Energy Transfer Partners L.P. (ETP), a master limited partnership (“MLP”), announced that two pipeline projects (Fayetteville Express Pipeline and the Tiger Pipeline) that will transport shale gas further downstream, will come online several months ahead of schedule and significantly below budget.
The Fayetteville Express Pipeline (a 185 mile 42-inch interstate pipeline originating in the Fayetteville Shale and extending through Arkansas and into Mississippi) and the Tiger Pipeline (a 175 mile 42-inch interstate pipeline originating near Carthage, Texas and ending near Delhi, Louisiana) are both expected to be in service on December 1, 2010. Additionally, the combined project costs for these two pipelines are expected to total $2.02 billion, $200 million under most recent estimates and $480 million under original estimates.
The Fayetteville Express Pipeline – a 50/50 joint venture with Kinder Morgan Energy Partners L.P. (KMP) serving the Fayetteville Shale producing region in Arkansas with the capacity to move up to 2 billion cubic feet of natural gas per day – was earlier anticipated to be fully operational by the first quarter of 2011 (interim service started in early October).
Energy Transfer further noted that costs for the project are likely to total approximately $1.01 billion, $115 million less than the most recent estimate and down $290 million from the original projection.
On the other hand, the 100% Energy Transfer owned and operated Tiger Pipeline (aimed at serving the Haynesville Shale and Bossier Sands producing regions in Louisiana and East Texas) was originally scheduled to have its initial capacity of 2 billion cubic feet per day in service during mid-2011.
As of now, Energy Transfer expects project costs to be approximately $1.01 billion, down $85 million from the most recent estimate and down $190 million from the original projection.
The earlier-than-expected completion of these large-scale, interstate projects, together with the cost savings the partnership is able to achieve is likely to translate into significant distributable cash flows for Energy Transfer’s unitholders in 2011 and the subsequent years.
Energy Transfer units currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
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