Energy Transfer 2015 Annual Report Download - page 46

Table of Contents
In markets served by our NGL pipelines, we compete with other pipeline companies and barge, rail and truck fleet operations. We also face competition with
other storage and fractionation facilities based on fees charged and the ability to receive, distribute and/or fractionate the customer’s products.
Our crude oil and refined petroleum products pipelines face significant competition from other pipelines for large volume shipments. These operations also
face competition from trucks for incremental and marginal volumes in the areas we serve. Further, our crude and refined product terminals compete with
terminals owned by integrated petroleum companies, refining and marketing companies, independent terminal companies and distribution companies with
marketing and trading operations.
We also face strong competition in the market for the sale of retail gasoline and merchandise. Our competitors include service stations operated by fully
integrated major oil companies and other well-recognized national or regional retail outlets, often selling gasoline or merchandise at aggressively
competitive prices. The actions of our retail marketing competitors, including the impact of imports, could lead to lower prices or reduced margins for the
products we sell, which could have an adverse effect on our business or results of operations.
We may be unable to retain or replace existing midstream, transportation, terminalling and storage customers or volumes due to declining demand or
increased competition in oil, natural gas and NGL markets, which would reduce our revenues and limit our future profitability.
The retention or replacement of existing customers and the volume of services that we provide at rates sufficient to maintain or increase current revenues and
cash flows depends on a number of factors beyond our control, including the price of and demand for oil, natural gas, and NGLs in the markets we serve and
competition from other service providers.
A significant portion of our sales of natural gas are to industrial customers and utilities. As a consequence of the volatility of natural gas prices and increased
competition in the industry and other factors, industrial customers, utilities and other gas customers are increasingly reluctant to enter into long-term
purchase contracts. Many customers purchase natural gas from more than one supplier and have the ability to change suppliers at any time. Some of these
customers also have the ability to switch between gas and alternate fuels in response to relative price fluctuations in the market. Because there are many
companies of greatly varying size and financial capacity that compete with us in the marketing of natural gas, we often compete in natural gas sales markets
primarily on the basis of price.
We also receive a substantial portion of our revenues by providing natural gas gathering, processing, treating, transportation and storage services. While a
substantial portion of our services are sold under long-term contracts for reserved service, we also provide service on an unreserved or short-term basis.
Demand for our services may be substantially reduced due to changing market prices. Declining prices may result in lower rates of natural gas production
resulting in less use of services, while rising prices may diminish consumer demand and also limit the use of services. In addition, our competitors may attract
our customers’ business. If demand declines or competition increases, we may not be able to sustain existing levels of unreserved service or renew or extend
long-term contracts as they expire or we may reduce our rates to meet competitive pressures.
Revenue from our NGL transportation systems and refined products storage is also exposed to risks due to fluctuations in demand for transportation and
storage service as a result of unfavorable commodity prices, competition from nearby pipelines, and other factors. We receive substantially all of our
transportation revenues through dedicated contracts under which the customer agrees to deliver the total output from particular processing plants that are
connected only to our transportation system. Reduction in demand for natural gas or NGLs due to unfavorable prices or other factors, however, may result
lower rates of production under dedicated contracts and lower demand for our services. In addition, our refined products storage revenues are primarily
derived from fixed capacity arrangements between us and our customers, a portion of our revenue is derived from fungible storage and throughput
arrangements, under which our revenue is more dependent upon demand for storage from our customers.
The volume of crude oil and products transported through our oil pipelines and terminal facilities depends on the availability of attractively priced crude oil
and refined products in the areas serviced by our assets. A period of sustained price reductions for crude oil or refined products could lead to a decline in
drilling activity, production and refining of crude oil, or import levels in these areas. A period of sustained increases in the price of crude oil or products
supplied from or delivered to any of these areas could materially reduce demand for crude oil or refined in these areas. In either case, the volumes of crude oil
or products transported in our oil pipelines and terminal facilities could decline.
The loss of existing customers by our midstream, transportation, terminalling and storage facilities or a reduction in the volume of the services our customers
purchase from us, or our inability to attract new customers and service volumes would negatively affect our revenues, be detrimental to our growth, and
adversely affect our results of operations.
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