This year is big for Enterprise Products Partners (EPD +0.69%). The master limited partnership (MLP) is in the midst of completing a major wave of expansion projects that will fuel growth in the coming quarters. That's allowing the midstream giant to continue increasing its distribution. It recently gave investors another raise, marking its 25th straight year of distribution growth. The MLP now yields 7.5%.
The company's distribution growth engine should keep humming along. It recently added a couple more projects to its backlog that should drive growth in the coming years.
NYSE: EPD
Key Data Points
A wave of additional cash flow is coming
Enterprise Products Partners had a busy second quarter. The MLP placed four major capital projects into service:
- A 400 million cubic feet per day expansion of the Haynesville Extension of its Acadian natural gas pipeline system. It will support additional gas volumes in the region.
- The Poseidon natural gas processing plant in the Midland Basin. The project will enable Enterprise to process more raw natural gas to extract natural gas liquids (NGLs).
- Its 12th NGL fractionator in Texas. This facility will enable the company to separate NGLs into various streams, like propane.
- Its second propane dehydrogenation plant (PDH) in Texas. The facility will turn propane into propylene, an important petrochemical used in many products.
The company invested $2.5 billion into these projects. It secured long-term, fee-based contracts to support most of these projects. They'll generate stable cash flow for the company.
Those projects are part of the $3.8 billion of expansions Enterprise Products Partners expects to place into service by the end of this year. It also remains on schedule to start up its Mentone II natural gas processing plant in the Delaware Basin during the fourth quarter. Meanwhile, it anticipates completing the first phase of its Texas Western products pipeline system by the end of the year. These projects should also supply the MLP with incremental fee-based cash flow.
Starting to refuel the growth engine
Enterprise Products Partners entered the second quarter with $6.1 billion of major capital projects under construction. While it completed four projects in the period, it added two more to its backlog. The company expects to invest around $500 million to expand its Beaumont Terminal and on natural gas gathering expansions in the Permian Basin. With those new additions, Enterprise entered August with $4.1 billion of projects in its backlog.
The MLP has more growth projects under development. It currently expects to invest between $2.4 billion and $2.8 billion on capital projects this year, $2.4 billion of which it has already approved. Meanwhile, it sees 2024 capital spending between $1.4 billion and $2.5 billion, with the low-end representing approved projects.
One of the biggest projects it currently has under development is the Sea Port Oil Terminal (SPOT). The company received a record of decision from the U.S. Department of Transportation last November, which marked a key milestone in the process needed to obtain a license to build the project. Enterprise has already secured an anchor customer for the project in oil giant Chevron and a joint venture partner to help finance construction in energy infrastructure behemoth Enbridge. The companies hope to have this project in service by the second half of 2026 to early 2027.
The MLP is also exploring lower carbon investment opportunities. Enterprise formed an evolutionary technology group in 2021 to pursue commercial opportunities in carbon capture and storage, hydrogen, and low-carbon fuels. It's working with several industry partners on potential low-carbon solutions, including a carbon capture and storage solution with Chevron. It could repurpose existing assets and build new facilities to support the flow of lower-carbon energy.
Enterprise's high-yielding payout will keep rising
Enterprise Products Partners has increased its distribution by 5.3% over the past year to hit the quarter-century milestone for annual growth. It has plenty of fuel to continue growing its payout in the coming years. The company recently completed $2.5 billion of projects and has more on the way. Meanwhile, it has added new projects to the backlog, with more under development. That visible growth makes the MLP a great investment for income seekers since it looks like a lock that its already attractive payout will continue rising.
