Name: EnLink Midstream, LLC Q2 2024 Earnings Call
Start: 2024-08-07T13:01:00.000Z

Executive Summary

Q2 2024 adjusted EBITDA was $306.0M, with net income of $67.0M, net cash from operations of $162.6M, and free cash flow after distributions of $53.3M; leverage ended at 3.3x and the quarter was seasonally weaker in Louisiana but broadly “in line with expectations.”
Management highlighted operational execution: Tiger II (Permian) entered service in May, boosting capacity and Permian run-rate for 2H; Jefferson Island Storage Hub expansion reached FID ($85M, +8 Bcf to ~10 Bcf working gas, service 2028).
Capital allocation remained shareholder-friendly: ~$50M of unit repurchases in Q2; authorization was raised post-quarter to $250M (from $200M) amid strong FCF and lower near-term CCS spend; ~10% of units repurchased since late 2021.
Guidance cadence: Company reiterated tracking close to the midpoint of its FY 2024 adjusted EBITDA range ($1.31B–$1.41B), with 2H weighted to Q4 on normal Louisiana NGL seasonality, storage-related activity, Tiger II full ramp, and Matterhorn JV contribution.
Potential stock catalysts: acceleration in Permian volumes from Tiger II, Louisiana gas/storage projects, expanded buyback authorization, and the forthcoming in-service of Matterhorn (September) aiding 4Q contribution.

What Went Well and What Went Wrong

What Went Well

Tiger II came online in May, supporting Permian growth and a higher 2H run-rate; Q2 Permian segment profit was $93.1M with volumes up (gathering +7% q/q; +17% y/y; processing +6% q/q; +14% y/y). “This plant relocation strategy represents an efficient capital allocation…”
Louisiana strategy advancing: reached FID on Jefferson Island Storage Hub brownfield expansion (+8 Bcf; ~$85M; low-to-mid single-digit EBITDA multiples; service by 2028), and continued Phase 2 debottlenecking (“Henry to River” 210 MMcf/d).
Balance sheet and capital returns: leverage at 3.3x; maintained $0.1325/unit distribution; ~$50M buybacks in Q2; authorization expanded to $250M post-quarter; ~$200M Series B preferreds purchased after quarter.

What Went Wrong

Seasonality and normalization in Louisiana led to lower sequential segment profit ex-derivatives (−39% q/q; −9% y/y), following outsized Q1 weather-driven activity.
North Texas margins showed a full-quarter impact from the onetime contract reset; Q2 segment profit $52.4M and −11% q/q ex-derivatives, −28% y/y ex-derivatives.
CCS progress slower than anticipated; ENLC and ExxonMobil are reassessing Pecan Island and pursuing financial agreement discussions for value recognition; timing depends on emitters’ pace.

Financial Results

Metric	Q2 2023	Q1 2024	Q2 2024
Revenues ($USD Millions)	$1,530.1	$1,647.9	$1,551.1
Net Income ($USD Millions)	$89.9	$50.0	$67.0
Diluted EPS ($/unit)	$0.12	$0.03	$0.07
Adjusted EBITDA ($USD Millions)	$333.6	$337.7	$306.0
Net Cash from Operations ($USD Millions)	$315.7	$293.3	$162.6
Free Cash Flow After Distributions ($USD Millions)	$95.7	$74.0	$53.3
Net Income Margin % (Net Income/Revenue)	5.9%	3.0%	4.3%
Adjusted EBITDA Margin % (Adj. EBITDA/Revenue)	21.8%	20.5%	19.7%

Segment Profit ($USD Millions)	Q2 2023	Q1 2024	Q2 2024
Permian	— (grew ~10% y/y, +10% q/q ex items)	$89.0	$93.1
Louisiana	— (−9% y/y, −39% q/q ex derivatives)	$110.4	$84.3
Oklahoma	— (−5% y/y, +14% q/q ex items)	$85.7	$103.5
North Texas	— (−28% y/y, −11% q/q ex derivatives)	$59.8	$52.4

Operating KPIs	Q2 2023	Q1 2024	Q2 2024
Permian Gathering & Transportation (MMBtu/d)	1,732,200	1,899,300	2,033,300
Permian Processing (MMBtu/d)	1,617,400	1,745,300	1,850,400
Permian Crude Handling (Bbls/d)	155,400	164,700	191,100
Louisiana Gathering & Transportation (MMBtu/d)	2,345,600	2,753,900	2,819,700
NGL Fractionation (Bbls/d)	179,000	183,700	175,300
Oklahoma Gathering & Transportation (MMBtu/d)	1,253,800	1,144,400	1,219,000
Oklahoma Processing (MMBtu/d)	1,204,600	1,090,900	1,173,200
North Texas Gathering & Transportation (MMBtu/d)	1,593,600	1,449,900	1,473,100
North Texas Processing (MMBtu/d)	740,000	668,800	677,500

Note: Segment profit Q2 2023 absolute values not disclosed in press releases; y/y and q/q directional changes per management commentary.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA	FY 2024	$1.31B–$1.41B (set in Feb/maintained in Q1)	Tracking near midpoint; no quarterly guidance; 2H weighted to Q4	Maintained
Common Unit Repurchase Authorization	FY 2024	$200M (Jan)	$250M (post-Q2)	Raised
Distribution per Unit	Q2 2024	$0.1325 (Q1)	$0.1325 declared; paid Aug 14	Maintained
CCS Capital Placeholder	FY 2024	~$50M placeholder in plan	“Less likely” to spend all $50M; slower project timing	Likely Lower
Louisiana Storage (JISH)	Stage 1	N/A	FID: +8 Bcf to ~10 Bcf working gas; ~$85M; service 2028; low-to-mid single-digit EBITDA multiples	New project
Matterhorn JV timing	2024	Target late Aug	In service September; 4Q financial contribution expected	Slight delay (weather)

Earnings Call Themes & Trends

Topic	Q4 2023 (Q-2)	Q1 2024 (Q-1)	Q2 2024 (Current)	Trend
AI/data center power demand	Macro tailwinds cited; positioning in demand centers	“Staggering” power demand forecasts; gas likely key baseload contributor	Encouraged by potential for new gas power generation/data centers, esp. North Texas	Building pipeline of opportunities
CCS strategy	Expanded Exxon scope; reassessing Pecan Island; Bridgeport CO2 project online	CCS slower; pursuing definitive terms; potential uplift if 2024 CCS spend reduced	Unable to find alternative CO2 transport projects with Exxon; pursuing financial agreement; timing uncertain	Slower execution; monetization path evolving
Louisiana gas & storage	3-phase strategy outlined; marketing +9 Bcf storage expansion	Executed “Henry to River” debottlenecking (210 MMcf/d); storage marketing underway	JISH Stage 1 FID (+8 Bcf); volumes up; normal NGL seasonality impacted Q2	Securing contracts; moving to FID
Permian capacity	Tiger II expected Q2; continued relocation strategy	Tiger II starting; next plant timing flexible via relocations	Tiger II online; likely Midland Basin next relocation; decision progressing	Capacity stepping up; more relocations
Commodity exposure/hedging	~90% fee-based; hedged 2024 gas/Waha; programmatic liquids hedging	Reiterated hedge coverage; +/− $5 WTI ⇒ ~±$6M EBITDA	~90% fee-based; well-hedged; layering 2025 hedges; North Texas rate reset visible	Stable margins with hedges

Management Commentary

“For the quarter, we generated $306 million of adjusted EBITDA… These results were in line with our expectations and drove solid free cash flow after distributions of approximately $53 million.” — CEO Jesse Arenivas
“We successfully brought online our third relocated processing plant in the Permian, Tiger II… [relocation] represents an efficient capital allocation with significant cost savings and shorter period-to-end service.” — CEO Jesse Arenivas
“We will expand our JISH working gas storage capacity to approximately 10 Bcf from 2 Bcf today… The project will cost approximately $85 million, and we expect to begin injecting gas in 2028.” — CCO Dilanka Seimon
“Our segments drove $306 million in adjusted EBITDA… we anticipate our second half 2024 results will be weighted towards the fourth quarter.” — CFO Ben Lamb
“We took a significant step towards simplifying our balance sheet through the purchase of nearly $200 million of our Series B preferreds… [buybacks] over 10% of total units outstanding.” — CFO Ben Lamb

Q&A Highlights

Second-half ramp drivers: Tiger II full utilization, Louisiana NGL seasonality, storage-related activity, and initial Matterhorn JV contribution in 4Q; normal pattern has Q4 as strongest quarter.
Permian NGL transport contracts: ENLC markets ~220 kb/d and controls ~150 kb/d; pipeline capacity expirations over 3–4 years likely allow lower recontracting T&F rates as capacity increases.
Louisiana project pipeline: Advancing Phase 1 renewals for 2025, continuing debottlenecking projects, and evaluating next storage expansion (JISH vs Napoleonville) to optimize economics.
Next processing plant: Likely Midland Basin relocation; decision progressing with customers; 2025 capital likely shift away from CCS toward Louisiana, roughly offset overall.
CCS timing: Market maturing slowly; ENLC well positioned with pipes and proximity to sequestration; timing uncertain and paced by emitters’ decisions.
Commodity/contract dynamics: ~90% fee-based; hedged Waha basis; North Texas margin decline reflects full-quarter onetime contract reset, expected to stabilize.

Estimates Context

Wall Street consensus from S&P Global was unavailable for ENLC Q2 2024 in our system, so we cannot provide a beat/miss vs Street for EPS/revenue/EBITDA. Investors should note seasonality and management’s 2H/Q4 weighting in evaluating intra-year cadence.
Note: Consensus estimates via S&P Global were unavailable for ENLC at this time.

Key Takeaways for Investors

Q2 2024 was “in line” operationally, with adjusted EBITDA of $306.0M and FCFAD of $53.3M, despite Louisiana seasonality; leverage at 3.3x supports continued capital returns.
Tiger II online in May lifts Permian capacity and volumes into 2H; management is progressing a likely Midland Basin relocation for the next plant, enabling capital-efficient growth.
Louisiana remains a structural growth lever: Phase 1 renewals largely captured, Phase 2 debottlenecking progressing, and JISH storage FID adds +8 Bcf working gas with attractive returns.
Capital allocation is supportive: ~$50M Q2 buybacks, authorization increased to $250M post-quarter, and reduction of Series B preferreds simplifying capital structure.
Expect a stronger Q4: seasonality in NGLs, planned storage activity, and Matterhorn JV contribution; monitor execution and any incremental projects or recontracting updates.
CCS provides optionality but is slower; ENLC is pursuing a financial agreement around Pecan Island value and continuing discussions across Gulf Coast; near-term cash use favors core projects/buybacks.
Risk watch: onetime resets in North Texas/Oklahoma now reflected; commodity sensitivity limited by fee-based model and hedging, but volume cadence remains tied to producer activity and LNG/industrial demand.

EnLink Midstream, LLC (ENLC)·Q2 2024 Earnings Summary