Enterprise Product Partners (NYSE:EPD)
Matthew | Michal | Jeremy | Lauring
Agenda
Executive Summary
Industry Overview
Company Overview
Valuation and Recommendation
Company Thesis
EPD intrinsic value value - $31.57
Strong Buy @ 24.16: 23.47% Margin of Safety
Buy @ 27.16: 13.97% Margin of Safety
Strategically positioned to take advantage of international increase demand in
Executive Summary
Market Cap - $56.0B
Enterprise Val - $76.8B DPS $1.53
Coverage Ratio 1.3x
Capital Projects $8.7B
Debt to Equity 1.02
Price 3/31/17 $24.55
Target Price: $31.57
● EPD is a midstream service company that stores transports and refines crude oil and natural gas.
● Strategically positioned the take full advantage of the increase in demand for NGL’s domestically and internationally (one of first to export GL’s)
● CEO has been with the company for more 17 years.
Key Figures
EPD Overview
Industry Overview
● Increasing demand for NGL’s in the international markets.
● 40 year ban lifted on exporting domestically produced crude
Industry Overview and Thesis
Background
Upstream Midstream Downstream
● Transportation
● Storage
● Exploration
● Drilling
● Production
● Refining
● Distribution
● Marketing
Background
Background
Background
Company Overview
Business Structure
%06
34% of LP
66% of LP
Public
Types of Contracts
1. Keep Whole and Margin-Band Contracts
take ownership of the mixed NGL extracted, EPD makes the margin in between the cost of the oil and the price it is sold for under contract.
2. Percent-of-Liquids
EPD takes ownership of the NGL’s sells them and the difference between cost and price is their revenue.
3. Percent-of-Proceeds
Take a percent of the proceeds the producer receives.
Contract Makeup
● Long term contracts with highly rated E&P companies
● Top 200 account for 95.7% of EPD’s 2015 Revenue
● Only 20 customers or 4.3% of revenues come from sub-investment grade customers
● Therefore low risk profile to weak oil prices / high costs.
Current Events
Acquisitions
Enterprise Product Partners(NYSE: EPD)
Oiltanking Partners(NYSE:OILT)
EFS Midstream LLC
Divestitures:
Offshore Pipeline & Services Business Segment
???
● LPG export expansion ● Aegis Ethane pipeline
● Ethane Export Terminal● Waha gas processing
plant
● PDH terminal● Infrastructure for
crude/refined products
● NGL & Propylene pipeline expansions
● Eagle Ford JV dock
SWOTStrength
● Asset infrastructure and Integrated Network ● Long-term contracts generally inflation
protected.● In lead position to export NGL’s and crude
Weakness● Macroeconomic Risks (Supply & Demand) ● Upstream bankruptcies nullify contracts. ● Long term debt
Opportunities ● Obtain Approval to build a pipeline connecting
the northeast region● Increase in global demand for natural gas
Threats ● Correlation between oil prices ● New gas transmission safety rule could add
costly expenses to existing infrastructure
Valuation and Recommendation
Key Stats of EPD and Competitors
Key Stats of EPD and Competitors
Key Stats of EPD and Competitors
Key Stats of EPD and Competitors
Key Stats of EPD and Competitors
Key Stats of EPD and Competitors
Key Stats of EPD and Competitors
Sensitivity Analysis of Gordon Growth Dividend Model
● Red is bad case
● Blue is base case
● Green is good case
Given our assumptions :
Football Analysis
Three Cases A. At the end of
2017 where will WTI be ?
Bad Case =$40
OK Case =$65
Good Case =$95
$31.57
Bad (10%)
Base (60%)
Good (30%)
Evaluation
Recommendation and Q&A
We believe the stock is a BUY at its current market price of $ 24.64 with a 21.95% upside to $31.57.