By talking up its $160 million in organic growth projects, executives at DCP Midstream Partners LP (DPM) sought to change the single-topic conversation of the company as drop-down beneficiary during its second-quarter conference call on Aug. 6.

“It’s these dropdowns that fuel higher return organic growth opportunities around our existing footprint and which then create even more opportunities,” said Wouter van Kempen, chairman and CEO of the MLP and its general partner, DCP Midstream LLC.

In the previous quarter, DPM gathered in $1.15 billion in dropdowns, including: the Sand Hills pipeline in the Permian Basin and Eagle Ford; Southern Hills pipeline in the midcontinent; and the Lucerne 1 gas processing plant in Colorado.

Company President Bill Waldheim listed project approvals garnered during the quarter:

  • Three laterals to connect the Sands Hills main line to DPM’s and third-party plants in southeast New Mexico, the Delaware Basin and Cline Shale of West Texas;
  • Condensate handling at two Eagle Ford Shale plants;
  • Improved liquids handling at Marysville storage facility; and
  • Facility modifications at Chesapeake to export butanes.

“If you add these to our Keathley Canyon and Lucerne 2 projects, we are well on our way to meeting our 2014 organic growth forecast of about $500 million,” Waldheim said.

Sounded like good news, but Wall Street bailed on DPM and dropped its unit price by 3.4% by the close of trading for the day as the company missed analyst expectations. Still, the stock price closing of $52.01 beat its 12-month average of $50.79 and was a healthy 12.8% above the 12-month low of $46.18 in September 2013. And company executives stressed it was adhering to its plan to meet financial goals for the year.

“Our second-quarter [distributable cash flow (DCF)] of $93 million and year-to-date DCF of $215 million is in line with our 2014 DCF target range of $400 million to $420 million,” Waldheim said. “And with our first- and second-quarter distribution increases, we are also on track to reach the 2014 distribution growth target of 7%.”

Sean O’Brien, CFO for both the DCP MLP and its general partner, reiterated the 37% hike in discounted cash flow as well as the $31 million increase in the quarter’s adjusted EBITDA to $110 million.

“Bottom line, despite our normal seasonality and heavy plan turnarounds and maintenance activity, we saw solid results during the quarter,” said O’Brien. “Specifically, these strong results were driven largely by growth from the Eagle Ford and O’Connor plant dropdowns and growth from our NGL pipelines.”

DPM’s Eagle Ford system reliably continued to generate results.

“This system continues to grow,” said Waldheim, “with volumes rapidly climbing up approximately 20% over the second quarter of last year, and up 5% second-quarter vs. first-quarter 2014, placing us now at about 85% of the system’s 1.2 Bcf [billion cubic feet] of processing capacity.”

“Due to the continued drilling in liquids-rich and condensate windows in the Eagle Ford, we are finding it necessary to beef up our condensate handling capabilities at two of our Eagle Ford plants [Goliad and O’Connor], where we are installing slug-catchers and additional liquids handling equipment to capture condensate vines and improve system reliability.”

DPM’s natural gas throughput volumes were 11% above output in second-quarter 2013, but O’Brien noted that “not all natural gas volumes are created equally.”

“As shown by the 34% increase in NGL production volumes, liquids-rich, higher margin gas is growing while some of our lower-margin dry gas is declining,” he said. “Volumes and improved recoveries from plants in our liquids-rich areas, such as the Eagle Ford and DJ Basin, are driving higher natural gas throughput and NGL production volumes from what we saw just a year ago.”