Energy Transfer to Expand Transwestern Pipelines for Southwest Growth

Core Insights - Energy Transfer LP (ET) is expanding the Transwestern Pipeline to increase its capacity to 2.3 billion cubic feet (Bcf) of natural gas per day by enlarging the pipeline diameter from 42 inches to 48 inches [1][10] - The expansion aims to meet rising natural gas demand in Arizona and New Mexico, driven by population growth, data center development, and potential coal-to-natural gas power plant conversions [2][10] - The total estimated cost of the project is approximately $5.6 billion, with an expected increase of $200 million in ET's growth capital expenditures for 2026 [3][10] Company Strategy - The capital investment in the pipeline expansion is expected to provide upside potential and secure long-term shipping contracts, which will lock in predictable cash flows and reduce risk [4] - ET is prioritizing pipeline expansions over capital-intensive projects like the Lake Charles LNG export project to enhance its position as a reliable natural gas infrastructure provider [5] Industry Context - Other companies in the oil and gas sector are also focusing on pipeline expansions to meet rising energy demand, which supports top-line growth [6] - TC Energy Corporation (TRP) is investing $900 million in a pipeline project that will add 400,000 million British thermal units of capacity, expected to be operational by late 2029 [7] - Kinder Morgan, Inc. (KMI) is constructing a $455 million expansion project to increase natural gas deliveries from the Permian Basin by 570 million cubic feet per day, with completion expected by mid-2026 [9] - The Williams Companies, Inc. (WMB) is undertaking two major expansions of its Transco pipeline system to support Gulf Coast demand and facilitate the transition from coal to natural gas in Alabama [12] Financial Performance - The Zacks Consensus Estimate for 2026 earnings per share (EPS) for TRP indicates a year-over-year growth of 7.5% [8] - The Zacks Consensus Estimate for 2026 EPS for WMB suggests a year-over-year growth of 10% [13] - ET's shares have declined by 16.9% over the past year, compared to a 12.3% decline in the industry [14]