Energy Transfer 2013 Annual Report Download - page 46

Table of Contents
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, 2013, EnerVest Operating, LLC (“EnerVest”), Anadarko E&P Onshore, LLC (“Anadarko”), affiliates of Halcon Operating,
Inc. and SEI Energy, LLC supplied us with approximately 60% of the Southeast Texas System’s natural gas supply. For the year ended December 31, 2013,
EOG Resources, Inc., affiliates of Chesapeake Energy Corporation, XTO and EnerVest supplied us with approximately 90% of the North Texas System’s
natural gas supply. For the year ended December 31, 2013, Rosetta Resources Operating, LP, SWEPI LP (“Shell”), Anadarko and Petrohawk supplied us with
approximately 62% 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 2017, 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
2015.
During 2013, EDF Inc., Motiva Enterprises LLC, XTO, and Chesapeake Energy Marketing, Inc. collectively accounted for approximately 29% of our
intrastate transportation and storage revenues.
With respect to our interstate transportation and storage operations we have an agreement with Chesapeake Energy Marketing, Inc. that provides for a 15-year
commitment for firm transportation capacity on the Tiger pipeline of approximately 1.0 Bcf/d. We also have agreements with other shippers that provide for
10-year commitments for firm transportation capacity on the Tiger pipeline totaling approximately 1.4 Bcf/d, bringing the total shipper commitments to
approximately 2.4 Bcf/d of firm transportation service in the Tiger pipeline project. Transwestern generates the majority of its revenues from long-term and
short-term firm transportation contracts with natural gas producers, local distribution companies and end-users. Additionally, Panhandle has long-term
transportation contracts with BG LNG Services and ProLiance, which accounted for 43% of Panhandle’s 2013 revenue.
Our joint ventures, FEP and Citrus, also depend on key customers for the transport of natural gas through their pipelines. FEP has 10-12 year agreements
from a small number of major shippers for approximately 1.85 Bcf/d of firm transportation service on the 2.0 Bcf/d Fayetteville Express Pipeline, while
Citrus has 10 and 14 year agreements with its top two customers, respectively, which accounted for 59% of its 2013 revenue.
During 2013, BG Energy Holdings, Chesapeake Energy Marketing, Inc., Ameren Corporation, EnCana Marketing (USA), Inc., and Petrohawk Energy
Corporation collectively accounted for 44% of our interstate transportation and storage revenues.
The failure of the major shippers on our and our joint ventures’ intrastate and interstate transportation and storage pipelines to fulfill their contractual
obligations could have a material adverse effect on our cash flow and results of operations if we or our joint ventures were unable to replace these customers
under arrangements that provide similar economic benefits as these existing contracts.
Our interstate pipelines are subject to laws, regulations and policies governing the rates they are allowed to charge for their services, which may
prevent us from fully recovering our costs.
Laws, regulations and policies governing interstate natural gas pipeline rates could affect the ability of our interstate pipelines to establish rates, to charge rates
that would cover future increases in its costs, or to continue to collect rates that cover current costs.
We are required to file tariff rates (also known as recourse rates) with the FERC that shippers may pay for interstate natural gas transportation services. We
may also agree to discount these rates on a not unduly discriminatory basis or negotiate rates with shippers who elect not to pay the recourse rates. The FERC
must approve or accept all rate filings for us to be allowed to charge such rates.
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