Energy company Enterprise Products Partners L.P. (EPD) reported Wednesday a higher profit in its third quarter on lower expenses, despite a 27% fall in revenues on lower commodity prices. The company's top line missed market projections.
Net income for the quarter rose to $229.9 million from $211.0 million a year ago. Net income attributable to the company increased to $212.9 million or $0.36 per unit from $203.1 million or $0.38 per unit last year.
The company noted that the latest quarter net income was reduced by $50 million or $0.11 per unit, comprising a $33 million or $0.07 per share charge for the settlement of litigation related to the Texas Offshore Port System partnership, $10 million or $0.02 per share for costs associated with the recently completed merger of Enterprise and TEPPCO Partners, L.P., and a $7 million or $0.02 per share increase in non-cash expense related to accelerated depreciation and the retirement of certain assets. Meanwhile, results were benefited from $19 million or $0.04 per unit, of recoveries received under business interruption insurance related to Hurricane Ike.
In the previous year, the results included approximately $46 million or $0.11 per unit of repair expense related to the 2008 hurricanes.
On average, 16 analysts polled by Thomson Reuters expected earnings of $0.42 per share for the quarter. Analysts' estimate typically excludes one-time items.
Revenues for the third quarter of 2009 slid to $4.60 billion from $6.30 billion in the comparable period, primarily due to lower commodity prices, and missed five Wall Street analysts' consensus estimate of $4.73 billion.
Gross operating margin was $561 million, up from $479 million a year earlier, driven by volume growth and strong natural gas processing margins. Operating income was $365 million, higher than last year's $319 million, mainly on decline in total costs and expenses to $4.25 billion from $5.99 billion last year. Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, for the quarter was $514 million, compared to $453 million in 2008.
Commenting on the results, Michael Creel, president and chief executive officer of Enterprise, stated, "Enterprise reported another quarter of strong performance in the third quarter of 2009. NGL, crude oil and petrochemical pipeline volumes were a record 2.5 million barrels per day, while NGL fractionation and butane isomerization volumes were a record 453,000 and 104,000 barrels per day, respectively. Our natural gas pipeline systems continued to run at near record levels of 9.6 trillion Btus per day."
In its preceding second quarter, Enterprise Products reported a decline in net income attributable to company to $187 million or $0.32 per unit from $263 million or $0.52 per unit last year, hurt largely by non-cash charges and lower commodity prices. Quarterly revenues plunged to $3.51 billion from $6.34 billion a year ago.
Among peers, Spectra Energy Corp. (SE) is slated to release its third-quarter results on Thursday, November 5. Analysts project earnings of $0.26 per share on revenues of $986.24 million, compared to prior year's earnings of $0.49 million and revenues of $1.08 billion.
Dynegy Inc. (DYN) is slated to release financial results for the third quarter on November 5. Analysts expect the company to report earnings of $0.03 per share for the quarter on revenues of $877.54 million, lower than prior year's earnings and revenues of $0.04 per share and $997.00 million, respectively.
For the nine months of fiscal 2009, Enterprise's net income fell to $667.3 million from $755.3 million last year. Net income attributable to Enterprise Products was $624.8 million or $1.09 per unit, down from $726.0 million or $1.41 per unit a year ago. Nine-month revenues fell to $11.53 billion from $18.32 billion in the previous year.
Looking ahead, Creel said, "We continue to see strong demand for NGLs by the petrochemical and refining industries as an alternative to more costly crude oil derivatives. With few exceptions, we continue to experience volume growth on our major natural gas pipelines."
Enterprise on Monday said it completed its merger with TEPPCO Partners, L.P. (TPP), an energy logistics partnership, following which TEPPCO has become a wholly-owned subsidiary of Enterprise. It was on June 29, 2009, Enterprise announced its plan to acquire TEPPCO in an All-stock Deal. The merger is expected to open up new avenues of growth for Enterprise by diversifying its asset portfolio, strengthening its presence in key geographic regions, and offering new service options. With an enterprise value of about $30 billion, 48,000 miles of pipelines and market capitalization of $18 billion, the combined entity has become the nation's largest publicly traded partnership, Enterprise noted.
Regarding its deal with TEPPCO, Creel now stated, "We are working to quickly absorb the TEPPCO businesses into the Enterprise model. We are excited with the expansion of our integrated midstream energy system anchored by approximately 48,000 miles of pipelines and our ability to provide cost efficient and value added services to producers and consumers of natural gas, NGLs, petrochemicals, refined products and crude oil. We are confident that we can generate distributable cash flow growth for our unitholders as we integrate the TEPPCO assets and continue to develop our system."
EPD closed Tuesday's regular trading session at $29.31, up $0.07, on a volume of 1.5 million shares. In the past 52 weeks, shares have been trading between $16.21 and $30.37.
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