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 June 30, 2017

OR

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

For the transition period from ___  to  ___.

Commission file number:  1-14323

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

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


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

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

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

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

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

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

There were 2,148,986,109 common units of Enterprise Products Partners L.P. outstanding at the close of business on July 31, 2017.  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)

   
June 30,
2017
    
December 31,
2016
  
ASSETS
            
Current assets:
            
Cash and cash equivalents
  
$
28.6
    
$
63.1
  
Restricted cash
    
35.4
      
354.5
  
Accounts receivable – trade, net of allowance for doubtful accounts
of $12.1 at June 30, 2017 and $11.3 at December 31, 2016
    
2,655.7
      
3,329.5
  
Accounts receivable – related parties
    
3.0
      
1.1
  
Inventories
    
1,604.3
      
1,770.5
  
Derivative assets (see Note 12)
    
70.0
      
541.4
  
Prepaid and other current assets
    
387.5
      
468.1
  
Total current assets
    
4,784.5
      
6,528.2
  
Property, plant and equipment, net
    
34,220.7
      
33,292.5
  
Investments in unconsolidated affiliates
    
2,661.3
      
2,677.3
  
Intangible assets, net of accumulated amortization of $1,483.9 at
June 30, 2017 and $1,403.1 at December 31, 2016 (see Note 6)
    
3,782.4
      
3,864.1
  
Goodwill (see Note 6)
    
5,745.2
      
5,745.2
  
Other assets
    
119.2
      
86.7
  
Total assets
  
$
51,313.3
    
$
52,194.0
  
 
                
LIABILITIES AND EQUITY
                
Current liabilities:
                
Current maturities of debt (see Note 7)
  
$
3,354.8
    
$
2,576.8
  
Accounts payable – trade
    
674.4
      
397.7
  
Accounts payable – related parties
    
62.9
      
105.1
  
Accrued product payables
    
2,951.1
      
3,613.7
  
Accrued interest
    
339.9
      
340.8
  
Derivative liabilities (see Note 12)
    
48.9
      
737.7
  
Other current liabilities
    
386.6
      
478.7
  
Total current liabilities
    
7,818.6
      
8,250.5
  
Long-term debt (see Note 7)
    
20,026.5
      
21,120.9
  
Deferred tax liabilities
    
53.4
      
52.7
  
Other long-term liabilities
    
534.6
      
503.9
  
Commitments and contingencies (see Note 14)
                
Equity: (see Note 8)
                
Partners’ equity:
                
Limited partners:
                
Common units (2,148,035,389 units outstanding at June 30, 2017
and 2,117,588,414 units outstanding at December 31, 2016)
    
22,788.8
      
22,327.0
  
Accumulated other comprehensive loss
    
(128.7
)
    
(280.0
)
Total  partners’ equity
    
22,660.1
      
22,047.0
  
Noncontrolling interests
    
220.1
      
219.0
  
Total equity
    
22,880.2
      
22,266.0
  
Total liabilities and equity
  
$
51,313.3
    
$
52,194.0
  


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 June 30,
    
For the Six Months
Ended June 30,
  
 
  
2017
    
2016
    
2017
    
2016
  
Revenues:
                        
Third parties
  
$
6,597.7
    
$
5,604.6
    
$
13,907.3
    
$
10,594.3
  
Related parties
    
9.9
      
13.2
      
20.7
      
28.8
  
Total revenues (see Note 9)
    
6,607.6
      
5,617.8
      
13,928.0
      
10,623.1
  
Costs and expenses:
                                
Operating costs and expenses:
                                
Third parties
    
5,457.6
      
4,551.9
      
11,539.2
      
8,418.2
  
Related parties
    
272.6
      
270.3
      
524.2
      
550.9
  
Total operating costs and expenses
    
5,730.2
      
4,822.2
      
12,063.4
      
8,969.1
  
General and administrative costs:
                                
Third parties
    
16.0
      
6.6
      
36.7
      
20.9
  
Related parties
    
29.7
      
28.5
      
59.4
      
58.1
  
Total general and administrative costs
    
45.7
      
35.1
      
96.1
      
79.0
  
Total costs and expenses (see Note 9)
    
5,775.9
      
4,857.3
      
12,159.5
      
9,048.1
  
Equity in income of unconsolidated affiliates
    
107.0
      
76.4
      
201.8
      
177.5
  
Operating income
    
938.7
      
836.9
      
1,970.3
      
1,752.5
  
Other income (expense):
                                
Interest expense
    
(245.8
)
    
(244.1
)
    
(495.1
)
    
(484.7
)
Change in fair market value of Liquidity Option
   Agreement (see Note 14)
    
(18.6
)
    
(23.3
)
    
(24.1
)
    
(21.1
)
Other, net
    
0.4
      
0.4
      
0.6
      
1.8
  
Total other expense, net
    
(264.0
)
    
(267.0
)
    
(518.6
)
    
(504.0
)
Income before income taxes
    
674.7
      
569.9
      
1,451.7
      
1,248.5
  
Benefit from (provision for) income taxes
    
(8.7
)
    
0.1
      
(14.7
)
    
(8.3
)
Net income
    
666.0
      
570.0
      
1,437.0
      
1,240.2
  
Net income attributable to noncontrolling interests
    
(12.3
)
    
(11.5
)
    
(22.6
)
    
(20.5
)
Net income attributable to limited partners
  
$
653.7
    
$
558.5
    
$
1,414.4
    
$
1,219.7
  
 
                                
Earnings per unit: (see Note 10)
                                
Basic earnings per unit
  
$
0.30
    
$
0.27
    
$
0.66
    
$
0.59
  
Diluted earnings per unit
  
$
0.30
    
$
0.27
    
$
0.66
    
$
0.59
  
















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 June 30,
    
For the Six Months
Ended June 30,
  
 
  
2017
    
2016
    
2017
    
2016
  
 
                        
Net income
  
$
666.0
    
$
570.0
    
$
1,437.0
    
$
1,240.2
  
Other comprehensive income (loss):
                                
Cash flow hedges:
                                
Commodity derivative instruments:
                                
Changes in fair value of cash flow hedges
    
30.4
      
(73.7
)
    
175.2
      
(74.9
)
Reclassification of losses (gains) to net income
    
(46.0
)
    
35.4
      
(38.9
)
    
(21.8
)
Interest rate derivative instruments:
                                
Changes in fair value of cash flow hedges
    
(6.9
)
    
(9.4
)
    
(4.5
)
    
(9.4
)
Reclassification of losses to net income
    
10.0
      
9.2
      
19.6
      
18.4
  
Total cash flow hedges
    
(12.5
)
    
(38.5
)
    
151.4
      
(87.7
)
Other
    
--
      
--
      
(0.1
)
    
(0.1
)
Total other comprehensive income (loss)
    
(12.5
)
    
(38.5
)
    
151.3
      
(87.8
)
Comprehensive income
    
653.5
      
531.5
      
1,588.3
      
1,152.4
  
Comprehensive income attributable to noncontrolling interests
    
(12.3
)
    
(11.5
)
    
(22.6
)
    
(20.5
)
Comprehensive income attributable to limited partners
  
$
641.2
    
$
520.0
    
$
1,565.7
    
$
1,131.9
  
  





























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 Six Months
Ended June 30,
  
 
  
2017
    
2016
  
Operating activities:
            
Net income
  
$
1,437.0
    
$
1,240.2
  
Reconciliation of net income to net cash flows provided by operating activities:
                
Depreciation, amortization and accretion
    
808.8
      
763.4
  
Asset impairment and related charges (see Note 12)
    
25.2
      
22.3
  
Equity in income of unconsolidated affiliates
    
(201.8
)
    
(177.5
)
Distributions received on earnings from unconsolidated affiliates
    
205.1
      
195.1
  
Net losses attributable to asset sales
    
--
      
6.6
  
Deferred income tax expense
    
0.7
      
4.3
  
Change in fair market value of derivative instruments
    
(43.9
)
    
68.3
  
Change in fair market value of Liquidity Option Agreement
    
24.1
      
21.1
  
Net effect of changes in operating accounts (see Note 15)
    
82.1
      
(294.6
)
Other operating activities
    
(2.4
)
    
(4.0
)
Net cash flows provided by operating activities
    
2,334.9
      
1,845.2
  
Investing activities:
                
Capital expenditures
    
(1,142.7
)
    
(1,880.4
)
Contributions in aid of construction costs
    
29.6
      
23.6
  
Decrease (increase) in restricted cash  (see Note 2)
    
319.1
      
(356.7
)
Cash used for Azure acquisition (see Note 4)
    
(191.4
)
    
--
  
Investments in unconsolidated affiliates
    
(24.1
)
    
(92.4
)
Distributions received for return of capital from unconsolidated affiliates
    
24.8
      
39.4
  
Proceeds from asset sales
    
3.2
      
27.9
  
Other investing activities
    
2.0
      
--
  
Cash used in investing activities
    
(979.5
)
    
(2,238.6
)
Financing activities:
                
Borrowings under debt agreements
    
33,307.8
      
33,235.3
  
Repayments of debt
    
(33,639.3
)
    
(32,986.7
)
Debt issuance costs
    
--
      
(9.7
)
Cash distributions paid to limited partners (see Note 8)
    
(1,757.8
)
    
(1,610.5
)
Cash payments made in connection with distribution equivalent rights
    
(7.2
)
    
(5.3
)
Cash distributions paid to noncontrolling interests
    
(23.1
)
    
(20.8
)
Cash contributions from noncontrolling interests
    
0.3
      
16.0
  
Net cash proceeds from the issuance of common units
    
757.2
      
1,888.3
  
Other financing activities
    
(27.8
)
    
(18.7
)
Cash provided by (used in) financing activities
    
(1,389.9
)
    
487.9
  
Net change in cash and cash equivalents
    
(34.5
)
    
94.5
  
Cash and cash equivalents, January 1
    
63.1
      
19.0
  
Cash and cash equivalents, June 30
  
$
28.6
    
$
113.5
  












See Notes to Unaudited Condensed Consolidated Financial Statements.
5

ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EQUITY
(See Note 8 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, January 1, 2017
  
$
22,327.0
    
$
(280.0
)
  
$
219.0
    
$
22,266.0
  
Net income
    
1,414.4
      
--
      
22.6
      
1,437.0
  
Cash distributions paid to limited partners
    
(1,757.8
)
    
--
      
--
      
(1,757.8
)
Cash payments made in connection with distribution equivalent rights
    
(7.2
)
    
--
      
--
      
(7.2
)
Cash distributions paid to noncontrolling interests
    
--
      
--
      
(23.1
)
    
(23.1
)
Cash contributions from noncontrolling interests
    
--
      
--
      
0.3
      
0.3
  
Net cash proceeds from the issuance of common units
    
757.2
      
--
      
--
      
757.2
  
Common units issued in connection with employee compensation
    
33.7
      
--
      
--
      
33.7
  
Amortization of fair value of equity-based awards
    
49.8
      
--
      
--
      
49.8
  
Cash flow hedges
    
--
      
151.4
      
--
      
151.4
  
Other
    
(28.3
)
    
(0.1
)
    
1.3
      
(27.1
)
Balance, June 30, 2017
  
$
22,788.8
    
$
(128.7
)
  
$
220.1
    
$
22,880.2
  

 
  
Partners’ Equity
              
 
  
Limited
Partners
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Noncontrolling
Interests
    
Total
  
Balance, January 1, 2016
  
$
20,514.3
    
$
(219.2
)
  
$
206.0
    
$
20,501.1
  
Net income
    
1,219.7
      
--
      
20.5
      
1,240.2
  
Cash distributions paid to limited partners
    
(1,610.5
)
    
--
      
--
      
(1,610.5
)
Cash payments made in connection with distribution equivalent rights
    
(5.3
)
    
--
      
--
      
(5.3
)
Cash distributions paid to noncontrolling interests
    
--
      
--
      
(20.8
)
    
(20.8
)
Cash contributions from noncontrolling interests
    
--
      
--
      
16.0
      
16.0
  
Net cash proceeds from the issuance of common units
    
1,888.3
      
--
      
--
      
1,888.3
  
Amortization of fair value of equity-based awards
    
45.6
      
--
      
--
      
45.6
  
Cash flow hedges
    
--
      
(87.7
)
    
--
      
(87.7
)
Other
    
(20.9
)
    
(0.1
)
    
--
      
(21.0
)
Balance, June 30, 2016
  
$
22,031.2
    
$
(307.0
)
  
$
221.7
    
$
21,945.9
  



















See Notes to Unaudited Condensed Consolidated Financial Statements.

6
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
With the exception of per unit amounts, or as noted within the context of each disclosure,
the dollar amounts presented in the tabular data within these disclosures are
stated in millions of dollars.

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

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

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

References to “EPCO” mean Enterprise Products Company, a privately held Texas corporation, and its privately held affiliates.  A majority of the outstanding voting capital stock of EPCO is owned by a voting trust, the current trustees (“EPCO Trustees”) of which are:  (i) Ms. Duncan Williams, who serves as Chairman of EPCO; (ii) Dr. Cunningham, who serves as Vice Chairman of EPCO; and (iii) Mr. Bachmann, who serves as the President and Chief Executive Officer of EPCO.  Ms. Duncan Williams and Mr. Bachmann also currently serve as directors of EPCO along with Mr. Fowler, who is also the Executive Vice President and Chief Administrative Officer of EPCO. EPCO, together with its privately held affiliates, owned approximately 32% of our limited partner interests at June 30, 2017.

References to “Oiltanking acquisition” mean the two-step acquisition of Oiltanking Partners, L.P. and its general partner that was completed in February 2015.
  
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

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

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 the 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 export and import terminals (including those used to export liquefied petroleum gases, or “LPG,” and ethane); crude oil gathering, transportation, storage, and export and import terminals; petrochemical and refined products transportation, storage, export and import terminals, and related services; and a marine transportation business that operates primarily on the U.S. inland and Intracoastal Waterway systems.  Our assets currently include approximately 50,000 miles of pipelines; 260 million barrels (“MMBbls”) of storage capacity for NGLs, crude oil, petrochemicals and refined products; and 14 billion cubic feet (“Bcf”) of natural gas storage capacity.
7
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Our operations are reported under four business segments: (i) NGL Pipelines & Services, (ii) Crude Oil Pipelines & Services, (iii) Natural Gas Pipelines & Services and (iv) Petrochemical & Refined Products Services.  See Note 9 for information regarding our business segments.


Note 2.  General Accounting and Disclosure Matters

Our results of operations for the six months ended June 30, 2017 are not necessarily indicative of results expected for the full year of 2017.  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, 2016 (the “2016 Form 10-K”) filed with the SEC on February 24, 2017.

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 the likelihood of loss is believed to be only reasonably possible or remote.  For contingencies where an unfavorable outcome is reasonably possible and the impact would be material to our consolidated financial statements, we disclose the nature of the contingency and, where 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.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Derivative Instruments
We use derivative instruments such as futures, swaps, forward contracts and other arrangements to manage price risks associated with inventories, firm commitments, interest rates 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 12 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.

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

Recent Developments involving Accounting for Revenues and Leases
Revenue Recognition.  In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification 606, Revenues from Contracts with Customers (“ASC 606”).  The new accounting standard, along with its related amendments, replaces the current rules-based U.S. GAAP governing revenue recognition with a principles-based approach.  We plan to adopt the new standard on January 1, 2018 using a modified retrospective approach, which requires us to apply the new revenue standard to (i) all new revenue contracts entered into after January 1, 2018 and (ii) all existing revenue contracts as of January 1, 2018 through a cumulative adjustment to equity.  In accordance with this approach, our consolidated revenues for periods prior to January 1, 2018 will not be revised.

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

Our implementation activities related to ASC 606 are ongoing.  For the vast majority of our businesses, we do not anticipate that there will be material differences in the amount or timing of revenues recognized following the new standard’s adoption date.  However, we continue to evaluate the guidance under ASC 606 applicable to natural gas processing agreements where non-cash consideration is received for services rendered (e.g., equity NGL volumes received under percent of liquids, keepwhole and similar arrangements).

As a result of adopting the new standard, there will be significant changes to our disclosures based on the additional requirements prescribed by ASC 606.  These new disclosures include information regarding the significant judgments used in evaluating when and how revenue is (or will be) recognized and data related to contract assets and liabilities.  Additionally, we are currently evaluating our business processes, systems and controls to ensure the accuracy and timeliness of the recognition and disclosure requirements under the new revenue guidance.

Leases.  In February 2016, the FASB issued ASC 842, Leases (“ASC 842”), which requires substantially all leases (with the exception of leases with a term of one year or less) to be recorded on the balance sheet using a method referred to as the right-of-use (“ROU”) asset approach.  We plan to adopt the new standard on January 1, 2019 using a modified retrospective approach.

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

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

We have started the process of reviewing our lease agreements in light of the new guidance.  Although we are in the early stages of our ASC 842 implementation project, we anticipate that this new lease guidance will cause significant changes to the way leases are recorded, presented and disclosed in our consolidated financial statements.

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED 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, NGLs, crude oil and refined products.  Additional cash may be restricted to maintain our commodity derivative instruments portfolio as prices fluctuate or margin requirements change.  

At June 30, 2017 and December 31, 2016, our restricted cash amounts were $35.4 million and $354.5 million, respectively.   The balance of restricted cash decreased since December 31, 2016 primarily due to the settlement of derivative instruments related to contango positions during 2017.  See Note 12 for information regarding our derivative instruments and hedging activities.

Impact of ASU 2016-18.  The FASB recently issued an amendment, ASU 2016-18, to Topic 230, Statement of Cash Flows, that standardizes the presentation of transfers to and from restricted cash within the cash flow statement.  As a result, the cash flow statement will present changes in total cash amounts, regardless of whether the cash balances are restricted or unrestricted.   The new guidance does not affect the separate presentation of restricted and unrestricted (i.e., cash and cash equivalents) amounts on the balance sheet.   Furthermore, this change in financial statement presentation will not impact our consolidated liquidity.

We intend to adopt the new cash flow statement guidance on December 31, 2017 by retrospectively adjusting our consolidated cash flow statements to eliminate the presentation of cash inflows and outflows associated with restricted cash that were historically shown in the investing activities section.


Note 3.  Inventories

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

 
  
June 30,
2017
    
December 31,
2016
  
NGLs
  
$
897.1
    
$
1,156.1
  
Petrochemicals and refined products
    
377.4
      
220.7
  
Crude oil
    
313.2
      
360.0
  
Natural gas
    
16.6
      
33.7
  
Total
  
$
1,604.3
    
$
1,770.5
  

Due to fluctuating commodity prices, we recognize lower of cost or net realizable value adjustments when the carrying value of our available-for-sale inventories exceeds their net realizable value.  The following table presents our total cost of sales amounts and lower of cost or net realizable value adjustments for the periods indicated:

 
  
For the Three Months
Ended June 30,
    
For the Six Months
Ended June 30,
  
 
  
2017
    
2016
    
2017
    
2016
  
Cost of sales (1)
  
$
4,731.1
    
$
3,838.7
    
$
10,066.8
    
$
7,047.0
  
Lower of cost or net realizable value adjustments within cost of sales
    
2.6
      
0.8
      
6.0
      
6.1
  
   
(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.
  

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

Note 4.  Property, Plant and Equipment

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

 
  
Estimated
Useful Life
in Years
    
June 30,
2017
    
December 31,
2016
  
Plants, pipelines and facilities (1)
  
3-45 (5)
 
  
$
35,785.9
    
$
35,124.6
  
Underground and other storage facilities (2)
  
5-40 (6)
 
    
3,388.4
      
3,326.9
  
Transportation equipment (3)
  
3-10
      
172.1
      
165.8
  
Marine vessels (4)
  
15-30
      
800.5
      
800.7
  
Land
            
266.8
      
264.6
  
Construction in progress
            
4,101.9
      
3,320.7
  
Total
            
44,515.6
      
43,003.3
  
Less accumulated depreciation
            
10,294.9
      
9,710.8
  
Property, plant and equipment, net
          
$
34,220.7
    
$
33,292.5
  
   
(1) Plants, pipelines and facilities include processing plants; NGL, natural gas, crude oil and petrochemical and refined products pipelines; terminal loading and unloading facilities; buildings; office furniture and equipment; laboratory and shop equipment and related assets.
(2) Underground and other storage facilities include underground product storage caverns; above ground storage tanks; water wells and related assets.
(3) Transportation equipment includes tractor-trailer tank trucks and other vehicles and similar assets used in our operations.
(4) Marine vessels include tow boats, barges and related equipment used in our marine transportation business.
(5) In general, the estimated useful lives of major assets within this category are: processing plants, 20-35 years; pipelines and related equipment, 5-45 years; terminal facilities, 10-35 years; buildings, 20-40 years; office furniture and equipment, 3-20 years; and laboratory and shop equipment, 5-35 years.
(6) In general, the estimated useful lives of assets within this category are: underground storage facilities, 5-35 years; storage tanks, 10-40 years; and water wells, 5-35 years.
  

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

 
  
For the Three Months
Ended June 30,
    
For the Six Months
Ended June 30,
  
 
  
2017
    
2016
    
2017
    
2016
  
Depreciation expense (1)
  
$
321.1
    
$
298.2
    
$
638.6
    
$
594.1
  
Capitalized interest (2)
    
44.5
      
46.4
      
84.1
      
88.9
  
   
(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.
  

Azure Acquisition
In April 2017, we closed the acquisition of a midstream energy business from Azure Midstream Partners, LP and its operating subsidiaries (collectively, “Azure”) for $191.4 million in cash.  The acquired business assets, which are located primarily in East Texas, include over 730 miles of natural gas gathering pipelines and two natural gas processing facilities with an aggregate processing capacity of 130 million cubic feet per day.   The acquired business serves production from the Haynesville Shale and Bossier, Cotton Valley and Travis Peak formations.

The financial results of the acquired business are reflected in our consolidated results from April 30, 2017, which was the effective date of the Azure acquisition.  On a historical pro forma consolidated basis, our revenues, costs and expenses, operating income, net income attributable to Enterprise Products Partners L.P., and earnings per unit amounts for the three and six months ended June 30, 2016 and 2017 would not have differed materially from those we actually reported had the Azure acquisition been completed on January 1, 2016 rather than April 30, 2017.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the preliminary fair value allocation of assets acquired and liabilities assumed in the Azure acquisition at April 30, 2017.  The allocation remains provisional due to ongoing efforts to clarify certain environmental liabilities (estimated at $2.2 million), which are expected to be resolved by December 31, 2017.

Assets acquired in business combination:
      
Current assets
  
$
3.1
  
Property, plant and equipment
    
194.2
  
Total assets acquired
    
197.3
  
Liabilities assumed in business combination:
        
Current liabilities
    
1.4
  
Long-term liabilities
    
4.5
  
Total liabilities assumed
    
5.9
  
Cash used for Azure acquisition
  
$
191.4
  

The contribution of this newly acquired business to our consolidated revenues and net income was not material for the second quarter of 2017.

Asset Retirement Obligations
We record asset retirement obligations (“AROs”) in connection with legal requirements to perform specified retirement activities under contractual arrangements and/or governmental regulations.  Our contractual AROs primarily result from right-of-way agreements associated with our pipeline operations and real estate leases associated with our plant sites.  In addition, we record AROs in connection with governmental regulations associated with the abandonment or retirement of above-ground brine storage pits and certain marine vessels.  We also record AROs in connection with regulatory requirements associated with the renovation or demolition of certain assets containing hazardous substances such as asbestos.  We typically fund our AROs using cash flow from operations.

Property, plant and equipment at June 30, 2017 and December 31, 2016 includes $40.3 million and $44.9 million, respectively, of asset retirement costs capitalized as an increase in the associated long-lived asset.

The following table presents information regarding our AROs since January 1, 2017:

ARO liability balance, January 1, 2017
  
$
$ 85.4
  
Liabilities incurred
    
3.1
  
Liabilities settled
    
(1.5
)
Revisions in estimated cash flows
    
(3.2
)
Accretion expense
    
2.8
  
ARO liability balance, June 30, 2017
  
$
86.6
  

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

Note 5.  Investments in Unconsolidated Affiliates

The following table presents our investments in unconsolidated affiliates by business segment at the dates indicated.  We account for these investments using the equity method.

 
  
Ownership
Interest at
June 30,
2017
    
June 30,
2017
    
December 31,
2016
  
NGL Pipelines & Services:
                  
Venice Energy Service Company, L.L.C.
  
13.1%
 
  
$
25.9
    
$
24.8
  
K/D/S Promix, L.L.C.
  
50%
 
    
32.2
      
33.7
  
Baton Rouge Fractionators LLC
  
32.2%
 
    
17.6
      
17.3
  
Skelly-Belvieu Pipeline Company, L.L.C.
  
50%
 
    
37.1
      
38.9
  
Texas Express Pipeline LLC
  
35%
 
    
327.8
      
331.9
  
Texas Express Gathering LLC
  
45%
 
    
36.5
      
35.8
  
Front Range Pipeline LLC
  
33.3%
 
    
166.5
      
165.4
  
Delaware Basin Gas Processing LLC
  
50%
 
    
108.2
      
102.6
  
Crude Oil Pipelines & Services:
                        
Seaway Crude Pipeline Company LLC
  
50%
 
    
1,380.5
      
1,393.8
  
Eagle Ford Pipeline LLC
  
50%
 
    
379.1
      
377.9
  
Eagle Ford Terminals Corpus Christi LLC
  
50%
 
    
63.2
      
52.9
  
Natural Gas Pipelines & Services:
                        
White River Hub, LLC
  
50%
 
    
21.3
      
21.7
  
Petrochemical & Refined Products Services:
                        
Centennial Pipeline LLC
  
50%
 
    
60.7
      
62.3
  
Other
  
Various
      
4.7
      
18.3
  
Total investments in unconsolidated affiliates
          
$
2,661.3
    
$
2,677.3
  

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

 
  
For the Three Months
Ended June 30,
    
For the Six Months
Ended June 30,
  
 
  
2017
    
2016
    
2017
    
2016
  
NGL Pipelines & Services
  
$
19.0
    
$
14.0
    
$
34.5
    
$
29.1
  
Crude Oil Pipelines & Services
    
89.2
      
65.8
      
170.4
      
155.9
  
Natural Gas Pipelines & Services
    
0.9
      
0.9
      
1.9
      
1.9
  
Petrochemical & Refined Products Services
    
(2.1
)
    
(4.3
)
    
(5.0
)
    
(9.4
)
Total
  
$
107.0
    
$
76.4
    
$
201.8
    
$
177.5
  

Excess Cost
On occasion, the price we pay to acquire an ownership interest in a company exceeds the underlying carrying value of the capital accounts we acquire.  These excess cost amounts are attributable to the fair value of the underlying tangible assets of these entities exceeding their respective book carrying values at the time of our acquisition of ownership interests in these entities.  We amortize such excess cost amounts as a reduction to equity earnings in a manner similar to depreciation.

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

 
  
June 30,
2017
    
December 31,
2016
  
NGL Pipelines & Services
  
$
23.5
    
$
24.1
  
Crude Oil Pipelines & Services
    
18.6
      
19.0
  
Petrochemical & Refined Products Services
    
1.9
      
2.1
  
Total
  
$
44.0
    
$
45.2
  

Amortization of excess cost amounts were $0.5 million and $0.6 million for the three months ended June 30, 2017 and 2016, respectively.  For the six months ended June 30, 2017 and 2016, amortization of excess costs amounts were $1.0 million and $1.1 million, respectively.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

 
  
For the Three Months
Ended June 30,
    
For the Six Months
Ended June 30,
  
 
  
2017
    
2016
    
2017
    
2016
  
Income Statement Data:
                        
Revenues
  
$
371.9
    
$
317.5
    
$
715.1
    
$
663.0
  
Operating income
    
229.8
      
181.7
      
433.5
      
395.4
  
Net income
    
237.6
      
178.3
      
440.5
      
393.5
  


Note 6.  Intangible Assets and Goodwill

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

 
  
June 30, 2017
    
December 31, 2016
  
 
  
Gross
Value
    
Accumulated
Amortization
    
Carrying
Value
    
Gross
Value
    
Accumulated
Amortization
    
Carrying
Value
  
NGL Pipelines & Services:
                                    
Customer relationship intangibles
  
$
447.4
    
$
(180.0
)
  
$
267.4
    
$
447.4
    
$
(172.7
)
  
$
274.7
  
Contract-based intangibles
    
279.9
      
(211.7
)
    
68.2
      
279.9
      
(204.4
)
    
75.5
  
Segment total
    
727.3
      
(391.7
)
    
335.6
      
727.3
      
(377.1
)
    
350.2
  
Crude Oil Pipelines & Services:
                                                
Customer relationship intangibles
    
2,203.5
      
(104.4
)
    
2,099.1
      
2,204.4
      
(84.5
)
    
2,119.9
  
Contract-based intangibles
    
281.0
      
(146.5
)
    
134.5
      
281.0
      
(121.9
)
    
159.1
  
Segment total
    
2,484.5
      
(250.9
)
    
2,233.6
      
2,485.4
      
(206.4
)
    
2,279.0
  
Natural Gas Pipelines & Services:
                                                
Customer relationship intangibles
    
1,350.3
      
(402.5
)
    
947.8
      
1,350.3
      
(390.0
)
    
960.3
  
Contract-based intangibles
    
464.7
      
(375.0
)
    
89.7
      
464.7
      
(370.5
)
    
94.2
  
Segment total
    
1,815.0
      
(777.5
)
    
1,037.5
      
1,815.0
      
(760.5
)
    
1,054.5
  
Petrochemical & Refined Products Services:
                                                
Customer relationship intangibles
    
185.5
      
(46.9
)
    
138.6
      
185.5
      
(43.9
)
    
141.6
  
Contract-based intangibles
    
54.0
      
(16.9
)
    
37.1
      
54.0
      
(15.2
)
    
38.8
  
Segment total
    
239.5
      
(63.8
)
    
175.7
      
239.5
      
(59.1
)
    
180.4
  
Total intangible assets
  
$
5,266.3
    
$
(1,483.9
)
  
$
3,782.4
    
$
5,267.2
    
$
(1,403.1
)
  
$
3,864.1
  

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

 
  
For the Three Months
Ended June 30,
    
For the Six Months
Ended June 30,
  
 
  
2017
    
2016
    
2017
    
2016
  
NGL Pipelines & Services
  
$
7.3
    
$
7.7
    
$
14.6
    
$
15.5
  
Crude Oil Pipelines & Services
    
22.3
      
24.7
      
45.4
      
52.4
  
Natural Gas Pipelines & Services
    
8.8
      
8.3
      
17.0
      
16.9
  
Petrochemical & Refined Products Services
    
2.3
      
2.3
      
4.7
      
4.5
  
Total
  
$
40.7
    
$
43.0
    
$
81.7
    
$
89.3
  

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The following table presents our forecast of amortization expense associated with existing intangible assets for the periods indicated:

Remainder
of 2017
    
2018
    
2019
    
2020
    
2021
  
$
81.1
    
$
163.8
    
$
157.7
    
$
152.8
    
$
163.2
  

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 2016 Form 10-K.

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 7.  Debt Obligations

The following table presents our consolidated debt obligations (arranged by company and maturity date) at the dates indicated:

 
  
June 30,
2017
    
December 31,
2016
  
EPO senior debt obligations:
            
Commercial Paper Notes, variable-rates
  
$
1,455.2
    
$
1,777.2
  
Senior Notes L, 6.30% fixed-rate, due September 2017
    
800.0
      
800.0
  
364-Day Credit Agreement, variable-rate, due September 2017
    
--
      
--
  
Senior Notes V, 6.65% fixed-rate, due April 2018
    
349.7
      
349.7
  
Senior Notes OO, 1.65% fixed-rate, due May 2018
    
750.0
      
750.0
  
Senior Notes N, 6.50% fixed-rate, due January 2019
    
700.0
      
700.0
  
Senior Notes LL, 2.55% fixed-rate, due October 2019
    
800.0
      
800.0
  
Senior Notes Q, 5.25% fixed-rate, due January 2020
    
500.0
      
500.0
  
Senior Notes Y, 5.20% fixed-rate, due September 2020
    
1,000.0
      
1,000.0
  
Multi-Year Revolving Credit Facility, variable-rate, due September 2020
    
--
      
--
  
Senior Notes RR, 2.85% fixed-rate, due April 2021
    
575.0
      
575.0
  
Senior Notes CC, 4.05% fixed-rate, due February 2022
    
650.0
      
650.0
  
Senior Notes HH, 3.35% fixed-rate, due March 2023
    
1,250.0
      
1,250.0
  
Senior Notes JJ, 3.90% fixed-rate, due February 2024
    
850.0
      
850.0
  
Senior Notes MM, 3.75% fixed-rate, due February 2025
    
1,150.0
      
1,150.0
  
Senior Notes PP, 3.70% fixed-rate, due February 2026
    
875.0
      
875.0
  
Senior Notes SS, 3.95% fixed-rate, due February 2027
    
575.0
      
575.0
  
Senior Notes D, 6.875% fixed-rate, due March 2033
    
500.0
      
500.0
  
Senior Notes H, 6.65% fixed-rate, due October 2034
    
350.0
      
350.0
  
Senior Notes J, 5.75% fixed-rate, due March 2035
    
250.0
      
250.0
  
Senior Notes W, 7.55% fixed-rate, due April 2038
    
399.6
      
399.6
  
Senior Notes R, 6.125% fixed-rate, due October 2039
    
600.0
      
600.0
  
Senior Notes Z, 6.45% fixed-rate, due September 2040
    
600.0
      
600.0
  
Senior Notes BB, 5.95% fixed-rate, due February 2041
    
750.0
      
750.0
  
Senior Notes DD, 5.70% fixed-rate, due February 2042
    
600.0
      
600.0
  
Senior Notes EE, 4.85% fixed-rate, due August 2042
    
750.0
      
750.0
  
Senior Notes GG, 4.45% fixed-rate, due February 2043
    
1,100.0
      
1,100.0
  
Senior Notes II, 4.85% fixed-rate, due March 2044
    
1,400.0
      
1,400.0
  
Senior Notes KK, 5.10% fixed-rate, due February 2045
    
1,150.0
      
1,150.0
  
Senior Notes QQ, 4.90% fixed-rate, due May 2046
    
975.0
      
975.0
  
Senior Notes NN, 4.95% fixed-rate, due October 2054
    
400.0
      
400.0
  
TEPPCO senior debt obligations:
                
TEPPCO Senior Notes, 6.65% fixed-rate, due April 2018
    
0.3
      
0.3
  
TEPPCO Senior Notes, 7.55% fixed-rate, due April 2038
    
0.4
      
0.4
  
Total principal amount of senior debt obligations
    
22,105.2
      
22,427.2
  
EPO Junior Subordinated Notes A, variable-rate, due August 2066 (1)
    
521.1
      
521.1
  
EPO Junior Subordinated Notes C, fixed/variable-rate, due June 2067 (2)
    
256.4
      
256.4
  
EPO Junior Subordinated Notes B, fixed/variable-rate, due January 2068 (3)
    
682.7
      
682.7
  
TEPPCO Junior Subordinated Notes, fixed/variable-rate, due June 2067 
    
14.2
      
14.2
  
Total principal amount of senior and junior debt obligations
    
23,579.6
      
23,901.6
  
Other, non-principal amounts
    
(198.3
)
    
(203.9
)
Less current maturities of debt
    
(3,354.8
)
    
(2,576.8
)
Total long-term debt
  
$
20,026.5
    
$
21,120.9
  
   
(1) Variable rate is reset quarterly and based on 3-month LIBOR plus 3.708%.
(2) Fixed rate of 7.000% through May 31, 2017 (i.e., first call date without a make-whole redemption premium); thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 2.778%.
(3) Fixed rate of 7.034% through January 15, 2018 (i.e., first call date without a make-whole redemption premium); thereafter, the rate will be the greater of 7.034% or a variable rate reset quarterly and based on 3-month LIBOR plus 2.680%.
  

The following table presents the range of interest rates and weighted-average interest rates paid on our consolidated variable-rate debt during the six months ended June 30, 2017:

 
Range of Interest
Rates Paid
Weighted-Average
Interest Rate Paid
Commercial Paper Notes
0.90% to 1.53%
1.20%
EPO Junior Subordinated Notes A
4.59% to 4.88%
4.76%
EPO Junior Subordinated Notes C
3.98%
3.98%
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents contractually scheduled maturities of our consolidated debt obligations outstanding at June 30, 2017 for the next five years, and in total thereafter:

 
        
Scheduled Maturities of Debt
  
 
  
Total
    
Remainder
of 2017
    
2018
    
2019
    
2020
    
2021
    
Thereafter
  
Commercial Paper Notes
  
$
1,455.2
    
$
1,455.2
    
$
--
    
$
--
    
$
--
    
$
--
    
$
--
  
Senior Notes
    
20,650.0
      
800.0
      
1,100.0
      
1,500.0
      
1,500.0
      
575.0
      
15,175.0
  
Junior Subordinated Notes
    
1,474.4
      
--
      
--
      
--
      
--
      
--
      
1,474.4
  
Total
  
$
23,579.6
    
$
2,255.2
    
$
1,100.0
    
$
1,500.0
    
$
1,500.0
    
$
575.0
    
$
16,649.4
  

Parent-Subsidiary Guarantor Relationships
Enterprise Products Partners L.P. acts as guarantor of the consolidated debt obligations of EPO, with the exception of the remaining debt obligations of TEPPCO.  If EPO were to default on any of its guaranteed debt, Enterprise Products Partners L.P. would be responsible for full and unconditional repayment of that obligation.

Letters of Credit
At June 30, 2017, EPO had $66.4 million of letters of credit outstanding primarily related to our commodity hedging activities.

Lender Financial Covenants
We were in compliance with the financial covenants of our consolidated debt agreements at June 30, 2017.


Note 8.  Equity and Distributions

Partners’ Equity
Partners’ equity reflects the various classes of limited partner interests (i.e., common units, including restricted common units) outstanding.  The following table summarizes changes in the number of our outstanding units from January 1, 2017 to June 30, 2017:

   
Common
Units
(Unrestricted)
    
Restricted
Common
Units
    
Total
Common
Units
  
Number of units outstanding at January 1, 2017
    
2,116,906,120
      
682,294
      
2,117,588,414
  
Common units issued in connection with ATM program
    
20,857,006
      
--
      
20,857,006
  
Common units issued in connection with DRIP and EUPP
    
7,035,681
      
--
      
7,035,681
  
Common units issued in connection with the vesting of phantom unit awards
    
2,351,436
      
--
      
2,351,436
  
Common units issued in connection with the vesting of restricted common unit awards
    
668,470
      
(668,470
)
    
--
  
Forfeiture of restricted common unit awards
    
--
      
(1,250
)
    
(1,250
)
Cancellation of treasury units acquired in connection with the
vesting of equity-based awards
    
(986,686
)
    
--
      
(986,686
)
Common units issued in connection with employee compensation
    
1,176,103
      
--
      
1,176,103
  
Other
    
14,685
      
--
      
14,685
  
Number of units outstanding at June 30, 2017
    
2,148,022,815
      
12,574
      
2,148,035,389
  

The net cash proceeds we received from the issuance of common units during the six months ended June 30, 2017 were used to temporarily reduce amounts outstanding under EPO’s commercial paper program and revolving credit facilities and for general company purposes.

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

Universal shelf registration statement.  We have a universal shelf registration statement (the “2016 Shelf”) on file with the SEC.  The 2016 Shelf allows Enterprise Products Partners L.P. and EPO (each on a standalone basis) to issue an unlimited amount of equity and debt securities, respectively.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At-the-Market (“ATM”) program.  We have a registration statement on file with the SEC covering the issuance of up to $1.89 billion of our common units in amounts, at prices and on terms to be determined by market conditions and other factors at the time of such offerings in connection with our ATM program.  Pursuant to this program, we may sell common units under an equity distribution agreement between Enterprise Products Partners L.P. and certain broker-dealers from time-to-time by means of ordinary brokers’ transactions through the NYSE at market prices, in block transactions or as otherwise agreed to with the broker-dealer parties to the agreement.  

During the six months ended June 30, 2017, we sold 20,857,006 common units under the ATM program for aggregate gross proceeds of $577.3 million.  After taking into account applicable costs, our transactions under the ATM program resulted in aggregate net cash proceeds of $571.8 million during the six months ended June 30, 2017.

During the six months ended June 30, 2016, we issued 68,645,180 common units under this program for aggregate gross cash proceeds of $1.66 billion, resulting in total net cash proceeds of $1.65 billion.  This includes 3,830,256 common units sold in January 2016 to a privately held affiliate of EPCO, which generated gross proceeds of $100 million.  

After taking into account the aggregate sales price of common units sold under the ATM program through June 30, 2017, we have the capacity to issue additional common units under the ATM program up to an aggregate sales price of $864.4 million.

Distribution reinvestment plan.  We also have registration statements on file with the SEC collectively authorizing the issuance of up to 240,000,000 of our common units in connection with a distribution reinvestment plan (“DRIP”).  The DRIP provides unitholders of record and beneficial owners of our common units a voluntary means by which they can increase the number of our common units they own by reinvesting the quarterly cash distributions they receive from us into the purchase of additional new common units.

We issued a total of 6,802,889 common units under our DRIP during the six months ended June 30, 2017, which generated net cash proceeds of $179.0 million.  During the six months ended June 30, 2016, we issued 10,104,741 common units under our DRIP, which generated net cash proceeds of $232.3 million.  Privately held affiliates of EPCO reinvested $100 million through the DRIP during the six months ended June 30, 2016 (this amount being a component of the net cash proceeds presented).

After taking into account the number of common units issued under the DRIP through June 30, 2017, we have the capacity to issue an additional 92,455,606 common units under this plan.

Employee unit purchase plan.  In addition to the DRIP, we have registration statements on file with the SEC authorizing the issuance of up to 8,000,000 of our common units in connection with our employee unit purchase plan (“EUPP”).  We issued 232,792 common units under our EUPP during the six months ended June 30, 2017, which generated net cash proceeds of $6.4 million.  During the six months ended June 30, 2016, we issued 279,960 common units under our EUPP, which generated net cash proceeds of $6.8 million.  After taking into account the number of common units issued under the EUPP through June 30, 2017, we may issue an additional 6,032,683 common units under this plan.

Common units issued in connection with employee compensation.  In February 2017, the dollar value of the discretionary employee bonus payments with respect to the year ended December 31, 2016 (less any retirement plan deductions and withholding taxes) was remitted through the issuance of an equivalent value of newly issued Enterprise common units.  The compensation expense associated with this issuance of common units was recognized during the year ended December 31, 2016.

Noncontrolling Interests
Noncontrolling interests represent third party equity ownership interests in our consolidated subsidiaries (e.g., joint venture partners in entities in which we have a controlling ownership interest).
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive Income (Loss)
The following tables present the components of accumulated other comprehensive income (loss) as reported on our Unaudited Condensed Consolidated Balance Sheets at the dates indicated:

 
  
Gains (Losses) on
Cash Flow Hedges
              
 
  
Commodity
Derivative
Instruments
    
Interest Rate
Derivative
Instruments
    
Other
    
Total
  
Balance, January 1, 2017
  
$
(83.8
)
  
$
(199.8
)
  
$
3.6
    
$
(280.0
)
Other comprehensive income (loss) before reclassifications
    
175.2
      
(4.5
)
    
(0.1
)
    
170.6
  
Amounts reclassified from accumulated other comprehensive loss (income)
    
(38.9
)
    
19.6
      
--
      
(19.3
)
Total other comprehensive income (loss)
    
136.3
      
15.1
      
(0.1
)
    
151.3
  
Balance, June 30, 2017
  
$
52.5
    
$
(184.7
)
  
$
3.5
    
$
(128.7
)

 
  
Gains (Losses) on
Cash Flow Hedges
              
 
  
Commodity
Derivative
Instruments
    
Interest Rate
Derivative
Instruments
    
Other
    
Total
  
Balance, January 1, 2016
  
$
56.6
    
$
(279.5
)
  
$
3.7
    
$
(219.2
)
Other comprehensive loss before reclassifications
    
(74.9
)
    
(9.4
)
    
(0.1
)
    
(84.4
)
Amounts reclassified from accumulated other comprehensive loss (income)
    
(21.8
)
    
18.4
      
--
      
(3.4
)
Total other comprehensive income (loss)
    
(96.7
)
    
9.0
      
(0.1
)
    
(87.8
)
Balance, June 30, 2016
  
$
(40.1
)
  
$
(270.5
)
  
$
3.6
    
$
(307.0
)

The following table presents reclassifications out of accumulated other comprehensive income (loss) into net income during the periods indicated:

 
  
  
For the Three Months
Ended June 30,
    
For the Six Months
Ended June 30,
  
 
Location 
  
2017
    
2016
    
2017
    
2016
  
Losses (gains) on cash flow hedges:
                          
Interest rate derivatives
Interest expense
  
$
10.0
    
$
9.2
    
$
19.6
    
$
18.4
  
Commodity derivatives
Revenue
    
(46.0
)
    
34.2
      
(38.5
)
    
(24.6
)
Commodity derivatives
Operating costs and expenses
    
--
      
1.2
      
(0.4
)
    
2.8
  
Total
 
  
$
(36.0
)
  
$
44.6
    
$
(19.3
)
  
$
(3.4
)

For information regarding our interest rate and commodity derivative instruments, see Note 12.

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

 
  
Distribution Per
Common Unit
  
Record
Date
Payment
Date
2016
             
1st Quarter
  
$
0.3950
  
4/29/2016
5/6/2016
2nd Quarter
  
$
0.4000
  
7/29/2016
8/5/2016
2017
        
 
    
1st Quarter
  
$
0.4150
  
4/28/2017
5/8/2017
2nd Quarter
  
$
0.4200
  
7/31/2017
8/7/2017

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

Note 9.  Business Segments

Our operations are reported under four business segments: (i) NGL Pipelines & Services, (ii) Crude Oil Pipelines & Services, (iii) Natural Gas Pipelines & Services and (iv) Petrochemical & Refined Products Services.

Our business segments are generally organized and managed according to the types of services rendered (or technologies employed) and products produced and/or sold.  Financial information regarding these segments is evaluated regularly by our chief operating decision makers in deciding how to allocate resources and in assessing operating and financial performance.

Segment Gross Operating Margin
We evaluate segment performance based on our financial measure of gross operating margin.  Gross operating margin is an important performance measure of the core profitability of our operations and forms the basis of our internal financial reporting.  We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results.  Gross operating margin is exclusive of other income and expense transactions, income taxes, the cumulative effect of changes in accounting principles and extraordinary charges.  Gross operating margin is presented on a 100% basis before any allocation of earnings to noncontrolling interests.

The following table presents our measurement of total segment gross operating margin for the periods presented.  The GAAP financial measure most directly comparable to total segment gross operating margin is operating income.

 
  
For the Three Months
Ended June 30,
    
For the Six Months
Ended June 30,
  
 
  
2017
    
2016
    
2017
    
2016
  
Income before income taxes
  
$
674.7
    
$
569.9
    
$
1,451.7
    
$
1,248.5
  
Add total other expense, net
    
264.0
      
267.0
      
518.6
      
504.0
  
Operating income
    
938.7
      
836.9
      
1,970.3
      
1,752.5
  
Adjustments to reconcile operating income to total gross operating margin:
                                
   Add depreciation, amortization and accretion expense in operating costs and expenses
    
379.2
      
360.3
      
755.4
      
718.5
  
   Add asset impairment and related charges in operating costs and expenses
    
14.0
      
20.2
      
25.2
      
21.9
  
   Add net losses attributable to asset sales in operating costs and expenses
    
0.3
      
1.7
      
--
      
6.6
  
   Add general and administrative costs
    
45.7
      
35.1
      
96.1
      
79.0
  
Adjustments for make-up rights on certain new pipeline projects:
                                
   Add non-refundable payments received from shippers attributable to make-up rights (1)
    
8.3
      
1.8
      
21.6
      
8.9
  
   Subtract the subsequent recognition of revenues attributable to make-up rights (2)
    
(6.8
)
    
(6.6
)
    
(15.9
)
    
(19.5
)
Total segment gross operating margin
  
$
1,379.4
    
$
1,249.4
    
$
2,852.7
    
$
2,567.9
  
                                 
(1) Since make-up rights entail a future performance obligation by the pipeline to the shipper, these receipts are recorded as deferred revenue for GAAP purposes; however, these receipts are included in gross operating margin in the period of receipt since they are nonrefundable to the shipper.
(2) As deferred revenues attributable to make-up rights are subsequently recognized as revenue under GAAP, gross operating margin must be adjusted to remove such amounts to prevent duplication since the associated non-refundable payments were previously included in gross operating margin.
  

Gross operating margin by segment is calculated by subtracting segment operating costs and expenses from segment revenues, with both segment totals reflecting the adjustments noted in the preceding table, as applicable, and before the elimination of intercompany transactions.  The following table presents gross operating margin by segment for the periods indicated:

 
  
For the Three Months
Ended June 30,
    
For the Six Months
Ended June 30,
  
 
  
2017
    
2016
    
2017
    
2016
  
Gross operating margin by segment:
                        
NGL Pipelines & Services
  
$
759.9
    
$
719.1
    
$
1,615.9
    
$
1,502.8
  
Crude Oil Pipelines & Services
    
236.7
      
177.4
      
501.3
      
379.7
  
Natural Gas Pipelines & Services
    
194.4
      
177.4
      
365.3
      
355.1
  
Petrochemical & Refined Products Services
    
188.4
      
175.5
      
370.2
      
330.3
  
Total segment gross operating margin
  
$
1,379.4
    
$
1,249.4
    
$
2,852.7
    
$
2,567.9
  

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Summarized Segment Financial Information
Information by business segment, together with reconciliations to amounts presented on our Unaudited Condensed Statements of Consolidated Operations, is presented in the following table:

 
  
Reportable Business Segments
              
 
  
NGL
Pipelines
& Services
    
Crude Oil
Pipelines
& Services
    
Natural Gas
Pipelines
& Services
    
Petrochemical
& Refined Products Services
    
Adjustments
and
Eliminations
    
Consolidated
Total
  
Revenues from third parties:
                                    
Three months ended June 30, 2017
  
$
2,617.8
    
$
1,895.8
    
$
782.9
    
$
1,301.2
    
$
--
    
$
6,597.7
  
Three months ended June 30, 2016
    
2,512.7
      
1,651.4
      
533.9
      
906.6
      
--
      
5,604.6
  
Six months ended June 30, 2017
    
5,960.8
      
3,698.4
      
1,540.7
      
2,707.4
      
--
      
13,907.3
  
Six months ended June 30, 2016
    
4,914.7
      
2,928.9
      
1,081.2
      
1,669.5
      
--
      
10,594.3
  
Revenues from related parties:
                                                
Three months ended June 30, 2017
    
2.8
      
3.8
      
3.3
      
--
      
--
      
9.9
  
Three months ended June 30, 2016
    
2.8
      
8.6
      
1.8
      
--
      
--
      
13.2
  
Six months ended June 30, 2017
    
5.6
      
8.4
      
6.7
      
--
      
--
      
20.7
  
Six months ended June 30, 2016
    
4.6
      
19.7
      
4.5
      
--
      
--
      
28.8
  
Intersegment and intrasegment revenues:
                                                
Three months ended June 30, 2017
    
5,642.1
      
3,383.7
      
220.6
      
389.7
      
(9,636.1
)
    
--
  
Three months ended June 30, 2016
    
4,880.8
      
2,445.7
      
146.9
      
307.7
      
(7,781.1
)
    
--
  
Six months ended June 30, 2017
    
14,516.9
      
6,857.7
      
415.1
      
804.4
      
(22,594.1
)
    
--
  
Six months ended June 30, 2016
    
8,055.6
      
3,945.1
      
271.6
      
550.4
      
(12,822.7
)
    
--
  
Total revenues:
                                                
Three months ended June 30, 2017
    
8,262.7
      
5,283.3
      
1,006.8
      
1,690.9
      
(9,636.1
)
    
6,607.6
  
Three months ended June 30, 2016
    
7,396.3
      
4,105.7
      
682.6
      
1,214.3
      
(7,781.1
)
    
5,617.8
  
Six months ended June 30, 2017
    
20,483.3
      
10,564.5
      
1,962.5
      
3,511.8
      
(22,594.1
)
    
13,928.0
  
Six months ended June 30, 2016
    
12,974.9
      
6,893.7
      
1,357.3
      
2,219.9
      
(12,822.7
)
    
10,623.1
  
Equity in income (loss) of unconsolidated affiliates:
                                                
Three months ended June 30, 2017
    
19.0
      
89.2
      
0.9
      
(2.1
)
    
--
      
107.0
  
Three months ended June 30, 2016
    
14.0
      
65.8
      
0.9
      
(4.3
)
    
--
      
76.4
  
Six months ended June 30, 2017
    
34.5
      
170.4
      
1.9
      
(5.0
)
    
--
      
201.8
  
Six months ended June 30, 2016
    
29.1
      
155.9
      
1.9
      
(9.4
)
    
--
      
177.5
  

Segment revenues include intersegment and intrasegment transactions, which are generally based on transactions made at market-based rates.  Our consolidated revenues reflect the elimination of intercompany transactions.  Substantially all of our consolidated revenues are earned in the U.S. and derived from a wide customer base.

Information by business segment, together with reconciliations to our Unaudited Condensed Consolidated Balance Sheet totals, is presented in the following table:

 
  
Reportable Business Segments
              
 
  
NGL
Pipelines
& Services
    
Crude Oil
Pipelines
& Services
    
Natural Gas
Pipelines
& Services
    
Petrochemical
& Refined Products Services
    
Adjustments
and
Eliminations
    
Consolidated
Total
  
Property, plant and equipment, net:
(see Note 4)
                                    
At June 30, 2017
  
$
14,125.8
    
$
4,355.1
    
$
8,297.2
    
$
3,340.7
    
$
4,101.9
    
$
34,220.7
  
At December 31, 2016
    
14,091.5
      
4,216.1
      
8,403.0
      
3,261.2
      
3,320.7
      
33,292.5
  
Investments in unconsolidated affiliates:
(see Note 5)
                                                
At June 30, 2017
    
751.8
      
1,822.8
      
21.3
      
65.4
      
--
      
2,661.3
  
At December 31, 2016
    
750.4
      
1,824.6
      
21.7
      
80.6
      
--
      
2,677.3
  
Intangible assets, net: (see Note 6)