Energy Transfer Equity Reports Second Quarter Results

Business Wire

DALLAS--(BUSINESS WIRE)--

Energy Transfer Equity, L.P. (ETE) (“ETE” or the “Partnership”) today reported financial results for the quarter ended June 30, 2014.

Distributable Cash Flow, as adjusted, for the three months ended June 30, 2014 was $218 million compared to $180 million for the three months ended June 30, 2013, an increase of $38 million. ETE’s net income attributable to partners was $164 million for the three months ended June 30, 2014 compared to $127 million for the three months ended June 30, 2013, an increase of $37 million.

Distributable Cash Flow, as adjusted, for the six months ended June 30, 2014 was $417 million compared to $358 million for the six months ended June 30, 2013, an increase of $59 million. ETE’s net income attributable to partners was $332 million for the six months ended June 30, 2014 compared to $217 million for the six months ended June 30, 2013, an increase of $115 million.

The Partnership’s key accomplishments during or subsequent to the second quarter include the following:

  • In April, ETE amended its Senior Secured Term Loan Agreement to increase the aggregate principal amount to $1.4 billion and used the proceeds from this $400 million increase to repay borrowings under our revolving credit facility and for general partnership purposes.
  • From January through May, ETE completed its repurchase of ETE common units under its $1 billion common unit buyback program.
  • In May, ETE issued $700 million aggregate principal amount of its 5.875% senior notes due 2024 in a private placement.
  • In June, a wholly-owned subsidiary of ETE purchased 14.4 million Regency Energy Partners LP (“Regency”) common units for approximately $400 million. In July, a wholly-owned subsidiary of ETE purchased an additional 16.5 million Regency common units for approximately $400 million. Subsequent to these purchases, ETE and ETP together own approximately 24% of the limited partner interest in Regency.
  • In July, ETE’s Board of Directors approved its seventh consecutive increase in its quarterly distribution to $0.38 per unit ($1.52 annualized) on ETE common units for the quarter ended June 30, 2014. Based on the increased distribution rate, ETE’s distribution coverage ratio was 1.06x for the quarter.

The Partnership has scheduled a conference call for 8:30 a.m. Central Time, Thursday, August 7, 2014 to discuss its second quarter 2014 results. The conference call will be broadcast live via an internet web cast, which can be accessed through www.energytransfer.com and will also be available for replay on the Partnership’s website for a limited time.

The Partnership’s principal sources of cash flow are the distributions it receives related to its direct and indirect investments in Energy Transfer Partners, L.P. (“ETP”) and Regency, including 100% of ETP’s and Regency’s general partner interest and incentive distribution rights, ETP common units, Regency common units, ETP Class H Units, and the Partnership’s ownership of Trunkline LNG Company, LLC (“Trunkline LNG”). The Partnership’s primary cash requirements are for general and administrative expenses, debt service requirements and distributions to its partners.

Energy Transfer Equity, L.P. (NYSE:ETE) is a master limited partnership which owns the general partner and 100% of the incentive distribution rights (IDRs) of Energy Transfer Partners, L.P. (ETP), approximately 30.8 million ETP common units, and approximately 50.2 million ETP Class H Units, which track 50% of the underlying economics of the general partner interest and IDRs of Sunoco Logistics Partners L.P. (SXL). ETE also owns the general partner and 100% of the IDRs of Regency Energy Partners LP (RGP) and approximately 57.2 million RGP common units. 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. web site at www.energytransfer.com.

Energy Transfer Partners, L.P. (NYSE:ETP) is a master limited partnership owning and operating one of the largest and most diversified portfolios of energy assets in the United States. ETP currently owns and operates approximately 35,000 miles of natural gas and natural gas liquids pipelines. ETP owns 100% of Panhandle Eastern Pipe Line Company, LP (the successor of Southern Union Company) and Sunoco, Inc., and a 70% interest in Lone Star NGL LLC, a joint venture that owns and operates natural gas liquids storage, fractionation and transportation assets. 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. (SXL), which operates a geographically diverse portfolio of crude oil and refined products pipelines, terminalling and crude oil acquisition and marketing assets. ETP’s general partner is owned by ETE. For more information, visit the Energy Transfer Partners, L.P. web site at www.energytransfer.com.

Regency Energy Partners LP (NYSE: RGP) is a growth-oriented, midstream energy partnership engaged in the gathering and processing, contract compression, treating and transportation of natural gas and the transportation, fractionation and storage of natural gas liquids. RGP also holds a 30% interest in Lone Star NGL LLC, a joint venture that owns and operates natural gas liquids storage, fractionation, and transportation assets in Texas, Louisiana and Mississippi. Regency’s general partner is owned by Energy Transfer Equity, L.P. (ETE). For more information, visit the Regency Energy Partners LP web site at www.regencyenergy.com.

Sunoco Logistics Partners L.P. (SXL), headquartered in Philadelphia, is a master limited partnership that owns and operates a logistics business consisting of a geographically diverse portfolio of complementary crude oil and refined product pipeline, terminalling, and acquisition and marketing assets. SXL’s general partner is owned by Energy Transfer Partners, L.P. (ETP). For more information, visit the Sunoco Logistics Partners, L.P. web site at www.sunocologistics.com.

Forward-Looking Statements

This press 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 Reports 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 web site at www.energytransfer.com.

       
 

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(unaudited)

 
June 30, 2014 December 31, 2013

ASSETS

 
CURRENT ASSETS $ 7,652 $ 6,536
 
PROPERTY, PLANT AND EQUIPMENT, net 35,118 30,682
 
ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES 3,686 4,014
NON-CURRENT PRICE RISK MANAGEMENT ASSETS 18
GOODWILL 6,230 5,894
INTANGIBLE ASSETS, net 5,072 2,264
OTHER NON-CURRENT ASSETS, net   857   922
Total assets $ 58,615 $ 50,330
 
 

LIABILITIES AND EQUITY

 
CURRENT LIABILITIES $ 8,222 $ 6,500
 
LONG-TERM DEBT, less current maturities 25,851 22,562
DEFERRED INCOME TAXES 3,712 3,865
NON-CURRENT PRICE RISK MANAGEMENT LIABILITIES 97 73
OTHER NON-CURRENT LIABILITIES 1,018 1,019
 
COMMITMENTS AND CONTINGENCIES
 
PREFERRED UNITS OF SUBSIDIARY 32 32
REDEEMABLE NONCONTROLLING INTEREST 15
 
EQUITY:
Total partners’ capital 582 1,078
Noncontrolling interest   19,086   15,201
Total equity   19,668   16,279
Total liabilities and equity $ 58,615 $ 50,330
       
 

ENERGY TRANSFER EQUITY, 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,
2014     2013 2014     2013
REVENUES $ 14,143 $ 12,063 $ 27,223 $ 23,242
COSTS AND EXPENSES:
Cost of products sold 12,351 10,565 23,793 20,372
Operating expenses 412 387 819 759
Depreciation, depletion and amortization 450 318 823 630
Selling, general and administrative   157     149     305     306  
Total costs and expenses   13,370     11,419     25,740     22,067  
OPERATING INCOME 773 644 1,483 1,175
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized (344 ) (305 ) (659 ) (615 )
Equity in earnings of unconsolidated affiliates 77 54 181 144
Losses on extinguishments of debt (7 ) (7 )
Gains (losses) on interest rate derivatives (46 ) 46 (48 ) 52
Gain on sale of AmeriGas common units 93 163
Other, net   (25 )   (14 )   (23 )   (33 )
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE 528 418 1,097 716
Income tax expense (benefit) from continuing operations   70     89     215     87  
INCOME FROM CONTINUING OPERATIONS 458 329 882 629
Income from discontinued operations   42     9     66     31  
NET INCOME 500 338 948 660
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST   336     211     616     443  
NET INCOME ATTRIBUTABLE TO PARTNERS 164 127 332 217
GENERAL PARTNER’S INTEREST IN NET INCOME 1 1
CLASS D UNITHOLDER INTEREST IN NET INCOME           1      
LIMITED PARTNERS’ INTEREST IN NET INCOME $ 163   $ 127   $ 330   $ 217  
INCOME FROM CONTINUING OPERATIONS PER LIMITED PARTNER UNIT:
Basic $ 0.29   $ 0.22   $ 0.59   $ 0.36  
Diluted $ 0.29   $ 0.22   $ 0.59   $ 0.36  
NET INCOME PER LIMITED PARTNER UNIT:
Basic $ 0.30   $ 0.23   $ 0.60   $ 0.39  
Diluted $ 0.30   $ 0.23   $ 0.60   $ 0.39  
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING:
Basic   543.6     560.9     550.6     560.4  
Diluted   544.5     560.9     551.5     560.4  
       
 

ENERGY TRANSFER EQUITY, L.P.

DISTRIBUTABLE CASH FLOW

(Tabular dollar amounts in millions)
(unaudited)
 
Three Months Ended
June 30,
Six Months Ended
June 30,
2014     2013 2014     2013
“Distributable Cash Flow,” “Distributable Cash Flow, as adjusted,” and “Distribution Coverage Ratio” (1):
Cash distributions from ETP associated with:
Limited partner interest $ 29 $ 89 $ 58 $ 178
General partner interest 5 5 10 10
Incentive distribution rights 178 183 346 363
IDR relinquishments (58 ) (55 ) (115 ) (86 )
Class H Units (50.05% general partner interest and incentive distribution rights distributions from SXL) 53 103
Distributions credited to Holdco consideration (2)               (68 )
Total cash distributions from ETP 207 222 402 397
Cash distributions from Regency associated with:
Limited partner interest 28 12 41 24
General partner interest 1 1 2 2
Incentive distribution rights 8 3 15 5
IDR relinquishment       (1 )   (1 )   (1 )
Total cash distributions from Regency 37 15 57 30
Cash dividends from Holdco               50  
Total cash distributions and dividends from ETP, Regency and Holdco 244 237 459 477
 
Distributable cash flow attributable to Trunkline LNG (3) 47 95
 
Deduct expenses of the Parent Company on a stand-alone basis:
Selling, general and administrative expenses, excluding non-cash compensation expense (5 ) (24 ) (7 ) (30 )
Management fee to ETP (4) (24 ) (48 )
Interest expense, net of amortization of financing costs, interest income, and realized gains and losses on interest rate swaps   (47 )   (48 )   (86 )   (106 )
Distributable Cash Flow 215 165 413 341
Transaction-related expenses   3     15     4     17  
Distributable Cash Flow, as adjusted $ 218   $ 180   $ 417   $ 358  
 
Cash distributions to be paid to the partners of ETE:
Distributions to be paid to limited partners $ 205 $ 184 $ 400 $ 365
Distributions to be paid to general partner 1 1 1
Distributions to be paid to Class D unitholder           1      
Total cash distributions to be paid to the partners of ETE $ 206   $ 184   $ 402   $ 366  
 
Distribution coverage ratio (5)

1.06

x

0.98

x

1.04

x

0.98

x

 
Reconciliation of Non-GAAP “Distributable Cash Flow” and “Distributable Cash Flow, as adjusted” to GAAP “Net income” (1):
Net income attributable to partners $ 164 $ 127 $ 332 $ 217
Equity in income related to investments in ETP, Regency and Holdco (209 ) (198 ) (410 ) (366 )
Total cash distributions and dividends from ETP, Regency and Holdco 244 237 459 477
Amortization included in interest expense (excluding ETP and Regency) 2 4 4 9
Fair value adjustment of ETE Preferred Units 9
Other non-cash (excluding ETP, Regency and Holdco)   14     (5 )   28     (5 )
Distributable Cash Flow 215 165 413 341
Transaction-related expenses   3     15     4     17  
Distributable Cash Flow, as adjusted $ 218   $ 180   $ 417   $ 358  
 

(1)

    This press release and accompanying schedules include the non-generally accepted accounting principle (“non-GAAP”) financial measure of Distributable Cash Flow. The schedule above provides a reconciliation of this non-GAAP financial measure to its most directly comparable financial measure calculated and presented in accordance with GAAP. The Partnership’s Distributable Cash Flow should not be considered as an alternative to GAAP financial measures such as net income, cash flow from operating activities or any other GAAP measure of liquidity or financial performance.
 

Distributable Cash Flow. The Partnership defines Distributable Cash Flow for a period as cash distributions expected to be received from ETP and Regency in respect of such period in connection with the Partnership’s investments in limited and general partner interests of ETP and Regency, net of the Partnership’s cash expenditures for general and administrative costs and interest expense. The Partnership’s definition of Distributable Cash Flow also includes distributable cash flow from Trunkline LNG to the Partnership beginning January 1, 2014. Distributable Cash Flow for the three and six months ended June 30, 2013 also included Holdco until ETE’s 60% interest in Holdco was contributed to ETP on April 30, 2013.

 
Distributable Cash Flow is a significant liquidity measure used by the Partnership’s senior management to compare net cash flows generated by the Partnership to the distributions the Partnership expects to pay its unitholders. Using this measure, the Partnership’s management can compute the coverage ratio of estimated cash flows for a period to planned cash distributions for such period.
 
Distributable Cash Flow is also an important non-GAAP financial measure for our limited partners since it indicates to investors whether the Partnership’s investments are generating cash flows at a level that can sustain or support an increase in quarterly cash distribution levels. Financial measures such as Distributable Cash Flow are quantitative standards used by the investment community with respect to publicly traded partnerships because the value of a partnership unit is in part measured by its yield (which in turn is based on the amount of cash distributions a partnership can pay to a unitholder). The GAAP measure most directly comparable to Distributable Cash Flow is net income for ETE on a stand-alone basis (“Parent Company”). The accompanying analysis of Distributable Cash Flow is presented for the three and six months ended June 30, 2014 and 2013 for comparative purposes.
 

Distributable Cash Flow, as adjusted. The Partnership defines Distributable Cash Flow, as adjusted, for a period as cash distributions expected to be received from ETP and Regency in respect of such period in connection with the Partnership’s investments in limited and general partner interests of ETP and Regency, plus distributable cash flow from Trunkline LNG and dividends from Holdco (as described in the definition of Distributable Cash Flow above), net of the Partnership’s cash expenditures for general and administrative costs and interest expense, excluding certain items, such as transaction-related expenses. Due to the cash expenses incurred from time to time in connection with the Partnership’s merger and acquisition activities and other transactions, Distributable Cash Flow, as adjusted, for the three and six months ended June 30, 2014 and 2013 is a significant liquidity measure used by the Partnership’s senior management to compare net cash flows generated by the Partnership to the distributions the Partnership expects to pay its unitholders. Using this measure, the Partnership’s management can compute the coverage ratio of estimated cash flows for a period to planned cash distributions for such period. The GAAP measure most directly comparable to Distributable Cash Flow, as adjusted, is net income for the Parent Company on a stand-alone basis. The accompanying analysis of Distributable Cash Flow, as adjusted, is presented for the three and six months ended June 30, 2014 and 2013 for comparative purposes.

 

(2)

For the six months ended June 30, 2013, cash distributions paid by ETP exclude distributions on 49.5 million ETP common units issued to ETE as a portion of the considerations for ETP’s acquisition of ETE’s interest in Holdco on April 30, 2013. These ETP common units received cash distributions on May 15, 2013; however, such distributions were reduced from the total cash portion of the consideration paid to ETE in connection with the April 30, 2013 Holdco transaction pursuant to the contribution agreement.
 

(3)

Distributable cash flow attributable to Trunkline LNG was calculated as follows (unaudited):
   

Three Months Ended
June 30, 2014

   

Six Months Ended
June 30, 2014

Revenues $ 53 $ 107
Operating expenses (4 ) (8 )
Selling, general and administrative expenses (2 ) (3 )
Other, net       (1 )
Distributable cash flow attributable to Trunkline LNG $ 47   $ 95  
 
(4)   In exchange for management services, ETE has agreed to pay to ETP fees totaling $95 million, $95 million and $5 million for the years ending December 31, 2014, 2015 and 2016, respectively.
 
(5) Distribution coverage ratio for a period is calculated as Distributable Cash Flow, as adjusted, divided by total cash distributions expected to be paid to the partners of ETE in respect of such period.
       
 

SUPPLEMENTAL INFORMATION

FINANCIAL STATEMENTS FOR PARENT COMPANY

 

Following are condensed balance sheets and statements of operations of the Parent Company on a stand-alone basis.

 

BALANCE SHEETS

(In millions)
(unaudited)
 

June 30,
2014

December 31,
2013

ASSETS
CURRENT ASSETS $ 39 $ 13
ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES 4,768 3,841
INTANGIBLE ASSETS, net 12 14
GOODWILL 9 9
OTHER NON-CURRENT ASSETS, net   50     41  
Total assets $ 4,878   $ 3,918  
LIABILITIES AND PARTNERS’ CAPITAL
CURRENT LIABILITIES $ 155 $ 38
LONG-TERM DEBT, less current maturities 4,140 2,801
OTHER NON-CURRENT LIABILITIES 1 1
COMMITMENTS AND CONTINGENCIES
PARTNERS’ CAPITAL:
General Partner (1 ) (3 )
Limited Partners:
Common Unitholders 563 1,066
Class D Units 14 6
Accumulated other comprehensive income   6     9  
Total partners’ capital   582     1,078  
Total liabilities and partners’ capital $ 4,878   $ 3,918  
       
 

STATEMENTS OF OPERATIONS

(Amounts in millions)
(unaudited)
 
Three Months Ended
June 30,
Six Months Ended
June 30,
2014     2013 2014     2013
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $ (8 ) $ (23 ) $ (15 ) $ (29 )
MANAGEMENT FEE TO ETP (24 ) (48 )
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized (50 ) (53 ) (90 ) (117 )
Gains (losses) on interest rate derivatives 6 6
Equity in earnings of unconsolidated affiliates 248 198 487 366
Other, net   (2 )   (2 )   (2 )   (10 )
INCOME BEFORE INCOME TAXES 164 126 332 216
Income tax benefit       (1 )       (1 )
NET INCOME 164 127 332 217
GENERAL PARTNER’S INTEREST IN NET INCOME 1 1
CLASS D UNITHOLDER’S INTEREST IN NET INCOME           1      
LIMITED PARTNERS’ INTEREST IN NET INCOME $ 163   $ 127   $ 330   $ 217  

Contact:
Investor Relations:
Energy Transfer
Brent Ratliff, 214-981-0700
or
Media Relations:
Granado Communications Group
Vicki Granado, 214-599-8785
Cell: 214-498-9272

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