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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-32740

ENERGY TRANSFER LP

(Exact name of registrant as specified in its charter)


Delaware						30-0108820
(State or other jurisdiction of incorporation or organization)						(I.R.S. 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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Units

New York Stock Exchange

7.375% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

ETprC

New York Stock Exchange

7.625% Series D Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

ETprD

New York Stock Exchange

7.600% Series E Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

ETprE

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

☐

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. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

At July 28, 2023, the registrant had 3,143,207,052 Common Units outstanding.

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FORM 10-Q

ENERGY TRANSFER LP AND SUBSIDIARIES

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Consolidated Balance Sheets			5
Consolidated Statements of Operations			7
Consolidated Statements of Comprehensive Income			8
Consolidated Statements of Equity			9
Consolidated Statements of Cash Flows			10
Notes to Consolidated Financial Statements			11
1. Organization and Basis of Presentation			11
2. Acquisitions			11
3. Cash and Cash Equivalents			12
4. Inventories			13
5. Fair Value Measurements			13
6. Net Income Per Common Unit			16
7. Debt Obligations			16
8. Redeemable Noncontrolling Interests			17
9. Equity			17
10. Regulatory Matters, Commitments, Contingencies and Environmental Liabilities			20
11. Revenue			29
12. Derivative Assets and Liabilities			31
13. Reportable Segments			35
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			38
Recent Developments			38
Results of Operations			40
Liquidity and Capital Resources			53
Cash Distributions			57


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			61
ITEM 4. CONTROLS AND PROCEDURES			62
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			64
ITEM 1A. RISK FACTORS			64







ITEM 6. EXHIBITS			65
SIGNATURE			66

Table of Contents

Definitions

References to the “Partnership” or “Energy Transfer” refer to Energy Transfer LP. In addition, the following is a list of certain acronyms and terms used throughout this document:


			/d						per day
			AOCI						accumulated other comprehensive income
			BBtu						billion British thermal units
			Citrus						Citrus, LLC, a 50/50 joint venture which owns Florida Gas Transmission Company, LLC, which owns the Florida Gas Transmission Pipeline
			Dakota Access						Dakota Access, LLC, a non-wholly-owned subsidiary of Energy Transfer and/or Dakota Access Pipeline
			Energy Transfer Canada						Energy Transfer Canada ULC, a non-wholly-owned subsidiary of Energy Transfer until its sale in August 2022
			Energy Transfer Preferred Units						Collectively, the Series A Preferred Units, Series B Preferred Units, Series C Preferred Units, Series D Preferred Units, Series E Preferred Units, Series F Preferred Units, Series G Preferred Units and Series H Preferred Units
			Energy Transfer R&M						Energy Transfer (R&M), LLC (formerly Sunoco (R&M), LLC)
			ETC Sunoco						ETC Sunoco Holdings LLC (formerly Sunoco, Inc.), a wholly-owned subsidiary of Energy Transfer
			ETO						Energy Transfer Operating, L.P., formerly a non-wholly-owned subsidiary of Energy Transfer until its merger into the Partnership in April 2021
			ETP Holdco						ETP Holdco Corporation, a wholly-owned subsidiary of Energy Transfer
			Exchange Act						Securities Exchange Act of 1934, as amended
			Explorer						Explorer Pipeline Company
			FERC						Federal Energy Regulatory Commission
			GAAP						accounting principles generally accepted in the United States of America
			General Partner						LE GP, LLC, the general partner of Energy Transfer
			HFOTCO						HFOTCO LLC, a wholly-owned subsidiary of Energy Transfer which owns the Houston Terminal
			IFERC						Inside FERC’s Gas Market Report
			LIBOR						London Interbank Offered Rate
			MBbls						thousand barrels
			MEP						Midcontinent Express Pipeline LLC
			NGL						natural gas liquid, such as propane, butane and natural gasoline
			NYMEX						New York Mercantile Exchange
			OTC						over-the-counter
			Panhandle						Panhandle Eastern Pipe Line Company, LP, a wholly-owned subsidiary of Energy Transfer and/or Panhandle Eastern Pipe Line
			Partnership Agreement						Energy Transfer’s Third Amended and Restated Agreement of Limited Partnership, as amended to date
			PHMSA						Pipeline and Hazardous Materials Safety Administration
			Rover						Rover Pipeline LLC, a non-wholly-owned subsidiary of Energy Transfer and/or Rover Pipeline
			Sea Robin						Sea Robin Pipeline Company, LLC, a wholly-owned subsidiary of Energy Transfer
			SEC						Securities and Exchange Commission
			Series A Preferred Units						6.250% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (currently a floating rate security)
			Series B Preferred Units						6.625% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units
			Series C Preferred Units						7.375% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (currently a floating rate security)
			Series D Preferred Units						7.625% Series D Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

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			Series E Preferred Units						7.600% Series E Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units
			Series F Preferred Units						6.750% Series F Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units
			Series G Preferred Units						7.125% Series G Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units
			Series H Preferred Units						6.500% Series H Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units
			SOFR						Secured overnight financing rate
			SPLP						Sunoco Pipeline L.P., a wholly-owned subsidiary of Energy Transfer
			Transwestern						Transwestern Pipeline Company, LLC, a wholly-owned subsidiary of Energy Transfer and/or Transwestern Pipeline
			USAC						USA Compression Partners, LP, a publicly traded partnership and consolidated subsidiary of Energy Transfer
			White Cliffs						White Cliffs Pipeline, L.L.C.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(unaudited)


	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	330	$	257
Accounts receivable, net	7,294		8,466
Accounts receivable from related companies	89		93
Inventories	2,271		2,461
Income taxes receivable	82		68
Derivative assets	15		10
Other current assets	517		726

Total current assets	10,598		12,081

Property, plant and equipment	108,718		105,996
Accumulated depreciation and depletion	(27,569)		(25,685)
Property, plant and equipment, net	81,149		80,311

Investments in unconsolidated affiliates	3,007		2,893
Non-current derivative assets	3		—
Lease right-of-use assets, net	826		819


Other non-current assets, net	1,684		1,558
Intangible assets, net	5,301		5,415
Goodwill	2,564		2,566

Total assets	$	105,132	$	105,643

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

(Dollars in million)

(unaudited)


	June 30, 2023		December 31, 2022
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	6,169	$	6,952
Accounts payable to related companies	10		17
Derivative liabilities	7		23

Operating lease current liabilities	45		45
Accrued and other current liabilities	3,323		3,329
Current maturities of long-term debt	3,459		2

Total current liabilities	13,013		10,368

Long-term debt, less current maturities	44,672		48,260

Non-current derivative liabilities	23		23
Non-current operating lease liabilities	786		798
Deferred income taxes	3,839		3,701
Other non-current liabilities	1,342		1,341


Commitments and contingencies
Redeemable noncontrolling interests	495		493

Equity:
Limited Partners:
Preferred Unitholders	6,042		6,051
Common Unitholders	27,487		26,960
General Partner	(2)		(2)
Accumulated other comprehensive income	24		16
Total partners’ capital	33,551		33,025
Noncontrolling interests	7,411		7,634
Total equity	40,962		40,659
Total liabilities and equity	$	105,132	$	105,643

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in millions, except per unit data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
REVENUES:
Refined product sales	$	5,834	$	7,950	$	11,288	$	13,396
Crude sales	5,233		6,683		10,711		11,985
NGL sales	3,489		5,896		7,649		11,005
Gathering, transportation and other fees	2,811		2,765		5,588		5,458
Natural gas sales	685		2,429		1,584		4,182
Other	268		222		495		410
Total revenues	18,320		25,945		37,315		46,436
COSTS AND EXPENSES:
Cost of products sold	14,092		21,515		28,702		37,653
Operating expenses	1,094		1,060		2,119		2,009
Depreciation, depletion and amortization	1,061		1,046		2,120		2,074
Selling, general and administrative	228		211		466		441
Impairment losses	10		—		11		300
Total costs and expenses	16,485		23,832		33,418		42,477
OPERATING INCOME	1,835		2,113		3,897		3,959
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized	(641)		(578)		(1,260)		(1,137)
Equity in earnings of unconsolidated affiliates	95		62		183		118


Gains on interest rate derivatives	35		129		15		243
Other, net	17		(18)		24		3
INCOME BEFORE INCOME TAX EXPENSE	1,341		1,708		2,859		3,186
Income tax expense	108		86		179		77
NET INCOME	1,233		1,622		2,680		3,109
Less: Net income attributable to noncontrolling interests	308		284		629		489
Less: Net income attributable to redeemable noncontrolling interests	14		12		27		25
NET INCOME ATTRIBUTABLE TO PARTNERS	911		1,326		2,024		2,595
General Partner’s interest in net income	1		1		2		2
Preferred Unitholders’ interest in net income	113		105		222		211
Common Unitholders’ interest in net income	$	797	$	1,220	$	1,800	$	2,382



NET INCOME PER COMMON UNIT:
Basic	$	0.25	$	0.40	$	0.58	$	0.77
Diluted	$	0.25	$	0.39	$	0.57	$	0.77

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in millions)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	1,233	$	1,622	$	2,680	$	3,109
Other comprehensive income (loss), net of tax:
Change in value of available-for-sale securities	(1)		(4)		—		(9)
Actuarial gain related to pension and other postretirement benefit plans	5		—		—		7
Foreign currency translation adjustments	(6)		(30)		(5)		(19)
Change in other comprehensive income from unconsolidated affiliates	3		6		3		18
	1		(28)		(2)		(3)
Comprehensive income	1,234		1,594		2,678		3,106
Less: Comprehensive income attributable to noncontrolling interests	308		270		629		480
Less: Comprehensive income attributable to redeemable noncontrolling interests	14		12		27		25
Comprehensive income attributable to partners	$	912	$	1,312	$	2,022	$	2,601

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in millions)

(unaudited)


	Common Unitholders		Preferred Unitholders		General Partner		AOCI		Noncontrolling Interests		Total
Balance, December 31, 2022	$	26,960	$	6,051	$	(2)	$	16	$	7,634	$	40,659
Distributions to partners	(920)		(80)		(1)		—		—		(1,001)
Distributions to noncontrolling interests	—		—		—		—		(441)		(441)

Capital contributions from noncontrolling interests	—		—		—		—		3		3
Other comprehensive loss, net of tax	—		—		—		(3)		—		(3)
Other, net	14		—		—		—		4		18
Net income, excluding amounts attributable to redeemable noncontrolling interests	1,003		109		1		—		321		1,434
Balance, March 31, 2023	27,057		6,080		(2)		13		7,521		40,669
Distributions to partners	(942)		(151)		(1)		—		—		(1,094)
Distributions to noncontrolling interests	—		—		—		—		(421)		(421)



Other comprehensive income, net of tax	—		—		—		1		—		1
Lotus Midstream acquisition	574		—		—		—		—		574
Other, net	1		—		—		10		3		14
Net income, excluding amounts attributable to redeemable noncontrolling interests	797		113		1		—		308		1,219
Balance, June 30, 2023	$	27,487	$	6,042	$	(2)	$	24	$	7,411	$	40,962


	Common Unitholders		Preferred Unitholders		General Partner		AOCI		Noncontrolling Interests		Total
Balance, December 31, 2021	$	25,230	$	6,051	$	(4)	$	23	$	8,045	$	39,345
Distributions to partners	(528)		(80)		—		—		—		(608)
Distributions to noncontrolling interests	—		—		—		—		(307)		(307)

Capital contributions from noncontrolling interests	—		—		—		—		373		373
Other comprehensive income, net of tax	—		—		—		20		5		25
Other, net	17		—		—		—		10		27
Net income, excluding amounts attributable to redeemable noncontrolling interests	1,162		106		1		—		205		1,474
Balance, March 31, 2022	25,881		6,077		(3)		43		8,331		40,329
Distributions to partners	(603)		(131)		(1)		—		—		(735)
Distributions to noncontrolling interests	—		—		—		—		(446)		(446)

Capital contributions from noncontrolling interests	—		—		—		—		24		24

Other comprehensive loss, net of tax	—		—		—		(14)		(14)		(28)
Other, net	9		—		—		—		2		11
Net income, excluding amounts attributable to redeemable noncontrolling interests	1,220		105		1		—		284		1,610
Balance, June 30, 2022	$	26,507	$	6,051	$	(3)	$	29	$	8,181	$	40,765

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(unaudited)


	Six Months Ended June 30,
	2023		2022
OPERATING ACTIVITIES:
Net income	$	2,680	$	3,109
Reconciliation of net income to net cash provided by operating activities:
Depreciation, depletion and amortization	2,120		2,074
Deferred income taxes	134		107
Inventory valuation adjustments	28		(121)
Non-cash compensation expense	64		61
Impairment losses	11		300


Distributions on unvested awards	(33)		(27)
Equity in earnings of unconsolidated affiliates	(183)		(118)
Distributions from unconsolidated affiliates	182		108
Other non-cash	(4)		(38)
Net change in operating assets and liabilities, net of effects of acquisitions	887		(731)
Net cash provided by operating activities	5,886		4,724
INVESTING ACTIVITIES:
Cash paid for Lotus Midstream acquisition, net of cash received	(930)		—
Cash paid for other acquisitions, net of cash received	(111)		(589)
Capital expenditures, excluding allowance for equity funds used during construction	(1,729)		(1,458)
Contributions in aid of construction costs	30		35
Contributions to unconsolidated affiliates	(1)		—
Distributions from unconsolidated affiliates in excess of cumulative earnings	27		46
Proceeds from sales of assets	23		12

Net cash used in investing activities	(2,691)		(1,954)
FINANCING ACTIVITIES:
Proceeds from borrowings	15,412		11,798
Repayments of debt	(15,549)		(12,819)



Capital contributions from noncontrolling interests	3		397
Distributions to partners	(2,095)		(1,343)
Distributions to noncontrolling interests	(862)		(753)
Distributions to redeemable noncontrolling interests	(24)		(24)
Debt issuance costs	(7)		(9)

Net cash used in financing activities	(3,122)		(2,753)
Increase in cash and cash equivalents	73		17
Cash and cash equivalents, beginning of period	257		336
Cash and cash equivalents, end of period	$	330	$	353

The accompanying notes are an integral part of these consolidated financial statements.

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ENERGY TRANSFER LP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar and unit amounts, except per unit data, are in millions)

(unaudited)

1.ORGANIZATION AND BASIS OF PRESENTATION

Organization

The consolidated financial statements presented herein contain the results of Energy Transfer LP and its subsidiaries (the “Partnership,” “we,” “us,” “our” or “Energy Transfer”).

Basis of Presentation

The unaudited financial information included in this Form 10-Q has been prepared on the same basis as the audited consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 17, 2023. In the opinion of the Partnership’s management, such financial information reflects all adjustments necessary for a fair presentation of the financial position and the results of operations for such interim periods in accordance with GAAP. All intercompany items and transactions have been eliminated in consolidation. Certain information and disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the SEC.

The consolidated financial statements of the Partnership presented herein include the results of operations of our controlled subsidiaries, including Sunoco LP and USAC. The Partnership owns the general partner interest, incentive distribution rights and 28.5 million common units of Sunoco LP, and the general partner interests and 46.1 million common units of USAC.

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net income or total equity.

Use of Estimates

The unaudited consolidated financial statements have been prepared in conformity with GAAP, which requires the use of estimates and assumptions made by management that affect the reported amounts of assets, liabilities, revenues, expenses and the accrual for and disclosure of contingent assets and liabilities that exist at the date of the consolidated financial statements. Although these estimates are based on management’s available knowledge of current and expected future events, actual results could be different from those estimates.

2.ACQUISITIONS

Lotus Midstream Acquisition

On May 2, 2023, Energy Transfer acquired Lotus Midstream Operations, LLC (“Lotus Midstream”) for total consideration of $1.50 billion, including working capital. Consideration included $930 million in cash and approximately 44.5 million newly issued Energy Transfer common units, which had an aggregate acquisition-date fair value of $574 million. Lotus Midstream owns and operates Centurion Pipeline Company LLC, an integrated crude midstream platform located in the Permian Basin.

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The following table summarizes the assumed allocation of the purchase price among the assets acquired and liabilities assumed:


	At May 2, 2023
Total current assets	$	61
Property, plant and equipment, net	1,263
Investments in unconsolidated affiliates	138
Lease right-of-use assets, net	10
Other non-current assets	4
Intangible assets, net	75

Total assets	1,551

Total current liabilities	27

Other non-current liabilities	16
Total liabilities	43



Total consideration	1,508
Cash received	4
Total consideration, net of cash received	$	1,504

Sunoco LP’s Acquisition

On May 1, 2023, Sunoco LP completed the acquisition of 16 refined product terminals located across the East Coast and Midwest from Zenith Energy for $111 million, including working capital. The purchase price was primarily allocated to property and equipment.

3.CASH AND CASH EQUIVALENTS

Cash and cash equivalents include all cash on hand, demand deposits and investments with original maturities of three months or less. We consider cash equivalents to include short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. The Partnership’s consolidated balance sheets did not include any material amounts of restricted cash as of June 30, 2023 or December 31, 2022.

We place our cash deposits and temporary cash investments with high credit quality financial institutions. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limit.

The net change in operating assets and liabilities, net of effects of acquisitions, included in cash flows from operating activities is comprised as follows:


	Six Months Ended June 30,
	2023		2022
Accounts receivable	$	1,192	$	(2,555)
Accounts receivable from related companies	(23)		(67)
Inventories	166		26
Other current assets	200		(333)
Other non-current assets, net	(108)		83
Accounts payable	(761)		2,029
Accounts payable to related companies	31		22
Accrued and other current liabilities	212		252
Other non-current liabilities	2		98
Derivative assets and liabilities, net	(24)		(286)
Net change in operating assets and liabilities, net of effects of acquisitions	$	887	$	(731)

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Non-cash investing and financing activities were as follows:


	Six Months Ended June 30,
	2023		2022

Accrued capital expenditures	$	339	$	595

Lease assets obtained in exchange for new lease liabilities	13		32
Distribution reinvestment	48		26

4.INVENTORIES

Inventories consisted of the following:


	June 30, 2023		December 31, 2022
Natural gas, NGLs and refined products	$	1,629	$	1,802
Crude oil	172		246
Spare parts and other	470		413
Total inventories	$	2,271	$	2,461

Sunoco LP’s fuel inventories are stated at the lower of cost or market using the last-in, first-out (“LIFO”) method. As of June 30, 2023 and December 31, 2022, the carrying value of Sunoco LP’s fuel inventory included lower of cost or market reserves of $144 million and $116 million, respectively. For the three and six months ended June 30, 2023 and 2022, the Partnership’s consolidated income statements did not include any material amounts of income from the liquidation of Sunoco LP’s LIFO fuel inventory. For the three months ended June 30, 2023 and 2022, the Partnership’s cost of products sold included unfavorable inventory adjustments of $57 million and favorable inventory adjustments of $1 million, respectively, related to Sunoco LP’s LIFO inventory. For the six months ended June 30, 2023 and 2022, the Partnership’s cost of products sold included unfavorable inventory adjustments of $28 million and favorable inventory adjustments of $121 million, respectively, related to Sunoco LP’s LIFO inventory.

5.FAIR VALUE MEASURES

We have commodity derivatives and interest rate derivatives that are accounted for as assets and liabilities at fair value in our consolidated balance sheets. We determine the fair value of our assets and liabilities subject to fair value measurement by using the highest possible “level” of inputs. Level 1 inputs are observable quotes in an active market for identical assets and liabilities. We consider the valuation of marketable securities and commodity derivatives transacted through a clearing broker with a published price from the appropriate exchange as a Level 1 valuation. Level 2 inputs are inputs observable for similar assets and liabilities. We consider OTC commodity derivatives entered into directly with third parties as a Level 2 valuation since the values of these derivatives are quoted on an exchange for similar transactions. Additionally, we consider options transacted through a clearing broker as having Level 2 inputs due to the level of activity of these contracts on the exchange in which they trade. The valuation methodologies employed for our interest rate derivatives do not necessitate material judgment, and the inputs are observed from actively quoted public markets and therefore are categorized in Level 2. Level 3 inputs are unobservable. During the six months ended June 30, 2023, no transfers were made between any levels within the fair value hierarchy.

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The following tables summarize the gross fair value of our financial assets and liabilities measured and recorded at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 based on inputs used to derive their fair values:


			Fair Value Measurements at June 30, 2023
	Fair Value Total		Level 1		Level 2
Assets:
Interest rate derivatives	$	13	$	—	$	13
Commodity derivatives:

Natural Gas:
Basis Swaps IFERC/NYMEX	3		3		—
Swing Swaps IFERC	5		5		—
Fixed Swaps/Futures	38		38		—


Forward Physical Contracts	4		—		4
Power:
Forwards	55		—		55
Futures	8		8		—

Options – Calls	1		1		—
NGLs – Forwards/Swaps	670		670		—
Refined Products – Futures	9		9		—
Crude – Forwards/Swaps	16		16		—

Total commodity derivatives	809		750		59
Other non-current assets	29		19		10
Total assets	$	851	$	769	$	82
Liabilities:
Interest rate derivatives	$	(23)	$	—	$	(23)
Commodity derivatives:
Natural Gas:
Basis Swaps IFERC/NYMEX	(11)		(11)		—
Swing Swaps IFERC	(3)		(3)		—
Fixed Swaps/Futures	(5)		(5)		—



Power:
Forwards	(54)		—		(54)
Futures	(10)		(10)		—
Options – Calls	(1)		(1)		—

NGLs – Forwards/Swaps	(644)		(644)		—
Refined Products – Futures	(16)		(16)		—
Crude – Forwards/Swaps	(6)		(6)		—
Total commodity derivatives	(750)		(696)		(54)
Total liabilities	$	(773)	$	(696)	$	(77)

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			Fair Value Measurements at December 31, 2022
	Fair Value Total		Level 1		Level 2
Assets:

Commodity derivatives:

Natural Gas:
Basis Swaps IFERC/NYMEX	$	60	$	60	$	—
Swing Swaps IFERC	75		75		—
Fixed Swaps/Futures	113		113		—


Forward Physical Contracts	10		—		10
Power:
Forwards	52		—		52
Futures	3		3		—


NGLs – Forwards/Swaps	317		317		—
Refined Products – Futures	20		20		—

Crude – Forwards/Swaps	38		38		—

Total commodity derivatives	688		626		62
Other non-current assets	27		18		9
Total assets	$	715	$	644	$	71
Liabilities:
Interest rate derivatives	$	(23)	$	—	$	(23)
Commodity derivatives:
Natural Gas:
Basis Swaps IFERC/NYMEX	(25)		(25)		—
Swing Swaps IFERC	(12)		(12)		—
Fixed Swaps/Futures	(4)		(4)		—


Forward Physical Contracts	(2)		—		(2)
Power:
Forwards	(51)		—		(51)
Futures	(3)		(3)		—

NGLs – Forwards/Swaps	(358)		(358)		—
Refined Products – Futures	(59)		(59)		—

Crude – Forwards/Swaps	(12)		(12)		—

Total commodity derivatives	(526)		(473)		(53)
Total liabilities	$	(549)	$	(473)	$	(76)

The aggregate estimated fair value and carrying amount of our consolidated debt obligations as of June 30, 2023 were $45.80 billion and $48.13 billion, respectively. As of December 31, 2022, the aggregate fair value and carrying amount of our consolidated debt obligations were $45.42 billion and $48.26 billion, respectively. The fair value of our consolidated debt obligations is a Level 2 valuation based on the respective debt obligations’ observable inputs for similar liabilities.

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6.NET INCOME PER COMMON UNIT

A reconciliation of income or loss and weighted average units used in computing basic and diluted income per common unit is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	1,233	$	1,622	$	2,680	$	3,109
Less: Net income attributable to noncontrolling interests	308		284		629		489
Less: Net income attributable to redeemable noncontrolling interests	14		12		27		25
Net income, net of noncontrolling interests	911		1,326		2,024		2,595
Less: General Partner’s interest in net income	1		1		2		2
Less: Preferred Unitholders’ interest in net income	113		105		222		211
Common Unitholders’ interest in net income	$	797	$	1,220	$	1,800	$	2,382
Basic Income per Common Unit:
Weighted average common units	3,126.9		3,085.9		3,111.3		3,084.7
Basic income per common unit	$	0.25	$	0.40	$	0.58	$	0.77

Diluted Income per Common Unit:
Common Unitholders’ interest in net income	$	797	$	1,220	$	1,800	$	2,382
Dilutive effect of equity-based compensation of subsidiaries (1)	—		—		1		1
Diluted income attributable to Common Unitholders	$	797	$	1,220	$	1,799	$	2,381
Weighted average common units	3,126.9		3,085.9		3,111.3		3,084.7
Dilutive effect of unvested restricted unit awards (1)	21.3		19.8		21.7		19.5
Weighted average common units, assuming dilutive effect of unvested restricted unit awards	3,148.2		3,105.7		3,133.0		3,104.2
Diluted income per common unit	$	0.25	$	0.39	$	0.57	$	0.77

(1)Dilutive effects are excluded from the calculation for periods where the impact would have been antidilutive.

7.DEBT OBLIGATIONS

Recent Transactions

Senior Notes

In the first quarter of 2023, the Partnership redeemed $350 million aggregate principal amount of its 3.45% Senior Notes due January 2023, $800 million aggregate principal amount of its 3.60% Senior Notes due February 2023 and $1.00 billion aggregate principal amount of its 4.25% Senior Notes due March 2023 using proceeds from its Five-Year Credit Facility (defined below).

HFOTCO Debt

In May 2023, the Partnership refinanced all of the $225 million outstanding principal amount of HFOTCO tax-exempt bonds with new 10-year tax-exempt bonds. The new bonds, which were issued through the Harris County Industrial Development Corporation and are obligations of Energy Transfer, accrue interest at a fixed rate of 4.05% and are mandatorily redeemable in 2033. Upon redemption, these tax-exempt bonds may be remarketed on different terms through final maturity of November 1, 2050.

Current Maturities of Long-Term Debt

As of June 30, 2023, current maturities of long-term debt reflected on the Partnership’s consolidated balance sheet includes (i) $2.45 billion, representing the amount of Energy Transfer senior notes maturing on or before June 30, 2024, less the current available capacity on the Partnership’s Five-Year Credit Facility and (ii) $1.00 billion of senior notes issued by the Bakken Pipeline entities, which mature in April 2024.

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Credit Facilities and Commercial Paper

Five-Year Credit Facility

The Partnership’s revolving credit facility (the “Five-Year Credit Facility”) allows for unsecured borrowings up to $5.00 billion and matures in April 2027. The Five-Year Credit Facility contains an accordion feature, under which the total aggregate commitment may be increased up to $7.00 billion under certain conditions.

As of June 30, 2023, the Five-Year Credit Facility had $2.61 billion of outstanding borrowings, of which $862 million consisted of commercial paper. The amount available for future borrowings was $2.36 billion, after accounting for outstanding letters of credit in the amount of $32 million. The weighted average interest rate on the total amount outstanding as of June 30, 2023 was 6.33%.

Sunoco LP Credit Facility

As of June 30, 2023, Sunoco LP’s credit facility had $990 million of outstanding borrowings and $7 million in standby letters of credit and matures in April 2027. The amount available for future borrowings at June 30, 2023 was $503 million. The weighted average interest rate on the total amount outstanding as of June 30, 2023 was 7.00%.

USAC Credit Facility

As of June 30, 2023, USAC’s credit facility, which matures in December 2026, had $750 million of outstanding borrowings and no outstanding letters of credit. As of June 30, 2023, USAC had $850 million of availability under its credit facility, and subject to compliance with applicable financial covenants, available borrowing capacity of $328 million. The weighted average interest rate on the total amount outstanding as of June 30, 2023 was 7.74%.

Compliance with our Covenants

We and our subsidiaries were in compliance with all requirements, tests, limitations and covenants related to our debt agreements as of June 30, 2023. For the quarter ended June 30, 2023, our leverage ratio, as calculated pursuant to the covenant related to our Five-Year Credit Facility, was 3.33x.

8.REDEEMABLE NONCONTROLLING INTERESTS

Certain redeemable noncontrolling interests in the Partnership’s subsidiaries were reflected as mezzanine equity on the consolidated balance sheets. Redeemable noncontrolling interests as of June 30, 2023 and December 31, 2022 included a balance of $477 million related to the USAC Series A preferred units. Redeemable noncontrolling interests also included a balance of $18 million as of June 30, 2023 and $16 million as of December 31, 2022 related to noncontrolling interest holders in one of the Partnership’s consolidated subsidiaries that have the option to sell their interests to the Partnership.

9.EQUITY

Energy Transfer Common Units

Changes in Energy Transfer common units during the six months ended June 30, 2023 were as follows:


			Number of Units
Number of common units at December 31, 2022			3,094.4
Common units issued under the distribution reinvestment plan			3.7
Common units issued for Lotus Midstream acquisition			44.5
Common units vested under equity incentive plans and other			0.6
Number of common units at June 30,2023			3,143.2

Energy Transfer Repurchase Program

During the six months ended June 30, 2023, Energy Transfer did not repurchase any of its common units under its current buyback program. As of June 30, 2023, $