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Share Name | Share Symbol | Market | Type |
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Energy Transfer Partners, L.P. Common Units Representing Limited Partner Interests (delisted) | NYSE:ETP | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 21.47 | 0 | 01:00:00 |
Energy Transfer Partners, L.P. (NYSE: ETP) today reported its financial results for the quarter ended March 31, 2015. Adjusted EBITDA for Energy Transfer Partners, L.P. (“ETP,” “we” or the “Partnership”) for the three months ended March 31, 2015 totaled $1.15 billion, a decrease of $57 million compared to the same period last year. Distributable Cash Flow attributable to the partners of ETP, as adjusted, for the three months ended March 31, 2015 totaled $692 million, a decrease of $52 million compared to the same period last year. Income from continuing operations for the three months ended March 31, 2015 was $308 million, a decrease of $159 million compared to the same period last year.
On a pro forma basis for the Regency Merger, as discussed below, Adjusted EBITDA for ETP and Regency Energy Partners LP (“Regency”) combined was $1.37 billion for the three months ended March 31, 2015. On a pro forma basis, Distributable Cash Flow attributable to the partners of ETP, as adjusted, was $857 million for the three months ended March 31, 2015.
On April 30, 2015, ETP and Regency completed the previously announced merger of an indirect subsidiary of ETP, with and into Regency, with Regency surviving the merger as a wholly-owned subsidiary of ETP (the “Regency Merger”). As part of the merger consideration, each Regency common unit and Class F unit was converted into the right to receive 0.4124 ETP Common Units. Based on the Regency units outstanding, ETP issued approximately 172.2 million ETP Common Units to Regency unitholders, including approximately 15.5 million units issued to ETP subsidiaries. The approximately 1.9 million outstanding Regency series A preferred units were converted into corresponding new ETP Series A Preferred Units. ETP and Regency are both controlled by Energy Transfer Equity, L.P. (“ETE”); therefore, the Regency Merger is a combination of entities under common control. Beginning with the quarter ending June 30, 2015, ETP’s GAAP financial statements will reflect retrospective consolidation of Regency; however, such consolidation is not yet reflected in the actual results presented herein. As such, ETP has included pro forma amounts to reflect the combined results of ETP and Regency.
In April 2015, ETP announced that its Board of Directors approved an increase in its quarterly distribution to $1.015 per ETP Common Unit ($4.06 annualized) for the quarter ended March 31, 2015, representing an increase of $0.32 per ETP Common Unit on an annualized basis, or 8.6%, compared to the first quarter of 2014. On a stand-alone basis (pre-merger) for the quarter ended March 31, 2015, ETP’s distribution coverage ratio was 1.18x. For the quarter ended March 31, 2015, ETP’s distribution coverage ratio would have been 1.04x on a pro forma basis for the Regency Merger (excluding the impact of any synergies).
ETP’s other recent key accomplishments include the following:
An analysis of ETP’s segment results and other supplementary data is provided after the financial tables shown below. ETP has scheduled a conference call for 8:00 a.m. Central Time, Thursday, May 7, 2015 to discuss the first quarter 2015 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 ETP’s web site for a limited time.
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’s subsidiaries include Panhandle Eastern Pipe Line Company, LP (the successor of Southern Union Company) and Lone Star NGL LLC, which owns and operates natural gas liquids storage, fractionation and transportation assets. In total, ETP currently owns and operates more than 62,000 miles of natural gas and natural gas liquids pipelines. ETP also owns the general partner, 100% of the incentive distribution rights, and approximately 67.1 million common units in Sunoco Logistics Partners L.P. (NYSE: SXL), which operates a geographically diverse portfolio of crude oil and refined products pipelines, terminalling and crude oil acquisition and marketing assets. ETP owns 100% of Sunoco, Inc. and 100% of Susser Holdings Corporation. Additionally, ETP owns the general partner, 100% of the incentive distribution rights and approximately 44% of the limited partner interests in Sunoco LP (formerly Susser Petroleum Partners LP) (NYSE: SUN), a wholesale fuel distributor and convenience store operator. ETP’s general partner is owned by ETE. For more information, visit the Energy Transfer Partners, L.P. web site at www.energytransfer.com.
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. (NYSE: ETP) and approximately 23.6 million ETP Common Units and 81.0 million ETP Class H Units, which track 90% of the underlying economics of the general partner interest and the IDRs of Sunoco Logistics Partners L.P. (NYSE: SXL). On a consolidated basis, ETE’s family of companies owns and operates approximately 71,000 miles of natural gas, natural gas liquids, refined products, and crude oil pipelines. For more information, visit the Energy Transfer Equity, L.P. web site at www.energytransfer.com.
Sunoco Logistics Partners L.P. (NYSE: 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, refined products, and natural gas liquids pipeline, terminalling and acquisition and marketing assets which are used to facilitate the purchase and sale of crude oil, refined products, and natural gas liquids. Sunoco Logistics’ general partner is owned by Energy Transfer Partners, L.P. (NYSE: ETP). For more information, visit the Sunoco Logistics Partners, L.P. web site at www.sunocologistics.com.
Sunoco LP (NYSE: SUN) is a growth-oriented master limited partnership that primarily distributes motor fuel to convenience stores, independent dealers, commercial customers and distributors. Sunoco LP also operates more than 150 convenience stores and retail fuel sites. Sunoco LP’s general partner is owned by Energy Transfer Partners, L.P. (NYSE: ETP). For more information, visit the Sunoco LP web site at www.sunocolp.com.
Forward-Looking Statements
This press release may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal law. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management’s control. An extensive list of factors that can affect future results are discussed in the Partnership’s Annual Reports on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission. The Partnership undertakes no obligation to update or revise any forward-looking statement to reflect new information or events.
The information contained in this press release is available on our web site at www.energytransfer.com.
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(unaudited)
Actual Pro Forma for Regency Merger(1) March 31,2015 December 31,2014 March 31,2015 December 31,2014ASSETS
CURRENT ASSETS $ 6,206 $ 5,439 $ 6,776 $ 6,043 PROPERTY, PLANT AND EQUIPMENT, net 31,649 29,743 41,143 38,907 ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES 3,723 3,840 3,667 3,760 GOODWILL 6,256 6,419 7,480 7,642 INTANGIBLE ASSETS, net 2,093 2,087 5,499 5,526 OTHER NON-CURRENT ASSETS, net 702 693 802 796 Total assets $ 50,629 $ 48,221 $ 65,367 $ 62,674LIABILITIES AND EQUITY
CURRENT LIABILITIES $ 4,707 $ 6,040 $ 5,258 $ 6,684 LONG-TERM DEBT, less current maturities 20,430 18,332 27,651 24,973 NON-CURRENT PRICE RISK MANAGEMENT LIABILITIES 214 138 228 154 DEFERRED INCOME TAXES 4,036 4,226 4,060 4,226 OTHER NON-CURRENT LIABILITIES 1,256 1,206 1,306 1,278 COMMITMENTS AND CONTINGENCIES SERIES A PREFERRED UNITS — — 33 33 REDEEMABLE NONCONTROLLING INTERESTS 15 15 15 15 EQUITY: Total partners’ capital 12,966 12,070 12,966 12,070 Noncontrolling interest 7,005 6,194 5,943 5,152 Predecessor equity — — 7,907 8,089 Total equity 19,971 18,264 26,816 25,311 Total liabilities and equity $ 50,629 $ 48,221 $ 65,367 $ 62,674 (1) The Regency Merger is a combination of entities under common control. Beginning with the quarter ending June 30, 2015, ETP’s GAAP financial statements will reflect retrospective consolidation of Regency. The pro forma amounts reflect the retrospective consolidation of Regency.ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per unit data)
(unaudited)
Actual Pro Forma for Regency Merger(1) Three Months EndedMarch 31, Three Months EndedMarch 31, 2015 2014 2015 2014 REVENUES $ 9,530 $ 12,232 $ 10,326 $ 13,027 COSTS AND EXPENSES: Cost of products sold 8,040 10,866 8,487 11,442 Operating expenses 485 336 619 414 Depreciation, depletion and amortization 322 266 479 360 Selling, general and administrative 100 76 133 105 Total costs and expenses 8,947 11,544 9,718 12,321 OPERATING INCOME 583 688 608 706 OTHER INCOME (EXPENSE): Interest expense, net of interest capitalized (228 ) (219 ) (310 ) (274 ) Equity in earnings of unconsolidated affiliates 40 79 57 104 Gain on sale of AmeriGas common units — 70 — 70 Losses on interest rate derivatives (77 ) (2 ) (77 ) (2 ) Other, net 3 (3 ) 7 — INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE 321 613 285 604 Income tax expense from continuing operations 13 146 17 145 INCOME FROM CONTINUING OPERATIONS 308 467 268 459 Income from discontinued operations — 24 — 24 NET INCOME 308 491 268 483 LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST 27 76 1 54 LESS: NET INCOME ATTRIBUTABLE TO PREDECESSOR — — (14 ) 14 NET INCOME ATTRIBUTABLE TO PARTNERS 281 415 281 415 General Partner’s interest in net income 242 113 242 192 Class H Unitholder’s interest in net income 54 49 54 49 Class I Unitholder’s interest in net income 33 — 33 — Common Unitholders’ interest in net income (loss) $ (48 ) $ 253 $ (48 ) $ 174 INCOME (LOSS) FROM CONTINUING OPERATIONS PER COMMON UNIT: Basic $ (0.17 ) $ 0.69 $ (0.09 ) $ 0.36 Diluted $ (0.17 ) $ 0.69 $ (0.09 ) $ 0.36 NET INCOME (LOSS) PER COMMON UNIT: Basic $ (0.17 ) $ 0.76 $ (0.09 ) $ 0.41 Diluted $ (0.17 ) $ 0.76 $ (0.09 ) $ 0.41 WEIGHTED AVERAGE NUMBER OF COMMON UNITS OUTSTANDING: Basic 323.8 324.5 495.8 420.3 Diluted 323.8 325.5 493.5 421.3(1) See Footnote 1 of the condensed consolidated balance sheets.
SUPPLEMENTAL INFORMATION
(Tabular dollar amounts in millions)
(unaudited)
Actual Pro Forma (a) Three Months EndedMarch 31, Three Months EndedMarch 31, 2015 2014 2015 2014 Reconciliation of net income to Adjusted EBITDA and Distributable Cash Flow (b): Net income $ 308 $ 491 $ 268 $ 483 Interest expense, net of interest capitalized 228 219 310 274 Gain on sale of AmeriGas common units — (70 ) — (70 ) Income tax expense from continuing operations (c) 13 146 17 145 Depreciation, depletion and amortization 322 266 479 360 Non-cash compensation expense 16 14 20 17 Losses on interest rate derivatives 77 2 77 2 Unrealized losses on commodity risk management activities 66 29 77 32 Inventory valuation adjustments 34 (14 ) 34 (14 ) Equity in earnings of unconsolidated affiliates (40 ) (79 ) (57 ) (104 ) Adjusted EBITDA related to unconsolidated affiliates 127 196 144 210 Other, net (2 ) 6 (4 ) 2 Adjusted EBITDA (consolidated) 1,149 1,206 1,365 1,337 Adjusted EBITDA related to unconsolidated affiliates (127 ) (196 ) (144 ) (210 ) Distributions from unconsolidated affiliates (d) 75 81 111 109 Interest expense, net of interest capitalized (228 ) (219 ) (310 ) (274 ) Amortization included in interest expense (13 ) (16 ) (13 ) (14 ) Current income tax (expense) benefit from continuing operations 9 (253 ) 9 (253 ) Transaction-related income taxes (e) — 306 — 306 Maintenance capital expenditures (62 ) (39 ) (84 ) (64 ) Other, net 4 2 3 2 Distributable Cash Flow (consolidated) 807 872 937 939 Distributable Cash Flow attributable to SXL (100%) (160 ) (157 ) (160 ) (157 ) Distributions from SXL to ETP 90 62 90 62 Distributable Cash Flow attributable to Sunoco LP (100%) (33 ) — (33 ) — Distributions from Sunoco LP to ETP 12 — 12 — Distributions to Regency in respect of Lone Star (f) (35 ) (33 ) — — Distributable Cash Flow attributable to the partners of ETP 681 744 846 844 Bakken Pipeline Transaction – pro forma interest expense (g) 6 — 6 — Transaction-related expenses 5 — 5 — Distributable Cash Flow attributable to the partners of ETP, as adjusted $ 692 $ 744 $ 857 $ 844 Distributions to the partners of ETP (h): Limited Partners (i): Common Units held by public $ 330 $ 266 $ 465 $ 390 Common Units held by ETE — 29 24 29 Class H Units held by ETE and ETE Common Holdings, LLC (“ETE Holdings”) (j) 56 50 56 50 General Partner interests held by ETE 8 5 8 5 Incentive Distribution Rights (“IDRs”) held by ETE 199 168 300 242 IDR relinquishments net of Class I Unit distributions (7 ) (57 ) (27 ) (57 ) Total distributions to be paid to the partners of ETP $ 586 $ 461 $ 826 $ 659 Distribution coverage ratio (k)1.18
x
1.61
x
1.04
x
1.28
x
Distributable Cash Flow per Common Unit (l) $ 1.35 $ 1.78 $ 1.05 $ 1.44(a) Pro forma amounts reflect the combined results of ETP and Regency assuming the Regency Merger closed January 1, 2014.
(b) Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures used by industry analysts, investors, lenders, and rating agencies to assess the financial performance and the operating results of ETP’s fundamental business activities and should not be considered in isolation or as a substitute for net income, income from operations, cash flows from operating activities, or other GAAP measures.
There are material limitations to using measures such as Adjusted EBITDA and Distributable Cash Flow, including the difficulty associated with using either as the sole measure to compare the results of one company to another, and the inability to analyze certain significant items that directly affect a company’s net income or loss or cash flows. In addition, our calculations of Adjusted EBITDA and Distributable Cash Flow may not be consistent with similarly titled measures of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP, such as gross margin, operating income, net income, and cash flow from operating activities.
Definition of Adjusted EBITDA
ETP defines Adjusted EBITDA as total partnership earnings before interest, taxes, depreciation, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities and other non-operating income or expense items. Unrealized gains and losses on commodity risk management activities include unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Adjusted EBITDA reflects amounts for less than wholly-owned subsidiaries based on 100% of the subsidiaries’ results of operations and for unconsolidated affiliates based on ETP’s proportionate ownership.
Adjusted EBITDA is used by management to determine our operating performance and, along with other financial and volumetric data, as internal measures for setting annual operating budgets, assessing financial performance of our numerous business locations, as a measure for evaluating targeted businesses for acquisition and as a measurement component of incentive compensation.
Definition of Distributable Cash Flow
ETP defines Distributable Cash Flow as net income, adjusted for certain non-cash items, less maintenance capital expenditures. Non-cash items include depreciation and amortization, non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities and deferred income taxes. Unrealized gains and losses on commodity risk management activities includes unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Distributable Cash Flow reflects earnings from unconsolidated affiliates on a cash basis.
Distributable Cash Flow is used by management to evaluate our overall performance. Our partnership agreement requires us to distribute all available cash, and Distributable Cash Flow is calculated to evaluate our ability to fund distributions through cash generated by our operations.
On a consolidated basis, Distributable Cash Flow includes 100% of the Distributable Cash Flow of ETP’s consolidated subsidiaries. However, to the extent that noncontrolling interests exist among ETP’s subsidiaries, the Distributable Cash Flow generated by ETP’s subsidiaries may not be available to be distributed to the partners of ETP. In order to reflect the cash flows available for distributions to the partners of ETP, ETP has reported Distributable Cash Flow attributable to the partners of ETP, which is calculated by adjusting Distributable Cash Flow (consolidated), as follows:
The Partnership has presented Distributable Cash Flow in previous communications; however, the Partnership changed its calculation of this non-GAAP measure in recent periods and has revised amounts in prior periods to be consistent with the Partnership’s updated calculation of this measure.
Previously, the Partnership’s calculation of Distributable Cash Flow reflected income tax expense from continuing operations, which included current and deferred income taxes. Current income tax expense represents the estimated taxes that will be payable or refundable for the current period, while deferred income taxes represent the estimated tax effects of tax carryforwards and the reversal of temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. The Partnership revised its calculation of Distributable Cash Flow to reflect current income tax expense from continuing operations, rather than total income tax expense from continuing operations. Management believes that this revised calculation is more useful and more accurately reflects the cash flows of the Partnership that are available for payment of distributions. Distributable Cash Flow previously reported for the three months ended March 31, 2014 has been revised to reflect these changes.
For Distributable Cash Flow attributable to the partners of ETP, certain transaction-related and non-recurring expenses that are included in net income are excluded.
(c) Income tax expense is based on the earnings of our taxable subsidiaries. For the three months ended March 31, 2015, the Partnership’s income tax expense from continuing operations included favorable state income tax adjustments of $14 million. For the three months ended March 31, 2014, the Partnership’s income tax expense from continuing operations included unfavorable income tax adjustments of $85 million related to the Lake Charles LNG Transaction, which was treated as a sale for tax purposes.
(d) Distributions from unconsolidated affiliates for the pro forma three months ended March 31, 2015 and 2014 include $16 million and $15 million, respectively, of distributions paid to a subsidiary of ETP related to Regency.
(e) Transaction-related income taxes primarily included income tax expense related to the Lake Charles LNG Transaction. For the three months ended March 31, 2014, amounts previously reported for each of the interim periods have been adjusted to reflect income taxes related to other transactions, which amounts had not previously been reflected in the calculation of Distributable Cash Flow for such interim periods.
(f) Cash distributions to Regency in respect of Lone Star consist of cash distributions paid in arrears on a quarterly basis. These amounts are in respect of the periods then ended, including payments made in arrears subsequent to period end.
(g) Pro forma interest expense adjustment for $879 million cash payment received from ETE related to the Bakken Pipeline Transaction.
(h) Distributions on ETP Common Units, as reflected above, exclude cash distributions on ETP Common Units held by subsidiaries of ETP.
(i) For the three months ended March 31, 2015, the distributions to the partners of ETP reflected in the “actual” column exclude distributions related to the ETP Common Units that were issued in the Regency Merger.
(j) Distributions on the Class H Units for the three months ended March 31, 2015 and 2014 were calculated as follows:
Three Months EndedMarch 31, 2015 2014 General partner distributions and incentive distributions from SXL $ 62 $ 39 90.05 % 50.05 % Share of SXL general partner and incentive distributions payable to Class H Unitholder 56 20 Incremental distributions payable to Class H Unitholder (IDR subsidy offset)* — 30 Total Class H Unit distributions $ 56 $ 50* Incremental distributions previously paid to the Class H Unitholder were eliminated in Amendment No. 9 to ETP’s Amended and Restated Agreement of Limited Partnership effective in the first quarter of 2015.
(k) Distribution coverage ratio for a period is calculated as Distributable Cash Flow attributable to the partners of ETP, as adjusted, divided by net distributions expected to be paid to the partners of ETP in respect of such period.
(l) The Partnership defines Distributable Cash Flow per Common Unit for a period as the quotient of Distributable Cash Flow attributable to the partners of ETP, as adjusted, net of distributions related to the Class H Units, Class I Units and the General Partner and IDR interests, divided by the weighted average number of Common Units outstanding.
Similar to Distributable Cash Flow as described above, Distributable Cash Flow per Common Unit 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 to its unitholders. Using this measure, the Partnership’s management can compare Distributable Cash Flow attributable to the partners of ETP, as adjusted, among different periods on a per-unit basis.
Distributable Cash Flow per Common Unit is calculated as follows:
Actual Pro Forma Three Months EndedMarch 31, Three Months EndedMarch 31, 2015 2014 2015 2014 Distributable Cash Flow attributable to the partners of ETP, as adjusted $ 692 $ 744 $ 857 $ 844 Less: Class H Units held by ETE and ETE Holdings (56 ) (50 ) (56 ) (50 ) General Partner interests held by ETE (8 ) (5 ) (8 ) (5 ) IDRs held by ETE (199 ) (168 ) (300 ) (242 ) IDR relinquishments net of Class I Unit distributions 7 57 27 57 $ 436 $ 578 $ 520 $ 604 Weighted average Common Units outstanding – basic 323.8 324.5 495.8 420.3 Distributable Cash Flow per Common Unit $ 1.35 $ 1.78 $ 1.05 $ 1.44SUMMARY ANALYSIS OF QUARTERLY RESULTS BY SEGMENT
(Tabular dollar amounts in millions) (unaudited)Our segment results were presented based on the measure of Segment Adjusted EBITDA. The tables below identify the components of Segment Adjusted EBITDA, which was calculated as follows:
Pro forma amounts reflect the combined results of ETP and Regency assuming the Regency Merger closed January 1, 2014.
Actual Pro Forma for Regency Merger Three Months EndedMarch 31, Three Months EndedMarch 31, 2015 2014 2015 2014 Segment Adjusted EBITDA: Midstream $ 153 $ 126 $ 318 $ 236 Liquids transportation and services 166 128 166 128 Interstate transportation and storage 277 300 302 324 Intrastate transportation and storage 162 177 176 191 Investment in Sunoco Logistics 221 208 221 208 Retail marketing 129 109 129 109 All other 41 158 53 141 $ 1,149 $ 1,206 $ 1,365 $ 1,337Midstream
Actual Pro Forma for Regency Merger Three Months EndedMarch 31, Three Months EndedMarch 31, 2015 2014 2015 2014 Gathered volumes (MMBtu/d) 3,657,371 2,558,851 9,413,358 5,221,201 NGLs produced (Bbls/d) 202,370 136,818 369,941 238,146 Equity NGLs (Bbls/d) 14,320 12,106 26,368 20,878 Revenues $ 531 $ 653 $ 1,406 $ 1,459 Cost of products sold 346 493 959 1,133 Gross margin 185 160 447 326Unrealized losses on commodity risk management activities
— — 11 3 Operating expenses, excluding non-cash compensation expense (30 ) (28 ) (138 ) (88 ) Selling, general and administrative expenses, excluding non-cash compensation expense (2 ) (6 ) (3 ) (7 ) Adjusted EBITDA related to unconsolidated affiliates — — 1 2 Segment Adjusted EBITDA $ 153 $ 126 $ 318 $ 236Gathered volumes, NGLs produced and equity NGLs produced increased primarily due to increased production by our customers in the Eagle Ford Shale and the recent startup of the Rebel plant in the Permian Basin.
Segment Adjusted EBITDA for the midstream segment reflected an increase in gross margin as follows:
Actual Pro Forma for Regency Merger Three Months EndedMarch 31, Three Months EndedMarch 31, 2015 2014 2015 2014 Gathering and processing fee-based revenues $ 161 $ 123 $ 363 $ 219 Non fee-based contracts and processing 24 37 84 107 Total gross margin $ 185 $ 160 $ 447 $ 326Midstream gross margin reflected an increase in fee-based revenues of $38 million primarily due to increased capacity from assets recently placed in service in the Eagle Ford Shale and Permian Basin and a change in contract terms on our Southeast Texas system where certain contracts were converted from non fee-based terms to fee-based. Lower commodity prices resulted in a decrease in non fee-based revenues of $24 million, which was partially offset by a $9 million increase in equity volumes due to production in the Eagle Ford Shale and Permian Basin.
Segment Adjusted EBITDA for the midstream segment also reflected lower selling, general and administrative expenses primarily due to a reduction in employee-related costs.
For the pro forma results, the increase in actual Segment Adjusted EBITDA, as discussed above, was incrementally increased due to Regency’s gathering and processing operations.
Liquids Transportation and Services
Three Months EndedMarch 31, 2015 2014 Liquids transportation volumes (Bbls/d) 438,646 307,511 NGL fractionation volumes (Bbls/d) 226,041 156,898 Revenues $ 831 $ 830 Cost of products sold 637 671 Gross margin 194 159 Unrealized losses on commodity risk management activities 9 1 Operating expenses, excluding non-cash compensation expense (35 ) (28 ) Selling, general and administrative expenses, excluding non-cash compensation expense (4 ) (5 ) Adjusted EBITDA related to unconsolidated affiliates 2 1 Segment Adjusted EBITDA $ 166 $ 128NGL transportation volumes increased approximately 98,000 Bbls/d on our wholly-owned and joint venture pipelines due to an increase in NGL production from our Jackson processing plants and volumes transported to our Mont Belvieu, Texas facilities via our Justice pipeline. The remainder of the increase was from volumes transported out of west Texas on our Lone Star pipeline system as producers ramped up volumes. Average daily fractionated volumes increased for the three months ended March 31, 2015 compared to the same period last year due to the ramp-up of our second 100,000 Bbls/d fractionator at Mont Belvieu, Texas, which was commissioned in October 2013. These volumes include all physical and contractual volumes where we collected a fractionation fee.
Segment Adjusted EBITDA for the liquids transportation and services segment reflected an increase in gross margin as follows:
Three Months EndedMarch 31, 2015 2014 Transportation margin $ 81 $ 59 Processing and fractionation margin 65 49 Storage margin 44 40 Other margin 4 11 Total gross margin $ 194 $ 159Transportation margin increased $11 million due to higher volumes transported out of west Texas and the Eagle Ford Shale on our Lone Star pipeline system, $9 million due to increases in NGL production from our processing plants that connect to various fractionators via our wholly-owned pipelines, and $2 million due to the recent commissioning of our wholly-owned crude pipeline.
Processing and fractionation margin increased primarily due to the ramp-up of Lone Star’s second fractionator at Mont Belvieu, Texas, which was commissioned in October 2013.
Storage margin reflected increases of approximately $6 million due to increased demand for leased storage capacity as a result of market conditions and higher ancillary fees associated with throughput volumes of $2 million. These increases in fee-based storage margin were offset by a decrease of $4 million from lower non fee-based storage activities, including blending activities.
Other margin decreased primarily due to the impact of the cold winter season in early 2014.
Segment Adjusted EBITDA for the liquids transportation and services segment also reflected an increase in operating expenses for the three months ended March 31, 2015 compared to the same period last year primarily due to the ramp-up of Lone Star’s second fractionator in Mont Belvieu, Texas, which was commissioned in October 2013.
Interstate Transportation and Storage
Actual Pro Forma for Regency Merger Three Months EndedMarch 31, Three Months EndedMarch 31, 2015 2014 2015 2014 Natural gas transported (MMBtu/d) 6,763,691 6,956,089 6,763,691 6,956,089 Natural gas sold (MMBtu/d) 16,656 15,783 16,656 15,783 Revenues $ 276 $ 298 $ 276 $ 298 Operating expenses, excluding non-cash compensation, amortization and accretion expenses (72 ) (71 ) (72 ) (71 ) Selling, general and administrative expenses, excluding non-cash compensation, amortization and accretion expenses (15 ) (14 ) (15 ) (14 ) Adjusted EBITDA related to unconsolidated affiliates 88 87 113 111 Segment Adjusted EBITDA $ 277 $ 300 $ 302 $ 324 Distributions from unconsolidated affiliates $ 49 $ 50 $ 69 $ 68Transported volumes decreased primarily due to warmer weather in 2015 along the Panhandle pipeline, resulting in a decrease of 137,508 MMBtu/d, and declines in supply into the Sea Robin pipeline as a result of a customer maintenance related outage, resulting in a decrease of 78,260 MMBtu/d.
Segment Adjusted EBITDA for the interstate transportation and storage segment decreased primarily due to lower transportation loan-related revenues of approximately $23 million as a result of higher basis differentials in 2014 driven by the colder weather.
The pro forma results for adjusted EBITDA related to unconsolidated affiliates and distributions from unconsolidated affiliates reflect the impact of Regency’s investment in Midcontinent Express Pipeline LLC (“MEP”).
Intrastate Transportation and Storage
Actual Pro Forma for Regency Merger Three Months EndedMarch 31, Three Months EndedMarch 31, 2015 2014 2015 2014 Natural gas transported (MMBtu/d) 8,809,018 9,399,267 8,809,018 9,399,267 Revenues $ 586 $ 934 $ 586 $ 934 Cost of products sold 416 734 416 734 Gross margin 170 200 170 200 Unrealized losses on commodity risk management activities 35 27 35 27 Operating expenses, excluding non-cash compensation expense (36 ) (42 ) (36 ) (42 ) Selling, general and administrative expenses, excluding non-cash compensation expense (7 ) (7 ) (7 ) (7 ) Adjusted EBITDA related to unconsolidated affiliates — (1 ) 14 13 Segment Adjusted EBITDA $ 162 $ 177 $ 176 $ 191 Distributions from unconsolidated affiliates $ 1 $ 1 $ 14 $ 11Transported volumes declined compared to the same period last year primarily due to lower production from certain key shippers in the Barnett Shale region.
Intrastate transportation and storage gross margin decreased $17 million in margin from natural gas sales and other primarily due to a decrease in gains from derivatives. Additionally, retained fuel revenues decreased $15 million primarily due to the impact of the cold weather season in early 2014 and storage margin decreased $9 million principally driven by a decline in the spreads between the spot and forward prices on natural gas inventory held in the Bammel storage facility. These decreases were partially offset by an increase of $11 million in transportation fees primarily due to increased revenue from long-term fixed capacity fee contracts on our Houston pipeline system resulting from the renegotiation of existing contracts, as well as the initiation of new contracts.
The pro forma results for adjusted EBITDA related to unconsolidated affiliates and distributions from unconsolidated affiliates reflect the impact of Regency’s investment in RIGS Haynesville Partnership Co. (“HPC”).
Investment in Sunoco Logistics
Three Months EndedMarch 31, 2015 2014 Revenues $ 2,572 $ 4,477 Cost of products sold 2,350 4,210 Gross margin 222 267 Unrealized (gains) losses on commodity risk management activities 15 (1 ) Operating expenses, excluding non-cash compensation expense (48 ) (39 ) Selling, general and administrative expenses, excluding non-cash compensation expense (22 ) (27 ) Inventory valuation adjustments 41 — Adjusted EBITDA related to unconsolidated affiliates 13 8 Segment Adjusted EBITDA $ 221 $ 208 Distributions from unconsolidated affiliates $ 5 $ 2Segment Adjusted EBITDA related to Sunoco Logistics increased due to the net impacts of the following:
Retail Marketing
Three Months EndedMarch 31, 2015 2014 Retail gasoline outlets, end of period: Total 6,683 5,122 Company-operated 1,258 529 Motor fuel sales: Total gallons (in millions) 1,881 1,392 Company-operated (gallons/month per site) 156,456 178,448 Motor fuel gross profit (cents per gallon): Total 12.9 8.4 Company-operated 26.0 22.1 Merchandise sales $ 481 $ 140 Revenues $ 4,805 $ 5,011 Cost of products sold 4,367 4,756 Gross margin 438 255 Unrealized losses on commodity risk management activities 2 3 Operating expenses, excluding non-cash compensation expense (271 ) (126 ) Selling, general and administrative expenses, excluding non-cash compensation expense (34 ) (10 ) Inventory valuation adjustments (7 ) (14 ) Adjusted EBITDA related to unconsolidated affiliates 1 1 Segment Adjusted EBITDA $ 129 $ 109Retail marketing gross margin increased due to the net impacts of the following:
Segment Adjusted EBITDA for the retail marketing segment also reflected an increase in operating expenses and in selling, general and administrative expenses primarily due to recent acquisitions.
All Other
Actual Pro Forma for Regency Merger Three Months EndedMarch 31, Three Months EndedMarch 31, 2015 2014 2015 2014 Revenues $ 383 $ 591 $ 493 $ 660 Cost of products sold 374 564 389 574 Gross margin 9 27 104 86 Unrealized (gains) losses on commodity risk management activities 5 (1 ) 5 (1 ) Operating expenses, excluding non-cash compensation expense 5 (5 ) (21 ) (27 ) Selling, general and administrative expenses, excluding non-cash compensation expense (18 ) (11 ) (46 ) (36 ) Adjusted EBITDA related to discontinued operations — 27 — 27 Adjusted EBITDA related to unconsolidated affiliates 25 102 3 75 Other 19 19 19 19 Elimination (4 ) — (11 ) (2 ) Segment Adjusted EBITDA $ 41 $ 158 $ 53 $ 141 Distributions from unconsolidated affiliates $ 18 $ 26 $ 18 $ 26Amounts reflected in our all other segment primarily include:
Segment Adjusted EBITDA decreased due to the net impact of the following:
For the pro forma results, the decrease in actual Segment Adjusted EBITDA, as discussed above, was partially offset by increases in Regency’s natural resources and contract services operations.
In connection with the Lake Charles LNG Transaction, ETP agreed to continue to provide management services for ETE through 2015 in relation to both Lake Charles LNG’s regasification facility and the development of a liquefaction project at Lake Charles LNG’s facility, for which ETE has agreed to pay incremental management fees to ETP of $75 million per year for the years ending December 31, 2014 and 2015. These fees were reflected in “Other” in the “All other” segment and for the three months ended March 31, 2015 were reflected as an offset to operating expenses of $6 million and selling, general and administrative expenses of $13 million in the consolidated statements of operations.
The decrease in cash distributions from unconsolidated affiliates was primarily due to a decrease of $11 million in cash distribution from our ownership in AmeriGas as a result of selling our interests in AmeriGas in 2014, partially offset by an increase of $2 million in cash distribution from our ownership in PES.
SUPPLEMENTAL INFORMATION ON CAPITAL EXPENDITURES
(Tabular amounts in millions) (unaudited)The following is a summary of capital expenditures (net of contributions in aid of construction costs) for the three months ended March 31, 2015, excluding Regency’s capital expenditures:
Growth Maintenance Total Direct(1): Midstream $ 248 $ 4 $ 252 Liquids transportation and services(2) 559 4 563 Interstate transportation and storage(2) 271 19 290 Intrastate transportation and storage 15 3 18 Retail marketing(3) 73 14 87 All other (including eliminations) 10 — 10 Total direct capital expenditures 1,176 44 1,220 Indirect(1): Investment in Sunoco Logistics 416 15 431 Investment in Sunoco LP(3) 36 3 39 Total indirect capital expenditures 452 18 470 Total capital expenditures – actual 1,628 62 1,690 Regency capital expenditures (excluding contributions to Lone Star) 438 22 460 Total capital expenditures – pro forma for Regency Merger $ 2,066 $ 84 $ 2,150 (1) Indirect capital expenditures comprise those funded by our publicly traded subsidiaries; all other capital expenditures are reflected as direct capital expenditures. (2) Includes 100% of Lone Star, Bakken and Rover’s capital expenditures. (3) The retail marketing segment includes the investment in Sunoco LP, as well as ETP’s wholly-owned retail marketing operations. Capital expenditures by Sunoco LP are reflected as indirect because Sunoco LP is a publicly traded subsidiary.We currently expect capital expenditures (net of contributions in aid of construction costs) for the full year 2015 to be within the following ranges, including Regency’s expected capital expenditures:
Growth Maintenance Low High Low High Direct(1): Midstream $ 1,900 $ 2,000 $ 90 $ 110 Liquids transportation and services: NGL(2) 1,700 1,750 25 30 Crude(3) 700 750 — — Interstate transportation and storage(3) 750 850 100 115 Intrastate transportation and storage 150 200 30 35 Retail marketing(4) 200 250 80 100 All other (including eliminations) 200 250 35 45 Total direct capital expenditures 5,600 6,050 360 435 Indirect(1): Investment in Sunoco Logistics 2,400 2,600 65 75 Investment in Sunoco LP(4) 180 230 15 25 Total indirect capital expenditures 2,580 2,830 80 100 Total projected capital expenditures $ 8,180 $ 8,880 $ 440 $ 535 (1) Indirect capital expenditures comprise those funded by our publicly traded subsidiaries; all other capital expenditures are reflected as direct capital expenditures. (2) Includes 100% of Lone Star’s capital expenditures. (3) Includes capital expenditures related to our proportionate ownership of the Bakken and Rover pipeline projects. (4) The retail marketing segment includes the investment in Sunoco LP, as well as ETP’s wholly-owned retail marketing operations. Capital expenditures by Sunoco LP are reflected as indirect because Sunoco LP is a publicly traded subsidiary.SUPPLEMENTAL INFORMATION ON UNCONSOLIDATED AFFILIATES
(In millions)
(unaudited)
Three Months EndedMarch 31, 2015 2014 Equity in earnings (losses) of unconsolidated affiliates: Citrus $ 19 $ 18 FEP 14 14 Regency 4 (7 ) PES (9 ) 17 AmeriGas 6 34 Other 6 3 Total equity in earnings of unconsolidated affiliates – actual $ 40 $ 79 MEP 12 11 HPC 9 7 Other and eliminations (4 ) 7 Total equity in earnings of unconsolidated affiliates – pro forma for Regency Merger $ 57 $ 104 Adjusted EBITDA related to unconsolidated affiliates: Citrus $ 69 $ 68 FEP 19 19 Regency 23 27 PES 2 23 AmeriGas — 51 Other 14 8 Total Adjusted EBITDA related to unconsolidated affiliates – actual $ 127 $ 196 MEP 24 26 HPC 15 14 Other and eliminations (22 ) (26 ) Total Adjusted EBITDA related to unconsolidated affiliates – pro forma for Regency Merger $ 144 $ 210 Distributions received from unconsolidated affiliates: Citrus $ 33 $ 34 FEP 16 16 Regency 16 15 PES 2 — AmeriGas — 11 Other 8 5 Total distributions received from unconsolidated affiliates – actual $ 75 $ 81 MEP 20 18 HPC 13 10 Other and eliminations 3 — Total distributions received from unconsolidated affiliates – pro forma for Regency Merger $ 111 $ 109
Investor Relations:Energy TransferBrent Ratliff, 214-981-0700orLyndsay Hannah, 214-840-5477orMedia Relations:Granado Communications GroupVicki Granado, 214-599-8785Cell: 214-498-9272
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