The laws of physics inform us that energy in a closed system is neither created nor destroyed. Instead, energy merely changes form.
With a web of interconnectedness more complex than the laws of physics, a trio of income-generating energy stocks has engaged in some meaningful transfers of energy over recent months.
To understand why Energy Transfer Partners
First of all, it's worth noting that Energy Transfer Equity (we'll call it "ETE") acquired 100% of the general partner of Regency from a unit of General Electric
ETE then transferred that interest to Regency, in exchange for a 22% stake in Regency's units valued at about $600 million. Lest ETP unitholders cry foul over the recorded impairment, we need also point out that ETE recorded an identical impairment charge associated with the transfers.
Backing out the above transfers, ETP's operations took a bit of a hit from rising costs in its propane retail unit, and reduced fees charged for interstate transportation of natural gas. Consolidated revenue jumped 10% to $1.27 billion, while the operating margin declined from 19% in the prior-year period to 15.7%. Offering some real solace to income-focused unitholders, however, ETP's distributable cash flow increased 49% to $200 million.
Following a fresh review of these high-yielding, natural gas-related partnerships, this Fool is inclined to transfer his prior recommendation of Energy Transfer Partners over to Energy Transfer Equity.
Simply stated, with its dual exposure to ETP and Regency's assets, ETE casts a wider net across a more diverse swath of domestic gas operations ... including that attractive stake in the Mid-Continent Express pipeline operated by rival Kinder Morgan Energy Partners
The dividend yield on ETE units (at 6.1%) is just slightly below that of ETP, but should still be well in excess of the reduced yields that are soon to strike those Canadian energy trusts ("Canroys"). I continue to like Penn West Energy
Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Enerplus Resources Fund and Penn West Energy. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.