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Edited Transcript of ETP earnings conference call or presentation 23-Feb-17 2:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Energy Transfer Partners LP and Energy Transfer Equity LP Joint Earnings Call

Dallas Feb 23, 2017 (Thomson StreetEvents) -- Edited Transcript of Energy Transfer Partners LP earnings conference call or presentation Thursday, February 23, 2017 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Tom Long

Energy Transfer Partners, L.P. - CFO

* Mackie McCrea

Energy Transfer Partners, L.P. - President & COO

* Kelcy Warren

Energy Transfer Partners, L.P. - CEO & Chairman

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Conference Call Participants

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* Jeremy Tonet

JPMorgan - Analyst

* Kristina Kazarian

Deutsche Bank - Analyst

* Brandon Blossman

Tudor, Pickering, Holt - Analyst

* Michael Blum

Wells Fargo Securities, LLC - Analyst

* Shneur Gershuni

UBS - Analyst

* Tom Abrams

Morgan Stanley - Analyst

* Ted Durbin

Goldman Sachs - Analyst

* Brian Zarahn

Mizuho - Analyst

* Darren Horowitz

Raymond James & Associates, Inc. - Analyst

* John Edwards

Credit Suisse - Analyst

* Keith Stanley

Wolfe Research - Analyst

* Ethan Bellamy

Robert W. Baird & Company, Inc. - Analyst

* Selman Akyol

Stifel Nicolaus - Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to the Energy Transfer fourth-quarter 2016 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tom Long, Chief Financial Officer for Energy Transfer. Please go ahead, sir.

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Tom Long, Energy Transfer Partners, L.P. - CFO [2]

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Thank you, operator. Good morning, everyone, and welcome to the Energy Transfer fourth-quarter 2016 earnings call, and thank you for joining us today. I am also joined today by Kelcy Warren, Mackie McCrea, Matt Ramsey, John McReynolds, and other members of our senior management team who are here to help answer your questions after our prepared remarks.

I will begin today with an update on our pending merger with SXL as well as the discussion of the latest developments on our Rover, Bakken, and other growth projects. Then I will turn our focus to Energy Transfer Partners fourth-quarter results followed by a financing and liquidity update, and lastly, a distribution discussion. As a reminder, we will be making forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.

These are based on our beliefs as well as certain assumptions and information currently available to us. I will also refer to adjusted EBITDA and distributable cash flow, or DCF, both of which are non-GAAP financial measures. You will find a reconciliation of our non-GAAP measures on our website. First turning to an update on our merger with SXL.

On November 21, 2016, ETP and SXL entered into a merger agreement providing for the acquisition of ETP by SXL in a unit per unit transaction. Under the terms of the transaction, ETP unit holders will receive 1.5 common units of SXL for each common unit of ETP they own. This equates to a 10% premium to the volume weighted average price of ETP's common units for the last 30 trading days immediately prior to the announcement of the transaction.

SXL filed its S4 with the SEC in December and received a second comment letter from the SEC on February 8. Late last week, SXL filed its second amendment to the S4 in response to the SEC's letter. The record date has been set for February 27, and we anticipate the proxy will be mailed to unitholders in early March with the ETP unitholder meeting and vote expected to occur no later than mid-April.

We expect the merger to close shortly after receipt of the vote. The integration teams from both partnerships are currently fully engaged in the integration planning process and are identifying both cost and commercial synergies. Now let's move to our growth projects where I will provide a brief update, starting with Rover. We received the first certificate to construct and operate the Rover Pipeline project on February 2.

At that time, FERC's order also approved Rover's proposed tariff rates without modification. FERC has now completed its obligation under Section 106 of the National Historic Preservation Act for the project, therefore Rover has received all federal permits except for the Army Corp's permit from the Buffalo District as well as the water quality certification from the Ohio EPA, both of which we anticipate receiving no later than tomorrow.

On February 13, we received notice from FERC that we can proceed with the non-mechanized tree clearing in upland areas, and we are hopeful that we will receive approval to begin the tree clearing in the remaining areas by the end of this week.

We expect to begin construction according to the plan later than March 1. We continue to anticipate being in service to the Midwest Hub near Defiance, Ohio in July and to the markets in Michigan and the Union Gas Dawn Hub in November of 2017.

Now moving to the Bakken update. On February 8, 2017, Dakota Access received the easement from the US Army Corps of Engineers to construct a pipeline across the land owned by the Army Corps on both sides of Lake Oahe in North Dakota. Dakota Access now has received all federal authorizations necessary to complete construction of the pipeline.

The Dakota Access pipeline is now 99% complete. With the receipt of the easement from the Army Corps of Engineers, we expect commercial operations on the Dakota Access Pipeline and the adjoining ETCO Pipeline, which is complete and ready for commissioning. We'll commence in the second quarter of 2017.

We reiterate our commitment to protect all cultural resources along with the environment and the safety of all those in the area as we move toward the completion of the Pipeline. Last week, we announced that we had successfully completed the project financing of the Bakken Pipeline as well as the closing of the previously announced sale by ETP and SXL of a 36.75% interest in the Bakken Pipeline to MarEn Bakken Company LLC, an entity jointly owned by MPLX LP and Enbridge Partners LP.

The completion of the project level financing by the Bakken Pipeline provided access to the remaining $1.4 billion of cash proceeds under the previously announced $2.5 billion project financing facility which Dakota Access will use to fund construction costs for its pipeline project. Upon closing of the sale of a minority interest in the Bakken pipeline to MarEn, ETP and SXL received $1.2 billion and $800 million in cash respectively, which they plan to use to pay down debt and help fund current growth projects.

As a result of this closing, ownership in the Bakken pipeline is now as follows. ETP and SXL own 38.25%, MarEn owns 36.75%, and PSX owns 25%. ETP and SXL own 60% and 40% respectively of the combined 38.25% equity interest in the Bakken Pipeline.

Next, on Bayou Bridge, as previously mentioned, we began commercial operations on the 30-inch segment from Nederland to Lake Charles in April. We currently have 80,000 barrels per day contracted under take or pay agreements and for the fourth quarter, we transported an average of 72,000 barrels per day. The 24-inch segment of Bayou bridge from Lake Charles to St. James continues to move forward with permitting going as expected and the right-of-way acquisition ahead of schedule.

We anticipate that deliveries to St. James will commence in the fourth quarter of 2017. On the Revolution project, the pipeline and plant as well as the fractionation facility are expected to be in service in the fourth quarter of 2017. And we are excited to announce that we have secured two additional producers, one of whom brings a significant acreage dedication in Western Pennsylvania.

Shifting now to Lone Star NGL. Frac four was placed in service in October of 2016, ahead of schedule. Our four fractionators are currently operating at or above nameplate capacity.

Due to the continued strong demand for fractionation services and the tremendous growth in the Delaware Basin, we are pleased to announce that we will construct a fifth fractionator in Mont Belvieu, which will have capacity of 120,000 barrels per day and also include NGL product infrastructure and a new 3 million barrel y-grade cavern. Frac V is fully subscribed by multiple long-term fixed-fee contracts and is expected to be in service in September of 2018.

On our Mexico projects, the Trans-Pecos and Comanche Trail Pipelines will expand our intrastate pipeline capacity to carry gas from the Permian Basin to Mexico. We are pleased to say the Comanche Trail Pipeline went into service as scheduled at the end of January at which point we began collecting demand fees on the pipeline.

The Trans-Pecos Pipeline is now 98% complete and on target to be in service before the end of March. Finally, in West Texas where the Permian Basin continues to drive growth for ETP, the 200 million a day Panther processing plant, which is in the Midland Basin, came online in January and volumes are expected to ramp up throughout 2017.

Also due to continued strong demand, we will be constructing the new 200 million a day Arrowhead processing plant in Reeves County in the Delaware Basin. This plant is expected to come online in the third quarter of 2017.

Now let's turn to ETP's fourth-quarter results. Adjusted EBITDA on a consolidated basis totaled $1.43 billion compared to $1.36 billions for the fourth quarter of 2015. This increase was primarily due to another nice quarter of growth in the liquids segment as well as solid growth in the intrastate segment and at SXL.

DCF attributable to the partners of ETP as adjusted totaled $796 million compared to $879 million a year ago primarily due to a current tax benefit that was recorded in 2015, which was primarily from bonus depreciation. Excluding the impact of the change in current tax benefit between the periods, DCF increased approximately $100 million compared to the fourth quarter of 2015.

Now let's look at the individual segment results starting with midstream, adjusted EBITDA was $258 million compared to $260 million for the fourth quarter of 2015. We experienced lower throughput volumes this quarter and increased G&A of $34 million primarily due to year-end accruals as well as cost associated with the acquisition of PennTex which will partially offset by higher crude oil and NGL prices and lower operating expenses.

Gathered gas volumes totaled 9.7 million MMBtu per day compared to 10.1 million MMBtu per day for the same period last year primarily due to lower volumes in South Texas and declines in North Texas and the midcontinent and Panhandle regions. These were partially offset by increases from the startup of the Orla processing plant in the Permian Basin, the Ohio River system in the Northeast, as well as the acquisitions of the PennTex and certain assets from DCP in North Louisiana.

Compared to the third quarter of 2016, volumes remained relatively flat. NGL production totaled 431,000 barrels per day compared to 444,000 barrels per day for the fourth quarter of 2015. Equity NGLs remained relatively flat at 29,000 barrels per day for the fourth quarter of this year compared to the same period in 2015.

The Permian and Delaware Basins continue to be the primary growth drivers for our midstream business. And we are well-positioned to meet producers growing needs for both gas and liquids services. And in South Texas, in the first two months of 2017, we are seeing volumes on our system grow as we are starting to see the impact of the continued increase in rig counts, which had doubled off the lows in October last year.

We strongly believe that we will continue to see volume growth from existing customers and new E&P players that have secured acreage in the region in 2017. In the liquids transportation and services segment, adjusted EBITDA increased more than 20% to $281 million compared to the same period last year. The increase was due to higher throughput at the Lone Star fractionators, higher NGL and crude transportation volumes, and increased storage margin.

NGL and crude transportation volumes on our wholly-owned and joint venture pipelines increased more than 25% to 670,000 barrels per day due to the increased volumes out of the Permian Basin as well as the startup of the Nederland to Lake Charles segment of the Bayou Bridge Pipeline, which averaged 72,000 barrels per day during the fourth-quarter and the startup of certain other West Texas crude assets.

Year over year, average daily fractionated volumes increased nearly 60% to 394,000 barrels per day due to the startup of our third and fourth fractionators in Mont Belvieu, which were commissioned in December of 2015 and October of 2016, respectively as well as increased producer volumes.

In our intrastate segment, adjusted EBITDA increased by $30 million year on year to $152 million due to increased asset optimization opportunities as a result of wider pipeline spreads, additional margin from the storage optimization business, and [mowing] fees related to the Mexican exports. Transported intrastate volumes decreased slightly due to lower production in the Barnett Shale partially offset by increased volumes to Mexico as well as the addition of new short-haul transportation pipeline delivery volumes into our Houston pipeline system.

We continue to expect volumes to Mexico to grow particularly with the startup of the Comanche Trail Pipeline in January of this year and the expected startup of Trans-Pecos Pipeline in March of this year, which should result in increased demand from transport services through our existing pipeline network.

In our interstate segment, adjusted EBITDA was $269 million compared to $283 million for the fourth quarter of 2015. We did see an impact from the contract restructuring on Tiger as well as lower rates on some of our pipelines due to weaker basis spreads and lower contracted capacity on Transwestern due to mild weather, which was partially offset by higher reservation revenues on Transwestern from a growth project.

Moving on to Sunoco Logistics, adjusted EBITDA was $327 million for the fourth quarter of 2016, an increase of $10 million compared to the fourth quarter of 2015. This was primarily due to an increase in SXL's crude oil pipelines which benefited from the Delaware Basin extension and Permian, Longview, and Louisiana extension pipelines that commenced operations in the third quarter of 2016 as well as higher contributions from its crude oil terminals and increased earnings attributable to the acquisition of Vitol.

Moving on to the all other segment, which now reflects our retail marketing operations prior to the transfer of the general partner interest of Sun from ETP to ETE in 2015. And the completion of the dropdown of the remaining retail and marketing interest from ETP to Sun in March of 2016, as well as our equity method investment in LP units of Sun consisting of 43.5 million units of Sun consisting of 43.5 million units, which represents about 44% of Sun's total outstanding common units.

For the all other segment, adjusted EBITDA was $146 million compared to $152 million a year ago. Results were impacted by lower revenue-generating horsepower from our compression business. This was partially offset by a decrease in operating expenses and a decrease in SG&A expenses resulting from lower transaction related expenses.

Now moving on to CapEx. For the full-year 2016, ETP invested nearly $3.2 billion in organic growth projects including our proportionate share of joint venture investments with a majority allocated to our liquids transportation and services and midstream segments. This also includes $577 million funded to the Bakken Pipeline project by ETP under a promissory note.

This note was repaid with funds from the project financing facility following the receipt by ETP of the final easement for the Bakken Pipeline project in the first quarter of 2017. For full-year 2016, we spent $305 million on direct maintenance capital expenditures. For 2017, organic growth project capital forecast is approximately $2.8 billion, net of the amounts expected to be financed at the asset level. The majority of which will be spent on growth projects in our interstate and midstream segments.

This is an increase from our previously CapEx funding needs of $1.9 billion as a result of the inclusion of frac five. In addition, our current plan does not contemplate project financing at the Rover asset but does include a $600 million of project level financing related to the drawdown of the Bakken Pipeline facility. For 2017, we are forecasting maintenance capital expenditures of $325 million to $365 million.

Let's take a look at our liquidity position. As of December 31, 2016, our debt to EBITDA ratio was 4.32 times for our credit facility calculation. In September 2016, ETP initiated a commercial paper program, which is back-stopped by the $3.75 billion revolving credit facility. As of December 31, 2016, the outstanding balance on this facility was $2.78 billion, which included $777 million of commercial paper.

Also during the quarter, we issued $236 million of equity under our ATM program and $68 million of equity under the direct program. In addition to the previously mentioned financings around Bakken, in January of 2017 ETP entered into a private placement with ETE in which ETP received gross proceeds of approximately $568 million in exchange the issuance to ETE of approximately 15.8 million ETP common units. ETP used the net proceeds of the transaction to repay existing indebtedness and for general partnership purposes.

Also in January of this year, ETP announced that it had successfully priced $1.5 billion of senior notes. ETP primarily used the proceeds of this offering to pre-fund the refinancing of its 2017 debt maturity obligations. Currently, taking into account the completion of these recent refinancings, ETP has approximately $250 million outstanding under its revolving credit facility.

As you can see, we have recently taken some steps to improve our balance sheet and address some of ETP's equity needs for 2017. We are excited to bring into service the remainder of our major capital projects throughout 2017 and look forward to the incremental cash flows that they will bring upon completion.

Now, I'd like to touch on our recent distribution announcement. In January, we announced a distribution $1.055 per common unit for the fourth quarter or $4.22 per common unit on an annualized basis. This was flat compared to our third quarter of 2016 distribution and was paid on February 14 to unit holders of record as of the close of business on February 7.

Before moving on to an overview of ETE's results, I wanted to briefly touch on PennTex's fourth-quarter results. Adjusted EBITDA totaled $19.4 million compared to $12.8 million for the fourth quarter of 2015. This increase was primarily due to an increase in processing MVCs from their primary customer. DCF attributable to the partners of PTXP as adjusted totaled $18.1 million compared to $11 million a year ago primarily due to the increased adjusted EBITDA.

Processing volumes averaged 240,000 MMBtu per day during the fourth quarter in 2016 and minimum volume commitments under PennTex's gathering and processing agreements with its primary customer where 460,000 MMBtu per day for the quarter.

PennTex also completed and placed into service additional gathering facilities in the Vernon Field for it's primary customer in December of 2016. On January 25, 2017, PennTex announced the distribution of $0.295 per common unit for the fourth quarter or $1.18 per common unit on an annualized basis.

Now moving to ETE. I will begin with ETE's fourth-quarter results followed by a liquidity and financing update and a brief update on the Lake Charles LNG. ETE's distributable cash flow as adjusted for the fourth quarter totaled $299 million compared to $343 million for the fourth quarter of 2015. The decrease was due to the additional $95 million IDR subsidies granted to ETP for the fourth quarter of 2016.

ETE's coverage for the fourth quarter was 1.19 times. ETE announced last month a quarterly distribution of $0.285 per unit; this equates to $1.14 per unit on an annualized basis. It was paid on February 21 to unit holders of record as of the close of business on February 7.

Let's look now at the liquidity and financing. ETE continues to have a healthy liquidity position. We ended the quarter with a debt to EBITDA ratio of 3 times for our credit facility. As of December 31 2016, there was $875 million in outstanding borrowings out of the credit facility. Therefore, the end of the fourth quarter of 2016, the overall ETE standalone debt was $6.4 billion with a blended interest rate of approximately 4.9%.

And in January of 2017, ETE issued 32.2 million common units representing limited partner interest in ETE to certain institutional investors in a private transaction for gross proceeds of approximately $580 million, which ETE used to purchase 15.8 million newly issued ETP common units. This transaction was both accretive to DCF and deleveraging for ETE while also demonstrating ETE's continued support of its underlying partnerships.

On February 2, ETE closed on a $2.2 billion institutional term loan, which effectively extends the maturity of our existing term loans from 2019 to 2024. As to Lake Charles LNG, really a brief update here. Basically, we just still remain in close dialogue with Shell regarding the possibility of course bringing this project to FID.

Before opening the call up to your questions, I would like to say we remain pleased with the performance of our base business as it has continued to demonstrate its resiliency. We remain focused on the completion of our remaining growth projects including the Bakken and Rover Pipelines which will generate future E-based EBITDA growth.

We continued to place emphasis on maintaining a strong balance sheet by lowering our leverage while also increasing coverage and liquidity and feel we have made some good strides in the first two months of this year. ETP is in great position for growth. We're also excited about our combination with SXL as we continue to simplify our family structure.

ETP remains firmly committed to its investment grade rating. ETE's priority continues to be supporting its core operating subsidiaries and ensuring their financial health. With that, operator, that concludes our prepared remarks. Please open the line up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

Jeremy Tonet, JPMorgan.

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Jeremy Tonet, JPMorgan - Analyst [2]

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Just wanted to touch base on Rover a bit here. You looked at a bunch of permits at the beginning, and did you list the 401 water permit that allows for mechanized pre-clearing?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [3]

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Jeremy, this is Mackie. As far as every federal permit, we have received everything including the Buffalo District was one of the last two that was remaining today, and we have been told that the final Ohio permit will be signed and sent today also. So as of today, we expect to have every federal permit from both the [Core and the FERC in hand.

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Jeremy Tonet, JPMorgan - Analyst [4]

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Okay. Great. Just a little follow-up there. As far as any portions of the route that have right-of-way issues for accretive selling or you have to reroute there. Do you feel good with all those issues? Just trying to get a sense for the March 31 deadline how comfortable you guys are with hitting that.

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [5]

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We couldn't feel better. I tell you, after what we went through last year in dealing with the administration we were dealing with and just the stresses and headaches and the team stayed together, us with our construction companies are moving forward.

We have talked with them last week. There's a tremendous amount of manpower out there now cutting trees. We have the actual right to clear up to 90% of the trees right now along the route. The wetlands are only about 10% so we're highly confident that we will have the trees cut by the end of March.

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Jeremy Tonet, JPMorgan - Analyst [6]

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Great. Thanks for that. Just wanted to turn to midstream for a quick second here. It looked like that the volumes were up versus third quarter, commodity prices were up a bit, and then you have the benefits of PennTex.

The gross margin stepped down a bit quarter over quarter, so I was just wondering if you could provide a little bit more color on some of the drivers there, 4Q versus 3Q, and how you see what's a good baseline for 2017 there?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [7]

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If you look at -- as Tom spoke about a little earlier, we had some one-time charges, some accruals. We had some lower capitalization on some CapEx. If you remove all of that, we actually from an EBITDA basis were relatively flat. Yes, volumes were softer but some from an EBITDA basis, we were very close to being flat quarter to quarter.

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Jeremy Tonet, JPMorgan - Analyst [8]

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Okay. I was just wondering on the gross margin side, it seemed like it came down a little bit even before the expenses. I didn't know if there was any kind of a one-off that was happening there.

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Tom Long, Energy Transfer Partners, L.P. - CFO [9]

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Yes, no. Listen, Jeremy. This is Tom. There really wasn't any one-offs. I think as always, when you get into the winter, you might have a little bit of operational type items that you work through, but I wouldn't really call it one-off other than the normal what I would refer to winter-type occurrences.

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Jeremy Tonet, JPMorgan - Analyst [10]

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Okay. Great, thanks. That's it for me. I will hop back into the queue.

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Operator [11]

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Kristina Kazarian, Deutsche Bank.

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Kristina Kazarian, Deutsche Bank - Analyst [12]

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Nice job on frac size announcement this morning. Can you guys just give it some more color around commitments and how this kind of came together? And with it now fully subscribed, which I think I caught in the opening comments about maybe thinking about timeframe for Frac VI and beyond?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [13]

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Yes, it's funny you say that. Every time we talked to Steve Spalding, he's asking for approval for another frac. He's not doing it just because he likes building fracs, but he's doing it because we have to based on our contractual obligations, and he and his team have done a tremendous job growing those assets.

We continue to concentrate our time and effort in the areas where it makes sense, and right now is of course the Delaware and Permian Basins. In addition to capturing all the liquids from the numerous plants that ETP continues to build, They also are very successful in capturing third-party plants.

As Tom read a minute ago, our plants are already running at full. Some of that we're just bringing in interruptible space as the firm fee-based volumes ramp up on Frac IV, and we will have the ability to take volumes to other fracs if we're full before Frac V is completed.

But as soon as it's completed, we will begin ramping it up and expect it to be full in less than a year, and no doubt probably in less than six months, Steve will come again asking for another frac based on some negotiations and discussions we have now.

It has been a phenomenal asset. It continues to grow. It continues to drive distributable cash, and we couldn't be more pleased with Lone Star's performance.

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Kristina Kazarian, Deutsche Bank - Analyst [14]

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Got it. And you know nice update on Revolution, too. Can you just remind me where we stand from a subscription level-wise and maybe a bit more color on the two new producers and what the scale of the big acreage dedication really is?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [15]

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Yes. We are under a confidence -- well, first of all, let me say how pleased we are to say we have added customers. We have been saying that for over a year now. We really have been in negotiations and closed with many including these, but we're very excited to announce that one of them is in a very large dedication or volume.

It's fairly material. The other one is a large acreage dedication. It's in excess of 30,000 acres. It's the life of a lease on this acreage, and they're also adding acreage. We are really excited about that transaction.

In addition to that, 18 months or earlier after the completion of Revolution, demand charges kick in at Revolution for 100,000 a day of that volume. So those are really two exciting additions and now we have three customers and looking to add a couple more. So even though it's taken a while, we are real pleased with how Revolution is turning out.

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Kristina Kazarian, Deutsche Bank - Analyst [16]

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Perfect, and last one for me and shooting this one Tom's way. Tom, on the last call I think we were bouncing around a $1.9 billion number for CapEx and now it sounds like we're looking more at the $2.8 billion range.

I got from the press release this morning that $385 million is from Frac V, but what's the other $600 million-ish? Does the new CapEx number cover all the topics, new announcements we have talked about on this call or is there the chance that that number creeps up throughout the year?

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Tom Long, Energy Transfer Partners, L.P. - CFO [17]

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Yes, well, I will kind of start with the last and then I will go back to reconcile with you, Kristina, a little bit the $1.9 billion to the $2.8 billion. But, yes. As far as creep up, we're always looking at new projects. When we give this guidance, it really is looking at the projects that we have approved that we pretty much have great clarity around.

Now as far as the $1.9 billion, really it is tied to the Rover project financing. In other words, the $1.9 billion that we always gave or what we give every quarter is always net of project financing. And what we have done is, is at least shown that if we don't end up going the financing project route on Rover that we're evaluating, we thought it was prudent to go ahead and show that with that project being just funded through the balance sheet and not putting it at the asset level here.

If you took that number and then you took Rover in and include about probably nearly $1.2 billion or so for that, but you have to remember because of the closing of the Dakota Access Project financing that you have a $600 million credit that came in. Go back and add in for the Frac V about $200 million.

I know you said the $380 million, but it's about $200 million spend in 2017. That will get you back to the $2.8 billion if you take those numbers I just laid out.

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Kristina Kazarian, Deutsche Bank - Analyst [18]

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Perfect. Thank you guys for the updates.

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Operator [19]

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Brandon Blossman, Tudor, Pickering, Holt.

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Brandon Blossman, Tudor, Pickering, Holt - Analyst [20]

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Where to start. Did anything change in terms of Rover project financing from when you were exploring that to now?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [21]

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Well, all along, we are always going to try to look at the most efficient way we can. So, to say something had changed, you know the markets are always changing out there as to what we can issue debt at the ETP level versus going out and doing project financing.

So I think in answer to your question, it's more of just the market and you're always going to evaluate to optimize the maximum DCF you can get at ETP. And so we will always make those decisions at the time.

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Brandon Blossman, Tudor, Pickering, Holt - Analyst [22]

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Okay. Makes sense. Equity needs for 2017 CapEx program, how are you guys thinking about that as we trace the year?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [23]

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Well, the way we always look at that is this isn't really about a funding question as much as just managing leverage. We have the ATM in place.

We will always opportunistically utilize that, but keep in mind on the first question you just asked is that whether you do project financing of the asset or whether you do in other words in the form of debt or whether you do it at ETP, that's one and the same.

We will balance the debt equity in order to be able to continue to stay in line with what we have shown to the rating agencies to protect our investment-grade rating. So I don't really have any guidance for you there other than we will navigate that throughout the year.

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Brandon Blossman, Tudor, Pickering, Holt - Analyst [24]

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Fair enough. And last question for me, the new Arrowhead plant in Reeves County. Did I hear that correctly? Q3 2017, is it currently under construction or do you plan on starting quickly here?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [25]

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That's correct. We expect to bring it online in the third quarter.

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Brandon Blossman, Tudor, Pickering, Holt - Analyst [26]

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That's awesome. Can you tell me where the residue gas [interconnect] is and are there any concerns around getting that gas away from the plant?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [27]

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No. There is zero plans about getting away. It will end up going into our pipeline network. It's really the choice of the producer. It will either go into our interstate network, or intrastate, or possibly to the [CSE] hitter, but there will be no issues about capacity of the plant

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Brandon Blossman, Tudor, Pickering, Holt - Analyst [28]

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Awesome. Thank you. That's all for me.

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Operator [29]

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Michael Blum, Wells Fargo Securities.

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Michael Blum, Wells Fargo Securities, LLC - Analyst [30]

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Basically, I have two questions but I think they might be one and the same. What is the latest cost estimate for Revolution and timing? And then I guess related to that, what's in the 2017 CapEx for midstream? What is that? It's roughly $950 million. What's in that number?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [31]

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As far as Revolution, where we are at, the route we initially selected, we shortened that significantly. We changed a few pipeline diameters so we have come in considerably under budget. We will probably be in the neighborhood including all the costs, the frac at Marcus Hook. We are just slightly over $1 billion for Revolution.

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Tom Long, Energy Transfer Partners, L.P. - CFO [32]

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And I will take the second part, Michael. I think if you were kind of summing up those projects, obviously it's Revolution that Mackie just mentioned. Arrowhead, that the question just came up on that piece, but it's also the Northeast projects that we are continuing to work on up there. It's really the main drivers for the projections we have for the 2017.

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Michael Blum, Wells Fargo Securities, LLC - Analyst [33]

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Okay. And then just the timing of Revolution, when does that sort of fully come into service?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [34]

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We expect to be online with the second phase of Rover in November of this year.

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Michael Blum, Wells Fargo Securities, LLC - Analyst [35]

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Okay, great, got it. Thanks, guys.

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Operator [36]

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Shneur Gershuni, UBS.

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Shneur Gershuni, UBS - Analyst [37]

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Just to start off, a lot has happened since last quarter, DAPL, Rover are finally advancing and so forth. I was wondering if you could talk about your existing base business a little bit. You touched on some trends during your prepared remarks, and there's been a significant rig activity pick up in the Permian.

If I recall correctly when thinking about the legacy Regency assets, are you not well-positioned to benefit from this uplift? Could we see a material pickup in earnings in 2017? I was wondering if there was a way to sensitize that for us as to what you think the upside could be as a result?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [38]

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To the first two questions, yes and yes. We couldn't be better situated in the Permian and Delaware Basins. If you look at our infrastructure, our gathering, our processing plants, our intrastate-interstate network, our NGL takeaway, there's nobody even comes close.

We couldn't be more pleased in our position. As you know with Arrowhead and some other -- a lot of other activity we have out there, we are expanding our processing capabilities and continue to look to expand it with ongoing negotiations. We expect the volume to grow and continue to grow as they have fairly significantly throughout this year, and we expect to play a large role in gathering, processing, and delivering the residue and the NGLs to market.

So great area for us. It will continue to be a huge focus, and we without a doubt have the best advantage out there to capture business than any of our competitors.

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Shneur Gershuni, UBS - Analyst [39]

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Great, and as a bit of follow-up, a lot of producers have announced Permian crude takeaway capacity, and obviously SXL made some big announcements last night. What are your plans with Lone Star going forward? Do you still plan to bring into service for crude given the pending merger, or are you considering some other options, maybe NGL takeaway capacity just given the robust drilling activity in the basin?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [40]

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Well, as we have been explaining ever since October when we announced the merger, we are really excited about our teams, SXL and ETP working together offering the full stream of services from the wellhead all the way to the delivery on the Gulf coast or even all the way to St. James. So we will have an NGL team that offers those services.

We will have an ETP combined team that offers the crude gathering and storage and blending and transport and delivery to market including exports. The exciting -- one of the most exciting synergies that we continue to look at, analyze, and are ready to move on are utilizing the available capacity, either idle or taking it out of the different commodity and putting it into oil or condensate.

We continue to evaluate that and there are numerous opportunities that we will take advantage of shortly after the merger.

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Shneur Gershuni, UBS - Analyst [41]

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Okay and then turning to Sun for a second, given that it's leveraged profile and so forth and I realize you have gotten some covenant relief there. Is there any plan from the ETE level to offer some support or is this going to be handled all at the Sun level?

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Kelcy Warren, Energy Transfer Partners, L.P. - CEO & Chairman [42]

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This is Kelcy. I think absolutely. To the extent ETE it's appropriate to support Sun, which as you know, you have seen our conduct in the past, that that happens frequently from our partnerships.

To the extent that that is necessary, that will be provided. I think in my view, there's quite a bit of wood to chop before we get to that. There's some fundamental things that need to improve with Sun in just running the business, and so we are going to focus on that first, but to the extent that ETE needs to step up, it certainly well.

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Shneur Gershuni, UBS - Analyst [43]

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Okay, and then one final question. You have gotten the cash in the door with the capital sale. You have all the approvals to move forward and you are going to start finally generating cash flow on DAPL. Have the discussions changed at all with the rating agencies?

Can you now consider strategies for a full simplification into ETE once SXL and ETP is completed? It would appear to me that there's a lot of cash accretion kind of where ETE is trading versus where ETP and SXL are. I was just wondering if you can sort of talk about the discussions with the agencies and how that impacts strategy going forward.

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Tom Long, Energy Transfer Partners, L.P. - CFO [44]

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Yes, no, you bet. And listen, everything that you just listed there, in other words all the good news that has occurred over the last month or so, was exactly what the plans we had laid out with the agency so there is really nothing new in any of that including the merger with SXL and ETP.

I think at the end of that, we'll just say that the conversations are obviously good with them as we execute on these and as everything falls into place.

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Shneur Gershuni, UBS - Analyst [45]

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All right. Great. Thank very much, guys. Appreciate the color.

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Operator [46]

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Tom Abrams, Morgan Stanley.

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Tom Abrams, Morgan Stanley - Analyst [47]

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Thank you. I wanted to ask about divestitures and what you're thinking about their compression call, CES, and so forth.

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Kelcy Warren, Energy Transfer Partners, L.P. - CEO & Chairman [48]

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This is Kelcy. I will take that. The compression business is not doing well, and it's a business that we would certainly consider divesting, but at the same time, I just don't know that the market is ripe for that. And then we would -- the Dakota Access Pipeline was a -- I think it's going to be one of the better pipelines built in the United States in a long time.

It was the right thing to do because it was a very strategic. We brought in partners that could guarantee the success of the pipeline by bringing commitments in barrels, and good partners, partners that bring vision to the project that we felt like was important as well.

Those type of transactions, we are open-minded to. If there were to be a situation where we could sell a minority nonoperating interest in one of our assets from someone that could actually help that project in its performance, we are open-minded to that.

As far as outright divestitures, none come to mind right now that we are exploring because of two reasons. Like I said on compression, I don't think the markets could pay what we would we would need to receive, and that's just -- we are not exploring anything right now.

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Tom Abrams, Morgan Stanley - Analyst [49]

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All right. And then I just wanted to know if DAPL was expected to pick up any volumes off of line 3 to support it a little bit or to give it some additional capacity.

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Kelcy Warren, Energy Transfer Partners, L.P. - CEO & Chairman [50]

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When you say line 3, what's line 3?

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Tom Abrams, Morgan Stanley - Analyst [51]

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I'm sorry. Enbridge's line 3 coming from Canada if DAPL was expected to pick up a couple hundred thousand barrels from there, whether it's all going to be Bakken barrels.

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [52]

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We will fill it up with Bakken barrels. We will see the demand grow. We will see the volumes grow up there. We have about 100,000 left to sell and we're talking to customers that are interested in it, just not timely yet but we expect the volumes to come from Bakken.

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Tom Abrams, Morgan Stanley - Analyst [53]

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All right. Thanks a lot.

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Operator [54]

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Ted Durbin, Goldman Sachs.

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Ted Durbin, Goldman Sachs - Analyst [55]

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Just coming back to Rover, you've got I think the CapEx is $3.8 billion, but you filed for $4 billion with the FERC. I just wanted to check your confidence that you will actually hit those numbers in what feels like a fairly quick end service date. Do you have firm contracts with your contractor? Just talk through how you're going to hit your cost number?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [56]

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Yes, I will start out. This is Mackie. Yes, we have not only firm contracts with the contractors but they are ready to go as soon as we have the approval from FERC to move forward on full construction which we expect no later than March 1.

We are ready to go. They are ready to go. And yes, it's going to be a challenge but we still believe we will be in and flowing gas to Defiance by July of 2017.

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Ted Durbin, Goldman Sachs - Analyst [57]

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That's great, and how much has been spent on Rover so far?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [58]

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We are probably a little bit over $1.5 billion spent to date on that. $1.5 billion, $1.6 billion.

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Ted Durbin, Goldman Sachs - Analyst [59]

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Okay. So is it fair to say what's in the CapEx budget for this year is largely Rover?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [60]

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Yes. It's in there, but like I said, those other ones that we talked about in midstream, you can't discount those either but that was the big driver for the increase obviously.

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Ted Durbin, Goldman Sachs - Analyst [61]

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Yes. No. Fair enough. And then if I can just switch over to the S4 and some of the projections you have in there. I guess the first question is, can you confirm that both Rover and DAPL are in your EBITDA projections at the 100% level?

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Tom Long, Energy Transfer Partners, L.P. - CFO [62]

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Yes. That is correct. They are in there at the 100% level.

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Ted Durbin, Goldman Sachs - Analyst [63]

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Okay. Has anything changed since you filed the S4 whether it's project timing or what you are seeing on volumes would make you think that those numbers should be materially different than what you have out there for 2018 and 2019?

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Tom Long, Energy Transfer Partners, L.P. - CFO [64]

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I don't know from a materiality standpoint I'd say, but yes, we clearly with the second quarter now start ed up of the Dakota Access Pipe, that one was intended to be obviously at the beginning of the year here, so.

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Ted Durbin, Goldman Sachs - Analyst [65]

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That's fine.

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Tom Long, Energy Transfer Partners, L.P. - CFO [66]

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But Rover is the same. Same as what we are giving here right now. Strictly Dakota Access.

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Ted Durbin, Goldman Sachs - Analyst [67]

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Yes, yes. Fair enough. Just coming back, there was a question earlier on ETP SXL merger but then I think there was a comment around a potential bigger sort of roll-up of ETE maybe rolling up all the MLPs, eliminating IDRs. Did I miss that? Is that something that you are still considering?

You are seeing a lot of your midstream peers go that route of eliminating IDRs. Where are you on that? And again, tying that into the ratings agencies, what sort of pro forma leverage would you need if you were to do that?

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Kelcy Warren, Energy Transfer Partners, L.P. - CEO & Chairman [68]

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This is Kelcy. I'll take the first part of it, Tom. You do the second if you don't mind. We have said recently and we'll say it for everybody here, we think and it's inevitable that at some point, not now, but at some point that there will be a complete consolidation of ETE into the family, and how we structure that, we don't know.

We think it's -- we know it's premature for that at this time. We do recognize others have done it, and this sometimes seems to be kind of a herd mentality of what everybody else should do, and that's not what we're going to do. So I think at some point, it becomes just the IDR subsidies are just -- become very routine rather than occasionally.

I can tell you we've never not done a project because of cost of capital, never once. If a subsidy is required, we offer it. We like that optionality, and we also like it because we think ETE is a great acquisition vehicle. We've only done one acquisition involving ETE; that was the Southern Union acquisition.

It turned out to be really, really great for our unitholders. And we think that we can do something like that again, and so we're open-minded to using that and we're actually back turning in acquisition analysis. So Tom, would you handle the second part, please?

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Tom Long, Energy Transfer Partners, L.P. - CFO [69]

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Yes, you bet. And as far as that pro forma leverage question you had, our target clearly would be straight out of the chute, to be below sub 5. I think it's going to be very important with the agencies now.

As we've said in the past, our target is always to be about that 4.5, 4 to 4.5. So I think over the long term, that was where you'd like to be but you would need to be below 5x at the time of any roll-up.

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Ted Durbin, Goldman Sachs - Analyst [70]

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Great. That's it for me. Thank you.

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Operator [71]

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Brian Zarahn, Mizuho.

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Brian Zarahn, Mizuho - Analyst [72]

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Just following up on the IDR questions. Do you expect some type of alteration for the pro forma Sunoco Logistics, Energy Transfer as their givebacks roll off at the end of this year? Do you expect some type of changes soon after the merger announcement -- merger closure?

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Tom Long, Energy Transfer Partners, L.P. - CFO [73]

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No, I think what you've seen in that S4 is what we're comfortable with. If I understand your question correctly. In other words, I think you have seen in there what we've baked into those assumptions, but in other words, no adjustments to what you have seen in that S4.

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Brian Zarahn, Mizuho - Analyst [74]

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And then as you contemplate a potential consolidation of the family, would that include Sunoco LP?

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Kelcy Warren, Energy Transfer Partners, L.P. - CEO & Chairman [75]

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Again, we think it's premature, so we've not really looked at that. I think that the analysis that we have done to date has been just rolling up ETP and ETE into the same vehicle, therefore reducing the cost of capital, but we haven't looked at Sun.

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Brian Zarahn, Mizuho - Analyst [76]

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I guess following up on Sun again on the distribution, you mentioned you're willing to provide support. Do you think a better approach would be to reset the distribution or would you potentially look at the IDR reduction route?

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Kelcy Warren, Energy Transfer Partners, L.P. - CEO & Chairman [77]

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I think either one of those would be on the table, but I want to reiterate, Sun has got to run its business first. Businesses need to operate at the best they're capable of and the most efficient that they can be run, and then you go and you look for IDR relief or support. I am not convinced that I am seeing that right now.

But that's -- I am not trying to be critical of a management team or staff, I am just saying let's get down to the fundamentals. Let's run the business correctly. Let's rationalize our costs and compare well against our peers. But we would look at either one of those things at the appropriate time.

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Brian Zarahn, Mizuho - Analyst [78]

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Thank you.

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Operator [79]

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Darren Horowitz, Raymond James.

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Darren Horowitz, Raymond James & Associates, Inc. - Analyst [80]

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Hey, Mackie, real quick on Dakota Access. Within the context of commercial operations starting next quarter, do you think line-fill starts in April? And if so, is there then going to be a big jump in commercial volumes through May and June that effectively puts the pipe on track for the contractually committed utilization and EBITDA to benefit 3Q more fully? Or do you think it ends up being a bit more of a linear volume ramp that suggest more of a full 4Q benefit?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [81]

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I'll tell you, Darren, things are going so well as far as on the drill. We expect to begin or continue line fillings in late March, early April. But to answer your question, we should be fully line packed and ready to go prior to June 1, sometime in May.

There's actually some agreements where we will begin charging demand charges prior to June 1. But by June 1, we do expect to begin charging the full demand charge on the fully subscribed volumes.

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Darren Horowitz, Raymond James & Associates, Inc. - Analyst [82]

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Okay. And then real quick if I could just on Lone Star. With the discussion around the fifth frac and the related NGL product infrastructure, can you remind us what the contractual commitments that you've got in place to move forward commercially with the project?

And more importantly, how you guys think about balancing the take-or-pay commitments versus maybe the potential to have some capacity to fractionate your own equity NGL barrels. And I'm thinking here about leveraging what's going to be coming out at the back of Arrowhead, and maybe having more control of those downstream distribution of [shared] products?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [83]

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Yes, we'll certainly without a doubt, we will always have capacity for all the barrels that tailgate at our plant. So that's just a given and yes, that's part of the formula. Both our volumes and also third-party volumes by and large had 85% to 90% demand charges on the frac component of the DNS charge.

The vast majority of the capital or the revenues to provide returns on this frac are from demand charges regardless whether the volumes show up or not.

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Darren Horowitz, Raymond James & Associates, Inc. - Analyst [84]

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Thanks, Mackie.

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Operator [85]

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John Edwards, Credit Suisse.

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John Edwards, Credit Suisse - Analyst [86]

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Thanks for taking my questions. I'm just curious regarding -- I think Mackie used the word tremendous tree-cutting manpower out there. I'm just curious, define tremendous. I mean how many crews and how many people? And obviously, it's a tremendous amount of tree-cutting to be done in a short period of time. I'm just pretty curious and what the mobilization effort has been there.

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [87]

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We actually met with one of the lead construction companies a couple of weeks ago for a number of reasons, and I don't have the exact numbers. I don't think we have the personnel here that can give you the exact numbers. All I know is we have a lot of folks out there with the goal and the intentions of getting the trees cut by the end of March.

And now that we have clearance from FERC to clear up approximately 90% of the trees, we'll be way down the way, if not completed, prior to even receiving the final 10%. But John, I don't have the exact numbers, but there's a lot of guys out there.

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Kelcy Warren, Energy Transfer Partners, L.P. - CEO & Chairman [88]

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John, let me add. This is Kelcy. In the normal pipeline construction job, you would as you are cutting the trees and knocking them down, you are also stacking them. You are dealing with the debris at the same time, so that's the process.

It's a much more efficient process. We are not allowed that luxury in this case. These trees are just going to be put on the ground, so unlike most right-of-way clearing where it's more than simply lying on top thing that this is just like Mackie said, a focus on getting trees on the ground.

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John Edwards, Credit Suisse - Analyst [89]

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Okay. I was just curious kind of like how many people it takes per mile or whatever. But that's fine, it's not that material. I just was really curious because I figured it just would take a tremendous number, just a huge effort to pull that together, and it sounds like you have it well in hand.

And just a follow-up on a question asked earlier in terms of the uplift -- the contribution from the Permian uplift over the next couple of years just percentage-wise. Any other insight you could provide on that or any additional granularity would be great.

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [90]

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Percentage-wise, if you just look at the Permian Basin and Delaware Basin, where we are today, I think we're projecting anywhere from 15% to 20% of growth. I mean, Rebel is full. Panther is on the way to being full later this year.

Arrowhead will start ramping up day one, will be full in less than a year. As you can imagine, we're also looking at not only adding additional processing capacity, but also possibly acquiring. There are some assets for sale out there. Some of them fit very well with us.

All of the deals we do as far as gathering and processing [on un-accretive] deals. And what we don't have in there is the downstream revenue, which the vast majority of it will hit our inter-intrastate network, and we also don't have the NGL volumes, which 100% of it will hit our Lone Star system.

So kind of throughout our divisions, we'll have both volume growth and revenue growth pretty substantial over the next two to three years.

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John Edwards, Credit Suisse - Analyst [91]

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Thank you for that. This may be more question for the Sun call. I'm just curious in terms of helping to manage the balance sheet over there, I mean, is sort of a PIK preferred option something that you guys have looked at as another way to go?

I know you -- the bank covenants were able to be relaxed which obviously was a big benefit. Any insight there or is that something more to take to the Sun call?

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Tom Long, Energy Transfer Partners, L.P. - CFO [92]

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Yes, and listen, by all means, definitely take it to Sun call. But I don't mind adding just a little bit here. We continue to work closely with them and evaluating a lot of various options. Just like what Kelcy mentioned earlier as far as support, et cetera, if it's something that requires some type of an IDR subsidy, et cetera, we are working with them on this kind of stuff.

And I guess, I can say everything is on the table as we look at various options, but at this point, not ready to really announce anything, what we're going to do. But I will assure you that we're evaluating a lot of various options, so.

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John Edwards, Credit Suisse - Analyst [93]

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All right. Thank you for that. That's it for me.

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Operator [94]

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Keith Stanley, Wolfe Research.

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Keith Stanley, Wolfe Research - Analyst [95]

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Just quickly, would you mind giving a little more color on Lake Charles and recent discussions with Shell? I know they put out their update on the LNG market this week. Just any broad sense of timeline for when this project might be able to move forward. Is it something you could see this year or next or is it further out in time?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [96]

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This is Mackie, again. As you know, we have been working on this project for years with BG initially and then Shell. Clearly, Shell is the leader, in our opinion, in the world on accomplishing something of this size in an environment that's changed dramatically. Basis has collapsed probably 80% or 90% from where it was four or five years ago.

The credit worthiness of customers has changed dramatically. The length of contracts that customers are willing to sign up have shortened. So it's become a very difficult environment. Shell, as you know, currently hasn't given up. They in fact are making headway. We remain, as Tom mentioned, in dialog with them.

We very much hope and believe they'll get to the finish line. However, one thing we are doing now, we are looking at utilizing the Lake Charles facility in a little different manner, not in a way that would harm in any way or get in the way of the Shell, call it footprint for their project with us.

But we're looking at possibly exploiting other products and other commodities, and we're going to be pretty aggressive on doing that and utilizing some terminal. We've acquired a lot of land out there for this project and more than we really need for the Shell project.

But that's kind of a long-winded statement to we believe Shell can get there, if anybody can. And we believe they're making headway on a kind of a new strategy that they have, and we're going to remain in dialog and hope they get there over these coming months.

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Keith Stanley, Wolfe Research - Analyst [97]

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Okay. Great, and just to clarify on Dakota Access, it sounds like the open season is still going on here potentially go to 570,000 barrels a day. Are you still -- (multiple speakers) upsizing that?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [98]

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We have not launched the next open season on DAPL. We do expect to do that probably in the next 30 to 60 days. But we do remain a dialogue with potential shippers, as you can imagine.

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Keith Stanley, Wolfe Research - Analyst [99]

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Great. Thank you.

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Operator [100]

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Ethan Bellamy, Baird.

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Ethan Bellamy, Robert W. Baird & Company, Inc. - Analyst [101]

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To follow up on John's question, does that lumberjack fire drill in Ohio add materially to Rover construction costs? And do you expect to receive a materially bigger bill from MasTec?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [102]

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Certainly by adding more people in a shorter period of time, it will increase costs materially. Maybe related to the costs of this project, it's another question. But certainly costs as we mentioned over the last couple of months, the longer it takes to get the FERC certificate, the more difficult and challenging this will be to get it built in time.

So we have hired of course more folks to get in there and to cut the trees down in time. I don't think we have any kind of finalized number on how material, but it has raised costs a little bit.

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Ethan Bellamy, Robert W. Baird & Company, Inc. - Analyst [103]

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Okay. Thanks, Mackie. And Tom, do you see any permanent damage to financing sources from the pushback that your counterparties have received on Dakota Access?

And then more broadly, are there any permanent changes to your process from what I think you would agree with is probably a PR failure on DAPL, and then the Stoneman House demolition that changes the way you operate or bet projects or move forward that might help keep you out of press?

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Kelcy Warren, Energy Transfer Partners, L.P. - CEO & Chairman [104]

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This is Kelcy. Unfortunately, we went through a period of time where you can follow every law, conduct yourself exactly correctly, and go above and beyond all the requirements to do things and yet you fall into the mess we fell into with Dakota Access Pipeline.

There is no way we can defend ourselves there. You are correct. That was a mistake on my part. I underestimated the power of social media. I didn't realize people could just say things that aren't true and freely do it, but they did. And I will let Tom address the lenders.

But you know, I think most people generally most have a little bit of fortitude to them, a little bit of will and I think most people when they look and say, you did everything right, and yet we are going to get out of your lending group. I don't think -- I am not seeing any of that. Tom, are you?

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Tom Long, Energy Transfer Partners, L.P. - CFO [105]

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No. Not at all. Matter of fact, it's just specific to the financing on this project. I will tell you that all 17 banks stepped up. Of course, they were contractually committed to step up, but they all stepped up. I think we do have very strong relationships with our bank groups. We do work with them on these, and I think this is a broader question, overall, as far as the midstream space.

But I will say that, like I say, that all the banks I think did a very good job as we worked through this. It has been tough, no doubt, some of the pushback on them, but it was great to see that everything fell into place as planned.

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Ethan Bellamy, Robert W. Baird & Company, Inc. - Analyst [106]

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Thanks, Tom, and Kelcy. And just to finish on a more positive note, I know you're always looking at stuff. You've got your major projects looking to be completed this year. New projects announced. Kelcy, are you currently [vetting] any merger targets, and should we see you getting back after it on the M&A side?

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Kelcy Warren, Energy Transfer Partners, L.P. - CEO & Chairman [107]

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You know, we -- as you know, we definitely believe all successful MLPs should have the correct mix of organic growth with M&A activity. It's very difficult to have the choppiness of just organic growth. It's very difficult to manage your business that way. So yes, we are back. We're back analyzing.

I tell you it's safe to say, we will never do a deal again where the management team on the other side is not supportive of it. Those days are behind us.

To the extent that I mentioned earlier, I do believe that ETE is an excellent acquisition currency to help the family. I don't want to mislead anybody, ETE is not in the business of aggregating assets. Those assets belong down at the partnership level.

But to the extent that ETE could help accomplish an M&A transaction just like we did Southern Union, and then migrate and pass that into the appropriate partnership, which would most certainly be ETP, we are excited about that and we believe strongly that we need to resume that activity.

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Ethan Bellamy, Robert W. Baird & Company, Inc. - Analyst [108]

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Thanks very much, Kelcy. Good luck.

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Operator [109]

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Selman Akyol, Stifel.

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Selman Akyol, Stifel Nicolaus - Analyst [110]

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Just real quickly, kind of going back to Arrowhead and sort of the outlook for that versus or thinking in conjunction with your outlook for additional fracs, can you just maybe talk about what you're seeing out there for additional processing plants as well as and then you alluded a little bit to potential acquisitions in that area? And then if we were to see it out, should we see an acceleration in Frac VI?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [111]

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Yes. As I think everybody on this call knows, we brought on Panther recently. We're bringing on Arrowhead. We are in negotiations to potentially bring on another plant in the Waha area because of the tremendous growth.

But at the same time, as some of these assets that come up for sale that have nice kind of synergistic fit with us and even have a lot of good processing capacity either built or being built, we'll take a look at that. And so it'll continue to be a huge focus on us.

And as Kelcy mentioned on the other side, we do kind of have a balance even out there of adding additional processing plants or buying other assets at the right price. And that's the difficult part with some of the multiples that the assets we're going for out in West Texas, but we'll continue to be in the M&A arena there also.

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Selman Akyol, Stifel Nicolaus - Analyst [112]

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Got you. And then just final from me and small, but on Frac III, you guys noted $13 million of increased costs for the plant. And I was just kind of wondering one-time and are all those behind you and can you just elaborate on what they were for?

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Mackie McCrea, Energy Transfer Partners, L.P. - President & COO [113]

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The Frac III, I'm sorry, costs?

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Selman Akyol, Stifel Nicolaus - Analyst [114]

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Yes. In the press release, you talked about Frac III and you had $13 million of additional expenses for that. I was just kind of wondering were those more in one-time in nature?

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Tom Long, Energy Transfer Partners, L.P. - CFO [115]

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Yes, I would call them more of one-time in nature from that standpoint for that $13 million.

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Selman Akyol, Stifel Nicolaus - Analyst [116]

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Okay. All right. Thank you.

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Operator [117]

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That does conclude our question-and-answer session. I'd like to turn the floor back to Mr. Long for any further or closing comments.

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Tom Long, Energy Transfer Partners, L.P. - CFO [118]

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Once again, thank all of you for joining us today and just to reiterate one more time just how excited we are about the products that we have coming online during 2017 as well as the merger with SXL. Look forward to talking to you in the future.

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Operator [119]

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Thank you. That does conclude today's teleconference. You may disconnect your line at this time and have a wonderful time. We thank you for your participation today.