For those of you who haven’t tired of Energy Transfer Partners’ financial story, there’s an excellent addition to the commentary coming out of ETP’s Q2 results. This article, written by Ray Merola and ultimately positive about ETP stock, talks about the critical point looming around the end of the year for ETP.
ETP’s CEO, Kelcy Warren, is quoted as saying, “Go big, or go home.” He’s a gambler, and the day of reckoning for his gamble is coming up soon. The Dragonpipe (Mariner East 2) is not the only investment that needs to start paying off. ETP is telling shareholders that the Dragonpipe ($2.5 billion invested) will be in operation by the end of the year, but the company is also telling them that the Rover pipeline in Ohio and Michigan ($1.4 billion invested) and the Revolution pipeline/processing complex ($1.5 billion invested) will also be operational by year’s end. None of them is really close to completion. Both the Dragonpipe and the Rover project are facing serious environmental issues and many pockets of local opposition, so everything would have to work out perfectly to make that deadline.
But making the deadline is essential for ETP, because the company desperately needs the cash flow that would result from those operations. As Merola writes, “A day of reckoning awaits Energy Transfer management and investors. It should arrive late this year or early 2018.” Merola intends to retain his ETP investment, but he clearly sees a lot of risk in it.
In response to one of the comments following the article, Merola notes: “I believe Energy Transfer management significantly underestimated the strength and resolve of the Left-Green movement to disrupt construction activities. DAPL was the canary in the coal mine. The Northeast U.S. holds many hostile to the energy business. Energy Transfer: You’re not in Texas and Louisiana anymore…”
You’ve got that right, Mr. Merola, except it’s much more than just “the Left-Green movement” that wants this pipeline stopped.