This year has been a busy one for Energy Transfer (NYSE:ET). In April, the company bought a stake in natural gas compression company USA Compression Partners (NYSE:USAC). It followed that up with an even bigger deal by acquiring its former namesake master limited partnership (MLP), Energy Transfer Partners, in an all-equity transaction, which resulted in the company shortening its name to Energy Transfer.
The new-and-improved company will issue its first earnings report since closing that transaction later this week. Here are a couple of things investors should keep an eye on when it reports those results.
See if its growth engine continued humming along
Energy Transfer reported significant increases in earnings and cash flow during the second quarter, with both up nearly 70% year over year. Fueling that surge were recently completed expansion projects at its former MLP, as well as some incremental income from its investment in USA Compression Partners.
That high-octane growth likely continued in the third quarter because Energy Transfer has completed several needle-moving projects in the past year. In May, for example, the company started full service on its Rover Pipeline, which transports natural gas from the Marcellus and Utica shale plays to market centers. That project will likely be a notable driver in the quarter, which should be a strong one for the pipeline company.
Look if it secured any new projects
In addition to finishing several expansions this year, Energy Transfer has been busy adding new ones to its backlog. In September, the company and its partners Magellan Midstream, MPLX, and Delek US Holdings secured enough customer contracts to give the Permian Gulf Coast pipeline the green light. The 600-mile pipeline will move crude oil from the Permian toward the coast, where it will feed into Energy Transfer's Nederland, Texas, terminal as well as Magellan Midstream's East Houston, Texas, terminal. The partners anticipate that the project will enter service and start producing cash flow by the middle of 2020.
Given the importance of expansion projects in driving needle-moving growth, investors should see if Energy Transfer has any more in the pipeline. One to keep an eye on is a potential expansion of its Bakken Pipeline system, which it just finished last year. The company noted last quarter that it's soliciting shippers for long-term contracts that would underpin an expansion of that pipeline's capacity since it's already operating at its max.
In addition to that, investors should keep an eye on the Permian where the company's midstream infrastructure is nearing capacity due to that region's strong growth. While Energy Transfer brought one gas processing plant online earlier this year and expects to finish another one in the fourth quarter, it could announce more projects in that fast-growing region soon. Meanwhile, with the industry needing to build an estimated $800 billion of new oil and gas midstream infrastructure in the next 18 years, Energy Transfer should have no shortage of opportunities to expand its energy infrastructure footprint.
All eye on growth
Now that Energy Transfer has merged with its former MLP, investors can turn their attention to the company's growth prospects. They look healthy in the near term given the expansion projects it recently completed and has coming down the pipeline. However, it needs to continue locking up needle-moving projects to keep its growth engine humming along, which is why investors should check out what else the company might have in the works when it reports results later this week.