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Energy Transfer Partners LP (NYSE:ETP)

Q1 2013 Results Earnings Call

May 9, 2013 9:30 AM ET

Executives

Martin Salinas, Energy Transfer Partners’ Chief Financial Officer

Kelcy Warren - Chairman and CEO

Mackie McCrea - President and COO

John McReynolds - President, Energy Transfer Company, LP.

Tom Mason - Vice President, General Counsel and Secretary

Analysts

Ted Durbin - Goldman Sachs

Stephen Maresca - Morgan Stanley

Darren Horowitz - Raymond James

Ross Payne - Wells Fargo Securities

Louis Shamie - Zimmer Partners

Helen Ryoo - Barclays Capital

Eric McCarthy - Balyasny Asset Management

Selman Akyol - Stifel

Operator

Good day, ladies and gentlemen. And welcome to the First Quarter Energy Transfer’s Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)

At this time, I would now like to hand the call over to your host for today, Mr. Martin Salinas, Energy Transfer Partners’ Chief Financial Officer. Please proceed.

Martin Salinas

Thank you, Operator, and good morning, everyone. Welcome to Energy Transfer's first quarter 2013 earnings call. With me today are Kelcy, Mackie, John McReynolds, Tom Mason, and other members of our management team, who are available to answer your questions after our prepared remarks.

On today’s call, I’ll make a few comments regarding some of our strategic transactions, including two which recently closed, followed by a brief update on the status of our projects, including the LPG Export project we recently announced, before discussing our Q1 2013 financial and operating results, before taking your questions.

And during the call, I’ll make forward-looking statements within the meaning of Section 21E of the SEC Act of 1934 based on our beliefs, as well as certain assumptions and information available to us.

But before we get start, I would like to mention how exciting we are that Jamie Welch will be joining as ETE’s Chief Financial Officer and Head of our Business Development beginning in late June. Jenny’s wealth of experience and industry insight will be of tremendous value to the Partnerships and we consider executing on our growth and business development initiatives and we look forward to having him on the team.

Let’s start with the transactions update and we continue executing on our plan of simplifying our structure. On April 30th we completed both the contribution of Southern Union Gas Services or SUGS to Regency and their sale of ETE’s 60% interest in ETP Holdco to ETP.

Two transactions are allowed for commercial and operational optimization, while simplifying our corporate structure. With the close of the SUGS transaction we received approximately 500 million of proceeds, net of closing adjustments and the proceeds will use to repay debt, including the outstanding balance on the Southern Union revolving credit facility which was subsequently terminated.

To the Holdco transaction, the cash portion which was approximately $1.3 billion net of closing adjustments was funded on ETP’s revolving credit facility. ETE use the proceeds to repay debt including a portion of its term loan.

Also in March, ETE redeemed its 8% deferred units held by GE to roughly $340 million, the transaction which removed the entire cost converted to ETE’s capital structure and further simplified our organization, was funded by a short term bridge loan and ETE’s revolver. Both of which were repaid in the proceeds from the Holdco transaction at close.

And lastly, turning to our attention to the pending sale of Southern Union’s LDS business. We continue to make good progress towards close which is still

expected third quarter of this year. And if you recall, we committed in our analyst meeting last November that we would simplify our organization through a series of transactions and we’re proud of what we have accomplished in such a period of time. With these transactions behind us, we are focused as ever in demonstrating growth to our unit holders across the Energy Transfer family.

As speaking of growth, I would like to add that we are on a major projects currently underway, primarily in our midstream and NGL segments. We are working towards the completion of our CapEx program for NGL and midstream projects announced over the last two to three years. We have several projects that are expected to go in service later this year on budget and ahead of schedule, including the Rich Eagle Ford Mainline, which will be expanded to 1 Bcf a day in the first quarter 2014 and once our second fractionator with a capacity of 100,000 barrels per day is proceeding ahead of schedule and that’s now expected to be in service by the fourth quarter of this year. And the expansion of our [Agave] plant which is tied to increasing volumes in the Woodford shale is scheduled to go in service in Q3 2013.

In addition, only this week Sunoco Logistics and Lone Star announced the Mariner South project which will further extend our capabilities by integrating SXL’s existing Nederland Marine Terminal and pipeline to Mont Belvieu, to Nederland with Lone Star’s Mont Belvieu fractionation and storage facilities, creating a world class LPG export/import operation along the U.S. Gulf Coast. This project is expected to be operational in the first quarter of 2015, is a clear example of the value created from the synergies between Sunoco Logistics and Lone Star that will provide an expedited solution to meet the growing customer demand for LPG exports. And we continue to be very pleased with the progress of our midstream and NGL build out which has allowed us to expand our service offerings to customers and provide visibility to significant growth in cash flow.

Looking forward, we continue to see a substantial amount of opportunity in the midstream sector. On top of the projects which have already been announced, we have more than 1.5 billion of additional growth projects under evaluation. Projects included in more than 3.6 billion CapEx program are expected to generate a total of $550 million to $650 million of EBITDA on an annual basis as volumes ramp up for the remainder of 2013 and into 2014. And this number will grow as initiatives like Mariner South move forward.

Now turning to EPT’s first quarter of 2013 results, where our consolidated adjusted EBITDA for the quarter was $956 million, that compares to $494 million in Q1 2012. Consolidated distributable cash flow for the quarter was 622 million, that compared to 371 million in Q1 of 2012. The increases were primarily driven by the acquisitions of Citrus, Sunoco Logistics and the Holdco transactions, along with the impact of numerous growth projects that have brought in service. And I will provide more details as I walk through those segments.

As of Q1, EPT will pay it’s unit holders $ 0.8938 on a quarterly basis per unit on May 15, unitholders of record as of May 6.

Now let's dive into the segment results and we will start with our midstream segment, where adjusted EBITDA for Q1 was $79 million, down about $10 million from Q1 2012. [ph]And we faced operating and G&A expenses.

Total gross margin increased $30 million from Q1 2012 and fee based margin increased $27 million due to additional volumes from production in the Eagle Ford shale, Woodford shale and additional volumes related to Southern Union’s gathering and processing operations. Non-fee based margin increased $1 million which is primarily driven by the Southern Union gathering and processing operations. These increases in gross margin were offset by increases in operating expenses and G&A expenses, primarily due to the addition of Southern Union's gathering and processing operations.

And looking at our NGL transportation and services segment, for Q1 2013, adjusted EBITDA was $80 million, a $30 million increase from this time last year, driven primarily driven by the completion of several projects.

Our NGL transportation volumes averaged just over 274,000 barrels per day for the quarter, an increase of about 123,000 barrels per day compared to Q1 2012. This increase was driven by the completion of the Gateway and Texas pipelines and from the startup of our Jackson and Kennedy Processing Plants.

In addition, NGL fractionation volumes averaged nearly 58,000 barrels per day for the quarter. That’s an increase of 48,000 barrels per day from Q1 of 2012, driven primarily by the start-up of Lonestar Frac 1 and Mont Belvieu. And from a commercial perspective, we have contracted 100% of the capacity on both fractionators and are proud to state that. And our volumes ramp up to the middle of 2014, we will have contracted approximately 85% of volumes on our Lone Star Texas Gateway NLG pipelines.

Now, for our interstate transportation segment where adjusted EBITDA was $297 million for the quarter, that’s an increase of $217 million from Q1 2012, driven primarily by the consolidation of Southern Union's interstate transportation and storage businesses, which includes the Panhandle Eastern and Trunkline Gas pipeline, as well as the Trunkline LNG facility.

Also contributing to the increase of the full quarter of results from the acquisition of Citrus that was done in the first quarter of 2012. And as it relates to our unconsolidated subsidiaries, the Q1 adjusted EBITDA attributable to our 50% interest in activity in Citrus was $8 million. That compares to $23 million for Q1 2013. And from a cash perspective, ETP received distributions from FEP and Citrus of $41 million during the quarter.

And looking at our interstate transportation and storage segment, adjusted EBITDA for the quarter was $132 million, down $60 million from Q1 2012, driven primarily by the recognition of storage margin from a cash perspective. Overall transportation is encouraging the decline from a period, due to the settlement of commodity derivatives.

The warm weather during the first quarter of 2012 resulted in the lack of withdrawal and a decline of natural gas prices. This creates significant financial gains on storage derivatives. That’s a physical offset from a cash perspective and resulted in a higher inventory value as we lived through during this winter.

The abnormal weather pattern resulted in huge storage margins period-over-period. And from a transportation perspective, our volumes averaged 9.7 Bcf a day in Q1 of 2013, down approximately 300,000 Mcf a day from Q1 2012, driven primarily by the continued low natural gas prices, narrow base of differentials and contract expirations.

However, volumes have increased in Q4 2012 by approximately 300,000 Mcf a day in response to a slightly more favorable price environment. And from an earnings perspective, the decrease of transportation fees of $50 million compared to Q1 2012 was offset by increases in natural gas sales and other activities, improved retention margins and lower SG&A expenses.

And, lastly on our retail marketing segment, our Q1 2013 adjusted EBITDA was $37 million, down about $109 million from Q4 2012. Our retail segment experienced a rise in fuel costs in the quarter, primarily driven by market conditions. For the period, Sunoco had averaged gasoline margins of $0.68 per gallon that compares to roughly $0.145 per gallon for Q4 of 2012.

Although, we have rebounded from the lower margins, we experienced in the first part of the year with March and April trending closer to historical averages. And as it relates to volumes for Q1 2013, Sunoco had approximately 187,000 gallons per month of gasoline and diesel throughput for the company operated size compared to 198,000 gallons per month in Q4 2012.

And at our PES refinery at JV, our share of adjusted EBITDA for the quarter was a negative $21.6 million, down $26 million from Q4 2012, 46 day turnaround at the Philadelphia refinery impacted production for the quarter. And to comment about our investment in Sunoco Logistics, for those of you who were unable to listen to Sunoco Logistics earnings call this morning, Mike Hennigan and his team continued to fire on all cylinders as they announced record results again this quarter with adjusted EBITDA of $336 million and BCF of 195 million. And from a cash perspective, ETP will receive 45 million from assets sales for the quarter and following asset sales, distribution increased to $2.49 per unit on an annual basis, asset sales are now in the high distribution split. As a result ETP will receive roughly 66% of any incremental distribution through ownership of asset sales common units and IDRs as we move forward.

That pretty much covers our growth for the quarter. Let's move on to growth CapEx where at the Q1 2013 we invested 435 million on a consolidated basis. That includes $136 million of Sunoco Logistics. Growth CapEx at ETP’s regulatory assets was $219 million and we expect $80 million on Southern Union related projects.

For the full year 2013, we expect total growth CapEx of 1.6 to 1.9 billion on a consolidated basis. That includes 635 to 735 million at Sunoco Logistics. Growth CapEx for ETP on a standalone basis is expected to be 865 to $980 million for the full year, and we expect to invest 130 to 170 million at Southern Union and Sunoco retail marketing’s operations.

And as it relates to maintenance CapEx for Q1 2013, we expect just over 50 million on a consolidated basis, including 4 million at asset sale. For the full year, we expect to spend 345 to 405 million on CapEx which includes roughly 60 to 70 million again on asset sale. And with respect to liquidity, barring our recent equity offering and the Holdco transaction, ETP currently has over $1 billion available on its revolving credit facility. We had a number of options to fund on CapEx while preserving our investment grade ratings and maintaining a sufficient amount of liquidity, including the sale of non-core assets. We’ve also utilized or continuing to utilize our aftermarket or dribble program to contribute to our funding needs. As such we filed an 800 million prospective supplement this morning to be able to continue issuing equity under the program. We believe that with this program and the sale of non-core assets, we may not lose to go to the market of any large overnight offering to the foreseeable future.

Now for ETE, their DCF as objected to exclude acquisition costs was $178 million for the quarter, that compares to 131 million by this time last year, an increase of $47 million driven by increased cash flows through our ETE ownership in ETP and from Southern Union, Holdco transactions. Distributions for ETE unit holders of $.0645 cents per unit on a quarterly basis or $2.58 on an annual basis will be paid on May 17 to unitholders of record as of May 6. And this is ETE’s second consecutive quarterly increase and we expect to continue to raise ETE’s distribution as we manage closer to one time covered ratio. And as we previously stated, our incentives to get ETE back to a pure play GP significant strides over the last several months to get there. Most notably with the sale of ETP and the remaining 60% of Holdco that ETE owns.

Operator, with that, that completes our prepared remarks. Let’s open up the lines for questions. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions) We have a first question from the line of Ted Durbin from Goldman Sachs.

Ted Durbin - Goldman Sachs

Wanted to just check in here on the trunkline conversion, how your initial conversations are going as you are talking through potential contracts, if you done more of the engineering. Are you still seeing there is a need -- I think you had said 250,000 barrels a day to make it to go. And then how you’re thinking about the kind of tariff, you need to charge on that to make your returns objective?

Mackie McCrea

Excuse me. This is Mackie. We are very excited about the progress of that project. To remind everybody, we’re on track to have the 30-inch trunkline -- pipeline abandoned probably within the next 60 days. We are continuing to negotiate with customers. We’ll be disappointed if about sometime in early June at the latest that we haven’t announced a foundation shipper and had started an open seasons. So things are going very well. As far as the tariff changes around the capital, that will all be finalized and determined once we complete an open season.

Ted Durbin - Goldman Sachs

Okay. That’s helpful. And then, I think, Martin you had mentioned the -- I think there is $550 million to $650 million of EBITDA from the CapEx, if I caught that correct. I’m just wondering if you can talk about the ramp up -- that's sort of a year one, you hit that number or is it overtime, kind of, the timing of when that cash flow is come in?

Martin Salinas

Yes. That’s more of, as the projects come in service and ramp up as you know, a lot of the bills that we do is not for day one production but more driven by production curves from our customers. So as I mentioned in my comments as volumes ramp up in ‘13 and more so into ‘14 do we see the full potential of these projects as we’ve guided before, kind of, the five to six multiple, particularly on the Midstream and NGL side that we’re seeking. We think we’ll get there certainly as we see a full year in 2015. But those cash flows do grow sequentially in ‘13 and into ‘14.

Ted Durbin - Goldman Sachs

That’s great. And then, last one from me is just any update from your side on the LNG exports that the Lake Charles stuff is there. Any more movement in terms of -- any sense of timing or kind of how you’re doing with that?

Mackie McCrea

Yes. This is Mackie. We have another project. We’re just extremely excited about things were going as planned. We intend to file the resource report by the end of this year and expect to get FERC approval within a year after that. Everybody knows that with a growth in shales, we need to export. I believe even our government is recognizing that. And since we’re next in line, we’re very optimistic within a short period of time, within six to nine days that we will receive our non-FDA permits. So it’s a project that we’re looking forward to and we’re moving forward and very excited about.

Ted Durbin - Goldman Sachs

Well, so 60 to 90 days is the timing you’re thinking of, we guess, what do we need between now and then to see that. I guess, we have some surprises in that sense?

Mackie McCrea

Yes. There is indications that we’re getting from Washington that they may move quicker on at least the next one or two decisions around non-FDA permits.

Ted Durbin - Goldman Sachs

Okay. That’s it for me and thanks a lot.

Kelcy Warren

Thanks, Ted.

Operator

Thanks for your questions, Ted. We have a next question from the line of Stephen Maresca from Morgan Stanley. Please go ahead.

Stephen Maresca - Morgan Stanley

Hey, good morning, Martin, Mackie and team.

Martin Salinas

Hi Stephen.

Stephen Maresca - Morgan Stanley

A follow-up on Lake Charles, Mackie, you mentioned 60 to 90 days for the non-FDA. Where do you think you stand on the timeline for commercial contract signings?

Mackie McCrea

Well, as you can imagine, we’re under a confidentiality agreements but we’re very optimistic that we’ll be able to disclose that in the very near future.

Stephen Maresca - Morgan Stanley

Okay. Fair enough. Second thing, you announced new CEO of ETE, how should we be thinking about or are you thinking about using ETE again in the way you’ve used it in the past in terms of a currency or an acquisition vehicle?

Kelcy Warren

Yes. Stephen, this is Kelcy. Yes, we did as you probably know ETE has been an industry that had very few employees. ETE moved into the asset-holding business. It did that, we felt by necessity but never wanted to be in that business long-term. Also, as you know, we have systematically now restructured that where ETE for all practical purposes is out of the asset-owning business and the fact they appear IDR recipient and unitholder of ETP. So Jamie Welch is a good friend of mine. Jamie Welch is one of the brightest people I have ever known and I’ve had the benefit of having a 10-year interview process with Jamie that was very expensive by the way. It’s -- I am pleased he’s joining our organization, ETE will not -- has no plans to change now. It’s a simplified structure. It’s just -- this helps us with the family of MLPs, it helps us with a consistent strategy with a consistent view of our finance, and I believe that it will be very positive for all the unitholders.

Stephen Maresca - Morgan Stanley

Okay, so no change kind of how you just restructured --

Kelcy Warren

That is correct.

Stephen Maresca - Morgan Stanley

Last one from me and you may have mentioned this, Martin, I apologize. Just on the interstate business, it looks like gross margin was up from the first quarter this year to last year, but I know adjusted EBITDA was down. Was there -- what’s going on in that business and are you seeing any change with that as gas prices have moved around?

Martin Salinas

Yes, really there, Stephen, was our gross margin, we had, given the warmer weather we saw last year, we took some financial gains on derivatives that we had added to, those inventory molecules so to speak were pushed into this winter and just didn’t have that financial offset. So that drove it. When you look at just the transportation side of the business it was pretty much flat quarter over quarter. We had a drop in transportation fees of about 15 million, but offsetting that we had some optimization and retention increases, not to mention lower SG&A costs, that got us back to basically a break-even or flat quarter over quarter performance, which gives us confidence that we talked about before that we’ve hit the trough and kind of are working our way back up. We’ve also seen gas prices move in our favor which has helped to move a little bit more through the pipe and also get a little bit more margin on the retained fuel that’s coming into the system. So we would see an improvement heading into the first part of 2013 than we saw last year.

Operator

We have our next question from the line of Darren Horowitz from Raymond James.

Darren Horowitz - Raymond James

A couple questions for you around the Mariner South project, what do you think those CapEx to get to that 6 million barrels loading rate?

Kelcy Warren

Well, I think first I should say this, another example of how excited we are to use the assets between all of our Energy Transport family of assets. We now can take gas from the wellhead gather process, deliver the residue to the (inaudible) and deliver now NGLs not only through the fractionator that we have owned, but also through our partnership with SXL, we will be able to export propane, butane. So we’re very excited about that.

From the standpoint of capital, we expect it to be approximately $700 million and it should to be online by first quarter of 2015 and the breakout on the JV is approximately 70% SXL and 30% Lone Star.

Darren Horowitz - Raymond James

And then with regard to Shell’s commitment, what volume per month does that represent relative to that stated capacity?

Kelcy Warren

Yes, as everybody probably knows we still have a couple of weeks in the open season and we’ll not release any kind of information of that kind of detail at this time.

Darren Horowitz - Raymond James

Last one, with fracs 1 and 2 fully committed and obviously the expectation for you guys to continue moving further downstream, of that $700 million commitment how far does that get you in terms of scalable growth of that facility? I mean ultimately is it the potential for you guys to possibly double capacity there or maybe even look doing other things with normal isobutane, exporting isobutylene, How should we think about the scalable growth factor and you will ultimately have an --

Kelcy Warren

Well, the way we are positioned at Mount Belvieu, and the way SXL’s position over at Nederland, there is tremendous amount of growth. We have mentioned, we are still in our open season. We hope to secure additional customers. We can literally double the size of the facility if we needed to, both from a standpoint of fractionation transportation, refrigeration and then delivering to vessels. So it remains to be seen on what kind of market interest there will be, but our intent is to grow if the market can support growth.

Darren Horowitz - Raymond James

Okay. I appreciate it, Mackie. Thanks.

Mackie McCrea

Thanks Darren.

Operator

Thank you. We have our next question from the line of Ross Payne, Wells Fargo. Please go ahead.

Ross Payne - Wells Fargo Securities

How are you doing guys?

Martin Salinas

Hi, Ross.

Ross Payne - Wells Fargo Securities

I just -- I wanted to just ask you a quick question on Southern Union. Have you guys decided if you’re going to guarantee those bonds? Thanks.

Martin Salinas

Yes. Ross, on that we’re now owning a 100% of Holdco at the ETP level. We’re looking at a number of things to not only simplify the structure but kind of put some of the capital structure in order that makes sense for us as a MLP. There’re a number of securities and covenant packages within Southern Union that were done for Southern Union that’s why don’t match up with our thoughts are around there. So those are things that we’re looking at now and certainly look to execute on over the next quarter or two and that is one option but one of several we’re looking at.

Ross Payne - Wells Fargo Securities

Okay. All right. Great. Thanks.

Martin Salinas

You bet.

Operator

Thank you. We have next caller from the line of Louis Shamie from Zimmer Partners. Please go ahead.

Louis Shamie - Zimmer Partners

Hey. Good morning, guys. Just a couple questions. First off, on the midstream segment being that the SUGS asset is going to be moving out of Holdco into Regency. Can you give us split of what the EBITDA was between kind of the assets that are going to be staying at Energy Transfer and the assets that are going to be moving over to Regency?

Martin Salinas

Yes. Louis, this is Martin. Let me, I thought, we kind of put that in -- let me give you offline on that one.

Louis Shamie - Zimmer Partners

Okay. Thank you. It might have been in there and I just missed it. The other question was kind of regarding your financing plans for this year. You guys mentioned that you’ve got that dribble program in place as an option. I was just wondering about the AmeriGas units whether those are -- whether you intend to use those as a component of financing for this year?

Martin Salinas

Yes. Good question Louis. I mean there are numbers of things at our option. We did -- overnight offering back several weeks ago, size to really meet the needs through the remainder of the year. We do have the AmeriGas units at our option. We’ve been working with AmeriGas to get through some regulatory approval hurdles and we’re well on our way there.

We also have the sale of the LDCs coming up as I mentioned we’re on track for our third quarter closing there and again we’ll use those proceeds efficiently between Southern Union and ETP.

The $800 million overnight offering was put in there really just to give us another source of liquidity. Although, I think it’s been clear that we are looking at doing at as much as we can to avoid having the issue as remaining ETP unit as we have to again to balanced liquidity maintain our investment grade rating. So it’s safe to say, looking at all options before we issue an ETP unit, so again meet our objectives.

Louis Shamie - Zimmer Partners

Okay. And kind of somewhat related, talking about the potential for Lake Charles LNG Export. What’s your vision for where that asset would fit or how it would be financed? Clearly, it would be beneficial for ETE, if you had project of that size done at ETP, but it’s definitely a lot to carry for a few years. So what’s your thought about the best way to finance that if that’s to go?

Kelcy Warren

Yes. You bet. Louis, this is Kelcy. You’re absolutely correct. It’s not -- this project is about as bad as you can get per an MLP when you look at the amount of capital required and the time just between spending large amounts of capital and actually creating distributable cash flow dollars to unitholders. So, we -- it’s just not the perfect fit for us. So therefore, if ETE stays in the project which I doubt, I think at some point ETE may exit the project with arrangement with ETP but let’s talk about the financing. The financing, we’re intrigued by what we have seen with other LNG facilities primarily Cheniere. We’re intrigued with those type of structures. And I think it’s safe to say that we will be pursuing some type of financial engineering that will be suitable for our unitholders and very suitable to the views of the rating agencies as well.

Operator

Next question, we have one more question from the line of Helen Ryoo from Barclays.

Helen Ryoo - Barclays Capital

Martin, did you say that there was -- there is about 1.5 billion of growth projects under evaluation?

Martin Salinas

That’s correct. That excludes the trunkline or LNG.

Helen Ryoo - Barclays Capital

So that’s an ETP -- sort of an ETP level or ETP only project we are talking about?

Martin Salinas

Correct. ETP and Lone Star I should add.

Helen Ryoo - Barclays Capital

Could you elaborate what geographic area you are looking at, is it going to be mostly in the Eagle Ford NGL infrastructure or are you also looking at other areas?

Martin Salinas

No, it certainly continues, it’s going to be primarily in the heavy hydrocarbon, whether it’s in the midstream, and gathering and processing, rich gas or on the NGL side, and building that at Mount Belvieu. Also northeast continues to be a hot button for us. We’ve got some assets at the ETP level and even more so with the acquisition of Sunoco Logistics. So we are looking at a number of options or opportunities up in the northeast as well as the Marcellus and Utica is still an area -- from an ETP perspective that we want to be a big player.

Helen Ryoo - Barclays Capital

And then just moving over to your CapEx number, maintenance CapEx number in the quarter, it seems like it came down quite significantly from fourth quarter, you just showed 51 million versus I guess 130 something in the last quarter. So could you talk about what’s driving that and also if this is a sustainable level going forward?

Martin Salinas

Yes, a lot of that is timing, Helen. It’s just dependent on what type of conservative work we have to do, timeline – dead;omes are around that, we are starting the year I think we tend to have a little bit lower as we are moving more molecules through our system. We did guide the CapEx numbers for the year, so I think you take the 51, plus what we got it to get you there for the full year.

Helen Ryoo - Barclays Capital

And then just lastly on ETE side, your cash flow from Holdco, it did reduce to 50 million versus like 75 million, you had in the quarter, what’s driving the reduction there?

Martin Salinas

Yes, that’s right. We did have a drop -- when you look at the retail business within Holdco, we had a very strong fourth quarter. The margins came down in the first quarter and so that drove some of that, that decreased from fourth quarter to first quarter. Also at the refinery we had a very strong quarter in the fourth. As I mentioned earlier that we had a downtime turnaround at the Philadelphia refinery limited production coming out of that facility and therefore impacting our results for the JV earnings. So those two really were the big driver between fourth quarter dividend through Holdco in the first quarter.

Operator

We have another question from the line of Eric McCarthy from Balyasny Asset Management.

Eric McCarthy - Balyasny Asset Management

Was curious if how we are expecting to balance the backlog of projects with -- if there is still a commitment to raising the distribution at the ETP level this year and how we can balance those two?

Kelcy Warren

Yes. This is Kelcy. Absolutely, there is commitment to raise the distribution as fast as we can raise it, but that is our absolute commitment here. We are pleased that we’ve simplified our structure again. We put assets in the place they belong. We are also pleased that when we held maximum, we will go back to projects of $1.5 billion. Yes, we’ve created a footprint in this partnership that is so large.

It would be virtually impossible not to have that type of backlog of projects at all time. But what we are doing is -- and you’ve got commitment from the management team. What we are doing is we are making projects compete for capital projects, that they meet higher RRs than we have had in the past. Our expectations are much greater.

We are also committed to issue as little equity as ETP, as we can to maintain the credit metrics that we must maintain and to run our business correctly. But I will tell you, trust me. Nothing gets talk about more in the halls around here than getting ETP to a point where it can resume distribution growth.

Eric McCarthy - Balyasny Asset Management

And do you think you would be in a position to give guidance towards that?

Kelcy Warren

More than what I just gave I don’t think -- I’m sorry. We quit giving guidance a few years ago. It backfired almost in 2008. But I will tell you, be happy to -- if we routinely do this, if you would call me a Brent Ratliff , be happy to have a conversation with you about more details of where we stand, what we are doing, what our philosophies are. We are committed to getting ETP consistently above the one coverage ratio in a healthy way and to resume distribution growth. At ETP, we are committed.

Eric McCarthy - Balyasny Asset Management

Okay. Great. Last question. Late trial seems to be further along in the queue, then some of the other LNG export projects. When do you think we will be in the position to communicate the strategy for whether it’s going to be -- if we can get offtake or a tolling agreement what -- when will be in a position to communicate that?

Mackie McCrea

This is Mackie, Eric. As I mentioned earlier what we have been in negotiations, we are very excited. We’re very optimistic and we believe in the short period of time, we will be able to talk much more openly on that.

Eric McCarthy - Balyasny Asset Management

Okay. Thanks, guys.

Martin Salinas

Thanks Eric.

Operator

Thanks for your questions. We have a next question from the line of Selman Akyol from Stifel. Please go ahead.

Selman Akyol - Stifel

Thank you. Good morning.

Kelcy Warren

Good morning.

Selman Akyol - Stifel

Two quick questions for me, you guys mentioned sale of non-core assets and I was wondering if you could add any more color around that in terms of either timing or goals that you hope to raise. And then the second question relates to your extensive backlog of 1.5 billion projects under considerations. Is there any color around maybe repurposing of assets that you already own maybe particularly less taxes et cetera?

Martin Salinas

Yes. Selman, this is Martin, on the sale of non-core assets, we talked about the LDC business that’s little over $1 billion sale that we expect to close in the third quarter. And again we will use those proceeds to pay down debt across the various entities. We talked about the AmeriGas units that we have a position of about 1.3 billion in there.

We’ll continue to be good partners and good stewards of those units as we work with AmeriGas and making sure that they continue to meet their objectives. But that is I think as we’ve stated in the past, our intent is to exit that position as efficiently and prudently as possible. We looked at other asset sales as many as -- so much non-core, but maybe where assets fits within a better entity.

We looked at SUGS going over the Regency. We think that’s a win-win for all parties. We were looking at ways of repurposing pipes and then putting them in various buckets. I think SXL talked about the acquisition of the Marcus Hook Refinery from Sunoco again, an inter company transaction if you will but another example of how we’re looking of put the pieces of the puzzle together and put the assets where they make the most sense and bring the most value to not only the partnerships, but our unit holders. So those are just -- excuse me -- those are just several examples of how we’re utilizing our assets to meet our objectives.

With respect to the backlog, you’re right. I mean, there is a number of assets that we’re looking at in terms of repurposing, I think that something that we’ll continue to do and now with the bigger sandbox that we have and looking at SXL again. And they’ve called us this morning, they talked about a project that Eaglebine Express – where they’re repurposing some refine products to convert it into crude.

We continue to look at our natural gas assets and where it makes more sense to move heavier hydrocarbons, again whether it be on the NGL side, crude, refine products and that is part of that backlog that I referred to earlier.

Kelcy Warren

Yes. Selman, this is Kelcy. Let me add to that. And Mackie said this earlier but I will emphasize. This acquisition of SXL has been better than anybody expected. An example, Mackie is Chairman of Board of SXL and he routinely -- where he and I talk routinely and we look at gas pipelines and these are awaited to ship gas from one line to another, meet our contractual objectives and then offer that pipeline to SXL for a better purpose. We routinely do that.

And those things that they -- those are long shots a lot of times, lot of times those pipes are in the wrong place. But we have an excellent working relationship with Mike Hennigan who runs SXL. He is a very bright guy and I would say every week we’re exploring the possibility of converting natural gas assets to a better purpose and the reverses through from time to time as well.

Selman Akyol - Stifel

All right. Thank you very much.

Operator

Thank you, Selman. Thank you all for your questions today. I would now like to turn the call over to Martin Salinas for closing remarks. Please go ahead.

Martin Salinas

Great. Again, thanks everyone for your time this morning. Have a great day.

Operator

Thank you. Ladies and gentlemen, this concludes the presentation. You may now disconnect. Have a good day. Thank you all for joining.

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