What Troubled Energy Transfer Equity and Its Subsidiaries in 3Q16?



Dakota Access Pipeline protest

Energy Transfer Partners’ (ETP) and Sunoco Logistics Partners’ (SXL) Dakota Access Pipeline project faced some delays due to protests from native communities and environmentalists in 3Q16. The construction of the project has resumed, but the protest is still on. The Dakota Access Pipeline, which is part of the Bakken Pipeline project, is expected to carry 470,000 barrels per day of crude oil from the Bakken Shale in North Dakota to Illinois. The barrels would then move to the Gulf Coast through a different pipeline. Energy Transfer Partners and Sunoco Logistics Partners together own 38.3% of the project.

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The successful and timely completion of this project and other organic projects is important for Energy Transfer Equity (ETE) and its subsidiaries if they are to keep growing its cash flows and reduce leverage. High leverage remains a major concern for ETE and its subsidiaries. ETE’s peers Kinder Morgan (KMI) and Williams Companies (WMB) are facing a similar or a slightly worse leverage situation. For more details, read ETE, EPD, KMI, and WMB: A Leverage Comparison.

Energy Transfer Equity’s outstanding debt

Energy Transfer Equity and its subsidiaries had $39.5 billion of total outstanding debt at the end of 2Q16. This includes $28.9 billion of long-term debt on Energy Transfer Partners’ balance sheet.

Energy Transfer Equity’s net debt to EBITDA

Energy Transfer Equity’s net debt to EBITDA was 6.6x at the end of the second quarter. The multiple is still quite high compared to industry standards. MLPs generally target a ratio between 4.0x to 4.5x. The leverage situation might not improve much in 3Q16, as its major organic projects are expected to come online in 4Q16 and 2017.

Moreover, ETP is still left with “$1.25 billion of own balance sheet capital funding needs” for the second half of 2016 after project financing of the Bakken project. The partnership is expecting to use the ATM (at the market) equity program and undrawn balances under the credit facility to fund the remaining 2016 growth capital.


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