Energy Transfer LP — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited consolidated results include Sunoco LP and USAC. Dollar amounts are in millions unless noted.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Revenue | $21,629 | $18,995 |
| Operating income | $2,380 | $2,062 |
| Net income | $1,692 | $1,447 |
| Net income attributable to partners | $1,240 | $1,113 |
| Net income attributable to common unitholders | $1,089 | $1,003 |
| Basic and diluted income per common unit | $0.32 | $0.32 |
| Adjusted EBITDA (non-GAAP) | $3,880 | $3,433 |
| Cash from operating activities | $3,772 | $3,350 |
| Cash used in investing activities | $(1,196) | $(803) |
| Cash used in financing activities | $(791) | $(2,474) |
- Revenue rose about 14%, net income about 17%, and Adjusted EBITDA about 13% year over year. Management attributed the EBITDA increase primarily to crude oil transportation and services, including acquired assets and higher volumes; that segment’s EBITDA increased $322 to $848.
- Net income growth also reflected higher operating income, partly offset by higher depreciation and interest expense. Interest expense was $728, up from $619. Q1 net income included a favorable $130 LIFO inventory valuation adjustment, compared with $29 in Q1 2023.
- Cash and cash equivalents were $1,946 at March 31, versus $161 at December 31, 2023. Operating cash flow included a positive $873 net change in operating assets and liabilities. Capital expenditures, excluding allowance for equity funds used during construction, were $795.
- Total debt was $53,476 at March 31, versus $52,388 at year-end; long-term debt less current maturities was $52,295. Net debt is not reported here. The debt’s estimated fair value was $52.85 billion versus carrying value of $53.48 billion.
- Current assets were $15,018 and current liabilities $12,719 at quarter-end. The $5.0 billion Energy Transfer revolver had no borrowings and $4.97 billion available after letters of credit. Sunoco LP and USAC had $870 million and $429 million, respectively, available to draw under their facilities, with USAC availability constrained by covenants. The Partnership reported a 3.27x credit-facility leverage ratio and compliance with debt covenants.
Material changes and business developments
- Crude oil transportation and services EBITDA increased to $848 from $526, driven by recently acquired assets, higher pipeline throughput and stronger crude acquisition and marketing results. Midstream EBITDA rose to $696 from $641; NGL and refined products transportation and services rose to $989 from $939.
- Interstate transportation and storage EBITDA declined to $483 from $536, reflecting lower operational gas sales, prior-period shipper bankruptcy-related revenue, higher unplanned maintenance and lower contributions from an unconsolidated affiliate. Intrastate EBITDA increased to $438 from $409, while Sunoco LP and USAC segment EBITDA increased to $242 and $139, respectively.
- Sunoco LP acquired Zenith Energy’s Amsterdam and Bantry Bay terminals in March for approximately $185 million. On April 16, Sunoco LP sold 204 convenience stores for approximately $1.0 billion and amended its fuel supply agreement with 7-Eleven.
- On May 3, 2024, after quarter-end, Sunoco LP completed its acquisition of NuStar. It issued approximately 50.6 million units, assumed about $3.4 billion of debt and preferred units with a fair value of about $800 million. Energy Transfer expects NuStar to be consolidated beginning May 2024; acquisition accounting was incomplete when this filing was issued.
- Energy Transfer redeemed its Series C and D preferred units in February for $895 million and announced redemption of all Series E preferred units on May 15, 2024. The common-unit distribution for Q1 was declared at $0.3175 per unit, or $1.27 annualized.
Outlook, risks and contingencies
- Energy Transfer expects 2024 growth capital expenditures of $2.8–$3.0 billion and maintenance capital expenditures of $835–$865 million, excluding capital expenditures related to investments in Sunoco LP and USAC. It expects growth capital expenditures of $2–$3 billion annually in future periods. Sunoco LP had not updated its 2024 capital expenditure expectations after the NuStar acquisition.
- Management says cash flows and distributions depend on future operating performance, market and weather conditions, regulatory developments, acquisition integration and other factors. The filing provides no formal earnings or distribution guidance beyond the announced distribution and capital expenditure expectations.
- Key uncertainties include integration of NuStar and other acquisitions; commodity prices, volumes and margins; interest rates and access to capital; FERC rate proceedings and pipeline regulation; environmental and safety compliance costs; and litigation. The Dakota Access Pipeline continues operating while the Army Corps of Engineers completes an environmental impact review; a final EIS and decision were anticipated in 2024.
- Accrued probable and estimable contingent obligations were approximately $254 million; the company estimated additional reasonably estimable losses of up to approximately $200 million for certain matters. Environmental liabilities were $280 million. These estimates exclude matters for which a possible loss or range could not be determined.
- Notable proceedings include proposed FERC penalties of $20 million in the Rover Stoneman House matter and $40 million in the Rover/Tuscarawas matter; the company disputes the claims. The Cline class-action judgment includes approximately $104 million in actual damages and $75 million in punitive damages and is being appealed. The filing also describes a new Oklahoma lawsuit related to Winter Storm Uri, for which the amount sought was unspecified.
- Energy Transfer reported $1.96 billion of floating-rate debt; a hypothetical 100-basis-point increase could raise annual interest expense by up to $20 million. The company also disclosed that compliance with the EPA Good Neighbor Plan, if implemented, could require retrofitting or replacing approximately 192 engines; potential cost was not yet estimable.
Important facts for investors to verify
- How NuStar integration, assumed obligations and subsequent financing affect consolidated debt, interest costs and cash distributions.
- Whether Q1 EBITDA growth persists after considering the $130 million favorable inventory valuation adjustment and acquisition-related contributions.
- Actual 2024 capital spending against the disclosed ranges, including any updated Sunoco LP and USAC plans.
- Developments in Dakota Access permitting, FERC rate cases, the disclosed litigation and environmental matters, and any resulting cash or operating impacts.
- Availability under subsidiary credit facilities, interest-rate exposure and refinancing needs, including maturities identified in the filing.