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Energy Transfer Gets FERC Nod for Additional Rover Drilling

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Energy Transfer Partners  recently received the Federal Energy Regulatory Commission (FERC) approval to resume horizontal drilling activities in Rover natural gas pipeline. This will allow the partnership to proceed with horizontal drillings at eight sites in Ohio and West Virginia. The locations include Highway 109, Highway 50, Private Roads and Middle Island Creek, Stream at Highway 241, Highway 39, UT to Wolf Creek, Sandusky River; and Tuscarawas River.

In May 2017, pipeline operator Energy Transfer was asked to stall operations by U.S. energy regulators after around 2-million gallons of drilling fluid spill in Ohio. It was followed by the Ohio Environmental Protection Agency fining Energy Transfer Partners $2.3 million for contaminating water and air. Toward September-end, the partnership received approval from FERC for horizontal drilling for the Rover Pipeline Project in Ohio. In October, the partnership’s mainline compressor station 1 of the Rover Pipeline Project was approved by the FERC for partial service.

In November 2017, FERC allowed the partnership to resume directional drilling at Honey Creek, Interstate Highway 77, Norfolk Southern railroad and the Ohio River.

The partnership expects to finish the final phase of the project by the end of first quarter 2018. Once the $4.2-billion Rover pipeline starts operation, we expect it to generate sufficient cash flow for Energy Transfer unitholders.  Energy Transfer has The Blackstone Group L.P. (BX - Free Report) as a fellow stakeholder in the project.

Completion of the 713-mile pipeline will help Energy Transfers to ship around 3.25 Bcf per day. Producers in the Marcellus and Utica Shale areas will benefit from the pipeline's service as it will connect them with the U.S. markets and the Union Gas Dawn Storage Hub located in Ontario, Canada.

Headquartered In Dallas, TX, Energy Transfer is a Master Limited Partnership (MLP) primarily engaged in the gathering, processing, storage and transportation of natural gas and natural gas liquids through a network of pipelines spanning some 62,500 miles.

The partnership is well poised to grow on the back of its geographically dispersed asset mix. Further, Sunoco’s merger with Energy Transfer is likely to boost growth and value of the partnership and result in around $200-million cost savings by 2019.

However, the partnership’s pricing chart is not impressive. Year to date, Energy Transfer has lost 27% as compared with the 18% decline of the industry.

 

As a result, Energy Transfer currently carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.  

A few better-ranked players in the same industry are Enable Midstream Partners, LP and Spectra Energy Partners, LP . Both the partnerships sport a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Enable Midstream delivered an average positive surprise of 17.95% in the trailing four quarters.

Spectra Energy delivered a positive earnings surprise in each of the trailing four quarters, the average beat being 22.02%.

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