Energy Transfer 2010 Annual Report Download - page 36

• actions taken by foreign oil and gas producing nations;
• the availability of local, intrastate and interstate transportation systems;
• the price, availability and marketing of competitive fuels;
• the demand for electricity;
• the impact of energy conservation efforts; and
• the extent of governmental regulation and taxation.
The use of derivative financial instruments could result in material financial losses by us.
From time to time, we have sought to limit a portion of the adverse effects resulting from changes in natural gas
and other commodity prices and interest rates by using derivative financial instruments and other risk
management mechanisms and by our marketing and/or system optimization activities. To the extent that we
hedge our commodity price and interest rate exposures, we forego the benefits we would otherwise experience if
commodity prices or interest rates were to change in our favor. In addition, even though monitored by
management, our derivatives activities can result in losses. Such losses could occur under various circumstances,
including if a counterparty does not perform its obligations under the derivative arrangement, the hedge is
imperfect, commodity prices move unfavorably related to our physical or financial positions or hedging policies
and procedures are not followed.
Our success depends upon our ability to continually contract for new sources of natural gas supply and
natural gas transportation services.
In order to maintain or increase throughput levels on our gathering and transportation pipeline systems and asset
utilization rates at our treating and processing plants, we must continually contract for new natural gas supplies
and natural gas transportation services. We may not be able to obtain additional contracts for natural gas supplies
for our natural gas gathering systems, and we may be unable to maintain or increase the levels of natural gas
throughput on our transportation pipelines. The primary factors affecting our ability to connect new supplies of
natural gas to our gathering systems include our success in contracting for existing natural gas supplies that are
not committed to other systems and the level of drilling activity and production of natural gas near our gathering
systems or in areas that provide access to our transportation pipelines or markets to which our systems connect.
The primary factors affecting our ability to attract customers to our transportation pipelines consist of our access
to other natural gas pipelines, natural gas markets, natural gas-fired power plants and other industrial end-users
and the level of drilling and production of natural gas in areas connected to these pipelines and systems.
Fluctuations in energy prices can greatly affect production rates and investments by third parties in the
development of new oil and natural gas reserves. Drilling activity and production generally decrease as oil and
natural gas prices decrease. We have no control over the level of drilling activity in our areas of operation, the
amount of reserves underlying the wells and the rate at which production from a well will decline, sometimes
referred to as the “decline rate.” In addition, we have no control over producers or their production decisions,
which are affected by, among other things, prevailing and projected energy prices, demand for hydrocarbons, the
level of reserves, geological considerations, governmental regulation and the availability and cost of capital.
A substantial portion of our assets, including our gathering systems and our processing and treating plants, are
connected to natural gas reserves and wells for which the production will naturally decline over time.
Accordingly, our cash flows will also decline unless we are able to access new supplies of natural gas by
connecting additional production to these systems.
Our transportation pipelines are also dependent upon natural gas production in areas served by our pipelines or in
areas served by other gathering systems or transportation pipelines that connect with our transportation pipelines.
A material decrease in natural gas production in our areas of operation or in other areas that are connected to our
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