Energy Transfer Partners: Oil’s Future Impact

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Pipeline operator Energy Transfer Partners, L.P. (NYSE:ETP) and affiliate Energy Transfer Equity, L.P. (NYSE:ETE) has reported good results for their fourth quarter revenue beating the prior year. What should investors make of it in the current market climate?

Energy Transfer Partners (NYSE:ETP) reported revenue for the December 2014 quarter of 12.28 billion versus $12.03 billion in the same quarter of 2013. ETP’s earnings per share also improved after reporting a net loss of $1.90 in 2013 against a net loss of $0.28 in the 2014 December quarter.

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Energy Transfer Equity (NYSE:ETE) reported revenue for the December 2014 quarter of 13.48 billion versus $12.61 billion in the same quarter of 2013. ETE’s earnings per share also improved after reporting a net loss of $0.31 in 2013 against a profit of $0.21 in the 2014 December quarter.

Pipeline companies have been posting strong results lately even in the face of declining oil prices. This is due to the fact that their revenues are fee based for work completed and not based on the price of oil. Investors should still be conscious about piling into pipeline stocks such as Energy Transfer Partners (NYSE:ETP) and Energy Transfer Equity (NYSE:ETE) because depressed oil prices may very well mean less production for the time being, meaning reduced revenues for ETP and ETE.

At the same time the stock price of Energy Transfer Partners (NYSE:ETP) and Energy Transfer Equity (NYSE:ETE) has remained “relatively” stable while the price of oil has declined. It would appear investors are potentially not pricing in enough the potential impact of depressed oil prices on production should they arise. On the other hand, the production effect may be minimal if oil demand does not fluctuate.

Energy Transfer Partners (NYSE:ETP) closed in trading yesterday at $59.37 after declining 1.69%, while Energy Transfer Equity (NYSE:ETE) closed at $60.14, down 0.58%.

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