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Understanding MLP Earnings Growth in 2Q17: ETE, WMB, PAGP, and WGP

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Sep. 22 2017, Updated 10:03 a.m. ET

Net income

Energy Transfer Equity’s (ETE) net income fell to $212 million in 2Q17, compared with $241 million in 2Q16, representing a 12.0% YoY (year-over-year) fall. This was mainly due to a reduction in distribution income resulting from IDR (incentive distribution rights) subsidies to Energy Transfer Partners (ETP).

Western Gas Equity Partners (WGP) saw an 18.1% YoY increase in its earnings during 2Q17, while Williams Companies (WMB) reported a net profit of $81.0 million in 2Q17, compared with a net loss of -$405.0 million in 2Q16. WMB’s 2Q16 earnings were impacted by impairment charges.

Plains GP Holdings (PAGP), which holds a majority interest in Plains All American Pipeline (PAA), posted a 39% YoY net profit growth in 2Q17.

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Distributable cash flows

Energy Transfer Equity’s 2Q17 distributable cash flow fell to $240 million from $276 million in 2Q16, representing a YoY (year-over-year) decline of 13.0%, mainly due to IDR subsidies. This resulted in a significant decline in the partnership’s distribution coverage ratio.

ETE’s 2Q17 distribution coverage came in at 0.96x, compared with 1.15x in 2Q16. The partnership’s distribution coverage could continue to decline until 4Q17. WGP and PAGP also posted positive distributable cash flow growth in 2Q17.

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