Energy Transfer 2012 Annual Report Download - page 51

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If we consummate future acquisitions, our capitalization and results of operations may change significantly. As we determine the
application of our funds and other resources, Unitholders will not have an opportunity to evaluate the economics, financial and
other relevant information that we will consider.
If we do not continue to construct new pipelines, our future growth could be limited.
During the past several years, we have constructed several new pipelines, and are currently involved in constructing several new
pipelines. Our results of operations and ability to grow and to increase distributable cash flow per unit will depend, in part, on our
ability to construct pipelines that are accretive to our distributable cash flow. We may be unable to construct pipelines that are
accretive to distributable cash flow for any of the following reasons, among others:
• we are unable to identify pipeline construction opportunities with favorable projected financial returns;
• we are unable to obtain necessary governmental approvals and contracts with qualified contractors and vendors on acceptable
terms;
• we are unable to raise financing for our identified pipeline construction opportunities; or
• we are unable to secure sufficient transportation commitments from potential customers due to competition from other pipeline
construction projects or for other reasons.
Furthermore, even if we construct a pipeline that we believe will be accretive, the pipeline may in fact adversely affect our results
of operations or results from those projected prior to commencement of construction and other factors.
Expanding our business by constructing new pipelines and related facilities subjects us to risks.
One of the ways that we have grown our business is through the construction of additions to our existing gathering, compression,
treating, processing and transportation systems. The construction of a new pipeline and related facilities (or the improvement and
repair of existing facilities) involves numerous regulatory, environmental, political and legal uncertainties beyond our control and
require the expenditure of significant amounts of capital that we will be required to finance through borrowings, the issuance of
additional equity or from operating cash flow. If we undertake these projects, they may not be completed on schedule, at all, or at
the budgeted cost. A variety of factors outside our control, such as weather, natural disasters and difficulties in obtaining permits
and rights-of-way or other regulatory approvals, as well as the performance by third party contractors, may result in increased
costs or delays in construction. Cost overruns or delays in completing a project could have a material adverse effect on our results
of operations and cash flows. Moreover, our revenues may not increase immediately following the completion of a particular
project. For instance, if we build a new pipeline, the construction will occur over an extended period of time, but we may not
materially increase our revenues until long after the project’s completion. In addition, the success of a pipeline construction project
will likely depend upon the level of oil and natural gas exploration and development drilling activity and the demand for pipeline
transportation in the areas proposed to be serviced by the project as well as our ability to obtain commitments from producers in
the area to utilize the newly constructed pipelines. In this regard, we may construct facilities to capture anticipated future growth
in oil or natural gas production in a region in which such growth does not materialize. As a result, new facilities may be unable
to attract enough throughput or contracted capacity reservation commitments to achieve our expected investment return, which
could adversely affect our results of operations and financial condition.
We depend on certain key producers for our supply of natural gas and the loss of any of these key producers could adversely
affect our financial results.
For the year ended December 31, 2012, EnCana Oil and Gas (USA), Inc. ("Encana"), EnerVest Operating, LLC, and SandRidge
Energy Inc. supplied us with approximately 66% of the Southeast Texas System’s natural gas supply. For the year ended
December 31, 2012, EOG Resources, Inc., affiliates of Chesapeake Energy Corporation, XTO Energy Inc. (“XTO”) and EnCana
Oil and Gas (USA), Inc., supplied us with approximately 58% of the North Texas System’s natural gas supply. For year ended
December 31, 2012, Rosetta Resources Operating, LP, SWEPI LP ("Shell") and Anadarko E&P Company LP ("Anadarko") supplied
us with approximately 63% of the Rich Eagle Ford Mainline System's natural gas supply. We are not the only option available to
these producers for disposition of the natural gas they produce. To the extent that these and other producers may reduce the volumes
of natural gas that they supply us, we would be adversely affected unless we were able to acquire comparable supplies of natural
gas from other producers.
Our intrastate transportation and storage and interstate transportation and storage operations depend on key customers to
transport natural gas through our pipelines and the pipelines of our joint ventures.
We have several nine- and ten-year fee-based transportation contracts with XTO that terminate through 2019, pursuant to which
XTO has committed to transport certain minimum volumes of natural gas on pipelines in our ET Fuel System. We also have an
eight-year fee-based transportation contract with Luminant Energy Company LLC (“Luminant”) to transport natural gas on the
ET Fuel System. We also extended two natural gas storage contracts with Luminant to store natural gas at the two natural gas
storage facilities that are part of the ET Fuel System. Each of the contracts with Luminant will terminate in 2017.
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