Krause Fund

Analysts
Stephen Poe
stephen-poe@uiowa.edu
Sagar Taurani
sagar-taurani@uiowa.edu
Company Overview
Enterprise Products Partners L.P. provides midstream energy
services to producers and consumers of natural gas, natural gas
liquids (NGLs), crude oil, petrochemicals, and refined products in
the United States and internationally. Their 5 main business
segments include: NGL pipelines and services, onshore natural gas
pipelines and services, onshore crude oil pipelines and services,
offshore pipelines and services, and petrochemical and refined
products services. They currently operate 51,000 miles of natural
gas, NGL, crude oil, refined products, and petrochemical pipelines.
For the fiscal year ended 12/31/13, total revenues rose 12.08% to
$47.73B.
Stock Performance Highlights
52 week High $41.38
52 week Low $15.19
Beta Value (Yahoo!) 0.83
Average Daily Volume (3m) 3.02M
Share Highlights
Market Capitalization $70.16B
Shares Outstanding 1.88B
Book Value per share $8.40
EPS (ttm) $1.51
P/E Ratio (ttm) 24.75
Dividend Yield 3.90%
Dividend Payout Ratio 93%
Company Performance Highlights
ROA (ttm) 5.31%
ROE (ttm) 18.64%
Sales (ttm) $50.86B
0.93
Financial Ratios
Current Ratio (mrq)
Debt to Equity (mrq) 122.93
Current Price $37.40
Target Price $41.43-43.71
EPD Exhibits Strong Growth
• Domestic production of both crude oil and natural gas have
increased steadily for five years up to 2014. Given EIA
estimates and new drilling techniques, production of these
energy products show no signs of contraction in the short-
term. With increased production comes substantial demand
for midstream infrastructure. As the largest publicly traded
energy partnership, EPD has significant opportunity to
capitalize on this increase in midstream demand.
• The emergence of the United States as an international
supplier of liquid natural gas gives EPD a competitive
advantage, given its existing natural gas assets. Their
existing NGL assets include 19,400 miles of NGL pipelines,
15 NGL fractionators, NGL storage facilities with 160
MMBbls capacity, and 24 NGL processing plants. These
assets coupled with planned NGL capital projects will allow
them to further increase market share.
• The recent $6B acquisition of Oiltanking Partners has given
them a much larger export asset base, specifically with NGLs.
• 2014 Q3 report showed record levels of transport volume and
an increase in quarterly distributions of 5.8%.
• For the 9 months ended 9/30/14, capital expenditures were
$2.7B. With the announced Bakken-Cushing and Delaware
Basin projects and opportunities in Rocky Mountains and US
Gulf Coast regions, EPD exhibits strong potential growth.
One Year Stock Performance
Important disclosures appear on the last page of this report.

Enterprise Products Partners L.P. (NYSE: EPD) is the
largest publicly traded energy partnership in the United
States. We expect them to be the primary beneficiary in the
midstream sector from increased domestic production of
crude oil and natural gas. Also, with substantial and
consistent capital growth projects in place, we believe cash
flows will increase into the foreseeable future. Utilizing the
Discounted Cash Flow valuation method, we have valued
EPD shares at $41.43. Because EPD is currently trading at
$37.40, we suggest that it is undervalued. We have placed a
BUY rating on EPD stock.
Inflation
The relationship between inflation and oil prices has a cause
and effect phenomenon built in. As oil falls down in prices,
inflation rates tend to decrease with it. Similarly, inflation
rates tend to increase when oil prices are high. The reason as
to why this happens is because oil is used many industries
and when companies are able to purchase oil at a low price,
their cost goes down and as a result, the companies can sell
their products at a low price, thus lowering inflation rates.
The Consumer Price Index (CPI) is a measure of inflation
and historically, the CPI has doubled when oil prices went
up drastically. This was evident during the 1979 oil crises1
.
In recent years, we don’t see a high correlation between the
oil prices and inflation rate. After the tech boom in the 1900s,
most companies now rely less on oil as the service industries
started to boom. As a result, shocks in oil prices now do not
affect the inflation rates.
Source: Macro Trends 2
Interest Rates
Energy midstream companies provide services to oil and gas
producers by storing and transporting oil, natural gas, and
refined products. Such companies distribute onshore and
offshore products both nationally and internationally, which
requires a large amount of capital. As an industry having a
total debt-to-equity ratio of 49.6%3
, most of the companies
in this industry sector are heavily in debt. Companies in this
sector are greatly affected by the fluctuations in interest
rates. A decreasing interest rate would lower the cost of
borrowing for the borrowers and allow them to present a
stronger financial position.
Oil price shocks can affect the US treasury bonds yield. As
of November 13, 2014, the T-bond yields strengthened as
crude oil price reached its lowest point since 2010.
The current 10-year Treasury bond is 2.345%4
. When the
price of oil falls down, the demand of oil goes up and
companies are willing to borrow money in order to increase
their inventory with low-priced oil. As a result, the interest
rates go up.
US Gross Domestic Product (GDP)
Real GDP is widely regarded as an indicator to gauge the
overall well-being of the economy and we expect the energy
sector to rise and fall with the changes in Real GDP. After
decreasing by 2.1% in the first quarter, the US Real GDP
grew by 4.6% in the second quarter and 3.5% in the third
quarter5
. We attest that consumer spending and exports will
continue to increase into the upcoming economic future.
More specifically, we forecast that the US economy is self-
sustaining and will produce a 2.2% annualized growth in
Real GDP in 2014. Overall, we believe an increase in real
GDP will benefit companies in all sectors, including the
energy sector. Increased consumer confidence and business
investment will lead to increased company profits and
capital market investment.
The importation of crude oil by the United States has been
decreasing since 2007. In 2007, the number of barrels
imported annually was 4.9 billion (34% of GDP) and it
decreased to 3.6 billion (22% of GDP) in 2013. On the other
hand, oil exports started to increase in 2001 as it used to be
354 million barrels (3% of GDP). As of 2013, oil exports are
1.3 billion barrels (8% of GDP)6,7,8
. One of the main reasons
as to why change in oil demand and supply can be seen is
because of an increase in domestic production of oil. Since
the US has started to depend on its own oil reserve, it is less
reliable on other countries for oil. In addition, oil companies
have been continuously pressuring Congress to build
pipelines so that they can utilize the domestic resources of
oil. The Keystone XL pipeline has been approved by the
congress on November 14, 2014 after 6 years of political
EXECUTIVE SUMMARY
ECONOMIC OUTLOOK
2

conflict. With the current trend in place, the number of oil
barrels imported should decrease to being 20% in 2015 while
number of oil barrels export will increase gradually to 8.5%
in 2015.
Source: The World Bank6
,EIA7,8
Exchange Rate
The US Dollar index measures the US dollar against the
weighted average of foreign currencies, Euro being of the
highest weight (57.6%) among the major currencies9
. Some
currencies included in the index export oil to the US. These
countries include Venezuela and Saudi Arabia and their
currency weights in the index are 0.3% and 0.61%
respectively10.
Source: Bloomberg28
The US imports oil from many countries and has kept the
exchange rate fixed to the US Dollar (USD) especially to
their major suppliers of oil. The US Dollar to Venezuela
bolivar (VEF) has a fixed exchange rate that gets revalued
after a certain period of years. In the past 10 years, the rate
has fallen down from 1 USD = 2.14 VEF to 6.29 VEF11
.
With the bolivar having a weaker currency, their price of oil
will increase but the fixed exchange rate does not allow the
price to have a major impact on the imports to the US. Such
fluctuations in the exchange rate have a small effect on the
US import of oil. With Middle Eastern countries like Saudi
Arabia and the United Arab Emirates, the exchange rates are
fixed since their currencies were pegged with the US Dollar
in 2003 and 1997 respectively12,13
. This was done to reduce
the risk of changing exchange rates. With the prices being
stable, the US can continue to import oil from the Middle
Eastern countries, if and when required. Oil imports from
Saudi Arabia and Venezuela consist about 12% and 9% of
the total oil imported to the US respectively14
. This level has
been the same for at least the past 10 years because of the
fixed exchange rates.
Natural Gas Prices
Natural gas accounts for almost a quarter of US energy
consumption, and the Henry Hub Natural Gas Price is the
benchmark US pricing point. We analyze the Energy Sector
with Henry Hub Natural Gas Prices, as do economists with
the overall economy. Growth in demand for natural gas,
largely from the electric power and industrial sectors, results
in upward pressure on prices. Electric power amounts for
31.2% of the total natural gas consumption and the Industrial
consumption amounts to 21.8% of the total natural gas
consumption15
. In the short run, spot prices dropped from
$4.47/million British thermal units (MMBtu) at the
beginning of July to $3.78/MMBtu at the end of the month16
.
We expect large growth numbers in the near and far future,
with particularly greater growth from 2015-2018 due to the
utilization of the Delaware basin. We expect the spot price
to reach $4.00 by the end of the year and reach $4.75 by
2016. This growth will be attributed to high
economic growth and increased consumption of
energy products.
Source: EIA15
0%
20%
40%
60%
1990 1995 2000 2005 2010 2013
Barrels Imported & Exported % of
GDP
Exports % of GDP Imports % of GDP
6,000,000
7,000,000
8,000,000
9,000,000
2008 2010 2012
MMcf(inmillionscubicft)
Years
Natural Gas consumption
Electric Power Industrial
3

Energy Production, Trade and Consumption
Energy production, trade, and consumption measure the
dynamic and strength of the energy industry. The current
7-month total production of year 2014 is 49.822 quadrillion
btu (quad), which is a little higher than the 7-month total of
year 2013 (47.237 quad) and 2012 (46.011 quad). The total
consumption of primary energy products decreased steadily
during 2005 and 2013 from 100.282 quad to 97.534 quad.
After that, the consumption amount maintained at a stable
level, the 2014 7-month total is 57.906 quad17
. Based on the
trend of the data, we expect the consumption of energy
products to be stable. The production is going to increase and
the net import is going to decrease through 2014 since the 7-
month total of net imports for 2014 (6.329 quad) is lower
than that of 2013 (7.696 quad) and 2012 (9.535 quad)17
.
Monthly Natural Gas Liquids Production is a good
production indicator we can use to gauge the health of the
energy sector. Natural gas liquids production grew 20% in
June vs the prior year and reached a record high of 3 million
barrels a day, supported by higher gas supply and NGL
export demand. Exports have strengthened prices and
improved margins by 25%. NGL production has surged this
year, driven by gas production on the supply side and exports
on the demand side. In May, NGL production rose 16.4%
vs the prior year with new plants coming online in Texas and
North Dakota17. The US has now become the largest
producer of both oil and natural gas overtaking Saudi Arabia
and Russia18
. We expect this surging growth to continue in
both the short and long run. We anticipate a growth of 5.1%
in 2014 and 4.8% in 2015 for NGL production with the
introduction of a new NGL plant by the end of 2014.
Badlands NGL will build the new plant that will develop
1.5m tonne/year of polyethylene19. Overall, we expect the
rapid growth in NGL production to increase exports,
produce more energy infrastructure projects, and benefit the
entire energy sector.
Industry Description
The Oil, Gas Storage & Transportation sub-industry
includes companies that use pipelines to transport crude oil,
natural gases, and petroleum products20
. This transportation
includes moving crude oil and natural gas from the
extraction sites where they were found, to refineries, finally
to storage areas where the oil will be distributed or stored for
use21
. Along with moving energy products from production
to distribution sites, midstream companies offer export
services that are vital to the global oil trade, via oil tankers.
The current product line in this sub-industry contains crude
oil and petroleum products. Some midstream companies,
including EPD, run small upstream and downstream
operations such as exploration and refining petroleum
products.
A majority of midstream players are structured as Master
Limited Partnerships (MLP) to combine the tax advantages
of a partnership with the liquidity of a publicly traded
stock38. This type of partnership is attractive to investors,
due to its consistencies in paying high and frequent
dividends.
Because the oil and gas being transported in this industry is
not owned by midstream companies, revenues are generated
from fee based haulage charges which are set by the Federal
Energy Regulatory Committee (FERC). While world oil and
gas prices do not directly affect midstream revenues, they
affect oil and gas production and consumption, a major
determinant for the supply and demand of midstream
infrastructure, therefore indirectly affecting industry
revenues.
Our long-term outlook for the Oil & Gas Transportation and
Storage industry is positive. Despite historically low crude
oil prices, we believe continued increases in crude oil and
natural gas production coupled with the emergence of shale
gas reserves in the United States will provide significant
infrastructure opportunities for companies in the midstream.
US Oil & Gas Production Growth
In the five years up to 2014, US oil and gas production has
increased at an annualized rate of 5.1%22
. Despite a recent
downward trend in crude oil prices, we expect an increase in
production and consumption due to expanding global
demand and increased drilling operations in the US. We
attribute expected growth to new drilling techniques such as
extracting crude oil from shale plays. Booming US oil
INDUSTRY ANALYSIS
4

production and high natural gas demands from the industrial
and power sectors provide significant investment
opportunities for the midstream sector. The EIA estimates
crude oil production to reach 9.5 million bbl/d and natural
gas production to grow 2.0% into 2015.
Source: EIA22
Because of this rise in domestic production, the EIA
estimates the net import share to decline to 20% in 2015, the
lowest level since 1968. Also, because of sharp increases in
domestic production, in June 2011, the Interstate Natural
Gas Association of America published a study that
concluded that the US and Canada will require an annual
average midstream investment of $10 billion per year over
the next 25 years to accommodate growing oil and natural
gas supply and demand infrastructure needs. The US Energy
Information Administration (EIA) expects the United States
to achieve energy independence over the next three decades
as it boosts production of crude oil, natural gas, natural gas
liquids and renewable energy24
.
Source: EIA23
Increase in Natural Gas Demand
We believe a strong demand for natural gas, specifically
from NGLs will require significant growth in the midstream
sector. Based on EIA estimates, the US will be transformed
from a natural gas importer to a net exporter over the next
three years. They attribute this to shale gas supply and
demand outside North America. This benefits midstream
companies, as means of transportation will be in high
demand.
Source: CohenSteers24
We also believe the US midstream sector will benefit from
LNG price disparities. Using estimates from the EIA and
FERC, we believe LNG export capacity could increase to 2
trillion cubic feet of gas per day by 202024.
Because of Enterprise Products Partners’ strong natural gas
fundamentals and existing natural gas asset base, we expect
them to capitalize on this global trend.
Source: CohenSteers24
5

Competitive Landscape
Competition in the midstream industry stems from fees
charged for transportation and quality of their services.
Because pipelines are recognized as the safest and most
efficient way of transport, competition comes from other
companies running pipelines from the same extraction sites.
The midstream industry is characterized with high barriers
to entry. Large capital requirements generally only allow for
existing midstream players to expand or for large integrated
oil companies to acquire pipeline space. Also, because of
high costs associated with pipeline infrastructure, large
contracts must be in place into the foreseeable future in order
to make investments viable. Another significant barrier to
entry comes with federal regulation. State and FERC
regulations must be met and may be multiplied due to
pipelines crossing several state lines.
The industry is highly concentrated with the 20 largest
companies accounting for over 75% of industry revenues.
Source: Sadif25
As existing midstream players compete to capitalize on the
increase in domestic production of oil and gas, capital
growth projects are key in gaining market share. As
Enterprise Products Partners has $2.7B in expenditures for
the 9 months ended 9/30/14 and estimated total expenditures
of $3.2B in 2014, we suggest that they have gained a
competitive advantage along with other companies with
expenditures greater than $3B. This is how their capital
expenditures compare across the industry:
Source: FactSet39
Overview
Enterprise Products Partners L.P. is a North American
midstream energy company that provides services to
producers and consumers of natural gas, NGLs, crude oil,
petrochemicals and refined products. Their midstream
assets link producers of natural gas, NGLs and crude oil
from some of the largest supply basins in the United States,
Canada, and Gulf of Mexico with domestic consumers and
international markets26
. Their operations are separated into
five business segments. These segments include: NGL
pipelines and services, onshore natural gas pipelines and
services, onshore crude oil pipelines and services, offshore
pipelines and services, and petrochemical and refined
products services. The company's key services include the
following: Natural gas transportation, gathering, processing,
and storage, NGL storage, transportation and importing and
exporting, crude oil and refined products storage,
transportation, petrochemical transportation and storage27
.
Enterprise Products Partners corporate strategy aims to
capitalize on expected increase in the production of oil and
gas as well as the expected demand growth for natural gas,
NGLs, crude oil, petrochemicals, and refined products. This
strategy involves expansion through growth capital projects
and acquisitions of midstream assets.
Revenue
For fiscal year 2013, Enterprise Products Partners revenue
grew by 12.08% to $47.73B. The proportion of total revenue
by business segment were as follows:
COMPANY ANALYSIS
6

Source: EPD 10-k26
NGL Pipelines and Services26
The NGL Pipelines and Services segment includes their
natural gas processing operations, NGL marketing activities,
NGL and related product storage, NGL fractionation, and
NGL import and export terminal operations. This segment
includes 19,400 miles of NGL pipelines, 15 NGL
fractionators, storage facilities with 160 MMBbls of storage
space, and 24 processing plants located across Colorado,
Louisiana, Mississippi, New Mexico, Texas, and Wyoming.
Onshore Natural Gas Pipelines and Services26
The onshore natural gas pipelines and services segment is
responsible for gathering and transporting natural gas in
Colorado, Louisiana, New Mexico, Texas, and Wyoming as
well as the related natural gas marketing activities. Onshore
natural gas assets include 19,600 miles of pipeline and leased
underground salt dome storage facilities that are essential to
their natural gas operations. These pipelines gather and
transport natural gas from major producing areas such as the
Eagle Ford Shale region.
Onshore Crude Oil Pipelines and Services26
The onshore crude oil pipeline and services segment gathers
and transports crude oil in New Mexico, Oklahoma, and
Texas to refineries as well as crude oil marketing activities.
Assets include 4,600 miles of onshore crude oil pipelines,
crude oil storage terminals in Oklahoma and Texas, and 470
tractor-trailer tank trucks.
Offshore Pipelines and Services26
The offshore pipelines and services segment serves drilling
and development regions in the northern Gulf of Mexico
offshore Texas, Louisiana, Mississippi, and Alabama.
Assets include 2,300 miles of offshore natural gas and crude
oil pipelines and six offshore hub platforms. Because of a
Gulf of Mexico oil spill in 2010, unrelated to Enterprise
Products Partners activities, increased government
regulation has slowed offshore exploration and production,
making it difficult to expand their offshore asset base.
Petrochemical and Refined Products Services26
The petrochemical and refined products services segment
includes propylene fractionation and transportation, butane
isomerization and transportation, octane enhancement,
marine transportation, and refined products transportation.
Assets include 680 miles of propylene pipelines, 4,200 miles
of refined products pipelines, and other related production
facilities.
Enterprise Products System Map
Source: Enterprise Products Partners27
EPD’s top 5 competitors include Spectra Energy Partners
(SEP), Williams Partners (WPZ), Energy Transfer Partners
(ETP), ONEOK Partners (OKS), and Kinder Morgan Energy
Partners (KMP).
Source: Company Websites27,29,30,31,32
EPD is attempting to differentiate itself from its competitors
through the growth of their broad asset base, mainly through
pipeline acquisition. Because of the capital intensive
competitive environment, they compete to gain strategic
locations and midstream assets with existing midstream
operators and integrated energy companies.
Ticker Revenues Gross Margin Net Income EPS Miles of Pipeline
EPD 47,748 3,586 2,597 1.38 51,000
SEP 1,965 1,118 987 5.59 17,000
WPZ 6,685 1,823 611 1.45 27,203
ETP 46,339 2,734 -78 -0.19 34,974
OKS 11,867 943 528 2.35 24,700
KMP 12,550 3,978 1,569 2.42 80,000
As of 2013
7

SWOT Analysis
Strengths
Enterprise Products Partners is the largest publicly traded
energy partnership in the US and has a very strong
midstream asset base. Their operating assets include:-
Their total assets have grown by an average of 8.61% each
of the past 3 years. This gives them a strong market position
and the opportunity to grow. These assets are also
strategically linked to the major supply basins giving them
strong business position across the energy value chain.
Weaknesses
EPD’s capital structure has a significant amount of debt. In
FY2013, their long-term debt level was $16.2B. This large
amount of debt may increase their cost of capital and
adversely affect their financial position in the future or
hinder their plans for strategic growth projects.
Opportunities
EPD has several strategic growth projects in place. In
FY2013, they spent approximately $3.6B on energy
infrastructure projects. In order to capitalize on expected
increases in natural gas, NGL, and crude oil production we
expect EPD to invest in production development areas.
Specifically, these areas include the Rocky Mountains and
US Gulf Coast regions, including the Barnett Shale,
Haynesville Shale and Eagle Ford Shale producing regions.
The proposed Bakken-Cushing and Delaware Basin projects
present a significant opportunity for growth. In October of
2014, EPD announced its investment in the proposed
Bakken-Cushing crude pipe. The proposed pipe would be
1,200 miles and would have a capacity of more than 700,000
b/d, pending its initiation in 2016-2017. In September of
2014, EPD announced it will build a processing plant and
NGL pipe infrastructure to handle growing Delaware Basin
production. The proposed plant would have a capacity of
200 mmcf/d, doubling their current processing capacity in
the region36
. Also, the project includes 80 miles of gas
gathering lines and 75 miles of NGL transportation
pipelines. The Delaware Basin assets are expected to begin
operations in the first quarter of 2016.
Source: Bakken Shale33
Threats
Increasing environmental regulations and competition from
fully integrated oil companies present themselves as threats
to EPD’s financial well-being. With increased focus on
environmental responsibility in the US, new FERC
regulations and costs may cut into operating margins. Also,
fully integrated companies may increase their midstream
presence with the expected increases in oil and gas
production. With access to large amounts of capital,
integrated companies such as Chevron may take on their
own midstream projects in the future.
Oiltanking Partners Acquisition
On October 1, 2014, EPD announced its acquisition of
Oiltanking Partners. The two phase acquisition was made for
a total of $6B. In phase 1, EPD acquired 66% of the company
for $2.2B in EPD units, $2.2B of cash, and $0.2B of notes
receivable. They have proposed a second phase that will
include the acquisition of the remaining 34% for $1.4 in EPD
units. The Oiltanking assets have significantly increased
EPD’s export presence and will help their future export
growth due to their access to waterborne markets in the
Houston Ship Channel34.
Positive Third-Quarter 2014 Earnings
Enterprise Products Partners reported third-quarter earnings
that were in line with most estimates. Earnings of 37 cents
per limited partner unit were reported. Also, record levels of
NGL, crude oil, refined products, and petrochemical pipeline
volumes were reported. Enterprise transported 5,245 million
barrels per day of NGL, crude oil, refined products, and
petrochemical products, up 2% on a year-over-year basis35.
This upward trend provided an increase of 5.8% in quarterly
distributions per common unit.
Piplines 51,000 miles of pipelines
Storage 200 million barrels of NGL, refined products, crude oil storage capacity
14 billion cubic feet of natural gas storage capacity
Natural Gas Processing 24 natural gas processing plants
Marine Services 55 tow boats, 176 barges
Fractionation 22 NGL and propylene fractionators
Platforms 6 offshore hub platforms
NGL Import/Export 14 MBbls/hr import capacity
14 MBbls/hr export capacity
8

Our valuation of Enterprise Products Partners employed the
Discounted Cash Flow (DCF), Economic Profit (EP),
Dividend Discount Model (DDM), and Relative P/E
valuation methods. Using the DCF and EP methods, we
arrived at a price of $41.43. The Dividend Discount
valuation approach produced an intrinsic value of $43.71.
We attribute the price spread to our assumption of a 100%
payout ratio, which increases the value given by discounted
dividends. Last, our Relative P/E model produced a stock
value of $49.52 in comparison to its top 5 competitors. EPD
is currently trading at $37.40, which is near our target price
range of $41.43 – 43.71.
Revenue Decomposition
We decomposed our revenue into 5 business segments that
Enterprise Products Partners currently operates under in
order to more accurately forecast total revenues. These
business segments include: NGL Pipelines and Services,
Onshore Natural Gas Pipelines and Services, Onshore Crude
Oil Pipelines and Services, Offshore Pipelines and Services,
and Petrochemical and Refined Products and Services.
Accounting for each segments weight in total revenues, we
forecasted revenue growth using acquisition information,
current and projected growth projects, along with industry
analysis.
With high focus on years 2014-2016, we forecasted revenues
and selected volumes simultaneously using acquisition and
growth project data. More specifically, the Oiltanking
Partners acquisition, Bakken-Cushing pipeline, and
Delaware Basin projects guided our revenue estimates. We
estimate $10.2B to be spent on projects going online during
this time period. We attribute 10% growth for Onshore
Crude Oil Pipeline revenue in 2015 to the Bakken-Cushing
project and high growth in the NGL pipeline business
segment to the Delaware Basin project. Last, the Oiltanking
Partners acquisition expanded EPD’s export presence
severely which is the reason we assume 48.10% growth in
the Offshore Pipelines and Services segment for 2014.
Capital Expenditures
Using the first three quarterly reports released in 2014, we
assume capital expenditures of $3.2B in 2014. Because of
the large demand for midstream infrastructure and growing
domestic oil and gas production, we have included
significant capital expenditures in our forecast horizon. In
2015, we assume an investment of $3.8B and reduce this
number over our horizon to $1.9B in 2023. Our model
assumes these expenditures are financed through a
combination of long-term debt, equity issuance, and cash.
Dividends/Payout Ratio
Enterprise Products Partners has the obligation to distribute
most of their earnings under its Master Limited Partnership
structure. Historically, they have kept a payout ratio
between 93-96% for the past three years because of this.
Because of historical payout ratios and their MLP structure,
we assume a payout ratio of 100%. Therefore, our earnings
per share is equivalent to our dividends per share throughout
our forecast horizon.
Share Issuance
In our model, we assumed equity issuances were made to
finance the acquisition of Oiltanking Partners and capital
expenditures. For the acquisition of Oiltanking Partners,
Enterprise Products Partners paid them $2.2B in common
units during 2014, and will pay $1.4B common units during
2015. In order to have sufficient capital for growth projects
in 2014-2018, we assume issuance of common units,
depending on capital expenditure projections and available
cash balances. We assume an issuance of $1B in common
units during 2014 and $0.2B in years 2015-2018.
Weighted Average Cost of Capital (WACC)
We calculated the weighted average cost of capital (WACC)
using cost of equity and cost of debt components. The
market value weights we used were 81% for equity and 19%
for debt.
For the cost of equity calculation, we used the 30 year US
Treasury Yield of 3.07%. We selected a risk premium of
4.64% which is a geometric average of the market returns
less US T-Bond yields from 1928-2013. Our beta of 0.77
was calculated by averaging out the betas estimated by
Yahoo, Google, and NASDAQ. The resulting cost of equity
is 6.63%. Enterprise Products Partners’ COGS comprises
mostly of variable costs and as a result, its beta is also low
when compared to the market beta of 1.
We used Standard and Poor’s credit rating of BBB+ to proxy
our calculated cost of debt. The yield-to-maturity of a
10-year Enterprise Products Partners bond is 3.594%, which
was used as our pre-tax cost of debt. The tax rate of 2.00%
used in our calculation was found by finding an average of
income taxes paid divided by taxable income. This
assumption was made because of their MLP tax benefits and
lack of clear marginal tax rate. As a result, we calculated an
after-tax cost of debt of 3.52%.
The market value of equity we used was calculated by taking
the current stock price multiplied by shares outstanding. The
VALUATION DISCUSSION
9

market value of debt is equal to the total of short-term debt,
current portion of long-term debt, long-term debt, and
operating leases. Using the total market values of equity and
debt, we found the appropriate weights used in the WACC
calculation. Our resulting WACC is 6.03%.
Relative Valuation
We used Enterprise Products Partners top competitors to
construct a relative valuation model. These companies
include: Spectra Energy Partners, Williams Partners,
Energy Transfer Partners, ONEOK Partners, and Kinder
Morgan Energy Partners. We selected these companies
because they not only are EPD’s main competitors, but they
also have the same master limited partnership structure and
provide the same services. Using earnings per share
estimates for 2014 and 2015, our relative valuation model
produces an implied relative price to earnings value of
$49.52 for 2014 and $42.29 for 2015.
DCF and EP Valuation
Our DCF and EP models yielded an intrinsic value of
$41.43. Key inputs in this valuation include continuing
value growth, continuing value return on invested capital,
weighted average cost of capital, and the cost of equity. We
assume a CV growth rate of 2% using historical real GDP
data. The 2% growth rate coincides with the steady state we
believe Enterprise Products Partners will achieve in 2023.
This rate is relatively low, due to a shift towards more
sustainable energy sources after our forecasted horizon. We
suggest that the DCF and EP models produce a more
effective stock price because they take into changes in
income statement accounts, capital expenditures, and
sources of growth financing.
Dividend Discount Model
The Dividend Discount Model yielded an intrinsic value of
$43.71 for Enterprise Products Partners shares. The DDM
approach produces a share price that is slightly higher than
our DCF and EP models due to our assumed high payout
ratio. We again use our assumption of 2% continuing value
growth.
We have created six different sensitivity analysis tables to
examine the effects on the intrinsic value by changing 11 key
assumptions against each other.
Continuing Value Return on Invested Capital (CV
ROIC):
The CV ROIC depends on the operations of the company
relative to the capital expenditures made in the future. As
Enterprise Products Partners increases their capital
expenditures, their ROIC falls down as beginning invested
capital will be low, which eventually results in a lower
intrinsic value. Similarly, Enterprise Products Partners can
have more income flowing through their daily operations
and raise their NOPLAT and eventually their ROIC. As a
result, if the CV ROIC goes by 2%, the intrinsic value tends
to increase by $0.68.
WACC:
According to our calculations, Enterprise Products Partners’
WACC is at 6.03%. By changing debt and equity balances,
the WACC can be affected which will eventually create a
small effect on the intrinsic value. Enterprise Products
Partners have 81% of their funds coming from shareholders
equity. Therefore, an increase of 50% in their shares
outstanding will increase their WACC by 0.17%, causing a
decrease of $3 of intrinsic value. Since Enterprise Products
Partners majorly depends on equity to fund its projects, they
has to cautiously fund projects.
Long-Term debt and Capital Expenditure:
Our analysis shows that funding capital expenditures
through the use of long-term debt will have a small effect on
the intrinsic value. Enterprise Products Partners can choose
to fund their projects by issuing debt if the interest rates are
low. Doing so will allow them to protect the intrinsic value
from undergoing drastic changes in the intrinsic value. By
choosing to increase capital expenditures by $1 million
through the use of debt, the intrinsic value will be lower by
$1.17 which is a relatively smaller effect in comparison to
using equity to fund the same capital expenditure.
Cost of Goods Sold (COGS) as a % of Sales and Revenue
Growth:
The average COGS as a % of sales was 89.82% over the past
15 years. This percentage has been around the same value
over the years since majority of the costs are dependent on
the use of pipelines and storage facilities and these costs are
mostly variable in nature. As more of such systems are used,
the revenue and the COGS increases in a similar proportion.
Based on the sensitivity analysis, a growth in revenue tends
to increase the intrinsic value. However, raising the COGS
as a % of sales tends to decrease the intrinsic value.
Therefore, an increase or a decrease in both the variables has
a slight effect on the intrinsic value. With inefficient cost
management, the COGS could increase and thus, a 0.5%
increase in COGS as a % of sales and 1.5% growth in
revenue could potentially decrease the intrinsic value by
9.7%.
Selling, Administrative and General Expenses (SG&A)
as a % of sales:
Over the past 15 years, the SG&A has been a very small
percentage of sales. There has been a downward trend for the
SENSITIVITY ANALYSIS
10

past 15 years since energy companies are less dependent on
selling expenses and more dependent on cost of
manufacturing, transporting and storing energy products.
With the current trend, over the coming years, the SG&A as
a % of sales will decrease and this decrease will have a minor
effect on the intrinsic value.
Risk Premium and Risk-free rate:
The market risk premium depends on the risk-free rate and
the risk-free rate majorly depends on the long-term treasury
yield. Although, the fluctuations of such variable are outside
the control of the company, a small change in these variables
can have a significant impact on the intrinsic value made by
the DCF and EP models since they ultimately change the
WACC of the company. With the Fed cutting monthly asset
purchases to $35 billion, the interest rates will increase,
resulting in an increase of long-term T-bond yields37
. Based
on our analysis, an increase of 0.5% in the risk-free will
slightly increase the risk premium by 0.5% (an increase in
risk premium is also seen historically), will decrease the
intrinsic value by 19.8%.
Beta:
We calculated the beta of Enterprise Products Partners to be
0.77, which is an average of betas used by different
databases. Since the COGS is variable in nature, the beta is
smaller than 1. The 5 year monthly return of the EPD stock
is 0.74. A change of 0.1 in beta will change the intrinsic
value by 13.4% which shows how beta can significantly
affect the intrinsic value.
Continuing Value (CV) growth:
The CV growth depends on Real GDP growth. Historically,
Real GDP growth have been around 2%. By 2023, we
estimate Enterprise Products Partners to reach a steady state
and so our CV growth is assumed to be 2%. Although, we
don’t expect a change in this rate, a small change occurrence
shifts the intrinsic value for the DCF, EP and DDM models.
According to our sensitivity analysis, the intrinsic value of
DCF and EP models will change by 9.5% if CV growth rate
changes by 0.5%.
11

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.
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12

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13

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14

ENTERPRISE PRODUCTS PART.
Revenue Decomposition
Fiscal Years Ending Dec. 31 2011 2012 2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
NGL Pipelines and Services
Sales of NGLs and related products 16,725 14,219 15,916 17,886 19,173 20,707 22,053 23,222 24,174 24,948 25,572 26,211 26,866
Midstream services 759 950 1,204 1,353 1,451 1,567 1,669 1,757 1,829 1,888 1,935 1,983 2,033
Total 17,483 15,168 17,120 19,239 20,624 22,274 23,722 24,979 26,003 26,835 27,506 28,194 28,899
Growth -13.24% 12.87% 12.38% 7.20% 8.00% 6.50% 5.30% 4.10% 3.20% 2.50% 2.50% 2.50%
Proportion of Total Revenue 39.45% 35.62% 35.87% 36.35% 36.08% 36.47% 36.53% 36.56% 36.56% 36.56% 36.56% 36.56% 36.56%
Selected Volumetric
NGL transportation volumes (MBPD) 2,284 2,472 2,787 2,898 3,014 3,135 3,260 3,391 3,526 3,668 3,741 3,816 3,892
NGL fractionation volumes (MBPD) 575 659 726 770 816 865 917 972 1,030 1,092 1,113 1,136 1,158
Equity NGL production (MBPD) 116 101 126 132 142 153 161 169 177 186 190 193 197
Fee-based natural gas processing (MMcf/d) 3,820 4,382 4,612 4,843 5,085 5,339 5,606 5,886 6,181 6,490 6,619 6,752 6,887
Onshore Natural Gas Pipelines and Services
Sales of natural gas 2,867 2,395 2,572 2,987 3,077 3,200 3,360 3,495 3,638 3,754 3,848 3,944 4,043
Midstream services 864 957 967 1,123 1,157 1,203 1,263 1,314 1,368 1,412 1,447 1,483 1,520
Total 3,730 3,353 3,539 4,111 4,234 4,403 4,623 4,808 5,006 5,166 5,295 5,427 5,563
Growth -10.12% 5.54% 16.17% 3.00% 4.00% 5.00% 4.00% 4.10% 3.20% 2.50% 2.50% 2.50%
Selected Volumetric
Natural gas transportation volumes (BBtus/d) 13,231 13,634 12,936 13,065 13,196 13,328 13,461 13,596 13,732 13,869 14,008 14,148 14,289
Onshore Crude Oil Pipelines and Services
Sales of crude oil 15,963 17,549 20,371 21,594 23,753 25,297 26,941 28,369 29,532 30,477 31,239 32,020 32,821
Midstream services 99 113 279 296 325 347 369 389 405 418 428 439 450
Total 16,061 17,662 20,650 21,889 24,078 25,643 27,310 28,758 29,937 30,895 31,667 32,459 33,270
Growth 9.97% 16.92% 6.00% 10.00% 6.50% 6.50% 5.30% 4.10% 3.20% 2.50% 2.50% 2.50%
Selected Volumetric
Crude oil transportation volumes (MBPD) 678 828 1,175 1,187 1,282 1,339 1,400 1,463 1,528 1,597 1,613 1,629 1,646
Offshore Pipelines and Services
Sales of natural gas 1.1 0.4 0.5 0.7 0.8 0.9 0.9 1.0 1.0 1.1 1.1 1.1 1.1
Sales of crude oil 9 3 6 8 9 10 11 11 12 12 12 13 13
Midstream Services 246 188 153 227 250 270 286 301 313 323 331 340 348
Total 256 192 159 236 260 280 297 313 326 336 345 353 362
Growth -25.20% -16.76% 48.10% 10.00% 8.00% 6.00% 5.30% 4.10% 3.20% 2.50% 2.50% 2.50%
Selected Volumetric
Natural gas transportation volumes (BBtus/d) 1,065 853 678 698 719 741 763 786 810 834 838 842 846
Crude oil transportation volumes (MBPD) 279 300 307 316 326 335 346 356 367 378 379 381 383
Platform natural gas processing (MMcf/d) 405 291 202 203 204 205 206 207 208 209 209 209 209
Platform crude oil processing (MBPD) 17 17 16 17 18 19 19 20 21 23 23 23 23
Petrochemical and Refined Products and Services
Sales of petrochemicals and refined products 6,001 5,471 5,569 6,635 7,083 7,543 7,996 8,419 8,764 9,045 9,271 9,503 9,740
Midstream Services 782 738 690 822 877 934 990 1,043 1,085 1,120 1,148 1,177 1,206
Total 6,782 6,209 6,259 7,456 7,960 8,477 8,986 9,462 9,850 10,165 10,419 10,680 10,947
Growth -8.46% 0.80% 19.14% 6.75% 6.50% 6.00% 5.30% 4.10% 3.20% 2.50% 2.50% 2.50%
Selected Volumetric
Propylene fractionation volumes (MBPD) 73 72 74 76 79 81 83 86 88 91 93 95 97
Butane isomerization volumes (MBPD) 101 95 94 113 135 162 167 172 177 183 186 190 194
Standalone DIB processing volumes (MBPD) 28 46 67 70 72 75 78 82 85 88 92 95 99
Octane additive and related plant production
volumes (MBPD)
17 16 20 21 22 22 23 24 25 26 27 28 30
Transportation volumes, primarily refined products
and petrochemicals (MBPD)
783 689 702 720 738 756 775 794 814 834 851 868 886
Total Consolidated Revenues 44,313 42,583 47,727 52,932 57,156 61,078 64,939 68,320 71,121 73,397 75,232 77,113 79,041
Growth -3.90% 12.08% 10.90% 7.98% 6.86% 6.32% 5.21% 4.10% 3.20% 2.50% 2.50% 2.50%

Income Statement
Income Statement
Sales 44,489 42,541 47,748 52,932 57,156 61,078 64,939 68,320 71,121 73,397 75,232 77,113 79,041
COGS excluding D&A 40,470 38,233 42,944 47,544 51,339 54,862 58,329 61,367 63,883 65,927 67,575 69,265 70,996
Gross Margin 4,019 4,307 4,804 5,387 5,817 6,216 6,609 6,953 7,239 7,470 7,657 7,848 8,045
Depreciation & Amortization Expense 1,007 1,105 1,218 1,294 1,378 1,474 1,532 1,576 1,592 1,608 1,621 1,630 1,635
Depreciation 777 901 1,012 1,102 1,211 1,329 1,406 1,467 1,497 1,526 1,549 1,568 1,581
Amortization of Intangibles 230 204 205 192 167 145 126 109 95 83 72 62 54
Gross Income 3,012 3,202 3,586 4,093 4,439 4,742 5,078 5,377 5,647 5,862 6,036 6,218 6,409
SG&A Expense 124 127 120 146 158 169 179 189 197 203 208 213 218
EBIT (Operating Income) 2,888 3,075 3,467 3,947 4,281 4,573 4,898 5,188 5,450 5,659 5,828 6,005 6,191
Nonoperating Income - Net 204 124 47 75 77 80 82 85 87 90 93 96 99
Interest Expense 720 750 772 611 696 788 843 882 898 923 941 955 967
Unusual Expense - Net 256 39 77 - - - - - - - - - -
Pretax Income 2,116 2,411 2,665 3,410 3,663 3,865 4,137 4,391 4,639 4,826 4,980 5,146 5,323
Income Taxes 27 (17) 58 58 63 66 71 75 79 82 85 88 91
Equity in Earnings of Affiliates - - - - - - - - - - - - -
Consolidated Net Income 2,088 2,428 2,607 3,352 3,600 3,799 4,067 4,316 4,560 4,744 4,895 5,058 5,232
Minority Interest Expense 41 8 10 10 10 10 10 10 10 10 10 10 10
Net Income 2,047 2,420 2,597 3,342 3,590 3,789 4,057 4,306 4,550 4,734 4,885 5,048 5,222
Total Shares Outstanding 1,772 1,807 1,880 1,968 2,002 2,007 2,011 2,015 2,015 2,015 2,015 2,015 2,015
Dividends per Share 1.2 1.3 1.4 1.7 1.8 1.9 2.0 2.1 2.3 2.3 2.4 2.5 2.6
Payout Ratio 101.1 93.5 95.7 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
EPS (basic) 1.2 1.3 1.4 1.7 1.8 1.9 2.0 2.1 2.3 2.3 2.4 2.5 2.6

Balance Sheet
Balance Sheet
Assets
Cash 58 20 123 144 191 229 184 206 288 254 233 242 211
Accounts Receivables 4,545 4,353 5,482 5,925 6,614 7,068 7,515 7,906 8,231 8,494 8,706 8,924 9,147
Inventories 1,112 1,088 1,093 1,475 1,593 1,702 1,810 1,904 1,982 2,045 2,096 2,149 2,202
Prepaid and Other Current Assets 353 381 326 332 339 345 352 359 367 374 381 389 397
Total Current Assets 6,069 5,843 7,023 7,876 8,737 9,345 9,861 10,376 10,867 11,167 11,417 11,704 11,957
Property, Plant & Equipment - Gross 27,430 30,955 34,018 37,785 41,877 45,077 47,977 50,177 52,377 54,477 56,477 58,377 60,277
Accumulated Depreciation 5,238 6,109 7,071 8,173 9,385 10,714 12,120 13,587 15,084 16,610 18,159 19,727 21,308
Net Property, Plant & Equipment 22,192 24,846 26,947 29,611 32,492 34,362 35,857 36,590 37,293 37,867 38,318 38,650 38,969
Total Investments and Advances 1,860 1,395 2,437 2,512 2,590 2,669 2,752 2,836 2,924 3,014 3,106 3,202 3,301
Net Goodwill 2,092 2,087 2,080 6,113 7,221 7,221 7,221 7,221 7,221 7,221 7,221 7,221 7,221
Net Other Intangibles 1,656 1,567 1,462 1,270 1,103 959 833 723 628 546 474 412 358
Net Intangible Assets 3,749 3,654 3,542 7,383 8,324 8,180 8,054 7,944 7,849 7,767 7,695 7,633 7,579
Deferred Tax Assets - 2 - 9 10 10 11 12 13 13 13 14 14
Other Assets 257 197 189 249 269 288 306 322 335 346 354 363 372
Total Assets 34,125 35,936 40,139 47,641 52,422 54,854 56,839 58,080 59,280 60,173 60,904 61,566 62,192
Liabilities & Shareholders' Equity
ST Debt & Curr. Portion LT Debt 500 1,547 1,125 1,125 1,300 750 800 350 521 521 521 521 521
Accounts Payable 985 892 874 1,241 1,340 1,432 1,522 1,602 1,667 1,721 1,764 1,808 1,853
Other Current Liabilities 5,948 5,318 6,240 7,664 8,276 8,844 9,403 9,892 10,298 10,628 10,893 11,166 11,445
Total Current Liabilities 7,432 7,756 8,239 10,030 10,916 11,026 11,725 11,844 12,487 12,870 13,178 13,495 13,819
Long-Term Debt 14,029 14,655 16,227 18,626 21,084 23,185 24,248 25,149 25,690 26,186 26,598 26,932 27,221
Deferred Tax Liabilities 91 24 61 52 56 59 63 67 71 74 76 78 81
Other Liabilities 353 205 172 252 272 291 309 325 339 349 358 367 376
Total Liabilities 21,906 22,640 24,698 28,960 32,328 34,560 36,345 37,386 38,586 39,479 40,210 40,872 41,498
Common Equity 12,465 13,558 15,574 18,815 20,227 20,427 20,627 20,827 20,827 20,827 20,827 20,827 20,827
Accumulated Gains/Losses (351) (370) (359) (359) (359) (359) (359) (359) (359) (359) (359) (359) (359)
Treasury Stock - - - - - - - - - - - - -
Total Shareholders' Equity 12,113 13,188 15,215 18,456 19,868 20,068 20,268 20,468 20,468 20,468 20,468 20,468 20,468
Accumulated Minority Interest 106 108 226 226 226 226 226 226 226 226 226 226 226
Total Equity 12,219 13,296 15,440 18,682 20,094 20,294 20,494 20,694 20,694 20,694 20,694 20,694 20,694
Total Liabilities & Shareholders' Equity 34,125 35,936 40,139 47,641 52,422 54,854 56,839 58,080 59,280 60,173 60,904 61,566 62,192

Historical Cash Flow Statement
Fiscal Years Ending Dec. 31 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Cash Flow
Operating Activities
Net Income / Starting Line 120 221 242 85 84 220 353 600 534 954 1,155 1,384 2,088 2,428 2,607
Depreciation, Depletion & Amortizatio 25 41 52 95 128 195 421 447 524 566 833 985 1,007 1,105 1,218
Depreciation and Depletion 22 33 43 73 101 161 329 352 415 466 678 746 777 901 1,012
Amortization of Intangible Assets 3 8 9 22 27 34 92 95 109 100 155 239 230 204 205
Deferred Taxes & Investment Tax Cre -- -- -- 2 11 10 9 14 8 6 5 8 12 (66) 38
Deferred Taxes -- -- -- 2 11 10 9 14 8 6 5 8 12 (66) 38
Other Funds (2) 28 26 55 81 48 116 30 84 68 138 114 (44) 7 79
Funds from Operations 144 290 320 237 304 473 898 1,092 1,150 1,594 2,131 2,490 3,064 3,473 3,942
Changes in Working Capital 25 71 (37) 93 121 (94) (266) 83 441 (357) 246 (190) 267 (583) (76)
Receivables -- -- -- (127) (54) (453) (364) 156 (703) 761 (1,062) (681) (716) 197 (1,140)
Inventories -- -- -- (84) 50 (44) (149) (66) (14) (15) (317) (438) 136 (228) 39
Accounts Payable -- -- -- 24 (7) 110 46 (12) 54 (3) (7) 151 123 (50) 14
Other Accruals -- -- -- 276 126 295 189 (52) 1,023 (1,057) 1,629 798 761 (410) 1,047
Other Assets/Liabilities -- -- -- 5 6 (1) 12 58 82 (42) 4 (21) (37) (92) (36)
Net Operating Cash Flow 169 361 283 330 425 379 632 1,175 1,591 1,237 2,377 2,300 3,331 2,891 3,866
Investing Activities
Capital Expenditures (21) (244) (150) (74) (148) (156) (864) (1,341) (2,197) (1,985) (1,586) (2,041) (3,868) (3,622) (3,408)
Capital Expenditures (Fixed Assets) (21) (244) (150) (72) (146) (156) (864) (1,341) (2,186) (1,979) (1,584) (2,041) (3,868) (3,622) (3,408)
Capital Expenditures (Other Assets) - - - (2) (2) - - - (11) (5) (1) - - - -
Net Assets from Acquisitions (208) - (226) (1,621) (37) (725) (327) (277) (36) (202) (107) (1,314) - - -
Sale of Fixed Assets & Businesses 0 0 1 0 0 7 45 4 12 42 4 106 1,034 1,199 281
Purchase/Sale of Investments (62) (31) (116) (14) (472) (64) (41) (138) (343) (134) (19) (8) (30) (610) (1,094)
Purchase of Investments 62 31 116 14 472 64 88 138 343 134 19 8 30 610 1,094
Sale/Maturity of Investments - - - - - - 48 - - - - - - -- -
Other Funds 26 7 - - - 9 56 63 10 (133) 161 5 86 14 (36)
Other Uses - - - - - - (2) (9) (47) (133) - (35) - (44) (62)
Other Sources 26 7 - - - 9 58 71 58 -- 161 40 86 58 26
Net Investing Cash Flow (265) (269) (491) (1,708) (657) (929) (1,130) (1,689) (2,554) (2,412) (1,547) (3,252) (2,778) (3,019) (4,258)
Financing Activities
Cash Dividends Paid (112) (140) (164) (215) (310) (439) (717) (843) (958) (1,037) (1,255) (308) (1,974) (2,179) (2,400)
Change in Capital Stock (5) (1) 1 168 565 835 638 848 420 141 911 525 532 817 1,792
Repurchase of Common & Preferred (5) (1) (18) (13) - - - - (2) (2) (2) (4) (11) - -
Sale of Common & Preferred Stock - - 19 181 565 835 638 848 421 143 913 529 543 817 1,792
Issuance/Reduction of Debt, Net 195 105 450 1,331 (107) 126 562 471 1,550 2,138 (292) 1,118 914 1,665 1,149
Change in Long-Term Debt 195 105 450 1,331 (107) 126 562 471 1,550 2,138 (292) 1,118 914 1,665 1,149
Issuance of Long-Term Debt 350 595 450 1,968 1,926 5,935 4,192 3,378 6,008 8,666 7,362 6,462 8,289 8,342 13,829
Reduction in Long-Term Debt (155) (490) - (637) (2,033) (5,809) (3,631) (2,907) (4,458) (6,528) (7,654) (5,344) (7,376) (6,676) (12,681)
Other Funds (1) (1) (7) (24) 100 23 34 19 (32) (70) (201) (373) (70) (179) (107)
Other Uses (1) (1) (7) (26) (13) (6) (6) (9) (32) (70) (340) (1,478) (79) (186) (223)
Other Sources 0 0 - 2 113 29 39 28 -- -- 139 1,105 9 7 115
Net Financing Cash Flow 78 (37) 280 1,260 249 544 516 495 979 1,171 (837) 961 (599) 124 433
Net Change in Cash (19) 55 72 (118) 17 (6) 18 (19) 17 (4) (7) 10 (46) (4) 41

Forecasted Cash Flow Statement
Fiscal Years Ending Dec. 31 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
Operating Activities
Net Income 3,342 3,590 3,789 4,057 4,306 4,550 4,734 4,885 5,048 5,222
Depreciation 1,102 1,211 1,329 1,406 1,467 1,497 1,526 1,549 1,568 1,581
Amortization 192 167 145 126 109 95 83 72 62 54
Accounts Receivable (443) (689) (454) (447) (391) (324) (263) (212) (218) (223)
Inventories (382) (118) (109) (108) (94) (78) (63) (51) (52) (54)
Prepaid and Other Current Assets (7) (7) (7) (7) (7) (7) (7) (7) (8) (8)
Deferred Tax Assets (9) (1) (1) (1) (1) (1) (1) (0) (0) (0)
Other Assets (60) (20) (18) (18) (16) (13) (11) (9) (9) (9)
Accounts Payable 367 99 92 91 79 66 53 43 44 45
Other Current Liabilities 1,425 612 568 559 490 406 330 266 272 279
Deferred Tax Liabilities (9) 4 3 4 4 4 3 2 3 3
Other Liabilities 80 20 19 18 16 13 11 9 9 9
Net Cash flow from Operating Activities 5,598 4,869 5,356 5,680 5,962 6,207 6,393 6,546 6,719 6,899
Investing Activities
Capital Expenditures (3,767) (4,092) (3,200) (2,900) (2,200) (2,200) (2,100) (2,000) (1,900) (1,900)
Investments (75) (77) (80) (82) (85) (87) (90) (93) (96) (99)
Intangible Assets
Goodwill (4,033) (1,108) - - - - - - - -
Net Cash Flow from Investing Activities (7,875) (5,277) (3,280) (2,982) (2,285) (2,287) (2,190) (2,093) (1,996) (1,999)
Financing Activities
St Debt - 175 (550) 50 (450) 171 - - - -
Long Term Debt 2,399 2,458 2,101 1,063 901 541 497 412 334 290
Common Equity 3,241 1,412 200 200 200 - - - - -
Acc. Gain/Losses - - - - - - - - - -
Acc. Minority Interest - - - - - - - - - -
Dividends (3,342) (3,590) (3,789) (4,057) (4,306) (4,550) (4,734) (4,885) (5,048) (5,222)
Net Cash Flow from Financing Activities 2,298 456 (2,038) (2,744) (3,654) (3,838) (4,237) (4,474) (4,714) (4,932)
Net Change in Cash 21 47 38 (46) 23 82 (34) (21) 9 (31)
Beginning Cash Flow 123 144 191 229 184 206 288 254 233 242
Ending Cash Balance 144 191 229 184 206 288 254 233 242 211

Common Size Income Statement
Income Statement
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
COGS excluding D&A 90.97% 89.88% 89.94% 89.82% 89.82% 89.82% 89.82% 89.82% 89.82% 89.82% 89.82% 89.82% 89.82%
Gross Margin 9.03% 10.12% 10.06% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18%
Depreciation & Amortization Expense 2.26% 2.60% 2.55% 2.45% 2.41% 2.41% 2.36% 2.31% 2.24% 2.19% 2.15% 2.11% 2.07%
Depreciation 1.75% 2.12% 2.12% 2.08% 2.12% 2.18% 2.16% 2.15% 2.10% 2.08% 2.06% 2.03% 2.00%
Amortization of Intangibles 0.52% 0.48% 0.43% 0.36% 0.29% 0.24% 0.19% 0.16% 0.13% 0.11% 0.10% 0.08% 0.07%
Gross Income 6.77% 7.53% 7.51% 7.73% 7.77% 7.76% 7.82% 7.87% 7.94% 7.99% 8.02% 8.06% 8.11%
SG&A Expense 0.28% 0.30% 0.25% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28% 0.28%
EBIT (Operating Income) 6.49% 7.23% 7.26% 7.46% 7.49% 7.49% 7.54% 7.59% 7.66% 7.71% 7.75% 7.79% 7.83%
Nonoperating Income - Net 0.46% 0.29% 0.10% 0.14% 0.14% 0.13% 0.13% 0.12% 0.12% 0.12% 0.12% 0.12% 0.12%
Interest Expense 1.62% 1.76% 1.62% 1.15% 1.22% 1.29% 1.30% 1.29% 1.26% 1.26% 1.25% 1.24% 1.22%
Unusual Expense - Net 0.58% 0.09% 0.16% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Pretax Income 4.76% 5.67% 5.58% 6.44% 6.41% 6.33% 6.37% 6.43% 6.52% 6.58% 6.62% 6.67% 6.73%
Income Taxes 0.06% -0.04% 0.12% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.12%
Equity in Earnings of Affiliates 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Consolidated Net Income 4.69% 5.71% 5.46% 6.33% 6.30% 6.22% 6.26% 6.32% 6.41% 6.46% 6.51% 6.56% 6.62%
Minority Interest Expense 0.09% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%
Net Income 4.60% 5.69% 5.44% 6.31% 6.28% 6.20% 6.25% 6.30% 6.40% 6.45% 6.49% 6.55% 6.61%

Common Size Balance Sheet
Balance Sheet
Assets
Cash 0.13% 0.05% 0.26% 0.27% 0.33% 0.38% 0.28% 0.30% 0.40% 0.35% 0.31% 0.31% 0.27%
Accounts Receivables 10.22% 10.23% 11.48% 11.19% 11.57% 11.57% 11.57% 11.57% 11.57% 11.57% 11.57% 11.57% 11.57%
Inventories 2.50% 2.56% 2.29% 2.79% 2.79% 2.79% 2.79% 2.79% 2.79% 2.79% 2.79% 2.79% 2.79%
Prepaid and Other Current Assets 0.79% 0.90% 0.68% 0.63% 0.59% 0.57% 0.54% 0.53% 0.52% 0.51% 0.51% 0.50% 0.50%
Total Current Assets 13.64% 13.74% 14.71% 14.88% 15.29% 15.30% 15.18% 15.19% 15.28% 15.21% 15.18% 15.18% 15.13%
Property, Plant & Equipment - Gross 61.65% 72.77% 71.24% 71.38% 73.27% 73.80% 73.88% 73.44% 73.64% 74.22% 75.07% 75.70% 76.26%
Accumulated Depreciation 11.77% 14.36% 14.81% 15.44% 16.42% 17.54% 18.66% 19.89% 21.21% 22.63% 24.14% 25.58% 26.96%
Net Property, Plant & Equipment 49.88% 58.41% 56.44% 55.94% 56.85% 56.26% 55.22% 53.56% 52.44% 51.59% 50.93% 50.12% 49.30%
Total Investments and Advances 4.18% 3.28% 5.10% 4.75% 4.53% 4.37% 4.24% 4.15% 4.11% 4.11% 4.13% 4.15% 4.18%
Net Goodwill 4.70% 4.91% 4.36% 11.55% 12.63% 11.82% 11.12% 10.57% 10.15% 9.84% 9.60% 9.36% 9.14%
Net Other Intangibles 3.72% 3.68% 3.06% 2.40% 1.93% 1.57% 1.28% 1.06% 0.88% 0.74% 0.63% 0.53% 0.45%
Intangible Assets 8.43% 8.59% 7.42% 13.95% 14.56% 13.39% 12.40% 11.63% 11.04% 10.58% 10.23% 9.90% 9.59%
Deferred Tax Assets 0.00% 0.00% 0.00% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02%
Other Assets 0.58% 0.46% 0.40% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47% 0.47%
Total Assets 76.70% 84.48% 84.06% 90.01% 91.72% 89.81% 87.53% 85.01% 83.35% 81.98% 80.95% 79.84% 78.68%
Liabilities & Shareholders' Equity 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
ST Debt & Curr. Portion LT Debt 1.12% 3.64% 2.36% 2.13% 2.27% 1.23% 1.23% 0.51% 0.73% 0.71% 0.69% 0.68% 0.66%
Accounts Payable 2.21% 2.10% 1.83% 2.34% 2.34% 2.34% 2.34% 2.34% 2.34% 2.34% 2.34% 2.34% 2.34%
Other Current Liabilities 13.37% 12.50% 13.07% 14.48% 14.48% 14.48% 14.48% 14.48% 14.48% 14.48% 14.48% 14.48% 14.48%
Total Current Liabilities 16.71% 18.23% 17.25% 18.95% 19.10% 18.05% 18.06% 17.34% 17.56% 17.53% 17.52% 17.50% 17.48%
Long-Term Debt 31.53% 34.45% 33.98% 35.19% 36.89% 37.96% 37.34% 36.81% 36.12% 35.68% 35.35% 34.92% 34.44%
Deferred Tax Liabilities 0.20% 0.06% 0.13% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
Other Liabilities 0.79% 0.48% 0.36% 0.48% 0.48% 0.48% 0.48% 0.48% 0.48% 0.48% 0.48% 0.48% 0.48%
Total Liabilities 49.24% 53.22% 51.73% 54.71% 56.56% 56.58% 55.97% 54.72% 54.25% 53.79% 53.45% 53.00% 52.50%
Common Equity 28.02% 31.87% 32.62% 35.55% 35.39% 33.44% 31.76% 30.48% 29.28% 28.38% 27.68% 27.01% 26.35%
Common Stock Par/Carry Value 28.02% 31.87% 32.62% 35.55% 35.39% 33.44% 31.76% 30.48% 29.28% 28.38% 27.68% 27.01% 26.35%
Accumulated Gains/Losses -0.79% -0.87% -0.75% -0.68% -0.63% -0.59% -0.55% -0.53% -0.50% -0.49% -0.48% -0.47% -0.45%
Treasury Stock 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total Shareholders' Equity 27.23% 31.00% 31.86% 34.87% 34.76% 32.86% 31.21% 29.96% 28.78% 27.89% 27.21% 26.54% 25.90%
Accumulated Minority Interest 0.24% 0.25% 0.47% 0.43% 0.39% 0.37% 0.35% 0.33% 0.32% 0.31% 0.30% 0.29% 0.29%
Total Equity 27.47% 31.25% 32.34% 35.29% 35.16% 33.23% 31.56% 30.29% 29.10% 28.19% 27.51% 26.84% 26.18%
Total Liabilities & Shareholders' Equit 76.70% 84.48% 84.06% 90.01% 91.72% 89.81% 87.53% 85.01% 83.35% 81.98% 80.95% 79.84% 78.68%

Weighted Average Cost of Capital (WACC) Estimation
Risk Free 3.07%
Risk Premium 4.64%
Beta 0.77
Cost of Equity 6.63%
Debt Rating BBB+
YTM (Pre-Tax Cost of Debt) 3.59%
Tax Rate 2.00%
After-tax Cost of Debt 3.52%
PV of ST and LT Debt (2013) 17,351.50
PV of Operating Leases (2013) 251.66
MV of Total Debt 17,603.16
Stock Price (Current) 37.4
Shares Outstanding 1,968
MV of equity 73,585.62
Market Value of firm 91,188.78
MV Weight of Equity 80.70%
MV Weight of Debt 19.30%
Forward WACC 6.03%

Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models
Key Inputs:
CV Growth 2.00%
CV ROIC 15.40%
WACC 6.03%
Time Period 1 2 3 4 5 6 7 8 9 10
DCF Model
NOPLAT 3,693 4,017 4,274 4,578 4,851 5,104 5,301 5,462 5,633 5,812
Beginning IC 27,125 28,856 31,913 33,749 35,123 35,809 36,539 37,035 37,432 37,737
FCF 1,962 960 2,438 3,204 4,165 4,375 4,804 5,066 5,327 5,562
CV 125,565
PV of FCF 1,851 854 2,046 2,535 3,108 3,079 3,189 3,172 77,292
Value of operations 97,125
Plus: Excess Cash -
Less: Pv of opr leases (277)
Less: Minority Interest Liability (226)
Less: ESOP (19)
Less: ST and LT Debt (19,751)
Value of Equity 76,853
Intrinsic Value 39.06
Adjusted for Partial Year 41.43
EP Model
NOPLAT 3,693 4,017 4,274 4,578 4,851 5,104 5,301 5,462 5,633 5,812
Beginning IC 27,125 28,856 31,913 33,749 35,123 35,809 36,539 37,035 37,432 37,737
EP 2,058 2,278 2,351 2,543 2,734 2,945 3,099 3,230 3,376 3,538
CV 87,828
PV of EP 1,941 2,026 1,972 2,012 2,040 2,073 2,057 2,022 53,856
PV of Economic Profit 70,000
Plus: Beginning IC 27,125
Value of operations 97,125
Plus: Excess Cash -
Less: Pv of opr leases (277)
Less: Minority Interest Liability (226)
Less: ESOP (19)
Less: ST and LT Debt (19,751)
Value of Equity 76,853
Intrinsic Value 39.06
Adjusted for Partial Year 41.43

Dividend Discount Model (DDM) or Fundamental P/E Valuation Model
1 2 3 4 5 6 7 8 9 10
EPS 1.70 1.79 1.89 2.02 2.14 2.26 2.35 2.42 2.51 2.59
Growth
Key Assumptions
CV growth 2.00%
CV ROE 25.23%
Payout Ratio 100.0%
Future Cash Flows
P/E Multiple 19.90
EPS(next period) 2.59
Future Stock Price 51.57$
Dividends Per Share 1.70$ 1.79$ 1.89$ 2.02$ 2.14$ 2.26$ 2.35$ 2.42$ 2.51$ 2.59$
Future Cash Flows 1.70$ 1.79$ 1.89$ 2.02$ 2.14$ 2.26$ 2.35$ 2.42$ 54.07$
Discounted Cash Flows 1.59 1.58 1.56 1.56 1.55 1.54 1.50 1.45 30.35
Intrinsic Value 42.68$
Adjusted for Partial Year 43.71$

Relative Valuation Models
EPS EPS
Ticker Company Price 2014E 2015E P/E 14 P/E 15
SEP SPECTRA ENERGY PARTNERS LP 57.10$ $2.56 $2.73 22.3 20.9
WPZ WILLIAMS PARTNERS L.P. 51.98$ $1.17 $2.39 44.4 21.7
ETP ENERGY TRANSFER PARTNERS L.P 67.52$ $2.88 $3.14 23.4 21.5
OKS ONEOK PARTNERS L.P. 48.73$ $2.62 $2.67 18.6 18.3
KMP KINDER MORGAN ENERGY PTNR 97.99$ $2.65 $2.76 37.0 35.5
Average 29.2 23.6
epd ENTERPRISE PRODUCTS PART. 37.40$ $ 1.70 $ 1.79 22.0 20.9
Implied Value:
Relative P/E (EPS14) $ 49.52
Relative P/E (EPS15) 42.29$

Key Management Ratios
Liquidity Ratios
Current Ratio (CA/CL) 0.82 0.75 0.85 0.79 0.80 0.85 0.84 0.88 0.87 0.87 0.87 0.87 0.87
Quick Ratio [(CA - Inventories)/CL] 0.67 0.61 0.72 0.64 0.65 0.69 0.69 0.72 0.71 0.71 0.71 0.71 0.71
Activity or Asset-Management Ratios
Inventory Turnover (COGS/Avg Inv of Curr and Prev Yrs) 36.04 34.76 39.37 37.03 33.47 33.30 33.22 33.05 32.88 32.74 32.63 32.63 32.63
Receivables Turnover (Sales/Avg of A/R of Curr and Prev yrs) 10.62 9.56 9.71 9.28 9.12 8.93 8.91 8.86 8.81 8.78 8.75 8.75 8.75
Total Assets Turnover (Sales/Total Assets) 1.30 1.18 1.19 1.11 1.09 1.11 1.14 1.18 1.20 1.22 1.24 1.25 1.27
Financial Leverage Ratios
Debt/Equity (Total liabilities/Total Equity) 1.81 1.72 1.62 1.57 1.63 1.72 1.79 1.83 1.89 1.93 1.96 2.00 2.03
Times Interest Earned Ratio (EBIT/Interest Expense) 4.01 4.10 4.49 6.46 6.15 5.80 5.81 5.88 6.07 6.13 6.20 6.29 6.40
Debt Ratio (Total Liabilities/Total Assets) 0.64 0.63 0.62 0.61 0.62 0.63 0.64 0.64 0.65 0.66 0.66 0.66 0.67
Profitability Ratios
ROA (Net Income/Total Assets) 6.00% 6.73% 6.47% 7.02% 6.85% 6.91% 7.14% 7.41% 7.68% 7.87% 8.02% 8.20% 8.40%
ROE (Net Income/Total Equity) 16.75% 18.20% 16.82% 17.89% 17.87% 18.67% 19.79% 20.81% 21.99% 22.87% 23.61% 24.39% 25.23%
Gross Margin [1-(COGS excl. D&A/Sales)] 9.03% 10.12% 10.06% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18% 10.18%
Operating Margin (EBIT/Sales) 6.49% 7.23% 7.26% 7.46% 7.49% 7.49% 7.54% 7.59% 7.66% 7.71% 7.75% 7.79% 7.83%
Payout Policy Ratios
Dividend Payout Ratio (Dividends paid/Net Income) 96.45% 90.03% 92.43% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Sensitivity Analysis
41.43 9.40% 11.40% 13.40% 15.40% 17.40% 19.40% 21.40% 41.43 3.14% 3.64% 4.14% 4.64% 5.14% 5.64% 6.14%
4.53% 68.08 71.18 73.36 74.98 76.22 77.21 78.01 1.57% 102.94 86.66 74.39 64.81 57.12 50.81 45.54
5.03% 54.58 57.06 58.81 60.10 61.09 61.88 62.52 2.07% 82.57 71.23 62.29 55.07 49.11 44.10 39.84
5.53% 44.91 46.95 48.39 49.45 50.27 50.92 51.44 2.57% 68.30 59.94 53.14 47.49 42.73 38.66 35.14
6.03% 37.65 39.36 40.57 41.43 42.14 42.69 43.13 3.07% 57.73 51.31 45.96 41.43 37.54 34.16 31.21
6.53% 31.99 33.45 34.48 35.24 35.82 36.29 36.67 3.57% 49.58 44.50 40.18 36.46 33.22 30.38 27.86
7.03% 27.46 28.72 29.61 30.27 30.77 31.17 31.50 4.07% 43.12 38.99 35.43 32.32 29.58 27.15 24.97
7.53% 23.75 24.86 25.63 26.20 26.64 26.99 27.27 4.57% 37.85 34.44 31.45 28.81 26.46 24.36 22.46
41.43 12,625$ 14,625$ 16,625$ 18,625$ 20,625$ 22,625$ 24,625$ 41.43 88.32% 88.82% 89.32% 89.82% 90.32% 90.82% 91.32%
1,700$ 46.09 44.94 43.79 43.43 43.42 43.40 43.39 6.35% 54.08 49.83 45.59 41.34 37.10 32.85 28.61
2,200$ 45.65 44.50 43.36 42.71 42.70 42.69 42.68 7.85% 54.12 49.87 45.62 41.38 37.13 32.88 28.64
2,700$ 45.22 44.07 42.92 41.99 41.98 41.97 41.96 9.35% 54.16 49.91 45.66 41.41 37.16 32.91 28.67
3,200$ 44.87 43.72 42.57 41.43 41.35 41.34 41.32 10.85% 54.20 49.95 45.70 41.43 37.20 32.94 28.69
3,700$ 44.56 43.42 42.27 41.12 40.76 40.75 40.74 12.35% 54.24 49.98 45.73 41.48 37.23 32.97 28.72
4,200$ 44.26 43.11 41.96 40.82 40.17 40.16 40.15 13.85% 54.28 50.02 45.77 41.51 37.26 33.01 28.75
4,700$ 43.95 42.81 41.66 40.51 39.58 39.57 39.56 15.35% 54.32 50.06 45.80 41.55 37.29 33.04 28.78
41.43 0.06% 0.13% 0.21% 0.28% 0.36% 0.43% 0.51% 41.43 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50%
74.82% 170.86 170.22 169.58 168.95 168.31 167.67 167.03 0.47 46.40 50.39 55.54 62.48 72.29 87.26 112.89
79.82% 128.34 127.70 127.07 126.43 125.79 125.15 124.52 0.57 41.56 44.70 48.68 53.86 60.92 71.07 86.93
84.82% 85.83 85.20 84.56 83.92 83.28 82.65 82.01 0.67 37.42 39.93 43.04 47.01 52.24 59.43 69.97
89.82% 43.33 42.69 42.05 41.43 40.78 40.14 39.50 0.77 33.84 35.87 38.34 41.43 45.39 50.66 58.02
94.82% 0.82 0.18 (0.45) (1.09) (1.73) (2.37) (3.00) 0.87 30.72 32.37 34.35 36.79 39.85 43.81 49.13
99.82% (41.68) (42.32) (42.96) (43.60) (44.23) (44.87) (45.51) 0.97 27.97 29.32 30.93 32.87 35.27 38.31 42.27
104.82% (84.19) (84.83) (85.47) (86.10) (86.74) (87.38) (88.02) 1.07 25.53 26.64 27.95 29.52 31.42 33.79 36.80
SGA as a % of Sales
COGS as a %
of Sales
CV Growth
Beta
COGS% of Sales
Revenue
Growth
Long-Term Debt
CV ROIC
WACC
Risk Premium
Risk free
rate
Capital
Expenditure

VALUATION OF OPTIONS GRANTED IN ESOP
Ticker Symbol epd
Current Stock Price 37.40
Risk Free Rate 0.14%
Current Dividend Yield 3.79%
Annualized St. Dev. of Stock Returns 20.96%
Average Average B-S Value
Range of Number Exercise Remaining Option of Options
Outstanding Options of Shares Price Life (yrs) Price Granted
Range 1 2,025,000 26.49 1.30 9.53$ 19,304,993$
Range 2
Range 3
Range 4
Total 2,025,000 26.49$ 1.30 11.18$ 19,304,993$

Effects of ESOP Exercise and Share Issuance on Common Stock Balance Sheet Account and Number of Shares Outstanding
Number of Options Outstanding (shares): 2,025,000
Average Time to Maturity (years): 1.30
Expected Annual Number of Options Exercised: 1,557,692
Current Average Strike Price: 26.49$
Cost of Equity: 9.00%
Current Stock Price: 37.40$
2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E
Increase in Shares Outstanding: 1,557,692 467,308
Average Strike Price: 26.49$ 26.49$
Increase in Common Stock Account: 41,263,269 12,378,981
Issuance of Common Stock 3,200,000,000 1,400,000,000 200,000,000 200,000,000 200,000,000
Expected Price of Repurchased Shares: 37.40$ 40.77$ 44.43$ 48.43$ 52.79$
Number of Shares Issued: 85,561,497 34,342,344 4,500,963 4,129,323 3,788,370
Shares Outstanding (beginning of the year) 1,880,410,878 1,967,530,068 2,002,339,719 2,006,840,682 2,010,970,005 2,014,758,376 2,014,758,376 2,014,758,376 2,014,758,376 2,014,758,376
Plus: Shares Issued Through ESOP 1,557,692 467,308 - - - - - - - -
Plus: Shares Issued 85,561,497 34,342,344 4,500,963 4,129,323 3,788,370 - - - - -
Shares Outstanding (end of the year) 1,967,530,068 2,002,339,719 2,006,840,682 2,010,970,005 2,014,758,376 2,014,758,376 2,014,758,376 2,014,758,376 2,014,758,376 2,014,758,376

Present Value of Operating Lease Obligations
2011 2012 2013
Operating Operating Operating
Fiscal Years Ending Leases Fiscal Years Ending Leases Fiscal Years Ending Leases
2013 58.3 2013 51.3 2013 42.4
2014 47.4 2014 44.1 2014 41.2
2015 39.7 2015 42.8 2015 38.2
2016 38.2 2016 37.5 2016 35.4
2017 32.3 2017 33.3 2017 30.7
Thereafter 170.5 Thereafter 154 Thereafter 144.9
Total Minimum Payments 386.4 Total Minimum Payments 363.0 Total Minimum Payments 332.8
Less: Interest 95.0 Less: Interest 86.9 Less: Interest 81.1
PV of Minimum Payments 291.4 PV of Minimum Payments 276.1 PV of Minimum Payments 251.7
Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases
Pre-Tax Cost of Debt 6.00% Pre-Tax Cost of Debt 6.00% Pre-Tax Cost of Debt 6.00%
Number Years Implied by Year 6 5.3 Number Years Implied by Year 6 4.6 Number Years Implied by Year 6 4.7
Lease PV Lease Lease PV Lease Lease PV Lease
Year Commitment Payment Year Commitment Payment Year Commitment Payment
1 58.3 55.0 1 51.3 48.4 1 42.4 40.0
2 47.4 42.2 2 44.1 39.2 2 41.2 36.7
3 39.7 33.3 3 42.8 35.9 3 38.2 32.1
4 38.2 30.3 4 37.5 29.7 4 35.4 28.0
5 32.3 24.1 5 33.3 24.9 5 30.7 22.9
6 & beyond 32.3 106.5 6 & beyond 33.3 98.0 6 & beyond 30.7 91.9
PV of Minimum Payments 291.4 PV of Minimum Payments 276.1 PV of Minimum Payments 251.7

Value Driver Estimation
NOPLAT:
Total Revenues 44,489 42,541 47,748 52,932 57,156 61,078 64,939 68,320 71,121 73,397 75,232 77,113 79,041
(COGS) (40,470) (38,233) (42,944) (47,544) (51,339) (54,862) (58,329) (61,367) (63,883) (65,927) (67,575) (69,265) (70,996)
(SG&A) (124) (127) (120) (146) (158) (169) (179) (189) (197) (203) (208) (213) (218)
(Depreciation & Amortization) (1,007) (1,105) (1,218) (1,294) (1,378) (1,474) (1,532) (1,576) (1,592) (1,608) (1,621) (1,630) (1,635)
Implied Interest on PV of operating Leases 17 17 15 17 18 19 20 21 21 21 21 22 22
EBITA 2,905 3,092 3,482 3,963 4,299 4,593 4,918 5,209 5,471 5,680 5,850 6,027 6,213
Less: Adjusted Taxes
Provision for Income Taxes 27 (17) 58 58 63 66 71 75 79 82 85 88 91
Add: Tax shield on interest expense 252 262 270 214 243 276 295 309 314 323 329 334 338
Less: Tax on interest income (71) (44) (17) (26) (27) (28) (29) (30) (31) (32) (32) (33) (35)
Add: tax shield on PV of operating leases 6 6 5 6 6 7 7 7 7 7 8 8 8
Total Adjusted Taxes 214 208 316 252 285 321 344 361 370 381 389 396 403
Plus: Change in Deferred Taxes 13 (69) 38 (18) 3 3 3 3 3 2 2 2 2
NOPLAT 2,704 2,816 3,203 3,693 4,017 4,274 4,578 4,851 5,104 5,301 5,462 5,633 5,812
Invested Capital:
Normal Cash 58 20 123 144 191 229 184 206 288 254 233 242 211
Accounts Receivable 4,545 4,353 5,482 5,925 6,614 7,068 7,515 7,906 8,231 8,494 8,706 8,924 9,147
Inventory 1,112 1,088 1,093 1,475 1,593 1,702 1,810 1,904 1,982 2,045 2,096 2,149 2,202
Other Operating Current Assets 353 381 326 332 339 345 352 359 367 374 381 389 397
Accounts Payable (985) (892) (874) (1,241) (1,340) (1,432) (1,522) (1,602) (1,667) (1,721) (1,764) (1,808) (1,853)
Other Current Liabilities (5,948) (5,318) (6,240) (7,664) (8,276) (8,844) (9,403) (9,892) (10,298) (10,628) (10,893) (11,166) (11,445)
Net Operating Working Capital (864) (366) (90) (1,029) (879) (931) (1,065) (1,118) (1,099) (1,181) (1,240) (1,270) (1,341)
Net PPE 22,192 24,846 26,947 29,611 32,492 34,362 35,857 36,590 37,293 37,867 38,318 38,650 38,969
PV of Operating Leases 291 276 252 277 303 321 335 342 348 354 358 361 364
Other Operating Assets 257 197 189 249 269 288 306 322 335 346 354 363 372
Other Operating Liabilities (353) (205) (172) (252) (272) (291) (309) (325) (339) (349) (358) (367) (376)
Invested Capital 21,523 24,748 27,125 28,856 31,913 33,749 35,123 35,809 36,539 37,035 37,432 37,737 37,988
ROIC: 13.82% 13.08% 12.94% 13.62% 13.92% 13.39% 13.56% 13.81% 14.25% 14.51% 14.75% 15.05% 15.40%
NOPLAT 2,704 2,816 3,203 3,693 4,017 4,274 4,578 4,851 5,104 5,301 5,462 5,633 5,812
Beginning IC 19,573 21,523 24,748 27,125 28,856 31,913 33,749 35,123 35,809 36,539 37,035 37,432 37,737
EP: 1,525 1,518 1,712 2,058 2,278 2,351 2,543 2,734 2,945 3,099 3,230 3,376 3,538
NOPLAT 2,704 2,816 3,203 3,693 4,017 4,274 4,578 4,851 5,104 5,301 5,462 5,633 5,812
Beginning IC 19,573 21,523 24,748 27,125 28,856 31,913 33,749 35,123 35,809 36,539 37,035 37,432 37,737
WACC 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03% 6.03%
FCF: 754 (409) 827 1,962 960 2,438 3,204 4,165 4,375 4,804 5,066 5,327 5,562
NOPLAT 2,704 2,816 3,203 3,693 4,017 4,274 4,578 4,851 5,104 5,301 5,462 5,633 5,812
Change in IC 1,950 3,225 2,377 1,731 3,057 1,836 1,374 686 729 497 397 306 250

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