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, 2020

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)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of Each Class
Trading Symbol(s)
Name of Each Exchange On Which Registered
Common Units
EPD
New York Stock Exchange

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 every Interactive Data File required to be submitted 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 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   
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 2,182,880,979 common units of Enterprise Products Partners L.P. outstanding at the close of business on October 31, 2020. 
ENTERPRISE PRODUCTS PARTNERS L.P.
TABLE OF CONTENTS

 
 
Page No.
 
 
2
 
3
 
4
 
5
 
6
 
 
 
8
 
9
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

PART I.  FINANCIAL INFORMATION.

ITEM 1.  FINANCIAL STATEMENTS.

EN TERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
   
September 30,
2020
   
December 31,
2019
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
1,032.2
   
$
334.7
 
Restricted cash
   
98.9
     
75.3
 
Accounts receivable – trade, net of allowance for doubtful accounts
of $13.8 at September 30, 2020 and $12.4 at December 31, 2019
   
3,776.2
     
4,873.6
 
Accounts receivable – related parties
   
4.1
     
2.5
 
Inventories
   
3,192.6
     
2,091.4
 
Derivative assets
   
132.9
     
127.2
 
Prepaid and other current assets
   
556.4
     
358.2
 
Total current assets
   
8,793.3
     
7,862.9
 
Property, plant and equipment, net
   
42,360.1
     
41,603.4
 
Investments in unconsolidated affiliates
   
2,485.4
     
2,600.2
 
Intangible assets, net of accumulated amortization of $1,796.8 at
September 30, 2020 and $1,687.5 at December 31, 2019 (see Note 6)
   
3,348.6
     
3,449.0
 
Goodwill (see Note 6)
   
5,745.2
     
5,745.2
 
Other assets
   
1,003.6
     
472.5
 
Total assets
 
$
63,736.2
   
$
61,733.2
 
 
               
LIABILITIES AND EQUITY
               
Current liabilities:
               
Current maturities of debt (see Note 7)
 
$
1,325.0
   
$
1,981.9
 
Accounts payable – trade
   
896.0
     
1,004.5
 
Accounts payable – related parties
   
121.3
     
162.3
 
Accrued product payables
   
4,317.1
     
4,915.7
 
Accrued interest
   
235.1
     
431.7
 
Derivative liabilities
   
329.7
     
122.4
 
Other current liabilities
   
622.7
     
511.2
 
Total current liabilities
   
7,846.9
     
9,129.7
 
Long-term debt (see Note 7)
   
28,537.0
     
25,643.2
 
Deferred tax liabilities (see Note 11)
   
463.3
     
100.4
 
Other long-term liabilities
   
735.2
     
1,032.4
 
Commitments and contingent liabilities (see Note 16)
   
     
 
Redeemable preferred limited partner interests: (see Note 8)
               
    Series A cumulative convertible preferred units (“preferred units”)
        (50,000 units outstanding at September 30, 2020)
   
49.1
         
Equity: (see Note 8)
               
Partners’ equity:
               
Common limited partner interests (2,182,880,979 units issued and outstanding at September 30, 2020, 2,189,226,130 units issued and outstanding at December 31, 2019)
   
26,381.9
     
24,692.6
 
Treasury units, at cost
   
(1,297.3
)
   
 
Accumulated other comprehensive income (loss)
   
(49.3
)
   
71.4
 
Total  partners’ equity
   
25,035.3
     
24,764.0
 
Noncontrolling interests in consolidated subsidiaries
   
1,069.4
     
1,063.5
 
Total equity
   
26,104.7
     
25,827.5
 
Total liabilities, preferred units, and equity
 
$
63,736.2
   
$
61,733.2
 



See Notes to Unaudited Condensed Consolidated Financial Statements.
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,
 
 
 
2020
   
2019
   
2020
   
2019
 
Revenues:
                       
Third parties
 
$
6,914.5
   
$
7,948.5
   
$
20,126.3
   
$
24,730.2
 
Related parties
   
7.5
     
15.6
     
29.2
     
53.7
 
Total revenues (see Note 9)
   
6,922.0
     
7,964.1
     
20,155.5
     
24,783.9
 
Costs and expenses:
                               
Operating costs and expenses:
                               
Third parties
   
5,288.2
     
6,217.6
     
15,087.4
     
19,342.4
 
Related parties
   
283.0
     
356.1
     
914.5
     
1,051.9
 
Total operating costs and expenses
   
5,571.2
     
6,573.7
     
16,001.9
     
20,394.3
 
General and administrative costs:
                               
Third parties
   
16.3
     
19.1
     
63.1
     
60.9
 
Related parties
   
34.0
     
36.4
     
99.7
     
99.3
 
Total general and administrative costs
   
50.3
     
55.5
     
162.8
     
160.2
 
Total costs and expenses (see Note 10)
   
5,621.5
     
6,629.2
     
16,164.7
     
20,554.5
 
Equity in income of unconsolidated affiliates
   
82.0
     
139.3
     
336.1
     
431.3
 
Operating income
   
1,382.5
     
1,474.2
     
4,326.9
     
4,660.7
 
Other income (expense):
                               
Interest expense
   
(320.5
)
   
(382.9
)
   
(958.2
)
   
(950.2
)
Change in fair market value of Liquidity Option (see Note 8)
   
     
(38.7
)
   
(2.3
)
   
(123.1
)
Interest income
   
2.2
     
6.9
     
12.3
     
8.9
 
Other, net
   
0.7
     
0.7
     
2.5
     
2.8
 
Total other expense, net
   
(317.6
)
   
(414.0
)
   
(945.7
)
   
(1,061.6
)
Income before income taxes
   
1,064.9
     
1,060.2
     
3,381.2
     
3,599.1
 
Benefit from (provision for) income taxes (see Note 11)
   
19.1
     
(15.4
)
   
138.6
     
(37.4
)
Net income
   
1,084.0
     
1,044.8
     
3,519.8
     
3,561.7
 
Net income attributable to noncontrolling interests
   
(31.4
)
   
(25.6
)
   
(82.4
)
   
(67.3
)
Net income attributable to preferred units (see Note 8)
   
-
*
   
     
-
*
   
 
Net income attributable to common unitholders
 
$
1,052.6
   
$
1,019.2
   
$
3,437.4
   
$
3,494.4
 
 
                               
* Amount is negligible
                               
                                 
Earnings per unit: (see Note 12)
                               
Basic earnings per common unit
 
$
0.48
   
$
0.46
   
$
1.56
   
$
1.59
 
Diluted earnings per common unit
 
$
0.48
   
$
0.46
   
$
1.56
   
$
1.59
 













See Notes to Unaudited Condensed Consolidated Financial Statements.

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,
 
 
 
2020
   
2019
   
2020
   
2019
 
 
                       
Net income
 
$
1,084.0
   
$
1,044.8
   
$
3,519.8
   
$
3,561.7
 
Other comprehensive income (loss):
                               
Cash flow hedges: (see Note 14)
                               
Commodity hedging derivative instruments:
                               
Changes in fair value of cash flow hedges
   
(4.2
)
   
72.3
     
392.7
     
58.6
 
Reclassification of losses (gains) to net income
   
29.5
     
(91.5
)
   
(334.8
)
   
(152.0
)
Interest rate hedging derivative instruments:
                               
Changes in fair value of cash flow hedges
   
62.6
     
(18.6
)
   
(207.7
)
   
(23.8
)
Reclassification of losses to net income
   
9.9
     
9.4
     
29.2
     
27.8
 
Total cash flow hedges
   
97.8
     
(28.4
)
   
(120.6
)
   
(89.4
)
Other
   
     
     
(0.1
)
   
(0.6
)
Total other comprehensive income (loss)
   
97.8
     
(28.4
)
   
(120.7
)
   
(90.0
)
Comprehensive income
   
1,181.8
     
1,016.4
     
3,399.1
     
3,471.7
 
Comprehensive income attributable to noncontrolling interests
   
(31.4
)
   
(25.6
)
   
(82.4
)
   
(67.3
)
Comprehensive income attributable to preferred units (see Note 8)
   
-
*
   
     
-
*
   
 
Comprehensive income attributable to common unitholders
 
$
1,150.4
   
$
990.8
   
$
3,316.7
   
$
3,404.4
 
  
* Amount is negligible




























See Notes to Unaudited Condensed Consolidated Financial Statements.

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

 
 
For the Nine Months
Ended September 30,
 
 
 
2020
   
2019
 
Operating activities:
           
Net income
 
$
3,519.8
   
$
3,561.7
 
Reconciliation of net income to net cash flows provided by operating activities:
               
Depreciation, amortization and accretion
   
1,545.1
     
1,456.7
 
Asset impairment and related charges
   
90.4
     
51.3
 
Equity in income of unconsolidated affiliates
   
(336.1
)
   
(431.3
)
Distributions received from unconsolidated affiliates attributable to earnings
   
337.4
     
431.2
 
Net gains attributable to asset sales
   
(2.1
)
   
(2.6
)
Deferred income tax expense (benefit)
   
(149.0
)
   
10.9
 
Change in fair market value of derivative instruments
   
(53.7
)
   
2.0
 
Change in fair market value of Liquidity Option
   
2.3
     
123.1
 
Non-cash expense related to long-term operating leases (see Note 16)
   
29.6
     
32.4
 
Net effect of changes in operating accounts (see Note 17)
   
(692.0
)
   
(409.0
)
Other operating activities
   
(0.1
)
   
(0.2
)
Net cash flows provided by operating activities
   
4,291.6
     
4,826.2
 
Investing activities:
               
Capital expenditures
   
(2,671.6
)
   
(3,302.1
)
Investments in unconsolidated affiliates
   
(9.9
)
   
(100.1
)
Distributions received from unconsolidated affiliates attributable to the return of capital
   
124.9
     
53.9
 
Proceeds from asset sales
   
8.4
     
16.8
 
Other investing activities
   
(16.0
)
   
(41.3
)
Cash used in investing activities
   
(2,564.2
)
   
(3,372.8
)
Financing activities:
               
Borrowings under debt agreements
   
6,672.1
     
44,629.6
 
Repayments of debt
   
(4,406.6
)
   
(42,855.3
)
Debt issuance costs
   
(46.3
)
   
(26.3
)
Monetization of interest rate derivative instruments
   
(33.3
)
   
 
Cash distributions paid to common unitholders (see Note 8)
   
(2,919.6
)
   
(2,871.1
)
Cash payments made in connection with distribution equivalent rights
   
(20.0
)
   
(16.4
)
Cash distributions paid to noncontrolling interests
   
(97.8
)
   
(69.7
)
Cash contributions from noncontrolling interests
   
21.2
     
590.8
 
Net cash proceeds from the issuance of common units
   
     
82.2
 
Repurchase of common units under 2019 Buyback Program (see Note 8)
   
(173.8
)
   
(81.1
)
Net cash proceeds from the issuance of preferred units (see Note 8)
   
32.5
     
 
Other financing activities
   
(34.7
)
   
(38.4
)
Cash used in financing activities
   
(1,006.3
)
   
(655.7
)
Net change in cash and cash equivalents, including restricted cash
   
721.1
     
797.7
 
Cash and cash equivalents, including restricted cash, at beginning of period
   
410.0
     
410.1
 
Cash and cash equivalents, including restricted cash, at end of period
 
$
1,131.1
   
$
1,207.8
 











See Notes to Unaudited Condensed Consolidated Financial Statements.


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 (see Note 8)
   
(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 (see Note 8)
   
1,297.3
     
     
     
     
1,297.3
 
   Treasury units acquired in connection with settlement
      of Liquidity Option, at cost (see Note 8)
   
     
(1,297.3
)
   
     
     
(1,297.3
)
   Common units exchanged for preferred units, with common
      units received being immediately cancelled (see Note 8)
   
(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.
ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019
(Dollars in millions)

 
 
Partners’ Equity
             
   
Common
Limited
Partner
Interests
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Noncontrolling
Interests in
Consolidated
Subsidiaries
   
Total
 
For the Three Months Ended September 30, 2019:
                       
     Balance, June 30, 2019
 
$
24,450.5
   
$
(10.7
)
 
$
535.6
   
$
24,975.4
 
   Net income
   
1,019.2
     
     
25.6
     
1,044.8
 
   Cash distributions paid to common unitholders
   
(963.2
)
   
     
     
(963.2
)
   Cash payments made in connection with distribution equivalent rights
   
(5.9
)
   
     
     
(5.9
)
   Cash distributions paid to noncontrolling interests
   
     
     
(22.8
)
   
(22.8
)
   Cash contributions from noncontrolling interests
   
     
     
491.2
     
491.2
 
   Amortization of fair value of equity-based awards
   
36.7
     
     
     
36.7
 
   Cash flow hedges
   
     
(28.4
)
   
     
(28.4
)
   Other, net
   
(2.2
)
   
     
(0.1
)
   
(2.3
)
    Balance, September 30, 2019
 
$
24,535.1
   
$
(39.1
)
 
$
1,029.5
   
$
25,525.5
 


 
 
Partners’ Equity
             
   
Common
Limited
Partner
Interests
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Noncontrolling
Interests in
Consolidated
Subsidiaries
   
Total
 
For the Nine Months Ended September 30, 2019:
                       
     Balance, December 31, 2018
 
$
23,802.6
   
$
50.9
   
$
438.7
   
$
24,292.2
 
   Net income
   
3,494.4
     
     
67.3
     
3,561.7
 
   Cash distributions paid to common unitholders
   
(2,871.1
)
   
     
     
(2,871.1
)
   Cash payments made in connection with distribution equivalent rights
   
(16.4
)
   
     
     
(16.4
)
   Cash distributions paid to noncontrolling interests
   
     
     
(69.7
)
   
(69.7
)
   Cash contributions from noncontrolling interests
   
     
     
590.8
     
590.8
 
   Net cash proceeds from the issuance of common units
   
82.2
     
     
     
82.2
 
   Common units issued in connection with employee compensation
   
45.6
     
     
     
45.6
 
   Repurchase and cancellation of common units under
      2019 Buyback Program (see Note 8)
   
(81.1
)
   
     
     
(81.1
)
   Amortization of fair value of equity-based awards
   
107.2
     
     
     
107.2
 
   Cash flow hedges
   
     
(89.4
)
   
     
(89.4
)
   Other, net
   
(28.3
)
   
(0.6
)
   
2.4
     
(26.5
)
    Balance, September 30, 2019
 
$
24,535.1
   
$
(39.1
)
 
$
1,029.5
   
$
25,525.5
 
















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

7


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

With the exception of per unit amounts, or as noted within the context of each disclosure,
the dollar amounts presented in the tabular data within these disclosures are
stated in millions of dollars.

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

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

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

References to “EPCO” mean Enterprise Products Company, a privately held Texas corporation, and its privately held affiliates.  A majority of the outstanding voting capital stock of EPCO is owned by a voting trust, the current trustees (“EPCO Trustees”) of which are:  (i) Ms. Duncan Williams, who serves as Chairman of EPCO; (ii) Dr. Cunningham, who serves as Vice Chairman of EPCO; and (iii) Mr. Bachmann, who serves as the President and Chief Executive Officer of EPCO.  Ms. Duncan Williams and Mr. Bachmann also currently serve as directors of EPCO along with Mr. Fowler, who is also the Executive Vice President and Chief Financial Officer of EPCO. EPCO, together with its privately held affiliates, owned approximately 32.2% of EPD’s common units outstanding and 30% of its preferred units outstanding at September 30, 2020.  See Note 8 for information regarding our issuance of preferred units on September 30, 2020.


Note 1.  Partnership Organization and Basis of Presentation

The Partnership is 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.”  The Partnership’s 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. 

The Partnership is owned by its limited partners (preferred and common unitholders) from an economic perspective.   Enterprise GP, which owns a non-economic general partner interest in the Partnership, manages our operations. The Partnership conducts substantially all of its business through EPO.  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, 2020 are not necessarily indicative of results expected for the full year of 2020.  In our opinion, the accompanying Unaudited Condensed Consolidated Financial Statements include all adjustments consisting of normal recurring accruals necessary for fair presentation.  Although we believe the disclosures in these financial statements are adequate and make the information presented not misleading, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

8


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

These Unaudited Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto included in our annual report on Form 10-K for the year ended December 31, 2019  (the “2019 Form 10-K”) filed with the SEC on February 28, 2020.


Note 2.  Summary of Significant Accounting Policies

Apart from those matters noted below, there have been no changes in our significant accounting policies since those reported under Note 2 of the 2019 Form 10-K.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents, and restricted cash reported within the Unaudited Condensed Consolidated Balance Sheets that sum to the total of the amounts shown in the Unaudited Condensed Statements of Consolidated Cash Flows.

   
September 30,
2020
   
December 31,
2019
 
Cash and cash equivalents
 
$
1,032.2
   
$
334.7
 
Restricted cash
   
98.9
     
75.3
 
Total cash, cash equivalents and restricted cash shown in the
  Unaudited Condensed Statements of Consolidated Cash Flows
 
$
1,131.1
   
$
410.0
 

Restricted cash primarily represents amounts held in segregated bank accounts by our clearing brokers as margin in support of our commodity derivative instruments portfolio and related physical purchases and sales of natural gas, NGLs, crude oil, refined products and power.  Additional cash may be restricted to maintain our commodity derivative instruments portfolio as prices fluctuate or margin requirements change.  See Note 14 for information regarding our derivative instruments and hedging activities.

Recent Accounting Developments

Credit Losses
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The new guidance, referred to as the current expected credit loss model, requires the measurement of  expected credit losses for financial assets (e.g., accounts receivable) held at the reporting date based on historical experience, current economic conditions, and reasonable and supportable forecasts.  These result in the more timely recognition of losses.  The adoption of this new guidance on January 1, 2020 did not have a material impact on our consolidated financial statements.

Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which amended the disclosure requirements related to fair value measurements in an effort to enhance the overall usefulness of the disclosures and reduce costs by eliminating certain disclosures that were not considered to be decision-useful for users of the financial statements.  The ASU will now require incremental disclosures regarding changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and measurement uncertainty.  Additionally, the ASU eliminated certain policy and process disclosures and reporting requirements.

The adoption of this new guidance on January 1, 2020 did not have a material impact on our consolidated financial statements.  See Note 14 for information regarding our fair value measurements.
9


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


Goodwill
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.  We adopted this guidance on January 1, 2020 for future goodwill impairment testing.


Note 3.  Inventories

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

   
September 30,
2020
   
December 31,
2019
 
NGLs
 
$
1,678.1
   
$
1,094.9
 
Petrochemicals and refined products
   
800.8
     
311.5
 
Crude oil
   
696.1
     
674.2
 
Natural gas
   
17.6
     
10.8
 
Total
 
$
3,192.6
   
$
2,091.4
 

Inventories of NGLs, refined products and crude oil increased since December 31, 2019 primarily due to the use of working capital in connection with our marketing activities.

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,
 
 
2020
 
2019
 
2020
 
2019
 
Cost of sales (1)
 
$
4,313.7
   
$
5,276.5
   
$
12,331.9
   
$
16,721.5
 
Lower of cost or net realizable value adjustments
   recognized in cost of sales
   
4.4
     
6.8
     
55.6
     
17.1
 

(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.



10


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,
2020
   
December 31,
2019
 
Plants, pipelines and facilities (1)
   
3-45
(5)
 
$
49,050.9
   
$
47,201.2
 
Underground and other storage facilities (2)
   
5-40
(6)
   
4,133.7
     
3,965.5
 
Transportation equipment (3)
   
3-10
     
204.1
     
198.9
 
Marine vessels (4)
   
15-30
     
928.9
     
905.9
 
Land
           
376.7
     
372.3
 
Construction in progress
           
2,468.9
     
2,641.2
 
Total
           
57,163.2
     
55,285.0
 
Less accumulated depreciation
           
14,803.1
     
13,681.6
 
Property, plant and equipment, net
         
$
42,360.1
   
$
41,603.4
 

(1)
Plants, pipelines and facilities include processing plants; NGL, natural gas, crude oil and petrochemical and refined products pipelines; terminal loading and unloading facilities; buildings; office furniture and equipment; laboratory and shop equipment and related assets.
(2)
Underground and other storage facilities include underground product storage caverns; above ground storage tanks; water wells and related assets.
(3)
Transportation equipment includes tractor-trailer tank trucks and other vehicles and similar assets used in our operations.
(4)
Marine vessels include tow boats, barges and related equipment used in our marine transportation business.
(5)
In general, the estimated useful lives of major assets within this category are: processing plants, 20-35 years; pipelines and related equipment, 5-45 years; terminal facilities, 10-35 years; buildings, 20-40 years; office furniture and equipment, 3-20 years; and laboratory and shop equipment, 5-35 years.
(6)
In general, the estimated useful lives of assets within this category are: underground storage facilities, 5-35 years; storage tanks, 10-40 years; and water wells, 5-35 years.

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

 
For the Three Months
Ended September 30,
 
For the Nine Months
Ended September 30,
 
 
2020
 
2019
 
2020
 
2019
 
Depreciation expense (1)
 
$
420.7
   
$
394.7
   
$
1,251.6
   
$
1,164.6
 
Capitalized interest (2)
   
34.5
     
33.9
     
96.9
     
102.9
 

(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.


11


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

Asset impairment charges and related matters

We recognized non-cash asset impairment charges of $77.0 million and $90.4 million during the three and nine months ended September 30, 2020, respectively, primarily due to the complete write-off of assets that would no longer be used or constructed.  These charges include the $42.0 million of expense we recognized in September 2020 in connection with our cancellation of the Midland-to-ECHO 4 pipeline construction project. We recognized impairment charges of $39.4 million and $51.2 million during the three and nine months ended September 30, 2019, respectively, primarily due to the complete write-off of assets that would no longer be used.  These impairment charges are a component of “Operating costs and expenses” on our Unaudited Condensed Statements of Consolidated Operations. We recognized $0.1 million of impairment charges in the three and nine months ended September 30, 2019 that are a component of general and administrative costs.

We are closely monitoring the recoverability of our long-lived assets 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 additional non-cash impairment charges in the future.

In connection with our cancellation of the Midland-to-ECHO 4 pipeline project, we reclassified $311.7 million of pipe and related items that were purchased for the project from construction in progress to long-term spare parts, where they will be held for future use.  Long-term spare parts is a component of “Other assets” as presented on our Unaudited Condensed Consolidated Balance Sheet.

Asset Retirement Obligations

Property, plant and equipment at September 30, 2020 and December 31, 2019 includes $70.2 million and $69.6 million, respectively, of asset retirement costs capitalized as an increase in the associated long-lived asset.  The following table presents information regarding our asset retirement obligations, or AROs, since December 31, 2019:

ARO liability balance, December 31, 2019
 
$
132.1
 
Liabilities incurred
   
3.5
 
Liabilities settled
   
(0.6
)
Revisions in estimated cash flows
   
2.9
 
Accretion expense
   
6.1
 
ARO liability balance, September 30, 2020
 
$
144.0
 


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,
2020
   
December 31,
2019
 
NGL Pipelines & Services
 
$
676.4
   
$
703.8
 
Crude Oil Pipelines & Services
   
1,774.8
     
1,866.5
 
Natural Gas Pipelines & Services
   
29.9
     
27.3
 
Petrochemical & Refined Products Services
   
4.3
     
2.6
 
Total
 
$
2,485.4
   
$
2,600.2
 

The following table presents our equity in income (loss) of unconsolidated affiliates by business segment for the periods indicated:

   
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
NGL Pipelines & Services
 
$
29.3
   
$
25.9
   
$
90.8
   
$
82.7
 
Crude Oil Pipelines & Services
   
51.8
     
113.2
     
243.2
     
348.8
 
Natural Gas Pipelines & Services
   
1.4
     
1.6
     
4.3
     
4.9
 
Petrochemical & Refined Products Services
   
(0.5
)
   
(1.4
)
   
(2.2
)
   
(5.1
)
Total
 
$
82.0
   
$
139.3
   
$
336.1
   
$
431.3
 


12


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, 2020
   
December 31, 2019
 
 
 
Gross
Value
   
Accumulated
Amortization
   
Carrying
Value
   
Gross
Value
   
Accumulated
Amortization
   
Carrying
Value
 
NGL Pipelines & Services:
                                   
Customer relationship intangibles
 
$
447.8
   
$
(217.0
)
 
$
230.8
   
$
447.8
   
$
(206.3
)
 
$
241.5
 
Contract-based intangibles
   
162.6
     
(52.2
)
   
110.4
     
162.6
     
(43.9
)
   
118.7
 
Segment total
   
610.4
     
(269.2
)
   
341.2
     
610.4
     
(250.2
)
   
360.2
 
Crude Oil Pipelines & Services:
                                               
Customer relationship intangibles
   
2,203.5
     
(287.5
)
   
1,916.0
     
2,203.5
     
(243.5
)
   
1,960.0
 
Contract-based intangibles
   
283.1
     
(246.7
)
   
36.4
     
276.9
     
(235.0
)
   
41.9
 
Segment total
   
2,486.6
     
(534.2
)
   
1,952.4
     
2,480.4
     
(478.5
)
   
2,001.9
 
Natural Gas Pipelines & Services:
                                               
Customer relationship intangibles
   
1,350.3
     
(504.2
)
   
846.1
     
1,350.3
     
(481.6
)
   
868.7
 
Contract-based intangibles
   
470.7
     
(401.7
)
   
69.0
     
468.0
     
(395.5
)
   
72.5
 
Segment total
   
1,821.0
     
(905.9
)
   
915.1
     
1,818.3
     
(877.1
)
   
941.2
 
Petrochemical & Refined Products Services:
                                               
Customer relationship intangibles
   
181.4
     
(62.2
)
   
119.2
     
181.4
     
(57.5
)
   
123.9
 
Contract-based intangibles
   
46.0
     
(25.3
)
   
20.7
     
46.0
     
(24.2
)
   
21.8
 
Segment total
   
227.4
     
(87.5
)
   
139.9
     
227.4
     
(81.7
)
   
145.7
 
Total intangible assets
 
$
5,145.4
   
$
(1,796.8
)
 
$
3,348.6
   
$
5,136.5
   
$
(1,687.5
)
 
$
3,449.0
 

The following table presents the amortization expense of our intangible assets by business segment for the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2020
   
2019
   
2020
   
2019
 
NGL Pipelines & Services
 
$
6.2
   
$
7.3
   
$
19.0
   
$
25.4
 
Crude Oil Pipelines & Services
   
16.0
     
25.1
     
55.7
     
71.2
 
Natural Gas Pipelines & Services
   
9.0
     
10.3
     
28.8
     
31.2
 
Petrochemical & Refined Products Services
   
1.9
     
2.1
     
5.8
     
6.5
 
Total
 
$
33.1
   
$
44.8
   
$
109.3
   
$
134.3
 

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

Remainder
of 2020
   
2021
   
2022
   
2023
   
2024
 
$
45.1
   
$
145.5
   
$
162.3
   
$
169.9
   
$
165.7
 

Goodwill

Goodwill represents the excess of the purchase price of an acquired business over the amounts assigned to assets acquired and liabilities assumed in the transaction.  There has been no change in our goodwill amounts since those reported in our 2019 Form 10-K.

We are closely monitoring the recoverability of our long-lived assets, which include goodwill, in light of the COVID-19 pandemic (see Note 4).
  

13


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,
2020
   
December 31,
2019
 
EPO senior debt obligations:
           
Commercial Paper Notes, variable-rates
 
$
   
$
482.0
 
Senior Notes Q, 5.25% fixed-rate, due January 2020
   
     
500.0
 
Senior Notes Y, 5.20% fixed-rate, due September 2020
   
     
1,000.0
 
Senior Notes TT, 2.80% fixed-rate, due February 2021
   
750.0
     
750.0
 
Senior Notes RR, 2.85% fixed-rate, due April 2021
   
575.0
     
575.0
 
September 2020 364-Day Revolving Credit Agreement, variable-rate, due September 2021
   
     
 
Senior Notes VV, 3.50% fixed-rate, due February 2022
   
750.0
     
750.0
 
Senior Notes CC, 4.05% fixed-rate, due February 2022
   
650.0
     
650.0
 
Senior Notes HH, 3.35% fixed-rate, due March 2023
   
1,250.0
     
1,250.0
 
Senior Notes JJ, 3.90% fixed-rate, due February 2024
   
850.0
     
850.0
 
Multi-Year Revolving Credit Agreement, variable-rate, due September 2024
   
     
 
Senior Notes MM, 3.75% fixed-rate, due February 2025
   
1,150.0
     
1,150.0
 
Senior Notes PP, 3.70% fixed-rate, due February 2026
   
875.0
     
875.0
 
Senior Notes SS, 3.95% fixed-rate, due February 2027
   
575.0
     
575.0
 
Senior Notes WW, 4.15% fixed-rate, due October 2028
   
1,000.0
     
1,000.0
 
Senior Notes YY, 3.125% fixed-rate, due July 2029
   
1,250.0
     
1,250.0
 
Senior Notes AAA, 2.80% fixed-rate, due January 2030
   
1,250.0
     
 
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
     
 
Senior Notes DDD, 3.20% fixed-rate, due February 2052
   
1,000.0
     
 
Senior Notes NN, 4.95% fixed-rate, due October 2054
   
400.0
     
400.0
 
Senior Notes CCC, 3.95% fixed rate, due January 2060
   
1,000.0
     
 
TEPPCO senior debt obligations:
               
TEPPCO Senior Notes, 7.55% fixed-rate, due April 2038
   
0.4
     
0.4
 
Total principal amount of senior debt obligations
   
27,500.0
     
25,232.0
 
EPO Junior Subordinated Notes C, variable-rate, due June 2067 (1)
   
232.2
     
232.2
 
EPO Junior Subordinated Notes D, fixed/variable-rate, due August 2077 (2)
   
700.0
     
700.0
 
EPO Junior Subordinated Notes E, fixed/variable-rate, due August 2077 (3)
   
1,000.0
     
1,000.0
 
EPO Junior Subordinated Notes F, fixed/variable-rate, due February 2078 (4)
   
700.0
     
700.0
 
TEPPCO Junior Subordinated Notes, variable-rate, due June 2067 (1)
   
14.2
     
14.2
 
Total principal amount of senior and junior debt obligations
   
30,146.4
     
27,878.4
 
Other, non-principal amounts
   
(284.4
)
   
(253.3
)
Less current maturities of debt
   
(1,325.0
)
   
(1,981.9
)
Total long-term debt
 
$
28,537.0
   
$
25,643.2
 

(1)
Variable rate is reset quarterly and based on 3-month London Interbank Offered Rate ("LIBOR"), plus 2.778%.
(2)
Fixed rate of 4.875% through August 15, 2022; thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 2.986%.
(3)
Fixed rate of 5.250% through August 15, 2027; thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 3.033%.
(4)
Fixed rate of 5.375% through February 14, 2028; thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 2.57%.

References to “TEPPCO” mean TEPPCO Partners, L.P. prior to its merger with one of our wholly owned subsidiaries in October 2009.
14


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, 2020:

Range of Interest
Rates Paid
Weighted-Average
Interest Rate Paid
Commercial Paper Notes
1.78% to 2.08%
1.86%
EPO Junior Subordinated Notes C and TEPPCO Junior Subordinated Notes
3.02% to 4.68%
3.87%

Amounts borrowed under EPO’s 364-Day and Multi-Year Revolving Credit Agreements bear interest, at its election, equal to: (i) LIBOR, plus an additional variable spread; or (ii) an alternate base rate, which is the greater of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 0.5%, or (c) the LIBO Market Index Rate in effect on such day plus 1% and a variable spread. The applicable spreads are determined based on EPO's debt ratings.

The following table presents the scheduled maturities of principal amounts of EPO’s consolidated debt obligations at September 30, 2020 for the next five years and in total thereafter:

 
       
Scheduled Maturities of Debt
 
 
 
Total
   
Remainder
of 2020
   
2021
   
2022
   
2023
   
2024
   
Thereafter
 
Principal amount of senior and junior debt obligations
 
$
30,146.4
   
$
   
$
1,325.0
   
$
1,400.0
   
$
1,250.0
   
$
850.0
   
$
25,321.4
 

September 2020 364-Day Revolving Credit Agreement

In September 2020, EPO entered into a new 364-Day Revolving Credit Agreement that replaced its September 2019 364-Day Revolving Credit Agreement.  The new 364-Day Revolving Credit Agreement matures in September 2021. There was no principal amount outstanding under the September 2019 364-Day Revolving Credit Agreement when it expired and was replaced by the September 2020 364-Day Revolving Credit Agreement.

Under the terms of the September 2020 364-Day Revolving Credit Agreement, EPO may borrow up to $1.5 billion (which may be increased by up to $200 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.  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 2022. Borrowings under the September 2020 364-Day Revolving Credit Agreement may be used for working capital, capital expenditures, acquisitions and general company purposes.

The September 2020 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 2020 364-Day Revolving 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 September 2020 364-Day Revolving Credit Agreement are not secured by any collateral; however, they are guaranteed by Enterprise Products Partners L.P.

15


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


August 2020 Senior Notes Offering

In August 2020, EPO issued $1.0 billion in principal amount of 3.20% senior notes due February 2052 (“Senior Notes DDD”) and $250.0 million in principal amount of 2.80% reopened Senior Notes AAA (as defined below).  The reopened Senior Notes AAA and the Senior Notes DDD were issued at 107.211% and 99.233% of their principal amounts, respectively.

We received aggregate net proceeds of $1.25 billion from the sale of the notes after deducting underwriting discounts and other estimated offering expenses payable by us.  Net proceeds from the issuance of these senior notes will be used for general company purposes, including for growth capital investments, and to repay all or part of $750.0 million in principal amount of Senior Notes TT, which mature in February 2021.

The reopened Senior Notes AAA represent a re-opening of an outstanding series of EPO’s senior notes. EPO originally issued $1.0 billion principal amount of Senior Notes AAA on January 15, 2020. The reopened Senior Notes AAA form a single series with the original notes of that series, trade under the same CUSIP number, and have the same terms as to status, redemption or otherwise as the original notes of that series.

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. 

April 2020 364-Day Revolving Credit Agreement

In April 2020, EPO entered into an additional 364-day revolving credit agreement (the “April 2020 364-Day Revolving Credit Agreement”). The new agreement provided EPO with an incremental $1.0 billion of borrowing capacity at a variable interest rate for a term of 364 days, subject to the terms and conditions set forth therein.

Following execution of the September 2020 364-Day Revolving Credit Agreement, EPO terminated the April 2020 364-Day Revolving Credit Agreement on September 11, 2020.

January 2020 Senior Notes Offering

In January 2020, EPO issued $3.0 billion aggregate principal amount of senior notes comprised of (i) $1.0 billion principal amount of senior notes due January 2030 (“Senior Notes AAA”), (ii) $1.0 billion principal amount of senior notes due January 2051 (“Senior Notes BBB”) and (iii) $1.0 billion principal amount of senior notes due January 2060 (“Senior Notes CCC”).   Net proceeds from this offering were used by EPO for the repayment of $500 million principal amount of its Senior Notes Q that matured in January 2020, temporary repayment of amounts outstanding under its commercial paper program and for general company purposes.  In addition, net proceeds from this offering were used by EPO for the repayment of $1.0 billion principal amount of its Senior Notes Y that matured in September 2020.

Senior Notes AAA were issued at 99.921% of their principal amount and have a fixed-rate interest rate of 2.80% per year.  Senior Notes BBB were issued at 99.413% of their principal amount and have a fixed-rate interest rate of 3.70% per year.  Senior Notes CCC were issued at 99.360% of their principal amount and have a fixed-rate interest rate of 3.95% per year.  EPD guaranteed these senior notes through an unconditional guarantee on an unsecured and unsubordinated basis.

Lender Financial Covenants

We were in compliance with the financial covenants of our consolidated debt agreements at September 30, 2020.

Letters of Credit

At September 30, 2020, EPO had $200.7 million of letters of credit outstanding primarily related to our commodity hedging activities.

16


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


Parent-Subsidiary Guarantor Relationships

EPD acts as guarantor of the consolidated debt obligations of EPO, with the exception of the remaining debt obligations of TEPPCO.  If EPO were to default on any of its guaranteed debt, EPD would be responsible for full and unconditional repayment of that obligation.


Note 8.  Capital Accounts

Common Limited Partner Interests

The following table summarizes changes in the number of our common units outstanding since December 31, 2019:

Common units outstanding at December 31, 2019
   
2,189,226,130
 
Common units issued to Skyline North Americas, Inc. in connection with
   settlement of Liquidity Option in March 2020
   
54,807,352
 
Treasury units acquired in connection with settlement of Liquidity Option in March 2020
   
(54,807,352
)
Common unit repurchases under 2019 Buyback Program
   
(6,357,739
)
Common units issued in connection with the vesting of phantom unit awards, net
   
2,912,214
 
Other
   
19,638
 
Common units outstanding at March 31, 2020
   
2,185,800,243
 
Common units issued in connection with the vesting of phantom unit awards, net
   
96,190
 
Common units outstanding at June 30, 2020
   
2,185,896,433
 
Common units exchanged for preferred units in September 2020,
   with the common units received being immediately cancelled
   
(1,120,588
)
Common unit repurchases under 2019 Buyback Program
   
(1,984,507
)
Common units issued in connection with the vesting of phantom unit awards, net
   
89,641
 
Units outstanding at September 30, 2020
   
2,182,880,979
 

Registration Statements
We have a universal shelf registration statement (the “2019 Shelf”) on file with the SEC which allows the Partnership and EPO to issue an unlimited amount of equity and debt securities, respectively. EPO issued $4.25 billion of senior notes during 2020 using the 2019 Shelf (see Note 7).

In addition, EPD has a registration statement on file with the SEC covering the issuance of up to $2.54 billion of its common units in amounts, at prices and on terms to be determined by market conditions and other factors at the time of such offerings in connection with its at-the-market (“ATM”) program.  During the nine months ended September 30, 2020 and 2019, EPD did not issue any common units under its ATM program.  After taking into account the aggregate sales price of common units sold under the ATM program through September 30, 2020, EPD has the capacity to issue additional common units under its ATM program up to an aggregate sales price of $2.54 billion. The existing ATM registration statement expires in November 2020, at which time we expect to file a replacement ATM registration statement with the SEC in order to maintain our financial flexibility.

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

March 2020 Issuance of Common Units to Skyline North Americas, Inc. and related acquisition of Treasury Units
In February 2020, the Partnership received notice from Marquard & Bahls AG (“M&B”) of M&B’s election to exercise its rights (the “Liquidity Option”) under the Liquidity Option Agreement among the Partnership, OTA Holdings, Inc., a Delaware corporation previously named Oiltanking Holding Americas, Inc. (“OTA”), and M&B dated October 1, 2014 (the “Liquidity Option Agreement”).  On March 5, 2020, the Partnership settled its obligations under the Liquidity Option Agreement by issuing 54,807,352 new common units to Skyline North Americas, Inc. (“Skyline,” an affiliate of M&B) in exchange for the capital stock of OTA.   As a result of the settlement, OTA became a consolidated subsidiary of ours and we indirectly acquired the 54,807,352 Partnership common units owned by OTA (which were issued by the Partnership to OTA in October 2014) and assumed all future income tax obligations of OTA, including its deferred tax liability.  At March 5, 2020, OTA’s assets and liabilities consisted primarily of the Partnership common units it owned and the related deferred tax liability, respectively.

17


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


At March 5, 2020, the Partnership’s accrual for the Liquidity Option liability was $511.9 million.  The Liquidity Option liability, at any measurement date, represented the fair value of estimated federal and state income taxes that we believe a market participant would assume due to ownership of OTA, including its deferred income tax liabilities.  OTA’s deferred tax liability at March 5, 2020 was $439.7 million.  The market value of the common units issued by the Partnership to Skyline was $1.30 billion based on a closing price of $23.67 per unit on March 5, 2020.

The common units issued to Skyline upon settlement of the Liquidity Option constitute “restricted securities” in the meaning of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”) and may not be resold except pursuant to an effective registration statement or an available exemption under the Securities Act.  In connection with the settlement of the Liquidity Option, the Partnership entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with Skyline. Pursuant to the Registration Rights Agreement, Skyline has the right to request that the Partnership prepare and file a registration statement to permit and otherwise facilitate the public resale of all or a portion of the Partnership’s common units owned by Skyline and its affiliates.  The Partnership’s obligation to Skyline to effect such transactions is limited to five registration statements and underwritten offerings.  In May 2020, the Partnership filed a registration statement on behalf of Skyline for the resale of up to 54,807,352 common units. This registration statement is effective and, in June 2020, the Partnership filed a prospectus supplement to this registration statement that allows Skyline to sell up to $500 million of the Partnership’s common units it owns in connection with an “at-the-market” program that it administers.   We do not receive any proceeds from such offerings.

As a result of the Liquidity Option settlement, the partners’ equity balance for common units (as presented on our Unaudited Condensed Consolidated Balance Sheet) increased by $1.30 billion, representing the market value of the Partnership’s common units issued to Skyline.

Since OTA does not meet the definition of a business as described in Accounting Standards Codification (“ASC”) 805, Business Combinations, the OTA transaction was accounted for as the reacquisition of limited partner units and the assumption of OTA’s related deferred tax liability by the Partnership.  In consolidation, we present the limited partner units owned by OTA as treasury units, with their historical cost equal to the $1.30 billion market value of the Partnership common units issued to Skyline.  On September 30, 2020, OTA exchanged the common units it holds for preferred units issued by the Partnership.  For information regarding the preferred units and exchange transaction, see “Redeemable Preferred Limited Partner Interests” within this Note 8.

Upon settlement of the Liquidity Option, the Liquidity Option liability was effectively replaced by the deferred tax liability of OTA as calculated in accordance with ASC 740, Income Taxes.  See Note 11 for additional information regarding OTA’s deferred tax liability.

Prior to March 5, 2020, changes in the estimated fair value of the Liquidity Option liability were recognized in earnings as a component of other income (expense) on our Unaudited Condensed Statements of Consolidated Operations.  We recognized $2.3 million of expense for the period January 1, 2020 to March 5, 2020 attributable to changes in the estimated fair value of the Liquidity Option.  We recognized $38.7 million and $123.1 million of such expense for the three and nine months ended September 30, 2019, respectively.

Common Unit Repurchases Under 2019 Buyback Program
In January 2019, we announced that the Board 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.  The timing and pace of buy backs under the program will be determined by a number of factors including (i) our financial performance and flexibility, (ii) organic growth and acquisition opportunities with higher potential returns on investment, (iii) the Partnership’s unit market price and implied cash flow yield and (iv) maintaining targeted financial leverage with a debt-to-normalized adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of approximately 3.5 times. No time limit has been set for completion of the program, and it may be suspended or discontinued at any time.

18


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


The Partnership repurchased an aggregate 8,342,246 common units under the 2019 Buyback Program through open market and private purchases during the nine months ended September 30, 2020.  The total purchase price of these repurchases was $173.8 million including commissions and fees. During the nine months ended September 30, 2019, the Partnership repurchased 2,909,128 common units under the 2019 Buyback Program for a total purchase price of $81.1 million including commissions and fees.  Units repurchased under the 2019 Buyback Program are immediately cancelled upon acquisition.

At September 30, 2020, the remaining available capacity under the 2019 Buyback Program was $1.75 billion.

Common Units Issued in Connection With the Vesting of Phantom Unit Awards
During the nine months ended September 30, 2020, after taking into account tax withholding requirements, the Partnership issued a net 3,098,045 new common units to employees in connection with the vesting of phantom unit awards.  See Note 13 for information regarding our phantom unit awards.

Common Units Delivered Under DRIP and EUPP
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, 2020, a total of 5,148,468 common units were purchased on the open market and delivered to participants in connection with the DRIP and EUPP.  Apart from $1.8 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, 2020.

Redeemable Preferred Limited Partner Interests

On September 30, 2020, the Partnership issued and sold an aggregate of 50,000 Series A Cumulative Convertible Preferred Units in a private placement transaction.  The stated value of each preferred unit is $1,000 per unit.  The total offering price for the preferred units was $50.0 million, of which $32.5 million was received in cash with the remaining $17.5 million funded through the exchange of 1,120,588 of the Partnership’s common units owned by the purchasers.  Cash proceeds from the preferred unit offering include $15.0 million received from a privately held affiliate of EPCO for the purchase of 15,000 preferred units.

Concurrently, the Partnership exchanged all of the 54,807,352 Partnership common units owned directly by OTA for 855,915 of the Partnership’s new preferred units having an equivalent value.  The preferred units held by OTA, like the common units OTA held prior to the exchange, are accounted for as treasury units by the Partnership in consolidation.  The historical cost of the treasury units did not change as a result of the exchange and remains at the $1.30 billion recognized in March 2020 in connection with settlement of the Liquidity Option.
19


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


The preferred units represent a new class of limited partner interests authorized under the Partnership’s Seventh Amended and Restated Agreement of Limited Partnership dated September 30, 2020 (the “Amended Partnership Agreement”).  As described in the Amended Partnership Agreement, key terms of the preferred units include the following:

With respect to distribution and liquidation rights, the preferred units rank senior to the Partnership’s common units. Preferred units held by persons other than the Partnership, its subsidiaries and its affiliates generally will vote on an as-converted basis with the Partnership’s common units and have certain class voting rights with respect to certain protective matters.

Holders of the preferred units are entitled to receive cumulative quarterly distributions at a rate of 7.25% per annum. The Partnership is prohibited from paying distributions on its common units unless full cumulative distributions on the preferred units are paid or set aside for payment. The Partnership may satisfy its obligation to pay distributions to the preferred unitholders through the issuance, in whole or in part, of additional preferred units (referred to as paid-in kind or “PIK” distributions), with the remainder in cash, subject to certain rights of a holder to elect all cash and other conditions as described in the Amended Partnership Agreement.  The exchange by OTA of its common units for PIK-eligible preferred units enables the Partnership to more effectively manage its consolidated cash balances.

Subject to certain limitations, each preferred unitholder may elect to convert its preferred units on or after September 30, 2025 into a number of the Partnership’s common units equal to (a) the number of preferred units to be converted multiplied by (b) the quotient of (i) $1,000 plus any accrued and unpaid distributions per preferred unit, divided by (ii) 92.5% of the volume-weighted average price of the Partnership’s common units at the time of conversion (as defined in the underlying agreements). In addition, each preferred unitholder may convert its preferred units into common units if EPO’s senior notes cease to have an investment grade rating or a Change of Control (as defined in the Amended Partnership Agreement) occurs, in each case based on the conversion ratio specified in the Amended Partnership Agreement.

The Partnership may elect to redeem the preferred units for cash, in whole or in part, based on a redemption price outlined in the following schedule, plus any accrued and unpaid distributions at the redemption date:

$1,100 per preferred unit from September 30, 2020 through September 29, 2022;
$1,070 per preferred unit from September 30, 2022 through September 29, 2024;
$1,030 per preferred unit from September 30, 2024 through September 29, 2025;
$1,010 per preferred unit from September 30, 2025 through September 29, 2026; and
$1,000 per preferred unit on or after September 30, 2026; however,
if a Change of Control event occurs prior to September 30, 2026, the redemption price is $1,010 per preferred unit.

In connection with a redemption at the Partnership’s election, the Partnership may convert up to 50% of the preferred units being redeemed into common units (and to pay cash with respect to the remainder), with each such preferred unit being converted on the applicable redemption date into a number of common units equal to (i) the then-applicable preferred unit redemption price divided by (ii) 92.5% of the volume-weighted average price of the Partnership’s common units at the time of conversion (as defined in the underlying agreements).

The Partnership has agreed to prepare and file a registration statement that would permit or otherwise facilitate the public resale of any common units resulting from the conversion of the preferred units to common units.

Our Unaudited Condensed Consolidated Balance Sheet at September 30, 2020 presents the capital accounts of the third-party and related party purchasers of the preferred units as mezzanine equity since the terms of the preferred units allow for cash redemption by the holders in a Change of Control event, without regard to the likelihood of such an event.  The preferred units held by OTA are presented as treasury units in consolidation since their ultimate disposition remains under the control of the Partnership.
20


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, 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
)

   
Cash Flow Hedges
             
 
 
Commodity
Derivative
Instruments
   
Interest Rate
Derivative
Instruments
   
Other
   
Total
 
Accumulated Other Comprehensive Income (Loss), December 31, 2018
 
$
152.7
   
$
(104.8
)
 
$
3.0
   
$
50.9
 
Other comprehensive income (loss) for period, before reclassifications
   
58.6
     
(23.8
)
   
(0.6
)
   
34.2
 
Reclassification of losses (gains) to net income during period
   
(152.0
)
   
27.8
     
     
(124.2
)
Total other comprehensive income (loss) for period
   
(93.4
)
   
4.0
     
(0.6
)
   
(90.0
)
Accumulated Other Comprehensive Income (Loss), September 30, 2019
 
$
59.3
   
$
(100.8
)
 
$
2.4
   
$
(39.1
)

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
 
2020
   
2019
   
2020
   
2019
 
Interest rate derivatives
Interest expense
 
$
9.9
   
$
9.4
   
$
29.2
   
$
27.8
 
Commodity derivatives
Revenue
   
19.5
     
(93.6
)
   
(344.7
)
   
(161.4
)
Commodity derivatives
Operating costs and expenses
   
10.0
     
2.1
     
9.9
     
9.4
 
Total
 
 
$
39.4
   
$
(82.1
)
 
$
(305.6
)
 
$
(124.2
)

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

Cash Distributions

On October 7, 2020, we announced that the Board declared a quarterly cash distribution of $0.4450 per common unit, or $1.78 per unit on an annualized basis, to be paid to the Partnership’s common unitholders with respect to the third quarter of 2020.  The quarterly distribution is payable on November 12, 2020 to unitholders of record as of the close of business on October 30, 2020.  In light of current economic conditions, management will evaluate any future increases in cash distributions on a quarterly basis.  The payment of any quarterly cash distribution is subject to management’s evaluation of our financial condition, results of operations and cash flows in connection with such payments and Board approval.


21


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,
 
 
 
2020
   
2019
   
2020
   
2019
 
NGL Pipelines & Services:
                       
Sales of NGLs and related products
 
$
2,048.4
   
$
2,624.9
   
$
6,401.7
   
$
7,955.5
 
Segment midstream services:
                               
Natural gas processing and fractionation
   
205.4
     
279.6
     
575.8
     
837.3
 
Transportation
   
254.7
     
248.2
     
769.6
     
767.4
 
Storage and terminals
   
105.5
     
99.4
     
311.3