Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS.
EN TERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
June 30,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents
$
1,298.5
$
334.7
Restricted cash
138.1
75.3
Accounts receivable – trade, net of allowance for doubtful accounts
of $ 13.9 at June 30, 2020 and $ 12.4 at December 31, 2019
2,907.7
4,873.6
Accounts receivable – related parties
2.6
2.5
Inventories
2,024.1
2,091.4
Derivative assets
209.7
127.2
Prepaid and other current assets
535.6
358.2
Total current assets
7,116.3
7,862.9
Property, plant and equipment, net
42,538.4
41,603.4
Investments in unconsolidated affiliates
2,547.4
2,600.2
Intangible assets, net of accumulated amortization of $ 1,763.7 at
June 30, 2020 and $ 1,687.5 at December 31, 2019 (see Note 6)
3,379.4
3,449.0
Goodwill (see Note 6)
5,745.2
5,745.2
Other assets
617.8
472.5
Total assets
$
61,944.5
$
61,733.2
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt (see Note 7)
$
2,325.0
$
1,981.9
Accounts payable – trade
902.5
1,004.5
Accounts payable – related parties
89.3
162.3
Accrued product payables
2,803.5
4,915.7
Accrued interest
461.7
431.7
Derivative liabilities
385.4
122.4
Other current liabilities
515.0
511.2
Total current liabilities
7,482.4
9,129.7
Long-term debt (see Note 7)
27,285.2
25,643.2
Deferred tax liabilities (see Note 11)
481.6
100.4
Other long-term liabilities
753.9
1,032.4
Commitments and contingencies (see Note 16)
Equity: (see Note 8)
Partners’ equity:
Limited partners:
Common units ( 2,240,703,785 units issued and 2,185,896,433 units outstanding at
June 30, 2020, 2,189,226,130 units issued and outstanding at December 31, 2019)
26,321.1
24,692.6
Treasury units, at cost ( 54,807,352 units at June 30, 2020) (see Note 8)
( 1,297.3
)
–
Accumulated other comprehensive income (loss)
( 147.1
)
71.4
Total partners’ equity
24,876.7
24,764.0
Noncontrolling interests
1,064.7
1,063.5
Total equity
25,941.4
25,827.5
Total liabilities and equity
$
61,944.5
$
61,733.2
See Notes to Unaudited Condensed Consolidated Financial Statements.
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ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(Dollars in millions, except per unit amounts)
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Revenues:
Third parties
$
5,745.3
$
8,250.5
$
13,211.8
$
16,781.7
Related parties
5.7
25.8
21.7
38.1
Total revenues (see Note 9)
5,751.0
8,276.3
13,233.5
16,819.8
Costs and expenses:
Operating costs and expenses:
Third parties
4,063.9
6,469.5
9,799.2
13,124.8
Related parties
306.5
331.4
631.5
695.8
Total operating costs and expenses
4,370.4
6,800.9
10,430.7
13,820.6
General and administrative costs:
Third parties
23.8
21.4
46.8
41.8
Related parties
33.2
31.1
65.7
62.9
Total general and administrative costs
57.0
52.5
112.5
104.7
Total costs and expenses (see Note 10)
4,427.4
6,853.4
10,543.2
13,925.3
Equity in income of unconsolidated affiliates
113.3
137.4
254.1
292.0
Operating income
1,436.9
1,560.3
2,944.4
3,186.5
Other income (expense):
Interest expense
( 320.2
)
( 290.1
)
( 637.7
)
( 567.3
)
Change in fair market value of Liquidity Option
–
( 26.6
)
( 2.3
)
( 84.4
)
Interest income
2.9
0.7
10.1
2.0
Other, net
0.9
1.9
1.8
2.1
Total other expense, net
( 316.4
)
( 314.1
)
( 628.1
)
( 647.6
)
Income before income taxes
1,120.5
1,246.2
2,316.3
2,538.9
Benefit from (provision for) income taxes (see Note 11)
( 59.7
)
( 9.7
)
119.5
( 22.0
)
Net income
1,060.8
1,236.5
2,435.8
2,516.9
Net income attributable to noncontrolling interests
( 26.1
)
( 21.8
)
( 51.0
)
( 41.7
)
Net income attributable to limited partners
$
1,034.7
$
1,214.7
$
2,384.8
$
2,475.2
Earnings per unit: (see Note 12)
Basic and diluted earnings per unit
$
0.47
$
0.55
$
1.08
$
1.12
See Notes to Unaudited Condensed Consolidated Financial Statements.
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ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED
COMPREHENSIVE INCOME
(Dollars in millions)
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Net income
$
1,060.8
$
1,236.5
$
2,435.8
$
2,516.9
Other comprehensive income (loss):
Cash flow hedges: (see Note 14)
Commodity hedging derivative instruments:
Changes in fair value of cash flow hedges
( 78.2
)
81.5
396.9
( 13.7
)
Reclassificatio n of gains to ne t income
( 208.7
)
( 2.2
)
( 364.3
)
( 60.5
)
Interest rate hedging derivative instruments:
Changes in fair value of cash flow hedges
7.8
( 5.2
)
( 284.2
)
( 5.2
)
Reclassification of losses to net income
9.7
9.2
33.2
18.4
Total cash flow hedges
( 269.4
)
83.3
( 218.4
)
( 61.0
)
Other
–
–
( 0.1
)
( 0.6
)
Total other comprehens ive income (loss)
( 269.4
)
83.3
( 218.5
)
( 61.6
)
Comprehensive income
791.4
1,319.8
2,217.3
2,455.3
Comprehensive income attributable to noncontrolling interests
( 26.1
)
( 21.8
)
( 51.0
)
( 41.7
)
Comprehensive income attributable to limited partners
$
765.3
$
1,298.0
$
2,166.3
$
2,413.6
See Notes to Unaudited Condensed Consolidated Financial Statements.
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ENTERPRISE PRODUCT S PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
For the Six Months
Ended June 30,
2020
2019
Operating activities:
Net income
$
2,435.8
$
2,516.9
Reconciliation of net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion
1,031.7
963.1
Asset impairment and related charges
13.4
11.8
Equity in income of unconsolidated affiliates
( 254.1
)
( 292.0
)
Distributions received from unconsolidated affiliates attributable to earnings
257.6
291.1
Net gains attributable to asset sales
( 1.5
)
( 2.5
)
Deferred income tax expense (benefit)
( 130.7
)
4.2
Change in fair market value of derivative instruments
( 91.4
)
( 83.8
)
Change in fair market value of Liquidity Option
2.3
84.4
Non-cash expense related to long-term operating leases (see Note 16)
19.8
21.7
Net effect of changes in operating accounts (see Note 17)
( 89.0
)
( 332.0
)
Other operating activities
( 0.1
)
0.8
Net cash flows provided by operating activities
3,193.8
3,183.7
Investing activities:
Capital expenditures
( 1,975.9
)
( 2,260.8
)
Investments in unconsolidated affiliates
( 7.3
)
( 59.9
)
Distributions received from unconsolidated affiliates attributable to the return of capital
58.0
23.4
Proceeds from asset sales
4.1
16.1
Other investing activities
( 9.4
)
( 5.3
)
Cash used in investing activities
( 1,930.5
)
( 2,286.5
)
Financing activities:
Borrowings under debt agreements
5,411.8
40,318.1
Repayments of debt
( 3,406.6
)
( 39,617.3
)
Debt issuance costs
( 32.2
)
( 0.3
)
Monetization of interest rate derivative instruments
( 33.3
)
–
Cash distributions paid to limited partners (see Note 8)
( 1,946.9
)
( 1,907.9
)
Cash payments made in connection with distribution equivalent rights
( 12.9
)
( 10.5
)
Cash distributions paid to noncontrolling interests
( 61.8
)
( 46.9
)
Cash contributions from noncontrolling interests
19.7
99.6
Net cash proceeds from the issuance of common units
–
82.2
Repurchase of common units under 2019 Buyback Program (see Note 8)
( 140.1
)
( 81.1
)
Other financing activities
( 34.4
)
( 35.9
)
Cas h used in financing ac tivities
( 236.7
)
( 1,200.0
)
Net change in cash and cash equivalents, including restricted cash
1,026.6
( 302.8
)
Cash and cash equivalents, including restricted cash, at beginning of period
410.0
410.1
Cash and cash equivalents, including restricted cash, at end of period
$
1,436.6
$
107.3
See Notes to Unaudited Condensed Consolidated Financial Statements.
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ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020
(Dollars in millions)
Partners’ Equity
Limited
Partners
Treasury
Units
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests
Total
For the Three Months Ended June 30, 2020:
Balance, March 31, 2020
$
26,225.4
$
( 1,297.3
)
$
122.3
$
1,063.8
$
26,114.2
Net income
1,034.7
–
–
26.1
1,060.8
Cash distributions paid to limited partners
( 972.7
)
–
–
–
( 972.7
)
Cash payments made in connection with
distribution equivalent rights
( 7.1
)
–
–
–
( 7.1
)
Cash distributions paid to noncontrolling interests
–
–
–
( 31.9
)
( 31.9
)
Cash contributions from noncontrolling interests
–
–
–
14.5
14.5
Amortization of fair value of equity-based awards
41.5
–
–
–
41.5
Cash flow hedges
–
–
( 269.4
)
–
( 269.4
)
Other, net
( 0.7
)
–
–
( 7.8
)
( 8.5
)
Balance, June 30, 2020
$
26,321.1
$
( 1,297.3
)
$
( 147.1
)
$
1,064.7
$
25,941.4
Partners’ Equity
Limited
Partners
Treasury
Units
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests
Total
For the Six Months Ended June 30, 2020:
Balance, December 31, 2019
$
24,692.6
$
–
$
71.4
$
1,063.5
$
25,827.5
Net income
2,384.8
–
–
51.0
2,435.8
Cash distributions paid to limited partners
( 1,946.9
)
–
–
–
( 1,946.9
)
Cash payments made in connection with
distribution equivalent rights
( 12.9
)
–
–
–
( 12.9
)
Cash distributions paid to noncontrolling interests
–
–
–
( 61.8
)
( 61.8
)
Cash contributions from noncontrolling interests
–
–
–
19.7
19.7
Amortization of fair value of equity-based awards
80.6
–
–
–
80.6
Repurchase and cancellation of common units under
2019 Buyback Program (see Note 8)
( 140.1
)
–
–
–
( 140.1
)
Common units issued in connection with settlement
of Liquidity Option (see Note 8)
1,297.3
–
–
–
1,297.3
Treasury units acquired in connection with settlement
of Liquidity Option, at cost (see Note 8)
–
( 1,297.3
)
–
–
( 1,297.3
)
Cash flow hedges
–
–
( 218.4
)
–
( 218.4
)
Other, net
( 34.3
)
–
( 0.1
)
( 7.7
)
( 42.1
)
Balance, June 30, 2020
$
26,321.1
$
( 1,297.3
)
$
( 147.1
)
$
1,064.7
$
25,941.4
See Notes to Unaudited Condensed Consolidated Financial Statements. For information regarding Unit History and
Accumulated Other Comprehensive Income (Loss), see Note 8.
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ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019
(Dollars in millions)
Partners’ Equity
Limited
Partners
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests
Total
For the Three Months Ended June 30, 2019:
Balance, March 31, 2019
$
24,151.9
$
( 94.0
)
$
463.4
$
24,521.3
Net income
1,214.7
–
21.8
1,236.5
Cash distributions paid to limited partners
( 957.5
)
–
–
( 957.5
)
Cash payments made in connection with distribution equivalent rights
( 6.0
)
–
–
( 6.0
)
Cash distributions paid to noncontrolling interests
–
–
( 28.9
)
( 28.9
)
Cash contributions from noncontrolling interests
–
–
64.8
64.8
Net cash proceeds from the issuance of common units
39.5
–
–
39.5
Repurchase and cancellation of common units under
2019 Buyback Program (see Note 8)
( 29.5
)
–
–
( 29.5
)
Amortization of fair value of equity-based awards
38.5
–
–
38.5
Cash flow hedges
–
83.3
–
83.3
Other
( 1.1
)
–
14.5
13.4
Balance, June 30, 2019
$
24,450.5
$
( 10.7
)
$
535.6
$
24,975.4
Partners’ Equity
Limited
Partners
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests
Total
For the Six Months Ended June 30, 2019:
Balance, December 31, 2018
$
23,802.6
$
50.9
$
438.7
$
24,292.2
Net income
2,475.2
–
41.7
2,516.9
Cash distributions paid to limited partners
( 1,907.9
)
–
–
( 1,907.9
)
Cash payments made in connection with distribution equivalent rights
( 10.5
)
–
–
( 10.5
)
Cash distributions paid to noncontrolling interests
–
–
( 46.9
)
( 46.9
)
Cash contributions from noncontrolling interests
–
–
99.6
99.6
Net cash proceeds from the issuance of common units
82.2
–
–
82.2
Common units issued in connection with employee compensation
45.6
–
–
45.6
Repurchase and cancellation of common units under
2019 Buyback Program (see Note 8)
( 81.1
)
–
–
( 81.1
)
Amortization of fair value of equity-based awards
70.5
–
–
70.5
Cash flow hedges
–
( 61.0
)
–
( 61.0
)
Other
( 26.1
)
( 0.6
)
2.5
( 24.2
)
Balance, June 30, 2019
$
24,450.5
$
( 10.7
)
$
535.6
$
24,975.4
See Notes to Unaudited Condensed Consolidated Financial Statements. For information regarding Unit History and
Accumulated Other Comprehensive Income (Loss), see Note 8.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
With the exception of per unit amounts, or as noted within the context of each disclosure,
the dollar amounts presented in the tabular data within these disclosures are
stated in millions of dollars.
KEY REFERENCES USED IN THESE
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unless the context requires otherwise, references to “we,” “us,” “our” or “Enterprise” are intended to mean the business and operations of Enterprise Products Partners L.P. and its consolidated subsidiaries. References to “EPD” or the “Partnership” mean Enterprise Products Partners L.P. on a standalone basis. References to “EPO” mean Enterprise Products Operating LLC, which is an indirect wholly owned subsidiary of EPD, and its consolidated subsidiaries, through which EPD conducts its business. Enterprise is managed by its general partner, Enterprise Products Holdings LLC (“Enterprise GP”), which is a wholly owned subsidiary of Dan Duncan LLC, a privately held Texas limited liability company.
The membership interests of Dan Duncan LLC are owned by a voting trust, the current trustees (“DD LLC Trustees”) of which are: (i) Randa Duncan Williams, who is also a director and Chairman of the Board of Directors (the “Board”) of Enterprise GP; (ii) Richard H. Bachmann, who is also a director and Vice Chairman of the Board of Enterprise GP; and (iii) Dr. Ralph S. Cunningham, who is also an advisory director of Enterprise GP. Ms. Duncan Williams and Mr. Bachmann also currently serve as managers of Dan Duncan LLC along with W. Randall Fowler, who is also a director and the Co-Chief Executive Officer and Chief Financial Officer of Enterprise GP.
References to “EPCO” mean Enterprise Products Company, a privately held Texas corporation, and its privately held affiliates. A majority of the outstanding voting capital stock of EPCO is owned by a voting trust, the current trustees (“EPCO Trustees”) of which are: (i) Ms. Duncan Williams, who serves as Chairman of EPCO; (ii) Dr. Cunningham, who serves as Vice Chairman of EPCO; and (iii) Mr. Bachmann, who serves as the President and Chief Executive Officer of EPCO. Ms. Duncan Williams and Mr. Bachmann also currently serve as directors of EPCO along with Mr. Fowler, who is also the Executive Vice President and Chief Financial Officer of EPCO. EPCO, together with its privately held affiliates, owned approximately 32.1 % of EPD’s limited partner common units at June 30, 2020.
Note 1. Partnership Organization and Basis of Presentation
We are a publicly traded Delaware limited partnership, the common units of which are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “EPD.” We were formed in April 1998 to own and operate certain natural gas liquids (“NGLs”) related businesses of EPCO and are a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, petrochemicals and refined products.
We conduct substantially all of our business through EPO and are owned 100 % by EPD’s limited partners from an economic perspective. Enterprise GP manages our partnership and owns a non-economic general partner interest in us. We, Enterprise GP, EPCO and Dan Duncan LLC are affiliates under the collective common control of the DD LLC Trustees and the EPCO Trustees. Like many publicly traded partnerships, we have no employees. All of our management, administrative and operating functions are performed by employees of EPCO pursuant to an administrative services agreement (the “ASA”) or by other service providers. See Note 15 for information regarding related party matters.
Our results of operations for the six months ended June 30, 2020 are not necessarily indicative of results expected for the full year of 2020. In our opinion, the accompanying Unaudited Condensed Consolidated Financial Statements include all adjustments consisting of normal recurring accruals necessary for fair presentation. Although we believe the disclosures in these financial statements are adequate and make the information presented not misleading, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
These Unaudited Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto included in our annual report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”) filed with the SEC on February 28, 2020.
Note 2. Summary of Significant Accounting Policies
Apart from those matters noted below, there have been no changes in our significant accounting policies since those reported under Note 2 of the 2019 Form 10-K.
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash and cash equivalents, and restricted cash reported within the Unaudited Condensed Consolidated Balance Sheets that sum to the total of the amounts shown in the Unaudited Condensed Statements of Consolidated Cash Flows.
June 30,
2020
December 31,
2019
Cash and cash equivalents
$
1,298.5
$
334.7
Restricted cash
138.1
75.3
Total cash, cash equivalents and restricted cash shown in the
Unaudited Condensed Statements of Consolidated Cash Flows
$
1,436.6
$
410.0
Restricted cash primarily represents amounts held in segregated bank accounts by our clearing brokers as margin in support of our commodity derivative instruments portfolio and related physical purchases and sales of natural gas, NGLs, crude oil, refined products and power. Additional cash may be restricted to maintain our commodity derivative instruments portfolio as prices fluctuate or margin requirements change. See Note 14 for information regarding our derivative instruments and hedging activities.
Recent Accounting Developments
Credit Losses
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . The new guidance, referred to as the current expected credit loss model, requires the measurement of expected credit losses for financial assets (e.g., accounts receivable) held at the reporting date based on historical experience, current economic conditions, and reasonable and supportable forecasts. These result in the more timely recognition of losses. The adoption of this new guidance on January 1, 2020 did not have a material impact on our consolidated financial statements.
Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which amended the disclosure requirements related to fair value measurements in an effort to enhance the overall usefulness of the disclosures and reduce costs by eliminating certain disclosures that were not considered to be decision-useful for users of the financial statements. The ASU will now require incremental disclosures regarding changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and measurement uncertainty. Additionally, the ASU eliminated certain policy and process disclosures and reporting requirements.
The adoption of this new guidance on January 1, 2020 did not have a material impact on our consolidated financial statements. See Note 14 for information regarding our fair value measurements.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Goodwill
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We adopted this guidance on January 1, 2020 for future goodwill impairment testing.
Note 3. Inventories
Our inventory amounts by product type were as follows at the dates indicated:
June 30,
2020
December 31,
2019
NGLs
$
840.0
$
1,094.9
Petrochemicals and refined products
649.9
311.5
Crude oil
519.3
674.2
Natural gas
14.9
10.8
Total
$
2,024.1
$
2,091.4
Due to fluctuating commodity prices, we recognize lower of cost or net realizable value adjustments when the carrying value of our available-for-sale inventories exceeds their net realizable value. The following table presents our total cost of sales amounts and lower of cost or net realizable value adjustments for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Cost of sales (1)
$
3,195.2
$
5,609.4
$
8,018.2
$
11,445.0
Lower of cost or net realizable value adjustments
recognized in cost of sales
13.2
4.9
51.2
10.3
(1)
Cost of sales is a component of “Operating costs and expenses” as presented on our Unaudited Condensed Statements of Consolidated Operations. Fluctuations in these amounts are primarily due to changes in energy commodity prices and sales volumes associated with our marketing activities.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Property, Plant and Equipment
The historical costs of our property, plant and equipment and related accumulated depreciation balances were as follows at the dates indicated:
Estimated
Useful Life
in Years
June 30,
2020
December 31,
2019
Plants, pipelines and facilities (1)
3 - 45
(5)
$
48,072.1
$
47,201.2
Underground and other storage facilities (2)
5 - 40
(6)
4,104.9
3,965.5
Transportation equipment (3)
3 - 10
204.5
198.9
Marine vessels (4)
15 - 30
906.8
905.9
Land
375.9
372.3
Construction in progress
3,279.4
2,641.2
Total
56,943.6
55,285.0
Less accumulated depreciation
14,405.2
13,681.6
Property, plant and equipment, net
$
42,538.4
$
41,603.4
(1)
Plants, pipelines and facilities include processing plants; NGL, natural gas, crude oil and petrochemical and refined products pipelines; terminal loading and unloading facilities; buildings; office furniture and equipment; laboratory and shop equipment and related assets.
(2)
Underground and other storage facilities include underground product storage caverns; above ground storage tanks; water wells and related assets.
(3)
Transportation equipment includes tractor-trailer tank trucks and other vehicles and similar assets used in our operations.
(4)
Marine vessels include tow boats, barges and related equipment used in our marine transportation business.
(5)
In general, the estimated useful lives of major assets within this category are: processing plants, 20 - 35 years; pipelines and related equipment, 5 - 45 years; terminal facilities, 10 - 35 years; buildings, 20 - 40 years; office furniture and equipment, 3 - 20 years; and laboratory and shop equipment, 5 - 35 years.
(6)
In general, the estimated useful lives of assets within this category are: underground storage facilities, 5 - 35 years; storage tanks, 10 - 40 years; and water wells, 5 - 35 years.
The following table summarizes our depreciation expense and capitalized interest amounts for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Depreciation expense (1)
$
418.7
$
389.3
$
830.9
$
769.9
Capitalized interest (2)
31.9
32.8
62.4
69.0
(1)
Depreciation expense is a component of “Costs and expenses” as presented on our Unaudited Condensed Statements of Consolidated Operations.
(2)
We capitalize interest costs incurred on funds used to construct property, plant and equipment while the asset is in its construction phase. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life as a component of depreciation expense. When capitalized interest is recorded, it reduces interest expense from what it would be otherwise.
Asset Retirement Obligations
Property, plant and equipment at June 30, 2020 and December 31, 2019 includes $ 70.3 million and $ 69.6 million, respectively, of asset retirement costs capitalized as an increase in the associated long-lived asset. The following table presents information regarding our asset retirement obligations, or AROs, since December 31, 2019:
ARO liability balance, December 31, 2019
$
132.1
Liabilities incurred
3.1
Liabilities settled
( 0.2
)
Revisions in estimated cash flows
4.1
Accretion expense
4.0
ARO liability balance, June 30, 2020
$
143.1
11
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Investments in Unconsolidated Affiliates
The following table presents our investments in unconsolidated affiliates by business segment at the dates indicated. We account for these investments using the equity method.
June 30,
2020
December 31,
2019
NGL Pipelines & Services
$
685.9
$
703.8
Crude Oil Pipelines & Services
1,828.7
1,866.5
Natural Gas Pipelines & Services
28.5
27.3
Petrochemical & Refined Products Services
4.3
2.6
Total
$
2,547.4
$
2,600.2
The following table presents our equity in income (loss) of unconsolidated affiliates by business segment for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
NGL Pipelines & Services
$
28.8
$
26.7
$
61.5
$
56.8
Crude Oil Pipelines & Services
84.1
111.0
191.4
235.6
Natural Gas Pipelines & Services
1.3
1.6
2.9
3.3
Petrochemical & Refined Products Services
( 0.9
)
( 1.9
)
( 1.7
)
( 3.7
)
Total
$
113.3
$
137.4
$
254.1
$
292.0
12
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Intangible Assets and Goodwill
Identifiable Intangible Assets
The following table summarizes our intangible assets by business segment at the dates indicated:
June 30, 2020
December 31, 2019
Gross
Value
Accumulated
Amortization
Carrying
Value
Gross
Value
Accumulated
Amortization
Carrying
Value
NGL Pipelines & Services:
Customer relationship intangibles
$
447.8
$
( 213.4
)
$
234.4
$
447.8
$
( 206.3
)
$
241.5
Contract-based intangibles
162.6
( 49.6
)
113.0
162.6
( 43.9
)
118.7
Segment total
610.4
( 263.0
)
347.4
610.4
( 250.2
)
360.2
Crude Oil Pipelines & Services:
Customer relationship intangibles
2,203.5
( 274.8
)
1,928.7
2,203.5
( 243.5
)
1,960.0
Contract-based intangibles
283.5
( 243.4
)
40.1
276.9
( 235.0
)
41.9
Segment total
2,487.0
( 518.2
)
1,968.8
2,480.4
( 478.5
)
2,001.9
Natural Gas Pipelines & Services:
Customer relationship intangibles
1,350.3
( 497.2
)
853.1
1,350.3
( 481.6
)
868.7
Contract-based intangibles
468.0
( 399.7
)
68.3
468.0
( 395.5
)
72.5
Segment total
1,818.3
( 896.9
)
921.4
1,818.3
( 877.1
)
941.2
Petrochemical & Refined Products Services:
Customer relationship intangibles
181.4
( 60.7
)
120.7
181.4
( 57.5
)
123.9
Contract-based intangibles
46.0
( 24.9
)
21.1
46.0
( 24.2
)
21.8
Segment total
227.4
( 85.6
)
141.8
227.4
( 81.7
)
145.7
Total intangible assets
$
5,143.1
$
( 1,763.7
)
$
3,379.4
$
5,136.5
$
( 1,687.5
)
$
3,449.0
The following table presents the amortization expense of our intangible assets by business segment for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
NGL Pipelines & Services
$
6.3
$
9.0
$
12.8
$
18.1
Crude Oil Pipelines & Services
18.8
24.1
39.7
46.1
Natural Gas Pipelines & Services
9.6
10.0
19.8
20.9
Petrochemical & Refined Products Services
1.9
2.2
3.9
4.4
Total
$
36.6
$
45.3
$
76.2
$
89.5
The following table presents our forecast of amortization expense associated with existing intangible assets for the periods indicated:
Remainder
of 2020
2021
2022
2023
2024
$
85.0
$
167.6
$
164.5
$
162.9
$
159.3
Goodwill
Goodwill represents the excess of the purchase price of an acquired business over the amounts assigned to assets acquired and liabilities assumed in the transaction. There has been no change in our goodwill amounts since those reported in our 2019 Form 10-K.
13
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Debt Obligations
The following table presents our consolidated debt obligations (arranged by company and maturity date) at the dates indicated:
June 30,
2020
December 31,
2019
EPO senior debt obligations:
Commercial Paper Notes, variable-rates
$
–
$
482.0
Senior Notes Q, 5.25 % fixed-rate, due January 2020
–
500.0
Senior Notes Y, 5.20 % fixed-rate, due September 2020
1,000.0
1,000.0
September 2019 364-Day Revolving Credit Agreement, variable-rate, due September 2020
–
–
Senior Notes TT, 2.80 % fixed-rate, due February 2021
750.0
750.0
Senior Notes RR, 2.85 % fixed-rate, due April 2021
575.0
575.0
April 2020 364-Day Revolving Credit Agreement, variable-rate, due April 2021
–
–
Senior Notes VV, 3.50 % fixed-rate, due February 2022
750.0
750.0
Senior Notes CC, 4.05 % fixed-rate, due February 2022
650.0
650.0
Senior Notes HH, 3.35 % fixed-rate, due March 2023
1,250.0
1,250.0
Senior Notes JJ, 3.90 % fixed-rate, due February 2024
850.0
850.0
Multi-Year Revolving Credit Agreement, variable-rate, due September 2024
–
–
Senior Notes MM, 3.75 % fixed-rate, due February 2025
1,150.0
1,150.0
Senior Notes PP, 3.70 % fixed-rate, due February 2026
875.0
875.0
Senior Notes SS, 3.95 % fixed-rate, due February 2027
575.0
575.0
Senior Notes WW, 4.15 % fixed-rate, due October 2028
1,000.0
1,000.0
Senior Notes YY, 3.125 % fixed-rate, due July 2029
1,250.0
1,250.0
Senior Notes AAA, 2.80 % fixed-rate, due January 2030
1,000.0
–
Senior Notes D, 6.875 % fixed-rate, due March 2033
500.0
500.0
Senior Notes H, 6.65 % fixed-rate, due October 2034
350.0
350.0
Senior Notes J, 5.75 % fixed-rate, due March 2035
250.0
250.0
Senior Notes W, 7.55 % fixed-rate, due April 2038
399.6
399.6
Senior Notes R, 6.125 % fixed-rate, due October 2039
600.0
600.0
Senior Notes Z, 6.45 % fixed-rate, due September 2040
600.0
600.0
Senior Notes BB, 5.95 % fixed-rate, due February 2041
750.0
750.0
Senior Notes DD, 5.70 % fixed-rate, due February 2042
600.0
600.0
Senior Notes EE, 4.85 % fixed-rate, due August 2042
750.0
750.0
Senior Notes GG, 4.45 % fixed-rate, due February 2043
1,100.0
1,100.0
Senior Notes II, 4.85 % fixed-rate, due March 2044
1,400.0
1,400.0
Senior Notes KK, 5.10 % fixed-rate, due February 2045
1,150.0
1,150.0
Senior Notes QQ, 4.90 % fixed-rate, due May 2046
975.0
975.0
Senior Notes UU, 4.25 % fixed-rate, due February 2048
1,250.0
1,250.0
Senior Notes XX, 4.80 % fixed-rate, due February 2049
1,250.0
1,250.0
Senior Notes ZZ, 4.20 % fixed-rate, due January 2050
1,250.0
1,250.0
Senior Notes BBB, 3.70 % fixed-rate, due January 2051
1,000.0
–
Senior Notes NN, 4.95 % fixed-rate, due October 2054
400.0
400.0
Senior Notes CCC, 3.95 % fixed rate, due January 2060
1,000.0
–
TEPPCO senior debt obligations:
TEPPCO Senior Notes, 7.55 % fixed-rate, due April 2038
0.4
0.4
Total principal amount of senior debt obligations
27,250.0
25,232.0
EPO Junior Subordinated Notes C, variable-rate, due June 2067 (1)
232.2
232.2
EPO Junior Subordinated Notes D, fixed/variable-rate, due August 2077 (2)
700.0
700.0
EPO Junior Subordinated Notes E, fixed/variable-rate, due August 2077 (3)
1,000.0
1,000.0
EPO Junior Subordinated Notes F, fixed/variable-rate, due February 2078 (4)
700.0
700.0
TEPPCO Junior Subordinated Notes, variable-rate, due June 2067 (1)
14.2
14.2
Total principal amount of senior and junior debt obligations
29,896.4
27,878.4
Other, non-principal amounts
( 286.2
)
( 253.3
)
Less current maturities of debt
( 2,325.0
)
( 1,981.9
)
Total long-term debt
$
27,285.2
$
25,643.2
(1)
Variable rate is reset quarterly and based on 3-month London Interbank Offered Rate ("LIBOR") , plus 2.778 %.
(2)
Fixed rate of 4.875 % through August 15, 2022; thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 2.986 %.
(3)
Fixed rate of 5.250 % through August 15, 2027; thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 3.033 %.
(4)
Fixed rate of 5.375 % through February 14, 2028; thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 2.57 %.
References to “TEPPCO” mean TEPPCO Partners, L.P. prior to its merger with one of our wholly owned subsidiaries in October 2009.
14
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the range of interest rates and weighted-average interest rates paid on our consolidated variable-rate debt during the six months ended June 30, 2020:
Range of Interest
Rates Paid
Weighted-Average
Interest Rate Paid
Commercial Paper Notes
1.78 % to 2.08 %
1.86 %
EPO Junior Subordinated Notes C and TEPPCO Junior Subordinated Notes
3.13 % to 4.68 %
4.26 %
Amounts borrowed under EPO’s 364-Day and Multi-Year Revolving Credit Agreements bear interest, at its election, equal to: (i) LIBOR, plus an additional variable spread; or (ii) an alternate base rate, which is the greater of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 0.5%, or (c) the LIBO Market Index Rate in effect on such day plus 1% and a variable spread. The applicable spreads are determined based on EPO's debt ratings.
The following table presents the scheduled contractual maturities of principal amounts of our consolidated debt obligations at June 30, 2020 for the next five years and in total thereafter:
Scheduled Maturities of Debt
Total
Remainder
of 2020
2021
2022
2023
2024
Thereafter
Principal amount of senior and junior debt obligations
$
29,896.4
$
1,000.0
$
1,325.0
$
1,400.0
$
1,250.0
$
850.0
$
24,071.4
Expected Renewal of September 2019 364-Day Revolving Credit Agreement
EPO’s September 2019 364-Day Revolving Credit Agreement is scheduled to mature in September 2020. As a result, EPO expects to renew this credit agreement during the third quarter of 2020. At June 30, 2020, there were no principal amounts outstanding under the September 2019 364-Day Revolving Credit Agreement.
April 2020 364-Day Revolving Credit Agreement
In April 2020, EPO entered into an additional 364-day revolving credit agreement (the “April 2020 364-Day Revolving Credit Agreement ”). The new agreement provides EPO with an incremental $ 1.0 billion of borrowing capacity, thereby increasing its overall borrowing capacity under its revolving credit agreements to $ 6.0 billion. Under the terms of the April 2020 364-Day Revolving Credit Agreement, EPO may borrow up to $ 1.0 billion at a variable interest rate for a term of 364 days, subject to the terms and conditions set forth therein. EPO may use proceeds from borrowings under the April 2020 364-Day Revolving Credit Agreement for working capital, capital expenditures, acquisitions and other company purposes.
Senior Notes Offering in January 2020
In January 2020, EPO issued $ 3.0 billion aggregate principal amount of senior notes comprised of (i) $ 1.0 billion principal amount of senior notes due January 2030 (“Senior Notes AAA”), (ii) $ 1.0 billion principal amount of senior notes due January 2051 (“Senior Notes BBB”) and (iii) $ 1.0 billion principal amount of senior notes due January 2060 (“Senior Notes CCC”). Net proceeds from this offering were used by EPO for the repayment of $ 500 million principal amount of its Senior Notes Q that matured in January 2020, temporary repayment of amounts outstanding under its commercial paper program and for general company purposes. In addition, net proceeds from this offering will be used by EPO for the repayment of $ 1.0 billion principal amount of its Senior Notes Y upon their maturity in September 2020.
Senior Notes AAA were issued at 99.921 % of their principal amount and have a fixed-rate interest rate of 2.80 % per year. Senior Notes BBB were issued at 99.413 % of their principal amount and have a fixed-rate interest rate of 3.70 % per year. Senior Notes CCC were issued at 99.360 % of their principal amount and have a fixed-rate interest rate of 3.95 % per year. EPD guaranteed these senior notes through an unconditional guarantee on an unsecured and unsubordinated basis.
See Note 19 for a subsequent event involving the reopening of Senior Notes AAA and the issuance of $ 1.25 billion aggregate principal amount of new senior notes in August 2020.
15
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Lender Financial Covenants
We were in compliance with the financial covenants of our consolidated debt agreements at June 30, 2020.
Letters of Credit
At June 30, 2020, EPO had $ 150.7 million of letters of credit outstanding primarily related to our commodity hedging activities.
Parent-Subsidiary Guarantor Relationships
EPD acts as guarantor of the consolidated debt obligations of EPO, with the exception of the remaining debt obligations of TEPPCO. If EPO were to default on any of its guaranteed debt, EPD would be responsible for full and unconditional repayment of that obligation.
Note 8. Equity and Distributions
Partners’ Equity
The following table summarizes changes in the number of our limited partner common units outstanding and treasury units since December 31, 2019:
Limited
Partner
Common Units
Outstanding
Treasury
Units
Units outstanding at December 31, 2019
2,189,226,130
–
Common units issued in connection with settlement of Liquidity Option
54,807,352
–
Treasury units acquired in connection with settlement of Liquidity Option
( 54,807,352
)
54,807,352
Common unit repurchases under 2019 Buyback Program
( 6,357,739
)
–
Common units issued in connection with the vesting of phantom unit awards, net
2,912,214
–
Other
19,638
–
Units outstanding at March 31, 2020
2,185,800,243
54,807,352
Common units issued in connection with the vesting of phantom unit awards, net
96,190
–
Units outstanding at June 30, 2020
2,185,896,433
54,807,352
We have a universal shelf registration statement (the “2019 Shelf”) on file with the SEC which allows EPD and EPO (each on a standalone basis) to issue an unlimited amount of equity and debt securities, respectively. EPO issued $ 3.0 billion of senior notes in January 2020 using the 2019 Shelf (see Note 7).
In addition, EPD has a registration statement on file with the SEC covering the issuance of up to $ 2.54 billion of its common units in amounts, at prices and on terms to be determined by market conditions and other factors at the time of such offerings in connection with its at-the-market (“ATM”) program. During the six months ended June 30, 2020 and 2019 , EPD did not issue any common units under its ATM program. After taking into account the aggregate sales price of common units sold under the ATM program through June 30, 2020, EPD has the capacity to issue additional common units under its ATM program up to an aggregate sales price of $ 2.54 billion.
We may issue additional equity and debt securities to assist us in meeting our future liquidity requirements, including those related to capital investments.
16
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Settlement of Liquidity Option in March 2020
On February 25, 2020, the Partnership received notice from Marquard & Bahls AG (“M&B”) of its election to exercise its rights (the “Liquidity Option”) under the Liquidity Option Agreement among EPD, OTA Holdings, Inc., a Delaware corporation previously named Oiltanking Holding Americas, Inc. (“OTA”), and M&B dated October 1, 2014 (the “Liquidity Option Agreement”). On March 5, 2020, we settled our obligations under the Liquidity Option Agreement by issuing 54,807,352 new EPD common units to Skyline North Americas, Inc. (“Skyline,” an affiliate of M&B) in exchange for the capital stock of OTA. Upon settlement of the Liquidity Option, we indirectly acquired the 54,807,352 EPD common units owned by OTA (which were issued to OTA in October 2014) and assumed all future income tax obligations of OTA, including its deferred tax liability. At March 5, 2020, OTA’s assets and liabilities consisted primarily of the EPD common units it owned and the related deferred tax liability, respectively.
At March 5, 2020, our accrual for the Liquidity Option liability was $ 511.9 million. The Liquidity Option liability, at any measurement date, represents the present value of estimated federal and state income taxes that we believe a market participant would incur due to ownership of OTA, including its deferred income tax liabilities. OTA’s deferred tax liability at March 5, 2020 was $ 439.7 million. The market value of the new EPD common units issued to Skyline was $ 1.3 billion based on a closing price of $ 23.67 per unit on March 5, 2020.
The 54,807,352 new EPD common units issued to Skyline upon settlement of the Liquidity Option constitute “restricted securities” in the meaning of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”) and may not be resold except pursuant to an effective registration statement or an available exemption under the Securities Act. In connection with the settlement of the Liquidity Option, Enterprise entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with Skyline. Pursuant to the Registration Rights Agreement, Skyline has the right to request that we prepare and file a registration statement to permit and otherwise facilitate the public resale of all or a portion of such EPD common units that Skyline and its affiliates then own. Our obligation to Skyline to effect such transactions is limited to five registration statements and underwritten offerings. In May 2020, we filed a registration statement on behalf of Skyline for the resale of up to 54,807,352 EPD common units. This registration statement is effective and, in June 2020, we filed a prospectus supplement to this registration statement that allows Skyline to sell up to $ 500 million of the EPD common units it owns in connection with an “at-the-market” program that it administers. We will not receive any proceeds from such offerings.
As a result of the Liquidity Option settlement, the partners’ equity balance for common units (as presented on our Unaudited Condensed Consolidated Balance Sheet) increased by the $ 1.3 billion market value of the new EPD common units issued to Skyline. Since OTA does not meet the definition of a business as described in ASC 805, Business Combinations , t he acquisition of OTA was accounted for as the purchase of treasury units and assumption of the related deferred tax liability. In consolidation, we present the 54,807,352 EPD common units owned by OTA as treasury units, with their historical cost based on the $ 1.3 billion market value of the 54,807,352 new EPD common units issued to Skyline.
Upon settlement of the Liquidity Option, the Liquidity Option liability was effectively replaced by the deferred tax liability of OTA as calculated in accordance with ASC 740, Income Taxes . See Note 11 for additional information regarding OTA’s deferred tax liability.
Common Unit Repurchases Under 2019 Buyback Program
In January 2019, we announced that the Board of Enterprise GP had approved a $ 2.0 billion multi-year unit buyback program (the “2019 Buyback Program”), which provides EPD with an additional method to return capital to investors. The 2019 Buyback Program authorizes EPD to repurchase its common units from time to time, including through open market purchases and negotiated transactions. The timing and pace of buy backs under the program will be determined by a number of factors including (i) our financial performance and flexibility, (ii) organic growth and acquisition opportunities with higher potential returns on investment, (iii) EPD’s unit price and implied cash flow yield and (iv) maintaining targeted financial leverage with a debt-to-normalized adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of approximately 3.5 times. No time limit has been set for completion of the program, and it may be suspended or discontinued at any time.
17
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In January 2020, management announced its intention to use approximately 2.0% of net cash flow provided by operating activities, or cash flow from operations (“CFFO”), in 2020 to repurchase EPD common units under the 2019 Buyback Program. EPD repurchased 6,357,739 common units under the 2019 Buyback Program through open market purchases during the six months ended June 30, 2020 . The total purchase price of these repurchases (including commissions and fees) was $ 140.1 million. During the six months ended June 30, 2019 , EPD repurchased 2,909,128 common units under the 2019 Buyback Program for a total purchase price of $ 81.1 million. The units repurchased during the six months ended June 30, 2020 and 2019 were immediately cancelled upon acquisition. At June 30, 2020, the remaining available capacity under the 2019 Buyback Program was $ 1.78 billion.
Common Units Issued in Connection With the Vesting of Phantom Unit Awards
During the six months ended June 30, 2020 , after taking into account tax withholding requirements, EPD issued a net 3,008,404 new common units to employees in connection with the vesting of phantom unit awards. See Note 13 for information regarding our phantom unit awards.
Common Units Delivered Under DRIP and EUPP
EPD has registration statements on file with the SEC in connection with its distribution reinvestment plan (“DRIP”) and employee unit purchase plan (“EUPP”). In July 2019, EPD announced that, beginning with the quarterly distribution payment paid in August 2019, it would use common units purchased on the open market, rather than issuing new common units, to satisfy its delivery obligations under the DRIP and EUPP. This election is subject to change in future quarters depending on the partnership’s need for equity capital. During the six months ended June 30, 2020, a total of 3,379,971 common units were purchased on the open market and delivered to participants in connection with the DRIP and EUPP. Apart from $ 1.3 million attributable to the plan discount available to all participants in the EUPP, the funds used to effect these purchases were sourced from the DRIP and EUPP participants. No other partnership funds were used to satisfy these obligations. We plan to use open market purchases to satisfy DRIP and EUPP reinvestments in connection with the distribution expected to be paid on August 12, 2020.
Accumulated Other Comprehensive Income (Loss)
The following tables present the components of accumulated other comprehensive income (loss) as reported on our Unaudited Condensed Consolidated Balance Sheets at the dates indicated:
Cash Flow Hedges
Commodity
Derivative
Instruments
Interest Rate
Derivative
Instruments
Other
Total
Accumulated Other Comprehensive Income, December 31, 2019
$
55.1
$
13.9
$
2.4
$
71.4
Other comprehensive income (loss) for period, before reclassifications
396.9
( 284.2
)
( 0.1
)
112.6
Reclassification of losses (gains) to net income during period
( 364.3
)
33.2
–
( 331.1
)
Total other comprehensive income (loss) for period
32.6
( 251.0
)
( 0.1
)
( 218.5
)
Accumulated Other Comprehensive Income (Loss), June 30, 2020
$
87.7
$
( 237.1
)
$
2.3
$
( 147.1
)
Cash Flow Hedges
Commodity
Derivative
Instruments
Interest Rate
Derivative
Instruments
Other
Total
Accumulated Other Comprehensive Income (Loss), December 31, 2018
$
152.7
$
( 104.8
)
$
3.0
$
50.9
Other comprehensive income (loss) for period, before reclassifications
( 13.7
)
( 5.2
)
( 0.6
)
( 19.5
)
Reclassification of losses (gains) to net income during period
( 60.5
)
18.4
–
( 42.1
)
Total other comprehensive income (loss) for period
( 74.2
)
13.2
( 0.6
)
( 61.6
)
Accumulated Other Comprehensive Income (Loss), June 30, 2019
$
78.5
$
( 91.6
)
$
2.4
$
( 10.7
)
18
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents reclassifications of (income) loss out of accumulated other comprehensive income into net income during the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
Losses (gains) on cash flow hedges:
Location
2020
2019
2020
2019
Interest rate derivatives
Interest expense
$
9.7
$
9.2
$
33.2
$
18.4
Commodity derivatives
Revenue
( 209.8
)
( 2.5
)
( 364.2
)
( 67.8
)
Commodity derivatives
Operating costs and expenses
1.1
0.3
( 0.1
)
7.3
Total
$
( 199.0
)
$
7.0
$
( 331.1
)
$
( 42.1
)
For information regarding our interest rate and commodity derivative instruments, see Note 14.
Cash Distributions
On July 7, 2020, we announced that the Board declared a quarterly cash distribution to be paid to our limited partners with respect to the second quarter of 2020 of $ 0.4450 per common unit, or $ 1.78 per unit on an annualized basis. The quarterly distribution associated with the second quarter of 2020 is payable on August 12, 2020, to unitholders of record as of the close of business on July 31, 2020. This distribution represents a 1.1 % increase over the distribution declared with respect to the second quarter of 2019.
In light of current economic conditions, management will evaluate future cash distributions in 2020 on a quarterly basis. The payment of any quarterly cash distribution is subject to Board approval and management’s evaluation of our financial condition, results of operations and cash flows in connection with such payments.
19
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Revenues
We classify our revenues into sales of products and midstream services. Product sales relate primarily to our various marketing activities whereas midstream services represent our other integrated businesses (i.e., gathering, processing, transportation, fractionation, storage and terminaling). The following table presents our revenues by business segment, and further by revenue type, for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
NGL Pipelines & Services:
Sales of NGLs and related products
$
1,934.1
$
2,659.4
$
4,353.3
$
5,330.6
Segment midstream services:
Natural gas processing and fractionation
181.9
288.2
370.4
557.7
Transportation
249.9
243.9
514.9
519.2
Storage and terminals
110.4
93.2
205.8
191.6
Total segment midstream services
542.2
625.3
1,091.1
1,268.5
Total NGL Pipelines & Services
2,476.3
3,284.7
5,444.4
6,599.1
Crude Oil Pipelines & Services:
Sales of crude oil
1,146.7
2,531.7
2,843.6
4,860.1
Segment midstream services:
Transportation
195.8
205.3
414.2
389.0
Storage and terminals
120.7
129.6
244.3
224.8
Total segment midstream services
316.5
334.9
658.5
613.8
Total Crude Oil Pipelines & Services
1,463.2
2,866.6
3,502.1
5,473.9
Natural Gas Pipelines & Services:
Sales of natural gas
347.7
531.4
746.9
1,187.1
Segment midstream services:
Transportation
237.5
287.9
508.9
559.7
Total segment midstream services
237.5
287.9
508.9
559.7
Total Natural Gas Pipelines & Services
585.2
819.3
1,255.8
1,746.8
Petrochemical & Refined Products Services:
Sales of petrochemicals and refined products
1,030.0
1,087.7
2,627.5
2,568.3
Segment midstream services:
Fractionation, and isomerization
38.6
41.5
74.4
82.3
Transportation, including marine logistics
115.4
132.2
250.3
258.8
Storage and terminals
42.3
44.3
79.0
90.6
Total segment midstream services
196.3
218.0
403.7
431.7
Total Petrochemical & Refined Products Services
1,226.3
1,305.7
3,031.2
3,000.0
Total consolidated revenues
$
5,751.0
$
8,276.3
$
13,233.5
$
16,819.8
Substantially all of our revenues are derived from contracts with customers as defined within ASC 606, Revenue from Contracts with Customers .
Unbilled Revenue and Deferred Revenue
The following table provides information regarding our contract assets and contract liabilities at June 30, 2020:
Contract Asset
Location
Balance
Unbilled revenue (current amount)
Prepaid and other current assets
$
151.5
Total
$
151.5
Contract Liability
Location
Balance
Deferred revenue (current amount)
Other current liabilities
$
136.0
Deferred revenue (noncurrent)
Other long-term liabilities
213.8
Total
$
349.8
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents significant changes in our unbilled revenue and deferred revenue balances during the six months ended June 30, 2020:
Unbilled
Revenue
Deferred
Revenue
Balance at December 31, 2019
$
17.6
$
314.9
Amount included in opening balance transferred to other accounts during period (1)
( 4.2
)
( 85.5
)
Amount recorded during period
160.1
315.1
Amounts recorded during period transferred to other accounts (1)
( 22.0
)
( 191.3
)
Other changes
–
( 3.4
)
Balance at June 30, 2020
$
151.5
$
349.8
(1)
Unbilled revenues are transferred to accounts receivable once we have an unconditional right to consideration from the customer. Deferred revenues are recognized as revenue upon satisfaction of our performance obligation to the customer.
Remaining Performance Obligations
The following table presents estimated fixed future consideration from revenue contracts that contain minimum volume commitments, deficiency and similar fees and the term of the contracts exceeds one year. These amounts represent the revenues we expect to recognize in future periods from these contracts as of June 30, 2020.
Period
Fixed
Consideration
Six Months Ended December 31, 2020
$
1,980.1
One Year Ended December 31, 2021
3,741.3
One Year Ended December 31, 2022
3,350.2
One Year Ended December 31, 2023
3,057.1
One Year Ended December 31, 2024
2,866.6
Thereafter
14,626.2
Total
$
29,621.5
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Business Segments and Related Information
Our operations are reported under four business segments: (i) NGL Pipelines & Services, (ii) Crude Oil Pipelines & Services, (iii) Natural Gas Pipelines & Services and (iv) Petrochemical & Refined Products Services.
Segment Gross Operating Margin
We evaluate segment performance based on our financial measure of gross operating margin. Gross operating margin is an important performance measure of the core profitability of our operations and forms the basis of our internal financial reporting. We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results. Gross operating margin is exclusive of other income and expense transactions, income taxes, the cumulative effect of changes in accounting principles and extraordinary charges. Gross operating margin is presented on a 100% basis before any allocation of earnings to noncontrolling interests. Our calculation of gross operating margin may or may not be comparable to similarly titled measures used by other companies.
The following table presents our measurement of total segment gross operating margin for the periods presented. The GAAP financial measure most directly comparable to total segment gross operating margin is operating income.
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Operating income
$
1,436.9
$
1,560.3
$
2,944.4
$
3,186.5
Adjustments to reconcile operating income to total segment gross operating margin
(addition or subtraction indicated by sign):
Depreciation, amortization and accretion expense in operating costs and expenses
494.3
462.8
977.1
913.7
Asset impairment and related charges in operating costs and expenses
11.8
7.0
13.4
11.8
Net gains attributable to asset sales in operating costs and expenses
( 1.6
)
( 2.1
)
( 1.5
)
( 2.5
)
General and administrative costs
57.0
52.5
112.5
104.7
N on-refundable payments received from shippers attributable to make-up rights (1)
13.0
11.3
29.8
13.5
Subsequent recognition of revenues attributable to make-up rights (2)
( 8.5
)
( 5.6
)
( 15.6
)
( 13.1
)
Total segment gross operating margin
$
2,002.9
$
2,086.2
$
4,060.1
$
4,214.6
(1)
Since make-up rights entail a future performance obligation by the pipeline to the shipper, these receipts are recorded as deferred revenue for GAAP purposes; however, these receipts are included in gross operating margin in the period of receipt since they are nonrefundable to the shipper.
(2)
As deferred revenues attributable to make-up rights are subsequently recognized as revenue under GAAP, gross operating margin must be adjusted to remove such amounts to prevent duplication since the associated non-refundable payments were previously included in gross operating margin.
Gross operating margin by segment is calculated by subtracting segment operating costs and expenses from segment revenues, with both segment totals reflecting the adjustments noted in the preceding table, as applicable, and before the elimination of intercompany transactions. The following table presents gross operating margin by segment for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Gross operating margin by segment:
NGL Pipelines & Services
$
968.1
$
966.3
$
2,010.1
$
1,925.5
Crude Oil Pipelines & Services
634.4
513.2
1,087.3
1,175.5
Natural Gas Pipelines & Services
208.9
301.8
492.7
566.1
Petrochemical & Refined Products Services
191.5
304.9
470.0
547.5
Total segment gross operating margin
$
2,002.9
$
2,086.2
$
4,060.1
$
4,214.6
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the non-cash mark-to-market gains (losses) included in gross operating margin for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Mark-to-market gains (losses) in gross operating margin:
NGL Pipelines & Services
$
35.7
$
( 0.7
)
$
23.4
$
0.6
Crude Oil Pipelines & Services
8.1
( 14.6
)
18.8
85.2
Natural Gas Pipelines & Services
( 4.0
)
0.3
24.8
–
Petrochemical & Refined Products Services
22.1
2.5
24.4
( 2.0
)
Total mark-to-market impact on gross operating margin
$
61.9
$
( 12.5
)
$
91.4
$
83.8
For information regarding our hedging activities, see Note 14.
Summarized Segment Financial Information
Information by business segment, together with reconciliations to amounts presented on our Unaudited Condensed Statements of Consolidated Operations, is presented in the following table:
Reportable Business Segments
NGL
Pipelines
& Services
Crude Oil
Pipelines
& Services
Natural Gas
Pipelines
& Services
Petrochemical
& Refined Products Services
Adjustments
and
Eliminations
Consolidated
Total
Revenues from third parties:
Three months ended June 30, 2020
$
2,474.7
$
1,461.3
$
583.0
$
1,226.3
$
–
$
5,745.3
Three months ended June 30, 2019
3,282.2
2,847.0
815.6
1,305.7
–
8,250.5
Six months ended June 30, 2020
5,441.0
3,489.0
1,250.6
3,031.2
–
13,211.8
Six months ended June 30, 2019
6,593.8
5,448.6
1,739.3
3,000.0
–
16,781.7
Revenues from related parties:
Three months ended June 30, 2020
1.6
1.9
2.2
–
–
5.7
Three months ended June 30, 2019
2.5
19.6
3.7
–
–
25.8
Six months ended June 30, 2020
3.4
13.1
5.2
–
–
21.7
Six months ended June 30, 2019
5.3
25.3
7.5
–
–
38.1
Intersegment and intrasegment revenues:
Three months ended June 30, 2020
5,947.7
4,039.9
92.9
709.7
( 10,790.2
)
–
Three months ended June 30, 2019
4,494.8
9,453.3
163.1
617.9
( 14,729.1
)
–
Six months ended June 30, 2020
11,728.4
11,880.2
208.0
1,517.8
( 25,334.4
)
–
Six months ended June 30, 2019
9,986.2
17,338.3
358.5
1,332.3
( 29,015.3
)
–
Total revenues:
Three months ended June 30, 2020
8,424.0
5,503.1
678.1
1,936.0
( 10,790.2
)
5,751.0
Three months ended June 30, 2019
7,779.5
12,319.9
982.4
1,923.6
( 14,729.1
)
8,276.3
Six months ended June 30, 2020
17,172.8
15,382.3
1,463.8
4,549.0
( 25,334.4
)
13,233.5
Six months ended June 30, 2019
16,585.3
22,812.2
2,105.3
4,332.3
( 29,015.3
)
16,819.8
Equity in income (loss) of unconsolidated affiliates:
Three months ended June 30, 2020
28.8
84.1
1.3
( 0.9
)
–
113.3
Three months ended June 30, 2019
26.7
111.0
1.6
( 1.9
)
–
137.4
Six months ended June 30, 2020
61.5
191.4
2.9
( 1.7
)
–
254.1
Six months ended June 30, 2019
56.8
235.6
3.3
( 3.7
)
–
292.0
Segment revenues include intersegment and intrasegment transactions, which are generally based on transactions made at market-based rates. Our consolidated revenues reflect the elimination of intercompany transactions. Substantially all of our consolidated revenues are earned in the U.S. and derived from a wide customer base.
23
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Information by business segment, together with reconciliations to our Unaudited Condensed Consolidated Balance Sheet totals, is presented in the following table:
Reportable Business Segments
NGL
Pipelines
& Services
Crude Oil
Pipelines
& Services
Natural Gas
Pipelines
& Services
Petrochemical
& Refined
Products
Services
Adjustments
and
Eliminations
Consolidated
Total
Property, plant and equipment, net:
(see Note 4)
At June 30, 2020
$
16,885.9
$
6,412.8
$
8,429.7
$
7,530.6
$
3,279.4
$
42,538.4
At December 31, 2019
16,652.1
6,324.4
8,432.5
7,553.2
2,641.2
41,603.4
Investments in unconsolidated affiliates:
(see Note 5)
At June 30, 2020
685.9
1,828.7
28.5
4.3
–
2,547.4
At December 31, 2019
703.8
1,866.5
27.3
2.6
–
2,600.2
Intangible assets, net: (see Note 6)
At June 30, 2020
347.4
1,968.8
921.4
141.8
–
3,379.4
At December 31, 2019
360.2
2,001.9
941.2
145.7
–
3,449.0
Goodwill: (see Note 6)
At June 30, 2020
2,651.7
1,841.0
296.3
956.2
–
5,745.2
At December 31, 2019
2,651.7
1,841.0
296.3
956.2
–
5,745.2
Segment assets:
At June 30, 2020
20,570.9
12,051.3
9,675.9
8,632.9
3,279.4
54,210.4
At December 31, 2019
20,367.8
12,033.8
9,697.3
8,657.7
2,641.2
53,397.8
Supplemental Revenue and Expense Information
The following table presents additional information regarding our consolidated revenues and costs and expenses for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Consolidated revenues:
NGL Pipelines & Services
$
2,476.3
$
3,284.7
$
5,444.4
$
6,599.1
Crude Oil Pipelines & Services
1,463.2
2,866.6
3,502.1
5,473.9
Natural Gas Pipelines & Services
585.2
819.3
1,255.8
1,746.8
Petrochemical & Refined Products Services
1,226.3
1,305.7
3,031.2
3,000.0
Total consolidated revenues
$
5,751.0
$
8,276.3
$
13,233.5
$
16,819.8
Consolidated costs and expenses
Operating costs and expenses:
Cost of sales
$
3,195.2
$
5,609.4
$
8,018.2
$
11,445.0
Other operating costs and expenses (1)
670.7
723.8
1,423.5
1,452.6
Depreciation, amortization and accretion
494.3
462.8
977.1
913.7
Asset impairment and related charges
11.8
7.0
13.4
11.8
Ne t gains attributable to asset sales
( 1.6
)
( 2.1
)
( 1.5
)
( 2.5
)
General and administrative costs
57.0
52.5
112.5
104.7
Total consolidated costs and expenses
$
4,427.4
$
6,853.4
$
10,543.2
$
13,925.3
(1)
Represents the cost of operating our plants, pipelines and other fixed assets excluding: depreciation, amortization and accretion charges; asset impairment and related charges; and net losses (or gains) attributable to asset sales.
Fluctuations in our product sales revenues and related cost of sales amounts are explained in part by changes in energy commodity prices. In general, lower energy commodity prices result in a decrease in our revenues attributable to product sales; however, these lower commodity prices also decrease the associated cost of sales as purchase costs are lower. The same type of correlation would be true in the case of higher energy commodity sales prices and purchase costs.
24
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Income Taxes
Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We did not rely on any uncertain tax positions in recording our income tax-related amounts during the six months ended June 30, 2020 and 2019.
OTA Deferred Tax Liability
On March 5, 2020, we settled the Liquidity Option (see Note 8) and assumed OTA’s deferred tax liability, which reflects the outside basis difference of OTA in the 54,807,352 EPD common units it received in October 2014. Upon settlement of the Liquidity Option, the Liquidity Option liability was effectively replaced by the deferred tax liability of OTA calculated in accordance with ASC 740, Income Taxes . At March 5, 2020, the Liquidity Option liability amount was $ 511.9 million. Since the book value of the Liquidity Option liability exceeded OTA’s estimated deferred tax liability of $ 439.7 million on that date, we recognized a non-cash benefit in earnings of $ 72.2 million, which is reflected in the “Benefit from (provision for) income tax” line on our Unaudited Condensed Statement of Consolidated Operations for the six months ended June 30, 2020 .
The deferred tax liability of OTA is subject to fluctuation due to changes in the market value of the EPD common units it owns relative to its underlying tax basis in the units. For example, if the market price of EPD common units increases between reporting dates, we expect to recognize deferred income tax expense in connection with an anticipated increase in OTA’s deferred tax liability. Conversely, if the market price of EPD common units decreases between reporting dates, we expect to recognize a deferred income tax benefit in connection with an anticipated decrease in OTA’s deferred tax liability. The following table presents changes in OTA’s deferred tax liability since the settlement date of March 5, 2020 to June 30, 2020:
Deferred tax liability at March 5, 2020
$
439.7
Impact of change in fair value of units on deferred tax liability:
Change in fair value of 54,807,352 EPD common units held by OTA (1)
$
( 301.4
)
Multiplied by estimated blended federal and state tax rate
22.4
%
( 67.4
)
Other, including interim allocations of taxable income
2.9
Deferred tax liability at June 30, 2020
$
375.2
(1)
The market price of EPD common units declined from $ 23.67 per unit at March 5, 2020 (settlement date of the Liquidity Option) to $ 18.17 per unit on June 30, 2020.
As presented in the preceding table, OTA recognized a net deferred income tax benefit of $ 64.5 million through June 30, 2020 primarily due to a decrease in the market value of its investment in EPD common units since March 5, 2020. With respect to the second quarter of 2020, OTA recognized deferred income tax expense of $ 50.5 million primarily due to an increase in the market value of its investment in EPD common units since March 31, 2020. The market price of EPD common units increased from $ 14.30 per unit at March 31, 2020 to $ 18.17 per unit on June 30, 2020. In total, earnings for the six months ended June 30, 2020 reflect a net $ 136.7 million of deferred income tax benefit attributable to OTA.
25
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Tabular Disclosures Regarding Income Taxes
Our federal, state and foreign income tax provision (benefit) is summarized below:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Current portion of income tax provision (benefit):
Federal
$
2.2
$
( 0.4
)
$
2.3
$
0.5
State
4.1
7.5
8.7
16.5
Foreign
–
0.2
0.2
0.8
Total current portion
6.3
7.3
11.2
17.8
Deferred portion of income tax provision (benefit):
Federal
46.4
–
( 126.4
)
( 0.1
)
State
7.0
2.6
( 4.3
)
4.5
Foreign
–
( 0.2
)
–
( 0.2
)
Total deferred portion
53.4
2.4
( 130.7
)
4.2
Total provision for (benefit from) income taxes
$
59.7
$
9.7
$
( 119.5
)
$
22.0
A reconciliation of the provision for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Pre-Tax Net Book Income (“NBI”)
$
1,120.5
$
1,246.2
$
2,316.3
$
2,538.9
Texas Margin Tax (1)
7.0
10.1
14.7
21.0
State income tax provision (benefit), net of federal benefit (2)
3.2
0.1
( 8.1
)
0.3
Federal income tax provision (benefit) computed by applying
the federal statutory rate to NBI of corporate entities
49.5
( 0.5
)
( 58.3
)
0.7
Federal benefit attributable to settlement of
Liquidity Option (2)
–
–
( 67.8
)
–
Provision for (benefit from) income taxes
$
59.7
$
9.7
$
( 119.5
)
$
22.0
Effective income tax rate
5.3
%
0.8
%
( 5.2
)%
0.9
%
(1)
Although the Texas Margin Tax is not considered a state income tax, it has the characteristics of an income tax since it is determined by applying a tax rate to a base that considers our Texas-sourced revenues and expenses.
(2)
The total benefit recognized in income tax expense on March 5, 2020 from settlement of the Liquidity Option was $ 72.2 million, which is comprised of $ 4.4 million of state income tax benefit and $ 67.8 million of federal income tax benefit.
Deferred income taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates, which will be in effect when these differences reverse.
26
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the significant components of deferred tax assets and deferred tax liabilities at the dates indicated:
June 30,
December 31,
2020
2019
Deferred tax liabilities:
Attributable to investment in OTA
$
375.2
Attributable to property, plant and equipment
105.6
$
100.2
Attributable to investments in other entities
3.4
3.3
Total deferred tax liabilities
484.2
103.5
Less deferred tax assets:
Net operating loss carryovers (1)
0.1
0.1
Temporary differences related to Texas Margin Tax
2.5
3.0
Total deferred tax assets
2.6
3.1
Total net deferred tax liabilities
$
481.6
$
100.4
(1)
These losses expire in various years between 2020 and 2037 and are subject to limitations on their utilization.
Note 12. Earnings Per Unit
The following table presents our calculation of basic and diluted earnings per unit for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
BASIC EARNINGS PER UNIT
Net income attributable to limited partners
$
1,034.7
$
1,214.7
$
2,384.8
$
2,475.2
Earnings allocated to phantom unit awards (1)
( 7.5
)
( 7.4
)
( 17.4
)
( 15.2
)
Net income available to common unitholders
$
1,027.2
$
1,207.3
$
2,367.4
$
2,460.0
Basic weighted-average number of common units outstanding
2,185.9
2,189.1
2,187.4
2,188.1
Basic earnings per unit
$
0.47
$
0.55
$
1.08
$
1.12
DILUTED EARNINGS PER UNIT
Net income attributable to limited partners
$
1,034.7
$
1,214.7
$
2,384.8
$
2,475.2
Diluted weighted-average number of units outstanding:
Distribution-bearing common units
2,185.9
2,189.1
2,187.4
2,188.1
Phantom units (1)
16.0
13.5
15.6
13.0
Total
2,201.9
2,202.6
2,203.0
2,201.1
Diluted earnings per unit
$
0.47
$
0.55
$
1.08
$
1.12
(1)
Phantom units are considered participating securities for purposes of computing basic earnings per unit. See Note 13 for information regarding our phantom units.
27
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 13. Equity-Based Awards
An allocated portion of the fair value of EPCO’s equity-based awards is charged to us under the ASA. The following table summarizes compensation expense we recognized in connection with equity-based awards for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Equity-classified awards:
Phantom unit awards
$
39.6
$
35.5
$
75.8
$
64.9
Profits interest awards
2.1
3.0
5.0
5.6
Total
$
41.7
$
38.5
$
80.8
$
70.5
The fair value of equity-classified awards is amortized to earnings over the requisite service or vesting period. Equity-classified awards are expected to result in the issuance of common units upon vesting. Compensation expense for liability-classified awards is recognized over the requisite service or vesting period based on the fair value of the award remeasured at each reporting date. Liability-classified awards are settled in cash upon vesting.
Phantom Unit Awards
Subject to customary forfeiture provisions, phantom unit awards allow recipients to acquire EPD common units once a defined vesting period expires (at no cost to the recipient apart from fulfilling required service and other conditions). The following table presents phantom unit award activity for the period indicated:
Number of
Units
Weighted-
Average Grant
Date Fair Value
per Unit (1)
Phantom unit awards at December 31, 2019
12,974,684
$
27.21
Granted (2)
7,400,345
$
25.72
Vested
( 4,333,916
)
$
26.34
Forfeited
( 63,539
)
$
26.82
Phantom unit awards at June 30, 2020
15,977,574
$
26.76
(1)
Determined by dividing the aggregate grant date fair value of awards (before an allowance for forfeitures) by the number of awards issued.
(2)
The aggregate grant date fair value of phantom unit awards issued during 2020 was $ 190.3 million based on a grant date market price of EPD common units ranging from $ 17.24 to $ 25.76 per unit. An estimated annual forfeiture rate of 2.4 % was applied to these awards.
Each phantom unit award includes a distribution equivalent right (“ DER”), which entitles the participant to nonforfeitable cash payments equal to the product of the number of phantom unit awards outstanding for the participant and the cash distribution per common unit paid by EPD to its common unitholders. Cash payments made in connection with DERs are charged to partners’ equity when the phantom unit award is expected to result in the issuance of common units; otherwise, such amounts are expensed.
The following table presents supplemental information regarding phantom unit awards for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Cash payments made in connection with DERs
$
7.1
$
6.0
$
12.9
$
10.5
Total intrinsic value of phantom unit awards that vested during period
2.2
4.7
111.4
101.7
For the EPCO group of companies, the unrecognized compensation cost associated with phantom unit awards was $ 237.1 million at June 30, 2020, of which our share of such cost is currently estimated to be $ 202.0 million. Due to the graded vesting provisions of these awards, we expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 2.2 years.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Profits Interest Awards
EPCO currently serves as the general partner for each of four limited partnerships (referred to as “Employee Partnerships”) that serve as long-term incentive arrangements for key employees of EPCO by providing such employees a profits interest in one or more of the Employee Partnerships. The profits interest in a fifth Employee Partnership (EPD PubCo Unit I L.P.) fully vested in February 2020 and the partnership was liquidated. At June 30, 2020 , our share of the total unrecognized compensation cost related to the four remaining Employee Partnerships was $ 18.9 million, which we expect to recognize over a weighted-average period of 3.1 years.
Note 14. Derivative Instruments, Hedging Activities and Fair Value Measurements
In the normal course of our business operations, we are exposed to certain risks, including changes in interest rates and commodity prices. In order to manage risks associated with assets, liabilities and certain anticipated future transactions, we use derivative instruments such as futures, forward contracts, swaps, options and other instruments with similar characteristics. Substantially all of our derivatives are used for non-trading activities.
Interest Rate Hedging Activities
We may utilize interest rate swaps, forward-starting swaps, options to enter into forward-starting swaps (“swaptions”), and similar derivative instruments to manage our exposure to changes in interest rates charged on borrowings under certain consolidated debt agreements. This strategy may be used in controlling our overall cost of capital associated with such borrowings.
Forward-Starting Swaps
The following table summarizes our portfolio of 30-year forward-starting swaps at June 30, 2020, all of which are associated with the expected future issuance of senior notes.
Hedged Transaction
Number and Type
of Derivatives
Outstanding
Notional
Amount
Expected
Settlement
Date
Weighted-Average
Fixed Rate
Locked
Accounting
Treatment
Future long-term debt offering
1 forward-starting swap
$ 75.0
4/2021
2.41 %
Cash flow hedge
Future long-term debt offering
5 forward-starting swaps
$ 500.0
4/2021
2.13 %
Cash flow hedge
Future long-term debt offering
2 forward-starting swaps (1)
$ 150.0
2/2022
1.72 %
Cash flow hedge
Future long-term debt offering
1 forward starting swap (1)
$ 100.0
4/2021
1.46 %
Cash flow hedge
Future long-term debt offering
2 forward starting swaps (1)
$ 150.0
2/2022
1.48 %
Cash flow hedge
Future long-term debt offering
2 forward starting swaps (1)
$ 100.0
2/2022
0.95 %
Cash flow hedge
(1)
These swaps were entered into during the first quarter of 2020.
In total, the notional amount of forward-starting swaps outstanding at June 30, 2020 was $ 1.08 billion. The weighted-average fixed interest rate of these derivative instruments is 1.83 %.
In January 2020, we terminated an aggregate $ 575 million notional amount of forward-starting swaps, which resulted in net cash payments of $ 33.3 million. These swaps were unwound in connection with our issuance of Senior Notes BBB due January 2051.
29
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Commodity Hedging Activities
The prices of natural gas, NGLs, crude oil, petrochemicals and refined products are subject to fluctuations in response to changes in supply and demand, market conditions and a variety of additional factors that are beyond our control. In order to manage such price risks, we enter into commodity derivative instruments such as physical forward contracts, futures contracts, fixed-for-float swaps and basis swaps.
At June 30, 2020, our predominant commodity hedging strategies consisted of (i) hedging anticipated future purchases and sales of commodity products associated with transportation, storage and blending activities, (ii) hedging the fair value of commodity products held in inventory and (iii) hedging natural gas processing margins.
The following table summarizes our portfolio of commodity derivative instruments outstanding at June 30, 2020 (volume measures as noted):
Volume (1)
Accounting
Derivative Purpose
Current (2)
Long-Term (2)
Treatment
Derivatives designated as hedging instruments:
Natural gas processing:
Forecasted natural gas purchases for plant thermal reduction (billion cubic feet (“Bcf”))
12.7
n/a
Cash flow hedge
Forecasted sales of NGLs (million barrels (“MMBbls”))
0.1
n/a
Cash flow hedge
Octane enhancement:
Forecasted purchase of NGLs (MMBbls)
0.6
n/a
Cash flow hedge
Forecasted sales of octane enhancement products (MMBbls)
8.9
n/a
Cash flow hedge
Natural gas marketing:
Forecasted purchase of natural gas (Bcf)
1.8
n/a
Cash flow hedge
Natural gas storage inventory management activities (Bcf)
5.9
n/a
Fair value hedge
NGL marketing:
Forecasted purchases of NGLs and related hydrocarbon products (MMBbls)
157.9
4.6
Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products (MMBbls)
162.4
15.6
Cash flow hedge
NGLs inventory management activities (MMBbls)
1.8
n/a
Fair value hedge
Refined products marketing:
Forecasted purchases of refined products (MMBbls)
46.8
15.4
Cash flow hedge
Forecasted sales of refined products (MMBbls)
52.5
18.7
Cash flow hedge
Refined products inventory management activities (MMBbls)
3.9
n/a
Fair value hedge
Crude oil marketing:
Forecasted purchases of crude oil (MMBbls)
78.2
n/a
Cash flow hedge
Forecasted sales of crude oil (MMBbls)
88.7
n/a
Cash flow hedge
Petrochemical marketing:
Forecasted sales of petrochemical products (MMBbls)
1.2
n/a
Cash flow hedge
Commercial energy:
Forecasted purchases of power related to asset operations (terawatt hours (“TWh”))
0.3
n/a
Cash flow hedge
Derivatives not designated as hedging instruments:
Natural gas risk management activities (Bcf) (3,4)
44.2
2.1
Mark-to-market
NGL risk management activities (MMBbls) (4)
21.4
8.4
Mark-to-market
Refined products risk management activities (MMBbls) (4)
4.0
n/a
Mark-to-market
Crude oil risk management activities (MMBbls) (4)
28.8
7.7
Mark-to-market
Commercial energy risk management activities (TWh) (4)
0.1
n/a
Mark-to-market
(1)
Volume for derivatives designated as hedging instruments reflects the total amount of volumes hedged whereas volume for derivatives not designated as hedging instruments reflects the absolute value of derivative notional volumes.
(2)
The maximum term for derivatives designated as cash flow hedges, derivatives designated as fair value hedges and derivatives not designated as hedging instruments is December 2022, March 2021 and December 2022, respectively.
(3)
Current volumes include approximately 0.7 Bcf of physical derivatives instruments that are predominantly priced as index plus a premium or minus a discount.
(4)
Reflects the use of derivative instruments to manage risks associated with our transportation, processing, storage assets and end use power requirements.
The carrying amount of our inventories subject to fair value hedges was $ 233.8 million and $ 31.7 million at June 30, 2020 and December 31, 2019, respectively.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Tabular Presentation of Fair Value Amounts, and Gains and Losses on
Derivative Instruments and Related Hedged Items
The following table provides a balance sheet overview of our derivative assets and liabilities at the dates indicated:
Asset Derivatives
Liability Derivatives
June 30, 2020
December 31, 2019
June 30, 2020
December 31, 2019
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Derivatives designated as hedging instruments
Interest rate derivatives
Current assets
$
–
Current assets
$
–
Current
liabilities
$
200.6
Current
liabilities
$
6.7
Interest rate derivatives
Other assets
–
Other assets
–
Other liabilities
49.9
Other liabilities
6.8
Total interest rate derivatives
–
–
250.5
13.5
Commodity derivatives
Current assets
165.3
Current assets
116.5
Current
liabilities
168.2
Current
liabilities
107.1
Commodity derivatives
Other assets
1.8
Other assets
–
Other liabilities
10.2
Other liabilities
–
Total commodity derivatives
167.1
116.5
178.4
107.1
Total derivatives designated as hedging instruments
$
167.1
$
116.5
$
428.9
$
120.6
Derivatives not designated as hedging instruments
Commodity derivatives
Current assets
$
44.4
Current assets
$
10.7
Current
liabilities
$
16.6
Current
liabilities
$
8.6
Commodity derivatives
Other assets
3.5
Other assets
0.6
Other liabilities
1.7
Other liabilities
0.5
Total commodity derivatives
47.9
11.3
18.3
9.1
Total derivatives not designated as hedging instruments
$
47.9
$
11.3
$
18.3
$
9.1
Certain of our commodity derivative instruments are subject to master netting arrangements or similar agreements. The following tables present our derivative instruments subject to such arrangements at the dates indicated:
Offsetting of Financial Assets and Derivative Assets
Gross
Amounts of
Recognized
Assets
Gross
Amounts
Offset in the
Balance Sheet
Amounts
of Assets
Presented
in the
Balance Sheet
Gross Amounts Not Offset
in the Balance Sheet
Amounts That
Would Have
Been Presented
On Net Basis
Financial
Instruments
Cash
Collateral
Received
Cash
Collateral
Paid
(i)
(ii)
(iii) = (i) – (ii)
(iv)
(v) = (iii) + (iv)
As of June 30, 2020:
Commodity derivatives
$
215.0
$
–
$
215.0
$
( 188.6
)
$
–
$
( 24.0
)
$
2.4
As of December 31, 2019:
Commodity derivatives
$
127.8
$
–
$
127.8
$
( 115.3
)
$
–
$
( 11.0
)
$
1.5
Offsetting of Financial Liabilities and Derivative Liabilities
Gross
Amounts of
Recognized
Liabilities
Gross
Amounts
Offset in the
Balance Sheet
Amounts
of Liabilities
Presented
in the
Balance Sheet
Gross Amounts Not Offset
in the Balance Sheet
Amounts That
Would Have
Been Presented
On Net Basis
Financial
Instruments
Cash
Collateral
Received
Cash
Collateral
Paid
(i)
(ii)
(iii) = (i) – (ii)
(iv)
(v) = (iii) + (iv)
As of June 30, 2020:
Interest rate derivatives
$
250.5
$
–
$
250.5
$
–
$
–
$
–
$
250.5
Commodity derivatives
196.7
–
196.7
( 188.6
)
–
–
8.1
As of December 31, 2019:
Interest rate derivatives
$
13.5
$
–
$
13.5
$
–
$
–
$
–
$
13.5
Commodity derivatives
116.2
–
116.2
( 115.3
)
–
–
0.9
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Derivative assets and liabilities recorded on our Unaudited Condensed Consolidated Balance Sheets are presented on a gross-basis and determined at the individual transaction level. The tabular presentation above provides a means for comparing the gross amount of derivative assets and liabilities, excluding associated accounts payable and receivable, to the net amount that would likely be receivable or payable under a default scenario based on the existence of rights of offset in the respective derivative agreements. Any cash collateral paid or received is reflected in these tables, but only to the extent that it represents variation margins. Any amounts associated with derivative prepayments or initial margins that are not influenced by the derivative asset or liability amounts or those that are determined solely on their volumetric notional amounts are excluded from these tables.
The following tables present the effect of our derivative instruments designated as fair value hedges on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:
Derivatives in Fair Value
Hedging Relationships
Location
Gain (Loss) Recognized in
Income on Derivative
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Interest rate derivatives
Interest expense
$
–
$
–
$
–
$
–
Commodity derivatives
Revenue
( 63.7
)
6.9
( 49.3
)
( 1.6
)
Total
$
( 63.7
)
$
6.9
$
( 49.3
)
$
( 1.6
)
Derivatives in Fair Value
Hedging Relationships
Location
Gain (Loss) Recognized in
Income on Hedged Item
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Interest rate derivatives
Interest expense
$
–
$
–
$
–
$
–
Commodity derivatives
Revenue
126.7
( 3.6
)
117.3
6.3
Total
$
126.7
$
( 3.6
)
$
117.3
$
6.3
The following tables present the effect of our derivative instruments designated as cash flow hedges on our Unaudited Condensed Statements of Consolidated Operations and Unaudited Condensed Statements of Consolidated Comprehensive Income for the periods indicated:
Derivatives in Cash Flow
Hedging Relationships
Change in Value Recognized in
Other Comprehensive Income (Loss) on Derivative
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Interest rate derivatives
$
7.8
$
( 5.2
)
$
( 284.2
)
$
( 5.2
)
Commodity derivatives – Revenue (1)
( 75.9
)
84.3
401.9
( 2.4
)
Commodity derivatives – Operating costs and expenses (1)
( 2.3
)
( 2.8
)
( 5.0
)
( 11.3
)
Total
$
( 70.4
)
$
76.3
$
112.7
$
( 18.9
)
(1)
The fair value of these derivative instruments will be reclassified to their respective locations on the Unaudited Condensed Statement of Consolidated Operations upon settlement of the underlying derivative transactions, as appropriate.
Derivatives in Cash Flow
Hedging Relationships
Location
Gain (Loss) Reclassified from
Accumulated Other Comprehensive Income (Loss) to Income
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Interest rate derivatives
Interest expense
$
( 9.7
)
$
( 9.2
)
$
( 33.2
)
$
( 18.4
)
Commodity derivatives
Revenue
209.8
2.5
364.2
67.8
Commodity derivatives
Operating costs and expenses
( 1.1
)
( 0.3
)
0.1
( 7.3
)
Total
$
199.0
$
( 7.0
)
$
331.1
$
42.1
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Over the next twelve months, we expect to reclassify $ 40.3 million of losses attributable to interest rate derivative instruments from accumulated other comprehensive loss to earnings as an increase in interest expense. Likewise, we expect to reclassify $ 128.0 million of gains attributable to commodity derivative instruments from accumulated other comprehensive income to earnings, $ 132.5 million as an increase in revenue and $ 4.5 million as an increase in operating costs and expenses.
The following table presents the effect of our derivative instruments not designated as hedging instruments on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:
Derivatives Not Designated
as Hedging Instruments
Location
Gain (Loss) Recognized in
Income on Derivative
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Interest rate derivatives
Interest expense
$
–
$
–
$
–
$
–
Commodity derivatives
Revenue
45.7
( 20.2
)
98.7
74.9
Commodity derivatives
Operating costs and expenses
0.9
( 4.8
)
0.8
( 4.7
)
Total
$
46.6
$
( 25.0
)
$
99.5
$
70.2
The $ 99.5 million gain recognized for the six months ended June 30, 2020 (as noted in the preceding table) from derivatives not designated as hedging instruments consists of $ 35.8 million of realized gains and $ 63.7 million of net unrealized mark-to-market gains attributable to commodity derivatives.
Fair Value Measurements
The following tables set forth, by level within the Level 1, 2 and 3 fair value hierarchy, the carrying values of our financial assets and liabilities at the dates indicated. These assets and liabilities are measured on a recurring basis and are classified based on the lowest level of input used to estimate their fair value. Our assessment of the relative significance of such inputs requires judgment.
The values for commodity derivatives are presented before and after the application of Chicago Mercantile Exchange (“CME”) Rule 814, which deems that financial instruments cleared by the CME are settled daily in connection with variation margin payments. As a result of this exchange rule, CME-related derivatives are considered to have no fair value at the balance sheet date for financial reporting purposes; however, the derivatives remain outstanding and subject to future commodity price fluctuations until they are settled in accordance with their contractual terms. Derivative transactions cleared on exchanges other than the CME (e.g., the Intercontinental Exchange or ICE) continue to be reported on a gross basis.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At June 30, 2020
Fair Value Measurements Using
Quoted Prices
in Active
Markets for
Identical Assets
and Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Financial assets:
Commodity derivatives:
Value before application of CME Rule 814
$
999.1
$
635.9
$
28.9
$
1,663.9
Impact of CME Rule 814
( 973.4
)
( 451.5
)
( 24.0
)
( 1,448.9
)
Total commodity derivatives
25.7
184.4
4.9
215.0
Total
$
25.7
$
184.4
$
4.9
$
215.0
Financial liabilities:
Interest rate derivatives
$
–
$
250.5
$
–
$
250.5
Commodity derivatives:
Value before application of CME Rule 814
1,207.1
605.3
48.9
1,861.3
Impact of CME Rule 814
( 1,181.6
)
( 447.9
)
( 35.1
)
( 1,664.6
)
Total commodity derivatives
25.5
157.4
13.8
196.7
Total
$
25.5
$
407.9
$
13.8
$
447.2
At December 31, 2019
Fair Value Measurements Using
Quoted Prices
in Active
Markets for
Identical Assets
and Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Financial assets:
Commodity derivatives:
Value before application of CME Rule 814
$
53.4
$
343.7
$
0.1
$
397.2
Impact of CME Rule 814
( 47.0
)
( 222.4
)
–
( 269.4
)
Total commodity derivatives
6.4
121.3
0.1
127.8
Total
$
6.4
$
121.3
$
0.1
$
127.8
Financial liabilities:
Liquidity Option (see Note 8)
$
–
$
–
$
509.6
$
509.6
Interest rate derivatives
–
13.5
–
13.5
Commodity derivatives:
Value before application of CME Rule 814
88.1
273.6
0.3
362.0
Impact of CME Rule 814
( 81.9
)
( 163.9
)
–
( 245.8
)
Total commodity derivatives
6.2
109.7
0.3
116.2
Total
$
6.2
$
123.2
$
509.9
$
639.3
In the aggregate, the fair value of our commodity hedging portfolios at June 30, 2020 was a net derivative liability of $ 197.4 million prior to the impact of CME Rule 814.
Financial assets and liabilities recorded on the balance sheet at June 30, 2020 using significant unobservable inputs (Level 3) are not material to the Unaudited Condensed Consolidated Financial Statements. Refer to Note 8 for discussion of the settlement of the Liquidity Option in March 2020 and Note 11 for the income tax impact related to this transaction.
34
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nonrecurring Fair Value Measurements
Non-cash asset impairment charges for the six months ended June 30, 2020 were $ 13.4 million compared to $ 11.8 million for the six months ended June 30, 2019. Charges for 2020 primarily relate to assets retired during the quarter whose operations have ceased. Impairment charges are a component of “Operating costs and expenses” on our Unaudited Condensed Statements of Consolidated Operations.
Other Fair Value Information
The carrying amounts of cash and cash equivalents (including restricted cash balances), accounts receivable, commercial paper notes and accounts payable approximate their fair values based on their short-term nature. The estimated total fair value of our fixed-rate debt obligations was $ 33.03 billion and $ 30.37 billion at June 30, 2020 and December 31, 2019, respectively. The aggregate carrying value of these debt obligations was $ 29.65 billion and $ 27.15 billion at June 30, 2020 and December 31, 2019, respectively. These values are primarily based on quoted market prices for such debt or debt of similar terms and maturities (Level 2) and our credit standing. Changes in market rates of interest affect the fair value of our fixed-rate debt. The carrying values of our variable-rate long-term debt obligations approximate their fair values since the associated interest rates are market-based. We do not have any long-term investments in debt or equity securities recorded at fair value.
Note 15. Related Party Transactions
The following table summarizes our related party transactions for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Revenues – related parties:
Unconsolidated affiliates
$
5.7
$
25.8
$
21.7
$
38.1
Costs and expenses – related parties:
EPCO and its privately held affiliates
$
277.1
$
267.2
$
563.1
$
540.1
Unconsolidated affiliates
62.6
95.3
134.1
218.6
Total
$
339.7
$
362.5
$
697.2
$
758.7
The following table summarizes our related party accounts receivable and accounts payable balances at the dates indicated:
June 30,
2020
December 31,
2019
Accounts receivable - related parties:
Unconsolidated affiliates
$
2.6
$
2.5
Accounts payable - related parties:
EPCO and its privately held affiliates
$
78.4
$
143.7
Unconsolidated affiliates
10.9
18.6
Total
$
89.3
$
162.3
We believe that the terms and provisions of our related party agreements are fair to us; however, such agreements and transactions may not be as favorable to us as we could have obtained from unaffiliated third parties.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Relationship with EPCO and Affiliates
We have an extensive and ongoing relationship with EPCO and its privately held affiliates (including Enterprise GP, our general partner), which are not a part of our consolidated group of companies.
At June 30, 2020, EPCO and its privately held affiliates (including Dan Duncan LLC and certain Duncan family trusts) beneficially owned the following limited partner interests in us:
Total Number
of Units
Percentage of
Total Units
Outstanding
701,969,275
32.1 %
Of the total number of units held by EPCO and its privately held affiliates, 88,222,618 have been pledged as security under the credit facilities of EPCO and its privately held affiliates at June 30, 2020. These credit facilities contain customary and other events of default, including defaults by us and other affiliates of EPCO. An event of default, followed by a foreclosure on the pledged collateral, could ultimately result in a change in ownership of these units and affect the market price of EPD’s common units.
We and Enterprise GP are both separate legal entities apart from each other and apart from EPCO and its other affiliates, with assets and liabilities that are also separate from those of EPCO and its other affiliates. EPCO and its privately held affiliates depend on the cash distributions they receive from us and other investments to fund their other activities and to meet their debt obligations. During the six months ended June 30, 2020 and 2019, we paid EPCO and its privately held affiliates cash distributions totaling $ 605.5 million and $ 593.7 million, respectively.
From time-to-time, EPCO and its privately held affiliates elect to purchase additional common units under EPD’s DRIP and ATM program. See Note 8 for additional information regarding the DRIP.
We have no employees. All of our operating functions and general and administrative support services are provided by employees of EPCO pursuant to the ASA or by other service providers. The following table presents our related party costs and expenses attributable to the ASA with EPCO for the periods indicated:
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Operating costs and expenses
$
241.9
$
233.6
$
493.1
$
472.7
General and administrative expenses
32.0
29.4
62.5
58.7
Total costs and expenses
$
273.9
$
263.0
$
555.6
$
531.4
We lease office space from privately held affiliates of EPCO. The rental rates in these lease agreements approximate market rates. For the three months ended June 30, 2020 and 2019, we recognized $ 2.9 million and $ 3.5 million, respectively, of related party operating lease expense in connection with these office space leases. For the six months ended June 30, 2020 and 2019, we recognized $ 6.3 million and $ 7.3 million, respectively, of related party operating lease expense in connection with these office space leases.
Note 16. Commitments and Contingencies
Litigation
As part of our normal business activities, we may be named as defendants in legal proceedings, including those arising from regulatory and environmental matters. Although we are insured against various risks to the extent we believe it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to fully indemnify us against losses arising from future legal proceedings. We will vigorously defend the partnership in litigation matters.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Our accruals for litigation contingencies were $ 0.2 million at June 30, 2020 and December 31, 2019, and recorded in our Unaudited Condensed Consolidated Balance Sheets as a component of “Other current liabilities.”
Energy Transfer Matter
As reported in our 2019 Form 10-K, we prevailed on our appeal on January 31, 2020 when the Supreme Court of Texas unanimously affirmed the opinion of the Dallas Court of Appeals. On March 6, 2020, the Supreme Court of Texas issued its mandate to the Dallas County Civil District Court, bringing this lawsuit and the resulting appeal to a close.
PDH Litigation
In July 2013, we executed a contract with Foster Wheeler USA Corporation (“Foster Wheeler”) pursuant to which Foster Wheeler was to serve as the general contractor responsible for the engineering, procurement, construction and installation of our initial propane dehydrogenation (“PDH 1”) facility. In November 2014, Foster Wheeler was acquired by an affiliate of AMEC plc to form Amec Foster Wheeler plc, and Foster Wheeler is now known as Amec Foster Wheeler USA Corporation (“AFW”). In December 2015, Enterprise and AFW entered into a transition services agreement under which AFW was partially terminated from the PDH 1 project. In December 2015, Enterprise engaged a second contractor, Optimized Process Designs LLC, to complete the construction and installation of PDH 1.
On September 2, 2016, we terminated AFW for cause and filed a lawsuit in the 151st Judicial Civil District Court of Harris County, Texas against AFW and its parent company, Amec Foster Wheeler plc, asserting claims for breach of contract, breach of warranty, fraudulent inducement, string-along fraud, gross negligence, professional negligence, negligent misrepresentation and attorneys’ fees. We intend to diligently prosecute these claims and seek all direct, consequential, and exemplary damages to which we may be entitled.
Contractual Obligations
Scheduled Maturities of Debt
We have long-term and short-term payment obligations under debt agreements. In total, the principal amount of our consolidated debt obligations were $ 29.90 billion and $ 27.88 billion at June 30, 2020 and December 31, 2019, respectively. See Note 7 for additional information regarding our scheduled future maturities of debt principal.
Lease Accounting Matters
The following table presents information regarding operating leases where we are the lessee at June 30, 2020:
Asset Category
ROU
Asset
Carrying
Value (1)
Lease
Liability
Carrying
Value (2)
Weighted-
Average
Remaining
Term
Weighted-
Average
Discount
Rate (3)
Storage and pipeline facilities
$
134.0
$
134.7
16 years
4.3 %
Transportation equipment
41.5
43.8
3 years
3.5 %
Office and warehouse space
173.6
180.5
17 years
3.2 %
Total
$
349.1
$
359.0
(1)
Right-of-use (“ROU”) asset amounts are a component of “Other assets” on our Unaudited Condensed Consolidated Balance Sheet.
(2)
At June 30, 2020 , lease liabilities of $ 30.1 million and $ 328.9 million were included within “Other current liabilities” and “Other liabilities,” respectively.
(3)
The discount rate for each category of assets represents the weighted average of either (i) the implicit rate applicable to the underlying leases (where determinable) or (ii) our incremental borrowing rate adjusted for collateralization (if the implicit rate is not determinable). In general, the discount rates are based on either (i) information available at the lease commencement date or (ii) January 1, 2019 for leases existing at the adoption date for ASC 842.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table disaggregates our total operating lease expense for the periods indicated :
For the Three Months
Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Long-term operating leases:
Fixed lease expense:
Non-cash lease expense (amortization of ROU assets)
$
9.8
$
10.7
$
19.8
$
21.7
Related accretion expense on lease liability balances
3.3
2.4
6.7
4.8
Total fixed lease expense
13.1
13.1
26.5
26.5
Variable lease expense
0.1
1.1
0.3
2.9
Subtotal operating lease expense
13.2
14.2
26.8
29.4
Short-term operating leases
11.8
11.7
25.0
23.5
Total operating lease expense
$
25.0
$
25.9
$
51.8
$
52.9
Fixed lease expense is charged to earnings on a straight-line basis over the contractual term, with any variable lease payments expensed as incurred. Short-term operating lease expense is expensed as incurred. Cash paid for operating lease liabilities recorded on our balance sheet was $ 7.9 million and $ 12.9 million for the three months ended June 30, 2020 and 2019, respectively. For the six months ended June 30, 2020 and 2019 cash paid for operating lease liabilities was $ 18.3 million and $ 26.4 million, respectively.
We do not have any significant operating or direct financing leases where we are the lessor. Our operating lease income for the three months ended June 30, 2020 and 2019 was $ 2.6 million and $ 2.4 million, respectively. For the six months ended June 30, 2020 and 2019 operating lease income was $ 6.1 million and $ 7.2 million, respectively. We do not have any sales-type leases.
Our operating lease commitments at June 30, 2020 did not differ materially from those reported in our 2019 Form 10-K.
Purchase Obligations
We have contractual future product purchase commitments for natural gas, NGLs, crude oil, petrochemicals and refined products. These commitments represent enforceable and legally binding agreements as of the reporting date. Our product purchase commitments at June 30, 2020 declined by an estimated $ 8.63 billion when compared to those reported in our 2019 Form 10-K primarily due to lower NGL and crude oil prices in the six months ended June 30, 2020. At June 30, 2020, our estimated long-term product purchase obligations totaled $ 11.94 billion after reflecting the decline in commodity prices, agreements added during the six months ended June 30, 2020 and those commitments that expired during the year. At December 31, 2019, our estimated long-term product purchase obligations totaled $ 20.57 billion.
Settlement of Liquidity Option
See Note 8 for information regarding settlement of the Liquidity Option on March 5, 2020.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 17. Supplemental Cash Flow Information
The following table presents the net effect of changes in our operating accounts for the periods indicated:
For the Six Months
Ended June 30,
2020
2019
Decrease (increase) in:
Accounts receivable – trade
$
2,077.0
$
( 124.8
)
Accounts receivable – related parties
( 0.1
)
( 10.6
)
Inventories
161.4
( 56.4
)
Prepaid and other current assets
906.2
( 291.2
)
Other assets
87.7
( 12.4
)
Increase (decrease) in:
Accounts payable – trade
81.9
60.0
Accounts payable – related parties
( 73.1
)
( 21.0
)
Accrued product payables
( 2,119.4
)
107.6
Accrued interest
30.0
( 3.3
)
Other current liabilities
( 1,142.3
)
83.0
Other liabilities
( 98.3
)
( 62.9
)
Net effect of changes in operating accounts
$
( 89.0
)
$
( 332.0
)
We incurred liabilities for construction in progress that had not been paid at June 30, 2020 and December 31, 2019 of $ 306.6 million and $ 432.0 million, respectively. Such amounts are not included under the caption “Capital expenditures” on the Unaudited Condensed Statements of Consolidated Cash Flows.
39
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 18. Condensed Consolidating Financial Information
EPO conducts all of our business. Currently, we have no independent operations and no material assets outside those of EPO.
EPO has issued publicly traded debt securities. As the parent company of EPO, EPD guarantees substantially all of the debt obligations of EPO. If EPO were to default on any of its guaranteed debt, EPD would be responsible for full and unconditional repayment of that obligation. See Note 7 for additional information regarding our consolidated debt obligations.
EPO’s consolidated subsidiaries have no significant restrictions on their ability to pay distributions or make loans to EPD.
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Balance Sheet
June 30, 2020
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
ASSETS
Current assets:
Cash and cash equivalents and restricted cash
$
1,256.8
$
201.7
$
( 22.0
)
$
1,436.5
$
0.1
$
–
$
1,436.6
Accounts receivable – trade, net
1,119.5
1,788.8
( 0.6
)
2,907.7
–
–
2,907.7
Accounts receivable – related parties
166.2
635.7
( 791.1
)
10.8
–
( 8.2
)
2.6
Inventories
1,465.2
559.1
( 0.2
)
2,024.1
–
–
2,024.1
Derivative assets
175.4
13.6
20.7
209.7
–
–
209.7
Prepaid and other current assets
273.6
395.0
( 133.5
)
535.1
0.5
–
535.6
Total current assets
4,456.7
3,593.9
( 926.7
)
7,123.9
0.6
( 8.2
)
7,116.3
Property, plant and equipment, net
6,607.0
35,972.9
( 41.5
)
42,538.4
–
–
42,538.4
Investments in unconsolidated affiliates
46,478.3
5,031.9
( 48,962.8
)
2,547.4
24,883.3
( 24,883.3
)
2,547.4
Intangible assets, net
627.6
2,768.8
( 17.0
)
3,379.4
–
–
3,379.4
Goodwill
459.5
5,285.7
–
5,745.2
–
–
5,745.2
Other assets
554.9
305.6
( 243.7
)
616.8
1.0
–
617.8
Total assets
$
59,184.0
$
52,958.8
$
( 50,191.7
)
$
61,951.1
$
24,884.9
$
( 24,891.5
)
$
61,944.5
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt
$
2,325.0
$
–
$
–
$
2,325.0
$
–
$
–
$
2,325.0
Accounts payable – trade
296.2
619.6
( 13.3
)
902.5
–
–
902.5
Accounts payable – related parties
709.5
192.6
( 812.8
)
89.3
8.2
( 8.2
)
89.3
Accrued product payables
1,432.3
1,372.0
( 0.8
)
2,803.5
–
–
2,803.5
Accrued interest
461.7
0.8
( 0.8
)
461.7
–
–
461.7
Derivative liabilities
368.9
37.2
( 20.7
)
385.4
–
–
385.4
Other current liabilities
152.9
454.9
( 93.0
)
514.8
–
0.2
515.0
Total current liabilities
5,746.5
2,677.1
( 941.4
)
7,482.2
8.2
( 8.0
)
7,482.4
Long-term debt
27,270.6
14.6
–
27,285.2
–
–
27,285.2
Deferred tax liabilities
26.1
452.7
( 0.6
)
478.2
–
3.4
481.6
Other long-term liabilities
381.8
618.5
( 246.4
)
753.9
–
–
753.9
Commitments and contingencies
Equity:
Partners’ and other owners’ equity
25,759.0
49,132.0
( 50,042.1
)
24,848.9
24,876.7
( 24,848.9
)
24,876.7
Noncontrolling interests
–
63.9
1,038.8
1,102.7
–
( 38.0
)
1,064.7
Total equity
25,759.0
49,195.9
( 49,003.3
)
25,951.6
24,876.7
( 24,886.9
)
25,941.4
Total liabilities and equity
$
59,184.0
$
52,958.8
$
( 50,191.7
)
$
61,951.1
$
24,884.9
$
( 24,891.5
)
$
61,944.5
40
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Balance Sheet
December 31, 2019
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
ASSETS
Current assets:
Cash and cash equivalents and restricted cash
$
109.2
$
315.8
$
( 15.1
)
$
409.9
$
0.1
$
–
$
410.0
Accounts receivable – trade, net
1,471.1
3,403.8
( 1.3
)
4,873.6
–
–
4,873.6
Accounts receivable – related parties
233.1
799.9
( 1,023.6
)
9.4
–
( 6.9
)
2.5
Inventories
1,351.3
740.4
( 0.3
)
2,091.4
–
–
2,091.4
Derivative assets
115.2
12.0
–
127.2
–
–
127.2
Prepaid and other current assets
221.0
183.5
( 46.3
)
358.2
–
–
358.2
Total current assets
3,500.9
5,455.4
( 1,086.6
)
7,869.7
0.1
( 6.9
)
7,862.9
Property, plant and equipment, net
6,413.3
35,233.6
( 43.5
)
41,603.4
–
–
41,603.4
Investments in unconsolidated affiliates
45,514.0
4,165.7
( 47,079.5
)
2,600.2
25,279.3
( 25,279.3
)
2,600.2
Intangible assets, net
636.7
2,852.3
( 40.0
)
3,449.0
–
–
3,449.0
Goodwill
459.5
5,285.7
–
5,745.2
–
–
5,745.2
Other assets
404.9
288.5
( 221.9
)
471.5
1.0
–
472.5
Total assets
$
56,929.3
$
53,281.2
$
( 48,471.5
)
$
61,739.0
$
25,280.4
$
( 25,286.2
)
$
61,733.2
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt
$
1,981.9
$
–
$
–
$
1,981.9
$
–
$
–
$
1,981.9
Accounts payable – trade
301.4
717.7
( 14.6
)
1,004.5
–
–
1,004.5
Accounts payable – related parties
977.5
222.3
( 1,037.5
)
162.3
6.9
( 6.9
)
162.3
Accrued product payables
1,895.4
3,021.9
( 1.6
)
4,915.7
–
–
4,915.7
Accrued interest
431.6
0.9
( 0.8
)
431.7
–
–
431.7
Derivative liabilities
114.2
8.2
–
122.4
–
–
122.4
Other current liabilities
120.5
438.2
( 47.3
)
511.4
–
( 0.2
)
511.2
Total current liabilities
5,822.5
4,409.2
( 1,101.8
)
9,129.9
6.9
( 7.1
)
9,129.7
Long-term debt
25,628.6
14.6
–
25,643.2
–
–
25,643.2
Deferred tax liabilities
22.2
75.6
( 0.8
)
97.0
–
3.4
100.4
Other long-term liabilities
161.2
608.9
( 247.2
)
522.9
509.5
–
1,032.4
Commitments and contingencies
Equity:
Partners’ and other owners’ equity
25,294.8
48,107.6
( 48,155.3
)
25,247.1
24,764.0
( 25,247.1
)
24,764.0
Noncontrolling interests
–
65.3
1,033.6
1,098.9
–
( 35.4
)
1,063.5
Total equity
25,294.8
48,172.9
( 47,121.7
)
26,346.0
24,764.0
( 25,282.5
)
25,827.5
Total liabilities and equity
$
56,929.3
$
53,281.2
$
( 48,471.5
)
$
61,739.0
$
25,280.4
$
( 25,286.2
)
$
61,733.2
41
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Operations
For the Three Months Ended June 30, 2020
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Revenues
$
8,817.0
$
3,835.7
$
( 6,901.7
)
$
5,751.0
$
–
$
–
$
5,751.0
Costs and expenses:
Operating costs and expenses
8,582.9
2,689.9
( 6,902.4
)
4,370.4
–
–
4,370.4
General and administrative costs
14.6
41.0
0.7
56.3
0.7
–
57.0
Total costs and expenses
8,597.5
2,730.9
( 6,901.7
)
4,426.7
0.7
–
4,427.4
Equity in income of unconsolidated affiliates
1,370.8
154.9
( 1,412.4
)
113.3
1,035.2
( 1,035.2
)
113.3
Operating income
1,590.3
1,259.7
( 1,412.4
)
1,437.6
1,034.5
( 1,035.2
)
1,436.9
Other income (expense):
Interest expense
( 320.5
)
( 2.5
)
2.8
( 320.2
)
–
–
( 320.2
)
Other, net
4.8
238.2
( 239.3
)
3.7
0.1
–
3.8
Total other expense, net
( 315.7
)
235.7
( 236.5
)
( 316.5
)
0.1
–
( 316.4
)
Income before income taxes
1,274.6
1,495.4
( 1,648.9
)
1,121.1
1,034.6
( 1,035.2
)
1,120.5
Benefit from (provision for) income taxes
( 4.2
)
( 55.3
)
–
( 59.5
)
0.1
( 0.3
)
( 59.7
)
Net income
1,270.4
1,440.1
( 1,648.9
)
1,061.6
1,034.7
( 1,035.5
)
1,060.8
Net income attributable to noncontrolling interests
–
( 1.4
)
( 26.3
)
( 27.7
)
–
1.6
( 26.1
)
Net income attributable to entity
$
1,270.4
$
1,438.7
$
( 1,675.2
)
$
1,033.9
$
1,034.7
$
( 1,033.9
)
$
1,034.7
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Operations
For the Three Months Ended June 30, 2019
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Revenues
$
7,918.3
$
5,740.0
$
( 5,382.0
)
$
8,276.3
$
–
$
–
$
8,276.3
Costs and expenses:
Operating costs and expenses
7,570.2
4,609.5
( 5,378.8
)
6,800.9
–
–
6,800.9
General and administrative costs
9.4
41.2
1.2
51.8
0.7
–
52.5
Total costs and expenses
7,579.6
4,650.7
( 5,377.6
)
6,852.7
0.7
–
6,853.4
Equity in income of unconsolidated affiliates
1,198.2
157.6
( 1,218.4
)
137.4
1,242.0
( 1,242.0
)
137.4
Operating income
1,536.9
1,246.9
( 1,222.8
)
1,561.0
1,241.3
( 1,242.0
)
1,560.3
Other income (expense):
Interest expense
( 290.4
)
( 2.5
)
2.8
( 290.1
)
–
–
( 290.1
)
Other, net
4.2
1.2
( 2.8
)
2.6
( 26.6
)
–
( 24.0
)
Total other expense, net
( 286.2
)
( 1.3
)
–
( 287.5
)
( 26.6
)
–
( 314.1
)
Income before income taxes
1,250.7
1,245.6
( 1,222.8
)
1,273.5
1,214.7
( 1,242.0
)
1,246.2
Provision for income taxes
( 5.5
)
( 3.9
)
–
( 9.4
)
–
( 0.3
)
( 9.7
)
Net income
1,245.2
1,241.7
( 1,222.8
)
1,264.1
1,214.7
( 1,242.3
)
1,236.5
Net income attributable to noncontrolling interests
–
( 1.6
)
( 21.7
)
( 23.3
)
–
1.5
( 21.8
)
Net income attributable to entity
$
1,245.2
$
1,240.1
$
( 1,244.5
)
$
1,240.8
$
1,214.7
$
( 1,240.8
)
$
1,214.7
42
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2020
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Revenues
$
18,444.0
$
8,474.1
$
( 13,684.6
)
$
13,233.5
$
–
$
–
$
13,233.5
Costs and expenses:
Operating costs and expenses
17,802.3
6,314.5
( 13,686.1
)
10,430.7
–
–
10,430.7
General and administrative costs
20.4
89.4
1.4
111.2
1.3
–
112.5
Total costs and expenses
17,822.7
6,403.9
( 13,684.7
)
10,541.9
1.3
–
10,543.2
Equity in income of unconsolidated affiliates
2,048.9
308.0
( 2,102.8
)
254.1
2,315.9
( 2,315.9
)
254.1
Operating income
2,670.2
2,378.2
( 2,102.7
)
2,945.7
2,314.6
( 2,315.9
)
2,944.4
Other income (expense):
Interest expense
( 638.2
)
( 5.1
)
5.6
( 637.7
)
–
–
( 637.7
)
Other, net
13.0
( 272.8
)
271.4
11.6
( 2.0
)
–
9.6
Total other expense, net
( 625.2
)
( 277.9
)
277.0
( 626.1
)
( 2.0
)
–
( 628.1
)
Income before income taxes
2,045.0
2,100.3
( 1,825.7
)
2,319.6
2,312.6
( 2,315.9
)
2,316.3
Benefit from (provision for) income taxes
( 8.8
)
57.0
( 0.3
)
47.9
72.2
( 0.6
)
119.5
Net income
2,036.2
2,157.3
( 1,826.0
)
2,367.5
2,384.8
( 2,316.5
)
2,435.8
Net income attributable to noncontrolling interests
–
( 2.8
)
( 51.2
)
( 54.0
)
–
3.0
( 51.0
)
Net income attributable to entity
$
2,036.2
$
2,154.5
$
( 1,877.2
)
$
2,313.5
$
2,384.8
$
( 2,313.5
)
$
2,384.8
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2019
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Revenues
$
17,396.1
$
11,379.6
$
( 11,955.9
)
$
16,819.8
$
–
$
–
$
16,819.8
Costs and expenses:
Operating costs and expenses
16,719.7
9,049.6
( 11,948.7
)
13,820.6
–
–
13,820.6
General and administrative costs
13.2
88.0
1.9
103.1
1.6
–
104.7
Total costs and expenses
16,732.9
9,137.6
( 11,946.8
)
13,923.7
1.6
–
13,925.3
Equity in income of unconsolidated affiliates
2,475.0
329.7
( 2,512.7
)
292.0
2,561.2
( 2,561.2
)
292.0
Operating income
3,138.2
2,571.7
( 2,521.8
)
3,188.1
2,559.6
( 2,561.2
)
3,186.5
Other income (expense):
Interest expense
( 567.7
)
( 5.2
)
5.6
( 567.3
)
–
–
( 567.3
)
Other, net
7.3
2.4
( 5.6
)
4.1
( 84.4
)
–
( 80.3
)
Total other expense, net
( 560.4
)
( 2.8
)
–
( 563.2
)
( 84.4
)
–
( 647.6
)
Income before income taxes
2,577.8
2,568.9
( 2,521.8
)
2,624.9
2,475.2
( 2,561.2
)
2,538.9
Provision for income taxes
( 9.7
)
( 11.7
)
–
( 21.4
)
–
( 0.6
)
( 22.0
)
Net income
2,568.1
2,557.2
( 2,521.8
)
2,603.5
2,475.2
( 2,561.8
)
2,516.9
Net income attributable to noncontrolling interests
–
( 3.4
)
( 41.1
)
( 44.5
)
–
2.8
( 41.7
)
Net income attributable to entity
$
2,568.1
$
2,553.8
$
( 2,562.9
)
$
2,559.0
$
2,475.2
$
( 2,559.0
)
$
2,475.2
43
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Comprehensive Income
For the Three Months Ended June 30, 2020
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Comprehensive income
$
1,195.0
$
1,246.1
$
( 1,648.8
)
$
792.3
$
765.3
$
( 766.2
)
$
791.4
Comprehensive income attributable to noncontrolling interests
–
( 1.4
)
( 26.3
)
( 27.7
)
–
1.6
( 26.1
)
Comprehensive income attributable to entity
$
1,195.0
$
1,244.7
$
( 1,675.1
)
$
764.6
$
765.3
$
( 764.6
)
$
765.3
Unaudited Condensed Consolidating Statement of Comprehensive Income
For the Three Months Ended June 30, 2019
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Comprehensive income
$
1,295.7
$
1,274.5
$
( 1,222.8
)
$
1,347.4
$
1,298.0
$
( 1,325.6
)
$
1,319.8
Comprehensive income attributable to noncontrolling interests
–
( 1.6
)
( 21.7
)
( 23.3
)
–
1.5
( 21.8
)
Comprehensive income attributable to entity
$
1,295.7
$
1,272.9
$
( 1,244.5
)
$
1,324.1
$
1,298.0
$
( 1,324.1
)
$
1,298.0
Unaudited Condensed Consolidating Statement of Comprehensive Income
For the Six Months Ended June 30, 2020
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Comprehensive income
$
1,684.1
$
2,291.0
$
( 1,826.0
)
$
2,149.1
$
2,166.3
$
( 2,098.1
)
$
2,217.3
Comp rehensive income attrib utable to noncontrolling interests
–
( 2.8
)
( 51.2
)
( 54.0
)
–
3.0
( 51.0
)
Comprehensive income attributable to entity
$
1,684.1
$
2,288.2
$
( 1,877.2
)
$
2,095.1
$
2,166.3
$
( 2,095.1
)
$
2,166.3
Unaudited Condensed Consolidating Statement of Comprehensive Income
For the Six Months Ended June 30, 2019
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Comprehensive income
$
2,589.9
$
2,473.8
$
( 2,521.8
)
$
2,541.9
$
2,413.6
$
( 2,500.2
)
$
2,455.3
Comprehensive income attributable to noncontrolling interests
–
( 3.4
)
( 41.1
)
( 44.5
)
–
2.8
( 41.7
)
Comprehensive income attributable to entity
$
2,589.9
$
2,470.4
$
( 2,562.9
)
$
2,497.4
$
2,413.6
$
( 2,497.4
)
$
2,413.6
44
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2020
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Operating activities:
Net income
$
2,036.2
$
2,157.3
$
( 1,826.0
)
$
2,367.5
$
2,384.8
$
( 2,316.5
)
$
2,435.8
Reconciliation of net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion
173.0
860.4
( 1.7
)
1,031.7
–
–
1,031.7
Equity in income of unconsolidated affiliates
( 2,048.9
)
( 308.0
)
2,102.8
( 254.1
)
( 2,315.9
)
2,315.9
( 254.1
)
Distributions received from unconsolidated affiliates attributable to earnings
765.5
132.3
( 640.2
)
257.6
2,159.0
( 2,159.0
)
257.6
Net effect of changes in operating accounts and other operating activities
1,704.0
( 1,604.7
)
( 307.3
)
( 208.0
)
( 69.3
)
0.1
( 277.2
)
Net cash flows provided by operating activities
2,629.8
1,237.3
( 672.4
)
3,194.7
2,158.6
( 2,159.5
)
3,193.8
Investing activities:
Capital expenditures
( 401.1
)
( 1,575.7
)
0.9
( 1,975.9
)
–
–
( 1,975.9
)
Proceeds from asset sales
0.5
3.6
–
4.1
–
–
4.1
Other investing activities
( 886.6
)
( 3.9
)
931.8
41.3
–
–
41.3
Cash used in investing activities
( 1,287.2
)
( 1,576.0
)
932.7
( 1,930.5
)
–
–
( 1,930.5
)
Financing activities:
Borrowings under debt agreements
5,411.8
–
–
5,411.8
–
–
5,411.8
Repayments of debt
( 3,406.6
)
–
–
( 3,406.6
)
–
–
( 3,406.6
)
Cash distributions paid to owners
( 2,159.0
)
( 737.4
)
761.8
( 2,134.6
)
( 1,971.3
)
2,159.0
( 1,946.9
)
Cash payments made in connection with DERs
–
–
–
–
( 12.9
)
–
( 12.9
)
Cash distributions paid to noncontrolling interests
–
( 4.2
)
( 58.1
)
( 62.3
)
–
0.5
( 61.8
)
Cash contributions from noncontrolling interests
–
–
19.7
19.7
–
–
19.7
Repurchase of common units under 2019 Buyback Program
–
–
–
–
( 140.1
)
–
( 140.1
)
Cash contributions from owners
–
966.2
( 966.2
)
–
–
–
–
Other financing activities
( 41.2
)
–
( 24.4
)
( 65.6
)
( 34.3
)
–
( 99.9
)
Cash provided by (used in) financing activities
( 195.0
)
224.6
( 267.2
)
( 237.6
)
( 2,158.6
)
2,159.5
( 236.7
)
Net change in cash and cash equivalents,
including restricted cash
1,147.6
( 114.1
)
( 6.9
)
1,026.6
–
–
1,026.6
Cash and cash equivalents, including
restricted cash, at beginning of period
109.2
315.8
( 15.1
)
409.9
0.1
–
410.0
Cash and cash equivalents, including
restricted cash, at end of period
$
1,256.8
$
201.7
$
( 22.0
)
$
1,436.5
$
0.1
$
–
$
1,436.6
45
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2019
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Operating activities:
Net income
$
2,568.1
$
2,557.2
$
( 2,521.8
)
$
2,603.5
$
2,475.2
$
( 2,561.8
)
$
2,516.9
Reconciliation of net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion
153.0
810.6
( 0.5
)
963.1
–
–
963.1
Equity in income of unconsolidated affiliates
( 2,475.0
)
( 329.7
)
2,512.7
( 292.0
)
( 2,561.2
)
2,561.2
( 292.0
)
Distributions received from unconsolidated affiliates attributable to earnings
742.1
163.8
( 614.8
)
291.1
2,021.2
( 2,021.2
)
291.1
Net effect of changes in operating accounts and other operating activities
1,246.9
( 1,718.2
)
43.9
( 427.4
)
131.9
0.1
( 295.4
)
Net cash flows provided by operating activities
2,235.1
1,483.7
( 580.5
)
3,138.3
2,067.1
( 2,021.7
)
3,183.7
Investing activities:
Capital expenditures
( 388.6
)
( 1,864.3
)
( 7.9
)
( 2,260.8
)
–
–
( 2,260.8
)
Proceeds from asset sales
0.8
15.3
–
16.1
–
–
16.1
Other investing activities
( 1,014.8
)
( 1.9
)
974.9
( 41.8
)
( 119.3
)
119.3
( 41.8
)
Cash used in investing activities
( 1,402.6
)
( 1,850.9
)
967.0
( 2,286.5
)
( 119.3
)
119.3
( 2,286.5
)
Financing activities:
Borrowings under debt agreements
40,318.1
–
–
40,318.1
–
–
40,318.1
Repayments of debt
( 39,617.2
)
( 0.1
)
–
( 39,617.3
)
–
–
( 39,617.3
)
Cash distributions paid to owners
( 2,021.2
)
( 679.8
)
679.8
( 2,021.2
)
( 1,907.9
)
2,021.2
( 1,907.9
)
Cash payments made in connection with DERs
–
–
–
–
( 10.5
)
–
( 10.5
)
Cash distributions paid to noncontrolling interests
–
( 4.9
)
( 42.5
)
( 47.4
)
–
0.5
( 46.9
)
Cash contributions from noncontrolling interests
–
–
99.6
99.6
–
–
99.6
Net cash proceeds from issuance of common units
–
–
–
–
82.2
–
82.2
Repurchase of common units under 2019 Buyback Program
–
–
–
–
( 81.1
)
–
( 81.1
)
Cash contributions from owners
119.3
1,097.0
( 1,097.0
)
119.3
–
( 119.3
)
–
Other financing activities
( 0.3
)
( 5.6
)
–
( 5.9
)
( 30.3
)
–
( 36.2
)
Cash provided by (used in) financing activities
( 1,201.3
)
406.6
( 360.1
)
( 1,154.8
)
( 1,947.6
)
1,902.4
( 1,200.0
)
Net change in cash and cash equivalents,
including restricted cash
( 368.8
)
39.4
26.4
( 303.0
)
0.2
–
( 302.8
)
Cash and cash equivalents, including
restricted cash, at beginning of period
393.4
50.3
( 33.6
)
410.1
–
–
410.1
Cash and cash equivalents, including
restricted cash, at end of period
$
24.6
$
89.7
$
( 7.2
)
$
107.1
$
0.2
$
–
$
107.3
46
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 19. Subsequent Events
Issuance of $ 1.25 Billion of Senior Notes in August 2020
In August 2020, EPO issued $ 1.0 billion in principal amount of 3.20 % senior notes due February 2052 (“Senior Notes DDD”) and $ 250.0 million in principal amount of 2.80 % reopened senior notes due January 2030 (“Senior Notes AAA”). The reopened Senior Notes AAA and the Senior Notes DDD were issued at 107.211 % and 99.233 % of their principal amounts, respectively.
We received aggregate net proceeds of $ 1.25 billion from the sale of the notes after deducting underwriting discounts and other estimated offering expenses payable by us. Net proceeds from the issuance of these senior notes will be used for general company purposes, including for growth capital investments, and to repay all or part of $ 750.0 million in principal amount of Senior Notes TT, which mature in February 2021.
The reopened Senior Notes AAA represent a re-opening of an outstanding series of EPO’s senior notes. EPO originally issued $ 1.0 billion principal amount of Senior Notes AAA on January 15, 2020. The reopened Senior Notes AAA will form a single series with the original notes of that series, will trade under the same CUSIP number, and will have the same terms as to status, redemption or otherwise as the original notes of that series.
47
Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.