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Enterprise execs see return to optimism for oil, gas industry in 2017

After enduring two difficult years, the U.S. oil and gas industry should experience a rebound in 2017, the CEO of Enterprise Products Holdings said Jan. 30.

Speaking during Enterprise Products Partners LP fourth-quarter 2016 earnings call, A.J. "Jim" Teague said Enterprise's customers had gone from being hesitant to put out a capital budget last year to expanding budgets in 2017. Enterprise Products Holdings is the general partner of the partnership.

"We believe the news is especially good for U.S. oil and gas," Teague said. "While we expect that 2017 will have its challenges, especially in the first half, we believe the worst part of the cycle is behind us."

Teague said Enterprise is working to keep pace with expected growth in critical areas, including the Permian Basin. He noted the partnership had completed two cryogenic gas processing plants in the play last year, as well as an ethane export facility on the Houston Ship Channel.

"We now have approximately $6.7 billion of growth capital projects under construction that would be completed between now and 2019. Our largest project, [propane dehydrogenation] at our Mont Belvieu complex, is expected to begin commercial operations midyear," Teague said. "And due to the increase in activity and expected crude oil volume growth from the Permian, we have decided to commission our Midland ECHO pipeline at its full capacity of 450,000 barrels per day."

Enterprise Senior Vice President Anthony Chovanec and Senior Vice President of Natural Gas Assets and Marketing Bradley Motal said Enterprise would continue to look for growth opportunities in the Permian. "The Permian is the hotbed of activity not just in the United States but really across the globe, "Chovanec said. "We have two new plants in service and another one under construction."

Another area of focus for Enterprise in 2017, company officials said, will be the now-overlooked Eagle Ford Shale, where Chovanec said many observers do not yet realize a rebound is already underway.

"People aren't just drilling the Eagle Ford there anymore. They're also mostly drilling the Austin Chalk. So we like what we see in the Eagle Ford," he said. "Our break-evens in the primaries in the Eagle Ford are competitive with the Permian as we run our half cycle economics. The last thing we're seeing that you've heard is we're seeing smaller players come in. So we think the Eagle Ford's going to be an area where you're going to go from a couple of handfuls of very large players to smaller players, which is really opposite of what's happening in the Permian."

Teague said overall industry sentiment is "180 degrees" from where it was this time last year, with positive signs and the arrival of the Trump administration buoying opinions. "Relative to changes in Washington, which we expect to get asked our opinion on that, what we will say is … we look forward to more pro-business environment and less regulation," he said.

Enterprise reported $658.8 million in fourth-quarter 2016 net income attributable to limited partners, or 31 cents per unit, compared to $684.8 million, or 34 cents per unit, in the prior-year quarter. The S&P Capital IQ consensus normalized EPS estimate for the fourth quarter was 32 cents.