Enterprise Products Partners LP transported record volumes on its pipeline systems during the third quarter of 2022, buoyed by the natural gas gathering and processing business it acquired from Navitas Midstream Partners LP earlier this year.


However, management acknowledged that pipeline capacity in the Permian Basin is tight, and more negative gas pricing may be on the way for the producing region.

Speaking to investors on the 3Q2022 earnings call earlier this week, Enterprise Chief Commercial Officer Brent Secrest said larger private exploration and production companies “still have a fairly robust growth plan” for 2023 despite the lack of spare pipeline capacity out of the Permian. He pegged growth in the Midland sub-basin gas business of around 23% in 2023, while the Delaware sub-basin would likely see growth of 7-10%.

The $3.25 billion Navitas deal in February gave Enterprise an additional 1 Bcf/d of natural gas processing capacity in the Midland. The company is building on the acquisition with several expansions under way.

Enterprise currently has about 350-400 MMcf/d of open capacity on its systems from the Waha Hub in West Texas to Gulf Coast markets, none of which is hedged for 2023, according to Secrest.

The executive said the $4-5 Waha gas prices seen this summer were a “gift” for Permian producers. Prior to this summer, Permian gas traded mostly in the $2-3 range. As production swelled and pipeline space became tight, however, producers sometimes had to pay offtakers for their gas. That occurred often in the run-up to the Gulf Coast Express pipeline entering service and again ahead of Permian Highway Pipeline’s (PHP) startup.

More recently, Waha has traded once again in the $3 range, but did fall below zero on several days in late October amid pipeline maintenance, robust regional output and soft demand in the basin.

Enterprise’s Tony Chovanec, vice president of fundamentals and supply appraisal, shared the positive outlook for the Permian in 2023. While supply chain and labor issues persist in the oil field, “there is a significant amount of momentum in the Permian,” he said. “We hear it from publics and privates alike. It’s hard to kill this kind of momentum.”

Expansions of PHP and the Whistler Pipeline are underway, with more than 1 Bcf/d of additional takeaway scheduled to come online in the Permian late next year.

“Ultimately, those pipelines can’t come on fast enough,” said Chovanec. “When things are this tight…it’s going to be incredibly challenging. I don’t think that’s the last we’ve seen of negative gas prices in Waha.”

Business Is Booming

It’s not only the Permian where Enterprise is seeing strong volumes.

Secrest said the entire natural gas segment is likely to see month/month increases going forward. “It’s a pretty healthy business right now.”

To be sure, Enterprise’s pipelines transported a record 11.3 million b/d equivalent of natural gas liquids (NGL), crude oil, natural gas, refined products and petrochemicals during the quarter. The midstreamer’s natural gas pipelines transported a record 17.5 trillion Btu/d, up from 14.6 TBtus/d in 3Q2021. Enterprise also set quarterly volumetric records for NGL fractionation, ethane export, butane isomerization and fee-based natural gas processing volumes.

The company has $5.5 billion of organic growth projects under construction, including a propane dehydration plant, two cryogenic natural gas processing plants in the Permian and the Texas Western Products System that are scheduled to be online by the end of 2023.

“It’s clear that the world wants and needs much more of what we have,” said CEO Jim Teague.

The company chief told investors that U.S. hydrocarbons remain “badly needed” to support countries whose populations live in poverty and to support allies in Europe amid the energy crisis in the wake of Russia’s invasion of Ukraine.

“Unfortunately, with the rhetoric that comes from our government and in action on badly needed permitting reform for pipelines, transmission, infrastructure and mining,” it appears that U.S. politicians don’t “have a clue about the realities of the world’s immediate and longer-term needs,” Teague said.

That said, it is going to take an “all-of-the-above” approach to meet the world’s growing energy needs, according to the CEO. To that end, Enterprise also is focused on investments in lower-carbon projects like carbon capture, utilization and storage and blue ammonia.

Enterprise reported 3Q2022 net income of $1.4 billion (62 cents/share), up from $1.2 billion (52 cents) last year. Distributable cash flow increased 16% to $1.9 billion during the quarter, compared with $1.6 billion in 3Q2021.

The firm repurchased about 3.9 million common units for $95 million during 3Q2022 and 5.3 million common units for $130 million this year to date.