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The merger of Energy Transfer (NYSE:) LP and Crestwood Equity (NYSE:) Partners LP has led to a significant expansion of Energy Transfer’s energy infrastructure. The integration, which took effect on Friday, November 3, 2023, enhances Energy Transfer’s pipeline network to over 125,000 miles across 41 states, strengthening its position in the midstream sector.
The merger has also led to the cessation of Crestwood units’ trading on the New York Stock Exchange (NYSE). The Common Unit Merger Consideration decided at an October 30, 2023 meeting, granted Crestwood common unit holders 2.07 Energy Transfer common units each. Preferred unitholders had options including conversion to Energy Transfer’s Series I Fixed Rate Perpetual Preferred Units (“ETprI”), a cash redemption plus accrued distributions, or conversion to a Crestwood common unit at a 1:10 ratio.
This move has not only increased Energy Transfer’s distributable cash flow per unit but also promises substantial cash inflows from firm contracts and acreage dedications. The integration is projected to yield initial annual run-rate cost and efficiency synergies of at least $40 million. This excludes further financial and commercial synergies that are anticipated from this strengthened position.
Despite the merger, Energy Transfer’s shares remained steady at $13.62 on Friday. This development signifies a crucial step in Energy Transfer’s growth strategy, as it continues to consolidate its position in the energy sector.
InvestingPro Insights
In light of the recent merger, real-time data from InvestingPro provides some interesting insights. Energy Transfer (ET) has maintained a high earnings quality, with free cash flow exceeding net income, and has consistently paid significant dividends to shareholders for 18 consecutive years. Despite a decline in revenue, the stock generally trades with low price volatility, and analysts predict the company will remain profitable this year.
From the InvestingPro data, we see that Energy Transfer has a market cap of 42.93B USD with a reasonable P/E Ratio of 12.77. Revenue over the last twelve months as of Q3 2023 was 78.56B USD, showing a decline of 10.77%. Despite this, the company’s dividend yield as of late 2023 was an attractive 9.16%.
On the other hand, Crestwood Equity Partners (CEQP) has been consistently increasing earnings per share and is expected to see growth in net income this year. The stock also pays a significant dividend to shareholders and, similar to Energy Transfer, trades with low price volatility.
InvestingPro data shows that Crestwood has a smaller market cap of 2970M USD and a higher P/E Ratio of 21.74. The company’s revenue over the last twelve months as of Q3 2023 was 4826.6M USD, marking a decline of 19.26%. Crestwood’s dividend yield as of late 2023 was slightly higher than Energy Transfer’s, at 9.27%.
These InvestingPro Tips and data provide a snapshot of the financial health of both companies. For more in-depth analysis and additional tips, the InvestingPro platform offers comprehensive insights into a wide range of companies.
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