Enterprise in Expansion Spree - Analyst Blog

Midstream energy services provider Enterprise Products Partners L.P. (EPD) continues with its expansion plans, announcing the expansion of its Houston export terminal and its Mid-America Pipeline system.

Houston Export Terminal Expansion

Enterprise Products Partners L.P. is planning the expansion of its natural gas liquids (NGLs) import/export terminal on the Houston Ship Channel, which is the highest rated facility of its kind in the United States.

Enterprise Products Partners said this project will nearly double the fully refrigerated export loading capacity for propane and other NGLs at the facility, bringing it to more than 10,000 barrels per hour. The expansion project will also enhance the partnership's ability to load multiple vessels simultaneously at the facility.

Enterprise has experienced record demand for its NGL export services in the past two years. The rationale behind this growing demand is the increased global demand for NGLs, which is substituting the expensive crude oil derivatives. Enterprise pointed out that its NGL export terminal has already sold out its full capacity for 2011, while capacity for 2012 is almost sold out.

Enterprise believes the existing NGL storage and pipeline infrastructure is sufficient to support the export terminal expansion. It believes the proposed expansion of the terminal, which is expected to be completed in the second half of 2012, will be timely and very cost efficient. 

Going forward, Enterprise expects this expansion to play a key role in meeting the projected demand growth and further solidifying the Enterprise terminal as the preferred NGL export location throughout the Gulf Coast.

Furthermore, we note that Enterprise's NGL fractionation facilities at Mont Belvieu, which is expected to complete the expansion of its fifth NGL fractionator later this year, complements the Houston terminal's export capabilities. On completion, the Mont Belvieu facility is expected to have NGL fractionation capacity of 375,000 barrels per day.

Coupled with 100 million barrels of NGL storage capacity at Mont Belvieu, Enterprise will have ample operating flexibility to load large quantities of propane with low ethane content.

Mid-America Pipeline System Expansion

Separately, an Enterprise affiliate Mid-America Pipeline Company LLC (MAPL) announced the binding open season to seek shipper support for the proposed expansion of the Rocky Mountain portion of its NGL pipeline system. The Rocky Mountain portion of the Mid-America Pipeline system currently has a capacity of 275,000 Bbls/d.

Through this project the Enterprise expects to add another 45,000 barrels per day (Bbls/d) to 85,000 Bbls/d of annual average capacity to the pipeline system to accommodate growing production in the region. On receipt of sufficient shipper commitment, Enterprise expects the additional capacity to be available by the third quarter of 2014.

The 2,793-mile long Mid-America Pipeline originates in the Rocky Mountain Overthrust and San Juan Basin oil and gas production areas, extending in to Enterprise's Hobbs fractionator in Gaines County, Texas.

At the Hobbs facility, the Mid-America Pipeline system joins the Seminole Pipeline, enabling shippers to access the world's largest NGL fractionation complex at Mont Belvieu, Texas, which includes facilities owned and operated by Enterprise affiliates.

Conclusion

Houston-based Enterprise Products Partners has made several investments to expand its pipeline network in the last two years. Last month, Enterprise offered to acquire midstream energy partnership Duncan Energy Partners L.P. (DEP) for about $1.8 billion in stock and debt.

Enterprise already owns 58% of Duncan Energy and its general partner, DEP Holdings LLC. The proposal is currently under review by Duncan Energy.

Enterprise Products Partners is the largest publicly traded partnership and a major provider of midstream energy services. The partnership has more than 50,000 miles of pipelines, mainly in the U.S. and Gulf of Mexico.

Enterprise Products Partners currently retains a Zacks #3 Rank, which translates into a short-term 'Hold' rating. We also maintain our long-term ‘Neutral' recommendation on the stock.