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Energy Transfer Partners: Possible Earnings Drivers in 1Q18

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May. 2 2018, Published 1:00 p.m. ET

1Q18 EBITDA estimates

Energy Transfer Equity (ETE) and its midstream MLP subsidiaries Energy Transfer Partners (ETP) and Sunoco (SUN) are scheduled to report their 1Q18 earnings on May 9.

Wall Street analysts’ 1Q18 consensus EBITDA (earnings before interest, tax, depreciation, and amortization) estimate for ETP is $1.9 billion. ETP’s 1Q18 estimate is 31.2% more than its 1Q17 adjusted EBITDA and 4.2% less than the previous quarter’s adjusted EBITDA. The partnership beat its earnings estimate in the previous quarter. The 4Q17 EBITDA estimate for ETP was $1.8 billion, and its adjusted EBITDA was $1.9 billion, a 10.2% beat.

Energy Transfer Partners is among the top midstream companies that are expected to post strong earnings growth during the first quarter. For details, read Top Earnings Growth Expected from Midstream Companies in 1Q18.

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1Q18 EBITDA drivers

Energy Transfer Equity’s earnings are mainly dependent on distribution income from its subsidiaries. Therefore, ETP’s EBITDA growth drives ETE’s earnings. ETP’s 1Q18 YoY (year-over-year) EBITDA growth is expected to be driven by the following factors:

  • higher processing and fractionation margins due to higher crude oil prices
  • strong natural gas and crude oil throughput volumes from the Permian region, driven by strong production growth and expansion projects placed into service
  • contribution from expansion projects placed into service, including the Bakken Pipeline project and phase 1 of the Rover Pipeline project
  • PennTex Midstream acquisition
  • higher natural gas sales and transportation volumes due to strong natural gas demand

The above increase might be offset by the following:

  • sale of compression business
  • halt of Mariner East 1 pipeline
  • lower gathering and processing throughput volumes from the Barnett and Eagle Ford Shale regions where ETP has an active presence
  • higher operating and maintenance expenses related to expansion projects placed into service

In the next two parts of this series, we’ll look at Energy Transfer Partners’ 1Q18 operating performance drivers. Then we’ll talk about recent market performance, key highlights, valuations, and analyst recommendations for both the GP (general partner) and the limited partnership.

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