Enterprise Products Partners (EPD) Q4 2023 Earnings Call Transcript

Enterprise Products Partners (EPD 0.45%)
Q4 2023 Earnings Call
Feb 01, 2024, 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 Q4 2023 Enterprise Products Partners, L.P. earnings conference call. At this time, all participants are in a listen-only mode.

After the speakers' presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Randy Burkhalter, vice president of investor relations.

Randy Burkhalter -- Vice President, Investor Relations

Thank you, Josh. Good morning, everyone, and welcome to the Enterprise Products Partners conference call to discuss fourth-quarter '23 earnings. Our speakers today will be co-chief executive officers of Enterprise Products Partners, Jim Teague and Randy Fowler. Other members of our senior management team were also in attendance for the call.

During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 based on the beliefs of the company, as well as assumptions made by 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 with that, I'll turn it over to Jim.

Jim Teague -- Director and Co-Chief Executive Officer

Thank you, Randy. We generated $7.6 billion of distributable cash flow in 2023, providing 1.7 times coverage, and we retain $3.2 billion. We set nine financial records and 13 operating records in '23. Our '23 operating results included records in NGL pipeline transportation, ethane exports, total NGL marine terminal volumes, NGL fractionation volumes, fee-based natural gas processing volumes, and crude pipeline and natural gas transportation volumes.

In barrels of oil equivalent per day, Enterprise transported a record 12.2 million barrels a day in 2023 compared to 11.2 million barrels a day in 2022. During the fourth quarter, we transported 12.7 million barrels a day compared to 11.5 million barrels a day in the fourth quarter of 2022. We exported a record 2.3 million barrels a day of liquid hydrocarbons, and that includes everything from crude oil to LPG to ethane; refined products; and basic petrochemicals, ethane and propylene. When you look at our exports, it's clear that Enterprise is not a one-trick pony.

It's quite remarkable that volumes across all our pipes and facilities increased sequentially each quarter in 2023, supported by the strong supply and demand fundamentals for hydrocarbons from the Permian and other basins we serve integrated with the midstream services that we have, including exports that we just discussed. Relative to commodity markets, 2023 was a relatively weak year, especially for natural gas and natural gas liquids. Nonetheless, Enterprise proved once again that we don't need really high prices to make substantial returns. The financial records and 13 operating record summarized were achieved in a commodity price environment where natural gas prices were down almost 60% from '22, crude was down nearly 20%, propane was down 36%, ethane was down almost 50%, and the NGL processing basket was down 35%.

Relative to the several '23 records at our marine terminals, we have long said that hydrocarbons would price to export proven once again in '23, In growth capital, during '23, we completed construction of $3.5 billion of process -- projects. Significant assets put into service include two new natural gas processing plant plants in the Permian Basin and our 12th NGL fractionator in Chambers County. All of these assets were essentially full after operations began. While production of our PDH 2 facility was completed in the third quarter of '23, we spent much of the remainder of the year addressing start-up issues.

As a result, this plant did not meet our expectations in earnings in '23. We believe most of these issues have been resolved, and we anticipate much higher utilization rates this year. We begin '24 with -- we began '24 with 6.8 billion of major organic projects under construction, with three projects representing approximately $1.1 billion in capital investment expected to be completed this year. Major 24 projects include our Texas Western products pipeline system, two -- and two additional processing plants in the Permian.

We have considerable amount of growth capital underway. All of these projects provide strategic growth to our system and can add considerable visibility to new sources of cash flow. I wanted to take a minute to talk about Project 9.3. We started this project in '22 as an incentive for all employees to find innovative ways to improve the bottom line.

This was especially important as we and the industry were reengaging after COVID and faced the challenges of a slower global economy in '23. We achieved the goals we set for ourselves both in 2022 and 2023. We are very proud of our employees for that accomplishment. That said, we will not have a Project 9-type program for 2024.

You've always heard me say," If you want to know where we're going, look at what we're doing." The Permian Basin has been the cornerstone for much of our growth capital. As we look at 2024 and beyond, we see supply and demand opportunities as the Permian continues to grow and the world continues to have an ever-increasing appetite for U.S. hydrocarbons. We noted in the press release that these may be the most geopolitically challenging times since World War II, but it's abundantly clear that all of this chaos is leading itself to a growing appetite for the most stable hydrocarbon supplies in the world, USA, in spite of government and regulatory challenges.

Without a doubt, relative to energy, our nation's biggest geopolitical challenges continue to be self-inflicted. Enterprise has one of the world's leading natural gas liquids franchise. And we have liquids, hydrocarbon storage, and export franchise. On top of all of that, we have a dedicated employee base that creates value regardless of the environment.

2023 marked our 25th anniversary as a public company. It's been a great quarter century. It has been for the U.S. energy industry.

It included the downfall of the energy merchants, the great financial crisis, the innovation of the E&P and oilfield service industries to unlock the potential of the shale plays, which is still continuing. It included the near-death and remarkable renaissance of the U.S. petrochemical industry from having the highest cost feedstock pre-Shell to now the lowest cost. It included two OPEC price wars, a once-in-a-century pandemic, and the reemergence of geopolitical upheaval.

During this time, we stuck to our objectives of investing capital at reasonable returns, providing reliable value-added services to customers, consistently returning capital to our partners, and increasing the value of the partnership for the long term. During this time, the enterprise value of the partnership has grown from 1.2 billion to almost 90 billion. The value of our partnership units has increased almost 400%. We increased our distribution 25 consecutive years at an approximately 7% compound annual growth rate, and we've returned $52 billion of capital to investors through distributions and buybacks.

We have high-quality employees. And we thank our employees, we thank our customers, our service providers, our banks, and our investors for the contributions to this success. We are looking forward to the exciting opportunities and challenges for the next 25 years as the world's population's quality of life and demand for energy reaches new heights. Put frankly, based on what I see in the future for energy, I'd give anything if I could turn the clock back and be 50 years old.

With that, I'll turn it over to Randy.

Randy Fowler -- Director and Co-Chief Executive Officer

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

The net income attributable to common unitholders for the fourth quarter of 2023 was 1.6 billion, or $0.72 per common unit on a fully diluted basis. This compares to 1.4 billion, or $0.65 per common unit for the fourth quarter of 2022. Adjusted cash flow from operations, which is cash flow from operating activities before changes in working capital, was 2.2 billion for the fourth quarter of '23, compared to 2.1 billion for the fourth quarter of '22. We declared a distribution of $0.515 per common unit for the fourth quarter of 2023, which is a 5.1% increase over the distribution declared for the fourth quarter of '22.

The distribution will be paid February 14th to common unitholders of record as of the close of business on January 31st. In the fourth quarter, the partnership purchased 3.7 million common units off the open market for $96 million. Total purchases for 2023 were $187 million, or 7.2 million common units, bringing total purchases under our buyback program to over $900 million. I mentioned it on the last call, looking at our five largest midstream peers by market cap, since 2019, Enterprise is the only midstream energy company to reduce absolute outstanding -- units outstanding without significant asset sales.

In addition to buybacks, our distribution reinvestment plan and employee unit purchase plan purchased a combined 6.6 million common units on the open market for $172 million during 2023. For 2023, Enterprise paid out approximately 4.3 billion in distributions to limited partners. These distributions combined with the buybacks for the year, resulting in our having a payout ratio of adjusted cash flow from operations of 56% and a payout ratio of adjusted free cash flow of 94%. Total capital investments in the fourth quarter of 2023 were $1 billion, which included $823 million for growth capital projects, $65 million for the acquisition of a small natural gas storage facility that we have historically leased, and $129 million of sustaining capital expenditures.

Capital investments for the year of 2023 were $3.3 billion, which includes 2.75 billion of organic growth capital projects, 100 million in asset acquisitions, and 413 million of sustaining capital expenditures. During the third quarter call, we estimated $3 billion of organic growth capital expenditures in 2023 and a range of 3 billion to 3.5 billion in 2024. Due to the timing of expenditures, we had approximately $250 million of capex shift from 2023 into 2024. Therefore, we now expect our 2024 growth capital expenditures to total $3.25 billion to $3.75 billion.

We expect 2024 sustaining capex will be approximately 550 million, which includes dollars for planned turnarounds at PDH 1, our iBDH, and our high-purity isobutylene facility. These scheduled turnarounds typically occur every three to four years for these type of plants. Our total debt principal outstanding was approximately 29 billion as of December 31, 2023. Assuming the final maturity date of our hybrids, the weighted average life of our debt portfolio was approximately 19 years.

Our weighted average cost of debt is 4.6%. At December 31st, approximately 96% of our debt was fixed rate. Our consolidated liquidity was approximately 3.9 billion at the end of the fourth quarter, which includes availability under our credit facilities and unrestricted cash. Adjusted EBITDA, as Jim mentioned, earlier was 9.3 billion for 2023.

We ended the year with a consolidated leverage ratio of 3.0 times on a net basis after adjusting debt for the partial equity treatment of our hybrid debt and reduced by partnership's unrestricted cash on hand. Our leverage target remains three times plus or minus a quarter turn, so 2.75 to 3.25 times. In January, we issued $2 billion of senior notes comprised of $1 billion of three-year notes at a coupon of 4.6% and $1 billion of 10-year notes at a 4.85% coupon. The proceeds from this offering will go toward an upcoming $850 million debt maturity in February, I guess this month, and funding our capital expenditure program.

We appreciate the continued support of our debt investors. Moving on to future events, Enterprise will host an analyst and investor call on Wednesday, April 3rd. This will be in lieu of our in-person Analyst Day. This call will include overviews on our current outlook, near-term objectives, allocation of capital, as well as a fundamentals update from Tony. Q&A will follow our prepared remarks.

More information will be provided in the coming weeks. Before we open the call up to questions, Jim and I would like to take a moment to recognize Randy Burkhalter, our vice president of investor relations. After a 46-year career in the energy industry, Randy has announced his retirement for April of this year. Randy has led our investor relations effort for the past 21 years when he joined us shortly after our acquisition of the Mid-America and Seminole Pipelines. Through -- through the annual Institutional Investor magazine All-America team surveys, Enterprise and our investor relations team have been consistently recognized by the sell-side and buy-side community as one of the best in the midstream sector. Randy has been integral to leading this effort.

We are grateful for Randy's service, his integrity, his attention to customer service, and his industry-renowned social prowess. Please join us in congratulating Randy on his 46-year career and a job well done. Most of you have met Libby Strait. Libby will succeed Randy in leading our IR effort. Libby is one of our young all-stars who joined the company in 2013 and worked in commercial roles of increasing responsibility across several of our business units before joining the IR team in 2019.

She and Michael Cisarik, another one of our all-stars, will comprise our IR team.

Jim Teague -- Director and Co-Chief Executive Officer

And, Randy, as it relates to Randy Burkhalter, I think it's fair to say we have already scheduled a quarterly visit by Randy to the building to have a couple of scotches at the bar downtown at least once a quarter.

Randy Fowler -- Director and Co-Chief Executive Officer

With that, I think we're now ready to open the call up to questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Michael Blum with Wells Fargo. You may proceed.

Michael Blum -- Wells Fargo Securities -- Analyst

Thanks. Good morning, everyone. And congrats, Randy. And, Jim, please send me the invite for the Scotch get-together.

I wanted to -- I wanted to start with maybe your -- your latest views on -- on Permian growth in -- in '24, both for oil and for gas. And then, kind of a related topic, clearly, there's seems like there will be need for another Permian gas takeaway. You had talked about a brownfield project a little while back. It's been kind of quiet lately. So, I want to get your latest thoughts on -- on a Permian gas takeaway solution in light of the -- your growth outlook.

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

Hey, Michael, this is Tony. In our last analyst meeting, which was March of 2023, we talked about growth in the United States of, call it, 1.8 million barrels. I'll just go to oil right now. We gave you some basic metrics as to -- as to what happens with the oil, but 1.8 million barrels in the '23, '24, '25 time frame.

Obviously, the -- there was a lot of pushback when -- when we published that forecast from all sides, including producers that hadn't looked at the number like we had. And, you know, what I'll say about that number now, of that 1.8, we said 1.5 in the Permian Basin. Certainly, given the performance of producers during 2023, the producer communities are on track to meet and likely beat those numbers. And -- and I don't -- I don't know how that changes this -- at this pace. And then, the -- you know, the combined growing wedge of PDP that a lot of people forget about in key basins, coupled with the, you know, continuous improvement in efficiency and productivity that we see from the producer community. So, that's -- we'll talk about it more in early April.

But I'll -- you know, I think the cliff notes now, for what we know is it's really going to be hard not to at least meet and likely beat that number as we look at the three-year period. Very much Permian dominated. Relative to gas pipelines, we've talked about a simple metrics before. For every million barrels incremental that you have with oil, you -- you have somewhere in the neighborhood of available 400,000 to 500,000 barrels of NGLs. And for rich gas, call that anywhere from 3.25 to 3.5 BCF, OK? So, you do the math. You look at -- at what we have today in incremental capacity over the next two years coming on is appreciable.

Will there need to be more between now and 2030? Yes, the answer -- that's yes, in some form or fashion, whether it be brownfield, you know, on existing pipes, or on another greenfield pipe.

Michael Blum -- Wells Fargo Securities -- Analyst

OK, great. Thanks for all that. Tony, maybe we'll just stay in gas. My second question, I just wanted to ask about the -- the pause in LNG permitting and I know you're not -- you know, you don't have an LNG asset per se.

Curious how, if at all, this would impact your business in '24 and beyond. Thanks.

Jim Teague -- Director and Co-Chief Executive Officer

OK, Michael, this is Jim. And I guess -- I wonder, is it truly a pause or is it something more? And with those -- will those projects that are not under construction but going through the regulatory process be allowed to continue to go through that process during this quote temporary pause? Or will all work stop? Our fundamentals group says we'll have 75 years of reserves at current production with current technology. Our -- you know, you look at it, our LNG has -- has had a huge difference to our allies. In 2019, we averaged 1.85 BCF a day to Europe.

In 2023, We exported, on average, 7.5 BCF a day with a winter peak of over 9 BCF a day. We went from less than 10% market share of LNG into Europe to 50% market share. Now, Rusty Braziel, in his RBN blog this morning, has an excellent write-up on this issue. So, really, you have to sit back and wonder, is this a temporary pause or is it a political pause?

Operator

Thank you. One moment for questions. Our next question comes from Neel Mitra with Bank of America. You may proceed.

Neel Mitra -- Bank of America Merrill Lynch -- Analyst

Hi, good morning. Congratulations, Randy. First question was on the NGL exports and hitting a quarterly record. Could you maybe comment on the export dynamics right now? Just with weaker PDH demand and the plants coming up slower than normal, but also lower NGL prices in the U.S.

and how that ARB is trending for 2024.

Tug Hanley -- Senior Vice President, Pipelines and Terminals

Yeah, this is -- this is Tug Hanley. So, we've -- we've had strong operational performance on our EHT assets, which has led to healthy volumes going across the dock. There's also been a decrease in freight values we've seen, which is continuing to support stronger values. With respect to the weaker PDH margins on an international level, the margins have improved, but there's still a lot of overcapacity.

So, necessarily, weak -- weak margins don't lead to decreased NGL demand because it's still -- the demand is still ultimately there.

Neel Mitra -- Bank of America Merrill Lynch -- Analyst

Got it. And then, my second question related to to Bahia, and I was just wondering if you could maybe give some puts and takes as to where you can see additional volumes picked up. I believe Navitas isn't going through your system right now. Maybe the Lucid volumes come up for -- for recontracting and -- and kind of later in the decade, and where you could see some additional opportunities to pick up volumes that aren't contracted onto your system right now?

Justin Kleiderer -- Senior Vice President, Hydrocarbon Marketing

Hey, Neel, it's Justin Kleiderer. Yeah, so kind of like three buckets of Bahia that we think about, first and foremost is our growing GMP footprint. So, you think about a metric of every new gas plant we put on, we yield about 40,000 to 45,000 barrels a day of NGLs into Bahia So, we're growing our footprint both in the Delaware and the Midland. So, that's always the base load as we think about Bahia. And then, on top of that, we have a robust set of third-party agreements. You know, we've got 40 connections on our Y-grade system that gives us a lot of -- a lot of diversity to go capture incremental third-party volumes as that market ebbs and flows.

And we've got a good runway of contracts on those that get us to the back end of the decade without having to really worry about any contract roll-off. And then, third, you know, we're kind of our -- our expectation is that Seminole won't be an NGL service once it comes online. You add all those up, and that's kind of how we landed on the capacity that we created out of the gate at 600 a day.

Randy Burkhalter -- Vice President, Investor Relations

And, Natalie, do you think we're through building processing plants out there?

Natalie Gayden -- Senior Vice President, Natural Gas

I don't think we're through.

Neel Mitra -- Bank of America Merrill Lynch -- Analyst

OK, great. Thank you very much.

Operator

Thank you. One moment for questions. Our next question comes from Theresa Chen with Barclays. You may proceed.

Theresa Chen -- Barclays -- Analyst

Good morning. I'd like to echo the congratulations to Randy on his retirement after a stellar career. We wish you continued social prowess. And also, congratulations to Libby and Michael.

When we look at your organic projects backlog, it's a robust set of opportunities. And as we look beyond 2025, just trying to, you know, think about what a run rate should be, knowing that you still do have projects under development and some of them are sizable. Is that $3 billion or $3-plus billion number a good run rate, or how should we think about that?

Randy Burkhalter -- Vice President, Investor Relations

Do you want to take it?

Randy Fowler -- Director and Co-Chief Executive Officer

Yeah, Theresa, I'll start off. You know, we're $6.8 billion worth of projects under construction. And, you know, again, this year, it'll range from 3 -- 3.25 billion to 3.75 billion. 2025 is 3 billion.

And then, there's a little bit of roll-off with that 6.8 billion that creeps over into 2026. The one thing I would just note is -- is in that 6.8 billion, we -- we've had --- we've got two lumpy projects, being Bahia pipeline and also the export facility that we're building on the Neches River. And so, if you -- if I come in and look forward and the expectation will, you know, continue to see build out with natural gas processing with the gas gathering and compression that supports that. I keep coming back that I really think that going forward, absent SPOT, that we're more in the $2 billion range. It's where I keep coming out, just again, because we've had some lumpy projects.

You know, we just put PDH 2 into service in 2023. That was another lumpy project. So, just don't foresee a lot of those lumpy projects coming, with the exception of SPOT.

Theresa Chen -- Barclays -- Analyst

Got it. Thank you.

Randy Fowler -- Director and Co-Chief Executive Officer

That's probably a three-year construction cycle.

Theresa Chen -- Barclays -- Analyst

Understood. And in terms of projects that are coming online near term, for your Texas West product system, can you remind us how much of that is underwritten by third-party commitments versus open capacity that you hope to market and capture that are -- especially in light of the fact that, you know, since you announced the project, one of your midstream competitors, who also has significant marketing capabilities, bought a huge refined product system and is also looking to close [Inaudible].

Justin Kleiderer -- Senior Vice President, Hydrocarbon Marketing

Hey, Theresa, it's Justin Kleiderer again, and Tug may chime in on a piece of that as well. But, you know, as we develop the project, it's really -- it really has developed into really a RAT marketing model. You know, we had the first phase of start-up really impending and the timing of the rest of it should be lined out in the deck. You know, but we've got significant interest.

We've got 40 third-party contracts agreed to across the terminals and we're signing up more seemingly daily. So, people are just itching for it to come on. But we do think, similar to Dixie and our legacy propane, long-haul pipelines being sort of a uncontracted RAT-based model, that that's the model that we're going to see on TW.

Theresa Chen -- Barclays -- Analyst

Thank you.

Operator

Thank you. One moment for questions. Our next question comes from Jeremy Tonet with J.P. Morgan Securities.

You may proceed.

Jeremy Tonet -- JPMorgan Chase and Company -- Analyst

Hi, good morning.

Randy Burkhalter -- Vice President, Investor Relations

Good morning.

Jeremy Tonet -- JPMorgan Chase and Company -- Analyst

And, Randy, I want to wish you congratulations here. Good luck with everything going forward. You will be missed and thank you.

Randy Burkhalter -- Vice President, Investor Relations

Thank you, Jeremy.

Jeremy Tonet -- JPMorgan Chase and Company -- Analyst

And I just want to start off, I guess, with the recent Houston ship channel enhancements that we've seen over time here. I'm wondering if you could comment on how that's impacted your LPG export capabilities. Have you seen any kind of improvements there given the changes? Just curious how that has developed.

Bob Sanders -- Executive Vice President, Asset Optimization

Yeah, this is Bob Sanders. Late in the fourth quarter last year, the Houston pilots removed the daylight restriction on LPG ships. So, we can sail 24 hours a day, loaded or empty. And we are incrementally picking up the number of vessels we're bringing in to try to maximize the utilization of the refrigeration units that we've got right now. So, we are seeing a direct benefit.

Jeremy Tonet -- JPMorgan Chase and Company -- Analyst

Got it. Just curious if that's a minor or maybe, you know, bigger expansion. And also, Tony, I guess I'm curious, I guess, with thoughts on LPG pricing here. I guess there's a concern in the marketplace that LPG exports might be maxed out and that could dislocate domestic pricing relative to international price markers. So, just wondering how you see that playing out?

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

Well, I'll answer the first piece a little bit. We're -- we're seeing about a 5% to 7% gain at this point.

Randy Fowler -- Director and Co-Chief Executive Officer

I think on -- on pricing, you've seen -- you've seen NGLs catch a bit here recently. I think some of what Bob mentioned has helped with pricing. as freights come off, there's been a benefit to -- certainly to propane and butane on -- on the flat price. But if you look at the growth that Tony mentioned earlier, we have NGLs growing at a faster pace than crude oil. We're seeing it across our system.

Storage is going to become more increasingly valuable. These expansions don't come on until '25, '26 time frame, so we expect the docks to remain at capacity, and then ultimately, the flat price of NGLs will be reflective of that.

Tug Hanley -- Senior Vice President, Pipelines and Terminals

Yeah, this is Tug. I'll just add that we're actually seeing that already manifest itself on our spot dock values that are upwards in the double digits right now.

Jeremy Tonet -- JPMorgan Chase and Company -- Analyst

Got it. That's very helpful. Thank you for that.

Operator

Thank you. One moment for questions. Our next question comes from Brian Reynolds with UBS. You may proceed.

Brian Reynolds -- UBS -- Analyst

Hi, good morning, everyone. And, Randy, thanks again for all the time you spent with me and the community over the last 21 years. And thanks for leaving the team in good hands with Libby and Michael.

Randy Burkhalter -- Vice President, Investor Relations

Thank you, Brian.

Brian Reynolds -- UBS -- Analyst

Maybe to start off on the NGL macro. Jim, on the last call, you kind of talked about competitive market dynamics, you know, right now where EPD seems to be threading the needle of maximizing return while preventing some new entrants into the integrated NGL value chain. While I appreciate some of the opening remarks from Tony, to Michael's question around Permian growth, just kind of curious how we should think about maybe, you know, volume growth is going to be really attractive over the next few years. But kind of curious if we can talk about how transportation, frac, and export rates, you know, should look relative to, you know, what they've been the past decade, just really attractive.

Thanks.

Brent Secrest -- Executive Vice President, Chief Commercial Officer

Hey, Brian, this is Brent. I mean it kind of varies based on the service. I think everything that you see on a processing side, certainly on any kind of long-haul pipeline, is a newbuild economic-type number. Fractionation is probably in that group too.

I think when you look across NGL docks and you look at the entrance that are -- that are in that space right now, I think anybody who wants to be in that space is going to have to compete with brownfield economics. And if you look at where FOB values are going for both ethane and LPG, it is incredibly incredibly difficult to make a project accretive. That's a new entrant in that space.

Randy Burkhalter -- Vice President, Investor Relations

So, Brent, put mildly -- put -- put directly, while Doug says on our spot deals we have double-digit tourmaline values, what can you do a five-year deal at?

Brent Secrest -- Executive Vice President, Chief Commercial Officer

I think when you look at -- I don't want to be totally specific on this, but you know, the fees on LPGs are considerably less than what we're seeing today. I don't think anybody's going to go out there and try to justify a project based on values that we see today. Because we have capacity that we're contracting, I think others have capacity that are contracting. And then, on the ethane piece, that's a very competitive market. I would have a hard time thinking enterprise would be in that market if we hadn't been, you know, one of the first ones in that market.

Randy Burkhalter -- Vice President, Investor Relations

So -- so -- so -- so, you couldn't build a greenfield terminal based on what we think the terminal fees are going to be.

Brent Secrest -- Executive Vice President, Chief Commercial Officer

Absolutely not.

Randy Burkhalter -- Vice President, Investor Relations

OK.

Brian Reynolds -- UBS -- Analyst

Great. Thanks. Appreciate all that. You know, as my follow-up, maybe just an update on the spot license and permit process.

You know, you alluded to some -- some some comments around LNG and maybe have some -- having some impacts on the upcoming U.S. elections. Just kind of curious if we should see any risks to the timeline around the spot licensing and permitting process relative to maybe expectations from last year. Thanks.

Randy Fowler -- Director and Co-Chief Executive Officer

Bob?

Randy Burkhalter -- Vice President, Investor Relations

Hang on, Bob. Brian, I didn't -- I didn't say anything about the elections, by the way.

Randy Fowler -- Director and Co-Chief Executive Officer

Yeah.

Randy Burkhalter -- Vice President, Investor Relations

Right now, we haven't -- we've got a record of decision, and I'll let Bob tell you what else we've got. But right now, we don't see anything that should preclude us getting that license.

Randy Fowler -- Director and Co-Chief Executive Officer

And so, where we are with -- with [Inaudible], we -- we have completed all the requirements to receive the license. We're in constant contact with [Inaudible]. As a matter of fact, we have seen a draft of the license, which they asked us to comment on, which we've commented on, and they've accepted our changes. So, everything is basically done.

We're just waiting on knowledge that we've got the license.

Brian Reynolds -- UBS -- Analyst

Great to hear. I'll leave it there. Enjoy the rest of your day. Thanks again.

Operator

Thank you. One moment for questions. Our next question comes from Neal Dingmann with Truist Securities. You may proceed.

Neal Dingmann -- Truist Securities -- Analyst

Well, thanks for the time. And, Randy, congrats and look forward to hearing what's next for you. I can only imagine. My first question is on guys on marketing, specifically.

And just wanted to -- you all capture some of the commodity price volatility experience with this last, I guess I'd call it, the January cold snap, you know perhaps in Waha or the HSC spreads.

Brent Secrest -- Executive Vice President, Chief Commercial Officer

Neal, this is Brent. We were able to capture some. There were some kind of puts and takes on that whole -- the whole weather event. There were some operational issues that we had in Midland that are -- that are getting fixed.

But from a marketing perspective, there was -- there was some arbitrage -- arbitrage capture on our side.

Randy Fowler -- Director and Co-Chief Executive Officer

We pulled all our levers is what you're saying.

Brent Secrest -- Executive Vice President, Chief Commercial Officer

That's right.

Neal Dingmann -- Truist Securities -- Analyst

Great. And then, my second question just on the PDH plants, just wanted -- it sounded like for the second quarter in a row, you all mentioned a bit of operational challenges maybe with the reactor and license issue. I'm just wondering -- I think, Randy, you know, you mentioned I think last quarter, you thought they'd maybe be more one-off. And just wondered, has something changed here? And maybe just talk about your sort of future view of the ops there?

Graham Bacon -- Executive Vice President, Chief Operating Officer

This is Graham. Yes, we did have some operating issues in the fourth quarter with the PDH plants. Some of those are -- some of those were related to some construction-related start-up issues, some design issues. At this point, we think we've got -- the unit is up and operating.

We're not quite at 100% capacity, but we've got line of sight on the fixes that will be taking place here soon. And I think at that point, we can expect we'll have a good operating unit. All the other parameters of the unit that we look at in terms of the robustness and ability to maintain operation are really looking good right now. There's just one -- one issue -- one more issue we've got to get past, and I think we'll be looking at a good unit there.

Neal Dingmann -- Truist Securities -- Analyst

Very good. Thanks for the details, guys.

Operator

Thank you. One moment for questions. Our next question comes from Tristan Richardson with Scotiabank. You may proceed.

Tristan Richardson -- Scotiabank -- Analyst

Hi, good morning, guys. Congrats to Randy. We appreciate all the time you spent with us over the years. Mr. Fowler, you -- you -- you guys have framed up the return of capital slide for a long time, and we've seen that payout ratio -- that adjusted payout ratio increase over time. And just curious, with the stability you're seeing in the earnings base and -- and in the stability you're seeing in capex sort of as you mentioned over the long term, do you see that payout ratio changing meaningfully over time? Or is there a way to think about a long-term target for that -- that adjusted cash flow ratio, particularly when you sit in such an advantage position from a leverage standpoint?

Randy Fowler -- Director and Co-Chief Executive Officer

Yeah, the -- I'm thinking of how to frame that because you had quite a quite a bit in there. You know, several of our peers in the energy sector have come in with a formulaic approach on returning capital. And I think we've just been hesitant to doing -- doing that because we live in a very dynamic world. And -- and opportunities come up, and so really coming in and locking into a formula of so much distribution and so much buyback, more often than not, when I -- when I've seen companies come in with those formulas, they're forever tweaking them or rescinding them.

And they really have a short shelf life. I really just come back and -- and look at, you know, Jim -- Jim went through some of our history of returning capital for our first 25 years. You know, we're going to continue to come in and -- and -- and do that. As far as distribution growth, I think, you know, you've seen over the last two or three years, you know, we're back to mid-single digit distribution growth, which is good to be there. And then, we've been doing buybacks steadily on this.

And, you know, I think if -- if -- obviously, if we come into an era where we're not spending as much capex, then, you know, we'll -- we'll have more flexibility to come in and -- and -- and do buybacks. They'll still be opportunistic buybacks. And I think you saw that, you know, when the third quarter, you know, the unit price was really pretty strong, and we just opted not to come in and do any buybacks in the third quarter of 2023. But when we got into year-end tax selling and saw the weakness in 2024, we executed buybacks at a better level even considering the distribution that we -- the November distribution, we still executed at a better buyback level in -- in the fourth quarter than what was available in the third quarter. So, I think we'll continue to be opportunistic going forward.

And -- and then, I think we just need to see what kind of opportunities that we have in the future. But -- but, you know, again, I come back in and I don't know of another midstream, maybe other than what's the -- Canadian [Inaudible] that -- that has successfully returned capital the way that we have over the last 25 years. So, I -- that was a long-winded, but I hope that helps.

Tristan Richardson -- Scotiabank -- Analyst

Appreciate it, Randy. And then, maybe just on the Bahia question. To ask it a different way, I think, you know, given the pace of NGL pipeline volumes today, plus Tony's forecast and Justin's earlier comments, is there an opportunity for the capacity of Bahia to expand as you progress through construction as we go into '25? Or are we seeing enough competing pipes in the market where this is -- this should be pretty balanced in '25?

Justin Kleiderer -- Senior Vice President, Hydrocarbon Marketing

Yeah, Tristan, this is Justin. We -- we picked 600 for the reasons before, but you know, you think of a 30-inch pipeline, if it's fully horse-powered, it could do upwards of -- of a million. But we're trying to be capital-efficient about how we phase into it. So, if our forecasts are right and we need more than what -- what we have today, we can add pumps on it to upsize.

Tristan Richardson -- Scotiabank -- Analyst

Appreciate it. Thank you, guys, very much.

Operator

Thank you. One moment for questions. Our next question comes from Keith Stanley with Wolfe Research. You may proceed.

Keith Stanley -- Wolfe Research -- Analyst

Hi, good morning. And congrats as well, Randy. You've definitely been one of the most helpful and friendly IR people that I've gotten the chance to work with. So, thank you.

Wanted to start just on -- on the outlook -- like, the outlook for the year. So, understanding you're not giving the -- the employee goal for EBITDA for 2024. At a high level, though, you had a lot of momentum exiting 2023 in your results, you have a fair amount of capital entering service with PDH 2 and a couple of plants. You know, you're still constructive on volumes. Is it fair to say 2024 should be a relatively stronger growth year? Or are there any headwinds or things you would point to versus 2023 that could be -- could be an offset?

Jim Teague -- Director and Co-Chief Executive Officer

I think -- this is Jim, I think 2024 is shaping up to be a better year than 2023. And it's not just the assets we brought on. We're seeing, for example, and Brent's got some information, our processing margins on our -- on what is not fee-based is looking better. You might want to address that.

Brent Secrest -- Executive Vice President, Chief Commercial Officer

Yeah, because if you just look at the fourth quarter on -- on what -- you know, we have floors in our processing contracts, especially around the Midland Basin. So, in the fourth quarter, I think those floors were at around -- they were all hit at -- about 97% of those contracts hit the floor. In fact, December was 100%. So, as things get more constructive on gas, we'll see if that happens. Certainly, we were -- there were some benefits in January.

We're seeing some benefits in -- in the current month on NGLs, but that number is probably around 62%. In January, they hit the floor. So, I think from a processing standpoint, there's definitely benefits across the portfolio that -- that -- that we'll see.

Keith Stanley -- Wolfe Research -- Analyst

OK, thank you.

Randy Burkhalter -- Vice President, Investor Relations

Keith, like, it seems like each quarter, we transport more and more hydrocarbons.

Keith Stanley -- Wolfe Research -- Analyst

Right. Yeah, Q4 volumes are definitely strong.

Randy Fowler -- Director and Co-Chief Executive Officer

And, Keith, this is -- hey, Keith, this is Randy. I think the other thing is, you know, just as you -- you know, I think we've -- again, we've got a pretty good track record that if you look out over time, you know, our average return on capital has been -- I mean it's -- when you look at the total company, has ranged from 10% to 13%. And then, when you come in and you look at the -- the -- the capex specifically, the -- the projects that we're putting into service and the level of capital expenditures that we have, I think what that translates to over a three-, four-year period is probably mid-single-digit EBITDA growth. Now, you're not going to be able to use a ruler on that number, but that's about what it -- what it works out to be. And then, you know, then you may have some variability in and around that -- that kind of number.

But I think if you come back in and just -- as you look at what we've -- what we've been able to do in the past and look at the amount of capital investment that we -- that we're making, I think that's where it would take you.

Jim Teague -- Director and Co-Chief Executive Officer

The other thing is, look at our -- our -- our people are relentless and -- and visiting customers and getting new deals. I've been shocked at the appetite, for example, for our ethane export dock. And so -- so, we're probably going to build new processing plants in the -- in the Permian. And I would expect that we're going to fill up our ethane docks and our LPG docks. The other thing we're seeing is more crude flows to Houston, so we're seeing more crude across our docks.

Keith Stanley -- Wolfe Research -- Analyst

That's -- that's all very helpful. And, Jim, if I can kind of follow-up on that last point. The NGL export volumes were very strong in Q4, and you noted the removal of the daylight restrictions helping you. Can you give a sense of how close the company is to its capacity based on that Q4 export number? Are you able to keep increasing exports this year before some of the expansions start up in 2025?

Jim Teague -- Director and Co-Chief Executive Officer

I think if you look at NGLs as a whole and maybe crude oil, yes. If you look at LPG, I think things are going to be tight in terms of dock space on LPG. That gets resolved probably mid-next year. But for '24 and maybe part of '25, LPG is going to -- going to be pretty tight.

You have something?

Keith Stanley -- Wolfe Research -- Analyst

Thank you.

Operator

Thank you. One moment for questions. Our next question comes from Jean Ann Salisbury with Bernstein. You may proceed.

Jean Salisbury -- AllianceBernstein -- Analyst

Hi, good morning. Do you forecast Permian processing utilization staying as tight as it is now over the next couple of years? Said another way, is it a stretch to say that the timing of processing coming on will dictate the pace of Permian growth in your view?

Randy Burkhalter -- Vice President, Investor Relations

Who's -- take the --

Brent Secrest -- Executive Vice President, Chief Commercial Officer

I think -- Jean Ann, this is Brent. I expect it to stay tight. You know, when we look at our build-out in the contracts that come on, there may be a short little window that -- that there's excess capacity, but it fills up very quickly. We'll lean on Tony for -- for his forecast.

But what Tony has told us in years past has certainly come true. If not, it's been even more prolific. And then, when you look at capacity right now, I think there is gas that's being held back in the basin. It's -- it's waiting on compression and it's waiting on processing capacity.

Natalie Gayden -- Senior Vice President, Natural Gas

That's exactly what I was going to say. It's not just processing, some of it's gathering, compression in the field that's behind. So, once we see that bottleneck kind of get fixed, we'll see processing get full very quickly.

Jean Salisbury -- AllianceBernstein -- Analyst

That's very helpful. Thank you. And then, one more. There's -- there's some discussion of -- of upcoming Haynesville gas pipelines possibly being delayed due to legal issues.

Is there any further expansion potential on Acadian, or is that maxed out here?

Natalie Gayden -- Senior Vice President, Natural Gas

We're maxed out after our last expansion. I'd say the only been -- I mean we may be a benefactor if that project's late; however, Haynesville is flat to -- staying flat, would you say that, Tony?

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

Yeah, you know, Jean, there's so much discussion about the Haynesville and what's going to happen. And honestly, I'm somewhat befuddled by it, and I think that's the right term. We've got LNG coming on in the Louisiana area that, call it, is 4.5 to 5 BCF over the next two years, OK? And that's a big number. And it's -- it has -- there's nothing that -- the whole permitting thing that has recently happened that Jim addressed so well this morning, it impacts that. So, we -- we think that -- or we talk like Louisiana and the Haynesville has a chance to go to hell in a handbasket.

And I'm sorry, I just don't see it unless I'm missing something. The Haynesville, last but not least, has a -- is one of the primary basins for a massive amount of long-term storage of gas reserves, no question about it. So, we still see it as -- as an ideal and kind of a cornerstone basin -- cornerstone basin for us relative to natural gas.

Jean Salisbury -- AllianceBernstein -- Analyst

Great. Thanks for that, Tony. And thank you, Randy, for all of your help over the years. You'll be missed.

That's all for me.

Operator

Thank you. One moment for questions. Our next question comes from Spiro Dounis with Citi. You may proceed.

Spiro Dounis -- Citi -- Analyst

Thanks, operator. Morning, team. Two very quick follow-ups from me. One, Randy, just want to go back to the distribution growth. And a follow-up on Tristan's question, you know, the cadence, the last, call it, two years or so has been an increase of about every two quarters, tracking around that 5% annual growth. I know you like to keep us guessing.

So, as we think going forward, you know, how opportunistic is the distribution growth from here? Or is that something we should really kind of expect going forward?

Randy Fowler -- Director and Co-Chief Executive Officer

Yeah. Spiro, I -- again, I just go back to our track record. We don't like to get out and front-run our board. But, you know, when -- again, I think with the -- with the capex -- you know, with the capex we're deploying and the return on capital that we're expecting to get, you know, I think coming in, and you know, we've been increasing distributions 25 years in a row, and I feel pretty good about '26, So, you know -- and, you know, we -- we've been doing it around, you know, mid-single digits, so.

Spiro Dounis -- Citi -- Analyst

All right, fair enough. Second one, just around M&A. You all purchased some natural gas storage assets there in the quarter. Pretty small for you, so I don't want to read into it too much. But just curious, is this sort of a -- the beginning of a bigger push into natural gas storage, or is it more opportunistic? And as you look at the rest of your asset base, are there more opportunities like this to bolt on?

Randy Burkhalter -- Vice President, Investor Relations

We -- on the -- that's a Wilson storage that we've leased for years and years. And in the contract, they had the right to put it to us, and they put it to us. And it was a reasonable price, so we weren't upset.

Randy Fowler -- Director and Co-Chief Executive Officer

And -- and -- and that was legacy going back to Gulf Terra Energy Partners. We sort of inherited that when we -- when we acquired Gulf Terra.

Spiro Dounis -- Citi -- Analyst

OK, perfect. Thanks, guys. I will save my project 10 questions for the April call. Thanks, everyone.

Randy Burkhalter -- Vice President, Investor Relations

Josh, this is Randy. Let me cut in. We have time for one more question.

Operator

Thank you. One moment for questions. And our next question comes from John Mackay with Goldman Sachs. You may proceed.

John Mackay -- Goldman Sachs -- Analyst

Hey, everyone, good morning. Thanks for the time. I just wanted to touch one more time on -- on the export side. You know, understand that, you know, FOB spreads, FOB premiums are really high right now, but you talked about kind of outer coming down farther.

Is it really just, you know, we are going to see these rates stay high until yours and your kind of competitors' projects come online in 2025? Or would you expect some benefit there once -- once -- or if the Panama Canal starts to clear up?

Randy Burkhalter -- Vice President, Investor Relations

Oh, go ahead.

Brent Secrest -- Executive Vice President, Chief Commercial Officer

Yeah, we -- we expect the rates to remain elevated until the expansion comes online from us and our competitors, call that, mid-25. But with respect to the Panama Canal issues and even issues in the Red Sea, we really haven't seen that impact the five values too much. The VLGC fleet has done a really good job at reposition itself. There's over 380 VLGCs on the water to help mitigate those issues. In fact, as I mentioned earlier, we've seen freight come down, so don't really see that impacting the FOB values too much from the canal.

Randy Fowler -- Director and Co-Chief Executive Officer

How many VLGCs came on in '23, and how many do we expect in '24?

Brent Secrest -- Executive Vice President, Chief Commercial Officer

Yeah, call it around north of 40 VLGCs came online in 2023, and there's going to be another 22 or so coming online in '24.

John Mackay -- Goldman Sachs -- Analyst

All right, that's great. Appreciate that. And maybe just one more clarification earlier. Appreciate the color on the fee floors on processing in the Permian.

Just one thing we wanted to try to frame up, I mean if we look year over year, Permian processing volumes are up about half a B, but margins are effectively flat. Just curious if you can comment, is that all commodity impact? or is there some kind of, you know, underlying deflation on the fee side as well?

Brent Secrest -- Executive Vice President, Chief Commercial Officer

It's all commodity.

John Mackay -- Goldman Sachs -- Analyst

Right. Makes sense. That's it for me. Thanks again.

Operator

Thank you. I would now like to turn the call back over to Randy Burkhalter for any closing remarks.

Randy Burkhalter -- Vice President, Investor Relations

Thank you, Josh. Before we close out, I'd like to thank Randy for the kind comments and the offer from you, Jim. And, you know -- and many thanks to all of you I've worked with for through the years. I can't help it.

Randy Fowler -- Director and Co-Chief Executive Officer

He's getting a little emotional, y'all

Randy Burkhalter -- Vice President, Investor Relations

Thank you. Close it out, Libby.

Libby Strait -- Director, Investor Relations

And I guess, with that, we'll end the call. Thanks to everyone for your participation.

Randy Burkhalter -- Vice President, Investor Relations

Thank you. All right. [Inaudible]

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 and Co-Chief Executive Officer

Michael Blum -- Wells Fargo Securities -- Analyst

Tony Chovanec -- Vice President, Fundamentals and Supply Appraisal

Neel Mitra -- Bank of America Merrill Lynch -- Analyst

Tug Hanley -- Senior Vice President, Pipelines and Terminals

Justin Kleiderer -- Senior Vice President, Hydrocarbon Marketing

Natalie Gayden -- Senior Vice President, Natural Gas

Theresa Chen -- Barclays -- Analyst

Jeremy Tonet -- JPMorgan Chase and Company -- Analyst

Bob Sanders -- Executive Vice President, Asset Optimization

Brian Reynolds -- UBS -- Analyst

Brent Secrest -- Executive Vice President, Chief Commercial Officer

Neal Dingmann -- Truist Securities -- Analyst

Graham Bacon -- Executive Vice President, Chief Operating Officer

Tristan Richardson -- Scotiabank -- Analyst

Keith Stanley -- Wolfe Research -- Analyst

Jean Salisbury -- AllianceBernstein -- Analyst

Spiro Dounis -- Citi -- Analyst

John Mackay -- Goldman Sachs -- Analyst

Libby Strait -- Director, Investor Relations

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