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Enterprise sees additional Permian projects on horizon

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Essential Energy Insights - January 2021


Enterprise sees additional Permian projects on horizon

As Enterprise Products Partners LP weighs a joint venture for its Shin Oak natural gas liquids pipeline from the Permian to its Mont Belvieu, Texas, fractionation and storage complex, the partnership is also looking at new opportunities that take advantage of booming production in the Delaware Basin.

"We're not through in the Delaware Basin, and you'll see more plant announcements," A. James Teague, CEO of Enterprise's general partner, said on a second-quarter earnings call. "The most reliable supply you can have for a pipeline or a fractionater is supply that comes out of your own plants."

Enterprise in April announced plans to build the 571-mile Shin Oak NGL pipeline with a designed initial capacity of 250,000 barrels per day, expandable to 600,000 bbl/d. Company President Randy Fowler in a June 26 presentation at the J.P. Morgan Energy Equity Investor Conference in New York City said Enterprise would consider a joint venture to expand the project.

"We're going to build this dadgum pipeline, and it's going to be pretty strategic for us," Teague said on the Aug. 3 call. "Our competitive advantage is not Shin Oak in and of itself. Our competitive advantage is the total system, and we're not afraid of it at all."

Despite low oil prices, Teague said the company expects production in the Permian and the Haynesville to grow as drillers add rigs. Though output in the Eagle Ford has dropped off, Teague said he thinks the South Texas play "has turned a corner."

Enterprise is also considering a new natural gas pipeline from the Permian to the Gulf Coast, though executives did not give any details on the potential project.

"We've had a number of folks come to us about the potential of a joint venture. We're listening," Enterprise Executive Vice President Bill Ordemann said. "It's tough to make money on those gas pipes. ... We think there's going to be a need for a pipe, and the question is who's going to pull it together. ... I don't think we're ready to take any victory laps at this time."

Earlier in the day, Enterprise reported $653.7 million, or 30 cents per unit, in second-quarter net income attributable to limited partners, an increase from $558.5 million, or 27 cents per unit, in the corresponding quarter last year. The S&P Capital IQ consensus normalized EPS estimate for the second quarter was 33 cents.