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Enterprise Products Grabs New Long-Term Propylene Supply Deal

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Enterprise Products Partners L.P. (EPD - Free Report) recently carried out a long-term polymer grade propylene agreement with Japan’s Marubeni Corporation. Enterprise Products’ second propane dehydrogenation plant near Mont Belvieu, TX — which is currently under construction — will likely be the source of supply to Japan’s olefins trader.

The second plant is expected to be capable of upgrading 35,000 barrels per day (bpd) of propane into 25,000 bpd of polymer grade propylene. This is likely to lead to production of 1.65 billion pounds of polymer grade propylene per annum. The petrochemical has massive global demand as a feedstock for the production of consumer, medical and industrial products. This unit is expected to come online in second-quarter 2023.

Once the project construction is completed, Enterprise Products will have a total output capacity of up to 11 billion pounds of polymer grade propylene per annum and the plant will be the largest production complex on a global basis. Seven propylene fractionators will produce around 8 billion pounds of polymer grade propylene per year, while two propane dehydrogenation plants will produce 3 billion pounds of polymer grade propyleneper annum.

The partnership’s polymer grade propylene network incorporates delivery pipelines of more than 300 miles, 26 connections and in excess of 5 million barrels of storage capacity. It also has an export terminal on the Houston Ship Channel. The latest deal with Marubeni should help the partnership generate steady cash flow in the long term.

Price Performance

The stock has risen 24.1% in the past three months compared with 31.9% jump of the industry it belongs to.

Zacks Rank & Other Stocks to Consider

Currently, the partnership has a Zacks Rank #2 (Buy). Other top-ranked players in the energy space include Chaparral Energy, Inc. (CHAP - Free Report) , TC PipeLines, LP (TCP - Free Report) and Bonanza Creek Energy, Inc. (BCEI - Free Report) , each holding a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chaparral Energy’s bottom line for 2020 is expected to rise 57.8% year over year.

TC PipeLines’ second-quarter 2020 earnings per share are expected to rise 1.3% year over year.

Bonanza Creek beat earnings estimates in the last four quarters, with average surprise of 8.7%.

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