10-QPeriod: Q2 FY2019

Energy Transfer LP Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 8, 2019For Securities:ETET-PI

Summary

Energy Transfer LP (ET) reported its financial results for the quarter and six months ended June 30, 2019. The company demonstrated strong operational performance with significant increases in Segment Adjusted EBITDA across multiple segments, notably Crude Oil Transportation and Services, and NGL and Refined Products Transportation and Services. This growth was driven by increased volumes, successful pipeline integrations (such as Mariner East 2 and Rover), and strategic acquisitions. The company also actively managed its debt, completing several debt offerings and exchanges to optimize its capital structure. While the company experienced revenue growth, it also faced increased operating expenses and interest expenses, partly due to new asset placements and debt financing. Management remains focused on executing its growth strategy, including ongoing capital expenditure projects. Investors should note the company's continued litigation and regulatory matters, particularly concerning environmental compliance and pipeline operations, which could pose future risks. Overall, the results indicate a robust operational quarter with strategic financial management, though ongoing legal and regulatory challenges require monitoring.

Financial Highlights

42 data points
Beta

Revenue

$13.88B

25.8% Gross Margin

Net Income

$879.00M

6.3% Net Margin

Total Assets

$90.81B

Cash & Equivalents

$445.00M

Free Cash Flow

$2.08B

Financial Statements
Beta
Revenue$13.88B
Cost of Revenue$10.30B
Gross Profit$3.58B
SG&A Expenses$179.00M
Operating Expenses$12.06B
Operating Income$1.82B
Interest Expense$578.00M
Net Income$879.00M

Key Highlights

  • 1Total Segment Adjusted EBITDA increased by $562 million to $2,824 million for the three months ended June 30, 2019, compared to the prior year period.
  • 2Crude Oil Transportation and Services segment saw a substantial EBITDA increase of $203 million, driven by higher throughput on Texas and Bakken pipelines.
  • 3NGL and Refined Products Transportation and Services segment EBITDA grew by $183 million, benefiting from the Mariner East 2 pipeline in service and increased fractionation capacity.
  • 4Interstate Transportation and Storage segment EBITDA rose by $85 million, largely due to the full in-service status of the Rover pipeline and increased utilization on other systems.
  • 5The company completed significant debt management activities, including the ET-ETO Senior Notes Exchange and new senior notes offerings, to refinance existing debt and optimize its capital structure.
  • 6Operating expenses and interest expenses increased, impacting net income, though this was partly due to growth initiatives and debt financing.
  • 7The company continues to navigate various legal and regulatory proceedings, including environmental matters and pipeline-related litigation, which are being closely monitored.

Frequently Asked Questions

Revenue growth was primarily driven by increased transportation volumes across key segments such as Crude Oil Transportation and Services, and NGL and Refined Products Transportation and Services. The full in-service of the Rover pipeline and the initiation of service on the Mariner East 2 pipeline also contributed significantly to higher throughput and related revenues.

Energy Transfer actively managed its debt by undertaking several significant transactions. These included the ET-ETO Senior Notes Exchange, where approximately 97% of ET's outstanding senior notes were exchanged for ETO senior notes. Additionally, ETO completed substantial senior notes offerings in January and March 2019, with proceeds used to repay existing debt, including ET's term loan. Several subsidiaries also issued senior notes and utilized credit facilities to manage their respective debt obligations.

The filing mentions ongoing legal proceedings and regulatory matters, particularly concerning environmental compliance and pipeline operations, such as the Rover and Mariner East projects. Litigation related to these operations, including environmental violations and permit challenges, represents a potential risk. The company also faces market risks related to commodity price volatility, managed through derivative instruments.

The adoption of ASC Topic 842 on January 1, 2019, resulted in the recognition of additional lease assets and liabilities on the balance sheet. Specifically, the company recognized approximately $888 million in net right-of-use lease assets and lease liabilities. This adoption had a material impact on the balance sheet but did not affect the consolidated statements of operations, comprehensive income, or cash flows.