Enterprise Products Partners Remains a Key Idea

Image: Enterprise Products Partners units have fared well since the beginning of 2023.

By Brian Nelson, CFA

Enterprise Products Partners (EPD) recently reported fourth quarter results that came in better than expected on both the top and bottom lines. Enterprise reported net income attributable to common unitholders of $1.6 billion, or $0.74 per diluted common unit, which was a 3% increase compared to last year’s marks. Distributable cash flow [DCF] was $2.2 billion for the fourth quarter of 2024 compared to $2.1 billion in the same period a year ago. Distributions increased 3.9%, to $2.14 per common unit annualized, compared to distributions declared in the same quarter last year. DCF offered 1.8 times coverage of the distributions declared for the fourth quarter of 2024.

Management had the following to say in the press release:

Our record 2024 financial performance was driven by record volumes across our midstream system. For the year, we reported record natural gas processing inlet volumes of 7.4 Bcf/d, a 10 percent increase from 2023; record total equivalent pipeline volumes of 12.9 million BPD, a 6 percent increase compared to 2023; record NGL fractionation volumes of 1.6 million BPD, a 3 percent increase compared to 2023; and record marine terminal volumes of 2.2 million BPD, a 6 percent increase from 2023. The volume growth across our system was largely attributable to natural gas and NGL volume growth associated with our investments in Permian Basin infrastructure and our downstream value chain.

We see these opportunities continuing for the next several years. We currently have approximately $7.6 billion of major growth capital projects under construction. These projects will go into service over the next three years. Substantially all of these projects are related to our natural gas and NGL businesses serving the Permian Basin and related expansions to our downstream infrastructure to support growing domestic and international demand. These projects are supported by long-term contracts and provide visibility to continuing net income and cash flow per unit growth.

In 2025, $6 billion of major organic growth projects are expected to be completed and begin generating cash flow. These include two natural gas processing plants in the Permian Basin, our Bahia NGL pipeline, Fractionator 14, the first phase of our NGL export facility on the Neches River and expansions of our ethane and ethylene marine terminals on the Houston Ship Channel. This growth in cash flow will support future distribution increases and returns of capital.

Consistent with our full-year 2024 results, our strong fourth quarter financial performance is related to record volumes in the fourth quarter of 2024 in our natural gas and NGL businesses. Inlet natural gas processing volumes were a record 7.6 billion cubic feet per day, a 7 percent increase compared to the fourth quarter of 2023. NGL pipeline volumes in the fourth quarter of 2024 were a record 4.8 million BPD, a 12 percent increase compared to the same quarter in 2023. NGL marine volumes were a record 1.0 million BPD, a 9 percent increase compared to the fourth quarter of 2023. Finally, equivalent pipeline volumes were a record 13.6 million BPD in the fourth quarter of 2024, a 6 percent increase compared to 2023. This growth in volumes, earnings and cash flow are directly related to the investments we have made in these businesses that continue to benefit from production growth in the Permian Basin as well as increases in domestic and international demand.

Enterprise generated ~$2.4 billion in net cash provided by operating activities in the fourth quarter, while capital investments were ~$2 billion, resulting in non-GAAP free cash flow of $393 million. For 2025, organic growth capital investments are expected in the range of $4-$4.5 billion, while sustaining capital expenditures are expected to be $525 million. At the end of 2024, Enterprise had total debt principal outstanding of $32.2 billion and consolidated liquidity of roughly $4.8 billion. We continue to like Enterprise as an idea in the High Yield Dividend Newsletter portfolio.

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