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Energy Transfer ‘Couldn’t Feel Better’ About Rover Schedule, Management Says

Energy Transfer Partners LP (ETP) is sticking to an aggressive timetable for its Rover Pipeline, deploying "a tremendous amount of manpower" to clear trees along the route before its window of opportunity closes at the end of March, management said Thursday.

Speaking to analysts during a 4Q2016 conference call, COO Marshall McCrea said the Dallas, TX-based master limited partnership "couldn't feel better" about where it currently stands with Rover. The massive 3.25 Bcf/d, $4.2 billion pipeline -- proposed to run from producing areas in Pennsylvania, Ohio and West Virginia to interconnects with the Vector Pipeline in Michigan and the Dawn Hub in Ontario, Canada -- received its FERC certificate order in early February. This is no doubt later than ETP would have hoped given the Federal Energy Regulatory Commission completed a final environmental impact statement for the project last summer.

With its federally-approved tree-clearing window closing at the end of spring and not to reopen until the fall, ETP had asked FERC for an order by the start of January to ensure timely construction.

But despite the lengthy federal approval process -- including a complication with FERC over a possible violation of the National Historic Preservation Act -- ETP management reassured analysts and investors that it expects to hit its original targets of partial service to Defiance, OH, by July and full service to Vector and Dawn by November of this year.

"I'll tell you, after what we went through last year in dealing with the administration we were dealing with and just the stresses and headaches, the team stayed together, us with our construction companies, and we're moving forward," McCrea said. "We've talked within the last week. There's a tremendous amount of manpower out there now cutting trees. We have" a notice to proceed from FERC "to clear up to 90% of the trees right now along the route. The wetlands are only about 10%. So, we are highly confident that we will have the trees cut by the end of March."

McCrea said that "as of today" ETP expects to soon have in hand the last remaining federal permits it needs to move forward, both from FERC and from the Army Corps of Engineers.

"We have firm contracts with the contractors. They are ready to go as soon as we have approval from FERC to move forward on full construction, which we expect no later than March 1," he said. "We're ready to go. They're ready to go, and yes, it's going to be a challenge, but we still believe we will be in and flowing gas to Defiance by July of 2017."

CEO Kelcy Warren said tree-clearing crews will have to adjust their procedure due to the time constraints.

"In a normal pipeline construction job, as you're cutting trees and knocking them down, you're also stacking them, you're dealing with debris at the same time," Warren said. "That's the process. It's a much more efficient process. We're not allowed that luxury in this case. These trees are just going to be put on the ground."

Management acknowledged that the accelerated tree-clearing will likely increase the project budget.

"Certainly, by adding more people in a shorter period of time, it will increase cost...the longer it takes to get the FERC certificate, the more difficult and challenging this will be to get built in time," McCrea said. "So we have hired more folks to get in there and to cut the trees down in time. I don't think we have any kind of finalized number on how material, but it is raising cost a little bit."

Management for Rice Energy Inc., a shipper on Rover that also held a conference call Thursday to discuss 4Q2016 results, said the company is "a little less optimistic about" Rover's in-service date. The producer said it's anticipating partial service to Defiance by the end of the year.

ETP also discussed a number of other growth projects on its plate Thursday, including the well-publicized Dakota Access Pipeline.

With the completion of construction now in sight for the embattled DAPL, Warren fielded a question Thursday about the public relations challenges the project faced.

"Unfortunately, we've entered a period of time where you can follow every law, conduct yourself exactly correctly and go above and beyond all the requirements, and yet you fall into the mess we fell into with [DAPL]. There's no way we can defend ourselves there," Warren said. "That was a mistake on my part. I underestimated the power of social media. I didn't realize people could just say things that aren't true and freely do it, but they did."

CFO Thomas Long said DAPL is on track to be in service by 2Q2017.

The day of its call ETP announced plans for subsidiary Lone Star NGL LLC to construct a fifth natural gas liquids (NGL) fractionation facility in Mont Belvieu, TX. The facility is fully subscribed at 120,000 b/d, the partnership said. The project is expected to cost $385 million and go into service by September 2018.

"The Permian and Delaware Basins continue to be the primary growth drivers for our midstream business," Long said, "and we are well-positioned to meet producer's growing needs for both gas and liquids services.

"And in South Texas, in the first two months of 2017, we're seeing volumes on our system grow, as we're starting to see the impact of the continued increase in rig counts, which have doubled off the lows in October of last year."

For 4Q2016, ETP reported midstream volumes of 9,693,728 MMBtu/d, down slightly from 10,051,593 MMBtu/d in the year-ago period. Liquids transportation and services volumes increased to 669,694 b/d from 523,285 b/d in 4Q2015.

Interstate transportation and storage volumes totaled 5,322,091 MMBtu/d transported, compared with 5,739,157 MMBtu/d in the year-ago quarter.

ETP reported a quarterly net loss of $362 million (minus $1.47/unit), compared with a net income of $21 million (minus 68 cents/unit) in the year-ago quarter.

ETP general partner Energy Transfer Equity LP reported a net loss of $760 million (22 cents/unit), compared with a net loss of $138 million (30 cents/unit) in the year-ago quarter.

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