Enterprise Products Partners L.P. (EPD)announced the acquisition of Houston Ship Channel facility for $38.5 million. The latter was previously a part of Bigler LP with a production capacity of 300 million pounds of high-purity isobutylene (HPIB) per annum, required in the manufacture of tires, lubricants and other petroleum-based products.
The facility is situated within a complex of almost 250-acre and houses four pressurized spheres for the storage of HPIB and butanes. Multiple transportation options, including marine, rail, truck and pipelines are available from this location. Moreover, Enterprise enjoys the advantage of having its liquids pipelines, transporting natural gas liquids and refined products, lying close to this facility.
With a considerable amount of acreage still left to be developed and better access to Enterprise’s integrated network of energy resources, the complex provides potential growth opportunities not only for the petrochemicals group but also for other business units within the partnership.
Enterprise management commented that the acquired facility will be integrated with the existing businesses of the partnership and will eventually aid in the expansion of the nearby Mont Belvieu operations. Thus the acquisition will act as a value addition for the partnership’s butane/isobutylene business unit and will enhance the quality of the products and services offered by the petrochemical services business.
We continue to view Enterprise as one of the largest fully-integrated midstream service providers with a positive long-term outlook, given its string of organic growth projects, potential acquisitions, strong balance sheet and solid liquidity position.
Although the partnership possesses several fundamental strengths, there is little room for further upside. Moreover, Enterprise faces tough competition from peers such as, Spectra Energy (SE)and Williams Companies (WMB).
We are reiterating our long-term Neutral rating on the stock. We also have a Zacks #3 Rank (short-term Hold recommendation) on the shares.
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