Energy Transfer Partners’ (ETP) earnings for the fourth quarter of 2009 were up US$139.3 million to $477.1 million compared to the previous year’s quarter. Earnings for the fiscal year rose by $104 million to $1.5 billion from fiscal year 2008.

While the company had improved earnings for the year, its intrastate transportation and storage operations reported its operating income was down 15% to $626.8 million in fiscal year 2009 from fiscal year 2008’s operating income of $718.3 million.

“Our results were impacted by less volume than we saw a year ago due to the reduction in drilling activity that really started in late 2008 and early 2009, the lower natural gas prices experienced during much of this quarter and low basis differentials across Texas,” Martin Salinas, the company’s chief financial officer, said during a conference call to discuss fourth quarter 2009 earnings.

He noted that the quarter marked a turnaround for the division as operating income rose by 22% to $216.1 million from the prior year’s quarter. This was partially due to increased production from the Barnett and Bossier shales, which saw production rise by as much as 250-300 million cubic feet per day (MMcf/d), according to Salinas.

“Based on recent discussions with several producers, we expect that number to grow to as much as 500 MMcf/d or more by the end of the first quarter of 2010,” he said.

The company also reported gains in its midstream businesses due to the improved processing environment, Salinas said. The division also benefited from increased volumes at its Godley, Texas, processing plant due to an increase in liquids takeway capacity in early 2009. Additionally, the division’s earnings were sustained through a steady mixture of fee and non-fee- based contracts.

ETP’s propane division also performed very well, posting a record $229 million operating income, which represented a 100% growth over its 2008 operating income.

“While we experienced, like many in the industry, a decline in volumes sold, we were able to offset the decline with higher margins that benefited from the drop in production cost during the early part of 2009, in addition to keeping a very close eye on our operating expenses. We were also positively impacted by a $45.6 million gain on our derivatives used to hedge our fixed-price programs in early 2009. We expect margins to remain strong in 2010 and are off to a great start given the weather patterns as of late primarily in the eastern half of the United State,” he said. ETP intends on spending $30 to $40 million on propane operations

The company anticipates investing about $1.2 to $1.3 billion in capital expenses for its natural gas operations, primarily the Tiger pipeline that will transport volumes out of the Haynesville shale (see Gas Processors Report 01/28/09).

ETP and Chesapeake Energy’s Chesapeake Energy Marketing are building the 178-mile Tiger Pipeline to transport gas from Carthage, Texas, to Delhi, La., where it will connect to seven interstate pipelines and have a cost of $1 to $1.2 billion and is expected to come online later in the first quarter of 2010.

“This pipeline project continues to plow full steam ahead. After previously securing binding long-term commitments to the entire original capacity of 2 billion cubic feet per day (Bcf/d), we have recently obtained a 10-year commitment for an additional 400 MMcf/d, bringing total commitments on Tiger to 2.4 Bcf/d. We launched our open season … to solicit additional shipper interest for possible further expansions and the ultimate capacity of the expansion will be based on producer response,” Salinas said.

The company also reached an agreement to expand its asset base in the Haynesville by acquiring midstream assets in the play from Tristate Midstream LP for an undisclosed sum (see Gas Processors Report 02/10/10).

The assets include Tristate North Louisiana Midstream LLC and TSM Treating LLC, which together include a 120-mile (193-kilometer) gathering system in Red River and Bienville parishes with a 275-million-cubic-feet-per-day (MMcf/d) capacity along with gas-treating facilities that have 480 MMcf/d in capacity.

“This acquisition along, with other active developments, not to mention the Tiger pipeline project, will give us a significant presence in the rapidly emerging Haynesville shale,” Salinas said.

ETP also began expanding its presence in the Marcellus shale in the quarter by adding some top lines, although Salinas said that the company’s activities are being kept quiet at the request of the affiliated producer.

“There is a lot of competitive acreage that we are going after, but we are pretty excited after a year-and-a-half of trying hard, of starting the foundation up there and really excited about the future up there,” he said.

The company also formed a 50/50 joint venture with Heckmann Corp. to develop and implement solutions for discharged water in the play.

“As we tried to grow up in the Marcellus, we got the impression … that there has to be a water solution in order to develop the reserves up there … Our focus is, of course, on gathering and treating and transporting natural gas, but the water complements it. It’s an absolute necessity,” Salinas said.

He added that the legislators and officials the company has spoken with in Pennsylvania and West Virginia are excited that a company is listening to their concerns over the water issues faced in the play. – Frank Nieto