Enterprise Products Partners (EPD 0.32%) has been a steady grower over the years. The master limited partnership (MLP) has built an integrated footprint of critical energy midstream infrastructure through organic expansion projects and selective acquisitions. Its methodical expansion has enabled the pipeline company to increase its distribution to investors every single year for a quarter of a century.
The MLP is one of the largest players in the energy midstream sector, with a $67 billion market cap. While it's one of the most valuable companies in the space today, I predict Energy Transfer (ET 0.06%), Kinder Morgan (KMI 1.42%), and Oneok (OKE 1.57%) will eclipse its value within five years because of their better growth prospects.
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Dual fuels
Energy Transfer has a current market value of around $61.5 billion. The MLP shares a lot of similarities with Enterprise Products Partners. It has a very diversified business model that includes a leading natural gas liquids export business.
While Enterprise Products Partners is currently bigger than its fellow MLP, I believe Energy Transfer will zoom past it within the next five years. One catalyst is its better organic growth prospects. Energy Transfer currently expects to invest $5 billion into growth capital projects this year, which is up from $3 billion last year. It's investing in several expansion projects that should come online over the next two years, led by the $2.7 billion Hugh Brinson natural gas pipeline.
The MLP also has several other expansion projects under development, including its large-scale Lake Charles LNG project. Given the timing of its current projects and its growing development pipeline, Energy Transfer's capital spending likely won't wind down anytime soon. For comparison, Enterprise Products Partners expects its capital spending level to decline from a range of $4 billion to $4.5 billion this year to a range of $2 billion to $2.5 billion next year because of a lack of major capital projects in development.
On top of its robust organic growth prospects, Energy Transfer is a serial acquirer. It has made several notable deals in recent years, including WTG Midstream for $3.3 billion in 2024, Crestwood Equity Partners for $7.1 billion in 2023, and Enable Midstream Partners for $7.2 billion in 2021. Given its more robust organic growth prospects and consolidation strategy, it will likely grow bigger than Enterprise Products Partners by 2030.
Stomping on the gas
Kinder Morgan currently has a market cap similar to that of Energy Transfer. Like that midstream rival, the natural gas pipeline giant has robust organic growth prospects. It currently has $8.8 billion of secured expansion projects on track to enter commercial service through 2030. That's a huge uptick in its growth profile as its backlog is nearly $6 billion above its average in recent years.
The gas pipeline giant sees more growth ahead. "The landscape for natural gas continues to be more and more favorable," CEO Kim Dang said in the first-quarter earnings press release. The company expects U.S. gas demand to grow another 20 billion to 28 billion cubic feet (Bcf/d) by the end of the decade, up from 110 Bcf/d last year. Kinder Morgan is pursuing over 5 Bcf/d of projects related to increased gas demand from the U.S. power sector and "a substantial amount of additional LNG feedgas opportunities," according to Dang.
Add in the growth from acquisitions, Kinder Morgan recently bought a gas gathering and processing system in the Bakken for $640 million, and the company should grow much larger in the coming years.
On an acquisition spree
Oneok is currently the smallest of this group, with a market cap of just over $50 billion. However, it's growing rapidly. It jump-started its growth in 2023 when it acquired Magellan Midstream Partners in a transformational $18.8 billion deal. Oneok followed that up last year by acquiring Medallion Midstream and a 43% interest in EnLink Midstream for $5.9 billion in cash. It has since acquired the remaining interest in EnLink in a $4.3 billion all-stock deal. The midstream company also closed a couple of smaller bolt-on acquisitions, totaling $940 million this June and $280 million last May.
The company still hasn't captured the full benefit of these deals, which should help fuel earnings growth over the next several years. On top of that, Oneok has a growing list of organic expansion projects under way. The biggest project is a $1 billion investment in a joint venture to build a new large-scale LPG export terminal and an associated pipeline with MPLX that should enter commercial service in 2028.
Despite all its wheeling and dealing, Oneok has ample financial flexibility to continue expanding. It can make additional acquisitions and approve new organic expansions as opportunities arise. Its strategy of building a leading integrated energy midstream company shows no signs of slowing.
Faster growth should fuel higher values
Enterprise Products Partners is a slow and steady grower. While the MLP has a wave of expansion projects on track to enter commercial service over the next two years, it doesn't have any major capital projects beyond those currently on track for approval, leaving faster-growing midstream companies Energy Transfer, Kinder Morgan, and Oneok poised to pass it within the next five years. Their faster growth could enable these companies to produce higher total returns than the midstream behemoth.
