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Swipe Right on WPZ in Q3

swipe-right-on-wpz-in-q3

WPZ is expected to report a very strong third quarter, increasing 9% YOY and a $128 million increase from Q2 2016. However, be mindful of the drivers behind the increase. Half of the  uptick this quarter is from a strong ethane/ethylene spread at Geismar due to cracker maintenance at competing facilities. Keep in mind that these spread-based margins tend to be very volatile, and we expect this spread to decrease in Q4 based on lower ethylene demand and a greater amount of ethylene supply hits the market as steam crackers are ending maintenance. WPZ is also benefitting from emergency services gathering in the offshore, after Enterprise experienced a severe fire at its Pascagoula Plant in June. The outage has re-directed over 200 MMcf/d of supply to Williams Field Services, which is being processed at Mobile Bay. Other noteworthy growth YOY includes several expansions on Transco and cost-cutting in the Central Segment. Looking ahead, we expect Adj EBITDA in Q4 to be lower based on WPZ’s renegotiated gathering contracts in the Barnett & Midcontinent and weaker margins at Geismar. (Tickers: WPZ)

About The Author Justin Carlson

I have over 10 years of experience in data analysis, research, and consulting across the energy sector. I currently serve as Vice President of Research and Managing Director at East Daley Capital, an energy assets research firm that is changing how investors look at midstream energy risk with an asset-driven information service that combines proprietary research with a trusted team of unbiased, experienced energy analysts. My insights and analysis bring greater transparency to the energy financial market by quantifying potential risks by asset and enabling investors to make more informed and accurate projections and investments. Prior to joining East Daley Capital, I was a senior manager at Platts, a division of McGraw Hill Financial, which acquired Bentek Energy, where I was a senior member of the leadership team.