Enterprise: A Core Holding for Energy & Income

08/16/2017 2:56 am EST

Focus: ENERGY

Elliott Gue

Editor and Publisher, Energy and Income Advisor and Capitalist Times

Enterprise Products Partners LP (EPD) posted second-quarter results that underscore why the blue-chip MLP remains a core holding in our model portfolio, explains energy sector expert Elliott Gue, editor of Energy & Income Adviser.


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The midstream operator hiked its quarterly payout by 1.2 percent sequentially and 5 percent year over year, and generated enough distributable cash flow to cover this disbursement by 1.2 times.

All the partnership’s operating segments grew their gross operating margins from year-ago levels, with NGL (natural gas liquids) pipelines and services benefiting from the start-up of petrochemical capacity on the Gulf Coast and crude oil pipelines and services receiving a bump from ramp-ups in exports and production in the Permian Basin.

Enterprise Products Partners continues to advance its slate of growth projects, including an ethylene storage and logistics hub in Mont Belvieu, Texas. The MLP also made a final investment decision on two projects serving producers in the Permian Basin:

• A second gas-processing plant in Orla, Texas, that will give the midstream operator about 1 billion cubic feet per day of capacity in the Delaware Basin;

• The 250,000-barrel-per-day Shin Oak pipeline, which will transport NGLs to the partnership’s fractionation complex in Mont Belvieu and has the potential to expand to 250,000 barrels per day.

During Enterprise Products Partners’ second-quarter earnings call, management indicated that the MLP continues to pursue two additional processing plants in the Delaware Basin as well as a solution (potentially a joint venture) to transport natural gas from this prolific play.

The MLP expects strong volumetric growth in the Permian Basin in the second half of 2017 and early 2018, while the Haynesville Shale and Eagle Ford Shale also show promise after acreage exchanges helped to reinvigorate drilling and completion activity.

Management also highlighted the marketing segment’s strength, indicating that robust oil exports could make August a record month.

Enterprise Products Partners’ integrated asset base, high-quality management team and highly visible backlog of growth projects set the MLP apart from the competition; the stock remains on our Focus List as a buy up to $33.

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