Air Products, Enterprise Products Expand Tie-Up - Analyst Blog

Air Products and Chemicals Inc. APD has inked a deal with Enterprise Products Operating LLC, a fully-owned subsidiary of Enterprise Products Partners L.P., to increase hydrogen supply for refinery and petrochemical customers connected to Air Products' vast Gulf Coast Connection Pipeline system.

Under the long-term agreement, Air Products will build, own and operate a 40 million standard cubic feet per day hydrogen production facility. The facility will process a hydrogen-rich off-gas stream from a new propane dehydrogenation PDH facility which Enterprise is currently building in Mont Belvieu, TX. The PDH facility is expected come on line in the third quarter of 2015.

Air Products already processes off-gas at Enterprise's Mont Belvieu complex servicing an existing facility and the deal expands its long-term relationship with Enterprise.

With the agreement in place, Air Products can cater to the increasing demand of its customers as well as increase the supply reliability and flexibility of its system. It also enables the company to purchase more off-gas during the life of the contract.

Air Products benefits from a diverse customer base, sustained pricing power and cost-reduction measures. New business deals and strategic investments are expected to support results in fiscal 2014.

Air Products is also seeing incremental opportunities in the liquefied natural gas LNG space. Moreover, it is making significant progress in its hydrogen business and is constructing a new world-scale hydrogen production plant in Canada.

However, Air Products' tonnage gases business continues to face challenges due to maintenance outages. Moreover, higher energy costs pose a threat to margin expansion.

Air Products is a Zacks Rank #4 (Sell) stock.
 
Other companies in the chemical industry with favorable Zacks Rank include Methanex Corporation MEOH, LyondellBasell Industries NV LYB and Olin Corp. OLN. All of them hold a Zacks Rank #2 (Buy).