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ENTERPRISE PRODUCTS PARTNERS L.P. Annual Report, Year Ended Dec 31, 2004

Filing Date
Filed March 15, 2005
Period End
December 31, 2004
Securities
EPDEPDU
In the record · 2016–202610-K1110-Q328-K128

EPD filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 128 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Aug ’17Aug ’17
  2. Leadership change8-K · Sep ’19Sep ’19
  3. Leadership change8-K · Aug ’21Aug ’21
  4. Material agreement8-K · Jun ’25Jun ’25

01—Abstract

Summary

Summary of the 10-K filed March 15, 2005. Cited figures are marked; the original filing is the authoritative source.

Enterprise Products Partners L.P.

(NYSE: EPD) reports its FY2004 10-K, filed March 15, 2005, in the wake of the transformational GulfTerra Merger completed September 30, 2004 (~$4 billiona aggregate consideration). Revenues rose to $8.32 billion in 2004 from $5.35 billion in 2003, and net income more than doubled to $268.3 million ($0.87 per unit) from $104.5 million, though much of the top-line growth reflects higher NGL and petrochemical marketing volumes and prices. Total segment gross operating margin increased to $655.2 million from $410.4 million, led by NGL Pipelines & Services ($374.2 million), with the acquired GulfTerra assets contributing for only one quarter of 2004.

Management highlights a strengthened midstream footprint in the deepwater Gulf of Mexico and Rockies, with large growth projects (Independence Hub, Independence Trail, Constitution, Rocky Mountain NGL expansions) targeted for 2005-2007. The balance sheet expanded materially: total assets grew to $11.3 billionb from $4.8 billion, and consolidated debt reached about $4.3 billion, up from $2.1 billion. Partners' equity increased to $5.3 billion, reflecting the 104.5 million units issued in the merger and multiple 2004 equity offerings.

Investors should weigh the higher leverage, large acquisition-related goodwill and intangibles ($459 millionc and $981 million), and integration risk against the expanded fee-based and diversified asset base. Note that the company disclosed it excluded GulfTerra and the South Texas assets from its SOX 404 internal control assessment for 2004, representing about 54% of total assets. Management also stated that the 2005 capital spending outlook is roughly $970 million, and EPCO, the ultimate parent, now controls approximately 37% of the common units.

02—Key points

Key Highlights

  1. Revenues rose 56% to $8.32 billion in 2004 from $5.35 billion in 2003, driven largely by NGL and petrochemical marketing and the GulfTerra Merger.
  2. Net income increased to $268.3 million ($0.87 per unit) from $104.5 million ($0.41-$0.42 per unit) in 2003.
  3. Total segment gross operating margin grew to $655.2 million from $410.4 million; NGL Pipelines & Services contributed $374.2 million.
  4. Total assets increased to $11.3 billion and total debt to about $4.3 billion, reflecting the approximately $4 billion GulfTerra Merger.
  5. Quarterly distribution raised to $0.40 per unit ($1.60 annualized) for Q4 2004, with distributions paid in 2004 totaling $438.8 million.
  6. Major growth projects underway include Independence Hub (850 MMcf/d), Independence Trail, Constitution gathering, Mont Belvieu fractionation expansion, and the Western Expansion Project.
  7. Management excluded GulfTerra and South Texas assets (about 54% of total assets) from its 2004 SOX 404 internal control assessment, a notable disclosure.

03—Questions

Frequently Asked Questions

  1. What was the main driver of Enterprise's 2004 earnings growth?

    The primary driver was the GulfTerra Merger completed September 30, 2004, which added offshore, onshore gas and NGL assets, plus higher NGL extraction margins from improved processing economics (Gulf Coast gross spreads averaged 18 cents per gallon versus 9 cents in 2003). Operating income rose to $423.0 million from $248.1 million, though only about three months of GulfTerra results were included.

  2. How much debt does Enterprise carry and what are the main risks?

    Consolidated debt was about $4.3 billion at December 31, 2004, versus $2.1 billion a year earlier, with roughly $2.9 billion at fixed rates and $1.4 billion variable after swaps. Risks include higher interest expense, covenant restrictions, a possible Pascagoula MBFC loan acceleration if credit ratings fall below specified levels, and sensitivity to interest rate increases.

  3. Is the distribution sustainable and how has it grown?

    Distributions per common unit were $1.54 for 2004 versus $1.47 in 2003. The distribution was raised to $0.40 per quarter ($1.60 annualized) for Q4 2004, and the partnership agreed in the merger to a minimum of $0.395 per quarter post-merger. Management notes distributions have historically exceeded earnings, and future payouts depend on cash flow and reserves.

  4. What growth projects and capital spending should investors expect in 2005?

    Management estimates 2005 capital spending of about $970 million, including roughly $900 million for growth projects and acquisitions. Key projects include Independence Hub ($385 million platform) and Independence Trail ($280 million pipeline), first production expected in 2007, plus Constitution gathering, NGL expansions, and the Indian Springs and Dixie acquisitions.

  5. Who controls Enterprise and could ownership change?

    EPCO, controlled by Dan Duncan, owns 100% of the general partner after acquiring El Paso's 9.9% interest in January 2005, and affiliates control about 37% of common units. Shell owns about 9.5% and has announced plans to reduce its stake over time. EPCO has pledged its units and general partner interest under its credit facility, and a default-driven foreclosure could trigger a change of control.

04—Continue

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