Energy Transfer Equity (ETE) continued to have the highest leverage among its peers. Energy Transfer Equity’s net debt-to-adjusted EBITDA ratio stood at 5.9x by the end of 4Q17. Energy Transfer Equity is followed by Plains GP Holdings (PAGP). Plains GP Holdings had a net debt-to-EBITDA ratio of 4.8x as of December 31, 2017. Energy Transfer Equity and Plains GP Holdings’ leverage positions have improved in recent quarters. However, their leverage multiple is still higher than the industry standards. Midstream companies usually target a ratio between 4.0x and 4.5x.
Williams Companies’ (WMB) net debt-to-EBITDA was 4.4x by the end of 4Q17. Similar to Energy Transfer Equity and Plains GP Holdings, Williams Companies’ leverage position has improved in recent quarters. However, the company’s leverage is expected to rise slightly in 2018 due to increased capital spending and the time lag in the contribution from organic projects expected to be placed during 2018.
Western Gas Equity Partners (WGP) is placed the best in terms of leverage among its peers. Western Gas Equity Partners ended 4Q17 with a net debt-to-EBITDA multiple of 3.2x. Similar to Williams Companies, Western Gas Equity Partners’ leverage is expected to increase by the end of this year.
Next, we’ll discuss the valuation analysis for the four peers.