When it issues its fourth-quarter earnings release on Wednesday, Energy Transfer Partners (NYSE:ETP) will be one of the last major midstream outfits to report for 2012. Its peers have posted strong results for the most part, but only time will tell if ETP follows suit. Here are three things to pay close attention to when Energy Transfer reports.
1. Distributable cash flow
Energy Transfer has already announced it won't be upping its beleaguered dividend this quarter, but investors should still pay close attention to how much distributable cash flow ETP is generating. Last quarter, the partnership increased its distributable cash flow sequentially, as well as year over year. If there is any hope for a distribution increase sometime this year, that number needs to continue to climb. For reference, Energy Transfer's third-quarter distributable cash flow was $339.5 million.
2. Intrastate transportation and storage
This business segment got absolutely crushed in the third quarter, as natural gas producers pulled back on production and volumes plummeted across Energy Transfer's intrastate (Texas) network. At the time, management remained hopeful that the cutback on drilling had bottomed out. However, quick looks at the Baker Hughes rig count and production statistics from the Texas Railroad Commission indicate that this may be another lousy quarter for ETP's intrastate transportation and storage segment. Adjusted EBITDA for this unit was $121 million in the third quarter, a 29% drop year over year.
3. Fee-based margins
Energy Transfer has been taking steps to increase its fee-based revenue, including increasing spending on its Midstream business unit. Last quarter, the segment's fee-based earnings increased by $20 million, which helped offset an 18% drop in non-fee-based margins. The drop was triggered mostly by lower natural gas liquids, or NGL, prices and volumes, and fee-based earnings will have to have increased again in the fourth quarter, as NGL prices did not recover.
Note: The NGL story should not be all bad for Energy Transfer. Its NGL transportation and services segment increased EBITDA 19% last quarter, and that number should continue to climb based on the strength of production coming out of the Eagle Ford Shale play.
Analysts are expecting EPS of $0.42 and revenue of $7.18 billion. Energy Transfer reports after the market close on Wednesday, with its conference call scheduled for 9:30 a.m. EST the following morning. Interested investors can listen here, or click here to add Energy Transfer to My Watchlist.