Enbridge Energy Partners, L.P. (EEP) aims to construct a cryogenic natural gas processing plant at its Anadarko gas gathering system near Wheeler, Texas, to handle the mounting pressure in Granite Wash play. The partnership expects the plant to be operational by early 2013.
The cryogenic natural gas processing plant –– Ajax –– with a capacity of 150 million cubic feet per day (MMcf/d) is aimed at adding the required natural gas processing capacity to the partnership's Anadarko System and cost approximately $230 million.
Houston, Texas-based Enbridge Energy Partners’ Anadarko System comprises 2,800 miles of natural gas gathering and transportation pipelines in southwest Oklahoma and the Texas Panhandle, one natural gas treating plant, and 12 natural gas processing plants, including the planned Ajax and previously announced Allison plants.
Amongst the significant investments for the Granite Wash, the partnership’s Ajax plant marks the latest. Last year, Enbridge spent or committed more than $1 billion to this region to serve producers, and seeks further exploration opportunities for other organic growth. Processing capacity will increase to 1.2 billion cubic feet per day after Ajax comes online.
The partnership is fairly active on organic as well as inorganic growth fronts. Enbridge’s September 2010 acquisition of Elk City Gathering and Processing System for $682 million is expected to expand exposure in the liquids-rich Granite Wash region. Focus on fee-based and diversified businesses has enabled it to dilute business risks, as well as provide a stable and steadily growing earnings profile.
We remain positive on Enbridge given its increased exposure to the Bakken Shale, the Haynesville Shale and Granite Wash. We believe these growth prospects have not been fairly captured.
However, through the expansion of its natural gas gathering and processing business, Enbridge has increased its risk exposure to commodity prices. We believe the risk will be further fueled by its integration of Elk City Natural Gas Gathering and Processing assets, the South Haynesville expansion project, as well as through the construction of a cryogenic plant in the Anadarko area.
Intense competition from master limited partnerships such as Kinder Morgan Energy Partners L.P. (KMP) and Enterprise Products Partners L.P. (EPD) is an added cause for concern.
Our long-term Neutral recommendation remains unchanged and the partnership holds a Zacks #3 Rank, which is equivalent to a short-term Hold rating.
ENBRIDGE EGY PT (EEP): Free Stock Analysis Report
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