ETE Energy Transfer Equity, L.P. Energy Transfer Equity, L.P. Common Units Representing Limited Partnership Interests (delisted)

Energy Transfer Equity, L.P. (NYSE:ETE) (“ETE” or the “Partnership”) today reported financial results for the quarter ended June 30, 2018.

ETE’s net income attributable to partners was $355 million for the three months ended June 30, 2018, an increase of $143 million compared to the three months ended June 30, 2017. Distributable Cash Flow, as adjusted, for the three months ended June 30, 2018 was $407 million, an increase of $167 million compared to the three months ended June 30, 2017. The improved results reflect an increase of $171 million in general partner and incentive distributions from Energy Transfer Partners, L.P. (“ETP”) of which $120 million was attributable to a reduction in incentive distribution waivers.

The Partnership’s recent key accomplishments and other developments include the following:

• In August 2018, ETE and ETP entered into a merger agreement pursuant to which ETP will merge with a wholly-owned subsidiary of ETE, with ETP unitholders (other than ETE and its subsidiaries) receiving 1.28 ETE common units in exchange for each ETP common unit they own. The transaction is expected to close in the fourth quarter of 2018, subject to the approval by a majority of the unaffiliated unitholders of ETP and other customary closing conditions.
• In April 2018, ETE acquired the general partner of USA Compression Partners, LP (“USAC”) and approximately 12.5 million USAC common units from USA Compression Holdings, LLC.
• In May 2018, the Partnership converted its 329.3 million Series A Convertible Preferred Units into approximately 79.1 million ETE common units in accordance with the terms of ETE’s partnership agreement.
• In July 2018, ETE announced a $0.305 distribution per ETE common unit for the quarter ended June 30, 2018, or $1.22 per unit on an annualized basis.
• As of June 30, 2018, ETE’s $1.5 billion revolving credit facility had $956 million of outstanding borrowings and its leverage ratio, as defined by the credit agreement, was 2.79x.

The Partnership has scheduled a conference call for 8:00 a.m. Central Time, Thursday, August 9, 2018 to discuss its second quarter 2018 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.

The Partnership’s principal sources of cash flow are derived from distributions related to its direct and indirect investments in the limited and general partner interests in ETP, including 100% of ETP’s incentive distribution rights, limited and general partner interests in Sunoco LP, as well as the Partnership’s ownership of Lake Charles LNG Company, LLC (“Lake Charles LNG”). Subsequent to the acquisition on April 2, 2018, the Partnership also owns interests in USAC, as discussed above. The Partnership’s primary cash requirements are for general and administrative expenses, debt service requirements and distributions to its partners.

Energy Transfer Equity, L.P. (NYSE: ETE) is a master limited partnership 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 and the general partner of USA Compression Partners, LP (NYSE: USAC). 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.

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’s operations 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. 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.

Sunoco LP (NYSE: SUN) is a master limited partnership that distributes motor fuel to approximately 9,200 convenience stores, independent dealers, commercial customers and distributors located in more than 30 states. SUN’s general partner is owned by Energy Transfer Equity, L.P. (NYSE: ETE). 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. More information is available 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 EQUITY, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(unaudited)

  June 30, 2018 December 31, 2017 ASSETS Current assets $ 7,593 $ 10,683   Property, plant and equipment, net 64,880 61,088   Advances to and investments in unconsolidated affiliates 2,687 2,705 Other non-current assets, net 996 886 Intangible assets, net 6,088 6,116 Goodwill 5,173   4,768   Total assets $ 87,417   $ 86,246   LIABILITIES AND EQUITY Current liabilities $ 7,636 $ 7,897   Long-term debt, less current maturities 44,473 43,671 Non-current derivative liabilities 136 145 Deferred income taxes 3,075 3,315 Other non-current liabilities 1,227 1,217   Commitments and contingencies Redeemable noncontrolling interests 487 21   Equity: Total partners’ deficit (1,110 ) (1,196 ) Noncontrolling interest 31,493   31,176   Total equity 30,383   29,980   Total liabilities and equity $ 87,417   $ 86,246          

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per unit data)

(unaudited)

 

Three Months EndedJune 30,

Six Months EndedJune 30, 2018     2017 (1) 2018     2017 (1) REVENUES $ 14,118 $ 9,427 $ 26,000 $ 19,088 COSTS AND EXPENSES: Cost of products sold 11,343 7,167 20,588 14,677 Operating expenses 772 648 1,496 1,249 Depreciation and amortization 694 607 1,359 1,235 Selling, general and administrative 183 173 331 338 Impairment losses —   89   —   89   Total costs and expenses 12,992   8,684   23,774   17,588   OPERATING INCOME 1,126 743 2,226 1,500 OTHER INCOME (EXPENSE): Interest expense, net of interest capitalized (510 ) (477 ) (976 ) (950 ) Equity in earnings of unconsolidated affiliates 92 49 171 136 Losses on extinguishments of debt — — (106 ) (25 ) Gains (losses) on interest rate derivatives 20 (25 ) 72 (20 ) Other, net (1 ) 57   56   74   INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE 727 347 1,443 715 Income tax expense from continuing operations 68   33   58   71   INCOME FROM CONTINUING OPERATIONS 659 314 1,385 644 Loss from discontinued operations (26 ) (193 ) (263 ) (204 ) NET INCOME 633 121 1,122 440 Less: Net income (loss) attributable to noncontrolling interest 278   (91 ) 404   (11 ) NET INCOME ATTRIBUTABLE TO PARTNERS 355 212 718 451 Convertible Unitholders’ interest in income 12 8 33 14 General Partner’s interest in net income 1   —   2   1   Limited Partners’ interest in net income $ 342   $ 204   $ 683   $ 436   NET INCOME PER LIMITED PARTNER UNIT: Basic $ 0.31   $ 0.19   $ 0.62   $ 0.40   Diluted $ 0.31   $ 0.18   $ 0.62   $ 0.39   WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING: Basic 1,114.8   1,075.2   1,097.1   1,077.2   Diluted 1,158.2   1,141.3   1,158.2   1,143.7    

(1)

  During the fourth quarter of 2017, the Partnership changed its accounting policy related to certain inventories. Certain crude oil, refined product and NGL inventories associated with the legacy Sunoco Logistics business were changed from the LIFO method to the weighted average cost method. These changes have been applied retrospectively to all periods presented, and the prior period amounts reflected below have been adjusted from those amounts previously reported. Certain other prior period amounts have also been reclassified to conform to the current period presentation, including a reclassification between capitalized interest and AFUDC from the three months and six months ended June 30, 2017.        

ENERGY TRANSFER EQUITY, L.P.

SUPPLEMENTAL INFORMATION

(In millions)

(unaudited)

  Three Months EndedJune 30, Six Months EndedJune 30, 2018     2017 2018     2017 Cash distributions from ETP associated with: Limited partner interest $ 15 $ 15 $ 31 $ 30 General partner interest and IDRs 451 400 900 781 IDR relinquishments, net of distributions on Class I Units (42 ) (162 ) (84 ) (319 ) Total cash distributions from ETP 424 253 847 492 Cash distributions from Sunoco LP 19 31 39 54 Cash distributions from USAC 11   —   11   —   Total cash distributions from investments in subsidiaries $ 454 $ 284 $ 897 $ 546   Distributable cash flow attributable to Lake Charles LNG: Revenues $ 49 $ 50 $ 98 99 Operating expenses (5 ) (4 ) (10 ) (9 ) Selling, general and administrative expenses —   (2 ) (1 ) (2 ) Distributable cash flow attributable to Lake Charles LNG $ 44 $ 44 $ 87 $ 88   Expenses of the Parent Company on a cash basis: Selling, general and administrative expenses, excluding certain non-cash expenses $ 8 $ 9 $ 10 17 Management fee to ETP (1) — — — 5 Interest expense, net of amortization of financing costs, interest income, and realized gains and losses on interest rate swaps 87   83   171   164   Total Parent Company expenses $ 95 $ 92 $ 181 $ 186   Cash distributions to be paid to the partners of ETE: Distributions to be paid to limited partners (2) $ 353 $ 250 $ 618 $ 500 Distributions to be paid to general partner 1   1   2   2   Total cash distributions to be paid to the partners of ETE $ 354   $ 251   $ 620   $ 502     Common units outstanding — end of period 1,158.2   1,079.1   1,158.2   1,079.1    

(1)

  ETE previously paid certain fees for management services under agreements which expired in the first quarter of 2017.

(2)

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.        

SUPPLEMENTAL INFORMATION

RECONCILIATION OF DISTRIBUTABLE CASH FLOW

(Dollars in millions)

(unaudited)

  Three Months EndedJune 30, Six Months EndedJune 30, 2018     2017 2018     2017 Net income attributable to partners $ 355 $ 212 $ 718 $ 451 Equity in earnings related to investments in ETP, Sunoco LP and USAC (420 ) (273 ) (834 ) (598 ) Total cash distributions from investments in subsidiaries 454 284 897 546 Amortization included in interest expense (excluding ETP, Sunoco LP and USAC) 3 3 5 5 Other non-cash (excluding ETP, Sunoco LP and USAC) 11   10   17   44   Distributable Cash Flow 403 236 803 448 Transaction-related expenses (recovery of prior expenses) 4   4   (1 ) 7   Distributable Cash Flow, as adjusted $ 407   $ 240   $ 802   $ 455     Total cash distributions to be paid to the partners of ETE $ 354   $ 251   $ 620   $ 502     Distribution coverage ratio(1) 1.15x 0.96x 1.29x 0.91x

(1)

  This press release and accompanying schedules include the non-generally accepted accounting principle (“non-GAAP”) financial measures of Distributable Cash Flow, Distributable Cash Flow, as adjusted, and Distributable Cash Flow, as adjusted, per Unit. The Partnership’s non-GAAP financial measures should not be considered as alternatives to GAAP financial measures such as net income, cash flow from operating activities or any other GAAP measure of liquidity or financial performance.  

Distributable Cash Flow and Distributable Cash Flow, as adjusted. The Partnership defines Distributable Cash Flow and Distributable Cash Flow, as adjusted, for a period as cash distributions expected to be received in respect of such period in connection with the Partnership’s investments in limited and general partner interests, net of the Partnership’s cash expenditures for general and administrative costs and interest expense. The Partnership’s definitions of Distributable Cash Flow and Distributable Cash Flow, as adjusted, also include distributable cash flow from Lake Charles LNG to the Partnership. For Distributable Cash Flow, as adjusted, certain transaction-related expenses that are included in net income are excluded.

Distributable Cash Flow is a significant liquidity measure used by the Partnership’s senior management to compare net cash flows generated by the Partnership to the distributions the Partnership expects to pay its unitholders. Due to cash expenses incurred from time to time in connection with the Partnership’s merger and acquisition activities and other transactions, Distributable Cash Flow, as adjusted, is also a significant liquidity measure used by the Partnership’s senior management to compare net cash flows generated by the Partnership to the distributions the Partnership expects to pay its unitholders. Using these measures, the Partnership’s management can compute the coverage ratio of estimated cash flows for a period to planned cash distributions for such period.

Distributable Cash Flow and Distributable Cash Flow, as adjusted, are also important non-GAAP financial measures for our limited partners since these indicate to investors whether the Partnership’s investments are generating cash flows at a level that can sustain or support an increase in quarterly cash distribution levels. Financial measures such as Distributable Cash Flow and Distributable Cash Flow, as adjusted, are quantitative standards used by the investment community with respect to publicly traded partnerships because the value of a partnership unit is in part measured by its yield (which in turn is based on the amount of cash distributions a partnership can pay to a unitholder). The GAAP measure most directly comparable to Distributable Cash Flow, and Distributable Cash Flow, as adjusted, is net income for ETE on a stand-alone basis (the “Parent Company”).

Distribution Coverage Ratio. The Partnership defines Distribution Coverage Ratio for a period as Distributable Cash Flow, as adjusted, divided by total cash distributions expected to be paid to the partners of ETE in respect of such period.

SUPPLEMENTAL INFORMATIONFINANCIAL STATEMENTS FOR PARENT COMPANY

Following are condensed balance sheets and statements of operations of the Parent Company on a stand-alone basis.

     

BALANCE SHEETS

(In millions)

(unaudited)

  June 30, 2018 December 31, 2017 ASSETS Current assets $ 59 $ 67 Property, plant and equipment, net 27 27 Advances to and investments in unconsolidated affiliates 6,042 6,082 Goodwill 9 9 Other non-current assets, net 7   8   Total assets $ 6,144   $ 6,193   LIABILITIES AND PARTNERS’ DEFICIT Current liabilities $ 78 $ 70 Long-term debt, less current maturities 6,472 6,700 Long-term notes payable – related companies 702 617 Other non-current liabilities 2 2 Commitments and contingencies Total partners’ deficit (1,110 ) (1,196 ) Total liabilities and partners’ deficit $ 6,144   $ 6,193          

STATEMENTS OF OPERATIONS

(In millions)

(unaudited)

  Three Months EndedJune 30, Six Months EndedJune 30, 2018     2017 2018   2017 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $ (9 ) $ (9 ) $ (11 ) $ (22 ) OTHER INCOME (EXPENSE): Interest expense, net (90 ) (86 ) (176 ) (169 ) Equity in earnings of unconsolidated affiliates 454 308 902 669 Losses on extinguishments of debt — — — (25 ) Other, net —   (1 ) 3   (2 ) NET INCOME 355 212 718 451 Convertible Unitholders’ interest in income 12 8 33 14 General Partner’s interest in net income 1   —   2   1   Limited Partners’ interest in net income $ 342   $ 204   $ 683   $ 436  

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Energy TransferInvestor Relations:Lyndsay Hannah, Brent Ratliff, 214-981-0795orMedia Relations:Vicki Granado, Lisa Dillinger, 214-840-5820