ET - Energy Transfer: And Then Came Williams With More On The Way

2024-02-20 14:27:04 ET

Summary

• Energy Transfer LP's earnings were lower due to a $627 million payment resulting from a legal action brought by Williams.
• The company has more pending cases and nearly $300 million accrued on the balance sheet, potentially impacting future shareholder returns.
• Energy Transfer's profitability is low compared to other midstream companies. Therefore, leverage may not increase returns to shareholders.
• The common units are probably not undervalued until the litigation issues are resolved.
• Earnings and operations appear to have made good progress. The debt rating was upgraded.

Energy Transfer LP ( ET ) would have you believe that everything is on the "up and up" based upon the latest earnings release . Indeed, operations do appear to be making good progress. But in the 10-K, all the way to page F-48 , management finally talks about why earnings were lower in some detail. It turns out the action brought by The Williams Companies, Inc. ( WMB ) resulted in a $627 million payment that turned an otherwise good year into a down year. Along with that payment are descriptions of even more cases pending. Management also has another nearly $300 million accrued on the balance sheet . While each of these is considered nonrecurring, it would appear there are a lot of these transactions that could cost shareholders in the future....

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