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Which Segment Could Drive Energy Transfer Partners’ 2Q15 Show?

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Midstream segment

Energy Transfer Partners’ (ETP) Midstream segment became its largest business segment after the completion of its merger with Regency Energy Partners (RGP) merger in April 2015. In 1Q15, this segment alone accounted for 23.2% of the company’s total pro forma—which assumes the merger was completed in January 2014—adjusted EBITDA (earnings before interest, tax, depreciation, and amortization). The Midstream segment mainly provides natural gas gathering and processing services.

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The segment’s 1Q15 actual adjusted EBITDA increased by 21.4% YoY (year-over-year) versus 1Q14. This trend may continue in 2Q15, driven by higher gathering and processing fee-based revenues, as the throughput volumes ramp up following the ETP–RGP merger completion. The segment’s performance might be offset by a decline in non-fee-based revenues resulting from low natural gas and NGL (natural gas liquid) prices.

Targa Resource Partners (NGLS), DCP Midstream Partners (DPM), Enable Midstream (ENBL), and Crestwood Midstream Partners (CMLP) are among the midstream companies that also have exposure to natural gas and NGL prices. Together, ETP, NGLS, DPM, and CMLP account for ~16.07% of the Alerian MLP ETF (AMLP).

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Interstate and Intrastate Transportation segments

Energy Transfer Partners’ Interstate and Intrastate Transportation segments are involved in natural gas transportation, storage, and sales. These segments may be negatively impacted by low natural gas prices and lower throughput volumes during the warmer weather months in 2Q15.

Liquids Transpiration and Services

ETP’s Liquids Transpiration and Services segment, which provides NGL transportation and fractionation services, grew by 29.7% YoY in 1Q15 over 1Q14. The trend might continue in 2Q15 as fractionation and transportation volumes continue to grow, driven by the ramp-up of Lone Star’s fractionators at Mont Belvieu. Lone Star is a subsidiary of ETP that provides NGL transportation, storage, and fractionation services.

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Retail Marketing

Retail Marketing, which provides retail marketing of gasoline and other distillates, grew by 18.3% YoY in 1Q15. However, the segment might be negatively impacted due to a decline in gasoline prices driven by excess supply.

Investment in Sunoco Logistics segment

Energy Transfer Partners’ Investment in Sunoco Logistics segment, which represents Sunoco Logistics’ (SXL) energy logistics business, grew by 6.3% YoY in 1Q15. This segment has little exposure to commodity prices and may continue to grow as throughput volumes increase.

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