Energy Transfer 2010 Annual Report Download - page 75

Midstream
Years Ended December 31,
2009 2008 Change
NGLs produced (Bbls/d) 46,640 30,261 16,379
Equity NGLs produced (Bbls/d) 17,355 14,386 2,969
Revenues $ 2,441,160 $ 5,342,393 $ (2,901,233)
Cost of products sold 2,116,279 4,986,495 (2,870,216)
Gross margin 324,881 355,898 (31,017)
Operating expenses 68,989 82,872 (13,883)
Depreciation and amortization 70,845 59,344 11,501
Selling, general and administrative 44,315 47,268 (2,953)
Segment operating income $ 140,732 $ 166,414 $ (25,682)
Volumes. The increase in NGLs produced was due to increased capacity to delivery NGL volumes at our Godley
plant starting in January 2009. These factors also contributed to an increase in our equity NGL volumes.
Gross Margin. The components of our midstream segment gross margin were as follows:
Years Ended December 31,
2009 2008 Change
Gathering and processing fee-based
revenues $ 169,814 $ 163,836 $ 5,978
Non fee-based contracts and processing 141,061 194,967 (53,906)
Other 14,006 (2,905) 16,911
Total gross margin $ 324,881 $ 355,898 $ (31,017)
Midstream gross margin decreased between the periods primarily due to the net impact of the following factors:
•Gathering and processing fee-based revenues. We recognized $169.8 million in gathering, processing
and treating fee-based revenues, an increase of $6.0 million compared to the prior year. The increase in
fee-based revenue was principally a result of more take away capacity at our Godley plant that allowed
for an increase in fee-based processing volumes.
•Non fee-based contracts and processing margins. We recognized $141.1 million in processing margin,
a decrease of $53.9 million compared to the prior year. The decrease in margin was primarily due to less
favorable processing conditions during 2009 as compared to 2008.
•Other midstream gross margin. We recognized $14.0 million in margin from our marketing activities
during 2009. This was a favorable change between the periods of approximately $16.9 million primarily
due to losses recognized from trading activities during 2008. As noted above, we ceased these trading
activities in the latter part of 2008. Included in the marketing activity discussed above are unrealized
gains of $8.7 million and $1.3 million in 2009 and 2008, respectively, on financial derivatives related to
our midstream activities.
Operating Expenses. Midstream operating expenses decreased between the periods primarily due to a $11.4
million goodwill impairment charge related to our Canyon assets in 2008. Additionally, we experienced a
decrease in compressor expense of $1.9 million, a decrease in plant operating expenses of $1.6 million and a net
decrease in other operating expenses of $1.8 million. These decreases were offset by an increase in ad valorem
taxes of $2.9 million due to increased property values.
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