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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-31219

Energy Transfer Operating, L.P.

(Exact name of registrant as specified in its charter)



Delaware		73-1493906
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

8111 Westchester Drive, Suite 600, Dallas, Texas 75225

(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code: (214) 981-0700

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
7.375% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units	ETPprC	New York Stock Exchange
7.625% Series D Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units	ETPprD	New York Stock Exchange
7.600% Series E Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units	ETPprE	New York Stock Exchange
4.250% Senior Notes due 2023	ETP 23	New York Stock Exchange
5.875% Senior Notes due 2024	ETP 24	New York Stock Exchange
5.500% Senior Notes due 2027	ETP 27	New York Stock Exchange

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FORM 10-Q

ENERGY TRANSFER OPERATING, L.P. AND SUBSIDIARIES

TABLE OF CONTENTS



PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

Consolidated Balance Sheets	1

Consolidated Statements of Operations	3

Consolidated Statements of Comprehensive Income (Loss)	4

Consolidated Statements of Equity	5

Consolidated Statements of Cash Flows	6

Notes to Consolidated Financial Statements	7

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	34

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	55

ITEM 4. CONTROLS AND PROCEDURES	57

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	58

ITEM 1A. RISK FACTORS	58

ITEM 6. EXHIBITS	60

SIGNATURE	62

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Definitions

References to the “Partnership” or “ETO” refer to Energy Transfer Operating, L.P. In addition, the following is a list of certain acronyms and terms used throughout this document:



	/d		per day

	AOCI		accumulated other comprehensive income (loss)

	BBtu		billion British thermal units

	Btu		British thermal unit, an energy measurement used by gas companies to convert the volume of gas used to its heat equivalent, and thus calculate the actual energy used

	CDM		CDM Resource Management LLC and CDM Environmental & Technical Services LLC, collectively

	Citrus		Citrus, LLC

	DOJ		United States Department of Justice

	EPA		United States Environmental Protection Agency

	ET		Energy Transfer LP, the parent company of ETO

	ETC Sunoco		ETC Sunoco Holdings LLC (formerly, Sunoco, Inc.), a wholly-owned subsidiary of ETO

	ETP GP		Energy Transfer Partners GP, L.P., the general partner of ETO

	ETP LLC		Energy Transfer Partners, L.L.C., the general partner of ETP GP

	Exchange Act		Securities Exchange Act of 1934

	FEP		Fayetteville Express Pipeline LLC

	FERC		Federal Energy Regulatory Commission

	FGT		Florida Gas Transmission Company, LLC, a wholly-owned subsidiary of Citrus

	GAAP		accounting principles generally accepted in the United States of America

	HFOTCO		Houston Fuel Oil Terminal Company, a wholly-owned subsidiary of ETO, which owns the Houston Terminal

	IDRs		incentive distribution rights

	Lake Charles LNG		Lake Charles LNG Company, LLC (previously named Trunkline LNG Company, LLC), a wholly-owned subsidiary of ETO

	LIBOR		London Interbank Offered Rate

	MBbls		thousand barrels

	MEP		Midcontinent Express Pipeline LLC

	MTBE		methyl tertiary butyl ether

	NGL		natural gas liquid, such as propane, butane and natural gasoline

	NYMEX		New York Mercantile Exchange

	OSHA		federal Occupational Safety and Health Act

	OTC		over-the-counter

	Panhandle		Panhandle Eastern Pipe Line Company, LP and its subsidiaries, wholly-owned by ETO

	PES		Philadelphia Energy Solutions Refining and Marketing LLC, non-controlling interest owned by ETO

	Preferred Unitholders		Unitholders of the Series A Preferred Units, Series B Preferred Units, Series C Preferred Units, Series D Preferred Units, Series E Preferred Units, Series F Preferred Units and Series G Preferred Units, collectively

	Regency		Regency Energy Partners LP, a wholly-owned subsidiary of ETO

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	RIGS		Regency Intrastate Gas System, a wholly-owned subsidiary of ETO

	Rover		Rover Pipeline LLC, a less than wholly-owned subsidiary of ETO

	SEC		Securities and Exchange Commission

	SemGroup		SemGroup Corporation

	Series A Preferred Units		6.250% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

	Series B Preferred Units		6.625% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

	Series C Preferred Units		7.375% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

	Series D Preferred Units		7.625% Series D Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

	Series E Preferred Units		7.600% Series E Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

	Series F Preferred Units		6.750% Series F Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units

	Series G Preferred Units		7.125% Series G Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units

	SPLP		Sunoco Pipeline L.P., a wholly-owned subsidiary of ETO

	Sunoco Logistics Operations		Sunoco Logistics Partners Operations L.P., a wholly-owned subsidiary of ETO

	Sunoco R&M		Sunoco (R&M), LLC

	Southwest Gas		Pan Gas Storage LLC (d.b.a. Southwest Gas Storage Company)

	Transwestern		Transwestern Pipeline Company, LLC, a wholly-owned subsidiary of ETO

	Trunkline		Trunkline Gas Company, LLC, a wholly-owned subsidiary of Panhandle

	USAC		USA Compression Partners, LP, a wholly-owned subsidiary of ETO

	USAC Preferred Units		USAC Series A Preferred Units
	White Cliffs		White Cliffs Pipeline

iii

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENERGY TRANSFER OPERATING, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(unaudited)



	March 31, 2020			December 31, 2019*
ASSETS
Current assets:
Cash and cash equivalents	$	189		$	265
Accounts receivable, net	3,268			4,921
Accounts receivable from related companies	138			175
Inventories	1,024			1,532
Income taxes receivable	115			141
Derivative assets	25			23
Other current assets	297			287
Total current assets	5,056			7,344

Property, plant and equipment	89,132			87,886
Accumulated depreciation and depletion	(16,161		)	(15,395		)
	72,971			72,491

Advances to and investments in unconsolidated affiliates	3,313			3,435
Lease right-of-use assets, net	1,026			956
Other non-current assets, net	1,493			1,547
Notes receivable from related company	5,299			5,926
Intangible assets, net	5,948			5,974
Goodwill	3,807			5,132
Total assets	$	98,913		$	102,805

*As adjusted. See Note 1.

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER OPERATING, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(unaudited)



	March 31, 2020			December 31, 2019*
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	2,378		$	4,099
Accounts payable to related companies	1,037			1,112
Derivative liabilities	9			147
Operating lease current liabilities	54			57
Accrued and other current liabilities	3,888			3,245
Current maturities of long-term debt	16			12
Total current liabilities	7,382			8,672

Long-term debt, less current maturities	49,909			50,560
Non-current derivative liabilities	573			273
Non-current operating lease liabilities	821			895
Deferred income taxes	3,180			3,113
Other non-current liabilities	1,161			1,134

Commitments and contingencies
Redeemable noncontrolling interests	492			492

Equity:
Limited Partners:
Preferred Unitholders	4,748			3,174
Common Unitholders	22,804			24,226
Accumulated other comprehensive loss	(37		)	(18		)
Total partners’ capital	27,515			27,382
Noncontrolling interests	7,880			8,018
Predecessor equity	—			2,266
Total equity	35,395			37,666
Total liabilities and equity	$	98,913		$	102,805

*As adjusted. See Note 1.

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER OPERATING, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in millions)

(unaudited)



	Three Months Ended March 31,
	2020			2019*
REVENUES:
Refined product sales	$	3,232		$	3,726
Crude sales	3,543			3,525
NGL sales	1,689			2,402
Gathering, transportation and other fees	2,326			2,267
Natural gas sales	588			964
Other	190			237
Total revenues	11,568			13,121
COSTS AND EXPENSES:
Cost of products sold	8,291			9,477
Operating expenses	848			808
Depreciation, depletion and amortization	851			771
Selling, general and administrative	192			149
Impairment losses	1,325			50
Total costs and expenses	11,507			11,255
OPERATING INCOME	61			1,866
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized	(595		)	(527		)
Equity in earnings (losses) of unconsolidated affiliates	(7		)	65
Losses on extinguishments of debt	(59		)	(2		)
Losses on interest rate derivatives	(329		)	(74		)
Other, net	75			17
INCOME (LOSS) BEFORE INCOME TAX EXPENSE	(854		)	1,345
Income tax expense	53			126
NET INCOME (LOSS)	(907		)	1,219
Less: Net income (loss) attributable to noncontrolling interests	(200		)	256
Less: Net income attributable to redeemable noncontrolling interests	12			13
NET INCOME (LOSS) ATTRIBUTABLE TO PARTNERS	$	(719	)	$	950

*As adjusted. See Note 1.

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER OPERATING, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in millions)

(unaudited)



	Three Months Ended March 31,
	2020			2019*
Net income (loss)	$	(907	)	$	1,219
Other comprehensive income (loss), net of tax:
Change in value of available-for-sale securities	(9		)	5
Actuarial gain related to pension and other postretirement benefit plans	6			7
Change in other comprehensive income from unconsolidated affiliates	(16		)	(4		)
	(19		)	8
Comprehensive income (loss)	(926		)	1,227
Less: Comprehensive income (loss) attributable to noncontrolling interests	(200		)	256
Less: Comprehensive income attributable to redeemable noncontrolling interests	12			13
Comprehensive income (loss) attributable to partners	$	(738	)	$	958

*As adjusted. See Note 1.

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER OPERATING, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in millions)

(unaudited)



	Limited Partners
	Preferred Unitholders			Common Unitholders			AOCI			Non-controlling Interests			Predecessor Equity			Total
Balance, December 31, 2019*	$	3,174		$	24,226		$	(18	)	$	8,018		$	2,266		$	37,666
Distributions to partners	(80		)	(2,550		)	—			—			—			(2,630		)
Distributions to noncontrolling interests	—			—			—			(340		)	—			(340		)
Units issued for cash	1,580			—			—			—			—			1,580
Capital contributions from noncontrolling interests	—			—			—			66			—			66
SemGroup contribution (See Note 2)	—			1,933			—			333			(2,266		)	—
Other comprehensive loss, net of tax	—			—			(19		)	—			—			(19		)
Other, net	(3		)	(9		)	—			3			—			(9		)
Net income (loss), excluding amounts attributable to redeemable noncontrolling interests	77			(796		)	—			(200		)	—			(919		)
Balance, March 31, 2020	$	4,748		$	22,804		$	(37	)	$	7,880		$	—		$	35,395



	Limited Partners
	Preferred Unitholders			Common Unitholders			AOCI			Non-controlling Interests			Total
Balance, December 31, 2018*	$	2,388		$	26,539		$	(42	)	$	7,903		$	36,788
Distributions to partners	(64		)	(1,450		)	—			—			(1,514		)
Distributions to noncontrolling interests	—			—			—			(361		)	(361		)
Capital contributions from noncontrolling interests	—			—			—			140			140
Sale of noncontrolling interest in subsidiary	—			—			—			93			93
Other comprehensive income, net of tax	—			—			8			—			8
Other, net	—			15			—			13			28
Net income, excluding amounts attributable to redeemable noncontrolling interest	40			910			—			256			1,206
Balance, March 31, 2019*	$	2,364		$	26,014		$	(34	)	$	8,044		$	36,388

*As adjusted. See Note 1.

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER OPERATING, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(unaudited)



	Three Months Ended March 31,
	2020			2019*
OPERATING ACTIVITIES
Net income (loss)	$	(907	)	$	1,219
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	851			771
Deferred income taxes	66			98
Inventory valuation adjustments	227			(93		)
Non-cash compensation expense	18			29
Impairment losses	1,325			50
Losses on extinguishments of debt	59			2
Distributions on unvested awards	(2		)	(1		)
Equity in (earnings) losses of unconsolidated affiliates	7			(65		)
Distributions from unconsolidated affiliates	58			66
Other non-cash	11			107
Net change in operating assets and liabilities, net of effects of acquisitions	113			(337		)
Net cash provided by operating activities	1,826			1,846
INVESTING ACTIVITIES
Cash proceeds from sale of noncontrolling interest in subsidiary	—			93
Cash paid for all other acquisitions, net of cash received	—			(5		)
Capital expenditures, excluding allowance for equity funds used during construction	(1,621		)	(1,150		)
Contributions in aid of construction costs	25			15
Contributions to unconsolidated affiliates	(9		)	(28		)
Distributions from unconsolidated affiliates in excess of cumulative earnings	52			13
Proceeds from the sale of other assets	2			4
Other	(6		)	(40		)
Net cash used in investing activities	(1,557		)	(1,098		)
FINANCING ACTIVITIES
Proceeds from borrowings	12,088			11,295
Repayments of debt	(12,769		)	(9,513		)
Cash received from (paid to) related company	611			(613		)
Preferred units issued for cash	1,580			—
Capital contributions from noncontrolling interests	66			140
Distributions to partners	(1,530		)	(1,514		)
Distributions to noncontrolling interests	(340		)	(361		)
Debt issuance costs	(51		)	(84		)
Net cash used in financing activities	(345		)	(650		)
Increase (decrease) in cash and cash equivalents	(76		)	98
Cash and cash equivalents, beginning of period	265			418
Cash and cash equivalents, end of period	$	189		$	516

*As adjusted. See Note 1.

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER OPERATING, L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar and unit amounts are in millions)

(unaudited)


1.	ORGANIZATION AND BASIS OF PRESENTATION

Organization

The consolidated financial statements presented herein include Energy Transfer Operating, L.P. and its subsidiaries (the “Partnership,” “we,” “us,” “our” or “ETO”).

Energy Transfer Operating, L.P. is a consolidated subsidiary of Energy Transfer LP. In December 2019, ET completed the acquisition of SemGroup. During the first quarter of 2020, ET contributed certain former SemGroup subsidiaries to ETO through sale and contribution transactions. The contribution transactions were accounted for as reorganizations of entities under common control; therefore, the contributed entities’ assets and liabilities were not adjusted as of the contribution date. The Partnership’s consolidated financial statements have been retrospectively adjusted to reflect consolidation beginning December 5, 2019 for SemGroup assets contributed (the date ET acquired SemGroup). Predecessor equity included in the consolidated financial statements represents the equity of contributed entities prior to the contribution transactions.

Our consolidated financial statements reflect the following reportable segments:

•intrastate transportation and storage;

•interstate transportation and storage;

•midstream;

•NGL and refined products transportation and services;

•crude oil transportation and services;

•investment in Sunoco LP;

•investment in USAC; and

•all other.

Basis of Presentation

The unaudited financial information included in this Form 10-Q has been prepared on the same basis as the audited consolidated financial statements of Energy Transfer Operating, L.P. for the year ended December 31, 2019, included in the Partnership’s Annual Report on Form 10-K filed with the SEC on February 21, 2020. In the opinion of the Partnership’s management, such financial information reflects all adjustments necessary for a fair presentation of the financial position and the results of operations for such interim periods in accordance with GAAP. All intercompany items and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the SEC.

The consolidated financial statements of the Partnership presented herein include the results of operations of our controlled subsidiaries, including Sunoco LP and USAC.

Certain prior period amounts have also been reclassified to conform to the current period presentation. These reclassifications had no impact on net income or total equity.

Change in Accounting Policy

Effective January 1, 2020, the Partnership elected to change its accounting policy related to certain barrels of crude oil that were previously accounted for as inventory. Under the revised accounting policy, certain amounts of crude oil that are not available for sale have been reclassified from inventory to non-current assets. These crude oil barrels, which are owned by the Partnership’s crude oil acquisition and marketing business, include pipeline linefill and tank bottoms and are not considered to be available for sale because the volumes must be maintained in order to continue normal operation of the related pipelines or tanks and because there is no expectation of liquidation or sale of these volumes in the near term.

Under the previous accounting policy, all crude oil barrels were recorded as inventory under the weighted-average cost method. Under the revised accounting policy, barrels related to pipeline linefill and tank bottoms are accounted for as long-lived assets and reflected as non-current assets on the consolidated balance sheet. These crude oil barrels will be tested for impairment

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consistent with the Partnership’s existing accounting policy for impairments of long-lived assets. The Partnership’s management believes that the change in accounting policy is preferable as it more closely aligns the accounting policies across the consolidated entity, given that similar assets in the Partnership’s natural gas, NGLs and refined products businesses are accounted for as non-current assets. In addition, management believes that reflecting these crude oil barrels as non-current assets better represents the economic results of the Partnership’s crude oil acquisition and marketing business by reducing volatility resulting from market price adjustments to crude oil barrels that are not expected to be sold or liquidated in the near term.

The impact of this accounting policy change on the Partnership’s net income for three months ended March 31, 2020, was approximately $265 million. As a result of this change in accounting policy, the Partnership’s consolidated balance sheets for prior periods have been retrospectively adjusted as follows:



	December 31, 2019							December 31, 2018
	As Originally Reported*		Effect of Change			As Adjusted		As Originally Reported		Effect of Change			As Adjusted
Inventories	$	1,935	$	(403	)	$	1,532	$	1,677	$	(305	)	$	1,372
Total current assets	7,747		(403		)	7,344		6,820		(305		)	6,515
Other non-current assets, net	1,051		496			1,547		1,006		472			1,478
Total assets	102,712		93			102,805		88,442		167			88,609
Total partners' capital	27,289		93			27,382		28,718		167			28,885

* Amounts reflect the retrospective consolidation of the SemGroup entities discussed above.

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In addition, the Partnership’s consolidated statements of operations, comprehensive income and cash flows for prior periods have been retrospectively adjusted as follows:



	Year Ended December 31,						Three Months Ended March 31,
	2019			2018			2019
As originally reported:
Consolidated Statements of Operations and Comprehensive Income
Cost of products sold	$	39,603		$	41,658		$	9,415
Operating income	7,285			5,402			1,928
Income from continuing operations before income tax expense (benefit)	5,386			4,044			1,407
Net income	5,186			3,774			1,281
Comprehensive income	5,210			3,731			1,289
Comprehensive income attributable to partners	4,108			2,982			1,020

Consolidated Statements of Cash Flows
Net income	5,186			3,774			1,281
Net change in operating assets and liabilities	(479		)	117			(399		)

Effect of change:
Consolidated Statements of Operations and Comprehensive Income
Cost of products sold	74			(55		)	62
Operating income	(74		)	55			(62		)
Income from continuing operations before income tax expense (benefit)	(74		)	55			(62		)
Net income	(74		)	55			(62		)
Comprehensive income	(74		)	55			(62		)
Comprehensive income attributable to partners	(74		)	55			(62		)

Consolidated Statements of Cash Flows
Net income	(74		)	55			(62		)
Net change in operating assets and liabilities	74			(55		)	62

As adjusted:
Consolidated Statements of Operations and Comprehensive Income
Cost of products sold	39,677			41,603			9,477
Operating income	7,211			5,457			1,866
Income from continuing operations before income tax expense (benefit)	5,312			4,099			1,345
Net income	5,112			3,829			1,219
Comprehensive income	5,136			3,786			1,227
Comprehensive income attributable to partners	4,034			3,037			958

Consolidated Statements of Cash Flows
Net income	5,112			3,829			1,219
Net change in operating assets and liabilities	(405		)	62			(337		)

Use of Estimates

The unaudited consolidated financial statements have been prepared in conformity with GAAP, which includes the use of estimates and assumptions made by management that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities that exist at the date of the consolidated financial statements. Although these estimates are based on management’s available knowledge of current and expected future events, actual results could be different from those estimates.

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Recent Accounting Pronouncements

Effective January 1, 2020, the Partnership adopted Accounting Standards Update (“ASU”) 2016-13 "Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments." ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate its lifetime "expected credit loss" and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. The impact of adoption was immaterial to the Partnership. However, due in large part to the global economic impacts of COVID-19, the Partnership and its subsidiaries recorded an aggregate $16 million of current expected credit losses for the three months ended March 31, 2020.

Goodwill

During the first quarter of 2020, due to the impacts of the COVID-19 pandemic, the decline in commodity prices and the decreases in the Partnership’s market capitalization, we determined that interim impairment testing should be performed on certain reporting units. We performed the interim impairment tests consistent with our approach for annual impairment testing, including using similar models, inputs and assumptions. As a result of the interim impairment test, the Partnership recognized a goodwill impairment of $483 million related to our Arklatex and South Texas operations within the midstream segment, a goodwill impairment of $183 million related to our Lake Charles LNG regasification operations within the interstate transportation and storage segment due to a contractual reduction in payments for the remainder of the contract term, and a goodwill impairment of $40 million related to our all other operations primarily due to decreases in projected future revenues and cash flows as a result of the overall market demand decline. In addition, USAC recognized a goodwill impairment of $619 million during the three months ended March 31, 2020, which is included in the Partnership's consolidated results of operations. No other impairments of the Partnership’s goodwill were identified.

In connection with aforementioned impairments, the Partnership determined the fair value of our reporting units using the income approach. The income approach is based on the present value of future cash flows, which are derived from our long-term financial forecasts, and requires significant assumptions including, among others, revenue growth rates, operating margins, weighted average costs of capital and future market conditions, among others. The Partnership believes the estimates and assumptions used in our impairment assessments are reasonable and based on available market information, but variations in any of the assumptions could result in materially different calculations of fair value and determinations of whether or not an impairment is indicated. Cash flow projections are derived from one-year budgeted amounts and three-year operating forecasts plus an estimate of later period cash flows, all of which are evaluated by management. Subsequent period cash flows are developed for each reporting unit using growth rates that management believes are reasonably likely to occur.

Of the $3.81 billion of goodwill on the Partnership’s consolidated balance sheet as of March 31, 2020, approximately $1.2 billion is recorded in reporting units for which the estimated fair value exceeded the carrying value by less than 20% in the most recent quantitative test. Management believes that all of the $1.2 billion is at significant risk of impairment, if commodity prices and/or overall market demand remains low. In addition, as of March 31, 2020, the Partnership's goodwill balance includes approximately $230 million of goodwill related to the SemGroup assets that were contributed from ET, as discussed above; these goodwill balances are subject to change as the purchase price allocation has not been finalized. Future goodwill impairment could be impacted by the finalization of the SemGroup purchase accounting.

Changes in the carrying amounts of goodwill were as follows: