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Energy Transfer Yet to Gain Full Approval for Rover Drilling

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Pipeline operator, Energy Transfer Partners (ETP - Free Report) recently received partial approval from the Federal Energy Regulatory Commission ("FERC") for resuming drilling activities at its Rover natural gas pipeline. The partnership can resume drilling at four new locations but still awaits approval at two other locations.


In May 2017, Energy Transfer asked to stall operations at the pipeline 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 water and air pollution violations. Toward September-end, the partnership received approval from FERC for Horizontal Directional Drilling operations 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.

Recent Development

Now, FERC has given the partnership the green signal for resuming directional drilling in four locations. The locations include the partnership's drilling plan at Honey Creek, Interstate Highway 77, Norfolk Southern railroad and the Ohio River. Energy Transfer is yet to receive approval for drilling under the Sandusky and Tuscarawas rivers as the measurements taken by the partnership for these locations fell short.

In addition, per the director of Ohio Environmental Protection Agency, Craig Butler, new violation notices are being prepared by the Agency as it believes that more spilling incidents occurred recently.

Significance of 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.

Energy Transfer has The Blackstone Group L.P. (BX - Free Report) as a fellow stakeholder in the Rover Pipeline project.

Price Performance

Energy Transfer has lost 32.1% of its value year to date compared with 22.1% decline of its industry.

About the Partnership

Energy Transfer is one of the largest master limited partnerships, with a highly diversified portfolio of energy assets in the United States. The asset list includes 71,000 miles of crude oil, natural gas, natural gas liquids and refined products pipelines, spanning 36 states. It also provides fractionation, storage and terminalling facilities. The partnership is headquartered in Dallas, TX.

Energy Transfer has been consistently returning value to its unitholders through distributions, making it attractive for those looking for a steady source of income. The partnership reported a 40.2% year-over-year increase in distributable cash flow this quarter. Further, various key projects of the partnership like, Bakken Pipeline and Permian Express 3 pipeline are driving the partnership’s growth.

Although most of the projects of the partnership are on track, a cloud of uncertainty still hovers over some. Bayou Bridge, Mariner East and the Revolution project are still grappling with major regulatory and logistic hurdles, which might affect cash flows and revenues of the partnership.

Zacks Rank and Stocks to Consider

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

Some better-ranked stocks in the oil and energy sector include Northern Oil and Gas, Inc. (NOG - Free Report) and Denbury Resources Inc. (DNR - Free Report) . Both stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Minnetonka, MN-based Northern Oil and Gas is an independent energy company. The company’s sales for the fourth quarter of 2017 are expected to increase 51.9% year over year. The company delivered an average positive earnings surprise of 175% in the last four quarters.

Plano, TX-based Denbury Resources is an oil and gas company. The company’s sales for the fourth quarter of 2017 are expected to increase 4.8% year over year. The company delivered an average positive earnings surprise of 125% in the last four quarters.

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