Energy Transfer's Valuation and Operational Momentum in 2025: A Discounted Midstream Play in a Stabilizing Energy Landscape

The midstream energy sector in 2025 is navigating a delicate balance between stabilizing energy markets and the relentless push for infrastructure modernization. Energy Transfer LP (ET), a titan in this space, has emerged as a focal point for investors seeking discounted exposure to midstream assets. While its Q3 2025 earnings report revealed a 7.2% year-over-year revenue decline to $19.24 billion-falling short of $24.07 billion expectations-the company's strategic investments in infrastructure and its alignment with emerging demand drivers suggest a compelling long-term narrative, according to a MarketBeat filing.

Operational Momentum: From Uinta Basin to Texas Data Centers

Energy Transfer's operational momentum is anchored in two transformative projects. First, the Uinta Basin Terminal expansion, a joint venture with FourPoint Resources, is set to double the terminal's capacity by late 2026. This $140 million project includes a continuous loop track, railcar rack, and heated storage tanks, addressing longstanding takeaway constraints in the Uinta Basin, as noted in an East Daley note. The terminal's upgraded capacity will not only serve local refineries but also position Energy Transfer to capture a share of the growing crude-by-rail market.

Second, the company is capitalizing on Texas's data center boom. In October 2025, Energy Transfer signed a supply agreement with Fermi America to deliver natural gas for the HyperGrid project in Amarillo, a 2 GW energy complex powering hyperscale AI computing, as described in an East Daley report. This shift from upstream-driven pipeline development to demand-pull models-where data centers and utilities dictate infrastructure needs-reflects a broader industry trend. Energy Transfer's Hugh Brinson Pipeline, a $2.7 billion project connecting the Permian Basin to Dallas/Fort Worth, was finalized in December 2024, driven by such demand-side contracts.

Financial Realities: A Discounted Valuation Amid High Debt

Despite these operational strides, Energy Transfer's financials remain a cause for caution. Q3 2025 revenue fell short of projections, and the company's $0.2111 per Series I Preferred Unit distribution, while a nod to capital returns, raises questions about sustainability, according to a Morningstar release. With debt levels straining its balance sheet and capital expenditures for new projects running into billions, the company's ability to maintain distributions without compromising growth is under scrutiny, per a SimplyWall analysis.

However, the midstream sector's valuation metrics offer a counterpoint. Enterprise Products Partners (EPD), a peer with a robust 7% yield and $9.9 billion in 2024 adjusted EBITDA, exemplifies the sector's potential, as outlined in an Enterprise Products profile. Energy Transfer's discounted valuation-relative to EPD's strong distributable cash flow (DCF) and 1.7x distribution coverage-suggests undervaluation if its projects deliver as promised. The U.S. lifting ethane export restrictions to China in 2025 further bolsters Energy Transfer's position, as it resumes shipments that had previously stalled, according to a Global Times report.

Strategic Pivots and Industry Tailwinds

Energy Transfer's pivot toward downstream-driven infrastructure aligns with broader market dynamics. The Desert Southwest initiative, part of its $2.7 billion pipeline network, underscores its focus on connecting energy-rich regions to high-demand corridors (as described in the East Daley report). Meanwhile, the rebranding of Uinta crude as "American Premium Uinta (APU)" highlights its competitive edge in quality and marketability, a point previously noted in the East Daley note.

The midstream sector's EBITDA multiples, though not explicitly stated for Energy Transfer, are influenced by peers like Expro Group, which reported a 22.8% EBITDA margin in Q3 2025, per a Seeking Alpha report. As Energy Transfer's projects reach completion, its EBITDA margins and free cash flow could converge with industry benchmarks, unlocking valuation upside.

Conclusion: A High-Risk, High-Reward Proposition

Energy Transfer's 2025 valuation reflects a discount driven by short-term financial pressures but is underpinned by long-term operational momentum. The company's infrastructure expansions, alignment with data center demand, and regulatory tailwinds position it to benefit from a stabilizing energy market. However, investors must weigh these opportunities against its debt burden and the execution risks inherent in large-scale projects. For those with a multi-year horizon, Energy Transfer offers a compelling case of a discounted midstream play poised to capitalize on the energy transition.