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Why Energy Transfer Partners’ YTD Total Returns Are Below Par

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Total returns

Energy Transfer Partners (ETP) is expected to release its 2Q15 earnings on August 6, 2015. In this series we’ll talk about ETP’s 2Q15 estimates, its segments’ contributions to earnings, 2Q15 distribution growth, and analyst recommendations. But first, let’s analyze ETP’s year-to-date (or YTD) total return performance.

ETP has generated a total return of -17.61% since the start of 2015. During the same timeframe, ETP’s general partner, Energy Transfer Equity (ETE), has returned 6.82%. ETP subsidiary Sunoco Logistics (SXL) returned -10.72%. ETP peers Enterprise Product Partners (EPD) and Enbridge Energy Partners (EEP) have returned -17.75% and -18.18% year-to-date, respectively.

ETP underperformed the Alerian MLP ETF (AMLP), which comprises 25 midstream energy MLPs, by 8.67 percentage points. AMLP returned -8.94% over this timeframe. Together, ETP, SXL, EPD, and EEP account for ~26.99% of AMLP.

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Performance drivers

ETP’s subdued YTD performance can be attributed to the weakness in energy prices affecting some of its business operations, including natural gas processing, retail marketing of refined products, natural gas and NGLs (natural gas liquids) sale, and crude oil acquisition and marketing. We will discuss ETP’s segment commodity price exposure in a later article.

On the other hand, ETE’s total YTD returns have been fairly stable, as its earnings are dependent upon distributions through its limited partner interest, general partner interest, and IDRs (incentive distribution rights) in its subsidiaries.

About Energy Transfer Partners

Energy Transfer Partners is a midstream energy infrastructure MLP. As a midstream company, ETP mainly provides the following services:

  • natural gas transportation and storage
  • transportation, storage, and fractionation services of NGLs
  • product and crude oil transportation, terminaling, acquisition, and marketing activities
  • retail marketing of gasoline

In the next article, we’ll look into ETP’s 2Q15 revenue estimates.

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