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Acquisitions and Related Transactions | 12 Months Ended
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Dec. 31, 2019
Acquisitions and Dispositions [Abstract] |
Acquisitions and Related Transactions | ACQUISITIONS, DIVESTITURES AND RELATED TRANSACTIONS: 2019 and 2020 Transactions SemGroup Acquisition and ET Contribution of SemGroup Assets to ETO On December 5, 2019, ET completed the acquisition of SemGroup pursuant to the terms of the Agreement and Plan of Merger, dated as of September 15, 2019 (the “Merger Agreement”). Under the terms of the Merger Agreement, a wholly owned subsidiary of ET merged with and into SemGroup (the “SemGroup Transaction”), with SemGroup surviving the Merger. At the effective time of the SemGroup Transaction on December 5, 2019, each share of class A common stock, par value $0.01 per share, of SemGroup issued and outstanding immediately prior to the effective time was converted into the right to receive (i) $6.80 in cash, without interest, and (ii) 0.7275 ET Common Units representing limited partner interests in ET. Each share of Series A Cumulative Perpetual Convertible Preferred Stock, par value $0.01 per share, of SemGroup that was issued and outstanding as of immediately prior to the effective time was redeemed by SemGroup for cash at a price per share equal to 101% of the liquidation preference. During the first quarter of 2020, ET contributed certain SemGroup assets to ETO through sale and contribution transactions. Summary of Assets Acquired and Liabilities Assumed The SemGroup merger was recorded using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition date. The purchase price allocation below is preliminary, as management is currently evaluating certain tax-related assumptions. The total purchase price was allocated as follows:
| At December 5, 2019
Total current assets | $ | 794 |
Property, plant and equipment | 3,914 |
Other non-current assets | 623 |
Goodwill(1) | 265 |
Intangible assets | 460 |
Total assets | 6,056 |
Total current liabilities | 629 |
Long-term debt, less current maturities (2) | 2,576 |
Other non-current liabilities | 196 |
SemCAMS Preferred shares | 241 |
Total liabilities | 3,642 |
Noncontrolling interest | 822 |
Total consideration (3) | 1,592 |
Cash received(4) | 153 |
Total consideration, net of cash received | $ | 1,439 |
(1) | None of the goodwill is expected to be deductible for tax purposes. Goodwill recognized from the business combination primarily relates to the value attributed to additional growth opportunities, synergies and operating leverage within SemGroup’s operations.
(2) | Long-term debt at December 5, 2019 includes SemGroup senior notes with an aggregate principal amount of $1.375 billion and SemGroup subsidiary debt of $593 million, all of which were redeemed in total in December 2019, subsequent to the close of the SemGroup Transaction, utilizing proceeds from an intercompany promissory note from ETO.
(3) | Total consideration includes (i) cash paid to SemGroup shareholders, (ii) fair value of ET Common Units issued in the acquisition and (iii) cash paid to redeem SemGroup’s preferred shares.
(4) | Cash received represents cash and cash equivalents held by SemGroup as of the acquisition date.
The fair values of the assets acquired and liabilities assumed were determined using various valuation techniques, including the income and market approaches. 2018 Transactions ET Contribution of Assets to ETO Immediately prior to the closing of the Energy Transfer Merger discussed in Note 1, ET contributed the following to ETO:
• | 2,263,158 common units representing limited partner interests in Sunoco LP to ETO in exchange for 2,874,275 ETO common units;
• | 100 percent of the limited liability company interests in Sunoco GP LLC, the sole general partner of Sunoco LP, and all of the IDRs in Sunoco LP, to ETO in exchange for 42,812,389 ETO common units;
• | 12,466,912 common units representing limited partner interests in USAC and 100 percent of the limited liability company interests in USA Compression GP, LLC, the general partner of USAC, to ETO in exchange for 16,134,903 ETO common units; and
• | a 100 percent limited liability company interest in Lake Charles LNG and a 60 percent limited liability company interest in each of Energy Transfer LNG Export, LLC, ET Crude Oil Terminals, LLC and ETC Illinois LLC to ETO in exchange for 37,557,815 ETO common units.
USAC Acquisition On April 2, 2018, ET acquired a controlling interest in USAC, a publicly traded partnership that provides compression services in the United States. Specifically the Partnership acquired (i) all of the outstanding limited liability company interests in USA Compression GP, LLC (“USAC GP”), the general partner of USAC, and (ii) 12,466,912 USAC common units representing limited partner interests in USAC for cash consideration equal to $250 million (the “USAC Transaction”). Concurrently, USAC cancelled its IDRs and converted its economic general partner interest into a non-economic general partner interest in exchange for the issuance of 8,000,000 USAC common units to USAC GP. Concurrent with these transactions, ETO contributed to USAC all of the issued and outstanding membership interests of CDM for aggregate consideration of approximately $1.7 billion, consisting of (i) 19,191,351 USAC common units, (ii) 6,397,965 units of a newly authorized and established class of units representing limited partner interests in USAC (“USAC Class B Units”) and (iii) $1.23 billion in cash, including customary closing adjustments (the “CDM Contribution”). The USAC Class B Units 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 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. Prior to the USAC acquisition, the CDM entities were indirect wholly-owned subsidiaries of ETO. Beginning April 2018, ETE’s consolidated financial statements reflected USAC as a consolidated subsidiary. Summary of Assets Acquired and Liabilities Assumed The USAC Transaction was recorded using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition date. The total purchase price was allocated as follows:
| At April 2, 2018
Total current assets | $ | 786 |
Property, plant and equipment | 1,332 |
Other non-current assets | 15 |
Goodwill(1) | 366 |
Intangible assets | 222 |
Total assets | 2,721 |
Total current liabilities | 110 |
Long-term debt, less current maturities | 1,527 |
Other non-current liabilities | 2 |
Total liabilities | 1,639 |
Noncontrolling interest | 832 |
Total consideration | 250 |
Cash received(2) | 711 |
Total consideration, net of cash received(2) | $ | (461 | )
(1) | None of the goodwill is expected to be deductible for tax purposes. Goodwill recognized from the business combination primarily relates to the value attributed to additional growth opportunities, synergies and operating leverage within USAC’s operations.
(2) | Cash received represents cash and cash equivalents held by USAC as of the acquisition date.
The fair values of the assets acquired and liabilities assumed were determined using various valuation techniques, including the income and market approaches. Sunoco LP Retail Store Divestment On January 23, 2018, Sunoco LP completed the disposition of assets pursuant to the purchase agreement with 7-Eleven, Inc. (the “7-Eleven Transaction”). As a result of the 7-Eleven Transaction, previously eliminated wholesale motor fuel sales to Sunoco LP’s retail locations are reported as wholesale motor fuel sales to third parties. Also, the related accounts receivable from such sales are no longer eliminated from the Partnership’s consolidated balance sheets and are reported as accounts receivable. In connection with the 7-Eleven Transaction, Sunoco LP entered into a Distributor Motor Fuel Agreement dated as of January 23, 2018 (“Supply Agreement”), with 7-Eleven and SEI Fuel (collectively, “Distributor”). The Supply Agreement consists of a 15-year take-or-pay fuel supply arrangement under which Sunoco LP has agreed to supply approximately 2.0 billion gallons of fuel annually plus additional aggregate growth volumes of up to 500 million gallons to be added incrementally over the first four years. For the period from January 1, 2018 through January 22, 2018 and the years ended December 31, 2017, Sunoco LP recorded sales to the sites that were subsequently sold to 7-Eleven of $199 million and $3.2 billion, respectively, which were eliminated in consolidation. Sunoco LP received payments on trade receivables of $3.7 billion and $3.4 billion, respectively, from 7-Eleven for the years ended December 31, 2019 and December 31, 2018 subsequent to the closing of the sale. The Partnership has concluded that it meets the accounting requirements for reporting the financial position, results of operations and cash flows of Sunoco LP’s retail divestment as discontinued operations. There were no results of operations associated with discontinued operations for the year ended December 31, 2019. The results of operations associated with discontinued operations for the years ended December 31, 2018 and 2017 are presented in the following table:
| Years Ended December 31,
| 2018 |  | 2017
REVENUES | $ | 349 |  |  | $ | 6,964 |
COSTS AND EXPENSES |  |  |
Cost of products sold | 305 |  |  | 5,806 |
Operating expenses | 61 |  |  | 763 |
Depreciation, depletion and amortization | — |  |  | 34 |
Selling, general and administrative | 7 |  |  | 168 |
Impairment losses | — |  |  | 285 |
Total costs and expenses | 373 |  |  | 7,056 |
OPERATING LOSS | (24 | ) |  | (92 | )
OTHER EXPENSE |  |  |
Interest expense, net | 2 |  |  | 36 |
Loss on extinguishment of debt | 20 |  |  | — |
Other, net | 61 |  |  | 1 |
LOSS FROM DISCONTINUED OPERATIONS BEFORE INCOME TAX EXPENSE | (107 | ) |  | (129 | )
Income tax expense | 158 |  |  | 48 |
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES | $ | (265 | ) |  | $ | (177 | )
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES ATTRIBUTABLE TO ET | $ | (10 | ) |  | $ | (6 | )
2017 Transactions Rover Contribution Agreement In October 2017, ETO completed the previously announced contribution transaction with a fund managed by Blackstone Energy Partners and Blackstone Capital Partners, pursuant to which ETO exchanged a 49.9% interest in the holding company that owns 65% of the Rover pipeline (“Rover Holdco”). As a result, Rover Holdco is now owned 50.1% by ETO and 49.9% by Blackstone. Upon closing, Blackstone contributed funds to reimburse ETO for its pro rata share of the Rover construction costs incurred by ETO through the closing date, along with the payment of additional amounts subject to certain adjustments. ETO and Sunoco Logistics Merger As discussed in Note 1, in April 2017, Energy Transfer Partners, L.P. and Sunoco Logistics completed the Sunoco Logistics Merger. Permian Express Partners In February 2017, the Partnership formed PEP, a strategic joint venture with ExxonMobil. The Partnership contributed its Permian Express 1, Permian Express 2, Permian Longview and Louisiana Access pipelines. ExxonMobil contributed its Longview to Louisiana and Pegasus pipelines, Hawkins gathering system, an idle pipeline in southern Oklahoma, and its Patoka, Illinois terminal. Assets contributed to PEP by ExxonMobil were reflected at fair value on the Partnership’s consolidated balance sheet at the date of the contribution, including $547 million of intangible assets and $435 million of property, plant and equipment. In July 2017, ETO contributed an approximate 15% ownership interest in Dakota Access and ETCO to PEP, which resulted in an increase in ETO’s ownership interest in PEP to approximately 88%. ETO maintains a controlling financial and voting interest in PEP and is the operator of all of the assets. As such, PEP is reflected as a consolidated subsidiary of the Partnership. ExxonMobil’s interest in PEP is reflected as noncontrolling interest in the consolidated balance sheets. ExxonMobil’s contribution resulted in an increase of $988 million in noncontrolling interest, which is reflected in “Capital contributions from noncontrolling interest” in the consolidated statement of equity. 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.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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