enlc-20210331

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 March 31, 2021

☐ 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 April 29, 2021, the Registrant had 490,055,937 common units outstanding.

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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	28

3.	Quantitative and Qualitative Disclosures About Market Risk	45

4.	Controls and Procedures	47

	PART II—OTHER INFORMATION

1.	Legal Proceedings	48

1A.	Risk Factors	48

2.	Unregistered Sales of Equity Securities and Use of Proceeds	48



6.	Exhibits	49

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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.
Adjusted gross margin						Revenue less cost of sales, exclusive of operating expenses and depreciation and amortization related to our operating segments. Adjusted gross 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.
AR Facility						A three-year committed accounts receivable securitization facility of up to $300 million entered into by EnLink Midstream Funding, LLC, a bankruptcy-remote special purpose entity and our indirect subsidiary, with PNC Bank, National Association, as administrative agent and lender, and PNC Capital Markets, LLC, as structuring agent.
ASC						The FASB Accounting Standards Codification.



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.
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.
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.
Midland Basin						A large sedimentary basin in West Texas.
MMbbls						Million barrels.
MMbtu						Million British thermal units.
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.
Permian Basin						A large sedimentary basin that includes the Midland and Delaware Basins.
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						A term loan originally in the amount of $850.0 million 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.

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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)


	March 31, 2021		December 31, 2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	72.8	$	39.6
Accounts receivable:
Trade, net of allowance for bad debt of $0.3 and $0.5, respectively	65.4		80.6
Accrued revenue and other	481.4		447.5

Fair value of derivative assets	40.2		25.0
Other current assets	65.6		58.7
Total current assets	725.4		651.4
Property and equipment, net of accumulated depreciation of $3,981.4 and $3,863.0, respectively	6,551.2		6,652.1
Intangible assets, net of accumulated amortization of $699.7 and $668.8, respectively	1,094.5		1,125.4

Investment in unconsolidated affiliates	31.7		41.6
Fair value of derivative assets	3.4		4.9
Other assets, net	110.1		75.5
Total assets	$	8,516.3	$	8,550.9
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Accounts payable and drafts payable	$	58.7	$	60.5
Accounts payable to related party	1.2		1.0
Accrued gas, NGLs, condensate, and crude oil purchases	363.1		290.5
Fair value of derivative liabilities	59.3		37.1
Current maturities of long-term debt	349.8		349.8
Other current liabilities	165.9		149.1
Total current liabilities	998.0		888.0
Long-term debt	4,145.2		4,244.0
Asset retirement obligations	14.4		14.2
Other long-term liabilities	85.3		80.6
Deferred tax liability, net	111.0		108.6
Fair value of derivative liabilities	—		2.5



Members’ equity:
Members’ equity (490,055,402 and 489,381,149 units issued and outstanding, respectively)	1,454.2		1,508.8
Accumulated other comprehensive loss	(11.7)		(15.3)
Non-controlling interest	1,719.9		1,719.5
Total members’ equity	3,162.4		3,213.0
Commitments and contingencies (Note 15)
Total liabilities and members’ equity	$	8,516.3	$	8,550.9

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 March 31,
	2021		2020
	(Unaudited)
Revenues:
Product sales	$	1,122.9	$	892.9

Midstream services	208.9		244.0

Gain (loss) on derivative activity	(83.4)		19.2
Total revenues	1,248.4		1,156.1
Operating costs and expenses:
Cost of sales, exclusive of operating expenses and depreciation and amortization (1)	934.7		755.3
Operating expenses	56.3		100.7
Depreciation and amortization	151.0		162.8
Impairments	—		353.0
Gain on disposition of assets	—		(0.6)
General and administrative	26.0		30.4


Total operating costs and expenses	1,168.0		1,401.6
Operating income (loss)	80.4		(245.5)
Other income (expense):
Interest expense, net of interest income	(60.0)		(55.6)
Gain on extinguishment of debt	—		5.3
Income (loss) from unconsolidated affiliates	(6.3)		1.7
Other expense	(0.1)		—
Total other expense	(66.4)		(48.6)
Income (loss) before non-controlling interest and income taxes	14.0		(294.1)
Income tax benefit (expense)	(1.4)		33.7
Net income (loss)	12.6		(260.4)
Net income attributable to non-controlling interest	25.3		26.4
Net loss attributable to ENLC	$	(12.7)	$	(286.8)
Net loss attributable to ENLC per unit:
Basic common unit	$	(0.03)	$	(0.59)
Diluted common unit	$	(0.03)	$	(0.59)

____________________________

(1)Includes related party cost of sales of $3.2 million and $2.9 million for the three months ended March 31, 2021 and 2020, respectively, and excludes all operating expenses as well as depreciation and amortization related to our operating segments of $149.0 million and $160.8 million for the three months ended March 31, 2021 and 2020, respectively.

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 March 31,
	2021		2020
	(Unaudited)
Net income (loss)	$	12.6	$	(260.4)
Gain (loss) on designated cash flow hedge (1)	3.6		(13.1)
Comprehensive income (loss)	16.2		(273.5)
Comprehensive income attributable to non-controlling interest	25.3		26.4
Comprehensive loss attributable to ENLC	$	(9.1)	$	(299.9)

____________________________

(1)Includes a tax expense of $1.1 million and a tax benefit of $4.0 million for the three months ended March 31, 2021 and 2020, 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, 2020	$	1,508.8	489.4	$	(15.3)	$	1,719.5	$	3,213.0	$	—
Conversion of restricted units for common units, net of units withheld for taxes	(1.2)		0.7	—		—		(1.2)		—
Unit-based compensation	6.5		—	—		—		6.5		—
Contributions from non-controlling interests	—		—	—		0.9		0.9		—
Distributions	(47.1)		—	—		(25.8)		(72.9)		(0.2)
Gain on designated cash flow hedge (1)	—		—	3.6		—		3.6		—
Fair value adjustment related to redeemable non-controlling interest	(0.1)		—	—		—		(0.1)		0.2

Net income (loss)	(12.7)		—	—		25.3		12.6		—
Balance, March 31, 2021	$	1,454.2	490.1	$	(11.7)	$	1,719.9	$	3,162.4	$	—

____________________________

(1)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, 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)		—
Fair value adjustment related to redeemable non-controlling interest	0.7		—	—		—		0.7		(0.9)
Redemption of non-controlling interest	—		—	—		—		—		(4.0)
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	$	—

____________________________

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

See accompanying notes to consolidated financial statements.

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ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In millions)


	Three Months Ended March 31,
	2021		2020
	(Unaudited)
Cash flows from operating activities:
Net income (loss)	$	12.6	$	(260.4)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Impairments	—		353.0
Depreciation and amortization	151.0		162.8
Utility credits	(40.4)		—
Deferred income tax (benefit) expense	1.3		(34.0)

Non-cash unit-based compensation	6.5		8.8
Non-cash (gain) loss on derivatives recognized in net income (loss)	7.8		(18.0)
Gain on extinguishment of debt	—		(5.3)
Amortization of debt issue costs, net discount (premium) of notes	1.2		1.0

Distribution of earnings from unconsolidated affiliates	—		1.6
(Income) loss from unconsolidated affiliates	6.3		(1.7)

Other operating activities	1.4		(1.2)
Changes in assets and liabilities:
Accounts receivable, accrued revenue, and other	(18.7)		124.8
Natural gas and NGLs inventory, prepaid expenses, and other	1.2		44.5
Accounts payable, accrued product purchases, and other accrued liabilities	95.6		(193.9)
Net cash provided by operating activities	225.8		182.0
Cash flows from investing activities:
Additions to property and equipment	(23.5)		(112.0)


Distribution from unconsolidated affiliates in excess of earnings	3.6		0.2
Other investing activities	0.7		(3.7)
Net cash used in investing activities	(19.2)		(115.5)
Cash flows from financing activities:
Proceeds from borrowings	200.0		440.0
Payments on borrowings	(300.0)		(241.0)

Conversion of restricted units, net of units withheld for taxes	(1.2)		(4.0)
Distribution to members	(47.1)		(93.3)
Distributions to non-controlling interests	(26.0)		(24.7)
Contributions by non-controlling interests	0.9		37.1
Other financing activities	—		0.1
Net cash provided by (used in) financing activities	(173.4)		114.2
Net increase in cash and cash equivalents	33.2		180.7
Cash and cash equivalents, beginning of period	39.6		77.4
Cash and cash equivalents, end of period	$	72.8	$	258.1

Supplemental disclosures of cash flow information:
Cash paid for interest	$	17.2	$	22.3

Non-cash investing activities:
Non-cash accrual of property and equipment	$	(2.7)	$	2.8
Right-of-use assets obtained in exchange for operating lease liabilities	$	10.2	$	4.8
Non-cash financing activities:
Redemption of non-controlling interest	$	—	$	(4.0)

See accompanying notes to consolidated financial statements.

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ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2021

(Unaudited)

(1) General

In this report, the terms “Company” or “Registrant,” as well as the terms “ENLC,” “our,” “we,” “us,” or like terms, are sometimes used as abbreviated references to EnLink Midstream, LLC itself or EnLink Midstream, LLC together with its consolidated subsidiaries, including ENLK and its consolidated subsidiaries. References in this report to “EnLink Midstream Partners, LP,” the “Partnership,” “ENLK,” or like terms refer to EnLink Midstream Partners, LP itself or EnLink Midstream Partners, LP together with its consolidated subsidiaries, including the Operating Partnership.

Please read the notes to the consolidated financial statements in conjunction with the Definitions page set forth in this report prior to Part I—Financial Information.

a.Organization of Business

ENLC is a Delaware limited liability company formed in October 2013. The Company’s common units are traded on the New York Stock Exchange under the symbol “ENLC.” ENLC owns all of ENLK’s common units and also owns all of the membership interests of the General Partner. The General Partner manages ENLK’s operations and activities.

b.Nature of Business

We primarily focus on providing midstream energy services, including:

•gathering, compressing, treating, processing, transporting, storing, and selling natural gas;

•fractionating, transporting, storing, and selling NGLs; and

•gathering, transporting, stabilizing, storing, trans-loading, and selling crude oil and condensate, in addition to brine disposal services.

Our midstream energy asset network includes approximately 11,900 miles of pipelines, 22 natural gas processing plants with approximately 5.5 Bcf/d of processing capacity, seven fractionators with approximately 290,000 Bbls/d of fractionation capacity, barge and rail terminals, product storage facilities, purchasing and marketing capabilities, brine disposal wells, a crude oil trucking fleet, and equity investments in certain joint ventures. Our operations are based in the United States, and our sales are derived primarily from domestic customers.

Our natural gas business includes connecting the wells of producers in our market areas to our gathering systems. Our gathering systems consist of networks of pipelines that collect natural gas from points at or near producing wells and transport it to our processing plants or to larger pipelines for further transmission. We operate processing plants that remove NGLs from the natural gas stream that is transported to the processing plants by our own gathering systems or by third-party pipelines. In conjunction with our gathering and processing business, we may purchase natural gas and NGLs from producers and other supply sources and sell that natural gas or NGLs to utilities, industrial consumers, marketers, and pipelines. Our transmission pipelines receive natural gas from our gathering systems and from third-party gathering and transmission systems and deliver natural gas to industrial end-users, utilities, and other pipelines.

Our fractionators separate NGLs into separate purity products, including ethane, propane, iso-butane, normal butane, and natural gasoline. Our fractionators receive NGLs primarily through our transmission lines that transport NGLs from East Texas and from our South Louisiana processing plants. Our fractionators also have the capability to receive NGLs by truck or rail terminals. We also have agreements pursuant to which third parties transport NGLs from our West Texas and Central Oklahoma operations to our NGL transmission lines that then transport the NGLs to our fractionators. In addition, we have NGL storage capacity to provide storage for customers.

Our crude oil and condensate business includes the gathering and transmission of crude oil and condensate via pipelines, barges, rail, and trucks, in addition to condensate stabilization and brine disposal. We also purchase crude oil and condensate from producers and other supply sources and sell that crude oil and condensate through our terminal facilities to various markets.

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ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Across our businesses, we primarily earn our fees through various fee-based contractual arrangements, which include stated fee-only contract arrangements or arrangements with fee-based components where we purchase and resell commodities in connection with providing the related service and earn a net margin as our fee. We earn our net margin under our purchase and resell contract arrangements primarily as a result of stated service-related fees that are deducted from the price of the commodities purchased. While our transactions vary in form, the essential element of most of our transactions is the use of our assets to transport a product or provide a processed product to an end-user or marketer at the tailgate of the plant, pipeline, or barge, truck, or rail terminal.

c.COVID-19 Update

On March 11, 2020, the World Health Organization declared the ongoing coronavirus (COVID-19) outbreak a pandemic and recommended containment and mitigation measures worldwide. There is considerable uncertainty regarding how long the COVID-19 pandemic will persist and affect economic conditions and the extent and duration of changes in consumer behavior.

(2) Significant Accounting Policies

a.Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q, are unaudited, and do not include all the information and disclosures required by GAAP for complete financial statements. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2020. Certain reclassifications were made to the financial statements for the prior period to conform to current period presentation. The effect of these reclassifications had no impact on previously reported members’ equity or net income (loss). All significant intercompany balances and transactions have been eliminated in consolidation.

b.Revenue Recognition

Certain of our gathering and processing agreements provide for quarterly or annual MVCs. Under these agreements, our customers or suppliers agree to ship and/or process a minimum volume of product on our systems over an agreed time period. If a customer or supplier under such an agreement fails to meet its MVC for a specified period, the customer is obligated to pay a contractually-determined fee based upon the shortfall between actual product volumes and the MVC for that period. Some of these agreements also contain make-up right provisions that allow a customer or supplier to utilize gathering or processing fees in excess of the MVC in subsequent periods to offset shortfall amounts in previous periods. We record revenue under MVC contracts during periods of shortfall when it is known that the customer cannot, or will not, make up the deficiency in subsequent periods. Deficiency fee revenue is included in midstream services revenue.

For our firm transportation contracts, we transport commodities owned by others for a stated monthly fee for a specified monthly quantity with an additional fee based on actual volumes. We include transportation fees from firm transportation contracts in our midstream services revenue.

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ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The following table summarizes the contractually committed fees that we expect to recognize in our consolidated statements of operations, in either revenue or reductions to cost of sales, from MVC and firm transportation contractual provisions. All amounts in the table below are determined using the contractually-stated MVC or firm transportation volumes specified for each period multiplied by the relevant deficiency or reservation fee. Actual amounts could differ due to the timing of revenue recognition or reductions to cost of sales resulting from make-up right provisions included in our agreements, as well as due to nonpayment or nonperformance by our customers. These fees do not represent the shortfall amounts we expect to collect under our MVC contracts, as we generally do not expect volume shortfalls to equal the full amount of the contractual MVCs during these periods. For example, for the three months ended March 31, 2021, we had contractual commitments of $13.5 million under our MVC contracts and recorded $0.3 million of revenue due to volume shortfalls.


MVC and Firm Transportation Commitments (in millions) (1)
2021 (remaining)	$	106.3
2022	127.5
2023	116.5
2024	104.4
2025	62.0
Thereafter	342.1
Total	$	858.8

____________________________

(1)Amounts do not represent expected shortfall under these commitments.

(3) Intangible Assets

Intangible assets associated with customer relationships are amortized on a straight-line basis over the expected period of benefits of the customer relationships, which range from 10 to 20 years.

The following table represents our change in carrying value of intangible assets (in millions):


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Three Months Ended March 31, 2021
Customer relationships, beginning of period	$	1,794.2	$	(668.8)	$	1,125.4
Amortization expense	—		(30.9)		(30.9)

Customer relationships, end of period	$	1,794.2	$	(699.7)	$	1,094.5

The weighted average amortization period for intangible assets is 15.0 years. Amortization expense was $30.9 million for each of the three months ended March 31, 2021 and 2020, respectively.

The following table summarizes our estimated aggregate amortization expense for the next five years and thereafter (in millions):


2021 (remaining)	$	92.5
2022	123.4
2023	123.4
2024	123.4
2025	106.1
Thereafter	525.7

Total	$	1,094.5

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ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(4) Related Party Transactions

Transactions with Cedar Cove JV. For the three months ended March 31, 2021 and 2020, we recorded cost of sales of $3.2 million and $2.9 million, respectively, related to our purchase of residue gas and NGLs from the Cedar Cove JV subsequent to processing at our Central Oklahoma processing facilities. Additionally, we had accounts payable balances related to transactions with the Cedar Cove JV of $1.2 million and $1.0 million at March 31, 2021 and December 31, 2020, respectively.

Transactions with GIP. For the three months ended March 31, 2021, we recorded general and administrative expenses of $0.1 million related to personnel secondment services provided by GIP. We did not record any expenses related to transactions with GIP for the three months ended March 31, 2020.

Management believes the foregoing transactions with related parties were executed on terms that are fair and reasonable to us. The amounts related to related party transactions are specified in the accompanying consolidated financial statements.

(5) Long-Term Debt

As of March 31, 2021 and December 31, 2020, long-term debt consisted of the following (in millions):


	March 31, 2021						December 31, 2020
	Outstanding Principal		Premium (Discount)		Long-Term Debt		Outstanding Principal		Premium (Discount)		Long-Term Debt
Term Loan due 2021 (1)	$	350.0	$	—	$	350.0	$	350.0	$	—	$	350.0
AR Facility due 2023 (2)	150.0		—		150.0		250.0		—		250.0
Consolidated Credit Facility due 2024	—		—		—		—		—		—
ENLK’s 4.40% Senior unsecured notes due 2024	521.8		1.0		522.8		521.8		1.1		522.9
ENLK’s 4.15% Senior unsecured notes due 2025	720.8		(0.5)		720.3		720.8		(0.6)		720.2
ENLK’s 4.85% Senior unsecured notes due 2026	491.0		(0.4)		490.6		491.0		(0.4)		490.6
ENLC's 5.625% Senior unsecured notes due 2028	500.0		—		500.0		500.0		—		500.0
ENLC’s 5.375% Senior unsecured notes due 2029	498.7		—		498.7		498.7		—		498.7
ENLK’s 5.60% Senior unsecured notes due 2044	350.0		(0.2)		349.8		350.0		(0.2)		349.8
ENLK’s 5.05% Senior unsecured notes due 2045	450.0		(5.6)		444.4		450.0		(5.7)		444.3
ENLK’s 5.45% Senior unsecured notes due 2047	500.0		(0.1)		499.9		500.0		(0.1)		499.9
Debt classified as long-term	$	4,532.3	$	(5.8)	4,526.5		$	4,632.3	$	(5.9)	4,626.4
Debt issuance cost (3)					(31.5)						(32.6)
Less: Current maturities of long-term debt (1)					(349.8)						(349.8)
Long-term debt, net of unamortized issuance cost					$	4,145.2					$	4,244.0

____________________________

(1)Bears interest based on Prime and/or LIBOR plus an applicable margin. The effective interest rate was 1.6% and 1.7% at March 31, 2021 and December 31, 2020, respectively. The Term Loan will mature on December 10, 2021. Therefore, the outstanding principal balance, net of discount and debt issuance costs, is classified as “Current maturities of long-term debt” on the consolidated balance sheet as of March 31, 2021 and December 31, 2020, respectively.

(2)Bears interest based on LIMR and/or LIBOR plus an applicable margin. The effective interest rate was 1.4% and 2.0% at March 31, 2021 and December 31, 2020, respectively.

(3)Net of amortization of $15.3 million and $14.1 million at March 31, 2021 and December 31, 2020, respectively.

Term Loan

On December 11, 2018, ENLK entered into the Term Loan 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. Upon the closing of the Merger, ENLC assumed ENLK’s obligations under the Term Loan, and ENLK became a guarantor of the Term Loan. In the event that ENLC defaults on the Term Loan and the outstanding balance becomes due, ENLK will be liable for any amount owed on the Term Loan not paid by

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

ENLC. The outstanding balance of the Term Loan was $350.0 million as of March 31, 2021. The obligations under the Term Loan are unsecured.

At March 31, 2021, we were in compliance with and expect to be in compliance with the financial covenants of the Term Loan until the Term Loan matures on December 10, 2021.

AR Facility

On October 21, 2020, EnLink Midstream Funding, LLC, a bankruptcy-remote special purpose entity that is an indirect subsidiary of ENLC (the “SPV”) entered into the AR Facility to borrow up to $250.0 million. In connection with the AR Facility, certain subsidiaries of ENLC have sold and contributed, and will continue to sell or contribute, their accounts receivable to the SPV to be held as collateral for borrowings under the AR Facility. The SPV’s assets are not available to satisfy the obligations of ENLC or any of its affiliates.

On February 26, 2021, the SPV entered into an amendment to the AR Facility that, among other things: (i) increased the AR Facility limit and lender commitments by $50.0 million to $300.0 million, (ii) reduced the Adjusted LIBOR and LMIR (each as defined in the AR Facility) minimum floor to zero, rather than the previous 0.375%, and (iii) reduced the currently effective drawn fee to 1.25% rather than the previous 1.625%.

Since our investment in the SPV is not sufficient to finance its activities without additional support from us, the SPV is a variable interest entity. We are the primary beneficiary of the SPV because we have the power to direct the activities that most significantly affect its economic performance and we are obligated to absorb its losses or receive its benefits from operations. Since we are the primary beneficiary of the SPV, we consolidate its assets and liabilities, which consist primarily of billed and unbilled accounts receivable of $505.9 million and long-term debt of $150.0 million as of March 31, 2021.

The amount available for borrowings at any one time under the AR Facility is limited to a borrowing base amount calculated based on the outstanding balance of eligible receivables held as collateral, subject to certain reserves, concentration limits, and other limitations. As of March 31, 2021, the AR Facility had a borrowing base of $262.1 million. Borrowings under the AR Facility bear interest (based on LIBOR or LMIR (as defined in the AR Facility)) plus a drawn fee in the amount of 1.25% at March 31, 2021. The drawn fee varies based on ENLC’s credit rating, and the SPV also pays a fee on the undrawn committed amount of the AR Facility. Interest and fees payable by the SPV under the AR Facility are due monthly.

The AR Facility is scheduled to terminate on October 20, 2023, unless extended in accordance with its terms or earlier terminated, at which time no further advances will be available and the obligations under the AR Facility must be repaid in full by no later than (i) the date that is ninety (90) days following such date or (ii) such earlier date on which the loans under the AR Facility become due and payable.

The AR Facility includes covenants, indemnification provisions, and events of default, including those providing for termination of the AR Facility and the acceleration of amounts owed by the SPV under the AR Facility if, among other things, a borrowing base deficiency exists, there is an event of default under the Consolidated Credit Facility, the Term Loan or certain other indebtedness, certain events negatively affecting the overall credit quality of the receivables held as collateral occur, a change of control occurs, or if the consolidated leverage ratio of ENLC exceeds limits identical to those in the Consolidated Credit Facility and the Term Loan.

At March 31, 2021, we were in compliance with and expect to be in compliance with the financial covenants of the AR Facility for at least the next twelve months.

Consolidated Credit Facility

The Consolidated Credit Facility permits ENLC to borrow up to $1.75 billion on a revolving credit basis and includes a $500.0 million letter of credit subfacility. The Consolidated Credit Facility became available for borrowings and letters of credit upon closing of the Merger. In addition, ENLK became a guarantor under the Consolidated Credit Facility upon the closing of the Merger. In the event that ENLC’s obligations under the Consolidated Credit Facility are accelerated due to a default, ENLK will be liable for the entire outstanding balance and 105% of the outstanding letters of credit under the Consolidated Credit Facility. There were no outstanding borrowings under the Consolidated Credit Facility and $27.5 million outstanding letters of credit as of March 31, 2021.

At March 31, 2021, we were in compliance with and expect to be in compliance with the financial covenants of the Consolidated Credit Facility for at least the next twelve months.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(6) Income Taxes

The components of our income tax benefit (expense) are as follows (in millions):


	Three Months Ended March 31,
	2021		2020
Current income tax expense	$	(0.1)	$	(0.3)
Deferred income tax benefit (expense)	(1.3)		34.0
Income tax benefit (expense)	$	(1.4)	$	33.7

The following schedule reconciles total income tax benefit (expense) and the amount calculated by applying the statutory U.S. federal tax rate to income (loss) before income taxes (in millions):


	Three Months Ended March 31,
	2021		2020
Expected income tax benefit based on federal statutory rate	$	2.4	$	67.3
State income tax benefit, net of federal benefit	0.2		8.0
Unit-based compensation (1)	(2.5)		2.4
Non-deductible expense related to goodwill impairment	—		(43.4)
Change in valuation allowance	(1.2)		—
Other	(0.3)		(0.6)
Income tax benefit (expense)	$	(1.4)	$	33.7

____________________________

(1)Related to book-to-tax differences recorded upon the vesting of restricted incentive units.

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred tax liabilities, net of deferred tax assets, are included in “Deferred tax liability, net” in the consolidated balance sheets. As of March 31, 2021, we had $111.0 million of deferred tax liabilities, net of $404.5 million of deferred tax assets, which included a $154.5 million valuation allowance. As of December 31, 2020, we had $108.6 million of deferred tax liabilities, net of $396.0 million of deferred tax assets, which included a $153.3 million valuation allowance.

A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized. We established a valuation allowance of $153.3 million as of December 31, 2020, primarily related to federal and state tax operating loss carryforwards for which we do not believe a tax benefit is more likely than not to be realized. For the three months ended March 31, 2021, we recorded a $1.2 million valuation allowance adjustment. As of March 31, 2021, management believes it is more likely than not that the Company will realize the benefits of the deferred tax assets, net of valuation allowance.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(7) Certain Provisions of the ENLK Partnership Agreement

a.Series B Preferred Units

As of March 31, 2021 and December 31, 2020, there were 60,348,278 and 60,197,784 Series B Preferred Units issued and outstanding, respectively.

A summary of the distribution activity relating to the Series B Preferred Units during the three months ended March 31, 2021 and 2020 is provided below:


Declaration period	Distribution paid as additional Series B Preferred Units	Cash Distribution (in millions)		Date paid/payable
2021
Fourth Quarter of 2020	150,494	$	16.9	February 12, 2021
First Quarter of 2021	150,871	$	17.0	May 14, 2021



2020
Fourth Quarter of 2019	148,999	$	16.8	February 13, 2020
First Quarter of 2020	149,371	$	16.8	May 13, 2020

b.Series C Preferred Units

As of March 31, 2021 and December 31, 2020, there were 400,000 Series C Preferred Units issued and outstanding, respectively. There was no distribution activity related to the Series C Preferred Units during the three months ended March 31, 2021 and 2020.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(8) Members’ Equity

a.Earnings Per Unit and Dilution Computations

As required under ASC 260, Earnings Per Share, unvested share-based payments that entitle employees to receive non-forfeitable distributions are considered participating securities for earnings per unit calculations. The following table reflects the computation of basic and diluted earnings per unit for the periods presented (in millions, except per unit amounts):


	Three Months Ended March 31,
	2021		2020
Distributed earnings allocated to:
Common units (1)	$	45.9	$	45.8
Unvested restricted units (1)	1.1		0.8
Total distributed earnings	$	47.0	$	46.6
Undistributed loss allocated to:
Common units	$	(58.3)	$	(327.4)
Unvested restricted units	(1.4)		(6.0)
Total undistributed loss	$	(59.7)	$	(333.4)
Net loss allocated to:
Common units	$	(12.4)	$	(281.6)
Unvested restricted units	(0.3)		(5.2)
Total net loss	$	(12.7)	$	(286.8)
Basic and diluted total net loss per unit:
Basic	$	(0.03)	$	(0.59)
Diluted	$	(0.03)	$	(0.59)

____________________________

(1)Represents distribution activity consistent with the distribution activity in “Distributions” below.

There were 490.0 million and 488.7 million weighted average common units outstanding for the three months ended March 31, 2021 and 2020, respectively. All common unit equivalents were antidilutive because a net loss existed for those periods.

All outstanding units were included in the computation of diluted earnings per unit and weighted based on the number of days such units were outstanding during the period presented.

b.Distributions

A summary of our distribution activity related to the ENLC common units for the three months ended March 31, 2021 and 2020, respectively, is provided below:


Declaration period	Distribution/unit		Date paid/payable
2021
Fourth Quarter of 2020	$	0.09375	February 12, 2021
First Quarter of 2021	$	0.09375	May 14, 2021



2020
Fourth Quarter of 2019	$	0.1875	February 13, 2020
First Quarter of 2020	$	0.09375	May 13, 2020

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(9) Investment in Unconsolidated Affiliates

As of March 31, 2021, our unconsolidated investments consisted of a 38.75% ownership in GCF and a 30% ownership in the Cedar Cove JV. The following table shows the activity related to our investment in unconsolidated affiliates for the periods indicated (in millions):


	Three Months Ended March 31,
	2021		2020
GCF

Distributions	$	3.5	$	1.6
Equity in income (loss)	$	(5.7)	$	1.8

Cedar Cove JV

Distributions	$	0.1	$	0.2
Equity in loss	$	(0.6)	$	(0.1)

Total

Distributions	$	3.6	$	1.8
Equity in income (loss)	$	(6.3)	$	1.7

The following table shows the balances related to our investment in unconsolidated affiliates as of March 31, 2021 and December 31, 2020 (in millions):


	March 31, 2021		December 31, 2020
GCF	$	31.4	$	40.6
Cedar Cove JV	0.3		1.0
Total investment in unconsolidated affiliates	$	31.7	$	41.6

(10) Employee Incentive Plans

a.Long-Term Incentive Plans

We account for unit-based compensation in accordance with ASC 718, Compensation—Stock Compensation, which requires that compensation related to all unit-based awards be recognized in the consolidated financial statements. Unit-based compensation cost is valued at fair value at the date of grant, and that grant date fair value is recognized as expense over each award’s requisite service period with a corresponding increase to equity or liability based on the terms of each award and the appropriate accounting treatment under ASC 718. Unit-based compensation associated with ENLC’s unit-based compensation plan awarded to directors, officers, and employees of the General Partner is recorded by ENLK since ENLC has no substantial or managed operating activities other than its interests in ENLK.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Amounts recognized on the consolidated financial statements with respect to these plans are as follows (in millions):


	Three Months Ended March 31,
	2021		2020
Cost of unit-based compensation charged to operating expense	$	1.7	$	2.2
Cost of unit-based compensation charged to general and administrative expense	4.8		6.6
Total unit-based compensation expense	$	6.5	$	8.8
Amount of related income tax benefit recognized in net income (loss) (1)	$	1.5	$	2.1

____________________________

(1)For the three months ended March 31, 2021, the amount of related income tax benefit recognized in net income excluded $2.5 million of income tax expense related to book-to-tax differences recorded upon vesting of restricted units. For the three months ended March 31, 2020, the amount of related income tax benefit recognized in net loss excluded $2.4 million of income tax benefit related to book-to-tax differences recorded upon vesting of restricted units.

b.ENLC Restricted Incentive Units

ENLC restricted incentive units were valued at their fair value at the date of grant, which is equal to the market value of ENLC common units on such date. A summary of the restricted incentive unit activity for the three months ended March 31, 2021 is provided below:

Three Months Ended
March 31, 2021

ENLC Restricted Incentive Units:

Number of Units

Weighted Average Grant-Date Fair Value

Non-vested, beginning of period

5,350,086