Formed as a result of a joint venture between OGE Energy (NYSE:OGE), CenterPoint Energy (NYSE:CNP), and ArcLight Capital Partners, Enable Midstream Partners (NYSE:ENBL) is a relatively low-risk master limited partnership (MLP) with attractive organic growth around its highly integrated natural gas gathering and processing (G&P) and transportation and storage (T&S) footprint exposed to the best liquid plays in Oklahoma.
Enable's fee-based multi-year contracts with minimum volume commitments result in highly stable cash flows. The company's large mix of fee-based cash flows, investment-grade credit metrics, an under-levered balance sheet, and top management team all translate into a below-average risk profile in the MLP space. Enable also benefits from having strong sponsors, which are highly experienced operators as well as key customers to Enable's transportation business.
Synergies and customer retention
In terms of asset value, Enable is one of the largest midstream partnerships in the U.S. The company owns an integrated suite of assets, including 11,000 miles of gathering systems, 12 major processing plants, 7,900 miles of interstate pipelines, 2,300 miles of intrastate pipelines, and eight storage facilities with 86.5 Bcf of capacity.
In addition, the partnership's integrated footprint spans 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. This large and diversified scale of Enable's asset base should continue to help the company gain operational synergies. This should also help the company maintain high customer retention that should continue to support a stable, largely fee-based business backed by added contract protection.
While the company expects to realize $15.6 million in operational synergies by the end of March next year, it also expects to obtain additional synergies with time as it creates a combined midstream service platform and is able to offer new and existing customers new and more efficient services.
Enable's growing super-header system in the Anadarko basin also allows it to increase operational efficiency to an extent rarely exceeded by its competitors. By interconnecting six of its nine natural gas processing facilities in the Anadarko basin, the company is able to optimize the economics of its natural gas processing activities while improving system reliability and utilization.
Under-levered balance sheet
Enable has a relatively under-levered balance sheet compared to its peers. This under-levered balance sheet should allow the company to consistently maintain its investment-grade (S&P: BBB-, Moody's: Baa3) credit rating in the future.
The company's strong investment-grade balance sheet not only differentiates it from its peers, but also provides it with increased financial flexibility to fund growth capital projects. Enable's $1.4 billion credit facility provides it the ability to debt finance capital projects for the first 12-18 months post IPO.
Enable's under-levered balance sheet also means the company has ample liquidity and should not need to issue further equity in the near to medium term. This not only increases the partnership's financial flexibility, but also reduces the risk of dilution.
Enable also benefits from an experienced and knowledgeable management team with an average energy industry experience of over 30 years. Moreover, the management team has experience with a vast array of midstream business capabilities, including constructing, acquiring, operating, developing, and integrating assets.
The management team commands the respect of the industry and has built strong foundations with key upstream producer customers and midstream suppliers that should advance Enable's strong contract structure as well as future growth opportunities.
Enable came public as a large-scale, well established midstream provider in the Mid-Continent and is well positioned for growth, given its integrated footprint spanning across the Anadarko, Ark-La-Tex, and Arkoma basins, with services to the upper Midwest and Southeastern U.S. and an emerging position in the Bakken.
The large scale and scope of the partnership's asset base provides growth and diversification benefits. Enable also benefits from having strong sponsors, which are highly experienced operators as well as key customers to Enable's transportation business.
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