Units of Enterprise Products Partners have given back about 11% from a 52-week high of $40.17, changing hands near $35.72 intraday on September 30 . Nothing in the business broke. The most recent print — the second quarter, reported July 30 — was the best in the partnership's history: record Adjusted EBITDA of $2.8 billion, up 17%; record operational distributable cash flow of $2.3 billion, covering the declared distribution 1.9 times with $1.1 billion retained; record equivalent pipeline volumes of 14.7 million barrels a day, up 8%; and marine terminal volumes up 33% to 2.8 million barrels a day . What moved, in the same week, was the discount rate: the thirty-year Treasury reached a level last seen in 2002 and the ten-year note sat near 5.24% . A security whose equity story is a 6.3% cash yield ($2.24 annualized on the current unit price ) gets marked down when the risk-free alternative repriced that far, that fast.
That is the setup, and it is worth being blunt about what it implies. Enterprise is one of the largest publicly traded partnerships in America — more than 50,000 miles of pipeline, over 300 million barrels of liquids storage and 14 billion cubic feet of gas storage — organized into four reporting segments: NGL Pipelines & Services, which handles natural gas liquids and is the engine; Natural Gas Pipelines & Services; Crude Oil Pipelines & Services; and Petrochemical & Refined Products Services. The system is best understood as one machine rather than four. Permian gas goes into Enterprise processing plants, the extracted liquids move down Enterprise pipelines to Mont Belvieu, get fractionated in Enterprise towers, and leave the country through Enterprise docks on the Houston Ship Channel and the Neches River. The partnership earns a toll at every step. My case is that this machine compounds at mid-single digits with contracted visibility into 2029, that the market is unlikely to pay a materially higher multiple for it, and that the resulting total return is worth having at a price set by the bond market...