Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Energy Transfer, LP (1012569) 10-Q published on Nov 07, 2017 at 5:43 pm
Reporting Period: Sep 29, 2017
In July 2017, ETP announced that it had entered into a contribution agreement with a fund managed by Blackstone Energy Partners and Blackstone Capital Partners (“Blackstone”), for the purchase by Blackstone of a 49.9% interest in the holding company that owns 65% of the Rover pipeline (“Rover Holdco”). The agreement with Blackstone required Blackstone to contribute, at closing, funds to reimburse ETP for its pro rata share of the Rover construction costs incurred by ETP through the closing date, along with the payment of additional amounts subject to certain adjustments. The transaction closed in October 2017. As a result of this closing, Rover Holdco is now owned 50.1% by ETP and 49.9% by Blackstone.
Following the January 26, 2015 announcement of the Regency-ETP merger (the “Regency Merger”), purported Regency unitholders filed lawsuits in state and federal courts in Dallas and Delaware asserting claims relating to the Regency Merger. All but one Regency Merger-related lawsuits have been dismissed. On June 10, 2015, Adrian Dieckman (“Dieckman”), a purported Regency unitholder, filed a class action complaint, Dieckman v. Regency GP LP, et al., C.A. No. 11130-CB, in the Court of Chancery of the State of Delaware (the “Regency Merger Litigation”), on behalf of Regency’s common unitholders against Regency GP, LP; Regency GP LLC; ETE, ETP, ETP GP, and the members of Regency’s board of directors (the “Regency Litigation Defendants”).
The Regency Merger litigation alleges that the Regency Merger breached the Regency partnership agreement because Regency’s conflicts committee was not properly formed, and the Regency Merger was not approved in good faith. On March 29, 2016, the Delaware Court of Chancery granted defendants’ motion to dismiss the lawsuit in its entirety. Dieckman appealed. On January 20, 2017, the Delaware Supreme Court reversed the judgment of the Court of Chancery. On May 5, 2017, Plaintiff filed an Amended Verified Class Action Complaint. The Regency Merger Litigation Defendants then filed Motions to Dismiss the Amended Complaint and a Motion to Stay Discovery on May 19, 2017. A hearing on these motions is currently set for January 9, 2018.
The Regency Merger Litigation Defendants cannot predict the outcome of the Regency Merger Litigation or any lawsuits that might be filed subsequent to the date of this filing; nor can the Regency Merger Litigation Defendants predict the amount of time and expense that will be required to resolve the Regency Merger Litigation. The Regency Litigation Defendants believe the Regency Merger Litigation is without merit and intend to vigorously defend against it and any others that may be filed in connection with the Regency Merger.
Seven purported Energy Transfer Partners, L.P. common unitholders (the “ETP Unitholder Plaintiffs”) separately filed seven putative unitholder class action lawsuits against ETP, ETP GP, ETP LLC, the members of the ETP Board, and ETE (the “ETP-SXL Defendants”) in connection with the announcement of the Sunoco Logistics Merger. Two of these lawsuits have been voluntarily dismissed. The five remaining lawsuits have been consolidated as In re Energy Transfer Partners, L.P. Shareholder Litig., C.A. No. 1:17-cv-00044-CCC, in the United States District Court for the District of Delaware (the “Sunoco Logistics Merger Litigation”).
The ETP Unitholder Plaintiffs allege causes of action challenging the merger and the proxy statement/prospectus filed in connection with the Sunoco Logistics Merger (the “ETP-SXL Merger Proxy”).
Segment Adjusted EBITDA. Segment Adjusted EBITDA increased for the nine months ended September 30, 2017 compared to the same period last year primarily due to the Midstream and Liquids Transportation and Services segments. The increase in the Midstream segment was primarily due to (i) higher realized crude, NGL and natural gas prices, which resulted in an increase of $113 million in non-fee based margin, (ii) a $38 million increase in non-fee based margin due to volume increases in the Permian, partially offset by declines in the South Texas, North Texas, and Mid-Continent/Panhandle regions, (iii) an increase of $36 million in fee-based margin due to minimum volume commitments in the South Texas region, as well as volume increases in the Permian and Northeast regions, partially offset by declines in South Texas, North Texas and the Mid-Continent/Panhandle regions, and (iv) an increase of $57 million in fee-based margin due to recent acquisitions, include PennTex. These increases in the Midstream segment were partially offset by an increase of $17 million in operating expenses primarily due to recent acquisitions and a $18 million increase in selling, general and administrative expenses due to impacts from capitalized overhead, shared services allocation and insurance allocation, as well as the impact of recent acquisitions. The increase in the Liquids Transportation and Services segment is primarily due to the DAPL pipeline being placed in-service in June 2017, an increase of $55 million in fractionation and refinery services margin, primarily due to higher NGL volumes from most major producing regions, and higher volumes on our NGL pipelines and fractionators. The increase in the Intrastate Transportation and Storage segment was primarily due to a $63 million increase in natural gas sales and other and a $10 million increase due to higher realized gains from pipeline optimization activity due to more favorable market conditions; these increases were offset by a $44 million decrease from renegotiated transportation contract resulting in lower billed volumes and an $11 million decrease in storage margin due to the impacts of market price changes on storage gas and financial derivatives. The decrease in the Interstate Transportation and Storage segment was primarily due to lack of customer demand driven by weak spreads and mild weather; in addition, contract restructuring resulted in a $17 million decrease in revenues on the Tiger pipeline. The decrease in the Investment in ETP segment was primarily due to
the deconsolidation of ETP (formerly Sunoco Logistics) upon the closing of the Sunoco Logistics Merger. The decrease in the All Other segment was primarily due to a $66 million decrease related to the termination of management fees paid by ETE that ended in 2016 and an increase of $39 million in transaction related expenses, partially offset by a $35 million increase in Adjusted EBITDA related to unconsolidated affiliates due to our investments in PES and Sunoco LP and a $15 million increase from commodity trading activities.