Energy infrastructure giant Enterprise Products Partners (EPD -0.60%) has been a steady grower throughout its history. Proof of that consistency is its distribution, which the company has increased 60 times since going public in 1998, including for the past 51 straight quarters. The driving force behind that stable growth has been the company's ability to buy or build energy infrastructure assets that deliver meaningful cash flow growth no matter what commodity prices are doing.
That has certainly been the case over the past year. While the company did experience several quarters of flat results due to the oil market downturn, it just recently reversed a trend thanks to the positive impact of several new additions to its network. That said, with several more projects currently under construction and others in development, Enterprise's best days are clearly in front of it.
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A model of consistency
Since going public in 1998, Enterprise Products Partners has invested billions of dollars in expanding its energy infrastructure network and cash flow. Acquisitions have driven that expansion, with the company completing $26 billion of deals in its history ranging from multibillion mergers to smaller asset purchases. One recent example was its 2015 deal to buy Eagle Ford Shale Midstream from Pioneer Natural Resources (PXD 0.03%) and Reliance Industries for $2.15 billion. That deal gave Pioneer Natural Resources the cash it needed to keep drilling during the downturn while providing Enterprise with an asset package that was not only complementary to its network in the region but underpinned by long-term fee-based contracts with Pioneer that locked in cash flow for the next several years.
The other driver of Enterprise's consistent growth has been the $38 billion it's invested in organic growth projects. Some of its notable recent project completions have been an ethane export terminal along the Gulf Coast, and the ATEX pipeline that ships NGLs from the Marcellus and Utica shale region to the Gulf Coast. These new additions are having a direct impact on the company's cash flow, with CEO Jim Teague pointing out last quarter that the "results were also driven by contributions from... new assets and the ramp up in commitments on assets such as our ATEX ethane pipeline and ethane export terminal."
For further proof that the company's investments in growth are delivering a meaningful impact, take a look at the chart in the upper right-hand corner of the following slide:
Data source: Enterprise Products Partners investor presentation.
As that chart shows, distributable cash flow has grown from less than $200 million on a quarterly basis in late 2004 up to nearly $1.2 billion last quarter as a direct result of the company's ability to buy and build new assets. It's also worth noting that this steady growth came despite significant volatility in the oil market.
Here's what's coming down the pipeline
That upward trend isn't expected to end anytime soon because Enterprise Products Partners currently has $8.4 billion of fee-based projects under construction. The largest project in the near term is its PDH facility, which is a fee-based petrochemical plant that will turn propane into propylene. That project is one of three expected to enter service this quarter, totaling $2.8 billion of investment spending. In addition, the company has $5.6 billion of projects that should start generating cash flow over the next two years, including the Shin Oak NGL pipeline and the Midland to Sealy crude oil pipeline, which will both service the red-hot Permian Basin. The company also has another petrochemical plant under construction and several other processing plants in the works. Finally, Enterprise has several more projects in development, including a potential natural gas pipeline from the Permian to the Gulf Coast.
These projects provide investors with clear visibility that cash flow will continue increasing in the future. While Enterprise Products Partners doesn't provide forward guidance, it has recently targeted mid-single-digit annual distribution growth. Given the large slate of projects it has in the backlog, it's likely to maintain that pace. Meanwhile, if it makes additional accretive acquisitions, it could grow at an even faster clip.
Investor takeaway
Enterprise Products Partners has steadily grown its cash flow and distribution since going public nearly two decades ago. It's a trend that doesn't look to be nearing an end because the company has an extensive pipeline of projects under construction and several more in development. Because of that, it still has plenty of growth left in the tank, suggesting the best is yet to come.
