Natural gas pipeline operator Energy Transfer Partners L.P. (ETP) recently announced a public offering of 12,000,000 common units to increase its liquidity. The partnership also offered a 30-day option to the underwriters to purchase 1,800,000 additional units.
Energy Transfer intends to use the entire proceeds to pay off the outstanding balance under its credit facility and other partnership purposes.
In January, Energy Transfer offered $1.25 billion senior notes. The offering was divided into two parts – $800 million 3.60% senior notes due 2023 and $450 million 5.15% senior notes due 2043. The net proceeds of $1.24 billion were used for the same purpose.
Energy Transfer ended fourth quarter 2012 with long-term debt (less current maturities) of $15,442 million. Debt-to-capitalization ratio was 47.1%.
The partnership currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.
We believe Energy Transfer Partners is well positioned to compete in the natural gas midstream, and transportation & storage businesses with its geographically dispersed asset mix. The partnership has a significant market presence in each of its operating areas, which are located in the major natural gas-producing regions of the U.S.
However, gathering and processing master limited partnerships (MLP) such as Energy Transfer Partners, are more sensitive to commodity prices compared to other MLP subgroups. As a result, collapsing energy prices have adversely affected their cash flow stability.
Meanwhile, there are other energy firms that offer value and are worth buying now. These include Range Resources Corp. (RRC), Calumet Specialty Products Partners L.P. (CLMT) and NGL Energy Partners LP (NGL). All these firms sport a Zacks Rank #1 (Strong Buy).
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