Ladies and gentlemen, welcome to the Energy Transfer Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions). As a reminder, this conference is being recorded. I'd like to turn the conference over to your host, your Chief Financial Officer, Mr. Martin Salinas. Please go ahead, sir.

Thank you, Alan. Good morning, everyone. We appreciate everyone's time this morning as we walk through the first quarter results for Energy Transfer Partners and Energy Transfer Equity, along with providing an update on our growth capital progress and liquidity matters. We will then jump into your Q&A. A reminder that you can obtain a copy of ETP and ETE's quarterly report on Form 10-Q by visiting our website at www.energytransfer.com. We will be making this morning forward-looking statements within the meaning of Section 21-E of the Securities and Exchange Act of 1934, based on our beliefs as well as assumptions and information available to us at this time. Although we believe these statements to be reasonable, we can't give assurance that such expectations will be proven correct. As always, Kelcy, Mackie, and other members of our senior management team are here with me and are available to answer your questions. We also have John McReynolds, ETE's President and CFO, here to address any ETE-related questions. Let me start with our first quarter results. Our consolidated EBITDA was approximately $441 million for the first quarter of 2009, just slightly higher than the first quarter of 2008. I do want to point out though that in the 2009 EBITDA is $45 million non-cash (inaudible) charge to write down our inventory at March 31, 2009. These results reflect our ability to continue to leverage and delivering strong results despite a significant drop in commodity prices period-over-period in a challenging and volatile economic environment. These results also highlight the benefit of owning natural gas operations in multiple regions, providing transportation services from prolific basins to major markets, coupled with the benefits from our geographically diverse propane operations, located throughout United States. Looking first at our intrastate operations, which is the largest operating segment we experienced a 43% increase in transportation volumes through our intrastate transportation assets, principally due to the completion of several large diameter pipelines in 2008 and during the first quarter of 2009. These projects have provided continued takeaway capacity, principally out of the Barnett Shale and Bossier Sands producing basins, with access to the eastern markets. Offsetting the revenues from the increased volumes were lower margins due to less withdrawals from our Bammel Storage facility, coupled with the $45 million non-cash charge to write down our inventory, as I mentioned earlier. I'll remind everyone that our policy is to hedge inventory that goes into Bammel and thereby reducing our risk to commodity price volatility. We also sell lower fuel retention revenues due to lower natural gas prices during the periods presented. However, the increased transportation volumes discussed earlier did offset some of the commodity price impact. Looking at our intrastate operations, we turned in another consistent quarter of results with operating income of approximately $28 million. The increased revenues were primarily from the completion of the San Juan and Phoenix expansion projects in 2008 and early 2009, offset by the increased operating expenses when looking at our results for two periods. We are very pleased to commence servicing the Phoenix market with the completion of the Phoenix lateral in February of 2009. This was a project that started prior to our acquisition of Transwestern back in 2006, and we believe the competition between the Phoenix and California markets will lead to additional opportunities off our main line. Looking at our midstream operating segment and the key drivers there, when looking at our operating segments for this segment, our volumes were up despite the drop in commodity prices and were principally driven by the increase in both processing capacity and NGL takeaway capabilities at our Godley processing plant. However, the increase in volumes did not make up for the drop in favorable processing margins period-over-period. Our price spreads dropped this quarter, were approximately 65% lower than the prior year, yet our margins did not decrease as much. As we've mentioned before, much of our processing volumes were under fee-based arrangements. We also have the unique capability of blending rich gas with our downstream pipes, thereby eliminating exposure to unfavorable processing conditions. Turning to our resale propane operations, where we saw impressive results this winter season, our folks started off strong at the end of last year and kept the momentum going into this quarter with solid results despite the drop in volume, as we benefited from the rapid decline in wholesale prices and our selling prices declined at a much slower pace. We also benefited from a small percentage of our expected volumes by hedging the expected volumes with forward sales contracts. Most of these hedges did settle during the quarter, as propane was delivered to our customers. Before I make comments regarding our balance sheet and liquidity, I did want to highlight a few accomplishments, both operational and financial that we achieved during and shortly after the quarter. We continue to add additional capacity to our system, both in our intra and interstate operations, with the completion of several large diameter transportation pipelines including the 500 million a day Phoenix lateral, the 36-inch Southern Shale, the 36-inch Katy pipeline expansion and our 36-inch Cleburne to Tolar. We also, as you know, brought to market in January, our first large transportation pipeline project, that is the Tiger Pipeline, post the credit market crisis. Since then, we've continued to work hard to fill it up, and as of today, we are very pleased to say that the Tiger Pipeline project has long-term contractual commitments with three key producers with significant holdings in the Haynesville producing basin for at least 1.5 Bcf a day. As a reminder, this pipeline can be designed to meet our customers' needs up to 2 Bcf a day. From a financial and liquidity perspective, we've raised almost $1.6 billion in net proceeds through senior notes and equity offerings since the beginning of the year. Most of these transactions were oversubscribed, which led us to upsize the offering and provide for additional liquidity. These proceeds were used to repay borrowings under our existing credit facility and to fund future CapEx and contributions to our joint ventures. These successful offerings demonstrate three things: Our ability to access the markets; our prudent management style to maintain an appropriate level of liquidity during these uncertain times; and thirdly, the partnership's commitment to maintain our investment-grade ratings. Turning to the balance sheet and a few comments on our growth CapEx, we had $191 million of gross CapEx for the first quarter of 2009. Of that, $136 million related to our intrastate operations and were primarily to complete the intrastate project that I mentioned earlier, along with the TIP project that we expect to go into service this year. On the interstate side, we had $42 million of CapEx, primarily to complete the Phoenix lateral and $12 million for propane. Our maintenance CapEx for the quarter was $50 million, primarily from the interstate business of $8 million and propane of $7 million. Regarding our CapEx program for 2009, we expect to spend between $595 million and $655 million of growth initiatives for the remainder of the year. This does include approximately 20% of Tiger's estimated costs in addition to amounts needed to bring TIP into service as I mentioned earlier. Related to our joint ventures with Kinder Morgan, we made $111 million of capital contributions to MEP during the first quarter to fund our 50% share of project costs. We expect to make an additional $345 million or $365 million in contributions for the remainder of the year as the base project the Transco 85 in Alabama is completed. We do expect sometime in the third quarter of this year. This does not include an additional $200 million to $250 million from contributions when we along with Kinder, put in place permanent financing at the MEP level. Secondly, we made $9 million in capital contributions to FEP to fund our 50% share and expect to make between $200 million to $220 million in additional contributions through the remainder of the year. We're very pleased with the progress of FEP thus far and expect FEP to be in service by the end of 2010 or early 2011. Looking at our liquidity, as I mentioned earlier, we've raised proceeds for several debt and equity offerings over the last few months, which have significantly enhanced our liquidity position. As of March 31, we had approximately $882 million drawn on our revolver, along with $60 million of letters of credit outstanding. However, on a pro forma basis for the April debt and equity offerings, we had approximately $1.94 billion in available capacity and cash on hand of $570 million. This gives us sufficient liquidity to fund our existing growth of CapEx projects and expected joint venture contributions through 2009 and into the first half of 2010 based on our current projections. Regarding our distributions, we continue to believe it's the partnership's and our stakeholders' best interest to closely manage every dollar in and out of the partnership and be prudent with how we allocate resources. We've kept our distribution at a rate of $3.575 per common unit on an annualized basis. That's 89 3/8 cents on a quarterly basis. As we mentioned in our 2008 year end earnings call, we expect additional cash flow from growth projects that will be coming online, as well as cash contributions from MEP over the next few months. As this additional cash flow grows, we will continue to evaluate the economic landscape as we make decisions on distributions. Turning our attention to Energy Transfer Equity, I will make a few comments there. As I mentioned earlier, John is here to address any questions. ETE's expected cash distribution to be received from its interest in ETP for the first quarter totaled $141.5 million and expect to pay out $117.4 million in distribution to its unit holders based on its announced distribution rate of 52 1/2 cents per unit on a quarterly basis or $2.10 on an annualized basis. This represents almost a 3% increase over the fourth quarter rate of $0.51 per unit and over 9% during the last six months. The growth was primarily driven by the additional cash flow to ETE resulting from ETP's recent equity ownership, through its incentive distribution rights ownership. This shows ETE's ability to grow its distribution despite ETE maintaining its distribution constant with the previous quarter. To sum it up, we will continue executing our business strategy of building an energy partnership that provides for distributable cash flow growth and makes sense for us, both short-term and long-term. We are excited about the opportunities, both organic and acquisition related that we are evaluating on a daily basis and expect to be a player in this arena in the months to come. We continue to be the company-of-choice for our customers to provide energy services, whether on the propane side or by midstream services through our extensive natural gas pipeline networks while looking for ways to provide these services in the most efficient and effective way possible. We are also managing our finances accordingly, given the ever-changing economic landscape. While we have seen some stability in the capital markets for the last few months, we continue to be cognizant of the fact that these windows open and close. As such, we will maintain a close watch on the capital markets, as developments unfold. Alan, that concludes our prepared remarks. Let's open up the line for questions. Thank you.

(Operator Instructions). Our first question comes from the line of Michael Blum with Wachovia. Please go ahead.

A couple of questions. One, just housekeeping, is your guidance that you provided for EBITDA before, is that still unchanged?

Yes, Michael. This is Kelcy. That is going to be a tough hill to climb this year. There is no question about it, but so far, we are monitoring our financial performance very closely. At some point, we feel that we will not be able to achieve the guidance then we will advise you, but right now, it looks good.

Then, on the intrastate pipeline side, obviously, the volumes are real strong, can you talk about the trends that you're expecting to see for volumes if it is possible in the first quarter or going forward? Can you talk about what the trend was in base volumes versus volumes that you received because of projects that came on line if it's possible to break that out? I don't know if it is.

Yes, let me do this. I'm going to ask Mackie for a little bit of help on this. But first of all, let me state that we created a pipeline system in Texas that now is not dependent upon a basin or basins. It actually can address the hydraulic needs of pretty much the intrastate. So therefore, the point I'm making by that is let's say, if rig counts fall in the Barnett Shale, that's okay. The capacity that we built for the Barnett Shale can fill volumes that may come in the system through the Permian Basin or other parts of the state. So what we've seen is we've seen healthy volumes. We were running our pipelines near capacity in most instances, even in a period of dramatic rig count reduction. As it relates, Mackie, to drilling versus pure third party, can you take a stab at that?

Just to kind of add to that, as you all know, we have about 80% to 85% of our capacity sold out on all of our long-haul intrastate pipeline systems. So regardless of any declines, we do have that protection. Depending on where the basins are, some of the pipelines are 100% full and some of them are nearly full. So we feel very fortunate to have the ability to fill our pipelines as much as possible, not only with our base volumes, but also in the day-to-day activity of completely (inaudible) our lines where possible.

The last question is just on the propane business. Obviously margins were very strong but volumes keep declining. Can you just talk about how you view that going forward? Do you expect volumes to continue to decline? Do you think you need to make small acquisitions to beef up the volumes? Just looking for some thoughts there.

I'm going to take a stab at this, and then if you would like some more detail, Bill can help me. The propane business is virtually nobody likes it, but me and Bill Powers and management. It goes across the board and everybody seems to want us to sell it, yet it continually performs and generates distributable cash flow. One thing I really like about it that we don't have in our other businesses is it is a pass-through model. In other words, it's cost-plus. I wish we could do all of our pipeline systems in that way. I wish we could structure all of our contracts that way, but the market will not allow that and in propane you can't. But if you think about it, the propane business generally, if someone has the capability to switch to a natural gas system, that is the more efficient way to supply BTUs to your home. So that would be a natural thing. I think you're going to have some attrition due to that. We've seen, in this very difficult period of time when propane prices got very high, we saw a lot of conservation, but Bill, would you pick up with that point, please?

Yes, sure. We've seen certainly conservation that kind of started the previous winter when prices really spiked. This past year, that conservation has continued and has been compounded somewhat by the economic malaise that the country is in, especially in our commercial industrial business. About 60% of our business is domestic-oriented and about 40% is commercial and industrial, and looking forward, we're taking a conservative view. I don't know when the economy is going to bounce back, but we are just going to assume that for the next few quarters anyway, we will see a shortfall in our volumes versus our expectations. Certainly, budgetary constraints on our consumers are impacting the demand, but we've been able to make up the gross profits that were missing due to the volume deficiencies by prudent margin management. We have benefited from the sharp decline in wholesale prices this past winter, and I think we'll probably see going forward margins stabilize somewhat. We look to manage on a same-store basis, if you will, the gross profit on fuel, not just margins independent of volume, but how they are mixed. We look to certainly preserve what we have and improve on what we have through organic growth. Hopefully, going forward, we can supplement and grow the business through some small, accretive acquisitions that that Heritage Propane has been pretty successful with in its 20-year history. So we just don't look to plug the gap necessarily, plug the EBITDA gap just by adding more acquisitions. We look for, certainly, same-store integrity and growth going forward as well.

(Operator Instructions). Our next question comes from the line of John Edwards with Morgan Keegan & Company. Please go ahead, sir.

Could you guys comment a little bit on the basis differentials, how those are holding up? Obviously you've talked before about with Rockies Express coming online, starting to push gas toward the Gulf and then with lower prices, it tends to squeeze them a bit, but I'm just wondering if you could comment or give a little color on that from your perspective?

John, this is Kelcy. Let me start off and then again I'm going to ask Mackie to kind of jump in here as well. I'd love to have one big straw into Oklahoma that could access our network. We continue to look for ways to open those doors for us and we are optimistic that we will find a way to do it in the future. As you know, when Rex came online as we expected, the basis differential between Midcontinent and other places that we accessed has widened. We think that's going to continue for a long period of time and we would like to help address that. Right now, we have seen the basis generally is much more narrow than it has been this time of the year in previous years. However, as you also know, this market is very fickle. That can change very rapidly. So I would call it healthy. We are seeing healthy basis differentials that exist today, but I would also say that they are a little disappointing. I think I expect to see them widen. Also, though, John, as you also know, there are some kind of weird anomalies that have occurred out there that have, in my opinion, altered what might ordinarily be a normal basis. There are some pipelines that have had some interrupted service that access our system and they will resume service at some point in the future, so therefore you've got some gas that may be clogged up in certain areas that's having a difficult time finding its way around, let's say those bottlenecks. I think when all of that works its way through I think we will resume a more normalized basis. Mackie?

Yes, I think I would just reiterate what I said. Since 80% to 85% of our capacity is sold, we really aren't subject to a whole lot through the daily or monthly spreads. No doubt it has tightened and has impacted that minimal amount of volumes or capacity that we haven't sold, but some of the positives that we see is that as the Haynesville picks up, we anticipate a lot of volumes being backhauled into the Carthage research area. There are not a lot of outlets that other competitors can provide that can compete with the outlets that we can provide. So there are some benefits that we perceived coming in the future with the Haynesville development.

That's great. Then on the $45 million charge on the storage withdrawal, so I take it that is an anomaly. This is a one-time event, as you see it?

Yes, John, I do. You know, it is more an accounting rule, given that the drop in commodity prices as you know and as I mentioned earlier, we hedged that inventory as it goes in the ground. We put forward contracts in place to basically lock in that margin. So basically what you are seeing is more just the timing effect of that, but as I mentioned, once that molecule hits the storage facility, there is a forward contract that locks in that margin for that spread.

Then, when do you expect to provide some 2010 guidance?

Good question. As we have some more visibility into and have some of these projects completed and see -- there's a lot of moving parts out there, John, between drilling, volumes, between the move in gas prices. The long answer to is probably some time third, fourth quarter is what I would expect.

Then just following up on Michael's question on the propane margins, you said that wholesale prices dropped and retail prices have come down more slowly. Are you expecting any downward pressure then on retail prices? Or is that now pretty stable?

Yes, going forward, we kind of expect margins perhaps to retreat a little bit more, you know, due to the competitive marketplace. Again, as we manage our gross margin fuel, we will achieve equilibrium, if you will, to where the volume shakes out and where the margins need to be. As Kelcy said earlier, we've got a little bit more pricing power, if you will. We are a margin-based business and somewhat constrained, if you will, by what the competition is doing. But nonetheless, there will probably be a little bit more retreat in the margins going forward.

In Dallas, I know a fraction of what Bill knows, but I was really surprised at the gallon consumption versus degree days in an area. Someone is going to tolerate running their heater, I guess, at 70 degrees if propane is at a certain price, and they may run it at 60 degrees if it is another price. I certainly expect and Bill, I'd like your thoughts on this to see the volumes come back to somewhat being more normalized now that we've seen commodity prices reduce.

Yes, I think you'll see some of that. We used to like to think that our demand was relatively price and elastic, but because of the big jump in demand, we have seen conservation. As the price levels come down, I think you'll see demand bounce back and I think that will be somewhat concomitant with the economic environment improvement, hopefully that we will see in the end of this year and into next year. So, I agree.

Our next question comes from the line of Wyatt McCormick with Raymond James.

I was wondering if you could provide an update on the Texas independent pipeline, still targeted for 3Q '09 completion?

We're still targeting for the end of the third quarter.

Okay, great. In the Midstream segment, what are you seeing currently in expectations, may be if you can quantify these, with respect to drilling and well completion in your coverage areas? Mackie McCrea Kelcy mentioned a little bit earlier, because we have access to all of the basins and some of the producers, for example in the Barnett Shale are still drilling and any of the reductions they've had in drilling they are moving over to the Haynesville Shale and/or to Bossier. So we have somewhat of protection to benefit from where they were moving [rig], but no doubt there are declines probably throughout Texas and other states because of where commodity prices are.

My final question will be, given your substantial liquidity situation, enough to last through 1H '10, would you consider acquisitions? What factors would you look at of paramount importance?

Yes, absolutely. A resounding yes. We spend a great deal of time here looking at acquisitions, a great deal of time here studying potential consolidations and modeling those. We believe that is not only forthcoming, but it's very necessary in the sector. We do believe that you will see that in our future.

It is difficult right now, Wyatt, as you might expect. Let's say you're doing a consolidation with another MLP, and that needs to occur by the way. There needs to be a great amount of consolidation. Often times, you have a change of control that triggers the debt and re-prices the debt to current market, and that alone can kill the deal. So we are working our way through some of those things, but we do believe that acquisitions and potential consolidations are definitely in our future.

With that, presenters, we have no other questions. Please continue.

Alan, thank you. Again, all those on the call, thank you much for your time and support. We look forward to the remainder of the year. Thank you.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and using AT&T Executive Teleconference. You may now disconnect.