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Behind 4 Key MLP General Partners

PART:
1 2 3 4 5 6 7 8 9 10 11
Part 7
Behind 4 Key MLP General Partners PART 7 OF 11

Why Williams Companies Has the Lowest Valuation among Peers

Relative valuation

So far in this series, we’ve analyzed four select peers in the MLP (master limited partnership) business—Energy Transfer Equity (ETE), Williams Companies (WMB), Plains GP Holdings (PAGP), and Western Gas Equity Partners (WGP)—based on their organizational structure, market performance, operating performance, distributions, and balance sheet positions. Now, we’ll compare valuations.

Why Williams Companies Has the Lowest Valuation among Peers

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Williams Companies (WMB) currently has the lowest valuation multiple in the peer group. WMB was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 11.5x as of September 17.

WMB’s lower valuation might indicate a buying opportunity, given its low crude oil exposure, significant natural gas expansion opportunities, and strong presence in the prolific Marcellus and Utica Basins.

Energy Transfer Equity (ETE) and Plains GP Holdings (PAGP) are also trading below the select peer group average. ETE’s and PAGP’s low valuations might reflect their relatively high crude oil exposure and leverage.

Western Gas Equity Partners (WGP) currently has the highest valuation multiple in the peer group. WGP was trading at a forward EV-to-EBITDA of 16.0x on September 17. This might reflect WGP’s strong distribution growth guidance, impressive distribution coverage, and low leverage.

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