Will the New Licensing Requirement Impact ET's Export Volume to China

Energy Transfer LP ET, a leading U.S. exporter of Liquefied Natural Gas (“LNG”), has substantial exposure to the ethane market of China through its Orbit joint venture with the country’s Satellite Petrochemical. This partnership has made China a key destination for ET’s ethane exports. However, new licensing requirements introduced by the U.S. Commerce Department in May 2025 have created fresh uncertainty around existing agreements and future shipment volumes to China.

The licensing rule, aimed at addressing national security concerns, could delay or block ethane shipments if export licenses are not granted in a timely manner. Since China accounts for nearly 50% of all the U.S. ethane exports, any disruption would pose a significant risk to Energy Transfer’s operations and revenues, particularly those tied to its Mont Belvieu and Nederland export terminals, which are critical for the NGL and ethane activities.

Energy Transfer is preparing to apply for the required export licenses and reviewing the scope of deals potentially affected by this change. The company is also evaluating how denied or delayed authorizations might impact overall export volumes and revenue streams tied to its operations related to China.

Despite these near-term risks, Energy Transfer’s long-term prospects remain strong. Take-or-pay contracts help secure steady revenues, even amid shipping delays. In addition, the company’s diversified infrastructure and growing global demand for ethane offer flexibility to redirect volumes to alternative markets in Asia, reducing dependency on exports to China.

How This New License Requirement Impacts Other Ethane Exporters

This new licensing requirement can adversely impact the prospects of other ethane exporters to China.

Enterprise Products Partners EPD recently announced that the Bureau of Industry and Security of the U.S. Department of Commerce has sent out a notice of intent to refuse export licenses for three 2.2-million-barrel ethane shipments to China. EPD’s export terminals are used to export a major volume of ethane to China.

Phillips 66 PSX has a significant presence in the global ethane market, and China is a key destination for the U.S. ethane exports. PSX may also need a license to export ethane to China.

ET Stock’s Price Performance

Units of ET have risen 3.2% in the past three months against the Zacks Oil and Gas - Production Pipeline - MLB industry’s decline of 4.3%.

Price Performance (Three months)

Phillips 66’s shares have lagged its industry in the past three months.

ET’s Estimates Moving North

The Zacks Consensus Estimate for Energy Transfer’s 2025 and 2026 earnings per unit indicates year-over-year growth of 12.5% and 1.88%, respectively.

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) is 10.18X compared with the industry average of 11.08X. This indicates that the firm is presently undervalued compared with its industry.

Another operator in the same space, Enterprise Products Partners' is also trading at 10.07X, which is a discount to its industry on an EV/EBITDA basis.

ET’s Zacks Rank

Energy Transfer currently has a Zacks Rank #2 (Buy). 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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