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Asset Diversity Leads Enterprise to Strong Quarter

Enterprise Products Partners LP (EPD) posted net income of $263 million (52 cents/share) in 2Q2008, up 85% from 2Q2007, and the publicly traded partnership it formed two years ago, Duncan Energy Partners LP, posted net income of $6.6 million (22 cents/share) during the same period, up 45% from last year, the companies said Thursday.

"Enterprise posted another exceptional quarter," said CEO Michael A. Creel. "The second quarter highlights the benefits of our large and diversified asset position across the midstream energy value chain. We had strong demand for our services from both producers and consumers of natural gas, NGL [natural gas liquids] and crude oil. Cash flow and volume contributions from new assets and expansions as well as solid year-over-year performance from other assets resulted in record gross operating margin, EBITDA [earnings before interest, taxes, depreciation and amortization] and net income. Enterprise's pipeline assets transported in excess of 2 million b/d of NGLs, crude oil and petrochemicals and 8.5 trillion Btu/d of natural gas for the third consecutive quarter."

Each of the Houston-based partnership's business segments reported increases in gross operating margins, which generated a 43% increase in total gross operating margin for 2Q2008 to a record $534 million, Creel said. The growth was primarily driven by EPD's natural gas processing and pipeline assets.

"Most notable about the strength of the second quarter and underscoring the benefits of our geographic and business diversification was the fact that second quarter 2008 gross operating margin exceeded that of the first quarter of 2008 by $12 million despite downtime and repair expense associated with our Independence project and Pioneer natural gas processing plant, which downtime and repairs resulted in a $52 million decrease in gross operating margin for the second quarter," Creel said.

Operations at Enterprise's Pioneer cryogenic gas processing facility in Lincoln County, WY, which were suspended following a release of natural gas and subsequent fire in a small gas handling area within the plant on March 27, resumed one month later (see NGI, April 28). The Independence Hub in the deepwater Gulf of Mexico went off-line on April 8 due to a leak on Independence Trail and returned to service in mid-June (see NGI, June 23).

EPD expects three large capital growth projects -- Sherman Extension expansion of its Texas Intrastate natural gas pipeline system serving the Barnett Shale, expansion of the Meeker natural gas processing plant in Colorado and completion of the ExxonMobil Corp. central treating facility in the Piceance Basin -- to be completed before the end of the year, Creel said.

The board of directors of EPD's general partner, Enterprise Products GP LLC, has approved an increase in the partnership's quarterly cash distribution rate to 5.15 cents/share, a 6.7% increase over the 4.825 cents/share rate that was paid for 2Q2007. The partnership retained approximately $86 million of distributable cash flow during 2Q2008, bringing the total amount of distributable cash flow retained for 2008 to $212 million.

Duncan saw a 52% revenue increase over 2Q2007, and said it will increase quarterly cash distribution to its partners by 5% over 2Q2007.

Last year Enterprise GP Holdings LP gained a minority stake in Energy Transfer Equity LP and TEPPCO Partners LP through a pair of transactions, which together were worth an estimated $2.8 billion, becoming the first publicly traded partnership to own direct or indirect interests in the general partners of multiple publicly traded partnerships, including EPD and Duncan (see NGI, May 14, 2007). Duncan was formed by EPD in 2006 (see NGI, Nov. 6, 2006).

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