UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 September 30, 2015

OR

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

For the transition period from ___  to  ___.

Commission file number:  1-14323

ENTERPRISE PRODUCTS PARTNERS L.P.
(Exact Name of Registrant as Specified in Its Charter)

Delaware
 
76-0568219
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
1100 Louisiana Street, 10th Floor
Houston, Texas 77002
    (Address of Principal Executive Offices, including Zip Code)
 
(713) 381-6500
(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    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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes    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.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Accelerated filer
Non-accelerated filer    (Do not check if a smaller reporting company)
Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes    No

There were 2,005,753,801 common units of Enterprise Products Partners L.P. outstanding at the close of business on October 30, 2015.  Our common units trade on the New York Stock Exchange under the ticker symbol “EPD.”

ENTERPRISE PRODUCTS PARTNERS L.P.
TABLE OF CONTENTS

 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
10
 
13 
 
21 
 
22 
 
24 
  25 
 
28 
 
30 
 
32 
 
36 
 
39 
 
41 
 
41 
 
44 
 
46 
54 
81 
84 
 
 
 
84 
85 
85 
86 
86 
86 
86 
 
 
 
95 

1

PART I.  FINANCIAL INFORMATION.

Item 1. Financial Statements.

ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)

   
September 30,
2015
   
December 31,
2014
 
ASSETS
       
Current assets:
 
   
 
Cash and cash equivalents
 
$
80.5
   
$
74.4
 
Restricted cash
   
46.2
     
--
 
Accounts receivable – trade, net of allowance for doubtful accounts
of $12.9 at September 30, 2015 and $13.9 at December 31, 2014
   
2,802.0
     
3,823.0
 
Accounts receivable – related parties
   
1.7
     
2.8
 
Inventories
   
1,085.4
     
1,014.2
 
Derivative assets
   
241.8
     
226.0
 
Prepaid and other current assets
   
402.4
     
350.3
 
Total current assets
   
4,660.0
     
5,490.7
 
Property, plant and equipment, net
   
31,214.1
     
29,881.6
 
Investments in unconsolidated affiliates
   
2,625.3
     
3,042.0
 
Intangible assets, net of accumulated amortization of $1,192.2 at
September 30, 2015 and $1,246.3 at December 31, 2014 (see Note 9)
   
4,082.1
     
4,302.1
 
Goodwill (see Note 9)
   
5,749.2
     
4,300.2
 
Other assets
   
197.1
     
184.4
 
Total assets
 
$
48,527.8
   
$
47,201.0
 
 
               
LIABILITIES AND EQUITY
               
Current liabilities:
               
Current maturities of debt (see Note 10)
 
$
1,619.4
   
$
2,206.4
 
Accounts payable – trade
   
844.9
     
773.8
 
Accounts payable – related parties
   
80.3
     
118.9
 
Accrued product payables
   
2,547.9
     
3,853.3
 
Accrued liability related to EFS Midstream acquisition (see Note 8)
   
997.7
     
--
 
Accrued interest
   
198.9
     
335.5
 
Other current liabilities
   
589.8
     
585.8
 
Total current liabilities
   
6,878.9
     
7,873.7
 
Long-term debt (see Note 10)
   
20,840.7
     
19,157.4
 
Deferred tax liabilities
   
53.4
     
66.6
 
Other long-term liabilities
   
401.9
     
411.1
 
Commitments and contingencies (see Note 15)
               
Equity:
               
Partners’ equity:
               
Limited partners:
               
Common units (2,005,785,601 units outstanding at September 30, 2015
and 1,937,324,817 units outstanding at December 31, 2014)
   
20,392.8
     
18,304.8
 
Accumulated other comprehensive loss
   
(230.7
)
   
(241.6
)
Total  partners’ equity
   
20,162.1
     
18,063.2
 
Noncontrolling interests
   
190.8
     
1,629.0
 
Total equity
   
20,352.9
     
19,692.2
 
Total liabilities and equity
 
$
48,527.8
   
$
47,201.0
 




See Notes to Unaudited Condensed Consolidated Financial Statements.
2


ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
 (Dollars in millions, except per unit amounts)

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2015
   
2014
   
2015
   
2014
 
Revenues:
 
   
   
   
 
Third parties
 
$
6,294.0
   
$
12,319.2
   
$
20,845.6
   
$
37,697.1
 
Related parties
   
13.9
     
11.0
     
27.3
     
63.8
 
Total revenues (see Note 12)
   
6,307.9
     
12,330.2
     
20,872.9
     
37,760.9
 
Costs and expenses:
                               
Operating costs and expenses:
                               
Third parties
   
5,167.9
     
11,198.1
     
17,642.6
     
34,198.9
 
Related parties
   
284.7
     
216.7
     
783.9
     
735.5
 
Total operating costs and expenses
   
5,452.6
     
11,414.8
     
18,426.5
     
34,934.4
 
General and administrative costs:
                               
Third parties
   
20.8
     
18.1
     
57.9
     
60.0
 
Related parties
   
28.2
     
31.9
     
85.3
     
90.9
 
Total general and administrative costs
   
49.0
     
50.0
     
143.2
     
150.9
 
Total costs and expenses (see Note 12)
   
5,501.6
     
11,464.8
     
18,569.7
     
35,085.3
 
Equity in income of unconsolidated affiliates
   
103.1
     
72.3
     
302.5
     
179.1
 
Operating income
   
909.4
     
937.7
     
2,605.7
     
2,854.7
 
Other income (expense):
                               
Interest expense
   
(243.7
)
   
(229.8
)
   
(723.2
)
   
(679.6
)
Change in fair value of Liquidity Option Agreement (see Note 15)
   
(4.3
)
   
--
     
(15.8
)
   
--
 
Other, net
   
1.8
     
(1.0
)
   
2.6
     
(0.2
)
Total other expense, net
   
(246.2
)
   
(230.8
)
   
(736.4
)
   
(679.8
)
Income before income taxes
   
663.2
     
706.9
     
1,869.3
     
2,174.9
 
Provision for income taxes
   
(5.5
)
   
(7.7
)
   
(4.4
)
   
(22.5
)
Net income
   
657.7
     
699.2
     
1,864.9
     
2,152.4
 
Net income attributable to noncontrolling interests (see Note 11)
   
(8.4
)
   
(8.1
)
   
(28.5
)
   
(24.8
)
Net income attributable to limited partners
 
$
649.3
   
$
691.1
   
$
1,836.4
   
$
2,127.6
 
 
                               
Earnings per unit: (see Note 14)
                               
Basic earnings per unit
 
$
0.33
   
$
0.38
   
$
0.94
   
$
1.16
 
Diluted earnings per unit
 
$
0.32
   
$
0.37
   
$
0.92
   
$
1.13
 
















See Notes to Unaudited Condensed Consolidated Financial Statements.
3


ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED
COMPREHENSIVE INCOME
(Dollars in millions)

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2015
   
2014
   
2015
   
2014
 
 
 
   
   
   
 
Net income
 
$
657.7
   
$
699.2
   
$
1,864.9
   
$
2,152.4
 
Other comprehensive income (loss):
                               
Cash flow hedges:
                               
Commodity derivative instruments:
                               
Changes in fair value of cash flow hedges
   
85.8
     
58.1
     
112.3
     
16.1
 
Reclassification of losses (gains) to net income
   
(46.8
)
   
(18.0
)
   
(128.1
)
   
12.9
 
Interest rate derivative instruments:
                               
Reclassification of losses to net income
   
8.9
     
8.0
     
26.3
     
23.9
 
Total cash flow hedges
   
47.9
     
48.1
     
10.5
     
52.9
 
Other
   
--
     
--
     
0.4
     
--
 
Total other comprehensive income
   
47.9
     
48.1
     
10.9
     
52.9
 
Comprehensive income
   
705.6
     
747.3
     
1,875.8
     
2,205.3
 
Comprehensive income attributable to noncontrolling interests
   
(8.4
)
   
(8.1
)
   
(28.5
)
   
(24.8
)
Comprehensive income attributable to limited partners
 
$
697.2
   
$
739.2
   
$
1,847.3
   
$
2,180.5
 
 






























See Notes to Unaudited Condensed Consolidated Financial Statements.
4


ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)

 
 
For the Nine Months
Ended September 30,
 
 
 
2015
   
2014
 
Operating activities:
 
   
 
Net income
 
$
1,864.9
   
$
2,152.4
 
Reconciliation of net income to net cash flows provided by operating activities:
               
Depreciation, amortization and accretion
   
1,147.7
     
992.4
 
Non-cash asset impairment charges (see Note 4)
   
139.1
     
18.2
 
Equity in income of unconsolidated affiliates
   
(302.5
)
   
(179.1
)
Distributions received from unconsolidated affiliates
   
362.4
     
260.7
 
Net losses (gains) attributable to asset sales and insurance recoveries (see Note 16)
   
14.7
     
(99.0
)
Gains on early extinguishment of debt
   
(1.4
)
   
--
 
Deferred income tax expense (benefit)
   
(13.3
)
   
2.6
 
Changes in fair value of Liquidity Option Agreement
   
15.8
     
--
 
Changes in fair market value of derivative instruments
   
(7.7
)
   
(3.8
)
Net effect of changes in operating accounts (see Note 16)
   
(627.9
)
   
(435.8
)
Other operating activities
   
(0.6
)
   
(4.2
)
Net cash flows provided by operating activities
   
2,591.2
     
2,704.4
 
Investing activities:
               
Capital expenditures
   
(2,630.5
)
   
(1,879.5
)
Contributions in aid of construction costs
   
11.4
     
20.0
 
Decrease (increase) in restricted cash
   
(46.2
)
   
59.0
 
Cash used for business combinations, net of cash received (see Note 8)
   
(1,045.1
)
   
--
 
Investments in unconsolidated affiliates
   
(130.7
)
   
(583.3
)
Proceeds from asset sales and insurance recoveries (see Note 16)
   
1,537.3
     
121.5
 
Other investing activities
   
(4.4
)
   
(5.8
)
Cash used in investing activities
   
(2,308.2
)
   
(2,268.1
)
Financing activities:
               
Borrowings under debt agreements
   
17,113.7
     
7,167.5
 
Repayments of debt
   
(16,139.2
)
   
(4,856.3
)
Debt issuance costs
   
(23.9
)
   
(18.1
)
Cash distributions paid to limited partners (see Note 11)
   
(2,185.1
)
   
(1,948.2
)
Cash payments made in connection with distribution equivalent rights
   
(5.6
)
   
(2.4
)
Cash distributions paid to noncontrolling interests
   
(33.2
)
   
(29.4
)
Cash contributions from noncontrolling interests
   
37.4
     
4.0
 
Net cash proceeds from the issuance of common units
   
1,011.4
     
304.9
 
Other financing activities
   
(52.4
)
   
(53.6
)
Cash provided by (used in) financing activities
   
(276.9
)
   
568.4
 
Net change in cash and cash equivalents
   
6.1
     
1,004.7
 
Cash and cash equivalents, January 1
   
74.4
     
56.9
 
Cash and cash equivalents, September 30
 
$
80.5
   
$
1,061.6
 












See Notes to Unaudited Condensed Consolidated Financial Statements.
5


ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EQUITY
(See Note 11 for Unit History, Accumulated Other Comprehensive
Income (Loss) and Noncontrolling Interests)
(Dollars in millions)

 
 
Partners’ Equity
   
   
 
 
 
Limited
Partners
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Noncontrolling
Interests
   
Total
 
Balance, December 31, 2014
 
$
18,304.8
   
$
(241.6
)
 
$
1,629.0
   
$
19,692.2
 
Net income
   
1,836.4
     
--
     
28.5
     
1,864.9
 
Cash distributions paid to limited partners
   
(2,185.1
)
   
--
     
--
     
(2,185.1
)
Cash payments made in connection with distribution equivalent rights
   
(5.6
)
   
--
     
--
     
(5.6
)
Cash distributions paid to noncontrolling interests
   
--
     
--
     
(33.2
)
   
(33.2
)
Cash contributions from noncontrolling interests
   
--
     
--
     
37.4
     
37.4
 
Common units issued in connection with Step 2 of Oiltanking acquisition
   
1,408.7
     
--
     
(1,408.7
)
   
--
 
Transfer of noncontrolling interests in connection with sale of Offshore Business
   
--
     
--
     
(62.1
)
   
(62.1
)
Net cash proceeds from the issuance of common units
   
1,011.4
     
--
     
--
     
1,011.4
 
Amortization of fair value of equity-based awards
   
72.9
     
--
     
--
     
72.9
 
Cash flow hedges
   
--
     
10.5
     
--
     
10.5
 
Other
   
(50.7
)
   
0.4
     
(0.1
)
   
(50.4
)
Balance, September 30, 2015
 
$
20,392.8
   
$
(230.7
)
 
$
190.8
   
$
20,352.9
 

 
 
Partners’ Equity
   
   
 
 
 
Limited
Partners
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Noncontrolling
Interests
   
Total
 
Balance, December 31, 2013
 
$
15,573.8
   
$
(359.0
)
 
$
225.6
   
$
15,440.4
 
Net income
   
2,127.6
     
--
     
24.8
     
2,152.4
 
Cash distributions paid to limited partners
   
(1,948.2
)
   
--
     
--
     
(1,948.2
)
Cash payments made in connection with distribution equivalent rights
   
(2.4
)
   
--
     
--
     
(2.4
)
Cash distributions paid to noncontrolling interests
   
--
     
--
     
(29.4
)
   
(29.4
)
Cash contributions from noncontrolling interests
   
--
     
--
     
4.0
     
4.0
 
Net cash proceeds from the issuance of common units
   
304.9
     
--
     
--
     
304.9
 
Amortization of fair value of equity-based awards
   
61.6
     
--
     
--
     
61.6
 
Cash flow hedges
   
--
     
52.9
     
--
     
52.9
 
Other
   
(53.7
)
   
--
     
(0.6
)
   
(54.3
)
Balance, September 30, 2014
 
$
16,063.6
   
$
(306.1
)
 
$
224.4
   
$
15,981.9
 



















See Notes to Unaudited Condensed Consolidated Financial Statements.
6

Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
With the exception of per unit amounts, or as noted within the context of each disclosure,
the dollar amounts presented in the tabular data within these disclosures are
stated in millions of dollars.

KEY REFERENCES USED IN THESE
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unless the context requires otherwise, references to “we,” “us,” “our,” “Enterprise” or “Enterprise Products Partners” are intended to mean the business and operations of Enterprise Products Partners L.P. and its consolidated subsidiaries.  References to “EPO” mean Enterprise Products Operating LLC, which is a wholly owned subsidiary of Enterprise, and its consolidated subsidiaries, through which Enterprise Products Partners L.P. conducts its business.  Enterprise is managed by its general partner, Enterprise Products Holdings LLC (“Enterprise GP”), which is a wholly owned subsidiary of Dan Duncan LLC, a privately held Texas limited liability company.

The membership interests of Dan Duncan LLC are owned by a voting trust, the current trustees (“DD LLC Trustees”) of which are: (i) Randa Duncan Williams, who is also a director and Chairman of the Board of Enterprise GP; (ii) Dr. Ralph S. Cunningham; and (iii) Richard H. Bachmann.  Each of the DD LLC Trustees also currently serves as one of the three managers of Dan Duncan LLC.

References to “EPCO” mean Enterprise Products Company, a privately held Texas corporation, and its privately held affiliates.  A majority of the outstanding voting capital stock of EPCO is owned by a voting trust, the current trustees (“EPCO Trustees”) of which are:  (i) Ms. Williams, who serves as Chairman of EPCO; (ii) Dr. Cunningham, who serves as a Vice Chairman of EPCO; and (iii) Mr. Bachmann, who serves as the President and Chief Executive Officer (“CEO”) of EPCO.  Each of the EPCO Trustees is also a director of EPCO.
  
In addition to owning our general partner, EPCO and its privately held affiliates owned approximately 33.7% of our limited partner interests at September 30, 2015.

References to “Oiltanking” and “Oiltanking GP” mean Oiltanking Partners, L.P. and OTLP GP, LLC, the general partner of Oiltanking, respectively.  In October 2014, we acquired approximately 65.9% of the limited partner interests of Oiltanking, all of the member interests of Oiltanking GP and the incentive distribution rights (“IDRs”) held by Oiltanking GP from Oiltanking Holding Americas, Inc. (“OTA”) as the first step of a two-step acquisition of Oiltanking.  In February 2015, we completed the second step of this acquisition.  See Note 11 for additional information regarding this acquisition.

References to “TEPPCO” mean TEPPCO Partners, L.P. prior to its merger with one of our wholly owned subsidiaries in October 2009.

References to “Offshore Business” refer to the Gulf of Mexico operations we sold to Genesis Energy, L.P. (“Genesis”) in July 2015.  See Note 6 for information regarding this sale.

References to “EFS Midstream” mean EFS Midstream LLC, which we acquired in July 2015 from affiliates of Pioneer Natural Resources Company (“Pioneer”) and Reliance Industries Limited (“Reliance”).  See Note 8 for additional information regarding this acquisition.


Note 1.  Partnership Operations, Organization and Basis of Presentation

General
We are a publicly traded Delaware limited partnership, the common units of which are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “EPD.”  We were formed in April 1998 to own and operate certain natural gas liquids (“NGLs”) related businesses of EPCO and are now a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, petrochemicals and refined products. 
7

Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our integrated midstream energy asset network links producers of natural gas, NGLs and crude oil from some of the largest supply basins in the United States (“U.S.”), Canada and the Gulf of Mexico with domestic consumers and international markets.  Our midstream energy operations currently include: natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage, and import and export terminals (including liquefied petroleum gas or “LPG”); crude oil gathering, transportation, storage and terminals;  petrochemical and refined products transportation, storage and terminals, and related services; and a marine transportation business that operates primarily on the U.S. inland and Intracoastal Waterway systems and in the Gulf of Mexico.  Our assets currently include approximately 49,000 miles of pipelines; 225 million barrels (“MMBbls”) of storage capacity for NGLs, crude oil, petrochemicals and refined products; and 14 billion cubic feet (“Bcf”) of natural gas storage capacity.  

Our historical operations are reported under five business segments: (i) NGL Pipelines & Services, (ii) Crude Oil Pipelines & Services, (iii) Natural Gas Pipelines & Services, (iv) Petrochemical & Refined Products Services and (v) Offshore Pipelines & Services.

On July 24, 2015, we completed the sale of our Offshore Business to Genesis.  As a result of this sale, we renamed our Onshore Crude Oil Pipelines & Services business segment “Crude Oil Pipelines & Services.”  In addition, we renamed our Onshore Natural Gas Pipelines & Services business segment “Natural Gas Pipelines & Services.”  The operations reported within these two onshore segments did not change due to these name changes.  Our consolidated financial statements reflect ownership of the Offshore Business through July 24, 2015. See Note 12 for additional information regarding our business segments.

As a result of our acquisition of the member interests of EFS Midstream effective July 1, 2015, we began consolidating the financial statements of EFS Midstream as of that date.  See Note 8 for information regarding this acquisition.

We conduct substantially all of our business through EPO and are owned 100% by our limited partners from an economic perspective.  Enterprise GP manages our partnership and owns a non-economic general partner interest in us.  We, Enterprise GP, EPCO and Dan Duncan LLC are affiliates under the collective common control of the DD LLC Trustees and the EPCO Trustees.  Like many publicly traded partnerships, we have no employees.  All of our management, administrative and operating functions are performed by employees of EPCO pursuant to an administrative services agreement (the “ASA”) or by other service providers. See Note 13 for information regarding the ASA and other related party matters.


Note 2.  General Accounting and Disclosure Matters

Our results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of results expected for the full year of 2015.  In our opinion, the accompanying Unaudited Condensed Consolidated Financial Statements include all adjustments consisting of normal recurring accruals necessary for fair presentation.  Although we believe the disclosures in these financial statements are adequate and make the information presented not misleading, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

These Unaudited Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto included in our annual report on Form 10-K for the year ended December 31, 2014 (the “2014 Form 10-K”) filed with the SEC on March 2, 2015.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Contingencies
Certain conditions may exist as of the date our consolidated financial statements are issued, which may result in a loss to us but which will only be resolved when one or more future events occur or fail to occur.  Management has regular quarterly litigation reviews, including updates from legal counsel, to assess the need for accounting recognition or disclosure of these contingencies, and such assessment inherently involves an exercise in judgment.  In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, our management and legal counsel evaluate the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

We accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated.  If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued.  We do not record a contingent liability when the likelihood of loss is probable but the amount cannot be reasonably estimated or when the likelihood of loss is believed to be only reasonably possible or remote.  For contingencies where an unfavorable outcome is reasonably possible and the impact would be material to our consolidated financial statements, we disclose the nature of the contingency and, where feasible, an estimate of the possible loss or range of loss.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  See Note 15 for additional information regarding our contingencies.

Derivative Instruments
We use derivative instruments such as futures, swaps, options, forward contracts and other arrangements to manage price risks associated with inventories, firm commitments, interest rates and certain anticipated future commodity transactions.  To qualify for hedge accounting, the hedged item must expose us to risk and the related derivative instrument must reduce the exposure to that risk and meet specific hedge documentation requirements related to designation dates, expectations for hedge effectiveness and the probability that hedged future transactions will occur as forecasted.  We formally designate derivative instruments as hedges and document and assess their effectiveness at inception of the hedge and on a monthly basis thereafter.  Forecasted transactions are evaluated for the probability of occurrence and are periodically back-tested once the forecasted period has passed to determine whether similarly forecasted transactions are probable of occurring in the future.

For certain physical forward commodity derivative contracts, we apply the normal purchase/normal sale exception, whereby changes in the mark-to-market values of such contracts are not recognized in income.  As a result, the revenues and expenses associated with such physical transactions are recognized during the period when volumes are physically delivered or received.  Physical forward commodity contracts subject to this exception are evaluated for the probability of future delivery and are periodically back-tested once the forecasted period has passed to determine whether similar forward contracts are probable of physical delivery in the future.  See Note 4 for additional information regarding our derivative instruments.

Estimates
Preparing our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates that affect amounts presented in the financial statements.  Our most significant estimates relate to (i) the useful lives and depreciation/amortization methods used for fixed and identifiable intangible assets; (ii) measurement of fair value and projections used in impairment testing of fixed and intangible assets (including goodwill); (iii) contingencies; and (iv) revenue and expense accruals.

Actual results could differ materially from our estimates.  On an ongoing basis, we review our estimates based on currently available information.  Any changes in the facts and circumstances underlying our estimates may require us to update such estimates, which could have a material impact on our consolidated financial statements.

Income Taxes
Provision for income taxes primarily reflects our state tax obligations under the Revised Texas Franchise Tax (the “Texas Margin Tax”).
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Cash
Restricted cash represents amounts held in segregated bank accounts by our clearing brokers as margin in support of our commodity derivative instruments portfolio and related physical purchases and sales of natural gas, NGLs, crude oil and refined products.  Additional cash may be restricted to maintain our commodity derivative instruments portfolio as prices fluctuate or deposit requirements change.  At September 30, 2015, our restricted cash amounts were $46.2 million.  We did not have any restricted cash as of December 31, 2014.  See Note 4 for information regarding our derivative instruments and hedging activities.


Note 3.  Equity-based Awards

An allocated portion of the fair value of EPCO’s equity-based awards is charged to us under the ASA.  The following table summarizes compensation expense we recognized in connection with equity-based awards for the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2015
   
2014
   
2015
   
2014
 
Equity-classified awards:
               
Restricted common unit awards
 
$
3.1
   
$
8.7
   
$
13.1
   
$
29.3
 
Phantom unit awards
   
20.3
     
12.9
     
60.2
     
32.3
 
Liability-classified awards
   
--
     
0.1
     
0.2
     
0.4
 
Total
 
$
23.4
   
$
21.7
   
$
73.5
   
$
62.0
 

The fair value of equity-classified awards is amortized into earnings over the requisite service or vesting period.  Equity-classified awards are expected to result in the issuance of common units upon vesting.  Compensation expense for liability-classified awards is recognized over the requisite service or vesting period based on the fair value of the award remeasured at each reporting date.  Liability-classified awards are settled in cash upon vesting.

At September 30, 2015, EPCO’s significant long-term incentive plans applicable to us were the Enterprise Products 1998 Long-Term Incentive Plan (“1998 Plan”) and the 2008 Enterprise Products Long-Term Incentive Plan (Third Amendment and Restatement) (“2008 Plan”).  Up to 14,000,000 of our common units may be issued as awards under the 1998 Plan.  The maximum number of common units available for issuance under the 2008 Plan was 30,000,000 at September 30, 2015.  This amount will automatically increase under the terms of the 2008 Plan by 5,000,000 common units on January 1, 2016 and will continue to automatically increase annually on January 1 thereafter during the term of the 2008 Plan; provided, however, that in no event shall the maximum aggregate number exceed 70,000,000 common units.  After giving effect to awards granted under the 1998 Plan and 2008 Plan through September 30, 2015, a total of 3,040,506 and 16,277,823 additional common units were available for issuance under these plans, respectively.

Restricted Common Unit Awards
Restricted common unit awards allow recipients to acquire our common units (at no cost to the recipient apart from fulfilling service and other conditions) once a defined vesting period expires, subject to customary forfeiture provisions.  Restricted common unit awards generally vest at a rate of 25% per year beginning one year after the grant date and are non-vested until the required service periods expire.  Restricted common units are included in the number of common units outstanding as presented on our Unaudited Condensed Consolidated Balance Sheets.

The fair value of a restricted common unit award is based on the market price per unit of our common units on the date of grant.  Compensation expense is recognized based on the grant date fair value, net of an allowance for estimated forfeitures, over the requisite service or vesting period.

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents information regarding restricted common unit awards for the period indicated:

 
 
Number of
Units
   
Weighted-
Average Grant
Date Fair Value
per Unit (1)
 
Restricted common units at December 31, 2014
   
4,229,790
   
$
26.96
 
Vested
   
(1,997,194
)
 
$
25.99
 
Forfeited
   
(157,750
)
 
$
27.64
 
Restricted common units at September 30, 2015
   
2,074,846
   
$
27.85
 
    
(1)    Determined by dividing the aggregate grant date fair value of awards (before an allowance for forfeitures) by the number of awards issued.
 

Each recipient of a restricted common unit award is entitled to nonforfeitable cash distributions equal to the product of the number of restricted common units outstanding for the participant and the cash distribution per unit paid to our common unitholders.  These distributions are included in “Cash distributions paid to limited partners” as presented on our Unaudited Condensed Statements of Consolidated Cash Flows.

The following table presents supplemental information regarding our restricted common unit awards for the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2015
   
2014
   
2015
   
2014
 
Cash distributions paid to restricted common unitholders
 
$
0.8
   
$
1.6
   
$
3.2
   
$
5.7
 
Total intrinsic value of restricted common unit awards that vested during period
   
1.5
     
1.3
     
66.9
     
85.4
 

For the EPCO group of companies, the unrecognized compensation cost associated with restricted common unit awards was an aggregate $11.5 million at September 30, 2015, of which our share of the cost is currently estimated to be $9.6 million.  Due to the graded vesting provisions of these awards, we expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 1.1 years.

Phantom Unit Awards
Phantom unit awards allow recipients to acquire our common units (at no cost to the recipient apart from fulfilling service and other conditions) once a defined vesting period expires, subject to customary forfeiture provisions.  Phantom unit awards generally vest at a rate of 25% per year beginning one year after the grant date and are non-vested until the required service periods expire.

At September 30, 2015, substantially all of our phantom unit awards are expected to result in the issuance of common units upon vesting; therefore, the applicable awards are accounted for as equity-classified awards.  The grant date fair value of a phantom unit award is based on the market price per unit of our common units on the date of grant.  Compensation expense is recognized based on the grant date fair value, net of an allowance for estimated forfeitures, over the requisite service or vesting period.

The following table presents phantom unit award activity for the period indicated:

 
 
Number of
Units
   
Weighted-
Average Grant
Date Fair Value
per Unit (1)
 
Phantom unit awards at December 31, 2014
   
3,342,390
   
$
33.13
 
Granted (2)
   
3,491,040
   
$
33.97
 
Vested
   
(933,890
)
 
$
33.13
 
Forfeited
   
(275,356
)
 
$
33.51
 
Phantom unit awards at September 30, 2015
   
5,624,184
   
$
33.63
 
  
 
(1)    Determined by dividing the aggregate grant date fair value of awards (before an allowance for forfeitures) by the number of awards issued.
 
(2)    The aggregate grant date fair value of phantom unit awards issued during 2015 was $118.6 million based on a grant date market price of our common units ranging from $27.31 to $34.40 per unit. An estimated annual forfeiture rate of 3.5% was applied to these awards.
 

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Our long-term incentive plans provide for the issuance of distribution equivalent rights (“DERs”) in connection with phantom unit awards.  A DER entitles the participant to nonforfeitable cash payments equal to the product of the number of phantom unit awards outstanding for the participant and the cash distribution per common unit paid to our common unitholders.  Cash payments made in connection with DERs are charged to partners’ equity when the phantom unit award is expected to result in the issuance of common units; otherwise, such amounts are expensed.

The following table presents supplemental information regarding our phantom unit awards and DERs for the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2015
   
2014
   
2015
   
2014
 
Cash payments made in connection with DERs
 
$
2.2
   
$
1.2
   
$
5.6
   
$
2.4
 
Total intrinsic value of phantom unit awards that vested during period
   
2.3
     
0.1
     
31.0
     
1.3
 

For the EPCO group of companies, the unrecognized compensation cost associated with phantom unit awards was $100.4 million at September 30, 2015, of which our share of the cost is currently estimated to be $91.7 million.  Due to the graded vesting provisions of these awards, we expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 2.0 years.

Unit Option Awards
EPCO’s long-term incentive plans provide for the issuance of non-qualified incentive options denominated in our common units.  In general, unit option awards have a vesting period of four years from the date of grant and expire at the end of the calendar year following the year of vesting (e.g., an option vesting on May 29, 2014 will expire on December 31, 2015).  However, unit option awards only become exercisable at certain times during the calendar year following the year in which they vest (typically the months of February, May, August and November).

The following table presents unit option award activity for the period indicated:

 
 
Number of
Units (1)
   
Weighted-
Average
Strike Price
(dollars/unit)
   
Weighted-
Average
Remaining
Contractual
Term
(in years)
   
Aggregate
Intrinsic
Value (2)
 
Unit option awards at December 31, 2014
   
1,270,000
   
$
16.14
         
Exercised
   
(1,080,000
)
 
$
16.14
   
   
 
Unit option awards at September 30, 2015
   
190,000
   
$
16.14
     
0.3
   
$
1.7
 
  
 
(1)    All of the unit option awards outstanding at September 30, 2015 were exercisable. None of the unit option awards outstanding at December 31, 2014 were exercisable.
(2)   Aggregate intrinsic value reflects fully vested unit option awards at the dates indicated.
 

In order to fund its unit option award-related obligations, EPCO may purchase common units at fair value either in the open market or directly from us.  When employees exercise unit option awards, we reimburse EPCO for the cash difference between the strike price paid by the employee and the actual purchase price paid by EPCO for the units issued to the employee.

The following table presents supplemental information regarding unit option awards during the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2015
   
2014
   
2015
   
2014
 
Total intrinsic value of unit option awards exercised during period
 
$
0.2
   
$
--
   
$
19.8
   
$
57.5
 
Cash received from EPCO in connection with the exercise of unit option awards
   
0.2
     
--
     
11.5
     
33.4
 
Unit option award-related cash reimbursements to EPCO
   
0.2
     
--
     
19.8
     
57.5
 

As of September 30, 2015, all compensation expense related to unit option awards had been recognized.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 4.  Derivative Instruments, Hedging Activities and Fair Value Measurements

In the normal course of our business operations, we are exposed to certain risks, including changes in interest rates and commodity prices.  In order to manage risks associated with assets, liabilities and certain anticipated future transactions, we use derivative instruments such as futures, forward contracts, swaps, options and other instruments with similar characteristics.  Substantially all of our derivatives are used for non-trading activities.

Interest Rate Hedging Activities
We may utilize interest rate swaps, forward starting swaps and similar derivative instruments to manage our exposure to changes in interest rates charged on borrowings under certain consolidated debt agreements.  This strategy may be used in controlling our overall cost of capital associated with such borrowings.  At December 31, 2014, we did not have any interest rate hedging derivative instruments outstanding.  The following table summarizes our portfolio of interest rate swaps at September 30, 2015:

Hedged Transaction
Number and Type
of Derivatives
Outstanding
 
Notional
Amount
 
Period of
Hedge
Rate
Swap
Accounting
Treatment
Senior Notes OO
10 fixed-to-floating swaps
 
$
750.0
 
5/2015 to 5/2018
1.65% to 0.79%
Fair value hedge

Interest rate swaps exchange the stated interest rate paid on a notional amount of existing debt for the fixed or floating interest rate stipulated in the derivative instrument.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Commodity Hedging Activities
The prices of natural gas, NGLs, crude oil, petrochemicals and refined products are subject to fluctuations in response to changes in supply and demand, market conditions and a variety of additional factors that are beyond our control.  In order to manage such price risks, we enter into commodity derivative instruments such as physical forward contracts, futures contracts, fixed-for-float swaps, basis swaps and option contracts.  The following table summarizes our portfolio of commodity derivative instruments outstanding at September 30, 2015 (volume measures as noted):

 
Volume (1)
Accounting
Derivative Purpose
Current (2)
Long-Term (2)
Treatment
Derivatives designated as hedging instruments:
     
Natural gas processing:
     
Forecasted natural gas purchases for plant thermal reduction (Bcf)
4.9
n/a
Cash flow hedge
Forecasted sales of NGLs (MMBbls) (3)
1.1
n/a
Cash flow hedge
Octane enhancement:
     
Forecasted purchases of NGLs (MMBbls)
0.1
n/a
Cash flow hedge
Forecasted sales of octane enhancement products (MMBbls)
0.5
n/a
Cash flow hedge
Natural gas marketing:
     
Forecasted purchases of natural gas for fuel (Bcf)
6.4
n/a
Cash flow hedge
Forecasted sales of natural gas (Bcf)
0.1
n/a
Cash flow hedge
Natural gas storage inventory management activities (Bcf)
10.2
n/a
Fair value hedge
NGL marketing:
     
Forecasted purchases of NGLs and related hydrocarbon products (MMBbls)
34.6
0.5
Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products (MMBbls)
49.8
n/a
Cash flow hedge
Refined products marketing:
 
   
Forecasted purchases of refined products (MMBbls)
0.4
n/a
Cash flow hedge
Forecasted sales of refined products (MMBbls)
0.7
n/a
Cash flow hedge
Refined products inventory management activities (MMBbls)
0.2
n/a
Fair value hedge
Crude oil marketing:
   
 
Forecasted purchases of crude oil (MMBbls)
9.0
1.6
Cash flow hedge
Forecasted sales of crude oil (MMBbls)
11.9
1.6
Cash flow hedge
Derivatives not designated as hedging instruments:
     
Natural gas risk management activities (Bcf) (4,5)
65.9
9.6
Mark-to-market
NGL risk management activities (MMBbls) (5)
14.9
n/a
Mark-to-market
Crude oil risk management activities (MMBbls) (5)
5.8
0.4
Mark-to-market
 
(1)    Volume for derivatives designated as hedging instruments reflects the total amount of volumes hedged whereas volume for derivatives not designated as hedging instruments reflects the absolute value of derivative notional volumes.
(2)    The maximum term for derivatives designated as cash flow hedges, derivatives designated as fair value hedges and derivatives not designated as hedging instruments is December 2017, April 2016 and March 2018, respectively.
(3)    Forecasted sales of NGL volumes under natural gas processing exclude 0.7 MMBbls of additional hedges executed under contracts that have been designated as normal sales agreements.
(4)    Current and long-term volumes include 38.7 Bcf and 0.9 Bcf, respectively, of physical derivative instruments that are predominantly priced at a marked-based index plus a premium or minus a discount related to location differences.
(5)    Reflects the use of derivative instruments to manage risks associated with transportation, processing and storage assets.

At September 30, 2015, our predominant commodity hedging strategies consisted of (i) hedging anticipated future purchases and sales of commodity products associated with transportation, storage and blending activities, (ii) hedging natural gas processing margins and (iii) hedging the fair value of commodity products held in inventory.  

§
The objective of our anticipated future commodity purchases and sales hedging program is to hedge the margins of certain transportation, storage, blending and operational activities by locking in purchase and sale prices through the use of forward contracts and derivative instruments.

§
The objective of our natural gas processing hedging program is to hedge an amount of gross margin associated with these activities. We achieve this objective by executing forward fixed-price sales of a portion of our expected equity NGL production using forward contracts and commodity derivative instruments.  For certain natural gas processing contracts, the hedging of expected equity NGL production also involves the purchase of natural gas for plant thermal reduction, which is hedged by executing forward fixed-price purchases using forward contracts and derivative instruments.
 
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
§
The objective of our inventory hedging program is to hedge the fair value of commodity products currently held in inventory by locking in the sales price of the inventory through the use of forward contracts and derivative instruments.
 
Tabular Presentation of Fair Value Amounts, and Gains and Losses on
Derivative Instruments and Related Hedged Items

The following table provides a balance sheet overview of our derivative assets and liabilities at the dates indicated:

 
Asset Derivatives
 
Liability Derivatives
 
 
September 30, 2015
 
December 31, 2014
 
September 30, 2015
 
December 31, 2014
 
   Balance
Sheet
Location
   
Fair
Value
 
Balance
Sheet
Location
   
Fair
Value 
  Balance
Sheet
Location
   
Fair
Value 
  Balance
Sheet
Location
 
 
Fair
Value 
 
Derivatives designated as hedging instruments  
                               
Interest rate derivatives
Current assets
 
$
7.4
 
Current assets
 
$
--
 
Other current
liabilities
 
$
--
 
Other current
liabilities
 
$
--
 
Interest rate derivatives
Other assets
   
0.2
 
Other assets
   
--
 
Other liabilities
   
--
 
Other liabilities
   
--
 
Total interest rate derivatives
     
7.6
       
--
       
--
       
--
 
Commodity derivatives
Current assets
   
216.9
 
Current assets
   
217.9
 
Other current
liabilities
   
178.5
 
Other current
liabilities
   
145.3
 
Commodity derivatives
Other assets
   
8.3
 
Other assets
   
--
 
Other liabilities
   
8.2
 
Other liabilities
   
--
 
Total commodity derivatives
 
   
225.2
 
 
   
217.9
 
 
   
186.7
 
 
   
145.3
 
Total derivatives designated as hedging instruments
   
$
232.8
     
$
217.9
     
$
186.7
     
$
145.3
 
 
 
       
 
       
 
       
 
       
Derivatives not designated as hedging instruments
 
Commodity derivatives
Current assets
 
$
17.5
 
Current assets
 
$
8.1
 
Other current
liabilities
 
$
9.4
 
Other current
liabilities
 
$
0.7
 
Commodity derivatives
Other assets
   
0.1
 
Other assets
   
0.6
 
Other liabilities
   
1.0
 
Other liabilities
   
1.4
 
Total commodity derivatives
 
 
$
17.6
 
 
 
$
8.7
 
 
 
$
10.4
 
 
 
$
2.1
 

Certain of our commodity derivative instruments are subject to master netting arrangements or similar agreements.  The following tables present our derivative instruments subject to such arrangements at the dates indicated:

 
Offsetting of Financial Assets and Derivative Assets
 
 
Gross
Amounts of
Recognized
Assets
 
Gross
Amounts
Offset in the
Balance Sheet
 
Amounts
of Assets
Presented
in the
Balance Sheet
 
Gross Amounts Not Offset
in the Balance Sheet
 
Amounts That
Would Have
Been Presented
On Net Basis
 
Financial
Instruments
   
Cash
Collateral
Received
   
Cash
Collateral
Paid
 
 
(i)
 
(ii)
 
(iii) = (i) – (ii)
 
(iv)
 
(v) = (iii) + (iv)
 
As of September 30, 2015:
                           
Interest rate derivatives
 
$
7.6
   
$
--
   
$
7.6
   
$
--
   
$
--
   
$
--
   
$
7.6
 
Commodity derivatives
   
242.8
     
--
     
242.8
     
(180.3
)
   
(38.2
)
   
(9.6
)
   
14.7
 
As of December 31, 2014:
                                                       
Commodity derivatives
 
$
226.6
   
$
--
   
$
226.6
   
$
(147.3
)
 
$
(23.9
)
 
$
--
   
$
55.4
 

 
Offsetting of Financial Liabilities and Derivative Liabilities
 
 
Gross
Amounts of
Recognized
Liabilities
 
Gross
Amounts
Offset in the
Balance Sheet
 
Amounts
of Liabilities
Presented
in the
Balance Sheet
 
Gross Amounts Not Offset
in the Balance Sheet
 
Amounts That
Would Have
Been Presented
On Net Basis
 
Financial
Instruments
 
Cash
Collateral
Paid
 
 
(i)
 
(ii)
 
(iii) = (i) – (ii)
 
(iv)
 
(v) = (iii) + (iv)
 
As of September 30, 2015:
                       
Commodity derivatives
 
$
197.1
   
$
--
   
$
197.1
   
$
(180.3
)
 
$
--
   
$
16.8
 
As of December 31, 2014:
                                               
Commodity derivatives
 
$
147.4
   
$
--
   
$
147.4
   
$
(147.3
)
 
$
--
   
$
0.1
 

15

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Derivative assets and liabilities recorded on our Unaudited Condensed Consolidated Balance Sheets are presented on a gross-basis and determined at the individual transaction level.  The tabular presentation above provides a means for comparing the gross amount of derivative assets and liabilities, excluding associated accounts payable and receivable, to the net amount that would likely be receivable or payable under a default scenario based on the existence of rights of offset in the respective derivative agreements.  Any cash collateral paid or received is reflected in these tables, but only to the extent that it represents variation margins.  Any amounts associated with derivative prepayments or initial margins that are not influenced by the derivative asset or liability amounts or those that are determined solely on their volumetric notional amounts are excluded from these tables.

The following tables present the effect of our derivative instruments designated as fair value hedges on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:

Derivatives in Fair Value
Hedging Relationships
 
Location
 
Gain (Loss) Recognized in
Income on Derivative
 
 
  
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
 
2015
   
2014
   
2015
   
2014
 
Interest rate derivatives
Interest expense
 
$
5.9
   
$
(4.1
)
 
$
5.1
   
$
(9.5
)
Commodity derivatives
Revenue
   
3.6
     
(0.3
)
   
4.0
     
0.6
 
Total
 
 
$
9.5
   
$
(4.4
)
 
$
9.1
   
$
(8.9
)

Derivatives in Fair Value
Hedging Relationships
 
Location
 
Gain (Loss) Recognized in
Income on Hedged Item
 
 
  
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
 
2015
   
2014
   
2015
   
2014
 
Interest rate derivatives
Interest expense
 
$
(5.7
)
 
$
3.9
   
$
(5.2
)
 
$
9.3
 
Commodity derivatives
Revenue
   
(2.5
)
   
1.0
     
7.4
     
(1.4
)
Total
 
 
$
(8.2
)
 
$
4.9
   
$
2.2
   
$
7.9
 

With respect to our derivative instruments designated as fair value hedges, amounts attributable to ineffectiveness and those excluded from the assessment of hedge effectiveness were not material to our consolidated financial statements during the periods presented.

The following tables present the effect of our derivative instruments designated as cash flow hedges on our Unaudited Condensed Statements of Consolidated Operations and Unaudited Condensed Statements of Consolidated Comprehensive Income for the periods indicated:

Derivatives in Cash Flow
Hedging Relationships
 
Change in Value Recognized in
Other Comprehensive Income (Loss)
on Derivative (Effective Portion)
 
 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2015
   
2014
   
2015
   
2014
 
Commodity derivatives – Revenue (1)
 
$
87.4
   
$
58.8
   
$
113.9
   
$
15.2
 
Commodity derivatives – Operating costs and expenses (1)
   
(1.6
)
   
(0.7
)
   
(1.6
)
   
0.9
 
Total
 
$
85.8
   
$
58.1
   
$
112.3
   
$
16.1
 
 
(1)     The fair value of these derivative instruments will be reclassified to their respective locations on the Unaudited Condensed Statement of Consolidated Operations upon settlement of the underlying derivative transactions, as appropriate.
 
16

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Derivatives in Cash Flow
Hedging Relationships
Location
 
Gain (Loss) Reclassified from
Accumulated Other Comprehensive Income (Loss)
to Income (Effective Portion)
 
 
  
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
 
2015
   
2014
   
2015
   
2014
 
Interest rate derivatives
Interest expense
 
$
(8.9
)
 
$
(8.0
)
 
$
(26.3
)
 
$
(23.9
)
Commodity derivatives
Revenue
   
46.8
     
17.8
     
128.6
     
(14.5
)
Commodity derivatives
Operating costs and expenses
   
--
     
0.2
     
(0.5
)
   
1.6
 
Total
 
 
$
37.9
   
$
10.0
   
$
101.8
   
$
(36.8
)

Derivatives in Cash Flow
Hedging Relationships
Location
 
Gain (Loss) Recognized in Income
on Derivative (Ineffective Portion)
 
 
  
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
 
2015
   
2014
   
2015
   
2014
 
Commodity derivatives
Revenue
 
$
(3.5
)
 
$
0.1
   
$
(3.1
)
 
$
--
 
Commodity derivatives
Operating costs and expenses
   
--
     
(0.1
)
   
--
     
--
 
Total
 
 
$
(3.5
)
 
$
--
   
$
(3.1
)
 
$
--
 

Over the next twelve months, we expect to reclassify $36.8 million of losses attributable to interest rate derivative instruments from accumulated other comprehensive loss to earnings as an increase in interest expense.  Likewise, we expect to reclassify $54.1 million of net gains attributable to commodity derivative instruments from accumulated other comprehensive income to earnings, $55.7 million as an increase in revenue and $1.6 million as an increase in operating costs and expenses.

The following table presents the effect of our derivative instruments not designated as hedging instruments on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:

Derivatives Not Designated
as Hedging Instruments
Location
 
Gain (Loss) Recognized in
Income on Derivative
 
 
  
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
 
2015
   
2014
   
2015
   
2014
 
Interest rate derivatives
Interest expense
 
$
--
   
$
--
   
$
--
   
$
(0.1
)
Commodity derivatives
Revenue
   
--
     
0.8
     
3.9
     
(26.8
)
Commodity derivatives
Operating costs and expenses
   
(0.3
)
   
--
     
--
     
--
 
Total
 
 
$
(0.3
)
 
$
0.8
   
$
3.9
   
$
(26.9
)

Fair Value Measurements
Our fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk, in the principal market of the asset or liability at a specified measurement date.  Recognized valuation techniques employ inputs such as contractual prices, quoted market prices or rates, operating costs, discount factors and business growth rates.  These inputs may be either readily observable, corroborated by market data or generally unobservable.  In developing our estimates of fair value, we endeavor to utilize the best information available and apply market-based data to the highest extent possible.  Accordingly, we utilize valuation techniques (such as the market approach) that maximize the use of observable inputs and minimize the use of unobservable inputs.

A three-tier hierarchy has been established that classifies fair value amounts recognized in the financial statements based on the observability of inputs used to estimate such fair values.  The hierarchy considers fair value amounts based on observable inputs (Levels 1 and 2) to be more reliable and predictable than those based primarily on unobservable inputs (Level 3).  At each balance sheet reporting date, we categorize our financial assets and liabilities using this hierarchy.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recurring Fair Value Measurements
The following tables set forth, by level within the fair value hierarchy, the carrying values of our financial assets and liabilities at the dates indicated.  These assets and liabilities are measured on a recurring basis and are classified based on the lowest level of input used to estimate their fair value.  Our assessment of the relative significance of such inputs requires judgment.

 
 
September 30, 2015
Fair Value Measurements Using
   
 
 
 
Quoted Prices
in Active
Markets for
Identical Assets
and Liabilities
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
   
Total
 
Financial assets:
 
   
   
   
 
Interest rate derivatives
 
$
--
   
$
7.6
   
$
--
   
$
7.6
 
Commodity derivatives
   
84.1
     
157.7
     
1.0
     
242.8
 
Total
 
$
84.1
   
$
165.3
   
$
1.0
   
$
250.4
 
 
                               
Financial liabilities:
                               
Liquidity Option Agreement
 
$
--
   
$
--
   
$
235.5
   
$
235.5
 
Commodity derivatives
   
37.4
     
142.7
     
17.0
     
197.1
 
Total
 
$
37.4
   
$
142.7
   
$
252.5
   
$
432.6
 

 
 
December 31, 2014
Fair Value Measurements Using
   
 
 
 
Quoted Prices
in Active
Markets for
Identical Assets
and Liabilities
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
   
Total
 
Financial assets:
 
   
   
   
 
Commodity derivatives
 
$
37.8
   
$
187.8
   
$
1.0
   
$
226.6
 
 
                               
Financial liabilities:
                               
Liquidity Option Agreement
 
$
--
   
$
--
   
$
219.7
   
$
219.7
 
Commodity derivatives
   
13.8
     
133.0
     
0.6
     
147.4
 
Total
 
$
13.8
   
$
133.0
   
$
220.3
   
$
367.1
 

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The following table sets forth a reconciliation of changes in the fair values of our recurring Level 3 financial assets and liabilities on a combined basis for the periods indicated:

 
  
 
For the Nine Months
Ended September 30,
 
 
Location  
2015
   
2014
 
Financial asset (liability) balance, net, January 1
 
 
$
(219.3
)
 
$
3.2
 
Total gains (losses) included in:
 
               
Net income (1)
Revenue
   
(0.4
)
   
4.6
 
Other comprehensive income
Commodity derivative instruments – changes in fair value of cash flow hedges
   
(1.5
)
   
--
 
Settlements
Revenue
   
(0.5
)
   
(0.1
)
Transfers out of Level 3
     
0.1
     
--
 
Financial asset (liability) balance, net, March 31
 
   
(221.6
)
   
7.7
 
Total gains (losses) included in:
 
               
Net income (1)
Revenue
   
(0.4
)
   
(3.3
)
Net income
Other expense, net
   
(11.5
)
   
--
 
Other comprehensive income
Commodity derivative instruments – changes in fair value of cash flow hedges
   
(1.0
)
   
--
 
Settlements
Revenue
   
0.2
     
(1.8
)
Transfers out of Level 3
     
1.5
     
--
 
Financial asset (liability) balance, net, June 30
 
   
(232.8
)
   
2.6
 
Total gains (losses) included in:
                 
Net income (1)
Revenue
   
(0.3
)
   
(0.9
)
Net income
Other expense, net
   
(4.3
)
   
--
 
Other comprehensive income
Commodity derivative instruments – changes in fair value of cash flow hedges
   
(15.5
)
   
(2.5
)
Settlements
Revenue
   
0.3
     
0.1
 
Transfers out of Level 3
     
1.1
     
--
 
Financial asset (liability) balance, net, September 30
   
$
(251.5
)
 
$
(0.7
)
 
(1)   There were $1.1 million of unrealized losses included in these amounts for the nine months ended September 30, 2015. There were unrealized gains of $0.8 million and $1.3 million included in these amounts for the three and nine months ended September 30, 2014, respectively.
 

The following table provides quantitative information about our recurring Level 3 fair value measurements at September 30, 2015:

 
 
Fair Value
 
 
 
   
 
 
Financial
Assets
   
Financial
Liabilities
 
Valuation
Techniques
Unobservable
Input
Range
Commodity derivatives – Crude oil
 
$
0.7
   
$
1.3
 
Discounted cash flow
Forward commodity prices
$44.47-$50.74/barrel
Commodity derivatives – Natural gasoline
   
0.3
     
15.6
 
Discounted cash flow
Forward commodity prices
$0.93-$1.00/gallon
Commodity derivatives – Propane
   
--
     
0.1
 
Discounted cash flow
Forward commodity prices
$0.50/gallon
Total
 
$
1.0
   
$
17.0
         

With respect to commodity derivatives, we believe forward commodity prices are the most significant unobservable inputs in determining our Level 3 recurring fair value measurements at September 30, 2015.  In general, changes in the price of the underlying commodity increases or decreases the fair value of a commodity derivative depending on whether the derivative was purchased or sold.  We generally expect changes in the fair value of our derivative instruments to be offset by corresponding changes in the fair value of our hedged exposures.

As described in Note 15, we adjusted the expected life of OTA following exercise of the Liquidity Option Agreement to reflect an equal probability of the dissolution of OTA over each of the 30 years in our forecast period.  None of the other key valuation assumptions we listed in our 2014 Form 10-K for the Liquidity Option Agreement have changed.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nonrecurring Fair Value Measurements
Long-lived assets (including intangible assets with finite useful lives and property, plant and equipment) are reviewed for impairment (i.e., subject to nonrecurring fair value measurements) when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Long-lived assets with carrying values that are not expected to be recovered through future cash flows are written-down to their estimated fair values. The following table summarizes our non-cash impairment charges by segment during each of the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2015
   
2014
   
2015
   
2014
 
NGL Pipelines & Services
 
$
14.6
   
$
1.2
   
$
20.6
   
$
6.6
 
Crude Oil Pipelines & Services
   
--
     
0.4
     
25.9
     
2.2
 
Natural Gas Pipelines & Services
   
--
     
0.4
     
21.5
     
0.7
 
Petrochemical & Refined Products Services
   
12.2
     
3.7
     
12.6
     
8.7
 
Offshore Pipelines & Services
   
--
     
--
     
58.5
     
--
 
Total
 
$
26.8
   
$
5.7
   
$
139.1
   
$
18.2
 

Impairment charges are a component of “Operating costs and expenses” on our Unaudited Condensed Statements of Consolidated Operations.

Our non-cash asset impairment charges for the third quarter of 2015 primarily relate to the planned abandonment of natural gas processing assets in southern Louisiana and the reclassification of certain marine vessels to held for sale status.  Our non-cash asset impairment charges for the nine months ended September 30, 2015 primarily reflect the $54.8 million charge we recorded in connection with the sale of our Offshore Business (see Note 6) and the abandonment of certain natural gas and crude oil pipeline assets in Texas. Our non-cash asset impairment charges for the nine months ended September 30, 2014 primarily reflect the abandonment of assets classified as property, plant and equipment.

The following table presents categories of long-lived assets that were subject to non-recurring fair value measurements during the nine months ended September 30, 2015:

 
 
   
Fair Value Measurements
at the End of the Reporting Period Using
   
 
 
 
Carrying
Value at
September 30,
2015
   
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
   
Significant
Other
Observable
Inputs
(Level 2)
   
Significant
Unobservable
Inputs
(Level 3)
   
Total
Non-Cash
Impairment
Loss
 
Long-lived assets disposed of other than by sale
 
$
0.4
   
$
--
   
$
--
   
$
0.4
   
$
69.9
 
Long-lived assets held for sale
   
34.2
     
--
     
--
     
34.2
     
14.2
 
Long-lived assets disposed of by sale (1)
   
--
     
--
     
--
     
--
     
55.0
 
Total
                                 
$
139.1
 
                                                  
(1)   Primarily represents the impairment charge recorded in second quarter of 2015 upon reclassification of our Offshore Business to held for sale status.
 
20

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents categories of long-lived assets that were subject to non-recurring fair value measurements during the nine months ended September 30, 2014:

 
 
Fair Value Measurements
at the End of the Reporting Period Using
 
 
 
Carrying
Value at
September 30,
2014
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Non-Cash
Impairment
Loss
 
Long-lived assets disposed of other than by sale
 
$
--
   
$
--
   
$
--
   
$
--
   
$
11.7
 
Long-lived assets held for sale
   
1.1
     
--
     
--
     
1.1
     
6.5
 
Total
                                 
$
18.2
 

Other Fair Value Information
The carrying amounts of cash and cash equivalents (including restricted cash balances), accounts receivable, commercial paper notes and accounts payable approximate their fair values based on their short-term nature.  The estimated total fair value of our fixed-rate debt obligations was $20.77 billion and $22.16 billion at September 30, 2015 and December 31, 2014, respectively.  The aggregate carrying value of these debt obligations was $20.88 billion and $20.48 billion at September 30, 2015 and December 31, 2014, respectively.  These values are based on quoted market prices for such debt or debt of similar terms and maturities (Level 2), our credit standing and the credit standing of our counterparties.  Changes in market rates of interest affect the fair value of our fixed-rate debt.  The amounts reported for fixed-rate debt obligations as of September 30, 2015, exclude those amounts hedged using fixed-to-floating interest rate swaps. See “Interest Rate Hedging Activities” within this Note 4 for additional information.  The carrying values of our variable-rate long-term debt obligations approximate their fair values since the associated interest rates are market-based.  We do not have any long-term investments in debt or equity securities recorded at fair value.


Note 5.  Inventories

Our inventory amounts by product type were as follows at the dates indicated:

 
 
September 30,
2015
   
December 31,
2014
 
NGLs
 
$
740.5
   
$
579.1
 
Petrochemicals and refined products
   
158.0
     
295.6
 
Crude oil
   
152.2
     
97.8
 
Natural gas
   
34.7
     
41.7
 
Total
 
$
1,085.4
   
$
1,014.2
 

Due to fluctuating commodity prices, we recognize lower of cost or market adjustments when the carrying value of our available-for-sale inventories exceeds their net realizable value.  The following table presents our total cost of sales amounts and lower of cost or market adjustments for the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2015
   
2014
   
2015
   
2014
 
Cost of sales (1)
 
$
4,419.9
   
$
10,455.1
   
$
15,355.9
   
$
32,213.1
 
Lower of cost or market adjustments
   
2.1
     
6.7
     
6.1
     
14.6
 
 
(1)   Cost of sales is a component of “Operating costs and expenses” as presented on our Unaudited Condensed Statements of Consolidated Operations. Fluctuations in these amounts are primarily due to changes in energy commodity prices and sales volumes associated with our marketing activities.
 


21

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 6.  Property, Plant and Equipment

The historical costs of our property, plant and equipment and related accumulated depreciation balances were as follows at the dates indicated:

 
 
Estimated
Useful Life
in Years
   
September 30,
2015
   
December 31,
2014
 
Plants, pipelines and facilities (1)
 
3-45 (6)
 
 
$
31,686.3
   
$
30,834.9
 
Underground and other storage facilities (2)
 
5-40 (7)
 
   
2,847.7
     
2,584.2
 
Platforms and facilities (3)
 
20-31
     
--
     
659.7
 
Transportation equipment (4)
 
3-10
     
164.8
     
154.2
 
Marine vessels (5)
 
15-30
     
787.5
     
796.4
 
Land
           
261.3
     
262.6
 
Construction in progress
           
3,777.2
     
2,754.7
 
Total historical cost of property, plant and equipment
           
39,524.8
     
38,046.7
 
    Less accumulated depreciation
           
8,310.7
     
8,165.1
 
Total property, plant and equipment, net
         
$
31,214.1
   
$
29,881.6
 
  
 
(1)   Plants, pipelines and facilities include processing plants; NGL, natural gas, crude oil and petrochemical and refined products pipelines; terminal loading and unloading facilities; office furniture and equipment; buildings; laboratory and shop equipment and related assets.
 
(2)   Underground and other storage facilities include underground product storage caverns; above ground storage tanks; water wells and related assets.
 
(3)   Platforms and facilities included offshore platforms and related facilities and other associated assets located in the Gulf of Mexico prior to the sale of our Offshore Business (see below).
 
(4)   Transportation equipment includes tractor-trailer tank trucks and other vehicles and similar assets used in our operations.
 
(5)   Marine vessels include tow boats, barges and related equipment used in our marine transportation business.
 
(6)   In general, the estimated useful lives of major assets within this category are: processing plants, 20-35 years; pipelines and related equipment, 5-45 years; terminal facilities, 10-35 years; office furniture and equipment, 3-20 years; buildings, 20-40 years; and laboratory and shop equipment, 5-35 years.
 
(7)   In general, the estimated useful lives of assets within this category are: underground storage facilities, 5-35 years; storage tanks, 10-40 years; and water wells, 5-35 years.
 

The following table summarizes our depreciation expense and capitalized interest amounts for the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2015
   
2014
   
2015
   
2014
 
Depreciation expense (1)
 
$
286.2
   
$
283.2
   
$
870.1
   
$
822.1
 
Capitalized interest (2)
   
40.3
     
17.2
     
105.6
     
53.4
 
    
(1)  Depreciation expense is a component of “Costs and expenses” as presented on our Unaudited Condensed Statements of Consolidated Operations.
 
(2)  We capitalize interest costs incurred on funds used to construct property, plant and equipment while the asset is in its construction phase. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life as a component of depreciation expense. When capitalized interest is recorded, it reduces interest expense from what it would be otherwise.
 

Sale of Offshore Business
On July 24, 2015, we consummated a sale to Genesis of our Offshore Business, which primarily consisted of our Offshore Pipelines & Services business segment, for approximately $1.53 billion in cash. Our Offshore Business served drilling and development regions, including deepwater production fields, in the northern Gulf of Mexico offshore Texas, Louisiana, Mississippi and Alabama. As of December 31, 2014, our Offshore Business included approximately 2,350 miles of offshore natural gas and crude oil pipelines and six offshore hub platforms. Our results of operations reflect ownership of the Offshore Business through July 24, 2015.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We viewed our Offshore Business as an extension of our midstream energy services network. As such, the sale of these assets did not represent a strategic shift in our consolidated operations, and their sale does not have a major effect on our financial results. At December 31, 2014 and June 30, 2015, segment assets for our Offshore Pipelines & Services segment represented 4.3% and 4.1%, respectively, of consolidated total segment assets. Likewise, gross operating margin from this business segment represented only 3.1% and 3.4% of our consolidated total gross operating margin for the year ended December 31, 2014 and six months ended June 30, 2015, respectively. The sale of this non-strategic business allowed us to redeploy capital to other business opportunities that we believe will generate a higher rate of return for us in the future (e.g., our recent acquisition of EFS Midstream (see Note 8)). Also, proceeds from the closing of this sale will reduce our need to issue additional equity and debt to support our ongoing capital spending program.

We recorded a non-cash asset impairment charge at June 30, 2015 of approximately $54.8 million, which reflects the excess of the carrying value of net assets of the Offshore Business at June 30, 2015 over their comparable estimated fair value based on the transaction price. The carrying value of the net assets of the Offshore Business at June 30, 2015 totaled approximately $1.59 billion, which included current assets of $26.9 million, property plant and equipment of $1.14 billion, investments in unconsolidated affiliates of $482.4 million, intangible assets of $37.1 million and goodwill of $82.0 million. Total liabilities were $116.4 million and noncontrolling interests were $62.2 million at that date. The fair value of the Offshore Business based on the transaction price was approximately $1.53 billion.

Upon closing of the transaction, we recorded a loss on the sale of $12.6 million based on the difference between the proceeds received and the carrying value of the net assets at July 24, 2015.

Operating costs and expenses for the nine months ended September 30, 2015 include $40.1 million of depreciation expense associated with the Offshore Business.  Likewise, for the three and nine months ended September 30, 2014, we recognized $21.5 million and $62.3 million, respectively, of depreciation expense associated with these assets.

Asset Retirement Obligations
We record asset retirement obligations (“AROs”) in connection with legal requirements to perform specified retirement activities under contractual arrangements and/or governmental regulations.  Our contractual AROs primarily result from right-of-way agreements associated with our pipeline operations and real estate leases associated with our plant sites.  In addition, we record AROs in connection with governmental regulations associated with the abandonment or retirement of above-ground brine storage pits and certain marine vessels.  We also record AROs in connection with regulatory requirements associated with the renovation or demolition of certain assets containing hazardous substances such as asbestos.  We typically fund our AROs using cash flow from operations.

Property, plant and equipment at September 30, 2015 and December 31, 2014 includes $17.8 million and $31.3 million, respectively, of asset retirement costs capitalized as an increase in the associated long-lived asset.

The following table presents information regarding our AROs since December 31, 2014:

ARO liability balance, December 31, 2014
 
$
98.3
 
Liabilities incurred
   
2.7
 
Liabilities settled
   
(5.9
)
Revisions in estimated cash flows
   
49.0
 
Accretion expense
   
4.2
 
    AROs related to Offshore Business sold in July 2015
   
(91.1
)
ARO liability balance, September 30, 2015
 
$
57.2
 

Revisions to estimated cash flows include a $39.5 million adjustment made in the second quarter of 2015 related to the Matagorda Gathering System, which was a component of the Offshore Business.  In June 2015, we were notified by the U.S. Army Corps of Engineers (the “CoE”) to fully remove two pipeline segments included in this system that we had originally requested to abandon in-place.  As a result, we adjusted the ARO liabilities for those pipeline segments under CoE jurisdiction to account for the estimated cost of removal.  All ARO liabilities related to our Offshore Business (including those of the Matagorda Gathering System) were removed from our Unaudited Condensed Consolidated Balance Sheet upon the sale of the Offshore Business on July 24, 2015.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Certain of our unconsolidated affiliates have AROs recorded at September 30, 2015 and December 31, 2014 relating to contractual agreements and regulatory requirements.  These amounts are immaterial to our consolidated financial statements.


Note 7.  Investments in Unconsolidated Affiliates

The following table presents our investments in unconsolidated affiliates by business segment at the dates indicated.  We account for these investments using the equity method.