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Rover Phase 2 Ramping Up in Increments, Full Service Delayed to 2Q2018

Full service on the Rover Pipeline will slip to the second quarter of this year, although the project is to ramp up in increments over the next few months, management for sponsor Energy Transfer Partners LP (ETP) said Thursday.

Rover’s construction is 99% complete, with horizontal directional drills (HDD), which have caused regulatory setbacks, now 82% complete, ETP CFO Thomas Long said during a conference call to discuss 4Q2017 results. About 14 HDDs remain for Rover, management indicated.

Phase 1 of the 713-mile, $4.2 billion Appalachian pipeline was completed in December, putting the project’s total east-to-west capacity at 1.7 Bcf/d, Long noted.

ETP plans to request permission from the Federal Energy Regulatory Commission “to put pipeline laterals and associated compression on Phase 2 into service in stages as they are completed throughout the next few months,” Long said. “This would allow Rover to ramp up capacity prior to achieving full completion of that 3.25 Bcf/d project in the second quarter of this year.”

That represents a delay from ETP’s previous target for finishing Phase 2 by the end of March, and the revised timeline comes after FERC temporarily halted work on the project’s second HDD under the Tuscarawas River in Ohio, a location that has proved problematic for the operator.

Meanwhile, the start-up of Rover’s Phase 1 had a positive impact on ETP’s bottom line during the fourth quarter. ETP reported a year/year increase of 812 billion Btu/d in transported volumes on its Interstate Transportation and Storage segment attributable to Phase 1 of the project, with the Tiger pipeline contributing an additional 410 billion Btu/d in volumes for the segment thanks to increased production in the Haynesville Shale, management said.

Revenues for the interstate segment totaled $268 million versus $240 million in the year-ago quarter.

“We expect earnings in this segment to pick up once the remaining sections of Rover are in service and we are able to efficiently provide end-user customers with Marcellus and Utica gas,” Long said.

As for capital expenditures, ETP in 2017 spent about $5 billion on organic growth projects, including $1 billion of asset-level debt, according to Long. In 2018, the partnership expects to spend approximately $4.5 billion on growth projects, an increase from previous guidance because of “higher costs resulting from delays on our Rover and Mariner East projects, newly approved projects and carryover from 2017.”

In its intrastate segment, ETP reported 8,944 billion Btu/d in transportation volumes for the quarter, up from 8,134 billion Btu/d in the year-ago period.

Long attributed the increase to “higher demand for exports to Mexico, as well as the addition of new pipes to our intrastate system. Although we continue to expect volumes to Mexico to grow, particularly as a result of the Trans-Pecos and Comanche Trail pipelines, we are dependent upon infrastructure buildout in Mexico, which has been running behind U.S. infrastructure.

“While we currently believe volume growth will be slower than originally anticipated, all capacity is contracted under firm transportation agreements.”

Quarterly net income totaled $1.097 billion (57 cents/unit) versus a year-ago net loss of $336 million (minus 97 cents). Revenues for the intrastate segment totaled $741 million for the quarter, down slightly from $756 million in 4Q2016. Total revenues were $8.6 billion for the fourth quarter, versus $6.5 billion in 4Q2016.

ETP general partner Energy Transfer Equity LP (ETE) reported quarterly revenues of $11.45 billion, up from $9.32 billion a year ago. ETE quarterly net income totaled $1.168 billion, versus a net loss of $734 million a year ago.

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