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Enterprise reports record results for 3Q18

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World Pipelines,

Enterprise Products Partners L.P. has announced its financial results for the three months ended 30 September 2018.

3Q18 highlights

  • Net income for 3Q18 includes US$204 million, or US$0.09 per unit on a fully diluted basis, of non-cash mark-to-market gains which were largely associated with the company’s hedging activities related to the Midland-to-ECHO crude oil pipeline.
  • Enterprise increased its cash distribution with respect to 3Q18 by 2.4% to US$0.4325 per unit compared to the distribution paid for 3Q17. The distribution will be paid 8 November 2018 to unitholders of record as of the close of business on 31 October 2018.
  • Enterprise reported distributable cash flow of US$1.6 billion 3Q18, which provided 1.7 times coverage of the US$0.4325 per unit cash distribution and resulted in US$632 million of retained distributable cash flow. Distributable cash flow for the first nine months of 2018 was US$4.4 billion, which provided 1.6 times coverage of the aggregate US$1.29 per unit of cash distributions for that period and resulted in US$1.6 billion of retained distributable cash flow. Retained distributable cash flow is available to reinvest in growth capital projects and reduces our need to issue additional equity.

Crude oil pipelines and services

Gross operating margin from the Crude Oil Pipelines & Services segment was a record US$594 million for 3Q18, which included non-cash, mark-to-market gains on financial instruments of US$200 million reflecting the reversal of previously recognized mark-to-market losses upon cash settlement of the underlying hedges and a narrowing of the crude oil commodity price differentials (basis spreads) between the Midland and Houston and Midland and Cushing markets. This compares to gross operating margin of US$190 million for 3Q17, which included US$22.0 million of non-cash, mark-to-market losses on financial instruments. Total crude oil pipeline transportation volumes increased 34% to 2.0 million bpd for 3Q18 compared to 1.5 million bpd for 3Q17. Total crude oil marine terminal volumes increased 40% to 632 million bpd for 3Q18 compared to 452 million bpd for 3Q17. Marine terminal loading volumes increased 231 million bpd for 3Q18.

Gross operating margin from the Midland-to-ECHO Pipeline and related business activities was a combined US$282 million for 3Q18. This included US$187 million of non-cash, mark-to-market gains on financial instruments executed to hedge the basis spread between Midland and Houston crude oil prices. At 30 September 2018, these hedges represented a weighted average of approximately 32% of the pipeline’s expected uncommitted capacity of 102 million bpd through 2020 at an average value of US$2.66/bbl.

Gross operating margin from the company’s crude oil marketing business increased US$84 million for 3Q18compared to the 3Q17. Included in this increase was a US$36 million increase attributable to non-cash mark-to-market activity. The mark-to-market gains this quarter were primarily attributable to narrowing basis spreads positively affecting hedges of uncommitted transportation capacity on the Basin Pipeline from Midland to Cushing. Results for 3Q18 also benefitted from higher sales margins, which contributed US$46 million to the increase in gross operating margin.

Gross operating margin from crude oil export activity at Enterprise’s marine terminal on the Houston Ship Channel increased US$20 million 3Q18 compared to 3Q17 due to a 206 million bpd increase in loading volumes and higher revenues from shipper make-up rights.

Enterprise’s West Texas, South Texas and Eagle Ford crude oil pipeline systems reported a combined US$17 million increase in gross operating margin primarily due to higher transportation volumes of 120 million bpd and fees. The Loving-to-Midland segment of the company’s West Texas crude oil pipeline system was placed into service in July 2018 and contributed to the overall 18 million bpd increase in transportation volumes for the West Texas system. The EFS Midstream System had a US$7 million increase in gross operating margin primarily due to higher deficiency fees and lower maintenance and operating costs.

Natural gas pipelines and services

Gross operating margin from the Natural Gas Pipelines & Services segment increased 27% to US$217 million for 3Q18 from US$171 million for 3Q17. Total natural gas transportation volumes for this segment increased 13% to 13 900 Btu/d this quarter compared to 12 400 Btu/d for 3Q17.

Gross operating margin from the Texas Intrastate System increased US$26 million, or 35%, to US$101 million for 3Q18, primarily due to higher capacity reservation and other fees. Natural gas pipeline volumes for this system were 4600 Btu/d in 3Q18 compared to 4400 Btu/d for the same quarter of 2017.

Enterprise’s Permian Basin Gathering System reported a US$9 million increase in gross operating margin for 3Q18 compared to the same quarter in 2017 on a 68% increase in gathering volumes and higher condensate sales volumes. The Haynesville gathering system in Louisiana had a US$5 million increase in gross operating margin this quarter, primarily from a 287 billion Btu/d increase in gathering volumes and higher fees as compared to the third quarter of last year.

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