As Permian Basin natural gas volumes continue to exceed expectations and drive record activity, Enterprise Products Partners LP has sanctioned a natural gas liquids (NGL) expansion to meet customers’ growing appetite for export capacity, executives said Tuesday.
Spring is typically the seasonally weakest for Enterprise, co-CEO Jim Teague said during the second quarter 2024 earnings call. However, for 2Q2024, the firm handled a near record of 12.6 million b/d pipeline volumes and 2.2 million b/d of marine terminal volumes. It also reported record fee-based natural gas processing, NGL pipeline and NGL fractionation volumes.
“I don’t think we have enough export capability based on what I see coming at us in the future,” Teague said. Executives estimated Permian associated gas, which is produced alongside oil, could further exceed previous forecasts.
The Houston-based midstream company processed a record 6.5 Bcf/d of natural gas during the quarter, up by 837,000 MMcf/d, or 15%, compared with the year-ago period.
NGL pipeline transportation volumes also reached an all-time high at 4.3 million b/d, up 9% over 2Q2023. NGL fractionation volumes increased year/year by 253,000 b/d to a record 1.6 million b/d.
The company’s reported gross operating margin was $2.4 billion, an increase of 11% from $2.2 billion the prior year. The NGL pipelines and services segment reported a gross operating margin of $1.3 billion for the second quarter from $1.1 billion a year earlier.
Enterprise’s Tony Chovanec, senior vice president for Fundamentals and Commodity Risk Assessment, noted that the company benefited from increased transportation volumes and marketing natural gas at market hubs with greater value than Permian benchmark Waha.
Waha Weakness
Year-to-date, NGI’s Waha natural gas price has averaged 18.7 cents/MMBtu as the hub’s prices have been weighed down by high storage inventories, strong Permian production and lackluster demand. Waha averaged negative 51.2 cents in 2Q2024, NGI’s Daily Historical Data show.
Producer activity, however, has not changed in the face of low Waha prices, Chovanec said.
“There is a lot of money on the table for producers to continue to produce because of the price of oil and how profitable they are,” Chovanec said. “Certainly none of them can like very weak prices at Waha. That doesn’t keep them from putting barrels on the table.”
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Chovanec said “rich gas continues the trend of exceeding both ours and producers’ expectations.” One of the main reasons is because producers are drilling in “some of the richer, gassier inches” of the Permian Delaware subbasin.
Growth Projects
Enterprise increased the bottom range of projected capital expenditures for 2024 to $3.5 billion from $3.25 billion to account for the latest project to add refrigeration capacity at its Enterprise Hydrocarbons Terminal (EHT) on the Houston Ship Channel.
The project would increase propane and butane export capabilities by about 300,000 b/d. The expansion would also increase instantaneous loading rates for the NGLs, while making additional capacity available for propylene exports. The expanded service is expected to begin by the end of 2026.
The need for increased liquefied petroleum gas capacity at EHT is being driven by the success Enterprise has had in contracting flexible product capacity at the Neches River Terminal (NRT) under construction in Orange County, TX. The first phase of the NRT buildout is expected to begin service in the second half of 2025. The second phase is projected to come online in the first half of 2026.
Currently, Enterprise has $6.7 billion in projects under construction. They include three processing plants. One is in the Permian Midland sub-basin and two are in the Delaware. The company also has the 550-mile-long, 600,000 b/d Bahia Pipeline in the works.
“All of these projects are backed by long-term contracts and significantly enhance what is already a very strong NGL value chain,” Teague said.
Looking ahead, Teague said Enterprise is likely to undertake additional projects to meet rising demand. Noting the expansion of the company’s primary petrochemical products system, Teague said, “I think we’ll be surprised in years to come how good we will do in that.”
Enterprise’s net profits rose to $1.4 billion (64 cents/share) in 2Q2024, compared with $1.3 billion (57 cents) a year earlier. Quarterly revenue of $13.48 billion was up 26.6% year/year.
