Enterprise Products' Q3 2025 Earnings Call: Contradictions Emerge on Permian Pipeline Impact, LPG Export Dynamics, Capital Allocation, and PDH Operations

Date of Call: October 30, 2025

Financials Results

• EPS: $0.61 per common unit, net income attributable to common unitholders $1.3B for Q3 2025

Guidance:

• 2025 growth capital expenditures expected ~ $4.5B; 2026 growth CapEx expected $2.2B–$2.5B.
• 2025 sustaining CapEx expected ~ $525M; mid-cycle organic CapEx ~ $2.0B–$2.5B/year going forward.
• Discretionary free cash flow expected to inflect in 2026 and be split between buybacks and debt reduction.
• Board increased buyback program by $3B to $5B (approx. $3.6B capacity remaining).
• Expect consolidated leverage to return to 3.3x (±0.25) by year-end 2026.

Business Commentary:

* Project Delays and Future Impact: - Enterprise Products Partners reported adjusted EBITDA of $2.4 billion for Q3 2025, with distributable cash flow providing 1.5x coverage. - The company faced some project delays, with Frac 14, Bahia pipeline, and Seminole pipeline conversion delayed but expected to contribute to results in the fourth quarter. - The delays were due to unforeseen issues, but the company expects significant upside from these projects.

• PDH Plant Operational Improvements:
• PDH 1 averaged 95% of nameplate capacity, and PDH 2 showed similar promise post-turnaround, addressing coking issues.

• These improvements were due to new operating procedures and modifications implemented during a recent turnaround.

• Capital Allocation and Shareholder Returns:

• Enterprise announced an increase in its buyback program from $2 billion to $5 billion.

• This move is driven by completed major capital projects, allowing for more discretionary cash flow allocation, with a focus on returning capital to unitholders.

• Permian Basin Producer Activity:

• In the Permian Basin, Enterprise's Midland well connections are projected to reach almost 600 in 2026, up 25% from previous expectations.
• Growth in production is supported by strong demand for takeaway capacity, despite the Permian being primarily an oil basin.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted a $3B increase to the buyback program, an expected inflection in discretionary FCF in 2026, confidence that PDH run rates will improve in 2026, and described projects coming into service (Frac 14, Bahia pipeline, Neches River Terminal) as drivers of upside; they called third-quarter results “lighter than expected, but far from discouraging.”

Q&A:

• Question from Jean Ann Salisbury (BofA Securities): So there are lots of Permian gas pipelines coming on next year in the basin. Do you think that that's going to drive producers to produce more gas at the margin? And do you consider that to be a constraint?
  Response: Takeaway: More takeaway capacity for gas and NGLs is healthy for producers and the Permian basin — not a constraint.

• Question from Jean Ann Salisbury (BofA Securities): As LPG exports ramp, do you see Asia rezcom and petchem demand as sort of an unlimited sink for all that LPG? Or will there potentially be extreme price pressure on global propane to make it flow?
  Response: Takeaway: International residential/commercial and petrochemical demand is growing; flows will be tied to supply and global price signals, and management is not worried about demand.

• Question from Theresa Chen (Barclays Bank PLC): On the upsized buyback authorization, would you talk about capital allocation outlook for the next couple of years? What do you see as a steady-state run rate for CapEx? Will buybacks be more ratable or opportunistic?
  Response: Takeaway: Mid‑cycle organic CapEx expected ~$2.0–$2.5B/year (2026 expected $2.2–$2.5B); free cash flow will be split between buybacks and debt paydown with buybacks a mix of programmatic and opportunistic.

• Question from Theresa Chen (Barclays Bank PLC): With DINO's plans to potentially move refined products from PADD4 to PADD5, could this lead to better utilization/marketing opportunities on your Texas Western product system that recently went into service?
  Response: Takeaway: The TW corridor to Salt Lake is uniquely positioned and would benefit if Salt Lake tightens; overall product system could benefit if announced projects proceed.

• Question from Michael Blum (Wells Fargo Securities): You're signaling an inflection point and pivot to returning cash. How much is that driven by a less constructive macro vs completion of the capital build-out and ample capacity?
  Response: Takeaway: It's primarily driven by completing large capital projects and returning to mid‑cycle CapEx, not a change in macro outlook.

• Question from Michael Blum (Wells Fargo Securities): On buybacks, how do you balance potential tax ramifications for unitholders and does that limit buybacks?
  Response: Takeaway: Tax consequences primarily affect selling unitholders, not holders who remain; no stated structural limit from tax considerations.

• Question from John Mackay (Goldman Sachs): You were cautious earlier this year—what's your mark-to-market now and what are you hearing from Permian producer customers?
  Response: Takeaway: Midland and Delaware volumes are outperforming expectations with well connects up ~25% vs prior guidance; base volume durability is a key upside and crude gathering has seen double-digit gains year-over-year.

• Question from John Mackay (Goldman Sachs): Several projects were delayed—when do you expect the projects you referenced (~$6B) to be fully ramped?
  Response: Takeaway: Frac 14 is in service; Bahia expected end-Nov/early-Dec; Neches River Terminal first train full by mid‑next year with second train shortly after; ~90% LPG contracted and ethane fully contracted.

• Question from Vrathan Reddy (JPMorgan): Where in the value chain do you see the most attractive organic growth opportunities?
  Response: Takeaway: Gas processing is the largest near‑term opportunity (line‑of‑sight to two additional ~300 MMcf/d plants), plus gathering expansion, export-related ethane opportunities and incremental power‑gen demand capture with efficient CapEx.

• Question from Keith Stanley (Wolfe Research): Are PDH issues now behind you and what gives you confidence after the turnaround?
  Response: Takeaway: Operational fixes and new procedures plus licensor engagement were implemented during outage; management is optimistic PDH run rates will rise and materially improve in 2026.

• Question from Keith Stanley (Wolfe Research): On Permian NGL pipelines, are volumes primarily moving your own plant volumes or meaningful third‑party volumes?
  Response: Takeaway: It's a mix, but increasingly anchored by Enterprise's own gathering and processing — share of own volumes rose from ~45% in 2020 to ~2/3 in 2025 and is expected to continue increasing.

• Question from Andrew John O'Donnell (Tudor, Pickering, Holt & Co.): For the third consecutive quarter we saw lower implied LPG terminal volumes — can you explain?
  Response: Takeaway: Lower volumes were due to minor maintenance and cargo timing; demand remains robust.

• Question from Andrew John O'Donnell (Tudor, Pickering, Holt & Co.): With propane inventories at records, what's the view on domestic propane market and read‑throughs for storage/marketing?
  Response: Takeaway: Contango creates storage monetization and arbitrage opportunities; Enterprise's large storage position positions it to benefit.

• Question from Manav Gupta (UBS Investment Bank): How is integration of the Oxy asset acquisition going and what organic growth does it unlock?
  Response: Takeaway: Integration is proceeding; 75,000‑acre dedication with >1,000 drillable locations bolts on to footprint and can unlock ~200 MMcf/d of incremental revenue by 2027 plus NGL pull‑through synergies.

• Question from Manav Gupta (UBS Investment Bank): How is the Permian sour gas (Pinon) opportunity developing after that deal?
  Response: Takeaway: Pinon remains very attractive; producer pacing slowed by H2S development hurdles but treating capacity expansion continues (Train 4 next summer + Train 5/6 expected), supporting bullish trajectory.

• Question from Brandon Bingham (Scotiabank): With a lot of announced Permian egress capacity coming online, might some projects be sidelined or will growth accelerate to meet build‑out?
  Response: Takeaway: ~4.5 Bcf/d of takeaway coming online next year; because the Permian is oil‑focused and multi‑bench development drives gas as a byproduct, additional takeaway is healthy and supportive for the basin.

• Question from Brandon Bingham (Scotiabank): You mentioned line‑of‑sight to two incremental plants beyond Athena — are those contemplated in 2026 CapEx?
  Response: Takeaway: Yes — 2026 CapEx expectations include building a couple more plants in addition to previously announced projects.

Contradiction Point 1

Permian Gas Pipeline Capacity and Impact on Production

It involves differing statements about the impact of Permian gas pipeline capacity on production, which could influence investor expectations regarding future growth and cash flows.

Will there be significant Permian gas pipelines coming online next year? Will this lead producers to increase marginal gas production? Do you view this as a constraint? - Jean Ann Salisbury (BofA Securities)

2025Q3: The Permian Basin is primarily an oil basin, and more gas pipelines are healthy for producers. They provide healthy transportation for both NGLs and natural gas. This is not a constraint but rather beneficial for the basin. - Tony Chovanec(Executive Vice President of Fundamentals & Commodity Risk Assessment)

Has the Permian outlook changed with OPEC's supply return? - Spiro Dounis (Citi)

2025Q1: Even with oil at $55, Permian will be in maintenance mode. Smaller players with fewer than three rigs will be impacted most. - Anthony Chovanec(Executive Vice President, Fundamentals and Commodity Risk Assessment)

Contradiction Point 2

LPG Export Demand and Capacity Expansion

It involves contrasting statements about the demand for and capacity expansion of LPG exports, which could affect investor perceptions of the company's export strategies and market positioning.

With increased LPG exports, is Asia's re-gasification and petrochemical demand sufficient to absorb it, or will global propane price pressures redirect it elsewhere? - Jean Ann Salisbury (BofA Securities)

2025Q3: Both rezcom demand and petchem demand are growing internationally, tied to supply. The U.S. will export what's needed to balance the market, and prices will adjust accordingly. - Tug Hanley(Senior Vice President of Hydrocarbon Marketing)

Are U.S. LPG shipments being rerouted away from China? How will tariffs and capacity expansions impact the competitive landscape for LPG exports? - Jean Ann Salisbury (Bank of America)

2025Q1: The Houston Ship Channel expansion is capital efficient, with 300,000 barrels a day for $400 million, making it the most competitive terminal fees in the market. - Tug Hanley(Senior Vice President, Hydrocarbon Marketing)

Contradiction Point 3

Capital Allocation and Shareholder Returns

It reflects differing views on the timing and approach to capital allocation and shareholder returns, which can impact investor expectations and perceptions of corporate strategy.

What are the capital allocation plans for the next few years under the increased buyback authorization? What is the steady-state CapEx run rate, and will buybacks be more systematic or opportunistic? - Theresa Chen (Barclays Bank PLC)

2025Q3: Organic growth CapEx next year is expected between $2.2 billion and $2.5 billion. Free cash flow will support buybacks and debt paydown, possibly including programmatic buybacks alongside opportunistic ones. - W. Fowler(Co-CEO & Director of Enterprise Products Holdings LLC)

Have your views on buybacks changed, and how should we assess the execution pace going forward? - Michael Blum (Wells Fargo)

2024Q4: By 2026, with excess DCF, we'll have more flexibility for buybacks and debt retirement. The mid-single-digit growth potential allows for this flexibility. - W. Fowler(Co-CEO & Director of Enterprise Products Holdings LLC)

Contradiction Point 4

PDH Facility Operations and Performance

It involves differing accounts of the operational status and outlook for PDH facilities, which could impact expectations for cash flows and operational performance.

Do you believe the PDH issues are fully resolved now? - Keith Stanley (Wolfe Research)

2025Q3: We've made modifications to address issues on PDH 2. PDH 1 had high run rates, and we're optimistic about improved operations in 2026. - Graham Bacon(Executive VP & COO of Enterprise Products Holdings LLC)

What are the current run rates and plans for PDH facilities 1 and 2? - Jeremy Tonet (JPMorgan Securities)

2024Q4: PDH 1 is experiencing a mechanical issue but should stabilize. PDH 2 has design issues limiting rates, aiming for upper 90% utilization. - Graham Bacon(Executive VP & COO of Enterprise Products Holdings LLC)