Midstream companies are having an excellent 2013 so far, and that includes Enterprise Products Partners (NYSE: EPD ) , which is up more than 20% year to date. The partnership reports earnings on Tuesday, and the results may give us an idea of exactly how bright its future may be. Here are three things to watch for when Enterprise reports.
1. NGL prices
Low natural gas liquids prices are likely to continue to have a negative effect on Enterprise's earnings. An increase in fee-based revenue helped last quarter, but what would really help the partnership is a significant rebound in the prices of ethane and propane. The propane spot price at Mont Belvieu is up about 7% since January, but all of those gains have occurred since the middle of March and will have little bearing on first-quarter results. NGL pipeline and fractionating volumes were able to mitigate losses in Enterprise's NGL pipeline and services segment last quarter, only time will tell if the partnership is able to pull that off again.
2. Seaway pipeline update
According to a recent FERC filing, Enterprise is dealing with a large number of speculators regarding the 10% capacity on the Seaway that the partnership reserved for uncommitted shippers. It has received approval from FERC to institute a lottery for the remaining space, so it is hoped that an update on that progress will be heard. This marks the first (nearly) full quarter of results for the Enterprise-Enbridge (NYSE: ENB ) joint venture at full capacity. The two partners expanded the 150,000 barrels per day line to 400,000 barrels per day in January. Enterprise attributed the Seaway to gross operating margin growth last quarter, prior to the expansion, so results should come in even higher for the first quarter.
3. Petrochemical and refined products services
This segment includes Enterprise's refined products and marine transportation services business units. Last quarter these two areas overcame losses by three other units to drive growth for the entire segment. There is an awful lot of maritime activity in the Gulf of Mexico right now as exports increase and producers move commodities to more lucrative domestic markets via barge. The partnership is teaming up with Oiltanking Partners (UNKNOWN: OILT.DL ) to improve dock infrastructure, and I expect big things out of its maritime business for at least the next few quarters.
Analysts are expecting earnings of about $0.65 per unit, while revenue estimates range from a high of $13.57 billion to a low of $10.58 billion. Last quarter analysts anticipated earnings per unit of $0.65, but actual earnings came in higher at $0.68. Enterprise reports before the market opens on Tuesday, with its conference call scheduled for 10:00 a.m. EST that morning. Interested investors can listen here, or click here to add Enterprise Products Partners to My Watchlist.
The growing production of natural gas from hydraulic fracturing and horizontal drilling is flooding the North American market and resulting in record-low prices for natural gas. Enterprise Products Partners, with its superior integrated asset base, can profit from the massive bottlenecks in takeaway capacity by taking on large-scale projects. To help investors decide whether Enterprise Products Partners is a buy or a sell today, click here now to check out The Motley Fool's brand-new premium research report on the company.