Analysts Stephen Poe stephen-poe@uiowa.edu

Sagar Taurani sagar-taurani@uiowa.edu

Company Overview

Enterprise Products Partners L.P. provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products in the United States and internationally. Their 5 main business segments include: NGL pipelines and services, onshore natural gas pipelines and services, onshore crude oil pipelines and services, offshore pipelines and services, and petrochemical and refined products services. They currently operate 51,000 miles of natural gas, NGL, crude oil, refined products, and petrochemical pipelines. For the fiscal year ended 12/31/13, total revenues rose 12.08% to $47.73B.

Stock Performance Highlights 52 week High $41.38 52 week Low $15.19 Beta Value (Yahoo!) 0.83 Average Daily Volume (3m) 3.02M

Share Highlights Market Capitalization $70.16B Shares Outstanding 1.88B Book Value per share $8.40 EPS (ttm) $1.51 P/E Ratio (ttm) 24.75 Dividend Yield 3.90% Dividend Payout Ratio 93%

Company Performance Highlights ROA (ttm) 5.31% ROE (ttm) 18.64% Sales (ttm) $50.86B

0.93 Financial Ratios Current Ratio (mrq) Debt to Equity (mrq) 122.93

Current Price $37.40 Target Price $41.43-43.71

EPD Exhibits Strong Growth

• Domestic production of both crude oil and natural gas haveincreased steadily for five years up to 2014. Given EIAestimates and new drilling techniques, production of theseenergy products show no signs of contraction in the short-term. With increased production comes substantial demandfor midstream infrastructure. As the largest publicly tradedenergy partnership, EPD has significant opportunity tocapitalize on this increase in midstream demand.

• The emergence of the United States as an internationalsupplier of liquid natural gas gives EPD a competitiveadvantage, given its existing natural gas assets. Theirexisting NGL assets include 19,400 miles of NGL pipelines,15 NGL fractionators, NGL storage facilities with 160MMBbls capacity, and 24 NGL processing plants. Theseassets coupled with planned NGL capital projects will allowthem to further increase market share.

• The recent $6B acquisition of Oiltanking Partners has giventhem a much larger export asset base, specifically with NGLs.

• 2014 Q3 report showed record levels of transport volume andan increase in quarterly distributions of 5.8%.

• For the 9 months ended 9/30/14, capital expenditures were$2.7B. With the announced Bakken-Cushing and DelawareBasin projects and opportunities in Rocky Mountains and USGulf Coast regions, EPD exhibits strong potential growth.

One Year Stock Performance

Important disclosures appear on the last page of this report.

Enterprise Products Partners L.P. (NYSE: EPD) is the largest publicly traded energy partnership in the United States. We expect them to be the primary beneficiary in the midstream sector from increased domestic production of crude oil and natural gas. Also, with substantial and consistent capital growth projects in place, we believe cash flows will increase into the foreseeable future. Utilizing the Discounted Cash Flow valuation method, we have valued EPD shares at $41.43. Because EPD is currently trading at $37.40, we suggest that it is undervalued. We have placed a BUY rating on EPD stock.

Inflation

The relationship between inflation and oil prices has a cause and effect phenomenon built in. As oil falls down in prices, inflation rates tend to decrease with it. Similarly, inflation rates tend to increase when oil prices are high. The reason as to why this happens is because oil is used many industries and when companies are able to purchase oil at a low price, their cost goes down and as a result, the companies can sell their products at a low price, thus lowering inflation rates. The Consumer Price Index (CPI) is a measure of inflation and historically, the CPI has doubled when oil prices went up drastically. This was evident during the 1979 oil crises1.

In recent years, we don’t see a high correlation between the oil prices and inflation rate. After the tech boom in the 1900s, most companies now rely less on oil as the service industries started to boom. As a result, shocks in oil prices now do not affect the inflation rates.

Source: Macro Trends 2

Interest Rates

Energy midstream companies provide services to oil and gas producers by storing and transporting oil, natural gas, and refined products. Such companies distribute onshore and offshore products both nationally and internationally, which requires a large amount of capital. As an industry having a total debt-to-equity ratio of 49.6%3, most of the companies in this industry sector are heavily in debt. Companies in this sector are greatly affected by the fluctuations in interest rates. A decreasing interest rate would lower the cost of borrowing for the borrowers and allow them to present a stronger financial position.

Oil price shocks can affect the US treasury bonds yield. As of November 13, 2014, the T-bond yields strengthened as crude oil price reached its lowest point since 2010. The current 10-year Treasury bond is 2.345%4. When the price of oil falls down, the demand of oil goes up and companies are willing to borrow money in order to increase their inventory with low-priced oil. As a result, the interest rates go up.

US Gross Domestic Product (GDP)

Real GDP is widely regarded as an indicator to gauge the overall well-being of the economy and we expect the energy sector to rise and fall with the changes in Real GDP. After decreasing by 2.1% in the first quarter, the US Real GDP grew by 4.6% in the second quarter and 3.5% in the third quarter5. We attest that consumer spending and exports will continue to increase into the upcoming economic future. More specifically, we forecast that the US economy is self-sustaining and will produce a 2.2% annualized growth in Real GDP in 2014. Overall, we believe an increase in real GDP will benefit companies in all sectors, including the energy sector. Increased consumer confidence and business investment will lead to increased company profits and capital market investment.

The importation of crude oil by the United States has been decreasing since 2007. In 2007, the number of barrels imported annually was 4.9 billion (34% of GDP) and it decreased to 3.6 billion (22% of GDP) in 2013. On the other hand, oil exports started to increase in 2001 as it used to be 354 million barrels (3% of GDP). As of 2013, oil exports are 1.3 billion barrels (8% of GDP)6,7,8. One of the main reasons as to why change in oil demand and supply can be seen is because of an increase in domestic production of oil. Since the US has started to depend on its own oil reserve, it is less reliable on other countries for oil. In addition, oil companies have been continuously pressuring Congress to build pipelines so that they can utilize the domestic resources of oil. The Keystone XL pipeline has been approved by the congress on November 14, 2014 after 6 years of political

EXECUTIVE SUMMARY

ECONOMIC OUTLOOK

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conflict. With the current trend in place, the number of oil barrels imported should decrease to being 20% in 2015 while number of oil barrels export will increase gradually to 8.5% in 2015.

Source: The World Bank6,EIA7,8 Exchange Rate The US Dollar index measures the US dollar against the weighted average of foreign currencies, Euro being of the highest weight (57.6%) among the major currencies9. Some currencies included in the index export oil to the US. These countries include Venezuela and Saudi Arabia and their currency weights in the index are 0.3% and 0.61% respectively10.

Source: Bloomberg28

The US imports oil from many countries and has kept the exchange rate fixed to the US Dollar (USD) especially to their major suppliers of oil. The US Dollar to Venezuela bolivar (VEF) has a fixed exchange rate that gets revalued after a certain period of years. In the past 10 years, the rate

has fallen down from 1 USD = 2.14 VEF to 6.29 VEF11. With the bolivar having a weaker currency, their price of oil will increase but the fixed exchange rate does not allow the price to have a major impact on the imports to the US. Such fluctuations in the exchange rate have a small effect on the US import of oil. With Middle Eastern countries like Saudi Arabia and the United Arab Emirates, the exchange rates are fixed since their currencies were pegged with the US Dollar in 2003 and 1997 respectively12,13. This was done to reduce the risk of changing exchange rates. With the prices being stable, the US can continue to import oil from the Middle Eastern countries, if and when required. Oil imports from Saudi Arabia and Venezuela consist about 12% and 9% of the total oil imported to the US respectively14. This level has been the same for at least the past 10 years because of the fixed exchange rates. Natural Gas Prices Natural gas accounts for almost a quarter of US energy consumption, and the Henry Hub Natural Gas Price is the benchmark US pricing point. We analyze the Energy Sector with Henry Hub Natural Gas Prices, as do economists with the overall economy. Growth in demand for natural gas, largely from the electric power and industrial sectors, results in upward pressure on prices. Electric power amounts for 31.2% of the total natural gas consumption and the Industrial consumption amounts to 21.8% of the total natural gas consumption15. In the short run, spot prices dropped from $4.47/million British thermal units (MMBtu) at the beginning of July to $3.78/MMBtu at the end of the month16. We expect large growth numbers in the near and far future, with particularly greater growth from 2015-2018 due to the utilization of the Delaware basin. We expect the spot price to reach $4.00 by the end of the year and reach $4.75 by 2016. This growth will be attributed to high economic growth and increased consumption of energy products.

Source: EIA15

0%

20%

40%

60%

1990 1995 2000 2005 2010 2013

Barrels Imported & Exported % of GDP

Exports % of GDP Imports % of GDP

6,000,000

7,000,000

8,000,000

9,000,000

2008 2010 2012

MM

cf (i

n m

illio

ns c

ubic

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Natural Gas consumption

Electric Power Industrial

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Energy Production, Trade and Consumption

Energy production, trade, and consumption measure the dynamic and strength of the energy industry. The current 7-month total production of year 2014 is 49.822 quadrillion btu (quad), which is a little higher than the 7-month total of year 2013 (47.237 quad) and 2012 (46.011 quad). The total consumption of primary energy products decreased steadily during 2005 and 2013 from 100.282 quad to 97.534 quad. After that, the consumption amount maintained at a stable level, the 2014 7-month total is 57.906 quad17. Based on the trend of the data, we expect the consumption of energy products to be stable. The production is going to increase and the net import is going to decrease through 2014 since the 7-month total of net imports for 2014 (6.329 quad) is lower than that of 2013 (7.696 quad) and 2012 (9.535 quad)17.

Monthly Natural Gas Liquids Production is a good production indicator we can use to gauge the health of the energy sector. Natural gas liquids production grew 20% in June vs the prior year and reached a record high of 3 million barrels a day, supported by higher gas supply and NGL export demand. Exports have strengthened prices and improved margins by 25%. NGL production has surged this year, driven by gas production on the supply side and exports on the demand side. In May, NGL production rose 16.4% vs the prior year with new plants coming online in Texas and North Dakota17. The US has now become the largest producer of both oil and natural gas overtaking Saudi Arabia and Russia18. We expect this surging growth to continue in both the short and long run. We anticipate a growth of 5.1% in 2014 and 4.8% in 2015 for NGL production with the introduction of a new NGL plant by the end of 2014. Badlands NGL will build the new plant that will develop 1.5m tonne/year of polyethylene19. Overall, we expect the rapid growth in NGL production to increase exports, produce more energy infrastructure projects, and benefit the entire energy sector.

Industry Description

The Oil, Gas Storage & Transportation sub-industry includes companies that use pipelines to transport crude oil, natural gases, and petroleum products20. This transportation includes moving crude oil and natural gas from the extraction sites where they were found, to refineries, finally to storage areas where the oil will be distributed or stored for use21. Along with moving energy products from production to distribution sites, midstream companies offer export services that are vital to the global oil trade, via oil tankers. The current product line in this sub-industry contains crude oil and petroleum products. Some midstream companies, including EPD, run small upstream and downstream operations such as exploration and refining petroleum products.

A majority of midstream players are structured as Master Limited Partnerships (MLP) to combine the tax advantages of a partnership with the liquidity of a publicly traded stock38. This type of partnership is attractive to investors, due to its consistencies in paying high and frequent dividends.

Because the oil and gas being transported in this industry is not owned by midstream companies, revenues are generated from fee based haulage charges which are set by the Federal Energy Regulatory Committee (FERC). While world oil and gas prices do not directly affect midstream revenues, they affect oil and gas production and consumption, a major determinant for the supply and demand of midstream infrastructure, therefore indirectly affecting industry revenues.

Our long-term outlook for the Oil & Gas Transportation and Storage industry is positive. Despite historically low crude oil prices, we believe continued increases in crude oil and natural gas production coupled with the emergence of shale gas reserves in the United States will provide significant infrastructure opportunities for companies in the midstream.

US Oil & Gas Production Growth

In the five years up to 2014, US oil and gas production has increased at an annualized rate of 5.1%22. Despite a recent downward trend in crude oil prices, we expect an increase in production and consumption due to expanding global demand and increased drilling operations in the US. We attribute expected growth to new drilling techniques such as extracting crude oil from shale plays. Booming US oil

INDUSTRY ANALYSIS

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production and high natural gas demands from the industrial and power sectors provide significant investment opportunities for the midstream sector. The EIA estimates crude oil production to reach 9.5 million bbl/d and natural gas production to grow 2.0% into 2015.

Source: EIA22

Because of this rise in domestic production, the EIA estimates the net import share to decline to 20% in 2015, the lowest level since 1968. Also, because of sharp increases in domestic production, in June 2011, the Interstate Natural Gas Association of America published a study that concluded that the US and Canada will require an annual average midstream investment of $10 billion per year over the next 25 years to accommodate growing oil and natural gas supply and demand infrastructure needs. The US Energy Information Administration (EIA) expects the United States to achieve energy independence over the next three decades as it boosts production of crude oil, natural gas, natural gas liquids and renewable energy24.

Source: EIA23

Increase in Natural Gas Demand

We believe a strong demand for natural gas, specifically from NGLs will require significant growth in the midstream sector. Based on EIA estimates, the US will be transformed from a natural gas importer to a net exporter over the next three years. They attribute this to shale gas supply and demand outside North America. This benefits midstream companies, as means of transportation will be in high demand.

Source: CohenSteers24

We also believe the US midstream sector will benefit from LNG price disparities. Using estimates from the EIA and FERC, we believe LNG export capacity could increase to 2 trillion cubic feet of gas per day by 202024.

Because of Enterprise Products Partners’ strong natural gas fundamentals and existing natural gas asset base, we expect them to capitalize on this global trend.

Source: CohenSteers24

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Competitive Landscape Competition in the midstream industry stems from fees charged for transportation and quality of their services. Because pipelines are recognized as the safest and most efficient way of transport, competition comes from other companies running pipelines from the same extraction sites. The midstream industry is characterized with high barriers to entry. Large capital requirements generally only allow for existing midstream players to expand or for large integrated oil companies to acquire pipeline space. Also, because of high costs associated with pipeline infrastructure, large contracts must be in place into the foreseeable future in order to make investments viable. Another significant barrier to entry comes with federal regulation. State and FERC regulations must be met and may be multiplied due to pipelines crossing several state lines. The industry is highly concentrated with the 20 largest companies accounting for over 75% of industry revenues.

Source: Sadif25

As existing midstream players compete to capitalize on the increase in domestic production of oil and gas, capital growth projects are key in gaining market share. As Enterprise Products Partners has $2.7B in expenditures for the 9 months ended 9/30/14 and estimated total expenditures of $3.2B in 2014, we suggest that they have gained a competitive advantage along with other companies with expenditures greater than $3B. This is how their capital expenditures compare across the industry:

Source: FactSet39 Overview Enterprise Products Partners L.P. is a North American midstream energy company that provides services to producers and consumers of natural gas, NGLs, crude oil, petrochemicals and refined products. Their midstream assets link producers of natural gas, NGLs and crude oil from some of the largest supply basins in the United States, Canada, and Gulf of Mexico with domestic consumers and international markets26. Their operations are separated into five business segments. These segments include: NGL pipelines and services, onshore natural gas pipelines and services, onshore crude oil pipelines and services, offshore pipelines and services, and petrochemical and refined products services. The company's key services include the following: Natural gas transportation, gathering, processing, and storage, NGL storage, transportation and importing and exporting, crude oil and refined products storage, transportation, petrochemical transportation and storage27. Enterprise Products Partners corporate strategy aims to capitalize on expected increase in the production of oil and gas as well as the expected demand growth for natural gas, NGLs, crude oil, petrochemicals, and refined products. This strategy involves expansion through growth capital projects and acquisitions of midstream assets. Revenue For fiscal year 2013, Enterprise Products Partners revenue grew by 12.08% to $47.73B. The proportion of total revenue by business segment were as follows:

COMPANY ANALYSIS

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Source: EPD 10-k26 NGL Pipelines and Services26 The NGL Pipelines and Services segment includes their natural gas processing operations, NGL marketing activities, NGL and related product storage, NGL fractionation, and NGL import and export terminal operations. This segment includes 19,400 miles of NGL pipelines, 15 NGL fractionators, storage facilities with 160 MMBbls of storage space, and 24 processing plants located across Colorado, Louisiana, Mississippi, New Mexico, Texas, and Wyoming. Onshore Natural Gas Pipelines and Services26 The onshore natural gas pipelines and services segment is responsible for gathering and transporting natural gas in Colorado, Louisiana, New Mexico, Texas, and Wyoming as well as the related natural gas marketing activities. Onshore natural gas assets include 19,600 miles of pipeline and leased underground salt dome storage facilities that are essential to their natural gas operations. These pipelines gather and transport natural gas from major producing areas such as the Eagle Ford Shale region. Onshore Crude Oil Pipelines and Services26 The onshore crude oil pipeline and services segment gathers and transports crude oil in New Mexico, Oklahoma, and Texas to refineries as well as crude oil marketing activities. Assets include 4,600 miles of onshore crude oil pipelines, crude oil storage terminals in Oklahoma and Texas, and 470 tractor-trailer tank trucks. Offshore Pipelines and Services26 The offshore pipelines and services segment serves drilling and development regions in the northern Gulf of Mexico offshore Texas, Louisiana, Mississippi, and Alabama. Assets include 2,300 miles of offshore natural gas and crude oil pipelines and six offshore hub platforms. Because of a Gulf of Mexico oil spill in 2010, unrelated to Enterprise Products Partners activities, increased government

regulation has slowed offshore exploration and production, making it difficult to expand their offshore asset base. Petrochemical and Refined Products Services26 The petrochemical and refined products services segment includes propylene fractionation and transportation, butane isomerization and transportation, octane enhancement, marine transportation, and refined products transportation. Assets include 680 miles of propylene pipelines, 4,200 miles of refined products pipelines, and other related production facilities. Enterprise Products System Map

Source: Enterprise Products Partners27

EPD’s top 5 competitors include Spectra Energy Partners (SEP), Williams Partners (WPZ), Energy Transfer Partners (ETP), ONEOK Partners (OKS), and Kinder Morgan Energy Partners (KMP).

Source: Company Websites27,29,30,31,32 EPD is attempting to differentiate itself from its competitors through the growth of their broad asset base, mainly through pipeline acquisition. Because of the capital intensive competitive environment, they compete to gain strategic locations and midstream assets with existing midstream operators and integrated energy companies.

Ticker Revenues Gross Margin Net Income EPS Miles of PipelineEPD 47,748 3,586 2,597 1.38 51,000SEP 1,965 1,118 987 5.59 17,000WPZ 6,685 1,823 611 1.45 27,203ETP 46,339 2,734 -78 -0.19 34,974OKS 11,867 943 528 2.35 24,700KMP 12,550 3,978 1,569 2.42 80,000

As of 2013

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SWOT Analysis Strengths Enterprise Products Partners is the largest publicly traded energy partnership in the US and has a very strong midstream asset base. Their operating assets include:-

Their total assets have grown by an average of 8.61% each of the past 3 years. This gives them a strong market position and the opportunity to grow. These assets are also strategically linked to the major supply basins giving them strong business position across the energy value chain. Weaknesses EPD’s capital structure has a significant amount of debt. In FY2013, their long-term debt level was $16.2B. This large amount of debt may increase their cost of capital and adversely affect their financial position in the future or hinder their plans for strategic growth projects. Opportunities EPD has several strategic growth projects in place. In FY2013, they spent approximately $3.6B on energy infrastructure projects. In order to capitalize on expected increases in natural gas, NGL, and crude oil production we expect EPD to invest in production development areas. Specifically, these areas include the Rocky Mountains and US Gulf Coast regions, including the Barnett Shale, Haynesville Shale and Eagle Ford Shale producing regions. The proposed Bakken-Cushing and Delaware Basin projects present a significant opportunity for growth. In October of 2014, EPD announced its investment in the proposed Bakken-Cushing crude pipe. The proposed pipe would be 1,200 miles and would have a capacity of more than 700,000 b/d, pending its initiation in 2016-2017. In September of 2014, EPD announced it will build a processing plant and NGL pipe infrastructure to handle growing Delaware Basin production. The proposed plant would have a capacity of 200 mmcf/d, doubling their current processing capacity in the region36. Also, the project includes 80 miles of gas gathering lines and 75 miles of NGL transportation pipelines. The Delaware Basin assets are expected to begin operations in the first quarter of 2016.

Source: Bakken Shale33 Threats Increasing environmental regulations and competition from fully integrated oil companies present themselves as threats to EPD’s financial well-being. With increased focus on environmental responsibility in the US, new FERC regulations and costs may cut into operating margins. Also, fully integrated companies may increase their midstream presence with the expected increases in oil and gas production. With access to large amounts of capital, integrated companies such as Chevron may take on their own midstream projects in the future. Oiltanking Partners Acquisition On October 1, 2014, EPD announced its acquisition of Oiltanking Partners. The two phase acquisition was made for a total of $6B. In phase 1, EPD acquired 66% of the company for $2.2B in EPD units, $2.2B of cash, and $0.2B of notes receivable. They have proposed a second phase that will include the acquisition of the remaining 34% for $1.4 in EPD units. The Oiltanking assets have significantly increased EPD’s export presence and will help their future export growth due to their access to waterborne markets in the Houston Ship Channel34. Positive Third-Quarter 2014 Earnings Enterprise Products Partners reported third-quarter earnings that were in line with most estimates. Earnings of 37 cents per limited partner unit were reported. Also, record levels of NGL, crude oil, refined products, and petrochemical pipeline volumes were reported. Enterprise transported 5,245 million barrels per day of NGL, crude oil, refined products, and petrochemical products, up 2% on a year-over-year basis35. This upward trend provided an increase of 5.8% in quarterly distributions per common unit.

Piplines 51,000 miles of pipelinesStorage 200 million barrels of NGL, refined products, crude oil storage capacity

14 billion cubic feet of natural gas storage capacityNatural Gas Processing 24 natural gas processing plantsMarine Services 55 tow boats, 176 bargesFractionation 22 NGL and propylene fractionatorsPlatforms 6 offshore hub platformsNGL Import/Export 14 MBbls/hr import capacity

14 MBbls/hr export capacity

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Our valuation of Enterprise Products Partners employed the Discounted Cash Flow (DCF), Economic Profit (EP), Dividend Discount Model (DDM), and Relative P/E valuation methods. Using the DCF and EP methods, we arrived at a price of $41.43. The Dividend Discount valuation approach produced an intrinsic value of $43.71. We attribute the price spread to our assumption of a 100% payout ratio, which increases the value given by discounted dividends. Last, our Relative P/E model produced a stock value of $49.52 in comparison to its top 5 competitors. EPD is currently trading at $37.40, which is near our target price range of $41.43 – 43.71. Revenue Decomposition We decomposed our revenue into 5 business segments that Enterprise Products Partners currently operates under in order to more accurately forecast total revenues. These business segments include: NGL Pipelines and Services, Onshore Natural Gas Pipelines and Services, Onshore Crude Oil Pipelines and Services, Offshore Pipelines and Services, and Petrochemical and Refined Products and Services. Accounting for each segments weight in total revenues, we forecasted revenue growth using acquisition information, current and projected growth projects, along with industry analysis. With high focus on years 2014-2016, we forecasted revenues and selected volumes simultaneously using acquisition and growth project data. More specifically, the Oiltanking Partners acquisition, Bakken-Cushing pipeline, and Delaware Basin projects guided our revenue estimates. We estimate $10.2B to be spent on projects going online during this time period. We attribute 10% growth for Onshore Crude Oil Pipeline revenue in 2015 to the Bakken-Cushing project and high growth in the NGL pipeline business segment to the Delaware Basin project. Last, the Oiltanking Partners acquisition expanded EPD’s export presence severely which is the reason we assume 48.10% growth in the Offshore Pipelines and Services segment for 2014. Capital Expenditures Using the first three quarterly reports released in 2014, we assume capital expenditures of $3.2B in 2014. Because of the large demand for midstream infrastructure and growing domestic oil and gas production, we have included significant capital expenditures in our forecast horizon. In 2015, we assume an investment of $3.8B and reduce this number over our horizon to $1.9B in 2023. Our model

assumes these expenditures are financed through a combination of long-term debt, equity issuance, and cash. Dividends/Payout Ratio Enterprise Products Partners has the obligation to distribute most of their earnings under its Master Limited Partnership structure. Historically, they have kept a payout ratio between 93-96% for the past three years because of this. Because of historical payout ratios and their MLP structure, we assume a payout ratio of 100%. Therefore, our earnings per share is equivalent to our dividends per share throughout our forecast horizon. Share Issuance In our model, we assumed equity issuances were made to finance the acquisition of Oiltanking Partners and capital expenditures. For the acquisition of Oiltanking Partners, Enterprise Products Partners paid them $2.2B in common units during 2014, and will pay $1.4B common units during 2015. In order to have sufficient capital for growth projects in 2014-2018, we assume issuance of common units, depending on capital expenditure projections and available cash balances. We assume an issuance of $1B in common units during 2014 and $0.2B in years 2015-2018. Weighted Average Cost of Capital (WACC) We calculated the weighted average cost of capital (WACC) using cost of equity and cost of debt components. The market value weights we used were 81% for equity and 19% for debt. For the cost of equity calculation, we used the 30 year US Treasury Yield of 3.07%. We selected a risk premium of 4.64% which is a geometric average of the market returns less US T-Bond yields from 1928-2013. Our beta of 0.77 was calculated by averaging out the betas estimated by Yahoo, Google, and NASDAQ. The resulting cost of equity is 6.63%. Enterprise Products Partners’ COGS comprises mostly of variable costs and as a result, its beta is also low when compared to the market beta of 1. We used Standard and Poor’s credit rating of BBB+ to proxy our calculated cost of debt. The yield-to-maturity of a 10-year Enterprise Products Partners bond is 3.594%, which was used as our pre-tax cost of debt. The tax rate of 2.00% used in our calculation was found by finding an average of income taxes paid divided by taxable income. This assumption was made because of their MLP tax benefits and lack of clear marginal tax rate. As a result, we calculated an after-tax cost of debt of 3.52%. The market value of equity we used was calculated by taking the current stock price multiplied by shares outstanding. The

VALUATION DISCUSSION

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market value of debt is equal to the total of short-term debt, current portion of long-term debt, long-term debt, and operating leases. Using the total market values of equity and debt, we found the appropriate weights used in the WACC calculation. Our resulting WACC is 6.03%. Relative Valuation We used Enterprise Products Partners top competitors to construct a relative valuation model. These companies include: Spectra Energy Partners, Williams Partners, Energy Transfer Partners, ONEOK Partners, and Kinder Morgan Energy Partners. We selected these companies because they not only are EPD’s main competitors, but they also have the same master limited partnership structure and provide the same services. Using earnings per share estimates for 2014 and 2015, our relative valuation model produces an implied relative price to earnings value of $49.52 for 2014 and $42.29 for 2015. DCF and EP Valuation Our DCF and EP models yielded an intrinsic value of $41.43. Key inputs in this valuation include continuing value growth, continuing value return on invested capital, weighted average cost of capital, and the cost of equity. We assume a CV growth rate of 2% using historical real GDP data. The 2% growth rate coincides with the steady state we believe Enterprise Products Partners will achieve in 2023. This rate is relatively low, due to a shift towards more sustainable energy sources after our forecasted horizon. We suggest that the DCF and EP models produce a more effective stock price because they take into changes in income statement accounts, capital expenditures, and sources of growth financing. Dividend Discount Model The Dividend Discount Model yielded an intrinsic value of $43.71 for Enterprise Products Partners shares. The DDM approach produces a share price that is slightly higher than our DCF and EP models due to our assumed high payout ratio. We again use our assumption of 2% continuing value growth.

We have created six different sensitivity analysis tables to examine the effects on the intrinsic value by changing 11 key assumptions against each other. Continuing Value Return on Invested Capital (CV ROIC):

The CV ROIC depends on the operations of the company relative to the capital expenditures made in the future. As Enterprise Products Partners increases their capital expenditures, their ROIC falls down as beginning invested capital will be low, which eventually results in a lower intrinsic value. Similarly, Enterprise Products Partners can have more income flowing through their daily operations and raise their NOPLAT and eventually their ROIC. As a result, if the CV ROIC goes by 2%, the intrinsic value tends to increase by $0.68. WACC: According to our calculations, Enterprise Products Partners’ WACC is at 6.03%. By changing debt and equity balances, the WACC can be affected which will eventually create a small effect on the intrinsic value. Enterprise Products Partners have 81% of their funds coming from shareholders equity. Therefore, an increase of 50% in their shares outstanding will increase their WACC by 0.17%, causing a decrease of $3 of intrinsic value. Since Enterprise Products Partners majorly depends on equity to fund its projects, they has to cautiously fund projects. Long-Term debt and Capital Expenditure: Our analysis shows that funding capital expenditures through the use of long-term debt will have a small effect on the intrinsic value. Enterprise Products Partners can choose to fund their projects by issuing debt if the interest rates are low. Doing so will allow them to protect the intrinsic value from undergoing drastic changes in the intrinsic value. By choosing to increase capital expenditures by $1 million through the use of debt, the intrinsic value will be lower by $1.17 which is a relatively smaller effect in comparison to using equity to fund the same capital expenditure. Cost of Goods Sold (COGS) as a % of Sales and Revenue Growth: The average COGS as a % of sales was 89.82% over the past 15 years. This percentage has been around the same value over the years since majority of the costs are dependent on the use of pipelines and storage facilities and these costs are mostly variable in nature. As more of such systems are used, the revenue and the COGS increases in a similar proportion. Based on the sensitivity analysis, a growth in revenue tends to increase the intrinsic value. However, raising the COGS as a % of sales tends to decrease the intrinsic value. Therefore, an increase or a decrease in both the variables has a slight effect on the intrinsic value. With inefficient cost management, the COGS could increase and thus, a 0.5% increase in COGS as a % of sales and 1.5% growth in revenue could potentially decrease the intrinsic value by 9.7%. Selling, Administrative and General Expenses (SG&A) as a % of sales: Over the past 15 years, the SG&A has been a very small percentage of sales. There has been a downward trend for the

SENSITIVITY ANALYSIS

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past 15 years since energy companies are less dependent on selling expenses and more dependent on cost of manufacturing, transporting and storing energy products. With the current trend, over the coming years, the SG&A as a % of sales will decrease and this decrease will have a minor effect on the intrinsic value. Risk Premium and Risk-free rate: The market risk premium depends on the risk-free rate and the risk-free rate majorly depends on the long-term treasury yield. Although, the fluctuations of such variable are outside the control of the company, a small change in these variables can have a significant impact on the intrinsic value made by the DCF and EP models since they ultimately change the WACC of the company. With the Fed cutting monthly asset purchases to $35 billion, the interest rates will increase, resulting in an increase of long-term T-bond yields37. Based on our analysis, an increase of 0.5% in the risk-free will slightly increase the risk premium by 0.5% (an increase in risk premium is also seen historically), will decrease the intrinsic value by 19.8%. Beta: We calculated the beta of Enterprise Products Partners to be 0.77, which is an average of betas used by different databases. Since the COGS is variable in nature, the beta is smaller than 1. The 5 year monthly return of the EPD stock is 0.74. A change of 0.1 in beta will change the intrinsic value by 13.4% which shows how beta can significantly affect the intrinsic value. Continuing Value (CV) growth: The CV growth depends on Real GDP growth. Historically, Real GDP growth have been around 2%. By 2023, we estimate Enterprise Products Partners to reach a steady state and so our CV growth is assumed to be 2%. Although, we don’t expect a change in this rate, a small change occurrence shifts the intrinsic value for the DCF, EP and DDM models. According to our sensitivity analysis, the intrinsic value of DCF and EP models will change by 9.5% if CV growth rate changes by 0.5%.

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Important Disclaimer This report was created by students enrolled in the Security Analysis (6F:112) class at the University of Iowa. The report was originally created to offer an internal investment recommendation for the University of Iowa Krause Fund and its advisory board. The report also provides potential employers and other interested parties an example of the students’ skills, knowledge and abilities. Members of the Krause Fund are not registered investment advisors, brokers or officially licensed financial professionals. The investment advice contained in this report does not represent an offer or solicitation to buy or sell any of the securities mentioned. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Krause Fund may hold a financial interest in the companies mentioned in this report. References

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25 - Sadif Analytics. 2014. “Is There Long-Term Value in Enterprise Products Partners L.P.?” Summary Due Diligence Report, Ilhavo, Portugal

26 - Enterprise Products Partners L.P. 2013. "Form 10-K " ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 .

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28 - "DOLLAR INDEX SPOT (DXY) Spot Chart." Bloomberg.com. Accessed November 18, 2014. http://www.bloomberg.com/quote/DXY:CUR/chart.

29 - "Kinder Morgan - A Different Kind of Energy Company." Kinder Morgan - A Different Kind of Energy Company. Accessed November 17, 2014. http://www.kindermorgan.com/. 30 - "Spectra Energy." Spectra Energy. Accessed November 18, 2014. http://www.spectraenergy.com/about-us/at-a-glance/. 31 - "ONEOK FIELD SERVICES COMPANY, L.L.C." |Company Profile|Vault.com. Accessed November 18, 2014.http://www.vault.com/company-profiles/oil-gas/oneok-field-services-company/company-overview.aspx.

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33 - "Bakken Shale Maps." Bakken Shale News. Accessed November 18, 2014. http://bakkenshale.com/maps/

34 - Barclays. 2014. "Enterprise Products Prtns LP $10B Projects Online 2014-2016." Equity Research Report.

35 - "Enterprise Products Q3 Earnings In Line on Record Volumes." - October 31, 2014. Accessed November 18, 2014. http://www.zacks.com/stock/news/152513/enterprise-products-q3-earnings-in-line-on-record-volumes.

36 - "Enterprise to Build Natural Gas Processing Facility and Pipelines to Serve Delaware Basin." Yahoo Finance. Accessed November 18, 2014. http://finance.yahoo.com/news/enterprise-build-natural-gas-processing-130000777.html. 37 - Sharaf, Samantha. "Fed Cuts Monthly Asset Purchases To $35 Billion At June Meeting, Markets Waits For Yellen Talk." Forbes. June 18, 2014. Accessed November 18, 2014. http://www.forbes.com/sites/samanthasharf/2014/06/18/fed-cuts-monthly-asset-purchases-to-35-billion-at-june-meeting-markets-waits-for-yellen-talk/.

38 - "Master Limited Partnership (MLP)." Definition & Example. Accessed November 17, 2014. http://www.investinganswers.com/financial-dictionary/commodities-precious-metals/master-limited-partnership-mlp-803..

39 - FactSet. 2014. Enterprise Products Partners L.P. Financial Items.

Other Sources Used:

"Federal Energy Regulatory Commission." Federal Energy Regulatory Commission. Accessed November 17, 2014. http://www.ferc.gov/.

"GICS Sub-Industry Summary: Oil & Gas Storage & Transportation." S&P Capital IQ NetAdvantage. Accessed November 17, 2014. http://www.netadvantage.standardandpoors.com/NASApp/NetAdvantage/cp/companyIndustryPage.do.

"US Energy Information Administration - EIA - Independent Statistics and Analysis." Short-Term Energy Outlook. Accessed November 12, 2014. http://www.eia.gov/forecasts/steo/report/us_oil.cfm.

"Oil Pipeline Transportation in the US." IBISWorld. October 1, 2014. Accessed November 16, 2014. http://clients1.ibisworld.com/reports/us/industry/default.aspx?entid=1179

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"MarketLine Advantage." Enterprise Products Partners L.P. SWOT Analysis. December 1, 2013. Accessed November 16, 2014. http://www.marketresearch.com/MarketLine-v3883/.

Oil & Gas Transportation & Storage Industry Information, via Bloomberg LP, accessed November 2, 2014.

"Yahoo Finance - Business Finance, Stock Market, Quotes, News." Yahoo Finance. Accessed November 18, 2014. http://finance.yahoo.com/.

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ENTERPRISE PRODUCTS PART. Revenue Decomposition

Fiscal Years Ending Dec. 31 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

NGL Pipelines and ServicesSales of NGLs and related products 16,725 14,219 15,916 17,886 19,173 20,707 22,053 23,222 24,174 24,948 25,572 26,211 26,866 Midstream services 759 950 1,204 1,353 1,451 1,567 1,669 1,757 1,829 1,888 1,935 1,983 2,033 Total 17,483 15,168 17,120 19,239 20,624 22,274 23,722 24,979 26,003 26,835 27,506 28,194 28,899 Growth -13.24% 12.87% 12.38% 7.20% 8.00% 6.50% 5.30% 4.10% 3.20% 2.50% 2.50% 2.50%Proportion of Total Revenue 39.45% 35.62% 35.87% 36.35% 36.08% 36.47% 36.53% 36.56% 36.56% 36.56% 36.56% 36.56% 36.56%

Selected VolumetricNGL transportation volumes (MBPD) 2,284 2,472 2,787 2,898 3,014 3,135 3,260 3,391 3,526 3,668 3,741 3,816 3,892 NGL fractionation volumes (MBPD) 575 659 726 770 816 865 917 972 1,030 1,092 1,113 1,136 1,158 Equity NGL production (MBPD) 116 101 126 132 142 153 161 169 177 186 190 193 197 Fee-based natural gas processing (MMcf/d) 3,820 4,382 4,612 4,843 5,085 5,339 5,606 5,886 6,181 6,490 6,619 6,752 6,887

Onshore Natural Gas Pipelines and ServicesSales of natural gas 2,867 2,395 2,572 2,987 3,077 3,200 3,360 3,495 3,638 3,754 3,848 3,944 4,043 Midstream services 864 957 967 1,123 1,157 1,203 1,263 1,314 1,368 1,412 1,447 1,483 1,520 Total 3,730 3,353 3,539 4,111 4,234 4,403 4,623 4,808 5,006 5,166 5,295 5,427 5,563 Growth -10.12% 5.54% 16.17% 3.00% 4.00% 5.00% 4.00% 4.10% 3.20% 2.50% 2.50% 2.50%Proportion of Total Revenue 8.42% 7.87% 7.41% 7.77% 7.41% 7.21% 7.12% 7.04% 7.04% 7.04% 7.04% 7.04% 7.04%

Selected VolumetricNatural gas transportation volumes (BBtus/d) 13,231 13,634 12,936 13,065 13,196 13,328 13,461 13,596 13,732 13,869 14,008 14,148 14,289

Onshore Crude Oil Pipelines and ServicesSales of crude oil 15,963 17,549 20,371 21,594 23,753 25,297 26,941 28,369 29,532 30,477 31,239 32,020 32,821 Midstream services 99 113 279 296 325 347 369 389 405 418 428 439 450 Total 16,061 17,662 20,650 21,889 24,078 25,643 27,310 28,758 29,937 30,895 31,667 32,459 33,270 Growth 9.97% 16.92% 6.00% 10.00% 6.50% 6.50% 5.30% 4.10% 3.20% 2.50% 2.50% 2.50%Proportion of Total Revenue 36.24% 41.48% 43.27% 41.35% 42.13% 41.98% 42.06% 42.09% 42.09% 42.09% 42.09% 42.09% 42.09%

Selected VolumetricCrude oil transportation volumes (MBPD) 678 828 1,175 1,187 1,282 1,339 1,400 1,463 1,528 1,597 1,613 1,629 1,646

Offshore Pipelines and ServicesSales of natural gas 1.1 0.4 0.5 0.7 0.8 0.9 0.9 1.0 1.0 1.1 1.1 1.1 1.1 Sales of crude oil 9 3 6 8 9 10 11 11 12 12 12 13 13 Midstream Services 246 188 153 227 250 270 286 301 313 323 331 340 348 Total 256 192 159 236 260 280 297 313 326 336 345 353 362 Growth -25.20% -16.76% 48.10% 10.00% 8.00% 6.00% 5.30% 4.10% 3.20% 2.50% 2.50% 2.50%Proportion of Total Revenue 0.58% 0.45% 0.33% 0.45% 0.45% 0.46% 0.46% 0.46% 0.46% 0.46% 0.46% 0.46% 0.46%

Selected VolumetricNatural gas transportation volumes (BBtus/d) 1,065 853 678 698 719 741 763 786 810 834 838 842 846 Crude oil transportation volumes (MBPD) 279 300 307 316 326 335 346 356 367 378 379 381 383 Platform natural gas processing (MMcf/d) 405 291 202 203 204 205 206 207 208 209 209 209 209 Platform crude oil processing (MBPD) 17 17 16 17 18 19 19 20 21 23 23 23 23

Petrochemical and Refined Products and ServicesSales of petrochemicals and refined products 6,001 5,471 5,569 6,635 7,083 7,543 7,996 8,419 8,764 9,045 9,271 9,503 9,740 Midstream Services 782 738 690 822 877 934 990 1,043 1,085 1,120 1,148 1,177 1,206 Total 6,782 6,209 6,259 7,456 7,960 8,477 8,986 9,462 9,850 10,165 10,419 10,680 10,947 Growth -8.46% 0.80% 19.14% 6.75% 6.50% 6.00% 5.30% 4.10% 3.20% 2.50% 2.50% 2.50%Proportion of Total Revenue 15.31% 14.58% 13.11% 14.09% 13.93% 13.88% 13.84% 13.85% 13.85% 13.85% 13.85% 13.85% 13.85%

Selected VolumetricPropylene fractionation volumes (MBPD) 73 72 74 76 79 81 83 86 88 91 93 95 97 Butane isomerization volumes (MBPD) 101 95 94 113 135 162 167 172 177 183 186 190 194 Standalone DIB processing volumes (MBPD) 28 46 67 70 72 75 78 82 85 88 92 95 99 Octane additive and related plant production volumes (MBPD) 17 16 20 21 22 22 23 24 25 26 27 28 30

Transportation volumes, primarily refined products and petrochemicals (MBPD) 783 689 702 720 738 756 775 794 814 834 851 868 886

Total Consolidated Revenues 44,313 42,583 47,727 52,932 57,156 61,078 64,939 68,320 71,121 73,397 75,232 77,113 79,041

Growth -3.90% 12.08% 10.90% 7.98% 6.86% 6.32% 5.21% 4.10% 3.20% 2.50% 2.50% 2.50%

ENTERPRISE PRODUCTS PART. Income Statement

Fiscal Years Ending Dec. 31 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Income StatementSales 44,489 42,541 47,748 52,932 57,156 61,078 64,939 68,320 71,121 73,397 75,232 77,113 79,041COGS excluding D&A 40,470 38,233 42,944 47,544 51,339 54,862 58,329 61,367 63,883 65,927 67,575 69,265 70,996Gross Margin 4,019 4,307 4,804 5,387 5,817 6,216 6,609 6,953 7,239 7,470 7,657 7,848 8,045

Depreciation & Amortization Expense 1,007 1,105 1,218 1,294 1,378 1,474 1,532 1,576 1,592 1,608 1,621 1,630 1,635Depreciation 777 901 1,012 1,102 1,211 1,329 1,406 1,467 1,497 1,526 1,549 1,568 1,581Amortization of Intangibles 230 204 205 192 167 145 126 109 95 83 72 62 54Gross Income 3,012 3,202 3,586 4,093 4,439 4,742 5,078 5,377 5,647 5,862 6,036 6,218 6,409

SG&A Expense 124 127 120 146 158 169 179 189 197 203 208 213 218EBIT (Operating Income) 2,888 3,075 3,467 3,947 4,281 4,573 4,898 5,188 5,450 5,659 5,828 6,005 6,191

Nonoperating Income - Net 204 124 47 75 77 80 82 85 87 90 93 96 99Interest Expense 720 750 772 611 696 788 843 882 898 923 941 955 967Unusual Expense - Net 256 39 77 - - - - - - - - - - Pretax Income 2,116 2,411 2,665 3,410 3,663 3,865 4,137 4,391 4,639 4,826 4,980 5,146 5,323

Income Taxes 27 (17) 58 58 63 66 71 75 79 82 85 88 91Equity in Earnings of Affiliates - - - - - - - - - - - - - Consolidated Net Income 2,088 2,428 2,607 3,352 3,600 3,799 4,067 4,316 4,560 4,744 4,895 5,058 5,232Minority Interest Expense 41 8 10 10 10 10 10 10 10 10 10 10 10Net Income 2,047 2,420 2,597 3,342 3,590 3,789 4,057 4,306 4,550 4,734 4,885 5,048 5,222

Total Shares Outstanding 1,772 1,807 1,880 1,968 2,002 2,007 2,011 2,015 2,015 2,015 2,015 2,015 2,015Dividends per Share 1.2 1.3 1.4 1.7 1.8 1.9 2.0 2.1 2.3 2.3 2.4 2.5 2.6Payout Ratio 101.1 93.5 95.7 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0EPS (basic) 1.2 1.3 1.4 1.7 1.8 1.9 2.0 2.1 2.3 2.3 2.4 2.5 2.6

ENTERPRISE PRODUCTS PART. Balance Sheet

Fiscal Years Ending Dec. 31 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Balance SheetAssetsCash 58 20 123 144 191 229 184 206 288 254 233 242 211 Accounts Receivables 4,545 4,353 5,482 5,925 6,614 7,068 7,515 7,906 8,231 8,494 8,706 8,924 9,147 Inventories 1,112 1,088 1,093 1,475 1,593 1,702 1,810 1,904 1,982 2,045 2,096 2,149 2,202 Prepaid and Other Current Assets 353 381 326 332 339 345 352 359 367 374 381 389 397 Total Current Assets 6,069 5,843 7,023 7,876 8,737 9,345 9,861 10,376 10,867 11,167 11,417 11,704 11,957

Property, Plant & Equipment - Gross 27,430 30,955 34,018 37,785 41,877 45,077 47,977 50,177 52,377 54,477 56,477 58,377 60,277 Accumulated Depreciation 5,238 6,109 7,071 8,173 9,385 10,714 12,120 13,587 15,084 16,610 18,159 19,727 21,308

Net Property, Plant & Equipment 22,192 24,846 26,947 29,611 32,492 34,362 35,857 36,590 37,293 37,867 38,318 38,650 38,969 Total Investments and Advances 1,860 1,395 2,437 2,512 2,590 2,669 2,752 2,836 2,924 3,014 3,106 3,202 3,301 Net Goodwill 2,092 2,087 2,080 6,113 7,221 7,221 7,221 7,221 7,221 7,221 7,221 7,221 7,221 Net Other Intangibles 1,656 1,567 1,462 1,270 1,103 959 833 723 628 546 474 412 358

Net Intangible Assets 3,749 3,654 3,542 7,383 8,324 8,180 8,054 7,944 7,849 7,767 7,695 7,633 7,579 Deferred Tax Assets - 2 - 9 10 10 11 12 13 13 13 14 14 Other Assets 257 197 189 249 269 288 306 322 335 346 354 363 372 Total Assets 34,125 35,936 40,139 47,641 52,422 54,854 56,839 58,080 59,280 60,173 60,904 61,566 62,192

Liabilities & Shareholders' EquityST Debt & Curr. Portion LT Debt 500 1,547 1,125 1,125 1,300 750 800 350 521 521 521 521 521 Accounts Payable 985 892 874 1,241 1,340 1,432 1,522 1,602 1,667 1,721 1,764 1,808 1,853 Other Current Liabilities 5,948 5,318 6,240 7,664 8,276 8,844 9,403 9,892 10,298 10,628 10,893 11,166 11,445 Total Current Liabilities 7,432 7,756 8,239 10,030 10,916 11,026 11,725 11,844 12,487 12,870 13,178 13,495 13,819

Long-Term Debt 14,029 14,655 16,227 18,626 21,084 23,185 24,248 25,149 25,690 26,186 26,598 26,932 27,221 Deferred Tax Liabilities 91 24 61 52 56 59 63 67 71 74 76 78 81 Other Liabilities 353 205 172 252 272 291 309 325 339 349 358 367 376 Total Liabilities 21,906 22,640 24,698 28,960 32,328 34,560 36,345 37,386 38,586 39,479 40,210 40,872 41,498

Common Equity 12,465 13,558 15,574 18,815 20,227 20,427 20,627 20,827 20,827 20,827 20,827 20,827 20,827 Accumulated Gains/Losses (351) (370) (359) (359) (359) (359) (359) (359) (359) (359) (359) (359) (359) Treasury Stock - - - - - - - - - - - - - Total Shareholders' Equity 12,113 13,188 15,215 18,456 19,868 20,068 20,268 20,468 20,468 20,468 20,468 20,468 20,468 Accumulated Minority Interest 106 108 226 226 226 226 226 226 226 226 226 226 226 Total Equity 12,219 13,296 15,440 18,682 20,094 20,294 20,494 20,694 20,694 20,694 20,694 20,694 20,694

Total Liabilities & Shareholders' Equity 34,125 35,936 40,139 47,641 52,422 54,854 56,839 58,080 59,280 60,173 60,904 61,566 62,192

ENTERPRISE PRODUCTS PART. Historical Cash Flow Statement

Fiscal Years Ending Dec. 31 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Cash FlowOperating ActivitiesNet Income / Starting Line 120 221 242 85 84 220 353 600 534 954 1,155 1,384 2,088 2,428 2,607 Depreciation, Depletion & Amortizatio 25 41 52 95 128 195 421 447 524 566 833 985 1,007 1,105 1,218 Depreciation and Depletion 22 33 43 73 101 161 329 352 415 466 678 746 777 901 1,012 Amortization of Intangible Assets 3 8 9 22 27 34 92 95 109 100 155 239 230 204 205 Deferred Taxes & Investment Tax Cre -- -- -- 2 11 10 9 14 8 6 5 8 12 (66) 38 Deferred Taxes -- -- -- 2 11 10 9 14 8 6 5 8 12 (66) 38 Other Funds (2) 28 26 55 81 48 116 30 84 68 138 114 (44) 7 79 Funds from Operations 144 290 320 237 304 473 898 1,092 1,150 1,594 2,131 2,490 3,064 3,473 3,942 Changes in Working Capital 25 71 (37) 93 121 (94) (266) 83 441 (357) 246 (190) 267 (583) (76) Receivables -- -- -- (127) (54) (453) (364) 156 (703) 761 (1,062) (681) (716) 197 (1,140) Inventories -- -- -- (84) 50 (44) (149) (66) (14) (15) (317) (438) 136 (228) 39 Accounts Payable -- -- -- 24 (7) 110 46 (12) 54 (3) (7) 151 123 (50) 14 Other Accruals -- -- -- 276 126 295 189 (52) 1,023 (1,057) 1,629 798 761 (410) 1,047 Other Assets/Liabilities -- -- -- 5 6 (1) 12 58 82 (42) 4 (21) (37) (92) (36) Net Operating Cash Flow 169 361 283 330 425 379 632 1,175 1,591 1,237 2,377 2,300 3,331 2,891 3,866

Investing ActivitiesCapital Expenditures (21) (244) (150) (74) (148) (156) (864) (1,341) (2,197) (1,985) (1,586) (2,041) (3,868) (3,622) (3,408) Capital Expenditures (Fixed Assets) (21) (244) (150) (72) (146) (156) (864) (1,341) (2,186) (1,979) (1,584) (2,041) (3,868) (3,622) (3,408) Capital Expenditures (Other Assets) - - - (2) (2) - - - (11) (5) (1) - - - - Net Assets from Acquisitions (208) - (226) (1,621) (37) (725) (327) (277) (36) (202) (107) (1,314) - - - Sale of Fixed Assets & Businesses 0 0 1 0 0 7 45 4 12 42 4 106 1,034 1,199 281 Purchase/Sale of Investments (62) (31) (116) (14) (472) (64) (41) (138) (343) (134) (19) (8) (30) (610) (1,094) Purchase of Investments 62 31 116 14 472 64 88 138 343 134 19 8 30 610 1,094 Sale/Maturity of Investments - - - - - - 48 - - - - - - -- - Other Funds 26 7 - - - 9 56 63 10 (133) 161 5 86 14 (36) Other Uses - - - - - - (2) (9) (47) (133) - (35) - (44) (62) Other Sources 26 7 - - - 9 58 71 58 -- 161 40 86 58 26 Net Investing Cash Flow (265) (269) (491) (1,708) (657) (929) (1,130) (1,689) (2,554) (2,412) (1,547) (3,252) (2,778) (3,019) (4,258)

Financing ActivitiesCash Dividends Paid (112) (140) (164) (215) (310) (439) (717) (843) (958) (1,037) (1,255) (308) (1,974) (2,179) (2,400) Change in Capital Stock (5) (1) 1 168 565 835 638 848 420 141 911 525 532 817 1,792 Repurchase of Common & Preferred (5) (1) (18) (13) - - - - (2) (2) (2) (4) (11) - - Sale of Common & Preferred Stock - - 19 181 565 835 638 848 421 143 913 529 543 817 1,792 Issuance/Reduction of Debt, Net 195 105 450 1,331 (107) 126 562 471 1,550 2,138 (292) 1,118 914 1,665 1,149 Change in Long-Term Debt 195 105 450 1,331 (107) 126 562 471 1,550 2,138 (292) 1,118 914 1,665 1,149 Issuance of Long-Term Debt 350 595 450 1,968 1,926 5,935 4,192 3,378 6,008 8,666 7,362 6,462 8,289 8,342 13,829 Reduction in Long-Term Debt (155) (490) - (637) (2,033) (5,809) (3,631) (2,907) (4,458) (6,528) (7,654) (5,344) (7,376) (6,676) (12,681) Other Funds (1) (1) (7) (24) 100 23 34 19 (32) (70) (201) (373) (70) (179) (107) Other Uses (1) (1) (7) (26) (13) (6) (6) (9) (32) (70) (340) (1,478) (79) (186) (223) Other Sources 0 0 - 2 113 29 39 28 -- -- 139 1,105 9 7 115 Net Financing Cash Flow 78 (37) 280 1,260 249 544 516 495 979 1,171 (837) 961 (599) 124 433

Net Change in Cash (19) 55 72 (118) 17 (6) 18 (19) 17 (4) (7) 10 (46) (4) 41

ENTERPRISE PRODUCTS PART. Forecasted Cash Flow Statement

Fiscal Years Ending Dec. 31 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Operating ActivitiesNet Income 3,342 3,590 3,789 4,057 4,306 4,550 4,734 4,885 5,048 5,222 Depreciation 1,102 1,211 1,329 1,406 1,467 1,497 1,526 1,549 1,568 1,581 Amortization 192 167 145 126 109 95 83 72 62 54 Accounts Receivable (443) (689) (454) (447) (391) (324) (263) (212) (218) (223) Inventories (382) (118) (109) (108) (94) (78) (63) (51) (52) (54) Prepaid and Other Current Assets (7) (7) (7) (7) (7) (7) (7) (7) (8) (8) Deferred Tax Assets (9) (1) (1) (1) (1) (1) (1) (0) (0) (0) Other Assets (60) (20) (18) (18) (16) (13) (11) (9) (9) (9) Accounts Payable 367 99 92 91 79 66 53 43 44 45 Other Current Liabilities 1,425 612 568 559 490 406 330 266 272 279 Deferred Tax Liabilities (9) 4 3 4 4 4 3 2 3 3 Other Liabilities 80 20 19 18 16 13 11 9 9 9 Net Cash flow from Operating Activities 5,598 4,869 5,356 5,680 5,962 6,207 6,393 6,546 6,719 6,899

Investing ActivitiesCapital Expenditures (3,767) (4,092) (3,200) (2,900) (2,200) (2,200) (2,100) (2,000) (1,900) (1,900) Investments (75) (77) (80) (82) (85) (87) (90) (93) (96) (99) Intangible AssetsGoodwill (4,033) (1,108) - - - - - - - - Net Cash Flow from Investing Activities (7,875) (5,277) (3,280) (2,982) (2,285) (2,287) (2,190) (2,093) (1,996) (1,999)

Financing ActivitiesSt Debt - 175 (550) 50 (450) 171 - - - - Long Term Debt 2,399 2,458 2,101 1,063 901 541 497 412 334 290 Common Equity 3,241 1,412 200 200 200 - - - - - Acc. Gain/Losses - - - - - - - - - - Acc. Minority Interest - - - - - - - - - - Dividends (3,342) (3,590) (3,789) (4,057) (4,306) (4,550) (4,734) (4,885) (5,048) (5,222) Net Cash Flow from Financing Activities 2,298 456 (2,038) (2,744) (3,654) (3,838) (4,237) (4,474) (4,714) (4,932)

Net Change in Cash 21 47 38 (46) 23 82 (34) (21) 9 (31) Beginning Cash Flow 123 144 191 229 184 206 288 254 233 242 Ending Cash Balance 144 191 229 184 206 288 254 233 242 211

ENTERPRISE PRODUCTS PART. Common Size Income Statement

Fiscal Years Ending Dec. 31 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Income StatementSales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%COGS excluding D&A 90.97% 89.88% 89.94% 89.82% 89.82% 89.82% 89.82% 89.82% 89.82% 89.82% 89.82% 89.82% 89.82%Gross Margin 9.03% 10.12% 10.06% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18%

Depreciation & Amortization Expense 2.26% 2.60% 2.55% 2.45% 2.41% 2.41% 2.36% 2.31% 2.24% 2.19% 2.15% 2.11% 2.07%Depreciation 1.75% 2.12% 2.12% 2.08% 2.12% 2.18% 2.16% 2.15% 2.10% 2.08% 2.06% 2.03% 2.00%Amortization of Intangibles 0.52% 0.48% 0.43% 0.36% 0.29% 0.24% 0.19% 0.16% 0.13% 0.11% 0.10% 0.08% 0.07%Gross Income 6.77% 7.53% 7.51% 7.73% 7.77% 7.76% 7.82% 7.87% 7.94% 7.99% 8.02% 8.06% 8.11%

SG&A Expense 0.28% 0.30% 0.25% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28%EBIT (Operating Income) 6.49% 7.23% 7.26% 7.46% 7.49% 7.49% 7.54% 7.59% 7.66% 7.71% 7.75% 7.79% 7.83%

Nonoperating Income - Net 0.46% 0.29% 0.10% 0.14% 0.14% 0.13% 0.13% 0.12% 0.12% 0.12% 0.12% 0.12% 0.12%Interest Expense 1.62% 1.76% 1.62% 1.15% 1.22% 1.29% 1.30% 1.29% 1.26% 1.26% 1.25% 1.24% 1.22%Unusual Expense - Net 0.58% 0.09% 0.16% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Pretax Income 4.76% 5.67% 5.58% 6.44% 6.41% 6.33% 6.37% 6.43% 6.52% 6.58% 6.62% 6.67% 6.73%

Income Taxes 0.06% -0.04% 0.12% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.12%Equity in Earnings of Affiliates 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Consolidated Net Income 4.69% 5.71% 5.46% 6.33% 6.30% 6.22% 6.26% 6.32% 6.41% 6.46% 6.51% 6.56% 6.62%Minority Interest Expense 0.09% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%Net Income 4.60% 5.69% 5.44% 6.31% 6.28% 6.20% 6.25% 6.30% 6.40% 6.45% 6.49% 6.55% 6.61%

ENTERPRISE PRODUCTS PART. Common Size Balance Sheet

Fiscal Years Ending Dec. 31 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Balance SheetAssetsCash 0.13% 0.05% 0.26% 0.27% 0.33% 0.38% 0.28% 0.30% 0.40% 0.35% 0.31% 0.31% 0.27%Accounts Receivables 10.22% 10.23% 11.48% 11.19% 11.57% 11.57% 11.57% 11.57% 11.57% 11.57% 11.57% 11.57% 11.57%Inventories 2.50% 2.56% 2.29% 2.79% 2.79% 2.79% 2.79% 2.79% 2.79% 2.79% 2.79% 2.79% 2.79%Prepaid and Other Current Assets 0.79% 0.90% 0.68% 0.63% 0.59% 0.57% 0.54% 0.53% 0.52% 0.51% 0.51% 0.50% 0.50%Total Current Assets 13.64% 13.74% 14.71% 14.88% 15.29% 15.30% 15.18% 15.19% 15.28% 15.21% 15.18% 15.18% 15.13%

Property, Plant & Equipment - Gross 61.65% 72.77% 71.24% 71.38% 73.27% 73.80% 73.88% 73.44% 73.64% 74.22% 75.07% 75.70% 76.26%Accumulated Depreciation 11.77% 14.36% 14.81% 15.44% 16.42% 17.54% 18.66% 19.89% 21.21% 22.63% 24.14% 25.58% 26.96%

Net Property, Plant & Equipment 49.88% 58.41% 56.44% 55.94% 56.85% 56.26% 55.22% 53.56% 52.44% 51.59% 50.93% 50.12% 49.30%Total Investments and Advances 4.18% 3.28% 5.10% 4.75% 4.53% 4.37% 4.24% 4.15% 4.11% 4.11% 4.13% 4.15% 4.18%Net Goodwill 4.70% 4.91% 4.36% 11.55% 12.63% 11.82% 11.12% 10.57% 10.15% 9.84% 9.60% 9.36% 9.14%Net Other Intangibles 3.72% 3.68% 3.06% 2.40% 1.93% 1.57% 1.28% 1.06% 0.88% 0.74% 0.63% 0.53% 0.45%

Intangible Assets 8.43% 8.59% 7.42% 13.95% 14.56% 13.39% 12.40% 11.63% 11.04% 10.58% 10.23% 9.90% 9.59%Deferred Tax Assets 0.00% 0.00% 0.00% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02%Other Assets 0.58% 0.46% 0.40% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47%Total Assets 76.70% 84.48% 84.06% 90.01% 91.72% 89.81% 87.53% 85.01% 83.35% 81.98% 80.95% 79.84% 78.68%

Liabilities & Shareholders' Equity 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%ST Debt & Curr. Portion LT Debt 1.12% 3.64% 2.36% 2.13% 2.27% 1.23% 1.23% 0.51% 0.73% 0.71% 0.69% 0.68% 0.66%Accounts Payable 2.21% 2.10% 1.83% 2.34% 2.34% 2.34% 2.34% 2.34% 2.34% 2.34% 2.34% 2.34% 2.34%Other Current Liabilities 13.37% 12.50% 13.07% 14.48% 14.48% 14.48% 14.48% 14.48% 14.48% 14.48% 14.48% 14.48% 14.48%Total Current Liabilities 16.71% 18.23% 17.25% 18.95% 19.10% 18.05% 18.06% 17.34% 17.56% 17.53% 17.52% 17.50% 17.48%

Long-Term Debt 31.53% 34.45% 33.98% 35.19% 36.89% 37.96% 37.34% 36.81% 36.12% 35.68% 35.35% 34.92% 34.44%Deferred Tax Liabilities 0.20% 0.06% 0.13% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%Other Liabilities 0.79% 0.48% 0.36% 0.48% 0.48% 0.48% 0.48% 0.48% 0.48% 0.48% 0.48% 0.48% 0.48%Total Liabilities 49.24% 53.22% 51.73% 54.71% 56.56% 56.58% 55.97% 54.72% 54.25% 53.79% 53.45% 53.00% 52.50%

Common Equity 28.02% 31.87% 32.62% 35.55% 35.39% 33.44% 31.76% 30.48% 29.28% 28.38% 27.68% 27.01% 26.35% Common Stock Par/Carry Value 28.02% 31.87% 32.62% 35.55% 35.39% 33.44% 31.76% 30.48% 29.28% 28.38% 27.68% 27.01% 26.35%Accumulated Gains/Losses -0.79% -0.87% -0.75% -0.68% -0.63% -0.59% -0.55% -0.53% -0.50% -0.49% -0.48% -0.47% -0.45%Treasury Stock 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Total Shareholders' Equity 27.23% 31.00% 31.86% 34.87% 34.76% 32.86% 31.21% 29.96% 28.78% 27.89% 27.21% 26.54% 25.90%Accumulated Minority Interest 0.24% 0.25% 0.47% 0.43% 0.39% 0.37% 0.35% 0.33% 0.32% 0.31% 0.30% 0.29% 0.29%Total Equity 27.47% 31.25% 32.34% 35.29% 35.16% 33.23% 31.56% 30.29% 29.10% 28.19% 27.51% 26.84% 26.18%

Total Liabilities & Shareholders' Equit 76.70% 84.48% 84.06% 90.01% 91.72% 89.81% 87.53% 85.01% 83.35% 81.98% 80.95% 79.84% 78.68%

ENTERPRISE PRODUCTS PART. Weighted Average Cost of Capital (WACC) Estimation

Risk Free 3.07%Risk Premium 4.64%Beta 0.77Cost of Equity 6.63%

Debt Rating BBB+YTM (Pre-Tax Cost of Debt) 3.59%Tax Rate 2.00%After-tax Cost of Debt 3.52%

PV of ST and LT Debt (2013) 17,351.50 PV of Operating Leases (2013) 251.66 MV of Total Debt 17,603.16

Stock Price (Current) 37.4Shares Outstanding 1,968MV of equity 73,585.62

Market Value of firm 91,188.78

MV Weight of Equity 80.70%MV Weight of Debt 19.30%

Forward WACC 6.03%

ENTERPRISE PRODUCTS PART. Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Inputs: CV Growth 2.00% CV ROIC 15.40% WACC 6.03% Cost of Equity 6.63%

Fiscal Years Ending Dec. 31 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Time Period 1 2 3 4 5 6 7 8 9 10

DCF ModelNOPLAT 3,693 4,017 4,274 4,578 4,851 5,104 5,301 5,462 5,633 5,812 Beginning IC 27,125 28,856 31,913 33,749 35,123 35,809 36,539 37,035 37,432 37,737 FCF 1,962 960 2,438 3,204 4,165 4,375 4,804 5,066 5,327 5,562 CV 125,565

PV of FCF 1,851 854 2,046 2,535 3,108 3,079 3,189 3,172 77,292 Value of operations 97,125 Plus: Excess Cash - Less: Pv of opr leases (277) Less: Minority Interest Liability (226) Less: ESOP (19) Less: ST and LT Debt (19,751) Value of Equity 76,853 Shares Outstanding 1,968 Intrinsic Value 39.06 Adjusted for Partial Year 41.43

EP Model

NOPLAT 3,693 4,017 4,274 4,578 4,851 5,104 5,301 5,462 5,633 5,812 Beginning IC 27,125 28,856 31,913 33,749 35,123 35,809 36,539 37,035 37,432 37,737 EP 2,058 2,278 2,351 2,543 2,734 2,945 3,099 3,230 3,376 3,538 CV 87,828 PV of EP 1,941 2,026 1,972 2,012 2,040 2,073 2,057 2,022 53,856

PV of Economic Profit 70,000 Plus: Beginning IC 27,125 Value of operations 97,125 Plus: Excess Cash - Less: Pv of opr leases (277) Less: Minority Interest Liability (226) Less: ESOP (19) Less: ST and LT Debt (19,751) Value of Equity 76,853 Shares Outstanding 1,968 Intrinsic Value 39.06 Adjusted for Partial Year 41.43

ENTERPRISE PRODUCTS PART. Dividend Discount Model (DDM) or Fundamental P/E Valuation Model

Fiscal Years Ending Dec. 31 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E1 2 3 4 5 6 7 8 9 10

EPS 1.70 1.79 1.89 2.02 2.14 2.26 2.35 2.42 2.51 2.59

GrowthKey Assumptions CV growth 2.00% CV ROE 25.23% Cost of Equity 6.63% Payout Ratio 100.0%

Future Cash Flows P/E Multiple 19.90 EPS(next period) 2.59 Future Stock Price 51.57$ Dividends Per Share 1.70$ 1.79$ 1.89$ 2.02$ 2.14$ 2.26$ 2.35$ 2.42$ 2.51$ 2.59$ Future Cash Flows 1.70$ 1.79$ 1.89$ 2.02$ 2.14$ 2.26$ 2.35$ 2.42$ 54.07$

Discounted Cash Flows 1.59 1.58 1.56 1.56 1.55 1.54 1.50 1.45 30.35

Intrinsic Value 42.68$ Adjusted for Partial Year 43.71$

ENTERPRISE PRODUCTS PART. Relative Valuation Models

EPS EPSTicker Company Price 2014E 2015E P/E 14 P/E 15SEP SPECTRA ENERGY PARTNERS LP 57.10$ $2.56 $2.73 22.3 20.9 WPZ WILLIAMS PARTNERS L.P. 51.98$ $1.17 $2.39 44.4 21.7 ETP ENERGY TRANSFER PARTNERS L.P 67.52$ $2.88 $3.14 23.4 21.5 OKS ONEOK PARTNERS L.P. 48.73$ $2.62 $2.67 18.6 18.3 KMP KINDER MORGAN ENERGY PTNR 97.99$ $2.65 $2.76 37.0 35.5

Average 29.2 23.6

epd ENTERPRISE PRODUCTS PART. 37.40$ $ 1.70 $ 1.79 22.0 20.9

Implied Value: Relative P/E (EPS14) $ 49.52 Relative P/E (EPS15) 42.29$

ENTERPRISE PRODUCTS PART. Key Management Ratios

Fiscal Years Ending Dec. 31 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Liquidity RatiosCurrent Ratio (CA/CL) 0.82 0.75 0.85 0.79 0.80 0.85 0.84 0.88 0.87 0.87 0.87 0.87 0.87Quick Ratio [(CA - Inventories)/CL] 0.67 0.61 0.72 0.64 0.65 0.69 0.69 0.72 0.71 0.71 0.71 0.71 0.71

Activity or Asset-Management RatiosInventory Turnover (COGS/Avg Inv of Curr and Prev Yrs) 36.04 34.76 39.37 37.03 33.47 33.30 33.22 33.05 32.88 32.74 32.63 32.63 32.63 Receivables Turnover (Sales/Avg of A/R of Curr and Prev yrs) 10.62 9.56 9.71 9.28 9.12 8.93 8.91 8.86 8.81 8.78 8.75 8.75 8.75 Total Assets Turnover (Sales/Total Assets) 1.30 1.18 1.19 1.11 1.09 1.11 1.14 1.18 1.20 1.22 1.24 1.25 1.27

Financial Leverage RatiosDebt/Equity (Total liabilities/Total Equity) 1.81 1.72 1.62 1.57 1.63 1.72 1.79 1.83 1.89 1.93 1.96 2.00 2.03 Times Interest Earned Ratio (EBIT/Interest Expense) 4.01 4.10 4.49 6.46 6.15 5.80 5.81 5.88 6.07 6.13 6.20 6.29 6.40 Debt Ratio (Total Liabilities/Total Assets) 0.64 0.63 0.62 0.61 0.62 0.63 0.64 0.64 0.65 0.66 0.66 0.66 0.67

Profitability RatiosROA (Net Income/Total Assets) 6.00% 6.73% 6.47% 7.02% 6.85% 6.91% 7.14% 7.41% 7.68% 7.87% 8.02% 8.20% 8.40%ROE (Net Income/Total Equity) 16.75% 18.20% 16.82% 17.89% 17.87% 18.67% 19.79% 20.81% 21.99% 22.87% 23.61% 24.39% 25.23%Gross Margin [1-(COGS excl. D&A/Sales)] 9.03% 10.12% 10.06% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18%Operating Margin (EBIT/Sales) 6.49% 7.23% 7.26% 7.46% 7.49% 7.49% 7.54% 7.59% 7.66% 7.71% 7.75% 7.79% 7.83%

Payout Policy RatiosDividend Payout Ratio (Dividends paid/Net Income) 96.45% 90.03% 92.43% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

ENTERPRISE PRODUCTS PART. Sensitivity Analysis

41.43 9.40% 11.40% 13.40% 15.40% 17.40% 19.40% 21.40% 41.43 3.14% 3.64% 4.14% 4.64% 5.14% 5.64% 6.14%4.53% 68.08 71.18 73.36 74.98 76.22 77.21 78.01 1.57% 102.94 86.66 74.39 64.81 57.12 50.81 45.54 5.03% 54.58 57.06 58.81 60.10 61.09 61.88 62.52 2.07% 82.57 71.23 62.29 55.07 49.11 44.10 39.84 5.53% 44.91 46.95 48.39 49.45 50.27 50.92 51.44 2.57% 68.30 59.94 53.14 47.49 42.73 38.66 35.14 6.03% 37.65 39.36 40.57 41.43 42.14 42.69 43.13 3.07% 57.73 51.31 45.96 41.43 37.54 34.16 31.21 6.53% 31.99 33.45 34.48 35.24 35.82 36.29 36.67 3.57% 49.58 44.50 40.18 36.46 33.22 30.38 27.86 7.03% 27.46 28.72 29.61 30.27 30.77 31.17 31.50 4.07% 43.12 38.99 35.43 32.32 29.58 27.15 24.97 7.53% 23.75 24.86 25.63 26.20 26.64 26.99 27.27 4.57% 37.85 34.44 31.45 28.81 26.46 24.36 22.46

41.43 12,625$ 14,625$ 16,625$ 18,625$ 20,625$ 22,625$ 24,625$ 41.43 88.32% 88.82% 89.32% 89.82% 90.32% 90.82% 91.32%1,700$ 46.09 44.94 43.79 43.43 43.42 43.40 43.39 6.35% 54.08 49.83 45.59 41.34 37.10 32.85 28.61 2,200$ 45.65 44.50 43.36 42.71 42.70 42.69 42.68 7.85% 54.12 49.87 45.62 41.38 37.13 32.88 28.64 2,700$ 45.22 44.07 42.92 41.99 41.98 41.97 41.96 9.35% 54.16 49.91 45.66 41.41 37.16 32.91 28.67 3,200$ 44.87 43.72 42.57 41.43 41.35 41.34 41.32 10.85% 54.20 49.95 45.70 41.43 37.20 32.94 28.69 3,700$ 44.56 43.42 42.27 41.12 40.76 40.75 40.74 12.35% 54.24 49.98 45.73 41.48 37.23 32.97 28.72 4,200$ 44.26 43.11 41.96 40.82 40.17 40.16 40.15 13.85% 54.28 50.02 45.77 41.51 37.26 33.01 28.75 4,700$ 43.95 42.81 41.66 40.51 39.58 39.57 39.56 15.35% 54.32 50.06 45.80 41.55 37.29 33.04 28.78

41.43 0.06% 0.13% 0.21% 0.28% 0.36% 0.43% 0.51% 41.43 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50%74.82% 170.86 170.22 169.58 168.95 168.31 167.67 167.03 0.47 46.40 50.39 55.54 62.48 72.29 87.26 112.89 79.82% 128.34 127.70 127.07 126.43 125.79 125.15 124.52 0.57 41.56 44.70 48.68 53.86 60.92 71.07 86.93 84.82% 85.83 85.20 84.56 83.92 83.28 82.65 82.01 0.67 37.42 39.93 43.04 47.01 52.24 59.43 69.97 89.82% 43.33 42.69 42.05 41.43 40.78 40.14 39.50 0.77 33.84 35.87 38.34 41.43 45.39 50.66 58.02 94.82% 0.82 0.18 (0.45) (1.09) (1.73) (2.37) (3.00) 0.87 30.72 32.37 34.35 36.79 39.85 43.81 49.13 99.82% (41.68) (42.32) (42.96) (43.60) (44.23) (44.87) (45.51) 0.97 27.97 29.32 30.93 32.87 35.27 38.31 42.27

104.82% (84.19) (84.83) (85.47) (86.10) (86.74) (87.38) (88.02) 1.07 25.53 26.64 27.95 29.52 31.42 33.79 36.80

SGA as a % of Sales

COGS as a % of Sales

CV Growth

Beta

COGS% of Sales

Revenue Growth

Long-Term Debt

CV ROIC

WACC

Risk Premium

Risk free rate

Capital Expenditure

VALUATION OF OPTIONS GRANTED IN ESOP

Ticker Symbol epdCurrent Stock Price 37.40 Risk Free Rate 0.14%Current Dividend Yield 3.79%Annualized St. Dev. of Stock Returns 20.96%

Average Average B-S ValueRange of Number Exercise Remaining Option of OptionsOutstanding Options of Shares Price Life (yrs) Price GrantedRange 1 2,025,000 26.49 1.30 9.53$ 19,304,993$ Range 2Range 3Range 4Total 2,025,000 26.49$ 1.30 11.18$ 19,304,993$

Effects of ESOP Exercise and Share Issuance on Common Stock Balance Sheet Account and Number of Shares Outstanding

Number of Options Outstanding (shares): 2,025,000Average Time to Maturity (years): 1.30Expected Annual Number of Options Exercised: 1,557,692

Current Average Strike Price: 26.49$ Cost of Equity: 9.00%Current Stock Price: 37.40$

2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

Increase in Shares Outstanding: 1,557,692 467,308Average Strike Price: 26.49$ 26.49$ Increase in Common Stock Account: 41,263,269 12,378,981

Issuance of Common Stock 3,200,000,000 1,400,000,000 200,000,000 200,000,000 200,000,000Expected Price of Repurchased Shares: 37.40$ 40.77$ 44.43$ 48.43$ 52.79$ Number of Shares Issued: 85,561,497 34,342,344 4,500,963 4,129,323 3,788,370

Shares Outstanding (beginning of the year) 1,880,410,878 1,967,530,068 2,002,339,719 2,006,840,682 2,010,970,005 2,014,758,376 2,014,758,376 2,014,758,376 2,014,758,376 2,014,758,376Plus: Shares Issued Through ESOP 1,557,692 467,308 - - - - - - - - Plus: Shares Issued 85,561,497 34,342,344 4,500,963 4,129,323 3,788,370 - - - - - Shares Outstanding (end of the year) 1,967,530,068 2,002,339,719 2,006,840,682 2,010,970,005 2,014,758,376 2,014,758,376 2,014,758,376 2,014,758,376 2,014,758,376 2,014,758,376

Present Value of Operating Lease Obligations2011 2012 2013

Operating Operating OperatingFiscal Years Ending Leases Fiscal Years Ending Leases Fiscal Years Ending Leases2013 58.3 2013 51.3 2013 42.42014 47.4 2014 44.1 2014 41.22015 39.7 2015 42.8 2015 38.22016 38.2 2016 37.5 2016 35.42017 32.3 2017 33.3 2017 30.7Thereafter 170.5 Thereafter 154 Thereafter 144.9Total Minimum Payments 386.4 Total Minimum Payments 363.0 Total Minimum Payments 332.8Less: Interest 95.0 Less: Interest 86.9 Less: Interest 81.1PV of Minimum Payments 291.4 PV of Minimum Payments 276.1 PV of Minimum Payments 251.7

Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases

Pre-Tax Cost of Debt 6.00% Pre-Tax Cost of Debt 6.00% Pre-Tax Cost of Debt 6.00%Number Years Implied by Year 6 5.3 Number Years Implied by Year 6 4.6 Number Years Implied by Year 6 4.7

Lease PV Lease Lease PV Lease Lease PV LeaseYear Commitment Payment Year Commitment Payment Year Commitment Payment1 58.3 55.0 1 51.3 48.4 1 42.4 40.02 47.4 42.2 2 44.1 39.2 2 41.2 36.73 39.7 33.3 3 42.8 35.9 3 38.2 32.14 38.2 30.3 4 37.5 29.7 4 35.4 28.05 32.3 24.1 5 33.3 24.9 5 30.7 22.96 & beyond 32.3 106.5 6 & beyond 33.3 98.0 6 & beyond 30.7 91.9PV of Minimum Payments 291.4 PV of Minimum Payments 276.1 PV of Minimum Payments 251.7

ENTERPRISE PRODUCTS PART. Value Driver Estimation

Fiscal Years Ending Dec. 31 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

NOPLAT:Total Revenues 44,489 42,541 47,748 52,932 57,156 61,078 64,939 68,320 71,121 73,397 75,232 77,113 79,041 (COGS) (40,470) (38,233) (42,944) (47,544) (51,339) (54,862) (58,329) (61,367) (63,883) (65,927) (67,575) (69,265) (70,996)(SG&A) (124) (127) (120) (146) (158) (169) (179) (189) (197) (203) (208) (213) (218)(Depreciation & Amortization) (1,007) (1,105) (1,218) (1,294) (1,378) (1,474) (1,532) (1,576) (1,592) (1,608) (1,621) (1,630) (1,635)Implied Interest on PV of operating Leases 17 17 15 17 18 19 20 21 21 21 21 22 22 EBITA 2,905 3,092 3,482 3,963 4,299 4,593 4,918 5,209 5,471 5,680 5,850 6,027 6,213

Less: Adjusted TaxesProvision for Income Taxes 27 (17) 58 58 63 66 71 75 79 82 85 88 91 Add: Tax shield on interest expense 252 262 270 214 243 276 295 309 314 323 329 334 338 Less: Tax on interest income (71) (44) (17) (26) (27) (28) (29) (30) (31) (32) (32) (33) (35) Add: tax shield on PV of operating leases 6 6 5 6 6 7 7 7 7 7 8 8 8 Total Adjusted Taxes 214 208 316 252 285 321 344 361 370 381 389 396 403

Plus: Change in Deferred Taxes 13 (69) 38 (18) 3 3 3 3 3 2 2 2 2 NOPLAT 2,704 2,816 3,203 3,693 4,017 4,274 4,578 4,851 5,104 5,301 5,462 5,633 5,812

Invested Capital:Normal Cash 58 20 123 144 191 229 184 206 288 254 233 242 211 Accounts Receivable 4,545 4,353 5,482 5,925 6,614 7,068 7,515 7,906 8,231 8,494 8,706 8,924 9,147 Inventory 1,112 1,088 1,093 1,475 1,593 1,702 1,810 1,904 1,982 2,045 2,096 2,149 2,202 Other Operating Current Assets 353 381 326 332 339 345 352 359 367 374 381 389 397 Accounts Payable (985) (892) (874) (1,241) (1,340) (1,432) (1,522) (1,602) (1,667) (1,721) (1,764) (1,808) (1,853) Other Current Liabilities (5,948) (5,318) (6,240) (7,664) (8,276) (8,844) (9,403) (9,892) (10,298) (10,628) (10,893) (11,166) (11,445) Net Operating Working Capital (864) (366) (90) (1,029) (879) (931) (1,065) (1,118) (1,099) (1,181) (1,240) (1,270) (1,341) Net PPE 22,192 24,846 26,947 29,611 32,492 34,362 35,857 36,590 37,293 37,867 38,318 38,650 38,969 PV of Operating Leases 291 276 252 277 303 321 335 342 348 354 358 361 364 Other Operating Assets 257 197 189 249 269 288 306 322 335 346 354 363 372 Other Operating Liabilities (353) (205) (172) (252) (272) (291) (309) (325) (339) (349) (358) (367) (376) Invested Capital 21,523 24,748 27,125 28,856 31,913 33,749 35,123 35,809 36,539 37,035 37,432 37,737 37,988

ROIC: 13.82% 13.08% 12.94% 13.62% 13.92% 13.39% 13.56% 13.81% 14.25% 14.51% 14.75% 15.05% 15.40%NOPLAT 2,704 2,816 3,203 3,693 4,017 4,274 4,578 4,851 5,104 5,301 5,462 5,633 5,812 Beginning IC 19,573 21,523 24,748 27,125 28,856 31,913 33,749 35,123 35,809 36,539 37,035 37,432 37,737

EP: 1,525 1,518 1,712 2,058 2,278 2,351 2,543 2,734 2,945 3,099 3,230 3,376 3,538 NOPLAT 2,704 2,816 3,203 3,693 4,017 4,274 4,578 4,851 5,104 5,301 5,462 5,633 5,812 Beginning IC 19,573 21,523 24,748 27,125 28,856 31,913 33,749 35,123 35,809 36,539 37,035 37,432 37,737 WACC 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03%

FCF: 754 (409) 827 1,962 960 2,438 3,204 4,165 4,375 4,804 5,066 5,327 5,562 NOPLAT 2,704 2,816 3,203 3,693 4,017 4,274 4,578 4,851 5,104 5,301 5,462 5,633 5,812 Change in IC 1,950 3,225 2,377 1,731 3,057 1,836 1,374 686 729 497 397 306 250