Energy Transfer 2012 Annual Report Download - page 76

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from fees based on volumes transported. We are also subject to risk from not renewing long-term fee-based contracts in areas of
declining supply. We expect these volumes to continue to trend downward in areas where we have assets connected to dry gas
given the outlook on natural gas prices and production in 2013.
We benefit from price differentials between receipt and delivery points on our system. These differentials are a driver of volumes
from certain of our customers and we also can capture price differentials on our open capacity. We do not expect a significant
change in price differentials between locations our assets are connected to during 2013 based on current supply, demand and
capacity dynamics.
With our expansion of activities in the Eagle Ford Shale and Permian Basin, we expect growth in margin from our midstream
segment as we continue to meet our customers' needs in these rich natural gas shale formations. We also anticipate NGL prices
to be stable during 2013.
We expect to see continued opportunities related to wet or rich natural gas from shale formations, as well as continued demand
for NGL related services, including storage, fractionation and exportation. In addition, we anticipate significant demand for
crude transportation to the Gulf Coast markets. Consequently, these expectations will shape our strategic transactions and
growth projects in the near term.
Results of Operations
We report Segment Adjusted EBITDA as a measure of segment performance. We define Segment Adjusted EBITDA as 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 and other non-
operating income or expense items. 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).
Adjusted EBITDA reflects amounts for unconsolidated affiliates based on the Partnership's proportionate ownership and amounts
for less than wholly owned subsidiaries based on 100% of the subsidiaries' results of operations. Previously, amounts for less than
wholly owned subsidiaries were reflected in Segment Adjusted EBITDA based on the Partnership's proportionate ownership, such
that the measure was reduced for amounts attributable to noncontrolling interests. During the three months ended December 31,
2012, management changed its definition of Segment Adjusted EBITDA to reflect amounts for less than wholly owned subsidiaries
based on 100% of the subsidiaries' results of operations. Management believes that the revised segment performance measure
more closely reflects the presentation of less than wholly owned subsidiaries within the Partnership's consolidated financial
statements. For periods prior to the three months ended December 31, 2012, only the NGL transportation and services segment
included a less than wholly owned subsidiary. Based on this change in our definition of Segment Adjusted EBITDA, we have
recast the presentation of our segment results for 2011 to be consistent with the current year presentation. This change did not
impact 2010, because the noncontrolling interest did not exist prior to the LDH Acquisition and formation of Lone Star.
When presented on a consolidated basis, Adjusted EBITDA is a non-GAAP measure. Although we include Segment Adjusted
EBITDA in this report, we have not included an analysis of the consolidated measure, Adjusted EBITDA. We have included a
total of Segment Adjusted EBITDA for all segments, which is reconciled to the GAAP measure of net income in the consolidated
results sections that follow.
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