Enterprise Products Partners LP (EPD) A. James Teague on Q1 2016 Results - Earnings Call Transcript

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Enterprise Products Partners LP (NYSE:EPD)

Q1 2016 Earnings Call

April 28, 2016 10:00 am ET

Executives

John Randy Burkhalter - Vice President, Investor Relations

A. James Teague - Chief Executive Officer & Director

Bryan F. Bulawa - Chief Financial Officer & Senior Vice President

William Ordemann - Executive Vice President, Commercial

Anthony C. Chovanec - Senior Vice President-Fundamentals/Supply Appraisal, Enterprise Products Holdings LLC

W. Randall Fowler - Chief Financial Officer, Director & Executive VP

Bradley Motal - Senior VP-Natural Gas Assets & Marketing

Analysts

Brian D. Gamble - Simmons & Company

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc.

Andrew Ramsay Burd - JPMorgan Securities LLC

Darren C. Horowitz - Raymond James & Associates, Inc.

Shneur Z. Gershuni - UBS Securities LLC

Kristina Kazarian - Deutsche Bank Securities, Inc.

Theodore Durbin - Goldman Sachs & Co.

Faisel H. Khan - Citigroup Global Markets, Inc. (Broker)

Danilo Juvane - BMO Capital Markets (United States)

John Edwards - Credit Suisse Securities (NYSE:USA) LLC (Broker)

Christopher Paul Sighinolfi - Jefferies LLC

Poe Fratt - D. A. Davidson & Co.

Michael Blum - Wells Fargo Securities LLC

T.J. Schultz - RBC Capital Markets LLC

Operator

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.

Thank you. Mr. Randy Burkhalter, you may begin your conference.

John Randy Burkhalter - Vice President, Investor Relations

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 21E 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.

A. James Teague - Chief Executive Officer & Director

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.

In this – 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 cost, 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 systems.

Gross operating margin for 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 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 were a 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 that we had in our BP (07:20) octane enhancement facility during most of the first quarter. But primarily, it's the result of lower margins. Our petrochemical segment was enhanced by things like increased propylene export volumes. The BP (07:32) 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 million of projects in service during 2016. These include two natural gas processing plants and related infrastructure in the Permian Basin, one of which, our South Eddy plant, is being – is in 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, with our two largest projects being the PDH plant, which we expect to be bringing online early next year, in 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, which 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 pool 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're 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 U.S. 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 U.S. 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. U.S. 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 U.S., 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're 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.

And with that, I'll turn it over to Bryan.

Bryan F. Bulawa - Chief Financial Officer & Senior Vice President

Thank you, Jim. I'll 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 sustaining capital expenditures. As Jim mentioned earlier, we completed $300 million of organic growth projects this quarter and we're 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 tenures 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 to the ATM program which is 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'd like to thank our debt and equity investors for their continued and demonstrated support. Randy?

John Randy Burkhalter - Vice President, Investor Relations

Thank you, Bryan. Ginger, we're ready for Q&A. And 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.

Question-and-Answer Session

Operator

Your first question comes from Brian Gamble from Simmons & Company.

Brian D. Gamble - Simmons & Company

Good morning, guys.

A. James Teague - Chief Executive Officer & Director

Good morning.

Brian D. Gamble - Simmons & Company

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?

A. James Teague - Chief Executive Officer & Director

Hey, Brian, this is Jim. The second quarter is typically our weakest quarter. So, hopefully, an answer to your question, do we expect seasonality, hopefully not. We're going to do everything in our power to try to deliver the same kind of results we have been. But an answer to your question, second quarter is typically our weakest quarter.

Brian D. Gamble - Simmons & Company

And then as a follow-up to that, just the benefits that we saw year-over-year, new assets and the like, 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 to the next several years. But is there any immediate bump in Q2 from the assets, or was that mostly a Q1 fully implemented number?

A. James Teague - Chief Executive Officer & Director

(18:41) what kind of ramp do we have the balance of the year on those?

Unknown Speaker

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

A. James Teague - Chief Executive Officer & Director

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

Brian D. Gamble - Simmons & Company

Great, Jim. I appreciate it.

A. James Teague - Chief Executive Officer & Director

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

Brian D. Gamble - Simmons & Company

That's helpful. Thank you.

Operator

Your next question is from Brandon Blossman from Tudor, Pickering, Holt.

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc.

Good morning, gentlemen.

A. James Teague - Chief Executive Officer & Director

Good morning.

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc.

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?

William Ordemann - Executive Vice President, Commercial

This is Bill. I think equity NGL production numbers you see that – 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 and we continue to do so in South Texas and the ability to hedge a little bit of that going forward as well.

A. James Teague - Chief Executive Officer & Director

Yeah. Typically, when we 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.

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc.

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

A. James Teague - Chief Executive Officer & Director

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

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc.

Fair enough. Okay. And then a higher level related question, somewhat related. Rig count's lower than I think anybody expected today versus two months 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?

Anthony C. Chovanec - Senior Vice President-Fundamentals/Supply Appraisal, Enterprise Products Holdings LLC

This is Tony. Obviously, rig counts for both gas and oil are low. They are not at our low case that we presented in the analyst meeting but very, very, very weak. We also see and other people see increase in liquid prices, NGL prices, because of demand. So I'll go out on a limb and say I think, during the second quarter, we're probably going to see rig counts bottom. And longer-term, you don't have to look out too much longer-term, 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.

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc.

Agreed. All right. Thank you for that color, Tony.

Operator

Your next question is from Jeremy Tonet from JPMorgan.

Andrew Ramsay Burd - JPMorgan Securities LLC

Hi. 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?

A. James Teague - Chief Executive Officer & Director

We can give you a little color on that. We're probably not going to give you all the color you want because we're not going to share it with people. But we're 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 our 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?

Anthony C. Chovanec - Senior Vice President-Fundamentals/Supply Appraisal, Enterprise Products Holdings LLC

As far as the Eagle Ford is concerned, volumes are beginning to roll over. Obviously, the whole industry knows that. But we also think going forward, as NGL volumes 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, so...

Andrew Ramsay Burd - JPMorgan Securities LLC

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 we – or do you see a bigger opportunity to just steal competitor volumes by leveraging the integrated platform?

A. James Teague - Chief Executive Officer & Director

I think one leads to the other.

Andrew Ramsay Burd - JPMorgan Securities LLC

Great. Thank you.

John Randy Burkhalter - Vice President, Investor Relations

Ginger, I think we're ready for the next question.

Operator

Okay. Your next question is from Darren Horowitz from Raymond James.

Darren C. Horowitz - Raymond James & Associates, Inc.

Hey, guys, good morning. Jim, first question for you. Just within the context of your discussion around commodity prices, when we're thinking about the opportunities to commercialize that ethylene export facility and you're 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 sustaining 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?

A. James Teague - Chief Executive Officer & Director

We won't have a polyethylene export facility. We're getting some traction. I don't know if we'll pull it off there, but we're getting some traction on an ethylene export. RB says he's going to do it. So hell, he's got his bonus riding on it. We'll see.

In terms of the ethylene, if you're 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. The – but yeah, 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, to add to that.

Anthony C. Chovanec - Senior Vice President-Fundamentals/Supply Appraisal, Enterprise Products Holdings LLC

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

A. James Teague - Chief Executive Officer & Director

That's right. It's a crude-to-gas play.

Anthony C. Chovanec - Senior Vice President-Fundamentals/Supply Appraisal, Enterprise Products Holdings LLC

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 U.S. has all they can use and much, much more for years to come. So the U.S. has some fundamental advantages, but it's going to be hard for other places around the world to overcome it. That's our view.

Darren C. Horowitz - Raymond James & Associates, Inc.

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 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?

Anthony C. Chovanec - Senior Vice President-Fundamentals/Supply Appraisal, Enterprise Products Holdings LLC

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

A. James Teague - Chief Executive Officer & Director

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

Darren C. Horowitz - Raymond James & Associates, Inc.

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

A. James Teague - Chief Executive Officer & Director

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

Darren C. Horowitz - Raymond James & Associates, Inc.

I appreciate it. Thank you very much.

Operator

Your next question is from Shneur Gershuni from UBS.

Shneur Z. Gershuni - UBS Securities LLC

Hi, good morning, guys.

A. James Teague - Chief Executive Officer & Director

Good morning.

Shneur Z. Gershuni - UBS Securities LLC

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?

A. James Teague - Chief Executive Officer & Director

Almost think they've degraded about as far as they can.

Anthony C. Chovanec - Senior Vice President-Fundamentals/Supply Appraisal, Enterprise Products Holdings LLC

We're talking about – in our comments, we mentioned that we think – I hope we're 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're 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.

Shneur Z. Gershuni - UBS Securities LLC

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

A. James Teague - Chief Executive Officer & Director

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

Shneur Z. Gershuni - UBS Securities LLC

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?

A. James Teague - Chief Executive Officer & Director

Well, the answer to your last question is yes, but it's not necessarily from the – I mean we can from the Marcellus, but we could bring more ethane on in South Texas in particular with a little bit of money, Bill.

William Ordemann - Executive Vice President, Commercial

A little bit.

A. James Teague - Chief Executive Officer & Director

So I don't remember your first – and I'm going to ask Randy to chime in on this, but it isn't bad if our margin base business is a bigger percentage of our total.

W. Randall Fowler - Chief Financial Officer, Director & Executive VP

We'd take it all day long.

Shneur Z. Gershuni - UBS Securities LLC

But I mean is it a material uplift from – like 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%?

W. Randall Fowler - Chief Financial Officer, Director & Executive VP

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.

Shneur Z. Gershuni - UBS Securities LLC

Okay. And one final question if I may. LPG export's 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 cargos leaving the U.S. and so forth? There were some comments recently about one of the VLGC owners that cargos leaving the U.S. 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.

A. James Teague - Chief Executive Officer & Director

I'll take a shot at it and then I'll see if Joseph or Tug's (31:49) got anything to say. I think, historically, most of our cargos went to Central and South America, Joseph (31:55). I think we see more going into Asia.

Unknown Speaker

Yes, we are. We saw about 55% of our cargos 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.

Shneur Z. Gershuni - UBS Securities LLC

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?

A. James Teague - Chief Executive Officer & Director

I think LPG is going to price to export. You probably got more capacity export than you got LPG. So I don't know how you could expand a heck of a lot further, Joseph (32:43)?

Unknown Speaker

I think so far the Asian appetite for LPG has been considerable and proven to take the barrels of capacity that we have. So I think they continued (32:54) that 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.

Shneur Z. Gershuni - UBS Securities LLC

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

W. Randall Fowler - Chief Financial Officer, Director & Executive VP

Hey, Shneur, Randy, in thinking about your question a bit more on margin expansion, it'd probably be in the 5% to 10% range.

Shneur Z. Gershuni - UBS Securities LLC

5% to 10%? Great.

W. Randall Fowler - Chief Financial Officer, Director & Executive VP

Yeah, of EBITDA.

Operator

Next question is from Kristina Kazarian from Deutsche Bank.

Kristina Kazarian - Deutsche Bank Securities, Inc.

Hey, guys.

A. James Teague - Chief Executive Officer & Director

Hi, Kristina.

Kristina Kazarian - Deutsche Bank Securities, Inc.

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 million during the remainder of the year. But can you guys just give me some color on what I should be watching for on these projects, and more importantly, how I should be thinking about timeframe for realizing the full cash flow benefit that you guys are expecting from like these all-in $2.5 billion of projects?

A. James Teague - Chief Executive Officer & Director

Hey, Brad, South Eddy, it's coming up as we speak.

Bradley Motal - Senior VP-Natural Gas Assets & Marketing

As we speak.

A. James Teague - Chief Executive Officer & Director

What will it be running at two months from now?

Bradley Motal - Senior VP-Natural Gas Assets & Marketing

Right near capacity.

A. James Teague - Chief Executive Officer & Director

Okay. Go ahead, Bryan.

Bryan F. Bulawa - Chief Financial Officer & Senior Vice President

Yeah, Kristina. We'll – 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 then – and so that will 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.

Kristina Kazarian - Deutsche Bank Securities, Inc.

Okay. Perfect. And then my follow-on, and I promise I'll limit it to two, is when we're talking, and you talked a little bit about Eagle Ford and some of the other regional volume trends that 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?

W. Randall Fowler - Chief Financial Officer, Director & Executive VP

Yeah, Kristina, this is Randy. With respect to the crude, it was more in South Texas around the Eagle Ford. In the gas, to a degree, you 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.

Kristina Kazarian - Deutsche Bank Securities, Inc.

Perfect. Thanks, guys. Nice job on the quarter.

Operator

Your next question is from Ted Durbin from Goldman Sachs.

Theodore Durbin - Goldman Sachs & Co.

Good morning. Looks like the growth capital guidance now is right at $2.8 billion. I think you've 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?

W. Randall Fowler - Chief Financial Officer, Director & Executive VP

Yeah. Ted, this is Randy. I think really it's just a combination of – for the most – 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.

Theodore Durbin - Goldman Sachs & Co.

And so I guess coming to that, as we look at the roll-off of the ethane spend and then 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?

Bryan F. Bulawa - Chief Financial Officer & Senior Vice President

Well, we're not providing guidance, but I think you're making a fair assumption.

A. James Teague - Chief Executive Officer & Director

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

Theodore Durbin - Goldman Sachs & Co.

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

Bryan F. Bulawa - Chief Financial Officer & Senior Vice President

Yeah, Ted, the – really, the combination of our retained distributable cash flow issuance (37:04) to the regular way (37:06) 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.

W. Randall Fowler - Chief Financial Officer, Director & Executive VP

And, Ted, just picking up on that last point Bryan made, I mean 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.

Theodore Durbin - Goldman Sachs & Co.

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 needs?

W. Randall Fowler - Chief Financial Officer, Director & Executive VP

Yeah. Yes.

Theodore Durbin - Goldman Sachs & Co.

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

Operator

Your next question is from Faisel Khan from Citigroup.

Faisel H. Khan - Citigroup Global Markets, Inc. (Broker)

Good morning, guys. On the NGL fractionation volumes, looks like you were up. Volumes are 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.

W. Randall Fowler - Chief Financial Officer, Director & Executive VP

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

Faisel H. Khan - Citigroup Global Markets, Inc. (Broker)

I'm sorry, when you say blending, this is – you're talking about at the actual fractionator itself or somewhere in the terminal – in the LPG terminals?

W. Randall Fowler - Chief Financial Officer, Director & Executive VP

Yeah. I think the volumes are up because we're recovering 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.

Faisel H. Khan - Citigroup Global Markets, Inc. (Broker)

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 just trying to understand some of the comments around that, and also if you could just comment on Centennial as well.

A. James Teague - Chief Executive Officer & Director

We – now what we're saying is we're 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, 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.

Faisel H. Khan - Citigroup Global Markets, Inc. (Broker)

Got you. Great. Thanks for the time.

Operator

Your next question is from Danilo Juvane, BMO Capital.

Danilo Juvane - BMO Capital Markets (United States)

(39:48-39:56) at all interested though, how do you think about the M&A specifically acquiring an entity that has a long-haul pipeline?

John Randy Burkhalter - Vice President, Investor Relations

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

Danilo Juvane - BMO Capital Markets (United States)

Yeah. 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.

A. James Teague - Chief Executive Officer & Director

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

Danilo Juvane - BMO Capital Markets (United States)

Fair enough. A quick follow-up. Within your natural gas pipeline segment, what are your expectations for volumes for the balance of 2016?

A. James Teague - Chief Executive Officer & Director

Brad?

Bradley Motal - Senior VP-Natural Gas Assets & Marketing

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 hauling 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.

Danilo Juvane - BMO Capital Markets (United States)

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

Operator

Your next question is from John Edwards from Credit Suisse.

John Edwards - Credit Suisse Securities (USA) LLC (Broker)

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

Bryan F. Bulawa - Chief Financial Officer & Senior Vice President

Yeah, John, 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.

John Edwards - Credit Suisse Securities (USA) LLC (Broker)

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

Operator

Your next question is from Chris Sighinolfi from Jefferies.

Christopher Paul Sighinolfi - Jefferies LLC

Hey, good morning, Jim. Thanks for the time. Was – just wanted 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 – it 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 U.S. docks? Thanks.

A. James Teague - Chief Executive Officer & Director

I'll answer the second part of your question, and I'll leave the other to somebody else because I don't know. We've been pretty aggressive in trying to extend our contracts. And, Joseph (43:35), I'd say we've done a pretty good job. We recently signed three large Asian contracts, and we're going to be pretty aggressive. We're going to do whatever we have to do, but our job is to keep it full.

Unknown Speaker

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

Christopher Paul Sighinolfi - Jefferies LLC

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

A. James Teague - Chief Executive Officer & Director

Yeah, we've still contracted full through 2019, Joseph (44:31)?

Unknown Speaker

Yeah, we are over 95% full in 2018 and we're (44:42) a bit lower in 2019.

A. James Teague - Chief Executive Officer & Director

And then (44:46) – hang on just a second. We have contracts going out to 2022?

Unknown Speaker

2024.

A. James Teague - Chief Executive Officer & Director

2024. And we're 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 year 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're – we very jealously guard those relationships. Worst case, we're going to get last look.

Christopher Paul Sighinolfi - Jefferies LLC

Jim, I appreciate that. And I think what I'm 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're 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?

A. James Teague - Chief Executive Officer & Director

Well, we used to get $0.14, $0.15 a gallon, and we enjoyed that duopoly. But we're not going to get $0.14, $0.15 a gallon, or $0.12 or $0.13 a gallon. By definition, 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 got to have the whole ball of wax. You got to have the storage. You got to have the fractionators. You 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're 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 cargos today are selling for less than they did this time last year.

Christopher Paul Sighinolfi - Jefferies LLC

Okay. Great. I really appreciate the added color.

Operator

Your next question comes from Poe Fratt from D.A. Davidson.

Poe Fratt - D. A. Davidson & Co.

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

A. James Teague - Chief Executive Officer & Director

$5.1 billion.

Poe Fratt - D. A. Davidson & Co.

I think ATM – could you help me reconcile the increase in liquidity over the last 30 days?

Bryan F. Bulawa - Chief Financial Officer & Senior Vice President

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.

Poe Fratt - D. A. Davidson & Co.

And do you have a cash number at the end of the quarter?

Bryan F. Bulawa - Chief Financial Officer & Senior Vice President

Just a second while we're looking for it.

Poe Fratt - D. A. Davidson & Co.

Okay. And 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?

Bryan F. Bulawa - Chief Financial Officer & Senior Vice President

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

Poe Fratt - D. A. Davidson & Co.

Great. Thank you so much.

Operator

Your next question is from Michael Blum from Wells Fargo.

Michael Blum - Wells Fargo Securities LLC

Hey, guys. 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 times and then come down from there, or do you think that peak is going to be lower?

Bryan F. Bulawa - Chief Financial Officer & Senior Vice President

Well, 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 the peak.

Michael Blum - Wells Fargo Securities LLC

Okay. And then second question just, I hate to keep harping on LPG exports, but kind of a broad question that's maybe for Tony. Just how are you thinking about how U.S., total U.S. LPG exports will trend into 2017 and 2018? Because there's 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're contracted so it doesn't really directly affect you in the near-term. But just want to get your view on how you think that looks.

A. James Teague - Chief Executive Officer & Director

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 to balance, and of course, here in the U.S., we have exports. So, on the margin, that's how U.S. propane is going to trade. You have to realize that we're exporting as much propane in the U.S. as we're consuming today, so it is a very big part of the equation. I don't – me, personally, unless you see GDPs collapse around the world, I don't see significant weakness in that market. Joseph (50:38), you have anything to add?

Unknown Speaker

No, I don't.

A. James Teague - Chief Executive Officer & Director

I hope that helps.

Michael Blum - Wells Fargo Securities LLC

Okay. Thank you very much, guys.

Operator

Your next question is from T.J. Schultz from RBC Capital Markets.

T.J. Schultz - RBC Capital Markets LLC

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 two (51:09) project that was discussed, it sounded like contracts were potentially near complete. Just any update on that project?

Unknown Speaker

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

T.J. Schultz - RBC Capital Markets LLC

Okay. Great. Thanks.

Operator

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

John Randy Burkhalter - Vice President, Investor Relations

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

Operator

Okay. 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. And the conference ID is 92708595.

John Randy Burkhalter - Vice President, Investor Relations

Thank you, Ginger, and that ends the call today. Thank you for joining us. Have a good day.

Operator

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

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