Enterprise Products Partners L.P. (EPD) has inked an additional contract with Anadarko Petroleum Corporation (APC), under which the former will provide midstream services in the Eagle Ford Shale play of South Texas. While the financial terms of the agreement were not disclosed, it is a follow-up to the deal that both companies had entered into in September 2010.
Per the agreement, Enterprise will provide gas processing, natural gas liquid (NGL) fractionation, as well as transportation services that will facilitate Anadarko’s rising production in the shale play. The partnership intends to construct a new infrastructure, which will comprise a 46.5-mile, 24-inch diameter pipeline to expand its gas-gathering system in the area.
Enterprise currently processes 1.5 billion cubic feet of natural gas at its existing South Texas facilities on a daily basis. It expects to increase natural gas processing capacity by 600 million cubic feet per day (MMcf/d) through mid-2012 with the completion of a new cryogenic processing plant in Lavaca County, Texas.
Recently, Enterprise has also signed a long-term agreement with two producers in South Texas Eagle Ford Shale to provide midstream services in the area. These agreements indicate a positive outlook for the Eagle Ford Shale.
With a current production level of approximately 750 MMcf/d of gas and 80,000 barrels per day of crude oil and condensate, this emerging South Texas resource play holds 500 drilled wells with 150 operating rigs.
Enterprise Products Partners is a leading master limited partnership (MLP) engaged in providing a wide range of midstream energy services to producers and consumers of natural gas, NGL and crude oil. The partnership’s string of organic growth projects, potential acquisitions, strong balance sheet and solid liquidity position will continue to spark organic growth opportunities that will expand its integrated system.
However, all these positives are already reflected in its current valuation, leaving little room for further upside. Again, intense competition from MLPs, such as Kinder Morgan Energy Partners L.P. (KMP) and Enbridge Energy Partners (EEP) is a cause for concern.
We maintain our Neutral recommendation at this stage and Enterprise currently holds a Zacks #3 Rank (short-term Hold rating).
ANADARKO PETROL (APC): Free Stock Analysis Report
ENBRIDGE EGY PT (EEP): Free Stock Analysis Report
ENTERPRISE PROD (EPD): Free Stock Analysis Report
KINDER MORG ENG (KMP): Free Stock Analysis Report
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