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Enterprise Earnings Clipped as Duncan's Soar

Enterprise Products Partners 2Q2009 earnings tumbled 29% compared with 2Q2008 while Duncan Energy Partners earnings leaped 74% in the same period based in large part on earnings it acquired in a deal with Enterprise last year, the companies said last week.

Houston-based Enterprise reported 2Q2009 net income of $187 million (32 cents/unit) compared with $263.3 million (52 cents/unit) in 2Q2009. Enterprise benefited from increased natural gas volumes and cash flow from its Independence Hub platform and Trail pipeline system. Net income was reduced by a $34 million noncash charge related to the forfeiture of Enterprise's investment in the Texas Offshore Port system partnership, $12 million of estimated lost business due to the continuing effects of last year's hurricanes and $4 million for costs associated with the pending merger of Enterprise and TEPPCO Partners LP.

Volumes handled by Enterprise's midstream energy system were at record or near-record levels, according to CEO Michael Creel.

"Despite lower drilling activity in many of the energy producing basins that we serve, our 36,000 miles of pipeline systems transported a record 9.7 trillion Btu/d of natural gas and 2.2 million barrels per day of NGL [natural gas liquids], crude oil and petrochemicals," Creel said. "We benefited from an increase in natural gas production delivered to our facilities and higher demand for NGL by the petrochemical industry."

Enterprise and TEPPCO recently struck a $3.3 billion all-stock deal to create the largest publicly traded energy partnership with an enterprise value of more than $26 billion (see NGI, July 6). The combined partnership would own almost 48,000 miles of pipelines composed of more than 22,000 miles of NGL, refined product and petrochemical pipelines, more than 20,000 miles of natural gas pipelines and more than 5,000 miles of crude oil pipelines. Assets would include about 200 million bbl of NGL, refined product and crude oil storage capacity; 27 Bcf of natural gas storage capacity; one of the largest NGL import/export terminals in the United States, located on the Houston Ship Channel; 60 NGL, refined product and chemical terminals; and crude oil import terminals on the Texas Gulf Coast.

Houston billionaire Dan Duncan's Enterprise GP Holdings LP controls the general partners of both Enterprise and TEPPCO.

Duncan Energy Partners, which is managed by Enterprise-owned DEP Holdings, last Monday reported 2Q2009 earnings of $23.2 million (40 cents/unit), up from $13.3 million (32 cents/unit) in 2Q2008. The increase was driven primarily by the allocation of $15.3 million of earnings from assets it acquired in a $730 million deal with Enterprise in December (see NGI, Dec. 15, 2008). Through that deal Duncan acquired a 51% membership interest in Enterprise Texas Pipeline LLC; a 51% general partnership interest in Enterprise Intrastate LP; and a 66% general partnership interest in Enterprise GC LP.

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