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What Could Drive Energy Transfer Partners Upward?

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Mar. 21 2018, Updated 11:32 a.m. ET

Energy Transfer Partners’ recent performance

Energy Transfer Partners (ETP) and the midstream sector have been very weak in recent trading sessions. Energy Transfer Partners has lost 10.0% since the beginning of March. At the same time, the Alerian MLP ETF (AMLP) has lost 5.7%. Overall, Energy Transfer Partners has lost 8.6% since the beginning of 2018. Kinder Morgan (KMI) and Enterprise Products Partners (EPD) have lost 11.5% and 6.6% year-to-date.

Currently, Energy Transfer Partners is trading close to its 52-week low of $15.1. However, the partnership could rise due to a few recent events—the announcement of a new export terminal, a general recovery in the midstream sector, and approval of the partnership’s Bayou Bridge pipeline project.

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New export terminal

Recently, Energy Transfer Partners entered into a definitive agreement to form a joint venture with Satellite Petrochemical USA. The companies plan to construct a new export terminal on the Gulf Coast named “Orbit.” The export terminal would provide ethane to Satellite’s ethane cracker facility in China. Energy Transfer Partners plans to construct a 20-inch ethane pipeline to move NGLs (natural gas liquids) from its Mont Belvieu fractionators to the proposed export terminal.

As far as service agreements are concerned, the related press release said, “ETP will provide Satellite with approximately 150,000 barrels per day of ethane under a long-term, demand-based agreement. ETP will also provide storage and marketing services for Satellite.” The partnership expects to bring the export terminal online by the end of 4Q20. Enterprise Products Partners and ONEOK (OKE) are among the midstream companies that are bullish on NGLs’ growth story.

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FERC ruling

The recent FERC tax ruling added uncertainty in the MLP space. However, Energy Transfer Partners doesn’t expect the ruling to have a material impact on its earnings and cash flow. According to a press release from Energy Transfer Partners, “Many of ETP’s rates are set pursuant to negotiated rate arrangements or rate settlements that it believes would not be subject to adjustment, or would be limited in terms of adjustment. In addition, many of its current transportation services are provided at discounted rates that are below maximum tariff rates, many of which it believes would not be impacted by a change in the maximum tariff rate.”

In this series

In this series, we’ll discuss whether Energy Transfer Partners could regain upward momentum after the recent plunge. We’ll discuss Energy Transfer Partners’ technical indicators and price forecast. We’ll also discuss Energy Transfer Partners’ distribution yield and valuation as well as analysts’ recommendations.

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