INVESTOR CONFERENCE ENTERPRISE PRODUCTS PARTNERS L.P. Randy Fowler President and Chief Financial Officer. March 5 7, 2019

Transcription

1 ENTERPRISE PRODUCTS PARTNERS L.P. INVESTOR CONFERENCE March 5 7, 2019 Randy Fowler President and Chief Financial Officer ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. enterpriseproducts.com

2 FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements based on the beliefs of the company, as well as assumptions made by, and information currently available to our management team. When used in this presentation, words such as anticipate, project, expect, plan, seek, goal, estimate, forecast, intend, could, should, will, believe, may, scheduled, potential and similar expressions and statements regarding our plans and objectives for future operations, are intended to identify forward-looking statements. 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. You should not put undue reliance on any forward-looking statements, which speak only as of their dates. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expected, including insufficient cash from operations, adverse market conditions, governmental regulations, the possibility that tax or other costs or difficulties related thereto will be greater than expected, the impact of competition and other risk factors discussed in our latest filings with the Securities and Exchange Commission. All forward-looking statements attributable to Enterprise or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained herein, in such filings and in our future periodic reports filed with the Securities and Exchange Commission. Except as required by law, we do not intend to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise. ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 2

3 KEY INVESTMENT CONSIDERATIONS One of the largest midstream energy companies Integrated system enables EPD to reduce impact of cyclical commodity swings Large supply aggregator and access to domestic and international markets provides optionality to producers and consumers History of successful execution of growth projects and M&A $38 billion of organic growth projects and $26 billion of major acquisitions completed since IPO in 1998 $5.1 billion of growth capital projects under construction Strong financial position and track record One of the highest credit ratings in midstream energy sector: Baa1 / BBB+ Simplified structure with no GP IDRs; eliminated 50% IDR in consecutive years of distribution growth Margin of safety with 1.6x distribution coverage in 2018 Transitioning from MLP to traditional financial model Self-funding equity portion of growth capital investment Use both distributions and buybacks to return capital to investors ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 3

4 EPD: NATURAL GAS, NGLs, CRUDE OIL, PETROCHEMICALS AND REFINED PRODUCTS Asset Overview Pipelines: 49,200 miles of natural gas, NGL, crude oil, petrochemicals and refined products pipelines Storage: 265 MMBbls of NGL, petrochemical, refined products, and crude oil, and 14 Bcf of natural gas storage capacity 26 natural gas processing plants; 23 fractionators; 11 condensate distillation facilities; PDH facility Export Facilities: 18 docks handling NGLs, PGP, crude oil & refined products Assets Under Construction / Commissioning Connectivity Fully integrated midstream energy company aggregating domestic supply directly connected to domestic and international demand Connected to U.S. major shale basins Connected to every U.S. ethylene cracker Connected to 90% of refineries East of Rockies 26 Gulf Coast PGP connections Pipelines: 700 miles of pipelines Processing: 2 nat gas processing trains Fractionators: Mont Belvieu area Petchem: 1 ibdh facility Ethylene export terminal NatGas 12% Petchem 14% NGL 53% Crude 21% Gross operating margin ( GOM ) is how we measure the performance of our business segments. See reconciliations for closest GAAP comparison. ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 2018: $7.3B Gross Operating Margin 4

5 EPD S INTEGRATED MIDSTREAM VALUE CHAIN Earning Fees at Each Link It s not uncommon for Enterprise to touch a molecule 5 7 times throughout the system Natural Gas Pipelines Natural Gas Pipelines Storage NGL Exports Natural Gas Pipelines Gas Processing Ethane Propane Butane Natural Gas Crude Oil Mixed NGLs Pipelines NGL Fractionation Iso-Butane N Gasoline Storage NGL Pipelines NGL Wholesale Trucks Storage Crude Oil Pipelines Butane Isom Crude Exports MTBE Export / Barges Barges Propylene Splitters / PDH Belvieu Fuels Chemical Market Crude Oil Pipelines Storage Refined Products Pipelines Crude Oil Refining ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 5

6 FINANCIAL UPDATE ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. enterpriseproducts.com

7 2018: RECORD RESULTS OPERATIONS Driven by Strong Fundamentals and New Assets 12 operational records as all of our business segments reported operational records Volume growth and operational leverage associated with legacy assets Record volumes associated with pipelines, marine terminals and fractionation Higher average sales margins associated with NGL and crude transportation volumes Increases in natural gas processing margins Continued to see volume ramp up associated with recently completed projects including the Midland-to-ECHO Pipeline and PDH Placed $1.9 billion of capital projects into service, including Orla I & II gas processing trains and associated gathering system, Frac IX, and the expansion of the Aegis NGL pipeline Total NGL, crude oil, petrochemical and refined product pipeline transportation volumes (MBPD): Equivalents pipeline transportation volumes (MBPD): Total NGL, crude oil, petrochemical and refined product marine terminal volumes (MBPD): Change 5,780 6, % 9,018 9, % 1,453 1, % NGL pipeline transportation volumes (MBPD): 3,168 3, % Total Ethane marine terminal volumes (MBPD): % Total NGL marine terminal volumes, excluding ethane volumes (MBPD): % Total NGL marine terminal volumes (MBPD): % NGL fractionation volumes (MBPD): % Crude oil pipeline transportation volumes (MBPD): 1,820 2, % Natural gas transportation volumes (BBtus/d): 12,305 13, % Propylene production volumes (MBPD): % Octane additive and related plant production volumes (MBPD): % ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 7

8 2018 FINANCIAL ACCOMPLISHMENTS 11 Financial Records Self-funded the equity component of $4.2 billion in growth capex (a year earlier than anticipated) Cash Flow From Operations was $6.1 billion in 2018, a 31% increase over 2017 Provided a payout ratio of 62% with respect to 2018 declared distributions Free Cash Flow from operations was a $2 billion in 2018, a 50% increase over 2017 Successfully bought back and retired 1.2 million LP units ($30.8 million) in late December Maintained substantial liquidity; $6.3 billion as of 12/31/18 (1) For definitions of these non-gaap financial measures and a reconciliation of these amounts to their nearest GAAP counterparts, see appendix. Segment Level Gross Operating Margin Change Distributable Cash Flow (1) : $4,502 $5, % DCF Coverage: 1.24x 1.59x +28.2% Retained DCF: $867 $2, % Cash Flow from Operations (1) : $4,666 $6, % Free Cash Flow (1) : $1,331 $2, % Adjusted EBITDA (1) : $5,615 $7, % Fully Diluted Earnings per Unit: $1.30 $ % Total Gross Operating Margin: $5,680 $7, % NGL Pipelines and Services: $3,258 $3, % Crude Oil Pipelines and Service: Natural Gas Pipelines and Services: Petchem & Ref. Products Services: $987 $1, % $715 $ % $715 $1, % ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 8

9 CONSISTENT FINANCIAL RESULTS THROUGH BUSINESS CYCLES 400% 350% 300% 250% 200% 150% 100% 50% EPD s Recent Price Reflects Current Investor Sentiment 0% Correlation to WTI 2Q EPD Unit Price AMZ Index XLE ETF $ Bbl EPD Has Delivered Consistent Results Throughout Cycles $160 $ in Millions $2,500 $140 $120 $2,000 $100 $1,500 $80 $60 $1,000 $40 $20 $500 $0 $- $/bbl $160.0 $140.0 $120.0 $100.0 $80.0 $60.0 $40.0 $20.0 $0.0 EPD Unit Price AMZ Index XLE ETF WTI Crude Which Has Supported Distribution Growth CAGR: EPD Distribution per Unit 2Q Q % Last 3 Years 3.7% 1 Year 2.4% $2.00 $1.80 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $- $/unit $ millions (1) (2) WTI Crude EPD Gross Operating Margin EPD DCF w/o Non Recurring While Building a Margin of Safety for Future Growth $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Cumulative Retained DCF and % of total DCF 2Q $9,537 22% Last 3 Years $3,513 19% Last 12 Months $2,056 25% WTI Crude Annualized Distribution per Unit Retained EPD DCF w/o Non Recurring Cash Distributions (1) Total gross operating margin and distributable cash flow represent reported amounts. For a reconciliation of these amounts to their nearest GAAP counterparts, see Non-GAAP Financial Measures on our website. (2) Excludes non-recurring cash transactions (e.g., proceeds from asset sales and property damage insurance claims and payments to settle interest rate hedges). Sources: EPD and Bloomberg ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 9

10 DELIVERED CONSISTENT RETURNS ON CAPITAL Structured For and Executing Through Cycles % 11.8% 10.8% 11.4% 11.2% 11.6% 12.9% 13.3% 13.1% 12.5% 11.0% 10.2% 10.7% 12.6% 14.0% 12.0% 10.0% $/Bbl % 6.0% Unlevered ROIC % % % ROIC (1,2,3) WTI Crude (1) For a definition, see appendix. (2) Pre-2008 is based on EPD reported results (not recast for Mergers). (3) 2008 and 2009 reflect the recast financial statements of Enterprise giving effect to the TEPPCO and Enterprise GP Holdings mergers. ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P % Sources: EPD and Bloomberg Past results may not be indicative of future performance

11 DURABLE CASH FLOW METRICS THROUGHOUT COMMODITY CYCLE $120 As measured by MLP or Conventional metrics $3.00 $100 $ x $ % $2.50 $/bbl $80 $60 $40 $ x $ % $ x $ % $1.99 $ x 76% $1.94 $ % 1.2x $ x $ % $2.00 $1.50 $1.00 Operational DCF & CFFO Per Unit $20 $0.50 $- $ (1,2) (1,3) Operational DCF per Fully Diluted Unit CFFO per fully diluted unit WTI Crude price (Annual Average) (1) For a definition, see appendix (2) Represents the operational DCF coverage ratio over the distributions paid (3) Represents the percentages CFFO that were paid in distributions Sources: EPD and Bloomberg ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 11

12 FUNDING GROWTH WITH FINANCIAL DISCIPLINE Total Growth Capital Expenditures & Debt Leverage $ in Billions $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $ x $7.8 $4.6 $ x (1) $6.2 $ x $ x $3.9 $1.0 $ x $3.1 $0.2 $2.9 $4.1 $0.2 $ x 4.7x 4.5x 4.3x 4.1x 3.9x 3.7x 3.5x Debt / Adjusted EBITDA $ Organic Growth Capital Acquisitions Debt Leverage Ratio 3.3x (1) Proforma includes full year EBITDA for Oiltanking ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 12

13 STRENGTHENING DEBT PORTFOLIO Extending Maturities Without Increasing Costs $27.0 Billion Notes Issued 2009 December % Fixed Rate Debt (1) (at December 2018) 8.0% % 12.6% 9.4% 29.0% Average Maturity Years % 5.8% % % % 4.7% % 6.0% 5.0% Cost of Debt % 4.6% 4.7% 4.0% 3 Year 5 Year 10 Year 30+ Year Average Maturity to First Call Date Average Cost of Debt (1) Pro forma average maturity, cost of debt and percentage of fixed rate debt at December 31, ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 13

14 EPD COMPARES WELL AGAINST S&P 100 USING CONVENTIONAL METRICS vs. S&P 100 Market Cap. AMZN $801B MSFT $812B Price / Earnings Price / Cash Flow Total Return Rating CFFO Payout Ratio (1) (1) (1) (1) NFLX 97.1x AIG 89.1x FOX 59% MSFT AAA KHC 216% CHTR 63.6x MA 30.7x MRK 46% JNJ AAA KO 99% EPD: 62% EPD: 15.4% EPD: 14.1x EPD: 9.7x EPD: BBB+ EPD: $60B ALL $30B HAL $27B F 7.0x GM 6.0x GM 3.8x ALL 3.7x (1) For a definitions, see appendix. Source: Data compiled from Bloomberg as of January 29, Compares EPD to the S&P 100 ( OEX ) Index constituents *Past results may not be indicative of future performance CELG -32% GE -55% CHTR BB+ GOOG 0% NFLX BB- AMZN 0% ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 14

15 EPD COMPARES WELL AGAINST UTILITIES USING CONVENTIONAL METRICS vs. Utilities Market Cap. NEE $82.4B DUK $61.1B EPD: $60BN Price / Earnings Price / Cash Flow Total Return Rating CFFO Payout Ratio (1) (1) (1) (1) AWK 28.0x EVRG 22.8x AWK 13.8x NEE 11.6x AES 51% NRG 38% ES A+ AWK A EPD 62% LNT 57% EPD: 62% EPD: 9.7x EPD: 15.4% EPD: BBB+ EPD: 14.1x NI $9.7B SCG $6.8B AES 12.8x PCG 7.0x AEX 3.7x PCG 2.9x EIX -30% PCG -51% (1) For a definition, see appendix. Source: Data complied from Bloomberg as of Jan 29, Compares EPD to the S&P 500 Utilities ( S5UTIL ) Index constituents. *Past results may not be indicative of future performance. AES BB+ NRG BB NRG 2% PCG 0% ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 15

16 TRANSITIONING TO A TRADITIONAL FINANCIAL MODEL 2-year transition period (2018 and 2019); ahead of schedule Continued distribution growth Self-fund equity portion of capital investments Target debt to normalized EBITDA leverage of 3.5x area Authorized multi-year $2 billion common unit buyback program Opportunistic Another tool in the toolbox to return capital to investors Timing and pace dependent on: EPD s financial performance and flexibility; Organic growth and acquisition opportunities with higher potential returns on investment; EPD s unit price and implied distributable cash flow yield; and Maintaining targeted financial leverage ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 16

17 MIDSTREAM ENERGY FUNDAMENTALS ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. enterpriseproducts.com

18 MACRO ENERGY THEMES Near Term 1 3 Years Production growth rates may be tempered slightly from previous trajectories DUCs, especially in the Permian, continue to grow indicative of tightness in completion services and concerns around the pace of global demand growth NGL, crude oil, natural gas pipeline capacity and Mont Belvieu fractionation capacity are all very tight Longer Term U.S. E&P industry has global staying power and are focused on living within their cash flows U.S. is oversupplied for all hydrocarbons U.S. Petchem industry will remain feedstock advantaged globally U.S. is becoming a substantial exporter of hydrocarbons and chemicals, with the largest demand growth being Asia $/MMbtu Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P cpg $/Bl Natural Gas Basis Spread HSC vs. Waha 0.0 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Propane Basis Spread MTBV vs. Conway Crude Oil Basis Spread MEH vs. Midland 0 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Sources: Bloomberg and EPD Fundamentals

19 RIG COUNTS: 58% OF RIGS ARE IN PERMIAN, EAGLE FORD AND HAYNESVILLE 1,200 Baker Hughes Rig Counts 1, All Others Haynesville Eagle Ford Permian Source: Baker Hughes ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 19

20 DUCS: 68% OF ALL DUCS ARE IN PERMIAN, EAGLE FORD AND HAYNESVILLE 9,000 Drilled Uncompleted Wells 8,000 7,000 6,000 4,170 5,000 4,000 3,000 2,000 1,000 1, ,826 - All Others Haynesville Eagle Ford Permian Source: EIA ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 20

21 U.S. OIL AND GAS SUPPLIES GROWING FAST 20 Oil & Condensate Production (MMBPD) 120 Dry Natural Gas Production (Bcf/d) ,000 8,000 6,000 4,000 2,000-2,466 NGL Production (MBPD) 4,859 6,038 7,125 8, Production growth is Gulf Coast centric Demand for hydrocarbons in the U.S. is not expected to grow E&P sector and Petchem industry have become dependent on exports Source: EPD Fundamentals published Aug Forecasts assume $55 WTI, $3.00 Henry Hub and full ethane recovery ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 21

22 U.S. PROJECTED TO BECOME A MAJOR CRUDE EXPORTER MMBPD U.S. Demand for Crude: LIGHT OIL CANADIAN IMPORTS Destined for Export US Prod - Light US Prod - Cond US Prod - Medium US Prod - Heavy Imports - Canada Imports: KSA, MEX & VEZ Other Imp PADD 5 Other Imp PADD 1 Base Imports actual exports EIA EPD Fundamentals Sources: EIA and EPD Fundamentals ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 22

23 LPG SUPPLIES ALREADY EXCEED DOMESTIC DEMAND, MORE EXPORT CAPACITY REQUIRED MBPD 4,500 4,000 3,500 3, MMBPD mostly headed to Asia? 2,500 2,000 1,500 1, LPG Domestic Demand Actual LPG Exports Industry Export Capacity LPG Supply Note: Industry Export Capacity at 85% Operating Rate. Includes EPD, Mariner East and Targa expansions Source: IEA and EPD Fundamentals published Aug ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 23

24 ASIA ABOUT HALF OF LPG IS IMPORTED Currently 40% from U.S. A large portion of this demand is consumer-oriented and relatively inelastic Between 2012 and 2017, Chinese and Indian LPG demand grew at 17% and 8% CAGR, respectively Subsidies in India (Ujjwala program: 100+ MM households) and policies promoting cleaner fuels in China are expected to keep demand strong 700 1,500 1,000 Population Million People* LPG Imports (MBPD) USA India China * As of China S Korea India Japan Sources: Bloomberg and EPD Fundamentals ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 24

25 INDIA + ASIA: 52% OF ALL U.S. GULF COAST NGL EXPORTS! 2018 USGC Exported C2: 47 MMB C3: 286 MMB C4: 51 MMB Europe: 8% of U.S. NGL Exports C2: 16 MMB C3: 14 MMB C4: 2 MMB Far East Asia: 43% of U.S. NGL Exports C2: 0 MMB C3: 137 MMB C4: 23 MMB LatAm: 17% of U.S. NGL Exports C2: 3 MMB C3: 53 MMB C4: 7 MMB Other Countries = 24% of U.S. NGL Exports C2: 2 MMB C3: 77 MMB C4: 14 MMB Indian Ocean = 9% of U.S. NGL Exports C2: 26 MMB C3: 4 MMB C4: 5 MMB Data is for 2018 Exports from USGC only Source: Waterborne ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 25

26 400 GLOBAL DEMAND FOR PETROCHEMICALS EXPECTED TO REMAIN STRONG Global Ethylene & Propylene Demand Approximate 2010 to 2019 Compounded Annual Growth Rates (CAGR) globally: GDP: 3.0% Oil 1.5% Ethylene: 3.3% Propylene: 4.2% 300 Billion Lb IEA: Petchems are set to account for more than one-third of the growth in oil demand to 2030, and nearly one-half to 2050 ahead of cars / trucks, aviation and ships Sources: IMF,IEA, Bloomberg and EPD Fundamentals ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 26

27 Company Occidental Chemical / Mexichem THE CHEMICALS INDUSTRY IS INVESTING OVER $200 BILLION* BASED ON U.S. SHALES U.S. World Scale Ethylene Plants Under Construction Capacity Billion lb/year Ethane Capacity (MBPD) Ethane Capacity Cumulative (MBPD) Estimated Completion Date Location Operational Ingleside, TX Chevron Phillips Chemical Operational Cedar Bayou, TX DowDupont Operational Freeport, TX ExxonMobil Chemical Operational Baytown, TX Indorama Lake Charles, LA Shintech Plaquemine, LA Sasol Lake Charles, LA Formosa Plastics Point Comfort, TX Westlake/ Lotte Lake Charles, LA Total / Borealis / Nova Early 2020s Port Arthur, TX Shell Early 2020s Monaca, PA DowDupont Early 2020s Freeport, TX Sabic/Exxon Mobil Early 2020s Corpus Christi, TX TOTAL GROWTH %! * $200B in capital could lead to $300B/year in output, supporting 786,000 new jobs across the economy by 2025! Per American Chemistry Council Source: EPD Fundamentals ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 27

28 ETHANE TO POLYETHYLENE MARGINS STRONG Margin Cents per Pound (15) Indicative U.S. Ethylene Cracker Profit Margin by Feedstock $ per Pound $0.8 $0.6 $0.4 $0.2 Polyethylene vs. Ethylene Prices (FOB Houston) HDPE + LDPE is 60% of production $0.20 spread (30) $0.0 MM lb/yr 100,000 80,000 60,000 40,000 20,000 - Ethane Propane Butane Lt Naphtha U.S. Ethylene Capacity & Production New Builds MBPD 3,000 2,750 2,500 2,250 2,000 1,750 1,500 1,250 1, Ethylene High Density Polyethylene (HDPE) Linear Low Density Polyethylene (LLDPE) Ethane Supply Demand on U.S. Gulf Coast Production Production incl. rejected ethane New Builds Exports Existing US Steam Cracker Capacity New Builds US Ethylene Production Sources: Hodson, EIA and EPD Fundamentals ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 28

29 IEA EXPECTS NATURAL GAS TO HELP REDUCE CO 2 EMISSIONS AT THE EXPENSE OF COAL AND OIL Reality is that the world needs fossil fuels. Pounds CO 2 per MMBtu Natural gas is expected to play a central role in reducing CO 2 emissions. Natural gas is needed to displace coal and oil as it emits 30% 50% less CO 2 per unit of energy. Thousand Megawatt Hours Net Power Generation by Source 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , Coal Petroleum Liquids Petroleum Coke Natural Gas Other Gases Nuclear Conventional Hydroelectric Other Renewables Hydro-Electric Pumped Storage Other Source: EIA ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 29

30 POWER GENERATION FROM SHALE NATURAL GAS AND RENEWABLES HAS LED TO LOWER CO 2 EMMISSIONS 3,500 15% Decrease in U.S. CO 2 Emissions Since ,000 Coal, Natural Gas & Petroleum in Million Metric Tons 3,000 2,500 2,000 1,500 1, ,000 5,000 4,000 3,000 2,000 1,000 0 Total Emissions in Million Metric Tons Total Coal Natural Gas Petroleum & Liquids Source: EIA ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 30

31 SHALE PRODUCED LPG AND NATURAL GAS SUPPORT EMERGING ECONOMIES WITH CLEANER FUELS Without access to cleaner fuels, poorer nations use wood and exacerbate deforestation and soil erosion problems. More over, propane for example emits 35% less CO 2 than burning wood. Source: United Nations In many developing countries, governments are promoting cleaner fuels such as LPG tanks instead of wood and coal. Their stated goals are: Stopping deforestation and accidental deaths from smoke inhalation, cleaner air in urban centers, as well as liberating women from chore of collecting wood India: Government implementing the Ujuwala program in 2016, which subsidizes LPG usage by poor families: 32 million households converted to LPG in 2016; another 70 million targeted by 2019 Nigeria: in 2017, 40 million houses were to be converted over next 24 months Indonesia: 90% LPG household coverage already achieved (2017) China: Chinese LPG demand is expected to increase 50% from 2014 to 2018 mostly for domestic heating and cooking ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 31

32 U.S. LPG...CHANGING LIVES AROUND THE WORLD In China s Coal Country, a Ban Brings Blue Skies and Cold Homes (New York Times February 10, 2018) A graveyard for coal stoves in Qiaoli offers silent testimony to China s effort to end its long dependence on coal, and clean its skies of smog. A large number of cities in China and India suffer from pollution and unhealthy air quality. Reducing reliance on coal and shifting instead to cleaner fuels such as LPG and natural gas is critical to improving urban air quality ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 32

33 NGLS PRODUCE ADVANCED MATERIALS FOR MAKING LIGHTER CARS AND PLANES A large portion of NGLs (about 35% ) are consumed as a feedstock for producing plastics and chemicals, which are used in everyday life. Advanced plastics and coatings enables more efficient planes, cars, houses and appliances, thus reducing energy usage and corresponding CO2 emissions. In some developing countries, single use plastics end up as rubbish pollution on land or in our oceans. Particularly countries lacking adequate rubbish collection and disposal, or recycling policies and incentives. Many countries have banned or limited the use of plastic bags while other have implemented serious recycling policies with consumer awareness programs Source: EPD Fundamentals ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 33

34 GROWTH PROJECTS UPDATE ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. enterpriseproducts.com

35 WE CONTINUE TO GROW $5.1B of Major Capital Projects Under Construction NatGas 2% $ in Billions $6.0 $5.5 $5.0 $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 Orla I & II gas plants Mont Belvieu Frac IX Aegis NGL (Phase 2) P/L Permian crude gathering $1.9 $0.2 $1.6 Shin Oak P/L Orla III gas plant Seminole NGL to Crude P/L conversion $1.0 $ Q2019 2Q2019 3Q2019 4Q Estimated Recently completed projects with expected volume ramps Midland to ECHO I & II pipelines: commitments expected to ramp to >730 MBPD end of 2021 Shin Oak pipeline: expected to ramp to 550 MBPD in 4Q 2019 Aegis ethane pipeline: expected ramp to 362 MBPD in 2019 Front Range pipeline: expected ramp to 162 MBPD in 2021 Texas Express pipeline: expected ramp to 289 MBPD in 2022 Ethylene export dock ibdh ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 35 $1.7 Petchem 33% Crude 12% NGL 53% Mentone gas plant Mont Belvieu fracs, DIB and Isom units $1.9

36 PERMIAN EXPANSION PROJECTS >$6 Billion of Capital Investments...more to come NGL Projects South Eddy and Waha Gas Plants added 350 MMcf/d Orla Gas Plant and related gathering 2 processing trains (Orla I and II) in-service; Orla III scheduled 2Q processing trains will provide 900 MMcf/d of capacity and 120 MBPD of NGL production Mentone Gas Plant (scheduled 1Q 2020); 300 MMcf/d Bringing Permian capacity >1.6 Bcf/d and >250 MBPD Shin Oak NGL Pipeline (250 MBPD in-service 1Q 2019) Expected to increase to 550 MBPD in 4Q th NGL Fractionator at Mont Belvieu; added 90 MBPD capacity Additional 300 MBPD Fractionation at Mont Belvieu (scheduled 2020) Will bring total area to >1 MMBPD Crude Oil Projects Midland to ECHO Crude Pipeline Capacity: 575 MBPD; increasing to 620 MBPD (March 2019) Permian Crude Gathering System Red Hills to Loving / to Midland Crude Pipeline Current: 200 MBPD; expandable to 350 MBPD Midland storage; added 3 MMBbls in past 2 years; 500 MBbls under construction Midland-to-ECHO II Pipeline System Capacity: 200 MBPD Limited service in February 2019; scheduled full service April 2019 Mont Belvieu ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 36

37 ENTERPRISE S PERMIAN CRUDE PIPELINE From Permian Supply Hub to Multiple Markets TEXAS Midland Cushing Midland-to-ECHO I Pipeline Systems Two parallel pipeline systems from Midland to ECHO: Existing 418-mile, 24 pipeline from Midland to ECHO currently at 575 MBPD; expected to increase to 620 MBPD in March 2019 Midland-to-ECHO II Pipeline System commenced line fill in February 2019 and expected to be in full commercial service at >200 MBPD in April 2019 Both pipeline systems integrated with existing 1.3 MMBPD Rancho II Pipeline from Sealy to Houston Hedged 29% of current uncommitted volumes through 2020 at an average of $5.55 per barrel Volume Ramp for Midland to ECHO Pipeline Systems (1) Marshall Milton Lyssy Gardendale Three Rivers Sealy Katy Jones Creek EHSC ECHO Freeport Beaumont Texas City MBPD ECO Unhedged + Uncommitted ECO Hedged 3rd Party Contracts Corpus Christi 0 4Q (1) Volume for 4Q 2018 represents average for the period; remaining years are peak annual volumes ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 37

38 PROPOSED SEA PORT OIL TERMINAL (SPOT) 2 MMBPD of Export Capacity SEALY EHSC Capable of loading at 85 MBPH Manned platform meets or exceeds USCG Regulations Access to over 300 MMBBLS of Gulf Coast storage and >8 MMBPD of supply Located 40 nautical miles offshore in 115 water depth Dedicated anchorage area Dual 36 pipelines provided flexibility and reliability Vapor Control Meets EPA and TCEQ rules and regulations for emissions control Minimizes emissions of Volatile Organic Compounds (VOCs) No other known existing or proposed projects meet these specs 36 Freeport ECHO New Terminal Offshore Export Terminal Existing EPD Pipeline Proposed Onshore Pipeline Proposed Offshore Pipeline *Design, location, and other technical information shown in this presentation is preliminary and subject to change. ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 38

39 ENTERPRISE CME / NYMEX HOUSTON WTI FUTURES CONTRACT Meeting customer demands: Specifications are reflective of Midland crude and provide a consistent, quality barrel of crude oil API 0.275% sulfur 4 ppm nickel 4 ppm vanadium 3 delivery points ECHO Enterprise Genoa Enterprise Houston Ship Channel (EHSC) EPD CME futures contracts have traded over 2X the volume of the ICE contract since November 5 th Contracts 10,000 8,000 6,000 4,000 2,000 - Midland Cushing Magellan Refinery EPD GENOA XOM Baytown Cushing EHSC ECHO Houston Futures Contract Volumes CME ICE Export Magellan Export Refinery Sources: NYMEX and ICE ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 39

40 LPG EXPORT TERMINAL EXPANSION Expected 2 nd Half of 2019 EHT LPG Expansion Capacity expected to increase 175 MBPD or 5 MMBbls/month >30% expansion Brings total export capacity to 700 MBPD, or 21 MMBbls/month Timeline expected 3Q Acres ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 40

41 ENTERPRISE ETHYLENE SYSTEM Under Development STORAGE & CONNECTIVITY PIPELINE EXPORT TERMINAL Cavern capacity 600 million lbs. Cavern In / Out delivery rates expandable up to 420,000 lbs. per hour 8 industry pipelines within half mile of Enterprise storage header Additional MTBV Enterprise owned caverns available for market growth Access to USGC ethylene via Enterprise Mont Belvieu system New pipeline enhances industry connectivity by directly linking Mont Belvieu Caverns to the export terminal and to USGC markets Export System capable of 2.2 billion lbs. per year Loading rate of 2.2 million lbs. per hour On-site refrigerated storage for 66 million lbs. Multiple docks for loading Expected in-service: 4Q rd Party Storage Ethylene Refrigeration & On-site Storage Ethylene Export 3 rd Party Olefins Plants Mont Belvieu Caverns - New Ethylene Cavern Ethylene Pipeline 3 rd Party Ethylene Connections ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 41

42 BUTANE TO BUTYLENE VALUE CHAIN Continuing Strategy: convert low cost NGLs into value added olefins Enterprise Assets Y-Grade n-butane IsoButane Existing Crude Isobutylene MTBE Gas Plants IsoButane Fractionation Isomerization isobutane DeHydro (ibdh) Crude Isobutylene Storage Caverns New High Purity Isobutylene (HPIB) Existing DeHydro Unit (with MTBE Unit) has been in operation for 24 years There continues to be very high growth in isobutylene derivative markets As the isobutylene market demand has grown (particularly for octane enhancers and fuel & lubricants additive packages) the opportunity cost of the underutilized capacity in our existing derivative units, MTBE and High Purity Isobutylene (HPIB), has become large enough to support additional isobutylene production capacity ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 42

43 ibdh The Other DeHydrogenation Project Capacity 937 million pounds of isobutylene annually (425,000 metric tons) Doubles Enterprise s capacity Consumes 30 MBPD butane Schedule Permits received Major equipment purchased Engineering, foundations and fabrication in progress Completion expected 4Q 2019 Contracts 50% will fill Crude Isobutylene sales on a 15-year, fee-based contract with an investment grade company, all on a feedstock cost-plus basis Facility rendering 25% will fill Enterprise s HPIB capacity for lubricants, additives and rubber, all on a feedstock cost-plus basis 25% will fill Enterprise s MTBE capacity into the export motor gasoline market ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 43

44 ENVIRONMENTAL, SOCIAL AND GOVERNANCE ( ESG ) PRIORITIES Governance and Oversight: The Governance Committee oversees implementation of policies related to environmental protection, transportation compliance, health & safety policies, Board-level committee includes Chairman of the board and two external directors The Safety Leadership Council has executive-level oversight of safety and environmental stewardship Members include the CEO, Chairman, President and other executives who meet weekly Safety Objectives: Abide by GoalZero policy Daily safety moments remind employees that: No task is so important that it be done at the risk of safety Every meeting begins with a safety moment >$300MM/year spent on maintenance capital and pipeline integrity Does NOT include all R&M expenses Best-in-class training In 2018, over 280,000 hours of safety, technical and compliance training was provided Some courses offered to external stakeholders and regulators Injury Rate YTD Total Recordable Incident Rate average industry rate Lost Time Injury Rate The OHSA Recordable Rate is calculate by multiplying the number of recordable injury cases by 200,000 and then dividing that number by the actual number of labor hours at the company ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 44

45 ESG PRIORITIES (continued) Environmental Stewardship Principles: Continuous monitoring of environmental data, allowing us to anticipate and prevent issues. Internal monitoring systems allow us to track operational and emissions data, and identify opportunities for improvement. Evaluate opportunities to lower emissions and energy consumption at our facilities to promote efficiencies and better protect the public and environment Proactive involvement in the environmental regulatory process helps ensure responsible government policy. Collaborate with industry trade associations such as: Houston Regional Monitoring, Gas Processors Association and Texas Pipeline Association to engage with stakeholders at all levels of government, provide leadership and share best practices for continuous improvement Other areas of emphasis: Stakeholder Engagement: Leadership role in over two dozen key state and federal associations, allowing us to coordinate advocacy and participate in key industry issues, including environmental and safety initiatives, pipeline security, safe and reliable pipeline construction and engagement with landowners and Native Americans. Support communities in which we work: $45MM of investments and financial contributions over the last 3.5 years have supported local and economic development, first responders, educational development and Public Safety Awareness ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 45

46 MORE GROWTH ON THE HORIZON Potential Opportunities Producer driven projects Additional gas processing plants Add natural gas, NGL and crude pipeline capacity Increase crude pipeline capacity from Permian Basin Expand existing and build additional NGL fractionators Expand Seaway crude oil pipeline capacity Demand driven projects PDH 2 and 3 Expand LPG export capacity Expand Aegis ethane pipeline Additional marine terminal capacity (multi-product) Offshore crude oil port ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 46

47 WHY ENTERPRISE? Market Capitalization: $60B Enterprise Value: $87B Daily Trading Value: $162MM As of January 30, 2019 Disciplined Allocator of Capital: 2018 CFFO Allocation: (1) Distributions 62% Capital investment 38% Funding 2018 Growth Capital Investment: CFFO (less distributions) 55% Debt 32% DRIP issuance 13% As of December 31, 2018 (1) For a definition, see appendix. 20 Years Publicly Traded Partnership Geographic Diversification: Average Unlevered Return on Invested Capital: (1) 12% over the last 10 years 2019 $1.765/unit FY distributions 3.5x Target Leverage (1) $3.1 $3.5B CAPEX ($645) MM potential contribution from partners $2B buyback announced Highest credit rating in midstream energy space: BBB+ / Baa1 FY 2018 Leverage (1) : 3.5x reported 3.7x normalized for outsized spread opportunities 20 consecutive years of distribution increases Interests Aligned with Investors: 32% of common units owned by Management ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 47

48 APPENDIX & NON-GAAP RECONCILIATIONS ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. enterpriseproducts.com

49 GROWTH CAPITAL PROJECTS NGL Pipeline & Services Mont Belvieu Frac 9 85 MBPD Done Orla gas plants 900 MMcf/d and related P/L ( I & II in service, III 2Q 2019) Done Aegis ethane pipeline Phase 2 Done Shin Oak (Permian to Mont Belvieu) 550 MBPD 24" NGL P/L (1Q 2019) Done Front Range and Texas Express mixed NGL pipeline expansions (3Q 2019) EHT LPG Dock metering expansion (3Q 2019) Panola III gas plant and related pipelines (4Q 2019) Mentone gas plant in Permian and related pipelines (2020) Mont Belvieu Fractionators 300 MBPD capacity (2020) Crude Oil Pipelines & Services Appelt and Beaumont storage terminal expansions Done ECHO addtional storage and EHT connection pipeline Done Midland to ECHO 24" P/L (in service) and four 240 MBbl storage at Sealy Done Permian pipelines Red Hills Loving Midland and gathering Done Eagle Ford (JV) crude oil dock at Corpus Christi (2Q 2019) Midland to ECHO II NGL pipeline conversion (2Q 2019) EHT Crude export dock replacement and expansion (2020) EFS Condensate delivery expansions (2020) Petrochemical & Refined Products Services Refined products export dock Beaumont expansion (1Q ) Done Ethylene storage and 24-mile 12" P/L from Mont Belvieu to Bayport and terminal (2019) Isobutane Dehydrogenation ( ibdh ) unit (4Q 2019) Mont Belvieu DIB expansion (3Q 2020) Mont Belvieu ISOM and HPiC4 pipeline (2022) Other Natural Gas Pipelines & Services North Texas 36" 150 MMcf/d expansion pipeline JV Done Permian gathering systems (3Q 2019) Value of capital placed in service ($ Billions) $ 1.9 $ 1.6 Value of remaining capital projects to be placed in service ($ Billions) $ 0.2 $ 1.0 $ 0.3 $ 1.7 $ 1.9 ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 49

50 ENTERPRISE EXPORT CAPACITY Linking U.S. Supplies to Global Demand Beaumont West Sealy Enterprise HSC Mont Belvieu Morgan s Point Beaumont East ECHO Texas City Freeport / Jones Creek Facility Product Ship Docks (1) Max Draft Max Loading Capacity (2) MBPD Enterprise HSC Multi 7 45` 2,184 Texas City / Freeport Crude 4 45` / 42` 1,440 Beaumont Multi 5 40` 1,132 Morgan s Point Ethane 2 45` 240 Total 18 4,996 ENTERPRISE ASSETS Docks NGLs Refined Products Crude Oil (1) Excludes Barge Docks (2) Theoretical Max capacity assumes all volumes are destined for exports (displacing imports), and may not represent current operating scenario ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 50

51 ENTERPRISE EXPORTS EXPECTED TO CONTINUE TO INCREASE 2,000 1,800 1,600 MBPD 1,400 1,200 1, HURRICANE HARVEY Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 NGL Petchem & Ref. Products EPD Crude Exports Sources: Waterborne (IHS), EPD Fundamentals and EPD Distribution Schedules, including estimates ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 51

52 NATURAL GAS GATHERING & PROCESSING Limiting the Commodity Exposure Total GOM $4,387 $4,814 $5,205 $5,339 $5,248 $5,680 $7,326 G&P % of Total GOM 27% 17% 15% 10% 8% 9% 11% $ in Millions $1,350 $1,200 $1,050 $900 $750 $600 $450 $300 $150 $0 $0.88 $832 $0.70 $510 $0.59 $535 $292 $169 $332 $301 $259 $253 $247 $264 $335 % contribution from G&P decreased with investments in fee-based pipelines, fractionators, & export facilities & lower commodity prices (1) Gross operating margin ( GOM ) presented for NG Gathering and NG Processing are components of total GOM amounts reported for our Natural Gas Pipelines & Services and NGL Pipelines & Services segments, respectively. For a reconciliation of total GOM amounts to their nearest GAAP counterparts, see Non-GAAP Financial Measures on our website. $0.25 ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 52 $0.28 $0.42 $244 $ NG Gathering (1) NG Processing (1) Indicative Processing Spread ($/Gal) $500 $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 $/Gal

53 MONT BELVIEU FRACTIONATION CAPACITY MBbls 6,000 5,000 4,000 3,000 2,000 1,000 - Existing Potential New Frac Capacity Cumulative New Supply This chart measures total supply vs. Mont Belvieu Frac capacity and does not consider available capacity in Louisiana, South Texas or at Conway Source: IEA and EPD Fundamentals published Aug ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 53

54 GROSS OPERATING MARGIN WATERFALL 2017 to 2018 $ in MMs $7,500 $7,000 $477 $189 $133 $7,326 $6,500 $846 $6,000 $5,500 $5,680 $5,000 $4,500 $4, FY GOM New & Expanded Asset Contribution Existing assets with operating leverage Legecy Gas Plants All other changes 2018 FY GOM New assets include Midland to ECHO, PDH, and Permian gas processing & gathering Existing assets (excluding gas plants) with operating leverage increased $5MM or more and did not have contractual ramp or expansion Legacy gas plants: Rockies, LA, MS, & South TX benefitted from 2018 processing spreads increasing 13c per gallon vs ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 54

55 $ in MMs $1,100 $1,000 $900 PETCHEM AND REFINED PRODUCTS MIDSTREAM SERVICES GOM 2017 to 2018 $172 $55 $35 $31 $21 $29 $1,058 $800 $700 $715 $600 $ GOM PDH & Termination of Bridging agreements MTBV Propylene Plants TE Products Pipeline Octane Enhancement Isoms & DIBs All Other Changes 2018 GOM ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 55

56 PETROCHEMICAL & REFINED PRODUCTS MIDSTREAM SERVICES $1.1B 2018 Gross Operating Margin TE Products FERC regulated Gulf Coast Terminals 8 ship/barge docks, 15.3MMbbls of storage, connectivity to the majority of Texas refineries Long term storage and export contracts: 95% fixed fee contracts 9.5 billion lbs of total capacity 1.65B lbs PDH PDH: 100% fixed fee contracts Propylene frac: 70% fixed fee contracts (excludes PDH) Over 90% of our term-customers are investment grade Refined Products 39% Propylene Production 31% Capacity: 35 MBPD HPIB: >90% fixed fee contracts Base octane margins are secured minimum of a year in advance Octane Enhancement and HPIB Butane Isomerization 10% 116 MBPD of capacity 50% fixed fee contracts Average contract is 15+ years ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 56

57 HOUSTON WTI FUTURES DELIVERY POINT SUPPLY / MARKET CONNECTIVITY Cushing Moore Rd. Junction KEYSTONE 36 Valero 190 MBD Colorado City Crane Eagle Ford SEAWAY 2 x 30 BRIDGETEX 20 LONGHORN 18 HR 264 MBD EHSC 24 Magellan East Houston EHSC 24 EHSC 30 Speed MPL 24 Junction BRIDGETEX 24 W. COLUMBIA 16 MPL 20 Galena Park Magellan Galena Park Seaway PRSI 112 MBD EHSC 24 Pasadena Junction EHSC 24 EHSC 36 EHSC EHSC 30 EHSC 30 EHSC 24 HFOTCO 24 HFOTCO 24 MPL 24 EHSC 24 HFOTCO Shell Deer Park Junction XOM Baytown 560 MBD XOM 16 HFOTCO Shell DP 326 MBD MIDLAND-ECHO 24 SEAWAY 1 30 SEALY KATY MPL 24 MMP Genoa Junction EPD EPD 24 RANCHO II 36 EPD 24 ECHO XOM 16 XOM 16 MPL Seabrook Logistics EAGLE FORD 24 SEAWAY 2 30 Jones Creek ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 57 Webster Junction DOE (XOM) 40 BRIDGETEX 24 MPL 26 Seaway TX City GENESIS 8 Texas City Junction MARATHON 86 MBD MARATHON 459 MBD VALERO 225 MBD

58 TOTAL GROSS OPERATING MARGIN We evaluate segment performance based on our financial measure of gross operating margin. Gross operating margin is an important performance measure of the core profitability of our operations and forms the basis of our internal financial reporting. We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results. The term "total gross operating margin" represents GAAP operating income exclusive of (i) depreciation, amortization and accretion expenses, (ii) impairment charges, (iii) gains and losses attributable to asset sales, insurance recoveries and related property damage and (iv) general and administrative costs. Total gross operating margin includes equity in the earnings of unconsolidated affiliates, but is exclusive of other income and expense transactions, income taxes, the cumulative effect of changes in accounting principles and extraordinary charges. Total gross operating margin is presented on a 100% basis before any allocation of earnings to noncontrolling interests. The GAAP financial measure most directly comparable to total gross operating margin is operating income (dollars in millions). For the Year Ended December 31, Gross operating margin by segment: NGL Pipelines & Services $ 2,877.7 $ 2,771.6 $ 2,990.6 $ 3,258.3 $ 3,830.7 Crude Oil Pipelines & Services ,511.3 Natural Gas Pipelines & Services Petrochemical & Refined Products Services ,057.8 Offshore Pipelines & Services Total segment gross operating margin (a) 5, , , , ,291.0 Net adjustment for shipper make-up rights (b) (81.7) Total gross operating margin (non-gaap) 5, , , , ,325.7 Adjustments to reconcile non-gaap gross operating margin to GAAP operating income: Subtract depreciation, amortization and accretion expense amounts not reflected in gross operating margin (1,282.7) (1,428.2) (1,456.7) (1,531.3) (1,687.0) Subtract asset impairment and related charges not reflected in gross operating margin (34.0) (162.6) (52.8) (49.8) (50.5) Add net gains or subtract net losses attributable to asset sales and insurance recoveries not reflected in gross operating margin (15.6) Subtract general and administrative costs not reflected in gross operating margin (214.5) (192.6) (160.1) (181.1) (208.3) Operating income (GAAP) $ 3,775.7 $ 3,540.2 $ 3,580.7 $ 3,928.9 $ 5,408.6 (a) Within the context of this table, total segment gross operating margin represents a subtotal and corresponds to measures similarly titled and presented with the business segment footnote found in our consolidated financial statements. (b) Gross operating margin by segment for NGL Pipelines & Services and Crude Oil Pipelines & Services reflect adjustments for shipper make-up rights that are included in management's evaluation of segment results. However, these adjustments are excluded from non-gaap total gross operating margin in compliance with recently issued guidance from the SEC. ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 58

59 ADJUSTED EBITDA Adjusted EBITDA is commonly used as a supplemental financial measure by our management and external users of our financial statements, such as investors, commercial banks, research analysts and ratings agencies to assess: (1) the financial performance of our assets without regard to financing methods, capital structures or historical cost basis; (2) the ability of our assets to generate cash sufficient to pay interest and support our indebtedness; and (3) the viability of projects and the overall rates of return on alternative investment opportunities. Since Adjusted EBITDA excludes some, but not all, items that affect net income or loss and because these measures may vary among other companies, the Adjusted EBITDA data included in this presentation may not be comparable to similarly titled measures of other companies. The following table reconciles non-gaap Adjusted EBITDA to net cash flows provided by operating activities, which is the most directly comparable GAAP financial measure to Adjusted EBITDA (dollars in millions): For the Year Ended December 31, Net income (GAAP) $ 2,833.5 $ 2,558.4 $ 2,553.0 $ 2,855.6 $ 4,238.5 Adjustments to GAAP net income to derive non-gaap Adjusted EBITDA: Subtract equity in income of unconsolidated affiliates (259.5) (373.6) (362.0) (426.0) (480.0) Add distributions received from unconsolidated affiliates Add interest expense, including related amortization ,096.7 Add provision for or subtract benefit from income taxes 23.1 (2.5) Add depreciation, amortization and accretion in costs and expenses 1, , , , ,723.3 Add asset impairment and related charges Add non-cash net losses or subtract net gains attributable to asset sales, insurance recoveries and acquisition of equity method investment (2.5) (10.7) (68.1) Add non-cash expense attributable to changes in fair value of the Liquidity Option Agreement Add losses and subtract gains attributable to unrealized changes in the fair market value of commodity derivative instruments 30.6 (18.4) Adjusted EBITDA (non-gaap) 5, , , , ,222.9 Adjustments to non-gaap Adjusted EBITDA to derive GAAP net cash flows provided by operating activities: Subtract interest expense, including related amortization, reflected in Adjusted EBITDA (921.0) (961.8) (982.6) (984.6) (1,096.7) Subtract provision for or add benefit from income taxes reflected in Adjusted EBITDA (23.1) 2.5 (23.4) (25.7) (60.3) Subtract net gains attributable to asset sales and insurance recoveries (109.8) (3.3) Subtract distributions received for return of capital from unconsolidated affiliates - - (71.0) (49.3) (50.0) Add deferred income tax expense or subtract benefit 6.1 (20.6) Add or subtract the net effect of changes in operating accounts, as applicable (108.2) (323.3) (180.9) Add or subtract miscellaneous non-cash and other amounts to reconcile non-gaap Adjusted EBITDA with GAAP net cash flows provided by operating activities Net cash flows provided by operating activities (GAAP) $ 4,162.2 $ 4,002.4 $ 4,066.8 $ 4,666.3 $ 6,126.3 ALL RIGHTS RESERVED. ENTERPRISE PRODUCTS PARTNERS L.P. 59