We reaffirmed our Neutral recommendation on leading master limited partnership Enterprise Products Partners, L.P. (EPD), on May 20, 2013. Riding on growth from record throughput volumes in its fee-based businesses, the partnership reported robust earnings in the first quarter. The partnership currently holds a Zacks Rank #3, which is equivalent to a short-term Hold rating.
Why Maintained?
Enterprise Products Partners is engaged in providing a wide range of midstream energy services to the producers and consumers of natural gas, natural gas liquids (NGL), and crude oil. The partnership's assets include 50,000 miles of onshore and offshore pipelines, approximately 200 million barrels of storage capacity for NGLs, refined products and crude oil, and 14 billion cubic feet of natural gas storage capacity.
We continue to view Enterprise Products Partners as a core holding in an MLP portfolio, given its string of organic growth projects, potential acquisitions, strong balance sheet and solid liquidity position. The partnership is one of the largest fully-integrated midstream service providers with a positive long-term outlook given its significant geographic and business diversity.
Enterprise Products Partners increased its first quarter 2013 cash distribution rate by 6.8% to $0.67 per common unit, or $2.68 per unit on an annualized basis. This marked the partnership’s 35th consecutive quarterly increase. With its diverse set of NGL, natural gas, crude oil and refined products midstream infrastructure assets, the partnership possesses fundamental strengths that will continue to support distribution growth.
Enterprise Products Partners made capital investments of around $914.3 million in the first quarter and expects to bring online $7.5 billion worth of major assets from 2013 through 2015, including $2.2 billion in the balance of 2013. The key projects consist of Seaway crude pipe reversal, The Texas Express Pipeline, Mid-America Pipeline, ATEX Express Pipeline, Western NGL Pipeline Expansions and Front Range. The successful execution of these projects will be value accretive to future cash flows.
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.
Other Stocks to Consider
There are other stocks in the sector that however appear more rewarding. These include Abraxas Petroleum Corp. (AXAS), Enerplus Corporation (ERF) and EPL Oil & Gas, Inc. (EPL), which are expected to perform impressively over the next few months and carry a Zacks Rank #1 (Strong Buy).
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