Please ensure Javascript is enabled for purposes of website accessibility

Enterprise Products Partners Demonstrated Its Durability in 2020

By Matthew DiLallo - Feb 4, 2021 at 7:05AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The high-yielding MLP delivered stable results despite the turbulent oil market.

Last year might go down as one of the most challenging in the history of the oil market. However, Enterprise Products Partners (EPD 1.65%) navigated those challenges quite well, as evidenced by its solid fourth-quarter results. The MLP's stability during the storm enabled it to continue increasing its high-yielding distribution. It's now in a solid position to benefit as the energy market recovers.

Drilling down into Enterprise Products Partners' fourth-quarter results


Q4 2020

Q4 2019

Year-Over-Year Change

Adjusted EBITDA

$2.057 billion

$2.019 billion


Distributable cash flow (DCF)

$1.629 billion

$1.634 billion


DCF per unit




Distribution coverage ratio

1.6 times

1.7 times


Data source: Enterprise Products Partners.  

Enterprise Products Partners ended 2020 on a solid note. Its earnings improved year-over-year, while its cash flow was nearly flat. For the full year, the MLP generated $8.06 billion of adjusted EBITDA and $6.41 billion of distributable cash flow, down 0.8% and 3.3%, respectively, from 2019's record levels. That relative stability amid such a challenging oil market showcased the durability of its diversified midstream footprint:

Enterprise Products fourth quarter earnings in 2020 and 2019.

Data source: Enterprise Products Partners. Chart by the author.

Enterprise's natural gas liquids (NGL) operations delivered steady results during the fourth quarter as its gross operating margin improved by 0.7%. The company benefited from completing two new NGL fractionators last year, which more than offset weaker results at some of its legacy gas plants.

Crude-related earnings improved by 2.8% during the fourth quarter, fueled mainly by higher average sales margins in its marketing business. That helped offset lower earnings on its South Texas Pipeline System and Seaway pipeline due to lower volumes caused by weaker oil prices last year.

Earnings from its natural gas infrastructure dipped 5.3% during the fourth quarter due to lower revenue in its Colorado, Wyoming, and East Texas gathering systems. The company partially offset those weak spots with higher gathering volumes in the Permian Basin thanks to the recent expansion of the Orla gas processing plant and the start-up of the Mentone facility.

Finally, petrochemical and refined products earnings improved significantly, jumping 27% during the period. Fueling that surge was significant volume growth for propylene services. That more than offset pandemic-related weakness on its TE Products pipeline and products related to gasoline production.

A pipeline connection to an oil refinery.

Image source: Getty Images.

A look at what's ahead for Enterprise Products Partners

Enterprise Products Partners generated $2.5 billion in excess cash after covering its distribution last year. The company used those funds to repurchase $200 million of its common units and finance the bulk of its $3 billion capital program. It covered the difference with its top-notch balance sheet, enabling it to end 2020 right at its 3.5 times debt-to-EBITDA target level.

The MLP currently expects to invest $1.6 billion in growth projects this year, with three scheduled to enter service and start generating cash flow by year-end. Meanwhile, it anticipates spending $800 million on expansions in 2022. However, those numbers don't include the proposed Sea Port Oil Terminal that's awaiting government approval.

With growth-related spending coming down, the company is on track to generate significant excess cash this year after covering its distribution. As a result, Enterprise plans to evaluate distribution growth quarterly this year. It nudged its fourth-quarter payout up by 1.1% from the prior-year level and has now increased it for 22 straight years. The company could also use its excess cash to continue repurchasing units or start making acquisitions.

Meanwhile, the company is in the early stages of planning for the energy transition away from fossil fuels toward cleaner sources. It's looking for opportunities to increase its use of renewable power and anticipates that it will get 25% of its energy from renewable sources by 2025. In addition, it has several growth projects in the early stages of development focused on the theme of energy evolution.

Proving the durability of its income stream

Enterprise Products Partners demonstrated the resilience of its business model last year as its earnings and cash flow proved to be very stable during one of the most challenging energy markets in history. The company was able to continue increasing its distribution, which now yields nearly 8.7%. That payout seems likely to continue rising in 2021 as the energy market improves and Enterprise's capital spending winds down. It stands out as an ideal option for yield-seeking investors to consider buying.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Enterprise Products Partners L.P. Stock Quote
Enterprise Products Partners L.P.
$23.99 (1.65%) $0.39

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.