UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 31, 2015

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, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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

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 1,991,455,631 common units of Enterprise Products Partners L.P. outstanding at the close of business on April 30, 2015.  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)

   
March 31,
2015
    
December 31,
2014
  
ASSETS
        
Current assets:
  
   
 
Cash and cash equivalents
  
$
81.1
    
$
74.4
  
Restricted cash
    
28.2
      
--
  
Accounts receivable – trade, net of allowance for doubtful accounts
of $14.3 at March 31, 2015 and $13.9 at December 31, 2014
    
2,985.1
      
3,823.0
  
Accounts receivable – related parties
    
3.4
      
2.8
  
Inventories
    
855.4
      
1,014.2
  
Prepaid and other current assets
    
481.6
      
576.3
  
Total current assets
    
4,434.8
      
5,490.7
  
Property, plant and equipment, net
    
30,367.6
      
29,881.6
  
Investments in unconsolidated affiliates
    
3,064.9
      
3,042.0
  
Intangible assets, net of accumulated amortization of $1,285.1 at
March 31, 2015 and $1,246.3 at December 31, 2014 (see Note 8)
    
2,804.1
      
4,302.1
  
Goodwill (see Note 8)
    
5,654.0
      
4,199.9
  
Other assets
    
179.9
      
184.4
  
Total assets
  
$
46,505.3
    
$
47,100.7
  
 
                
LIABILITIES AND EQUITY
                
Current liabilities:
                
Current maturities of debt (see Note 9)
  
$
1,399.8
    
$
2,206.4
  
Accounts payable – trade
    
704.5
      
773.8
  
Accounts payable – related parties
    
49.3
      
118.9
  
Accrued product payables
    
3,085.2
      
3,853.3
  
Accrued interest
    
180.0
      
335.5
  
Other current liabilities
    
457.1
      
585.8
  
Total current liabilities
    
5,875.9
      
7,873.7
  
Long-term debt (see Note 9)
    
20,192.2
      
19,157.4
  
Deferred tax liabilities
    
68.0
      
66.6
  
Other long-term liabilities
    
311.1
      
310.8
  
Commitments and contingencies (see Note 14)
                
Equity:
                
Partners’ equity:
                
Limited partners:
                
Common units (1,988,553,334 units outstanding at March 31, 2015
and 1,937,324,817 units outstanding at December 31, 2014)
    
20,098.9
      
18,304.8
  
Accumulated other comprehensive loss
    
(263.2
)
    
(241.6
)
Total  partners’ equity
    
19,835.7
      
18,063.2
  
Noncontrolling interests (see Note 10)
    
222.4
      
1,629.0
  
Total equity
    
20,058.1
      
19,692.2
  
Total liabilities and equity
  
$
46,505.3
    
$
47,100.7
  






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 March 31,
  
 
  
2015
    
2014
  
Revenues:
  
   
 
Third parties
  
$
7,466.4
    
$
12,874.4
  
Related parties
    
6.1
      
35.5
  
Total revenues (see Note 11)
    
7,472.5
      
12,909.9
  
Costs and expenses:
                
Operating costs and expenses:
                
Third parties
    
6,384.3
      
11,618.4
  
Related parties
    
232.1
      
262.1
  
Total operating costs and expenses
    
6,616.4
      
11,880.5
  
General and administrative costs:
                
Third parties
    
20.3
      
23.0
  
Related parties
    
29.0
      
30.2
  
Total general and administrative costs
    
49.3
      
53.2
  
Total costs and expenses (see Note 11)
    
6,665.7
      
11,933.7
  
Equity in income of unconsolidated affiliates
    
89.2
      
56.5
  
Operating income
    
896.0
      
1,032.7
  
Other income (expense):
                
Interest expense
    
(239.1
)
    
(220.9
)
Other, net
    
0.5
      
(0.3
)
Total other expense, net
    
(238.6
)
    
(221.2
)
Income before income taxes
    
657.4
      
811.5
  
Provision for income taxes
    
(6.8
)
    
(4.8
)
Net income
    
650.6
      
806.7
  
Net income attributable to noncontrolling interests (see Note 10)
    
(14.5
)
    
(7.9
)
Net income attributable to limited partners
  
$
636.1
    
$
798.8
  
 
                
Earnings per unit: (see Note 13)
                
Basic earnings per unit
  
$
0.33
    
$
0.44
  
Diluted earnings per unit
  
$
0.32
    
$
0.43
  
















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 March 31,
  
 
  
2015
    
2014
  
 
  
   
 
Net income
  
$
650.6
    
$
806.7
  
Other comprehensive income (loss):
                
Cash flow hedges:
                
Commodity derivative instruments:
                
Changes in fair value of cash flow hedges
    
30.8
      
(9.2
)
Reclassification of losses (gains) to net income
    
(61.1
)
    
16.0
  
Interest rate derivative instruments:
                
Reclassification of losses to net income
    
8.7
      
7.9
  
Total other comprehensive income (loss)
    
(21.6
)
    
14.7
  
Comprehensive income
    
629.0
      
821.4
  
Comprehensive income attributable to noncontrolling interests
    
(14.5
)
    
(7.9
)
Comprehensive income attributable to limited partners
  
$
614.5
    
$
813.5
  

































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 Three Months
Ended March 31,
  
 
  
2015
    
2014
  
Operating activities:
  
   
 
Net income
  
$
650.6
    
$
806.7
  
Reconciliation of net income to net cash flows provided by operating activities:
                
Depreciation, amortization and accretion
    
367.4
      
319.9
  
Non-cash asset impairment charges (see Note 4)
    
33.3
      
8.8
  
Equity in income of unconsolidated affiliates
    
(89.2
)
    
(56.5
)
Distributions received from unconsolidated affiliates
    
134.4
      
71.7
  
Net gains attributable to asset sales and insurance recoveries (see Note 15)
    
(0.1
)
    
(89.6
)
Deferred income tax expense
    
1.5
      
0.2
  
Changes in fair market value of derivative instruments
    
(4.6
)
    
(7.8
)
Net effect of changes in operating accounts (see Note 15)
    
(139.0
)
    
342.5
  
Other operating activities
    
(0.3
)
    
8.2
  
Net cash flows provided by operating activities
    
954.0
      
1,404.1
  
Investing activities:
                
Capital expenditures
    
(812.8
)
    
(699.7
)
Contributions in aid of construction costs
    
19.6
      
4.3
  
Decrease (increase) in restricted cash
    
(28.2
)
    
22.3
  
Investments in unconsolidated affiliates
    
(68.3
)
    
(284.7
)
Proceeds from asset sales and insurance recoveries (see Note 15)
    
0.5
      
96.3
  
Other investing activities
    
0.1
      
--
  
Cash used in investing activities
    
(889.1
)
    
(861.5
)
Financing activities:
                
Borrowings under debt agreements
    
9,182.5
      
4,181.5
  
Repayments of debt
    
(8,953.2
)
    
(3,160.0
)
Debt issuance costs
    
(0.1
)
    
(15.9
)
Cash distributions paid to limited partners (see Note 10)
    
(703.8
)
    
(639.2
)
Cash payments made in connection with distribution equivalent rights
    
(1.2
)
    
--
  
Cash distributions paid to noncontrolling interests
    
(16.5
)
    
(8.0
)
Cash contributions from noncontrolling interests
    
4.0
      
--
  
Net cash proceeds from the issuance of common units
    
468.4
      
83.0
  
Other financing activities
    
(38.3
)
    
(52.5
)
Cash provided by (used in) financing activities
    
(58.2
)
    
388.9
  
Net change in cash and cash equivalents
    
6.7
      
931.5
  
Cash and cash equivalents, January 1
    
74.4
      
56.9
  
Cash and cash equivalents, March 31
  
$
81.1
    
$
988.4
  














See Notes to Unaudited Condensed Consolidated Financial Statements.
5

ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EQUITY
(See Note 10 for Unit History, Accumulated Other Comprehensive
Income (Loss) and Noncontrolling Interests)
(Dollars in millions)

 
  
Partners’ Equity
    
   
 
 
  
Limited
Partners
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Noncontrolling
Interests
    
Total
  
Balance, December 31, 2014
  
$
18,304.8
    
$
(241.6
)
  
$
1,629.0
    
$
19,692.2
  
Net income
    
636.1
      
--
      
14.5
      
650.6
  
Cash distributions paid to limited partners
    
(703.8
)
    
--
      
--
      
(703.8
)
Cash payments made in connection with distribution equivalent rights
    
(1.2
)
    
--
      
--
      
(1.2
)
Cash distributions paid to noncontrolling interests
    
--
      
--
      
(16.5
)
    
(16.5
)
Cash contributions from noncontrolling interests
    
--
      
--
      
4.0
      
4.0
  
Common units issued in connection with Step 2 of Oiltanking acquisition
    
1,408.7
      
--
      
(1,408.7
)
    
--
  
Net cash proceeds from the issuance of common units
    
468.4
      
--
      
--
      
468.4
  
Amortization of fair value of equity-based awards
    
23.3
      
--
      
--
      
23.3
  
Cash flow hedges
    
--
      
(21.6
)
    
--
      
(21.6
)
Other
    
(37.4
)
    
--
      
0.1
      
(37.3
)
Balance, March 31, 2015
  
$
20,098.9
    
$
(263.2
)
  
$
222.4
    
$
20,058.1
  

 
  
Partners’ Equity
    
   
 
 
  
Limited
Partners
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Noncontrolling
Interests
    
Total
  
Balance, December 31, 2013
  
$
15,573.8
    
$
(359.0
)
  
$
225.6
    
$
15,440.4
  
Net income
    
798.8
      
--
      
7.9
      
806.7
  
Cash distributions paid to limited partners
    
(639.2
)
    
--
      
--
      
(639.2
)
Cash distributions paid to noncontrolling interests
    
--
      
--
      
(8.0
)
    
(8.0
)
Net cash proceeds from the issuance of common units
    
83.0
      
--
      
--
      
83.0
  
Amortization of fair value of equity-based awards
    
17.4
      
--
      
--
      
17.4
  
Cash flow hedges
    
--
      
14.7
      
--
      
14.7
  
Other
    
(50.6
)
    
--
      
(2.4
)
    
(53.0
)
Balance, March 31, 2014
  
$
15,783.2
    
$
(344.3
)
  
$
223.1
    
$
15,662.0
  



















See Notes to Unaudited Condensed Consolidated Financial Statements.
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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 Enterprise GP; (ii) Dr. Ralph S. Cunningham; and (iii) Richard H. Bachmann.  Each of the DD LLC Trustees also currently serves as one of the three managers of Dan Duncan LLC.

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. Williams, who serves as Chairman of EPCO; (ii) Dr. Cunningham, who serves as a Vice Chairman of EPCO; and (iii) Mr. Bachmann, who serves as the President and Chief Executive Officer (“CEO”) of EPCO.  Each of the EPCO Trustees is also a director of EPCO.
  
In addition to owning our general partner, EPCO and its privately held affiliates owned approximately 34.6% of our limited partner interests at March 31, 2015.

References to “Oiltanking” and “Oiltanking GP” mean Oiltanking Partners, L.P. and OTLP GP, LLC, the general partner of Oiltanking, respectively.  In October 2014, we acquired approximately 65.9% of the limited partner interests of Oiltanking, all of the member interests of Oiltanking GP and the incentive distribution rights (“IDRs”) held by Oiltanking GP from Oiltanking Holding Americas, Inc. (“OTA”) as the first step of a two-step acquisition of Oiltanking.  In February 2015, we completed the second step of this acquisition.  See Note 10 for additional information regarding this acquisition.

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 Operations, Organization and Basis of Presentation

General

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 now a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, petrochemicals and refined products. 

Our integrated midstream energy asset network links producers of natural gas, NGLs and crude oil from some of the largest supply basins in the United States (“U.S.”), Canada and Gulf of Mexico with domestic consumers and international markets.  Our midstream energy operations currently include: natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage, and import and export terminals (including liquefied petroleum gas or “LPG”); crude oil gathering, transportation, storage and terminals; offshore production platforms; petrochemical and refined products transportation, storage and terminals, and related services; and a marine transportation business that operates primarily on the U.S. inland and Intracoastal Waterway
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

systems and in the Gulf of Mexico.  Our assets include approximately 51,000 miles of onshore and offshore pipelines; 225 million barrels (“MMBbls”) of storage capacity for NGLs, petrochemicals, refined products and crude oil; and 14 billion cubic feet (“Bcf”) of natural gas storage capacity.  In addition, our asset portfolio includes 24 natural gas processing plants, 22 NGL and propylene fractionators, six offshore hub platforms located in the Gulf of Mexico, a butane isomerization complex, NGL import and LPG export terminals, a refined products export terminal and octane enhancement and high-purity isobutylene production facilities.

We have five reportable business segments: (i) NGL Pipelines & Services; (ii) Onshore Natural Gas Pipelines & Services; (iii) Onshore Crude Oil Pipelines & Services; (iv) Offshore Pipelines & Services; and (v) Petrochemical & Refined Products Services.

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 12 for information regarding the ASA and other related party matters.

In August 2014, we completed a two-for-one common unit split.  All per unit amounts and number of units outstanding presented in these Unaudited Condensed Consolidated Financial Statements and Notes thereto are on a post-split basis.


Note 2.  General Accounting and Disclosure Matters

Our results of operations for the three months ended March 31, 2015 are not necessarily indicative of results expected for the full year of 2015.  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 U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

These Unaudited Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto included in our annual report on Form 10-K for the year ended December 31, 2014 (the “2014 Form 10-K”) filed with the SEC on March 2, 2015.

Contingencies

Certain conditions may exist as of the date our consolidated financial statements are issued, which may result in a loss to us but which will only be resolved when one or more future events occur or fail to occur.  Management has regular quarterly litigation reviews, including updates from legal counsel, to assess the need for accounting recognition or disclosure of these contingencies, and such assessment inherently involves an exercise in judgment.  In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, our management and legal counsel evaluate the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

We accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated.  If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued.  We do not record a contingent liability when the likelihood of loss is probable but the amount cannot be reasonably estimated or when it is believed to be only reasonably possible or remote.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For contingencies where an unfavorable outcome is reasonably possible and the impact would be material, we disclose the nature of the contingency and, if feasible, an estimate of the possible loss or range of loss.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  See Note 14 for additional information regarding our contingencies.

Derivative Instruments

We use derivative instruments such as futures, swaps, options, forward contracts and other arrangements to manage price risks associated with inventories, firm commitments, interest rates, foreign currencies and certain anticipated future commodity transactions.  To qualify for hedge accounting, the hedged item must expose us to risk and the related derivative instrument must reduce the exposure to that risk and meet specific hedge documentation requirements related to designation dates, expectations for hedge effectiveness and the probability that hedged future transactions will occur as forecasted.  We formally designate derivative instruments as hedges and document and assess their effectiveness at inception of the hedge and on a monthly basis thereafter.  Forecasted transactions are evaluated for the probability of occurrence and are periodically back-tested once the forecasted period has passed to determine whether similarly forecasted transactions are probable of occurring in the future.

For certain physical forward commodity derivative contracts, we apply the normal purchase/normal sale exception, whereby changes in the mark-to-market values of such contracts are not recognized in income.  As a result, the revenues and expenses associated with such physical transactions are recognized during the period when volumes are physically delivered or received.  Physical forward commodity contracts subject to this exception are evaluated for the probability of future delivery and are periodically back-tested once the forecasted period has passed to determine whether similar forward contracts are probable of physical delivery in the future.  See Note 4 for additional information regarding our derivative instruments.

Estimates

Preparing our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates that affect amounts presented in the financial statements. Our most significant estimates relate to (i) the useful lives and depreciation/amortization methods used for fixed and identifiable intangible assets; (ii) measurement of fair value and projections used in impairment testing of fixed and intangible assets (including goodwill); (iii) contingencies; and (iv) revenue and expense accruals.

Actual results could differ materially from our estimates.  On an ongoing basis, we review our estimates based on currently available information.  Any changes in the facts and circumstances underlying our estimates may require us to update such estimates, which could have a material impact on our consolidated financial statements.

Restricted Cash

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, crude oil, refined products and NGLs.  Additional cash may be restricted to maintain our commodity derivative instruments portfolio as prices fluctuate or deposit requirements change.  At March 31, 2015, our restricted cash amounts were $28.2 million.  We did not have any restricted cash as of December 31, 2014.  See Note 4 for information regarding our derivative instruments and hedging activities.

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

Note 3.  Equity-based Awards

An allocated portion of the fair value of EPCO’s equity-based awards is charged to us under the ASA.  The following table summarizes compensation expense we recognized in connection with equity-based awards for the periods indicated:

 
  
For the Three Months
Ended March 31,
  
 
  
2015
    
2014
  
Equity-classified awards:
        
Restricted common unit awards
  
$
6.1
    
$
11.6
  
Phantom unit awards
    
17.2
      
5.8
  
Liability-classified awards
    
0.1
      
0.1
  
Total
  
$
23.4
    
$
17.5
  

The fair value of equity-classified awards is amortized into earnings over the requisite service or vesting period.  Equity-classified awards are expected to result in the issuance of common units upon vesting.  Compensation expense for liability-classified awards is recognized over the requisite service or vesting period based on the fair value of the award remeasured at each reporting date.  Liability-classified awards are settled in cash upon vesting.

At March 31, 2015, EPCO’s significant long-term incentive plans applicable to us were the Enterprise Products 1998 Long-Term Incentive Plan (“1998 Plan”) and the 2008 Enterprise Products Long-Term Incentive Plan (Third Amendment and Restatement) (“2008 Plan”).  Up to 14,000,000 of our common units may be issued as awards under the 1998 Plan.  The maximum number of common units available for issuance under the 2008 Plan was 30,000,000 at March 31, 2015.  This amount will automatically increase under the terms of the 2008 Plan by 5,000,000 common units on January 1, 2016 and will continue to automatically increase annually on January 1 thereafter during the term of the 2008 Plan; provided, however, that in no event shall the maximum aggregate number exceed 70,000,000 common units.  After giving effect to awards granted under the 1998 Plan and 2008 Plan through March 31, 2015, a total of 2,990,928 and 15,902,141 additional common units could be issued under these plans, respectively.

Restricted Common Unit Awards

Restricted common unit awards allow recipients to acquire our common units (at no cost to the recipient apart from fulfilling service and other conditions) once a defined vesting period expires, subject to customary forfeiture provisions.  Restricted common unit awards generally vest at a rate of 25% per year beginning one year after the grant date and are non-vested until the required service periods expire.  Restricted common units are included in the number of common units outstanding as presented on our Unaudited Condensed Consolidated Balance Sheets.

The fair value of a restricted common unit award is based on the market price per unit of our common units on the date of grant.  Compensation expense is recognized based on the grant date fair value, net of an allowance for estimated forfeitures, over the requisite service or vesting period.

The following table presents information regarding restricted common unit awards for the period indicated:

 
  
Number of
Units
    
Weighted-
Average Grant
Date Fair Value
per Unit (1)
  
Restricted common units at December 31, 2014
    
4,229,790
    
$
26.96
  
Vested
    
(1,852,746
)
  
$
25.89
  
Forfeited
    
(84,700
)
  
$
27.16
  
Restricted common units at March 31, 2015
    
2,292,344
    
$
27.82
  
   
(1)    Determined by dividing the aggregate grant date fair value of awards (before an allowance for forfeitures) by the number of awards issued.
  
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Each recipient of a restricted common unit award is entitled to nonforfeitable cash distributions equal to the product of the number of restricted common units outstanding for the participant and the cash distribution per unit paid to our common unitholders.  These distributions are included in “Cash distributions paid to limited partners” as presented on our Unaudited Condensed Statements of Consolidated Cash Flows.

The following table presents supplemental information regarding our restricted common unit awards for the periods indicated:

 
For the Three Months
Ended March 31,
  
 
2015
  
2014
  
Cash distributions paid to restricted common unitholders
  
$
1.5
    
$
2.5
  
Total intrinsic value of restricted common unit awards that vested during period
  
$
62.4
    
$
81.4
  

For the EPCO group of companies, the unrecognized compensation cost associated with restricted common unit awards was an aggregate $20.5 million at March 31, 2015, of which our allocated share of the cost is currently estimated to be $17.7 million.  Due to the graded vesting provisions of these awards, we expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 1.4 years.

Unit Option Awards

EPCO’s long-term incentive plans provide for the issuance of non-qualified incentive options denominated in our common units. In general, unit option awards have a vesting period of four years from the date of grant and expire at the end of the calendar year following the year of vesting (e.g., an option vesting on May 29, 2014 will expire on December 31, 2015). However, unit option awards only become exercisable at certain times during the calendar year following the year in which they vest (typically the months of February, May, August and November).

The following table presents unit option award activity for the period indicated:

 
  
Number of
Units (1)
    
Weighted-
Average
Strike Price
(dollars/unit)
    
Weighted-
Average
Remaining
Contractual
Term
(in years)
    
Aggregate
Intrinsic
Value (2)
  
Unit option awards at December 31, 2014
    
1,270,000
    
$
16.14
          
Exercised
    
(940,000
)
  
$
16.14
    
   
 
Unit option awards at March 31, 2015
    
330,000
    
$
16.14
      
0.8
    
$
5.5
  
 
(1)    All of the unit option awards outstanding at March 31, 2015 were exercisable. None of the unit option awards outstanding at December 31, 2014 were exercisable.
(2)   Aggregate intrinsic value reflects fully vested unit option awards at the dates indicated.
  
 
In order to fund its unit option award-related obligations, EPCO may purchase common units at fair value either in the open market or directly from us.  When employees exercise unit option awards, we reimburse EPCO for the cash difference between the strike price paid by the employee and the actual purchase price paid by EPCO for the units issued to the employee.

The following table presents supplemental information regarding unit option awards during the periods indicated:

 
For the Three Months
Ended March 31,
  
 
2015
  
2014
  
Total intrinsic value of unit option awards exercised during period
  
$
17.4
    
$
54.7
  
Cash received from EPCO in connection with the exercise of unit option awards
    
10.1
      
31.8
  
Unit option award-related cash reimbursements to EPCO
    
17.4
      
54.7
  
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
As of March 31, 2015, all compensation expense related to unit option awards had been recognized.

Phantom Unit Awards

Phantom unit awards allow recipients to acquire our common units (at no cost to the recipient apart from fulfilling service and other conditions) once a defined vesting period expires, subject to customary forfeiture provisions.  Phantom unit awards generally vest at a rate of 25% per year beginning one year after the grant date and are non-vested until the required service periods expire.

At March 31, 2015, substantially all of our phantom unit awards are expected to result in the issuance of common units upon vesting; therefore, the applicable awards are accounted for as equity-classified awards.  The grant date fair value of a phantom unit award is based on the market price per unit of our common units on the date of grant.  Compensation expense is recognized based on the grant date fair value, net of an allowance for estimated forfeitures, over the requisite service or vesting period.

The following table presents phantom unit award activity for the period indicated:

 
  
Number of
Units
    
Weighted-
Average Grant
Date Fair Value
per Unit (1)
  
Phantom unit awards at December 31, 2014
    
3,342,390
    
$
33.13
  
Granted (2)
    
3,446,240
    
$
34.05
  
Vested
    
(786,890
)
  
$
33.04
  
Forfeited
    
(78,204
)
  
$
33.16
  
Phantom unit awards at March 31, 2015
    
5,923,536
    
$
33.67
  
  
 
(1)    Determined by dividing the aggregate grant date fair value of awards (before an allowance for forfeitures) by the number of awards issued.
  
(2)    The aggregate grant date fair value of phantom unit awards issued during 2015 was $117.3 million based on a grant date market price of our common units ranging from $34.04 to $34.40 per unit. An estimated annual forfeiture rate of 3.5% was applied to these awards.
  

Our long-term incentive plans provide for the issuance of distribution equivalent rights (“DERs”) in connection with phantom unit awards.  A DER entitles the participant to nonforfeitable cash payments equal to the product of the number of phantom unit awards outstanding for the participant and the cash distribution per common unit paid to our common unitholders.  Cash payments made in connection with DERs are charged to partners’ equity when the phantom unit award is expected to result in the issuance of common units; otherwise, such amounts are expensed.

The following table presents supplemental information regarding our phantom unit awards for the periods indicated:

 
For the Three Months
Ended March 31,
  
 
2015
  
2014
  
Cash payments made in connection with DERs
  
$
1.2
    
$
--
  
Total intrinsic value of phantom unit awards that vested during period
  
$
26.6
    
$
--
  

For the EPCO group of companies, the unrecognized compensation cost associated with phantom unit awards was $146.9 million at March 31, 2015, of which our allocated share of the cost is currently estimated to be $136.5 million.  Due to the graded vesting provisions of these awards, we expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 2.3 years.


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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 4.  Derivative Instruments, Hedging Activities and Fair Value Measurements

In the normal course of our business operations, we are exposed to certain risks, including changes in interest rates and commodity prices.  In order to manage risks associated with assets, liabilities and certain anticipated future transactions, we use derivative instruments such as futures, forward contracts, swaps, options and other instruments with similar characteristics.  Substantially all of our derivatives are used for non-trading activities.

Interest Rate Hedging Activities

We may utilize interest rate swaps, forward starting swaps and similar derivative instruments to manage our exposure to changes in interest rates charged on borrowings under certain consolidated debt agreements.  At March 31, 2015 and December 31, 2014, we did not have any interest rate hedging derivative instruments outstanding.

Commodity Hedging Activities

The prices of natural gas, NGLs, crude oil, refined products and petrochemical products are subject to fluctuations in response to changes in supply and demand, market conditions and a variety of additional factors that are beyond our control.  In order to manage such price risks, we enter into commodity derivative instruments such as physical forward contracts, futures contracts, fixed-for-float swaps, basis swaps and option contracts.  The following table summarizes our portfolio of commodity derivative instruments outstanding at March 31, 2015 (volume measures as noted):

 
Volume (1)
Accounting
Derivative Purpose
Current (2)
Long-Term (2)
Treatment
Derivatives designated as hedging instruments:
 
 
 
Natural gas processing:
 
 
 
Forecasted natural gas purchases for plant thermal reduction (Bcf)
12.8
n/a
Cash flow hedge
Forecasted sales of NGLs (MMBbls) (3)
4.2
n/a
Cash flow hedge
Natural gas marketing:
 
 
 
Forecasted purchases of natural gas (Bcf)
11.1
n/a
Cash flow hedge
Forecasted sales of natural gas (Bcf)
2.1
n/a
Cash flow hedge
Natural gas storage inventory management activities (Bcf)
3.5
n/a
Fair value hedge
NGL marketing:
 
 
 
Forecasted purchases of NGLs and related hydrocarbon products (MMBbls)
18.5
n/a
Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products (MMBbls)
18.6
n/a
Cash flow hedge
Refined products marketing:
 
 
 
Forecasted purchases of refined products (MMBbls)
1.2
n/a
Cash flow hedge
Forecasted sales of refined products (MMBbls)
1.8
n/a
Cash flow hedge
Refined products inventory management activities (MMBbls)
1.1
n/a
Fair value hedge
Crude oil marketing:
 
 
 
Forecasted purchases of crude oil (MMBbls)
9.3
0.4
Cash flow hedge
Forecasted sales of crude oil (MMBbls)
11.5
0.4
Cash flow hedge
Derivatives not designated as hedging instruments:
 
 
 
Natural gas risk management activities (Bcf) (4,5)
89.5
10.0
Mark-to-market
NGL risk management activities (MMBbls) (5)
1.8
n/a
Mark-to-market
Crude oil risk management activities (MMBbls) (5)
5.5
n/a
Mark-to-market
 
(1)   Volume for derivatives designated as hedging instruments reflects the total amount of volumes hedged whereas volume for derivatives not designated as hedging instruments reflects the absolute value of derivative notional volumes.
(2)   The maximum term for derivatives designated as cash flow hedges, derivatives designated as fair value hedges and derivatives not designated as hedging instruments is June 2016, February 2016 and March 2018, respectively.
(3)   Forecasted sales of NGL volumes under natural gas processing exclude 1.3 MMBbls of additional hedges executed under contracts that have been designated as normal sales agreements.
(4)   Current volumes include 56.2 Bcf of physical derivative instruments that are predominantly priced at a marked-based index plus a premium or minus a discount related to location differences.
(5)   Reflects the use of derivative instruments to manage risks associated with transportation, processing and storage assets.

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
At March 31, 2015, our predominant commodity hedging strategies consisted of (i) hedging anticipated future purchases and sales of commodity products associated with transportation, storage and blending activities, (ii) hedging natural gas processing margins and (iii) hedging the fair value of commodity products held in inventory.  

§
The objective of our anticipated future commodity purchases and sales hedging program is to hedge the margins of certain transportation, storage, blending and operational activities by locking in purchase and sale prices through the use of forward contracts and derivative instruments.

§
The objective of our natural gas processing hedging program is to hedge an amount of gross margin associated with these activities. We achieve this objective by executing forward fixed-price sales of a portion of our expected equity NGL production using forward contracts and commodity derivative instruments. For certain natural gas processing contracts, the hedging of expected equity NGL production also involves the purchase of natural gas for plant thermal reduction, which is hedged by executing forward fixed-price purchases using forward contracts and derivative instruments.

§
The objective of our inventory hedging program is to hedge the fair value of commodity products currently held in inventory by locking in the sales price of the inventory through the use of forward contracts and derivative instruments.

Tabular Presentation of Fair Value Amounts, and Gains and Losses on
Derivative Instruments and Related Hedged Items

The following table provides a balance sheet overview of our derivative assets and liabilities at the dates indicated:
 
 
Asset Derivatives
  
Liability Derivatives
  
 
March 31, 2015
  
December 31, 2014
  
March 31, 2015
  
December 31, 2014
  
 
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Derivatives designated as hedging instruments
Commodity derivatives
Other current
assets
  
$
123.9
  
Other current
assets
  
$
217.9
  
Other current
liabilities
  
$
100.3
  
Other current
liabilities
  
$
145.3
  
Commodity derivatives
Other assets
    
0.7
  
Other assets
    
--
  
Other liabilities
    
0.9
  
Other liabilities
    
--
  
Total commodity derivatives
 
  
$
124.6
  
 
  
$
217.9
  
 
  
$
101.2
  
 
  
$
145.3
  
 
 
        
 
        
 
        
 
        
Derivatives not designated as hedging instruments
  
Commodity derivatives
Other current
assets
  
$
7.8
  
Other current
assets
  
$
8.1
  
Other current
liabilities
  
$
5.5
  
Other current
liabilities
  
$
0.7
  
Commodity derivatives
Other assets
    
0.3
  
Other assets
    
0.6
  
Other liabilities
    
1.3
  
Other liabilities
    
1.4
  
Total commodity derivatives
 
  
$
8.1
  
 
  
$
8.7
  
 
  
$
6.8
  
 
  
$
2.1
  

Certain of our commodity derivative instruments are subject to master netting arrangements or similar agreements.  The following tables present our derivative instruments subject to such arrangements at the dates indicated:

 
Offsetting of Financial Assets and Derivative Assets
  
 
Gross
Amounts of
Recognized
Assets
  
Gross
Amounts
Offset in the
Balance Sheet
  
Amounts
of Assets
Presented
in the
Balance Sheet
  
Gross Amounts Not Offset
in the Balance Sheet
  
Amounts That
Would Have
Been Presented
On Net Basis
  
Financial
Instruments
  
Cash
Collateral
Received
  
Cash
Collateral
Paid
  
 
(i)
  
(ii)
  
(iii) = (i) – (ii)
  
(iv)
  
(v) = (iii) + (iv)
  
As of March 31, 2015:
                            
Commodity derivatives
  
$
132.7
    
$
--
    
$
132.7
    
$
(91.2
)
  
$
--
    
$
(28.4
)
  
$
13.1
  
As of December 31, 2014:
                                                        
Commodity derivatives
  
$
226.6
    
$
--
    
$
226.6
    
$
(147.3
)
  
$
(23.9
)
  
$
--
    
$
55.4
  

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 
Offsetting of Financial Liabilities and Derivative Liabilities
  
 
Gross
Amounts of
Recognized
Liabilities
  
Gross
Amounts
Offset in the
Balance Sheet
  
Amounts
of Liabilities
Presented
in the
Balance Sheet
  
Gross Amounts Not Offset
in the Balance Sheet
  
Amounts That
Would Have
Been Presented
On Net Basis
  
Financial
Instruments
  
Cash
Collateral
Paid
  
 
(i)
  
(ii)
  
(iii) = (i) – (ii)
  
(iv)
  
(v) = (iii) + (iv)
  
As of March 31, 2015:
                        
Commodity derivatives
  
$
108.0
    
$
--
    
$
108.0
    
$
(91.2
)
  
$
--
    
$
16.8
  
As of December 31, 2014:
                                                
Commodity derivatives
  
$
147.4
    
$
--
    
$
147.4
    
$
(147.3
)
  
$
--
    
$
0.1
  

Derivative assets and liabilities recorded on our Unaudited Condensed Consolidated Balance Sheets are presented on a gross-basis and determined at the individual transaction level.  The tabular presentation above provides a means for comparing the gross amount of derivative assets and liabilities, excluding associated accounts payable and receivable, to the net amount that would likely be receivable or payable under a default scenario based on the existence of rights of offset in the respective derivative agreements.  Any cash collateral paid or received is reflected in these tables, but only to the extent that it represents variation margins.  Any amounts associated with derivative prepayments or initial margins that are not influenced by the derivative asset or liability amounts or those that are determined solely on their volumetric notional amounts are excluded from these tables.

The following tables present the effect of our derivative instruments designated as fair value hedges on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:

Derivatives in Fair Value
Hedging Relationships
Location
  
Gain (Loss) Recognized in
Income on Derivative
  
 
  
  
For the Three Months
Ended March 31,
  
 
 
  
2015
    
2014
  
Interest rate derivatives
Interest expense
  
$
--
    
$
(2.9
)
Commodity derivatives
Revenue
    
0.7
      
(0.4
)
Total
 
  
$
0.7
    
$
(3.3
)
 
Derivatives in Fair Value
Hedging Relationships
Location
  
Gain (Loss) Recognized in
Income on Hedged Item
  
 
  
  
For the Three Months
Ended March 31,
  
 
 
  
2015
    
2014
  
Interest rate derivatives
Interest expense
  
$
--
    
$
2.9
  
Commodity derivatives
Revenue
    
8.6
      
(1.4
)
Total
 
  
$
8.6
    
$
1.5
  

With respect to our derivative instruments designated as fair value hedges, amounts attributable to ineffectiveness and those excluded from the assessment of hedge effectiveness were not material to our consolidated financial statements during the periods presented.

15
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The following tables present the effect of our derivative instruments designated as cash flow hedges on our Unaudited Condensed Statements of Consolidated Operations and Unaudited Condensed Statements of Consolidated Comprehensive Income for the periods indicated:

Derivatives in Cash Flow
Hedging Relationships
  
Change in Value Recognized in
Other Comprehensive Income (Loss)
on Derivative (Effective Portion)
  
 
  
For the Three Months
Ended March 31,
  
 
  
2015
    
2014
  
Commodity derivatives – Revenue (1)
  
$
32.6
    
$
(10.7
)
Commodity derivatives – Operating costs and expenses (1)
    
(1.8
)
    
1.5
  
Total
  
$
30.8
    
$
(9.2
)
  
 
(1)    The fair value of these derivative instruments will be reclassified to their respective locations on the Unaudited Condensed Statement of Consolidated Operations upon settlement of the underlying derivative transactions, as appropriate.
  

Derivatives in Cash Flow
Hedging Relationships
Location
  
Gain (Loss) Reclassified from
Accumulated Other
Comprehensive Income (Loss)
to Income (Effective Portion)
  
 
  
  
For the Three Months
Ended March 31,
  
 
 
  
2015
    
2014
  
Interest rate derivatives
Interest expense
  
$
(8.7
)
  
$
(7.9
)
Commodity derivatives
Revenue
    
61.1
      
(16.9
)
Commodity derivatives
Operating costs and expenses
    
--
      
0.9
  
Total
 
  
$
52.4
    
$
(23.9
)

Derivatives in Cash Flow
Hedging Relationships
Location
  
Gain (Loss) Recognized in
Income on Derivative
(Ineffective Portion)
  
 
  
  
For the Three Months
Ended March 31,
  
 
 
  
2015
    
2014
  
Commodity derivatives
Revenue
  
$
0.3
    
$
(0.1
)
Commodity derivatives
Operating costs and expenses
    
--
      
0.1
  
Total
 
  
$
0.3
    
$
--
  

Over the next twelve months, we expect to reclassify $35.8 million of losses attributable to interest rate derivative instruments from accumulated other comprehensive loss to earnings as an increase in interest expense.  Likewise, we expect to reclassify $39.9 million of net gains attributable to commodity derivative instruments from accumulated other comprehensive income to earnings, $41.8 million as an increase in revenue and $1.9 million as an increase in operating costs and expenses.

The following table presents the effect of our derivative instruments not designated as hedging instruments on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:

Derivatives Not Designated
as Hedging Instruments
Location
  
Gain (Loss) Recognized in
Income on Derivative
  
 
  
  
For the Three Months
Ended March 31,
  
 
 
  
2015
    
2014
  
Commodity derivatives
Revenue
  
$
(0.4
)
  
$
(21.0
)

16
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Fair Value Measurements

Our fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk, in the principal market of the asset or liability at a specified measurement date.  Recognized valuation techniques employ inputs such as contractual prices, quoted market prices or rates, operating costs, discount factors and business growth rates.  These inputs may be either readily observable, corroborated by market data or generally unobservable.  In developing our estimates of fair value, we endeavor to utilize the best information available and apply market-based data to the highest extent possible.  Accordingly, we utilize valuation techniques (such as the market approach) that maximize the use of observable inputs and minimize the use of unobservable inputs.

A three-tier hierarchy has been established that classifies fair value amounts recognized in the financial statements based on the observability of inputs used to estimate such fair values.  The hierarchy considers fair value amounts based on observable inputs (Levels 1 and 2) to be more reliable and predictable than those based primarily on unobservable inputs (Level 3).  At each balance sheet reporting date, we categorize our financial assets and liabilities using this hierarchy.

Recurring Fair Value Measurements
 
The following tables set forth, by level within the fair value hierarchy, the carrying values of our financial assets and liabilities at the dates indicated.  These assets and liabilities are measured on a recurring basis and are classified based on the lowest level of input used to estimate their fair value.  Our assessment of the relative significance of such inputs requires judgment.

 
  
March 31, 2015
Fair Value Measurements Using
    
 
 
  
Quoted Prices
in Active
Markets for
Identical Assets
and Liabilities
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Unobservable
Inputs
(Level 3)
    
Total
  
Financial assets:
  
   
   
   
 
Commodity derivatives
  
$
19.9
    
$
112.4
    
$
0.4
    
$
132.7
  
 
                                
Financial liabilities:
                                
Liquidity Option Agreement
  
$
--
    
$
--
    
$
119.4
    
$
119.4
  
Commodity derivatives
    
10.9
      
94.8
      
2.3
      
108.0
  
Total
  
$
10.9
    
$
94.8
    
$
121.7
    
$
227.4
  

 
  
December 31, 2014
Fair Value Measurements Using
    
 
 
  
Quoted Prices
in Active
Markets for
Identical Assets
and Liabilities
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Unobservable
Inputs
(Level 3)
    
Total
  
Financial assets:
  
   
   
   
 
Commodity derivatives
  
$
37.8
    
$
187.8
    
$
1.0
    
$
226.6
  
 
                                
Financial liabilities:
                                
Liquidity Option Agreement
  
$
--
    
$
--
    
$
119.4
    
$
119.4
  
Commodity derivatives
    
13.8
      
133.0
      
0.6
      
147.4
  
Total
  
$
13.8
    
$
133.0
    
$
120.0
    
$
266.8
  

17
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The following table sets forth a reconciliation of changes in the fair values of our recurring Level 3 financial assets and liabilities on a combined basis for the periods indicated:

 
  
  
For the Three Months
Ended March 31,
  
 
Location
  
2015
    
2014
  
Financial asset (liability) balance, net, January 1
 
  
$
(119.0
)
  
$
3.2
  
Total gains (losses) included in:
 
                
Net income (1)
Revenue
    
(0.4
)
    
4.6
  
    Other comprehensive income
Commodity derivative instruments –
changes in fair value of cash flow hedges
    
(1.5
)
    
--
  
Settlements
Revenue
    
(0.5
)
    
(0.1
)
Transfers out of Level 3
      
0.1
      
--
  
Financial asset (liability) balance, net, March 31
 
  
$
(121.3
)
  
$
7.7
  
    
(1)    There were $1.0 million of unrealized losses and $4.5 million of unrealized gains included in these amounts for the three months ended March 31, 2015 and 2014, respectively.
 

The following table provides quantitative information about our recurring Level 3 fair value measurements at March 31, 2015:

 
  
Fair Value
  
 
 
   
 
  
Financial
Assets
    
Financial
Liabilities
  
Valuation
Techniques
Unobservable
Input
Range
Commodity derivatives – Crude oil
  
$
0.4
    
$
0.8
  
Discounted cash flow
Forward commodity prices
$47.63-$57.73/barrel
Commodity derivatives – Natural gasoline
    
--
      
1.5
  
Discounted cash flow
Forward commodity prices
$1.12-$1.13/gallon
Total
  
$
0.4
    
$
2.3
          

With respect to commodity derivatives, we believe forward commodity prices are the most significant unobservable inputs in determining our Level 3 recurring fair value measurements at March 31, 2015.  In general, changes in the price of the underlying commodity increases or decreases the fair value of a commodity derivative depending on whether the derivative was purchased or sold.  We generally expect changes in the fair value of our derivative instruments to be offset by corresponding changes in the fair value of our hedged exposures.

There were no changes in the unobservable inputs associated with the fair value of the Liquidity Option Agreement from those listed in our 2014 Form 10-K.

Nonrecurring Fair Value Measurements

The following table summarizes our non-cash impairment charges by segment during each of the periods indicated:

 
  
For the Three Months
Ended March 31,
  
 
  
2015
    
2014
  
NGL Pipelines & Services
  
$
0.8
    
$
2.6
  
Onshore Natural Gas Pipelines & Services
    
20.7
      
0.2
  
Onshore Crude Oil Pipelines & Services
    
7.8
      
1.0
  
Offshore Pipelines & Services
    
3.6
      
--
  
Petrochemical & Refined Products Services
    
0.4
      
5.0
  
Total
  
$
33.3
    
$
8.8
  

These impairment charges are a component of “Operating costs and expenses” on our Unaudited Condensed Statements of Consolidated Operations.

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Our non-cash asset impairment charges for the three months ended March 31, 2015 primarily represent the abandonment of certain natural gas and crude oil pipeline segments in Texas.  The following table summarizes our non-recurring fair value measurements for the three months ended March 31, 2015:

 
 
Fair Value Measurements Using
  
 
 
Carrying
Value at
March 31,
2015
  
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
  
Significant
Other
Observable
Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  
Total
Non-Cash
Impairment
Loss
  
Impairment of long-lived assets disposed of other than by sale
  
$
--
    
$
--
    
$
--
    
$
--
    
$
33.1
  
Impairment of long-lived assets to be disposed of by sale
    
0.6
      
--
      
--
      
0.6
      
0.2
  
Total
                                  
$
33.3
  

Our non-cash asset impairment charges for the three months ended March 31, 2014 primarily represent the abandonment of assets classified as property, plant and equipment.  The following table summarizes our non-recurring fair value measurements for the three months ended March 31, 2014:

 
 
Fair Value Measurements Using
  
 
 
Carrying
Value at
March 31,
2014
  
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
  
Significant
Other
Observable
Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  
Total
Non-Cash
Impairment
Loss
  
Impairment of long-lived assets disposed of other than by sale
  
$
--
    
$
--
    
$
--
    
$
--
    
$
3.8
  
Impairment of long-lived assets to be disposed of by sale
    
0.1
      
--
      
--
      
0.1
      
5.0
  
Total
                                  
$
8.8
  

Other Fair Value Information

The carrying amounts of cash and cash equivalents (including restricted cash balances), accounts receivable, commercial paper notes and accounts payable approximate their fair values based on their short-term nature.  The estimated total fair value of our fixed-rate debt obligations was $22.35 billion and $22.16 billion at March 31, 2015 and December 31, 2014, respectively.  The aggregate carrying value of these debt obligations was $20.23 billion and $20.48 billion at March 31, 2015 and December 31, 2014, respectively.  These values are based on quoted market prices for such debt or debt of similar terms and maturities (Level 2), our credit standing and the credit standing of our counterparties.  Changes in market rates of interest affect the fair value of our fixed-rate debt.  The carrying values of our variable-rate long-term debt obligations approximate their fair values since the associated interest rates are market-based.  We do not have any long-term investments in debt or equity securities recorded at fair value.


Note 5.  Inventories

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

 
  
March 31,
2015
    
December 31,
2014
  
NGLs
  
$
490.8
    
$
579.1
  
Petrochemicals and refined products
    
218.5
      
295.6
  
Crude oil
    
130.5
      
97.8
  
Natural gas
    
15.6
      
41.7
  
Total
  
$
855.4
    
$
1,014.2
  

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Due to fluctuating commodity prices, we recognize lower of cost or market 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 market adjustments for the periods indicated:

 
  
For the Three Months
Ended March 31,
  
 
  
2015
    
2014
  
Cost of sales (1)
  
$
5,678.1
    
$
11,052.7
  
Lower of cost or market adjustments
    
3.5
      
5.2
  
    
(1)   Cost of sales is a component of “Operating costs and expenses” as presented on our Unaudited Condensed Statements of Consolidated Operations. Fluctuations in these amounts are primarily due to changes in energy commodity prices and sales volumes associated with our marketing activities.
  
 

Note 6.  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
    
March 31,
2015
    
December 31,
 2014
  
Plants, pipelines and facilities (1)
  
3-45 (6)
 
  
$
31,153.8
    
$
30,834.9
  
Underground and other storage facilities (2)
  
5-40 (7)
 
    
2,609.3
      
2,584.2
  
Platforms and facilities (3)
  
20-31
      
659.7
      
659.7
  
Transportation equipment (4)
  
3-10
      
158.7
      
154.2
  
Marine vessels (5)
  
15-30
      
803.1
      
796.4
  
Land
            
260.9
      
262.6
  
Construction in progress
            
3,196.6
      
2,754.7
  
Total
            
38,842.1
      
38,046.7
  
Less accumulated depreciation
            
8,474.5
      
8,165.1
  
Property, plant and equipment, net
          
$
30,367.6
    
$
29,881.6
  
  
 
(1)     Plants, pipelines and facilities include processing plants; NGL, natural gas, crude oil and petrochemical and refined products pipelines; terminal loading and unloading facilities; office furniture and equipment; buildings; 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)     Platforms and facilities include offshore platforms and related facilities and other associated assets located in the Gulf of Mexico.
  
(4)     Transportation equipment includes tractor-trailer tank trucks and other vehicles and similar assets used in our operations.
  
(5)     Marine vessels include tow boats, barges and related equipment used in our marine transportation business.
  
(6)     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; office furniture and equipment, 3-20 years; buildings, 20-40 years; and laboratory and shop equipment, 5-35 years.
  
(7)     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 March 31,
  
 
  
2015
    
2014
  
Depreciation expense (1)
  
$
291.3
    
$
267.9
  
Capitalized interest (2)
    
29.6
      
18.5
  
    
(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 March 31, 2015 and December 31, 2014 includes $32.9 million and $31.3 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 (“AROs”) since December 31, 2014:

ARO liability balance, December 31, 2014
  
$
98.3
  
Liabilities incurred
    
--
  
Liabilities settled
    
(3.3
)
Revisions in estimated cash flows
    
11.0
  
Accretion expense
    
1.6
  
ARO liability balance, March 31, 2015
  
$
107.6
  

The following table presents our forecast of accretion expense for the periods indicated:

Remainder
of 2015
    
2016
    
2017
    
2018
    
2019
  
$
4.7
    
$
6.4
    
$
6.8
    
$
7.3
    
$
7.9
  

Certain of our unconsolidated affiliates have AROs recorded at March 31, 2015 and December 31, 2014 relating to contractual agreements and regulatory requirements.  These amounts are immaterial to our consolidated financial statements.


Note 7.  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
March 31,
2015
    
March 31,
2015
    
December 31,
2014
  
NGL Pipelines & Services:
  
   
   
 
Venice Energy Service Company, L.L.C.
  
13.1%
 
  
$
27.0
    
$
27.7
  
K/D/S Promix, L.L.C.
  
50%
 
    
37.6
      
38.5
  
Baton Rouge Fractionators LLC
  
32.2%
 
    
18.6
      
18.8
  
Skelly-Belvieu Pipeline Company, L.L.C.
  
50%
 
    
39.5
      
40.1
  
Texas Express Pipeline LLC
  
35%
 
    
349.6
      
349.3
  
Texas Express Gathering LLC
  
45%
 
    
37.6
      
37.9
  
Front Range Pipeline LLC
  
33.3%
 
    
171.7
      
170.0
  
Onshore Natural Gas Pipelines & Services:
                      
White River Hub, LLC
  
50%
 
    
23.1
      
23.2
  
Onshore Crude Oil Pipelines & Services:
                      
Seaway Crude Pipeline Company LLC
  
50%
 
    
1,430.1
      
1,431.2
  
Eagle Ford Pipeline LLC
  
50%
 
    
350.5
      
336.5
  
Eagle Ford Terminals Corpus Christi LLC (1)
  
50%
 
    
17.3
      
--
  
Offshore Pipelines & Services:
                      
Poseidon Oil Pipeline Company, L.L.C. (“Poseidon”)
  
36%
 
    
29.2
      
31.8
  
Cameron Highway Oil Pipeline Company
  
50%
 
    
198.1
      
201.3
  
Deepwater Gateway, L.L.C.
  
50%
 
    
78.9
      
79.6
  
Neptune Pipeline Company, L.L.C.
  
25.7%
 
    
33.7
      
34.9
  
Southeast Keathley Canyon Pipeline Company L.L.C.
  
50%
 
    
147.6
      
146.1
  
Petrochemical & Refined Products Services:
                      
Baton Rouge Propylene Concentrator, LLC
  
30%
 
    
6.1
      
6.5
  
Centennial Pipeline LLC (“Centennial”)
  
50%
 
    
66.3
      
66.1
  
Other
  
Various
      
2.4
      
2.5
  
Total
        
$
3,064.9
    
$
3,042.0
  
                             
(1)   New joint venture formed with Plains Marketing, L.P. in March 2015 to construct and operate a marine terminal that will handle crude oil delivered by Eagle Ford Pipeline LLC.
 
  
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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 March 31,
  
 
  
2015
    
2014
  
NGL Pipelines & Services
  
$
11.6
    
$
1.4
  
Onshore Natural Gas Pipelines & Services
    
0.9
      
0.9
  
Onshore Crude Oil Pipelines & Services
    
59.9
      
42.7
  
Offshore Pipelines & Services
    
20.2
      
11.1
  
Petrochemical & Refined Products Services
    
(3.4
)
    
0.4
  
Total
  
$
89.2
    
$
56.5
  

The following table presents our unamortized excess cost amounts by business segment at the dates indicated:

 
  
March 31,
2015
    
December 31,
2014
  
NGL Pipelines & Services
  
$
26.2
    
$
26.5
  
Onshore Crude Oil Pipelines & Services
    
21.4
      
21.7
  
Offshore Pipelines & Services
    
53.1
      
9.0
  
Petrochemical & Refined Products Services
    
2.4
      
2.4
  
Total
  
$
103.1
    
$
59.6
  

The following table presents our amortization of excess cost amounts by business segment for the periods indicated:

 
  
For the Three Months
Ended March 31,
  
 
  
2015
    
2014
  
NGL Pipelines & Services
  
$
0.3
    
$
0.3
  
Onshore Crude Oil Pipelines & Services
    
0.3
      
0.2
  
Offshore Pipelines & Services
    
2.0
      
0.2
  
Total
  
$
2.6
    
$
0.7
  

Other

The credit agreements of Poseidon and Centennial restrict their ability to pay cash dividends if a default or event of default (as defined in each credit agreement) has occurred and is continuing at the time such payments are scheduled to be paid.  These businesses were in compliance with the terms of their credit agreements at March 31, 2015.



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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 8.  Intangible Assets and Goodwill

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

 
  
March 31, 2015
    
December 31, 2014
  
 
  
Gross
Value
    
Accumulated
Amortization
    
Carrying
Value
    
Gross
Value
    
Accumulated
Amortization
    
Carrying
Value
  
NGL Pipelines & Services:
  
   
   
   
   
   
 
Customer relationship intangibles
  
$
340.8
    
$
(187.2
)
  
$
153.6
    
$
340.8
    
$
(183.2
)
  
$
157.6
  
Contract-based intangibles
    
277.7
      
(182.2
)
    
95.5
      
277.7
      
(178.7
)
    
99.0
  
IDRs (1)
    
--
      
--
      
--
      
432.6
      
--
      
432.6
  
Segment total
    
618.5
      
(369.4
)
    
249.1
      
1,051.1
      
(361.9
)
    
689.2
  
Onshore Natural Gas Pipelines & Services:
                                                
Customer relationship intangibles
    
1,163.6
      
(314.9
)
    
848.7
      
1,163.6
      
(308.9
)
    
854.7
  
Contract-based intangibles
    
466.0
      
(351.7
)
    
114.3
      
466.0
      
(347.8
)
    
118.2
  
Segment total
    
1,629.6
      
(666.6
)
    
963.0
      
1,629.6
      
(656.7
)
    
972.9
  
Onshore Crude Oil Pipelines & Services:
                                                
Customer relationship intangibles
    
1,108.0
      
(10.3
)
    
1,097.7
      
1,108.0
      
(7.7
)
    
1,100.3
  
Contract-based intangibles
    
281.4
      
(27.6
)
    
253.8
      
281.4
      
(13.5
)
    
267.9
  
IDRs (1)
    
--
      
--
      
--
      
855.4
      
--
      
855.4
  
Segment total
    
1,389.4
      
(37.9
)
    
1,351.5
      
2,244.8
      
(21.2
)
    
2,223.6
  
Offshore Pipelines & Services:
                                                
Customer relationship intangibles
    
195.8
      
(157.2
)
    
38.6
      
195.8
      
(154.9
)
    
40.9
  
Contract-based intangibles
    
1.2
      
(0.5
)
    
0.7
      
1.2
      
(0.5
)
    
0.7
  
Segment total
    
197.0
      
(157.7
)
    
39.3
      
197.0
      
(155.4
)
    
41.6
  
Petrochemical & Refined Products Services:
                                                
Customer relationship intangibles
    
198.4
      
(44.6
)
    
153.8
      
198.4
      
(43.3
)
    
155.1
  
Contract-based intangibles
    
56.3
      
(8.9
)
    
47.4
      
56.3
      
(7.8
)
    
48.5
  
IDRs (1)
    
--
      
--
      
--
      
171.2
      
--
      
171.2
  
Segment total
    
254.7
      
(53.5
)
    
201.2
      
425.9
      
(51.1
)
    
374.8
  
Total all segments
  
$
4,089.2
    
$
(1,285.1
)
  
$
2,804.1
    
$
5,548.4
    
$
(1,246.3
)
  
$
4,302.1
  
                                                    
(1)   At December 31, 2014, we had indefinite-lived intangible assets outstanding with a carrying value of $1.46 billion recorded in connection with our acquisition of the Oiltanking IDRs in October 2014. The IDRs represented contractual rights to future cash incentive distributions to be paid by Oiltanking. In February 2015 (following completion of Step 2 of the Oiltanking acquisition), the Oiltanking IDRs were cancelled and the carrying value of the IDRs were reclassified to goodwill.
  

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

 
  
For the Three Months
Ended March 31,
  
 
  
2015
    
2014
  
NGL Pipelines & Services
  
$
7.5
    
$
8.6
  
Onshore Natural Gas Pipelines & Services
    
9.9
      
11.6
  
Onshore Crude Oil Pipelines & Services
    
16.7
      
0.3
  
Offshore Pipelines & Services
    
2.3
      
2.6
  
Petrochemical & Refined Products Services
    
2.4
      
1.6
  
Total
  
$
38.8
    
$
24.7
  

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

Remainder
of 2015
    
2016
    
2017
    
2018
    
2019
  
$
112.3
    
$
152.3
    
$
149.3
    
$
142.7
    
$
131.3
  

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
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.  The following table presents changes in the carrying amount of goodwill since December 31, 2014:

 
  
NGL
Pipelines
& Services
    
Onshore
Natural Gas
Pipelines
& Services
    
Onshore
Crude Oil
Pipelines
& Services
    
Offshore
Pipelines
& Services
    
Petrochemical
& Refined
Products
Services
    
Consolidated
Total
  
Balance at December 31, 2014
  
$
2,180.4
    
$
296.3
    
$
859.9
    
$
82.0
    
$
781.3
    
$
4,199.9
  
Reclassification of Oiltanking IDR balances to goodwill in connection with the cancellation of such rights in February 2015
    
432.6
      
--
      
850.7
      
--
      
170.8