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Why Have Investors Dumped Energy Transfer Equity?

Kurt Gallon

What to Expect from ETE’s, ETP’s, and SXL’s 4Q15 Earnings

(Continued from Prior Part)

Energy Transfer Equity’s market performance

Energy Transfer Equity (ETE) has lost 79.9% of its market value in the past year. ETE peers Williams Companies, Western Gas Equity Partners (WGP), and EnLink Midstream (ENLC) have lost 41.6%, 40.4%, and 40.9%, respectively, over the same period. ETE forms 0.45% of the Guggenheim Raymond James SB-1 Equity ETF (RYJ).

Uncertainty surrounding the pending ETE-WMB merger

The partnership has lost 55.9% alone since the beginning of 2016 due to the uncertainty surrounding the ETE-Williams Companies (WMB) merger deal, which was announced in September 2015. The respective 73.9% and 63.9% falls in ETE’s and WMB’s prices since the merger announcement indicates the overall negative investor sentiments toward the deal.

ETE replaces CFO      

In a recent 8-K filing, Energy Transfer Equity announced the sudden departure of Jamie Welch as its CFO. Thomas E. Long, the current CFO of ETE’s subsidiary, Energy Transfer Partners (ETP), will likely replace Jamie Welch.

The sudden departure of Welch, which is considered as instrumental in bringing the ETE-WMB deal, likely added uncertainty to the pending merger. ETE plunged by 42% following the announcement. Following the plunge, ETE issued a follow-up 8-K stating that “the Partnership affirms that the replacement of Mr. Welch as Chief Financial Officer of the Partnership was not based on any disagreement with respect to any accounting or financial matter involving the Partnership or any of its affiliates.”

4Q15 distribution

Energy Transfer Equity decided to keep its 4Q15 distributions flat compared to the previous quarter. ETE declared a distribution of ~$0.29 per unit for 4Q15 on January 27, 2016. This represents a ~26.7% YoY increase over 4Q14. Based on recent distributions, ETE is trading at a massive distribution yield of 19.1%.

Now let’s return to Energy Transfer Partners for deeper analysis.

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