In the following video, Joel South reviews three important issues that investors need to watch regarding Energy Transfer Partners.
First, distributions. The company pays a 7.6% distribution yield, but the rate hasn't increased since 2008. The company should see revenue growth from its Sunoco acquisition and its $3.1 billion buildout since 2010, and distribution growth should follow.
Second, fee-based contracts. This type of agreement has a customer leasing pipelines from ETP, insuring cash flow and, in turn, lowering borrowing costs. ETP hasn't been effective in this area in the past. Watch to see whether management improves corporate cash flow with this sort of leasing term going forward.
Third, Sunoco's contribution. In theory, Sunoco should increase cash flow and earnings by giving ETP exposure to Eagle Ford shale oil and Utica and Marcellus shale gas.
The surge in oil and natural gas production from hydraulic fracturing and horizontal drilling is creating massive bottlenecks in takeaway capacity. However, this problem for producers creates a massive and immensely profitable opportunity for midstream companies. Energy Transfer Partners helps alleviate the gluts in supply with 23,500 miles of transformational pipelines. To see if ETP and its industry-leading yield will be a fit for you, click on this detailed premium report, which will supply you with a thorough analysis of this midstream.