25 Sep

Energy Transfer Partners: Largest Capital Budget of US Midstreams

WRITTEN BY Kurt Gallon

Series overview

The US shale boom has resulted in exponential crude oil, natural gas, and NGL (natural gas liquids) growth. This unprecedented growth would not have been possible without the huge growth in the US energy infrastructure. US midstream companies have invested heavily in building midstream infrastructures, including pipelines, storage facilities, processing facilities, and fractionation plants from the start of the shale boom. However, in 2016, they saw a massive cut in capital spending due to the significant weakness in commodity prices. Midstream companies’ capital spending picked up in 2017 due to ongoing projects, the postponement of 2016 capital spending, and the addition of new projects driven by the recent recovery in drilling activity.

Energy Transfer Partners: Largest Capital Budget of US Midstreams

Below are the top five US midstream companies with the largest capital spending budgets for 2017:

  • Energy Transfer Partners (ETP)
  • Enterprise Products Partners (EPD)
  • Kinder Morgan (KMI)
  • Williams Partners (WPZ)

In this series, we’ll look at the capital spending plans for these companies, their balance sheet positions, and distribution (or dividend) growth guidance. Let’s start with Energy Transfer Partners.

Energy Transfer Partners’ capital expenditure

Energy Transfer Partners’ capital expenditure fell to $1.0 billion in 2016 compared to $2.7 billion in the previous year, a YoY (year-over-year) fall of 27.8%. The decline could be mainly attributed to project delays, stake sales in some of its major projects, and lower capital spending amid the challenging energy price environment.

ETP’s capital spending in 2017 is expected to be the highest in recent years. It expects to spend $3.9 billion on capital expenditure funding by the end of 2017. That’s net of the $1.0 billion in asset level financing. ETP spent ~$1.7 billion on growth projects and maintenance, net of asset level financing, during the first half of 2017. That leaves $2.2 billion to be spent in the second half of the year. ETP’s capital budget for the remainder of 2017 would be allocated mostly to the Rover Pipeline, the Revolution Project, Mariner East 2, Bayou Bridge Phase 2, and other natural gas midstream projects. ETP recently received an FERC (Federal Energy Regulatory Commission) approval for phase 1 of the Rover project.

In the next part, we’ll look at Energy Transfer Partners’ balance sheet position.

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