Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS.
EN TERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
September 30,
2021
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents
$
2,213.5
$
1,059.9
Restricted cash
144.6
98.2
Accounts receivable – trade, net of allowance for credit losses
of $ 50.0 at September 30, 2021 and $ 46.5 at December 31, 2020
6,119.5
4,802.6
Accounts receivable – related parties
3.0
5.6
Inventories (see Note 3)
3,095.9
3,303.5
Derivative assets (see Note 13)
694.9
228.6
Prepaid and other current assets
557.0
411.0
Total current assets
12,828.4
9,909.4
Property, plant and equipment, net (see Note 4)
42,253.8
41,912.8
Investments in unconsolidated affiliates (see Note 5)
2,433.4
2,429.2
Intangible assets, net (see Note 6)
3,190.0
3,309.1
Goodwill (see Note 6)
5,448.9
5,448.9
Other assets
1,165.4
1,097.3
Total assets
$
67,319.9
$
64,106.7
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt (see Note 7)
$
1,399.3
$
1,325.0
Accounts payable – trade
708.1
704.6
Accounts payable – related parties
124.7
149.5
Accrued product payables
7,997.1
5,395.4
Accrued interest
225.2
455.6
Derivative liabilities (see Note 13)
770.1
349.2
Other current liabilities
646.2
608.7
Total current liabilities
11,870.7
8,988.0
Long-term debt (see Note 7)
28,132.8
28,540.7
Deferred tax liabilities (see Note 15)
511.3
464.7
Other long-term liabilities
771.2
686.6
Commitments and contingent liabilities (see Note 16)
Redeemable preferred limited partner interests: (see Note 8)
Series A cumulative convertible preferred units (“preferred units”)
( 50,412 units outstanding at September 30, 2021 and 50,138 units outstanding
at December 31, 2020 )
49.3
49.3
Equity: (see Note 8)
Partners’ equity:
Common limited partner interests ( 2,182,129,957 units issued and outstanding at
September 30, 2021 , 2,182,308,958 units issued and outstanding at December 31, 2020 )
26,390.3
25,766.6
Treasury units, at cost
( 1,297.3
)
( 1,297.3
)
Accumulated other comprehensive loss
( 171.8
)
( 165.2
)
Total partners’ equity
24,921.2
24,304.1
Noncontrolling interests in consolidated subsidiaries
1,063.4
1,073.3
Total equity
25,984.6
25,377.4
Total liabilities, preferred units, and equity
$
67,319.9
$
64,106.7
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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Revenues:
Third parties
$
10,800.4
$
6,914.5
$
29,382.2
$
20,126.3
Related parties
30.9
7.5
54.5
29.2
Total revenues (see Note 9)
10,831.3
6,922.0
29,436.7
20,155.5
Costs and expenses:
Operating costs and expenses:
Third party and other costs
9,068.1
5,288.2
24,063.9
15,087.4
Related parties
340.4
283.0
964.7
914.5
Total operating costs and expenses
9,408.5
5,571.2
25,028.6
16,001.9
General and administrative costs:
Third party and other costs
16.4
16.3
56.6
63.1
Related parties
30.9
34.0
98.5
99.7
Total general and administrative costs
47.3
50.3
155.1
162.8
Total costs and expenses (see Note 10)
9,455.8
5,621.5
25,183.7
16,164.7
Equity in income of unconsolidated affiliates
137.6
82.0
447.2
336.1
Operating income
1,513.1
1,382.5
4,700.2
4,326.9
Other income (expense):
Interest expense
( 315.9
)
( 320.5
)
( 954.8
)
( 958.2
)
Change in fair market value of Liquidity Option
–
–
–
( 2.3
)
Interest income
0.9
2.2
2.7
12.3
Other, net
0.1
0.7
( 0.1
)
2.5
Total other expense, net
( 314.9
)
( 317.6
)
( 952.2
)
( 945.7
)
Income before income taxes
1,198.2
1,064.9
3,748.0
3,381.2
Benefit from (provision for) income taxes (see Note 15)
( 16.1
)
19.1
( 57.3
)
138.6
Net income
1,182.1
1,084.0
3,690.7
3,519.8
Net income attributable to noncontrolling interests
( 28.3
)
( 31.4
)
( 82.3
)
( 82.4
)
Net income attributable to preferred units
( 0.8
)
–
*
( 2.7
)
–
*
Net income attributable to common unitholders
$
1,153.0
$
1,052.6
$
3,605.7
$
3,437.4
*Amount is negligible
Earnings per unit: (see Note 11)
Basic and diluted earnings per common unit
$
0.52
$
0.48
$
1.64
$
1.56
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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Net income
$
1,182.1
$
1,084.0
$
3,690.7
$
3,519.8
Other comprehensive income (loss):
Cash flow hedges: (see Note 13)
Commodity hedging derivative instruments:
Changes in fair value of cash flow hedges
( 100.6
)
( 4.2
)
( 852.2
)
392.7
Reclassificatio n of losses ( gains) to ne t income
117.1
29.5
633.8
( 334.8
)
Interest rate hedging derivative instruments:
Changes in fair value of cash flow hedges
–
62.6
182.9
( 207.7
)
Reclassification of losses to net income
10.3
9.9
29.1
29.2
Total cash flow hedges
26.8
97.8
( 6.4
)
( 120.6
)
Other
0.1
–
( 0.2
)
( 0.1
)
Total other comprehens ive income (loss)
26.9
97.8
( 6.6
)
( 120.7
)
Comprehensive income
1,209.0
1,181.8
3,684.1
3,399.1
Comprehensive income attributable to noncontrolling interests
( 28.3
)
( 31.4
)
( 82.3
)
( 82.4
)
Comprehensive income attributable to preferred units
( 0.8
)
–
*
( 2.7
)
–
*
Comprehensive income attributable to common unitholders
$
1,179.9
$
1,150.4
$
3,599.1
$
3,316.7
*Amount is negligible
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 Nine Months
Ended September 30,
2021
2020
Operating activities:
Net income
$
3,690.7
$
3,519.8
Reconciliation of net income to net cash flows provided by operating activities:
Depreciation and accretion
1,281.0
1,262.6
Amortization of intangible assets
113.3
109.3
Amortization of major maintenance costs for reaction-based plants
19.0
–
Other amortization expense
180.4
173.2
Impairment of assets other than goodwill (see Note 4)
112.9
90.4
Equity in income of unconsolidated affiliates
( 447.2
)
( 336.1
)
Distributions received from unconsolidated affiliates attributable to earnings
405.9
337.4
Net losses (gains) attributable to asset sales and related matters
8.4
( 2.1
)
Deferred income tax expense (benefit)
33.1
( 149.0
)
Change in fair market value of derivative instruments
( 86.3
)
( 53.7
)
Change in fair market value of Liquidity Option
–
2.3
Non-cash expense related to long-term operating leases (see Note 16)
29.5
29.6
Net effect of changes in operating accounts (see Note 17)
1,047.1
( 692.0
)
Other operating activities
( 0.5
)
( 0.1
)
Net cash flows provided by operating activities
6,387.3
4,291.6
Investing activities:
Capital expenditures
( 1,805.7
)
( 2,671.6
)
Investments in unconsolidated affiliates
( 1.3
)
( 9.9
)
Distributions received from unconsolidated affiliates attributable to the return of capital
41.2
124.9
Proceeds from asset sales
58.1
8.4
Other investing activities
( 13.8
)
( 16.0
)
Cash used in investing activities
( 1,721.5
)
( 2,564.2
)
Financing activities:
Borrowings under debt agreements
11,158.5
6,672.1
Repayments of debt
( 11,491.8
)
( 4,406.6
)
Debt issuance costs
( 15.1
)
( 46.3
)
Monetization of interest rate derivative instruments
75.2
( 33.3
)
Cash distributions paid to common unitholders (see Note 8)
( 2,948.5
)
( 2,919.6
)
Cash payments made in connection with distribution equivalent rights
( 23.1
)
( 20.0
)
Cash distributions paid to noncontrolling interests
( 115.1
)
( 97.8
)
Cash contributions from noncontrolling interests
23.0
21.2
Repurchase of common units under 2019 Buyback Program (see Note 8)
( 88.8
)
( 173.8
)
Net cash proceeds from the issuance of preferred units
–
32.5
Other financing activities
( 40.1
)
( 34.7
)
Cas h used in financing ac tivities
( 3,465.8
)
( 1,006.3
)
Net change in cash and cash equivalents, including restricted cash
1,200.0
721.1
Cash and cash equivalents, including restricted cash, at beginning of period
1,158.1
410.0
Cash and cash equivalents, including restricted cash, at end of period
$
2,358.1
$
1,131.1
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 NINE MONTHS ENDED SEPTEMBER 30, 2021
(Dollars in millions)
Partners’ Equity
Common
Limited
Partner
Interests
Treasury
Units
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Consolidated
Subsidiaries
Total
For the Three Months Ended September 30, 2021 :
Balance, June 30, 2021
$
26,268.8
$
( 1,297.3
)
$
( 198.7
)
$
1,074.0
$
25,846.8
Net income
1,153.0
–
–
28.3
1,181.3
Cash distributions paid to common unitholders
( 983.5
)
–
–
–
( 983.5
)
Cash payments made in connection with
distribution equivalent rights
( 7.9
)
–
–
–
( 7.9
)
Cash distributions paid to noncontrolling interests
–
–
–
( 43.7
)
( 43.7
)
Cash contributions from noncontrolling interests
–
–
–
4.9
4.9
Amortization of fair value of equity-based awards
35.1
–
–
–
35.1
Repurchase and cancellation of common units under
2019 Buyback Program (see Note 8)
( 74.9
)
–
–
–
( 74.9
)
Cash flow hedges
–
–
26.8
–
26.8
Other, net
( 0.3
)
–
0.1
( 0.1
)
( 0.3
)
Balance, September 30, 2021
$
26,390.3
$
( 1,297.3
)
$
( 171.8
)
$
1,063.4
$
25,984.6
Partners’ Equity
Common
Limited
Partner
Interests
Treasury
Units
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Consolidated
Subsidiaries
Total
For the Nine Months Ended September 30, 2021 :
Balance, December 31, 2020
$
25,766.6
$
( 1,297.3
)
$
( 165.2
)
$
1,073.3
$
25,377.4
Net income
3,605.7
–
–
82.3
3,688.0
Cash distributions paid to common unitholders
( 2,948.5
)
–
–
–
( 2,948.5
)
Cash payments made in connection with
distribution equivalent rights
( 23.1
)
–
–
–
( 23.1
)
Cash distributions paid to noncontrolling interests
–
–
–
( 115.1
)
( 115.1
)
Cash contributions from noncontrolling interests
–
–
–
23.0
23.0
Amortization of fair value of equity-based awards
114.6
–
–
–
114.6
Repurchase and cancellation of common units under
2019 Buyback Program (see Note 8)
( 88.8
)
–
–
–
( 88.8
)
Cash flow hedges
–
–
( 6.4
)
–
( 6.4
)
Other, net
( 36.2
)
–
( 0.2
)
( 0.1
)
( 36.5
)
Balance, September 30, 2021
$
26,390.3
$
( 1,297.3
)
$
( 171.8
)
$
1,063.4
$
25,984.6
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 NINE MONTHS ENDED SEPTEMBER 30, 2020
(Dollars in millions)
Partners’ Equity
Common
Limited
Partner
Interests
Treasury
Units
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Consolidated
Subsidiaries
Total
For the Three Months Ended September 30, 2020 :
Balance, June 30, 2020
$
26,321.1
$
( 1,297.3
)
$
( 147.1
)
$
1,064.7
$
25,941.4
Net income
1,052.6
–
–
31.4
1,084.0
Cash distributions paid to common unitholders
( 972.7
)
–
–
–
( 972.7
)
Cash payments made in connection with
distribution equivalent rights
( 7.1
)
–
–
–
( 7.1
)
Cash distributions paid to noncontrolling interests
–
–
–
( 36.0
)
( 36.0
)
Cash contributions from noncontrolling interests
–
–
–
1.5
1.5
Amortization of fair value of equity-based awards
39.5
–
–
–
39.5
Repurchase and cancellation of common units under
2019 Buyback Program (see Note 8)
( 33.7
)
–
–
–
( 33.7
)
Common units exchanged for preferred units, with common units received being immediately cancelled
( 17.5
)
–
–
–
( 17.5
)
Cash flow hedges
–
–
97.8
–
97.8
Other, net
( 0.3
)
–
–
7.8
7.5
Balance, September 30, 2020
$
26,381.9
$
( 1,297.3
)
$
( 49.3
)
$
1,069.4
$
26,104.7
Partners’ Equity
Common
Limited
Partner
Interests
Treasury
Units
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Consolidated
Subsidiaries
Total
For the Nine Months Ended September 30, 2020 :
Balance, December 31, 2019
$
24,692.6
$
–
$
71.4
$
1,063.5
$
25,827.5
Net income
3,437.4
–
–
82.4
3,519.8
Cash distributions paid to common unitholders
( 2,919.6
)
–
–
–
( 2,919.6
)
Cash payments made in connection with
distribution equivalent rights
( 20.0
)
–
–
–
( 20.0
)
Cash distributions paid to noncontrolling interests
–
–
–
( 97.8
)
( 97.8
)
Cash contributions from noncontrolling interests
–
–
–
21.2
21.2
Amortization of fair value of equity-based awards
120.1
–
–
–
120.1
Repurchase and cancellation of common units under
2019 Buyback Program (see Note 8)
( 173.8
)
–
–
–
( 173.8
)
Common units issued to Skyline North Americas, Inc. in
connection with settlement of Liquidity Option
1,297.3
–
–
–
1,297.3
Treasury units acquired in connection with settlement
of Liquidity Option, at cost
–
( 1,297.3
)
–
–
( 1,297.3
)
Common units exchanged for preferred units, with common units received being immediately cancelled
( 17.5
)
–
–
–
( 17.5
)
Cash flow hedges
–
–
( 120.6
)
–
( 120.6
)
Other, net
( 34.6
)
–
( 0.1
)
0.1
( 34.6
)
Balance, September 30, 2020
$
26,381.9
$
( 1,297.3
)
$
( 49.3
)
$
1,069.4
$
26,104.7
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
KEY REFERENCES USED IN THESE
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unless the context requires otherwise, references to “we,” “us” or “our” within these Notes to Unaudited Condensed Consolidated Financial Statements are intended to mean the business and operations of Enterprise Products Partners L.P. and its consolidated subsidiaries.
References to 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 the Partnership, and its consolidated subsidiaries, through which the Partnership conducts its business. We are managed by our 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) W. Randall Fowler, who is also a director and the Co-Chief Executive Officer and Chief Financial Officer of Enterprise GP. Ms. Duncan Williams and Messrs. Bachmann and Fowler also currently serve as managers of Dan Duncan LLC.
References to “EPCO” mean Enterprise Products Company, a privately held Texas corporation, and its privately held affiliates. 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) Mr. Bachmann, who serves as the President and Chief Executive Officer of EPCO; and (iii) Mr. Fowler, who serves as an Executive Vice President and the Chief Financial Officer of EPCO. Ms. Duncan Williams and Messrs. Bachmann and Fowler also currently serve as directors of EPCO.
We, Enterprise GP, EPCO and Dan Duncan LLC are affiliates under the collective common control of the DD LLC Trustees and the EPCO Trustees. EPCO, together with its privately held affiliates, owned approximately 32.2 % of the Partnership’s common units outstanding at September 30, 2021.
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.
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Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Partnership Organization and Operations
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.” Our preferred units are not publicly traded. 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 are owned by our limited partners (preferred and common unitholders) from an economic perspective. Enterprise GP, which owns a non-economic general partner interest in us, manages our Partnership. We conduct substantially all of our business operations through EPO and its consolidated subsidiaries.
Our fully integrated, midstream energy asset network (or “value chain”) links producers of natural gas, NGLs and crude oil from some of the largest supply basins in the United States (“U.S.”), Canada and the Gulf of Mexico with domestic consumers and international markets. Our midstream energy operations include:
•
natural gas gathering, treating, processing, transportation and storage;
•
NGL transportation, fractionation, storage, and marine terminals (including those used to export liquefied petroleum gases, or “LPG,” and ethane);
•
crude oil gathering, transportation, storage, and marine terminals;
•
propylene production facilities (including propane dehydrogenation (“PDH”) facilities), butane isomerization, octane enhancement, isobutane dehydrogenation (“iBDH”) and high purity isobutylene (“HPIB”) production facilities;
•
petrochemical and refined products transportation, storage, and marine terminals (including those used to export ethylene and polymer grade propylene (“PGP”)); and
•
a marine transportation business that operates on key U.S. inland and intracoastal waterway systems.
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 14 for information regarding related party matters.
Our results of operations for the nine months ended September 30, 2021 are not necessarily indicative of results expected for the full year of 2021. 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”).
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, 2020 (the “2020 Form 10-K”) filed with the SEC on March 1, 2021.
9
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Summary of Significant Accounting Policies
Apart from those matters described in this footnote, there have been no updates to our significant accounting policies since those reported under Note 2 of the 2020 Form 10-K.
Allowance for Credit Losses
We estimate our allowance for credit losses (formerly, the allowance for doubtful accounts) at each reporting date using a current expected credit loss model, which requires the measurement of expected credit losses for financial assets (e.g., accounts receivable) based on historical experience with customers, current economic conditions, and reasonable and supportable forecasts. We may also increase the allowance for credit losses in response to the specific identification of customers involved in bankruptcy proceedings and similar financial difficulties.
The following table presents our allowance for credit losses activity since December 31, 2020:
Allowance for credit losses, December 31, 2020
$
46.5
Charged to costs and expenses
2.5
Charged to other accounts
4.4
Deductions
( 3.4
)
Allowance for credit losses, September 30, 2021
$
50.0
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.
September 30,
2021
December 31,
2020
Cash and cash equivalents
$
2,213.5
$
1,059.9
Restricted cash
144.6
98.2
Total cash, cash equivalents and restricted cash shown in the
Unaudited Condensed Statements of Consolidated Cash Flows
$
2,358.1
$
1,158.1
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 13 for information regarding our derivative instruments and hedging activities.
Note 3. Inventories
Our inventory amounts by product type were as follows at the dates indicated:
September 30,
2021
December 31,
2020
NGLs
$
2,500.8
$
1,888.1
Petrochemicals and refined products
368.9
642.6
Crude oil
201.3
758.1
Natural gas
24.9
14.7
Total
$
3,095.9
$
3,303.5
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Cost of sales (1)
$
8,112.8
$
4,313.7
$
21,215.8
$
12,331.9
Lower of cost or net realizable value adjustments
recognized in cost of sales
1.3
4.4
14.2
55.6
(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.
Note 4. Property, Plant and Equipment
The historical costs of our property, plant and equipment and related balances were as follows at the dates indicated:
Estimated
Useful Life
in Years
September 30,
2021
December 31,
2020
Plants, pipelines and facilities (1)
3 - 45
(5)
$
50,766.1
$
49,972.8
Underground and other storage facilities (2)
5 - 40
(6)
4,281.2
4,207.5
Transportation equipment (3)
3 - 10
208.2
204.9
Marine vessels (4)
15 - 30
941.8
932.7
Land
383.0
371.9
Construction in progress
2,182.6
1,807.7
Subtotal
58,762.9
57,497.5
Less accumulated depreciation
16,593.1
15,584.7
Subtotal property, plant and equipment, net
42,169.8
41,912.8
Capitalized major maintenance costs for reaction-based
plants, net of accumulated amortization (7)
84.0
–
Property, plant and equipment, net
$
42,253.8
$
41,912.8
(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.
(7)
For reaction-based plants, we use the deferral method when accounting for major maintenance activities. Under the deferral method, major maintenance costs are capitalized and amortized over the period until the next major overhaul project. On a weighted-average basis, the expected amortization period for these costs is 2.6 years.
Property, plant and equipment at September 30, 2021 and December 31, 2020 includes $ 79.1 million and $ 69.7 million, respectively, of asset retirement costs capitalized as an increase in the associated long-lived asset.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents information regarding our asset retirement obligations, or AROs, since December 31, 2020:
ARO liability balance, December 31, 2020
$
149.5
Liabilities incurred (1)
6.5
Revisions in estimated cash flows (2)
3.9
Liabilities settled (3)
( 0.7
)
Accretion expense (4)
8.0
ARO liability balance, September 30, 2021
$
167.2
(1)
Represents the initial recognition of estimated ARO liabilities during period.
(2)
Represents subsequent adjustments to estimated ARO liabilities during period.
(3)
Represents cash payments to settle ARO liabilities during period.
(4)
Represents net change in ARO liability balance attributable to the passage of time and other adjustments, including true-up amounts associated with revised closure estimates.
Of the $ 167.2 million total ARO liability recorded at September 30, 2021 , $ 12.9 million was reflected as a current liability and $ 154.3 million as a long-term liability.
The following table summarizes our depreciation and accretion expense and capitalized interest amounts for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Depreciation expense (1)
$
425.3
$
420.7
$
1,273.0
$
1,251.6
Accretion expense (1)
4.2
0.8
8.0
11.0
Capitalized interest (2)
23.0
34.5
63.8
96.9
(1)
Depreciation and accretion expense is a component of “Third party and other costs” within “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 impairment charges
In March 2021, we entered into agreements to sell a coal bed natural gas gathering system and related Val Verde treating facility, both of which were components of our San Juan Gathering System, to a third party for $ 39.1 million in cash. The transaction closed and was effective on April 1, 2021. We recognized an impairment charge of $ 44.3 million attributable to this transaction, which reflects the write down of $ 37.5 million of property, plant and equipment and $ 6.8 million of intangible assets (see Note 6) to their respective fair values. The remainder of our impairment charges for the nine month periods ended September 30, 2021 and 2020 are attributable to the complete write-off of assets that are no longer expected to be used or constructed.
Asset impairment charges related to operations are a component of “Third party and other costs” within “Operating costs and expenses” as presented on our Unaudited Condensed Statements of Consolidated Operations.
We are closely monitoring the recoverability of our long-lived assets, investments in unconsolidated affiliates and goodwill in light of the adverse economic effects of the coronavirus disease 2019 (“COVID-19”) pandemic. If the adverse economic impacts of the pandemic persist for longer periods than currently expected, these developments could result in the recognition of non-cash impairment charges in the future.
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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.
September 30,
2021
December 31,
2020
NGL Pipelines & Services
$
656.4
$
671.6
Crude Oil Pipelines & Services
1,742.1
1,723.7
Natural Gas Pipelines & Services
32.1
31.4
Petrochemical & Refined Products Services
2.8
2.5
Total
$
2,433.4
$
2,429.2
The following table presents our equity in income (loss) of unconsolidated affiliates by business segment for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
NGL Pipelines & Services
$
30.5
$
29.3
$
87.5
$
90.8
Crude Oil Pipelines & Services
105.2
51.8
354.2
243.2
Natural Gas Pipelines & Services
1.4
1.4
4.3
4.3
Petrochemical & Refined Products Services
0.5
( 0.5
)
1.2
( 2.2
)
Total
$
137.6
$
82.0
$
447.2
$
336.1
Note 6. Intangible Assets and Goodwill
Identifiable Intangible Assets
The following table summarizes our intangible assets by business segment at the dates indicated:
September 30, 2021
December 31, 2020
Gross
Value
Accumulated
Amortization
Carrying
Value
Gross
Value
Accumulated
Amortization
Carrying
Value
NGL Pipelines & Services:
Customer relationship intangibles
$
447.8
$
( 231.3
)
$
216.5
$
447.8
$
( 221.3
)
$
226.5
Contract-based intangibles
166.0
( 59.3
)
106.7
162.6
( 55.0
)
107.6
Segment total
613.8
( 290.6
)
323.2
610.4
( 276.3
)
334.1
Crude Oil Pipelines & Services:
Customer relationship intangibles
2,195.0
( 339.2
)
1,855.8
2,195.0
( 291.6
)
1,903.4
Contract-based intangibles
283.1
( 259.5
)
23.6
283.1
( 249.9
)
33.2
Segment total
2,478.1
( 598.7
)
1,879.4
2,478.1
( 541.5
)
1,936.6
Natural Gas Pipelines & Services:
Customer relationship intangibles
1,350.3
( 541.1
)
809.2
1,350.3
( 512.2
)
838.1
Contract-based intangibles
231.1
( 181.2
)
49.9
470.7
( 403.8
)
66.9
Segment total
1,581.4
( 722.3
)
859.1
1,821.0
( 916.0
)
905.0
Petrochemical & Refined Products Services:
Customer relationship intangibles
181.4
( 72.4
)
109.0
181.4
( 68.3
)
113.1
Contract-based intangibles
44.9
( 25.6
)
19.3
44.9
( 24.6
)
20.3
Segment total
226.3
( 98.0
)
128.3
226.3
( 92.9
)
133.4
Total intangible assets
$
4,899.6
$
( 1,709.6
)
$
3,190.0
$
5,135.8
$
( 1,826.7
)
$
3,309.1
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the amortization expense of our intangible assets by business segment for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
NGL Pipelines & Services
$
6.2
$
6.2
$
18.3
$
19.0
Crude Oil Pipelines & Services
20.3
16.0
57.2
55.7
Natural Gas Pipelines & Services
11.5
9.0
32.7
28.8
Petrochemical & Refined Products Services
1.7
1.9
5.1
5.8
Total
$
39.7
$
33.1
$
113.3
$
109.3
The following table presents our forecast of amortization expense associated with existing intangible assets for the periods indicated:
Remainder
of 2021
2022
2023
2024
2025
$
37.4
$
169.6
$
173.8
$
177.9
$
174.4
Impairment of Intangible Asset
In March 2021, we recognized an impairment charge of $ 6.8 million for the write down of contract-based intangible assets associated with the sale of a portion of our San Juan Gathering System (see Note 4). The contract-based intangible assets were classified within our Natural Gas Pipelines & Services business segment.
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 2020 Form 10-K. We are closely monitoring the recoverability of our long-lived assets, which include goodwill, in light of the COVID-19 pandemic.
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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:
September 30,
2021
December 31,
2020
EPO senior debt obligations:
Commercial Paper Notes, variable-rates
$
–
$
–
Senior Notes TT, 2.80 % fixed-rate, due February 2021
–
750.0
Senior Notes RR, 2.85 % fixed-rate, due April 2021
–
575.0
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
September 2021 364-Day Revolving Credit Agreement, variable-rate, due September 2022
–
–
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
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
September 2021 Multi-Year Revolving Credit Agreement, variable-rate, due September 2026
–
–
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
1,250.0
1,250.0
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
1,000.0
Senior Notes DDD, 3.20 % fixed-rate, due February 2052
1,000.0
1,000.0
Senior Notes EEE, 3.30 % fixed-rate, due February 2053
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
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
27,175.0
27,500.0
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
29,821.4
30,146.4
Other, non-principal amounts
( 289.3
)
( 280.7
)
Less current maturities of debt
( 1,399.3
)
( 1,325.0
)
Total long-term debt
$
28,132.8
$
28,540.7
(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.
15
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Variable Interest Rates
The following table presents the range of interest rates and weighted-average interest rates paid on our consolidated variable-rate debt during the nine months ended September 30, 2021:
Range of Interest
Rates Paid
Weighted-Average
Interest Rate Paid
Commercial Paper Notes
0.15 % to 0.25 %
0.21 %
EPO Junior Subordinated Notes C and TEPPCO Junior Subordinated Notes
2.90 % to 3.00 %
2.95 %
Amounts borrowed under EPO’s September 2021 364-Day Revolving Credit Agreement and September 2021 Multi-Year Revolving Credit Agreement bear interest, at its election, equal to: (i) LIBOR, plus an additional variable spread; or (ii) an alternate base rate, which is the greatest 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) LIBOR for an interest period of one month in effect on such day plus 1%, and a variable spread. The applicable spreads are determined based on EPO's debt ratings.
In July 2017, the Financial Conduct Authority in the U.K. announced a desire to phase out LIBOR as a benchmark by the end of June 2023. Financial industry working groups are developing replacement rates and methodologies to transition existing agreements that depend on LIBOR as a reference rate. We currently do not expect the transition from LIBOR to have a material financial impact on us.
Scheduled Maturities of Debt
The following table presents the scheduled maturities of principal amounts of EPO’s consolidated debt obligations at September 30, 2021 for the next five years, and in total thereafter:
Scheduled Maturities of Debt
Total
Remainder
of 2021
2022
2023
2024
2025
Thereafter
Senior Notes
$
27,175.0
$
–
$
1,400.0
$
1,250.0
$
850.0
$
1,150.0
$
22,525.0
Junior Subordinated Notes
2,646.4
–
–
–
–
–
2,646.4
Total
$
29,821.4
$
–
$
1,400.0
$
1,250.0
$
850.0
$
1,150.0
$
25,171.4
In February 2021, EPO repaid all of the $ 750.0 million in principal amount of its Senior Notes TT using remaining cash on hand attributable to its August 2020 senior notes offering and proceeds from the issuance of short-term notes under its commercial paper program.
In March 2021, EPO redeemed all of the $ 575.0 million outstanding principal amount of its Senior Notes RR one month prior to their scheduled maturity in April 2021. These notes were redeemed at par (i.e., at a redemption price equal to the outstanding principal amount of such notes to be redeemed, plus accrued and unpaid interest thereon) using proceeds from the issuance of short-term notes under its commercial paper program.
September 2021 364-Day Revolving Credit Agreement
In September 2021, EPO entered into a new 364-Day Revolving Credit Agreement (the “September 2021 364-Day Revolving Credit Agreement”) that replaced its September 2020 364-Day Revolving Credit Agreement. There were no principal amounts outstanding under the September 2020 364-Day Revolving Credit Agreement when it was replaced by the September 2021 364-Day Revolving Credit Agreement. At September 30, 2021, there were no principal amounts outstanding under the September 2021 364-Day Revolving Credit Agreement.
Under the terms of the September 2021 364-Day Revolving Credit Agreement, EPO may borrow up to $ 1.5 billion (which may be increased by up to $ 200.0 million to $ 1.7 billion at EPO’s election, provided certain conditions are met) at a variable interest rate for a term of up to 364 days, subject to the terms and conditions set forth therein. The September 2021 364-Day Revolving Credit Agreement matures in September 2022. To the extent that principal amounts are outstanding at the maturity date, EPO may elect to have the entire principal balance then outstanding continued as non-revolving term loans for a period of one additional year, payable in September 2023. Borrowings under the September 2021 364-Day Revolving Credit Agreement may be used for working capital, capital expenditures, acquisitions and general company purposes.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The September 2021 364-Day Revolving Credit Agreement contains customary representations, warranties, covenants (affirmative and negative) and events of default, the occurrence of which would permit the lenders to accelerate the maturity date of any amounts borrowed under this credit agreement. The September 2021 364-Day Revolving Credit Agreement also restricts EPO’s ability to pay cash distributions to the Partnership, if an event of default (as defined in the credit agreement) has occurred and is continuing at the time such distribution is scheduled to be paid or would result therefrom.
EPO’s obligations under the September 2021 364-Day Revolving Credit Agreement are not secured by any collateral; however, they are guaranteed by the Partnership.
September 2021 Multi-Year Revolving Credit Agreement
In September 2021, EPO entered into a new revolving credit agreement that matures in September 2026 (the “September 2021 Multi-Year Revolving Credit Agreement”). The September 2021 Multi-Year Revolving Credit Agreement replaced EPO’s prior multi-year revolving credit agreement that was scheduled to mature in September 2024. There were no principal amounts outstanding under the prior multi-year revolving credit agreement when it was replaced by the September 2021 Multi Year Revolving Credit Agreement. At September 30, 2021, there were no principal amounts outstanding under the September 2021 Multi-Year Revolving Credit Agreement.
Under the terms of the September 2021 Multi-Year Revolving Credit Agreement, EPO may borrow up to $ 3.0 billion (which may be increased by up to $ 500.0 million to $ 3.5 billion at EPO’s election, provided certain conditions are met) at a variable interest rate for a term of five years, subject to the terms and conditions set forth therein. Borrowings under the September 2021 Multi-Year Revolving Credit Agreement may be used as a backstop for commercial paper and for working capital, capital expenditures, acquisitions and general company purposes.
The September 2021 Multi-Year Revolving Credit Agreement contains customary representations, warranties, covenants (affirmative and negative) and events of default, the occurrence of which would permit the lenders to accelerate the maturity date of any amounts borrowed under this credit agreement. The September 2021 Multi-Year Revolving Credit Agreement also restricts EPO’s ability to pay cash distributions to the Partnership, if an event of default (as defined in the credit agreement) has occurred and is continuing at the time such distribution is scheduled to be paid or would result therefrom.
EPO’s obligations under the September 2021 Multi-Year Revolving Credit Agreement are not secured by any collateral; however, they are guaranteed by the Partnership.
September 2021 Senior Notes Offering
In September 2021, EPO issued $ 1.0 billion in principal amount of senior notes due February 2053 (“Senior Notes EEE”). Senior Notes EEE were issued at 99.170 % of their principal amount and have a fixed rate of interest of 3.30 % per year.
Net proceeds from the issuance of these senior notes will be used for general company purposes, including for growth capital investments, and the repayment of debt (including the repayment of a portion of our $ 750.0 million in principal amount of 3.50 % Senior Notes VV and/or a portion of our $ 650.0 million in principal amount of 4.05 % Senior Notes CC, in each case at their maturity in February 2022).
EPO’s fixed-rate senior notes are unsecured obligations of EPO that rank equal with its existing and future unsecured and unsubordinated indebtedness. They are senior to any existing and future subordinated indebtedness of EPO. EPO’s senior notes are subject to make-whole redemption rights and were issued under indentures containing certain covenants, which generally restrict its ability (with certain exceptions) to incur debt secured by liens and engage in sale and leaseback transactions.
Letters of Credit
At September 30, 2021, EPO had $ 88.0 million of letters of credit outstanding primarily related to our commodity hedging activities.
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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 September 30, 2021.
Parent-Subsidiary Guarantor Relationships
The Partnership 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, the Partnership would be responsible for full and unconditional repayment of such obligations.
Note 8. Capital Accounts
Common Limited Partner Interests
The following table summarizes changes in the number of our common units outstanding since December 31, 2020:
Common units outstanding at December 31, 2020
2,182,308,958
Common unit repurchases under 2019 Buyback Program
( 709,816
)
Common units issued in connection with the vesting of phantom unit awards, net
3,553,313
Other
26,148
Common units outstanding at March 31, 2021
2,185,178,603
Common units issued in connection with the vesting of phantom unit awards, net
203,066
Common units outstanding at June 30, 2021
2,185,381,669
Common unit repurchases under 2019 Buyback Program
( 3,367,377
)
Common units issued in connection with the vesting of phantom unit awards, net
115,665
Common units outstanding at September 30, 2021
2,182,129,957
Registration Statements
We have a universal shelf registration statement (the “2019 Shelf”) on file with the SEC which allows the Partnership and EPO (each on a standalone basis) to issue an unlimited amount of equity and debt securities, respectively.
In addition, the Partnership 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 based on market conditions and other factors at the time of such offerings (referred to as the Partnership’s at-the-market (“ATM”) program). The Partnership did not issue any common units under its ATM program during the nine months ended September 30, 2021. The Partnership’s capacity to issue additional common units under the ATM program remains at $ 2.54 billion as of September 30, 2021.
We may issue additional equity and debt securities to assist us in meeting our future liquidity requirements, including those related to capital investments.
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 the Partnership with an additional method to return capital to investors. The 2019 Buyback Program authorizes the Partnership to repurchase its common units from time to time, including through open market purchases and negotiated transactions. No time limit has been set for completion of the program, and it may be suspended or discontinued at any time.
The Partnership repurchased an aggregate 3,367,377 and 4,077,193 common units through open market purchases during the three and nine months ended September 30, 2021, respectively . The total cost of these repurchases, including commissions and fees, was $ 74.9 million and $ 88.8 million , respectively . During the three and nine months ended September 30, 2020 , the Partnership repurchased 1,984,507 and 8,342,246 common units, respectively, under the 2019 Buyback Program. The total cost of these repurchases, including commissions and fees, was $ 33.7 million and $ 173.8 million, respectively. Units repurchased under the 2019 Buyback Program are immediately cancelled upon acquisition. At September 30, 2021, the remaining available capacity under the 2019 Buyback Program was $ 1.64 billion.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Common Units Issued in Connection With the Vesting of Phantom Unit Awards
After taking into account tax withholding requirements, the Partnership issued 3,872,044 new common units to employees in connection with the vesting of phantom unit awards during the nine months ended September 30, 2021. See Note 12 for information regarding our phantom unit awards.
Common Units Delivered Under DRIP and EUPP
The Partnership 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, the Partnership 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 nine months ended September 30, 2021 , agents of the Partnership purchased 4,754,016 common units on the open market and delivered them to participants in the DRIP and EUPP. Apart from $ 2.9 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 November 12, 2021.
Preferred Units
The following table summarizes changes in the number of our Series A Cumulative Convertible Preferred Units (“preferred units”) outstanding since December 31, 2020:
Preferred units outstanding at December 31, 2020
50,138
Paid in-kind distribution to related party
274
Preferred units outstanding at March 31, 2021, June 30, 2021 and September 30, 2021
50,412
We present the capital accounts attributable to our preferred unitholders as mezzanine equity on our consolidated balance sheets since the terms of the preferred units allow for cash redemption by such unitholders in the event of a Change of Control (as defined in our partnership agreement), without regard to the likelihood of such an event.
During the nine months ended September 30, 2021, the Partnership made quarterly distributions to its third party and related party preferred unitholders valued at $ 2.8 million, consisting of paid-in-kind distributions of 274 new preferred units and $ 2.5 million of cash.
In March 2021, a privately held affiliate of EPCO sold its entire ownership interest in the Partnership’s preferred units to third parties.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 (Loss), December 31, 2020
$
( 93.2
)
$
( 74.3
)
$
2.3
$
( 165.2
)
Other comprehensive income (loss) for period, before reclassifications
( 852.2
)
182.9
( 0.3
)
( 669.6
)
Reclassification of losses to net income during period
633.8
29.1
0.1
663.0
Total other comprehensive income (loss) for period
( 218.4
)
212.0
( 0.2
)
( 6.6
)
Accumulated Other Comprehensive Income (Loss), September 30, 2021
$
( 311.6
)
$
137.7
$
2.1
$
( 171.8
)
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
392.7
( 207.7
)
( 0.1
)
184.9
Reclassification of losses (gains) to net income during period
( 334.8
)
29.2
–
( 305.6
)
Total other comprehensive income (loss) for period
57.9
( 178.5
)
( 0.1
)
( 120.7
)
Accumulated Other Comprehensive Income (Loss), September 30, 2020
$
113.0
$
( 164.6
)
$
2.3
$
( 49.3
)
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 September 30,
For the Nine Months
Ended September 30,
Losses (gains) on cash flow hedges:
Location
2021
2020
2021
2020
Interest rate derivatives
Interest expense
$
10.3
$
9.9
$
29.1
$
29.2
Commodity derivatives
Revenue
116.8
19.5
614.9
( 344.7
)
Commodity derivatives
Operating costs and expenses
0.3
10.0
18.9
9.9
Total
$
127.4
$
39.4
$
662.9
$
( 305.6
)
For information regarding our interest rate and commodity derivative instruments, see Note 13.
Cash Distributions
On October 12, 2021, we announced that the Board declared a quarterly cash distribution of $ 0.45 per common unit, or $ 1.80 per common unit on an annualized basis, to be paid to the Partnership’s common unitholders with respect to the third quarter of 2021. The quarterly distribution is payable on November 12, 2021 to unitholders of record as of the close of business on October 29, 2021. The total amount to be paid is $ 989.7 million, which includes $ 7.8 million for distribution equivalent rights (“DERs”) on phantom unit awards.
The payment of quarterly cash distributions is subject to management’s evaluation of our financial condition, results of operations and cash flows in connection with such payments and Board approval. In light of current economic conditions, management will evaluate any future increases in cash distributions on a quarterly basis.
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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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
NGL Pipelines & Services:
Sales of NGLs and related products
$
3,169.6
$
2,048.4
$
9,151.0
$
6,401.7
Segment midstream services:
Natural gas processing and fractionation
253.6
205.4
688.5
575.8
Transportation
235.0
254.7
745.1
769.6
Storage and terminals
158.4
105.5
402.6
311.3
Total segment midstream services
647.0
565.6
1,836.2
1,656.7
Total NGL Pipelines & Services
3,816.6
2,614.0
10,987.2
8,058.4
Crude Oil Pipelines & Services:
Sales of crude oil
2,890.0
1,216.1
6,868.2
4,059.7
Segment midstream services:
Transportation
232.9
189.3
691.4
603.5
Storage and terminals
111.7
116.2
344.0
360.5
Total segment midstream services
344.6
305.5
1,035.4
964.0
Total Crude Oil Pipelines & Services
3,234.6
1,521.6
7,903.6
5,023.7
Natural Gas Pipelines & Services:
Sales of natural gas
732.2
350.7
2,543.1
1,097.6
Segment midstream services:
Transportation
247.7
256.2
732.7
765.1
Total segment midstream services
247.7
256.2
732.7
765.1
Total Natural Gas Pipelines & Services
979.9
606.9
3,275.8
1,862.7
Petrochemical & Refined Products Services:
Sales of petrochemicals and refined products
2,537.8
1,966.2
6,523.6
4,593.7
Segment midstream services:
Fractionation and isomerization
81.0
54.6
214.6
129.0
Transportation, including marine logistics
116.2
115.2
357.1
365.5
Storage and terminals
65.2
43.5
174.8
122.5
Total segment midstream services
262.4
213.3
746.5
617.0
Total Petrochemical & Refined Products Services
2,800.2
2,179.5
7,270.1
5,210.7
Total consolidated revenues
$
10,831.3
$
6,922.0
$
29,436.7
$
20,155.5
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 September 30, 2021:
Contract Asset
Location
Balance
Unbilled revenue (current amount)
Prepaid and other current assets
$
164.9
Total
$
164.9
Contract Liability
Location
Balance
Deferred revenue (current amount)
Other current liabilities
$
164.9
Deferred revenue (noncurrent)
Other long-term liabilities
238.5
Total
$
403.4
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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 for the nine months ended September 30, 2021:
Unbilled
Revenue
Deferred
Revenue
Balance at December 31, 2020
$
18.8
$
343.5
Amount included in opening balance transferred to other accounts during period (1)
( 18.8
)
( 134.4
)
Amount recorded during period (2)
199.9
686.6
Amounts recorded during period transferred to other accounts (1)
( 35.0
)
( 481.4
)
Other changes
–
( 10.9
)
Balance at September 30, 2021
$
164.9
$
403.4
(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.
(2)
Unbilled revenue represents revenue that has been recognized upon satisfaction of a performance obligation, but cannot be contractually invoiced (or billed) to the customer at the balance sheet date until a future period. Deferred revenue is recorded when payment is received from a customer prior to our satisfaction of the associated performance obligation.
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 September 30, 2021.
Period
Fixed
Consideration
Three Months Ended December 31, 2021
$
1,003.5
One Year Ended December 31, 2022
3,589.2
One Year Ended December 31, 2023
3,025.5
One Year Ended December 31, 2024
2,830.8
One Year Ended December 31, 2025
2,476.9
Thereafter
11,113.3
Total
$
24,039.2
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. Our business segments are generally organized and managed according to the types of services rendered (or technologies employed) and products produced and/or sold.
Financial information regarding these segments is evaluated regularly by our co-chief operating decision makers in deciding how to allocate resources and in assessing our operating and financial performance. The co-principal executive officers of our general partner have been identified as our co-chief operating decision makers. While these two officers evaluate results in a number of different ways, the business segment structure is the primary basis for which the allocation of resources and financial results are assessed.
The following information summarizes the assets and operations of each business segment:
•
Our NGL Pipelines & Services business segment includes our natural gas processing and related NGL marketing activities, NGL pipelines, NGL fractionation facilities, NGL and related product storage facilities, and NGL marine terminals .
•
Our Crude Oil Pipelines & Services business segment includes our crude oil pipelines, crude oil storage and marine terminals, and related crude oil marketing activities.
•
Our Natural Gas Pipelines & Services business segment includes our natural gas pipeline systems that provide for the gathering, treating and transportation of natural gas. This segment also includes our natural gas marketing activities.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
•
Our Petrochemical & Refined Products Services business segment includes our (i) propylene production facilities, which include propylene fractionation units and a PDH facility, and related pipelines and marketing activities, (ii) butane isomerization complex and related deisobutanizer operations, (iii) octane enhancement, iBDH and HPIB production facilities, (iv) refined products pipelines, terminals and related marketing activities, (v) ethylene export terminal and related operations; and (vi) marine transportation business .
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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Operating income
$
1,513.1
$
1,382.5
$
4,700.2
$
4,326.9
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 (1)
502.7
484.2
1,497.9
1,461.3
Asset impairment charges in operating costs and expenses
29.3
77.0
112.7
90.4
Net losses (gains) attributable to asset sales and related matters in operating costs
and expenses
( 2.2
)
( 0.6
)
9.0
( 2.1
)
General and administrative costs
47.3
50.3
155.1
162.8
Non-refundable payments received from shippers attributable to make-up rights (2)
25.4
49.3
67.0
79.1
Subsequent recognition of revenues attributable to make-up rights (3)
( 35.2
)
( 9.4
)
( 113.4
)
( 25.0
)
Total segment gross operating margin
$
2,080.4
$
2,033.3
$
6,428.5
$
6,093.4
(1)
Excludes amortization of major maintenance costs for reaction-based plants, which are a component of gross operating margin.
(2)
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.
(3)
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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Gross operating margin by segment:
NGL Pipelines & Services
$
1,022.9
$
1,028.1
$
3,206.9
$
3,038.2
Crude Oil Pipelines & Services
422.9
481.8
1,242.0
1,569.1
Natural Gas Pipelines & Services
223.3
208.4
960.5
701.1
Petrochemical & Refined Products Services
411.3
315.0
1,019.1
785.0
Total segment gross operating margin
$
2,080.4
$
2,033.3
$
6,428.5
$
6,093.4
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Summarized Segment Financial Information
Information by business segment, together with reconciliations to amounts presented on, or included in, 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 September 30, 2021
$
3,814.5
$
3,210.0
$
975.7
$
2,800.2
$
–
$
10,800.4
Three months ended September 30, 2020
2,612.4
1,518.0
604.6
2,179.5
–
6,914.5
Nine months ended September 30, 2021
10,979.6
7,867.3
3,265.2
7,270.1
–
29,382.2
Nine months ended September 30, 2020
8,053.4
5,007.0
1,855.2
5,210.7
–
20,126.3
Revenues from related parties:
Three months ended September 30, 2021
2.1
24.6
4.2
–
–
30.9
Three months ended September 30, 2020
1.6
3.6
2.3
–
–
7.5
Nine months ended September 30, 2021
7.6
36.3
10.6
–
–
54.5
Nine months ended September 30, 2020
5.0
16.7
7.5
–
–
29.2
Intersegment and intrasegment revenues:
Three months ended September 30, 2021
13,753.5
6,611.2
145.9
6,149.9
( 26,660.5
)
–
Three months ended September 30, 2020
7,098.2
6,422.5
117.0
1,297.8
( 14,935.5
)
–
Nine months ended September 30, 2021
37,140.3
21,907.8
441.0
18,979.7
( 78,468.8
)
–
Nine months ended September 30, 2020
18,826.6
18,302.7
325.0
2,815.6
( 40,269.9
)
–
Total revenues:
Three months ended September 30, 2021
17,570.1
9,845.8
1,125.8
8,950.1
( 26,660.5
)
10,831.3
Three months ended September 30, 2020
9,712.2
7,944.1
723.9
3,477.3
( 14,935.5
)
6,922.0
Nine months ended September 30, 2021
48,127.5
29,811.4
3,716.8
26,249.8
( 78,468.8
)
29,436.7
Nine months ended September 30, 2020
26,885.0
23,326.4
2,187.7
8,026.3
( 40,269.9
)
20,155.5
Equity in income (loss) of unconsolidated affiliates:
Three months ended September 30, 2021
30.5
105.2
1.4
0.5
–
137.6
Three months ended September 30, 2020
29.3
51.8
1.4
( 0.5
)
–
82.0
Nine months ended September 30, 2021
87.5
354.2
4.3
1.2
–
447.2
Nine months ended September 30, 2020
90.8
243.2
4.3
( 2.2
)
–
336.1
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.
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 September 30, 2021
$
17,330.0
$
6,927.3
$
8,280.3
$
7,533.6
$
2,182.6
$
42,253.8
At December 31, 2020
17,128.3
6,982.6
8,465.8
7,528.4
1,807.7
41,912.8
Investments in unconsolidated affiliates:
(see Note 5)
At September 30, 2021
656.4
1,742.1
32.1
2.8
–
2,433.4
At December 31, 2020
671.6
1,723.7
31.4
2.5
–
2,429.2
Intangible assets, net: (see Note 6)
At September 30, 2021
323.2
1,879.4
859.1
128.3
–
3,190.0
At December 31, 2020
334.1
1,936.6
905.0
133.4
–
3,309.1
Goodwill: (see Note 6)
At September 30, 2021
2,651.7
1,841.0
–
956.2
–
5,448.9
At December 31, 2020
2,651.7
1,841.0
–
956.2
–
5,448.9
Segment assets:
At September 30, 2021
20,961.3
12,389.8
9,171.5
8,620.9
2,182.6
53,326.1
At December 31, 2020
20,785.7
12,483.9
9,402.2
8,620.5
1,807.7
53,100.0
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Consolidated revenues:
NGL Pipelines & Services
$
3,816.6
$
2,614.0
$
10,987.2
$
8,058.4
Crude Oil Pipelines & Services
3,234.6
1,521.6
7,903.6
5,023.7
Natural Gas Pipelines & Services
979.9
606.9
3,275.8
1,862.7
Petrochemical & Refined Products Services
2,800.2
2,179.5
7,270.1
5,210.7
Total consolidated revenues
$
10,831.3
$
6,922.0
$
29,436.7
$
20,155.5
Consolidated costs and expenses
Operating costs and expenses:
Cost of sales
$
8,112.8
$
4,313.7
$
21,215.8
$
12,331.9
Other operating costs and expenses (1)
757.3
696.9
2,174.2
2,120.4
Depreciation, amortization and accretion
511.3
484.2
1,516.9
1,461.3
Asset impairment charges
29.3
77.0
112.7
90.4
Ne t losses (gains) attributable to asset sales and related matters
( 2.2
)
( 0.6
)
9.0
( 2.1
)
General and administrative costs
47.3
50.3
155.1
162.8
Total consolidated costs and expenses
$
9,455.8
$
5,621.5
$
25,183.7
$
16,164.7
(1)
Represents the cost of operating our plants, pipelines and other fixed assets excluding: depreciation, amortization and accretion charges; asset impairment charges; and net losses (or gains) attributable to asset sales and related matters.
Fluctuations in our product sales revenues and cost of sales amounts are explained in large part by changes in energy commodity prices. In general, higher energy commodity prices result in an increase in our revenues attributable to product sales; however, these higher commodity prices would also be expected to increase the associated cost of sales as purchase costs are higher. The same type of relationship would be true in the case of lower energy commodity sales prices and purchase costs.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Earnings Per Unit
The following table presents our calculation of basic and diluted earnings per common unit for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
BASIC EARNINGS PER COMMON UNIT
Net income attributable to common unitholders
$
1,153.0
$
1,052.6
$
3,605.7
$
3,437.4
Earnings allocated to phantom unit awards (1)
( 9.1
)
( 7.5
)
( 29.0
)
( 24.9
)
Net income allocated to common unitholders
$
1,143.9
$
1,045.1
$
3,576.7
$
3,412.5
Basic weighted-average number of common units outstanding
2,184.0
2,185.5
2,184.2
2,186.7
Basic earnings per common unit
$
0.52
$
0.48
$
1.64
$
1.56
DILUTED EARNINGS PER COMMON UNIT
Net income attributable to common unitholders
$
1,153.0
$
1,052.6
$
3,605.7
$
3,437.4
Net income attributable to preferred units
0.8
–
*
2.7
–
*
Net income attributable to limited partners
$
1,153.8
$
1,052.6
$
3,608.4
$
3,437.4
Diluted weighted-average number of units outstanding:
Distribution-bearing common units
2,184.0
2,185.5
2,184.2
2,186.7
Phantom units (2)
17.5
15.9
17.6
15.7
Preferred units (2)
2.5
–
*
2.5
–
*
Total
2,204.0
2,201.4
2,204.3
2,202.4
Diluted earnings per common unit
$
0.52
$
0.48
$
1.64
$
1.56
* Amount is negligible
(1)
Phantom units are considered participating securities for purposes of computing basic earnings per unit. See Note 12 for information regarding the phantom units.
(2)
We use the “if-converted method” to determine the potential dilutive effect of the vesting of phantom unit awards and the conversion of preferred units outstanding. See Note 12 for information regarding phantom unit awards. See Note 8 for information regarding preferred units.
Note 12. 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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Equity-classified awards:
Phantom unit awards
$
35.0
$
37.3
$
111.0
$
113.1
Profits interest awards
0.6
2.2
4.7
7.2
Liability-classified awards
–
–
0.1
–
Total
$
35.6
$
39.5
$
115.8
$
120.3
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 the Partnership’s 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.
26
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Phantom Unit Awards
Subject to customary forfeiture provisions, phantom unit awards allow recipients to acquire the Partnership’s 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, 2020
15,669,442
$
26.76
Granted (2)
7,720,645
$
21.30
Vested
( 5,574,695
)
$
27.01
Forfeited
( 514,907
)
$
24.48
Phantom unit awards at September 30, 2021
17,300,485
$
24.31
(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 2021 was $ 164.4 million based on a grant date market price of the Partnership’s common units ranging from $ 20.79 to $ 22.05 per unit. An estimated annual forfeiture rate of 2.0 % was applied to these awards.
Each phantom unit award includes a 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 the Partnership 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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Cash payments made in connection with DERs
$
7.9
$
7.1
$
23.1
$
20.0
Total intrinsic value of phantom unit awards that vested during period
3.5
2.0
122.6
113.4
For the EPCO group of companies, the unrecognized compensation cost associated with phantom unit awards was $ 185.1 million at September 30, 2021, of which our share of such cost is currently estimated to be $ 153.0 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 2.0 years.
Profits Interest Awards
In 2016 and 2018, EPCO Holdings Inc., a privately held affiliate of EPCO, contributed a portion of the Partnership common units it owned to form limited partnerships (referred to as “Employee Partnerships”) that serve as long-term incentive arrangements for key employees of EPCO by providing them a “profits interest” (in the form of a Class B limited partner interest) in an Employee Partnership.
The Class B limited partner interests of two of the four Employee Partnerships outstanding at January 1, 2021, EPD PubCo Unit II L.P. and EPD PrivCo Unit I L.P., vested on June 11, 2021 when the closing market price of the Partnership’s common units exceeded $ 25.41 per unit. As a result of these vesting events, we recognized an aggregate $ 1.9 million of non-cash, compensation expense in the three months ended June 30, 2021.
The Class B limited partner interests of EPD Unit IV L.P. and EPCO Unit II L.P. remain outstanding. At September 30, 2021 , our share of the total unrecognized compensation cost related to these two Employee Partnerships was $ 10.4 million , which we expect to recognize over a weighted-average period of 2.2 years.
27
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 13. 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
As a result of favorable market conditions, we terminated an aggregate $ 675.0 million notional amount of forward-starting swaps in March 2021, which resulted in a net cash payment of $ 0.1 million. Since the original swaptions associated with these forward-starting swaps were not designated as hedging instruments and were subject to mark-to-market accounting, we previously incurred an unrealized, mark-to-market loss at inception of the forward starting swaps of $ 47.6 million that was reflected as an increase in interest expense in 2019. Immediately following exercise of the swaptions and our being put into the forward-starting swaps, these instruments were designated as cash flow hedges. For the period from inception through the termination date in March 2021, we recognized cumulative gains on the forward-starting swaps of $ 47.5 million in accumulated other comprehensive income, of which $ 45.9 million will be reclassified to earnings (as a decrease in interest expense) over the life of the associated debt obligations. We reclassified $ 1.6 million of the cumulative gain as a decrease in interest expense in March 2021.
We terminated an additional aggregate $ 400.0 million notional amount of forward-starting swaps in March 2021 due to favorable market conditions, which resulted in net cash proceeds of $ 75.3 million. As cash flow hedges, gains on these derivative instruments are reflected as a component of accumulated other comprehensive income and will be reclassified to earnings (as a decrease in interest expense) over the life of the associated future debt obligations.
As a result of these terminations, we do not have any interest rate derivative instruments outstanding at September 30, 2021.
28
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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 September 30, 2021, 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 natural gas processing margins and (iii) hedging the fair value of commodity products held in inventory.
The following table summarizes our portfolio of commodity derivative instruments outstanding at September 30, 2021 (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”))
18.8
2.6
Cash flow hedge
Forecasted sales of NGLs (MMBbls)
0.6
0.1
Cash flow hedge
Octane enhancement:
Forecasted sales of octane enhancement products (MMBbls)
23.0
2.8
Cash flow hedge
Natural gas marketing:
Natural gas storage inventory management activities (Bcf)
2.4
n/a
Fair value hedge
NGL marketing:
Forecasted purchases of NGLs and related hydrocarbon products (MMBbls)
126.5
4.7
Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products (MMBbls)
142.4
2.7
Cash flow hedge
NGLs inventory management activities (MMBbls)
1.8
n/a
Fair value hedge
Refined products marketing:
Forecasted purchases of refined products (MMBbls)
10.5
n/a
Cash flow hedge
Forecasted sales of refined products (MMBbls)
10.7
n/a
Cash flow hedge
Crude oil marketing:
Forecasted purchases of crude oil (MMBbls)
4.1
n/a
Cash flow hedge
Forecasted sales of crude oil (MMBbls)
5.9
0.1
Cash flow hedge
Petrochemical marketing:
Forecasted purchases of petrochemical products (MMBbls)
0.5
n/a
Cash flow hedge
Forecasted sales of petrochemical products (MMBbls)
0.9
n/a
Cash flow hedge
Commercial energy:
Forecasted purchases of power related to asset operations (terawatt hours (“TWh”))
0.7
0.2
Cash flow hedge
Derivatives not designated as hedging instruments:
Natural gas risk management activities (Bcf) (3)
5.3
0.2
Mark-to-market
NGL risk management activities (MMBbls) (3)
42.3
14.3
Mark-to-market
Refined products risk management activities (MMBbls) (3)
8.1
n/a
Mark-to-market
Crude oil risk management activities (MMBbls) (3)
28.6
2.4
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 2023, January 2022 and December 2023, respectively.
(3)
Reflects the use of derivative instruments to manage risks associated with our transportation, processing and storage assets.
The carrying amount of our inventories subject to fair value hedges was $ 151.5 million and $ 144.0 million at September 30, 2021 and December 31, 2020, respectively.
29
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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
September 30, 2021
December 31, 2020
September 30, 2021
December 31, 2020
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
$
–
Current
liabilities
$
109.1
Interest rate derivatives
Other assets
–
Other assets
12.4
Other liabilities
–
Other liabilities
11.0
Total interest rate derivatives
–
12.4
–
120.1
Commodity derivatives
Current assets
637.4
Current assets
210.5
Current
liabilities
706.0
Current
liabilities
234.0
Commodity derivatives
Other assets
8.4
Other assets
0.4
Other liabilities
12.3
Other liabilities
6.1
Total commodity derivatives
645.8
210.9
718.3
240.1
Total derivatives designated as hedging instruments
$
645.8
$
223.3
$
718.3
$
360.2
Derivatives not designated as hedging instruments
Commodity derivatives
Current assets
$
57.5
Current assets
$
18.1
Current
liabilities
$
64.1
Current
liabilities
$
6.1
Commodity derivatives
Other assets
8.4
Other assets
0.2
Other liabilities
7.5
Other liabilities
0.1
Total commodity derivatives
65.9
18.3
71.6
6.2
Total derivatives not designated as hedging instruments
$
65.9
$
18.3
$
71.6
$
6.2
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 September 30, 2021:
Commodity derivatives
$
711.7
$
–
$
711.7
$
( 711.2
)
$
–
$
–
$
0.5
As of December 31, 2020:
Interest rate derivatives
$
12.4
$
–
$
12.4
$
–
$
–
$
–
$
12.4
Commodity derivatives
229.2
–
229.2
( 228.5
)
–
–
0.7
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 September 30, 2021:
Commodity derivatives
$
789.9
$
–
$
789.9
$
( 711.2
)
$
–
$
( 77.7
)
$
1.0
As of December 31, 2020:
Interest rate derivatives
$
120.1
$
–
$
120.1
$
–
$
–
$
–
$
120.1
Commodity derivatives
246.3
–
246.3
( 228.5
)
–
( 17.3
)
0.5
30
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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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Commodity derivatives
Revenue
$
( 49.5
)
$
( 19.8
)
$
( 236.6
)
$
( 69.1
)
Total
$
( 49.5
)
$
( 19.8
)
$
( 236.6
)
$
( 69.1
)
Derivatives in Fair Value
Hedging Relationships
Location
Gain (Loss) Recognized in
Income on Hedged Item
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Commodity derivatives
Revenue
$
21.5
$
22.4
$
230.0
$
142.6
Total
$
21.5
$
22.4
$
230.0
$
142.6
The gain (loss) corresponding to the hedge ineffectiveness on the fair value hedges was negligible for all periods presented. The remaining gain (loss) for each period presented is primarily attributable to prompt-to-forward month price differentials that were excluded from the assessment of hedge effectiveness.
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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Interest rate derivatives
$
–
$
62.6
$
182.9
$
( 207.7
)
Commodity derivatives – Revenue (1)
( 110.8
)
2.6
( 843.5
)
404.5
Commodity derivatives – Operating costs and expenses (1)
10.2
( 6.8
)
( 8.7
)
( 11.8
)
Total
$
( 100.6
)
$
58.4
$
( 669.3
)
$
185.0
(1)
The fair value of these derivative instruments will be reclassified to their respective locations on the Unaudited Condensed Statement of Consolidated Operations when the forecasted transactions affect earnings.
Derivatives in Cash Flow
Hedging Relationships
Location
Gain (Loss) Reclassified from
Accumulated Other Comprehensive Income (Loss) to Income
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Interest rate derivatives
Interest expense
$
( 10.3
)
$
( 9.9
)
$
( 29.1
)
$
( 29.2
)
Commodity derivatives
Revenue
( 116.8
)
( 19.5
)
( 614.9
)
344.7
Commodity derivatives
Operating costs and expenses
( 0.3
)
( 10.0
)
( 18.9
)
( 9.9
)
Total
$
( 127.4
)
$
( 39.4
)
$
( 662.9
)
$
305.6
31
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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 $ 28.2 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 $ 283.6 million of losses attributable to commodity derivative instruments from accumulated other comprehensive loss to earnings, with $ 294.3 million as a decrease in revenue and $ 10.7 million as a decrease 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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Commodity derivatives
Revenue
$
107.2
$
14.7
$
143.6
$
113.4
Commodity derivatives
Operating costs and expenses
1.5
0.1
1.5
0.9
Total
$
108.7
$
14.8
$
145.1
$
114.3
The $ 145.1 million gain recognized for the nine months ended September 30, 2021 (as noted in the preceding table) from derivatives not designated as hedging instruments consists of $ 7.3 million of realized gains and $ 137.8 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.
32
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2021
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
$
435.3
$
2,344.1
$
0.1
$
2,779.5
Impact of CME Rule 814
( 435.3
)
( 1,632.5
)
–
( 2,067.8
)
Total commodity derivatives
–
711.6
0.1
711.7
Total
$
–
$
711.6
$
0.1
$
711.7
Financial liabilities:
Commodity derivatives:
Value before application of CME Rule 814
$
655.1
$
2,594.5
$
0.2
$
3,249.8
Impact of CME Rule 814
( 655.1
)
( 1,804.8
)
–
( 2,459.9
)
Total commodity derivatives
–
789.7
0.2
789.9
Total
$
–
$
789.7
$
0.2
$
789.9
At December 31, 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:
Interest rate derivatives
$
–
$
12.4
$
–
$
12.4
Commodity derivatives:
Value before application of CME Rule 814
678.6
878.6
12.9
1,570.1
Impact of CME Rule 814
( 678.6
)
( 650.4
)
( 11.9
)
( 1,340.9
)
Total commodity derivatives
–
228.2
1.0
229.2
Total
$
–
$
240.6
$
1.0
$
241.6
Financial liabilities:
Interest rate derivatives
$
–
$
120.1
$
–
$
120.1
Commodity derivatives:
Value before application of CME Rule 814
1,065.6
1,047.4
25.9
2,138.9
Impact of CME Rule 814
( 1,065.6
)
( 807.3
)
( 19.7
)
( 1,892.6
)
Total commodity derivatives
–
240.1
6.2
246.3
Total
$
–
$
360.2
$
6.2
$
366.4
In the aggregate, the fair value of our commodity hedging portfolios at September 30, 2021 was a net derivative liability of $ 470.3 million prior to the impact of CME Rule 814.
Financial assets and liabilities recorded on the balance sheet at September 30, 2021 using significant unobservable inputs (Level 3) are not material to the Unaudited Condensed Consolidated Financial Statements.
Nonrecurring Fair Value Measurements
We did not have any significant nonrecurring fair value measurements during the nine months ended September 30, 2021 or 2020.
See Note 4 for information regarding other non-cash asset impairment charges.
33
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 $ 33.9 billion and $ 35.0 billion at September 30, 2021 and December 31, 2020, respectively. The aggregate carrying value of these debt obligations was $ 29.58 billion and $ 29.9 billion at September 30, 2021 and December 31, 2020, 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 14. Related Party Transactions
The following table summarizes our related party transactions for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Revenues – related parties:
Unconsolidated affiliates
$
30.9
$
7.5
$
54.5
$
29.2
Costs and expenses – related parties:
EPCO and its privately held affiliates
$
287.1
$
283.9
$
861.8
$
847.0
Unconsolidated affiliates
84.2
33.1
201.4
167.2
Total
$
371.3
$
317.0
$
1,063.2
$
1,014.2
The following table summarizes our related party accounts receivable and accounts payable balances at the dates indicated:
September 30,
2021
December 31,
2020
Accounts receivable - related parties:
EPCO and its privately held affiliates
$
1.3
$
1.9
Unconsolidated affiliates
1.7
3.7
Total
$
3.0
$
5.6
Accounts payable - related parties:
EPCO and its privately held affiliates
$
110.1
$
139.6
Unconsolidated affiliates
14.6
9.9
Total
$
124.7
$
149.5
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.
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 September 30, 2021, 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 Limited Partner Interests Held
Percentage of
Common Units
Outstanding
702,152,448 common units
32.2 %
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Of the total number of Partnership common units held by EPCO and its privately held affiliates, 92,976,464 have been pledged as security under the separate credit facilities of EPCO and its privately held affiliates at September 30, 2021. 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 the Partnership’s common units.
The Partnership 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 respective debt obligations. During the nine months ended September 30, 2021 and 2020, we paid EPCO and its privately held affiliates cash distributions totaling $ 918.1 million and $ 908.2 million, respectively.
We have no employees. All of our administrative and operating functions are provided either by employees of EPCO (pursuant to the ASA) or by other service providers. We and our general partner are parties to the ASA. 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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Operating costs and expenses
$
253.7
$
247.8
$
755.5
$
740.9
General and administrative expenses
33.4
32.1
98.0
94.6
Total costs and expenses
$
287.1
$
279.9
$
853.5
$
835.5
We lease office space from privately held affiliates of EPCO at rental rates that approximate market rates. For the three months ended September 30, 2021 and 2020 , we recognized $ 3.4 million and $ 3.3 million, respectively, of related party operating lease expense in connection with these office space leases. For the nine months ended September 30, 2021 and 2020 , we recognized $ 10.1 million and $ 9.6 million, respectively, of related party operating lease expense in connection with these office space leases.
Note 15. Income Taxes
The following table presents the components of our consolidated benefit from (provision for) income taxes for the periods indicated (dollars in millions):
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Deferred tax benefit (expense) attributable to
OTA Holdings, Inc. (“OTA”)
$
( 6.8
)
$
21.3
$
( 20.1
)
$
158.0
Revised Texas Franchise Tax (“Texas Margin Tax”)
( 9.6
)
( 7.2
)
( 37.0
)
( 21.9
)
Other
0.3
5.0
( 0.2
)
2.5
Benefit from (provision for) income taxes
$
( 16.1
)
$
19.1
$
( 57.3
)
$
138.6
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Our federal, state and foreign income tax benefit (provision) is summarized below:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Current portion of income tax benefit (provision):
Federal
$
1.0
$
5.3
$
1.6
$
3.0
State
( 8.2
)
( 4.7
)
( 24.8
)
( 13.4
)
Foreign
0.1
0.2
( 1.0
)
–
Total current portion
( 7.1
)
0.8
( 24.2
)
( 10.4
)
Deferred portion of income tax benefit (provision):
Federal
( 7.1
)
18.7
( 19.3
)
145.1
State
( 1.9
)
( 0.4
)
( 13.8
)
3.9
Foreign
–
–
–
–
Total deferred portion
( 9.0
)
18.3
( 33.1
)
149.0
Total benefit from (provision for) income taxes
$
( 16.1
)
$
19.1
$
( 57.3
)
$
138.6
A reconciliation of the benefit from (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 September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Pre-Tax Net Book Income (“NBI”)
$
1,198.2
$
1,064.9
$
3,748.0
$
3,381.2
Texas Margin Tax (1)
( 9.6
)
( 7.2
)
( 37.0
)
( 21.9
)
State income tax benefit (provision), net of federal benefit (2)
( 0.1
)
1.6
( 1.0
)
9.7
Federal income tax benefit (provision) computed by applying
the federal statutory rate to NBI of corporate entities
( 3.3
)
25.1
( 9.8
)
83.4
Federal benefit attributable to settlement of
Liquidity Option Agreement (2)
–
–
–
67.8
Valuation allowance (3)
( 3.1
)
–
( 9.3
)
–
Other
–
( 0.4
)
( 0.2
)
( 0.4
)
Benefit from (provision for) income taxes
$
( 16.1
)
$
19.1
$
( 57.3
)
$
138.6
Effective income tax rate
( 1.3
)%
1.8
%
( 1.5
)%
4.1
%
(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.
(3)
Management believes that it is more likely than not that the net deferred tax assets attributable to OTA will not be fully realizable; therefore, we have provided for a valuation allowance.
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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:
September 30,
December 31,
2021
2020
Deferred tax liabilities:
Attributable to investment in OTA
$
376.7
$
356.6
Attributable to property, plant and equipment
119.8
106.4
Attributable to investments in other entities
4.4
4.1
Other
13.5
–
Total deferred tax liabilities
514.4
467.1
Deferred tax assets:
Net operating loss carryovers (1)
9.4
0.1
Temporary differences related to Texas Margin Tax
3.0
2.3
Total deferred tax assets
12.4
2.4
Valuation allowance
9.3
–
Total deferred tax assets, net of valuation allowance
3.1
2.4
Total net deferred tax liabilities
$
511.3
$
464.7
(1)
Of the loss amount presented for September 30, 2021, $ 0.1 million expires in various years between 2021 and 2037. The remaining $ 9.3 million has an indefinite carryover period. All losses are subject to limitations on their utilization.
OTA Deferred Tax Liability
On March 5, 2020, the Partnership settled its obligations under a put option agreement (the “Liquidity Option Agreement” or “Liquidity Option”) with OTA and Marquard & Bahls AG, and became the owner of OTA and indirectly assumed its deferred tax liability, which reflects OTA’s outside basis difference in the limited partner interests it received from the Partnership in October 2014. Upon settlement of the Liquidity Option, the Liquidity Option liability recorded by the Partnership 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 taxes” line on our Unaudited Condensed Statement of Consolidated Operations for the nine months ended September 30, 2020 . OTA recognized an additional net, non-cash deferred income tax benefit of $ 85.8 million at September 30, 2020 primarily due to a decrease in the outside basis difference of its investment in the Partnership attributable to a decline in the market price of the Partnership’s common units subsequent to March 5, 2020 through September 30, 2020 . In total, our earnings for the nine months ended September 30, 2020 reflect $ 158.0 million of net deferred income tax benefit attributable to OTA.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 16. Commitments and Contingent Liabilities
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.
Our accruals for litigation contingencies were $ 0.2 million and $ 6.1 million at September 30, 2021 and December 31, 2020, respectively. We have classified our accruals for litigation contingencies in our Unaudited Condensed Consolidated Balance Sheets as a component of “Other current liabilities” or “Other long-term liabilities” based on management’s estimate regarding the timing of settlement.
PDH 1 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 first propane dehydrogenation facility (“PDH 1”). 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 $ 29.82 billion and $ 30.15 billion at September 30, 2021 and December 31, 2020, respectively. The year-to-date reduction in debt principal amount outstanding is due to EPO’s repayment of Senior Notes TT and RR, partially offset by EPO’s issuance of Senior Notes EEE. See Note 7 for additional information regarding our scheduled future maturities of debt principal.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Lease Accounting Matters
There has been no significant change in our operating lease obligations since those disclosed in the 2020 Form 10-K.
The following table presents information regarding operating leases where we are the lessee at September 30, 2021:
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
$
164.0
$
164.5
12 years
3.6 %
Transportation equipment
22.6
24.4
2 years
2.6 %
Office and warehouse space
166.3
190.2
15 years
3.2 %
Total
$
352.9
$
379.1
(1)
Right-of-use (“ROU”) asset amounts are a component of “Other assets” on our Unaudited Condensed Consolidated Balance Sheet.
(2)
At September 30, 2021 , lease liabilities of $ 35.5 million and $ 343.6 million were included within “Other current liabilities” and “Other long-term 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 information available at the lease commencement date or January 1, 2019 for leases existing at the adoption date for ASC 842, Leases .
The following table disaggregates our total operating lease expense for the periods indicated :
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2021
2020
2021
2020
Long-term operating leases:
Fixed lease expense:
Non-cash lease expense (amortization of ROU assets)
$
10.9
$
9.8
$
29.5
$
29.6
Related accretion expense on lease liability balances
3.2
3.1
9.3
9.8
Total fixed lease expense
14.1
12.9
38.8
39.4
Variable lease expense
0.2
0.1
0.8
0.4
Subtotal operating lease expense
14.3
13.0
39.6
39.8
Short-term operating leases
15.0
12.3
41.4
37.3
Total operating lease expense
$
29.3
$
25.3
$
81.0
$
77.1
Cash payments attributable to operating lease liabilities were $ 10.8 million and $ 9.8 million for the three months ended September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021 and 2020, cash paid for operating lease liabilities was $ 29.2 million and $ 28.1 million, respectively.
Operating lease income for the three months ended September 30, 2021 and 2020 was $ 3.1 million and $ 2.3 million, respectively. For the nine months ended September 30, 2021 and 2020 , operating lease income was $ 9.2 and $ 8.4 million, respectively.
Purchase Obligations
We have contractual future product purchase commitments for natural gas, NGLs, crude oil, petrochemicals and refined products representing enforceable and legally binding agreements as of the reporting date. Our product purchase commitments increased from $ 14.8 billion at December 31, 2020 to $ 22.1 billion at September 30, 2021 primarily due to an increase in crude oil and NGL prices between the two reporting dates.
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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 provides information regarding the net effect of changes in our operating accounts and cash payments for interest and income taxes for the periods indicated:
For the Nine Months
Ended September 30,
2021
2020
Decrease (increase) in:
Accounts receivable – trade
$
( 1,541.0
)
$
1,119.5
Accounts receivable – related parties
2.0
1.0
Inventories
520.2
( 1,063.2
)
Prepaid and other current assets
409.7
288.2
Other assets
104.0
( 27.7
)
Increase (decrease) in:
Accounts payable – trade
35.6
147.0
Accounts payable – related parties
( 24.8
)
( 41.0
)
Accrued product payables
2,501.8
( 621.9
)
Accrued interest
( 230.4
)
( 196.6
)
Other current liabilities
( 696.3
)
( 212.3
)
Other liabilities
( 33.7
)
( 85.0
)
Net effect of changes in operating accounts
$
1,047.1
$
( 692.0
)
Cash payments for interest, net of $ 63.8 and $ 96.9 capitalized during the
nine months ended September 30, 2021 and 2020 , respectively
$
1,143.5
$
1,107.4
Cash payments for federal and state income taxes
$
17.0
$
24.9
We incurred liabilities for construction in progress that had not been paid at September 30, 2021 and December 31, 2020 of $ 194.6 million and $ 236.1 million, respectively. Such amounts are not included under the caption “Capital expenditures” on the Unaudited Condensed Statements of Consolidated Cash Flows.
We recognized non-cash charges totaling $ 11.3 million for involuntary conversions during the nine months ended September 30, 2021 that are a component of net losses attributable to asset sales and related matters.
40
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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.