November 07, 2012 at 17:08 PM EST
Energy Transfer Partners Reports Third Quarter Results

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

Adjusted EBITDA for Energy Transfer Partners, L.P. ("ETP" or the "Partnership") for the three months ended September 30, 2012 totaled $481.7 million, an increase of $77.5 million over the three months ended September 30, 2011. Distributable Cash Flow for the three months ended September 30, 2012 totaled $339.5 million, an increase of $73.4 million over the three months ended September 30, 2011. Income from continuing operations for the three months ended September 30, 2012 was $193.4 million, an increase of $115.8 million over the three months ended September 30, 2011. Net income for the three months ended September 30, 2012 totaled $46.2 million, a decrease of $29.8 million from the three months ended September 30, 2011.

Adjusted EBITDA for ETP for the nine months ended September 30, 2012 totaled $1.48 billion, an increase of $220.5 million over the nine months ended September 30, 2011. Distributable Cash Flow for the nine months ended September 30, 2012 totaled $935.2 million, an increase of $108.7 million from the nine months ended September 30, 2011. Income from continuing operations for the nine months ended September 30, 2012 was $1.45 billion, an increase of $961.8 million over the nine months ended September 30, 2011. Net income for the nine months ended September 30, 2012 totaled $1.30 billion, an increase of $816.2 million over the nine months ended September 30, 2011.

As of and during the nine months ended September 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 (the "Propane Contribution"), which resulted in the recognition of a $1.1 billion gain on deconsolidation in ETP's consolidated financial statements during the nine months ended September 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 of 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.
  • Discontinued Operations. In October 2012, we sold ETC Canyon Pipeline, LLC (“Canyon”) for approximately $207 million. For the three and nine months ended September 30, 2012, the results of continuing operations of Canyon have been reclassified to loss from discontinued operations and the prior year amounts have been restated to present Canyon's operations as discontinued operations. Canyon's assets and liabilities have been reclassified and reported as assets and liabilities held for sale as of September 30, 2012, and a $145 million non-cash write-down of the carrying amounts of the Canyon assets to net recoverable value was recorded during the three months ended September 30, 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, Thursday November 8, 2012 to discuss the third 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 master limited partnership owning and operating one of the largest and most diversified portfolios of energy assets in the United States. ETP currently has natural gas operations that include approximately 24,000 miles of gathering and transportation pipelines, treating and processing assets, and storage facilities. ETP also owns the general partner interests, 100% of the incentive distribution rights, and a 32.4% limited partnership interest in Sunoco Logistics Partners L.P. (NYSE:SXL), which operates a geographically diverse portfolio of crude oil and refined products pipelines, terminalling and crude oil acquisition and marketing assets. ETP also holds a 70% interest in Lone Star NGL, a joint venture that owns and operates natural gas liquids storage, fractionation and transportation assets in Texas, Louisiana and Mississippi. In addition, ETP holds controlling interest in a corporation (ETP Holdco Corporation) that owns Southern Union Company and Sunoco, Inc. 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 master limited partnership, which owns the general partner and 100% of the incentive distribution rights (IDRs) of Energy Transfer Partners, L.P. (NYSE:ETP) and approximately 50.2 million ETP limited partner units; and owns the general partner and 100% of the IDRs of Regency Energy Partners LP (NYSE:RGP) and approximately 26.3 million RGP limited partner units. ETE also owns a non-controlling interest in a corporation (ETP Holdco Corporation) that owns Southern Union Company and Sunoco, Inc. The ETE family of companies owns approximately 69,000 miles of natural gas, natural gas liquids, refined products, and crude pipelines. For more information, visit the Energy Transfer Equity, L.P. website at www.energytransfer.com.

Sunoco Logistics Partners L.P. (NYSE:SXL), headquartered in Philadelphia, is a master limited partnership that owns and operates a logistics business consisting of a geographically diverse portfolio of complementary pipeline, terminalling and crude oil acquisition and marketing assets. The Crude Oil Pipelines segment consists of approximately 5,400 miles of crude oil pipelines, located principally in Oklahoma and Texas. The Crude Oil Acquisition and Marketing segment consists of acquisition and marketing of crude oil and is principally conducted in the midcontinent and consists of approximately 200 crude oil transport trucks and approximately 120 crude oil truck unloading facilities. The Terminal Facilities segment consists of approximately 42 million shell barrels of refined products and crude oil terminal capacity (including approximately 22 million shell barrels of capacity at the Nederland Terminal on the Gulf Coast of Texas and approximately 5 million shell barrels of capacity at the Eagle Point terminal on the banks of the Delaware River in New Jersey). The Refined Products Pipelines segment consists of approximately 2,500 miles of refined products pipelines located in the northeast, midwest and southwest United States, and equity interests in four refined products pipelines. Sunoco Logistics' general partner is owned by Energy Transfer Partners, L.P. For more information, visit the Sunoco Logistics Partners, L.P. web site at www.sunocologistics.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)

September 30,
2012
December 31,
2011

ASSETS

CURRENT ASSETS $ 1,089,717 $ 1,275,494
PROPERTY, PLANT AND EQUIPMENT, net 12,858,320 12,306,366
NON-CURRENT ASSETS HELD FOR SALE 190,996
ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES 3,197,520 200,612
LONG-TERM PRICE RISK MANAGEMENT ASSETS 41,879 25,537
GOODWILL 600,152 1,219,597
INTANGIBLE ASSETS, net 161,847 331,409
OTHER NON-CURRENT ASSETS, net 157,129 159,601
Total assets $ 18,297,560 $ 15,518,616

LIABILITIES AND EQUITY

CURRENT LIABILITIES $ 1,570,481 $ 1,585,169
LONG-TERM DEBT, less current maturities 8,690,740 7,388,170
LONG-TERM PRICE RISK MANAGEMENT LIABILITIES 72,660 42,303
OTHER NON-CURRENT LIABILITIES 174,351 152,550
COMMITMENTS AND CONTINGENCIES
EQUITY:
Total partners' capital 6,913,196 5,721,707
Noncontrolling interest 876,132 628,717
Total equity 7,789,328 6,350,424
Total liabilities and equity $ 18,297,560 $ 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
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011
REVENUES:
Natural gas sales $ 603,449 $ 679,889 $ 1,480,729 $ 1,963,135
NGL sales 326,841 333,078 1,011,735 756,740
Gathering, transportation and other fees 399,494 392,080 1,162,386 1,094,762
Retail propane sales 213,496 87,082 962,258
Other 90,690 82,920 198,830 217,085
Total revenues 1,420,474 1,701,463 3,940,762 4,993,980
COSTS AND EXPENSES:
Cost of products sold 886,888 1,070,076 2,319,318 3,067,316
Operating expenses 99,602 193,364 349,465 563,917
Depreciation and amortization 94,812 106,419 282,485 294,356
Selling, general and administrative 47,295 57,745 151,310 158,000
Total costs and expenses 1,128,597 1,427,604 3,102,578 4,083,589
OPERATING INCOME 291,877 273,859 838,184 910,391
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized (112,141 ) (124,000 ) (383,271 ) (347,706 )
Equity in earnings of unconsolidated affiliates 7,920 6,713 63,011 13,386
Gain on deconsolidation of Propane Business 1,056,709
Loss on extinguishment of debt (115,023 )
Losses on non-hedged interest rate derivatives (65 ) (68,595 ) (8,087 ) (64,705 )
Other, net 6,548 (6,345 ) 9,547 (6,559 )
INCOME BEFORE INCOME TAX EXPENSE 194,139 81,632 1,461,070 504,807
Income tax expense 768 4,039 14,915 20,417
INCOME FROM CONTINUING OPERATIONS 193,371 77,593 1,446,155 484,390
Loss from discontinued operations (147,162 ) (1,543 ) (150,062 ) (4,522 )
NET INCOME 46,209 76,050 1,296,093 479,868
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST 9,184 9,285 32,914 17,673
NET INCOME ATTRIBUTABLE TO PARTNERS 37,025 66,765 1,263,179 462,195
GENERAL PARTNER’S INTEREST IN NET INCOME 116,583 104,810 341,925 318,241
LIMITED PARTNERS’ INTEREST IN NET INCOME $ (79,558 ) $ (38,045 ) $ 921,254 $ 143,954
INCOME (LOSS) FROM CONTINUING OPERATIONS PER LIMITED PARTNER UNIT:
Basic $ 0.26 $ (0.18 ) $ 4.54 $ 0.70
Diluted $ 0.26 $ (0.18 ) $ 4.52 $ 0.70
NET INCOME (LOSS) PER LIMITED PARTNER UNIT:
Basic $ (0.33 ) $ (0.19 ) $ 3.91 $ 0.68
Diluted $ (0.33 ) $ (0.19 ) $ 3.89 $ 0.68

SUPPLEMENTAL INFORMATION

(Dollars in thousands)

(unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011
Reconciliation of net income to Adjusted EBITDA (a):
Net income $ 46,209 $ 76,050 $ 1,296,093 $ 479,868
Interest expense, net of interest capitalized 112,141 124,000 383,271 347,706
Income tax expense 768 4,039 14,915 20,417
Depreciation and amortization 94,812 106,419 282,485 294,356
Gain on deconsolidation of Propane Business (1,056,709 )
Loss on extinguishment of debt 115,023
Non-cash compensation expense 9,198 10,350 30,190 31,139
Losses on non-hedged interest rate derivatives 65 68,595 8,087 64,705
Unrealized (gains) losses on commodity risk management activities (11,456 ) 6,441 59,519 (1,213 )
Write-down of assets included in loss from discontinued operations 145,214 145,214
Equity in earnings of unconsolidated affiliates (7,920 ) (6,713 ) (63,011 ) (13,386 )
Adjusted EBITDA attributable to unconsolidated affiliates 105,359 15,229 301,559 37,623
Adjusted EBITDA attributable to noncontrolling interest (13,188 ) (13,152 ) (44,246 ) (23,737 )
Other, net 463 12,894 11,684 26,109
Adjusted EBITDA $ 481,665 $ 404,152 $ 1,484,074 $ 1,263,587
Reconciliation of net income to Distributable Cash Flow (a):
Net income $ 46,209 $ 76,050 $ 1,296,093 $ 479,868
Amortization of finance costs charged to interest 2,382 2,536 7,774 7,199
Deferred income taxes 7,563 404 14,828 1,994
Depreciation and amortization 94,812 106,419 282,485 294,356
Gain on deconsolidation of Propane Business (1,056,709 )
Loss on extinguishment of debt 115,023
Non-cash compensation expense 9,198 10,350 30,190 31,139
Unrealized losses on non-hedged interest rate derivatives 5,730 78,969 15,021 70,468
Unrealized (gains) losses on commodity risk management activities (11,456 ) 6,441 59,519 (1,213 )
Write-down of assets included in loss from discontinued operations 145,214 145,214
Equity in earnings of unconsolidated affiliates (7,920 ) (6,713 ) (63,011 ) (13,386 )
Distributions received from unconsolidated affiliates 80,562 22,736 188,976 31,294
Distributable Cash Flow attributable to noncontrolling interest (12,512 ) (11,877 ) (41,901 ) (22,023 )
Maintenance capital expenditures (26,957 ) (31,390 ) (81,211 ) (80,520 )
Other, net 6,693 12,210 22,948 27,396
Distributable Cash Flow $ 339,518 $ 266,135 $ 935,239 $ 826,572

(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
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011
Segment Adjusted EBITDA:
Intrastate transportation and storage $ 120,593 $ 170,183 $ 469,810 $ 514,547
Interstate transportation 204,488 102,312 501,888 265,920
Midstream 105,252 103,233 298,915 273,829
NGL transportation and services 36,445 30,504 110,623 55,200
Retail propane and other retail propane related 3,977 (3,667 ) 94,476 150,924
All other 10,910 1,587 8,362 3,167
$ 481,665 $ 404,152 $ 1,484,074 $ 1,263,587

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 attributable 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
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011
Natural gas transported (MMBtu/d) 9,942,575 11,148,186 9,995,218 11,367,812
Revenues $ 554,843 $ 650,834 $ 1,531,377 $ 2,095,087
Cost of products sold 362,186 422,801 949,254 1,396,001
Gross margin 192,657 228,033 582,123 699,086
Unrealized (gains) losses on commodity risk management activities (12,364 ) 5,342 54,289 (1,368 )
Operating expenses, excluding non-cash compensation expense (45,454 ) (49,336 ) (131,318 ) (144,631 )
Selling, general and administrative expenses, excluding non-cash compensation expense (12,230 ) (14,869 ) (33,858 ) (40,299 )
Adjusted EBITDA attributable to unconsolidated affiliates (2,016 ) 1,013 (1,426 ) 1,759
Segment Adjusted EBITDA $ 120,593 $ 170,183 $ 469,810 $ 514,547
Distributions from unconsolidated affiliates $ 2,108 $ 1,109 $ 4,023 $ 3,581
Maintenance capital expenditures 7,440 8,355 21,026 26,491

Volumes. Transported volumes decreased due to an unfavorable natural gas price environment during the three and nine months ended September 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 and nine months ended September 30, 2012 compared to the same periods in 2011 primarily due to the impacts of lower transported and retained volumes, lower demand fees and lower margin from sales of natural gas, including negative impacts from derivatives.

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

Three Months Ended
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011
Transportation fees $ 138,991 $ 148,331 $ 420,196 $ 448,669
Natural gas sales and other 21,557 42,981 68,064 106,570
Retained fuel revenues 21,735 32,560 55,102 104,222
Storage margin, including fees 10,374 4,161 38,761 39,625
Total gross margin $ 192,657 $ 228,033 $ 582,123 $ 699,086

Storage margin was comprised of the following:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011
Withdrawals from storage natural gas inventory (MMBtu) 5,258,344 8,661,359 9,698,738 24,443,485
Realized margin (loss) on natural gas inventory transactions $ (3,188 ) $ 5,575 $ 76,323 $ 16,837
Fair value inventory adjustments 19,335 (27,603 ) 17,263 (22,772 )
Unrealized gains (losses) on derivatives (12,953 ) 18,231 (77,620 ) 20,024
Margin recognized on natural gas inventory and related derivatives 3,194 (3,797 ) 15,966 14,089
Revenues from fee-based storage 7,364 8,072 23,254 25,891
Other (184 ) (114 ) (459 ) (355 )
Total storage margin $ 10,374 $ 4,161 $ 38,761 $ 39,625

The increase in storage margin for the three months ended September 30, 2012 compared to the three months ended September 30, 2011 was principally driven by an increase in inventory valuation and derivatives settled during the period. The decrease in storage margin for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 was due to fewer withdrawals and a decline in fee-based revenue resulting from the cessation of 4.5 Bcf in fee-based contracts in 2011. These decreases were partially offset by realized gains on the settlement of derivatives during the nine month period compared to the same period in the prior year. For the three and nine months ended September 30, 2012 compared to the same periods in the prior year, intrastate transportation and storage Segment Adjusted EBITDA also reflected lower operating expenses due to decreases in natural gas consumed for compression and lower selling, general and administrative expenses due to decreases in employee-related costs.

Interstate Transportation

Three Months Ended
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011
Natural gas transported (MMBtu/d) 3,059,915 3,155,559 3,015,458 2,709,522
Natural gas sold (MMBtu/d) 16,976 21,808 18,416 22,859
Revenues $ 131,989 $ 120,065 $ 387,165 $ 330,016
Operating expenses, excluding non-cash compensation, amortization and accretion expenses (19,594 ) (21,338 ) (76,735 ) (73,513 )
Selling, general and administrative expenses, excluding non-cash compensation, amortization and accretion expenses (9,034 ) (10,814 ) (27,896 ) (26,743 )
Adjusted EBITDA attributable to unconsolidated affiliates 101,127 14,399 219,354 36,160
Segment Adjusted EBITDA $ 204,488 $ 102,312 $ 501,888 $ 265,920
Distributions from unconsolidated affiliates $ 54,800 $ 21,626 $ 115,100 $ 27,713
Maintenance capital expenditures 8,946 5,864 25,131 15,290

Volumes. Transported volumes increased for the three and nine months ended September 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 nine months ended September 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 nine months ended September 30, 2012 was $80.9 million and $162.2 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
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011
Gathered volumes (MMBtu/d) 2,463,987 2,204,792 2,327,284 1,939,398
NGLs produced (Bbls/d) 83,736 55,943 77,038 51,824
Equity NGLs produced (Bbls/d) 15,890 16,269 18,582 16,142
Revenues $ 656,915 $ 630,135 $ 1,742,241 $ 1,876,171
Cost of products sold 528,311 507,806 1,366,428 1,541,158
Gross margin 128,604 122,329 375,813 335,013
Unrealized (gains) losses on commodity risk management activities 214 (919 ) 2,381 (2,091 )
Operating expenses, excluding non-cash compensation expense (18,948 ) (17,930 ) (68,849 ) (59,795 )
Selling, general and administrative expenses, excluding non-cash compensation expense (9,378 ) (5,254 ) (25,613 ) (14,326 )
Adjusted EBITDA attributable to discontinued operations 4,760 5,007 15,183 15,028
Segment Adjusted EBITDA $ 105,252 $ 103,233 $ 298,915 $ 273,829
Maintenance capital expenditures $ 7,034 $ 3,550 $ 20,445 $ 13,690

Volumes. The increases in NGL production reflected higher overall production during the three and nine months ended September 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
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011
Gathering and processing fee-based revenues $ 81,336 $ 61,177 $ 226,225 $ 172,809
Non-fee-based contracts and processing 54,572 66,830 169,441 174,433
Other (7,304 ) (5,678 ) (19,853 ) (12,229 )
Total gross margin $ 128,604 $ 122,329 $ 375,813 $ 335,013

The increase in our fee-based revenues reflected higher overall production during the three and nine months ended September 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. For the three and nine months ended September 30, 2012, our non-fee-based contracts and processing margin decreased primarily due to lower NGL prices. For the three and nine months ended September 30, 2012, midstream Segment Adjusted EBITDA also reflects the impacts of incremental operating expenses and selling , general and administrative expenses from new assets placed in service in the Eagle Ford Shale.

NGL Transportation and Services

Three Months Ended
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011
NGL transportation volumes (Bbls/d) 174,234 133,149 166,825 131,147
NGL fractionation volumes (Bbls/d) 11,442 13,833 17,530 14,912
Revenues $ 168,313 $ 146,596 $ 496,341 $ 245,416
Cost of products sold 101,222 81,224 285,210 133,628
Gross margin 67,091 65,372 211,131 111,788
Operating expenses, excluding non-cash compensation expense (13,104 ) (16,575 ) (43,074 ) (23,062 )
Selling, general and administrative expenses, excluding non-cash compensation expense (5,230 ) (4,958 ) (15,421 ) (9,606 )
Adjusted EBITDA attributable to unconsolidated affiliates 876 (183 ) 2,233 (183 )
Adjusted EBITDA attributable to noncontrolling interest (13,188 ) (13,152 ) (44,246 ) (23,737 )
Segment Adjusted EBITDA $ 36,445 $ 30,504 $ 110,623 $ 55,200
Distributable cash flow attributable to noncontrolling interest $ 12,512 $ 11,877 $ 41,901 $ 22,023
Maintenance capital expenditures 2,708 4,221 8,980 5,497

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

Volumes. NGL transportation volumes for the three and nine month periods ended September 30, 2012 as compared to the same periods in 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 increased production in the Eagle Ford Shale. Additionally, fractionation volumes decreased for the three and nine months ended September 30, 2012 as compared to the same periods in 2011 primarily due to refinery closures at our Geismar, Louisiana fractionation complex as a result of Hurricane Isaac and refinery downtime.

Segment Adjusted EBITDA. For the three months ended September 30, 2012 compared to the same periods in 2011, the increase in NGL Transportation and Services Segment Adjusted EBITDA was attributable to increased volumes on our wholly-owned NGL pipelines due to increased activity related to the Eagle Ford Shale and increased transportation rates on our West Texas NGL pipeline due to increased capacity out of West Texas.

For the nine months ended September 30, 2012 compared to the same period in 2011, the increase 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
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011
Storage margin $ 33,986 $ 34,287 $ 96,177 $ 57,702
Transportation fees 21,069 13,646 51,818 20,696
Processing and fractionation margin 11,587 16,602 62,692 33,324
Other margin 449 837 444 66
Total gross margin $ 67,091 $ 65,372 $ 211,131 $ 111,788

Supplemental Information on Unconsolidated Affiliates

The following table presents equity in earnings of affiliates, distributions received from affiliates and the proportionate share of unconsolidated affiliates' interest, depreciation, amortization, non-cash compensation expense, loss on debt extinguishment and taxes by unconsolidated affiliate for the three and nine months ended September 30, 2012 and 2011:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011
Equity in earnings (losses) of unconsolidated affiliates:
AmeriGas $ (31,970 ) $ $ (28,920 ) $
Citrus 25,225 49,039
FEP 14,846 5,870 41,041 11,869
Other (181 ) 843 1,851 1,517
Total equity in earnings of unconsolidated affiliates $ 7,920 $ 6,713 $ 63,011 $ 13,386
Proportionate share of interest, depreciation, amortization, non-cash compensation expense, loss on debt extinguishment and taxes:
AmeriGas $ 35,946 $ $ 107,993 $
Citrus 55,675 113,153
FEP 5,381 8,495 16,121 24,156
Other 437 21 1,281 81
Total proportionate share of interest, depreciation, amortization, non-cash compensation expense, loss on debt extinguishment and taxes $ 97,439 $ 8,516 $ 238,548 $ 24,237
Adjusted EBITDA attributable to unconsolidated affiliates:
AmeriGas $ 3,976 $ $ 79,073 $
Citrus 80,900 162,192
FEP 20,227 14,365 57,162 36,025
Other 256 864 3,132 1,598
Total Adjusted EBITDA attributable to unconsolidated affiliates $ 105,359 $ 15,229 $ 301,559 $ 37,623
Distributions from unconsolidated affiliates:
AmeriGas $ 23,654 $ $ 69,853 $
Citrus 37,500 62,500
FEP 17,300 21,513 52,600 27,600
Other 2,108 1,223 4,023 3,694
Total distributions from unconsolidated affiliates $ 80,562 $ 22,736 $ 188,976 $ 31,294

Contacts:

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