Enterprise Products Partners said it plans to "embrace volatility and not be victimized" by low commodity prices by utilizing strong storage spreads and regional price dislocations to generate profits that were lost in the first quarter of this year.
Enterprise profits dropped 19.3pc to $651mn in the first quarter compared to a year earlier as the midstream operator sold more LPG export volumes based on long-term contracts rather than higher margin spot business opportunities that arose in the first quarter of 2014.
But the tables have turned since this season last year, as spot sales no longer fetch higher margins than termed supply.
"Right now we like our long-term contracts," chief operating officer Jim Teague said during Enterprise's first quarter earnings call this morning.
Enterprise's NGL storage positions will allow the company to capture a profit on the market contango seen in the forward curve, Teague said. Abilities to move and store both natural gas and ethane, including ethane rejection and re-injection plays along the Appalachia-to-Texas pipeline, is sparking opportunities to capture arbitrages between natural gas and ethane values.
"We can and do make these kinds of changes daily," Teague said.
A nearly 40pc reduction in year-on-year natural gas prices driven by weak heating demand during the 2014-2015 winter season means cheaper feedstocks for NGL production and lower power costs at gas processing plants.
Enterprise today said it entered into a 50/50 joint venture company with Occidental Petroleum to construct a 150mn ft3/d cryogenic natural gas processing plant in the Delaware basin. The facility will be owned by two groups' split company, Delaware Basin Gas Processing, with operations expected to begin in the middle of 2016.
Enterprise will operate the Eddy County, New Mexico, plant, and plans to build a 12-inch diameter pipeline that will connect the new facility to the existing Enterprise NGL system, opening access to the Mont Belvieu, Texas, storage and fractionation hub.
The company's nearby South Eddy 200mn ft3/d processing plant announced last September will come online in the first quarter of 2016. The addition of the new plant would bring total Delaware Basin capacity to 400mn ft3/d.
The midstream company has finishing building and commenced commercial operations for $4.4bn worth of capital expenditures since the beginning of 2014, including $300mn of investment in the first quarter of this year.
NGL pipelines, storage, fractionation and gas processing gross operating margins dipped by 10.9pc year-on-year to $695mn. NGL transported volumes declined by 148,000 b/d to 2.69mn bl while fractionation volumes ticked up by a slight 6,000 b/d to 798,000 b/d. Fee-based processing of natural gas saw volumes up 69mn ft3/d to 4.78bn ft3/d.
The dip in NGL transported volumes was attributed to lower recoveries in the Rocky Mountain regions which impacted deliveries on the Mid-America Seminole pipeline. The Mid-America Dixie line had reduced shipments as eastern region it serves saw a milder winter compared to last year.
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