01—Abstract
Summary
Summary of the 10-K filed February 18, 2022. Cited figures are marked; the original filing is the authoritative source.
Energy Transfer LP (NYSE: ET) reported a sharp earnings recovery for fiscal 2021, with net income of $6.69 billiona versus $140 million in 2020 and consolidated Adjusted EBITDA up 24%.
The rebound was driven largely by Winter Storm Uri in February 2021, which generated one-time gains in the intrastate transportation and storage segment (Segment Adjusted EBITDA rose from $863 million to $3.48 billionb). Excluding storm effects, results were mixed: crude oil and interstate segments declined on lower tariff rates and contract expirations, while midstream and NGL segments benefited from stronger commodity prices. Comparisons to 2020 are also distorted by roughly $2.9 billion of impairments recorded that year.
The balance sheet remains large, with about $49.7 billionc of consolidated debt and a leverage ratio of 3.07x under the credit agreement, well inside the 5.0x covenant. Liquidity is adequate, with $336 million of cash and $2.03 billion of availability under the $5 billion revolver. The April 2021 Rollup Mergers folded ETO into Energy Transfer, and the December 2021 Enable Acquisition added substantial midstream and interstate assets, though it contributed only about one month of results to 2021.
Management expects a higher-cost capital environment and is trimming growth capex, with 2022 growth spending guided to $1.6 to $1.9 billiond. Investors should weigh several legal and regulatory overhangs. A Delaware court ruled against the Partnership in the Williams merger litigation, awarding the $410 million termination fee plus fees, with a final judgment and appeal still pending.
FERC has proposed a $40 million penalty related to Rover's Tuscarawas River drilling incident and a $20 million penalty tied to the Stoneman House matter. The Dakota Access pipeline remains operating while an environmental impact statement is completed by late 2022, and the Lake Charles LNG liquefaction project still lacks long-term offtake contracts and a final investment decision.
02—Key points
Key Highlights
- Net income of $6.69 billion for 2021, up from $140 million in 2020; consolidated Adjusted EBITDA rose 24%, largely from one-time Winter Storm Uri benefits.
- Intrastate transportation and storage Segment Adjusted EBITDA jumped to $3.48 billion from $863 million, driven by $1.5 billion of higher storage margin and $950 million of higher natural gas sales during the storm.
- Completed the Rollup Mergers (April 2021), consolidating ETO into Energy Transfer, and the Enable Acquisition (December 2021), adding about 5,900 miles of interstate pipeline (EGT) and 2,200 miles of intrastate pipeline (EOIT).
- Total consolidated debt of $49.7 billion; leverage ratio of 3.07x versus a 5.0x maximum; $2.03 billion of revolver availability and $336 million of cash at year-end.
- Quarterly common unit distribution raised to $0.175 per unit for Q4 2021 (paid February 2022), up from $0.1525 per unit.
- Material legal exposures include a Williams merger termination-fee judgment (roughly $410 million plus fees and expenses), proposed FERC penalties of $40 million (Rover HDD) and $20 million (Stoneman House), and MTBE and Pennsylvania Mariner East proceedings.
- Crude oil segment Segment Adjusted EBITDA fell $235 million to $2.02 billion on lower Texas crude pipeline tariffs; interstate segment EBITDA fell $165 million on shipper contract expirations and a Tiger system bankruptcy.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Energy Transfer LP kept $0.08.
- Revenue$67.42B100.0%
- Cost of revenue−$50.40B74.8%
- Gross profit$17.02B25.2%
- Operating costs−$8.23B12.2%
- Operating income$8.79B13.0%
- Interest, other & tax−$3.32B4.9%
- Net income$5.47B8.1%
Where FY2021 revenue went
$67.42B- Cost of revenue: $50.40B, 75% of revenue
- Net income: $5.47B, 8.1% of revenue
- SG&A: $818.0M, 1.2% of revenue
- Other operating costs: $7.41B, 11% of revenue
- Interest, other & tax: $3.32B, 4.9% of revenue
Kept 8.1% as net incomeNet income $5.47B · 8.1%SG&A $818.0M · 1.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 18, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $67.42B$38.95B | +73.1% |
| Cost of Revenue | $50.40B$25.49B | +97.7% |
| Gross Profit | $17.02B$13.47B | +26.4% |
| SG&A Expenses | $818.00M$711.00M | +15.0% |
| Operating Expenses | $58.63B$35.97B | +63.0% |
| Operating Income | $8.79B$2.98B | +195.0% |
| Interest Expense | $2.27B$2.33B | −2.6% |
| Net Income | $5.47B-$648.00M | +944.1% |
05—Questions
Frequently Asked Questions
Why did Energy Transfer's earnings improve so dramatically in 2021?
Most of the improvement came from Winter Storm Uri in February 2021, which created one-time gains in the intrastate transportation and storage segment through higher storage withdrawals and natural gas sales. Net income also benefited from the absence of 2020's $2.88 billion of impairments, which included goodwill write-downs tied to COVID-19 demand declines. Excluding storm effects, several segments declined.
How strong is Energy Transfer's balance sheet and liquidity?
The Partnership carried about $49.7 billion of consolidated debt at year-end 2021 and reported a 3.07x leverage ratio under its revolving credit agreement, below the 5.0x maximum. Liquidity included $336 million of cash and $2.03 billion of undrawn revolver capacity. Management states it had sufficient liquidity for both near-term and long-term needs and was in compliance with all debt covenants.
What are the biggest legal or regulatory risks disclosed in the filing?
The most significant items are the Williams merger litigation, where a Delaware court awarded Williams the $410 million termination fee plus fees on December 29, 2021, with final judgment and appeal still pending; FERC proposed civil penalties of $40 million against Rover related to the Tuscarawas River drilling incident and $20 million tied to the Stoneman House matter; and ongoing Dakota Access pipeline litigation requiring an environmental impact statement, now expected by the end of 2022. The filing indicates the Partnership intends to contest these matters.
What is the outlook for capital spending and growth projects?
Management guided 2022 growth capital expenditures of $1.6 billion to $1.9 billion and maintenance capex of $615 million to $665 million, reflecting a lower growth spending level than in prior years. The Lake Charles LNG liquefaction project remains under development, with FERC completion deadline extension to December 2028 requested and an expectation that approval will be granted in the second quarter of 2022. A final investment decision depends on securing long-term LNG offtake commitments and equity partners, which the company says it is actively pursuing.
How did the Enable Acquisition change Energy Transfer's business?
The December 2, 2021 Enable Acquisition added midstream gathering and processing capacity in Oklahoma and Arkansas, the EOIT and EGT interstate systems, the MRT pipeline, and a 50% interest in SESH, along with assumed Enable senior notes of $3.18 billion. Energy Transfer issued about 374.6 million common units and 384,780 Series G preferred units, valued at roughly $3.5 billion. Because the deal closed late in the year, 2021 results included only about one month of Enable's activity, so the full impact will show up in 2022.
06—Continue