false0000076063Panhandle Eastern Pipe Line Company, LP 0000076063 2019-11-06 2019-11-06

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

November 6, 2019
Date of Report (Date of earliest event reported)
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)	(IRS Employer Identification No.)

8111 Westchester Drive, Suite 600, Dallas, Texas 75225

(Address of principal executive offices) (zip code)

(214) 981-0700

(Registrant’s telephone number, including area code)

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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Item 7.01	Regulation FD Disclosure.

On November 6, 2019, Energy Transfer LP (the "Partnership"), 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 announcing the financial and operating results of Energy Transfer LP, including certain financial results of the Company, for the third quarter ended September 30, 2019. A copy of the Partnership'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 Number	Description of the Exhibit
99.1	Energy Transfer LP Press Release dated November 6, 2019
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*	Filed herewith.

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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: November 6, 2019	By:		/s/ Thomas E. Long
			Thomas E. Long
			Chief Financial Officer (duly authorized to sign on behalf of the registrant)

•	Net income attributable to partners of $832 million, reflecting an increase over previous period primarily due to higher operating income and the impact of the simplification transaction.

•	Adjusted EBITDA of $2.79 billion, up 8 percent from the third quarter of 2018.

•	Distributable Cash Flow attributable to partners of $1.52 billion, up 10 percent from the third quarter of 2018.

•	Distribution coverage ratio of 1.88x, yielding excess coverage of $712 million of Distributable Cash Flow attributable to partners in excess of distributions.

•	The JC Nolan Pipeline joint venture successfully commissioned its diesel fuel pipeline in West Texas during the third quarter of 2019.

•	The Arrowhead III processing plant went into service in early July 2019 and is projected to be full by year-end.

•	Phase II of the Red Bluff Express pipeline was completed ahead of schedule in August 2019.

•	The Permian Express 4 expansion went into full service on October 1, 2019.

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On September 16, 2019, the Partnership entered into a definitive merger agreement to acquire SemGroup Corporation (“SemGroup”) in a unit and cash transaction (the “SemGroup Merger”). Total consideration, including the assumption of debt is approximately $5 billion, based on the closing price of the Partnership’s common units on September 13, 2019. The transaction is subject to the approval of SemGroup’s stockholders, and the SemGroup stockholders’ meeting is scheduled for December 4, 2019. We expect to close the transaction shortly after receipt of the vote, and the Partnership expects to contribute the SemGroup assets to ETO subsequent to closing the acquisition.

•	In October 2019, ET announced a quarterly distribution of $0.305 per unit ($1.220 annualized) on ET common units for the quarter ended September 30, 2019. The distribution coverage ratio for the third quarter of 2019 is 1.88x.

•	In October 2019, ETO entered into a term loan credit agreement providing for a $2 billion three-year term loan credit facility. Borrowings under the term loan agreement mature on October 17, 2022.

•	As of September 30, 2019, ETO’s $6.00 billion revolving credit facilities had an aggregate $3.32 billion of available capacity, and ETO’s leverage ratio, as defined by its credit agreement, was 3.63x.

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(a)	Lease-related balances as of September 30, 2019 were recorded in connection with the required adoption of the new lease accounting principles (referred to as ASC 842) on January 1, 2019.

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(a)

The closing of the ETO Merger has impacted the Partnership’s calculation of Distributable Cash Flow attributable to partners, as well as the number of ET Common Units outstanding and the amount of distributions to be paid to partners for the three and nine months ended September 30, 2018. In order to provide information on a comparable basis for pre-ETO Merger and post-ETO Merger periods, the Partnership has included certain pro forma information for the three and nine months ended September 30, 2018.

•	ETO is reflected as a wholly-owned subsidiary and pro forma Distributable Cash Flow attributable to partners reflects ETO’s consolidated Distributable Cash Flow (less certain other adjustments);

•	Distributions from Sunoco LP and USAC include distributions to both ET and ETO; and

•	Distributable Cash Flow attributable to noncontrolling interests in our other non-wholly-owned subsidiaries is subtracted from consolidated Distributable Cash Flow to calculate Distributable Cash Flow attributable to partners.

(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.

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•	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.

(c)

The amounts reflected for the nine months ended September 30, 2018 includes distributions to unitholders who elected to participate in a plan to forgo a portion of their future potential cash distributions on common units and reinvest those distributions in ETE Series A convertible preferred units representing limited partner interests in the Partnership for the nine months ended September 30, 2018. The quarter ended March 31, 2018 was the final quarter of participation in the plan.

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•	an increase of $9 million in transportation fees primarily due to increased utilization of our Texas pipelines;

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•	an increase of $2 million in realized natural gas sales and other due to higher realized gains from pipeline optimization activity; and

•	an increase of $1 million in realized storage margin primarily due to higher storage fees; partially offset by

•	a decrease of $2 million in retained fuel revenue primarily due to lower gas prices.

•	an increase of $37 million in operating expenses primarily due to an increase to ad valorem expenses of $48 million on the Rover pipeline system due to placing the final portions of this asset into service, partially offset by $5 million in lower maintenance expenditures and $4 million in lower storage lease expenses on our Panhandle system due to lower leased capacity; and

•	a decrease in EBITDA from unconsolidated affiliates of $11 million primarily resulting from a $7 million decrease due to lower earnings from MEP as a result of lower capacity being re-contracted and lower rates on expiring contracts, and a $3 million decrease due to Citrus resulting from the Texas Brine settlement being received in 2018; partially offset by

•	an increase of $24 million in reservation fees from placing the Rover pipeline fully in-service and $7 million from increased utilization of our Transwestern and Trunkline pipelines; and

•	an increase of $4 million in interruptible transportation volumes due to improved market conditions on our Rover, Transwestern, Trunkline and Panhandle pipeline systems.

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•	a decrease of $54 million in non-fee-based margin due to lower NGL prices of $51 million and lower gas prices of $14 million, partially offset by an increase of $11 million from increased throughput volumes in the Permian region;

•	an increase of $2 million in selling, general and administrative expenses due to an increase in allocated overhead costs; and

•	an increase of $23 million in operating expenses primarily due to increases in outside services, maintenance project costs, and employee costs; partially offset by

•	an increase of $59 million in fee-based margin due to volume growth in the Northeast, Permian and South Texas regions, offset by declines in the Mid-Continent/Panhandle regions.

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an increase of $152 million in transportation margin primarily due to an $87 million increase resulting from the initiation of service on our Mariner East 2 pipeline in the fourth quarter of 2018, a $54 million increase resulting from higher throughput volumes received from the Permian region on our Texas NGL pipelines, and an $11 million increase due to higher throughput volumes received from the Barnett and Southeast Texas regions;

•	an increase of $45 million in terminal services margin primarily due to the initiation of service on our Mariner East 2 pipeline in the fourth quarter of 2018;

•	an increase of $30 million in fractionation and refinery services margin primarily resulting from the commissioning of our sixth fractionator in February 2019 and higher NGL volumes from the Permian region feeding our Mont Belvieu fractionation facility. This increase was partially offset by a $3 million decrease resulting from a reclassification between our fractionation and storage margins; and

•	an increase of $7 million in storage margin primarily due to a $3 million increase from throughput pipeline fees collected at our Mont Belvieu storage facility, a $3 million increase resulting from a reclassification between our storage and fractionation margins; partially offset by

•	a decrease of $59 million in marketing margin primarily due to lower optimization gains resulting from less favorable market conditions and an $8 million write down on the value of stored NGL inventory; and

•	an increase of $5 million in selling, general and administrative expenses due to a $3 million increase in allocated overhead costs and a $2 million increase in legal fees.

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an increase of $5 million in segment margin (excluding unrealized gains and losses on commodity risk management activities) primarily due to a $63 million increase from higher throughput on our Texas crude pipeline system primarily due to increased production from the Permian region, a $90 million increase from higher throughput on the Bakken pipeline, and a $6 million increase from higher ship loading and tank rental fees at our Nederland terminal; partially offset by a $106 million decrease (excluding a net change of $116 million in unrealized gains and losses on commodity risk management activities) from our crude oil acquisition and marketing business primarily resulting from non-cash inventory valuation adjustments and lower basis differentials between the Permian producing region and the Nederland terminal on the Gulf Coast, as well as a $5 million decrease due to lower throughput volumes at our refinery terminal in the Northeast. The remainder of the offsetting decrease was primarily attributable to a change in the presentation of certain intrasegment transactions, which were eliminated in the current period presentation but were shown on a gross basis in revenues and operating expenses in the prior period;

•	a decrease of $16 million in operating expenses primarily due to the impact of certain intrasegment transactions discussed above, partially offset by a $17 million increase in ad valorem taxes; and

•	a decrease of $3 million in Adjusted EBITDA related to unconsolidated affiliates due to lower margin from jet fuel sales by our joint ventures.

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•	a decrease of $23 million in segment margin, excluding inventory valuation adjustments and unrealized gains and losses on commodity risk management activities, primarily due to a one-time benefit of approximately $25 million related to a cash settlement with a fuel supplier in the prior period, partially offset by an increase in motor fuel gallons sold; partially offset by

•	a net decrease of $6 million in operating expenses and selling, general and administrative expenses, excluding non-cash compensation, primarily as a result of lower lease expense and utilities.

•	an increase of $7 million in segment margin primarily due to an increase in demand for compression services driven by increased U.S. production of crude oil and natural gas;

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a decrease of $7 million in operating expenses primarily due to a $3 million decrease in outside maintenance services, a $2 million decrease in ad valorem taxes primarily due to prior year refunds received in the current period, a $2 million decrease in direct labor costs, and a $1 million decrease in indirect expenses, such as transportation and freight, partially offset by a $3 million increase in parts and fluids expenses as a result of higher revenue generating horsepower; and

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•	a decrease of $2 million in selling, general and administrative expenses primarily due to transaction related expenses as a result of transactions completed during 2018.

•	an increase of $3 million from power trading activities;

•	an increase of $5 million in optimized gains on residue gas sales;

•	an increase of $5 million from settled derivatives;

•	an increase of $6 million from the recognition of deferred revenue related to a bankruptcy; and

•	a decrease of $24 million in selling, general and administrative expenses, which includes a decrease of $9 million in merger and acquisition expenses, a decrease of $6 million in professional fees, and a decrease of $4 million in insurance expenses.

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(a)	Adjusted EBITDA of non-wholly-owned subsidiaries reflects the total Adjusted EBITDA of our non-wholly-owned subsidiaries on an aggregated basis. This is the amount of Adjusted EBITDA included in our consolidated non-GAAP measure of Adjusted EBITDA.

(b)	Our proportionate share of Adjusted EBITDA of non-wholly-owned subsidiaries reflects the amount of Adjusted EBITDA of such subsidiaries (on an aggregated basis) that is attributable to our ownership interest.

(c)	Distributable Cash Flow of non-wholly-owned subsidiaries reflects the total Distributable Cash Flow of our non-wholly-owned subsidiaries on an aggregated basis.

(d)	Our proportionate share of Distributable Cash Flow of non-wholly-owned subsidiaries reflects the amount of Distributable Cash Flow of such subsidiaries (on an aggregated basis) that is attributable to our ownership interest. This is the amount of Distributable Cash Flow included in our consolidated non-GAAP measure of Distributable Cash Flow attributable to the partners of ET.

(e)	Our ownership reflects the total economic interest held by us and our subsidiaries. In some cases, this percentage comprises ownership interests held in (or by) multiple entities.