Good day, ladies and gentlemen, and welcome to the Second Quarter 2014 Energy Transfer Partners and Energy Transfer Equity Joint Earnings Conference Call. At this time, all participants are in a listen-only mode. (Operator Instructions) I'll now like to turn the conference over to your host for today to Mr. Martin Salinas, Chief Financial Officer. Sir, you may begin. Martin Salinas Thank you, operator, and good morning everyone. Welcome to Energy Transfer's second quarter 2014 earnings call. We thank you for joining us, and appreciate your continued interest in Energy Transfer. As always, I'm accompanied by Kelcy Warren, Mackie McCrea, John McReynolds, Jamie Welch and other members of our senior management team who are available to help answer your questions after our prepared remarks. On today's call, I'll start with a few remarks about some of the key accomplishments ETP achieved during the quarter, followed by a brief update on our growth projects before concluding with ETP's quarterly financial results. After that, I'll hand the call over to Jamie Welch to discuss ETE's activities and financial results for the quarter before opening up the call to take your questions. As a remainder, we'll be making 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. I'll also refer to adjusted EBITDA and distributable cash flow or DCF, both of which are non-GAAP financial measures. A reconciliation of our non-GAAP measures can be found on our Web site. With that, let's start with our distribution rate, where we announced a fourth consecutive increase in our quarterly distribution to $3.82 per unit on an annualized basis. That represents an increase of just over 6.5% from last year, which will be paid on August 14th…

Thanks, Martin. It was a busy quarter with all the partnerships continuing on from the strong performance in Q1 2014. It was also active for the large scale organic development program across the family including the recently announced two new ETP growth projects, Bakken and Rover. The total growth CapEx of board approved projects across the family excluding any M&A activity in Lake Charles LNG currently exceeds $15 billion. From a financing perspective from January through May ETP completed its $1 billion common unit buyback program. As a result there is a reduction of approximately $500 million in partners' capital on our balance sheet from December 31, 2013 to June 30, 2014. ETE also amended its senior secured term loan agreement to increase the aggregate principle amount to $1.4 billion and use the proceeds from this $400 million increase to repay borrowings under our revolving credit facility at the general partnership purchases. In May ETE issued $700 million aggregate principle amount of its 5% and 7%-8% senior notes due 2024. And lastly ETE purchases 14.4 million regency common units for $400 million in June and shortly after purchased an additional 16.5 million regency common units for another $400 million as part of the closing of the Eagle Rock transaction. Subsequent to these purchases ETE and ETP owned approximately 23% on the limited partner interest in regency. Switching over to LNG, we remain confident in our ability to achieve financial investment decision or FID in mid 2015. We continue to make progress on the overall project development and expect a notice of schedule for environmental review from FERC in September, a draft environmental impact segment in the fall and the binding submissions from the select EPC consortiums for the construction of the project by the end of November. As we previously…

(Operator Instructions) Your first question comes from Gabe Moreen from BofA. Please go ahead.

Hey, good morning, everyone. Jamie if you can just talk about where things maybe stand contractually with BG on Trunkline LNG? And then also talk about your latest thinking on how you're approaching financing the project?

Sure, Gabe. As far as BG is concerned, yes, we've spend the last four or five months negotiating with them over the fundamental terms of all the contracts. So, between the construction management agreement, the O&M agreement and what we call liquefaction services, we're now fully agreed on all the terms with BG. They're going through their internal BG formal process that will lead to their Board approval. We expect that will happen some time in September. And the terms are very consistent with the framework that we laid out last year at the Analyst Day as far as the underlying economics as well as the term of the contracts. So we have a term of the contract that right now we just take it down into 2046. So we feel pretty good about getting that element now behind us focusing now on obviously getting on the regulatory side and also focusing on the EPC side. As it relates, again, to the timing of -- as it relates to an MLP IPO for LNG, I think since we had no real need for the proceeds, we put that to one side until such time as we had Lake Charles, we think fully in the bag that FID was clearly inside, and then we really would move -- take this forward and then go through the IPO process. I think it was -- that's a better roadmap and I think better industrial logic as we thought about the overall requirements and what we saw.

Thanks, Jamie. And then turning to I guess Rover and the crude oil pipeline projects, I'm just curious in terms of your thoughts. It sounds like there will be shippers either participating or potentially participating, but also involving other members of the Energy Transfer, I guess family of MLPs in those projects, either one whether Regency or SXL.

Hi, Gabe. This is Kelcy. Sure, at the present time we have nothing to announce. But it's as you know ETE does not really desire to be in the asset-only business. We have done that from time to time. And as you know them, we implied a way to exit that within the family. So I think the same thing can be expected here. I am hopeful we'll have something to announce in a short period of time.

Great, thanks, Kelcy. And then just last one for me, is on the Bakken crude pipe project. Can you just talk about expectations on returns longer term and just how those returns I guess would ramp over time with volumes?

Okay. This is Mackie. Yes, I will start out saying how excited we are. A lot of companies that have worked for a long time to build a direct ramp out there combined with the conversion by Trunkline that we've worked on for a long time. We couldn't be more excited and pleased with our team. I am glad to give that the baseline is an exceptional project. We continue to have a tremendous amount of interest. As we showed in our press release and stated this morning, we expect to stand above $5 billion and is about 7.50 to 8 multiple is what we anticipate at the end of the day.

I should love to congrats, so congrats on that, Mackie. And I'll jump back in the queue.

Thank you. Your next question comes from, apologies for pronunciation, John Kiani from Teilinger Capital. Please go ahead.

Good morning.

Good morning, John.

At last November's Analyst meeting, for the LNG, Lake Charles LNG export project, you provided some future cash flow forecasts and estimates and some project economics. I know you were touching on those a little bit when you were answering Gabe's question. As we sit here today are those largely unchanged or is there something that we should think about there that is any different?

Well, as we said at the Analyst Day and as the actual fundamental terms of the contract stand, John, we get on a unlevered rate of return on an absolute amount of invested capital. So it will fluctuate until such time as we hit FID. And I think at that time last year we said 9.2, 9 billion of EPC overnight and 200 million of our cost for development. As probably said we should have gone through that right now. We will know more as we go through the EPC cost discovery. I would anticipate that we are still in that zip code, maybe somewhere $9 billion and $10 billion. So it's at least what we showed, it may be a little better. Only time will tell. And we will have a better sense over the course of the next eight or nine months, frankly.

Got it and then I had a separate unrelated question. Can you talk a little bit about the Company's philosophy on diversification and how you think about the economics and accretion/dilution when you're looking at different opportunities?

Yes. This is Kelcy. Diversification, we think it's -- look at what's happened to us the last five to seven years, it's a deliberate to move to diversifying to different sectors primarily the movement of hydrocarbons. Fine thing is we did that. And then as we stand here today finally we are seeing shortly for best gas bases coming back. So we believe in it. We think it's necessary. We are proud of what we've done to diversify. But it's also important to know that we must diversify across basins and geographical footprint. We've done that quite well and for example when spreads are good, in Texas, they might not be bad to the northeast and vice versa. And so we are proud of what we've created and we will continue to look at diversification. We will try to participate in all of the active share plays. We tend to move our activity where rig count seems to be increasing, and we will continue to do that. As it relates to accretive nature of acquisitions, it depends. It's something -- it's just a straightforward acquisition than our expectations of the accretive nature of that would be greater. If something is defensive in nature or very strategic. In other words, is an entry into a new area, we would be a little more aggressive where we might do something and approaching accretive neutral. That worked out very well for us in the past and we will continue to view our M&A strategy that way.

Got it. Thank you.

You are welcome.

Thank you. Next question, apologies again for pronunciation, this one is from Abhi Rajendran from Credit Suisse. Please go ahead.

Hi. Good morning, guys.

Good morning, Abhi.

Hi, Abhi.

A couple of quick questions ETP distribution growth accelerated a bit from $0.015 to $0.02. Is this a level that you guys think is sustainable going forward or do you think there are opportunities to step that up further? Given all of the projects that are coming down the pike, any color there would be helpful.

Yes, Abhi. This is Martin. As we sat down with the management team over the course of the last couple of months, I think not only about in the distribution rate for this quarter, but what it means going forward. As we said in our prepared remarks, really strong quarter on top of the first quarter that we had. The visibility and transparency of growth that we see coming to the ETP not only over the course of the next six to nine months, but certainly longer term as we think about the continued growth in the Eagle Ford, what we're doing out in the Permian, the Rover and Bakken projects that started come online in '16 and '17. I know you factor that in with the subs for transaction and what that could do for ETP, just had a stronger conviction of what we can deliver to the marketplace from a distribution rate growth perspective. And we decided to take that next step up this quarter compared to last quarter. And we certainly believe that though we can sustain that type of growth surely over the next two to five years.

Okay, got it. And then on some of those newer projects, can you touch on whether you have any preference on the ownership of these projects? If you prefer to have shippers take on greater stakes or you're fine with doing them on your own? Any thoughts there would be helpful.

Well, the way we've structured these and the returns that we expect we're very happy to a 100% on them. However, the nature of our negotiations and the negotiations that we had with the shippers brought the opportunity to them to participate in equity -- in some type of equity involvement. And so we are neutral that they elect to be in further rights on these projects can -- we certainly will welcome them in. If they are not, we are very excited them funding them ourselves and own them outright.

Okay got it thanks and then last quick one for me on the LNG area. We've obviously seen a shift in some of the regulatory landscape in terms of who's approving what and the order of it and then where the focus is. Can you just talk a little bit about your thoughts on just where you think maybe aggregate capacity approved over the next couple years trends? I think it seems like now, a threshold to look at would be around 12 Bcf per day. With the DOE looking beyond at the 12 Bcf to 20 Bcf range, so any color there would be very helpful.

Abhi, this is Jamie. I think our view is 12 approved. Now, I am going through the update for the newer review. I think our expectation is that there may be several more, but obviously at some point you have to be balancing the way you think the public interest is, and that's for the government to make the decision. And I think it will mean that we won't see endless number of liquefaction projects. The short answer is, by the way, even on the commercial side, and we just don't see there as being enough sustainable support for an endless amount. But those projects that are well structured, that had good commercial foundations have access to gas which is one of the critical things I think Mackie, Kelcy and the rest of us spend lots of our time talking about. That will probably get done. They make a lot of good, they make good logical sense, but we won't see endless numbers these.

Okay, got it. Thanks very much, guys.

Thanks, Abhi.

Thank you. Next question come from, again, apologies for pronunciation, Schneur Gershuni from UBS. Please go ahead.

Hi. Good morning, guys.

Good morning, Schneur.

Good morning, Schneur.

Hi, good morning guys. Just a quick question going back to the projects again and the ownership potential of the shippers. Is there a limit as to how much, I mean I understand there's a 40% limit. Does their level of participation impact the level of participation of other Energy Transfer Partner family entities? Do you want to keep 60% specifically at ETP and then if the shippers don't take their stake then you would be considering others? I was just wondering if you can talk about the dynamic there a little bit.

Okay, let me talk about each one individually. With Rover, it's 100% ETP. If the shippers elect to participate from an equity position, they can go as high as 49%, but the remaining 51% would be owned and operated by ETP. On the Dapple Pipeline our Bakken project, we are in negotiations and there is not a chance that we will have a shipper or shippers that have the right to participate up to the 49% and as we've stated publicly the remaining 51% remains to be seen, we certainly will have some involvement at a minimum from a shared services operating perspective, from our SXL brethren. And as we've mentioned and as was mentioned on the SXL call this morning, they do have an interest in participating in a project and we do have ongoing dialog around those discussions.

I might add, it's Mackie, if I might, in all instances we will be the operator. Let me add, we will consider reducing our ownership and letting other people come in that we believe their volumes can enhance the project, but in no instances where we not be the operator. That's a very, very important point. We are not investors. We think we add a lot of value by being the operators.

Somebody need a chance (indiscernible) collaborate.

Yes.

Great, and just a quick follow-up on that. Is there a go or no go deadline on when they have to decide they're going to take an equity participation? Like once the shovel hits the ground, either they're in or out from an equity perspective?

Of those details are highly confidential and we are bound by confidentiality agreement. But, yes, there is a limited term on Rover that had to write the auction and it is an extended term.

Okay, great. And one quick follow-up on the structure side; there had been chatter about up sea structures in the past. I was wondering if it's something you're still thinking about or pursuing as financing option?

Kelcy loves up sea structures by the way. The short answer is we've had so much going on in the second quarter. Yes, we spend a lot of time, I'd say, on the legal, the tax and the structuring side. So we got it on the shelf. If we decide that it makes sense in particular, Kelcy decides that it makes sense from our standpoint then we will move forward. But right now we will have to see a pressing knee move forward with it.

Okay, and then just one final question crossing the T's and dotting I's a little bit. I was wondering if you can elaborate on the income tax impacts that we're seeing? Assume some of it is related to the AmeriGas sale but I was just wondering if you can give us a little bit of color on how to think about it on a go forward basis?

This is Martin. You are right. We are seeing from noise regarding to acquisition just given some of the things that we are doing to show up our balance sheet and obviously enhance the liquidity. I think when you look at the run rate for the quarter; it's probably a good benchmark for what I think we will see for the next couple of quarter as we get to the back half of the year. As we get into '15, '16 there are some things that are kicking in that we should manage our income taxes probably a lower number than that. But that's what's going on for this year.

Great. Thank you very much, guys. It's all for me.

Yes. Thanks, Schneur.

Thank you. We have another question for you. This one is from Darren Horowitz from Raymond James. Please go ahead.

Good morning, guys.

Hi, Darren.

Good morning guys. Mackie, quick question for you on the Bakken project; is that $4.8 billion to $5 billion cost estimate that you mentioned, does that include a rail terminal facility in Illinois to move product east? And also as you think about it is there any additional CapEx with regard to infrastructure build out at Sunoco Logistics Nederland terminal facility that's going to be necessary to handle those additional barrels moving south?

Darren, this is Mackie. The first question is, no. The rail facilities are not included in that CapEx albeit that wouldn't be a large CapEx issue. As far as Netherland any facilities or storage or moving barrels through that facility will be managed and handled by SXL as a barrel for delivery to them. So that is not part of the project either.

Okay and then quick follow-up question around the taxable ramifications. Just with regard, Jamie, to the commentary around the retail drop downs into SUSP and you guys mentioning that target for the first drop down to be closed by the end of this year. I realize it's important to structure that cash piece to amortize any gain over a 10 year or 15 year period, so you're obviously incentivized to accelerate the drop downs. And I'm just wondering, do you expect that first drop to be larger in size or more of a series of consistent drop downs in order to establish that tax shield and manage the cash tax piece that way?

Darren, I think as far as the first one is concerned, whether we do one of the legacy Sunoco businesses which obviously have a lower tax profile or we do something that's more recent, some of the recent acquisitions. We are still making that debate we need to go through internally as a management team and them up through a special committee process. I think it's quite possible just given -- as we look at it and we look at the markets it's possible that we end up doing maybe a large size deal than maybe the market will have anticipated, And the course over the balance of 2014 as we do the drop down.

Okay. Thanks, Jamie.

Thank you. We have another question for you. This one is from Helen Ryoo. She is from Barclays. Please go ahead.

Thank you. Just a couple of quick follow-ups, so on the Bakken project, I guess the right way to think about it is whatever stake that stays within the family, the Energy Transfer family, ETE and ETP will have 60/40 ownership, and then ETE would product dropdown or have other members of the family participate in their stake?

Helen, this is Kelcy. That is correct. It's presently 60/40 as you know E owning part of that as a legacy transaction of the Southern Union acquisition. I do not see ETE staying in that position. I think that will be moved into the family hopefully relatively soon.

Okay, great. And then, the 570,000 barrels per day, is that -- that looks like an increase from the 320 that you put out earlier, so just wondering, is all of that 570 currently contracted out and if so, I mean what sort of the mix of the customers mostly, is it mostly producers or do you have some end customers, end users?

Yes. We have a mix of everything. We have marketing companies, we have producers, we have markets, quite a number of shippers on the project, and -- oh, yes, 570. Right now, we have 320,000 that we're building to; we're very close to another large amount of volumes that we'd hope to announce very soon. And we're very optimistic that ultimately the design capacity will be 570,000 barrels a day, probably down to Netherland.

So, your current contracting capacity is 320, but you're expecting that you're going to get to 570 in terms of contracting? Did I understand that correctly?

Yes. We're in negotiations right now. We'll add a large chunk on top of the 320,000 a day. And in addition of that, we have other negotiations going on that would increase the size to 570, the initial size to 570.

And then there is the 4.8 billion to 5 billion cost based on the 570 capacity?

That's correct.

Okay, great. And then, just on Rover; how much of your back haul capacity on Trunkline has been contracted out and with would this require you to expand the 36-inch line based on what's been contracted?

Helen, I think Mackie should answer this question, but I'd like a little clarity, when you talk about Trunkline capacity, are you referring to the Panhandle Eastern pipeline that will be connecting to this, is that …

Yes. I was just referring to the 36-inch Trunkline that you'll use to move Marcellus Utica Gas down to the Gulf Coast whether that line needs to be expanded based on the back haul capacity contracted out.

Yes, it does. Well, even today we've already contracted some of the capacity from strictly a back haul basis on volumes that moved from the south to the north, but as part of our Rover Project we're making the entire 36-inch pipeline bidirectional, and we'll have the capability of moving 750,000 a day down to the Gulf Coast.

Okay. And the cost of that Rover Project, with the new builds now firmed up, new build to Dawn firmed up, what's the cost looking like there?

As we've stated publicly it's between $3.8 billion and $4.4 billion.

Okay, great. And then just lastly on the LNG side, I guess in the past you've talked about starting some financing discussions during the summer and maybe Jamie could just talk a little bit about what you're hearing in terms from the commercial bankers?

Sure, Helen. So now we're done with BG. We're off to the races. We're going to get started in earnest with the banks. It's like a never-ending pilgrimage between whether they come to our place, or we go and see them, but we're I think going to undertake the financing in earnest and our intent and hope is that we can get that framed up by the end of the year that we'll actually know exactly what our debt financing looks like, and then we'll just have at that point just the formal fair process and just the equity to be raised and that should then allow us to achieve FID.

Okay, great. Thank you very much.

Thank you. We have another question for you, and this one is from Michael Blum from Wells Fargo. Please go ahead.

Hi, good morning. I guess just staying on LNG for a second, so just, Jamie, just to your earlier comments, so what is the latest in terms of timing for an IPO?

Michael, I'd say at the earliest it's probably end of this year, beginning of early next year, I'd probably say right now if you ask me most likely the beginning of next year, because I think that will coincide nicely with the timing around FID, and we'll know where everything stand. Yes. We obviously need to do the IPO to raise we think the equity required for Lake Charles, the external third-party equity that we'll be seeking. So I think that probably dovetails well with how we're looking at the overall project, because then it will be fully formed, right? We'll know what the EPC number is because we'll having submissions in November, we'll know where our draft EIS statement is, we'll know what our debt financing looks like. So I think by that point, we'll really, really know exactly what our project looks like in which case it's the ideal time to then, I think go to market and start talking about.

Okay, great. And then on the Bakken pipeline project, I guess a couple of points of clarification for me; the shippers their option to take the 49%, up to a 49%, interest in the project. Is that on the entire project overall or is that just the Bakken piece or does that include Trunkline? Just wanted to make sure I understood that.

Yes, let me clarify. Right now, we do not have any shipper that has the right to buy equity. We do anticipate that, and it could be as high as 49%, but it would be in the entire project; the Dapple new build and the conversion and the connection to Nederland.

Okay, and then when you talk about the 7.5 to 8 multiple, was that also on the entire project?

Correct.

Okay, got it. All right, that's all I had, thank you.

Thank you. We have another question for you. This one is from Valerie Zhang from Deutsche Bank. Please go ahead.

Good morning. Jamie, ETE completed 1 billion share buybacks. Are you contemplating on the next program?

Valerie, no, we're not contemplating the next program at this time.

Okay. Martin, on the growth CapEx on mainstream, it increased by $200 million this quarter, what contributes to that increase?

The lion share, Valerie was if you recall on our first quarter call, we increased the scope of our Rover Project to take it to the full capacity. So that was a big piece of that. And then we've got some smaller expansion projects that are occurring around our systems, primarily in South Texas around the Eagle Ford. So that contributed to the increase from last quarter and this quarter.

Okay, then on the natural gas pipeline, how much lower do you anticipate the volume of crude will go before the LNG in New Mexico kicks in?

As far as our interstate pipelines, they have leveled out pretty well. Regardless of what the results look like, the volumes have only slightly fallen on our interstate network, on our -- and the volumes on our interstate network predominantly were declining on the Tiger system, which is everybody probably knows we have full domain charges regardless of what flows. So it didn't have a significant financial impact. And then, on our interstate pipelines, we do continue to see declines in the Fort Worth Basin. However, we'll see volumes continuing to increase from Oklahoma, from the Woodford into that Barnett Shale area, and the rest of the volumes will be transported on our downstream pipes. But in summary, we continue to believe it's got about bad as it can get. The declines have leveled off, and we think -- especially beginning of 2015 and forward, we'll see growth in the increases in our volumes throughout our systems.

Okay. Thank you, that's it from me.

Thank you. We have another question for you. This one is from Jeremy Tonet from JPMorgan. Please go ahead.

Good morning, it's Jeremy Tonet from JPM. Just a question on the up sea theme; I was wondering down the road is there a preference if there was going to be an up sea structure for it to go through an IPO process? Or if the right M&A opportunity came along would that also be a possible avenue to gain that type of structure? Just wondering any thoughts you might be willing to share there.

Yes. Jeremy, this is Kelcy. Up sea is not even on our radar screen at this point. So we can speculate if we were to look at this again, we can speculate of what we might do. Jamie, you can talk too. But this is not something that is even -- it's not on our roadmap at all.

Jeremy, you can do it, but to answer your question, you can do either. You could do it as M&A transaction. You could do it as an IPO. I mean that makes it helpful.

Okay, thanks. And then just one last question; I realize gas storage is a much, much smaller portion of your business at this point. But I was just wondering if you could share any thoughts there on market trends you see? It seems like it was a tough quarter, I'm just wondering if you have any visibility to things improving there?

We do, and once again it's tied to the future. Storage spreads are as bad as they've ever been, but with all the growth along the Gulf Coast, the market demand, especially the LNG we believe the value of storage will do nothing, but increase over time. So, similar to the basis across our pipelines, we think it's about as bad they can get, and it's only upside from here.

That's it for me. Thank you very much.

Thanks, Jim.

Thanks, Jeremy.

Thank you. We have no more questions at this time. So, now I'll like to hand the call back over to Martin Salinas for closing remarks.

Great, again. Thanks everyone for your time this morning, and look forward to more exciting news to come from the Energy Transfer family. Everybody have a good day.

Thank you. Ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining, and enjoy the rest of your day.