Enterprise Products Partners (EPD +0.41%) has returned over 60% over the last five years, but as we all know, past performances are not indicative of future returns. That's why I created a premium report on Enterprise; to help investors examine its future and decide if the company is still right for their portfolios.
Following is an excerpt from the report, which focuses on the main risks facing the company. It's just a sample of one section, but we hope you enjoy it.
Risks
- Increasing politicization of the American energy scene may affect the partnership. Though the bulk of Enterprise's assets are in the "energy-friendly" regions of Texas, Oklahoma, and Louisiana, investors have plenty of reason to be concerned that energy production, and thereby transportation and processing, may be affected by an uptick in federal and state regulation, environmental opposition, and the "not in my backyard" stance of local citizens.
- Severe weather can affect pipelines and producers. Energy-friendly though it may be, the U.S. Gulf Coast is also hurricane-friendly. Severe weather in the late summer and early fall may derail construction projects or impair existing assets, which has the ability to negatively affect the partnership's bottom line. For example, though there was no significant damage to Enterprise's assets in the Gulf of Mexico during Hurricane Isaac, it evacuated its employees and shut down all but one of its offshore natural gas hubs, reaffirming the very real threat of weather-related disruption every year.
- Volatile commodities can impact the bottom line. Enterprise has an immense NGL processing and fractionation business, which leaves it more exposed to commodity risk than if it were solely a pipeline operator. In the face of a sustained NGL price collapse, Enterprise could see its margins crunched. For example, in the second quarter of 2012 the partnership felt the effect of higher than normal propane and ethane inventories, due to warmer weather and the planned turnaround of several ethylene crackers. Excess supply put downward pressure on the respective prices of these commodities, which in turn resulted in lower revenue. A strong, diverse business model can partially mitigate this loss, but it is still a risk.
Looking for more guidance?
That was just a sample of our new premium report on Enterprise Products Partners. If you're weighing whether the company is a buy or sell, the report is an essential resource for investors seeking more information on the company. Not only that, but the report also comes with updated quarterly guidance and dives into upcoming catalysts on the horizon. To get started, simply click here now.
