Enterprise Products Partners Posts $225.3 Million Net Income In Q1 2009

Published: 27-Apr-2009

By: Staff Writer Staff Writer Staff Writer

Enterprise Products Partners L.P. (Enterprise Products Partners), a midstream energy company, has reported revenues of $3.4 billion for the first quarter of 2009, compared with the revenues of $5.7 billion in the year-ago quarter. It also reported a net income of $225.3 million, $0.41 per diluted unit, for the first quarter of 2009, compared with the net income of $259.6 million, or $0.51 per diluted unit, in the year-ago quarter.

Review and Comment on First Quarter 2009 Results

Net income for the first quarter of 2009 was negatively impacted by about $21 million, or $0.05 per unit, due to estimated lost business as a result of the continuing effects of Hurricanes Gustav and Ike.

The partnership generated $343 million of distributable cash flow in the first quarter of 2009 compared to a record $383 million in the year-ago quarter. On April 15, 2009, the board of directors of Enterprise Products Partners’ general partner approved a raise in the partnership’s quarterly cash distribution rate to $0.5375 per unit regarding the first quarter of 2009, representing a 6% increase over the $0.5075 per unit rate that was paid with respect to the year-ago quarter. Distributable cash flow for the first quarter of 2009 provided 1.2 times coverage of the cash distribution to be paid to limited partners. Enterprise Products Partners maintained $56 million of distributable cash flow in the first quarter of 2009, which is available to reinvest in growth capital projects, to reduce debt, and to lessen the need to issue additional equity.

“Enterprise had a good start to 2009 in the first quarter,” said Michael A. Creel, president and chief executive officer of Enterprise Products Partners. “We reported record NGL, crude oil and petrochemical pipeline transportation volumes of 2.2 million barrels per day and record natural gas transportation volumes of 9.5 trillion Btus per day supported by strong volumes from our existing assets and contributions from recently constructed and acquired assets that have gone into service. We generated record gross operating margin of $549 million and record Adjusted EBITDA of $526 million as a result of this volume growth and the performance of our natural gas processing business.

Demand for NGLs in the first quarter of 2009 exceeded our expectations as the result of higher operating rates by the petrochemical industry following their massive de-stocking of inventory in the fourth quarter of last year coupled with an industry preference for NGLs as a feedstock over more expensive crude oil derivatives. In addition, a colder than normal winter led to an increase in the demand for propane. Based on this performance and new sources of distributable cash flow that will be generated from major assets that have recently gone into service, we elected to increase our quarterly cash distribution rate by $0.0075 per unit while retaining $56 million, or 16% , of the partnership’s distributable cash flow for financial flexibility.”

“During the first quarter, we completed construction and commenced operations at four major projects totaling $1.3 billion of capital investment. These projects were the 1.1 billion cubic feet per day Sherman Extension expansion of our Texas Intrastate natural gas pipeline system in the Barnett Shale, the 750 million cubic feet per day expansion of our Meeker natural gas processing facility and the Exxon central treating facility in the Piceance Basin and the 230,000 barrel per day Shenzi crude oil pipeline in the Gulf of Mexico. These assets are in the early stages of increasing volumes, which for certain assets will continue over the remainder of the year. In the second half of 2009, we expect to begin operations on smaller expansions to our Piceance Basin and Texas Intrastate natural gas pipeline systems,” stated Creel.

Revenue for the first quarter of 2009 was $3.4 billion compared to $5.7 billion in the same quarter of 2008 due mainly to lower commodity prices in the first quarter of 2009. Enterprise Products Partners’ revenues and certain operating costs and expenses can fluctuate considerably based on the prices of natural gas and NGLs without necessarily affecting gross operating margin and operating income. Therefore, even though the partnership had lower revenues in the first quarter of 2009, gross operating margin raised to $549 million for the first quarter of 2009 from $522 million for the first quarter of last year and operating income increased to $372 million for the first quarter of 2009 from $367 million of operating income for the year-ago quarter.

Review of Segment Performance for the First Quarter of 2009

NGL pipelines & services – Gross operating margin for the NGL pipelines and services segment increased 18% to $343 million for the first quarter of 2009 compared to $290 million in the year-ago quarter. Estimated lost business for this segment in the first quarter of 2009 due to the continuing effects of the 2008 hurricanes was about $5 million.

Enterprise Products Partners’ natural gas processing business recorded gross operating margin of $195 million for the first quarter of 2009, up 10% from $178 million in the year-ago quarter. Estimated lost business due to the hurricanes for this business in the first quarter of 2009 was about $4 million. This business benefited from an increase in gross operating margin from the Meeker and Pioneer natural gas processing plants, the company’s hedging activities and a 10% increase in equity NGL production from 104 thousand barrels per day (MBPD) in the year-ago quarter to 114 MBPD in the first quarter of 2009. The raise in equity NGL production, the NGLs that Enterprise Products Partners earns as a result of providing processing services, was mainly attributable to higher volumes from the Pioneer natural gas processing plant serving the Jonah/Pinedale fields, which started operations late in the first quarter of last year. The raise in NGL volumes from Pioneer more than equalized lower equity NGL production in South Louisiana due to hurricane effects.

Gross operating margin from the partnership’s NGL pipeline and storage business raised by 40% to $120 million in the first quarter of 2009 from $86 million in the year-ago quarter on a 119 MBPD, or 7% , increase in transportation volumes between the two periods. The $34 million increase in gross operating margin was mainly attributable to a $17 million increase from the Mid-America, Seminole and Dixie pipelines on higher volumes and lower fuel costs. Gross operating margin for the first quarter of 2009 raised by $6 million due to higher utilization of Enterprise Products Partners’ NGL import/export facilities on the Houston Ship Channel and the related Channel NGL pipeline. The partnership also realized increases in gross operating margin from its South Louisiana pipeline system and its NGL storage facilities. Total volumes related with the major NGL pipelines for the first quarter of 2009 were a record 2 million barrels per day (BPD) compared to 1.8 million BPD for the year-ago quarter. The volume increases were associated with the Dixie pipeline, the import/export facility and related Channel pipeline and the Skelly-Belvieu pipeline in which Enterprise Products Partners acquired a 49% ownership interest in December 2008.

Gross operating margin from Enterprise Products Partners’ NGL fractionation business was $29 million in the first quarter of 2009 against $25 million reported for the year-ago quarter of 2008. Gross operating margin for this business was higher mainly due to decreased fuel costs at the partnership’s Mont Belvieu and Hobbs NGL fractionators. Estimated lost business for the NGL fractionation business in the first quarter of 2009 due to the hurricanes was about $1 million, which was mainly attributable to lower volumes at Norco. NGL fractionation volumes for the first quarter of 2009 increased by 9 MBPD to 432 MBPD from 423 MBPD reported in the year-ago quarter.

Tell your friend about this article