Energy Transfer Reports Record First Quarter 2019 Results While Delivering on Capital Project Backlog

  • Net income attributable to partners of $870 million, reflecting an
    increase over previous periods primarily due to the impact of the
    simplification transaction.
  • Record Adjusted EBITDA of $2.80 billion, up 40 percent from the first
    quarter of 2018.
  • Record Distributable Cash Flow attributable to partners of $1.66
    billion, up 39 percent from the first quarter of 2018.
  • Distribution coverage ratio of 2.07x, yielding excess coverage of $856
    million of Distributable Cash Flow attributable to partners in excess
    of distributions.
  • Placed Bayou Bridge pipeline expansion in-service in March.
  • Reaffirms 2019 outlook for Adjusted EBITDA of approximately $10.7
    billion and capital expenditures of approximately $5 billion.

DALLAS–(BUSINESS WIRE)–Energy Transfer LP (NYSE:ET) (“ET” or the “Partnership”) today
reported financial results for the quarter ended March 31, 2019.

ET reported net income attributable to partners for the three months
ended March 31, 2019 of $870 million, an increase of $507 million
compared to the three months ended March 31, 2018. For the prior period,
net income attributable to partners continues to reflect only the amount
of net income attributable to the legacy Energy Transfer LP partners
prior to the simplification merger transaction of ET and Energy Transfer
Operating, L.P. (“ETO”) on October 19, 2018 (the “Merger”).

Adjusted EBITDA for the three months ended March 31, 2019 was $2.80
billion, an increase of $795 million compared to the three months ended
March 31, 2018. Results were supported by increases in all of the
Partnership’s five core segments, with record operating performance in
the Partnership’s NGL and refined products and crude businesses.

Distributable Cash Flow attributable to partners, as adjusted, for the
three months ended March 31, 2019 was a record $1.66 billion, an
increase of $461 million compared to the three months ended March 31,
2018. The increase was primarily due to the increase in Adjusted EBITDA.

Key accomplishments and current developments:

Operational

  • ET is currently progressing with plans on a Bakken pipeline
    optimization project, which is targeted to start up in 2020.
  • ET is currently expanding its Permian Express pipeline system by an
    incremental 120,000 barrels per day. The Permian Express 4 expansion
    is expected to be in-service by the end of the third quarter of 2019.
  • ET and Phillips 66 Partners LP (“PSXP”) launched a non-binding
    expansion open season in April 2019 for expanded joint tariff
    transportation service connecting into Bayou Bridge.
  • ET and PSXP announced in March 2019 that the second phase of the Bayou
    Bridge pipeline was complete and ready for service.

Strategic

  • ET and Shell US LNG, LLC initiated an invitation to tender to solicit
    engineering, procurement and construction (EPC) bids for the Lake
    Charles LNG liquefaction project in May 2019.
  • ET announced an expanded presence in China to meet growing demand for
    LNG and NGL products by opening an office in Beijing in April 2019.
  • ET signed a non-binding letter of intent with Sunoco LP to enter into
    a joint venture on a diesel fuel pipeline to West Texas.
  • ET sold a 30 percent interest in Red Bluff Express pipeline to a
    subsidiary of Western Midstream Partners LP.

Financial

  • In April 2019, ET announced a quarterly distribution of $0.305 per
    unit ($1.220 annualized) on ET common units for the quarter ended
    March 31, 2019. The distribution coverage ratio for the first quarter
    of 2019 is 2.07x.
  • ETO issued 32 million of its 7.600% Series E Preferred Units in April
    2019 for gross proceeds of $800 million, primarily replacing debt and
    efficiently improving leverage metrics.
  • In March 2019, ET and ETO completed a debt exchange whereby ETO issued
    $4.21 billion aggregate principal amount of senior notes in exchange
    for settling approximately 97% of ET’s outstanding senior notes.
  • As of March 31, 2019, ETO’s $6.00 billion revolving credit facilities
    had an aggregate $4.15 billion of available capacity, and ETO’s
    leverage ratio, as defined by its credit agreement, was 3.82x.

ET benefits from a portfolio of assets with exceptional product and
geographic diversity. The Partnership’s multiple segments generate
high-quality, balanced earnings with no single segment contributing more
than 30 percent of the Partnership’s consolidated Adjusted EBITDA for
the three months ended March 31, 2019. The great majority of the
Partnership’s segment margins are fee-based and therefore have limited
commodity price sensitivity.

Conference Call information:

The Partnership has scheduled a conference call for 8:00 a.m. Central
Time, Thursday, May 9, 2019 to discuss its first quarter 2019 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 the Partnership’s website for a
limited time.

Energy Transfer LP (NYSE: ET) owns and operates one of the
largest and most diversified portfolios of energy assets in the United
States, with a strategic footprint in all of the major U.S. production
basins. ET is a publicly traded limited partnership with core operations
that include 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; and various acquisition and marketing assets.
ET, through its ownership of Energy Transfer Operating, L.P., formerly
known as Energy Transfer Partners, L.P., also owns the general partner
interests, the incentive distribution rights and 28.5 million common
units of Sunoco LP (NYSE: SUN), and the general partner interests and
39.7 million common units of USA Compression Partners, LP (NYSE: USAC).
For more information, visit the Energy Transfer LP website at www.energytransfer.com.

Sunoco LP (NYSE: SUN) is a master limited partnership that
distributes motor fuel to approximately 10,000 convenience stores,
independent dealers, commercial customers and distributors located in
more than 30 states. Sunoco’s general partner is owned by Energy
Transfer Operating, L.P., a subsidiary of Energy Transfer LP (NYSE: ET).
For more information, visit the Sunoco LP website at www.sunocolp.com.

USA Compression Partners, LP (NYSE: USAC) is a
growth-oriented Delaware limited partnership that is one of the nation’s
largest independent providers of compression services in terms of total
compression fleet horsepower. USAC partners with a broad customer base
composed of producers, processors, gatherers and transporters of natural
gas and crude oil. USAC focuses on providing compression services to
infrastructure applications primarily in high-volume gathering systems,
processing facilities and transportation applications. For more
information, visit the USAC website at www.usacompression.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 LP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(unaudited)

 
    March 31, 2019     December 31, 2018
ASSETS
Current assets $ 7,127 $ 6,750
 
Property, plant and equipment, net 67,317 66,963
 
Advances to and investments in unconsolidated affiliates 2,653 2,642
Lease right-of-use assets, net (a) 872
Other non-current assets, net 1,007 1,006
Intangible assets, net 5,912 6,000
Goodwill   4,885   4,885
Total assets $ 89,773 $ 88,246
LIABILITIES AND EQUITY
Current liabilities $ 6,695 $ 9,310
 
Long-term debt, less current maturities 46,373 43,373
Non-current derivative liabilities 150 104
Non-current operating lease liabilities (a) 817
Deferred income taxes 3,023 2,926
Other non-current liabilities 1,154 1,184
 
Commitments and contingencies
Redeemable noncontrolling interests 499 499
 
Equity:
Total partners’ capital 20,654 20,559
Noncontrolling interest   10,408   10,291
Total equity   31,062   30,850
Total liabilities and equity $ 89,773 $ 88,246

(a) Lease-related balances as of March 31, 2019 were recorded in
connection with the required adoption of the new lease accounting
principles (referred to as ASC 842) on January 1, 2019.

 
 

ENERGY TRANSFER LP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS

(In millions, except per unit data)

(unaudited)

 
    Three Months Ended
March 31,
  2019         2018  
REVENUES $ 13,121 $ 11,882
COSTS AND EXPENSES:
Cost of products sold 9,415 9,245
Operating expenses 808 724
Depreciation, depletion and amortization 774 665
Selling, general and administrative 147 148
Impairment losses   50      
Total costs and expenses   11,194     10,782  
OPERATING INCOME 1,927 1,100
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized (590 ) (466 )
Equity in earnings of unconsolidated affiliates 65 79
Losses on extinguishments of debt (18 ) (106 )
Gains (losses) on interest rate derivatives (74 ) 52
Other, net   (4 )   57  
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE (BENEFIT) 1,306 716
Income tax expense (benefit) from continuing operations   126     (10 )
INCOME FROM CONTINUING OPERATIONS 1,180 726
Loss from discontinued operations, net of income taxes       (237 )
NET INCOME 1,180 489
Less: Net income attributable to noncontrolling interest 297 126
Less: Net income attributable to redeemable noncontrolling interests   13      
NET INCOME ATTRIBUTABLE TO PARTNERS 870 363
Series A Convertible Preferred Unitholders’ interest in income 21
General Partner’s interest in net income   1     1  
Limited Partners’ interest in net income $ 869   $ 341  
NET INCOME PER LIMITED PARTNER UNIT:
Basic $ 0.33 $ 0.31
Diluted $ 0.33 $ 0.31
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING:
Basic 2,619.5 1,079.1
Diluted 2,627.9 1,154.7
 
 

ENERGY TRANSFER LP AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

(Dollars and units in millions)

(unaudited)

 
    Three Months Ended
March 31,
  2019         2018  
Reconciliation of net income to Adjusted EBITDA and Distributable
Cash Flow (b):
Net income $ 1,180 $ 489
Loss from discontinued operations 237
Interest expense, net 590 466
Impairment losses 50
Income tax expense (benefit) 126 (10 )
Depreciation, depletion and amortization 774 665
Non-cash compensation expense 29 23
(Gains) losses on interest rate derivatives 74 (52 )
Unrealized (gains) losses on commodity risk management activities (49 ) 87
Losses on extinguishments of debt 18 106
Inventory valuation adjustments (93 ) (25 )
Equity in earnings of unconsolidated affiliates (65 ) (79 )
Adjusted EBITDA related to unconsolidated affiliates 146 156
Adjusted EBITDA from discontinued operations (20 )
Other, net   17     (41 )
Adjusted EBITDA (consolidated) 2,797 2,002
Adjusted EBITDA related to unconsolidated affiliates (146 ) (156 )
Distributable cash flow from unconsolidated affiliates 93 104
Interest expense, net (590 ) (468 )
Preferred unitholders’ distributions (53 ) (24 )
Current income tax expense (28 ) (468 )
Transaction-related income taxes 480
Maintenance capital expenditures (92 ) (91 )
Other, net   18     7  
Distributable Cash Flow (consolidated) 1,999 1,386
Distributable Cash Flow attributable to Sunoco LP (100%) (97 ) (84 )
Distributions from Sunoco LP 41 41
Distributable Cash Flow attributable to USAC (100%) (55 )
Distributions from USAC 21
Distributable Cash Flow attributable to noncontrolling interest in
other non-wholly-owned consolidated subsidiaries
  (251 )   (147 )
Distributable Cash Flow attributable to the partners of ET – pro
forma for the Merger (a)
1,658 1,196
Transaction-related adjustments   (2 )   (1 )
Distributable Cash Flow attributable to the partners of ET, as
adjusted – pro forma for the Merger (a)
$ 1,656   $ 1,195  
 
Distributions to partners – pro forma for the Merger (a):
Limited Partners (c) $ 799 $ 709
General Partner   1     1  
Total distributions to be paid to partners $ 800   $ 710  
Common Units outstanding – end of period – pro forma for the Merger
(a)
  2,619.6     2,535.3  
Distribution coverage ratio – pro forma for the Merger (a) 2.07x 1.68x

(a) The closing of the Merger has impacted the Partnership’s calculation
of Distributable Cash Flow attributable to partners, as well as the
number of ET Common Units outstanding and the amount of distributions to
be paid to partners for the three months ended March 31, 2018. In order
to provide information on a comparable basis for pre-Merger and
post-Merger periods, the Partnership has included certain pro forma
information for the three months ended March 31, 2018.

Pro forma Distributable Cash Flow attributable to partners reflects the
following merger related impacts:

  • ETO is reflected as a wholly-owned subsidiary and pro forma
    Distributable Cash Flow attributable to partners reflects ETO’s
    consolidated Distributable Cash Flow (less certain other adjustments);
  • Distributions from Sunoco LP include distributions to both ET and ETO;
    and
  • Distributable Cash Flow attributable to noncontrolling interest in our
    other non-wholly-owned subsidiaries is subtracted from consolidated
    Distributable Cash Flow to calculate Distributable Cash Flow
    attributable to partners.

Pro forma distributions to partners include actual distributions to
legacy ET partners, as well as pro forma distributions to legacy ETO
partners. Pro forma distributions to ETO partners are calculated
assuming (i) historical ETO common units converted under the terms of
the Merger and (ii) distributions on such converted common units were
paid at the historical rate paid on ET Common Units.

Pro forma Common Units outstanding include actual Common Units
outstanding, in addition to Common Units assumed to be issued in the
Merger, which are based on historical ETO common units converted under
the terms of the Merger.

(b) Adjusted EBITDA, Distributable Cash Flow and distribution coverage
ratio are non-GAAP financial measures used by industry analysts,
investors, lenders and rating agencies to assess the financial
performance and the operating results of ET’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, Distributable Cash Flow and distribution coverage ratio,
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, Distributable Cash Flow and
distribution coverage ratio 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 valuation 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 distributions to preferred unitholders and
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 valuation 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 ET’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, other than
    ETO, 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 subsidiaries, but Distributable Cash Flow
    attributable to partners reflects only the amount of Distributable
    Cash Flow of such subsidiaries that is attributable to our ownership
    interest.

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

Definition of Distribution Coverage Ratio

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

(c) Includes distributions to unitholders who elected to participate in
a plan to forgo a portion of their future potential cash distributions
on common units and reinvest those distributions in ETE Series A
convertible preferred units representing limited partner interests in
the Partnership. The quarter ended March 31, 2018 was the final quarter
of participation in the plan.

 
 

ENERGY TRANSFER LP AND SUBSIDIARIES

SUMMARY ANALYSIS OF QUARTERLY RESULTS BY
SEGMENT

(Tabular dollar amounts in millions)

(unaudited)

As a result of the Merger in October 2018, our reportable segments were
reevaluated during the quarter ended December 31, 2018 and currently
reflect the following segments.

    Three Months Ended
March 31,
2019     2018
Segment Adjusted EBITDA:
Intrastate transportation and storage $ 252 $ 192
Interstate transportation and storage 456 366
Midstream 382 377
NGL and refined products transportation and services 612 451
Crude oil transportation and services 806 464
Investment in Sunoco LP 153 109
Investment in USAC 101
All other   35   43
Total Segment Adjusted EBITDA $ 2,797 $ 2,002

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.

Following is a reconciliation of our segment margin to operating income,
as reported in the Partnership’s consolidated statements of operations:

    Three Months Ended
March 31,
  2019         2018  
Segment Margin:
Intrastate transportation and storage $ 284 $ 171
Interstate transportation and storage 498 365
Midstream 577 553
NGL and refined products transportation and services 705 600
Crude oil transportation and services 1,086 568
Investment in Sunoco LP 370 296
Investment in USAC 149
All other 42 95
Intersegment eliminations   (5 )   (11 )
Total segment margin 3,706 2,637
 
Less:
Operating expenses 808 724
Depreciation, depletion and amortization 774 665
Selling, general and administrative 147 148
Impairment losses   50      
Operating income $ 1,927   $ 1,100  
 
 

Intrastate Transportation and Storage

    Three Months Ended
March 31,
  2019         2018  
Natural gas transported (BBtu/d) 11,982 9,271
Withdrawals from storage natural gas inventory (BBtu) 17,703
Revenues $ 856 $ 875
Cost of products sold   572     704  
Segment margin 284 171
Unrealized losses on commodity risk management activities 10 53
Operating expenses, excluding non-cash compensation expense (42 ) (39 )
Selling, general and administrative expenses, excluding non-cash
compensation expense
(6 ) (6 )
Adjusted EBITDA related to unconsolidated affiliates   6     13  
Segment Adjusted EBITDA $ 252   $ 192  

Transported volumes increased primarily due to the impact of reflecting
RIGS as a consolidated subsidiary beginning in April 2018 and the impact
of the Red Bluff Express pipeline coming online in May 2018, as well as
the impact of favorable market pricing spreads.

Segment Adjusted EBITDA. For the three months ended March 31,
2019 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 realized natural gas sales and other

Contacts

Energy Transfer
Investor Relations:
Bill Baerg, Brent
Ratliff, Lyndsay Hannah, 214-981-0795
or
Media Relations:
Vicki
Granado, 214-840-5820

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