UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___  to  ___.

Commission file number:  1-14323

ENTERPRISE PRODUCTS PARTNERS L.P.
(Exact Name of Registrant as Specified in Its Charter)

Delaware
 
76-0568219
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
1100 Louisiana Street, 10th Floor
Houston, Texas 77002
    (Address of Principal Executive Offices, including Zip Code)
 
(713) 381-6500
(Registrant’s Telephone Number, including Area Code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes    No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Accelerated filer
Non-accelerated filer    (Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth company   
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No

There were 2,182,661,550 common units of Enterprise Products Partners L.P. outstanding at the close of business on October 31, 2018.  Our common units trade on the New York Stock Exchange under the ticker symbol “EPD.”

ENTERPRISE PRODUCTS PARTNERS L.P.
TABLE OF CONTENTS

 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1

PART I.  FINANCIAL INFORMATION.

Item 1.
Financial Statements.

ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)

   
September 30,
2018
   
December 31,
2017
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
30.2
   
$
5.1
 
Restricted cash
   
248.9
     
65.2
 
Accounts receivable – trade, net of allowance for doubtful accounts
of $12.2 at September 30, 2018 and $12.1 at December 31, 2017
   
4,222.9
     
4,358.4
 
Accounts receivable – related parties
   
1.6
     
1.8
 
Inventories
   
2,335.8
     
1,609.8
 
Derivative assets
   
236.6
     
153.4
 
Prepaid and other current assets
   
609.9
     
312.7
 
Total current assets
   
7,685.9
     
6,506.4
 
Property, plant and equipment, net
   
37,802.9
     
35,620.4
 
Investments in unconsolidated affiliates
   
2,603.4
     
2,659.4
 
Intangible assets, net of accumulated amortization of $1,693.4 at
September 30, 2018 and $1,564.8 at December 31, 2017 (see Note 6)
   
3,654.2
     
3,690.3
 
Goodwill (see Note 6)
   
5,745.2
     
5,745.2
 
Other assets
   
260.6
     
196.4
 
Total assets
 
$
57,752.2
   
$
54,418.1
 
 
               
LIABILITIES AND EQUITY
               
Current liabilities:
               
Current maturities of debt (see Note 7)
 
$
3,405.5
   
$
2,855.0
 
Accounts payable – trade
   
1,153.2
     
801.7
 
Accounts payable – related parties
   
136.2
     
127.3
 
Accrued product payables
   
5,149.8
     
4,566.3
 
Accrued interest
   
190.5
     
358.0
 
Derivative liabilities
   
487.1
     
168.2
 
Other current liabilities
   
400.0
     
418.6
 
Total current liabilities
   
10,922.3
     
9,295.1
 
Long-term debt (see Note 7)
   
22,508.5
     
21,713.7
 
Deferred tax liabilities
   
68.4
     
58.5
 
Other long-term liabilities
   
747.2
     
578.4
 
Commitments and contingencies (see Note 16)
               
Equity: (see Note 8)
               
Partners’ equity:
               
Limited partners:
               
Common units (2,182,661,550 units outstanding at September 30, 2018
and 2,161,089,479 units outstanding at December 31, 2017)
   
23,380.4
     
22,718.9
 
Accumulated other comprehensive loss
   
(307.3
)
   
(171.7
)
Total  partners’ equity
   
23,073.1
     
22,547.2
 
Noncontrolling interests
   
432.7
     
225.2
 
Total equity
   
23,505.8
     
22,772.4
 
Total liabilities and equity
 
$
57,752.2
   
$
54,418.1
 


See Notes to Unaudited Condensed Consolidated Financial Statements.
2


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,
 
 
 
2018
   
2017
   
2018
   
2017
 
Revenues:
                       
Third parties
 
$
9,571.7
   
$
6,874.4
   
$
27,257.4
   
$
20,781.7
 
Related parties
   
14.2
     
12.5
     
94.5
     
33.2
 
Total revenues (see Note 9)
   
9,585.9
     
6,886.9
     
27,351.9
     
20,814.9
 
Costs and expenses:
                               
Operating costs and expenses:
                               
Third parties
   
7,643.4
     
5,773.8
     
22,722.0
     
17,313.0
 
Related parties
   
358.5
     
306.0
     
1,054.6
     
830.2
 
Total operating costs and expenses
   
8,001.9
     
6,079.8
     
23,776.6
     
18,143.2
 
General and administrative costs:
                               
Third parties
   
15.3
     
11.0
     
57.5
     
47.7
 
Related parties
   
37.4
     
30.3
     
99.6
     
89.7
 
Total general and administrative costs
   
52.7
     
41.3
     
157.1
     
137.4
 
Total costs and expenses (see Note 10)
   
8,054.6
     
6,121.1
     
23,933.7
     
18,280.6
 
Equity in income of unconsolidated affiliates
   
112.0
     
113.4
     
350.0
     
315.2
 
Operating income
   
1,643.3
     
879.2
     
3,768.2
     
2,849.5
 
Other income (expense):
                               
Interest expense
   
(279.5
)
   
(243.9
)
   
(806.2
)
   
(739.0
)
Change in fair market value of Liquidity Option
   Agreement (see Note 16)
   
(18.5
)
   
(8.9
)
   
(34.9
)
   
(33.0
)
Gain on step acquisition of unconsolidated affiliate (see Note 11)
   
--
     
--
     
39.4
     
--
 
Other, net
   
0.3
     
0.3
     
1.3
     
0.9
 
Total other expense, net
   
(297.7
)
   
(252.5
)
   
(800.4
)
   
(771.1
)
Income before income taxes
   
1,345.6
     
626.7
     
2,967.8
     
2,078.4
 
Provision for income taxes
   
(11.0
)
   
(5.4
)
   
(34.5
)
   
(20.1
)
Net income
   
1,334.6
     
621.3
     
2,933.3
     
2,058.3
 
Net income attributable to noncontrolling interests
   
(21.4
)
   
(10.4
)
   
(45.6
)
   
(33.0
)
Net income attributable to limited partners
 
$
1,313.2
   
$
610.9
   
$
2,887.7
   
$
2,025.3
 
 
                               
Earnings per unit: (see Note 12)
                               
Basic earnings per unit
 
$
0.60
   
$
0.28
   
$
1.32
   
$
0.94
 
Diluted earnings per unit
 
$
0.60
   
$
0.28
   
$
1.32
   
$
0.94
 















See Notes to Unaudited Condensed Consolidated Financial Statements.
3


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,
 
 
 
2018
   
2017
   
2018
   
2017
 
 
                       
Net income
 
$
1,334.6
   
$
621.3
   
$
2,933.3
   
$
2,058.3
 
Other comprehensive income (loss):
                               
Cash flow hedges:
                               
Commodity derivative instruments:
                               
Changes in fair value of cash flow hedges
   
(145.8
)
   
(177.8
)
   
(156.0
)
   
(2.6
)
Reclassification of gains to net income
   
(53.5
)
   
(10.1
)
   
(28.8
)
   
(49.0
)
Interest rate derivative instruments:
                               
Changes in fair value of cash flow hedges
   
6.1
     
(0.3
)
   
20.7
     
(4.8
)
Reclassification of losses to net income
   
9.1
     
10.3
     
29.0
     
29.9
 
Total cash flow hedges
   
(184.1
)
   
(177.9
)
   
(135.1
)
   
(26.5
)
Other
   
--
     
--
     
(0.5
)
   
(0.1
)
Total other comprehensive loss
   
(184.1
)
   
(177.9
)
   
(135.6
)
   
(26.6
)
Comprehensive income
   
1,150.5
     
443.4
     
2,797.7
     
2,031.7
 
Comprehensive income attributable to noncontrolling interests
   
(21.4
)
   
(10.4
)
   
(45.6
)
   
(33.0
)
Comprehensive income attributable to limited partners
 
$
1,129.1
   
$
433.0
   
$
2,752.1
   
$
1,998.7
 
  





























See Notes to Unaudited Condensed Consolidated Financial Statements.
4


ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)

 
 
For the Nine Months
Ended September 30,
 
 
 
2018
   
2017
 
Operating activities:
           
Net income
 
$
2,933.3
   
$
2,058.3
 
Reconciliation of net income to net cash flows provided by operating activities:
               
Depreciation, amortization and accretion
   
1,360.5
     
1,221.4
 
Asset impairment and related charges (see Note 14)
   
21.4
     
35.2
 
Equity in income of unconsolidated affiliates
   
(350.0
)
   
(315.2
)
Distributions received on earnings from unconsolidated affiliates
   
345.7
     
316.2
 
Net gains attributable to asset sales
   
(8.1
)
   
(1.1
)
Deferred income tax expense
   
9.3
     
1.1
 
Change in fair market value of derivative instruments
   
254.9
     
(14.2
)
Change in fair market value of Liquidity Option Agreement
   
34.9
     
33.0
 
Gain on step acquisition of unconsolidated affiliate (see Note 11)
   
(39.4
)
   
--
 
Net effect of changes in operating accounts (see Note 17)
   
(261.9
)
   
(512.1
)
Other operating activities
   
(25.3
)
   
(2.7
)
Net cash flows provided by operating activities
   
4,275.3
     
2,819.9
 
Investing activities:
               
Capital expenditures
   
(3,004.2
)
   
(2,118.2
)
Cash used for business combinations, net of cash received (see Note 11)
   
(150.6
)
   
(198.7
)
Investments in unconsolidated affiliates
   
(95.1
)
   
(32.8
)
Distributions received for return of capital from unconsolidated affiliates
   
47.0
     
36.8
 
Proceeds from asset sales
   
24.1
     
6.2
 
Other investing activities
   
(4.0
)
   
2.8
 
Cash used in investing activities
   
(3,182.8
)
   
(2,303.9
)
Financing activities:
               
Borrowings under debt agreements
   
67,086.3
     
53,150.4
 
Repayments of debt
   
(65,742.1
)
   
(52,133.2
)
Debt issuance costs
   
(25.2
)
   
(24.0
)
Cash distributions paid to limited partners (see Note 8)
   
(2,782.9
)
   
(2,660.4
)
Cash payments made in connection with distribution equivalent rights
   
(13.2
)
   
(11.2
)
Cash distributions paid to noncontrolling interests
   
(50.9
)
   
(35.4
)
Cash contributions from noncontrolling interests (see Note 8)
   
222.0
     
0.4
 
Net cash proceeds from the issuance of common units (see Note 8)
   
449.4
     
877.2
 
Other financing activities
   
(27.1
)
   
2.3
 
Cash used in financing activities
   
(883.7
)
   
(833.9
)
Net change in cash and cash equivalents, including restricted cash
   
208.8
     
(317.9
)
Cash and cash equivalents, including restricted cash, at beginning of period
   
70.3
     
417.6
 
Cash and cash equivalents, including restricted cash, at end of period
 
$
279.1
   
$
99.7
 











See Notes to Unaudited Condensed Consolidated Financial Statements.
5


ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018
(Dollars in millions)

 
 
Partners’ Equity
             
For the Three Months Ended September 30, 2018:
 
Limited
Partners
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Noncontrolling
Interests
   
Total
 
    Balance, June 30, 2018
 
$
22,794.8
   
$
(123.2
)
 
$
418.9
   
$
23,090.5
 
   Net income
   
1,313.2
     
--
     
21.4
     
1,334.6
 
   Cash distributions paid to limited partners
   
(935.6
)
   
--
     
--
     
(935.6
)
   Cash payments made in connection with distribution equivalent rights
   
(4.6
)
   
--
     
--
     
(4.6
)
   Cash distributions paid to noncontrolling interests
   
--
     
--
     
(22.6
)
   
(22.6
)
   Cash contributions from noncontrolling interests
   
--
     
--
     
15.1
     
15.1
 
   Net cash proceeds from the issuance of common units
   
188.4
     
--
     
--
     
188.4
 
   Common units issued in connection with employee compensation
   
--
     
--
     
--
     
--
 
   Common units issued in connection with land acquisition
   
--
     
--
     
--
     
--
 
   Amortization of fair value of equity-based awards
   
24.9
     
--
     
--
     
24.9
 
   Cash flow hedges
   
--
     
(184.1
)
   
--
     
(184.1
)
   Other
   
(0.7
)
   
--
     
(0.1
)
   
(0.8
)
    Balance, September 30, 2018
 
$
23,380.4
   
$
(307.3
)
 
$
432.7
   
$
23,505.8
 


 
 
Partners’ Equity
             
For the Nine Months Ended September 30, 2018:
 
Limited
Partners
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Noncontrolling
Interests
   
Total
 
     Balance, December 31, 2017
 
$
22,718.9
   
$
(171.7
)
 
$
225.2
   
$
22,772.4
 
   Net income
   
2,887.7
     
--
     
45.6
     
2,933.3
 
   Cash distributions paid to limited partners
   
(2,782.9
)
   
--
     
--
     
(2,782.9
)
   Cash payments made in connection with distribution equivalent rights
   
(13.2
)
   
--
     
--
     
(13.2
)
   Cash distributions paid to noncontrolling interests
   
--
     
--
     
(50.9
)
   
(50.9
)
   Cash contributions from noncontrolling interests
   
--
     
--
     
222.0
     
222.0
 
   Net cash proceeds from the issuance of common units
   
449.4
     
--
     
--
     
449.4
 
   Common units issued in connection with employee compensation
   
39.1
     
--
     
--
     
39.1
 
   Common units issued in connection with land acquisition
   
30.0
     
--
     
--
     
30.0
 
   Amortization of fair value of equity-based awards
   
77.5
     
--
     
--
     
77.5
 
   Cash flow hedges
   
--
     
(135.1
)
   
--
     
(135.1
)
   Other
   
(26.1
)
   
(0.5
)
   
(9.2
)
   
(35.8
)
     Balance, September 30, 2018
 
$
23,380.4
   
$
(307.3
)
 
$
432.7
   
$
23,505.8
 

















See Notes to Unaudited Condensed Consolidated Financial Statements.  For information regarding Unit History,
Accumulated Other Comprehensive Income (Loss) and Noncontrolling Interests, see Note 8.
6

ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017
(Dollars in millions)

 
 
Partners’ Equity
             
For the Three Months Ended September 30, 2017:
 
Limited
Partners
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Noncontrolling
Interests
   
Total
 
     Balance, June 30, 2017
 
$
22,788.8
   
$
(128.7
)
 
$
220.1
   
$
22,880.2
 
   Net income
   
610.9
     
--
     
10.4
     
621.3
 
   Cash distributions paid to limited partners
   
(902.6
)
   
--
     
--
     
(902.6
)
   Cash payments made in connection with distribution equivalent rights
   
(4.0
)
   
--
     
--
     
(4.0
)
   Cash distributions paid to noncontrolling interests
   
--
     
--
     
(12.3
)
   
(12.3
)
   Cash contributions from noncontrolling interests
   
--
     
--
     
0.1
     
0.1
 
   Net cash proceeds from the issuance of common units
   
120.0
     
--
     
--
     
120.0
 
   Common units issued in connection with employee compensation
   
--
     
--
     
--
     
--
 
   Amortization of fair value of equity-based awards
   
24.3
     
--
     
--
     
24.3
 
   Cash flow hedges
   
--
     
(177.9
)
   
--
     
(177.9
)
   Other
   
(0.2
)
   
--
     
--
     
(0.2
)
    Balance, September 30, 2017
 
$
22,637.2
   
$
(306.6
)
 
$
218.3
   
$
22,548.9
 


 
 
Partners’ Equity
             
For the Nine Months Ended September 30, 2017:
 
Limited
Partners
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Noncontrolling
Interests
   
Total
 
     Balance, December 31, 2016
 
$
22,327.0
   
$
(280.0
)
 
$
219.0
   
$
22,266.0
 
   Net income
   
2,025.3
     
--
     
33.0
     
2,058.3
 
   Cash distributions paid to limited partners
   
(2,660.4
)
   
--
     
--
     
(2,660.4
)
   Cash payments made in connection with distribution equivalent rights
   
(11.2
)
   
--
     
--
     
(11.2
)
   Cash distributions paid to noncontrolling interests
   
--
     
--
     
(35.4
)
   
(35.4
)
   Cash contributions from noncontrolling interests
   
--
     
--
     
0.4
     
0.4
 
   Net cash proceeds from the issuance of common units
   
877.2
     
--
     
--
     
877.2
 
   Common units issued in connection with employee compensation
   
33.7
     
--
     
--
     
33.7
 
   Amortization of fair value of equity-based awards
   
74.1
     
--
     
--
     
74.1
 
   Cash flow hedges
   
--
     
(26.5
)
   
--
     
(26.5
)
   Other
   
(28.5
)
   
(0.1
)
   
1.3
     
(27.3
)
    Balance, September 30, 2017
 
$
22,637.2
   
$
(306.6
)
 
$
218.3
   
$
22,548.9
 


















See Notes to Unaudited Condensed Consolidated Financial Statements. For information regarding Unit History,
Accumulated Other Comprehensive Income (Loss) and Noncontrolling Interests, see Note 8.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
With the exception of per unit amounts, or as noted within the context of each disclosure,
the dollar amounts presented in the tabular data within these disclosures are
stated in millions of dollars.

KEY REFERENCES USED IN THESE
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unless the context requires otherwise, references to “we,” “us,” “our,” “Enterprise” or “Enterprise Products Partners” are intended to mean the business and operations of Enterprise Products Partners L.P. and its consolidated subsidiaries.  References to “EPO” mean Enterprise Products Operating LLC, which is a wholly owned subsidiary of Enterprise, and its consolidated subsidiaries, through which Enterprise Products Partners L.P. conducts its business.  Enterprise is managed by its general partner, Enterprise Products Holdings LLC (“Enterprise GP”), which is a wholly owned subsidiary of Dan Duncan LLC, a privately held Texas limited liability company.

The membership interests of Dan Duncan LLC are owned by a voting trust, the current trustees (“DD LLC Trustees”) of which are: (i) Randa Duncan Williams, who is also a director and Chairman of the Board of Directors (the “Board”) of Enterprise GP; (ii) Richard H. Bachmann, who is also a director and Vice Chairman of the Board of Enterprise GP; and (iii) Dr. Ralph S. Cunningham.  Ms. Duncan Williams and Mr. Bachmann also currently serve as managers of Dan Duncan LLC along with W. Randall Fowler, who is also a director and the President and Chief Financial Officer of Enterprise GP.

References to “EPCO” mean Enterprise Products Company, a privately held Texas corporation, and its privately held affiliates.  A majority of the outstanding voting capital stock of EPCO is owned by a voting trust, the current trustees (“EPCO Trustees”) of which are:  (i) Ms. Duncan Williams, who serves as Chairman of EPCO; (ii) Dr. Cunningham, who serves as Vice Chairman of EPCO; and (iii) Mr. Bachmann, who serves as the President and Chief Executive Officer of EPCO.  Ms. Duncan Williams and Mr. Bachmann also currently serve as directors of EPCO along with Mr. Fowler, who is also the Executive Vice President and Chief Administrative Officer of EPCO. EPCO, together with its privately held affiliates, owned approximately 32% of our limited partner interests at September 30, 2018.
  
References to “TEPPCO” mean TEPPCO Partners, L.P. prior to its merger with one of our wholly owned subsidiaries in October 2009.


Note 1.  Partnership Organization and Basis of Presentation

We are a publicly traded Delaware limited partnership, the common units of which are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “EPD.”  We were formed in April 1998 to own and operate certain natural gas liquids (“NGLs”) related businesses of EPCO and are a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, petrochemicals and refined products. 

We conduct substantially all of our business through EPO and are owned 100% by our limited partners from an economic perspective.  Enterprise GP manages our partnership and owns a non-economic general partner interest in us.  We, Enterprise GP, EPCO and Dan Duncan LLC are affiliates under the collective common control of the DD LLC Trustees and the EPCO Trustees.  Like many publicly traded partnerships, we have no employees.  All of our management, administrative and operating functions are performed by employees of EPCO pursuant to an administrative services agreement (the “ASA”) or by other service providers.  See Note 15 for information regarding related party matters.

Our results of operations for the nine months ended September 30, 2018 are not necessarily indicative of results expected for the full year of 2018.  In our opinion, the accompanying Unaudited Condensed Consolidated Financial Statements include all adjustments consisting of normal recurring accruals necessary for fair presentation.  Although we believe the disclosures in these financial statements are adequate and make the information presented not misleading, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
These Unaudited Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto included in our annual report on Form 10-K for the year ended December 31, 2017  (the “2017 Form 10-K”) filed with the SEC on February 28, 2018.


Note 2.  Summary of Significant Accounting Policies

Apart from those matters noted below, there have been no changes in our significant accounting policies since those reported under Note 2 of the 2017 Form 10-K.

Adoption of New Revenue Recognition Policies on January 1, 2018
For periods through December 31, 2017, we accounted for our revenue streams using Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition.  Under ASC 605, we recognized revenue when all of the following criteria were met: (i) persuasive evidence of an exchange arrangement existed between us and the counterparty (e.g., published tariffs), (ii) delivery of products or the rendering of services had occurred, (iii) the price of the products or the fee for services was fixed or determinable and (iv) collectibility of the amount owed by the counterparty was reasonably assured.

Effective January 1, 2018, we adopted FASB ASC 606, Revenue from Contracts with Customers, using a modified retrospective approach that applied the new revenue recognition standard to existing contracts at the implementation date and any future revenue contracts.   As such, our consolidated revenues and related financial information for periods prior to January 1, 2018 were not adjusted and continue to be reported in accordance with ASC 605.   We did not record a cumulative effect adjustment upon initially applying ASC 606 since there was no impact on partners’ equity upon adoption; however, the extent of our revenue-related disclosures has increased under the new standard.

Due to the large number of individual contracts that were in effect at the implementation date of ASC 606, we evaluated our contracts using a portfolio approach based on the types of products sold or services rendered within our business segments.  There are no material differences in the amount or timing of revenues recognized under ASC 606 when compared to ASC 605.

The core principle of ASC 606 is that a company should recognize revenue in a manner that fairly depicts the transfer of goods or services to customers in amounts that reflect the consideration the company expects to receive for those goods or services.  We apply this core principle by following five key steps outlined in ASC 606: (i) identify the contract; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the performance obligation is satisfied. Each of these steps involves management judgment and an analysis of the contract’s material terms and conditions.

Substantially all of our revenues are accounted for under ASC 606; however, to a limited extent, some revenues are accounted for under other guidance such as ASC 840, Leases, ASC 845, Nonmonetary Transactions or ASC 815, Derivatives and Hedging Activities.

Under ASC 606, we recognize revenue when or as we satisfy our performance obligation to the customer.  In situations where we have recognized revenue, but have a conditional right to consideration (based on something other than the passage of time) from the customer, we recognize unbilled revenue (a contract asset) on our consolidated balance sheet.  Unbilled revenue is reclassified to accounts receivable when we have an unconditional right of payment from the customer. Payments received from customers in advance of the period in which we satisfy a performance obligation are recorded as deferred revenue (a contract liability) on our consolidated balance sheet.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our revenue streams are derived from the sale of products and providing midstream services.  Revenues from the sale of products are recognized at a point in time, which represents the transfer of control (and the satisfaction of our performance obligation under the contract) to the customer.  From that point forward, the customer is able to direct the use of, and obtain substantially all the benefits from, its use of the products.  With respect to midstream services (e.g., interruptible transportation), we satisfy our performance obligations over time and recognize revenues when the services are provided and the customer receives the benefits based on an output measure of volumes redelivered.  We believe this measure is a faithful depiction of the transfer of control for midstream services since there is (i) an insignificant period of time between the receipt of customers’ volumes and their subsequent redelivery, and (ii) it is not possible to individually track and differentiate customers’ inventories as they traverse our facilities.  For stand-ready performance obligations (e.g., a storage capacity reservation contract), we recognize revenues over time on a straight-line basis as time elapses over the term of the contract. We believe that these approaches accurately depict the transfer of benefits to the customer.

Customers are invoiced for product purchases or services rendered when we have an unconditional right to consideration under the associated contract. The consideration we are entitled to invoice may be either fixed, variable or a combination of both.  Examples of fixed consideration would be fixed payments from customers under take-or-pay arrangements, storage capacity reservation agreements and firm transportation contracts. Variable consideration represents payments from customers that are based on factors that fluctuate (or vary) based on volumes, prices or both. Examples of variable consideration include interruptible transportation agreements, market-indexed product sales contracts and the value of NGLs we retain under natural gas processing agreements.  The terms of our billings are typical of the industry for the products we sell.

Under certain midstream service agreements, customers are required to provide a minimum volume over an agreed-upon period with a provision that allows the customer to make-up any volume shortfalls over an agreed-upon period (referred to as “make-up rights”).  Revenue pursuant to such agreements is initially deferred and subsequently recognized when either the make-up rights are exercised, the likelihood of the customer exercising the rights becomes remote, or we are otherwise released from the performance obligation.

Customers may contribute funds to us to help offset the construction costs related to pipeline construction activities and production well tie-ins.   Under ASC 605, these amounts were accounted for as contributions in aid of construction costs (“CIACs”) and netted against property, plant and equipment.   Under ASC 606, these receipts are recognized as additional service revenues over the term of the associated midstream services provided to the customer.

As a practical expedient, for those contracts under which we have the ability to invoice the customer in an amount that corresponds directly with the value of the performance obligation completed to date, we recognize revenue as we have the right to invoice.

See Note 9 regarding our new revenue disclosures.

Impact of ASU 2016-18 on Restricted Cash Disclosures
We adopted Accounting Standard Update (“ASU”) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, in the fourth quarter of 2017 and applied this ASU retrospectively to the periods presented in our Unaudited Condensed Statements of Consolidated Cash Flows.  As a result, the decrease in restricted cash of $287.7 million was excluded from net cash used in investing activities for the nine months ended September 30, 2017.

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,
2018
   
December 31,
2017
 
Cash and cash equivalents
 
$
30.2
   
$
5.1
 
Restricted cash
   
248.9
     
65.2
 
Total cash, cash equivalents and restricted cash shown in the
  Unaudited Condensed Statements of Consolidated Cash Flows
 
$
279.1
   
$
70.3
 

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Restricted cash 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 and refined products.  Additional cash may be restricted to maintain our commodity derivative instruments portfolio as prices fluctuate or margin requirements change.  The balance of restricted cash at September 30, 2018 consisted of initial margin requirements of $58.9 million and variation margin requirements of $190.0 million. The initial margin requirements will be returned to us as the related derivative instruments are settled.  See Note 14 for information regarding our derivative instruments and hedging activities.

Other Recent Accounting Developments
Lease accounting standard.  In February 2016, the FASB issued ASC 842, Leases (“ASC 842”), which requires substantially all leases to be recorded on the balance sheet. We will adopt the new standard on January 1, 2019 and apply it to (i) all new leases entered into after January 1, 2019 and (ii) all existing lease contracts as of January 1, 2019.  ASC 842 will supersede existing lease accounting guidance found under ASC 840, Leases (“ASC 840”).

The new standard introduces two lease accounting models, which result in a lease being classified as either a “finance” or “operating” lease on the basis of whether the lessee effectively obtains control of the underlying asset during the lease term.  A lease would be classified as a finance lease if it meets one of five classification criteria, four of which are generally consistent with current lease accounting guidance.  By default, a lease that does not meet the criteria to be classified as a finance lease will be deemed an operating lease.  Regardless of classification, the initial measurement of both lease types will result in the balance sheet recognition of a right-of-use (“ROU”) asset (representing a company’s right to use the underlying asset for a specified period of time) and a corresponding lease liability.  The lease liability will be recognized at the present value of the future lease payments, and the ROU asset will equal the lease liability adjusted for any prepaid rent, lease incentives provided by the lessor, and any indirect costs.

The subsequent measurement of each type of lease varies. Finance leases will be accounted for using the effective interest method.  Under this approach, a lessee will amortize the ROU asset (generally on a straight-line basis in a manner similar to depreciation) and the discount on the lease liability (as a component of interest expense).  Operating leases will result in the recognition of a single lease expense amount that is recorded on a straight-line basis (or another systematic basis, as appropriate).

ASC 842 will result in changes to the way our operating leases are recorded, presented and disclosed in our consolidated financial statements. Upon adoption of ASC 842 on January 1, 2019, we expect to recognize a ROU asset and a corresponding lease liability based on the present value of then existing operating lease obligations. In addition, there are several key accounting policy elections that we will make upon adoption of ASC 842 including:

We will not recognize ROU assets and lease liabilities for short-term leases and instead record them in a manner similar to operating leases under legacy lease accounting guidelines.  A short term lease is one with a maximum lease term of 12 months or less and does not include a purchase option the lessee is reasonably certain to exercise.

We will not assess whether any expired or existing contracts are or contain leases or the lease classification for any existing or expired leases.

The impact of adopting ASC 842 will be prospective beginning January 1, 2019.  We will not recast prior periods presented in our consolidated financial statements to reflect the new lease accounting guidance.

Based on current information, we forecast that our total remaining payment obligations under then existing operating leases will approximate $310 million (undiscounted) at January 1, 2019.   As a result, we expect to recognize an estimated $250 million ROU asset and a $250 million lease liability on our consolidated balance sheet based on discounted amounts.  These amounts would represent less than 1% of our total consolidated assets and liabilities, respectively.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair value measurements.  In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which amends certain disclosure requirements related to fair value measurements.   The amendments will require incremental disclosures regarding uncertainties surrounding fair value measurements, including discussions of any interrelationships between significant unobservable inputs used to estimate Level 3 fair value measurements, and changes in unrealized gains and losses.  The amendments in this ASU are effective January 1, 2020, which is when we expect to apply the new requirements.  We are currently reviewing the effect of this ASU on our consolidated financial statements.

Credit losses.  In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”  This ASU modifies the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology.   These changes are expected to result in the more timely recognition of losses.  The amendments in this ASU are effective January 1, 2020, which is when we expect to apply the new requirements to how the allowance for doubtful accounts is determined.  We are currently reviewing the effect of this ASU on our consolidated financial statements.


Note 3.  Inventories

Our inventory amounts by product type were as follows at the dates indicated:

 
 
September 30,
2018
   
December 31,
2017
 
NGLs
 
$
1,658.6
   
$
917.4
 
Petrochemicals and refined products
   
198.6
     
161.5
 
Crude oil
   
467.0
     
516.3
 
Natural gas
   
11.6
     
14.6
 
Total
 
$
2,335.8
   
$
1,609.8
 

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,
 
 
 
2018
   
2017
   
2018
   
2017
 
Cost of sales (1)
 
$
6,838.9
   
$
5,049.6
   
$
20,371.2
   
$
15,116.4
 
Lower of cost or net realizable value adjustments
   recognized within cost of sales
   
1.7
     
1.7
     
4.3
     
7.7
 
                                 
(1)   Cost of sales is a component of “Operating costs and expenses” as presented on our Unaudited Condensed Statements of Consolidated Operations. Fluctuations in these amounts are primarily due to changes in energy commodity prices and sales volumes associated with our marketing activities.
 

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4.  Property, Plant and Equipment

The historical costs of our property, plant and equipment and related accumulated depreciation balances were as follows at the dates indicated:

 
 
Estimated
Useful Life
in Years
   
September 30,
2018
   
December 31,
2017
 
Plants, pipelines and facilities (1)
 
3-45 (5)
 
 
$
41,939.8
   
$
37,132.2
 
Underground and other storage facilities (2)
 
5-40 (6)
 
   
3,527.8
     
3,460.9
 
Transportation equipment (3)
 
3-10
     
181.1
     
177.1
 
Marine vessels (4)
 
15-30
     
814.1
     
803.8
 
Land
           
360.0
     
273.1
 
Construction in progress
           
2,769.9
     
4,698.1
 
Total
           
49,592.7
     
46,545.2
 
Less accumulated depreciation
           
11,789.8
     
10,924.8
 
Property, plant and equipment, net
         
$
37,802.9
   
$
35,620.4
 
   
(1)   Plants, pipelines and facilities include processing plants; NGL, natural gas, crude oil and petrochemical and refined products pipelines; terminal loading and unloading facilities; buildings; office furniture and equipment; laboratory and shop equipment and related assets. We placed a number of growth projects into service since December 31, 2017 including our propane dehydrogenation facility, the first processing train at our Orla natural gas processing facility, and our ninth NGL fractionator at Mont Belvieu.
(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.
 

In March 2018, we acquired the remaining 50% member interest of our Delaware Processing joint venture, which resulted in the consolidation of $200 million of property, plant and equipment.  See Note 11 for information regarding this recent acquisition.

In April 2018, we acquired 65-acres of waterfront property on the Houston Ship Channel for approximately $85.2 million, all of which was recorded as land.  The purchase price consisted of $55.2 million in cash with the balance funded through 1,223,242 newly-issued Enterprise common units.  The land is located immediately to the east of our Enterprise Hydrocarbons Terminal (“EHT”) and is expected to facilitate future expansion projects at EHT.

See Note 19 regarding the sale of our Red River System in October 2018.

The following table summarizes our depreciation expense and capitalized interest amounts for the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2018
   
2017
   
2018
   
2017
 
Depreciation expense (1)
 
$
368.3
   
$
327.5
   
$
1,061.1
   
$
966.1
 
Capitalized interest (2)
   
28.1
     
53.6
     
113.4
     
137.7
 
   
(1)   Depreciation expense is a component of “Costs and expenses” as presented on our Unaudited Condensed Statements of Consolidated Operations.
(2)   We capitalize interest costs incurred on funds used to construct property, plant and equipment while the asset is in its construction phase. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life as a component of depreciation expense. When capitalized interest is recorded, it reduces interest expense from what it would be otherwise.
 

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Asset Retirement Obligations
Property, plant and equipment at September 30, 2018 and December 31, 2017 includes $49.6 million and $39.9 million, respectively, of asset retirement costs capitalized as an increase in the associated long-lived asset.  The following table presents information regarding our asset retirement obligations, or AROs, since January 1, 2018:

ARO liability balance, December 31, 2017
 
$
86.7
 
Liabilities incurred
   
0.5
 
Liabilities settled
   
(1.9
)
Revisions in estimated cash flows
   
11.4
 
Accretion expense
   
4.5
 
ARO liability balance, September 30, 2018
 
$
101.2
 


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.

 
 
Ownership
Interest at
September 30,
2018
   
September 30,
2018
   
December 31,
2017
 
NGL Pipelines & Services:
                 
Venice Energy Service Company, L.L.C.
 
13.1%
 
 
$
24.7
   
$
25.7
 
K/D/S Promix, L.L.C.
 
50%
 
   
31.2
     
30.9
 
Baton Rouge Fractionators LLC
 
32.2%
 
   
16.7
     
17.0
 
Skelly-Belvieu Pipeline Company, L.L.C.
 
50%
 
   
36.6
     
37.0
 
Texas Express Pipeline LLC
 
35%
 
   
328.6
     
314.4
 
Texas Express Gathering LLC
 
45%
 
   
44.7
     
35.9
 
Front Range Pipeline LLC
 
33.3%
 
   
175.7
     
165.7
 
Delaware Basin Gas Processing LLC (1)
 
100%
 
   
--
     
107.3
 
Crude Oil Pipelines & Services:
                     
Seaway Crude Pipeline Company LLC
 
50%
 
   
1,370.3
     
1,378.9
 
Eagle Ford Pipeline LLC
 
50%
 
   
385.1
     
385.2
 
Eagle Ford Terminals Corpus Christi LLC
 
50%
 
   
104.4
     
75.1
 
Natural Gas Pipelines & Services:
                       
White River Hub, LLC
 
50%
 
   
20.4
     
20.8
 
Old Ocean Pipeline, LLC
 
50%
 
   
1.6
     
--
 
Petrochemical & Refined Products Services:
                     
Centennial Pipeline LLC
 
50%
 
   
59.5
     
60.8
 
Other
 
Various
     
3.9
     
4.7
 
Total investments in unconsolidated affiliates
         
$
2,603.4
   
$
2,659.4
 
                         
(1)   In March 2018, we acquired the remaining 50% membership interest in our Delaware Processing joint venture. See Note 11 for information regarding this recent acquisition.
 

In May 2018, we and Energy Transfer Partners, L.P. (“ETP”) formed Old Ocean Pipeline, LLC to facilitate the resumption of full service on the Old Ocean natural gas pipeline owned by ETP.  The 24-inch diameter Old Ocean Pipeline originates in Maypearl, Texas in Ellis County and extends south approximately 240 miles to Sweeny, Texas in Brazoria County.  ETP serves as operator of the pipeline.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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,
 
 
 
2018
   
2017
   
2018
   
2017
 
NGL Pipelines & Services
 
$
28.3
   
$
18.8
   
$
87.1
   
$
53.3
 
Crude Oil Pipelines & Services
   
83.7
     
95.9
     
265.1
     
266.3
 
Natural Gas Pipelines & Services
   
2.1
     
0.9
     
4.7
     
2.8
 
Petrochemical & Refined Products Services
   
(2.1
)
   
(2.2
)
   
(6.9
)
   
(7.2
)
Total
 
$
112.0
   
$
113.4
   
$
350.0
   
$
315.2
 

Summarized Combined Financial Information of Unconsolidated Affiliates
Combined results of operations data for the periods indicated for our unconsolidated affiliates are summarized in the following table (all data presented on a 100% basis):

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2018
   
2017
   
2018
   
2017
 
Income Statement Data:
                       
Revenues
 
$
439.1
   
$
401.6
   
$
1,296.4
   
$
1,116.7
 
Operating income
   
258.0
     
249.3
     
789.8
     
682.8
 
Net income
   
256.9
     
247.5
     
785.6
     
688.0
 

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 6.  Intangible Assets and Goodwill

Identifiable Intangible Assets
The following table summarizes our intangible assets by business segment at the dates indicated:

 
 
September 30, 2018
   
December 31, 2017
 
 
 
Gross
Value
   
Accumulated
Amortization
   
Carrying
Value
   
Gross
Value
   
Accumulated
Amortization
   
Carrying
Value
 
NGL Pipelines & Services:
                                   
Customer relationship intangibles
 
$
457.3
   
$
(198.4
)
 
$
258.9
   
$
447.4
   
$
(187.5
)
 
$
259.9
 
Contract-based intangibles
   
363.4
     
(233.1
)
   
130.3
     
280.8
     
(218.4
)
   
62.4
 
Segment total
   
820.7
     
(431.5
)
   
389.2
     
728.2
     
(405.9
)
   
322.3
 
Crude Oil Pipelines & Services:
                                               
Customer relationship intangibles
   
2,203.5
     
(161.8
)
   
2,041.7
     
2,203.5
     
(127.0
)
   
2,076.5
 
Contract-based intangibles
   
281.0
     
(203.5
)
   
77.5
     
281.0
     
(171.0
)
   
110.0
 
Segment total
   
2,484.5
     
(365.3
)
   
2,119.2
     
2,484.5
     
(298.0
)
   
2,186.5
 
Natural Gas Pipelines & Services:
                                               
Customer relationship intangibles
   
1,350.3
     
(439.9
)
   
910.4
     
1,350.3
     
(417.1
)
   
933.2
 
Contract-based intangibles
   
464.7
     
(385.8
)
   
78.9
     
464.7
     
(379.5
)
   
85.2
 
Segment total
   
1,815.0
     
(825.7
)
   
989.3
     
1,815.0
     
(796.6
)
   
1,018.4
 
Petrochemical & Refined Products Services:
                                               
Customer relationship intangibles
   
181.4
     
(50.3
)
   
131.1
     
181.4
     
(45.9
)
   
135.5
 
Contract-based intangibles
   
46.0
     
(20.6
)
   
25.4
     
46.0
     
(18.4
)
   
27.6
 
Segment total
   
227.4
     
(70.9
)
   
156.5
     
227.4
     
(64.3
)
   
163.1
 
Total intangible assets
 
$
5,347.6
   
$
(1,693.4
)
 
$
3,654.2
   
$
5,255.1
   
$
(1,564.8
)
 
$
3,690.3
 

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,
 
 
 
2018
   
2017
   
2018
   
2017
 
NGL Pipelines & Services
 
$
9.2
   
$
7.2
   
$
25.6
   
$
21.8
 
Crude Oil Pipelines & Services
   
20.7
     
22.6
     
67.3
     
68.0
 
Natural Gas Pipelines & Services
   
9.8
     
9.3
     
29.1
     
26.3
 
Petrochemical & Refined Products Services
   
2.2
     
2.3
     
6.6
     
7.0
 
Total
 
$
41.9
   
$
41.4
   
$
128.6
   
$
123.1
 

The following table presents our forecast of amortization expense associated with existing intangible assets for the periods indicated:

Remainder
of 2018
   
2019
   
2020
   
2021
   
2022
 
$
36.8
   
$
151.7
   
$
140.7
   
$
148.4
   
$
144.6
 

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 2017 Form 10-K.

16

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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,
2018
   
December 31,
2017
 
EPO senior debt obligations:
           
Commercial Paper Notes, variable-rates
 
$
2,707.6
   
$
1,755.7
 
Senior Notes V, 6.65% fixed-rate, repaid April 2018
   
--
     
349.7
 
Senior Notes OO, 1.65% fixed-rate, repaid May 2018
   
--
     
750.0
 
Senior Notes N, 6.50% fixed-rate, due January 2019
   
700.0
     
700.0
 
364-Day Revolving Credit Agreement, variable-rate, due September 2019
   
--
     
--
 
Senior Notes LL, 2.55% fixed-rate, due October 2019
   
800.0
     
800.0
 
Senior Notes Q, 5.25% fixed-rate, due January 2020
   
500.0
     
500.0
 
Senior Notes Y, 5.20% fixed-rate, due September 2020
   
1,000.0
     
1,000.0
 
Senior Notes TT, 2.80% fixed-rate, due February 2021
   
750.0
     
--
 
Senior Notes RR, 2.85% fixed-rate, due April 2021
   
575.0
     
575.0
 
Senior Notes CC, 4.05% fixed-rate, due February 2022
   
650.0
     
650.0
 
Multi-Year Revolving Credit Facility, 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
 
Senior Notes SS, 3.95% fixed-rate, due February 2027
   
575.0
     
575.0
 
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
     
--
 
Senior Notes NN, 4.95% fixed-rate, due October 2054
   
400.0
     
400.0
 
TEPPCO senior debt obligations:
               
TEPPCO Senior Notes, 6.65% fixed-rate, repaid April 2018
   
--
     
0.3
 
TEPPCO Senior Notes, 7.55% fixed-rate, due April 2038
   
0.4
     
0.4
 
Total principal amount of senior debt obligations
   
23,457.6
     
21,605.7
 
EPO Junior Subordinated Notes A, variable-rate, redeemed August 2018
   
--
     
521.1
 
EPO Junior Subordinated Notes B, fixed/variable-rate, redeemed March 2018
   
--
     
682.7
 
EPO Junior Subordinated Notes C, variable-rate, due June 2067 (1)
   
256.4
     
256.4
 
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
     
--
 
TEPPCO Junior Subordinated Notes, fixed/variable-rate, due June 2067 
   
14.2
     
14.2
 
Total principal amount of senior and junior debt obligations
   
26,128.2
     
24,780.1
 
Other, non-principal amounts
   
(214.2
)
   
(211.4
)
Less current maturities of debt
   
(3,405.5
)
   
(2,855.0
)
Total long-term debt
 
$
22,508.5
   
$
21,713.7
 
   
(1)   Variable rate is reset quarterly and based on 3-month 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%.
 

17

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The following table presents the range of interest rates and weighted-average interest rates paid on our consolidated variable-rate debt during the nine months ended September 30, 2018:

 
Range of Interest
Rates Paid
Weighted-Average
Interest Rate Paid
Commercial Paper Notes
1.50% to 2.50%
2.23%
Multi-Year Revolving Credit Facility
2.58% to 5.00%
3.37%
EPO Junior Subordinated Notes A (prior to redemption)
5.08% to 6.07%
5.71%
EPO Junior Subordinated Notes B (prior to redemption)
7.03%
7.03%
EPO Junior Subordinated Notes C
4.26% to 5.10%
4.80%

The following table presents contractually scheduled maturities of our consolidated debt obligations outstanding at September 30, 2018 for the next five years, and in total thereafter:

 
       
Scheduled Maturities of Debt
 
 
 
Total
   
Remainder
of 2018
   
2019
   
2020
   
2021
   
2022
   
Thereafter
 
Commercial Paper Notes
 
$
2,707.6
   
$
2,707.6
   
$
--
   
$
--
   
$
--
   
$
--
   
$
--
 
Senior Notes
   
20,750.0
     
--
     
1,500.0
     
1,500.0
     
1,325.0
     
650.0
     
15,775.0
 
Junior Subordinated Notes
   
2,670.6
     
--
     
--
     
--
     
--
     
--
     
2,670.6
 
Total
 
$
26,128.2
   
$
2,707.6
   
$
1,500.0
   
$
1,500.0
   
$
1,325.0
   
$
650.0
   
$
18,445.6
 

Parent-Subsidiary Guarantor Relationships
Enterprise Products Partners L.P. 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, Enterprise Products Partners L.P. would be responsible for full and unconditional repayment of that obligation.

Issuance of $3.0 Billion of Senior Notes in October 2018
In October 2018, EPO issued $3.0 billion aggregate principal amount of senior notes comprised of (i) $750 million principal amount of senior notes due February 2022, (ii) $1.0 billion principal amount of senior notes due October 2028 and (iii) $1.25 billion principal amount of senior notes due February 2049.  See Note 19 for information regarding this subsequent event and related use of proceeds.

Issuance of $2.0 Billion of Senior Notes and $700 Million of Junior Subordinated Notes in February 2018
In February 2018, EPO issued $2.7 billion aggregate principal amount of notes comprised of (i) $750 million principal amount of senior notes due February 2021 (“Senior Notes TT”), (ii) $1.25 billion principal amount of senior notes due February 2048 (“Senior Notes UU”) and (iii) $700 million principal amount of junior subordinated notes due February 2078 (“Junior Subordinated Notes F”).

Net proceeds from the February 2018 offerings were used by EPO for the temporary repayment of amounts outstanding under its commercial paper program, general company purposes, and the redemption of all $682.7 million outstanding aggregate principal amount of its Junior Subordinated Notes B.

Senior Notes TT were issued at 99.946% of their principal amount and have a fixed-rate interest rate of 2.80% per year.  Senior Notes UU were issued at 99.865% of their principal amount and have a fixed-rate interest rate of 4.25% per year.  Enterprise Products Partners L.P. has guaranteed the senior notes through an unconditional guarantee on an unsecured and unsubordinated basis.

The Junior Subordinated Notes F are redeemable at EPO’s option, in whole or in part, on one or more occasions, on or after February 15, 2028 at 100% of their principal amount, plus any accrued and unpaid interest thereon, and bear interest at a fixed rate of 5.375% per year through February 14, 2028.  Beginning February 15, 2028, the Junior Subordinated Notes F will bear interest at a floating rate based on a three-month LIBOR plus 2.57%, reset quarterly.  Enterprise Products Partners L.P. has guaranteed the Junior Subordinated Notes F through an unconditional guarantee on an unsecured and subordinated basis.
18

Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Redemption of Junior Subordinated Notes
In March 2018, EPO redeemed all of the $682.7 million outstanding aggregate principal amount of its Junior Subordinated Notes B at a price equal to 100% of the principal amount of the notes being redeemed, plus all accrued and unpaid interest thereon to, but not including, the redemption date.  This redemption was funded by EPO’s issuance of senior notes and junior subordinated notes in February 2018.

In August 2018, EPO redeemed all of the $521.1 million outstanding aggregate principal amount of its Junior Subordinated Notes A at a price equal to 100% of the principal amount of the notes being redeemed, plus all accrued and unpaid interest thereon to, but not including, the redemption date.  This redemption was funded by the issuance of short-term notes under EPO’s commercial paper program.

364-Day Revolving Credit Agreement
In September 2018, EPO entered into a 364-Day Revolving Credit Agreement that replaced its prior 364-day credit facility.  The new 364-Day Revolving Credit Agreement matures in September 2019. There are currently no principal amounts outstanding under this revolving credit agreement.

Under the terms of the new 364-Day Revolving Credit Agreement, EPO may borrow up to $2.0 billion (which may be increased by up to $200 million to $2.2 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.  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 a non-revolving term loan for a period of one additional year, payable in September 2020. Borrowings under this revolving credit agreement may be used for working capital, capital expenditures, acquisitions and general company purposes.

The new 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 credit agreement also restricts EPO’s ability to pay cash distributions to its parent, Enterprise Products Partners L.P., 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 new 364-Day Revolving Credit Agreement are not secured by any collateral; however, they are guaranteed by Enterprise Products Partners L.P.

Increase in Amount Authorized under Commercial Paper Program
In June 2018, EPO increased the aggregate principal amount of short-term notes that it could issue (and have outstanding at any time) under its commercial paper program from $2.5 billion to $3.0 billion.  All commercial paper notes issued under the program are senior unsecured obligations of EPO that are unconditionally guaranteed by Enterprise Products Partners L.P.

Lender Financial Covenants
We were in compliance with the financial covenants of our consolidated debt agreements at September 30, 2018.

Letters of Credit
At September 30, 2018, EPO had $101.4 million of letters of credit outstanding primarily related to our commodity hedging activities.

19

Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 8.  Equity and Distributions

Limited Partner Common Units Outstanding
The following table summarizes changes in the number of our limited partner common units outstanding since December 31, 2017:

Common units outstanding at December 31, 2017
   
2,161,089,479
 
Common units issued in connection with DRIP and EUPP
   
6,642,286
 
Common units issued in connection with the vesting of phantom unit awards
   
3,170,861
 
Cancellation of treasury units acquired in connection with the vesting of equity-based awards
   
(949,778
)
Common units issued in connection with employee compensation
   
1,443,586
 
Other
   
16,360
 
Common units outstanding at March 31, 2018
   
2,171,412,794
 
Common units issued in connection with DRIP and EUPP
   
3,234,804
 
Common units issued in connection with the vesting of phantom unit awards
   
115,115
 
Cancellation of treasury units acquired in connection with the vesting of equity-based awards
   
(34,827
)
Common units issued in connection with land acquisition (see Note 4)
   
1,223,242
 
Common units outstanding at June 30, 2018
   
2,175,951,128
 
Common units issued in connection with DRIP and EUPP
   
6,600,486
 
Common units issued in connection with the vesting of phantom unit awards
   
151,692
 
Cancellation of treasury units acquired in connection with the vesting of equity-based awards
   
(41,756
)
Common units outstanding at September 30, 2018
   
2,182,661,550
 

The net cash proceeds we received from the issuance of common units during the nine months ended September 30, 2018 were used to temporarily reduce amounts outstanding under EPO’s commercial paper program and revolving credit facilities and for general company purposes, including for growth capital expenditures.

We may issue additional equity and debt securities to assist us in meeting our future liquidity requirements, including those related to capital spending.

Active Registration Statements
Universal shelf registration statement.  We have a universal shelf registration statement (the “2016 Shelf”) on file with the SEC which allows Enterprise Products Partners L.P. and EPO (each on a standalone basis) to issue an unlimited amount of equity and debt securities, respectively.  EPO issued $2.7 billion of senior and junior subordinated notes in February 2018 using the 2016 Shelf (see Note 7).  In addition, EPO issued $3.0 billion of senior notes in October 2018 using this registration statement (see Note 19).

At-the-Market (“ATM”) program.  We have a registration statement on file with the SEC covering the issuance of up to $2.54 billion of our common units in amounts, at prices and on terms to be determined by market conditions and other factors at the time of such offerings in connection with our ATM program.  Pursuant to this program, we may sell common units under an equity distribution agreement between Enterprise Products Partners L.P. and certain broker-dealers from time-to-time by means of ordinary brokers’ transactions through the NYSE at market prices, in block transactions or as otherwise agreed to with the broker-dealer parties to the agreement.  

During the nine months ended September 30, 2018, we did not issue any common units under the ATM program.  During the nine months ended September 30, 2017, we issued 21,807,726 common units under this program for aggregate gross cash proceeds of $603.1 million, resulting in total net cash proceeds of $597.3 million.

After taking into account the aggregate sales price of common units sold under the ATM program in periods prior to fiscal 2018, we have the capacity to issue additional common units under the ATM program up to an aggregate sales price of $2.54 billion.
20

Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Distribution reinvestment plan.  We have a registration statement on file with the SEC in connection with our distribution reinvestment plan (“DRIP”).  The DRIP provides unitholders of record and beneficial owners of our common units a voluntary means by which they can increase the number of our common units they own by reinvesting the quarterly cash distributions they receive from us into the purchase of additional new common units.

We issued a total of 16,073,974 common units under our DRIP during the nine months ended September 30, 2018, which generated net cash proceeds of $438.1 million.  Privately held affiliates of EPCO reinvested $206 million through the DRIP during the nine months ended September 30, 2018 (this amount being a component of the net cash proceeds presented).  During the nine months ended September 30, 2017, we issued 10,345,655 common units under our DRIP, which generated net cash proceeds of $269.9 million.  After taking into account the number of common units issued under the DRIP through September 30, 2018, we have the capacity to issue an additional 64,643,166 common units under this plan.

Employee unit purchase plan.  In addition to the DRIP, we have registration statements on file with the SEC in connection with our employee unit purchase plan (“EUPP”).  We issued 403,602 common units under our EUPP during the nine months ended September 30, 2018, which generated net cash proceeds of $11.3 million.  During the nine months ended September 30, 2017, we issued 364,934 common units under our EUPP, which generated net cash proceeds of $10.0 million.  After taking into account the number of common units issued under the EUPP through September 30, 2018, we may issue an additional 5,357,209 common units under this plan.

Common Units Issued in Connection With Employee Compensation
In February 2018, the dollar value of  discretionary employee bonus payments with respect to the year ended December 31, 2017 (less any retirement plan deductions and withholding taxes) was remitted through the issuance of an equivalent value of newly issued Enterprise common units under EPCO’s 2008 Enterprise Products Long-Term Incentive Plan (Third Amendment and Restatement) (“2008 Plan”).  We issued 1,443,586 common units, which had a value of $39.1 million, in connection with the employee bonus payments.  The compensation expense associated with this issuance of common units was recognized during the year ended December 31, 2017.

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, 2017
 
$
(10.1
)
 
$
(165.1
)
 
$
3.5
   
$
(171.7
)
Other comprehensive income (loss) for period, before reclassifications
   
(156.0
)
   
20.7
     
(0.5
)
   
(135.8
)
Reclassification of losses (gains) to net income during period
   
(28.8
)
   
29.0
     
--
     
0.2
 
Total other comprehensive income (loss) for period
   
(184.8
)
   
49.7
     
(0.5
)
   
(135.6
)
Accumulated Other Comprehensive Income (Loss), September 30, 2018
 
$
(194.9
)
 
$
(115.4
)
 
$
3.0
   
$
(307.3
)

 
 
Cash Flow Hedges
             
 
 
Commodity
Derivative
Instruments
   
Interest Rate
Derivative
Instruments
   
Other
   
Total
 
Accumulated Other Comprehensive Income (Loss), December 31, 2016
 
$
(83.8
)
 
$
(199.8
)
 
$
3.6
   
$
(280.0
)
Other comprehensive income (loss) for period, before reclassifications
   
(2.6
)
   
(4.8
)
   
(0.1
)
   
(7.5
)
Reclassification of losses (gains) to net income during period
   
(49.0
)
   
29.9
     
--
     
(19.1
)
Total other comprehensive income (loss) for period
   
(51.6
)
   
25.1
     
(0.1
)
   
(26.6
)
Accumulated Other Comprehensive Income (Loss), September 30, 2017
 
$
(135.4
)
 
$
(174.7
)
 
$
3.5
   
$
(306.6
)

21

Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The following table presents reclassifications of (income) loss out of accumulated other comprehensive income into net income during the periods indicated:

 
  
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
Location  
2018
   
2017
   
2018
   
2017
 
Losses (gains) on cash flow hedges:
                         
Interest rate derivatives
Interest expense
 
$
9.1
   
$
10.3
   
$
29.0
   
$
29.9
 
Commodity derivatives
Revenue
   
(53.9
)
   
(10.6
)
   
(28.5
)
   
(49.1
)
Commodity derivatives
Operating costs and expenses
   
0.4
     
0.5
     
(0.3
)
   
0.1
 
Total
 
 
$
(44.4
)
 
$
0.2
   
$
0.2
   
$
(19.1
)

For information regarding our interest rate and commodity derivative instruments, see Note 14.

Cash Distributions
The following table presents Enterprise’s declared quarterly cash distribution rates per common unit with respect to the quarter indicated:

 
 
Distribution Per
Common Unit
 
Record
Date
Payment
Date
2017
            
1st Quarter
 
$
0.4150
 
4/28/2017
5/8/2017
2nd Quarter
 
$
0.4200
 
7/31/2017
8/7/2017
3rd Quarter
 
$
0.4225
 
10/31/2017
11/7/2017
2018
       
 
    
1st Quarter
 
$
0.4275
 
4/30/2018
5/8/2018
2nd Quarter
 
$
0.4300
 
7/31/2018
8/8/2018
3rd Quarter
 
$
0.4325
 
10/31/2018
11/8/2018

The payment of any quarterly cash distribution is subject to Board approval and management’s evaluation of our financial condition, results of operations and cash flows in connection with such payment.  Management currently expects to recommend to the Board a quarterly cash distribution of $0.4350 with respect to the fourth quarter of 2018.

Noncontrolling Interests
In June 2018, pursuant to an option agreement, an affiliate of Western Gas Partners, LP (“Western”) acquired a noncontrolling 20% equity interest in our subsidiary, Whitethorn Pipeline Company LLC (“Whitethorn”), for approximately $189.6 million in cash.  Whitethorn owns the Midland-to-ECHO pipeline, which originates at our Midland, Texas terminal and extends 416 miles to our Sealy, Texas facility. This amount is a component of contributions from noncontrolling interests as presented on our Unaudited Condensed Statement of Consolidated Cash Flows for the nine months ended September 30, 2018.

In January 2018, we announced a project to construct, own and operate an ethylene export facility, the location of which was subsequently determined to be at our Morgan’s Point facility on the Houston Ship Channel. Navigator Ethylene Terminals LLC holds a noncontrolling 50% equity interest in our consolidated subsidiary, Enterprise Navigator Ethylene Terminal LLC, that owns the export facility, which is expected to be completed in the fourth quarter of 2019.

Other
In May 2018, Apache Corporation (“Apache”) executed a long-term supply agreement with us whereby Apache would sell all of its NGL production from the Alpine High discovery to Enterprise.  Alpine High is a major hydrocarbon resource located in the Delaware Basin that encompasses rich natural gas (i.e., gas that has a high NGL content), dry natural gas and oil-bearing horizons.  In conjunction with the long-term NGL supply agreement, we granted Apache an option to acquire up to a 33% equity interest in our subsidiary that owns the Shin Oak NGL Pipeline, which is currently under construction and expected to be placed into service during the second quarter of 2019.  The option is exercisable once the pipeline is placed into commercial service and contingent upon the execution of associated definitive agreements.  In August 2018, Apache announced its intent to contribute the Shin Oak option to Altus Midstream Company, which would be majority-owned by Apache.

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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,
 
 
 
2018 (1)
   
2017 (2)
   
2018 (1)
   
2017 (2)
 
NGL Pipelines & Services:
                       
Sales of NGLs and related products
 
$
3,898.2
   
$
2,415.3
   
$
9,324.5
   
$
7,460.5
 
Midstream services
   
724.7
     
499.0
     
1,985.4
     
1,420.2
 
Total
   
4,622.9
     
2,914.3
     
11,309.9
     
8,880.7
 
Crude Oil Pipelines & Services:
                               
Sales of crude oil
   
2,209.0
     
1,589.0
     
8,082.9
     
4,912.7
 
Midstream services
   
285.9
     
207.7
     
764.1
     
590.8
 
Total
   
2,494.9
     
1,796.7
     
8,847.0
     
5,503.5
 
Natural Gas Pipelines & Services:
                               
Sales of natural gas
   
589.0
     
568.9
     
1,681.5
     
1,673.5
 
Midstream services
   
261.2
     
227.7
     
766.3
     
670.5
 
Total
   
850.2
     
796.6
     
2,447.8
     
2,344.0
 
Petrochemical & Refined Products Services:
                               
Sales of petrochemicals and refined products
   
1,408.9
     
1,194.2
     
4,111.6
     
3,519.4
 
Midstream services
   
209.0
     
185.1
     
635.6
     
567.3
 
Total
   
1,617.9
     
1,379.3
     
4,747.2
     
4,086.7
 
Total consolidated revenues
 
$
9,585.9
   
$
6,886.9
   
$
27,351.9
   
$
20,814.9
 
   
(1)   Revenues are accounted for under ASC 606 upon implementation at January 1, 2018.
(2)   Revenues are accounted for under ASC 605 for historical periods prior to January 1, 2018.
 

Substantially all of our revenues are derived from contracts with customers as defined within ASC 606.  In total, product sales and midstream services accounted for 85% and 15%, respectively, of our consolidated revenues for the three and nine months ended September 30, 2018.  During the three and nine months ended September 30, 2017, product sales and midstream services accounted for 84% and 16%, respectively, of our consolidated revenues.

Apart from the following information regarding natural gas processing, the description of our significant revenue streams by business segment found under Note 3 of the 2017 Form 10-K have not changed in connection with the adoption of ASC 606.

Natural gas processing utilizes service contracts that are either fee-based, commodity-based or a combination of the two. Our commodity-based contracts include keepwhole, margin-band, percent-of-liquids, percent-of-proceeds and contracts featuring a combination of commodity and fee-based terms.  When a cash fee for natural gas processing services is stipulated by a contract, we record revenue as a producer’s natural gas has been processed.

Under ASC 605, our natural gas processing business did not recognize revenue in connection with non-cash consideration (the “equity NGL volumes”) it received under percent-of-liquids and similar arrangements. We recognized revenue when the associated NGLs were delivered and sold to downstream customers under NGL marketing product sales contracts.

Under ASC 606, our natural gas processing business recognizes the value of the equity NGL volumes it receives from customers as a form of midstream service revenue. The value assigned to this non-cash consideration and related inventory is based on the market value of the equity NGLs we are entitled to when the services are performed.  We also recognize revenue, along with a corresponding cost of sales, when the NGLs are delivered and sold to downstream customers under NGL marketing product sales contracts.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The additional service revenue recognized for the non-cash consideration increased our total revenues by approximately 2% for the nine months ended September 30, 2018 when compared to the amount of revenues we would have recognized under ASC 605 for the quarter.  Given the rapid turnover of our inventories of NGL products each month, we do not expect a significant change in our gross operating margin from natural gas processing and related NGL marketing activities as a result of the changes required by ASC 606.

Unbilled Revenue and Deferred Revenue
The following table provides information regarding our contract assets and contract liabilities at September 30, 2018:

Contract Asset
Location
 
Balance
 
Unbilled revenue (current amount)
Prepaid and other current assets
 
$
188.6
 
Unbilled revenue (noncurrent)
Other assets
   
--
 
Total
   
$
188.6
 

Contract Liability
Location
 
Balance
 
Deferred revenue (current amount)
Other current liabilities
 
$
94.4
 
Deferred revenue (noncurrent)
Other long-term liabilities
   
191.2
 
Total
   
$
285.6
 

The following table presents significant changes in our unbilled revenue and deferred revenue balances during the nine months ended September 30, 2018:

   
Unbilled
Revenue
   
Deferred
Revenue
 
Balance at January 1, 2018 (upon adoption of ASC 606)
 
$
--
   
$
224.7
 
Amount included in opening balance transferred to other accounts during period (1)
   
--
     
(83.5
)
Amount recorded during period
   
224.1
     
334.3
 
Amounts recorded during period transferred to other accounts (1)
   
(37.7
)
   
(189.9
)
Amount recorded in connection with business combination
   
2.2
     
--
 
Balance at September 30, 2018
 
$
188.6
   
$
285.6
 
                 
(1)   Unbilled revenues are transferred to accounts receivable once we have an unconditional right to consideration from the customer. Deferred revenues are recognized as revenue upon satisfaction of our performance obligation to the customer.
 

Remaining Performance Obligations
The following table presents estimated fixed consideration from contracts with customers 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 at September 30, 2018.  For a significant portion of our revenue, we bill customers a contractual rate for the services provided multiplied by the amount of volume handled in a given period.  We have the right to invoice the customer in the amount that corresponds directly with the value of our performance completed to date.  Therefore, we are not required to disclose information about the variable consideration of remaining performance obligations as we recognize revenue equal to the amount that we have the right to invoice.

Remainder
of 2018
   
2019
   
2020
   
2021
   
2022
   
Thereafter
   
Total
 
$
816.6
   
$
3,361.4
   
$
3,036.9
   
$
2,528.8
   
$
2,050.0
   
$
8,718.0
   
$
20,511.7
 

Impact of Change in Accounting Policy – ASC 606 Transition Disclosures
The following information and tables are provided to summarize the material impacts of adopting ASC 606 on our consolidated financial statements for the three and nine months ended September 30, 2018.

As noted previously, additional service revenue and related inventory is now