Energy Transfer (ET 1.33%) is in the midst of a transitional year. The midstream giant hasn't completed an acquisition in the past 12 months and has only finished a few smaller expansion projects. As a result, its growth rate has slowed considerably this year.
However, the master limited partnership (MLP) could be in a much different place a year from now. Here's a look at where Energy Transfer could be by the end of 2026.
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The coming expansion project completion wave
Energy Transfer is currently investing heavily to complete a growing slate of organic capital projects. The midstream giant's growth capital spending budget has increased from $3 billion last year to $4.6 billion in 2025, with plans to spend another $5 billion next year. These funds have enabled the company to complete a few growth capital projects this year, including relocating its Badger gas processing plant and finishing its Nederland Flexport NGL expansion project.
The MLP has several more expansion projects under construction that should come online over the next year. These projects include building two new gas processing plants, an expansion of the Lone Star Express pipeline, a ninth natural gas liquids fractionation facility at its Mont Belvieu complex, and the first phase of its Hugh Brinson gas pipeline. Additionally, Energy Transfer expects to supply natural gas to three data centers operated by Oracle by the middle of next year. These expansions should provide the company with significant incremental cash flow by the end of next year.
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Key Data Points
More project approvals forthcoming
Energy Transfer has approved several new expansion projects in the past few months. It recently sanctioned its Mustang Draw II gas processing plant (with a fourth-quarter 2026 in-service date), Phase II of the Hugh Brinson Pipeline (first quarter of 2027), the Bethel storage expansion (late 2028), and the Desert Southwest expansion project (fourth quarter of 2029). It also secured new gas supply deals with Oracle and Entergy (beginning in 2028). These projects give it visibility into its growth through the end of the decade.
The MLP will undoubtedly approve additional growth capital projects over the next year. It currently has several projects in development, including the Dakota Access North Project, the Lake Charles LNG Export Terminal, and projects to supply gas to new data centers.
The most notable project is Lake Charles, which Energy Transfer has been working on for the past decade. The company could finally approve the project early next year. It's currently trying to secure additional equity partners to help fund the project, which will reduce risk and its capital spending requirements (it previously signed a deal with a partner to take a 30% stake in the project). Approving Lake Charles and other new expansion projects would further enhance the company's long-term growth outlook.
Another acquisition seems likely in the next year
Energy Transfer has a history of consolidating the energy midstream sector. It has made several sizable acquisitions over the years, including buying WTG Midstream ($3.3 billion in 2024), Crestwood Equity Partners ($7.1 billion in 2023), Enable Midstream ($7 billion in 2021), and SemGroup ($5 billion in 2019). These deals have enhanced its operations and helped fuel accelerated earnings growth.
The company hasn't completed a deal in over a year. However, that could change in the next year. Energy Transfer is in the best financial shape in its history, with its leverage ratio now in the lower half of its 4.0-4.5 times target range. That gives it lots of flexibility to capitalize when the right opportunity emerges. One potential option is an acquisition that enhances its ability to capitalize on growing gas demand by power plants and data centers by strategically bolstering its gas infrastructure footprint.
Growing bigger
Energy Transfer is in the midst of a major organic expansion phase. It expects to complete several growth capital projects over the next year, which should expand its operations and cash flow. The MLP will likely approve additional projects in the 12 months and could secure another acquisition, further enhancing its growth profile. Given all this, Energy Transfer will likely be a faster-growing company a year from now with even more visibility into its long-term growth prospects.
