GEL Genesis Energy, L.P.

Enterprise Products Partners L.P. (EPD) and Genesis Energy L.P. (GEL) have inked a construction agreement for a crude oil gathering pipeline to serve the Lucius development area in the Gulf of Mexico.

Southeast Keathley Canyon Pipeline Company LLC (“SEKCO”) - a 50:50 joint venture between Enterprise and Genesis, will be the owner and responsible for the construction.

Enterprise and Genesis have executed the crude oil transportation agreement with a group of six producer companies consisting of Anadarko Petroleum Corporation (APC), Apache Corp. (APA), ExxonMobil Corp. (XOM), Eni SpA (E), Petroleo Brasileiro (PBR), and Plains Exploration & Production Company (PXP).

The 149-mile SEKCO pipeline, capable of carrying 115,000 barrels per day (bpd), will link the Lucius-truss spar floating production platform to an existing junction platform at South Marsh Island 205 that forms part of the Enterprise-operated Poseidon pipeline system.

The SEKCO pipeline is expected to come online by mid-2014. It will also provide a reliable source of uninterrupted crude oil supplies to Gulf Coast refineries. The Lucius production area is estimated to contain reserves in excess of 300 million barrels of oil equivalent.

Enterprise with a 36% stake is the operator of the Poseidon pipeline system, which has a capacity to carry around 400,000 barrels per day of crude oil.

We continue to view Enterprise Products Partners as a core holding in an 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 holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. We maintain an Outperform rating on the stock for the long term.

 
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