EQUITY:

Limited Partner Units

Limited partner interests in the Partnership are represented by Common Units that entitle the holders thereof to the rights and privileges specified in the Partnership Agreement. The Partnership’s Common Units are registered under the Securities Exchange Act of 1934 (as amended) and are listed for trading on the NYSE. Each holder of a Common Unit is entitled to one vote per unit on all matters presented to the Limited Partners for a vote. In addition, if at any time any person or group (other than the Partnership’s General Partner and its affiliates) owns beneficially 20% or more of all Common Units, any Common Units owned by that person or group may not be voted on any matter and are not considered to be outstanding when sending notices of a meeting of Unitholders (unless otherwise required by law), calculating required votes, determining the presence of a quorum or for other similar purposes under the Partnership Agreement. The Common Units are entitled to distributions of Available Cash as described below under “Parent Company Quarterly Distributions of Available Cash.”

As of December 31, 2018, there were issued and outstanding 2.62 billion Common Units representing an aggregate 99.9% limited partner interest in the Partnership.

Our Partnership Agreement contains specific provisions for the allocation of net earnings and losses to the partners for purposes of maintaining the partner capital accounts. For any fiscal year that the Partnership has net profits, such net profits are first allocated to the General Partner until the aggregate amount of net profits for the current and all prior fiscal years equals the aggregate amount of net losses allocated to the General Partner for the current and all prior fiscal years. Second, such net profits shall be allocated to the Limited Partners pro rata in accordance with their respective sharing ratios. For any fiscal year in which the Partnership has net losses, such net losses shall be first allocated to the Limited Partners in proportion to their respective adjusted capital account balances, as defined by the Partnership Agreement, (before taking into account such net losses) until their adjusted capital account balances have been reduced to zero. Second, all remaining net losses shall be allocated to the General Partner. The General Partner may distribute to the Limited Partners funds of the Partnership that the General Partner reasonably determines are not needed for the payment of existing or foreseeable Partnership obligations and expenditures.

Common Units

The change in ET Common Units during the years ended December 31, 2018, 2017 and 2016 was as follows:



	Years Ended December 31,
	2018	2017	2016
Number of Common Units, beginning of period	1,079.1	1,046.9	1,044.8
Conversion of ET Series A Convertible Preferred Units to common units	79.1	—	—
Common Unit increase from Energy Transfer Merger	1,458.9	—	—
Issuance of common units	2.3	32.2	2.1
Number of Common Units, end of period	2,619.4	1,079.1	1,046.9

In October 2018, ET issued 1.46 billion ET Common Units in connection with the Energy Transfer Merger.

ET Equity Distribution Agreement

In March 2017, the Partnership entered into an equity distribution agreement with an aggregate offering price up to $1 billion. There was no activity under the distribution agreements for the year ended December 31, 2018.

ET Series A Convertible Preferred Units

In May 2018, the Partnership converted its 329.3 million Series A Convertible Preferred Units into approximately 79.1 million ET common units in accordance with the terms of ET’s partnership agreement.

ET Class A Units

In connection with the Energy Transfer Merger, the Partnership issued 647,745,099 Class A units (“ET Class A Units”) representing limited partner interests in the Partnership to LE GP, LLC (“LE GP”), the general partner of ET. The number of ET Class A Units issued allows LE GP and its affiliates to retain a voting interest in the Partnership that is identical to their voting interest in the Partnership prior to the completion of the Merger. The ET Class A Units are entitled to vote together with the Partnership’s common units, as a single class, except as required by law. Additionally, ET’s partnership agreement provides that, under certain circumstances, upon the issuance by the Partnership of additional common units or any securities that have voting rights that are pari passu with the Partnership common units, the Partnership will issue to any holder of ET Class A Units additional ET Class A Units such that the holder maintains a voting interest in the Partnership that is identical to its voting interest in the Partnership prior to such issuance. The ET Class A Units are not entitled to distributions and otherwise have no economic attributes.

Repurchase Program

In February 2015, the Partnership announced a common unit repurchase program, whereby the Partnership may repurchase up to an additional $2 billion of ET Common Units in the open market at the Partnership’s discretion, subject to market conditions and other factors, and in accordance with applicable regulatory requirements. The Partnership repurchased no ET Common Units under this program in 2018, 2017 or 2016 and there was $936 million available to use under the program as of December 31, 2018.

Class D Units

In 2013, the Partnership issued 3,080,000 Class D Units of ET pursuant to an agreement with a former executive. The Class D Units were convertible to ET Common Units, subject to certain vesting requirements which were not met prior to the former executive’s termination in 2016.

Sale of Common Units by Subsidiaries

The Parent Company accounts for the difference between the carrying amount of its investment in subsidiaries and the underlying book value arising from issuance of units by subsidiaries (excluding unit issuances to the Parent Company) as a capital transaction. If a subsidiary issues units at a price less than the Parent Company’s carrying value per unit, the Parent Company assesses whether the investment has been impaired, in which case a provision would be reflected in our statement of operations. The Parent Company did not recognize any impairment related to the issuances of subsidiary common units during the periods presented.

ETO Class E Units

There were previously 8.9 million Class E Units outstanding, all of which were owned by HHI. The Class E Units were entitled to aggregate cash distributions equal to 11.1% of the total amount of cash distributed to all Unitholders, including the Class E Unitholders, up to $1.41 per unit per year. As the Class E Units were owned by a wholly-owned subsidiary, the cash distributions on those units were eliminated in our consolidated financial statements. On December 31, 2018, the Class E units were converted to Class L units, as described below.

ETO Class G Units

There were previously 90.7 million Class G Units outstanding, all of which were held by a wholly-owned subsidiary of the Partnership. The Class G Units were entitled to aggregate cash distributions equal to 35% of the total amount of cash generated by us and our subsidiaries, other than ETP Holdco, and available for distribution, up to a maximum of $3.75 per Class G Unit per year. Allocations of depreciation and amortization to the Class G Units for tax purposes were based on a predetermined percentage and are not contingent on whether ETO has net income or loss. These units were reflected as treasury units in the consolidated financial statements. On December 31, 2018, the Class G units were converted to Class L units, as described below.

ETO Class H Units

The ETO Class H Units were generally entitled to (i) allocations of profits, losses and other items from ETO corresponding to 90.05% of the profits, losses, and other items allocated to ETO by Sunoco Partners with respect to the IDRs and general partner interest in Sunoco Logistics held by Sunoco Partners and (ii) distributions from available cash at ETO for each quarter equal to 90.05% of the cash distributed to ETO by Sunoco Partners with respect to the IDRs and general partner interest in Sunoco Logistics held by Sunoco Partners for such quarter and, to the extent not previously distributed to holders of the Class H Units, for any previous quarters. The Class H units were cancelled in connection with the merger of ETO and Sunoco Logistics in April 2017.

ETO Class I Units

In connection with the Bakken Pipeline Transaction discussed in Note 3, in March 2015, ETO issued 100 ETO Class I Units. The ETO Class I Units are generally entitled to: (i) pro rata allocations of gross income or gain until the aggregate amount of such items allocated to the holders of the ETO Class I Units for the current taxable period and all previous taxable periods is equal to the cumulative amount of all distributions made to the holders of the ETO Class I Units and (ii) after making cash distributions to ETO Class H Units, any additional available cash deemed to be either operating surplus or capital surplus with respect to any quarter will be distributed to the Class I Units in an amount equal to the excess of the distribution amount set forth in ETO’s Partnership Agreement, as amended, (the “Partnership Agreement”) for such quarter over the cumulative amount of available cash previously distributed commencing with the quarter ended March 31, 2015 until the quarter ending December 31, 2016. The Class I Units were cancelled in connection with the Energy Transfer Merger in October 2018.

Bakken Equity Sale

In February 2017, Bakken Holdings Company LLC, an entity in which ETO indirectly owns a 100% membership interest, sold a 49% interest in its wholly-owned subsidiary, Bakken Pipeline Investments LLC, to MarEn Bakken Company LLC, an entity jointly owned by MPLX LP and Enbridge Energy Partners, L.P., for $2.00 billion in cash. Bakken Pipeline Investments LLC indirectly owns a 75% interest in each of Dakota Access and ETCO. The remaining 25% of each of Dakota Access and ETCO is owned by wholly-owned subsidiaries of Phillips 66. ETO continues to consolidate Dakota Access and ETCO subsequent to this transaction.

ETO Class K Units

On December 29, 2016, ETO issued to certain of its indirect subsidiaries, in exchange for cash contributions and the exchange of outstanding common units representing limited partner interests in ETO, Class K Units, each of which is entitled to a quarterly cash distribution of $0.67275 per Class K Unit prior to ETO making distributions of available cash to any class of units, excluding any cash available distributions or dividends or capital stock sales proceeds received by ETO from ETO Holdco. If ETO is unable to pay the Class K Unit quarterly distribution with respect to any quarter, the accrued and unpaid distributions will accumulate until paid and any accumulated balance will accrue 1.5% per annum until paid. As of December 31, 2018, a total of 101.5 million Class K Units were held by wholly-owned subsidiaries of ETO.

ETO Class L Units

On December 31, 2018, ETO issued a new class of limited partner interests titled Class L Units to two wholly-owned subsidiaries of the Partnership when the Partnership’s outstanding Class E units and Class G units held by such subsidiaries were converted into Class L Units. As a result of the conversion, the Class E units and Class G units were cancelled.

The Class L Units generally do not have any voting rights. The Class L Units are entitled to aggregate cash distributions equal to 7.65% per annum of the total amount of cash generated by us and our subsidiaries, other than ETP Holdco, and available for distribution. Distributions shall be paid quarterly, in arrears, within 45 days after the end of each quarter. As the Class L Units are owned by a wholly-owned subsidiary, the cash distributions on those units are eliminated in our consolidated financial statements.

Sales of Common Units by Sunoco Logistics

Prior to the Sunoco Logistics Merger, we accounted for the difference between the carrying amount of our investment in Sunoco Logistics and the underlying book value arising from the issuance or redemption of units by the respective subsidiary (excluding transactions with us) as capital transactions.

In September and October 2016, a total of 24.2 million common units were issued for net proceeds of $644 million in connection with a public offering and related option exercise. The proceeds from this offering were used to partially fund the acquisition from Vitol.

ETO Preferred Units

In November 2017, ETO issued 950,000 of its 6.250% Series A Preferred Units at a price of $1,000 per unit and 550,000 of its 6.625% Series B Preferred Units at a price of $1,000 per unit. In April 2018, ETO issued 18 million of its 7.375% Series C Preferred Units at a price of $25 per unit. In July 2018, ETO issued 17.8 million of its 7.625% Series D Preferred Units at a price of $25 per unit. Subsequent to the Energy Transfer Merger, all of ETO’s Series A, Series B, Series C and Series D Preferred Units remain outstanding.

ETO Series A Preferred Units

Distributions on the Series A Preferred Units will accrue and be cumulative from and including the date of original issue to, but excluding, February 15, 2023, at a rate of 6.250% per annum of the stated liquidation preference of $1,000. On and after February 15, 2023, distributions on the Series A Preferred Units will accumulate at a percentage of the $1,000 liquidation preference equal to an annual floating rate of the three-month LIBOR, determined quarterly, plus a spread of 4.028% per annum. The Series A Preferred Units are redeemable at ETO’s option on or after February 15, 2023 at a redemption price of $1,000 per Series A Preferred Unit, plus an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date of redemption.

ETO Series B Preferred Units

Distributions on the Series B Preferred Units will accrue and be cumulative from and including the date of original issue to, but excluding, February 15, 2028, at a rate of 6.625% per annum of the stated liquidation preference of $1,000. On and after February 15, 2028, distributions on the Series B Preferred Units will accumulate at a percentage of the $1,000 liquidation preference equal to an annual floating rate of the three-month LIBOR, determined quarterly, plus a spread of 4.155% per annum. The Series B Preferred Units are redeemable at ETO’s option on or after February 15, 2028 at a redemption price of $1,000 per Series B Preferred Unit, plus an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date of redemption.

ETO Series C Preferred Units

Distributions on the Series C Preferred Units will accrue and be cumulative from and including the date of original issue to, but excluding, May 15, 2023, at a rate of 7.375% per annum of the stated liquidation preference of $25. On and after May 15, 2023, distributions on the Series C Preferred Units will accumulate at a percentage of the $25 liquidation preference equal to an annual floating rate of the three-month LIBOR, determined quarterly, plus a spread of 4.530% per annum. The Series C Preferred Units are redeemable at ETO’s option on or after May 15, 2023 at a redemption price of $25 per Series C Preferred Unit, plus an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date of redemption.

ETO Series D Preferred Units

Distributions on the Series D Preferred Units will accrue and be cumulative from and including the date of original issue to, but excluding, August 15, 2023, at a rate of 7.625% per annum of the stated liquidation preference of $25. On and after August 15, 2023, distributions on the Series D Preferred Units will accumulate at a percentage of the $25 liquidation preference equal to an annual floating rate of the three-month LIBOR, determined quarterly, plus a spread of 4.738% per annum. The Series D Preferred Units are redeemable at ETO’s option on or after August 15, 2023 at a redemption price of $25 per Series D Preferred Unit, plus an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date of redemption.

PennTex Tender Offer and Limited Call Right Exercise

In June 2017, ETO purchased all of the outstanding PennTex common units not previously owned by ETO for $20.00 per common unit in cash. ETO now owns all of the economic interests of PennTex, and PennTex common units are no longer publicly traded or listed on the NASDAQ.

Subsidiary Equity Transactions

Sunoco LP’s Common Unit Repurchase

In February 2018, after the record date for Sunoco LP’s fourth quarter 2017 cash distributions, Sunoco LP repurchased 17,286,859 Sunoco LP common units owned by ETO for aggregate cash consideration of approximately $540 million. ETO used the proceeds from the sale of the Sunoco LP common units to repay amounts outstanding under its revolving credit facility.

Sunoco LP’s Equity Distribution Program

In October 2016, Sunoco LP entered into an equity distribution agreement pursuant to which Sunoco LP may sell from time to time common units having aggregate offering prices of up to $400 million.

For the year ended December 31, 2018, Sunoco LP issued no additional units under its ATM program. For the years ended December 31, 2017 and 2016, Sunoco LP issued an additional 1.3 million and 2.8 million units with total net proceeds of $33 million and $71 million, net of commissions of $0.3 million and $1 million, respectively. As of December 31, 2018, $295 million of Sunoco LP common units remained available to be issued under the currently effective equity distribution agreement.

Sunoco LP’s Unit Issuances

On March 31, 2016, Sunoco LP sold 2.3 million of Sunoco LP’s common units in a private placement to the Partnership.

In January 2016, Sunoco LP issued 16.4 million Class C units representing limited partner interest consisting of (i) 5.2 million Class C Units issued by Sunoco LP to Aloha as consideration for the contribution by Aloha to an indirect wholly-owned subsidiary, and (ii) 11.2 million Class C Units that were issued by Sunoco LP to its indirect wholly-owned subsidiaries in exchange for all of the outstanding Class A Units held by such subsidiaries.

Sunoco LP’s Series A Preferred Units

On March 30, 2017, ET purchased 12.0 million Sunoco LP Series A Preferred Units representing limited partner interests in Sunoco LP in a private placement transaction for an aggregate purchase price of $300 million. The distribution rate of Sunoco LP Series A Preferred Units is 10.00%, per annum, of the $25.00 liquidation preference per unit until March 30, 2022, at which point the distribution rate will become a floating rate of 8.00% plus three-month LIBOR of the liquidation preference.

In January 2018, Sunoco LP redeemed all outstanding Sunoco LP Series A Preferred Units held by ET for an aggregate redemption amount of approximately $313 million. The redemption amount included the original consideration of $300 million and a 1% call premium plus accrued and unpaid quarterly distributions.

USAC’s Distribution Reinvestment Program

During the nine months ended December 31, 2018, distributions of $1 million were reinvested under the USAC distribution reinvestment program resulting in the issuance of approximately 39,280 USAC common units.

USAC’s Warrant Private Placement

On April 2, 2018, USAC issued two tranches of warrants to purchase USAC common units (the “USAC Warrants”), which included USAC Warrants to purchase 5,000,000 common units with a strike price of $17.03 per unit and USAC Warrants to purchase 10,000,000 common units with a strike price of $19.59 per unit. The USAC Warrants may be exercised by the holders thereof at any time beginning on the one year anniversary of the closing date and before the tenth anniversary of the closing date. Upon exercise of the USAC Warrants, USAC may, at its option, elect to settle the USAC Warrants in common units on a net basis.

USAC’s Class B Units

The USAC Class B Units, all of which are owned by ETO, are a new class of partnership interests of USAC that have substantially all of the rights and obligations of a USAC common unit, except the USAC Class B Units will not participate in distributions for the first four quarters following the closing date of the USAC Transaction on April 2, 2018. Each USAC Class B Unit will automatically convert into one USAC common unit on the first business day following the record date attributable to the quarter ending June 30, 2019.

Parent Company Quarterly Distributions of Available Cash

Our distribution policy is consistent with the terms of our Partnership Agreement, which requires that we distribute all of our available cash quarterly. The Parent Company’s only cash-generating assets currently consist of distributions from its interest in ETO.

Our distributions declared and paid with respect to our common units for the periods presented were as follows:



Quarter Ended	Record Date	Payment Date	Rate
December 31, 2015	February 4, 2016	February 19, 2016	$	0.2850
March 31, 2016 ⁽¹⁾	May 6, 2016	May 19, 2016	0.2850
June 30, 2016 ⁽¹⁾	August 8, 2016	August 19, 2016	0.2850
September 30, 2016 ⁽¹⁾	November 7, 2016	November 18, 2016	0.2850
December 31, 2016 ⁽¹⁾	February 7, 2017	February 21, 2017	0.2850
March 31, 2017 ⁽¹⁾	May 10, 2017	May 19, 2017	0.2850
June 30, 2017 ⁽¹⁾	August 7, 2017	August 21, 2017	0.2850
September 30, 2017 ⁽¹⁾	November 7, 2017	November 20, 2017	0.2950
December 31, 2017 ⁽¹⁾	February 8, 2018	February 20, 2018	0.3050
March 31, 2018	May 7, 2018	May 21, 2018	0.3050
June 30, 2018	August 6, 2018	August 20, 2018	0.3050
September 30, 2018	November 8, 2018	November 19, 2018	0.3050
December 31, 2018	February 8, 2019	February 19, 2019	0.3050

⁽¹⁾

Certain common unitholders elected to participate in a plan pursuant to which those unitholders elected to forego their cash distributions on all or a portion of their common units for a period of up to nine quarters commencing with the distribution for the quarter ended March 31, 2016 and, in lieu of receiving cash distributions on these common units for each such quarter, each said unitholder received Convertible Units (on a one-for-one basis for each common unit as to which the participating unitholder elected be subject to this plan) that entitled them to receive a cash distribution of up to $0.11 per Convertible Unit. See additional information below.

Our distributions declared and paid with respect to our Convertible Unit during the years ended December 31, 2016 and 2017 were as follows:



Quarter Ended	Record Date	Payment Date	Rate
March 31, 2016	May 6, 2016	May 19, 2016	$	0.1100
June 30, 2016	August 8, 2016	August 19, 2016	0.1100
September 30, 2016	November 7, 2016	November 18, 2016	0.1100
December 31, 2016	February 7, 2017	February 21, 2017	0.1100
March 31, 2017	May 10, 2017	May 19, 2017	0.1100
June 30, 2017	August 7, 2017	August 21, 2017	0.1100
September 30, 2017	November 7, 2017	November 20, 2017	0.1100
December 31, 2017	February 8, 2018	February 20, 2018	0.1100
March 31, 2018	May 7, 2018	May 21, 2018	0.1100

ETO Preferred Unit Distributions

Distributions on the Partnership’s Series A, Series B, Series C and Series D preferred units declared and/or paid by the Partnership during the periods presented were as follows:



Period Ended	Record Date	Payment Date	Series A⁽¹⁾			Series B⁽¹⁾			Series C			Series D
December 31, 2017	February 1, 2018	February 15, 2018	$	15.4510	^*	$	16.3780	^*	$	—		$	—
June 30, 2018	August 1, 2018	August 15, 2018	31.2500			33.1250			0.5634		^*	—
September 30, 2018	November 1, 2018	November 15, 2018	—			—			0.4609			0.5931		^*
December 31, 2018	February 1, 2019	February 15, 2019	31.2500			33.1250			0.4609			0.4766

^*Represent prorated initial distributions.

⁽¹⁾Series A and Series B preferred unit distributions are paid on a bi-annual basis.

Sunoco LP Cash Distributions

The following table illustrates the percentage allocations of available cash from operating surplus between Sunoco LP’s common unitholders and the holder of its IDRs based on the specified target distribution levels, after the payment of distributions to Class C unitholders. The amounts set forth under “marginal percentage interest in distributions” are the percentage interests of the IDR holder and the common unitholders in any available cash from operating surplus which Sunoco LP distributes up to and including the corresponding amount in the column “total quarterly distribution per unit target amount.” The percentage interests shown for common unitholders and IDR holder for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution.



		Marginal Percentage Interest in Distributions
	Total Quarterly Distribution Target Amount	Common Unitholders	Holder of IDRs
Minimum Quarterly Distribution	$0.4375	100%	—%
First Target Distribution	$0.4375 to $0.503125	100%	—%
Second Target Distribution	$0.503125 to $0.546875	85%	15%
Third Target Distribution	$0.546875 to $0.656250	75%	25%
Thereafter	Above $0.656250	50%	50%

Distributions on Sunoco LP’s units declared and/or paid by Sunoco LP were as follows:



Quarter Ended	Record Date	Payment Date	Rate
December 31, 2015	February 5, 2016	February 16, 2016	$	0.8013
March 31, 2016	May 6, 2016	May 16, 2016	0.8173
June 30, 2016	August 5, 2016	August 15, 2016	0.8255
September 30, 2016	November 7, 2016	November 15, 2016	0.8255
December 31, 2016	February 13, 2017	February 21, 2017	0.8255
March 31, 2017	May 9, 2017	May 16, 2017	0.8255
June 30, 2017	August 7, 2017	August 15, 2017	0.8255
September 30, 2017	November 7, 2017	November 14, 2017	0.8255
December 31, 2017	February 6, 2018	February 14, 2018	0.8255
March 31, 2018	May 7, 2018	May 15, 2018	0.8255
June 30, 2018	August 7, 2018	August 15, 2018	0.8255
September 30, 2018	November 6, 2018	November 14, 2018	0.8255
December 31, 2018	February 6, 2019	February 14, 2019	0.8255

USAC Cash Distributions

Subsequent to the Energy Transfer Merger and USAC Transactions described in Note 1 and Note 3, respectively, ETO owns approximately 39.7 million USAC common units and 6.4 million USAC Class B units. As of December 31, 2018, USAC had approximately 96.4 million common units outstanding. USAC currently has a non-economic general partner interest and no outstanding incentive distribution rights.

Distributions on USAC’s units declared and/or paid by USAC subsequent to the USAC transaction on April 2, 2018 were as follows:



Quarter Ended	Record Date	Payment Date	Rate
March 31, 2018	May 1, 2018	May 11, 2018	$	0.5250
June 30, 2018	July 30, 2018	August 10, 2018	0.5250
September 30, 2018	October 29, 2018	November 09, 2018	0.5250
December 31, 2018	January 28, 2019	February 8, 2019	0.5250

Accumulated Other Comprehensive Income (Loss)

The following table presents the components of AOCI, net of tax:



	December 31,
	2018			2017
Available-for-sale securities ⁽¹⁾	$	2		$	8
Foreign currency translation adjustment	(5		)	(5		)
Actuarial gain (loss) related to pensions and other postretirement benefits	(48		)	(5		)
Investments in unconsolidated affiliates, net	9			5
Total AOCI, net of tax	(42		)	3
Amounts attributable to noncontrolling interest	—			(3		)
Total AOCI included in partners’ capital, net of tax	$	(42	)	$	—


⁽¹⁾	Effective January 1, 2018, the Partnership adopted Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which resulted in the reclassification of $2 million from accumulated other comprehensive income related to available-for-sale equity securities to common unitholders.

The table below sets forth the tax amounts included in the respective components of other comprehensive income (loss):



	December 31,
	2018			2017
Available-for-sale securities	$	(1	)	$	(2	)
Foreign currency translation adjustment	2			3
Actuarial loss relating to pension and other postretirement benefits	12			3
Total	$	13		$	4