Energy Transfer's unit prices have surged over 13% this year, bolstered by two significant acquisitions. The company spent nearly $1.5 billion on acquiring Lotus Midstream, a deal that will instantly boost its free and distributable cash flow. A recently inked $7.1 billion deal to acquire Crestwood Equity Partners is also set to immediately enhance the company's distributable cash flow per unit.
Energy Transfer aims to unlock commercial opportunities and refinance Crestwood's debt, amplifying the deal's value proposition. These strategic acquisitions provide the company additional avenues for expanding its distribution, which already offers a strong yield of 9.2%. Energized by both organic growth and its midstream consolidation efforts, Energy Transfer aims to uplift its payout by 3% to 5% annually.
Drilling down into Energy Transfer's latest $7.1 Billion acquisition
Energy Transfer LP announces plans to buy Crestwood Equity Partners LP in a stock-based transaction worth $7.1 billion, marking another major deal in the midstream industry this year.
- Crestwood's portfolio features gathering and processing facilities in the Williston, Delaware, and Powder River basins.
- The assets include roughly 2 billion cubic feet per day in gas gathering, 1.4 billion cubic feet per day in gas processing, and 340,000 barrels per day in crude gathering capacity.
- The acquired assets from Crestwood are anticipated to synergize well with Energy Transfer's downstream fractionation facilities at Mont Belvieu.
- They are also expected to bolster the company's hydrocarbon export operations at its Nederland Terminal in Texas and Marcus Hook Terminal in Philadelphia.
Energy Transfer projects a yearly cost savings of $40 million from the deal, not accounting for other financial and commercial advantages. Crestwood unitholders are set to gain both in distributions per unit and the chance to be part of Energy Transfer's aimed annual distribution growth of 3% to 5%.
Energy Transfer: Leader Due To Natural Gas
Energy Transfer (ET) with headquarter in Houston, Texas stands as a prominent midstream energy entity, boasting a vast infrastructure that includes 90k miles of pipelines and 477 facilities, supported by a 10k-strong workforce. As one of the foremost midstream master limited partnerships in the U.S., it has an extensive network spreading predominantly across the Central and Eastern parts of the country:
- Energy Transfer LP ranks among the U.S.'s largest and most diversified midstream master limited partnerships.
- A major share of the company's revenue is generated from natural gas, positioning it favorably for future expansion.
- The company is well-situated to meet the anticipated surge in natural gas demand from the LNG export sector.
- Boasting one of the industry's most robust financial standings, Energy Transfer is well-equipped to manage its debt obligations.
The company has a broad presence across nearly all major U.S. resource basins, providing a layer of diversification that's advantageous. Different basins have their own set of economic dynamics that can impact the business. For instance, hydrocarbon production in the Permian Basin is generally more cost-effective than in the Bakken Shale. This was evident in 2020, when producers scaled back in the Bakken but continued in the Permian due to low energy prices. However, when prices rebounded, so did Bakken production, benefiting companies like Crestwood Equity Partners, which reported strong Q4 2020 results.
Each basin specializes in different types of resource production. The Marcellus Shale is a hotspot for natural gas, while the Bakken is more oil-centric. This geographical spread insulates Energy Transfer against downturns in any single region, while allowing it to capitalize on positive trends across the board.
Is Energy Transfer LP (ET) a Blend of Value and Momentum?
Recently, ET has inked three provisional contracts to sell LNG from Lake Charles, even though the U.S. Department of Energy has refused to extend Lake Charles' permit to sell LNG to non-FTA countries past December 2025:
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September 30, 2020: ET posted a net income loss of -$272 million, indicating financial challenges for the company.
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December 31, 2020: The situation worsened as the net income slipped further to -$648 million, amplifying the loss.
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March 31, 2021: Marking the first quarter of 2021, ET experienced a strong recovery, posting a net income of $3.49 billion.
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June 30, 2021: The net income continued to climb in the second quarter, reaching $3.77 billion.
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September 30, 2021: The third quarter saw yet another increase, this time to $5.19 billion, illustrating a continued growth trend.
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December 31, 2021: The net income capped off the year at $5.47 billion, setting a new high for the year.
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March 31, 2022: There was a slight dip in the first quarter, with the net income decreasing to $3.45 billion. However, this setback was temporary.
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June 30, 2022: The company rebounded in the second quarter, posting a net income of $4.15 billion.
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September 30, 2022: The third quarter witnessed another surge in net income, reaching $4.52 billion.
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December 31, 2022: By the end of the year, ET reported a net income of $4.76 billion, maintaining the growth trend.
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March 31, 2023: The first quarter of 2023 saw a slight decrease in net income to $4.6 billion. Despite this dip, the figure remains substantially higher than where it started in September 2020.
This comprehensive data clearly illustrates ET's financial journey from a challenging period in 2020 to a stable and profitable position by the first quarter of 2023. Even though there were some fluctuations in quarterly performance, the overall trajectory from September 2020 to March 2023 reveals a significant positive financial transformation for Energy Transfer.
Energy Transfer is getting even bigger by acquiring Lotus Midstream
The purchase of Lotus Midstream in 2023 will expand Energy Transfer's oil pipeline network in the fertile Permian Basin, adding 3,000 miles of oil collection and delivery pipelines, including the significant Centurion Pipeline. The expanded network will be capable of moving 1.5 million barrels of oil per day and includes 2 million barrels of oil storage. Lotus also holds a 5% stake in the Wink to Webster pipeline, which directs oil toward the Gulf Coast.
Energy Transfer aims to integrate Lotus' infrastructure through a new 30-mile pipeline set for completion in the upcoming year's first quarter. This addition will facilitate the transfer of oil from Midland Basin terminals to the main U.S. oil hub in Cushing, Oklahoma.
To fund the acquisition, Energy Transfer will shell out $900 million in cash and issue 44.5 million company units, a strategy expected to neither raise nor lower the company's existing leverage ratios.
Energy Transfer's Key Transactions Over the Years
Energy Transfer Equity to Acquire Southern Union Company
Energy Transfer and Southern Union Company announced that they had entered into a definitive merger agreement. In the deal, ET acquired Southern Union for $7.9 billion, which included approximately $3.7 billion of Southern Union's existing debt.
Energy Transfer To Acquire Sunoco For $5.3 Billion
Energy Transfer and Sunoco, Inc. announced that they had entered into a definitive merger agreement. In the deal, ET acquired Sunoco in a unit and cash transaction valued at $50.13 per share, for a total consideration of approximately $5.3 billion, based on ETP's closing price on April 27, 2012.
AmeriGas Partners Announced Completion of Heritage Propane Acquisition
AmeriGas Propane, Inc. completed its acquisition of Energy Transfer Partners' ‶Heritage″ propane operations for about $1.46 billion in cash, $1.32 billion in common units, and assumed debt. An Energy Transfer affiliate owns 34% of the partnership, with the public holding the remaining 38%.
Regency Energy Partners to Acquire PVR Partners for $5.6 Billion
Regency's general partner is owned by Energy Transfer Equity, L.P. The boards of directors for Regency Energy Partners LP and PVR Partners, L.P. had unanimously approved a definitive merger agreement. The overall value of the deal was approximately $5.6 billion, which included the assumption of $1.8 billion in net debt. The transaction was slated to close in the first quarter of 2014.
Phillips 66 Became Joint Venture Partner with Energy Transfer to Build Bakken Crude Oil Pipelines
Energy Transfer Partners and Phillips 66 had formed two joint ventures to develop the Dakota Access Pipeline (DAPL) and Energy Transfer Crude Oil Pipeline (ETCOP). Energy Transfer owned a 75% stake in each venture and managed the pipelines, while Phillips 66 held the remaining 25% and funded its share of construction costs. Both projects aimed for commercial operations to start in Q4 2016.
Susser Petroleum Partners And Energy Transfer Partners
Susser Petroleum Partners and Energy Transfer Partners announced their first dropdown transaction, along with Susser's acquisition of Hawaii-based Aloha Petroleum Ltd. The company also closed a new $1.25 billion revolving credit facility and revealed plans to rebrand as Sunoco LP.
Regency Energy Partners to Unite with Energy Transfer Partners in an $18 Billion Deal
The acquisition involved a unit-for-unit exchange, along with a one-time cash payment to Regency stakeholders. The total value for Regency in the deal was estimated at roughly $18 billion, which included assuming $6.8 billion in net debt and other liabilities. The merger was anticipated to be finalized in the second quarter of 2015.
Phillips 66, Energy Transfer Partners, and Sunoco Logistics Collaboration
Phillips 66, Energy Transfer Partners, and Sunoco Logistics Partners announced they had formed a joint venture to construct the Bayou Bridge pipeline. The pipeline was planned to carry crude oil from terminals in Nederland, Texas, to Lake Charles, Louisiana. Phillips 66 had a 40% stake in the venture, while Energy Transfer and Sunoco Logistics each had a 30% stake.
Energy Transfer and Williams $33bn Non-Merger
June 2016, a $33 billion merger agreement between Energy Transfer Equity LP (ETE) and The Williams Cos. Inc. fell through. Energy Transfer terminated the deal on June 29th after its legal team at Latham & Watkins LLP could not confirm that the merger would be tax-free.
In 2021 court decision, Energy Transfer LP, a major oil-pipeline company, was ordered to pay $410 million for terminating a $33 billion merger with competitor Williams Cos. due to a tax issue in the agreement.
Energy Transfer Partners to Buy the Remaining PennTex Units
Dallas-based Energy Transfer Partners, L.P. (ETP) had struck a $640 million deal to acquire stakes in its Houston-based subsidiary, PennTex Midstream Partners, LP (PTXP). ETP subsequently completed the acquisition of all remaining units of PennTex.
Energy Transfer to sell stake in Rover pipeline entity to Blackstone
Energy Transfer Partners L.P. (ETP.N) announced it had sold a 32.44% stake in a firm connected to the Rover pipeline project to Blackstone funds for approximately $1.57 billion. The 700-mile Rover pipeline, which was the largest natural gas pipeline under construction in the United States at the time, was designed to carry 3.25 billion cubic feet per day of domestically produced natural gas from the Marcellus and Utica Shale regions to various U.S. and Canadian markets.
USA Compression Expands Fleet Through $1.8B Purchase from Energy Transfer
USA Compression Partners LP announced that it had acquired Energy Transfer Partners LP's compression unit, CDM Resource Management, for approximately $1.8 billion. This acquisition effectively doubled the buyer's fleet and broadened its reach to all major U.S. basins, including South Texas' Eagle Ford Shale, the Gulf Coast, and the Rockies.
Energy Transfer To Acquire SemGroup For $5 Billion
Energy Transfer LP announced that it had entered into a definitive merger agreement to acquire SemGroup Corporation in a deal involving both units and cash. The transaction was valued at $17 per share, with a total consideration, including assumed debt, of approximately $5 billion. The deal was expected to close either in late 2019 or early 2020.
Completion Of Lone Star Express Pipeline Expansion Project
Energy Transfer announced the completion of its Lone Star Express Pipeline expansion project, a key component of the company's 2020 capital program. The expansion adds over 400,000 barrels per day of Natural Gas Liquids (NGL) capacity to the existing Lone Star NGL pipeline system in Texas.
The 352-mile pipeline, with a 24-inch diameter, starts in Winkler County, Texas, and joins the existing 30-inch Lone Star Express pipeline at Morgan Junction in Bosque County, Texas, south of Fort Worth. This expansion offers shippers enhanced connectivity from the Permian and Delaware basins.
Energy Transfer to Acquire Southern Union
Energy Transfer Equity LP acquired Southern Union Co. for $4.2 billion, a deal that integrated Energy Transfer's extensive footprint in key natural gas shale production regions with Southern's market access in the Midwest and Florida.
Acquisition of Enable Midstream for $7.2 Billion
Dallas-based Energy Transfer LP and Oklahoma City-based Enable Midstream Partners LP finalized their previously disclosed merger, in a deal valued at $7.2 billion. With the merger complete, Energy Transfer extended its ownership and operation to over 114,000 miles of pipelines and associated assets across 41 states, reinforcing its dominant role in the U.S. midstream sector.
Sunoco Revealed Acquisitions to Bolster Its Fuel Distribution Network
Dallas-based Sunoco LP is owned by Energy Transfer LP. Sunoco LP acquired eight refined product terminals from NuStar Energy LP and one refined product terminal from Cato Inc. at a combined purchase price of $255.5 million.
Energy Transfer to Acquire Woodford Express for $485 Million
Woodford Express, situated in the core of the SCOOP play in the Mid-Continent region, boasted 450 MMcf per day of cryogenic gas processing and treating capacity, along with over 200 miles of gathering and transportation lines. These lines were connected to Energy Transfer's pipeline network.
Pembina-KKR Joint Venture Acquires Canadian Midstream Assets from Energy Transfer
Energy Transfer LP sold its 51% stake in Energy Transfer Canada to a joint venture between Pembina Pipeline Corp. and KKR & Co. Inc. The deal involved six gas processing plants and an 848-mile pipeline network. The new entity, owned 60% by Pembina and 40% by KKR, consolidates various western Canadian gas assets, totaling a value of $11.4 billion. Post-acquisition, the joint venture plans to sell its interest in the Key Access Pipeline System. Energy Transfer's stake was valued at $1.3 billion, including debt and preferred equity.
Energy Transfer to Acquire Crestwood Equity Partners for $7.1 Billion
On August 16 2023, Energy Transfer LP announced its acquisition of Crestwood Equity Partners LP in an all-stock deal valued at $7.1 billion. Crestwood's assets, which are primarily in the Williston, Delaware, and Powder River basins, include around 2 Bcf/d of gas gathering capacity, 1.4 Bcf/d of gas processing capacity, and 340,000 bbl/d of crude gathering capacity.
Crestwood Equity Partners: The Company Cashing in its Assets for $7.1 Billion Today
Crestwood Equity Partners LP is both a holding company and a master limited partnership (MLP) that operates in the energy midstream sector. The company has three main business segments: northern gathering and processing, southern gathering and processing, and storage and logistics.
Its northern operations focus on services like natural gas, crude oil, and produced water gathering, as well as compression, treating, processing, and disposal in the Williston and Powder River Basins.
The southern operations offer similar services in the Marcellus, Barnett, and Delaware basins. The storage and logistics segment provides storage, terminal, marketing, and transportation services for NGL, crude oil, and natural gas to a variety of clients including producers, refiners, marketers, and utilities.
TOP 10 Crestwood Equity Partners Competitors In The Midstream Sector
- Enterprise Products Partners L.P. This is one of the largest publicly-traded partnerships and a leading North American provider of midstream energy services.
- Kinder Morgan, Inc. Another giant in the energy infrastructure industry, Kinder Morgan owns an extensive network of pipelines and terminals.
- Magellan Midstream Partners, L.P. Specializes in the transportation, storage, and distribution of refined petroleum products and crude oil.
- Energy Transfer L.P. Involved in natural gas and propane pipeline transport, it's a U.S. Fortune 500 company and one of the country's largest and most diversified midstream energy companies.
- Plains All American Pipeline, L.P. Focuses on crude oil transportation but also deals with natural gas and NGLs.
- Williams Companies, Inc. Primarily involved in natural gas processing and transportation, with an extensive pipeline network.
- ONEOK, Inc. Engaged in natural gas and NGLs, it owns one of the nation's premier natural gas liquids (NGL) systems and is a leader in the gathering, processing, storage and transportation of natural gas.
- MPLX LP. A diversified, large-cap master limited partnership that owns and operates midstream energy infrastructure and logistics assets, and provides fuels distribution services.
- Targa Resources Corp. Engages in the business of gathering, compressing, treating, processing, and selling natural gas; storing, fractionating, treating, transporting, and selling NGLs and NGL products.
- EnLink Midstream, LLC. Provides integrated midstream services across natural gas, crude oil, condensate, and NGL commodities.
Crestwood Equity Partners Draws Attention with Favorable Ratings
Recently, Crestwood Equity Partners LP has been gaining significant attention in the midstream energy sector, and the buzz is backed by solid ratings. Bloomberg Ratings indicates that out of the ten analysts covering the company, six recommend a 'Buy,' while three suggest a 'Hold.' The average twelve-month price target stands at $29.88.
The company specializes in the investment and management of energy midstream infrastructure through various divisions: Gathering and Processing, Storage, Transportation, and Marketing and Logistics. The Gathering and Processing unit, in particular, provides services like transport, processing, compression, and disposal to producers operating in unconventional shale and tight-gas regions.
As of September 1, 2023 according AAII (American Association of Individual Investors), Crestwood Equity Partners LP boasts a market capitalization of $3.0 billion, positioning it in the top quartile, specifically the 76th percentile, within the Oil & Gas - Transportation Services sector.
The company's current Price-Earnings (P/E) ratio stands at 30.7. Over the trailing 12 months, Crestwood has generated revenue of $5.3 billion, maintaining a profit margin of 2.0%. However, it's worth noting that the firm experienced a year-over-year quarterly sales decline of 29.5% most recently. Despite this, analysts are optimistic, forecasting adjusted earnings to hit $1.817 per share for the current fiscal year. Additionally, Crestwood currently offers an attractive dividend yield of 9.1%.
Crestwood Equity Partners Announces Greenhouse Gas Reduction Targets
Crestwood Equity Partners LP has unveiled its three-year sustainability strategy, featuring a detailed carbon management plan to mitigate greenhouse gas (GHG) emissions. The plan outlines specific commitments from the master limited partnership (MLP) in the midstream sector:
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Yearly GHG Intensity Targets: Crestwood pledges to reduce its GHG intensity on an annual basis, encompassing both its existing operations and any future acquisitions.
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Optimizing Scope 2 Emissions: The company will continually assess ways to minimize Scope 2 emissions and improve overall energy efficiency within its operations.
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Acquisition-Specific Carbon Guidelines: Crestwood is formulating an Acquisition Carbon Protocol to guide emissions management during the expansion of its asset portfolio. This will include specific GHG reduction targets for each new operation acquired.
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Expanded Methane Monitoring: Plans are in place to extend continuous methane monitoring to more operational sites in 2023, building on existing pilot programs.
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Development of RSG Standards: Crestwood aims to be a key player in crafting responsibly sourced gas (RSG) standards for the midstream industry, with a goal of earning certification in the coming years.
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Investment in Data Capabilities: The company commits to invest in technology for accurate emissions tracking, aiming to create comprehensive inventories for Scope 1, 2, and 3 GHG emissions.
Evolution of Crestwood Through Strategic Transactions
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Date
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Event
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Transaction Amount
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Oct 2010
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Acquired Quicksilver Gas Services, including Barnett Shale assets
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$701 million
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Mar 2012
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Acquired Antero Resources' Marcellus Shale gathering system in West Virginia
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$380 million
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Jun 2013
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Completed acquisition of Inergy L.P.'s general partner and merged with Crestwood Midstream
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Combined entity: $7 billion
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Oct 2013
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Closed merger with Inergy Midstream, rebranded as Crestwood Midstream Partners LP and Crestwood Equity Partners LP
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$8 billion enterprise value
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Nov 2013
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Acquired Arrow Midstream's Bakken Shale business
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$750 million
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Jun 2016
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Created Stagecoach Gas Services LLC, JV with Consolidated Edison
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Contributed assets worth $975 million
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Apr 2019
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Doubled position in Powder River Basin by acquiring Williams' 50% stake
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$485 million
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Apr 2020
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Acquired NGL assets from Plains All American
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Around $160 million
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Oct 2020
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Divested Fayetteville Shale assets
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About $23 million
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Jul 2021
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Sold Stagecoach Gas Services to Kinder Morgan
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$1.225 billion
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Oct 2021
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Announced acquisition of Oasis Midstream Partners
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$1.8 billion
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Jul 2022
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Sold Barnett Shale assets to EnLink Midstream and acquired Sendero Midstream Partners
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$275 million (Sold), $600 million (Acquired)
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Oct 2022
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Divested Marcellus Shale assets to Antero Midstream
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$205 million
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Apr 2023
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Sold Tres Palacios Gas Storage to Enbridge with Brookfield Infrastructure
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$335 million
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Some Deals in Details
Crestwood Acquires Arrow Midstream for Bakken Expansion
Crestwood Midstream Partners LP announced that it had acquired privately-owned Arrow Midstream Holdings LLC for $750 million to capitalize on the growing demand for pipeline and storage services in North America's rapidly expanding Bakken shale field.
The acquisition was expected to contribute to Crestwood's estimated distributable cash flow per limited partner unit for the year 2014.
Crestwood and Inergy Unite to Create $7 Billion Energy Midstream Alliance
Crestwood Midstream Partners LP and Crestwood Holdings LLC, along with Inergy, L.P. and Inergy Midstream, L.P., had announced the signing of definitive agreements that created a fully integrated midstream partnership with a total enterprise value of approximately $7 billion. The merger of Crestwood and Inergy had resulted in a diverse platform of midstream assets offering a wide array of services across North America's premier shale plays, including the Marcellus Shale, Bakken Shale, Eagle Ford Shale, Permian Basin.
Crestwood Equity Finalized Merger with Crestwood Midstream
In 2015, Crestwood Equity Partners LP and Crestwood Midstream Partners LP underwent a merger to unify their corporate structures. Unlike a typical acquisition, this was a significant consolidation intended to optimize governance and operational functions.
Originally announced in 2014, the merger was projected to yield a combined enterprise value of around $7.5 billion. This move pooled a variety of midstream assets together, fostering improved operational efficiency and potentially offering greater returns for shareholders.
The merger didn't involve one company purchasing another but was rather a marriage of equals, geared towards establishing a singular, streamlined entity. The transaction was pivotal for both organizations and their stakeholders, as it aimed to realize cost efficiencies and bolster long-term shareholder value.
Crestwood Acquired Oasis For $1.8B
Crestwood Equity Partners LP announced that it had acquired Oasis Midstream Partners in a $1.8 billion transaction. The merger resulted in a top-tier midstream service provider in the Williston Basin, with a combined enterprise value of roughly $7.0 billion. The transaction was an at-market deal, based on the closing prices of Oasis Midstream and Crestwood as of October 25, 2021.
Crestwood and Con Edison Declare Sale of Stagecoach Gas Services
Crestwood Equity Partners LP and Consolidated Edison, Inc. announced that their subsidiaries had entered into a purchase and sale agreement to sell Stagecoach Gas Services LLC to a subsidiary of Kinder Morgan, Inc. for $1.225 billion. The agreement was signed on May 31, 2021, and was subject to two closing periods. The first closing involved the transfer of Stagecoach subsidiaries (except for Twin Tier Pipeline LLC) and was valued at $1.195 billion.
Crestwood Equity Partners LP acquired Sendero for $600 MM
ECP had entered into a definitive agreement to sell Sendero Midstream Partners, LP to Crestwood Midstream Partners LP, an affiliate of Crestwood Equity Partners LP. The deal had an enterprise value cash purchase price of $600 million, subject to adjustments for working capital. The transaction was expected to close in July 2022 and has since been completed.
Conclusion
The latest 2023 $7.1 billion acquisition of Crestwood Equity Partners by Energy Transfer represents a significant milestone in the energy midstream sector. If completed, this deal would not only mark a strategic extension for Energy Transfer into key basins like the Williston, Delaware, and Powder River but also promises to offer synergies with Energy Transfer's existing downstream operations:
- Crestwood's asset profile—comprising 2 Bcf/d of gas gathering capacity, 1.4 Bcf/d of gas processing capacity, and 340,000 bbl/d of crude gathering capacity—complements Energy Transfer's fractionation capacity at Mont Belvieu and its hydrocarbon export capabilities from its terminals in Texas and Philadelphia.
- Energy Transfer is looking to integrate its operations vertically, gaining greater control over the entire value chain, from gathering and processing to fractionation and export.
- The added storage and terminal assets, totaling approximately 10 MMbbl of storage capacity, further cement the deal's value.
Energy Transfer described the acquisition as a ‶credit neutral bolt-on,″ despite the assumption of Crestwood's $3.3 billion in debt. This implies confidence in the deal's long-term profitability, supported by Energy Transfer's expected $40 million in annual run-rate cost synergies, even before considering additional financial and commercial opportunities.
