President Trump's tariff plan has caused a lot of uncertainty and concern. There are growing worries that they could cause an economic downturn and a reacceleration in inflation. Tariffs could also upend global trade.
The potential shift in global trade could have significant implications for the U.S. energy market due to its growing reliance on exports. As a leader in exporting U.S. hydrocarbons, Enterprise Products Partners (EPD +0.35%) is seeing firsthand the chaos caused by tariffs.
However, while there's a lot of uncertainty about how things will shake out in the short term, the midstream energy company believes the long-term outlook for U.S. energy exports remains bright. That bodes well for its ability to continue growing its more than 7%-yielding cash distribution.
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From chaos to a new normal
Enterprise Products Partners' co-CEO Jim Teague discussed the tariff situation on the company's recent first-quarter conference call. He commented:
Stating the obvious, a lot is going on that is causing nothing short of chaos around the world. Energy is not excluded. No one can tell how all the pieces land.
Because of that, Teague said, "We must fall back on what we think we know."
One thing we do know is that President Trump ran on a pro-oil and -gas platform for his second term, desiring that we "unleash and expand our domestic energy production and exports." His administration also undoubtedly understands the importance of U.S. oil and gas for our economy, the global market, and our balance of trade.
So, while tariffs could change the flow of U.S. hydrocarbons, as some countries might import less of our production, they will ultimately find a market because, as Teague put it, "The bottom line is the world needs U.S. oil, natural gas, and natural gas liquids to provide for their people and to grow their economies."
"Amid all this uncertainty," stated Teague, "I have the core belief that when the dust settles in, the game of this administration's policies, laws, and regulations is intended to promote U.S. energy, not just for the next four years, but for decades."
NYSE: EPD
Key Data Points
Built to thrive in an export economy
Enterprise Products Partners has built one of the country's largest hydrocarbon export platforms. It has 20 deepwater docks along the Gulf Coast, where it exports various hydrocarbons, including natural gas liquids, petrochemicals, crude oil, and refined products. It also has a vast network of upstream assets that gather, process, upgrade, and transport hydrocarbons for the U.S. and international markets.
The company is currently investing heavily in expanding its export capacity. It's enhancing its Morgan's Point Ethane Terminal to load volumes at higher rates, which it expects to complete in the fourth quarter of this year. Enterprise is also building a new ethane and propane export terminal (Neches River Terminal), which should come online in two phases (the third quarter of 2025 and the first half of 2026). On top of that, the company is expanding the Enterprise Hydrocarbons Terminal to export more propane and butane (completion by the end of 2026).
"We feel great about our assets and the investments we are making and what they mean to our future," stated Teague on the call. He firmly believes that export demand for U.S. hydrocarbons will continue growing in the future. Because of that, the company should have more opportunities to expand its infrastructure to support this rising export demand. That could come from building additional export capacity or supporting rising upstream production that will ultimately flow to global markets.
The company's export-fueled expansion will grow its cash flow in the future. That should allow Enterprise Products Partners to continue increasing its lucrative cash distribution to investors. The master limited partnership (MLP) has raised its payment for 26 straight years.
Tariffs shouldn't slow down the U.S. energy export machine
While tariffs have thrown global markets into chaos, the dust will eventually settle. While the exact future remains unknown, the U.S. will likely continue to export more of its hydrocarbon output, which bodes well for Enterprise Products Partners. It should enable the company to continue growing its operations, cash flow, and cash distribution, making it look like a solid long-term investment opportunity.
