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Enterprise Product Partners Off to a Strong Start

By Shubh Datta - Updated Apr 6, 2017 at 9:46PM

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Profits soared in the first quarter of 2011, and the momentum is likely to continue this year.

After a disappointing end to 2010, midstream service provider Enterprise Products Partners (NYSE: EPD) kicked off the year shattering records. Its first-quarter net income soared to $420.7 million, fueled mainly by higher production volumes and an increased demand for natural gas liquids from U.S. petrochemical companies.

Figuring it out
Revenues grew by 19.2% to $10.2 billion from $9.6 billion in the year-ago quarter. This was aided by the strong performance of its 50,000-mile pipeline network for natural gas, natural gas liquids, crude oil, and petrochemicals. Increases in production in the Eagle Ford shale play and higher demand for NGLs also benefited Enterprise.

Net income, excluding minority interest earnings, nearly sextupled compared to the corresponding quarter last year. It went up to $420.7 million from $69.9 million, last year, which is obviously great news for shareholders.

In the pipeline
After a strong start to the year, Enterprise's proposed expansion plans for the rest of the year augur well for the company and its shareholders. Total infrastructure projects for the year are already worth $5 billion. The company will emphasize its investments in the Acadian gas system, which is the company's largest investment for the year.

In the Eagle Ford shale play region, it currently has 21 projects totaling nearly $2.5 billion under way. A couple of months ago, the company also struck a deal with one of the world's largest independent oil and gas exploration companies, Anadarko Petroleum (NYSE: APC), to provide natural gas processing and transport services there. This adds to the long-term commercial agreements it made in the Eagle Ford shale play region, with EOG Resources (NYSE: EOG) in September last year and with Chesapeake Energy (NYSE: CHK) toward the end of 2010.

As to whether the company is well-placed to take on these expansion efforts, Enterprise's total EBITDA stands at $849.8 million for the quarter, up 13% from the year-ago period. Even though its unlevered cash flow and interest coverage ratios are lower compared to last year, I believe the company is still well-placed to take on these expansions, especially considering what's going on in the larger energy markets.

The Foolish bottom line
I expect Enterprise to continue its strong performance throughout the year. With the demand for natural gas rising and expected to rise even further, its expansion activities have placed it firmly to capitalize on this surge. It will definitely give a boost to both its top and bottom lines as the year rolls on. Expect Enterprise to post even stronger numbers in the coming quarters.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Enterprise Products Partners L.P. Stock Quote
Enterprise Products Partners L.P.
EPD
$21.31 (1.38%) $0.29
Anadarko Petroleum Corporation Stock Quote
Anadarko Petroleum Corporation
APC
Chesapeake Energy Corporation Stock Quote
Chesapeake Energy Corporation
CHKA.Q
EOG Resources, Inc. Stock Quote
EOG Resources, Inc.
EOG
$86.56 (1.42%) $1.21

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

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