enlc-20210630

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 June 30, 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 July 29, 2021, the Registrant had 488,622,133 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	30

3.	Quantitative and Qualitative Disclosures About Market Risk	51

4.	Controls and Procedures	53

	PART II—OTHER INFORMATION

1.	Legal Proceedings	54

1A.	Risk Factors	54

2.	Unregistered Sales of Equity Securities and Use of Proceeds	54



6.	Exhibits	55

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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.
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 processing 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.
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.
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)


	June 30, 2021		December 31, 2020
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	32.8	$	39.6
Accounts receivable:
Trade, net of allowance for bad debt of $0.3 and $0.5, respectively	55.3		80.6
Accrued revenue and other	534.3		447.5

Fair value of derivative assets	69.1		25.0
Other current assets	116.6		58.7
Total current assets	808.1		651.4
Property and equipment, net of accumulated depreciation of $4,096.8 and $3,863.0, respectively	6,493.6		6,652.1
Intangible assets, net of accumulated amortization of $731.3 and $668.8, respectively	1,120.2		1,125.4

Investment in unconsolidated affiliates	30.7		41.6
Fair value of derivative assets	2.0		4.9
Other assets, net	111.9		75.5
Total assets	$	8,566.5	$	8,550.9
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Accounts payable and drafts payable	$	95.5	$	60.5
Accounts payable to related party	1.4		1.0
Accrued gas, NGLs, condensate, and crude oil purchases	415.0		290.5
Fair value of derivative liabilities	107.6		37.1
Current maturities of long-term debt	249.9		349.8
Other current liabilities	170.1		149.1
Total current liabilities	1,039.5		888.0
Long-term debt	4,206.4		4,244.0
Asset retirement obligations	14.6		14.2
Other long-term liabilities	89.3		80.6
Deferred tax liability, net	118.7		108.6
Fair value of derivative liabilities	—		2.5

Members’ equity:
Members’ equity (489,854,915 and 489,381,149 units issued and outstanding, respectively)	1,390.1		1,508.8
Accumulated other comprehensive loss	(8.0)		(15.3)
Non-controlling interest	1,715.9		1,719.5
Total members’ equity	3,098.0		3,213.0
Commitments and contingencies (Note 15)
Total liabilities and members’ equity	$	8,566.5	$	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 June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(Unaudited)
Revenues:
Product sales	$	1,235.6	$	532.6	$	2,358.5	$	1,425.5

Midstream services	209.3		234.7		418.2		478.7

Loss on derivative activity	(38.2)		(22.4)		(121.6)		(3.2)
Total revenues	1,406.7		744.9		2,655.1		1,901.0
Operating costs and expenses:
Cost of sales, exclusive of operating expenses and depreciation and amortization (1)(2)	1,055.1		397.7		1,989.8		1,153.0
Operating expenses	96.8		88.1		153.1		188.8
Depreciation and amortization	151.9		158.2		302.9		321.0
Impairments	—		1.5		—		354.5
(Gain) loss on disposition of assets	(0.3)		5.2		(0.3)		4.6
General and administrative	26.1		23.5		52.1		53.9


Total operating costs and expenses	1,329.6		674.2		2,497.6		2,075.8
Operating income (loss)	77.1		70.7		157.5		(174.8)
Other income (expense):
Interest expense, net of interest income	(60.0)		(55.2)		(120.0)		(110.8)
Gain on extinguishment of debt	—		26.7		—		32.0
Income (loss) from unconsolidated affiliates	(1.3)		(0.7)		(7.6)		1.0
Other income	0.2		—		0.1		—
Total other expense	(61.1)		(29.2)		(127.5)		(77.8)
Income (loss) before non-controlling interest and income taxes	16.0		41.5		30.0		(252.6)
Income tax benefit (expense)	(6.6)		(11.7)		(8.0)		22.0
Net income (loss)	9.4		29.8		22.0		(230.6)
Net income attributable to non-controlling interest	31.0		25.7		56.3		52.1
Net income (loss) attributable to ENLC	$	(21.6)	$	4.1	$	(34.3)	$	(282.7)
Net income (loss) attributable to ENLC per unit:
Basic common unit	$	(0.04)	$	0.01	$	(0.07)	$	(0.58)
Diluted common unit	$	(0.04)	$	0.01	$	(0.07)	$	(0.58)

____________________________

(1)Includes related party cost of sales of $3.6 million and $1.3 million for the three months ended June 30, 2021 and 2020, respectively, and excludes all operating expenses as well as depreciation and amortization related to our operating segments of $150.1 million and $156.1 million for the three months ended June 30, 2021 and 2020, respectively.

(2)Includes related party cost of sales of $6.8 million and $4.2 million for the six months ended June 30, 2021 and 2020, respectively, and excludes all operating expenses as well as depreciation and amortization related to our operating segments of $299.1 million and $316.9 million for the six months ended June 30, 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 June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(Unaudited)
Net income (loss)	$	9.4	$	29.8	$	22.0	$	(230.6)
Unrealized gain (loss) on designated cash flow hedge (1)	3.7		1.5		7.3		(11.6)
Comprehensive income (loss)	13.1		31.3		29.3		(242.2)
Comprehensive income attributable to non-controlling interest	31.0		25.7		56.3		52.1
Comprehensive income (loss) attributable to ENLC	$	(17.9)	$	5.6	$	(27.0)	$	(294.3)

____________________________

(1)Includes a tax expense of $1.1 million and a tax expense of $0.5 million for the three months ended June 30, 2021 and 2020, respectively, and a tax expense of $2.2 million and a tax benefit of $3.5 million for the six months ended June 30, 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)
Unrealized 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		—
Conversion of restricted units for common units, net of units withheld for taxes	(0.2)		0.1	—		—		(0.2)		—
Unit-based compensation	6.4		—	—		—		6.4		—
Contributions from non-controlling interests	—		—	—		1.0		1.0		—
Distributions	(46.7)		—	—		(36.0)		(82.7)		—
Unrealized gain on designated cash flow hedge (2)	—		—	3.7		—		3.7		—
Common units repurchased	(2.0)		(0.3)	—		—		(2.0)		—
Net income (loss)	(21.6)		—	—		31.0		9.4		—
Balance, June 30, 2021	$	1,390.1	489.9	$	(8.0)	$	1,715.9	$	3,098.0	$	—

____________________________

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

(2)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)
Unrealized 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		—
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)		—
Unrealized 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	$	—

____________________________

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

(2)Includes a tax expense 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)


	Six Months Ended June 30,
	2021		2020
	(Unaudited)
Cash flows from operating activities:
Net income (loss)	$	22.0	$	(230.6)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Impairments	—		354.5
Depreciation and amortization	302.9		321.0
Utility credits	(43.8)		—
Deferred income tax (benefit) expense	7.9		(22.7)

Non-cash unit-based compensation	12.9		16.2
Amortization of designated cash flow hedge	6.0		—
Payments to terminate interest rate swaps	(1.3)		—
Non-cash loss on derivatives recognized in net income (loss)	34.2		6.0
Gain on extinguishment of debt	—		(32.0)
Amortization of debt issue costs, net discount (premium) of notes	2.5		2.2

Distribution of earnings from unconsolidated affiliates	—		1.2
(Income) loss from unconsolidated affiliates	7.6		(1.0)
Other operating activities	(2.8)		4.1
Changes in assets and liabilities:
Accounts receivable, accrued revenue, and other	(61.4)		109.8
Natural gas and NGLs inventory, prepaid expenses, and other	(47.8)		9.3
Accounts payable, accrued product purchases, and other accrued liabilities	163.3		(221.2)
Net cash provided by operating activities	402.2		316.8
Cash flows from investing activities:
Additions to property and equipment	(62.5)		(203.6)


Acquisitions	(55.0)		—
Distribution from unconsolidated affiliates in excess of earnings	3.7		0.8
Other investing activities	1.6		0.8
Net cash used in investing activities	(112.2)		(202.0)
Cash flows from financing activities:
Proceeds from borrowings	539.5		490.0
Payments on borrowings	(679.5)		(476.0)

Conversion of restricted units, net of units withheld for taxes	(1.4)		(4.3)
Distribution to members	(93.8)		(139.8)
Distributions to non-controlling interests	(62.0)		(60.6)
Contributions by non-controlling interests	1.9		50.3
Common unit repurchases	(2.0)		—
Other financing activities	0.5		0.2
Net cash used in financing activities	(296.8)		(140.2)
Net decrease in cash and cash equivalents	(6.8)		(25.4)
Cash and cash equivalents, beginning of period	39.6		77.4
Cash and cash equivalents, end of period	$	32.8	$	52.0

Supplemental disclosures of cash flow information:
Cash paid for interest	$	97.1	$	106.6
Cash paid (refunded) for income taxes	$	0.2	$	(1.0)
Non-cash investing activities:
Non-cash accrual of property and equipment	$	6.9	$	(19.6)
Non-cash acquisitions	$	16.5	$	—
Right-of-use assets obtained in exchange for operating lease liabilities	$	10.7	$	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

June 30, 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 12,000 miles of pipelines, 23 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

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. 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. 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 and six months ended June 30, 2021, we had contractual commitments of $10.9 million and $24.4 million under our MVC contracts, respectively, and recorded $0.3 million of revenue due to volume shortfalls for the six months ended June 30, 2021. No revenue due to volume shortfalls was recorded for the three months ended June 30, 2021.


MVC and Firm Transportation Commitments (in millions) (1)
2021 (remaining)	$	75.1
2022	134.1
2023	121.6
2024	105.8
2025	62.2
Thereafter	342.1
Total	$	840.9

____________________________

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

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ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

c.Acquisition of Business

On April 30, 2021, we completed the acquisition of Amarillo Rattler, LLC, the owner of a gathering and processing system located in the Midland Basin. In connection with the purchase, we entered into an amended and restated gas gathering and processing agreement with Diamondback Energy, strengthening our dedicated acreage position with Diamondback Energy. We acquired the system with an upfront payment of $50.0 million, which was paid with cash-on-hand, with an additional $10 million to be paid on April 30, 2022, and contingent consideration capped at $15 million based on Diamondback Energy’s drilling activity above historical levels.

Under the acquisition method of accounting, the acquired assets of Amarillo Rattler, LLC have been recorded at their respective fair values as of the date of the acquisition. We have prepared a preliminary purchase price allocation, which is subject to change upon finalization. Determining the fair value of the assets of Amarillo Ratter, LLC requires judgment and certain assumptions to be made, particularly related to the valuation of acquired customer relationships. The inputs and assumptions related to the customer relationships are categorized as level 3 in the fair value hierarchy. On a historical pro forma basis, our consolidated revenues, net income (loss), total assets, and earnings per unit amounts would not have differed materially had the acquisition been completed on January 1, 2021 rather than April 30, 2021.

(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 ranged from 10 to 20 years at the time the intangible assets were originally recorded.

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


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Six Months Ended June 30, 2021
Customer relationships, beginning of period	$	1,794.2	$	(668.8)	$	1,125.4
Customer relationships obtained from acquisition of business	57.3		—		57.3
Amortization expense	—		(62.5)		(62.5)

Customer relationships, end of period	$	1,851.5	$	(731.3)	$	1,120.2

The weighted average amortization period for intangible assets is 14.9 years. Amortization expense was $31.6 million and $30.9 million for the three months ended June 30, 2021 and 2020, respectively, and $62.5 million and $61.8 million for the six months ended June 30, 2021 and 2020, respectively.

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


2021 (remaining)	$	64.1
2022	128.2
2023	128.2
2024	128.2
2025	110.8
Thereafter	560.7

Total	$	1,120.2

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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 and six months ended June 30, 2021, we recorded cost of sales of $3.6 million and $6.8 million, respectively, and for the three and six months ended June 30, 2020, we recorded costs of sales of $1.3 million and $4.2 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 $1.4 million and $1.0 million at June 30, 2021 and December 31, 2020, respectively.

Transactions with GIP. For the three and six months ended June 30, 2021, we recorded general and administrative expenses of $0.1 million and $0.2 million, respectively, related to personnel secondment services provided by GIP. We did not record any expenses related to transactions with GIP for the three and six months ended June 30, 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 June 30, 2021 and December 31, 2020, long-term debt consisted of the following (in millions):