Dan Duncan
Editor's note: This profile is part of Hart Energy's 50th anniversary Hall of Fame series honoring industry pioneers of the past 50 years and the Agents of Change (ACEs) who are leading the energy sector into the future.
Summertime, mid-1970s. A petrochemical company faces a sudden disruption in its supply of propane, a key raw material in one of its manufacturing processes. Suppliers, sensing opportunity, start calculating how much they will charge the company while it’s vulnerable.
Dan Duncan, also sensing opportunity, offers to loan the company his propane for free. Free. To a company that is not even a customer. All Duncan asks is that the same amount of propane be returned before the winter heating season begins. There is pushback from his staff, but Duncan makes the call. Enterprise pulls the propane out of storage, transports it over, later transports propane back.
“Needless to say, it really helped the company build great goodwill,” Craig Murray, a longtime friend and business associate of Duncan’s, told Hart Energy. “And guess what? They became a customer.”
It was a not just a savvy business move. Duncan (1933-2010) understood what it was like to be in a tough spot and need somebody to give him a break. When he was 7, his brother, Joe, and his mother both died within a span of three months. His father was away for long periods as an oil pipeline worker. Growing up in the East Texas town of Center, near the Louisiana border, he and his grandmother got by on government assistance of about $35 a month.
After serving in the Army, he headed to college and then to the oil fields to work as a roughneck and learn the industry. In 1968, Duncan and two partners founded Enterprise Products with $10,000 and two propane delivery trucks. Next came construction of a fractionator at Mont Belvieu and soon a small midstream company began its trek toward midstream powerhouse. Full-year revenue in 2022 totaled $58 billion.
“When I started out in business, I continued to follow my grandmother’s guiding principle of ‘do the best you can every day,’” Duncan said in a speech to the United Way in 2006. “I was in hopes this would cause others to want to do business with me when they saw that I could do a good job for them, that I was honest and ethical and that I cared about the relationship with them.”
Fortunately for him and his company, he added, it worked.
“Dan stressed the need to hire talented employees with a good work ethic, honesty and integrity,” said Murray, an attorney who met Duncan while representing a bank that did business with Enterprise. He worked with Enterprise while at Vinson & Elkins, then joined the company as group senior vice president and general counsel in 2014. “He let them see how hard he and other executives worked and stressed to them his business principles and philosophies.”
Duncan took Enterprise public in 1998 as an MLP but in 2002 eliminated the general partner’s 50% incentive distribution rights (IDRs), a move that continues to benefit the company.
“Morgan Stanley called this a ‘landmark action’ in the industry,” said Enterprise co-CEO Randy Fowler. Duncan’s approach reduced the long-term cost of equity capital. This resulted in more cash flow being available to reinvest in the business, and rewarded all limited partners with durable distribution growth, he said.
“This one action was probably the most significant factor in enabling EPD to avoid the season of distribution/dividend cuts and financial restructuring that most of EPD’s midstream peers with 50% IDRs had to endure from 2013 to 2020, and has enabled EPD to become one of the distribution/dividend aristocrats with 25 consecutive years of distribution growth,” Fowler said. “In 2002, he prognosticated that the midstream MLPs with 50% IDRs would one day ‘hit a wall.’ He was right.”
It was Duncan again taking a different approach, seeing value where others could not.