Energy Transfer LP — 2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing; the supplied text does not provide a clear Q4-only financial summary. Unless stated otherwise, amounts are U.S. dollars.
Business context
Energy Transfer is a U.S. diversified energy infrastructure partnership, with natural gas gathering, processing, transportation and storage; crude oil, NGL and refined-products pipelines and terminals; and consolidated investments in Sunoco LP and USAC. Its cash flow and distribution capacity depend substantially on operating subsidiaries and investees.
Financial performance and liquidity
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $78.586 billion | $89.876 billion | Down 12.6% |
| Operating income | $8.295 billion | $7.738 billion | Up $557 million |
| Net income | $5.294 billion | $5.868 billion | Down $574 million |
| Net income attributable to common unitholders | $3.469 billion | $4.330 billion | Down $861 million |
| Basic earnings per common unit | $1.10 | $1.40 | Down $0.30 |
| Adjusted EBITDA (non-GAAP) | $13.698 billion | $13.093 billion | Up $605 million |
| Cash provided by operating activities | $9.555 billion | $9.051 billion | Up $504 million |
| Cash capital expenditures | $3.134 billion | $3.381 billion | Down $247 million |
Operating margin was approximately 10.6% versus 8.6% in 2022; net margin was approximately 6.7% versus 6.5%. Adjusted EBITDA margin was approximately 17.4% versus 14.6%; this is a non-GAAP comparison and should not be treated as a GAAP margin. Operating cash flow less cash capital expenditures was approximately $6.421 billion; this simple subtraction is not a company-defined free-cash-flow measure.
Debt and liquidity: Consolidated debt was $52.388 billion at year-end, up from $48.262 billion. Cash and cash equivalents were $161 million, and availability under Energy Transfer’s revolving credit facility was $3.56 billion. Approximately $3.29 billion of consolidated debt bore variable interest rates. The partnership reported a 3.31x leverage ratio under its credit agreement and compliance with debt covenants at year-end. The debt maturity schedule lists $4.672 billion due in 2024; management stated that certain notes classified as long-term were intended and able to be refinanced.
Distributions: The common-unit quarterly distribution rose during 2023 from $0.305 to $0.315 per unit, with the fourth-quarter distribution paid in February 2024. Total 2023 distributions to Energy Transfer partners were $4.248 billion, including distributions to noncontrolling interests separately reported in financing cash flows.
Material changes versus 2022
- Revenue declined, principally reflecting lower commodity-related sales values and prices; Adjusted EBITDA increased, showing that revenue changes did not translate directly into lower operating earnings.
- NGL and refined-products transportation and services Adjusted EBITDA increased $869 million, supported by higher throughput, contractual rate escalations, exports, optimization and the Mont Belvieu fractionator placed in service in August.
- Crude oil transportation and services Adjusted EBITDA increased $494 million, with higher volumes and contributions from acquisitions among the drivers. Interstate transportation and storage Adjusted EBITDA increased $256 million, including the contribution of Gulf Run, which entered service in December 2022.
- Midstream Adjusted EBITDA fell $685 million, primarily due to lower natural gas and NGL prices, partly offset by acquired assets and higher volumes. Intrastate transportation and storage Adjusted EBITDA fell $285 million, mainly due to lower pipeline optimization and retained-fuel revenue.
- Net income included a $627 million non-operating litigation-related loss associated with the Williams litigation. Energy Transfer paid approximately $627 million to resolve the judgment in November 2023.
- Debt increased alongside the Crestwood acquisition and other financing activity. Crestwood closed in November; the partnership issued approximately 216 million common units and 41 million Series I preferred units, paid $300 million cash, and assumed $2.85 billion of Crestwood senior notes. Lotus Midstream was acquired in May for approximately $1.50 billion, including $930 million cash and newly issued common units.
Outlook, management commentary and key risks
Management described the outlook as strong, citing production improvements, improved market conditions, higher use of existing assets and domestic and international demand. It expects to maintain prudent growth spending and stated it has ample near-term liquidity; the filing does not provide a consolidated Adjusted EBITDA or earnings forecast.
For 2024, Energy Transfer forecast growth capital expenditures of $2.4–$2.6 billion and maintenance capital expenditures of $835–$865 million, excluding capital expenditures related to investments in Sunoco LP and USAC. Sunoco LP separately expected at least $200 million of growth and about $70 million of maintenance spending; USAC budgeted $115–$125 million of expansion and about $32 million of maintenance spending.
Material risks include high leverage and interest-rate exposure; commodity-price and volume variability; reliance on key shippers and producers; regulation of pipeline rates, safety and emissions; environmental remediation and litigation; severe weather and operational interruptions; and integration and execution risks from acquisitions. Environmental liabilities accrued were $277 million at year-end. Pending matters include Dakota Access permitting and environmental review, MTBE groundwater lawsuits, pipeline-related cases and a PHMSA proposed safety order. The filing reports proposed penalties and claims in certain proceedings, but outcomes and possible losses are uncertain.
The proposed Lake Charles LNG export project remains subject to commercial and regulatory uncertainty. The Department of Energy denied an extension of the prior non-FTA export authorization in April 2023; Energy Transfer applied for a new authorization in August 2023. A U.S. administration pause on new non-FTA LNG export authorization decisions, announced in January 2024, added uncertainty. Existing offtake agreements cover nearly 8 million tonnes per year but may be terminated if specified conditions, including a final investment decision, are not met by agreed dates.
After year-end, Sunoco LP agreed to acquire NuStar in an all-equity transaction valued at about $7.3 billion including assumed debt, expected to close in Q2 2024. Sunoco LP also agreed to sell 204 convenience stores for about $1.0 billion and to acquire fuel terminals in the Netherlands and Ireland for €170 million. These transactions were pending at the report date.
Most important facts for investors to verify
- Review the audited financial statements and the reconciliation of Adjusted EBITDA to GAAP results; distinguish full-year figures from Q4-only performance.
- Check debt maturities, refinancing activity, interest costs and liquidity after the January 2024 debt issuance and preferred-unit redemptions.
- Assess the sustainability of the higher common-unit distribution against operating cash flow, capital spending, debt service and subsidiary distributions.
- Track performance and integration of Crestwood and Lotus Midstream, and the status, financing and expected impact of Sunoco LP’s NuStar acquisition and store sale.
- Monitor material litigation and regulatory developments, particularly Dakota Access, Williams-related matters, pipeline safety proceedings and the Lake Charles LNG export authorization.