How Did Energy Transfer Equity and Its MLP Fare in 4Q15?
Energy Transfer Partners’ stock price reaction
The shares of Energy Transfer Partners (ETP) and Energy Transfer Equity (ETE) fell 8.7% and 5.2%, respectively, on Thursday following their 4Q15 earnings release. At the same time, the Alerian MLP ETF (AMLP), which comprises 22 midstream energy MLPs, fell 0.71%.
ETP’s huge fall could be attributed to its weak 4Q15 operating results, which included a decline in adjusted EBITDA ( earnings before interest, tax, depreciation, and amortization) , weak distribution coverage, and a decline in throughput volumes at some of its assets. The partnership’s 4Q15 distribution coverage should lie between 0.8x and 0.9x if the distributable cash flow is adjusted for the one-time tax benefit.
Energy Transfer Partners’ 4Q15 distribution
Energy Transfer Partners kept its 4Q15 distributions flat compared to the previous quarter. ETP declared a distribution of $1.1 per unit for 4Q15. This represents a ~6.0% YoY increase over 4Q14. At the same time, ETE declared a distribution of $0.29 per unit for 4Q15. This represents a ~26.7% YoY increase over 4Q14. ETE forms 0.52% of the Guggenheim Raymond James SB-1 Equity ETF (RYJ).
Based on recent distributions, ETP is trading at a massive distribution yield of 15.5%. ETP’s peers Williams Partners (WPZ), EnLink Midstream Partners (ENLK), and DCP Midstream Partners (DPM) are trading at distribution yields of 17.6%, 18.4%, and 18.3%, respectively.
Regarding flat distributions, Thomas E. Long, ETP’s chief financial officer, said, “This is a time when coverage and liquidity are valued more by the equity markets and rating agencies than distribution growth. We will continue to evaluate our distribution on a quarterly basis and will be prudent as it relates to balancing coverage and liquidity with distribution growth.”
Energy Transfer Partners’ 2016 capital plans
According to a recent press release, Energy Transfer Partners decided to lower its 2016 capital program by $750 million to $4.2 billion compared to the previous guidance of $5.0 billion.
In the next part of this series, we’ll see how analysts rate Energy Transfer Equity and Energy Transfer Partners.
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