Energy Transfer Partners’ leverage
Currently, Energy Transfer Partners’ (ETP) net debt-to-adjusted EBITDA stands at ~5.1x—the highest among the four MLPs that we’re discussing in this series. We’re also analyzing Enterprise Products Partners (EPD), MPLX (MPLX), and Plains All American Pipeline (PAA). MPLX’s ratio is the lowest at 3.5x. Enterprise Products Partners’ ratio stands at ~4.2x.
MLPs usually target a debt-to-EBITDA ratio below 4.5x. The above graph compares the net debt-to-EBITDA ratios of the four MLPs.
Measures to reduce debt, combined with EBITDA growth, have helped Energy Transfer Partners reduce its leverage in recent quarters. However, the leverage is still higher than desired. The company’s capital plans might put some pressure on its balance sheet.
Plains All American Pipeline’s leverage
Plains All American Pipeline’s leverage also remains high. Currently, the company’s net debt-to-adjusted EBITDA ratio is 4.8x. While the ratio has come down in recent quarters, the company intends to continue to improve it more. Plains All American expects to achieve its targeted leverage by the first half of 2019.
Plains All American Pipeline expects to achieve the targeted debt-to-EBITDA ratio through EBITDA growth while holding its debt level relatively flat. The company expects its growth projects, especially relating to the Permian Basin, to contribute to its EBITDA growth. Plains All American targets ~$700 million of asset sales in 2018.
Next, we’ll discuss the recent changes in the four MLPs’ short interest.