Now that 2013 is almost behind us, it's time to look ahead to next year. Specifically, what the management team at Energy Transfer Partners (NYSE:ETP) has in store for its master limited partnership.
We'll begin with the partnership's plan for 2014 capital expenditures. Energy Transfer will spend between $2.1 billion and $2.7 billion on growth projects, including a $1.0 billion investment in Sunoco Logistics Partners (NYSE:SXL). Outside of that, the bulk of its cash will be directed toward its natural gas liquids transportation and services segment and its midstream segment.
Energy Transfer's NGL business has grown by leaps and bounds, and it now controls the second most processing capacity in the booming Eagle Ford shale play after Enterprise Products Partners (NYSE:EPD). Energy Transfer has capacity of 1.34 billion cubic feet per day, while Enterprise is at 1.52 bcf per day.
Beyond that, the partnership has an impressive slate of projects scheduled to come online between now and the end of 2015, including the Trunkline crude oil conversion, its Mariner South NGL pipeline joint venture with Sunoco Logistics, several NGL fractionators, and, of course, its plan for an LNG export facility at Lake Charles, La.
The sheer variety of the growth projects is especially noteworthy, given that three years ago ETP was predominantly a natural gas transportation MLP.
After years of work straightening out its balance sheet, Energy Transfer Partners is committed to achieving two very important financial goals in terms of two key metrics: distribution coverage ratio and debt to adjusted EBITDA.
Anyone who has paid even the slightest bit of attention to ETP over the past few years knows that it has had major issues in the distribution department. It held its quarterly payout straight for five years, and at times it couldn't even cover that.
All that changed this past quarter when the partnership increased its payout and produced out 1.14 times coverage on that distribution. Going forward, management would like to maintain an average coverage ratio of 1.05 times payouts or greater, while increasing its distribution in a sustainable manner.
Leadership is also targeting between 4.00 and 4.25 times debt to adjusted EBITDA. That is in line with what the ratings agencies require for an investment grade credit rating. Energy Transfer currently sports a BBB- rating from Standard & Poor's, which is investment grade, though it is the very last rung on the ladder before junk.
Energy Transfer Partners seems to have turned the corner, but 2014 will be a crucial year for investors to determine whether this is an MLP they want to be a part of for the long haul. If the partnership executes on its growth plan while meeting its financial goals, it could be a very compelling opportunity.
Fool contributor Aimee Duffy has no position in any stocks mentioned. The Motley Fool recommends Enterprise Products Partners. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.