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Analyzing ETE and ETP’s First-Quarter Earnings and Outlook

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Part 2
Analyzing ETE and ETP’s First-Quarter Earnings and Outlook PART 2 OF 7

ETE and ETP Could See Distribution Growth in 2018

Distribution outlook for ETE and ETP

Energy Transfer Partners (ETP) and Energy Transfer Equity (ETE) declared a flat distribution for the first quarter. Energy Transfer Partners’ flat distribution is mainly due to its high cost of equity capital. The partnership expects to use the cash savings to fund an equity portion of the capital budget this year.

On the other hand, Energy Transfer Equity posted flat distribution for the first quarter after two consecutive quarters of distribution growth. Energy Transfer Equity’s flat distribution despite impressive distribution coverage is due to its focus towards reducing leverage.


ETE and ETP Could See Distribution Growth in 2018

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The high cost of equity has remained a concern for Energy Transfer Partners for quite some time—mainly due to the IDRs in its capital structure. The IDRs entitle Energy Transfer Equity a higher share of incremental cash flows. The partnership’s high cost of equity isn’t expected to improve until the capital structure is simplified. There’s a chance that distribution growth could resume this year.

Energy Transfer has been exploring options to simplify its capital structure.

Management’s commentary

Regarding Energy Transfer Equity’s distribution growth for the rest of this year, Thomas E. Long said, “we always want to say that’s a quarter-by-quarter decision. I can’t highlight enough the fact that preserving cash and deleveraging, how important that is, but that is one of the factors that goes into the discussion every quarter as we look at it.”

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