Energy Transfer's Q1 Earnings Show Resilience Amid Revenue Dip: Here's What Investors Need to Know

Energy Transfer (NYSE: ET) reported mixed results for Q1 2025, with net income and Adjusted EBITDA rising but total revenue slipping slightly. While the 2.8% year-over-year revenue decline to $21.02 billion raised some eyebrows, the company’s strategic moves and operational strength suggest investors should look beyond the headline number.

The earnings report highlights a complex energy landscape, where volume growth in key segments and strategic projects offset near-term headwinds in crude oil transportation. Let’s break down what matters most.

The Numbers: Strength in EBITDA, Diversification at Work

Despite the revenue dip, Energy Transfer’s Adjusted EBITDA surged to $4.10 billion, up 5% from Q1 2024. This reflects the power of its diversified asset base, which spans midstream gathering, interstate pipelines, LNG projects, and data center partnerships.

Segment performance tells the story:
- Midstream operations (including Permian Basin infrastructure) saw a 32% revenue jump, driven by higher NGL production and gathered volumes.
- Intrastate natural gas revenue rose 41% as storage optimization and third-party demand boosted results.
- Crude oil transportation, however, fell 12.5%, likely due to pricing pressures and reduced optimization gains.

The company’s Distributable Cash Flow (DCF) of $2.31 billion remained robust, supporting its 3% dividend hike to $0.3275 per unit. With an 8.09% dividend yield, ET remains a top choice for income investors.

Strategic Moves: LNG, Data Centers, and Pipeline Growth

Energy Transfer’s long-term value hinges on its ability to capitalize on structural trends. Here’s where the company is betting big:

1. LNG Expansion via Lake Charles

The partnership with MidOcean Energy for the Lake Charles LNG project is a game-changer. MidOcean’s 30% equity stake and binding agreements with international buyers (e.g., a Japanese utility and a German energy firm) reduce execution risk. If fully commercialized by year-end, this project could add 15 MTPA of LNG capacity, a critical growth lever as global LNG demand rises.

2. Data Centers and Power Generation

Energy Transfer is leveraging its existing pipeline network to supply natural gas to AI-focused data centers, a sector with explosive growth potential. A signed deal with Cloudburst Data Centers and eight 10-MW gas-fired power plants under construction (first online in Q1 2025) underscore this pivot. Executives call this a “gold mine” of low-capital, high-return opportunities.

3. The Hugh Brinson Pipeline

Phase 1 of this Texas pipeline—set to begin service by late 2026—is already fully sold out. Negotiations for Phase 2 are exceeding capacity, signaling strong demand from power plants and industrial users.

Risks and Mitigations

• Crude Oil Volatility: Declining Permian Basin drilling at $50–60/bbl oil prices could pressure crude transport revenue. However, management notes that Permian production still accounts for 20% of West Texas crude, and gas demand from power plants and LNG is stabilizing volumes.
• Regulatory Hurdles: While U.S. policy shifts favor LNG, permitting delays remain a risk. Energy Transfer’s track record—securing all pipeline steel for Lake Charles domestically—suggests mitigation is underway.

Conclusion: A Steady Hand in a Volatile Market

Energy Transfer’s Q1 results reveal a company navigating headwinds with a clear growth playbook. The revenue dip is offset by Adjusted EBITDA resilience (up 5% year-over-year) and $5 billion in 2025 capex targeting high-return projects. With 90%+ of its revenue from fee-based contracts and a Financial Health Score of “GOOD”, the balance sheet remains a fortress.

Investors should focus on the long game:
- LNG and data center projects could drive $16 billion in FID capital spending by year-end.
- DCF coverage (2.1x) ensures the dividend’s safety, even if revenue growth remains tepid in 2025.
- The company’s diversified portfolio—with no single segment contributing more than 33% of EBITDA—buffers against commodity swings.

While Q1’s revenue softness is a speed bump, Energy Transfer’s strategic bets position it to thrive in the energy transition. For income investors and long-term holders, this is a story of steady execution in a sector where few can match its scale and flexibility.

In short: ET’s near-term dip is a blip, not a trend. The real story is the LNG-powered future taking shape.

Data as of May 6, 2025. Always consult with a financial advisor before making investment decisions.