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Energy Transfer Partners Merged with Sunoco Logistics: Now What?

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Part 3
Energy Transfer Partners Merged with Sunoco Logistics: Now What? PART 3 OF 9

Analyzing Energy Transfer Partners’ Cash Flow

Cash flow

Energy Transfer Partners’ (ETP) pro forma DCF (distributable cash flow) for 1Q17 was $934.0 million compared to $956.0 million during 1Q16—a YoY decline of 2.3%. The decline was reportedly due to the impact of LIFO (last in first out) accounting in legacy Sunoco Logistics’ crude oil acquisition and marketing business. The partnership expects the decline to reverse in future periods.

There was also a decline in Energy Transfer Partners’ pro forma distribution coverage ratio. However, it’s still greater than one due to distribution savings resulting from Energy Transfer Partners’ merger with Sunoco Logistics Partners. The partnership’s pro forma coverage ratio stood at 1.13x.

Analyzing Energy Transfer Partners’ Cash Flow

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Distribution growth

Pro forma, Energy Transfer Partners declared a distribution of $0.54 per common unit for 1Q17. According to the related press release, “this quarterly distribution is equivalent to $0.8025 per ETP common unit on a pre-merger basis.” For legacy Energy Transfer Partners unitholders, it represents a quarter-over-quarter decline of 23.9%. Williams Companies (WMB) and its MLP subsidiary, Williams Partners (WPZ), also announced distribution cuts in recent quarters to de-lever their balance sheet.

After the merger, Energy Transfer Partners expects to grow its distribution in the low double digits and maintain a distribution coverage greater than one. The growth is expected to be driven by merger synergies, distribution savings, and EBITDA growth.

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