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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 September 30, 2023

¨ 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 October 27, 2023, the registrant had 3,145,065,881 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			11
Notes to Consolidated Financial Statements			12
1. Organization and Basis of Presentation			12
2. Acquisitions			12
3. Cash and Cash Equivalents			13
4. Inventories			14
5. Fair Value Measurements			14
6. Net Income Per Common Unit			17
7. Debt Obligations			17
8. Redeemable Noncontrolling Interests			18
9. Equity			19
10. Regulatory Matters, Commitments, Contingencies and Environmental Liabilities			22
11. Revenue			32
12. Derivative Assets and Liabilities			33
13. Reportable Segments			38
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			41
Recent Developments			41
Results of Operations			43
Liquidity and Capital Resources			57
Cash Distributions			61


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			66
ITEM 4. CONTROLS AND PROCEDURES			67
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			69
ITEM 1A. RISK FACTORS			69







ITEM 6. EXHIBITS			70
SIGNATURE			71

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
			BBtu						billion British thermal units
			Citrus						Citrus, LLC, a 50/50 joint venture which owns Florida Gas Transmission Company, LLC, which owns the Florida Gas Transmission Pipeline
			Dakota Access						Dakota Access, LLC, a non-wholly-owned subsidiary of Energy Transfer and/or Dakota Access Pipeline
			Energy Transfer Canada						Energy Transfer Canada ULC, a non-wholly-owned subsidiary of Energy Transfer until its sale in August 2022
			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
			Energy Transfer R&M						Energy Transfer (R&M), LLC (formerly Sunoco (R&M), LLC)
			ETC Sunoco						ETC Sunoco Holdings LLC (formerly Sunoco, Inc.), a wholly-owned subsidiary of Energy Transfer
			ETO						Energy Transfer Operating, L.P., formerly a non-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
			GAAP						accounting principles generally accepted in the United States of America
			General Partner						LE GP, LLC, the general partner of Energy Transfer
			HFOTCO						HFOTCO LLC, 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
			NGL						natural gas liquid, such as propane, butane and natural gasoline
			NYMEX						New York Mercantile Exchange
			OTC						over-the-counter
			Panhandle						Panhandle Eastern Pipe Line Company, LP, a wholly-owned subsidiary of Energy Transfer and/or Panhandle Eastern Pipe Line
			Partnership Agreement						Energy Transfer’s Third Amended and Restated Agreement of Limited Partnership, as amended to date
			PHMSA						Pipeline and Hazardous Materials Safety Administration
			Rover						Rover Pipeline LLC, a non-wholly-owned subsidiary of Energy Transfer and/or Rover Pipeline
			Sea Robin						Sea Robin Pipeline Company, LLC, a 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 (currently a floating rate security)
			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 (currently a floating rate security)
			Series D Preferred Units						7.625% Series D Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (currently a floating rate security)
			Series E Preferred Units						7.600% Series E Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

Table of Contents


			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
			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 and/or Transwestern Pipeline
			USAC						USA Compression Partners, LP, a publicly traded partnership and consolidated subsidiary of Energy Transfer
			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)


	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	514	$	257
Accounts receivable, net	9,612		8,466
Accounts receivable from related companies	101		93
Inventories	2,590		2,461
Income taxes receivable	84		68
Derivative assets	14		10
Other current assets	508		726

Total current assets	13,423		12,081

Property, plant and equipment	109,411		105,996
Accumulated depreciation and depletion	(28,538)		(25,685)
Property, plant and equipment, net	80,873		80,311

Investments in unconsolidated affiliates	2,993		2,893
Non-current derivative assets	4		—
Lease right-of-use assets, net	820		819


Other non-current assets, net	1,690		1,558
Intangible assets, net	5,204		5,415
Goodwill	2,564		2,566

Total assets	$	107,571	$	105,643

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)


	September 30, 2023		December 31, 2022
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	7,997	$	6,952
Accounts payable to related companies	7		17
Derivative liabilities	4		23

Operating lease current liabilities	45		45
Accrued and other current liabilities	3,696		3,329
Current maturities of long-term debt	1,006		2

Total current liabilities	12,755		10,368

Long-term debt, less current maturities	47,075		48,260

Non-current derivative liabilities	—		23
Non-current operating lease liabilities	775		798
Deferred income taxes	3,891		3,701
Other non-current liabilities	2,016		1,341


Commitments and contingencies
Redeemable noncontrolling interests	498		493

Equity:
Limited Partners:
Preferred Unitholders	6,083		6,051
Common Unitholders	27,014		26,960
General Partner	(2)		(2)
Accumulated other comprehensive income	29		16
Total partners’ capital	33,124		33,025
Noncontrolling interests	7,437		7,634
Total equity	40,561		40,659
Total liabilities and equity	$	107,571	$	105,643

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
REVENUES:
Refined product sales	$	6,403	$	6,647	$	17,691	$	20,043
Crude sales	6,587		5,773		17,298		17,758
NGL sales	3,760		4,823		11,409		15,828
Gathering, transportation and other fees	2,824		2,830		8,412		8,288
Natural gas sales	878		2,648		2,462		6,830
Other	287		218		782		628
Total revenues	20,739		22,939		58,054		69,375
COSTS AND EXPENSES:
Cost of products sold	16,059		18,516		44,761		56,169
Operating expenses	1,105		973		3,224		2,982
Depreciation, depletion and amortization	1,107		1,030		3,227		3,104
Selling, general and administrative	234		361		700		802
Impairment losses and other	1		86		12		386
Total costs and expenses	18,506		20,966		51,924		63,443
OPERATING INCOME	2,233		1,973		6,130		5,932
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized	(632)		(577)		(1,892)		(1,714)
Equity in earnings of unconsolidated affiliates	103		68		286		186


Gains on interest rate derivatives	32		60		47		303
Non-operating litigation-related loss	(625)		—		(625)		—
Other, net	13		(120)		37		(117)
INCOME BEFORE INCOME TAX EXPENSE	1,124		1,404		3,983		4,590
Income tax expense	77		82		256		159
NET INCOME	1,047		1,322		3,727		4,431
Less: Net income attributable to noncontrolling interests	451		304		1,080		793
Less: Net income attributable to redeemable noncontrolling interests	12		12		39		37
NET INCOME ATTRIBUTABLE TO PARTNERS	584		1,006		2,608		3,601
General Partner’s interest in net income	—		1		2		3
Preferred Unitholders’ interest in net income	118		106		340		317
Common Unitholders’ interest in net income	$	466	$	899	$	2,266	$	3,281



NET INCOME PER COMMON UNIT:
Basic	$	0.15	$	0.29	$	0.73	$	1.06
Diluted	$	0.15	$	0.29	$	0.72	$	1.06

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	1,047	$	1,322	$	3,727	$	4,431
Other comprehensive income (loss), net of tax:
Change in value of available-for-sale securities	2		(4)		2		(13)
Actuarial gain related to pension and other postretirement benefit plans	—		—		—		7
Foreign currency translation adjustments	—		13		(5)		(6)
Change in other comprehensive income from unconsolidated affiliates	3		6		6		24
	5		15		3		12
Comprehensive income	1,052		1,337		3,730		4,443
Less: Comprehensive income attributable to noncontrolling interests	451		307		1,080		787
Less: Comprehensive income attributable to redeemable noncontrolling interests	12		12		39		37
Comprehensive income attributable to partners	$	589	$	1,018	$	2,611	$	3,619

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, 2022	$	26,960	$	6,051	$	(2)	$	16	$	7,634	$	40,659
Distributions to partners	(920)		(80)		(1)		—		—		(1,001)
Distributions to noncontrolling interests	—		—		—		—		(441)		(441)

Capital contributions from noncontrolling interests	—		—		—		—		3		3
Other comprehensive loss, net of tax	—		—		—		(3)		—		(3)
Other, net	14		—		—		—		4		18
Net income, excluding amounts attributable to redeemable noncontrolling interests	1,003		109		1		—		321		1,434
Balance, March 31, 2023	27,057		6,080		(2)		13		7,521		40,669
Distributions to partners	(942)		(151)		(1)		—		—		(1,094)
Distributions to noncontrolling interests	—		—		—		—		(421)		(421)



Other comprehensive income, net of tax	—		—		—		1		—		1
Lotus Midstream acquisition	574		—		—		—		—		574
Other, net	1		—		—		10		3		14
Net income, excluding amounts attributable to redeemable noncontrolling interests	797		113		1		—		308		1,219
Balance, June 30, 2023	27,487		6,042		(2)		24		7,411		40,962
Distributions to partners	(952)		(77)		—		—		—		(1,029)
Distributions to noncontrolling interests	—		—		—		—		(428)		(428)


Other comprehensive income, net of tax	—		—		—		5		—		5
Other, net	13		—		—		—		3		16
Net income, excluding amounts attributable to redeemable noncontrolling interests	466		118		—		—		451		1,035
Balance, September 30, 2023	$	27,014	$	6,083	$	(2)	$	29	$	7,437	$	40,561

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

Table of Contents

ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (continued)

(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 loss, 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
Distributions to partners	(694)		(80)		(1)		—		—		(775)
Distributions to noncontrolling interests	—		—		—		—		(424)		(424)
Capital contributions from noncontrolling interests	—		—		—		—		7		7

Energy Transfer Canada sale	—		—		—		(9)		(337)		(346)
Other comprehensive loss, net of tax	—		—		—		12		3		15
Other, net	13		—		—		—		3		16
Net income, excluding amounts attributable to redeemable noncontrolling interests	899		106		1		—		304		1,310
Balance, September 30, 2022	$	26,725	$	6,077	$	(3)	$	32	$	7,737	$	40,568

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)


	Nine Months Ended September 30,
	2023		2022
OPERATING ACTIVITIES:
Net income	$	3,727	$	4,431
Reconciliation of net income to net cash provided by operating activities:
Depreciation, depletion and amortization	3,227		3,104
Deferred income taxes	187		158
Inventory valuation adjustments	(113)		(81)
Non-cash compensation expense	99		88
Impairment losses and other	12		386


Distributions on unvested awards	(47)		(37)
Equity in earnings of unconsolidated affiliates	(286)		(186)
Distributions from unconsolidated affiliates	286		182
Other non-cash	(15)		(120)
Net change in operating assets and liabilities, net of effects of acquisitions and divestitures	1,182		(212)
Net cash provided by operating activities	8,259		7,713
INVESTING ACTIVITIES:
Cash paid for Lotus Midstream acquisition, net of cash received	(930)		—
Cash paid for other acquisitions, net of cash received	(111)		(1,062)
Capital expenditures, excluding allowance for equity funds used during construction	(2,430)		(2,493)
Contributions in aid of construction costs	38		50
Contributions to unconsolidated affiliates	(5)		—
Distributions from unconsolidated affiliates in excess of cumulative earnings	45		66
Proceeds from sale of Energy Transfer Canada interest	—		302
Proceeds from sales of other assets	31		60
Other, net	1		—
Net cash used in investing activities	(3,361)		(3,077)
FINANCING ACTIVITIES:
Proceeds from borrowings	22,912		19,400
Repayments of debt	(23,095)		(21,110)



Capital contributions from noncontrolling interests	3		404
Distributions to partners	(3,124)		(2,118)
Distributions to noncontrolling interests	(1,290)		(1,177)
Distributions to redeemable noncontrolling interests	(37)		(37)
Debt issuance costs	(12)		(9)
Other, net	2		1
Net cash used in financing activities	(4,641)		(4,646)
Increase (decrease) in cash and cash equivalents	257		(10)
Cash and cash equivalents, beginning of period	257		336
Cash and cash equivalents, end of period	$	514	$	326

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, 2022, filed with the SEC on February 17, 2023. 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

Pending Crestwood Acquisition

On August 16, 2023, the Partnership announced its entry into a definitive merger agreement to acquire Crestwood Equity Partners LP (“Crestwood”). Under the terms of the merger agreement, Crestwood’s common unitholders will receive 2.07 Energy Transfer common units for each Crestwood common unit. Crestwood owns gathering and processing assets located in the Williston, Delaware and Powder River basins. On October 30, 2023, a majority of Crestwood’s unitholders voted to approve the merger. The transaction is expected to close on November 3, 2023, subject to customary closing conditions.

Lotus Midstream Acquisition

On May 2, 2023, Energy Transfer acquired Lotus Midstream Operations, LLC (“Lotus Midstream”) for total consideration of $1.50 billion, including working capital. Consideration included $930 million in cash and approximately 44.5 million newly issued Energy Transfer common units, which had an aggregate acquisition-date fair value of $574 million. Lotus Midstream owns and operates Centurion Pipeline Company LLC, an integrated crude midstream platform located in the Permian Basin.

Table of Contents

The following table summarizes the assumed allocation of the purchase price among the assets acquired and liabilities assumed:


	At May 2, 2023
Total current assets	$	61
Property, plant and equipment, net	1,263
Investments in unconsolidated affiliates	138
Lease right-of-use assets, net	10
Other non-current assets	4
Intangible assets, net	75

Total assets	1,551

Total current liabilities	27

Other non-current liabilities	16
Total liabilities	43



Total consideration	1,508
Cash received	4
Total consideration, net of cash received	$	1,504

Sunoco LP’s Acquisition

On May 1, 2023, Sunoco LP completed the acquisition of 16 refined product terminals located across the East Coast and Midwest from Zenith Energy for $111 million, including working capital. The purchase price was primarily allocated to property and equipment.

3.CASH AND CASH EQUIVALENTS

Cash and cash equivalents include all cash on hand, demand deposits and investments with original maturities of three months or less. We consider cash equivalents to include short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. The Partnership’s consolidated balance sheets did not include any material amounts of restricted cash as of September 30, 2023 or December 31, 2022.

We place our cash deposits and temporary cash investments with high credit quality financial institutions. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limit.

Table of Contents

The net change in operating assets and liabilities, net of effects of acquisitions, included in cash flows from operating activities is comprised as follows:


	Nine Months Ended September 30,
	2023		2022
Accounts receivable	$	(1,125)	$	(999)
Accounts receivable from related companies	(8)		17
Inventories	(3)		(287)
Other current assets	208		(176)
Other non-current assets, net	(135)		106
Accounts payable	1,076		599
Accounts payable to related companies	(12)		1
Accrued and other current liabilities	562		585
Other non-current liabilities	669		254
Derivative assets and liabilities, net	(50)		(312)
Net change in operating assets and liabilities, net of effects of acquisitions and divestitures	$	1,182	$	(212)

Non-cash investing and financing activities were as follows:


	Nine Months Ended September 30,
	2023		2022

Accrued capital expenditures	$	354	$	454

Lease assets obtained in exchange for new lease liabilities	26		37
Distribution reinvestment	70		42

4.INVENTORIES

Inventories consisted of the following:


	September 30, 2023		December 31, 2022
Natural gas, NGLs and refined products	$	1,951	$	1,802
Crude oil	169		246
Spare parts and other	470		413
Total inventories	$	2,590	$	2,461

Sunoco LP’s fuel inventories are stated at the lower of cost or market using the last-in, first-out (“LIFO”) method. As of September 30, 2023 and December 31, 2022, the carrying value of Sunoco LP’s fuel inventory included lower of cost or market reserves of $3 million and $116 million, respectively. For the three and nine months ended September 30, 2023 and 2022, the Partnership’s consolidated income statements did not include any material amounts of income from the liquidation of Sunoco LP’s LIFO fuel inventory. For the three months ended September 30, 2023 and 2022, the Partnership’s cost of products sold included favorable inventory adjustments of $141 million and unfavorable inventory adjustments of $40 million, respectively, related to Sunoco LP’s LIFO inventory. For the nine months ended September 30, 2023 and 2022, the Partnership’s cost of products sold included favorable inventory adjustments of $113 million and favorable inventory adjustments of $81 million, respectively, related to Sunoco LP’s LIFO inventory.

5.FAIR VALUE MEASURES

We have commodity derivatives and interest rate derivatives that are accounted for as assets and liabilities at fair value in our consolidated balance sheets. We determine the fair value of our assets and liabilities subject to fair value measurement by using the highest possible “level” of inputs. Level 1 inputs are observable quotes in an active market for identical assets and liabilities. We consider the valuation of marketable securities and commodity derivatives transacted through a clearing

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broker with a published price from the appropriate exchange as a Level 1 valuation. Level 2 inputs are inputs observable for similar assets and liabilities. We consider OTC commodity derivatives entered into directly with third parties as a Level 2 valuation since the values of these derivatives are quoted on an exchange for similar transactions. Additionally, we consider options transacted through a clearing broker as having Level 2 inputs due to the level of activity of these contracts on the exchange in which they trade. The valuation methodologies employed for our interest rate derivatives do not necessitate material judgment, and the inputs are observed from actively quoted public markets and therefore are categorized in Level 2. Level 3 inputs are unobservable. During the nine months ended September 30, 2023, no transfers were made between any levels within the fair value hierarchy.

The following tables summarize the gross fair value of our financial assets and liabilities measured and recorded at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 based on inputs used to derive their fair values:


			Fair Value Measurements at September 30, 2023
	Fair Value Total		Level 1		Level 2
Assets:
Interest rate derivatives	$	14	$	—	$	14
Commodity derivatives:

Natural Gas:
Basis Swaps IFERC/NYMEX	$	3	$	3	$	—
Swing Swaps IFERC	4		4		—
Fixed Swaps/Futures	28		28		—


Forward Physical Contracts	3		—		3
Power:
Forwards	46		—		46
Futures	6		6		—


NGLs – Forwards/Swaps	256		256		—
Refined Products – Futures	27		27		—
Crude – Forwards/Swaps	32		32		—

Total commodity derivatives	405		356		49
Other non-current assets	28		18		10
Total assets	$	447	$	374	$	73
Liabilities:

Commodity derivatives:
Natural Gas:
Basis Swaps IFERC/NYMEX	$	(10)	$	(10)	$	—
Swing Swaps IFERC	(5)		(5)		—
Fixed Swaps/Futures	(2)		(2)		—



Power:
Forwards	(45)		—		(45)
Futures	(5)		(5)		—


NGLs – Forwards/Swaps	(306)		(306)		—
Refined Products – Futures	(35)		(35)		—
Crude – Forwards/Swaps	(41)		(41)		—
Total commodity derivatives	(449)		(404)		(45)
Total liabilities	$	(449)	$	(404)	$	(45)

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			Fair Value Measurements at December 31, 2022
	Fair Value Total		Level 1		Level 2
Assets:

Commodity derivatives:

Natural Gas:
Basis Swaps IFERC/NYMEX	$	60	$	60	$	—
Swing Swaps IFERC	75		75		—
Fixed Swaps/Futures	113		113		—


Forward Physical Contracts	10		—		10
Power:
Forwards	52		—		52
Futures	3		3		—


NGLs – Forwards/Swaps	317		317		—
Refined Products – Futures	20		20		—

Crude – Forwards/Swaps	38		38		—

Total commodity derivatives	688		626		62
Other non-current assets	27		18		9
Total assets	$	715	$	644	$	71
Liabilities:
Interest rate derivatives	$	(23)	$	—	$	(23)
Commodity derivatives:
Natural Gas:
Basis Swaps IFERC/NYMEX	(25)		(25)		—
Swing Swaps IFERC	(12)		(12)		—
Fixed Swaps/Futures	(4)		(4)		—


Forward Physical Contracts	(2)		—		(2)
Power:
Forwards	(51)		—		(51)
Futures	(3)		(3)		—

NGLs – Forwards/Swaps	(358)		(358)		—
Refined Products – Futures	(59)		(59)		—

Crude – Forwards/Swaps	(12)		(12)		—

Total commodity derivatives	(526)		(473)		(53)
Total liabilities	$	(549)	$	(473)	$