Energy Transfer 2012 Annual Report Download - page 92

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For additional information regarding our business segments, see “Item 1. Business” and Notes 1 and 14 to our consolidated financial
statements. In addition, following the acquisition of all of the membership interests in LDH on May 2, 2011, we have added an
NGL transportation and services segment, which includes all of Lone Star’s results of operations.
Selling, General and Administrative Expenses Not Allocated to Segments. Selling, general and administrative expenses are
allocated monthly to the Operating Companies using the Modified Massachusetts Formula Calculation (“MMFC”). The expenses
subject to allocation are based on estimated amounts and take into consideration our actual expenses from previous months and
known trends. The difference between the allocation and actual costs is adjusted in the following month which results in over or
under allocation of these costs due to timing differences.
Segment Operating Results
Intrastate Transportation and Storage
Years Ended December 31,
2011 2010 Change
Natural gas transported (MMBtu/d) 11,295,084 12,251,457 (956,373)
Revenues $ 2,674 $ 3,291 $ (617)
Cost of products sold 1,774 2,381 (607)
Gross margin 900 910 (10)
Unrealized losses on commodity risk management activities 9 62 (53)
Operating expenses, excluding non-cash compensation expense (191)(196) 5
Selling, general and administrative, excluding non-cash compensation
expense (54)(63) 9
Adjusted EBITDA related to unconsolidated affiliates 3 3 $ —
Segment Adjusted EBITDA $ 667 $ 716 (49)
Volumes. Transported volumes decreased due to a less favorable natural gas price environment and lower basis differentials
primarily between the West and East Texas market hubs offset by increased volumes from rich natural gas shale formations
primarily in the Eagle Ford and certain areas of the Barnett Shale. The average spot price difference between these locations was
$0.036/MMBtu in 2011 compared to $0.127/MMBtu in 2010.
Gross Margin. The components of our intrastate transportation and storage segment gross margin were as follows:
Years Ended December 31,
2011 2010 Change
Transportation fees $ 599 $ 594 $ 5
Natural gas sales and other 107 110 (3)
Retained fuel revenues 130 144 (14)
Storage margin, including fees 64 62 2
Total gross margin $ 900 $ 910 $ (10)
Our gross margin decreased due to the net impact of the following factors:
• Additional demand-based contracts offset a decline in transported volumes, resulting in a net increase of $5 million in
transportation fees.
• 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 $36 million in 2011 compared to $40 million in 2010. The decrease of $4 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 $3 million primarily due to unfavorable impacts from system
optimization activities.
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