Why Permian Well Connections Could Brighten Enterprise Products' 2H25

Enterprise Products Partners (EPD) expects increased activity and earnings in the second half of 2025 due to connecting a projected 1,000 new oil and gas wells, primarily in the Permian Basin, to its midstream assets. This increase in well connections is anticipated to drive higher volumes of oil and gas transported through EPD's network, potentially boosting cash flows; Kinder Morgan (KMI) and Energy Transfer (ET) are two other midstream players with a strong Permian presence.

Analysis

Enterprise Products Partners (EPD) is poised for potential cash flow growth in the second half of 2025, driven by an anticipated increase in well connections within the Permian Basin. The partnership connected over 1,000 oil and gas wells in the previous year and projects a similar number for 2025, with the majority of these new connections slated for the latter half of the year, suggesting a back-ended impact on volumes and earnings. This operational development is significant given EPD's substantial midstream infrastructure in the Permian, the most prolific U.S. basin, serving large upstream and integrated energy clients. EPD's units have demonstrated relative strength, gaining 18% over the past year and outperforming the industry composite's 16.9% rise. From a valuation perspective, EPD trades at a trailing 12-month EV/EBITDA multiple of 10.07x, which is below the broader industry average of 11.07x, potentially indicating a favorable valuation. However, the Zacks Consensus Estimate for EPD's 2025 earnings has remained unchanged in the past seven days, and the stock currently holds a Zacks Rank #3 (Hold). Competitors such as Kinder Morgan (KMI) and Energy Transfer (ET) also maintain a strong Permian presence, with KMI advancing its Gulf Coast Express Pipeline expansion (operational mid-next year) and ET consistently benefiting from increased Permian volumes, underscoring the basin's strategic importance for midstream operators.

Key Decisions for Investors

• Investors should monitor EPD's execution on new well connections and subsequent volume uplifts in the second half of 2025, which are key catalysts for potential cash flow improvement.
• Consider EPD's current valuation (EV/EBITDA of 10.07x vs. industry 11.07x) and recent share price outperformance (18% gain in past year) in the context of the projected 2H25 earnings inflection.
• Maintain awareness of the competitive landscape and broader Permian Basin activity, including progress on KMI's pipeline expansion and ET's volume trends, as these may influence regional dynamics and EPD's relative positioning.
• Note the current Zacks Rank #3 (Hold) and the lack of recent revisions to 2025 earnings estimates, suggesting a need for further confirmation of the anticipated growth before adopting a more aggressive stance.