NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollar and unit amounts are in millions)
(unaudited)
|
|
|
|
1.
|
ORGANIZATION AND BASIS OF PRESENTATION
|
Organization
The consolidated financial statements presented herein include Energy Transfer Operating, L.P. and its subsidiaries (the “Partnership,” “we,” “us,” “our” or “ETO”).
Energy Transfer Operating, L.P. is a consolidated subsidiary of Energy Transfer LP. In October 2018, we completed the merger of ETO with a wholly-owned subsidiary of ET in a unit-for-unit exchange (the “Energy Transfer Merger”). In connection with the transaction, ETO unitholders (other than ET and its subsidiaries) received
1.28
common units of ET for each common unit of ETO they owned. Following the closing of the Energy Transfer Merger, Energy Transfer Partners, L.P. was renamed Energy Transfer Operating, L.P. In addition, Energy Transfer Equity, L.P. was renamed Energy Transfer LP, and its common units began trading on the New York Stock Exchange under the “ET” ticker symbol on Friday, October 19, 2018.
Immediately prior to the closing of the Energy Transfer Merger, the following also occurred:
|
|
|
|
•
|
the IDRs in ETO were converted into
1,168,205,710
ETO common units;
|
|
|
|
|
•
|
the
general partner interest in ETO was converted to a non-economic general partner interest and ETO issued
18,448,341
ETO common units to ETP GP;
|
|
|
|
|
•
|
ET contributed its
2,263,158
Sunoco LP common units to ETO in exchange for
2,874,275
ETO common units and
100 percent
of the limited liability company interests in Sunoco GP LLC, the sole general partner of Sunoco LP, and all of the IDRs in Sunoco LP, to ETO in exchange for
42,812,389
ETO common units;
|
|
|
|
|
•
|
ET contributed its
12,466,912
common units representing limited partner interests in USAC and
100 percent
of the limited liability company interests in USA Compression GP, LLC, the general partner of USAC, to ETO in exchange for
16,134,903
ETO common units; and
|
|
|
|
|
•
|
ET contributed its
100 percent
limited liability company interest in Lake Charles LNG and a
60 percent
limited liability company interest in each of Energy Transfer LNG Export, LLC, ET Crude Oil Terminals, LLC and ETC Illinois LLC (collectively, “Lake Charles LNG and Other”) to ETO in exchange for
37,557,815
ETO common units.
|
The Energy Transfer Merger was a combination of entities under common control; therefore, Sunoco LP, Lake Charles LNG and USAC’s assets and liabilities were not adjusted. The Partnership’s consolidated financial statements have been retrospectively adjusted to reflect consolidation beginning January 1, 2018 of Sunoco LP and Lake Charles LNG and Other and April 2, 2018 for USAC (the date ET acquired USAC). Predecessor equity included on the consolidated financial statements represents Sunoco LP, Lake Charles LNG and Other and USAC’s equity prior to the Energy Transfer Merger.
Our consolidated financial statements reflect the following reportable business segments:
•
intrastate transportation and storage
;
•
interstate transportation and storage
;
•
midstream
;
•
NGL and refined products transportation and services
;
•
crude oil transportation and services
;
•
investment in Sunoco LP;
•
investment in USAC; and
•
all other
.
Basis of Presentation
The unaudited financial information included in this Form 10-Q has been prepared on the same basis as the audited consolidated financial statements of Energy Transfer Operating, L.P. for the year ended
December 31, 2018
, included
in the Partnership’s Annual Report on Form 10-K filed with the SEC on February 22, 2019
. In the opinion of the Partnership’s management,
such financial information reflects all adjustments necessary for a fair presentation of the financial position and the results of operations for such interim periods in accordance with GAAP. All intercompany items and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the SEC.
The consolidated financial statements of the Partnership presented herein include the results of operations of our controlled subsidiaries, including Sunoco LP and USAC.
For periods presented herein, certain balances have been reclassified to assets and liabilities held for sale and certain revenues and expenses to discontinued operations. Certain other prior period amounts have also been reclassified to conform to the current period presentation. These reclassifications had no impact on net income or total equity.
Use of Estimates
The unaudited consolidated financial statements have been prepared in conformity with GAAP, which includes the use of estimates and assumptions made by management that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities that exist at the date of the consolidated financial statements. Although these estimates are based on management’s available knowledge of current and expected future events, actual results could be different from those estimates.
Change in Accounting Policy
Adoption of Lease Accounting Standard
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02,
Leases (Topic 842)
, which has amended the FASB Accounting Standards Codification (“ASC”) and introduced Topic 842, Leases. On January 1, 2019, the Partnership has adopted ASC Topic 842 (“Topic 842”), which is effective for interim and annual reporting periods beginning on or after December 15, 2018. Topic 842 requires entities to recognize lease assets and liabilities on the balance sheet for all leases with a term of more than one year, including operating leases, which historically were not recorded on the balance sheet in accordance with the prior standard.
To adopt Topic 842, the Partnership recognized a cumulative catch-up adjustment to the opening balance sheet as of January 1, 2019 related to certain leases that existed as of that date. As permitted, we have not retrospectively modified our consolidated financial statements for comparative purposes. The adoption of the standard had a material impact on our consolidated balance sheet, but did not have an impact on our consolidated statements of operations, comprehensive income or cash flows. As a result of adoption, we have recorded additional net right-of-use (“ROU”) lease assets and lease liabilities of approximately
$888 million
and
$888 million
, respectively, as of January 1, 2019. In addition, we have updated our business processes, systems, and internal controls to support the on-going reporting requirements under the new standard.
To adopt Topic 842, the Partnership elected the package of practical expedients permitted under the transition guidance within the standard. The expedient package allowed us not to reassess whether existing contracts contained a lease, the lease classification of existing leases and initial direct cost for existing leases. In addition to the package of practical expedients, the Partnership has elected not to capitalize amounts pertaining to leases with terms less than twelve months, to use the portfolio approach to determine discount rates, not to separate non-lease components from lease components and not to apply the use of hindsight to the active lease population.
Cumulative-effect adjustments made to the opening balance sheet at January 1, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018, as previously reported
|
|
Adjustments due to Topic 842 (Leases)
|
|
Balance at January 1, 2019
|
|
Assets:
|
|
|
|
|
|
|
Property, plant and equipment, net
|
$
|
66,655
|
|
|
$
|
(1
|
)
|
|
$
|
66,654
|
|
|
Lease right-of-use assets, net
|
—
|
|
|
889
|
|
|
889
|
|
|
Liabilities:
|
|
|
|
|
|
|
Operating lease current liabilities
|
$
|
—
|
|
|
$
|
71
|
|
|
$
|
71
|
|
|
Accrued and other current liabilities
|
2,847
|
|
|
(1
|
)
|
|
2,846
|
|
|
Current maturities of long-term debt
|
2,655
|
|
|
1
|
|
|
2,656
|
|
|
Long-term debt, less current maturities
|
37,853
|
|
|
6
|
|
|
37,859
|
|
|
Non-current operating lease liabilities
|
—
|
|
|
823
|
|
|
823
|
|
|
Other non-current liabilities
|
1,184
|
|
|
(12
|
)
|
|
1,172
|
|
Additional disclosures related to lease accounting are included in
Note 12
.
Recent Accounting Pronouncements
ASU 2017-12
In August 2017, the FASB issued ASU No. 2017-12,
Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities.
The amendments in this update improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition, the amendments in this update make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The Partnership adopted the new rules in the first quarter of 2019, and the adoption of the new accounting rules did not have a material impact on the consolidated financial statements and related disclosures.
|
|
|
|
2.
|
ACQUISITIONS, DIVESTURES AND RELATED TRANSACTIONS
|
Assets Held for Sale
Assets held for sale are written down to the lower of cost or estimated net realizable value at the time we offer them for sale. When we have determined that an asset is more likely than not to be sold in the next twelve months, that asset is classified as assets held for sale and included in other current assets.
As of
March 31, 2019
, the Partnership had
$28 million
classified as assets held for sale related to the pending sale of Sunoco LP’s ethanol plant in Fulton, New York. Based on the sale price of the pending sale, Sunoco LP wrote down the assets held for sale and recorded a
$47 million
impairment charge during the
three months ended
March 31, 2019
.
Sunoco LP Retail Store and Real Estate Sales
On January 23, 2018, Sunoco LP completed the disposition of assets pursuant to the purchase agreement with 7-Eleven, Inc. (the “7-Eleven Transaction”). As a result of the 7-Eleven Transaction, previously eliminated wholesale motor fuel sales to Sunoco LP’s retail locations are reported as wholesale motor fuel sales to third parties. Also, the related accounts receivable from such sales are no longer eliminated from the Partnership’s consolidated balance sheets and are reported as accounts receivable.
In connection with the 7-Eleven Transaction, Sunoco LP entered into a Distributor Motor Fuel Agreement dated as of January 23, 2018, as amended (“Supply Agreement”), with 7-Eleven and SEI Fuel (collectively, “Distributor”). The Supply Agreement consists of a 15-year take-or-pay fuel supply arrangement. For the period from January 1, 2018 through January 22, 2018, Sunoco LP recorded sales to the sites that were subsequently sold to 7-Eleven of
$199 million
which were eliminated in consolidation. Sunoco LP received payments on trade receivables from 7-Eleven of
$782 million
for the
three months ended
March 31, 2019
and
$612 million
for the first quarter of 2018 subsequent to the closing of the sale.
On January 18, 2017, with the assistance of a third-party brokerage firm, Sunoco LP launched a portfolio optimization plan to market and sell 97 real estate assets. Real estate assets included in this process are company-owned locations, undeveloped greenfield sites and other excess real estate. Properties are located in Florida, Louisiana, Massachusetts, Michigan, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Texas and Virginia. The properties are being sold through a sealed-bid. Of the
97
properties,
51
have been sold,
one
is under contract to be sold, and
four
continue to be marketed by the third-party brokerage firm. Additionally,
32
were sold to 7-Eleven and
nine
are part of the approximately
207
retail sites located in certain West Texas, Oklahoma and New Mexico markets which are operated by a commission agent.
The Partnership has concluded that it meets the accounting requirements for reporting the financial position, results of operations and cash flows of Sunoco LP’s retail divestment as discontinued operations.
There were no results of operations associated with discontinued operations for the period ended
March 31, 2019
. The results of operations associated with discontinued operations for the period ended
March 31, 2018
were as follows:
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018
|
|
REVENUES
|
$
|
349
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
Cost of products sold
|
305
|
|
|
Operating expenses
|
61
|
|
|
Selling, general and administrative
|
2
|
|
|
Total costs and expenses
|
368
|
|
|
OPERATING LOSS
|
(19
|
)
|
|
Interest expense, net
|
2
|
|
|
Loss on extinguishment of debt and other
|
20
|
|
|
Other, net
|
23
|
|
|
LOSS FROM DISCONTINUED OPERATIONS BEFORE INCOME TAX EXPENSE
|
(64
|
)
|
|
Income tax expense
|
173
|
|
|
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES
|
$
|
(237
|
)
|
|
|
|
|
3.
|
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.
We place our cash deposits and temporary cash investments with high credit quality financial institutions. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limit.
The net change in operating assets and liabilities (net of effects of acquisitions) included in cash flows from operating activities is comprised as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
2018
|
|
Accounts receivable
|
$
|
(302
|
)
|
|
$
|
907
|
|
|
Accounts receivable from related companies
|
(28
|
)
|
|
103
|
|
|
Inventories
|
49
|
|
|
186
|
|
|
Other current assets
|
91
|
|
|
(46
|
)
|
|
Other non-current assets, net
|
(10
|
)
|
|
7
|
|
|
Accounts payable
|
323
|
|
|
(810
|
)
|
|
Accounts payable to related companies
|
(69
|
)
|
|
(125
|
)
|
|
Accrued and other current liabilities
|
(409
|
)
|
|
508
|
|
|
Other non-current liabilities
|
(31
|
)
|
|
20
|
|
|
Derivative assets and liabilities, net
|
(13
|
)
|
|
(9
|
)
|
|
Net change in operating assets and liabilities, net of effects of acquisitions
|
$
|
(399
|
)
|
|
$
|
741
|
|
Non-cash investing and financing activities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
2018
|
|
Accrued capital expenditures
|
$
|
630
|
|
|
$
|
1,011
|
|
|
Losses from subsidiary common unit transactions
|
—
|
|
|
(104
|
)
|
|
Lease assets obtained in exchange for new lease liabilities
|
8
|
|
|
—
|
|
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Natural gas, NGLs and refined products
|
$
|
760
|
|
|
$
|
833
|
|
|
Crude oil
|
589
|
|
|
506
|
|
|
Spare parts and other
|
373
|
|
|
338
|
|
|
Total inventories
|
$
|
1,722
|
|
|
$
|
1,677
|
|
We utilize commodity derivatives to manage price volatility associated with our natural gas inventory. Changes in fair value of designated hedged inventory are recorded in inventory on our consolidated balance sheets and cost of products sold in our consolidated statements of operations.
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 and carrying amount of our consolidated debt obligations as of
March 31, 2019
was
$48.38 billion
and
$46.40 billion
, respectively. As of
December 31, 2018
, the aggregate fair value and carrying amount of our consolidated debt obligations was
$39.54 billion
and
$40.51 billion
, respectively. The fair value of our consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities.
We have commodity derivatives and interest rate derivatives 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 marketable securities and 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. Level 3 inputs are unobservable. During the
three months ended
March 31, 2019
,
no
transfers were made between any levels within the fair value hierarchy.
The following tables summarize the gross fair value of our financial assets and liabilities measured and recorded at fair value on a recurring basis as of
March 31, 2019
and
December 31, 2018
based on inputs used to derive their fair values:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
March 31, 2019
|
|
|
Fair Value Total
|
|
Level 1
|
|
Level 2
|
|
Assets:
|
|
|
|
|
|
|
Commodity derivatives:
|
|
|
|
|
|
|
Natural Gas:
|
|
|
|
|
|
|
Basis Swaps IFERC/NYMEX
|
$
|
40
|
|
|
$
|
40
|
|
|
$
|
—
|
|
|
Swing Swaps IFERC
|
3
|
|
|
1
|
|
|
2
|
|
|
Fixed Swaps/Futures
|
16
|
|
|
16
|
|
|
—
|
|
|
Forward Physical Contracts
|
10
|
|
|
—
|
|
|
10
|
|
|
Power:
|
|
|
|
|
|
|
Forwards
|
44
|
|
|
—
|
|
|
44
|
|
|
Futures
|
7
|
|
|
7
|
|
|
—
|
|
|
NGLs – Forwards/Swaps
|
162
|
|
|
162
|
|
|
—
|
|
|
Refined Products – Futures
|
5
|
|
|
5
|
|
|
—
|
|
|
Crude – Forwards/Swaps
|
51
|
|
|
51
|
|
|
—
|
|
|
Total commodity derivatives
|
338
|
|
|
282
|
|
|
56
|
|
|
Other non-current assets
|
28
|
|
|
18
|
|
|
10
|
|
|
Total assets
|
$
|
366
|
|
|
$
|
300
|
|
|
$
|
66
|
|
|
Liabilities:
|
|
|
|
|
|
|
Interest rate derivatives
|
$
|
(232
|
)
|
|
$
|
—
|
|
|
$
|
(232
|
)
|
|
Commodity derivatives:
|
|
|
|
|
|
|
Natural Gas:
|
|
|
|
|
|
|
Basis Swaps IFERC/NYMEX
|
(81
|
)
|
|
(81
|
)
|
|
—
|
|
|
Swing Swaps IFERC
|
(4
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
Fixed Swaps/Futures
|
(18
|
)
|
|
(18
|
)
|
|
—
|
|
|
Forward Physical Contracts
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|
Power:
|
|
|
|
|
|
|
Forwards
|
(35
|
)
|
|
—
|
|
|
(35
|
)
|
|
Futures
|
(6
|
)
|
|
(6
|
)
|
|
—
|
|
|
NGLs – Forwards/Swaps
|
(155
|
)
|
|
(155
|
)
|
|
—
|
|
|
Refined Products – Futures
|
(4
|
)
|
|
(4
|
)
|
|
—
|
|
|
Crude – Forwards/Swaps
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
Total commodity derivatives
|
(309
|
)
|
|
(267
|
)
|
|
(42
|
)
|
|
Total liabilities
|
$
|
(541
|
)
|
|
$
|
(267
|
)
|
|
$
|
(274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
December 31, 2018
|
|
|
Fair Value Total
|
|
Level 1
|
|
Level 2
|
|
Assets:
|
|
|
|
|
|
|
Commodity derivatives:
|
|
|
|
|
|
|
Natural Gas:
|
|
|
|
|
|
|
Basis Swaps IFERC/NYMEX
|
$
|
42
|
|
|
$
|
42
|
|
|
$
|
—
|
|
|
Swing Swaps IFERC
|
52
|
|
|
8
|
|
|
44
|
|
|
Fixed Swaps/Futures
|
97
|
|
|
97
|
|
|
—
|
|
|
Forward Physical Contracts
|
20
|
|
|
—
|
|
|
20
|
|
|
Power:
|
|
|
|
|
|
|
|
Forwards
|
48
|
|
|
—
|
|
|
48
|
|
|
Futures
|
1
|
|
|
1
|
|
|
—
|
|
|
Options – Calls
|
1
|
|
|
1
|
|
|
—
|
|
|
NGLs – Forwards/Swaps
|
291
|
|
|
291
|
|
|
—
|
|
|
Refined Products – Futures
|
7
|
|
|
7
|
|
|
—
|
|
|
Crude – Forwards/Swaps
|
1
|
|
|
1
|
|
|
—
|
|
|
Total commodity derivatives
|
560
|
|
|
448
|
|
|
112
|
|
|
Other non-current assets
|
26
|
|
|
17
|
|
|
9
|
|
|
Total assets
|
$
|
586
|
|
|
$
|
465
|
|
|
$
|
121
|
|
|
Liabilities:
|
|
|
|
|
|
|
Interest rate derivatives
|
$
|
(163
|
)
|
|
$
|
—
|
|
|
$
|
(163
|
)
|
|
Commodity derivatives:
|
|
|
|
|
|
|
Natural Gas:
|
|
|
|
|
|
|
Basis Swaps IFERC/NYMEX
|
(91
|
)
|
|
(91
|
)
|
|
—
|
|
|
Swing Swaps IFERC
|
(40
|
)
|
|
—
|
|
|
(40
|
)
|
|
Fixed Swaps/Futures
|
(88
|
)
|
|
(88
|
)
|
|
—
|
|
|
Forward Physical Contracts
|
(21
|
)
|
|
—
|
|
|
(21
|
)
|
|
Power:
|
|
|
|
|
|
|
|
Forwards
|
(42
|
)
|
|
—
|
|
|
(42
|
)
|
|
Futures
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
NGLs – Forwards/Swaps
|
(224
|
)
|
|
(224
|
)
|
|
—
|
|
|
Refined Products – Futures
|
(15
|
)
|
|
(15
|
)
|
|
—
|
|
|
Crude – Forwards/Swaps
|
(61
|
)
|
|
(61
|
)
|
|
—
|
|
|
Total commodity derivatives
|
(583
|
)
|
|
(480
|
)
|
|
(103
|
)
|
|
Total liabilities
|
$
|
(746
|
)
|
|
$
|
(480
|
)
|
|
$
|
(266
|
)
|
Notes and Debentures
ET-ETO Senior Notes Exchange
In February 2019, ETO commenced offers to exchange all of ET’s outstanding senior notes for senior notes issued by ETO (the “ET-ETO senior notes exchange”). Approximately
97%
of ET’s outstanding senior notes were tendered and accepted, and the exchanges settled on March 25, 2019.
In connection with the exchange, ETO issued approximately
$4.21 billion
aggregate principal amount of the following senior notes:
•
$1.13 billion
aggregate principal amount of
7.50%
senior notes due 2020
;
•
$993 million
aggregate principal amount of
4.25%
senior notes due 2023
;
•
$1.13 billion
aggregate principal amount of
5.875%
senior notes due 2024
; and
•
$956 million
aggregate principal amount of
5.50%
senior notes due 2027
.
The senior notes were registered under the Securities Act of 1933 (as amended). The Partnership may redeem some or all of the senior notes at any time, or from time to time, pursuant to the terms of the indenture and related indenture supplements related to the senior notes. The principal on the senior notes is payable upon maturity and interest is paid semi-annually.
The senior notes rank equally in right of payment with ETO’s existing and future senior debt, and senior in right of payment to any future subordinated debt ETO may incur. The notes of each series will initially be fully and unconditionally guaranteed by our subsidiary, Sunoco Logistics Partners Operations L.P., on a senior unsecured basis so long as it guarantees any of our other long-term debt. The guarantee for each series of notes ranks equally in right of payment with all of the existing and future senior debt of Sunoco Logistics Partners Operations L.P., including its senior notes.
ETO Senior Notes Offering and Redemption
In January 2019, ETO issued the following senior notes:
•
$750 million
aggregate principal amount of
4.50%
senior notes due 2024
;
•
$1.50 billion
aggregate principal amount of
5.25%
senior notes due 2029
; and
•
$1.75 billion
aggregate principal amount of
6.25%
senior notes due 2049
.
The senior notes were registered under the Securities Act of 1933 (as amended). The Partnership may redeem some or all of the senior notes at any time, or from time to time, pursuant to the terms of the indenture and related indenture supplements related to the senior notes. The principal on the senior notes is payable upon maturity and interest is paid semi-annually.
The senior notes rank equally in right of payment with ETO’s existing and future senior debt, and senior in right of payment to any future subordinated debt ETO may incur. The notes of each series will initially be fully and unconditionally guaranteed by our subsidiary, Sunoco Logistics Partners Operations L.P., on a senior unsecured basis so long as it guarantees any of our other long-term debt. The guarantee for each series of notes ranks equally in right of payment with all of the existing and future senior debt of Sunoco Logistics Partners Operations L.P., including its senior notes.
The
$3.96 billion
net proceeds from the offering were used to make an intercompany loan to ET (which ET used to repay its term loan in full), for general partnership purposes and to redeem at maturity all of the following:
•
ETO’s
$400 million
aggregate principal amount of
9.70%
senior notes due March 15, 2019
;
•
ETO’s
$450 million
aggregate principal amount of
9.00%
senior notes due April 15, 2019
; and
•
Panhandle’s
$150 million
aggregate principal amount of
8.125%
senior notes due June 1, 2019
.
Bakken Senior Notes Offering
In March 2019, Midwest Connector Capital Company LLC, a wholly-owned subsidiary of Dakota Access, LLC, issued the following senior notes related to the Bakken pipeline
:
•
$650 million
aggregate principal amount of
3.625%
senior notes due 2022
;
•
$1.00 billion
aggregate principal amount of
3.90%
senior notes due 2024
; and
•
$850 million
aggregate principal amount of
4.625%
senior notes due 2029
.
The
$2.48 billion
in net proceeds from the offering were used to repay in full all amounts outstanding on the Bakken credit facility and the facility was terminated.
Sunoco LP Senior Notes Offering
In March 2019, Sunoco LP issued
$600 million
aggregate principal amount of
6.00%
senior notes due 2027 in a private placement to eligible purchasers. The net proceeds from this offering were used to repay a portion of Sunoco LP’s existing borrowings under its credit facility.
USAC Senior Notes Offering
In March 2019, USAC issued
$750 million
aggregate principal amount of
6.875%
senior unsecured notes due 2027 in a private placement to eligible purchasers. The net proceeds from this offering were used to repay a portion of USAC’s existing
borrowings under its credit facility and for general partnership purposes.
Credit Facilities and Commercial Paper
ETO Five-Year Credit Facility
ETO’s revolving credit facility (the “ETO Five-Year Credit Facility”) allows for unsecured borrowings up to
$5.00 billion
and matures on December 1, 2023. The ETO Five-Year Credit Facility contains an accordion feature, under which the total aggregate commitment may be increased up to
$6.00 billion
under certain conditions.
As of
March 31, 2019
, the ETO Five-Year Credit Facility had
$1.76 billion
of outstanding borrowings, all of which
was commercial paper. The amount available for future borrowings was
$3.15 billion
after taking into account letters of credit of
$89 million
. The weighted average interest rate on the total amount outstanding as of
March 31, 2019
was
3.17%
.
ETO 364-Day Facility
ETO’s 364-day revolving credit facility (the “ETO 364-Day Facility”) allows for unsecured borrowings up to
$1.00 billion
and matures on November 29, 2019.
As of
March 31, 2019
, the ETO 364-Day Facility had
no
outstanding borrowings.
Sunoco LP Credit Facility
Sunoco LP maintains a
$1.50 billion
revolving credit facility (the “Sunoco LP Credit Facility”), which matures in July 2023. As of
March 31, 2019
, the Sunoco LP Credit Facility had
$150 million
of outstanding borrowings and
$8 million
in standby letters of credit. As of
March 31, 2019
,
Sunoco LP had
$1.34 billion
of availability under the Sunoco LP Credit Facility. The weighted average interest rate on the total amount outstanding as of
March 31, 2019
was
4.49%
.
USAC Credit Facility
USAC maintains a
$1.60 billion
revolving credit facility (the “USAC Credit Facility”), which matures in April 2023. As of
March 31, 2019
, the USAC Credit Facility had
$361 million
of outstanding borrowings and
no
outstanding letters of credit. As of
March 31, 2019
, USAC had
$1.24 billion
of borrowing base availability and, subject to compliance with the applicable financial covenants, available borrowing capacity of
$493 million
under the USAC Credit Facility. The weighted average interest rate on the total amount outstanding as of
March 31, 2019
was
5.17%
.
Compliance with Our Covenants
We were in compliance with all requirements, tests, limitations, and covenants related to our credit agreements as of
March 31, 2019
.
|
|
|
|
7.
|
REDEEMABLE NONCONTROLLING INTERESTS
|
Certain redeemable noncontrolling interests in the Partnership’s subsidiaries are reflected as mezzanine equity on the consolidated balance sheets. Redeemable noncontrolling interests as of
March 31, 2019
included (i)
$477 million
related to the USAC Preferred Units described below and (ii)
$22 million
related to noncontrolling interest holders in one of the Partnership’s consolidated subsidiaries that have the option to sell their interests to the Partnership.
USAC Preferred Units
In 2018, USAC issued
500,000
USAC Preferred Units at a price of
$1,000
per USAC Preferred Unit, for total gross proceeds of
$500 million
in a private placement.
The USAC Preferred Units are entitled to receive cumulative quarterly distributions equal to
$24.375
per USAC Preferred Unit, subject to increase in certain limited circumstances. The USAC Preferred Units will have a perpetual term, unless converted or redeemed.
As of
March 31, 2019
, all of our outstanding common units are owned by ET.
Preferred Units
As of each of
March 31, 2019
and
December 31, 2018
, ETO’s preferred units outstanding were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A
|
|
Series B
|
|
Series C
|
|
Series D
|
|
Number of units outstanding
|
950,000
|
|
|
550,000
|
|
|
18,000,000
|
|
|
17,800,000
|
|
Series E Preferred Units Issuance
In April 2019, ETO issued
32 million
of its
7.600%
Series E Preferred Units at a price of
$25
per unit, including
4 million
Series E Preferred Units pursuant to the underwriters’ exercise of their option to purchase additional preferred units. The total gross proceeds from the Series E Preferred Unit issuance were
$800 million
,
including
$100 million
from the underwriters’ exercise of their option. The net proceeds were used to repay amounts outstanding under ETO’s revolving credit facility and for general partnership purposes.
Distributions on the Series E Preferred Units will accrue and be cumulative from and including the date of original issue to, but excluding, May 15, 2024, at a rate of
7.600%
per annum of the stated liquidation preference of
$25
. On and after May 15, 2024, distributions on the Series E Preferred Units will accumulate at a percentage of the
$25
liquidation preference equal to an annual floating rate of the three-month LIBOR, determined quarterly, plus a spread of
5.161%
per annum. The Series E Preferred Units are redeemable at ETO’s option on or after May 15, 2024 at a redemption price of
$25
per Series E Preferred Unit, plus an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date of redemption.
Subsidiary Equity Transactions
Sunoco LP Equity Distribution Program
For the
three months ended
March 31, 2019
, Sunoco LP issued
no
additional units under its at-the-market equity distribution program. As of
March 31, 2019
,
$295 million
of Sunoco LP common units remained available to be issued under the currently effective equity distribution agreement.
USAC Distribution Reinvestment Program
During the
three months ended
March 31, 2019
, distributions of
$0.3 million
were reinvested under the USAC distribution reinvestment program resulting in the issuance of approximately
16,714
USAC common units.
Cash Distributions
Distributions on ETO’s preferred units declared and paid by the Partnership subsequent to
December 31, 2018
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended
|
|
Record Date
|
|
Payment Date
|
|
Series A
(1)
|
|
Series B
(1)
|
|
Series C
|
|
Series D
|
|
December 31, 2018
|
|
February 1, 2019
|
|
February 15, 2019
|
|
$
|
31.25
|
|
|
$
|
33.125
|
|
|
$
|
0.4609
|
|
|
$
|
0.4766
|
|
|
March 31, 2019
|
|
May 1, 2019
|
|
May 15, 2019
|
|
—
|
|
|
—
|
|
|
0.4609
|
|
|
0.4766
|
|
(1)
Series A and Series B preferred unit distributions are paid on a semi-annual basis.
Sunoco LP Cash Distributions
The following are distributions declared and paid by Sunoco LP subsequent to
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Record Date
|
|
Payment Date
|
|
Rate
|
|
December 31, 2018
|
|
February 6, 2019
|
|
February 14, 2019
|
|
$
|
0.8255
|
|
|
March 31, 2019
|
|
May 7, 2019
|
|
May 15, 2019
|
|
0.8255
|
|
USAC Cash Distributions
The following are distributions declared and paid by USAC subsequent to
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Record Date
|
|
Payment Date
|
|
Rate
|
|
December 31, 2018
|
|
January 28, 2019
|
|
February 8, 2019
|
|
$
|
0.5250
|
|
|
March 31, 2019
|
|
April 29, 2019
|
|
May 10, 2019
|
|
0.5250
|
|
Accumulated Other Comprehensive Income (Loss)
The following table presents the components of AOCI, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Available-for-sale securities
|
$
|
7
|
|
|
$
|
2
|
|
|
Foreign currency translation adjustment
|
(5
|
)
|
|
(5
|
)
|
|
Actuarial loss related to pensions and other postretirement benefits
|
(41
|
)
|
|
(48
|
)
|
|
Investments in unconsolidated affiliates, net
|
5
|
|
|
9
|
|
|
Total AOCI, net of tax
|
$
|
(34
|
)
|
|
$
|
(42
|
)
|
The Partnership’s effective tax rate differs from the statutory rate primarily due to partnership earnings that are not subject to United States federal and most state income taxes at the partnership level. For the
three months ended
March 31, 2019
, the Partnership’s effective tax rate was primarily driven by an increase in income before tax expense (benefit) at our corporate subsidiaries.
ETC Sunoco Holdings LLC (“Sunoco, Inc.”) historically included certain government incentive payments as taxable income on its federal and state income tax returns. In connection with Sunoco, Inc.'s 2004 through 2011 years, Sunoco, Inc. filed amended returns with the IRS excluding these government incentive payments from federal taxable income. The IRS denied the amended returns, and Sunoco, Inc. petitioned the Court of Federal Claims ("CFC") in June 2015 on this issue for the 2004 through 2009 tax years. Sunoco, Inc.'s 2010 and 2011 years are extended for this issue with the Internal Revenue Service ("IRS"). In November 2016, the CFC ruled against Sunoco, Inc., and the United States Court of Appeals for the Federal Circuit (the "Federal Circuit") affirmed the CFC's ruling on November 1, 2018. Sunoco, Inc. subsequently filed a petition for rehearing with the Federal Circuit, and this was denied on January 24, 2019. Sunoco, Inc. has until May 24, 2019 to file a petition for writ of certiorari to review the Federal Circuit's affirmation of the CFC's ruling. If Sunoco, Inc. is ultimately fully successful in this litigation, it will receive tax refunds of approximately
$530 million
. However, due to the uncertainty surrounding the litigation, a reserve of
$530 million
was established for the full amount of the litigation. Due to the timing of the litigation and the related reserve, the receivable and the reserve for this issue have been netted in the balance sheets as of
March 31, 2019
and
December 31, 2018
.
|
|
|
|
10.
|
REGULATORY MATTERS, COMMITMENTS, CONTINGENCIES AND ENVIRONMENTAL LIABILITIES
|
FERC Proceedings
By order issued January 16, 2019, the FERC initiated a review of Panhandle’s existing rates pursuant to Section 5 of the Natural Gas Act to determine whether the rates currently charged by Panhandle are just and reasonable and set the matter for hearing. Panhandle filed a cost and revenue study on April 1, 2019. An initial decision is expected to be issued in the first quarter of 2020. In addition, on November 30, 2018, Sea Robin filed a rate case pursuant to Section 4 of the Natural Gas Act. A hearing date is scheduled for October 23, 2019 and an initial decision is expected to be issued in the first quarter of 2020.
By order issued February 19, 2019, the FERC initiated a review of Southwest Gas Storage Company’s existing rates pursuant to Section 5 of the Natural Gas Act to determine whether the rates currently charged by Southwest Gas Storage Company are just and reasonable and set the matter for hearing. Southwest Gas Storage Company filed a cost and revenue study on May 6, 2019. An initial decision is expected to be issued in the first quarter of 2020.
Commitments
In the normal course of business, ETO purchases, processes and sells natural gas pursuant to long-term contracts and enters into long-term transportation and storage agreements. Such contracts contain terms that are customary in the industry. ETO believes that the terms of these agreements are commercially reasonable and will not have a material adverse effect on its financial position or results of operations.
Our joint venture agreements require that we fund our proportionate share of capital contributions to our unconsolidated affiliates. Such contributions will depend upon our unconsolidated affiliates’ capital requirements, such as for funding capital projects or repayment of long-term obligations.
We have certain non-cancelable right-of-way (“ROW”) commitments, which require fixed payments and either expire upon our chosen abandonment or at various dates in the future. The table below reflects ROW expense included in operating expenses in the accompanying statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
2018
|
|
ROW expense
|
$
|
6
|
|
|
$
|
6
|
|
Litigation and Contingencies
We may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business. Natural gas and crude oil are flammable and combustible. Serious personal injury and significant property damage can arise in connection with their transportation, storage or use. In the ordinary course of business, we are sometimes threatened with or named as a defendant in various lawsuits seeking actual and punitive damages for product liability, personal injury and property damage. We maintain liability insurance with insurers in amounts and with coverage and deductibles management believes are reasonable and prudent, and which are generally accepted in the industry. However, there can be no assurance that the levels of insurance protection currently in effect will continue to be available at reasonable prices or that such levels will remain adequate to protect us from material expenses related to product liability, personal injury or property damage in the future.
Dakota Access Pipeline
On July 25, 2016, the United States Army Corps of Engineers (“USACE”) issued permits to Dakota Access, LLC (“Dakota Access”) to make two crossings of the Missouri River in North Dakota. The USACE also issued easements to allow the pipeline to cross land owned by the USACE adjacent to the Missouri River. On July 27, 2016, the Standing Rock Sioux Tribe (“SRST”) filed a lawsuit in the United States District Court for the District of Columbia (“the Court”) against the USACE and challenged the legality of these permits and claimed violations of the National Historic Preservation Act (“NHPA”). SRST also sought a preliminary injunction to rescind the USACE permits while the case was pending, which the court denied on September 9, 2016. Dakota Access intervened in the case. The Cheyenne River Sioux Tribe (“CRST”) also intervened. SRST filed an amended complaint and added claims based on treaties between SRST and CRST and the United States and statutes governing the use of government property.
In February 2017, in response to a Presidential memorandum, the Department of the Army delivered an easement to Dakota Access allowing the pipeline to cross Lake Oahe. CRST moved for a preliminary injunction and temporary restraining order (“TRO”) to block operation of the pipeline, which motion was denied, and raised claims based on the religious rights of CRST.
In June 2017, SRST and CRST amended their complaints to incorporate religious freedom and other claims. In addition, the Oglala Sioux and Yankton Sioux tribes (collectively, “Tribes”) have filed related lawsuits to prevent construction of the Dakota Access pipeline project. These lawsuits have been consolidated into the action initiated by SRST. Several individual members of the Tribes have also intervened in the lawsuit asserting claims that overlap with those brought by the four Tribes.
On June 14, 2017, the Court ruled on SRST’s and CRST’s motions for partial summary judgment and the USACE’s cross-motions for partial summary judgment. The Court concluded that the USACE had not violated trust duties owed to the Tribes and had generally complied with its obligations under the Clean Water Act, the Rivers and Harbors Act, the Mineral Leasing Act, the National Environmental Policy Act (“NEPA”) and other related statutes; however, the Court remanded to the USACE three discrete issues for further analysis and explanation of its prior determinations under certain of these statutes.
In November 2017, the Yankton Sioux Tribe (“YST”), moved for partial summary judgment asserting claims similar to those already litigated and decided by the Court in its June 14, 2017 decision on similar motions by CRST and SRST. YST argues that the USACE and Fish and Wildlife Service violated NEPA, the Mineral Leasing Act, the Rivers and Harbors Act, and YST’s treaty and trust rights when the government granted the permits and easements necessary for the pipeline.
On December 4, 2017, the Court imposed three conditions on continued operation of the pipeline during the remand process. First, Dakota Access must retain an independent third party to review its compliance with the conditions and regulations governing its easements and to assess integrity threats to the pipeline. The assessment report was filed with the Court. Second, the Court directed Dakota Access to continue its work with the Tribes and the USACE to revise and finalize its emergency spill response planning for the section of the pipeline crossing Lake Oahe. Dakota Access filed the revised plan with the Court. And third, the Court directed Dakota Access to submit bi-monthly reports during the remand period disclosing certain inspection and maintenance information related to the segment of the pipeline running between the valves on either side of the Lake Oahe crossing. The first and second reports were filed with the court on December 29, 2017 and February 28, 2018, respectfully.
On February 8, 2018, the Court docketed a motion by CRST to “compel meaningful consultation on remand.” SRST then made a similar motion for “clarification re remand process and remand conditions.” The motions sought an order from the Court directing the USACE as to how it should conduct its additional review on remand. Dakota Access and the USACE opposed both motions. On April 16, 2018, the Court denied both motions.
On March 19, 2018, the District Court denied YST’s motion for partial summary judgment and instead granted judgment in favor of Dakota Access pipeline and the USACE on the claims raised in YST’s motion. The Court concluded that YST’s NHPA claims are moot because construction of the pipeline is complete and that the government’s review process did not violate NEPA or the various treaties cited by the YST.
On May 3, 2018, the District Court ordered the USACE to file a status report by June 8, 2018 informing the Court when the USACE expects the remand process to be complete. On June 8, 2018, the USACE filed a status report stating that they would conclude the remand process by August 10, 2018. On August 7, 2018, the USACE informed the Court that they would need until August 31, 2018 to finish the remand process. On August 31, 2018, the USACE informed the Court that it had completed the remand process and that it had determined that the three issues remanded by the Court had been correctly decided. On October 1, 2018, the USACE produced a detailed remand analysis document supporting that determination. The Tribes and certain of the individuals sought leave of the Court to amend their complaints to challenge the remand process and the USACE’s decision on remand.
On January 3, 2019, the Court granted the Tribes’ requests to supplement their respective complaints challenging the remand process, subject to defendants’ right to argue later that such supplementation may be overbroad and not permitted by law. On January 10, 2019, the Court denied the Oglala Sioux Tribe’s motion to amend its complaint to expand one of its pre-remand claims.
On January 17, 2019, the DOJ, on behalf of the USACE, moved to stay the litigation in light of the lapse in appropriations for the DOJ. The Tribes and individual plaintiffs opposed that request. On January 28, 2019, the USACE moved to withdraw this motion because appropriations for the DOJ had been restored. The Court granted this motion the next day.
On January 31, 2019, the USACE notified the Court that it had provided the administrative record for the remand to all parties. On February 27, 2019, the four Tribes filed a joint motion challenging the completeness of the record. The USACE opposed this motion in part, and Dakota Access opposed in full. The Tribes filed their reply brief on March 18, 2019 and the motion is now fully briefed and before the Court.
On May 8, 2019, the Court issued an order on Plaintiffs’ motion to complete the administrative record, requiring the parties to submit additional information so that the Court can determine what documents, if any, should be added to the record. The Court’s previous orders require that the parties must file a joint proposed schedule for the final round of summary judgment briefing within seven days of a final order on the challenges to the record.
While Energy Transfer believes that the pending lawsuits are unlikely to halt or suspend operation of the pipeline, we cannot assure this outcome. Energy Transfer cannot determine when or how these lawsuits will be resolved or the impact they may have on the Dakota Access project.
Mont Belvieu Incident
On June 26, 2016, a hydrocarbon storage well located on another operator’s facility adjacent to Lone Star NGL Mont Belvieu’s (“Lone Star”) facilities in Mont Belvieu, Texas experienced an over-pressurization resulting in a subsurface release. The
subsurface release caused a fire at Lone Star’s South Terminal and damage to Lone Star’s storage well operations at its South and North Terminals. Normal operations have resumed at the facilities with the exception of one of Lone Star’s storage wells. Lone Star is still quantifying the extent of its incurred and ongoing damages and has obtained, and will continue to seek, reimbursement for these losses.
MTBE Litigation
Sunoco, Inc. and Sunoco, Inc. (R&M) (now known as Sunoco (R&M), LLC) (collectively, “Sunoco”) are defendants in lawsuits alleging MTBE contamination of groundwater. The plaintiffs, state-level governmental entities, assert product liability, nuisance, trespass, negligence, violation of environmental laws, and/or deceptive business practices claims. The plaintiffs seek to recover compensatory damages, and in some cases also seek natural resource damages, injunctive relief, punitive damages, and attorneys’ fees.
As of
March 31, 2019
, Sunoco is a defendant in
five
cases, including one case each initiated by the States of Maryland and Rhode Island, one by the Commonwealth of Pennsylvania and two by the Commonwealth of Puerto Rico. The more recent Puerto Rico action is a companion case alleging damages for additional sites beyond those at issue in the initial Puerto Rico action. The actions brought by the State of Maryland and Commonwealth of Pennsylvania have also named as defendants Energy Transfer Partners, L.P., ETP Holdco Corporation, and Sunoco Partners Marketing & Terminals, L.P. (“SPMT”).
It is reasonably possible that a loss may be realized in the remaining cases; however, we are unable to estimate the possible loss or range of loss in excess of amounts accrued. An adverse determination with respect to one or more of the MTBE cases could have a significant impact on results of operations during the period in which any such adverse determination occurs, but such an adverse determination likely would not have a material adverse effect on the Partnership’s consolidated financial position.
Regency Merger Litigation
Purported Regency unitholders filed lawsuits in state and federal courts in Dallas and Delaware asserting claims relating to the Regency-ETO merger (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 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; ET, ETO, ETP GP, and the members of Regency’s board of directors (“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. Defendants then filed Motions to Dismiss the Amended Complaint and a Motion to Stay Discovery on May 19, 2017. On February 20, 2018, the Court of Chancery issued an Order granting in part and denying in part the motions to dismiss, dismissing the claims against all defendants other than Regency GP, LP and Regency GP LLC (the “Regency Defendants”). On March 6, 2018, the Regency Defendants filed their Answer to Plaintiff’s Verified Amended Class Action Complaint. Trial is currently set for September 23-27, 2019.
The Regency 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 Defendants predict the amount of time and expense that will be required to resolve the Regency Merger Litigation. The Regency 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.
Enterprise Products Partners, L.P. and Enterprise Products Operating LLC Litigation
On January 27, 2014, a trial commenced between ETO against Enterprise Products Partners, L.P. and Enterprise Products Operating LLC (collectively, “Enterprise”) and Enbridge (US) Inc. Trial resulted in a verdict in favor of ETO against Enterprise that consisted of
$319 million
in compensatory damages and
$595 million
in disgorgement to ETO. The jury also found that ETO owed Enterprise
$1 million
under a reimbursement agreement. On July 29, 2014, the trial court entered a final judgment in favor of ETO and awarded ETO
$536 million
,
consisting of compensatory damages, disgorgement, and pre-judgment interest. The trial court also ordered that ETO shall be entitled to recover post-judgment interest and costs of court and that Enterprise is not entitled to any net recovery on its counterclaims. Enterprise filed a notice of appeal with the Court of Appeals. On July 18, 2017, the Court of Appeals issued its opinion and reversed the trial court’s judgment. ETO’s motion for rehearing to the Court of Appeals was denied. On June 8, 2018, the Texas Supreme Court ordered briefing on the merits. ETO’s petition for review remains under consideration by the Texas Supreme Court.
Rover
On November 3, 2017, the State of Ohio and the Ohio Environmental Protection Agency (“Ohio EPA”) filed suit against Rover and Pretec Directional Drilling, LLC (“Pretec”) seeking to recover approximately
$2.6 million
in civil penalties allegedly owed and certain injunctive relief related to permit compliance. Laney Directional Drilling Co., Atlas Trenchless, LLC, Mears Group, Inc., D&G Directional Drilling, Inc. d/b/a D&G Directional Drilling, LLC, and B&T Directional Drilling, Inc. (collectively, with Rover and Pretec, “Defendants”) were added as defendants on April 17, 2018 and July 18, 2018.
Ohio EPA alleges that the Defendants illegally discharged millions of gallons of drilling fluids into Ohio’s waters that caused pollution and degraded water quality, and that the Defendants harmed pristine wetlands in Stark County. Ohio EPA further alleges that the Defendants caused the degradation of Ohio’s waters by discharging pollution in the form of sediment-laden storm water into Ohio’s waters and that Rover violated its hydrostatic permits by discharging effluent with greater levels of pollutants than those permits allowed and by not properly sampling or monitoring effluent for required parameters or reporting those alleged violations. Rover and other Defendants filed several motions to dismiss and Ohio EPA filed a motion in opposition. The State’s opposition to those motions was filed on October 12, 2018. Rover and other Defendants filed their replies on November 2, 2018. On March 13, 2019, the court granted Rover and the other Defendants’ motion to dismiss on all counts. On April 10, 2019, the Ohio EPA filed a notice of appeal.
In January 2018, Ohio EPA sent a letter to the FERC to express concern regarding drilling fluids lost down a hole during horizontal directional drilling (“HDD”) operations as part of the Rover Pipeline construction. Rover sent a January 24, 2018 response to the FERC and stated, among other things, that as Ohio EPA conceded, Rover was conducting its drilling operations in accordance with specified procedures that had been approved by the FERC and reviewed by the Ohio EPA. In addition, although the HDD operations were crossing the same resource as that which led to an inadvertent release of drilling fluids in April 2017, the drill in 2018 had been redesigned since the original crossing. Ohio EPA expressed concern that the drilling fluids could deprive organisms in the wetland of oxygen. Rover, however, has now fully remediated the site, a fact with which Ohio EPA concurs. Construction of Rover is now complete and the pipeline is fully operational.
Bayou Bridge
On January 11, 2018, environmental groups and a trade association filed suit against the USACE in the United States District Court for the Middle District of Louisiana. Plaintiffs allege that the USACE’s issuance of permits authorizing the construction of the Bayou Bridge Pipeline through the Atchafalaya Basin (“Basin”) violated the National Environmental Policy Act, the Clean Water Act, and the Rivers and Harbors Act. They asked the district court to vacate these permits and to enjoin construction of the project through the Basin until the USACE corrects alleged deficiencies in its decision-making process. ETO, through its subsidiary Bayou Bridge Pipeline, LLC (“Bayou Bridge”), intervened on January 26, 2018. On March 27, 2018, Bayou Bridge filed an answer to the complaint.
On January 29, 2018, Plaintiffs filed motions for a preliminary injunction and TRO. United States District Court Judge Shelly Dick denied the TRO on January 30, 2018, but subsequently granted the preliminary injunction on February 23, 2018. On February 26, 2018, Bayou Bridge filed a notice of appeal and a motion to stay the February 23, 2018 preliminary injunction order. On February 27, 2018, Judge Dick issued an opinion that clarified her February 23, 2018 preliminary injunction order and denied Bayou Bridge’s February 26, 2018 motion to stay as moot. On March 1, 2018, Bayou Bridge filed a new notice of appeal and motion to stay the February 27, 2018 preliminary injunction order in the district court. On March 5, 2018, the district court denied the March 1, 2018 motion to stay the February 27, 2018 order.
On March 2, 2018, Bayou Bridge filed a motion to stay the preliminary injunction in the Fifth Circuit. On March 15, 2018, the Fifth Circuit granted a stay of injunction pending appeal and found that Bayou Bridge “is likely to succeed on the merits of its claim that the district court abused its discretion in granting a preliminary injunction.” Oral arguments were heard on the merits of the appeal, that is, whether the district court erred in granting the preliminary injunction in the Fifth Circuit on April 30, 2018. The district court has stayed the merits case pending decision of the Fifth Circuit. On May 10, 2018, the District Court stayed the litigation pending a decision from the Fifth Circuit. On July 6, 2018, the Fifth Circuit vacated the Preliminary Injunction and remanded the case back to the District Court. Construction is ongoing.
On August 14, 2018, Plaintiffs sought leave of court to amend their complaint to add an “as applied” challenge to the USACE’s application of the Louisiana Rapid Assessment Method to Bayou Bridge’s permits. Defendants’ filed motions in opposition on September 18, 2018. On September 18, 2018, Plaintiffs filed a motion for partial summary judgment on the issue of the USACE’s analysis of the risks of an oil spill once the pipeline is in operation. On November 6, 2018 the court struck plaintiffs’ motion as premature.
At an October 2, 2018 scheduling conference, the USACE agreed to lodge the administrative record for Plaintiffs’ original complaint, which it has done. Challenges to the completeness of the record have been briefed and are currently pending
before the Court. At the October 18 conference, the Court also scheduled summary judgment briefing on Plaintiffs’ original complaint; briefing is scheduled to conclude by the Spring of 2019.
On December 28, 2018, Judge Dick issued a General Order for the Middle District of Louisiana holding in abeyance all civil matters where the United States is a party. Notwithstanding the General Order, on January 11, 2019, Plaintiffs filed a Motion for Summary Judgment on their National Environmental Policy Act and Clean Waters Act claims.
On January 11, 2019, Plaintiffs attempted to file a Motion for Summary Judgment on its National Environmental Policy Act and Coastal Water Authority claims. On January 23, 2019, Plaintiffs filed a Second Motion for Preliminary Injunction based on alleged permit violations, which the Court later denied. On February 11, 2019, the Court denied Plaintiffs’ August 14, 2018 motion for leave to amend their complaint.
On February 14, 2019, Judge Dick ordered that all summary judgment briefing is stayed until the Court rules on the motions challenging the completeness of the administrative record. Judge Dick further ordered that once those motions are decided, the parties will be allowed to update any summary judgment briefs they have already filed, if necessary, and that the Court will set new briefing deadlines.
On April 26, 2019, Plaintiffs filed a motion seeking reconsideration of Judge Dick’s February 14, 2019 order staying summary judgment briefing. Defendants filed their oppositions on May 6, 2019.
Revolution
On September 10, 2018, a pipeline release and fire (the “Incident”) occurred on the Revolution pipeline, a natural gas gathering line, in the vicinity of Ivy Lane located in Center Township, Beaver County, Pennsylvania. There were no injuries, but there were evacuations of local residents as a precautionary measure. The Pennsylvania Department of Environmental Protection (“PADEP”) and the Pennsylvania Public Utility Commission (“PUC”) are investigating the incident. On October 29, 2018, PADEP issued a Compliance Order requiring our subsidiary, ETC Northeast Pipeline, LLC (“ETC Northeast”), to cease all earth disturbance activities at the site (except as necessary to repair and maintain existing Best Management Practices (“BMPs”) and temporarily stabilize disturbed areas), implement and/or maintain the Erosion and Sediment BMPs at the site, stake the limit of disturbance, identify and report all areas of non-compliance, and submit an updated Erosion and Sediment Control Plan, a Temporary Stabilization Plan, and an updated Post Construction Stormwater Management Plan. The scope of the Compliance Order has been expanded to include the disclosure to PADEP of alleged violations of environmental permits with respect to various construction and post-construction activities and restoration obligations along the
42
-mile route of the Revolution line. ETC Northeast filed an appeal of the Compliance Order with the Pennsylvania Environmental Hearing Board.
On February 8, 2019, PADEP filed a Petition to Enforce the Compliance Order with Pennsylvania’s Commonwealth Court. The Court issued an Order on February 14, 2019 requiring the submission of an answer to the Petition on or before March 12, 2019, and scheduled a hearing on the Petition for March 26, 2019. On March 12, 2019, ETC Northeast answered the Petition. ETC Northeast and PADEP have since agreed to a Stipulated Order regarding the issues raised in the Compliance Order, which obviated the need for a hearing. The Commonwealth Court approved the Stipulated Order on March 26, 2019. On February 8, 2019, PADEP also issued a Permit Hold on any requests for approvals/permits or permit amendments made by us or any of our subsidiaries for any projects in Pennsylvania pursuant to the state’s water laws. The Partnership filed an appeal of the Permit Hold with the Pennsylvania Environmental Hearing Board on March 11, 2019. The Partnership continues to work through these issues with PADEP.
Chester County, Pennsylvania Investigation
In December 2018, the Chester County District Attorney (“Chester County D.A.”) sent a letter to the Partnership stating that it was investigating the Partnership and related entities for “potential crimes” related to the Mariner East pipelines.
On April 11, 2019, the Partnership was served with twenty-two grand jury subpoenas seeking a variety of documents and records sought by the Chester County Investigation Grand Jury. While the Partnership intends to cooperate with the investigation, we intend to vigorously defend ourselves against these allegations.
Delaware County, Pennsylvania Investigation
On March 11, 2019, the Delaware County District Attorney’s Office (“Delaware County D.A.”) announced that the Delaware County D.A. and the Pennsylvania Attorney General’s Office (“Pennsylvania A.G.”), at the request of the Delaware County D.A., are conducting an investigation of alleged criminal misconduct involving the construction and related activities of the Mariner East pipelines in Delaware County. There are neither specifics with regard to who has made the allegations of criminal
misconduct nor specifics of any such conduct. While the Partnership intends to cooperate with the investigation, we intend to vigorously defend ourselves against these allegations.
Other Litigation and Contingencies
We or our subsidiaries are a party to various legal proceedings and/or regulatory proceedings incidental to our businesses. For each of these matters, we evaluate the merits of the case, our exposure to the matter, possible legal or settlement strategies, the likelihood of an unfavorable outcome and the availability of insurance coverage. If we determine that an unfavorable outcome of a particular matter is probable and can be estimated, we accrue the contingent obligation, as well as any expected insurance recoverable amounts related to the contingency. As of
March 31, 2019
and
December 31, 2018
,
accruals of approximately
$42 million
and
$53 million
,
respectively, were reflected on our consolidated balance sheets related to these contingent obligations. As new information becomes available, our estimates may change. The impact of these changes may have a significant effect on our results of operations in a single period.
The outcome of these matters cannot be predicted with certainty and there can be no assurance that the outcome of a particular matter will not result in the payment of amounts that have not been accrued for the matter. Furthermore, we may revise accrual amounts prior to resolution of a particular contingency based on changes in facts and circumstances or changes in the expected outcome. Currently, we are not able to estimate possible losses or a range of possible losses in excess of amounts accrued.
On April 25, 2018, and as amended on April 30, 2018, State Senator Andrew Dinniman filed a Formal Complaint and Petition for Interim Emergency Relief (“Complaint”) against Sunoco Pipeline L.P. (“SPLP”) before the PUC. Specifically, the Complaint alleges that (i) the services and facilities provided by the Mariner East Pipeline (“ME1,” “ME2” or “ME2x”) in West Whiteland Township (“the Township”) are unreasonable, unsafe, inadequate, and insufficient for, among other reasons, selecting an improper and unsafe route through densely populated portions of the Township with homes, schools, and infrastructure and causing inadvertent returns and sinkholes during construction because of unstable geology in the Township; (ii) SPLP failed to warn the public of the dangers of the pipeline; (iii) the construction of ME2 and ME2x increases the risk of damage to the existing co-located ME1 pipeline; and (iv) ME1, ME2 and ME2x are not public utility facilities. Based on these allegations, Senator Dinniman’s Complaint seeks emergency relief by way of an order (i) prohibiting construction of ME2 and ME2x in the Township; (ii) prohibiting operation of ME1; (iii) in the alternative to (i) and (ii) prohibiting the construction of ME2 and ME2x and the operation of ME1 until SPLP fully assesses and the PUC approves the condition, adequacy, efficiency, safety, and reasonableness of those pipelines and the geology in which they sit; (iv) requiring SPLP to release to the public its written integrity management plan and risk analysis for these pipelines; and (v) finding that these pipelines are not public utility facilities. In short, the relief, if granted, would continue the suspension of operation of ME1 and suspend further construction of ME2 and ME2x in the Township.
Following a hearing on May 7, 2018 and 10, 2018, Administrative Law Judge Elizabeth H. Barnes (“ALJ”) issued an Order on May 24, 2018 that granted Senator Dinniman’s petition for interim emergency relief and required SPLP to shut down ME1, to discontinue construction of ME2 and ME2x within the Township, and required SPLP to provide various types of information and perform various geotechnical and geophysical studies within the Township. The ALJ’s Order was immediately effective, and SPLP complied by shutting down service on ME1 and discontinuing all construction in the Township on ME2 and ME2x. The ALJ’s Order was automatically certified as a material question to the PUC, which issued an Opinion and Order on June 15, 2018 (following a public meeting on June 14, 2018) that reversed in part and affirmed in part the ALJ’s Order. PUC’s Opinion and Order permitted SPLP to resume service on ME1, but continued the shutdown of construction on ME2 and ME2x pending the submission of the following three types of information to PUC: (i) inspection and testing protocols; (ii) comprehensive emergency response plan; and (iii) safety training curriculum for employees and contractors. SPLP submitted the required information on June 22, 2018. On July 2, 2018, Senator Dinniman and intervenors responded to the submission. SPLP is also required to provide an affidavit that the PADEP has issued appropriate approvals for construction of ME2 and ME2x in the Township before recommencing construction of ME2 and ME2x locations within the Township. SPLP submitted all necessary affidavits. On August 2, 2018 the PUC entered an Order lifting the stay of construction on ME2 and ME2x in the Township with respect to four of the eight areas within the Township where the necessary environmental permits had been issued. Subsequently, after PADEP’s issuance of permit modifications for two of the four remaining construction sites, the PUC lifted the construction stay on those two sites as well. Also on August 2, 2018, the PUC ratified its prior action by notational voting of certifying for interlocutory appeal to the Pennsylvania Commonwealth Court the legal issue of whether Senator Dinniman has standing to pursue this matter. Sunoco submitted a petition for permission to appeal on this issue of standing. Senator Dinniman and intervenors opposed that petition. On September 27, 2018, the Commonwealth Court issued an Order that certified for appeal the issue of Senator Dinniman’s standing. The Order stays all proceedings in the PUC.
On September 27, 2018, the Commonwealth Court issued an Order that certified for appeal the issue of Senator Dinniman’s standing. The Order stays all proceedings in the PUC. Briefing in the Commonwealth Court has been completed and oral argument has been scheduled for June 3, 2019.
On March 29, 2019, SPLP filed a supplemental affidavit with the PUC in accordance with the established procedure to request the PUC lift the stay of construction of ME2 for one of the remaining work locations in the Township
–
Shoen Road. That same day, Senator Dinniman filed a letter objecting to SPLP’s request, arguing the Commonwealth Court’s order staying all proceedings barred the PUC from issuing an approval to lift the stay of construction of ME2 at Shoen Road. SPLP filed a reply to Senator Dinniman’s letter on April 4, 2019 explaining that the Commonwealth Court’s order did not prevent the PUC from lifting the stay of construction of ME2 at Shoen Road. On April 25, 2019, the PUC issued an Opinion and Order that it lacked jurisdiction to lift the stay of construction of ME2 at Shoen Road in light of the Commonwealth Court’s order staying proceedings in the PUC. That same day, SPLP filed an Application for Expedited Clarification to the Commonwealth Court, which seeks to clarify that the Commonwealth Court’s stay of proceedings does not prevent the PUC from issuing an approval to lift the stay of construction of ME2 at Shoen Road, or any of the other remaining work locations in the Township. Senator Dinniman’s response to SPLP’s application was filed on May 8, 2019, and oral argument is set for May 15, 2019.
No
amounts have been recorded in our
March 31, 2019
or
December 31, 2018
consolidated balance sheets for contingencies and current litigation, other than amounts disclosed herein.
Environmental Matters
Our operations are subject to extensive federal, tribal, state and local environmental and safety laws and regulations that require expenditures to ensure compliance, including related to air emissions and wastewater discharges, at operating facilities and for remediation at current and former facilities as well as waste disposal sites. Historically, our environmental compliance costs have not had a material adverse effect on our results of operations but there can be no assurance that such costs will not be material in the future or that such future compliance with existing, amended or new legal requirements will not have a material adverse effect on our business and operating results. Costs of planning, designing, constructing and operating pipelines, plants and other facilities must incorporate compliance with environmental laws and regulations and safety standards. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of investigatory, remedial and corrective action obligations, natural resource damages, the issuance of injunctions in affected areas and the filing of federally authorized citizen suits. Contingent losses related to all significant known environmental matters have been accrued and/or separately disclosed. However, we may revise accrual amounts prior to resolution of a particular contingency based on changes in facts and circumstances or changes in the expected outcome.
Environmental exposures and liabilities are difficult to assess and estimate due to unknown factors such as the magnitude of possible contamination, the timing and extent of remediation, the determination of our liability in proportion to other parties, improvements in cleanup technologies and the extent to which environmental laws and regulations may change in the future. Although environmental costs may have a significant impact on the results of operations for any single period, we believe that such costs will not have a material adverse effect on our financial position.
Based on information available at this time and reviews undertaken to identify potential exposure, we believe the amount reserved for environmental matters is adequate to cover the potential exposure for cleanup costs.
In February 2017, we received letters from the DOJ on behalf of EPA and Louisiana Department of Environmental Quality (“LDEQ”) notifying SPLP and Mid-Valley Pipeline Company (“Mid-Valley”) that enforcement actions were being pursued for three separate crude oil releases: (a) an estimated 550 barrels released from the Colmesneil-to-Chester pipeline in Tyler County, Texas (“Colmesneil”) which allegedly occurred in February of 2013; (b) an estimated 4,509 barrels released from the Longview-to-Mayersville pipeline in Caddo Parish, Louisiana (a/k/a Milepost 51.5) which allegedly occurred in October of 2014; and (c) an estimated 40 barrels released from the Wakita 4-inch gathering line in Oklahoma which allegedly occurred in January of 2015. In January of 2019, a Consent Decree approved by all parties as well as an accompanying Complaint was filed in the United States District Court for the Western District of Louisiana seeking public comment and final court approval to resolve all penalties with DOJ and LDEQ for the three releases. The Consent Decree requires certain injunctive relief to be completed on the Longview-to-Mayersville pipeline within three years but the injunctive relief is not expected to have any material impact on operations. In addition to resolution of the civil penalty and injunctive relief, we continue to discuss natural resource damages with the Louisiana trustees.
On January 3, 2018, PADEP issued an Administrative Order to SPLP directing that work on the Mariner East 2 and 2X pipelines be stopped. The Administrative Order detailed alleged violations of the permits issued by PADEP in February 2017, during the construction of the project. SPLP began working with PADEP representatives immediately after the Administrative Order was issued to resolve the compliance issues. Those compliance issues could not be fully resolved by the deadline to appeal the Administrative Order, so SPLP took an appeal of the Administrative Order to the Pennsylvania Environmental Hearing Board on February 2, 2018. On February 8, 2018, SPLP entered into a Consent Order and Agreement with PADEP that (i) withdraws the Administrative Order; (ii) establishes requirements for compliance with permits on a going forward basis; (iii) resolves the non-compliance alleged in the Administrative Order; and (iv) conditions restart of work on an agreement
by SPLP to pay a
$12.6 million
civil penalty to the Commonwealth of Pennsylvania. In the Consent Order and agreement, SPLP admits to the factual allegations, but does not admit to the conclusions of law that were made by PADEP. PADEP also found in the Consent Order and Agreement that SPLP had adequately addressed the issues raised in the Administrative Order and demonstrated an ability to comply with the permits. SPLP concurrently filed a request to the Pennsylvania Environmental Hearing Board to discontinue the appeal of the Administrative Order. That request was granted on February 8, 2018.
In October 2018, Pipeline Hazardous Materials Safety Administration (“PHMSA”) issued a notice of proposed safety order (the “Notice”) to SPMT, a wholly owned subsidiary of ET. The Notice alleged that conditions exist on certain pipeline facilities owned and operated by SPMT in Nederland, Texas that pose a pipeline integrity risk to public safety, property or the environment. The Notice also made preliminary findings of fact and proposed corrective measures. SPMT responded to the Notice by submitting a timely written response on November 2, 2018, attended an informal consultation held on January 30, 2019 and entered into a consent agreement with PHMSA resolving the issues in the Notice as of March 2019.
Environmental Remediation
Our subsidiaries are responsible for environmental remediation at certain sites, including the following:
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certain of our interstate pipelines conduct soil and groundwater remediation related to contamination from past uses of polychlorinated biphenyls (“PCBs”). PCB assessments are ongoing and, in some cases, our subsidiaries could potentially be held responsible for contamination caused by other parties.
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certain gathering and processing systems are responsible for soil and groundwater remediation related to releases of hydrocarbons.
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legacy sites related to Sunoco, Inc. that are subject to environmental assessments, including formerly owned terminals and other logistics assets, retail sites that Sunoco, Inc. no longer operates, closed and/or sold refineries and other formerly owned sites.
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Sunoco, Inc. is potentially subject to joint and several liability for the costs of remediation at sites at which it has been identified as a potentially responsible party (“PRP”). As of
March 31, 2019
,
Sunoco, Inc. had been named as a PRP at approximately
38
identified or potentially identifiable “Superfund” sites under federal and/or comparable state law. Sunoco, Inc. is usually one of a number of companies identified as a PRP at a site. Sunoco, Inc. has reviewed the nature and extent of its involvement at each site and other relevant circumstances and, based upon Sunoco, Inc.’s purported nexus to the sites, believes that its potential liability associated with such sites will not be significant.
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To the extent estimable, expected remediation costs are included in the amounts recorded for environmental matters in our consolidated balance sheets. In some circumstances, future costs cannot be reasonably estimated because remediation activities are undertaken as claims are made by customers and former customers. To the extent that an environmental remediation obligation is recorded by a subsidiary that applies regulatory accounting policies, amounts that are expected to be recoverable through tariffs or rates are recorded as regulatory assets on our consolidated balance sheets.
The table below reflects the amounts of accrued liabilities recorded in our consolidated balance sheets related to environmental matters that are considered to be probable and reasonably estimable. Currently, we are not able to estimate possible losses or a range of possible losses in excess of amounts accrued. Except for matters discussed above, we do not have any material environmental matters assessed as reasonably possible that would require disclosure in our consolidated financial statements.
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March 31, 2019
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December 31, 2018
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Current
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$
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48
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$
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42
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Non-current
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289
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295
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Total environmental liabilities
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$
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337
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$
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337
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In 2013, we established a wholly-owned captive insurance company to bear certain risks associated with environmental obligations related to certain sites that are no longer operating. The premiums paid to the captive insurance company include estimates for environmental claims that have been incurred but not reported, based on an actuarially determined fully developed claims expense estimate. In such cases, we accrue losses attributable to unasserted claims based on the discounted estimates that are used to develop the premiums paid to the captive insurance company.
During the
three months ended March 31,
2019
and
2018
,
the Partnership recorded
$6 million
and
$6 million
,
respectively, of expenditures related to environmental cleanup programs.
Our pipeline operations are subject to regulation by the United States Department of Transportation under the PHMSA, pursuant to which the PHMSA has established requirements relating to the design, installation, testing, construction, operation, replacement and management of pipeline facilities. Moreover, the PHMSA, through the Office of Pipeline Safety, has promulgated a rule requiring pipeline operators to develop integrity management programs to comprehensively evaluate their pipelines, and take measures to protect pipeline segments located in what the rule refers to as “high consequence areas.” Activities under these integrity management programs involve the performance of internal pipeline inspections, pressure testing or other effective means to assess the integrity of these regulated pipeline segments, and the regulations require prompt action to address integrity issues raised by the assessment and analysis. Integrity testing and assessment of all of these assets will continue, and the potential exists that results of such testing and assessment could cause us to incur future capital and operating expenditures for repairs or upgrades deemed necessary to ensure the continued safe and reliable operation of our pipelines; however, no estimate can be made at this time of the likely range of such expenditures.
Our operations are also subject to the requirements of OSHA, and comparable state laws that regulate the protection of the health and safety of employees. In addition, the Occupational Safety and Health Administration’s hazardous communication standard requires that information be maintained about hazardous materials used or produced in our operations and that this information be provided to employees, state and local government authorities and citizens. We believe that our past costs for OSHA required activities, including general industry standards, record keeping requirements, and monitoring of occupational exposure to regulated substances have not had a material adverse effect on our results of operations but there is no assurance that such costs will not be material in the future.
Disaggregation of revenue
The Partnership’s consolidated financial statements reflect the eight reportable segments, which also represent the level at which the Partnership aggregates revenue for disclosure purposes.
Note 15
depicts the disaggregation of revenue by segment.
Contract Balances with Customers
The Partnership satisfies its obligations by transferring goods or services in exchange for consideration from customers. The timing of performance may differ from the timing the associated consideration is paid to or received from the customer, thus resulting in the recognition of a contract asset or a contract liability.
The Partnership recognizes a contract asset when making upfront consideration payments to certain customers or when providing services to customers prior to the time at which the Partnership is contractually allowed to bill for such services.
The Partnership recognizes a contract liability if the customer's payment of consideration precedes the Partnership’s fulfillment of the performance obligations. Certain contracts contain provisions requiring customers to pay a fixed fee for a right to use our assets, but allows customers to apply such fees against services to be provided at a future point in time. These amounts are reflected as deferred revenue until the customer applies the deficiency fees to services provided or becomes unable to use the fees as payment for future services due to expiration of the contractual period the fees can be applied or physical inability of the customer to utilize the fees due to capacity constraints. Additionally, Sunoco LP maintains some franchise agreements requiring dealers to make one-time upfront payments for long term license agreements. Sunoco LP recognizes a contract liability when the upfront payment is received and recognizes revenue over the term of the license. As of
March 31, 2019
, the Partnership had
$378 million
in deferred revenues representing the current value of our future performance obligations.
The amount of revenue recognized for the
three months ended
March 31, 2019
and
2018
that was included in the deferred revenue liability balance as of
December 31, 2018
and January 1, 2018 was
$76 million
and
$35 million
, respectively.
The balances of receivables from contracts with customers listed in the table below include both current trade receivables and long-term receivables, net of allowance for doubtful accounts. The allowance for receivables represents Sunoco LP’s best estimate of the probable losses associated with potential customer defaults. Sunoco LP determines the allowance based on historical experience and on a specific identification basis.
The balances of Sunoco LP’s contract assets and contract liabilities as of
March 31, 2019
and
December 31, 2018
were as follows:
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March 31, 2019
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December 31, 2018
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Contract Balances
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Contract asset
|
$
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84
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$
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75
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Accounts receivable from contracts with customers
|
467
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348
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Contract liability
|
1
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1
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Performance Obligations
At contract inception, the Partnership assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Partnership considers all the goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. For a contract that has more than one performance obligation, the Partnership allocates the total contract consideration it expects to be entitled to, to each distinct performance obligation based on a standalone-selling price basis. Revenue is recognized when (or as) the performance obligations are satisfied, that is, when the customer obtains control of the good or service. Certain of our contracts contain variable components, which, when combined with the fixed component are considered a single performance obligation. For these types of contacts, only the fixed component of the contracts are included in the table below.
As of
March 31, 2019
, the aggregate amount of transaction price allocated to unsatisfied (or partially satisfied) performance obligations is
$41.91 billion
and the Partnership expects to recognize this amount as revenue within the time bands illustrated below:
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|
|
|
|
Years Ending December 31,
|
|
|
|
|
|
|
|
2019 (remainder)
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total
|
|
Revenue expected to be recognized on contracts with customers existing as of March 31, 2019
|
|
$
|
4,454
|
|
|
$
|
5,048
|
|
|
$
|
4,503
|
|
|
$
|
27,906
|
|
|
$
|
41,911
|
|
Costs to Obtain or Fulfill a Contract
Sunoco LP recognizes an asset from the costs incurred to obtain a contract (e.g. sales commissions) only if it expects to recover those costs. On the other hand, the costs to fulfill a contract are capitalized if the costs are specifically identifiable to a contract, would result in enhancing resources that will be used in satisfying performance obligations in future and are expected to be recovered. These capitalized costs are recorded as a part of Other Assets and are amortized on a systematic basis consistent with the pattern of transfer of the goods or services to which such costs relate. The amount of amortization expense that the Sunoco LP recognized for the
three months ended
March 31, 2019
and
2018
was
$4 million
and
$3 million
, respectively. Sunoco LP has also made a policy election of expensing the costs to obtain a contract, as and when they are incurred, in cases where the expected amortization period is one year or less.
Lessee Accounting
The Partnership leases terminal facilities, tank cars, office space, land and equipment under non-cancelable operating leases whose initial terms are typically
five
to
15
years, with some real estate leases having terms of
40
years or more, along with options that permit renewals for additional periods. At the inception of each, we determine if the arrangement is a lease or contains an embedded lease and review the facts and circumstances of the arrangement to classify lease assets as operating or finance leases under Topic 842. The Partnership has elected not to record any leases with terms of 12 months or less on the balance sheet.
At present, the majority of the Partnership’s active leases are classified as operating in accordance with Topic 842. Balances related to operating leases are included in operating lease ROU assets, accrued and other current liabilities, operating lease current liabilities and non-current operating lease liabilities in our consolidated balance sheets. Finance leases represent a small portion of the active lease agreements and are included in finance lease ROU assets, current maturities of long-term
debt and long-term debt, less current maturities in our consolidated balance sheets. The ROU assets represent the Partnership’s right to use an underlying asset for the lease term and lease liabilities represent the obligation of the Partnership to make minimum lease payments arising from the lease for the duration of the lease term.
Most leases include one or more options to renew, with renewal terms that can extend the lease term from
one
to
20
years or greater. The exercise of lease renewal options is typically at the sole discretion of the Partnership and lease extensions are evaluated on a lease-by-lease basis. Leases containing early termination clauses typically require the agreement of both parties to the lease. At the inception of a lease, all renewal options reasonably certain to be exercised are considered when determining the lease term. Presently, the Partnership does not have leases that include options to purchase or automatic transfer of ownership of the leased property to the Partnership. The depreciable life of lease assets and leasehold improvements are limited by the expected lease term.
To determine the present value of future minimum lease payments, we use the implicit rate when readily determinable. Presently, because many of our leases do not provide an implicit rate, the Partnership applies its incremental borrowing rate based on the information available at the lease commencement date to determine the present value of minimum lease payments. The operating and finance lease ROU assets include any lease payments made and exclude lease incentives.
Minimum rent payments are expensed on a straight-line basis over the term of the lease. In addition, some leases require additional contingent or variable lease payments, which are based on the factors specific to the individual agreement. Variable lease payments the Partnership is typically responsible for include payment of real estate taxes, maintenance expenses and insurance.
For short-term leases (leases that have term of twelve months or less upon commencement), lease payments are recognized on a straight-line basis and no ROU assets are recorded.
The Partnership maintains a small number of active related party leases.
The components of operating and finance lease amounts recognized in the accompanying consolidated balance sheet as of
March 31, 2019
were as follows:
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
Operating leases:
|
|
|
Lease right-of-use assets, net
|
$
|
868
|
|
|
Operating lease current liabilities
|
68
|
|
|
Accrued and other current liabilities
|
1
|
|
|
Non-current operating lease liabilities
|
817
|
|
|
Finance leases:
|
|
|
Property, plant and equipment, net
|
$
|
2
|
|
|
Lease right-of-use assets, net
|
4
|
|
|
Accrued and other current liabilities
|
1
|
|
|
Long-term debt, less current maturities
|
7
|
|
|
Other non-current liabilities
|
2
|
|
The components of lease expense for the
three months ended
March 31, 2019
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement Location
|
|
Three Months Ended March 31, 2019
|
|
Operating lease costs:
|
|
|
|
Operating lease cost
|
|
Cost of goods sold
|
|
$
|
8
|
|
|
Operating lease cost
|
|
Operating expenses
|
|
17
|
|
|
Operating lease cost
|
|
Selling, general and administrative
|
|
3
|
|
|
Total operating lease costs
|
|
28
|
|
|
Finance lease costs:
|
|
|
|
Amortization of lease assets
|
|
Depreciation, depletion and amortization
|
|
1
|
|
|
Short-term lease cost
|
|
Operating expenses
|
|
11
|
|
|
Variable lease cost
|
|
Operating expenses
|
|
3
|
|
|
Lease costs, gross
|
|
43
|
|
|
Less: Sublease income
|
|
Other revenue
|
|
11
|
|
|
Lease costs, net
|
|
$
|
32
|
|
The weighted average remaining lease terms and weighted average discount rates as of
March 31, 2019
were as follows:
|
|
|
|
|
|
|
|
March 31, 2019
|
|
Weighted-average remaining lease term (years):
|
|
|
Operating leases
|
21
|
|
|
Finance leases
|
10
|
|
|
Weighted-average discount rate (%):
|
|
|
Operating leases
|
5
|
%
|
|
Finance leases
|
8
|
%
|
Cash flows and non-cash activity related to leases for the
three months ended
March 31, 2019
were as follows:
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
Operating cash flows from operating leases
|
$
|
(34
|
)
|
|
Lease assets obtained in exchange for new operating lease liabilities
|
8
|
|
Maturities of lease liabilities as of
March 31, 2019
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
Finance leases
|
|
Total
|
|
2019 (remainder)
|
$
|
85
|
|
|
$
|
2
|
|
|
$
|
87
|
|
|
2020
|
96
|
|
|
2
|
|
|
98
|
|
|
2021
|
84
|
|
|
2
|
|
|
86
|
|
|
2022
|
71
|
|
|
1
|
|
|
72
|
|
|
2023
|
67
|
|
|
1
|
|
|
68
|
|
|
Thereafter
|
1,148
|
|
|
7
|
|
|
1,155
|
|
|
Total lease payments
|
1,551
|
|
|
15
|
|
|
1,566
|
|
|
Less: present value discount
|
665
|
|
|
5
|
|
|
670
|
|
|
Present value of lease liabilities
|
$
|
886
|
|
|
$
|
10
|
|
|
$
|
896
|
|
Lessor Accounting
The Partnership leases or subleases a portion of its real estate portfolio to third-party companies as a stable source of long-term revenue. Our lessor and sublease portfolio consists mainly of operating leases with convenience store operators. At this time, most lessor agreements contain
five
-year terms with renewal options to extend and early termination options based on established terms specific to the individual agreement.
Rental income included in other revenue in our consolidated income statement for the
three months ended
March 31, 2019
was
$36 million
.
Future minimum operating lease payments receivable as of
March 31, 2019
are as follows:
|
|
|
|
|
|
|
|
|
Lease Payments
|
|
2019 (remainder)
|
$
|
68
|
|
|
2020
|
72
|
|
|
2021
|
59
|
|
|
2022
|
53
|
|
|
2023
|
3
|
|
|
Thereafter
|
5
|
|
|
Total undiscounted cash flows
|
$
|
260
|
|
|
|
|
|
13.
|
DERIVATIVE ASSETS AND LIABILITIES
|
Commodity Price Risk
We are exposed to market risks related to the volatility of commodity prices. To manage the impact of volatility from these prices, we utilize various exchange-traded and OTC commodity financial instrument contracts. These contracts consist primarily of futures, swaps and options and are recorded at fair value in our consolidated balance sheets.
We use futures and basis swaps, designated as fair value hedges, to hedge our natural gas inventory stored in our Bammel storage facility. At hedge inception, we lock in a margin by purchasing gas in the spot market or off peak season and entering into a financial contract. Changes in the spreads between the forward natural gas prices and the physical inventory spot price result in unrealized gains or losses until the underlying physical gas is withdrawn and the related designated derivatives are settled. Once the gas is withdrawn and the designated derivatives are settled, the previously unrealized gains or losses associated with these positions are realized.
We use futures, swaps and options to hedge the sales price of natural gas we retain for fees in our intrastate transportation and storage segment and operational gas sales in our interstate transportation and storage segment. These contracts are not designated as hedges for accounting purposes.
We use NGL and crude derivative swap contracts to hedge forecasted sales of NGL and condensate equity volumes we retain for fees in our midstream segment whereby our subsidiaries generally gather and process natural gas on behalf of producers, sell the resulting residue gas and NGL volumes at market prices and remit to producers an agreed upon percentage of the proceeds based on an index price for the residue gas and NGL. These contracts are not designated as hedges for accounting purposes.
We utilize swaps, futures and other derivative instruments to mitigate the risk associated with market movements in the price of refined products and NGLs to manage our storage facilities and the purchase and sale of purity NGL. These contracts are not designated as hedges for accounting purposes.
We use futures and swaps to achieve ratable pricing of crude oil purchases, to convert certain expected refined product sales to fixed or floating prices, to lock in margins for certain refined products and to lock in the price of a portion of natural gas purchases or sales. These contracts are not designated as hedges for accounting purposes.
We use financial commodity derivatives to take advantage of market opportunities in our trading activities which complement our transportation and storage segment’s operations and are netted in cost of products sold in our consolidated statements of operations. We also have trading and marketing activities related to power and natural gas in our all other segment which are also netted in cost of products sold. As a result of our trading activities and the use of derivative financial instruments in our transportation and storage segment, the degree of earnings volatility that can occur may be significant, favorably or unfavorably,
from period to period. We attempt to manage this volatility through the use of daily position and profit and loss reports provided to our risk oversight committee, which includes members of senior management, and the limits and authorizations set forth in our commodity risk management policy.
The following table details our outstanding commodity-related derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
|
Notional Volume
|
|
Maturity
|
|
Notional Volume
|
|
Maturity
|
|
Mark-to-Market Derivatives
|
|
|
|
|
|
|
|
|
(Trading)
|
|
|
|
|
|
|
|
|
Natural Gas (BBtu):
|
|
|
|
|
|
|
|
|
Fixed Swaps/Futures
|
610
|
|
|
2019-2021
|
|
468
|
|
|
2019
|
|
Basis Swaps IFERC/NYMEX
(1)
|
2,595
|
|
|
2019-2020
|
|
16,845
|
|
|
2019-2020
|
|
Options – Puts
|
10,000
|
|
|
2019
|
|
10,000
|
|
|
2019
|
|
Power (Megawatt):
|
|
|
|
|
|
|
|
|
Forwards
|
2,554,800
|
|
|
2019-2020
|
|
3,141,520
|
|
|
2019
|
|
Futures
|
14,776
|
|
|
2019-2021
|
|
56,656
|
|
|
2019-2021
|
|
Options – Puts
|
(144,611
|
)
|
|
2019-2021
|
|
18,400
|
|
|
2019
|
|
Options – Calls
|
391,740
|
|
|
2019
|
|
284,800
|
|
|
2019
|
|
(Non-Trading)
|
|
|
|
|
|
|
|
|
Natural Gas (BBtu):
|
|
|
|
|
|
|
|
|
Basis Swaps IFERC/NYMEX
|
(18,250
|
)
|
|
2019-2022
|
|
(30,228
|
)
|
|
2019-2021
|
|
Swing Swaps IFERC
|
39,685
|
|
|
2019-2020
|
|
54,158
|
|
|
2019-2020
|
|
Fixed Swaps/Futures
|
80
|
|
|
2019-2021
|
|
(1,068
|
)
|
|
2019-2021
|
|
Forward Physical Contracts
|
(27,096
|
)
|
|
2019-2021
|
|
(123,254
|
)
|
|
2019-2020
|
|
NGL (MBbls) – Forwards/Swaps
|
(857
|
)
|
|
2019-2021
|
|
(2,135
|
)
|
|
2019
|
|
Crude (MBbls) – Forwards/Swaps
|
13,832
|
|
|
2019
|
|
20,888
|
|
|
2019
|
|
Refined Products (MBbls) – Futures
|
(592
|
)
|
|
2019-2021
|
|
(1,403
|
)
|
|
2019
|
|
Corn (thousand bushels)
|
(2,070
|
)
|
|
2019
|
|
(1,920
|
)
|
|
2019
|
|
Fair Value Hedging Derivatives
|
|
|
|
|
|
|
|
|
(Non-Trading)
|
|
|
|
|
|
|
|
|
Natural Gas (BBtu):
|
|
|
|
|
|
|
|
|
Basis Swaps IFERC/NYMEX
|
(30,958
|
)
|
|
2019-2020
|
|
(17,445
|
)
|
|
2019
|
|
Fixed Swaps/Futures
|
(30,958
|
)
|
|
2019-2020
|
|
(17,445
|
)
|
|
2019
|
|
Hedged Item – Inventory
|
30,958
|
|
|
2019-2020
|
|
17,445
|
|
|
2019
|
|
|
|
|
(1)
|
Includes aggregate amounts for open positions related to Houston Ship Channel, Waha Hub, NGPL TexOk, West Louisiana Zone and Henry Hub locations.
|
Interest Rate Risk
We are exposed to market risk for changes in interest rates. To maintain a cost effective capital structure, we borrow funds using a mix of fixed rate debt and variable rate debt. We also manage our interest rate exposure by utilizing interest rate swaps to achieve a desired mix of fixed and variable rate debt. We also utilize forward starting interest rate swaps to lock in the rate on a portion of our anticipated debt issuances.
The following table summarizes our interest rate swaps outstanding, none of which were designated as hedges for accounting purposes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term
|
|
Type
(1)
|
|
Notional Amount Outstanding
|
|
March 31, 2019
|
|
December 31, 2018
|
|
July 2019
(2)
|
|
Forward-starting to pay a fixed rate of 3.56% and receive a floating rate
|
|
$
|
400
|
|
|
$
|
400
|
|
|
July 2020
(2)
|
|
Forward-starting to pay a fixed rate of 3.52% and receive a floating rate
|
|
400
|
|
|
400
|
|
|
July 2021
(2)
|
|
Forward-starting to pay a fixed rate of 3.55% and receive a floating rate
|
|
400
|
|
|
400
|
|
|
March 2019
|
|
Pay a floating rate and receive a fixed rate of 1.42%
|
|
—
|
|
|
300
|
|
|
|
|
|
(1)
|
Floating rates are based on 3-month LIBOR.
|
|
|
|
|
(2)
|
Represents the effective date. These forward-starting swaps have terms of 30 years with a mandatory termination date the same as the effective date.
|
Credit Risk
Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a loss to the Partnership. Credit policies have been approved and implemented to govern the Partnership’s portfolio of counterparties with the objective of mitigating credit losses. These policies establish guidelines, controls and limits to manage credit risk within approved tolerances by mandating an appropriate evaluation of the financial condition of existing and potential counterparties, monitoring agency credit ratings, and by implementing credit practices that limit exposure according to the risk profiles of the counterparties. Furthermore, the Partnership may, at times, require collateral under certain circumstances to mitigate credit risk as necessary. The Partnership also uses industry standard commercial agreements which allow for the netting of exposures associated with transactions executed under a single commercial agreement. Additionally, we utilize master netting agreements to offset credit exposure across multiple commercial agreements with a single counterparty or affiliated group of counterparties.
The Partnership’s counterparties consist of a diverse portfolio of customers across the energy industry, including petrochemical companies, commercial and industrial end-users, oil and gas producers, municipalities, gas and electric utilities, midstream companies and independent power generators. Our overall exposure may be affected positively or negatively by macroeconomic or regulatory changes that impact our counterparties to one extent or another. Currently, management does not anticipate a material adverse effect in our financial position or results of operations as a consequence of counterparty non-performance.
The Partnership has maintenance margin deposits with certain counterparties in the OTC market, primarily with independent system operators and with clearing brokers. Payments on margin deposits are required when the value of a derivative exceeds our pre-established credit limit with the counterparty. Margin deposits are returned to us on or about the settlement date for non-exchange traded derivatives, and we exchange margin calls on a daily basis for exchange traded transactions. Since the margin calls are made daily with the exchange brokers, the fair value of the financial derivative instruments are deemed current and netted in deposits paid to vendors within other current assets in the consolidated balance sheets.
For financial instruments, failure of a counterparty to perform on a contract could result in our inability to realize amounts that have been recorded on our consolidated balance sheets and recognized in net income or other comprehensive income.
Derivative Summary
The following table provides a summary of our derivative assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Derivative Instruments
|
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
Commodity derivatives (margin deposits)
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
(13
|
)
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
Commodity derivatives (margin deposits)
|
|
209
|
|
|
402
|
|
|
(248
|
)
|
|
(397
|
)
|
|
Commodity derivatives
|
|
127
|
|
|
158
|
|
|
(60
|
)
|
|
(173
|
)
|
|
Interest rate derivatives
|
|
—
|
|
|
—
|
|
|
(232
|
)
|
|
(163
|
)
|
|
|
|
336
|
|
|
560
|
|
|
(540
|
)
|
|
(733
|
)
|
|
Total derivatives
|
|
$
|
338
|
|
|
$
|
560
|
|
|
$
|
(541
|
)
|
|
$
|
(746
|
)
|
The following table presents the fair value of our recognized derivative assets and liabilities on a gross basis and amounts offset on the consolidated balance sheets that are subject to enforceable master netting arrangements or similar arrangements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
|
|
|
Balance Sheet Location
|
|
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Derivatives without offsetting agreements
|
|
Derivative liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(232
|
)
|
|
$
|
(163
|
)
|
|
Derivatives in offsetting agreements:
|
|
|
|
|
|
|
|
|
|
OTC contracts
|
|
Derivative assets (liabilities)
|
|
127
|
|
|
158
|
|
|
(60
|
)
|
|
(173
|
)
|
|
Broker cleared derivative contracts
|
|
Other current assets (liabilities)
|
|
211
|
|
|
402
|
|
|
(249
|
)
|
|
(410
|
)
|
|
Total gross derivatives
|
|
338
|
|
|
560
|
|
|
(541
|
)
|
|
(746
|
)
|
|
Offsetting agreements:
|
|
|
|
|
|
|
|
|
|
Counterparty netting
|
|
Derivative assets (liabilities)
|
|
(57
|
)
|
|
(47
|
)
|
|
57
|
|
|
47
|
|
|
Counterparty netting
|
|
Other current assets (liabilities)
|
|
(207
|
)
|
|
(397
|
)
|
|
207
|
|
|
397
|
|
|
Total net derivatives
|
|
$
|
74
|
|
|
$
|
116
|
|
|
$
|
(277
|
)
|
|
$
|
(302
|
)
|
We disclose the non-exchange traded financial derivative instruments as derivative assets and liabilities on our consolidated balance sheets at fair value with amounts classified as either current or long-term depending on the anticipated settlement date.
The following tables summarize the amounts recognized in income with respect to our derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain Recognized in Income on Derivatives
|
|
Amount of Gain Recognized in Income Representing Hedge Ineffectiveness and Amount Excluded from the Assessment of Effectiveness
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2019
|
|
2018
|
|
Derivatives in fair value hedging relationships (including hedged item):
|
|
|
|
|
|
|
Commodity derivatives
|
Cost of products sold
|
|
$
|
—
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Gain (Loss) Recognized in Income on Derivatives
|
|
Amount of Gain (Loss) Recognized in Income on Derivatives
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2019
|
|
2018
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
Commodity derivatives – Trading
|
Cost of products sold
|
|
$
|
5
|
|
|
$
|
17
|
|
|
Commodity derivatives – Non-trading
|
Cost of products sold
|
|
(12
|
)
|
|
(71
|
)
|
|
Interest rate derivatives
|
Gains (losses) on interest rate derivatives
|
|
(74
|
)
|
|
52
|
|
|
Total
|
|
|
$
|
(81
|
)
|
|
$
|
(2
|
)
|
|
|
|
|
14.
|
RELATED PARTY TRANSACTIONS
|
In October 2018, in connection with the Energy Transfer Merger, ET and ETO entered into an intercompany promissory note (“ET-ETO Promissory Note A”) for an aggregate amount up to
$2.20 billion
that accrues interest at a weighted average rate based on interest payable by ETO on its outstanding indebtedness. The ET-ETO Promissory Note A matures on October 18, 2019. As of
March 31, 2019
and
December 31, 2018
, the ET-ETO Promissory Note A had outstanding balances of
$1.07 billion
and
$440 million
, respectively. Amount outstanding was classified as long-term as of
March 31, 2019
as management anticipates refinancing the borrowing on a long-term basis.
In March 2019, in connection with the ET-ETO senior notes exchange, ET and ETO entered into an intercompany promissory note (“ET-ETO Promissory Note B”) for an aggregate amount up to
$4.25 billion
that accrues interest at a weighted average rate based on interest payable by ETO on its outstanding indebtedness. The ET-ETO Promissory Note B matures on December 31, 2024. As of
March 31, 2019
the ET-ETO Promissory Note B had an outstanding balance of
$4.21 billion
.
As of
March 31, 2019
, ETO has a long-term intercompany payable due to ET of
$41 million
, which has been netted against the outstanding promissory notes receivable in our consolidated balance sheet.
The Partnership also has related party transactions with several of its equity method investees. In addition to commercial transactions, these transactions include the provision of certain management services and leases of certain assets.
The following table summarizes the revenues from related companies on our consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
2018
|
|
Revenues from related companies
|
$
|
109
|
|
|
$
|
102
|
|
The following table summarizes the related company balances on our consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Accounts receivable from related companies:
|
|
|
|
|
ET
|
$
|
55
|
|
|
$
|
65
|
|
|
FGT
|
32
|
|
|
25
|
|
|
Phillips 66
|
33
|
|
|
42
|
|
|
Other
|
54
|
|
|
44
|
|
|
Total accounts receivable from related companies
|
$
|
174
|
|
|
$
|
176
|
|
|
|
|
|
|
|
Accounts payable to related companies:
|
|
|
|
|
ET
|
$
|
—
|
|
|
$
|
59
|
|
|
Other
|
53
|
|
|
60
|
|
|
Total accounts payable to related companies
|
$
|
53
|
|
|
$
|
119
|
|
As a result of the Energy Transfer Merger in October 2018, our reportable segments were reevaluated and currently reflect the following segments, which conduct their business primarily in the United States:
•
intrastate transportation and storage
;
•
interstate transportation and storage
;
•
midstream
;
•
NGL and refined products transportation and services
;
•
crude oil transportation and services
;
•
investment in Sunoco LP
;
•
investment in USAC
; and
•
all other
.
Consolidated revenues and expenses reflect the elimination of all material intercompany transactions.
The investment in USAC segment reflects the results of USAC beginning April 2018, the date that the Partnership obtained control of USAC.
Revenues from our intrastate transportation and storage segment are primarily reflected in natural gas sales and gathering, transportation and other fees. Revenues from our interstate transportation and storage segment are primarily reflected in gathering, transportation and other fees. Revenues from our midstream segment are primarily reflected in natural gas sales, NGL sales and gathering, transportation and other fees. Revenues from our NGL and refined products transportation and services segment are primarily reflected in NGL sales and gathering, transportation, terminalling and other fees. Revenues from our crude oil transportation and services segment are primarily reflected in crude sales. Revenues from our investment in Sunoco LP segment are primarily reflected in refined product sales. Revenues from our investment in USAC segment are primarily reflected in gathering, transportation and other fees. Revenues from our all other segment are primarily reflected in natural gas sales.
We report Segment Adjusted EBITDA as a measure of segment performance. We define Segment Adjusted EBITDA as total partnership earnings before interest, taxes, depreciation, depletion, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, non-cash impairment charges, losses on extinguishments of debt 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 valuation adjustments (excluding lower of cost or market adjustments). Segment Adjusted EBITDA reflects amounts for unconsolidated affiliates based on our proportionate ownership.
The following tables present financial information by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
2018
|
|
Revenues:
|
|
|
|
|
Intrastate transportation and storage:
|
|
|
|
|
Revenues from external customers
|
$
|
769
|
|
|
$
|
817
|
|
|
Intersegment revenues
|
87
|
|
|
58
|
|
|
|
856
|
|
|
875
|
|
|
Interstate transportation and storage:
|
|
|
|
|
Revenues from external customers
|
492
|
|
|
362
|
|
|
Intersegment revenues
|
6
|
|
|
3
|
|
|
|
498
|
|
|
365
|
|
|
Midstream:
|
|
|
|
|
Revenues from external customers
|
663
|
|
|
440
|
|
|
Intersegment revenues
|
1,055
|
|
|
1,174
|
|
|
|
1,718
|
|
|
1,614
|
|
|
NGL and refined products transportation and services:
|
|
|
|
|
Revenues from external customers
|
2,713
|
|
|
2,263
|
|
|
Intersegment revenues
|
318
|
|
|
283
|
|
|
|
3,031
|
|
|
2,546
|
|
|
Crude oil transportation and services:
|
|
|
|
|
Revenues from external customers
|
4,167
|
|
|
3,731
|
|
|
Intersegment revenues
|
19
|
|
|
14
|
|
|
|
4,186
|
|
|
3,745
|
|
|
Investment in Sunoco LP:
|
|
|
|
|
Revenues from external customers
|
3,692
|
|
|
3,748
|
|
|
Intersegment revenues
|
—
|
|
|
1
|
|
|
|
3,692
|
|
|
3,749
|
|
|
Investment in USAC:
|
|
|
|
|
Revenues from external customers
|
167
|
|
|
—
|
|
|
Intersegment revenues
|
4
|
|
|
—
|
|
|
|
171
|
|
|
—
|
|
|
All other:
|
|
|
|
|
Revenues from external customers
|
458
|
|
|
521
|
|
|
Intersegment revenues
|
39
|
|
|
50
|
|
|
|
497
|
|
|
571
|
|
|
Eliminations
|
(1,528
|
)
|
|
(1,583
|
)
|
|
Total revenues
|
$
|
13,121
|
|
|
$
|
11,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
2018
|
|
Segment Adjusted EBITDA:
|
|
|
|
|
Intrastate transportation and storage
|
$
|
252
|
|
|
$
|
192
|
|
|
Interstate transportation and storage
|
456
|
|
|
366
|
|
|
Midstream
|
382
|
|
|
377
|
|
|
NGL and refined products transportation and services
|
612
|
|
|
451
|
|
|
Crude oil transportation and services
|
806
|
|
|
464
|
|
|
Investment in Sunoco LP
|
153
|
|
|
109
|
|
|
Investment in USAC
|
101
|
|
|
—
|
|
|
All other
|
33
|
|
|
45
|
|
|
Total
|
2,795
|
|
|
2,004
|
|
|
Depreciation, depletion and amortization
|
(771
|
)
|
|
(661
|
)
|
|
Interest expense, net
|
(527
|
)
|
|
(380
|
)
|
|
Impairment losses
|
(50
|
)
|
|
—
|
|
|
Gains (losses) on interest rate derivatives
|
(74
|
)
|
|
52
|
|
|
Non-cash compensation expense
|
(29
|
)
|
|
(23
|
)
|
|
Unrealized gains (losses) on commodity risk management activities
|
49
|
|
|
(87
|
)
|
|
Losses on extinguishments of debt
|
(2
|
)
|
|
(109
|
)
|
|
Inventory valuation adjustments
|
93
|
|
|
25
|
|
|
Adjusted EBITDA related to unconsolidated affiliates
|
(146
|
)
|
|
(156
|
)
|
|
Equity in earnings of unconsolidated affiliates
|
65
|
|
|
79
|
|
|
Adjusted EBITDA related to discontinued operations
|
—
|
|
|
20
|
|
|
Other, net
|
4
|
|
|
40
|
|
|
Income from continuing operations before income tax (expense) benefit
|
1,407
|
|
|
804
|
|
|
Income tax (expense) benefit
|
(126
|
)
|
|
10
|
|
|
Income from continuing operations
|
1,281
|
|
|
814
|
|
|
Loss from discontinued operations
|
—
|
|
|
(237
|
)
|
|
Net income
|
$
|
1,281
|
|
|
$
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Assets:
|
|
|
|
|
Intrastate transportation and storage
|
$
|
6,601
|
|
|
$
|
6,365
|
|
|
Interstate transportation and storage
|
15,161
|
|
|
15,081
|
|
|
Midstream
|
19,759
|
|
|
19,745
|
|
|
NGL and refined products transportation and services
|
19,185
|
|
|
18,267
|
|
|
Crude oil transportation and services
|
18,363
|
|
|
18,022
|
|
|
Investment in Sunoco LP
|
5,423
|
|
|
4,879
|
|
|
Investment in USAC
|
3,758
|
|
|
3,775
|
|
|
All other and eliminations
|
6,498
|
|
|
2,308
|
|
|
Total assets
|
$
|
94,748
|
|
|
$
|
88,442
|
|
|
|
|
|
16.
|
CONSOLIDATING GUARANTOR FINANCIAL INFORMATION
|
Sunoco Logistics Partners Operations L.P., a subsidiary of ETO, is the issuer of multiple series of senior notes that are guaranteed by ETO. These guarantees are full and unconditional. For the purposes of this footnote, Energy Transfer Operating,
L.P. is referred to as “Parent Guarantor” and Sunoco Logistics Partners Operations L.P. is referred to as “Subsidiary Issuer.” All other consolidated subsidiaries of the Partnership are collectively referred to as “Non-Guarantor Subsidiaries.”
The following supplemental condensed consolidating financial information reflects the Parent Guarantor’s separate accounts, the Subsidiary Issuer’s separate accounts, the combined accounts of the Non-Guarantor Subsidiaries, the combined consolidating adjustments and eliminations, and the Parent Guarantor’s consolidated accounts for the dates and periods indicated. For purposes of the following condensed consolidating information, the Parent Guarantor’s investments in its subsidiaries and the Subsidiary Issuer’s investments in its subsidiaries are accounted for under the equity method of accounting.
The consolidating financial information for the Parent Guarantor, Subsidiary Issuer and Non-Guarantor Subsidiaries are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
|
Parent Guarantor
|
|
Subsidiary Issuer
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Partnership
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
516
|
|
|
$
|
—
|
|
|
$
|
516
|
|
|
All other current assets
|
22
|
|
|
57
|
|
|
7,056
|
|
|
(468
|
)
|
|
6,667
|
|
|
Property, plant and equipment, net
|
—
|
|
|
—
|
|
|
67,013
|
|
|
—
|
|
|
67,013
|
|
|
Investments in unconsolidated affiliates
|
52,099
|
|
|
13,723
|
|
|
2,647
|
|
|
(65,822
|
)
|
|
2,647
|
|
|
All other assets
|
5,240
|
|
|
75
|
|
|
12,590
|
|
|
—
|
|
|
17,905
|
|
|
Total assets
|
$
|
57,361
|
|
|
$
|
13,855
|
|
|
$
|
89,822
|
|
|
$
|
(66,290
|
)
|
|
$
|
94,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
(674
|
)
|
|
$
|
(3,222
|
)
|
|
$
|
11,410
|
|
|
$
|
(892
|
)
|
|
$
|
6,622
|
|
|
Non-current liabilities
|
30,644
|
|
|
7,604
|
|
|
13,595
|
|
|
—
|
|
|
51,843
|
|
|
Noncontrolling interest
|
—
|
|
|
—
|
|
|
8,044
|
|
|
—
|
|
|
8,044
|
|
|
Total partners’ capital
|
27,391
|
|
|
9,473
|
|
|
56,773
|
|
|
(65,398
|
)
|
|
28,239
|
|
|
Total liabilities and equity
|
$
|
57,361
|
|
|
$
|
13,855
|
|
|
$
|
89,822
|
|
|
$
|
(66,290
|
)
|
|
$
|
94,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
Parent Guarantor
|
|
Subsidiary Issuer
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Partnership
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
418
|
|
|
$
|
—
|
|
|
$
|
418
|
|
|
All other current assets
|
5
|
|
|
57
|
|
|
7,074
|
|
|
(734
|
)
|
|
6,402
|
|
|
Property, plant and equipment, net
|
—
|
|
|
—
|
|
|
66,655
|
|
|
—
|
|
|
66,655
|
|
|
Investments in unconsolidated affiliates
|
51,876
|
|
|
13,090
|
|
|
2,636
|
|
|
(64,966
|
)
|
|
2,636
|
|
|
All other assets
|
12
|
|
|
75
|
|
|
12,244
|
|
|
—
|
|
|
12,331
|
|
|
Total assets
|
$
|
51,893
|
|
|
$
|
13,222
|
|
|
$
|
89,027
|
|
|
$
|
(65,700
|
)
|
|
$
|
88,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
(635
|
)
|
|
$
|
(3,315
|
)
|
|
$
|
14,469
|
|
|
$
|
(1,222
|
)
|
|
$
|
9,297
|
|
|
Non-current liabilities
|
24,787
|
|
|
7,605
|
|
|
10,132
|
|
|
—
|
|
|
42,524
|
|
|
Noncontrolling interest
|
—
|
|
|
—
|
|
|
7,903
|
|
|
—
|
|
|
7,903
|
|
|
Total partners’ capital
|
27,741
|
|
|
8,932
|
|
|
56,523
|
|
|
(64,478
|
)
|
|
28,718
|
|
|
Total liabilities and equity
|
$
|
51,893
|
|
|
$
|
13,222
|
|
|
$
|
89,027
|
|
|
$
|
(65,700
|
)
|
|
$
|
88,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
Parent Guarantor
|
|
Subsidiary Issuer
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Partnership
|
|
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,121
|
|
|
$
|
—
|
|
|
$
|
13,121
|
|
|
Operating costs, expenses, and other
|
—
|
|
|
—
|
|
|
11,193
|
|
|
—
|
|
|
11,193
|
|
|
Operating income
|
—
|
|
|
—
|
|
|
1,928
|
|
|
—
|
|
|
1,928
|
|
|
Interest expense, net
|
(362
|
)
|
|
(66
|
)
|
|
(99
|
)
|
|
—
|
|
|
(527
|
)
|
|
Equity in earnings of unconsolidated affiliates
|
1,427
|
|
|
611
|
|
|
65
|
|
|
(2,038
|
)
|
|
65
|
|
|
Losses on extinguishments of debt
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
|
Gains on interest rate derivatives
|
(74
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(74
|
)
|
|
Other, net
|
21
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
17
|
|
|
Income before income tax expense
|
1,012
|
|
|
545
|
|
|
1,888
|
|
|
(2,038
|
)
|
|
1,407
|
|
|
Income tax expense
|
—
|
|
|
—
|
|
|
126
|
|
|
—
|
|
|
126
|
|
|
Net income
|
1,012
|
|
|
545
|
|
|
1,762
|
|
|
(2,038
|
)
|
|
1,281
|
|
|
Less: Net income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
256
|
|
|
—
|
|
|
256
|
|
|
Less: Net income attributable to redeemable noncontrolling interest
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
|
Net income attributable to partners
|
$
|
1,012
|
|
|
$
|
545
|
|
|
$
|
1,493
|
|
|
$
|
(2,038
|
)
|
|
$
|
1,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
Comprehensive income
|
1,012
|
|
|
545
|
|
|
1,770
|
|
|
(2,038
|
)
|
|
1,289
|
|
|
Comprehensive income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
256
|
|
|
—
|
|
|
256
|
|
|
Comprehensive income attributable to redeemable noncontrolling interest
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
|
Comprehensive income attributable to partners
|
$
|
1,012
|
|
|
$
|
545
|
|
|
$
|
1,501
|
|
|
$
|
(2,038
|
)
|
|
$
|
1,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018
|
|
|
Parent Guarantor
|
|
Subsidiary Issuer
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Partnership
|
|
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,882
|
|
|
$
|
—
|
|
|
$
|
11,882
|
|
|
Operating costs, expenses, and other
|
—
|
|
|
—
|
|
|
10,777
|
|
|
—
|
|
|
10,777
|
|
|
Operating income
|
—
|
|
|
—
|
|
|
1,105
|
|
|
—
|
|
|
1,105
|
|
|
Interest expense, net
|
(278
|
)
|
|
(40
|
)
|
|
(62
|
)
|
|
—
|
|
|
(380
|
)
|
|
Equity in earnings of unconsolidated affiliates
|
941
|
|
|
260
|
|
|
79
|
|
|
(1,201
|
)
|
|
79
|
|
|
Losses on extinguishments of debt
|
—
|
|
|
—
|
|
|
(109
|
)
|
|
—
|
|
|
(109
|
)
|
|
Gains on interest rate derivatives
|
52
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52
|
|
|
Other, net
|
—
|
|
|
—
|
|
|
57
|
|
|
—
|
|
|
57
|
|
|
Income from continuing operations before income tax benefit
|
715
|
|
|
220
|
|
|
1,070
|
|
|
(1,201
|
)
|
|
804
|
|
|
Income tax benefit
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
|
Net income from continuing operations
|
715
|
|
|
220
|
|
|
1,080
|
|
|
(1,201
|
)
|
|
814
|
|
|
Loss from discontinued operations
|
—
|
|
|
—
|
|
|
(237
|
)
|
|
—
|
|
|
(237
|
)
|
|
Net income
|
715
|
|
|
220
|
|
|
843
|
|
|
(1,201
|
)
|
|
577
|
|
|
Less: Net income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
164
|
|
|
—
|
|
|
164
|
|
|
Less: Net loss attributable to predecessor equity
|
—
|
|
|
—
|
|
|
(302
|
)
|
|
—
|
|
|
(302
|
)
|
|
Net income attributable to partners
|
$
|
715
|
|
|
$
|
220
|
|
|
$
|
981
|
|
|
$
|
(1,201
|
)
|
|
$
|
715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
Comprehensive income
|
715
|
|
|
220
|
|
|
844
|
|
|
(1,201
|
)
|
|
578
|
|
|
Comprehensive income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
164
|
|
|
—
|
|
|
164
|
|
|
Comprehensive loss attributable to predecessor equity
|
—
|
|
|
—
|
|
|
(302
|
)
|
|
—
|
|
|
(302
|
)
|
|
Comprehensive income attributable to partners
|
$
|
715
|
|
|
$
|
220
|
|
|
$
|
982
|
|
|
$
|
(1,201
|
)
|
|
$
|
716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
Parent Guarantor
|
|
Subsidiary Issuer
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Partnership
|
|
Cash flows provided by operating activities
|
$
|
1,026
|
|
|
$
|
314
|
|
|
$
|
1,184
|
|
|
$
|
(678
|
)
|
|
$
|
1,846
|
|
|
Cash flows provided by (used in) investing activities
|
(123
|
)
|
|
(314
|
)
|
|
(1,339
|
)
|
|
678
|
|
|
(1,098
|
)
|
|
Cash flows provided by (used in) financing activities
|
(903
|
)
|
|
—
|
|
|
253
|
|
|
—
|
|
|
(650
|
)
|
|
Change in cash
|
—
|
|
|
—
|
|
|
98
|
|
|
—
|
|
|
98
|
|
|
Cash at beginning of period
|
—
|
|
|
—
|
|
|
418
|
|
|
—
|
|
|
418
|
|
|
Cash at end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
516
|
|
|
$
|
—
|
|
|
$
|
516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018
|
|
|
Parent Guarantor
|
|
Subsidiary Issuer
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated Partnership
|
|
Cash flows provided by operating activities
|
$
|
1,147
|
|
|
$
|
434
|
|
|
$
|
2,475
|
|
|
$
|
(1,841
|
)
|
|
$
|
2,215
|
|
|
Cash flows used in investing activities
|
(1,554
|
)
|
|
(431
|
)
|
|
(1,557
|
)
|
|
1,841
|
|
|
(1,701
|
)
|
|
Cash flows provided by (used in) financing activities
|
407
|
|
|
—
|
|
|
(3,450
|
)
|
|
—
|
|
|
(3,043
|
)
|
|
Net increase in cash and cash equivalents of discontinued operations
|
—
|
|
|
—
|
|
|
2,740
|
|
|
—
|
|
|
2,740
|
|
|
Change in cash
|
—
|
|
|
3
|
|
|
208
|
|
|
—
|
|
|
211
|
|
|
Cash at beginning of period
|
—
|
|
|
(2
|
)
|
|
337
|
|
|
—
|
|
|
335
|
|
|
Cash at end of period
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
545
|
|
|
$
|
—
|
|
|
$
|
546
|
|
