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Enterprise Products Partners (NYSE:EPD)
Q2 2020 Earnings Call
Jul 29, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by, and welcome to the second-quarter Enterprise Products Partners earnings call. [Operator instructions] Please be advised today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker, Randy Burkhalter. Please go ahead.

Randy Burkhalter -- Vice President, Investor Relations

Good morning, and welcome to the Enterprise Products Partners conference call to discuss second-quarter earnings. Our speakers today will be co-chief executive officers of Enterprise's general partner, Jim Teague and Randy Fowler. Other members of our senior management team are also in attendance and will assist on the call today. During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, based on the beliefs of the company, as well as assumptions made by and information currently available to Enterprise's management team.

Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in any forward-looking statements made during this call. And with that, I'll turn the call over to Jim.

Jim Teague -- Co-Chief Executive Officer

Thank you, Randy. I said at the beginning of the last call, when we were talking about first-quarter earnings, while I thought -- while it was supposed to be an earnings call, I thought it was going to be a COVID call, and that's what it turned out to be. So sticking with that theme, I guess, today, we're going to tell you our COVID story. For the second quarter of 2020, we reported EBITDA of $2 billion, compared to $2.1 billion for the same quarter last year.

Our DCF, I think you saw in the press release, was 1.6 times coverage. And year to date, we've retained $1.2 billion. And something else we're quite proud of is this is the best first-half safety performance that we've ever had at Enterprise. Given what we've all gone through, as you would expect, our volumes were down as a result of the pandemic and the oil price crash, but they are quickly improving.

With all of the events, our results for the second quarter highlight the diversification of our system, the quality of our customers, cost control, and the responsiveness of our assets and our employees during what was probably the most challenging quarter of my career. Our profits were protected by a strong base of firm customer obligations and the natural hedge we have in our storage and marketing activities, which enabled us to largely offset the weakness in our natural gas gathering and processing and petrochemical businesses. The facts are we're in the commodity service business. For us, both on the supply and demand side of the equation.

We transport, store, upgrade and buy and sell multiple energy commodities. Because we're so tightly integrated, we have a lot of tools at our disposal. When the market say store crude, we can, when the market says store diesel, but give me LPG, we convert wells and do so. When the market says store Y-grade, we store Y-grade.

In addition, our people and our systems have a strong history of performing no matter the type of crisis. And our balance sheet always has the dry powder to move quickly. We usually get the question of how much our results are nonrecurring. And it's the same question we got when Katrina blew through South Louisiana and literally knocked out every plant we had.

ARCO was down for months as was Promix, Venice, and Neptune. Demand came back before indigenous supply, and we made more money with our West to East pipelines than if those plants had been running. So it was nonrecurring. We got that question during Hurricane Ike in 2008, which went right over Mont Belvieu.

We had Mont Belvieu up before producers could even get their supplies back. Got that question in Hurricane Harvey in 2017 when production never stopped, but virtually, all of our customers quit taking, in some cases, for months. And we never interrupted a single contract customer. Events like what we are going through now and the opportunities they present may be labeled as nonrecurring, but our performance and our results are recurring regardless of the environment.

We outlined in today's earnings release the petrochemical and refined product service segment was particularly hit hard due to the decrease in demand for those products. However, we remain encouraged by the efforts of most companies to reopen their economies. In addition to being one of the largest refined products consumers in the world, the U.S. is also a substantial exporter of refined products, especially to Latin America.

As you all know, during the second quarter, refining utilization rates bottomed in April, which negatively impacted our propylene and octane enhancement businesses due to lower feedstock availability and a decrease in international demand. Currently, the refining industry has recovered to near 80%, which has facilitated an improvement in both propylene and octane enhancement. On the production side, our natural gas gathering and processing were impacted by low prices and some shut-in production. While those shut-ins were not insignificant, for the most part, they were relatively short-lived and volumes on our system are recovering.

We've made substantial progress in deferring and reducing capital by $1 billion, and we continue to discuss JV opportunities, which could further reduce our capital. In addition, Graham and his folks have reduced 2020 sustaining capex $100 million. That said, we have some important projects coming online over the next few months. In the third quarter, our 11th fractionator and the ECHO segment of Wink to Webster are expected online.

And in the fourth quarter, we expect to complete our rich gas pipeline to Carthage, add a DIB at Mont Belvieu, and complete a strategic ethylene tank and pipeline build-out. We continue to make strides in our petrochemicals segment, which we have always described as an extension of our NGL franchise and our value chain. Because we are probably the only midstream that's fairly big in the petrochemical midstream space, it's easy to underestimate the long-term strategic importance of what we're doing. Rather than being a feedstock-starved olefin industry with a handful of players, the United States, especially in ethylene, has quickly moved into being the world's incremental supplier.

This is really no different than what has happened in LPG over the last 10 years, where the U.S. has moved from being an importer to supplying over 75% of the world's demand growth. In short, to meet the world's growing demand for primary petrochemical products, Enterprise built the world's first open-access hub for polymer grade propylene. Now we have developed the first hub for ethylene.

These hubs are transforming how ethylene and propylene markets transact and will create a true marketplace for the world's primary petrochemical producers, consumers, and traders. These hubs provide the essentials for an efficient market reliable supplies, price transparency, and access to domestic and global markets. In June, we loaded a record-sized ethylene cargo of 44 million pounds. Then in July, we successfully loaded combination cargoes of NGLs and olefins on the same vessel, including the simultaneous loading of propane and polymer grade propylene into separate compartments on VLGC at our ship channel facility, as well as a simultaneous loading of ethane and ethylene on a vessel at our Morgan's Point facility.

Both vessels were the first export cargoes of their kind from the U.S. Co-loading olefins on larger vessels with NGLs allows for more efficient use of dock capacity, but it also provides significant freight benefits to petrochemical export customers. I thought I'd also spend a minute to talk about what we're doing to keep our business running while keeping our people safe. We started out the quarter with much of our headquarters staff working from home.

But over the last few weeks, we've been gradually bringing our headquarters personnel back into the office and are essentially staffed at this point, fully staffed. In addition to helping our employees understand social distancing, we also now require face coverings at all times in our office. It's an adjustment, but we have adjusted, and thanks to our people taking personal responsibility, both in and out of the office, our case count has been minimal. I will sincerely want to thank our people for their flexibility, their adjustments, and their sacrifices.

And I'd also like to give a shout out to our operations and commercial folks that were not able to work from home. Plants and pipelines don't run themselves. There's no such thing as a home-based control center, and the collaboration between our commercial people that we ask to be here, ask might be too soft, but we told to be here on a long way to achieving those results. I guess finally, I'd just like to say that I think we've got the best employees in the business, and I think their performance this quarter reflects that.

And I just wanted to know how much they're appreciated. Randy?

Randy Fowler -- Co-Chief Executive Officer

Thanks, Jim, and good morning. I'll start with the income statement for the second quarter. Net income attributable to limited partners for the second quarter of 2020 was $1 billion or $0.47 per unit on a fully diluted basis. This compares to $0.55 per unit for the second quarter of 2019.

Net income for the second quarter of 2020 included $51 million or $0.02 per unit of the expense related to an increase in the deferred tax liability associated with the OTA Holdings Corporation, we acquired from Marquard & Bahls in March 2020 and the settlement of the liquidity option agreement related to our acquisition of Oiltanking back in 2014. Moving on to cash flows. Cash flow from operations was $1.2 billion for the second quarter of 2020, compared to $2 billion for the second quarter of 2019. Changes in operating accounts or think of it as working capital accounted for approximately $660 million or 80% of the $842 million decrease in cash flow from operations between the two periods.

We used working capital to fund our marketing and contango activities during the quarter. We currently expect this usage to peak during the third quarter of 2020. Excluding changes in working capital accounts, cash flow from operations for the second-quarter 2020 was about 10% lower than the second quarter of last year. The change in distributable cash flow between the two periods mirrors this with a decrease of approximately 8.4%.

Free cash flow, which we define as cash flow from operations less cash used in investing activities plus contributions from our joint venture partners, was $305 million for the quarter, which again was reduced by our use of working capital. Free cash flow was $2.7 billion for the 12 months ended June 2020, which was 27% higher than the comparable trailing 12 months ending in June of last year. We defined payout ratio as the sum of cash distributions and buybacks as a percent of cash flow from operations. Our payout ratio was 83% for the second quarter of 2020, which is an inflated percentage due to our use of cash flow from operations used for working capital purposes.

For the trailing 12 months, it was 62%. We declared our distribution of $0.445 per unit with respect to the second quarter on July 7, and it will be paid August 12. This distribution represents a 1.1% increase when compared to the same quarter of 2019 and is flat to the prior two quarters. As we stated on our first-quarter call, given the uncertainty of the macroeconomic backdrop, our board will continue to evaluate our distribution growth quarter by quarter in 2020.

Additionally, EPD's distribution reinvestment plan and employee unit purchase plan purchased a combined 1.9 million EPD units in the open market during the second quarter, which rivals the purchase activity of our typical institutional investor. Moving on to capital expenditures. We have recently placed approximately $150 million of assets into service in the second quarter and have another $6.6 billion of projects under construction and underwritten by long-term contracts. Our capital investments were $910 million during the second quarter, which includes $74 million for sustaining capital expenditures.

We still anticipate spending between $2.5 billion and $3 billion in growth capital projects for this year and approximately $300 million for sustaining capital expenditures. For 2021 and 2022, we currently anticipate growth capital investments to be approximately $2.3 billion and $1 billion, respectively. This is an aggregate $700 million reduction from guidance we provided for 2021 and 2022 at the end of the first quarter. The changes were largely attributable to the indefinite deferral of several expansion projects, of which some of the largest were at our Houston Ship Channel facility.

We continue to engage with industry participants regarding potential joint ventures for sanctioned projects, but the pace of these discussions has slowed due to COVID-19. Our capital expenditure forecast excludes our proposed spot offshore crude oil terminal that is subject to government approvals. Currently, we do not expect to receive these approvals in 2020. Moving on to capitalization.

Our total debt principal outstanding was approximately $30 billion at June 30, 2020. Assuming the first call date for our hybrids, the average life of our debt portfolio was almost 16 years. Assuming the final maturity date for the hybrids, the average life was almost 20 years. Our effective average cost of debt is 4.5%.

Adjusted EBITDA for the trailing 12 months ended June 30, 2020, was $8 billion, and our consolidated leverage ratio was 3.4 times after adjusting debt for the partial equity credit for the hybrid debt securities and also further reduced by unrestricted cash. Our consolidated liquidity was approximately $7.3 billion at June 30, including availability under our existing credit facilities and approximately $1.3 billion of unrestricted cash on hand. Finally, before we open it up for Q&A, I want to mention that we also announced this morning in a separate press release that our 2019-2020 sustainability report, which reflects our latest environmental, social, and governance disclosures, is currently available on our website. We have also initiated the annual review process with the independent sustainability rating providers and believe our disclosures and initiatives, which are described in this comprehensive 104-page report will be reflected in updated scores.

We believe our stakeholders will find these efforts beneficial. We thank our customers, community leaders, banks, debt and equity investors, and board members for their participation in our sustainability survey that drove the outline for this report. With that, Randy, I think we can open it up for questions.

Randy Burkhalter -- Vice President, Investor Relations

OK. Sidney, we're ready to take questions from our listeners.

Questions & Answers:


Operator

Certainly. [Operator instructions] And our first question comes from the line of Jeremy Tonet with JP Morgan. Your line is open.

Jeremy Tonet -- J.P. Morgan -- Analyst

Hi. Good morning.

Anthony Chovanec -- Senior Vice President

Good morning.

Jeremy Tonet -- J.P. Morgan -- Analyst

Just wanted to start off with a question maybe Tony could answer best. Just you guys had talked about pace of recovery being slower and maybe extending into 2021. I was wondering if you could provide a bit more details, I guess, on how you see that transpiring and how that impacts you across, I guess, your different business lines.

Anthony Chovanec -- Senior Vice President

You wanted to talk about the production side or the demand side, Jeremy?

Jeremy Tonet -- J.P. Morgan -- Analyst

If you have both, we'll take both.

Anthony Chovanec -- Senior Vice President

Yes. So obviously, we had this shut-in because of the price crash and chaos. And we think about 1.5 million, and I'll just use crude as an example, 1.5 million to 1.8 million barrels came off the market. I'm kind of a numbers kind of person, not real visual.

But if you look at how that production has come back, it's probably one of the steepest V's I've ever seen in statistics. So yes, we've recovered a substantial amount of it. We think that maybe 300,000 barrels will lag. But with that said, you can't deny given the amount of declines that the shales have that momentum has changed, and there's a fair amount of ground to be picked up.

So that's the reality. When we look at Y-grade coming into our system, for example, those numbers are really strong. And I'll let Brent address that. But when we get out to 2025, as we see it today, we will be down from where we were before.

And it's not because momentum doesn't pick back up. Look, we think that we were at about 1,150 completions a month in February. And we think that as we get into 2022 that we'll be at around 950, OK, and probably completing the best of the best wells. And that's what's in our forecast today.

And so when you get out to 2025, there'll be some smaller volumes than what we said before. But, Brent, do you want to talk about what's going on in our business in that regard and what you're seeing?

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Yes. The one thing we have seen is just the resiliency of the Permian, and part of it is just what's going on out there, then part of it is how we've contracted. But if you look at our Y-grade receipts for June, if you look at our Y-grade receipts for July, those are both records for Enterprise. And if you look at our Y-grade inventories, they're at all-time high.

So in terms of how we've contracted, in terms of what we're seeing coming out of Permian, the fractionation volumes that we have access to, those have bounced back quite nicely.

Anthony Chovanec -- Senior Vice President

On the demand side, gasoline is not really -- I mean, it's off. It's off 10% to 15%, depending on what numbers you look at. Diesel is the same. And again, that's to be expected.

So if we think about going forward, what the data shows is Latin America, and we are a large exporting country to Latin America is waking back up. Moving away from being in shutdown and largely think about Mexico and Brazil. So that's a positive. And we're hoping that as we work off inventories, we'll put our refineries back to work.

Jeremy Tonet -- J.P. Morgan -- Analyst

That's very helpful. Thanks. And on the petchem side, as far as demand there, any trends that we should be thinking about with LPGs and petchems?

Chris D'Anna -- Senior Vice President, Petrochemicals

Yes. Jeremy, this is Chris D'Anna. We saw at the beginning of the pandemic, so in March, April time frame, lower demands on the durables, the single-use actually was pretty resilient. We saw pretty good demand.

We're starting to see gradual improvement in demand for the durables. And, of course, single-use is still pretty good.

Jim Teague -- Co-Chief Executive Officer

The fact that our ethylene export dock is sold out also says something about the demand for ethylene.

Jeremy Tonet -- J.P. Morgan -- Analyst

That's very helpful. Thanks. And one last one if I could. Just with regards to arbitrage opportunities that you've seen so far kind of the nonrecurring, recurring earnings that you've gotten that really boosted this quarter, what type of opportunities do you see in the third quarter here, I guess, with contango, what have you, and delayed realization of those profits? Just trying to think through that a bit more.

Jim Teague -- Co-Chief Executive Officer

I think, Jeremy, what we said last call is we thought we'd be at $500 million to $600 million in spread, and I think we're probably saying for the year we'll be at the upper end of that range.

Jeremy Tonet -- J.P. Morgan -- Analyst

Very helpful. Thank you very much.

Operator

Thank you. And our next question comes from the line of Jean Ann Salisbury with Bernstein. Your line is open.

Jean Ann Salisbury -- Sanford C. Bernstein -- Analyst

Good morning. The main fundamental bear case on Enterprise is expected margin compression in the NGL business now that everything looks overbuilt for the medium term. Anything that you can provide to address these fears of a coming price war, basically, in NGL pipelines, frac, and exports would be really helpful.

Jim Teague -- Co-Chief Executive Officer

I didn't get the question. Did you understand the question? Who wants to answer it?

Randy Fowler -- Co-Chief Executive Officer

Yes. So Jean Ann, your question is, as we think about margin compression -- and I'm going to assume you're talking about as people recontract on midstream assets. Is that where you're headed?

Jean Ann Salisbury -- Sanford C. Bernstein -- Analyst

I think it's a little bit more than that. I think people usually talk about fracs, but I think it's really the whole chain of NGL pipeline, frac, and exports. It seems like now there's too much capacity. And so people are concerned that you could see a similar phenomenon to what we see in crude, which is that, yes, when contracts come up, that you would see massive declines.

Jim Teague -- Co-Chief Executive Officer

I think, Jean Ann, what you're saying, kind of makes sense. I think you have to take a look at what a company has to work with. If you look at -- that's why we -- I emphasized petrochemicals in my opening comments because that gives us a heck of a lot longer of the value chain to leverage. So it's about what are you having to leverage.

And while one part of that value chain may be under some stress, the total won't be. Is that fair, Brent?

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Yes.

Jim Teague -- Co-Chief Executive Officer

And you had another point to make. So in our situation, yes, maybe, but we got a value chain that we're going to leverage, and we'll give them what they want, where the hot button is. We'll collect what we need at the rest of the value chain.

Brent Secrest -- Executive Vice President and Chief Commercial Officer

I think there is some offset, Jean Ann, and what we're seeing on ethane is an offset on volumes, both for pipelines and for fractionation. I hear what you're saying from an industry standpoint, and I'll repeat myself. I think we've done a heck of a job contracting, and I think how you contract and who you contract with matters in this environment. And we'll say that about other commodities as well.

If you look at our LPG export facility, it's in a very, very good position in terms of the contracts we have in place. And if you look at the balance of this year and you look at the following couple of years, we're in a very, very good spot. And then ultimately, if supply starts going down, you look at what we have built in Mont Belvieu and the pricing points that we have, I fundamentally believe that the downstream assets that we have at those pricing points benefit. So there are some offsets in this environment.

Jean Ann Salisbury -- Sanford C. Bernstein -- Analyst

That makes sense. Thanks. So effectively, the bundled chain, you think will kind of give you a better and different outcome than the working on crude pipeline more broadly.

Jim Teague -- Co-Chief Executive Officer

I think it always has.

Jean Ann Salisbury -- Sanford C. Bernstein -- Analyst

Great. Thanks. That is all for me.

Operator

Thank you. And our next question comes from the line of Tristan Richardson with SunTrust. Your line is open.

Tristan Richardson -- SunTrust Robinson Humphrey -- Analyst

Hey, good morning, guys. Could you talk about your prepared comments about the JV opportunities for reducing capital? You noticed that that process has been elongated due to the pandemic. Are the six potential JVs still in play that you noted on the last call? Or can you just give us a general update there?

Jim Teague -- Co-Chief Executive Officer

Yes. I think on the last call, we said that we were pretty engaged with three of those six. And not to guess what I could say today is we're probably pretty engaged with one of those three. It's not that you're not in discussions with the others, but it's like Randy said, in this environment, everybody is just kind of pulling their horns in.

So we're discussing some JVs with some of our larger projects. But I wouldn't say we're highly engaged with more than one, but we are highly engaged with one.

Tristan Richardson -- SunTrust Robinson Humphrey -- Analyst

That's helpful. And then just a quick follow-up. Could you just help frame how we should think about maybe the largest components of the 2021, $2 billion outlook, whether it be PDH 2 or Midland-to-ECHO 4? And does this number presume joint ventures? Or is this more like an eight times type of budget?

Jim Teague -- Co-Chief Executive Officer

So it is. Isn't it, Randy?

Randy Fowler -- Co-Chief Executive Officer

Yes. Tristan, this is Randy. Yes, the $2.3 billion is assuming no joint ventures. And if you would, two-thirds of that $2.3 billion are really three projects, and that's PDH 2, Midland-to-ECHO 4 crude oil pipeline, and the Gillis natural gas pipeline.

Tristan Richardson -- SunTrust Robinson Humphrey -- Analyst

Great. Thank you, guys, very much.

Operator

Thank you. And our next question comes from Colton Bean with Tudor, Pickering. Your line is open.

Colton Bean -- Tudor, Pickering, Holt & Co. -- Analyst

Thank you. So you noted in the press release the process volumes were back to 88% of March levels and NGLs were nearly at parity. On the inlet volume side, can you provide a bit more detail as to the mix across your footprint? And then on NGLs, is that outperformance relative to gas? Is that primarily increased extraction?

Jim Teague -- Co-Chief Executive Officer

Who wants to take that?

Brent Secrest -- Executive Vice President and Chief Commercial Officer

I think in terms of the mix of Y-grade, this is Brent, Colton, but I think -- I'd say ethane has probably increased about 4%, maybe 5% across our system. And then in terms of just the whole volume metric, and I'm not sure I understood the question, but where you're seeing the growth come from is obviously in the Permian. And I think you'll see in July some very robust volumes that come from that area.

Colton Bean -- Tudor, Pickering, Holt & Co. -- Analyst

OK. Yes. And that was mainly the focus of the first point. It was just when you look at kind of the four primary footprints for you guys, what would that recovery look like on a bi-basin basis? I mean, Permian, Permian.

Brent Secrest -- Executive Vice President and Chief Commercial Officer

We're not seeing a whole lot. I mean, Eagle Ford has been fairly flat. There's people talking about putting rigs. There's a certain company that's looking to deploy some capital there that we're involved with.

But I'd say in the Rockies, you're seeing ethane recoveries pick up out there. And then obviously, in the Permian, just in terms of how aggressive we've been on contracting and just the bounce-back in volumes, we're seeing the bulk of the benefits out there in that area.

Jim Teague -- Co-Chief Executive Officer

But that, too, the chase is Permian-centric, right?

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Yes, sir.

Colton Bean -- Tudor, Pickering, Holt & Co. -- Analyst

Understood. Got it. And just on the update to the 2022 capital budget, now down to $1 billion, can you frame what that might look like if you were to strip out the PDH 2 spend? Or in the simpler terms, if you remove the major projects, what that run rate might be?

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Probably, it would be less. Yes. I mean, you're probably knocking on the door of $500 million.

Colton Bean -- Tudor, Pickering, Holt & Co. -- Analyst

Got it. All right. That's helpful. I appreciate it.

Operator

Thank you. And our next question comes from the line of Ujjwal Pradhan with Bank of America. Your line is open.

Ujjwal Pradhan -- Bank of America Merrill Lynch -- Analyst

Thank you. Good morning, everyone. Thanks for taking my questions here. Firstly, a quick follow-up on Christian's question on the potential JVs on growth capital projects.

Could you maybe, high level, discuss what are the parameters of your negotiations there? And who would be your preferred JV partners?

Jim Teague -- Co-Chief Executive Officer

Typically, they either bring -- they bring more than money. They've got to bring throughput, or they got to bring offtake typically. So those are the kind of people we do joint ventures with. Does that answer your question?

Ujjwal Pradhan -- Bank of America Merrill Lynch -- Analyst

I guess that does. That's helpful. And in terms of sort of the parameters of what you're negotiating or within the project how you plan to sort of sell the interest, can you comment on that?

Jim Teague -- Co-Chief Executive Officer

Did you understand that?

Randy Fowler -- Co-Chief Executive Officer

Yes. Could you repeat that question? I'm sorry.

Ujjwal Pradhan -- Bank of America Merrill Lynch -- Analyst

Sorry. Could you maybe discuss what you're considering when it comes to the negotiations? Maybe simply put the -- some of the bigger projects that you have on the backlog, which ones -- how do you rank them in terms of which ones you would want the partners to get involved in?

Jim Teague -- Co-Chief Executive Officer

Well, I'll tell you what we wouldn't want them getting involved in. That's the church house, which I think is probably our storage system in Mont Belvieu. I don't think we have a problem to get them -- having them involved in some of our -- some of the less strategic things that maybe feed the system, but it's about it -- that's about all we're going to say.

Ujjwal Pradhan -- Bank of America Merrill Lynch -- Analyst

Got it. Thanks for that. And a follow-up on elections this year. Would you be able to share some thoughts on how you're watching the elections and the recent movements there? And maybe if you could share your perspective on potential impacts and/or benefits to EPD, as well as the overall MLP space in terms of corporate taxes, as well as energy infrastructure proposals.

Randy Fowler -- Co-Chief Executive Officer

OK. This is Randy. I guess it is a season of political rhetoric. And I don't know how much you can really -- with some of the proposals that are being put out in the public domain, I would -- frankly, I don't know how focused you can get on those at this point in time, again, because everyone is in campaign mode.

I think with the deficits that the country is running up, it looks like income taxes, tax rates for both individuals and corporations are going to go up and perhaps substantially. So to be honest, this year, we really not spend any time coming in and looking at an MLP versus C-Corp analysis. We've been too focused on executing, and just given with the uncertainty in the environment and the volatility in the environment, frankly, we're pretty content with our current MLP structure. And as far as policy is going as far as what's been proposed, I go back a little bit and use the analogy of the U.S.

Highway Trust Fund. It was created in 1956, and it taxes on motor gasoline and diesel to come in and fund road construction and road maintenance. The last time the tax on diesel and gasoline was raised to fund that trust fund was 1993. Since 2008, the trust fund has been running deficits, and no one in Congress, be it a Republican or a Democrat Administration, has been willing to go up on that and raise the tax on motor gasoline and diesel because they didn't want the impact on individuals, and they did not want impact on businesses.

And some of the things that are being contemplated in some of these policies that we hear in this campaign rhetoric would substantially increase the cost of energy, both on individuals and companies. So it's really hard to see if the powers it be wouldn't even increase the price on gasoline, how some of these large proposals can come in and be executed.

Ujjwal Pradhan -- Bank of America Merrill Lynch -- Analyst

Got it. Thanks for that.

Operator

Thank you. And our next question comes from the line of Shneur Gershuni. Your line is open.

Shneur Gershuni -- UBS -- Analyst

Hi. Good morning, everyone. Good to hear everyone is well. Maybe to start off, Jim, in your prepared remarks, you sort of talked about how the marketing and spread business is effectively a natural hedge for the business, opportunities pop-up with dislocations, and so forth.

I was just wondering if you can sort of give us your thoughts on how the trends play out for the balance of this year. And what I mean by that is spread opportunities start to recede over the next couple of quarters, but at the same time, you have the shut-ins coming back, base business starts to move higher. Is the trend of the base business recovering stronger than the, I guess, subsiding of the marketing opportunities? Is there a scenario where 3Q can be higher than Q2 without giving like specific guidance, but just sort of talking about the trends, which is the stronger trend right now? Or is the natural hedge going to reverse itself and sort of keep us in a running flat scenario?

Jim Teague -- Co-Chief Executive Officer

Yes. It's a good question, Shneur. I think personally, I mean, you get dislocations and you get spreads when you have events. So when crude prices fall invariably, we'll see contango -- I mean, it's been the way it's been.

If those spreads aren't there, then in my mind, our pipelines are probably a lot more throughput than we have today. So that's kind of the way I see it. In terms of -- I'm probably a little more bullish than Tony is in terms of recovery. I think I personally think demand is going to recover sooner than probably Tony thinks is going to recover.

And I think you're going to get a price signal next year on hydrocarbons that turn some things back on. So that's what I see.

Shneur Gershuni -- UBS -- Analyst

OK. And maybe as a follow-up question here. Just sticking with the theme of dislocations, obviously, you've been very opportunistic to take advantage of the market on dislocations to capture spreads within hydrocarbons for your base business itself. What I think about EPD's unit price, do you see similar dislocations in your stock price right now? For example, you're down today with the results that you put out.

And do you see an opportunity to use the excess cash generated from the strong marketing proceeds, lower capex budget to potentially accelerate or increase your buyback target to take advantage of these dislocations within your stock price?

Jim Teague -- Co-Chief Executive Officer

I'm going to let Randy answer that. But individually, there's a number of us that have accelerated our buyback program.

Randy Fowler -- Co-Chief Executive Officer

Yes. Shneur, I think that just as I mentioned, that really, this year, we're really coming in and going quarter by quarter as we consider cash distribution growth to our investors and spending capital on buybacks falls in that same category. So again, we'll come in and take a look at it quarter by quarter. We had come in and allocated approximately 2% of cash flow from operations to go toward buybacks.

We've done that. We'll come in and look for opportunities for the remainder of the year to see how we would want to come in and if we're going to return more capital to investors, whether that be in the form of distributions or buyback. So more to come on that.

Shneur Gershuni -- UBS -- Analyst

OK. So it's fair to conclude that the 2% target is not a hard line. It's something that you can go above and that you would look at a 9.75% yield as probably being very opportunistic.

Randy Fowler -- Co-Chief Executive Officer

You know, Shneur, yes, it was approximately 2% is what we said. But we'll come in and take a look at it quarter by quarter. Some of this, we'd like to get, as Tony described, there's still some uncertainty out there as far as coming in and how the economy reopens. We just like to get a little bit more visibility on what we see for the business environment.

Shneur Gershuni -- UBS -- Analyst

All right. That sounds great. I appreciate the time. I want to keep it to just two questions.

Have a great and safe day.

Jim Teague -- Co-Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from Justin Jenkins with Raymond James. Your line is open.

Justin Jenkins -- Raymond James -- Analyst

Hi. Good morning, everyone. I guess I'd like to start on 2020 growth spending. Randy, I think you covered a bit of the further outlook for '21, '22.

But is it more timing at this point in terms of the range of spend left for 2020 or is some of that dependent on JV outcomes, too?

Randy Fowler -- Co-Chief Executive Officer

It's the range that we give for 2020, the $2.5 billion to $3 billion is largely just timing on how we see cash leave the -- go out the door.

Justin Jenkins -- Raymond James -- Analyst

OK. That makes sense. And then you also mentioned that you expect working capital to peak in 3Q in terms of usage. Do you have a magnitude in mind for that? And then maybe give us a sense of how quick that cash comes back in the door as a tailwind thereafter.

Randy Fowler -- Co-Chief Executive Officer

Yes. Probably could see another, call it, another $300 million to $500 million increase in working capital between now and the end of the third quarter. And then I think it would just work off over -- from the third quarter, probably work off. Typically, you've got a good bit of working capital deployed.

I mean, just in our typical business, you have a good bit of working capital deployed over the fourth quarter. So I think you would see, ultimately, from that peak in the third quarter, you probably see it worked off largely by the end of the first quarter next year.

Justin Jenkins -- Raymond James -- Analyst

Got it. Thanks, Randy.

Operator

And our next question comes from the line of Keith Stanley with Wolfe Research. Your line is now open.

Keith Stanley -- Wolfe Research -- Analyst

Hi. Good morning. Just following up on the last question. If your working capital is still increasing in Q3, should we assume that that means some of the contango marketing-type opportunities could be even greater in the future than what we saw in Q2 in future quarters?

Randy Fowler -- Co-Chief Executive Officer

No. I think some of it is just a carryover to what we put on. I think what Jim alluded to that we think we may be as far as total spread opportunities be in the upper end of that $600 million range, really sort of see that split 50-50 first half of the year, second half of the year. But you still have -- just with some of the positions that we put on, you can have working capital creep with those positions.

Keith Stanley -- Wolfe Research -- Analyst

OK. That's helpful. And then going back to last quarter, I thought the messaging was pretty strong from the company that there weren't acquisitions you were interested in. I guess with the dust settling somewhat here, what's your view on the merits of acquiring companies or assets and synergies? I mean, the one thing that's striking is you guys could issue 10-year debt right now at under 2% interest rate.

So just any updated thoughts on how you're thinking about that.

Jim Teague -- Co-Chief Executive Officer

I'd say we got the same answer as the first quarter.

Randy Fowler -- Co-Chief Executive Officer

Yes. Keith, I think you heard that one. That's where I think we are, too. We look at opportunities that come across.

Frankly, we've not seen as far as teasers coming in. We frankly have not seen much in the way of teasers come across the last three or four months and certainly not anything compelling. So I think right now, we're just focused on continuing to execute with the business that we have and go from there. I mean, we're open to come in and look at opportunities, but it really needs to be a good fit, probably what would be more likely would come in and be a bolt-on type opportunity.

But again, really haven't seen anything develop on that front.

Keith Stanley -- Wolfe Research -- Analyst

Interesting. Thank you.

Operator

Thank you. And our next question comes from the line of Pearce Hammond with Simmons Energy. Your line is open.

Pearce Hammond -- Simmons Energy -- Analyst

Good morning, and thanks for taking my questions. Just two questions on the same subject. The first one is, what are your views on U.S. NGL export capacity? And do you see more opportunities to grow your NGL export business? And then the second question is, overall, it seems that U.S.

NGL exports have a better outlook than U.S. crude exports. Do you think that is a fair statement?

Jim Teague -- Co-Chief Executive Officer

This is Jim. But Tony and Brent, chime in. I think the world needs U.S. LPG.

And as lifestyles improve in other parts of the world, in many cases, LPG is what creates that improvement. You got any thought?

Anthony Chovanec -- Senior Vice President

Data speaks for itself, Jim. You're exactly right. You look at what happened in the height of the pandemic.

Jim Teague -- Co-Chief Executive Officer

Brent, were you blown away by the demand at our dock?

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Yes, absolutely. Record-type numbers.

Jim Teague -- Co-Chief Executive Officer

I wouldn't be too quick to write off crude oil exports. Rich had seen quite a lot. We've seen a pickup in crude exports. And I thought we had a record week as a country at one point.

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Yes. A couple of weeks ago, I think we started going back to the highs. We're seeing just a different interest in the slate, the lighter. There's bigger demand for West Texas light.

There's a bigger demand for the Eagle Ford-type barrel, as people have the bid on motor gasoline, and we're seeing those go to Asia, mostly Korea and some Latin America. But on the LPG side, I think we're in a good spot as Enterprise. We have a project out there that we can expand when the time is right to expand. I'm not sure from a capacity standpoint, it needs to be expanded anytime soon.

But certainly, we have a project that's a low capital project that we can execute on.

Pearce Hammond -- Simmons Energy -- Analyst

Thank you for your responses.

Randy Burkhalter -- Vice President, Investor Relations

Sidney, this is Randy. We have time for one more question, and then if you would give the replay information.

Operator

Certainly. Our last question comes from the line of Michael Blum with Wells Fargo. Your line is open.

Michael Blum -- Wells Fargo Securities -- Analyst

Thanks. Good morning, everyone. Just two quick ones for me. So just to stay on the LPG export topic.

It seems like your volumes are holding up here, at least in the beginning of the first half of -- the second half of 2020. Can you just give your kind of talk about what you're seeing? Are you seeing any drop-off as some of these countries come out of lockdown? Or are you still seeing strength there in LPG export volumes? And if so, what do you think is driving it?

Jim Teague -- Co-Chief Executive Officer

Yes. I think we still -- Michael, I think we still see strength. I think what's driving is what we talked about a while ago.

Randy Fowler -- Co-Chief Executive Officer

I think we're seeing a lot of PDH demand over in Asia. I think just in terms of how we contracted, Michael, I'd say this humbly, but I think we'll probably be toward the end to see any kind of drop off. I mean, just in terms of our supply position, in terms of the pricing point, in terms of how aggressive that we've contracted out for this year and the next couple of years, we're in a good position to kind of maintain these type of levels. I think you're seeing this export, call it around 18 million barrels a month of LPGs, and I think that's sticky.

Those are sticky numbers.

Jim Teague -- Co-Chief Executive Officer

What's interesting, Michael, is whenever we do get a cancellation, we've been pretty successful in backfilling it with the supply. So the appetite is there.

Michael Blum -- Wells Fargo Securities -- Analyst

OK. Great. That makes a lot of sense. My second question, I think, is probably for Randy.

You referenced the sort of that target payout ratio number that you're now referring to a bit. Do you have kind of like a long-term target for where you want that to sort of settle out over time? Or are you thinking about that way?

Randy Fowler -- Co-Chief Executive Officer

Michael, I don't think we've developed our thoughts that far along on setting a long-term target. Some of your balance to that would be what kind of growth opportunities do you see. So we've really not come in and set out any long-term targets. I mean, we do come in and compare how we're doing compared to the market.

And I think when we come in and look at the market and put the various sectors of the S&P 500 on the page, I think we're among the top two, top three of the sector. So we think we're -- and by nature of being an MLP, the whole thing with an MLP is you have a high payout ratio. And so I think we comp pretty well against the market.

Michael Blum -- Wells Fargo Securities -- Analyst

Great. Thanks, everyone. I appreciate it.

Randy Burkhalter -- Vice President, Investor Relations

OK, Sidney. Do you want to give the replay information?

Operator

Certainly. You may dial in at 1 (800) 859-2056 or (404) 537-3406 with the access code 1667154 to access the replay information. I would now like to turn the call back to Randy Burkhalter for any further remarks.

Randy Burkhalter -- Vice President, Investor Relations

OK. Well, that concludes our remarks today. And I'd like to thank everyone for joining us and have a good day. Thank you.

Good-bye now.

Operator

[Operator signoff]

Duration: 54 minutes

Call participants:

Randy Burkhalter -- Vice President, Investor Relations

Jim Teague -- Co-Chief Executive Officer

Randy Fowler -- Co-Chief Executive Officer

Jeremy Tonet -- J.P. Morgan -- Analyst

Anthony Chovanec -- Senior Vice President

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Chris D'Anna -- Senior Vice President, Petrochemicals

Jean Ann Salisbury -- Sanford C. Bernstein -- Analyst

Tristan Richardson -- SunTrust Robinson Humphrey -- Analyst

Colton Bean -- Tudor, Pickering, Holt & Co. -- Analyst

Ujjwal Pradhan -- Bank of America Merrill Lynch -- Analyst

Shneur Gershuni -- UBS -- Analyst

Justin Jenkins -- Raymond James -- Analyst

Keith Stanley -- Wolfe Research -- Analyst

Pearce Hammond -- Simmons Energy -- Analyst

Michael Blum -- Wells Fargo Securities -- Analyst

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