EUR 850.00 For Business Accounts Only

Morningstar | Enterprise has a sizable opportunity with NGL exports over the coming years.

While many other midstream operators are playing checkers, Enterprise Products Partners is a chess master. It is the pre-eminent midstream infrastructure company, vertically integrated with best-in-class assets at nearly every point in the midstream value chain. It can aggregate supply of every type of hydrocarbon from multiple sources in major producing basins (Permian, Eagle Ford, DJ, Piceance, Green River) and deliver it to multiple end markets (refiners, petrochemicals, exports). These assets are the linchpins for both shippers and end users. The firm has built out a dominant position in natural gas liquids. Its Houston Ship Channel and Beaumont Terminal and its Mont Belvieu assets (NGL fractionation, storage, pipelines) means it will be the primary beneficiary as U.S. NGL exports increase in the coming years. The partnership generates nearly 60% of its gross operating margin from this business. We view the forthcoming NGL demand-pull toward the Gulf Coast as the key growth driver for Enterprise. From its vast NGL system, Enterprise's connection with every ethylene cracker on the Gulf Coast, its sold-out PDH splitter, and the upgraded isobutylene unit make it adept at converting low-cost NGLs into higher value-added olefins. We expect its dominance in this area to grow materially over the coming years, supporting healthy growth prospects. As an example of how this diverse footprint supports a wide moat, consider management’s response to concerns about excess NGL fractionation capacity and propane prices. Rather than risk return compression through exposure to solely propane molecules, Enterprise's now active propane dehydrogenation plant has capitalized on low-cost feedstock coming through its system. Not only is this expansion a natural hedge against its NGL exposure, but by extending its participation in the value chain, Enterprise mitigates prospective volatility from propane prices in its processing and fractionation assets.