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Energy Transfer Partners Is Firing on All Cylinders

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Segment performance

Energy Transfer Partners (ETP) posted strong earnings growth in the second quarter of 2018 and beat earnings estimates. The better-than-expected earnings were driven by strong performances across all its business segments, particularly the Crude Oil Transportation and Services segment. Except for the Other segment, the remaining five segments posted YoY EBITDA growth during the second quarter of 2018. All other segments’ YoY decline was due to a stake sale in the CDM business to USA Compression Partners (USAC) and lower contribution from Sunoco (SUN) resulting from its stake sale in the 7-Eleven business and repurchase of 17 million common units from ETP in February 2018.

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Crude oil transportation and services

The crude oil transportation and services segment continued to be Energy Transfer Partners’ top-performing segment in the second quarter of 2018. The segment posted a 140.4% YoY EBITDA increase in the second quarter. This was mainly driven by strong crude oil throughput volumes from the Permian Basin, contributions from the Bakken Pipeline project, higher volumes at the Nederland terminal, and a strong performance from the crude oil acquisition and marketing business resulting from a favorable price differential between Midland and Gulf Coast.

Midstream

The Midstream segment, which is mainly involved in natural gas gathering and processing, posted a strong 0.5% YoY EBITDA increase in the first quarter. The segment benefitted from higher commodity-linked margins due to higher crude oil and NGLs (natural gas liquids) prices and strong Permian volumes. However, a one-time $30 million benefit during the second quarter of 2017 resulted in the segment’s lower YoY growth.

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NGLs and refined products transportation and services

NGLs and the refined products transportation and services segment reported 18.8% YoY EBITDA growth in Q2. This was driven by higher NGLs (natural gas liquids) transportation and fractionation volumes. Moreover, the segment benefitted from higher refined products terminal volumes.

Interstate Transportation

The Interstate Transportation segment posted a 26.0% YoY adjusted EBITDA increase during the quarter. The segment’s Q2 performance was mainly driven by the partial placement of the Rover Pipeline project into service. Moreover, the segment benefitted from higher volumes on the Panhandle, Tiger, and Transwestern pipelines.

Intrastate Transportation

Intrastate Transportation was ETP’s second-best-performing segment in the second quarter. The segment saw a 40.5% YoY EBITDA increase in Q2 mainly driven by higher volumes resulting from wider basis differentials between the West Texas and Gulf coast and the “acquisition of the remaining interest in the rigs pipeline,” as noted in the Q2 earnings call.

In the next two articles, we’ll look into ETP’s leverage position and project updates. Later in the series, we’ll look into Energy Transfer Equity’s (ETE) technical indicators and analysts’ recommendations.

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