What happened
Units of Energy transfer (NYSE: ET) fell 12.8% in June, according to data provided by S&P Global Market Intelligence. Weighing in the master limited partnership (MLP) They were lackluster opinions put forth by some analysts and the bankruptcy filing of a large client.
And that
Analysts offered mixed opinions on the future of Energy Transfer last month. For example, BMO Capital grew more bullish, improving its rating on the energy company from market performance to superior performance, and calling it the best way to invest in intermediate sector. BMO estimated that the company’s value should be closer to $ 13 per unit (85% higher than the current price). On the other hand, Citi He lowered his Energy Transfer price target from $ 18 to $ 10 based on his assumption that profits will drop due to the COVID-19 pandemic.
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Another factor that weighed on Energy Transfer last month was the bankruptcy of Chesapeake Energy. The oil and gas company plans to use the Chapter 11 process to restructure its debt and part of its legacy pipeline contracts, and a major deal he wants to get out of is a $ 293 million deal for the Energy Transfer Tiger pipeline. If the court allows you to cancel that contract, it will reduce the Energy Transfer cash flow.
Now what
Midsize companies like Energy Transfer have been under pressure throughout the year due to the impact lower oil prices have had on their customers. Many producers needed to stop production from uneconomic wells, which affected volume-based profits from pipeline operators. Meanwhile, their future earnings are potentially under pressure as oil and natural gas producers declare bankruptcy. So analysts are more unsure than usual about what to expect from companies like Energy Transfer.
