Energy Transfer 2012 Annual Report Download - page 83

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Our 2012 margin decreased as compared to 2011 due to the net impact of the following factors:
• Transport fees decreased primarily due to a decrease in transported volumes as unfavorable market conditions continued
and the cessation of certain long-term transportation contracts;
• From time to time, our marketing affiliate will contract with our intrastate pipelines for long-term and interruptible
transportation capacity. Our intrastate transportation and storage segment recorded intercompany transportation fees from
our marketing affiliate of $28 million in 2012 compared to $36 million in 2011. The decrease of $8 million between
periods was primarily due to a reduction in the amount of capacity utilized by our marketing affiliate;
• Margin from natural gas sales and other activity decreased primarily due to a decline of $30 million in margin where we
utilize third party processing, offset by increased margin of $13 million from wellhead purchases in the Eagle Ford Shale
that were sold to end users on our HPL system and increased margin of $4 million from system optimization and other
operational activities.
The margin from the natural gas sales and other includes purchased natural gas for transport and sale, derivatives used
to hedge transportation activities, and gains and losses on derivatives used to hedge net retained fuel. Excluding derivatives
related to storage, unrealized gains of $13 million were recorded in 2012 as compared to unrealized losses of $21 million
in 2011; and
• Retained fuel revenues include gross volumes retained as a fee at the current market price; the cost of consumed fuel is
included in operating expenses. Retention revenue decreased $51 million due to less retained volumes and a $37 million
decline in the average of natural gas spot prices.
Storage margin was comprised of the following:
Years Ended December 31,
2012 2011 Change
Withdrawals from storage natural gas inventory (MMBtu) 12,887,906 24,517,008 (11,629,102)
Realized margin on natural gas inventory transactions $ 75 $ 19 $ 56
Fair value inventory adjustments 27 (52) 79
Unrealized gains (losses) on derivatives (59) 63 (122)
Margin recognized on natural gas inventory, including related derivatives 43 30 13
Revenues from fee-based storage 31 35 (4)
Other costs (1)(1) —
Total storage margin $ 73 $ 64 $ 9
The increase in our storage margin was principally driven by gains on settled derivatives which offset a decline in margin on the
physical sale of storage gas due to a decrease in volumes withdrawn from our Bammel storage facility. Additionally, we experienced
a decline in fee-based storage revenue due to the cessation of 4.5 Bcf of fixed fee storage contracts in 2011.
Unrealized (Gains) Losses on Commodity Risk Management Activities. Unrealized losses on commodity risk management activities
reflect the net impact from unrealized gains and losses on storage and non-storage derivatives, as well as fair value adjustments
on inventory. For 2012, unrealized losses on derivatives of $46 million were offset by fair value adjustments to storage gas
inventory of $27 million. For 2011, unrealized losses reflected fair value adjustments to storage gas inventory of $52 million,
offset by gains on derivatives of $42 million.
Operating Expenses, Excluding Non-Cash Compensation Expense. Intrastate transportation and storage operating expenses
decreased primarily due to a decrease in natural gas consumed for compression of $16 million due to lower spot prices and a
decrease in ad valorem taxes of $3 million.
Selling, General and Administrative Expenses, Excluding Non-Cash Compensation Expense. Intrastate transportation and storage
selling, general and administrative expenses decreased between the periods primarily due to a decrease in employee-related costs
and allocated overhead expenses.
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