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Enterprise Products Posts Record 4Q

Zacks Equity Research

Enterprise Products Partners LP (NYSE:EPD - News) reported record fourth quarter 2011 results, thanks to natural gas production growth in the Rocky Mountains, Haynesville and Eagle Ford shale plays as well as strong demand for natural gas liquids (NGLs) in the U.S. petrochemical industry and global markets.

Earnings per limited unit of 82 cents surpassed the Zacks Consensus Estimate of 56 cents and grew a whopping 148% from 33 cents a year ago.


We believe Enterprise Products remains a core holding in a master limited partnership portfolio and focuses on projects that generate stable cash flow and contribute to its integrated value chain. While Enterprise increased its cash flow distribution by 5.1% in the reported quarter, it also deployed cash in various fee-based development projects that will likely generate operating cash flow to support its future distribution growth.


We are still optimistic on the partnership’s gas processing/NGL fractionation and expect higher profit margin from the petrochemical segment. Enterprise Products has received adequate transportation commitments to progress with the development of its 1,230-mile pipeline, which extends from Appalachia to Texas, also known as ATEX Express.


The pipeline will provide shippers with access to the partnership’s storage facility in Mont Belvieu, Texas that will offer indirect and direct access to the U.S. ethylene plants and thus position the partnership favorably.


Further, Enterprise and Genesis Energy L.P. (NYSE: GEL - News) have executed the crude oil transportation agreement with a group of six producer companies to build the SEKCO pipeline, which is expected to come online by mid-2014. It will also provide a reliable source of uninterrupted crude oil supplies to the Gulf Coast refineries. 


Given a broad and vertically integrated asset base, steady cash flow generation ability and financial strength for strategic growth, we believe Enterprise is well positioned to deliver an impressive total return versus pipeline peers Kinder Morgan Energy Partners L.P. (NYSE: KMP - News) and Enbridge Energy Partners going forward.


We maintain our long-term Outperform recommendation on Enterprise Products. However, Enterprise Products holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months.

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