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Balanced View on EPD - Analyst Blog
We reaffirmed our Neutral recommendation on leading master
Enterprise Products Partners, L.P.
), on Aug 22, 2013. The partnership reported weak numbers for the
second quarter due to more than 15% year-over-year increase in
total costs and expenses. The partnership currently holds a Zacks
Rank #3, which is equivalent to a short-term Hold rating.
Enterprise Products Partners is engaged in providing a wide range of midstream energy services to the producers and consumers of natural gas, natural gas liquids (NGL), and crude oil. The partnership's assets include 50,000 miles of onshore and offshore pipelines, approximately 200 million barrels of storage capacity for NGLs, refined products and crude oil, and 14 billion cubic feet of natural gas storage capacity.
We continue to view Enterprise Products Partners 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.
Enterprise Products Partners increased its second quarter 2013 cash distribution rate by 7% to $0.68 per common unit, or $2.72 per unit on an annualized basis. This marked the partnership's 36th consecutive quarterly increase. With its diverse set of NGL, natural gas, crude oil and refined products midstream infrastructure assets, the partnership possesses fundamental strengths that will continue to support distribution growth.
Enterprise Products Partners has made capital investments of around $700 million in the second quarter of 2013 and further expects to bring online $7.5 billion worth of major assets from 2013 through 2015, including $1.5 billion in the second half of 2013. The key projects consist of two NGL fractionators at Mont Belvieu; Texas Express NGL pipeline; Front Range NGL pipeline; extension of the Seaway crude oil pipeline; and the completion of Eagle Ford crude oil pipeline. The successful execution of these projects will be value accretive to future cash flows.
However, Enterprise remains vulnerable to macro conditions and unstable oil and gas prices, which in turn could hurt margins in NGL, natural gas and other businesses.
Other Stocks to Consider
There are other stocks in the sector that however appear more rewarding. These include Abraxas Petroleum Corp. ( AXAS ), Oiltanking Partners, L.P. ( OILT ) and Seacor Holdings Inc. ( CKH ), which are expected to perform impressively over the next few months and carry a Zacks Rank #1 (Strong Buy).
ABRAXAS PETE/NV (AXAS): Free Stock Analysis Report
SEACOR HLDGS (CKH): Get Free Report
ENTERPRISE PROD (EPD): Free Stock Analysis Report
OILTANKING PTNR (OILT): Free Stock Analysis Report
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