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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Think4Yourself who wrote (81609)	12/13/2000 4:36:36 PM
From: excardog	Read Replies (2) \| Respond to of 95453

thought these comments were telling and may be one reason the overall energy stocks are not reacting to gas prices: Enterprise Product Partners (EPD, 27 7/8)(Accum/Aggr) We are changing our recommendation on EPD to Accumulate/Aggressive from Buy/Aggressive due to the near term uncertainties created by unusually high--$9.50/mcf--natural gas prices, which, if they remain high, are likely to negatively affect earnings comparisons in the 1Q01 and possibly the 2Q01. Gas processing spreads are likely to narrow unless natural gas liquids (NGL) prices escalate. Fractionation volumes could also come under pressure depending on trends in the chemical industry. For the 9M00, gas processing and fractionations gross margin was 36% and 40%, respectively, of total gross operating margin. A number of factors could help offset potential negative gas processing comparisons in 2001. These positive factors include: the expected acquisition of the Acadian Pipeline, full year benefits of the 4Q00 start-up of the Lou-Tex Pipeline, favorable export terminal operations and potential new acquisitions. In addition, EPD's announced one million common unit buyback program should benefit the unit price over time. The recent 4.8% distribution increase, payable in mid-February 2001, also bodes well for overall distribution growth of 10% during 2001. However, given the partnership's stellar performance in 2000 (+49.8% Y-T-D) coupled with the near term earnings uncertainty, we believe an Accumulate recommendation is more appropriate. We still consider EPD one of the best-positioned midstream MLPs from a long-term perspective and any unit price weakness below $25 would be considered a potential buying opportunity. EPD investors should also be aware that selling EPD could create a significant tax liability, in that the cumulative amount of the tax deferred income will be taxable as ordinary income in the year the units are sold and the capital appreciation is taxable per capital gains rules. Given the currently indicated $2.20 annual distribution, EPD holders are earning a favorable 8.0% yield, which is 75% tax deferred.