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UPDATE: ETP pushes back full service on Rover pipeline to Q2


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UPDATE: ETP pushes back full service on Rover pipeline to Q2

The full commercial service date for Energy Transfer Partners LP's $4.2 billion Rover Pipeline LLC project has been delayed to the second quarter of 2018, according to CFO Thomas Long.

During Energy Transfer's Feb. 22 fourth-quarter earnings call, Long said the 3.25-Bcf/d, 511-mile pipeline will not meet the previously targeted full-service date at the end of the first quarter. Energy Transfer spokesperson Alexis Daniel confirmed the commercial service setback to S&P Global Market Intelligence in an email.

The delay comes after the Federal Energy Regulatory Commission ordered Energy Transfer to stop horizontal directional drilling at river crossings in Ohio due to drilling fluid spills and losses in 2017 and 2018. FERC has lifted those holds, but the setbacks contributed to Rover's delayed timeline.

FERC began authorizing parts of the Rover system in August 2017, and most recently granted Energy Transfer permission to begin service at a mainline compressor station for the project that transports Marcellus and Utica shale gas to Midwest and Canadian markets. Long added that construction activities for the entire project are 99% complete, and horizontal drilling activities are over 82% complete. Executives said the project has work to complete at about 14 horizontal directional drill sites.

The CFO also noted that the Energy Transfer-led Mariner East 2 pipeline project, which would add 345,000 barrels per day of NGL takeaway capacity to the system transporting Appalachian supplies to destinations like the Marcus Hook Industrial Complex near Philadelphia, is still expected to begin service on schedule in the second quarter.

Outside Appalachia, Energy Transfer executives announced that they are "aggressively pursuing" a larger project to move oil from the Permian Basin to Nederland. The company has been working with several producers and it would consider bringing on partners to make the project happen.

And in a sharp turn from CEO Kelcy Warren's November 2017 push back against the sectorwide trend toward equity self-funding through modifying distribution growth, Energy Transfer executives struck a different tone on the call.

"Even with [Energy Transfer's] great fourth quarter and the contribution from major projects coming online, we felt with [Energy Transfer’s] current cost of equity it was prudent to temporarily suspend the distribution growth in order to retain excess cash flow to fund the equity components of our growth projects and continued to reduce our leverage," Long said during the Feb. 22 call.

Long added that Energy Transfer does not plan to issue equity through the middle of 2018 and is targeting zero equity needs for the whole year.

Addressing the wave of midstream structural consolidation, Warren emphasized that Energy Transfer and Energy Transfer Equity LP will not rush to merge before an anticipated target date of 2019 unless credit rating agencies improve their outlook.

"It's fundamentally simple," he said during the call. "We just can't risk ... our financial health."

When the Energy Transfer family does reorganize its structure, according to Long, it may be organized under a C-corp structure. "We are very interested in [that] structure, we almost did one with the Williams transaction," he said.

Energy Transfer Partners on Feb. 21 reported fourth-quarter 2017 adjusted EBITDA of $1.94 billion, an increase from $1.49 billion in the prior-year period. The partnership's distributable cash flow in the quarter was $1.20 billion, an increase from $955 million in the year-earlier period.

For the full year, the partnership reported adjusted EBITDA of $6.71 billion, an increase from $5.73 billion a year prior, and distributable cash flow for the year was $4.19 billion, an increase from $3.62 billion in 2016.