Enterprise Products Partners L.P. (EPD) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day, and welcome to the Q1 2021 Enterprise Products conference call. At this time, all participants are in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. Please be advised that today’s conference is being recorded.
Randy Burkhalter: Thank you, Christie. Good morning, everyone, and welcome to the Enterprise Products Partners call to discuss first quarter 2021 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 the 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, 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. And so with that, I’ll turn the call over to Jim.
Jim Teague: Thank you, Randy. Our businesses continued to perform extremely well during the first quarter. We reported $2.2 billion of adjusted EBITDA, distributable cash flow was $1.7 billion, and 1.8 times coverage and we retained $700 million that Randy’s going to get into the numbers deeper. We couldn’t be prouder of our people. Time and time again, whether they’re faced with a financial crisis, over 50 inches of rain from Hurricane Harvey at Mont Belvieu, or a combination pandemic global price war that was immediately followed by a record Gulf Coast hurricane season, or a historic winter storm that shuts down virtually the entire state, our people prepare, adjust when needed and they execute and make things happen, and for that we are extremely grateful. Relative to the winter storm, forecasters did a great job of calling for a major event, historic event at least a weekend as advanced. As the storm developed, every county in Texas, as you know, was under a winter storm warning. Those in supplies across the state and affected the entire energy value chain. It impacted much of the generating capacity across the state, at one point, even some of our nuclear. In spite of what you’ve heard in the press, Texas ended up counting on natural gas as wind generation dropped to near zero at the height of the storm. Our people prepared, packing our pipelines, buying extra gas to prepare for freeze-offs, scheduling our assets and staging themselves in hotels and own cuts at our plants.
Randy Fowler: Okay. Thank you, Jim. Good morning, everyone. Starting off with the income statement, as far as on the first quarter net income attributable to common unitholders for the first quarter of 2021 was $1.3 billion or $0.61 per unit on a fully diluted basis, this compares to $1.4 billion or $0.61 per unit on a fully diluted basis for the first quarter of 2020. Net income for the first quarter of this year was reduced by non-cash asset impairment charge of approximately $66 million or $0.03 per fully diluted unit. The impairment charges were largely related to our legacy coal seam, natural gas gathering system and Val Verde treating facility in the San Juan basin that was held-for-sale at the end of the quarter. Notably, net income for the first quarter of 2020 included a $187 million or $0.08 benefit from deferred income tax benefits. Moving on to cash flows. Cash flow from operations was $2 billion for both the first quarters of 2021 and 2020. Free cash flow for the 12 months ending March 2021, that is cash flow from operations, less cash used for investing activities, netting out any contribution from our JV partners was $3.1 billion. This compares to $3.4 billion for the comparable trailing 12 months. We generated over $350 million of discretionary free cash flow in the first quarter, that’s cash flow from operations minus capital investments and also minus cash distributions to partners. We believe we remain on track to be discretionary free cash flow positive for the entire year.
Randy Burkhalter: Thank you, Randy. Christie, we’re ready to take questions from our audience. Before you do that, let me remind our listeners, if you would, please limit your questions to one question and one follow-up question. Thank you. Christie, go ahead.
Q - Jeremy Tonet: Hi. Good morning.
Jim Teague: Good morning.
Jeremy Tonet: I recognize it’s probably kind of a complex question with our array, but just want to know if you guys could provide any color as far as net-net what type of benefits you saw from the storm during the quarter, and then just to isolate kind of base business trends, I guess, how you see volumes recovering or not recovering at this point?
Jim Teague: Yes, Jeremy. I’m going to look at Chris. I think we’re in $250 million.
Chris Nelly: Yes.
Jim Teague: Did that answer you, Jeremy?
Jeremy Tonet: Yes. And just the base business then outside of that, do you still see kind of recovering at this point or just trying to get help for that?
Jim Teague: Absolutely, we see it recovering. If you listen to my script, we’re bullish. I mean, you think about crude oil, since April of last year, it’s gone up wet, down nearly $100 a barrel from a negative $37.
Jeremy Tonet: Got it.
Jim Teague: Yes. What’s Goldman saying, $80 in the third quarter?
Jeremy Tonet: Got it. Got it. And maybe just a quick one on energy evolution. Just wondering, as it relates to carbon capture right now, if you see the 45Q’s being kind of sufficient policy to make projects, economics such as gas processing there, what other opportunities could this breed? I mean, could you have underutilized Permian pipelines move CO2 from the Gulf Coast into the Permian for injection there and kind of tightening take-away market? Just trying to think of what’s possible here.
Jim Teague: Yes, I think everything’s possible, Jeremy. We’re not taking anything off the table. What we have done is we read everybody’s going to net, whatever, past my lifetime. What we’ve decided is we got to take a step back and that’s why Angie’s taken the lead on just looking at the technology associated with all of these different possibilities and understanding the technology. And then working with our people in other parts of – like our commercial groups and our operations group saying how does that fit here? Hell if we just captured our own carbon at Mont Belvieu and sequestered it, it’d be a nice thing. Graham?
Graham Bacon: Yes, it would be about quite a bit. We have nothing really to elaborate more on what Jim said. We’re still evaluating all of our pipelines and all of our opportunities. Everything’s on the table and we really just got a focused effort on it now and coordinated throughout the world.
Jeremy Tonet: Got it. Great. I’ll leave it there. Thank you.
Operator: Thank you. Your next question is from Christine Cho of Barclays.
Christine Cho: Good morning.
Jim Teague: Good morning.
Christine Cho: Can you give us an update on your outlook for crude production overall and specifically in the Permian? How that has evolved over the last couple of months, especially with the big surge in private activity in the Permian, how that shapes your volume and price outlook for the rest of this year and maybe next year? And also curious to the competition for getting the barrels from a lot of these private producers, most of which seem to have only one rig operating. And my guess is they don’t have much contract from the midstream perspective, but any color would be helpful.
Tony Chovanec: Chris, it’s Tony, I’ll take the first part and Brent may add on the second part. Permian volumes, like everything else, it’s hard to look at the latest EIA reports and make too much sense of it. But the long and the short of it is if you look at frac crews in the Permian, they’re back to about almost 80% of their all-time highs, okay? The frac are the Permian’s leading everything. The challenge there is in every other base, if we think about oil, it’s lagging. It’s really all about Permian. So where we are as we have originally said at our analysts meeting, we thought that we’d have somewhere short of 100,000 barrels December year-end 2020 to 2021 of increase across the United States. We think that number at this point is low. It’s probably closer to 250 in the year 2021. We also said that we thought in 2022 and 2023 that we have about 1.5 million barrels of production increase across the United States. So if you – and it’s hard to say, is that going to happen in 2022, or is it going to happen in 2023? Of course, it’s very difficult. But if you add that all up, that’s 1.8 million barrels a day of incremental crude over three-year period with very much loaded in 2022 and 2023. That’s a pretty good run rate and it’s very much dominated by the Permian Basin. And Brent, I’ll ask you how you think the projects are fairing and how they’re contracted.
Brent Secrest: From our side, we’ve seen these guys very active. At this point, really it comes down to geography and where your assets are. I’d venture to guess we’ve done more deals with privates in the last nine months than we probably did over the last nine years. They’re not big capital projects, but they fill up pipelines capacity, they fill up processing capacity. On the crude side, there’s some production that’s close to our lines, we could use some gathering deals with them, but – there – a lot of stuff is acreage dedication, but we feel very good about their activity and where that’s going to end up.
Christine Cho: Got it. That’s really helpful. And then earlier this year, you guys mentioned that you still expect your – expect to capture $500 million to $600 million of margin from outside spread opportunities and marketing. With the first quarter out of the way and I think to Jeremy’s question you said $250 million from weather impact. Is that $500 million to $600 million still something you’re comfortable with? And where should we expect the remainder to come from in the remaining quarters?
Jim Teague: I’ll start and then I’ll let somebody else jump in. This is Jim. I’m not comfortable with $500 million to $600 million. I think we might be approaching that now. So I think it could likely be a little more than that. What do you think, Randy?
Randy Fowler: Yes, Christine, because a little bit I go back there’s something Jim said really I believe he said it on our fourth quarter call of 2020 and our fourth quarter call of 2019 that over the last few years, what we call out-sized spreads, have ranged $500 million to $800 million. And I think his comment was we seem to always find a way to come in and capture opportunity. And the way this year is shaping up and what we see, I think we may get to that, be back in that same range again this year as well.
Christine Cho: Great. Thank you.
Operator: Thank you. Your next question is from Jean Ann Salisbury of Bernstein.
Jean Ann Salisbury: Hi. Good morning. You were at 100% frac utilization at the end of last year. Should we expect another frac FID pretty soon?
Brent Secrest: Jean, this is Brent. That’s not in our plans.
Jean Ann Salisbury: All right. You guys have a way to send it to a third-party frac or something I guess if you go over your capacity.
Brent Secrest: I think if you look at our system and how we optimize our system and what the variable costs are for us to go access additional capacity, the economics are hard to justify for new frac for Enterprise.
Jean Ann Salisbury: Got it. And I think you all recently estimated getting approval for the spot terminal and the third quarter of this year. Would you need to see some of the rebound, I think that Tony just talked about in a previous question like would you need to see volumes to start going up to continue to pursue that? Or you’re happy with the project as it is. And as soon as you get the approval, you wouldn’t need to see the rebound first.
Jim Teague: This is Jim. I think we’re happy with where it is. We’re also in discussions with some other companies as to coming in as joint venture partners and wouldn’t surprise me if we didn’t do that.
Jean Ann Salisbury: Great. That’s all for me. Thank you.
Operator: Thank you. Your next question is from Tristan Richardson of Truist Securities.
Tristan Richardson: Hi, good morning, guys. Just with the production commentary, Tony and Brent discussed in the downstream demand recovery you’re seeing. Does this put us on a path for a stronger 2022, even despite sort of the non-recurring margin capture we saw in the first quarter?
Jim Teague: Yes, I’ll start off. Yes, I think we’re pretty bullish. I mean I think Tony said it best. Yes, we’ve always had debates between Tony and I’ve always been more bullish than he is. And its non-recurring or whatever we call it and Randy just said it when you do it every year, why is it non-recurring, it just happens somewhere else. If it’s not gas marketing, its NGO marketing, if it’s not contango, its backwardation. We seem to – we have a footprint that lends itself when there are issues, we have opportunities.
Tristan Richardson: That’s helpful. And then just you’ve talked about some of the carbon capture hydrogen, renewable gas opportunities. Should we think of the $1.5 billion to $2 billion of high level sort of annual spend as including some of these more energy evolution oriented projects or technologies or what a project that comes in under that sort of umbrella, the incremental to that annual number?
Jim Teague: I think the annual number is all inclusive.
Tristan Richardson: Thank you, guys. Appreciate it.
Operator: Thank you. Your next question is from Shneur Gershuni of UBS.
Shneur Gershuni: Hi, good morning, everyone. Jim, it was very good to hear about the initiative that, that you’re embarking upon and Angie’s new responsibilities. Maybe a follow-up to Tristan’s question here. So when I sort of thinking about Enterprise in terms of FID being CapEx, you have $800 million FID for 2022 and you gave $1.5 billion to $2 billion longer-term number. If I understood Tristan’squestion correctly, some of that may include some of these evolutionary opportunities. Can we assume that’s going to be the case for the 2022 calendar year? How far down the path are we in terms of Angie’s new responsibilities? Are there any technologies in particular that are in the later innings that would get us closer to FID whether it’s hydrogen or whether it’s carbon capture. I’m just wondering if you can give us a little color on that.
Graham Bacon: This is Graham. We’re still identifying what those projects are. Always our first opportunity is to really take the low hanging fruit, utilize, existing assets and minimize the capital and get a big bang for the buck with the assets that we have. Over the longer-term, we’ll develop probably more extensive projects as the technology improves and becomes economical. So at this point, we’re really looking how do we capture the biggest benefit with the assets that we have.
Jim Teague: We produce how much hydrogen Graham $150 million.
Graham Bacon: $150 million.
Jim Teague: $150 million a day, so and we use $40 million, $50 million a day something like that.
Graham Bacon: Yes. We’re looking to use more of that. We’re looking at technology that allows us to reuse that a lot more of that at our Mont Belvieu facility. It’s a big bang for the buck on emissions, but it doesn’t cost us a lot of capital. Those are the type of projects that we’re really trying to move forward with as quickly as possible.
Jim Teague: So if we can optimize what we have within our own system, and then let it evolve to see what other commercial opportunities might evolve from that, carbon capture, if we can see sequesterour own carbon, then what other opportunities evolve from that. We’re not going to announce CO2 pipeline out of the Permian today, but who knows down the road.
Shneur Gershuni: That makes for – makes a lot of sense. Appreciate the color there. And maybe it’s kind of a follow-up on Tony of your current existing business. I was wondering if we – and I’m not sure if this is a Jim or Tony question here, but if – can we talk about the kind of where you see the direction for hydrocarbons right now? We have upstream companies that are looking to be disciplined with respect to growth, so kind of more muted. At the same time, you have changing consumption patterns, whether it’s energy transition or whether it’s just commutes post pandemic. Is exports the path that you see forward to spot give Enterprise an opportunity to kind of optimize your asset footprint where you move crude to spot, add more LPG and ethane export capacity in the channel. Do you consider exporting refined products? I was just wondering if you can opine on that, if you can.
Tony Chovanec: I’ll take it. The forecast of energy economist of late, many of them a large portion of them are showing that U.S. be back, I mean that the world would be back to a 100 million barrels by the end of 2021. And you see it in diesel consumption just because of the amount of money there is and pent-up demand. And now you’re seeing it in gasoline comment, Jim made in his script. Glad to hear him say that because that, that is the case around this town. While Downtown is somewhat sparse, it’s amazing at traffic levels, there are no cars on the car lots for sale around Houston. I mean there are some, but there’s a tremendous shortage. People have money. I don’t know if you’ve noticed, but the savings rate in the United States has doubled. Those are meaningful stats. So then we look at the news, we see what’s going on in India, which is not real positive for India, but at the end of the day, the U.S. and others are pitching in to get vaccine to India. Europe is going to catch up. We just look at the world and we look at the change in GDP from 2020, 2021, and the potential for 2022. There’s no way to deny the numbers. They’re very meaningful. So do I think that hydrocarbon demand in the world that we’re going to see all time highs probably in 2022 could well happen. Yes, I’ll say – I’d be surprised if it didn’t. Randy, you feel different.
Randy Fowler: Yes, a little bit we’ll come in. And again it’s a little bit of a theme that we talk about is you still have 3 billion people, almost 40% of the world living in energy, poverty, meaning cooking with was not having access to clean cooking. So either cooking with a charcoal or cooking with wood and leading to 4 million or 5 million deaths a year within home pollution. So there’s still a huge need just to improve human life. And I think we’ve seen it over the last 100 years that nothing has improved human life better than the products that come from natural gas and oil production.
Graham Bacon: And I think relative to exports, I’m going to start a little bit, and then I’m going to handover to Brent. But where are you think – let’s think long-term in that regard and where you think U.S. is going to go as far as electric vehicles and hybrids. Certainly, we’re going to have more of them, we’re going to have efficiency standards on our gasoline. We’re going to do more from an industrial standpoint here. But I don’t talk to as many foreign customers as Brent does, but the message is always the same. We see them on Zoom calls, we’re seeing them in person now, and they want to know that we believe that U.S. producer is in it to win it long-term.
Brent Secrest: I think that’s the question is, I mean, do you believe that the U.S. is going to increase production on crude NGLs and is there other economics for them to do that. And then at that point, if you believe that – you believe demand here in this country is staying flat to declining, then what’s the most efficient and effective way to get to the water. When you look at the projects that we have that we’ve talked about in the past, you guys talk about spot, that’s the most efficient way to get crude oil to the water. Now there’s some contractual issues that exist right now, but those will go away. And that project is more strategic to our upstream system and that’s why we like it. On the NGL side, we still believe in NGL production and that frankly it has to price to export. So there’s different ways that once these things happen that we can optimize the system.
Shneur Gershuni: Great. Perfect. Really appreciate the expanded discussion. Thank you very much. And that’s all for me today.
Operator: Thank you. Next question is from Michael Blum of Wells Fargo.
Michael Blum: Thanks. Good morning, everyone. Just maybe stay on the exports for a minute. I wondering if you can give us any kind of real-time look into what you’re seeing in terms of LPG export demand in light of the surge of COVID cases in India.
Jim Teague: With the export?
Brent Secrest: Yes. With this month is…
Jim Teague: $15 million, $16 million…
Brent Secrest: It’s around there. So it’s not like you saw – this is Brent, it’s not what you saw in fourth quarter, there were some balancing going on right now. I don’t know if it’s much it’s – look, the demands there long-term, but if you look at just what prices have done on propane first quarter of 2020, it was $0.37, fourth quarter it was $0.57, first quarter of 2021, it was $0.90. So markets work and you saw the backwardation in some of the LPG markets. And so I think you saw some deferrals or you got some cancellations and then ultimately this is – how this is going to balance until production starts doing what Tony has talked about in the past. So we’ve seen some drop-off in India, but certainly China has been able to step up and help fill that gap.
Michael Blum: Got it. My second question really relates to pipeline capacity rationalization you talked a bit about that at your Analyst Day, and I’m wondering if you could tell us, are there any discussions going on behind the scenes within the industry to make this happen. Or do you think it’s just something that’s going to be very difficult, because there’s just too many hurdles to actually achieving it either yourselves or for the industry. Thank you.
Jim Teague: You’re talking about repurposing pipelines, Michael.
Michael Blum: Pipeline rationalization, however, it could get done.
Jim Teague: You’re referring to some of Brent’s comments with the last earnings call.
Michael Blum: Correct.
Jim Teague: Yes. I hesitate take to have Brent speak for himself. We’re looking at repurposing for sure. And I think you’ll see more of that. What Brent was saying last quarter is, do you say it Brent, you don’t – some of these guys that are going to have problems.
Brent Secrest: If you look at pipelines that don’t have contracts, somebody asks about CO2 being repurposed. I mean, that looks like a good project, if you don’t have contracts and you’re exposed to an art from a market to another market, that’s fairly flat. All the Permian capacity is very competitive regardless of the commodity. And no different than other companies, Enterprise tries to figure out the most efficient ways to move NGLs and crude oil on our system. And we have a similar pipeline that’s in crude service and we have an NGL pipeline that frankly, we only own two-thirds. So there’s different ways that we can as Enterprise try to rationalize and optimize our capacity to the benefit of enterprise. As far as the others, I assume they’re doing the same thing.
Michael Blum: Thank you.
Tony Chovanec: Contracts on crude oil go up to 28.
Brent Secrest: We have to let our contracts go out there. Yes.
Operator: Thank you. Your next question is from Keith Stanley of Wolfe Research.
Keith Stanley: Hi, good morning. I wanted to ask on capital allocation and Randy, you said, again, that you wanted flexibility on redeploying free cash flow early in the year, and highlighted just uncertainty on federal policies, including I think you said tax policies. Can you just elaborate on what you’re mainly focused on in the new administration’s infrastructure and related tax plan or any other potential policy changes you’re focused on for capital allocation?
Randy Fowler: Keith, when you come in and you look at what’s been introduced thus far this year and one of those things you’ve been to look at the newspaper every day to keep in touch. In the last 100 years, there’s really been three big moves in tax policy and that was the new deal. It was the Reagan Era tax policy and now as we emerge into the Biden Era, this is like the third major tax wing that we’ve seen in 100 years. And so I think we’re paying attention to see, which of these proposals actually make it into legislation and then actually get passed. And I think we’ll be a lot smarter three months, six months from now than we are today. And we think it’s just responsible to, let’s come in and focus on financial flexibility and again, we’ll be a lot smarter here in three to six months.
Keith Stanley: Okay. I guess, I’m just curious like from a – being an MLP, just how you’re thinking – are you thinking the tax policy changes could affect you directly or just any further thoughts on the tax piece of that?
Randy Fowler: Yes. Keith, honestly, we’ve got a 180 of possibilities out there. You’ve got this finance, our energy future act, which is bipartisan legislation that’s been introduced on the house and the Senate that is actually taking the existing MLP tax law and really expanding the scope of it to bring in new activities as qualified earnings, such as handling some of this green or blue hydrogen coming in and being able to get into renewables, whether it’s wind or solar and some of these other activities. So I actually would be broadening the scope of what qualifies as earnings for an MLP. On the other side of the equation, there’s been a proposal that came out of Senate Finance Committee. It is not bipartisan, it is partisan. And I think it’s actually legislation that’s been introduced at least a couple of times before, but never went anywhere. And with that one, it would come in and take business activities that handle fossil fuels. So what we do today and you would no longer be qualified for pass-through treatment and you would be taxed as a C-corp. So really there’s – the range of possibilities is 180 degrees in here. And I’ll think we’ll be spending a good bit of time up in D.C. Some of the legislation is just sort of counter to what some of the objectives that you hear are, whether, again, this coming in and taking traditional MLPs and then making them subject to taxation, so it goes counter to what we’re trying to do with our finance, our energy future act is sort of counter to that. It’s sort of counter to the infrastructure bill too. Out here with a package trying to promote infrastructure, but it seems like it’s counter to infrastructure. And finally, the last thing is it seems like it might be counter to is this whole pivot to Asia. One of the reasons we’ve been able as a country I think are able to pivot to Asia is the energy security that the United States has, and that we’re not relying on the Middle East. So some of what we’re seeing out there on the tax front is there seems to be some inconsistency on some of the proposals, but I think this will be an active year in D.C.
Keith Stanley: Thank you. That’s very helpful color. Second question, just, I guess it’s kind of summing up some of the earlier questions, but last quarter, you guys, for the first time you indicated 2021 EBITDA could be kind of flattish versus 2020. You had a pretty good Q1 with some storm benefits, and you have a pretty positive tone on the macro environment and on marketing potential, hence differentials for this year. Is it fair to assume 2021 EBITDA at this point now tracking better than 2020, or just any rough sense how to think about the year?
Randy Fowler: Yes, Keith. Really, I think we’ll just stick with our guidance. We’ll let you guys model it up. We don’t provide formal guidance, not really looking to start on this call. But you did do a great job as well with some of your peers, so we’ll pass on that.
Keith Stanley: Okay. Thank you.
Operator: Thank you. Your next question is from Michael Lapides of Goldman Sachs.
Michael Lapides: Hey guys, thanks for taking my question. It’s actually a little bit of a follow-on thinking about D.C. and legislation. Just curious, I mean, Congress is pretty divided. Few people think a 28% tax rate happens, most think it’s a lower number than that, but it’s also – we’re 18 months out from the next election in a very divided Congress. How long do you wait, right? Like, we may have uncertainty for a long time. Legislation is hard. When you’re thinking about capital allocation, at what point do you say we start ramping the process because to be blunt D.C. may take some time?
Randy Fowler: Yes, I hear you on that, but it seems like this is – let’s just say this is a noteworthy Congress and a noteworthy time. And we’ve got the luxury that we can come in and I’ll see – I think if we come in and we see good capital projects, we’re going to allocate our capital there. But to come in and say anything beyond that, I think we’d like to see what tax policy looks like. So, and again, I think in three to six months, we’ll be a lot smarter.
Michael Lapides: Got it. Okay. And then one last question, just curious if you move forward with SPOT, how should we think – I mean, given the fact, and I don’t know, we’re exporting as a nation, what 2.5 million to 3.5 million barrels a day just depending what we’re looking at, and we have a lot more capacity than what we’re actually exporting. How do you think that ripples through the broader supply and demand matrix for those who – for existing export facilities, including some of your own?
Randy Fowler: I think contracts matter. That’s going to take some time. But that project has a long runway, but I mean there’s no question that crude export capacity is overbuilt, but I do think it will do it the most efficient way. It’ll do it the most economic way. And frankly, when you look at who’s producing crude oil now and it’s larger type companies. At the end of the day, I do believe they want to deal with larger companies on the service side. And they do want to do it the most efficient way.
Michael Lapides: Got it. Thank you, guys. Much appreciate it.
Operator: Thank you. Your next question is from Michael Cusimano of Heikkinen Energy.
Michael Cusimano: Hey, good morning. I wanted to first talk about the propylene business. Propylene from frac seems to be doing really well. Could you just maybe talk about your expectations for that business for the rest of the year and maybe your outlooks on spreads also for the rest of 2021?
Jim Teague: Chris, do you want to take it?
Chris Nelly: Sure. Yes, the outside spreads that we’ve seen over the last several months, really a result of the hurricanes and the winter freeze, so we think things are going to normalize here. But we’re bullish overall, the need for primary petrochemicals, and it goes to the same story as LPG, just the improving quality of life around the world.
Michael Cusimano: Got it. Okay. And then as a follow-up, I wanted to talk about that $1.6 billion CapEx number. Is there anything you’re looking at for 2021 that can move that higher? Or any risk to that number?
Jim Teague: It’s Jim. I don’t think so.
Michael Cusimano: Okay. Perfect. Well, thank you. I appreciate it.
Operator: Thank you. Your next question is from Christine Cho of Barclays.
Christine Cho: Hi, I just had a follow-up on the response to one of your earlier questions. You mentioned the possibility of repurposing a pipe this year to service. But I was under the impression that this is pretty difficult to do with the liquids pipeline and maybe possible with a gas pipeline since the CO2 pipelines require separate pipelines and a lot more compression. So curious as to your thoughts here on how capital-intensive version could be.
Jim Teague: Yes, Christine, we’re just using it as an example. We agree with you. I think, Graham…
Graham Bacon: The pipelines come in all shapes and forms, and some are suitable for conversion to CO2 and some aren’t, and we have some that are.
Jim Teague: And Christine, we’re not making any announcements.
Christine Cho: Right. Right. I just was curious as to how that would work in actuality, but, okay. Great. Thanks.
Randy Burkhalter: Christie, this is Randy. If there’s no other questions, I think we can go ahead and give our listeners the playback information, and then also wanted to thank everyone for joining us today and have a good day. Thank you.
Operator: And ladies and gentlemen, to access a replay of today’s call, you may dial (800) 585-8367 and reference ID number 3068988. Again, that number is (800) 585-8367 and reference ID number 3068988. This does conclude today’s conference call. You may now disconnect.
