Energy Transfer Equity, L.P. (ETE)

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Energy Transfer Equity L.P. (ETE)

Q3 2010 Earnings Call Transcript

November 9, 2010 10:00 am ET


Martin Salinas – CFO

Mackie McCrea – President and COO

Kelcy Warren – CEO and Chairman


Darren Horowitz – Raymond James

Steve Maresca – Morgan Stanley

Barrett Blaschke – RBC Capital Markets

Yves Siegel – Credit Suisse

Ross Payne – Wells Fargo

Ted Durbin – Goldman Sachs

John Edwards – Morgan Keegan

Bradley Olefin – Eagle Global Advisors



Good day, ladies and gentlemen, and welcome to the Energy Transfer Partners conference call. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference.

I will now turn the presentation over to your host for today’s call to Martin Salinas, Chief Financial Officer. You may proceed.

Martin Salinas

Thank you and good morning everyone. Welcome to our third quarter earnings call for 2010. Similar to our previous call, I will walk through a few numbers with you related to our third quarter results, which were in the release we issued this morning, in addition to providing an update on some of the projects we recently announced, along with a few other items impacting our partnership. We’ll then go in to Q&A.

I’ll 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 certain assumptions and information available to us during this call. As always, Kelcy, Mackie, John McReynolds and other members of our senior management team are available to answer your questions.

As I said earlier, I’ll cover some of the drivers related to our results for the quarter, but before I do, let’s talk about the significant growth projects being completed within the next few months. First and foremost, we’ve been talking the talk and now it’s time to walk the walk.

Both FEP and Tiger are set to come online in less than a month from now, December 1 to be precise, and we couldn’t be more excited inside of our accomplishments.

As we stated in yesterday’s release, not only are we way ahead of schedule, but we also expect our total cost for both projects to be significantly less than our original cost estimates, and even lower than our most recently provided estimates, thereby making these two projects even more accretive than what we had originally thought.

These two projects are going to provide significant stable cash flow from demand fee contract and they are also going to have a deleveraging impact on our credit metrics going forward, something that, as you know, we continue to be very committed to.

In addition to bringing on our interstate pipelines, we also recently announced two separate projects that we are embarking on in the Eagle Ford Shale. The Dos Hermanas project, one that we mentioned in the second quarter call back in May, is approximately 50 miles of 24-inch pipe, which will deliver gas to our HPL-rich system. The capacity will be approximately 400 million cubic feet a day when we bring it online in December of this year and we anticipate volumes to grow rapidly throughout 2011.

The other pipeline project we announced was the Chisholm Pipeline, which is approximately 83 miles of 20-inch pipeline, which will deliver gas to our LaGrange processing facility in Southeast Texas. After processing the residual volumes will then be transported into our Oasis Pipeline.

This pipeline will have an initial capacity of 100 million cubic feet a day and is expected to be in service by the second quarter of 2011. Future expansion projects could bring the total capacity of this pipeline to 300 million cubic feet a day.

It goes without saying that we are not done in the Eagle Ford Shale as we continue to meet with our existing producers and also potential new customers to provide additional solutions out of the area. There is no question that we intend to be a leading provider of Midstream services in the Eagle Ford.

Moving to some of the other areas where we are seeing more growth as well. Starting with our East Texas pipeline, where it is still expected to be completed by the end of the year and we anticipate volumes to exceed 100 million cubic feet a day by the end of 2010 or early 2011, with volumes expanding through 2011.

In North Louisiana, the Haynesville Shale, we continue to see volume growth in this area and still expect to exceed 350 million cubic feet a day by the end of the year.

As we look beyond 2010, you could see our volumes in North Louisiana average between 450 million and 500 million cubic feet a day in 2011, as producers continue their drilling programs.

In the North East, we started flowing initial volumes on our pipeline in the Marcellus this quarter and still believe that they will grow to nearly 100 million cubic feet a day by the end of the first quarter of 2011 and 250 million cubic feet a day by the end of 2011 year.

Let’s now talk about our results. Our third quarter adjusted EBITDA was $280.5 million, a slight decrease from the third quarter of 2009 and distributable cash flow was a $160.5 million for the quarter, an almost 10% increase compared to the quarter ended September 30, 2009.

With respect to our distributions to our unitholders, we will pay our quarterly distribution of $0.8938 per common unit, that’s $3.575 on an annual basis to our unitholders of record on November 15.

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