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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, 2020


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

For the transition period from _____to_____

Commission File No. 1-36413

https://cdn.kscope.io/5e5c46d9a36430e8be1bb05d3b94762a-enbl-20200630_g1.jpg

ENABLE MIDSTREAM PARTNERS, LP

(Exact name of registrant as specified in its charter)

_______________________________________

Delaware

72-1252419

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

499 West Sheridan Avenue, Suite 1500 Oklahoma City, Oklahoma

73102

(Address of Principal Executive Offices)

(Zip Code)

(405) 525-7788

Registrant’s telephone number, including area code

_______________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Units Representing Limited Partner Interests

ENBL

New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically 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 Exchange Act.

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 Exchange Act). Yes ☐ No ☒

As of July 17, 2020, there were 435,462,758 common units outstanding.

Table of Contents

ENABLE MIDSTREAM PARTNERS, LP

FORM 10-Q

TABLE OF CONTENTS


			Page
GLOSSARY OF TERMS			1
FORWARD-LOOKING STATEMENTS			3

Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income			5
Condensed Consolidated Statements of Comprehensive Income			6
Condensed Consolidated Balance Sheets			7
Condensed Consolidated Statements of Cash Flows			8
Condensed Consolidated Statements of Partners' Equity			9
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			32
Item 3. Quantitative and Qualitative Disclosures About Market Risk			49
Item 4. Controls and Procedures			50

Part II - OTHER INFORMATION
Item 1. Legal Proceedings			51
Item 1A. Risk Factors			51
Item 5. Other Information			51
Item 6. Exhibits			52

Signature			54

AVAILABLE INFORMATION

Our website is www.enablemidstream.com. On the investor relations tab of our website, http://investors.enablemidstream.com, we make available free of charge a variety of information to investors. Our goal is to maintain the investor relations tab of our website as a portal through which investors can easily find or navigate to pertinent information about us, including but not limited to:

•our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports as soon as reasonably practicable after we electronically file that material with or furnish it to the SEC;

•press releases on quarterly distributions, quarterly earnings, and other developments;

•governance information, including our governance guidelines, committee charters, and code of ethics and business conduct;

•information on events and presentations, including an archive of available calls, webcasts, and presentations;

•news and other announcements that we may post from time to time that investors may find useful or interesting; and

•opportunities to sign up for email alerts and RSS feeds to have information pushed in real time.

Information contained on our website or any other website is not incorporated by reference into this report and does not constitute a part of this report.

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GLOSSARY OF TERMS



2019 Term Loan Agreement.			Unsecured term loan agreement dated January 29, 2019, by and among Enable Midstream Partners, LP and Bank of America, N.A., as administrative agent, and the several lenders from time to time party thereto.
2024 Notes.			$600 million aggregate principal amount of the Partnership’s 3.900% senior notes due 2024.
2027 Notes.			$700 million aggregate principal amount of the Partnership’s 4.400% senior notes due 2027.
2028 Notes.			$800 million aggregate principal amount of the Partnership’s 4.950% senior notes due 2028.
2029 Notes.			$550 million aggregate initial principal amount of the Partnership’s 4.150% senior notes due 2029.
2044 Notes.			$550 million aggregate initial principal amount of the Partnership’s 5.000% senior notes due 2044.
Adjusted EBITDA.			A non-GAAP measure calculated as net income attributable to limited partners plus depreciation and amortization expense, interest expense, net of interest income, income tax expense, distributions received from equity method affiliate in excess of equity earnings, non-cash equity-based compensation, change in fair value of derivatives not designated as hedging instruments, certain other non-cash gains and losses (including gains and losses on retirement of assets, sales of assets and write-downs of materials and supplies), gain on extinguishment of debt and impairments, less the noncontrolling interest allocable to Adjusted EBITDA.
Adjusted interest expense.			A non-GAAP measure calculated as interest expense plus interest income, amortization of premium on long-term debt and capitalized interest on expansion capital, less amortization of debt costs and discount on long-term debt.
Annual Report.			Annual Report on Form 10-K for the year ended December 31, 2019.

ASC.			Accounting Standards Codification.
ASU.			Accounting Standards Update.
Atoka.			Atoka Midstream LLC, in which the Partnership owns a 50% interest, which provides gathering and processing services to customers in the Arkoma Basin in Oklahoma.
ATM Program.			The offer and sale, from time to time, of common units representing limited partner interests having an aggregate offering price of up to $200 million in quantities, by sales methods and at prices determined by market conditions and other factors at the time of such sales, pursuant to that certain ATM Equity Offering Sales Agreement, entered into on May 12, 2017.
Barrel.			42 U.S. gallons of petroleum products.
Bbl.			Barrel.
Bbl/d.			Barrels per day.

Bcf/d.			Billion cubic feet per day.
Board of Directors.			The board of directors of Enable GP, LLC.
Btu.			British thermal unit. When used in terms of volume, Btu refers to the amount of natural gas required to raise the temperature of one pound of water by one degree Fahrenheit at one atmospheric pressure.


CenterPoint Energy.			CenterPoint Energy, Inc., a Texas corporation, and its subsidiaries.







Condensate.			A natural gas liquid with a low vapor pressure, mainly composed of propane, butane, pentane and heavier hydrocarbon fractions.

DCF.			Distributable Cash Flow, a non-GAAP measure calculated as Adjusted EBITDA, as further adjusted for Series A Preferred Unit distributions, distributions for phantom and performance units, Adjusted interest expense, maintenance capital expenditures and current income taxes.

Distribution coverage ratio.			A non-GAAP measure calculated as DCF divided by distributions related to common unitholders.





EGT.			Enable Gas Transmission, LLC, a wholly owned subsidiary of the Partnership that operates an approximately 5,900-mile interstate pipeline that provides natural gas transportation and storage services to customers principally in the Anadarko, Arkoma and Ark-La-Tex Basins in Oklahoma, Texas, Arkansas, Louisiana and Kansas.

Enable GP.			Enable GP, LLC, the general partner of Enable Midstream Partners, LP.


EOCS.			Enable Oklahoma Crude Services, LLC, formerly Velocity Holdings, LLC, a wholly owned subsidiary of the Partnership that provides crude oil and condensate gathering services in the SCOOP and STACK plays of the Anadarko Basin in Oklahoma.
EOIT.			Enable Oklahoma Intrastate Transmission, LLC, formerly Enogex LLC, a wholly owned subsidiary of the Partnership that operates an approximately 2,200-mile intrastate pipeline that provides natural gas transportation and storage services to customers in Oklahoma.

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EOIT Senior Notes.			$250 million aggregate principal amount of EOIT’s 6.25% senior notes that were repaid in March 2020.

ESCP.			Enable South Central Pipeline, LLC, formerly Velocity Pipeline Partners, LLC, in which the Partnership, through EOCS, owns a 60% joint venture interest in a 26-mile pipeline system with a third party which owns and operates a refinery connected to the EOCS system.
ETGP.			Enable Texola Gathering & Processing, LLC, formerly Align Midstream, LLC, a wholly owned subsidiary of the Partnership that provides natural gas gathering and processing services to customers in the Cotton Valley and Haynesville plays of the Ark-La-Tex Basin in Texas.
Exchange Act.			Securities Exchange Act of 1934, as amended.
FASB.			Financial Accounting Standards Board.
FERC.			Federal Energy Regulatory Commission.


GAAP.			Accounting principles generally accepted in the United States of America.
Gas imbalance.			The difference between the actual amounts of natural gas delivered from or received by a pipeline, as compared to the amounts scheduled to be delivered or received.


Gross margin.			A non-GAAP measure calculated as Total revenues minus Cost of natural gas and natural gas liquids, excluding depreciation and amortization.

LDC.			Local distribution company involved in the delivery of natural gas to consumers within a specific geographic area.
LIBOR.			London Interbank Offered Rate.


March 31 Quarterly Report.			Quarterly Report on Form 10-Q for the period ended March 31, 2020.
MBbl.			Thousand barrels.
MBbl/d.			Thousand barrels per day.

MMcf.			Million cubic feet of natural gas.

MMcf/d.			Million cubic feet per day.

Moody’s.			Moody’s Investor Services.
MRT.			Enable Mississippi River Transmission, LLC, a wholly owned subsidiary of the Partnership that operates a 1,600-mile interstate pipeline that provides natural gas transportation and storage services principally in Texas, Arkansas, Louisiana, Missouri and Illinois.

NGA.			Natural Gas Act of 1938.


NGLs.			Natural gas liquids, which are the hydrocarbon liquids contained within natural gas including condensate.
NYMEX.			New York Mercantile Exchange.

OGE Energy.			OGE Energy Corp., an Oklahoma corporation, and its subsidiaries.


OPEC.			Organization of the Petroleum Exporting Countries.
Partnership.			Enable Midstream Partners, LP, and its subsidiaries.
Partnership Agreement.			Fifth Amended and Restated Agreement of Limited Partnership of Enable Midstream Partners, LP dated as of November 14, 2017.
PHMSA.			Pipeline and Hazardous Materials Safety Administration.









Revolving Credit Facility.			$1.75 billion senior unsecured revolving credit facility.


S&P.			Standard & Poor’s Rating Services.
SCOOP.			South Central Oklahoma Oil Province.


SEC.			Securities and Exchange Commission.

Series A Preferred Units.			10% Series A Fixed-to-Floating Non-Cumulative Redeemable Perpetual Preferred Units representing limited partner interests in the Partnership.
SESH.			Southeast Supply Header, LLC, in which the Partnership owns a 50% interest, that operates an approximately 290-mile interstate natural gas pipeline from Perryville, Louisiana to southwestern Alabama near the Gulf Coast.




STACK.			Sooner Trend Anadarko Canadian and Kingfisher Counties.
TBtu.			Trillion British thermal units.
TBtu/d.			Trillion British thermal units per day.

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FORWARD-LOOKING STATEMENTS

Some of the information in this report may contain forward-looking statements. Forward-looking statements give our current expectations, contain projections of results of operations or of financial condition, or forecasts of future events. Words such as “could,” “will,” “should,” “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential,” or “continue,” and similar expressions are used to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this report include our expectations of plans, strategies, objectives, growth and anticipated financial and operational performance, including revenue projections, capital expenditures and tax position. In particular, our statements with respect to continuity plans and preparedness measures we have implemented in response to the novel coronavirus (COVID-19) pandemic and its expected impact on our business, operations, earnings and results are forward-looking statements. Forward-looking statements can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, no forward-looking statements can be guaranteed.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, when considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in our Annual Report and in our March 31 Quarterly Report. Those risk factors and other factors noted throughout this report and in our Annual Report and in our March 31 Quarterly Report could cause our actual results to differ materially from those disclosed in any forward-looking statement. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:

•changes in general economic conditions, including the material and adverse consequences of the COVID-19 pandemic and its unfolding impact on the global and national economy;

•competitive conditions in our industry;

•actions taken by our customers and competitors;

•the supply and demand for natural gas, NGLs, crude oil and midstream services;

•the actions of the Organization of Petroleum Exporting Countries (OPEC) and other significant producers and governments;

•our ability to successfully implement our business plan;

•our ability to complete internal growth projects on time and on budget;

•the price and availability of debt and equity financing;

•strategic decisions by CenterPoint Energy and OGE Energy regarding their ownership of us and Enable GP;

•operating hazards and other risks incidental to transporting, storing, gathering and processing natural gas, NGLs, crude oil and midstream products;

•natural disasters, weather-related delays, casualty losses and other matters beyond our control;

•world health events, including the ongoing COVID-19 pandemic and the economic effects of the pandemic;

•interest rates;

•the timing and extent of changes in labor and material prices;

•labor relations;

•large customer defaults;

•changes in the availability and cost of capital;

•changes in tax status;

•the effects of existing and future laws and governmental regulations;

•changes in insurance markets impacting costs and the level and types of coverage available;

•the timing and extent of changes in commodity prices;

•the suspension, reduction or termination of our customers’ obligations under our commercial agreements;

•disruptions due to equipment interruption or failure at our facilities, or third-party facilities on which our business is dependent;

•the effects of current or future litigation, including the recent U.S. Supreme Court ruling involving the Muscogee (Creek) Nation reservation in Eastern Oklahoma; and

•other factors set forth in this report and our other filings with the SEC, including our Annual Report and our March 31 Quarterly Report.

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Forward-looking statements speak only as of the date on which they are made. We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ENABLE MIDSTREAM PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In millions, except per unit data)
Revenues (including revenues from affiliates (Note 13)):
Product sales	$	196	$	393	$	484	$	836
Service revenues	319		342		679		694
Total Revenues	515		735		1,163		1,530
Cost and Expenses (including expenses from affiliates (Note 13)):
Cost of natural gas and natural gas liquids (excluding depreciation and amortization shown separately)	177		317		403		695
Operation and maintenance	115		99		217		202
General and administrative	21		25		45		51
Depreciation and amortization	105		110		209		215
Impairments (Note 7)	—		—		28		—
Taxes other than income tax	17		17		35		35
Total Cost and Expenses	435		568		937		1,198
Operating Income	80		167		226		332
Other Income (Expense):
Interest expense	(46)		(48)		(93)		(94)
Equity in earnings of equity method affiliate	5		4		11		7
Other, net	5		1		5		1
Total Other Expense	(36)		(43)		(77)		(86)
Income Before Income Tax	44		124		149		246
Income tax benefit	—		—		—		(1)
Net Income	$	44	$	124	$	149	$	247
Less: Net (loss) income attributable to noncontrolling interest	—		—		(7)		1
Net Income Attributable to Limited Partners	$	44	$	124	$	156	$	246
Less: Series A Preferred Unit distributions (Note 6)	9		9		18		18
Net Income Attributable to Common Units (Note 5)	$	35	$	115	$	138	$	228

Basic earnings per unit (Note 5)
Common units	$	0.08	$	0.26	$	0.32	$	0.52
Diluted earnings per unit (Note 5)
Common units	$	0.08	$	0.26	$	0.30	$	0.52

See Notes to the Unaudited Condensed Consolidated Financial Statements

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ENABLE MIDSTREAM PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

	(In millions)
Net income	$	44	$	124	$	149	$	247
Other comprehensive loss:
Unrealized losses on derivative instruments	—		(3)		(6)		(3)

Other comprehensive loss	—		(3)		(6)		(3)
Comprehensive income	44		121		143		244
Less: Comprehensive (loss) income attributable to noncontrolling interest	—		—		(7)		1
Comprehensive income attributable to Limited Partners	$	44	$	121	$	150	$	243

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ENABLE MIDSTREAM PARTNERS, LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2020		December 31, 2019

	(In millions)
Current Assets:
Cash and cash equivalents	$	11	$	4

Accounts receivable, net of allowance for doubtful accounts (Note 1)	223		244
Accounts receivable—affiliated companies	15		25
Inventory	43		46
Gas imbalances	38		35
Other current assets	44		35
Total current assets	374		389
Property, Plant and Equipment:
Property, plant and equipment	13,172		13,161
Less: Accumulated depreciation and amortization	2,430		2,291
Property, plant and equipment, net	10,742		10,870
Other Assets:
Intangible assets, net	570		601
Goodwill	—		12
Investment in equity method affiliate	301		309
Other, net of allowance for doubtful accounts (Note 1)	74		85
Total other assets	945		1,007
Total Assets	$	12,061	$	12,266
Current Liabilities:
Accounts payable	$	88	$	161
Accounts payable—affiliated companies	2		1
Current portion of long-term debt	—		251
Short-term debt	30		155
Taxes accrued	38		32
Gas imbalances	19		19
Other	113		161
Total current liabilities	290		780
Other Liabilities:
Accumulated deferred income taxes, net	5		4
Regulatory liabilities	25		24
Other	75		80
Total other liabilities	105		108
Long-Term Debt	4,349		3,969
Commitments and Contingencies (Note 14)
Partners’ Equity:
Series A Preferred Units (14,520,000 issued and outstanding at June 30, 2020 and December 31, 2019)	362		362
Common Units (435,454,209 issued and outstanding at June 30, 2020 and 435,201,365 issued and outstanding at December 31, 2019)	6,937		7,013
Accumulated other comprehensive loss	(9)		(3)
Noncontrolling interest	27		37
Total Partners’ Equity	7,317		7,409
Total Liabilities and Partners’ Equity	$	12,061	$	12,266

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ENABLE MIDSTREAM PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2020		2019

	(In millions)
Cash Flows from Operating Activities:
Net income	$	149	$	247
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	209		215
Deferred income taxes	1		(1)
Impairments	28		—
Net loss on sale/retirement of assets	17		2
Gain on extinguishment of debt	(5)		—
Equity in earnings of equity method affiliate	(11)		(7)
Return on investment in equity method affiliate	11		7
Equity-based compensation	7		9
Amortization of debt costs and discount	1		—
Changes in other assets and liabilities:
Accounts receivable, net	20		58
Accounts receivable—affiliated companies	10		(1)
Inventory	3		4
Gas imbalance assets	(3)		3
Other current assets	(10)		(3)
Other assets	3		6
Accounts payable	(71)		(111)
Accounts payable—affiliated companies	1		(1)
Gas imbalance liabilities	—		(4)
Other current liabilities	(45)		15
Other liabilities	(4)		(11)
Net cash provided by operating activities	311		427
Cash Flows from Investing Activities:
Capital expenditures	(102)		(252)

Proceeds from sale of assets	19		—


Return of investment in equity method affiliate	8		9
Other, net	2		(9)
Net cash used in investing activities	(73)		(252)
Cash Flows from Financing Activities:
(Decrease) increase in short-term debt	(125)		32
Proceeds from long-term debt, net of issuance costs	—		850
Repayment of long-term debt	(267)		(500)
Proceeds from Revolving Credit Facility	869		—
Repayment of Revolving Credit Facility	(469)		(250)



Distributions to common unitholders	(216)		(276)
Distributions to preferred unitholders	(18)		(18)
Distributions to non-controlling interests	(3)		(2)
Cash paid for employee equity-based compensation	(2)		(23)
Net cash used in financing activities	(231)		(187)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	7		(12)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	4		22
Cash, Cash Equivalents and Restricted Cash at End of Period	$	11	$	10

See Notes to the Unaudited Condensed Consolidated Financial Statements

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ENABLE MIDSTREAM PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY

(Unaudited)