Enterprise Posts Solid Results - Analyst Blog

Enterprise Products Partners L.P. (EPD) has reported its fourth quarter results. Recurring earnings per limited partners unit was 52 cents, easily beating the Zacks Consensus Estimate of 47 cents and year-ago earnings of 44 cents. Including one-time items, earnings were 60 cents per unit.
 
Enterprise’s quarterly earnings topped the Zacks Consensus Estimate by 10.6%. The partnership’s earnings surprise history for the preceding four quarters varies between 2.3% and 27.8%, with the average being 11.7%.
 
According to the partnership, earnings were refigured following the merger between Enterprise and Houston-based pipeline operator TEPPCO Partners.
 
Importantly, Enterprise increased its quarterly distribution by 5.7% year-over-year to an annualized run rate of $2.24 per unit. This was the 22nd consecutive quarterly distribution increase. The partnership generated record distributable cash flow of $570 million in the quarter, providing 1.5x distribution coverage.
 
Revenue for the quarter increased more than 42% year-over-year to $8.4 billion, driven by an increase in sales volumes and energy prices. Gross operating margin also increased nearly 33% to $865 million.
 
At the individual business level, gross operating margin in the NGL Pipeline & Services segment went up 44% year-over-year to $511 million. Gross operating margin in the natural gas processing business went up 47% to $299 million, driven by the contribution from Louisiana, Rocky Mountain and Texas natural gas processing plants.
 
Gross margin for the partnership's natural gas liquids (NGL) pipeline and storage business went up 44% year-over-year to $176 million. For the NGL fractionation business, gross margin was up approximately 24% to $36 million.
 
The gross operating margin for Enterprise's Onshore Natural Gas Pipeline and Services segment decreased nearly 20% year-over-year to $110 million, due to poor contribution from the San Juan, Val Verde and Carlsbad systems.
 
The Offshore Pipelines & Services segment recorded a gross operating margin of $98 million, an increase of 81% year-over-year. Gross operating margin in the Petrochemical Services segment rose 30% year-over-year to $109 million.
 
During the quarter, the partnership spent $517 million on capital expenditures, which included $58 million in sustaining capital expenditures. For 2009, total capital expenditure was $1.7 billion. Interest expense for the quarter was $170 million on an average debt balance of $11.8 billion.
 
Enterprise expects to incur $1.75 billion capex this year to fund several projects including the completion of the Trinity River Basin Lateral natural gas pipeline, the Haynesville Extension of Acadian intrastate natural gas pipeline system in Louisiana, a new NGL fractionator at its complex in Mont Belvieu and expansions of South Texas natural gas, NGL and crude oil pipeline systems.
 
These projects along with last year’s TEPPCO merger augment the partnership’s fundamental strengths, which should continue supporting consistent distribution growth this year and beyond. In addition, with its strong balance sheet and liquidity position, we view Enterprise as a core holding in a master limited partnership (MLP) portfolio.
 

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