Enterprise Prods Partners (NYSE:EPD) reported first-quarter financial results on Tuesday. The transcript from the company's first-quarter earnings call has been provided below.
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The full earnings call is available at https://edge.media-server.com/mmc/p/jtvknh7s/
Summary
Enterprise Products Partners L.P reported a strong first quarter 2026 with an EBITDA of $2.7 billion, a 10% increase from the previous year.
The company set multiple operational records, including processing 8.3 billion cubic feet per day of natural gas and fractionating 1.9 million barrels per day of NGLs.
Enterprise Products Partners L.P expects strong international demand for US energy due to disruptions in the Middle East, projecting this demand to continue through 2026 and possibly into 2027.
The company declared a distribution of $0.55 per common unit, a 2.8% increase over the previous year, marking 28 consecutive years of distribution growth.
Capital expenditures for 2026 are expected to be between $2.3 billion and $2.6 billion, with discretionary free cash flow potentially reaching $1 billion.
Management highlighted opportunities in the ethane market and increased petrochemical customer demand as key areas of growth.
Enterprise Products Partners L.P plans to maintain a 50-60% allocation of discretionary free cash flow to buybacks and debt retirement in 2026.
Full Transcript
OPERATOR
Thank you for standing by and welcome to Enterprise Products Partners L.P.'s first quarter 2026 earnings conference call. Currently, all participants are in a listen only mode. After the speakers' presentation there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you'll need to press star 11 again. I would now like to hand over the call over to Joe Theriac, Vice President of Finance and Investor Relations. Please go ahead.
Joe Theriac
Thanks Lateef Good morning and welcome to the Enterprise Products Partners Conference call to discuss first quarter 2026 earnings. Our speakers today will be Co Chief Executive Officers of Enterprise's General Partner Jim Teague and Randy Fowler. Other members of our senior management team are also in attendance for the call today. During this call we will make forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 based on the beliefs of the company as well as assumptions made by and information currently available to Enterprise's management team. Although management believes that the expectations reflected in such forward looking statements are reasonable and give no assurance that such expectations will prove to be correct, please refer to our latest filings with the Securities and Exchange Commission 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 (Co-Chief Executive Officer)
Thank you Joe. We got off to a very strong start this year and the business is performing well across the board. In the first quarter we generated $2.7 billion of EBITDA. In a short quarter this was up 10% over last year. We generated 1.8 times coverage of our distributable cash flow. By any measure, this was an exceptional quarter. The assets we brought online over the past year, including the Bahia NGL Pipeline Fractionator 14 and 3 Permian natural gas processing plants, continued to ramp throughout the quarter. In fact, frac 14 was full on day one. The gas plants were essentially full by mid quarter and if you look at Bahia and Chinook as a system, they are running at 80% of a combined 1.2 million barrels a day of capacity. Operationally, the quarter was outstanding. We set multiple operating records across the system. With the addition of Midtone West 2 in the Delaware Basin. During the first quarter we set a new record for gas processing plant and inlet volumes. We processed 8.3 billion cubic feet per day of natural gas. That was up 7% from last year. We fractionated 1.9 million barrels per day of NGLs. It was up 16%. We loaded 2.3 million barrels per day of hydrocarbons at our docks, up 15%. We transported 14.2 million barrels of oil equivalent per day, up 7%. In total, we set 12 new volumetric records for the first quarter. Those results speak to both the scale of our system and the demand we are seeing across the markets we serve. On the market side, commodity prices were volatile throughout most of the quarter and we tend to embrace volatility. In January, winter storm storm gave us a strong start to the year. Elevated demand for natural gas and propane created price dislocations across our asset network as producers faced widespread supply disruptions following the short drop in temperatures. Our trucks, pipelines and storage facilities enabled us to continue meeting customer needs despite these challenges, while our marketing teams and asset flexibility allowed us to capture incremental value. And this was only the beginning of the volatility we experienced during the quarter. The ongoing conflict in the Middle east and restricted flows through the Strait have driven a substantial increase in demand for all forms of US Energy, petrochemicals and refined products. The supply shock dramatically improved US Petrochemical margins, prompting our domestic petrochemical customers to run their units full out. One week before the start of the war in Iran, ethane to ethylene cracking margins were about 7 cents a pound. Today they're 23. The ethylene to polyethylene spread was 20 cents per pound. Now it's over 45. It's no wonder why my former employer stock is up over 50% here today. International demand for US feedstocks is as strong as we have seen in quite some time. The loss of Middle east hydrocarbon supply fractured the Asian supply chain. China's PDHs are currently, we hear, are currently operating and at less than 50% of capacity. As a result, Asian petrochemicals have been destocking inventories by consuming derivative inventories. The impact to hydrocarbon markets around the world has been significant and we see this strong demand continue through the remainder of 26 and maybe into 27. The demand pull is showing up very clearly in our marine export business. Our crude oil terminals are benefiting from volumes being released from the U.S. strategic Petroleum Reserve that are being directed to international markets. And our ethane and LPG customers continue to line up at our docks for US NGL feedstocks. In the first quarter, we averaged around 70 million barrels per month across our dock and we expect that strength to continue into the second quarter as we are scheduled to load more than 88 million barrels in April on the upstream side, we continue to build on the momentum in our system. Producer activity remains constructive in the basins where we operate and our assets are well positioned to capture volume growth. The combination of strong supply, growing export demand, and new projects ramping into service is creating real operating leverage across the business. We also saw strong contributions from the downstream stack. In addition to record product flows, strong margins across our assets, and high utilization at our PDH facilities that supported solid earnings and cash flow for the quarter. Our new assets are ramping well, volumes are at record levels, demand remains strong both domestically and internationally, and our system is performing the way it was built to perform. We entered 2026 expecting steady production growth and oversupplied markets, which we thought would lead to another year of relatively benign commodity prices. That has clearly not been the case today. We believe the financial markets are underestimating the potential global supply implications from a prolonged closure of the strata Hormuz Depending on the industry expert you have ask, anywhere from 12 to 15 million barrels a day of crude oil, refined products, LPG and petrochemical supplies are constrained, that is almost half a billion barrels of hydrocarbon supplies off the market every month. Shipping and geopolitical commentators estimate that the earliest the Strait could reopen for normal air operations, including vessel repositioning, as July, and that does not account for the time required to repair onshore production and refining facilities damaged in the war. Until global supplies and inventories return to normal, we believe there will continue to be strong international demand for US Energy and products. We are also seeing international consumers look to increase purchases of US Energy as an avenue to improve their US Trade balance and add greater resilience and security to their energy supply chains. Given the current disruption of product flows in the Middle east after the first quarter, we are encouraged by the momentum we are seeing across the business and increasingly confident in the outlook for the year. At the same time, we remain focused on what matters most, operating safely, serving our customers reliable, allocating capital with discipline, and creating long term value for our investors. With that, I'll turn it over to Randy.
Randy Fowler (Co-Chief Executive Officer)
Thank you, Jim, and good morning everyone. Starting with the income statement items, net income attributable to common unitholders for the first quarter of 2026 was 1.5 billion or $0.68 per common unit on a fully diluted basis, which is a 6% increase compared to the first quarter of 2025. Adjusted cash flow from operations, which is cash flow from operating activities before changes in working capital, increased 10% to $2.3 billion for the first quarter of 2026 compared to 2.1 billion for the first quarter of 2025. We declared a distribution of $0.55 per common unit for the first quarter of 2026, which is a 2.8% increase over the distribution declared for the first quarter of 2025. The distribution will be paid May 14th to common unitholders of record as of close of business on April 30th. We are on track for 28 consecutive years of distribution growth in 2026. To our knowledge, this is the longest period of distribution growth of any US Midstream company and is an example of Enterprise's consistency and commitment to returning capital directly to our unitholders. The partnership purchased 3.1 million common units off the open market during the first quarter for approximately $116 million. In addition to buybacks, our distribution Reinvestment Plan and employee Unit Purchase Plan purchased a combined 1 million common units on the open market for $37 million during the first quarter. For the 12 months ended March 31, 2026, Enterprise returned approximately $5.1 billion of capital to our equity investors. 93%, or approximately $4.8 billion, was in the form of cash distributions to limited partners and the remaining 77% through 356 million of buybacks. Our payout ratio of adjusted cash flow from operations was 57% over this period. Since our IPO in 1998, we have prioritized returning capital to our partners, returning over 63 billion through distributions and buybacks. At the same time, we have reinvested capital to build one of the largest energy infrastructure networks in North America. Total Capital investments were $988 million in the first quarter of 2026, which included $783 million of growth capital projects and $205 million of sustaining capital expenditures in the first quarter. We also received the final payment of $596 million from Exxon Mobil for the purchase of a 40% interest in the Bahia NGL pipeline. With the completion of major projects such as the Bahia NGL pipeline and Natchez River Terminal, we believe our expected range of growth capital expenditures for 2026 will net to 2.3 to $2.6 billion. After applying approximately $600 million in proceeds from asset sales already received for 2027, we expect our growth capital expenditures to be in the area of 2 to $2.5 billion. Sustaining capital expenditures for 2026 are expected to be approximately $580 million on the fourth quarter. 2025. Earnings Call we stated that discretionary free cash flow for 2026 had the potential to be in the $1 billion area. Even though our estimate of growth capital expenditures for 2026 has increased by $300 million as a result of investments in two new natural gas processing plants in the Permian, we still believe discretionary cash flow for 2026 has the potential to be in the billion dollar area and, depending on commodity prices and spreads for the remainder of the year, could be higher in terms of allocation of capital. As we have said many times, we see cash distributions to partners grow in commensurate with operational distributable cash flow per unit. Let me repeat that as we have said many times, cash we think distributions to partners will grow commensurate with operational distributable cash flow per unit growth in the near term, we continue to expect discretionary free cash flow to be split between buybacks and retiring debt in 2026. We still expect this split would be approximately 50 to 60% in buybacks. As we have said before, Enterprise's buyback program has both programmatic and opportunistic elements. In periods of momentum and volatility characterized by higher equity prices, we may elect not to chase price and instead retain cash in the opportunistic bucket for buybacks in future periods when momentum has ebbs. Similarly, in periods when there are significant price dislocations in equity prices, we may elect to pull cash forward earmarked for buybacks in future periods, such as bringing cash forward from 2027 to buy back the partnership units at more opportunistic prices in the near term. Our total debt principal outstanding was approximately 34.2 billion as of March 31, 2026. Assuming the final maturity date for our hybrids, the weighted average life of our debt portfolio is approximately 17 years. Our weighted average cost of debt was 4.7% and approximately 95% of our debt was fixed. At March 31. Our consolidated liquidity was approximately 3.3 billion, including availability of our credit facilities and unrestricted cash on hand. As Jim mentioned, adjusted EBITDA increased 10% to $2.7 billion for the first quarter 2026. As of March 31, 2026, our consolidated leverage ratio decreased to 3.2 times on a net basis after adjusting debt for the partial equity treatment of our hybrid debt and reduced by the partners unrestricted cash on hand. Our current leverage ratio reflects significant investment in the large scale projects that we recently brought into service such as the Bahia NGL pipeline port, Niche's terminal and Frac 14, and the midstream Asset Acquisition from Occidental where the debt is on the balance sheet, but the resulting annual adjusted EBITDA generation from these investments is yet to flow into our 12 month trailing EBITDA number. Our overall leverage Target remains at 3 times plus or minus 0.25 times or 2.75 to 3.25. With that Cheryl, I think we can open it up for questions. Thanks Randy Latif we are ready to open the call for questions.
OPERATOR
As a reminder to ask a question, you will need to press Star 11 on your telephone to remove yourself from the queue. You may press star 11 again. Please limit yourself to one question and one follow up or two questions to allow everyone the opportunity to participate. Please stand by while we compile the Q and A roster. Our first question comes from the line of Teresa Chen of Barclays. Your line is open.
Teresa Chen
Theresa, Good morning. Following up on the comments about the uptick for US energy demand in general and export infrastructure demand in particular, can you walk us through the contract duration profile across your export docs today? Specifically, how much capacity is tied to contracts with near term expirations that could be recontracted at higher rates and longer term, how much incremental brownfield expansion capability do you have across your export assets?
Tyler Cott
Hi Theresa, this is Tyler Cott. I'll speak to the NGL exports. Specifically, I think we've said before our NGL export docs are contracted around the range of 90% on LPG. Those contracts go through the end of this decade. On ethane they extend, you know, 10 to 20 years depending on contract. So lengthy duration we have 10% available for spot capacity in the near term, but long term we're significantly contracted.
Teresa Chen
Okay. And on the LPG side in particular, given the recent strength in LPG export arbitrage alongside the commissioning timeline for phase two of the Neches River expansion, can you talk about the incremental earnings uplift or cash uplift from spot cargoes in the interim? And related to this, when do you expect phase two officially enter service to support your term commitments with customers?
Tyler Cott
Sure. This is Tyler Cott. Our operations team has done a fantastic job expediting a bit the commissioning of Neches River Terminal. We're still in the process of commissioning it. We began in the second half of April and at this point we expect to complete commissioning for both ethane and propane sometime in May. In terms of spot utilization and earnings uplift, we really got to get through the commissioning process here and see what we have. I think an important point to note about our export business going forward is we have a significant amount of flexibility. So our spot business will be dictated across different products in terms of what the market needs at a given time.
Jay Behney
Hey Theresa, this is Jay Behney. Just on the crude front of that, we've got a pretty wide mix of contract structures. So contracts that last through 28 and 29 and similar for 26, we have about 10% of open capacity. And yes, I think we're having good conversations about 27.
Teresa Chen
Thank you.
OPERATOR
Thank you. Our next question comes from the line of Spiro Dunas of Citi. Your line is Open. Spiro.
Spiro Dunas
Thanks operator. Good morning team. Want to get back to the growth outlook really quickly. Jim, you sound incrementally more positive than when we last caught up. Obviously a lot has changed. And then Randy, you seem to indicate that your operating cash flow is going to at least sort of mirror the increase in Capex to keep that DCF free cash flow kind of stable. So curious if you just give us an update on the sort of 3% growth you guys are talking about for 26 and the 10% growth you were talking about for 2027 on the last call. And as you answer that question, just curious if these two new processing plants are additive to that 27 outlook.
Randy Fowler (Co-Chief Executive Officer)
This is Jim. Yeah, I think I said modest in 26 and 10% in 27. I think we'll beat modest. As you think about 20. Sorry, go ahead. Yeah. Yes, Spiro, I sort of like the point you made in your note that probably modest is a low bar now and I think you're right. You know again it's sort of hard to come in and look at 2026 because again just what's the duration of these commodity prices going to be and the duration of spreads so really shaping up to be a much stronger year than what we expected. And again because we were really coming in and not expecting much benefit at all from commodity or spread and really we're relying on our fee based businesses so really hard to come in and give much guidance because it's, you don't have much visibility especially when you come in and look at the futures market because we don't think the futures market really is representative of what the physical markets could be. So but the end point is 2026 looks to be a much more favorable year than when we first started commercial. Guys team did a great job in underwriting two more natural gas processing plants in the Permian which really then will come on during 2027. We really did not have those baked into our 2027 numbers at the time. So that would be additive. And then from the same token, I think we're still in good shape to come in and do meaningful buyback and meaningful debt retirement in 2026, even with CapEx kicking up a little bit for these two new plants.
Jim Teague (Co-Chief Executive Officer)
Yeah, Samir, I've been around a while and I have never seen a supply disruption like we're experiencing today. That supply disruption creates a lot of benefits that enterprise is able to capture.
Spiro Dunas
Yes, and that's actually a good segue to the second question. Jim, you also talked about embracing volatility. And I know we go back a few years ago, you used to sort of talk about this sort of $500 million or so of outsized spread gains you guys would sort of find in any given year that's been absent for about maybe the last two years or so. Just curious, it sounds like that's back.
Jim Teague (Co-Chief Executive Officer)
I don't want to put too fine a number on it, but in the environment you're seeing now, do you think we see a return to that 500 million? And what parts of the market do you see that from? Obviously export being a big one. I don't know. I don't know if it's going to be 500 million, 600 million or 700 million, frankly. But I do expect that we're going to have what you call outsized spreads, frankly. Typically we have it every year. We just don't know which spread it will be. Last year was pretty benign and unusual for us as to what specifically it might be. I'll throw it to Tug.
Tug
Yeah, this is Tug. I'll just add, I mean, this first quarter we had some outside spreads on natural gas. Winter Storm Firm presented some opportunities, but largely the spreads that we've seen post Iranian conflict, those will come second quarter.
Spiro Dunas
Great helpful color graphics. I'll leave it there. Thank you. Thank you.
OPERATOR
Our next question comes from the line of Jean Ann Salisbury of B of A. Your line is open.
Jean Ann Salisbury
Jean Ann. Hi, good morning. We talked about this a little bit at the dinner, Tug. But it seems like international crackers that are running ethane are pretty happy that they do so right now. Has there been any interest in the last couple of months in more international conversions to ethane that could drive the next leg of about ethane demand.
Doug
Hi, Jean Ann. Yeah, this is Doug. So, yes, they were happy prior to the conflict and they're even happier now. I will say that the interest and demand we've seen on ethane specifically, and I'll even throw LPG in there, we had quite the appetite for demand prior to the conflict. And I would say we have this similar appetite for demand post conflict. It made sense before and it still makes sense today.
Jean Ann Salisbury
That's helpful. And I guess as a follow up to that question, how. What's kind of the timeline if a cracker does decide to convert to ethane or take more ethane to the ethane being delivered, should we expect like basically a couple years for them and you to build that capacity?
Doug
That's probably. It's not overnight, Genan. I think your couple of years is probably in the ballpark.
Jean Ann Salisbury
All right, thank you. I'll leave it there. Thank you.
OPERATOR
Our next question comes from the line of Michael Blum of Wells Fargo. Your line is open, Michael.
Michael Blum
Thanks. Good morning, everyone. You know, at dinner a few weeks ago, you didn't really think you'd see any permanent shifts in where global buyers are going to source their hydrocarbons. I thought maybe they'd shift more to the US but you seem to think that that wouldn't happen. Curious. Just if that's. If you've had any change in your thinking there. And in a similar vein, I think at the time, you didn't really think we'd see any reaction from the US Producers. And I'm curious if you still think that's the case.
Jim Teague (Co-Chief Executive Officer)
Take the second one first. Jay and Natalie, what reaction by US Producers?
Natalie Gaydon
This is Natalie Gaydon, I'd say, and Jay can chime in here. I don't know that US Producers have done much different. It seems to be that they're staying pretty disciplined. And sure, we see some movement and rig activity to different, maybe producing zones or maybe different areas of their acreage, if they have discretionary acreage. But other than that, I'd say they're keeping discipline.
Jim Teague (Co-Chief Executive Officer)
I'd agree with Natalie. We do hear some conversations from the independents about cadence maybe moving up where they think they can. On our gathering systems. We've seen incremental growth, call it over the last three months, but that could just be anecdotal. As to the first question, Gen, you know, a supply disruption, like we have changes a lot of things, and we're seeing interest from countries like India. But, you know, it's a funny thing. We're geographically challenged when it comes to lpg, and, and the question will be, when this is all over and everything returns to normal, do they still want to lift us LPG when the AG is so close to them? Right now, they're showing a lot of interest.
Michael Blum
Okay, thanks for that. The second question was just on Capital allocation. Randy, appreciate your comments on the $1 billion of discretionary cash. The question is, assuming you you're able to realize stronger results this year as a result of the conflict, and would you maintain that 50 or 60% allocation to buybacks first debt pay down or if that billion dollars turned into 1.5 billion, for example, would the incremental above plan just go to buyback since your leverage is already within the target?
Randy Fowler (Co-Chief Executive Officer)
Thanks. Yeah, Michael, I like the way you're thinking this morning. Yeah, Michael, I think we would still in the near term, when we think about 2026, we'd probably still maintain that 50 to 60% split. You know, 2027 could be a different story, but I think 2026 still probably maintain that split. Thank you. Thank you.
OPERATOR
Our next question comes from the line of Brandon Bingham of Scotiabank. Please go ahead. Brandon.
Brandon Bingham
Hey, good morning. Thanks for taking the questions. Just thinking about the two new plant announcements in the Permian and I know it's barely hasn't even really been a month since the macro update, but just curious what you think the go forward cadence should be for Permian processing capacity. I believe previously you guys were around one or two a year with the thought process. Do you think we're moving more to a two plus environment or just how should we think about that moving forward?
Natalie Gaydon
This is Natalie Gaydon. I think we're probably trending closer to 2 and obviously that depends on how gors shape up. But Corey's showing you that gors are increasing. That is definitely true. So I'd say we're trending more to 2 per year.
Brandon Bingham
Okay, great. Thank you. And then maybe just shifting over to the global supply demand dynamics, especially on the demand side. Just curious what you guys are seeing for refined products and crude and what that might mean for your export business moving forward.
Jay Behney
Yeah, Brandon, this is Jay again. Yeah, we've seen volumes leave our dock. I mean you go back to first quarter last year, I think we for fourth quarter we were up 70,000 barrels a day on exports. And then add that to the first quarter, that's another 70. With the SPR barrels now looking for second quarter, I mean we could be well over a million barrels a day.
Brandon Bingham
Okay, great. Thanks. Thank you.
OPERATOR
Our next question comes from the line of Manav Gupta of UBS. Please go ahead, Manav.
Manav Gupta
Good morning. Congrats on the good results. I just wanted to quickly focus on slide 17. It looks like PDH units are operating much better based on that slide. And I think you did do some kind of turnaround on The PDH unit too, and it's been operating better after that. Can you speak to those dynamics, please?
Graham
Yes, this is Graham. PDH2 has been running much better and much consistently since the turnaround that we had last year. The teams have put a lot of work in, work very closely with our licensing partner and have resolved a number of the issues that we had. And I'm looking forward to sustained operation of that unit, PDH1 as well. And we've invested a lot over the years in improving the reliability and we still have some projects that we're working. But I think what you're seeing in PDH one much improved reliability in that unit as well due to the investments that we've made over the last few years and reliability as well. The teams. We've got good teams working out there and we're just knocking down the barriers that we've had out there over previous years. And good work by those folks out at our Mont Belvie PDH team.
Manav Gupta
Perfect. My quick follow up is the macro comments you made at the beginning of the call, which were actually very informative. And you know, you talked about 15 million barrels of total disruptions and then straight probably normally operating, maybe only in July. I'm just trying to understand what does this do to the various storage levels of crude refined products lpg, do you think, like. Because based on this depletion, like storage levels could probably take a year or so to get fully replenished here. If you could talk about some of those dynamics, please.
Jim Teague (Co-Chief Executive Officer)
So if we look at the numbers, and I think Jim was pretty spot on with saying around 500 million barrels a month of lost supply, depending on who you ask. As he pointed out, it's somewhere between 10 and 15 million barrels a day of lost supply through the Strait of Hormoz. That's crude oil products and NGLs. So just take 12 million barrels, for example. Multiply that times 60 days, you've lost 720 million barrels through the strait for global supply. So imagine if we can get back to normal and let's say we're down a handful of barrels. You're only going to get maybe a million or 2 million barrels above that. So it could take years to get back to where we were before the war. What we don't know is what's been destroyed or damaged by the war and what it takes to repair that. I mean, we've heard about the train that Qatar has, but there's still not a hell of a lot of information as to what other assets have been damaged.
Manav Gupta
Thank you so much. Thank you.
OPERATOR
Our next question comes from the line of John Mackay of Goldman Sachs. Your line is open, John.
John Mackay
Hey, good morning, everyone. Thank you for the time. I just want to go back to the 2027 kind of soft guide from the last call. You talked about it a little bit earlier in this one, but I just want to put a little finer point on it. When you shared that update, were you thinking of 27 being a kind of what had at the time thought to be a kind of softer 2026 macro environment or 2025 macro environment where we weren't going to have a lot of spreads? Or was 2027 meant to be a more kind of normalized environment, maybe closer to what you outlined in the fundamentals update a couple weeks ago? Maybe just kind of walk us through the kind of macro behind the 27 piece.
Randy Fowler (Co-Chief Executive Officer)
Yeah, John, this is Randy. I appreciate the question. Really what we were looking at when we saw the potential for 2027 was really just fee based EBITDA growth. It was, you know, we were in a situation in 2025 and coming into 2026, Jim mentioned earlier, it was really a benign environment for commodity prices and spreads. So really the driver was really fee based cash flows off new assets going into service. And also around the acquisition that we did from Occidental Petroleum that you start seeing those volumes show up on our system at the beginning of 2027. Those are really drivers.
John Mackay
I appreciate that. That's clear. Thank you. And then maybe just switching to kind of the broader macro. You guys have commented a couple times on this call about the disconnect between the, let's say, paper market and the physical market. Can you talk a little bit more about that and maybe what you think is driving the divergence or what could drive a convergence in that.
Tug
Yeah, this is tug. You're seeing strong physical premiums, for example, in dated Brent. But I really think what we're alluding to is the Ford market may not be accurately reflecting what we're seeing in the physical market. It's probably not high enough.
John Mackay
Make it sound like you'd expect the kind of futures market to drift up over time even if we get closer to, let's say, some clear resolution in this rate. It sure looks like it. Looks like it. All right, Appreciate the time. Thank you. Thank you.
OPERATOR
Our next question comes from the line of Gabe Dowd of Truist. Your line is open, Gabe.
Gabe Dowd
Thanks, operator. Morning, everyone. Thanks for the time. Was hoping maybe to just touch on the gas side just for a second. Maybe Haynesville gathering. We're in the shoulder season now in front month at 250. We'll see what happens in the summer. But curious if you're seeing any change in behavior. It does seem like privates build productive capacity to turn on at the appropriate price signal. But curious if you're seeing any change in behavior.
Natalie Gaydon
This is Natalie Gaydon. You're right. The privates, you see some rigs or quite a few rigs actually running. So I think we expect a little bit of pop on our system in the Haynesville at the end of the year. But otherwise it looks pretty steady for the most part. Maybe it'll be a growth. I don't know what Corey's got in the forecast, something like that.
Gabe Dowd
All right, Natalie, got it. Thanks, Natalie. Just a quick follow up. Maybe shifting back to the Permian as the commercial team tends to win some new business, obviously competitive basin. But just curious what's most important to producers today? Is it reliability just given where pricing is fees, maybe differentiation given your sour gas capabilities. Just trying to frame the competitive dynamics today. Thanks guys.
Natalie Gaydon
Well, we always use our integrated value chain to compete. There's no doubt about that. And then cost of capital and what it takes to build out whatever a producer needs. I will say an established footprint that far reaches into areas of the basin that people are producing in is a competitive advantage because you're already there. And when producers want to bring on gas and the next 12 months you kind of have. You already have a foot in the door per se. So I would say a mix of all of the things integrated value chain and just geographical position in the basin.
Jim Teague (Co-Chief Executive Officer)
I'll just try to add that Natalie operates a SEAPRA system out there which provides our customers a lot of reliability. Yep, understood. That makes sense. Thanks everyone. Thank you.
OPERATOR
Our next question comes from the line of Julian Doman Smith of Jefferies. Your line is open, Julian.
Rob Mosca
Hi, good morning everyone. This is Rob Mosca on for Julian on the CapEx revision and the plan fids. I would imagine you'd line a site to these projects when you issued guidance last quarter. Should we interpret this to mean that incremental fids like a new frac could bias 26 capex higher and is what you have now actually a pretty firm number? And also maybe if you could provide an update on those commercial agreements you spoke to with Exxon last quarter. Thanks.
Randy Fowler (Co-Chief Executive Officer)
Yeah, the first part of your question. No, our CAPEX guide does include anticipated projects that are under development. I won't talk to specifically any unannounced projects but we do have some projects that are under development that are in that guide. Previously, where we were, we had on the two processing plants that we just announced with the earnings release this morning, we actually had the long lead items associated with that plant in our guide. We just did not know as far as when we were going to come in and actually FID those. And the fid, again, just with the volume growth we've seen in the Permian, the FID came earlier. So that was, if you would, the reason for the increase in the CAPEX guide for this year. Because we'll see some of that CAPEX happening late this year.
Zach Strait
And this is Zach Strait on the NGL side. On the fractionation side, Natalie mentioned she's probably up on the upper end of her guidance. So we're always looking at building fractionators. We like to bring on fractionators. Full helps the economics. We've got a lot of levers within the system. Honestly, we were probably a little late on 14, but we got a lot of levers. So we'll see if we need another fractionator and if we do, we'll build one. Not sure what your question is on
Rob Mosca
the Exxon side, but on the downstream agreements I would say that we talked about, I would say a lot of those agreements were just extensions of deals that we already had and it was just a natural fit, while we're in the conversations about Bahia, to go ahead and extend those contracts. Got it. No, that addressed it. Thanks for that and for my follow up. Just wondering how we should think about the quantum of LPG that could be shipped out of NRT 2 phase 2 once it's online relative to the 360,000 barrels per day refrigeration capacity. It seems like you guys might have just one dock there. And wondering how contracted that capacity is until that EHT expansion comes online on the LPG side at the end of this year.
Tyler Cott
Thanks. Yeah, this is Tyler Cott. I'll just reiterate again that over the longer term we're contracted around the range of 90%. We have propane contracts that will start to ramp pretty quickly at nrt. And I think, as we've said before, we expect NRT to do a good amount of propane in the balance of this year and that will transition to ethane as our EHT capacity comes online late this year.
Rob Mosca
All right, appreciate the time, everyone. Thank you.
OPERATOR
Our next question comes from the line of A.J. o' Donnell of TPH. Please go ahead. A.J.
A.J. o' Donnell
Good morning, all. Wondering if I could just go back to some of the comments on damaged infrastructure in the Middle East, I think we saw from Saudi Aramco this morning they're going to be halting LPG shipments through May. There's been some published price indexes from third party sources showing that spot loading rates in the US Gulf coast have been as high as 55 cents. And just wondering, given that phase two of Nages river will be up soon, curious how you would characterize that rate and what maybe you're seeing in terms of spot opportunities and how that could affect the return profile of your two new export projects.
Tyler Cott
Yeah, we've seen elevated spot rates. They've been volatile, they've been as high as kind of what you mentioned and they're off from those highs now. I think going back to what I said earlier, our system now has a significant amount more flexibility than it did previously. And so we'll respond to what products the markets need and have the highest value with the spot capacity that we have available. Those products being ethylene propylene, LPG and ethane.
A.J. o' Donnell
Okay, great. Then I just had one more on the crude business. Looking at the Q1 results. Just could you provide a little bit more detail on kind of the specific drivers behind the lower sales margin and lower transport revenues? Curious, with the higher commodity strip and overall volatile basis spreads that you guys have been citing, is this something that we could see kind of reverting in Q2 and the rest of the year? Thanks. Yeah.
Jay Behney
AJ this is Jay again. You know it's Q1 results. You know we had a headwind with the Eagle Ford JV renegotiation on some fees there and then some mark to market noise, lower spreads. But you brought up looking forward, the spreads increasing. That really didn't take place until call it April business. But your point's valid. We see definitely at least as April looks now that turning around.
A.J. o' Donnell
Okay, thank you very much. Thank you.
OPERATOR
Our next question comes from the line of Jeremy Tonette of JPMorgan Securities. Your line is open. Jeremy, hi, good morning.
Jeremy Tonette
Good morning. Just wanted to come back to some of the commentary that you provided on the macro level and just wanted to see, I guess you know, the industry, as you said, I don't think has really responded with a lot of new rig activity and wondering what you think the industry would need to see in the market to pick up activity and
Natalie Gaydon
do you expect us to get there? We hear from producers is they're going to stay disciplined. Go ahead, Natalie. I think that's true. I mean stay disciplined. You'll have a few companies that May break out from the pack, but they're private in nature and don't add a whole lot to the bottom line. So that's what we're seeing.
Jeremy Tonette
Do you see any certain price levels out there in the 27 curve that might start to warrant more activity or
Tug
just can't tell that? No, this is tug. I don't think it's necessarily a specific price level. It's probably more focused on the back of the curve being lifted up and not just next year. Needs to get lifted up for many years beyond that.
Jeremy Tonette
Got it, thanks. And then just wondering for the CapEx backlog as a whole, if you might be able to share, I guess, how much of that could be allocated to kind of projects that have not taken FID yet. Just trying to get a sense for.
Randy Fowler (Co-Chief Executive Officer)
For how that might look. Oh, for 2026, Jeremy, that's getting pretty granular. Probably
Jeremy Tonette
27 works as well.
Randy Fowler (Co-Chief Executive Officer)
Thank you. Oh, 2020. Probably for 2027, Chris. I mean, I would say probably half of 2027 is not spoken for. That's very helpful. Yeah, thank you. Somewhere between 50 and 65%.
Jeremy Tonette
Thank you. Thank you.
OPERATOR
Our next question comes from the line of Keith Stanley of Wolf Research. Please go ahead. Keith. Hi, good morning.
Keith Stanley
Wanted to clarify on Neches River Phase 2, would you have contracted any of the LPG shipments on that since it's only an interim service until you switch to ethane, or is that all spot and then just want to confirm the timeline you would switch to ethane. You're required to do that at year end. We do have propane contracts that will be ramping up here at NRT on the flex train. And then as EHT comes online, we'll satisfy that contract demand long term. At EHT, our ethane commitments are generally driven by when the VLECs arrive, and largely that's later this year and into next year. Got it. Bigger picture question as a follow up, what would you say is the biggest opportunity for enterprise? With the situation in the Middle east and some of the commodity dynamics, is there any particular business or commodity that you see as most exciting that you call out or things we might not be thinking about?
Jim Teague (Co-Chief Executive Officer)
Frankly, I think ethane has surprised me. The appetite for it. I could see that growing. And another one is we're going to ship out, what, Chris? Three million barrels of ethylene this. This month? That's right, Jim. Yeah. Our ethylene exports over the last couple months have been really high. What excites me is how we have broadened the offering across our docks. We're not just an LPG dock. We're not just a crude oil dock. We're a hydrocarbon dock. And I think I'd like to see that grow. We've got our own target support where we like to be. That I'm not going to share. But I like the broadening of the offerings rather than a specific project.
Randy Fowler (Co-Chief Executive Officer)
Thank you. And probably the only thing I'd add to that just really what this just the improvement in fundamentals for our petrochemical customers has really been a big change, which is good to see for them. And we'll get the benefit from just volumes going through the system, but that's much improved. Yeah. Healthy petrochemical business is good for enterprise and they were running pretty strong before this. What's changed? So making a heck of a lot of money.
Keith Stanley
Thank you.
OPERATOR
Thank you. Our next question comes from the line
Jason Gableman
of Jason Gableman of TD Cohen for. Please go ahead, Jason. Yeah. Hey. Most of my questions have been answered. I want to ask about another commodity exposure you guys have around octane enhancement. I think in 2022 that business did in 23, north of $400 million of gross margin. How are those spreads looking right now? Do you see that repeating this year?
Jim Teague (Co-Chief Executive Officer)
We just now are coming out of a turnaround on our Olaflex unit. And so we're not able to get full capacity, but we're coming out of that and we think it's going to be strong through the. Through the quarter. Got it. That was. That was it for me. Thanks for the question.
Jason Gableman
Thank you.
OPERATOR
I would now like to turn the conference back to Joe Theriac for closing remarks.
Joe Theriac
Thanks, Latif. And thank you to our participants for joining us today. That concludes our remarks. Have a good day.
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