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Energy Transfer plans further spending cuts amid gas pipelines volume decline

Highlights

Crude shut-ins and weaker LNG export demand blamed

Pace of recovery likely to be slower than expected

Houston — Energy Transfer is cutting spending this year on growth projects by an additional $200 million amid a decline in volumes of associated gas on its interstate pipelines due primarily to shut-ins of crude production and lower demand for LNG exports, the company said Aug. 5.

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The disclosures in Energy Transfer's report on its second-quarter financial results reflect ongoing impacts from the coronavirus pandemic on North American energy markets.

The operator of the Rover gas pipeline, Mariner East NGL pipeline and Dakota Access crude pipeline, as well as developer of the proposed Lake Charles LNG export project in Louisiana, saw signs of improving conditions as the third-quarter began. However, it plans to remain cautious because of uncertainty of the pace of recovery.

Although Energy Transfer believes the demand destruction caused by the virus "reached the bottom during the second quarter," it sees the likelihood of a slower than previously expected ramp up in activity in the months ahead amid "unprecedented times," Chief Financial Officer Thomas Long said on an investor conference call.

For the April-June quarter, Energy Transfer reported net income of $353 million, or 13 cents/share, compared with profit of $878 million, or 33 cents/share, a year ago. Revenue totaled $7.34 billion compared with $13.88 billion in the second quarter of 2019. Comparisons between the most recent period and the year-ago period were affected by a change in how Energy Transfer accounts for crude inventories.

Transported volumes of natural gas on Energy Transfer's interstate pipelines fell 0.7 Bcf/d in the second quarter. On its intrastate transportation infrastructure, volumes rose primarily due to increased utilization of its Texas pipelines, Energy Transfer said. NGLs volumes were strong in the latest quarter.

Energy Transfer's growth capital spending cuts mean the company now expects to invest approximately $3.4 billion in 2020. Such spending is expected to drop to approximately $1.3 billion in 2021 and $500 million to $700 million per year in 2022 and 2023.

A recent fire at Energy Transfer's Lone Star natural gas liquids storage and fractionation facility at Mont Belvieu, Texas erupted following an explosion at the storage hub east of Houston. According to Lone Star, a contractor at the site struck an underground pipeline. The facility offers NGL storage and fractionation facility to producers. The facility has a 940,000 b/d fractionating capacity, Platts Analytics' NGL Facilities Databank showed.

Energy Transfer continues to move forward with development of the Lake Charles LNG export project, after Shell pulled out as a joint venture partner in March.