Enterprise Products Partners L.P. (EPD)

EPD 
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Enterprise Products Partners L.P. (EPD)

Q3 2012 Earnings Call

November 01, 2012 10:00 am ET

Executives

John R. Burkhalter - Vice President of Investor Relations

Michael A. Creel - Chief Executive Officer of Enterprise Products Holdings LLC, President of Enterprise Products Holdings LLC and Director of Enterprise Products Holdings LLC

A. James Teague - Chief Operating Officer of Enterprise Products Holdings LLC, Executive Vice President of Enterprise Products Holdings LLC and Director of Enterprise Products Holdings LLC

W. Randall Fowler - Chief Finance Officer of Enterprise Products Holdings LLC, Executive Vice President of Enterprise Products Holdings LLC and Director of Enterprise Products GP-General Partner

Robbie Leffel - Senior Vice President - Crude Oil of Enterprise Products Holdings LLC

Rudy A. Nix - Officer of Subsidiary

Leonard W. Mallett - Group Senior Vice President of Engineering - Enterprise Products Holdings Llc

Analysts

Darren Horowitz - Raymond James & Associates, Inc., Research Division

Brian J. Zarahn - Barclays Capital, Research Division

Theodore Durbin - Goldman Sachs Group Inc., Research Division

TJ Schultz - RBC Capital Markets, LLC, Research Division

John Edwards - Crédit Suisse AG, Research Division

Michael J. Blum - Wells Fargo Securities, LLC, Research Division

Bernard L. Colson - Global Hunter Securities, LLC, Research Division

Presentation

Operator

Good morning. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Enterprise Products Partners Third Quarter 2012 Earnings Conference Call. [Operator Instructions] Thank you. I now like to turn the conference over to Randy Burkhalter. Please go ahead, sir.

John R. Burkhalter

Thank you, Tiffany. Good morning, everyone, and welcome to the Enterprise Products Partners conference call to discuss results for our third quarter. Our 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.

And Tiffany, before I turn it over to Mike, how's the quality of the call? Can you hear us?

Operator

Yes, you are coming through loud and clear.

John R. Burkhalter

Okay. All right, Mike.

Michael A. Creel

Thanks, Randy. And before I start, I would like to let all of our friends in the Northeast know that our thoughts are with you. We know what it's like to go through a hurricane and how much damage and destruction it can cause, and you just got hit by the largest hurricane to ever have been formed in the Atlantic basin. All of us at Enterprise are wishing the best for you and your families, and a speedy recovery for the affected areas.

Moving on to earnings, we are pleased to report strong results again this quarter with 4 of our 5 business segments showing improved performance over the third quarter of 2011. Record onshore crude oil and natural gas transportation volumes, record fee-based natural gas processing volumes and near-record NGL transportation and fractionation volumes led to $167 million or 17% increase in gross operating margin to a record $1.14 billion compared to $973 million in the third quarter of last year.

Our NGL Pipelines & Services segment accounted for $68 million of this increase with substantially all of the increase attributable to our fee-based NGL pipelines, storage, export and fractionation businesses. Our Mont Belvieu fractionators reported an $18 million increase in gross operating margin, primarily due to our fifth NGL fractionator that began service in October of last year.

Our South Texas NGL pipelines, including our new Eagle Ford NGL pipeline that began service in April of this year, reported a $16 million increase, while the Mid-America and Seminole systems reported a $15 million increase. Our NGL storage, export terminal and related facilities had a $19 million increase compared to last year.

Gross operating margin from our natural gas processing and NGL marketing business increased by $4 million for the quarter compared to last year. Our fee-based processing volumes increased 17% to a record 4.5 billion cubic feet a day, while our equity NGL volume decreased 13%. This shift reflected the desire of our producers to retain the value of their NGL production and the associated volume risk to increase their return on investment. We view this development as a win-win that provides producers with greater economic incentive to drill and provides Enterprise with an increase in fee-based volume and cash flow.

Our Onshore Crude Oil Pipelines & Services segment reported a $15 million increase in gross operating margins compared to the third quarter of 2011. Our record pipeline volume is 820,000 barrels per day. Our South Texas crude pipeline system, including the new 24-inch pipeline [ph] from [indiscernible] that began service in June of this year accounted for $20 million of this increase or a 75,000 barrel per day increase in volume. Our share of Seaway's earnings increased by $18 million with a full quarter of revenues after the reversal of the pipeline [indiscernible] from the Texas Gulf Coast.

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