What Could Drive Energy Transfer Partners’ Earnings?



Second-quarter EBITDA estimates

Energy Transfer Equity (ETE) and its midstream MLP subsidiaries, Energy Transfer Partners (ETP) and Sunoco LP (SUN), are scheduled to report their second-quarter earnings on August 8.

Wall Street analysts’ second-quarter consensus EBITDA estimate for Energy Transfer Partners is $1909.1 million. The second-quarter estimate is 19.3% more than the adjusted EBITDA in the second quarter of 2017 and 1.5% more than the adjusted EBITDA in the first quarter. The partnership beat its earnings estimate in the previous quarter. The first-quarter EBITDA estimate for Energy Transfer Partners was $1855.8 million, while the adjusted EBITDA was $1881.0 million—a 1.4 % beat.

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EBITDA drivers

Energy Transfer Equity’s earnings mainly depend on distribution income from its subsidiaries. Therefore, Energy Transfer Partners’ EBITDA growth drives Energy Transfer Equity’s earnings. Energy Transfer Partners’ second-quarter EBITDA growth year-over-year is expected to be driven by the following factors.

  • strong natural gas and crude oil throughput volumes due to strong production growth, particularly in the Permian region
  • higher non-fee-based processing and fractionation margins due to higher crude oil prices
  • contribution from expansion projects placed into service including Bakken pipeline and Rover pipeline projects
  • a strong performance at the partnership’s crude oil acquisition and marketing business due to the wider WTI spreads

The above increase might be offset by:

  • sale of the compression business
  • halt on the Mariner East 1 pipeline
  • higher operating and maintenance expenses related to expansion projects placed into service
  • lower throughput volumes and natural gas pipeline systems

In the next two parts, we’ll discuss Energy Transfer Partners’ second-quarter operating performance drivers. In this series, we’ll discuss the key expectations and analysts’ recommendations for Energy Transfer Partners and Energy Transfer Equity.


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