We were saddened to learn of the passing of Proven Reserves holdings Enterprise Product Partners LP (NYSE: EPD) and Duncan Energy Partners LP (NYSE: DEP) chairman and founder Dan L. Duncan on Sunday evening.
 
Duncan was a father of the MLP industry and one of the most respected managers in the energy business. As unitholders we all owe Duncan a debt of gratitude. Since going public in 1998, Enterprise Products has generated a total return of more than 600 percent, an average annualized gain of 18.4 percent.

That’s head and shoulders above the 21 percent total return from the S&P 500, the 430 percent return from the industry benchmark Alerian MLP Index and the 193 percent gain from the S&P 500 Energy Index over the same time frame.

Duncan was also a true believer in the company he founded, holding more than 25 percent of Enterprise and more than 75 percent of Enterprise GP Holdings LP (NYSE: EPE), the general partner for Enterprise Products.  Investors could always take comfort in the fact that Dan Duncan steadily bought Enterprise units in good times and bad, aligning his interests with those of other holders.

Duncan made Enterprise the first MLP to cap its incentive distribution rights (IDR) at 25 percent, effectively giving public unitholders more distribution upside from the business and lowering the MLP’s cost of capital.

Quarterly distributions today are 150 percent higher than they were in the company’s first full quarter as a public MLP. In an era where so many managers have come under fire for excessive compensation packages, Duncan was one chairman who consistently and tirelessly generated value while profiting alongside his unitholders.

In particular, this unitholder will never forget Duncan’s performance during Enterprise Products’ conference call at the height of the financial crisis on Oct. 23, 2008. Duncan was a calming voice, pledging to invest the $50 million in distributions he received from Enterprise in the units and patiently reassuring analysts that Enterprise’s GP had plenty of cash on hand to fund the MLP’s needs, even amid the worst credit markets since the Great Depression.

Anyone who’s listened in on any one of Enterprise’s conference calls in recent years can attest that Duncan’s enthusiasm for and knowledge of the energy business hadn’t dimmed a bit in the 42 years since he founded the company.

Duncan will also be remembered for his contributions outside the energy business including a $50 million donation to the Texas Children’s Hospital in 2007 among other medicine-related causes.

The true hallmark of the best leaders and managers is that they surround themselves with a great team, just as Duncan has at Enterprise. The company’s CEO, Michael Creel, has been with the company since the late 1990s and has served as CEO of the general partner for nearly five years and of Enterprise for three. CFO Randy Fowler has been with Enterprise since 1999 and has served as CFO of the GP or Enterprise itself since 2005. Creel and the rest of the management team have vast experience in the industry and will continue the MLP’s existing strategy.

The MLP has also indicated that there’s no planned change on the company’s ownership or management structure. Duncan’s heirs are largely viewed as supportive of the MLP, and distributions from Duncan’s holdings are a solid source of ongoing income. It would not be in their interest to exit the units; given their large holdings, such a move would dilute the valuation they would receive.

Dan L. Duncan, an icon of the energy business and notable philanthropist, is dead at the age of 77. But our confidence in his legacy, Enterprise Product Partners, is undimmed.

Enterprise Products Partners LP remains among the best-positioned MLPs in the business and is a buy under 33. Duncan Energy Partners LP is a buy only on dips under 25.