Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
This doesn't scare me, not in the least. When we overeat, we know we're going to wear it---as in storing excesses on our bodies. And so it is- and will be---with oversupply of oil and related solids and natural gas:
We will store it!
Hooray for those of us heavily vested in logistics! It provides additional compensation for commodity volumetrics scaled to lowering prices by enabling providers of storage space to increase fees. And, with a finger on the demand-side pulse, companies such as NGL will know when it's time to add to stores of oil and NG, carving out space for these commodities when they're cheap and expect to resell when things are on the rise.
US production actually going to exceed pipeline capacity: Expert
Duration: 02:37
John Kilduff, Again Capital, and Mike Kelly, Seaport Global Securities, offer their outlooks for energy in the second half.
https://www.msn.com/en-us/money/careers/us-production-actually-going-to-exceed-pipeline-capacity-expert/vi-AAzuBSf
Funny! I was thinking the same thing and added the other day too.
I believe you are right this could be another big winner with the new sources coming on line.
06/25 Bought 200 ETP @ 18.83-$ 3,772.00
Finally EPT has my attention. Other holdings have crowded me but I feel very strongly that ETP is going to outperform many other picks in the same area. So I added some today and hope to add more as cash becomes available. I didn't mind paying $19.22 given that we go Ex.D in not much more than a month.
Happy hunting!
Very nice price action here today. Once we break through $20 there should be more upward movement.
Rida Morwa
This 12% Yielding Midstream MLP Still Has 30% Upside Potential
Jun. 10, 2018 9:45 AM•ETP
SummaryEnergy Transfer Partners has been engaged in an impressive expansion mode over the past few years.It is just now beginning to reap the rewards of its massive expansion program and is now having a banner year.Strong growth should continue for at least the next 3 years for this 12% yielder.ETP still trades at ridiculously low valuations of 7.3 time "Distributable Cash Flow" ('DCF').We will address the implications of the potential merger with its parent company ETE, and why the shares still have 30% upside potential in addition to the very generous yield.
This report was jointly produced by the High Dividend Opportunities research team and author Long Player.
Energy Transfer Partners(ETP) is a large midstream energy MLP which closed recently at $18.99. ETP has massive midstream and downstream assets strategically positioned to take advantage of the enormous growth in production in the Bakken and Permian Basins. It has large natural gas gathering systems, natural gas pipelines, oil pipelines and natural gas liquid production facilities. It also has large LNG export facilities and a massive motor fuel distribution system. ETP transports some 3.8 million barrels of crude oil per day and some 17 mmbtus of natural gas per day.
ETP has been in the process of adding major new facilities throughout its system. Whenever an MLP is in expansion mode, investors can have a difficult time discerning the likely future. The costs of expansion appear on the balance sheet before the new facilities come online, and it is difficult to project financial results for the time period in which the new facilities will be operational. ETP is just now beginning to reap the rewards of its massive expansion program and is now having that banner year that was forecasted awhile back.
There has been a serious talk of a merger between ETP and its general partner (its parent company), Energy Transfer Equity (ETE). This can lead to a discounting based on an anticipated distribution cut or the risk of a transaction which is not favorable to the acquired entity. While the simplification should save some costs and make the whole corporate structure a much easier one to understand, we would like to address concerns that this could lead to a discounting of ETP units. Until the details of the merger are announced, there is uncertainty over the specific terms of the transaction as well as when and whether it will occur.
Source: ETP Website
The proposed merger would combine one of the largest, if not the largest division within Energy Transfer Equity. This simplifies the above chart even more. The current partnership structure has been hard for the market to understand and has kept the shares of both ETP and ETE distressed. ETP and ETE are rapidly growing and still cheap given the enormous growth potential. This long-term growth is likely to continue.
Energy Transfer Partner Results
Source: Energy Partners First Quarter, 2018 Earnings Press Release
Energy Transfer Partners clearly reported a banner first quarter. Distributable cash flow ('DCF') increased by about 33% to an effective annualized rate of $2.60 per unit. At the current price, ETP is trading at a very cheap 7.3 times DCF. This price/DCF ratio would be dirt cheap if ETP was not growing, but it is ridiculously cheap, given that DCF is relatively certain to grow as additional projects come online. As shown above, earnings and other key metrics increased considerably in the first quarter on a year over year basis.
Source: Energy Transfer Partners And Energy Transfer Equity Joint Mizuho Corporate Presentation April 9, 2018
In addition to a long list of completed projects that are finishing their first year of financial results, the company has a sizable list of more projects coming online as depicted in the table above. The table lists numerous projects which did not even contribute to Q1 2018 DCF. As these projects come online through 2018 and continue through 2019 and 2020, DCF is virtually certain to grow rapidly. This makes the current 7.3 price/DCF ratio one of the best bargains available in the market at this time.
As for the debt level, those projects are leading to a natural reduction in the debt/EBITDA ratio. Some debt will be repaid. However, most of the deleveraging comes from increasing earnings that leads to higher cash flow from operations and higher EBITDA. This is virtually certain because many projections already have customers with long-term contracts and volume commitments.
Normally, investors in a company with these characteristics could happily project income increases for the near future; this would logically lead to a valuation based on a mid-teen price/DCF ratio. But the coming proposed acquisition (or merger) with Energy Transfer Equity is causing a discounting of what would otherwise be very bullish projections.
Energy Transfer Equity Outlook
Source: Energy Transfer Equity First Quarter 2018 Earnings Press Release
One of the reasons that ETE is growing quickly is because its income generated by its interest in Energy Transfer Partners is also growing very fast. As shown above, by far, the largest determination of corporate cash flow is the money received from Energy Transfer Partners - mostly in the form of incentive distribution rights (IDRs). Based on the most recent quarter, ETE's annualized DCF provides 148% coverage of its distribution and is equal to $1.37 per unit. It is poised to increase due to the fact that the percentage of distributions going to IDRs increases as the distributions themselves increase. As the new projects discussed above come online, ETP will likely increase its own distributions which will have the automatic effect of increasing ETE's IDRs.
ETE's high level of distribution coverage of 148% may suggest a second reason for the simplification. ETP distributes far more cash flow than ETE as a percentage of cash flow from operations or even distributable cash flow. Mr. Market has previously taken a very dim view of low distribution coverage, but the recent growth of ETP has proved Mr. Market wrong. The coming merger would allow the surviving company, ETE, to continue the policy of Mr. Market favoring well covered distributions while avoiding the hot button issue of distribution reductions.
Merger Talk
As shown below, ETP shares are up lately largely due to strong Q1 results and a strengthening crude oil market.
Source: Seeking Alpha Website May 22, 2018
ETP should grow revenue and DCF substantially this year. The distribution is well covered (115%), yet it trades at a ridiculously low multiple for a fast growing company. The steady parade of completing capital projects set forth above should assure very positive EBITDA and DCF comparisons the rest of the year.
Source: Seeking Alpha
ETE unit pricing has remained fairly strong in the face of the potential acquisition news from the conference call. It has a lower distribution per unit than ETP and also has a lower DCF. It also has a higher coverage ratio. This creates complex considerations in determining what a "fair" deal for a merger would be.
There will be speculation on what the terms of the merger may turn out to be. It is possible that ETP investors will feel that they have been treated unfairly. One solution to this problem is for investors to buy equal percentage shares in both entities (ETP and ETE). The share counts of the two entities are very close (on a fully diluted basis, 1.155 billion shares for ETE and 1.164 billion shares for ETP). Thus, an investor owning roughly the same number of shares in each of the two entities will be substantially indifferent to the deal terms (he will wind up owning roughly the same percentage of the combined entity regardless of the deal terms).
It is likely that the merged entity will initially have a somewhat lower distribution than the ETP distribution but a somewhat higher distribution than the ETE distribution. If the entities are merged, there will be no more IDRs. Investors' morale problems created by a somewhat lower distribution (for ETP legacy holders) may be assuaged by the improving numbers created by new projects coming online which may also allow distributions to move back up to the old ETP level.
Valuation
Making a simplifying assumption that each ETP unit is exchanged for one new ETE unit, the combined entity would have a DCF of approximately $2 per unit without any growth after Q1. Given growth prospects and the removal of the uncertainty due to a pending merger, the combined entity should trade at a level of at least 12 times DCF which would suggest a price of $24 a unit. Investors who want to hedge against uncertainty as to the merger deal terms should consider buying an equal number of shares in the two entities which will make them substantially indifferent to the deal terms. An investor buying equal numbers of ETE and ETP units would reap a gain of roughly 30% if the combined entity (under the above assumptions) traded at $24 per unit.
There will be a temptation to "wait until the dust settles" and postpone entering this investment until deal terms are announced or a merger is unambiguously abandoned. This is unlikely to turn out to be a wise strategy. ETP's numbers should keep getting stronger as additional expansion projects come online throughout 2018 and beyond. ETP is cheap now, and investors should pile in at this point.
If you enjoyed this article and wish to receive updates on our latest research, click "Follow" next to my name at the top of this article.
Disclosure: I am/we are long ETP, ETE.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Get Exclusive Articles from Rida Morwa
Free TrialOverall dividend yield of 9-10% by investing in Property REITs, BDCs, MLPs, CEFs, and more.Includes an actively managed model portfolio - with up to 40 top high-yield securities.Aim to identify high-dividends trading at bargain prices + Live Alerts to pick them up.
About this article:
Tagged: Dividends & Income,Dividend Ideas,Basic Materials,Oil & Gas Pipelines,Alternative Investing
Includes: Energy Transfer Partners, L.P. (ETP),ETE
Recommended for you:
Top AuthorsRSS FeedSitemapAbout UsFeedbackContact Us
Terms of UsePrivacyIOS AppAndroid AppFacebookTwitter
© 2018 Seeking Alpha
SA Stock Market news
VIEW IN APP
Thanks for the tip I looked at it . Makes a lot of sense . I have a tenet that is a private contractor and for the first time in years he is current on rent
I own a few oil stocks in addition to ETP and they are all kicking butt right now. Another good stock to look at that will be coming to profitability at the end of the second quarter 2018 since the merger last year is $ANGI. A dot-com mega monster in the home services industry.
Yep I wanted others opinion I love ETP .and AMFE
We all have our likes and dislikes. So does Jim Kramer.
It probably has little to do with logic. He simply doesn't relate well to a commodity-based area.
Well Jim Kramer and I just simply have a disagreement on $ETP.
Funny since etp until last qtr bumped divas every. Qtr for years
He's long been down on high yield plays, claiming they are always unsustainable. He doesn't relate well enough to oil and gas plays to be an open critic so he takes a back seat and tries to coast on his momentum in other sectors.
Jim Kramer said yesterday he hates mlp s what’s his problem
I love my ETP! All my oil stocks are right now are like girls gone wild.
Last Stop Before Partners Before Takeoff
https://seekingalpha.com/article/4178210-last-stop-energy-transfer-partners-takeoff
red flags, white flags all I know is that I love my ETP.
Breakout from the cup and handle is complete. The uptrend continues as we now enter a series of flag and pennant formations.
I did not get the feeling from the last conference call that management had any clear decisive direction on this issue...but I thought there was some sense of urgency.
I believe that the combined assetts and low valuation may make for an attractive takeover target...especially as these assetts begin to perform.
They are both MLP's so it would be logical they remain one, post merger, and the new goal of most is to remove IDR's and it's GP favoritism. There is something in place here to move IDR's down the road I think and maybe they will get the deal done in time to eliminate them entirely. I would like to see the contraction of boards, one set of directors, to drop the insider overhead immensely.
C corps are undeniably in market favor, but not in my world. I think the rules requiring 90% DCF distribution are the one thing I can feel good about in the stock market.
jugs can tell you from experience about over the top insider behavior from his time as an IR rep.
Then the question becomes whether that would be based on present or future value
Yes, growth is currently in the works here. I don’t rightly know what the time frame would be for any merger.
If the MLP status is tossed out with the ETP ticker symbol, what has you thinking the juicy distribution will be continuing?
I'm not seeing that at all. And I have no number in mind but I'd expect it to be close to ETE's payout scheme.
No, no prognostication here although I sense that ETP needs to better distinguish itself from ETE, its GP. Otherwise there could be a "run" on TETP bringing many investors to disengage out of fear that ETE won't treat them with respect.
Change happens much more easily that acceptance of same. It's true of me and most anybody I know. And I look for ETP to open up some dazzling opportunities in the near term.
@70.00 wti the pipes are full . Standing room only Plus ferc is out of the way AND ete and etp willmerge shortly . throw in .565 a share every 3 months . Whats not to like .
Last nights assessment is history, and has held true as ETP is continuing to break out of the handle...up 20 cents this morning. I have been following the fundamentals as well...or I would not have taken my position last year.
You seem to want to prognosticate about the next big deal. Tell me what the tea leaves are telling you about the future.
Pardon my sarcasm but I'll bet you teach algebra!
When ETP announces the next big deal very likely to affect the bottom line going forward, all TA will be quickly forgotten, offering nothing but a recollection of history. And there's no future in history.
I'll take fundamentals every time. Charts help me solidify things I sensed along the way but I will never delude myself into thinking that I can ignore fundamental realities in lieu of pictographic literature compiled by observers. I was a theory major in college and have regretted it throughout the half century since.
You call it instinct. I narrow it down to "wisdom" based on fear.
Most people go after diversification. The idea, as you well know, is to limit exposure to mistakes. I go the other way, as I believe I'll do better trusting my instincts and disallowing fear to occupy a lofty throne.
I've never had a bad year---it's always highly profitable. Despite my being an energy trader for the most part, I'm about where I was in January in terms of total asset value. I engage with my instincts and am always trying to narrow choices down to the tightest possible range. While it may not work for others, it definitely does so---for me.
Energy typically gains turf after Spring has sprung. So I'm expecting gains to begin accruing from here on as we move into the driving season.
Short term cup and handle formation, within a longer term double bottom formation. Emerging from the handle on relatively low volume...not a bad setup.
My instinct makes me spread out and diversify. No matter how much I like a position. Eggs-Baskets.
Didn't end up selling back the 600 ETP after all. Kept them and sold off some, GRUB, GMLP, SDLP instead to buy back my 200 DK just about where I sold them. Got my divy as well!
Maybe picking up more here on dips.
The conservative broker I use does not pay until they receive the money and so most times it is a day later. Tomorrow it will appear at the open. More Dry Powder!
No, I didn't believe a gorilla could weigh in at 800 pounds or anything even close. Turns out the 250 to 350 or so is the max.
Good payday today, huh?
I've been to the Zoo... and as the joke goes, next I go to the vet to get tutored. lol.
You may be thinking chimp. ... or chump? But don't feed anything through the bars! You could find it hard to type later...
The Western gorilla has a top weight of just 440 pounds so forget about an 800 pound gorilla as it ain't gonna happen. lol
I also seriously doubt a gorilla that outlandishly overweight could even fantasize pouncing---even on an exotic fruit salad!
I like your thinking, though. It's time to wait and watch.
When I saw ETP below 16 I did the same thing. Pounce. They are a re-make of two MLPs that were going along unhappy post merger. Those that held Sunoco Logistics and the heavier indebted Energy Transfer Partners did not have a choice on debt and distribution so many bailed... but new money... like ours was making a choice that took advantage of that disjointedness.
I will be watching as management handles capital expenditure and debt service, but they are generating enough cash flow to cover and are positioned well in the space. Rising oil brings favor back to energy investing and the US is the new 800 lb gorilla!
Thank you. Character counts, as the Boy Scouts maintain and you show humility.
And I concur. Am sitting with a bunch of distribution money from ETP, NGL and CEQP and weighing opportunities.
There's time for adding ETP (given that it just paid out) although I am sensing the time is near that will have people flooding into a somewhat safer MLP as evidenced by the up-ticking in energy, natural gas taking off more and more and that, of course, it's great reason to be in ETP.
DK is looking largely like a cap. app. play to me and nothing more. But that has value and certainly merits holding for now.
Something I've been doing over the past several months is accumulating cash. Sure, we're in the sweet spot right now but as anybody wearing a watch will tell you---
"Now don't last no time at all!"
So I'm at about 28% cash and daily I study what I can trim back without disturbing my income base. And, of course, I've got to have enough room in which to romp and play for the sake of fun. Interestingly, I'm finding that my fun is not at all diminished by my remaining 28% in cash. I'm leaning towards accumulating dry powder in the 30%-35% range.
It is in the nature of the human race to screw up royally. When it comes to the stock market? It's all about preparedness. This is so due to the emotional wellbeing or lack thereof that forces the weakest among us to jump off rooftops ala 1920's style.
So we know the next debacle will most surely happen. Now is the time to prepare. When the banking crisis occurred back on 2008, I was ready but even I was shocked by the money I made via GE and BOA. A month ago I jumped into CLDR and am hugely improved for it. The company was eviscerated after issuing slightly unfavorable guidance. I saw it and dove.
That's the fun, for me, at least. It's all about pacing as I see it---we build our strengths by tending to the accumulation of resources and then we wait and watch, knowing full well that the tide will turn as all tides eventually must. That 28% reserved stash is perfectly positioned for future parties. lol
Have a wonderful day! I've enjoyed putting this little piece together as it reinforces my belief that there's balance to be found in life.
I now understand. I still like ETP but probably would not have sold the other for diversification purposes. Keep the golden eggs spread out in case some rot..
I happen to hold both but at this moment ETP is up 29 cents while DK is higher to the tune of $1.31.
You obviously mean well but don't know of a relationship involving the other poster and me now spanning many years.
Still, I hold more ETP than DK and hope to add more down the road---but when momentum is screaming, I pause to accumulate the biggest bang for the buck.
DK is banging hard.
" DK is #1 on the highest priority buy-list of most prominent analysts" If you like DK, buy DK. I also like it, but I believe I will get the best return on my dollar on ETP.
On vacation, visiting in Canada so I just saw your post. Was a very nice Q and I expect better in Q2. I don't see this share price staying this undervalued very long.
Too bad as DK is #1 on the highest priority buy-list of most prominent analysts. Talk is that shares will make it to the mid-$50 range maybe $58. If it's spared via a RINs exemption, watch out above!
Just sold 200 sh DK paying 2% and picked up 500 more sh ETP @ $18.45 ( had 1,100 before ) paying paying 12%. I like it!
With all the new ventures coming on line in the next 18 months, this puppy has much more room to run...while we keep collecting nice divies to wait!
GLTA!
Analysts look at EPS soooooo... Another winning quarter.
EPS of $0.24 beats by $0.03
Revenue of $8.3B (+ 20.5% Y/Y) misses by $-540M
Heh welcome This stock doesn’t get much attn on IH Most tied to penny’s ETP 200 day at 18.31 . I have been buying since it broke below 20. Got some @ 15 and 16 so good average I think 24. Is the near term and 30 s in a couple qtrs . Really can’t believe it is still down .
New to board:
Found on Seeking Alpha
DAC: Enterprise Transfer Partners L.P. (NYSE:ETP) units currently represent an excellent buying opportunity for long-term high-yield income investors looking for capital gains as well as income. One of my favorite quotes from investing icon Sir John Templeton is:
"Invest at the point of maximum pessimism."
Templeton is known as a contrarian investor. He referred to his investment philosophy as "bargain hunting." His guiding principle was:
"Search for companies that offered low prices and an excellent long-term outlook."
I feel this statement perfectly illustrates where ETP units lie at present. The reward far outweighs the risk at the time. There is still a wide gap between the bullish sentiment level regarding ETP and the natural gas and energy sectors. The stock may have already bounced off the point of maximum pessimism, yet that only increases the margin of safety for investors opening a new position. ETP's newly combined assets have created a strong foothold in the most prolific producing basins for the MLP. This should augur well for organic growth for years to come. The over 12% yield, coupled with adequate coverage ratio of better than 1, establishes a solid margin of safety. The ETP is under-owned and oversold presently. I still see 30% upside in the stock. If we can break through resistance at the 200-day SMA, we could be off to the races. Discovered Dividends members are up 10% on the units in the past month alone with a 14% yield on cost locked in. The current yield is still a healthy 12.6%.
Anything under the $18 - $19 range presents a great buying opportunity down here with ETP for investors with a long term view and time frame.
Company director and his daughter bought 10,550 units at market price...
http://archive.fast-edgar.com//20180320/AAZ2OQ2C3M22IZL222272ZZ2762OB22R42A2/
Followers
|
15
|
Posters
|
|
Posts (Today)
|
0
|
Posts (Total)
|
403
|
Created
|
07/11/10
|
Type
|
Free
|
Moderators |
Volume | |
Day Range: | |
Bid Price | |
Ask Price | |
Last Trade Time: |