I have been in the retail gasoline business and a close friend has also owned 20 gas stations. The problem I see for ETP is the over $1 billion paid for Sunoco gas stations. Those stations do not generate 8% cash flow which ETP investors are use to. That is going to impact ETP over the next year. Large acquisitions usually take time to swallow and function the way you want. Those stations have much lower profits than ETP assets currently generate, talking about the retail gas stations.
Also, there are duplicate corporate headquarters personnel and those will have to be sorted out. I see payments being incurred during 2013 for termination costs and issues regarding the what to do with the gas stations and their cash flow margins.
I think this will be a drag on ETP for 2013. If Europe's problems get worse and they are bad, this will effect our economy in 2013. The run in our stock market is not going to continue unabated, there will be a correction in 2013 and ETP will not buck the decline. Remember Spain has 25% unemployment, I suspect Greece will be in a similar spot in 2013 and my friends in Italy tell me that the economy is getting worse there too. This will effect the U.S. in 2013. In addition all the oil pipeline outfits have been running miles of pipelines to natural gas fields and natural gas liquids and more wells will be hooked up in 2013 that are currently not hooked up. All this production could result in too much supply and declining prices for liquids and natural gas as you tend to get both out of the same wells.
I predict a tough year for ETP. It might be better to exit ETP and come back a year from now, there are plenty of better buys that pay 7-8-9% yield that have not experienced a down year like ETP. I expect ETP to decline further as this purchase of Sunoco has some hiccups.
Are there existing regulations that cover the addition of natural gas to distribution points that also sell regular gas products? Why can't Sunoco be positioned to compete with Cleanair (a Texaco investment) which as a whopping 138 NG stations coast to coast starting from scratch? Both Ford and GM are building 2013 vehicles with NG engines. Are you all aware that NG costs one fourth the price/mile of gasoline? I think T. Boone has something in pushing NG as the interim solution to our energy crisis. I don't know what ETP's thinking is on this or if they could be that nimble to compete with the "big boys", but they just might be onto something big here. I'm not sure why no one has brought this idea forth to date or is this supposed to be some kind of a "stealth move". Just curious and not trying to steal anyone's lunch here.............Could be a no brainer. In the meantime, while waiting for all these ETP projects to come on line, The distribution over 8% is nothing to sneeze at and should keep folks happy as long as it can be maintained. I've been in EPD for some time now but believe this a could time to start nibbling on ETP until I've a better idea as to what they are up to. The over leveraged status (debt risk) assumed by management does make this more of a risk than I'm normally willing to assume but the risk seems to be manageable at this point. ETP has peaked my interest for now.
I think all of you have a point. For me over the past few months this thing has been a put sellers then buy back the option dream. Down two bucks up two bucks down two bucks up two bucks. For the record if the fiscal cliff hits or get's close everything is going to get hit.
Richard, Richard, Richard, an mlp such as etp cannot own the gas stations. That division will be spun off as a dividend, split, or sold. Secondly, Sun is one of the top five oil/gas pipe line companies in America. ETP wants to diversify into oil lines, they just became a major player. Sort of like not a player, or even on the bench, to starting shortstop, from the minors to the majors in a day. Oh, and by the way, the gas stations do make money, I welcome the spin of that division.
None of my posts have argued that the Sunoco acquisition is bad. It is not bad. I like what management is doing long term, it will pay off. But it has hurt investors for 2012 and this could continue into 2013 which I am predicting as I believe it can take 6-12 months to close a billion dollar plus sale of gas stations.
Look, I own a MLP that owns gas stations, so I do not know why you are insisting that gas stations are a no-no for a public limited partnership. I did the gas station investment as a very small investment. I like the double digit distribution when I bought but it is not a long term hold.
ETP looks good as a long term hold, but there has been little for the investors in 2012 and I argue the same for 2013. Now 2014 and 2015 should be a different story. I might be buying but I want to see growth for the shareholders first and this acquisition is going to take time to get it right.
ON gas stations in MLPs, perhaps you are not allowed to operate mini-mart groceries or restaurant segments with a gas station in an energy MLP but I am not certain on that.
I doubt ETP has to get rid of the gas stations for tax reasons, but they should dump them ASAP for the profit margin problem.
As I've noted above, management could have other reasons and there intentions on the distribution system purchase are not yet clear. Maybe they'll compete with Cleanair and the big boys who are building a chain of NG distributorships nationwise for NG vehicles whose operating costs are one fourth that of gasoline operated vehicles. Aside from the commerical trucking business which is now mostly NG, F and GM plan to build private transport vehicles that run on NG as early as next year. You'll be able to buy an F150 with an NG engine. Where you going to refill that one?
Well, how long is it going to take to sell the stations and close that transaction? Six months, 9 months, one year. That billion dollar plus asset is not going to be very productive for them and that is why I believe ETP shares have been in free fall for the last quarter while all other MLPs have gone up significantly. Having a billion dollars or more tied up in low profit margin or no profit margin is going to impact the next several quarters. If I am correct if will impact share price further. I also predict that the Sunoco investors will be surprised when they receive a K-1 for the last quarter of this year. Many investors do not want them, so they will dump shares through the last quarter of this year and the first quarter or two of next year.
I am also predicting a recession across Europe for 2013 and this will impact us here in the U.S. if I am correct.
I have done better this quarter on my LINE, VNR, BBEP, RPG, and I think those will outperform ETP for the next 3-4 quarters as they continue to appreciate and ETP goes down or side-ways as it digests Sunoco. ETP is going to have to write off costs associated with this acquisition, eliminate redundant headquarter staff (termination costs), and the under performing retail gas station segment of this business. All of this is going to impact 4th quarter and 1st quarter or longer if the gas stations take longer to divest which is possible.
If I am right and ETP falls 5-10% over the next couple of quarters while the other MLPs go up 5-10%, that is a big hit. Those kind of decisions make successful investing vs. less successful investing.
I did not say this was only a gas station purchase. I merely pointed out that over a billion dollars of Sunoco gas stations are being acquired. Do some research on gas station margins and profits and you will realize why this stock has been in a free fall.
No doubt there will be growing pains, but ETP has prepared for that by holding up on distribution increases. I see nothing that indicates their distribution is threatened in any manner. I don't care if Sun owners dump shares. Don't care if there's volatility in share price. EPT is on a long term growth move. As long as they maintain their distribution I'm content to wait it out. I'll add if it hits $40 and accumulate below that and collect my nice +8.5% forever.
Tell us about all these better investments that will not be effected by the same forces that might impact ETP. All these other investments will surely appreciate you posting about how great they are. Perhaps you should spend you time and efforts on their message boards. Your Weasel whiskers are showing.
Well, ding dong, try SUI, NRF, SCCO and PM as none are affected by the same industry forces that impact ETP.
On the other hand, here's today's performance on other pipelines I own:
KMP + 1.28%
EEP + .58%
RGP + 2.79%
BWP + .86%
All on no company specific news. All affected by the same macro forces which affect ETP.
Since you are so smart, please tell us why ETP went down 1.56% when the 4 above went up. I think it's sun shareholders running as fast as they can, with much more to come when the merger shares appear in the sun holders' accounts.
I'm very long ETP and may buy some flippers when the sun people are finished dumping unwanted ETP shares. It looks to me like the dumping has already started.