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Equity and Distributions

12 Months Ended

Dec. 31, 2019

Note 8. Equity and Distributions

Partners Equity

Partners’ equity reflects the classes of our limited partner interests outstanding. Our common units represent limited partner interests, which give the holders thereof the right to participate in distributions and to exercise the other rights or privileges available to them under our Sixth Amended and Restated Agreement of Limited Partnership (as amended from time to time, the “Partnership Agreement”). We are managed by our general partner, Enterprise GP.

In accordance with our Partnership Agreement, capital accounts are maintained for our limited partners. The capital account provisions of our Partnership Agreement incorporate principles established for U.S. federal income tax purposes and are not comparable to the equity amounts presented in our consolidated financial statements prepared in accordance with GAAP. Earnings and cash distributions are allocated to holders of our common units in accordance with their respective percentage interests.

The following table summarizes changes in the number of our units issued and outstanding since December 31, 2016:

	Common Units (Unrestricted)			Restricted Common Units			Total Common Units
Number of units issued and outstanding at December 31, 2016		2,116,906,120			682,294			2,117,588,414
Common units issued in connection with ATM program		21,807,726			–			21,807,726
Common units issued in connection with DRIP and EUPP		19,046,019			–			19,046,019
Common units issued in connection with the vesting of phantom unit awards		2,485,580			–			2,485,580
Common units issued in connection with the vesting of restricted common unit awards		681,044			(681,044	)		–
Forfeiture of restricted common unit awards		–			(1,250	)		(1,250	)
Cancellation of treasury units acquired in connection with the vesting of equity-based awards		(1,027,798	)		–			(1,027,798	)
Common units issued in connection with employee compensation		1,176,103			–			1,176,103
Other		14,685			–			14,685
Number of units issued and outstanding at December 31, 2017		2,161,089,479			–			2,161,089,479
Common unit repurchases under Legacy Buyback Program		(1,236,800	)		–			(1,236,800	)
Common units issued in connection with DRIP and EUPP		19,861,951			–			19,861,951
Common units issued in connection with the vesting of phantom unit awards		3,479,958			–			3,479,958
Cancellation of treasury units acquired in connection with the vesting of equity-based awards		(1,037,522	)		–			(1,037,522	)
Common units issued in connection with employee compensation		1,443,586			–			1,443,586
Common units issued in connection with land acquisition		1,223,242			–			1,223,242
Other		45,135			–			45,135
Number of units issued and outstanding at December 31, 2018		2,184,869,029			–			2,184,869,029
Common unit repurchases under 2019 Buyback Program		(2,909,128	)		–			(2,909,128	)
Common units issued in connection with DRIP and EUPP		2,897,990			–			2,897,990
Common units issued in connection with the vesting of phantom unit awards		3,895,049			–			3,895,049
Cancellation of treasury units acquired in connection with the vesting of equity-based awards		(1,174,446	)		–			(1,174,446	)
Common units issued in connection with employee compensation		1,626,041			–			1,626,041
Other		21,595			–			21,595
Number of units issued and outstanding at December 31, 2019		2,189,226,130			–			2,189,226,130

The net cash proceeds we received from the issuance of common units during the year ended December 31, 2019 were used to temporarily reduce amounts outstanding under EPO’s commercial paper program and for general partnership purposes.

Common unit repurchases under buyback programs

In January 2019, we announced that the Board of Enterprise GP had approved a $2.0 billion multi-year unit buyback program (the “2019 Buyback Program”), which provides EPD with an additional method to return capital to investors. The 2019 Buyback Program authorizes EPD to repurchase its common units from time to time, including through open market purchases and negotiated transactions. The timing and pace of buy backs under the program will be determined by a number of factors including (i) our financial performance and flexibility, (ii) organic growth and acquisition opportunities with higher potential returns on investment, (iii) EPD’s unit price and implied cash flow yield and (iv) maintaining targeted financial leverage with a debt-to-normalized adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of approximately 3.5 times. No time limit has been set for completion of the program, and it may be suspended or discontinued at any time.

EPD repurchased 2,909,128 common units under the 2019 Buyback Program through open market purchases during the year ended December 31, 2019. The total purchase price of these repurchases was $81.1 million, excluding commissions and fees. The repurchased units were cancelled immediately upon acquisition. At December 31, 2019, the remaining available capacity under the 2019 Buyback Program was $1.92 billion.

In December 1998, we announced a common unit buyback program whereby we, together with certain affiliates, could repurchase up to 4,000,000 EPD common units on the open market (the “Legacy Buyback Program”). EPD purchased the remaining authorized amount of 1,236,800 common units in December 2018 for $30.8 million. The repurchased units were cancelled immediately upon acquisition.

Distribution reinvestment plan and employee unit purchase plan

We have a registration statement on file with the SEC in connection with our distribution reinvestment plan (“DRIP”). The DRIP provides unitholders of record and beneficial owners of our common units a voluntary means by which they can increase the number of our common units they own by reinvesting the quarterly cash distributions they receive from us into the purchase of additional common units at a discount ranging from 0% to 5.0%. Beginning with the distribution declared with respect to the fourth quarter of 2017 and paid in February 2018, the discount was reduced from 5.0% to 2.5%. Likewise, beginning with the distribution declared with respect to the fourth quarter of 2018 and paid in February 2019, the discount was reduced from 2.5% to 0%. We have the sole discretion to determine whether common units purchased under the DRIP will come from our authorized but unissued common units or from common units purchased on the open market by the DRIP administrator.

Activity under our DRIP for the last three years was as follows: 2,601,727 new common units issued during 2019, which generated net cash proceeds of $73.7 million; 19,316,781 new common units issued during 2018, which generated net cash proceeds of $523.3 million; and 18,541,355 new common units issued during 2017, which generated net cash proceeds of $462.9 million. Privately held affiliates of EPCO reinvested $29 million, $213 million and $100 million through the DRIP in each of the years ended December 31, 2019, 2018 and 2017, respectively (this amount being a component of the net cash proceeds presented for each period).

After taking into account the number of common units delivered under the DRIP through December 31, 2019, we have the capacity to deliver an additional 56,320,229 common units under this plan.

In addition to the DRIP, we have registration statements on file with the SEC in connection with our employee unit purchase plan (“EUPP”). Activity under our EUPP for the last three years was as follows: 296,263 new common units issued during 2019, which generated net cash proceeds of $8.5 million; 545,170 new common units issued during 2018, which generated net cash proceeds of $15.1 million; and 504,664 new common units issued during 2017, which generated net cash proceeds of $13.5 million.

After taking into account the number of common units delivered under the EUPP through December 31, 2019, we have the capacity to deliver an additional 4,596,585 common units under this plan.

In July 2019, EPD announced that, beginning with the quarterly distribution paid in August 2019, it would use common units purchased on the open market, rather than issuing new common units, to satisfy its delivery obligations under the DRIP and EUPP. This election is subject to change in future quarters depending on the Partnership’s need for equity capital. During 2019, a total of 2,801,196 common units were purchased on the open market and delivered to participants in connection with the DRIP and EUPP. Apart from $0.9 million attributable to the plan discount available to all participants in the EUPP, the funds used to effect these purchases were sourced from the DRIP and EUPP participants. No other Partnership funds were used to satisfy these obligations. We also used open market purchases to satisfy DRIP and EUPP investments in connection with the distribution paid on February 12, 2020.

Phantom unit vestings and related treasury unit transactions

During the year ended December 31, 2019, a total of 3,895,049 phantom units vested and 1,174,446 units were sold back to us by employees to cover withholding tax requirements in connection with the vestings. During the year ended December 31, 2018, a total of 3,479,958 phantom units vested and 1,037,522 units were sold back to us. During the year ended December 31, 2017, an aggregate 3,166,624 phantom and restricted unit awards vested and 1,027,798 units were sold back to us. We cancelled such treasury units immediately upon acquisition.

The total cost of these treasury unit purchases was $33.7 million, $27.3 million and $29.5 million for the years ended December 31, 2019, 2018 and 2017, respectively. These amounts are reflected as a component of “Other, net” as presented on our Statements of Consolidated Equity.

See Note 13 for additional information regarding our equity-based awards.

Common units issued in connection with employee compensation

In February 2019, 2018 and 2017, certain employees of EPCO received discretionary bonus payments, less any retirement plan deductions and applicable withholding taxes, for work performed on our behalf during the prior fiscal year (e.g., the bonus paid in February 2019 was with respect to the year ended December 31, 2018). The net dollar value of the bonus amounts was remitted to employees through the issuance of an equivalent value of newly issued EPD common units under EPCO’s 2008 Enterprise Products Long-Term Incentive Plan (Third Amendment and Restatement) (referred to as the “2008 Plan”).

In February 2019, we issued 1,626,041 common units, which had a value of $45.6 million, in connection with the employee bonus awards. In February 2018, we issued 1,443,586 common units, which had a value of $39.1 million, in connection with the employee bonus awards. In February 2017, we issued 1,176,103 common units, which had a value of $33.7 million. The compensation expense associated with each bonus award was recognized during the year in which the work was performed.

Common units issued in connection with land acquisition

In April 2018, we acquired land in the Houston, Texas area for $85.2 million. The consideration paid consisted of $55.2 million in cash with the balance funded by the issuance of 1,223,242 EPD common units.

At-the-Market (“ATM”) Program

In November 2017, we filed an amended registration statement with the SEC covering the issuance of up to $2.54 billion of our common units in amounts, at prices and on terms to be determined by market conditions and other factors at the time of such offerings in connection with our ATM program. Pursuant to this program, we may sell common units under an equity distribution agreement between EPD and certain broker-dealers from time-to-time by means of ordinary brokers’ transactions through the NYSE at market prices, in block transactions or as otherwise agreed to with the broker-dealer parties to the agreement.

We did not issue any common units under the ATM program during 2019 or 2018. During 2017, we issued 21,807,726 common units under the ATM program for aggregate gross cash proceeds of $603.1 million, resulting in total net cash proceeds of $597.0 million. After taking into account the aggregate sales price of common units sold under the ATM program through December 31, 2019, we have the capacity to issue additional common units under the ATM program up to an aggregate sales price of $2.54 billion.

Universal shelf registration statement

We have a universal shelf registration statement (the “2019 Shelf”) on file with the SEC which allows EPD and EPO (each on a standalone basis) to issue an unlimited amount of equity and debt securities, respectively. The 2019 Shelf replaced our prior universal shelf registration statement, which expired in May 2019. EPO used the 2019 Shelf to issue $2.5 billion aggregate principal amount of senior notes during the year ended December 31, 2019 (see Note 7). In addition, EPO used the 2019 Shelf to issue $3.0 billion aggregate principal amount of senior notes in January 2020 (see Note 22). We may issue additional equity and debt securities in the future to assist us in meeting our funding and liquidity requirements, including those related to capital investments.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) primarily reflects cumulative gain or loss on derivative instruments designated and qualified as cash flow hedges from inception less gains or losses previously reclassified from accumulated other comprehensive income (loss) into earnings. Gain or loss amounts related to cash flow hedges recorded in accumulated other comprehensive income (loss) are reclassified to earnings in the same period(s) in which the underlying hedged forecasted transactions affect earnings. If it becomes probable that a forecasted transaction will not occur, the related net gain or loss in accumulated other comprehensive income (loss) is immediately reclassified into earnings.

The following tables present the components of accumulated other comprehensive income (loss) as reported on our Consolidated Balance Sheets at the dates indicated:

	Cash Flow Hedges
	Commodity Derivative Instruments			Interest Rate Derivative Instruments			Other			Total
Accumulated Other Comprehensive Income (Loss), December 31, 2017	$	(10.1	)	$	(165.1	)	$	3.5		$	(171.7	)
Other comprehensive income (loss) for period, before reclassifications		293.2			22.2			(0.5	)		314.9
Reclassification of losses (gains) to net income during period		(130.4	)		38.1			–			(92.3	)
Total other comprehensive income (loss) for period		162.8			60.3			(0.5	)		222.6
Accumulated Other Comprehensive Income (Loss), December 31, 2018		152.7			(104.8	)		3.0			50.9
Other comprehensive income (loss) for period, before reclassifications		44.1			81.4			(0.6	)		124.9
Reclassification of losses (gains) to net income during period		(141.7	)		37.3			–			(104.4	)
Total other comprehensive income (loss) for period		(97.6	)		118.7			(0.6	)		20.5
Accumulated Other Comprehensive Income (Loss), December 31, 2019	$	55.1		$	13.9		$	2.4		$	71.4

The following table presents reclassifications of (income) loss out of accumulated other comprehensive income (loss) into net income during the years indicated:

		For the Year Ended December 31,
Losses (gains) on cash flow hedges:	Location	2019			2018
Interest rate derivatives	Interest expense	$	37.3		$	38.1
Commodity derivatives	Revenue		(152.4	)		(131.7	)
Commodity derivatives	Operating costs and expenses		10.7			1.3
Total		$	(104.4	)	$	(92.3	)

For information regarding our interest rate and commodity derivative instruments, see Note 14.

Noncontrolling Interests

Noncontrolling interests represent third party ownership interests in our consolidated subsidiaries.

Breviloba LLC

In July 2019, Altus Midstream Processing LP acquired a noncontrolling 33% equity interest in our consolidated subsidiary, Breviloba LLC, that owns the Shin Oak NGL Pipeline for $440.7 million in cash.

Pascagoula Gas Processing LLC

In June 2019, an affiliate of Third Coast Midstream, LLC acquired a noncontrolling 25% equity interest in our consolidated subsidiary, Pascagoula Gas Processing LLC, that owns the Pascagoula natural gas processing plant for $36.0 million in cash.

Baymark Pipeline LLC

In May 2019, we formed a new business venture with Lavaca Pipe Line Company (“Lavaca”) to construct and own an ethylene pipeline in South Texas. Lavaca holds a noncontrolling 30% equity interest in Baymark Pipeline LLC, which owns the pipeline.

Whitethorn Pipeline Company LLC

In June 2018, an affiliate of Western Gas Partners, LP acquired a noncontrolling 20% equity interest in our subsidiary, Whitethorn Pipeline Company LLC (“Whitethorn”), for $189.6 million in cash. Whitethorn owns the majority of our Midland-to-ECHO 1 pipeline.

Enterprise Navigator Ethylene Terminal LLC

In January 2018, we formed a new business venture with Navigator Ethylene Terminals LLC (“Navigator”) to construct and own an ethylene export terminal, which is located at Morgan’s Point on the Houston Ship Channel. Navigator holds a noncontrolling 50% equity interest in Enterprise Navigator Ethylene Terminal LLC, which owns the export facility.

Cash Distributions

The following table presents Enterprise’s declared quarterly cash distribution rates per common unit with respect to the quarter indicated. Actual cash distributions are paid by Enterprise within 45 days after the end of each fiscal quarter.

	Distribution Per Common Unit		Record Date	Payment Date
2017:
1st Quarter	$	0.4150	4/28/2017	5/8/2017
2nd Quarter	$	0.4200	7/31/2017	8/7/2017
3rd Quarter	$	0.4225	10/31/2017	11/7/2017
4th Quarter	$	0.4250	1/31/2018	2/7/2018
2018:
1st Quarter	$	0.4275	4/30/2018	5/8/2018
2nd Quarter	$	0.4300	7/31/2018	8/8/2018
3rd Quarter	$	0.4325	10/31/2018	11/8/2018
4th Quarter	$	0.4350	1/31/2019	2/8/2019
2019:
1st Quarter	$	0.4375	4/30/2019	5/13/2019
2nd Quarter	$	0.4400	7/31/2019	8/13/2019
3rd Quarter	$	0.4425	10/31/2019	11/12/2019
4th Quarter	$	0.4450	1/31/2020	2/12/2020

In January 2020, based on current expectations, management announced its plans to continue to recommend to the Board an increase of $0.0025 per unit per quarter to our cash distribution rate with respect to 2020. The anticipated rate of increase would result in distributions for 2020 (of $1.8050 per unit) being 2.3% higher than those paid for 2019 (of $1.7650 per unit). The payment of any quarterly cash distribution is subject to Board approval and management’s evaluation of our financial condition, results of operations and cash flows in connection with such payment.