Enterprise Products Partners L.P. (EPD) signed long-term deals spanning six years, with Anadarko Petroleum Corporation (APC). As per the agreements, the partnership will provide Anadarko diverse services in South Texas Eagle Ford Shale. These services include natural gas transportation and processing, natural gas liquids (NGL) fractionation and transportation services.
The package deal will mainly facilitate Anadarko’s mounting natural gas and NGL production in the region by integrating the partnership’s growing South Texas midstream infrastructure.
According to the contract suite, the partnership will construct a new 17-mile, 20-inch diameter natural gas gathering pipeline. The pipeline will be initiated at Anadarko’s central production facilities located in Dimmit County, Texas, and be linked with Enterprise’s existing South Texas pipeline system. The new pipeline is expected to come online in late-October 2010.
Enterprise’s South Texas facilities can process 1.5 billion cubic feet per day (Bcf/d) at present. With the completion of the cryogenic gas processing plant in Lavaca County, Texas, the processing capacity is expected to add approximately 600 million cubic feet per day (MMcf/d) by mid-2012.
The exploration activities of the companies have made Eagle Ford the most happening shale play. Till date, approximately 100 rigs in the play have drilled more than 175 wells with approximately 150 additional wells in various stages of drilling and completion.
With a current production of approximately 300 MMcf/d of natural gas and 40,000 barrels per day (BPD) of crude oil and condensate, this emerging South Texas resource play continues to beat industry expectations.
Enterprise’s diverse set of infrastructure assets allows it fundamental strengths, which will support distribution growth consistently. The partnership is also poised to benefit from its cost-effective new infrastructure that will draw attention to the producers in emerging shale plays.
We continue to view Enterprise as a core holding in a Master Limited Partnership portfolio, given its string of organic growth projects, potential acquisitions, strong balance sheet and solid liquidity position. However, we remain concerned about the partnership’s operating margin, which is lagging its peers. Consequently, our Neutral recommendation for Enterprise units remains unchanged with the Zacks #3 Rank (Hold).
ANADARKO PETROL (APC): Free Stock Analysis Report
ENTERPRISE PROD (EPD): Free Stock Analysis Report
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