The ups and downs of Enterprise Products Partners’ 4Q14 results (Part 5 of 13)
Operating profit down
We’ve already looked at some of Enterprise Products Partners’ (EPD) segment performances. In this article, we’ll focus on the company’s NGL Pipelines & Services segment. NGL is natural gas liquids.
In 4Q14, operating profit fell 4.4% for this segment, to $705 million from $737.4 million recorded a year ago.
Why did profits decrease?
There are several reasons for the fall in NGL Pipelines & Services’ profits. Let’s look at them in the list below.
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Lower fee-based processing volumes in the natural gas processing segment primarily contributed to the lower operating income. Natural gas processing and related NGL marketing business gross operating profit slumped to $257 million for 4Q14 compared to $339 million for 4Q13.
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Gross operating profit from Enterprise Products’ NGL marketing activities also decreased $39 million due to lower margins in the business.
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Lower fractionation operating profit due to lower product blending revenue on account of lower relative prices of NGL components and higher operating expenses also contributed to lower profits.
Reasons operating profit made a partial recovery
There are also reasons why profits made a partial recovery.
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A partial recovery was due to higher NGL pipeline profits due to higher revenues from deficiency fees and an increase in tariffs.
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A $19-million higher operating profit from Oiltanking Partners also contributed to a partial recovery. This was attributable to fees it charged EPD for the use of Oiltanking Partners’ Houston Ship Channel docks and related infrastructure to load and unload NGLs.
What are the growth drivers for the NGL Pipeline & Services segment?
Let’s look at EPD’s NGL Pipeline & Services segment. Its natural gas processing volume for 4Q14 decreased to 4.53 billion cubic feet per day (or Bcf/d) from 4.68 Bcf/d in 4Q13. During the latest quarter, EPD’s ATEX (Appalachia-to-Texas Express) ethane pipeline, which began commercial service in January 2014, transported ~72 thousand barrels per day (or MBPD) of ethane and generated $35 million in operating profit.
Enterprise Products (EPD) recorded 1% and 7.2% higher NGL transportation and NGL fractionation volumes in 4Q14 over 4Q13, respectively. The Texas Express Pipeline and gathering system and the Front Range Pipeline contributed to the higher volume during the latest quarter.
Enterprise Products Partners (EPD) is 10% of the Alerian MLP ETF (AMLP). Kinder Morgan Inc. (KMI), the largest energy midstream company in the United States, is 4.5% of the Energy Select Sector EDDPR ETF (XLE). Williams Companies (WMB) and Spectra Energy (SE) are also components of XLE.