Enterprise Products Partners is talking to customers about providing commercial support for the potential addition of two more trains at its planned Mentone natural gas processing facility in Texas amid further growth in drilling activity in the Permian Basin, CEO Jim Teague said Wednesday.
The comments came as the Houston-based midstream operator reported a 40% year-on-year jump in first-quarter profits, even as overall revenue fell, thanks to lower costs and strong demand for most of its services.
In addition to the Permian, Enterprise has seen strength in Louisiana's Haynesville Shale, and in exports of NGLs and refined products. The results suggest the company's efforts to leverage its connectivity to the US Gulf Coast and global markets are working.
"Consistency and execution are essential in all facets of our business," Teague said during an investor conference call.
Mentone will be a key cog in the Permian wheel.
As envisioned when it was announced in 2019, the Loving County facility, which is expected to begin operations in the second quarter of 2020, will have the capacity to process 300 MMcf/d of gas and extract in excess of 40,000 b/d of NGLs. The plant, through additional infrastructure that is being added, will link to Enterprise's NGL system, including the Shin Oak pipeline, as well as Enterprise's Texas Intrastate gas pipeline network.
The initial plant is supported by a long-term acreage dedication agreement. During the call, Teague said Enterprise is in discussions with customers that could underwrite two more processing trains at Mentone. And, he suggested, the company may not be done there.
"That's another 80,000 b/d," Teague said. "I don't think that is going to be the end of our processing plants in the Permian."
Spokesman Rick Rainey said in an email responding to questions that Enterprise has hinted in the past it could add additional gas processing capacity in the Permian, but has not previously stated how many trains it may add.
For the first three months of 2019, Enterprise reported net income attributable to limited partners of $1.26 billion, or 57 cents a share, compared with profit of $901 million, or 41 cents a share, in the same period a year ago. Revenue fell 8% to $8.54 billion from $9.3 billion in Q1 2018.
Total gas transportation volumes in the quarter were a record 14.2 trillion Btu/d, compared with 13 trillion Btu/d in Q1 2018. Enterprise said it benefited from strength on its Texas Intrastate system and its Permian gas gathering system. Its Jonah and Piceance gathering systems reported lower volumes.
Along the Gulf Coast, Enterprise's connectivity to export markets, geared toward serving robust demand in Asia, has been a growth driver.
Teague said Enterprise has the flexibility if needed in the future to convert its Midland-to-Echo 2 crude pipeline back to NGL service. The system currently transports crude from the Permian in West Texas to markets in the Houston area.
In Q1, operating margins in Enterprise's petrochemical and refined products segment decreased year on year. Total segment pipeline transportation volumes also fell.
