Energy Transfer: A Midstream Giant on the Rise with Multiple Growth Opportunities

Energy Transfer (NYSE: ET) is poised for significant growth over the next several years, with multiple expansion projects in the pipeline. The company plans to invest $5 billion in capital projects this year, up from $3 billion last year, with a focus on expanding its natural gas midstream network. The biggest project is the Hugh Brinson Pipeline, which will transport natural gas from the Permian Basin to market hubs and is expected to enter service by the end of 2023. In addition to the Hugh Brinson Pipeline, Energy Transfer is also developing its Lake Charles LNG export terminal, which would enhance and extend its growth outlook. The company has a strong backlog of expansion projects that should all enter service by the end of 2024, but it has a large pipeline of projects under development as well. Energy Transfer aims to raise its high-yielding distribution by 3% to 5% per year, and its financial flexibility gives it the ability to continue making strategic acquisitions in the energy midstream sector. In five years, Energy Transfer is likely to be a much bigger company with an even higher distribution payment, making it a compelling long-term investment opportunity. Since 2020, Energy Transfer has come a long way. It needed to slash its distribution by 50% to retain additional cash to fund its expansion projects and repay debt. Fast-forward five years, and the midstream giant is in the best financial shape in its history, having reduced debt and increased earnings by more than 50%. Its improving financial flexibility has enabled it to raise its cash distribution well past its prior peak. Looking ahead, Energy Transfer expects to continue growing over the next several years. Its current backlog of expansion projects should all enter service by the end of 2024, but that doesn't mean the MLP is running low on fuel. It has a large pipeline of projects under development, including the long-delayed Lake Charles LNG export terminal, which would earn incremental income from its retained stake and provide substantial incremental cash flows through its natural gas pipeline network. Energy Transfer is also seeing significant demand for natural gas from new and existing customers. The company has already signed a contract to supply gas to CloudBurst's AI data center in Texas and has requests to connect over 60 power plants and over 200 data centers to its gas pipelines. In addition, the company is exploring lower-carbon investment opportunities such as carbon capture and sequestration and blue ammonia. Given its financial strength and flexibility, Energy Transfer has ample room to continue making strategic acquisitions in the energy midstream sector. In five years, it is likely to be a much bigger company with an even higher distribution payment, making it a compelling long-term investment opportunity for those looking for growth and stability in their portfolio.