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Comparing Midstream Leverage: ETE, EPD, KMI, and WMB

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ETE’s debt-to-EBITDA ratio

Of the four companies that we’re discussing in this series—Enterprise Products Partners (EPD), Energy Transfer Equity (ETE), Williams Companies (WMB), and Kinder Morgan (KMI)—Energy Transfer Equity and Kinder Morgan have the highest net-debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratios.

According to the analyst-adjusted numbers, Energy Transfer Equity’s and Kinder Morgan’s net-debt-to-EBITDA currently stands at 6.8x. Just ETE’s debt and DE (debt-to-equity) ratio levels remain concerns, ETE’s debt-to-EBITDA metric highlights a similar issue.

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KMI’s debt-to-EBITDA

Kinder Morgan’s ratio also remains on the higher side. While the company has managed to reduce its debt levels, its lower EBITDA in the most recent quarter, as discussed in part 3 of this series, likely caused the noticeable increase in the 3Q17 ratio.

The ratio was relatively stable for the past three quarters prior to 3Q17. Still, the ratio remains high enough to concern investors.

WMB’s and EPD’s ratios

Williams Companies’ debt-to-EBITDA ratio is also at the high level of ~6.3x. By comparison, Enterprise Products’ ratio has been well below 5x for the past five years. EPD’s total debt, debt-to-equity, and net debt-to-EBITDA ratios all reflect financial discipline.

Remember, the net-debt-to-EBITDA ratio is a commonly used metric for analyzing a company’s leverage. The ratio is calculated by dividing the net debt of a company by its EBITDA. A lower ratio indicates lower risk.

In the next part, we’ll discuss the current short interest in EPD, ETE, KMI, and WMB.

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