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What’s Next for Energy Transfer Partners?


Nov. 20 2020, Updated 12:10 p.m. ET

Energy Transfer Partners’ yield

Energy Transfer Partners (ETP) mainly provides natural gas midstream services including transportation and storage. It also provides NGL (natural gas liquids) transportation, storage, and fractionation services. After the merger with Sunoco Logistics, ETP is now also involved in crude oil and refined products transportation, terminalling, and marketing. Despite being the second-largest MLP by market capitalization, the company’s yield of 11.7% puts it on the list of top ten highest-yielding MLPs.

In comparison, Enterprise Products Partners (EPD) and Magellan Midstream Partners (MMP) are trading at yields of ~6.7% and 5.4%, respectively. Williams Partners (WPZ) is trading at a yield of ~6.4%.

Learn how Energy Transfer Partners’ performance compares with MLP giants in In-Depth Analysis of the Top 4 MLPs: EPD, ETP, WPZ, and MMP.

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Distribution growth

The above graph shows Energy Transfer Partners’ quarterly distributions over the last ten quarters. ETP increased its 2Q17 distributions by 2.8% compared to the previous quarter. Notably, ETP’s per-unit distribution was effectively reduced by ~24% in 1Q17 because of its merger with Sunoco Logistics. So, its 2Q17 distribution is lower than the ~$1.06 per unit that Energy Transfer Partners offered before the merger. Despite the cut, ETP’s yield remains high. The drop in the company’s stock price also pushed its yield higher.

Energy Transfer Partners’ distribution coverage ratio for 2Q17 stood at ~1.2x. It has a debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio of ~5x.

Year-to-date performance

Energy Transfer Partners is down nearly 22% year-to-date. The company initiated a public offering of 54 million units in August to repay debt and fund capital projects. ETP’s high leverage remains a key investor concern.

In the next part, we’ll discuss the two compression services MLPs, USA Compression Partners (USAC) and CSI Compressco (CCLP), that are among the top ten highest-yielding MLPs that we are analyzing in this series.


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