Energy Transfer Made $2.4 Billion From Texas Winter Storm

Source: By Gerson Freitas Jr, Bloomberg • Posted: Sunday, May 9, 2021

Energy Transfer LP, the pipeline giant controlled by billionaire Kelcy Warren, has emerged as the biggest winner so far from the deadly winter storm that paralyzed Texas in February.

The company saw a positive earnings impact from the extreme weather of about $2.4 billion, it said Thursday in its first-quarter earnings statement. Energy Transfer raised its full-year earnings guidance to as much as $13.3 billion, from up to $11 billion previously. The stock jumped as much as 4.9% in after-hours trading.

The company joins a growing list of gas market players who reaped windfalls totaling almost $5 billion amid the chaos of the storm. Plunging prices and power cuts interrupted the normal flow of gas from many wells. Those with available supplies were able to sell at sky-high spot prices.

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Speculation over the extent of Energy Transfer’s gains began soon after the storm when Co-Chief Executive Officer Marshall McCrea told investors in a conference call that the company had done “exceptionally well” as a dramatic gas shortage spurred demand for the supplies held in the company’s storage facilities. The fossil-fuel hauler was sued by CPS Energy, a Texas utility, in the immediate aftermath of the crisis for allegedly charging a natural gas price more than 15,000% higher than normal. Energy Transfer rejected the claims.

Winners From Winter Storm Uri
Energy Transfer $2.4 billion
Kinder Morgan $1 billion
BP $1 billion (Citigroup estimate)
Macquarie $210 million
CF Industries $112 million
Williams $77 million
Nutrien $30 million
Targa Resources $30 million

“During the storm, employees manned facilities 24 hours a day, ET’s transmission lines remained fully operational and the Partnership did everything within its control to keep plants running and field compression idling, so that ET would be prepared to deliver natural gas to facilities throughout Texas for residential consumption and power generation,” the company said in the statement.

Kinder Morgan Inc., another pipeline operator, said last month the storm had a $1 billion positive impact on its results. BP Plc also reported an “exceptional” quarter in gas trading; while it didn’t break out more detail, one Citigroup Inc. analyst estimated BP’s Texas-related gain easily exceeded $1 billion, Meanwhile Australian investment bank Macquarie Group Ltd. pocketed $210 million.

Energy Transfer reports all-time-high gain on freeze

The storm could bring a longer-standing boost to Energy Transfer’s earnings as customers are now demanding for increased storage and transportation capacity under long-term contracts as a way to mitigate their risks, according to McCrea. “Our transportation service and, more importantly, our storage capacity has been undervalued for many years,” McCrea said in a conference call Thursday, adding there’s potential for “much improved margins” around those assets.

Energy Transfer operates over 90,000 miles (145,000 kilometers) of pipelines and related infrastructure spanning 38 states and Canada. The company posted a record quarterly net income of $3.29 billion in the first quarter, far exceeding the $820.5 million average of analysts’ estimates compiled by Bloomberg. The company lost $854 million a year earlier. The pipeline operator used extra cash to pay down about $3.7 billion in debt in the first quarter.

(Updates with co-CEO comment in seventh paragraph)