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Enterprise Products Partners LPÂ (EPD -0.71%)
Q3Â 2018 Earnings Conference Call
Oct. 31, 2018, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, and welcome to the Enterprise Products Earnings Call. All lines have been placed on mute to prevent any background noise. (Operator Instructions)
It is now my pleasure to hand the conference over to Mr. Randy Burkhalter.
Randy Burkhalter -- Vice President of Investor Relations
Thank you, Nicole. Good morning, everyone, and welcome to the Enterprise Products Partners third quarter earnings call. Our speakers today will be Jim Teague, Chief Executive Officer; and Randy Fowler, President and Chief Financial Officer of Enterprise's General Partner. Other members of our senior management team are also in attendance 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 an 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.
With that, I'll turn the call over to Jim.
James Teague -- Chief Executive Officer
Thank you, Randy. Before we jump into the third quarter, Randy Fowler and I wanted to take a step back in time. A lot of you might not realize, but the third quarter of 2018 marked our 20th anniversary as a public company. This year we're on track for our 20th consecutive year of increasing our cash distributions to partners, to our knowledge no other US midstream company has accomplished that. $1,000 investment in Enterprise at the IPO with reinvested distributions would be worth approximately $17,000 today.
We've accomplished this through two commodity price cycles, petrochemical cycle, one of the worst financial crisis in US history. We're proud of these accomplishments and our team of 7,000 employees that drive this performance, and we're thankful to our long-term debt and equity investors and to our customers who make this performance possible. It's been a quick 20 years, don't you think, Randy?
Randy Fowler -- President and Chief Financial Officer
It has.
James Teague -- Chief Executive Officer
Now, onto our results. Supported by a robust supply growth and strong demand, both domestic and global, our businesses continue to perform exceptionally well in the third quarter. Gross operating margin excluding non-cash mark-to-market was $1.9 billion, $576 million increase versus third quarter of last year. These increases are largely attributed to a combination of new assets put in service, volume growth and operational leverage associated with our legacy assets and increases in gas processing margins.
Long-term fundamentals are strong across our entire value chain, and we're working hard to make this kind of performance the norm. Our results provided distributable cash flow of $1.6 billion, which provided 1.7 times coverage. Our DCF for the first nine months of 2018 was $4.4 billion providing 1.6 times coverage and $1.6 billion of retained distributable cash flow. This kind of performance for the quarter and year-to-date puts us far ahead of our self funding goals we communicated in the fourth quarter of last year.
Moving to our operating results, increased volumes and margins across all our businesses led to 16 operational and financial records for the third quarter, building on the 14 from last quarter. Our NGL and natural gas business segments reported seven operational records relative to volumes for our pipelines, marine terminals, fractionation, and the base processing. And our crude oil and propylene businesses report a near record volumes.
We also set nine new financial records in the third quarter, which was covered in our press release. Total capital spending for the first nine months of this year was approximately $3.3 billion. We expect to spend $4.2 billion in 2018, and about $350 million in sustaining capital. The current environment of strong demand for our services coupled with productive discussions with customers to develop new infrastructure projects across all of our business segments is the strongest climate we have seen in recent memory.
We announced two additional projects this morning, a 150,000 barrel a day expansion of our NGL fractionation capacity at Mont Belvieu, and our Mentone natural gas processing plant serving the Permian. Including these projects, we currently have over $6.6 billion of growth capital projects under construction scheduled to be completed and generating new sources of cash between now and 2020. In addition to what we have announced and have under construction, we have other exciting strategic projects under development. I'll give you a couple of examples. Our Deepwater Port project is advancing on both the engineering and commercial fronts. We're in discussions with domestic producers and global consumers. As I look at a lot of announcements and hear a lot of talk, one must realize that anyone can build a terminal, but it's -- what's behind that terminal that determines its success. The reason we are the largest ethane and propane exporter in the world is because of the 130 million barrels of NGL storage and over 1 million barrels of fractionation that we have in Mont Belvieu, and our pipeline connectivity bringing Y-grade from the Eagle Ford; from the Permian; from the Rockies; and the Midcontinent. We call that supply aggregation. The same is true with crude oil. A terminal success depends on what's behind that terminal. Enterprise can aggregate 5 million barrels a day of crude oil today, and that will grow to 8 million barrels a day over the next five years, that's accomplished, because we have pipelines of our own bringing crude from Cushing, which can access the DJ as well as Canada from the Permian and from the Eagle Ford, and our header system is tied to other third-party pipelines. Our terminal has connectivity to 300 million barrels of storage and access to almost 40 different grades of crude oil. An efficient market hub requires supply, demand, and connectivity. Enterprise's connectivity to its own and third-party pipelines and storage gives it unparalleled crude oil supply aggregation. I don't think there's another location that has that.
And finally, the launch next Monday of the CME Gulf Coast Crude Contract at Enterprise Houston locations will give our terminal price transparency, which will be a huge benefit to our terminal customers. Another example, we are finalizing engineering and license arrangements for a second PDH. Frankly, it's not out of the question that we could build too, as negotiations are under way with several petrochemical companies. Again, couple of our feedstock position lead that to be supply aggregation of NGLs, coupled that position with our growing -- petrochemical infrastructure, and we are well on our way to significantly extending the Enterprise value chain into primary petrochemicals, which add significant long-term global GDP upside to Enterprise. Last but not least, one should not assume that Enterprises done building pipe out of the Permian. We continue to believe that the Permian has substantial upside, and we have an excellent footprint for expansion and extension. As we said in the press release, our goal is to position Enterprise to capitalize on these type of opportunities, while funding our equity needs to drive continued growth in DCF per unit and ultimately the value of our units.
These results are impressive, and we're obviously proud of them, but they're not luck. Our highly integrated systems across the entire value chain from producing regions to end users, and now with emphasis on growing international demand give us tremendous operating leverage across our businesses plus long-term growth opportunities in virtually all environment. I believe the last few years has proven that when the industry goes through a slump, our investors can take comfort that our integrated asset model and our dedicated employees are going to provide superior coverage that always allow us to grow. And one fundamental strength unlike today, those businesses are going to provide even greater coverage. Our goal is to perform in any environment, and not to dilute your investment.
I'll finish today reminding you that what you own when you own Enterprise. Firstly on what I think is the best supply system in the US, but all gas, NGLs, and petrochemicals. Next to you on the most integrated demand system in the US. And finally, when you own Enterprise, it's our goal that you will own the best liquid hydrocarbon export system in the US.
With that, I'll turn it over to Randy.
Randy Fowler -- President and Chief Financial Officer
Thank you, Jim. Good morning, everyone. I'd like to start with a few items on the income statement and cash flow statement. Net income attributable to limited partners for the third quarter of 2018 was $1.3 billion or $0.60 per unit on a fully diluted basis, this compares to $611 million or $0.28 per unit on a fully diluted basis for the same quarter in 2017. We recognize the total of $204 million or $0.09 per unit in non-cash mark-to-market gains during the third quarter of 2018, primarily to Midland-to-Houston basis hedges on crude oil. Adjusted earnings per unit of $0.51 per unit for the third quarter of this year is 76% increase compared to the same adjusted number for the third quarter last year. Distributable cash flow per unit excluding non-recurring items for the third quarter of 2018 increased 45% to $0.71 compared to the third quarter of last year. And as Jim mentioned, we retained $632 million in excess distributable cash flow in the quarter and had distribution coverage of 1.7 times. To put in context, our strength to generate distributable cash flow per unit in the current business environment, for the first nine months of 2018, our distributable cash flow per unit excluding non-recurring items was $2 per unit, this compares to a record DCF per unit of $2.06 for all of 2014. Through the first nine months of 2018, we were about 30% ahead of 2014 record pace.
Moving to capitalization in our balance sheet. At September 30, our total debt principal was $26 billion, assuming the first call date for our hybrids. The average life of our debt portfolio was 13.4 years. Our effective average cost of debt was 4.5% and 89% of our debt portfolio was fixed as of September 30. On October 3, we priced an aggregate $3 billion of senior unsecured notes comprised of $1.25 billion of 30 year notes at a 4.8% coupon, $1 billion of tenure notes at 4.15% and $750 million of three year notes at 3.5%. Based on our debt maturities in 2019, and our current estimate of at least $3.5 billion in growth CapEx in 2019, coupled with strong support from our fixed income investors, we elected to upsize the offering to $3 billion. Absent on acquisition, we do not currently expect to have the need to be back in the debt capital markets until 2020. Adjusted EBITDA for the 12 months ended September 30, 2018, was $6.9 billion, and our consolidated leverage ratio was 3.6 times after adjusting debt for the partial equity credit of the hybrid debt securities by the rating agencies, and further reduced by unrestricted cash. Our consolidated liquidity was approximately $3.3 billion at September 30, which included available borrowing capacity under our credit facilities and unrestricted cash. The proceeds from the October debt offering obviously increases that liquidity, as of yesterday, total liquidity was approximately $6.5 billion.
Moving on to equity issuances. During the third quarter, our only proceeds were from the distribution reinvestment program and employee unit purchase program for approximately $188 million, which included $106 million from privately held affiliates of APCO. Aside from the drip and employee purchase plans, we have not raised any equity in the past 15 months. Given our current business and cash flow outlook, we elected to reduce the discount under the dividend reinvestment plan to zero, effective with the distribution expected to be paid in February 2019.
And with that, Randy, I think we can open it up for questions.
Randy Burkhalter -- Vice President of Investor Relations
Okay. Nicole, we're ready to take questions from our participants.
Questions and Answers:
Operator
(Operator Instructions) Your first question comes from the line of Jeremy Tonet with JP Morgan.
Jeremy Tonet -- JP Morgan -- Analyst
Good morning. Congratulations on the quarter.
James Teague -- Chief Executive Officer
Thank you, Jeremy.
Jeremy Tonet -- JP Morgan -- Analyst
Just want to touch on the fractionation market, and it seems like industry reports have point to that being extremely tight right now in a lot of logistical challenges as far as more NGLs hitting Belvieu than there's frac space, that causing issues of storage, and then also the Petchem pull being so strong, it seems like that tightness is likely to persist until 2020, if -- as long as Brent and Henry Hub kind of stay at these spreads. So, I'm just wondering what's your thoughts on I guess how tight the market is, what the duration of that tightness and how does that impact Enterprise?
James Teague -- Chief Executive Officer
Jeremy, I think you just nailed it. I think 2019 is good, it's going to -- the right things are going right now, it's going to be very tight. Pipeline capacity is tight right now, that gets relieved whenever frankly Shin Oak comes on. But fractionation, we think will be tight through 2019. We -- our position is we have not -- we're not in a situation where we have over-contracted our capabilities. We are having people come to us and ask for fractionation capacity, and we're looking at the levers that we can pull to accommodate them, and frankly, we like to tie those opportunities to longer-term deals.
Jeremy Tonet -- JP Morgan -- Analyst
That makes sense. That kind of goes into my next question with Shin Oak there, and I just want to touch on progress and thoughts I guess is when Shin Oak comes on line as far as converting some of the other NGL pipes that you might have excess capacity into crude oil service given kind of a good need for that pipe, incremental crude oil takeaway out of Permian today?
James Teague -- Chief Executive Officer
Well. You heard in my earnings -- in my script that I said we're not through building takeaway out of the Permian, and we are putting ourselves in a position to be able to convert a pipeline, but the earliest that would be, would be when Shin Oak comes on and that's not till the second quarter of next year.
Jeremy Tonet -- JP Morgan -- Analyst
So a conversion middle of next year for the NGL and the crude pipe, is that possible or how much of a lag time would there be?
James Teague -- Chief Executive Officer
We put ourselves -- we're putting ourselves in a position to convert an NGL pipeline to crude oil service, and the earliest that would be, would be when Shin Oak comes on. Jeremy, you can ask the question again, you're going to get the same answer about it.
Jeremy Tonet -- JP Morgan -- Analyst
Got you. Fair enough. I didn't know if you come on the lag time. Last one for me, I mean you guys have been on the DRIP, you're decreasing, the discount is zero, but based on numbers we see, it seems like it might make sense to go the other way and repurchase unit, under what conditions would it make sense for Enterprise to start buying back units, granted you guys have a very deep organic growth portfolio, but it seems like, fundamentals are really coming your way and you're going to be gushing a lot of cash flow?
Randy Fowler -- President and Chief Financial Officer
Yes, Jeremy. For one, when we sort of went with the equity self funding goal, at the time we were talking about $2.5 billion to $3 billion in growth CapEx, now we're running, call it between $3.5 billion and $4 billion a year of growth CapEx. So I think we've got good places to put the capital back to work with some good returns on capital. I think the other overlay that you come in and you look at it from a buyback standpoint, when you do a buyback by definition you're reducing your financial flexibility, and given the equity markets that we're in where we're not seeing any funds flow at all come in to the midstream space, that matter of your C-Corp of MLP. I think this is a -- we're out of time or in a season where you need to make sure you've got financial strength and financial flexibility. So I don't see a buyback in the near-term.
Jeremy Tonet -- JP Morgan -- Analyst
That's all for me. Thanks for taking my questions. I'll hop back in the queue.
Operator
Your next question comes from Shneur Gershuni with UBS.
Shneur Gershuni -- UBS -- Analyst
Hi. Good morning, guys. Just a couple of philosophical questions. First, touching on the NGL market, as you responded just a few minutes ago about how tight it is and so forth. I was wondering if you can sort of talk about contract negotiations in general, are we in an environment where as you build the next suite of assets, does it lend itself to longer duration contracts and better pricing terms than you had previously or I guess that differently, are we in an environment that the next dollar of CapEx deployed results and even higher returns versus the last dollar that you spent?
James Teague -- Chief Executive Officer
I hope so. I think we're in an environment where short -- where you probably are better leveraging the opportunity into longer-term deals rather than trying to mine it for the last penny. Does that make sense?
Shneur Gershuni -- UBS -- Analyst
No. Absolutely, I was just wondering if -- when you converted into longer-term deals, is it better than the longer-term deals that you've signed previously?
James Teague -- Chief Executive Officer
Yes.
Shneur Gershuni -- UBS -- Analyst
Okay. Following up on that, in terms of your growth rate, I mean obviously you've exhibited a very strong growth rate this year, when you moderated distribution growth in 2017, you talked about reevaluating it in 2019. Do you have any sense on where you think Enterprises sustainable growth rate is now given, kind of the performance that you had this year and the visibility of growth outlook that you have going forward?
James Teague -- Chief Executive Officer
Yes, Shneur, it seems like a -- goals higher every week. Right now we're in the middle of our 2019 planning process, and your question, I mean, growth CapEx is very fluid right now. And Jim mentioned, we're trying to come in and underwrite two or three other projects in development. So what we -- the projects if we would that have been sanctioned right now, I think puts us at about $3.5 billion of growth CapEx next year, that could grow and grow by a sizable amount. So, I think we need to continue to monitor that and what we had said is we'd come in and provide guidance on 2019 distribution when we report fourth quarter earnings, and I think as dynamic as things are right now, we'll adhere to that.
Randy Fowler -- President and Chief Financial Officer
One of the things as you look forward, where we can grow as a change, we can grow in more areas. In that PDH plant we built was a huge step down into the primary petrochemicals as it was IBDA (ph 23:47). So, we're not just building pipelines anymore or processing plants or fractionators, we're building primary petrochemical plants, which gives us even more opportunity.
Shneur Gershuni -- UBS -- Analyst
No. Completely recognize that I'm just doing what I do with the back of the envelope math in terms of your retained distributable cash flow, it seems like you can easily self fund $6 billion a year program. And I guess that's where the question is coming from?
Randy Fowler -- President and Chief Financial Officer
I think Graham Bacon that runs engineering and operations just turned white, when you said $6 billion, but --
Shneur Gershuni -- UBS -- Analyst
Fair enough. One last question, Randy, last quarter you talked about Mr. Market, you've had a very strong quarter this quarter as well too. But stock price outside of today has been kind of lackluster, when I sort of think about all your financial metrics, you've got coverage, self funding and so forth, you've done everything right. But have we hit a point with almost $60 billion in market cap that Enterprise has gotten too big for the MLP market, does it makes sense to review ticking the box or somehow entering the C-Corp market to make sure that valuations properly reflected?
Randy Fowler -- President and Chief Financial Officer
Yes. Shneur. I mean that's something that we continue to evaluate. As we come in and look at valuations, I don't necessarily think it's MLP valuations specific, I think it's broader than that. Again, I think if he would, energy is still macro if he would the energy sector is broadly out of favor, and we need to see some sector rotation back into energy broadly. And then I think midstream's will get our share of that capital, but if we come out and look at those guys that have converted to C-Corps, and we look at the valuation of the large diversified MLPs, although there aren't very many of us. The valuations are on top of one another when you come in and you look at the peer group, so I don't know if checking the box necessarily results in higher valuation.
Shneur Gershuni -- UBS -- Analyst
Fair enough. Thank you very much. Appreciate all the commentary.
Operator
Your next question comes from the line of Jean Ann Salisbury with Bernstein.
Jean Ann Salisbury -- Bernstein -- Analyst
Good morning. Have you had a material uptick and requests from external parties to store Y-grades, if so, is that a fixed fee to external parties, or you can kind of charge off, so what the market is willing to pay or is it a fixed fee where you can't really move that around?
Brent Secrest -- Senior Vice President, Commercial
Hey, Jean Ann. This is Brent Secrest. There's definitely more interest in store and Y-grade. I think there's some interest and obviously fractionating our Y-grades ultimately it depends on the structure of the contract. In some cases where we're storing Y-grade, in some cases it's a much larger feat of fractionation, but overall, there's definitely demand for store and Y-grade.
Jean Ann Salisbury -- Bernstein -- Analyst
Okay. And the storage for Y-grade, that fee can kind of move around based on how much demand there is for it.
Brent Secrest -- Senior Vice President, Commercial
That's right.
Jean Ann Salisbury -- Bernstein -- Analyst
Thanks. And I was just wondering, how many fracs do you have space to build in Mont Belvieu, and how should we think about that limitation if there is one?
James Teague -- Chief Executive Officer
We've got more space than I hope we build fracs. I joke some time with Randa Duncan, and at the rate we're going, we're going to have them built all the way to Dayton, Texas. But we got, what have we got left Graham, 1,500 acres, 1,300 acres out there. We got about -- how many acres does a frac takeup. Okay. Call it 15 acres, Jean Ann and do the math.
Jean Ann Salisbury -- Bernstein -- Analyst
All right. Fair enough. And then just one last one, kind of building on a question, it was asked before, is it fair to think that the new processing and frac announcement from today might really reduce the chances that you will convert the NGL line, it seems like you might need it at NGL?
James Teague -- Chief Executive Officer
We recently announced 550,000 barrels a day. Duncan (ph), can we expand that beyond or it's done. Is that a 550?
Unidentified Speaker --
Yes. 550 is max.
James Teague -- Chief Executive Officer
Yes. So I think we have ample of Y-grade space.
Jean Ann Salisbury -- Bernstein -- Analyst
Okay. Sounds great. That's all for me. Thank you.
Operator
Your next question comes from the line of Tom Abrams with Morgan Stanley.
Tom Abrams -- Morgan Stanley -- Analyst
Follow-up on that NGL, the crude line conversion as well, you're setting yourself up to do that possibly next year, would it be a fairly rapid conversion or would it take nine months say to do?
James Teague -- Chief Executive Officer
It won't come up Tom, before Shin Oak comes up.
Tom Abrams -- Morgan Stanley -- Analyst
Well, once it does, once Shin Oak comes up, is it almost an instant conversion or is there some more that needs to be done?
James Teague -- Chief Executive Officer
I wish come up -- it would come up at its earliest when Shin Oak comes up.
Tom Abrams -- Morgan Stanley -- Analyst
Okay. And then on the NGL side, there's just been a lot of volatility in ethane prices in the basins on some import export differentials, kind of a Belvieu differentials against the business, I guess if you will from third quarter to fourth, is that a potential headwind of any magnitude quarter-to-quarter?
James Teague -- Chief Executive Officer
It's hard to say. I'm not convinced it is because our pipelines have been on -- allocation throughout the third quarter, so we've probably created some of those spreads.
Tom Abrams -- Morgan Stanley -- Analyst
Yes. Well, I think too, because you -- it looks like your NGL equity volumes you kind of gave up some of those, which I assume had an economic impact in favor of your customers, you're managing that to some degree?
James Teague -- Chief Executive Officer
Exactly. Some of our equity volumes are when our customers do not elect, we had discretionary opportunities to process that gas ourselves. The margins have been such that they've been electing full recoveries.
Tom Abrams -- Morgan Stanley -- Analyst
So, consumably the market would give you less, but your contracts, your equity lines would give you more, that's one way to think about it perhaps?
James Teague -- Chief Executive Officer
Yes.
Tom Abrams -- Morgan Stanley -- Analyst
And on the taxpayer question, or I'm sorry C-Corp question, when you do that path and look over it again and again and again, when do you think if you did go C-Corp you would be a taxpayer?
James Teague -- Chief Executive Officer
Yes. Tom.
Unidentified Speaker --
A little bit, it depends on how you wind up becoming a taxpayer, and checking the box C-Corp conversion step up. I don't foresee us coming in and do any type of step up, that would not be in our plans, because of the tax liability that would cause to a limited partners out of the gate.
Unidentified Speaker --
We're very -- I mean we're profitable where we are Tom, maybe it gets down, I mean, you do bonus depreciation, do you come in and take tax depreciation overtime. There are a number of things that you can do to come in and manage that tax liability. So hard to comment right now what we might do if we're taxable as a C-Corp when we're still on MLP.
Tom Abrams -- Morgan Stanley -- Analyst
I understand. I'm just trying to get to the idea that it's not a lay up that C-Corp is home free that there's some future tax liability, whether it's five years, 10 years down the road that has to be.
James Teague -- Chief Executive Officer
Oh sure. I mean --
Tom Abrams -- Morgan Stanley -- Analyst
Considered in this map.
James Teague -- Chief Executive Officer
Very much. Again, that's where you come back in with what Congress did in enacting bonus depreciation, with where your growth CapEx is, and acquisitions for that matter, that can do, I mean you can -- again depending on what your growth profile is, you can keep your income taxes negligible for quite a while, just have been that what your growth rate is.
Tom Abrams -- Morgan Stanley -- Analyst
Last questions on this offshore loading facility, and you're working on engineering and customer relationships, can you start the permitting without a fully defined project or is that have to wait till you get that in hand and can define it to the regulators and then kind of starts the clock on that, call it 18-month permitting process?
Graham Bacon -- Executive Vice President, Operations & Engineering
This is Graham Bacon. I think we have a project defined at this point, well enough that we're proceeding with the permitting process, and we have all the blocks in place to proceed. We're just finalizing the package at this time.
Tom Abrams -- Morgan Stanley -- Analyst
Great. Thanks a lot.
Randy Burkhalter -- Vice President of Investor Relations
Nicole, before we do our next one, let's remind our participants if we could keep our questions to one question and one follow-up, please. I'd really -- we can get to more questions, that really would be great. Thank you. Go ahead.
Operator
Your next question comes from the line of Christine Cho from Barclays.
Christine Cho -- Barclays -- Analyst
Morning, everyone. I just wanted to start with a line you had in your release, you guys said that your equity NGL production volumes for the quarter were reduced to alleviate takeaway pipeline capacity constraints. Can you go into what this means exactly. I wasn't sure if you were putting your equity NGL into storage?
James Teague -- Chief Executive Officer
I think what we were talking about is that was the triggers, and what have you.
Randy Fowler -- President and Chief Financial Officer
Right. Yes, we're pulling the levers to accommodate some of our customers and some of the levers that we're pulling that reduces our equity NGLs in order to create pipeline and frac space for opportunities we're getting from producers.
Christine Cho -- Barclays -- Analyst
Okay. But if you're reducing your equity NGLs, isn't the customer still, I guess increasing their NGL production to offset your reduced equity NGLs?
James Teague -- Chief Executive Officer
Yes. That's the point.
Christine Cho -- Barclays -- Analyst
I see. Okay.
Unidentified Speaker --
I think that some of each.
Christine Cho -- Barclays -- Analyst
Okay. And then I hate to beat a dead horse, but around another question for the C-Corp, how do you think about the up fee structure versus going full C-Corp, there would be differences in corporate governance, board makeup, but you can't go into the big indices as an up fee, so curious as to your thinking there?
James Teague -- Chief Executive Officer
Yes. Christine, we had our day in the sun, when we had four different equity securities trading at one time, and I think we like simple is better. So coming in and having two equity securities outstanding does not have a lot of appeal to it.
Christine Cho -- Barclays -- Analyst
Okay. But you could still have an up fee and do one security, no?
James Teague -- Chief Executive Officer
But I mean, again if one of the goals of the up fee is to get access to the capital markets through the up fee then you're looking at publicly traded securities.
Christine Cho -- Barclays -- Analyst
Okay. All right. Thank you.
Operator
Your next question comes from the line of TJ Schultz with RBC Capital Markets.
TJ Schultz -- RBC Capital Market -- Analyst
Hey, good morning. Just first a quick follow-up on the offshore port, the advantages of supply aggregation makes sense, but as we see more announcements to develop these ports, and now an onshore export option to handle VLCC, does an onshore solution have any advantages as far as the permitting process may go. And then is there a need for more than one solution here?
James Teague -- Chief Executive Officer
The onshore process has its own challenges with dredge depths and maintenance and permits associated with that, so there's not a clear advantage there.
TJ Schultz -- RBC Capital Market -- Analyst
Okay. I guess for the second question, if you can just touch on the Eagle Ford, we've seen some ownership changes there, you had pointed I think at the Analyst Day, the 50,000 to 100,000 barrels a day of incremental volumes this year, are you seeing that. And what does the open capacity you have on that crude system. And then on Chesapeake's call yesterday, they talked about access to ECHO and the Corpus in excess capacity across two pipe. So, in that case what would drive more volumes to ECHO as oppose to Corpus across your systems?
James Teague -- Chief Executive Officer
Yes. Well, we would drive more volumes to ECHO rather than Corpus'. Corpus is a destination, Houston is a market, as 4.5 million barrels a day refining 300 million barrels of storage and access to water. Corpus is a work until it didn't work. Brent?
Brent Secrest -- Senior Vice President, Commercial
That's it. That's been our position from the beginning.
James Teague -- Chief Executive Officer
It's no different than NGLs, producers typically want to go to the biggest sponge.
TJ Schultz -- RBC Capital Market -- Analyst
Okay. And if we see more activity in the Eagle Ford, what's kind of your open capacity you have on that system?
James Teague -- Chief Executive Officer
We got plenty, the Eagle Ford, thank god for demand fees.
TJ Schultz -- RBC Capital Market -- Analyst
Okay. Understood. Thank you.
Operator
Your next question comes from the line of Colton Bean with Tudor, Pickering and Holt Company.
Colton Bean -- Tudor Pickering Holt -- Analyst
Morning. Jim, you mentioned the ongoing conversations with off-takers there for the crude export terminal. Any additional color you could offer on that. And then just as you have been working through the feed study, you guys have been able to refine kind of a general construction timeline, I think permitting process was highlighted to 18 to 24 months, but just thinking kind of post permitting, what the actual construction timeline might look like?
James Teague -- Chief Executive Officer
Yes. The color I can give you on the discussions is that Bob Sanders, Brent Secrest and I spent 11 days in Asia recently, and the fact I would spend 11 days with Brent Secrest in Asia says something about how serious we are to the permitting, I thought it was one year, Graham.
Graham Bacon -- Executive Vice President, Operations & Engineering
Correct.
James Teague -- Chief Executive Officer
And then the timeline after that, I mean this isn't rocket science.
Graham Bacon -- Executive Vice President, Operations & Engineering
Some of we're still defining out, we're still defining that timeline.
James Teague -- Chief Executive Officer
Yes. I think, Graham said, we're still defining that timeline, TJ (ph).
Colton Bean -- Tudor Pickering Holt -- Analyst
Got it. And just on the frac 11 announcement, so it's ready to come on just behind frac 10, and arguably a little bit sooner than market expectations there. So can you just give us a bit of commentary on the supply chain background that allowed you to hit that timeline?
James Teague -- Chief Executive Officer
One thing is Shin Oak, another is our -- the deal we recently did that we announced at Alpine High that really starts ramping up in that timeline. So, I think those are two are the biggies.
Graham Bacon -- Executive Vice President, Operations & Engineering
Yes. The plant we announced this morning.
James Teague -- Chief Executive Officer
Yes. Mentone.
Colton Bean -- Tudor Pickering Holt -- Analyst
Maybe more specifically on the engineering and construction side in terms of -- anything that you guys had already secured maybe long lead time items that factored into that?
James Teague -- Chief Executive Officer
What-the timeline on the construction of frac 11, obviously, we've already done some long lead time equipment -- purchase.
Graham Bacon -- Executive Vice President, Operations & Engineering
Yes. We've got the long lead items are defined, all the engineering is -- on complete on the long lead items, and it's in the purchasing queue and we look forward.
James Teague -- Chief Executive Officer
If you think about it as and wouldn't that long ago, we had three trains out there, so we built the number of trains over the last few years. So really, we've gotten pretty good at it.
Graham Bacon -- Executive Vice President, Operations & Engineering
Yes, we have. I think it's pretty -- that timeline is pretty well, pretty well defined and the shop space is high, but we've got our place inline.
Colton Bean -- Tudor Pickering Holt -- Analyst
Got it. Thank you.
Operator
Your next question comes from the line of Tristan Richardson with SunTrust.
Tristan Richardson -- SunTrust -- Analyst
Hey, good morning, guys. You talked about strategic projects out there and positioning yourself for expansion and extension out of the Permian. Curious to the potential ramp here on Shin Oak with an additional 40 a day potential on Mentone and all those three and Alpine High is the 550 a day adequate enough initially to handle this supply growth you guys are seeing and potential for expansion there?
James Teague -- Chief Executive Officer
I think it's patient for the ramp we see. I hope it's not.
Tristan Richardson -- SunTrust -- Analyst
Fair enough. Thank you, guys, very much.
James Teague -- Chief Executive Officer
Thanks, Tristan.
Operator
Your next question comes from of the line of Matthew Phillips with Guggenheim.
Matthew Phillips -- Guggenheim -- Analyst
Good morning, guys. Another export related question, the recent NGL announcements on the Ship Channel, I mean do you see that as sufficient for the runway all are building out in terms of inbound NGLs, Shin Oak et cetera, and frac capacity of Belvieu, or is this a precursor to needing more capacity three, four years, hence?
Randy Fowler -- President and Chief Financial Officer
I think it's the later. I think this was -- this expansion was relatively cheap and pretty good bank for the dollar, if we look forward at some of Tony Chovanec's work with our fundamental's group, we have ways to further expand and we probably will.
Matthew Phillips -- Guggenheim -- Analyst
Got it. Contingent upon that I mean, are you expecting to move some of the crude export volumes flowing through that hub offshore and that frees up space, and if for whatever reason the SPM project it's pushed out, I mean, does that change how you view the Ship Channel site?
Unidentified Speaker --
No. First and foremost, yes, if we -- as we build the offshore port, we will backfill that capacity with more LPG exports capability, which we think will be needed. If it takes longer than we think it will to build an offshore port, then we have a lot of capability in Texas City and in Beaumont.
Matthew Phillips -- Guggenheim -- Analyst
For NGLs?
Unidentified Speaker --
No, for the crude, I'm sorry. NGLs is going to be on the Ship Channel.
Matthew Phillips -- Guggenheim -- Analyst
Got you. Okay.
Unidentified Speaker --
But my point to you was we can move crude to other ports to accommodate NGLs.
Matthew Phillips -- Guggenheim -- Analyst
Okay. Thank you.
Operator
Your next question comes from the line of Spiro Dounis with Credit Suisse.
Spiro Dounis -- Credit Suisse -- Analyst
Hey, good morning, everyone. Thanks for taking the question. Jim, just wanted to go back on the comment you made earlier, just around as being one of the strongest markets, you've seen in a while. So I guess the question is from an M&A perspective, what does this mean, does the math starts to really work as you can increasingly positive outlook come out of you guys, just against the price equity values across the space?
James Teague -- Chief Executive Officer
Are you asking if we're looking at M&A?
Spiro Dounis -- Credit Suisse -- Analyst
Yes.
James Teague -- Chief Executive Officer
Yes. I guess we constantly look at it, but we found that building organic growth gives us better returns than an M&A would, so it's much more accretive to build.
Spiro Dounis -- Credit Suisse -- Analyst
Okay. That's fair. And then you also mentioned heading over to Asia just in the context of crude exports. Curious just on the back drop of the trade tensions and the Chinese kind of already curtailing crude exports out of the US, do you see any risk there on their front, or is it the view that effectively the crude gets displaced in one spot and effectively goes to another?
James Teague -- Chief Executive Officer
Yes. Trade patterns change, it becomes less efficient, but volumes move.
Spiro Dounis -- Credit Suisse -- Analyst
Fair enough. Thanks for the time.
Operator
Your next question comes from the line of Keith Stanley with Wolfe Research.
Keith Stanley -- Wolfe Research -- Analyst
Hi. Good morning. Can you give an update on the status of the 100,000 barrel a day Seaway expansion, and just a level customer demand to maybe to a larger expansion at Seaway if that's something you're actively working on still?
Unidentified Speaker --
Yes. Thanks, Keith. This is Jade (ph). The DRA expansion was mechanically complete earlier this month in October. We continue to work with our connected carrier to basically test out that, increased rates on the discharge of the terminals and basically see what capacity is available through the DRA expansion. Now, I think your second question was on, is there something larger for Seaway with additional expansion. We do have a horsepower expansion that's in development right now as well.
Keith Stanley -- Wolfe Research -- Analyst
Okay, but not adding another pipe, it would all be DRA and horsepower?
Unidentified Speaker --
Yes. The DRA, when we talked about in the horsepower would just be on the existing pipe.
Keith Stanley -- Wolfe Research -- Analyst
Okay. Second question just on NGL marketing at a high level, how repeatable do you think the Q3 results, they were quite strong. How repeatable are they for the next few quarters, if market conditions they tied on NGL pipelines and fractionation?
James Teague -- Chief Executive Officer
I think we are going to have a good -- I think the future looks bright for us. The fundamentals are in our favor.
Keith Stanley -- Wolfe Research -- Analyst
Got it. Thank you.
Operator
Your next question comes from the line of Danilo Juvane with BMO Capital.
Danilo Juvane -- BMO Capital -- Analyst
Good morning, and thank you. Randy, clearly you outlined that you're not in favor of doing buybacks right now, but how do you think about the dividend growth in 2019?
Randy Fowler -- President and Chief Financial Officer
Yes. Danilo, good morning. I think where we are again to come in we're in a great place business environment, while as to come in and see good places to deploy capital from a growth CapEx standpoint. We are -- Jim, earlier talked about it, we're on track to have 20 consecutive years of distribution growth. Probably, this time next year, we'll be talking about 21 consecutive years of distribution growth. But as far as I think we want to really stick with our timeline as far as coming in and what level of distribution growth that we see in 2019 really like to come in and get through our planning process and see where we shake out on some of these larger projects that Jim talked about. The one thing, that we are -- we do have a goal of coming in and equity self-funding, but at the end of the day we're not going to let that goal put a limit of what were going to do on organic growth CapEx when we have good project. So right now, it's still more to come and we need to complete our planning process, but I mean organizationally business wise we're in a great place.
Danilo Juvane -- BMO Capital -- Analyst
Thanks for that. And as a follow-up on the equity NGL volumes, should we expect to continue to sort of have lowered volumes like you did this quarter until Shin Oak comes online. How should we think about that?
Randy Fowler -- President and Chief Financial Officer
I think about it in terms of fractionation more than once Shin Oak comes online, and lower equity volumes does not mean lower margins, we're pulling triggers that give us higher margins than those equity volumes. Whatever we're replacing those equity volumes where you can bet -- we're making more money than we're taking out of our pocket on those equity volumes.
Danilo Juvane -- BMO Capital -- Analyst
Okay. So the volume should improve when one of your fracs comes online at Belvieu?
Randy Fowler -- President and Chief Financial Officer
It's hard to hear you, I'm sorry.
Danilo Juvane -- BMO Capital -- Analyst
So, I asked that the volume should improve once one of your frac facilities -- new frac facilities come online at Belvieu?
Randy Fowler -- President and Chief Financial Officer
You're right.
Danilo Juvane -- BMO Capital -- Analyst
Okay.
Tony Chovanec -- SVP, Fundamentals/Supply Appraisal
This is Tony. I just want to add some, because this equity volume thing just coming up, at the end of the day liquids production in United States continues to grow to beat everyone's expectations, so that's the reality and it's not a region for us to slowdown at this point. So those barrels go somewhere and they keep coming.
Randy Fowler -- President and Chief Financial Officer
And Danilo, if we choose to lower those equity volumes, you'd see to replace with the customers volumes, if you know our system, there's also an opportunity to bring purities out of Conway, so that's just the optimization game that we do every day.
Danilo Juvane -- BMO Capital -- Analyst
Understood. Thank you, guys.
Operator
Your next question comes from the line of Michael Lapides with Goldman Sachs.
Michael Lapides -- Goldman Sachs -- Analyst
Hey guys, congrats on a great quarter. Quick question for you, when you're signing fractionation deals, how different is the tenure of the contracts you're signing these days relative to what you may have started signing when you first started the significant build out at Mont Belvieu?
James Teague -- Chief Executive Officer
It comes and goes, really, and sometimes it's dedications and sometimes it's demand phase, and both have their positives, so it's kind of we take the Forest Gump approach, they want vanilla, we're going to sell them vanilla. They want strawberry, we'll sell them strawberry. We're seeing a little more demand fee request.
Michael Lapides -- Goldman Sachs -- Analyst
Got it. And can you talk about length of contracts that you just gave great detail on kind of type of contracts, but I mean average contract in five to seven year range are much significantly longer than that?
James Teague -- Chief Executive Officer
We like 10 year deals, if it's a five year deal, it's a different fee then if it's a 10 year deal, but we like 10 year deals.
Michael Lapides -- Goldman Sachs -- Analyst
Got it. Thank you, guys. Much appreciated.
Operator
Your next question comes from the line of Becca Followill with U.S. Capital.
Becca Followill -- U.S. Capital -- Analyst
Good morning, guys. It seems like the pipes and fracs are chock-full, can you talk about where you have remaining operating leverage on volumes besides the Eagle Ford?
James Teague -- Chief Executive Officer
That's pretty much it, Becca.
Becca Followill -- U.S. Capital -- Analyst
Okay. Super. That's my only question. Thank you.
Randy Burkhalter -- Vice President of Investor Relations
Hi, Nicole. We have time for one more question.
Operator
And your final question comes from the line of Sunil Sibal with Seaport Global.
Sunil Sibal -- Seaport Global -- Analyst
Yes. Hi, good morning, guys, and thanks for all the color. My question was related to your crude segment, the 200 million mark-to-market loss that you had in the press release. I was wondering, if you could talk about the duration of your remaining basis hedges on crude. I mean, how much time those basis hedges run through?
Randy Fowler -- President and Chief Financial Officer
Okay. If you look at the kind of like to-date earnings from mark-to-market on these hedges including the $204 million gain this quarter, it's about $309 million that's what's outstanding, and we expect to get about a $167 million of that back in the fourth quarter. And in 2019, we should get 137, and then in 2020, $5 million. And so that assumes there's no price differential changes, which is probably not a good assumption to the extent. Spreads widen further, we could see additional mark-to-market losses or if they narrow we could see gains.
Sunil Sibal -- Seaport Global -- Analyst
Okay. Got it. And then on the crude segment volume seems like, there was a bit of a decline sequentially both on the medium terminal volumes as well as the pipeline volumes. I was wondering, was there any kind of trend, which determines that?
Randy Fowler -- President and Chief Financial Officer
I think on the crude trembling volumes, there is a period where the Chinese stepped out of the market in August. And I think there were some barrels that stayed here before vessels get repositioned then you saw kind of a big uptick in September as they start to come back.
Sunil Sibal -- Seaport Global -- Analyst
Okay. And that reflected in the pipelines also, I guess?
Randy Fowler -- President and Chief Financial Officer
Yes. I would say there are -- wasn't as wide open on Seaway as it is right now, and I'd say Eagle Ford quarter-over-quarter stayed flat.
Sunil Sibal -- Seaport Global -- Analyst
Okay.
James Teague -- Chief Executive Officer
The bulk of the Seaway.
Randy Fowler -- President and Chief Financial Officer
Yes. Seaway, it was a period couple of months and they were -- the tariff wasn't justified versus the (inaudible).
Sunil Sibal -- Seaport Global -- Analyst
Okay. Got it. Thanks, guys. That's all I had.
Randy Burkhalter -- Vice President of Investor Relations
Okay. Nicole, if you were to give our listeners the replay information and then that would be it from the company, everyone have a great day. Thank you.
Operator
Thank you for participating in today's Enterprise conference call. This call will be available for replay beginning approximately an hour after the end of today's call and ending on November 7 at midnight central time. The conference id number for this replay is 9969565. Again the conference id number for this replay is 9969565. The dial-in numbers for the replay are 855-859-2056 or 404-537-3406. Thank you for participating in today's call. You may now disconnect.
Duration: 65 minutes
Call participants:
Randy Burkhalter -- Vice President of Investor Relations
James Teague -- Chief Executive Officer
Randy Fowler -- President and Chief Financial Officer
Jeremy Tonet -- JP Morgan -- Analyst
Shneur Gershuni -- UBS -- Analyst
Jean Ann Salisbury -- Bernstein -- Analyst
Brent Secrest -- Senior Vice President, Commercial
Unidentified Speaker --
Tom Abrams -- Morgan Stanley -- Analyst
Graham Bacon -- Executive Vice President, Operations & Engineering
Christine Cho -- Barclays -- Analyst
TJ Schultz -- RBC Capital Market -- Analyst
Colton Bean -- Tudor Pickering Holt -- Analyst
Tristan Richardson -- SunTrust -- Analyst
Matthew Phillips -- Guggenheim -- Analyst
Spiro Dounis -- Credit Suisse -- Analyst
Keith Stanley -- Wolfe Research -- Analyst
Danilo Juvane -- BMO Capital -- Analyst
Tony Chovanec -- SVP, Fundamentals/Supply Appraisal
Michael Lapides -- Goldman Sachs -- Analyst
Becca Followill -- U.S. Capital -- Analyst
Sunil Sibal -- Seaport Global -- Analyst
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