Enterprise Products Partners LP (NYSE:EPD) reported robust third-quarter results for 2023, despite facing operational challenges and low natural gas and NGL prices. The company demonstrated resilience, handling record volumes across its midstream system and announcing several expansion plans. These include the construction of two more processing plants in the Permian Basin and the conversion of the Seminole crude oil pipeline back to NGL service.
Key takeaways from the earnings call include:
- Enterprise reported an adjusted EBITDA of $2.3 billion for Q3 2023, and a trailing 12-month EBITDA of $9.2 billion as of September 30, 2023.
- The company's consolidated leverage ratio was 3.0 times, meeting its target range.
- Enterprise announced ambitious expansion plans, including building two processing plants in the Permian Basin and converting the Seminole crude oil pipeline back to NGL service.
- The firm expects 2024 growth capital expenditures to range between $3 billion to $3.5 billion and plans to continue its buyback activity.
- Enterprise anticipates generating more free cash flow in the future, which could be used for distribution growth and buybacks.
Despite operational issues at its PDH plants and low natural gas and NGL prices, Enterprise handled record volumes across its midstream system, including pipelines, NGL fractionators, and marine terminals. The firm also announced the Bahia NGL pipeline, which will deliver up to 600,000 barrels per day of NGL into its storage system.
The company's representative, Jim Teague, acknowledged past mistakes in charging high fees, which led to increased competition. However, he expressed confidence in Enterprise's aggressive market strategy and the potential for a tailwind from tight export capacity for Gulf Coast LPG in the next year and a half.
Teague also highlighted the advantages of organic growth, particularly in the Permian G&P sector, where the company has more control over the location of their plants and the liquids. He mentioned the possibility of additional growth projects in the future, depending on the success of their SPOT project.
The company expects a strong appetite for ethane in Asia, with potential contracts on the horizon. It also noted a significant demand for LPG in areas where people don't have access to it, and anticipates the U.S. will need to step up to fill that void.
Finally, the company addressed concerns about the growth of hydrocarbon production in the Permian Basin, stating that they expect production to exceed 600,000 barrels per day. The company's total debt principal outstanding was approximately $29.2 billion as of September 30, 2023.
InvestingPro Insights
While Enterprise Products Partners LP (NYSE: EPD) has been navigating through operational challenges, InvestingPro data reveals a promising financial outlook for the company. With a market cap of $56.55 billion, and a P/E ratio of 10.78 as of Q3 2023, the company's solid financial foundation is evident. Despite a revenue decline of 12.81% in the last twelve months leading up to Q3 2023, the company has managed to maintain a gross profit of $6572 million, showcasing its resilience in a challenging market.
InvestingPro Tips further highlight the company's robust performance. Enterprise has consistently increased its earnings per share, and has a commendable track record of raising dividends for 26 consecutive years, making it a reliable choice for investors seeking steady returns. Despite trading at a high P/E ratio relative to near-term earnings growth, the company's stock is in oversold territory as per the Relative Strength Index (RSI), indicating a potential buying opportunity.
Enterprise's prominent role in the Oil, Gas & Consumable Fuels industry, coupled with its strong financial metrics and consistent dividend payments, make it an attractive investment. For more insights like these, consider exploring the additional 10 InvestingPro Tips available for Enterprise.
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