ETE 09-30-2014 10-Q
Table of Contents

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-32740
ENERGY TRANSFER EQUITY, L.P.
(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.)
3738 Oak Lawn Avenue, Dallas, Texas 75219
(Address of principal executive offices) (zip code)
(214) 981-0700
(Registrant’s telephone number, including area code)
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
ý
 
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
 
Smaller reporting company
¨
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 October 31, 2014, the registrant had 538,766,899 Common Units outstanding.
 


Table of Contents

FORM 10-Q
ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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Forward-Looking Statements
Certain matters discussed in this report, excluding historical information, as well as some statements by Energy Transfer Equity, L.P. (“Energy Transfer Equity,” the “Partnership” or “ETE”) in periodic press releases and some oral statements of Energy Transfer Equity officials during presentations about the Partnership, include forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Statements using words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “estimate,” “intend,” “continue,” “believe,” “may,” “will” or similar expressions help identify forward-looking statements. Although the Partnership and its general partner believe such forward-looking statements are based on reasonable assumptions and current expectations and projections about future events, no assurance can be given that such assumptions, expectations or projections will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, the Partnership’s actual results may vary materially from those anticipated, estimated or expressed, forecasted, projected or expected in forward-looking statements since many of the factors that determine these results are subject to uncertainties and risks that are difficult to predict and beyond management’s control. For additional discussion of risks, uncertainties and assumptions, see “Part I — Item 1A. Risk Factors” in the Partnership’s Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission on February 27, 2014.
Definitions
The following is a list of certain acronyms and terms generally used in the energy industry and throughout this document:
 
/d
 
per day
 
 
 
 
AmeriGas
 
AmeriGas Partners, L.P.
 
 
 
 
 
AOCI
 
accumulated other comprehensive income (loss)
 
 
 
 
 
Bbls
 
barrels
 
 
 
 
Bcf
 
billion cubic feet
 
 
 
 
 
Btu
 
British thermal unit, an energy measurement used by gas companies to convert the volume of gas used to its heat equivalent, and thus calculate the actual energy content
 
 
 
 
 
Citrus
 
Citrus Corp., which owns 100% of FGT
 
 
 
 
 
CrossCountry
 
CrossCountry Energy LLC, which owns an indirect 50% interest in Citrus
 
 
 
 
 
Eagle Rock
 
Eagle Rock Energy Partners, L.P.
 
 
 
 
 
ETC OLP
 
La Grange Acquisition, L.P., which conducts business under the assumed name of Energy Transfer Company
 
 
 
 
 
ETP
 
Energy Transfer Partners, L.P.
 
 
 
 
 
ETP Credit Facility
 
ETP’s $2.5 billion revolving credit facility
 
 
 
 
 
Exchange Act
 
Securities Exchange Act of 1934
 
 
 
 
 
FEP
 
Fayetteville Express Pipeline LLC
 
 
 
 
 
FERC
 
Federal Energy Regulatory Commission
 
 
 
 
 
FGT
 
Florida Gas Transmission Company, LLC
 
 
 
 
 
GAAP
 
accounting principles generally accepted in the United States of America
 
 
 
 
 
HPC
 
RIGS Haynesville Partnership Co.
 
 
 
 
 
Holdco
 
ETP Holdco Corporation
 
 
 
 
 
Hoover
 
Hoover Energy Partners, LP
 
 
 
 
 
IDRs
 
incentive distribution rights
 
 
 
 
 
Lake Charles LNG
 
Lake Charles LNG Company, LLC
 
 
 
 
 
LIBOR
 
London Interbank Offered Rate
 
 
 
 

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LNG
 
liquefied natural gas
 
 
 
 
 
Lone Star
 
Lone Star NGL LLC
 
 
 
 
 
MACS
 
Mid-Atlantic Convenience Stores, LLC
 
 
 
 
 
MEP
 
Midcontinent Express Pipeline LLC
 
 
 
 
 
MMBtu
 
million British thermal units
 
 
 
 
 
MTBE
 
methyl tertiary butyl ether
 
 
 
 
 
NGL
 
natural gas liquid, such as propane, butane and natural gasoline
 
 
 
 
NYMEX
 
New York Mercantile Exchange
 
 
 
 
 
OSHA
 
Federal Occupational Safety and Health Act
 
 
 
 
OTC
 
over-the-counter
 
 
 
 
 
Panhandle
 
Panhandle Eastern Pipe Line Company, LP
 
 
 
 
 
PCBs
 
polychlorinated biphenyl
 
 
 
 
 
PEPL Holdings
 
PEPL Holdings, LLC, a wholly-owned subsidiary of ETP
 
 
 
 
 
PES
 
Philadelphia Energy Solutions
 
 
 
 
 
PHMSA
 
Pipeline Hazardous Materials Safety Administration
 
 
 
 
 
PVR
 
PVR Partners, L.P.
 
 
 
 
 
Regency
 
Regency Energy Partners LP
 
 
 
 
 
Regency Credit Facility
 
Regency’s $1.5 billion revolving credit facility
 
 
 
 
 
Regency Preferred Units
 
Regency’s Series A Convertible Preferred Units, the Preferred Units of a Subsidiary
 
 
 
 
 
SEC
 
Securities and Exchange Commission
 
 
 
 
 
Southern Union
 
Southern Union Company
 
 
 
 
 
SUGS
 
Southern Union Gas Services
 
 
 
 
 
Sunoco
 
Sunoco, Inc.
 
 
 
 
 
Sunoco Logistics
 
Sunoco Logistics Partners L.P.
 
 
 
 
 
Susser
 
Susser Holdings Corporation
 
 
 
 
 
Transwestern
 
Transwestern Pipeline Company, LLC
 
 
 
 
 
WTI
 
West Texas Intermediate Crude
Adjusted EBITDA is a term used throughout this document, which we define as 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, non-cash impairment charges, loss on extinguishment of debt, gain on deconsolidation and other non-operating income or expense items. Unrealized gains and losses on commodity risk management activities include unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Adjusted EBITDA reflects amounts for less than wholly-owned subsidiaries based on 100% of the subsidiaries’ results of operations and for unconsolidated affiliates based on the Partnership’s proportionate ownership.

iii

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(unaudited)
 
 
September 30,
2014
 
December 31, 2013
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
1,108

 
$
590

Accounts receivable, net
4,722

 
3,658

Accounts receivable from related companies
51

 
63

Inventories
1,780

 
1,807

Exchanges receivable
58

 
67

Price risk management assets
16

 
39

Other current assets
307

 
312

Total current assets
8,042

 
6,536

 
 
 
 
PROPERTY, PLANT AND EQUIPMENT
43,017

 
33,917

ACCUMULATED DEPRECIATION
(4,280
)
 
(3,235
)
 
38,737

 
30,682

 
 
 
 
ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES
3,633

 
4,014

NON-CURRENT PRICE RISK MANAGEMENT ASSETS
1

 
18

GOODWILL
7,867

 
5,894

INTANGIBLE ASSETS, net
5,504

 
2,264

OTHER NON-CURRENT ASSETS, net
897

 
922

Total assets
$
64,681

 
$
50,330


















The accompanying notes are an integral part of these consolidated financial statements.
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ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in million)
(unaudited)

 
September 30,
2014
 
December 31, 2013
LIABILITIES AND EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable
$
4,694

 
$
3,834

Accounts payable to related companies
6

 
14

Exchanges payable
269

 
284

Price risk management liabilities
9

 
53

Accrued and other current liabilities
2,108

 
1,678

Current maturities of long-term debt
1,345

 
637

Total current liabilities
8,431

 
6,500

 
 
 
 
LONG-TERM DEBT, less current maturities
28,508

 
22,562

DEFERRED INCOME TAXES
4,230

 
3,865

NON-CURRENT PRICE RISK MANAGEMENT LIABILITIES
112

 
73

OTHER NON-CURRENT LIABILITIES
1,060

 
1,019

 
 
 
 
COMMITMENTS AND CONTINGENCIES (Note 13)

 

 
 
 
 
PREFERRED UNITS OF SUBSIDIARY
32

 
32

REDEEMABLE NONCONTROLLING INTEREST
15

 

 
 
 
 
EQUITY:
 
 
 
General Partner
(1
)
 
(3
)
Limited Partners:
 
 
 
Common Unitholders
687

 
1,066

Class D Units
18

 
6

Accumulated other comprehensive income
5

 
9

Total partners’ capital
709

 
1,078

Noncontrolling interest
21,584

 
15,201

Total equity
22,293

 
16,279

Total liabilities and equity
$
64,681

 
$
50,330












The accompanying notes are an integral part of these consolidated financial statements.
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ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per unit data)
(unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2014
 
2013
 
2014
 
2013
REVENUES:
 
 
 
 
 
 
 
Natural gas sales
$
1,290

 
$
915

 
$
4,082

 
$
2,752

NGL sales
1,797

 
968

 
4,451

 
2,468

Crude sales
4,497

 
4,215

 
13,022

 
11,408

Gathering, transportation and other fees
958

 
786

 
2,708

 
2,341

Refined product sales
5,165

 
4,633

 
14,581

 
13,945

Other
1,280

 
969

 
3,366

 
2,814

Total revenues
14,987

 
12,486

 
42,210

 
35,728

COSTS AND EXPENSES:
 
 
 
 
 
 
 
Cost of products sold
13,015

 
11,064

 
36,808

 
31,436

Operating expenses
540

 
419

 
1,359

 
1,178

Depreciation, depletion and amortization
425


332

 
1,248

 
962

Selling, general and administrative
185

 
142

 
490

 
448

Total costs and expenses
14,165

 
11,957

 
39,905

 
34,024

OPERATING INCOME
822

 
529

 
2,305

 
1,704

OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
Interest expense, net of interest capitalized
(356
)

(298
)
 
(1,015
)
 
(913
)
Equity in earnings of unconsolidated affiliates
84

 
38

 
265

 
182

Gains (losses) on extinguishment of debt
2

 

 
2

 
(7
)
Gains (losses) on interest rate derivatives
(25
)

3

 
(73
)
 
55

Gain on sale of AmeriGas common units
14

 
87

 
177

 
87

Other, net
(15
)
 
33

 
(38
)
 

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE
526

 
392

 
1,623

 
1,108

Income tax expense from continuing operations
56


49

 
271


136

INCOME FROM CONTINUING OPERATIONS
470

 
343

 
1,352

 
972

Income from discontinued operations


13

 
66


44

NET INCOME
470

 
356

 
1,418

 
1,016

LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST
282

 
205

 
898

 
648

NET INCOME ATTRIBUTABLE TO PARTNERS
188

 
151

 
520

 
368

GENERAL PARTNER’S INTEREST IN NET INCOME

 
1

 
1

 
1

CLASS D UNITHOLDER’S INTEREST IN NET INCOME

 

 
1

 

LIMITED PARTNERS’ INTEREST IN NET INCOME
$
188

 
$
150

 
$
518

 
$
367

INCOME FROM CONTINUING OPERATIONS PER LIMITED PARTNER UNIT:
 
 
 
 
 
 
 
Basic
$
0.35

 
$
0.26

 
$
0.94

 
$
0.62

Diluted
$
0.35

 
$
0.26

 
$
0.93

 
$
0.62

NET INCOME PER LIMITED PARTNER UNIT:
 
 
 
 
 
 
 
Basic
$
0.35

 
$
0.27

 
$
0.95

 
$
0.65

Diluted
$
0.35

 
$
0.27

 
$
0.94

 
$
0.65


The accompanying notes are an integral part of these consolidated financial statements.
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ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions)
(unaudited)
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2014
 
2013
 
2014
 
2013
Net income
$
470

 
$
356

 
$
1,418

 
$
1,016

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Reclassification to earnings of gains and losses on derivative instruments accounted for as cash flow hedges

 
(3
)
 
6

 
(5
)
Change in value of derivative instruments accounted for as cash flow hedges
3

 
(4
)
 
(3
)
 
4

Change in value of available-for-sale securities
1

 
1

 
1

 
1

Actuarial gain (loss) relating to pension and other postretirement benefits
(1
)
 
8

 
(2
)
 
9

Foreign currency translation adjustments
(1
)
 

 
(3
)
 
(1
)
Change in other comprehensive income from unconsolidated affiliates

 
9

 
(6
)
 
13

 
2

 
11

 
(7
)
 
21

Comprehensive income
472

 
367

 
1,411

 
1,037

Less: Comprehensive income attributable to noncontrolling interest
285

 
213

 
895

 
660

Comprehensive income attributable to partners
$
187

 
$
154

 
$
516

 
$
377






























The accompanying notes are an integral part of these consolidated financial statements.
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ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(Dollars in millions)
(unaudited)
 
 
General
Partner    
 
Common
Unitholders    
 
Class D Units
 
Accumulated
Other
Comprehensive
Income
 
Non-
controlling
Interest
 
Total    
Balance, December 31, 2013
$
(3
)
 
$
1,066

 
$
6

 
$
9

 
$
15,201

 
$
16,279

Distributions to partners
(1
)
 
(593
)
 
(2
)
 

 

 
(596
)
Distributions to noncontrolling interest

 

 

 

 
(1,359
)
 
(1,359
)
Subsidiary units issued for cash

 
106

 
2

 

 
1,773

 
1,881

Subsidiary units issued in certain acquisitions

 
211

 

 

 
5,382

 
5,593

Subsidiary units redeemed in Lake Charles LNG Transaction
2

 
480

 

 

 
(482
)
 

Purchase of additional Regency Units

 
(99
)
 

 

 
99

 

Non-cash compensation expense, net of units tendered by employees for tax withholdings

 

 
11

 

 
47

 
58

Capital contributions received from noncontrolling interest

 

 

 

 
19

 
19

Other, net

 
(2
)
 

 

 
9

 
7

Units repurchased under buyback program

 
(1,000
)
 

 

 

 
(1,000
)
Other comprehensive loss, net of tax

 

 

 
(4
)
 
(3
)
 
(7
)
Net income
1

 
518

 
1

 

 
898

 
1,418

Balance, September 30, 2014
$
(1
)
 
$
687

 
$
18

 
$
5

 
$
21,584

 
$
22,293




















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

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(unaudited)
 
Nine Months Ended
September 30,
 
2014
 
2013
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
1,418

 
$
1,016

Reconciliation of net income to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
1,248

 
962

Deferred income taxes
(66
)
 
244

Amortization included in interest expense
(41
)
 
(43
)
Non-cash compensation expense
60

 
43

Gain on sale of AmeriGas common units
(177
)
 
(87
)
Losses on disposal of assets
13

 

(Gains) losses on extinguishment of debt
(2
)
 
7

LIFO valuation adjustments
17

 
(22
)
Equity in earnings of unconsolidated affiliates
(265
)
 
(182
)
Distributions from unconsolidated affiliates
224

 
269

Other non-cash
(42
)
 
22

Net change in operating assets and liabilities, net of effects of acquisitions and deconsolidation
120

 
(382
)
Net cash provided by operating activities
2,507

 
1,847

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Cash paid for acquisitions, net of cash received
(1,794
)
 
(5
)
Cash proceeds from the sale of AmeriGas common units
814

 
346

Capital expenditures (excluding allowance for equity funds used during construction)
(3,714
)
 
(2,504
)
Contributions in aid of construction costs
34

 
11

Contributions to unconsolidated affiliates
(264
)
 
(3
)
Distributions from unconsolidated affiliates in excess of cumulative earnings
97

 
326

Proceeds from sale of discontinued operations
79

 
973

Proceeds from the sale of assets
22

 
72

Change in restricted cash
162

 

Other
(10
)
 
(49
)
Net cash used in investing activities
(4,574
)
 
(833
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from borrowings
12,044

 
9,768

Repayments of long-term debt
(8,342
)
 
(9,439
)
Subsidiary equity offerings, net of issue costs
1,881

 
1,450

Distributions to partners
(596
)
 
(544
)
Debt issuance costs
(61
)
 
(56
)
Distributions to noncontrolling interest
(1,359
)
 
(1,050
)
Capital contributions received from noncontrolling interest
19

 
15

Redemption of Preferred Units

 
(340
)
Units repurchased under buyback program
(1,000
)
 

Other, net
(1
)
 
(13
)
Net cash provided by (used in) financing activities
2,585

 
(209
)
INCREASE IN CASH AND CASH EQUIVALENTS
518

 
805

CASH AND CASH EQUIVALENTS, beginning of period
590

 
372

CASH AND CASH EQUIVALENTS, end of period
$
1,108

 
$
1,177


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

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollar and unit amounts, except per unit data, are in millions)
(unaudited)
1.
OPERATIONS AND ORGANIZATION:
Unless the context requires otherwise, references to “we,” “us,” “our,” the “Partnership” and “ETE” mean Energy Transfer Equity, L.P. and its consolidated subsidiaries. References to the “Parent Company” mean Energy Transfer Equity, L.P. on a stand-alone basis.
Our consolidated subsidiaries, Trunkline LNG Company, LLC, Trunkline LNG Export, LLC and Susser Petroleum Partners LP, changed their names in September 2014 and October 2014, respectively, to Lake Charles LNG Company, LLC, Lake Charles LNG Export, LLC and Sunoco LP, respectively. All references to these subsidiaries throughout this document reflect the new names of those subsidiaries, regardless of whether the disclosure relates to periods or events prior to the dates of the name changes.
The consolidated financial statements of ETE presented herein include the results of operations of:
the Parent Company;
our controlled subsidiaries, ETP and Regency (see description of their respective operations below under “Business Operations”);
ETP’s and Regency’s consolidated subsidiaries and our wholly-owned subsidiaries that own the general partner and IDRs in ETP and Regency; and
our wholly-owned subsidiary, Lake Charles LNG. Lake Charles LNG was acquired from ETP in February 2014.
Business Operations
The Parent Company’s principal sources of cash flow are derived from its direct and indirect investments in the limited partner and general partner interests in ETP and Regency and cash flows from the operations of Lake Charles LNG. The Parent Company’s primary cash requirements are for general and administrative expenses, debt service requirements and distributions to its partners. Parent Company-only assets are not available to satisfy the debts and other obligations of ETE’s subsidiaries. In order to understand the financial condition of the Parent Company on a stand-alone basis, see Note 18 for stand-alone financial information apart from that of the consolidated partnership information included herein.
Our activities are primarily conducted through our operating subsidiaries as follows:
ETP is a publicly traded partnership whose operations are conducted through the following subsidiaries:
ETC OLP, a Texas limited partnership engaged in midstream and intrastate transportation and storage natural gas operations. ETC OLP owns and operates, through its wholly and majority-owned subsidiaries, natural gas gathering systems, intrastate natural gas pipeline systems and gas processing plants and is engaged in the business of purchasing, gathering, transporting, processing, and marketing natural gas and NGLs in the states of Texas, Louisiana, New Mexico and West Virginia. ETC OLP’s intrastate transportation and storage operations primarily focus on transporting natural gas in Texas through its Oasis pipeline, ET Fuel System, East Texas pipeline and HPL System. ETC OLP’s midstream operations focus on the gathering, compression, treating, conditioning and processing of natural gas, primarily on or through its Southeast Texas System, Eagle Ford System, North Texas System and Northern Louisiana assets. ETC OLP also owns a 70% interest in Lone Star.
ET Interstate, a Delaware limited liability company with revenues consisting primarily of fees earned from natural gas transportation services and operational gas sales. ET Interstate is the parent company of:
Transwestern, a Delaware limited liability company engaged in interstate transportation of natural gas. Transwestern’s revenues consist primarily of fees earned from natural gas transportation services and operational gas sales.
ETC Fayetteville Express Pipeline, LLC, a Delaware limited liability company that directly owns a 50% interest in FEP, which owns 100% of the Fayetteville Express interstate natural gas pipeline.
ETC Tiger Pipeline, LLC, a Delaware limited liability company engaged in interstate transportation of natural gas.

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CrossCountry, a Delaware limited liability company that indirectly owns a 50% interest in Citrus, which owns 100% of the FGT interstate natural gas pipeline.
ETC Compression, LLC, a Delaware limited liability company engaged in natural gas compression services and related equipment sales.
Holdco, a Delaware limited liability company that indirectly owns Panhandle and Sunoco. Panhandle and Sunoco operations are described as follows:
Panhandle owns and operates assets in the regulated and unregulated natural gas industry and is primarily engaged in the transportation and storage of natural gas in the United States. As discussed in Note 2, in January 2014, Panhandle consummated a merger with Southern Union, the indirect parent of Panhandle, and PEPL Holdings, the sole limited partner of Panhandle, pursuant to which each of Southern Union and PEPL Holdings were merged with and into Panhandle, with Panhandle surviving the merger.
Sunoco owns and operates retail marketing assets, which sell gasoline and middle distillates at retail locations and operates convenience stores primarily on the east coast and in the midwest region of the United States. Effective June 1, 2014, ETP combined certain Sunoco retail assets with another wholly-owned subsidiary of ETP to form a limited liability company owned by ETP and its wholly-owned subsidiary, Sunoco.
Sunoco Logistics, a publicly traded Delaware limited partnership that owns and operates a logistics business, consisting of refined products, crude oil and NGL pipelines, terminalling and storage assets, and refined products, crude oil and NGL acquisition and marketing assets.
ETP owns an indirect 100% equity interest in Susser and the general partner interest, incentive distribution rights and a 44% limited partner interest in Sunoco LP. Susser operates convenience stores in Texas, New Mexico and Oklahoma. Sunoco LP distributes motor fuels to convenience stores and retail fuel outlets in Texas, New Mexico, Oklahoma, Kansas and Louisiana and other commercial customers. As discussed in Note 2, in October 2014, Sunoco LP acquired MACS from ETP.
Regency is a publicly traded partnership engaged in the gathering and processing, compression, treating and transportation of natural gas; the transportation, fractionation and storage of NGLs; the gathering, transportation and terminaling of oil (crude and/or condensate, a lighter oil) received from producers; natural gas and NGL marketing and trading, and the management of coal and natural resource properties in the United States. Regency focuses on providing midstream services in some of the most prolific natural gas producing regions in the United States, including the Eagle Ford, Haynesville, Barnett, Fayetteville, Marcellus, Utica, Bone Spring, Avalon and Granite Wash shales. Its assets are primarily located in Texas, Louisiana, Arkansas, Pennsylvania, California, Mississippi, Alabama, New Mexico and the mid-continent region of the United States, which includes Kansas, Colorado and Oklahoma. Regency also holds a 30% interest in Lone Star.
Lake Charles LNG operates a LNG import terminal, which has approximately 9.0 Bcf of above ground LNG storage capacity and re-gasification facilities on Louisiana’s Gulf Coast near Lake Charles, Louisiana. Lake Charles LNG is engaged in interstate commerce and is subject to the rules, regulations and accounting requirements of the FERC.
Our financial statements reflect the following reportable business segments:
Investment in ETP, including the consolidated operations of ETP.
Investment in Regency, including the consolidated operations of Regency.
Investment in Lake Charles LNG, including the operations of Lake Charles LNG.
Corporate and Other, including the following:
activities of the Parent Company; and
the goodwill and property, plant and equipment fair value adjustments recorded as a result of the 2004 reverse acquisition of Heritage Propane Partners, L.P.
Preparation of Interim Financial Statements
The accompanying consolidated balance sheet as of December 31, 2013, which has been derived from audited financial statements, and the unaudited interim consolidated financial statements and notes thereto of the Partnership as of September 30, 2014 and for the three and nine months ended September 30, 2014 and 2013 have been prepared in accordance with GAAP for interim consolidated financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. However, management believes that the disclosures made are adequate to make the information not misleading. The results of operations

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for interim periods are not necessarily indicative of the results to be expected for a full year due to the seasonal nature of the Partnership’s operations, maintenance activities of the Partnership’s subsidiaries and the impact of forward natural gas prices and differentials on certain derivative financial instruments that are accounted for using mark-to-market accounting.
In the opinion of management, all adjustments (all of which are normal and recurring) have been made that are necessary to fairly state the consolidated financial position of the Partnership as of September 30, 2014, and the Partnership’s results of operations and cash flows for the three and nine months ended September 30, 2014 and 2013. The unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto presented in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on February 27, 2014.
Certain prior period amounts have been reclassified to conform to the 2014 presentation. These reclassifications had no impact on net income or total equity.
We record the collection of taxes to be remitted to government authorities on a net basis except for ETP’s retail marketing operations, in which consumer excise taxes on sales of refined products and merchandise are included in both revenues and cost of products sold in the consolidated statements of operations, with no net impact on net income. Excise taxes collected by ETP’s retail marketing operations were $632 million and $581 million for the three months ended September 30, 2014 and 2013, respectively, and $1.74 billion and $1.66 billion for the nine months ended September 30, 2014 and 2013, respectively.
New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which clarifies the principles for recognizing revenue based on the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, with earlier adoption not permitted. ASU 2014-09 can be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption. The Partnership is currently evaluating the impact, if any, that adopting this new accounting standard will have on our revenue recognition policies.
In April 2014, the FASB issued Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”), which changed the requirements for reporting discontinued operations. Under ASU 2014-08, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on an entity’s operations and financial results. ASU 2014-08 is effective for all disposals or classifications as held for sale of components of an entity that occur within fiscal years beginning after December 15, 2014, and early adoption is permitted. We expect to adopt this standard for the year ending December 31, 2015. ASU 2014-08 could have an impact on whether transactions will be reported in discontinued operations in the future, as well as the disclosures required when a component of an entity is disposed.
2.
ACQUISITIONS, DIVESTITURES AND RELATED TRANSACTIONS:
2014
Susser Merger
On August 29, 2014, ETP and Susser completed the previously announced merger of an indirect wholly-owned subsidiary of ETP, with and into Susser, with Susser surviving the merger as a subsidiary of ETP for total consideration valued at approximately $1.8 billion (the “Susser Merger”). The total consideration paid in cash was approximately $875 million and the total consideration paid in equity was approximately 15.8 million ETP Common Units. The Susser Merger broadens ETP’s retail geographic footprint and provides synergy opportunities and a platform for future growth.
In connection with the Susser Merger, ETP acquired an indirect 100% equity interest in Susser and the general partner interest and the incentive distribution rights in Sunoco LP, approximately 11 million Sunoco LP common and subordinated units, and Susser’s existing retail operations, consisting of 630 convenience store locations.
Effective with the closing of the transaction, Susser ceased to be a publicly traded company and its common stock discontinued trading on the NYSE.

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Summary of Assets Acquired and Liabilities Assumed
We accounted for the Susser Merger using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition date. Our consolidated balance sheet as of September 30, 2014 reflected the preliminary purchase price allocations based on available information. Management is reviewing the valuation and confirming the results to determine the final purchase price allocation.
The following table summarizes the preliminary assets acquired and liabilities assumed recognized as of the merger date:
 
 
Susser
Total current assets
 
$
422

Property, plant and equipment
 
1,065

Goodwill(1)
 
1,605

Intangible assets
 
481

Other non-current assets
 
27

 
 
3,600

 
 
 
Current liabilities
 
377

Long-term debt, less current maturities
 
564

Deferred income taxes
 
432

Other non-current liabilities
 
40

Noncontrolling interest
 
404

 
 
1,817

Total consideration
 
1,783

Cash received
 
67

Total consideration, net of cash received
 
$
1,716

(1) 
None of the goodwill is expected to be deductible for tax purposes.
ETP incurred merger related costs related to the Susser Merger of $24 million during the three months ended September 30, 2014. Our consolidated statements of operations for the three and nine months ended September 30, 2014 reflected revenue and net income related to Susser of $575 million and $2 million, respectively.
No pro forma information has been presented for the Susser Merger, as the impact of this acquisition was not material in relation to our consolidated results of operations.
MACS to Sunoco LP
On October 1, 2014, Sunoco LP acquired MACS from ETP in a transaction valued at approximately $768 million (the “MACS Transaction”). The transaction included approximately 110 company-operated retail convenience stores and 200 dealer-operated and consignment sites from MACS. The consideration paid by Sunoco LP consisted of approximately 4 million Sunoco LP common units issued to ETP and $556 million in cash, subject to customary closing adjustments. Sunoco LP initially financed the cash portion by utilizing availability under its revolving credit facility. In October 2014, Sunoco LP partially repaid borrowings on its revolving credit facility with net proceeds of $359 million from a public offering of 8 million Sunoco LP common units.
Aloha Petroleum Acquisition
On September 25, 2014, Sunoco LP entered into a definitive agreement to acquire Honolulu, Hawaii-based Aloha Petroleum, Ltd (“Aloha Petroleum”). Aloha Petroleum is an independent gasoline marketer and convenience store operator in Hawaii, with an extensive wholesale fuel distribution network and six fuel storage terminals on the islands. The base purchase price for Aloha Petroleum is approximately $240 million, subject to post-closing earn-out, certain closing adjustments, and before transaction costs and expenses. The transaction is expected to close in the fourth quarter of 2014, subject to customary closing conditions and required consents and approvals.

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Lake Charles LNG Transaction
On February 19, 2014, ETP completed the transfer to ETE of Lake Charles LNG, the entity that owns a LNG regasification facility in Lake Charles, Louisiana, in exchange for the redemption by ETP of 18.7 million ETP Common Units held by ETE (the “Lake Charles LNG Transaction”). This transaction was effective as of January 1, 2014, at which time ETP deconsolidated Lake Charles LNG.
In connection with ETE’s acquisition of Lake Charles LNG, ETP agreed to continue to provide management services for ETE through 2015 in relation to both Lake Charles LNG’s regasification facility and the development of a liquefaction project at Lake Charles LNG’s facility, for which ETE has agreed to pay incremental management fees to ETP of $75 million per year for the years ending December 31, 2014 and 2015. ETE also agreed to provide additional subsidies to ETP through the relinquishment of future incentive distributions, as discussed further in Note 10.
Panhandle Merger
On January 10, 2014, Panhandle consummated a merger with Southern Union, the indirect parent of Panhandle at the time of the merger, and PEPL Holdings, a wholly-owned subsidiary of Southern Union and the sole limited partner of Panhandle at the time of the merger, pursuant to which each of Southern Union and PEPL Holdings were merged with and into Panhandle (the “Panhandle Merger”), with Panhandle surviving the Panhandle Merger. In connection with the Panhandle Merger, Panhandle assumed Southern Union’s obligations under its 7.6% Senior Notes due 2024, 8.25% Senior Notes due 2029 and the Junior Subordinated Notes due 2066. At the time of the Panhandle Merger, Southern Union did not have material operations of its own, other than its ownership of Panhandle and noncontrolling interests in PEI Power II, LLC, Regency (31.4 million common units and 6.3 million Class F Units), and ETP (2.2 million common units). In connection with the Panhandle Merger, Panhandle also assumed PEPL Holdings’ guarantee of $600 million of Regency senior notes.
Regency’s Acquisition of Eagle Rock’s Midstream Business
On July 1, 2014, Regency acquired Eagle Rock’s midstream business (the “Eagle Rock Midstream Acquisition”) for $1.3 billion, including the assumption of $499 million of Eagle Rock’s 8.375% Senior Notes due 2019. The remainder of the purchase price was funded by $400 million in Regency Common Units sold to a wholly-owned subsidiary of ETE, 8.2 million Regency Common Units issued to Eagle Rock and borrowings under Regency’s revolving credit facility. Regency is accounting for the Eagle Rock Midstream Acquisition using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition date. This acquisition is expected to complement Regency’s core gathering and processing business and is expected to further diversify Regency’s geographic presence in the Mid-Continent region, East Texas and South Texas. Our consolidated statements of operations for the three and nine months ended September 30, 2014 included revenues and net income attributable to Eagle Rock’s operations of $472 million and $18 million, respectively.
Regency’s evaluation of the assigned fair values is ongoing. The table below represents a preliminary allocation of the total purchase price:
Assets
At July 1, 2014
Current assets
$
115

Property, plant and equipment
1,329

Other long-term assets
4

Total assets acquired
1,448

Liabilities
 
Current liabilities
109

Long-term debt
499

Long-term liabilities
12

Total liabilities assumed
620

Net assets acquired
$
828

Regency’s Acquisition of PVR
On March 21, 2014, Regency acquired PVR for a total purchase price of $5.7 billion (based on Regency’s closing price of $27.82 per unit on March 21, 2014), including $1.8 billion principal amount of assumed debt (“PVR Acquisition”). PVR unitholders received (on a per unit basis) 1.02 Regency Common Units and a one-time cash payment of $36 million, which

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was funded through borrowings under Regency’s revolving credit facility. The PVR Acquisition enhances Regency’s geographic diversity with a strategic presence in the Marcellus and Utica shales in the Appalachian Basin and the Granite Wash in the Mid-Continent region. Regency accounted for the acquisition of PVR using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition date. Our statements of operations included revenues attributable to PVR of $302 million and $653 million for the three and nine months ended September 30, 2014, respectively. Our statements of operations included net income attributable to PVR of $84 million and $119 million for the three and nine months ended September 30, 2014, respectively.
Management completed the evaluation of the assigned fair values to the assets acquired and liabilities assumed. The total purchase price was allocated as follows:
Assets
At March 21, 2014
Current assets
$
149

Property, plant and equipment
2,716

Investment in unconsolidated affiliates
62

Intangible assets (average useful lives of 30 years)
2,717

Goodwill
370

Other long-term assets
18

Total assets acquired
6,032

Liabilities
 
Current liabilities
168

Long-term debt
1,788

Premium related to senior notes
99

Long-term liabilities
30

Total liabilities assumed
2,085

Net assets acquired
$
3,947

Regency’s Acquisition of Hoover
On February 3, 2014, Regency acquired certain subsidiaries of Hoover for a total purchase price of $293 million, consisting of (i) 4,040,471 Regency Common Units issued to Hoover, (ii) $184 million in cash and (iii) $2 million in asset retirement obligations assumed (the “Hoover Acquisition”). The acquisition of Hoover increases Regency’s fee-based revenue, expanding its existing footprint in the southern portion of the Delaware Basin in West Texas, and its services to producers into crude and water gathering. A portion of the consideration is being held in escrow as security for certain indemnification claims. Regency financed the cash portion of the purchase price through borrowings under its revolving credit facility. Regency accounted for the acquisition of Hoover using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition date. Our statements of operations included revenues attributable to Hoover’s operations of $11 million and $26 million for the three and nine months ended September 30, 2014, respectively. Our statements of operations included net losses of $2 million and net income of $2 million attributable to Hoover’s operations for the three and nine months ended September 30, 2014, respectively.

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Management completed the evaluation of the assigned fair values to the assets acquired and liabilities assumed. The total purchase price was allocated as follows:
Assets
At February 3, 2014
Current assets
$
5

Property, plant and equipment
117

Intangible assets (average useful lives of 30 years)
148

Goodwill
30

Total assets acquired
300

Liabilities
 
Current liabilities
5

Asset retirement obligations
2

Total liabilities assumed
7

Net assets acquired
$
293

The fair values of the assets acquired and liabilities assumed for the Eagle Rock Midstream, PVR and Hoover acquisitions were determined using various valuation techniques, including the income and market approaches.
Pro Forma Results of Operations
The following unaudited pro forma consolidated results of operations for the three and nine months ended September 30, 2014 and 2013 are presented as if the PVR and Eagle Rock Midstream acquisitions had been completed on January 1, 2013, and assume there were no other changes in operations. This pro forma information does not necessarily reflect the actual results that would have occurred had the acquisitions occurred on January 1, 2013, nor is it indicative of future results of operations. Actual results for the three months ended September 30, 2014 include PVR and the Eagle Rock midstream business for the entire period.
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2014
 
2013
 
2014
 
2013
Revenues
$
14,987

 
$
13,042

 
$
43,036

 
$
37,310

Net income attributable to partners
188

 
138

 
496

 
324

 
 
 
 
 
 
 
 
Basic net income per Limited Partner unit
$
0.35

 
$
0.25

 
$
0.91

 
$
0.58

Diluted net income per Limited Partner unit
$
0.35

 
$
0.25

 
$
0.91

 
$
0.58

The pro forma consolidated results of operations include adjustments to reflect incremental expenses associated with the fair value adjustments recorded as a result of applying the acquisition method of accounting and incremental interest expense related to the financing of a portion of the purchase price.
The pro forma information is not necessarily indicative of the results of operations that would have occurred had the transactions been made at the beginning of the periods presented or the future results of the combined operations.
Discontinued Operations
Discontinued operations for the nine months ended September 30, 2014 included the results of operations for a marketing business that had been recently acquired by ETP and was sold effective April 1, 2014, as well as a $39 million gain on the sale. The disposed subsidiary’s results of operations were not material during any periods in 2013; therefore, the disposed subsidiary’s results were not reclassified to discontinued operations in the prior period.
Discontinued operations for the three and nine months ended September 30, 2013 included the results of Southern Union’s distribution operations.

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3.
ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES:
The following investments in unconsolidated affiliates are reflected in our consolidated financial statements using the equity method:
AmeriGas. During the nine months ended September 30, 2014, ETP sold a total of approximately 18.9 million AmeriGas common units for net proceeds of $814 million. Net proceeds from these sales were used to repay borrowings under the ETP Credit Facility and for general partnership purposes. Subsequent to the sales, ETP’s remaining interest in AmeriGas common units consisted of 3.1 million units held by a wholly-owned captive insurance company.
Citrus. ETP owns a 50% interest in Citrus, which owns 100% of FGT, a natural gas pipeline system that originates in Texas and delivers natural gas to the Florida peninsula.
FEP. ETP owns a 50% interest in the FEP, which owns a natural gas pipeline that originates in Conway County, Arkansas, continues eastward through White County, Arkansas and terminates at an interconnect with Trunkline Gas Company, LLC in Panola County, Mississippi.
HPC. Regency owns a 49.99% interest in HPC, which, through its ownership of the Regency Intrastate Gas System, delivers natural gas from Northwest Louisiana to downstream pipelines and markets through an intrastate pipeline system.
MEP. Regency owns a 50% interest in MEP, which owns natural gas pipelines that extend from Southeast Oklahoma, across Northeast Texas, Northern Louisiana and Central Mississippi to an interconnect with the Transcontinental natural gas pipeline system in Butler, Alabama.
The following table presents aggregated selected income statement data for our unconsolidated affiliates listed above (on a 100% basis for all periods presented).
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2014
 
2013
 
2014
 
2013
Revenue
$
919

 
$
883

 
$
3,703

 
$
3,324

Operating income
206

 
196

 
881

 
839

Net income
82

 
64

 
505

 
460

In addition to the equity method investments described above, our subsidiaries have other equity method investments, which are not significant to our consolidated financial statements.
In May 2014, Sunoco Logistics entered into a joint agreement to form Bayview Refining Company, LLC (“Bayview”). Bayview will construct and operate a facility that will process crude oil into intermediate petroleum products. Sunoco Logistics will fund construction of the facility through contributions proportionate to its 49% economic and voting interests, with the remaining portion funded by the joint owner through a promissory note entered into with Sunoco Logistics. Through September 30, 2014, the joint owners have made contributions totaling $21 million. The facility is expected to commence operations in the second half of 2015. Bayview is a variable interest entity of which Sunoco Logistics is not the primary beneficiary. As a result, Sunoco Logistics’ interest in Bayview is reflected as an equity method investment.

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4.
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.
Non-cash investing and financing activities were as follows:
 
Nine Months Ended
September 30,
 
2014
 
2013
NON-CASH INVESTING ACTIVITIES:
 
 
 
Accrued capital expenditures
$
399

 
$
260

Net gains (losses) from subsidiary common unit transactions
$
702

 
$
(410
)
NON-CASH FINANCING ACTIVITIES:
 
 
 
Subsidiary issuances of common units in connection with PVR, Hoover and Eagle Rock Midstream acquisitions
$
4,281

 
$

Subsidiary issuances of common units in connection with Susser Merger
$
1,312

 
$

Long-term debt assumed in PVR Acquisition
$
1,887

 
$

Long-term debt exchanged in Eagle Rock Midstream Acquisition
$
499

 
$

5.
INVENTORIES:
Inventories consisted of the following:
 
September 30,
2014
 
December 31,
2013
Natural gas and NGLs
$
404

 
$
523

Crude oil
459

 
488

Refined products
597

 
597

Appliances, parts and fittings and other
320

 
199

Total inventories
$
1,780

 
$
1,807

ETP utilizes commodity derivatives to manage price volatility associated with certain of its natural gas inventory and designates certain of these derivatives as fair value hedges for accounting purposes. Changes in fair value of the designated hedged inventory have been recorded in inventory on our consolidated balance sheets and in cost of products sold in our consolidated statements of operations.
6.
FAIR VALUE MEASUREMENTS:
We have commodity derivatives, interest rate derivatives and embedded derivatives in the Regency Preferred Units 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 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 our options transacted through our clearing broker as having Level 2 inputs due to the level of activity of these contracts on the exchange in which they trade. We consider the valuation of our interest rate derivatives as Level 2 as the primary input, the LIBOR curve, is based on quotes from an active exchange of Eurodollar futures for the same period as the future interest swap settlements, and we discount the future cash flows accordingly, including the effects of credit risk. Level 3 inputs are unobservable. Derivatives related to the Regency Preferred Units are valued using a binomial lattice model. The market inputs utilized in the model include credit spread, probabilities of the occurrence of certain events,

15

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common unit price, dividend yield, and expected value, and are considered Level 3. During the nine months ended September 30, 2014, no transfers were made between any levels within the fair value hierarchy.
Based on the estimated borrowing rates currently available to us and our subsidiaries for loans with similar terms and average maturities, the aggregate fair value of our consolidated debt obligations as of September 30, 2014 and December 31, 2013 was $31.23 billion and $23.97 billion, respectively. As of September 30, 2014 and December 31, 2013, the aggregate carrying amount of our consolidated debt obligations was $29.85 billion and $23.20 billion, respectively. The fair value of our consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities.
The following tables summarize the fair value of our financial assets and liabilities measured and recorded at fair value on a recurring basis as of September 30, 2014 and December 31, 2013 based on inputs used to derive their fair values:
 
Fair Value Measurements at
September 30, 2014
 
Fair Value
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Interest rate derivatives
$
3

 
$

 
$
3

 
$

Commodity derivatives:
 
 
 
 
 
 
 
Condensate — Forward Swaps
4

 

 
4

 

Natural Gas:
 
 
 
 
 
 
 
Basis Swaps IFERC/NYMEX
6

 
6

 

 

Swing Swaps IFERC
6

 
1

 
5

 

Fixed Swaps/Futures
75

 
69

 
6

 

Forward Physical Swaps
1

 

 
1

 

Natural Gas Liquids — Forwards/Swaps
16

 
13

 
3

 

Power:
 
 
 
 
 
 
 
Forwards
2

 

 
2

 

Futures
1

 
1

 

 

Refined Products — Futures
19

 
19

 

 

Total commodity derivatives
130

 
109

 
21

 

Total assets
$
133

 
$
109

 
$
24

 
$

Liabilities:
 
 
 
 
 
 
 
Interest rate derivatives
$
(86
)
 
$

 
$
(86
)
 
$

Embedded derivatives in the Regency Preferred Units
(30
)
 

 

 
(30
)
Commodity derivatives:
 
 
 
 
 
 
 
Condensate — Forward Swaps
(1
)
 

 
(1
)
 

Natural Gas:
 
 
 
 
 
 
 
Basis Swaps IFERC/NYMEX
(8
)
 
(8
)
 

 

Swing Swaps IFERC
(5
)
 
(1
)
 
(4
)
 

Fixed Swaps/Futures
(75
)
 
(73
)
 
(2
)
 

Forward Physical Swaps
(1
)
 

 
(1
)
 

Natural Gas Liquids — Forwards/Swaps
(19
)
 
(18
)
 
(1
)
 

Power:
 
 
 
 
 
 
 
Forwards
(2
)
 

 
(2
)
 

Futures
(2
)
 
(2
)
 

 

Refined Products — Futures
(5
)
 
(5
)
 

 

Total commodity derivatives
(118
)
 
(107
)
 
(11
)
 

Total liabilities
$
(234
)
 
$
(107
)
 
$
(97
)
 
$
(30
)



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Fair Value Measurements at
December 31, 2013
 
Fair Value
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Interest rate derivatives
$
47

 
$

 
$
47

 
$

Commodity derivatives:
 
 
 
 
 
 
 
Natural Gas:
 
 
 
 
 
 
 
Basis Swaps IFERC/NYMEX
5

 
5

 

 

Swing Swaps IFERC
8

 
1

 
7

 

Fixed Swaps/Futures
203

 
201

 
2

 

NGLs — Swaps
7

 
5

 
2

 

Power — Forwards
3

 

 
3

 

Refined Products — Futures
5

 
5

 

 

Total commodity derivatives
231

 
217

 
14

 

Total Assets
$
278

 
$
217

 
$
61

 
$

Liabilities:
 
 
 
 
 
 
 
Interest rate derivatives
$
(95
)
 
$

 
$
(95
)
 
$

Embedded derivatives in the Regency Preferred Units
(19
)
 

 

 
(19
)
Commodity derivatives:
 
 
 
 
 
 
 
Condensate — Forward Swaps
(1
)
 

 
(1
)
 

Natural Gas:
 
 
 
 
 
 
 
Basis Swaps IFERC/NYMEX
(4
)
 
(4
)
 

 

Swing Swaps IFERC
(6
)
 

 
(6
)
 

Fixed Swaps/Futures
(206
)
 
(201
)
 
(5
)
 

Forward Physical Contracts
(1
)
 

 
(1
)
 

NGLs — Swaps
(9
)
 
(5
)
 
(4
)
 

Power — Forwards
(1
)
 

 
(1
)
 

Refined Products — Futures
(5
)
 
(5
)
 

 

Total commodity derivatives
(233
)
 
(215
)
 
(18
)
 

Total Liabilities
$
(347
)
 
$
(215
)
 
$
(113
)
 
$
(19
)
The following table presents a reconciliation of the beginning and ending balances for our Level 3 financial instruments measured at fair value on a recurring basis using significant unobservable inputs for the nine months ended September 30, 2014.
Balance, December 31, 2013
$
(19
)
Net unrealized loss included in other income (expense)
(11
)
Balance, September 30, 2014
$
(30
)


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7.
NET INCOME PER LIMITED PARTNER UNIT:
A reconciliation of income from continuing operations and weighted average units used in computing basic and diluted income from continuing operations per unit is as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2014
 
2013
 
2014
 
2013
Income from continuing operations
$
470

 
$
343

 
$
1,352

 
$
972

Less: Income from continuing operations attributable to noncontrolling interest
282

 
195

 
839

 
623

Income from continuing operations, net of noncontrolling interest
188

 
148

 
513

 
349

Less: General Partner’s interest in income from continuing operations

 
1

 
1

 
1

Less: Class D Unitholder’s interest in income from continuing operations

 

 
1

 

Income from continuing operations available to Limited Partners
$
188

 
$
147

 
$
511

 
$
348

Basic Income from Continuing Operations per Limited Partner Unit:
 
 
 
 
 
 
 
Weighted average limited partner units
538.8

 
561.4

 
546.6

 
560.8

Basic income from continuing operations per Limited Partner unit
$
0.35

 
$
0.26

 
$
0.94

 
$
0.62

Basic income from discontinued operations per Limited Partner unit
$

 
$
0.01

 
$
0.01

 
$
0.03

Diluted Income from Continuing Operations per Limited Partner Unit:
 
 
 
 
 
 
 
Income from continuing operations available to Limited Partners
$
188

 
$
147

 
$
511

 
$
348

Dilutive effect of equity-based compensation of subsidiaries and distributions to Class D Unitholder
(1
)
 

 
(2
)
 
(1
)
Diluted income from continuing operations available to Limited Partners
$
187

 
$
147

 
$
509

 
$
347

Weighted average limited partner units
538.8

 
561.4

 
546.6

 
560.8

Dilutive effect of unconverted unit awards
1.1

 

 
1.0

 

Weighted average limited partner units, assuming dilutive effect of unvested unit awards
539.9

 
561.4

 
547.6

 
560.8

Diluted income from continuing operations per Limited Partner unit
$
0.35

 
$
0.26

 
$
0.93

 
$
0.62

Diluted income from discontinued operations per Limited Partner unit
$

 
$
0.01

 
$
0.01

 
$
0.03



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8.
DEBT OBLIGATIONS:
Our outstanding consolidated indebtedness was as follows:
 
September 30,
2014
 
December 31,
2013
Parent Company Indebtedness:
 
 
 
ETE Senior Notes due October 15, 2020
$
1,187

 
$
1,187

ETE Senior Notes due January 15, 2024
1,150

 
450

ETE Senior Secured Term Loan due December 2, 2019
1,400

 
1,000

ETE Senior Secured Revolving Credit Facility due December 2, 2018
800

 
171

Subsidiary Indebtedness:
 
 
 
ETP Senior Notes
10,890

 
11,182

Regency Senior Notes
4,899

 
2,800

PVR Senior Notes
789

 

Transwestern Senior Notes
870

 
870

Panhandle Senior Notes
1,085

 
1,085

Sunoco Senior Notes
965

 
965

Sunoco Logistics Senior Notes
2,975

 
2,150

Revolving Credit Facilities:
 
 
 
ETP $2.5 billion Revolving Credit Facility due October 27, 2017
800

 
65

Regency $1.5 billion Revolving Credit Facility due May 21, 2018
689

 
510

Sunoco Logistics $35 million Revolving Credit Facility due April 30, 2015
35

 
35

Sunoco Logistics $1.5 billion Revolving Credit Facility due November 19, 2018
525

 
200

Sunoco LP $1.25 billion Revolving Credit Facility due September 25, 2019
270

 

Other Long-Term Debt
220

 
228

Unamortized premiums, net of discounts and fair value adjustments
304

 
301

Total
29,853

 
23,199

Less: Current maturities of long-term debt
1,345

 
637

Long-term debt and notes payable, less current maturities
$
28,508

 
$
22,562

Parent Company Indebtedness
The Parent Company’s indebtedness, including its senior notes, senior secured term loan and senior secured revolving credit facility, is secured by all of its and certain of its subsidiaries’ tangible and intangible assets.
ETE Term Loan Facility
In April 2014, the Parent Company amended its Senior Secured Term Loan Agreement (the “ETE Term Credit Agreement”) to increase the aggregate principal amount to $1.4 billion. The Parent Company used the proceeds from this $400 million increase to repay borrowings under its revolving credit facility and for general partnership purposes. No other significant changes were made to the terms of the ETE Term Credit Agreement, including maturity date and interest rate.
Revolving Credit Facility
In May 2014, the Parent Company amended its revolving credit facility to increase the capacity to $1.2 billion. As of September 30, 2014, there were $800 million outstanding borrowings under the Parent Company Credit Facility and the amount available for future borrowings was $400 million.
Senior Notes
In May 2014, the Parent Company issued an additional $700 million in principal amount of its 5.875% senior notes due 2024 in a private placement and used the net proceeds to repay amounts outstanding under its revolving credit facility and for general partnership purposes.
The Parent Company currently has outstanding an aggregate of $1.19 billion in principal amount of 7.5% senior notes due 2020 and $1.15 billion in principal amount of 5.875% senior notes due 2024.

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Sunoco Logistics Senior Notes
In April 2014, Sunoco Logistics issued $300 million aggregate principal amount of 4.25% senior notes due April 2024 and $700 million aggregate principal amount of 5.30% senior notes due April 2044. The net proceeds from the offering were used to pay outstanding borrowings under the Sunoco Logistics’ Credit Facility and for general partnership purposes.
Regency Senior Notes
In February 2014, Regency issued $900 million aggregate principal amount of 5.875% senior notes due March 1, 2022.
In March 2014, as part of the PVR Acquisition, Regency assumed the outstanding senior notes of PVR with an aggregate notional amount of $1.2 billion. The PVR senior notes consisted of $300 million principal amount of 8.25% senior notes due April 15, 2018, $400 million principal amount of 6.5% senior notes due May 15, 2021, and $473 million principal amount of 8.375% senior notes due June 1, 2020. In April 2014, Regency redeemed all of the $300 million principal amount of 8.25% senior notes due April 15, 2018 for $313 million in cash. In July 2014, Regency redeemed $83 million of the $473 million principal amount of 8.375% senior notes due June 1, 2020 for $91 million, including $8 million of accrued interest and redemption premium.
In July 2014, Regency exchanged $499 million aggregate principal amount of 8.375% senior notes due 2019 of Eagle Rock and Eagle Rock Energy Finance Corp. for 8.375% Senior Notes due 2019 issued by Regency and its wholly-owned subsidiary.
In July 2014, Regency issued $700 million aggregate principal amount of 5.0% senior notes that mature on October 1, 2022.
In October 2014, Regency issued a notice of redemption to the holders of the $600 million 6.875% senior notes due December 1, 2018, with a redemption date of December 2, 2014 for a total price of 103.438%.
Subsidiary Credit Facilities
ETP Credit Facility
The ETP Credit Facility allows for borrowings of up to $2.5 billion and expires in October 2017. The indebtedness under the ETP Credit Facility is unsecured and not guaranteed by any of ETP’s subsidiaries and has equal rights to holders of ETP’s current and future unsecured debt. As of September 30, 2014, the ETP Credit Facility had $800 million of outstanding borrowings.
Regency Credit Facility
In February 2014, Regency entered into an amendment to the Regency Credit Facility to increase the borrowing capacity of the Regency Credit Facility to $1.5 billion with a $500 million uncommitted incremental facility and extended the maturity date to May 21, 2018. In September 2014, Regency entered into an amendment to, among other things, increase the letter of credit sublimit from $50 million to $100 million and update various swap agreement provisions to conform to current market standards. As of September 30, 2014, the Regency Credit Facility had a balance outstanding of $689 million in outstanding borrowings and approximately $25 million in letters of credit.
Sunoco Logistics Credit Facilities
Sunoco Logistics maintains a $1.50 billion unsecured credit facility (the “Sunoco Logistics Credit Facility”) which matures in November 2018. The Sunoco Logistics Credit Facility contains an accordion feature, under which the total aggregate commitment may be increased to $2.25 billion under certain conditions. As of September 30, 2014, the Sunoco Logistics Credit Facility had $525 million of outstanding borrowings.
Sunoco LP Credit Facility
On September 25, 2014, Sunoco LP entered into a $1.25 billion revolving credit agreement (the “Sunoco LP Credit Facility”), which expires in September 2019. The Sunoco LP Credit Facility can be increased from time to time upon Sunoco LP’s written request, subject to certain conditions, up to an additional $250 million. As of September 30, 2014, the Sunoco LP Credit Facility had $270 million of outstanding borrowings.
Compliance with Our Covenants
We and our subsidiaries were in compliance with all requirements, tests, limitations, and covenants related to our respective credit agreements as of September 30, 2014.

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9.
REDEEMABLE NONCONTROLLING INTERESTS:
The noncontrolling interest holders in one of Sunoco Logistics’ consolidated subsidiaries have the option to sell their interests to Sunoco Logistics. In accordance with applicable accounting guidance, the noncontrolling interest is excluded from total equity and reflected as redeemable interest on our consolidated balance sheet as of September 30, 2014.
10.
EQUITY:
ETE Common Unit Activity
The change in ETE Common Units during the nine months ended September 30, 2014 was as follows:
 
Number of
Units
Outstanding at December 31, 2013
559.9

Repurchase of units under buyback program
(21.1
)
Outstanding at September 30, 2014
538.8

From January through May, ETE repurchased approximately $1 billion of ETE common units, completing its buyback program.
Sales of Common Units by Subsidiaries
The Parent Company accounts for the difference between the carrying amount of its investments in ETP and Regency and the underlying book value arising from the issuance or redemption of units by ETP or Regency (excluding transactions with the Parent Company) as capital transactions.
As a result of ETP’s and Regency’s issuances of common units during the nine months ended September 30, 2014, we recognized increases in partners’ capital of $702 million.
Sales of Common Units by ETP
During the nine months ended September 30, 2014, ETP received proceeds of $1.03 billion, net of commissions of $11 million, from the issuance of units pursuant to equity distribution agreements, which proceeds were used for general partnership purposes. As of September 30, 2014, approximately $109 million of ETP Common Units remained available to be issued under an equity distribution agreement, and all of the remaining capacity was utilized in October 2014.
During the nine months ended September 30, 2014, distributions of $100 million were reinvested under ETP’s Distribution Reinvestment Plan resulting in the issuance of 1.9 million ETP Common Units. As of September 30, 2014, a total of 0.2 million ETP Common Units remain available to be issued under the existing registration statement.
In October 2014, ETP filed a new registration statement with the SEC covering the issuance of up to an additional 8 million ETP Common Units under the Distribution Reinvestment Plan.
Sales of Common Units by Regency
For the nine months ended September 30, 2014, Regency received proceeds of $162 million, net of commissions of approximately $2 million, from units issued pursuant to its equity distribution agreements, which proceeds were used for general partnership purposes. As of September 30, 2014, approximately $272 million remained available to be issued under the agreement.
Regency issued 4.0 million, 140.4 million and 8.2 million Regency Common Units in connection with the Hoover, PVR and Eagle Rock Midstream acquisitions, respectively.
In June 2014, Regency sold 14.4 million Regency Common Units to a wholly-owned subsidiary of ETE for approximately $400 million. In July 2014, Regency sold an additional 16.5 million Regency Common Units to a wholly-owned subsidiary of ETE in connection with the Eagle Rock Midstream Acquisition for approximately $400 million. Proceeds from the issuance were used to fund a portion of the cash consideration paid to Eagle Rock in connection with the Eagle Rock Midstream Acquisition.

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Sales of Common Units by Sunoco Logistics
In May 2014, Sunoco Logistics entered into an equity distribution agreement pursuant to which Sunoco Logistics may sell from time to time common units having aggregate offering prices of up to $250 million. During the nine months ended September 30, 2014, Sunoco Logistics received proceeds of $231 million, net of commissions of $2 million, from the issuance of units pursuant to an equity distribution agreement, which were used for general partnership purposes. All remaining units authorized under this distribution agreement were issued during October 2014.
In September 2014, Sunoco Logistics filed a registration statement which will allow it to issue up to an additional $1.0 billion of common units directly to the public under its equity distribution agreement.
Additionally, Sunoco Logistics completed an overnight public offering of 7.7 million common units for net proceeds of $362 million in September 2014. The net proceeds from this offering were used to repay outstanding borrowings under the $1.5 billion Sunoco Logistics Credit Facility and for general partnership purposes.
Sales of Common Units by Sunoco LP
In October 2014, Sunoco LP issued 8.0 million common units in an underwritten public offering. Net proceeds of $359 million from the offering were used to repay amounts outstanding under the $1.25 billion Sunoco LP Credit Facility and for general partnership purposes.
Parent Company Quarterly Distributions of Available Cash
Following are distributions declared and/or paid by us subsequent to December 31, 2013:
Quarter Ended
 
Record Date
 
Payment Date
 
Rate
December 31, 2013
 
February 7, 2014
 
February 19, 2014
 
$
0.34625

March 31, 2014
 
May 5, 2014
 
May 19, 2014
 
0.35875

June 30, 2014
 
August 4, 2014
 
August 19, 2014
 
0.38000

September 30, 2014
 
November 3, 2014
 
November 19, 2014
 
0.41500

ETP Quarterly Distributions of Available Cash
Following are distributions declared and/or paid by ETP subsequent to December 31, 2013:
Quarter Ended
 
Record Date
 
Payment Date
 
Rate
December 31, 2013
 
February 7, 2014
 
February 14, 2014
 
$
0.9200

March 31, 2014
 
May 5, 2014
 
May 15, 2014
 
0.9350

June 30, 2014
 
August 4, 2014
 
August 14, 2014
 
0.9550

September 30, 2014

November 3, 2014

November 14, 2014

0.9750

In connection with previous transactions between ETP and ETE, ETE has agreed to relinquish its right to certain incentive distributions in future periods, and ETP has agreed to make incremental distributions on the Class H Units in future periods. The net impact of these adjustments will result in a reduction of $88 million in the distributions to be paid from ETP to ETE for the nine months ended September 30, 2014. Following is a summary of the net reduction in total distributions that would potentially be made to ETE in future periods:
 
 
Total Year
2014 (remainder)
 
$
35

2015
 
86

2016
 
107

2017
 
85

2018
 
80

2019
 
70

The amounts reflected above include the relinquishment of $350 million in the aggregate of incentive distributions that would potentially be made to ETE by ETP over the first forty fiscal quarters commencing immediately after the consummation of

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the Susser Merger. Such relinquishments would cease upon the agreement of an exchange of the Sunoco LP general partner interest and the incentive distribution rights between ETE and ETP.
Regency Quarterly Distributions of Available Cash
Following are distributions declared and/or paid by Regency subsequent to December 31, 2013:
Quarter Ended
 
Record Date
 
Payment Date
 
Rate
December 31, 2013
 
February 7, 2014
 
February 14, 2014
 
$
0.4750

March 31, 2014
 
May 8, 2014
 
May 15, 2014
 
0.4800

June 30, 2014
 
August 7, 2014
 
August 14, 2014
 
0.4900

September 30, 2014
 
November 7, 2014
 
November 14, 2014
 
0.5025

Sunoco Logistics Quarterly Distributions of Available Cash
Following are distributions declared and/or paid by Sunoco Logistics subsequent to December 31, 2013:
Quarter Ended
 
Record Date
 
Payment Date
 
Rate
December 31, 2013
 
February 10, 2014
 
February 14, 2014
 
$
0.3312

March 31, 2014
 
May 9, 2014
 
May 15, 2014
 
0.3475

June 30, 2014
 
August 8, 2014
 
August 14, 2014
 
0.3650

September 30, 2014
 
November 7, 2014
 
November 14, 2014
 
0.3825

Sunoco Logistics Unit Split
On May 5, 2014, Sunoco Logistics’ board of directors declared a two-for-one split of Sunoco Logistics common units. The unit split resulted in the issuance of one additional Sunoco Logistics common unit for every one unit owned as of the close of business on June 5, 2014. The unit split was effective June 12, 2014. All Sunoco Logistics unit and per unit information included in this report is presented on a post-split basis.
Sunoco LP Quarterly Distributions of Available Cash
Following are distributions declared by Sunoco LP subsequent to our acquisition on August 29, 2014:
Quarter Ended
 
Record Date
 
Payment Date
 
Rate
September 30, 2014
 
November 18, 2014
 
November 28, 2014
 
$
0.5457

Accumulated Other Comprehensive Income
The following table presents the components of AOCI, net of tax:
 
September 30,
2014
 
December 31, 2013
Available-for-sale securities
$
3

 
$
2

Foreign currency translation adjustment
(4
)
 
(1
)
Net loss on commodity related hedges
(1