Enterprise Products Partners LP was able to hold its own during a fourth quarter that was anything but business as usual with regard to commodity prices.
Net income for the fourth quarter was $694 million compared to $681 million for the fourth quarter of 2014. On a fully diluted basis, net income attributable to limited partners was 34 cents/unit for the fourth quarters of 2015 and 2014. Net income for the fourth quarters of 2015 and 2014 was reduced by noncash impairment charges of $24 million, 1 cent/unit, and $16 million, or 1 cent/ unit, respectively, on a fully diluted basis.
Net income for the full year was $2.56 billion compared with $2.83 billion in 2014.
Distributable cash flow (DCF) for the fourth quarter was $1.09 billion compared with $1.06 billion in the year-ago quarter. For the full year, DCF was $5.61 billion compared with $4.08 billion in 2014. Excluding proceeds from asset sales, Enterprise reported $4 billion in DCF for 2015, which was a record, the company said.
Distributions declared with respect to 2015 were $1.53/unit, a 5.5% increase compared to those paid for 2014. DCF for 2015, excluding the proceeds from asset sales, provided 1.3 times coverage. Including $1.6 billion of proceeds from asset sales, Enterprise retained $2.6 billion of DCF in 2015.
"It's not business as usual for anyone in our industry," Jim Teague, CEO of Enterprise's general partner, told analysts during a conference call Thursday. "Crude oil and NGL [natural gas liquids] prices started 2015 at levels that we thought were low and generally had a downward bias all year. Futures prices fell more or less in lockstep with weakness in the cash markets.
"Inflation-adjusted prices for crude oil, natural gas and most NGLs are at lows that go back as far as 1999. We don't think anyone knows how long the depressed prices will last, how low they can go, or how we are going to redefine normal after we finally start to see some stability."
Markets are oversupplied, Teague said, partially because of growth in U.S. shale output. "History tells us this won't last forever and at some point we'll come out of this cycle," he said. "History also tells us that not everyone will make it through this cycle, at least not in their current form. For some the deck is stacked against them for various reasons. Our experience has taught us that you need to understand your business and be prepared for the lean times, otherwise you'll find yourself reacting to negative events."
Later during the conference call, Teague was asked whether Enterprise might be an acquirer of distressed assets or a participant in joint ventures (JV) with peers.
"We have a lot of joint ventures, and we're not afraid of joint ventures," he said, "but joint ventures have to be assets that fit what we are and who we are. So I don't think we're going to go out and do a joint venture to help a competitor with its financing needs. We may very well look to joint venture a pipeline or a plant or something with a producer or a consumer that either brings feedstock to the plant or consumes feedstock off the plant. That's historically how we've approached joint ventures."
On Wednesday, executives at Kinder Morgan Inc. (KMI) during the company's annual analyst day in Houston said talks were under way for the sale of partial stakes in two of its projects: the Elba Island liquefied natural gas terminal and the Palmetto refined products pipeline. In recent months, KMI has reduced its planned 2016 spending and cut its dividend (see Daily GPI, Jan. 21; Dec. 9, 2015). KMI has said more than once it will not turn to debt or equity markets to fund growth (see Daily GPI, Jan. 27).
Teague said Thursday that Enterprise's results were driven by the company's fee-based businesses, contributions from recently completed assets and the acquisitions of Oiltanking Partners [see Shale Daily, Oct. 1, 2014] and EFS Midstream [see Shale Daily, June 1, 2015]. These offset the effect of lower NGL prices on natural gas processing and earnings lost due to the sale of offshore assets. "NGL, crude oil, refined products and petrochemical pipeline volumes increased 6% to 5.3 million b/d, LPG export loadings increased 19% to 299,000 b/d and fee-based natural gas processing volumes were 4.9 Bcf/d for 2015.
"...We are on schedule to complete construction of four major growth projects in 2016: two natural gas processing plants and related infrastructure serving the Permian Basin; our ethane export terminal on the Houston Ship Channel [see Daily GPI, Dec. 31, 2015], and our propane dehydrogenation facility at Mont Belvieu [TX]."