01—Abstract
Summary
Summary of the 10-K filed February 17, 2023. Cited figures are marked; the original filing is the authoritative source.
Energy Transfer LP (NYSE: ET) reported a 2022 full-year Adjusted EBITDA of $13.09 billiona, essentially flat versus $13.05 billion in 2021, while net income fell 12% to $5.87 billion from $6.69 billion.
The flat EBITDA masked a sharp mix shift: the midstream segment's Segment Adjusted EBITDA rose $1.34 billion to $3.21 billionb on favorable NGL and natural gas prices and recent acquisitions, which offset a $2.09 billion decline in intrastate transportation and storage, where 2021 benefited from outsized storage margins during Winter Storm Uri. Net income was also pressured by non-cash items, including a $347 million rise in depreciation and a $365 million increase in impairments tied to the Energy Transfer Canada sale and USAC compression assets. Cash generation remained strong, with operating cash flow of $9.05 billion, though it declined from $11.16 billion in 2021 as working capital absorbed cash.
Management funded $3.05 billionc of distributions to common and preferred unitholders while reducing total consolidated debt to $48.26 billion from $49.70 billion, and the Partnership reports a leverage ratio of 3.32x against a 5.00x covenant. The 2023 capital plan calls for $1.58–1.80 billion of growth capex and $725–775 million of maintenance capex, with the Lake Charles LNG export project advancing on six long-term offtake agreements. Key investor risks include the Williams litigation (roughly $601 million judgment under appeal), FERC enforcement actions against Rover, environmental and product liability exposure (MTBE, Mariner East), and the Dakota Access Pipeline regulatory proceedings.
Distribution growth is a notable positive: the quarterly common unit distribution rose from $0.1750 to $0.3050d across 2022, and the February 2023 payment was set at $0.3050. Investors should weigh this dividend momentum against higher leverage risk, the elevated litigation overhang, and the reduced storage-driven earnings that boosted 2021.
02—Key points
Key Highlights
- Adjusted EBITDA was $13.09 billion, up slightly ($47 million) year over year, with midstream Segment Adjusted EBITDA up $1.34 billion to $3.21 billion.
- Intrastate transportation and storage Segment Adjusted EBITDA fell $2.09 billion to $1.40 billion, reflecting the absence of Winter Storm Uri storage and gas sales gains from 2021.
- Net income declined 12% to $5.87 billion, driven by a $347 million increase in depreciation and a $365 million rise in impairment losses and other.
- Operating cash flow was $9.05 billion, and total consolidated debt decreased to $48.26 billion, with a leverage ratio of 3.32x versus a 5.00x covenant.
- The common unit distribution increased to $0.3050 per quarter by year-end 2022, up from $0.1525 at the start of 2021, and the company paid $3.05 billion to partners in 2022.
- Lake Charles LNG Export executed six long-term offtake agreements totaling nearly 8 million tonnes per annum, and the FERC extended the construction deadline to December 2028.
- Material legal exposures include the Williams merger litigation (approximately $601 million judgment on appeal), FERC enforcement proceedings against Rover (up to $60 million in proposed penalties), and MTBE contamination suits.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Energy Transfer LP kept $0.05.
- Revenue$89.88B100.0%
- Cost of revenue−$72.23B80.4%
- Gross profit$17.64B19.6%
- Operating costs−$9.91B11.0%
- Operating income$7.74B8.6%
- Interest, other & tax−$2.98B3.3%
- Net income$4.76B5.3%
Where FY2022 revenue went
$89.88B- Cost of revenue: $72.23B, 80% of revenue
- Net income: $4.76B, 5.3% of revenue
- SG&A: $1.02B, 1.1% of revenue
- Other operating costs: $8.89B, 9.9% of revenue
- Interest, other & tax: $2.98B, 3.3% of revenue
Kept 5.3% as net incomeNet income $4.76B · 5.3%SG&A $1.02B · 1.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 17, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $89.88B$67.42B | +33.3% |
| Cost of Revenue | $72.23B$50.40B | +43.3% |
| Gross Profit | $17.64B$17.02B | +3.7% |
| SG&A Expenses | $1.02B$818.00M | +24.4% |
| Operating Expenses | $82.14B$58.63B | +40.1% |
| Operating Income | $7.74B$8.79B | −12.0% |
| Interest Expense | $2.31B$2.27B | +1.7% |
| Net Income | $4.76B$5.47B | −13.1% |
05—Questions
Frequently Asked Questions
Why did net income fall in 2022 even though Adjusted EBITDA was roughly flat?
Adjusted EBITDA excludes non-cash items. Net income declined $819 million mainly because depreciation, depletion and amortization rose $347 million on newly placed assets and acquisitions, and impairment losses and other increased $365 million, including a $300 million write-down and $85 million deconsolidation loss tied to the Energy Transfer Canada sale.
Is the distribution sustainable given the company's leverage and cash flow?
Operating cash flow of $9.05 billion covered the $3.05 billion of partner distributions with room to spare, and leverage improved modestly to 3.32x, below the 5.00x covenant. However, the Partnership distributes 100% of Available Cash each quarter under its partnership agreement, so distributions are not reserved against downturns, and cash flow remains sensitive to commodity prices and storage margins.
What drove the decline in intrastate transportation and storage earnings?
The 2021 results benefited from outsized storage withdrawals and natural gas sales during Winter Storm Uri. In 2022, storage margin fell $1.47 billion and realized natural gas sales fell $628 million, partly offset by $88 million of higher transportation fees on the acquired Enable Oklahoma Intrastate Transmission system.
What is the largest legal risk facing Energy Transfer?
The Williams litigation is the most significant near-term item. A Delaware court entered a final judgment of about $601 million plus 3.5% post-judgment interest, which the Energy Transfer defendants are appealing, and earlier fees and expenses of about $190 million were also awarded to Williams. The company states it is unable to estimate the loss beyond amounts accrued for the remaining matters.
What growth projects should investors watch in 2023?
Management expects $1.58–1.80 billion of growth capital in 2023, concentrated in midstream ($825–900 million) and interstate transportation ($275–300 million). Key longer-term catalysts include the Lake Charles LNG export liquefaction project, which has six offtake contracts and is fully permitted, and the Woodford Express gathering acquisition in the SCOOP play.
06—Continue