Energy Transfer Earnings: Growth, Growth, and More Growth With Crestwood

Energy Transfer’s ET third-quarter results were good, and with the Crestwood deal expected to close Nov. 3, the year 2024 is already expected to have healthy growth. EBITDA in 2023, factoring in about $200 million of Crestwood contributions, is now expected to be about $13.6 billion. The guidance implies about $13.4 billion in contributions from Energy Transfer, roughly $100 million more than a quarter ago, so Energy Transfer is outperforming as well. EBITDA in 2024 will likely be around $15 billion, after about $870 million in Crestwood contributions. We expect to tweak our forecasts, but our fair value estimate of $17.50 and no-moat rating will be unchanged.

We attribute the majority of the strength in Energy Transfer’s business to volumes, with obviously a heavy dose of M&A-goosed volumes as well with the Lotus assets added earlier this year. Natural gas liquids transportation volumes increased 14%, natural gas liquids exports 20%, interstate natural gas transportation 15%, and crude transportation 23% over last year’s levels. Overall third-quarter EBITDA increased 15% to $3.54 billion over the same time frame, with the offset being mainly lower realized oil and gas prices.

Notably, Energy Transfer has taken over industry leadership from Enterprise Products Partners on natural gas liquids export volumes, with about 20% global market share and 40% of U.S. exports primarily via ethane. Enterprise Products Partners has lamented in recent quarters that it initially set fees too high on export terminals when it was the sole U.S. exporter, allowing Energy Transfer to undercut them and now gain industry leadership. Energy Transfer, like Enterprise, is expanding here as well, with a $1.25 billion expansion for its Nederland Terminal due online in 2025, and optimization efforts underway at Marcus Hook. Demand is being driven by Chinese appetite for petrochemicals and switching away from coal.