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PANHANDLE EASTERN PIPE LINE CO LP filed this Form 10-Q on 11/08/2017
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-2921
PANHANDLE EASTERN PIPE LINE COMPANY, LP
(Exact name of registrant as specified in its charter)
Delaware
44-0382470
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
8111 Westchester Drive, Suite 600, Dallas, Texas 75225
(Address of principle executive offices) (zip code)
(214) 981-0700
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company 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 Exchange Act.
Large accelerated filer
¨
 
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
ý (Do not check if a smaller reporting company)
 
Smaller reporting company
¨
 
 
 
 
 
 
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨   No x
Panhandle Eastern Pipe Line Company, LP meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.



FORM 10-Q

PANHANDLE EASTERN PIPE LINE COMPANY, LP
TABLE OF CONTENTS


i


Forward-Looking Statements
Certain matters discussed in this report, excluding historical information, as well as some statements by Panhandle Eastern Pipe Line Company, LP and its subsidiaries (“PEPL” or the “Company”) in periodic press releases and some oral statements of Panhandle officials during presentations about the Company, include forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Statements using words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “estimate,” “intend,” “continue,” “believe,” “may,” “will” or similar expressions help identify forward-looking statements. Although the Company believes such forward-looking statements are based on reasonable assumptions and current expectations and projections about future events, no assurance can be given that such assumptions, expectations, or projections will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, the Company’s actual results may vary materially from those anticipated, projected, forecasted, estimated or expressed in forward-looking statements since many of the factors that determine these results are subject to uncertainties and risks that are difficult to predict and beyond management’s control. For additional discussion of risks, uncertainties and assumptions, see “Part I — Item 1A. Risk Factors” in the Company’s Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on February 24, 2017.
Definitions
The following is a list of certain acronyms and terms generally used in the energy industry and throughout this document:
 
 
 
ETE
 
Energy Transfer Equity, L.P.
 
 
 
Exchange Act
 
Securities Exchange Act of 1934
 
 
 
FERC
 
Federal Energy Regulatory Commission
 
 
 
GAAP
 
Accounting principles generally accepted in the United States of America
 
 
 
PCBs
 
Polychlorinated biphenyls
 
 
 
Sea Robin
 
Sea Robin Pipeline Company, LLC
 
 
 
SEC
 
United States Securities and Exchange Commission
 
 
 
Southwest Gas
 
Pan Gas Storage LLC (d.b.a. Southwest Gas)
 
 
 
TBtu
 
Trillion British thermal units
 
 
 
Trunkline
 
Trunkline Gas Company, LLC

ii


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PANHANDLE EASTERN PIPE LINE COMPANY, LP
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(unaudited)

 
September 30, 2017
 
December 31, 2016
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
15

 
$
4

Accounts receivable, net
37

 
46

Accounts receivable from related companies
12

 
17

Exchanges receivable
5

 
7

Inventories
95

 
179

Other current assets
3

 
4

Total current assets
167

 
257

 
 
 
 
Property, plant and equipment
3,317

 
3,242

Accumulated depreciation
(411
)
 
(355
)
 
2,906

 
2,887

 
 
 
 
Other non-current assets, net
161

 
153

Notes receivable from related parties
189

 
251

Goodwill
285

 
285

Total assets
$
3,708

 
$
3,833





















The accompanying notes are an integral part of these consolidated financial statements.
1


PANHANDLE EASTERN PIPE LINE COMPANY, LP
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(unaudited)

 
September 30, 2017
 
December 31, 2016
LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
Current liabilities:
 
 
 
Current maturities of long-term debt
$
710

 
$
307

Accounts payable and accrued liabilities
3

 
11

Accounts payable to related companies
44

 
66

Exchanges payable
77

 
165

Accrued interest
24

 
12

Customer advances and deposits
9

 
9

Other current liabilities
47

 
40

Total current liabilities
914

 
610

 
 
 
 
Long-term debt, less current maturities
413

 
834

Deferred income taxes
740

 
711

Other non-current liabilities
216

 
217

Commitments and contingencies


 


 
 
 
 
Partners’ capital:
 
 
 
Partners’ capital
1,415

 
1,456

Accumulated other comprehensive income
10

 
5

Total partners’ capital
1,425

 
1,461

Total liabilities and partners’ capital
$
3,708

 
$
3,833












The accompanying notes are an integral part of these consolidated financial statements.
2


PANHANDLE EASTERN PIPE LINE COMPANY, LP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Dollars in millions)
(unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
OPERATING REVENUES:
 
 
 
 
 
 
 
Transportation and storage of natural gas
$
104

 
$
115

 
$
327

 
$
370

Other
6

 
5

 
15

 
15

Total operating revenues
110

 
120

 
342

 
385

OPERATING EXPENSES:
 
 
 
 
 
 
 
Cost of natural gas and other energy

 

 
2

 
2

Operating and maintenance
52

 
53

 
149

 
155

General and administrative
10

 
11

 
27

 
29

Depreciation and amortization
32

 
33

 
95

 
98

Total operating expenses
94

 
97

 
273

 
284

OPERATING INCOME
16

 
23

 
69

 
101

OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
Interest expense, net
(11
)
 
(12
)
 
(34
)
 
(37
)
Interest income — affiliates
1

 
9

 
9

 
23

Other, net

 

 
1

 

INCOME BEFORE INCOME TAX EXPENSE
6

 
20

 
45

 
87

Income tax expense
2

 
7

 
19

 
28

NET INCOME
$
4

 
$
13

 
$
26

 
$
59

 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME, NET OF TAX
 
 
 
 
 
 
 
Actuarial gain relating to postretirement benefit plans
5

 

 
5

 

 


 


 


 


COMPREHENSIVE INCOME
$
9

 
$
13

 
$
31

 
$
59










The accompanying notes are an integral part of these consolidated financial statements.
3


PANHANDLE EASTERN PIPE LINE COMPANY, LP
CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(Dollars in millions)
(unaudited)

 
Partners’ Capital
 
Accumulated Other
Comprehensive Income
 
Total
Balance, December 31, 2016
$
1,456

 
$
5

 
$
1,461

Distributions to partners
(74
)
 

 
(74
)
Unit-based compensation expense
2

 

 
2

Other comprehensive income

 
5

 
5

Deemed contribution from partners
5

 

 
5

Net income
26

 

 
26

Balance, September 30, 2017
$
1,415

 
$
10

 
$
1,425








































The accompanying notes are an integral part of these consolidated financial statements.
4


PANHANDLE EASTERN PIPE LINE COMPANY, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
(unaudited)

 
Nine Months Ended
September 30,
 
2017
 
2016
OPERATING ACTIVITIES:
 
 
 
Net income
$
26

 
$
59

Reconciliation of net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
95

 
98

Deferred income taxes
29

 
45

Amortization of deferred financing fees
(19
)
 
(18
)
Other non-cash
12

 
8

Changes in operating assets and liabilities
(4
)
 
110

Net cash flows provided by operating activities
139

 
302

INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(118
)
 
(70
)
Repayment of note receivable from related party
102

 
35

Notes receivable issued to related party
(40
)
 
(265
)
Other
2

 

Net cash flows used in investing activities
(54
)
 
(300
)
FINANCING ACTIVITIES:
 
 
 
Distributions to partners
(74
)
 

Net cash flows used in financing activities
(74
)
 

Net change in cash and cash equivalents
11

 
2

Cash and cash equivalents, beginning of period
4

 
3

Cash and cash equivalents, end of period
$
15

 
$
5

 
 
 
 
SUPPLEMENTAL INFORMATION:
 
 
 
Non-cash activity - Settlement of related party payable
$
5

 
$
541

Cash paid for interest
$
43

 
$
43







The accompanying notes are an integral part of these consolidated financial statements.
5


PANHANDLE EASTERN PIPE LINE COMPANY, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollar amounts are in millions)
(unaudited)

1.
ORGANIZATION AND BASIS OF PRESENTATION
Organization
Panhandle Eastern Pipe Line Company, LP and its subsidiaries are primarily engaged in the transportation of natural gas from the Gulf of Mexico, south Texas and the panhandle region of Texas and Oklahoma to major United States markets in the Midwest and Great Lakes regions and the storage of natural gas and are subject to the rules and regulations of the FERC.  The Company’s subsidiaries are Trunkline, Sea Robin and Southwest Gas.
In April 2017, Energy Transfer Partners, L.P. (“ETP”) merged with a subsidiary of Sunoco Logistics Partners L.P., at which time ETP changed its name from “Energy Transfer Partners, L.P.” to “Energy Transfer, LP” and Sunoco Logistics Partners L.P. changed its name to “Energy Transfer Partners, L.P.” References to “ETP” refer to the consolidated entity named Energy Transfer Partners, L.P. subsequent to the close of the merger.
Energy Transfer, LP is a wholly-owned subsidiary of Energy Transfer Partners, L.P.
Southern Union Panhandle LLC, an indirect wholly-owned subsidiary of ETP, owns a 1% general partner interest in PEPL and ETP indirectly owns a 99% limited partner interest in PEPL.

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net income, total partners’ capital, or cash flows.
Basis of Presentation
The unaudited financial information included in this Form 10-Q has been prepared on the same basis as the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. In the opinion of the Company’s management, such financial information reflects all adjustments necessary for a fair presentation of the financial position and the results of operations for such interim periods in accordance with GAAP. All intercompany items and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the SEC.
Use of Estimates
The unaudited consolidated financial statements have been prepared in conformity with GAAP, which includes the use of estimates and assumptions made by management that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities that exist at the date of the consolidated financial statements. Although these estimates are based on management’s available knowledge of current and expected future events, actual results could be different from those estimates.
Recent Accounting Pronouncements
ASU 2014-09
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which clarifies the principles for recognizing revenue based on the core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company expects to adopt ASU 2014-09 in the first quarter of 2018 and will apply the cumulative catchup transition method, which requires recognition, upon the date of initial application, of the cumulative effect of the retrospective application of the standard.
We are continuing the process of evaluating our revenue contracts by fee type to determine the potential impact of adopting the new standard. At this point in our evaluation process, we have determined that the timing and/or amount of revenue that we recognize on certain contracts (as discussed below) may be impacted by the adoption of the new standard; however, we

6


are still in the process of quantifying these impacts and cannot say whether or not they would be material to our financial statements.
We currently anticipate a change to revenues and costs associated with the accounting for noncash consideration and do not expect these changes in the accounting for noncash consideration to impact net income.
We continue to assess the impact of the disclosure requirements under the new standard and are evaluating the manner in which we will disaggregate revenue into categories that show how economic factors affect the nature, timing and uncertainty of revenue and cash flows generated from contracts with customers. In addition, we are in the process of implementing appropriate changes to our business processes, systems and controls to support recognition and disclosure under the new standard. We continue to monitor additional authoritative or interpretive guidance related to the new standard as it becomes available, as well as comparing our conclusions on specific interpretative issues to other peers in our industry, to the extent that such information is available to us.
ASU 2016-02
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which establishes the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that adopting this new standard will have on the consolidated financial statements and related disclosures.
ASU 2017-04
In January 2017, the FASB issued ASU No. 2017-04 “Intangibles-Goodwill and other (Topic 350): Simplifying the test for goodwill impairment”. The amendments in this update remove the second step of the two-step test currently required by Topic 350. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. This ASU is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We expect that our adoption of this standard will change our approach for testing goodwill for impairment; however, this standard requires prospective application and therefore will only impact periods subsequent to adoption. The Company plans to apply this ASU for its annual goodwill impairment test in the fourth quarter of 2017.
2.
RELATED PARTY TRANSACTIONS
Accounts receivable from related companies reflected on the consolidated balance sheets primarily related to services provided to ETE, ETP and other affiliates. Accounts payable to related companies reflected on the consolidated balance sheets related to various services provided by ETP and other affiliates.
The following table provides a summary of the related party activity included in the consolidated statements of operations:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Operating revenues
$
11

 
$
4

 
$
18

 
$
13

Operating and maintenance
1

 
4

 
5

 
11

General and administrative
7

 
6

 
18

 
20

Interest income — affiliates
1

 
9

 
9

 
23

The Company settled related party payables with a subsidiary of ETP through a non-cash contribution during the nine months ended September 30, 2017 for $5 million. Additionally, the Company settled a note receivable and related accrued interest from a subsidiary of ETP through a non-cash distribution during the nine months ended September 30, 2016 for $541 million.

7


3.
FAIR VALUE MEASURES
The Company did not have any assets or liabilities measured at fair value on a recurring basis at September 30, 2017 or December 31, 2016. The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximates fair value due to their short-term maturities. Based on the estimated borrowing rates currently available to the Company and its subsidiaries for loans with similar terms and average maturities, the aggregate fair value of the Company’s consolidated debt obligations was $1.13 billion and $1.14 billion at September 30, 2017 and December 31, 2016, respectively. The fair value of the Company’s consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities. The Company did not have any Level 3 instruments measured at fair value at September 30, 2017 or December 31, 2016, and there were no transfers between hierarchy levels.
4. DEBT OBLIGATIONS
Senior Notes
Panhandle’s 6.20% Senior Notes in the amount of $300 million matured on November 1, 2017 and were repaid with borrowings under an affiliate loan agreement.
5.
REGULATORY MATTERS, COMMITMENTS, CONTINGENCIES AND ENVIRONMENTAL LIABILITIES
Contingent Residual Support Agreement with ETP
The Company provides contingent, residual support to Citrus ETP Finance LLC (on a non-recourse basis to the Company) with respect to Citrus ETP Finance LLC’s obligations to ETP to support the payment of $2 billion in principal amount of senior notes issued by ETP on January 17, 2012.
FERC Audit
In March 2016, the FERC commenced an audit of Trunkline for the period from January 1, 2013 to present to evaluate Trunkline’s compliance with the requirements of its FERC gas tariff, the accounting regulations of the Uniform System of Accounts as prescribed by the FERC, and the FERC’s annual reporting requirements. The audit is ongoing.
Environmental Matters
The Company’s operations are subject to federal, state and local laws, rules and regulations regarding water quality, hazardous and solid waste management, air quality control and other environmental matters.  These laws, rules and regulations require the Company to conduct its operations in a specified manner and to obtain and comply with a wide variety of environmental regulations, licenses, permits, inspections and other approvals.  Failure to comply with environmental laws, rules and regulations may expose the Company to significant fines, penalties and/or interruptions in operations.  The Company’s environmental policies and procedures are designed to achieve compliance with such applicable laws and regulations.  These evolving laws and regulations and claims for damages to property, employees, other persons and the environment resulting from current or past operations may result in significant expenditures and liabilities in the future.  The Company engages in a process of updating and revising its procedures for the ongoing evaluation of its operations to identify potential environmental exposures and enhance compliance with regulatory requirements.
The Company is responsible for environmental remediation at certain sites on its natural gas transmission systems for contamination resulting from the past use of lubricants containing PCBs in compressed air systems; the past use of paints containing PCBs; and the prior use of wastewater collection facilities and other on-site disposal areas.  The Company has implemented a program to remediate such contamination.  The primary remaining remediation activity on the Company’s systems is associated with past use of paints containing PCBs or PCB impacts to equipment surfaces and to a building at one location. The PCB assessments are ongoing and the related estimated remediation costs are subject to further change. Other remediation typically involves the management of contaminated soils and may involve remediation of groundwater.  Activities vary with site conditions and locations, the extent and nature of the contamination, remedial requirements, complexity and sharing of responsibility.  The ultimate liability and total costs associated with these sites will depend upon many factors.  If remediation activities involve statutory joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Company could potentially be held responsible for contamination caused by other parties.  In some instances, the Company may share liability associated with contamination with other potentially responsible parties.  The Company may also benefit from contractual indemnities that cover some or all of the cleanup costs.  These sites are generally managed in the normal course of business or operations.

8


The Company’s environmental remediation activities are undertaken in cooperation with and under the oversight of appropriate regulatory agencies, enabling the Company under certain circumstances to take advantage of various voluntary cleanup programs in order to perform the remediation in the most effective and efficient manner.
The table below reflects the amount of accrued liabilities recorded on the consolidated balance sheets at the dates indicated to cover environmental remediation activities where management believes a loss is probable and reasonably estimable.  The Company is not able to estimate the possible loss or range of loss in excess of amounts accrued. The Company does not have any material environmental remediation matters assessed as reasonably possible.
 
September 30, 2017
 
December 31, 2016
Current
$

 
$

Non-current
2

 
2

Total environmental liabilities
$
2

 
$
2

Liabilities for Litigation and Other Claims
The Company records accrued liabilities for litigation and other claim costs when management believes a loss is probable and reasonably estimable.  When management believes there is at least a reasonable possibility that a material loss or an additional material loss may have been incurred, the Company discloses (i) an estimate of the possible loss or range of loss in excess of the amount accrued; or (ii) a statement that such an estimate cannot be made. As of September 30, 2017 and December 31, 2016, the Company has litigation and other claim-related accrued liabilities of $21 million and $21 million, respectively, included in other non-current liabilities on the consolidated balance sheets. The Company does not have any material litigation or other claim contingency matters assessed as probable or reasonably possible that would require disclosure in the financial statements.
Other Commitments and Contingencies
The Company is subject to the laws and regulations of states and other jurisdictions concerning the identification, reporting and escheatment (the transfer of property to the state) of unclaimed or abandoned funds, and is subject to audit and examination for compliance with these requirements.  The Company is currently being examined by a third party auditor on behalf of nine states for compliance with unclaimed property laws.

9


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Tabular dollar amounts are in millions)
The information in Item 2 has been prepared pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q. Accordingly, this Item 2 includes only management’s narrative analysis of the results of operations and should be read in conjunction with (i) our historical consolidated financial statements and accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 24, 2017.
RESULTS OF OPERATIONS
 
 
Nine Months Ended
September 30,
 
 
2017
 
2016
OPERATING REVENUES:
 
 
 
 
Transportation and storage of natural gas
 
$
327

 
$
370

Other
 
15

 
15

Total operating revenues
 
342

 
385

OPERATING EXPENSES:
 
 
 
 

Cost of natural gas and other energy
 
2

 
2

Operating and maintenance
 
149

 
155

General and administrative
 
27

 
29

Depreciation and amortization
 
95

 
98

Total operating expenses
 
273

 
284

OPERATING INCOME
 
69

 
101

OTHER INCOME (EXPENSE):
 
 
 
 

Interest expense, net
 
(34
)
 
(37
)
Interest income — affiliates
 
9

 
23

Other, net
 
1

 

INCOME BEFORE INCOME TAX EXPENSE
 
45

 
87

Income tax expense
 
19

 
28

NET INCOME
 
$
26

 
$
59

 
 
 
 
 
Panhandle natural gas volumes transported (TBtu):
 
 
 
 

PEPL
 
452

 
458

Trunkline
 
378

 
369

Sea Robin
 
56

 
64

Operating Revenues. Operating revenues decreased for the nine months ended September 30, 2017 compared to the same period in the prior year on the Panhandle and Trunkline pipelines due to lower customer demand driven by weak spreads and mild weather and on the Sea Robin pipeline due to producer maintenance and production declines.
Operating Expenses. Operating expenses decreased for the nine months ended September 30, 2017 compared to the same period in the prior year due to lower allocated costs and system gas activity.
Interest income - affiliates. Interest income - affiliates decreased for the nine months ended September 30, 2017 compared to the same period in the prior year primarily due to the settlement of a note receivable from a subsidiary of ETP in August 2016.
Income Taxes. The change in income tax expense for the nine months ended September 30, 2017 compared to the same period in the prior year was primarily due to lower pre-tax income.


10


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 3, Quantitative and Qualitative Disclosures About Market Risk, has been omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that information required to be disclosed by us, including our consolidated entities, in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Under the supervision and with the participation of senior management, including the Chief Executive Officer (“Principal Executive Officer”) and the Chief Financial Officer (“Principal Financial Officer”) of our General Partner, we evaluated our disclosure controls and procedures, as such term is defined under Rule 13a–15(e) promulgated under the Exchange Act. Based on this evaluation, the Principal Executive Officer and the Principal Financial Officer of our General Partner concluded that our disclosure controls and procedures were effective as of September 30, 2017 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to management, including the Principal Executive Officer and Principal Financial Officer of our General Partner, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting (as defined in Rule 13(a)-15(f) or Rule 15d-15(f) of the Exchange Act) during the three months ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

11


PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to or has property subject to litigation and other proceedings, including matters arising under provisions relating to the protection of the environment, as described in Note 5 in this Quarterly Report on Form 10-Q and in Note 11 in the Company’s Form 10-K for the year ended December 31, 2016.
The Company is subject to federal and state requirements for the protection of the environment, including those for the discharge of hazardous materials and remediation of contaminated sites. As a result, the Company is a party to or has its property subject to various other lawsuits or proceedings involving environmental protection matters. For information regarding these matters, see Note 5 in this Quarterly Report on Form 10-Q and Note 11 included in the Company’s Form 10-K for the year ended December 31, 2016.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed in the Company’s Form 10-K filed with the SEC on February 24, 2017.
ITEM 6. EXHIBITS
The exhibits listed below are filed or furnished, as indicated, as part of this report:
 
Exhibit
Number
 
Description
 
 
 
 
 
 
 
 
 
101.INS*
 
XBRL Instance Document
 
101.SCH*
 
XBRL Taxonomy Extension Schema Document
 
101.CAL*
 
XBRL Taxonomy Calculation Linkbase Document
 
101.DEF*
 
XBRL Taxonomy Extension Definitions Document
 
101.LAB*
 
XBRL Taxonomy Label Linkbase Document
 
101.PRE*
 
XBRL Taxonomy Presentation Linkbase Document

*    Filed herewith.
**    Furnished herewith.


12


SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Panhandle Eastern Pipe Line Company, LP has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
PANHANDLE EASTERN PIPE LINE COMPANY, LP
 
 
(Registrant)
 
 
 
 
 
 
 
 
 
Date:
November 7, 2017
By:
 
 /s/   A. Troy Sturrock
 
 
 
 
A. Troy Sturrock
 
 
 
 
Senior Vice President and Controller (duly authorized to sign on behalf of the registrant)

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