Reduced pipeline volumes and gas processing activity hits Enterprise results

MOSCOW (MRC) -- Enterprise Products Partners' second-quarter profit slid as declines in natural gas and crude pipeline volumes and reduced activity at processing plants - due to producer shut-ins and weak NGL prices - caused revenue to plunge, reported S&P Global.

The company is cutting its combined spending on growth projects in 2021 and 2022 by a total of USD700 million from its previous expectations. It is also talking seriously with a joint venture partner about helping it fund existing build-out plans, executives said during an investor conference call in late July.

The cautious approach reflects uncertainty in the midstream sector about the future trajectory of supply and demand fundamentals amid the coronavirus pandemic, geopolitical tensions that could disrupt market flows and the November US presidential election that could lead to trade and tax policy changes.

"We're discussing some JVs with some of our largest projects, but I wouldn't say we're highly engaged with more than one," co-CEO Jim Teague said on the call. "But we are highly engaged with one."

Teague declined to elaborate.

Just 18 months ago, the operator of gathering and processing facilities, pipelines, storage and import and export terminals across oil, gas, NGLs and petrochemicals touted enthusiastically its plans to get bigger, believing that greater scale would enhance its market position and generate higher profits and investor returns.Then the coronavirus started to spread globally in January.

Enterprise still plans to get bigger - it has USD6.6 billion in projects currently in its construction queue, including in Texas an 11th NGL fractionator and a new segment of a crude pipeline that are expected to begin initial service by the end of September.

What's different now is the breadth of the growth and how much risk it is comfortable shouldering on its own, as it believes that the pace and scope of the reopening of energy markets as the virus eases in parts of the world is uncertain and may extend well into 2021.

It still expects to spend USD2.5-USD3 billion on growth capital projects this year. For 2021 and 2022, it expects growth capital investments will be reduced from previous guidance to approximately USD2.3 billion and USD1 billion, respectively.

Preferred joint venture partners, meanwhile, would ideally "bring more than money," Teague said. "They've got to bring throughput or offtake typically.".

For the April-June quarter, Enterprise reported net income attributable to limited partners of USD1.03 billion, or 47 cents/share, a 15% drop from the USD1.21 billion, or 55 cents/share, in the second quarter of 2019. Revenue in the latest quarter fell over 30% to USD5.75 billion from $8.28 billion in the year-ago period.

The company would consider a strategic acquisition if it complemented an existing business, but has not seen any opportunities over the last several months that would be compelling, executives said during the call. It is more focused on executing its existing assets, they said.

There also are no current plans to change its master limited partnership structure, amid its concerns that depending on who wins the upcoming US presidential election tax obligations and the cost of energy infrastructure could increase, executives said.

Looking ahead, Enterprise is optimistic there is a recovery on the horizon.

"I think you're going to get a price signal next year on hydrocarbons that turns some things back on," Teague said.

As MRC wrote before, Enterprise Products Partners LP (EPP), through one of its affiliates, has entered a long-term agreement with Marubeni Corp. of Japan, under which Marubeni will offtake polymer-grade propylene (PGP) produced from a second (PDH 2) plant currently under construction at EPP’s operations in Mont Belvieu, Tex., for supply to global customers. Concluded on June 16, the PGP offtake agreement is part of a long-term collaboration between EPP and Marubeni that also includes the export of liquefied ethylene, the first 25-million lb vessel of which loaded and sailed from EPP and Navigator Holdings Ltd.’s 50-50 joint venture marine terminal at Morgan’s Point, Tex., in early January, EPP and Marubeni said on June 30.

We remind that in July, 2020, Enterprise Products conducted maintenance at its propane dehydrogenation (PDH) unit in Mont Belvieu, Texas. This PDH unit has the capacity of 750,000 mt/y of propylene.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's DataScope report, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC

MOSCOW (MRC) -- Dow Chemical is in plans to resume operations at its propane dehydrogenation (PDH)unit in Freeport, Texas, at the en of this week after a scheduled maintenance, reported S&P Global with reference to sources.

Thus, the planned turnaround at this PDH unit with the capacity of 750,000 mt/y of propylene started on 8 July, 2020, and will last 45 days.

As MRC informed before, as part of the company’s current slate of low capital intensity, high-return incremental growth investments, Dow announced in August 2019 that it will retrofit proprietary fluidized catalytic dehydrogenation (FCDh) technology into one of its mixed-feed crackers in Plaquemine, Louisiana, to produce on-purpose propylene.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's DataScope report, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

The Dow Chemical Company is an American multinational chemical corporation. Dow is a large producer of plastics, including polystyrene, polyurethane, polyethylene, polypropylene, and synthetic rubber.
MRC

MOSCOW (MRC) -- In line with estimates, BASF SE recorded a second-quarter net loss of EUR878 million, or a loss of 95 cents per share, compared with a net income of EUR5.95 billion, or EUR6.48 per share, a year earlier, according to S&P Global.

The German chemical giant attributed the loss to a noncash-effective impairment of its Wintershall Dea shareholding amounting to EUR819 million due to a weaker outlook for oil and gas prices and revised reserve estimates.

Adjusted EPS fell to 25 cents from 83 cents a year ago. Second-quarter EBIT before special items plunged to EUR226 million from EUR995 million a year ago, with the chemicals and materials segments accounting for 70% of the decline.

Sales fell 12% to EUR12.68 billion as global lockdown measures to contain the coronavirus resulted in lower sales volumes, particularly in surface technologies, and materials and industrial solutions segments.

Cash flows from operating activities rose to EUR2.24 billion from EUR1.95 billion due to cash released from net working capital. Free cash flow increased to EUR1.52 billion from EUR965 million a year ago.

"Given the continued high level of uncertainty and low visibility surrounding economic developments, BASF still does not make any concrete statements on the development of sales and earnings for the full year 2020," the company said.

It added that third-quarter EBIT before special items is not expected to show a significant recovery from the prior three-month period due to lower demand in August and seasonal factors related to the agriculture business.

As MRC reported previously, BASF will increase its alkoxylate capacity in Asia Pacific, with its latest investment in Jinshan, China. The company has acquired land, buildings and assets of SPC, related to alkoxylates production, adjoining the BASF Jinshan site, in order to fulfil the growing demand from customers across Asia Pacific, especially China. With the current alkoxylate line in the Care Chemicals Jinshan plant running at full capacity, this acquisition will help double the capacity at Jinshan from end 2020.

We remind that BASF-YPC, a 50-50 joint venture of BASF and Sinopec, undertook a planned shutdown at its naphtha cracker on 30 April 2020. The company initially planned to start turnaround at the cracker on April 5, 2020. The plant remained under maintenance unitl 18 June, 2020. Located in Jiangsu, China, the cracker has an ethylene capacity of 750,000 mt/year and propylene capacity of 400,000 mt/year.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.

BASF is the leading chemical company. It produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases, basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries. BASF generated sales of EUR59 billion in 2019.
MRC

MOSCOW (MRC) -- Protective packaging maker Klockner Pentaplast Group (KP) has announced plans for a “multimillion-dollar investment” to expand its post-consumer recycled PET (rPET) extrusion capacity in North America, said Canplastics.

In an Aug. 19 statement, the company said it is still deciding on the precise location for the expansion, and will announce at a later date which of its eight North American sites is best situation for the project to serve KP’s thermoformed protein and sustainable consumer packaging customers.

"The 17,500-tonne extrusion expansion supports the increased consumer demand for curb-side recyclable options, supporting closed loop packaging, and a circular economy," KP’s statement said.

"As major brands announce robust, sustainability initiatives that includes post-consumer and recyclable packaging, KP will be positioned to service those market needs for the foreseeable future,” said KP CEO Scott Tracey. “The extra capacity will also go a long way in supporting our company’s goals for product innovations and sustainability."

Globally, this is the fourth major expansion for KP. In March, the company announced a 30 per cent capacity expansion at their Cotia, Brazil location, and in June KP broke ground at their central Virginia location that increased it pharmaceutical films capacity by 6,000 metric tonnes.

As MRC informed earlier, Russia's output of chemical products rose by 4.4% year on year in May 2020 . Thus, production of basic chemicals increased year on year by 5.4% in the first five months of 2020. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-May. Production of benzene was 110,000 tonnes in May 2020, which equalled the figure a month earlier. Overall output of this product reached 615,000 tonnes over the stated period, up by 1.7% year on year.

Founded in 1965, KP has 32 plants in 18 countries and employs over 5,900 people.
MRC

MOSCOW (MRC) -- Crude oil futures were higher in mid-morning trade in Asia on Aug.17 as sentiment remained buoyed ahead of a key OPEC+ production review meeting on Aug.19 despite a postponement in the US-China trade deal review over the weekend amid expectations of a continued uptick in China's US crude import, reported S&P Global.

At 11:33 am Singapore time (0333 GMT), the ICE Brent October crude futures were up 31 cents/b (0.69%) from the previous settle at USD45.11/b, while NYMEX September light sweet crude contract was up 35 cents/b (0.83%) at USD42.36/b.

"Oil remains buoyed by optimism that a sustained recovery in energy demand is underway boosted by US government data showing crude oil, gasoline, and distillate inventories all declined the week-ending Aug.7," AxiCorp chief global markets strategist Stephen Innes said in a note Aug. 17.

A delay in the meeting between US and China, which was to occur over the weekend, to review its trade agreement did not dampen investors' sentiment on expectations that China plans to continue shipping large volumes of US crude in the near-term.

"China increasing US oil imports is the most apparent trade deal reaffirmation," Innes said. "From a trade talk risk perspective, wiping down the last remnants of escalation risk is favorable for oil prices."

China's independent refineries ramped up US crude imports in July, picking up 1.37 million mt in the month, according to market information collected by S&P Global Platts earlier this month.

In addition, at least 965,000 mt of North American crude cargoes are waiting to be discharged for the private companies in August.

China's total crude imports from US, meanwhile, had jumped to an eight-month high of 143,452 b/d, or 587,118 mt, in June with expectations that US imports could rise further in July and August, analysts and traders said last month.

Oil prices moved higher ahead of a meeting this week to review OPEC+ cut agreement. The Joint Ministerial Monitoring Committee (JMCC), which is co-chaired by Saudi Arabia and Russia, is set to meet on Aug. 19 to assess compliance with quotas and recommend any adjustments to the cuts if needed.

"The OPEC+ meeting this week is expected to yield little surprises, with production curbs expected to continue as outlined in April," OCBC Bank researchers wrote in a note on Aug. 17.

OPEC and 10 allies, including Russia, had implemented the largest coordinated production cut in history of 9.7 million b/d, equivalent to about 10% of pre-pandemic demand.

The cuts have been scaled back to 7.7 million b/d from August through the end of the year and will relax even further to 5.8 million b/d from January 2021 through April 2022.

Members that exceeded their production quotas will have to make compensatory cuts in the coming months, moderating the full impact of relaxing the OPEC+ deal, ministers have said.

"Russia's Energy Minister Alexander Novak said the global oil market is stabilizing gradually, so [there is] no need to ease OPEC+ output cuts ahead of schedule," Innes said on Aug. 17.

Meanwhile, OPEC+ member Oman has reported a 13.5% month-on-month decline in its crude oil exports in July to around 778,012 b/d.

China accounted for 88.81% of the total exports in July, while India took the remaining 11.19%, the oil and gas ministry said Aug.16.

Oman's crude oil production averaged 671,275 b/d in July, down 1.85% on the month, and lower than the 682,000 b/d quota under the OPEC+ agreement for May-July. Its quota for will rise to 722,000 b/d from August through the end of the year.

As MRC informed before, Navigator Holdings (London, UK) says US ethylene exports are back on the rise, driven by recovering Asian demand and a continuing arbitrage. The company shared its assessment in preliminary second-quarter financial results released on 13 August. Ethylene shipments slowed late in the first quarter as COVID-19 lockdowns and the related global economic downturn weighed on demand, says Navigator. “However, as Asian economies restarted during the latter half of the second quarter, so too did the demand for ethylene. An upsurge in US ethylene export capacity from our([Morgan’s Point) marine export terminal, drove an uptake in cargo liftings from the second half of May onwards, positively impacting handysize ethylene tonnage.”

We remind that Enterprise Products Partners (Houston, Texas) co-loaded olefins and natural gas liquids (NGLs) twice in July, the first time such cargoes have been loaded for export from the US. A VLGC (very large gas carrier) received propane and polymer-grade propylene (PGP) simultaneously into separate compartments at the Enterprise Houston Ship Channel terminal. Another vessel took on ethane and ethylene simultaneously at the company’s Morgan’s Point facility in Houston.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
MRC