Enterprise Products Partners (EPD) Q1 2021 Earnings Call Transcript

Enterprise Products Partners (EPD 1.69%)
Q1 2021 Earnings Call
May 03, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Q1 2021 Enterprise Products conference call. [Operator instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Randy Burkhalter, VP of investor relations. Please go ahead, sir.

Randy Burkhalter -- Vice President of Investor Relations

Thank you, Christy. Good morning, everyone, and welcome to the Enterprise Products Partners' call to discuss first-quarter 2021 earnings. Our speakers today will be co-chief executive officers of Enterprise's general partner, Jim Teague, and Randy Fowler. Other members of our senior management team are also in attendance for the call today.

During the call, we will make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 based on the beliefs of the company, as well as assumptions made by and information currently available to Enterprise's management team. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. And so with that, I'll turn the call over to Jim.

Jim Teague -- Director and Co-Chief Executive Officer

Thank you, Randy. Our businesses continued to perform extremely well during the first quarter. We reported $2.2 billion of adjusted EBITDA. Distributable cash flow was 1.7 billion and a 1.8 times coverage, and we retained 700 million.

Randy is going to get [Inaudible] numbers deeper. We couldn't be prouder of our people. Time and time again, whether they're faced with a financial crisis, over 50 inches of rain from Hurricane Harvey at Mont Belvieu, a combination of pandemic, global price war that was immediately followed by a record Gulf Coast hurricane season, or historic winter storm that shuts down virtually the entire state, our people prepare, adjust when needed, and they execute and make things happen. And for that, we -- we are extremely grateful.  Relative to the winter storm, forecasters did a great job of calling for a major, even historic, event at least a week in advance.

As the storm developed, every county in Texas, as you know, was under a winter storm warning, paused end supplies across the state, and affected the entire energy value chain. It impacted much of the generating capacity across the state at one point, even some of our nuclear. In spite of what you have heard in the press, Texas ended up counting on natural gas as wind generation dropped to near zero at the height of the storm. Our people prepared, backing our pipelines, buying extra gas to prepare for freeze-out, scheduling our assets, and staging themselves in hotels and on cots at our plants.

Most of our Texas assets, including our assets at Mont Belvieu and the Ship Channel, were offline at the height of the storm, mostly intentionally, as we work to make BTUs available through deep rejection, bypass, and plant shutdowns. We sold natural gas to electricity generators, natural gas utilities, and industrial customers to assist them in meeting their needs. Our gas business, which includes pipelines, gas storage, small gas storage, and gas marketing is integral to what we do in many of our other businesses, but it's nowhere near the size of, say, a Kinder Morgan or Energy Transfer. During the freeze, our natural gas team, including the commercial gas control and gas marketing and schedulers, worked tirelessly.

They knew to start preparing long before the temperature has dropped, then they worked around the clock for days to deal with the problems and the opportunities. And it shows in our results. As to power, our people took proactive steps to minimize our exposure to $9,000-megawatt hour through participation in ERCOT's LRS program, which redeploys industrial power supplies to human needs and by voluntary shedding a significant amount of load. Today, Texas and Louisiana Gulf Coast petrochemical plants and refineries have completed repairs and have increased rates with both industries, realizing some of the best margins we have ever seen.

As we emerge from COVID-related lockdowns, global demand continues to improve for crude, NGLs, primary petrochemicals, and refined products. Diesel demand actually exceeds pre-COVID norms in much of the world. And gasoline demand is picking up, already exceeding 2019 levels in some countries. Downtown Houston is far from fully occupied, but traffic in this city is, at times, already back to what some time is awful.

For the first time in my life, I think traffic jams are beautiful. Since April 20, 2020, we have been outspoken about why we felt oil prices would go up dramatically. While economic recoveries aren't uniform, when you look at the world's largest economies, demand has moved up, and all indications are that even Europe isn't far behind. Moving on to capital.

We continue to expect our growth in capital investments for '21 to be 1.6 billion and another 440 million for sustaining capital. The rest of '21, we continue to be on schedule to complete the expansion of Acadian gas system to Gillis, Louisiana, which serves LNG markets; the expansion of our ethane, ethylene, and propylene pipeline systems; and the construction of our natural gasoline hydrotreater. Our growth capital in '22 and '23 projects currently sanctioned is 800 million and 400 million, respectively. Longer-dated capital commitments are largely around our PDH 2 plant expected online in 2023.

We know that we're in the show-me state for this project because of the difficulties we had in our first PDH. I will tell you I have a high level of confidence that PDH 2 will be highly successful and will generate consistent cash flow. As to PDH 1, we recently completed a 46-day turnaround. It was on time and it was under budget.

The restart went exactly as planned, and the unit is operating above design capacity. Sometimes I read reports that make me thank investors are worried that we're running out of projects. And then the next report I pick up makes me think investors are worried that we're going to spend the dollar. We have never been afraid of opportunity, but we definitely respect this part of the cycle.

And our expectation for returns on new projects have moved forward. Going forward, I think you should probably think about our capital run rate of somewhere between $1.5 billion and $2 billion. I hear a lot about energy evolution. Note that we don't say transition.

We're thinking of things like hydrogen and carbon capture utilization and storage not just as threats, but as potential opportunities. Angie Murray, our senior vice president of Technology Services, has taken on additional responsibilities around a deep-dive technical analysis of low-carbon technologies currently under discussion. Over the last two years, Angie and her team have worked closely with operations and our big data team identifying several areas to significantly cut our operating, in some case, our capital costs. What we're finding is these are not one-time hits and are to be thought of as continual improvement.

In addition to those responsibilities, Angie's role has been expanded to -- to include a focus on evolutionary technology for lower-carbon opportunities. We have to have a strong technical focus on these opportunities. For example, for hydrogen, outside of the rather large presence we have today through our petrochemical assets, Angie's evolutionary technologies team -- that's a mouthful, Randy -- is leading the initiative to research and analyze where we might go next in applications for things like transportation and storage. And this team is also responsible for helping us understand the technology behind sequestering our own carbon.

In addition to hydrogen and carbon capture, there are other new low-carbon areas that could be a fit. For example, as a member of the Alliance to End Plastic Waste, we are clearly interested in the different technologies used to recycle plastics and what opportunities might exist for Enterprise in handling the resultant products. As to new initiatives, we always have commercially sensitive things we are working on, but most of the things we're working on expanding, in some cases, converts what we already have, think in terms of product upgrade and repurposing the underutilized assets done in a manner that gives our customers new markets. Some of these initiatives even fit the definition of energy evolution.

However, profitability will always be a prerequisite. Things are never typical, but what has become typical is, regardless of the environment, Enterprise people perform. The groundwork for our performance today was created five to 10 years ago. And what we will become in five to 10 years is being created today.

Our natural extension of our value chain in five to 10 years could very well be things like hydrogen transportation and storage or sequestering carbon; and transporting, storing, and upgrading the by-products produced from recycled plastics. While nothing is off the table, demand for fossil fuel and its derivatives will continue to grow. And that will remain our foundation. And with that, Randy, you got it.  

Randy Fowler -- Director, Co-Chief Executive Officer, and Chief Financial Officer

OK. Thank you, Jim. Good morning, everyone. Starting off with the income statement.

As far as on the first quarter, net income attributable to common unitholders for the first quarter of 2021 was $1.3 billion or $0.61 per unit on a fully diluted basis. This compares to $1.4 billion or $0.61 per unit on a fully diluted basis for the first quarter of 2020. Net income for the first quarter of this year was reduced by a noncash asset impairment charge of approximately $66 million or $0.03 per fully diluted unit. The impairment charges were largely related to our legacy coal seam natural gas gathering system in Val Verde treating facility in the San Juan Basin that was held for sale at the end of the quarter.

Notably, net income for the first quarter of 2020 included a $187 million or $0.08 benefit from deferred-income-tax benefits. Moving on to cash flows. Cash flow from operations was $2 billion for both the first quarters of '21 and '20. Free cash flow for the 12 months ending March 2021, that is cash flow from operations less cash used for investing activities, netting out any contribution from our JV partners, was 3.1 billion.

This compares to 3.4 billion for the comparable trailing 12 months. We generated over $350 million of discretionary free cash flow in the first quarter. That's cash flow from operations minus capital investments and also minus cash distributions to partners. We believe we -- we remain on track to be discretionary free cash flow positive for the entire year.

We declared a distribution of $0.45 with respect to the first quarter to be paid on May 12. This distribution represents 1.1% increase compared with the first quarter of 2020. While we settled $14 million of unit purchases -- unit repurchases in early January, these were associated with open market purchases in the month of December, and that really just the settlement of them. We did not execute any new additional unit purchases in the first quarter of 2021.

EPD's distribution reinvestment plan and employee unit purchase plan purchased a combined $33 million of EPD units in the open market during the first quarter. This was equivalent to about 1.6 million EPD units purchased off the open market. Our payout ratio, which we define as the sum of cash distributions and buybacks as a percent of our cash flow from operations over the trailing 12 months, was 68% as of March 31, 2021. As we said on our earnings call in February, while we currently expect to generate discretionary free cash flow for 2021, our first priority is financial flexibility until we get better visibility on regulatory, energy, and tax policies of this new administration and Congress.

We believe it would be premature to provide any distribution growth and buyback guidance at this time. Enterprise has a long history of reciprocal -- responsibly returning capital to limited partners. It continues to be one of our primary financial objectives and has been since our IPO. And in fact, since our IPO, we have returned approximately $40 billion of capital to our limited partners, including $4.2 billion in 2020.

Moving on to capitalization. Our total debt principal outstanding was approximately $29 billion at the end of the first quarter. Assuming the first call date for our hybrids or the final maturity date for the hybrids, the average life of our debt portfolio is 16.7 years and 21 years, respectively. Our effective average cost of debt is 4.4%.

In the first quarter, we repaid 1.325 billion of maturing senior notes using the remaining proceeds from our August 2020 senior notes offering and proceeds from the issuance of short-term notes under our commercial paper program. Adjusted EBITDA for the first quarter of '21 was $2.2 billion and $8.3 billion for the 12 months ended with the first quarter. Our consolidated leverage was 3.3 times after adjusting debt for the partial equity credit given by the -- on the hybrid securities given by the rating agencies and further reduced for unrestricted cash. This was at the lower end of our leverage target of 3.5 times plus or minus a quarter, or our -- our target leverage range of three in a quarter to 3.75 times.

Our consolidated liquidity was approximately $5.1 billion at the end of the quarter. That includes availability under our existing credit facilities and approximately $229 million of unrestricted cash on hand. At this time, we do not foresee the need to access the debt capital markets in '21. However, depending on market conditions, we may elect to approach the debt capital markets later this year to prefund our 2022 maturities.

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

Randy Burkhalter -- Vice President of Investor Relations

Thank you, Randy. Christy, we're ready to take questions from our audience. Before you do that, let me remind our listeners. If you -- if you would, please limit your questions to one question and one follow-up question.

Thank you. Christy, go ahead.

Questions & Answers:

Operator

Certainly. [Operator instructions] And your first question is from Jeremy Tonet of J.P. Morgan.

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

Hi. Good morning. 

Randy Burkhalter -- Vice President of Investor Relations

Good morning.

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

Recognize it's probably kind of a complex question with Uri, but just want to know if you guys could provide any color as far as net-net, what type of benefits you -- you saw from the storm during the quarter? And then just to isolate kind of base business trends, I guess, you know, how you see volumes recovering or -- or not recovering at this point? 

Jim Teague -- Director and Co-Chief Executive Officer

Jeremy, I'm going to look at Chris. I think we're around 250 million. 

Chris D'Anna -- Senior Vice President, Petrochemicals

Yeah. 

Jim Teague -- Director and Co-Chief Executive Officer

Did that answer -- did that answer, Jeremy?

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

Yeah, and just the base business then outside of that, do you still see kind of recovering at this point or just trying to [Inaudible]? 

Jim Teague -- Director and Co-Chief Executive Officer

Absolutely, we see it recovering. If you listen to my script, we're -- we're bullish. I mean, you think about it, crude oil since April of last year is going what, damn near a $100 a barrel, from a -- from a -- from a negative 37 print. 

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

Got it. 

Jim Teague -- Director and Co-Chief Executive Officer

Yeah. What did go -- what's Goldman saying? Eighty dollars in the third quarter?

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

Got it. Got it. And maybe just a quick one on energy evolution. I'm just wondering, you know, as it relates to carbon capture right now if you see the 45Q is being kind of sufficient policy to make projects economic such as gas processing there and, you know, what other opportunities could this breed? I mean, could you have underutilized Permian pipeline's move to CO2 from the Gulf Coast into the Permian for injection there and kind of tightening, you know, take away market? Just trying to think of what's possible here.

Jim Teague -- Director and Co-Chief Executive Officer

Yeah, I think everything's possible, Jeremy. We're -- we're not taking anything off the table. What we have done is, you know, we -- we read everybody's going to net whatever, you know, past my lifetime. What we've decided is we're going to take a step back.

And that's why Angie has taken the lead on just looking at the technology associated with all of these different possibilities and understanding the technology. And they're working with our people in other parts of company like our commercial groups and our operations group, saying how does that fit here? Hell, if we just captured our own carbon at Mont Belvieu and sequestered it, it'd be quite a -- it'd be a nice thing. Graham? 

Graham Bacon -- Executive Vice President and Chief Operating Officer

Yeah, it'd be about quite a bit. Yeah. Nothing really to elaborate more on what Jim said. We're still evaluating all of our pipelines, all of our opportunities.

Everything's on the table. And I really just got a focused effort on it now and coordinated throughout the organization.

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

Got it. Great. I'll leave it there. Thank you.

Operator

Thank you. Your next question is from Christine Cho of Barclays.

Christine Cho -- Barclays -- Analyst

Good morning. 

Jim Teague -- Director and Co-Chief Executive Officer

Good morning.

Christine Cho -- Barclays -- Analyst

Can you give us an update on your outlook for crude fraction overall and specifically in the Permian? You know, how that has evolved over the last couple of months, especially with the big surge in private activity in the Permian -- Permian and how that shapes your volume and price outlook for the rest of this year and maybe next year? And also curious to the competition for getting the barrels from a lot of these private producers, most of which seem to have only one rig operating. And my guess is they don't have much contracted from the machine perspective, but any color would be helpful.

Tony Chovanec -- Senior Vice President

Hey, it's Tony, I'll -- I'll take the first part of then Brent may add on the second part. Permian volumes, you know, like everything else, it's hard to look at the latest EIA reports and -- and make, you know, make too much sense of it. But the long and short of it is if you look at frac crews in the Permian, they're back to about almost 80% of their -- their all-time highs. OK? The facts are the Permian is leading everything.

The challenge there is -- is every other base and if we think about oil is lagging, it, you know, it's really all about Permian. So where we are is we originally said at our Analyst Meeting we thought that we'd have somewhere short of 100,000 barrels December year-end '20 to '21 have increased across the United States. We think that number at this point is low. It's probably closer to 250 in -- in the year 2021.

All right. We also said that we thought in '22 and '23 that we have about 1.5 million barrels of production increase across the United States. So if you -- and -- and it's hard to say is that going to happen in '22 or is it going to happen in '23. Of course, it's very difficult.

But if you -- if you add that all -- all up, that's 1.8 million barrels a day of incremental crude over a three-year period with it very much loaded in '22 and '23. That's a pretty good run rate, and it's very much dominated by the Permian Basin. And, Brent, I'll ask you how you think the privates are faring and how they're contracted. 

Brent Secrest -- Executive Vice President and Chief Commercial Officer

From our side, we've -- we've seen these guys very active. At this point, really, it comes down to geography and where your assets are. I'd venture to guess we've done more deals with privates in the last nine months than we've probably did over the last nine years. They're not big capital projects but they fill up pipelines that pass through.

They fill up processing capacity on the crude side. There's some production that's close to our lines. We could do some gathering deals with them. But they're -- they're -- and so a lot of stuff is acreage dedication, but we feel very good about their activity and where that's going to end up.

Christine Cho -- Barclays -- Analyst

Got it. That's really helpful. And then, you know, earlier this year, you guys mentioned that you still expect to -- expect to capture 500 million to 600 million of margin from outside spread opportunities and marketing. With the first quarter out of the way and I think to Jeremy's question, you said, you know, 250 million from weather impact.

Is that -- is the 500 million to 600 million still something you're comfortable with and where should we expect the remainder to come from in the remaining quarters?

Jim Teague -- Director and Co-Chief Executive Officer

I'll start and I'll let somebody else jump, and this is Jim. I know I'm not comfortable with 500 million or 600 million. I think we might be approaching that now. So I think it could likely be a little more than that.

What do you think, Randy?

Randy Fowler -- Director, Co-Chief Executive Officer, and Chief Financial Officer

Yeah, Christine, because a little bit, I -- I go back to something Jim said. Really, I believe you said it on our fourth quarter call of 2020 and our fourth quarter call of 2019 that, you know, over the last few years, we've, you know, what we call outsized spreads have range $500 million to $800 million. And I think his comment was we seem to always find a way to come in and capture opportunity. And, you know, the way this year is -- is shaping up and -- and what we -- what we see, I think we may get to that, be back in that same range again this year as well.

Christine Cho -- Barclays -- Analyst

Great. Thank you. 

Operator

Thank you. Your next question is from Jean Ann Salisbury of Bernstein.

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

Hi. Good morning. You are at 100% frac utilization at the end of last year. Should we expect another frac [Inaudible] pretty soon? 

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Jean Ann, this is Brent. I'd -- that's not in our plans. 

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

All right. You guys have a way to send it to third-party frac or something I guess if you go over your -- your capacity?

Brent Secrest -- Executive Vice President and Chief Commercial Officer

I think if we look at our system and how we optimize our system and what the variable costs are for us to go access additional capacity, the economics are hard to justify for a new frac for Enterprise.

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

Got it. And I think you all recently estimated getting approval for the spot terminal in the third quarter of this year. Would you need to see some of the rebound, I think, that Tony just talked about in a previous question? Like what do you need to see volumes to start going up to continue to pursue that or you're happy with the project as it is and as soon as you get the approval you wouldn't need to see the rebound first?

Jim Teague -- Director and Co-Chief Executive Officer

This is Jim. I think we're happy with where it is. We're also in discussions with some other companies as to coming in as joint venture partners and it wouldn't surprise me if we didn't do that.

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

Great. That's all for me. Thank you.

Operator

Thank you. Your next question is from Tristan Richardson of Truist Securities.

Tristan Richardson -- Truist Securities -- Analyst

Hi, good morning, guys. I just looked at the production commentary Tony and Brent discussed in the downstream demand recovery you're seeing. Does this put us on a path for a stronger 2022 even despite sort of the nonrecurring margin capture we saw in the first quarter?

Jim Teague -- Director and Co-Chief Executive Officer

Yeah. I'll start off. Yes, I think we're pretty bullish. I mean, I think he said it best.

We've always had debates between Tony and I have always been more bullish than he is. And you know, it's nonrecurring or whatever we call it. And Randy just said it, when you do it every year, why is it nonrecurring? It just happens somewhere else. It's not gas marketing it's NGL marketing, it's not contango as backwardation.

We seem to -- we have a footprint that lends itself to when there are issues, we have opportunities.

Tristan Richardson -- Truist Securities -- Analyst

That's helpful. And then, you've talked about some of the carbon capture hydrogen renewable gas opportunities. Should we think of the $1.5 billion to $2 billion of high-level sort of annual spend as including some of these more energy-evolution-oriented projects or technologies or what a project that comes in under that sort of umbrella be incremental to that annual number?

Jim Teague -- Director and Co-Chief Executive Officer

I think the annual number is all-inclusive.

Tristan Richardson -- Truist Securities -- Analyst

Thank you, guys. Appreciate it.

Operator

Thank you. Your next question is from Shneur Gershuni of UBS.

Shneur Gershuni -- UBS -- Analyst

Hi, good morning, everyone. You know, Jim, it was very good to hear about the initiatives that you're embarking upon and Angie's new responsibilities. Maybe a follow-up to Tristan's question here. So when I'm sort of thinking about Enterprise in terms of FID being capex, you have 800 million FID for 2022 and you gave $1.5 billion to $2 billion longer-term number.

If I understood Tristan's question correctly, some of that may include some of these evolutionary opportunities. Could we assume that's going to be the case for the '22 calendar year? How far down the path are we in terms of Angie's new responsibilities? Are there any technologies in particular that, you know, are in the later innings that would get us closer to FID as to whether it's hydrogen or whether it's carbon capture? I'm just wondering if you can give us a little color on that.

Graham Bacon -- Executive Vice President and Chief Operating Officer

Hi, this is Graham. We're still identifying what those projects are.  Always our first opportunity is to really take the low-hanging fruit and utilize existing assets and minimize the capital and get a big bang for the buck with the assets that we have. Over the long term, we will develop probably more extensive projects as the technology improves and becomes economical. So at this point, we're really looking how do we capture the biggest benefit with the assets that we have.

Jim Teague -- Director and Co-Chief Executive Officer

You know, we produce how much hydrogen, Graham, 150 million?

Graham Bacon -- Executive Vice President and Chief Operating Officer

One hundred fifty million.

Jim Teague -- Director and Co-Chief Executive Officer

One hundred fifty million a day. So if we use 40 million, 50 million a day, something like that?

Graham Bacon -- Executive Vice President and Chief Operating Officer

Yeah. We're looking to use more of that. We're looking at technology that allows us to reuse that a lot more of that at our Mont Belvieu facility. It's a big bang for the buck on emissions but it doesn't cost us a lot of capital.

And those are the type of projects that we're really trying to move forward with as quickly as possible.

Jim Teague -- Director and Co-Chief Executive Officer

So that we can optimize what we have within our own system and then ready to evolve to see what other commercial opportunities might evolve from that carbon capture. If we can sequester our own carbon then what other opportunities evolved from that. We're not going to announce the CO2 pipeline out of the Permian today, but who knows down the road.

Shneur Gershuni -- UBS -- Analyst

Now, that makes further -- it makes a lot of sense. Appreciate the color there. And maybe just kind of a follow-up on Tony of your current existing business. You know I was wondering if we -- and I'm not sure if this is a Jim or Tony question here but if can we talk about the kind of where you see the direction for hydrocarbons right now.

We have upstream companies that are looking to be disciplined, you know, with respect to growth so kind of more muted. At the same time, you know, you have changed in consumption patterns whether it's energy transition or whether it's just, you know, communities close to the pandemic. You know is export the path that you see forward despite giving Enterprise an opportunity to kind of optimize your asset footprint where you move crude to spot, add more LPG in ethane export capacity in the channel?  Do you consider exporting refined products? I was just wondering if you can open on that if you can.

Brent Secrest -- Executive Vice President and Chief Commercial Officer

I'll take it. You know the forecast of energy economists of late, many of them -- a large portion of them are showing that the U.S. be back, I mean, that the world may be back to 100 million barrels by the end of 2021. And you see in diesel consumption, just because of the amount of money there is and pent-up demand and now you're seeing it in gasoline.

The comment Jim made in his script, glad to hear him say that because that is the case around this town. While downtown is somewhat sparse, it's amazing and the traffic levels -- there are no cars on the car lots for sale around Houston. I mean, there are some but there's a tremendous shortage. People have money.

I don't know if you've noticed but the savings rate in the United States has doubled. Those are meaningful stats. So then we look at the news, we see what's going on in India, which is you know not real positive for India. But look, at the end of the day, the U.S.

and others are pitching in to get vaccines to India. Europe is going to catch up. We just look at the world and we look at the change in GDP from 2020 to 2021 and the potential for 2022. There's no way to deny the numbers.

They're very meaningful. So do I think that hydrocarbon demand in the world that we're going to see all-time highs probably in 2022 could well happen? I'll say, I'd be surprised if it didn't. Randy, do you feel differently?

Randy Fowler -- Director, Co-Chief Executive Officer, and Chief Financial Officer

Yeah. You know a little bit would come in and, you know, again, the little bit of the thing that we talk about is you still have 3 billion people, almost 40% of the world living in energy poverty. Meaning, you know, cooking with not having access to clean cooking. So either, you know, cooking with charcoal or cooking with wood and leading to 4 million or 5 million deaths a year within home pollution.

So you know, there's still a huge need just to improve human life and I think we've seen it over the last 100 years that nothing has improved human life better than the products that come from natural gas and oil production. 

Graham Bacon -- Executive Vice President and Chief Operating Officer

And I think relative to exports -- I'm gonna start a little bit and I'm going to hand over the Brent. But where do you think, and let's think long-term in that regard, where you think the U.S. is going to go as far as electric vehicles and hybrids? You know certainly, we're going to have more of and we're going to have efficiency standards on our gasoline. We're going to do more from an industrial standpoint here but I don't talk to as many foreign customers as Brent does, but the message is always the same.

We see them -- we see margin calls we're seeing them in person now and they want to know that we believe that U.S. producer is in it to win it long term.

Brent Secrest -- Executive Vice President and Chief Commercial Officer

I think that's the question. I mean, do you believe that the U.S. is going to increase production on crude NGL, and is there economics for them to do that? And then at that point, if you believe that, you believe demand here in this country is staying flat to declining then what's the most efficient and effective way to get to the water? When you look at the projects that we have that we've talked about in the past, you guys talk about the spot and that's the most efficient way to get crude oil to the water. There are some contractual issues that exist right now but those will go away.

And that project is more strategic to our upstream system and that's why we like it. On the NGL side, we still believe in NGL production and frankly, has to price to export. So there are different ways that once these things happen that we can optimize the system.

Shneur Gershuni -- UBS -- Analyst

Great. Perfect. I really appreciate the expanded discussion. Thank you very much.

That's all for me today.

Operator

Thank you. The next question is from Michael Blum of Wells Fargo.

Michael Blum -- Wells Fargo Securities -- Analyst

Thanks. Good morning, everyone. Just maybe stay on the exports for a minute. I'm wondering if there's any kind of real-time look into what you're seeing in terms of LPG export demand in light of the surging COVID cases in India?

Jim Teague -- Director and Co-Chief Executive Officer

With the export?

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Yeah, with this month is --

Jim Teague -- Director and Co-Chief Executive Officer

Fifteen, 16 million-plus?

Brent Secrest -- Executive Vice President and Chief Commercial Officer

It's around there. So it's not what you saw as a branch, not what you saw in the fourth quarter and there's some balancing going on right now. I don't know if it's much, it's like a -- the demand there is long term. But if you look at just what prices have done on propane, the first quarter '20 it was $0.37, fourth quarter it was $0.57, first quarter '21 it was $0.90.

So you know, the market has worked and you saw the backwardation in some of the LPG markets. And so I think, you saw some deferrals or, yes, some cancellations. And then ultimately, this is how this is going to balance until production, starts doing what Tony has talked about in the past. So we've seen some drop-off in India but certainly, China has been able to step up and help fill that gap.

Michael Blum -- Wells Fargo Securities -- Analyst

Got it. My second question really relates to pipeline capacity rationalization. You talked a bit about that at your Analyst Day and I'm wondering if you could tell us are there any discussions going on behind the scenes within the industry to make this happen or do you think it's just something that's going to be very difficult because you're just too many hurdles to actually achieving it yourselves or for the industry?

Jim Teague -- Director and Co-Chief Executive Officer

You're talking about repurposing pipelines, Michael?

Michael Blum -- Wells Fargo Securities -- Analyst

Pipeline rationalization however it could get done. 

Jim Teague -- Director and Co-Chief Executive Officer

You have -- you are referring to some of Brent's comments with the last earnings call.

Michael Blum -- Wells Fargo Securities -- Analyst

Correct. 

Jim Teague -- Director and Co-Chief Executive Officer

Yeah, I hesitate to have Brent speak for himself. We're looking at repurposing for sure. And I think you'll see more of that. What Brent was saying last quarter is -- if you say it, Brent, you don't -- there are some of these guys that are going to have problems.

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Maybe if you look at pipelines that don't have a contract, you know, somebody asked about CO2 being repurposed. I mean, that looks like a good project if you don't have contracts and you're exposed to an -- or from -- from a market to another market that's -- that's fairly flat. All the Permian capacity is very competitive regardless of the commodity. And, you know, no different than other companies, enterprise tries to figure out the most efficient ways to move NGLs and crude oil in our system.

And, you know, we have -- we have a similar pipeline that's in crude service and we have an NGL pipeline that, frankly, we only own two-thirds of. So, there's different ways that we can, as enterprise, try to rationalize and optimize our capacity to the benefit of enterprise. As far as the others, I assume they're doing the same thing.

Jim Teague -- Director and Co-Chief Executive Officer

Which is great -- 

Michael Blum -- Wells Fargo Securities -- Analyst

OK. Thank you.

Jim Teague -- Director and Co-Chief Executive Officer

Contracts on crude oil go out to 28%.

Randy Fowler -- Director, Co-Chief Executive Officer, and Chief Financial Officer

We are glad our contracts go out, yeah.

Operator

Thank you. Our next question is from Keith Stanley of Wolfe Research.

Keith Stanley -- Wolfe Research -- Analyst

Hi, good morning. I want to ask on capital allocation and Randy you said, again, that you wanted flexibility on redeploying free cash flow early in the year, and highlighted just the uncertainty on federal policies, including I think you said tax policies. Can you just elaborate on what you're mainly focused on in the new administration's infrastructure and related tax plan, or any other potential policy changes you're focused on for -- for capital allocation?

Randy Fowler -- Director, Co-Chief Executive Officer, and Chief Financial Officer

Yeah. Keith, you know, when you -- when you come in and you look at what's been introduced thus far this year and -- and you -- all those things you barely look at the newspaper every day to keep in touch, you know, in the last 100 years, there's really been three big moves in tax policy and that was the New Deal, it was the Reagan-era tax policy, and now as we emerge into the Biden era, this is like the third -- third major tax swing that we've seen in 100 years. You know, and so, I think we're paying attention to see, you know, which of these proposals actually make it into the legislation and then actually get passed. And I think we'll be a lot smarter three months, six months from now than we are today.

And we think it's just responsible to, you know, let's come in and focus on financial flexibility and -- and -- and again, we'll be a lot smarter here in three to six months.

Keith Stanley -- Wolfe Research -- Analyst

OK. I guess I'm just curious like from a tat being an MLP, just how you're thinking -- are you thinking the tax policy changes could affect you directly? Or just any further thoughts on the tax piece of that.

Randy Fowler -- Director, Co-Chief Executive Officer, and Chief Financial Officer

Yeah, Keith. And honestly, we've got a 180 of possibilities out there. You know, you've got this Finance our Energy Future Act which has bipartisan legislation that's been introduced on the House and the Senate that is actually taking ML -- the existing MLP tax law and really expanding the scope of it to bring in new activities as qualified earnings, such as handling some of this green or blue hydrogen coming in and being able to get into renewables, whether it's wind or solar, and some of these other activities. So, I actually would be broadening the scope of what qualifies as earnings for an MLP.

On the other side of the equation, you -- you know, there's been a proposal that came out of Senate Finance Committee, it is not bipartisan, it is partisan. And I think it's actually legislation that's been introduced at least a couple of times before and -- but it never went anywhere. And with that one, it would come in and take, you know, business activities that handle fossil fuels. So, what we do today -- and you would no longer be qualified for pass-through treatment and you would be taxed as a sea corp.

So, really there's, you know, the -- the range of possibilities is 180 degrees in here and, you know, I think we'll be spending a good bit of time up and in D.C. You know, some of the legislation is just sort of counter to what some of the objectives that you hear are where -- whether the, again, this coming in and -- and taking traditional MLPs and then making them subject to taxation. So, it goes counter to what we're trying to do with that Finance our Energy Future Act is sort of counter to that. It's sort of counter to the Infrastructure Bill too that, you know, you're out here, you know, with a -- with a package trying to promote infrastructure but it seems like it's counter to infrastructure.

And finally, the last thing, it seems like it might be a counter too as this whole pivot to Asia, one of the reasons we've been able to, as a country, I think, are able to pivot to Asia is the energy security that the United States has and that we're not reliant on the Middle East. So, some of them -- some of what we're seeing out there on the tax front is there seems to be some inconsistency on some of the proposals. But I think this will be an active year in D.C.

Keith Stanley -- Wolfe Research -- Analyst

Thank you. That's -- that's very helpful color. Second question just -- I guess, it's kind of summing up some of the earlier questions. But -- but last quarter, you guys for the first time indicated 2021 EBITDA to be kind of flattish versus 2020.

You had a pretty good Q1 with some strong benefits and you've pretty positive tone on the macro environment and on marketing potential and differentials for this year. Is it fair to assume '21 EBITDA at this point is now -- now tracking better than 2020 or just any rough sense how to think about the year?

Randy Fowler -- Director, Co-Chief Executive Officer, and Chief Financial Officer

Yeah, Keith. Really, I think we'll just stick with our guidance. We'll let you guys model it up. You know, we don't provide formal guidance, not really looking to start on this call.

But you -- you do a great job as well with some of your peers. So, we'll pass on that.

Keith Stanley -- Wolfe Research -- Analyst

OK. Thank you.

Operator

Thank you. Your next question is from Michael Lapides of Goldman Sachs.

Michael Lapides -- Goldman Sachs -- Analyst

Hey, guys. Thanks for taking my question. It's actually a little bit of a follow-on on thinking about D.C. and legislation.

Just curious, I mean, Congress was pretty divided. Few people think a 28% tax rate happens. Most think it's a -- it's a lower number than that. But it's also -- we're 18 months out from the next election and a very divided Congress.

How long do you wait, right? Like we may have uncertainty for a long time. Legislation is hard. When you're thinking about capital allocation, at what point do you say, you know, we start ramping the process because to be blunt, D.C., you know, D.C. may take some time.

Randy Fowler -- Director, Co-Chief Executive Officer, and Chief Financial Officer

Yeah. I hear you on -- on that but it seems like this is a -- let's just say this is a noteworthy Congress and a noteworthy time. And, you know, I -- we've got the luxury that we can come in and -- I'll see -- I think if we come in and we see, you know, good capital projects, we're going to allocate our capital there. But to come in and say anything beyond that, I think we'd like to see what -- see what tax policy looks like.

So -- and again, I think in three to six months, we'll be a lot smarter.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. OK. And then one last question. Just curious, if you move forward with spot, how should we think -- I mean, given the fact -- I don't know, we're -- we're exporting as a nation what, 2.5 million to 3.5 million barrels a day just depending, you know, what week we are looking at, and we have a lot more capacity than what we're actually exporting.

How do you think that ripples through the broader supply and-demand matrix for those who -- for existing export facilities including some of your own? 

Randy Fowler -- Director, Co-Chief Executive Officer, and Chief Financial Officer

I think that contracts matter. That's going to take some time, but, you know, that project has a long runway. But -- I mean, there's no question that crude export capacity is overbuilt, but I do think it will do at the most efficient way, it'll do at the most economical way. And frankly, when you look at who's producing crude oil now and it's more -- it's larger-type companies, at the end of the day, I do believe they want to deal with larger companies on the service side and they do want to do it the most efficient way.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. Thank you, guys. Much appreciated.

Operator

Thank you. Our next question is from Michael Cusimano of Heikkinen Energy.

Michael Cusimano -- Heikkinen Energy -- Analyst

Hey, good morning. I wanted to first talk about the propylene business. Propylene from frac seems to be doing really well. Can you just maybe talk about your expectations for that business for the rest of the year and maybe your -- your outlooks on -- on spreads also for the rest of 2021?

Jim Teague -- Director and Co-Chief Executive Officer

Christy, I'll take it. Sure, yeah. The -- the out -- outside spreads that we've seen over the last several months really a result of the hurricanes and the winter freeze. So, we think things are going to normalize here.

But we're bullish overall. The need for primary petrochemicals and it -- it goes the same story as LPG. Just the improving quality of life around the world.

Michael Cusimano -- Heikkinen Energy -- Analyst

Got it. OK. And then as a follow-up, I want to talk about that $1.6 billion capex number. Is there anything you're looking at for 2021 that can move that higher, or any -- any risk to that number?

Jim Teague -- Director and Co-Chief Executive Officer

It's Jim. I don't think so.

Michael Cusimano -- Heikkinen Energy -- Analyst

OK. Perfect. Well, thank you all. Appreciate it.

Operator

Thank you. Our next question is from Christine Cho of Barclays.

Christine Cho -- Barclays -- Analyst

Hi. I just had a follow-up on the response to one of your earlier questions. You mentioned the possibility of repurposing a pipe this year to service, but I was under the impression that this is pretty difficult to do with the liquids pipeline and may be possible with a gas pipeline since the CO2 pipelines require, you know, separate pipelines and a lot more compression. So, curious as to your thoughts here on how capital-intensive that you can -- version could be.

Jim Teague -- Director and Co-Chief Executive Officer

Yeah, Christine. We're just using it as an example. We -- we agree with you. I think, Graham, it's -- 

Graham Bacon -- Executive Vice President and Chief Operating Officer

The -- the pipelines come in all shapes and forms, and some are suitable for conversion to CO2, and some are -- and we have some that are --

Jim Teague -- Director and Co-Chief Executive Officer

Christine, we're -- we're that's, you know, we're not making any announcements.

Christine Cho -- Barclays -- Analyst

Right. Right. I just was curious as to, you know, how that would work in actuality. But, OK.

Great. Thanks.

Randy Fowler -- Director, Co-Chief Executive Officer, and Chief Financial Officer

Christy, this is Randy. If there's no other questions, I think we can go and give our listeners the playback information. And then also, I wanted to thank everyone for joining us today, and have a good day. Thank you.

Operator

And ladies and gentlemen, to access a replay of today's call you may dial 800-585-8367 and reference ID number 306-8988. Again, that number is 800-585-8367 and reference ID number 306-8988. [Operator signoff]

Duration: 51 minutes

Call participants:

Randy Burkhalter -- Vice President of Investor Relations

Jim Teague -- Director and Co-Chief Executive Officer

Randy Fowler -- Director, Co-Chief Executive Officer, and Chief Financial Officer

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

Chris D'Anna -- Senior Vice President, Petrochemicals

Graham Bacon -- Executive Vice President and Chief Operating Officer

Christine Cho -- Barclays -- Analyst

Tony Chovanec -- Senior Vice President

Brent Secrest -- Executive Vice President and Chief Commercial Officer

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

Tristan Richardson -- Truist Securities -- Analyst

Shneur Gershuni -- UBS -- Analyst

Michael Blum -- Wells Fargo Securities -- Analyst

Keith Stanley -- Wolfe Research -- Analyst

Michael Lapides -- Goldman Sachs -- Analyst

Michael Cusimano -- Heikkinen Energy -- Analyst

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