7 Mar

ETP: The Highest Capital-Spending MLP

WRITTEN BY Kurt Gallon

Energy Transfer Partners’ capital expenditure

Energy Transfer Partners (ETP) expects its 2018 capital expenditure (capex) to reach ~$4.8 billion–$5.2 billion. At the midpoint, this represents a 15.2% decline compared to 2017.

Lower capital spending could be attributed to greater spending on its major projects, including the Rover Pipeline project, Mariner East 2, the Bakken Pipeline project, and the Lone Star fractionator in 2017. Despite the year-over-year (or YoY) fall, the partnership’s capital spending is the highest among the midstream companies.

ETP: The Highest Capital-Spending MLP

Where would ETP spend?

Energy Transfer Partners’ NGL and Refined Products Transportation and Services segment has the maximum allocations among the five major segments. The partnership expects to spend ~$2.4 billion–$2.5 billion on this segment. This includes spending on Mariner East 2, Lone Star Frac V and VI, and Mariner East 2X.

Midstream received the second-highest capital budget allocation. ETP expects to spend $750.0 million–$800.0 million on the expansion of midstream infrastructure. Intrastate transportation and storage, which is involved in the movement of natural gas within the state borders, saw the smallest capital contribution in 2018.

Energy Transfer Partners’ allocation of its capital budget indicates its focus toward its natural gas midstream and NGLs businesses. This in line with an expected rise in natural gas and NGLs demand both from domestic and international markets. The partnership is considering a new pipeline to move crude oil from the Permian region to Nederland, Texas.

Projects expected to come online in 2018

The partnership expects to place seven projects by the end of this year—Phase 2 of the Rover Pipeline, Phase 2 of the Bayou Bridge Pipeline, Mariner East 2, Revolution System, Rebel II Processing Plant, Red Bluff Pipeline, and Lone Star Frac V. Most of the partnership’s upcoming projects are focused in the prolific Marcellus and Permian Basins.

How ETP plans to fund 2018 capex

The partnership expects the proceeds from the sale of its compression business, the sale of the Sunoco LP (SUN) common unit, and internally generated cash flow to fund its 2018 capex. It doesn’t expect to issue equity in 2018, particularly in 1H18.

However, the partnership expects to access the debt and hybrid security markets to refinance its 2018 debt maturities. Hybrid securities include convertible and non-convertible preferred stocks.

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