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Enterprise Products Partners LP (NYSE:EPD)
Q2 2019 Earnings Call
Jul 31, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Jason and I will be your conference operator today. At this time, I would like to welcome everyone to the Enterprise Products Partners Second Quarter 2019 Earnings Call. [Operator Instructions]. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Randy Burkhalter, VP of Investor Relations, you may begin your call.

Randy Burkhalter -- Vice President, Investor Relations

Thank you, Jason. Good morning and welcome everyone to the Enterprise Products Partners conference call to discuss earnings for the second quarter. Our speakers today will be Jim Teague, Chief Executive Officer and Randy Fowler, President and Chief Financial Officer of Enterprises' General Partner. 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 Enterprise's management team. Although management believes that the expectations -- expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. And with that I will turn the call over to Jim.

J. Teague -- Director and Chief Executive Officer

Thank you, Randy. Before I get into the script, I wanted to acknowledge a person sitting directly to my left, Bill Ordemann, who will be retiring later in August. So this will be his first -- his last earnings call and I fully intend to direct almost all questions to Bill. Last quarter, we talked about what should drive -- what should drive investors back into energy stocks and the conclusion was show me the cash, which we did. We continued to show the cash with a record $1.7 billion of DCF in the second quarter, which provided a record 1.8 times coverage giving us $3.4 billion of DCF for the first 6 months of 2019. After increasing distributions for the 60th consecutive quarter, we retained $753 million of distributable cash in the second quarter and a total of $1.4 billion for the first half. Adjusted EBITDA for the second quarter was $2.1 billion, that's up 18% in the same quarter a year ago for a total adjusted EBITDA of $4.1 billion for the first 6 months, which is up 17% compared to the first 6 months of last year. Our results continue to provide us healthy excess cash at the flexibility to fund our projects and maintain a solid balance sheet without having to issue equity. Continuing the trend of previous quarters, Enterprise again reported a number of records during the quarter. In total, we reported 16 operational and financial records, including record volumes in our liquid pipelines at 6.6 million barrels a day, our marine terminals of 2 million barrels per day, gross NGL fractionation volumes of 1.2 million barrels a day and natural gas pipeline volumes at 14-Bcf a day. In our petrochemical segment, our PDH plant exceeded design for the quarter.

Yesterday, we announced that we had signed transport and terminaling service agreements with Chevron for crude transport from Midland to our ECHO terminal. We also announced that we entered into long-term agreements with Chevron for significant capacity on our spot offshore crude oil terminals, which enabled us to make a financial investment decision to build a terminal subject to government and regulatory approvals. With access to over 6 million barrels a day of crude oil supply, and that's growing, more than 300 million barrels of storage of which nearly 50 million is owned by Enterprise, the VLCC terminal leverages our supply storage and distribution network along the Gulf Coast.

We believe this project provides a solution to US producers, who must have long-term certainty around their ability to competitively access international markets. Earlier in July, we announced three expansions at our Houston Ship Channel Marine Terminal, which will enable us to increase loading capacity of LPG, propylene, and crude oil.

These expansions are on top of the LPG expansion expected online in the third quarter this year. We already provide about 50% of the NGLs exported from the US and roughly 1/3rd of the crude oil and the lion's share of propylene. I think we have shown by these expansion projects that we can and we will add capacity cheaper and faster than most others can build. With integrated systems, the size of ours, there are other fairly low cost add-ons in our future. We completed construction and brought into service $900 million of major growth projects in the second quarter, including the third oil and gas plant and the Midland-to-ECHO 2 crude oil pipeline. We are on schedule to complete construction of $3.2 billion of major growth projects in the second half of this year, including 175,000-barrel per day expansion of our LPG Marine Terminal, the first phase of our ethylene export terminal, our isobutane dehydrogenation facility, a 10th NGL fractionation train, our Mentone 1 natural gas processing plant and our natural gas processing plant in East Texas.

We also continue to make progress in underwriting several additional organic projects, all of which will provide additional sources of cash flow. We are focused on natural gas processing and NGL and crude oil takeaway and on defining what it means to be the US petrochemical midstream provider. I would like to take a couple of minutes and speak specifically to the Houston Ship Channel. In the last 5 years, we have invested over $8 billion around the ship channel. People lose sight of the fact that in spite of our country's massive supply growth, because of shale US and because of shale, US demand for all liquid hydrocarbons except ethane has peaked. Even lower prices in US has proved that you aren't going to stop that trend.

Access to supply is the key to a viable export facility. And given our supply position in both NGLs and crude and our early focus on exports, we are a player in this area. Virtually every incremental barrel produced is headed for export. Thus, as we build pipelines and fractionators, you can expect export expansions from enterprise. We project that the US crude oil exports will increase from approximately 3 million barrels a day today to more than 8 million barrels a day in the next few years, as production from shale continues to climb. Looking at suppliers coming into our NGL System, our internal forecast shows that our own LPG dock capacity will roughly have to double over the next few years.

Add to that, our forecast for exports of petrochemicals and the refined products and the growth we see in Aframax crude oil exports to supply the Atlantic Basin, even after we get our pending VLCC terminal built and our Houston Ship Channel terminal must continue to expand. On a more global scale, as US production is growing, the US producer is provided essentially all the incremental liquid hydrocarbons to the world. In many respects, the Houston Ship Channel is not just as important as Strait of Hormuz. I haven't seen any ships have bombs put to their hull. I haven't seen any tanker ceased. I haven't heard Britain talking about consequences.

The reason I haven't seen the price of oil skyrocket regardless of the tensions in the Middle East and around the Strait. The reason is because of what's happening in the US from a production perspective, because we have this important waterway, the Houston Ship Channel. Approximately 90% of cargo traffic on the Ship Channel carries energy and petrochemicals. Neither this country nor the world has ever fully understood or appreciated the importance of the Ship Channel, but the US Oil and Gas and Petrochemical Industry is beginning to. Most major producers are pointing their hydrocarbons toward the Ship Channel and the Houston Ship Channel is already the largest exporter of LPG to the world. The coalition of major producers, midstream companies, and terminal operators recently joined forces to make sure that two-way traffic will always be maintained in the Ship Channel.

We were successful and have now joined the port and moved our Houston Ship Channel efforts to Washington for the funding and permitting of a significant expansion of the Ship Channel in an expedited way. As we see it, every bit of the US incremental energy growth is headed for export and most of that growth is pointed toward Houston. Houston is the energy capital of the world. We have oil, we have natural gas, we have natural gas liquids, we have refining, we have petrochemicals, we have pipelines, we have tank and salt dome storage, we have fractionation, we have docks and last but not least, we have the Houston Ship Channel. Over the next few months, you can expect to see a heightened awareness on the importance of this waterway, not just to Texas in the US, but to the world. Hopefully judging by our performance in recent announcements, it is clear that we remain focused on serving growing suppliers and on developing markets, domestically and internationally for US hydrocarbons and petrochemicals. That doesn't come without a long-term vision and that doesn't come without unbelievable execution by our employees. Randy?

Randall Fowler -- Director, President and Chief Financial Officer

Okay. Thank you, Jim and Good morning everyone. I'd like to start off with the income statement for the quarter. Net income attributable to limited partners for the second quarter of 2019 was $1.2 billion or $0.55 per unit on a fully diluted basis, which included $13 million or less than $0.01 per unit in non-cash mark-to-market hedging losses. This represents a 22% increase in earnings per unit, excluding these non-cash mark-to-market hedging activities versus the second quarter 2018. Cash flow from operations was $2 billion for the second quarter of 2019, a 38% increase when compared to the second quarter of 2018. In the second quarter of '19, cash flow from operations included $228 million of benefits from changes in operating accounts.

In terms of cash flow from operations, our cash distribution payout ratio was approximately 47% for the second quarter of ’19 and 58% with respect to the trailing 12 months ended June 30, 2019. And looking at the trailing 12 months, if you would, is a way to come in and remove the noise of cash uses and provided by seasonal working capital uses. Free cash flow was $2.2 billion for the trailing 12 months of June 30, 2019, which represents a 96% increase when compared to the 12 months ending June 30, 2018.

In terms of capital investments and to follow what Jim said regarding capital investments, we have a total of approximately $6 billion of major capital projects under construction and this includes the $3.2 billion, which he mentioned is expected to be placed in service by the end of this year.

Our capital investments in the second quarter were $1.1 billion including $80 million of sustaining capex. We still expect growth capital investments for 2019 to be approximately $4 billion and $350 million for sustaining capex. As noted in one of the other -- in the other press release that we issued this morning, we received contributions of $441 million today from Altus Midstream related to their exercise to acquire -- exercise their option to acquire 33% interest in our subsidiary that owns the Shin Oak NGL pipeline. We expect to receive another $57 million from Altus later in 2019 for their share of future capex to complete Shin Oak. In total, for the full year of 2019, we expect these contributions from non-controlling partners or JV partners to be a total of $635 million. So when you take that $635 million applied to gross -- growth capex of $4 billion, if you would, our net growth capex is somewhere between $3.3 billion and $3.4 billion is what we currently expect.

On June 24th, we elected to go to the debt capital markets early to stay ahead of our debt financing and refinancing needs. We priced $2.5 billion of senior unsecured notes, comprised of $1.25 billion of 30-year notes at a 4.2% coupon and $1.25 billion of 10-year notes at a 3.8% coupon. The transaction was completed on July 8th. We were very pleased with the level of demand for both tranches and are thankful for the continued support of our fixed income investors.

As of June 30, 2019, our total debt principal outstanding was $27 billion. Assuming the first call date for our hybrids, the average life of our debt portfolio was 13.8 years. Assuming the maturity date of the hybrids, that average life of the debt portfolio was 18.3 years. The average cost of our debt portfolio was 4.5%.

Adjusted EBITDA for the trailing 12 months ended June 30, 2019 was $7.8 billion and our consolidated leverage ratio was 3.3 times after adjusting debt for the partial equity treatment for the hybrid debt securities and also reduce for unrestricted cash. Our consolidated liquidity was $4.7 billion at June 30, 2019, which included available borrowing capacity under our credit facilities and unrestricted cash. As of today, that same number for liquidity was approximately -- $7.9 billion, I repeat $7.9 billion, which includes the proceeds from the debt offering and the aforementioned proceeds that we received today from Altus Midstream.

Moving on to equity issuances and repurchases, Enterprise received approximately $40 million of net proceeds from the dividend reinvestment plan and employee unit purchase programs during the second quarter 2019. Beginning with the August '13 distribution payment, we elected to change the source of the funding of the DRIP and the employee unit purchase plan to open market purchases, instead of newly issued units and we will continue this until further notice, and as we do not currently need any external equity financing. We also -- during the quarter, we also bought back or repurchased 1.1 million units of buyback activity. These purchases were done at an average weighted price of $27.95. So if you would, that equates to about an 11% distributable cash flow yield. We will continue to utilize a buyback program on our opportunistic basis going forward, balancing it along with our capex needs and distribution payments.

And with that Randy, I think we can open it up for questions.

Randy Burkhalter -- Vice President, Investor Relations

Thank you, Randy. Jason, we're ready now to take questions from our listeners. And I’ll just remind everyone to please limit your questions to one question and one follow up. Go ahead, Jason.

Questions and Answers:

Operator

Certainly. [Operator Instructions] Your first question comes from the line of Shneur Gershuni from UBS. Your line is open.

Shneur Gershuni -- UBS -- Analyst

Hi, good morning everyone. Maybe I -- maybe we can start off with a big picture question here. There has been a lot of volatility in NGL prices over the past couple of months. I was wondering if there are multiple opportunities for enterprise to benefit from the situation via storage and frac later. In that context, can we also talk about due to propane export expansions that you're bringing online, does that close the international spreads or there are going to be more opportunities there? And if we can even talk about ethane as well also, given how low ethane is, are there opportunities to -- to take advantage of that? Or are there things that you're new tooling [Phonetic] and thinking about that weren't discussed at the Analyst Day.

J. Teague -- Director and Chief Executive Officer

Justin, you want to take that.

Justin Kleiderer -- Vice President, NGL Marketing & Supply at Enterprise Products–

Yes, I mean, let's start with the export arm. I mean, I think with our expansions that we've announced, the one coming on this year and the expansions announced between us and the rest of the folks in the market over the next 12 months, I mean, I do expect that that arb will start normalizing again. I think if it doesn't, that just supports further expansions that Jim's alluded to in the form of projects along the channel. I do think that NGL price dynamics today are supporting a lot of the various optimization opportunities that we have within our system, when it comes to storage and -- and regional arbs. So I think on a holistic basis that this NGL price environment benefits us and our assets in many different ways.

Brent B. Secrest -- Senior Vice President

I'll just -- this is Brent, I'll just add that, question about storage, I think regardless of the hydrocarbon storage by the water matters. You're about to see things in different markets where storage does matter. So I think we'll have opportunities from crude oil and petrochemicals and NGLs to capitalize on that.

Randall Fowler -- Director, President and Chief Financial Officer

Yeah. And, Shneur,. this is Randy. One thing I would also add, just if you go back and look over time, it seemed like anytime we've seen processing margins get abnormally weak, if you would, there is a natural hedge out there with contango opportunities and we're sort of seeing that again this time too.

Shneur Gershuni -- UBS -- Analyst

All right. That makes great sense. Thank you, guys. And just one follow-up question. With the projects that you just recently announced, how much will you be expanding capacity from Midland-to-ECHO and are there any thoughts in bringing in a partner into the VLCC loader facility or do you want to own that 100%?

J. Teague -- Director and Chief Executive Officer

Right. It depends on how many contracts we get as to whether I want to own it 100%. But as we, I guess we had always entertained joint venture partners. We got to get this thing permitted first and that's off a good year plus.

Brent B. Secrest -- Senior Vice President

Yeah, I'd say we'd probably have the permit in its final stages by the end of first quarter of next year with approval in the second quarter.

Shneur Gershuni -- UBS -- Analyst

And just with respect to the Midland-to-ECHO site, how much capacity were you -- were you planning to add there?

J. Teague -- Director and Chief Executive Officer

Stay tuned. I think, I think that's a stay tuned.

Shneur Gershuni -- UBS -- Analyst

All right. Perfect. Well, thank you very much guys. Really appreciate the color.

Operator

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

Jeremy Tonet -- JPMorgan -- Analyst

Hi, Good morning. Maybe just picking up on the last point here with the new agreement that you talked about the Chevron supporting the expansion of your crude oil system, do you envision kind of new pipeline like a third Midland-to-ECHO or is this expanding existing capacity or is there any other kind of details that you can provide as far as what extensions you're envisioning here?

J. Teague -- Director and Chief Executive Officer

I think the only detail we're prepared to provide is we're building our pipeline.

Jeremy Tonet -- JPMorgan -- Analyst

A new pipeline. Okay. That's helpful. Thanks. And it seems like you guys keep setting new records financially and have quite a strong position here. And just wondering if you could update us as far as your thoughts with regards to excess capital via deploying it on new growth capex or maybe accelerating repurchase program or maybe ticking up distribution growth a little bit higher towards where some of the peers are, just wondering how you think about the interplay of those three at this point.

Randall Fowler -- Director, President and Chief Financial Officer

Yeah. Jeremy, this is Randy. I think where we are is again we've got a number of growth capital expenditure opportunities that we like to get a little bit better visibility on those that are -- if you would, that are still under development. We think we'll get better visibility between now and the end of the year. And if you would, sort of 2019 was also the second year of a transition period. So I think the guidance that we provided for distribution growth in January, we're looking to stick to that. And we're -- we'll take a look at it at the end of the year, beginning of next year and sort of provide an update, a guidance at that point. The buyback we're still thinking about it in terms of opportunistic, and so we'll see what -- what the market gives us on that front, while and I hear what you say on a number of our peers, increasing their distribution slightly, but also some of those guys I think were on that list that cut them pretty dramatically here, a couple of years ago. So we're staying our course and we're looking to return capital back to our partners. We've done that for growing distributions for 21 years. So, we'll look to continue.

Jeremy Tonet -- JPMorgan -- Analyst

Got you. That's it from me. Thank you.

Operator

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

Michael Blum -- Wells Fargo -- Analyst

Thanks. Good morning, everybody. First question just, there has been -- I guess there has been some market conversations around a lot of I guess new entrants or participants trying to get into the LPG export market. And I'm just wondering if you could just kind of walk us through your view of the competitive landscape, as you see it here today.

J. Teague -- Director and Chief Executive Officer

Hi, Michael, this is Jim. I don't look at it that we have to compete with anyone. I'll look at it that they got to compete with us and they better be prepared to compete with a very aggressive fee program from Enterprise.

Michael Blum -- Wells Fargo -- Analyst

Got it. Okay. Thanks. And then second question, the press release, talks about particularly with your Mont Belvieu fractionator, so you saw higher volumes but the press release mentioned lower fees and I just was hoping you could just talk a little bit about the dynamics there. I would have thought with the frac market pretty tight that the fees would be pretty high as well. So I'm just -- just want to understand a little better on what's going on there? Thank you.

Randall Fowler -- Director, President and Chief Financial Officer

Yes Michael. This is Randy. I think some of that could be lower margins from blending opportunities that we may have seen during the quarter.

Michael Blum -- Wells Fargo -- Analyst

Okay. But in terms of the just the trends and fees for fractionation, would you say that that's steady, rising, falling?

Zach Strait -- Vice President of Unregulated NGL Commercial

This is Zach. So I think some of that was some one-time events. We did have a turnaround in South Texas. But as far as fees, no I think short-term fees are still elevated. They are above new build there. When I say that I mean short-term deals, I think long-term deals are still around, fees needed for new build economics. I think there is still an appetite from the producing community for more fractionation space.

Michael Blum -- Wells Fargo -- Analyst

Great. Thank you.

Operator

Your next question comes from the line of Tristan Richardson from SunTrust. Your line is open.

Tristan Richardson -- SunTrust -- Analyst

Hey, good morning guys. Go back to the Midland-to-ECHO site, you guys have talked in the past about your optionality you have with Midland-to-ECHO 2 and the potential to return to NGL Service longer term with the commercial agreements announced last night and third party crude capacity currently in line fill. Can you talk about that optionality and potentially the timing there, particularly once Shin Oak goes into full service?

J. Teague -- Director and Chief Executive Officer

Yeah. We always had the option. We think it's a pretty valuable option that we have with Seminole. Secrest seems to think we're going to flip it in and out every other month, but we're not, but it is a valuable option that we have as Shin Oak fills up. It gives us an opportunity to either put that back in NGL service and add capacity to our crude pipelines. And there is really no timing other than what opportunity presents itself.

Tristan Richardson -- SunTrust -- Analyst

Helpful. And then just last one with the large slate of projects coming online this year, can you talk about just normalized levels of capital deployment and just given the projects in the portfolio slated for 2020 and beyond. Could we see capital deployment over the next couple of years closely resemble, sort of the levels you are expecting here in 2019?

Randall Fowler -- Director, President and Chief Financial Officer

Yeah. Tristan, when we come in based on the projects currently sanctioned, and if you would, just for clarity, that at this point, does not include spot because it's still pending government approval. So if you would, just on the projects that have been sanctioned, we're looking at growth capex next year, call it in the $2 billion to $2.5 billion range.

Tristan Richardson -- SunTrust -- Analyst

Helpful. Thank you guys very much.

Operator

Your next question comes from the line of Jean Ann Salisbury from Bernstein. Your line is open.

Jean Ann Salisbury -- Bernstein -- Analyst

Good morning and congratulations on the FID of the offshore terminal. Assuming that that goes forward, I think we can assume that some of your existing crude export docks could be converted to NGL exports. Could we get a sense of how much of a time and cost advantage it is to convert rather than start from scratch. My understanding is that it's not a huge advantage, because most of the cost is refrigeration, but I am happy to be corrected.

J. Teague -- Director and Chief Executive Officer

Graham, you got any thoughts on that?

Graham W. Bacon -- Executive Vice President

I'm not sure -- I'm not sure I fully understood the question.

J. Teague -- Director and Chief Executive Officer

What's the cost advantage of expanding versus building new and Jean Ann seems to think that there is not a great advantage to it. You take a shot and I’ll take a shot.

Graham W. Bacon -- Executive Vice President

If you take -- if you take crude oil off the dock and convert it to an NGL service, it's relatively quick and inexpensive to do that, but it’s not a not a big undertaking.

J. Teague -- Director and Chief Executive Officer

What about -- and she is referring to refrigeration.

Graham W. Bacon -- Executive Vice President

Refrigeration, with the -- one of the things that we have at the docks that allows us to expand refrigeration pretty readily is all of the other infrastructure, the piping, the insulated. Some of the things that we do for refrigerated loading are already there, so expansions into the facilities are relatively inexpensive.

Jean Ann Salisbury -- Bernstein -- Analyst

Thank you. That's helpful. And just as a follow-up. The original LPG export that you signed a few years ago at the good rates, can you remind us of the cadence of how those roll out over the next few years?

J. Teague -- Director and Chief Executive Officer

I didn't get the question.

Brent B. Secrest -- Senior Vice President

LPG export roll off contracts, we're talking.

J. Teague -- Director and Chief Executive Officer

Let me -- let me take that one, because I think -- I think we get so focused on oil, do you have that particular part of your value chain fully contracted. Our LPG, our fractionators our fully, fully, fully contracted. If I believe that every incremental barrel is got to go across the export dock, then as far as I'm concerned from a value chain perspective, I'm fully contracted whether I have 10-year contracts specific to the dock or not. So you heard us say to Michael's question earlier is we're looking, we're looking at the total value chain. And we're going to compete, to the extent we have to on our LPG export because it’s supporting so much other stuff that we have. So if you're going to compete with us on LPG exports, you better be able to do it with something like a 5 to 6 handle, otherwise you're not going to be there. Does that help you, Jean Ann?

Jean Ann Salisbury -- Bernstein -- Analyst

That does. Yes. Thank you very much. That's all for me.

Operator

Your next question comes from the line of Christine Cho from Barclays. Your line is open.

Christine Cho -- Barclays Capital -- Analyst

Good morning, everyone. I wanted to start on the NGL business. In the Permian, we've seen maximum ethane extraction there because no one wants to reject gas in a negative Waha pricing environment. With the upcoming in-service of Gulf Coast Express that local pricing should improve and maybe rejection math makes sense. Am I thinking about that correctly, should we expect that to impact NGL volumes out of your Permian pipe and the services downstream of that?

Bradley Motal -- Senior Vice President

Good morning. This is Brad. In the short-term, you're going to see some frac spread compression on ethane. But again, going toward our value chain, if we give our producers, the ability to reduce their ethane recovery, but our value chain allows us to continue to produce that ethane. So as far as we look at it in the short term, I think we're probably not going to see a lot of swing in our NGL production out of the Permian.

Christine Cho -- Barclays Capital -- Analyst

Okay. And then Randy, you mentioned that there is good growth opportunities and you're waiting for a clarity before looking at what you want to do with excess cash flow. How do you think about M&A, just given that your balance sheet is one of the strongest in this space and there are various parties looking to exit their midstream position?

Randall Fowler -- Director, President and Chief Financial Officer

Hey, Christine. We I’d say continually get shown "M&A opportunities" and where we keep coming back is, our organic growth projects that bolt-on to our existing system give us better returns on capital. And you know and I dare say, when we come in and look at some of the M&A opportunities that are provided, the capital intensity to drive DCF per unit growth is much less with organic growth projects than it is with M&A opportunities. So that continues to be our focus, we will continue to come in and look at opportunities, but really we're more focused on the growth capex and just develop it organically.

Christine Cho -- Barclays Capital -- Analyst

Very helpful. Thank you.

Operator

Your next question comes from the line of Justin Jenkins from Raymond James. Your line is open.

Justin Jenkins -- Raymond James -- Analyst

Good morning, everyone. I guess maybe just to start real quick, as a follow-up on Midland-to-ECHO 2 the -- the extra materials noted it did about 209,000 barrels a day of throughput in the quarter, is that pretty close to max capacity or can you squeeze a little more of that?

J. Teague -- Director and Chief Executive Officer

We could probably squeeze a little more out of it, but it would be at a high cost.

Justin Jenkins -- Raymond James -- Analyst

Fair enough. And I guess second question here, more on the octane market. It seems like that's been an area of strength here recently. And based on what we're seeing on the refining land, looks like that's going to continue for some time. I know we got iBDH later this year, but anything else in the cards in terms of capitalizing on maybe more octane enhancement opportunities into 2020 and beyond?

J. Teague -- Director and Chief Executive Officer

Not really, I mean we're realizing some nice earnings from our BEF plant and you have quite a bit of demand for the isobutylene mix that will not big -- that we have available too.

Justin Jenkins -- Raymond James -- Analyst

Fair enough. Thanks guys.

Operator

Your next question comes from the line of Pearce Hammond from Simmons Energy. Your line is open.

Pearce Hammond -- Simmons Energy -- Analyst

Good morning and thank you for taking my questions. My first pertains to the spot terminal. It was very helpful color you provided on your expectation on when permitting will occur. But how long would it take you to build the actual terminal?

Randall Fowler -- Director, President and Chief Financial Officer

We're looking. We're basically looking at a couple of years.

Pearce Hammond -- Simmons Energy -- Analyst

And that would be a couple of years from when you get all the permits in place or would that be happening ahead of the permits?

Randall Fowler -- Director, President and Chief Financial Officer

Some of that would be happening ahead of the permits.

Pearce Hammond -- Simmons Energy -- Analyst

Perfect. And then the follow-up question, in your prepared remarks you talked a little bit about the Houston Ship Channel and its importance to the nation and to the energy industry writ large. If you could elaborate a little bit more, are you seeking to get more support in Washington to do anything specific within the Ship Channel, whether it be dredging or any kind of other economic support or is it just more to shine a light on the importance of the asset.

J. Teague -- Director and Chief Executive Officer

I think there is an initiative that industry is working with the Port of Houston on to widen the Ship Channel from 530 feet to 700 feet, up to Morgan's Point and then to do some dredging, making it deeper at the upper end of the Ship Channel. What that does for us, it gives us more daylight hours, in particular, for LPG. So if we gain 3 or 4 daylight hours each day, that's a pretty dramatic for Enterprise and others. Bob, do you want to add to that.

Robert D. Sanders -- Senior Vice President

Yes. So, the port has been working with the Army Corps of Engineers for 4 years on -- on a plan to widen the Ship Channel. That plan should come out early spring next year to get voted on by the federal government to approve the project so that we can move forward to widening it to 700 feet. And industry is working with the port on trying to accelerate the construction of that project…

J. Teague -- Director and Chief Executive Officer

Through local funding.

Robert D. Sanders -- Senior Vice President

…through local funding.

Pearce Hammond -- Simmons Energy -- Analyst

Great. Thank you very much.

Operator

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

Colton Bean -- Tudor Pickering Holt -- Analyst

Good morning. So just to start off on the propylene side of things, it looks like you had a pretty good quarter of volumes there. I think you noted that the PDH unit was running at 120% of nameplate, so just how do you view the sustainability of that rate. And does it impact, what you need to underwrite to feel comfortable with potential PDH unit addition there?

J. Teague -- Director and Chief Executive Officer

I don't think we -- if we said 120%, I missed it. Did we -- we ran at 120%?

Randall Fowler -- Director, President and Chief Financial Officer

I think it's accounting on byproducts or not. I think the actual propylene production was more like 106% of nameplate.

J. Teague -- Director and Chief Executive Officer

Okay. Okay.

Randall Fowler -- Director, President and Chief Financial Officer

And I think we would expect that to be at those levels going forward.

Justin Kleiderer -- Vice President, NGL Marketing & Supply at Enterprise Products

And then, just in terms, in terms of the second part of your question, we're still commercializing and having negotiations with our customers on PDH 2.

Colton Bean -- Tudor Pickering Holt -- Analyst

Got it. Okay. So not necessarily a read through from these results into any sort of change in goalpost around that?

Randall Fowler -- Director, President and Chief Financial Officer

Correct.

Colton Bean -- Tudor Pickering Holt -- Analyst

Okay. And then just on the nat gas side of things, it looks like the marketing margin was even in context of nearly a 250 spread for Waha, it looks nat gas margin was pretty impressive there. Did you guys realize any incremental spot volumes, kind of on a quarter-over-quarter basis?

Randall Fowler -- Director, President and Chief Financial Officer

Yeah. Part of it is we -- the expansion that we did to be able to come in and transport more natural gas from Waha to the Gulf Coast and the Carthage area that really didn't go into effect really until like third quarter of last year. So yes, we had more opportunities in the second quarter if not than we did in '18.

Colton Bean -- Tudor Pickering Holt -- Analyst

Got it. Okay. But not necessarily any change year-to-date.

Randall Fowler -- Director, President and Chief Financial Officer

No.

Colton Bean -- Tudor Pickering Holt -- Analyst

All right. I appreciate it. Thanks.

Operator

Your next question comes from the line of Spiro Dounis from Credit Suisse. Your line is open.

Spiro Dounis -- Credit Suisse -- Analyst

Hey. Good morning everyone. Starting off on crude exports, Jim very encouraging to hear your outlook there on 8 million barrels a day of exports in the next few years. But I guess in the near-term here, I think we continue to hear maybe concerns from the investor community just around all the crude, that's going to be ending up on the Gulf Coast pretty soon as all of these Permian takeaway pipes come online specifically kind of south of Houston. Just curious how you think about how the industry solves for that without a sort of a big price dislocation in the meantime.

Anthony C. Chovanec -- Senior Vice President

This is Tony, I'll start it out and then see if Brent wants to add anything to it. Clearly, we’re piped to bring crude oil to the Gulf Coast. I think really Brent's already covered it. Once you get it to the Gulf Coast, it has to be -- it has to hit a terminal and then it has to hit a dock. That’s kind of the end of story. And so terminal capacity and dock capacity is critical to the US producer. It's that simple. It's going to go.

J. Teague -- Director and Chief Executive Officer

Brent, speak to your flexibility to load at our other terminals.

Brent B. Secrest -- Senior Vice President

Yeah, I mean, so if you look at how Enterprise runs its crude docks, it's not a whole lot of different than when Zach talks about how we optimize around our fractionation. So we have -- we have other terminals that we can flex on so the goal is to load everything at the enterprise, 100% owned Houston Ship Channel. And then we kind of optimize around that based on other facilities. So we have a 50-50 JV with Enbridge at Freeport and Texas City and then ultimately will flex down to Texas City when we get backed up when things happen and things always happen, we're about to see that in different markets as more supply comes online. In terms of the demand, we're still seeing a healthy appetite for crude oil, the arb, the water hasprobably decreased slightly over the last month or so. But -- and we've said this before on NGLs is these barrels were priced to clear and there may be some lumps along the way that may take some time to invest capital and make things happen. But if you spend any time in China and you spend any time in India, you are seeing the demand happening. And the amount of money that these guys are investing to take what we produce that is real, it will take time, but it is real.

Spiro Dounis -- Credit Suisse -- Analyst

Okay. So just to clarify, it sounds like you're saying that in the near term here in terms of our ability to export, it's pretty balanced, with all the new pipeline capacity and supply that's coming online. Is that fair?

Brent B. Secrest -- Senior Vice President

I think it's fair, but I mean, we've been public on this, I mean, pipeline capacity is one thing, dock capacity is another thing, storage is another thing. And to think that all these things are going to harm the max capacity I think is a false thought.

Spiro Dounis -- Credit Suisse -- Analyst

Yeah. That's fair. Second question is on the Permian and Delaware maybe specifically. Peers out this morning with pretty severe cut to the outlook pointing to things like well timing, power issues, weather issues. Just curious if you guys had seen any of that in your acreage?

J. Teague -- Director and Chief Executive Officer

No. The answer is no.

Randall Fowler -- Director, President and Chief Financial Officer

This is right. I would say most of our customers, large integrated producers have done a real good job of laying the groundwork for production growth. As of right now, our volume curve is kind of where we thought it was going to be, hadn't seen a lot of down.

Spiro Dounis -- Credit Suisse -- Analyst

Great. I appreciate the color. Thanks, everyone.

Operator

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

Keith Stanley -- Wolfe Research -- Analyst

Hi, good morning. Just on the capital backlog in the slides 2020 and beyond is up, it's about $1.3 billion. So I'm assuming some of that's the Midland-to-ECHO expansion. But just any more detail breakdown on where that $1.3 billion increase is coming from?

Randall Fowler -- Director, President and Chief Financial Officer

Yeah, some of it was also -- Keith, this is Randy. Some of it was also on the -- the LPG and crude and propylene export expansion projects that we mentioned. We also have, we also announced during the quarter some new propylene and ethylene pipelines, as well as an expansion of Aegis.

Keith Stanley -- Wolfe Research -- Analyst

Okay. Thank you very much.

Randall Fowler -- Director, President and Chief Financial Officer

And your math was right at $1.3 billion.

Operator

Your next question comes from the line of Michael Lapides from Goldman Sachs. Your line is open.

Michael Lapides -- Goldman Sachs -- Analyst

Hey guys, just thinking about spot for a second. Can you talk about kind of a range of how capital intensive or kind of a capex expected, if you get the go-ahead from Uncle Sam to move forward?

J. Teague -- Director and Chief Executive Officer

It's not cheap.

Michael Lapides -- Goldman Sachs -- Analyst

Is there, just kind of a back of the envelope or rule of thumb to think about it in terms of size and scale? And also trying to think about the EBITDA impact kind of how impactful relative to the size and scale of Enterprise?

J. Teague -- Director and Chief Executive Officer

Yeah. I don't think it's impactful relative to size and scale of Enterprise. And I am going to narrow it, not very -- not very narrow, but I'll give you an answer of more than one, less than two.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. Thanks guys. Much appreciated.

Operator

There are no further questions at this time. I turn the call back to Randy Burkhalter.

Randy Burkhalter -- Vice President, Investor Relations

Thank you, Jason. And with that, we're ready to conclude our call today, I'd like to thank everybody for participating. And Jason if you would -- could you give our listeners the replay information. And then after that, we'll conclude the call. Thank you.

Operator

Absolutely. A digitalized replay of the discussion will be available beginning today, July 31, 2019 at 1:00 PM Eastern and will end on Wednesday, August 7, 2019 at 11:59 PM Eastern Time. To access the digitalized replay, please dial 855-859-2056 or 404-537-3406. That concludes today's conference call. You may now disconnect. Thank you.

Duration: 48 minutes

Call participants:

Randy Burkhalter -- Vice President, Investor Relations

J. Teague -- Director and Chief Executive Officer

Randall Fowler -- Director, President and Chief Financial Officer

Justin Kleiderer -- Vice President, NGL Marketing & Supply at Enterprise Products

Zach Strait -- Vice President of Unregulated NGL Commercial

Graham W. Bacon -- Executive Vice President

Bradley Motal -- Senior Vice President

Robert D. Sanders -- Senior Vice President

Anthony C. Chovanec -- Senior Vice President

Brent B. Secrest -- Senior Vice President

Tristan Richardson -- SunTrust -- Analyst

Jeremy Tonet -- JPMorgan -- Analyst

Michael Blum -- Wells Fargo. -- Analyst

Jean Ann Salisbury -- Bernstein -- Analyst

Christine Cho -- Barclays Capital -- Analyst

Justin Jenkins -- Raymond James -- Analyst

Pearce Hammond -- Simmons Energy -- Analyst

Colton Bean -- Tudor Pickering Holt -- Analyst

Spiro Dounis -- Credit Suisse -- Analyst

Keith Stanley -- Wolfe Research -- Analyst

Michael Lapides -- Goldman Sachs -- Analyst

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