What were the primary drivers of the increase in Enterprise Products Partners' operating income in the third quarter of 2001?

The significant increase in operating income was driven by several factors, including higher revenues from newly acquired natural gas pipeline businesses (Acadian Gas and Gulf of Mexico systems), a substantial increase in income from commodity hedging activities within the Processing segment, and improved margins in the Pipelines and Fractionation segments. The decline in natural gas prices also contributed to more favorable operating conditions for some segments.

How did the company finance its recent acquisitions, and what is the impact on its debt levels?

The company financed its recent acquisitions, notably Acadian Gas and the Gulf of Mexico natural gas pipeline systems, through the issuance of $450 million in 7.50% Senior Notes in January 2001. This resulted in a substantial increase in total long-term debt to $855.4 million as of September 30, 2001, from $403.8 million at the end of 2000. The company stated it was in compliance with all debt covenants.

What is the company's outlook regarding natural gas and NGL prices, and how does this affect their business?

Management anticipates that natural gas and NGL prices will remain within historical ranges relative to other energy forms, supported by expected long-term demand growth and a rebounding economy. While lower prices can impact margins in certain merchant activities, they also lead to increased NGL extraction rates and volumes for processing and transportation. The company utilizes commodity financial instruments and hedging strategies to mitigate the volatility and risks associated with fluctuating commodity prices.

What is the significance of the adoption of SFAS No. 133 for Enterprise Products Partners?

The adoption of SFAS No. 133, 'Accounting for Derivative Instruments and Hedging Activities,' on January 1, 2001, required the company to record its financial instruments (commodity and interest rate swaps) at fair value. While many of these instruments did not qualify for hedge accounting, the company views them as hedges for risk management purposes. This has led to increased volatility in reported earnings due to mark-to-market accounting for these instruments, particularly impacting the Processing segment where commodity price fluctuations are significant.

EPD/EPDU 10-Q Quarterly Report Q3 FY2001 — Revenue, Net Income, EPS

Summary

Enterprise Products Partners L.P. (EPD) reported strong growth in its third quarter and year-to-date results for 2001. The company saw a significant increase in operating income driven by higher revenues across its segments, particularly boosted by new acquisitions in the natural gas pipeline sector and strong performance in its processing segment, which benefited from commodity hedging activities. Despite a decrease in equity NGL production due to high natural gas prices earlier in the year, overall volumes in NGL fractionation and major pipelines showed robust improvement. The company also successfully integrated the acquisition of Acadian Gas and several Gulf of Mexico natural gas pipeline systems, funded through a significant debt issuance. This expansion, combined with strategic investments, positions EPD for continued fee-based revenue growth. Management remains optimistic about future prospects, expecting continued demand for natural gas and NGL services, supported by ongoing infrastructure investments and a favorable energy price outlook.

Key Highlights

1Operating income significantly increased by $31.5 million to $87.4 million for the three months ended September 30, 2001, compared to $55.9 million in the prior year period.
2Revenues for the third quarter of 2001 rose to $729.6 million from $721.9 million in the same period of 2000, reflecting contributions from new acquisitions.
3The Pipelines segment saw gross operating margin increase to $22.4 million from $10.3 million, largely due to the acquisition of Acadian Gas and Gulf of Mexico natural gas pipeline systems.
4The Processing segment's gross operating margin more than doubled to $52.0 million from $29.1 million, significantly boosted by $48.2 million in income from commodity hedging activities.
5Total long-term debt increased substantially to $855.4 million from $403.8 million, primarily due to the issuance of $450 million in Senior Notes to finance recent acquisitions.
6The company announced an increase in its quarterly distribution rate to $0.6250 per Common Unit, effective November 2001, indicating confidence in future cash flows.
7Acquired Acadian Gas for approximately $226 million and equity interests in four Gulf of Mexico natural gas pipeline systems for $112 million, funded by the issuance of $450 million in Senior Notes.

ENTERPRISE PRODUCTS PARTNERS L.P. Quarterly Report for Q3 Ended Sep 30, 2001

Summary

Key Highlights

Frequently Asked Questions