Enterprise Products Partners L.P. (EPD) reported second-quarter 2014 adjusted earnings per limited partner unit of 67 cents, which came behind the Zacks Consensus Estimate of 73 cents but was higher than the year-ago quarterly earnings of 65 cents.
Transportation of more crude, natural gas and other commodities through its pipelines led to higher earnings year over year. Enterprise transported 8,718 million barrels per day (MBP/d) of natural gas liquids (NGL), crude oil, refined products and petrochemical products, up 1.6% on a year-over-year basis.
Quarterly distribution at Enterprise increased 5.9% year over year to 72 cents per common unit, or $2.88 per unit on an annualized basis. Distributable cash flow of $954 million provided coverage of 1.4x. The partnership retained $293 million in cash flow, thereby reducing its financing needs.
Revenues in the quarter increased nearly 12.3% year over year to $12.5 billion but came behind the Zacks Consensus Estimate of $13.7 billion.
Second Quarter Segmental Performance
Gross operating income in the NGL Pipeline & Services segment rose 25% year over year to $681 million.
Onshore Natural Gas Pipeline and Services’ gross operating income increased 2.5% year over year to $203 million.
Gross operating income from the Onshore Crude Oil Pipelines & Services segment fell 6.6% year over year to $184 million.
Gross operating income in the Petrochemical & Refined Product Services segment fell to $162 million from the year-earlier level of $163 million.
Gross operating margin for the Offshore Pipelines & Services segment was $34 million compared with $40 million for the same quarter of 2013.
Financials
During the quarter, the partnership spent $697 million, including $77 million of sustaining capital expenditures. Total debt principal outstanding at the end of the quarter was $18.4 million. As of Jun 30, 2014, Enterprise had consolidated liquidity of approximately $3.7 billion, which comprised $242 million of unrestricted cash on hand and approximately $3.5 billion of available borrowing capacity under revolving credit facility.
Outlook
Enterprise Products is a core holding in a master limited partnership portfolio and focuses on projects that generate stable cash flow and contribute to its integrated value chain. While Enterprise increased its cash flow distribution by 5.9% in the reported quarter, it also deployed cash in various fee-based development projects that will likely generate operating cash flow to support its future distribution growth.
For 2014, the partnership expects continuing volume and gross operating margin growth from its NGL pipelines and fractionators; crude oil pipelines and storage facilities; and LPG and refined product export terminals businesses.
However, Enterprise remains vulnerable to macro conditions and unstable oil and gas prices, which in turn could hurt margins in NGL, natural gas and other businesses.
Enterprise currently holds a Zacks Rank #3 (Hold). Meanwhile, one can consider better-ranked energy sector stocks such as Weatherford International plc (WFT), Sasol Ltd. (SSL) and Cameron International Corp. (CAM). All these stocks currently sport a Zacks Rank #1 (Strong Buy).
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