Good day, thank you for standing by. Welcome to the Q1 2023 Enterprise Products Partners L.P. Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Randy Burkhalter, VP of Investor Relations. Please go ahead.
Thank you, Gigi, and welcome everyone. Good morning and welcome to the Enterprise Products Partners conference call to discuss first 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 for the call today. During this call, excuse me, 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 an information currently available to Enterprise's management team. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it 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 the forward-looking statements made during this call. With that, I'll turn the call over to Jim.
Thank you, Randy. Today, we announced Enterprise off to another good start for the year. We reported Adjusted EBITDA of $2.3 billion for the first quarter of 2023. We generated $1.9 billion of distributable flat cash flow, providing 1.8 times coverage. We retained $863 million of DCF for the first quarter. We reported seven operating records and one financial record in the quarter, mostly related to our pipeline activities and export volumes across multiple commodities. We had record pipeline and fee-based natural gas processing volumes, record NGL marine terminal volumes, and near record total marine terminal volumes. In March alone, our marine terminals loaded over 70 million barrels of NGLs, crude oil, refined products, and petrochemicals for export.
Our NGL and natural gas pipeline businesses, as well as our natural gas marketing and octane enhancement activities, also reported strong increases in gross operating margin compared to the first quarter last year. We also saw strong margins in our refined products business, offset by lower volumes in our propylene business, where PDH one was down for 24 days during the first quarter for planned maintenance. We remain on schedule to put approximately $3.8 billion of major projects in service this year. In the second quarter, we will commission PDH 2 and the expansion of the Acadian Gas Pipeline System. In the second half of the year, we will complete our nineteenth NGL fractionator, two natural gas processing plants in the Permian, and put the first phase of the Texas Western Products Pipeline in service.
We are running essentially full across all our assets with the exception of the Rockies. We have significant expansions in our ethane, ethylene, propylene, and LPG systems. We are upgrading export capacity and adding geographic diversity to our ethane export assets with positions at Morgan's Point and now Beaumont, and expanding our LPG and propylene capacity at our Houston Ship Channel facility. Our ethylene export facility has been full since day one, and we're expanding that by 50%. Ethane exports have moved from being only consumed by a handful of niche players in point-to-point movements to significant growth in demand by several petrochemicals in Asia, Europe, and the Americas. We recently completed new ethane export contracts that add 240,000 barrels a day with multiple counterparties.
On SPOT, we received our Record of Decision this past November and expect to get other permits and our license in the second half of the year. We are way ahead of other applicants, and we know what it takes to get a Record of Decision. two buoys and a motorboat to hook up to a ship won't cut it. We will have a 24/7 man platform, hyper combustion and two pipelines that provide the ability to load multiple grades of crude oil and also able to evacuate those lines during hurricane. Time is on our side as we commercialize this project, because we don't think it's needed until 2027. While the second quarter can be our weakest seasonally, we remain constructive on global market fundamentals, even though the forward curve doesn't reflect that.
In addition to low global inventories, we also note that OPEC+ seems to be intent on managing global balances. On the demand side, expectations for most consultants range from 1.4 million to 2 million barrels a day for global demand growth in 2023. OPEC+ economists say they are standing by their forecast of 2.3 million barrels a day demand growth by the end of 2023. From our perspective, that sounds rich. Although the last five weeks, U.S. crude inventories have drawn 20 million barrels. Countering these bullish fundamentals are concerns about the global economies, with central banks continuing to signal additional rate increases to tame inflation. Meanwhile, while the Chinese continue to ramp up travel in a huge way, their industrial manufacturing surprised to the downside when their PMI turned negative yesterday.
Regardless of the near-term mixed signals, which continue to signal a range-bound market near term, for us, it's very hard to make a bearish call for oil in the medium to long term. It's hard for us to be too constructive on natural gas. A wide gas to crude spread gives U.S. petrochemicals a structural feedstock advantage that, in our view, is permanent. Case in point is the current operating environment where the U.S. ethylene industry is the only region that has been consistently profitable, while the rest of the world have been very selective in what they crack and how they operate. Single-use plastics are doing good. They're profitable, while durables have their challenges and their headwinds. Meanwhile, the U.S. refining industry is one of the most competitive and technologically capable in the world.
In short, we expect U.S. production to continue to grow, and we expect demand at our docks will likewise continue to grow. If you want to know where we're going, look at what we're doing. We continue to expand our ability to export hydrocarbons out of the U.S. to points all over the world where it's needed. With that, I'll turn it over to Randy.
Thank you, Jim. Good morning, everyone. Starting with income statement items, net income attributable to common unit holders for the first quarter of 2023 increased 7.3% to $1.4 billion or $0.63 per common unit on a fully diluted basis. This compares to $1.3 billion or $0.59 per common unit for the first quarter of 2022. Adjusted cash flow from operations, or adjusted CFFO, which is cash flow from operating activities before changes in working capital, was $2 billion for both the first quarters of 2023 and 2022. We declared a distribution of $0.49 per common unit for the first quarter of 2023, which is 5.4% higher than the distribution declared for the first quarter of the prior year.
This distribution will be paid May 12th to common unit holders of record as of close of business on April 28th. As we mentioned on our February earnings call, we will evaluate another increase mid-year. In March, we repurchased approximately 683,000 common units at an average price of $24.89 per unit for a total cost of approximately $17 million. On a combined basis, our DRIP and employee unit purchase program purchased another 1.7 million common units on the open market during the quarter. For the 12 months ending March 31, 2023, Enterprise paid out approximately $4.2 billion of distributions to limited partners. We also repurchased $267 million of common units off the open market.
As a result, our payout ratio of adjusted cash flow from operations was 55% for this period, and our payout ratio of adjusted free cash flow was 75% for this 12-month period. Total capital investments in the first quarter of 2023 were $654 million, which included $570 million for organic growth capital projects and $84 million of sustaining capital expenditures. Our major growth projects that are sanctioned and under construction remains unchanged at $6.1 billion. We currently expect our 2023 growth capital expenditures will be in the range of $2.4 billion-$2.8 billion, which includes possible expenditures associated with projects under development and not yet sanctioned. Frankly, I have a hard time seeing us get to the upper end of this range.
The changes to our CapEx ranges for 2023 and 2024 since our recent Analyst Day are projects under development, which are substantially comprised of potential expansions of our Permian gathering and processing systems and our NGL distribution system, including exports. None of this creep is associated with cost overruns or delays. We expect 2023 sustaining capital expenditures will be approximately $400 million. Our total debt principal outstanding was approximately $28.9 billion at the end of the quarter. Assuming the final maturity of our hybrids, the weighted average life of our debt portfolio was approximately 20 years. Our weighted average cost of debt is 4.6%. At March 31, approximately 97% of our debt was fixed rate.
Our consolidated liquidity was approximately $4 billion at the end of the first quarter, which includes $3.9 billion of availability under our credit facilities and $76 million of unrestricted cash on hand. In March 2023, we entered into a new $1.5 billion 364-day revolving credit agreement and a new $2.7 billion revolving multiyear agreement that matures in March 2028. These agreements replaced our prior credit facilities. For the 12 months ended March 31, 2023, our Adjusted EBITDA increased 11.7% to $9.4 billion compared to our trailing 12 months as of March 31, 2022.
We ended the quarter with a consolidated leverage ratio of 3.0 on a net basis after adjusting debt for the partial equity treatment of our hybrid debt and reduced by the partner's unrestricted cash on hand. Earlier this year, we announced a lower leverage target of 3.0 times ±0.25, or in a range from 2.75 times-3.25 times. This change in financial policy are lower leverage, along with an established track record of growing stable fee-based cash flows and strong credit metrics resulted in Standard & Poor's upgrading our senior unsecured credit rating to A- with a stable outlook. We are appreciative of this recognition as the only A- rated midstream energy company. With that, Randy, we can open it up for questions.
Okay. Excuse me. Thank you, Randy. Gigi would like to remind our listeners that when they ask questions, to limit their questions to one question and one follow-up, please. We can go ahead and start our Q&A.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We ask that you please limit yourselves to two questions or to one question and one follow-up question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Spiro Dounis from Citi.
Thanks, operator. Morning, guys. First question on pet chem was particularly strong this quarter, at least relative to what we had expected. I know in the past you'd all talked about maybe a six to nine month period or a lag on inventory getting worked down globally before that really started to tighten. I'm just curious, you know, Jim, I know you mentioned the weaker than expected PMI, but is something happening maybe sooner than you all had expected, or are we still sort of waiting to see that destocking effect take place later the year?
I'm gonna let Chris D'Anna answer you.
Yeah. You know, I think what really happened in this first quarter is that it was more of a supply shortage than stronger demand. I mean, we had decent demand just coming off of the fourth quarter. It was really weak. Ultimately it was reduced supply from a couple of PDHs being offline.
Got it. Okay. That's helpful, Chris. Second question, just turning to Chinook. You know, I know you all were sort of looking at potential alternatives there to expanding that pipeline. Just curious if you can give us an update there on maybe what some of the potential alternatives could be and how you're thinking about the timing to make a decision there.
I probably don't wanna tell you what the alternatives are. I will tell you, and, you know, we're trying to be capital disciplined. In the course of trying to do that, I guess we've kinda confused people, but we will loop Chinook. If we can find some options that defer that capital, then we'll probably do that. Make no mistake, our intent is, we are going to loop Chinook.
Understood.
There's a deadline on the permit that we're gonna have to be aware of.
Got it. Got it. Understood.
Does that clear it up?
It does, Jim. Always appreciate your color. Crystal clear. Thanks again, guys.
Thank you. One moment for our next question. Our next question comes from the line of Jean Ann Salisbury from Sanford C. Bernstein.
Hi, good morning. NGL marketing has been falling in recent quarters and was quite low in this quarter. Can you talk through the drivers of this and if you see this as a trough?
Lower commodity prices, where is it stuck?
I think if you look at what we did last quarter in 2022, the first quarter of 2022, I think we had some very good opportunities in that quarter with our storage program that we didn't have in the market this quarter. Commodity prices probably have a little bit to do with it, but there was just probably some opportunities last year that we didn't see this year.
Okay, that makes sense. Kind of a broader question. Once the Houston Ship Channel is expanded, does Enterprise forecast Houston crude prices trading at least at parity to Corpus or maybe even a premium?
Who wants to take that? You, Tony, or who?
there's a couple things we're doing, Jean Ann, and, you know.
Talk about Jean Ann mentions it in her write-up. Talk about Jean Ann says that the pipelines to Corpus are full.
Yeah. I mean, we're getting incremental barrels.
I'm sure you'll get that right.
We're getting some incremental barrels kind of month-over-month. I'd just say if the East Daley Permian grows 40,000-50,000 barrels a month, that we're getting our fair share on the Houston Destin pipelines. There's some premiums that happen at Corpus on the docks. I wouldn't say those premiums are that much higher, and I wouldn't say that they're day in and day out. I think what you're seeing us doing on our system, Jean Ann, is we've implemented a new quality program.
Yes. There it is.
If you look at the quality of crude oil that we're getting right now across our docks, it's the best quality that we've seen since we've been up in operation. I think it compares with anything that Corpus can offer. I think some of that is going to be equalized. Some of the freight advantages, we'll have to overcome. I think over time, if you look at where our program is going on crude oil, I think that we're gonna eventually get there.
what was your objective in changing the why did we change quality, Mark?
I mean, we did it for a couple reasons, I mean, one thing is we listen to our customers. We listen to our customers both on the production side, we listen to them on the refinery side here in Houston, also our export customers. If you started going through the program on what we identified, there's probably a couple folks out there that were trying to do a little bit too much aggressive blending, and we've effectively eliminated them and done a lot more routine testing in terms of maintaining the quality that we can offer these customers downstream.
Thank you.
Ultimately, that's going to achieve higher prices.
Very good, Brad.
Yeah.
Great.
Yes.
That's super helpful, Brad, as always. Thank you so much, and thanks for taking my question.
Thank you.
Thank you. One moment for our next question. Our next question comes from the line of Brian Reynolds from UBS.
Hi. Good morning, everyone. Maybe just to talk on distribution outlook and expectations. We've seen Enterprise raise kind of in that 1%-5% range over the, you know, since 2018. You know, looking forward with leverage below 3x and free cash flow, you know, still hovering around $1 billion after dividends the next two years, kind of curious if we could see that DPU growth rate, you know, go above 5% or perhaps, you know, a little more CapEx kind of, you know, temper that distribution growth expectation. Thanks.
Yeah. Hey, Brian. This is Randy. Yeah, thanks for the question. You know, I think coming in and really looking, you know, at a range of 1%-5% and going back to 2018, I would probably differ in my perspective of how I would look at it, because from 2017 through, call it 2020, 2021, we were really in a mode of transitioning from more of an external funding model to now more of an internal funding model. That, we were very measured on what we did in distribution growth to be able to grow into that internally funded model.
Since that point in time, you know, I would really say since, over the last couple of years, two years, we've grown more in the range of, call it, 4%-6%. You know, and like I said, we'll come in, as I mentioned in the prepared remarks, we'll come in and discuss with the board here middle of this year, as far as what we wanna do, for the rest of this year on distribution growth. You know, again, we're, we've demonstrated good EBITDA growth. Jim mentioned $3.8 billion worth of projects going into service for the remainder of the year. That gives us good cash flow growth that'll support distribution growth down the road.
I really hate to come in and get more granular than that because I don't want to usurp our board or front run our board. I think we'll look to continue to come in and provide distribution growth and buybacks for that matter, as far as getting capital back to investors.
Great. Appreciate it. We'll wait for that mid-year update. Then, you know, as my follow-up question, I'll take the CapEx question. You know, projects under development have increased by $1 billion for 2023 and 2024. You talked about in your prepared remarks that you see, you know, limited ability to get to the high end, you know, of that range. So kind of curious if you can just talk about, you know, perhaps some of the projects in the hopper and then within the existing CapEx backlog, was there any CapEx inflation or perhaps pull forward of CapEx into 2023 and 2024 that we should be thinking about? Thanks.
Yeah. I'll take the first part of the question. There was not any cost or any overruns or delays on projects. In fact, Graham and his engineering team have done a great job of delivering projects on time and more often than not, slightly under budget. Really the change that we've had since Analyst Day are more projects that we've, I guess we've got a good bit of confidence in, and we included them in the range, but they're still subject to,
Being completely underwritten through commercial contracts and rather not elaborate into much detail. We'll just come in and go back in, and again, what I said in prepared remarks, you know, and a lot of it is what we talked about at our Analyst Day, where we're seeing most of the opportunities for growth are gathering and processing in the Permian broadly. It is also in our NGL distribution system, including export facilities. Just seeing a lot of demand on that front.
Great. I'll leave it there. Enjoy the rest of your morning, everyone.
Thank you. One moment for our next question. Our next question comes from the line of Michael Blum from Wells Fargo.
Thanks, good morning, everyone. Yeah, I wanted to ask about the marine export, particularly the LPG and Ethane. It came in, you know, really strong this quarter. Just want to get your color on the market, what demand looks like, and do you think these levels are sustainable from here? Thanks.
Doug, do you wanna take that? Would you...
Yeah. No, this is Tug. Yeah, we did definitely see strong demand this last quarter, and we're gonna expect to continue to see that demand, really it comes down to production's continuing to grow. It's still a supply push, and the barrel is still having a price to clear across the water.
Yeah, Michael, I was, I've been surprised, pleasantly so, at how well we've done on our ethane exports. I'm surprised that we're able to do 240,000 barrels a day of new contracts with more to come.
Very good. That's all I have today. Thank you.
Thank you. One moment for our next question. Our next question comes from the line of Tristan Richardson from Scotiabank.
Hi, good morning, guys. Could you talk a little bit about PDH 2 and overall in the pet chem segment? How should we think maybe about that fee-based mix pro forma once that asset comes online relative to the sort of 70%-ish fee based we typically see in that segment?
I think this one's 100% fee based, isn't it, Chris?
That's correct.
It's 100% fee based with all creditworthy customers. Graham is sitting to my left. They always come in, we can do more than whatever the nameplate is. We'll probably have some extra pounds to play with.
Great. Maybe just on EHT export expansion, could you talk a little bit about the mix of products you're seeing? I mean, you talked a lot about refrigeration at Analyst Day, and I think you highlighted that that expansion could be 120 a day. Should we think of it as pretty fungible across products or primarily focused on LPG? Could the scope change for that project, just given sort of the strength you're seeing across the dock indicated by the first quarter?
Yeah, this is Brent. I think in terms of where it stands right now, it's propane, butane, and some propylene. Slated to come on the second half of 2025. We continue to look, Tristan, at, you know, is there another project there? It's all under evaluation, but right now it's slated to come on the second half of 2025. I just wanna correct the number. You said 120,000 barrels a day. Our LPG export expansion's north of 170,000 barrels a day.
Got it. Helpful.
we're talking about the...
Ship channel.
The Ship Channel widening. You might explain that. Bob, can you explain what you get out of the Ship Channel widening for Tristan?
Yes, sir. When project eleven is complete on the widening, which we expect to be by the end of 2024, first quarter of 2025, it'll add four to five hours of daylight, and most of the products we deal with are daylight restricted, so that's easily an incremental 15% to 20% additional cargoes that can come in, if needs be.
Which means, you or Zach, you sell out your Refrigeration now.
Yep. All the contracts.
Thank you. One moment for our next question. Our next question comes from the line of Chase Mulvehill from Bank of America.
Hey, good morning, everybody. I guess a lot of ground has been covered, but could I ask on processing margins in the Permian and, you know, kind of relative to your fee floors? You know, obviously, Waha is seeing a lot of pressure, so, you know, are we kind of at those fee floors for Waha at this point? Also just an update on kind of how you're thinking about, you know, I think it's 400 Mcf a day of latent capacity on your Texas intrastate pipelines. Just how you're thinking about that, you know, still holding it open or contracting it up. Updates on kind of how you see Permian natural gas egress, you know, between the brownfield additions and when Matterhorn comes online.
Natalie and Tug.
I'll answer the fee floor question. Post Navitas, the first quarter of 2023, we did hit more fee floors than, I guess, the end of 2022. Less volume is being subject to the fee floor, so I'd call it 75% of the volume. It's not very far under the fee floor. Long story short, there's probably upside the rest of the year.
This is Tug. On the pipeline capacity question, we still have open pipeline capacity. We are utilizing every day as marketing. Just like every decision here at Enterprise, there's a opportunity to work with Natalie, for a long-term contract opportunity. We'll evaluate that or evaluate to continue to hold it open for, spot opportunity.
When we feel like it's the right time, we will contract that capacity.
Okay, great. Makes sense. an unrelated follow-up on octane enhancement. you're still generating, you know, some nice, gross operating margin there and really some nice non-fee gross operating margin as RBOB and butane spreads are still wide. I'd be curious kind of your thoughts on how you see these spreads playing out, the rest of 2023 and how much you have hedged at this point.
You want me to take it or you wanna...
We have, right now, I think that octane enhancement's about 75% hedged. We feel pretty good about where those margins are gonna be. There was an earlier question about LPG pricing. I think as you see this production come on, you look at the ability for propane and butane to go find markets, I could see that being somewhat challenged, and that's to the benefit of our octane enhancement program. Are we gonna see as good a margins that we saw from the MTBE uplift that we saw earlier this year? Probably not. It's still very good business for us.
Okay, perfect. I'll turn it back over. Appreciate it.
Thank you. One moment for our next question. Our next question comes from the line of Jeremy Tonet from J.P. Morgan Securities LLC.
Hi, good morning.
Jeremy.
Just wanted to kind of pick up a bit, I guess, on the Permian and natural gas. There's been some conversation out there with GOR ratios increasing, and just wondering if you could talk about what your experience or thoughts are there and how you see that, I guess, kind of impacting basin production as a whole.
Yeah. Jeremy, this is Tony.
Takeaway dynamics, sorry.
Okay, go ahead. All right. Yes, GORs, when we look at the basin holistically are absolutely going up. It's largely driven by the preponderance of drilling in the more gassy areas in, think, Delaware Basin, compared to, say, the Midland Basin. There's no question that the GORs are going up. You know, that's how midstreams are contracting, and that's what producers are doing. Producers look at their portfolio, they look at what they plan to drill, and gas GORs, the decline over time, oil declines faster than natural gas does. That impacts the long-term outlook in this regard.
Does that mean you'll have less crude?
Jim wanted to know, does that mean you have less crude? Yeah, I think there's a misconception, thanks for that, Jim, that we don't have the amount of crude that we had before because of GORs and that's absolutely it's not the fact. You can look at our forecast, which we stand by. You have a lot of both. That's the bottom line. You have a lot of crude. There's been no change in those curves as we forecast. You have a lot of very rich gas. The answer is it doesn't mean less crude. Ultimately, this is not a bad story. It's not a bad story for Enterprise. It's a great story.
Got it. That's very helpful there. Then just wanted to kind of come back to the LPG and pet chem side, and you've touched on this a few different times across the call. Just wanted to see, I guess, what patterns you're seeing over the balance of the year. LPG exports, is that kind of one time in nature and surprise? Do you see this strength continuing? People are concerned about a recession. How do you see LPG exports in pet chem, I guess, kind of being impacted by these trends looking forward?
I think, and I'll hand it to Brent, but, you know, LPG's got a price to export, period. price creates demand, and it's gonna have the price to export and there will be demand for it. Brent?
Yeah, I mean, the only thing I'd add, that's our fundamental belief, it'll have to go fight to maintain some sort of margin. If there's some sort of issue, obviously at Enterprise, we have a pretty good shock absorber, which is our storage footprint. If you can play this out, 'cause there's another question about LPG export. Why we're expanding our export capacity is because the market needs it. If you look at infrastructure bottlenecks, our belief is that as the production comes online, it'll price to export, but at some point, the export capacity isn't gonna be there. That's an opportunity for folks like Enterprise to participate in that market.
If you go out even further and you look at the overall demand, especially what's coming out of China with PDHs, there's gonna be a period of time in there in 2025, 2026, 2027 timeframe, where the U.S. producer has to catch up to the overall capacity and the overall demand.
All this is gonna be healthy for the system.
Great. Thank you very much.
Thank you. One moment for our next question. Our next question comes from the line of Colton Bean from Tudor, Pickering, Holt & Co.
Morning. Randy, coming back to Brian's question from a different angle, do you all view leverage as more of an output, or are you intent on managing towards the target range? Meaning, are there any items you view as a balancing mechanism, whether that be distribution growth, buybacks, CapEx, or would you let leverage drift below the range in any given year?
Colton, the range that we have out there, I think is a sufficient range for us, you know, for the foreseeable future that really comes in and gives us a lot of flexibility to come in and fund organic growth. You know, if we see a surge in organic growth projects, I think it gives us the flexibility to handle that, stay in the range. I think it gives us the flexibility to come in and if we see an acquisition opportunity that we wanna use cash or incur debt for, I think it gives us plenty of flexibility to do that, as well as come in and continue to provide distribution growth and buyback.
I know I'm not probably answering the question the way you wanted it to, but that range of $2.75 billion-$3.25 billion gives us a lot of flexibility. you know, when we get all these new growth capital projects coming online, and again, we've got a lot under construction now. I think we'll see more of that EBITDA, certainly a full year of that EBITDA show up in 2024, 2025. I think at that point in time, we'll reassess.
Okay. It sounds like for the near term, expecting to stay within that range. The question was more angled towards, it seems like you guys are more likely to break the bottom end than the top end. Just if, you know, if we'd see a ramp in distribution growth or buybacks, if it looks like you all were drifting into, you know, call it mid twos or even low twos.
Colton, I'd just hate to get the cart ahead of the horse. Let us get there first, and then, let us see what the situation looks like, when that prevails and, you know, I think we're gonna do the responsible thing once we get to that point.
That's perfect. Maybe shifting over to gathering. I think there's a $25 million step-up in the Rocky Mountain region called out. From what we were seeing, it looked like regional pricing was actually down, specifically in the San Juan, which I think is where you have those gathering fees index. I guess, can you explain kind of what the uplift was there quarter-on-quarter?
Tony?
Yeah, really, I think, what we were seeing was really, for a period of time, I think especially January, we really saw strong natural gas prices more driven by California, both up in the Rockies and in the San Juan. Tony, I don't know if you wanna-
Completely agree. Phenomenal prices. Definitely an outlier.
Yep.
That's because utilities just wanna prepare and say, we have to have the gas.
Great. Thank you.
Thank you. One moment for our next question. Our next question comes from the line of Theresa Chen from Barclays.
Good morning. I wanted to touch on the near-term demand outlook for U.S. LPG exports a bit more. Going back to your comments about the Chinese PDH unit, what are you seeing in terms of the pace and ramp of them? Do you think there could be an incremental bid for U.S. cargoes later on this year due to lower LPG exports from Saudi Arabia and Qatar?
I'm sorry, Theresa, what was the first part of that question?
Chinese PDH unit ramp.
Yeah, I mean, I think you're seeing quite a few PDHs come online this year. You'll see some next year, and then obviously the year after. I don't know if the run rates are gonna be sustainable in terms of what they're doing right now. I think they're doing probably around 70%. There'll be some opportunities for LPG exports. I think the overall propane consumption is only gonna increase. I just don't know if those run rates over there in China are gonna be able to be maintained. If you look at our opportunities, we have the availability of some spots. Those will probably get filled up, but it's not, it's not a ton. It's probably 2 or 3 spots a month, Tug, that we have available, right?
You know, you know, it still goes back to the gas to crude spread as to how much those PDHs run. As we said in our script, we can't make a bearish case medium to long term on crude prices, and we can't, we're not constructive on natural gas. Inherent net gas to crude spread ought to be more LPG and ethylene plants and PDH plants in Asia.
Thank you. The second part of the question related to U.S. LPG cargoes potentially getting a bid due to OPEC production cuts.
By definition, I think if they cut crude, they cut LPG, Tony.
They do, but just, Theresa, they're not huge LPG exporters anyway. They've been really outspoken that at least for now, incremental barrels, whether they're up or down, will affect internal consumption. They're just another balancing item in the market where barrels are pricing to get consumed.
Got it.
We don't see it as a big factor.
Understood. Brent, going back to your comments about, you know, infrastructure bottlenecks on the LPG export front down the line eventually, where do you think the export constraint will come about? Is it dock space? Is it refrigeration capacity? Is it tonnage? What does that look like?
I mean, I think it's refrigeration capacity. That's where it starts to begin with. If you look at what the industry is doing right now, we're running at pretty high rates. You know, the dock piece is easily or easier to solve. On the front end, I would probably say it's gonna be refrigeration capacity.
Thank you.
Thank you. One moment for our next question. Our next question comes from the line of Keith Stanley from Wolfe Research.
Hi. Good morning. I wanted to start with a follow-up on CapEx. You're at about $2.5 billion this year. I think the potential spend for next year, $2 billion-$2.5 billion. A couple of years ago, I think the company talked to $1.5 billion-$2 billion as somewhat of a run rate for CapEx. Should we think of 2023 and 2024 as elevated CapEx years, or is the run rate now higher just as the company continues to grow?
Keith, yeah, the opportunities are there. yeah, just good opportunities at the time. You know, what 2026 and 2027 looks like, we'll let you know when we get closer to that point. Right now, we just see a lot of good opportunities both on the upstream side and the downstream side.
You know, we're bringing on $3.8 billion worth of major projects this year. You take our PDH 2 plant, our fractionator, Acadian expansion, those will all be full on day one.
Thanks for that. Second question, just you rolled out the Project 9.3 last quarter. At a high level, any areas of the business that are going better than planned, any lighter than planned? Just any high-level comments on progress towards that internal target?
We have probably on petrochemicals, we're over plan. I can't think of anything other than the Rockies and I guess our Eagle Ford crude pipeline as we're hustling that. Other than that, Zach, you got anything going on?
No, no. Our segment's.
I called him. I felt the need to call on you.
I think segment by segment, we're pretty close to where we planned.
Okay. Thank you.
Thank you. One moment for our next question. Our next question comes from the line of Neal Dingmann from Truist.
Morning, gentlemen. Thanks for taking my questions. My first is on shareholder return. I'm just wondering, given how strong your financial position continues to be with over $4 billion in liquidity, I'm just wondering, you know, what factors go into the decision on the unit repurchase, you know, on a go forward?
Yeah, Neal, good morning. Yeah, Neal, I guess we had talked to the buyback program is still more in, more of an opportunistic program right now. I guess good news, bad news is frankly, in the first quarter, we didn't see a lot of good opportunities. When we, in the month of March, I think around the Silicon Valley Bank failure, there was more volatility in the market and, the units were under pressure and we saw good value and we came in and executed then. Our window wasn't long enough. We would like to have bought more, but, you know, the units rallied pretty quickly on the heels of that.
No, that's great. Great to hear. My second question on Petrochem specifically, looks like the propylene side was slightly down, just largely, I think, mostly just on the planned maintenance. I'm just wondering if you remind me of any major planned maintenance for the remainder of the year, specifically for that propylene production facilities?
Brent, you got any?
We've currently got a couple of splitters and down for planned maintenance, but after that...
We got a couple of splitters down right now for planned maintenance. After that, I think we're done for the year.
The splitter turnarounds, they're not material to any financials.
I'm gonna hold you to that.
I'll hold on that. Thanks, Brent.
Thank you. At this time, there are no further questions. I would now like to turn the conference back over to Randy Burkhalter for closing remarks.
Thank you, Gigi. That concludes our call today, everyone. We'd like to thank our listeners for joining us today and have a great rest of your day and goodbye for now.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.