Enterprise Products Partners LP (NYSE: EPD) posted impressive first-quarter results, generating enough cash flow to cover its distribution by 1.5 times. This $450 million in retained casjh flow funded about 45 percent of the partnership’s growth-related capital expenditures over this three-month period.
Management reiterated its goal of growing the MLP’s distributable cash flow to the point that the midstream operator can fund the equity portion of its capital needs internally, a huge point of differentiation in today’s market.
Three of Enterprise Products Partners’ four business lines increased their gross margin on a year-over-year basis. The natural-gas segment benefited from higher volumes in the Haynesville Shale and Jonah Field, while the petrochemical and refined-product segment enjoyed strong throughput and exports. Volumes on Enterprise Products Partners’ crude oil pipelines and marine terminals reached a record level during the quarter, though gross margins took temporary a hit from hedging activities. The natural gas liquids (NGL) segment posted record quarterly results on higher gas-processing margins and increased throughput on its pipelines and at its export facilities.
Although the first quarter represents a period of seasonal strength for Enterprise Products Partners, the start-up of the Orla gas-processing plant in the Delaware Basin, the propane dehydrogenation unit and Midland-to-ECHO pipeline should drive further upside as the year goes on.
Enterprise Products Partners’ growth prospects for the next two years also look bright, with the blue-chip MLP pursuing projects to support expanding petrochemical capacity on the Gulf Coast and increase its ability to export crude oil, refined products, natural gas liquids and ethylene. Pulling this off while funding a growing proportion of its capital expenditures internally should unlock significant value for unitholders.
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Elliott and Roger on May. 31, 2018
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