Last year, Energy Transfer Partners LP (ETP) and its general partner, Energy Transfer Equity LP (ETE), completed two mammoth mergers. Both were strategic in that they solidly planted ETP as a player in the crude-oil transportation segment while diversifying the partnership. The first was ETE’s $5.35 billion merger with Southern Union Co., which is now in an entity controlled and operated by ETP, while the second was ETP’s $5.3 billion acquisition of Sunoco Inc. While the moves were made to diversify the partnership, executives say they’re not a sign ETP is moving away from natural gas. In fact, just the opposite is happening.

In an interview with Hart Energy, company President Mackie McCrea says 2013 could be a time to bring more natural gas projects online, given the strengthening price of gas and ETP’s ability to capitalize on its existing assets. The partnership expects this to take it back onto the path of unitholder distribution growth this year, says McCrea.

ETP is certainly no stranger to growth. In about a decade, it has gone from a partnership with 20 employees and 150 miles of pipe, to one that boasts nearly 70,000 miles of pipeline and more than 14,000 employees.

Here, mccrea reflects on the company’s accomplishments and the challenges it expects to face in the New Year.

HART ENERGY What initially lured you toward a career in the energy industry?

MCCREA My dad. He was an entrepreneur in every sense of the word. He was involved in the oil and gas business in West Texas. He knew that I loved land and rock formations, so he encouraged me to study geology. I think in the back of his mind, he knew with that type of degree I would probably end up in the energy industry, so I give the credit to my dad.

HART ENERGY Tell us about your educational and professional background.

MCCREA I have a Bachelor of Science in geology from the University of Texas at Dallas and a law degree from the St. Mary’s School of Law in San Antonio, Texas. After passing the bar, I went back into the midstream business.

I started my career in the pipeline business with a company called Endevco. It was a company based in Dallas and run by Jim Bryant and Kelcy Warren. I began working with Endevco in Pennsylvania. My role was to develop pipeline projects in the Northeast. As we grew, I took advantage of an opportunity to move to Dallas and get more involved in managing assets.

HART ENERGY You’ve been an executive with Energy Transfer Partners and its subsidiaries since the mid-90s. What are some of the biggest challenges you’ve faced?

MCCREA Probably the greatest challenge has been our rapid growth. Ten years ago we had 20 employees and about 150 miles of pipe. Today we have more than 14,000 employees and over 69,000 miles of pipeline. We were a small company that has now grown to a very sizable partnership. Helping manage that growth and integrating the different businesses and companies has been a challenge, but we have a great group of employees, and it has gone very well.

HART ENERGY Energy Transfer Partners recently completed its $5.3 billion merger with Sunoco Inc. How does this merger fit into your company’s long-term strategy?

MCCREA It was another major step in our partnership’s strategy of focusing on heavier hydrocarbon transportation. For years, we were one of the fastest-growing master limited partnerships in the country, but we focused primarily on gathering, processing and transporting natural gas. We built a pretty extensive interstate and intrastate network throughout the country, but after the collapse of natural gas prices, we recognized our need to diversify. We began to look both organically and through acquisitions, for natural gas liquid, refined product and crude-transportation opportunities.

HART ENERGY Along with buying Sunoco’s 5,400 miles of petroleum and crude pipeline, ETP is also changing some of its existing gas infrastructure to serve crude. Is this a sign ETP is moving away from gas?

MCCREA We’re not moving away from gas. We will remain a major player in transporting natural gas. If there is a need for additional gas pipelines, we will work with producers and markets to provide that infrastructure, however, we are focusing on NGL [natural gas liquid], refined product and crude oil opportunities and assets.

We are analyzing every pipeline asset owned by Energy Transfer including the Sunoco assets, to determine if there are better utilization opportunities that would provide improved revenues and more distributable cash for our unitholders.

HART ENERGY Sunoco was the second major change for Energy Transfer in 2012. Together, how significant were these mergers for the company?

MCCREA Very significant. Those acquisitions were important for us to broaden our footprint throughout a much greater portion of the country so we could offer a wide range of services to almost every major basin in the U.S. The acquisitions gave us the ability to provide services all the way from the well head to the burner tip throughout the country as well as the ability to offer NGL transportation, fractionation and marketing services.

HART ENERGY Do you prefer to grow the company through mergers and acquisitions such as those noted above?

MCCREA As our Chief Executive Kelcy Warren has stated, ETP is out of the merger and acquisition (M&A) business for a while. We’ve been on a pretty steady diet of M&A growth over the past couple of years, and it is time for us to intensify the focus on our assets and to more efficiently and profitably utilize our capacity. We plan to continue our organic growth, but really focus on the assets we’ve built and making the most out of them.

HART ENERGY Are you planning any organic projects in the near future?

MCCREA Yes. In 2012, we spent in excess of $2 billion, much of which has been in the Eagle Ford shale including 300 miles of larger diameter pipe mostly in the Eagle Ford, with some up in the Woodford. In the Eagle Ford we are adding more than 1.1 billion cubic (Bcf) per day of processing capacity, and we will have more than 700 million cubic feet (MMcf) per day of processing capacity in the Barnett shale by mid-2013.

On our NGL (natural gas liquids) side of the business, we are building several large fractionators at Mont Belvieu, Texas. Our first 100,000 bbl. a day fractionator came online in December, and the second fractionator will come online in the fourth-quarter 2013. Additionally, we have completed an NGL pipeline from West Texas to Mont Belvieu to provide NGL transportation for customers all the way from the Permian Basin in West Texas, through the heart of the Eagle Ford, for ultimate delivery of liquids to Mont Belvieu.

HART ENERGY ETP has assets scattered all over the map. Is there an area you’re most excited about or plan to strengthen your presence in?

MCCREA We are very active in the Permian Basin and the Eagle Ford. In both of those regions, we are well positioned to expand and grow our assets and revenues, because of the full range of services that we offer for both natural gas and NGLs. We will continue to focus on those areas and build midstream infrastructure as needed.

We’re also, through our Sunoco acquisition, looking at significant potential growth in the Marcellus and in the Bakken shale, as well as throughout Texas and Oklahoma.

HART ENERGY ETP went from being a small startup to one of the largest midstream companies in the nation. How was this accomplished?

MCCREA Primarily because of the leadership and vision of our chief executive. From the beginning, he has emphasized the importance of developing relationships with producers and working with them to build the necessary infrastructure to gather, transport and deliver both natural gas and NGLs to consumers. He began a strategy of combining our assets and organic-growth projects with strategic acquisitions that were very synergistic to those assets. Through his leadership and the incredible effort from our employees, we were able to create a very large and exciting partnership.

HART ENERGY What advice would you impart to new midstream companies in today’s market?

MCCREA (Laughs) I would hesitate on giving advice to new midstream companies from a competitive standpoint. But what I would say is to have a goal of developing relationships with customers by doing what you say you’re going to do. If you commit to something, do it. And commit to being the best provider of whatever service you’re offering. It has worked well for us.

HART ENERGY What are the major challenges you anticipate facing in 2013 and how will you overcome them?

MCCREA I would say our main challenge and goal is to improve our coverage ratio, which means beginning to increase distributions again. We’ve had a very loyal and patient unitholder base for the last number of years, and we are doing everything we can to start back on the path of distribution growth sometime in 2013. With the strengthening price of natural gas over the past three or four months and the number of projects we are bringing online, we believe we are on track to do just that. In order to accomplish this, we are focusing on maximizing our throughput and revenues through the asset base that we have built.

I would add that we have the best employees in the industry. Because of them and their hard work, we believe we will be able to grow and create value for our unit holders for many years to come.

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