Morningstar Key Metrics for Energy Transfer
Thoughts on Energy Transfer's earnings
Energy Transfer's ET first-quarter earnings were generally strong, thanks to strong sales volumes and a $250 million marketing contribution from weather-related volatility. Overall EBITDA improved 13% year over year to $3.88 billion. Recent acquisitions of Crestwood and Lotus were the main contributors. Even excluding these contributions, crude oil volumes increased by 14% year-on-year, which is considered solid. After updating the model, the $21 fair value estimate and no-mortar rating remain unchanged.
Guidance for 2024 has been increased to a midpoint of $15.15 billion from a previous midpoint of $14.65 billion. The main factor was Sunoco's acquisition of his NuStar Energy in an all-stock deal. Following the transaction, Energy Transfer is estimated to own approximately 21% of the combined company. Sunoco could bring further opportunities in energy transfer over time, as NuStar adds his 9,500 miles of crude oil and product pipelines, among other assets. We have reset our EBITDA expectations to $15.4 billion in 2024 and $16.7 billion in 2025, including the contribution from NuStar, excluding minority interests.
Somewhat unsurprisingly given spending trends, Energy Transfer raised its 2024 growth spending outlook from $2.5 billion to $2.9 billion as it adds new projects. The good news is that management expects some of these efforts to come online in late 2024 and all to be active within two years, providing a relatively high return on incremental capital investment. That's what I'm doing. The bad news is that several high-profile initiatives, including Lake Charles LNG, the proposed Warrior pipeline in the Permian Basin, and the Blue Marlin offshore export port, continue to be further delayed without final investment decisions being made. That's what I'm doing.
The author owns no shares in any securities mentioned in this article.
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