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Enterprise (EPD) Wins Appeal Against Energy Transfer Lawsuit

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Midstream energy partnership, Enterprise Products Partners L.P. (EPD - Free Report) recently received a favorable ruling from the US Fifth Circuit Court of Appeals in a lawsuit filed by Energy Transfer Partners, L.P. . This ruling reverses a $535 million verdict against the company.

Story So Far

In 2011, Enterprise Products and Energy Transfer agreed to team up over an oil pipeline project spanning from Cushing, OK to the Houston area of the Gulf Coast. Enterprise Products later dropped the agreement citing lack of customer support. Later, it teamed up with Enbridge Inc (ENB - Free Report) for a similar pipeline for a deal worth approximately $2 billion, for higher profit level. The pipeline deal with Enbridge involved moving crude oil from Oklahoma to Texas Gulf Coast refineries.

In 2012, Energy Transfer alleged that Enterprise Products had violated a binding deal and sued the latter. A judgment against Enterprise Products would have amounted to $535 million plus interests, a total of $620 million. The verdict included $319.4 million actual damage compensation, $150 million of lost profits and $66.4 million pre-judgment interest.

Recent Verdict

The new verdict - based on more than 60 volumes of exhibits, transcripts and arguments submitted by both the companies - from a three-judge panel, unanimously overturned the jury’s verdict, stating that Energy Transfer will receive nothing from Enterprise Products from this case.

Enterprise Products stated that it had signed a nonbinding letter of intent with Energy Transfer on Mar 16, 2011, which stated definitive agreements and board approval was required to form a formal partnership. Enterprise Products declared that no such agreement was signed.

Enterprise Products has expressed its gratitude to the Dallas Court of Appeals for reaffirming the importance of written contracts. It also believes the decision will have a significant impact on joint ventures in the Texas region.

About the Partnership

Enterprise Products, a leading master limited partnership (MLP), is engaged in providing a wide range of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGL), and crude oil. Enterprise Products has an extensive network of pipeline that spreads over almost 50,000 miles and earns stable fee-based revenues.

However, since 2012, long-term debt of Enterprise Products has risen at an exponential rate. As of Mar 31, 2017, the total long-term debt stands at $21.1 billion, while its cash and equivalents came in at only $107 million reflecting balance sheet weakness.

Price Performance

Enterprise Products has gained 1% year to date versus 8.6% loss recorded by the industry.

Zacks Rank and Stock to Consider

Enterprise Products presently has a Zacks Rank #3 (Hold).

A better-ranked stock in the oil and energy sector is Par Pacific Holdings, Inc. (PARR - Free Report) . It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Par Pacific’s sales for the second quarter of 2017 are expected to increase 45.2% year over year. The partnership delivered an average positive earnings surprise of 171.8% in the last four quarters.

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