Tags: EPD | EEP | APC | MLP

Enterprise Products Partners: Pipeline Power

By Dan Weil   |   Tuesday, 20 Sep 2011 08:36 PM

Enterprise Products Partners (EPD), the largest U.S. energy pipeline master limited partnership, is sitting pretty. Its presence in all areas of midstream operations sets Enterprise apart from its competitors. It gathers natural gas at production facilities from the Rocky Mountains to the Gulf of Mexico.

EPD’s gas-processing plants separate natural gas liquids (NGLs) from the gas stream. It transports both natural gas and NGLs through its pipelines, provides storage and fractionation for NGLs, and then markets the natural gas and NGLs to petrochemical companies.

All that gives Enterprise a hefty revenue stream in good times and bad. It’s a toll collector on the nation’s natural gas highway.

Enterprise recently signed an agreement with Enbridge Energy Partners (EEP) and Anadarko Petroleum (APC) to jointly develop a new NGL pipeline linking producing basins in Skellytown, Texas, to fractionation and storage facilities in Mont Belvieu, Texas.

The Texas Express Pipeline will run 580 miles. The joint venture also includes two new NGL gathering systems. Enterprise will build and operate the pipeline. All this means more revenue for the company.

Enterprise recorded record profit of $449 million in the second quarter, up 27 percent from $354 million a year earlier.

All systems go

Standard & Poor’s analyst Tanjila Shafi has a five-star buy rating on Enterprise shares. “Our strong buy recommendation reflects our belief that EPD is well positioned to benefit from
its strategically located assets, diverse cash flows, and solid balance sheet,” Shafi writes. “It has a strong asset base with access to high-demand markets and major supply sources.”

Rising pipeline volume should lift earnings and cash flow over the next few years, as Enterprise has a large portfolio of its own projects that have potential for high returns with low risk, Shafi writes.

The analyst expects double-digit growth in Enterprise’s operating income this year, helped by strong performance in its onshore crude oil pipelines and services unit. The company next reports around Nov. 8.

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Enterprise Products Partners (EPD), the largest U.S. energy pipeline master limited partnership, is sitting pretty. Its presence in all areas of midstream operations sets Enterprise apart from its competitors. It gathers natural gas at production facilities from the Rocky...
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