Enable Midstream Partners, LP (NYSE:ENBL) is a master limited partnership (MLP) that was started as a joint venture in May 2013 between OGE Energy (NYSE:OGE), CenterPoint Energy (NYSE:CNP), and ArcLight Capital Partners. While the partnership's diversified asset base, protective contracts structure, and top energy customers provide it with stable cash flows, Enable's highly integrated natural gas gathering and processing assets also offer an attractive organic growth profile.
The partnership is well positioned for growth, given the company's integrated footprint spanning across the Anadarko, Ark-La-Tex, and Arkoma basins, with services to the upper Midwest and Southeastern regions and an emerging position in the Bakken. The fact that Enable enjoys a more diversified portfolio of gathering and processing (G&P) and transportation and storage (T&S) assets than its smaller midstream peers allows Enable to optimize its operations and focus its organic growth strategy on those parts of its business that offer the greatest ROIC, as it is currently doing in the liquids-rich parts of the Mid-Continent, including the SCOOP, STACK, Mississippian Lime, and Granite Wash.
The South Central Oklahoma Oil Province (SCOOP), an emerging area of crude and liquids-rich gas in the Anadarko, is currently regarded as the highest-returning resource play in the Mid-Continent, driven by oil economics. Continental Resources (NYSE:CLR), which is credited with having discovered the play, is currently the dominant leaseholder, with most of its acreage dedicated to Enable Midstream. Continental currently operates 185 wells across its 425,000 net acres of leasehold in the SCOOP. Continental is one of Enable's top G&P customers by volumes, spearheading the liquids-rich growth in the partnership's footprint over the last 24 months. The company currently produces roughly 30,000 barrels per day in the area, up from less than 5,000 barrels per day at the end of 2012.
Enable is currently in the process of constructing a new 200 million cubic feet per day processing plant in Grady County, Oklahoma. The Bradley Plant is expected to be completed in the first quarter of 2015. While the new plant will help the company serve the growing liquids-rich production in the SCOOP, more importantly, it will tie directly into Enable's super-header system, allowing for greater operational flexibility.
While SCOOP is the major growth driver for Enable, other liquids-rich basins in the Mid-Continent also offer the company growth opportunities. The company has dedications from Devon Energy (NYSE: DVN) in the Mississippian Lime and from Apache Corp (NYSE: APA) in the Granite Wash area.
Enable's emerging crude oil gathering business in the Bakken shale also offers strong growth potential. Despite a declining rig count in North Dakota since 2012, efficiency gains have allowed crude production to continue to soar. Supply has roughly doubled from 500,000 barrels per day to just under 1 million barrels per day since 2012.
The partnership's current relationship with XTO Energy, a subsidiary of ExxonMobil (NYSE:XOM), could serve as a platform for growth in the region. Enable was invited into the Bakken to serve as a dedicated crude oil gathering partner for XTO. Enable's first crude gathering system commenced operations in November 2013 and will be fully operational in 3Q14 with a total oil gathering capacity of 19,500 barrels per day and a supportive fee-based contract through 2028, including partial minimum volume commitments (MVCs).
In February, Enable entered into another long-term agreement with XTO Energy to gather XTO's crude oil production through a new system that will be constructed in the Bakken Shale. Initial operations are expected in 2Q15. The new system will have a capacity of up to 30,000 barrels per day of crude gathering and will include 85 miles of crude gathering lines.
Enable Midstream's sponsors, OGE and CenterPoint, are large, regulated utilities with stable earning profiles. Both OGE and CenterPoint have investment-grade ratings and derive the majority of their earnings from regulated operations, providing stability. Both OGE and CenterPoint have an almost equal stake in Enable's general partner, and with Enable's LP interest representing a significant portion of the sponsors' assets, the sponsors will be motivated to increase Enable's distributions to its limited partners. Moreover, these parent companies are also important customers of Enable's transportation and storage segment, with roughly 11% of Enable's 2013 total gross margin derived from contracts owned by OGE and CenterPoint.
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Enable Midstream Partners provides investors with a combination of both stable cash flows and organic growth opportunities. The partnership has contracts with some of the top investment-grade energy customers in the U.S. Enable Midstream's linkage to a vast array of interstate pipelines through the Perryville Hub and its diversified platform of services provide it with the flexibility to retain existing and attract new customers. The partnership's assets are also underpinned by significant commitments from its sponsors.
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