Although Enterprise Products Partners LP (EPD) stock tends to rise and fall with oil prices, it is not involved in drilling and exploration. Enterprise Products is a pipeline and storage company that also processes natural gas.
EPD has a 5-year backlog of projects under contract. That may explain the stock’s recent price stability. Revenues look to be steady because of the project backlog. Enterprise Products also has strong cash flow, which may insulate it from rising interest rates because the company will not be as likely to have to borrow money.
Forward-looking capital expenditures (CAPEX) include a new natural gas processing plant in the Delaware Basin and a Houston storage facility that can store 2 million barrels of crude oil. Projects near completion include a pipeline and a propane processing plant.
Depressed oil prices have forced some energy companies to hang on the best they can and hope for an oil rebound that will lift them back to profitability. Other companies, such as EPD, have been quietly spending money on assets that can provide revenue and income for the future. Such companies may be the leaders if and when oil prices rise again.
Enterprise Products Partners is a Master Limited Partnership that provides distributions to investors on a quarterly basis. By maintaining a conservative distribution amount (currently about 5.9%), the company preserves cash.
The consensus estimate for a target price for EPD is $32.50 per share. With EPD trading at $26.69 mid-morning on October 24, the stock has room to grow. A rise in oil prices would most likely encourage analysts to raise the target price.
Of course, there is no guarantee oil prices will rise soon. Optimism may be warranted about Enterprise Products Partners, but it should be a cautious optimism that is dependent on oil prices making a definitive break to the upside.