Energy Transfer, LP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 10, 2015

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EX-99.2 - EXHIBIT 99.2 - Energy Transfer, LPex992rgp-33115financials.htm


ENERGY TRANSFER PARTNERS, L.P.
UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma consolidated financial information of Energy Transfer Partners, L.P. (“ETP”) reflects the pro forma impacts of ETP’s merger with Regency Energy Partners LP (“Regency”), which was completed in April 2015 (the “Regency Merger”).

The unaudited pro forma condensed consolidated balance sheet gives effect to the Regency Merger as if it had occurred on March 31, 2015; the unaudited pro forma condensed consolidated statement of operations assumes that the Regency Merger was consummated on January 1, 2015. The unaudited pro forma condensed balance sheet and condensed consolidated statement of operations should be read in conjunction with (i) ETP's Quarterly Report on Form 10-Q for the three months ended March 31, 2015, (ii) ETP's Annual Report on Form 10-K for the year ended December 31, 2014, (iii) Regency's Quarterly Report on Form 10-Q for the three months ended March 31, 2015, and (iv) Regency's Annual Report on Form 10-K for the year ended December 31, 2014.

The unaudited pro forma condensed consolidated financial statements are for illustrative purposes only and are not necessarily indicative of the financial results that would have occurred if the Regency Merger had been consummated on the dates indicated, nor are they necessarily indicative of the financial position or results of operations in the future. The pro forma adjustments, as described in the accompanying notes, are based upon available information and certain assumptions that are believed to be reasonable as of the date of this document.

Regency Merger

In April 2015, ETP and Regency completed the previously announced merger of an indirect subsidiary of ETP, with and into Regency, with Regency surviving the merger as a wholly-owned subsidiary of ETP. As part of the merger consideration, each Regency common unit and Class F unit was converted into the right to receive 0.4124 ETP Common Units. Based on the Regency units outstanding, ETP issued approximately 172.2 million ETP Common Units to Regency unitholders, including approximately 15.5 million units issued to ETP subsidiaries.

In connection with the transaction, Energy Transfer Equity, L.P. (“ETE”), which owns the general partner and 100% of the incentive distribution rights of ETP, will reduce the incentive distributions it receives from ETP by a total of $320 million over a five-year period. The IDR subsidy will be $80 million in the first year post-closing and $60 million per year for the following four years. ETP and Regency are under common control of ETE; therefore, ETP will account for the Regency Merger at historical cost as a reorganization of entities under common control. Accordingly, beginning with the quarter ending June 30, 2015, ETP’s consolidated financial statements will be retrospectively adjusted to reflect the consolidation of Regency for all prior periods subsequent to May 26, 2010 (the date ETE acquired Regency’s general partner).










ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 2015
(in millions)
 
ETP Historical
 
Regency Historical
 
Pro Forma Adjustments
 
ETP Pro Forma for Regency Merger
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,789

 
$
59

 
$
—

 
$
1,848

 
Accounts receivable, net
2,464

 
384

 
(3
)
a, f
2,845

 
Accounts receivable from related companies
127

 
76

 
(101
)
a
102

 
Inventories
1,388

 
63

 
—

 
1,451

 
Exchanges receivable
36

 
—

 
9

f
45

 
Price risk management assets
12

 
65

 
—

 
77

 
Other current assets
390

 
16

 
2

f
408

 
Total current assets
6,206

 
663

 
(93
)
 
6,776

 
 
 
 
 
 
 
 
 
 
PROPERTY, PLANT AND EQUIPMENT, net
31,649

 
9,540

 
(46
)
a
41,143

 
ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES
3,723

 
2,484

 
(1,216
)
b
3,668

 
 
 
 
 
 
(1,323
)
c

 
GOODWILL
6,256

 
1,223

 
—

 
7,479

 
INTANGIBLE ASSETS, net
2,093

 
3,405

 
—

 
5,498

 
OTHER NON-CURRENT ASSETS, net
702

 
101

 
—

 
803

 
Total assets
$
50,629

 
$
17,416

 
$
(2,678
)
 
$
65,367

 


 

See accompanying notes to unaudited condensed consolidated pro forma financial statements.


ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 2015
(in millions)
 
ETP Historical
 
Regency Historical
 
Pro Forma Adjustments
 
ETP Pro Forma for Regency Merger
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
 
 
 
 
Accounts payable
$
2,548

 
$
430

 
$
(113
)
f
$
2,865

 
Accounts payable to related companies
94

 
25

 
(90
)
a, f
29

 
Exchanges payable
155

 
—

 
—

 
155

 
Price risk management liabilities
16

 
—

 
—

 
16

 
Accrued and other current liabilities
1,625

 
188

 
111

a, f
1,924

 
Current maturities of long-term debt
269

 
—

 
—

 
269

 
Total current liabilities
4,707

 
643

 
(92
)
 
5,258

 
 
 
 
 
 
 
 
 
 
LONG-TERM DEBT, less current maturities
20,430

 
7,221

 
—

 
27,651

 
DEFERRED INCOME TAXES
4,036

 
—

 
24

f
4,060

 
NON-CURRENT PRICE RISK MANAGEMENT LIABILITIES
214

 
14

 
—

 
228

 
OTHER NON-CURRENT LIABILITIES
1,256

 
74

 
(24
)
f
1,306

 
 
 
 
 
 
 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SERIES A PREFERRED UNITS
—

 
33

 
—

 
33

 
REDEEMABLE NONCONTROLLING INTEREST
15

 
—

 
—

 
15

 
 
 
 
 
 
 
 
 
 
EQUITY:
 
 
 
 
 
 
 
 
General Partner
282

 
770

 
(770
)
c
282

 
Limited Partners
 
 
 
 
 
 


 
Common unitholders
9,232

 
8,351

 
(407
)
c
17,138

 
 
 
 
 
 
(38
)
a
 
 
Class F Units
—

 
155

 
(155
)
c
—

 
Class H Units
3,432

 
—

 
—

 
3,432

 
Class I Units
33

 
—

 
—

 
33

 
Accumulated other comprehensive income
(13
)
 
—

 
—

 
(13
)
 
Total partners’ capital
12,966

 
9,276

 
(1,370
)
 
20,872

 
Noncontrolling interest
7,005

 
155

 
(1,216
)
b
5,944

 
Total equity
19,971

 
9,431

 
(2,586
)
 
26,816

 
Total liabilities and equity
$
50,629

 
$
17,416

 
$
(2,678
)
 
$
65,367

 


See accompanying notes to unaudited condensed consolidated pro forma financial statements.


ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF CONTINUING OPERATIONS
For the Three Months Ended March 31, 2015
(in millions, except per unit data)
 
ETP Historical
 
Regency Historical
 
Pro Forma Adjustments
 
ETP Pro Forma for Regency Merger
 
REVENUES
$
9,530

 
$
999

 
$
(203
)
a, f
$
10,326

 
 
 
 
 
 
 
 
 
 
COSTS AND EXPENSES:
 
 
 
 
 
 
 
 
Cost of products sold
8,040

 
641

 
(194
)
a, f
8,487

 
Operating expenses
485

 
133

 
—

 
618

 
Depreciation, depletion and amortization
322

 
158

 
—

 
480

 
Selling, general and administrative
100

 
36

 
(3
)
f
133

 
Total costs and expenses
8,947

 
968

 
(197
)
 
9,718

 
OPERATING INCOME
583

 
31

 
(6
)
 
608

 
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
Interest expense, net of interest capitalized
(228
)
 
(82
)
 
—

 
(310
)
 
Equity in earnings of unconsolidated affiliates
40

 
50

 
(33
)
b, c
57

 
Losses on interest rate derivatives
(77
)
 
—

 
—

 
(77
)
 
Other, net
3

 
3

 
—

 
6

 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE
321

 
2

 
(39
)
 
284

 
Income tax expense from continuing operations
13

 
5

 
—

 
18

 
INCOME FROM CONTINUING OPERATIONS
$
308

 
$
(3
)
 
$
(39
)
 
$
266

 
 
 
 
 
 
 
 
 
 
ALLOCATIOAN OF INCOME FROM CONTINUING OPERATIONS:


 


 


 


 
General Partner
$
242

 
$
—

 
$
—

 
$
242

 
Common unitholders
(48
)
 
(10
)
 
(7
)
d
(65
)
 
Other Securities
87

 
3

 
(3
)
d
87

 
Noncontrolling Interests
27

 
4

 
(29
)
b
2

 
 
$
308

 
$
(3
)
 
$
(39
)
 
$
266

 
INCOME FROM CONTINUING OPERATIONS PER COMMON UNIT:
 
 
 
 
 
 


 
Basic
$
(0.17
)
 
$
(0.02
)
 
 
 
$
(0.11
)
 
Diluted
$
(0.17
)
 
$
(0.02
)
 
 
 
$
(0.11
)
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE LIMITED PARTNER UNITS:
 
 
 
 
 
 
 
 
Basic
323.8

 
410.7

 
 
 
495.8

e
Diluted
323.8

 
410.7

 
 
 
495.8

e



See accompanying notes to unaudited condensed consolidated pro forma financial statements.



ENERGY TRANSFER PARTNERS, L.P.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated financial statements are for illustrative purposes only and are not necessarily indicative of the financial results that would have occurred if the Regency Merger had been consummated on the dates indicated, nor are they necessarily indicative of the financial position or results of operations in the future. The pro forma adjustments, as described in the accompanying notes, are based upon available information and certain assumptions that are believed to be reasonable as of the date of this document.
Pro Forma Adjustments

Following is a description of the pro forma adjustments made to the combined historical financial statements of ETP and Regency:

a.
Pro forma adjustments to eliminate related party balances and transactions between ETP and Regency, including commercial transactions, as well as fees for services provided under an operating and service agreement between ETP and Regency. These adjustments also include the elimination of profit recognized by a subsidiary of ETP from sales of equipment to Regency, including elimination of the cumulative amount of ETP’s profit related to such equipment sales included in Regency’s property, plant and equipment, net, as of March 31, 2015.
b.
Pro forma adjustments to eliminate Regency’s investment in Lone Star NGL LLC (“Lone Star”), a consolidated subsidiary of ETP. ETP owns a 70% interest in Lone Star, and Regency owned a 30% interest in Lone Star. Regency’s interest in Lone Star is reflected as a noncontrolling interest in ETP’s historical consolidated financial statements and is reflected as an equity method investment in Regency’s historical consolidated financial statements.
c.
Pro forma adjustment to eliminate limited partner interests in Regency held by a subsidiary of ETP. ETP indirectly owned 31.4 million Regency common units and all of the outstanding Regency Class F units; these interests were acquired in the SUGS Contribution on April 30, 2013. These limited partner interests converted to limited partner interests in ETP upon the closing of the merger, and the related amounts will subsequently be eliminated from ETP’s consolidated financial statements. This also includes an adjustment to eliminate the Regency general partner interest.
d.
Pro forma adjustments to limited partners’ income from continuing operations reflect the elimination of intercompany earnings between ETP and Regency. In addition, for the period ended March 31, 2015, $2 million of income attributable to Regency’s Class F units was reclassified from “other securities” to “Common unitholders” based on the conversion of Regency’s Class F units to common units.
e.
Pro forma weighted average limited partner units outstanding reflects (i) the conversion of Regency’s common and Class F units to ETP common units, based on the weighted average of Regency’s common and Class F units outstanding during the respective periods multiplied by the conversion rate of 0.4124. In addition, for the three months ended March 31, 2015, the pro forma weighted average also reflects the elimination of Regency common units held by a subsidiary of ETP (see additional information in note (c) above).
f.
Pro forma adjustments to conform Regency's presentation to ETP's.


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