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Enterprise Products Partners (NYSE:EPD)
Q4 2017 Earnings Conference Call
Jan. 31, 2018 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Amy and I will be your conference operator today. At this time, I would like to welcome everyone to the Enterprise Products Partners Q4 2017 Earnings 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. If you would like to ask a question, please press *, then the number 1 on your telephone keypad. To withdraw your question, press the # key. We ask that you limit your questions to one question with one follow-up and then you may reenter to the queue to ask additional questions and follow-up.

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

Randy Burkhalter -- Vice President of Investor Relations

Thank you, Amy. Good morning, everyone, and welcome to the Enterprise Products Partners conference call to discuss earnings for the fourth quarter. 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 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 that may be made during this call. And with that, I'll turn it over to Jim Teague.

Jim Teague -- Chief Executive Officer

OK. Thank you, Randy. As we said in this morning's press release, our businesses continued to perform well in 2017 and, frankly, throughout the turmoil over the last three years. With higher crude oil prices, production of oil and gas in the U.S.

is growing dramatically. Meanwhile, demand globally continues to exceed expectations. The downturn that started in 2014 has been painful but it did have a silver lining. The downturn taught the market a lesson about the staying power of the U.S.

oil and gas industry, abundant short-cycle, highly reliable supplies priced by free markets and made possible by our workforce, who have produced from rock that was previously thought to be worthless. As indicated by record liquid pipeline volumes and record marine terminal volumes, the amount of this new production that's in our pipes, in our plants, and moving across our docks is continually growing. Given our size, our reach, and our business model, we have significant operating leverage across all our systems to handle growing production, serve new markets, and handle the significant increases we're seeing in exports. In addition, we have a number of our long-lead-time projects coming online and several new initiatives that are under construction.

For 2017, Enterprise reported a 10% increase in operating income, to $3.9 billion. Gross operating margin for 2017 increased at 8%, to a record $5.7 billion from $5.2 billion in 2016. Net cash flow provided by operating activities for 2017 increased 14%, to $4.6 billion from $4.1 billion. Distributable cash flow excluding proceeds from asset sales increased 10%, to a record $4.5 billion in 2017 from $4.1 billion in 2016.

We retained $860 million of distributable cash flow in 2017 to reinvest. It's been a long time since we reported record, in quotes, financial and operating results like these. Actually, the last time was in January 2015, when we were reporting 2014 results of much higher commodity prices. During 2017, Enterprise completed construction and either began service or commissioning on projects representing $4.5 million.

In the fourth quarter, we began limited service on our Midland-Sealy pipeline, moving one-grader crude from the Permian Basin to the Houston refining and export market. This pipeline is expected to be in full service in the second quarter after we complete construction of pump stations and storage facilities. We're operating our PDH facility, which has been running and producing polymer-grade propylene. We expect commissioning activities to last another month.

Other the major growth projects completed in 2017 included an expansion of our Atex Ethane pipeline, expansion of propylene pipeline infrastructure on the Gulf Coast, and expansion of our refined products and crude oil marine terminals in Beaumont. In addition, we have another $5.5 billion of growth projects under construction. In the Permian Basin, we're scheduled to bring on two natural gas processing plants at our Orla complex in the Delaware Basin this year, one in the second quarter and the other in the third quarter, put our Midland-to-Sealy crude oil pipeline system in full service, and continue working on our third Orla plant, which is scheduled to be put into service in 2019.When you look at a map of our systems, you couldn't have put the Permian Basin at a better place. It's close to our assets all along the Gulf Coast and literally in the fairway of many of our natural gas and natural gas and liquid assets.

We're finding opportunities to connect the dots around our assets, including expanding existing assets, converting assets, and building new projects like our Orla processing complex, Shin Oak, and Midland-to-Sealy crude line. We're not done finding opportunities in what is now the world's hottest basin. As to Mont Belvieu and petrochemicals, we'll soon be putting our ninth NGL fractionator in services and we're expanding our NGL crude oil and refined products storage facilities. Our iBDH is under construction with completion expected in 2019.

Half of this plant will help build excess capacity in our high-purity isobutylene and MTBE plants, which will allow us to upgrade more NGLs into higher-value products. The other half of this capacity is committed to an investment-grade customer through a 15-year fee-based contract on a feedstock-plus cost basis. Also in petrochemicals, we've begun building an ethylene logistics system to support the nearly 50% increase in ethylene capacity we're seeing on the Gulf Coast. Like we've seen in natural gas, NGLs, and crude oil, petrochemical expansions of this magnitude don't come without opportunities for Enterprise.

We're converting a storage cavern to a high-capacity ethylene salt dome well at Mont Belvieu, which is expected to begin service in the first quarter of 2019. This system will be designed around the eight ethylene pipelines that are within a half a mile of our storage system. We also announced this morning that we have entered into a 50-50 joint venture to build a new ethylene export facility along the Gulf Coast that will have the capacity to export 1 million tons of ethylene per year. These new ethylene assets leverage and extend our existing NGL and petrochemical systems, and we believe are the beginning of the Gulf Coast ethylene distribution system.

A lot of folks don't realize that by 2021 just the state of Texas will be the largest producer of ethylene from steam cracking in the world and that's not counting what is happening across the border in Louisiana. That's in our backyard and the resulting rapid growth in ethylene, combined with increased international demand from markets like Asia, creates an ideal scenario in which markets abroad can diversify their supply toward cost-advantaged U.S. feedstocks. Finally, some comments on exports.

With continuing increases in production, more and more products are being exported. Our Midland-to-Sealy pipeline has delivered initial volumes to the Houston area and as predicted we're seeing most of this crude being exported. Obviously, the same can be said for NGLs, including ethane, and for petrochemicals and refined products. Our dock activity has increased by approximately 50% in the last year.

We expect continued increases in market share of hydrocarbons from our dock. We mentioned in our press release that our success in 2017 and, frankly, every day would not have been possible without the daily creativity and hustle by our team of over 6,700 employees, and this is something we're quite proud of. In 2017, Enterprise had the best safety performance ever with a total recordable rate of 0.41 and lost time rate of 0.17. This is because of the hard work and diligence of all of our folks at Enterprise.

Sincere thanks to the entire Enterprise team for 2017 and a bright future that you continue to give our company. We feel pretty good about 2018 and our longer-term opportunities. With that, I'll turn it over to Bryan.

Bryan Bulawa -- Chief Financial Officer

Thank you, Jim, and good morning, everyone. I'd like to echo Jim's earlier comment that we are very pleased with our record operational and financial performance. Our operational DCF per unit, or if you will, which excludes asset sales, insurance proceeds, and monetization of interest rate derivatives, was $2.05 per unit for 2017. This compares favorably to the same metric in 2016 of $1.93 per unit and approaches DCF per unit levels enjoyed prior to the most recent commodity cycle downturn or, again, if you will, 2014.

Before diving further into our discussion, one of the most popular topics during our recent investor calls and meetings relates to the expected impact associated with tax reform. The Tax Cuts and Jobs Act passed by Congress in December 2017 appropriately preserves favorable tax attributes for master limited partnerships and encourages MLPs to continue investing in infrastructure growth opportunities, which contributes to U.S. job and GDP growth. Having said that, I'll review a few income statement items for the fourth quarter, provide expectations for our growth and sustaining capital expenditures for 2018, and wrap up with an overview of our balance sheet metrics and equity funding objectives.Starting with income [Inaudible] items, net income attributable to limited partners for the fourth quarter of 2017 was $774 million or $0.36 per unit on a fully diluted basis, compared to $659 million, or $0.31 per unit, on a fully diluted basis for the fourth quarter of 2016.

Net income attributable to limited partners and fully diluted earnings per unit for the fourth quarters of 2017 and 2016 include noncash impairment charges of approximately $55 million and $24 million, or a penny per unit for both quarters respectively. Depreciation, amortization, and accretion expenses were $21 million higher when compared to the same quarter of 2016, due to assets being placed into service such as our Midland-to-Sealy crude oil pipeline, which began interim service in November, our Morgan's Point Ethane Export Terminal, the Azure Asset Acquisition, and a number of expansions. Total capital spending in the fourth quarter of 2017 was $1 billion, including $80 million for sustaining capital expenditures. For the full year of 2017, we invested $3.4 billion for growth capital projects in acquisitions, including the $191 million we paid in connection with the Azure acquisition and $244 million for sustaining capital expenditures.

For 2018, we currently expect to invest approximately $3 billion for growth capital expenditures and approximately $325 million for sustaining capital expenditures.Moving to our balance sheet, at December 31, 2017, our total debt principal outstanding was $24.8 billion. The average life of our debt portfolio was 13.9 years assuming the first call date for our hybrids and our effective average cost of debt was 4.6%. Approximately 87% of our debt outstanding is fixed-rate, thereby inflating our debt portfolio in a rising-interest rate environment. Adjusted EBITDA for the 12 months ending December 31, 2017, was $5.6 billion, and our consolidated leverage ratio was 4.1 times after adjusting debt for the partial equity treatment of the hybrid debt securities by the rating agencies and further reduced for cash and cash equivalents.

Working capital requirements remained elevated by approximately $700 million or 0.1 times leverage with self-liquidating short-term marketing opportunities along with higher inventory levels attributed to the continuing effects of Hurricane Harvey. When further applying the pro forma impact of our contracted growth projects under construction during the quarter, namely PPH and Midland-to-Sealy, our leverage ratio would have been 3.7 times. Our consolidated liquidity was approximately $3.7 billion at December 31, 2017, which included available borrowing capacity under our credit facilities and unrestricted cash. With respect to the upcoming distribution, which will be paid next week on February 7, Enterprise Products Company and certain of its affiliates plan to reinvest an aggregate of $100 million in EPD common units through the partnership's distribution reinvestment program.

This continuing level of support from our general partner will further reduce our external equity funding needs for 2018. This year represents the 20th year since our IPO, and with this latest investment, the Duncan family support of our partnership through purchases of EPD common units, contribution of assets, and waiver of distributions totals over $2.5 billion. Finally, during 2017 we funded through excess distributable cash flow or retained earnings approximately 55% of our equity funding requirements attributed to 2017 growth capital investments. We anticipate this level to continue to rise in 2018 and to reach a self-funding equity model in 2019 with a $2.5 billion to $3 billion growth-capital investment profile while preserving our targeted leverage objective of 3.75 to 4 times.

And with that, I'll turn the call back over to Randy.

Randy Burkhalter -- Vice President of Investor Relations

Thank you, Bryan. Amy, we're ready to take questions now from our listeners.

Questions and Answers:

Operator

At this time we will be conducting a question-and-answer session. In order to ask a question, please press *, then number 1 on your telephone keypad. We ask that you limit your questions to one question with one follow-up and then you may reenter the queue to ask additional questions as time allows. Your first question comes from the line of TJ Schultz with RBC Capital Markets.

TJ, your line is open.

TJ Schultz -- RBC Capital Markets -- Analyst

Oh great, thanks. Good quarter, guys. I think just first on the ethylene export terminal, to reach FID, you mentioned you need acceptable arrangements with local tax authorities. Is that just procedural or if you could expand what still needs to get done to reach FID and any reason that it would not be at Morgan's Point?

Jim Teague -- Chief Executive Officer

The reason it wouldn't be at Morgan's Point is we can get a tax abatement that's better somewhere else and there's another location that we could put it at.

TJ Schultz -- RBC Capital Markets -- Analyst

Got it. OK, thanks. Just on Shin Oak, the volumes from the converted pipe, do those move over at the start-up for Shin Oak? And then beyond the volumes, you get from the Orla additions, what traction are you getting on adding other customers and is there any change to your initial design capacity, I think, at 250,000 barrels a day?

Jim Teague -- Chief Executive Officer

I fully expect that we'll have to bring it on at little more than 250,000 barrels a day and we're having positive discussions with several people.

TJ Schultz -- RBC Capital Markets -- Analyst

OK, great. Thanks, guys.

Operator

Your next question comes from the line of Tom Abrams with Morgan Stanley. Tom, your line is open.

Tom Abrams -- Morgan Stanley -- Analyst

Hey, thanks a lot. I wanted to understand a little bit about the mix on the Midland-to-Sealy, Midland-to-ECHO. Inasmuch as you've got uncommitted tariff volumes that might decline and committed flows coming onto it, will that impact the EBITDA temporarily at all in the next couple of quarters?

Brent Secrest -- Senior Vice President

This is Brent Secrest. If you look at the walk-up rate and where the margin is currently for the first quarter, and if you extrapolate that over the rest of the calendar year you'll see volumes increase and the per-barrel fee decrease but I wouldn't say there's a major delta between the dollars.

Tom Abrams -- Morgan Stanley -- Analyst

OK, that's good. The other one, a couple of long-ball questions. One is -- actually, one might be more short-term. Inasmuch as the capacity on Midland-to-Sealy is filling up faster than some might have thought and as a lot of people are hunting around for additional barrels to put on new pipes, are you in a position perhaps to do something earlier than your NGL conversion idea? After Shin Oak, I mean, literally, could you have either an expansion in Midland-to-Sealy or yet participate in another project in the next couple of years?

Jim Teague -- Chief Executive Officer

We can wrap Midland-to-Sealy up beyond what our initial capacity is going to be relatively easy with just pump stations. We can do that and we can use DRA, which is fairly inexpensive. So, yes there's upside there. I'm not sure exactly what.

Tom Abrams -- Morgan Stanley -- Analyst

All right. And then a couple of the long-ball questions are, if you're hearing anything tentatively about additional pet-chem facilities on the Gulf Coast?

Jim Teague -- Chief Executive Officer

Yes. Tony believes there's a second wave coming. We have companies in here whose name I can't hardly pronounce, pretty routinely talking about wanting to the evaluate putting ethylene plants in the U.S. Tony?

Tony Chovanec -- Senior Vice President

Absolutely. And with the plentiful ethane that we have, and that number growing especially when you look at the Delaware Basin, people understand this. So, they're coming, I believe.

Jim Teague -- Chief Executive Officer

Yeah, one of the things, and it gets back to our ethylene export also, when crude oil goes up, natural gas doesn't. It makes this a heck of a lot more attractive than it was this time last year.

Tom Abrams -- Morgan Stanley -- Analyst

Are you moving the timing of that wave forward?

Tony Chovanec -- Senior Vice President

It's hard for us to predict when these folks are going to have FID. It really is. These plants take a while to come on and people to plan for them but at the end of the day, the macro look is that people are coming to the U.S. to make ethylene because ethane supplies are so plentiful.

Tom Abrams -- Morgan Stanley -- Analyst

When you get to 2019 and you're self-funding what happens next? Assuming DCF per unit keeps growing, what do you do with that extra coverage? What are the priorities?

Randy Fowler -- Director and Chief Executive Officer

I think we'll wait till 2019 and see what the opportunities look like at that point in time. To come in and speculate on that now is a little bit premature.

Tom Abrams -- Morgan Stanley -- Analyst

Fair enough. Thanks, Randy. Thanks, all.

Operator

Your next question comes from the line of Darren Horowitz with Raymond James. Darren, your line is open.

Darren Horowitz -- Raymond James -- Analyst

Good morning, guys. Jim, my first question on the petrochemical value chain, specifically on propane versus propylene, if we end up tracking toward 32 million or 33 million barrels of propane inventory exiting March, obviously that's below five-year lows and that supports higher propane process. Does that mean, for you guys, the way you look at it, do you have more opportunity to arb the propane price first or to arbitrage what could be an even wider propane-to-polymer-grade-propylene spread? And then that kind of legs me into my next point. That means that quote-unquote commissioning activity on the PDH could actually capitalize on that before it ends up entering commercial service.

How does the math work for you?

Jim Teague -- Chief Executive Officer

I think you answered your own question, Darren.

Darren Horowitz -- Raymond James -- Analyst

I guess I just wanted to hear you say that, Jim.

Randy Fowler -- Director and Chief Executive Officer

Every pound that we produce in PDH while we're commissioning is sold to our customers as we go. So, we're selling PGP right now on a propane basis.

Darren Horowitz -- Raymond James -- Analyst

How wide do you think that spread, RB, could get over the next couple months?

Randy Fowler -- Director and Chief Executive Officer

I don't think I'm the right person speculate on that.

Darren Horowitz -- Raymond James -- Analyst

OK. And then just one quick housekeeping question for Bryan. As it relates to contango opportunities across the commodities, let's just generically call it, how much do you guys have out on the working cap facility currently?

Bryan Bulawa -- Chief Financial Officer

Well, our working capital facility really is, we have $5.5 billion of credit facilities, so the -- what we have outstanding or what we had on December 31 was about $1 billion of working capital associated with short-term marketing opportunities as well as some elevated inventory levels, again, from the ongoing effects of Hurricane Harvey.

Jim Teague -- Chief Executive Officer

Brent, everything's backward today. So we either have contango rolling off, or we're taking advantage of backwardation, which is bringing money in.

Darren Horowitz -- Raymond James -- Analyst

And from a short-term perspective, with regard to that billion that's out the facility, how much of that do you expect to be mark to market in 1Q?

Bryan Bulawa -- Chief Financial Officer

Well, Darren, it's always, it's dangerous territory because markets shift a bit. Currently, it's -- we declined from September to December by about $300 million and I think we'll see that pull back by at least that amount from now to the end of March.

Randy Fowler -- Director and Chief Executive Officer

There's a decent amount just in the commissioning of Midland-to-Sealy. And as contracts roll on, you'll see some of those crude working inventories roll off.

Darren Horowitz -- Raymond James -- Analyst

OK, that's all I had. Thank you very much.

Operator

your next question comes from the line of Brian Zarahn with Mizuho. Brian, your line is open.

Brian Zarahn -- Mizuho -- Analyst

Thank you. Good morning. Follow-up on Midland-to-Sealy. Can you give an estimate of how much additional capacity could be added through DRA and pump stations and how long would you estimate it would take to add additional pump stations?

Jim Teague -- Chief Executive Officer

I don't think we need additional pump stations. We wouldn't need additional pump stations, just DRA. And this is somewhere between 520 and 550? Let's call it 550,000 barrels a day.

Brian Zarahn -- Mizuho -- Analyst

OK. And then I guess switching to NGLs, as of today, how do you see the ethane uplift opportunity on your system with the crackers making progress coming online?

Tony Chovanec -- Senior Vice President

Brian, this is Tony. We published a slide as to how we see ethane balances west of Appalachia and we think that drives ethane prices. I don't want to tell you that we think ethane is going to blow out. Obviously, you could have periods of volatility.

We acknowledge on our slide there will be times when ethane could be tight and people could be reaching into storage or going to other products, but at the end of the day, especially with the new production forecast, we're not finished with it yet but incremental ethane volumes, we're not predicting that you're going to have a big blowout in ethane prices.

Jim Teague -- Chief Executive Officer

Probably in the Permian or the Eagle Ford, you're going to see, it's going to be transportation-related and it's going to be the appetite that petrochemicals have for ethane. If they have an appetite, then you're going to see higher margins the closer you are to the marketplace. So, in the Permian and the Eagle Ford, you're going to enjoy it. If you're further away, it's going to be marginal.

Brian Zarahn -- Mizuho -- Analyst

I guess not so much on the price side and the volume side on your system, are you optimistic this year about upside of processing volumes, transportation, frack volumes related to ethane recovery?

Brent Secrest -- Senior Vice President

This is Brent. If you look across our portfolio and our expectation of the ethane and the Y-grade, I mean, it's quite healthy in terms of the increase in volumes. So, I think where the margins are right now, it makes sense for people to recover ethane.

Brian Zarahn -- Mizuho -- Analyst

Thank you.

Operator

Your next question comes from the line of Ted Durbin with Goldman Sachs. Ted, our line is open.

Ted Durbin -- Goldman Sachs -- Analyst

Yeah, thanks. So, PDH, just coming back there. Still in commissioning, just feels like it continues to push out a little bit to the right. What's happening with [Inaudible] commercial service? And then can you speak to, are you actually producing on-spec product now? Is there any kind of earnings contribution in the quarter from that? Where's all the product going?

Jim Teague -- Chief Executive Officer

We have produced on-spec product. These are really big plants and it's not unexpected that commissioning takes a little longer. All you've gotta do is look back at Dow and PetroLogistics and see that, we expected that, but, yes, we have been gradually ramping up and we've been producing on-spec propylene. Graham, have you got anything else to add?

Graham Bacon -- Executive Vice President

We've been producing on-spec propylene at capacity. As we go through this, there's a certain amount of activities in terms of conditioning the catalyst that requires us to do some different things but, overall, the plant is up and running and we're just taking it through the normal steps of commissioning right now.

Ted Durbin -- Goldman Sachs -- Analyst

OK, great. And then as you're in the commissioning phase, I think, there was a thought that you might be able to run a bit of a nameplate. Is that still potentially on the cards on the plant or what's your view there?

Jim Teague -- Chief Executive Officer

We'd just like to get the nameplate right now and hold it there. It's like every other Enterprise plant. It's built we'll probably have excess capacity but we're not selling it yet.

Ted Durbin -- Goldman Sachs -- Analyst

Understood. I think we heard the comments on tax reform but I know one of the questions we've got and you thought about over the years is the optimal corporate structure for Enterprise and one of the uncertainties there was what would happen with tax reforms. So, we have that behind us now. I'd just love your thoughts on, do you think you're in the right corporate structure as you think about access to capital, M&A, or other strategic ideas?

Randy Fowler -- Director and Chief Executive Officer

Ted, this is Randy. I think where we are is I think we still feel like the MLP structure works for us as far as access to capital is concerned, access to equity capital at a reasonable price. We'll continue to monitor, frankly, how the market values midstream C-Corps versus midstream MLPs. Frankly, we haven't seen a lot of difference over the last couple of years but, frankly, there was a lot of noise in the space whether you're a C-Corp or MLP over the last three years.

So, I think we'll continue to monitor that and see what develops on that front but that's a forever election. So, it's not to be taken lightly and we'll continue to come in and evaluate but we think we got good access to capital now.

Ted Durbin -- Goldman Sachs -- Analyst

Understood. I'll leave it at that. Thanks, Randy.

Operator

Your next question comes from the line of Colton Bean with Tudor, Pickering, Holt. Colton, your line is open.

Colton Bean -- Tudor, Pickering, Holt -- Analyst

Good morning, everyone. So, just on the ethylene export project, there are some U.S. pet-chem producers who are low on ethylene capacity relative to their polyethylene. So, do you think there's potential to add to the current level of commitments or are you comfortable with where they sit today?

Jim Teague -- Chief Executive Officer

We think we're going to add to the current level of commitments.

Colton Bean -- Tudor, Pickering, Holt -- Analyst

OK. And any sense as to where you sit versus capacity?

Jim Teague -- Chief Executive Officer

Excuse me?

Colton Bean -- Tudor, Pickering, Holt -- Analyst

Just in terms of commitments versus capacity, any comments there?

Jim Teague -- Chief Executive Officer

No, enough to make it accretive.

Colton Bean -- Tudor, Pickering, Holt -- Analyst

Understood. And just switching gears, on the LPG export side of things, it looks like the spread between U.S. and global pricing has widened out a bit presumably tied to the NAFTA linkage, but shipping rates are still relatively muted. So any sense as to where the margin is accruing, whether that be on the terminal side of things or just off-take or trading margins?

Brent Secrest -- Senior Vice President

This is Brent talking. I think the feedback that we're seeing, the traders are struggling with it. The guys who are taking it across the water are struggling with it. So the folks who did take or pay terminaling fee, those the ones that are probably making money in this market.

When these contracts first started, it was a different deal. Those were the guys making most of the money and the terminaling guys were just making their standard fee, but it's definitely swung the other way.

Colton Bean -- Tudor, Pickering, Holt -- Analyst

OK, perfect.

Operator

Your next question comes from the line of Jean Ann Salisbury with Bernstein. Jean Ann, your line is now open.

Jean Ann Salisbury -- Bernstein -- Analyst

Good morning. I just want to make sure I'm thinking about Midland-to-Sealy right. You averaged $333,000 over the fourth quarter but started up in November. Does this mean that you were running at close to 500 in November and December? And if so, is this higher than nameplate because you're not blending and it'll come down once your blending infrastructure is in?

Jim Teague -- Chief Executive Officer

I don't think we were running at 500 at any point in time.

Brent Secrest -- Senior Vice President

Yeah, Jean Ann, I think part of it is, with the pipeline, the base capacity before we added pump stations was 300,000 barrels a day. So pretty much when you bring up a pipe, it's coming up. So, there wasn't that much of a ramp from November into December.

Jean Ann Salisbury -- Bernstein -- Analyst

So, does that mean in October you had some line fill and some numbers that were included there?

Brent Secrest -- Senior Vice President

I think the numbers are, if you look at the days crude was flowing on the pipeline, we averaged 330,000 barrels a day.

Jean Ann Salisbury -- Bernstein -- Analyst

OK, got it, but not necessarily over the entire fourth quarter.

Bryan Bulawa -- Chief Financial Officer

That's right.

Jean Ann Salisbury -- Bernstein -- Analyst

OK, perfect. And then, are you currently marketing the volumes on the NGL-to-crude conversion pipeline from the Permian? It sounds like there might be significant downward pressure on rates from newly FID'd pipelines like Epic and Cactus II, or at least that is what the E&Ps are saying. So I was just wondering if you could say what you're seeing in the marketplace.

Brent Secrest -- Senior Vice President

I think your color on the rates, I mean, there's a lot of competition for crude pipelines right. You guys can read the announcements just like we can, but we are still pursuing the conversion of the NGL line. We got talking to a handful of customers who value having essentially their own pipeline and their own quality of crude oil. So that project, we're still pushing forward on it.

Jean Ann Salisbury -- Bernstein -- Analyst

OK, that makes sense. In general, as a blanket statement, we should expect the next wave of crude pipelines that are FID'd to be at materially lowered rates then what's there now?

Brent Secrest -- Senior Vice President

I would say so.

Jean Ann Salisbury -- Bernstein -- Analyst

OK, thank you so much.

Operator

Your next question comes from the line of Jeremy Tonet with JP Morgan. Jeremy, you line is open.

Jeremy Tonet -- JP Morgan -- Analyst

Good morning. Just wanted to come back to Midland-to-Sealy here and wanted to make sure I had your comments straight as far as what the ultimate size of the pipeline could be. It sounds like it's on track for 450 right now but adding DRA could bring it to 550 and then pumps could bring it bigger? Or could you just help clarify that for me, what the ultimate potential size Midland-to-Sealy could reach if market demand is there?

Jim Teague -- Chief Executive Officer

Right now we've got the capacity to go in the 540-550 range. There's a few other studies that we can do to tweak it so that we might be able to get slightly higher than that but we haven't completed those yet. Those are under way.

Jeremy Tonet -- JP Morgan -- Analyst

Gotcha, so that would just be pumping, adding a little pumping could maybe get a little bit more demand.

Jim Teague -- Chief Executive Officer

It's just some optimization of equipment that's involved that we didn't have in the initial installation that we're taking a look at. We just haven't published a number on that yet.

Jeremy Tonet -- JP Morgan -- Analyst

OK. And then for the earnings capacity of the pipe right now, it was a just over $60 million contribution and that was only part of a quarter. It seems like there was some benefit there with the spread. Just wondering if you could help us think what the normalized earnings power of this asset is just so that we don't kind of get ahead of ourselves as far as our estimates are concerned.

And then the $36 million uplift in south Texas in the Eagle Ford. I was wondering if you could kind of parse out how much was Midland-to-Sealy related versus maybe other drivers so we can just better model what's happening in the segment.

Randy Fowler -- Director and Chief Executive Officer

Jeremy, I'll take the first part of that. On Midland-to-Sealy, Midland-to-ECHO, I think, if you would, that $60 million, $65 million for the quarter from a modeling standpoint, that's probably a good run rate over time. Again, as we bring it up into service, that will move around but that's probably a good run rate. On the Eagle Ford, if you could repeat your question on the Eagle Ford?

Jeremy Tonet -- JP Morgan -- Analyst

It seems like there was a $36 million uplift in the quarter in south Texas in the Eagle Ford, on the crude side there, and it seems like there was some knock-on effect from the Midland-to-Sealy pipe. That's how I was reading the press release. Just wondering if you could add a little bit more color to that.

Randy Fowler -- Director and Chief Executive Officer

That's exactly it. I'd say almost all of it was Midland-to-Sealy related for those volumes to go on [Inaudible]. It's not a significant increase on Eagle Ford by any stretch.

Jeremy Tonet -- JP Morgan -- Analyst

Gotcha. That's helpful. And then one last one, if I could. It looked like the fee-based nat gas processing volumes ticked down a little bit in the quarter.

From looking at quarter over quarter there, was just wondering if that's kind of any seasonality or shift to kind of commodity sensitive or anything else that you can help us with there?

Bradley Motal -- Senior Vice President

This is Brad. The biggest driver there was the South Eddy fire. South Eddy was down for five to six weeks and that was a big driver in the quarter for the delta.

Jeremy Tonet -- JP Morgan -- Analyst

That's very helpful. That's it from me. Thanks.

Operator

Your next question comes from the line of Keith Stanley with Wolfe Research. Keith, your line is open.

Keith Stanley -- Wolfe Research -- Analyst

Hi, good morning. I just wanted to first circle back on equity needs for this year. So CAPEX going a little higher here. Just curious if you think it's still possible to only need the drip this year based on the current plan.

Bryan Bulawa -- Chief Financial Officer

Keith, this is Bryan. There's several factors that it's dependent upon. Certainly, the ultimate size, as you cite, with respect our growth capital, which is at $3 billion today and we certainly hope more opportunities come our way and that grows. In our assumptions, and we talked about this last quarter, we have modest assumptions around the participation in the distribution-reinvestment program.

It certainly will be dependent on the timing around PDH coming fully online, as well as Midland-to-Sealy or Midland-to-ECHO performing as we anticipate and the two Orla trains that are coming on this year. So there's a lot of moving parts, but having said all that, with the potential shifts in those factors, I still anticipate our external equity needs to be very light.

Keith Stanley -- Wolfe Research -- Analyst

OK, great. And one follow-up just on the Q4 results. Obviously, a lot of strength across the businesses overall but the NGL and crude marketing businesses continue to see some pressure here. Can you just give a little more color on what's going on there?

Brent Secrest -- Senior Vice President

This is Brent. On the NGL side, you're seeing a compression of spreads and we've talked before in the past that we're somewhat resilient to decreased commodity prices because of our storage presence. So, there's a lot of contango opportunities that marketing gets to realize, but as the market gets backward, barrels start to flow down pipes, they don't stay in storage, and that limits some of our opportunity. Crude oil, you're seeing some compression on spreads.

I feel that things are getting better, especially from a crude purchasing side, but just overall storage is one of our plays and storage and contango opportunities are somewhat limited right now.

Jim Teague -- Chief Executive Officer

Is it fair to say we like it better when our pipes are full than when there are contango opportunities, Brent?

Brent Secrest -- Senior Vice President

That's right. So, I think this as Enterprise, when barrels are flowing and going through assets, it's such a good thing for us but from a marketing side we're probably more there to help [Inaudible] when that's not happening.

Keith Stanley -- Wolfe Research -- Analyst

Thank you.

Operator

Your next question comes from the line of Michael Blum with Wells Fargo. Michael, your line is open.

Michael Blum -- Wells Fargo -- Analyst

Thanks. Good morning, everyone. Two quick ones from me. One, just a point of clarification on PDH, when this year do you expect it to be fully up and running?

Jim Teague -- Chief Executive Officer

I think we've said in the earnings script that we figure by the end of February things ought to be humming along. That's our plan.

Michael Blum -- Wells Fargo -- Analyst

OK. And then the second question is, can you give us your thoughts on a front-range pipeline expansion? It seems like the NGL market in the DJ is getting or could get tight and just wanted to get your thoughts on if that's possible and if so, what would the dynamics be to make you go ahead with that?

Jim Teague -- Chief Executive Officer

Michael, yes, we can expand that pipeline. We're looking at expanding that pipeline and we've got producers on that pipeline that are working with us to make that happen.

Michael Blum -- Wells Fargo -- Analyst

Do you think that's a 2018 event?

Jim Teague -- Chief Executive Officer

Early 2019, Doug says.

Michael Blum -- Wells Fargo -- Analyst

All right. Thank you so much.

Operator

Your next question comes from the line of Becca Followill with US Capital. Becca, your line is open.

Becca Followill -- US Capital -- Analyst

Good morning. One question left that hasn't been asked. ATM program, anything done in the quarter on that?

Jim Teague -- Chief Executive Officer

Hi, Becca. None.

Becca Followill -- US Capital -- Analyst

OK, thank you.

Operator

Your next question comes from the line of Nick [Inaudible] with Citi. Nick, your line is open.

Nick [Inaudible] -- Citi -- Analyst

Hi, thank you very much. Just turning to the Permian real quick. Do you still have an interest in building your natural gas pipeline down to Agua Dulce? Could you just give us your view of that [Inaudible] recent projects have been announced?

Jim Teague -- Chief Executive Officer

This is Jim. Yeah, we still have an interest. Whether we can get traction on it is a different thing and we've brushed it off here recently and frankly we're taking a look at it. I think, ultimately, personally I'll look to Tony and Brad, I think a second pipeline is going to be required out of there and whether it's to Agua Dulce or Katy or wherever but there will be a second pipeline needed.

No question about that.

Nick [Inaudible] -- Citi -- Analyst

OK. And what do you think the spread needs to be roughly to sort of entice a midstream company to FID a project after all the projects that have been announced and FID'd right now have come through?

Jim Teague -- Chief Executive Officer

Talking about on a natural gas pipeline?

Nick [Inaudible] -- Citi -- Analyst

Yeah.

Jim Teague -- Chief Executive Officer

I see a natural gas pipeline as being a way to produce crude oil. So I'm not sure it's just the spread of natural gas. I think it has to do with our ability to produce crude. Tony.

Tony Chovanec -- Senior Vice President

I agree and I'll tell you, if you look at the spreads today, they'll sort of take your breath away. As far as what basis is traded at, well over a dollar, and then that basis markets assumes that a pipe's going to be built and then it still is over $0.50 for long as you can look at it. So, the market's saying another pipe is needed and will be built.

Bradley Motal -- Senior Vice President

This is Brad. I'll just echo what Jim and Tony said. A lot of the conversations we have with producers, it seems that the first wave did take capacity on the pipeline but there are a lot of people out there that are still trying to understand what their long-term plan is and how much capacity that they're really going to need.

Nick [Inaudible] -- Citi -- Analyst

OK, that's helpful. And then just to switch gears a little bit on the northeast side, any updates you can provide us on Centennial and what your thoughts are about that going forward?

Jim Teague -- Chief Executive Officer

I wish we had updates on Centennial but right now we don't.

Nick [Inaudible] -- Citi -- Analyst

OK, that's all I had. Thank you very much.

Operator

Your next question comes from the line of Dennis Coleman with Bank of America. Dennis, your line is open.

Dennis Coleman -- Bank of America -- Analyst

Thanks very much. Good morning, everyone. Just, I guess, to dig a little bit more into the export facility that you announced today, obviously you didn't include any capital estimates, but I wonder if you might just talk broadly or if there's anything you might say as to directionally what those would be. I mean, would the ethane facility be an example or something that we could look to to sort of estimate that number?

Jim Teague -- Chief Executive Officer

I doubt it.

Randy Fowler -- Director and Chief Executive Officer

Really around the ethylene refrigeration and storage facility, really you're talking pretty nominal capital dollars.

Dennis Coleman -- Bank of America -- Analyst

OK, that's helpful. Thanks very much.

Operator

And as a reminder, if you would like to ask a question, please press *, then the number 1 on your telephone keypad. Your next question comes from the line of Kristina Kazarian with Credit Suisse. Kristina, your line is open.

Kristina Kazarian -- Credit Suisse -- Analyst

Hey, guys. Thanks for the update on timing around Frac 9. I was just wondering if you could talk a little more around demand supporting or time frame for a potential Frac Canada. You announced 9 at the analyst day last year, and we've got another analyst day upcoming or maybe even 11.

Thoughts on that?

Jim Teague -- Chief Executive Officer

Well, we have it permitted. We can build it. I think if we are successful on what we're doing on Shin Oak, I think it's a strong possibility that we would build it. I would expect that it would probably be sometime after 2019.

Kristina Kazarian -- Credit Suisse -- Analyst

Right. And then a follow-on, if you will, could you just talk a little bit more on the NGL opportunity especially on the export side? I mean, you guys have a slide in your deck that keeps talking about tight capacity after 2019. Would you mind talking a bit more about that trend as well and opportunity there?

Tony Chovanec -- Senior Vice President

Kristina, this Tony. It's just a matter of supply and demand and as we see supply grow, we've been really outspoken and it's really not rocket science that demand in the U.S. really isn't going to grow a great deal. So, it has to price to export and we all model and have a pretty good idea what the export facilities' capacity is today and that's why we published the slide that we published that shows export capacity is going to be added.

When we publish again, the gap is going to be even bigger because the NGL number will be up.

Brent Secrest -- Senior Vice President

This is a Brent. As Tony said, if you believe in the production numbers and especially if you believe in the Permian Basin, the net barrel has to go somewhere. So, probably there'll be a period of time where it can be handled in storage, but at some point, the price will get to a level where that price will increase demand and that barrel will move across the water.

Jim Teague -- Chief Executive Officer

So Tony, do you expect production growth to exceed export capability, today's export capability?

Tony Chovanec -- Senior Vice President

The answer to that's absolutely.

Kristina Kazarian -- Credit Suisse -- Analyst

Great. Thank you, guys.

Jim Teague -- Chief Executive Officer

I'll add one thing to that. It's amazing how crude-to-gas gives people an appetite. We talk about LPG but we're beginning to get a lot of interest in ethane exports, and that's driven primarily by that cast to crude spread or the price of [Inaudible] in Asia or whatever.

Operator

Your next question comes from the line one of Danilo Juvane from BMO Capital. Danilo, your line is open.

Randy Burkhalter -- Vice President of Investor Relations

Amy, this is Randy. We have time for one more. You [Inaudible] ask Danilo. This will be our last one.

Unknown Speaker --

Actually, all of the questions have been asked already.

Randy Burkhalter -- Vice President of Investor Relations

OK, Amy, would you give our listeners the playback information, please?

Operator

Certainly. Thank you for participating in today's conference call. The call will be available beginning at 2 p.m. Eastern today to 11:59 p.m.

Eastern on February 7, 2018. The conference ID number for the replay is 49822183. Again, the conference number for the replay is 49822183. The number to dial in to replay is 1-800-585-8367 or 1-404-537-3406.

Randy Burkhalter -- Vice President of Investor Relations

Thank you, Amy, and thank you all for joining us today and have a good day. Goodbye now.

Operator

This concluded today's conference call.

Duration: 54 minutes

Call Participants:

Randy Burkhalter -- Vice President of Investor Relations

Jim Teague -- Chief Executive Officer

Bryan Bulawa -- Chief Financial Officer

TJ Schultz -- RBC Capital Markets -- Analyst

Randy Fowler -- Director and Chief Executive Officer

Tom Abrams -- Morgan Stanley -- Analyst

Brent Secrest -- Senior Vice President

Tony Chovanec -- Senior Vice President

Darren Horowitz -- Raymond James -- Analyst

Brian Zarahn -- Mizuho -- Analyst

Ted Durbin -- Goldman Sachs -- Analyst

Graham Bacon -- Executive Vice President

Colton Bean -- Tudor, Pickering, Holt -- Analyst

Jean Ann Salisbury -- Bernstein -- Analyst

Jeremy Tonet -- JP Morgan -- Analyst

Bradley Motal -- Senior Vice President

Keith Stanley -- Wolfe Research -- Analyst

Michael Blum -- Wells Fargo -- Analyst

Becca Followill -- US Capital -- Analyst

Nick [Inaudible] -- Citi -- Analyst

Dennis Coleman -- Bank of America -- Analyst

Kristina Kazarian -- Credit Suisse -- Analyst

Unknown Speaker --

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