Can ET Gain From Its Expanding Processing Capacity Amid Rising Demand?

Energy Transfer LP ET, one of the largest midstream energy operators in the United States, is enhancing its competitive edge through the strategic expansion of the natural gas processing capacity. With assets spanning key production basins, the firm is well-positioned to capitalize on rising hydrocarbon volumes. 

Energy Transfer operates gathering pipelines, processing plants, and treating and conditioning facilities, either directly or via joint ventures, with a total processing capacity of about 12.9 billion cubic feet per day (Bcf/d). In the Permian Basin, the firm has nearly 4.9 Bcf/d of processing capacity. 

The firm plans to add 50 million cubic feet per day (MMcf/d) of capacity at four different Permian Basin processing plants for an incremental 200 MMcf/d of processing capacity. Its Mustang Draw project will provide an incremental 275 MMcf/d of processing capacity in the Midland Basin and is expected to be in service in the first half of 2026.

By expanding processing facilities in the key production regions, Energy Transfer can manage greater throughput of natural gas and natural gas liquids (“NGL”), further solidifying its role as a vital link between producers and end markets. With its scale and strategically positioned assets, the company is well-placed to capture enduring growth opportunities in a competitive landscape.

Energy Transfer’s processing expansion not only drives near-term growth but also strengthens its long-term prospects. Higher network utilization and stable cash flows enhance cash distributions, positioning the firm to deliver lasting value to unitholders while meeting the increasing energy demand.

Midstream Benefits From Processing Expansion

Expanding processing facilities enables midstream firms to handle greater natural gas and NGL volumes, improve throughput and offer more integrated services. This expansion supports fee-based income, attracts long-term agreements and enhances profitability in response to increasing energy demand.

Enterprise Products Partners EPD and Plains All American Pipeline PAA are among the leading midstream firms that are expanding processing capacity to capture growing hydrocarbon volumes. By enhancing processing capacity, the companies secure long-term contracts, strengthen fee-based revenues and improve operating efficiencies, positioning themselves to benefit from rising domestic production and global export demand.

ET’s Earnings Estimates

The Zacks Consensus Estimate for Energy Transfer’s 2025 and 2026 earnings per unit indicates year-over-year growth of 8.59% and 10.91%, respectively.

ET Stock’s Price Performance

Units of ET have risen 8.4% in the past year against the Zacks Oil and Gas - Production Pipeline - MLB industry’s decline of 0.7%.

ET’s Units Are Trading at a Discount

Energy Transfer units are somewhat inexpensive relative to the industry. ET’s current trailing 12-month Enterprise Value/Earnings before Interest, Tax, Depreciation and Amortization (EV/EBITDA) TTM is 9.31X compared with the industry average of 10.65X. This indicates that the firm is presently undervalued compared with its industry. 

ET’s Zacks Rank

Energy Transfer currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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