Energy Transfer Reports Fourth Quarter 2020 Results

Rhea-AI Impact

(Neutral)

Rhea-AI Sentiment

(Very Positive)

Tags

02/17/2021 - 04:15 PM

Energy Transfer LP (NYSE:ET) (“ET” or the “Partnership”) today reported financial results for the quarter and year ended December 31, 2020.

ET reported net income attributable to partners for the three months ended December 31, 2020 of $509 million. For the three months ended December 31, 2020, net income per limited partner unit (basic and diluted) was $0.19 per unit.

Adjusted EBITDA for the three months ended December 31, 2020 was $2.59 billion. Results for the quarter continued to reflect improved efficiencies, with lower operating expenses in all of the Partnership’s core operating segments compared to the same period in the prior year.

Distributable Cash Flow attributable to partners, as adjusted, for the three months ended December 31, 2020 was $1.36 billion.

Key accomplishments and recent developments:

Operational

In January 2021, the first Very Large Ethane Carrier (“VLEC”) was loaded under ET’s joint venture with Satellite Petrochemical USA Corp., Orbit Gulf Coast NGL Exports, LLC. The Seri Everest, the world’s largest VLEC, departed from Orbit’s newly constructed export facility at our Nederland Terminal in Nederland, Texas, as the largest single shipment of ethane to date.
In December 2020, the Partnership completed the expansion of its Nederland Terminal LPG facilities to increase its export capabilities.
Also during the fourth quarter of 2020, the Partnership completed a new 20-inch pipeline directly linking its fractionation and storage facilities in Mont Belvieu, Texas to its Nederland Terminal.
In October 2020, the Partnership released its Community Engagement Report, which highlights ET’s business achievements and safety programs, as well as its stakeholder outreach and community investment initiatives.

Strategic

In February 2021, the Partnership announced the acquisition of Enable Midstream Partners, LP (“Enable”) in a $7.2 billion, all-equity transaction.
In November 2020, the Partnership announced its first-ever dedicated solar power contract, which will reduce the Partnership’s environmental footprint by integrating alternative energy sources when economically beneficial. The Partnership continues to increase its focus on near and long-term alternative energy projects aimed at reducing its environmental footprint throughout its operations.
In February 2021, the Partnership announced the creation of a new group that will focus on alternative energy initiatives.
With the addition of ethane export facilities at our Nederland Terminal, the Partnership now owns two of the three U.S. ethane export terminals, and is the only company with export facilities on the Gulf Coast and East Coast.

Financial

In January 2021, ET announced a quarterly distribution of $0.1525 per unit ($0.61 annualized) on ET common units for the quarter ended December 31, 2020. The distribution coverage ratio for the fourth quarter of 2020 was 3.30x.
As of December 31, 2020, Energy Transfer Operating, L.P.’s (“ETO’s”) $6.00 billion revolving credit facilities had an aggregate $2.79 billion of available capacity, and the leverage ratio, as defined by its credit agreements, was 4.31x.
Energy Transfer completed 2020 with full-year Adjusted EBITDA of $10.53 billion, which was above the high end of estimates provided in August 2020.
For 2021, the Partnership expects Adjusted EBITDA to be $10.6 billion to $11.0 billion, excluding any contribution from the recently announced Enable acquisition.
For the year ended December 31, 2020, the Partnership spent approximately $3.05 billion on growth capital expenditures. The Partnership expects to spend approximately $1.45 billion on growth capital expenditures in 2021, including approximately $250 million of 2020 growth capital that was deferred into 2021.

ET benefits from a portfolio of assets with exceptional product and geographic diversity. The Partnership’s multiple segments generate high-quality, balanced earnings with no single segment contributing more than 30% of the Partnership’s consolidated Adjusted EBITDA for the three months or full year ended December 31, 2020. The vast majority of the Partnership’s segment margins are fee-based and therefore have limited commodity price sensitivity.

Conference call information:

The Partnership has scheduled a conference call for 4:00 p.m. Central Time/5:00 p.m. Eastern Time on Wednesday, February 17, 2021 to discuss its fourth quarter 2020 results and provide an update on the Partnership, including its outlook for 2021. The conference call will be broadcast live via an internet webcast, which can be accessed through www.energytransfer.com or ir.energytransfer.com and will also be available for replay on the Partnership’s website for a limited time.

Energy Transfer LP (NYSE: ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with a strategic footprint in all of the major domestic production basins. ET is a publicly traded limited partnership with core operations that include complementary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (NGL) and refined product transportation and terminalling assets; NGL fractionation; and various acquisition and marketing assets. ET, through its ownership of Energy Transfer Operating, L.P., also owns Lake Charles LNG Company, as well as the general partner interests, the incentive distribution rights and 28.5 million common units of Sunoco LP (NYSE: SUN), and the general partner interests and 46.1 million common units of USA Compression Partners, LP (NYSE: USAC). For more information, visit the Energy Transfer LP website at www.energytransfer.com.

Sunoco LP (NYSE: SUN) is a master limited partnership with core operations that include the distribution of motor fuel to approximately 10,000 convenience stores, independent dealers, commercial customers and distributors located in more than 30 states as well as refined product transportation and terminalling assets. SUN's general partner is owned by Energy Transfer Operating, L.P., a wholly owned subsidiary of Energy Transfer LP (NYSE: ET). For more information, visit the Sunoco LP website at www.sunocolp.com.

USA Compression Partners, LP (NYSE: USAC) is a growth-oriented Delaware limited partnership that is one of the nation’s largest independent providers of natural gas compression services in terms of total compression fleet horsepower. USA Compression partners with a broad customer base composed of producers, processors, gatherers and transporters of natural gas and crude oil. USA Compression focuses on providing natural gas compression services to infrastructure applications primarily in high-volume gathering systems, processing facilities and transportation applications. For more information, visit the USAC website at www.usacompression.com.

Forward-Looking Statements

This news release may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal law. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management’s control. An extensive list of factors that can affect future results are discussed in the Partnership’s Annual Report on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission, including the Partnership’s Quarterly Report on Form 10-Q to be filed for the current period. In addition to the risks and uncertainties previously disclosed, the Partnership has also been, or may in the future be, impacted by new or heightened risks related to the COVID-19 pandemic, and we cannot predict the length and ultimate impact of those risks. The Partnership undertakes no obligation to update or revise any forward-looking statement to reflect new information or events.

The information contained in this press release is available on our website at www.energytransfer.com.


ENERGY TRANSFER LP AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) (unaudited)

	December 31, 2020		December 31, 2019
ASSETS
Current assets ⁽¹⁾	$	6,317	$	7,464

Property, plant and equipment, net	75,107		74,193

Advances to and investments in unconsolidated affiliates	3,060		3,460
Lease right-of-use assets, net	866		964
Other non-current assets, net ⁽¹⁾	1,657		1,571
Intangible assets, net	5,746		6,154
Goodwill	2,391		5,167
Total assets	$	95,144	$	98,973
LIABILITIES AND EQUITY
Current liabilities	$	5,923	$	7,724

Long-term debt, less current maturities	51,417		51,028
Non-current derivative liabilities	237		273
Non-current operating lease liabilities	837		901
Deferred income taxes	3,428		3,208
Other non-current liabilities	1,152		1,162

Commitments and contingencies
Redeemable noncontrolling interests	762		739

Equity:
Total partners’ capital	18,529		21,920
Noncontrolling interest	12,859		12,018
Total equity	31,388		33,938
Total liabilities and equity	$	95,144	$	98,973

⁽¹⁾

Effective January 1, 2020, the Partnership elected to change its accounting policy related to certain barrels of crude oil that were previously accounted for as inventory. Under the revised accounting policy, certain amounts of crude oil that are not available for sale have been reclassified from inventory to non-current assets. The balances as of December 31, 2019 have been adjusted to reflect this change in accounting policy.


ENERGY TRANSFER LP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per unit data) (unaudited)

	Three Months Ended December 31,				Year Ended December 31,
	2020		2019 ⁽¹⁾		2020		2019 ⁽¹⁾
REVENUES	$	10,034	$	13,720	$	38,954	$	54,213
COSTS AND EXPENSES:
Cost of products sold	6,703		10,159		25,487		39,801
Operating expenses	796		888		3,218		3,294
Depreciation, depletion and amortization	963		804		3,678		3,147
Selling, general and administrative	156		195		711		694
Impairment losses	77		12		2,880		74
Total costs and expenses	8,695		12,058		35,974		47,010
OPERATING INCOME	1,339		1,662		2,980		7,203
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized	(577)		(584)		(2,327)		(2,331)
Equity in earnings of unconsolidated affiliates	73		78		119		302
Impairment of investments in unconsolidated affiliates	—		—		(129)		—
Losses on extinguishments of debt	(13)		—		(75)		(18)
Gains (losses) on interest rate derivatives	74		130		(203)		(241)
Other, net	6		6		12		105
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE (BENEFIT)	902		1,292		377		5,020
Income tax expense (benefit) from continuing operations	69		(19)		237		195
NET INCOME	833		1,311		140		4,825
Less: Net income attributable to noncontrolling interest	312		325		739		1,256
Less: Net income attributable to redeemable noncontrolling interests	12		13		49		51
NET INCOME (LOSS) ATTRIBUTABLE TO PARTNERS	509		973		(648)		3,518
General Partner’s interest in net income (loss)	—		1		(1)		4
Limited Partners’ interest in net income (loss)	$	509	$	972	$	(647)	$	3,514
NET INCOME (LOSS) PER LIMITED PARTNER UNIT:
Basic	$	0.19	$	0.37	$	(0.24)	$	1.34
Diluted	$	0.19	$	0.37	$	(0.24)	$	1.33
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING:
Basic	2,699.1		2,646.2		2,695.6		2,628.0
Diluted	2,699.1		2,653.3		2,695.6		2,637.6

⁽¹⁾

Effective January 1, 2020, the Partnership elected to change its accounting policy related to certain barrels of crude oil that were previously accounted for as inventory. Under the revised accounting policy, certain amounts of crude oil that are not available for sale have been reclassified from inventory to non-current assets. The condensed consolidated statement of operations for the three months and full year ended December 31, 2019 has been adjusted to reflect this change in accounting policy.


ENERGY TRANSFER LP AND SUBSIDIARIES SUPPLEMENTAL INFORMATION (Dollars and units in millions) (unaudited)

	Three Months Ended December 31,				Year Ended December 31,
	2020		2019 ^(a)		2020		2019 ^(a)
Reconciliation of net income to Adjusted EBITDA and Distributable Cash Flow ^(b):
Net income	$	833	$	1,311	$	140	$	4,825
Interest expense, net of interest capitalized	577		584		2,327		2,331
Impairment losses	77		12		2,880		74
Income tax expense (benefit) from continuing operations	69		(19)		237		195
Depreciation, depletion and amortization	963		804		3,678		3,147
Non-cash compensation expense	28		28		121		113
(Gains) losses on interest rate derivatives	(74)		(130)		203		241
Unrealized losses on commodity risk management activities	44		95		71		5
Losses on extinguishments of debt	13		—		75		18
Inventory valuation adjustments (Sunoco LP)	(44)		(8)		82		(79)
Impairment of investment in an unconsolidated affiliate	—		—		129		—
Equity in earnings of unconsolidated affiliates	(73)		(78)		(119)		(302)
Adjusted EBITDA related to unconsolidated affiliates	148		156		628		626
Other, net	31		13		79		(54)
Adjusted EBITDA (consolidated)	2,592		2,768		10,531		11,140
Adjusted EBITDA related to unconsolidated affiliates	(148)		(156)		(628)		(626)
Distributable Cash Flow from unconsolidated affiliates	99		108		452		415
Interest expense, net of interest capitalized	(577)		(584)		(2,327)		(2,331)
Preferred unitholders’ distributions	(96)		(68)		(378)		(253)
Current income tax (expense) benefit	(19)		45		(27)		22
Transaction-related income taxes	—		(31)		—		(31)
Maintenance capital expenditures	(152)		(215)		(520)		(655)
Other, net	17		30		74		85
Distributable Cash Flow (consolidated)	1,716		1,897		7,177		7,766
Distributable Cash Flow attributable to Sunoco LP (100%)	(97)		(120)		(516)		(450)
Distributions from Sunoco LP	42		42		165		165
Distributable Cash Flow attributable to USAC (100%)	(51)		(58)		(221)		(222)
Distributions from USAC	25		24		97		90
Distributable Cash Flow attributable to noncontrolling interest in other non-wholly-owned consolidated subsidiaries	(282)		(286)		(1,015)		(1,113)
Distributable Cash Flow attributable to the partners of ET	1,353		1,499		5,687		6,236
Transaction-related adjustments	9		8		55		14
Distributable Cash Flow attributable to the partners of ET, as adjusted	$	1,362	$	1,507	$	5,742	$	6,250

Distributions to partners:
Limited Partners	$	412	$	820	$	2,468	$	3,221
General Partner	1		1		3		4
Total distributions to be paid to partners	$	413	$	821	$	2,471	$	3,225
Common Units outstanding – end of period	2,702.3		2,689.6		2,702.3		2,689.6
Distribution coverage ratio	3.30x		1.84x		2.32x		1.94x

^(a)		Effective January 1, 2020, the Partnership elected to change its accounting policy related to certain barrels of crude oil that were previously accounted for as inventory. Under the revised accounting policy, certain amounts of crude oil that are not available for sale have been reclassified from inventory to non-current assets. The results for the three and twelve months ended December 31, 2020 have been adjusted to reflect this change in accounting policy.

^(b)		Adjusted EBITDA, Distributable Cash Flow and distribution coverage ratio are non-GAAP financial measures used by industry analysts, investors, lenders and rating agencies to assess the financial performance and the operating results of ET’s fundamental business activities and should not be considered in isolation or as a substitute for net income, income from operations, cash flows from operating activities or other GAAP measures.

There are material limitations to using measures such as Adjusted EBITDA, Distributable Cash Flow and distribution coverage ratio, including the difficulty associated with using any such measure as the sole measure to compare the results of one company to another, and the inability to analyze certain significant items that directly affect a company’s net income or loss or cash flows. In addition, our calculations of Adjusted EBITDA, Distributable Cash Flow and distribution coverage ratio may not be consistent with similarly titled measures of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP, such as operating income, net income and cash flow from operating activities.

Definition of Adjusted EBITDA

We define Adjusted EBITDA as total partnership earnings before interest, taxes, depreciation, depletion, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, inventory valuation adjustments, non-cash impairment charges, losses on extinguishments of debt and other non-operating income or expense items. Inventory adjustments that are excluded from the calculation of Adjusted EBITDA represent only the changes in lower of cost or market reserves on inventory that is carried at last-in, first-out (“LIFO”). These amounts are unrealized valuation adjustments applied to Sunoco LP’s fuel volumes remaining in inventory at the end of the period.

Adjusted EBITDA reflects amounts for unconsolidated affiliates based on the same recognition and measurement methods used to record equity in earnings of unconsolidated affiliates. Adjusted EBITDA related to unconsolidated affiliates excludes the same items with respect to the unconsolidated affiliate as those excluded from the calculation of Adjusted EBITDA, such as interest, taxes, depreciation, depletion, amortization and other non-cash items. Although these amounts are excluded from Adjusted EBITDA related to unconsolidated affiliates, such exclusion should not be understood to imply that we have control over the operations and resulting revenues and expenses of such affiliates. We do not control our unconsolidated affiliates; therefore, we do not control the earnings or cash flows of such affiliates. The use of Adjusted EBITDA or Adjusted EBITDA related to unconsolidated affiliates as an analytical tool should be limited accordingly.

Adjusted EBITDA is used by management to determine our operating performance and, along with other financial and volumetric data, as an internal measure for setting annual operating budgets, assessing financial performance of our numerous business locations, as a measure for evaluating targeted businesses for acquisition and as a measurement component of incentive compensation.

Definition of Distributable Cash Flow

We define Distributable Cash Flow as net income, adjusted for certain non-cash items, less distributions to preferred unitholders and maintenance capital expenditures. Non-cash items include depreciation, depletion and amortization, non-cash compensation expense, amortization included in interest expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, inventory valuation adjustments, non-cash impairment charges, losses on extinguishments of debt and deferred income taxes. For unconsolidated affiliates, Distributable Cash Flow reflects the Partnership’s proportionate share of the investee’s distributable cash flow.

Distributable Cash Flow is used by management to evaluate our overall performance. Our partnership agreement requires us to distribute all available cash, and Distributable Cash Flow is calculated to evaluate our ability to fund distributions through cash generated by our operations.

On a consolidated basis, Distributable Cash Flow includes 100% of the Distributable Cash Flow of ET’s consolidated subsidiaries. However, to the extent that noncontrolling interests exist among our subsidiaries, the Distributable Cash Flow generated by our subsidiaries may not be available to be distributed to our partners. In order to reflect the cash flows available for distributions to our partners, we have reported Distributable Cash Flow attributable to partners, which is calculated by adjusting Distributable Cash Flow (consolidated), as follows:

For subsidiaries with publicly traded equity interests, other than ETO, Distributable Cash Flow (consolidated) includes 100% of Distributable Cash Flow attributable to such subsidiary, and Distributable Cash Flow attributable to our partners includes distributions to be received by the parent company with respect to the periods presented.
For consolidated joint ventures or similar entities, where the noncontrolling interest is not publicly traded, Distributable Cash Flow (consolidated) includes 100% of Distributable Cash Flow attributable to such subsidiaries, but Distributable Cash Flow attributable to partners reflects only the amount of Distributable Cash Flow of such subsidiaries that is attributable to our ownership interest.

For Distributable Cash Flow attributable to partners, as adjusted, certain transaction-related adjustments and non-recurring expenses that are included in net income are excluded.

Definition of Distribution Coverage Ratio

Distribution coverage ratio for a period is calculated as Distributable Cash Flow attributable to partners, as adjusted, divided by distributions expected to be paid to the partners of ET in respect of such period.


ENERGY TRANSFER LP AND SUBSIDIARIES SUMMARY ANALYSIS OF QUARTERLY RESULTS BY SEGMENT (Tabular dollar amounts in millions) (unaudited)

	Three Months Ended December 31,
	2020		2019
Segment Adjusted EBITDA:
Intrastate transportation and storage	$	233	$	222
Interstate transportation and storage	448		434
Midstream	390		397
NGL and refined products transportation and services	703		743
Crude oil transportation and services	517		676
Investment in Sunoco LP	159		168
Investment in USAC	99		110
All other	43		18
Total Segment Adjusted EBITDA	$	2,592	$	2,768

In the following analysis of segment operating results, a measure of segment margin is reported for segments with sales revenues. Segment margin is a non-GAAP financial measure and is presented herein to assist in the analysis of segment operating results and particularly to facilitate an understanding of the impacts that changes in sales revenues have on the segment performance measure of Segment Adjusted EBITDA. Segment margin is similar to the GAAP measure of gross margin, except that segment margin excludes charges for depreciation, depletion and amortization. Among the GAAP measures reported by the Partnership, the most directly comparable measure to segment margin is Segment Adjusted EBITDA; a reconciliation of segment margin to Segment Adjusted EBITDA is included in the following tables for each segment where segment margin is presented.

In addition, for certain segments, the sections below include information on the components of segment margin by sales type, which components are included in order to provide additional disaggregated information to facilitate the analysis of segment margin and Segment Adjusted EBITDA. For example, these components include transportation margin, storage margin, and other margin. These components of segment margin are calculated consistent with the calculation of segment margin; therefore, these components also exclude charges for depreciation, depletion and amortization.

Intrastate Transportation and Storage

Three Months Ended
December 31,

2020