How DAPL Environmental Study Could Impact Energy Transfer

ETP, ETE, and SXL stocks plunged

Stocks of the Energy Transfer group companies, those involved directly or indirectly in the DAPL project, fell following the announcement of the environmental study of DAPL. Energy Transfer Partners (ETP), Sunoco Logistics Partners (SXL), and Energy Transfer Equity (ETE) fell 3.0%, 2.8%, and 2.9%, respectively. At the same time, the Alerian MLP ETF (AMLP), which comprises of 25 midstream energy MLPs, was down 0.6%. ETP and SXL are among the top ten holdings of AMLP.

How DAPL Environmental Study Could Impact Energy Transfer

ETP and SXL, which together own 75% of the project, have already lost ~14% and ~23% of their market value since the beginning of the protest. Phillips 66 (PSX) owns the remaining 25%.

EIS adds to delays

The EIS (Environmental Impact Study) would further delay the DAPL project, resulting in higher losses to stakeholders. According to industry sources, the delays had already cost Energy Transfer $450 million. The project was in an advanced stage, and the majority of the pipeline has been laid. Only the section near the Missouri River remained to be drilled.

DAPL is an important project for Energy Transfer Equity and its subsidiaries to grow their distributable cash flows and resume distribution growth. ETE’s earnings are dependent upon distribution income from its subsidiaries.

Stake sale deal

Energy Transfer Partners and Sunoco Logistics Partners announced a 36.8% stake sale in the Bakken Pipeline Project to MarEn Bakken Company, an entity jointly owned by Enbridge Energy Partners (EEP) and Marathon Petroleum (MPC), in August 2016 for $2 billion. The deal couldn’t close until now due to the DAPL protest, and more delays will most likely scuttle the deal. The proceeds from the transaction were to be used for debt repayment.

Analyst recommendations for ETE, ETP, and SXL

Energy Transfer Partners, Energy Transfer Equity, and Sunoco Logistics Partners have “buy” ratings from 74%, 58%, and 60% of analysts, respectively. For details on recent rating changes for Energy Transfer Group, read Master Limited Partnerships: Last Week’s Ratings Update.