Energy Transfer Partners Reports Second Quarter Results

Source Press Release
Company Energy Transfer Partners LP 
Tags Financial & Operating Data
Date August 08, 2017

nergy Transfer Partners, L.P. (NYSE: ETP) (“ETP” or the “Partnership”) today reported its financialresults for the quarter ended June 30, 2017. For the three months ended June 30, 2017, net income was $292 million and Adjusted EBITDA was $1.60 billion. Adjusted EBITDA increased $229 million compared to the three months ended June 30, 2016, reflecting significantly higher results from the midstream and crude oil transportation and services segments, as discussed in the segment results analysis below. Net income decreased $180 million compared to the three months ended June 30, 2016, primarily due to a non-cash loss recorded on the Partnership’s investment in Sunoco LP related to  Sunoco LP’s anticipated sale of its retail business, as well as a one-time deferred tax impact resulting from the merger of Energy Transfer Partners, L.P. and Sunoco Logistics Partners L.P. (the “Sunoco Logistics Merger”). On a pro forma basis for the  Sunoco Logistics Merger, Distributable Cash Flow attributable to partners, as adjusted, for the three months ended June 30, 2017 totaled $990 million, an increase of $175 million compared to the three months ended June 30, 2016, primarily due to the increase in Adjusted EBITDA.

In April 2017, Energy Transfer Partners, L.P. and Sunoco Logistics Partners L.P. (“Sunoco Logistics”) completed the merger transaction in which  Sunoco Logistics acquired Energy Transfer Partners, L.P. in a unit-for-unit transaction. At the time of the  Sunoco Logistics Merger, Energy Transfer Partners, L.P. changed its name from “Energy Transfer Partners, L.P.” to “Energy Transfer, LP” and  Sunoco Logistics Partners L.P. changed its name to “Energy Transfer Partners, L.P.” For purposes of maintaining clarity, the following references are used herein:

  • References to “ETLP” refer to Energy Transfer, LP subsequent to the close of the merger;
  • References to “Sunoco Logistics” refer to the entity named Sunoco Logistics Partners L.P. prior to the close of the merger; and
  • References to “ETP” refer to the consolidated entity named Energy Transfer Partners, L.P. subsequent to the close of the merger.

In July 2017, ETP announced that it had entered into a contribution agreement, whereby the Partnership will receive approximately $1.57 billion in exchange for a 49.9% interest in the holding company that owns 65% of the Rover pipeline. The transaction is expected to close in October 2017, subject to customary closing conditions.

In July 2017, ETP announced a quarterly distribution of $0.550 per unit ($2.20 annualized) on ETP Common Units for the quarter ended June 30, 2017.

As of June 30, 2017, ETP had approximately $3.2 billion outstanding under its aggregate $6.25 billion revolving credit facilities and its leverage ratio, as defined by the legacy Sunoco Logistics 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, Wednesday, August 9, 2017 to discuss the second quarter 2017 results. The conference call will be broadcast live via an internet webcast, which can be accessed through  and will also be available for replay on ETP’s website for a limited time.

       
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(unaudited) 
         
    June 30,
2017 
  December 31,
2016 (a) 
ASSETS           
           
Current assets    5,386      5,729   
           
Property, plant and equipment, net      54,536        50,917   
           
Advances to and investments in unconsolidated affiliates      4,228        4,280   
Other non-current assets, net      707        672   
Intangible assets, net      5,443        4,696   
Goodwill      3,919        3,897   
Total assets    74,219      70,191   
           
LIABILITIES AND EQUITY           
           
Current liabilities    6,989      6,203   
           
Long-term debt, less current maturities      32,029        31,741   
Long-term notes payable – related company      —        250   
Non-current derivative liabilities      201        76   
Deferred income taxes      4,498        4,394   
Other non-current liabilities      1,066        952   
           
Commitments and contingencies           
Series A Preferred Units      —        33   
Redeemable noncontrolling interests      21        15   
           
Equity:           
Total partners’ capital      25,616        18,642   
Noncontrolling interest      3,799        7,885   
Total equity      29,415        26,527   
Total liabilities and equity    74,219      70,191   
 

(a) The Sunoco Logistics Merger resulted in Energy Transfer Partners, L.P. being treated as the surviving consolidated entity from an accounting perspective, while  Sunoco Logistics (prior to changing its name to “Energy Transfer Partners, L.P.”) was the surviving consolidated entity from a legal and reporting perspective. Therefore, for the pre-merger periods, the consolidated financial statements reflect the consolidated financial statements of the legal acquiree (i.e., the entity that was named “Energy Transfer Partners, L.P.” prior to the merger and name changes).

The Sunoco Logistics Merger was accounted for as an equity transaction. The  Sunoco Logistics Merger did not result in any changes to the carrying values of assets and liabilities in the consolidated financial statements, and no gain or loss was recognized. For the periods prior to the  Sunoco Logistics Merger, the  Sunoco Logistics limited partner interests that were owned by third parties (other than Energy Transfer Partners, L.P. or its consolidated subsidiaries) are presented as noncontrolling interest in these consolidated financialstatements.

         
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per unit data)
(unaudited) 
         
    Three Months Ended
June 30, 
  Six Months Ended
June 30, 
    2017    2016 (a)    2017 (a)    2016 (a) 
REVENUES    6,576      5,289      13,471      9,770   
COSTS AND EXPENSES:                 
Cost of products sold      4,742        3,630        9,934        6,598   
Operating expenses      425        374        804        722   
Depreciation, depletion and amortization      557        496        1,117        966   
Selling, general and administrative      120        74        230        155   
Total costs and expenses      5,844        4,574        12,085        8,441   
OPERATING INCOME      732        715        1,386        1,329   
OTHER INCOME (EXPENSE):                 
Interest expense, net      (346      (317      (685      (636 
Equity in earnings (losses) of unconsolidated affiliates      (61      119        12        195   
Losses on interest rate derivatives      (25      (81      (20      (151 
Other, net      71        27        97        44   
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)      371        463        790        781   
Income tax expense (benefit)      79        (9      134        (67 
NET INCOME      292        472        656        848   
Less: Net income attributable to noncontrolling interest      93        102        133        167   
NET INCOME ATTRIBUTABLE TO PARTNERS      199        370        523        681   
General Partner’s interest in net income      251        223        457        520   
Class H Unitholder’s interest in net income      —        85        98        164   
Class I Unitholder’s interest in net income      —              —         
Common Unitholders’ interest in net income (loss)    (52    60      (32    (7 
NET INCOME (LOSS) PER COMMON UNIT: (b)                 
Basic    (0.04    0.07      (0.04    (0.03 
Diluted    (0.04    0.06      (0.04    (0.03 
WEIGHTED AVERAGE NUMBER OF COMMON UNITS OUTSTANDING: (b)                 
Basic      1,021.7        752.4        922.5        743.9   
Diluted      1,021.7        753.9        922.5        744.4   
 

(a) See note (a) to the condensed consolidated balance sheets.

(b) The historical common units and net income (loss) per limited partner unit amounts presented in these consolidated financialstatements have been retrospectively adjusted to reflect the 1.5 to one unit-for-unit exchange in connection with the Sunoco Logistics Merger.

         
SUPPLEMENTAL INFORMATION
(Dollars and units in millions)
(unaudited) 
         
    Three Months Ended
June 30, 
  Six Months Ended
June 30, 
    2017 (a)    2016 (a)    2017 (a)    2016 (a) 
Reconciliation of net income to Adjusted EBITDA and Distributable Cash Flow (b):                 
Net income    292      472      656      848   
Interest expense, net      346        317        685        636   
Income tax expense (benefit)      79        (9      134        (67 
Depreciation, depletion and amortization      557        496        1,117        966   
Non-cash unit-based compensation expense      15        19        38        38   
Losses on interest rate derivatives      25        81        20        151   
Unrealized gains (losses) on commodity risk management activities      (34      18        (98      81   
Inventory valuation adjustments      58        (132      56        (106 
Equity in earnings (losses) of unconsolidated affiliates      61        (119      (12      (195 
Adjusted EBITDA related to unconsolidated affiliates      247        252        486        471   
Other, net      (47      (25      (69      (41 
Adjusted EBITDA (consolidated)      1,599        1,370        3,013        2,782   
Adjusted EBITDA related to unconsolidated affiliates      (247      (252      (486      (471 
Distributable cash flow from unconsolidated affiliates      123        116        267        260   
Interest expense, net      (346      (317      (685      (636 
Amortization included in interest expense      (2      (5      (3      (12 
Current income tax expense      (12      (13      (13      (12 
Maintenance capital expenditures      (107      (78      (167      (137 
Other, net      14              30         
Distributable Cash Flow (consolidated)      1,022        824        1,956        1,780   
Distributable Cash Flow attributable to PennTex Midstream Partners, LP (“PennTex”) (100%) (c)      —        —        (19      —   
Distributions from PennTex to ETP (c)      —        —              —   
Distributable cash flow attributable to noncontrolling interest in other consolidated subsidiaries      (57      (9      (80      (17 
Distributable Cash Flow attributable to the partners of ETP      965        815        1,865        1,763   
Transaction-related expenses      25        —        32         
Distributable Cash Flow attributable to the partners of ETP, as adjusted    990      815      1,897      1,765   
                 
Distributions to partners (d):                 
Limited Partners:                 
Common Units held by public    589      492      1,156      965   
Common Units held by parent      15              30         
Class H Units held by ETE      —        —        —        —   
General Partner interests                         
Incentive Distribution Rights (“IDRs”) held by parent      396        319        773        622   
IDR relinquishments      (162      (109      (319      (143 
Total distributions to be paid to partners    842      708      1,648      1,455   
Common Units outstanding – end of period (d)(e)      1,092.6        981.5        1,092.6        981.5   
Distribution coverage ratio (f)    1.18x    1.15x    1.15x    1.21x 
                 

(a) For the three and six months ended June 30, 2017 and 2016, the calculation of Distributable Cash Flow and the amounts reflected for distributions to partners and common units outstanding reflect the pro forma impacts of the Sunoco Logistics Merger as though the merger had occurred on January 1, 2016. As a result, the prior period amounts reported above differ from information previously reported by legacy ETP, as follows:

  • Distributable cash flow attributable to the partners of ETP includes amounts attributable to the partners of both legacy ETP and legacy Sunoco Logistics. Previously, the calculation of distributable cash flow attributable to the partners of ETP (as previously reported by legacy ETP) excluded the distributable cash flow attributable to  Sunoco Logistics and only included distributions from legacy  Sunoco Logistics to legacy ETP.
  • Distributable cash flow attributable to noncontrolling interest in other consolidated subsidiaries includes amounts attributable to the noncontrolling interests in the other consolidated subsidiaries of both legacy ETP and legacy Sunoco Logistics.
  • The transaction-related expenses adjustment in distributable cash flow attributable to the partners of ETP, as adjusted, includes amounts incurred by both legacy ETP and legacy Sunoco Logistics.
  • Distributions to limited partners include distributions paid on the common units of both legacy ETP and legacy Sunoco Logistics but exclude the following distributions in the prior periods on units that were cancelled in the merger, which comprise the following: (i) distributions paid by legacy  Sunoco Logistics on its common units held legacy ETP and (ii) distributions paid by legacy ETP on its Class H units held by ETE.
  • Distributions on General Partner interests and incentive distribution rights are reflected on a pro forma basis, based on the pro forma cash distributions to limited partners and the current distribution waterfall per the limited partnership agreement (i.e., the legacy Sunoco Logistics distribution waterfall).
  • Common units outstanding for the pre-merger periods reflect (i) the legacy ETP common units outstanding at the end of the period multiplied by a factor of 1.5x and (ii) the legacy Sunoco Logistics common units outstanding at the end of the period minus 67.1 million legacy  Sunoco Logistics common units held by ETP, which were cancelled in connection with the closing of the merger.

(b) 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 segment margin, operating income, net income, and cash flow from operating activities.

Definition of Adjusted EBITDA

We define Adjusted EBITDA as total partnership earnings before interest, taxes, depreciation, depletion, 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, non-cash impairment charges, losses on extinguishments of debt 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 our 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

We define Distributable Cash Flow as net income, adjusted for certain non-cash items, less maintenance capital expenditures. Non-cash items include depreciation, depletion 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, non-cash impairment charges, losses on extinguishments of debt 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 our subsidiaries, the Distributable Cash Flow generated by our subsidiaries may not be available to be distributed to our partners. In order to reflect the cash flows available for distributions to our partners, we have reported Distributable Cash Flow attributable to partners, 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 our partners 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 partners is net of distributions to be paid by the subsidiary to the noncontrolling interests.

For Distributable Cash Flow attributable to partners, as adjusted, certain transaction-related and non-recurring expenses that are included in net income are excluded.

(c) Beginning with the second quarter of 2017, PennTex became a wholly owned subsidiary of ETP. The amounts reflected above for PennTex relate only to the first quarter of 2017, and no distributable cash flow has been attributed to noncontrolling interests in PennTex subsequent to March 31, 2017.

(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.

(e) Reflects the sum of (i) the ETP Common Units outstanding at the end of period multiplied by a factor of 1.5x and (ii) the Sunoco Logistics Common Units outstanding at end of period minus 67.1 million  Sunoco Logistics Common Units held by ETP, which units were cancelled in connection with the closing of the merger.

(f) Distribution coverage ratio for a period is calculated as Distributable Cash Flow attributable to partners, 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) 
     
    Three Months Ended
June 30, 
    2017    2016 
Segment Adjusted EBITDA:           
Intrastate transportation and storage    148      149   
Interstate transportation and storage      262        278   
Midstream      412        298   
NGL and refined products transportation and services (1)      391        341   
Crude oil transportation and services (1)      279        124   
All other      107        180   
    1,599      1,370   
                 

(1) Subsequent to the Sunoco Logistics Merger, the Partnership’s reportable segments were revised. Amounts reflected in prior periods have been retrospectively adjusted to conform to the current reportable segment presentation for NGL and refined products transportation and services and crude oil transportation and services.

In the following analysis of segment operating results, a measure of segment margin is reported for segments with sales revenues. Segment Margin is a non-GAAP financial measure and is presented herein to assist in the analysis of segment operating results and particularly to facilitate an understanding of the impacts that changes in sales revenues have on the segment performance measure of Segment Adjusted EBITDA. Segment Margin is similar to the GAAP measure of gross margin, except that Segment Margin excludes charges for depreciation, depletion and amortization.

In addition, for certain segments, the sections below include information on the components of Segment Margin by sales type, which components are included in order to provide additional disaggregated information to facilitate the analysis of Segment Margin and Segment Adjusted EBITDA. For example, these components include transportation margin, storage margin, and other margin. These components of Segment Margin are calculated consistent with the calculation of Segment Margin; therefore, these components also exclude charges for depreciation, depletion and amortization.

Following is a reconciliation of Segment Margin to operating income, as reported in the Partnership’s consolidated statements of operations:

         
    Three Months Ended
June 30, 
  Six Months Ended
June 30, 
    2017    2016    2017    2016 
Segment Margin by segment:                 
Intrastate transportation and storage    202      188      384      353   
Interstate transportation and storage      207        234        442        493   
Midstream      571        460        1,084        874   
NGL and refined products transportation and services      523        448        1,080        879   
Crude oil transportation and services      369        319        614        586   
All other      76        86        178        179   
Intersegment eliminations      (114      (76      (245      (192 
Total Segment Margin      1,834        1,659        3,537        3,172   
                 
Less:                 
Operating expenses      425        374        804        722   
Depreciation, depletion and amortization      557        496        1,117        966   
Selling, general and administrative      120        74        230        155   
Operating income    732      715      1,386      1,329   
     
Intrastate Transportation and Storage 
     
    Three Months Ended
June 30, 
    2017    2016 
Natural gas transported (MMBtu/d)      9,254,999        8,659,255   
Revenues    753      541   
Cost of products sold      551        353   
Segment margin      202        188   
Unrealized gains on commodity risk management activities      (21      (7 
Operating expenses, excluding non-cash compensation expense      (46      (41 
Selling, general and administrative expenses, excluding non-cash compensation expense      (5      (6 
Adjusted EBITDA related to unconsolidated affiliates      18        15   
Segment Adjusted EBITDA    148      149   
         
Distributions from unconsolidated affiliates    14      13   
                 

Transported volumes increased primarily due to higher demand for exports to Mexico, along with the acquisition of an intrastate pipeline in northern Louisiana. These increases were partially offset by lower production volumes in the Barnett Shale region.

Segment Adjusted EBITDA. For the three months ended June 30, 2017 compared to the same period last year, Segment Adjusted EBITDA related to our intrastate transportation and storage segment decreased due to the net impacts of the following:

  • a decrease of $20 million in transportation fees due to renegotiated contracts resulting in lower billed volumes;
  • a decrease of $13 million in storage margin (excluding net changes in unrealized amounts of $7 million related to fair value inventory adjustments and unrealized gains and losses on derivatives); and
  • an increase of $5 million in operating expenses primarily due to higher maintenance and project related expenses of $6 million as well as higher compression fuel expense of $2 million, partially offset by fewer allocated expenses and lower capitalized overhead; partially offset by
  • an increase of $29 million in natural gas sales and other (excluding changes in unrealized gains of $4 million) primarily from higher realized gains from pipeline optimization activity due to more favorable market conditions;
  • an increase of $4 million in retained fuels (excluding changes in unrealized gains of $3 million) primarily due to higher market prices. The average spot price at the Houston Ship Channel location increased 53% for the quarter ended June 30, 2017 compared to the same period last year; and
  • an increase of $3 million in adjusted EBITDA related to unconsolidated affiliates due to the Trans-Pecos and Comanche Trail pipelines that were placed in service in 2017.

Interstate Transportation and Storage

     
    Three Months Ended
June 30, 
    2017    2016 
Natural gas transported (MMBtu/d)      5,299,099        5,363,658   
Natural gas sold (MMBtu/d)      17,035        21,539   
Revenues    207      234   
Operating expenses, excluding non-cash compensation, amortization and accretion expenses      (67      (75 
Selling, general and administrative expenses, excluding non-cash compensation, amortization and accretion expenses      (7      (11 
Adjusted EBITDA related to unconsolidated affiliates      128        128   
Other             
Segment Adjusted EBITDA    262      278   
         
Distributions from unconsolidated affiliates    52      58   
                 

Transported volumes decreased primarily due to producer maintenance and production declines related to the Sea Robin pipeline.

Segment Adjusted EBITDA. For the three months ended June 30, 2017 compared to the same period last year, Segment Adjusted EBITDA related to our interstate transportation and storage segment decreased due to the net effect of the following:

  • a decrease in revenues of $21 million on the Panhandle, Trunkline and Transwestern pipelines, including a $14 million decrease in reservation revenues and a decrease of $7 million in gas parking service related revenues on the Panhandle and Trunkline pipelines, primarily due to lack of customer demand driven by weak spreads and mild weather. In addition, revenues decreased by $3 million on the Tiger pipeline due to contract restructuring and $2 million on the Sea Robin pipeline due to producer maintenance and production declines; partially offset by
  • a decrease in operating expenses of $8 million primarily due to lower allocated costs and system gas activity; and
  • a decrease in selling, general and administrative expenses of $4 million due to refunds associated with legal fees, insurance premiums and franchise taxes.

The decrease in cash distributions from unconsolidated affiliates is due to higher Citrus cash taxes and Fayetteville Express Pipeline LLC debt settlement, partially offset by increased distributions from Midcontinent Express Pipeline LLC.

Midstream

     
    Three Months Ended
June 30, 
    2017    2016 
Gathered volumes (MMBtu/d)      10,961,338        10,037,648   
NGLs produced (Bbls/d)      473,699        468,732   
Equity NGLs (Bbls/d)      28,083        31,638   
Revenues    1,615      1,330   
Cost of products sold      1,044        870   
Segment margin      571        460   
Unrealized gains on commodity risk management activities      (3      —   
Operating expenses, excluding non-cash compensation expense      (152      (155 
Selling, general and administrative expenses, excluding non-cash compensation expense      (11      (13 
Adjusted EBITDA related to unconsolidated affiliates             
Segment Adjusted EBITDA    412      298   
                 

Gathered volumes and NGL production increased primarily due to recent acquisitions, including PennTex, and gains in the Permian and Northeast regions, partially offset by basin declines in the South Texas, North Texas, and Mid-Continent/Panhandle regions.

For the three months ended June 30, 2017 compared to the same period last year, Segment Adjusted EBITDA related to our midstream segment increased due to the net effects of the following:

  • an increase of $45 million in non-fee based margin due to higher realized crude, NGL and natural gas prices;
  • an increase of $1 million (excluding unrealized gains of $3 million) in non-fee based margin due to higher benefit from settled derivatives used to hedge commodity margins;
  • an increase of $18 million in non-fee based margin due to volume increases in the Permian, partially offset by declines in the South Texas, North Texas, and Mid-Continent/Panhandle regions;
  • an increase of $20 million in fee-based revenue due to minimum volume commitments in the South Texas region, as well as volume increases in the Permian and Northeast regions. These increases were partially offset by declines in South Texas, North Texas and the Mid-Continent/Panhandle regions; and
  • an increase of $24 million in fee-based revenue due to recent acquisitions, including PennTex; partially offset by
  • a decrease of $3 million in operating expenses primarily due to lower outside service costs and capitalized overhead; and
  • a decrease in general and administrative expenses due to a favorable impact of $11 million from the adjustment of certain reserves that were recorded in connection with contingent matters, partially offset by an increase of $2 million in shared services allocation, a $1 million increase in insurance allocation, and a $3 million increase due to additional costs from the PennTex acquisition.

NGL and Refined Products Transportation and Services

     
    Three Months Ended
June 30, 
    2017    2016 
NGL transportation volumes (MBbls/d)      835        741   
Refined products transportation volumes (MBbls/d)      643        556   
NGL and refined products terminal volumes (MBbls/d)      791        773   
NGL fractionation volumes (MBbls/d)      431        345   
Revenues    1,768      1,487   
Cost of products sold      1,245        1,039   
Segment margin      523        448   
Unrealized (gains) losses on commodity risk management activities      (4      10   
Operating expenses, excluding non-cash compensation expense      (129      (107 
Selling, general and administrative expenses, excluding non-cash compensation expense      (17      (15 
Adjusted EBITDA related to unconsolidated affiliates      18        16   
Inventory valuation adjustments      —        (11 
Segment Adjusted EBITDA    391      341   
                 

NGL transportation volumes increased in the major producing regions, including the Permian, Louisiana and the Eagle Ford, but declined slightly in North Texas. Refined products transportation volumes increased due to increased throughput from certain Midwest and Northeast refineries.

Average daily fractionated volumes increased 25% for the three months ended June 30, 2017 compared to the same period last year primarily due to the commissioning of our fourth fractionator at Mont Belvieu, Texas, in October 2016 which has a capacity of 120,000 Bbls/d, as well as increased producer volumes as mentioned above.

For the three months ended June 30, 2017 compared to the same period last year, Segment Adjusted EBITDA related to our NGL and refined products transportation and services segment increased due to net impact of the following:

  • an increase in storage margin of $4 million primarily due to increased volumes from our Mont Belvieu fractionators;
  • an increase in transportation margin of $34 million primarily due to higher volumes on our Texas NGL pipelines and the ramp-up of volumes on our Mariner East system;
  • an increase in fractionation and refinery services margin of $23 million (excluding changes in unrealized losses of $2 million) primarily due to higher NGL volumes from most major producing regions, as noted above;
  • an increase in terminal services margin of $2 million due to higher terminal volumes from the Mariner NGL projects; and
  • an increase of $8 million in marketing margin (excluding changes in unrealized gains of $16 million) primarily due to the timing of the recognition of margin from optimization activities; offset by
  • an increase of $22 million in operating expenses primarily due to increased utilities costs associated with our fourth fractionator at Mont Belvieu and the Mariner project ramp-up at the Marcus Hook Industrial Complex of $3 million, higher ad valorem tax expenses of $6 million from our Lone Star Express pipeline beginning service in 2016, and higher employee expenses associated with assets placed in service of $10 million, project related service expenses of $2 million; and
  • an increase of $2 million in selling, general and administrative expenses due to higher allocations and lower capitalized overhead resulting from reduced capital spending.

Crude Oil Transportation and Services

     
    Three Months Ended
June 30, 
    2017    2016 
Crude Transportation Volumes (MBbls/d)      3,484        2,639   
Crude Terminals Volumes (MBbls/d)      1,921        1,497   
Revenues    2,586      1,989   
Cost of products sold      2,217        1,670   
Segment margin      369        319   
Unrealized gains on commodity risk management activities      (2      —   
Operating expenses, excluding non-cash compensation expense      (116      (63 
Selling, general and administrative expenses, excluding non-cash compensation expense      (32      (14 
Inventory valuation adjustments      58        (121 
Adjusted EBITDA related to unconsolidated affiliates             
Segment Adjusted EBITDA    279      124   
         
Distributions from unconsolidated affiliates         
                 

Segment Adjusted EBITDA. For the three months ended June 30, 2017 compared to the same period last year, Segment Adjusted EBITDA related to our crude oil transportation and services segment increased due to the following:

  • an increase of $66 million due to the impact of LIFO accounting; and
  • an increase of $129 million due to improved results from our crude oil pipelines, joint ventures and terminal activities, which was primarily attributed to expansion projects and the acquisition of Vitol Inc.’s crude oil assets in the fourth quarter of 2016, resulting in an increase of $109 million, as well as increased volumes and lower operating expenses from our existing crude pipeline and terminal assets resulting in an increase of $20 million; partially offset by
  • a decrease of $21 million due to lower results from our crude oil acquisition and marketing activities; and
  • an increase of $18 million in selling, general and administrative expenses driven largely by merger-related expenses and legal and environmental reserves.

All Other

     
    Three Months Ended
June 30, 
    2017    2016 
Revenues    870      711   
Cost of products sold      794        625   
Segment margin      76        86   
Unrealized (gains) losses on commodity risk management activities      (4      15   
Operating expenses, excluding non-cash compensation expense      (34      (16 
Selling, general and administrative expenses, excluding non-cash compensation expense      (29      (19 
Adjusted EBITDA related to unconsolidated affiliates      76        85   
Other      21        24   
Eliminations             
Segment Adjusted EBITDA    107      180   
         
Distributions from unconsolidated affiliates    40      39   
                 

Amounts reflected in our all other segment primarily include:

  • our equity method investment in limited partnership units of Sunoco LP consisting of 43.5 million units, representing 43.7% of  Sunoco LP’s total outstanding common units;
  • 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, 2017 compared to the same period last year, Segment Adjusted EBITDA related to our all other segment decreased primarily due to a decrease of $27 million in Adjusted EBITDA related to our investment in PES. In addition, the three months ended June 30, 2017 experienced lower segment margin from the mark-to-market of physical system gas related to our marketing operation, and higher general and administrative expenses and operating expenses related to the termination of the management fees received from ETE as well as higher transaction-related expenses.

             
SUPPLEMENTAL INFORMATION ON CAPITAL EXPENDITURES
(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, 2017: 
             
    Growth    Maintenance    Total 
Intrastate transportation and storage    23      13      36   
Interstate transportation and storage      979        27        1,006   
Midstream      560        45        605   
NGL and refined products transportation and services      1,096        33        1,129   
Crude oil transportation and services      231        21        252   
All other (including eliminations)      70        28        98   
Total capital expenditures    2,959      167      3,126   
                   

 
SUPPLEMENTAL INFORMATION ON LIQUIDITY
(In millions)
(unaudited) 
             
    Facility Size    Funds Available at
June 30, 2017 
  Maturity Date 
Legacy ETP Revolving Credit Facility    3,750      2,066      November 18, 2019 
Legacy Sunoco Logistics Revolving Credit Facility      2,500        827      March 20, 2020 
    6,250      2,893       
                     


   
SUPPLEMENTAL INFORMATION ON UNCONSOLIDATED AFFILIATES
(In millions)
(unaudited) 
       
    Three Months Ended
June 30, 
    2017    2016 
Equity in earnings (losses) of unconsolidated affiliates:           
Citrus    30      28   
FEP      13        12   
PES      (20       
MEP      10        11   
HPC             
AmeriGas      (6      19   
Sunoco LP      (110      23   
Other      17        12   
Total equity in earnings (losses) of unconsolidated affiliates    (61    119   
           
Adjusted EBITDA related to unconsolidated affiliates:           
Citrus    88      87   
FEP      19        18   
PES      (10      17   
MEP      21        23   
HPC      12        15   
Sunoco LP      83        68   
Other      34        24   
Total Adjusted EBITDA related to unconsolidated affiliates    247      252   
           
Distributions received from unconsolidated affiliates:           
Citrus    22      27   
FEP      10        13   
AmeriGas             
MEP      20        18   
HPC      13        13   
Sunoco LP      37        36   
Other      14        10   
Total distributions received from unconsolidated affiliates    119      120   
               

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd