Enterprise Increases Capacity – Analyst Blog

Enterprise Products Partners L.P. (EPD) and Duncan Energy Partners L.P. (DEP) announced a long-term deal for their jointly owned Acadian Gas LLC subsidiary. The deal with a transporter enables the subsidiary to increase total capacity commitments by 200 million cubic feet per day (MMcf/d). The contract also facilitates the transportation of natural gas on Acadian’s Haynesville Extension pipeline that is currently under construction.

 

The Haynesville Extension is an expansion of the Acadian Gas intrastate natural gas pipeline system. This extension provides producers, engaged in the development of the Haynesville shale, to access 150 end-users (including industrial and municipal consumers) on the Acadian system and markets across the eastern US through interconnects with 12 interstate pipelines, including the Florida Gas Transmission and Southern Natural Gas systems. Enterprise expects completion of the 270-mile Haynesville Extension at a capacity of 2 billion cubic feet per day (Bcf/d) in third-quarter 2011.

 

Acadian Gas is 66% owned by Duncan Energy Partners and 34% owned by Enterprise Products Partners. Enterprise Products Partners is the parent of Duncan Energy Partners and currently owns approximately 52% of the outstanding common units of DEP, in addition to significant direct equity interests in each of Duncan Energy’s subsidiaries.

 

Enterprise also announced the expansion of its State Line gas gathering system, accommodating producers in the Haynesville shale area of Northwest Louisiana. The expansion is scheduled for completion in June 2010.

 

The State Line system expansion will increase the capacity to approximately 700 MMcf/d from about 400 MMcf/d.

 

State Line includes the 180 MMcf/d Battlefield gas treatment facility that is situated in southern DeSoto Parish, Louisiana. This expansion also includes a new 250 MMcf/d pipeline delivering gas from Battlefield treating facility to the 42-inch diameter Gulf South Pipeline at the Kingston Station in DeSoto Parish.

 

The expansion initiative includes a new pipeline under construction with a delivery capacity of up to 250 MMcf/d of natural gas from the Battlefield treating facility to the 42-inch diameter Gulf South Pipeline at the Kingston Station in DeSoto Parish. Given the volume growth and higher demand, Enterprise is increasing its Battlefield and Keatchie treating facilities to add two amine units, each with a circulation rate of 700 gallons per minute. An incremental treating capacity of up to 350 MMcf/d would be provided by these units. These expansions are slated for completion by year-end 2010.

 

We appreciate Enterprise for its strong balance sheet, liquidity position, investment grade credit rating, and a sound track record of delivering solid distribution growth to unit holders. Enterprise is one of the largest fully integrated midstream service providers with a positive long-term outlook, given its significant geographic and business diversity. However, we remain cautious regarding the possibility of lower natural gas volumes as a result of a steep decline in the rig count and the partnership’s un-hedged natural gas liquids exposure in 2010.