enlc-20200930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2020

☐ 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: 001-36336

ENLINK MIDSTREAM, LLC

(Exact name of registrant as specified in its charter)


Delaware		46-4108528
(State of organization)		(I.R.S. Employer Identification No.)

1722 Routh St., Suite 1300
Dallas,	Texas	75201
(Address of principal executive offices)		(Zip Code)

(214) 953-9500

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE SECURITIES EXCHANGE ACT OF 1934:

Title of Each Class

Trading Symbol

Name of Exchange on which Registered

Common Units Representing Limited Liability Company Interests

ENLC

The New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of October 29, 2020, the Registrant had 489,746,802 common units outstanding.

Table of Contents

TABLE OF CONTENTS


Item	Description	Page

	PART I—FINANCIAL INFORMATION

1.	Financial Statements	5

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

3.	Quantitative and Qualitative Disclosures About Market Risk	51

4.	Controls and Procedures	54

	PART II—OTHER INFORMATION

1.	Legal Proceedings	55

1A.	Risk Factors	55

2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

5.	Other Information	55

6.	Exhibits	56

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DEFINITIONS

The following terms as defined are used in this document:


Defined Term						Definition
/d						Per day.
2014 Plan						ENLC’s 2014 Long-Term Incentive Plan.

ASC						The FASB Accounting Standards Codification.
ASC 350						ASC 350, Intangibles—Goodwill and Other.
ASC 842						ASC 842, Leases.
Ascension JV						Ascension Pipeline Company, LLC, a joint venture between a subsidiary of ENLK and a subsidiary of Marathon Petroleum Corporation in which ENLK owns a 50% interest and Marathon Petroleum Corporation owns a 50% interest. The Ascension JV, which began operations in April 2017, owns an NGL pipeline that connects ENLK’s Riverside fractionator to Marathon Petroleum Corporation’s Garyville refinery.
ASU						The FASB Accounting Standards Update.

Bbls						Barrels.
Bcf						Billion cubic feet.
Cedar Cove JV						Cedar Cove Midstream LLC, a joint venture between a subsidiary of ENLK and a subsidiary of Kinder Morgan, Inc. in which ENLK owns a 30% interest and Kinder Morgan, Inc. owns a 70% interest. The Cedar Cove JV, which was formed in November 2016, owns gathering and compression assets in Blaine County, Oklahoma, located in the STACK play.
CFTC						U.S. Commodity Futures Trading Commission.
CNOW						Central Northern Oklahoma Woodford Shale.
Commission						U.S. Securities and Exchange Commission.
Consolidated Credit Facility						A $1.75 billion unsecured revolving credit facility entered into by ENLC that matures on January 25, 2024, which includes a $500.0 million letter of credit subfacility.
Delaware Basin						A large sedimentary basin in West Texas and New Mexico.
Delaware Basin JV						Delaware G&P LLC, a joint venture between a subsidiary of ENLK and an affiliate of NGP in which ENLK owns a 50.1% interest and NGP owns a 49.9% interest. The Delaware Basin JV, which was formed in August 2016, owns the Lobo processing facilities and the Tiger Plant located in the Delaware Basin in Texas.
Devon						Devon Energy Corporation.

ENLC						EnLink Midstream, LLC.

ENLC Credit Facility						A $250.0 million secured revolving credit facility entered into by ENLC that would have matured on March 7, 2019, which included a $125.0 million letter of credit subfacility. The ENLC Credit Facility was terminated on January 25, 2019 in connection with the consummation of the Merger.

ENLK						EnLink Midstream Partners, LP or, when applicable, EnLink Midstream Partners, LP together with its consolidated subsidiaries. Also referred to as the “Partnership.”


FASB						Financial Accounting Standards Board.
GAAP						Generally accepted accounting principles in the United States of America.
Gal						Gallons.
GCF						Gulf Coast Fractionators, which owns an NGL fractionator in Mont Belvieu, Texas. ENLK owns 38.75% of GCF.
General Partner						EnLink Midstream GP, LLC, the general partner of ENLK.
GIP						Global Infrastructure Management, LLC, an independent infrastructure fund manager, itself, its affiliates, or managed fund vehicles, including GIP III Stetson I, L.P., GIP III Stetson II, L.P., and their affiliates.



Gross Operating Margin						Revenue less cost of sales. Gross Operating Margin is a non-GAAP financial measure. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for additional information.
ISDAs						International Swaps and Derivatives Association Agreements.


Managing Member						EnLink Midstream Manager, LLC, the managing member of ENLC.
Merger						On January 25, 2019, NOLA Merger Sub, LLC (previously a wholly-owned subsidiary of ENLC) merged with and into ENLK with ENLK continuing as the surviving entity and a subsidiary of ENLC.

MMbbls						Million barrels.
MMbtu						Million British thermal units.
MMcf						Million cubic feet.
MVC						Minimum volume commitment.

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NGL						Natural gas liquid.
NGP						NGP Natural Resources XI, LP.

OPEC+						Organization of the Petroleum Exporting Countries and its broader partners.
Operating Partnership						EnLink Midstream Operating, LP, a Delaware limited partnership and wholly owned subsidiary of ENLK.
ORV						ENLK’s Ohio River Valley crude oil, condensate stabilization, natural gas compression, and brine disposal assets in the Utica and Marcellus shales.
OTC						Over-the-counter.

POL contracts						Percentage-of-liquids contracts.
POP contracts						Percentage-of-proceeds contracts.
Series B Preferred Units						ENLK’s Series B Cumulative Convertible Preferred Units.
Series C Preferred Units						ENLK’s Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units.
STACK						Sooner Trend Anadarko Basin Canadian and Kingfisher Counties in Oklahoma.
Term Loan						An $850.0 million term loan entered into by ENLK on December 11, 2018 with Bank of America, N.A., as Administrative Agent, Bank of Montreal and Royal Bank of Canada, as Co-Syndication Agents, Citibank, N.A. and Wells Fargo Bank, National Association, as Co-Documentation Agents, and the lenders party thereto, which ENLC assumed in connection with the Merger and the obligations of which ENLK guarantees.

Tiger Plant						A gas processing plant in the Delaware Basin owned by the Delaware Basin JV.
White Star						White Star Petroleum, LLC.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Balance Sheets

(In millions, except unit data)


	September 30, 2020		December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	78.9	$	77.4
Accounts receivable:
Trade, net of allowance for bad debt of $0.5 and $0.5, respectively	58.3		36.2
Accrued revenue and other	352.9		460.1

Fair value of derivative assets	9.6		12.9
Other current assets	81.7		57.8
Total current assets	581.4		644.4
Property and equipment, net of accumulated depreciation of $3,775.9 and $3,418.6, respectively	6,742.0		7,081.3
Intangible assets, net of accumulated amortization of $638.0 and $545.9, respectively	1,156.2		1,249.9
Goodwill	—		184.6
Investment in unconsolidated affiliates	41.9		43.1
Fair value of derivative assets	5.4		4.3
Other assets, net	140.3		128.2
Total assets	$	8,667.2	$	9,335.8
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Accounts payable and drafts payable	$	54.4	$	70.6
Accounts payable to related party	0.9		1.1
Accrued gas, NGLs, condensate, and crude oil purchases	214.8		354.8
Fair value of derivative liabilities	33.1		14.4

Other current liabilities	198.8		206.2
Total current liabilities	502.0		647.1
Long-term debt	4,650.0		4,764.3
Asset retirement obligations	16.1		15.5
Other long-term liabilities	83.5		90.8

Fair value of derivative liabilities	4.5		6.8

Redeemable non-controlling interest	—		5.2

Members’ equity:
Members’ equity (489,734,530 and 487,791,612 units issued and outstanding, respectively)	1,701.2		2,135.5
Accumulated other comprehensive loss	(19.0)		(11.0)
Non-controlling interest	1,728.9		1,681.6
Total members’ equity	3,411.1		3,806.1
Total liabilities and members’ equity	$	8,667.2	$	9,335.8

See accompanying notes to consolidated financial statements.

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ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Statements of Operations

(In millions, except per unit data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(Unaudited)
Revenues:
Product sales	$	696.1	$	1,137.2	$	2,121.6	$	4,118.5

Midstream services	237.5		263.3		716.2		762.5

Gain (loss) on derivative activity	(5.1)		7.5		(8.3)		16.2
Total revenues	928.5		1,408.0		2,829.5		4,897.2
Operating costs and expenses:
Cost of sales	549.5		999.5		1,702.5		3,663.0
Operating expenses	94.3		119.2		283.1		351.6
General and administrative	25.7		38.5		79.6		122.1
(Gain) loss on disposition of assets	(1.8)		(3.0)		2.8		(2.9)
Depreciation and amortization	160.3		157.3		481.3		463.1
Impairments	—		—		354.5		186.5
Loss on secured term loan receivable	—		—		—		52.9

Total operating costs and expenses	828.0		1,311.5		2,903.8		4,836.3
Operating income (loss)	100.5		96.5		(74.3)		60.9
Other income (expense):
Interest expense, net of interest income	(55.5)		(56.6)		(166.3)		(160.5)
Gain on extinguishment of debt	—		—		32.0		—
Income (loss) from unconsolidated affiliates	(0.2)		4.0		0.8		14.0
Other income (expense)	0.4		(0.1)		0.4		0.1
Total other expense	(55.3)		(52.7)		(133.1)		(146.4)
Income (loss) before non-controlling interest and income taxes	45.2		43.8		(207.4)		(85.5)
Income tax benefit (expense)	(6.0)		(6.3)		16.0		(2.7)
Net income (loss)	39.2		37.5		(191.4)		(88.2)
Net income attributable to non-controlling interest	26.6		25.7		78.7		92.4
Net income (loss) attributable to ENLC	$	12.6	$	11.8	$	(270.1)	$	(180.6)
Net income (loss) attributable to ENLC per unit:
Basic common unit	$	0.03	$	0.02	$	(0.55)	$	(0.40)
Diluted common unit	$	0.03	$	0.02	$	(0.55)	$	(0.40)

See accompanying notes to consolidated financial statements.

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ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

(In millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(Unaudited)
Net income (loss)	$	39.2	$	37.5	$	(191.4)	$	(88.2)
Gain (loss) on designated cash flow hedge (1)	3.6		(1.3)		(8.0)		(11.2)
Comprehensive income (loss)	42.8		36.2		(199.4)		(99.4)
Comprehensive income attributable to non-controlling interest	26.6		25.7		78.7		92.4
Comprehensive income (loss) attributable to ENLC	$	16.2	$	10.5	$	(278.1)	$	(191.8)

____________________________

(1)Includes a tax expense of $1.1 million and a tax benefit of $2.4 million for the three and nine months ended September 30, 2020, respectively, and a tax benefit of $0.5 million and $4.1 million for the three and nine months ended September 30, 2019, respectively.

See accompanying notes to consolidated financial statements.

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ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Statements of Changes in Members’ Equity

(In millions)


	Common Units			Accumulated Other Comprehensive Loss		Non-Controlling Interest		Total		Redeemable Non-controlling interest (Temporary Equity)
	$		Units	$		$		$		$
	(Unaudited)
Balance, December 31, 2019	$	2,135.5	487.8	$	(11.0)	$	1,681.6	$	3,806.1	$	5.2
Conversion of restricted units for common units, net of units withheld for taxes	(4.0)		1.3	—		—		(4.0)		—
Unit-based compensation	12.3		—	—		—		12.3		—
Contributions from non-controlling interests	—		—	—		37.1		37.1		—
Distributions	(93.3)		—	—		(24.4)		(117.7)		(0.3)
Loss on designated cash flow hedge (1)	—		—	(13.1)		—		(13.1)		—
Redemption of non-controlling interest	—		—	—		—		—		(4.0)
Fair value adjustment related to redeemable non-controlling interest	0.7		—	—		—		0.7		(0.9)
Net income (loss)	(286.8)		—	—		26.4		(260.4)		—
Balance, March 31, 2020	1,764.4		489.1	(24.1)		1,720.7		3,461.0		—
Conversion of restricted units for common units, net of units withheld for taxes	(0.3)		0.4	—		—		(0.3)		—
Unit-based compensation	6.8		—	—		—		6.8		—
Contributions from non-controlling interests	—		—	—		13.2		13.2		—
Distributions	(46.5)		—	—		(35.9)		(82.4)		—
Gain on designated cash flow hedge (2)	—		—	1.5		—		1.5		—


Net income	4.1		—	—		25.7		29.8		—
Balance, June 30, 2020	1,728.5		489.5	(22.6)		1,723.7		3,429.6		—
Conversion of restricted units for common units, net of units withheld for taxes	(0.4)		0.2	—		—		(0.4)		—
Unit-based compensation	7.2		—	—		—		7.2		—
Contributions from non-controlling interests	—		—	—		1.9		1.9		—
Distributions	(46.4)		—	—		(23.3)		(69.7)		(0.3)
Gain on designated cash flow hedge (3)	—		—	3.6		—		3.6		—

Fair value adjustment related to redeemable non-controlling interest	(0.3)		—	—		—		(0.3)		0.3
Net income	12.6		—	—		26.6		39.2		—
Balance, September 30, 2020	$	1,701.2	489.7	$	(19.0)	$	1,728.9	$	3,411.1	$	—

____________________________

(1)Includes a tax benefit of $4.0 million.

(2)Includes a tax expense of $0.5 million.

(3)Includes a tax expense of $1.1 million.

See accompanying notes to consolidated financial statements.

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ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Statements of Changes in Members’ Equity (Continued)

(In millions)


	Common Units			Accumulated Other Comprehensive Loss		Non-Controlling Interest		Total		Redeemable Non-Controlling Interest (Temporary Equity)
	$		Units	$		$		$		$
	(Unaudited)
Balance, December 31, 2018	$	1,730.9	181.3	$	(2.0)	$	3,245.3	$	4,974.2	$	9.3
Adoption of ASC 842	0.3		—	—		—		0.3		—
Balance, January 1, 2019	1,731.2		181.3	(2.0)		3,245.3		4,974.5		9.3
Conversion of restricted units for common units, net of units withheld for taxes	(5.6)		1.0	—		(2.8)		(8.4)		—
Unit-based compensation	12.2		—	—		1.4		13.6		—
Contributions from non-controlling interests	—		—	—		15.7		15.7		—
Distributions	(51.0)		—	—		(127.6)		(178.6)		—
Fair value adjustment related to redeemable non-controlling interest	2.5		—	—		—		2.5		(2.1)
Net income (loss)	(176.3)		—	—		41.5		(134.8)		—
Issuance of common units for ENLK public common units related to the Merger	1,958.1		304.9	—		(1,559.1)		399.0		—
Balance, March 31, 2019	3,471.1		487.2	(2.0)		1,614.4		5,083.5		7.2


Unit-based compensation	6.6		—	—		—		6.6		—
Contributions from non-controlling interests	—		—	—		29.5		29.5		—
Distributions	(137.2)		—	—		(35.1)		(172.3)		—
Loss on designated cash flow hedge (1)	—		—	(9.9)		—		(9.9)		—
Fair value adjustment related to redeemable non-controlling interest	0.2		—	—		—		0.2		(1.4)
Net income (loss)	(16.1)		—	—		25.2		9.1		—
Balance, June 30, 2019	3,324.6		487.2	(11.9)		1,634.0		4,946.7		5.8
Conversion of restricted units for common units, net of units withheld for taxes	(2.1)		0.4	—		—		(2.1)		—
Unit-based compensation	11.1		—	—		—		11.1		—
Contributions from non-controlling interests	—		—	—		33.4		33.4		—
Distributions	(139.8)		—	—		(22.1)		(161.9)		(0.3)
Loss on designated cash flow hedge (2)	—		—	(1.3)		—		(1.3)		—
Fair value adjustment related to redeemable non-controlling interest	0.1		—	—		—		0.1		(0.1)
Net income	11.8		—	—		25.6		37.4		0.1

Balance, September 30, 2019	$	3,205.7	487.6	$	(13.2)	$	1,670.9	$	4,863.4	$	5.5

____________________________

(1)Includes a tax benefit of $3.6 million.

(2)Includes a tax benefit of $0.5 million.

See accompanying notes to consolidated financial statements.

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ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In millions)


	Nine Months Ended September 30,
	2020		2019
	(Unaudited)
Cash flows from operating activities:
Net loss	$	(191.4)	$	(88.2)
Adjustments to reconcile net loss to net cash provided by operating activities:
Impairments	354.5		186.5
Depreciation and amortization	481.3		463.1
Loss on secured term loan receivable	—		52.9
Deferred income tax (benefit) expense	(17.1)		0.7


Non-cash unit-based compensation	24.6		31.2
(Gain) loss on derivatives recognized in net loss	8.3		(16.2)
Cash settlements on derivatives	(1.0)		12.5
Gain on extinguishment of debt	(32.0)		—
Amortization of debt issue costs, net discount (premium) of notes	3.1		3.9

Distribution of earnings from unconsolidated affiliates	1.6		14.7
Income from unconsolidated affiliates	(0.8)		(14.0)

Other operating activities	2.1		(5.0)
Changes in assets and liabilities:
Accounts receivable, accrued revenue, and other	85.3		338.6
Natural gas and NGLs inventory, prepaid expenses, and other	(12.7)		2.7
Accounts payable, accrued product purchases, and other accrued liabilities	(144.8)		(205.9)
Net cash provided by operating activities	561.0		777.5
Cash flows from investing activities:
Additions to property and equipment	(254.4)		(594.5)
Proceeds from sale of property	7.2		13.7


Other investing activities	(3.5)		(2.2)
Net cash used in investing activities	(250.7)		(583.0)
Cash flows from financing activities:
Proceeds from borrowings	690.0		2,855.0
Payments on borrowings	(776.0)		(2,591.4)
Debt financing costs	—		(10.0)
Conversion of restricted units, net of units withheld for taxes	(4.7)		(10.5)
Distribution to members	(186.2)		(328.0)
Distributions to non-controlling interests	(84.2)		(185.1)
Contributions by non-controlling interests	52.2		78.6
Other financing activities	0.1		(1.3)
Net cash used in financing activities	(308.8)		(192.7)
Net increase in cash and cash equivalents	1.5		1.8
Cash and cash equivalents, beginning of period	77.4		100.4
Cash and cash equivalents, end of period	$	78.9	$	102.2

Supplemental disclosures of cash flow information:
Cash paid for interest	$	125.7	$	128.0
Cash paid (refunded) for income taxes	$	(0.1)	$	2.8
Non-cash investing activities:
Non-cash accrual of property and equipment	$	(27.2)	$	24.6