8-KEarnings & ResultsMaterial AgreementsOther Events+1

ENTERPRISE PRODUCTS PARTNERS L.P. 8-K Report, Agreement Terminated (May 1, 2014)

Filed May 1, 2014For Securities:EPDEPDU

Summary

Enterprise Products Partners L.P. (EPD) filed an 8-K on May 1, 2014, primarily announcing its first-quarter 2014 financial results and the termination of a 364-day credit agreement. Operationally, the company reported a strong first quarter with net income attributable to limited partners increasing to $798.8 million ($0.85 per unit) from $753.5 million ($0.83 per unit) in the prior year, driven by a significant increase in NGL Pipelines & Services segment gross operating margin. This growth was fueled by expanded LPG export capabilities, new processing plants, and increased NGL production and pipeline volumes, notably from the ATEX and Front Range pipelines which commenced operations. Despite positive segment performance, the Onshore Crude Oil Pipelines & Services segment saw a decrease in gross operating margin due to lower crude oil price spreads affecting marketing margins, and the Petrochemical & Refined Products Services segment was impacted by an extended turnaround at an octane enhancement plant. Financially, the company terminated its $1.0 billion 364-day credit agreement, effective May 1, 2014, with no outstanding borrowings at the time of termination. This action suggests a strong existing liquidity position or a reliance on other credit facilities. The company also highlighted significant capital investments and expansions, including plans for a new ethane export facility on the Texas Gulf Coast expected to begin operations in Q3 2016, the commencement of operations for the ATEX and Front Range pipelines, and ongoing expansions at its Houston Ship Channel LPG export terminal, underscoring strategic growth initiatives in the NGL export and midstream infrastructure space.

Key Highlights

  • 1Net income attributable to limited partners increased to $798.8 million ($0.85 per unit) in Q1 2014 from $753.5 million ($0.83 per unit) in Q1 2013.
  • 2NGL Pipelines & Services segment reported a record gross operating margin of $780 million, a substantial increase driven by expanded LPG export terminal, new processing plants, and higher NGL production and pipeline volumes.
  • 3Terminated the $1.0 billion 364-Day Credit Agreement effective May 1, 2014, with no outstanding borrowings at the time, indicating a secure liquidity position or alternative funding.
  • 4Announced plans to construct a new ethane export facility on the Texas Gulf Coast, expected to commence operations in Q3 2016, to capitalize on growing domestic ethane production.
  • 5The ATEX and Front Range Pipelines commenced operations in early 2014, enhancing NGL transportation capabilities from the Marcellus/Utica and Denver-Julesburg basins, respectively.
  • 6Onshore Crude Oil Pipelines & Services segment gross operating margin decreased due to significantly lower regional crude oil price spreads impacting marketing margins.
  • 7Total debt principal outstanding increased to $18.38 billion as of March 31, 2014, from $17.36 billion as of December 31, 2013, while cash and cash equivalents significantly increased to $988.4 million.

Frequently Asked Questions

Enterprise Products Operating LLC (EPO), the operating subsidiary, terminated its $1.0 billion 364-Day Credit Agreement effective May 1, 2014. Since no amounts were outstanding under this agreement at the time of termination, it suggests that EPO either had sufficient liquidity from other sources, preferred alternative financing, or no immediate need for the credit line. This action is generally viewed positively as it removes a potentially unused or less favorable financing instrument.

The NGL Pipelines & Services segment delivered a record gross operating margin of $780 million in Q1 2014, a significant increase from $593 million in Q1 2013. This growth was driven by multiple factors including the expansion of the LPG export terminal, the commencement of operations at the Yoakum natural gas processing plant, a 12% increase in equity NGL production, and higher fee-based processing volumes. The ATEX pipeline also contributed positively upon its commencement of service in January 2014.

The filing highlights several key growth initiatives. Most notably, Enterprise announced plans to construct a new ethane export facility on the Texas Gulf Coast, slated for operation in Q3 2016, to address growing U.S. ethane production. Additionally, the ATEX and Front Range pipelines, along with expansions to the Houston Ship Channel LPG export terminal, commenced or progressed in early 2014, strengthening the company's NGL export and transportation infrastructure.

The gross operating margin for the Onshore Crude Oil Pipelines & Services segment decreased significantly in Q1 2014 compared to Q1 2013. While pipeline volumes increased, the company's crude oil marketing business reported a substantial decrease in gross operating margin. This was primarily attributed to lower margins caused by a significant narrowing of regional price spreads for crude oil, exemplified by the reduced difference between Louisiana Light Sweet and West Texas Intermediate crude.