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ETP’s Coverage Fall Might Delay Distribution Growth Resumption

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Energy Transfer Partners’ distribution growth

Energy Transfer Partners (ETP) declared a distribution of ~$1.1 per unit for 3Q16. This represents flat distribution as compared to the previous quarter and the same quarter one year previously, due to high leverage and low coverage.

On ETP’s distribution growth resumption, Kelcy Warren, ETP’s Chief Executive Officer, said in the company’s 2Q16 earnings call that “it’s our intention that ETP should not be hanging around the one coverage ratio” but that it should be “hanging around a 1.1 to 1.15 coverage ratio going forward.”

Warren also stated: “Now, that’s not to get anybody depressed that we don’t have an aggressive distribution strategy. We do, but I think our number one focus right now is to get ETP into that healthy zone of coverage. And then, we will resume distribution increases.”

The partnership’s distribution coverage fall in 3Q16 is expected to further delay its distribution growth resumption.

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Energy Transfer Equity’s distribution growth

Energy Transfer Equity (ETE) declared a distribution of ~$0.29 per unit for 3Q16. ETE’s distribution has also remained flat for the past four quarters, despite an impressive distribution coverage.

ETE’s coverage ratio improved in 3Q16 despite the IDRs (incentive distribution rights) reduction to its subsidiaries. This was mainly driven by higher distribution income from Sunoco Logistics Partners (SXL) and Sunoco LP (SUN).

Sunoco Logistics Partners’ distribution growth

Sunoco Logistics Partners’ distribution has continued to grow for 46 consecutive quarters. SXL declared a distribution of $0.51 per common unit for the second quarter of 2016, which represents an 11.0% YoY rise over 3Q15 and a sequential rise of 2.0%.

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