Energy Transfer (ET +0.18%) has grown into one of the country's largest midstream players. It has a unique coast-to-coast asset base with a fully integrated system to move hydrocarbons from the wellhead to the water for global market access. This massive energy infrastructure network generates enormous recurring cash flows, giving the master limited partnership (MLP) the money to pay a generous distribution that currently yields 9.9%.
Energy Transfer expects to continue growing its already massive system in the coming years. Future growth was a key topic on the company's first-quarter conference call. It discussed several growth projects that will give it more fuel to increase its sizable payout. Here's a look at the growth it has coming down the pipeline.
NYSE: ET
Key Data Points
Adding more fuel to the growth engine
Energy Transfer expects to invest about $2 billion in growth capital projects this year. That's an increase from its initial $1.6 billion-$1.8 billion forecast and slightly higher than the $1.9 billion it invested last year.
The company recently added a couple of more expansion projects to its backlog, driving the spending increase. In conjunction with its recently closed acquisition of Lotus Midstream, the MLP is building a new 30-mile pipeline project to enhance connectivity between its assets and those acquired in the Lotus deal. That project should start service in the first quarter of next year.
CFO Tom Long detailed the other addition on the company's quarterly conference call:
We are bullish that there will be significant growth in the international demand [for natural gas liquids (NGLs)] for many years to come and we are well positioned to benefit from that demand. In order to address this growth, we have recently FID [Final Investment Decision] an expansion to our NGL export capacity at Nederland which we expect to add up to 250,000 barrels per day of export capacity. This expansion, which is projected to cost approximately $1.25 billion, will give us tremendous flexibility to load different products as well as new products based upon customer demand and market dynamics at the time. The expansion is expected to be in service in mid-2025.
These new projects provide some longer-term visibility into the company's growth since most of its other expansions are on track to come online later this year.
Pursuing many additional opportunities
Energy Transfer has many more potential expansion projects under development. Long stated on the first-quarter call: "We continue to evaluate a number of other potential growth projects that over the long term could provide strong returns and significant upside to our business. We remain optimistic that we can bring these projects to FID and will share any significant updates on these potential projects at the appropriate time."
It's working on a couple of notable developments on the alternative-energy front. The CFO pointed out that the company continues to make progress on its carbon capture project with CapturePoint, which will capture the greenhouse gas from its natural gas treating plants in north Louisiana. It's also working with Occidental Petroleum (OXY +1.39%) on developing its Magnolia carbon dioxide sequestration hub. Occidental and Energy Transfer are working to sign long-term contracts with carbon emitters. Long noted, "If this project reaches FID, Energy Transfer would construct a CO2 pipeline to connect the customers in Oxy's sequestration site."
The company's ability to capture these and other projects will help grow its cash flow, giving it more fuel to increase its distribution.
Lots of fuel to continue growing
Energy Transfer has grown its earnings from $9.5 billion in 2018 to over $13 billion in the past year, largely fueled by organic expansion projects. It has plenty of fuel to continue growing, which is evident by its higher 2023 capital spending plan and development pipeline.
These projects will grow the MLP's cash flow, allowing it to continue growing its monster distribution. It recently revealed its long-term target of increasing that big-time payout by 3% to 5% per year. That makes it an extremely attractive option for investors seeking a big-time passive income stream.
