A leading master limited partnership (MLP), Enterprise Products Partners, L.P. (EPD) announced the commencement of a two-week supplemental binding open commitment period. The open commitment is likely to meet additional shipper demand for capacity on the partnership’s 1,230-mile Appalachia-to-Texas (“ATEX Express”) pipeline.
The pipeline will transport the escalating ethane yield to Mont Belvieu, Texas from the Marcellus/Utica Shale areas of Pennsylvania, West Virginia.
Management reported that it has ample long-term commitments that are more than adequate for it to advance with the expansion of ATEX Express pipeline. This supplementary open commitment will assist those producers, who have endless enquiries for long-term shipping capacity.
The open commitment will aid Enterprise in assessing market interest in additional binding, 15-year transportation agreements. The ATEX Express pipeline is anticipated to be commissioned in the first quarter of 2014.
Recently, the partnership entered into a 50/50 joint venture (JV) with Plains All American Pipeline, L.P. (PAA) for a crude oil pipeline in South Texas. A 140-mile crude oil and condensate line – with capacity of 350,000 BPD – from Gardendale in LaSalle County to Three Rivers in Live Oak County will form part of the JV.
The joint venture is expected to optimize the companies’ capital investments and is supported by a commitment of 210,000 barrels per day (BPD) from shippers.
Given a broad and vertically integrated asset base, steady cash flow generation ability and financial strength for strategic growth, we believe Enterprise is well positioned to deliver an impressive total return going forward. The partnership believes that the projects will generate new sources of fee-based cash flow that are expected to increase the percentage of its gross operating margin attributable to fee-based activities from approximately 73% in 2011 to approximately 80% in 2013.
Enterprise Products holds a Zacks #3 Rank, equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation.
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