Energy Transfer (ET 0.13%) is having a rather disappointing 2025. Units of the master limited partnership (MLP) are down over 15% year-to-date. That's due in part to a significant slowdown in its earnings growth rate.
However, I think 2026 will be a better year for the midstream giant. Here are two bold predictions of what I see ahead for the MLP in the coming year.
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Energy Transfer will make a multi-billion-dollar acquisition in 2026
Energy Transfer has long been a consolidator in the energy midstream sector. Over the past five years, it has bought Enable Midstream ($7 billion in 2021), Spindletop ($325 million in 2022), Lotus Midstream ($1.5 billion in 2023), Crestwood Equity Partners ($7.1 billion in 2023), and WTG Midstream ($3.3 billion in 2024). These deals helped fuel a 10% compound annual growth rate in its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from 2020 to 2024.
Despite being in the strongest financial position in its history, Energy Transfer hasn't closed a deal since WTG Midstream in July of last year. That's a big reason why its adjusted EBITDA growth rate will dip below 4% in 2025.
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I expect the lull to end in 2026. I predict that Energy Transfer will make at least one multi-billion-dollar deal next year.
The company could consider purchasing a smaller, publicly traded midstream company, such as Kinetik Holdings or Western Midstream Partners. Kinetik is a pure-play midstream company focused on the Permian Basin, where it's benefiting from the region's rapidly rising oil and gas production. Western Midstream also operates in the Permian Basin, as well as the DJ and Powder River basins in the Rockies. Acquiring a publicly traded midstream company, such as Kinetik or Western Midstream, would further diversify and expand Energy Transfer's diversified platform.
Alternatively, the company could acquire a privately held midstream company from a private equity fund to bolster its operations in a core area. These funds will eventually need to monetize their holdings to return capital to investors, which could provide Energy Transfer with acquisition opportunities in the coming year.
Energy Transfer will sell Lake Charles to a strategic buyer
After a decade of starts and stops, Energy Transfer recently made the surprising decision to stop development on its Lake Charles LNG project. Energy Transfer has spent most of the past year working to commercialize the potential liquefied natural gas (LNG) export project. Although it has taken some time, the company has secured sufficient volume contracts with customers to move forward with the project. That had the company anticipating it would make a Final Investment Decision on Lake Charles LNG early next year.
However, MLP didn't want to approve the project until it sold down 80% of the equity interest to partners. To date, the only partner it has secured is MidOcean Energy, which agreed to take a 30% interest in the project in exchange for 30% of the LNG output. Given its trouble finding additional equity partners, Energy Transfer suspended further development of the project. It wants to focus its full attention on developing its growing backlog of natural gas pipeline infrastructure projects.
However, Energy Transfer noted in the press release announcing the project's suspension that it "remains open to discussions with third parties who may have an interest in developing the project." That leads me to believe the company would be willing to sell control of the entire project to a strategic buyer that has experience in developing LNG projects. The new owner could leverage their expertise to bring on additional equity partners.
This approach has been successful for Driftwood LNG. Australia's Woodside Energy bought Driftwood's developer, Tellurian, for $900 million in cash last year after the company struggled for years to develop the project. Woodside, an experienced LNG developer, subsequently sold a 40% stake in the project, since renamed Louisiana LNG, to private equity fund Stonepeak earlier this year. It also sold a 10% stake to gas pipeline giant Williams, along with an 80% interest in the Driftwood Pipeline.
Given that Energy Transfer has already fully commercialized the project, I think it may have an easier time finding a strategic buyer willing to take over the project. It appears that potential equity investors were hesitant to commit to a project led by Energy Transfer, given its inexperience in the space.
2026 could be a busy year for Energy Transfer
This year has been a slower one for Energy Transfer. It didn't complete a significant acquisition, causing its growth rate to slow considerably compared to prior years.
I predict that 2026 will be a more active year for the company. I see it completing a needle-moving deal and selling Lake Charles to a strategic buyer. These moves could provide the MLP with the fuel to deliver much stronger total returns in the coming years.
