
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Enterprise Products Partners L.P. (EPD)

Q1 2010 Earnings Conference Call

April 27, 2010 10:00 AM ET

Executives

Randy Burkholter – VP, IR

Mike Creel – President and CEO

Jim Teague – EVP and Chief Commercial Officer

Randall Fowler – EVP and CFO

Mark Hurley - EVP

Chris Skoog – SVP

Analysts

Brian Zarahn – Barclays Capital

Steven Moresco – Morgan Stanley

Darren Horowitz – Raymond James

Ted Durbin – Goldman Sachs

Ross Payne – Wells Fargo

Yves Siegel – Credit Suisse

Michael Blum – Wells Fargo

John Edwards – Morgan Keegan

Mark Easterbrook – RBC Capital

Presentation

Operator

Welcome to the Enterprise Products Partners First Quarter Earnings Conference call. At this time all participants are in a listen-only mode. After the speakers’ remarks, there will be a question and answer session. (Operator Instructions) As a reminder today’s call is being recorded and if you have any objection you may disconnect at this time. I would now like to introduce, Mr. Randy Burkholter, Vice President of Investor Relations. You may begin.

Randy Burkholter

Thank you (Tina). Good morning and welcome to the Enterprise Products Partners conference call to discuss first quarter earnings. Our speakers today will be Mike Creel, President and CEO of Enterprise’s general partner; followed by Jim Teague, Executive Vice President and Chief Commercial Officer; then Randy Fowler, our Executive Vice President and Chief Financial Officer of the general partner will wrap it up. Also in attendance for the call today are other members of our senior management team to assist in Q&A. Afterwards, we will open the call up for your questions.

During this call, we will make forward-looking statements within the meaning of section 21-E 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. Although management believes that the expectations reflected in such forward-looking statements are reasonable, they 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. And with that, I'll turn the call over to Mike.

Michael Creel

Thanks Randy. We got off to a great start in the first quarter this year with record distributable cash flow supported by all time high volumes for natural gas transportation, equity NGL production and Propylene Fractionation. We also had increased NGL, crude oil and petrochemical transportation volumes and higher NGL fractionation volumes. This strong performance resulted in 11% year-over-year increase in gross operating margin for the quarter. The advantages of our large geographical foot print and diverse portfolio of integrated businesses continues to benefit our investors.

Based on our continued strong performance, we recently announced the 23rd consecutive increase in our quarterly cash distribution rate, increasing at 5.6% to fifty six and three quarter cents per unit or $2.27 per unit on an annualized basis. Enterprise generated $580 million of distributable cash flow, our third consecutive quarterly record. This provided 1.4 times coverage of the distribution declared with the respect to the quarter. One of our important financial goals is to retail a portion of our distributable cash flow for investment and growth capital projects to reduce debt and to decrease the need issue additional equity.

In this quarter we retained a $156 million or 27% of the distributable cash flow we generated. Since our IPO in 1998, we’ve retained approximately 16% or $1.3 billion of distributable cash flow. As I mentioned earlier, gross operating margin increased 11% or $81 million to $795 million this quarter. The largest increase was from our NGL pipelines and services segment with $437 million of gross operating margin up 25% from the first quarter of last year.

This segment is benefited from record equity NLG production and higher gas processing margins primarily from our Rocky Mountain processing plants. We also had increased NGL pipeline and fractionation volumes and profits from Ford NGL sales transaction has settled in the quarter. Fundamentals continued to be strong for this segment. NGL inventories are low particularly ethane and demand continues to be high result against strong natural gas processing margins and Jim will talk about this more in a little bit.

Gross operating margin from our onshore crude oil pipelines in services segment was $27 million for the quarter compared to $50 million for the first quarter of 2009, primarily due to lower sales margins from our crude oil marketing activities. Gross operating margin for the onshore natural gas pipelines and services segment decreased $32 million from the first quarter of 2009 primarily due to our natural gas marketing business which reported a loss of $9 million for the quarter, compared to a record profit of $34 million for the first quarter of last year.

This decrease was due to lower unit margins and higher transportation and storage expenses. The delay into the completion of the Trinity River basin lateral pipeline is resulting in the loss of approximately $3 million per month of the gas marketing business due to charges being incurred for transportation capacity on a downstream pipeline in anticipation of natural gas volumes originating on the Trinity River basin lateral pipeline.

Partially offsetting this decline was the San Juan Gathering System which reported a $7 million increase in gross operating margin attributable to higher fees from contract index to gas prices as well as increase sites sales. We also had a higher gross operating margin from our Piceance Gathering System due to the (Colderin) Valley System that began service in the fourth quarter of 2009, the Exxon treating facility which began service in March of last year and our Acadian and Texas Intrastate pipeline systems.

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