Market Overview

Energy Transfer Partners Reports Third Quarter Results

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Energy Transfer Partners, L.P. (NYSE:ETP) ("ETP" or the
"Partnership") today reported its financial results for the quarter
ended September 30, 2017. For the three months ended September 30, 2017,
net income was $761 million and Adjusted EBITDA was $1.74 billion.
Adjusted EBITDA increased $354 million compared to the three months
ended September 30, 2016, reflecting an increase of $227 million in
Adjusted EBITDA from the crude oil transportation and services segment,
as well as significantly higher results from several of the other
segments, as discussed in the segment results analysis below. Net income
increased $623 million compared to the three months ended September 30,
2016, primarily due to increased operating income and higher equity in
earnings from unconsolidated affiliates, as well as the impact of a
non-cash impairment recorded in the prior year on an investment in an
unconsolidated affiliate. Distributable Cash Flow attributable to
partners, as adjusted, for the three months ended September 30, 2017
totaled $1.05 billion, an increase of $226 million compared to the three
months ended September 30, 2016 (on a pro forma basis for the Sunoco
Logistics merger completed in April 2017), primarily due to the increase
in Adjusted EBITDA.

ETP's other recent key accomplishments include the following:

  • In October 2017, ETP announced a quarterly distribution of $0.565 per
    unit ($2.26 annualized) on ETP common units for the quarter ended
    September 30, 2017.
  • In October 2017, ETP completed the previously announced contribution
    transaction with a fund managed by Blackstone Energy Partners and
    Blackstone Capital Partners, pursuant to which ETP exchanged a 49.9%
    interest in the holding company that owns 65% of the Rover pipeline.
  • In August 2017, the Partnership issued 54 million ETP common units in
    an underwritten public offering. Net proceeds of $997 million from the
    offering were used by the Partnership to repay amounts outstanding
    under its revolving credit facilities, to fund capital expenditures
    and for general partnership purposes.
  • In September 2017, Sunoco Logistics Partners Operations L.P., a
    subsidiary of ETP, issued $750 million aggregate principal amount of
    4.00% senior notes due 2027 and $1.50 billion aggregate principal
    amount of 5.40% senior notes due 2047. The $2.22 billion net proceeds
    from the offering were used to redeem all of the $500 million
    aggregate principal amount of ETLP's 6.5% senior notes due 2021, to
    repay borrowings outstanding under the Sunoco Logistics Credit
    Facility and for general partnership purposes. Also, in October 2017,
    ETP redeemed all of the outstanding $700 million of 5.5% senior notes
    due 2023 previously issued by Regency Energy Partners LP.
  • As of September 30, 2017, ETP had approximately $2.1 billion
    outstanding under its aggregate $6.25 billion revolving credit
    facilities and its leverage ratio, as defined by the legacy Sunoco
    Logistics credit agreement, was 4.16x.

An analysis of ETP's segment results and other supplementary data is
provided after the financial tables shown below. ETP has scheduled a
conference call for 8:00 a.m. Central Time, Wednesday, November 8, 2017
to discuss the third quarter 2017 results. The conference call will be
broadcast live via an internet webcast, which can be accessed through www.energytransfer.com
and will also be available for replay on ETP's website for a limited
time.

Energy Transfer Partners, L.P. (NYSE:ETP) is a master limited
partnership that owns and operates one of the largest and most
diversified portfolios of energy assets in the United States.
Strategically positioned in all of the major U.S. production basins, ETP
owns and operates a geographically diverse portfolio of complementary
natural gas midstream, intrastate and interstate transportation and
storage assets; crude oil, natural gas liquids (NGL) and refined product
transportation and terminalling assets; NGL fractionation assets; and
various acquisition and marketing assets. ETP's general partner is owned
by Energy Transfer Equity, L.P. (NYSE:ETE). For more information, visit
the Energy Transfer Partners, L.P. website at www.energytransfer.com.

Energy Transfer Equity, L.P. (NYSE:ETE) is a master limited
partnership that owns the general partner and 100% of the incentive
distribution rights (IDRs) of Energy Transfer Partners, L.P. (NYSE:ETP)
and Sunoco LP (NYSE:SUN). ETE also owns Lake Charles LNG Company. On a
consolidated basis, ETE's family of companies owns and operates a
diverse portfolio of natural gas, natural gas liquids, crude oil and
refined products assets, as well as retail and wholesale motor fuel
operations and LNG terminalling. For more information, visit the Energy
Transfer Equity, L.P. website at www.energytransfer.com.

Forward-Looking Statements

This news 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 Report 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
website at www.energytransfer.com.

 
 

ENERGY TRANSFER PARTNERS, L.P. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(unaudited)

 

 
    September 30,     December 31,
2017

2016 (a)

ASSETS
 
Current assets $ 5,780 $ 5,729
 
Property, plant and equipment, net 56,972 50,917
 
Advances to and investments in unconsolidated affiliates 4,221 4,280
Other non-current assets, net 752 672
Intangible assets, net 5,379 4,696
Goodwill   3,907   3,897  
Total assets $ 77,011 $ 70,191  
 
LIABILITIES AND EQUITY
 
Current liabilities $ 6,886 $ 6,203
 
Long-term debt, less current maturities 33,630 31,741
Long-term notes payable – related company 250
Non-current derivative liabilities 132 76
Deferred income taxes 4,374 4,394
Other non-current liabilities 1,111 952
 
Commitments and contingencies
Series A Preferred Units 33
Redeemable noncontrolling interests 21 15
 
Equity:
Total partners' capital 26,666 18,642
Noncontrolling interest   4,191   7,885  
Total equity   30,857   26,527  
Total liabilities and equity $ 77,011 $ 70,191  

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

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

 
 

ENERGY TRANSFER PARTNERS, L.P. AND
SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS

(In millions, except per unit data)

(unaudited)

 
    Three Months Ended   Nine Months Ended
September 30, September 30,
2017  

2016 (a)

2017 (a)

 

2016 (a)

REVENUES $ 6,973 $ 5,531 $ 20,444 $ 15,301
COSTS AND EXPENSES:
Cost of products sold 4,876 3,844 14,582 10,280
Operating expenses 571 475 1,603 1,359
Depreciation, depletion and amortization 596 503 1,713 1,469
Selling, general and administrative   105     71     335     226  
Total costs and expenses   6,148     4,893     18,233     13,334  
OPERATING INCOME 825 638 2,211 1,967
OTHER INCOME (EXPENSE):
Interest expense, net (367 ) (345 ) (1,052 ) (981 )
Equity in earnings of unconsolidated affiliates 127 65 139 260
Impairment of investment in an unconsolidated affiliate (308 ) (308 )
Losses on interest rate derivatives (8 ) (28 ) (28 ) (179 )
Other, net   72     52     169     96  
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) 649 74 1,439 855
Income tax expense (benefit)   (112 )   (64 )   22     (131 )
NET INCOME 761 138 1,417 986
Less: Net income attributable to noncontrolling interest   110     64     243     231  
NET INCOME ATTRIBUTABLE TO PARTNERS 651 74 1,174 755
General Partner's interest in net income 270 220 727 740
Class H Unitholder's interest in net income 93 98 257
Class I Unitholder's interest in net income       2         6  
Common Unitholders' interest in net income (loss) $ 381   $ (241 ) $ 349   $ (248 )
NET INCOME (LOSS) PER COMMON UNIT: (b)
Basic $ 0.33 $ (0.33 ) $ 0.35 $ (0.36 )
Diluted $ 0.33 $ (0.33 ) $ 0.34 $ (0.36 )
WEIGHTED AVERAGE NUMBER OF COMMON UNITS OUTSTANDING: (b)
Basic 1,125.2 761.1 990.9 749.7
Diluted 1,128.9 761.1 995.5 749.7

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

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

 
 

SUPPLEMENTAL INFORMATION

(Dollars and units in millions)

(unaudited)

 
    Three Months Ended     Nine Months Ended
September 30, September 30,
2017    

2016 (a)

2017 (a)

   

2016 (a)

Reconciliation of net income to Adjusted EBITDA and Distributable
Cash Flow (b):
Net income $ 761 $ 138 $ 1,417 $ 986
Interest expense, net 367 345 1,052 981
Income tax expense (benefit) (112 ) (64 ) 22 (131 )
Depreciation, depletion and amortization 596 503 1,713 1,469
Non-cash unit-based compensation expense 19 22 57 60
Losses on interest rate derivatives 8 28 28 179
Unrealized (gains) losses on commodity risk management activities 81 15 (17 ) 96
Inventory valuation adjustments (86 ) (37 ) (30 ) (143 )
Impairment of investment in an unconsolidated affiliate 308 308
Equity in earnings of unconsolidated affiliates (127 ) (65 ) (139 ) (260 )
Adjusted EBITDA related to unconsolidated affiliates 279 240 765 711
Other, net   (42 )   (43 )   (111 )   (84 )
Adjusted EBITDA (consolidated) 1,744 1,390 4,757 4,172
Adjusted EBITDA related to unconsolidated affiliates (279 ) (240 ) (765 ) (711 )
Distributable cash flow from unconsolidated affiliates 169 124 436 384
Interest expense, net (367 ) (345 ) (1,052 ) (981 )
Current income tax expense (9 ) (11 ) (22 ) (23 )
Maintenance capital expenditures (119 ) (97 ) (286 ) (234 )
Other, net   16     3     43     (3 )
Distributable Cash Flow (consolidated) 1,155 824 3,111 2,604
Distributable Cash Flow attributable to PennTex Midstream Partners,
LP ("PennTex") (100%) (c)
(19 )
Distributions from PennTex to ETP (c) 8 8 8
Distributable cash flow attributable to noncontrolling interest in
other consolidated subsidiaries
  (119 )   (11 )   (199 )   (28 )
Distributable Cash Flow attributable to the partners of ETP 1,036 821 2,901 2,584
Transaction-related expenses   13     2     45     4  
Distributable Cash Flow attributable to the partners of ETP, as
adjusted
$ 1,049   $ 823   $ 2,946   $ 2,588  
 
Distributions to partners (d):
Limited Partners:
Common Units held by public $ 638 $ 530 $ 1,794 $ 1,495
Common Units held by parent 15 2 45 6
General Partner interests 4 3 12 10
Incentive Distribution Rights ("IDRs") held by parent 431 346 1,204 968
IDR relinquishments   (163 )   (135 )   (482 )   (278 )
Total distributions to be paid to partners $ 925   $ 746   $ 2,573   $ 2,201  
Common Units outstanding – end of period (d)(e)   1,155.5     1,019.9     1,155.5     1,019.9  
Distribution coverage ratio (f) 1.13x 1.10x 1.14x 1.18x
 

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

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

(b) Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial
measures used by industry analysts, investors, lenders, and rating
agencies to assess the financial performance and the operating results
of ETP's fundamental business activities and should not be considered in
isolation or as a substitute for net income, income from operations,
cash flows from operating activities, or other GAAP measures.

There are material limitations to using measures such as Adjusted EBITDA
and Distributable Cash Flow, including the difficulty associated with
using either as the sole measure to compare the results of one company
to another, and the inability to analyze certain significant items that
directly affect a company's net income or loss or cash flows. In
addition, our calculations of Adjusted EBITDA and Distributable Cash
Flow may not be consistent with similarly titled measures of other
companies and should be viewed in conjunction with measurements that are
computed in accordance with GAAP, such as segment margin, operating
income, net income, and cash flow from operating activities.

Definition of Adjusted EBITDA

We define Adjusted EBITDA as total partnership earnings before interest,
taxes, depreciation, depletion, amortization and other non-cash items,
such as non-cash compensation expense, gains and losses on disposals of
assets, the allowance for equity funds used during construction,
unrealized gains and losses on commodity risk management activities,
non-cash impairment charges, losses on extinguishments of debt and other
non-operating income or expense items. Unrealized gains and losses on
commodity risk management activities include unrealized gains and losses
on commodity derivatives and inventory fair value adjustments (excluding
lower of cost or market adjustments). Adjusted EBITDA reflects amounts
for less than wholly-owned subsidiaries based on 100% of the
subsidiaries' results of operations and for unconsolidated affiliates
based on our proportionate ownership.

Adjusted EBITDA is used by management to determine our operating
performance and, along with other financial and volumetric data, as
internal measures for setting annual operating budgets, assessing
financial performance of our numerous business locations, as a measure
for evaluating targeted businesses for acquisition and as a measurement
component of incentive compensation.

Definition of Distributable Cash Flow

We define Distributable Cash Flow as net income, adjusted for certain
non-cash items, less maintenance capital expenditures. Non-cash items
include depreciation, depletion and amortization, non-cash compensation
expense, amortization included in interest expense, gains and losses on
disposals of assets, the allowance for equity funds used during
construction, unrealized gains and losses on commodity risk management
activities, non-cash impairment charges, losses on extinguishments of
debt and deferred income taxes. Unrealized gains and losses on commodity
risk management activities includes unrealized gains and losses on
commodity derivatives and inventory fair value adjustments (excluding
lower of cost or market adjustments). For unconsolidated affiliates,
Distributable Cash Flow reflects the Partnership's proportionate share
of the investee's distributable cash flow.

Distributable Cash Flow is used by management to evaluate our overall
performance. Our partnership agreement requires us to distribute all
available cash, and Distributable Cash Flow is calculated to evaluate
our ability to fund distributions through cash generated by our
operations.

On a consolidated basis, Distributable Cash Flow includes 100% of the
Distributable Cash Flow of ETP's consolidated subsidiaries. However, to
the extent that noncontrolling interests exist among our subsidiaries,
the Distributable Cash Flow generated by our subsidiaries may not be
available to be distributed to our partners. In order to reflect the
cash flows available for distributions to our partners, we have reported
Distributable Cash Flow attributable to partners, which is calculated by
adjusting Distributable Cash Flow (consolidated), as follows:

  • For subsidiaries with publicly traded equity interests, Distributable
    Cash Flow (consolidated) includes 100% of Distributable Cash Flow
    attributable to such subsidiary, and Distributable Cash Flow
    attributable to our partners includes distributions to be received by
    the parent company with respect to the periods presented.
  • For consolidated joint ventures or similar entities, where the
    noncontrolling interest is not publicly traded, Distributable Cash
    Flow (consolidated) includes 100% of Distributable Cash Flow
    attributable to such subsidiary, but Distributable Cash Flow
    attributable to partners is net of distributions to be paid by the
    subsidiary to the noncontrolling interests.

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

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

(d) Distributions on ETP Common Units and the number of ETP Common Units
outstanding at the end of the period, both as reflected above, exclude
amounts related to ETP Common Units held by subsidiaries of ETP.

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

(f) Distribution coverage ratio for a period is calculated as
Distributable Cash Flow attributable to partners, as adjusted, divided
by net distributions expected to be paid to the partners of ETP in
respect of such period.

 
 

SUMMARY ANALYSIS OF QUARTERLY RESULTS BY
SEGMENT

(Tabular dollar amounts in millions)

(unaudited)

 
    Three Months Ended
September 30,
2017     2016
Segment Adjusted EBITDA:
Intrastate transportation and storage $ 163 $ 133
Interstate transportation and storage 273 278
Midstream 356 314
NGL and refined products transportation and services (1) 423 383
Crude oil transportation and services (1) 396 169
All other   133   113
$ 1,744 $ 1,390

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

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

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

For prior periods reported herein, certain transactions related to the
business of legacy Sunoco Logistics have been reclassified from cost of
products sold to operating expenses; these transactions include sales
between operating subsidiaries and their marketing affiliates. These
reclassifications had no impact on net income or total equity.

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

    Three Months Ended
September 30,
  2017         2016  
Intrastate transportation and storage $ 167 $ 172
Interstate transportation and storage 224 236
Midstream 530 476
NGL and refined products transportation and services 488 484
Crude oil transportation and services 588 266
All other 112 79
Intersegment eliminations   (12 )   (26 )
Total Segment Margin 2,097 1,687
 
Less:
Operating expenses 571 475
Depreciation, depletion and amortization 596 503
Selling, general and administrative   105     71  
Operating income $ 825   $ 638  
 
 

Intrastate Transportation and Storage

 
    Three Months Ended
September 30,
  2017         2016  
Natural gas transported (MMBtu/d) 8,942,066 8,289,826
Revenues $ 773 $ 758
Cost of products sold   606     586  
Segment margin 167 172
Unrealized (gains) losses on commodity risk management activities 22 (7 )
Operating expenses, excluding non-cash compensation expense (40 ) (43 )
Selling, general and administrative expenses, excluding non-cash
compensation expense
(6 ) (5 )
Adjusted EBITDA related to unconsolidated affiliates 19 15
Other   1     1  
Segment Adjusted EBITDA $ 163   $ 133  
 
Distributions from unconsolidated affiliates $ 10 $ 13
 

Transported volumes increased primarily due to higher demand for exports
to Mexico, along with the addition of new pipes to our intrastate
pipeline system. These increases were partially offset by lower
production volumes in the Barnett Shale region.

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

  • an increase of $29 million in natural gas sales and other (excluding
    net changes in unrealized gains and losses of $13 million) primarily
    due to higher realized gains from pipeline optimization activity;
  • an increase of $9 million in storage margin (excluding net changes in
    unrealized gains and losses of $16 million related to fair value
    inventory adjustments and unrealized gains and losses on derivatives);
  • a decrease of $3 million in operating expenses primarily due to the
    timing of project related expenses of $3 million, lower allocated
    expenses and lower capitalized overhead of $2 million, partially
    offset by higher outside services and employee expenses of $2 million;
    and
  • an increase of $4 million in Adjusted EBITDA related to unconsolidated
    affiliates due to two new joint venture pipelines placed in service in
    2017; partially offset by
  • a decrease in transportation fees of $14 million due to renegotiated
    contracts resulting in lower billed volumes, offset by increased
    margin from optimization activity recorded in natural gas sales and
    other.
 
 

Interstate Transportation and Storage

 
    Three Months Ended
September 30,
  2017         2016  
Natural gas transported (MMBtu/d) 6,074,783 5,385,679
Natural gas sold (MMBtu/d) 19,012 19,478
Revenues $ 224 $ 236
Operating expenses, excluding non-cash compensation, amortization
and accretion expenses
(79 ) (76 )
Selling, general and administrative expenses, excluding non-cash
compensation, amortization and accretion expenses
(14 ) (13 )
Adjusted EBITDA related to unconsolidated affiliates 140 131
Other   2      
Segment Adjusted EBITDA $ 273   $ 278  
 
Distributions from unconsolidated affiliates $ 81 $ 84
 

Transported volumes reflected increases of 157,060 MMBtu/d on the
Trunkline pipeline as a result of increased backhaul deliveries, 153,401
MMBtu/d on the Tiger pipeline due to an increase in production in the
Haynesville Shale, and 142,207 MMBtu/d on the Transwestern pipeline as a
result of weather driven demand in the West and opportunities in the
Texas intrastate market. The remainder of the increase was primarily due
to the Rover pipeline, which was placed in partial service on August 31,
2017.

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

  • a decrease in reservation revenues of $16 million on the Panhandle,
    Trunkline and Transwestern pipelines and a decrease of $3 million in
    gas parking service related revenues on the Panhandle and Trunkline
    pipelines, primarily due to lack of customer demand driven by weak
    spreads and mild weather. In addition, revenues on the Tiger pipeline
    decreased $3 million due to contract restructuring. These decreases
    were offset by $10 million of revenues from the placement in partial
    service of the Rover pipeline effective August 31, 2017; and
  • an increase in operating expenses of $3 million primarily due to
    higher ad valorem taxes resulting from higher valuations; offset by
  • an increase in income from unconsolidated joint ventures of $9 million
    primarily due to a legal settlement and lower operating expenses on
    Citrus.
 
 

Midstream

 
    Three Months Ended
September 30,
  2017         2016  
Gathered volumes (MMBtu/d) 11,090,285 9,675,003
NGLs produced (Bbls/d) 449,454 420,877
Equity NGLs (Bbls/d) 27,185 34,341
Revenues $ 1,765 $ 1,343
Cost of products sold   1,235     867  
Segment margin 530 476
Unrealized losses on commodity risk management activities 1
Operating expenses, excluding non-cash compensation expense (157 ) (153 )
Selling, general and administrative expenses, excluding non-cash
compensation expense
(26 ) (17 )
Adjusted EBITDA related to unconsolidated affiliates 6 7
Other   2     1  
Segment Adjusted EBITDA $ 356   $ 314  
 

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

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

  • an increase of $24 million (excluding net changes in unrealized gains
    and losses of $1 million) in non-fee based margin due to higher crude
    oil and NGL prices;
  • an increase of $16 million in fee-based revenue due to minimum volume
    commitments in the South Texas region, as well as volume increases in
    the Permian and Northeast regions. These increases were partially
    offset by volume declines in South Texas, North Texas and the
    Mid-Continent/Panhandle regions; and
  • an increase of $15 million in fee-based revenue due to recent
    acquisitions, including PennTex; partially offset by
  • an increase of $4 million in operating expenses primarily due to
    recent acquisitions, including PennTex; and
  • an increase in selling, general and administrative expenses primarily
    due to an increase in shared services allocation.
 
 

NGL and Refined Products Transportation and Services

 
    Three Months Ended
September 30,
  2017         2016  
NGL transportation volumes (MBbls/d) 836 766
Refined products transportation volumes (MBbls/d) 612 611
NGL and refined products terminal volumes (MBbls/d) 782 822
NGL fractionation volumes (MBbls/d) 390 338
Revenues $ 2,070 $ 1,545
Cost of products sold   1,582     1,061  
Segment margin 488 484
Unrealized losses on commodity risk management activities 56 21
Operating expenses, excluding non-cash compensation expense (105 ) (109 )
Selling, general and administrative expenses, excluding non-cash
compensation expense
(13 ) (12 )
Adjusted EBITDA related to unconsolidated affiliates 19 21
Inventory valuation adjustments   (22 )   (22 )
Segment Adjusted EBITDA $ 423   $ 383  
 

NGL and refined products transportation volumes increased in the major
producing regions, including the Permian, Southeast Texas, Louisiana,
Eagle Ford and North Texas. NGL and refined products terminal volumes
decreased for the three months ended September 30, 2017 primarily due to
the sale of one of our refined product terminals in April 2017.

Average daily fractionated volumes increased 17% compared to the same
period last year primarily due to the commissioning of our fourth
fractionator at Mont Belvieu, Texas, in October 2016, which has a
capacity of 120,000 Bbls/d, as well as increased producer volumes as
mentioned above.

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

  • an increase in transportation margin of $20 million primarily due to
    higher volumes on our Texas NGL pipelines and our Mariner East system;
  • an increase in fractionation and refinery services margin of
    $13 million (excluding net changes in unrealized gains and losses of
    $1 million) primarily due to higher NGL volumes from most major
    producing regions, as noted above;
  • an increase in terminal services margin of $7 million due to higher
    terminal volumes from the Mariner NGL projects; and
  • a decrease of $4 million in operating expenses primarily due to a
    legal settlement of $8 million and a quarterly ad valorem tax true-up
    of $1 million; partially offset by
  • a decrease of $1 million in marketing margin (excluding net changes in
    unrealized gains and losses of $36 million) primarily due to the
    timing of the recognition of margin from optimization activities; and
  • an increase of $1 million in selling, general and administrative
    expenses due to higher allocations and lower capitalized overhead
    resulting from reduced capital spending.
 
 

Crude Oil Transportation and Services

 
    Three Months Ended
September 30,
  2017         2016  
Crude Transportation Volumes (MBbls/d) 3,758 2,686
Crude Terminals Volumes (MBbls/d) 1,923 1,559
Revenues $ 2,725 $ 1,856
Cost of products sold   2,137     1,590  
Segment margin 588 266
Unrealized gains on commodity risk management activities (1 )
Operating expenses, excluding non-cash compensation expense (119 ) (71 )
Selling, general and administrative expenses, excluding non-cash
compensation expense
(13 ) (16 )
Inventory valuation adjustments (64 ) (15 )
Adjusted EBITDA related to unconsolidated affiliates   5     5  
Segment Adjusted EBITDA $ 396   $ 169  
 

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

  • an increase of $194 million resulting primarily from placing our
    Bakken Pipeline in service in the second quarter of 2017, as well as
    the acquisition of a crude oil gathering system in West Texas;
  • an increase of $28 million from existing assets due to increased
    volumes throughout the system; and
  • an increase of $18 million due to the impact of LIFO accounting;
    partially offset by
  • additional operating expense as a result of placing other new projects
    in service and costs associated with increased volumes on our system.
 
 

All Other

 
    Three Months Ended
September 30,
  2017         2016  
Revenues $ 683 $ 956
Cost of products sold   571     877  
Segment margin 112 79
Unrealized losses on commodity risk management activities 3 1
Operating expenses, excluding non-cash compensation expense (34 ) (20 )
Selling, general and administrative expenses, excluding non-cash
compensation expense
(34 ) (14 )
Adjusted EBITDA related to unconsolidated affiliates 88 63
Other and eliminations   (2 )   4  
Segment Adjusted EBITDA $ 133   $ 113  
 
Distributions from unconsolidated affiliates $ 39 $ 38
 

Amounts reflected in our all other segment primarily include:

  • our equity method investment in limited partnership units of Sunoco LP
    consisting of 43.5 million units, representing 43.7% of Sunoco LP's
    total outstanding common units;
  • our natural gas marketing and compression operations;
  • a non-controlling interest in PES, comprising 33% of PES' outstanding
    common units; and
  • our investment in Coal Handling, an entity that owns and operates
    end-user coal handling facilities.

Segment Adjusted EBITDA. For the three months ended September 30,
2017 compared to the same period last year, Segment Adjusted EBITDA
related to our all other segment increased primarily due to the net
impact of the following:

  • an increase of $25 million in Adjusted EBITDA related to
    unconsolidated affiliates, reflecting an increase of $34 million from
    our investment in PES, offset by a decrease of $9 million from our
    investment in Sunoco LP;
  • an increase of $7 million from commodity trading activities; and
  • an increase of $4 million from our compression operations; partially
    offset by
  • an increase of $11 million in transaction related expenses; and
  • an increase of $9 million in operating expenses related to an
    equipment lease buyout.
 
 

SUPPLEMENTAL INFORMATION ON CAPITAL
EXPENDITURES

(In millions)

(unaudited)

 

The following is a summary of capital expenditures (net of
contributions in aid of construction costs) for the nine months
ended September 30, 2017:

 
    Growth     Maintenance     Total
Intrastate transportation and storage $ 34 $ 22 $ 56
Interstate transportation and storage 1,704 50 1,754
Midstream 914 76 990
NGL and refined products transportation and services 2,106 53 2,159
Crude oil transportation and services 331 36 367
All other (including eliminations)   128   49   177
Total capital expenditures $ 5,217 $ 286 $ 5,503
 
 

SUPPLEMENTAL INFORMATION ON LIQUIDITY

(In millions)

(unaudited)

 
        Funds Available at    
Facility Size September 30, 2017 Maturity Date
Legacy ETP Revolving Credit Facility $ 3,750 $ 1,549 November 18, 2019
Legacy Sunoco Logistics Revolving Credit Facility   2,500   2,463 March 20, 2020
$ 6,250 $ 4,012
 
 

SUPPLEMENTAL INFORMATION ON
UNCONSOLIDATED AFFILIATES

(In millions)

(unaudited)

 
    Three Months Ended
September 30,
2017     2016
Equity in earnings (losses) of unconsolidated affiliates:
Citrus $ 35 $ 31
FEP 14 12
PES 11 (26 )
MEP 9 9
HPC 5 8
Sunoco LP 35 16
Other   18   15  
Total equity in earnings of unconsolidated affiliates $ 127 $ 65  
 
Adjusted EBITDA related to unconsolidated affiliates:
Citrus $ 99 $ 90
FEP 18 19
PES 15 (19 )
MEP 23 22
HPC 13 15
Sunoco LP 74 83
Other   37   30  
Total Adjusted EBITDA related to unconsolidated affiliates $ 279 $ 240  
 
Distributions received from unconsolidated affiliates:
Citrus $ 50 $ 50
FEP 18 17
MEP 13 17
HPC 9 13
Sunoco LP 36 36
Other   18   16  
Total distributions received from unconsolidated affiliates $ 144 $ 149  
 

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