Energy Transfer LP (ET): A Midstream Giant Delivering Consistent Growth

Published on September 24, 2024 | Ticker: ET

Energy Transfer LP (NYSE:ET) is a leading midstream energy company that has consistently delivered strong financial performance and growth. With a diversified asset base spanning natural gas, natural gas liquids (NGLs), crude oil, and refined products, Energy Transfer has established itself as a dominant player in the North American energy infrastructure landscape.

Financials

For the full year 2023, Energy Transfer reported net income of $3.935 billion, revenue of $78.586 billion, operating cash flow of $9.555 billion, and free cash flow of $6.421 billion. These impressive financial results showcase the company's ability to generate substantial value for its shareholders.

In the first quarter of 2024, Energy Transfer continued its strong momentum, reporting adjusted EBITDA of $3.9 billion, up from $3.4 billion in the same period last year. This growth was driven by record volumes through the company's crude oil pipelines, as well as solid performances across its other business segments.

Segment Performance

The company's NGL and refined products transportation and services segment saw adjusted EBITDA increase to $989 million, compared to $939 million in the first quarter of 2023. This was primarily due to growth in the segment's transportation, fractionation, and terminal operations, partially offset by lower gains from hedged NGL inventory.

Energy Transfer's midstream segment also delivered strong results, with adjusted EBITDA rising to $696 million, up from $641 million in the prior-year quarter. This improvement was largely attributable to the addition of the Crestwood assets, as well as higher volumes in the Permian Basin.

The company's crude oil transportation and services segment was a standout performer, with adjusted EBITDA surging to $848 million, compared to $526 million in the first quarter of 2023. This significant increase was driven by stronger pipeline volumes, higher terminal throughput, and favorable timing on gains associated with hedged inventory.

In the interstate transportation and storage segment, adjusted EBITDA declined to $483 million, down from $536 million in the same period last year. This was primarily due to lower operational gas sales resulting from lower prices and unplanned maintenance projects, partially offset by higher contracted volumes at increased rates on several of the company's pipelines.

Energy Transfer's intrastate transportation and storage segment reported adjusted EBITDA of $438 million, up from $409 million in the first quarter of 2023. This improvement was mainly attributable to gains related to pipeline optimization opportunities, as well as volume ramp-ups and new contracts on several of the company's Texas pipelines.

The company's investment in Sunoco LP and USAC segments also contributed to the overall strong performance, with adjusted EBITDA of $242 million and $139 million, respectively, in the first quarter of 2024.

Outlook

Looking ahead, Energy Transfer has raised its 2024 adjusted EBITDA guidance to a range of $15 billion to $15.3 billion, up from its previous guidance of $14.5 billion to $14.8 billion. This updated outlook reflects the earnings contribution from Sunoco LP's recent acquisition of NuStar Energy L.P.

Recent Developments

The company continues to execute on its strategic growth initiatives, with plans to invest approximately $2.9 billion in organic growth capital expenditures in 2024, primarily in the NGL and refined products, and midstream segments. Key projects include the expansion of NGL export capacity at the Nederland terminal, debottlenecking of the West Texas Gateway and Lone Star Express pipelines, and the conversion of the Sabina 2 pipeline to provide additional natural gasoline service.

Liquidity

Energy Transfer's financial position remains strong, with no outstanding borrowings under its $5 billion revolving credit facility as of the end of the first quarter. The company has also taken steps to further strengthen its balance sheet, including the redemption of all outstanding Series C and Series D preferred units in February 2024 and the planned redemption of the Series E preferred units in May 2024.

Conclusion

The company's diversified asset base, strategic growth initiatives, and solid financial footing position Energy Transfer well to continue delivering consistent growth and value to its shareholders. As the midstream industry navigates evolving market dynamics, Energy Transfer's proven track record and forward-looking strategy make it a compelling investment opportunity in the energy infrastructure space.

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