Post $7.1B Crestwood Deal, Energy Transfer ‘Ready to Roll’ on M&A—CEO

Energy Transfer (ET), fresh off its $7.1 billion merger with Crestwood Equity Partners, reported fourth-quarter 2023 earnings of $1.33 billion, a $172 million increase from the same period in 2022. During the company’s Feb. 14 earnings call, Tom Long, co-CEO and director, was asked about ET’s attitude towards further M&A heading into 2024.

“Ready to roll,” Long said.

“We've been very consistent on our M&A discussions with everyone; that we felt like it made a lot of sense in the midstream space, and you're seeing it,” he said. “And we're going to continue to evaluate opportunities, but the other thing that's worth highlighting here is that we are staying very disciplined with these acquisitions.”

In 2023, Energy Transfer merged with Crestwood and Lotus Midstream in stock-heavy transactions worth a combined $8.55 billion. The acquisitions expanded the company’s operating footprint, and ET reported record fourth-quarter throughput on its pipeline network as a result. The company’s crude oil segment posted adjusted fourth-quarter EBITDA of $775 million, compared to $571 million over the same period in 2022.

Like several other midstream operators, ET also reported that high international demand for NGLs helped to drive earnings for the quarter. The company expects NGL demand to remain high this year. Company NGL fractionation volumes hit a record in the fourth quarter—and exports out of the Nederland, Texas, and Marcus Hook, Pennsylvania, terminals were up by 13% compared to fourth-quarter 2022.

“For 2023, we loaded more than 61 million barrels of ethane out of Nederland and nearly 27 million barrels of ethane out of Marcus Hook,” Long said. “We continued to export more NGLs than any other company and maintained approximately 20% market share of worldwide NGL exports.”

For the fourth quarter, ET reported adjusted EBITDA of $3.6 billion, a $165 million increase compared to fourth-quarter 2022. Cash flow in fourth-quarter 2023 hit $2.03 billion compared to $1.91 billion in 2022. Net income per common stock unit was $0.37.

Legal, political challenges

Energy Transfer executives also weighed in on national headlines that have dismayed many in the oil and gas industry, including the Biden administration’s pause on pending LNG export terminal applications.

Long gave an update on the company’s Lake Charles LNG project, which will be held up pending a Department of Energy review that will consider the facilities’ effects on climate change.

“The DOE most recently conducted similar studies in 2019 and, based on the results of these studies, the DOE subsequently approved several LNG export projects,” Long said. “In light of the extremely low natural gas prices in the U.S. currently and the beneficial climate impacts from the use of natural gas compared to coal for power generation, it would be difficult to believe that these new studies won't continue to conclude that LNG exports are in the U.S.’ public interest.”

The pause creates “uncertainties,” Long said, but ET will continue to develop the project.

Bloomberg reported that Australia-based Woodside Energy Group was interested in buying a stake in the Lake Charles project, according to sources that were familiar with the plan. Executives did not comment on the report.

Long also addressed his company’s legal battles with several other midstream companies over pipeline rights-of-way in Louisiana.

In November, Momentum Midstream filed suit over the path of its Gulf Run system, which crosses some of ET’s pipelines. In April 2023, ET won a similar case over DT Midstream, though the ruling is being appealed, Bloomberg reported. Energy Transfer is also in a battle with Williams Cos. over plans for that company’s Louisiana Gateway Project.

The companies accused ET of anti-competitive action by blocking their developments.

ET executives did not name the other companies in their earnings call but did address the court actions.

Long said Energy Transfer had been approached by other companies about installing between 140 to 160 pipeline crossings. The company requested technical information but received no response.

“Instead, on at least two occasions, they told us they would begin construction on these new pipes, whether we agreed to the crossings or not,” Long said. “At that point, we had no choice but to enforce our property rights by filing legal actions to prevent these crossings, pending our ability to evaluate the technical details of the crossing.”

While Long said he would not litigate the matter in public, he did say the accusations claiming ET is using unfair practices are false.