Natural gas pipeline operator, Energy Transfer Partners LP (ETP) sold off the assets of the New England Gas Company (“NEG”) to the regulated distribution utility, Liberty Utilities Corp. NEG is a unit of ETP’s wholly owned indirect subsidiary, Southern Union.
The transaction closed for a consideration of $60 million. Of the total proceeds, Liberty assumed a debt of around $20 million and paid the remaining $40 million in cash.
The NEG asset sale, along with the sale of Missouri Gas Energy assets by Southern Union that completed on Sep 1, indicates ETP’s intention to divest its non-core assets in order to deliver value to its shareholders.
Dallas, Texas-based Energy Transfer Partners is a master limited partnership (MLP) engaged primarily in the gathering, processing, storage and transportation of natural gas. The partnership is a premier MLP with strategically positioned assets that serve major North American natural gas-producing basins. The robust organic growth profile, stable fee-based operating income and strong liquidity position are other positives for the company.
However, we believe that the partnership’s natural gas gathering and processing business will remain weak in the near to medium term. Moreover, the lack of distribution increase has been a major impediment to a breakout in Energy Transfer Partners’ unit price.
ETP stock trades in a 52-week range of $42.00 to $54.93 per unit. The stock moved marginally up, settling at $52.52 on Dec 20, from the previous close of $52.23.
ETP currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can consider better-ranked stocks such as Pacific Drilling S.A. (PACD), Clayton Williams Energy, Inc. (CWEI) and Tesco Corporation (TESO). All these stocks currently sport a Zacks Rank #1 (Strong Buy).
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