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Enterprise barrels through tough market with 'pretty good quarter,' CEO says


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Enterprise barrels through tough market with 'pretty good quarter,' CEO says

was able to stabilize its operating margins during an extremely difficultquarter for the oil and gas industry, CEO A. James Teague said.

DuringEnterprise's first-quarter earnings call April 28, Teague said Enterprise keptits gross operating margin steady compared to the first quarter of 2015 at $1.3billion but increased its distributable cash flow to $1.1 billion from $1billion.

"Distributablecash flow provided a solid 1.3 times coverage for the 39.5-cent-per-unitdistribution we declared for first quarter 2016, which was a 5.3% increase overthe first quarter of 2015," he said. "This was our 56th distributionincrease since Enterprise's IPO in 1998 and our 47th consecutive quarterlyincrease. In other words, we had another pretty good quarter in a pretty toughmarket environment."

Teaguesaid the partnership's NGL pipelines and services segment increased revenue by$89 million year over year, to $784 million, which he credited to Enterprise'soverall growth strategy.

"Thesenumbers reflect the ramp-up of new assets, including ATEX, Aegis, Front Rangeand Texas Express, but these numbers also reflect our success in being veryaggressive and adding incremental volumes by using the strength of our valuechain," he said. "Our NGL export volumes were up substantially,reflecting the new LPG assets we put in service in December, and ourfractionation volumes increased 5% to 836,000 barrels a day from 798,000barrels a day in the first quarter of 2015. That fractionation increase isevidence of our using the strength of our value chain to bring incrementalvolumes. That's one place we realize those results."

Enterprise'scrude oil pipeline segment saw a drop in revenue from $214 million in the firstquarter of 2015 to $202 million in the past quarter, in spite of flat pipelinevolumes of 1.4 MMbbl/d.

"Thelower earnings were a result of declining contract throughput," Teague said.

Thepartnership's gas pipeline segment saw a larger drop in revenue year over year,from $205 million to $178 million. Transportation volumes also fell, from 12.5Bcf/d to 11.9 Bcf/d.

"Ourvolumes are down 5%. Our earnings are down 14%," Teague said. "It'sthe same story we told in the crude oil segment."'

Despitethe tough oil and gas price environment, Enterprise continued to expand itsasset base with a number of project completions in the first quarter.

"Wecompleted $300 million worth of projects in the first quarter and expect to putapproximately $2.5 billion worth of projects into service in 2016," Teaguesaid. "These include two natural gas processing plants and relatedinfrastructure in the Permian Basin, one of which … is in commissioning mode aswe speak. Our ethane export terminal will be online during the third quarter,and additional crude oil storage is being put into service in Houston andBeaumont areas."

Teaguesaid Enterprise intends to complete approximately $4.2 billion worth of capitalprojects in 2017 and 2018, including the Midland-to-Sealy, Texas, crudepipeline that is expected to be in service by mid-2018.

Forthe first quarter, Enterprise reported net income attributable to limited partners of $661.2 million, or 32cents per unit, compared to $636.1 million, or 32 cents per unit, in theyear-ago quarter. The S&P Capital IQ consensus normalized EPS estimate forthe first quarter was 33 cents.