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Why Energy Transfer Equity Is among the Best Performing MLPs


Sep. 17 2015, Published 5:34 p.m. ET

Total return performance

In the midst of a sell-off in energy securities, including relatively safer MLPs, Energy Transfer Equity (ETE) is one of the few MLPs that stands out in terms of the total return performance. In this series, we’ll analyze the factors that have driven Energy Transfer Equity’s solid performance. We’ll look at Wall Street analysts’ recommendations for the MLP. First, let’s analyze its YTD (year-to-date) total return performance.

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Peer comparison

YTD, Energy Transfer Equity has outperformed the Alerian MLP ETF (AMLP), comprised of 23 midstream MLPs, by 9.81 percentage points. Energy Transfer Equity mostly stayed positive during the recent turmoil in the energy sector. It has returned -4.02% YTD. AMLP has returned -13.8% YTD. Energy Transfer Equity lost considerable equity value since the rejection of its merger proposal with Williams Companies (WMB).

Energy Transfer Equity’s subsidiaries, Energy Transfer Partners (ETP) and Sunoco Logistics (SXL), have returned -22.40% and -20% despite their recent solid operating performance and strong distribution growth. Energy Transfer Partners and Sunoco Logistics’ underperformance can be attributed to the general negative sentiment prevailing in the energy sector.

ETE peers, Williams Companies and Enbridge (ENB) are structured as c-corps. They have returned 5.88% YTD and -20.70% YTD. Williams Companies and Enbridge hold a general partner interest in Williams Partners (WPZ) and Enbridge Energy Partners (EEP), respectively. Energy Transfer Partners, Energy Transfer Equity, Williams Partners, Enbridge Energy Partners, and Sunoco Logistics are among the 23 holdings of the Global X MLP ETF (MLPA). Together, they account for ~31.27% of the ETF.

About Energy Transfer Equity

Energy Transfer Equity is one of the largest MLPs in the US. The partnership is a pure play GP (general partner) with very few business assets. It receives cash flows from the following LP (limited partner), GP, and IDRs (Incentive Distribution Rights) interests in its subsidiaries.

  • Energy Transfer Partners – ~1% LP interest, 100% of GP interest, and IDRs
  • Sunoco Logistics Partners – 90% of GP and IDR through ownership of class H units in Energy Transfer Partners
  • Sunoco LP (SUN) – 100% GP and IDRs. This reflects Energy Transfer Partners and Energy Transfer Equity’s transaction for Sunoco Logistics’ GP and IDR Exchange.
  • 100% interest in Energy Transfer LNG

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