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ETP, Sunoco Already Planning Post-Merger Operations

Energy Transfer Partners LP's (ETP) $5.3 billion purchase of Sunoco Inc. isn't expected to close until the second half of this year, but integration of the two companies "is well under way," according to ETP CFO Martin Salinas.

"We are already meeting with Sunoco and Sunoco Logistics [Partners LP] management teams to work on commercial and operational synergies, and integration teams have been assembled to begin looking at ways to incorporate Sunoco's operations into ours," Salinas said during a conference call with analysts Wednesday.

The Sunoco deal, which was first announced last week (see Daily GPI, May 1), is intended to diversify the natural gas midstream player's business by adding transport of heavier hydrocarbons such as crude oil, natural gas liquids (NGL) and refined products. Acquisition of Philadelphia-based Sunoco would also give Dallas-based ETP assets in the Marcellus Shale region, among other things.

The combined company would be one of the largest and most diversified energy partnerships in the country through the expandion of ETP's geographic footprint and strengthening its presence in the transportation, terminaling and logistics of crude oil, NGLs and refined products.

ETP has been getting calls from "a lot" of third parties interested in acquiring Sunoco's retail business, but "nothing that has any traction associated with it," Salinas said.

In addition to the Sunoco deal, ETP's efforts to move toward heavier hydrocarbons have included general partner owner Energy Transfer Equity LP's recent acquisition of Southern Union Co., which created a midstream company with more than 44,000 miles of interstate natural gas pipelines and an estimated 30.7 Bcf/d of transportation capacity (see Daily GPI, March 27). Last year ETP and Regency Energy Partners LP acquired NGL storage, fractionation and transportation assets when they bought LDH Energy Asset Holdings LLC from Louis Dreyfus Highbridge Energy LLC for $1.925 billion (see Daily GPI, March 23, 2011).

The Sunoco acquisition would add 107,000 b/d of NGL throughput to ETP's current NGL throughput of 576,000 b/d and also add 1 million bbl of NGL storage capacity to the 33 million bbl ETP currently has. On the crude side, ETP would gain 5,400 miles of crude oil pipelines, an infrastructure that spans the Marcellus region of Ohio, Pennsylvania and beyond in the Northeast.

ETP reported earnings before interest, taxes, depreciation and amortization of $536.1 million in 1Q2012, a 14% increase from $471.3 million in 1Q2011. Net income for 1Q2012 was $1.13 billion, an increase of $878.9 million from 1Q2011, and included a gain on deconsolidation and a loss on debt extinguishment, which had a net favorable impact of $941 million on net income, ETP said.

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