Yahoo Finance EnLink Midstream LLC (ENLC) Q1 2024 Earnings Call Transcript Highlights: Strategic Moves and ...
Adjusted EBITDA: $338 million, driven by Louisiana system strength.
Free Cash Flow After Distributions: Approximately $74 million.
Common Unit Repurchase: Approximately $50 million spent, reaching nearly 10% of units outstanding over two years.
Leverage Ratio: 3.3 times at the end of the first quarter.
Common Unit Distribution: Maintained at 13.25 cents per unit, a 6% increase over the first quarter of 2023.
Segment Profit - Permian: $89 million, including costs related to plant relocations and unrealized derivative losses.
Segment Profit - Louisiana: $110.4 million, benefiting from price volatility and strong NGL segment results.
Segment Profit - Oklahoma: $85.7 million, impacted by lower volumes and contract resets.
Segment Profit - North Texas: $59.8 million, affected by lower volumes and price-related shut-ins.
Adjusted EBITDA Guidance for 2024: Between $1.31 billion and $1.41 billion.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
EnLink Midstream LLC generated $338 million of adjusted EBITDA, showcasing the resiliency of their business model despite weather impacts.
The company successfully executed a capital-efficient, quick-to-market de-bottlenecking project in Louisiana, which is fully subscribed by high-quality customers.
EnLink Midstream LLC continues to advance in the CO2 transportation sector, operating both newbuild and converted CO2 pipelines, despite industry-wide slow development.
The company has a strong focus on returning capital to investors, having repurchased approximately $50 million of units in the quarter, reaching nearly 10% of units outstanding over two years.
EnLink Midstream LLC is well-positioned to benefit from the rising demand for natural gas, driven by the AI data center boom and LNG expansions, predicting significant future growth.
Negative Points
The CCS industry development has been slower than anticipated, affecting the pace of project executions and partnerships.
Operational challenges such as plant relocations and winter weather impacts led to increased operating expenses and affected volume outputs in certain regions.
Segment profit in Oklahoma and North Texas decreased due to lower volumes and one-time contract resets, indicating potential volatility in these markets.
The company faces uncertainty in the timing and scale of future CCS projects, as progress depends on external partnerships and regulatory developments.
Despite holding a strong position, EnLink Midstream LLC must navigate the complexities of a changing energy market, where delays in project executions and shifts in energy demand could impact growth.
Q & A Highlights
Q: Can you provide more detail on the status of the carbon capture project, especially given the urgency due to capture obligations coming in 2025? A: Jesse Arenivas, CEO of EnLink Midstream, mentioned that discussions continue regarding the carbon capture project, with significant progress in defining the scope of additional projects. However, the industry has developed slower than anticipated, and definitive agreements with emitters and sequesters are necessary before finalizing anything. EnLink is gaining practical experience in CCS at their Bridgeport facility, which is crucial for future operations.
Q: How are the first quarter items like shut-ins in Oklahoma and weather impacts in the Permian expected to influence the second quarter? A: Benjamin Lamb, EVP and COO, explained that most shut-in activity in Oklahoma is resolving, with a robust schedule of well connections expected. In the Permian, excluding weather impacts, volumes were stable, and the upcoming online TIGER-2 plant will support further growth.
Q: What is the outlook for CapEx in 2024 and 2025, especially with the Henry Hub Two River project and potential reductions in CCS budget due to delays? A: Jesse Arenivas stated that the midpoint of the 2024 CapEx guidance remains unchanged at $65 million, with no additional funds required for the Henry Hub River project this year. For 2025, they do not anticipate significant deviations from the current run rate. The $50 million allocated for CCS in 2024 might not be fully utilized due to slower project developments.
Q: Can you update on the potential for adding processing capacity in the Permian beyond the TIGER-2 plant? A: Jesse Arenivas highlighted that with three successful plant relocations to the Permian, EnLink can closely align capacity additions with actual needs. This strategic flexibility allows them to optimize timing based on producer plans and market conditions.
Q: What are the prospects for commercial activity and pipeline projects in Louisiana compared to six months ago? A: Dilanka Seimon, EVP and Chief Commercial Officer, noted increased realization of demand, particularly as industrial facilities adapt to dynamic market conditions. The recontracting success and quick project executions reflect strong market demand, with several other projects being pursued actively.
Q: How does the investment grade rating influence your balance sheet strategies, particularly regarding debt structure and preferred equity? A: Benjamin Lamb discussed that the existing debt structure, established when base rates were lower, already benefits from low costs, limiting optimization opportunities. While they might reduce preferred equity opportunistically, significant actions are unlikely as they aim to maintain the investment grade rating and focus on returning capital to common unit holders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
