Energy Transfer Partners (NYS: ETP) has been left out in the cold over the past year. Missing out on many of the gains its midstream peers have experienced, ETP is down more than 8% on the year.  Part of the problem is that the partnership hasn't increased its distribution a single cent over the past four years.  

Down doesn't necessarily mean out, however, and ETP packs a lot of potential not just to grow, but to also finally ratchet up that distribution payment.  I created a premium report on ETP to help guide investors on whether the company merits portfolio consideration. 

Following is an excerpt from the report, laying out the company's opportunity. We hope you enjoy it.  


Since the end of 2010, ETP has announced $3 billion worth of organic growth projects, the majority of which will be online and in service by the end of this year. The sheer volume of these projects, combined with recent strategic acquisitions, do two things. First, it increases the diversity of ETP's business mix. Second, it almost guarantees the likelihood of additional distributable cash flow.

For example, in one fell swoop the recent acquisition of Sunoco gives ETP (once strictly a natural gas midstream company) access to the crude oil, refined products, and natural gas liquids markets. Between Sunoco and its associated master limited partnership, Sunoco Logistics Partners (NYS: SXL) , ETP now operates 5,400 miles of crude oil pipeline and 2,500 miles of refined products pipeline. Energy Transfer also picked up 40 miles of NGL pipeline, and one NGL storage facility in the deal.

In 2009, 52% of ETP's business was dedicated to intrastate natural gas pipelines. Today, that number is down to 26%, and the overall make-up of the business is far more diversified than it was even two years ago. In this way, ETP mitigates any disadvantages that affect one specific revenue stream, while opening the door for more opportunistic growth across the various niches of the midstream industry. As Energy Transfer's business mix continues to diversify, its cash flows will do the same. Right now, 70% of ETP's cash flows are derived from some aspect of its natural gas and NGL business, and 30% is derived from crude and petroleum products.

Many of ETP's new projects are fee-based, meaning there is little to no exposure to commodity price risks, creating reliable income streams that lend themselves well to increasing distribution payments.

The other important diversification component that is also represented in the Sunoco acquisition is that the buyout expands the Energy Transfer's range geographically, as most of Sunoco's pipelines and terminals are located in the Northeast.

The Sunoco Logistics pipelines stretch down from New York, across Pennsylvania and Ohio into Michigan and ultimately run down to Oklahoma and Texas, giving ETP incredible access to the Marcellus and Utica shales. The Marcellus Shale is a particularly intriguing play right now. Natural gas and NGL production in the shale is booming, even despite low gas prices, and energy analysts expect output from the Marcellus to climb 78% over the next three years.

In fact, Sunoco is converting a shuttered Pennsylvania oil refinery into a natural gas plant dedicated to processing propane and ethane from the Marcellus. The gas will arrive at the refurbished facility via a converted petroleum products pipeline run by Sunoco Logistics and MarkWest Energy (NYS: MWE) .

Another crucial pick-up for ETP was its recent acquisition of a 50% stake in the Citrus pipeline system, which runs from Texas along the Gulf Coast and down into Florida. Florida is a quiet yet significant player in the world of natural gas. Second only to Texas, the state generates 62% of its electricity from natural gas. ETP's pick-up is a smart foray into one of the most crucial gas markets in the U.S.

All of these new projects should mean increased opportunities for additional distributable cash flow for Energy Transfer. For example, ETP expects the recent acquisition of Sunoco to bring in 33% of future cash flow. The partnership picks up 100% of the general partner stake in Sunoco Logistics, as well as incentive distribution rights and a 32.4% of the MLP's common units. SXL's distributions to Sunoco averaged about $95 million annually over the last three years.

Looking for more guidance?
That was just a sample of our new premium report on ETP. If you're weighing whether the company is a buy or sell, the report is an essential resource for investors seeking more information on the company. Not only that, but the report comes with updated quarterly guidance and dives into upcoming catalysts on the horizon. To get started, simply click here now

The article What's the Opportunity at ETP? originally appeared on Fool.com.

Fool contributor Aimee Duffy and The Motley Fool have no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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