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Business Combinations | 12 Months Ended
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Dec. 31, 2015
Business Combinations [Abstract] |
Business Combinations | Note 12. Business Combinations Acquisition of EFS Midstream In July 2015, we purchased EFS Midstream from affiliates of Pioneer and Reliance for approximately $2.1 billion. The purchase price will be paid in two installments. The first installment of approximately $1.1 billion was paid at closing on July 8, 2015 and the final installment of approximately $1.0 billion will be paid no later than the first anniversary of the closing date. The effective date of the acquisition was July 1, 2015. We funded the cash consideration for the first installment using proceeds from the issuance of short-term notes under our commercial paper program and cash on hand. The EFS Midstream System provides condensate gathering and processing services as well as gathering, treating and compression services for the associated natural gas. The EFS Midstream System includes approximately 460 miles of gathering pipelines, ten central gathering plants, 119 thousand barrels per day of condensate stabilization capacity and 780 million cubic feet per day of associated natural gas treating capacity. Our primary purpose in acquiring the EFS Midstream System was to secure the underlying production, particularly the processed condensate, for our midstream asset network. Under terms of the associated agreements, Pioneer and Reliance have dedicated certain of their Eagle Ford Shale acreage to us under 20-year, fixed-fee gathering agreements that include minimum volume requirement for the first seven years. Pioneer and Reliance have also entered into related 20-year fee-based agreements with us for natural gas transportation and processing, NGL transportation and fractionation, and for processed condensate and crude oil transportation services. In connection with the agreements to acquire EFS Midstream, we are obligated to spend up to an aggregate of $270 million on specified midstream gathering assets for Pioneer and Reliance, if requested by these producers, over a ten- year period. If constructed, these new assets would be owned by us and be a component of the EFS Midstream System. We engaged an independent third party business valuation expert to assist us in estimating the fair values of the tangible and intangible assets of EFS Midstream. The following table summarizes our final purchase price allocation for the EFS Midstream acquisition:
Consideration: |  |  |
Cash |  | $ | 1,069.9 |
Accrued liability related to EFS Midstream acquisition |  |  | 986.6 |
Total consideration |  | $ | 2,056.5 |
Identifiable assets acquired in business combination: |  |  |  |
Current assets, including cash of $13.4 million |  | $ | 64.0 |
Property, plant and equipment |  |  | 636.0 |
Customer relationship intangible assets (see Note 7) |  |  | 1,409.8 |
Total assets acquired |  |  | 2,109.8 |
Liabilities assumed in business combination: |  |  |  |
Current liabilities |  |  | (9.6 | )
Long-term debt |  |  | (125.0 | )
Other long-term liabilities |  |  | (1.3 | )
Total liabilities assumed |  |  | (135.9 | )
Total assets acquired less liabilities assumed |  |  | 1,973.9 |
Total consideration given for EFS Midstream |  |  | 2,056.5 |
Goodwill (see Note 7) |  | $ | 82.6 |
The estimated fair value of the acquired property, plant and equipment was determined using the cost approach. Of the $636 million of fair value assigned to property, plant and equipment, $366 million was assigned to pipelines and rights of way, $112 million to processing equipment, $84 million to electrical and metering equipment, $42 million to pumps and compressors and $32 million to other assets. Our consolidated revenues and net income include $117.8 million and $59.9 million, respectively, from EFS Midstream for the six months ended December 31, 2015. Since the effective date of the EFS Midstream acquisition was July 1, 2015, our Statements of Consolidated Operations do not include earnings from this business prior to this date. The following table presents selected unaudited pro forma earnings information for the years ended December 31, 2015 and 2014 as if the acquisition had been completed on January 1, 2014. This pro forma information was prepared using historical financial data for EFS Midstream and reflects certain estimates and assumptions made by our management. Our unaudited pro forma financial information is not necessarily indicative of what our consolidated financial results would have been for the periods presented had we acquired EFS Midstream on January 1, 2014.
|  | For the Year Ended December 31, |
|  | 2015 |  |  | 2014 |
Pro forma earnings data: |  |  |  |  |  |
Revenues |  | $ | 27,148.5 |  |  | $ | 48,180.4 |
Costs and expenses |  |  | 23,937.1 |  |  |  | 44,583.6 |
Operating income |  |  | 3,585.0 |  |  |  | 3,856.3 |
Net income |  |  | 2,594.4 |  |  |  | 2,896.1 |
Net income attributable to noncontrolling interests |  |  | 37.2 |  |  |  | 46.1 |
Net income attributable to limited partners |  |  | 2,557.2 |  |  |  | 2,850.0 |
Basic earnings per unit: |  |  |  |  |  |  |  |
As reported basic earnings per unit |  | $ | 1.28 |  |  | $ | 1.51 |
Pro forma basic earnings per unit |  | $ | 1.30 |  |  | $ | 1.54 |
Diluted earnings per unit: |  |  |  |  |  |  |  |
As reported diluted earnings per unit |  | $ | 1.26 |  |  | $ | 1.47 |
Pro forma diluted earnings per unit |  | $ | 1.28 |  |  | $ | 1.50 |
Acquisition of Oiltanking On October 1, 2014, we acquired Oiltanking GP and the related IDRs, 15,899,802 common units and 38,899,802 subordinated units of Oiltanking from OTA. We paid total consideration of approximately $4.4 billion to OTA comprised of $2.21 billion in cash and 54,807,352 Enterprise common units for these ownership interests and rights. We also paid $228.3 million to assume the outstanding loans, including related accrued interest, owed by Oiltanking or its subsidiaries to OTA. Collectively, these transactions are referred to as "Step 1" of the Oiltanking acquisition. We funded the cash consideration for the Step 1 transactions using borrowings under our 364-Day Credit Agreement, proceeds from the sale of short-term notes under our commercial paper program and cash on hand. As a result of completing Step 1 of the acquisition, we began consolidating the financial statements of Oiltanking and its general partner on October 1, 2014. Oiltanking owned marine terminals located on the Houston Ship Channel and at the Port of Beaumont with a total of 12 ship and barge docks and approximately 26 MMBbls of crude oil and petroleum products storage capacity. Oiltanking's marine terminal on the Houston Ship Channel is connected by pipeline to our Mont Belvieu, Texas complex and is integral to our growing LPG export, crude oil storage and octane enhancement and propylene businesses. Our ECHO facility is also connected to Oiltanking's system. We had a strategic relationship and enjoyed mutual growth with Oiltanking and its predecessors since 1983. The combination of our legacy midstream assets and Oiltanking's access to waterborne markets and crude oil and petroleum products storage assets extended and broadened our midstream energy services business. We engaged an independent third party business valuation expert to assist us in estimating the fair values of the tangible and intangible assets of Oiltanking. The following table summarizes our final purchase price allocation for the Oiltanking acquisition:
Consideration: |  |  |
Cash |  | $ | 2,438.3 |
Equity instruments (54,807,352 common units of Enterprise) (1) |  |  | 2,171.5 |
Fair value of total consideration transferred in Step 1 |  | $ | 4,609.8 |
Identifiable assets acquired in business combination: |  |  |  |
Current assets, including cash of $21.5 million |  | $ | 68.0 |
Property, plant and equipment |  |  | 1,080.1 |
Identifiable intangible assets: |  |  |  |
Customer relationship intangible assets |  |  | 1,192.4 |
Contract-based intangible assets |  |  | 297.5 |
IDRs (2) |  |  | 1,459.2 |
Total identifiable intangible assets |  |  | 2,949.1 |
Other assets |  |  | 227.6 |
Total assets acquired |  |  | 4,324.8 |
Liabilities assumed in business combination: |  |  |  |
Current liabilities |  |  | (84.8 | )
Long-term debt |  |  | (223.3 | )
Other long-term liabilities (3) |  |  | (230.0 | )
Total liabilities assumed |  |  | (538.1 | )
Noncontrolling interest in Oiltanking (4) |  |  | (1,397.2 | )
Total assets acquired less liabilities assumed and noncontrolling interest |  |  | 2,389.5 |
Total consideration given for ownership interests in Oiltanking in Step 1 |  |  | 4,609.8 |
Goodwill (see Note 7) |  | $ | 2,220.3 |
(1) The fair value of the equity-based consideration paid in connection with Step 1 of the Oiltanking acquisition was based on the closing market price of our common units of $39.62 per unit on the acquisition date. (2) The IDRs represented contractual rights to future cash incentive distributions to be paid by Oiltanking. These rights were granted to Oiltanking GP under the terms of Oiltanking's partnership agreement. Oiltanking GP could separate and sell the IDRs independent of its other residual general partner interest in Oiltanking. In February 2015 (following completion of Step 2 of the Oiltanking acquisition), the Oiltanking IDRs were cancelled and the carrying value of this intangible asset was reclassified to goodwill. (3) In connection with Step 1, we entered into the Liquidity Option Agreement with OTA and Marquard & Bahls ("M&B", a German corporation and ultimate parent company of OTA). Other long-term liabilities includes $219.7 million for the Liquidity Option Agreement (see Note 17). (4) From an accounting perspective, Enterprise acquired control of Oiltanking as a result of completing Step 1. The estimated fair value of Oiltanking's common units held by parties other than Enterprise following Step 1 (i.e., the "noncontrolling interest") is based on 28,328,890 common units held by third parties on October 1, 2014 multiplied by the closing unit price for Oiltanking common units of $49.32 per unit on that date. |
Although we are not subject to federal income tax, our partners are individually responsible for paying federal income taxes on their share of our taxable income. In deriving our taxable income, the amount assigned to goodwill in this transaction will be amortized over a period of 15 years. Our consolidated revenues and net income included $57.5 million and $8.1 million, respectively, from Oiltanking for the three months ended December 31, 2014. We incurred $3.8 million of direct transaction costs in connection with Step 1 of the Oiltanking acquisition in the year ended December 31, 2014. These costs are included in general and administrative costs in the accompanying Statements of Consolidated Operations. Since the effective date of Step 1 of the Oiltanking acquisition was October 1, 2014, our Statements of Consolidated Operations do not include earnings from this business prior to this date. The following table presents selected unaudited pro forma earnings information for the year ended December 31, 2014 as if the acquisition had been completed on January 1, 2013. This pro forma information was prepared using historical financial data for Oiltanking and reflects certain estimates and assumptions made by our management. Our unaudited pro forma financial information is not necessarily indicative of what our consolidated financial results would have been for the year ended December 31, 2014 had we acquired Oiltanking on January 1, 2013.
Pro forma earnings data: |  |  |
Revenues |  | $ | 48,087.5 |
Costs and expenses |  |  | 44,509.0 |
Operating income |  |  | 3,838.0 |
Net income |  |  | 2,877.5 |
Net income attributable to noncontrolling interests |  |  | 75.0 |
Net income attributable to limited partners |  |  | 2,802.5 |
Basic earnings per unit: |  |  |  |
As reported basic units outstanding |  |  | 1,848.7 |
Pro forma basic units outstanding |  |  | 1,903.5 |
As reported basic earnings per unit |  | $ | 1.51 |
Pro forma basic earnings per unit |  | $ | 1.47 |
Diluted earnings per unit: |  |  |  |
As reported diluted units outstanding |  |  | 1,895.2 |
Pro forma diluted units outstanding |  |  | 1,950.0 |
As reported diluted earnings per unit |  | $ | 1.47 |
Pro forma diluted earnings per unit |  | $ | 1.44 |
Automatic conversion of subordinated units. Following Step 1 of the Oiltanking acquisition, but not part of Step 2 of the acquisition, on November 17, 2014, the 38,899,802 Oiltanking subordinated units held by us automatically converted into an equal number of Oiltanking common units pursuant to the terms of the Oiltanking partnership agreement. Following this conversion, we owned 54,799,604 Oiltanking common units, or approximately 65.9% of its outstanding common units. Step 2 of the Oiltanking acquisition. As a second step ("Step 2") of the Oiltanking acquisition (separately negotiated by the conflicts committee of Oiltanking GP on behalf of Oiltanking), we entered into an Agreement and Plan of Merger (the "merger agreement") with Oiltanking in November 2014 that provided for the following:
 | the merger of a wholly owned subsidiary of ours with and into Oiltanking, with Oiltanking surviving the merger as our wholly owned subsidiary; and
 | all outstanding common units of Oiltanking at the effective time of the merger held by Oiltanking's public unitholders (which consisted of Oiltanking unitholders other than us and our subsidiaries) to be cancelled and converted into our common units based on an exchange ratio of 1.30 of our common units for each Oiltanking common unit.
In accordance with the merger agreement and Oiltanking's partnership agreement, the merger was submitted to a vote of Oiltanking's common unitholders, with the required majority of unitholders (including our ownership interests) voting to approve the merger on February 13, 2015. Upon approval of the merger, a total of 36,827,517 of our common units were issued to Oiltanking's former public unitholders. With the completion of Step 2, total consideration paid by Enterprise for Oiltanking was approximately $6.02 billion. Since we had a controlling financial interest in Oiltanking before and after completion of Step 2, the increase in our ownership interest in Oiltanking was accounted for as an equity transaction with no gain or loss recognized. Step 2 represented our acquisition of the noncontrolling interests in Oiltanking; therefore, approximately $1.4 billion of noncontrolling interests attributable to Oiltanking were reclassified to limited partners' equity to reflect the February 2015 issuance of 36,827,517 new common units. Upon completion of the merger, the IDRs of Oiltanking were cancelled since we now own 100% of the future cash flows attributable to the Oiltanking business we acquired. As a result, the $1.46 billion carrying value of the IDR intangible asset was reclassified to goodwill and allocated among our business segments (see Note 7). See Note 17 for information regarding a Federal Trade Commission ("FTC") inquiry related to the Oiltanking acquisition and our operations.

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