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We reaffirmed our Neutral recommendation on leading master limited partnership Enterprise Products Partners, L.P. (EPD - Analyst Report), on Nov 21, 2013. The partnership reported weak numbers for the third quarter due to higher quantum of expenses and weak performance by the Petrochemical & Refined Products Services segment.

Why Maintained?

Enterprise Products Partners is engaged in providing a wide range of midstream energy services to the producers and consumers of natural gas, natural gas liquids (NGL) and crude oil. The partnership's assets include 50,000 miles of onshore and offshore pipelines, approximately 200 million barrels of storage capacity for NGLs, refined products and crude oil, and 14 billion cubic feet of natural gas storage capacity.

We continue to view Enterprise Products Partners as a core holding in a master limited partnership (MLP) portfolio, given its string of organic growth projects, potential acquisitions, strong balance sheet and solid liquidity position. The partnership is one of the largest fully integrated midstream service providers with a positive long-term outlook given its significant geographic and business diversity.

Enterprise Products Partners increased its third quarter cash distribution rate by 6% to $0.69 per common unit, or $2.76 per unit on an annualized basis, thus marking the partnership’s 37th consecutive quarterly increase. With its diverse set of NGL, natural gas, crude oil and refined products midstream infrastructure assets, the partnership possesses fundamental strengths that will continue to support distribution growth.

Enterprise Products Partners has made capital investments of around $1.2 billion in the third quarter of 2013 and further expects to bring online $7.5 billion worth of major assets from 2013 through 2015, including $1.5 billion in the remaining part of 2013. The key projects consist of two NGL fractionators at Mont Belvieu; Texas Express NGL pipeline (TEP); Front Range NGL pipeline; extension of the Seaway crude oil pipeline; and the completion of Eagle Ford crude oil pipeline. The successful execution of these projects will be value accretive to future cash flows.

However, Enterprise remains vulnerable to macro conditions and unstable oil and gas prices, which in turn could hurt margins in NGL, natural gas and other businesses.

Zacks Rank & Other Picks

Currently, Enterprise Products Partners retains a Zacks Rank #3 (Hold).

However, some better-ranked oil and gas stocks include VOC Energy Trust (VOC - Snapshot Report), SM Energy Company (SM - Analyst Report) and Matador Resources Company (MTDR - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).
 

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