The Dakota Access Pipeline and #NoDAPL: Market Impact

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The Dakota Access Pipeline and #NoDAPL: Market Impact PART 1 OF 2

Rerouting the Dakota Access Pipeline? Impact on Energy Transfer

Obama says the DAPL could be re-routed

President Obama spoke for the first time about the DAPL (Dakota Access Pipeline) protest in an interview with Now This News. He said “My view is that there is a way for us to accommodate sacred lands of Native Americans. And I think that right now the Army Corps is examining whether there are ways to reroute this pipeline. We’re going to let it play out for several more weeks and determine whether or not this can be resolved in a way that I think is properly attentive to the traditions of First Americans.”

In this article, we’ll look at the possible impact of re-routing the pipeline for Energy Transfer Partners (ETP) and other stakeholders.

Rerouting the Dakota Access Pipeline? Impact on Energy Transfer

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Increased project costs

If there’s no alternative left with the Army Corps of Engineers other than re-routing the pipeline, then it would most likely increase the cost of the project since it’s in its advanced stage and the majority of the pipeline has been laid. This decision would increase the capital burden for Energy Transfer and other stakeholders. Energy Transfer Partners was still left with “$1.25 billion of own balance sheet capital funding needs” for the second half of 2016 after financing of the Bakken Pipeline project.

Extended timeline

Rerouting the DAPL is likely to extend the project timeline. The timely completion of DAPL project is very important for Energy Transfer to keep growing its cash flows and reduce leverage. High leverage remains a major concern for ETP. Energy Transfer is expecting to complete the project by the end of the fourth quarter of 2016.

Market performance

Rerouting would eventually impact Energy Transfer Partners’ market performance. Energy Transfer Partners has already lost ~15% of its market value since the beginning of the protest. Sunoco Logistics Partners (SXL), which also owns a stake in the Bakken project, has lost ~16% of its market value during the same timeframe. Energy Transfer Equity (ETE), which depends on ETP and SXL for distribution income, has lost ~19%.

At the same time, the Alerian MLP ETF (AMLP) and the SPDR S&P 500 ETF (SPY) have fallen ~3.0% and ~7.0%


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