New Jersey, USA – Enterprise Products, a leading company in the energy industry, is making significant strides in the Permian Basin by bringing online three new gas processing facilities with three more in the construction phase. Despite challenges in the natural gas market domestically, the firm is seeing growth in their liquids business, particularly in crude oil and NGL volumes in the first quarter of 2024. With a strong outlook for the future, management plans to maintain a high capital budget in the coming years before gradually reducing it as new projects become operational, signaling a potential for significant growth ahead, especially as demand for liquids-rich basins increases.
In a recent update on their operations, Enterprise has been strategically expanding in the Permian Basin, where operators are ramping up production in the Delaware and Midland Basins. The firm added 600MMcf/d of natural gas processing capacity in these regions in the first quarter of 2024 with the launch of the Leonidas plant in the Midland Basin and the Mentone 3 plant in the Delaware Basin. Additionally, with more plants under construction, such as three in the Delaware Basin and one in the Midland Basin, as well as the development of the Bahia NGL pipeline and Frac 14, Enterprise is poised for continued growth by enhancing their infrastructure.
Looking ahead, Enterprise plans to invest between $3.25-3.75 billion in capital projects for the fiscal years 2024 and 2025 before scaling back to $2-2.5 billion in 2026. With projects totaling $6.9 billion currently under construction, the company aims to allocate $550 million of the capital investments for sustaining expenditures in 2024, including petrochemical turnarounds. As the Permian Basin’s capacity expands, management anticipates a shift towards more growth capital expenditure in the upcoming year.
Enterprise recently launched Phase 1 of the Texas Western Products System, providing increased capacity for truck loading and storage of gasoline and diesel. The next phase, which includes terminals in Albuquerque, New Mexico, and Grand Junction, Colorado, is expected to be operational in the second or third quarter of 2024. Furthermore, the company’s SPOT project, a seaport oil terminal with the capacity to load 2 million barrels per day of crude oil, is progressing towards commissioning, offering a strategic advantage in accessing deepwater shipping channels.
In terms of financial performance, Enterprise experienced a 19% year-over-year increase in revenue, driven by growth in crude oil pipelines and services, as well as in petrochemical and refined products and services revenue, showing a positive trend in the company’s operations. The firm has also outlined plans for planned turnarounds at various facilities to enhance operational efficiency and maintain a competitive edge in the market.
Enterprise’s valuation and shareholder value remain strong, with the company trading at 9.75 times EV/aEBITDA. Despite facing challenges in certain segments due to maintenance activities, such as planned turnarounds and market dynamics impacting pricing, the overall outlook for Enterprise remains optimistic. Comparing the company to its peers, there is potential for a higher valuation closer to 11 times EBITDA, reflecting the growth prospects and strategic investments in the Permian Basin.
In conclusion, Enterprise Products is well-positioned for growth and value creation, with a solid operational foundation and strategic investments in key areas. With a commitment to capital expenditure and a focus on expanding capacity in the Permian Basin, the company is poised to capitalize on opportunities in the evolving energy landscape. Investors may find potential upside in Enterprise’s stock, with growth and multiple expansion on the horizon.
