Midstream energy service provider, Enterprise Products Partners L.P. (EPD) plans to add two natural gas liquid (NGL) fractionators at its Mont Belvieu, Texas complex to accommodate the mounting production level from the Eagle Ford shale play and enhance its midstream infrastructure.
The partnership’s objective for the construction of two NGL fractionators, each having a processing capacity of approximately 75,000 barrels per day, will likely lift capacity at Mont Belvieu by 150,000 barrels per day (bpd). The two units, which are scheduled to come on-stream in the fourth quarter of 2013, in association of a sixth unit, are expected to allow Enterprise to fractionate more than 610,000 bpd at the Mont Belvieu facility.
The construction of the sixth unit is currently underway and is expected to start operation in the fourth quarter of 2012. The seventh and eighth fractionators are subject to necessary approvals. Additional capacity at Mont Belvieu, which has the largest gas liquids storage facility in the country, will support the sustained growth of NGL production from regions that include Rocky Mountain and the Eagle Ford Shale play in South Texas, which is believed to be one of the most prolific shale plays in U.S.
As Eagle Ford Shale is gaining traction, pipeline companies and midstream operators are increasingly looking to the South Texas play for opportunities to build new networks. Enterprise is poised to benefit from its existing assets and new developments, like the Texas Express Pipeline project, in providing packaged services to producers in emerging shale plays.
Notably, Enterprise has inked a long-term agreement with Anadarko Energy Services for the pipeline expansion, connecting the partnership’s Yoakum natural gas processing facility in Lavaca County, Texas to Mont Belvieu. The extended pipeline – with a capacity of 140,000 bpd – will commence service in the second quarter of 2013.
Enterprise Products Partners, a leading master limited partnership (MLP), is engaged in a wide range of midstream energy services to producers and consumers of natural gas, NGL, and crude oil. With its diverse set of midstream infrastructure assets, we believe the partnership possesses fundamental strengths, which will in turn support distribution growth consistently.
However, we believe that these factors are effectively reflected in the present valuation, leaving little room for meaningful upside from the current levels. Further, intense competition from MLPs such as Kinder Morgan Energy Partners L.P. (KMP) and Enbridge Energy Partners (EEP) is a cause for concern.
Consequently, our Neutral recommendation remains unchanged. Enterprise also holds a Zacks #3 Rank (short-term Hold rating).
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