Energy Transfer Units Trading Below $17: A Valuation Disconnect Worth Noting

The Current Pressure on ET

Energy Transfer (NYSE: ET) units have experienced a notable decline, slipping below $17 in recent trading activity. This pullback stands in sharp contrast to broader market strength, with the S&P 500 gaining over 16% year-to-date while ET has retreated more than 15%. The resulting yield now exceeds 8%, creating what some market participants view as an intriguing risk-reward scenario for income-focused investors.

Understanding the Growth Deceleration

The master limited partnership’s underperformance can be traced to a significant slowdown in its expansion trajectory. From 2020 through 2024, Energy Transfer achieved robust adjusted EBITDA growth at a 10% compound annual rate, fueled by strategic acquisitions—including Enable Midstream ($7.2 billion), Crestwood Equity Partners ($7.1 billion), and WTG Midstream ($3.3 billion)—combined with organic project completions.

This year presents a different picture. Management guidance suggests adjusted EBITDA will land slightly beneath the lower bound of its $16.1 billion to $16.5 billion range, translating to growth of less than 4%. The slowdown stems from three primary headwinds: depressed oil price environments reducing activity levels, fewer completed organic expansion projects delivering immediate impact, and an absence of material acquisition activity.

Infrastructure Investments Positioned for Acceleration

Despite near-term deceleration, Energy Transfer has positioned itself for meaningful reacceleration. The company is deploying $4.6 billion in growth capital this year, with an additional $5 billion committed for 2026. Several expansion milestones have recently entered commercial operation, including new gas processing facilities and the Nederland Flexport NGL expansion.

The pipeline of incoming projects is substantial. Expected commercial service entries include phase I of the Hugh Brinson Pipeline, a ninth NGL fractionator at the Mont Belvieu complex, and an additional gas processing facility. These projects will generate incremental cash flow as they ramp volumes throughout 2025 and 2026.

AI Data Centers and Structural Demand Tailwinds

A significant structural opportunity has emerged through AI infrastructure demand. Energy Transfer has secured gas supply agreements supporting data center power requirements, including arrangements with three Oracle facilities—with initial flows expected by year-end 2025 and continuing through mid-2026. The company also signed a utility agreement with Entergy scheduled to commence at the end of 2028, plus pending projects with CloudBurst and Fermi data center operators.

Beyond these near-term contracts, Energy Transfer is advancing several transformational projects. The $5.3 billion Desert Southwest Expansion project targets completion by Q4 2029. Additionally, the company is nearing regulatory approval for the Dakota Access North Project and Lake Charles LNG Export Terminal. These initiatives provide multi-year growth visibility while supporting the company’s objective to increase its distribution 3% to 5% annually.

The Valuation Gap in Energy Midstream

Energy Transfer’s current valuation presents a disconnect from fundamentals. The MLP trades at less than nine times EBITDA—the second-lowest valuation among large-cap energy midstream operators, compared to an industry average near 12 times EBITDA. This discount lacks clear justification given the company’s operational positioning.

Energy Transfer maintains its strongest financial position in company history. While this year’s growth rate is decelerating, the company continues expanding at rates above industry averages. More importantly, growth should accelerate in 2026 and beyond as expansion projects enter service and data center-related demand materializes.

Investment Considerations at Current Transfer Quotes

The combination of depressed unit pricing, elevated distribution yield, and visible growth reacceleration creates what many income investors consider an attractive entry opportunity. Energy Transfer’s infrastructure assets provide durable cash generation supporting sustainable distribution growth, while its project visibility extends well into the next decade.

For investors with tax-planning awareness regarding Schedule K-1 forms, the current valuation and yield profile appear compelling relative to the operational trajectory ahead.