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What to Expect from ETP and ETE in 3Q17

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What to Expect from ETP and ETE in 3Q17 PART 1 OF 8

What Could Drive Energy Transfer Partners’ 3Q17 EBITDA Growth?

ETE’s 3Q17 EBITDA estimates

Energy Transfer Equity (ETE) and its midstream MLP (master limited partnership) subsidiaries, Energy Transfer Partners (ETP) and Sunoco LP (SUN), are scheduled to release their 3Q17 earnings on November 7, 2017.

In this series, we’ll talk about their 3Q estimates, segment-wise performance drivers, throughput volumes, 3Q17 distribution, market performance, technical indicators, and analyst recommendations.

What Could Drive Energy Transfer Partners’ 3Q17 EBITDA Growth?

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Peers Kinder Morgan (KMI) and MPLX LP (MPLX) have already reported their 3Q17 numbers. (For details, read Kinder Morgan’s 3Q17 Results Met Analysts’ Expectations and MPLX Posted Strong 3Q17 Results, Distributions Rose 4%.)

The Wall Street analysts’ 3Q17 consensus EBITDA (earnings before interest, tax, depreciation, and amortization) estimate for ETP is ~$1.6 billion. ETP’s 3Q17 estimate is 14.1% higher than its 3Q16 adjusted EBITDA and 0.8% lower than its 2Q17 adjusted EBITDA.

ETP’s 3Q17 EBITDA drivers

Energy Transfer Partners’ 3Q17 YoY (year-over-year) EBITDA growth is expected to be driven by the following factors:

  • strong natural gas and crude oil throughput volumes in the Permian region
  • higher processing and fractionation margins due to higher average crude oil prices, with average crude oil prices reaching $48.2 per barrel in 3Q17, compared with $44.9 per barrel in 3Q16 (a YoY rise of 7.3%)
  • higher Pipeline exports to Mexico
  • contribution from the Bakken Pipeline project, which came online in 2Q17
  • higher fractionation volumes, driven by the ramp-up of Lone Star’s fractionator at Mont Belvieu

The above rise could be offset by the following:

  • lower gathering and processing throughput volumes from the Eagle Ford and Barnett Shale regions, where ETP has an active presence
  • lower natural gas transportation and sales volumes due to lower demand

ETP’s adjusted EBITDA versus consensus estimates

The 2Q17 EBITDA estimate for ETP was ~$1.5 billion while the adjusted EBITDA was ~$1.6 billion—a 9.8% beat—but we’ll have to wait for its 3Q17 earnings release to see whether ETP beats or misses its 3Q17 EBITDA estimates. We’ll cover this release in a post-earnings series on ETP after it reports its 3Q17 results.

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