Energy Transfer Partners, L.P. (NYSE: ETP) (“ETP” or the
“Partnership”) today reported its financial results for the quarter
ended June 30, 2016. Net income for the three months ended
June 30, 2016 was $472 million, a decrease of $367 million
compared to the three months ended June 30, 2015, primarily due to
a $208 million impact from interest rate derivatives, a $118
million decrease in Adjusted EBITDA, and a $50 million impact from
income taxes. Adjusted EBITDA for ETP for the three months ended
June 30, 2016 totaled $1.37 billion, a decrease of $118
million compared to the three months ended June 30, 2015, primarily
due to an $85 million impact from LIFO inventory accounting, a $72
million decrease from retail marketing primarily driven by the
deconsolidation of those operations, and the absence of a $63
million realized gain from ETP’s midstream segment in the prior
period. These Adjusted EBITDA impacts were partially offset by
increased earnings from ETP’s liquids transportation and services
and intrastate transportation and storage segments of $66 million
and $32 million, respectively. Distributable Cash Flow attributable
to the partners of ETP, as adjusted, for the three months ended
June 30, 2016 totaled $774 million, a decrease of $183 million
compared to the three months ended June 30, 2015, primarily due to
the decrease in Adjusted EBITDA as well as the absence of a current
income tax benefit in the prior period, partially offset by lower
maintenance capital expenditures and lower interest expense.
In July 2016, ETP announced a quarterly distribution of $1.055
per unit ($4.22 annualized) on ETP Common Units for the quarter
ended June 30, 2016.
ETP’s other recent key accomplishments include the
following:
- In light of ETP’s current common unit
price and its resultant cost of capital, Energy Transfer Equity,
L.P. (“ETE”) has agreed to a reduction in incentive distributions
from ETP in the aggregate amount of $720 million over a period of
seven quarters, beginning with the quarter ended June 30, 2016
through the quarter ending December 31, 2017. The quarterly
incentive distribution reduction for the quarter ended June 30,
2016 was $75 million, and incentive distribution reductions
will increase each subsequent quarter, reaching $130 million for
the quarter ending December 31, 2017. Through these incentive
distribution reductions, ETE is providing support for ETP during
its current major capital spending related to new projects. As
these projects are completed, ETP is expected to receive
significant cash flow from these projects which, in turn, is
expected to facilitate cash distribution growth related to ETP’s
common units as well as growth in future incentive distributions to
ETE.
- In August 2016, ETP, Sunoco Logistics
Partners L.P. (“Sunoco Logistics”) and Phillips 66 announced the
completion of the project-level financing of the Dakota Access
Pipeline and Energy Transfer Crude Oil Pipeline projects
(collectively the “Bakken Pipeline”). The $2.50 billion
facility is anticipated to provide substantially all of the
remaining capital necessary to complete the projects.
- In August 2016, ETP and Sunoco
Logistics announced they have signed an agreement to sell 36.75% of
the Bakken Pipeline project to MarEn Bakken Company LLC, an entity
jointly owned by Enbridge Energy Partners, L.P. and Marathon
Petroleum Corporation, for $2.00 billion in cash. The sale is
expected to close in the third quarter of 2016, subject to certain
closing conditions. ETP and Sunoco Logistics will receive $1.20
billion and $800 million in cash at closing, respectively, and will
own a combined 38.25% of the Bakken Pipeline project.
- As of June 30, 2016, ETP’s $3.75
billion credit facility had $1.13 billion of outstanding
borrowings and its leverage ratio, as defined by the credit
agreement, was 4.47x.
An analysis of ETP’s segment results and other supplementary
data is provided after the financial tables shown below. ETP has
scheduled a conference call for 8:00 a.m. Central Time, Thursday,
August 4, 2016 to discuss the second quarter 2016 results. The
conference call will be broadcast live via an internet webcast,
which can be accessed through www.energytransfer.com and will also be available
for replay on ETP’s website for a limited time.
Energy Transfer Partners, L.P. (NYSE: ETP) is a master
limited partnership that owns and operates one of the largest and
most diversified portfolios of energy assets in the United States.
ETP’s subsidiaries include Panhandle Eastern Pipe Line Company, LP
(the successor of Southern Union Company) and Lone Star NGL LLC,
which owns and operates natural gas liquids storage, fractionation
and transportation assets. In total, ETP currently owns and
operates more than 62,500 miles of natural gas and natural gas
liquids pipelines. ETP also owns the general partner, 100% of the
incentive distribution rights, and approximately 67.1 million
common units in Sunoco Logistics Partners L.P. (NYSE: SXL), which
operates a geographically diverse portfolio of pipelines,
terminalling and acquisition and marketing assets. ETP’s general
partner is owned by Energy Transfer Equity, L.P. For more
information, visit the Energy Transfer Partners, L.P. website at
www.energytransfer.com.
Energy Transfer Equity, L.P. (NYSE:ETE) is a master
limited partnership that owns the general partner and 100% of the
incentive distribution rights (IDRs) of Energy Transfer Partners,
L.P. (NYSE:ETP) and Sunoco LP (NYSE:SUN). ETE also owns
approximately 2.6 million ETP common units and approximately 81.0
million ETP Class H Units, which track 90% of the underlying
economics of the general partner interest and IDRs of Sunoco
Logistics Partners L.P. (NYSE:SXL). On a consolidated basis, ETE’s
family of companies owns and operates approximately 71,000 miles of
natural gas, natural gas liquids, refined products, and crude oil
pipelines. For more information, visit the Energy Transfer Equity,
L.P. website at www.energytransfer.com.
Sunoco Logistics Partners L.P. (NYSE: SXL) is a master
limited partnership that owns and operates a logistics business
consisting of a geographically diverse portfolio of complementary
pipeline, terminalling and acquisition and marketing assets which
are used to facilitate the purchase and sale of crude oil, natural
gas liquids, and refined products. Sunoco Logistics’ general
partner is a consolidated subsidiary of Energy Transfer Partners,
L.P. (NYSE: ETP). For more information, visit the Sunoco Logistics
Partners L.P. website at www.sunocologistics.com.
Forward-Looking Statements
This news release may include certain statements concerning
expectations for the future that are forward-looking statements as
defined by federal law. Such forward-looking statements are subject
to a variety of known and unknown risks, uncertainties, and other
factors that are difficult to predict and many of which are beyond
management’s control. An extensive list of factors that can affect
future results are discussed in the Partnership’s Annual Report on
Form 10-K and other documents filed from time to time with the
Securities and Exchange Commission. The Partnership undertakes no
obligation to update or revise any forward-looking statement to
reflect new information or events.
The information contained in this press release is available on
our website at www.energytransfer.com.
ENERGY TRANSFER
PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In millions)
(unaudited)
June 30, December 31, 2016 2015
ASSETS Current assets $ 5,329 $ 4,698
Property, plant and equipment, net 46,987 45,087 Advances to
and investments in unconsolidated affiliates 5,018 5,003
Non-current derivative assets 18 — Other non-current assets, net
518 536 Intangible assets, net 4,032 4,421 Goodwill 4,139
5,428 Total assets $ 66,041 $ 65,173
LIABILITIES
AND EQUITY Current liabilities $ 5,359 $ 4,121
Long-term debt, less current maturities 27,950 28,553 Long-term
notes payable – related companies 182 233 Non-current derivative
liabilities 367 137 Deferred income taxes 4,471 4,082 Other
non-current liabilities 961 968 Commitments and
contingencies Series A Preferred Units 33 33 Redeemable
noncontrolling interests 15 15 Equity: Total partners’
capital 19,728 20,836 Noncontrolling interest 6,975
6,195 Total equity 26,703 27,031 Total liabilities
and equity $ 66,041 $ 65,173
ENERGY TRANSFER
PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per unit data)
(unaudited)
Three Months Ended Six Months
Ended June 30, June 30, 2016
2015 2016 2015
REVENUES $ 5,289 $ 11,540 $ 9,770 $ 21,866 COSTS AND EXPENSES: Cost
of products sold 3,630 9,354 6,598 17,850 Operating expenses 374
635 722 1,245 Depreciation, depletion and amortization 496 501 966
980 Selling, general and administrative 74 162
155 295 Total costs and expenses
4,574 10,652 8,441
20,370 OPERATING INCOME 715 888 1,329 1,496 OTHER INCOME
(EXPENSE): Interest expense, net (317 ) (336 ) (636 ) (646 ) Equity
in earnings of unconsolidated affiliates 119 117 195 174 Losses on
extinguishments of debt — (33 ) — (33 ) Gains (losses) on interest
rate derivatives (81 ) 127 (151 ) 50 Other, net 27
17 44 24 INCOME BEFORE
INCOME TAX BENEFIT 463 780 781 1,065 Income tax benefit (9 )
(59 ) (67 ) (42 ) NET INCOME 472 839 848 1,107
Less: Net income attributable to noncontrolling interest 102 212
167 206 Less: Net loss attributable to predecessor —
(27 ) — (34 ) NET INCOME ATTRIBUTABLE
TO PARTNERS 370 654 681 935 General Partner’s interest in net
income 223 260 520 502 Class H Unitholder’s interest in net income
85 64 164 118 Class I Unitholder’s interest in net income 2
32 4 65 Common
Unitholders’ interest in net income (loss) $ 60 $ 298
$ (7 ) $ 250 NET INCOME (LOSS) PER COMMON UNIT: Basic $ 0.10
$ 0.67 $ (0.05 ) $ 0.63 Diluted $ 0.10 $ 0.67 $ (0.05 ) $ 0.63
WEIGHTED AVERAGE NUMBER OF COMMON UNITS OUTSTANDING: Basic 501.6
434.8 495.9 379.6 Diluted 502.7 436.3 496.3 381.1
SUPPLEMENTAL
INFORMATION
(Dollars and units in millions, except per
unit amounts)
(unaudited)
Three Months EndedJune 30, Six
Months EndedJune 30, 2016 2015
2016 2015
Reconciliation of net income to Adjusted EBITDA and
Distributable Cash Flow (a): Net income $ 472 $ 839 $ 848 $
1,107 Interest expense, net of interest capitalized 317 336 636 646
Income tax benefit (b) (9 ) (59 ) (67 ) (42 ) Depreciation,
depletion and amortization 496 501 966 980 Non-cash compensation
expense 19 23 38 43 Gains (losses) on interest rate derivatives 81
(127 ) 151 (50 ) Unrealized losses on commodity risk management
activities 18 42 81 119 Inventory valuation adjustments (132 ) (184
) (106 ) (150 ) Losses on extinguishments of debt — 33 — 33 Equity
in earnings of unconsolidated affiliates (119 ) (117 ) (195 ) (174
) Adjusted EBITDA related to unconsolidated affiliates 252 215 471
361 Other, net (25 ) (14 ) (41 ) (19 )
Adjusted EBITDA (consolidated) 1,370 1,488 2,782 2,854 Adjusted
EBITDA related to unconsolidated affiliates (252 ) (215 ) (471 )
(361 ) Distributable cash flow from unconsolidated affiliates 116
188 260 289 Interest expense, net of interest capitalized (317 )
(336 ) (636 ) (646 ) Amortization included in interest expense (5 )
(8 ) (12 ) (21 ) Current income tax (expense) benefit (13 ) 112 (12
) 121 Maintenance capital expenditures (78 ) (100 ) (137 ) (184 )
Other, net 3 3 6 7
Distributable Cash Flow (consolidated) 824 1,132 1,780 2,059
Distributable Cash Flow attributable to Sunoco Logistics (100%)
(173 ) (264 ) (456 ) (422 ) Distributions from Sunoco Logistics to
ETP 132 98 257 188 Distributable Cash Flow attributable to Sunoco
LP (100%) (c) — (35 ) — (68 ) Distributions from Sunoco LP to ETP
(c) — 12 — 24 Distributable cash flow attributable to
noncontrolling interest in other consolidated subsidiaries
(9 ) (5 ) (16 ) (10 ) Distributable Cash Flow
attributable to the partners of ETP 774 938 1,565 1,771
Transaction-related expenses — 19
2 30 Distributable Cash Flow
attributable to the partners of ETP, as adjusted $ 774 $ 957
$ 1,567 $ 1,801
Distributions to the
partners of ETP (d): Limited Partners: Common Units held by
public $ 527 $ 485 $ 1,053 $ 950 Common Units held by ETE 2 24 5 48
Class H Units held by ETE (e) 88 62 171 118 General Partner
interests held by ETE 8 7 16 15 Incentive Distribution Rights
(“IDRs”) held by ETE 335 317 666 617 IDR relinquishments net of
Class I Unit distributions (f) (110 ) (28 )
(144 ) (55 ) Total distributions to be paid to the partners
of ETP $ 850 $ 867 $ 1,767 $ 1,693
Common Units outstanding – end of period (d) 502.3
492.2 502.3 492.2
Distribution coverage ratio (g) 0.91x 1.10x 0.89x 1.06x
(a) Adjusted EBITDA and Distributable Cash Flow are non-GAAP
financial measures used by industry analysts, investors, lenders,
and rating agencies to assess the financial performance and the
operating results of ETP’s fundamental business activities and
should not be considered in isolation or as a substitute for net
income, income from operations, cash flows from operating
activities, or other GAAP measures.
There are material limitations to using measures such as
Adjusted EBITDA and Distributable Cash Flow, including the
difficulty associated with using either as the sole measure to
compare the results of one company to another, and the inability to
analyze certain significant items that directly affect a company’s
net income or loss or cash flows. In addition, our calculations of
Adjusted EBITDA and Distributable Cash Flow may not be consistent
with similarly titled measures of other companies and should be
viewed in conjunction with measurements that are computed in
accordance with GAAP, such as gross margin, operating income, net
income, and cash flow from operating activities.
Definition of Adjusted EBITDA
ETP defines Adjusted EBITDA as total partnership earnings before
interest, taxes, depreciation, amortization and other non-cash
items, such as non-cash compensation expense, gains and losses on
disposals of assets, the allowance for equity funds used during
construction, unrealized gains and losses on commodity risk
management activities and other non-operating income or expense
items. Unrealized gains and losses on commodity risk management
activities include unrealized gains and losses on commodity
derivatives and inventory fair value adjustments (excluding lower
of cost or market adjustments). Adjusted EBITDA reflects amounts
for less than wholly-owned subsidiaries based on 100% of the
subsidiaries’ results of operations and for unconsolidated
affiliates based on ETP’s proportionate ownership.
Adjusted EBITDA is used by management to determine our operating
performance and, along with other financial and volumetric data, as
internal measures for setting annual operating budgets, assessing
financial performance of our numerous business locations, as a
measure for evaluating targeted businesses for acquisition and as a
measurement component of incentive compensation.
Definition of Distributable Cash Flow
ETP defines Distributable Cash Flow as net income, adjusted for
certain non-cash items, less maintenance capital expenditures.
Non-cash items include depreciation and amortization, non-cash
compensation expense, gains and losses on disposals of assets, the
allowance for equity funds used during construction, unrealized
gains and losses on commodity risk management activities and
deferred income taxes. Unrealized gains and losses on commodity
risk management activities includes unrealized gains and losses on
commodity derivatives and inventory fair value adjustments
(excluding lower of cost or market adjustments). For unconsolidated
affiliates, Distributable Cash Flow reflects the Partnership’s
proportionate share of the investee’s distributable cash flow.
Distributable Cash Flow is used by management to evaluate our
overall performance. Our partnership agreement requires us to
distribute all available cash, and Distributable Cash Flow is
calculated to evaluate our ability to fund distributions through
cash generated by our operations.
On a consolidated basis, Distributable Cash Flow includes 100%
of the Distributable Cash Flow of ETP’s consolidated subsidiaries.
However, to the extent that noncontrolling interests exist among
ETP’s subsidiaries, the Distributable Cash Flow generated by ETP’s
subsidiaries may not be available to be distributed to the partners
of ETP. In order to reflect the cash flows available for
distributions to the partners of ETP, ETP has reported
Distributable Cash Flow attributable to the partners of ETP, which
is calculated by adjusting Distributable Cash Flow (consolidated),
as follows:
- For subsidiaries with publicly traded
equity interests, Distributable Cash Flow (consolidated) includes
100% of Distributable Cash Flow attributable to such subsidiary,
and Distributable Cash Flow attributable to the partners of ETP
includes distributions to be received by the parent company with
respect to the periods presented.
- For consolidated joint ventures or
similar entities, where the noncontrolling interest is not publicly
traded, Distributable Cash Flow (consolidated) includes 100% of
Distributable Cash Flow attributable to such subsidiary, but
Distributable Cash Flow attributable to the partners of ETP is net
of distributions to be paid by the subsidiary to the noncontrolling
interests.
For Distributable Cash Flow attributable to the partners of ETP,
as adjusted, certain transaction-related and non-recurring expenses
that are included in net income are excluded.
(b) For the three and six months ended June 30, 2016, the
Partnership’s effective income tax rate decreased from the prior
year primarily due to lower earnings among the Partnership’s
consolidated corporate subsidiaries. The three and six months ended
June 30, 2016 also reflected a benefit of $35 million of
net state tax benefit attributable to statutory state rate changes
resulting from the contribution by ETP to Sunoco LP of its
remaining 68.42% interest in Sunoco, LLC and 100% interest in the
legacy Sunoco, Inc. retail business and state law changes.
(c) Amounts related to Sunoco LP reflect the periods through
June 30, 2015, subsequent to which Sunoco LP was deconsolidated and
is now reflected as an unconsolidated affiliate.
(d) Distributions on ETP Common Units and the number of ETP
Common Units outstanding at the end of the period, both as
reflected above, exclude amounts related to ETP Common Units held
by subsidiaries of ETP. For the three and six months ended June 30,
2015, ETP Common Units outstanding at the end of the period
includes ETP Common Units issued in connection with the Regency
Merger.
(e) Distributions on the Class H Units for the three and six
months ended June 30, 2016 and 2015 were calculated as
follows:
Three Months EndedJune 30, Six Months
EndedJune 30, 2016 2015
2016 2015 General partner
distributions and incentive distributions from Sunoco Logistics $
98 $ 69 $ 190 $ 131 90.05 % 90.05 % 90.05 %
90.05 % Total Class H Unit distributions $ 88 $ 62
$ 171 $ 118
(f) IDR relinquishments for the three and six months ended June
30, 2016 include the impact of $75 million of incentive
distribution reduction with respect to the second quarter 2016
distribution, as agreed to between ETE and ETP in July 2016.
(g) Distribution coverage ratio for a period is calculated as
Distributable Cash Flow attributable to the partners of ETP, as
adjusted, divided by net distributions expected to be paid to the
partners of ETP in respect of such period.
SUMMARY ANALYSIS
OF QUARTERLY RESULTS BY SEGMENT
(Tabular dollar amounts in millions) (unaudited)
Our segment results were presented based on the measure of
Segment Adjusted EBITDA. The tables below identify the components
of Segment Adjusted EBITDA, which was calculated as follows:
- Gross margin, operating expenses, and
selling, general and administrative expenses. These amounts
represent the amounts included in our consolidated financial
statements that are attributable to each segment.
- Unrealized gains or losses on commodity
risk management activities and inventory valuation adjustments.
These are the unrealized amounts that are included in cost of
products sold to calculate gross margin. These amounts are not
included in Segment Adjusted EBITDA; therefore, the unrealized
losses are added back and the unrealized gains are subtracted to
calculate the segment measure.
- Non-cash compensation expense. These
amounts represent the total non-cash compensation recorded in
operating expenses and selling, general and administrative
expenses. This expense is not included in Segment Adjusted EBITDA
and therefore is added back to calculate the segment measure.
- Adjusted EBITDA related to
unconsolidated affiliates. These amounts represent our
proportionate share of the Adjusted EBITDA of our unconsolidated
affiliates. Amounts reflected are calculated consistently with our
definition of Adjusted EBITDA.
Three Months EndedJune 30, 2016 2015
Segment Adjusted EBITDA: Midstream $ 298 $ 352 Liquids
transportation and services 220 154 Interstate transportation and
storage 278 285 Intrastate transportation and storage 149 117
Investment in Sunoco Logistics 245 326 Retail marketing 68 140 All
other 112 114 $ 1,370 $ 1,488
Midstream
Three Months EndedJune 30, 2016
2015 Gathered volumes (MMBtu/d)
10,037,648 9,964,237 NGLs produced (Bbls/d) 468,732 399,662 Equity
NGLs (Bbls/d) 31,638 30,160 Revenues $ 1,330 $ 1,240 Cost of
products sold 870 796 Gross margin 460
444 Unrealized losses on commodity risk management activities — 71
Operating expenses, excluding non-cash compensation expense (155 )
(147 ) Selling, general and administrative expenses, excluding
non-cash compensation expense (13 ) (24 ) Adjusted EBITDA related
to unconsolidated affiliates 6 7 Other — 1
Segment Adjusted EBITDA $ 298 $ 352
Gathered volumes and NGLs produced increased primarily due to
increased gathering and processing capacities in the Permian Basin,
Eagle Ford and Cotton Valley regions, partially offset by declines
in the Mid-Continent/Panhandle and North Texas regions. In
addition, volumes also increased for the six months ended June 30,
2016 due to the King Ranch acquisition in the second quarter of
2015.
Segment Adjusted EBITDA for the midstream segment reflected an
increase in gross margin as follows:
Three Months EndedJune 30, 2016 2015
Gathering and processing fee-based revenues $ 396 $ 384 Non
fee-based contracts and processing 64 60 Total gross
margin $ 460 $ 444
For the three months ended June 30, 2016 compared to the
same period last year, Segment Adjusted EBITDA related to our
midstream segment decreased due to the net effects of the
following:
- a decrease of $5 million in non-fee
based margins due to lower natural gas prices and a $5 million
decrease in non-fee based margins due to lower crude oil and NGL
prices;
- a decrease in gross margin of $63
million due to lower benefit from settled derivatives used to hedge
commodity margins; and
- an increase in operating expenses of
$8 million primarily due to assets that are recently placed in
service in the Permian and Eagle Ford regions; offset by
- increases of $10 million in fee-based
revenues and $5 million in non-fee based margins due to increased
production and increased capacity from assets placed in service in
the Eagle Ford, Permian Basin and Cotton Valley regions, partially
offset by volume declines in the North Texas and
Mid-Continent/Panhandle regions; and
- a decrease in general and
administrative expenses of $11 million primarily due to a
lower allocation of employee-related expenses to the midstream
segment.
Liquids Transportation and
Services
Three Months EndedJune 30, 2016
2015 Liquids transportation volumes (Bbls/d)
607,656 455,739 NGL fractionation volumes (Bbls/d) 345,182 246,348
Revenues $ 1,110 $ 828 Cost of products sold 850
629 Gross margin 260 199 Unrealized (gains) losses on
commodity risk management activities 6 (5 ) Operating expenses,
excluding non-cash compensation expense (41 ) (39 ) Selling,
general and administrative expenses, excluding non-cash
compensation expense (5 ) (4 ) Adjusted EBITDA related to
unconsolidated affiliates — 3 Segment
Adjusted EBITDA $ 220 $ 154
NGL transportation volumes increased in all major producing
regions, including the Permian, North Texas, Southeast Texas, Eagle
Ford, and Louisiana. Additionally, our crude transportation
pipeline in the Eagle Ford region transported approximately 45,000
Bbls/d for the three months ended June 30, 2016 compared to
36,000 Bbls/d for the three months ended June 30, 2015. Our
crude pipeline, originating in Nederland and delivering into Lake
Charles, also began transporting volumes in April 2016, and
transported approximately 57,000 Bbls/d during the three months
ended June 30, 2016.
Average daily fractionated volumes increased for the three
months ended June 30, 2016 compared to the same period last
year due to the ramp-up of our third 100,000 Bbls/d fractionator at
Mont Belvieu, Texas, which was commissioned in late December 2015,
as well as increased producer volumes as mentioned above.
Segment Adjusted EBITDA for the liquids transportation and
services segment reflected an increase in gross margin as
follows:
Three Months EndedJune 30, 2016
2015 Transportation margin $ 123 $ 96
Processing and fractionation margin 93 76 Storage margin 49 39
Other margin (5 ) (12 ) Total gross margin $ 260
$ 199
For the three months ended June 30, 2016 compared to the
same period last year, Segment Adjusted EBITDA related to our
liquids transportation and services segment increased due to the
following:
- an increase in storage margin of
$10 million partially due to an increase in demand for leased
storage capacity as a result of favorable market conditions, which
increased fee-based storage revenues by $3 million. The remainder
of the storage margin increase was primarily due to increases in
throughput fees, as shuttle volumes increased for the three months
ended June 30, 2016 by 36%;
- an increase in transportation fees of
$27 million due to significantly higher volumes transported
out of all of our producing regions and higher average rates. The
increase in average rates was primarily due to a higher proportion
of the volumes originating from West Texas where transport rates
are higher. Higher volumes from the Permian region resulted in an
increase in margin of $18 million;
- an increase of $15 million in
processing and fractionation margin (excluding changes in
unrealized gains of $2 million) primarily due to the ramp-up of our
third 100,000 Bbls/d fractionator at Mont Belvieu, Texas, along
with higher producer volumes, primarily from West Texas.
Additionally, the three months ended June 30, 2016 also reflect an
additional $2 million increase from the commissioning of the
Mariner South LPG export project during February 2015. Margin
associated with our off-gas fractionator in Geismar, Louisiana
decreased by $2 million as NGL and olefin market prices decreased
significantly for the comparable period; and
- an increase of $20 million in other
margin (excluding an increase in unrealized losses of $13 million)
primarily due to more favorable market conditions; offset by
- an increase in operating expenses of
$2 million primarily due to increased costs associated with
our third fractionator at Mont Belvieu; and
- an increase in general and
administrative expenses of $1 million due to lower capitalized
overhead as a result of reduced capital spending.
Interstate Transportation and
Storage
Three Months EndedJune 30, 2016
2015 Natural gas transported (MMBtu/d)
5,363,658 5,873,424 Natural gas sold (MMBtu/d) 21,539 14,827
Revenues $ 234 $ 243 Operating expenses, excluding non-cash
compensation, amortization and accretion expenses (75 ) (71 )
Selling, general and administrative expenses, excluding non-cash
compensation, amortization and accretion expenses (11 ) (14 )
Adjusted EBITDA related to unconsolidated affiliates 128 127 Other
2 — Segment Adjusted EBITDA $ 278
$ 285 Distributions from unconsolidated
affiliates $ 58 $ 83
Transported volumes decreased 343,629 MMBtu/d on the Trunkline
pipeline due to the transfer of one of the pipelines at Trunkline
which was repurposed from natural gas service to crude oil service,
96,758 MMBtu/d on the Sea Robin pipeline due to reduced supply as a
result of producer system maintenance and overall lower production,
and 84,390 MMBtu/d on the Tiger pipeline due to lower contract
utilization due to market conditions.
For the three months ended June 30, 2016 compared to the
same period last year, Segment Adjusted EBITDA related to our
interstate transportation and storage segment decreased due to the
net effects of the following:
- a decrease of approximately
$9 million in revenues due to contract restructuring on the
Tiger pipeline, $4 million due to the transfer of one of the
Trunkline pipelines which was repurposed from natural gas service
to crude oil service, and $3 million due to the expiration of a
transportation rate schedule on the Transwestern pipeline. These
decreases were partially offset by higher revenues of
$7 million from gas parking services; and
- an increase of $4 million in operating
expenses primarily due to higher system gas balancing expenses;
partially offset by
- a decrease of $3 million in selling,
general and administrative expenses primarily due to lower employee
related expenses and lower allocations; and
- an increase of $2 million in other
items due to income associated with a reimbursable project.
The decrease in cash distributions from unconsolidated
affiliates is due to higher Citrus cash taxes.
Intrastate Transportation and
Storage
Three Months EndedJune 30, 2016
2015 Natural gas transported (MMBtu/d)
7,861,264 8,666,363 Revenues $ 541 $ 569 Cost of products sold
353 383 Gross margin 188 186 Unrealized
gains on commodity risk management activities (7 ) (34 ) Operating
expenses, excluding non-cash compensation expense (41 ) (42 )
Selling, general and administrative expenses, excluding non-cash
compensation expense (6 ) (8 ) Adjusted EBITDA related to
unconsolidated affiliates 15 15 Segment
Adjusted EBITDA $ 149 $ 117 Distributions from
unconsolidated affiliates $ 13 $ 14
Transported volumes decreased primarily due to lower production
volumes, primarily in the Barnett Shale region, partially offset by
increased volumes related to significant new long-term
transportation contracts.
Segment Adjusted EBITDA. For the three months ended
June 30, 2016 compared to the same period last year, Segment
Adjusted EBITDA related to our intrastate transportation and
storage segment increased due to the net impacts of the
following:
- a decrease of $2 million in
transportation fees due to lower throughput volumes;
- an increase of $2 million in natural
gas sales (excluding changes in unrealized gains of $3 million) and
other primarily due to higher realized gains from the buying and
selling of gas along our system, as well as lower fuel losses;
- a decrease of $2 million from the sale
of retained fuel (excluding changes in unrealized losses of $3
million) primarily due to significantly lower market prices. The
average spot price at the Houston Ship Channel location decreased
23% for the three months ended June 30, 2016 compared to the same
period last year;
- an increase of $30 million in storage
margin (excluding net changes in unrealized amounts of $26 million
related to fair value inventory adjustments and unrealized gains
and losses on derivatives), as discussed below;
- a decrease of $1 million in operating
expenses due to lower costs for gas used to run compressors on our
pipelines as a result of lower market prices; and
- a decrease of $2 million in general and
administrative expenses due to lower legal fees, as well as lower
allocated overhead costs due to shared services cost savings.
Investment in Sunoco Logistics
Three Months EndedJune 30, 2016
2015 Revenues $ 2,268 $ 3,202 Cost of
products sold 1,859 2,737 Gross margin
409 465 Unrealized losses on commodity risk management activities 4
8 Operating expenses, excluding non-cash compensation expense (31 )
(37 ) Selling, general and administrative expenses, excluding
non-cash compensation expense (24 ) (23 ) Inventory valuation
adjustments (132 ) (100 ) Adjusted EBITDA related to unconsolidated
affiliates 19 13 Segment Adjusted
EBITDA $ 245 $ 326 Distributions from
unconsolidated affiliates $ 5 $ 5
Segment Adjusted EBITDA. For the three months ended
June 30, 2016 compared to the same period last year, Segment
Adjusted EBITDA related to Sunoco Logistics decreased due to the
following:
- a decrease of $49 million from Sunoco
Logistics’ crude oil operations. The decrease was largely
attributable to lower operating results from Sunoco Logistics’
crude oil acquisition and marketing activities, which includes the
reversal of approximately $60 million of positive LIFO inventory
accounting that was reflected in the first quarter of 2016 related
to contango market opportunities. The acquisition and marketing
results, which include transportation and storage fees related to
Sunoco Logistics’ crude oil pipelines and terminal facilities, were
also impacted by lower volumes and significantly lower crude oil
differentials. This decrease was partially offset by improved
results from Sunoco Logistics’ crude oil pipelines which benefited
from the Permian Express 2 pipeline that commenced operations in
July 2015. Higher results from Sunoco Logistics’ Nederland terminal
and improved contributions from joint venture interests also
contributed to the offset; and
- a decrease of $51 million from Sunoco
Logistics’ NGLs operations, primarily due to lower results from
Sunoco Logistics’ NGLs acquisition and marketing activities, which
includes the absence of approximately $25 million of positive LIFO
inventory accounting reflected in the second quarter of 2015. Lower
volumes and margins attributable to acquisition and marketing
activities also contributed to the decrease. These factors were
partially offset by increased volumes and fees from Sunoco
Logistics’ Mariner NGLs projects, which includes Sunoco Logistics’
NGLs pipelines and Marcus Hook facility; offset by
- an increase of $19 million from Sunoco
Logistics’ refined products operations, primarily due to improved
operating results from Sunoco Logistics’ refined products
pipelines, which benefited from higher volumes on Sunoco Logistics’
Allegheny Access pipeline, and higher results from Sunoco
Logistics’ refined products terminals. Higher contributions from
joint venture interests and Sunoco Logistics’ refined products
acquisition and marketing activities also contributed to the
increase.
Retail Marketing
Three Months EndedJune 30, 2016
2015 Revenues $ — $ 5,537 Cost of products sold —
5,003 Gross margin — 534 Unrealized losses on
commodity risk management activities — 1 Operating expenses,
excluding non-cash compensation expense — (281 ) Selling, general
and administrative expenses, excluding non-cash compensation
expense — (57 ) Inventory valuation adjustments — (57 ) Adjusted
EBITDA related to unconsolidated affiliates 68
— Segment Adjusted EBITDA $ 68 $ 140
Distributions from unconsolidated affiliates $ 36 $ —
Due to the transfer of the general partnership interest of
Sunoco LP from ETP to ETE in 2015 and completion of the dropdown of
remaining Retail Marketing interests from ETP to Sunoco LP in March
2016, the Partnership’s retail marketing segment has been
deconsolidated, and the segment results now reflect an equity
method investment in limited partnership units of Sunoco LP. As of
June 30, 2016, the Partnership owns 43.5 million Sunoco LP
common units, representing 45.6% of Sunoco LP’s total outstanding
common units.
For the three months ended June 30, 2016, distributions
from unconsolidated affiliates reflect the distributions to be
received from Sunoco LP for the period. No comparable amounts are
reflected in the prior period, because Sunoco LP was a consolidated
subsidiary at that time.
All Other
Three Months EndedJune 30, 2016
2015 Revenues $ 711 $ 722 Cost of
products sold 625 617 Gross margin 86
105 Unrealized losses on commodity risk management activities 15 1
Operating expenses, excluding non-cash compensation expense (16 )
(23 ) Selling, general and administrative expenses, excluding
non-cash compensation expense (19 ) (30 ) Adjusted EBITDA related
to unconsolidated affiliates 17 53 Other 24 24 Eliminations
5 (16 ) Segment Adjusted EBITDA $ 112 $ 114
Distributions from unconsolidated affiliates $ 3 $ 22
Amounts reflected in our all other segment primarily
include:
- our natural gas marketing and
compression operations;
- a non-controlling interest in PES,
comprising 33% of PES’ outstanding common units; and
- our investment in Coal Handling, an
entity that owns and operates end-user coal handling
facilities.
For the three months ended June 30, 2016 compared to the
same period last year, Segment Adjusted EBITDA slightly decreased
due to lower horsepower from our compression operations and the
impact of refining crack spreads on our investment in PES that
reduced Adjusted EBITDA related to unconsolidated affiliates,
partially offset by elimination timing and increased gains in our
natural gas marketing operations.
SUPPLEMENTAL
INFORMATION ON CAPITAL EXPENDITURES
(Tabular amounts in millions) (unaudited)
The following is a summary of capital expenditures (net of
contributions in aid of construction costs) for the six months
ended June 30, 2016:
Growth Maintenance Total
Direct(1): Midstream $ 586 $ 49 $ 635 Liquids transportation and
services(2) 1,342 9 1,351 Interstate transportation and storage(2)
87 26 113 Intrastate transportation and storage 25 6 31 All other
(including eliminations) 54 20 74 Total direct
capital expenditures 2,094 110 2,204 Indirect(1): Investment in
Sunoco Logistics 821 27 848 Total capital
expenditures $ 2,915 $ 137 $ 3,052
(1)
Indirect capital expenditures comprise those funded by our
publicly traded subsidiary; all other capital expenditures are
reflected as direct capital expenditures.
(2)
Includes capital expenditures related to the Bakken, Rover and
Bayou Bridge pipeline projects, which includes $277 million related
to Sunoco Logistics’ proportionate ownership in the Bakken and
Bayou Bridge pipeline projects.
We currently expect capital expenditures for the full year 2016
to be within the following ranges:
Growth Maintenance Low
High Low High Direct(1): Midstream $ 1,225 $ 1,275 $
125 $ 135 Liquids transportation and services: NGL 975 1,000 20 25
Crude(2)(3) 300 325 — — Interstate transportation and storage(2)(3)
210 250 105 115 Intrastate transportation and storage(3) 30 40 20
25 All other (including eliminations) 90 100
40 45 Total direct capital expenditures $ 2,830 $ 2,990 $
310 $ 345
(1)
Direct capital expenditures exclude those funded by our
publicly traded subsidiary.
(2)
Includes capital expenditures related to our proportionate
ownership of the Bakken, Rover and Bayou Bridge pipeline projects.
(3)
Net of amounts forecasted to be financed at the asset level with
non-recourse debt of approximately $1.16 billion.
SUPPLEMENTAL
INFORMATION ON UNCONSOLIDATED AFFILIATES
(In millions)
(unaudited)
Three Months EndedJune 30, 2016
2015
Equity in earnings (losses) of unconsolidated
affiliates: Citrus $ 28 $ 29 FEP 12 13 PES 7 47 MEP 11 11 HPC 7
6 AmeriGas 19 (2 ) Sunoco LP 23 — Other 12 13
Total equity in earnings of unconsolidated affiliates $ 119 $ 117
Adjusted EBITDA related to unconsolidated
affiliates: Citrus $ 87 $ 85 FEP 18 18 PES 17 54 MEP 23 24 HPC
15 15 Sunoco LP 68 — Other 24 19 Total
Adjusted EBITDA related to unconsolidated affiliates $ 252 $ 215
Distributions received from unconsolidated
affiliates: Citrus $ 27 $ 47 FEP 13 16 AmeriGas 3 3 PES — 19
MEP 18 20 HPC 13 14 Sunoco LP 36 — Other 10 9
Total distributions received from unconsolidated affiliates $ 120 $
128
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160803006807/en/
Investor Relations:Energy TransferLyndsay Hannah or Brent
Ratliff, 214-981-0795orMedia Relations:Granado
Communications GroupVicki Granado, 214-599-8785214-498-9272
(cell)
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