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ET Has Caught Up in the Permian G&P Race

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Energy Transfer (ET) is making inroads to match rivals and expand its already enormous Permian G&P systems. Several splashy acquisitions for Crestwood Equity (CEQP) and WTG Midstream (WTG) have made headlines, but the company with less fanfare is also posting organic growth.

ET announced it is expanding its processing capacity by 200 MMcf/d across four Delaware Basin plants (Grey Wolf, Orla East, Arrowhead II, and Arrowhead III) by 4Q24 and 1Q25. It is also relocating an idled 200 MMcf/d plant (“Badger”) to northeast Culberson County by mid-2025, and is evaluating adding another plant.

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These organic expansions have been overshadowed by ET’s latest acquisition spree, which has the bulk of the company’s new Permian processing capacity. The $7.1B purchase of Crestwood in 2023 added 550 MMcf/d of capacity in the Delaware, and the latest acquisition of WTG will eventually add 1.7 Bcf/d. With the bolt-on deals and organic expansions, ET is on track to add 3.1 Bcf/d of processing capacity since 2021 (see figure). That matches rivals Enterprise Products (EPD) and Targa Resources (TRGP), who have added 3.1 Bcf/d and 3.4 Bcf/d over that timeframe, respectively.

East Daley Analytics tracks ET, EPD and TRGP in the Financial Blueprint in Energy Data Studio. Stripping out the acquisitions, ET has added (or is in the process of adding) 800 MMcf/d of capacity since YE21, and is currently evaluating another 200 MMcf/d of expansions. That organic growth is lower than EPD and TRGP’s, but those companies have used earlier acquisitions as a platform to expand. EPD acquired Navitas Midstream in January 2022 when it had ~1.3 Bcf/d of capacity (including FID’d expansions), and has reached a final investment decision on another 600 MMcf/d of capacity after closing the deal. TRGP acquired Lucid in July 2022 when it had 1.3 Bcf/d of capacity, and has FID’d 890 MMcf/d of additional expansions to its Delaware system since closing.

We estimate ET’s new plant capacity can add 115 Mb/d of NGLs when full, and up to 140 Mb/d if the company moves forward with another 200 MMcf/d plant. CEQP and WTG will add another ~200 Mb/d of NGL production. We estimate ET’s Lone Star and West TX Gateway NGL pipelines are already nearing capacity. The company is expanding Lone Star by 90 Mb/d, which it should be able to fill with its organic plant expansions.

ET expects a sub-7x multiple on WTG, in line with its rivals’ acquisitions from 2022, and implies ~$440MM in annual EBITDA. We expect the 400 MMcf/d of FID’d expansions could add another ~$100MM in annual EBITDA. Despite being a little late to the race compared to its rivals, it seems ET has rapidly caught up. – Ajay Bakshani, CFA Tickers: ET, EPD, TRGP.


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