ET Stock Overview
Energy Transfer LP provides energy-related services.
Energy Transfer Competitors
Price History & Performance
|Historical stock prices|
|Current Share Price||US$10.97|
|52 Week High||US$12.49|
|52 Week Low||US$7.96|
|1 Month Change||-7.11%|
|3 Month Change||9.48%|
|1 Year Change||14.51%|
|3 Year Change||-14.76%|
|5 Year Change||-38.51%|
|Change since IPO||93.73%|
Recent News & Updates
MPLX's 10% Yield Vs. Energy Transfer's 9% Yield: Which Is Better?
Summary Energy midstream names have sold off in recent weeks. The macro environment is compelling, however. Both ET and MPLX offer hefty income yields. There are differences when it comes to near-term dividend growth potential and dividend consistency, however. What are the pros and cons of these two high-yield picks? Article Thesis Fears about a recession and an overall weak equity market have made the stocks of many energy midstream companies drop considerably in the recent past. That holds true despite the fact that the macro environment is very positive for these companies right now. Income investors have the chance to load up on high-yielding pipeline players, which is why we pitch Energy Transfer (ET) and its 9% yield versus MPLX (MPLX) and its 10% yield in this article in order to see which one is more attractive right here. The Macro Environment For Energy Midstream Companies Is Compelling Right now, the world is experiencing a massive energy crisis. Growing energy hunger following the pandemic, underinvestment in new production over many years, and supply disruptions caused by the current Russia-Ukraine war explain why energy prices have soared around the globe. This holds true for coal, natural gas, oil, and even electricity. In this environment, the companies that make money by supplying these commodities are highly profitable. But infrastructure players that offer pipeline and storage services benefit as well, in several ways. First, due to massive energy hunger around the world, their services are in high demand. Pipelines are easily filled as producing oil and gas and moving those commodities to demand centers is highly profitable. The strong profits for upstream and downstream players in the energy space mean that counterparty risk for midstream infrastructure players has declined to a very low level -- with Exxon Mobil (XOM) and others generating record profits, infrastructure players don't have to worry that these energy companies won't pay their bills. At the same time, midstream companies benefit from high inflation rates. Many fee-based contracts are CPI-linked, which means that the cash flows that the pipelines of ET, MPLX, and others generate will be growing considerably. High inflation also makes the value of the underlying assets increase over time -- those are "real assets", after all. Since debt has been locked in at lowish rates, interest expenses are not rising a lot in the near term, which results in debt getting inflated away in real terms, as most midstream players pay far less than 8% on their debt. Energy Infrastructure Has Been Sold Off One can thus argue that the macro environment for energy infrastructure companies, including MPLX and Energy Transfer, is one of the best in many years. And yet, their stocks have sold off in the recent past: Data by YCharts Over the last month alone, MPLX and ET have dropped by double-digits. Their business prospects have not declined to the same degree. In fact, ET's and MPLX's forecasted EBITDA for the current year is essentially flat in the same time frame, as we can see in the following chart: Data by YCharts There thus is a clear discrepancy between how the outlook for the two businesses has changed, and the performance of these two stocks. The discrepancy can be explained by the indiscriminate selling of equities due to the ongoing correction. At the same time, forced selling by energy ETFs also seems to play a role in the weak performance of energy infrastructure players, even though the outlook for their businesses has not really changed. For enterprising investors, this disconnect provides a compelling buying opportunity, we believe. After all, buying stocks that have dropped without a good reason can make for attractive entry points and compelling starting dividend yields. Both seem to be the case with MPLX and ET. MPLX Versus ET: Pros And Cons One can of course argue that energy midstream as a whole is an attractive sector right now and opt for an ETF, although leveraged ETFs are risky and it could thus be a good idea to avoid them. For those that opt for individual stocks, which I personally prefer, we'll look into the pros of MPLX and ET -- two high-yielding midstream infrastructure players that are both attractive. Income Consistency And Growth Both companies offer high dividend yields, with MPLX offering a slightly higher yield right now. That being said, ET's 9% dividend yield is also very attractive, although slightly lower than MPLX's yield. But high yields alone do not make for great investments, as reliability and growth need to be considered as well. Energy Transfer angered many (former) investors when it decided to cut its dividend in half during the midst of the pandemic. MPLX has fared better, as it didn't cut its dividend during the pandemic. Even better, it actually increased its payout in both 2020 and 2021, maintaining its dividend growth streak even during this crisis. MPLX thus clearly wins out on dividend reliability and when it comes to management being committed to the dividend. ET, however, has more dividend growth potential, one could say. The company's management team has stated repeatedly that bringing the dividend to pre-crisis levels was its top priority. The company also has hiked the dividend by a combined 53% over the last year, which is more than the dividend growth delivered by MPLX. If Energy Transfer increases the dividend to the pre-pandemic level of $1.22, that would mean another 33% in dividend increases from the current level. ET could achieve that over the next year if its recent dividend growth pace is maintained. MPLX will most likely not deliver similar dividend growth. Overall, MPLX is thus the more conservative income investment. Energy Transfer has a weaker track record but more potential, making it the more aggressive, or higher-risk/higher-reward income from a dividend growth perspective. Balance Sheet Strength Balance sheet strength matters due to two reasons. First, it helps protect a company during an industry downturn (although energy is experiencing a favorable macro environment right now). On top of that, balance sheet strength also matters due to the fact that rising interest rates will make high debt loads more costly over time. Data by YCharts When we look at each company's debt load and the forecasted EBITDA for next year, we see that MPLX is more conservatively financed. Its net leverage ratio is 3.3, which is far from high for an infrastructure company with strong cash flows and low capital expenditure needs. ET is more leveraged, sporting a 3.7x net debt to EBITDA ratio. When we adjust for some accounting items at ET, such as its partially-owned daughter entities USA Compression Partners (USAC) and Sunoco (SUN), its net leverage ratio is even higher, in the 4x range. That makes for a considerably weaker balance sheet relative to MPLX, but ET does still not seem overly risky from a financial health perspective. Its debt load has declined and its cash flows are high enough to pay growing dividends while bringing down debt further. With EBITDA likely growing over time due to fee increases etc. it's highly likely that ET's leverage ratio will decline further in the next couple of years -- although it will remain higher than that of MPLX. Again, MPLX looks like the more conservative, lower-risk pick, while ET has somewhat higher risk. Valuation Quality has its price. That is reflected in the valuations of MPLX and Energy Transfer: Data by YCharts
Energy Transfer: Remarkable Dividend Yield, Noteworthy Recent Insider Transactions
Summary Energy Transfer has a 4-year average dividend yield in the double-digits and an outstanding forward yield of 7.88%. Being up around 45% year-to-date, the stock has greatly outperformed the broader market and the energy sector. With a sub-10 P/E ratio, Energy Transfer has an attractive valuation compared to its peers and has the potential to run even more. There has been tons of insider activity lately, all being buys, which is a fantastic sign, as the CEO picked up over $30 million in shares himself this trading week. Energy has been the best performing sector this year, being up nearly 45%, and with a flood of recent insider buying activity, Energy Transfer LP can be primed for another run-up. Overview of Energy Transfer LP and my Investment Thesis Energy Transfer LP (NASDAQ:ET) has been a strong outperformer in this year's bear market. With its high volume of recent insider buying activity, this can be another indication of a potential move higher. Energy Transfer is a company that operates as a midstream oil company with terminals mainly in Texas, Louisiana, and a portion of the Northeast. They are a midstream oil company tasked with managing the pipeline and gathering facilities that move the gas from the well (upstream) to businesses and consumers (downstream). Locations of Oil Terminals and Pipelines for Energy Transfer (September 2022 Investor Presentation) There were significant buys from the CEO, Kelcy Warren, and recent purchases from the CFO Bradford Whitehurst and directors Richard Brannon and Michael Grimm. These purchases have all been in the range of $10-12. Considering that these executives purchased shares earlier in the year at around $7.50/share, which is much lower than current levels, investors might consider some potential for another move higher. Not only does ET have solid fundamentals/valuation relative to industry averages, but it also pays out a significant dividend, along with this flurry of confidence from the insiders. Given all of this recent buying activity, especially at a high volume, this makes me more confident in potentially investing in ET at these levels. Moving forward in this analysis, I will back my buy thesis with the many strengths I see in this company compared to its peers, as well as some risks to my thesis. YTD Performance of ET and Energy Funds (YCharts) How Energy Transfer Excels Ahead of its Peers Within the Energy Sector Some peers not only within the energy sector but also in the oil and gas transportation and storage industry include Cheniere Energy Inc (NASDAQ:LNG), Kinder Morgan Inc (NASDAQ:KMI), and ONEOK Inc (NASDAQ:OKE). I will show a comprehensive analysis comparing Energy Transport LP with these competitors and reiterate why I think ET shines above these names. I will use valuation ratios and compare the dividend yields of each peer to get a general comparison of the sector and industry. Data Provided By (YCharts) As you can see above, Energy Transfer excels in the price-to-earnings ratio category, with a multiple that is nearly half of its peers' ratios. Although there has been a slight uptick in ET's PE ratio due to its outstanding stock performance in 2022, it remains cheaply valued and is given a pretty strong B+ valuation rating by Seeking Alpha. Energy Transfer has done an exceptional job at securing contracts and increasing net income margins, making its valuation appear more attractive. The execution of six long-term liquefied natural gas SPAs to supply around 8 million tons of LNG per year, with first deliveries expected to commence as early as 2026 under SPA terms ranging from 18 to 25 years. This will allow ET to penetrate the midstream market even stronger and enable management to target higher payout yields and deleverage. Comparable EV/EBITDA Ratios Across the Energy Sector (ET September 2022 Investor Presentation) Another metric in which ET is extremely undervalued is its EV/EBITDA multiple. Above, you can see the value Energy Transfer attains when compared to its peers across the industry. ET remains one of the strongest valued companies across Energy using the EV/EBITDA ratio, which illustrates the company's ability to turn sales into profits reliably. While delivering growth projects, they've also been able to significantly eliminate debt from the balance sheets, providing a stronger EV/EBITDA multiple. Competitive Dividend Yield Energy Transfer noted that they now have $1.88 billion in distributable cash flow in Q2 2022, which is up 35% YOY. Because Energy Transfer has been able to bolster its free cash flow recently, they are now focused on increasing the yield again and target anywhere from $.90-1.20/share in annualized yields. This is a significant number considering the present inflation rate in America and all over the globe. ET's current yield of around 7% offers as an excellent inflation hedge while also providing robust growth strategies in the liquified natural gas space. Average yields have been in a downtrend since 2019; however, the company primarily targeted debt reduction during these times and allocated most of its FCF towards deleveraging its balance sheet.
Energy Transfer (NYSE: ET) is a Solid Combination of Yield and Value
Some analysts argue that the oil sector is experiencing the tobacco market treatment in the 1990s. The public sentiment is negative, yet most are still consuming those products. However, despite all the efforts and sustainability plans, global economies are still very much addicted to oil and natural gas – enabling companies like Energy Transfer to pay out hefty dividends to their shareholders.
Energy Transfer: Who's On The Bandwagon?
Summary Energy Transfer stock appears to be getting a lot more attention these days. The bandwagon is filling up. Unit prices have improved as investors have become cozy with energy sector stocks. In this article, I will cover seven different topics relevant to Energy Transfer investors. Introduction I've been writing about Energy Transfer (ET) for a number of years. In times past, sometimes it felt like hardly any Seeking Alpha authors were writing about the company, whereas now it seems like everyone is writing about ET. Personally, I'm happy for it. Let's call it the "bandwagon" factor. Over the past month, I counted 17 Seeking Alpha focus articles about Energy Transfer. In 2019 and 2018, there were ~half the number of articles written about ET over the same time period. In each of those prior years, one of those articles was mine. Is this important? Well, I've found that there seems to be a correlation between the relative volume of S.A. ticker coverage and broad stock sentiment. Stock sentiment is a factor in determining price. It may reveal itself in higher valuation multiples. In the article, I'll offer several observations about topics that revolve around the most recent earnings report but were not unpacked. These include: The current debt leverage ratio as determined by the rating agencies The sale of Energy Transfer's Canadian assets The status of the OG&E sale of ET common units The cash distribution The "KW factor" Common unit performance Unit Valuation General Energy Transfer Investment Thesis I remain constructive on Energy Transfer common units. Over the past few years, my investment thesis hasn't changed much. Energy Transfer has assembled one of the strongest sets of pipeline transportation assets in the United States. Several years ago, management undertook major construction projects that became lightning rods for pipeline opponents. Doing so cost the company dearly in terms of financial performance. "Pioneers take the arrows." However, these projects are now complete. Opponents' attacks have lost some starch. The company is now running for cash and reducing debt leverage. ET units may be poised to command comparable valuation multiples to peers. If so, ET stock remains discounted and offers strong cash distributions yield to boot. Let's break down the bullet points denoted earlier. Debt Leverage From time-to-time, I've provided readers with my take on Energy Transfer's debt-to-EBITDA ratio. Rightfully, this metric has dogged the stock for a long time. Some years back, Energy Transfer management over-leveraged itself. Some of it had to do with timing (the 2015 - 2016 energy price collapse), and a lot of it had to do with chasing too many deals with too many hooks and sinkers attached. Using what I believe is the S&P 500 methodology, I calculate a current 4.3x or 4.4x leverage ratio. That's within the 4.0x to 4.5x sideboards management (and the rating agencies) have been fixated upon for many years. However, on the 2Q 2022 earnings conference call, co-CEO Tom Long had this to say: We also expect to reach our leverage target range by the end of this year and going forward, expect our strong coverage and balance sheet strength to allow us to further prioritize growth within our capital allocation strategy. Are my figures off? Well, that's possible. In previous articles, I've provided the specific inputs utilized. You can check the inputs and my math from the earnings report and filings. I suspect the apparent disconnect has more to do with differing methodologies used by the three major rating agencies. I've pointed this out before. Furthermore, I understand Energy Transfer management is most focused upon Moody's leverage ratio calculation. Evidently, Moody's is the most conservatively computed ratio between the credit rating agencies: S&P, Moody's and Fitch. Nonetheless, ET is on the doorstep: right here and right now. Furthermore, using my understanding of the S&P 500 methodology, Energy Transfer may find its year-end 2022 debt leverage ratio near the low end of the target range. Indeed, this presumes $11.3 billion EBITDA (management's 2022 guidance midpoint) and NO debt reduction from current levels. Barring unforeseen circumstances, it appears ET leadership has finally got this issue put to bed. It removes an overhang that's been hindering the stock for years. Canadian Asset Sale In August, Energy Transfer announced the completion of the sale of its Canadian assets. The sale raised $270 million cash and reduced consolidated debt by $550 million. All good stuff. These assets were not core to the company and management got a good price for them. However, I don't expect the deal to have a significant effect on net debt. On the conference call, Tom Long offered remarks on another transaction: This week, Energy Transfer signed an agreement to acquire Woodford Express, LLC, a Mid-Continent gas gathering and processing system for approximately $485 million. This bolt-on opportunity will provide a roughly 450 million cubic foot per day of cryogenic gas processing and treating capacity in Grady County, Oklahoma as well more than 200 miles of low and mid-pressure gathering lines in the heart of the SCOOP play. The assets are already connected to our inter and intrastate systems as well our gas gathering system. The system is supported by dedicated acreage with long-term predominantly fixed fee contracts with active proven producers. We're excited to have these strong assets, quality customer contracts and established operations to our footprint in the Mid-Continent, all at an attractive valuation that will be immediately accretive to Energy Transfer unitholders. The Woodford Express transaction more or less washes out the ET Canada deal. The Canadian assets netted $270 million cash and reduced debt by $550 million. Woodford should suck down ~$485 million. Net/net is $335 million, nothing to sneeze at, but it amounts to less than one percent of Energy Transfer's current consolidated debt and lease liabilities. On the other hand, investors should take note of some key wording in the statement: "...immediately accretive to Energy Transfer unitholders." The same language was used when the Enable Midstream assets were purchased. Management sold outlying non-core assets and exchanged these for assets found in the heart of the domestic, unconventional Anadarko Basin; located in South Central Oklahoma. The pipes are connected to Energy Transfer's existing system and offer immediate cash, presumably better than what was coming in from Energy Transfer Canada. OG&E Common Unit Sale Somewhat off the radar screen has been the sale of ET common units by CenterPoint Energy (CNP) and OGE Energy (OGE). Please recall the Enable Midstream acquisition was equity-funded by ET common units. After the sale closed, Enable Midstream unitholders CenterPoint and OGE announced their intent to peddle the ET units. CenterPoint finished offloading their units earlier this year. They enjoyed ~20 percent uplift on the sale and got a credit agency rating kicker. Meanwhile, OGE has quietly been selling its units, too. Initially, the company received 95.4 million units. As of June 30, 2022, management announced the business sold 73.3 million units, leaving 22.1 million remaining. This is less than one percent of the total Energy Transfer diluted common units outstanding, and about one days' average trading volume for ET. I expect OGE to wind up the process in the third quarter. The completed OGE sale will remove another overhang on the stock. Immediately after the Enable Midstream acquisition, about 200 million common units were on the block. It's down to a tenth of that. Energy Transfer's Cash Distribution In 3Q 2020, Energy Transfer slashed its quarterly common unit dividend in half; from 30.5 cents to 15.25 cents. Investors howled. Since that time, the payout has been increasing. Here's the lowdown: 4Q 2021 distribution raised to 17.5 cents (15 percent) 1Q 2022 distribution raised to 20 cents (15 percent) 2Q 2022 distribution raised to 23 cents (15 percent) On the 2Q 2022 conference call, Tom Long added these remarks: As a reminder, future increases to distribution level will be evaluated quarterly with the ultimate goal of returning distributions to the previous level of $0.305 per quarter or $1.22 on an annualized basis while balancing our leverage target, growth opportunities and unit buybacks. Let's do some arithmetic. The current distribution is 23 cents. If we add 15%, we have ~26.5 cents. Increase it another 15 percent and we're back to 30.5 cents per quarter. I suspect we've cracked the code. In another few quarters we should be back to the old cash distribution. On today's closing bid, that's a 10 percent distribution yield when the ten-year T-note yields 3 percent. My rule-of-thumb is a reasonably valued midstream MLP should offer a cash yield about 300 bps above the ten-year. While we're not to the valuation section of this article yet, a 6 percent yield on ET common units offering $1.22 a year suggest a $20 stock. The "KW Factor" While likely overhyped by ET bears, the "KW Factor" certainly appears to remain a function the stock. Unquestionably, Executive Chairman Kelcy Warren remains at the center of the Energy Transfer franchise. Energy Transfer LP is not a C-corp. As a Limited Partnership managed by a General Partner, the Executive Chairman and largest individual unitholder is Kelcy Warren; he holds the aces. We also know sentiment can and does play a role in stock prices; likely an above average role in the case of Energy Transfer. It's doesn't matter that Kelcy Warren took a sleepy intrastate pipeline company and turned it into one of America's largest and most dynamic midstream / transportation companies in the United States. Based upon TTM revenues, peers Enterprise Products (EPD), Plains All American (PAA), Kinder Morgan (KMI), Magellan Midstream (MMP) or MPLX (MPLX) are not even close. Check the most recent earnings releases for these companies; it hammers home the point. On the August earnings conference call, was the KW Factor in play? Here's some Q&A commentary from Energy Transfer management. I've highlighted certain sections: Co-CEO Mackie McCrea on Energy Transfer's interest in purchasing petrochemical assets: When Kelsey kind of gave us the directive that we need to step in to pet chem [petrochemicals], we certainly are doing that, two perspectives: one, we're - from an M&A perspective, anything that's for sale, we'll take a look at pretty much like anything in the industry; and then on the organic side, we're excited the project that we're working on... [Author observation: maybe better if these comments sounded a little more process-driven / deliberate?] Co-CEO Tom Long on the Lake Charles LNG project: Well, the bottom line of that entry is at what point are we going to go to our Board and our Executive Chairman to ask for approval. I think we've said publicly that that we can get to that 12% to 14% depending on the customer mix and of course, the infrastructure funds that will be a part of this...but certainly, we'll make that decision at the right time here towards the end of the year. [Author observation: maybe better if these remarks ended with a period and without the boldface?] There wasn't anything wrong with these statements. No one mis-spoke. However, ET stock fell 5.3 percent during two trading sessions: the day of the earnings conference call and the next day. Meanwhile, the Alerian MLP ETF (AMLP) gave back 2.1 percent and bellwethers Enterpriser Products Partners and Magellan Midstream eased 1.7 percent and 1.3 percent, respectively. Maybe I'm too jumpy. Maybe it's just optics. Or coincidence. Look, the Enable Midstream acquisition / integration has gone well. I am highly confident the Woodford Express deal will pan out just fine. The SemGroup purchase wasn't so hot, but it wasn't a terrible move, either. I think the Lake Charles LNG project has legs. I just think it would be better if we hear about the good projects Energy Transfer management and its board are contemplating instead of referencing a "KW directive." Perhaps it's best to highlight seeking approval from the Board and not call out the "Executive Chairman" specifically when speaking about getting a major project FID (Final Investment Decision). Common Unit Performance Just for the record, I thought it worthwhile to point out Energy Transfer common units have been doing well. I've observed some reader comments on other S.A. articles that might have one believe ET stock hasn't been performing well.
Reaffirming WTI Price Predictions And Price Targets For Energy Transfer And TETRA - With 100% Upside
Summary I continue to opine - as I did in an article five months ago - that crude oil prices will stay "higher for longer," with an expected range between $90 and $110. Energy Transfer turned a corner in early 2021, did even better in 2022, and I believe will continue that trajectory in 2023 - price target $17. TTI is up >50% since I recommended it 6 months ago and has several new profit centers in its legacy oil & gas business that could add meaningful EBITDA in 2023. TTI's renewable initiatives are likely to add revenues this year, and the 473 mg/l lithium concentrations bode well for monetizing its lithium resource in Arkansas. TTI is due to release its lithium "inferred resource" statement in the next week or two, which, if positive, could be a significant catalyst to the stock price. Oil and natural gas ((NG)) have been in the headlines continually since Russia invaded Ukraine six months ago but much of the virtual ink has been contradictory, with some experts predicting $200 oil and others calling for a crash to $50 or less. I wrote an article in April in which I provided my projections for WTI crude pricing for this year ($100 Oil Is Here To Stay - 'Drill, Baby, Drill') and made recommendations regarding 5 oil-and-gas-related equities. If you are really interested in the topic and have some time on your hands, you may want to read my previous article because I discussed there many topics which still apply and which I will not repeat here.. Five months have passed since I wrote that article, and I thought I would revisit my predictions and extend them into 2023, as well as comment on two of the equities I recommended in my previous article (I am only discussing two equities in this article because the last article took me nearly 50 hrs to prepare and I simply do not have the time to do THAT again!). How Did I Do On My WTI Price Projections? To condense 5,000 words of crude-oil-pricing discussion from my previous article into a single paragraph here, I posited previously that oil was likely to stay in triple digits in 2022, unless we encountered a recession and/or Iranian barrels were likely to come back on the market, in which case I thought WTI might go into the $80's (look in the section of my previous article entitled "Counterarguments to the Foregoing Thesis"). It turns out I was pretty much on target. After my article came out, WTI did basically remain in triple digits for the following two months, until June when the recession drumbeat became a roar and WTI dropped into the $90's, a number that recently dropped into the $80's as it became more likely that a deal would be done with Iran. My Predictions For WTI In 2022 and 2023 Although I think the analysis of where WTI is likely to trade is important to making money in the energy space, I realize this is a long article, so if time is short, you can skip the WTI price analysis and jump to the discussion of Energy Transfer and TETRA Technologies below. On the other hand, if you want to understand the nuts-and-bolts, let's dive in. The key conclusion in my previous article was "that crude oil prices will stay higher for longer than perhaps many people expect." To give you the punchline at the beginning of this article, my opinion continues to be pretty much the same, with a few caveats and wrinkles. To be more specific, I think we have triple-digit oil prices coming back to us in the next 12 months (since I bought my crystal ball at the dollar store, I rarely make predictions more than 8-12 months out), although a serious recession/bear market (i.e., if the S & P drops another 15-25%, as Jeremy Grantham and others believe) may drop WTI back to the $70's. I realize that in making the above prediction, I am going contrary to the forward curve which shows $80's prices in 2023, and I am going contrary to projections of many E & P's (exploration and production companies-the companies that produce crude), who are often using $65 to $70 WTI as a basis for their EBITDA/FCF projections. Let me provide the reasons why I believe the forward curve is wrong and why I believe we have more $90's and $100's in our future than $60's and $70's (unless the S & P resumes its downdraft). 1. Even Though Many E & P's Quote Their "Breakeven" Prices To Be in the $30's, That Is NOT Correct. Traditionally-and even today-the concept of "breakeven" price has only taken direct production costs into account, and under this rubric, yes, many companies can tout "breakeven" numbers in the $30's per barrel. But that rubric no longer exists in today's world. Let's take a company that is producing 1000 bpd in 2022, and has a traditionally-calculated breakeven price of $30/barrel. If the company did nothing but produce those barrels, natural production decline in its unconventional wells might result in 2023 production dropping to 700 bpd, and even less in subsequent years. Therefore, just to maintain production, the company has to drill a well or two every year. Although well drilling and fracking have traditionally been thought of as "capex" and therefore not included in breakeven costs, I think today every E & P either implicitly or explicitly includes in their "conceptual breakeven" costs the capex needed to at least maintain production (and maybe even the capex costs to increase production a few percent a year). But that's not all that most E & P's are now including in their "conceptual breakeven" costs. If the company has more debt than management thinks it should, then debt reduction costs will also be included in "breakeven" costs. Furthermore, some sort of "capital return to shareholders" (in addition to debt paydown, which is a return of capital to shareholders, whether they recognize it or not) must now also now be covered by the company's revenues. Finally, it could be argued that the costs of obtaining new acreage to replace already-drilled acreage should also be included in the broader breakeven cost discussed above. And once all of the above have been covered by revenues, having some real free cash flow (i.e., cash left over after all of the above have been paid out of revenues) is the new financial target for most E & P's. To put it a different way, in the old days, companies would borrow money to drill wells, thinking of it as "capex," rather than what it actually was, which was the cost of simply maintaining production. Not very many E & P's think that way anymore. Why is that relevant to the discussion about crude pricing? Because the above updated rubric for determining the real breakeven point means that unlike before, excess production will not occur at $60 or $70 oil-a number that some years ago would have incentivized lots of debt for lots of extra drilling and capex. Indeed, the opposite is likely to occur-i.e., if WTI hits the $80's (as it did a couple of weeks ago), companies may stop deploying rigs or even pull rigs, lowering production (as natural decline takes over) and leading to a different, higher floor ($80's) than what was considered adequate just a few years ago ($60's). In essence, rolling all of the above costs into a more realistic "unified cost of production" forces the breakeven point far higher than before, and precludes excess production that would lower WTI to the $60's or $70's (barring a resumption of the bear market). In late July-early August, we had a bit of a test of this theory. During that time frame, WTI dropped from upper $90's to mid-$80's, and I told a friend of mine at that time (about a month ago) that I would not be surprised if rig counts stopped increasing or even went negative. (rig counts had been climbing steadily throughout 2022, so I was predicting a change in that trend) As it turns out, rig counts went negative the following three weeks and just went up by 3 rigs this past week-meaning that rig counts basically remained unchanged for the whole month of August. Obviously, this is hardly a scientific test and a month does not prove a point, but it certainly supports the foregoing argument. 2. Russia's Attack On Ukraine Will Revamp Oil and Gas Flows Around the Globe and Keep Oil and Gas Prices Higher for Longer I borrowed the above subtitle verbatim from my previous article because what I said five months ago still applies-and maybe even applies with greater force. Whereas some geopolitical experts believed early on that the war would be over in a matter of weeks, I believed otherwise, and unfortunately, I continue to believe otherwise. I explained the reasons why in my previous article and won't repeat them in full here, but I will quote the following paragraphs from my previous article: I don't see the above circumstances reversing over the next year. In fact, even if the war is resolved soon--which does not seem likely--I doubt that Russia's isolation (discussed above) will change anytime soon. I do not see the West's "self-sanctions" ending in 2022 (nor probably in 2023) and I certainly do not see Shell, Halliburton, Schlumberger and the rest of them rushing back to Russia anytime soon. In fact, I think the world's disgust with Putin may actually INCREASE once the missiles stop flying and the war crime investigations begin and more atrocities are revealed. But even if I am wrong about everything I have said above, there is one more reason that convinces me that global oil prices (i.e., Brent and Arabian light and related crudes) are likely to remain in triple digits this year, and that reason is a sea change in European attitudes toward continuing to depend on Russian hydrocarbons. Although Europe has not sanctioned its current purchase of Russian hydrocarbons (NOTE ADDED IN CURRENT ARTICLE: Europe has agreed to sanction Russian oil effective 12/5/22. Although this sanction will have its holes, it certainly will lower the amount of Russian oil that hits the market-although "by how much?" is an open question), there is no question that Europe has finally recognized the self-inflicted vulnerability it has created in terms of its critical dependence on Russian hydrocarbons. The Europeans banned fracking, shut down hydrocarbon production in Europe, shuttered nuclear power plants and sourced huge amounts of their hydrocarbons from Russia. This might have been forgivable if Putin's Ukraine attack had been a surprise, but after his forays into Chechnya, Georgia and Crimea (the latter just 8 years ago)-not to mention his repeated statements that all of Ukraine (not just Crimea) belonged to Russia, his support of the separatists in eastern Ukraine, and his repeated use of Russia's hydrocarbon production to blackmail Europe, it is hard to argue that Putin's attack on Ukraine was a surprise. Be that as it may, Europe now recognizes that relying on Russia for over one-third of its hydrocarbon needs (a percentage that is almost 50% in Germany) is unwise policy, and therefore, there is little doubt that Europe is going to wean itself off Russian hydrocarbons over the next 2-3 years. The 180-million-barrel Release from the SPR (Strategic Petroleum Reserve) Is A Huge Factor That Nobody Is Talking About Demonstrating the administration's panic over the impact that high gasoline (and even higher diesel) prices would have on the Democrats' prospects in the November midterm elections, Biden announced in early April an unprecedented release of 180 mb of crude from the nation's SPR over the following 6 months-i.e., 1 million barrels per day, every day, from May to October. Over the past few months, I have read dozens of articles arguing that "demand destruction" has been leading to "builds" of crude in storage, and not a single article has noted that the builds have occurred SOLELY due to the release of 7 million barrels per week from the SPR. Despite that release, we have not had a single weekly crude build of 7 million barrels which means that if no oil had been released from the SPR, we would not have had a single crude build in the US in the past few months. To put this yet another way, in the absence of the SPR release, we would have had a crude draw every week and the amount in non-SPR storage would have been about 120 million barrels (May thru August releases-120 days-at 1 mbd) LESS than the EIA has been reporting in its weekly reports (which EXCLUDE the SPR draw). To put this a third way, there has been NO "demand destruction" relative to production-in other words, demand has actually exceeded production over the past few months but it doesn't look that way because 120 million barrels have been released from the SPR. What is even more interesting is that despite the release of 7 mb of crude from the SPR per week, there was a crude draw of 7 million barrels two weeks ago and a crude draw of 3.3 mb for the week ending 8/19 (reported by the EIA on 8/23/22). In other words, crude supply in the US was unable to keep up with crude demand-despite the addition of 14 million SPR barrels to the supply over those 2 weeks. Finally, it should be noted that the 120 million barrels that have been released from the SPR so far have driven the SPR to its lowest level since 1985-and there are still another 60 million barrels to be released in September and October. But keep in mind that according to longstanding procedure, these barrels must be replaced. Therefore, if that policy is followed, 180 mb of crude must be returned to the SPR in the future, increasing future demand. OPEC+ Has Undergone a Huge Change In The Past Eighteen Months-But American E & P's And Oil Experts Haven't Noticed As I explained in my previous article, huge changes in the recent geopolitics of the Middle East have led OPEC to respond to the SPR release (and to Biden's recent trip to Saudi Arabia) in a way that has to a large extent negated the impact of the SPR release. I explained in my previous article that since his inauguration 20 months ago, Biden had been hostile to Saudi Arabia and the United Arab Emirates ((UAE)). Since I provided substantial details on this in my previous article, I will only briefly summarize and update that discussion here. As I previously explained, while the US has been abandoning the Middle East, both China and Russia have been doing the opposite. As the Saudis and the UAE--the only countries in the world with spare capacity to impact global supplies-are concerned about the US's apparent interest in enriching Iran and allowing Iran to obtain a nuclear weapon (due to their assumption that a very poor "deal" with Iran is likely) and as these Gulf countries see that America has abandoned other former US allies (such as Afghanistan), Saudi Arabia and the UAE have logically decided to do what's best for Russia, not America. Saudi Arabia and the UAE's refusal to pump more oil-even after Biden made a personal trip to Saudi Arabia a few weeks ago-helps Russia by keeping global oil prices high. Indeed, for various and complicated reasons, OPEC+ has underproduced its published targets by almost 3 mbd over the past few months. Saudi Arabia and UAE could have pumped more (how much more is not clear) but have clearly chosen not to do so, keeping world markets tight and maintaining an average Brent price this year of >$100. Based on OPEC's actions in the past 18 months (including Saudi Arabia's oil minister saying last week that OPEC might actually cut production at its next meeting!), it is clear to me that today's OPEC is different from OPEC at Biden's inauguration. Whereas OPEC previously stated it was happy with $75 oil (and Russia traditionally stated it was happy with $45 oil), OPEC has continually refused to add more production despite triple-digit Brent (and Arabian light) prices almost all of this year. In essence, when faced with a choice, Saudi Arabia and UAE chose to do what benefits Russia (higher oil prices generating billions of extra dollars to Russia, especially important to Russia now given the expenses associated with Russia's attack on Ukraine and hits to the Russian economy due to sanctions) than what benefits the US (lower oil prices). OPEC feels that the US has abandoned the Middle East, while Russia has done the opposite. Given the foregoing-and since OPEC (ie, Saudi Arabia and the UAE) can absolutely determine global crude prices by changing their production-I believe OPEC's new price "setpoint" for crude on a long-term basis will be at least $90-$100 and as high as $110 to $120. OPEC would probably want to avoid sustained prices over $120 to prevent meaningful "demand destruction") which I do believe would occur at $130 WTI (pushing gasoline prices over $5 again and diesel prices solidly above $6). Could WTI Hit $130? $140? $150? As I noted in the above paragraph, I believe OPEC will try to prevent Brent/WTI from exceeding $120 for any meaningful period of time. But over the past few months, some experts have argued that if demand increases, OPEC does not have the spare capacity to address much additional demand, and that therefore, prices could rise to $150 or even $200. I don't think that is very likely because at $150 WTI, gasoline in the US will exceed $6 per gallon, diesel will likely exceed $7, and demand destruction will lower demand and bring supply and demand back into balance in the low $100's. In addition, I think both domestic and international supply will be incentivized with Brent and WTI in the $120 range and above. Domestically, WTI of $120 would enable E & P's to add rigs, pay all the other expenses discussed above, and still make boatloads of FCF. International producers would be similarly incentivized, plus we might find that Western sanctions against Iranian (assuming those remain in place) and Venezuelan production are much less enforced at WTI of $120 than they might be at WTI of $90 (we are already seeing waivers being given to Western oil companies that operate in Venezuela). In summary, basic economics (and increased likelihood of recession should oil go to the $120-130 range) would work to increase supply, lower demand, and bring oil prices back to where both producers and consumers can live with it, which I believe is between $90 and $110. I will close by saying that the lower end of that range is more likely in September and October-as the SPR release continues-and the upper end of that range is more likely in Q4, as the SPR release ends. If Europe actually implements its sanctions against Russian oil effective 12/5/22, that might push oil past $110, although as discussed above, demand destruction may then take hold and prevent oil from going much beyond $120-$130. Counterarguments To The Foregoing Thesis The following might sustainably lower oil prices below $90: 1. Iranian oil comes back after a new nuclear deal is signed. Although I think handing Iran tens of billions of dollars so it can further develop its nukes and long-range missiles (hello, North Korea) is a worse decision than Europe's decision to rely on Russian hydrocarbons, recent events suggest that this may happen. I think such an event-especially given that Iran has somewhere between 60 and 80 million barrels in floating storage-is likely to lower oil prices meaningfully, possibly below $90 and maybe even below $80. But there are a couple of factors that may minimize the impact of Iranian barrels. First, it appears that Iran can only add about 1 mbd to global supplies (after the initial release of floating storage), and if Europe sanctions Russian oil, those sanctions may well remove that amount of oil (or more) from the global market. Second, if sanctions are lifted, Iran's production may come under OPEC control so that Iran's extra production/exports may end up being nullified completely by OPEC policy, as suggested by Saudi Arabia's oil minister last week. Third, the SPR release will likely end at about the same time (or before) Iranian barrels hit the market, further muting the impact of the Iranian barrels. Therefore, although crude prices would initially drop if (and when) a nuclear deal is signed, the long-term impact of such a deal on the oil markets may end up being mooted by other events. 2. Global recession. Obviously, a global recession will lower demand for hydrocarbons, which may well decrease oil prices back to $80 or even less. There are valid arguments to be made supporting-and rebutting-the likelihood of a recession, and in my book, it's way too close to call. But even if a recession is on the horizon, my guess is that OPEC and domestic E & P's will show enough restraint (as they have already) that WTI will not drop much below $80, for reasons explained above. If My Thesis of "Higher-For-Longer" Is Correct, What's The Best Way to Play it? In early March 2022, I submitted an article on TETRA Technologies, Inc., (Tetra Technologies, Inc. - 100% Return In One Year. (TTI)) in which I argued that Russia's attack on Ukraine would lead to major realignments in global hydrocarbon supply. Because I wrote that article just a few days after Russia attacked Ukraine, my thesis constituted a projection of what I thought would happen, but there was not much evidence (at that time) to actually support my thesis. Part of my thesis was based on an understanding of Putin-my belief that he would pursue his attack with vengeance, as he had in Chechnya and Georgia, as well as his use of chemical weapons in Syria and his support of the separatists in eastern Ukraine since annexing Crimea in 2014. Unlike many talking heads who spouted the common (and sometimes wrong) "wisdom" that geopolitical events are usually short-lived and have minor impact on global markets, I believed the war would be prolonged, and that Putin might well resort to attacks on civilians, especially if the war wasn't going as well as he had hoped. I further posited that the longer the war lasted, and the more draconian the attacks on civilians, the more determined the West would be to terminate its dependence on Russian hydrocarbons. Unfortunately, since I submitted my TTI article in early March, my fears of civilian targeting have been realized to an even greater degree than I had envisioned. In essence, subsequent developments in the Ukraine war-and the West's response to it-have provided strong support for the belief I expressed that the West would be moving away from Russian hydrocarbons. Russia's attack on Ukraine and the resulting motivation to increase hydrocarbon production in the US (and elsewhere, of course) has further enhanced the value proposition of virtually all companies involved in the production of hydrocarbons, and although many oil and gas equities have risen as WTI and NG prices have gone up, those increases do not adequately reflect what I believe to be a sea change in global hydrocarbon supply channels. Based on the above beliefs, I loaded my portfolio with various oil-and-gas companies, and in my previous article, I discussed five companies in my portfolio that I believe offered compelling value. Due to the length of this article, I am limiting my discussion to just 2 of those companies, but I continue to believe that the companies I do not discuss here-- Callon Petroleum (CPE), Ring Energy (REI) and CSI Compressco (CCLP)-offer at least 50% upside over the next year. The two companies I discuss below are Energy Transfer (ET) a huge midstream, and TETRA Technologies (TTI), which is probably my favorite equity in the oil and gas space because it offers not only a growing and unique oil/gas services business but also because TTI has three renewable initiatives that could help the stock price to double in 2023. 1. Energy Transfer (ET) Has 50% Upside Over the Next Year. I have written 5 articles on ET. In my very first article on ET published in Jan. 2021, I recommended it when it was trading at $6.65. I wrote a second article in Feb. 21, and then a series of 3 articles in May, 2021 (third article, fourth article (Energy Transfer (ET): Q1 Operational Performance Augurs Well For Stock) and fifth article (Energy Transfer (ET) Stock: Setting A 12-Month Price Target Of $14 Per Share). Although ET has done well since I first recommended it (total return, including distributions, of almost 100% since January 2021), I hereby reiterate my most recent price target for ET of $17, which I set in my April, 2022, article cited above. This price target amounts to an additional 50% return over the next year (ET is $12.12 as I write this). I posited in my very first article that ET would have a very good 2021 and an even better 2022, and that is in fact what has happened. A good part of ET's success is due to the fact that ET uses its 120,000 miles of pipelines to move about 30% of the natural gas that is shipped around the United States every day and Europe's goal of replacing Russian NG has increased domestic NG flows (as well as NG liquids-another big profit center for ET) in 2022, filling ET's pipelines and increasing ET's revenues. Given that NG is trading at $9.32 as I write this, it is very likely that NG flows will continue to increase into 2023 and beyond, further adding to ET's EBITDA and FCF. Because so many other SA authors have written about ET (probably over 20 articles in the past month), I will focus my ET discussion on a couple of issues that have not been addressed by the other authors. The most common negative comment I read in these pages argues that ET is a bad investment because it may not stick to its previous low capex projections and instead, will go back to spending too much on capex. There are two problems with this criticism. First, since when did spending money to increase revenues become a problem? Isn't that what happens with most tech companies? It seems capex in the oil-and-gas field is a bad word, but in other spaces, it's a good expenditure. That makes absolutely no sense. The correct question to ask is: What kind of return can ET earn on the capex it is about to spend? In the past two years, ET's EBITDA has gone from about $10.5 billion to upper end of guidance of $12.8 billion projected this year (personally, I think ET will hit $13 billion). Didn't that EBITDA climb because ET bought Enable (a kind of capex, or investment of your capital, -buying a company in anticipation of a return on that investment) and because ET has brought online multiple other projects on which capex was previously spent but was now generating revenues and EBITDA? And if that is true-which of course it is-why are we denigrating ET's current capex spending plans? Again, that makes no sense. So I now hear the naysayers arguing-"But look how many billions of capex ET spent in the past, generating poor returns," to which I respond, "That's ancient history." Every investor is, of course, welcome to judge a company by its previous track record, but if you miss an inflection point-a change in either the market and/or the company-you miss the outsized returns that someone who sees that inflection point will make. Frankly, it was clear to me in January of last year, that an inflection point was upon us, both in how ET was being run and in the hydrocarbon market. Based on identifying that inflection point, I recommended ET at $6.65, bought a boatload of it, and have more than doubled my money. Others disagreed with my view in Jan. 2021, but continuing to disagree with what has now become obvious (i.e., that ET is generating excellent returns on its capex) just because ET didn't spend its capex as productively as it could have years ago means leaving money (and outsized returns) on the table. The other problem with the complaint about ET increasing its capex spend is the apparent lack of recognition that global hydrocarbon supply chains changed in 2021 and even more so since Russia attacked Ukraine in February this year. Given the marginalization of Russian hydrocarbon production-and the consequent focus on US hydrocarbons-is it really THAT unreasonable for ET, a hydrocarbon midstream, to increase its capex so it can take advantage of the markedly changed macro environment? Finally, a few words about my $17 price target. In my earlier articles, I felt there was a good chance that ET would return to its historical distribution of $1.22/unit in 2022, or perhaps in early 2023, and indeed, ET has increased its previously-lowered distribution in each of the last three quarters. I think there is a decent chance that ET raises its quarterly distribution from 23 cents in Q2 '22 to 27 cents in Q3 and 30.5 cents (its original distribution) in Q4, although the trip from 23 cents to 30.5 cents might take 3 quarters rather than 2. Reaching a distribution of $1.22 would constitute a 10% yield on today's price. Also, a $1.22 distribution would support my price target of $17 (a 7.2% yield, which is very close to ET's historical yield). In addition, with debt at about $50 billion, and assuming (as I do) EBITDA hits $13 billion this year, the debt ratio will be comfortably under 4 to 1, and in my book that will render debt a non-issue, especially in the current hydrocarbon macro environment. Some people are concerned that an FID (final investment decision) on the Lake Charles LNG facility-which is likely to be announced this year-will ramp debt back up, but although that is possible, I rather doubt it. First, I believe ET will share the equity cost of Lake Charles with one or two partners, lowering ET's share to perhaps $1.5 to $2 billion. Second, even with an increased distribution, I expect ET to generate several hundred million of FCF per quarter in 2023 and beyond, and since ET's likely equity contribution will be spread over several years, there should be enough FCF to cover Lake Charles capex out of cash flow while paying the full $1.22 distribution. Therefore, with an implied distribution yield of 7.2% ($1.22/$17), and strong hydrocarbon fundamentals in 2023, a $17 price target in a year is reasonable. Therefore, I think ET is a very good buy under $13, which would give you a tax-advantaged 10% distribution yield on purchase price once the distribution hits $1.22. This is not to say ET couldn't be bought in the $11's, or maybe even $10's if the S & P heads backs to 3000, but as they say, timing the bottom is impossible, and buying an equity that yields 7.6% today and is likely to yield 10% in six to nine months is still a pretty attractive proposition. 2. TTI Has Low Downside Risk And 100% Upside-And Potentially Even More If Its Zinc Bromide Battery Storage and Lithium Initiatives Succeed I have written two articles on TTI this year (Tetra Technologies Stock: A Potential Double In One Year and Tetra Technologies, Inc. - 100% Return In One Year. TTI was at $2.74 when I first recommended it on 2/22/22, six months ago. TTI is at $3.96 as I write this, sporting a return of 45% in the past six months (which months haven't been so good in the overall markets). If my discussion of TTI here interests you, you may find it worthwhile to go back and read my earlier articles. As discussed above, the West is concertedly moving away from Russian hydrocarbons, and that is enhancing TTI's value proposition in two ways-by strengthening both TTI's legacy oil services business as well as amplifying the potential of TTI's renewable initiatives which are themselves enhanced as hydrocarbons become more expensive. First, the profitability of TTI's oil-services business has been improving as hydrocarbon production has increased and with WTI likely to stay in the $90's and above and NG reasonably likely to stay over $7.00 this year and next year ($9.32 as I write this)-not to mention some new opportunities for TTI in the hydrocarbon space--TTI's legacy business has been doing well in 2022 and likely to do even better in 2023. Therefore-and as explained in more detail below--I maintain my 1-year price target for TTI's legacy business at $5.50 (the math on that target can be found in my previous articles). Second, the high cost of hydrocarbons-which, as discussed above is likely to stay high-as well as the recently-enacted Inflation Reduction Act ("IRA") will both serve as tailwinds to TTI's renewable initiatives, two of which are likely to add $2-$3 in stock value over the next year, yielding an overall price target of $7.50 to $8.50 (midpoint of $8.00) in one year, and representing 100% upside from TTI's price today ($3.96). I should add that the consensus target among analysts following the stock is about $7.00 but our targets differ because I believe they have not given enough value to TTI's lithium potential. TTI's Q2 legacy-business results were good. Revenues grew 8% from Q1 22 and 38% from Q2 21. Adjusted EBITDA was about flat with Q1 22 after deleting one-time items. Q2 22 cash from operating activities was $18 million, far exceeding pre-pandemic Q1 20 cash flow. As I mentioned above, TTI appears to be getting involved in new markets/products not only in its renewable businesses but also in its legacy offshore services space. For example, TTI is beginning to serve oil and gas operators in Argentina's shale basin, providing its flowback and best-in-class sand management services, soon to be followed by its leading water recycling services. In fact, because of the lack of midstream and pipeline infrastructure in the Argentine Vaca Muerta basin being served, TTI's suite of services in Argentina are broader (and thus likely to generate more revenues) than the same type of services that TTI provides to domestic E & P's. Another growing oil field service being provided by TTI, both domestically and internationally, is water recycling. Disposing of produced water (water that comes up out of wells after the well is fracked, and also as part of the process of producing oil and gas) has become a major issue, both for practical and environmental reasons. The practical reason is that it appears that disposing of produced water by forcing it into disposal wells has been causing earthquakes. The environmental reason is that there has been growing pushback to the use of fresh water to frack oil/gas wells-especially in arid areas like the Permian basin. If produced water can be recycled and then used to frack additional wells, both of the above problems are solved. The costs of disposing produced water are very high. Add to this the cost of buying more fresh water to frac wells makes the total cost of water at well sites to be very high-not to mention the environmental issues around water. Yet another growth opportunity was described by Mr. Brady as follows: I'm excited to announce that during the second quarter, we also had a successful trial for our new auto drill-out technology for a large independent producer in Appalachia. This new technology is expected to reduce wellsite personnel by more than 30%, reduce rig up and downtime by approximately 40% and reduce HS&E exposure [NOTE ADDED: the safety exposure of having so many personnel around the well site], a meaningful impact to our customers' well operations and their economics. Although it is impossible to quantify the revenue impact of the above technology, it seems that any technology that can lower wellsite payroll costs and downtime by 30-40% would represent a huge savings to the operator and would therefore achieve substantial market penetration and provide a high margin to TTI. This is especially true now given that oil-field service workers are not easy to find. TTI achieved such savings and grew revenue with their sand filtration technology (which they call "Sandstorm,") and is now looking to expand their wellsite expertise with technology that facilitates completing a well. As mentioned above, this is a rapidly growing business for TTI, who is a leader in the water-recycling field. In Q2 22, TTI recycled 571 million gallons-up 62% since Q2 21 and up 17% sequentially. Given the seismicity and environmental problems discussed above, there is every reason to believe that this business will continue to grow rapidly. Finally, I think the most exciting new oil-field-services opportunity for TTI is the ability to go a step beyond TTI's current water-recycling and instead be able to clean up produced water to the level that the water can be used to irrigate a field (surface discharge). Today TTI is already cleaning produced water enough to be used to frack wells. Because disposing of produced water (as discussed above) is costly and creates environmental and seismic issues, and because of drought conditions across the US and around the globe, if produced water can actually be productively reused-maybe even more than once-that will be a billion-dollar win for the company that proves that tech on a commercial scale. Produced water is very complex, containing not only very high concentrations of dissolved minerals, including some pretty toxic ones (iron, arsenic, lead, mercury, cyanide) but also substantial concentrations of various minerals that have commercial value (bromine, calcium, manganese, barium, etc) as well as various life forms (e.g., algae, bacteria). Figuring out how to cost-effectively treat that water to a level where it can be beneficially reused is a complex technological challenge but TTI's CEO stated that TTI is working on exactly that challenge ("that's been a focus of ours as part of the next evolution of our recycling capabilities." Switching now to TTI's lithium progress, during the Q2 22 earnings call, TTI announced lithium and bromine results of samples obtained from an exploratory well on its 100%-owned acreage that was drilled in Q1. Because previous results in the same brine aquifer (the Smackover formation) have been positive- (around 250 to 300mg/liter), I expected similarly positive results from TTI's own testing. The results far surpassed my expectations, with lithium levels far higher than I expected. This is how Brady Murphy, the CEO, stated the results during the earnings call: The fluid sample test results were conducted by 2 independent labs, and all valid results yielded very consistent lithium results across all 3 zones with an average concentration of 473 milligrams per liter, which is 67% above the concentrations used for the exploratory target.
|ET||US Oil and Gas||US Market|
Return vs Industry: ET underperformed the US Oil and Gas industry which returned 35.9% over the past year.
Return vs Market: ET exceeded the US Market which returned -20.3% over the past year.
|ET Average Weekly Movement||5.1%|
|Oil and Gas Industry Average Movement||8.1%|
|Market Average Movement||6.9%|
|10% most volatile stocks in US Market||15.8%|
|10% least volatile stocks in US Market||2.8%|
Stable Share Price: ET is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.
Volatility Over Time: ET's weekly volatility (5%) has been stable over the past year.
About the Company
Energy Transfer LP provides energy-related services. The company owns and operates approximately 11,600 miles of natural gas transportation pipeline, and three natural gas storage facilities in Texas and two natural gas storage facilities located in the state of Texas and Oklahoma; and 19,830 miles of interstate natural gas pipeline. It also sells natural gas to electric utilities, independent power plants, local distribution and other marketing companies, and industrial end-users.
Energy Transfer Fundamentals Summary
|ET fundamental statistics|
Is ET overvalued?See Fair Value and valuation analysis
Earnings & Revenue
|ET income statement (TTM)|
|Cost of Revenue||US$69.35b|
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
|Earnings per share (EPS)||1.21|
|Net Profit Margin||4.57%|
How did ET perform over the long term?See historical performance and comparison
8.4%Current Dividend Yield
Is ET undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score 5/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Key Valuation Metric
Which metric is best to use when looking at relative valuation for ET?
Other financial metrics that can be useful for relative valuation.
|What is ET's n/a Ratio?|
Price to Earnings Ratio vs Peers
How does ET's PE Ratio compare to its peers?
|ET PE Ratio vs Peers|
|Company||PE||Estimated Growth||Market Cap|
WMB Williams Companies
KMI Kinder Morgan
CQP Cheniere Energy Partners
ET Energy Transfer
Price-To-Earnings vs Peers: ET is good value based on its Price-To-Earnings Ratio (9.1x) compared to the peer average (19.3x).
Price to Earnings Ratio vs Industry
How does ET's PE Ratio compare vs other companies in the US Oil and Gas Industry?
Price-To-Earnings vs Industry: ET is expensive based on its Price-To-Earnings Ratio (9.1x) compared to the US Oil and Gas industry average (8.7x)
Price to Earnings Ratio vs Fair Ratio
What is ET's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
|Current PE Ratio||9.1x|
|Fair PE Ratio||18.4x|
Price-To-Earnings vs Fair Ratio: ET is good value based on its Price-To-Earnings Ratio (9.1x) compared to the estimated Fair Price-To-Earnings Ratio (18.4x).
Share Price vs Fair Value
What is the Fair Price of ET when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: ET ($10.97) is trading below our estimate of fair value ($22.84)
Significantly Below Fair Value: ET is trading below fair value by more than 20%.
Analyst Price Targets
What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?
Analyst Forecast: Target price is more than 20% higher than the current share price and analysts are within a statistically confident range of agreement.
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How is Energy Transfer forecast to perform in the next 1 to 3 years based on estimates from 9 analysts?
Future Growth Score1/6
Future Growth Score 1/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: ET's forecast earnings growth (4.1% per year) is above the savings rate (1.9%).
Earnings vs Market: ET's earnings (4.1% per year) are forecast to grow slower than the US market (14.8% per year).
High Growth Earnings: ET's earnings are forecast to grow, but not significantly.
Revenue vs Market: ET's revenue (2.7% per year) is forecast to grow slower than the US market (7.7% per year).
High Growth Revenue: ET's revenue (2.7% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: ET's Return on Equity is forecast to be low in 3 years time (17.4%).
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How has Energy Transfer performed over the past 5 years?
Past Performance Score2/6
Past Performance Score 2/6
Growing Profit Margin
Earnings vs Industry
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: ET has high quality earnings.
Growing Profit Margin: ET's current net profit margins (4.6%) are lower than last year (7.1%).
Past Earnings Growth Analysis
Earnings Trend: ET's earnings have grown significantly by 20.5% per year over the past 5 years.
Accelerating Growth: ET's earnings growth over the past year (1.6%) is below its 5-year average (20.5% per year).
Earnings vs Industry: ET earnings growth over the past year (1.6%) underperformed the Oil and Gas industry 184.6%.
Return on Equity
High ROE: ET's Return on Equity (12.7%) is considered low.
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How is Energy Transfer's financial position?
Financial Health Score3/6
Financial Health Score 3/6
Short Term Liabilities
Long Term Liabilities
Financial Position Analysis
Short Term Liabilities: ET's short term assets ($15.4B) exceed its short term liabilities ($13.5B).
Long Term Liabilities: ET's short term assets ($15.4B) do not cover its long term liabilities ($54.0B).
Debt to Equity History and Analysis
Debt Level: ET's net debt to equity ratio (115.7%) is considered high.
Reducing Debt: ET's debt to equity ratio has reduced from 176.3% to 116.6% over the past 5 years.
Debt Coverage: ET's debt is not well covered by operating cash flow (18.1%).
Interest Coverage: ET's interest payments on its debt are well covered by EBIT (3.7x coverage).
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What is Energy Transfer current dividend yield, its reliability and sustainability?
Dividend Score 5/6
Cash Flow Coverage
Current Dividend Yield
Dividend Yield vs Market
|Energy Transfer Dividend Yield vs Market|
|Company (Energy Transfer)||8.4%|
|Market Bottom 25% (US)||1.6%|
|Market Top 25% (US)||4.6%|
|Industry Average (Oil and Gas)||4.9%|
|Analyst forecast in 3 Years (Energy Transfer)||10.6%|
Notable Dividend: ET's dividend (8.39%) is higher than the bottom 25% of dividend payers in the US market (1.64%).
High Dividend: ET's dividend (8.39%) is in the top 25% of dividend payers in the US market (4.61%)
Stability and Growth of Payments
Stable Dividend: ET's dividend payments have been volatile in the past 10 years.
Growing Dividend: ET's dividend payments have increased over the past 10 years.
Earnings Payout to Shareholders
Earnings Coverage: With its reasonable payout ratio (59.3%), ET's dividend payments are covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: With its reasonable cash payout ratio (51.2%), ET's dividend payments are covered by cash flows.
Discover strong dividend paying companies
How experienced are the management team and are they aligned to shareholders interests?
Average management tenure
Mackie McCrea (63 yo)
Mr. Marshall S. McCrea, III, also known as Mackie, has been Co-Chief Executive Officer of LE GP, LLC at Energy Transfer LP since January 01, 2021. He serves as Co-Chief Executive Officer of Panhandle Easte...
CEO Compensation Analysis
|Mackie McCrea's Compensation vs Energy Transfer Earnings|
|Date||Total Comp.||Salary||Company Earnings|
|Jun 30 2022||n/a||n/a|
|Mar 31 2022||n/a||n/a|
|Dec 31 2021||US$21m||US$1m|
|Sep 30 2021||n/a||n/a|
|Jun 30 2021||n/a||n/a|
|Mar 31 2021||n/a||n/a|
|Dec 31 2020||US$8m||US$1m|
|Sep 30 2020||n/a||n/a|
|Jun 30 2020||n/a||n/a|
|Mar 31 2020||n/a||n/a|
|Dec 31 2019||US$12m||US$1m|
|Sep 30 2019||n/a||n/a|
|Jun 30 2019||n/a||n/a|
|Mar 31 2019||n/a||n/a|
|Dec 31 2018||US$11m||US$1m|
|Sep 30 2018||n/a||n/a|
|Jun 30 2018||n/a||n/a|
|Mar 31 2018||n/a||n/a|
|Dec 31 2017||US$12m||US$1m|
|Sep 30 2017||n/a||n/a|
|Jun 30 2017||n/a||n/a|
|Mar 31 2017||n/a||n/a|
|Dec 31 2016||US$11m||US$1m|
|Sep 30 2016||n/a||n/a|
|Jun 30 2016||n/a||n/a|
|Mar 31 2016||n/a||n/a|
|Dec 31 2015||US$9m||US$840k|
Compensation vs Market: Mackie's total compensation ($USD21.46M) is above average for companies of similar size in the US market ($USD13.03M).
Compensation vs Earnings: Mackie's compensation has increased by more than 20% in the past year.
Experienced Management: ET's management team is not considered experienced ( 1.7 years average tenure), which suggests a new team.
Experienced Board: ET's board of directors are considered experienced (5.4 years average tenure).
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: ET insiders have bought more shares than they have sold in the past 3 months.
Recent Insider Transactions
|13 Sep 22||BuyUS$6,769,348||Kelcy Warren||Individual||571,253||US$11.85|
|12 Sep 22||BuyUS$29,242,114||Kelcy Warren||Individual||2,428,747||US$12.04|
|15 Aug 22||BuyUS$115,000||Bradford Whitehurst||Individual||10,000||US$11.50|
|09 Aug 22||BuyUS$17,406,546||Kelcy Warren||Individual||1,591,092||US$10.94|
|08 Aug 22||BuyUS$12,666,864||Kelcy Warren||Individual||1,158,908||US$10.93|
|15 Jul 22||BuyUS$1,334,660||Richard Brannon||Individual||137,680||US$9.75|
|06 Apr 22||BuyUS$5,605,000||Michael Grimm||Individual||500,000||US$11.21|
|06 Apr 22||BuyUS$52,026||Michael Grimm||Individual||4,600||US$11.32|
|17 Dec 21||BuyUS$25,232||Michael Grimm||Individual||3,040||US$8.30|
|10 Dec 21||BuyUS$499,998||Bradford Whitehurst||Individual||67,121||US$7.45|
|10 Dec 21||BuyUS$600,003||Thomas Long||Individual||80,546||US$7.45|
|10 Dec 21||BuyUS$250,003||Matthew Ramsey||Individual||33,561||US$7.45|
|10 Dec 21||BuyUS$120,000,198||Kelcy Warren||Individual||16,109,139||US$7.45|
|10 Dec 21||BuyUS$999,996||Ray Davis||Individual||134,242||US$7.45|
|Owner Type||Number of Shares||Ownership Percentage|
Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 14.1%.
|Ownership||Name||Shares||Current Value||Change %||Portfolio %|
Energy Transfer LP's employee growth, exchange listings and data sources
- Name: Energy Transfer LP
- Ticker: ET
- Exchange: NYSE
- Founded: 1996
- Industry: Oil and Gas Storage and Transportation
- Sector: Energy
- Implied Market Cap: US$33.864b
- Shares outstanding: 3.09b
- Website: https://energytransfer.com
Number of Employees
- Energy Transfer LP
- 8111 Westchester Drive
- Suite 600
- United States
|Ticker||Exchange||Primary Security||Security Type||Country||Currency||Listed on|
|ET||NYSE (New York Stock Exchange)||Yes||Common Units||US||USD||Feb 2006|
|ET *||BMV (Bolsa Mexicana de Valores)||Yes||Common Units||MX||MXN||Feb 2006|
|ET.PRD||NYSE (New York Stock Exchange)||7.625 PFD UNIT D||US||USD||Apr 2021|
|ET.PRE||NYSE (New York Stock Exchange)||7.60% CUM PFD E||US||USD||Apr 2021|
|ET.PRC||NYSE (New York Stock Exchange)||7.375% PFD SR C||US||USD||Apr 2021|
Company Analysis and Financial Data Status
|Data||Last Updated (UTC time)|
|Company Analysis||2022/09/29 00:00|
|End of Day Share Price||2022/09/29 00:00|
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.