Units of Energy Transfer (NYSE:ET) slumped 12.8% in June, according to data provided by S&P Global Market Intelligence. Weighing on the master limited partnership (MLP) were lackluster views put out by some analysts and the bankruptcy filing of a large customer.
Analysts offered mixed opinions about Energy Transfer's future last month. For example, BMO Capital grew more bullish, upgrading its rating on the energy company from market perform to outperform, and calling it the best way to invest in the midstream sector. BMO estimated that the company's value should be closer to $13 per unit (85% higher than the current price). On the other hand, Citi cut its price target on Energy Transfer from $18 to $10 based on its assumption that earnings will be reduced due to the COVID-19 pandemic.
Another factor weighing on Energy Transfer last month was the bankruptcy filing of Chesapeake Energy. The oil and gas company plans to use the Chapter 11 process to restructure its debt and some of its legacy pipeline contracts, and one major deal that it wants to get out of is a $293 million agreement for Energy Transfer's Tiger Pipeline. If the court allows it to cancel that contract, it will cut into Energy Transfer's cash flow.
Midstream companies like Energy Transfer have been under pressure all year because of the impact that lower oil prices have had on their customers. Many producers needed to pause production from wells that weren't economical, which impacted the volume-based earnings of pipeline operators. Meanwhile, their future earnings are potentially under pressure as oil and natural gas producers file for bankruptcy. Because of that, analysts more uncertain than usual about what's ahead for companies like Energy Transfer.