01—Abstract
Summary
Summary of the 10-K filed February 16, 2024. Cited figures are marked; the original filing is the authoritative source.
Energy Transfer LP (ET) closed 2023 with consolidated Adjusted EBITDA of $13.70 billiona, up from $13.09 billion in 2022, and net income of $5.29 billion, down about 10% year over year.
The decline in net income was driven mainly by a $627 millionb non-operating litigation-related loss (the Williams litigation, paid in November 2023) and lower gains on interest rate derivatives, partly offset by higher equity earnings. Operating cash flow was strong at $9.56 billion, which covered $4.25 billion of distributions to common and preferred unitholders and $3.09 billion of capital expenditures, though net debt rose as total debt reached $52.39 billion. Growth in 2023 came largely from acquisitions and fee-based midstream and transportation assets.
The company closed the Lotus Midstream acquisition in May for $1.50 billionc and the Crestwood acquisition in November, which added gathering and processing assets in the Williston, Delaware and Powder River basins and roughly $2.85 billion of assumed senior notes. The NGL and refined products segment was the strongest performer, with Segment Adjusted EBITDA up $869 million, while the midstream segment fell $685 million on lower natural gas and NGL prices. Management guides to 2024 growth capital of $2.4–2.6 billion and maintenance capital of $835–865 million, and the company reports a leverage ratio of 3.31x against a 5.00x covenant.
Key risks include the pending Lake Charles LNG export project, which depends on DOE export authorization after the January 2024 moratorium on new approvals, and ongoing regulatory and environmental exposure, including the Dakota Access Pipeline, Mariner East, and FERC enforcement matters (Rover). Sunoco LP's planned $7.3 billiond all-equity NuStar acquisition (expected to close Q2 2024) and the sale of 204 convenience stores for about $1.00 billion add further execution and leverage considerations at the subsidiary level.
02—Key points
Key Highlights
- Consolidated Adjusted EBITDA rose 4.6% to $13.70 billion in 2023 (from $13.09 billion), driven by NGL and refined products (+$869M) and crude oil transportation (+$494M) segments.
- Net income fell about 10% to $5.29 billion, primarily because of a $627M non-operating litigation-related loss tied to the Williams merger dispute, paid in November 2023.
- Operating cash flow of $9.56 billion (vs. $9.05 billion in 2022) covered $4.25B of partner distributions and $3.09B of capital expenditures.
- Crestwood acquisition (closed November 3, 2023) added gathering and processing assets in the Williston, Delaware and Powder River basins, with about $3.66B of total consideration and $2.85B of assumed senior notes.
- Midstream segment Adjusted EBITDA declined $685M (to $2.53B) on lower natural gas and NGL prices, partly offset by newly acquired assets.
- Total consolidated debt reached $52.39B; leverage ratio was 3.31x at year-end versus a 5.00x covenant maximum, with $3.56B available under the Five-Year Credit Facility.
- 2024 guidance calls for $2.4–2.6B of growth capex and $835–865M of maintenance capex; Sunoco LP's pending $7.3B NuStar acquisition is expected to close in Q2 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Energy Transfer LP kept $0.05.
- Revenue$78.59B100.0%
- Cost of revenue−$60.54B77.0%
- Gross profit$18.05B23.0%
- Operating costs−$9.75B12.4%
- Operating income$8.29B10.6%
- Interest, other & tax−$4.36B5.5%
- Net income$3.94B5.0%
Where FY2023 revenue went
$78.59B- Cost of revenue: $60.54B, 77% of revenue
- Net income: $3.94B, 5.0% of revenue
- SG&A: $985.0M, 1.3% of revenue
- Other operating costs: $8.77B, 11% of revenue
- Interest, other & tax: $4.36B, 5.5% of revenue
Kept 5.0% as net incomeNet income $3.94B · 5.0%SG&A $985.0M · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 16, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $78.59B$89.88B | −12.6% |
| Cost of Revenue | $60.54B$72.23B | −16.2% |
| Gross Profit | $18.05B$17.64B | +2.3% |
| SG&A Expenses | $985.00M$1.02B | −3.2% |
| Operating Expenses | $70.29B$82.14B | −14.4% |
| Operating Income | $8.29B$7.74B | +7.2% |
| Interest Expense | $2.58B$2.31B | +11.8% |
| Net Income | $3.94B$4.76B | −17.3% |
05—Questions
Frequently Asked Questions
Why did net income decline in 2023 even though Adjusted EBITDA grew?
Net income fell $574 million to $5.29 billion mainly because of a $627 million non-operating litigation-related loss from the Williams merger case, which was paid in November 2023. Higher interest expense (up $272 million on higher floating-rate debt), lower gains on interest rate derivatives, and higher depreciation also weighed on results. Adjusted EBITDA, which excludes non-cash and non-operating items, rose $605 million, so the decline is largely a non-recurring charge rather than a deterioration in core operations.
How well is the distribution covered by cash flow?
In 2023, operating cash flow of $9.56 billion covered roughly $5.9 billion of total distributions (including $1.69 billion to noncontrolling interests and $4.25 billion to partners) and $3.09 billion of capital expenditures, with remaining cash used in acquisitions and debt management. Coverage is reasonable, but reliance on debt-financed growth and acquisitions means that sustained high payout levels depend on continued fee-based earnings and access to capital markets.
What is the main risk to the Lake Charles LNG export project?
The project's Non-FTA export authorization is pending at the DOE. In January 2024, the Biden administration imposed a moratorium on new LNG export approvals and ordered studies on public-interest impacts, with completion not expected before the November 2024 election. The project also depends on long-term offtake contracts, several of which are conditional on a final investment decision, so timing and financial viability remain uncertain.
How is leverage trending, and how much liquidity does the company have?
Total debt increased from $48.26 billion to $52.39 billion, largely due to the Crestwood assumption and Lotus-related financing. The company reports a 3.31x leverage ratio against a 5.00x covenant, and as of December 31, 2023 it had $161 million of cash and $3.56 billion of availability under its revolving credit facility. Management states it has ample liquidity, though about $3.67 billion of senior notes due by end-2024 are classified as long-term based on refinancing intent, and the company issued new notes in January 2024 to refinance maturities.
What is the impact of Sunoco LP's NuStar acquisition on Energy Transfer?
Sunoco LP, in which Energy Transfer owns the general partner, IDRs and about 28.5 million common units, plans an all-equity acquisition of NuStar valued at about $7.3 billion including assumed debt. Sunoco LP expects to assume NuStar's debt and issue about $4.2 billion of additional debt, which may increase subsidiary leverage and affect IDR economics. Energy Transfer's exposure is indirect, but any strain at Sunoco LP could reduce cash distributions received by the parent.
06—Continue