1 | EPD

Enterprise Products Partners L.P. (NYSE: EPD) Recommendation: HOLD

ENERGY April 12, 2016

Krause Fund Research Spring 2016

Analysts

Katherine Boyle Ryan Dowd katherine-boyle@uiowa.edu ryan-dowd@uiowa.edu

Jack Abrahamson Elliott Smith Jack-abrahamson@uiowa.edu elliott-smith@uiowa.edu

Company Overview

Enterprise Products Partners L.P. (EPD) is an industry leading Master Limited Partnership (MLP) in the transportation and storage subsector for energy companies. EPD has current infrastructure to transport and store crude oil, natural gas liquids (NGLs), and petrochemicals throughout the United States, Mexico, and Canada and is always expanding its vast network of pipelines. Its integrated midstream network of transportation pipelines, processing plants, terminals, and storage facilities allows for ease in linking oil and natural gas producers with the largest supply basins and downstream refineries in North America. For the fiscal year ended December 31, 2015, EPD reported revenue of $27.03B and net income of $2.52B.

Stock Performance Highlights 52 week High $34.30 52 week Low $19.79 Beta Value 0.845 Average Daily Volume 3.97M

Share Highlights Market Capitalization $48.47B Shares Outstanding 2.013B Book Value per share $10.08 EPS (as of FYE ended 12/21/15) $1.25 P/E Ratio 18.40 Distribution Yield 6.40% Distribution Payout Ratio 99.37%

Company Performance Highlights ROA 5.15% ROE 12.30% ROIC 9.33%

Current Price: $25.01 Target Price Range: $27.00 - $30.00

EPD Maintains Strong Distributions and Capital Investment Despite Low Commodity Prices

• EPD exhibited record years both in terms of gross operatingmargin and distributable cash flow of $5.3B and $4.0B,respectively, providing 1.3 times the coverage of required cashdistributions in 2015.

• Cash Distributions have increased in 47 consecutivequarters with a compound annual growth rate of 7% leading theway among its peers as a value stock MLP.

• The recent acquisition of Eagle Ford Shale Midstreamadded over 470 miles of natural gas liquids transportation andincreased condensate process capabilities achieving synergiesthrough deeper integration into the NGL rich areas of EagleFord Shale.

• EPD has $6.8B worth of capital projects to be completed by2018 to increase their natural gas and NGL exporting abilitiesleading to greater potential revenue growth and expandedmarket reach.

April 12, 2016 2 | EPD

ECONOMIC OUTLOOK

ENTERPRISE PRODUCTS PARTNERS L.P. (NYSE: EPD) ● Recommendation: HOLD ●

Real Gross Domestic Product

Real gross domestic product (GDP) is a general measure of the economic climate. By adjusting for inflation, it properly reflects the monetary value of all the goods and services that a country produces.

Real GDP growth has a strong correlation with the demand for oil. In order to produce more goods and services, more energy resources are required to power the machines that manufacture the goods and services, and fuel transportation. The graph below illustrates this correlation between oil demand and GDP growth.

Source: EIAxx

We predict that real GDP will increase gradually in 2017 to approximately 2.5%, and will continue to rise in the following years until peaking at around 3.5-3.75%. Similarly, we predict oil prices will eventually recover to around $60 a barrel by the end of 2017. We expect that strong recoveries will happen in Europe and that emerging markets will help drive up the demand for oil as more goods and services are being produced.

Domestic Growth Outlook

Real GDP growth for the U.S. in 2015 was 2%, a decline from 2.47% in 2014.xxvii This decrease is due to a yearlong appreciation of the U.S. dollar which has widened the trade gap by reducing external demand for U.S. goods. Real GDP growth is expected to sit around 2% in 2016, a decrease from earlier forecasts by the Fed which forecasted it at 2.8%. The unemployment rate decline has stalled at around 5.0%. This decline, paired with an expected increase in the federal funds rate will further slow U.S. GDP growth for the remainder of 2016. Despite this bleak economic data for the U.S., it is faring well compared to many other industrialized nations.

We predict this low growth to be short-term and should begin picking up in 2017 when stronger oil prices are realized and net exports increase as the U.S. dollar starts losing value. Real GDP can expect to see about a 2.7% increase and an average of 3.25% growth for the years 2018-2021.

Europe

Europe had a real GDP growth of 1.8% in 2015 but has had a rough start to 2016 due to a sharp drop in banking stocks that stimulated recession fears. However, the majority of these stock drops were based on bad loans to energy companies facing 15 year lows in oil prices. The lack of consumer spending has also hurt European growth outlook. The European Central Bank (ECB) is attempting to solve this issue by setting negative interest rates on bonds to encourage lending and negative deposit rates on consumer deposit accounts to encourage spending. At the end of March, the yield on 10-year bonds in the Eurozone hit negative rates. Currently about 40% of European government bonds are negative as seen in the graph below.

Source: FRAviii

We believe that Europe will have a decrease in real GDP growth in 2016 of approximately 1.6% but will bounce back to 2% growth in 2017 as consumer spending increases again and a larger labor force welcomes more millennials and migrants. We forecast that Europe should have real GDP growth of around 2.5-3% for the years 2018-2021.

China

In 2015, China had its lowest GDP growth in decades at around 6.7% and expects it to slump to as low as 6% in 2016.iv This has been driven by deflationary trends suggesting that Chinese consumers and businesses are not spending as much as they used to. They also exported less in 2015 than 2014 indicating that exports may have reached their peak at around 2.3 trillion (USD) and will likely have more modest growth in the future.iii This slowdown has contributed to a lower demand for oil.

April 12, 2016 3 | EPD

ENTERPRISE PRODUCTS PARTNERS L.P. (NYSE: EPD) ● Recommendation: HOLD ● We believe that the years of 12-14% real GDP growth are over, and that rates will fluctuate more modestly between 6-7.5% in the future. However, by modern country standards, these expected growth rates are still large in stature. We believe that China’s economy has begun to stabilize due to peaks in the working age population and export growth. Additionally, the technology gap between China and other modern countries has closed and will now grow at a slower rate than it had in the 2000s. South America and OPEC Growth in OPEC and South American countries has been decimated by the rapid decline in oil and other commodity prices. In these countries, commodities have substantial contribution to economic growth. For example, in Saudi Arabia, oil can contribute between 45-50% of GDP and 80% of government revenue.xv South America has had increases in unemployment, inflation and political instability in big economies such as Venezuela, Argentina, and Brazil. These relatively large economies were either flat or contracted in terms of real GDP growth. The country best positioned to succeed is Iran which is coming off of trade restrictions and receiving economic incentives which will dramatically increase trade in the oil rich nation. Iran’s real GDP growth is estimated to be around 4.2 % in 2016 and could hit 6% by 2020.xx Other OPEC countries have cut real GDP growth from around 3.3% to 2.9% for 2016 due mostly to a decrease in oil revenue.xiii

We believe that South America’s real GDP growth will narrow again this year due to a slower rebound of commodity prices, significant value decreases in currencies, and current political unrest which inhibits economies from stabilizing. We project GDP to reduce about 2-3% and then have a slight positive growth in 2017, eventually reaching 2% by 2020. For middle-eastern OPEC countries we predict real GDP growth will be about 3% this year and should slowly increase as oil prices and oil demand increases in 2017 when foreign economies begin to recover. We also expect these countries to invest more in technology and manufacturing to become less reliant on oil as the quintessential revenue source in the future. Interest and Currency Exchange Rates The usage of widespread quantitative easing and manipulation of national interest rates in order to promote spending is devaluing currencies, and is causing interest rates to fluctuate around the world. The U.S. dollar has been increasing in value for a couple years as it has recovered from the 2008-2009 recession quicker than other countries. In 2011 $1 equaled .65 Euro. Today that gap has closed to around .9 Euro.vii This strong appreciation has had a substantial effect on U.S. imports across the world. Multi-national businesses particularly those that recognize revenue in

other currencies have suffered from these devaluation effects. In order to find a solution, the ECB, Bank of Japan (BOJ), and People’s Bank of China (PBC) initially devalued their currencies by turning to negative national interest rates. These reductions are intended to increase inflation, boost consumer spending, and promote the exportation of their goods and services. These events should make their exports cheaper than other industrialized countries. We expect exchange rates to stabilize in the next year as the ECB ends quantitative easing and other foreign banks stop reducing interest rates. Long-term, we expect the dollar to realize minor devaluations relative to the Euro and the Chinese Yuan. This expectation will be spurred by GDP growth in respective countries. However, it will be mostly offset by the U.S. raising its own rates at a steady pace as the federal funds rate reaches around .7% by 2017 and 3-3.25% by the end of 2020. This will slow consumer and business spending.

Country Interest Rate %

United States 0.50%

Euro Area 0.00%

China 4.35%

Japan -0.10%

Germany 0.00%

United Kingdom 0.50%

France 0.00%

Brazil 14.25%

India 6.50%

Russia 11.00%

Canada 0.50%

Australia 2.00%

Saudi Arabia 2.00%

Source: Trading Economicsxi

Oil Prices Since September of 2014 oil prices have fallen over 60% from $105 to $40/barrel which has hurt companies whose earnings are at all tied to the oil industry. Prices are expected to rebound over the next 3 years, reaching $60-65/barrel for Crude oil before leveling off.xi We believe that oil will not go back to $100/barrel or anywhere near it due to the substantial amount of oil producers, such as Iran which will start harvesting large quantities of oil. The low prices have caused solvency concerns for many small firms who do not have economies of scale, have no way to raise capital due to extremely low prices of stock, or have little access to debt markets. The graph below better demonstrates the intense drop in the price per barrel of crude oil in the past year and a half.

April 12, 2016 4 | EPD

INDUSTRY ANALYSIS

ENTERPRISE PRODUCTS PARTNERS L.P. (NYSE: EPD) ● Recommendation: HOLD ●

Source: ThomsonOnexix

Oil Inventories The large decline in oil prices was caused by stunted or negative economic growth around the world and an increase of production in North America from the shale oil and fracking boom. This growth occurred in states such as Texas, North Dakota and New Mexico who increased production around 2011 when oil was over $100/barrel. Through innovation, the breakeven price has dropped from $75-$90 to between $40-$50/barrel in 2015 depending on location.xx However, the market is now oversupplied with oil as OCED countries oil inventories totaled 3.04 billion at the end of 2015 and are expected to rise to 3.24 billion by the end of 2016. The chart below shows the oil inventories’ dramatic increase in early 2015 from 57 days of supply to 69 days of supply in April of 2016. As illustrated by blue trend line, the inventory levels are well outside the normal range.

Source: EIAxx The U.S. alone has 530 million barrels in reserve as of April 1, 2016. This is a net increase of 140 million barrels since January of 2015. The rise has slowed in recent weeks as less rigs remain active. The large supply of oil has prompted many oil producers to slow production and extraction of oil due to the sharp increase of oil supply relative to demand which began in early

2015. As shown below, the Baker Hughes rig count, an important industry metric indicating the extent of drilling activity, provides insight into current production trends. (BHI rig count)

Source: Baker Hughes Rig Countxxi

We expect the declining rig count to help reduce the oil supply glut and stimulate upward mobility in oil prices over the next three years when demand increases in the world’s big economies as they start to recover from the current economic slowdown. In the short term, this will hurt the revenue of firms in the oil service industry which is reflected in our forecasts for EPD. Industry Description and Overview EPD operates in the Oil & Gas Storage & Transportation industry. The company is known for serving as essentially a “toll road” for upstream E&P companies. Firms operating in this industry are known as midstream companies delivering value through their pipelines and storage facilities. EPD and its competitive peers in this industry of the Energy sector provide transport and storage services to oil producers.

Source: EIAxx

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ENTERPRISE PRODUCTS PARTNERS L.P. (NYSE: EPD) ● Recommendation: HOLD ● As of the beginning of 2015 there was 199,243 miles of pipeline in the US. There are 66,649 miles of pipeline for crude oil, 61,681 miles for refined products, and 65,595 miles for natural gas or NGL’s. The map above shows the extensiveness of the current pipeline systems and they are going to continue to expand in the coming years. NGLs and natural gas lines have increased 27.5% in the last 10 years and are expected to grow the most over the next 5 years as 27,866 miles were planned to begin construction in 2015. Crude oil and refined products are expected to grow by 10,626 and 3,247 miles over the next 5 years in comparison. This continued growth of pipeline speaks to the room for growth in this industry and suggest that there will be sufficient demand for these oil and gas products. Recent Development and Trends Natural gas production decreases

Source: EIAxx

Natural Gas production has been on the rise in recent years and fell late in 2015 due to low oil prices and declining rig counts, which hurts the demand for natural gas. The production is anticipated to increase again in 2017 according to the EIA. We project steady increases as foreign and domestic industrial and commercial demand increase in the coming years. This is illustrated by increasing sales for EPD to 29.156 billion in 2016 and 32.071 billion in 2017 as demand and natural gas prices increase. The U.S. is projected to be a net exporter by 2018, which will help the major NGL and natural gas firms, such as EPD, grow their revenues significantly from 2018-2022 as demand rises.

Natural gas storage increases

Source: EIAxx

Natural gas storage levels are at near all-time highs due to a warm winter which affected heating needs and are projected to continue to be at a high level for the foreseeable future. The current levels show a stark contrast from mid-2013 to mid-2015 when storage was far lower than usual. We expect demand to increase in 2017 due to a recovering oil price which will make natural gas cheaper compared to oil and a stronger demand in Mexico and Canada resulting from increased electrical power needs. Additionally, exports are expected to grow in Asia due to new trade agreements and continued economic growth in these markets. Competition Analysis Company Name Mkt. Cap Sales ROE P/E 17

Enterprise Product Partners L.P. 48.47 B 27.03 B 13.10% 18.4Magellan Midstream Partners L.P. 15.00 B 2.19 B 47.11% 19.8Spectra Energy Partners L.P. 13.57 B 2.50 B 9.33% 14.3Energy Transfer Partners L.P. 23.22 B 34.30 B 1.93% 26.1Williams Companies Inc. 13.16 B 7.36 B -7.65% 21.8Energy Transfer Equity L.P. 9.37 B 42.13 B - 7.4Kinder Morgan 40.55 B 13.92 B 0.69% 26Plains All American Pipelines L.P. 8.76 B 22.97 B 3.97% 16.1Mean - 19.04 B 9.78% 18.74 Source: Factsetvii

Despite the downturn that affected the energy sector as a whole, the oil pipeline industry remained profitable. Most companies performed well in 2015 and had a net income consistent to prior years. This is largely due to the only major expense being cost of goods sold which rises and falls with revenue. Williams Company (WMB) and Energy Transfer Equity (ETE) performed poorly due to high interest expense from debt necessary to finance expansion projects. EPD had interest expense of $927 million which is small relative to EPD’s size. Smaller firms had interest expense of over $1 billion which has caused their net incomes to drop.

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ENTERPRISE PRODUCTS PARTNERS L.P. (NYSE: EPD) ● Recommendation: HOLD ●

Source: Factsetvii

The graph above illustrates the diversity of the product offerings for different companies. EPD is the most diversified company with significant exposure to all three pipelines listed above. NGLs and Natural Gas make up 87.7% and Crude Oil being the remaining 13.3% of EPD’s pipeline coverage. Others offer only one or two types of pipeline service which makes firms in the industry react differently based on energy prices. Below is the revenue generated per mile of pipeline. Companies with more miles of pipeline used for natural gas or NGLs had a larger drop in revenue compared to firms who had bigger operations with oil pipelines. Magellan Midstream Partners (MMP) operates exclusively in the oil pipeline space and was not affected by the drop in natural gas or NGL prices. Though oil prices dropped, it transported almost double the value of oil. ETE and Kinder Morgan (KMI) have more miles of pipeline than EPD. However, EPD earns more revenue per mile of pipeline than they do. Thus, EPD has more productive assets.

Source: Factsetvii

Capital Expenditures

Source: Factsetvii

Strong capital expenditures are a good indicator that there is potential for growth. Every company in the industry has had consistent capital expenditures with ETP having a strong increase in 2015. EPD has had about industry average capital expenditures which will remain consistent in 2016. We complied management’s guidance for projected capital expenditures for 2016 and it shows consistency in its capital expenditures which suggests a strong future for this industry even though revenues dipped last year. These figures suggest firms are continuing to build more pipelines and are expanding their operations. Comparisons Among MLP firms

MLP Name Mkt. Cap EV/EBITDA P/DCF 17 Net IncomeEnterprise Product Partners L.P. 48.47 B 16.08 4.03 B 12.00 2.51 BMagellan Midstream Partners L.P. 15.00 B 18.96 .94 B 15.70 0.82 BEnergy Transfer Partners L.P. 23.22 B 12.17 3.37 B 5.10 0.31 BPlains All American Pipelines L.P. 8.76 B 13.68 1.47 B 7.80 0.31 BEnergy Transfer Equity L.P. 9.37 B 15.64 1.32 B 11.0 1.18 BSpectra Energy Partners L.P. 13.57 B 13.18 1.21 B 13.00 0.98 BMean - 14.95 2.06 B 10.77 1.02 B

Distribution Cash Flow

Source: Factsetvii

The above table compares only MLP’s omitting corporations like Kinder Morgan (KMI) and Energy Transfer Equity (ETE). We limited this comparison to MLP’s since EPD possesses that corporate structure. MLPS compare better to each other because they use Price-to-Distributive-Cash-Flow (P/DCF) instead of Price/Earnings (P/E) as an accurate metric for comparison despite some having smaller operations than companies such as KMI. This is because P/E ratios can be misleading when doing relative valuation. MLPs normally have high depreciation expenses due to the heavy fixed-asset nature of their industry. The large amounts of depreciation can give a negative view of company earnings regardless of company performance, it does not affect cash flows. These MLP’s 2017E P/E average is 19.5 which can make their stocks look expensive earnings wise. However, the P/DCF ratio is 10.75 on average which paints a much more reasonable picture for trading prices. EV/EBITDA is also important because it includes debt in the multiple. Due to the heavy capital requirements for building

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COMPANY ANALYSIS

ENTERPRISE PRODUCTS PARTNERS L.P. (NYSE: EPD) ● Recommendation: HOLD ● and maintaining oil pipelines, it is useful to use this multiple when comparing MLPs. EPD tends to trade at a premium as it is an industry leader and has performed well relative to peers during the drop in oil prices which has affected all three facets (upstream, midstream, and downstream) of the oil industry. It has also increased its quarterly dividend 47 straight quarters, including Q1 2016, and is expected to continue this into the future. According to our model, we expect the distribution to be $1.58 for 2016 and grow by around $.07 per year to around $2.00 in 2022. Porter’s 5-Forces Analysis: Supplier Power Suppliers in the pipeline industry cater primarily to companies in the energy sector, which currently are being hit hard by low commodity prices. Just as the upstream companies in the sector are struggling, so are those supplying servicing them. The suppliers need their product to be purchased in order to make a profit. Often times in this industry, the suppliers have entered into long-term contracts with the purchasing companies. These contracts typically only get negotiated every few years. For companies like EPD that are primarily pipeline based, the supplier costs are mostly paid all at once and up front. Overall, the supplier power in the industry is low due to the inability to negotiate regularly. Buyer Power Demand for oil, gas, and the respective pipeline services is relatively inelastic, meaning consumers will always need it no matter what price it is currently trading at. Buyers in general do not have much power in setting the prices. They are primarily set by the drilling companies and organizations. However, if buyers are pessimistic and shareholders divest shares of equity then the company may have to leverage more of its operations with debt which could be detrimental for the company in the long run if it cannot meet payments. That being said, the buyers power is set currently at a medium level of influence in terms of equity pricing versus commodity pricing which is primarily set by larger companies and organizations. Competitive Rivalry Competition is usually what leads to volatile markets. Currently a variety of companies and associations are dumping oil and gas into the market to drive prices down or are building up reserve supplies in order to drive prices up. Major sources of oil in the industry are WTI and Brent. EPD and most other U.S. pipeline MLP’s deal with WTI. OPEC and other institutions influence the competition for price by communicating various announcements and setting drilling

policies. Currently OPEC has decided to continue to drill despite already low prices. This type of news hurts the energy commodities market further. The price in this industry is driven by the competition over market share between companies and organizations. Additionally, strong competition is the primary reason for smaller companies going bankrupt and larger companies struggling. Threat of Substitution The oil industry in general does not have many substitutions other than wind and solar energy. Both of these are more expensive than energy provided by oil and gas due to low commodity prices. Infrastructure in many buildings and cities is also set up to run on oil and gas energy. Creating a whole new infrastructure to enable cities and buildings to use alternative forms of energy would require incredibly high costs. As far as pipelines and transportation of oil and gas more specifically, the only substitute would be boats and trucks. In order to get energy to these transportation services, the use of pipelines is still required. At this point in time, there are virtually no alternatives or substitutes for pipelines in terms of transporting energy across the U.S. Threat of New Entry The oil and gas industry is one of the toughest industries to enter right now. Currently, there are few banks are giving out loans to companies looking to invest in the industry. Many small companies already involved are having to default on loan payments and either go bankrupt or get acquired by larger companies who have the cash flow to withstand these rough times. Due to such poor conditions the threat of entry for this industry is extremely low. Enterprise Product Partners, L.P. (EPD) is a leading North American provider of midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. As a leader of midstream energy services, it has been able to endure the low energy commodity prices well in comparison to its competitors. It has managed to increase its distributions by over 5% from 2014 to 2015 reporting 47 consecutive quarters of cash distribution increases. In 2015, EPD generated 1.85 times the coverage needed to meet shareholder distribution requirements set forth by its board of directors. Despite the economic downturn, EPD is still able to invest large amounts of money into acquisitions as well as capital expenditures. In 2014, EPD acquired Oiltanking Partners L.P. The deal has greatly increased its storage and transportation capacity along the Texas Gulf Coast. EPD also sold its offshore Gulf of Mexico pipeline and services business segment to Genesis Oil and Gas

April 12, 2016 8 | EPD

ENTERPRISE PRODUCTS PARTNERS L.P. (NYSE: EPD) ● Recommendation: HOLD ● Consultants Ltd. for $1.5 billion in cash. The cash infusion allows EPD to invest in better suited projects more likely to generate long-term future cash flows. This year, EPD plans to complete the final payment installment necessary to acquire EFS Midstream. Capital spending exceed $6 billion in 2015 and the company expects that figure to be similar at the end of 2016. In comparison with its competitors, EPD has the size, geographic exposure, and diversity of business segments to separate itself in the industry and provide a positive long-term outlook to unit holders. EPD has proven that it can remain profitable within a tough economic environment for energy companies. Its revenue is dependent on the health of its upstream clients. When E&P companies see their margins falling due to slumping commodity prices, transportation and storage firms feel pressure to decrease rates. EPD has felt this pressure, and while revenues suffered in 2015 compared to the year before, its profit margins remained stable. The company is gearing up for the long run. Between its quarterly increases in cash distributions and capital expenditures, EPD seems confident that an oil and gas price turnaround is looming. As energy prices rebound, EPD is poised to realize significantly larger revenues and an attractive bottom line.

General Information

EPD’s operations include the gathering, treating, processing, transportation, and storage of natural gas. It also transports, fracks, stores, imports, and exports NGLs. EPD gathers, transports, and stores crude oil in addition to having offshore production platforms. It deals with refined products and petrochemicals and also has a marine transportation business that operates primarily on the U.S. inland, Intracoastal Waterway systems, and in the Gulf of Mexico. EPD generates revenue mainly through fee-based services that involve the transportation, refining, and storage of these energy products. It accomplishes these services through its extensive network of onshore and offshore pipelines, over 44,000 miles worth. Its revenue streams are broken down into five reportable segments: NGL pipelines & services, onshore natural gas pipelines & services, onshore crude oil pipelines & services, offshore pipelines & services, and petrochemical & refined products services. Reported revenues were down by almost 45% from a year ago to just over $27 billion mostly due to falling commodity prices. Costs also fell proportionally leading to only a slight decline in net income from a year ago. Source: 10-Kxxvi

Products and Markets

EPD’s NGL pipelines and services business segment includes a natural gas processing plant, 19,300 miles of pipelines, storage facilities, and 15 NGL fractionators. Within this segment, it also has an import and export terminal it can operate out of.

The onshore natural gas pipeline & services business segment also includes about 19,300 miles of onshore natural gas pipeline systems that provide transportation across Colorado, Louisiana, New Mexico, Texas, and Wyoming. EPD has underground salt domes for natural gas storage that it leases out and are vital to its natural gas pipeline operations.

Its onshore crude oil pipelines & services include 5,400 miles of onshore crude oil pipelines and crude oil storage terminals. Included in this business segment is approximately 560 tractor-trailer tank trucks that EPD leases and operates to transport crude oil for itself and its customers.

EPD’s offshore pipeline & services recently got smaller with the sale of part of its assets to Genesis, but still serves some of the most active drilling and development regions. These regions include Deepwater production fields, some as deep as 7 km below the water. It also has about 2,350 miles of offshore natural gas and crude oil pipelines paired with six offshore hub platforms for drilling and storage.

Its petrochemical & refined products services business segment includes propylene fractionation and related operations with 680 miles of pipelines. It also includes a butane isomerization complex with the associated deisobutanizer units, octane enhancement and high purity isobutylene production facilities, refined products pipelines stretching over 4,200 miles, and marine transportation.

Source: Factsetvi

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ENTERPRISE PRODUCTS PARTNERS L.P. (NYSE: EPD) ● Recommendation: HOLD ● Recent Earnings and Distribution Payout

Revenues were down from a year ago by almost 45% and earnings per share also decreased by $0.21 from a year ago. That being said, distributions continued to increase achieving 1.3 times its coverage ratio. The stock price has taken a big hit in the past year currently towards the low end of the range trading around the $23 - $25 mark in recent weeks. Positive earnings reports and guidance have improved the price slightly, but investor attitude in the energy space is low and will remain that way until commodity prices see a rebound. Net income has remained steady from 2014 to 2015 from $2.78 billion to $2.5 billion because cost of goods sold are mostly proportional to revenue, the only other major expense is interest expense used to finance acquisitions and capital expenditures. EPD is famously consistent with its quarterly distribution increases. This continued in or model by increasing at a rate of near $.07 per year before reaching $2.00 in 2022. The unitholder distribution is what makes EPD such a popular investment for investors.

Source: Factsetvii

Business Segment Revenue Projections

EPD has been extremely consistent with each business segment’s portion of revenue the past 5 years. No segment has deviated more than 2% of the average for each segment: NGL’s have always been approximately 37% of revenue, natural gas 8%, crude oil 40%, and petrochemicals 14% the past 5 years. For years 2016-2022 we continued a similar distribution of revenue. This assumption is grounded in out expectation that all segments will continue to grow at a similar pace.

Source: Factsetvii

Products and Distribution

As an MLP, EPD technically does not have employees and rather leases out its assets for set fees. It is involved minimally in the production of energy resources, but is rather almost entirely focused on the distribution and transportation of energy products. In order to thrive with fee-based compensation, it is pivotal to always have the competitive advantage and be looking for ways to increase transportation and storage infrastructure. EPD has completed over $6 billion of projects and acquisitions in the past two years and has close to $4 billion planned for 2016 already. It is continually looking for ways to set itself apart from competition because customer satisfaction and ease of service is a large part of determining fees charged to customers.

Other Topics

By way of definition, EPD is a Master Limited Partnership (MLP). MLPs are flow through entities where the tax burden is placed upon the shareholders rather than the corporation. It is essentially a hybrid between a publicly traded corporation and a partnership. They are essentially publicly traded partnerships. They deal in “units” not “shares” and receive distributions instead of dividends. However, dividends and distributions are valued the same way. EPD also owns many subsidiaries under the name Enterprise Products Holdings. Many of these subsidiaries were strategic acquisitions to further EPD’s already vast network of pipelines and transportation related services.

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ANALYSIS OF VALUATION METHODS

ENTERPRISE PRODUCTS PARTNERS L.P. (NYSE: EPD) ● Recommendation: HOLD ● Catalysts for Growth/Change

The catalysts that will drive growth or a business restructuring are the strength of the economy and population growth in countries identified as emerging markets. As population increases in nations such as India, China, and Indonesia demand for energy will increase. EPD could be a potential supplier of natural gas in 2018 when the U.S. will allow companies to export natural gas. Currently however, there is an oversupply of oil on the market. This has driven the price per barrel down to around $40 per barrel. This is the lowest it has been in ten years. An excess supply combined with a demand increasing at a slower pace does not bode well for companies operating in the energy sector. Oil reserves are nearing capacity and with prices so low, E&P companies are pumping less. This means less new oil in the pipelines of companies like EPD, and pumping natural gas is less profitable as its price also drops. While onshore rig counts in the United States have seen a sharp decline, the amount of oil on the market is still too high. When this happens companies in this sector make budget cuts and downsize. EPD is focusing on its long term contracts by continuing to spend at least $4 billion on capital expenditures in 2016 to build more pipelines for anticipated increased future demand. An increase in the price for oil will lead to increased activity and earnings for E&Ps. In turn, they will require more midstream services which will help EPD and its sub-industry rebound.

Key Investment Positives/Negatives:

Strengths

EPD’s corporate strategy and instrumental services are strengths that should be positive indicators to potential investors. This midstream service provider has a large scale and integrated network of diversified assets in close proximity to domestic supply basins and production hubs. It has built strong relationships with major oil, natural gas, and petrochemical companies. From those relationships it has been able to secure long term contracts yielding fee based revenue. This avenue of earnings should be viewed as a positive as fee based revenue is less susceptible to the volatility of commodity prices. EPD’s four different business segments under the midstream service umbrella combined with its billions of dollars invested in growth projects and acquisitions give the company a diversified portfolio of assets.

Another strength of EPD is its size and partnership structure which gives it the ability to access debt and equity financing with ease. In 2010, EPD acquired Enterprise GP Holdings L.P. which resulted in a more simplified partnership structure. The ensuing capital structure gave EPD a lower long-term cost of equity which enables it to acquire new assets more effectively. Lastly, EPD’s proven track record as a dependable provider of midstream services has allowed it to build a strong reputation

within the industry. The partnership prides itself on its management team’s well established industry experience and ability to operate nearly all of its facilities itself. As long as oil and natural gas commodities are trading in North America, EPD will be realizing revenue from its transportation and storage services.

Weaknesses

EPD’s business relies heavily on the market, demand, and production of hydrocarbon products. Even though oil and NGLs must be transported or stored, EPD has to adjust its fees and rates associated with transportation to keep customers happy. It will not be able to justify keeping its pipeline and storage rates high when their customers have to sell a barrel now at $40 when it was almost double that a year ago and even triple that when going three years back.

Opportunities

EPD has recently acquired Oiltanking Partners giving it access to waterborne markets through marine terminals on the Houston Ship Channel. EPD will also finish its final installment payment for the purchase EFS Midstream in 2016. Strategic acquisitions such as the ones listed above are going to be opportunities facing larger MLP’s like EPD as smaller companies are not able to withstand the low commodity prices and are having to default on their loans. Growth is key for any company to thrive as long as they are well thought out moves and it is also important for investor confidence to know that EPD is able to continue to grow despite the hard economic times.

Threats

Other midstream energy MLPs might be turned to during these times if they offer lower fees. With production not halting and storage capacities being reached with many MLP’s, downstream oil companies will increasingly be looking for alternative companies to transport their energy products.

Overview We are issuing a HOLD recommendation on Enterprise Product’s Partners (EPD) stock based on the results of our valuation model and key assumptions. We calculate EPD’s intrinsic value to be between $27.00 and $30.00 with our DCF/EP model and dividend discount model (DDM) producing a $28.77 and $27.22 partially adjusted present value of the stock, respectively. EPD has been able to endure the commodity price cycle that is occurring supported largely by its liquefied petroleum (LPG) exports to compensate for its lost revenue in

April 12, 2016 11 | EPD

ENTERPRISE PRODUCTS PARTNERS L.P. (NYSE: EPD) ● Recommendation: HOLD ● their natural gas liquids (NGLs) business segment. Despite the low commodity prices, EPD was able to have record years both in terms of gross operating margin, and distributable cash flow. It posted figures of $5.3 billion and $4.00 billion respectively. It was also able to maintain its coverage providing 1.3 times the coverage of cash distributions paid in 2015 meaning it was able to retain $2.6 billion. This can go towards capital expenditures and other growth projects. The key assumptions used in our financial models are revenue forecasts, distributions per share payouts, capital expenditures and acquisitions, our WACC estimation, and our continuing value growth assumptions. Discounted Cash Flow (DCF) - Economic Profit (EP) Model Our DCF/EP model calculates the intrinsic value, as of today, to be $28.77. The DCF/EP model is the most accurate and best representation of the true value EPD unitholders get when investing. With the current price (as of 4/12/2016) being $25.01, our valuation range of $27.00 to $30.00 would result in a small premium of between 5% and 10% over EPD’s current price. This slight premium represents small growth potential. The major factors playing into the small premium and overall HOLD rating are the continuing value growth assumptions, our continuing value return on invested capital (ROIC), our WACC calculation, and our cost of equity calculation. The DCF/EP valuation model represents EPD’s intrinsic value well due to the emphasis placed on invested capital and NOPLAT which have historically shown steady growth. Historical information paired with capital projects guidance from the board of directors establishes the credibility of this valuation method as an accurate representation of EPD’s intrinsic value. Distributions Discount Model (DDM) The DDM produces an output partially adjusted intrinsic value of $27.22. In the nature of Master Limited Partnerships (MLPs), almost all the cash income made is paid out in the form of distributions to its unitholders, or limited partners. Once an MLP meets its distribution coverage, it invests the remaining cash in capital projects to further growth of its pipelines. In looking at historical distributions for EPD, it has raised distributions in 47 consecutive quarters while also providing greater coverages allowing surpluses of cash that is able to be invested back in the company. Since EPD has a historical track record of raising distributions by an average of $0.07 per year, we have forecasted this to continue through to our continuing value year of 2022. The consistency and strong distribution growth over the past years makes forecasting distributions easier and leads to an accurate representation of EPD’s intrinsic value of $27.22 as reflected in the DDM. Relative Price to Earnings (P/E) The relative P/E model bears a price of $28.65 and $25.82 in the years 2016 and 2017 respectively. When assessing key

competitors and players in the MLP space with EPD, most companies maintain relatively stable financial measurements such as P/E since most all costs associated with MLPs are variable costs. MLPs have no employees so their administrative costs are low and they primarily function as “toll roads” for oil so their prices, and therefore their costs, are largely dependent upon their customers and the current market price of oil. The consistent financial measures and cost structure of MLPs leads to a valuable relative P/E model and an accurate representation of the intrinsic value of the stock. Forecasting Summary Important notes to keep in mind when examining our forecasted financial statements are that goodwill and accumulated other comprehensive income were froze and remain constant throughout the model. We also did not predict any of the sale of fixed assets/investments line items and when we do, it is either through guidance or a consistent growth rate based on historical data. The “Other Funds” accounts on the cash flow statement were treated as “plug” accounts to maintain an average cash balance. We have chosen to forecast both assets from acquisitions and sale of fixed assets based on historical data with the help of guidance from management. Many other Master Limited Partnerships (MLPs) are getting hit hard with the current economic conditions and EPD is well positioned to strategically acquire some of the smaller companies adding to its already vast network of pipelines. We chose 2022 as our continuing value year with a constant growth rate of 4% moving forward. The key assumptions used in our financial models are revenue forecasts, distributions per share payouts, capital expenditures and acquisitions, our WACC estimation, and our continuing value growth assumptions. All other financial statement forecasting assumptions were based upon historical data from the past 10 years. Forecasts were based upon both year over year growth rates for certain growth oriented line items. This is typically most balance sheet accounts. Other more variable line items such as those on the income statement, were forecasted as a percentage of sales. All assumptions were in line with analyst estimates and company guidance where applicable. Key Assumptions: Revenue Forecasts EPD’s revenue segments can be broken into five main segments: NGL pipelines & services, onshore natural gas pipelines & services, onshore crude oil pipelines & services, and petrochemical & refined products services. Its largest revenue sources are from NGL pipelines & services and onshore crude oil pipelines & services with all revenue streams increasing and decreasing in a uniform matter. Revenues dropped almost 50% in the past fiscal year, but we expect increases for the 2016

April 12, 2016 12 | EPD

SENSITIVITY ANALYSIS

ENTERPRISE PRODUCTS PARTNERS L.P. (NYSE: EPD) ● Recommendation: HOLD ● fiscal year. For revenue forecasts, we largely went in line with analyst estimates and company guidance. Paired with historical segmentation data, we arrived at our revenue forecasts. We, as well as other analysts, predict increases in revenue beginning in the current fiscal year in all business segments. We expect the increases to continue until they level off at 4% in the continuing value year of 2022. Distributions per Share EPD has increased its distributions for 47 consecutive quarters by an average of $0.07 per year. Based upon these historical figures, company guidance, and an already increased first quarter FY2016 distribution, we have forecasted an increase of $0.07 per year until our continuing value year. This increase will have them at a $2.00 distribution to unitholders by 2022. Capital Expenditures and Acquisitions EPD has a history of successful capital investments leading to heightened organic growth. It has completed $36 billion of capital projects in its history with $16 billion of those projects coming within the past five years. The capital expenditures are solely aimed at broadening and extending its already integrated midstream pipeline system and network. EPD announced three more capital projects to be completed in 2016 to widen its reach in the United States. It will add over 400 miles of crude oil pipelines and two more natural gas processing plants. These projects sum up to $6.8 billion of growth capital projects currently under construction and are primarily financed through long-term debt contracts. EPD also recently completed the acquisition of Eagle Ford Shale Midstream LLC in July 2015. This acquisition provided EPD with condensate gathering and processing services in addition to natural gas gathering, treating, and compression services. EPD also gained access to the rich areas once owned exclusively by Eagle Ford Shale further integrating its system of NGL and condensates. It managed to pay for most of the acquisition through the sale of offshore assets that had declining earnings and were not a part of EPD’s overall growth strategy as a company. The Eagle Ford Shale acquisition will provide much greater synergies as well as higher, risk-adjusted returns on invested capital. WACC Estimation We determined EPD’s weighted average cost of capital (WACC) to be 6.533%. This percentage is derived after taking into consideration the cost of equity, cost of debt, and included in the cost of debt is EPD’s operating leases. For our calculation of cost of equity, we utilized a 2.60% risk free rate, a 5.00% risk premium, and a 0.845 beta arriving at a final cost of equity of 6.83%. The risk free rate was based on 30

year Treasury bond yields, the risk premium was a percentage we chose as a group based on historical data, and our beta was derived from a Bloomberg terminal using monthly beta data over the course of the past five years. We used a 5.92% rate for the after tax cost of debt. For the tax rate, we took its marginal tax rate of -0.10% for the 2015 fiscal year pulled off the 10-K. EPD had many bonds outstanding past the 30 year mark so we took an average of the stated coupon rates for the bonds maturing between the years of 2046 and 2076 to arrive at an average bond yield of 5.91%. After multiplying the bond yield by one minus the marginal tax rate, we reached an after tax cost of debt of 5.92%. Our model utilized the capital asset pricing model (CAPM) for the calculation of the WACC. The weight of equity is 68% and the weight of debt is 32%. When multiplied by their respective cost of capital, the WACC estimation comes out to be 6.533%. We expect the weights of the two primary sources of capital to rise to around 75% equity and 25% debt in the coming years as EPD will have a tough time issue debt as most bonds in the energy sector have “junk” ratings. We expect its operations to balance back out to approximately 70% equity and 30% debt by the continuing value year. CV Growth Assumptions We arrived at the continuing value of growth assumption of 4% through a combination of variables. The primary drivers of the continuing value assumption is last years’ GDP growth for the United States of 1.9% and the fact that EPD consistently increases distributions and has a track record of success when it comes to capital investments and meeting desired coverage ratios. Due to the combination of these factors, we multiplied the United States prior year GDP growth rate by two to arrive at or 4% continuing value growth rate. EPD shows promise in the midstream energy industry and has proved this through its ability to produce record years by many financial measures despite a volatile energy commodity market. It will continue this trend of steady growth through increased distributions and successful capital investment projects and be able to maintain a 4% continuing value growth rate with ease.

Risk Free Rate vs. Equity Risk Premium When comparing the risk free rate to the equity risk premium, both are derived from historical data and were decided upon as a group. Small deviations from these metrics can result in a change in stock price with a lower risk free rate and lower risk premium both being advantageous for the intrinsic value of the stock.

April 12, 2016 13 | EPD

ENTERPRISE PRODUCTS PARTNERS L.P. (NYSE: EPD) ● Recommendation: HOLD ●

Beta vs. Equity Risk Premium The beta and equity risk premium metrics are pivotal measurements when arriving at our target price range. A small decrease in the beta could mean a stock price increase of almost $5.00, because of this we spent much time and deliberation in choosing to measure the beta with a monthly average over the last five years. When examining EPD’s historical performance, many different economic and market conditions are captured in the past five years and in the highly cyclical industry of midfield energy transportation services we feel as though a 0.845 beta best represents EPD’s performance with respect to market fluctuations. The equity risk premium was chosen by our group based upon historical average risk premiums. Small deviations in the risk premium by even 25 basis points results in large fluctuations in stock price.

Revenue Growth vs. SG&A Growth We carefully arrived at the initial revenue growth rate of 8%, which is in line with analyst estimates and management guidance. We chose to portray the variable about SG&A Growth to show how in the MLP space SG&A costs are minimal and lead to very little to no change in intrinsic value. MLP’s do not have employees, just limited and general partners so their SG&A expense is far lower than other companies in the oil & gas industry.

Marginal Tax Rate vs. Pretax Cost of Debt EPD’s marginal tax rate remains fairly constant between -1% and 1% as all of its income is treated as flow through and taxed at the individual unitholder level. As described earlier, the pretax cost of debt is the bond coupon rate from the average of

bonds more than 30 years outstanding and being issued all the way until 2076. Since the weight of the cost of debt is only 32%, and the marginal tax rate is close to 0% on a yearly basis, neither variable has that big of an effect on the stock price. Even if EPD leveraged more of its operations with debt rather than equity than the marginal tax rate still would not have a big effect on the intrinsic value due to the nature of MLPs.

Continuing Value NOPLAT vs Pretax Cost of Debt The CV Growth percentage was derived from consistent and steady growth in capital expenditures over the past five years spending over $16B and having over $6B planned in the next three years. Further explanations are above in the assumptions section, but this metric is also very important as small changes in assumptions can have an effect on the intrinsic value of the stock by more $10.00 if increased 100 bps. The pretax cost of debt was arrived upon based on the average of the coupon rates of bonds more than 30 years outstanding but has much less of an effect on the intrinsic value due to EPD being primarily financed through equity and being structured as an MLP and flow through entity.

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.

April 12, 2016 14 | EPD

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Enterprise Products Partners L.P.Revenue DecompositionMillionsFiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E CV 2022Revenue 47,547 47,952 27,028 29,156 32,071 35,920 39,512 41,882 43,558 45,300

YoY Growth 11.65% 0.85% -43.64% 7.87% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00%

Business Segmentation NGL Pipelines & Services 17,120 17,090 9,788 10,571 11,628 13,024 14,326 15,185 15,793 16,425

YoY Growth 12.87% -0.18% -42.73% 8.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Onshore Natural Gas Pipelines & Services 3,359 4,204 2,743 2,928 3,221 3,608 3,968 4,207 4,375 4,550

YoY Growth 0.18% 25.16% -34.75% 6.76% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Offshore Pipelines & Services 159 157 79 85 94 105 115 122 127 132

YoY Growth -17.19% -1.26% -49.68% 7.73% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Onshore Crude Oil Pipelines & Services 20,650 20,184 10,306 11,130 12,243 13,713 15,084 15,989 16,628 17,294

YoY Growth 16.92% -2.26% -48.94% 8.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Petrochemical & Refined Products Services 6,259 6,317 4,112 4,441 4,885 5,471 6,018 6,379 6,635 6,900

YoY Growth 0.81% 0.93% -34.91% 8.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00%TOTAL GROWTH 47,547 47,952 27,028 29,156 32,071 35,920 39,512 41,882 43,558 45,300

NGL Pipelines & Services Sales of NGLs 15,916 15,460 8,045 8,688 9,557 10,704 11,774 12,481 12,980 13,499

YoY Growth 11.94% -2.86% -47.96% 8.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Midstream services 1,204 1,630 1,743 1,883 2,071 2,319 2,551 2,704 2,813 2,925

YoY Growth 26.77% 35.33% 6.96% 8.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Selected Volumetrics

NGL Transportational Volume (MBPD) 2,787 2,892 3,002 3,242 3,566 3,994 4,394 4,657 4,844 5,037 NGL Fractionation Volume (MBPD) 726 824 826 892 981 1,099 1,209 1,281 1,333 1,386 Equity NGL production (MBPD) 126 116 133 144 158 177 195 206 215 223 Fee-based natural gas processing (MMcf/d) 4,612 4,786 4,905 5,297 5,827 6,526 7,179 7,610 7,914 8,231

Onshore Crude Oil Pipelines & Services Sales of crude oil 20,371 19,784 9,733 10,512 11,563 12,950 14,245 15,100 15,704 16,332

YoY Growth 16.08% -2.88% -50.80% 8.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Midstream services 279 400 573 619 681 762 839 889 925 962

YoY Growth 146.99% 43.46% 43.11% 8.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Selected Volumetric

Crude oil transportation volumes (MBPD) 1,175 1,278 1,474 1,592 1,751 1,961 2,157 2,287 2,378 2,473 Crude oil marine terminal volumes(MBPD) 210 691 557 602 662 741 815 864 899 935

Onshore Natural Gas Pipelines & Services Sales of natural gas 2,772 3,182 1,723 1,826 2,009 2,250 2,475 2,623 2,728 2,837

YoY Growth 15.71% 14.80% -45.86% 6.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Midstream services 967 1,022 1,021 1,102 1,213 1,358 1,494 1,584 1,647 1,713

YoY Growth 1.01% 5.71% -0.14% 8.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Selected Volumetric

Natural gas transportation volumes(Bbtus/d) 12,936 12,476 12,321 13,307 14,637 16,394 18,033 19,115 19,880 20,675

Petrochemical & Refined Products & Services Sales of petrochemical and refined products 5,569 5,576 3,334 3,600 3,960 4,435 4,879 5,172 5,379 5,594

YoY Growth 1.79% 0.12% -40.21% 8.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Midstream services 690 741 778 841 925 1,036 1,139 1,208 1,256 1,306

YoY Growth -6.54% 7.44% 5.05% 8.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Selected Volumetrics

Propylene fractional volumes (MBPD) 74 75 71 77 84 94 104 110 115 119 Butane isomerization volumes (MBPD) 94 93 96 104 114 128 141 149 155 161 Standalone DIB processing volumes (MBPD) 67 82 79 85 94 105 116 123 127 133 Octane additive and related plant production volumes (MBPD) 20 17 17 18 20 23 25 26 27 29 Transportation volumes, primarily refined products and petrochemicals (MBPD) 702 758 784 847 931 1,043 1,147 1,216 1,265 1,316 Refined products and petrochemical marine terminal volumes (MBPD) 5 270 355 383 422 472 520 551 573 596

Offshore Pipelines & Services Sales of natural gas 0.50 0.30 - - - - - - - -

YoY Growth 25.00% -40.00% -100.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Sales of crude oil 5.70 8.60 3.20 3.46 3.80 4.26 4.68 4.96 5.16 5.37

YoY Growth 72.73% 50.88% -62.79% 8.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Midstream services 153 148 76 82 90 101 111 117 122 127

YoY Growth -18.42% -3.46% -48.88% 8.00% 10.00% 12.00% 10.00% 6.00% 4.00% 4.00% Selected Volumetrics

Natural gas transporation volumes (BBtus/d) 678 627 587 634 697 781 859 911 947 985 Crude oil transportation volumes (MBPD) 307 330 357 386 424 475 523 554 576 599 Platform natural gas processing (MMcf/d) 202 145 101 109 120 134 148 157 163 169 Platform crude oil processing (MBPD) 16 14 13 14 15 17 19 20 21 22

Enterprise Products Partners L.P.Income Statement

Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E CV 2022 REVENUE 47,727 47,951 27,028 29,156 32,071 35,920 39,512 41,882 43,558 45,300

EXPENSES Total operating costs & expenses 43,090 42,938 22,358 23,908 26,619 29,813 33,585 36,019 37,895 38,958 Depreciation & amortization 1,149 1,283 1,311 1,206 1,279 1,465 1,472 1,637 1,620 1,713 Total general & administrative costs 188 215 193 147 163 182 204 210 213 226 TOTAL EXPENSES 44,427 44,435 23,861 25,261 28,061 31,460 35,261 37,865 39,729 40,897

Equity in income (loss) of unconsolidated affiliates 167 260 374 102 119 140 159 177 195 218 OPERATING INCOME 3,467 3,776 3,540 3,998 4,130 4,600 4,410 4,194 4,024 4,621

OTHER REVENUE (EXPENSES) AND GAINS (LOSSES) Interest expense (803) (921) (962) (1,074) (1,128) (1,173) (1,212) (1,223) (1,223) (1,228) Interest income 0.9 1.3 - 0.5 0.7 0.8 0.9 1.0 1.1 1.3 Other income (expense), net (1.1) 0.6 (22.5) 3.0 (2.0) 6.0 2.0 (1.0) 1.0 2.0 TOTAL OTHER REVENUE (EXPENSES) AND GAINS (LOSSES) (803) (919) (984) (1,071) (1,129) (1,166) (1,209) (1,223) (1,221) (1,225)

INCOME BEFORE INCOME TAXES 2,665 2,857 2,556 2,927 3,001 3,434 3,201 2,971 2,803 3,397 Provision for (benefit from) income taxes 58 23 23 (7) 3 5 27 34 39 51

NET INCOME 2,607 2,834 2,533 2,934 2,998 3,429 3,173 2,937 2,764 3,346

Net income (loss) attributable to noncontrolling interests (10) (46) (37) - - - - - - -

NET INCOME ATTRIBUTABLE LIMITED PARTNERS 2,597 2,787 2,521 2,934 2,998 3,429 3,173 2,937 2,764 3,346

Basic EPS 1.39 1.44 1.25 1.41 1.39 1.54 1.38 1.23 1.12 1.31 Units Outstanding 1,871 1,937 2,013 2,083 2,152 2,228 2,308 2,390 2,473 2,560 Distributions per share 1.35 1.43 1.51 1.58 1.65 1.72 1.79 1.86 1.93 2.00

Enterprise Products Partners L.P.Balance SheetFiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E CV 2022ASSETS Current Assets: Cash & cash equivalents 57 74 35 54 45 51 37 33 45 63 Accounts & notes receivable - trade, net 5,482 3,826 2,571 2,920 3,229 3,553 4,074 4,235 4,349 4,511 Inventories 1,093 1,014 1,038 704 773 884 1,034 1,107 1,141 1,183 Derivative assets - 226 259 203 213 236 208 280 297 252 Prepaid & other current assets 326 576 410 262 487 529 637 665 702 723 Total Current Assets 7,023 5,491 4,313 4,142 4,748 5,253 5,990 6,320 6,534 6,732

Property, plant & equipment, at cost 34,018 38,047 40,612 43,861 46,493 48,817 50,770 52,801 54,913 57,109 Less: accumulated depreciation (7,071) (8,165) (8,577) (8,920) (9,277) (9,648) (10,034) (10,435) (10,853) (11,287) Property, plant & equipment, net 26,947 29,882 32,035 34,941 37,216 39,169 40,736 42,365 44,060 45,822 Investments in unconsolidated affiliates 2,437 3,042 2,629 2,525 2,452 3,318 4,203 4,970 5,359 5,028 Intangible assets, net 1,462 4,302 4,037 3,916 3,838 3,761 3,686 3,575 3,432 3,295 Goodwill 2,080 4,200 5,745 5,745 5,745 5,745 5,745 5,745 5,745 5,745 Other assets 189 184 193 187 190 198 202 210 218 227 TOTAL ASSETS 40,139 47,101 48,952 51,455 54,188 57,443 60,560 63,185 65,347 66,849

LIABILITIES Current Liabilities Current maturities of debt 1,125 2,206 1,864 1,550 1,890 1,249 1,271 1,572 1,932 1,016 Accounts Payable 6,483 4,746 3,428 3,468 3,924 4,343 5,197 5,518 5,792 5,963 Accrued expenses - - 993 863 817 936 982 990 783 999 Accrued interest 304 336 352 326 253 384 316 331 346 396 Derivative liabilities - - - - - - - - - - Other current liabilities 327 586 529 574 468 501 438 453 427 497 Total current liabilities 8,239 7,874 7,166 6,781 7,352 7,412 8,204 8,864 9,280 8,871

Total long-term debt 16,227 19,157 20,827 21,660 22,526 23,202 23,666 24,140 24,381 24,625 Deferred tax liabilities 61 67 46 96 65 67 77 89 67 94 Other long-term liabilities 172 311 412 239 209 342 379 339 314 403 TOTAL LIABILITIES 24,698 27,409 28,451 28,777 30,153 31,023 32,326 33,432 34,042 33,993

EQUITY Minority/Noncontrolling interests 226 1,629 206 760 363 854 623 485 282 592 Total partners' equity 15,215 18,063 20,295 21,919 23,672 25,566 27,611 29,268 31,024 32,265 TOTAL EQUITY 15,440 19,692 20,501 22,679 24,035 26,420 28,234 29,753 31,306 32,857

TOTAL LIABILITIES & EQUITY 40,139 47,101 48,952 51,455 54,188 57,443 60,560 63,185 65,347 66,849

Enterprise Products Partners L.P.Cash Flow Statement

Fiscal Years Ending Dec. 31 2016E 2017E 2018E 2019E 2020E 2021E CV 2022CASH FLOW FROM OPERATING ACTIVITIES Net income 2,934 2,998 3,429 3,173 2,937 2,764 3,346 Depreciation, amortization & accretion 1,405 1,425 1,594 1,692 1,760 1,827 1,865 Deferred Taxes & Investment Tax Credit 16 (10) 3 11 20 8 17 Other Funds 42 196 227 224 4 145 92 Changes in Working Capital 25 77 (16) 183 87 126 (33) NET OPERATING CASH FLOW 4,423 4,686 5,237 5,284 4,807 4,870 5,287

CASH FLOW FROM INVESTING ACTIVITIES Capital expenditures (4,100) (3,310) (3,194) (2,954) (3,393) (3,346) (3,967) Net Assets from Acquisitions (1,044) (1,692) (1,659) (1,764) (1,825) (1,287) (1,589) Sale of Fixed Assets & Businesses 1,643 1,330 1,162 418 335 1,423 1,316 Purchase/Sale of Investments (321) (628) (90) (78) (519) (691) (864) Other Funds 36 134 74 (82) 19 11 (77) NET INVESTING CASH FLOW (3,786) (4,166) (3,707) (4,460) (5,383) (3,890) (5,181)

CASH FLOW FROM FINANCING ACTIVIES Cash Disbursements Paid (3,292) (3,551) (3,833) (4,131) (4,445) (4,773) (5,119) Change in Capital Stock 1,624 1,753 1,894 2,045 1,657 1,756 1,241 Issuance/Reduction of Debt, Net 1,248 1,323 655 1,606 3,417 2,103 4,031 Other Funds (198) (54) (240) (359) (57) (54) (240) NET FINANCING CASH FLOW (618) (528) (1,524) (838) 572 (968) (87)

Exchange Rate Effect - - - - - - -

NET CHANGE IN CASH 19 (8) 6 (14) (4) 12 19

Beginning Cash Balance 35.0 53.7 45.4 51.1 36.8 32.8 44.6 Net Change in Cash 18.7 (8.3) 5.6 (14.3) (4.0) 11.8 18.6 Ending Cash Balance 53.7 45.4 51.1 36.8 32.8 44.6 63.2

Enterprise Products Partners L.P.Common Size Income Statement

Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E CV 2022REVENUE 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

EXPENSES Total operating costs & expenses 90.28% 89.54% 82.72% 82.00% 83.00% 83.00% 85.00% 86.00% 87.00% 86.00% Depreciation & amortization 2.41% 2.68% 4.85% 4.14% 3.99% 4.08% 3.73% 3.91% 3.72% 3.78% Total general & administrative costs 0.39% 0.45% 0.71% 0.50% 0.51% 0.51% 0.52% 0.50% 0.49% 0.50%TOTAL EXPENSES 93.09% 92.67% 88.28% 86.64% 87.49% 87.58% 89.24% 90.41% 91.21% 90.28%

Equity in income (loss) of unconsolidated affiliates 0.35% 0.54% 1.38% 0.35% 0.37% 0.39% 0.40% 0.42% 0.45% 0.48%OPERATING INCOME 7.26% 7.87% 13.10% 13.71% 12.88% 12.81% 11.16% 10.01% 9.24% 10.20%

OTHER REVENUE (EXPENSES) AND GAINS (LOSSES) Interest expense -1.68% -1.92% -3.56% -3.68% -3.52% -3.27% -3.07% -2.92% -2.81% -2.71% Interest income 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Other income (expense), net 0.00% 0.00% -0.08% 0.01% -0.01% 0.02% 0.01% 0.00% 0.00% 0.00%TOTAL OTHER REVENUE (EXPENSES) AND GAINS (LOSSES) -1.68% -1.92% -3.64% -3.67% -3.52% -3.25% -3.06% -2.92% -2.80% -2.70%

INCOME BEFORE INCOME TAXES 5.58% 5.96% 9.46% 10.04% 9.36% 9.56% 8.10% 7.09% 6.44% 7.50% Provision for (benefit from) income taxes 0.12% 0.05% 0.09% -0.03% 0.01% 0.01% 0.07% 0.08% 0.09% 0.11%

NET INCOME 5.46% 5.91% 9.37% 10.06% 9.35% 9.55% 8.03% 7.01% 6.35% 7.39%

Net income (loss) attributable to noncontrolling interests -0.02% -0.10% -0.14% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

NET INCOME ATTRIBUTABLE LIMITED PARTNERS 5.44% 5.81% 9.33% 10.06% 9.35% 9.55% 8.03% 7.01% 6.35% 7.39%

Enterprise Products Partners L.P.Common Size Balance Sheet

Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E CV 2022ASSETS Current Assets: Cash & cash equivalents 0.12% 0.16% 0.13% 0.18% 0.14% 0.14% 0.09% 0.08% 0.10% 0.14% Accounts & notes receivable - trade, net 11.49% 8.02% 9.51% 10.01% 10.07% 9.89% 10.31% 10.11% 9.99% 9.96% Inventories 2.29% 2.13% 3.84% 2.41% 2.41% 2.46% 2.62% 2.64% 2.62% 2.61% Derivative assets 0.00% 0.47% 0.96% 0.70% 0.66% 0.66% 0.53% 0.67% 0.68% 0.56% Prepaid & other current assets 0.68% 1.21% 1.52% 0.90% 1.52% 1.47% 1.61% 1.59% 1.61% 1.60%Total Current Assets 14.72% 11.50% 15.96% 14.21% 14.81% 14.62% 15.16% 15.09% 15.00% 14.86%

Property, plant & equipment, at cost 71.28% 79.72% 150.26% 150.44% 144.97% 135.91% 128.49% 126.07% 126.07% 126.07% Less: accumulated depreciation -14.82% -17.11% -31.73% -30.59% -28.93% -26.86% -25.39% -24.92% -24.92% -24.92% Property, plant & equipment, net 56.46% 62.61% 118.53% 119.84% 116.04% 109.05% 103.10% 101.15% 101.15% 101.15% Investments in unconsolidated affiliates 5.11% 6.37% 9.73% 8.66% 7.64% 9.24% 10.64% 11.87% 12.30% 11.10% Intangible assets, gross 5.47% 11.63% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Less: accumulated amortization - intangible assets -2.41% -2.61% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Intangible assets, net 3.06% 9.01% 14.94% 13.43% 11.97% 10.47% 9.33% 8.54% 7.88% 7.27% Goodwill 4.36% 8.80% 21.26% 19.70% 17.91% 15.99% 14.54% 13.72% 13.19% 12.68% Other assets 0.40% 0.39% 0.71% 0.64% 0.59% 0.55% 0.51% 0.50% 0.50% 0.50%TOTAL ASSETS 84.10% 98.69% 181.12% 176.48% 168.96% 159.92% 153.27% 150.86% 150.02% 147.57%

LIABILITIES Current Liabilities Current maturities of debt 2.36% 4.62% 6.90% 5.32% 5.89% 3.48% 3.22% 3.75% 4.44% 2.24% Payable 13.58% 9.94% 12.68% 11.89% 12.24% 12.09% 13.15% 13.18% 13.30% 13.16% Accrued expenses 0.00% 0.00% 3.67% 2.96% 2.55% 2.60% 2.49% 2.36% 1.80% 2.20% Accrued interest 0.64% 0.70% 1.30% 1.12% 0.79% 1.07% 0.80% 0.79% 0.79% 0.87% Derivative liabilities 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Other current liabilities 0.68% 1.23% 1.96% 1.97% 1.46% 1.39% 1.11% 1.08% 0.98% 1.10% Total current liabilities 17.26% 16.50% 26.51% 23.26% 22.92% 20.63% 20.76% 21.16% 21.30% 19.58%

Total long-term debt 34.00% 40.14% 77.06% 74.29% 70.24% 64.59% 59.90% 57.64% 55.97% 54.36% Deferred tax liabilities 0.13% 0.14% 0.17% 0.33% 0.20% 0.19% 0.19% 0.21% 0.15% 0.21% Other long-term liabilities 0.36% 0.65% 1.52% 0.82% 0.65% 0.95% 0.96% 0.81% 0.72% 0.89%TOTAL LIABILITIES 51.75% 57.43% 105.27% 98.70% 94.02% 86.37% 81.81% 79.82% 78.15% 75.04%

EQUITY Minority/Noncontrolling interests 0.47% 3.41% 0.76% 2.61% 1.13% 2.38% 1.58% 1.16% 0.65% 1.31% Total partners' equity 31.88% 37.85% 75.09% 75.18% 73.81% 71.17% 69.88% 69.88% 71.22% 71.22%TOTAL EQUITY 32.35% 41.26% 75.85% 77.78% 74.94% 73.55% 71.46% 71.04% 71.87% 72.53%

TOTAL LIABILITIES & EQUITY 84.10% 98.69% 181.12% 176.48% 168.96% 159.92% 153.27% 150.86% 150.02% 147.57%

Enterprise Products Partners L.P.Value Driver Estimation

Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E CV 2022Marginal Tax Rate 2.16% 0.81% -0.10% -0.25% 0.10% 0.15% 0.85% 1.15% 1.40% 1.50%

WACC 6.53% 6.53% 6.53% 6.53% 6.53% 6.53% 6.53% 6.53% 6.53% 6.53%Normal Cash (% of sales) 3.40% 3.40% 3.40% 3.40% 3.40% 3.40% 3.40% 3.40% 3.40% 3.40%Cost of Debt 7.03% 7.03% 7.03% 7.03% 7.03% 7.03% 7.03% 7.03% 7.03% 7.03%

NOPLAT Computation

EBITA: Net Sales 47,727 47,951 27,028 29,156 32,071 35,920 39,512 41,882 43,558 45,300 (-)Cost of Goods Sold (43,090) (42,938) (22,358) (23,908) (26,619) (29,813) (33,585) (36,019) (37,895) (38,958) (-)Depreciation & Amortization (1,149) (1,283) (1,311) (1,206) (1,279) (1,465) (1,472) (1,637) (1,620) (1,713) (-)Other SG&A (188) (215) (193) (147) (163) (182) (204) (210) (213) (226) (-)Operating Expenses (1,337) (1,497) (1,504) (1,353) (1,441) (1,647) (1,676) (1,847) (1,833) (1,939) (+)Implied Interest on Operating Leases 18.9 29.9 62.0 55.8 54.7 56.4 59.7 64.5 67.1 69.8 EBITA 3,319 3,546 3,229 3,951 4,065 4,516 4,310 4,082 3,896 4,473

Less: Adjusted Taxes: Provision for Income Taxes 57.50 23.10 23.10 (7.32) 3.00 5.15 27.21 34.17 39.25 50.95 (+)Tax Shield on Interest Expense 17.33 7.46 (0.96) (2.69) 1.13 1.76 10.30 14.07 17.12 18.42 (-)Tax Sheild on Non-Operating Income, Net (0.02) (0.01) - 0.00 (0.00) (0.00) (0.01) (0.01) (0.02) (0.02) (+)Tax Shield on Interest on Operating Leases 0.41 0.24 (0.06) (0.14) 0.05 0.08 0.51 0.74 0.94 1.05 Total Adjusted Taxes 75.22 30.79 22.08 (10.14) 4.18 6.99 38.01 48.96 57.29 70.39

Plus: Change in Deffered Tax (DT) Liabilities: DT Liabilities 60.80 66.60 46.00 96.00 65.00 67.00 77.00 89.00 67.00 94.00 DT Current Assets - - - - - - - - - - DT Long-Term Assets - - - - - - - - - - Net DT Liabilities 61 67 46 96 65 67 77 89 67 94 Change in DT Liabilities (YoY) 38.30 5.80 (20.60) 50.00 (31.00) 2.00 10.00 12.00 (22.00) 27.00

NOPLAT = EBITA - Adjusted Taxes + Change in DT 3,282 3,521 3,186 4,011 4,030 4,511 4,282 4,045 3,817 4,430

Invested Capital Computation

Operating Current Assets: Normal Cash 57 74 35 54 45 51 37 33 45 63 Short-Term Receivables, Net 5,482 3,826 2,571 2,920 3,229 3,553 4,074 4,235 4,349 4,511 Inventory 1,093 1,014 1,038 704 773 884 1,034 1,107 1,141 1,183 Other Current Assets 326 576 410 262 487 529 637 665 702 723 Operating Current Assets 6,958 5,491 4,054 3,939 4,535 5,017 5,782 6,040 6,237 6,480

Operating Current Liabilities: Accounts Payable & Accrued Liabilities 6,483 4,746 4,421 4,331 4,741 5,278 6,179 6,508 6,575 6,962 Other Operating Liabilities 327 586 529 574 468 501 438 453 427 497 Operating Current Liabilities 6,809 5,332 4,950 4,905 5,209 5,779 6,617 6,961 7,002 7,459

Net Operating Working Capital 148 159 (896) (966) (674) (763) (836) (921) (765) (979)

Plus: Net PPE 26,947 29,882 32,035 34,941 37,216 39,169 40,736 42,365 44,060 45,822 Plus: PV of Operating Leases 269 425 882 794 778 801 849 917 954 992 Plus: Net Intangible (Non-Goodwill) Assets 1,462 4,302 4,037 3,916 3,838 3,761 3,686 3,575 3,432 3,295 Plus: Other Operating Assets 189 184 193 187 190 198 202 210 218 227 Less: Other Operating Liabilities (327) (586) (529) (574) (468) (501) (438) (453) (427) (497)

Invested Capital 28,689 34,366 35,722 38,297 40,879 42,665 44,199 45,693 47,472 48,860

Value Drivers:

ROIC 12.48% 12.27% 9.27% 11.23% 10.52% 11.04% 10.04% 9.15% 8.35% 9.33% NOPLAT 3,282 3,521 3,186 4,011 4,030 4,511 4,282 4,045 3,817 4,430 Beginning Invested Capital 26,294 28,689 34,366 35,722 38,297 40,879 42,665 44,199 45,693 47,472

EP 1,564 1,647 941 1,677 1,528 1,840 1,495 1,157 832 1,328 Beginning Invested Captial 26,294 28,689 34,366 35,722 38,297 40,879 42,665 44,199 45,693 47,472 ROIC 12.48% 12.27% 9.27% 11.23% 10.52% 11.04% 10.04% 9.15% 8.35% 9.33% WACC 6.53% 6.53% 6.53% 6.53% 6.53% 6.53% 6.53% 6.53% 6.53% 6.53%

FCF 887 (2,156) 1,830 1,436 1,449 2,725 2,749 2,550 2,038 3,041 NOPLAT 3,282 3,521 3,186 4,011 4,030 4,511 4,282 4,045 3,817 4,430 Change in Invested Capital 2,394 5,677 1,356 2,575 2,582 1,786 1,533 1,494 1,779 1,389

Enterprise Products Partners L.P.Weighted Average Cost of Capital (WACC) Estimation

Cost of EquityRisk Free Rate 2.60%Risk Premium 5.00%Beta 0.845Cost of Equity 6.83%

Cost of DebtBond Yield 5.91%Tax Rate -0.10%After Tax Cost of Debt 5.92%

Variable WeightsTotal Equity 50,345 # Shares 2,013 $/Share $25.01Total Debt 23,573 Enterprise Value 73,918 Weight of Equity 68%Weight of Debt 32%

WACC 6.533%

Enterprise Products Partners L.P.Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Inputs: CV Growth 4.00% CV ROIC 9.33% WACC 6.53% Cost of Equity 6.83%

DCF ModelFiscal Years Ending Dec. 31 2015 2016E 2017E 2018E 2019E 2020E 2021E CV 2022NOPLAT 3,186 4,011 4,030 4,511 4,282 4,045 3,817 4,430 Change in Invested Capital 1,356 2,575 2,582 1,786 1,533 1,494 1,779 1,389 FCF 1,830 1,436 1,449 2,725 2,749 2,550 2,038 3,041 Continuing Value 99,900

Periods to Discount 1 2 3 4 5 6 6 Present Value of FCF 1,348 1,276 2,254 2,134 1,858 1,394 68,337

Value of Operating Assets 78,601 Add: Excess Cash - Add: Derivative Securities 259 Add: Investment in affiliated companies 2,629 Less: St Debt (1,864) Less: LT Debt (20,827) Less: Accumulated Minority Interests (206) Less: PV of Operating Leases (882) Less: Employee Stock Options (3)

Value of Equity $57,707.71Shares Outstanding 2013Intrinsic Value $28.67Intrinsic Value (Adjusted) $28.77

EP Model Fiscal Years Ending Dec. 31 2015 2016E 2017E 2018E 2019E 2020E 2021E 2022EBeginning Invested Capital 34,366 35,722 38,297 40,879 42,665 44,199 45,693 47,472 ROIC 9.27% 11.23% 10.52% 11.04% 10.04% 9.15% 8.35% 9.33%Economic Profit 1,677 1,528 1,840 1,495 1,157 832 1,328 Continuing Value 52,428 Periods to Discount 1 2 3 4 5 6 6 PV(EP) 1,574 1,346 1,522 1,160 843 569 35,864

Present Value of Economic Profit 42,879 Plus: Beginning Invested Capital 35,722 Value of Operating Assets 78,601 Add: Excess Cash - Add: Derivative Securities 259 Add: Investment in affiliated companies 2,629 Less: St Debt (1,864) Less: LT Debt (20,827) Less: Accumulated Minority Interests (206) Less: PV of Operating Leases (882) Less: Employee Stock Options (3)

Value of Equity $57,707.71Shares Outstanding 2013Intrinsic Value $28.67Intrinsic Value (Adjusted) $28.77

Enterprise Products Partners L.P.Distribution Discount Model (DDM) or Fundamental P/E Valuation Model

Fiscal Years Ending Dec. 31 2016E 2017E 2018E 2019E 2020E 2021E CV 2022

EPS 1.41$ 1.39$ 1.54$ 1.38$ 1.23$ 1.12$ 1.31$

Key Assumptions CV growth 4.00% CV ROE 10.18% Cost of Equity 6.83%

Future Cash Flows P/E Multiple (CV Year) 21.49 EPS (CV Year) 1.31$ Future Stock Price 28.09 Dividends Per Share 1.58 1.50 1.72 1.79 1.86 1.93 2.00 Period 1 2 3 4 5 6 6

Discounted Cash Flows 1.48 1.31 1.41 1.37 1.34 1.30 18.90

Intrinsic Value 27.12$ As of Today 27.22$

Enterprise Products Partners L.P.Relative Valuation Models

EPS EPSTicker Company Price 2016E 2017E P/E 16 P/E 17 EV/EBITDA 16 EV/EBITDA 17ETP Energy Transfer Partners $34.87 $1.38 $2.42 25.3 14.4 8.7 7.5PPA Plains All American Piplines $36.19 $2.05 $2.31 17.7 15.7 9.94 9.26SEP Spectra Energy Partners $48.52 $3.24 $3.41 15.0 14.2 10.4 9.4KMI Kinder Morgan Inc. $19.24 $0.70 $0.82 27.5 23.5 10.9 10.3MMP Magellan Midstream Partners $68.48 $3.43 $3.74 20.0 18.3 16.4 15.3

Average 21.1 17.2 11.3 10.4

EPD Enterprise Products Partners L.P. $25.01 $1.36 $1.50 18.4 16.7 13.4 12.5

Implied Value: Relative P/E (EPS16) 28.65$ Relative P/E (EPS17) 25.82$ EV/EBITDA 16 15.32$ EV/EBITDA 17 15.53$

Enterprise Products Partners L.P.Key Management Ratios

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

Liquidity RatiosCurrent Ratio Current Assets / Current Liabilities 0.85 0.70 0.60 0.61 0.65 0.71 0.73 0.71 0.70 0.76Quick Ratio (Total Current Assets - Inventories) / TotalCurrent Liabilities 0.72 0.57 0.46 0.51 0.54 0.59 0.60 0.59 0.58 0.63Cash Ratio (Cash + Cash Equivalents) / Total Liaiblities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Asset-Management RatiosTotal Asset Turnover Ratio Revenue / Total Assets 1.19 1.02 0.55 0.57 0.59 0.63 0.65 0.66 0.67 0.68Fixed Asset Turnover Ratio Revenue / Net PPE 1.77 1.60 0.84 0.83 0.86 0.92 0.97 0.99 0.99 0.99Receivables Turnover Ratio Revenue / Average Accounts Receivable 10.73 9.75 5.81 9.12 11.68 11.68 11.65 10.98 10.48 10.55

Financial Leverage RatiosDebt/Total Assets Total Debt / Total Assets 0.43 0.45 0.46 0.45 0.45 0.43 0.41 0.41 0.40 0.38Debt to Equity Ratio Total Debt / Total Shareholder's Equity 1.12 1.08 1.11 1.02 1.02 0.93 0.88 0.86 0.84 0.78LT Debt to Equity Ratio Long Term Debt / Total Shareholder's Equity 1.05 0.97 1.02 0.96 0.94 0.88 0.84 0.81 0.78 0.75Interest Coverage Ratio Net Income / Total Shareholder's Equity 0.17 0.14 0.12 0.13 0.12 0.13 0.11 0.10 0.09 0.10

Profitability RatiosGross Margin (Revenue - Cost of goods sold) / Revenues 9.32% 10.01% 16.57% 17.50% 16.49% 16.49% 14.48% 13.50% 12.51% 13.50%Operating Margin Operating Income / Net Sales 7.26% 7.87% 13.10% 13.71% 12.88% 12.81% 11.16% 10.01% 9.24% 10.20%Return on Equity Net Income / Total Shareholder's Equity 16.82% 14.15% 12.30% 12.94% 12.47% 12.98% 11.24% 9.87% 8.83% 10.18%Return on Assets Net Income / Total Assets 6.47% 5.92% 5.15% 5.70% 5.53% 5.97% 5.24% 4.65% 4.23% 5.00%

Payout Policy RatiosPayout Ratio Dividends / EPS 97.26% 99.37% 120.56% 112.18% 118.44% 111.78% 130.16% 151.35% 172.70% 153.01%Dividend Coverage Ratio Net Income / Dividend Payout 1.03 1.01 0.83 0.89 0.84 0.89 0.77 0.66 0.58 0.65

Operating Operating Operating OperatingFiscal Years Ending Dec. 31 Leases Fiscal Years Ending Dec. 31 Leases Fiscal Years Ending Dec. 31 Leases Fiscal Years Ending Dec. 31 Leases2016 298 2015 60.5 2014 42.4 2013 51.32017 246 2016 62 2015 41.2 2014 44.12018 225 2017 56.4 2016 38.2 2015 42.82019 29 2018 48.9 2017 35.4 2016 37.52020 56 2019 42.3 2018 30.7 2017 33.3Thereafter 142 Thereafter 272.6 Thereafter 144.9 Thereafter 154Total Minimum Payments 996 Total Minimum Payments 542.7 Total Minimum Payments 332.8 Total Minimum Payments 363Less: Interest 114 Less: Interest 118 Less: Interest 64 Less: Interest 69PV of Minimum Payments 882 PV of Minimum Payments 425 PV of Minimum Payments 269 PV of Minimum Payments 294

Pre-Tax Cost of Debt 4.52% Pre-Tax Cost of Debt 4.52% Pre-Tax Cost of Debt 4.52% Pre-Tax Cost of Debt 4.52%Number Years Implied by Year 6 Payment 2.5 Number Years Implied by Year 6 Payment 6.4 Number Years Implied by Year 6 Payment 4.7 Number Years Implied by Year 6 Payment 4.6

Lease PV Lease Lease PV Lease Lease PV Lease Lease PV LeaseYear Commitment Payment Year Commitment Payment Year Commitment Payment Year Commitment Payment1 298 285.1 1 60.5 57.9 1 42.4 40.6 1 51.3 49.12 246 225.2 2 62 56.8 2 41.2 37.7 2 44.1 40.43 225 197.1 3 56.4 49.4 3 38.2 33.5 3 42.8 37.54 29 24.3 4 48.9 41.0 4 35.4 29.7 4 37.5 31.45 56 44.9 5 42.3 33.9 5 30.7 24.6 5 33.3 26.76 & beyond 56 105.3 6 & beyond 42.3 186.0 6 & beyond 30.7 102.5 6 & beyond 33.3 109.2PV of Minimum Payments 881.9 PV of Minimum Payments 424.9 PV of Minimum Payments 268.6 PV of Minimum Payments 294.3

Operating Operating Operating OperatingFiscal Years Ending Dec. 31 Leases Fiscal Years Ending Dec. 31 Leases Fiscal Years Ending Dec. 31 Leases Fiscal Years Ending Dec. 31 Leases2012 58.3 2011 48.2 2010 37.6 2009 32.2992013 47.4 2012 45.9 2011 35.3 2010 27.5412014 39.7 2013 38.7 2012 32.7 2011 27.8312015 38.2 2014 31.4 2013 27.3 2012 27.0662016 32.3 2015 25.8 2014 21.5 2013 24.481Thereafter 170.5 Thereafter 185.8 Thereafter 189.5 Thereafter 192.201Total Minimum Payments 386.4 Total Minimum Payments 375.8 Total Minimum Payments 343.9 Total Minimum Payments 331.419Less: Interest 75 Less: Interest 82 Less: Interest 84 Less: Interest 81PV of Minimum Payments 311 PV of Minimum Payments 294 PV of Minimum Payments 260 PV of Minimum Payments 250

Pre-Tax Cost of Debt 4.52% Pre-Tax Cost of Debt 4.52% Pre-Tax Cost of Debt 4.52% Pre-Tax Cost of Debt 4.52%Number Years Implied by Year 6 Payment 5.3 Number Years Implied by Year 6 Payment 7.2 Number Years Implied by Year 6 Payment 8.8 Number Years Implied by Year 6 Payment 7.9

Lease PV Lease Lease PV Lease Lease PV Lease Lease PV LeaseYear Commitment Payment Year Commitment Payment Year Commitment Payment Year Commitment Payment1 58.3 55.8 1 48.2 46.1 1 37.6 36.0 1 32.299 30.92 47.4 43.4 2 45.9 42.0 2 35.3 32.3 2 27.541 25.23 39.7 34.8 3 38.7 33.9 3 32.7 28.6 3 27.831 24.44 38.2 32.0 4 31.4 26.3 4 27.3 22.9 4 27.066 22.75 32.3 25.9 5 25.8 20.7 5 21.5 17.2 5 24.481 19.66 & beyond 32.3 119.2 6 & beyond 25.8 124.8 6 & beyond 21.5 123.1 6 & beyond 24.481 127.3PV of Minimum Payments 311.1 PV of Minimum Payments 293.8 PV of Minimum Payments 260.1 PV of Minimum Payments 250.1

Operating OperatingFiscal Years Ending Dec. 31 Leases Fiscal Years Ending Dec. 31 Leases2008 27.789 2007 19.192009 25.866 2008 19.8772010 23.306 2009 16.3742011 23.785 2010 15.6882012 23.187 2011 16.263Thereafter 201.826 Thereafter 187.308Total Minimum Payments 325.759 Total Minimum Payments 274.7Less: Interest 85 Less: Interest 83PV of Minimum Payments 241 PV of Minimum Payments 192

Pre-Tax Cost of Debt 4.52% Pre-Tax Cost of Debt 4.52%Number Years Implied by Year 6 Payment 8.7 Number Years Implied by Year 6 Payment 11.5

Lease PV Lease Lease PV LeaseYear Commitment Payment Year Commitment Payment1 27.789 26.6 1 19.19 18.42 25.866 23.7 2 19.877 18.23 23.306 20.4 3 16.374 14.34 23.785 19.9 4 15.688 13.15 23.187 18.6 5 16.263 13.06 & beyond 23.187 131.4 6 & beyond 16.263 115.1PV of Minimum Payments 240.6 PV of Minimum Payments 192.2

Present Value of Operating Lease Obligations (2015) Present Value of Operating Lease Obligations (2014) Present Value of Operating Lease Obligations (2013) Present Value of Operating Lease Obligations (2012)

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

Present Value of Operating Lease Obligations (2009) Present Value of Operating Lease Obligations (2008)

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

Present Value of Operating Lease Obligations (2007) Present Value of Operating Lease Obligations (2006)

Capitalization of Operating Leases Capitalization of Operating Leases

Present Value of Operating Lease Obligations (2011) Present Value of Operating Lease Obligations (2010)

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

Number of Options Outstanding (shares): 317,800Average Time to Maturity (years): 1.34Expected Annual Number of Options Exercised: 237,640

Current Average Strike Price: 16.14$ Cost of Equity: 6.83%Current Stock Price: $25.01

2016E 2017E 2018E 2019E 2020E 2021E CV 2022Increase in Shares Outstanding: 237,640 237,640 237,640 237,640 237,640 237,640 237,640Average Strike Price: 16.14$ 16.14$ 16.14$ 16.14$ 16.14$ 16.14$ 16.14$ Increase in Common Stock Account: 3,835,504 3,835,504 3,835,504 3,835,504 3,835,504 3,835,504 3,835,504

Change in Treasury Stock 0 0 0 0 0 0 0Expected Price of Repurchased Shares: 25.01$ 26.72$ 28.54$ 30.49$ 32.57$ 34.79$ 37.17$ Number of Shares Repurchased: - - - - - -

Shares Outstanding (beginning of the year) 2,013 2,083 2,152 2,228 2,308 2,390 2,473Plus: Shares Issued Through ESOP 237,640 237,640 237,640 237,640 237,640 237,640 237,640Less: Shares Repurchased in Treasury - - - - - - - Shares Outstanding (end of the year) 239,653 239,723 239,791 239,868 239,947 240,029 240,113

VALUATION OF OPTIONS GRANTED IN ESOP

Ticker Symbol EPDCurrent Stock Price $25.01Risk Free Rate 2.60%Current Dividend Yield 6.40%Annualized St. Dev. of Stock Returns 22.58%

AverageExercise

PriceRange 1 0.21 16.14 1.00 8.25$ 1.74$ Range 2 0.11 16.14 2.00 7.61$ 0.82$ Total 0.32 16.14 1.34 24.11$ 2.55$

Value of Options Granted in MM

B-S Option Price

Average Remaining Life (yrs)

Number of Shares in Range of Outstanding

Options