Energy Transfer 2013 Annual Report Download - page 86

Table of Contents
Segment Operating Results
Intrastate Transportation and Storage
Years Ended December 31,
2012
2011
Change
Natural gas transported (MMBtu/d) 9,849,900
11,295,084
(1,445,184)
Revenues $2,191
$2,674
$(483)
Cost of products sold 1,394
1,774
(380)
Gross margin 797
900
(103)
Unrealized losses on commodity risk management activities 19
9
10
Operating expenses, excluding non-cash compensation expense (191)
(210)
19
Selling, general and administrative, excluding non-cash compensation expense (25)
(35)
10
Adjusted EBITDA related to unconsolidated affiliates 1
3
(2)
Segment Adjusted EBITDA $ 601
$667
$(66)
 We experienced a decrease in transport volumes in 2012 due to a less favorable natural gas price environment, the cessation of certain long-term
contracts, and lower basis differentials primarily between the West and East Texas hubs. The average spot price at the Houston Ship Channel for 2012
declined to $2.70/MMBtu from $3.94/MMBtu for 2011, while the average basis differential between West Texas and the Houston Ship Channel decreased
from $0.035/MMBtu in 2011 to $0.019/MMBtu in 2012.
. The components of our intrastate transportation and storage segment gross margin were as follows:
Years Ended December 31,
2012
2011
Change
Transportation fees $550
$599
$(49)
Natural gas sales and other 95
107
(12)
Retained fuel revenues 79
130
(51)
Storage margin, including fees 73
64
9
Total gross margin $797
$900
$(103)
Our gross margin decreased 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.
81