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Understanding Energy Transfer’s Increased Fractionation Capacity

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Feb. 27 2017, Updated 7:37 a.m. ET

Energy Transfer announces 5th fractionator

Energy Transfer Partners’ (ETP) subsidiary, Lone Star NGL, announced the construction of a fifth fractionator at Mont Belvieu on the day following its 4Q16 earnings release.

According to the related press release, “the 120,000 barrel per day fractionator is fully subscribed under multiple long-term, fixed-fee contracts and is scheduled to be operational by September of 2018.”

ETP’s total fractionation capacity would be 540,000 barrels per day at Mont Belvieu following the completion of the fifth fractionator.

According to Energy Transfer, “Fractionator V is a result of the tremendous production growth in the Delaware and Permian Basins.” ONEOK Partners (OKS) and Western Gas Partners (WES) are among the midstream companies that provide fractionation services.

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Energy Transfer’s market performance

Energy Transfer Partners’ and Energy Transfer Equity’ (ETE) opened 1.5% and 2.4% higher in early hours of trading, following the announcement. Both Energy Transfer Partners and Sunoco Logistics Partners have risen ~6.2% since the beginning of 2017 through February 22, 2017, while ETE has fallen 2.0%.

During the same period, the Alerian MLP ETF (AMLP) has gained 2.9%. ETP’s and SXL’s gains could be mainly attributed to the removal of blockade for few major organic projects including DAPL (Dakota Access Pipeline) and Mariner East 2.

The Dakota Access Pipeline

Energy Transfer Partners has now resumed construction of Dakota Access Pipeline project, after the Trump administration ordered the Army Corps of Engineers to remove the local Native American tribes and environmentalist protestors from the area where the work had previously stopped. It expects to bring the pipeline online by the end of second quarter of 2017.

Energy Transfer recently completed the pending project financing of the Bakken Pipeline project and 37.5% stake sale to MarEn Bakken Company after the receiving the go-ahead. Notably, MarEn is a joint venture formed by Enbridge Energy Partners (EEP) and MPLX LP (MPLX).

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