10-QPeriod: Q3 FY2020

Energy Transfer LP Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 5, 2020For Securities:ETET-PI

Summary

Energy Transfer LP (ET) reported a net loss of $401 million for the third quarter of 2020, a significant downturn from the $1.187 billion net income reported in the same period of the prior year. This loss was largely driven by substantial impairment charges, including $1.474 billion related to goodwill and fixed assets, reflecting the economic impact of COVID-19 and volatile commodity prices. Total revenues also saw a decline, falling to $9.955 billion from $13.495 billion year-over-year for the quarter, and $28.920 billion from $40.493 billion for the nine-month period. Despite the net loss, the company generated solid Adjusted EBITDA of $2.866 billion for the quarter, a slight increase from the prior year, driven by improvements in its Midstream and NGL/refined products segments, partly offset by lower volumes and pricing in other segments due to market disruptions. Management announced a significant reduction in its quarterly cash distribution to $0.1525 per unit, a 50% decrease from the previous quarter, with the intention to use the excess cash flow to reduce indebtedness and preserve its investment-grade credit ratings. The company continues to navigate ongoing legal proceedings, particularly concerning the Dakota Access Pipeline, and a challenging macroeconomic environment.

Financial Highlights

41 data points
Beta

Revenue

$9.96B

36.0% Gross Margin

Net Income

-$655.00M

-6.6% Net Margin

Total Assets

$95.19B

Cash & Equivalents

$275.00M

Free Cash Flow

$2.30B

Financial Statements
Beta
Revenue$9.96B
Cost of Revenue$6.38B
Gross Profit$3.58B
SG&A Expenses$176.00M
Operating Expenses$9.71B
Operating Income$244.00M
Interest Expense$569.00M
Net Income-$655.00M

Key Highlights

  • 1Net loss of $401 million for Q3 2020, a significant decrease from a net income of $1.187 billion in Q3 2019, primarily due to $1.474 billion in impairment charges.
  • 2Total revenues decreased to $9.955 billion for Q3 2020 from $13.495 billion in Q3 2019.
  • 3Consolidated Adjusted EBITDA was $2.866 billion for Q3 2020, a slight increase from $2.812 billion in Q3 2019, driven by performance in Midstream and NGL/Refined Products segments, despite COVID-19 impacts.
  • 4Quarterly cash distribution reduced by 50% to $0.1525 per unit, signaling a focus on debt reduction.
  • 5Significant goodwill impairments totaling $1.454 billion were recorded across various segments, reflecting the impact of market conditions.
  • 6The company continues to be involved in ongoing legal and regulatory proceedings, notably concerning the Dakota Access Pipeline.
  • 7Total assets decreased to $95.195 billion as of September 30, 2020, from $98.973 billion as of December 31, 2019, while long-term debt increased slightly to $51.424 billion from $51.028 billion.

Frequently Asked Questions

The primary driver of the net loss of $401 million in the third quarter of 2020 was the recognition of significant impairment charges totaling $1.474 billion. These impairments were primarily related to goodwill and fixed assets across various business segments, reflecting the adverse impact of the COVID-19 pandemic, volatile commodity prices, and reduced future cash flow expectations.

Energy Transfer LP reduced its quarterly cash distribution by 50% to $0.1525 per unit, as announced in October 2020, to preserve cash flow. The company intends to utilize the excess cash generated by this reduction to pay down its indebtedness and maintain its investment-grade credit ratings amidst challenging market conditions.

The COVID-19 pandemic has negatively impacted Energy Transfer's financial performance through reduced demand for its services, leading to lower volumes and market prices in several core operating segments. This has contributed to decreased revenues and was a significant factor leading to substantial impairment charges recognized during the period. However, the company has taken steps to mitigate these impacts, including reducing capital and operating expenses.

The Dakota Access Pipeline (DAPL) is facing ongoing legal challenges, primarily related to permits and easements. While a court vacated an easement and ordered a shutdown, appellate courts have granted stays, allowing the pipeline to continue operations during the appeals process. The company believes the litigation is unlikely to adversely affect DAPL's continued operation, but acknowledges uncertainty and potential impacts on future projects.