Energy Transfer LP (ET): Assessing the Contrarian Case in a Volatile Energy Sector

In the ever-shifting landscape of the energy sector, Energy Transfer LP (ET) stands at a crossroads of opportunity and risk. While the company faces near-term headwinds-including weaker oil prices, operational volatility, and sector-wide challenges-its valuation metrics, insider confidence, and robust asset base present a compelling case for a strategic hold or selective entry. This analysis explores how ET's discounted forward P/E ratio, insider buying activity, and divergence from broader sector performance create a unique investment narrative amid market dislocation.

Valuation Dislocation: A Discounted P/E in a High-Growth Sector

Energy Transfer LP currently trades at a forward P/E ratio of approximately 12.21, slightly above its industry average of 11.73 but significantly below the broader US Oil and Gas sector's average of 35.1x. This discrepancy highlights a valuation dislocation, as ET's earnings multiple appears unreasonably low relative to its peers and the sector's long-term growth potential. For context, the company's Price-to-Earnings ratio of 13.2x is well below the midstream industry's peer average of 19.4x, suggesting that the market is underappreciating its operational resilience and infrastructure-driven cash flows.

This undervaluation is further underscored by ET's forward-looking metrics. Analysts have noted that its valuation offers an attractive entry point for investors, particularly given the midstream sector's projected growth. The global oil and gas midstream market is expected to reach $960 billion by 2027, driven by LNG expansion, Permian production, and AI-driven data-center demand.

ET's forward P/E, therefore, appears to discount these tailwinds, creating a potential upside for investors who can stomach near-term volatility.

Insider Confidence: A Vote of Faith Amid Uncertainty

Insider buying activity in 2024–2025 has reinforced confidence in ET's long-term prospects. Notably, WARREN KELCY L, a key insider, purchased 97,705 shares at $450.03 each in November 2025, adding to a total of $113 million in insider purchases over the past two years. This contrasts sharply with minimal selling activity, as the only significant insider sale-$25,000 by Perry James Richard-pales in comparison to the overall buying trend. The total value of insider transactions over this period is positive at $116 million, reflecting a clear alignment of interests between management and shareholders.

Such activity is particularly noteworthy given ET's recent earnings challenges. For instance, Q3 2025 results showed a decline in net income to $1.02 billion from $1.18 billion in the prior year, attributed to one-time items like debt extinguishment losses and reduced non-operational income. Despite these near-term pressures, insiders continue to accumulate shares, signaling that they view the current valuation as a compelling opportunity to capitalize on the company's infrastructure-driven growth.

Asset Base and Sector Divergence: A Foundation for Resilience

ET's operational strength lies in its vast asset base, which includes 140,000 miles of pipelines and energy infrastructure across 44 U.S. states. The company is investing $4.6 billion in 2025 to expand its natural gas and NGL capacity, including a new 250 MMcf/d processing plant in the Midland Basin and the Price River Terminal expansion in Utah. These projects are critical to meeting growing demand from data centers and industrial power loads, positioning ET to benefit from structural trends in energy consumption.

However, ET's return on equity (ROE) of 10.71% lags behind the midstream sector's average of 13.28%, highlighting a divergence in performance. This underperformance is partly due to weak oil prices and supply chain pressures in the NGL segment, which account for 25% of its revenue. Yet, the company's strategic focus on natural gas infrastructure-such as the Desert Southwest pipeline expansion-aims to offset these challenges by diversifying its revenue streams and tapping into higher-growth markets.

Near-Term Headwinds and Liquidity Strength

While ET's long-term fundamentals are robust, near-term challenges persist. Q3 2025 Adjusted EBITDA fell to $3.84 billion from $3.96 billion in 2024, and Distributable Cash Flow (DCF) declined to $1.90 billion from $1.99 billion. These declines were driven by one-time financial items, including a $12 million loss on debt extinguishment and reduced non-operational income. However, the company's liquidity position remains strong, with a $2.51 billion in available borrowing capacity under its revolving credit facility. This provides ET with the flexibility to manage debt maturities and fund capital expenditures without overleveraging.

Strategic Implications: A Contrarian Case for Selective Entry

The interplay of valuation dislocation, insider confidence, and asset-driven growth creates a compelling case for a strategic hold or selective entry in ET. While the company's near-term earnings and ROE underperformance may deter some investors, its discounted P/E ratio and insider buying activity suggest that the market is underestimating its long-term potential. Furthermore, the midstream sector's projected growth-driven by LNG expansion and AI-driven energy demand-positions ET to outperform in the medium term.

For investors with a medium-term horizon, ET offers a unique opportunity to capitalize on a mispriced asset. The key risks include prolonged weakness in oil prices and regulatory headwinds, but the company's liquidity and infrastructure investments provide a buffer against these uncertainties. In a sector where volatility is the norm, Energy Transfer LP's valuation and insider confidence make it a stock worth watching.