Enterprise Earnings: Record Pipeline Volumes Even in Seasonally Weak Quarter

Enterprise’s second-quarter results were quite healthy, despite seasonal weakness. Overall EBITDA improved 10% year over year to $2.4 billion. Equivalent pipeline transportation volumes increased 6% to a record 12.6 million barrels per day over the same time frame. After updating our model, our fair value estimate increases to $31 from $30 to reflect cash flows earned, while our wide moat rating is unchanged. We still anticipate respective EBITDA of about $9.9 billion and $10.3 billion in 2024 and 2025. The biggest contribution to the overall strength came from the natural gas liquids segment. Total gross operating margins jumped 18% to $1.3 billion from last year’s levels. Improved marketing profits because of wide spreads between Waha and other hubs and the addition of four natural gas processing plants to the fleet over the last year were the primary drivers. Higher fractionation profits from the addition of the twelfth fractionator in service also contributed. Reflecting the ongoing strength and need for natural gas liquids exports, Enterprise is moving forward with a Houston Ship Channel expansion, adding 300,000 barrels per day of propane and butane export capacity, due online in 2026.