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- Despite lower oil prices, Enterprise Products Partners maintains its leadership and profitability with its pipeline and offshore assets.
- Enterprise Products Partners increases its third quarter revenues when compared to the previous year, although earnings were less than expected.
- Consistent dividend payouts and yields make it an attractive and stable investment for any portfolio.
- Enterprise Products Partners continues to invest in its infrastructure to position itself as the leader in the movement of crude and natural gas.
- Recent merger continues to increase its reach across the oil and natural gas markets.
Update: This Merger Will Further Enhance The Midstream Footprint Of Enterprise Products Partners
- The partnership announced the merger agreement with the Oiltanking Partners.
- We did not expect EPD to acquire an oil tanking business as we expected the company to focus on the expansion of pipelines and terminals business.
- This acquisition will give EPD a different dimension and it will allow the partnership to capture another segment of the midstream market.
A Closer Look At Enterprise Products Partners' Q3 2014 Distributable Cash Flow
- Consistently strong DCF coverage ratios; growth in DCF per unit exceeding growth in distributions.
- Substantial excess cash reduces reliance on capital markets and minimizes dilution.
- Favorable structure: no IDRs, low leverage, breadth and diversification.
- Growth underpinned by projects beginning commercial operations: $4.9 billion in latest 12 months and a further $6.3 billion in 2015-2016.
- Core MLP holding; premium price vs. other MLPs justified.
Update: Enterprise Products' Results Show Why It Is A Core MLP Holding
- EPD reported another solid quarter.
- While results were impacted by one-time factors, fundamentals at EPD remain solid.
- Volumes on Enterprise Products’ liquids pipelines, processing plants, and fractionators continue to track near all-time records.
Update: Enterprise Products Partners Continues Its Impressive Performance
- The partnership announced impressive third quarter earnings.
- We expected the partnership to continue growth in earnings and revenues but we did not expect a two-for-one unit split.
- The future growth projects coming online over the next few years will further enhance the cash flows.
- We maintain Enterprise products Partners will continue to grow.
Our Take On Enterprise Products Partners LP's Acquisition Of Oiltanking Partners LP
- Investors should take profits on OILT, which offers much different investment proposition than EPD. Portfolio managers likely will rotate out of name in favor of other growth-oriented fare.
- NS or NSH would be suitable replacements for OILT in your portfolio; these turnaround stories should deliver yield compression. NS also has valuable dock space in Corpus Christi.
- OILT acquisition not immediately accretive, but strategic value of assets is critical b/c of NGLs and crude oil flowing to Gulf Coast. Also provides dock space to ramp condensate exports.
- EPD a foundational portfolio holding, but investors should only buy on pullbacks. Fear of rising interest rates should provide buying opportunities.
Why MLP Investors Should Be Nervous About Enterprise Products' Acquisition
- EPD buys Oiltanking's General Partner and IDR interests for $4.6B.
- EPD will purchase Oiltanking public units in the near future for $1.4B.
- Oiltanking LP unitholders will receive no market premium for their high-growth units.
- In a two-step transaction EPD acquires the limited partner and general partner interests in OILT.
- The acquisition of OILT’s strategic asset base broadens EPD’s services offerings and expands the capital project opportunity set.
- The acquisition marks the continuation of EPD as a growing export story for LPGs, ethane, refined products, processed condensate, and potentially crude oil.
- The focus on the NGLs segment will continue to bring growth for the company as this segment is growing at an exceptional rate.
- The completion of the phase one of Aegis pipeline will start to show benefit by the end of the next quarter.
- Addition of another fractionator will further enhance the capacity of the partnership in the NGLs segment.
Overvalued Enterprise Products Partners Will Lag Peers For The Next Several Years
- Over the last year, EPD has been the best performing large-cap MLP, doubling the average return of its peers.
- Unit price gains have pushed the EPD yield to 1.0% less than faster growing, high quality, large cap MLPs.
- Best case for EPD is 10% total returns for the next several years, while other MLPs will do mid-teens returns and better.
Enterprise Products Partners: These Projects Will Be Key For The Partnership
- Growing demand for Ethane in Asia and Europe will take care of the growing supply in the U.S.
- Export potential of Ethane has created an opportunity for local producers and EPD is looking to benefit from this opportunity by developing its NGLs assets.
- Expansion of the crude pipeline will add to the midstream footprint of the partnership and considerably enhance the revenue potential as the capacity increases.
- These two projects will add to the revenues and cash flows substantially over the next two years.
A Closer Look At Enterprise Products Partners' Q2'14 Distributable Cash Flow
- Consistently strong DCF coverage ratios.
- Substantial excess cash reduces reliance on capital markets and minimizes dilution.
- Growth in DCF per unit exceeding growth in distributions.
- Favorable structure: no IDRs, low leverage, breadth and diversification.
- Core MLP holding; premium price vs. other MLPs justified.
Enterprise Products Partners LP: Great Company, Not A Great Stock
- EPD's prescient management team, consistent execution, impressive asset base and conservative finances make the company the preeminent master limited partnership--a foundational portfolio holding.
- The most recent example of EPD's excellence: obtaining a private-letter ruling from the Commerce Dept to export minimally processed condensate.
- But a great company isn't necessarily a great stock. EPD looks expensive at these levels; investors should wait for a pullback or consider less expensive names with better near-term upside.
- The recent fall in the unit price will be temporary as the long-term growth prospects of the partnership remain intact.
- Global markets will play a key role in the future growth of the partnership as the demand for condensate and petrochemicals remains strong in Asia and Latin America.
- Agreements like Arkema show that the partnership is making the right moves to exploit the growth opportunity in the global markets.
- Enterprise is a best-of-breed midstream MLP, and is so for good reason.
- Capital projects switching from supply side to demand side.
- While the recent downward momentum is encouraging, valuations are not yet attractive.
- Expansive geographic footprint, diversified asset base, strong balance sheet, and impressive track record of executing organic growth projects on budget and on time make EPD a core MLP holding;
- The partnership continues to demonstrate the strength of its platform through strong quarterly results and new project identification;
- A proactive yet disciplined approach should support solid distribution growth sustainability with relatively limited execution risk.
Enterprise Product Partners Is Poised To Deliver Long-Term Value
- The volume-based business model of Enterprise Products Partners protects the company from volatile oil and gas prices.
- The company recently received approval to export processed condensate outside of the U.S. Citibank expects the export volume to be around 300,000 barrels per day during the current year.
- Enterprise also announced the completion of the Seaway oil pipeline. After successful commissioning, the pipeline is expected to double the capacity and reach 850,000 barrels per day.
- The Aegis and ATEX pipelines are expected to become operational within the next couple of years and will help to boost the earnings.
Enterprise Products Partners Will Continue To Rise
- The expansion of the Seaway pipeline system will considerably enhance the operational capability of the partnership.
- Condensate exports will allow the partnership to grow its revenues, as well as cash flows.
- Strong fundamental growth will support the rising unit price, and growing cash flows will result in improved cash distributions.
Federal Approval Of Condensate Exports By Pioneer And Enterprise Products Should Give Eagle Ford E&P Companies A Lift
- The US Department of Commerce ruled June 25, 2014 to allow PXD and EPD to export condensates (an ultra light crude oil).
- This should mean greater profits for PXD and EPD.
- PXD produces about 43,000 boepd of condensates. EPD is a midstream company that can export directly or use its splitters to refine condensates beforehand.
- What other effects will there be?.
Yesterday, 11:55 AM
- The fundamentals underlying oil and gas pipeline MLPs have fallen much less than energy stocks in recent days, acording to Forbes' John Dobosz, who suggests seeking out MLPs with a long history of rising distributions, payouts well covered by cash flow, a strong balance sheet and an investment-grade credit rating.
- Two MLPs that fit these criteria, Dobosz writes, are Enterprise Products Partners (EPD +3.2%) and Magellan Midstream Partners (MMP +3.9%); he also likes Sunoco Logistics Partners (SXL +5.2%), which is expected to increase revenue 15% to $22B in 2015, with EBITDA rising 20% and distributions growing 18% this year.
- Spectra Energy Partners (SEP +2.3%), Western Gas Partners (WES +2.7%) and Energy Transfer Partners (ETP +2.4%) are appealing because of consistently rising distributions and revenues, Dobosz adds.
Fri, Dec. 12, 5:21 PM
- Enterprise Products Partners (NYSE:EPD) says it will not move forward with development of its crude oil pipeline from North Dakota to the Cushing, Okla., storage hub, apparently hindered by competition from other shippers and lower crude oil prices.
- EPD does not say whether the price decline from $100/bbl in June, when the project was announced, to below $60 this week prompted it to scrap the project, but COO Jim Teague had told analysts in October, when prices had slipped to $80, that such prices "aren't going to help that project."
- EPD also had competition from other Bakken pipeline projects; crude traders say fewer tariffs, better destinations and more options from other projects could be more of a factor in EPD's decision than lower oil prices.
Tue, Dec. 2, 7:21 PM
- A fresh report this week from BofA Merrill Lynch’s MLP team highlights which MLPs may be mostly insulated from the carnage in oil prices, as long as the situation does not deteriorate further: Enterprise Products (NYSE:EPD), Magellan Midstream (NYSE:MMP), Buckeye Pipeline ([BPL), Energy Transfer (NYSE:ETP), Plains All American (NYSE:PAA), and - even though it is now a corporation rather than a parent of three MLP entities - Kinder Morgan (NYSE:KMI).
- The firm considers these MLPs as relatively lower-risk because of their diverse asset bases, investment grade balance sheets, low direct commodity sensitivity, seasoned management teams and solid organic growth outlook.
Mon, Nov. 24, 3:48 PM
- Enterprise Products Partners (EPD -0.9%), which obtained U.S. approval to ship condensate overseas this year, is seeking to sell the lightly processed oil to Asian buyers in 2015, Bloomberg reports.
- EPD is said to be offering to export 600K barrels/month of condensate from the Eagle Ford formation, and potential buyers were required to make their bids by Nov. 22, according to the report.
Wed, Nov. 12, 8:54 AM
- Oiltanking Partners (NYSE:OILT) +6.1% premarket on news of a merger agreement with Enterprise Products Partners (NYSE:EPD).
- OILT unitholders would receive 1.3 EPD common units for each OILT common unit, representing a 5.6% premium based on closing prices from Sept. 30, the day before the merger was originally proposed.
- If the merger is completed, consideration paid by EPD, including the Oct. 1 acquisition of general partner and limited partner interests in OILT, would total ~$6B.
- EPD says the combination of its system of midstream assets and OILT's access to waterborne markets and crude oil and petroleum products storage assets would extend and broaden its midstream energy services business.
Tue, Nov. 11, 3:21 PM
- Prospects for energy MLPs remain bright despite lower crude oil prices, Credit Suisse’s John Edwards says, as Q3 distribution growth in the sector has averaged ~11% Y/Y and direct cash flow per unit rose 20% Y/Y on average.
- The analyst says he saw little change in capex plans from energy MLPs in Q3 reports: Kinder Morgan (KMI, KMP) said it had seen no impact to business, Enterprise Products Partners (NYSE:EPD) continues to expect to invest $3.7B-$4.2B for 2015 and 2016 - the same as indicated before the oil price pullback - and Spectra Energy Partners (NYSE:SEP) remains on track in its drive to a $35B program.
- Credit Suisse upgrades Midcoast Energy Partners (NYSE:MEP), ONEOK Partners (NYSE:OKS), Targa Resources Partners (NYSE:NGLS) and Western Gas Partners (NYSE:WES) to Outperform from Neutral, while reducing Magellan Midstream Partners (NYSE:MMP) to Neutral from Outperform.
- ETFs: AMLP, AMJ, MLPL, YMLP, MLPI, MLPA, MLPN, EMLP, MLPG, MLPX, MLPS, MLPY
Thu, Oct. 30, 2:49 PM
- Enterprise Products Partners (EPD -0.9%) says Q3 earnings rose for its midstream business, as it reported higher fees in some sectors and an increase in crude volume moving through its pipelines.
- EPD says its Q3 distributable cash flow was $975M, compared to $908M for the year-ago quarter, and it had retained $284M of DCF for Q3 and $1B YTD.
- Gross operating margin for the natural gas liquid pipelines and services segment gained 11% to $712M vs. $640M in the same period last year; in natural gas, gross margin was fell to $195M from $213M a year ago, primarily due to the settlement of a contract dispute.
- Crude oil gross operating margin rose 31% to $191M, driven in part by higher fees at the Seaway Crude Pipeline and an increase in volume at lines serving plays in Texas.
Thu, Oct. 30, 6:04 AM| Comment!
Wed, Oct. 29, 5:30 PM
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Wed, Oct. 15, 3:18 PM
- MLPs have been crushed this week, and today Citi warns that the rapid drop in oil prices has created a "negative feedback loop on spending” and that a 15% drop in oil-directed drilling activity would result in a 50% drop in oil production growth.
- It Brent oil prices stabilize at $85-$90, Citi thinks the MLPs exposed mostly to oil and natural gas liquids would rebound modestly as a new equilibrium is developed between producers and midstream companies on spending; if crude continues to slide, Citi says MLPs exposed to natural gas would outperform.
- Miller Howard, a money manager specializing in income-producing stocks, is blaming newbie investors who don't fully understand MLPs and are "in it for the yield."
- Most MLP contracts are very long term, meaning that a temporary change in the oil price has no effect on those sources of revenue, Howard says, adding that "there is far from enough infrastructure to serve the domestic energy industry, even if it slows a bit."
- Some big MLPs have turned higher even as most stocks plunge: KMI +1.8%, KMP +1.5%, EPD +4.8%, PAA +3.7%, ETP +4%, ETE +8.6%, RGP +7.2%, CQP +6.6%, TEP +5.2%, PSXP +4.1%, MMP +7.1%, PAGP +4.9%, EEP +2.1%.
- ETFs: AMLP, AMJ, MLPL, MLPI, MLPA, MLPN, EMLP, MLPX, MLPS, AMU, ENFR, ATMP, MLPW, AMZA, IMLP, OSMS
Tue, Oct. 14, 12:33 PM
- MLPs have been brutalized lately, with the benchmark Alerian MLP Index (AMJ +0.5%) plunging 13% in the past week and down another 3% earlier today, but at least some in the group have been trying to bounce back in the past hour or so.
- J.P. Morgan strategists are sticking with their bullish central thesis on MLPs, saying prolific production from unconventional energy plays will keep demand high for new energy infrastructure; the firm believes most core acreage in leading shale plays continues to be economic at current commodity prices, which should drive strong long-term growth prospects for MLPs.
- JPM favors MLPs owning high-quality, diversified assets with strong management teams and proven track records, naming Kinder Morgan (KMI -1.5%), Enterprise Products Partners (EPD +2.5%) and Plains All American Pipeline (PAA -1%).
- ETP +3.7% and OKS +2.5%, LINE +1.4%, but EROC -5.3%, CQP -4.5%, BBEP -2.5%, MMP -2.5%, TEP -2.1%, PSXP -2%, WPZ -1.1%, ACMP -0.5%.
- ETFs: AMLP, AMJ, MLPL, MLPI, MLPA, MLPN, EMLP, MLPX, MLPS, AMU, ENFR, ATMP, MLPW, IMLP, AMZA, OSMS
Thu, Oct. 9, 3:25 PM
- Crushed by relentless anxiety about oversupply and weakening global demand, Nymex crude oil futures closed down $1.54 at $85.76/bbl, their lowest close since Dec. 2012, while Brent crude fell below $90/bbl for the first time in more than two years.
- Including today's losses, WTI crude is down 6.2% since the start of the month and Brent has surrendered ~5%.
- In the face of surging output, a move in WTI below its 10-year average at $82 is not out of the realm of possibility, Brown Brothers Harriman says, adding that "a break of $73/barrel could send WTI toward $64, which corresponds with the 2010 low."
- Among big oil names so far today: APC -6.3%, LINE -4.6%, EPD -3.8%, DVN -3.8%, MRO -3.6%, HES -3.8%, KMI -3.7%, TOT -3.5%, STO -3.3%, RDS.A -3.1%, OXY -3%, KMP -3%, XOM -2.6%, COP -2.6%, MUR -2.6%, CVX -2.5%, BP -2.4%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, ERY, XOP, DIG, BNO, DTO, DBO, DUG, IYE, XES, IEO, CRUD, IEZ, PXE, USL, UWTI, PXJ, FENY, DNO, DWTI, RYE, FXN, SZO, OLO, DDG, OLEM, TWTI
Wed, Oct. 1, 9:19 AM
- Enterprise Products Partners (NYSE:EPD) agrees to acquire general partner and limited partner interests in Oiltanking Partners (NYSE:OILT) for $2.21B in cash and ~54.8M EPD common units for total consideration of ~$4.41B; EPD will own ~66% of OILT common units.
- Oiltanking Holding Americas is selling its 64.7% limited partner interest in OILT, represented by ~15.9M common units and ~38.9M subordinated units in the partnership, as well as its 2% general partner interest and related incentive distribution rights, to EPD.
- In a second step, EPD makes a takeover proposal for OILT through a unit exchange totaling another ~$1.4B.
- OILT owns marine terminals on the Houston Ship Channel and the Port of Beaumont with a total of 12 ship and barge docks and ~24M barrels of crude oil and petroleum products storage capacity on the Texas Gulf coast.
- EPD +1.5%, OILT +8.6% premarket.
Mon, Sep. 29, 3:19 PM
- Enterprise Product Partners (EPD +0.9%) says it will build a new natural gas liquid fractionator at its Mont Belvieu complex in Texas and has secured the permits for another.
- The first fractionator would be the ninth at Mont Belvieu when it begins operations as early as Jan. 2016; upon completion, the plant will have a fractionation capacity of 755K bbl/day.
- EPD owns an interest in 15 NGL fractionation facilities in Texas, Louisiana and Ohio, with Mont Belvieu the largest; its eight operating fractionators have a capacity of ~670K bbl/day.
- Separately, EPD says it finished construction on the first segment of the 60-mile Aegis pipeline running from Mont Belvieu and Beaumont, Tex.
Mon, Sep. 29, 4:36 AM
- Pioneer Natural Resources (NYSE:PXD) expects to double its U.S. exports of condensate to 50K barrels per day next year.
- The U.S. shale resources explorer, along with Enterprise Product Partners (NYSE:EPD), received permits in June to export the ultra-light oil, after the country eased its 40-year ban on oil exports.
- Pioneer sells condensate from its Eagle Ford shale site to Enterprise, which markets the oil to foreign buyers.
Sat, Sep. 27, 9:15 AM
- Worries that energy MLPs could struggle to produce gains this year have proven unfounded, as the group has produced double the return of the broader market so far this year and are yielding ~5.2%.
- Distributions during Q2 rose 6.8%, growth that can compensate for price declines as other income investments with less risk attract investors.
- Kinder Morgan's (KMI, KMP) consolidation is no longer seen as spelling the end of the MLP as a structure, and most analysts see continued robust growth and hefty valuations from the industry.
- The Alerian MLP Index has returned 17% YTD vs. 12% for the Philadelphia Utilities Index components and 8% for the S&P 500; among individual MLPs, Emerge Energy (NYSE:EMES) leads the pack with a 267% return while the laggard is Oxford Resource Partners (NYSE:OXF) with a loss of 57.5%.
- But the problem with MLPs is that the assets underlying them generally have a finite lifespan, and many have been bid up to very high prices; Enterprise Product Partners (NYSE:EPD), for example, is yielding just 3.8% and trading at 4.8x book value.
- ETFs: AMLP, AMJ, MLPL, YMLP, MLPI, MLPA, MLPN, EMLP, MLPX, MLPG, MLPS, MLPY, AMU, YMLI, ZMLP, ENFR, ATMP, MLPW, MLPC, IMLP, OSMS
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