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Energy Transfer Partners Looks for Bears to Exit in 2010

While volume declines are suppressing bullish talk, Energy Transfer Partners (ETP) thinks the industry may be poised to pull out of the bear market next year, and until then CEO Kelcy L. Warren doesn't think there is much risk of shut-ins for his midstream business.

"We'll see some, of course, in the Rockies and in some of the other areas where the basis is so wide," Warren said during a conference call with investors. "But what we're seeing -- and overall, this tends to suggest that we'll be recovering from this bear market hopefully in the not to distant future, maybe in 2010 -- we're seeing volume declines. The rig counts in the Barnett Shale have impacted the volumes. That's just reality."

Dallas-based ETP reported 2Q2009 earnings before interest, taxes, depreciation and amortization (EBITDA) of $307.7 million compared with EBITDA of $292 million in 2Q2008. Net income for 2Q2009 was $150.7 million (38 cents/unit), compared with net income of $165.7 million (61 cents) in 2Q2008.

ETP remains tight-lipped about pending Federal Energy Regulatory Commission (FERC) enforcement proceedings. In July 2007 FERC accused ETP and several affiliates -- Energy Transfer Co., ETC Marketing Ltd. and Houston Pipeline Co. -- of manipulating physical natural gas prices at the Houston Ship Channel (HSC) and Waha trading hub on various dates from December 2003 through December 2005 (see NGI, July 30, 2007).

In July an administrative law judge suspended FERC enforcement proceedings against ETP, saying that the two sides were in settlement negotiations to resolve pending charges against ETP (see NGI, July 13). The judge's order placed all judicial hearings involving the ETP enforcement case on hold.

ETP faces potential civil penalties totaling $82 million -- $79 million for the manipulations at the HSC and $3 million for the manipulations at Waha and Permian trading hubs. FERC also proposed disgorgement of $69.9 million, plus interest, in unjust profits. ETP has said it believes that its business transactions during the times covered by the proceedings were conducted in a lawful and responsible manner.

"We're prohibited from talking about it...I think everything that we've said publicly before, we stand behind today," Warren said.

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