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Analyzing Energy Transfer’s Leverage Trends

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Jan. 24 2019, Published 8:03 a.m. ET

Leverage

Energy Transfer’s (ET) leverage ratio trended lower in the last few quarters, which indicates its improving balance sheet. The improved leverage position could be due to its strong EBITDA growth over the last few quarters. As of September 30, Energy Transfer had a net debt of $44.4 billion—an increase of 1.4% compared to its net debt at the end of 2017.

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Net debt-to-EBITDA

Energy Transfer’s net debt-to-EBITDA multiple at the end of the third quarter was ~6.0x. A net debt-to-EBITDA ratio shows how many years it will take for a company to repay its debt using its EBITDA if its debt and EBITDA remain constant. A healthy financial profile generally indicates that the company could comfortably finance its future projects and dividends.

In comparison, Enterprise Products Partners (EPD) reported a net debt-to-EBITDA ratio of 4.8x, while Kinder Morgan’s (KMI) ratio was 6.4x at the end of the third quarter.

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