Pipeline operator Energy Transfer Partners L.P. (ETP) announced in-line fourth quarter results, as improved sales from its retail propane segment were offset by weakness in its natural gas transportation operations.
The owner of the biggest intrastate pipeline system in Texas reported earnings per unit of 65 cents, same as the Zacks Consensus Estimate but below the year-ago profit of 91 cents. Revenues of $1,454 5 million were down 3.4% year-over-year and missed our projection by 21.3%.
Quarterly Cash Distribution
Last month, Energy Transfer announced fourth quarter distribution of 89.375 cents per unit ($3.575 per unit annualized), which remains unchanged from the year-earlier quarter and the previous quarter distribution. The distribution was paid on February 14, to unit-holders of record on February 7, 2011.
EBITDA & Operating Income
Adjusted EBITDA for the quarter was $411.1 million, compared with $410.6 million in the year-ago quarter. The slight year-over-year increase in EBITDA was primarily due to robust performance in the partnership’s midstream operations on the back of increased volumes.
However, operating income for the period, at $306.5 million, was down 17.2% from the fourth quarter of 2009, reflecting a significant dip in storage margins.
Distributable Cash Flow
The partnership reported distributable cash flows of $284.4 million in the quarter, up from $257.7 million in the prior-year quarter.
Capital Expenditure
During the quarter, maintenance capital expenditure totaled $29.0 million, as against the year-earlier level of $30.9 million. For full-year 2010, the partnership devoted $99.3 million in maintenance capital spending.
Balance Sheet
As of December 31, 2010, Energy Transfer had cash and cash equivalents of $49.5 million and long-term debt (including current maturities) of $6.,404.9 million. Debt-to-capitalization ratio was 57.5%.
Our Recommendation
Energy Transfer Partners – which competes with other large-cap pipeline master limited partnership (“MLP”) peers like Enterprise Products Partners L.P. (EPD), Kinder Morgan Energy Partners L.P. (KMP) and Plains All American Pipeline L.P. (PAA) – currently retains a Zacks #2 Rank (short-term Buy rating).
But longer-term, we maintain our Neutral recommendation on the partnership.
Energy Transfer Partners remains a premier MLP with strategically-positioned assets that serve major North American natural gas-producing basins. We like the partnership’s robust organic growth profile, stable fee-based operating income and strong liquidity position.
While the partnership kept its distribution unchanged, we expect growth to resume shortly, driven by the completion of a broad array of organic growth projects.
However, we believe that the near- to medium-term outlook for ETP’s natural gas gathering and processing business continues to be weak. The partnership’s seasonal propane business also remains a major liability, in our view.
ENTERPRISE PROD (EPD): Free Stock Analysis Report
ENERGY TRAN PTR (ETP): Free Stock Analysis Report
KINDER MORG ENG (KMP): Free Stock Analysis Report
PLAINS ALL AMER (PAA): Free Stock Analysis Report
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