PEPL and its subsidiaries primarily operate interstate pipelines that transport natural gas from the Gulf of Mexico, South Texas and the Panhandle region of Texas and Oklahoma to major United States markets in the Midwest and Great Lakes regions and natural gas storage assets and are subject to the rules and regulations of the FERC. The Company’s subsidiaries are Trunkline, Sea Robin and Southwest Gas. Southern Union Panhandle LLC, an indirect wholly-owned subsidiary of ETO, owns a 1% general partner interest in PEPL and ETO indirectly owns a 99% limited partner interest in PEPL.
The financial soundness of the Company’s customers could affect its business and operating results and the Company’s credit risk management may not be adequate to protect against customer risk.
The Company is controlled by ETO.
Some of our executive officers and directors face potential conflicts of interest in managing our business.
Our affiliates may compete with us.
The Company is subject to operating risks.
Terrorist attacks aimed at our facilities could adversely affect our business, results of operations, cash flows and financial condition.
Cybersecurity breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
Our operations could be disrupted if our information systems fail, causing increased expenses and loss of sales.
Security breaches and other disruptions could compromise our information and operations, and expose us to liability, which would cause our business and reputation to suffer.
The success of the pipeline business depends, in part, on factors beyond the Company’s control.
The expansion of the Company’s pipeline systems by constructing new facilities subjects the Company to construction and other risks that may adversely affect the financial results of the pipeline businesses.
The inability to continue to access lands owned by third parties could adversely affect the Company’s ability to operate and/or expand its pipeline and gathering and processing businesses.
Our interstate pipelines are subject to laws, regulations and policies governing the rates they are allowed to charge for their services, which may prevent us from fully recovering our costs.
Our interstate pipelines are subject to laws, regulations and policies governing terms and conditions of service, which could adversely affect our business and results of operations.
We may incur significant costs and liabilities resulting from performance of pipeline integrity programs and related repairs.
Federal, state and local jurisdictions may challenge the Company’s tax return positions.
The Company is subject to extensive federal, state and local laws and regulations regulating the environmental aspects of its business that may increase its costs of operations, expose it to environmental liabilities and require it to make material unbudgeted expenditures.
The adoption of climate change legislation or regulations restricting emissions of greenhouse gases could result in increased operating costs and reduced demand for the services we provide.
Additional deepwater drilling laws and regulations, delays in the processing and approval of drilling permits and exploration, development, oil spill-response and decommissioning plans, and other related developments may have a material adverse effect on our business, financial condition, or results of operations.
An impairment of goodwill and intangible assets could reduce our earnings.
The Company’s business could be affected adversely by union disputes and strikes or work stoppages by its unionized employees.
The costs of providing postretirement health care benefits and related funding requirements are subject to changes in other postretirement fund values and fluctuating actuarial assumptions and may have a material adverse effect on the Company’s financial results. In addition, the passage of the Health Care Reform Act in 2010 could significantly increase the cost of providing health care benefits for Company employees.
The Company’s business is highly regulated.
The pipeline business of the Company is subject to competition.
Substantial risks are involved in operating a natural gas pipeline system.
Fluctuations in energy commodity prices could adversely affect the business of the Company.
The pipeline business of the Company is dependent on a small number of customers for a significant percentage of its sales.
The success of the Company depends on the continued development of additional natural gas reserves in the vicinity of its facilities and its ability to access additional reserves to offset the natural decline from existing sources connected to its system.
The pipeline revenues of the Company are generated under contracts that must be renegotiated periodically.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information in Item 7 has been prepared pursuant to the reduced disclosure format permitted by General Instruction I to Form 10-K. Accordingly, this Item 7 includes only management’s narrative analysis of the results of operations and certain supplemental information.
The Company’s business is conducted through both short- and long-term contracts with customers. Shorter-term contracts, both firm and interruptible, tend to have a greater impact on the volatility of revenues. Short-term and long-term contracts are affected by changes in market conditions and competition with other pipelines, changing supply sources and volatility in natural gas prices and basis differentials. Demand for natural gas transmission services on the Company’s pipeline system is seasonal, with the highest throughput and a higher portion of annual total operating revenues occurring in the traditional winter heating season, which occurs during the first and fourth calendar quarters. Since the majority of the Company’s revenues are related to firm capacity reservation charges, which customers pay whether they utilize their contracted capacity or not, volumes transported do not have as significant an impact on revenues over the short-term. However, longer-term demand for capacity may be affected by changes in the customers’ actual and anticipated utilization of their contracted capacity and other factors. For additional information concerning the Company’s related risk factors and the weighted average remaining lives of firm transportation and storage contracts, see “Item 1A. Risk Factors” and “Item 1. Business,” respectively.