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PEPL 5.8.13 8-K


UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549


FORM 8-K

CURRENT REPORT


Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 8, 2013


PANHANDLE EASTERN PIPE LINE COMPANY, LP
(Exact name of registrant as specified in its charter)



Delaware
1-2921
44-0382470
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)

3738 Oak Lawn Avenue
Dallas, Texas
(Address of principal executive offices)
75219
(Zip Code)

Registrant's telephone number, including area code: (214) 981-0700


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 7.01. Regulation FD Disclosure.

On May 8, 2013, Energy Transfer Partners, L.P. (“ETP”), the entity which owns 100% of ETP Holdco Corporation, which indirectly owns 100% of the equity interests of Panhandle Eastern Pipe Line Company, LP (the "Company"), issued a press release after market close announcing its financial and operating results, including certain financial results of the Company, for the quarter ended March 31, 2013. A copy of ETP's press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information set forth in the attached Exhibit 99.1 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.


Item 9.01
Financial Statements and Exhibits.

(d) Exhibits. In accordance with General Instruction B.2 of Form 8-K, the information set forth in the attached Exhibit 99.1 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.

Exhibit No. Exhibit

99.1
Energy Transfer Partners, L.P. Press Release dated May 8, 2013






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
 
 
PANHANDLE EASTERN PIPE LINE COMPANY, LP
 
(Registrant)
Date: May 8, 2013
By:
/s/ Robert M. Kerrigan, III
 
Robert M. Kerrigan, III
 
Vice President and Secretary






EXHIBIT INDEX

Exhibit No. Exhibit

99.1
Energy Transfer Partners, L.P. Press Release dated May 8, 2013



ETP Earnings Release-03-31-2013-Ex 99.1


ENERGY TRANSFER PARTNERS
REPORTS FIRST QUARTER RESULTS
Dallas – May 8, 2013 – Energy Transfer Partners, L.P. (NYSE: ETP) today reported its financial results for the quarter ended March 31, 2013.
Adjusted EBITDA for Energy Transfer Partners, L.P. (“ETP” or the “Partnership”) for the three months ended March 31, 2013 totaled $956 million, an increase of $462 million compared to the same period last year. Distributable Cash Flow for the three months ended March 31, 2013 totaled $622 million, an increase of $351 million compared to the same period last year. Income from continuing operations for the three months ended March 31, 2013 was $402 million, a decrease of $687 million compared to the same period last year that was primarily due to the recognition of a $1.06 billion gain as a result of the contribution of ETP’s Propane Business in January 2012. The increases in Adjusted EBITDA and Distributable Cash Flow were primarily due to strategic acquisitions in 2012, including Sunoco, Inc. (“Sunoco”) and ownership interests in Citrus Corp (“Citrus”), Sunoco Logistics Partners L.P. (“Sunoco Logistics”), and ETP Holdco Corporation (“Holdco”).
The Partnership’s key accomplishments to date in 2013 include the following:
•
During the first quarter of 2013, Phase I of the Jackson Plant was completed.
•
On April 30, 2013, the Partnership acquired from Energy Transfer Equity, L.P. (“ETE”) its interest in Holdco for approximately 49.5 million newly issued ETP common units and $1.4 billion in cash, less $68 million of estimated closing adjustments.
•
On April 30, 2013, Southern Union Company (“Southern Union”) contributed its interest in Southern Union Gathering Company, LLC to Regency Energy Partners LP (“Regency”), a subsidiary of ETE, in exchange for cash and Regency common units.
•
On May 6, 2013, the Partnership's subsidiaries, Sunoco Logistics and Lone Star NGL LLC, announced that long-term, fee-based agreements have been executed with an anchor tenant to move forward with a liquefied petroleum gas (LPG) export/import project.
An analysis of the Partnership’s segment results and other supplementary data is provided after the financial tables shown below. The Partnership has scheduled a conference call for 8:30 a.m. Central Time, Thursday, May 9, 2013 to discuss the first quarter 2013 results. The conference call will be broadcast live via an internet web cast which can be accessed through www.energytransfer.com and will also be available for replay on the Partnership’s website for a limited time.
Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures used by industry analysts, investors, lenders, and rating agencies to assess the financial performance and the operating results of the Partnership’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. A table reconciling Adjusted EBITDA and Distributable Cash Flow with appropriate GAAP financial measures is included in the summarized financial information included in this release. Beginning with the quarter ended December 31, 2012 and applied retroactively to all periods presented, the Partnership has revised its calculation of Adjusted EBITDA and Distributable Cash Flow. (See notes under “Supplemental Information” for further information.)
Energy Transfer Partners, L.P. (NYSE: ETP) is a master limited partnership owning and operating one of the largest and most diversified portfolios of energy assets in the United States. ETP currently has natural gas operations that include approximately 47,000 miles of gathering and transportation pipelines, treating and processing assets, and storage facilities. ETP owns 100% of ETP Holdco Corporation, which owns Southern Union Company and Sunoco, Inc., and a 70% interest in Lone Star NGL LLC, a joint venture that owns and operates natural gas liquids storage, fractionation and transportation assets. ETP also owns the general partner, 100% of the incentive distribution rights, and approximately 33.5 million common units in Sunoco Logistics Partners L.P. (NYSE: SXL), which operates a geographically diverse portfolio of crude oil and refined products pipelines, terminalling and crude oil acquisition and marketing assets. ETP’s general partner is owned by ETE. For more information, visit the Energy Transfer Partners, L.P. website at www.energytransfer.com.
Energy Transfer Equity, L.P. (NYSE: ETE) is a master limited partnership which owns the general partner and 100% of the incentive distribution rights (IDRs) of Energy Transfer Partners, L.P. (NYSE: ETP) and approximately 99.7 million ETP common units; and owns the general partner and 100% of the IDRs of Regency Energy Partners LP (NYSE: RGP) and approximately 26.3 million RGP common units. The Energy Transfer family of companies owns more than 71,000 miles of natural gas, natural gas

1


liquids, refined products, and crude pipelines. For more information, visit the Energy Transfer Equity, L.P. website at www.energytransfer.com.
Sunoco Logistics Partners L.P. (NYSE: SXL), headquartered in Philadelphia, is a master limited partnership that owns and operates a logistics business consisting of a geographically diverse portfolio of complementary crude oil and refined product pipeline, terminalling, and acquisition and marketing assets. SXL’s general partner is owned by Energy Transfer Partners, L.P. (NYSE: ETP). For more information, visit the Sunoco Logistics Partners, L.P. web site at www.sunocologistics.com.
The information contained in this press release is available on our website at www.energytransfer.com.
Contacts
Investor Relations:
Energy Transfer
Brent Ratliff
214-981-0700 (office)
Media Relations:
Vicki Granado
Granado Communications Group
214-599-8785 (office)
214-498-9272 (cell)

2


ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(unaudited)
 
March 31,
2013
 
December 31,
2012
ASSETS
 
 
 
 
 
 
 
CURRENT ASSETS
$
6,359

 
$
5,404

 
 
 
 
PROPERTY, PLANT AND EQUIPMENT, net
26,007

 
25,773

 
 
 
 
NON-CURRENT ASSETS HELD FOR SALE
992

 
985

ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES
3,489

 
3,502

NON-CURRENT PRICE RISK MANAGEMENT ASSETS
35

 
42

GOODWILL
5,586

 
5,606

INTANGIBLE ASSETS, net
1,544

 
1,561

OTHER NON-CURRENT ASSETS, net
356

 
357

Total assets
$
44,368

 
$
43,230

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
CURRENT LIABILITIES
$
5,783

 
$
5,548

 
 
 
 
NON-CURRENT LIABILITIES HELD FOR SALE
142

 
142

LONG-TERM DEBT, less current maturities
16,135

 
15,442

LONG-TERM NOTES PAYABLE — RELATED PARTY
166

 
166

NON-CURRENT PRICE RISK MANAGEMENT LIABILITIES
124

 
129

DEFERRED INCOME TAXES
3,541

 
3,476

OTHER NON-CURRENT LIABILITIES
1,008

 
995

 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
EQUITY:
 
 
 
Total partners’ capital
9,340

 
9,201

Noncontrolling interest
8,129

 
8,131

Total equity
17,469

 
17,332

Total liabilities and equity
$
44,368

 
$
43,230


3


ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per unit data)
(unaudited)
 
Three Months Ended March 31,
 
2013
 
2012(1)
REVENUES
$
10,854

 
$
1,323

COSTS AND EXPENSES:
 
 
 
Cost of products sold
9,594

 
781

Operating expenses
304

 
130

Depreciation and amortization
260

 
99

Selling, general and administrative
162

 
104

Total costs and expenses
10,320

 
1,114

OPERATING INCOME
534

 
209

OTHER INCOME (EXPENSE):
 
 
 
Interest expense, net of interest capitalized
(211
)
 
(141
)
Equity in earnings of unconsolidated affiliates
72

 
55

Gain on deconsolidation of Propane Business
—

 
1,056

Loss on extinguishment of debt
—

 
(115
)
Gains on interest rate derivatives
7

 
28

Other, net
3

 
(1
)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE
405

 
1,091

Income tax expense from continuing operations
3

 
2

INCOME FROM CONTINUING OPERATIONS
402

 
1,089

Income (loss) from discontinued operations
22

 
(1
)
NET INCOME
424

 
1,088

LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST
102

 
(27
)
NET INCOME ATTRIBUTABLE TO PARTNERS
322

 
1,115

GENERAL PARTNER’S INTEREST IN NET INCOME
128

 
117

LIMITED PARTNERS’ INTEREST IN NET INCOME
$
194

 
$
998

INCOME FROM CONTINUING OPERATIONS PER LIMITED PARTNER UNIT:
 
 
 
Basic
$
0.60

 
$
4.37

Diluted
$
0.60

 
$
4.36

NET INCOME PER LIMITED PARTNER UNIT:
 
 
 
Basic
$
0.63

 
$
4.36

Diluted
$
0.63

 
$
4.35

WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING:
 
 
 
Basic
300,831,573

 
226,549,263

Diluted
301,832,910

 
227,406,484

(1) 
In accordance with generally accepted accounting principles, amounts previously reported for interim periods in 2012 have been revised to reflect the retrospective consolidation of Southern Union into ETP as a result of the Holdco Transaction as the transfer of Southern Union into Holdco met the definition of a transaction between entities under common control. Thus, Southern Union is retroactively consolidated beginning March 26, 2012, the date that ETE completed its merger with Southern Union.

4


SUPPLEMENTAL INFORMATION
(Dollars in millions)
(unaudited)
 
Three Months Ended March 31,
 
2013
 
2012 (b) (c)
Reconciliation of net income to Adjusted EBITDA and Distributable Cash Flow (a):
 
 
 
Net income
$
424

 
$
1,088

Interest expense, net of interest capitalized
211

 
141

Gain on deconsolidation of Propane Business
—

 
(1,056
)
Income tax expense
3

 
2

Depreciation and amortization
260

 
99

Non-cash compensation expense
14

 
11

Gains on interest rate derivatives
(7
)
 
(28
)
Unrealized (gains) losses on commodity risk management activities
(19
)
 
86

LIFO valuation adjustment
(38
)
 
—

Loss on extinguishment of debt
—

 
115

Adjusted EBITDA related to unconsolidated affiliates
165

 
99

Equity in earnings of unconsolidated affiliates
(72
)
 
(55
)
Other, net
15

 
(8
)
Adjusted EBITDA
956

 
494

Adjusted EBITDA related to unconsolidated affiliates
(165
)
 
(99
)
Distributions from unconsolidated affiliates
95

 
42

Interest expense, net of interest capitalized
(211
)
 
(141
)
Income tax expense
(3
)
 
(2
)
Maintenance capital expenditures
(51
)
 
(24
)
Other, net
1

 
1

Distributable Cash Flow
$
622

 
$
271

 
 
 
 
Distributions to be paid to the partners of ETP (d):
 
 
 
Limited Partners:
 
 
 
Common units held by ETE
$
45

 
$
45

Common units held by public
241

 
160

General Partner interest held by ETE
5

 
5

Incentive Distribution Rights (“IDR”) held by ETE
156

 
114

 
447

 
324

IDR relinquishment related to previous acquisitions
(31
)
 
(14
)
Total distributions to be paid to the partners of ETP
416

 
310

 
 
 
 
Distributions to be paid to noncontrolling interests:
 
 
 
Distributions to ETE in respect of Holdco (e)
50

 
—

Distributions to Regency in respect of Lone Star (f)
23

 
11

Distributions to Sunoco Logistics unitholders (common units held by public) (g)
40

 
—

Total distributions to be paid to noncontrolling interests
113

 
11

Total distributions to be paid to the partners of ETP and noncontrolling interests
$
529

 
$
321

 
 
 
 

5


(a)
The Partnership has disclosed in this press release Adjusted EBITDA and Distributable Cash Flow, which are non-GAAP financial measures. Management believes Adjusted EBITDA and Distributable Cash Flow provide useful information to investors as measures of comparison with peer companies, including companies that may have different financing and capital structures. The presentation of Adjusted EBITDA and Distributable Cash Flow also allows investors to view our performance in a manner similar to the methods used by management and provides additional insight into our operating results.
There are material limitations to using measures such as Adjusted EBITDA and Distributable Cash Flow, including the difficulty associated with using either 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 and Distributable Cash Flow 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 gross margin, operating income, net income, and cash flow from operating activities.
Definition of Adjusted EBITDA
The Partnership defines Adjusted EBITDA as total partnership earnings before interest, taxes, depreciation, 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, non-cash impairment charges, loss on extinguishment of debt, gain on deconsolidation of our Propane Business and other non-operating income or expense items. Unrealized gains and losses on commodity risk management activities include unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Adjusted EBITDA reflects amounts for less than wholly owned subsidiaries based on 100% of the subsidiaries’ results of operations and for unconsolidated affiliates based on the Partnership’s proportionate ownership.
Adjusted EBITDA is used by management to determine our operating performance and, along with other financial and volumetric data, as internal measures 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
The Partnership defines Distributable Cash Flow as net income, adjusted for certain non-cash items, less maintenance capital expenditures. Non-cash items include depreciation and amortization, 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, non-cash impairment charges, loss on extinguishment of debt and gain on deconsolidation of our Propane Business. Unrealized gains and losses on commodity risk management activities includes unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Distributable Cash Flow reflects earnings from unconsolidated affiliates on a cash basis.
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.
(b)
In accordance with generally accepted accounting principles, amounts previously reported for interim periods in 2012 have been revised to reflect the retrospective consolidation of Southern Union into ETP as a result of the Holdco Transaction as the transfer of Southern Union into Holdco met the definition of a transaction between entities under common control. Thus, Southern Union is retroactively consolidated beginning March 26, 2012, the date that ETE completed its merger with Southern Union.
(c)
The Partnership has presented Adjusted EBITDA and Distributable Cash Flow in previous communications; however, the Partnership changed its definition for these non-GAAP measures in the quarter ended December 31, 2012 to reflect less than wholly-owned subsidiaries on a fully consolidated basis. Previously, the Partnership presented less than wholly-owned subsidiaries on a proportionate basis. The Partnership believes that with this change, Adjusted EBITDA and Distributable Cash Flow more accurately reflect the Partnership’s operating performance and therefore are more useful measures. This change has been applied retroactively to all periods presented. See “Non-GAAP Measures” available on the Partnership’s website at www.energytransfer.com for the reconciliation of net income to Adjusted EBITDA for recent prior periods reflecting the changes described above.
(d)
For the three months ended March 31, 2013, cash distributions to be paid to the partners of ETP consist of cash distributions payable on May 15, 2013 to holders of record on May 6, 2013 in respect of the quarter ended March 31, 2013. For the three

6


months ended March 31, 2012, cash distributions to be paid to the partners of ETP consist of cash distributions paid on May 15, 2012 in respect of the quarter ended March 31, 2012.
For the three months ended March 31, 2013, cash distributions to be paid to the partners of ETP exclude distributions to be paid on 49.5 million ETP common units issued to ETE as a portion of the consideration for ETP's acquisition of ETE's interest in Holdco on April 30, 2013. These newly issued ETP common units will receive cash distributions on May 15, 2013; however, such distributions were reduced from the total cash portion of the consideration paid to ETE in connection with the April 30, 2013 Holdco transaction.
(e)
For the three months ended March 31, 2013, cash distributions to ETE in respect of Holdco consist of cash distributions paid in April 2013 in respect of the quarter ended March 31, 2013.
(f)
Cash distributions to Regency in respect of Lone Star consist of cash distributions paid on a quarterly basis. The amounts reflected above are in respect of the periods then ended, including payments made in arrears subsequent to period end.
(g)
For the three months ended March 31, 2013, cash distributions to be paid to the partners of Sunoco Logistics consist of cash distributions payable on May 15, 2013 to holders of record on May 9, 2013 in respect of the quarter ended March 31, 2013.

7


SUMMARY ANALYSIS OF QUARTERLY RESULTS BY SEGMENT
(Dollars in millions)
(unaudited)
Subsequent to the Sunoco Merger and Holdco Transactions in October 2012, our reportable segments changed, as follows:
•
Interstate transportation and storage segment now includes Southern Union’s transportation and storage operations;
•
Midstream segment now includes Southern Union’s gathering and processing operations;
•
Investment in Sunoco Logistics segment reflects the consolidated operations of Sunoco Logistics;
•
Retail marketing segment reflects the consolidated operations of Sunoco’s retail marketing business; and,
•
All other now includes the investments and operations identified under the segment table below.
Our segment results were presented based on the measure of Segment Adjusted EBITDA. The tables below identify the components of Segment Adjusted EBITDA, which was calculated as follows:
•
Gross margin, operating expenses, and selling, general and administrative. These amounts represent the amounts included in our consolidated financial statements that are attributable to each segment.
•
Unrealized gains or losses on commodity risk management activities. These are the unrealized amounts that are included in gross margin. These amounts are not included in Segment Adjusted EBITDA; therefore, the unrealized losses are added back and the unrealized gains are subtracted to calculate the segment measure.
•
Non-cash compensation expense. These amounts represent the total non-cash compensation recorded in operating expenses and selling, general and administrative. These amounts are not included in Segment Adjusted EBITDA and therefore are added back to calculate the segment measure.
•
Adjusted EBITDA related to unconsolidated affiliates. These amounts represent our proportionate share of the Adjusted EBITDA of our unconsolidated affiliates. Amounts reflected are calculated consistently with our definition of Adjusted EBITDA above.
 
Three Months Ended March 31,
 
2013
 
2012
Segment Adjusted EBITDA:
 
 
 
Intrastate transportation and storage
$
132

 
$
192

Interstate transportation and storage
297

 
80

Midstream
79

 
89

NGL transportation and services
80

 
50

Investment in Sunoco Logistics
236

 
—

Retail marketing
37

 
—

All other
95

 
83

 
$
956

 
$
494


8


Intrastate Transportation and Storage
 
Three Months Ended March 31,
 
2013
 
2012
Natural gas transported (MMBtu/d)
9,733,480

 
10,114,354

Revenues
$
690

 
$
482

Cost of products sold
496

 
314

Gross margin
194

 
168

Unrealized (gains) losses on commodity risk management activities
(12
)
 
82

Operating expenses, excluding non-cash compensation expense
(39
)
 
(39
)
Selling, general and administrative expenses, excluding non-cash compensation expense
(11
)
 
(19
)
Segment Adjusted EBITDA
$
132

 
$
192

 
 
 
 
Distributions from unconsolidated affiliates
$
—

 
$
1

Segment Adjusted EBITDA for the intrastate transportation and storage segment decreased primarily due to a lower realized margin on natural gas storage activities. Additionally, a decrease in transportation fees was offset by increases in natural gas sales and other activities, improved retention margins and lower selling, general and administrative expenses.
Interstate Transportation and Storage
 
Three Months Ended March 31,
 
2013
 
2012
Natural gas transported (MMBtu/d):
 
 
 
ETP legacy assets
2,613,154

 
3,153,073

Southern Union transportation and storage
4,420,650

 
3,764,599

Natural gas sold (MMBtu/d) – ETP legacy assets
16,768

 
20,517

Revenues
$
324

 
$
142

Operating expenses, excluding non-cash compensation, amortization and accretion expenses
(72
)
 
(32
)
Selling, general and administrative expenses, excluding non-cash compensation, amortization and accretion expenses
(35
)
 
(53
)
Adjusted EBITDA related to unconsolidated affiliates
80

 
23

Segment Adjusted EBITDA
$
297

 
$
80

 
 
 
 
Distributions from unconsolidated affiliates
$
41

 
$
18

Segment Adjusted EBITDA for the interstate transportation and storage segment increased primarily due to the consolidation of Southern Union’s transportation and storage operations beginning March 26, 2012. Selling, general and administrative expenses decreased because the incremental expenses from Southern Union’s transportation and storage operations in the current year was more than offset by Southern Union’s recognition of merger-related expenses during the period from March 26, 2012 to March 31, 2012. Adjusted EBITDA related to the Transwestern and Tiger pipelines also contributed approximately $1 million to the increase. Adjusted EBITDA related to unconsolidated affiliates increased primarily due to an increase of $58 million from Citrus, in which we acquired a 50% interest on March 26, 2012.

9


Midstream
 
Three Months Ended March 31,
 
2013
 
2012
Gathered volumes (MMBtu/d):
 
 
 
ETP legacy assets
2,587,787

 
2,239,220

Southern Union gathering and processing
480,339

 
404,422

NGLs produced (Bbls/d):
 
 
 
ETP legacy assets
96,775

 
65,627

Southern Union gathering and processing
39,681

 
38,723

Equity NGLs produced (Bbls/d):
 
 
 
ETP legacy assets
9,499

 
17,630

Southern Union gathering and processing
7,206

 
8,744

Revenues
$
951

 
$
563

Cost of products sold
794

 
436

Gross margin
157

 
127

Unrealized losses on commodity risk management activities
—

 
2

Operating expenses, excluding non-cash compensation expense
(49
)
 
(26
)
Selling, general and administrative expenses, excluding non-cash compensation expense
(29
)
 
(19
)
Adjusted EBITDA attributable to discontinued operations
—

 
5

Segment Adjusted EBITDA
$
79

 
$
89

Segment Adjusted EBITDA for the midstream segment reflected increases in gross margin as follows:
 
Three Months Ended March 31,
 
2013
 
2012
Gathering and processing fee-based revenues
$
97

 
$
70

Non fee-based contracts and processing
67

 
64

Other
(7
)
 
(7
)
Total gross margin
$
157

 
$
127

Increased production in the Eagle Ford Shale resulted in increased fee-based revenues of $22 million. Additional volumes from the Woodford Shale also increased gross margin from our North Texas system by $3 million. The consolidation of Southern Union's gathering and processing operations, beginning March 26, 2012, also increased gross margin by $5 million.
Segment Adjusted EBITDA also reflected higher operating expenses and selling, general and administrative expenses primarily due to the consolidation of Southern Union’s gathering and processing operations beginning March 26, 2012.

10


NGL Transportation and Services
 
Three Months Ended March 31,
 
2013
 
2012
NGL transportation volumes (Bbls/d)
274,030

 
150,881

NGL fractionation volumes (Bbls/d)
86,703

 
20,006

Revenues
$
365

 
$
167

Cost of products sold
257

 
98

Gross margin
108

 
69

Operating expenses, excluding non-cash compensation expense
(19
)
 
(14
)
Selling, general and administrative expenses, excluding non-cash compensation expense
(10
)
 
(5
)
Adjusted EBITDA related to unconsolidated affiliates
1

 
—

Segment Adjusted EBITDA
$
80

 
$
50

 
 
 
 
Distributions from unconsolidated affiliates
$
1

 
$
—

Segment Adjusted EBITDA for the NGL transportation and services segment reflected higher gross margin, as discussed below, offset by higher operating expenses due to increased ad valorem taxes and other expenses related to the start-up of Lone Star’s fractionator and higher selling, general and administrative expenses due to increased employee-related costs and allocated overhead expenses resulting from overall asset growth on the system.
Segment Adjusted EBITDA for the NGL transportation and services segment reflected increases in gross margin as follows:
 
Three Months Ended March 31,
 
2013
 
2012
Storage margin
$
32

 
$
32

Transportation margin
41

 
13

Processing and fractionation margin
34

 
24

Other margin
1

 
—

Total gross margin
$
108

 
$
69

Transportation margin increased due to an increase in volumes transported out of West Texas due to the commissioning of Lone Star’s Gateway pipeline during the fourth quarter of 2012. A higher concentration of volumes sourced from transportation contracts originating in West Texas and renegotiated contracts on the East side of the legacy Lone Star pipeline system increased our average realized rate. These volume and rate factors increases on our Lone Star pipeline system accounted for $21 million of the increase in transportation margin between the periods. The completion of our Justice pipeline connection to Mont Belvieu, Texas and additional NGL production from our processing plants accounted for the remainder of the increase in transportation margin.
Processing and fractionation margin increased due to the startup of Lone Star’s fractionator at Mont Belvieu, Texas in December 2012, which contributed $16 million during the three months ended March 31, 2013. The increase in margin related to our fractionator was offset by a decrease in margin attributable to our fractionator in Geismar, Louisiana due to a less favorable pricing environment and contract mix.

11


Investment in Sunoco Logistics
 
Three Months Ended March 31,
 
2013
 
2012
Revenue
$
3,512

 
$
—

Cost of products sold
3,226

 
—

Gross margin
286

 
—

Unrealized gains on commodity risk management activities
(3
)
 
—

Operating expenses, excluding non-cash compensation expense
(24
)
 
—

Selling, general and administrative expenses, excluding non-cash compensation expense
(30
)
 
—

Adjusted EBITDA related to unconsolidated affiliates
7

 
—

Segment Adjusted EBITDA
$
236

 
$
—

 
 
 
 
Distributions from unconsolidated affiliates
$
3

 
$
—

We obtained control of Sunoco Logistics Partners L.P. on October 5, 2012 in connection with our acquisition of Sunoco, Inc.; therefore, no comparative results were reflected in our financial statements.
Retail Marketing
 
Three Months Ended March 31,
 
2013
 
2012
Total retail gasoline outlets, end of period
4,979

 
—

Total company-operated outlets, end of period
439

 
—

Gasoline and diesel throughput per company-operated site (gallons/month)
187,000

 
—

Revenue
$
5,222

 
$
—

Cost of products sold
5,036

 
—

Gross margin
186

 
—

Operating expenses, excluding non-cash compensation expense
(98
)
 
—

Selling, general and administrative expenses, excluding non-cash compensation expense
(15
)
 
—

LIFO valuation adjustment
(38
)
 
—

Adjusted EBITDA related to unconsolidated affiliates
2

 
—

Segment Adjusted EBITDA
$
37

 
$
—

We acquired our retail marketing segment on October 5, 2012 in connection with our acquisition of Sunoco, Inc.; therefore, no comparative results were reflected in our financial statements.

12


All Other
 
Three Months Ended March 31,
 
2013
 
2012
Revenue
$
150

 
$
129

Cost of products sold
137

 
91

Gross margin
13

 
38

Unrealized (gains) losses on commodity risk management activities
(4
)
 
2

Operating expenses, excluding non-cash compensation expense
(5
)
 
(20
)
Selling, general and administrative expenses, excluding non-cash compensation expense
(18
)
 
(13
)
Adjusted EBITDA attributable to discontinued operations
40

 
2

Adjusted EBITDA related to unconsolidated affiliates
76

 
75

Elimination
(7
)
 
(1
)
Segment Adjusted EBITDA
$
95

 
$
83

 
 
 
 
Distributions from unconsolidated affiliates
$
50

 
$
23

Amounts reflected in our all other segment primarily include:
•
Our retail propane and other retail propane related operations prior to our contribution of those operations to AmeriGas in January 2012. Our investment in AmeriGas was reflected in the all other segment subsequent to that transaction;
•
Southern Union’s local distribution operations beginning March 26, 2012;
•
Our natural gas compression operations; and,
•
An approximate 30% non-operating interest in PES, a refining joint venture, effective upon our acquisition of Sunoco on October 5, 2012.
The decrease in gross margin and operating expenses was primarily due to our recognition of $31 million of gross margin and $18 million of operating expenses from our retail propane operations prior to the deconsolidation of those operations in January 2012.
Adjusted EBITDA attributable to discontinued operations reflected the results of Southern Union's local distribution operations. Adjusted EBITDA related to unconsolidated affiliates reflected the results from our investments in AmeriGas and PES. Additional information related to unconsolidated affiliates is provided below in “Supplemental Information on Unconsolidated Affiliates.”

13


SUPPLEMENTAL INFORMATION ON CAPITAL EXPENDITURES
(Dollars in millions)
(unaudited)
The following is a summary of capital expenditures recorded during the three months ended March 31, 2013:
 
Growth
 
Maintenance
 
Total
ETP legacy assets:
 
 
 
 
 
Intrastate transportation and storage
$
2

 
$
3

 
$
5

Interstate transportation and storage
2

 
3

 
5

Midstream
113

 
5

 
118

NGL transportation and services(1)
102

 
3

 
105

 
219

 
14

 
233

Holdco:
 
 
 
 
 
Southern Union transportation and storage
—

 
(1
)
 
(1
)
Southern Union gathering and processing
80

 
7

 
87

Retail marketing
6

 
10

 
16

 
86

 
16

 
102

Investment in Sunoco Logistics
136

 
4

 
140

All other (including eliminations)
(6
)
 
17

 
11

Total capital expenditures
$
435

 
$
51

 
$
486

(1) 
We received capital contributions from Regency related to their 30% share of Lone Star of $27 million.
We currently expect capital expenditures for the full year 2013 to be within the following ranges:
 
Growth
 
Maintenance
 
Low
 
High
 
Low
 
High
ETP legacy assets:
 
 
 
 
 
 
 
Midstream and intrastate transportation and storage
$
315

 
$
355

 
$
75

 
$
85

Interstate transportation and storage
10

 
25

 
20

 
30

NGL transportation and services(1)
540

 
600

 
15

 
25

 
865

 
980

 
110

 
140

Holdco:
 
 
 
 
 
 
 
Southern Union transportation and storage
30

 
40

 
90

 
100

Southern Union gathering and processing
80

 
80

 
5

 
5

Retail marketing
25

 
55

 
65

 
75

 
135

 
175

 
160

 
180

Investment in Sunoco Logistics
635

 
735

 
60

 
70

All other (including eliminations)
(5
)
 
(5
)
 
15

 
15

Total capital expenditures
$
1,630

 
$
1,885

 
$
345

 
$
405

(1) 
We expect to receive capital contributions from Regency related to their 30% share of Lone Star of $100 million.

14


SUPPLEMENTAL INFORMATION ON UNCONSOLIDATED AFFILIATES
(Dollars in millions)
(unaudited)
 
Three Months Ended March 31,
 
2013
 
2012
Equity in earnings of unconsolidated affiliates:
 
 
 
AmeriGas
$
63

 
$
40

Citrus
14

 
1

FEP
13

 
13

Other
(18
)
 
1

Total equity in earnings of unconsolidated affiliates
$
72

 
$
55

Proportionate share of interest, depreciation, amortization, non-cash compensation expense, loss on debt extinguishment and taxes:
 
 
 
AmeriGas
$
34

 
$
35

Citrus
48

 
3

FEP
5

 
6

Other
6

 
—

Total proportionate share of interest, depreciation, amortization, non-cash compensation expense, loss on debt extinguishment and taxes
$
93

 
$
44

Adjusted EBITDA related to unconsolidated affiliates:
 
 
 
AmeriGas
$
97

 
$
75

Citrus
62

 
4

FEP
18

 
19

Other
(12
)
 
1

Total Adjusted EBITDA attributable to unconsolidated affiliates
$
165

 
$
99

Distributions received from unconsolidated affiliates:
 
 
 
AmeriGas
$
24

 
$
23

Citrus
24

 
—

FEP
17

 
18

Other
30

 
1

Total distributions received from unconsolidated affiliates
$
95

 
$
42


15