NGI The Weekly Gas Market Report / NGI All News Access

Enterprise Posts Record Earnings, Sees Independence Restart in May

Due to increased demand in all of its business segments, Enterprise Products Partners LP reported a 132% increase in 1Q2008 net income to $260 million, or 51 cents per unit on a fully diluted basis, over net income of $112 million, or 20 cents per unit, during 1Q2007. Responding to the natural gas industry's significant concern surrounding the April 8 suspension of production at the Independence Hub in the Gulf of Mexico, the company noted that repairs on the associated natural gas pipeline system should be completed during the "first half of May," allowing the hub to restart activity.

Revenue for 1Q2008 increased to a record $5.7 billion from $3.3 billion during 1Q2007. Gross operating margin increased 61% to a record $522 million from $324 million during last year's quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) for 1Q2008 was a record $491 million, a 61% increase, compared to $305 million for 1Q2007.

"The first quarter of 2008 was a record quarter for our partnership," said Enterprise CEO Michael A. Creel. "Demand for NGLs [natural gas liquids], natural gas and crude oil and our midstream infrastructure services resulted in each of our business segments having an exceptional quarter. Cash flow and volume contributions from new assets such as the Independence project, Meeker and Pioneer as well as solid year-over-year performance from our other assets resulted in a substantial increase in EBITDA and distributable cash flow. Enterprise's pipeline assets transported in excess of 2 million b/d of NGLs, crude oil and petrochemicals and 9 trillion Btu/d of natural gas, and for the second consecutive quarter our Mid-America and Seminole pipelines transported in excess of 1 million b/d of NGLs."

Enterprise's Onshore Natural Gas Pipelines and Services segment reported a 43% increase in gross operating margin to $110 million for 1Q2008 compared to $77 million for the same quarter of 2007. Sparked by the start-up of the Independence Hub during the quarter, gross operating margin for the Offshore Pipelines and Services segment increased $62 million, or 310%, to $82 million in the 1Q2008 from $20 million in the same quarter of 2007. The Independence project accounted for $51 million of this increase on average throughput of 867 billion Btu/d.

Operations at the Independence Hub platform and associated Independence Trail pipeline were suspended on April 8 due to a leak in a flex joint, which is in approximately 85 feet of water and connects the pipeline to the platform (see NGI, April 14). With the outage suspending the production of approximately 900 MMcf/d, natural gas commodity markets have voiced their concerns.

"Repairs to the flex joint are ongoing. It is still our expectation that Independence will resume operations during the first half of May," Enterprise said Monday. "While the Independence platform and pipeline do not earn volumetric fees during this period of suspended operations, the Independence Hub still continues to earn its fixed demand revenues of approximately $5 million per month. The estimated impact to gross operating margin from downtime at Independence is approximately $400,000 per day."

Enterprise said it has taken steps to insulate itself from disruptions in the capital markets for the remainder of 2008 as the company funds its $1.6 billion growth capital budget. "In addition to retaining one-third of the partnership's distributable cash flow for the first quarter of 2008, we also issued $1.1 billion of five- and 10-year notes at attractive interest rates averaging 6.20%," stated Creel. "We expect that these actions coupled with EBITDA growth, retained distributable cash flow and proceeds from our distribution reinvestment plan for the rest of the year will provide the partnership with ample financial flexibility for 2008. The first quarter gives Enterprise a great start toward achieving our objective of increasing our year-end 2008 annualized cash distribution rate to partners to at least $2.12 per unit and retaining over $200 million of distributable cash flow despite the expected effects of downtime at Pioneer and Independence."

Operations at Enterprise's Pioneer cryogenic gas processing facility in Lincoln County, WY, were suspended following a release of natural gas and subsequent fire in a small gas handling area within the plant on March 27 (see NGI, March 31). The company reported late last week that the repairs were complete and that operations had resumed (see NGI, April 28).

©Copyright 2008 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

Comments powered by Disqus