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Enterprise Management Watching 'Green Shoots' in Oil/NatGas Patch

The worst of the commodity price rout is over, according to Enterprise Products Partners LP management. Among other things, company executives are watching producer activity in plays such as the Permian Basin, Eagle Ford and Haynesville shales, and they're seeing signs of better times to come.

In the Haynesville, "...we're seeing a significant change in operators, new operators coming in and acreage being sold...applying science that has not been applied in that acreage. And the results that we're seeing generally are exceeding even what the new producers told us they were going to do, so they're very happy with their results," said Tony Chovanec, senior vice president in charge of fundamentals/supply appraisal, during a conference call Thursday.

"...[T]he Eagle Ford acreage is largely held by production. You have, I'm going to call it, a handful of major players down there that largely aren't drilling because their acreage is held and they have an interest in holding acreage in other areas. So we think some of that acreage is going to change hands, just like we've seen starting in the Haynesville, except the deals are going to be larger.

"We feel very good about the Eagle Ford rock, as we always have. It's now developed, what we believe, is a commercial lean gas window, and it sits probably in the best place in the whole country relative to markets. We believe that you'll see acreage turn over in the Eagle Ford and drilling begin. And 2017 could well be the year that you see that process starting."

As for the Delaware Basin, a sub-basin of the Permian, Enterprise has a third natural gas processing plant under construction there, said Jim Teague, CEO of Enterprise's general partner.

"We are seeing significant 'green shoots' of producer activity as a result of the opportunity to hedge future sales of crude, NGLs [natural gas liquids] and natural gas at economic levels," Teague said. "In addition to the acceleration of investment in the Permian Basin, we are seeing activity attributable to new discoveries, deployment of new technology, including in well-established areas...

"...[A] substantial increase in demand for natural gas and NGLs is expected from new domestic petrochemical, natural gas-fired power plants and LNG facilities under construction and scheduled to begin operations over the next one to three years. Through the end of 2017, five new ethylene facilities on the U.S. Gulf Coast are scheduled to begin operations that represent 333,000 b/d, or a 30% increase in demand for ethane. In addition, certain refining and petrochemical customers are evaluating new facilities or modifications to existing facilities that will require additional midstream energy infrastructure."

During the conference call, analysts asked Teague whether the proposed Centennial pipeline, a project of Enterprise and Marathon Petroleum Corp., would go forward and when (see Shale Daily, Sept. 26). He declined to give details on when a decision might be made but said Enterprise's interest is aligned with partner Marathon Petroleum Corp.'s for getting NGLs from the Marcellus Shale region to the Gulf Coast.

Enterprise reported third quarter net income of $643 million (30 cents/unit) compared with $658 million (32 cents/unit) in the year-ago quarter. Adjusted earnings before interest, taxes, depreciation and amortization were $1.259 billion compared with $1.310 billion a year ago.

Distributable cash flow (DCF) was $978 million compared with $2.501 billion in the year-ago quarter. DCF includes cash proceeds from asset sales and insurance recoveries of $16 million and $1.5 billion for the third quarters of 2016 and 2015, respectively. DCF for the year-ago quarter includes proceeds from the sale of the partnership's offshore business in July 2015.

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