(Idea) Enterprise Products Partners - Nearing A Cash Flow Inflection
By: Jon Costello
Enterprise Products Partners, LP (EPD) recently completed one of the largest capex sprees in its history, investing $17.6 billion over the past five years and $5.6 billion in 2025 alone. Among the investments was the massive buildout of the company’s Permian gathering and processing capacity, as well as the construction of:
The 600 Mbpd Bahia NGL pipeline,
The Neches River ethane export terminal,
Frac 14 fractionator, and
An LPG export infrastructure expansion on the Houston Ship Channel.
EPD completed these projects while maintaining its ongoing streak of 27 consecutive years of distribution growth and an investment-grade balance sheet, an unprecedented achievement for a midstream operator.
In a pattern seen time and again in the midstream space, the market has treated EPD’s investment period as a headwind for its unit price. During a period of heavy capex, free cash flow declines, leverage rises above management’s targets, and discretionary cash flow dips into negative territory, as it did for EPD in 2025.
The depressed unit price makes sense if the company is consistently allocating capex to low-returning projects. This isn’t the case for EPD. Its period of heavy capex spending did not lower its return on capital employed or diminish its overall business quality. I expect its investments in low-capex infrastructure projects to generate substantial—and growing—fee-based income for decades. This is one of the reasons why I considered its units a top buy while they were depressed.