Enterprise Products Partnerships

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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 oil-storage 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 don’t 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).”

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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 it’s 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 Dakota’s 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)."

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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