Energy Transfer Equity Reports Third Quarter Results

Business Wire

DALLAS--(BUSINESS WIRE)--

Energy Transfer Equity, L.P. (ETE) today reported financial results for the quarter ended September 30, 2013.

Distributable Cash Flow, as adjusted, for the three months ended September 30, 2013 was $176 million as compared to $189 million for the three months ended September 30, 2012, a decrease of $13 million. ETE’s net income attributable to partners was $151 million for the three months ended September 30, 2013, as compared to $35 million for the three months ended September 30, 2012, an increase of $116 million.

Distributable Cash Flow, as adjusted, for the nine months ended September 30, 2013 was $534 million as compared to $476 million for the nine months ended September 30, 2012, an increase of $58 million. ETE’s net income attributable to partners was $368 million for the nine months ended September 30, 2013, as compared to $255 million for the nine months ended September 30, 2012, an increase of $113 million.

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

  • ETE’s Board of Directors approved an increase in its quarterly distribution to $0.6725 per unit ($2.69 annualized) on ETE Common Units for the quarter ended September 30, 2013, representing an increase of $0.07 per common unit on an annualized basis.
  • ETP completed the sale of the assets of Missouri Gas Energy to Laclede Gas Company, a subsidiary of The Laclede Group, Inc., for $975 million.
  • The Department of Energy conditionally granted authorization to ETE, Energy Transfer Partners, L.P. (“ETP”) and BG Group to export from the existing Trunkline liquefied natural gas (“LNG”) import terminal up to 15 million metric tons per annum of LNG to non-free trade agreement nations. ETE, ETP and BG Group subsequently announced their entry into a project development agreement to jointly develop the LNG export project at the existing Trunkline LNG import terminal in Lake Charles, Louisiana.
  • ETE exchanged 50.2 million ETP common units for newly issued Class H Units by ETP that track 50% of the underlying economics of the general partner interest and the incentive distribution rights of Sunoco Logistics Partners L.P.
  • ETP and Regency Energy Partners LP (“Regency”), both subsidiaries of ETE, announced that Lone Star NGL LLC (“Lone Star”), a joint venture between ETP and Regency, has placed in service a second natural gas liquids fractionator at its facility in Mont Belvieu, Texas, bringing Lone Star’s total fractionation capacity at Mont Belvieu to 200,000 barrels per day.

Furthermore, ETE commenced a tender offer on October 30, 2013 to purchase up to $400 million in principal amount of its existing 7.50% Senior Notes due 2020. In conjunction with the tender offer, ETE intends to launch a comprehensive refinancing of its existing debt. To that end, ETE intends to refinance its current $900 million senior secured term loan due March 2017 and is also finalizing a new five-year revolving credit facility for up to $600 million. Proceeds from a possible new issuance of senior secured notes and/or a new term loan will be used to satisfy any proceeds required for a successful tender of the Senior Notes. There can be no assurance that ETE will successfully refinance its existing term loan or raise adequate funds for the tender from any intended new issuance of senior secured notes or any term loan financing.

The Partnership has scheduled a conference call for 8:30 a.m. Central Time, Wednesday, November 6, 2013 to discuss its third quarter 2013 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 derived from distributions related to its direct and indirect investments in the limited and general partner interests in ETP and Regency, including 100% of ETP’s and Regency’s incentive distribution rights, approximately 49.6 million of ETP’s common units, approximately 26.3 million of Regency’s common units and approximately 50.2 million ETP Class H Units. 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 49.6 million ETP common units, and approximately 50.2 million ETP Class H Units, which track 50% of the underlying economics of the general partners 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 26.3 million RGP common units. The Energy Transfer family of companies owns more than 56,000 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 43,000 miles of natural gas, natural gas liquids, refined products, and crude oil pipelines. ETP owns 100% of ETP Holdco Corporation, which owns 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 33.5 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 owns 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.

   

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)
(unaudited)
 

September 30,
2013

December 31,
2012

ASSETS

 
CURRENT ASSETS $ 6,887 $ 5,597
 
PROPERTY, PLANT AND EQUIPMENT, net 29,674 28,284
 
NON-CURRENT ASSETS HELD FOR SALE 145 985
ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES 4,087 4,737
NON-CURRENT PRICE RISK MANAGEMENT ASSETS 20 43
GOODWILL 6,428 6,434
INTANGIBLES ASSETS, net 2,195 2,291
OTHER NON-CURRENT ASSETS, net   607   533
Total assets $ 50,043 $ 48,904
 
 

LIABILITIES AND EQUITY

 
CURRENT LIABILITIES $ 6,047 $ 5,845
 
NON-CURRENT LIABILITIES HELD FOR SALE 70 142
LONG-TERM DEBT, less current maturities 22,011 21,440
DEFERRED INCOME TAXES 3,708 3,566
NON-CURRENT PRICE RISK MANAGEMENT LIABILITIES 78 162
SERIES A CONVERTIBLE PREFERRED UNITS 331
OTHER NON-CURRENT LIABILITIES 893 995
 
COMMITMENTS AND CONTINGENCIES
 
PREFERRED UNITS OF SUBSIDIARY 32 73
 
EQUITY:
Total partners’ capital 1,400 2,113
Noncontrolling interest   15,804   14,237
Total equity   17,204   16,350
Total liabilities and equity $ 50,043 $ 48,904
   

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per unit data)
(unaudited)
 

Three Months Ended
September 30,

Nine Months Ended
September 30,

  2013       2012     2013       2012  
REVENUES $ 12,486 $ 2,104 $ 35,728 $ 5,651
COSTS AND EXPENSES:
Cost of products sold 11,064 1,228 31,436 3,205
Operating expenses 403 208 1,127 614
Depreciation and amortization 332 211 962 571
Selling, general and administrative   158     98     499     353  
Total costs and expenses   11,957     1,745     34,024     4,743  
OPERATING INCOME 529 359 1,704 908
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized (298 ) (237 ) (913 ) (732 )
Bridge loan related fees (62 )
Equity in earnings of unconsolidated affiliates 38 21 182 118
Gain on deconsolidation of Propane Business 1,057
Losses on extinguishments of debt (7 ) (123 )
Gains (losses) on interest rate derivatives 3 (6 ) 55 (23 )
Gain on sale of AmeriGas common units 87 87
Other, net   33     (3 )       28  
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE 392 134 1,108 1,171
Income tax expense from continuing operations   49     26     136     33  
INCOME FROM CONTINUING OPERATIONS 343 108 972 1,138
Income (loss) from discontinued operations   13     (142 )   44     (136 )
NET INCOME (LOSS) 356 (34 ) 1,016 1,002
LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST   205     (69 )   648     747  
NET INCOME ATTRIBUTABLE TO PARTNERS 151 35 368 255
GENERAL PARTNER’S INTEREST IN NET INCOME   1         1     1  
LIMITED PARTNERS’ INTEREST IN NET INCOME $ 150   $ 35   $ 367   $ 254  
INCOME FROM CONTINUING OPERATIONS PER LIMITED PARTNER UNIT:
Basic $ 0.52   $ 0.23   $ 1.24   $ 1.06  
Diluted $ 0.52   $ 0.23   $ 1.24   $ 1.06  
NET INCOME PER LIMITED PARTNER UNIT:
Basic $ 0.54   $ 0.13   $ 1.31   $ 0.97  
Diluted $ 0.54   $ 0.13   $ 1.31   $ 0.97  
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING:
Basic and diluted   280.7     280.0     280.4     262.3  
   

ENERGY TRANSFER EQUITY, L.P.

DISTRIBUTABLE CASH FLOW

(Tabular dollar amounts in millions)
(unaudited)
 

Three Months Ended
September 30,

  Nine Months Ended
September 30,
 
2013   2012 2013   2012
“Distributable Cash Flow,” “Distributable Cash Flow, as adjusted,” and “Distribution Coverage Ratio” (1):
Cash distributions from ETP associated with: (2)
Limited partner interest $ 45 $ 45 $ 223 $ 135
Class H Units 16 16
General partner interest 5 5 15 15
Incentive distribution rights 165 147 528 381
IDR relinquishments (21 ) (31 ) (107 ) (59 )
Distributions credited to Holdco consideration (3)           (68 )    
Total cash distributions from ETP 210 166 607 472
Cash distributions from Regency associated with: (4)
Limited partner interest 12 12 36 36
General partner interest 1 1 3 4
Incentive distribution rights 3 2 8 6
IDR relinquishment   (1 )       (2 )    
Total cash distributions from Regency 15 15 45 46
Cash distributions from Holdco           50      
Total cash distributions from ETP, Regency and Holdco 225 181 702 518
Distributable cash flow attributable to Southern Union (including acquisition-related expenses) from March 26, 2012 through September 30, 2012 (5) 77 82
Deduct expenses of the Parent Company on a stand-alone basis:
Selling, general and administrative expenses, excluding non-cash compensation expense (8 ) (6 ) (38 ) (47 )
Interest expense, net of amortization of financing costs, interest income, and realized gains and losses on interest rate swaps (43 ) (64 ) (149 ) (172 )
Bridge financing costs               (62 )
Distributable Cash Flow 174 188 515 319
Transaction-related expenses (6)   2     1     19     157  
Distributable Cash Flow, as adjusted $ 176   $ 189   $ 534   $ 476  
 
Cash distributions to be paid to the partners of ETE:
Distributions to be paid to limited partners $ 189 $ 175 $ 554 $ 525
Distributions to be paid to general partner           1     1  
Total cash distributions to be paid to the partners of ETE (7) $ 189   $ 175   $ 555   $ 526  
 
Distribution Coverage Ratio (8)

0.93

x

1.08

x

0.96

x

0.90

x

 
Reconciliation of Non-GAAP “Distributable Cash Flow” and “Distributable Cash Flow, as adjusted” to GAAP “Net income” (1):
Net income attributable to partners $ 151 $ 35 $ 368 $ 255
Equity in income related to investments in ETP, Regency and Holdco (207 ) (101 ) (573 ) (562 )
Total cash distributions from ETP, Regency and Holdco 225 181 702 518
Amortization included in interest expense (excluding ETP and Regency) 5 5 14 10
Fair value adjustment of ETE Preferred Units 8 9 5
Other non-cash (excluding ETP, Regency and Holdco)       60     (5 )   93  
Distributable Cash Flow 174 188 515 319
Transaction-related expenses (6)   2     1     19     157  
Distributable Cash Flow, as adjusted $ 176   $ 189   $ 534   $ 476  
 

(1) This press release and accompanying schedules include the non-generally accepted accounting principle (“non-GAAP”) financial measures of Distributable Cash Flow. The schedule above provides a reconciliation of these non-GAAP financial measures to their 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 related to Southern Union for the period from March 26, 2012 (Southern Union acquisition date) until Southern Union was contributed to Holdco on October 5, 2012. From October 5, 2012 until ETE’s 60% interest in Holdco was contributed to ETP on April 30, 2013, Distributable Cash Flow reflects dividends expected to be received from Holdco. The Partnership defines distributable cash flow for Southern Union as net income, adjusted for certain non-cash items, less maintenance capital expenditures. Non-cash items include depreciation and amortization, deferred income taxes, non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, and non-cash impairment charges.

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 nine months ended September 30, 2013 and 2012 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 the distributable cash flow related to Southern Union (as described in the definition of Distributable Cash Flow above), dividends expected to be received 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 that were incurred during the three and nine months ended September 30, 2013 and 2012 in connection with the Partnership’s merger and acquisition activities and other transactions, Distributable Cash Flow, as adjusted, for the three and nine months ended September 30, 2013 and 2012 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 nine months ended September 30, 2013 and 2012 for comparative purposes.

(2) For the three months ended September 30, 2013, cash distributions expected to be received from ETP consist of cash distributions in respect of the quarter ended September 30, 2013 payable on November 14, 2013 to holders of record on November 4, 2013. For the three months ended September 30, 2012, cash distributions received from ETP consist of cash distributions paid on November 14, 2012 in respect of the quarter ended September 30, 2012.

For the nine months ended September 30, 2013, cash distributions received or expected to be received from ETP consist of cash distributions paid on May 15, 2013 in respect of the quarter ended March 31, 2013, cash distributions paid on August 14, 2013 in respect of the quarter ended June 30, 2013, and cash distributions payable on November 14, 2013 to holders of record on November 4, 2013 in respect of the quarter ended September 30, 2013. For the nine months ended September 30, 2012, cash distributions received or expected to be received from ETP consist of cash distributions paid on May 15, 2012 in respect of the quarter ended March 31, 2012, cash distributions paid on August 14, 2012 in respect of the quarter ended June 30, 2012 and cash distributions paid on November 14, 2012 in respect of the quarter ended September 30, 2012.

(3) For the nine months ended September 30, 2013, cash distributions paid by ETP exclude distributions paid in respect of the quarter ended March 31, 2013 on 49.5 million ETP common units issued to ETE as a portion of the consideration for ETP's acquisition of ETE's interest in Holdco on April 30, 2013. These newly acquired 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.

(4) For the three months ended September 30, 2013, cash distributions expected to be received from Regency consist of cash distributions in respect of the quarter ended September 30, 2013 payable on November 14, 2013 to holders of record on November 4, 2013. For the three months ended September 30, 2012, cash distributions received from Regency consist of cash distributions paid on November 14, 2012 in respect of the quarter ended September 30, 2012.

For the nine months ended September 30, 2013, cash distributions received or expected to be received from Regency consist of cash distributions paid on May 15, 2013 in respect of the quarter ended March 31, 2013, cash distributions paid on August 14, 2013 in respect of the quarter ended June 30, 2013 and cash distributions payable on November 14, 2013 to holders of record on November 4, 2013 in respect of the quarter ended September 30, 2013. For the nine months ended September 30, 2012, cash distributions received or expected to be received from Regency consist of cash distributions paid on May 14, 2012 in respect of the quarter ended March 31, 2012, cash distributions paid on August 14, 2012 in respect of the quarter ended June 30, 2012 and cash distributions paid on November 14, 2012 in respect of the quarter ended September 30, 2012.

(5) Distributable cash flow attributable to Southern Union was calculated as follows:

 

Three Months Ended
September 30, 2012

 

Period from
Acquisition
(March 26, 2012) to
September 30, 2012

Net income (loss) $ 17 $ (10 )
Amortization of finance costs charged to interest (12 ) (21 )
Depreciation and amortization 76 155
Deferred income taxes 27 26
Non-cash equity-based compensation, accretion expense and amortization of regulatory assets 5
Other, net 11 17
Maintenance capital expenditures   (42 )   (90 )
Distributable cash flow attributable to Southern Union 77 82
Acquisition-related expenses recognized by Southern Union   1     57  
Distributable cash flow, as adjusted, attributable to Southern Union $ 78   $ 139  
 

Distributable cash flow attributable to Southern Union reflected above includes change in control payments of $72 million, offset by benefit plan curtailment gains of $15 million. The net amount of $57 million was added back to calculate ETE’s Distributable Cash Flow, as adjusted.

(6) Transaction-related expenses for the nine months ended September 30, 2012 related to ETE’s acquisition of Southern Union consisted of $62 million bridge financing costs, $38 million of selling, general and administrative expenses incurred by ETE and $57 million of merger-related expenses that were incurred directly by Southern Union.

(7) For the three months ended September 30, 2013, cash distributions expected to be paid by ETE consist of cash distributions in respect of the quarter ended September 30, 2013 payable on November 19, 2013 to holders of record on November 4, 2013. For the three months ended September 30, 2012, cash distributions paid by ETE consist of cash distributions paid on November 16, 2012 in respect of the quarter ended September 30, 2012.

For the nine months ended September 30, 2013, cash distributions paid or to be paid by ETE consist of cash distributions paid on May 17, 2013 in respect of the quarter ended March 31, 2013, cash distributions paid on August 19, 2013 in respect of the quarter ended June 30, 2013 and cash distributions payable on November 19, 2013 to holders of record on November 4, 2013 in respect of the quarter ended September 30, 2013. For the nine months ended September 30, 2012, cash distributions paid or to be paid by ETE consist of cash distributions paid on May 18, 2012 in respect of the quarter ended March 31, 2012, cash distributions paid on August 17, 2012 in respect of the quarter ended June 30, 2012 and cash distributions paid on November 16, 2012 in respect of the quarter ended September 30, 2012.

(8) Distribution Coverage Ratio is calculated as Distributable Cash Flow, as adjusted, divided by total cash distributions to be paid to the partners of ETE.

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

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