Natural gas pipeline operator Energy Transfer Partners L.P. (ETP) announced impressive fourth-quarter 2012 results, aided by strong margins in all of its business segments.
The partnership reported a profit of 62 cents per limited partner unit, breezing past the Zacks Consensus Estimate of 44 cents. Reported profit was also above the year-earlier earnings of 41 cents.
Quarterly revenues of $10,981 million were above our projection of $6,326 million. Comparing year over year, sales saw a whopping increase from $1,805 million to $10,981 million, due to higher natural gas sales.
Quarterly Cash Distribution
Last month, Energy Transfer announced fourth quarter distribution of $0.89375 per unit ($3.575 per unit annualized), unchanged from the year-earlier as well as previous quarter distributions.
EBITDA & Operating Income
Adjusted earnings before interest, taxes, depreciation, and amortization (:EBITDA) for the quarter was $948 million compared with $493 million in the year-ago quarter, reflecting robust performance from the Interstate Transportation and Storage business unit along with investments in Sunoco Logistics Partners L.P. (SXL).
Operating income of $463 million was up 37.8% from the fourth quarter of 2011.
Distributable Cash Flow
Energy Transfer Partners reported distributable cash flow of $488 million, up from $319 million in the prior-year quarter.
Maintenance capital expenditure totaled $143 million, up 164.8% year over year.
As of Dec 31, 2012, Energy Transfer had long-term debt (less current maturities) of $15,442 million. Debt-to-capitalization ratio was 47.1%.
The partnership currently retains a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next 1 to 3 months.
Acquisitions have historically played a major role in the partnership’s growth profile and are expected to remain significant in the future as well. Energy Transfer may find it difficult to complete accretive transactions in the future, and this could negatively impact its growth rate.
Additionally, unfavorable regulatory changes by the Federal Energy Regulatory Commission (:FERC) would impact the partnership’s results. This will also contribute towards higher borrowing costs and depress the market value of its limited partner units.
In addition to Energy Transfer, there are certain other pipeline operators that offer value and are worth buying now. These include Access Midstream Partners L.P. (ACMP) with a Zacks Rank #1 (Strong Buy) and Atlas Pipeline Partners L.P. (APL) with a Zacks Rank #2 (Buy).
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