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Key for Investors: Energy Transfer Partners’ 3Q15 Distributions

What to Expect from Energy Transfer Partners’ 3Q15 Earnings

(Continued from Prior Part)

Energy Transfer Partners’ 3Q15 distributions

Energy Transfer Partners (ETP) announced its ninth consecutive rise in quarterly cash distribution in a press release published on October 26, 2015.

ETP declared a quarterly distribution per unit of $1.06 for 3Q15. This represented an 8.2% YoY (year-over-year) rise from 3Q14 and a 1.9% sequential rise from 2Q15.

ETP’s general partner Energy Transfer Equity (ETE) announced a distribution per unit of $0.29. This represented a 37.3% YoY rise compared to 3Q14 and a 7.5% sequential rise compared to 2Q15.

ETP’s peers Spectra Energy Partners (SEP), EnLink Midstream Partners (ENLK), and Enbridge Energy Partners (EEP) declared their 3Q15 distributions before their earnings releases. Their 3Q15 distributions per unit are $0.63, $0.39, and $0.58, respectively. These represent quarter-over-quarter distribution growths of 2.0%, 1.3%, and 2.3%, respectively.

ETP forms 1.5% of the First Trust North American Energy Infrastructure ETF (EMLP).

Energy Transfer Partners’ distribution growth drivers

ETP’s 3Q15 distribution growth seems to be driven by fee-based cash flows resulting from the Regency Energy Partners merger completed during 2Q15, other fee-based projects which came online in the first nine months of 2015, IDR (incentive distribution rights) subsidies from ETE, and growth in distribution income from ETP’s subsidiaries as listed below:

  • 27% limited partner interest, 10% of GP (general partner) interest and IDRs (incentive distribution rights) in Sunoco Logistics Partners (SXL). The remaining 90% of GP interest and IDRs in SXL are held by ETE through Class H units.

  • 60% limited partner interest in Sunoco LP (SUN).

Energy Transfer Partners’ distribution yield

ETP has a current distribution yield of 9.5%. Reasons for ETP’s high distribution yield can be attributed to the tier-4 split IDRs present in its capital structure and a volatile cash stream.

Some of ETP’s business segments have commodity price exposure. Tier-4 IDRs lead to a large share of incremental distributions being paid to its general partner, Energy Transfer Equity (ETE).

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