Energy Transfer 2012 Annual Report Download - page 95

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Volumes. NGL production increased primarily due to increased inlet volumes at our La Grange plant as a result of more favorable
processing conditions and more production by our customers in the Eagle Ford Shale area in south Texas. The decrease in equity
NGL production was primarily due to a higher concentration of volumes billed under fee-based contracts in 2011 as compared to
2010.
Gross Margin. The components of our midstream segment gross margin were as follows:
Years Ended December 31,
2011 2010 Change
Gathering and processing fee-based revenues $ 253 $ 198 $ 55
Non fee-based contracts and processing 234 200 34
Other (16)(20) 4
Total gross margin $ 471 $ 378 $ 93
Midstream gross margin increased between the periods due to the net impact of the following:
• Gathering and processing fee-based revenues. Increased volumes from production in the Eagle Ford Shale resulted in
increased fee-based revenues of $26 million. Additionally, increased volumes from the growth of our assets in West
Virginia and Louisiana provided an increase in our fee-based margin of $18 million.
• Non fee-based contracts and processing margin. Our non fee-based gross margins increased $49 million primarily due
to higher NGL prices. The composite NGL price for 2011 was $1.30 per gallon as compared to $1.02 per gallon in 2010.
Lower equity NGL production volumes partially offset this increase.
• Other midstream gross margin. The increase in other midstream gross margin was due to increased margin associated
with processing where third party processing was utilized. Additionally, we recorded unrealized gains of $3 million in
2011 associated with our marketing activities compared to unrealized losses of $13 million in 2010. For the years ended
December 31, 2011 and 2010, other midstream margin was net of $36 million and $40 million, respectively, of fees
charged by our intrastate transportation systems. These fees were recognized as income by our intrastate transportation
and storage segment and have no effect on our consolidated results of operations.
Unrealized (Gains) Losses on Commodity Risk Management Activities. Our midstream segment recorded unrealized gains of $3
million in 2011 compared to unrealized losses of $13 million in 2010 primarily due to a decrease in the volume of hedging activities
of our marketing affiliate.
Operating Expenses, Excluding Non-Cash Compensation Expense. Midstream operating expenses increased $18 million primarily
due to an increase in maintenance and operating expenses of $7 million, an increase in ad valorem taxes of $4 million, an increase
in employee expenses of $5 million and an increase in professional fees of $2 million. These increases primarily resulted from
new assets placed into service in the Eagle Ford Shale.
Selling, General and Administrative Expenses, Excluding Non-Cash Compensation Expense. Midstream selling, general and
administrative expenses increased primarily due to increases in professional fees of $4 million and other costs of $2 million offset
by a decrease in employee costs of $2 million.
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