Zacks_Analysts' Blog : Energy Transfer Prices Unit Offer - Analyst Blog

Energy Transfer Partners L.P. (ETP) priced a public offering of 13,250,000 common units at $44.67 a piece, with a 30-day over-allotment option for an additional 1,987,500 units.

The natural gas and propane gas master limited partnership (MLP) plans to use the net proceeds from this offering to pay back outstanding debt under its revolving credit facility, to finance capital expenditures associated with pipeline construction projects and for general partnership purposes. The offering is expected to close on November 14, 2011.

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.

Additionally, the partnership holds a 70% stake in Lone Star NGL LLC, a joint venture that owns and operates natural gas liquids (NGL) storage, fractionation and transportation assets in Texas, Louisiana and Mississippi.

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 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. Additionally, the impending sale of its propane business will help ETP to concentrate on its key pipeline assets.

However, we believe that the near- to medium-term outlook for the partnership’s natural gas gathering and processing business continues to be weak, which 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.