Enterprise Products Partners L.P. ($EPD)

Thank you for standing by, and welcome to Enterprise Products Partners LP's First Quarter 2026 Earnings Conference Call. I would now like to hand the call over to Joe Thiriak, Vice President of Finance and Investor Relations. Please go ahead.

Thanks, Latif. Good morning, and welcome to the Enterprise Products Partners conference call to discuss first quarter 2026 earnings. Our speakers today will be Co-Chief Executive Officers of Enterprise's General Partner, Jim Teague and Randy Fowler. 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 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 team. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it 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 it over to Jim.

Thank you, Joe. We got off to a very strong start this year, and the business is performing well across the board. In the first quarter, we generated $2.7 billion of EBITDA in a short quarter, and this was up 10% over last year. We generated 1.8x coverage of our distributable cash flow. By any measure, this was an exceptional quarter. The assets we brought online over the past year, including the Bahia NGL pipeline, fractionator 14 and 3 Permian natural gas processing plants continued to ramp throughout the quarter. In fact, frac 14 was full on day 1. The gas plants were essentially full by mid-quarter. And if you look at Bahia and Shin Oak as a system, they are running at 80% of a combined 1.2 million barrels a day of capacity. Operationally, the quarter was outstanding. We set multiple operating records across the system. With the addition of Midtown West 2 in the Delaware Basin during the first quarter, we set a new record for gas processing plant in [Audio Gap] volumetric records for the first quarter. Those results speak to both the scale of our system and the demand we are seeing across the markets we serve. On the market side, commodity prices were volatile throughout most of the quarter, and we tend to embrace volatility. In January, Winter storm Farn gave us a strong start to the year. elevated demand for natural gas and propane created price dislocations across our asset network as producers faced widespread supply disruptions following the short drop in temperatures. Our trucks, pipelines and storage facilities enabled us to continue meeting customer needs despite these challenges while our marketing teams and asset flexibility allowed us to capture incremental value, and this was only the beginning of the volatility we experienced during the quarter. The ongoing conflict in the Middle East and restricted flows through the strike have driven a substantial increase in demand for all forms of U.S. energy, petrochemicals and refined products. The supply shock dramatically improved U.S. petrochemical margins, prompting our domestic petrochemical customers to run their units full out 1 week before the start started the war in Iran. Ethane to ethylene cracking margins were about $0.07 a pound. Today, they are $0.23. The ethylene to polyethylene spread was $0.20 per pound now over $0.45. It's no wonder when my former employee stock is up over 50% year-to-date. International demand for U.S. feedstocks is as strong as we have seen in quite some time. The loss of Middle East hydrocarbon supply fractured the Asian supply chain. China's PDHs are currently operating at less than 50% of capacity. As a result, Asian petrochemicals have been destocking inventories by consuming derivative inventories. The impact to hydrocarbon markets around the world has been significant and we see this strong demand continue through the remainder of '26 and maybe into '27. The demand pool is showing up very clearly in our Marine Export business. Our crude oil terminals are benefiting from volumes being released from the U.S. Strategic Petroleum Reserve that are being directed to international markets. And our ethane and LPG customers continue to line up at our docks for U.S. NGL feedstocks. In the first quarter, we averaged around 70 million barrels per month across our dock, and we expect that strength to continue into the second quarter as we are scheduled to load more than 88 million barrels in April. On the upstream side, we continue to build on the momentum in our system. Producer activity remains constructive in the basins where we operate and our assets are well positioned to capture volume growth. The combination of strong supply, growing export demand and new projects ramping into service is creating real operating leverage across the business. We also saw strong contributions from the downstream stack. In addition to record product flows, strong margins across our assets and high utilization at our PDH facilities that supported solid earnings and cash flow for the quarter. Our new assets are ramping well volumes are at record levels. Demand remains strong both domestically and internationally, and our system is performing the way it was built to perform. We entered 2026 expecting steady production growth and oversupplied markets, which we thought would lead to another year of relatively benign commodity prices. That has clearly not been the case. Today, we believe the financial markets are underestimating the potential global supply implications from a prolonged closure of the strata or moves. Depending on the industry expert you ask anywhere from 12 million to 15 million barrels a day of crude oil, refined products, LPG and petrochemical supplies are constrained. That is almost 0.5 billion barrels of hydrocarbon supplies of the market every month. Shipping and geopolitical commentators estimate that the earliest Strait could reopen for normal operations, including vessel repositioning as July, and that does not account for the time required to repair onshore production and refining facilities damaged in the war. Until global supplies and inventories returned to normal, we believe there will continue to be strong international demand for U.S. energy and products. We are also seeing international consumers look to increase purchases of U.S. Energy is an avenue to improve the U.S. trade balance and add greater resilience in security to their energy supply chains given the current disruption of product flows in the Middle East. After the first quarter, we are encouraged by the momentum we are seeing across the business and increasingly confident in the outlook for the year. At the same time, we remain focused on what matters most: operating cycling, serving our customers rely on them, allocating capital with discipline and creating long-term value for our investors. With that, I'll turn it over to Andy.

Thank you, Jim, and good morning, everyone. Starting with the income statement items. Net income attributable to common unitholders for the first quarter of 2026 was $1.5 billion, or $0.68 per common unit on a fully diluted basis, which is a 6% increase compared to the first quarter of 2025. Adjusted cash flow from operations which is cash flow from operating activities before changes in working capital increased 10% to $2.3 billion for the first quarter of 2026 compared to $2.1 billion for the first quarter of 2025. We declared a distribution of $0.55 per common unit for the first quarter of 2026, which is a 2.8% increase over the distribution declared for the first quarter of 2025. The distribution will be paid on April 14 to common unitholders of record as of close of business on April 30. We are on track for 28 consecutive years of distribution growth in 2026. To our knowledge, this is the longest period of distribution growth of any U.S. midstream company and is example of Enterprise's consistency and commitment to returning capital directly to our unitholders. The partnership purchased 3.1 million common units of the open market during the first quarter for approximately $116 million. In addition to buybacks, our distribution reinvestment plan and employee unit purchase plan purchased a combined 1 million common units on the open market for $37 million during the first quarter. For the 12 months ended March 31, 2026, enterprise returned approximately [ $5.1 ] billion of capital to our equity investors. 93% or approximately $4.8 billion was in the form of cash distributions to limited partners and the remaining 77% through $356 million of buybacks. Our payout ratio of adjusted cash flow from operations was 57% over this period. Since our IPO in 1998, we have prioritized returning capital to our partners, returning over $63 billion through distributions and buybacks. At the same time, we have reinvested capital to build one of the largest energy infrastructure networks in North America. Total capital investments were $988 million in the first quarter of 2026, which included $783 million of growth capital projects and $205 million of sustaining capital expenditures. In the first quarter, we also see the final payment of $596 million from ExxonMobil for the purchase of a 40% interest in the Bahia NGL pipeline. With the completion of major projects such as the Bahia NGL pipeline and Neches River terminal, we believe our expected range of growth capital expenditures for 2026 will net to $2.3 billion to $2.6 billion after applying approximately $600 million in proceeds from asset sales already received. For 2027, we expect our growth capital expenditures to be in the area of $2 billion to $2.5 billion. Sustaining capital expenditures for 2026 are expected to be approximately $580 million. On the fourth quarter 2025 earnings call, we stated that discretionary free cash flow for 2026 has the potential to be in the $1 billion area. Even though estimate of growth capital expenditures for 2026 has increased by $300 million as a result of investments in 2 new natural gas processing plants in the Permian, we still believe discretionary cash flow for 2026 has to be -- has the potential to be in the $1 billion area. And depending on commodity prices and spreads for the remainder of the year could be higher. In terms of allocation of capital, as we have said many times, we see cash distributions to partners grow in commensurate with operational distributable cash flow per unit. Let me repeat that, as we have said many times, we think distributions to partners will grow commensurate with operational distributable cash flow per unit growth. In the near term, we continue to expect discretionary free cash flow to be split between buybacks and retiring debt. In 2026, we still expect this slip would be approximately 50% to 60% in buybacks. As we have said before, Enterprise's buyback program has both programmatic and opportunistic elements. In periods of momentum and volatility characterized by higher equity prices, we may elect not to chase price and instead retain cash in the opportunistic bucket for buybacks in future periods when momentum has on. Similarly, in periods when there are significant price dislocations in equity prices, we may elect to pull cash forward earmark buybacks in future periods, such as bringing cash forward from 2027 to buy back the partnership units at more opportunistic prices in the near term. Our total debt principal outstanding was approximately [ $34.2 ] billion as of March 31, 2026. Assuming the final maturity date for our hybrids, the weighted average life of our debt portfolio is approximately 17 years. Our weighted average cost of debt was 4.7% and approximately 95% of our debt was fixed. At March 31, our consolidated liquidity was approximately $3.3 billion, including availability on our credit facilities and unrestricted cash on hand. As Jim mentioned, adjusted EBITDA increased 10% to $2.7 billion for the first quarter of 2026. As of March 31, 2026, our consolidated leverage ratio decreased to 3.2x on a net basis after adjusting debt for the partial equity treatment of our hybrid debt and reduced by the partner's unrestricted cash on hand. Our current leverage ratio reflects significant investments in the large-scale projects that we recently brought into service, such as the Bahia NGL pipeline, Port Neches terminal and frac and the midstream asset acquisition from [ Occidental ], where the debt is on the balance sheet, but the resulting annual adjusted EBITDA generation from these investments is yet to flow into our 12-month trailing EBITDA number. Our overall leverage target remains at 3x plus or minus 0.25x or $2.75 to $3.25 billion. With that, [indiscernible], I think we can open it up to questions.

Thanks, Randy. Latif, we are ready to open the call for questions.

[Operator Instructions] Our first question comes from the line of Theresa Chen of Barclays.

Following up on the comments about the uptick for U.S. energy demand in general and export infrastructure demand in particular, can you walk us through the contract duration profile across your export docs today? Specifically, how much capacity is tied to contracts with near-term expirations that could be recontracted at higher rates? And longer term, how much incremental brownfield expansion capability do you have across your export assets? .

Theresa, this is Tyler Cott. I'll speak to the NGL exports specifically. I think we've said before, our NGL export docks are contracted around the range of on LPG, those contracts go through the end of this decade on ethane, they extend 1 to 2 years depending on contracts, so lengthy duration. We had 10% available for spot capacity in the near term, but long term, we're significantly contracted.

Okay. And on the LPG side, in particular, given the recent strength in LPG export ARPS, alongside the commissioning time line for Phase 2 of the Neches River expansion, can you talk about incremental earnings uplift or cash uplift from spot cargoes in interim? And related to this, when do you expect Phase II officially enter service to support your term commitments with customers? .

Sure. This is Tyler Cott again. Our operations team has done a fantastic job expediting a bit the commissioning of Matas River terminal. We're still in the process of commissioning it. We began in the second half of April. And at this point, we expect to complete commissioning for both ethane and propane sometime in May. In terms of spot utilization and earnings uplift, we really got to get through the commissioning process here and see what we have. I think an important point to note about our export business going forward, as we have a significant amount of flexibility, so our spot business will be dictated across different products in terms of what the market needs at a given time. Jay?

Yes. Theresa, this is Jay Baney. Just on the crude front of that, -- we've got a pretty wide mix of contract structures. So contracts that last through '28 and '29. And similar for '26, we have about 10% of open capacity. And yes, I think we're having good conversations about '27.

Our next question comes from the line of Spiro Dounis of Citi.

I want to go back to the growth outlook really quickly, Jim, you sound incrementally more positive than when we last caught up. Obviously, a lot has changed. And then, Randy, you seem to indicate that your operating cash flow is going to have at least sort of mirror the increase in CapEx to keep that DCF free cash flow kind of stable. So Curious if you could give us an update on the sort of 3% growth you guys are talking about for '26 and the 10% growth you were talking about for 2027 on the last call. And as you answer that question, just curious if these 2 new processing plants are additive to that '27 outlook?

This is Jim. Yes, I think I said modest in '26 and 10% and: '27. I think will be modest.

Yes. Spiro, I sort of like the point you made in your note that probably modest is a low bar now. And I think you're right. again, it's sort of hard to come in and look at 2026 because, again, just what's the duration of these commodity price is going to be and the duration of spreads. So really shaping up to be a much stronger year than what we expected. And again, because we were really coming in and not expecting much benefit at all from commodity or spread and really, we're aligned on our fee-based businesses. So really hard to come in and give much guidance because it's sort of -- you don't have much visibility, especially when you come in and look at the futures market because we don't think the futures market really is representative of what the physical markets should be. So -- but the end point is 2026 looks to be much more favorable year than when we first started. Commercial guys team did a great job in underwriting 2 more natural gas processing plants in the Permian, which really then will come on during 2027. We really did not have those baked into our 2027 numbers at the time. So that would be additive. And then from the same token, I think we're still in good shape to come in and do meaningful buyback and meaningful debt retirement in 2026 even with CapEx ticking up a little bit for these 2 new plants.

And Sprio, I've been around a while, and I have never seen a supply disruption like we're experiencing today. that supply disruption creates a lot of benefits that Enterprise is able to capture.

Yes. And that's actually a good segue to the second question. Jim, you also talked about embracing volatility. And I know we go back a few years ago, you used to sort of talk about this sort of $500 million or so outsized spread gains you guys would sort of find in any given year, that's been absent for about maybe the last 2 years or so. Just curious, it sounds like that's back. I don't want to put too fine a number on it, but in the environment you're seeing now, do you think we see a return to that $500 million? And what parts of the market do you see that from, obviously, export being a big one?

I don't know -- I don't know if it's going to be $500 million, $600 million or $700 million, frankly. But I do expect that we're going to have what you call outsized spreads. Frankly, typically, we have it every year, we just don't know which spread it will be. Last year was pretty benign and usual for us as to what specifically it might be. I'll throw it to [indiscernible]. .

Yes. This is Doug. I'll just add. I mean, this first quarter, we had some outsized spreads on natural gas, when storm firm presented some opportunities, but largely the spreads that we've seen post Iranian conflict, those will come second quarter. .

Our next question comes from the line of Jean Salisbury of BofA. .

We've talked about this a little bit at the dinner tug, but it seems like international crackers that are running ethane and are pretty happy that they do so right now. Has there been any interest in the last couple of months in more international conversions to than that could drive the next leg of ethane demand?

Yes, this is Doug. So yes, they were happy prior to the conflict and they're even happier now. I will say that interest and demand we've seen on ethane specifically and I'll even throw LPG in there, we had quite the appetite for demand prior to the conflict. And I would say we have the similar appetite for demand post conflict. It made sense before and it still makes sense today. .

That's helpful. And I guess as a follow-up to that question, how -- what's kind of the time line if a cracker does decide to convert to ethane or take more ethane to the ethane being delivered? Should we expect like basically a couple of years for them and you to build that capacity?

That's probably -- it's not overnight, Jean. I think your couple of years is probably in the ballpark.

Our next question comes from the line of Michael Blum of Wells Fargo.

At dinner a few weeks ago, you didn't really think you'd see any cement shifts in where global buyers are going to source their hydrocarbons. I thought maybe they trip more to the U.S., but you seem to think that wouldn't happen. Curious just if that's -- if any -- if you've had any change in your thinking there? And -- in a similar vein, I think at the time, you didn't really think we'd see any reaction from the U.S. producers, and I'm curious if you still think that's the case?

I'll take the second one first, [indiscernible] what reaction by U.S. producers?

Not only gain I'd say, and Jay can chime in here, I don't know that U.S. producers have done much different. It seems to be that they're staying pretty disciplined. Sure, we see some movement in rig activity to different maybe producing zones or maybe different areas of their acreage that they have discretionary acreage. But other than that, I'd say they're keeping discipline.

I'd agree with Natalie. We do hear some conversations from the independents about cadence, maybe moving up where they think they can on our gathering systems. We've seen incremental growth, call it, over the last 3 months, but that could just be anecdotal.

As to the first question, in Jean Ann, a supply disruption like we have changes a lot of things. And we're seeing interest from countries to like India. But it's a funny thing. We're geographically challenged when it comes to LPG and India. And the question will be, when this is all over and everything returns to normal, do they still want to lift U.S. LPG when the AG is so close to. Right now, they're showing a lot of interest.

The second question is just on capital allocation. Randy, I appreciate your comments on the $1 billion of discretionary cash. The question is, assuming you're able to realize stronger results this year as a result of the conflict. And would you maintain that 50% to 60% allocation to buybacks versus debt pay down or if that $1 billion turned into $1.5 billion, for example, would the incremental above plan just go to buybacks since your leverage is already within the target?

Yes, Michael, I like the way you're thinking this morning. Yes, Michael, I think we would still, in the near term, -- when we think about 2026, we'd probably still maintain that 50% to 60% split. 2027 could be a different story. But I think 2026 still probably maintain that split. .

Our next question onto the line of Brandon Bingham of Scotiabank.

Just thinking about the 2 new plant announcements in the Permian, and I know it's barely -- hasn't even really been a month since the macro update. But just curious what you think the go-forward cadence should be for Permian processing capacity, I believe, Previously, you guys were around 1 or 2 a year with the thought process. Do you think we're moving more to a 2-plus environment? Or just how should we think about that moving forward?

This is Natalie, I think we're probably trending closer to 2. And obviously, that depends on how GORs shape up. But Cory, the GORs are increasing, that is definitely true. So I'd say we're turning more to 2 per year.

Okay. Great. And then maybe just shifting over to the global supply-demand dynamics, especially on the demand side. Just curious what you guys are seeing for refined products and crude and what that might mean for your export business moving forward?

Yes, Brandon, this is Jay again. Yes, we've seen volumes leave our dock. I mean you go back to first quarter last year, I think we -- for fourth quarter, we were up 70,000 barrels a day on exports. -- and then add back to the first quarter, that's another 70 with the SPR barrels, now looking for second quarter, I mean, we could be well over 1 million barrels a day.

Our next question comes from the line of Manav Gupta of UBS.

I just wanted to quickly focus on Slide 17. It looks like PDH units are operating much better based on that slide. And I think you did do some kind of turnaround on the PDH unit 2, and it's been operating better after that. Can you speak to those dynamics, please?

Yes. This is [indiscernible]. PDH 2 has been running much better and much consistent lease since the turnaround that we had last year. The teams have put a lot of work and work very closely with our licensing partner, and have resolved a number of the issues that we had and looking forward to sustained operation of that unit. PDH 1 as well. we've invested a lot over the years in improving the reliability, and we still have some projects that we're working, but I think what you're seeing in PDH much improved reliability in that unit as well due to the investments that we've made over the last few years and reliability as well. And the team we've got gets working out there. And just knocking down the barriers that we've had out there over the previous years and good work by those folks out in our Belvieu PDH team.

Perfect. My quick follow-up is the macro comments you made at the beginning of the call, which were actually very informative. And you talked about 15 million barrels of total disruptions. And then straight probably normally operating maybe only in July. I'm just trying to understand what does this do to various storage levels of crude, refined products, do you think like because based on this depletion, like storage levels could probably take a year or so to get fully replenished here? If you could talk about some of those dynamics, please?

So if we look at the numbers, and then I think Jim was pretty spot on with saying around 500 million barrels a month of lost supply depending on who you ask. As you pointed out, it's somewhere between 10 million and 15 million barrels a day of lost supply through the Straight of Hormuz. That's crude oil products and -- so just take 12 million barrels, for example, multiply that times 60 days. You've lost 720 million barrels through the straight for global supply. So imagine if we can get back to normal and let's say we're or down a handful of barrels, you're only going to get maybe 1 million or 2 million barrels above that. So it could take years to get back to where we were before the war.

What we don't know is what's been destroyed or damaged by the war and what it takes to repair that. I mean, we've heard about the train that Qatar has, but there's still not a hell of a lot of information as to what other assets have been damaged.

Next questions from the line of John Mackay of Goldman Sachs.

I just want to go back to the 2027 kind of soft guide from the last call. You talked about it a little bit earlier in this one, but I just want to put a little finer point on it. When you shared that update, were you thinking of '27 being a kind of what had at the time thought to be a kind of softer 2026 macro environment or a 2025 macro environment where we weren't going to have a lot of spreads? Or was 2027 meant to be a more kind of normalized environment, maybe closer to what you outlined in the fundamentals update a couple of weeks ago. Maybe just kind of walk us through the kind of macro behind the '27 piece.

John, this is Randy. I appreciate the question. Yes, really, what we were looking at when we saw the potential for 2027 was really just fee-based EBITDA growth. It was -- we were in a situation in 2025 and coming into 2026, Jim mentioned earlier, it was really a benign environment for commodity prices and spreads. So really, the driver was really fee-based cash flows off new assets going into service and also around the acquisition that we did from Occidental Petroleum that you'd start seeing those volumes show up on our system at the beginning of 2027. Those are really for drivers. .

I appreciate that. That's clear. And then maybe just switching to kind of the broader macro commented a couple of times on this call about the disconnect between the, let's say, paper market in the physical market. Can you talk a little bit more about that and maybe what you think is driving the divergence or what could drive a convergence in that?

Yes, this is [indiscernible]. I mean you're seeing strong physical premiums, for example, in data of Brent, but I think that we're alluding to is the forward market may not be accurately reflected in what we're seeing in the physical market. It's probably not high enough.

It may sound like you'd expect the kind of futures market to drift up over time even if we get closer to, let's say, some clear resolution in the rate.

So it sure looks like.

Our next question comes from the line of Gabe Dow of Truist.

I was hoping maybe to just touch on the gas side just for a second. Maybe Haynesville gathering -- is there in the shoulder season now and front month at 250. We'll see what happens in the summer, but curious if you're seeing any change in behavior. It does seem like privates build productive capacity to turn on at the appropriate price in. But curious if you're seeing any change in the behavior?

This is Natalie Gayden. You're right, the privates, you see some rigs or quite a few rigs actually running. And so I think we expect a little bit of pop on our system in the Haynesville at the end of the year. And otherwise, it looks pretty steady for the most part. Maybe it'd be a growth, I don't know what Corey's got in the forecast, but something like that.

All right, Natalie. And just a quick follow-up, maybe shifting back to the Permian as the commercial team tends to win some new business, obviously, a competitive basin. But just curious, what's most important to producers today? Is it reliability just given where pricing is, fees, differentiation given your story capabilities? Just trying to frame the competitive dynamics today.

Well, we always use our integrated value chain to compete. There's no doubt about that. And then cost of capital and what it takes to build out whatever a producer needs. I will say, an established footprint that far reaches into areas of the basin that people are producing in as a competitive advantage because you're already there. And when producers want to bring on gas in the next 12 months, you kind of have -- you already have a foot in the door per se. So that would be a mix of all of the things, integrated value chain and just geographical position in the basin.

I'll just add that Natalie operates a super system out there, which provides our customers a lot of reliability.

Our next question comes from the line of Julien Dumoulin-Smith of Jefferies. .

This is Rob Mosca on for Julian. On the CapEx revision and the planned FIDs, I would imagine you'd line of sight to these projects when you issued guidance last quarter? Should we interpret this to mean that incremental FIDs like a new frac could bias '26 CapEx higher? And is what you have now actually a pretty firm number? And also maybe if you could provide an update on those commercial agreements you spoke to with Exxon last quarter?

Yes. The first part of your question, no, our CapEx guide does include anticipated projects that are under development. I will talk to specifically any unannounced projects, but we do have some projects that are under development that are in that guide. Previously where we were, we had on the 2 processing plants that we just announced with the earnings release this morning, we actually had the long lead items associated with that plant in our guide. We just did not know as far as when we were going to come in and actually FID those and again, just with the volume growth we've seen in the Permian, but FID came earlier. So that was, if you would, the reason for the increase in the CapEx guide for this year because we'll see some of that CapEx happening in like the fee.

And this is [indiscernible]. On the NGL side, on the fractionation side, not only mentioned, she's probably up on the upper end of her guidance. So we're always looking at building fractionators. We like to bring on fractionators full helps the economics. We've got a lot of levers within the system. Honestly, we were probably a little late on 14, but we got a lot of levers. So we'll see if we need another fractionator. And if we do, we'll build one. I'm not sure what your question is on the Exxon side. But on the downstream agreements, I would say that we talked about, I would say a lot of those agreements were just extensions of deals that we already had, and it was just a natural fit why we're in the conversations about Bahia to go ahead and extend those contracts.

Got it. No, that addressed it. And for my follow-up, just wondering how we should think about the quantum of that could be shipped out of NRT 2 Phase II once it's online relative to the 360,000 barrels per day refrigeration capacity. It seems like you guys might have just 1 dock there. I'm wondering how contracted that capacity is until the EHT agent comes online on the LPG side at the end of this year?

Yes, this is Tyler Cott. I'll just reiterate again that over the longer term, we're contracted around the range of 90%. We have propane contracts that will start to ramp pretty quickly at NRT. And I think as we've said before, we expect NRT to do a good amount of propane in the balance of this year, and that will transition to ethane as our EHT capacity comes online late this year.

Our next question comes from the line of A.J. O'Donnell of TPH.

I am just wondering if I could just go back to some of the comments on damaged infrastructure in the Middle East. I think we saw from Saudi Aramco this morning, they're going to be halting LPG shipments through May. There's been some published price indexes from third-party sources showing that spot loading rates in the U.S. Gulf Coast have been as high as $0.55. And I'm just wondering, given that Phase 2 of Nature River will be up soon. Curious how you would characterize that rate and what maybe you're seeing in terms of spot opportunities and how that could affect the return profile of your 2 new export projects?

Yes. We've seen elevated spot rates. They've been volatile. They've been as high as kind of what you mentioned, and they're off from those highs now. I think going back to what I said earlier, our system now has a significant amount more flexibility than it did previously. And so we'll respond to what products the markets need and have the highest value with the spot capacity that we have available.

Those products being ethylene, propylene, LPG and ethane.

Okay. Great. Then I just had 1 more on the crude business. looking at the Q1 results, I was just -- could you provide a little bit more detail on kind of the specific drivers behind the lower sales margin and lower transport revenues. Curious with the higher commodity strip and overall volatile basis spreads that you guys have been citing. Is this something that we could see kind of reverting in Q2 and the rest of the year?

Yes, A.J., this is Jay again. As Q1 results, we had a headwind with the Eagle Ford JV renegotiation on some fees there and then some mark-to-market noise. -- lower spreads. But you brought up looking forward, the spreads increasing, that really didn't take place until, call it, April business. But your point is valid. We see definitely at least as April looks now, that turning around.

Our next question comes from the line of Jeremy Tonet of JPMorgan Securities.

Just wanted to come back to some of the commentary that you provided on the macro level. And just wanted to see, I guess, the industry, as you said, I don't think has really responded with a lot of new rig activity. And wondering what you think the industry would need to see in the market to pick up activity? And do you expect us to get there? .

We hear from producers is they're going to stay disciplined. Go ahead, Natalie.

I think that's true. I mean, we'll stay disciplined. We have a few companies that may break out from the back, but they're private in nature and don't add a whole lot to the bottom line. So that's what we're seeing. .

Do you see any certain price levels out there in the '27 curve that might start to warrant more activity? Or just can't tell that?

No, this is Todd. I don't think it's necessarily a specific price that was probably more focused on the back of the curve being lifted up and not just next year needs to get looked at from any year beyond that.

Got it. And then just wondering for the CapEx backlog as a whole, if you might be able to share, I guess, how much of that could be allocated to kind of projects that have not taken FID yet? Just trying to get a sense for how that might look?

For 2026, Jeremy, that's getting pretty granular there.

'27 works as well.

Probably for 2027 -- Chris, I mean, I would say probably half of 2027 is not spoken for. Somewhere between 50% and 65%.

Our next question comes from the line of Keith Stanley of Wolfe Research. .

I wanted to clarify on Neches River Phase I. Would you have contracted any of the LPG shipments on that since it's only an interim service until you switch to ethane? Or is that all spot? And then I just want to confirm the time line you would switch to ethane, you're required to do that at year-end?

We do have propane contracts that we'll be ramping up here at NRT on the Flex train. And then as EHC comes online, we'll satisfy that contract demand long term at EHC. Our ethane commitments are generally driven by when the VLECs arrive and largely, that's later this year and into next year.

Got it. Bigger picture question as a follow-up. What would you say is the biggest opportunity for Enterprise with the situation in the Middle East and some of the commodity dynamics? Is there any particular business or commodity that you see as most exciting that you'd call out or things we might not be thinking about? .

Frankly, I think ethane has surprised me the appetite for it. I could say that growing. And another one is we're going to ship out what, Chris, 3 million barrels of ethylene this month?

That's right, Jim. Yes, our ethylene exports over the last couple of months have been really high. .

What excites me is how we have broadened the offering across our docks. We're not just an LPG dock. We're not just a crude oil dog. We're a hydrocarbon dock. And I think I'd like to see that grow. We've got our own target to support where we like to be that I'm not going to share, but I like the broadening of the offerings rather than a specific project.

And probably the only thing I'd add to that, just really what is just the improvement in fundamentals for our petrochemical customers has really been a big change, which is good to see for them, and we'll get the benefit from just volumes going through the system, but that's much improved.

Yes, healthy petrochemical business is good for Enterprise. And they were running pretty strong before this what's changed? Some are going to heck of a lot of money.

Our next question comes from the line of Jason Gabelman of TD Cohen.

Most of my questions have been answered. I wanted to ask about another commodity exposure. You guys have around octane enhancement. I think in 2022, that business did in '23, north of $400 million of gross margin. How are those spreads looking right now? Do you see that repeating this year? .

And we just now are coming out of a turnaround on our Oleflex unit. And so we're not able to get full capacity, but if we're coming out of that, and we think it's going to be strong through the quarter. .

I would now like to turn the conference back to James Teague for closing remarks. Sir? .

Thanks, Latif, and thank you to our participants for joining us today.

This concludes today's conference call. Thank you for participating. You may now disconnect.