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EPD, ETP, WPZ, and MMP: Analyzing Distributable Cash Flow Growth

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Why is distributable cash flow important?

Distributable cash flow is a commonly used measure of MLP performance. The metric is broadly calculated by subtracting interest, tax, and maintenance capital expenditures from EBITDA (earnings before interest, taxes, depreciation, and amortization). Unlike C-corps, MLPs distribute a substantial part of generated cash flow to investors. As distributions to investors come from distributable cash flows generated by an MLP, growth in this metric is considered a key factor when evaluating an MLP’s performance.

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The above graph compares the distributable cash flow for Enterprise Products Partners (EPD), Energy Transfer Partners (ETP), Magellan Midstream Partners (MMP), and Williams Partners (WPZ) for 2Q17 with 2Q16. The right axis shows the YoY (year-over-year) growth in distributable cash flow for the four MLPs. Excluding Williams Partners, the other three MLPs recorded positive YoY growth in distributable cash flow in 2Q17.

Among the four MLPs, Energy Transfer Partners’ distributable cash flow grew the most in 2Q17 over 2Q16. Its distributable cash flow rose 21.5% YoY. MMP followed ETP with 13.2% YoY growth.

Energy Transfer Partners’ distributable cash flow

Energy Transfer Partners’ distributable cash flow rose 21.5% YoY to $990 million in 2Q17 compared to $815 million in 2Q16. The YoY growth in ETP’s 2Q17 distributable cash flow was mainly due to EBITDA growth during the quarter. ETP’s 2Q17 EBITDA growth was driven by strong performance at its Midstream and Crude Oil Transportation and services segments. Learn more in Which Segment Drove Energy Transfer Partners’ 2Q17 Performance.

ETP’s distributable cash flow for 2Q17 and 2Q16 in the chart above reflect the pro forma impacts of the merger with Sunoco Logistics as if the merger had occurred on January 1, 2016. The merger was completed on April 28, 2017.

Williams Partners’ distributable cash flow

Williams Partners’ distributable cash flow fell 5.3% YoY to $698 million in 2Q17, compared to $737 million in 2Q16. The 2Q17 distributable cash flow “has been reduced by $58 million for the planned removal of non-cash deferred revenue amortization associated with the fourth-quarter 2016 contract restructuring in the Barnett Shale and Mid-Continent region.” Learn more in Analyzing 2Q17 Results: Williams Companies and Williams Partners.

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