Ladies and gentlemen, thank you for standing by, and welcome to the 2nd Quarter Enterprise Product Partner Earnings Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker, Randy Burkhauser.
Please go ahead.
Good morning and welcome to the Enterprise Products Partners conference call to discuss 2nd quarter 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 and will assist on the call today. 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 and information currently available to Enterprise's management team. Although management believes that the expectations reflected in such forward looking statements are reasonable, we 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 any forward looking statements made during this call. And with that, I'll turn the call over to Jim. Thank you, Randy. I said at the beginning of the last call, we were talking about Q1 earnings. While I thought it was supposed to be an earnings call, I thought it was going to be a COVID call and that's what it turned out to be.
So sticking with that theme, I guess today we're going to tell you our COVID story. For the Q2 of 2020, we reported EBITDA of $2,000,000,000 compared to $2,100,000,000 for the same quarter last year. Our DCF, I think you saw in the press release, was 1.6 coverage. And year to date, we've retained $1,200,000,000 And so else we're quite proud of is this is the best first half safety performance that we've ever had at Enterprise. Given what we've all gone through, as you would expect, our volumes were down as a result of the pandemic and the oil price crash, but they are quickly improving.
With all of the events, our results for the Q2 highlight the diversification of our system, the quality of our customers, cost control and the responsiveness of our assets and our employees during what was probably the most challenging quarter of my career. Our profits were protected by a strong base customer obligations and the natural hedge we have in our storage and marketing activities, which enabled us to largely offset the weakness in our natural gas gathering and processing and petrochemical businesses. The facts are we are in the commodity service business for us both on the supply and demand side of the equation. We transport, store, upgrade and buy and sell multiple energy commodities. Because we're so tightly integrated, we have a lot of tools at our disposal.
When the market says store crude, we can. When the market says store diesel but give me LPG, we convert wells and do so. When the market says store Y grade, we store Y grade. In addition, our people and our systems have a strong history of performing no matter the type of crisis, and our balance sheet always has the dry powder to move quickly. We usually get the question of how much our results are nonrecurring.
It's the same question we got when blew through South Louisiana and literally knocked out every plant we had. Narco was down for months as was Promix, Menace and Neptune. Demand came back before indigenous supply and we made more money with our West to East pipelines than if those plants had been running. So it was nonrecurring. We got that question during Hurricane Ike in 2,008, which went right over Mont Belvieu.
We had Mont Belvieu up before producers could even get their supplies back home. Got that question in Hurricane Harvey in 2017 when production never stopped, but virtually all of our customers quit taking, in some cases, for months, and we never interrupted a single contract customer. Events like what we are going through now and the opportunities they present may be labeled as nonrecurring, but our performance and our results are recurring regardless of the environment. We outlined in today's earnings release that petrochemical and refined product service segment was particularly hit hard due to the decrease in demand for those products. However, we remain encouraged by the efforts of most companies to reopen their economies.
In addition to being one of the largest refined products consumers in the world, the U. S. Is also a substantial exporter of refined products, especially to Latin America. As you all know, during the Q2, refining utilization rates bottomed in April, which negatively impacted our propylene octane enhancement businesses due to lower feedstock availability and a decrease in international demand. Currently, the refining industry has recovered to near 80%, which has facilitated an improvement in both propylene and octane enhancement.
On the production side, our natural gas gathering and processing were impacted by low prices and some shut in production. While those shut ins were not insignificant, for the most part, they were relatively short lived and volumes on our system are recovering. We've made substantial progress in deferring and reducing capital by $1,000,000,000 and we continue to discuss JV opportunities, which further reduce our capital. In addition, Graham and his folks have reduced 2020 sustaining CapEx by $100,000,000 That said, we have some important projects coming online over the next few months. In the Q3, our 11th fractionator and the echo segment of Wink to Webster are expected online.
And in the Q4, we expect to complete our rich gas pipeline to Carthage, add a DIB at Mont Belvieu and complete a strategic ethylene tank and pipeline build out. We continue to make strides in our petrochemical segment, which we have always described as an extension of our NGL franchise and our value chain. Because we are probably the only midstream that's fairly big in the petrochemical midstream space, it's easy to underestimate the long term strategic importance of what we're doing. Rather than being a feedstock starved olefin industry with a handful of players, the United States, especially in ethylene, has quickly moved into being the world's incremental supplier. This is really no different than what has happened in LPG over the last 10 years, where the U.
S. Has moved from being an importer supplying over 75% of the world's demand growth. In short, to meet the world's growing demand for primary petrochemical products, Enterprise built the world's 1st open access hub for polymer grade propylene. Now we have developed the first hub for ethylene. These hubs are transforming how ethylene and propylene markets transact and will create a true marketplace for the world's primary petrochemical producers, consumers and traders.
These hubs provide the essentials for an efficient market, reliable supplies, price transparency and access to domestic and global markets. In June, we loaded a record sized ethylene cargo of £44,000,000 Then in July, we successfully loaded combination cargoes of NGLs and olefins on the same vessel, including the simultaneous loading of propane and polymer grade propylene into separate compartments on a DLGC at our Ship Channel facility as well as a simultaneous loading of ethane and ethylene on a vessel at our Morgan's Point facility. Both vessels were the 1st export cargoes of their kind from the U. S. Co loading olefins on larger vessels with NGLs allows for more efficient use of dock capacity, but it also provides significant freight benefits to petrochemical export customers.
I thought I'd also spend a minute to talk about what we're doing to keep our business running while keeping our people safe. We started out the quarter with much of our headquarters staff working from home. But over the last few weeks, we've been gradually bringing our headquarters personnel back into the office and are essentially staffed at this point, fully staffed. In addition to helping our employees understand social distancing, we also now require face coverings at all times in our office. It's an adjustment, but we have adjusted.
And thanks to our people taking personal responsibility both in and out of the office, our case count has been minimal. I will sincerely want to thank our people for their flexibility, their adjustments and their sacrifices. And I would also like to give a shout out to our operations and commercial folks that were not able to work from home. Plans and pipelines don't run themselves. There's no such thing as a home based control center.
And the collaboration between our commercial people that we ask to be here, my ask might be too soft, but we told to be here, went a long way to achieving those results. I guess and finally, I'd just like to say that I think we've got the best employees in the business and I think their performance this quarter reflects that and I just want them to know how much they're appreciated. Randy?
Thanks, Jim,
and good morning. I'll start with the income statement for the Q2. Net income attributable to limited partners for the Q2 2020 was $1,000,000,000 or $0.47 per unit on a fully diluted basis. This compares to $0.55 per unit for the Q2 of 2019. Net income for the Q2 of 20 associated with the OTA Holdings Corporation we acquired from Mark Broward and Falls in March 2020 in the settlement of the liquidity option agreement related to our acquisition of Oil Tanking back in 2014.
Moving on to cash flows. Cash flow from operations was $1,200,000,000 for the Q2 of 20 20 compared to $2,000,000,000 for the Q2 2019. Changes in operating accounts or think of it as working capital accounted for approximately $660,000,000 or 80 percent of the $842,000,000 decrease in cash flow from operations between the two periods. We used working capital to fund our marketing and contango activities during the quarter. We currently expect this usage to peak during the Q3 of 2020.
Excluding changes in working capital accounts, cash flow from operations for the Q2 of 2020 was about 10% lower than the Q2 of last year. The change in distributable cash flow between the two periods mirrors this with a decrease of approximately 8.4%. Free cash flow, which we define as cash flow from operations less investing cash used in investing activities plus contributions from our joint venture partners was $305,000,000 for the quarter, which again was reduced by our use of working capital. Free cash flow was $2,700,000,000 for the 12 months ended June 2020, which was 27% higher than the comparable trailing 12 months ending in June of last year. We define payout ratio as the sum of cash distributions and buybacks as a percent of cash flow from operations.
Our payout ratio was 83% for the Q2 of 2020, which is an inflated percentage due to our use of cash flow from operations used for working capital purposes. For the trailing 12 months, it was 62%. We declared our distribution of 0.445 dollars per unit with respect to the Q2 on July 7, and it will be paid August 12. This distribution represents a 1.1% increase when compared to the same quarter of 2019 and is flat to the prior two quarters. As we stated on our Q1 call, given the uncertainty of the macroeconomic backdrop, our Board will continue to evaluate our distribution growth quarter by quarter in 2020.
Additionally, EPD's distribution reinvestment plan and employee unit purchase plan purchased a combined 1,900,000 EPD units in the open market during the 2nd quarter, which rivals the dollars of projects under construction and underwritten by long term contracts. Our capital investments were $910,000,000 during the 2nd quarter, which includes $74,000,000 for sustaining capital expenditures. We still anticipate spending between $2,500,000,000 $3,000,000,000 in growth capital projects for this year and approximately $300,000,000 for sustaining capital expenditures. For 2021 and for 2021 2022, we currently anticipate Growth Capital Investments to be approximately $2,300,000,000 $1,000,000,000 respectively. This is an aggregate $700,000,000 reduction from guidance we provided for 2021 and 2022 at the end of the Q1.
The changes were largely attributable to the indefinite deferral of several expansion projects, of which some of the largest were at our Houston Ship Channel facility. We continue to engage with industry participants regarding potential joint ventures or sanctioned projects, but the pace of these discussions have slowed due to COVID-nineteen. Our capital expenditure forecast excludes our proposed spot offshore crude oil terminal that is subject to government approvals. Currently, we do not expect to receive these approvals in 2020. Moving on to capitalization.
Our total debt principal outstanding was approximately $30,000,000,000 at June 30, 2020. Assuming the first call date for our hybrids, the average life of our debt portfolio was almost 16 years. Assuming the final maturity date for the hybrids, the average life was almost 20 years. Our effective average cost of debt is 4.5%. Adjusted EBITDA for the trailing 12 months ended June 30, 2020 was $8,000,000,000 and our consolidated leverage ratio was 3.4 times after adjusting debt for the partial equity credit for the hybrid debt securities and also further reduced by unrestricted cash.
Our consolidated liquidity was approximately $7,300,000,000 at June 30, including availability under our existing credit facility and approximately 1 $300,000,000 of unrestricted cash on hand. Finally, before we open it up for Q and A, I want to mention that we also announced this morning in a separate press release that our 2019 2020 Sustainability Report, which reflects our latest environmental, social and governance disclosures, is currently available on our website. We have also initiated the annual review process with the independent sustainability rating providers and believe our disclosures and initiatives, which are described in this comprehensive 104 page report, will be reflected in updated scores. We believe our stakeholders will find these efforts beneficial. We thank our customers, community leaders, banks, debt and equity investors and Board members for their participation in our sustainability survey that drove the outline for this report.
With that, Randy, I think we can open it up for questions.
Okay, Sydney. We're ready to take questions from our listeners.
Certainly. And our first question comes from the line of Jeremy Tonet with JPMorgan. Your line is open.
Hi, good morning.
Good morning.
Just wanted to start off with a question maybe Tony could answer best. Just you guys had talked about patient recovery being slower and maybe extending into 2021. I was wondering if you could provide a bit more details, I guess, on how you see that transpiring and how that impacts you across, I guess, your different business lines?
You want to talk about the production side or the demand side, Jeremy?
If you have both, we'll take both.
Yes. So obviously, we had this shut in because of the price crash and chaos. And we think about 1,500,000 and I'll just use crude as an example, 1,500,000 to 1,800,000 barrels came off the market. I'm kind of a numbers person, not real visual, but if you look at how that production has come back, it's
probably one of
the steepest Bs I've ever seen in statistics. So yes, we've recovered a substantial amount of it. We think that maybe 300,000 barrels will lag. But with that said, you can't deny, given the amount of declines that the shells have, that momentum has changed, and there's a fair amount of ground to be picked up. So that's the reality.
When we look at Y grade coming into our system, for example, those numbers are really strong. And I'll let Brent address that. But when we get out to 2025 as we see it today, we'll be down from where we were before, and it's not because momentum doesn't pick back up. Look, we think that we were at about 11.50 completions a month in February, and we think that as we get into 2022, that we'll be at around 950, okay, and probably completing the best of the best wells. That's what's in our forecast today.
And so when you get out to 2025, there'll be some smaller volumes than we said before. But Brent, do you want to talk about what's going on in our business in that regard and what you're seeing?
Yes. The one thing we have seen is just the resiliency of the Permian and part of it's just what's going on out there and part of it's how we have contracted. But if you look at our Y Grade receipts for June, if you look at our Y Grade receipts for July, those are both records for enterprise. And if you look at our Y Grade inventories, they're at all time highs. So in terms of how we've contracted, in terms of what we're seeing coming out of the Permian, the fractionation volumes that we have access to, those have bounced back quite nicely.
On the demand side, gasoline is not really I mean, it's off 10% to 15% depending on what numbers you look at. Diesel is the same. And again, that's to be expected. So if we think about going forward, what the data shows is Latin America, and we are a large exporting country to Latin America, is waking back up, moving away from being shut down and largely that think about Mexico and Brazil. So that's a positive, and we hoping that as we work off inventories, we'll put our refineries back to work.
That's very helpful. Thanks. And on the petchem side as far as demand there, any trends that we should be thinking about with LPGs and pet chem?
Yes, Jeremy, this is Chris. We saw at the beginning of the pandemic, so in March April timeframe, lower demands on the durables. The single use actually was pretty resilient. We saw pretty good demand. We're starting to see a gradual improvement in demand for the durables.
And of course, single use is still pretty good.
The fact that our ethylene export dock is sold out also says something about the demand for ethylene.
That's very helpful. And one last one, if I could. Just with regards to arbitrage opportunities that you've seen so far kind of the non recurring recurring earnings that you've gotten that really boosted this quarter. What type of opportunities do you see in the 3rd quarter here, I guess, with contango, what have you and delayed realization of those profits? Just trying to think through that a bit more.
I think, Jeremy, what we said last call is we thought we'd be at $500,000,000 to $600,000,000 in spread. And I think we're probably saying for the year, we'll be at the upper end of that range.
Very helpful. Thank you very much.
Thank you. And our next question comes from the line of Jean Salisbury with Bernstein. Your line is open.
Good morning.
The main fundamental bear case on enterprise is expected margin compression in the NGL business now that everything looks overbuilt for the medium term. Anything that you can provide to address these fears of a coming price war basically in NGL pipelines frac and exports would be really helpful.
I need to get the question. Jake understand the question. Who understands?
Yes. So, Jean Ann, your question is, as we think about margin compression, and I'm going to assume you're talking about as people recontract on midstream assets,
is that where you're headed?
I think it's a little bit more than that. I think people usually talk about frac, but I think it's really the whole chain of NGL pipelines frac and exports. It seems like now there's too much capacity. And so people are concerned that you could see a similar phenomenon to what we see in crude, which is that, yes, it's when contracts come up that you would see massive declines?
I think Jean Ann, what you're saying kind of makes sense. I think you have to take a look at what a company has to work with. If you look at that's why we I emphasize petrochemicals in my opening comments because that gives us a heck of a lot longer of a value chain to leverage. So we it's about what are you having to leverage. And while one part of that value chain may be under some stress, the total won't be.
Is that fair, Brent? Yes. And you had another point to make. So in our situation, yes, maybe. But we got a value chain that we're going to leverage and we'll give them what they want, where their hot button is.
We'll collect what we need at the rest of the value chain.
I think there is some offset G and A and what we're seeing on ethane is an offset on volumes, both for pipelines and for fractionation. I hear what you're saying from an industry standpoint, I'll repeat myself. I think we've done a heck of a job contracting. And I think how you contract and who you contract with matters in this environment. And we'll say that about other commodities as well.
If you look at our LPG export facility, it's in a very, very good position in terms of the contracts we have in place. And if you look at the balance of this year and you look at the following couple of years, we're in a very, very good spot. And then ultimately, if supply starts going down, you look at what we have built in Mont Belvieu and the pricing points that we have, I fundamentally believe that the downstream assets that we have at those pricing points benefit. So there are some offsets in this environment.
So effectively, the bundled chain, you think will kind of give you a better and different outcome than the worry on crude pipelines more broadly?
I think it always has.
Great. Thanks. That's all for me.
Thank you. And our next question comes from the line of Tristan Richardson with SunTrust. Your line is open.
Hey, good morning, guys. Could you talk about your prepared comments about the JV opportunities for reducing capital? You noticed that that process has been elongated due to the pandemic. Are the 6 potential JVs still in play that you noted on the last call? Or can you just give us a general update there?
Yes. I think on the last call, we said that we were pretty engaged with 3 of those 6. And I think guess what I can say today is we're probably pretty engaged with 1 of those 3. It's not that you're not in discussions with the others, but it's like Randy said, in this environment, nobody everybody is just kind of pulling their horns in. So we're discussing some JVs with some of our larger projects, but I wouldn't say we're highly engaged with more than 1, but we are highly engaged with 1.
That's helpful. And then just a quick follow-up. Could you frame how we should think about maybe the largest components of the 2021 $2,000,000,000 outlook, whether it be PDH2 or Midland ECHO 4? And does this number presume joint ventures? Or is this more like an 8 8s type of budget?
So you're sitting at Randy?
Yes, Tristan. This is Randy. Yes, this is the $2,300,000,000 is assuming no joint ventures. And if you would, 2 thirds of that $2,300,000,000 are really 3 projects. And that's PDH-two, Midland Deco-four crude oil pipeline and the Gillis natural gas pipeline.
Great. Thank you guys very much.
Thank you. And our next question comes from Colton Bean with Tudor Pickering. Your line is open.
So you noted in the press release, the process volumes were back to 88% of March levels and NGLs were nearly at parity. On the inlet volume side, can you provide a bit more detail as to the mix across your footprint? And then on NGLs, is that outperformance relative to gas? Is that primarily increased extraction?
Who wants to take that?
In terms of the mix of Y Grade, this is Brent Colton, but I think, I'd say, ethane has probably increased about 4%, maybe 5% across our system. And then in terms of just the whole volume metric, and I'm not sure I understood the question, but where you're seeing the growth come from is obviously in the Permian, and I think you'll see in July some very robust volumes that come from that area.
Okay. Yes. And that was mainly the focus of the first point is just when you look at kind of 4 primary footprints for you guys, what would that recovery look like on a by basin basis?
Permian, Permian, Permian?
We're not seeing a whole lot. I mean, Eagle Ford has been fairly flat. There's people talking about putting rigs. There's a certain company that's looking to deploy some capital there that we're involved with. But I'd say in the Rockies, you're seeing ethane recoveries pick up out there.
And then obviously in the Permian, just in terms of how aggressive we've been on contracting and just the bounce back in volumes, we're seeing the bulk of the benefits out there in that area.
But cut to the chase is Permian centric, right?
Yes, sir.
Understood. And then just on the update to the 2022 capital budget, now down to $1,000,000,000 Can you frame what that might look like if you were to strip out the PDH2 spend? Or in simpler terms if you remove the major projects what that run rate might be?
Colton would be
less.
Yes, I mean you're probably knocking on the door of 500,000,000
dollars All right. That's helpful. Appreciate it.
Thank you. And our next question comes from the line of Ujjwal Pradhan with Bank of America. Your line is open.
Thank you. Good morning, everyone. Thanks for taking my question here. Firstly, a quick follow-up on Tristan's question on the potential JVs on growth capital projects. Could you maybe high level discuss what are the parameters of your negotiations there and who would be your preferred JV partners?
Typically, they either bring they bring more than money. They've got to bring throughput or they got to bring offtake typically as how are the kind of people we do joint ventures with. Does that answer your question?
I guess that does. That's helpful. And in terms of sort of the parameters of what you're negotiating or within the project, how you plan to sort of sell the interest, can you comment on that?
I think you understand that.
Could you repeat that question? I'm sorry.
Sorry. Could you maybe discuss what you are considering when it comes to the negotiations? Maybe simply put, the some of the bigger projects that you have on the backlog, which ones how would you rank them in terms of which ones you would want the partners to get involved in?
Well, I'll tell you what we wouldn't want them getting involved in. That's the church house, which I think is probably a storage system in Mont Belvieu. I don't think we have a problem getting having them involved in some of our some of the less strategic things that maybe
Thanks for that. And a follow-up on elections this year. Would you be able to share some thoughts on how you're watching the elections and the recent movements there? And maybe if you could share your perspective on potential impacts and or benefits to EPD as well as the overall MLP space in terms of corporate taxes as well as energy infrastructure proposals?
Okay. This is Randy. I guess, 'tis the season of political rhetoric and don't know how much you can really with some of the proposals that are being put out in the public domain, frankly, I don't know how focused you can get on those at this point in time, again, because it is everyone is in campaign mode. I think with the deficits that the country is running up, it looks like income taxes tax rates for both individuals and corporations are going to go up and perhaps substantially. So to be honest, this year, we've really not spent any time coming in and looking at a MLP versus C Corp analysis.
We've been too focused on executing. And just given with the uncertainty in the environment and the volatility in the environment, frankly, we're pretty content with our current MLP structure. And as far as policy is going as far as what's been proposed, I go back a little bit and use the analogy of the U. S. Highway Trust Fund.
It was created in 1956 and its taxes on motor gasoline and diesel to come in and fund road construction and road maintenance. The last time the tax on diesel and gasoline was raised to fund that trust fund was 1993. Since 2,008, the trust fund has been running deficits and no one in Congress be it a Republican or a Democrat administration has been willing to go up on the and raise the tax on motor gasoline and diesel because they didn't want the impact on individuals and they did not want impact on businesses. And some of the things that are being contemplated in some of these policies that we hear in this campaign rhetoric would substantially increase the cost of energy both on individuals and companies. So it's really hard to see if the powers that be wouldn't even increase the price on gasoline how some of these large proposals can come in and be executed.
Got it. Thanks for that.
Thank you. And our next question comes from the line of Shneur Gershuni. Your line is open.
Hi, good morning, everyone. Good to hear everyone as well. Maybe to start off, Jim, in your prepared remarks, you sort of talked about how the marketing and spread business is effectively a natural hedge for the business, opportunities pop up with dislocations and so forth. I was just wondering if you can sort of give us your thoughts on how this on how the trends play out for the balance of this year. And what I mean by that is spread opportunities start to recede over the next couple of quarters.
But at the same time, you have the shut ins coming back, base business starts to move higher. Is the trend of the base business recovering stronger than the, I guess, subsiding of the marketing opportunities? Is there a scenario where 3Q can be higher than Q2 without giving specific guidance? But just sort of talking about the trends, which ones which is the stronger trend right now? Or is the natural hedge going to reverse itself and sort of keep us in a running flat scenario?
Yes. It's a good question, Shneur. I think personally, I mean, you get dislocations and you get spreads when you have events. So when crude prices fall, invariably we'll see contango. I mean, that's been the way it's been.
If those spreads aren't there, then in my mind, our pipelines are probably a lot more throughput than we have today. So that's kind of the way I see it. In terms of I'm probably a little more bullish than Tony is in terms of recovery. I think I personally think demand is going to recover sooner than probably Tony thinks it's going to recover. And I think you're going to get a price signal next year on hydrocarbons that turn some things back on.
So that's what I see.
Okay. And maybe as a follow-up question
here, just sticking with the theme of dislocations. Obviously, you've been very opportunistic to take advantage of the market on dislocations to capture spreads within hydrocarbons for your base business itself. When I think about EPD's unit price, do you see similar dislocations in your stock price right now? For example, you're down today with the results that you put out. And do you see an opportunity to use the excess cash generated from the strong marketing proceeds, lower CapEx budget to potentially accelerate or increase your buyback target to take advantage of these dislocations within your stock price?
I'm going to let Randy answer that. But individually, there's a number of us that have accelerated our buyback program.
Yes. Shneur, I think that just as I mentioned that really this year, we're really coming in and going quarter by quarter as we consider cash distribution growth to our investors. And spending capital on buybacks falls in that same category. So again, we'll come in and take a look at it quarter by quarter. We had come in and allocated approximately 2% of cash flow from operations to go towards buybacks.
We've done that. We'll come in and look for opportunities for the remainder of the year to see how we would want to come in. And if we're going to return more capital to investors whether that would be in the form of distributions or buybacks. So more to come on that.
Okay. And so it's fair to conclude that the 2% target is not a hard line. It's something that you can go above and that you would look at a 9.75% yield as probably being very opportunistic?
Shneur, it's yes, it was approximately 2% is what we said. But we'll come in and take a look at it quarter by quarter. Some of this, we'd like to get, as Tony described, there's still some uncertainty out there as far as coming in and how the economy reopens. We just like to get a little bit more visibility on what we see for the business environment.
All
right. That sounds great. I appreciate the time. I want to keep it to just 2 questions. Have a great and safe day.
Thank you.
Thank you. And our next question comes from Justin Jenkins with Raymond James. Your line is open.
Hi, good morning everyone. I guess I'd like to start on 2020 growth spending. Randy, I think you covered a bit of the further out outlook for 2021, 2022. But is it more timing at this point in terms of the range of spend left for 2020? Or is some of that dependent on JV outcome too?
The range that we give for 2020, the $2,500,000,000 to $3,000,000,000 is largely just timing on how we see cash leave the go out the door.
Okay.
That makes sense. And then you also mentioned that you expect working capital to peak in 3Q in terms of usage. Do you have a magnitude in mind for that? And then maybe give us a sense of how quick that cash comes back in the door as a tailwind thereafter?
Yes. Probably could see another, call it, another $300,000,000 to $500,000,000 increase in working capital between now and the end of the third quarter. And then I think it would just work off over from the Q3, probably work quarter, you have a good bit of working capital deployed over the Q4. So I think you would see ultimately that from that peak in the Q3, you probably see it worked off largely by the end of the Q1 next year.
And our next question comes from the line of Keith Stanley with Wolfe Research. Your line is now open.
Hi, good morning. Just following up on the last question. If your working capital is still increasing in Q3, should we assume that then means some of the contango marketing type opportunities could be even greater in the future than what we saw in Q2 in future quarters?
No, I think it's just some of it
is just a carryover to what we put on. I think when what Jim alluded to that we think we may be as far as total spread opportunities be in the upper end of that $600,000,000 range really sort of see that split fifty-fifty first half of the year second half of the year. But you still have just with some of the positions that we put on, you can have working capital creep with those positions.
Okay. That's helpful. And then going back to last quarter, I thought the messaging was pretty strong from the company that there weren't acquisitions you were interested in. With I guess with the dust settling somewhat here, what's your view on the merits of acquiring companies or assets and synergies? I mean the one thing that's striking is you guys could issue 10 year debt right now at under 2% interest rate.
So just any updated thoughts on how you're thinking about that?
I'd say we've got the same answer as the Q1.
Yes. Keith, I think you heard that one. That's where I think we are too. We look at opportunities that come across. Frankly, there's we've not seen as far as teasers coming in, we frankly have not seen much in the way of teasers come across the last 3 or 4 months.
And certainly not anything compelling. So I think right now we're just focused on continuing to execute with the business that we have and go from there. But I mean, we're open to come in and look at opportunities, but it really needs to be a good fit. Probably what would be more likely would come in and be a bolt on type opportunity. And but again, really haven't seen anything develop on that front.
Interesting. Thank you.
Thank you. And our next question comes from the line of Pierce Hammond with Simmons Energy. Your line is open.
Good morning and thanks for taking my questions. Just two questions on the same subject. The first one is what are your views on U. S. NGL export capacity?
And do you see more opportunities to grow your NGL export business? And then the second question is overall it seems that U. S. NGL exports have a better outlook than U. S.
Crude exports. Do you think that is a fair statement?
This is Jim. I'll let Tony and Brent chime in. I think the world needs U. S. LPG.
And as lifestyles improve in other parts of the world, In many cases, LPG is what creates that improvement. You got any thoughts?
The data speaks for itself, Jim, exactly right. If you look at what happened in the height of the pandemic, Brent, were you blown away by the demand in our dock?
Absolutely. Record type numbers.
I wouldn't be too quick to write off crude oil exports. We Rich, you've seen quite a lot. We've seen a pickup in crude exports, and I thought we had a record week as a country at one point.
Yes, a couple of weeks ago, I think we started going back to the highs. We're seeing just a different interest in the slate. The lighter there's a bigger demand for West Texas light, there's bigger demand for the Eagle Ford type barrel as people have a bid on motor gasoline and we're seeing those go to Asia, mostly Korea and some Latin America. But on the LPG side, I think we're in a good spot as enterprise. We have a project out there that we can expand when the time is right to expand.
I'm not sure from a capacity standpoint, it needs to be expanded anytime soon. But certainly, we have a project that's a low capital project that we can execute on.
Great. Thank you for your responses.
Sydney, this is Randy. We have time for one more question and then we'll if you would give the replay information.
Certainly. Our last question comes from the line of Michael Blum with Wells Fargo. Your line is open.
Thanks. Good morning, everyone. Just two quick ones for me. So just to stay on the LPG export topic. It seems like your volumes are holding up here at least at the beginning of the first half of the second half of twenty twenty.
Can you just give your kind of talk about what you're seeing? Are you seeing any drop off as some of these countries come out of lockdown? Or are you still seeing strength there in LPG export volumes? And if so, what do you think is driving it?
I think we still hi, Michael. I think we still see strength. I think what's driving is what we talked about a while ago.
I think we're seeing a lot of PDH demand over in Asia. I think just in terms of how we contracted, Michael, I'd say this humbly, but I think we'll probably be toward the end to see any kind of drop off. I mean, we have just in terms of our supply position, in terms of the pricing point, in terms of how aggressive that we've contracted out for this year, in the next couple of years, we're in a good position to kind of maintain these type of levels. I think you're seeing us export around 18,000,000 barrels a month of LPGs, and I think that's sticky. Those are sticky numbers.
What's interesting, Michael, is whenever we do get a cancellation, we've been pretty successful in backfilling it with a spot. So the appetite is there.
Okay, great. That makes a lot of sense. My second question, I think, is probably for Randy. You referenced the sort of that target payout ratio number that you're now referring to a bit. Do you have kind of like a long term target for where you want that to sort of settle out over time?
Or are you thinking about that way?
Michael, I don't think we've developed our thoughts that far along on setting a long term target. Some of it some of your balance to that would be what kind of growth opportunities do you see. So, we've really not come in and set any long term targets. I mean, we do come in and compare how we're doing compared to the market. And I think we're when we come in and look at the market and put the various sectors of the S and P 500 on the page, I think we're amongst the top 2, top 3 of the sector.
So we think we're and it's by nature being an MLP, the whole thing with an MLP is you have a high payout ratio. And so I think we comp pretty well against the market.
Great. Thanks, everyone. Appreciate it.
Okay, Sydney. Do you want to give the replay information?
Certainly. You may dial in at 1-eight hundred-eight fifty nine-two thousand and fifty six or 404 to access the replay information. I would now like to turn the call back to Randy Burkhalter for any further remarks.
Okay. Well, that concludes our remarks today. And I'd like to thank everyone for joining us and have a good day. Thank you and goodbye now.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a great day.