01—Abstract
Summary
Summary of the 10-K filed February 19, 2021. Cited figures are marked; the original filing is the authoritative source.
Energy Transfer LP's 2020 Form 10-K (filed February 19, 2021) shows a year of sharp earnings pressure driven by COVID-19 demand destruction and the collapse in crude prices.
Consolidated revenues fell about 28% to $38.95 billion, operating income dropped to $2.98 billiona from $7.20 billion, and net income attributable to limited partners swung to a loss of $647 million, or $(0.24) per unit, versus $3.5 billion in 2019. The decline was driven primarily by $2.88 billion of impairments, mostly goodwill impairments of roughly $2.8 billion across midstream, crude, interstate and other reporting units, plus $619 million at USAC. Total Segment Adjusted EBITDA declined about 5.5% to $10.53 billion, with the crude oil segment down $640 million and the NGL segment up $136 million, showing the partnership's fee-based and NGL assets held up better than commodity-exposed businesses.
Cash generation remained solid. Operating cash flow was $7.36 billionb, and capital spending was reduced, with 2020 total capex of about $3.76 billion (including proportionate JV spend) and 2021 guidance of roughly $1.86 billion to $2.11 billion in combined growth and maintenance spending. Distributions to common unitholders were cut in half during 2020, with the quarterly rate falling from $0.3050 to $0.1525 starting with the September 2020 payment.
The balance sheet carries about $51.4 billionc of consolidated debt, a leverage ratio of 4.31x under ETO's credit agreements, and roughly $6.7 billion of floating-rate exposure. Management reports compliance with all debt covenants and ample liquidity.
The filing also flags a pending acquisition of Enable Midstream Partners, announced February 17, 2021, in which Enable unitholders would receive 0.8595 ET common units per Enable unit. Key risks investors should monitor include the Lake Charles LNG liquefaction project's future after Shell's withdrawal, ongoing litigation (the Williams termination-fee claim, the Dakota Access easement proceedings, the Cline class action with a roughly $156 milliond judgment under appeal, and MTBE suits), and regulatory uncertainty under the new administration, including FERC rate policy and methane and climate rules.
02—Key points
Key Highlights
- Net income attributable to limited partners was a loss of $647 million, or $(0.24) per unit, versus $3.51 billion ($1.33 per unit) in 2019, driven mainly by about $2.9 billion of impairment charges.
- Goodwill impairments totaled roughly $2.8 billion in 2020, including $1.28 billion in crude operations, $483 million in midstream, and $226 million in interstate, with USAC recording an additional $619 million.
- Total Segment Adjusted EBITDA fell about 5.5% to $10.53 billion; crude oil transportation fell $640 million while NGL and refined products rose $136 million on higher Mariner East and Permian throughput.
- Quarterly common unit distribution was halved from $0.3050 to $0.1525 beginning with the payment for the quarter ended September 30, 2020, and that rate was maintained for the December 2020 quarter.
- Operating cash flow of $7.36 billion comfortably covered distributions and capital spending, supporting the partnership's ability to fund growth and reduce debt.
- Pending acquisition of Enable Midstream Partners (announced February 17, 2021) at 0.8595 ET units per Enable common unit, subject to unitholder and regulatory approvals.
- Consolidated debt of about $51.4 billion with a 4.31x leverage ratio under ETO's credit agreements; management states it was in compliance with all covenants and has ample liquidity.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2020, Energy Transfer LP lost $0.02.
- Revenue$38.95B100.0%
- Cost of revenue−$25.49B65.4%
- Gross profit$13.47B34.6%
- Operating costs−$10.49B26.9%
- Operating income$2.98B7.7%
- Interest, other & tax−$3.63B9.3%
- Net income−$648.0M1.7%
Where FY2020 revenue went
$38.95B- Cost of revenue: $25.49B, 65% of revenue
- Other operating costs: $9.78B, 25% of revenue
- Operating income: $2.98B, 7.7% of revenue
- SG&A: $711.0M, 1.8% of revenue
Kept 7.7% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 19, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $38.95B$54.21B | −28.1% |
| Cost of Revenue | $25.49B$39.80B | −36.0% |
| Gross Profit | $13.47B$14.41B | −6.6% |
| SG&A Expenses | $711.00M$694.00M | +2.4% |
| Operating Expenses | $35.97B$47.01B | −23.5% |
| Operating Income | $2.98B$7.20B | −58.6% |
| Interest Expense | $2.33B$2.33B | −0.2% |
| Net Income | -$648.00M$3.52B | −118.4% |
05—Questions
Frequently Asked Questions
Why did Energy Transfer report a net loss attributable to limited partners in 2020?
The loss was driven primarily by impairment charges of $2.88 billion, mostly goodwill write-downs in crude, midstream, interstate and other units, triggered by COVID-19 demand declines and lower commodity prices. Lower volumes and prices also reduced margins in the crude and midstream segments. Excluding these non-cash charges, the business continued to generate substantial Segment Adjusted EBITDA of about $10.5 billion.
Was the distribution cut, and what is the current payout?
Yes. The quarterly distribution was reduced by 50%, from $0.3050 to $0.1525 per common unit, beginning with the payment for the quarter ended September 30, 2020. The $0.1525 rate was declared again for the December 31, 2020 quarter, payable February 19, 2021. Total 2020 distributions to common unitholders were $2.47 billion.
What is the Enable acquisition and how does it affect unitholders?
Energy Transfer agreed to acquire Enable Midstream Partners in February 2021. Enable common unitholders will receive 0.8595 ET common units per Enable unit, and Enable Series A preferred units will convert into ET Series G preferred units at 0.0265 per unit. The deal would add ET units outstanding, so existing holders' ownership would be diluted, and it remains subject to approvals and integration risk noted in the filing.
How leveraged is the partnership and are there refinancing or rate risks?
Consolidated debt was about $51.4 billion at year-end 2020, with ETO's leverage ratio at 4.31x against a 5.0x covenant maximum, which can rise to 5.5x during specified acquisition periods. About $6.7 billion of debt bears floating rates, and a 100 basis point rate increase would raise annual interest expense by up to $67 million. The filing also notes LIBOR transition risk, with its phase-out expected by June 2023.
What are the main legal and regulatory risks flagged in the filing?
Key items include the Williams litigation seeking a $410 million termination fee, the Dakota Access pipeline easement case, which could require an environmental impact statement, and an Oklahoma Cline class action with a judgment of about $80.7 million in actual damages plus $75 million in punitive damages, currently under appeal. The filing also flags MTBE contamination suits, Pennsylvania Mariner East and Revolution investigations, and potential changes to FERC rate policy and federal methane and climate rules under the new administration.
06—Continue