Why Energy Transfer Rocketed 72% in the First Half of 2021

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What happened

Units of Energy Transfer (NYSE:ET) zoomed 72% during the first half of 2021, according to data provided by S&P Global Market Intelligence. Several factors propelled the energy stock, including improving oil market conditions, positive news on a pipeline lawsuit, another needle-moving deal, and blowout first-quarter results. 

So what

Energy Transfer has gotten a lot of good news in 2021. One of the biggest positives involves its disputed Dakota Access Pipeline. The company had to undergo another environmental review of that project. While opponents wanted it shut down during this process, the U.S. Army Corps of Engineers and the U.S. District Court said it could remain open during this review, which the Army expects to finish next spring. Because of that, the pipeline can continue shipping oil and generating cash for Energy Transfer. 

A welder works on a pipeline.

Image source: Getty Images.

Another catalyst for the company was the acquisition of fellow master limted partnership (MLP) Enable Midstream (NYSE:ENBL). Energy Transfer is paying $7.2 billion for the company, which will increase its footprint in many regions and improve the connectivity of its natural gas and natural gas liquids (NGL) transportation businesses. The deal should also save the combined company some money and improve its cash flow.  

Finally, Energy Transfer reported blowout first-quarter earnings mainly due to a winter storm’s impact on Texas earlier in the year. Energy Transfer was able to take advantage of opportunities to supply gas to the region, enabling it to generate $2.4 billion in additional earnings, nearly double what analysts expected during the period. That allowed the company to boost its full-year guidance and pay off additional debt. 

Now what

After a challenging 2020, Energy Transfer is enjoying stronger market conditions in 2021. That’s helped boost its earnings, enabling the company to pay off a bigger chunk of its debt. Meanwhile, despite the surge in its unit price, it’s still down about 20% since the start of last year. With oil prices potentially heading even higher, the MLP could have more upside ahead in the second half of this year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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