Sunoco LP (SUN +6.3%) surges after Credit Suisse upgrades shares to Outperform from Neutral with a $31 price target, saying a distribution cut is unlikely given options available for Sunoco and Energy Transfer to execute before reducing payouts.
Taking into account the pending dilutive merger of Sunoco Logistics Partners (SXL +0.5%) and Energy Transfer Partners (ETP +0.7%), CS analyst John Edwards says a distribution cut seems to be a “logically unviable option,” even though it would mean “immediate and significant” cash savings of $230M/year.
Edwards says an issuance of convertible preferred units to Energy Transfer Equity (ETE +1.3%), a two-year incentive distribution rights waiver and deferring distribution growth by a year seems “the most likely path to be adopted by SUN to rescue its balance sheet and continue on its expected growth trajectory.”
The new Trump administration should bode well for MLPs, RBC analysts say, as cabinet appointments appear energy friendly and the federal regulatory environment could ease somewhat for energy; MLPs also could benefit from the new pro-infrastructure stance, which could help the group to stay clear of any tax changes.
The group was in a "hunker down" mode this year, RBC says, as the best performing MLPs mostly were those that came out of distress by successfully addressing balance sheet concerns - such as NGL Energy Partners (NYSE:NGL) and Plains All American Pipeline (NYSE:PAA) - and those most obviously exposed to the fundamental macro themes on the year - such as Targa Resources (NYSE:TRGP) and Oneok (NYSE:OKE)/Oneok Parnters (NYSE:OKS).
YTD, Oneok, American Midstream (NYSE:AMID) and USD Partners (NYSE:USDP) are the best performers in the sector, all more than doubling, while Ferrellgas Partners (NYSE:FGP) and Southcross Energy Partners (NYSE:SXE) both lost more than 50%.
Pres.-elect Trump formally announces former Texas governor Rick Perry as his choice to lead the U.S. Department of Energy, a department he has proposed eliminating in the past.
Perry is at least the third Ttrump cabinet pick considered a strong ally of the oil industry, joining Exxon CEO Rex Tillerson as secretary of state and Oklahoma Attorney General Scott Pruitt as EPA chief.
But Texas also became a leading wind energy producer under Perry, whose office used state incentive funds to funnel public dollars to companies promoting alternative energy.
Perry joined the board of Energy Transfer Partners (NYSE:ETP) in early 2015 after serving as Texas governor for 14 years, ETP's Kelcy Warren gave $5M to a political action committee that backed Perry's recent presidential candidacy, and ETP employees donated ~$1.5M to Perry's campaign and outside groups supporting him.
ETP is attempting to build the $3.8B Dakota Access Pipeline that has sparked sometimes violent protests; Trump says he supports the project and once owned shares of ETP and Phillips 66 (NYSE:PSX), a part owner of Dakota Access, but Trump's transition team recently said Trump sold all of his stock this summer.
Protesters at the site of the Dakota Access pipeline say their concerns are validated by the leak of 176K gallons (4,200 barrels) of crude oil from the Belle Fourche pipeline 150 miles away in western North Dakota.
The leak has been contained, but not before 130K gallons of oil flowed into and contaminated more than five miles of Ash Coulee Creek, state officials estimate.
One of the protesters' central arguments for months has been that, despite assurances from Dakota Access project leader Energy Transfer Partners (NYSE:ETP), an oil spill would be inevitable at the Missouri River.
The Belle Fourche leak came from a section of a 1980s-era pipeline that had been replaced in 2012. state officials say.
Energy Transfer Partners (NYSE:ETP) is continuing to pursue a court challenge to force the Obama administration to approve completion of the Dakota Access pipeline instead of waiting for Pres.-elect Trump to take office next month.
ETP's lawyers asked the U.S. District Court in D.C. for an expedited ruling late Monday that would allow the company to complete the project, and a hearing in the case is scheduled for Friday morning.
ETP argued that the Army Corps of Engineers already had approved completion of the pipeline via a crossing underneath the Missouri River, and that the final easement is merely a perfunctory "ministerial" document, adding that the delays amount to political interference and are not supported by the law.
The delays already have cost ETP $450M, according to court papers, and ETP has said continued delays cost ~$83M/month.
A crude oil transmission line operated by Belle Fourche Pipeline Co. has been shut down in western North Dakota following a leak that spilled oil into a creek, a development that could harden the views of Native Americans, climate activists and other protesters camped ~200 miles away at the Dakota Access pipeline project worried that a leak there could contaminate the water supply.
Many of the demonstrators say they are planning to stay at the Dakota Access site, despite a recent win against the building of the pipeline, the wishes of the chairman of the tribe that has led the protest and blizzard conditions.
Meanwhile, the American Petroleum Institute and the MAIN Coalition, which represents entities that benefit from Midwest infrastructure projects, are calling on Pres.-elect Trump to pave the way for completion of the pipeline when he enters the White House.
Pres.-elect Trump supports completion of the Dakota Access pipeline, a Trump spokesperson says, a day after the Obama administration denied a permit needed to finish the project.
Pipeline experts say Trump has several options once he takes office to enable the pipeline to proceed, including directing the Secretary of the Army to reinstate a previous permit for the reservoir crossing or issuing an executive order approving the pipeline: the Republican-led Congress, which reconvenes more than two weeks before the inauguration, also could get involved.
But nearly any outcome delays completion until mid 2017, and ETP has said it expects to lose nearly $84M each month the pipeline is delayed, and that losing shippers could result in its cancellation.
Energy Transfer Partners (ETP -3.4%) and Sunoco Logistics Partners (SXL -3.5%) open lower after the U.S. Army Corps of Engineers refused a crucial permit needed for completion of their $3.7B Dakota Access pipeline project, which said the companies would need to consider alternative routes other than passing under Lake Oahe; also ETE -1.8%.
In an angry statement, the companies say the decision is "a purely political action... the latest in a series of overt and transparent political actions by an administration which has abandoned the rule of law in favor of currying favor with a narrow and extreme political constituency."
Analysts generally agree that a Trump administration eventually will approve the project but warn that investors should be aware of headline pressure on Dakota names including EOG Resources (EOG +1.8%), Marathon Oil (MRO +2.2%), Whiting Petroleum (WLL +2.4%), Continental Resources (CLR +1%) and Hess (HES +3.5%).
North Dakota's governor orders an "emergency evacuation" of thousands of protesters camped on federal property near the Dakota Access oil pipeline project, citing dangerous winter weather.
The order, which Standing Rock Sioux Chairman Dave Archambault calls a "menacing action meant to cause fear," comes days after the U.S. Army Corps of Engineers, which manages the site, set a Dec. 5 deadline for the demonstrators to vacate their encampment.
The National Weather Service has posted a storm warning for most of western and central North Dakota, forecasting the possibility of heavy snow through Wednesday.
Dakota Access pipeline protesters say they will not leave the area where hundreds have camped for months, despite a U.S. Army Corps of Engineers directive that all federal lands north of the Cannonball River will be closed to public access Dec. 5 for "safety concerns."
Several hundred protestors on Corps land in southern North Dakota have erected semi-permanent structures or brought motor homes and trailers in advance of the harsh winter; the Corps has said it would not evict the encampment, and Standing Rock Sioux tribal leader Dave Archambault says he does not believe the Corps would forcibly evict anyone.
It's the federal government's job to peacefully close the camp because it allowed people to stay there in the first place, North Dakota Gov. Dalrymple says.
Relevant tickers include ETP -2.3%, ETE -2.6%, SXL -2.5%.
Energy Transfer Partners (ETP -3%) and Sunoco Logistics Partners (SXL -2.7%) are lower for a second straight session following yesterday's unit-for-unit merger deal (I, II), while Enbridge Energy Partners (EEP +2.8%) rises for a third consecutive day.
Stifel downgrades ETP to Hold from Buy with a $37 price target, trimmed from $48, as the firm sees little upside at current valuations given that units now effectively track movements in the price of SXL, which the firm reiterates at Hold with a $24 target, cut from $29.
Tudor Pickering says it would be buyers of SXL “despite investor fears of a forced SXL takeout bid materializing,” and adds that the deal cuts yield for ETP unitholders in exchange for no premium takeout, while SXL owners “have their asset base diluted to shore up ETP’s unsustainable payout."
Authorities are defending their decision to douse protesters with water during sub-freezing weather last night near the Dakota Access oil pipeline, and say they will not rule out doing it again if some of the protesters continue to throw objects including rocks, asphalt and water bottles at law enforcement officers.
Protest organizers say at least 17 protesters were taken to the hospital, including some who were treated for hypothermia.
Protesters massed against police today at a bridge near the protesters' main camp, but turned back at the request of Standing Rock Sioux elders after reports of firearms in the crowd.
Both Sunoco Logistics Partners (SXL -7.8%) and Energy Transfer Partners (ETP -7.9%) trade sharply lower on news of the plan for the much smaller SXL to purchase ETP that will result in a net implicit reduction in distribution yield for ETP unitholders.
ETP investors will receive 1.5 units of SXL for each unit of ETP they own but their payouts will be reduced since SXL has a much lower dividend yield; CreditSights says the merger amounts to a “stealth distribution cut” that reduces the ETP cash payout by 29%.
Bernstein Research notes CEO Kelcy Warren chose a path that protects Energy Transfer Equity (ETE +2.8%), the entity in the group of companies in which he holds more than 10% of shares outstanding.
But analysts generally are pleased that the deal - if it is approved by unitholders - will simplify ETE's complex structure, which also includes Sunoco LP (SUN -3.6%) and PennTex Midstream Partners (PTXP +0.8%); Baird analyst Ethan Bellamy calls the deal "a major step in untangling... the most complex web of publicly traded partnerships."
Seaport Global's Sunil Sibal calculates that the deal will lead to a distribution reduction of ~$1.22 per ETP unit, or $650M, but could turn out well in the long run, lowering the cost of capital through the Energy Transfer complex and positioning it for acquisitions as the industry continues to consolidate.
Sunoco Logistics Partners (SXL -1.6%) agrees to acquire Energy Transfer Partners (ETP -1%) in a unit-for-unit transaction.
ETP unitholders will receive 1.5 common units of SXL for each common unit of ETP they own, which equates to a 10% premium to the volume weighted average pricing of ETP’s common units for the last 30 trading days.
The companies say the combined partnership will offer increased scale and diversification across multiple producing basins and have greater opportunities to more closely integrate SXL's natural gas liquids business with ETP's natural gas gathering, processing and transportation business; the companies also anticipate more than $200M/year in commercial synergies and costs savings by 2019.
Kelcy Warren, Chairman of parent company Energy Transfer Equity (ETE +10%), will be CEO of the combined company; ETE will continue to provide all incentive distribution right subsidies that are currently in effect for both partnerships.