Kinder Morgan's (NYSE: KMI ) recent acquisition of El Paso (NYSE: EP ) may have knocked Enterprise Products Partners (NYSE: EPD ) off its perch as the largest pipeline operator in the U.S., but that didn't stop the Houston-based midstream service provider from posting robust quarterly numbers. Enterprise saw third-quarter earnings multiply an outstanding 13 times, and the juggernaut isn't showing any signs of slowing down. Let's dig in.
Houston, we have liftoff...
The natural gas environment is an exciting place to be these days, as it is characterized by high production and high demand. The higher demand from the U.S. petrochemical industry for natural gas liquids (NGLs) coupled with its high production sent Enterprise's revenues soaring 40%, to $11.3 billion, from a year ago. Helped by the favorable conditions and a large increase in its top line, Enterprise saw its bottom line swell nearly 13 times, to $471.4 million.
Enterprise has seen positive results in the past few quarters thanks to a number of mergers. A couple of years ago, it acquired Teppco Partners for a deal worth $3.3 billion, which helped create one of the largest pipeline companies in the U.S. In September, Enterprise acquired its sister concern, Duncan Energy Partners (NYSE: DEP ) , for $2.5 billion, helping the company on its expansion path.
Enterprise has $5 billion worth of expansions lined up for the next few years. The company might have received a further impetus when Kinder Morgan acquired El Paso and knocked Enterprise from the top spot. The combined entity will control nearly 80,000 miles of pipelines, whereas Enterprise currently operates 50,000 miles of pipelines. Given the expansion plans, Enterprise is definitely looking to expand its pipeline network and take advantage of the expected increase in the demand for natural gas.
The Eagle Ford shale play
In the south Texas shale play called Eagle Ford, Enterprise is looking to expand its NGL infrastructure. It has entered into a deal with Enbridge (NYSE: ENB ) and Anadarko Petroleum (NYSE: APC ) to build a new NGL pipeline (called the Texas Express pipeline) and two NGL gathering systems. The pipeline is slated to have an initial capacity of 280,000 barrels per day (bpd) with facilities for increasing output to 400,000 bpd.
Enterprise expects its Eagle Ford operations to produce between 200,000 and 250,000 bpd currently, which can go as high as 750,000 to 850,000 bpd. Production is so strong currently that an Enterprise spokesman said its pipelines are "chock-a-block full."
Flow reversal
Enterprise and Enbridge have joined forces to boost the ability of Texas coast refineries to transport oil from a storage depot in Cushing, Okla. Enbridge has agreed to pay $1.15 billion for ConocoPhillips' (NYSE: COP ) share of a north-flowing pipeline that stretches from Houston refineries on the Gulf of Mexico to Cushing. Enbridge and Enterprise, which owns the other half, will then reverse the flow of the pipeline. The 500-mile long seaway pipeline will, in all probability, start shipping 150,000 barrels by the second quarter of 2012, with the ability to reach 400,000 barrels by early 2013.
Enterprise's investors have a lot to look forward to as the company capitalizes on the demand for natural gas to become one of the top providers of the commodity in the U.S. Another bit of good news for investors is that Enterprise this quarter raised its quarterly cash distribution rate by 5.2%, to $0.6125.
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