SEC Filing | Energy Transfer

View:

Download DOC

Download PDF

Download XLS

Download XBRL

et-20220630

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-32740

ENERGY TRANSFER LP

(Exact name of registrant as specified in its charter)


Delaware						30-0108820
(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)

(214) 981-0700

(Registrant’s telephone number, including area code)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Units

New York Stock Exchange

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

ETprC

New York Stock Exchange

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

ETprD

New York Stock Exchange

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

ETprE

New York Stock Exchange

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.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

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

At July 29, 2022, the registrant had 3,086,970,948 Common Units outstanding.

Table of Contents

FORM 10-Q

ENERGY TRANSFER LP AND SUBSIDIARIES

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

Consolidated Balance Sheets			5

Consolidated Statements of Operations			7

Consolidated Statements of Comprehensive Income			8

Consolidated Statements of Equity			9

Consolidated Statements of Cash Flows			10

Notes to Consolidated Financial Statements			11



























ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			37

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			60

ITEM 4. CONTROLS AND PROCEDURES			61

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS			62

ITEM 1A. RISK FACTORS			62









ITEM 6. EXHIBITS			62

SIGNATURE			64

Table of Contents

Definitions

References to the “Partnership” or “Energy Transfer” refer to Energy Transfer LP. 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





































			Citrus						Citrus, LLC, a 50/50 joint venture which owns FGT

			Dakota Access						Dakota Access, LLC, a less than wholly-owned subsidiary of Energy Transfer



			Enable						Enable Midstream Partners, LP, a Delaware limited partnership

			Energy Transfer Canada						Energy Transfer Canada ULC, a less than wholly-owned subsidiary of Energy Transfer

			Energy Transfer R&M						Energy Transfer (R&M), LLC (formerly Sunoco (R&M), LLC)



			Energy Transfer Preferred Units						Collectively, 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, Series G Preferred Units and Series H Preferred Units







			ETC Tiger						ETC Tiger Pipeline, LLC, a wholly-owned subsidiary of Energy Transfer, which owns the Tiger Pipeline






			ETO						Energy Transfer Operating, L.P., formerly a less than wholly-owned subsidiary of Energy Transfer until its merger into the Partnership in April 2021



			Exchange Act						Securities Exchange Act of 1934, as amended

			Explorer						Explorer Pipeline Company







			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















			General Partner						LE GP, LLC, the general partner of Energy Transfer

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



			IFERC						Inside FERC’s Gas Market Report

			LIBOR						London Interbank Offered Rate















			MBbls						thousand barrels

			MEP						Midcontinent Express Pipeline LLC

			MMcf						million cubic feet

			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, a wholly-owned subsidiary of Energy Transfer































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

















			SEC						Securities and Exchange Commission

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

Table of Contents



			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

			Series H Preferred Units						6.500% Series H Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units

			SCOOP						South Central Oklahoma Oil Province



















			SOFR						Secured overnight financing rate

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















			Transwestern						Transwestern Pipeline Company, LLC, a wholly-owned subsidiary of Energy Transfer

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



			USAC						USA Compression Partners, LP, a publicly traded partnership, of which Energy Transfer owns the general partner interests and 46.1 million common units

			White Cliffs						White Cliffs Pipeline, L.L.C.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(unaudited)


	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	353	$	336
Accounts receivable, net	10,163		7,654
Accounts receivable from related companies	122		54
Inventories	2,216		2,014
Income taxes receivable	86		32
Derivative assets	57		10
Other current assets	726		437
Current assets held for sale	1,711		—
Total current assets	15,434		10,537

Property, plant and equipment	103,724		103,991
Accumulated depreciation and depletion	(23,856)		(22,384)
Property, plant and equipment, net	79,868		81,607

Investments in unconsolidated affiliates	2,924		2,947

Lease right-of-use assets, net	822		838


Other non-current assets, net	1,561		1,645
Intangible assets, net	5,607		5,856
Goodwill	2,553		2,533

Total assets	$	108,769	$	105,963

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

Table of Contents

ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

(Dollars in million)

(unaudited)


	June 30, 2022		December 31, 2021
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	8,897	$	6,834
Accounts payable to related companies	17		—
Derivative liabilities	13		203

Operating lease current liabilities	44		47
Accrued and other current liabilities	3,413		3,071
Current maturities of long-term debt	2		680
Current liabilities held for sale	1,089		—
Total current liabilities	13,475		10,835

Long-term debt, less current maturities	48,104		49,022

Non-current derivative liabilities	144		193
Non-current operating lease liabilities	801		814
Deferred income taxes	3,611		3,648
Other non-current liabilities	1,376		1,323


Commitments and contingencies
Redeemable noncontrolling interests	493		783

Equity:
Limited Partners:
Preferred Unitholders	6,051		6,051
Common Unitholders	26,507		25,230
General Partner	(3)		(4)
Accumulated other comprehensive income	29		23
Total partners’ capital	32,584		31,300
Noncontrolling interests	8,181		8,045
Total equity	40,765		39,345
Total liabilities and equity	$	108,769	$	105,963

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

Table of Contents

ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in millions, except per unit data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
REVENUES:
Refined product sales	$	7,950	$	4,403	$	13,396	$	7,927
Crude sales	6,683		3,911		11,985		6,899
NGL sales	5,896		3,364		11,005		6,270
Gathering, transportation and other fees	2,765		2,255		5,458		4,521
Natural gas sales	2,429		1,007		4,182		6,131
Other	222		161		410		348
Total revenues	25,945		15,101		46,436		32,096
COSTS AND EXPENSES:
Cost of products sold	21,515		11,505		37,653		22,453
Operating expenses	1,060		867		2,009		1,687
Depreciation, depletion and amortization	1,046		940		2,074		1,894
Selling, general and administrative	211		184		441		385
Impairment losses	—		8		300		11
Total costs and expenses	23,832		13,504		42,477		26,430
OPERATING INCOME	2,113		1,597		3,959		5,666
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized	(578)		(566)		(1,137)		(1,155)
Equity in earnings of unconsolidated affiliates	62		65		118		120

Losses on extinguishments of debt	—		(1)		—		(8)
Gains (losses) on interest rate derivatives	129		(123)		243		71
Other, net	(18)		18		3		12
INCOME BEFORE INCOME TAX EXPENSE	1,708		990		3,186		4,706
Income tax expense	86		82		77		157
NET INCOME	1,622		908		3,109		4,549
Less: Net income attributable to noncontrolling interests	284		269		489		610
Less: Net income attributable to redeemable noncontrolling interests	12		13		25		25
NET INCOME ATTRIBUTABLE TO PARTNERS	1,326		626		2,595		3,914
General Partner’s interest in net income	1		1		2		4
Preferred Unitholders’ interest in net income	105		86		211		86
Common Unitholders’ interest in net income	$	1,220	$	539	$	2,382	$	3,824



NET INCOME PER COMMON UNIT:
Basic	$	0.40	$	0.20	$	0.77	$	1.41
Diluted	$	0.39	$	0.20	$	0.77	$	1.41

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

Table of Contents

ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in millions)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	1,622	$	908	$	3,109	$	4,549
Other comprehensive income, net of tax:
Change in value of available-for-sale securities	(4)		3		(9)		3
Actuarial gain related to pension and other postretirement benefit plans	—		—		7		5
Foreign currency translation adjustments	(30)		12		(19)		24
Change in other comprehensive income from unconsolidated affiliates	6		9		18		—
	(28)		24		(3)		32
Comprehensive income	1,594		932		3,106		4,581
Less: Comprehensive income attributable to noncontrolling interests	270		275		480		622
Less: Comprehensive income attributable to redeemable noncontrolling interests	12		13		25		25
Comprehensive income attributable to partners	$	1,312	$	644	$	2,601	$	3,934

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

Table of Contents

ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in millions)

(unaudited)


	Common Unitholders		Preferred Unitholders		General Partner		AOCI		Noncontrolling Interests		Total
Balance, December 31, 2021	$	25,230	$	6,051	$	(4)	$	23	$	8,045	$	39,345
Distributions to partners	(528)		(80)		—		—		—		(608)
Distributions to noncontrolling interests	—		—		—		—		(307)		(307)

Capital contributions from noncontrolling interests	—		—		—		—		373		373
Other comprehensive income, net of tax	—		—		—		20		5		25
Other, net	17		—		—		—		10		27
Net income, excluding amounts attributable to redeemable noncontrolling interests	1,162		106		1		—		205		1,474
Balance, March 31, 2022	25,881		6,077		(3)		43		8,331		40,329

Distributions to partners	(603)		(131)		(1)		—		—		(735)
Distributions to noncontrolling interests	—		—		—		—		(446)		(446)

Capital contributions from noncontrolling interests	—		—		—		—		24		24

Other comprehensive income, net of tax	—		—		—		(14)		(14)		(28)
Other, net	9		—		—		—		2		11
Net income, excluding amounts attributable to redeemable noncontrolling interests	1,220		105		1		—		284		1,610
Balance, June 30, 2022	$	26,507	$	6,051	$	(3)	$	29	$	8,181	$	40,765


	Common Unitholders		Preferred Unitholders		General Partner		AOCI		Noncontrolling Interests		Total
Balance, December 31, 2020	$	18,531	$	—	$	(8)	$	6	$	12,859	$	31,388
Distributions to partners	(406)		—		—		—		—		(406)
Distributions to noncontrolling interests	—		—		—		—		(406)		(406)

Capital contributions from noncontrolling interests	—		—		—		—		20		20
Other comprehensive income, net of tax	—		—		—		2		6		8
Other, net	18		—		—		—		3		21
Net income, excluding amounts attributable to redeemable noncontrolling interests	3,285		—		3		—		341		3,629
Balance, March 31, 2021	21,428		—		(5)		8		12,823		34,254
Preferred units converted in Rollup Mergers	—		4,768		—		—		(4,768)		—
Distributions to partners	(403)		(88)		(1)		—		—		(492)
Distributions to noncontrolling interests	—		—		—		—		(354)		(354)
Units issued	—		889		—		—		—		889
Capital contributions from noncontrolling interests	—		—		—		—		43		43

Other comprehensive income, net of tax	—		—		—		18		6		24
Other, net	15		(1)		—		—		2		16
Net income, excluding amounts attributable to redeemable noncontrolling interests	539		86		1		—		269		895
Balance, June 30, 2021	$	21,579	$	5,654	$	(5)	$	26	$	8,021	$	35,275

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

Table of Contents

ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(unaudited)


	Six Months Ended June 30,
	2022		2021
OPERATING ACTIVITIES:
Net income	$	3,109	$	4,549
Reconciliation of net income to net cash provided by operating activities:
Depreciation, depletion and amortization	2,074		1,894
Deferred income taxes	107		133
Inventory valuation adjustments	(121)		(159)
Non-cash compensation expense	61		55
Impairment losses	300		11

Losses on extinguishments of debt	—		8
Distributions on unvested awards	(27)		(13)
Equity in earnings of unconsolidated affiliates	(118)		(120)
Distributions from unconsolidated affiliates	108		100
Other non-cash	(38)		41
Net change in operating assets and liabilities, net of effects of acquisitions	(731)		661
Net cash provided by operating activities	4,724		7,160
INVESTING ACTIVITIES:
Cash paid for acquisition of Spindletop Assets	(325)		—
Cash paid for all other acquisitions	(264)		—
Capital expenditures, excluding allowance for equity funds used during construction	(1,458)		(1,429)
Contributions in aid of construction costs	35		16
Contributions to unconsolidated affiliates	—		(4)
Distributions from unconsolidated affiliates in excess of cumulative earnings	46		64
Proceeds from sales of other assets	12		24

Net cash used in investing activities	(1,954)		(1,329)
FINANCING ACTIVITIES:
Proceeds from borrowings	11,798		8,245
Repayments of debt	(12,819)		(13,425)
Preferred Units issued for cash	—		889

Capital contributions from noncontrolling interests	397		63
Distributions to partners	(1,343)		(898)
Distributions to noncontrolling interests	(753)		(760)
Distributions to redeemable noncontrolling interests	(24)		(24)
Debt issuance costs	(9)		(3)
Other, net	—		(3)
Net cash used in financing activities	(2,753)		(5,916)
Increase (decrease) in cash and cash equivalents	17		(85)
Cash and cash equivalents, beginning of period	336		367
Cash and cash equivalents, end of period	$	353	$	282

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

Table of Contents

ENERGY TRANSFER LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar and unit amounts, except per unit data, are in millions)

(unaudited)

1.ORGANIZATION AND BASIS OF PRESENTATION

Organization

The consolidated financial statements presented herein contain the results of Energy Transfer LP and its subsidiaries (the “Partnership,” “we,” “us,” “our” or “Energy Transfer”).

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 included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 18, 2022. 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 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. The Partnership owns the general partner interest, incentive distribution rights and 28.5 million common units of Sunoco LP, and the general partner interests and 46.1 million common units of USAC.

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

Use of Estimates

The unaudited consolidated financial statements have been prepared in conformity with GAAP, which requires the use of estimates and assumptions made by management that affect the reported amounts of assets, liabilities, revenues, expenses and the accrual for 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.

2.ACQUISITIONS AND DIVESTITURE TRANSACTIONS

Woodford Express Acquisition

In August 2022, Energy Transfer entered into an agreement to acquire 100% of the membership interests in Woodford Express, LLC, a Mid-Continent gas gathering and processing system, for approximately $485 million in cash consideration. The system, which is located in the heart of the SCOOP play, has 450 MMcf/d of cryogenic gas processing and treating capacity and over 200 miles of gathering lines, which are connected to Energy Transfer’s pipeline network. The transaction is expected to close by the end of the third quarter, subject to customary closing conditions including Hart-Scott-Rodino Act clearance.

Energy Transfer Canada Sale

In March 2022, the Partnership announced a definitive agreement to sell its 51% interest in Energy Transfer Canada. The sale is expected to result in cash proceeds to Energy Transfer of approximately C$340 million (US$264 million at the June 30, 2022 exchange rate), subject to certain purchase price adjustments. The transaction is expected to close by the third quarter of 2022.

Energy Transfer Canada’s assets and liabilities were reflected as held for sale in the Partnership’s consolidated balance sheet as of June 30, 2022. Energy Transfer Canada’s assets and operations are included in the all other segment. Energy Transfer Canada does not meet the criteria to be reflected as discontinued operations in the Partnership’s consolidated statement of operations. Based on the anticipated proceeds of the sale, during the three months ended March 31, 2022, the Partnership recorded a write-down on Energy Transfer Canada’s assets of $300 million, of which $164 million was allocated to noncontrolling interests and $136 million was reflected in net income attributable to partners.

Table of Contents

The following table presents the assets and liabilities classified as held for sale in the Partnership’s consolidated balance sheet as of June 30, 2022:


	June 30, 2022
Carrying amounts of assets held for sale
Cash and cash equivalents	$	3
Accounts receivable, net	102
Other current assets	7
Property, plant and equipment, net	1,486
Other non-current assets, net	16
Intangible assets, net	97
Total assets held for sale	$	1,711

Carrying amounts of liabilities held for sale
Accounts payable	$	2
Accrued and other current liabilities	58
Long-term debt, including current maturities	543
Other non-current liabilities, net	195
Redeemable noncontrolling interests	291
Total liabilities held for sale	$	1,089

Spindletop Assets Purchase

In March 2022, the Partnership purchased the membership interests in Caliche Coastal Holdings, LLC (subsequently renamed Energy Transfer Spindletop LLC), which owns an underground storage facility near Mont Belvieu, Texas, for approximately $325 million.

Enable Acquisition

On December 2, 2021, the Partnership completed the acquisition of Enable. As of August 4, 2022, there has been no material changes to the preliminary purchase price allocation disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 18, 2022.

Sunoco LP Acquisition

On April 1, 2022, Sunoco LP completed the acquisition of a transmix processing and terminal facility in Huntington, Indiana for $264 million, of which $96 million was allocated to intangible assets, $19 million to goodwill, $