The latest chapter in what’s become an agonizingly long saga for ETE shareholders and for owners of ETP stock in particular? It may have to shut down its recently opened Dakota Access pipeline while the U.S. Army Corps of Engineers reconsiders the potential impact of an oil spill. The ruling came down from a federal judge last week.
Energy Transfer Partners investors can only hang their heads at this point, too tired of the roller coaster ride to even argue in favor of ETP stock. The good news is, the make-or-break line in the sand for the shares is pretty well defined.
Here We Go Again!
The quick recap of the Energy Transfer Partners story goes like this:
The company has been run through the wringer over the past couple of years. After a huge run-up through late 2014 in step with oil’s (and gas) strong prices, ETP peaked at $52.47 in November of that year. The prospect of establishing an underground pipeline from North Dakota to Illinois helped fanned the flames of the rally leading up to that high.
The project was up-ended before it was completed and turned on, however. Though a federal court didn’t side with the Standing Rock Sioux Tribe (as was expected late last year), then-President Obama did, forcing work on the pipeline to a halt with its completion in sight.
Once in office, President Donald Trump put the project back in motion, which was completed last month and opened for business this month.
Now it may be turned off just as quickly as it was turned on. Judge James Boasberg determined:
“Although the Corps substantially complied with NEPA in many areas, the Court agrees that it did not adequately consider the impacts of an oil spill on fishing rights, hunting rights, or environmental justice, or the degree to which the pipeline’s effects are likely to be highly controversial.
To remedy those violations, the Corps will have to reconsider those sections of its environmental analysis upon remand by the Court. Whether Dakota Access must cease pipeline operations during that remand presents a separate question of the appropriate remedy, which will be the subject of further briefing.”
The judge’s ruling doesn’t necessarily shut the pipeline down while the Army Corps of Engineers hammers out the rest of the work it needs to complete. It could, but that call won’t be made until a hearing takes place on a date yet to be determined.
In the meantime, though, the matter once again hangs over ETP owners who’ve been waiting for a break. ETP stock is down more than 60% since its 2014 highs, less because of oil’s pullback, and more because of the rhetoric associated with the Dakota Access pipeline.
Indeed, Energy Transfer Partners has seemingly been unaffected by weak oil prices.
ETP Stock Itself Holds the Key
You read that right. While weak oil prices crimp the demand for pipe-based delivery and the nationwide oil glut likely means there’s crude oil nearby for any would-be customer, Energy Transfer Partners’s revenue meltdown hasn’t translated into a corresponding dip in earnings.
Perhaps more important, it hasn’t crimped the distribution of dividends that MLP owners love. The graph below tells the tale.