Energy Transfer LP (ET) units have rallied a strong 21.8% year-to-date, surpassing the industry’s growth of 20.8%. This impressive performance stems from the company’s strategic positioning within the oil and gas midstream sector, coupled with its robust growth initiatives.
Energy Transfer, with its vast network of over 130,000 miles of pipelines spanning across 44 states, is a major player in the energy transportation landscape. The company’s expansion strategy, fueled by organic initiatives and strategic acquisitions, has further strengthened its position. Notably, the recent acquisition of WTG has expanded ET’s natural gas pipeline and processing network in the critical Permian Basin.
The company boasts a well-balanced asset mix, providing a solid foundation for earnings growth. ET’s diverse portfolio includes oil and gas pipelines, gathering and processing facilities, and storage assets strategically located across major US basins and high-demand markets. To solidify its position, the company plans to invest between $3-3.2 billion in 2024, further expanding and strengthening its asset base.
Energy Transfer is a significant player in the global NGL export market. With a current export capacity of over 1.1 million barrels per day for NGLs and 1.9 million barrels for crude oil, the company is actively expanding its NGL export capabilities through projects like the expansion of its Marcus Hook and Nederland export terminals. This focus on NGL exports positions ET favorably to capitalize on the growing global demand for these products.
A key indicator of confidence in the company’s future is the increasing ownership by insiders. Management members and independent board members have consistently purchased ET units, demonstrating their belief in the company’s long-term growth prospects. Since January 2021, Energy Transfer insiders have purchased over 44 million units worth $468 million, signaling a strong commitment to the company’s success.
Analysts also share a positive outlook on ET’s future. The Zacks Consensus Estimate for Energy Transfer’s 2024 and 2025 earnings per unit indicates year-over-year growth of 28.4% and 12.6%, respectively. This positive outlook for earnings growth further supports the strong performance of ET units.
Furthermore, ET’s units are currently trading at a discount compared to its peers. The company’s current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) ratio is 10.32, compared to the industry average of 11.62. This suggests that ET units are undervalued and present an attractive entry point for investors seeking exposure to the energy midstream sector.
In conclusion, Energy Transfer is well-positioned to capitalize on the growing demand for oil, natural gas, and NGLs in the United States. Its impressive pipeline network, strategic acquisitions, and focus on NGL exports are key drivers of its success. The increasing insider ownership and positive earnings estimates further solidify its prospects. For investors seeking exposure to the energy midstream sector, Energy Transfer presents a compelling investment opportunity.
