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Energy Transfer Partners’ Key Segments to Watch in 1Q15

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Liquids Transportation and Services segment

In the last part of this series, we discussed Energy Transfer Partners’ (ETP) earnings and revenue estimates. In this part of the series, we’ll look at the segments that are expected to drive Energy Transfer Partners’ earnings growth in the next quarter.

The Liquids Transportation and Storage segment was Energy Transfer Partners’ best performing segment in the last quarter. It’s expected to perform well in the coming quarters. The segment is involved in the transportation, storage, and fractionation of NGLs (natural gas liquids). The segment’s performance is mostly driven by an increase in transportation and storage fees—due to an increase in transportation and storage volumes.

NGLs’ transportation volumes would benefit from the construction of a third fractionator at Mont Belvieu. With its completion, the total fractionation capacity is expected to reach 300,000 bpd (barrels per day).

The segment’s liquid storage operations are expected to benefit from the current contango in NGLs. “Contango” is a situation where the future prices are higher than the expected spot prices. The consumer would generally like to store NGLs until their prices increase.

Other players operating in this segment include MarkWest Energy Partners (MWE), Targa Resources Partners (NGLS), and DCP Midstream Partners (DPM). All of these are part of the Alerian MLP ETF (AMLP). Together, they account for ~15.1% of AMLP.

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Retail Marketing and Distribution segment

The Retail Marketing and Distribution segment is involved in the retail sales and wholesale distribution of refined products like gasoline, middle distillates, and other fuels. The segment delivered a solid performance in the last quarter. The performance was driven by an improvement in retail margins due to declining crude oil prices. The retail margins are expected to stay intact in the coming quarters. Commodity prices are expected to stay low.

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