Capital Accounts

12 Months Ended

Dec. 31, 2022

Capital Accounts [Abstract]

Capital Accounts

Note 8.  Capital Accounts

Common Limited Partner Interests

The following table summarizes changes in the number of our common units outstanding since December 31, 2019:

Common units outstanding at December 31, 2019	2,189,226,130
Common units issued to Skyline North Americas, Inc. in connection with    settlement of Liquidity Option in March 2020	54,807,352
Treasury units acquired in connection with settlement of the Liquidity Option in March 2020	(54,807,352	)
Common unit repurchases under 2019 Buyback Program	(8,978,317	)
Common units issued in connection with the vesting of phantom unit awards, net	3,162,095
Common units exchanged for preferred units in September 2020,    with the common units received being immediately cancelled	(1,120,588	)
Other	19,638
Common units outstanding at December 31, 2020	2,182,308,958
Common unit repurchases under 2019 Buyback Program	(9,891,956	)
Common units issued in connection with the vesting of phantom unit awards, net	3,936,437
Other	26,148
Common units outstanding at December 31, 2021	2,176,379,587
Common unit repurchases under 2019 Buyback Program	(10,166,923	)
Common units issued in connection with the vesting of phantom unit awards, net	4,571,333
Other	22,350
Common units outstanding at December 31, 2022	2,170,806,347

The Partnership’s common units represent limited partner interests that give the holders thereof the right to participate in distributions and to exercise the other rights or privileges available to them under our Seventh Amended and Restated Agreement of Limited Partnership (as amended from time to time, the “Partnership Agreement”).  In accordance with the 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 balances presented in our consolidated financial statements prepared in accordance with GAAP.  Partnership earnings and cash distributions are allocated to holders of our common units in accordance with their respective percentage interests.

Registration Statements

We have a universal shelf registration statement (the “2021 Shelf”) on file with the SEC which allows the Partnership and EPO (each on a standalone basis) to issue an unlimited amount of equity and debt securities, respectively.  The 2021 Shelf replaced our prior universal shelf registration statement, which was set to expire in March 2022.

In addition, the Partnership has a registration statement on file with the SEC covering the issuance of up to $2.5 billion of its common units in amounts, at prices and on terms based on market conditions and other factors at the time of such offerings (referred to as the Partnership’s at-the-market (“ATM”) program).  The Partnership did not issue any common units under its ATM program during the three years ended December 31, 2022.  The Partnership’s capacity to issue additional common units under the ATM program remains at $2.5 billion as of December 31, 2022.

We may issue additional equity and debt securities to assist us in meeting our future liquidity requirements, including those related to capital investments.

Issuance of Common Units due to Settlement of Liquidity Option in March 2020

In October 2014, we acquired approximately 65.9% of the limited partner interests of Oiltanking Partners, L.P. (“Oiltanking”), all of the member interests of OTLP GP, LLC, the general partner of Oiltanking (“Oiltanking GP”), and the incentive distribution rights held by Oiltanking GP from Oiltanking Holding Americas, Inc. (currently known as OTA Holdings, Inc., “OTA”), a U.S. corporation, as the first step (“Step 1”) of a two-step acquisition of Oiltanking.  In February 2015, we completed the second step of this transaction consisting of the acquisition of the noncontrolling interests in Oiltanking.  In order to fund the equity consideration paid in Step 1 of the Oiltanking acquisition, we issued 54,807,352 common units to OTA on October 1, 2014 in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof.  We also entered into a put option agreement (the “Liquidity Option Agreement” or “Liquidity Option”) with OTA and Marquard & Bahls AG (“M&B”), a German corporation and the ultimate parent company of OTA, in connection with Step 1.  Under the Liquidity Option Agreement, we granted M&B the option to sell to the Partnership 100% of the issued and outstanding capital stock of OTA at any time within a 90-day period commencing on February 1, 2020.

On February 25, 2020, the Partnership received notice of M&B’s election to exercise its rights under the Liquidity Option Agreement.  On March 5, 2020, the Partnership settled its obligations under the Liquidity Option Agreement by issuing 54,807,352 new common units to Skyline North Americas, Inc. (“Skyline,” an affiliate of M&B) in exchange for the capital stock of OTA. As a result of the settlement, OTA became a consolidated subsidiary of ours and we indirectly acquired the 54,807,352 Partnership common units owned by OTA and assumed all future income tax obligations of OTA, including its deferred tax liability.

As a result of the Liquidity Option settlement, the partners’ equity balance for common units (as presented on our Consolidated Balance Sheet) increased by $1.3 billion, representing the market value of the 54,807,352 Partnership common units issued to Skyline on March 5, 2020 at a closing price of $23.67 per unit.  Since OTA did not meet the definition of a business as described in ASC 805, Business Combinations, the OTA transaction was accounted for by the Partnership as the reacquisition of common units and the assumption of OTA’s related deferred tax liability.  In consolidation, we present the common units owned by OTA as treasury units, with their historical cost equal to the $1.3 billion market value of the Partnership common units issued to Skyline.  On September 30, 2020, OTA exchanged the common units it holds for preferred units issued by the Partnership.  For information regarding the preferred units and exchange transaction, see “Redeemable Preferred Limited Partner Interests” within this Note 8.

The common units issued to Skyline upon settlement of the Liquidity Option constitute “restricted securities” in the meaning of Rule 144 under the Securities Act and may not be resold except pursuant to an effective registration statement or an available exemption under the Securities Act.  In connection with the settlement of the Liquidity Option, the Partnership entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with Skyline. Pursuant to the Registration Rights Agreement, Skyline has the right to request that the Partnership prepare and file a registration statement to permit and otherwise facilitate the public resale of all or a portion of the Partnership’s common units owned by Skyline and its affiliates.  The Partnership’s obligation to Skyline to effect such transactions is limited to five registration statements and underwritten offerings.  In May 2020, the Partnership filed a registration statement on behalf of Skyline for the resale of up to 54,807,352 common units. This registration statement is effective and, in June 2020, the Partnership filed a prospectus supplement to this registration statement that allows Skyline to sell up to $500 million of the Partnership’s common units it owns in connection with an “at-the-market” program that it administers.  We do not receive any proceeds from such offerings.

Upon settlement of the Liquidity Option on March 5, 2020, the Liquidity Option liability was effectively replaced by the deferred tax liability of OTA as calculated in accordance with ASC 740, Income Taxes.  See Note 16 for additional information regarding OTA’s deferred tax liability.

Common Unit Repurchases Under 2019 Buyback Program

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 the Partnership with an additional method to return capital to investors.  The 2019 Buyback Program authorizes the Partnership to repurchase its common units from time to time, including through open market purchases and negotiated transactions.  No time limit has been set for completion of the program, and it may be suspended or discontinued at any time.

The Partnership repurchased 10,166,923 and 9,891,956 common units under the 2019 Buyback Program through open market purchases during the years ended December 31, 2022 and 2021, respectively.  The total cost of these repurchases, including commissions and fees, was $250 million and $214 million, respectively.  During the year ended December 31, 2020, the Partnership repurchased 8,978,317 common units under the 2019 Buyback Program through open market and private purchases for a total cost, including commissions and fees, of $186 million.  Common units repurchased under the 2019 Buyback Program are immediately cancelled upon acquisition.  At December 31, 2022, the remaining available capacity under the 2019 Buyback Program was $1.3 billion.

Common Units Delivered Under DRIP and EUPP

The Partnership has a registration statement on file with the SEC authorizing the issuance or other delivery of our common units in connection with a 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.  

In addition to the DRIP, we have registration statements on file with the SEC authorizing the issuance or other delivery of our common units in connection with an employee unit purchase plan (“EUPP”).  In November 2022, our unitholders approved the amendment and restatement of the EUPP.  As a result, the maximum aggregate number of common units that have been, or in the future may be, delivered under the EUPP was increased from 8,000,000 common units to 23,000,000 common units, and the term of the plan was extended to November 2032.

We have the sole discretion to determine whether common units purchased under the DRIP and EUPP will come from our authorized but unissued common units or from common units purchased on the open market by each plan’s administrator.  During each of the years ended December 31, 2022, 2021 and 2020, the Partnership used 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.  Agents of the Partnership purchased 6,392,846, 6,363,197 and 6,982,963 common units on the open market and delivered them to participants in the DRIP and EUPP during the years ended December 31, 2022, 2021 and 2020, respectively.  Apart from $3 million, $3 million and $2 million attributable to the plan discount available to all participants in the EUPP during 2022, 2021 and 2020, respectively, 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 used open market purchases to satisfy DRIP and EUPP reinvestments in connection with the distribution paid on February 14, 2023.

After taking into account the number of common units delivered under the DRIP through December 31, 2022, we have the capacity to deliver an additional 39,951,651 common units under this plan.  Likewise, we have the capacity to deliver an additional 16,226,159 common units under the EUPP. 

Common Units Issued in Connection With the Vesting of Phantom Unit Awards

After taking into account tax withholding requirements, the Partnership issued 4,571,333, 3,936,437 and 3,162,095 new common units to employees in connection with the vesting of phantom unit awards during the years ended December 31, 2022, 2021 and 2020, respectively.  See Note 13 for information regarding our phantom unit awards.

Redeemable Preferred Limited Partner Interests

The following table summarizes changes in the number of our preferred units outstanding since September 30, 2020:

Original issuance of preferred units outstanding on September 30, 2020	50,000
Paid-in kind distribution to related party	138
Preferred units outstanding at December 31, 2020	50,138
Paid-in kind distribution to related party	274
Preferred units outstanding at December 31, 2021	50,412
Preferred units outstanding at December 31, 2022	50,412

On September 30, 2020, the Partnership issued and sold an aggregate of 50,000 Series A Cumulative Convertible Preferred Units in a private placement transaction.  The preferred units represent a new class of limited partner interests authorized under the Partnership Agreement.  The stated value of each preferred unit is $1,000 per unit.  The total offering price for the preferred units was $50 million, of which $32 million was received in cash with the remaining $18 million funded through the exchange of 1,120,588 of the Partnership’s common units owned by the purchasers.  Cash proceeds from the preferred unit offering include $15 million received from a privately held affiliate of EPCO for the purchase of 15,000 preferred units.  Offering expenses were approximately $1 million.

Concurrently, the Partnership exchanged all of the 54,807,352 Partnership common units owned directly by OTA for 855,915 of the Partnership’s new preferred units having an equivalent value.  The preferred units held by OTA, like the common units OTA held prior to the exchange, are accounted for as treasury units by the Partnership in consolidation.  The historical cost of the treasury units did not change as a result of the exchange and remains at the $1.3 billion recognized on March 5, 2020 in connection with settlement of the Liquidity Option.

In March 2021, a privately held affiliate of EPCO sold its entire ownership interest in the Partnership’s preferred units to third parties.

As described in the Partnership Agreement, key terms of the preferred units include the following:

• With respect to distribution and liquidation rights, the preferred units rank senior to the Partnership’s common units. Preferred units held by persons other than the Partnership, its subsidiaries and its affiliates generally will vote on an as-converted basis with the Partnership’s common units and have certain class voting rights with respect to certain protective matters.

• Holders of the preferred units are entitled to receive cumulative quarterly distributions at a rate of 7.25% per annum. The Partnership is prohibited from paying distributions on its common units unless full cumulative distributions on the preferred units are paid or set aside for payment. The Partnership may satisfy its obligation to pay distributions to the preferred unitholders through the issuance, in whole or in part, of additional preferred units (referred to as paid-in kind or “PIK” distributions), with the remainder in cash, subject to certain rights of a holder to elect all cash and other conditions as described in the Partnership Agreement.  The exchange by OTA of its common units for PIK-eligible preferred units enables the Partnership to more effectively manage its consolidated cash balances.

In November 2020, the Partnership made its first quarterly distribution to third party and related party preferred unitholders.  The distribution was valued at $1 million, consisting of PIK distributions of 138 new preferred units and less than $1 million in cash.

During the year ended December 31, 2021, the Partnership made quarterly distributions to its third party and related party preferred unitholders valued at $3 million, consisting of PIK distributions of 274 new preferred units and $3 million in cash.

During the year ended December 31, 2022, the Partnership made quarterly cash distributions to its preferred unitholders for $3 million.

• Subject to certain limitations, each preferred unitholder may elect to convert its preferred units on or after September 30, 2025 into a number of the Partnership’s common units equal to (a) the number of preferred units to be converted multiplied by (b) the quotient of (i) $1,000 plus any accrued and unpaid distributions per preferred unit, divided by (ii) 92.5% of the volume-weighted average price of the Partnership’s common units at the time of conversion (as defined in the underlying agreements). In addition, each preferred unitholder may convert its preferred units into common units if EPO’s senior notes cease to have an investment grade rating or a Change of Control (as defined in the Partnership Agreement) occurs, in each case based on the conversion ratio specified in the Partnership Agreement.

• The Partnership may elect to redeem the preferred units for cash, in whole or in part, based on a redemption price outlined in the following schedule, plus any accrued and unpaid distributions at the redemption date:

• $1,100 per preferred unit from September 30, 2020 through September 29, 2022;

• $1,070 per preferred unit from September 30, 2022 through September 29, 2024;

• $1,030 per preferred unit from September 30, 2024 through September 29, 2025;

• $1,010 per preferred unit from September 30, 2025 through September 29, 2026; and

• $1,000 per preferred unit on or after September 30, 2026; however,

• if a Change of Control event occurs prior to September 30, 2026, the redemption price is $1,010 per preferred unit.

In connection with a redemption at the Partnership’s election, the Partnership may convert up to 50% of the preferred units being redeemed into common units (and to pay cash with respect to the remainder), with each such preferred unit being converted on the applicable redemption date into a number of common units equal to (i) the then-applicable preferred unit redemption price divided by (ii) 92.5% of the volume-weighted average price of the Partnership’s common units at the time of conversion (as defined in the underlying agreements).

The Partnership has agreed to prepare and file a registration statement that would permit or otherwise facilitate the public resale of any common units resulting from the conversion of the preferred units to common units.

Our Consolidated Balance Sheet at December 31, 2022 presents the capital accounts of the third-party purchasers of the preferred units as mezzanine equity since the terms of the preferred units allow for cash redemption by the holders in a Change of Control event, without regard to the likelihood of such an event.  The preferred units held by OTA are presented as treasury units in consolidation since their ultimate disposition remains under the control of the Partnership.

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, 2020	$	(93	)	$	(74	)	$	2	$	(165	)
Other comprehensive income (loss) for period, before reclassifications		(678	)		183			–		(495	)
Reclassification of losses (gains) to net income during period		908			38			–		946
Total other comprehensive income (loss) for period		230			221			–		451
Accumulated Other Comprehensive Income (Loss), December 31, 2021		137			147			2		286
Other comprehensive income (loss) for period, before reclassifications		254			26			–		280
Reclassification of losses (gains) to net income during period		(220	)		19			–		(201	)
Total other comprehensive income (loss) for period		34			45			–		79
Accumulated Other Comprehensive Income (Loss), December 31, 2022	$	171		$	192		$	2	$	365

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	2022			2021
Interest rate derivatives	Interest expense	$	19		$	38
Commodity derivatives	Revenue		(181	)		893
Commodity derivatives	Operating costs and expenses		(39	)		15
Total		$	(201	)	$	946

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.  The following table presents the components of noncontrolling interests as reported on our Consolidated Balance Sheets at the dates indicated:

	At December 31,
Consolidated Subsidiary	2022		2021
Breviloba LLC (“Breviloba”)(1)	$	448	$	462
Whitethorn Pipeline Company LLC (“Whitethorn”)(2)		183		188
Enterprise Navigator Ethylene Terminal LLC (“ENET”)(3)		141		142
Other (4)		307		318
Total noncontrolling interests in consolidated subsidiaries	$	1,079	$	1,110

(1)	Altus Midstream Processing LP acquired a noncontrolling 33% equity interest in Breviloba, which owns the Shin Oak NGL Pipeline.
(2)	An affiliate of Western Gas Partners, LP owns a noncontrolling 20% equity interest in Whitethorn, which owns the majority of our Midland-to-ECHO 1 Pipeline.
(3)	Navigator Ethylene Terminals LLC owns a noncontrolling 50% equity interest in ENET, which owns our ethylene export terminal located at Morgan’s Point on the Houston Ship Channel.
(4)	Primarily represents noncontrolling equity interests in NGL fractionation and pipeline businesses.

Net income attributable to noncontrolling interests was $125 million, $117 million and $110 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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.

	Quarterly Distribution Per Common Unit		Record Date	Payment Date
2020:
1st Quarter	$	0.4450	4/30/2020	5/12/2020
2nd Quarter	$	0.4450	7/31/2020	8/12/2020
3rd Quarter	$	0.4450	10/30/2020	11/12/2020
4th Quarter	$	0.4500	1/29/2021	2/11/2021
2021:
1st Quarter	$	0.4500	4/30/2021	5/12/2021
2nd Quarter	$	0.4500	7/30/2021	8/12/2021
3rd Quarter	$	0.4500	10/29/2021	11/12/2021
4th Quarter	$	0.4650	1/31/2022	2/11/2022
2022:
1st Quarter	$	0.4650	4/29/2022	5/12/2022
2nd Quarter	$	0.4750	7/29/2022	8/12/2022
3rd Quarter	$	0.4750	10/31/2022	11/14/2022
4th Quarter	$	0.4900	1/31/2023	2/14/2023

On January 5, 2023, we announced that the Board of Enterprise GP declared a quarterly cash distribution of $0.490 per common unit, or $1.96 per common unit on an annualized basis, to be paid to the Partnership’s common unitholders with respect to the fourth quarter of 2022.  The quarterly distribution was paid on February 14, 2023 to unitholders of record as of the close of business on January 31, 2023.  The total amount paid was $1.07 billion, which includes $9 million for distribution equivalent rights (“DERs”) on phantom unit awards.

The payment of quarterly cash distributions is subject to management’s evaluation of our financial condition, results of operations and cash flows in connection with such payments and Board approval.  Management will evaluate any future increases in cash distributions on a quarterly basis.