EX-99.1 2 etpearningsrelease-9x30x20.htm ENERGY TRANSFER PARTNERS, L.P. PRESS RELEASE DATED NOVEMBER 7, 2012 ETP Earnings Release - 9-30-2012 - Ex 99.1




ENERGY TRANSFER PARTNERS
REPORTS THIRD QUARTER RESULTS


Dallas - November 7, 2012 - Energy Transfer Partners, L.P. (NYSE:ETP) today reported its financial results for the quarter ended September 30, 2012.

Adjusted EBITDA for Energy Transfer Partners, L.P. ("ETP" or the "Partnership") for the three months ended September 30, 2012 totaled $481.7 million, an increase of $77.5 million over the three months ended September 30, 2011. Distributable Cash Flow for the three months ended September 30, 2012 totaled $339.5 million, an increase of $73.4 million over the three months ended September 30, 2011. Income from continuing operations for the three months ended September 30, 2012 was $193.4 million, an increase of $115.8 million over the three months ended September 30, 2011. Net income for the three months ended September 30, 2012 totaled $46.2 million, a decrease of $29.8 million from the three months ended September 30, 2011.

Adjusted EBITDA for ETP for the nine months ended September 30, 2012 totaled $1.48 billion, an increase of $220.5 million over the nine months ended September 30, 2011. Distributable Cash Flow for the nine months ended September 30, 2012 totaled $935.2 million, an increase of $108.7 million from the nine months ended September 30, 2011. Income from continuing operations for the nine months ended September 30, 2012 was $1.45 billion, an increase of $961.8 million over the nine months ended September 30, 2011. Net income for the nine months ended September 30, 2012 totaled $1.30 billion, an increase of $816.2 million over the nine months ended September 30, 2011.
As of and during the nine months ended September 30, 2012, ETP's financial position and operating results were impacted by the following transactions:
•
Citrus Dropdown. ETP acquired a 50% interest in Citrus Corp. (“Citrus”) in exchange for approximately $1.9 billion in cash and $105.0 million of ETP common units. Citrus was reflected as an equity method investment in ETP's consolidated financial statements from the date of acquisition, March 26, 2012. In connection with this transaction, ETE also relinquished its rights to $220.0 million of the incentive distributions from ETP that it would otherwise be entitled to receive over 16 consecutive quarters.
•
Propane Contribution. On January 12, 2012, ETP completed the contribution of its retail propane operations to AmeriGas Partners, L.P. (“AmeriGas”) in exchange for approximately $2.7 billion, consisting of cash and AmeriGas common units (the "Propane Contribution"), which resulted in the recognition of a $1.1 billion gain on deconsolidation in ETP's consolidated financial statements during the nine months ended September 30, 2012, and ETP's consolidated financial statements now reflect ETP's equity method investment in AmeriGas.
•
Tender Offer. ETP used the cash proceeds from the Propane Contribution discussed above to repay borrowings under its existing revolving credit facility and to extinguish approximately $750.0 million of senior notes outstanding through a tender offer. As a result of the tender offer, a loss on extinguishment of debt of $115.0 million was recorded during the three months ended March 31, 2012.
•
Discontinued Operations. In October 2012, we sold ETC Canyon Pipeline, LLC (“Canyon”) for approximately $207 million.  For the three and nine months ended September 30, 2012, the results of continuing operations of Canyon have been reclassified to loss from discontinued operations and the prior year amounts have been restated to present Canyon's operations as discontinued operations. Canyon's assets and liabilities have been reclassified and reported as assets and liabilities held for sale as of September 30, 2012, and a $145 million non-cash write-down of the carrying amounts of the Canyon assets to net recoverable value was recorded during the three months ended September 30, 2012.     

An analysis of the Partnership's segment results and other supplementary data is provided after the financial tables shown below. The Partnership has scheduled a conference call for 8:30 a.m. Central Time, Thursday November 8, 2012 to discuss the third quarter 2012 results. The conference call will be broadcast live via an internet web cast which can be accessed through www.energytransfer.com and will also be available for replay on the Partnership's website for a limited time.





Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures used by industry analysts, investors, lenders, and rating agencies to assess the financial performance and the operating results of the Partnership's fundamental business activities and should not be considered in isolation or as a substitute for net income, income from operations, cash flows from operating activities, or other GAAP measures. A table reconciling Adjusted EBITDA and Distributable Cash Flow with appropriate GAAP financial measures is included in the summarized financial information included in this release.

Energy Transfer Partners, L.P. (NYSE:ETP) is a master limited partnership owning and operating one of the largest and most diversified portfolios of energy assets in the United States. ETP currently has natural gas operations that include approximately 24,000 miles of gathering and transportation pipelines, treating and processing assets, and storage facilities. ETP also owns the general partner interests, 100% of the incentive distribution rights, and a 32.4% limited partnership interest in Sunoco Logistics Partners L.P. (NYSE:SXL), which operates a geographically diverse portfolio of crude oil and refined products pipelines, terminalling and crude oil acquisition and marketing assets. ETP also holds a 70% interest in Lone Star NGL, a joint venture that owns and operates natural gas liquids storage, fractionation and transportation assets in Texas, Louisiana and Mississippi. In addition, ETP holds controlling interest in a corporation (ETP Holdco Corporation) that owns Southern Union Company and Sunoco, Inc. ETP’s general partner is owned by Energy Transfer Equity, L.P. (NYSE:ETE). For more information, visit the Energy Transfer Partners, L.P. website at www.energytransfer.com.

Energy Transfer Equity, L.P. (NYSE:ETE) is a master limited partnership, which owns the general partner and 100% of the incentive distribution rights (IDRs) of Energy Transfer Partners, L.P. (NYSE:ETP) and approximately 50.2 million ETP limited partner units; and owns the general partner and 100% of the IDRs of Regency Energy Partners LP (NYSE:RGP) and approximately 26.3 million RGP limited partner units. ETE also owns a non-controlling interest in a corporation (ETP Holdco Corporation) that owns Southern Union Company and Sunoco, Inc. The ETE family of companies owns approximately 69,000 miles of natural gas, natural gas liquids, refined products, and crude pipelines. For more information, visit the Energy Transfer Equity, L.P. website at www.energytransfer.com.
Sunoco Logistics Partners L.P. (NYSE:SXL), headquartered in Philadelphia, is a master limited partnership that owns and operates a logistics business consisting of a geographically diverse portfolio of complementary pipeline, terminalling and crude oil acquisition and marketing assets. The Crude Oil Pipelines segment consists of approximately 5,400 miles of crude oil pipelines, located principally in Oklahoma and Texas. The Crude Oil Acquisition and Marketing segment consists of acquisition and marketing of crude oil and is principally conducted in the midcontinent and consists of approximately 200 crude oil transport trucks and approximately 120 crude oil truck unloading facilities. The Terminal Facilities segment consists of approximately 42 million shell barrels of refined products and crude oil terminal capacity (including approximately 22 million shell barrels of capacity at the Nederland Terminal on the Gulf Coast of Texas and approximately 5 million shell barrels of capacity at the Eagle Point terminal on the banks of the Delaware River in New Jersey). The Refined Products Pipelines segment consists of approximately 2,500 miles of refined products pipelines located in the northeast, midwest and southwest United States, and equity interests in four refined products pipelines. Sunoco Logistics' general partner is owned by Energy Transfer Partners, L.P. For more information, visit the Sunoco Logistics Partners, L.P. web site at www.sunocologistics.com.
The information contained in this press release is available on our website at www.energytransfer.com.
Contacts
Investor Relations:
Energy Transfer
Brent Ratliff
214-981-0700 (office)
Media Relations:
Vicki Granado
Granado Communications Group
214-599-8785 (office)
214-498-9272 (cell)







ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)

 
September 30,
2012
 
December 31,
2011
ASSETS
 
 
 
 
 
 
 
CURRENT ASSETS
$
1,089,717

 
$
1,275,494

 
 
 
 
PROPERTY, PLANT AND EQUIPMENT, net
12,858,320

 
12,306,366

 
 
 
 
NON-CURRENT ASSETS HELD FOR SALE
190,996

 
—

ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES
3,197,520

 
200,612

LONG-TERM PRICE RISK MANAGEMENT ASSETS
41,879

 
25,537

GOODWILL
600,152

 
1,219,597

INTANGIBLE ASSETS, net
161,847

 
331,409

OTHER NON-CURRENT ASSETS, net
157,129

 
159,601

Total assets
$
18,297,560

 
$
15,518,616

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
CURRENT LIABILITIES
$
1,570,481

 
$
1,585,169

 
 
 
 
LONG-TERM DEBT, less current maturities
8,690,740

 
7,388,170

LONG-TERM PRICE RISK MANAGEMENT LIABILITIES
72,660

 
42,303

OTHER NON-CURRENT LIABILITIES
174,351

 
152,550

 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
EQUITY:
 
 
 
Total partners' capital
6,913,196

 
5,721,707

Noncontrolling interest
876,132

 
628,717

Total equity
7,789,328

 
6,350,424

Total liabilities and equity
$
18,297,560

 
$
15,518,616






ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per unit data)
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
REVENUES:
 
 
 
 
 
 
 
Natural gas sales
$
603,449

 
$
679,889

 
$
1,480,729

 
$
1,963,135

NGL sales
326,841

 
333,078

 
1,011,735

 
756,740

Gathering, transportation and other fees
399,494

 
392,080

 
1,162,386

 
1,094,762

Retail propane sales
—

 
213,496

 
87,082

 
962,258

Other
90,690

 
82,920

 
198,830

 
217,085

Total revenues
1,420,474

 
1,701,463

 
3,940,762

 
4,993,980

COSTS AND EXPENSES:
 
 
 
 
 
 
 
Cost of products sold
886,888

 
1,070,076

 
2,319,318

 
3,067,316

Operating expenses
99,602

 
193,364

 
349,465

 
563,917

Depreciation and amortization
94,812

 
106,419

 
282,485

 
294,356

Selling, general and administrative
47,295

 
57,745

 
151,310

 
158,000

Total costs and expenses
1,128,597

 
1,427,604

 
3,102,578

 
4,083,589

OPERATING INCOME
291,877

 
273,859

 
838,184

 
910,391

OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
Interest expense, net of interest capitalized
(112,141
)
 
(124,000
)
 
(383,271
)
 
(347,706
)
Equity in earnings of unconsolidated affiliates
7,920

 
6,713

 
63,011

 
13,386

Gain on deconsolidation of Propane Business
—

 
—

 
1,056,709

 
—

Loss on extinguishment of debt
—

 
—

 
(115,023
)
 
—

Losses on non-hedged interest rate derivatives
(65
)
 
(68,595
)
 
(8,087
)
 
(64,705
)
Other, net
6,548

 
(6,345
)
 
9,547

 
(6,559
)
INCOME BEFORE INCOME TAX EXPENSE
194,139

 
81,632

 
1,461,070

 
504,807

Income tax expense
768

 
4,039

 
14,915

 
20,417

INCOME FROM CONTINUING OPERATIONS
193,371

 
77,593

 
1,446,155

 
484,390

Loss from discontinued operations
(147,162
)
 
(1,543
)
 
(150,062
)
 
(4,522
)
NET INCOME
46,209

 
76,050

 
1,296,093

 
479,868

LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST
9,184

 
9,285

 
32,914

 
17,673

NET INCOME ATTRIBUTABLE TO PARTNERS
37,025

 
66,765

 
1,263,179

 
462,195

GENERAL PARTNER’S INTEREST IN NET INCOME
116,583

 
104,810

 
341,925

 
318,241

LIMITED PARTNERS’ INTEREST IN NET INCOME
$
(79,558
)
 
$
(38,045
)
 
$
921,254

 
$
143,954

INCOME (LOSS) FROM CONTINUING OPERATIONS PER LIMITED PARTNER UNIT:
 
 
 
 
 
 
 
Basic
$
0.26

 
$
(0.18
)
 
$
4.54

 
$
0.70

Diluted
$
0.26

 
$
(0.18
)
 
$
4.52

 
$
0.70

NET INCOME (LOSS) PER LIMITED PARTNER UNIT:
 
 
 
 
 
 
 
Basic
$
(0.33
)
 
$
(0.19
)
 
$
3.91

 
$
0.68

Diluted
$
(0.33
)
 
$
(0.19
)
 
$
3.89

 
$
0.68






SUPPLEMENTAL INFORMATION
(Dollars in thousands)
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Reconciliation of net income to Adjusted EBITDA (a):
 
 
 
 
 
 
 
Net income
$
46,209

 
$
76,050

 
$
1,296,093

 
$
479,868

Interest expense, net of interest capitalized
112,141

 
124,000

 
383,271

 
347,706

Income tax expense
768

 
4,039

 
14,915

 
20,417

Depreciation and amortization
94,812

 
106,419

 
282,485

 
294,356

Gain on deconsolidation of Propane Business
—

 
—

 
(1,056,709
)
 
—

Loss on extinguishment of debt
—

 
—

 
115,023

 
—

Non-cash compensation expense
9,198

 
10,350

 
30,190

 
31,139

Losses on non-hedged interest rate derivatives
65

 
68,595

 
8,087

 
64,705

Unrealized (gains) losses on commodity risk management activities
(11,456
)
 
6,441

 
59,519

 
(1,213
)
Write-down of assets included in loss from discontinued operations
145,214

 
—

 
145,214

 
—

Equity in earnings of unconsolidated affiliates
(7,920
)
 
(6,713
)
 
(63,011
)
 
(13,386
)
Adjusted EBITDA attributable to unconsolidated affiliates
105,359

 
15,229

 
301,559

 
37,623

Adjusted EBITDA attributable to noncontrolling interest
(13,188
)
 
(13,152
)
 
(44,246
)
 
(23,737
)
Other, net
463

 
12,894

 
11,684

 
26,109

Adjusted EBITDA
$
481,665

 
$
404,152

 
$
1,484,074

 
$
1,263,587

 
 
 
 
 
 
 
 
Reconciliation of net income to Distributable Cash Flow (a):
 
 
 
 
 
 
 
Net income
$
46,209

 
$
76,050

 
$
1,296,093

 
$
479,868

Amortization of finance costs charged to interest
2,382

 
2,536

 
7,774

 
7,199

Deferred income taxes
7,563

 
404

 
14,828

 
1,994

Depreciation and amortization
94,812

 
106,419

 
282,485

 
294,356

Gain on deconsolidation of Propane Business
—

 
—

 
(1,056,709
)
 
—

Loss on extinguishment of debt
—

 
—

 
115,023

 
—

Non-cash compensation expense
9,198

 
10,350

 
30,190

 
31,139

Unrealized losses on non-hedged interest rate derivatives
5,730

 
78,969

 
15,021

 
70,468

Unrealized (gains) losses on commodity risk management activities
(11,456
)
 
6,441

 
59,519

 
(1,213
)
Write-down of assets included in loss from discontinued operations
145,214

 
—

 
145,214

 
—

Equity in earnings of unconsolidated affiliates
(7,920
)
 
(6,713
)
 
(63,011
)
 
(13,386
)
Distributions received from unconsolidated affiliates
80,562

 
22,736

 
188,976

 
31,294

Distributable Cash Flow attributable to noncontrolling interest
(12,512
)
 
(11,877
)
 
(41,901
)
 
(22,023
)
Maintenance capital expenditures
(26,957
)
 
(31,390
)
 
(81,211
)
 
(80,520
)
Other, net
6,693

 
12,210

 
22,948

 
27,396

Distributable Cash Flow
$
339,518

 
$
266,135

 
$
935,239

 
$
826,572


(a) The Partnership has disclosed in this press release Adjusted EBITDA and Distributable Cash Flow, which are non-GAAP financial measures. Management believes Adjusted EBITDA and Distributable Cash Flow provide useful information to investors as measures of comparison with peer companies, including companies that may have different financing and capital structures. The presentation of Adjusted EBITDA and Distributable Cash Flow also allows investors to view our performance in a manner similar to the methods used by management and provides additional insight into our operating results.





There are material limitations to using measures such as Adjusted EBITDA and Distributable Cash Flow, including the difficulty associated with using either as the sole measure to compare the results of one company to another, and the inability to analyze certain significant items that directly affect a company's net income or loss or cash flows. In addition, our calculations of Adjusted EBITDA and Distributable Cash Flow may not be consistent with similarly titled measures of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP, such as gross margin, operating income, net income, and cash flow from operating activities.

Definition of Adjusted EBITDA
The Partnership defines Adjusted EBITDA as total partnership earnings before interest, taxes, depreciation, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, non-cash impairment charges, loss on extinguishment of debt, gain on deconsolidation of our Propane Business and other non-operating income or expense items. Unrealized gains and losses on commodity risk management activities include unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Adjusted EBITDA reflects amounts for less than wholly owned subsidiaries and unconsolidated affiliates based on the Partnership's proportionate ownership.

Adjusted EBITDA is used by management to determine our operating performance and, along with other financial and volumetric data, as internal measures for setting annual operating budgets, assessing financial performance of our numerous business locations, as a measure for evaluating targeted businesses for acquisition and as a measurement component of incentive compensation.

Definition of Distributable Cash Flow
The Partnership defines Distributable Cash Flow as net income, adjusted for certain non-cash items, less maintenance capital expenditures. Non-cash items include depreciation and amortization, deferred income taxes, 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, and non-cash impairment charges. Unrealized gains and losses on commodity risk management activities includes unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Distributable Cash Flow reflects amounts for less than wholly owned subsidiaries based on the Partnership's proportionate ownership and also reflects earnings from unconsolidated affiliates on a cash basis.

Distributable Cash Flow is used by management to evaluate our overall performance. Our partnership agreement requires us to distribute all available cash, and Distributable Cash Flow is calculated to evaluate our ability to fund distributions through cash generated by our operations.







Summary Analysis of Results by Segment
(tabular dollar amounts in thousands)

Following is a summary of ETP's results by segment:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Segment Adjusted EBITDA:
 
 
 
 
 
 
 
Intrastate transportation and storage
$
120,593

 
$
170,183

 
$
469,810

 
$
514,547

Interstate transportation
204,488

 
102,312

 
501,888

 
265,920

Midstream
105,252

 
103,233

 
298,915

 
273,829

NGL transportation and services
36,445

 
30,504

 
110,623

 
55,200

Retail propane and other retail propane related
3,977

 
(3,667
)
 
94,476

 
150,924

All other
10,910

 
1,587

 
8,362

 
3,167

 
$
481,665

 
$
404,152

 
$
1,484,074

 
$
1,263,587


Our segment results are presented based on the measure of Segment Adjusted EBITDA. We previously reported segment operating income as a measure of segment performance. We have revised certain reports provided to our chief operating decision maker to assess the performance of our business to reflect Segment Adjusted EBITDA. Segment Adjusted EBITDA reflects amounts for less than wholly owned subsidiaries and unconsolidated affiliates based on our proportionate ownership. We have recast the presentation of our segment results for the prior years to be consistent with the current year presentation. The tables below identify the components of Segment Adjusted EBITDA, which is calculated as follows:
•
Gross margin, operating expenses, and selling, general and administrative. These amounts represent the amounts included in our consolidated financial statements that are attributable to each segment.

•
Unrealized gains or losses on commodity risk management activities. These are the unrealized amounts that are included in gross margin. These amounts are not included in Segment Adjusted EBITDA; therefore, the unrealized losses are added back and the unrealized gains are subtracted to calculate the segment measure.

•
Non-cash compensation expense. These amounts represent the total non-cash compensation recorded in operating expenses and selling, general and administrative. These amounts are not included in Segment Adjusted EBITDA and therefore are added back to calculated the segment measure.

•
Adjusted EBITDA attributable to unconsolidated affiliates. These amounts represent our proportionate share of the Adjusted EBITDA of our unconsolidated affiliates. Amounts reflected are calculated consistently with our definition of Adjusted EBITDA above.

•
Adjusted EBITDA attributable to noncontrolling interest. These amounts represent the portion of Segment Adjusted EBITDA attributable to noncontrolling interest. Currently, the only noncontrolling interest in ETP is the 30% interest in Lone Star that is held by Regency. We reflect this amount as noncontrolling interest because we consolidate 100% of Lone Star on our consolidated financial statements.






Intrastate Transportation and Storage

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Natural gas transported (MMBtu/d)
9,942,575

 
11,148,186

 
9,995,218

 
11,367,812

Revenues
$
554,843

 
$
650,834

 
$
1,531,377

 
$
2,095,087

Cost of products sold
362,186

 
422,801

 
949,254

 
1,396,001

Gross margin
192,657

 
228,033

 
582,123

 
699,086

Unrealized (gains) losses on commodity risk management activities
(12,364
)
 
5,342

 
54,289

 
(1,368
)
Operating expenses, excluding non-cash compensation expense
(45,454
)
 
(49,336
)
 
(131,318
)
 
(144,631
)
Selling, general and administrative expenses, excluding non-cash compensation expense
(12,230
)
 
(14,869
)
 
(33,858
)
 
(40,299
)
Adjusted EBITDA attributable to unconsolidated affiliates
(2,016
)
 
1,013

 
(1,426
)
 
1,759

Segment Adjusted EBITDA
$
120,593

 
$
170,183

 
$
469,810

 
$
514,547

 
 
 
 
 
 
 
 
Distributions from unconsolidated affiliates
$
2,108

 
$
1,109

 
$
4,023

 
$
3,581

Maintenance capital expenditures
7,440

 
8,355

 
21,026

 
26,491


Volumes.  Transported volumes decreased due to an unfavorable natural gas price environment during the three and nine months ended September 30, 2012 compared to the same periods in 2011.

Segment Adjusted EBITDA. Segment Adjusted EBITDA for the intrastate transportation and storage segment decreased for the three and nine months ended September 30, 2012 compared to the same periods in 2011 primarily due to the impacts of lower transported and retained volumes, lower demand fees and lower margin from sales of natural gas, including negative impacts from derivatives.
The components of our intrastate transportation and storage segment gross margin were as follows:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Transportation fees
$
138,991

 
$
148,331

 
$
420,196

 
$
448,669

Natural gas sales and other
21,557

 
42,981

 
68,064

 
106,570

Retained fuel revenues
21,735

 
32,560

 
55,102

 
104,222

Storage margin, including fees
10,374

 
4,161

 
38,761

 
39,625

Total gross margin
$
192,657

 
$
228,033

 
$
582,123

 
$
699,086







Storage margin was comprised of the following:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Withdrawals from storage natural gas inventory (MMBtu)
5,258,344

 
8,661,359

 
9,698,738

 
24,443,485

Realized margin (loss) on natural gas inventory transactions
$
(3,188
)
 
$
5,575

 
$
76,323

 
$
16,837

Fair value inventory adjustments
19,335

 
(27,603
)
 
17,263

 
(22,772
)
Unrealized gains (losses) on derivatives
(12,953
)
 
18,231

 
(77,620
)
 
20,024

Margin recognized on natural gas inventory and related derivatives
3,194

 
(3,797
)
 
15,966

 
14,089

Revenues from fee-based storage
7,364

 
8,072

 
23,254

 
25,891

Other
(184
)
 
(114
)
 
(459
)
 
(355
)
Total storage margin
$
10,374

 
$
4,161

 
$
38,761

 
$
39,625

The increase in storage margin for the three months ended September 30, 2012 compared to the three months ended September 30, 2011 was principally driven by an increase in inventory valuation and derivatives settled during the period. The decrease in storage margin for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 was due to fewer withdrawals and a decline in fee-based revenue resulting from the cessation of 4.5 Bcf in fee-based contracts in 2011. These decreases were partially offset by realized gains on the settlement of derivatives during the nine month period compared to the same period in the prior year. For the three and nine months ended September 30, 2012 compared to the same periods in the prior year, intrastate transportation and storage Segment Adjusted EBITDA also reflected lower operating expenses due to decreases in natural gas consumed for compression and lower selling, general and administrative expenses due to decreases in employee-related costs.

Interstate Transportation

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Natural gas transported (MMBtu/d)
3,059,915

 
3,155,559

 
3,015,458

 
2,709,522

Natural gas sold (MMBtu/d)
16,976

 
21,808

 
18,416

 
22,859

Revenues
$
131,989

 
$
120,065

 
$
387,165

 
$
330,016

Operating expenses, excluding non-cash compensation, amortization and accretion expenses
(19,594
)
 
(21,338
)
 
(76,735
)
 
(73,513
)
Selling, general and administrative expenses, excluding non-cash compensation, amortization and accretion expenses
(9,034
)
 
(10,814
)
 
(27,896
)
 
(26,743
)
Adjusted EBITDA attributable to unconsolidated affiliates
101,127

 
14,399

 
219,354

 
36,160

Segment Adjusted EBITDA
$
204,488

 
$
102,312

 
$
501,888

 
$
265,920

 
 
 
 
 
 
 
 
Distributions from unconsolidated affiliates
$
54,800

 
$
21,626

 
$
115,100

 
$
27,713

Maintenance capital expenditures
8,946

 
5,864

 
25,131

 
15,290

Volumes. Transported volumes increased for the three and nine months ended September 30, 2012 compared to the same periods in the prior year primarily due to additional transported volumes related to the expansion of the Tiger pipeline which went in service in August 2011. Operational sales volumes decreased in the Transwestern pipeline principally as a result of unfavorable market conditions.

Segment Adjusted EBITDA. We experienced an increase in our interstate transportation segment's Segment Adjusted EBITDA for the three and nine months ended September 30, 2012 compared to the same periods in 2011 due to the acquisition of a 50% interest in Citrus on March 26, 2012. Adjusted EBITDA attributable to our investment in Citrus for the three and nine months ended September 30, 2012 was $80.9 million and $162.2 million, respectively. The remainder of the increase in Segment Adjusted EBITDA resulted from incremental reservation fees from increased contractual commitments related to the Tiger pipeline expansion and from increased Adjusted EBITDA attributable to our 50% interest in the Fayetteville Express Pipeline.




Midstream

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Gathered volumes (MMBtu/d)
2,463,987

 
2,204,792

 
2,327,284

 
1,939,398

NGLs produced (Bbls/d)
83,736

 
55,943

 
77,038

 
51,824

Equity NGLs produced (Bbls/d)
15,890

 
16,269

 
18,582

 
16,142

Revenues
$
656,915

 
$
630,135

 
$
1,742,241

 
$
1,876,171

Cost of products sold
528,311

 
507,806

 
1,366,428

 
1,541,158

Gross margin
128,604

 
122,329

 
375,813

 
335,013

Unrealized (gains) losses on commodity risk management activities
214

 
(919
)
 
2,381

 
(2,091
)
Operating expenses, excluding non-cash compensation expense
(18,948
)
 
(17,930
)
 
(68,849
)
 
(59,795
)
Selling, general and administrative expenses, excluding non-cash compensation expense
(9,378
)
 
(5,254
)
 
(25,613
)
 
(14,326
)
Adjusted EBITDA attributable to discontinued operations
4,760

 
5,007

 
15,183

 
15,028

Segment Adjusted EBITDA
$
105,252

 
$
103,233

 
$
298,915

 
$
273,829

 
 
 
 
 
 
 
 
Maintenance capital expenditures
$
7,034

 
$
3,550

 
$
20,445

 
$
13,690


Volumes. The increases in NGL production reflected higher overall production during the three and nine months ended September 30, 2012 compared to the same periods in 2011 primarily due to increased inlet volumes at our La Grange and Chisholm plants as a result of increased capacity and more production in the Eagle Ford Shale.

Segment Adjusted EBITDA. Segment Adjusted EBITDA for the midstream segment reflected increases in gross margin as follows:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Gathering and processing fee-based revenues
$
81,336

 
$
61,177

 
$
226,225

 
$
172,809

Non-fee-based contracts and processing
54,572

 
66,830

 
169,441

 
174,433

Other
(7,304
)
 
(5,678
)
 
(19,853
)
 
(12,229
)
Total gross margin
$
128,604

 
$
122,329

 
$
375,813

 
$
335,013


The increase in our fee-based revenues reflected higher overall production during the three and nine months ended September 30, 2012 compared to the same periods in 2011 primarily due to increased inlet volumes at our La Grange and Chisholm plants as a result of increased capacity and more production in the Eagle Ford Shale. For the three and nine months ended September 30, 2012, our non-fee-based contracts and processing margin decreased primarily due to lower NGL prices. For the three and nine months ended September 30, 2012, midstream Segment Adjusted EBITDA also reflects the impacts of incremental operating expenses and selling , general and administrative expenses from new assets placed in service in the Eagle Ford Shale.





NGL Transportation and Services

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
NGL transportation volumes (Bbls/d)
174,234

 
133,149

 
166,825

 
131,147

NGL fractionation volumes (Bbls/d)
11,442

 
13,833

 
17,530

 
14,912

Revenues
$
168,313

 
$
146,596

 
$
496,341

 
$
245,416

Cost of products sold
101,222

 
81,224

 
285,210

 
133,628

Gross margin
67,091

 
65,372

 
211,131

 
111,788

Operating expenses, excluding non-cash compensation expense
(13,104
)
 
(16,575
)
 
(43,074
)
 
(23,062
)
Selling, general and administrative expenses, excluding non-cash compensation expense
(5,230
)
 
(4,958
)
 
(15,421
)
 
(9,606
)
Adjusted EBITDA attributable to unconsolidated affiliates
876

 
(183
)
 
2,233

 
(183
)
Adjusted EBITDA attributable to noncontrolling interest
(13,188
)
 
(13,152
)
 
(44,246
)
 
(23,737
)
 Segment Adjusted EBITDA
$
36,445

 
$
30,504

 
$
110,623

 
$
55,200

 
 
 
 
 
 
 
 
Distributable cash flow attributable to noncontrolling interest
$
12,512

 
$
11,877

 
$
41,901

 
$
22,023

Maintenance capital expenditures
2,708

 
4,221

 
8,980

 
5,497

Our NGL Transportation and Services segment primarily reflects the results from Lone Star, which was formed in 2011 and acquired all of the membership interests in LDH on May 2, 2011 as well as other wholly-owned or joint venture pipelines that were recently placed in service.
Volumes. NGL transportation volumes for the three and nine month periods ended September 30, 2012 as compared to the same periods in 2011 increased primarily due to an increase in volumes transported on our wholly-owned NGL pipelines originating from our La Grange and Chisholm plants as a result of increased production in the Eagle Ford Shale. Additionally, fractionation volumes decreased for the three and nine months ended September 30, 2012 as compared to the same periods in 2011 primarily due to refinery closures at our Geismar, Louisiana fractionation complex as a result of Hurricane Isaac and refinery downtime.
Segment Adjusted EBITDA. For the three months ended September 30, 2012 compared to the same periods in 2011, the increase in NGL Transportation and Services Segment Adjusted EBITDA was attributable to increased volumes on our wholly-owned NGL pipelines due to increased activity related to the Eagle Ford Shale and increased transportation rates on our West Texas NGL pipeline due to increased capacity out of West Texas.
For the nine months ended September 30, 2012 compared to the same period in 2011, the increase in NGL Transportation and Services Segment Adjusted EBITDA were attributable to the full-period impacts from the formation of Lone Star in May 2011 as well as the impacts from multiple other wholly-owned or joint venture pipelines that have recently become operational. Lone Star is a consolidated joint venture; therefore, 100% of Lone Star's revenues, operating expenses, and selling, general and administrative expenses are included in the NGL Transportation and Services segment data above, and the Adjusted EBITDA attributable to the 30% noncontrolling interest is reflected separately.
The components of our NGL transportation and services segment gross margin were as follows:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Storage margin
$
33,986

 
$
34,287

 
$
96,177

 
$
57,702

Transportation fees
21,069

 
13,646

 
51,818

 
20,696

Processing and fractionation margin
11,587

 
16,602

 
62,692

 
33,324

Other margin
449

 
837

 
444

 
66

Total gross margin
$
67,091

 
$
65,372

 
$
211,131

 
$
111,788






Supplemental Information on Unconsolidated Affiliates
The following table presents equity in earnings of affiliates, distributions received from affiliates and the proportionate share of unconsolidated affiliates' interest, depreciation, amortization, non-cash compensation expense, loss on debt extinguishment and taxes by unconsolidated affiliate for the three and nine months ended September 30, 2012 and 2011:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Equity in earnings (losses) of unconsolidated affiliates:
 
 
 
 
 
 
 
AmeriGas
$
(31,970
)
 
$
—

 
$
(28,920
)
 
$
—

Citrus
25,225

 
—

 
49,039

 
—

FEP
14,846

 
5,870

 
41,041

 
11,869

Other
(181
)
 
843

 
1,851

 
1,517

Total equity in earnings of unconsolidated affiliates
$
7,920

 
$
6,713

 
$
63,011

 
$
13,386

Proportionate share of interest, depreciation, amortization, non-cash compensation expense, loss on debt extinguishment and taxes:
 
 
 
 
 
 
 
AmeriGas
$
35,946

 
$
—

 
$
107,993

 
$
—

Citrus
55,675

 
—

 
113,153

 
—

FEP
5,381

 
8,495

 
16,121

 
24,156

Other
437

 
21

 
1,281

 
81

Total proportionate share of interest, depreciation, amortization, non-cash compensation expense, loss on debt extinguishment and taxes
$
97,439

 
$
8,516

 
$
238,548

 
$
24,237

Adjusted EBITDA attributable to unconsolidated affiliates:
 
 
 
 
 
 
 
AmeriGas
$
3,976

 
$
—

 
$
79,073

 
$
—

Citrus
80,900

 
—

 
162,192

 
—

FEP
20,227

 
14,365

 
57,162

 
36,025

Other
256

 
864

 
3,132

 
1,598

Total Adjusted EBITDA attributable to unconsolidated affiliates
$
105,359

 
$
15,229

 
$
301,559

 
$
37,623

Distributions from unconsolidated affiliates:
 
 
 
 
 
 
 
AmeriGas
$
23,654

 
$
—

 
$
69,853

 
$
—

Citrus
37,500

 
—

 
62,500

 
—

FEP
17,300

 
21,513

 
52,600

 
27,600

Other
2,108

 
1,223

 
4,023

 
3,694

Total distributions from unconsolidated affiliates
$
80,562

 
$
22,736

 
$
188,976

 
$
31,294