Enterprise Products Partners and Targa Resources to Benefit from NGL Supply Growth

Growing NGL supply has resulted in the need for additional infrastructure to deliver product further downstream and help balance the market.

Apr 8, 2014 at 9:50AM

Growing supply of natural gas liquids, or NGL, has resulted in the need for additional infrastructure to deliver product further downstream and help balance the market. The significant supply growth is expected to drive a multibillion dollar opportunity for NGL-levered stocks in the coming years. Some of the key infrastructure segments that would require billions of investment include gathering and processing, NGL pipelines, fractionation, and NGL exports. This increasing NGL production supply and lucrative market is expected to benefit a number of companies, particularly those with exposure to NGL pipelines, processing, storage, fractionation, terminalling and logistics businesses. Enterprise Products Partners (NYSE:EPD) and Targa Resources Corp (NYSE:TRGP) are particularly well positioned to benefit from this bullish outlook on NGL supply growth.

Enterprise Products Partners
Enterprise Products Partners, a midstream energy company, is a core MLP holding. It has an expansive geographic asset footprint which extends from the Marcellus down to the U.S. Gulf Coast. The company has multiple areas of opportunities tied to increasing volumes such as gathering, processing, storage, fractionation, pipelines, and export terminals. Enterprise Products Partners has over 110 million bbls of NGL storage; it has 670 mbpd fractionation capacity, and 250 mbpd LPG export capacity, which the company is expanding to about 500 mbpd by the end of 2015.

As mentioned earlier, the company has multiple areas of opportunities, and its leading position at Mt. Belvieu and the Gulf Coast serves as a major advantage in securing and executing future growth projects. The company has the ability to execute necessary projects through asset repurposing -- for example its ATEX ethane pipeline and the TE Products Pipeline diluent project. Given its strong asset base on the Gulf Coast, the company is also well positioned to benefit from an increase in ethane exports. While large-scale ethane exports are not expected, additional fractionation expansions are highly likely in the near term.

Targa Resources Corp
Targa offers investors levered dividend growth to its underlying MLP Targa Resources Partners (NYSE:NGLS). Similar to EPD, Targa also offers a diversified growth across the NGL value chain. The company has about 500 mbpd of net fractionation capacity and 117 mbpd LPG export capacity, which the company will expand to 183mbpd in 2014. TRGP is also a major NGL player on the U.S. Gulf Coast and Mt. Belvieu region. Targa Resources' business model not only provides investors with upside potential but also downside protection. Higher NGL prices, in particular propane and butane, provide upside to the company's un-hedged commodity margins while the ability to provide short-term spot propane exports acts as a natural hedge to lower prices. Moreover, the company's gathering and processing footprint should also continue to see expansion opportunities in the near term. The company is expected to bring online its 200 MMcf/d High Plains plant in 2014.

Bottom line
To deliver product further downstream and help balance the market, growing NGL supply has resulted in the need for additional infrastructure. Both Enterprise Products Partners and Targa Resources are levered to segments of the infrastructure value chain where material growth is expected. While many new NGL pipelines are built in the past few years delivering either individual purity products or mixed NGLs to demand centers or storage, most of these pipelines originated from oily or liquids-rich producing regions.

From a demand viewpoint Mt. Belvieu, due to its storage capabilities and access to Gulf Coast and export markets, is the most typical destination for NGL pipeline routes. Both Enterprise Products Partners and Targa Resources are major players in the Mt. Belvieu region. Both companies are likely to see incremental pipeline, fractionation, and export projects as their market share serves as a major advantage in securing future projects.

3 stock picks to ride America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don’t miss out on this timely opportunity; click here to access your report -- it’s absolutely free. 


Jan-e- Alam has no position in any stocks mentioned. The Motley Fool recommends Enterprise Products Partners L.P.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers