What were the most significant strategic moves for EPD in 2002?

In 2002, EPD made significant strategic acquisitions, most notably the $1.2 billion purchase of the Mid-America and Seminole Pipeline Systems from Williams. Additionally, EPD acquired Diamond-Koch's propylene fractionation business for $239 million and its NGL and petrochemical storage business for $130 million. These acquisitions substantially expanded EPD's midstream infrastructure and market reach.

How did EPD finance its major acquisitions and manage its debt?

The significant acquisitions in 2002, particularly the Mid-America and Seminole Pipeline Systems, were initially financed by a $1.2 billion 364-day term loan. To manage its debt and liquidity, EPD completed public offerings of Common Units in October 2002 ($183.3 million net proceeds) and January 2003 ($258.9 million net proceeds), and issued Senior Notes C and D in January and February 2003 ($350 million and $500 million respectively). These proceeds were used to repay the term loan and reduce outstanding debt.

What is the outlook for EPD's distributions to unitholders?

EPD historically aims to increase its quarterly cash distributions to partners by at least 10% annually. The company demonstrated this commitment by increasing its declared annual distribution rate in 2002. Management expects to continue paying comparable cash distributions in the future, supported by operating cash flows and growth initiatives.

EPD/EPDU 10-K FY2002 Annual Report — Revenue, Net Income, EPS

Q: How did the company's financial performance change in 2002 compared to 2001?

EPD's revenues increased significantly in 2002 compared to 2001, driven by the full-year impact of acquisitions made in 2001 (Acadian Gas) and the new acquisitions completed in 2002. However, operating income decreased year-over-year primarily due to increased costs and expenses, including unfavorable changes in commodity hedging activities, which resulted in a loss of $51.3 million compared to an income of $101.3 million in 2001.

Summary

Enterprise Products Partners L.P. (EPD) reported strong performance for the fiscal year ending December 31, 2002, marked by significant strategic acquisitions that expanded its midstream energy infrastructure. The company completed several key acquisitions in 2002, including the substantial purchase of Mid-America and Seminole Pipeline Systems from Williams for approximately $1.2 billion, as well as Diamond-Koch's propylene fractionation and storage businesses. These acquisitions are expected to enhance EPD's asset base, integrate its services along the natural gas and NGL value chain, and increase fee-based cash flows. Financially, EPD's revenues grew, driven by these acquisitions, although operating income saw a decrease due to increased expenses, including unfavorable changes in commodity hedging results. The company's liquidity was supported by a significant term loan for acquisitions, which was subsequently refinanced through equity and debt offerings in late 2002 and early 2003. Management remains focused on long-term growth through accretive acquisitions and internal projects, aiming for a 10% annual increase in distributions to unitholders, underscoring a commitment to unitholder value.

Key Highlights

1Completed major acquisitions in 2002, notably the $1.2 billion purchase of Mid-America and Seminole Pipeline Systems, significantly expanding its NGL and natural gas pipeline network.

2Acquired Diamond-Koch's propylene fractionation and storage businesses for $239 million and $130 million respectively, enhancing its fractionation capabilities and storage infrastructure.

3Revenues increased significantly due to these strategic acquisitions, reflecting the growth in the company's asset base and service offerings.

4Operating income decreased year-over-year, primarily impacted by increased operating expenses and unfavorable commodity hedging results, with a $152.6 million decrease in hedging income compared to the prior year.

5The company's liquidity was managed through a combination of debt and equity financings, including a $1.2 billion term loan for acquisitions later refinanced by equity and debt offerings.

6Despite increased debt from acquisitions, EPD maintained its investment-grade credit ratings from Moody's (Baa2) and S&P (BBB), with a stable outlook following recent financings.

7EPD declared and paid increasing quarterly cash distributions to its unitholders, a key aspect of its strategy to enhance unitholder value.

ENTERPRISE PRODUCTS PARTNERS L.P. Annual Report, Year Ended Dec 31, 2002

Summary

Key Highlights

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