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Shale Liquids Helped Fuel Earnings Increase, Enterprise Says

The growth of natural gas liquids (NGL) production from North American shale plays helped Enterprise Products Partners LP (EPD) set a net income record in 2010, according to COO Jim Teague.

"It's no secret that we believe that unconventional natural gas production -- shale gas production -- is a game changer," Teague said during a conference call with financial analysts Thursday. "We continue to make progress on our initiatives in both the Eagle Ford and the Haynesville, and our plants in the Rockies continue to run to capacity. Our pipelines are full; our fractionators are full. Relative to staying power, we think that most of the major plays we participate in -- be it the Piceance, Jonah Pinedale, Eagle Ford or Haynesville -- have 20-plus years of drilling locations, even without considering refracks, recompletions and/or the potential of accessing other zones."

EPD reported 4Q2010 earnings before interest, taxes, depreciation and amortization (EBITDA) of $803 million (33 cents/share), a 5.6% decrease compared with $851 million (37 cents/share) in 4Q2009. EPD also reported full year 2010 EBITDA of $3.26 billion, an 18% increase compared with $2.76 billion in 2009.

Record fee-based gas processing volumes during the year contributed to the record net income and a gross operating margin of $3.3 billion for the year, Teague said.

"We expect that NGL production will continue to grow...Last quarter we said ethane production could reach as high as 960,000 b/d by 2015 and we still feel that is a reasonable target...We continue to monitor about 20 additional plays, which are near our existing assets, which we believe have the potential to add significant amounts of natural gas, NGLs and oil to our portfolio. We always have a list of 'what next' initiatives, and these 20 plays make up that list of 'what next' initiatives."

In December EPD struck 10-year agreements to handle "a substantial portion" of Chesapeake Energy Corp.'s liquids-rich gas production in the Eagle Ford Shale in South Texas, one of the largest single-producer commitments for the partnership in the play (see Shale Daily, Dec. 21, 2010). Enterprise previously struck long-term deals with producers Petrohawk Energy Corp., EOG Resources Inc. (see Daily GPI, Sept. 2, 2010), Anadarko Petroleum Corp. (see Daily GPI, Sept. 22, 2010) and Pioneer Natural Resources USA Inc. (see Shale Daily, Oct. 26, 2010).

EPD's NGL fractionation business reported record gross operating margin of $38 million for 4Q2010 compared with $36 million in 4Q2009. The increase was primarily due to higher volumes and fees associated with the expansion of the Mont Belvieu NGL fractionation facility, where a fourth unit began commercial operations late in the quarter.

The Mont Belvieu plant experienced a series of explosions Feb. 8, which resulted in a fire that spread to nearby vehicles and equipment (see Daily GPI, Feb. 9). A contract worker was found dead in the rubble. Most operations at the plant are either back to normal or soon will be, and plans for a fifth fractionator there remain on schedule, according to EPD CEO Michael Creel.

"We spent about $58 million of capex on frac five in the fourth quarter and it's scheduled to come on at the end of 2011 or the beginning of 2012," Creel said.

EPD partner Duncan Energy Partners LP reported a 4Q2010 profit of $25 million (43 cents) compared with $23.2 million (40 cents) in 4Q2009.

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