Enterprise Products Partners L.P. (EPD)

EPD 
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Enterprise Products Partners L.P. (EPD)

Q4 2012 Earnings Call

January 31, 2013 10:00 am ET

Executives

Randy Burkhalter – Vice President-Investor Relations

Michael A. Creel – President and Chief Executive Officer

W. Randall Fowler – Executive Vice President and Chief Financial Officer

A. J. Teague – Executive Vice President and Chief Operating Officer

William Ordemann – Group Senior Vice President

Thomas M. Zulim – Group Senior Vice President

Analysts

Darren Horowitz – Raymond James & Associates, Inc.

Brian J. Zarahn – Barclays Capital, Inc.

Brad Olsen – Tudor, Pickering, Holt & Co., LLC

Curt N. Launer – Deutsche Bank Securities, Inc.

Michael J. Blum – Wells Fargo Securities LLC

John Edwards – Credit Suisse Securities

Yves C. Siegel – Neuberger Berman LLC

Presentation

Operator

Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Enterprise Products Partners Fourth Quarter 2012 Earnings Conference Call. (Operator Instructions) After the speakers remarks there will be a question-and-answer session (Operator Instructions). Thank you, Randy, you may begin.

Randy Burkhalter

Thank you, Regina. Good morning, everyone. Welcome to the Enterprise Products Partners conference call to discuss results for the fourth quarter of 2012. Speakers today will be Mike Creel, President and CEO of Enterprise’s General Partner; followed by Jim Teague, Executive Vice President and Chief Operating Officer; and Randy Fowler, Executive Vice President and CFO. Other members of our senior management team are also in attendance.

During this call today, we will make forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 based on the beliefs of the company, as well as assumptions made by, and information currently available to Enterprise's management team. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the Securities and Exchange Commission for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call.

With that I’ll turn the call over to Mike.

Michael A. Creel

Thanks Randy. 2012 was an exceptional year for Enterprise. We had a number of financial and operating records which is remarkable given the challenging ethane and propane commodity markets much as here and the market uncertainty around the financial problems in Europe and the U.S. election.

Our record financial performance in 2012 includes net income of $2.4 billion; earnings per unit are $2.71 on a fully diluted basis; gross operating margin of $4.4 billion with improved results in four out of our five business segments; and distributable cash flow of $4.1 billion, which included $1.2 billion of proceeds from the sale of non-core assets.

We ended the year with a strong fourth quarter that produced record gross operating margin of $1.2 billion and adjusted EBITDA of little over $1.1 billion. This led to net income of $617 million or $0.68 on a fully diluted basis for the quarter. Net income included losses of $27 million or $0.03 per unit on a fully diluted basis with non-cash impairment and other similar charges.

Distributable cash flow provided 1.5 times coverage of the distribution paid with respect to the fourth quarter of 2012.

The NGL pipelines and services segment reported gross operating margin of $632 million for the quarter only slightly below the $635 million for the fourth quarter 2011.

Our natural gas processing and related NGL marketing business reported a $66 million decrease in gross operating margin for the quarter compared to the fourth quarter of 2011 and this was due in large parts of lower processing margins and equity NGL production volumes primarily from our Rocky Mountain, Permian Basin, and East Texas facilities.

Our fee-based natural gas processing volumes continue to increase reaching a record 4.7 billion cubic feet a day this quarter and that's 15% higher than the fourth quarter of 2011. Our NGL pipelines and stores business reported a $50 million or 29% increase in gross operating margin for the quarter supported by record pipeline volumes of 2.5 million barrels per day.

Enterprises South Texas NGL pipeline which includes the new Eagle Ford NGL pipeline completed in mid-2012 reported a $27 million increase in gross operating margin on higher volumes. Our NGL fractionation business continues to perform well, earning a record $82 million of gross operating margin this quarter from a record volume of 707,000 barrels per day.

We had a $24 million increase in gross operating margin from our Mont Belvieu NGL fractionators and a 32% increase in volume. Our sixth NGL fractionators at Mont Belvieu began operations in October 2012 and the seventh and eight fractionators are on schedule to begin operations in the fourth quarter of this year.

The onshore natural gas pipelines and services segment reported gross operating margin of $210 million for the quarter, that’s an 8% increase over the fourth quarter of 2011 and another record. We had $18 million or 29% in gross operating margin from our Texas Intrastate system with a 9% increase in volumes, reflecting the strong production increases from the Eagle Ford Shale.

Our Acadian Gas system reported a $14 million increase in gross operating margin as a result of a full quarter of operations from its Haynesville Extension pipeline, that began service in November 1, 2011.

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