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Enterprise Products Partners L.P. Message Board

  • warrcee warrcee Oct 20, 2011 2:07 AM Flag

    SUG seemed like the perfect fit?

    Was it anti-trust that kept EPD out of the bidding?
    Was it waiting for the DEP deal to close?
    Didn't you think it was odd that EPD never even bid on SUG since it is a bolt on system?
    Is the SUG deal locked up?
    Does a bidding war breakout for EP? Now that Kinder has under bid it? EP is a real working company, when you go to their offices. EP is not a bunch of fossils shuffling around the carpet generating static, like at XOM, BP, Bass or Yates. Who would have thought EP was even for sale with 80+ oil, it was built on a 15 to 25 oil model, with gas just to fill their pipeline's over capacity, from the Costal deal. An amazingly low offer for EP? Puts a bid under anyone who wants to sell assets. Interesting that Barclays as the 2nd largest Federal Reserve Bank Corp shareholder( by taking LEH) is the deal lead. Does BCS say they want to play in the oil patch with this deal? Not really their style of deal, but they will get 1.4 billion if it closes. Do they really need capital that bad? To come to the oil patch?

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    • Interesting thoughts..let me pass along a few observations that might help. Recognize that these days EPD's main business is natural gas LIQUIDS(NGLs) not natural gas gathering/shipping. EPD has become a mass NGL exporter from its' Mont Belvieu fractionation center on the Houston Ship channel. EPD has just opened a bidding season for Marcellus ethane producers who want to ship up to 150,000 barrels/day in a 1200 mile pipeline to Mont Belvieu. Other EPD NGL pipelines are being built all over the SW. NGL fractionation at Mont Belvieu is now pushing 400,000 barrels/day with more coming. And EPD just sold its' Mississippi natural gas storage operations for $550Million to Boardwalk. So,SUG is not a perfect fit for EPD. You want a perfect fit for EPD? The best one right now is MWE. MWE is 1/10th the size of EPD but has a commanding NGL position in the Marcellus/Appalachia regions. Note,too, that ETP just sold its' propane operations to concentrate on natural gas pipelines. ETP has zip in NGLs.

      • 4 Replies to hachi05man
      • EPD mgt is doing exactly the right thing by focusing on organic growth projects which integrate perfectly with existing assets and produce excellent returns as ARB has noted. These guys know how to allocate capital and their current emphasis on the Eagleford is a classic example. It's an extremely productive play, intrastate(no FERC), subject to a favorable state regulatory climate (TX vs PA and NY) and creates more synergy (ROI) with their existing assets.

      • ETP not a zero in NGLs

        But that just shows that NGL is the hot area, and not that the essence of what you wrote is wrong.

        ETP did approach MWE in the past, but now has a lot on their plate.

      • Two other reasons EPD did not get into the bidding, but was simply not interested in SUG and would not want most of EP. Buying assets at a teensX EBITDA compared to building at 4-6X is a no brainer. Steady fee based income is nice but not great. EPD can and does make an annual return of 15%+ on its processing system. Yes, they can and will provide takeaway for NG, but this is mainly to facilitate collection of NGLs. The new lines are also generally intrastate and thus not regulated and fairly short area specific to meet a defined need for takeaway capacity to a main pipeline.

        I agree the MWE would be a perfect fit and if Dan Duncan were still around there would be an interesting discussion. IMO the owners of MWE will not be very interested in selling (do agree that EPD would be interesting to them) until they get a bit further down the trail on their dream in the Marcellus. That one is a few years down the road after the assets there have hit the bottom line.

        The delay is because the ROI on Marcellus assets for MWE is about 15% compared to the other MWE assets due to the lag in getting organic expansion $$ to the bottom line. MWE now has about 3 years of 10%+ growth in DCF and distributions. MWE will wait till that hits and maximizes both value and egos. Then it might be for sale as a stock exchange with a company they feel good about.

        Hachi - right on

        Just my thoughts. ARB

      • As for the other comments: Because of horizontal drilling/hydraulic fracturing(fracking) Oil and natural gas production in the USA is suddenly on the upswing. Old production areas thought to be depleted are taking on new life. As a result, the USA is on a historic shift from coal fired electrical generation to natural gas power generation. This is monster financial action,too, and Barclays and every other big bank will be thirsting for the action. Besides, Barclays was interested in buying Lehman even before the collapse. When Lehman went under Barclays got the Lehman action/personnel it wanted for chickenfeed. I am positive that the USA Lehmen people that Barclays bought are leading the charge into the oil and natural gas patch.

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