Enterprise Products Partners (EPD 0.47%) has an excellent track record of growing its lucrative cash distribution to investors. The master limited partnership (MLP) has given its investors a raise 74 times since its initial public offering in 1998. This year marks its 24th consecutive one of growing its payout.
The MLP should have no problem increasing its 7%-yielding distribution in the future. It recently added three more expansion projects to its backlog, adding to an already sizable list of growth projects. They should provide Enterprise Products Partners with plenty of fuel to keep growing its payout.
A trio of new growth drivers
Enterprise Products Partners recently unveiled three new expansion projects in the resource-rich Permian Basin:
- The MLP will build a third natural gas processing plant at its Mentone site in the Delaware Basin. The plant will process 300 million cubic feet per day (MMcf/d), allowing it to extract 40,000 barrels of natural gas liquids (NGLs) per day. The company expects the plant to enter service in the first quarter of 2024.
- Enterprise will add a seventh natural gas processing plant in the Midland Basin, which it recently entered by acquiring Navitas Midstream. The plant will have the same capacity and projected in-service date as the Delaware Basin facility.
- It is expanding its Shin Oak NGL pipeline to support higher NGL production in the region from those and other new plants. The initial expansion would add up to 275,000 barrels per day of capacity when it comes online in the first half of 2024.
These expansion projects will supply Enterprise Products Partners with some incremental cash flow when they come online in two years. That will provide the company with more money to potentially grow its high-yielding dividend.
The Shin Oak expansion will also support the growth of fellow pipeline company Kinetik Holdings (KNTK 1.89%), which bought a stake in that pipeline when it started service in 2019. Kinetik pointed toward a potential future expansion of Shin Oak as a long-term growth driver.
Adding to a sizable backlog
These three Permian Basin expansion projects will boost Enterprise Products Partners' large and growing backlog. The company now has $5.5 billion of major projects under construction that should enter service through 2025. Some of its other projects include additional natural gas processing capacity in the Permian Basin, a new ethane export terminal, and another large-scale petrochemical plant.
These commercially secured projects will supply Enterprise with incremental revenue when they enter service, and the company's cash flow should steadily rise over the next several years. That should give the MLP the fuel to continue growing its distribution.
Meanwhile, Enterprise has several more expansion projects under development. The company expects to invest around $2 billion on capital projects next year, an increase from this year's $1.6 billion spending level. The MLP has already approved $1.9 billion of those projects, suggesting it expects to sanction at least $100 million of additional investments.
There's the potential it could spend even more. Enterprise and its partner Enbridge (ENB 0.29%) continue to work toward obtaining regulatory approval for their Sea Port Oil Terminal (SPOT) project. Enterprise and Enbridge secured oil giant Chevron (CVX -0.84%) as an anchor shipper on the project. They hope to receive approval to start construction this year on the project that would take two to three years to complete. SPOT would enable Chevron to export oil produced in the U.S. more easily while supplying Enbridge and Enterprise Products Partners with steady cash flow as volumes flow through the facility.
The MLP also signed a letter of intent with a subsidiary of Occidental Petroleum (OXY -1.67%) to work on a potential carbon dioxide transportation and sequestration solution for the Texas Gulf Coast. Enterprise would develop the carbon dioxide aggregation and transportation network using new and existing pipelines, while Occidental would develop sequestration hubs to store the greenhouse gas underground. Enterprise is also exploring carbon storage opportunities with Chevron. These potential projects could supply Enterprise with steady cash flow while potentially extending the life of its fossil fuel businesses.
Enhancing the visibility of its future growth prospects
Enterprise Products Partners has steadily increased its distribution over the years. A big driver has been the MLP's ability to expand its portfolio by making acquisitions and completing expansion projects. With three more expansions lined up, and plenty more in the pipeline, the company should have ample fuel to continue growing its big-time payout through at least 2025.