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Which Segment Will Drive DCP Midstream’s 3Q16 Performance?

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Natural Gas Services

DCP Midstream Partners’ (DPM) Natural Gas Services segment mainly provides natural gas gathering, processing, compression, and transportation services. Natural Gas Services is DPM’s largest business segment. It alone accounted for 63.8% of DPM’s 2Q16 adjusted EBITDA (earnings before interest, tax, depreciation, and amortization).

The segment’s 3Q16 earnings could be negatively impacted by lower Eagle Ford and East Texas throughput volumes and the expiration of direct commodity hedges. These negatives might be partially offset by recent projects placed into service and wider fractionation spread. Midstream companies impacted by the decline in Eagle Ford Production include Western Gas Partners (WES), Boardwalk Pipeline Partners (BWP), and Kinder Morgan (KMI).

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NGL Logistics

DCP Midstream’s NGL (natural gas liquid) Logistics segment provides NGL transportation and fractionation services. The segment’s 3Q16 performance is expected to be driven by higher fractionation volumes, new processing plants placed into service, and higher NGL transportation volumes due to an increase in NGL demand and higher NGL prices.

Wholesale Propane Logistics

DCP Midstream’s Wholesale Propane Logistics segment is involved in propane marketing. The segment’s adjusted EBITDA increased to $5 million in 2Q16 from $4 million in 2Q15, driven by lower operating expenses and partially offset by a lower propane sales volume. The trend is expected to continue in the third quarter.

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