Energy Transfer Partners (NYSE:ETP) is positioned to benefit from the explosive growth in development of unconventional resource basins and the necessary midstream assets to gather, process and transport this natural gas to the end user.
IN PICTURES: 7 Tools Of The Trade

Intrastate Transportation and Storage
Energy Transfer Partners is a master limited partnership involved in the transfer and storage of various hydrocarbons. The company owns 17,500 miles of natural gas gathering and transportation pipelines in the United States. The Intrastate Transportation and Storage segment generated 47% of the company's adjusted EBITDA in the 12 months ending September 30, 2010. The company's asset base here is near several major emerging shale plays in the United States. In the Eagle Ford Shale, the company has two projects scheduled to be completed within the next six months.

The Dos Hermanas pipeline is 50 miles in length and will run across both the dry and wet gas areas of the Eagle Ford Shale. The pipeline will have a capacity of 400 million cubic feet per day. Energy Transfer Partners is also building the Chisholm Pipeline, an 83-mile project also servicing development of the Eagle Ford Shale. This pipeline will have a capacity of 100 million to 200 million cubic feet per day.

The Haynesville Shale is another growth area for Energy Transfer Partners in both Texas and Louisiana. In Louisiana, the company has 175 miles of pipeline and is currently transporting 350 million cubic feet per day of natural gas. This is expected to increase to 460 million cubic feet per day in 2011.

In Texas, the company has 62 miles of pipeline with current volume of 90 million cubic feet per day. The company expects its volume to average 250 million cubic feet per day.

Interstate Pipeline
The Interstate Pipeline segment was 16% of adjusted EBITDA in the 12 months ending September 30, 2010. The company recently completed the Fayetteville Express Pipeline, which runs across Arkansas and Mississippi. This pipeline has a capacity of 2 billion cubic feet per day and will go into service fully in December 2010. In the Haynesville Shale, the company recently finished the Tiger Pipeline. This pipeline also has a capacity of 2 billion cubic feet per day, and the company plans a 400 million cubic feet per day expansion in 2011. EnCana Corporation (NYSE:ECA) and Chesapeake Energy (NYSE:CHK) have both signed multi-year agreements with Energy Transfer Partners to utilize this pipeline.

Retail Propane
Energy Transfer Partners operates a retail propane business under the Heritage Propane brand. The company serves 1.2 million customers in 41 states, and this business accounted for 18% of adjusted EBITDA in the 12 months ending September 30, 2010.

Other companies in the propane business include Suburban Propane Partners, L.P. (NYSE:SPH), which just reported fiscal 2010 net income of $115.3 million, or $3.26 per common unit. Inergy, L.P. (NYSE:NRGY) is also in the propane business and recently acquired Pennington Gas Service, which serves 15,000 customers in Michigan and Ohio.

Distribution
Energy Transfer Partners has also paid a distribution of $3.575 per unit over the last four quarters giving a yield of 7%. This distribution has grown at a compound annual growth rate of 13% since 2004, but has not been raised since 2008.

The Bottom Line
Energy Transfer Partners can be considered a play on the growth of shale and tight gas plays, as this pipeline and storage company has an asset base positioned near many of these high growth areas. The company is also planning many expansion projects to help transport production out of these areas. (The CAGR is a good and valuable tool to evaluate investment options, but it does not tell the whole story. See Compound Annual Growth Rate: What You Should Know.)

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Tickers in this Article: ETP, ECA, CHK, SPH, NRGY

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