Energy Transfer Equity Hits 52-Week High - Analyst Blog

On Jun 10, 2014, the units of Energy Transfer Equity, L.P. (ETE) climbed to its 52-week high of $54.84. The unit price was finally closed at $53.93, up around 95.2% from the prior-year closing of $27.63. The surge in unit price was driven by several factors, including the partnership's favorable liquidity position backed by a strong cash generation capacity, systematic investments in growth projects, diversified revenue streams and sharing profits with unitholders through payment of regular cash distributions and effective unit repurchase program.

Energy Transfer Equity maintained a strong liquidity position. As of Mar 31, 2014, the partnership had cash balance of around $1 billion, up 69.5% from 2013 year end. In May 2014, the partnership increased the limits to $1.2 billion under its revolving credit facility. In addition, Energy Transfer Equity exhibited its efficiency in terms of improving cash inflow through operating activities. In the first three months of 2014, the partnership's operating cash flow increased 151.5% to $0.83 billion from the prior-year comparable figure.

We consider Energy Transfer Equity as an organization having crude oil, natural gas and natural gas liquids (NGL) midstream operations in many mineral-rich regions. The partnership has numerous units, including Energy Transfer Partners, L.P. (ETP), Regency Energy Partners LP (RGP) and several others. A well-diversified operation continues to help the partnership to generate steady cash inflows.

Energy Transfer Equity and its subsidiaries strongly follow inorganic growth strategies to expand their scale of operations. In Apr 2014, Energy Transfer Partners announced that it has signed an agreement with Susser Holdings Corporation (SUSS) to acquire the latter for around $1.8 billion. Earlier, the partnership and its units have completed several inorganic transactions, including acquisition of certain subsidiaries of Hoover Energy Partners LP by Regency Energy Partners and completion of transfer of Trunkline LNG Company, LLC to Energy Transfer Equity from Energy Transfer Partners. Regency Energy Partners also merged with PVR Partners, L.P. (“PVR”). Acquisition of assets with a similar line of businesses will enable the partnership to increase its scale of operations and the transactions are expected to be immediately accretive.

On the other side, Energy Transfer Partners and Regency Energy Partners continue to invest substantially for their respective growth projects. Energy Transfer Partners plans to invest $2.75 - $2.95 billion under 2014 growth projects. In 2014, Regency Energy intends to spend $1.22 billion in gathering and processing and NGL operations. The scheduled completion of these ventures will enable the partnerships to serve more customers.

Apart from utilizing funds in growth projects, Energy Transfer Equity focuses on maximizing unitholders' value. In Apr 2014, the board of directors announced that the partnership will pay annualized cash distribution of $1.435 per unit, up from the previous rate of $1.385. From Jan through Apr 2014, Energy Transfer Equity repurchased around $0.75 billion of its common units.

Energy Transfer Equity currently has a Zacks Rank #3 (Hold).