Energy Transfer and Others Redomicile to Texas
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 day ago
0mins
Source: seekingalpha
- Redomicile Announcement: Energy Transfer (ET), Sunoco (SUN), SunocoCorp (SUNC), and USA Compression Partners (USAC) have officially redomiciled to Texas as of Monday, marking a significant change in their legal status in accordance with New York Stock Exchange regulations.
- Market Impact: The redomicile will not affect the companies' NYSE ticker symbols or CUSIP numbers, and existing economic and governance rights for unitholders will remain unchanged, ensuring investor rights are preserved and maintaining market stability.
- Industry Trend: These companies join a growing list of major firms, including Exxon Mobil, Tesla, and Dell Technologies, indicating a trend of corporate migration to Texas, which may reflect the state's attractiveness and business-friendly environment.
- Strategic Implications: Although no reason for the move was disclosed, this action could provide the companies with a more favorable legal and tax environment, thereby enhancing their operational efficiency and flexibility in the competitive energy market.
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Analyst Views on ET
Wall Street analysts forecast ET stock price to rise
11 Analyst Rating
7 Buy
4 Hold
0 Sell
Moderate Buy
Current: 19.330
Low
17.00
Averages
20.65
High
23.00
Current: 19.330
Low
17.00
Averages
20.65
High
23.00
About ET
Energy Transfer LP owns and operates a diversified portfolios of energy assets in the United States, with more than 140,000 miles of pipeline and associated energy infrastructure. The Company’s strategic network spans 44 states with assets in all of the major United States production basins. Its core operations include complementary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (NGL) and refined product transportation and terminalling assets; and NGL fractionation. The Company’s segments include intrastate transportation and storage, interstate transportation and storage, midstream, NGL and refined products transportation and services, crude oil transportation and services, investment in Sunoco LP, investment in USA Compression Partners, LP (USAC), and all other. It also owns Lake Charles LNG Company, LLC, its wholly owned subsidiary, which owns an LNG import terminal and regasification facility.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Clear Use of Proceeds: The offering is expected to close on July 20, with anticipated net proceeds of approximately $1.7325 billion primarily aimed at redeeming all outstanding 6.500% Series H preferred units, refinancing existing debt, and general partnership purposes, thereby optimizing its capital structure.
- Redemption Plan: The company plans to redeem the Series H preferred units starting August 15, with a formal redemption notice to be issued separately, which will further alleviate financial burdens and improve cash flow.
- Market Reaction: On the New York Stock Exchange, Energy Transfer closed down 0.41% at $19.25 on Monday, with after-hours trading showing a slight increase of 0.28% to $19.30, reflecting a cautious market sentiment regarding its debt management strategy.
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- Capital Allocation Plan: The company expects to generate approximately $1.73 billion in net proceeds before offering expenses, intending to use these funds to redeem all outstanding 6.500% Series H Preferred Units during the redemption window starting August 15, 2026, thereby optimizing its capital structure.
- Debt Restructuring Strategy: Remaining proceeds will be allocated to refinance existing indebtedness, including the repayment of commercial paper and outstanding borrowings under its revolving credit facility, aimed at reducing financial costs and enhancing liquidity to improve overall financial health.
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See More
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- Bond Offering Size: Energy Transfer LP successfully priced a $1.75 billion offering of junior subordinated notes, which includes $650 million of 6.550% Series 2026A notes and $1.1 billion of 6.700% Series 2026B notes, both priced at 100% of face value, indicating strong market confidence in its financing needs.
- Clear Use of Proceeds: The offering is expected to close on July 20, with anticipated net proceeds of approximately $1.7325 billion primarily aimed at redeeming all outstanding 6.500% Series H preferred units, refinancing existing debt, and general partnership purposes, thereby optimizing its capital structure.
- Redemption Plan: The company plans to redeem the Series H preferred units starting August 15, with a formal redemption notice to be issued separately, which will further alleviate financial burdens and improve cash flow.
- Market Reaction: On the New York Stock Exchange, Energy Transfer closed down 0.41% at $19.25 on Monday, with after-hours trading showing a slight increase of 0.28% to $19.30, reflecting a cautious market sentiment regarding its debt management strategy.
See More
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- Debt Issuance Size: Energy Transfer LP announced a dual-tranche subordinated notes offering priced at 100% of face value, raising a total of $1.75 billion, with the 2026A notes at an annual interest rate of 6.550% and the 2026B notes at 6.700%, indicating strong market support for its financing needs.
- Capital Allocation Plan: The company expects to generate approximately $1.73 billion in net proceeds before offering expenses, intending to use these funds to redeem all outstanding 6.500% Series H Preferred Units during the redemption window starting August 15, 2026, thereby optimizing its capital structure.
- Debt Restructuring Strategy: Remaining proceeds will be allocated to refinance existing indebtedness, including the repayment of commercial paper and outstanding borrowings under its revolving credit facility, aimed at reducing financial costs and enhancing liquidity to improve overall financial health.
- Positive Market Response: The successful pricing of this debt issuance reflects a rebound in investor confidence towards Energy Transfer, particularly following the company's $392 million judgment win in the Texas winter storm dispute, further solidifying its market position.
See More
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- Interest Rate Setting: The Series 2026A notes will bear an annual interest rate of 6.550%, while the Series 2026B notes will have a rate of 6.700%, providing the company with a stable funding source to support future capital expenditures and operations.
- Clear Use of Proceeds: The approximately $1.7325 billion in net proceeds from this bond offering is expected to be used to redeem all outstanding 6.500% Series H Preferred Units and to repay commercial paper and borrowings under its revolving credit facility, thereby optimizing the company's capital structure.
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See More
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- Strategic Acquisition Focus: Last year, MPLX made three acquisitions while divesting its Rocky Mountain business, honing its focus on the Marcellus and Permian shale regions, which not only optimizes its business structure but also strengthens its competitive position in the natural gas liquids market, projected to grow at 7.1% by 2035.
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See More
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- Acquisition Strategy Optimization: Last year, MPLX made three acquisitions focusing on the Marcellus and Permian regions, enhancing its competitiveness in the natural gas liquids market, which is expected to drive future revenue growth.
- Financial Stability: With a debt-to-equity ratio of 1.8 and $5 billion in liquidity, MPLX can support nearly two years of spending, ensuring the sustainability and safety of its dividends.
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See More
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- Court Victory: Energy Transfer secured a $392 million judgment in a Texas court, affirming that its gas pricing during the February 2021 Winter Storm was consistent with market standards, thereby legitimizing its pricing strategy during extreme weather events.
- Compensation Breakdown: The judgment includes $263.6 million in disputed amounts, $119 million in interest, and $9.3 million in attorney fees, reflecting strong judicial support for Energy Transfer's position in the pricing dispute and bolstering its financial foundation.
- Market Reaction: In February 2021, Energy Transfer sold electricity at the maximum rate of $9,000/MWh amid surging demand, and although the local utility alleged price gouging, the court's ruling provides a legal basis for its pricing strategy.
- Industry Impact: This ruling not only brings direct financial benefits to Energy Transfer but may also influence the legal framework for future energy pricing, enhancing the company's competitive position in the energy market.
See More
