A leading master limited partnership (MLP),
Enterprise Products Partners, L.P.
) recently announced a public offering of 8,000,000 common units to
increase its liquidity. Enterprise Products offered a 30-day option
to the underwriters to purchase an additional 1,200,000 units by
exercising their full over-allotment option. The units were priced
at $53.07 each.
ENTERPRISE PROD (EPD): Free Stock Analysis
PLAINS ALL AMER (PAA): Free Stock Analysis
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The public offering - including underwriter allotment - will fetch
approximately $473 million after deducting underwriting discounts,
commissions and offering expenses.
The net proceeds from this offering will be utilized by Enterprise
Products to reduce its debt under multi-year revolving credit
facility and for other partnership purposes.
Enterprise Products holds a Zacks #3 Rank, equivalent to a Hold
rating for a period of one to three months. Longer term, we
maintain our Neutral recommendation.
Enterprise Products is engaged in providing a wide range of
midstream energy services to the producers and consumers of natural
gas, natural gas liquids, and crude oil.
The partnership has a track record of steadily increasing
distributions over the years. Enterprise Products paid a
distribution of 63.5 cents per unit in second quarter 2012,
representing an increase of 5.0% year over year. Management intends
to increase distribution for the third quarter and fourth quarters
of 2012 by 6.1% and 6.5%, respectively.
Recently, the partnership entered into a 50/50 joint venture (JV)
Plains All American Pipeline, L.P.
) for a crude oil pipeline in South Texas. A 140-mile crude oil and
condensate line − with capacity of 350,000 barrels per day (BPD)−
from Gardendale in LaSalle County to Three Rivers in Live Oak
County will form part of the JV.
We continue to view Enterprise Products as a core holding in an MLP
portfolio, given its string of organic growth projects, potential
acquisitions, strong balance sheet and solid liquidity position.
The partnership is one of the largest fully-integrated midstream
service providers with a positive long-term outlook given its
significant geographic and business diversity.
While we believe the partnership's massive expansion program
provides clear growth visibility over the coming years, finding
adequate projects of similar scale in the future could pose