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Form 8-K Energy Transfer Equity, For: Nov 09

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November 9, 2016 4:40 PM EST



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 9, 2016
Date of Report (Date of earliest event reported)
 
ENERGY TRANSFER EQUITY, L.P.
(Exact name of Registrant as specified in its charter)
 
 
 
 
 
 
Delaware
 
1-32740
 
30-0108820
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification Number)
 
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))



Item 2.02. Results of Operations and Financial Condition.
On November 9, 2016, Energy Transfer Equity, L.P. (the “Partnership”) issued a press release announcing its financial and operating results for the quarter ended September 30, 2016. A copy of this 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 this Item 2.02 and in the attached exhibit shall be deemed to be “furnished” and not be deemed to be “filed” for purposes of the Securities Exchange Act of 1934, as amended (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
Exhibit 99.1
 
Energy Transfer Equity, L.P. Press Release dated November 9, 2016


 
 
 




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 hereunto duly authorized.


 
ENERGY TRANSFER EQUITY, L.P.
 
By:
LE GP, L.L.C., its General Partner
 
 
 
Date: November 9, 2016
By:
/s/ Thomas E. Long
 
 
Thomas E. Long
 
 
Group Chief Financial Officer (duly
authorized to sign on behalf of the registrant)





Exhibit Index



Exhibit Number
 
Description of the Exhibit
Exhibit 99.1
 
Energy Transfer Equity, L.P. Press Release dated November 9, 2016







etclogoa01a01a06.jpg
ENERGY TRANSFER EQUITY
REPORTS THIRD QUARTER RESULTS

Dallas - November 9, 2016 - Energy Transfer Equity, L.P. (NYSE: ETE) (“ETE” or the “Partnership”) today reported financial results for the quarter ended September 30, 2016.
ETE’s net income attributable to partners was $209 million for the three months ended September 30, 2016 compared to $293 million for the three months ended September 30, 2015. Distributable Cash Flow, as adjusted, for the three months ended September 30, 2016 was $281 million compared to $325 million for the three months ended September 30, 2015. The decreases in net income attributable to partners and Distributable Cash Flow, as adjusted, were primarily driven by an $85 million reduction in incentive distributions from ETP. As previously reported, ETE has agreed to a reduction in incentive distributions from ETP in the aggregate amount of $720 million over a period of seven quarters, beginning the quarter ended June 30, 2016.
The Partnership’s recent key accomplishments and other developments include the following:
•
In October 2016, ETE announced a $0.285 distribution per ETE common unit for the quarter ended September 30, 2016, or $1.14 per unit on an annualized basis.
•
As of September 30, 2016, ETE’s $1.5 billion revolving credit facility had $885 million of outstanding borrowings and its leverage ratio, as defined by the credit agreement, was 3.08x.
The Partnership has scheduled a conference call for 8:00 a.m. Central Time, Thursday, November 10, 2016 to discuss its third quarter 2016 results. The conference call will be broadcast live via an internet webcast, which can be accessed through www.energytransfer.com and will also be available for replay on the Partnership’s website for a limited time.
The Partnership’s principal sources of cash flow are derived from distributions related to its direct and indirect investments in the limited and general partner interests in Energy Transfer Partners, L.P. (“ETP”), including 100% of ETP’s incentive distribution rights, ETP Common Units, ETP Class I Units, and, through ETP Class H Units, which track 90% of the underlying economics of the general partner interest and IDRs of Sunoco Logistics Partners L.P. (“Sunoco Logistics”), distributions related to its investments in the general partner interests in Sunoco Logistics, limited and general partner interest in Sunoco LP, including Sunoco LP Common Units, as well as the Partnership’s ownership of Lake Charles LNG. The Partnership’s primary cash requirements are for general and administrative expenses, debt service requirements and distributions to its partners.
Energy Transfer Equity, L.P. (NYSE: ETE) is a master limited partnership that owns the general partner and 100% of the incentive distribution rights (IDRs) of Energy Transfer Partners, L.P. (NYSE: ETP) and Sunoco LP (NYSE: SUN). ETE also owns approximately 2.6 million ETP common units and approximately 81.0 million ETP Class H Units, which track 90% of the underlying economics of the general partner interest and IDRs of Sunoco Logistics Partners L.P. (NYSE: SXL). On a consolidated basis, ETE’s family of companies owns and operates approximately 71,000 miles of natural gas, natural gas liquids, refined products, and crude oil pipelines. For more information, visit the Energy Transfer Equity, L.P. website at  www.energytransfer.com.
Energy Transfer Partners, L.P. (NYSE: ETP) is a master limited partnership that owns and operates one of the largest and most diversified portfolios of energy assets in the United States. ETP’s subsidiaries include Panhandle Eastern Pipe Line Company, LP (the successor of Southern Union Company) and Lone Star NGL LLC, which owns and operates natural gas liquids storage, fractionation and transportation assets. In total, ETP currently owns and operates more than 62,500 miles of natural gas and natural gas liquids pipelines. ETP also owns the general partner, 100% of the incentive distribution rights, and approximately 67.1 million common units of Sunoco Logistics Partners L.P. (NYSE: SXL), which operates a geographically diverse portfolio of pipelines, terminalling and acquisition and marketing assets. ETP recently acquired the general partner, 100% of the incentive distribution rights, and an approximate 65% limited partnership interest in PennTex Midstream Partners, LP (Nasdaq: PTXP), which is a growth-oriented master limited partnership that provides natural gas gathering and processing and residue gas and natural gas

1


liquids transportation services to producers in northern Louisiana. ETP’s general partner is owned by Energy Transfer Equity, L.P. (NYSE: ETE). For more information, visit the Energy Transfer Partners, L.P. website at www.energytransfer.com.
Sunoco Logistics Partners L.P. (NYSE: SXL) is a master limited partnership that owns and operates a logistics business consisting of a geographically diverse portfolio of complementary pipeline, terminalling and acquisition and marketing assets which are used to facilitate the purchase and sale of crude oil, natural gas liquids, and refined products. SXL’s general partner is a consolidated subsidiary of Energy Transfer Partners, L.P. (NYSE: ETP). For more information, visit the Sunoco Logistics Partners L.P. website at www.sunocologistics.com.
Sunoco LP (NYSE: SUN) is a master limited partnership that operates approximately 1,345 retail fuel sites and convenience stores (including APlus, Stripes, Aloha Island Mart and Tigermarket brands) and distributes motor fuel to convenience stores, independent dealers, commercial customers and distributors located in 30 states at approximately 6,900 sites. SUN’s parent -- Energy Transfer Equity, L.P. (NYSE: ETE) -- owns SUN's general partner and incentive distribution rights. For more information, visit the Sunoco LP website at www.sunocolp.com.
Forward-Looking Statements
This press 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 Reports on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission. 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 web site at www.energytransfer.com.
Contacts
 
 
Investor Relations:
 
 
Energy Transfer
 
 
Lyndsay Hannah or Brent Ratliff
 
 
214-981-0795
 
 
 
 
 
Media Relations:
 
 
Vicki Granado
 
 
Granado Communications Group
 
 
214-599-8785 (office)
 
 
214-498-9272 (cell)
 
 
            

2



ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(unaudited)
 
September 30, 2016
 
December 31, 2015
ASSETS
 
 
 
 
 
 
 
Current assets
$
6,467

 
$
5,410

 
 
 
 
Property, plant and equipment, net
53,565

 
48,683

 
 
 
 
Advances to and investments in unconsolidated affiliates
3,104

 
3,462

Non-current derivative assets
11

 
—

Other non-current assets, net
776

 
730

Intangible assets, net
5,318

 
5,431

Goodwill
7,598

 
7,473

Total assets
$
76,839

 
$
71,189

 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
Current liabilities
$
7,042

 
$
4,910

 
 
 
 
Long-term debt, less current maturities
40,020

 
36,837

Long-term notes payable to related company
83

 
—

Non-current derivative liabilities
160

 
137

Deferred income taxes
5,209

 
4,590

Other non-current liabilities
1,087

 
1,069

 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
Preferred units of subsidiary
33

 
33

Redeemable noncontrolling interests
15

 
15

 
 
 
 
Equity:
 
 
 
Total partners’ deficit
(1,703
)
 
(932
)
Noncontrolling interest
24,893

 
24,530

Total equity
23,190

 
23,598

Total liabilities and equity
$
76,839

 
$
71,189



3



ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per unit data)
(unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
REVENUES
$
9,675

 
$
10,616

 
$
26,701

 
$
32,590

COSTS AND EXPENSES:
 
 
 
 
 
 
 
Cost of products sold
7,448

 
8,581

 
20,124

 
26,406

Operating expenses
689

 
706

 
2,018

 
1,997

Depreciation, depletion and amortization
595

 
524

 
1,745

 
1,531

Selling, general and administrative
246

 
155

 
589

 
493

Total costs and expenses
8,978

 
9,966

 
24,476

 
30,427

OPERATING INCOME
697

 
650

 
2,225

 
2,163

OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
Interest expense, net of interest capitalized
(481
)
 
(442
)
 
(1,358
)
 
(1,221
)
Equity in earnings of unconsolidated affiliates
49

 
110

 
205

 
284

Impairment of investment in affiliate
(308
)
 
—

 
(308
)
 
—

Losses on extinguishments of debt
—

 
(10
)
 
—

 
(43
)
Losses on interest rate derivatives
(28
)
 
(64
)
 
(179
)
 
(14
)
Other, net
54

 
31

 
94

 
55

INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)
(17
)
 
275

 
679

 
1,224

Income tax expense (benefit)
(58
)
 
37

 
(122
)
 
(7
)
NET INCOME
41

 
238

 
801

 
1,231

Less: Net income (loss) attributable to noncontrolling interest
(168
)
 
(55
)
 
39

 
356

NET INCOME ATTRIBUTABLE TO PARTNERS
209

 
293

 
762

 
875

General Partner’s interest in net income
—

 
1

 
2

 
2

Convertible Unitholders’ interest in income
2

 
—

 
3

 
—

Class D Unitholder’s interest in net income
—

 
1

 
—

 
2

Limited Partners’ interest in net income
$
207

 
$
291

 
$
757

 
$
871

NET INCOME PER LIMITED PARTNER UNIT:
 
 
 
 
 
 
 
Basic
$
0.20

 
$
0.28

 
$
0.72

 
$
0.81

Diluted
$
0.19

 
$
0.28

 
$
0.71

 
$
0.81

WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING:
 
 
 
 
 
 
 
Basic
1,045.5

 
1,052.5

 
1,045.0

 
1,068.9

Diluted
1,100.7

 
1,054.1

 
1,071.3

 
1,070.5



4


ENERGY TRANSFER EQUITY, L.P.
SUPPLEMENTAL INFORMATION
(Dollars in millions)
(unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Cash distributions from ETP associated with:
 
 
 
 
 
 
 
Limited partner interest
$
3

 
$
3

 
$
8

 
$
51

Class H Units
92

 
68

 
263

 
186

General partner interest
8

 
8

 
24

 
23

Incentive distribution rights
346

 
320

 
1,012

 
937

IDR relinquishments, net of distributions on Class I Units (1)
(127
)
 
(28
)
 
(271
)
 
(83
)
Total cash distributions from ETP
322

 
371

 
1,036

 
1,114

Cash distributions from Sunoco LP (2)
22

 
8

 
66

 
8

Total cash distributions from investments in subsidiaries
344

 
379

 
1,102

 
1,122

 
 
 
 
 
 
 
 
Distributable cash flow attributable to Lake Charles LNG:
 
 
 
 
 
 
 
Revenues
50

 
54

 
148

 
162

Operating expenses
(4
)
 
(4
)
 
(13
)
 
(12
)
Selling, general and administrative expenses
(1
)
 
(1
)
 
(2
)
 
(3
)
Distributable cash flow attributable to Lake Charles LNG
45

 
49

 
133

 
147

 
 
 
 
 
 
 
 
Expenses of the Parent Company on a cash basis:
 
 
 
 
 
 
 
Selling, general and administrative expenses, excluding certain non-cash expenses
17

 
2

 
72

 
9

Management fee to ETP (3)
24

 
24

 
72

 
72

Interest expense, net of amortization of financing costs, interest income, and realized gains and losses on interest rate swaps
78

 
78

 
235

 
206

Total Parent Company expenses
119

 
104

 
379

 
287

 


 


 

 


Cash distributions to be paid to the partners of ETE:
 
 
 
 
 
 
 
Distributions to be paid to limited partners (4)
$
241

 
$
296

 
$
721

 
$
841

Distributions to be paid to general partner
1

 
1

 
2

 
2

Distributions to be paid to Class D unitholder
—

 
1

 
—

 
2

Total cash distributions to be paid to the partners of ETE
$
242

 
$
298

 
$
723

 
$
845

 
 
 
 
 
 
 
 
Common units outstanding — end of period
1,047.0

 
1,044.8

 
1,047.0

 
1,044.8

_________________
(1) 
IDR relinquishments for the three and nine months ended September 30, 2016 include the impact of $85 million and $160 million, respectively, of incentive distribution reduction with respect to the second and third quarters 2016 distributions, as agreed to between ETE and ETP in July 2016.
(2) 
Effective July 1, 2015, ETE acquired 100% of the membership interests of Sunoco GP LLC, the general partner of Sunoco LP, and all of the IDRs of Sunoco LP from ETP.
(3) 
In exchange for management services, ETE has agreed to pay to ETP fees totaling $95 million per year. For GAAP purposes, ETE has capitalized fees totaling $3 million for the three months ended September 30, 2016 and 2015 and $9 million and $10 million for the nine months ended September 30, 2016 and 2015, respectively.
(4) 
Includes distributions of $0.11 per common unit for the three months ended September 30, 2016, and $0.33 per common unit for the nine months ended September 30, 2016, to unitholders who elected to participate in a plan to forgo a portion of their future potential cash distributions on common units for a period of up to nine fiscal quarters, commencing with the with distributions for the quarter ended March 31, 2016, and reinvest those distributions in the Convertible Units representing limited partner interest in the Partnership.

5


SUPPLEMENTAL INFORMATION
RECONCILIATION OF DISTRIBUTABLE CASH FLOW
(Dollars in millions)
(unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Net income attributable to partners
$
209

 
$
293

 
$
762

 
$
875

Equity in earnings related to investments in ETP and Sunoco LP
(333
)
 
(365
)
 
(1,065
)
 
(1,056
)
Total cash distributions from investments in subsidiaries
344

 
379

 
1,102

 
1,122

Amortization included in interest expense (excluding ETP and Sunoco LP)
3

 
3

 
9

 
7

Other non-cash (excluding ETP and Sunoco LP)
47

 
14

 
48

 
34

Distributable Cash Flow
270

 
324

 
856

 
982

Transaction-related expenses
11

 
1

 
51

 
5

Bakken Pipeline Transaction — pro forma interest expense
—

 
—

 
—

 
(6
)
Distributable Cash Flow, as adjusted
$
281

 
$
325

 
$
907

 
$
981

 
 
 
 
 
 
 
 
Total cash distributions to be paid to the partners of ETE
$
242

 
$
298

 
$
723

 
$
845

Distribution coverage ratio(1)
1.16x

 
1.09x

 
1.25x

 
1.16x

_________________
(1) 
This press release and accompanying schedules include the non-generally accepted accounting principle (“non-GAAP”) financial measures of Distributable Cash Flow, Distributable Cash Flow, as adjusted, and Distributable Cash Flow, as adjusted, per Unit. The Partnership’s non-GAAP financial measures should not be considered as alternatives to GAAP financial measures such as net income, cash flow from operating activities or any other GAAP measure of liquidity or financial performance.
Distributable Cash Flow and Distributable Cash Flow, as adjusted. The Partnership defines Distributable Cash Flow and Distributable Cash Flow, as adjusted, for a period as cash distributions expected to be received in respect of such period in connection with the Partnership’s investments in limited and general partner interests, net of the Partnership’s cash expenditures for general and administrative costs and interest expense. The Partnership’s definitions of Distributable Cash Flow and Distributable Cash Flow, as adjusted, also include distributable cash flow from Lake Charles LNG to the Partnership. For Distributable Cash Flow, as adjusted, certain transaction-related expenses that are included in net income are excluded.
Distributable Cash Flow is a significant liquidity measure used by the Partnership’s senior management to compare net cash flows generated by the Partnership to the distributions the Partnership expects to pay its unitholders. Due to cash expenses incurred from time to time in connection with the Partnership’s merger and acquisition activities and other transactions, Distributable Cash Flow, as adjusted, is also a significant liquidity measure used by the Partnership’s senior management to compare net cash flows generated by the Partnership to the distributions the Partnership expects to pay its unitholders. Using these measures, the Partnership’s management can compute the coverage ratio of estimated cash flows for a period to planned cash distributions for such period.
Distributable Cash Flow and Distributable Cash Flow, as adjusted, are also important non-GAAP financial measures for our limited partners since these indicate to investors whether the Partnership’s investments are generating cash flows at a level that can sustain or support an increase in quarterly cash distribution levels. Financial measures such as Distributable Cash Flow and Distributable Cash Flow, as adjusted, are quantitative standards used by the investment community with respect to publicly traded partnerships because the value of a partnership unit is in part measured by its yield (which in turn is based on the amount of cash distributions a partnership can pay to a unitholder). The GAAP measure most directly comparable to Distributable Cash Flow, and Distributable Cash Flow, as adjusted, is net income for ETE on a stand-alone basis (the “Parent Company”).
Distributable Cash Flow, as adjusted, per Unit. The Partnership defines Distributable Cash Flow, as adjusted, per Unit for a period as the quotient of Distributable Cash Flow, as adjusted, divided by the weighted average number of units outstanding. For purposes of this calculation, the number of units outstanding represents the Partnership’s basic average common units outstanding plus Class D units outstanding and the general partner common unit equivalent.

6


Similar to Distributable Cash Flow, as adjusted, as described above, Distributable Cash Flow, as adjusted, per Unit is a significant liquidity measure used by the Partnership’s senior management to compare net cash flows generated by the Partnership to the distributions the Partnership expects to pay to its unitholders.
Distribution Coverage Ratio. The Partnership defines Distribution Coverage Ratio for a period as Distributable Cash Flow, as adjusted, divided by total cash distributions expected to be paid to the partners of ETE in respect of such period.

7



SUPPLEMENTAL INFORMATION
FINANCIAL STATEMENTS FOR PARENT COMPANY

Following are condensed balance sheets and statements of operations of the Parent Company on a stand-alone basis.
BALANCE SHEETS
(In millions)
(unaudited)
 
September 30,
2016
 
December 31, 2015
ASSETS
 
 
 
Current assets
$
58

 
$
35

Property, plant and equipment, net
36

 
20

Advances to and investments in unconsolidated affiliates
5,069

 
5,764

Intangible assets, net
2

 
6

Goodwill
9

 
9

Other non-current assets, net
9

 
10

Total assets
$
5,183

 
$
5,844

LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
Current liabilities
$
122

 
$
178

Long-term debt, less current maturities
6,365

 
6,332

Note payable to related company
396

 
265

Other non-current liabilities
3

 
1

Commitments and contingencies

 

Partners’ capital:
 
 
 
General Partner
(3
)
 
(2
)
Limited Partners:
 
 
 
Common Unitholders
(1,818
)
 
(952
)
Class D Units
—

 
22

Series A Convertible Preferred Units
118

 
—

Total partners’ deficit
(1,703
)
 
(932
)
Total liabilities and partners’ deficit
$
5,183

 
$
5,844



8


STATEMENTS OF OPERATIONS
(In millions)
(unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
$
(75
)
 
$
(24
)
 
$
(156
)
 
$
(81
)
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
Interest expense, net of interest capitalized
(81
)
 
(81
)
 
(244
)
 
(214
)
Equity in earnings of unconsolidated affiliates
367

 
403

 
1,166

 
1,174

Other, net
(2
)
 
(4
)
 
(4
)
 
(3
)
INCOME BEFORE INCOME TAX BENEFIT
209

 
294

 
762

 
876

Income tax benefit
—

 
1

 
—

 
1

NET INCOME
209

 
293

 
762

 
875

General Partner’s interest in net income
—

 
1

 
2

 
2

Convertible Unitholders' interest in income
2

 
—

 
3

 
—

Class D Unitholder’s interest in net income
—

 
1

 
—

 
2

Limited Partners’ interest in net income
$
207

 
$
291

 
$
757

 
$
871



9

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