Zacks_Analysts' Blog : Energy Transfer Raises Funds - Analyst Blog

Energy Transfer Partners L.P. (ETP) has commenced an underwritten public offering of 13,250,000 common units representing limited partner interests.

The natural gas and propane gas master limited partnership (“MLP”) also intends to provide the underwriters with a 30-day option to purchase up to 1,987,500 additional common units to cover over-allotments, if any.

Energy Transfer plans to use the net proceeds from this offering to pay back the outstanding debt under its revolving credit facility, to finance capital expenditures associated with pipeline construction projects and for general partnership purposes.

Dallas, Texas-based Energy Transfer owns and operates a diversified portfolio of energy assets. It is engaged primarily in two businesses: 1) the gathering, processing, storage and transportation of natural gas, and 2) and the distribution of propane.

Energy Transfer Partners, which competes with other large-cap pipeline 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 #3 Rank (short-term 'Hold' rating). We are also maintaining our long-term Neutral recommendation on the unit.

Energy Transfer Partners remains a premier MLP with strategically-positioned assets – intrastate and interstate pipelines, significant midstream and storage properties, as well as retail propane operations – 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 Energy Transfer Partners' natural gas gathering and processing business continues to be weak. The partnership’s seasonal propane business also remains a major liability, in our view.

As such, we expect the pipeline operator’s growth potential to be restrained with little room for meaningful upside from current levels.