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Enterprise Products Partners forms JV to build ethylene export terminal, reports strong results

January 31, 2018

Houston-based Enterprise Products Partners LP (NYSE: EPD) announced on Jan. 31 it’s moving forward on a joint venture to build an ethylene export facility along the Gulf Coast.

The same day, the company announced record financial results for 2017.

The joint venture is with U.K.-based Navigator Holdings Ltd. (NYSE: NVGS), according to a press release. The companies signed a letter of intent in July but were still working on a definitive agreement at the time. Although plans announced in July proposed building the project at Enterprise’s Morgan’s Point complex, the companies now say the export terminal’s location and final investment decision “are subject to reaching acceptable arrangements with local taxing authorities,” per the release.

The facility is expected to have the capacity to export about 1 million tons of ethylene per year and refrigerated storage for 30,000 tons of ethylene, making it possible to load ethylene at rates of 1,000 tons per hour. The project is expected to be in service by the first quarter of 2020 and has long-term contracts with anchor customers including Kansas-based Flint Hills Resources and a major Japanese trading company, per the release. 

“This new ethylene export terminal will support the growing production of ethylene on the U.S. Gulf Coast by providing access to international markets,” A.J. “Jim” Teague, CEO of Enterprise’s general partner, said in the release. “By 2021, the petrochemical industry is expected to expand aggregate ethylene production capacity in Texas and Louisiana by nearly 50 percent to approximately 90 billion pounds per year. The resulting rapid growth in the supply of U.S. ethylene, combined with increased demand from international markets, like Asia, creates an ideal scenario in which markets abroad are able to diversify their supply by accessing cost-advantaged feedstocks made possible by the shale revolution in the United States.”

Additionally, the company is working on two ethylene projects around Mont Belvieu — a storage upgrade and a short pipeline. Those plans were announced in April.

In a separate Jan. 31 press release, Enterprise reported an increase in revenue and net income for both the fourth quarter and all of 2017, among other strong financial metrics. 

Revenue for the quarter increased 30 percent year over year to nearly $8.43 billion, beating analysts’ expectation of $7.05 billion, according to Yahoo Finance. Revenue for the year also increased 27 percent to more than $29.24 billion, compared to analysts’ prediction of $27.61 billion. 

Net income for the quarter grew 19 percent year over year to $797.3 million, and earnings per diluted unit increased 16 percent to 36 cents each, including non-cash impairment charges of about $15 million, or 1 cent per share. Net income for the year increased almost 12 percent to nearly $2.86 billion, with earnings per unit increasing 8 percent to $1.30 each, including charges of $50 million, or 2 cents per unit.

Analysts had expected earnings per unit of 35 cents for the quarter and $1.31 for the year. 

Additionally, Enterprise’s total gross operating margin for 2017 hit a record $5.7 billion, up 8 percent year over year, and 2017 distributable cash flow, excluding proceeds from asset sales, set a record of $4.5 billion, up 10 percent. 

“Enterprise reported record operating and financial results in 2017 as the energy industry began to emerge from a challenging three-year commodity cycle,” Teague said in the release. “We posted record liquid pipeline volumes and marine terminal volumes."

By Olivia Pulsinelli, Houston Business Journal