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Truist Securities analyst Neal Dingmann downgraded Crestwood Equity Partners LP (NYSE:CEQP) to Hold from Buy with a lowered price target of $28 from $31.
The analyst favors CEQP's acquisition by Energy Transfer LP (NYSE:ET) as the much larger proforma company is expected to benefit from improved growth prospects on an increased scale and diversification. However, the analyst believes there was a scope for growth for CEQP as a standalone firm.
This week, CEQP and ET penned an acquisition deal in an all-equity of around $7.1 billion.
The acquisition price includes the assumption of $3.3 billion of debt, based on the closing price of August 15, 2023. As per the deal, Crestwood shareholders will receive 2.07 ET common units for each share held.
Given the much larger size and diversified scale of ET's existing infrastructure, the analyst expects CEQP's G&P assets to benefit from increased direct access to markets for gas, fractionation, and NGLs.
Also, the analyst thinks the deal will boost CEQP's balance sheet/re-financing opportunities as ET's balance sheet is investment grade and has more liquidity on hand.
Dingmann estimates EBITDA of $802 million (vs. consensus: $825 million) for FY23 and $884 million (vs. $888 million estimate) for FY24.
Price Action: CEQP shares are trading lower by 0.80% at $27.13 on the last check Friday.
