Natural gas liquids (NGL) production is a significant growth opportunity for Enterprise Products Partners (EPD).
The midstream energy company has seen continued growth in natural gas and NGL production in the Permian. Enterprise now expects natural gas production to be roughly 3 Bcf/d higher in 2030 than the 28.9 Bcf/d forecasted at the company’s Investor Day in April 2024.
NGLs are extracted from raw natural gas. Gas from the Permian Basin consists of particularly high levels of these liquids.
“As has been the case for several years running, we continue to see even more rich gas volumes coming from the Permian than we had previously forecasted,” Enterprise Co-CEO James Teague said during the Q2 2024 Enterprise Products Partners LP Earnings Call on July 30.
Importantly, production has exceeded expectations despite weak natural gas prices. Strong oil prices have incentivized producers to continue drilling, according to Stacey Morris, head of energy research at VettaFi.
Oil prices are driving gas production as most natural gas production in the Permian is associated with gas. Associated gas is produced from oil wells.
Another positive driver impacting NGL production growth is increased efficiency. Permian gas plants are becoming more efficient, enabling them to extract more ethane, according to Enterprise SVP – Natural Gas Natali Gayden.
“One thing that has surprised people to the upside is the NGL production out of the basin,” Gayden said. “The capability of the plant and the portfolio of processing plants now there in the Permian just is much greater than past.”
Export Expansion Projects and Growth Opportunities
Enterprise currently has $6.7 billion of projects under construction, which includes three processing plants and associated gatherings. The new processing plants include one in the Midland Basin and two in the Delaware Basin.
Enterprise’s investments in expansion – including more processing plants, a new Bahia NGL line from the Permian, fractionation capacity, and expanding their export facility – will significantly enhance the NGL value chain.
Based on the anticipated production figures, there is not currently enough export capability, according to Teague.
Enterprise is adding 300,000 barrels per day of butane and propane capacity at its Houston Ship Channel export facility.
Midstream ETFs Provide Exposure to NGL Production Growth
Investors can gain exposure to NGL production growth through the Alerian MLP ETF (AMLP ) and the Alerian Energy Infrastructure ETF (ENFR ).
Enterprise is a top-five name in AMLP, making up nearly 12% of the MLP ETF by weight. Meanwhile, the midstream company is the second largest holding by weight in ENFR, weighted at 8.4%.
AMLP is based on the Alerian MLP Infrastructure Index (AMZI), which is a composite of energy infrastructure MLPs. Additionally, names in the index earn most of their cash flow from midstream activities.
ENFR tracks the Alerian Midstream Energy Select Index (AMEI), which includes North American midstream energy infrastructure companies. Furthermore, the index consists of MLPs (25%) and corporations (75%) engaged in the pipeline transportation, storage, and processing of energy commodities.
For more news, information, and analysis, visit the Energy Infrastructure Channel.
vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for AMLP and ENFR, for which it receives an index licensing fee. However, AMLP and ENFR are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of AMLP and ENFR.
