Energy Transfer LP

Overview

Our ability to satisfy obligations and pay distributions to unitholders will depend on our future performance, which will be subject to prevailing economic, financial, business and weather conditions, and other factors, many of which are beyond management’s control.

We currently expect capital expenditures in 2024 to be within the following ranges (including capitalized interest and overhead and only our proportionate share for joint ventures, but excluding capital expenditures related to our investments in Sunoco LP and USAC):

The Partnership expects its growth capital expenditures will be between $2 billion and $3 billion per year in future periods.

The assets used in our natural gas and liquids operations, including pipelines, gathering systems and related facilities, are generally long-lived assets and do not require significant maintenance capital expenditures. Accordingly, we do not have any significant financial commitments for maintenance capital expenditures in our businesses. From time to time we experience increases in pipe costs due to a number of reasons, including but not limited to, delays from steel mills, limited selection of mills capable of producing large diameter pipe timely, higher steel prices and other factors beyond our control. However, we have included these factors in our anticipated growth capital expenditures for each year.

We generally fund capital expenditures and distributions with cash flows from operating activities.

Sunoco LP has not announced its updated expectations for growth and maintenance capital expenditures in 2024, subsequent to its completion of the NuStar acquisition.

USAC currently plans to spend approximately $32 million in maintenance capital expenditures and between $115 million and $125 million in expansion capital expenditures for the full year 2024.

Cash Flows

Our cash flows may change in the future due to a number of factors, some of which we cannot control. These include regulatory changes, the price for our products and services, the demand for such products and services, margin requirements resulting from significant changes in commodity prices, operational risks, the successful integration of our acquisitions and other factors.

Operating Activities

Changes in cash flows from operating activities between periods primarily result from changes in earnings (as discussed in “Results of Operations”), excluding the impacts of non-cash items and changes in operating assets and liabilities. Non-cash items include recurring non-cash expenses, such as depreciation, depletion and amortization expense and non-cash compensation expense. The increase in depreciation, depletion and amortization expense during the periods presented primarily resulted from construction and acquisition of assets, while changes in non-cash compensation expense resulted from changes in the number of units granted and changes in the grant date fair value estimated for such grants. Cash flows from operating activities also differ from earnings as a result of non-cash charges that may not be recurring, such as impairment charges and allowance for equity funds used during construction. The allowance for equity funds used during construction increases in periods when we have a significant amount of interstate pipeline construction in progress. Changes in operating assets and liabilities between periods result from factors such as the changes in the value of price risk management assets and liabilities, the timing of accounts receivable collection, the timing of payments on accounts payable, the timing of purchase and sales of inventories and the timing of advances and deposits received from customers.

Three months ended March 31, 2024 compared to three months ended March 31, 2023. Cash provided by operating activities during 2024 was $3.77 billion compared to $3.35 billion for 2023, and net income was $1.69 billion for 2024 and $1.45 billion for 2023. The difference between net income and net cash provided by operating activities for the three months ended March 31, 2024 primarily consisted of net changes in operating assets and liabilities (net of effects of acquisitions and divestitures) of $873 million and non-cash items totaling $1.14 billion.

The non-cash activity in 2024 and 2023 consisted primarily of depreciation, depletion and amortization of $1.25 billion and $1.06 billion, respectively, non-cash compensation expense of $46 million and $37 million, respectively, favorable inventory valuation adjustments of $130 million and $29 million, respectively, and deferred income taxes of $67 million and $53 million, respectively. Net income also included equity in earnings of unconsolidated affiliates of $98 million and $88 million in 2024 and 2023, respectively.

Cash provided by operating activities includes cash distributions received from unconsolidated affiliates that are deemed to be paid from cumulative earnings, which distributions were $84 million in 2024 and $87 million in 2023.

Cash paid for interest, net of interest capitalized, was $444 million and $406 million for the three months ended March 31, 2024 and 2023, respectively. Interest capitalized was $23 million and $15 million for the three months ended March 31, 2024 and 2023, respectively.

Investing Activities

Cash flows from investing activities primarily consist of cash amounts paid for acquisitions, capital expenditures, cash contributions to our joint ventures and cash proceeds from sales or contributions of assets or businesses. In addition, distributions from equity investees are included in cash flows from investing activities if the distributions are deemed to be a return of the Partnership’s investment. Changes in capital expenditures between periods primarily result from increases or decreases in our growth capital expenditures to fund our construction and expansion projects.

Three months ended March 31, 2024 compared to three months ended March 31, 2023. Cash used in investing activities during 2024 was $1.20 billion compared to $803 million for 2023. Total capital expenditures (excluding the allowance for equity funds used during construction and net of contributions in aid of construction costs) for 2024 were $770 million compared to $837 million for 2023. Additional detail related to our capital expenditures is provided in the table below.

In 2024, Sunoco LP paid $185 million in cash for the acquisition of liquid fuels terminals in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy. In 2024, we paid $84 million to acquire the outstanding noncontrolling interest in Edwards Lime Gathering, LLC, which is now a wholly owned subsidiary, and we also paid $180 million for other acquisitions.

The following is a summary of capital expenditures (including only our proportionate share for joint ventures, net of contributions in aid of construction costs) on an accrual basis for the three months ended March 31, 2024:

Financing Activities

Changes in cash flows from financing activities between periods primarily result from changes in the levels of borrowings and equity issuances, which are primarily used to fund our acquisitions and growth capital expenditures. Distributions increase between the periods based on increases in the number of common units outstanding or increases in the distribution rate.

Three months ended March 31, 2024 compared to three months ended March 31, 2023. Cash used in financing activities during 2024 was $791 million compared to $2.47 billion for 2023. During 2024, we had a net increase in our debt level of $1.88 billion compared to a net decrease of $1.02 billion for 2023. In 2024, we paid debt issuance costs of $60 million, paid $895 million in cash for the redemption of our Series C and Series D Preferred Units and paid $37 million in cash to redeem a portion of the outstanding Crestwood Niobrara LLC preferred units. In 2024, USAC paid $749 million in cash for investments in government securities in connection with the legal defeasance of senior notes.

In 2024 and 2023, we paid distributions of $1.13 billion and $1.00 billion, respectively, to our partners. In 2024 and 2023, we paid distributions of $421 million and $441 million, respectively, to noncontrolling interests. In 2024 and 2023, we paid distributions of $22 million and $12 million, respectively, to our redeemable noncontrolling interests.

In 2024 and 2023, we received capital contributions of $637 million and $3 million, respectively, in cash from noncontrolling interests.

Description of Indebtedness

Our outstanding consolidated indebtedness was as follows:

(1)As of March 31, 2024, this balance included a total of $2.92 billion aggregate principal amount of senior notes due on or before March 31, 2025, which were classified as long-term as management has the intent and ability to refinance the borrowings on a long-term basis.

(2)See additional information below under “Recent Transactions.”

(3)As of March 31, 2024, current maturities of long-term debt reflected on the Partnership’s consolidated balance sheet included $1.00 billion of senior notes issued by the Bakken Pipeline entities which were repaid in April 2024, as described below under “Recent Transactions.” The Partnership’s proportional ownership in the Bakken Pipeline entities is 36.4%.

Recent Transactions

Energy Transfer Senior Notes Redemptions

During the first quarter of 2024, the Partnership redeemed its $1.15 billion aggregate principal amount of 5.875% Senior Notes due January 2024, $350 million aggregate principal amount of 4.90% Senior Notes due February 2024 and $82 million aggregate principal amount of 7.60% Senior Notes due February 2024 using proceeds from its January 2024 notes issuance described below.

In April 2024, the Partnership redeemed its $500 million aggregate principal amount of 4.25% Senior Notes due April 2024, $750 million aggregate principal amount of 4.50% Senior Notes due April 2024 and $450 million aggregate principal amount of 8.00% Senior Notes due April 2029 using cash on hand and proceeds from its Five-Year Credit Facility (defined below).

Bakken Project Debt Redemption

In April 2024, the Bakken Pipeline entities redeemed $1.00 billion aggregate principal amount of 3.90% Senior Notes due April 2024 using proceeds from member contributions. The Partnership indirectly owns 36.4% of the ownership interests in the Bakken Pipeline entities.

Energy Transfer January 2024 Notes Issuance

In January 2024, the Partnership issued $1.25 billion aggregate principal amount of 5.55% Senior Notes due 2034, $1.75 billion aggregate principal amount of 5.95% Senior Notes due 2054 and $800 million aggregate principal amount of 8.00% fixed-to-fixed reset rate Junior Subordinated Notes due 2054. The Partnership used the net proceeds to refinance existing indebtedness, including borrowings under its Five-Year Credit Facility, to redeem its outstanding Series C Preferred Units and Series D

Preferred Units and for general partnership purposes. The Partnership will also use the net proceeds to redeem its outstanding Series E Preferred Units in May 2024.

Sunoco LP April 2024 Notes Issuance

On April 30, 2024, Sunoco LP issued $750 million of 7.000% senior notes due 2029 and $750 million of 7.250% senior notes due 2032 in a private offering. Sunoco LP used the net proceeds from the offering to (i) repay certain outstanding indebtedness of NuStar, in connection with the merger between Sunoco LP and NuStar, (ii) fund the redemption of NuStar's preferred units in connection with the merger and (iii) pay offering fees and expenses.

USAC March 2024 Notes Issuance

In March 2024, USAC issued $1.00 billion aggregate principal amount of 7.125% Senior Notes due 2029. The net proceeds from this issuance were used to repay a portion of existing borrowings under USAC’s revolving credit facility, to redeem its $725 million aggregate principal amount of 6.875% senior notes due 2026, which constituted a legal defeasance under GAAP (the “Defeasance”), and for general partnership purposes.

The Defeasance required a cash outlay in the net amount of $749 million, which was used to purchase U.S. government securities. These securities generated sufficient cash upon maturity to fund interest payments on the senior notes due 2026 occurring between the effective date of the Defeasance through April 4, 2024, when the senior notes due 2026 were redeemed at par, as well as fund the redemption of the senior notes due 2026 in full. As a result of the Defeasance, USAC recognized a loss on early extinguishment of debt of $5 million for the three months ended March 31, 2024.

Credit Facilities and Commercial Paper

Five-Year Credit Facility

The Partnership’s revolving credit facility (the “Five-Year Credit Facility”) allows for unsecured borrowings up to $5.00 billion and matures in April 2027. The Five-Year Credit Facility contains an accordion feature, under which the total aggregate commitment may be increased up to $7.00 billion under certain conditions.

As of March 31, 2024, the Five-Year Credit Facility had no outstanding borrowings and no outstanding commercial paper. The amount available for future borrowings was $4.97 billion, after accounting for outstanding letters of credit in the amount of $29 million.

Sunoco LP Credit Facility

As of March 31, 2024, Sunoco LP’s credit facility had $625 million of outstanding borrowings and $5 million in standby letters of credit and matures in May 2029 (as amended in May 2024). The amount available for future borrowings at March 31, 2024 was $870 million. The weighted average interest rate on the total amount outstanding as of March 31, 2024 was 7.18%.

USAC Credit Facility

As of March 31, 2024, USAC’s credit facility, which matures in December 2026, had $736 million of outstanding borrowings and $1 million outstanding letters of credit. As of March 31, 2024, USAC’s credit facility had $863 million of remaining unused availability of which, due to restrictions related to compliance with the applicable financial covenants, $429 million was available to be drawn. The weighted average interest rate on the total amount outstanding as of March 31, 2024 was 8.00%.

Compliance with our Covenants

We and our subsidiaries were in compliance with all requirements, tests, limitations and covenants related to our debt agreements as of March 31, 2024.