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Energy Transfer Partners, Exxon Arm Tie Up

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Energy Transfer Partners LP (ETP - Free Report) signed a long-term contract to deliver midstream services to XTO Energy Inc. – a subsidiary of oil giant ExxonMobil Corporation (XOM - Free Report) . These midstream services will support production from XTO Energy’s wells in the Permian Basin.

Per the agreement, the natural gas pipeline operator will build a cryogenic processing plant with a capacity of 130 million cubic feet per day (Mmcf/d) in Glasscock County, Texas. This facility will have the provision to expand to 200 Mmcf/d. Additionally, Energy Transfer Partners would construct a gathering system, comprising over 100 miles of high and low pressure gathering pipelines, connecting the plant.

The cryogenic processing plant and the gathering system are expected to be online in third quarter 2014.

The contract reflects Energy Transfer Partners’ initiative to provide a wide array of midstream services in the Permian Basin. It would also provide connectivity to other assets of Energy Transfer Partners in the region like the Lone Star NGL pipeline system and the Energy Transfer Fuel gas transmission system, brining in additional revenues.

Dallas-based Energy Transfer Partners is a master limited partnership (MLP) engaged primarily in the gathering, processing, storage and transportation of natural gas. The partnership is a premier MLP with strategically positioned assets that are ideally situated to benefit from increasing production from unconventional sources of natural gas.

Energy Transfer Partners has not fared well in the past two quarters and has missed the Zacks Consensus Estimate both times. Considering this track record, we remain cautious ahead of the partnership’s fourth quarter and full year results, expected sometime after the market closes on Feb 19.  

Energy Transfer Partners currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players from the industry such as Crestwood Equity Partners LP (CEQP - Free Report) and Magellan Midstream Partners LP (MMP - Free Report) . While Crestwood sports a Zacks Rank #1 (Strong Buy), Magellan Midstream holds a Zacks Rank #2 (Buy).

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