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American Midstream to Acquire Interest in Enterprise's Plant

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Enterprise Products Partners L.P. EPD and American Midstream Partners, LP (AMID) have inked an agreement. Per the terms, American Midstream may opt to acquire a 25% interest in Enterprise’s Pascagoula natural gas processing plant.

The purchase option may be exercised on fulfillment of certain conditions, which include the completion of alterations to certain facilities on High Point pipeline system by American Midstream. As a result, incremental natural gas volumes will be available to the Pascagoula plant

Enterprise-operated Toca Gas Plant in St. Bernard Parish, Louisiana, receives offshore natural gas production from the American Midstream’s High Point pipeline system, for processing services. Due to the pending modifications to the High Point facilities, the Toca plant owners have decided to suspend operations. This will enable considerable operating expense savings to Enterprise Products and other Toca plant owners as well as utilization of existing processing capacity at the more competent Pascagoula plant.

This pact will also offer customers of the Toca plant an alternative to enter into similar processing arrangement with the Pascagoula facility. This is likely to provide customers with increased netbacks in the form of enhanced NGL recoveries and lower energy costs.

The deal emphasizes the benefits of strategically positioned midstream companies, which can create a robust and more consistent processing alternative for customers through an innovative approach.

The company boasts an extensive network of pipeline that is spread across 50,000 miles. Importantly, the pipeline network is connected to every major U.S. shale play and provides services to producers and users of commodities by transporting gas, liquids and refined products. Almost 80% of the Enterprise’s pipeline contracts with shippers have been extended for 15-20 years, which will help the partnership generate steady cashflow for unit holders. Moreover, the partnership is expanding midstream operations to capitalize the growing feedstock demand by petrochemical plants in the domestic and international markets.

Price Performance

Units of Enterprise have gained 13.5% in the past year compared with the industry’s 8.1% rise.


Zacks Rank & Stocks to Consider

Enterprise Products currently carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Petroleo Brasileiro S.A. PBR, or Petrobras SA, Helix Energy Solutions Group, Inc HLX and TC Pipelines, LP TCP. All these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Petrobras is the largest integrated energy firm in Brazil and one of the major players in Latin America. It pulled off an average positive earnings surprise of 10.4% in the last four quarters.

Helix Energy offers specialty services to the offshore energy industry. The company delivered an average positive earnings surprise of 66.7% in the trailing four quarters.

TC Pipelines purchases, owns and actively participates in the management of U.S.-based natural gas pipelines and related assets. The company delivered an average positive earnings surprise of 3.7% in the last four quarters.

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