Energy Transfer LP (ET)

In October 2018, Energy Transfer Partners, L.P. (NYSE: ETP) was renamed as Energy Transfer LP (ET) after it merged with Energy Transfer Equity (ETE).

• Sector: Energy
• Industry: Oil & Gas Midstream
• Full Time Employees: 29,486
• HQ:  Dallas, Texas
• http://www.energytransfer.com
• Master limited partnership; Forward Dividend & Yield 1.22 (8.29%)

Energy Transfer LP is a U.S. Fortune 500 natural gas and propane pipeline transport company
Energy Transfer LP provides diversified energy-related services in the United States. It owns and operates approximately 7,900 miles of natural gas transportation pipelines and three natural gas storage facilities in Texas; and approximately 11,800 miles of interstate natural gas pipelines. The company sells natural gas to electric utilities, independent power plants, local distribution companies, industrial end-users, and other marketing companies. It owns and operates natural gas and natural gas liquid (NGL) gathering pipelines, as well as natural gas processing plants, treating facilities, and conditioning facilities in Texas, New Mexico, West Virginia, Pennsylvania, and Louisiana; natural gas gathering, oil pipeline, and oil stabilization facilities in South Texas; a natural gas gathering system in Ohio; and transportation and supply of water to natural gas producers in Pennsylvania. The company also owns approximately 4,300 miles of NGL pipelines, 5 NGL and propane fractionation facilities, and NGL storage facilities with aggregate working storage capacity of approximately 53 million barrels.

Master Limited Partnerships (MLPs) tumble on FERC’s revised income tax policy

Master Limited Partnerships (AMLP, AMJ) fall to 52 week low after the Federal Energy Regulatory Commission announces it no longer will allow MLPs to recover an income tax allowance in the cost of service 

• MLP weakness: EEP -14.66% TCP -11.46% BPL -8.42% ETE -8.11% ETP -7.05% SNMP -7.37% NGL -6.19% SEP -6.28% NS -5.61% MMP -6.33% DM -6.69% PAGP -6.15% WPZ -5.55% VLP -6.04% BWP -4.96% SHLX -5.50% ANDX -5.28% DCP -4.58%
• By descending market cap: EPD -4.02% WPZ -5.51% MPLX -3.08%ETP -6.60% SEP -6.16% PAA -4.70% ETE -7.82% MMP-6.31% CQP-2.78% ANDX-5.19% WGP-1.38% WES-2.42% APO-1.40% BPL-8.63% EQGP-3.88% PSXP-4.70% ENBL-4.26% BEP-0.72% SHLX-5.46% 
• This is weighing on the Energy sector (XLE-0.6%)

 

In an unprecedented move, FERC (the Federal Energy Regulatory Commission) revised its income tax policy for MLPs. MLPs, which aren’t taxed at the corporate level and which operate as pass-through entities, allocate their income to investors. Investors are taxed on their share of the net income. To compensate investors for the income tax burden, MLPs have been receiving an income tax allowance from customers on FERC-regulated pipelines.

Who's Protected from FERC's Revised Income Tax Policy?

No harm to C-corps

Midstream companies such as Kinder Morgan (KMI), Targa Resource (TRGP), and ONEOK (OKE) are taxed as C-corps, so the revised policy doesn’t apply to them. C-corps reacted negatively to the news, but they recovered by the end of the trading session. Williams Companies (WMB) and Enbridge Inc. (ENB), which are also C-corps, were an exception due to their GP-LP model and dependence on limited partnerships for their distribution income.

Non-regulated pipelines

Non-regulated pipelines—such as gathering pipelines and other intrastate pipelines—aren’t regulated by FERC, so they wouldn’t see much impact from the revised tax policy. The gathering MLPs include Antero Midstream Partners (AM), Cone Midstream Partners (CNNX), and EQT Midstream Partners (EQM).

Other midstream activities

Other midstream activities—such as natural gas processing, NGLs fractionation, and fuel terminaling and storage—shouldn’t have any impact on the revised policy, as prices in these cases aren’t regulated by FERC. They include MPLX LP (MPLX), Western Gas Partners (WES), and DCP Midstream (DCP).

However, most midstream MLPs have some exposure to interstate transportation and the sell-off across the sector.

Other value chain

MLPs that aren’t involved in midstream activities—such as upstream MLPs, downstream MLPs, frac-sand producers, catalytic conversion, and midstream services—should see no impact from the revised policy. They include Legacy Reserves (LGCY), Hi-Crush Partners (HCLP), CSI Compressco LP (CCLP), and CVR Refining (CVRR).

ETP — is it a buy?

• 12/22:   Is ETP a buy?

• 2 months later:  NO

Energy Transfer Partners (ETP) to be acquired by Sunoco Logistics (SXL) for $21 billion

Sunoco Logistics Partners L.P. will buy Energy Transfer Partners L.P. in an all-stock deal worth about $21 billion, pushing together two pieces of the Energy Transfer family of companies.

   

• The parent company, ETP, operates more than 62,500 miles of natural-gas and natural-gas liquids pipelines. 
• Energy Transfer is currently in the midst of building the controversial Dakota Access Pipeline, which is facing protests from the Standing Rock Sioux tribe and environmental activists.  That pipeline is scheduled to begin moving oil in May from North Dakota to a terminal in Illinois.
• Energy Transfer Partners, which owns about 20% of Sunoco shares, is one of four publicly traded partnerships in the Energy Transfer family; the others are Energy Transfer Equity LP and Sunoco LP. 
• The merger will close Friday, and the combined company, headquartered in Dallas, will begin trading Monday on the New York Stock Exchange under the parent company’s current ticker symbol, "ETP."

  

Energy Transfer to be acquired by Sunoco Logistics (SXL) for 1.5 common units of SXL common stock for each unit of ETP :

• Under the terms of the transaction, ETP unitholders will receive 1.5 common units of SXL for each common unit of ETP they own.
• As SXL will be the acquiring entity, the existing incentive distribution rights provisions in the SXL partnership agreement will continue to be in effect, and Energy Transfer Equity (ETE) will own the incentive distribution rights of SXL following the closing of the transaction. As part of this transaction, ETE has agreed to continue to provide all the incentive distribution right subsidies that are currently in effect with respect to both partnerships. The transaction is expected to be immediately accretive to SXL's distributable cash flow per common unit.
• SXL and ETP expect that the transaction will allow for commercial synergies and costs savings in excess of $200 mln annually by 2019.
• SXL and ETP will hold a joint conference call to discuss the transaction details on Monday, Nov 21, 2016 at 4:00 pm ET.

ETP — is it a buy?

• Sept. 2, 16:   Is ETP a buy?

• 2 months later : NO

ETP — NR

• Aug. 7, 15:  

• 2 months later: