David Abrams’ Bold Bet on Energy Transfer LP: A Long-Term Infrastructure Play Amid Short-Term Headwinds

David Abrams, the value-driven investor behind Abrams Capital Management, has quietly built a significant stake in Energy Transfer LP (NYSE: ET) over the past five years. Despite recent headwinds, including a reduced price target from Mizuho Securities and a strategic reduction in holdings, Abrams’ portfolio remains anchored by ET—a bet rooted in its sprawling energy infrastructure and long-term growth prospects. This article explores why Abrams is doubling down on ET and what it means for investors.

The Abrams Investment Thesis: Value in Declining Industries

Abrams’ approach prioritizes risk assessment over short-term gains, favoring sectors with declining competition yet enduring demand. ET fits this mold: it operates 32,290 miles of natural gas pipelines (combining intrastate and interstate networks) and manages critical assets in NGL (natural gas liquids) and refined products. These assets form the backbone of U.S. energy infrastructure, 90% of whose margins are fee-based, shielding ET from commodity price volatility.

As of March 2025, Abrams Capital held 6.21 million ET shares, valued at $115.37 million—a 92% gain since initial purchases in 2020. The firm’s reduced holdings (selling 15.92 million shares since 2020) reflect a disciplined rebalancing, not a loss of confidence. ET remains Abrams’ 4th top stock pick, with an average upside potential of 36%, underscoring his long-term optimism.

Strategic Moves Fueling ET’s Resilience

ET’s recent initiatives highlight its focus on expansion, diversification, and partnerships, aligning with Abrams’ infrastructure-centric thesis:

1. Lake Charles LNG Project: A joint venture with MidOcean Energy will fund 30% of construction costs, reducing ET’s capital burden while securing a 30% stake in LNG production. This positions ET to capitalize on rising global LNG demand, especially as Europe seeks alternatives to Russian gas.

2. Mustang Draw Processing Plant: A 275 MMcf/d facility in the Permian Basin, set to operate by Q2 2026, will support surging shale production.

3. Cloudburst Data Center Partnership: A long-term agreement to supply natural gas to an AI-focused data center in Texas diversifies ET’s customer base into tech infrastructure, a sector hungry for reliable energy.

4. Nederland Flexport Expansion: By mid-2025, this terminal began exporting ethane and propane, with ethylene exports expected by year-end—a move to leverage the U.S.’s shale boom and global chemical demand.

Financial Performance and Analyst Sentiment

ET’s Q4 2024 NGL segment reported $1.1 billion in Adjusted EBITDA, a 6% year-over-year rise, driven by higher throughput at Gulf Coast and Mariner East pipelines. Despite Mizuho Securities trimming its price target to $22 (from $24) due to lower 2025 EBITDA guidance, the firm maintained an “Outperform” rating. Patient Capital Management, another top holder, remains bullish, citing $1.4 billion in 2025 capex for projects like LNG terminals and pipelines as catalysts for growth.

Risks and Near-Term Challenges

• Regulatory and Permitting Hurdles: Projects like the Lake Charles LNG terminal depend on timely approvals, which can delay timelines and inflate costs.
• Commodity Price Volatility: While 90% of ET’s revenue is fee-based, a prolonged downturn in natural gas or crude oil could strain margins.
• Debt Management: With $5 billion in 2025 growth capex and $53.5 billion in total debt (as of 2024), ET must balance expansion with maintaining investment-grade ratings.

Conclusion: A Fortress in Flux

David Abrams’ sustained stake in ET reflects a calculated bet on infrastructure resilience. Despite a $22 price target and short-term EBITDA headwinds, ET’s scale, fee-based model, and strategic investments in LNG and tech partnerships position it for long-term growth. With a 92% return on Abrams’ remaining holdings and a 36% average upside, ET’s valuation appears undervalued relative to its asset base.

The data speaks clearly:
- Adjusted EBITDA: Expected to reach $16.3 billion in 2025, up from $15.8 billion in 2024.
- Capex Efficiency: $5 billion allocated to projects like Nederland Flexport and Mustang Draw, which promise stable returns.
- Diversification: No single segment contributes more than 33% of EBITDA, reducing exposure to sector-specific risks.

For investors, ET offers a counter-cyclical play—a “moat”-like asset in an energy landscape undergoing rapid transformation. While short-term dips may test nerves, Abrams’ patience suggests the real payoff lies in the decade ahead.