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Center Coast operating at full capacity despite US Gulf Coast flooding

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World Pipelines,

Center Coast has reported that all of its employees are safe following Hurricane Harvey, and it has been operating at full capacity ever since Harvey hit the US Gulf Coast and will continue to do so.

At present, the company has not heard of any permanent or long-term damage to the assets of any Fund constituents, but continue to monitor the situation and expect more detailed assessments from the companies over the next few weeks. Enterprise Products Partners L.P., one of its top holdings with significant assets on the Gulf Coast, reported that "at this time, none of the facilities have incurred any significant damage." Similarly, Targa Resources Corp., another top holding of the Fund with important assets on the Gulf Coast, reported that "damage to date to Targa facilities has been minimal … disruptions to operations are expected to be limited … normal operations will resume shortly after flood waters recede."

The company expects temporary outages and downtime for assets positioned in or connected to the affected regions of the Gulf Coast. The magnitude of the impact will depend on the length of the downtime and the contractual arrangement behind the cash flows generated by each impacted asset. To date, the impact of Hurricane Harvey and the related flooding appears to be transitory in nature and limited to asset downtime, with little or no impact to the long-term investment thesis of midstream infrastructure. For example, Genesis Energy, L.P., a midstream provider focused on the Gulf of Mexico and the Gulf Coast, indicated that operational impacts may impact quarterly results by less than 2% with no lasting impacts. Center Coast anticipate similar types of impacts to those midstream names with significant infrastructure on the coast, and believe that disclosures regarding any material cash flow impacts or downtime would need to be made within the week.

Assets with known downtime:

  • Upstream:
    • Certain producing Eagle Ford assets.
    • Select offshore platforms.
  • Downstream:
    • Refineries around Houston, Beaumont, Galveston, Port Arthur, and Lake Charles.
    • Petchem facilities, including a significant amount of ethylene capacity.
  • Midstream:
    • Assets associated with impacted upstream and downstream assets listed above.
    • Some offshore pipelines.
    • Onshore pipelines closer to demand centres.
    • Some Mont Belvieu fractionation.
    • Export facilities from Corpus Christi all the way to Louisiana.

Importantly, it appears that a large portion of the Fund's constituents should see limited or no impact from Harvey. Nevertheless, the company is staying abreast of the situation and will pass along material information as necessary.

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