Q2 Earnings Preview: Enterprise Products Partners

Master limited partnerships are having an excellent 2014 compared to the broader market, and that includes Enterprise Products Partners (NYSE: EPD  ) , which is up more than 18% year to date. The partnership reports earnings on Thursday, and the results may give us an idea of exactly how bright its future may continue to be. Here are three things to watch for when Enterprise reports.

In June, Enterprise Products Partners announced it would build the world's largest ethane export plant on the Houston Ship Channel. Photo credit: author

1. Updates on two key crude projects
Enterprise announced plans for a crude oil pipeline running from the Bakken oil field in North Dakota down to Cushing, Oklahoma, at a June summit in Bismarck, but has yet to issue a formal release on its plans. Expect analysts to ask many questions about the proposed line that is expected to have a capacity of 200,000 barrels per day and be completed by the end of 2016.

We should also get some feedback on the Seaway looping project that is now "mechanically complete." The Cushing to Gulf Coast crude line has an improved capacity of 850,000 barrels per day, more than double its previous capacity.

Both projects emphasize Enterprise's willingness to embrace crude oil, venturing into new markets, after focusing on natural gas liquids for so long. Early color on these projects should give investors meaningful insight into the partnership's strategy for the coming years.

2. ATEX Express
Enterprise has a history of completing projects on time, under budget, and having those projects ramp up gross operating margin quicker than anticipated. The second quarter will give us our first look at a full quarter's worth of GOM for the partnership's ATEX Express pipeline, which carries natural gas liquids from the Marcellus shale down to the Gulf Coast.

After starting up in January, the pipeline contributed a partial quarter's worth of gross operating margin totaling $31 million. The line's initial capacity is 125,000 barrels per day, capable of reaching 265,000 barrels per day at some point in the coming years. That said, the current capacity via actual commitments is closer to 65,000 bpd right now. Investors should watch for the new gross operating figure and guidance on the line's capacity going forward. It will give us insight into not just Enterprise's operations, but the state of Marcellus production in general.

3. Financials
Investors who follow Enterprise closely may take it for granted at this point that the partnership will report sound financial results, meaning it can cover its declared distribution, that distribution is about 5% or 6% higher than it was last year, and that its debt picture remains sound. Still, it is always worth looking into those figures each quarter.

We already know the distribution increase has come on schedule, as management announced earlier this month that the board had approved the 40th consecutive distribution increase for the partnership. The second quarter payout will be 5.9% higher than last year, coming in at $0.72 per unit. Information on the coverage for that payout will come with the full earnings release.

Bottom line
Analysts are expecting earnings of about $0.74 per unit, while revenue estimates range from a high of $15.47 billion to a low of $11.64 billion. Any initial price movement on units will probably be related to whether or not Enterprise hits those "targets." The partnership reports before the market opens on Thursday, with its conference call scheduled for 10:00 a.m. EST that morning. Interested investors can listen here.

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