Enterprise Products Partnerships

Enterprise Products Partnerships is a Houston Texas based company providing

services to producers and consumers of the oil industry, specializing in natural gas,
refined products, and crude oil pipelines through the United States. Their assets include
over 51,000 miles of pipeline, 24 natural gas processing plants, 22 natural gas liquids and
propylene fractionators, and 6 off shore hub platforms.
The company operates in four different business divisions natural gas liquid
(NGL) pipelines and services, offshore pipelines and services, onshore natural gas
pipelines and services, petrochemical services. The onshore natural gas pipelines and
services division is responsible for the companys approximately 18,000 miles of onshore
pipelines that help connect the company with many states spread through out the United
States and the companys marketing activities. The natural gas liquids and services
division includes natural gas liquids related marketing activities and the NGL processing
business. The offshore natural gas and crude oil pipeline transportation and related
offshore platform operations are provided by the offshore pipelines and services division.
The final division is petrochemical services, provides isomerization and propylene
fractionation services as well as the sale of certain petrochemical products. (Business
Insights: Essentials, 2015)
Enterprise Products Partnerships also know as EDP is in the basic materials sector
and in the Independent Oil and Gas industry. This industry is in a major flux right now
due to rapidly changing price of oil and the new record lows we have had this year. At
$60 per barrel, the current price of oil is likely approaching or already below the expected
per-barrel costs of some of the most expensive U.S. tight oil projects, (Silverstein,
Forbes, 2015) the U.S. Energy Information Agency says. These prices have scared many
companies involved with oil and have caused them to either put on hold or halt many
building projects or even led to laying off workers. According to the U.S. Energy
Information Administration, anything below $60 a barrel forces the hand of the oil sector:
Either pull up stakes or keep at it and hope to be last one standing. Either way, something
has to give, which means peoples jobs, project expansions or shareholders dividends.
(Silverstein, Forbes, 2015)
Some of the opportunities this industry is taking advantage of are the rapidly
increasing rate of production within the United States and the possibility of having the
ban of exporting oil and natural gas to foreign countries lifted soon by the government. In
2008, this country created 5 million barrels a day. Now it accounts for 10 percent of the
globes development, or about 8.4 million barrels a day. This year, U.S. production is
expected to hit 9.3 million barrels a day, unless drillers slow up. according to Ken
Silverstein of Forbes Business. (Silverstein, Forbes, 2015) This industry is a highly
contested one filled with many different companies but there are a few at the top that
stand out from the rest. Some of the competitors that EDP faces in this industry are
Energy Transfer Partners, TransCanada Corporation, Williams Companies Incorporated,
EQT Midstream Partners, Gdf Suez and Kinder Morgan Management Energy Partners.

(Business Insights: Essentials, 2015) Some of the different projects rival companies are
involved in are TransCanada is involved in getting the United States government to allow
for the northern section of the Keystone Pipeline to be built to allow for a direct route of
over 900,000 barrels a day to be delivered to the Gulf Coast refineries. (Silverstein,
Forbes, 2015) Many other competitors are in the process of trying to find ways to keep up
with Enterprise Products Partnerships ways of exporting oil and to find new ways to
lower prices and be able to stay competitive in domestic and international markets.

One of the most important things Enterprise has been able to do is to seem to
always be one step ahead of their competition and other firms in the market. Whether it
has been a merger with another company or planning a new construction project many
years in advance that has helped them be at the forefront of the industry. The major
operational issues I have found with Enterprise Products Partners is not a problem
effecting everyday business but has more to do with there rapid expansion and being able
to make use of there facilities the best way possible. These issues along with dealing with
ever fluctuating oil prices and there controversial method of getting around the US oil
exporting bans have led the company to be in hot water and make some important
decisions about the future direction of the company.
The company has been under some heavy questioning recently due to many rival
companies complaining about their refining process and how it has allowed them to
export oil. A Houston pipeline company became the envy of the energy industry last
year when it found a way around the decades-old legal ban on exporting U.S. oil (Wall
Street Journal, 2015). Operationally the company has had to make sure they continue to
follow all proper techniques and methods knowing they are being closely watched.
Companies including BP PLC have complained to the U.S. Federal Trade Commission,
which is investigating (Wall Street Journal, 2015).

This new process that has led to many complaints to the Government agencies in
charge of these practices were approved before they began implementing them allowing
them to be the first company able to do this. Enterprise and its lawyers helped persuade
the U.S. Commerce Department that heating up and distilling ultralight oil in the field to
remove volatile gases--instead of running it through a traditional refinery--was enough to
qualify it as a legally exportable refined fuel (Wall Street Journal, 2015). An innovation
like this is whats driving EPDs profit and business to new heights. The company is
contracted to load a minimum of 21 more tankers with at least 13 million barrels of
ultralight oil this year. Since Enterprise started exporting ultralight oil at the end of July,
operating profits in that segment of its business have seen a huge uptick in numbers
jumping nearly 36%, earning it an additional $110 million from July 2014 through the
end of the year. (Wall Street Journal, 2015) Enterprise jumped out in front in the race to
export ultralight oil and has since reaped the benefits of being one of the first to be able to
fulfill orders with overseas clients. U.S. exports of condensate have been given an
important boost after pipeline company Enterprise Products Partners LP agreed annual
contracts with at least two major trading companies to sell the light crude, trade sources
said (Reuters International, 2015)
Enterprise Products Partners is one of the leaders in transporting and storing oil and other
natural gases. They are constantly involved in new projects and new ways to expand and
grow their company. Nevertheless, capital intensity is high for this industry, due to the
dependence on pipeline infrastructure. In 2014, for every dollar spent on labor, industry
operators are estimated to spend $1.59 on capital investments (Ibisworld US, 2015)Last
year they made a $5.9 billion deal to purchase Oiltanking Partners, the single largest oilstorage operator on the Gulf Coast. Storage of natural gases is at an all time high demand
right now. This merger gives it more then 10% of oil storage in this area along the
waterfronts of Texas and Louisiana with plans to build even more. (Wall Street Journal,
2015)
Technology used in the pipeline and storage aspect of natural gas and oil is
relatively simple and not to complexed. One of the most important technologies needed
in the oil pipeline business that many outsiders and even people involved from within is
the use of security features. This industry is more suspect to online hackers and different
attacks of malware from hackers then the financial industry is. Many reports show that
companies who spend over 1 million dollars and have the right personnel in place dont
face the same problems as companies with out the proper controls.
Enterprise Products Partners is strong player in the natural gas and crude oil
industries but they really have a strong hold on the natural gas liquid market. Today the
company controls more than 50% of the U.S.' propane and propane product export
market, and expects that number to grow as it heavily invests in its pipeline network to
deliver more product to the Gulf Coast, increase propane processing capacity, and expand
its export capacity in the Houston ship channel (Investopedia, 2015). They are using this
momentum to help them continue to move forward and help them lead the petrochemical

field. There are many new projects helping them get chemicals to there factories and
storage facilities along the gulf coast. EPP also is building its 270-mile Aegis Pipeline
header system to deliver ethane to US Gulf Coast petrochemical producers (Oil & Gas
Journal, 2015).

The biggest issue any company involved in with anything to do with oil or gas
right now is the ever changing market conditions and the new low prices everything
reached this year. This has forced many companies to make decisions on different
operations and new projects to determine if they are still worth the investment at the new
prices. Enterprise Products Partners (EPD) is shelving a proposed pipeline that would
have transported crude from North Dakota to Oklahoma, the company announced on
Friday (Yahoo Finance, 2014). Enterprise is not the only company having to make
operational cut backs and decisions to make cost cutting moves against the low oil prices.
"It's a clear indication that the lowering of oil prices and the dialing down of crude
demand for 2015 is taking its toll," said Vincent DeVito, partner at the law firm of
Bowditch & Dewey (Yahoo Finance, 2014).
The biggest challenge Enterprise Products Partners has faced due to market
concerns about lower prices is the layoff of workers in 2015. U.S. energy companies are
starting to cut drilling, lay off workers and slash spending in the face of an accelerating
decline in oil prices, which fell to a fresh five-year low Wednesday (Cook and Ailworth,
Wall Street Journal, 2015). Many of their wells are still able to produce a profit even with
prices below $50 a barrel. Although the companies revenue was down in the fourth
quarter of 2014 its operating profit was up. This is a sign of the downturn in the
economy and not necessarily negative sign of the company.

Many companies have been forced to stop drilling at pricier oil fields and focus
more attention on the more cost effective fields. This was a direct effect of the price of oil
dropping in recent months. An important thing that Enterprise Products Partners has
going for them is they are involved in many different aspects of this industry that keeps
revenue pouring in. From the oil production, moving of oil through pipelines, storing oil
and natural gas, producing petrochemicals, and the recent addition of shipping oil
overseas allows them to not rely on one thing to much. But wells considered high grade
can withstand much lower prices. For instance, some wells in South Texas are profitable
at prices of $30 a barrel, while the best in North Dakotas Bakken area can only withstand
a drop to under $50 a barrel, According to Enterprise Products Partners analysts (Cook
and Ailworth, Wall Street Journal, 2014).
Chief Executive Michael A. Creel said he believes the company is in a good
position to withstand the recent volatility in energy price (Calia, Wall Street Journal,
2015). The company has been very successful in spreading the assets out in into many
different sectors and divisions allowing them to gain revenue streams in a number of
different areas. Them also being largely fee based with there pipelines and oil storage
facilities plays a huge role in them not being as vulnerable in the fluctuating market
conditions. There continued investment in new infrastructure, including thousands of
miles of pipeline, new storage facilities along the highly competitive gulf coast and new
plants adding up to over six billion dollars sets the stage for a bright future and even more
growth. "As we begin 2015, the energy sector is entering another commodity price cycle.
We believe that Enterprise is well positioned to manage, adapt and prosper through this
cycle," Mr. Creel said in a news release. "Our businesses are diversified and primarily
fee-based (Calia, Wall Street Journal, 2015)."

Being a leader in the newly gained exporting business of lightly refined oil is a
great source of new revenue that company can use to help get through touch economic

time domestically. They have overcome a great operational feat by being the first
company within the United States to be able to gain permission and receive a license
from the United States to be able to export lightly refined oil. The purchase of Oiltanking
Partners in late 2014 that made them the leader of storage of natural gases in the Gulf
Coast and acquire more pipeline has left potential for great revenue growth within there
already owned assets. This platform and potential for a great amount of growth has led
many reasons to be excited and ready for a great amount of growth in the future.
Enterprise Products Partners has had very strong growth and returns on many
investments in there sixteen years since they went public. EPD has weathered numerous
operational challenges and met or exceeded expectations. They have had great success
with mergers and implementing new innovations at the right time and look to grow on
their success in the future to continue there push to the front of the industry. But in that
world, it is famous for being a tough competitor. "They really become a force of nature in
the areas they choose to compete in," said Mark Reichman, (Wall Street Journal, 2015).

Bibliography
Oil and Gas Journal, Web. 30 Mar. 2015.
"EPP to Add 50,000 B/d of Capacity to Panola NGL Pipeline." - Oil & Gas
Journal. Web. 30 Mar. 2015.
"Enterprise Products Reports Higher Volumes, but Results Shy;
Declining Energy Prices Weigh on Results." 29 Jan. 2015. Web. 30 Mar.
2015.
"How Falling Oil Prices Will Impact Economy--And The Keystone Pipeline
Debate." Forbes. Forbes Magazine. Web. 30 Mar. 2015.
"Rivals Hit Oil Exporter That Opened U.S. Spigot; Firms Complain Firm
Is Trying to Muscle Out Competitors." 25 Feb. 2015. Web. 30 Mar. 2015.
"U.S. Crude Exports Boosted as Enterprise Signs Term Contractssources." Reuters. Thomson Reuters, 27 Jan. 2015. Web. 30 Mar. 2015.