Enterprise Products Partners (EPD) Q2 2022 Earnings Call Transcript

Enterprise Products Partners (EPD 0.03%)
Q2 2022 Earnings Call
Aug 03, 2022, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Enterprise Products Partners second quarter 2022 conference call. [Operator instructions] Please be advised that today's conference is being recorded. And now I would now like to hand the conference over to your speaker today, Randy Burkhalter, vice president, investor relations.

Please go ahead.

Randy Burkhalter -- Vice President, Investor Relations

Thank you, Victor. Good morning, everyone, 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 for this 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, via the 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 ultimately be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. And with that, I'll turn the call over to Jim.

Jim Teague -- Director and Co-Chief Executive Officer

Thank you, Randy. Today, we reported record adjusted EBITDA of $2.4 billion for the second quarter, and that was driven primarily by higher margins in our octane enhancement business, higher natural gas processing margins and contributions from the Midland Basin assets we recently acquired. Those assets continue to significantly exceed our expectations. We generated a record $2 billion of DCF, excluding proceeds from asset sales, providing 1.9 times coverage.

We retained $974 million of DCF for the quarter, taking us to $1.8 billion for the first six months. We achieved 11 financial records and four operating records and more details outlined in the press release. In short, it was a good quarter. In this environment, we're not having any trouble keeping our systems full.

Our Permian processing plants are running at capacity. We have two processing plants under construction, one in the Delaware, one in the Midland, and we've approved two more, one in each of those basins. When this build-out is complete, we'll have 15 processing plants in the Permian, producing 530,000 barrels a day of liquids, which will take us to 36 processing plants as a company, producing over 900,000 barrels a day. We also recently approved a project that expands our Shin Oak NGL pipeline by 275,000 barrels a day, and this is done through partial looping.

We now have powerful options as it relates to takeaway for NGLs out of the Permian. We can close those loops to gain a lot of capacity or we can put Seminole back into NGL service or we can do both. These projects do not change the capex guidance that we have communicated in the past. As we announced at analyst day, we're also expanding our systems in the Haynesville over and above the Gillis Lateral we put into service last year.

Our 2.5 Bcf a day Haynesville system is unique. It not only reaches into the supply area, but it ties into interstate and LNG quarters but it's quarters, but it also reaches into the lucrative Mississippi River Industrial Corridor, which is hungry for gas. We have significant operations in key basins that consistently represents 65% to 75% of the rigs running in the U.S. We've always focused not just on supply but also markets.

Today, we export 2 million barrels a day of crude oil, NGLs, refined products and petrochemicals. We started building this export position over 25 years ago. And the leader of the negotiating team when we did that was the lady named Randa Duncan. That trend continues with the major export expansions we have underway for both ethane and ethylene.

In addition, this last Friday, our spot project reached an important milestone with the FEIS for the terminal put in the federal registry. I think it was in the Wall Street Journal I read that the past three years, we've gone from pandemic to pandemonium. When Russia invaded Ukraine in late February, no one was really surprised. Instead, the surprise to most is that the conflict looks like it's going to last a while.

The other surprise to most is the magnitude of the impact this war is having on both energy and agriculture. We're all coming to grips with the fact that many things we took for granted have changed. We have suddenly realized that what a just-in-time world we live in and how quickly prices shoot up when something breaks. We're also learnings for some of us relearning about inflation, how strong and insidious it is.

Most of our young people have never experienced inflation. Energy is reportedly responsible for over 50% of inflation as it is involved in every aspect of our lives. Add to that, the high cost of food and the increasing cost of housing. U.S.

energy independence is now more valuable than ever. It is clear that Russia has a stranglehold on Europe, and Russia and China appear to be aligned in policies that are in direct conflict with Western values. Fortunately, the U.S. has an abundant energy resource.

It is a fact that our crude oil, NGLs and LNG cargoes are the only short-cycle resources the world has left. We have tremendous hydrocarbons potential, but unfortunately, it is squandered in the current political climate that is intent on restricting its development. Appalachia alone has over 25 Bcf a day of production upside. That's more than what Europe imports from Russia.

However, this potential is unattainable, not by economics or resource, but by massive amounts of laws and regulations that are vague at best and consistently applied and consistently. In addition to being the only short-cycle resource the world has, our energy is environmentally superior. It's much cleaner because it comes from Shell and is produced here in the U.S. under environmental and safety standards that are second to none.

It's not an oil and gas versus renewable debate as so many make it out to be. Enterprise's view has always been, and we are absolutely going to need it all and what most call energy transition is actually going to be badly needed energy additions that will take place gradually. Oil and gas will be in high demand for decades. People who say otherwise are either extremely naive or have their own agenda.

Demonizing fossil fuels over restrictions on investments and massive layers of regulation that are designed to keep it in the ground will only create chaos in the form of ever-increasing shortages and high prices. We need to learn from the mistakes of our friends in Europe and avoid risky dependence on unreliable or unfriendly suppliers for our oil and gas or for the materials and equipment needed for cleaner energy. Randy will go into this more, but the proposed mentioned legislation is not everything the oil and gas community wanted, but the same will be said by the green movement. It appears to try to strike a balance between clean energy incentives and recognition that continued development of fossil fuels is needed to ensure energy security and energy reliability.

Randy?

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

All right. Thank you, Jim. Good morning. Starting with second quarter income statement items.

Net income attributable to common unitholders for the second quarter of 2022 was a record $1.4 billion or $0.64 per unit on a fully diluted basis. This compares to $1.1 billion or $0.50 per common unit for the second quarter of last year. Turning to cash flows. Adjusted cash flow from operations, which is cash flow from operations before changes in working capital, was $2.1 billion for the second quarter.

This is a 23% increase compared to $1.7 billion generated for the second quarter of last year. Moving on to distributions and buybacks. We declared a distribution of $0.475 per common unit with respect to the second quarter of 2022. This is 5.6% higher than the distribution that we declared for the second quarter of last year.

This distribution will be paid next week on August 12 to common unitholders of record as of the close of business on July 29. During the quarter, we also repurchased approximately 1.4 million common units at a cost of $35 million. For the 12 months ended June 30, we returned over $4 billion of distributions to limited partners and $235 million of buybacks. So for the last 12 months, our payout ratio compared to adjusted cash flow from operations was 56%, and our payout ratio of adjusted free cash flow after excluding the acquisition, the $3.2 billion acquisition of Navitas Midstream, was a payout ratio of 72%.

Turning to capital investments. Total capital investments for the quarter were $383 million, which includes $301 million of organic growth projects and $82 million of sustaining capital expenditures. Capital investments for the first six months of the year were $3.9 billion, which includes $3.2 billion for the Navitas acquisition, $576 million invested in growth capital projects and $157 million for sustaining capital. As Jim detailed earlier this morning, we announced three new projects in the Permian Basin, two new 300 million cubic feet a day natural gas processing plants and a 275,000 barrel a day expansion of our NGL pipeline system.

With these projects, we now expect 2022 growth capital investments to be approximately $1.6 billion and sustaining capital expenditures to be approximately $350 million. For 2023, we currently expect that our growth capital spending will be $2 billion. Our total debt principal outstanding at the end of the quarter was $29.1 billion. Assuming the final maturity date for the hybrids, the average life of our debt portfolio is approximately 21 years.

Our weighted average cost of debt is 4.4%. And at June 30, approximately 97% of our debt was fixed rate. Our consolidated liquidity at the end of the quarter was $4.1 billion, and this includes availability under our credit facilities and $231 million of unrestricted cash on hand. Adjusted EBITDA was $8.8 billion for the 12 months ended June 30, 2022, which net yields a consolidated leverage ratio of 3.1 times after adjusting debt for the partial equity credit treatment of our hybrid debt and also reduced by the partnership's unrestricted cash on hand.

On August 1, we provided notice of our intention to redeem $350 million of the $700 million of junior subordinated notes D with a redemption date of August 31, 2022. These hybrid notes that were originally issued in August 2017 are redeemable on or after August 16. These notes have a fixed rate coupon of 4.875% for the first five years and then become floating at LIBOR plus, call it, 3% beginning August 16. Based on current floating rates, the indicative spot floating rate for this note will now jump to 5.8%, making these notes one of our highest cost debt issues and really our only issue that is redeemable without a premium.

Given the forecast that the fed will increase floating rates by at least another 1% or more, we elected to redeem half of this issuance now using cash on hand and commercial paper to fund the redemption. Considering these notes received 50% equity credit from the rating agencies and Lowell redeeming the entire $700 million of the notes, we decided to redeem half of the notes at this time. And in addition, we plan to opportunistically buy back up to $300 million of EPD common units over the remainder of the year. Our common units are a more expensive cost of equity versus the cost of the equity embedded in the hybrids.

In regard to the proposed Inflation Reduction Act, overall, we have received positive feedback from our customers, especially with regard to the availability of federal leases for oil and gas drilling. Further, in our efforts to commercialize a carbon sequestration system with Oxy, we believe the proposed changes to the 45Q credits could be a game changer for post-combustion emitting customers. It was harder to come in or more of a challenge to come in and commercialize the carbon sequestration projects and attract these customers when the existing 45Q program was only paying $50 per metric ton and had no direct pay options. With that, Randy, I think we can open it up for questions.

Randy Burkhalter -- Vice President, Investor Relations

OK. Thank you, Randy. Victor, we're ready to take questions from our participants.

Questions & Answers:

Operator

Sounds good. [Operator instructions] Our first question comes from the line of Jeremy Tonet from J.P. Morgan. Your line is open.

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

Hi. Good morning.

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

Good morning.

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

Just want to pick up maybe on that last bit there with regards to carbon capture and 45Q, if the bill comes through as advertised lifting it to -- lifting it higher there. Just curious, what type of time line do you think things could happen? Could things be developed? Would this happen in Louisiana before Texas, given Louisiana peers on the verge of gaining classics well primacy by the end of the year? Just trying to scope out what this opportunity set could look like for enterprise over time.

Carrie Weaver -- Vice President, Commercial, Evolutionary Technology

Hi, Jeremy. This is Carrie Weaver. I don't think it matters whether it's Texas or Louisiana or announcement with Oxy in Texas. And I think the relationship and working with the EPA can bring a project to fruition at the same time line as in Louisiana, if they gain primacy.

And I think we have received very positive feedback from customers as we've been discussing the project with them and the complementary collaboration with Oxy. So our goal is to be ready to deploy the project as soon as they're ready, and we think this new legislation will be very encouraging to bring those decisions in those time lines sooner.

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

Got it. That's helpful there. And then just wanted to touch base real quick on the Quest for $9 billion of EBITDA. It seems like if you print quarters like this one, that should be pretty easy to attain, but just wondering any updated thoughts there?

Jim Teague -- Director and Co-Chief Executive Officer

I don't think it's easy to attain, Jeremy. We're just halfway through the year. And my role around here is to worry about everything. So I'm not high-fiving anybody at this point.

Operator

Thank you. Our next question come from the line of Brian Reynolds from UBS. Your line is open.

Brian Reynolds -- UBS -- Analyst

Good morning, everyone. Just to follow up on some of Jeremy's comments on CCUS project. EPD has a lot of opportunities in front of it in terms of large-scale projects, including CCUS, the potential for the cracker and then in addition, the spot export project, assuming regulatory certainty over the coming back half of the year. Assuming we get the Inflation Reduction Act pass as it stands, I was curious if management could just talk about how it's thinking about priority of projects and perhaps timing of pursuing some of these large-scale projects looking forward? Thanks.

Jim Teague -- Director and Co-Chief Executive Officer

First of all, we're not looking at building a cracker. You put a press release out that you're not looking at it. The next thing you know it's on the front page of the Houston Chronicle business section. Yes, we have gotten the FEIS for spot put in federal registry.

But we still got another comment period to go. And I'm looking for Bob. We've still got another comment period to go, what are we 60-plus thousand comments to date and another 90-day comment period or something like that?

Bob Sanders -- Executive Vice President, Asset Optimization

It's a 45-day comment period from last Friday. So it should be over by September 12. Last public meeting will be on August 23. And we're well in excess of 60,000 comments, Jim.

Jim Teague -- Director and Co-Chief Executive Officer

So once we get through this, God knows how many we'll have . Then you got to slip through those. So I think we've got it away -- if we get this thing by the end of the year, I think we'd be lucky. It depends on the environment at the time we get it and what kind of customer base we can get as to where it fits in the priority list.

Brian Reynolds -- UBS -- Analyst

Great. Appreciate the color. And then maybe just to pivot to capital allocation. You're looking to exit '22 and '23 well below the 3.5% target.

Given the distribution raise this quarter and the small buyback, just curious if you could provide some incremental color on how we should be thinking about preferences for return of capital as we head into the back half of '22 and into '23, also given just higher inflation, etc.?

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

Yes, Brian, really, our thoughts are still to come in and take of all of the above approach. And that's -- I think that's reflected by what we're doing on these call them these part of this hybrid note issue. I mean it's really -- it's not the highest coupon, but it's near the highest coupon debt we have but then the other side of it is we're looking to come in and buy back up to $325 million, $350 million of equity between now and the end of the year, too. So a balanced approach between buybacks and debt reduction.

I think the other thing, and -- yes, I think this was represented what we did in 2021 is we came in and retained cash and really have been self-sufficient in funding our growth capex. But the other thing we had coming into the year is we almost -- we had quite a bit of cash on hand and that enabled us to come in and fund a substantial amount of our acquisition of Navitas Midstream with cash and gave us the flexibility that the remainder that we could come in and just use commercial paper. So again, I think coming in and retaining cash for balance sheet flexibility paid off in how we came in and were able to capture opportunities that we didn't come in and stress the balance sheet by coming in and doing an acquisition. So I don't think you'll see much change for us.

You did see us come in also this time and bumped the distribution 5.6% compared to last year. So again, I think you still come in and see us taking an all of the above approach.

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

Great. I appreciate the commentary, and enjoy the rest of your day. Thanks.

Operator

Our next question will come from Theresa Chen from Barclays. Your line is open.

Theresa Chen -- Barclays -- Analyst

Good morning. Jim, I wanted to go back to your comments earlier about the need for incremental NGL takeaway out of the Permian and your FID'd expansion of Chinook today. Can you just help us understand the puts and takes as to the relative economics of the Chinook expansion versus putting Seminole back into NGL service? And for the looping on Chinook, do you have the permitting in place for multiple line of right of way? Or do you still have to get through some of that?

Jim Teague -- Director and Co-Chief Executive Officer

Well, Justin, do you want to take it or Randy, which one?

Randy Burkhalter -- Vice President, Investor Relations

Yes. I'll take it. So I think, to Jim's point, the expansion was -- is clearly supported by the growth in the Permian that we're seeing, supported by our G&P expansions. And I think what really drove the decision in this direction was just preserving that optionality of what we do with some of those repurposing options that we have.

There's a lot of production growth that we expect coming out of the basin in the next three to five years so that preserving that the value of a potential Seminole conversion for a later decision made -- drove us to make this decision.

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

This is Tony. I want to add something to that, Theresa. Between now and 2027 -- can you hear me?

Theresa Chen -- Barclays -- Analyst

Yes.

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

Between now and 2027, we estimate that liquids out of the Permian Basin to grow about 1 million barrels a day. If you look at what they've grown year to date, and you can't find these numbers in anything because EIA has reported May and any other commercial reporters that do it have only reported through April. We think NGLs have grown already 125,000 barrels a day. Natural gas is about 900, maybe even a little more.

Those are big numbers. But I'll have to tell you that you've heard on these calls before, it's what we're seeing on our systems. You're seeing it in the basis market in natural gas, and you're seeing it in our fracks, and you've seen it in our plants, which is the reason for this announcement this morning, the customer is backing all that. So getting to putting some numbers behind what Justin said, that's how we see it.

Theresa Chen -- Barclays -- Analyst

And maybe as a follow-up to that, Tony. In light of the Forward basis, for the Forward Waha basis, indicating that we may face a dire situation for residue gas takeaway to your point about incremental net gas growth. So if we do face that situation in the first half of 2023, can you remind us how much incremental ethane recovery you think is realistic out of the basin? And in general, how do you expect the industry to work through this?

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

Let's talk about basis first. If you've watched the basis or whether you watched it on ICE or through brokers, next summer has moved up to a minus $2. It wasn't long ago that that was minus $1, minus $1.20. So that tells you the pressure that the producer community is seeing from just incremental supplies.

Relative to ethane, somebody how much ethane we think is being rejected in the Permian. I don't think it's --

Brent Secrest -- Executive Vice President and Chief Commercial Officer

It's probably somewhere around 200,000, 250,000 barrels a day. It depends on the month, Permian.

Jim Teague -- Director and Co-Chief Executive Officer

Is that wider basis, which you extract ethane because it is a Btu.

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

Yes, sure, absolutely. You can do everything you can to get your gas out because you're protecting your oil barrels.

Brent Secrest -- Executive Vice President and Chief Commercial Officer

But then that creates a situation for NGL pipelines. And so that's how that market will balance.

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

Theresa, did that answer your question?

Theresa Chen -- Barclays -- Analyst

Thank you. Yes.

Operator

Our next question will come from the line of Colton Bean from TPHC. Go ahead. Your line is open.

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

Good morning. It looks like total spend increased by about $900 million or so between 2022 and '23. Is that solely attributable to the new processing in Chinook capacity? And then if so, are you seeing any material price pressures? Or alternatively, are you having to build more gathering relative to what was required for the previous round of plants?

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

Colton, I'll take the first part of that, and then I'll let Graham handle as far as what we're seeing as far as any cost creep on existing projects. But what we had said earlier was, call it, $1.5 billion or so of growth projects for 2023. And now we've seen that grow to about $2 billion, and that's really just reflective of some of these project announcements that we had this morning.

Graham Bacon -- Executive Vice President and Chief Operating Officer

In terms of -- on the project cost increases, we are seeing some increases, particularly in the latter half of the year. I think we were pretty solid earlier in the year. We've seen cost increases anywhere from 10% to 15% depending on the type of material used in the project. We are starting to see some softening in some markets, particularly steel seems to be turning around.

Although labor markets are going to still be strong and have some upward pressure on cost as we go forward into 2023.

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

And Graham, as far as budget and status of our largest project, PDH 2.

Graham Bacon -- Executive Vice President and Chief Operating Officer

Yes, as far as PDH 2, we're still on track, on time, on budget. All of our costs were effectively locked in at the time we did that project. So we don't really see any escalation on PDH 2.

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

Got it. And maybe, Randy, just to clarify on the approved project specifically for 2023 going from something that may be close to $1 billion up to maybe closer to $1.8 billion, $1.9 billion today. Is that accurate?

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

We were estimating -- I think we -- back at our Investor Day back in March, we said that our expectation was that the growth capex would be in the $1.5 billion to $2 billion area. And then again, some of that was going to move from -- there were projects under development. And now you're just coming in and seeing some of those projects being announced.

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

Understood. And maybe shifting over to frack margins, I think Q4 and Q1 had a pretty significant increase. It looks like you all reported nearly $0.05 a gallon. And then this quarter had a bit of a pullback closer to Q3 levels.

So I guess just moving forward, would you characterize Q2 as more indicative of what you're looking at in the back half of the year? Or could we see a bit of a rebound there?

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

Hey, Colton, are you really saying natural gas processing margins, is that what you're reporting.

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

Specifically on the -- now your fractionation fleet, I think you guys reported 201 or so for this quarter in fractionation specifically. And I think Q4 and Q1 had a pretty impressive margins there on a unit basis. So just looking at your unit margins for fractionation, specifically not frack spread on the processing side?

Jim Teague -- Director and Co-Chief Executive Officer

Who wants to take that?

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Zach, you want to take it?

Zach Strait -- Vice President, Unregulated NGL Commercial

Yes. This is Zach. I think on a go-forward basis for the remainder of this year, I think it looks more like this last quarter. A couple of things have happened.

Power costs have gone up and also the blending at the fracks is also compressed. I think Q4 and Q1 were higher than normal.

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

OK. And on the power side, is most of that pass-through or are you retaining some of that exposure on at the EPD level?

Zach Strait -- Vice President, Unregulated NGL Commercial

It's sort of a pass-through. We have a little bit of exposure to it and then just how much we have hedged relative to that exposure as well.

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

Got it. Appreciate it.

Operator

Thank you. Our next question comes from the line of Chase Mulvehill from Bank of America Securities. Your line is open.

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

Hey, I think this may have been me. Good morning, everybody. so I guess thinking about Navitas and the natural gas processing and NGL marketing business, obviously, you inherited a lot more commodity exposure when you acquired Navitas. So really, I guess maybe a couple of questions around this is really kind of one.

I don't know if you can kind of help us understand the commodity sensitivities within the natural gas processing and NGL marketing business? And then also talk a little bit about the Waha basis. I think somebody mentioned it earlier, but have you hedged that? Do you have a lot of risk around that? I mean -- so just kind of help us understand whatever risk you may or may not have if Waha basis does blow out at some point next year?

Jim Teague -- Director and Co-Chief Executive Officer

Chase, this is Jim. One of the reasons we bought Navitas is, frankly, we wanted that commodity exposure given our fairly bullish sentiment. And what was the other part of the question? I think the only place -- looking at --

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Waha basis, how much exposure do you have.

Jim Teague -- Director and Co-Chief Executive Officer

I think we probably have 300 million a day of exposure, and that's on purpose, and I don't think we've hedged any of that that I'm aware of. It's good.

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

OK. All right. un-related follow-up. There's a lot of talk on the call today about retiring debt.

And obviously, interest rates continue to move higher. So when we think about your targeted 3.5% leverage ratio, is there any chance that you think about lowering that at some point if interest rates continue to kind of rise over the next year or two?

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

Chase, I think we're -- at this point, we're still comfortable with the 3.5 times debt to EBITDA, plus or minus a quarter, either side, so 3.25% to 3.75%. I think one of the keys there is that, again, at the end of the quarter, 97% of that debt was fixed and the average life was 21 years. So our exposure to floating debt and increased interest costs are really, really low. We've been preparing for this environment for a dozen years.

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

OK, perfect. I'll turn it back over. Thanks, everybody.

Operator

Thank you. One moment for our next question. Our next question come from the line of Jean Ann Salisbury from Bernstein. Your line is open.

Jean Ann Salisbury -- AllianceBernstein -- Analyst

Hi. Good morning. I just have one. Year to date, Permian crude pipes to Corpus have been flowing at very high utilization, much higher than those going to Houston.

Can you comment on the drivers of this? And if you expect this to kind of stay around until the Houston Ship Channel has expanded or maybe spot starts?

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Hey, Jean Ann, this is Brent. I think there's been a lot more crude exports in Corpus, and I think that's starting to change. But it's a function of the pipeline capacity that's one of that direction, minus the local demand there and everything else is going to head to the water. They can load larger ships than us.

They can do it at higher rates. I think you've seen some flows change as Wink Webster has started up as more barrels are pointed toward Houston -- also pointed toward Houston. They're taken from some pipes in Corpus are taken from others. But ultimately, I think once spot goes forward, that will change the flow patterns for crude oil exports.

Jean Ann Salisbury -- AllianceBernstein -- Analyst

Great. Thanks. That's all for me.

Operator

Thank you. One moment for our next question. Our next question will come from the line of Neal Dingmann from Truist. Your line is open.

Unknown speaker -- Truist Securities -- Analyst

Good morning. This is Danny Pregno in for Neal Dingmann. First question, maybe it might be too simplistic, but why not just buy units back given the current roughly 7.13% yield versus your filing this morning suggesting the redemption of the notes that had a roughly 6% yield?

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

Yes. It's really just taking a balanced approach. I mean, we're coming in and the way we're thinking about it is we're redeeming $350 million of debt, and we're redeeming $350 million of common units. And coming in and redeeming $350 million of the hybrids is not a levering event where buying the units back is a levering event.

But again, it's just still all of the above balanced approach.

Unknown speaker -- Truist Securities -- Analyst

OK, great, great Thank you. That's all from me.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Michael Blum from Wells Fargo. Your line is open.

Michael Blum -- Wells Fargo Securities -- Analyst

Thank you. Good morning, everyone. I just wanted to just put a finer point on the discussion around the distribution. So clearly, if you look at the last, I think, at least two years, maybe longer, you've done one increase in the fourth quarter.

Obviously, this is sort of a new or out of pattern. So I just want to understand, is this a new pattern? Or is this a one-time event? Is it a step change in growth rate? Just want to make sure I understand that better.

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

Yes, I mean, Michael, the Board comes in and takes a look at the distribution rate every quarter. I want to say we went through a period, call it, 2017 to 2021 where we were -- or 2020, really, where we were coming in and trying to make a shift in a financial model. And the old model was where you finance a substantial amount of your growth capital expenditures in the capital markets with a pretty good reliance on the equity capital markets. And the pivot that we began to make in 2017 was to come in and be more self-sufficient and coming in and funding our growth capital investments.

And so that was -- we were more deliberate on distribution growth, and I think that's paid off. This year, I think -- one of the differences in this year, we've -- and then we work through the pandemic -- pandemic question mark. But the business has performed very well. We came in earlier this year and made an attractive acquisition and that we talked about that being accretive.

So that provided us an opportunity to come in and boost the -- do a midyear increase in the distribution. And in light of what was going on from an inflation standpoint, we thought it made sense to do a midyear boost. I don't know if this is necessarily going to change what we do going forward. But we take a look at it every quarter, but we thought it was appropriate this quarter to go ahead and do a midyear bump.

Michael Blum -- Wells Fargo Securities -- Analyst

OK, great. That makes sense. Also just one, I have kind of a macro question, Jim, in your opening comments, you referenced inflation, higher interest rates, higher commodity prices. My question is, are you seeing any signs of weakness in demand across your business segments due to these factors? I know that's kind of like an open-ended question, but I'm basically just kind of probing to see if we're seeing any signs of economic weakness that --

Jim Teague -- Director and Co-Chief Executive Officer

I was with some customer last night who has a number of convenience stores and his read is and I got more data on than you can say [inaudible] and his read and say he wasn't seeing that much -- he has seen some, but not that much at the service station, Tony?

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

Yes. If you look at the data, it's little bit in -- we were down a small amount, call it, 5%. But when you listen to the scope called , that was about 1 million barrels. But when you listen to the calls from somebody like Valero and PBF, they're definitive that their wholesale demand is great, not just reducible for gasoline, too.

So --

Jim Teague -- Director and Co-Chief Executive Officer

And it's reflected in the crack spread, isn't it?

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

It is kind of reflected in crack spread. You see some weakness in some of the olefins markets. Ethylene is overproduced now, and those plants are taking economic run cuts. You see PDHs going down in China.

But I will tell you the flip side to that for Enterprise and Brent, tell me if I'm wrong, but if we don't export ethylene, we're going to export ethane. The demand for our ethane terminal has been phenomenal.

Brent Secrest -- Executive Vice President and Chief Commercial Officer

Yes. We're seeing record numbers, especially this month, and I think what we'll see going forward. If you look across our ethane exports, we did a record number in July. If you look across our LPG dock, it is incredibly strong.

We talked about crude exports, but it's -- on the export docks, it's really picked up the last couple of months, Michael.

Jim Teague -- Director and Co-Chief Executive Officer

Also, this is Jim. Tony spoke to overproducing ethylene. That hurts the merchant player. The integrate is still making money ethane to polyethylene.

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

Michael, the world is short MMBtus and a good way for the world and because of the natural gas situation, a good way for them to get more MMBtus is in ethane, propane, and butane. So it's just the facts.

Michael Blum -- Wells Fargo Securities -- Analyst

Great. Thanks for all that. Appreciate it.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Keith Stanley from Wolfe Research. Your line is open.

Keith Stanley -- Wolfe Research -- Analyst

Hi. Good morning. I had two questions on the good results with the second quarter. First, on NGL marketing, it was up about $50 million Q2 versus Q1.

It's a pretty high number. I usually think NGL marketing is a little weaker seasonally in Q2. So anything in particular driving the strength in marketing there?

Jim Teague -- Director and Co-Chief Executive Officer

One of the things is a lot of what marketing does is fixed fee. All of the exports of, I think of LPG. Those contracts are held by marketing. And I'm not sure about ethane.

I think those are too. And I'm not sure about ethylene. Chris, is that true about marketing?

Chris Nelly -- Executive Vice President, Finance Sustainability and Treasurer

Large impact, Tim.

Brent Secrest -- Executive Vice President and Chief Commercial Officer

If you look at some of the structural things that were going on in the market between first quarter and second quarter, especially on the NGL side, that's why the second quarter was so strong.

Keith Stanley -- Wolfe Research -- Analyst

OK. And then similar question on processing. So obviously, a very strong Q2 number there. Headline frack spreads, which you usually look at for Enterprise were down in Q2.

So not sure if there's a lag effect there? Or is it just Navitas is more POP and you're just seeing so much strength there that's kind of overwhelming and bringing processing up?

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

Yes. Keith, I think part of it is we only had Navitas from February 22 or so in the first quarter. And then we got a full contribution from Navitas in the second quarter. But it does have a fee-based floor ballpark, I want to say, from a commodity exposure.

Again, it's got a fee-based floor, but we probably picked up an incremental 22,000 barrels a day of NGLs, another 3,000 or 4,000 barrels a day of condensate and probably 75 million, 80 million cubic feet a day of natural gas exposure. So that really provided some uplift.

Keith Stanley -- Wolfe Research -- Analyst

Got it. Thank you.

Randy Burkhalter -- Vice President, Investor Relations

Victor, we have time for one more question, please.

Operator

All right. Our last question, one moment. Our last question will come from the line of Yves Siegel from Siegel Asset Management. Your line is open.

Yves, your line is open. You might be on mute. All right. We'll go to the next person.

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

Michael Lapides -- Goldman Sachs -- Analyst

Hey, guys. Congrats on a good quarter, and thank you for taking my questions. Really a longer-term one. When I think about the asset portfolio of EPD, you are the big dominant player in crude and NGL exports.

One of the places where you're not really involved in is in the LNG business. Just curious, is that simply due to the fact that others moved much quicker than you guys did. Is that because you don't think it's an attractive business? Or is it just a valuation in call? Just curious about how you think about longer term, your role in kind of the export of natural gas in the U.S. or from the U.S.?

Jim Teague -- Director and Co-Chief Executive Officer

I think our role will be focused on crude, petrochemicals, and natural gas liquids. Remotely, I think we -- if anything, we've missed the boat on LNG.

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

Yes. And -- on the quicker part, I don't know about the quicker part. I think that was an election that we made. And if we sort of go back in the history books, it was really LNG imports, and we were not a believer in LNG imports.

And we just felt like the U.S. was going to have a good resource base and U.S. LNG would be the first one to turn off, as far as imports. And it was really the importers that really became the exporters when their import business model fell apart.

And they had first mover advantage to come in and convert to LNG exporters and then they were there because they already had some capital, and they already had some equipment. So it was very easy for them to come in and do conversion. So really, it was -- our not being involved in the LNG imports that to a degree, put us at a disadvantage compared to those incumbents.

Michael Lapides -- Goldman Sachs -- Analyst

Thank you, guys.

Jim Teague -- Director and Co-Chief Executive Officer

We are involved in delivering gas to export facilities, Gillis Lateral. And I think if I'm not mistaken, our expansion will be at the capability. We love our position exporting NGLs, crude oil and petrochemicals. And I said in my script, we're exporting just over 2 million barrels a day, that's not too bad.

Randy Burkhalter -- Vice President, Investor Relations

OK. Victor, we're ready to end the call. And so with that, the company will sign off and would like to thank everybody for joining us. And Victor, if you would give our participants the replay information.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Randy Burkhalter -- Vice President, 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

Carrie Weaver -- Vice President, Commercial, Evolutionary Technology

Brian Reynolds -- UBS -- Analyst

Bob Sanders -- Executive Vice President, Asset Optimization

Theresa Chen -- Barclays -- Analyst

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

Brent Secrest -- Executive Vice President and Chief Commercial Officer

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

Graham Bacon -- Executive Vice President and Chief Operating Officer

Zach Strait -- Vice President, Unregulated NGL Commercial

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

Jean Ann Salisbury -- AllianceBernstein -- Analyst

Unknown speaker -- Truist Securities -- Analyst

Michael Blum -- Wells Fargo Securities -- Analyst

Keith Stanley -- Wolfe Research -- Analyst

Chris Nelly -- Executive Vice President, Finance Sustainability and Treasurer

Michael Lapides -- Goldman Sachs -- Analyst

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