Energy Transfer Partners Reports Second Quarter Results

Energy Transfer Partners, L.P. (NYSE:ETP) today reported its financial results for the quarter ended June 30, 2012.

Adjusted EBITDA for the three months ended June 30, 2012 totaled $466.4 million, an increase of $78.2 million over the three months ended June 30, 2011. Distributable Cash Flow for the three months ended June 30, 2012 totaled $275.2 million, an increase of $51.9 million over the three months ended June 30, 2011. Net income for the three months ended June 30, 2012 totaled $123.8 million, a decrease of $32.8 million from the three months ended June 30, 2011.

Adjusted EBITDA for the six months ended June 30, 2012 totaled $1.0 billion, an increase of $143.0 million over the six months ended June 30, 2011. Distributable Cash Flow for the six months ended June 30, 2012 totaled $595.7 million, an increase of $35.3 million from the six months ended June 30, 2011. Net income for the six months ended June 30, 2012 totaled $1.25 billion, an increase of $846.1 million over the six months ended June 30, 2011. ETP's net income for the six months ended June 30, 2012 included a gain on deconsolidation and a loss on debt extinguishment which had a net favorable impact of $941.7 million on net income; neither of these were reflected in ETP's Adjusted EBITDA and Distributable Cash Flow for the period.

As of and during the six months ended June 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, which resulted in the recognition of a $1.1 billion gain on deconsolidation in ETP's consolidated financial statements during the six months ended June 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 in 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.

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, Wednesday, August 8, 2012 to discuss the second 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 publicly traded partnership owning and operating a diversified portfolio of energy assets. ETP has pipeline operations in Alabama, Arizona, Arkansas, Colorado, Florida, Louisiana, Mississippi, New Mexico, Utah and West Virginia and owns the largest intrastate pipeline system in Texas. ETP currently has natural gas operations that include approximately 23,500 miles of gathering and transportation pipelines, treating and processing assets, and three storage facilities located in Texas. ETP also holds a 70 percent interest in Lone Star NGL, a joint venture that owns and operates NGL storage, fractionation and transportation assets in Texas, Louisiana and Mississippi. 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 publicly traded partnership, which owns the general partner and 100 percent of the incentive distribution rights (IDRs) of Energy Transfer Partners, L.P. (NYSE:ETP) and approximately 52.5 million ETP limited partner units; and owns the general partner and 100 percent of the IDRs of Regency Energy Partners LP (NYSE:RGP) and approximately 26.3 million RGP limited partner units. ETE is also the parent of Southern Union Company. The ETE family of companies owns approximately 45,000 miles of natural gas and natural gas liquids pipelines. For more information, visit the Energy Transfer Equity, L.P. web site at www.energytransfer.com.

The information contained in this press release is available on our website at www.energytransfer.com.

ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(unaudited)

June 30, December 31,
2012 2011

ASSETS

CURRENT ASSETS $ 1,037,561 $ 1,275,494
PROPERTY, PLANT AND EQUIPMENT, net 12,593,701 12,306,366
ADVANCES TO AND INVESTMENTS IN AFFILIATES 3,259,129 200,612
LONG-TERM PRICE RISK MANAGEMENT ASSETS 38,974 25,537
GOODWILL 600,152 1,219,597
INTANGIBLE ASSETS, net 170,062 331,409
OTHER NON-CURRENT ASSETS, net 159,840 159,601
Total assets $ 17,859,419 $ 15,518,616

LIABILITIES AND EQUITY

CURRENT LIABILITIES $ 1,176,741 $ 1,585,169
LONG-TERM DEBT, less current maturities 9,043,393 7,388,170
LONG-TERM PRICE RISK MANAGEMENT LIABILITIES 140,554 42,303
OTHER NON-CURRENT LIABILITIES 167,208 152,550
COMMITMENTS AND CONTINGENCIES
EQUITY:
Total partners' capital 6,521,565 5,721,707
Noncontrolling interest 809,958 628,717
Total equity 7,331,523 6,350,424
Total liabilities and equity $ 17,859,419 $ 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 June 30, Six Months Ended June 30,
2012 2011 2012 2011
REVENUES:
Natural gas sales $ 456,792 $ 684,686 $ 878,208 $ 1,284,154
NGL sales 334,200 274,785 695,777 431,686
Gathering, transportation and other fees 386,500 379,714 775,244 715,813
Retail propane sales 11,637 220,296 87,082 748,762
Other 51,185 68,614 109,863 135,257
Total revenues 1,240,314 1,628,095 2,546,174 3,315,672
COSTS AND EXPENSES:
Cost of products sold 667,434 1,008,628 1,440,919 2,003,085
Operating expenses 128,839 189,302 256,829 377,791
Depreciation and amortization 99,102 104,972 201,019 200,936
Selling, general and administrative 55,500 54,774 104,023 100,306
Total costs and expenses 950,875 1,357,676 2,002,790 2,682,118
OPERATING INCOME 289,439 270,419 543,384 633,554
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized (134,310 ) (116,466 ) (271,130 ) (223,706 )
Equity in earnings of affiliates 466 5,040 55,091 6,673
Gain on deconsolidation of Propane Business 765 1,056,709
Gains (losses) on disposal of assets 146 (528 ) (878 ) (2,254 )
Loss on extinguishment of debt (115,023 )
Gains (losses) on non-hedged interest rate derivatives (35,917 ) 2,111 (8,022 ) 3,890
Allowance for equity funds used during construction 123 1,201 227 69
Other, net 3,099 622 3,673 1,972
INCOME BEFORE INCOME TAX EXPENSE 123,811 162,399 1,264,031 420,198
Income tax expense 24 5,783 14,147 16,380
NET INCOME 123,787 156,616 1,249,884 403,818
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST 12,366 8,388 23,730 8,388
NET INCOME ATTRIBUTABLE TO PARTNERS 111,421 148,228 1,226,154 395,430
GENERAL PARTNER’S INTEREST IN NET INCOME 108,806 105,892 225,343 213,431
LIMITED PARTNERS’ INTEREST IN NET INCOME $ 2,615 $ 42,336 $ 1,000,811 $ 181,999
BASIC NET INCOME PER LIMITED PARTNER UNIT $ 0.00 $ 0.19 $ 4.35 $ 0.89
BASIC AVERAGE NUMBER OF UNITS OUTSTANDING 229,663,164 208,615,415 228,097,706 201,259,140
DILUTED NET INCOME PER LIMITED PARTNER UNIT $ 0.00 $ 0.19 $ 4.33 $ 0.88
DILUTED AVERAGE NUMBER OF UNITS OUTSTANDING 230,680,644 209,675,032 229,141,002 202,364,488

SUPPLEMENTAL INFORMATION

(Dollars in thousands)

(unaudited)

Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Reconciliation of net income to Adjusted EBITDA (a):
Net income $ 123,787 $ 156,616 $ 1,249,884 $ 403,818
Interest expense, net of interest capitalized 134,310 116,466 271,130 223,706
Income tax expense 24 5,783 14,147 16,380
Depreciation and amortization 99,102 104,972 201,019 200,936
Gain on deconsolidation of Propane Business (765 ) (1,056,709 )
Loss on extinguishment of debt 115,023
Non-cash compensation expense 10,283 10,600 20,992 20,789
(Gains) losses on disposal of assets (146 ) 528 878 2,254
(Gains) losses on non-hedged interest rate derivatives 35,917 (2,111 ) 8,022 (3,890 )
Allowance for equity funds used during construction (123 ) (1,201 ) (227 ) (69 )
Unrealized (gains) losses on commodity risk management activities (14,652 ) (562 ) 70,974 (7,654 )
Proportionate share of unconsolidated affiliates' interest, depreciation, amortization, non-cash compensation expense, loss on extinguishment of debt and taxes 96,623 8,251 141,110 15,721
Adjusted EBITDA attributable to noncontrolling interest (15,810 ) (10,585 ) (31,057 ) (10,585 )
Other, net (2,200 ) (622 ) (2,774 ) (1,972 )
Adjusted EBITDA $ 466,350 $ 388,135 $ 1,002,412 $ 859,434
Reconciliation of net income to Distributable Cash Flow (a):
Net income $ 123,787 $ 156,616 $ 1,249,884 $ 403,818
Amortization of finance costs charged to interest 2,408 2,365 5,392 4,663
Deferred income taxes (3,379 ) (43 ) 7,265 1,592
Depreciation and amortization 99,102 104,972 201,019 200,936
Gain on deconsolidation of Propane Business (765 ) (1,056,709 )
Loss on extinguishment of debt 115,023
Non-cash compensation expense 10,283 10,600 20,992 20,789
(Gains) losses on disposal of assets (146 ) 528 878 2,254
Unrealized (gains) losses on non-hedged interest rate derivatives 35,917 (7,529 ) 9,292 (8,501 )
Allowance for equity funds used during construction (123 ) (1,201 ) (227 ) (69 )
Unrealized (gains) losses on commodity risk management activities (14,652 ) (562 ) 70,974 (7,654 )
Distributions (less than) in excess of equity in earnings of unconsolidated affiliates, net 65,997 (2,802 ) 53,323 1,885
Distributable Cash Flow attributable to noncontrolling interest (15,037 ) (10,146 ) (29,389 ) (10,146 )
Maintenance capital expenditures (30,402 ) (29,493 ) (54,254 ) (49,130 )
Other, net 2,258 2,258
Distributable Cash Flow $ 275,248 $ 223,305 $ 595,721 $ 560,437

(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 June 30, Six Months Ended June 30,
2012 2011 2012 2011
Segment Adjusted EBITDA:
Intrastate transportation and storage $ 156,948 $ 171,549 $ 349,217 $ 344,364
Interstate transportation 184,419 83,498 297,399 163,608
Midstream 93,375 95,220 193,663 170,596
NGL transportation and services 38,963 24,696 74,180 24,696
Retail propane and other retail propane related 1,704 12,236 90,499 154,591
All other (9,059 ) 936 (2,546 ) 1,579
$ 466,350 $ 388,135 $ 1,002,412 $ 859,434

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 related 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 June 30, Six Months Ended June 30,
2012 2011 2012 2011
Natural gas transported (MMBtu/d) 9,928,726 11,322,195 10,021,540 11,477,624
Revenues $ 494,481 $ 672,494 $ 976,534 $ 1,444,253
Cost of products sold 272,897 440,570 587,068 973,200
Gross margin 221,584 231,924 389,466 471,053
Unrealized (gains) losses on commodity risk management activities (15,034 ) 121 66,653 (6,710 )
Operating expenses, excluding non-cash compensation expense (46,961 ) (49,496 ) (85,864 ) (95,295 )
Selling, general and administrative expenses, excluding non-cash compensation expense (2,827 ) (10,930 ) (21,629 ) (25,430 )
Adjusted EBITDA related to unconsolidated affiliates 186 (70 ) 591 746
Segment Adjusted EBITDA $ 156,948 $ 171,549 $ 349,217 $ 344,364
Distributions from unconsolidated affiliates $ 1,009 $ 1,203 $ 1,915 $ 2,472
Maintenance capital expenditures $ 7,359 $ 10,219 $ 13,586 $ 18,136

Volumes. Transported volumes decreased due to a less favorable natural gas price environment, during the three and six months ended June 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 months ended June 30, 2012 compared to the same period in 2011 primarily due to the impacts of lower transported and retained volumes and natural gas prices, as well as lower demand fees of $17.4 million primarily due to a change in a customer contract that impacted the timing of the recording of demand fees. For the six months ended June 30, 2012 compared to the same period in 2011, the impact in Adjusted EBITDA from lower transported and retained volumes and natural gas prices was offset by realized gains on the settlement of financial derivatives used to hedge natural gas in our storage facility that was not withdrawn due to the warmer than normal winter during the first three months of 2012.

The components of our intrastate transportation and storage segment gross margin were as follows:

Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Transportation fees $ 137,356 $ 157,672 $ 281,205 $ 300,338
Natural gas sales and other 32,693 18,390 46,507 63,589
Retained fuel revenues 16,395 36,680 33,367 71,662
Storage margin, including fees 35,140 19,182 28,387 35,464
Total gross margin $ 221,584 $ 231,924 $ 389,466 $ 471,053

Storage margin was comprised of the following:

Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Withdrawals from storage natural gas inventory (MMBtu) 3,893,660 647,373 4,440,394 15,772,126
Realized margin (loss) on natural gas inventory transactions $ 18,827 $ (5,020 ) $ 79,511 $ 11,262
Fair value inventory adjustments 48,229 3,309 (2,072 ) 4,831
Unrealized gains (losses) on derivatives (39,270 ) 12,750 (64,667 ) 1,793
Margin recognized on natural gas inventory and related derivatives 27,786 11,039 12,772 17,886
Revenues from fee-based storage 7,411 8,218 15,890 17,819
Other (57 ) (75 ) (275 ) (241 )
Total storage margin $ 35,140 $ 19,182 $ 28,387 $ 35,464

The increase in our storage margin for the three months ended June 30, 2012 compared to the three months ended June 30, 2011 was principally driven by an increase in inventory valuation and derivatives settled during the period due to a recent increase in prices and a larger inventory balance at June 30, 2012. The decrease in margin for the six months ended June 30, 2012 compared to the six months ended June 30, 2012 was due to fewer withdrawals given the price environment and a decline in fee-based revenue resulting from the cessation of 4.5 Bcf in fixed fee contracts in 2011.

Interstate Transportation

Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Natural gas transported (MMBtu/d) 2,832,897 2,712,947 2,992,985 2,482,807
Natural gas sold (MMBtu/d) 17,770 22,158 19,144 22,868
Revenues $ 126,900 $ 104,850 $ 255,176 $ 209,951
Operating expenses, excluding non-cash compensation, amortization and accretion expenses (29,220 ) (25,550 ) (57,141 ) (52,175 )
Selling, general and administrative expenses, excluding non-cash compensation, amortization and accretion expenses (8,719 ) (9,276 ) (18,862 ) (15,929 )
Adjusted EBITDA related to unconsolidated affiliates 95,458 13,474 118,226 21,761
Segment Adjusted EBITDA $ 184,419 $ 83,498 $ 297,399 $ 163,608
Distributions from unconsolidated affiliates $ 41,800 $ 1,036 $ 60,300 $ 6,087
Maintenance capital expenditures $ 8,683 $ 7,614 $ 16,185 $ 9,426

Volumes. Transported volumes increased for the three and six months ended June 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 six months ended June 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 six months ended June 30, 2012 was $77.0 million and $81.3 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 June 30, Six Months Ended June 30,
2012 2011 2012 2011
Gathered volumes (MMBtu/d) 2,450,673 2,080,027 2,424,862 2,003,745
NGLs produced (Bbls/d) 82,807 50,728 74,474 50,243
Equity NGLs produced (Bbls/d) 22,744 17,137 20,413 16,519
Revenues $ 556,654 $ 617,935 $ 1,111,212 $ 1,269,191
Cost of products sold 421,578 490,854 846,606 1,039,197
Gross margin 135,076 127,081 264,606 229,994
Unrealized (gains) losses on commodity risk management activities (245 ) (673 ) 2,167 (1,172 )
Operating expenses, excluding non-cash compensation expense (28,656 ) (24,696 ) (56,867 ) (49,103 )
Selling, general and administrative expenses, excluding non-cash compensation expense (12,800 ) (6,492 ) (16,243 ) (9,123 )
Segment Adjusted EBITDA $ 93,375 $ 95,220 $ 193,663 $ 170,596
Maintenance capital expenditures $ 8,228 $ 5,303 $ 13,411 $ 10,157

Volumes. The increases in gathered volumes and equity NGL production reflected higher overall production during the three and six months ended June 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 June 30, Six Months Ended June 30,
2012 2011 2012 2011
Gathering and processing fee-based revenues $ 82,048 $ 65,989 $ 157,949 $ 125,596
Non-fee-based contracts and processing 58,679 64,579 119,185 110,949
Other (5,651 ) (3,487 ) (12,528 ) (6,551 )
Total gross margin $ 135,076 $ 127,081 $ 264,606 $ 229,994

The increase in our fee-based revenues reflected higher overall production during the three and six months ended June 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. In addition, for the six months ended June 30, 2012 increased volumes resulting from assets located in West Virginia provided an increase in our fee-based margin. For the three months ended June 30, 2012, our non-fee-based contracts and processing margin decreased primarily due to lower NGL prices offset by higher equity NGL volumes resulting from increased capacity from growth projects in the Eagle Ford Shale. For the six months ended June 30, 2012, our non-fee-based contracts and processing margin increased primarily due to higher equity NGL volumes.

For the three and six months ended June 30, 2012, the increases in midstream gross margin were offset by incremental operating expenses from new assets placed in service in the Eagle Ford Shale and by increased selling, general and administrative expenses due to higher employee-related costs.

NGL Transportation and Services

Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
NGL transportation volumes (Bbls/d) 175,591 128,127 163,531 128,127
NGL fractionation volumes (Bbls/d) 21,204 15,658 20,606 15,658
Revenues $ 160,477 $ 98,820 $ 328,028 $ 98,820
Cost of products sold 85,341 52,404 183,988 52,404
Gross margin 75,136 46,416 144,040 46,416
Operating expenses, excluding non-cash compensation expense (16,334 ) (6,487 ) (29,970 ) (6,487 )
Selling, general and administrative expenses, excluding non-cash compensation expense (5,126 ) (4,648 ) (10,191 ) (4,648 )
Adjusted EBITDA related to unconsolidated affiliates 1,097 1,358
Adjusted EBITDA attributable to noncontrolling interest (15,810 ) (10,585 ) (31,057 ) (10,585 )
Segment Adjusted EBITDA $ 38,963 $ 24,696 $ 74,180 $ 24,696
Distributable cash flow attributable to noncontrolling interest $ 15,037 $ 10,585 $ 29,389 $ 10,585
Maintenance capital expenditures $ 3,846 $ 1,259 $ 6,272 $ 1,259

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 multiple other wholly-owned or joint venture pipelines that were recently placed in service.

Volumes. The volumes reflected above for the three and six months ended June 30, 2011 represent average daily volumes for the period from May 2, 2011 to June 30, 2011. NGL transportation volumes for the three and six month ended June 30, 2012 as compared to the three and six month ended June 30, 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 more production in the Eagle Ford Shale. Additionally, fractionation volumes for the three and six months ended June 30, 2012 as compared to the same periods in 2011 increased principally due to increased production at our Geismar, Louisiana fractionation complex as a result of less refinery downtime for turnarounds.

Segment Adjusted EBITDA. For the three and six months ended June 30, 2012 compared to the same periods in 2011, the increases 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 June 30, Six Months Ended June 30,
2012 2011 2012 2011
Storage margin $ 30,560 $ 23,414 $ 62,192 $ 23,414
Transportation fees 17,677 7,051 30,749 7,051
Processing and fractionation margin 26,904 16,722 51,105 16,722
Other margin (5 ) (771 ) (6 ) (771 )
Total gross margin $ 75,136 $ 46,416 $ 144,040 $ 46,416

Retail Propane and Other Retail Propane Related

Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Retail propane gallons (in thousands) 3,328 84,161 29,720 288,301
Revenues $ 11,637 $ 220,296 $ 87,082 $ 748,762
Other retail propane related revenues $ 1,329 $ 23,677 $ 5,890 $ 52,426
Cost of products sold 7,325 139,472 56,027 454,892
Gross margin 5,641 104,501 36,945 346,296
Unrealized (gains) losses on commodity risk management activities 1,320 (10 ) 3,318 228
Operating expenses, excluding non-cash compensation expense (5,615 ) (79,134 ) (23,604 ) (166,726 )
Selling, general and administrative expenses, excluding non-cash compensation expense 198 (13,121 ) (1,256 ) (25,207 )
Adjusted EBITDA related to unconsolidated affiliates 160 75,096
Segment Adjusted EBITDA $ 1,704 $ 12,236 $ 90,499 $ 154,591
Distributions from unconsolidated affiliates $ 23,654 $ $ 46,199 $
Maintenance capital expenditures $ 435 $ 3,430 $ 1,590 $ 7,524

On January 12, 2012, we received an equity investment in AmeriGas as partial consideration for the contribution of our Propane Business to AmeriGas. As a result, the retail propane and other retail propane related segment data presented above only included eleven days of consolidated activity related to our Propane Business for the six months ended June 30, 2012. For the three and six months ended June 30, 2012, the retail propane and other retail propane related segment data presented above also included our equity investment in AmeriGas. We recorded equity in losses related to AmeriGas of $36.4 million and equity in earnings of $3.1 million for the three and six months ended June 30, 2012, respectively.

Contacts:

Investor Relations:
Energy Transfer
Brent Ratliff, 214-981-0700
or
Media Relations:
Granado Communications Group
Vicki Granado, 214-599-8785
214-498-9272 (cell)
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