Sunoco Logistics Partners L.P. : 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 atwww.sunocologistics.com.

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

(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.

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

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:

Storage margin was comprised of the following:

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

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

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:

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

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:

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:

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