On Aug 19, 2014, we issued an updated research report on Enterprise Products Partners L.P. (EPD), a leading master limited partnership (MLP) engaged in providing a wide range of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGL) and crude oil.
Enterprise Products Partners reported second-quarter 2014 adjusted earnings per limited partner unit of 67 cents, which lagged the Zacks Consensus Estimate of 73 cents but was higher than the year-ago quarterly earnings of 65 cents.
We continue to view Enterprise Products Partners as a core holding in an MLP portfolio, given its string of organic growth projects, potential acquisitions, strong balance sheet and solid liquidity position. The partnership is one of the major fully integrated midstream service providers with a positive long-term outlook, and has significant geographic and business diversity.
Enterprise Products Partners increased its second-quarter 2014 cash distribution rate by 5.9% to 72 cents per common unit, or $2.88 per unit on an annualized basis, thus marking the partnership’s 40th consecutive quarterly increase.
The partnership has made a capital investment of around $697 million in second-quarter 2014, and expects to bring $6 billion worth of major assets online through 2016. The key projects consist of two NGL fractionators at Mont Belvieu and Front Range NGL pipeline; extension of the Seaway crude oil pipeline; expansion of Mid-America Pipeline; the ATEX ethane pipeline and completion of the Eagle Ford crude oil pipeline. The successful execution of these projects will be value accretive and drive future cash flows.
Enterprise Products Partners continues to position itself to capitalize on NGL market dynamics by increasing its Eagle Ford shale exposure. The Eagle Ford shale continues to be a growth driver for the partnership by offsetting volume weakness in other regions of the Mid-continent.
The partnership has several projects planned for this region, including an expanded gas processing facility at Yoakum with a total processing capacity of to over 140,000 barrels a day. This makes it one of the major NGL producing plants in North America.
While we believe that Enterprise Products Partners has solid cash flow stability based on its quality pipeline, storage assets and geographic diversity, volume risk and commodity price exposure could weigh on its near-term results. We remain apprehensive of a volatile NGL pricing environment.
Moreover, the Gulf Coast and Gulf of Mexico (GoM) are prone to storms and hurricanes. The partnership’s significant presence in these regions will continue to expose its results to such weather-related uncertainties.
Other Stocks to Consider
At present, Enterprise Products Partners carries a Zacks Rank #3 (Neutral). Some better-ranked stocks in the same industry include Weatherford International plc (WFT), Sunoco Logistics Partners L.P (SXL) and Sanchez Energy Corp (SN). All of these stocks sport a Zacks Rank #1 (Strong Buy).