Energy Transfer Equity, L.P. (ETE)

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Energy Transfer Equity, L.P. (ETE)

Q4 2008 Earnings Call Transcript

February 17, 2009 10:00 am ET

Executives

Martin Salinas – CFO, Energy Transfer Partners

Mackie McCrea – President & COO, Energy Transfer Partners

Kelcy Warren – Chairman & CEO

Jerry Langdon – Chief Administrative & Compliance Officer

Analysts

Jay Murray [ph] – Bank of America

Derrick Lahey [ph] – RBC Capital Markets

Ross Payne – Wachovia

Darren Horowitz – Raymond James

Michael Blum – Wachovia

John Edwards – Morgan Keegan

John Tysseland – Citigroup

Steve Maresca – Morgan Stanley

Kevin Segal [ph] – Royal Capital [ph]

David Luzenske [ph] – James [ph]

Shaman Ducon [ph] – Lotus Partners

Ted Greene [ph] – Boston America [ph]

Noah Lerner – Hartz Capital

Ryan Gartnell [ph] – Brennet Associates [ph]

Presentation

Operator

Ladies and gentlemen, thank you very much for standing by. And welcome to the Energy Transfer earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given to you at that time. (Operator Instructions) And also as a reminder, today’s conference is being recorded. I would now like to turn the conference over to your host, Mr. Martin Salinas. Please go ahead.

Martin Salinas

Thank you, Flor Jean. Good morning, everyone. Thank you for joining Energy Transfer’s fourth quarter and year-to-date earnings call. Reminder, that we will be filing our 10-K for ETP and ETE for the year ended December 31st, 2008 with the SEC on or before March 2nd, 2009. You can obtain a copy of that on our Web site when it is filed.

During the call, we will be making forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 based on our beliefs as well as assumptions and information available to us. Although we believe these statements to be reasonable, we can’t give assurance that such expectations will be proven correct.

As we’ve done in the past, we will make a few brief comments about the results for the quarter and year-end December 31st, 2008 before answering your questions. Just as a reminder and if you’ve noticed in the press release, we changed our fiscal year from August 31st to December 31st back in May 2007. For the purpose of this call, we are comparing our fourth quarter results from the results for the period ended November 30th, 2007 and the 2008 results for the 12-month period ended November 30th.

I’ll also comment on our CapEx for 2008 and our expected CapEx for 2009 during our recent (inaudible) announcement, for which (inaudible) and Energy Transfer is very excited. I’d also tie that end to our liquidity through 2009.

As always, Kelcy, Mackie, and other senior management are available to answer your questions. We also have John McReynolds here, ETE’s President and CFO, to address any ETE related questions.

Before commenting on our financial results, I would like to bring your attention to a few things we did during and shortly after the fourth quarter as it was a pretty busy one for us. First and foremost, we exceeded our EBITDA expectations despite a very challenging environment. This demonstrates our asset in management team’s superior performance. And I’ll speak to that more in a minute.

We also successfully raised $800 million in proceeds, (inaudible) amounts and equity offerings, of which these proceeds were used to reduce borrowings under our existing credit facilities. These offerings were executed despite the challenging market headwinds we’ve been experiencing for the last few months, but we couldn’t be more pleased with the results of those transactions.

We’ve also added the capacity for expensive natural gas pipeline system with the completion of several projects, including a Southern Shale, which is a 30-mile, 36-inch 700-a-day pipeline connected to our Maypearl compression station that then delivers gas into our extensive networks.

We also completed the Cleburne to Tolar, which is a 36-inch mile – I’m sorry, 36-inch, 400-a-day, 21-mile pipeline connected to the western region of the Barnett Shale. We also completed Katy expansion, our 36 inch pipeline, 56 miles, 400 days capacity providing outlets out of the Bossier and Barnett Shales into the Katy hub. And we also look to bring the Phoenix lateral online before the end of the month. As a reminder, this is a 500 mile extension of the mainline pipe from our Transwestern system and consisting of 36 and 32-inch diameter pipe serving the Phoenix area.

Beginning with our original 42 inch Cleburne to Carthage pipeline, we’ve added over seven BCF of incremental capacity with the majority subscribed in a long term commitment from ten pipeline projects completed during the last two years. It’s a pretty impressive speed.

We also, during the fourth quarter – actually shortly after the fourth quarter, announced the Tiger pipeline, which is the 42 inch long haul transfer station pipeline connecting from our dual 42 inch pipeline at Carthage, and extending through the heart of Haynesville shale. The pipeline will not only serve as an expected capacity requirements producers from Haynesville, but will also derive the much needed takeaway capacity out of East Texas. We believe this project will demonstrate ETE’s ability to make the market accretive deals despite the challenging landscape and our cost of capital we keep today.

Moving on to the fourth quarter and year-end results, our consolidated EBITDA for the fourth quarter was $338 million, a 20% increase over the three-month period ended November 30th, 2007. For the year, EBITDA was $1.4 billion, a 22% increase over a 12-month period ended November 30th, 2007, and probably ahead over our updated guidance of $1.35 billion. We want to point out that our initial guidance that dates back in the beginning of 2008 was $1.25 billion, with a net increase over guidance that much larger.

Stepping through our segment results – and we’re pretty proud of our company and our people and what they’ve accomplished, just a great job. Looking first at our interstate operations, which consists mainly of our Texas assets, but also includes our Canyon and (inaudible) systems. Very impressive results for the quarter and the year, which were mainly driven by our continued efforts to add incremental capacity to our natural gas pipeline systems and our ability to transport gas and natural gas producing basins to major market delivery points along our pipelines.

As I mentioned earlier, we brought into service over seven BCF in capacity resulting in higher fee based revenue year-over-year. The increment capacity, coupled with higher natural gas prices, and favorable (inaudible) price differentials were the main drivers for earnings growth in 2008. As you can see in our volumes, we’ve also been able to grow our volume by over 50% quarter-over-quarter and year-over-year for our transportation segments.

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