Midstream partnerships Energy Transfer Partners, L.P. (ETP) and Regency Energy Partners LP (RGP) announced that Lone Star Fractionator I – that can process 100,000 barrels of mixed natural gas liquids (NGL) per day – is ready for service. Lone Star Fractionator I – is situated at Mont Belvieu, Texas, and is owned by Lone Star NGL LLC (Lone Star). Lone Star is a joint venture between Energy Transfer and Regency Energy, in which the former have a stake of 70% while the rest 30% is owned by the latter.
Lone Star Fractionator I is expected to process mixed NGL, delivered from Lone Star West Texas Gateway NGL Pipeline and several other sources. It is also expected to process prolific mixed barrel NGL produced in the Permian and Eagle Ford regions. Out of the two fractionators (Lone Star Fractionator I and Fractionator II) owned by Lone Star, each of 100,000 barrels per day capacity, Fractionator II is expected to be completed by the fourth quarter of 2013. Lone Star is also looking for expansion of further fractionation opportunities in Mont Belvieu.
Additionally, Energy Transfer announced that Kenedy Plant – a new processing plant, situated in Karnes County, Texas is also in service presently. This plant has processing capabilities of 200 million cubic feet of natural gas per day. Another initiative, the Jackson County Processing Plant, which is expected to process an extra 400 million cubic feet of natural gas per day, will be completed by the first quarter of 2013. Both these plants are believed to be the most important part of the Eagle Ford Shale projects. Jackson County Processing Plant is expected to generate significant cash flows after coming online within few months.
Dallas, Texas-based Energy Transfer is a master limited partnership (MLP) engaged primarily in the gathering, processing, storage and transportation of natural gas. The company’s business is divided into four segments: Midstream, Intrastate Transportation & Storage, Interstate Transportation, and NGL Transportation & Services.
Energy Transfer currently retains a Zacks #3 Rank (short-term Hold rating). We are, also maintaining our long-term Neutral recommendation on the stock.
Energy Transfer is ideally situated to benefit from increasing production from unconventional sources of natural gas. With the largest intrastate system in Texas and expanding interstate assets, the partnership is connected to nearly every natural gas shale play in North America, including the Haynesville, Fayetteville and Barnett shales.
However, Energy Transfer like other gathering and processing MLPs are more sensitive to commodity prices compared to other MLP subgroups. Consequently, collapsing energy prices have adversely effected their cash flow stability.
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