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Enterprise Volumes Higher but Revenues Drop 22%

Enterprise Products Partners LP's $4.6 billion acquisition of Oiltanking Partners LP and growth in its fee-based businesses helped to offset the effects of lower commodity prices in the final quarter of 2014, but revenues fell 22%.

The midstream services company has more than $6 billion of projects scheduled to begin operations over the next two years.

"On distribution, [falling oil prices] really had a change and that's why we're pretty concerned about how we manage our balance sheet and cash flows to be able to make it through [this cycle] and we have done it before," Michael Creel, CEO of Enterprise's general partner said. "With respect to capital, it really doesn't affect our ability to spend money; our customers desire for assets may change.

"They may push out the need for certain assets and I think you can see that where we may have thought our [capital expenditures] would have been closer to $4 billion for 2015, we are looking at something closer to $3.5 billion, but it's not a function of our ability to fund those investments. It's the function of our customers and their needs and their timing."

Enterprise reported record volumes of 5.3 million bd for its natural gas liquids (NGL), crude oil, refined products and petrochemical pipelines; 824,000 b/d for fractionators and 4.8 Bcf/d of fee-based gas processing volumes in 2014.

Throughput on those systems was driven to new heights by $4.1 billion of projects that began commercial operations last year, including, among others, the Appalachia-to-Texas Express (ATEX) ethane pipeline; SEKCO pipeline, which expanded capacity for producers in an area of the deepwater Gulf of Mexico, and the Seaway Loop Pipeline, which doubled capacity along an existing stretch of pipeline running from Oklahoma to the Gulf Coast (seeShale DailyMarch 28, 2012).

In late January, a 26-mile segment of ATEX ruptured in West Virginia, limiting ethane deliveries from Washington County, PA. The U.S. Pipeline and Hazardous Materials Safety Administration issued a Corrective Action Order to keep that portion of the 1,265 mile pipeline shut down until the agency approves a restart plan (see Shale DailyJan. 29Jan. 26). But during a conference call to discuss year-end earnings Thursday, Senior Vice President Bill Ordemann said the company expects to resume operations in two weeks.

Net income was $659.8 million (34 cents/unit), down from $698.9 million (37 cents) in 4Q2013. Revenue fell 22% to $10.2 billion. One-time charges and flat or decreasing volumes in some of its business segments, such as  natural gas liquids and services and onshore gas services contributed to the decline. The consolidated earnings from Oiltanking Partners provided $63 million, including $25 million net income (see Shale Daily, Oct. 1, 2014).

"There is no doubt that 2015 will present significant challenges across the entire upstream, and therefore, related midstream value," said COO Jim Teague. "Margins will be thinner and landing new projects will be competitive. However, all of the assets we have recently constructed or have under construction are backed by long term commitments. In addition, many of these new assets are backed by volume commitments that ramp over the next several years providing us with not only stable, but also increasing revenues."

Heading into 2015, Enterprise expects to bring online additional processing in the Permian Basin, expand its propane export capacity and continue building a large-scale ethane export facility at Morgan's Point on the Houston Ship Channel (seeDaily GPIAug. 4, 2014).

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