Enterprise Products Partners Proves Crude Is Still King

| About: Enterprise Products (EPD)
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Summary

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.

Despite falling oil prices and the growing popularity of green energy initiatives, oil and natural gas are still kings of their domains and have shown very few, if any signs of slipping from their respective mountain tops. In recent years more and more sources of energy have been discovered domestically leading to the real possibility of U.S. energy independence. However, currently the country lacks the proper infrastructure to transport the crude and natural gas coming out of the ground. Enterprise Products Partners (NYSE:EPD), with its vast network of pipelines and production and transport facilities, is positioned to be on the forefront of this vast growth of infrastructure as the U.S. moves to a more independent energy model.

Headquartered in Houston, Texas, Enterprise Products Partners is the largest publicly traded master limited partnership (MLP) in the United States. It boasts a diversified business mix that includes natural gas pipelines, offshore production platforms, oil pipelines and even tank barges. The company provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLS), crude oil, petrochemicals, and refined products in the United States and internationally.

Income and Earnings

Recently, Enterprise Product Partners released its third quarter earnings report and while coming in slightly under expectations, the company still posted strong earnings and growth over the previous third quarter results. With earnings of $699 million, the company has successfully posted an impressive growth over the same quarter last year. In addition, the earnings report demonstrated several aspects of the company's strengths and dedication to its investors.

  1. Enterprise increased its cash distribution with respect to the third quarter of 2014 by 5.8 percent to $0.365 per unit, or $1.46 per unit on an annualized basis, compared to the distribution paid with respect to the third quarter of 2013.
  2. Enterprise reported distributable cash flow of $975 million for the third quarter of 2014, which provided 1.4 times coverage of the $0.365 per unit cash distribution.
  3. Enterprises natural gas liquid (NGL), crude oil, refined products and petrochemical pipeline volumes for the third quarter of 2014 increased 2 percent to a record 5.2 million barrels per day (BPD) compared to the third quarter of 2013.
  4. Enterprise made capital investments of approximately $772 million during the third quarter of 2014, including $107 million of sustaining capital expenditures.

Michael Creel, CEO, stated:

"Our performance continues to be driven by record or near record volumes transported on our liquid pipelines, fee-based natural gas processing volumes and NGL fractionation volumes. We benefited from cash flow growth from new assets placed in service over the past twelve months as well as the diversification of our businesses. Four of our five business segments reported increases in gross operating margin leading to a 16 percent increase in total gross operating margin and generating a 14 percent increase in distributable cash flow, excluding proceeds from asset sales, in the third quarter of 2014 compared to the third quarter of last year."

Consistent Dividend Growth

Ex/Eff Date

Type

Cash Amount

Declaration Date

Record Date

Payment Date

10/29/2014

Cash

0.365

10/10/2014

10/31/2014

11/7/2014

7/29/2014

Cash

0.72

7/10/2014

7/31/2014

8/7/2014

4/28/2014

Cash

0.71

4/8/2014

4/30/2014

5/7/2014

1/29/2014

Cash

0.7

1/13/2014

1/31/2014

2/7/2014

10/29/2013

Cash

0.69

10/14/2013

10/31/2013

11/7/2013

7/29/2013

Cash

0.68

7/10/2013

7/31/2013

8/7/2013

4/26/2013

Cash

0.67

4/9/2013

4/30/2013

5/7/2013

1/29/2013

Cash

0.66

1/14/2013

1/31/2013

2/7/2013

10/29/2012

Cash

0.65

10/10/2012

10/31/2012

11/8/2012

7/27/2012

Cash

0.635

7/11/2012

7/31/2012

8/8/2012

4/26/2012

Cash

0.6275

4/13/2012

4/30/2012

5/9/2012

1/27/2012

Cash

0.62

1/17/2012

1/31/2012

2/9/2012

10/27/2011

Cash

0.6125

10/13/2011

10/31/2011

11/9/2011

7/27/2011

Cash

0.605

7/15/2011

7/29/2011

8/10/2011

4/27/2011

Cash

0.5975

4/14/2011

4/29/2011

5/6/2011

1/27/2011

Cash

0.59

1/14/2011

1/31/2011

2/7/2011

10/27/2010

Cash

0.5825

10/14/2010

10/29/2010

11/8/2010

7/28/2010

Cash

0.575

7/13/2010

7/30/2010

8/5/2010

4/28/2010

Cash

0.5675

4/13/2010

4/30/2010

5/6/2010

1/27/2010

Cash

0.56

1/12/2010

1/29/2010

2/4/2010

Source

As the table above demonstrates, Enterprise Products Partners has consistently paid dividends each and every quarter. In fact, the company has a proven track record of dividend payouts over the last fifteen years. With a current dividend yield of 3.91 percent, Enterprise Products Partners provides a stable return on investment that is perfect for any investor's portfolio.

Infrastructure Investment

Enterprise Products Partners has steadily been investing in the future by improving its infrastructure to provide the means to move both crude and natural gas across the country. Recently completed projects include new pipelines to reduce the glut of crude oil at Oklahoma's Cushing hub and bringing the Eagle Ford Shale output to the Texas Gulf Coast. These investments in infrastructure are just part of the company's plan to increase its ability to move oil and gas across the country much more quickly and easily.

Recent Merger Increases Reach

Enterprise Products Partners recently announced a merger with Oiltanking Partners. This merger will bring Oiltanking Partners into the company extending the potential reach of Enterprise as it works to position itself as the leader in crude and natural gas infrastructure.

"We are pleased to announce the execution of this merger agreement that would result in the merger of Oiltanking Partners into Enterprise," said Michael A. Creel, chief executive officer of the general partner of Enterprise. "The combination of Enterprise's system of midstream assets and Oiltanking Partners' access to waterborne markets and crude oil and petroleum products storage assets would extend and broaden Enterprise's midstream energy services business. Upon completion of the merger, Oiltanking Partners unit holders would benefit from Enterprise's scale, diversification and financial flexibility; visibility to growth driven by over $6 billion of capital projects under construction; a significant increase in cash distributions; and more daily liquidity from ownership of Enterprise common units."

Energy Investment Brings Trepidation but Could Bring Big Profits

There is no doubt that as oil prices have fallen over the last several months that many energy stocks have seen their values eroded as well. These losses may give investors pause before choosing to sink money into fuel. However, oil and natural gas are still the sources of a majority of the energy used in this country and there are no signs of this changing in the future. Because of this, investors have a rare opportunity to invest in energy companies when the stock prices are much lower, and companies such as Enterprise Products Partners still offer the stability to mitigate many of the risks to investors.

Enterprise Products Partners has lost some ground due to the falling oil prices, but still remains viable and cash-rich, making it a definite buy for anyone looking for great opportunities in energy stocks. Their dedication to infrastructure investments has greatly expanded their reach and positioned them to win big when energy prices begin to rise again as they move both crude and natural gas across the entire country with relative ease.

Final Thoughts

The price of oil may be down at the moment, but like so many energy resources, the price is almost guaranteed to rise again. When that happens you can expect to see Enterprise Products Partners positioned quite well as they move oil and natural gas around the country. Despite the recent losses in the company's stock price, Enterprise Products Partners has strategically positioned itself to be a leader in the U.S. movement of both crude and natural gas, and as more and more local reserves are discovered as the U.S. seeks to reduce its dependency on foreign oil, Enterprise Products Partners foresees almost limitless growth potential. Combine this strategic positioning with its consistent dividend yields over the last decade and you have a stock that is a must-buy for all investors. This stable and consistent stock is a great addition to any portfolio and especially for energy investors seeking a stable and reliable stock to shore up their portfolios.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.