Energy Transfer Reports Strong Third Quarter 2022 Results and Raises 2022 Outlook

DALLAS–(BUSINESS WIRE)–Energy Transfer LP (NYSE:ET) (“Energy Transfer” or the “Partnership”) today reported financial results for the quarter ended September 30, 2022.

Energy Transfer reported net income attributable to partners for the three months ended September 30, 2022 of $1.01 billion, a $371 million increase from the same period last year. For the three months ended September 30, 2022, net income per limited partner unit (basic and diluted) was $0.29 per unit.

Adjusted EBITDA for the three months ended September 30, 2022 was $3.09 billion compared to $2.58 billion for the three months ended September 30, 2021. In the third quarter 2022, the Partnership experienced a $126 million charge in the crude oil transportation and services segment related to a legal matter. In addition, Energy Transfer’s third quarter 2022 results were impacted by an approximately $130 million negative adjustment related to hedged inventory in the NGL and refined products transportation and services segment. These two items impacted third quarter 2022 Adjusted EBITDA by approximately $260 million in the aggregate.

Distributable Cash Flow attributable to partners, as adjusted, for the three months ended September 30, 2022 was $1.58 billion compared to $1.31 billion for the three months ended September 30, 2021.

The improved results were primarily due to higher volumes across all of our core segments and the impacts of the recent acquisition of Enable Midstream.

Key accomplishments and recent developments:

Operational

• Energy Transfer’s nation-wide system, with diverse products and services, is well-positioned throughout various markets. During the third quarter of 2022, each of Energy Transfer’s five core segments realized higher volumes compared with the same period in 2021.
  • Intrastate natural gas transportation volumes were up 28% and set a new Partnership record.
  • Interstate natural gas transportation volumes were up 43%.
  • Midstream gathered volumes were up 47% and set a new Partnership record.
  • NGL transportation volumes were up 5%.
  • NGL fractionation volumes were up 6% and set a new Partnership record.
  • Crude oil transportation and terminal volumes were up 10% and 14%, respectively.
• Energy Transfer’s Nederland terminal and related facilities serve as critical resources with access to the U.S. Strategic Petroleum Reserve (“SPR”). Higher SPR volumes and increased activity in the region drove transportation and terminal volumes at the Nederland and Houston terminals to new records during the third quarter.
• Mainline construction on the Gulf Run Pipeline was recently finished and the project remains on schedule to be completed by year-end

Strategic

• Over 90 percent of Energy Transfer’s growth capital spending is comprised of projects that are already on-line or expected to be on-line and contributing cash flow at very attractive returns before the end of 2023. The project backlog includes Gulf Run Pipeline in Louisiana, Grey Wolf and Bear processing plants in the Permian Basin, Fractionator VIII in Mont Belvieu and LPG facilities projects at Energy Transfer’s Nederland Terminal.
• In September 2022, Energy Transfer completed the acquisition of Woodford Express, LLC, which owns a Mid-Continent gas gathering and processing system, for approximately $485 million. The system, which is located in the heart of the SCOOP play, has 450 MMcf per day of cryogenic gas processing and treating capacity and over 200 miles of gathering and transportation lines, which are connected to Energy Transfer’s pipeline network. The system is supported by dedicated acreage with long-term, predominantly fixed-fee contracts with active, proven producers.
• In August 2022, Energy Transfer announced a 20-year LNG Sale and Purchase Agreement (“SPA”) with Shell NA LNG LLC. To date in 2022, the Partnership has entered into six long-term LNG SPAs. Under these SPAs, Energy Transfer LNG Export, LLC is expected to supply a total of 7.9 million tonnes of LNG per annum, with terms ranging from 18 to 25 years.
• In August 2022, the Partnership completed the previously announced sale of its 51% interest in Energy Transfer Canada for cash proceeds to Energy Transfer of approximately $302 million. The sale reduced Energy Transfer’s consolidated debt by approximately $850 million, which includes the use of proceeds to pay down Energy Transfer’s revolving credit facility and the deconsolidation of Energy Transfer Canada’s debt.

Financial

• Energy Transfer’s base business continues to execute well with performance ahead of expectations, driven by continued strong demand across Energy Transfer’s network. As a result, the Partnership now expects Adjusted EBITDA for the full year 2022 to be between $12.8 billion and $13.0 billion (previously $12.6 billion to $12.8 billion). The Partnership continues to expect its 2022 growth capital expenditures to be between $1.8 billion and $2.1 billion.
• In October 2022, Energy Transfer announced a quarterly cash distribution of $0.265 per common unit ($1.06 annualized) for the quarter ended September 30, 2022. This distribution represents a more than 70% increase over the third quarter of 2021. Future increases to the distribution level will continue to be evaluated quarterly with the ultimate goal of returning distributions to the previous level of $0.305 per common unit per quarter ($1.22 annualized) while balancing the Partnership’s leverage target, growth opportunities and unit buybacks.
• As of September 30, 2022, the Partnership’s revolving credit facility had $2.32 billion of available capacity.
• For the three months ended September 30, 2022, the Partnership invested approximately $500 million on growth capital expenditures.

Energy Transfer benefits from a portfolio of assets with exceptional product and geographic diversity. The Partnership’s multiple segments generate high-quality, balanced earnings with no single segment contributing more than 30% of the Partnership’s consolidated Adjusted EBITDA for the three or nine months ended September 30, 2022. The vast majority of the Partnership’s segment margins are fee-based and therefore have limited commodity price sensitivity.

Conference Call information:

The Partnership has scheduled a conference call for 3:30 p.m. Central Time/4:30 p.m. Eastern Time on Tuesday, November 1, 2022 to discuss its third quarter 2022 results and provide an update on the Partnership. 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.

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

Sunoco LP (NYSE: SUN) is a master limited partnership with core operations that include the distribution of motor fuel to approximately 10,000 convenience stores, independent dealers, commercial customers and distributors located in more than 40 U.S. states and territories, as well as refined product transportation and terminalling assets. SUN’s general partner is owned by Energy Transfer LP (NYSE: ET). For more information, visit the Sunoco LP website at www.sunocolp.com.

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

Forward-Looking Statements

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

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

ENERGY TRANSFER LP AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) (unaudited)
	September 30, 2022				December 31, 2021
ASSETS
Current assets	$	12,159			$	10,537
Property, plant and equipment, net		80,261				81,607
Investments in unconsolidated affiliates		2,869				2,947
Lease right-of-use assets, net		815				838
Other non-current assets, net		1,573				1,645
Intangible assets, net		5,505				5,856
Goodwill		2,553				2,533
Total assets	$	105,735			$	105,963
LIABILITIES AND EQUITY
Current liabilities	$	11,243			$	10,835
Long-term debt, less current maturities		47,413				49,022
Non-current derivative liabilities		33				193
Non-current operating lease liabilities		794				814
Deferred income taxes		3,661				3,648
Other non-current liabilities		1,530				1,323
Commitments and contingencies
Redeemable noncontrolling interests		493				783
Equity:
Limited Partners:
Preferred Unitholders		6,077				6,051
Common Unitholders		26,725				25,230
General Partner		(3	)			(4	)
Accumulated other comprehensive income		32				23
Total partners’ capital		32,831				31,300
Noncontrolling interests		7,737				8,045
Total equity		40,568				39,345
Total liabilities and equity	$	105,735			$	105,963

ENERGY TRANSFER LP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per unit data) (unaudited)
	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
REVENUES	$	22,939			$	16,664			$	69,375			$	48,760
COSTS AND EXPENSES:
Cost of products sold		18,516				13,188				56,169				35,641
Operating expenses		973				898				2,982				2,585
Depreciation, depletion and amortization		1,030				943				3,104				2,837
Selling, general and administrative		361				198				802				583
Impairment losses and other		86				—				386				11
Total costs and expenses		20,966				15,227				63,443				41,657
OPERATING INCOME		1,973				1,437				5,932				7,103
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized		(577	)			(558	)			(1,714	)			(1,713	)
Equity in earnings of unconsolidated affiliates		68				71				186				191
Losses on extinguishments of debt		—				—				—				(8	)
Gains on interest rate derivatives		60				1				303				72
Other, net		(120	)			33				(117	)			45
INCOME BEFORE INCOME TAX EXPENSE		1,404				984				4,590				5,690
Income tax expense		82				77				159				234
NET INCOME		1,322				907				4,431				5,456
Less: Net income attributable to noncontrolling interests		304				260				793				870
Less: Net income attributable to redeemable noncontrolling interests		12				12				37				37
NET INCOME ATTRIBUTABLE TO PARTNERS		1,006				635				3,601				4,549
General Partner’s interest in net income		1				1				3				5
Preferred Unitholders’ interest in net income		106				99				317				185
Limited Partners’ interest in net income	$	899			$	535			$	3,281			$	4,359
NET INCOME PER COMMON UNIT:
Basic	$	0.29			$	0.20			$	1.06			$	1.61
Diluted	$	0.29			$	0.20			$	1.06			$	1.60
WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING:
Basic		3,087.6				2,705.2				3,085.6				2,704.0
Diluted		3,108.6				2,720.6				3,106.4				2,718.4

ENERGY TRANSFER LP AND SUBSIDIARIES SUPPLEMENTAL INFORMATION (Dollars and units in millions) (unaudited)
	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021(a)
Reconciliation of net income to Adjusted EBITDA and Distributable Cash Flow(b):
Net income	$	1,322			$	907			$	4,431			$	5,456
Interest expense, net of interest capitalized		577				558				1,714				1,713
Impairment losses and other		86				—				386				11
Income tax expense		82				77				159				234
Depreciation, depletion and amortization		1,030				943				3,104				2,837
Non-cash compensation expense		27				26				88				81
Gains on interest rate derivatives		(60	)			(1	)			(303	)			(72	)
Unrealized (gains) losses on commodity risk management activities		(76	)			19				(130	)			(74	)
Losses on extinguishments of debt		—				—				—				8
Inventory valuation adjustments (Sunoco LP)		40				(9	)			(81	)			(168	)
Equity in earnings of unconsolidated affiliates		(68	)			(71	)			(186	)			(191	)
Adjusted EBITDA related to unconsolidated affiliates		147				141				409				400
Other, net		(19	)			(11	)			65				—
Adjusted EBITDA (consolidated)		3,088				2,579				9,656				10,235
Adjusted EBITDA related to unconsolidated affiliates		(147	)			(141	)			(409	)			(400	)
Distributable cash flow from unconsolidated affiliates		102				103				270				268
Interest expense, net of interest capitalized		(577	)			(558	)			(1,714	)			(1,713	)
Preferred unitholders’ distributions		(118	)			(110	)			(353	)			(305	)
Current income tax expense		(31	)			(10	)			(1	)			(34	)
Transaction-related income taxes(c)		—				—				(42	)			—
Maintenance capital expenditures		(247	)			(155	)			(527	)			(371	)
Other, net		5				14				17				50
Distributable Cash Flow (consolidated)		2,075				1,722				6,897				7,730
Distributable Cash Flow attributable to Sunoco LP (100%)		(195	)			(146	)			(496	)			(399	)
Distributions from Sunoco LP		41				41				124				124
Distributable Cash Flow attributable to USAC (100%)		(55	)			(52	)			(161	)			(157	)
Distributions from USAC		25				25				73				73
Distributable Cash Flow attributable to noncontrolling interests in other non-wholly-owned consolidated subsidiaries		(315	)			(284	)			(926	)			(786	)
Distributable Cash Flow attributable to the partners of Energy Transfer		1,576				1,306				5,511				6,585
Transaction-related adjustments		5				6				26				34
Distributable Cash Flow attributable to the partners of Energy Transfer, as adjusted	$	1,581			$	1,312			$	5,537			$	6,619
Distributions to partners:
Limited Partners	$	818			$	413			$	2,145			$	1,238
General Partner		1				1				2				2
Total distributions to be paid to partners	$	819			$	414			$	2,147			$	1,240
Common Units outstanding – end of period		3,088.0				2,705.8				3,088.0				2,705.8
Distribution coverage ratio	1.93x				3.17x				2.58x				5.34x

(a)		Winter Storm Uri, which occurred in February 2021, resulted in one-time impacts to the Partnership’s consolidated net income, Adjusted EBITDA and Distributable Cash Flow.
(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 Energy Transfer’s fundamental business activities and should not be considered in isolation or as a substitute for net income, income from operations, cash flows from operating activities or other GAAP measures.
		There are material limitations to using measures such as Adjusted EBITDA, Distributable Cash Flow and distribution coverage ratio, including the difficulty associated with using any such measure as the sole measure to compare the results of one company to another, and the inability to analyze certain significant items that directly affect a company’s net income or loss or cash flows. In addition, our calculations of Adjusted EBITDA, Distributable Cash Flow and distribution coverage ratio may not be consistent with similarly titled measures of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP, such as operating income, net income and cash flow from operating activities.
		Definition of Adjusted EBITDA
		We define Adjusted EBITDA as total partnership earnings before interest, taxes, depreciation, depletion, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, inventory valuation adjustments, non-cash impairment charges, losses on extinguishments of debt and other non-operating income or expense items. Inventory adjustments that are excluded from the calculation of Adjusted EBITDA represent only the changes in lower of cost or market reserves on inventory that is carried at last-in, first-out (“LIFO”). These amounts are unrealized valuation adjustments applied to Sunoco LP’s fuel volumes remaining in inventory at the end of the period.
		Adjusted EBITDA reflects amounts for unconsolidated affiliates based on the same recognition and measurement methods used to record equity in earnings of unconsolidated affiliates. Adjusted EBITDA related to unconsolidated affiliates excludes the same items with respect to the unconsolidated affiliate as those excluded from the calculation of Adjusted EBITDA, such as interest, taxes, depreciation, depletion, amortization and other non-cash items. Although these amounts are excluded from Adjusted EBITDA related to unconsolidated affiliates, such exclusion should not be understood to imply that we have control over the operations and resulting revenues and expenses of such affiliates. We do not control our unconsolidated affiliates; therefore, we do not control the earnings or cash flows of such affiliates. The use of Adjusted EBITDA or Adjusted EBITDA related to unconsolidated affiliates as an analytical tool should be limited accordingly.
		Adjusted EBITDA is used by management to determine our operating performance and, along with other financial and volumetric data, as 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
		We define Distributable Cash Flow as net income, adjusted for certain non-cash items, less distributions to preferred unitholders and maintenance capital expenditures. Non-cash items include depreciation, depletion and amortization, non-cash compensation expense, amortization included in interest expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, inventory valuation adjustments, non-cash impairment charges, losses on extinguishments of debt and deferred income taxes. For unconsolidated affiliates, Distributable Cash Flow reflects the Partnership’s proportionate share of the investee’s distributable cash flow.
		Distributable Cash Flow is used by management to evaluate our overall performance. Our partnership agreement requires us to distribute all available cash, and Distributable Cash Flow is calculated to evaluate our ability to fund distributions through cash generated by our operations.
		On a consolidated basis, Distributable Cash Flow includes 100% of the Distributable Cash Flow of Energy Transfer’s consolidated subsidiaries. However, to the extent that noncontrolling interests exist among our subsidiaries, the Distributable Cash Flow generated by our subsidiaries may not be available to be distributed to our partners. In order to reflect the cash flows available for distributions to our partners, we have reported Distributable Cash Flow attributable to partners, which is calculated by adjusting Distributable Cash Flow (consolidated), as follows:
		For subsidiaries with publicly traded equity interests, Distributable Cash Flow (consolidated) includes 100% of Distributable Cash Flow attributable to such subsidiary, and Distributable Cash Flow attributable to our partners includes distributions to be received by the parent company with respect to the periods presented.
		For consolidated joint ventures or similar entities, where the noncontrolling interest is not publicly traded, Distributable Cash Flow (consolidated) includes 100% of Distributable Cash Flow attributable to such subsidiaries, but Distributable Cash Flow attributable to partners reflects only the amount of Distributable Cash Flow of such subsidiaries that is attributable to our ownership interest.
		For Distributable Cash Flow attributable to partners, as adjusted, certain transaction-related adjustments and non-recurring expenses that are included in net income are excluded.
		Definition of Distribution Coverage Ratio
		Distribution coverage ratio for a period is calculated as Distributable Cash Flow attributable to partners, as adjusted, divided by distributions expected to be paid to the partners of Energy Transfer in respect of such period.
(c)		For the nine months ended September 30, 2022, the amount reflected for transaction-related income taxes was related to an amended return from a previous transaction.

ENERGY TRANSFER LP AND SUBSIDIARIES SUMMARY ANALYSIS OF QUARTERLY RESULTS BY SEGMENT (Tabular dollar amounts in millions) (unaudited)
	Three Months Ended September 30,
	2022			2021
Segment Adjusted EBITDA:
Intrastate transportation and storage	$	301		$	172
Interstate transportation and storage		409			334
Midstream		868			556
NGL and refined products transportation and services		634			706
Crude oil transportation and services		461			496
Investment in Sunoco LP		276			198
Investment in USAC		109			99
All other		30			18
Total Segment Adjusted EBITDA	$	3,088		$	2,579

The following analysis of segment operating results includes a measure of segment margin. Segment margin is a non-GAAP financial measure and is presented herein to assist in the analysis of segment operating results and particularly to facilitate an understanding of the impacts that changes in sales revenues have on the segment performance measure of Segment Adjusted EBITDA.

Contacts

Energy Transfer

Investor Relations:
Bill Baerg, Brent Ratliff, Lyndsay Hannah, 214-981-0795

or

Media Relations:
Vicki Granado, 214-840-5820

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