abarrelfull wrote on 13 Jan 2014 20:15
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April 12, 2006
Enterprise Products Partners L.P. (NYSE:EPD) announced today that it has received initial flows of crude oil and natural gas into its Constitution oil and natural gas pipelines from Kerr-McGee's 100 percent-owned Constitution field and Kerr-McGee's and Noble Energy's 50 percent each-owned Ticonderoga field in the south Green Canyon area of the Gulf of Mexico. Current production into the pipelines from two Ticonderoga wells and one Constitution well is approximately 32,000 barrels of oil per day and 30 million cubic feet of natural gas per day, with five additional wells expected to begin flow from Constitution in 2006. Construction of the wholly owned pipelines was completed in late 2005 below budget, and Enterprise received initial production from the two fields in the first quarter of 2006.
The Constitution oil and natural gas pipelines are located in approximately 5,000 feet of water in the central Gulf of Mexico and are designed to provide gathering services for the Constitution and Ticonderoga fields, as well as other undeveloped blocks in the south Green Canyon area. The 32-mile, 16-inch natural gas pipeline has the capacity to transport up to 200 million cubic feet per day by connecting the fields to Enterprise's existing Anaconda Gathering System which gathers gas production from the Marco Polo area. The crude oil export pipeline is a 70-mile, 16-inch line with a capacity of approximately 100,000 barrels per day that connects the fields with the Cameron Highway Oil Pipeline and Poseidon Oil Pipeline systems at Cameron Highway's Ship Shoal 332B junction platform. Enterprise owns a 50 percent and 36 percent ownership interest in the Cameron Highway and Poseidon oil pipelines, respectively.
At the current volumes, our Constitution oil and gas pipelines will generate approximately $22 million in annualized gross operating margin, ramping up to approximately $48 million in annualized gross operating margin by the end of 2006 based on volumetric expectations. These amounts include the impact of both Constitution pipelines as well as additional equity earnings from our investments in Poseidon Oil Pipeline Company and Cameron Highway Oil Pipeline Company resulting from the expected increase in downstream volumes.
"Completion of the Constitution Oil and Gas Pipeline project extends the reach of our integrated value chain and provides flexible export solutions for producers developing the prolific south Green Canyon area," said Robert G. Phillips, Enterprise's President and Chief Executive Officer. "Producers in this area have access to crude oil markets in both Texas and Louisiana through our jointly owned Cameron Highway Oil Pipeline and Poseidon Oil Pipeline systems, and natural gas can reach markets on the Gulf Coast through our Anaconda Gathering System's interconnect to the ANR pipeline system. The integration of this project with our Cameron Highway and Poseidon oil pipelines provides additional cash flow to those assets, which enhances the cash return on our incremental investment in the Constitution pipelines."
The Constitution Pipeline project is part of Enterprise's previously announced portfolio of organic growth projects and was completed ahead of schedule.
Our estimates of annualized gross operating margin reflect a number of key assumptions including:
- Producers will meet publicly announced production targets, which affect the amount of crude oil and natural gas we expect to be transported on our offshore pipeline systems during the forecast periods.
- There will be no significant change in either the contractual or market-based transportation rates on the Constitution pipelines or adjoining pipelines in which we own an equity interest that are included in our estimate.
- There will be no significant production outages in the areas served by our pipelines or of throughput on the pipelines themselves as a result of unforeseen events, including hurricanes or tropical storms in the Gulf of Mexico.
If throughput rates are 10% less than our projected amounts, annualized gross operating margin would be $2.2 million lower based on current rates and $4.9 million lower based on anticipated end-of-year rates. Since we do not prepare GAAP financial forecasts at the project level, we are not able to provide reconciliations between project-specific gross operating margin amounts and consolidated operating income, which includes all aspects of our operations.
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