In the year 2024, Energy Transfer Experienced a 42% Surge
Energy Transfer's Energy Transfer Units (ET) saw a jaw-dropping 42% surge in 2024, outpacing the S&P 500's impressive 23% return. With the boost from lucrative cash distributions and reinvestment, ET's total return nearly hit 54%, leaving the S&P 500 in the dust with a 25% total return. Let's dive into what propelled the MLP's triumph in 2024 and its prospects for 2025.
Acquisition-driven success
Energy Transfer began 2024 with a burst of momentum. Closing deals for Lotus Midstream and Crestwood Equity Partners in 2023 fueled this growth, along with organic expansion projects and favorable market conditions. These factors contributed to record volumes across various sectors during Q3, setting Energy Transfer on a course for 12% earnings growth at the midpoint of its guidance range. The impressive growth allowed the MLP to continuously increase its distribution, recording a 3.2% year-over-year boost in Q3.
Energy Transfer continued its acquisition spree in 2024, acquiring WTG Midstream in July. The MLP projects this deal to enhance its distributable cash flow by $0.04 per unit this year, with the figure expected to rise to $0.07 by 2027.
The MLP also secured several organic expansion projects in 2024. The $2.7 billion Hugh Brinson Pipeline, slated to increase gas takeaway capacity in the Permian Basin by 2026, was its most significant accomplishment. Energy Transfer continues to pursue new projects, such as the Lake Charles LNG project with Chevron as a customer, keeping that long-delayed export terminal one step closer to realization.
Artificial intelligence (AI) data centers present a promising growth opportunity for Energy Transfer, with the potential to expand its natural gas pipeline network and support the anticipated surge in electricity demand from these facilities engagement with AI data centers in the near future.
A promising 2025
Entering 2025, Energy Transfer carries a wave of momentum. The WTG Midstream acquisition will bolster its performance, with other expansion projects scheduled to come online in the first half of the year, providing additional income. Aside from ongoing expansion projects, the MLP has further potential growth catalysts, such as approving new projects and possibly launching a unit repurchase program. With a yield of 6.5% despite its rally in 2024, Energy Transfer has an ample supply of growth factors to deliver a strong total return in 2025.
Enrichment Data:
- Distributable Cash Flow Increase:
- The WTG Midstream acquisition is projected to enhance distributable cash flow by $0.04 per unit in 2025, subsequently rising to $0.07 per unit by 20271.
- Earnings Growth:
- Energy Transfer is on track to deliver 12% earnings growth at the midpoint of its guidance range for 2024, which should carry over into 20251[3].
- Organic Expansion Projects:
- The company has secured several organic expansion projects, including the $2.7 billion Hugh Brinson Pipeline, providing additional gas takeaway capacity in the Permian Basin by 20261[3].
- The proposed Lake Charles LNG project, with Chevron as a customer, is another major expansion effort that will contribute to the company's growth1[3].
These strategic acquisitions and organic expansion projects place Energy Transfer on a solid footing for continued successful performance in 2025, with further growth catalysts such as new expansion projects and a potential unit repurchase program under consideration1[3].
[3]: https://www.investing.com/news/commodities-news/energy-transfer- LPs-to-approve-redemption-withdrawal-for- fifth-time-this-cycle-in-two-years-2887828
In light of its successful acquisitions and organic expansion projects, Energy Transfer is actively considering investing further money into new expansion projects and potentially launching a unit repurchase program, which could boost its total return in 2025. With its high yield of 6.5% and promising growth opportunities, Energy Transfer's finance strategy looks promising for delivering strong returns in the coming year.