Enterprise Products Partners L.P. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report; the filing does not provide a standalone fourth-quarter income statement summary. EPD is a publicly traded midstream energy partnership operating across NGL, crude oil, natural gas, petrochemical and refined-products infrastructure.
Financial and operating performance
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $58.2 billion | $40.8 billion |
| Operating income | $6.9 billion | $6.1 billion |
| Net income attributable to common unitholders | $5.5 billion | $4.6 billion |
| Basic earnings per common unit | $2.50 | $2.11 |
| Net cash from operating activities | $8.0 billion | $8.5 billion |
| Distributable cash flow (non-GAAP) | $7.8 billion | $6.6 billion |
| Distribution coverage ratio (non-GAAP) | 1.85x | 1.66x |
- Revenue rose about 43%, primarily as marketing revenues increased with higher commodity prices and sales volumes. Marketing revenue growth also raised cost of sales; revenue growth therefore should not be read as equivalent growth in underlying margins.
- Non-GAAP total gross operating margin increased to $9.3 billion from $8.6 billion. By segment, NGL Pipelines & Services rose to $5.1 billion; Crude Oil Pipelines & Services declined to $1.7 billion; Natural Gas Pipelines & Services declined to $1.0 billion; and Petrochemical & Refined Products Services increased to $1.5 billion.
- Operating cash flow fell $474 million year over year, largely reflecting working-capital use in marketing activities, partly offset by higher earnings. Investing cash use was $5.0 billion, including $3.2 billion for the Navitas acquisition.
- At year-end, total assets were $68.1 billion, total equity was $27.7 billion and cash and cash equivalents were $76 million. Current liabilities exceeded current assets; liquidity also depends on revolving credit availability and operating cash generation.
- Debt principal was $28.6 billion, including $25.8 billion of senior debt and $2.3 billion of junior subordinated notes; commercial paper outstanding was $495 million. EPO reported approximately 20 years’ average debt maturity and investment-grade ratings of BBB+/Baa1/BBB+ from S&P, Moody’s and Fitch.
- Capital investments in property, plant and equipment were $2.0 billion: $1.6 billion for growth and $358 million for sustaining projects. The fourth-quarter 2022 common-unit distribution was $0.49 per unit, or $1.96 annualized; 2022 declared distributions totaled $1.905 per unit.
Material changes versus 2021
- Navitas Midstream was acquired in February 2022 for approximately $3.2 billion net cash consideration, adding Midland Basin gathering and processing assets. Its post-acquisition contribution included $385 million of NGL-segment gross operating margin and $52 million of natural-gas-segment gross operating margin.
- NGL segment gross operating margin increased $826 million, supported by Navitas and improved processing results. Crude Oil and Natural Gas segment gross operating margins decreased $25 million and $113 million, respectively; Petrochemical & Refined Products increased $160 million.
- Net income attributable to common unitholders increased $853 million. Non-cash impairment charges declined to $53 million from $233 million, while interest expense decreased modestly to $1.24 billion from $1.28 billion.
- Operating cash flow declined despite stronger earnings, principally because working-capital movements were less favorable than in 2021. The 2021 comparison included unusual winter-storm-related market activity and Hurricane Ida impacts.
Outlook, risks and unusual items
- Management estimated 2023 capital investments, net of partner contributions, at $2.7–$2.9 billion, including $2.3–$2.5 billion of growth capital and $400 million of sustaining capital. Forecasts may change with market, cost, supply-chain and project conditions.
- Management expected U.S. production and global liquids demand to grow, while expressing a less constructive view on natural gas prices. It identified uncertainty around economic conditions, China’s reopening, Russian supply and sanctions, and commodity demand.
- Growth projects include new Permian processing plants, an Acadian gas-system expansion, Frac XII, PDH 2, ethane and ethylene export expansions, and a Shin Oak pipeline expansion. Timelines and expected capacity depend on execution and market conditions.
- The proposed Sea Port Oil Terminal (SPOT) received a favorable federal Record of Decision in November 2022, but still required licensing conditions and state approvals. Construction and operation were not assured; SPOT investment was excluded from the 2023 capital forecast.
- Material risks include commodity-price and volume volatility, customer credit and counterparty exposure, inflation and construction-cost escalation, leverage and refinancing, competition, pipeline integrity, cyber incidents, severe weather, environmental regulation and potential climate-related demand or compliance changes.
- In November 2022, a PDH 1 contractor litigation settlement generated $115 million: $99 million reduced property, plant and equipment and $16 million was recognized as other income. No litigation-contingency accruals were recorded at year-end; management said pending litigation was not expected to materially affect consolidated statements. Several environmental notices and enforcement matters remained disclosed, with no expected material expenditure stated.
- The partnership structure entails limited common-unitholder voting rights, potential conflicts involving the general partner and affiliates, and pass-through tax considerations. EPCO and affiliates held approximately 32.4% of common units. One customer, Vitol, accounted for 10.2% of 2022 consolidated revenue.
Most important facts for investors to verify
- How much of revenue and earnings growth reflects durable fee-based volumes versus commodity marketing prices, margins and working-capital swings.
- Whether operating cash flow and distributable cash flow continue to cover distributions and planned growth and sustaining capital; review the partnership’s non-GAAP definitions and reconciliations.
- Debt maturities, refinancing costs, variable-rate exposure, credit-facility availability and the use of January 2023 note proceeds, including repayment of the March 2023 notes.
- Navitas integration and returns, and whether announced growth projects meet budgets, schedules and customer commitments; monitor remaining SPOT approvals and commercial contracts.
- Exposure to customer concentration, related-party arrangements, environmental and pipeline-safety liabilities, commodity hedging outcomes, and partnership tax and governance terms.
Controls and audit: Deloitte & Touche issued unqualified opinions on the consolidated financial statements and internal control over financial reporting; management also concluded disclosure controls were effective.