Enterprise Product Partners (EPD) Sept 2024 Valuation Model and Risk Framework

This EPD valuation model includes comparable company valuation, financial forecasts, segment breakdown, and detailed operating model. Assumptions can easily be adjusted by the user.

On a potential pullback in oil related stocks, high dividend, large-cap midstream names like Enterprise Products Partners (EPD) with low exposure to commodities prices could be buying opportunities. Earlier in the year, we cut exposure to upstream energy stocks due to OPEC+ increasing production. Since then U.S. production has also risen to 13.9 million barrels per day (record), outpacing demand growth in a slowing global economy.

Business:

Enterprise Products Partners is one of the leading players in the North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, petrochemicals, and refined products. Its fully integrated, midstream energy asset network or value chain links producers of natural gas, NGLs and crude oil from some of the largest supply basins in the US, Canada, and the Gulf of Mexico with domestic consumers and international markets. The company conducts substantially all of its business operations through EPO and its consolidated subsidiaries.

Segments:

Enterprise Products operates through four business segments: NGL (natural gas liquids) Pipelines and Services, Crude Oil Pipelines and Services, Petrochemical and Refined Products Services, and Natural Gas Pipelines and Services.

The NGL Pipelines and Services segment generates about 40% of revenue and comprises the activities of natural gas processing plants. The segment is comprised of related NGL marketing activities, NGL pipelines, NGL fractionation facilities, related product storage facilities, and NGL marine terminals.

The Crude Oil Pipelines & Services segment brings in about 40% of revenue. It includes crude oil pipelines and related operations, crude oil storage and marine terminals, and crude oil marketing activities. Perhaps its most important pipeline is the Seaway pipeline that connects the Cushing, Oklahoma crude oil hub with markets in Southeast Texas

The Petrochemical and Refined Products Services segment engages in petrochemical and refined products transportation and services. It fractionates propylene to create the building blocks of carpet fibers, molded plastic parts for appliances, cars, and medical products, and packaging film. It accounts for about 20% of revenue.

NGL Pipelines and Services segment includes more than 20,000 miles of pipeline used to gather and transport natural gas from shale plays Eagle Ford, Haynesville, Permian and others. It leases underground salt dome natural gas storage facilities and conducts natural gas marketing activities. It accounts for approximately 10% of revenue.

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