Energy Transfer LP (NYSE: ET) intends to reshape its portfolio with the disposition of its 51% stake in Energy Transfer Canada ULC for $1.3 billion. The other party in the deal is a joint venture related to KKR-managed infrastructure funds and Pembina Pipeline Corporation.
Shares of this energy-linked services provider increased 2.8% on Tuesday, closing at $10.42.
Energy Transfer is principally engaged in the transportation and storage of natural gas. Also, it transports crude oil and natural gas liquids. With its headquarter in Dallas-TX, Energy Transfer operates in the U.S. and Canada.
Details of the Deal
Alberta-based Energy Transfer Canada provides natural gas-related processing and gathering services. It has six processing plants, including two for sweet natural gas and four for sour natural gas. At 2021-end, the operating capacity of these facilities was 1,290 million cubic feet per day. In addition, Energy Transfer Canada operates 848 miles of gathering and transportation pipelines.
The results of Energy Transfer Canada are under Energy Transfer’s All Other segment. The segment’s revenues were $3.5 billion in 2021, reflecting an increase of 89.1% year-over-year.
Per the terms agreed upon, the transaction value of $1.3 billion includes preferred equity and debt of Energy Transfer Canada. The net cash proceeds related to the transaction will be roughly $270 million, which Energy Transfer plans to use for investing in U.S. operations and lowering its debts.
Highly Leveraged Balance Sheet
At 2021-end, Energy Transfer’s long-term debts (net of current portions) were $49 billion, and its current liabilities were $10.8 billion. These compare with long-term debt of $51.4 billion and current liabilities of $5.9 billion at 2020-end.
Recently, Elviro Scotto, an analyst at RBC Capital, reiterated a Buy rating on Energy Transfer and a price target of $14 (34.36% upside potential).
Overall, the analysts are optimistic on Energy Transfer, with the stock presently carrying a Strong Buy consensus rating. The average Energy Transfer price target of $13.88 suggests 33.21% upside potential from current levels. Over the past year, shares of Energy Transfer have gained 39.3%.
Per TipRanks data, the financial blogger opinions are 100% Bullish on ET, compared with the sector’s average of 69%.
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