In This Article:
With Donald Trump stepping into the presidency, an opportunity is on the horizon for the energy sector. Many expect more favorable policies to drive exploration and drilling within the United States, which could pave the way for expansion opportunities for oil and gas companies.
One area to watch is midstream energy stocks. These companies play a critical role in the energy supply chain, specializing in gathering, processing, transporting, storing, and exporting oil and gas. Midstream operators stand to gain from an uptick in production, and one midstream energy stock investors should consider today is Energy Transfer (NYSE: ET). Here's why.
Natural gas production in the U.S. continues to climb
Energy Transfer is a powerhouse in the midstream sector, specializing in the transportation, storage, and terminal operations of vital energy commodities, including natural gas, crude oil, natural gas liquids (NGLs), and liquefied natural gas (LNG). The company boasts an extensive network of pipelines and storage facilities, ensuring efficient movement of natural gas from production sites directly to utilities, industrial clients, and other pipelines.
What sets Energy Transfer apart is that it is one of the largest integrated midstream operators in the United States, and recent trends have benefited it significantly. Since the 2010s, the U.S. has experienced an explosion in natural gas output, propelled by advancements in hydraulic fracturing (also referred to as fracking) and horizontal drilling -- techniques that have tapped into vast reserves of shale gas.
The U.S. is making significant strides in natural gas production, reaching 1,035 billion cubic meters in 2023, thanks to improved extraction techniques. Not only that, but many see natural gas as a bridge fuel to transition from higher-carbon sources like coal to more renewable sources such as wind, solar, and nuclear energy. Natural gas emits about 50% less carbon dioxide than coal.
Energy Transfer has made significant moves to grow its footprint
With steady revenue streams generated from transportation fees and storage services, Energy Transfer is well-positioned to benefit from the increasing volumes of products flowing through its systems. The company has also made moves to boost its natural gas infrastructure footprint.
The company has reached a positive final investment decision for constructing the Hugh Brinson pipeline through central Texas. Previously known as the Warrior Pipeline, this infrastructure will link the Permian Basin to key markets and trading hubs, enhancing transportation capacity to satisfy the increasing demand for natural gas.