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Energy Transfer Partners Beats Analyst Estimates Yet Again

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ETP beats analyst estimates

Energy Transfer Partners (ETP) and its GP (general partner), Energy Transfer Equity (ETE), announced their 1Q18 earnings after markets closed on May 9. Energy Transfer Partners continued to surprise Wall Street with its fourth consecutive quarterly earnings beat. Energy Transfer Partners posted adjusted EBITDA of $1,881 million in 1Q18, which was 1.4% above expectations.

ETP’s 1Q18 EBITDA represented a YoY (year-over-year) increase of 30.0%. Expansion projects, higher non-fee margins, strong Permian throughput volumes, and higher realized natural gas sales were some of the factors that positively impacted ETP’s operating performance in 1Q18. The above positives were offset by higher operation and maintenance expenses and a decline in throughput volumes along some pipeline systems.

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The partnership’s YoY EBITDA growth is significantly higher than the industry median and that of most of its peers. ETP peers Enterprise Products Partners (EPD) and ONEOK (OKE) saw YoY adjusted EBITDA growth of 19% and 24%, respectively. For more on EPD’s and OKE’s 1Q18 earnings drivers, read Enterprise Products’ Distributable Cash Flow Rose 23% in 1Q18 and ONEOK’s 1Q18 Earnings Rose 24% due to Higher Volumes.

ETP’s and ETE’s distributable cash flows

Energy Transfer Partners’ distributable cash flows rose to $1.2 billion in 1Q18 compared to $938 million in 1Q17, a YoY increase of 29.4%. ETP’s huge YoY distributable cash flows growth was mainly driven by strong EBITDA growth. ETP’s distribution coverage has fallen YoY despite strong EBITDA growth due to significant equity issuance over the past one year.

On the other hand, Energy Transfer Equity, which is dependent on its subsidiaries for distribution income, saw a significant improvement in distribution coverage supported by strong distributable cash flow growth. ETE reported distributable cash flows of $395 million in 1Q18 compared to $215 million in 1Q17, a YoY increase of 83.7%. This rise was mainly driven by the removal of IDR subsidies and equity issuance at ETP.

How the market reacted

Energy Transfer Partners fell 1.8% in after-hours trading. ETP and ETE ended 0.3% and 0.7% higher on May 9, respectively. At the same time, the Alerian MLP ETF (AMLP) rose 0.6%. We’ll have to wait and see how ETP opens on Thursday. The market might also look for cues from the earnings call, which is scheduled for today.

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