Enterprise Products: "Unparalleled Assets"
08/19/2016 8:00 am EST
We continue to recommend this blue-chip master limited partnership; strength in NGL pipelines & services have offset weakness in crude oil, states Elliott Gue, editor of Energy & Income Advisor.
Enterprise Products Partners LP (EPD) hiked its quarterly distribution by the familiar $0.005 per unit and generated enough cash flow to cover 120 percent of this higher payout while retaining $428 million to invest in growth projects.
The MLP expects to complete another $1.4 billion worth of growth projects in the back half of the year, including a gas-processing plant in the Permian Basin and an ethane export facility on the Gulf Coast.
Incremental cash flow from these assets, coupled with another $5.2 billion worth of infrastructure slated to come on-stream over the subsequent two years, should help to offset volumetric weakness on some of the partnership’s legacy assets.
Enterprise Products expects growing domestic ethane demand associated with the start-up of various world-scale petrochemical facilities on the Gulf Coast over the next few years to drive a 5 to 10 percent increase in the operating cash flow generated by its legacy assets and create additional growth opportunities.
Every MLP has its warts, especially those that have existed since the early years of the shale oil and gas revolution.
But whereas too many MLPs focus on adding cash flow with little regard to an overarching strategy, Enterprise’s prescient management team has amassed an unparalleled asset base in terms of its interconnections, geographic diversity and exposure to a wide range of hydrocarbons.
This integrated asset base gives EPD a leg up on the competition in taking market share and signing up new volumes. Enterprise Products Partners LP continues to rate a buy up to $33 per unit.
By Elliott Gue, Editor of Energy & Income Advisor