Enterprise Products Partners L.P. (EPD) on Thursday announced its financial results for the three and six months ended June 30, 2008. The partnership reported an 85 percent increase in net income to $263 million, or $0.52 per unit on a fully diluted basis, for the second quarter of 2008 compared to net income of $142 million, or $0.26 per unit on a fully diluted basis, for the second quarter of 2007.

Distributable cash flow increased 18 percent to $347 million in the second quarter of 2008 from $294 million in the same quarter of 2007. Excluding gains and losses associated with activities to manage interest rate risk for both periods, distributable cash flow increased 49 percent to $375 million for the second quarter of 2008 compared to $251 million for the second quarter of last year. On July 16, 2008, the board of directors of Enterprise's general partner approved an increase in the partnership's quarterly cash distribution rate to $0.515 per unit with respect to the second quarter of 2008. This represents a 6.7 percent increase over the $0.4825 per unit rate that was paid with respect to the second quarter of last year. Distributable cash flow for the second quarter of 2008 provided 1.4 times coverage of the cash distribution to be paid to limited partners. The partnership retained approximately $86 million of distributable cash flow during the second quarter of 2008 bringing the total amount of distributable cash flow retained for 2008 to $212 million. This cash is available to reinvest in growth capital projects, to reduce debt and to limit the need to issue additional equity. Distributable cash flow is a non-generally accepted accounting principle ("non-GAAP") financial measure that is defined and reconciled later in this press release to its most directly comparable GAAP financial measure, net cash flows provided by operating activities.

"Enterprise posted another exceptional quarter," said Michael A. Creel, president and chief executive officer of Enterprise. "The second quarter highlights the benefits of our large and diversified asset position across the midstream energy value chain. We had strong demand for our services from both producers and consumers of natural gas, NGLs and crude oil. Cash flow and volume contributions from new assets and expansions as well as solid year-over-year performance from other assets resulted in record gross operating margin, EBITDA and net income. Enterprise's pipeline assets transported in excess of 2 million barrels per day of NGLs, crude oil and petrochemicals and 8.5 trillion Btus per day of natural gas for the third consecutive quarter."

"Each of our business segments reported increases in gross operating margin which generated a 43 percent increase in total gross operating margin for the second quarter to a record $534 million compared to the second quarter of last year. This growth was primarily driven by our natural gas processing and pipeline assets and our NGL pipeline assets. Most notable about the strength of the second quarter and underscoring the benefits of our geographic and business diversification was the fact that second quarter 2008 gross operating margin exceeded that of the first quarter of 2008 by $12 million despite downtime and repair expense associated with our Independence project and Pioneer natural gas processing plant, which downtime and repairs resulted in a $52 million decrease in gross operating margin for the second quarter. Repairs to Independence were completed in June and to Pioneer in April and both facilities have returned to normal operations," stated Creel.

"During the second half of 2008, three large capital growth projects are scheduled to be completed: the expansion of our Meeker natural gas processing plant and the completion of the Exxon central treating facility in the growing Piceance basin and the Sherman Extension expansion to our Texas Intrastate natural gas pipeline system serving the prolific Barnett Shale area. We retained approximately 25 percent of our distributable cash flow during the second quarter of 2008 to manage our financial flexibility as we execute our capital growth program. We balanced this retention of cash with increasing the cash distribution rate to our limited partners by 6.7 percent over the second quarter of last year," said Creel.

Revenue for the second quarter of 2008 increased 50 percent to a record $6.3 billion from $4.2 billion in the same quarter of 2007. Gross operating margin increased to a record $534 million for the second quarter of this year from $373 million for the second quarter of last year. Operating income was $374 million for the second quarter of 2008, a 75 percent increase over the $215 million of operating income for the same quarter of 2007. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the second quarter of 2008 increased 51 percent to a record $506 million from $335 million for the second quarter of 2007. Gross operating margin and EBITDA are non-GAAP financial measures that are defined and reconciled later in this press release to their most directly comparable GAAP financial measures.

Review of Segment Performance for the Second Quarter of 2008

NGL Pipelines & Services - Gross operating margin for the NGL Pipelines and Services segment increased 52 percent to $318 million for the second quarter of 2008 compared to $209 million for the same quarter of 2007. The second quarter of 2007 included $20 million of proceeds from recoveries under business interruption insurance.

Enterprise's natural gas processing business recorded gross operating margin of $196 million for the second quarter of 2008, a 92 percent increase from $102 million in the second quarter of 2007, excluding $13 million of recoveries from business interruption insurance in 2007. This business benefited from strong natural gas processing margins and increases in volumes from both the addition of two new natural gas processing plants as well as performance from the partnership's existing South Texas and Chaco plants. Approximately $74 million of this increase was attributable to the results of the Meeker and Pioneer natural gas processing plants that began operations in the fourth quarter of 2007 and first quarter of 2008, respectively. Pioneer was out of service for approximately 24 days during the second quarter of 2008 for repairs. This downtime reduced gross operating margin for the facility by approximately $9 million. Equity NGL production, the NGLs that Enterprise earns and takes title to as a result of providing processing services, increased 66 percent to 111 thousand barrels per day ("MBPD") for the second quarter of 2008 from 67 MBPD for the same quarter in 2007. This increase was largely due to equity NGL production associated with the Meeker and Pioneer plants. Natural gas volumes processed under fee-based contracts increased 13 percent to approximately 2.7 billion cubic feet per day ("Bcfd") this quarter from 2.4 Bcfd in the second quarter of 2007.

Gross operating margin from the partnership's NGL pipeline and storage business increased 42 percent to $94 million in the second quarter of 2008 compared to $66 million in the second quarter of 2007, excluding $2 million of recoveries from business interruption insurance in 2007. This increase was primarily attributable to a $29 million increase in gross operating margin from the Mid-America and Seminole pipelines generated by a 114 MBPD increase in NGL volumes and benefits from certain acquisition-related settlements. Total volumes associated with the NGL pipeline and storage business for the second quarter of 2008 were 1.8 million barrels per day compared to 1.7 million barrels per day for the same quarter last year.

Gross operating margin from Enterprise's NGL fractionation business was $27 million in the second quarter of 2008 versus $21 million reported for the same quarter of 2007, excluding $5 million of recoveries from business interruption insurance in 2007. Gross operating margin and volumes for this business were higher because of the addition of the Hobbs fractionator and partially offset by a decrease in gross operating margin due to lower volumes at the partnership's Norco fractionator. NGL fractionation volumes for the second quarter of this year increased 21 percent or 77 MBPD, to 447 MBPD from 370 MBPD recorded in the second quarter of last year. The volume increase was principally due to the addition of the Hobbs fractionator that went into service during the third quarter of 2007 and associated volumes of 78 MBPD for the second quarter of 2008.

Onshore Natural Gas Pipelines & Services - Enterprise's Onshore Natural Gas Pipelines and Services segment reported a 48 percent increase in gross operating margin to $123 million for the second quarter of 2008 compared to $83 million for the second quarter of last year.

Gross operating margin for the partnership's onshore natural gas pipeline business increased 49 percent to $115 million for the second quarter of this year from $77 million reported for the second quarter of 2007. The San Juan system reported an $18 million increase in gross operating margin on higher revenues from transportation fees indexed to natural gas prices and from NGL and condensate sales. The Texas Intrastate natural gas pipeline system reported a $9 million increase in gross operating margin from a 0.5 trillion British thermal units per day ("TBtud") increase in volume and from higher average transportation and reservation fees. The Acadian Gas and Jonah Gas Gathering pipeline systems reported increases in gross operating margin of $5 million and $4 million, respectively. Total onshore natural gas transportation volumes increased 17 percent to a record 7.4 TBtud for the second quarter of 2008 versus 6.3 TBtud in the same quarter of 2007.

Gross operating margin from the partnership's natural gas storage business was $8 million for the second quarter of 2008 compared to $6 million for the same quarter in 2007. This increase was primarily attributable to Petal, which benefited from new storage capacity being placed into service in the third quarter of 2007.

Offshore Pipelines & Services - Gross operating margin for the Offshore Pipelines and Services segment increased to $35 million in the second quarter of 2008 from $31 million in the same quarter of 2007. The Independence project reported gross operating margin of $12 million. The Independence project's gross operating margin for the second quarter of 2008 was adversely impacted by approximately $14 million for expenses and $29 million for reduced revenues as a result of 66 days of either downtime or operating at significantly lower volumes while repairs were being made to a flange at the top of the pipeline's flexjoint. Operations at the platform and pipeline were suspended from April 8 and resumed at lower rates on June 3 before resuming normal rates on June 14, 2008. Gross operating margin for the second quarter of 2007 included $1 million of proceeds from business interruption insurance.

The offshore platform services business reported gross operating margin of $32 million for the second quarter of 2008 compared to $27 million for the same quarter of 2007. The Independence Hub platform reported a $6 million increase in gross operating margin to $19 million. Contributions from the Independence Hub were partially offset by a $2 million decrease from the Falcon platform on lower demand revenues due to the expiration of the period that demand fees were applicable. For the second quarter of 2008, Enterprise's offshore platform natural gas processing volume increased 87 percent to 353 million cubic feet per day while crude oil processing volumes decreased 22 percent to 22 MBPD compared to the same quarter last year.

Gross operating margin from Enterprise's offshore natural gas pipeline business decreased $15 million to a loss of $11 million for the second quarter of this year compared to a positive $4 million in the second quarter of 2007, excluding $1 million of recoveries from business interruption insurance in 2007. This loss was largely due to downtime at the Independence Trail pipeline including $14 million of repair expense. The Viosca Knoll, Phoenix and Neptune systems reported lower gross operating margin due to producers shutting in wells for workovers and pipeline repairs. Transportation volumes for the offshore natural gas pipeline business were 1.2 TBtud in the second quarter of 2008 compared to 1.3 TBtud in the same quarter of 2007.

Enterprise's offshore oil pipeline business recorded gross operating margin of $15 million for the second quarter of 2008 compared to a loss of $1 million for the second quarter of 2007. This increase is primarily due to Enterprise's 50 percent ownership interest in the Cameron Highway Oil Pipeline system, which benefited from a 119 percent increase in transportation volumes and the retirement of project finance debt in the second quarter of 2007. Cameron Highway reported net transportation volumes of 97 MBPD for the second quarter of 2008 compared to 45 MBPD for the same period last year. Overall, offshore oil pipeline transportation volumes for the second quarter of 2008 increased 23 percent to 216 MBPD from 175 MBPD for the same quarter of 2007.

Petrochemical Services - Gross operating margin for the Petrochemical Services segment increased 16 percent to $58 million in the second quarter of 2008 from $50 million in the same quarter of 2007.

Enterprise's butane isomerization business reported a 41 percent increase in gross operating margin to $31 million in the second quarter of 2008 compared to $22 million in the same period last year on continuing strong demand for high-purity isobutane and higher revenues from sales of NGL by-products. Butane isomerization volumes were 89 MBPD for both the second quarter of 2008 and the second quarter of 2007.

The partnership's propylene fractionation and petrochemical pipeline business earned $18 million of gross operating margin during the second quarter of 2008 versus $14 million in the same quarter of 2007. This increase was primarily due to higher propylene fractionation and transportation volumes. Propylene fractionation volumes were 61 MBPD for the second quarter of 2008 compared to 55 MBPD for the same quarter of last year. Petrochemical pipeline transportation volumes were 119 MBPD during the second quarter of 2008 compared to 103 MBPD in the second quarter of 2007.

Enterprise's octane enhancement business reported gross operating margin of $9 million in the second quarter of 2008 compared to $14 million in the second quarter of 2007. Octane enhancement production was 11 MBPD for the second quarter of 2008 compared to 10 MBPD for the second quarter of last year.

Capitalization - Total debt principal outstanding at June 30, 2008 was approximately $7.7 billion, including $1.25 billion of junior subordinated notes to which the debt rating agencies ascribe, on average, approximately 58 percent equity content. Enterprise's consolidated debt also included $208 million of debt of Duncan Energy Partners L.P. ("DEP") for which Enterprise does not have the payment obligation. Enterprise had total liquidity of approximately $1.3 billion at June 30, 2008, which included availability under the partnership's $1.75 billion, five-year credit facility and unrestricted cash.

Total capital spending in the second quarter of 2008, net of contributions in aid of construction, was approximately $468 million. This includes $44 million of sustaining capital expenditures and $22 million of investments in unconsolidated affiliates.

Interest expense for the second quarter of 2008 was $96 million on an average debt balance of $7.6 billion compared to interest expense of $71 million in the second quarter of 2007 which had an average debt balance of $5.9 billion. The increase in the average debt balance between the two periods was primarily due to debt incurred to fund the partnership's capital investment program.

Enterprise Products Partners L.P. is one of the largest publicly traded partnerships with an enterprise value of approximately $20 billion, and is a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil and petrochemicals. Enterprise transports natural gas, NGLs, crude oil and petrochemical products through approximately 35,000 miles of onshore and offshore pipelines. Services include natural gas gathering, processing, transportation and storage; NGL fractionation (or separation), transportation, storage and import and export terminaling; crude oil transportation; offshore production platform services; and petrochemical transportation and services. Enterprise Products Partners L.P. is managed by its general partner, Enterprise Products GP, LLC, which is wholly owned by Enterprise GP Holdings L.P. (EPE).