Thanks, operator, and good morning, everyone. Welcome to Energy Transfer's Second Quarter 2012 Earnings Call.

With me today are Kelcy, Mackie, Tom Mason and John McReynolds, along with other members of our management team, who will be available to help answer your questions after our prepared remarks. Today, I'll start with a brief update on the pending Sunoco acquisition and recently announced drop-down of Southern Union into an ETP-controlled entity, as well as other growth initiatives that we're pursuing.

We'll also discuss the second quarter financial and operating results for ETP, ETE and Southern Union before going and taking your questions. Our earnings releases, which were released yesterday after the market closed, are available on our website.

And we intend to file our quarterly reports on Form 10-Q today. I'll also remind you that during the call, I'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 financial information available to us today.

Before going into second quarter results, I'd like to give you a quick update on where we stand with our pending acquisition of Sunoco and the subsequent announcement of the ETP HoldCo transaction. We recently filed [indiscernible] Proxy statement for the Sunoco transaction and expect to receive clearance soon.

Once we receive clearance, the next steps will be to set the Sunoco shareholder record and meeting dates. Assuming a favorable vote at the shareholder meeting, we expect that we will be able to close the Sunoco acquisition sometime in early to mid-October.

And we couldn't be more excited to get our hands on these assets and deliver on the unitholder value that we believe these assets will bring to them. Also, as announced in June, contemporary with the Sunoco acquisition, ETP will contribute Southern Union to ETP Holdco.

In exchange for a 60% equity interest in Holdco, ETP will contribute its ownership of Sunoco to ETP Holdco for a 40% equity interest, though Sunoco's equity interest in Sunoco Logistics will be transferred to ETP prior to the transaction and will not be owned by Holdco. Through this transaction we resolve the timing of the ETE's drop-down of the Southern Union assets without the need for external equity or debt financing of these assets.

And we've substantially increased ETP's scale of operations and ability to serve more customers in a rapidly expanding midstream marketplace. The new Holdco will be governed by a 5-person Board of Directors, with 3 from ETP and 2 from ETE.

And Holdco will be consolidated by ETP and financial statements. Sunoco and Southern Union will continue to operate as separate entities under Holdco.

And as such, the Board of Directors will remain in place. Now turning to project update, and I'd like to briefly comment on our portfolio of midstream and liquids-rich growth projects, which will support growth in our distributable cash flow while continuing to diversify our business mix.

We continue to make significant progress on our projects in both our midstream and NGL segments. We should see our adjusted NGL pipeline, Phase 2 of the REM pipeline and our Red River Gathering Pipeline and our Karnes County processing plant go in service later this year on time and on budget.

We also expect Phase 1 of our Jackson County processing plant and Lone Star's West Texas Gateway pipeline and the first Mont Belvieu fractionator to go in service no later than January of 2013. In addition, we are actively evaluating $1 billion and $ 2 billion of growth capital projects in the midstream NGL and crude space, which could be announced over the next year or so, and to deliver additional distributable cash flow into 2008 to 2013 and into 2014.

And we couldn't be more excited about our ability to execute on these projects. Now turning our attention to results, and I'll start with ETPs.

ETP's adjusted EBITDA was $466.4 million, up approximately 20% from Q2 of 2011. Distributable cash flow for the quarter was $275.2 million, an increase of $51.9 million from this time last year.

These increases are primary due to our Interstate segment, which is seeing the benefits of the contractual ramp-ups at FEP and Tiger, as well as our 50% interest in Citrus, one that we acquired in March of this year. For the quarter, ETP will pay its unitholders $89.38 for the quarter or $3.575 on an annualized basis per unit on August 14 to our unitholders of record as of August 6.

Now from a segment level perspective, and I'll begin with our Midstream segment, where our Q2 2012 adjusted EBITDA was $93.4 million. That's down slightly from the second quarter of last year, and it was primarily driven by lower NGL prices, as well as higher SG&A and operating expenses.

For the quarter, NGL produced volumes increased 63% from the prior year to almost 82,000 barrels per day, primarily driven from growth projects in the Eagle Ford Shale, which resulted in increased fee-based revenues of roughly $16.1 million. Non-fee-based contracts and processing margins declined approximately 9% from last year, as the impacts of lower NGL prices was partially offset by an increase in equity NGL volumes.

With a large portfolio of fee-based growth projects expected to be online over the next 6 to 12 months, we expect our Midstream segment to represent a larger portion of our overall business mix and contribute significantly to cash flow growth in late 2012 and into 2013. Turning to our Interstate Transportation segment.

Adjusted EBITDA for the quarter was $184.4 million, a 121% increase from this time last year and was primarily driven, as I've said before, by contractual ramp-ups with FEP and Tiger, as well as the addition of the 50% interest in Citrus. As I mentioned on our first quarter earnings call, both Tiger and FEP have completed their contractual ramp-up periods and are now collecting the full amount of demand fees under the long-term contracts we have with our shippers on these 2 pipelines.

For the quarter, adjusted EBITDA attributable to ETP's share of FEP increased $5 million to $18.5 million, and adjusted EBITDA attributed to Citrus was roughly $77 million for the quarter. Now looking at our NGL Transportation and Services segment, where adjusted EBITDA was $39 million for the quarter.

That's a 58% increase from Q2 of 2011, primarily driven by the results from Lone Star, but also wholly-owned and JV pipelines that were recently placed in service. Our NGL Transportation volumes averaged 176,000 barrels per day for the quarter, that's an 37% increase as compared to last quarter of 2011.

And it was primarily driven by increased volumes transported on our wholly-owned NGL pipeline as a result of more production in the Eagle Ford area. Average NGL Transportation volumes were also up, increasing 25% [ph] to roughly 21,000 barrels per day for the quarter.

This was due in large part to the increased production at our Geismar, Louisiana fractionation facility as a result of less refinery downtime for turnarounds. We also expect to see our volumes and margins in our NGL segment continue to increase, as recently our soon-to-be-completed projects contribute to an already solid platform of NGL services we provide our customers.

Now looking at our Intrastate Transportation & Storage segment. Adjusted EBITDA for the quarter was $156.9 million, down approximately 8% from Q2 of 2011, primarily due to lower transported volumes as a result of continued unfavorable natural gas price environment.

Our transportation volumes in Q2 averaged 9.9 Bcf a day, that's down about 1.4 Bcf a day from Q2 2011 and driven primarily by the continued low natural gas price environment and now order [ph] basis differentials. Our transportation fees were down $20.3 million.

That's primarily due to a change in the customer contract that impacted the timing of recording our demand fees, as well as unfavorable impact from a decline in transported volumes of roughly $4 million. Our retained fuel was also down $20 million for the quarter, primarily due to lower gas prices and slightly lower volumes.

But realized gains on commodity derivatives, about $6 million were recorded in other natural gas sales and other, which helped to offset the decline. And to mitigate our exposure to lower natural gas prices, we have hedged approximately 50,000 MMBtu's per day at an average price of $3.60 for the remainder of 2012, and have hedged approximately 20,000 MMBtu's per day for 2013 at an average price of $3.24.

Margin from sales of natural gas and other activities increased $14.3 million. It was primarily driven by a favorable mark-to-market impact associated with commercial optimization activities of $22.3 million, offset by a decline of $11.4 million in margin, where we utilized third-party processing.

We also experienced a $3.5 million decrease in natural gas costs compared to the same period in 2011. Our storage margin was $35.1 [ph] million for the quarter, an increase of $16 million, primarily driven by an increase in inventory valuation and derivatives settled in the period due to higher gas prices during the quarter-end.

And as of June 30, we had approximately 50,000 Bcf in the ground managed for our account that we now expect to withdraw in late 2012, early 2013. And lastly, in our Propane segment, which now only consists of our equity investment in AmeriGas.

Our adjusted EBITDA for the second quarter was $1.7 million, a decline of $10.5 million from Q2 of 2011. This was primarily driven by the contribution of our propane operation to AmeriGas in January of this year.

Also, we recorded equity and losses related to AmeriGas of $36.4 million. However, we have received cash distributions from AmeriGas of $23.7 million in the second quarter.

That's an increase of $1.1 million from the first quarter of this year. That concludes our remarks on our results for the quarter.

I'll now move over to our CapEx, where in the second quarter of 2012, we invested a total of $690 million, with the majority of that spent in our Midstream and NGL segments, primarily on our Eagle Ford Shale-related projects and NGL pipeline and fractionation projects at Lone Star. Our maintenance CapEx for the second quarter was $30.4 million: $19.5 million was spent on our Midstream, Intrastate and NGL segments; $8.7 million was spent on our Interstate segment; and the remainder spent in other segments.

As we plan for the remainder of 2012, we expect to spend between $1.15 billion and $1.3 billion of growth CapEx, which includes $450 million to $500 million in our Midstream segment, $700 million to $800 million in our NGL segment. And these numbers do not reflect the impact of $200 million to $250 million in contributions from Regency for their 30% share of Lone Star-related growth projects.

We also expect to spend between $50 million to $60 million on maintenance CapEx for the remainder of 2012, which includes Intrastate pipeline integrity and well connects Interstate pipeline integrity and maintenance in our Lone Star JV. For our Southern Union assets, we expect to spend between $50 million and $100 million of growth CapEx for the remainder of 2012 and roughly $100 million to $120 million on maintenance CapEx.

And as it relates to ETP's liquidity, on July 3, ETP completed an equity offering of 15.5 million common units. The net proceeds of roughly $670 million were used to repay outstanding borrowings under ETP's revolver, providing for approximately $2.45 billion of revolver availability as of July 27th, which leaves us enough liquidity to fund planned capital expenditures for at least the next 12 months.

However, we will continue to keep a close eye on the capital markets and opportunistically raise debt and equity to fund all of our CapEx needs, maintain efficient liquidity and certainly manage our credit metrics to maintain our investment grade credit metrics. Now moving on to Southern Union's results.

Adjusted EBITDA for the second quarter was $162.2 million. That compares to $254 million in the second quarter of 2011.

The quarter-over-quarter results were lower, largely due to the sale of Citrus to ETP in March of 2012. The impact of lower realized NGL prices in the Gathering and Processing segment and acquisition-related expenses of roughly $2.3 million at Southern Union during the second quarter.

In the Gathering and Processing segment, adjusted EBITDA was $22.4 million. That compares to $39.5 million in the second quarter of 2011, as lower average NGL prices offset the increase in NGL produced volumes.

And within the Transportation and Storage segment, adjusted EBITDA was $115.9 million in Q2 of 2012. That's down $87.4 million from last quarter of 2011, primarily driven by lower contributions from hand-handle [ph] of $14 million and lower adjusted EBITDA of $73.3 million due to the sale of Citrus to ETP.

And within the distribution segment, or the LDC business, adjusted EBITDA increased approximately $11 million from Q2 of 2011 to Q2 of 2012, primarily due to a decrease in operating, maintenance and general expenses, as well as increases in net operating revenues, which resulted from the impact of new customer rate at oil and [ph] gas companies. Now looking at the ETE.

Distributable cash flow was $158.2 million after adjusting for certain acquisition-related costs for the second quarter. That compares to roughly $125 million for Q2 of 2011.

ETE's cash distribution from ETP before the impact of the IDR relinquishment was $170.7 million for the quarter. That compares to $153 million this time last year.

Net of the IDR relinquishment, which ETP agreed to, as part of ETP's acquisition of Citrus, cash distributions from ETP were $157 million for the second quarter. For the same period, ETE's cash distributions from Regency was $15.5 million, a 7% increase from this time last year.

And distributions to ETE unitholders will be $0.625 per unit on a quarterly basis, that's $2.50 on an annualized basis, which we paid on August 17 to our unitholders of record as of August 3. And from an ETE perspective, it stands to benefit from not only the ETP SUN mergers, but also the ETP Holdco transaction, as the transaction will create a best-in-class natural gas crude oil, NGLs and revitalized logistics platform, but also further Energy Transfer's long-term initiative to expand its business, diversify and grow its cash flows while also providing for numerous commercial opportunities through logistics, Sunoco Logistics, complementary asset-based and Sunoco inventory of attractive, high-accretive growth projects.

In closing, we are very proud of what we have done in the last several years, particularly in the light of the headwinds we've endured in the commodities markets and the continued volatility in the capital markets. We have not only significantly increased our size and scale, but we've also expanded a suite of Midstream services that are bar none.

We don't think there's a mission [ph] company out there that can provide the same amount of services that we can and so many prolific producing basins across the U.S. and the Sunoco Holdco transaction, will only enhance that.

While we continue to pursue significant growth opportunities across areas where our assets are or where we intend to be a significant player, we are committed to simplifying our structure. We intend to take steps in the not-too-distant future to put the assets we've acquired in the right places while continuing to deliver on unitholder value primarily through increased distributable cash flow growth across the entities under Energy Transfer's control.

With that, operator, that concludes my prepared remarks. Let's open up the line for questions.

Thank you

A couple of questions, Martin, on the ETE results I'm just thinking about, I guess, cash taxes, cash interest expense, whether the second quarter numbers were a good run rate to use going forward for those items. And then also, in terms of where -- how you guys feel you are in terms of synergies with the legacy Southern Union assets and how much of that showed up in the quarter, and how much you think still has to show up or still will show up?

Yes. I guess on ETE, are you referring to just the stand-alone results for ETE or on a consolidated basis?

Stand-alone.

Stand-alone. Yes, I think the -- for cash interest expense this quarter, probably represents a good quarter going forward, where we picked up the entire period on the term loan.

And obviously, you have the existing senior notes in place. I think it's a good number.

From a tax perspective, we really don't see a lot of taxes being paid at the ETE level, but really, it should be minimal going forward. With respect to synergies, we're going to continue to see those as we integrate those assets.

As we said before, I think it's going to take a good 18 to 24 months to get that into our system and start seeing those results.

Got it. And then if I can ask maybe on kind of the Holdco -- first Holdco transaction, the level of leverage you're contemplating at the Holdco, when that's ultimately formed, and then also I guess, a bit more maybe about the strategic rationale, just kind of hopefully minimizing cash taxes for taxable subs, does it possibly effectuate asset sale is a little bit easier, if you could maybe touch on some of those?

Yes, you bet. With respect to leverage at Holdco, when you drop in the Sunoco assets, the debt comes with that.

When you drop in the Southern Union assets, the debt drops in with that. We are operating on some internal leverage at Holdco to allow for some additional synergies to be had there, I need to go back and look and see where that, ultimately, would end up.

But what I can say is that if all that gets consolidated up into ETP, so whatever intercompany financing we're doing at the Holdco level, when we reported it out to The Street, it will be on a consolidated basis. So it -- you may not see it -- we don't intend to put any additional external leverage at the Holdco level.

So all that you'd see there, what's existing today is the SUN debt. Once they get consummated, that transaction gets consummated, and then SUN debt following down into Holdco.

With respect to strategy, and I guess kind of the rationale behind Holdco, there are a number of things that are focusing here on. I think it's -- it was clear when we were attempting to acquire Southern Union, we would prefer it to be at the ETP level principal than Southern Union, saw it a little bit differently.

And in order to get a transaction done, we ultimately agreed on ETE being the currency to acquire that acquisition, with the thought that down the road, we would move MLP assets into the operating MLPs, whether it be ETP or Regency. The Holdco transaction really pushes the control of those assets down into ETP, which we're pretty excited about.

That gives our commercial teams the ability to go out and talk to our customers and really provide a very exceptional and robust suite of Midstream services across many geographic basins, which is key in this competitive environment. So that was a key strategy.

We also, from a investment grade perspective, with Holdco being consolidated to ETP. I guess from a credit perspective, ETP, increased size, scale, but also the diversification that the rating agency certainly would look at.

Based on the feedback we've from the agency, it was very favorable. And then there are also additional synergies within the Holdco structure that we think we'll be able to take advantage of, although some of those are going to be taxes.

Okay. That's helpful.

And the last one for me is just latest thinking in terms of asset divestitures, whether legacy Southern Union assets or, prospectively, any of the Sunoco assets.

Dave, this is Kelcy. Sure.

I think there's been speculation that the Missouri and Massachusetts LDCs, at some point, might be part of the divestiture. And I would say that, that's a very reasonable possibility, very reasonable.

So we are considering that. Also, we believe that it would be -- it would be more distributable cash flow generated if, in fact, the [indiscernible] assets, they're probably Southern Union gas services.

If those assets were to find their way into our MLP structure, we believe that, that makes more sense. There's just more operating synergies that can't be taken advantage of with those assets remaining where they are.

So I do believe that those are 2 obvious ones that I would not be surprised to see us move on something with those 2 assets in the near future. And quite possibly, others as well.

Great. Thanks, everyone for being on today's call, and we'll talk to you at the conference here in the not too distant [ph] future.

Thank you.