10-QPeriod: Q3 FY2018

Energy Transfer LP Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 8, 2018For Securities:ETET-PI

Summary

Energy Transfer LP (ET) reported strong financial performance for the nine months ended September 30, 2018, with significant increases in total revenues and net income compared to the same period in the prior year. This growth was largely driven by higher volumes and favorable market conditions across its key segments, particularly in crude oil, NGL, and refined products transportation. The company also completed a major strategic transaction with the merger of ETP and ETE, which is expected to enhance operational efficiencies and simplify its corporate structure. Despite a challenging regulatory environment for some pipeline projects and ongoing litigation, the company demonstrated solid operational execution and managed its debt effectively. Key financial highlights include a substantial increase in Segment Adjusted EBITDA, driven by strong performance in the ETP segment, which benefited from new pipeline services and increased throughput. Sunoco LP also saw improved profitability, though this was partially offset by the divestiture of its retail operations. The acquisition of USAC in April 2018 added a new revenue stream and contributed positively to overall segment performance. Overall, the results indicate a robust operational quarter with strategic progress being made. Investors should note the company's continued investment in growth capital expenditures, particularly in the ETP segment, to expand its infrastructure. While the company navigated various legal and regulatory matters, including ongoing reviews by the FERC and litigation related to pipeline projects like Dakota Access, these appear to have been managed without significant immediate financial impact, though they represent ongoing risks. The company's liquidity remains adequate, supported by its credit facilities and operating cash flows.

Financial Highlights

42 data points
Beta

Revenue

$14.51B

23.6% Gross Margin

Net Income

$371.00M

2.6% Net Margin

Total Assets

$88.19B

Cash & Equivalents

$398.00M

Free Cash Flow

$2.13B

Financial Statements
Beta
Revenue$14.51B
Cost of Revenue$11.09B
Gross Profit$3.42B
SG&A Expenses$184.00M
Operating Expenses$12.81B
Operating Income$1.70B
Interest Expense$535.00M
Net Income$371.00M

Key Highlights

  • 1Total revenues increased significantly by approximately 39% to $40.51 billion for the nine months ended September 30, 2018, compared to $29.07 billion in the prior year.
  • 2Net income attributable to Limited Partners grew substantially to $1.04 billion for the nine months ended September 30, 2018, up from $676 million in the same period of 2017.
  • 3Segment Adjusted EBITDA increased by over 30% to $6.84 billion for the nine months ended September 30, 2018, compared to $5.24 billion in the prior year, reflecting strong operational performance across segments.
  • 4ETP's Segment Adjusted EBITDA saw substantial growth, driven by increased volumes, new contracts, and the initiation of service on the Rover pipeline.
  • 5The company completed the significant ETE-ETP merger in October 2018, aiming for simplified structure and operational efficiencies.
  • 6Sunoco LP completed the sale of approximately 1,030 retail fuel outlets to 7-Eleven, Inc. for $3.2 billion in January 2018, impacting its segment results.
  • 7Capital expenditures for the nine months ended September 30, 2018, were $5.18 billion, primarily for growth initiatives, compared to $6.13 billion in the prior year.
  • 8The company reported $42.12 billion in long-term debt less current maturities as of September 30, 2018.

Frequently Asked Questions

The ETE-ETP merger was completed in October 2018, shortly after the reporting period end. Therefore, its full financial impact is not reflected in this 10-Q filing for the period ending September 30, 2018. However, the merger is expected to simplify the corporate structure and potentially lead to operational efficiencies going forward.

Sunoco LP sold approximately 1,030 retail fuel outlets to 7-Eleven in January 2018 for $3.2 billion. This transaction significantly impacted its results by removing retail operations, leading to a decrease in 'Adjusted EBITDA from discontinued operations' in the comparison to the prior year, but also provided substantial proceeds and a simplified business focus on its core distribution and marketing segments.

As of September 30, 2018, Energy Transfer LP had total long-term debt less current maturities of approximately $42.12 billion. The company manages its debt through a mix of credit facilities and long-term debt issuances. In June 2018, ETP issued significant amounts of senior notes and used the proceeds to redeem existing notes and repay borrowings, indicating active management of its debt structure.

Yes, the company faces several legal and regulatory matters, including ongoing litigation related to the Dakota Access Pipeline and environmental matters concerning pipeline construction and operations. The company also notes potential impacts from FERC policy changes regarding income tax allowances in regulated rates. While the company believes these matters are being managed appropriately, they represent ongoing risks that could affect future results or operations.