Why Energy Transfer Partners’ Stock Plunged after 4Q15 Results



Energy Transfer Partners’ stock price reaction

The shares of Energy Transfer Partners (ETP) and Energy Transfer Equity (ETE) fell 8.7% and 5.2%, respectively, on Thursday following their 4Q15 earnings release. At the same time, the Alerian MLP ETF (AMLP), which comprises 22 midstream energy MLPs, fell 0.71%.

ETP’s huge fall could be attributed to its weak 4Q15 operating results, which included a decline in adjusted EBITDA (earnings before interest, tax, depreciation, and amortization), weak distribution coverage, and a decline in throughput volumes at some of its assets. The partnership’s 4Q15 distribution coverage should lie between 0.8x and 0.9x if the distributable cash flow is adjusted for the one-time tax benefit.

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Energy Transfer Partners’ 4Q15 distribution 

Energy Transfer Partners kept its 4Q15 distributions flat compared to the previous quarter. ETP declared a distribution of $1.1 per unit for 4Q15. This represents a ~6.0% YoY increase over 4Q14. At the same time, ETE declared a distribution of $0.29 per unit for 4Q15. This represents a ~26.7% YoY increase over 4Q14. ETE forms 0.52% of the Guggenheim Raymond James SB-1 Equity ETF (RYJ).

Based on recent distributions, ETP is trading at a massive distribution yield of 15.5%. ETP’s peers Williams Partners (WPZ), EnLink Midstream Partners (ENLK), and DCP Midstream Partners (DPM) are trading at distribution yields of 17.6%, 18.4%, and 18.3%, respectively.

Regarding flat distributions, Thomas E. Long, ETP’s chief financial officer, said, “This is a time when coverage and liquidity are valued more by the equity markets and rating agencies than distribution growth. We will continue to evaluate our distribution on a quarterly basis and will be prudent as it relates to balancing coverage and liquidity with distribution growth.”

Energy Transfer Partners’ 2016 capital plans

According to a recent press release, Energy Transfer Partners decided to lower its 2016 capital program by $750 million to $4.2 billion compared to the previous guidance of $5.0 billion.

In the next part of this series, we’ll see how analysts rate Energy Transfer Equity and Energy Transfer Partners.


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