UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2017

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, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

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

There were 2,152,702,622 common units of Enterprise Products Partners L.P. outstanding at the close of business on October 31, 2017.  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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
1

 
PART I.  FINANCIAL INFORMATION.

Item 1.
Financial Statements.

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

   
September 30,
2017
   
December 31,
2016
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
32.9
   
$
63.1
 
Restricted cash
   
66.8
     
354.5
 
Accounts receivable – trade, net of allowance for doubtful accounts
of $12.3 at September 30, 2017 and $11.3 at December 31, 2016
   
3,392.2
     
3,329.5
 
Accounts receivable – related parties
   
3.2
     
1.1
 
Inventories
   
1,983.2
     
1,770.5
 
Derivative assets (see Note 12)
   
180.2
     
541.4
 
Prepaid and other current assets
   
372.6
     
468.1
 
Total current assets
   
6,031.1
     
6,528.2
 
Property, plant and equipment, net
   
34,979.3
     
33,292.5
 
Investments in unconsolidated affiliates
   
2,660.2
     
2,677.3
 
Intangible assets, net of accumulated amortization of $1,525.3 at
September 30, 2017 and $1,403.1 at December 31, 2016 (see Note 6)
   
3,739.8
     
3,864.1
 
Goodwill (see Note 6)
   
5,745.2
     
5,745.2
 
Other assets
   
145.0
     
86.7
 
Total assets
 
$
53,300.6
   
$
52,194.0
 
 
               
LIABILITIES AND EQUITY
               
Current liabilities:
               
Current maturities of debt (see Note 7)
 
$
3,009.0
   
$
2,576.8
 
Accounts payable – trade
   
720.3
     
397.7
 
Accounts payable – related parties
   
109.0
     
105.1
 
Accrued product payables
   
3,760.2
     
3,613.7
 
Accrued interest
   
206.5
     
340.8
 
Derivative liabilities (see Note 12)
   
225.3
     
737.7
 
Other current liabilities
   
408.4
     
478.7
 
Total current liabilities
   
8,438.7
     
8,250.5
 
Long-term debt (see Note 7)
   
21,710.9
     
21,120.9
 
Deferred tax liabilities
   
53.7
     
52.7
 
Other long-term liabilities
   
548.4
     
503.9
 
Commitments and contingencies (see Note 14)
               
Equity: (see Note 8)
               
Partners’ equity:
               
Limited partners:
               
Common units (2,152,702,622 units outstanding at September 30, 2017
and 2,117,588,414 units outstanding at December 31, 2016)
   
22,637.2
     
22,327.0
 
Accumulated other comprehensive loss
   
(306.6
)
   
(280.0
)
Total  partners’ equity
   
22,330.6
     
22,047.0
 
Noncontrolling interests
   
218.3
     
219.0
 
Total equity
   
22,548.9
     
22,266.0
 
Total liabilities and equity
 
$
53,300.6
   
$
52,194.0
 


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,
 
 
 
2017
   
2016
   
2017
   
2016
 
Revenues:
                       
Third parties
 
$
6,874.4
   
$
5,904.7
   
$
20,781.7
   
$
16,499.0
 
Related parties
   
12.5
     
15.7
     
33.2
     
44.5
 
Total revenues (see Note 9)
   
6,886.9
     
5,920.4
     
20,814.9
     
16,543.5
 
Costs and expenses:
                               
Operating costs and expenses:
                               
Third parties
   
5,773.8
     
4,781.2
     
17,313.0
     
13,199.4
 
Related parties
   
306.0
     
284.5
     
830.2
     
835.4
 
Total operating costs and expenses
   
6,079.8
     
5,065.7
     
18,143.2
     
14,034.8
 
General and administrative costs:
                               
Third parties
   
11.0
     
15.0
     
47.7
     
35.9
 
Related parties
   
30.3
     
27.0
     
89.7
     
85.1
 
Total general and administrative costs
   
41.3
     
42.0
     
137.4
     
121.0
 
Total costs and expenses (see Note 9)
   
6,121.1
     
5,107.7
     
18,280.6
     
14,155.8
 
Equity in income of unconsolidated affiliates
   
113.4
     
92.3
     
315.2
     
269.8
 
Operating income
   
879.2
     
905.0
     
2,849.5
     
2,657.5
 
Other income (expense):
                               
Interest expense
   
(243.9
)
   
(250.9
)
   
(739.0
)
   
(735.6
)
Change in fair market value of Liquidity Option
   Agreement (see Note 14)
   
(8.9
)
   
(6.9
)
   
(33.0
)
   
(28.0
)
Other, net
   
0.3
     
0.7
     
0.9
     
2.5
 
Total other expense, net
   
(252.5
)
   
(257.1
)
   
(771.1
)
   
(761.1
)
Income before income taxes
   
626.7
     
647.9
     
2,078.4
     
1,896.4
 
Provision for income taxes
   
(5.4
)
   
(4.8
)
   
(20.1
)
   
(13.1
)
Net income
   
621.3
     
643.1
     
2,058.3
     
1,883.3
 
Net income attributable to noncontrolling interests
   
(10.4
)
   
(8.5
)
   
(33.0
)
   
(29.0
)
Net income attributable to limited partners
 
$
610.9
   
$
634.6
   
$
2,025.3
   
$
1,854.3
 
 
                               
Earnings per unit: (see Note 10)
                               
Basic earnings per unit
 
$
0.28
   
$
0.30
   
$
0.94
   
$
0.89
 
Diluted earnings per unit
 
$
0.28
   
$
0.30
   
$
0.94
   
$
0.89
 
















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,
 
 
 
2017
   
2016
   
2017
   
2016
 
 
                       
Net income
 
$
621.3
   
$
643.1
   
$
2,058.3
   
$
1,883.3
 
Other comprehensive income (loss):
                               
Cash flow hedges:
                               
Commodity derivative instruments:
                               
Changes in fair value of cash flow hedges
   
(177.8
)
   
22.7
     
(2.6
)
   
(52.2
)
Reclassification of gains to net income
   
(10.1
)
   
(26.9
)
   
(49.0
)
   
(48.7
)
Interest rate derivative instruments:
                               
Changes in fair value of cash flow hedges
   
(0.3
)
   
(6.9
)
   
(4.8
)
   
(16.3
)
Reclassification of losses to net income
   
10.3
     
9.4
     
29.9
     
27.8
 
Total cash flow hedges
   
(177.9
)
   
(1.7
)
   
(26.5
)
   
(89.4
)
Other
   
--
     
--
     
(0.1
)
   
(0.1
)
Total other comprehensive loss
   
(177.9
)
   
(1.7
)
   
(26.6
)
   
(89.5
)
Comprehensive income
   
443.4
     
641.4
     
2,031.7
     
1,793.8
 
Comprehensive income attributable to noncontrolling interests
   
(10.4
)
   
(8.5
)
   
(33.0
)
   
(29.0
)
Comprehensive income attributable to limited partners
 
$
433.0
   
$
632.9
   
$
1,998.7
   
$
1,764.8
 
  





























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,
 
 
 
2017
   
2016
 
Operating activities:
           
Net income
 
$
2,058.3
   
$
1,883.3
 
Reconciliation of net income to net cash flows provided by operating activities:
               
Depreciation, amortization and accretion
   
1,221.4
     
1,155.3
 
Asset impairment and related charges (see Note 12)
   
35.2
     
29.1
 
Equity in income of unconsolidated affiliates
   
(315.2
)
   
(269.8
)
Distributions received on earnings from unconsolidated affiliates
   
316.2
     
281.6
 
Net gains attributable to asset sales
   
(1.1
)
   
(2.3
)
Deferred income tax expense
   
1.1
     
5.3
 
Change in fair market value of derivative instruments
   
(14.2
)
   
42.1
 
Change in fair market value of Liquidity Option Agreement
   
33.0
     
28.0
 
Net effect of changes in operating accounts (see Note 15)
   
(512.1
)
   
(489.7
)
Other operating activities
   
(2.7
)
   
(3.9
)
Net cash flows provided by operating activities
   
2,819.9
     
2,659.0
 
Investing activities:
               
Capital expenditures
   
(2,154.4
)
   
(2,443.9
)
Contributions in aid of construction costs
   
36.2
     
34.1
 
Decrease (increase) in restricted cash  (see Note 2)
   
287.7
     
(261.4
)
Cash used for business combinations, net of cash received (see Note 4)
   
(198.7
)
   
(1,000.0
)
Investments in unconsolidated affiliates
   
(32.8
)
   
(119.9
)
Distributions received for return of capital from unconsolidated affiliates
   
36.8
     
51.9
 
Proceeds from asset sales
   
6.2
     
43.9
 
Other investing activities
   
2.8
     
(0.4
)
Cash used in investing activities
   
(2,016.2
)
   
(3,695.7
)
Financing activities:
               
Borrowings under debt agreements
   
53,150.4
     
50,183.8
 
Repayments of debt
   
(52,133.2
)
   
(48,776.5
)
Debt issuance costs
   
(24.0
)
   
(10.5
)
Monetization of interest rate derivative instruments
   
30.6
     
--
 
Cash distributions paid to limited partners (see Note 8)
   
(2,660.4
)
   
(2,448.3
)
Cash payments made in connection with distribution equivalent rights
   
(11.2
)
   
(8.5
)
Cash distributions paid to noncontrolling interests
   
(35.4
)
   
(35.7
)
Cash contributions from noncontrolling interests
   
0.4
     
20.1
 
Net cash proceeds from the issuance of common units
   
877.2
     
2,170.4
 
Other financing activities
   
(28.3
)
   
(20.0
)
Cash provided by (used in) financing activities
   
(833.9
)
   
1,074.8
 
Net change in cash and cash equivalents
   
(30.2
)
   
38.1
 
Cash and cash equivalents, January 1
   
63.1
     
19.0
 
Cash and cash equivalents, September 30
 
$
32.9
   
$
57.1
 










See Notes to Unaudited Condensed Consolidated Financial Statements.
5


ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EQUITY
(See Note 8 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, January 1, 2017
 
$
22,327.0
   
$
(280.0
)
 
$
219.0
   
$
22,266.0
 
Net income
   
2,025.3
     
--
     
33.0
     
2,058.3
 
Cash distributions paid to limited partners
   
(2,660.4
)
   
--
     
--
     
(2,660.4
)
Cash payments made in connection with distribution equivalent rights
   
(11.2
)
   
--
     
--
     
(11.2
)
Cash distributions paid to noncontrolling interests
   
--
     
--
     
(35.4
)
   
(35.4
)
Cash contributions from noncontrolling interests
   
--
     
--
     
0.4
     
0.4
 
Net cash proceeds from the issuance of common units
   
877.2
     
--
     
--
     
877.2
 
Common units issued in connection with employee compensation
   
33.7
     
--
     
--
     
33.7
 
Amortization of fair value of equity-based awards
   
74.1
     
--
     
--
     
74.1
 
Cash flow hedges
   
--
     
(26.5
)
   
--
     
(26.5
)
Other
   
(28.5
)
   
(0.1
)
   
1.3
     
(27.3
)
Balance, September 30, 2017
 
$
22,637.2
   
$
(306.6
)
 
$
218.3
   
$
22,548.9
 

 
 
Partners’ Equity
             
 
 
Limited
Partners
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Noncontrolling
Interests
   
Total
 
Balance, January 1, 2016
 
$
20,514.3
   
$
(219.2
)
 
$
206.0
   
$
20,501.1
 
Net income
   
1,854.3
     
--
     
29.0
     
1,883.3
 
Cash distributions paid to limited partners
   
(2,448.3
)
   
--
     
--
     
(2,448.3
)
Cash payments made in connection with distribution equivalent rights
   
(8.5
)
   
--
     
--
     
(8.5
)
Cash distributions paid to noncontrolling interests
   
--
     
--
     
(35.7
)
   
(35.7
)
Cash contributions from noncontrolling interests
   
--
     
--
     
20.1
     
20.1
 
Net cash proceeds from the issuance of common units
   
2,170.4
     
--
     
--
     
2,170.4
 
Amortization of fair value of equity-based awards
   
67.7
     
--
     
--
     
67.7
 
Cash flow hedges
   
--
     
(89.4
)
   
--
     
(89.4
)
Other
   
(22.0
)
   
(0.1
)
   
0.1
     
(22.0
)
Balance, September 30, 2016
 
$
22,127.9
   
$
(308.7
)
 
$
219.5
   
$
22,038.7
 



















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 Directors (the “Board”) of Enterprise GP; (ii) Richard H. Bachmann, who is also a director and Vice Chairman of the Board of Enterprise GP; and (iii) Dr. Ralph S. Cunningham.  Ms. Duncan Williams and Mr. Bachmann also currently serve as managers of Dan Duncan LLC along with W. Randall Fowler, who is also a director and President of Enterprise GP.

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. Duncan Williams, who serves as Chairman of EPCO; (ii) Dr. Cunningham, who serves as Vice Chairman of EPCO; and (iii) Mr. Bachmann, who serves as the President and Chief Executive Officer of EPCO.  Ms. Duncan Williams and Mr. Bachmann also currently serve as directors of EPCO along with Mr. Fowler, who is also the Executive Vice President and Chief Administrative Officer of EPCO. EPCO, together with its privately held affiliates, owned approximately 32 percent of our limited partner interests at September 30, 2017.

References to “Oiltanking acquisition” mean the two-step acquisition of Oiltanking Partners, L.P. and its general partner that was completed in February 2015.
  
References to “TEPPCO” mean TEPPCO Partners, L.P. prior to its merger with one of our wholly owned subsidiaries in October 2009.


Note 1.  Partnership Operations, Organization and Basis of Presentation

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 a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, petrochemicals and refined products. 

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 export and import terminals (including those used to export liquefied petroleum gases, or “LPG,” and ethane); crude oil gathering, transportation, storage, and export and import terminals; petrochemical and refined products transportation, storage, export and import terminals, and related services; and a marine transportation business that operates primarily on the U.S. inland and Intracoastal Waterway systems.  Our assets currently include approximately 50,000 miles of pipelines; 260 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.
7

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

We conduct substantially all of our business through EPO and are owned 100 percent 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.

Our operations are reported under four business segments: (i) NGL Pipelines & Services, (ii) Crude Oil Pipelines & Services, (iii) Natural Gas Pipelines & Services and (iv) Petrochemical & Refined Products Services.  See Note 9 for information regarding our business segments.


Note 2.  General Accounting and Disclosure Matters

Our results of operations for the nine months ended September 30, 2017 are not necessarily indicative of results expected for the full year of 2017.  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, 2016 (the “2016 Form 10-K”) filed with the SEC on February 24, 2017.

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 14 for additional information regarding our contingencies.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Derivative Instruments
We use derivative instruments such as futures, swaps, 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 12 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.

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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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting Developments
Revenue RecognitionIn May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification 606, Revenues from Contracts with Customers (“ASC 606”).  The new accounting standard, along with its related amendments, replaces the current rules-based U.S. GAAP governing revenue recognition with a principles-based approach.  We will adopt the new standard on January 1, 2018 using a modified retrospective approach, which requires us to apply the new revenue standard to (i) all new revenue contracts entered into after January 1, 2018 and (ii) all existing revenue contracts as of January 1, 2018 through a cumulative adjustment to equity, if necessary.  In accordance with this approach, our consolidated revenues for periods prior to January 1, 2018 will not be revised.

The core principle in the new guidance is that a company should recognize revenue in a manner that fairly depicts the transfer of goods or services to customers in amounts that reflect the consideration the company expects to receive for those goods or services.  In order to apply this core principle, companies will apply the following five steps in determining the amount of revenues to recognize: (i) identify the contract; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the performance obligation is satisfied.  Each of these steps involves management’s judgment and an analysis of the contract’s material terms and conditions.

Our implementation activities related to ASC 606 are nearly complete.  For the vast majority of our businesses, we will not have any material differences in the amount or timing of revenues once we adopt ASC 606.

However, based on guidance in ASC 606 applicable to non-cash consideration, we will start recognizing revenue in connection with equity NGL volumes we receive as consideration for providing processing services under percent of liquids and similar arrangements.  The value assigned to this non-cash consideration and related inventory will be based on the fair value of NGLs we are entitled to at the time the processing services are performed.  An additional revenue stream, along with the related cost of sales, would be recognized in connection with the ultimate sale of the NGL products derived from the NGLs acquired as a fee for service. Under current accounting practice, we only recognize revenue from the downstream sale of NGL products and do not record service revenue.  Based on initial estimates, the changes required by ASC 606 are expected to result in less than a 5 percent increase in our total consolidated revenues.

Given the rapid turnover of our inventories of NGL products each month, we do not expect a significant change in our gross operating margin from natural gas processing and related NGL marketing activities as a result of the changes required by ASC 606.  The additional revenue stream recognized in connection with receipt of the equity NGLs will be offset by an equal cost of sales amount when the associated NGL products are sold, which is expected to typically be completed in the same accounting period.

As a result of adopting the new standard, there will be significant changes to our disclosures based on the additional requirements prescribed by ASC 606.  These new disclosures include information regarding the significant judgments used in evaluating when and how revenue is (or will be) recognized and data related to contract assets and liabilities.  Additionally, we are revising our business processes, systems and controls to ensure the accuracy and timeliness of the recognition and disclosure requirements under the new revenue guidance.

Leases.  In February 2016, the FASB issued ASC 842, Leases (“ASC 842”), which requires substantially all leases (with the exception of leases with a term of one year or less) to be recorded on the balance sheet using a method referred to as the right-of-use (“ROU”) asset approach.  We plan to adopt the new standard on January 1, 2019 using a modified retrospective approach.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The new standard introduces two lease accounting models, which result in a lease being classified as either a “finance” or “operating” lease on the basis of whether the lessee effectively obtains control of the underlying asset during the lease term.  A lease would be classified as a finance lease if it meets one of five classification criteria, four of which are generally consistent with current lease accounting guidance.  By default, a lease that does not meet the criteria to be classified as a finance lease will be deemed an operating lease.  Regardless of classification, the initial measurement of both lease types will result in the balance sheet recognition of a ROU asset representing a company’s right to use the underlying asset for a specified period of time and a corresponding lease liability.  The lease liability will be recognized at the present value of the future lease payments, and the ROU asset will equal the lease liability adjusted for any prepaid rent, lease incentives provided by the lessor, and any indirect costs.

The subsequent measurement of each type of lease varies.  Leases classified as a finance lease will be accounted for using the effective interest method.  Under this approach, a lessee will amortize the ROU asset (generally on a straight-line basis in a manner similar to depreciation) and the discount on the lease liability (as a component of interest expense).  Leases classified as an operating lease will result in the recognition of a single lease expense amount that is recorded on a straight-line basis (or another systematic basis, if more appropriate).

We have started the process of reviewing our lease agreements in light of the new guidance.  Although we are in the early stages of our ASC 842 implementation project, we anticipate that this new lease guidance will cause significant changes to the way leases are recorded, presented and disclosed in our consolidated financial statements.

Derivative Instruments. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements.  As a result, companies will record the entire change in fair value of cash flow hedges to other comprehensive income until the hedged item impacts earnings and present the earnings effect of cash flow and fair value hedges in the same income statement line item that is used to present the earnings impact of the hedged item.  Companies will no longer be required to separately measure and disclose the effect of hedge ineffectiveness, but will need to include tabular disclosures related to income statement effect of cash flow and fair value hedges and cumulative basis adjustments for fair value hedges.  We are currently evaluating the impact of this guidance on our consolidated financial statements and the timing of our planned adoption.

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 margin requirements change.  

At September 30, 2017 and December 31, 2016, our restricted cash amounts were $66.8 million and $354.5 million, respectively.   The balance of restricted cash decreased since December 31, 2016 primarily due to the settlement of derivative instruments related to contango positions during 2017.  See Note 12 for information regarding our derivative instruments and hedging activities.

Impact of ASU 2016-18.  The FASB recently issued an amendment, ASU 2016-18, to Topic 230, Statement of Cash Flows, that standardizes the presentation of transfers to and from restricted cash within the cash flow statement.  As a result, the cash flow statement will present changes in total cash amounts, regardless of whether the cash balances are restricted or unrestricted.  The new guidance does not affect the separate presentation of restricted and unrestricted (i.e., cash and cash equivalents) amounts on the balance sheet.   Furthermore, this change in financial statement presentation will not impact our consolidated liquidity.

We intend to early adopt the new cash flow statement guidance on December 31, 2017 by retrospectively adjusting our consolidated cash flow statements to eliminate the presentation of cash inflows and outflows associated with restricted cash that were historically shown in the investing activities section.

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

Note 3.  Inventories

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

 
 
September 30,
2017
   
December 31,
2016
 
NGLs
 
$
1,527.8
   
$
1,156.1
 
Petrochemicals and refined products
   
223.4
     
220.7
 
Crude oil
   
211.9
     
360.0
 
Natural gas
   
20.1
     
33.7
 
Total
 
$
1,983.2
   
$
1,770.5
 

Due to fluctuating commodity prices, we recognize lower of cost or net realizable value 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 net realizable value adjustments for the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2017
   
2016
   
2017
   
2016
 
Cost of sales (1)
 
$
5,049.6
   
$
4,088.6
   
$
15,116.4
   
$
11,135.6
 
Lower of cost or net realizable value adjustments within cost of sales
   
1.7
     
1.5
     
7.7
     
7.6
 
   
(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.
 


Note 4.  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,
2017
   
December 31,
2016
 
Plants, pipelines and facilities (1)
 
3-45 (5)
 
 
$
35,970.8
   
$
35,124.6
 
Underground and other storage facilities (2)
 
5-40 (6)
 
   
3,427.0
     
3,326.9
 
Transportation equipment (3)
 
3-10
     
174.3
     
165.8
 
Marine vessels (4)
 
15-30
     
802.4
     
800.7
 
Land
           
271.1
     
264.6
 
Construction in progress
           
4,942.0
     
3,320.7
 
Total
           
45,587.6
     
43,003.3
 
Less accumulated depreciation
           
10,608.3
     
9,710.8
 
Property, plant and equipment, net
         
$
34,979.3
   
$
33,292.5
 
   
(1) Plants, pipelines and facilities include processing plants; NGL, natural gas, crude oil and petrochemical and refined products pipelines; terminal loading and unloading facilities; buildings; office furniture and equipment; 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) Transportation equipment includes tractor-trailer tank trucks and other vehicles and similar assets used in our operations.
(4) Marine vessels include tow boats, barges and related equipment used in our marine transportation business.
(5) 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; buildings, 20-40 years; office furniture and equipment, 3-20 years; and laboratory and shop equipment, 5-35 years.
(6) 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.
 

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
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,
 
 
 
2017
   
2016
   
2017
   
2016
 
Depreciation expense (1)
 
$
327.5
   
$
309.4
   
$
966.1
   
$
903.5
 
Capitalized interest (2)
   
53.6
     
38.9
     
137.7
     
127.8
 
   
(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.
 

Azure Acquisition
In April 2017, we closed the acquisition of a midstream energy business from Azure Midstream Partners, LP and its operating subsidiaries (collectively, “Azure”) for $191.4 million in cash.  The acquired business assets, which are located primarily in East Texas, include over 730 miles of natural gas gathering pipelines and two natural gas processing facilities with an aggregate processing capacity of 130 million cubic feet per day.   The acquired business serves production from the Haynesville Shale and Bossier, Cotton Valley and Travis Peak formations.

The financial results of the acquired business are reflected in our consolidated results from April 30, 2017, which was the effective date of the Azure acquisition.  On a historical pro forma consolidated basis, our revenues, costs and expenses, operating income, net income attributable to Enterprise Products Partners L.P., and earnings per unit amounts for the three and nine months ended September 30, 2016 and 2017 would not have differed materially from those we actually reported had the Azure acquisition been completed on January 1, 2016 rather than April 30, 2017.

The following table presents the preliminary fair value allocation of assets acquired and liabilities assumed in the Azure acquisition at April 30, 2017.  The allocation remains provisional due to ongoing efforts to clarify certain environmental liabilities (estimated at $2.2 million), which are expected to be resolved by December 31, 2017.

Assets acquired in business combination:
     
Current assets
 
$
3.1
 
Property, plant and equipment
   
194.2
 
Total assets acquired
   
197.3
 
Liabilities assumed in business combination:
       
Current liabilities
   
1.4
 
Long-term liabilities
   
4.5
 
Total liabilities assumed
   
5.9
 
Cash used for Azure acquisition
 
$
191.4
 

The contribution of this newly acquired business to our consolidated revenues and net income was not material for the three and nine months ended September 30, 2017.

Final Payment to Acquire EFS Midstream in July 2016
We acquired EFS Midstream in July 2015 for approximately $2.1 billion in cash, which was payable in two installments.  The initial payment of $1.1 billion was paid at closing in July 2015.  The second and final installment of $1.0 billion was paid in July 2016.

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.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Property, plant and equipment at September 30, 2017 and December 31, 2016 includes $41.3 million and $44.9 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 January 1, 2017:

ARO liability balance, January 1, 2017
 
$
85.4
 
Liabilities incurred
   
4.7
 
Liabilities settled
   
(2.0
)
Revisions in estimated cash flows
   
(5.6
)
Accretion expense
   
4.1
 
ARO liability balance, September 30, 2017
 
$
86.6
 


Note 5.  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.

 
 
Ownership
Interest at
September 30,
2017
   
September 30,
2017
   
December 31,
2016
 
NGL Pipelines & Services:
                 
Venice Energy Service Company, L.L.C.
 
13.1%
 
 
$
25.9
   
$
24.8
 
K/D/S Promix, L.L.C.
 
50%
 
   
32.0
     
33.7
 
Baton Rouge Fractionators LLC
 
32.2%
 
   
17.3
     
17.3
 
Skelly-Belvieu Pipeline Company, L.L.C.
 
50%
 
   
37.2
     
38.9
 
Texas Express Pipeline LLC
 
35%
 
   
321.1
     
331.9
 
Texas Express Gathering LLC
 
45%
 
   
36.2
     
35.8
 
Front Range Pipeline LLC
 
33.3%
 
   
165.8
     
165.4
 
Delaware Basin Gas Processing LLC
 
50%
 
   
107.3
     
102.6
 
Crude Oil Pipelines & Services:
                       
Seaway Crude Pipeline Company LLC
 
50%
 
   
1,378.4
     
1,393.8
 
Eagle Ford Pipeline LLC
 
50%
 
   
384.5
     
377.9
 
Eagle Ford Terminals Corpus Christi LLC
 
50%
 
   
66.9
     
52.9
 
Natural Gas Pipelines & Services:
                       
White River Hub, LLC
 
50%
 
   
21.2
     
21.7
 
Petrochemical & Refined Products Services:
                       
Centennial Pipeline LLC
 
50%
 
   
61.4
     
62.3
 
Other
 
Various
     
5.0
     
18.3
 
Total investments in unconsolidated affiliates
         
$
2,660.2
   
$
2,677.3
 

The following table presents our equity in income (loss) of unconsolidated affiliates by business segment for the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2017
   
2016
   
2017
   
2016
 
NGL Pipelines & Services
 
$
18.8
   
$
15.9
   
$
53.3
   
$
45.0
 
Crude Oil Pipelines & Services
   
95.9
     
78.4
     
266.3
     
234.3
 
Natural Gas Pipelines & Services
   
0.9
     
1.0
     
2.8
     
2.9
 
Petrochemical & Refined Products Services
   
(2.2
)
   
(3.0
)
   
(7.2
)
   
(12.4
)
Total
 
$
113.4
   
$
92.3
   
$
315.2
   
$
269.8
 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Excess Cost
On occasion, the price we pay to acquire an ownership interest in a company exceeds the underlying carrying value of the capital accounts we acquire.  These excess cost amounts are attributable to the fair value of the underlying tangible assets of these entities exceeding their respective book carrying values at the time of our acquisition of ownership interests in these entities.  We amortize such excess cost amounts as a reduction to equity earnings in a manner similar to depreciation.

The following table presents our unamortized excess cost amounts by business segment at the dates indicated:

 
 
September 30,
2017
   
December 31,
2016
 
NGL Pipelines & Services
 
$
23.2
   
$
24.1
 
Crude Oil Pipelines & Services
   
18.4
     
19.0
 
Petrochemical & Refined Products Services
   
1.8
     
2.1
 
Total
 
$
43.4
   
$
45.2
 

Amortization of excess cost amounts were $0.6 million and $0.5 million for the three months ended September 30, 2017 and 2016, respectively.  For the nine months ended September 30, 2017 and 2016, amortization of excess costs amounts were $1.6 million and $1.6 million, respectively.

Summarized Combined Financial Information of Unconsolidated Affiliates
Combined results of operations data for the periods indicated for our unconsolidated affiliates are summarized in the following table (all data presented on a 100 percent basis):

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2017
   
2016
   
2017
   
2016
 
Income Statement Data:
                       
Revenues
 
$
401.6
   
$
328.9
   
$
1,116.7
   
$
991.9
 
Operating income
   
249.3
     
193.6
     
682.8
     
589.0
 
Net income
   
247.5
     
192.0
     
688.0
     
585.5
 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 6.  Intangible Assets and Goodwill

Identifiable Intangible Assets
The following table summarizes our intangible assets by business segment at the dates indicated:

 
 
September 30, 2017
   
December 31, 2016
 
 
 
Gross
Value
   
Accumulated
Amortization
   
Carrying
Value
   
Gross
Value
   
Accumulated
Amortization
   
Carrying
Value
 
NGL Pipelines & Services:
                                   
Customer relationship intangibles
 
$
447.4
   
$
(183.8
)
 
$
263.6
   
$
447.4
   
$
(172.7
)
 
$
274.7
 
Contract-based intangibles
   
279.2
     
(215.1
)
   
64.1
     
279.9
     
(204.4
)
   
75.5
 
Segment total
   
726.6
     
(398.9
)
   
327.7
     
727.3
     
(377.1
)
   
350.2
 
Crude Oil Pipelines & Services:
                                               
Customer relationship intangibles
   
2,203.5
     
(114.7
)
   
2,088.8
     
2,204.4
     
(84.5
)
   
2,119.9
 
Contract-based intangibles
   
281.0
     
(158.8
)
   
122.2
     
281.0
     
(121.9
)
   
159.1
 
Segment total
   
2,484.5
     
(273.5
)
   
2,211.0
     
2,485.4
     
(206.4
)
   
2,279.0
 
Natural Gas Pipelines & Services:
                                               
Customer relationship intangibles
   
1,350.3
     
(409.5
)
   
940.8
     
1,350.3
     
(390.0
)
   
960.3
 
Contract-based intangibles
   
464.7
     
(377.3
)
   
87.4
     
464.7
     
(370.5
)
   
94.2
 
Segment total
   
1,815.0
     
(786.8
)
   
1,028.2
     
1,815.0
     
(760.5
)
   
1,054.5
 
Petrochemical & Refined Products Services:
                                               
Customer relationship intangibles
   
185.5
     
(48.4
)
   
137.1
     
185.5
     
(43.9
)
   
141.6
 
Contract-based intangibles
   
53.5
     
(17.7
)
   
35.8
     
54.0
     
(15.2
)
   
38.8
 
Segment total
   
239.0
     
(66.1
)
   
172.9
     
239.5
     
(59.1
)
   
180.4
 
Total intangible assets
 
$
5,265.1
   
$
(1,525.3
)
 
$
3,739.8
   
$
5,267.2
   
$
(1,403.1
)
 
$
3,864.1
 

The following table presents the amortization expense of our intangible assets by business segment for the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2017
   
2016
   
2017
   
2016
 
NGL Pipelines & Services
 
$
7.2
   
$
7.6
   
$
21.8
   
$
23.1
 
Crude Oil Pipelines & Services
   
22.6
     
23.2
     
68.0
     
75.6
 
Natural Gas Pipelines & Services
   
9.3
     
8.1
     
26.3
     
25.0
 
Petrochemical & Refined Products Services
   
2.3
     
2.3
     
7.0
     
6.8
 
Total
 
$
41.4
   
$
41.2
   
$
123.1
   
$
130.5
 

The following table presents our forecast of amortization expense associated with existing intangible assets for the periods indicated:

Remainder
of 2017
   
2018
   
2019
   
2020
   
2021
 
$
40.8
   
$
163.8
   
$
157.7
   
$
152.8
   
$
163.2
 

Goodwill
Goodwill represents the excess of the purchase price of an acquired business over the amounts assigned to assets acquired and liabilities assumed in the transaction.  There has been no change in our goodwill amounts since those reported in our 2016 Form 10-K.

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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 7.  Debt Obligations

The following table presents our consolidated debt obligations (arranged by company and maturity date) at the dates indicated:
 
 
 
September 30,
2017
   
December 31,
2016
 
EPO senior debt obligations:
           
Commercial Paper Notes, variable-rates
 
$
1,910.0
   
$
1,777.2
 
Senior Notes L, 6.30% fixed-rate, due September 2017
   
--
     
800.0
 
Senior Notes V, 6.65% fixed-rate, due April 2018
   
349.7
     
349.7
 
Senior Notes OO, 1.65% fixed-rate, due May 2018
   
750.0
     
750.0
 
364-Day Revolving Credit Agreement, variable-rate, due September 2018
   
--
     
--
 
Senior Notes N, 6.50% fixed-rate, due January 2019
   
700.0
     
700.0
 
Senior Notes LL, 2.55% fixed-rate, due October 2019
   
800.0
     
800.0
 
Senior Notes Q, 5.25% fixed-rate, due January 2020
   
500.0
     
500.0
 
Senior Notes Y, 5.20% fixed-rate, due September 2020
   
1,000.0
     
1,000.0
 
Senior Notes RR, 2.85% fixed-rate, due April 2021
   
575.0
     
575.0
 
Senior Notes CC, 4.05% fixed-rate, due February 2022
   
650.0
     
650.0
 
Multi-Year Revolving Credit Facility, variable-rate, due September 2022
   
--
     
--
 
Senior Notes HH, 3.35% fixed-rate, due March 2023
   
1,250.0
     
1,250.0
 
Senior Notes JJ, 3.90% fixed-rate, due February 2024
   
850.0
     
850.0
 
Senior Notes MM, 3.75% fixed-rate, due February 2025
   
1,150.0
     
1,150.0
 
Senior Notes PP, 3.70% fixed-rate, due February 2026
   
875.0
     
875.0
 
Senior Notes SS, 3.95% fixed-rate, due February 2027
   
575.0
     
575.0
 
Senior Notes D, 6.875% fixed-rate, due March 2033
   
500.0
     
500.0
 
Senior Notes H, 6.65% fixed-rate, due October 2034
   
350.0
     
350.0
 
Senior Notes J, 5.75% fixed-rate, due March 2035
   
250.0
     
250.0
 
Senior Notes W, 7.55% fixed-rate, due April 2038
   
399.6
     
399.6
 
Senior Notes R, 6.125% fixed-rate, due October 2039
   
600.0
     
600.0
 
Senior Notes Z, 6.45% fixed-rate, due September 2040
   
600.0
     
600.0
 
Senior Notes BB, 5.95% fixed-rate, due February 2041
   
750.0
     
750.0
 
Senior Notes DD, 5.70% fixed-rate, due February 2042
   
600.0
     
600.0
 
Senior Notes EE, 4.85% fixed-rate, due August 2042
   
750.0
     
750.0
 
Senior Notes GG, 4.45% fixed-rate, due February 2043
   
1,100.0
     
1,100.0
 
Senior Notes II, 4.85% fixed-rate, due March 2044
   
1,400.0
     
1,400.0
 
Senior Notes KK, 5.10% fixed-rate, due February 2045
   
1,150.0
     
1,150.0
 
Senior Notes QQ, 4.90% fixed-rate, due May 2046
   
975.0
     
975.0
 
Senior Notes NN, 4.95% fixed-rate, due October 2054
   
400.0
     
400.0
 
TEPPCO senior debt obligations:
               
TEPPCO Senior Notes, 6.65% fixed-rate, due April 2018
   
0.3
     
0.3
 
TEPPCO Senior Notes, 7.55% fixed-rate, due April 2038
   
0.4
     
0.4
 
Total principal amount of senior debt obligations
   
21,760.0
     
22,427.2
 
EPO Junior Subordinated Notes A, variable-rate, due August 2066 (1)
   
521.1
     
521.1
 
EPO Junior Subordinated Notes C, fixed/variable-rate, due June 2067 (2)
   
256.4
     
256.4
 
EPO Junior Subordinated Notes B, fixed/variable-rate, due January 2068 (3)
   
682.7
     
682.7
 
EPO Junior Subordinated Notes D, fixed/variable-rate, due August 2077 (4)
   
700.0
     
--
 
EPO Junior Subordinated Notes E, fixed/variable-rate, due August 2077 (5)
   
1,000.0
     
--
 
TEPPCO Junior Subordinated Notes, fixed/variable-rate, due June 2067 
   
14.2
     
14.2
 
Total principal amount of senior and junior debt obligations
   
24,934.4
     
23,901.6
 
Other, non-principal amounts
   
(214.5
)
   
(203.9
)
Less current maturities of debt
   
(3,009.0
)
   
(2,576.8
)
Total long-term debt
 
$
21,710.9
   
$
21,120.9
 
   
(1) Variable rate is reset quarterly and based on 3-month LIBOR plus 3.708%.
(2) Fixed rate of 7.000% through May 31, 2017; thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 2.778%.
(3) Fixed rate of 7.034% through January 14, 2018; thereafter, the rate will be the greater of 7.034% or a variable rate reset quarterly and based on 3-month LIBOR plus 2.680%.
(4) Fixed rate of 4.875% through August 15, 2022; thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 2.986%.
(5) Fixed rate of 5.250% through August 15, 2027; thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 3.033%.
 

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

The following table presents the range of interest rates and weighted-average interest rates paid on our consolidated variable-rate debt during the nine months ended September 30, 2017:

 
Range of Interest
Rates Paid
Weighted-Average
Interest Rate Paid
Commercial Paper Notes
0.90% to 1.53%
1.28%
Prior Multi-Year Revolving Credit Facility (replaced in September 2017)
2.23%
2.23%
EPO Junior Subordinated Notes A
4.59% to 5.02%
4.83%
EPO Junior Subordinated Notes C
3.98% to 4.09%
4.01%

The following table presents contractually scheduled maturities of our consolidated debt obligations outstanding at September 30, 2017 for the next five years, and in total thereafter:

 
       
Scheduled Maturities of Debt
 
 
 
Total
   
Remainder
of 2017
   
2018
   
2019
   
2020
   
2021
   
Thereafter
 
Commercial Paper Notes
 
$
1,910.0
   
$
1,910.0
   
$
--
   
$
--
   
$
--
   
$
--
   
$
--
 
Senior Notes
   
19,850.0
     
--
     
1,100.0
     
1,500.0
     
1,500.0
     
575.0
     
15,175.0
 
Junior Subordinated Notes
   
3,174.4
     
--
     
--
     
--
     
--
     
--
     
3,174.4
 
Total
 
$
24,934.4
   
$
1,910.0
   
$
1,100.0
   
$
1,500.0
   
$
1,500.0
   
$
575.0
   
$
18,349.4
 

Parent-Subsidiary Guarantor Relationships
Enterprise Products Partners L.P. acts as guarantor of the consolidated debt obligations of EPO, with the exception of the remaining debt obligations of TEPPCO.  If EPO were to default on any of its guaranteed debt, Enterprise Products Partners L.P. would be responsible for full and unconditional repayment of that obligation.

Issuance of $1.7 Billion of Junior Subordinated Notes in August 2017
In August 2017, EPO issued a combined $1.7 billion in principal amount of junior subordinated notes in two series.  The EPO Junior Subordinated Notes D (“Junior Notes D”), which were issued at $700 million principal amount in the aggregate, are redeemable at EPO’s option, in whole or in part, on one or more occasions, on or after August 16, 2022 (the non-call 5 notes) at 100% of their principal amount, plus any accrued and unpaid interest.  Junior Notes D bear interest at a fixed rate of 4.875% per year up to, but not including, August 16, 2022.  From, and including August 16, 2022, Junior Notes D will bear interest at a floating rate based on a three-month LIBOR rate plus 2.986%, reset quarterly.  Junior Notes D mature in August 2077.

The EPO Junior Subordinated Notes E (“Junior Notes E”), which were issued at $1.0 billion principal amount in the aggregate, are redeemable at EPO’s option, in whole or in part, on one or more occasions, on or after August 16, 2027 (the non-call 10 notes) at 100% of their principal amount, plus any accrued and unpaid interest.  Junior Notes E bear interest at a fixed rate of 5.25% per year up to, but not including, August 16, 2027. From, and including August 16, 2027, Junior Notes E will bear interest at a floating rate based on a three-month LIBOR rate plus 3.033%, reset quarterly.  Junior Notes E also mature in August 2077.

Net proceeds from the issuance of Junior Notes D and E were used for (i) the temporary repayment of approximately $900 million of amounts then outstanding under EPO’s commercial paper program and (ii) the repayment of $800 million in principal amount of Senior Notes L that matured in September 2017.

EPO’s payment obligations under Junior Notes D and E are subordinated to the prior payment in full of all of its current and future senior indebtedness (as defined in the indenture governing such notes).  Enterprise Products Partners L.P. guarantees repayment of amounts due under Junior Notes D and E on an unsecured and junior subordinated basis.  The indenture governing these notes allows EPO to defer interest payments on one or more occasions for up to ten consecutive years subject to certain conditions.  Subject to certain exceptions, during any period in which interest payments are deferred, neither we nor EPO can declare or pay any distributions with respect to, or redeem, purchase or acquire, any of our respective equity securities or make any payments on, or repay, repurchase or redeem, any of our respective debt securities that rank equally with or are subordinate to EPO’s junior subordinated notes (or any related guarantee, as applicable).  Each series of EPO’s junior subordinated notes ranks equally with each other.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

364-Day Revolving Credit Agreement
In September 2017, EPO entered into a 364-Day Revolving Credit Agreement that replaced its prior 364-day credit facility.  The new 364-Day Revolving Credit Agreement matures in September 2018. There are currently no principal amounts outstanding under this revolving credit agreement.

Under the terms of the new 364-Day Revolving Credit Agreement, EPO may borrow up to $1.5 billion (which may be increased by up to $200 million to $1.7 billion at EPO’s election, provided certain conditions are met) at a variable interest rate for a term of 364 days, subject to the terms and conditions set forth therein.  To the extent that principal amounts are outstanding at the maturity date, EPO may elect to have the entire principal balance then outstanding continued as a non-revolving term loan for a period of one additional year, payable in September 2019. Borrowings under this revolving credit agreement may be used for working capital, capital expenditures, acquisitions and general company purposes.

The 364-Day Revolving Credit Agreement contains customary representations, warranties, covenants (affirmative and negative) and events of default, the occurrence of which would permit the lenders to accelerate the maturity date of any amounts borrowed under this credit agreement.  The credit agreement also restricts EPO’s ability to pay cash distributions to its parent, Enterprise Products Partners L.P., if an event of default (as defined in the credit agreement) has occurred and is continuing at the time such distribution is scheduled to be paid or would result therefrom.

EPO’s obligations under the 364-Day Revolving Credit Agreement are not secured by any collateral; however, they are guaranteed by Enterprise Products Partners L.P.

Multi-Year Revolving Credit Facility
In September 2017, EPO entered into a revolving credit agreement that matures in September 2022 (the “Multi-Year Revolving Credit Facility”).  This new facility replaced EPO’s prior multi-year revolving credit facility that was scheduled to mature in September 2020.  There are currently no principal amounts outstanding under the new credit facility.

Under the terms of the new Multi-Year Revolving Credit Facility, EPO may borrow up to $4.0 billion (which may be increased by up to $500 million to $4.5 billion at EPO’s election, provided certain conditions are met) at a variable interest rate for a term of five years, subject to the terms and conditions set forth therein.  Borrowings under this revolving credit facility may be used as a backstop for commercial paper and for working capital, capital expenditures, acquisitions and general company purposes.

The Multi-Year Revolving Credit Facility contains customary representations, warranties, covenants (affirmative and negative) and events of default, the occurrence of which would permit the lenders to accelerate the maturity date of any amounts borrowed under this credit facility.  The credit facility also restricts EPO’s ability to pay cash distributions to its parent, Enterprise Products Partners L.P., if an event of default (as defined in the credit facility) has occurred and is continuing at the time such distribution is scheduled to be paid or would result therefrom.

EPO’s obligations under the Multi-Year Revolving Credit Facility are not secured by any collateral; however, they are guaranteed by Enterprise Products Partners L.P.

Lender Financial Covenants
We were in compliance with the financial covenants of our consolidated debt agreements at September 30, 2017.

Letters of Credit
At September 30, 2017, EPO had $66.4 million of letters of credit outstanding primarily related to our commodity hedging activities.

19

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

Note 8.  Equity and Distributions

Partners’ Equity
Partners’ equity reflects the various classes of limited partner interests (i.e., common units, including restricted common units) outstanding.  The following table summarizes changes in the number of our outstanding units from January 1, 2017 to September 30, 2017:

   
Common
Units
(Unrestricted)
   
Restricted
Common
Units
   
Total
Common
Units
 
Number of units outstanding at January 1, 2017
   
2,116,906,120
     
682,294
     
2,117,588,414
 
Common units issued in connection with ATM program
   
21,807,726
     
--
     
21,807,726
 
Common units issued in connection with DRIP and EUPP
   
10,710,589
     
--
     
10,710,589
 
Common units issued in connection with the vesting of phantom unit awards
   
2,413,070
     
--
     
2,413,070
 
Common units issued in connection with the vesting of restricted common unit awards
   
679,370
     
(679,370
)
   
--
 
Forfeiture of restricted common unit awards
   
--
     
(1,250
)
   
(1,250
)
Cancellation of treasury units acquired in connection with the
vesting of equity-based awards
   
(1,006,715
)
   
--
     
(1,006,715
)
Common units issued in connection with employee compensation
   
1,176,103
     
--
     
1,176,103
 
Other
   
14,685
     
--
     
14,685
 
Number of units outstanding at September 30, 2017
   
2,152,700,948
     
1,674
     
2,152,702,622
 

The net cash proceeds we received from the issuance of common units during the nine months ended September 30, 2017 were used to temporarily reduce amounts outstanding under EPO’s commercial paper program and revolving credit facilities and for general company purposes.

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

Universal shelf registration statement.  We have a universal shelf registration statement (the “2016 Shelf”) on file with the SEC.  The 2016 Shelf allows Enterprise Products Partners L.P. and EPO (each on a standalone basis) to issue an unlimited amount of equity and debt securities, respectively.  EPO issued $1.7 billion of junior subordinated notes in August 2017 using this registration statement (see Note 7).

At-the-Market (“ATM”) program.  We have a registration statement on file with the SEC covering the issuance of up to $1.89 billion of our common units in amounts, at prices and on terms to be determined by market conditions and other factors at the time of such offerings in connection with our ATM program.  Pursuant to this program, we may sell common units under an equity distribution agreement between Enterprise Products Partners L.P. and certain broker-dealers from time-to-time by means of ordinary brokers’ transactions through the NYSE at market prices, in block transactions or as otherwise agreed to with the broker-dealer parties to the agreement.  

During the nine months ended September 30, 2017, we sold 21,807,726 common units under the ATM program for aggregate gross proceeds of $603.1 million.  After taking into account applicable costs, our transactions under the ATM program resulted in aggregate net cash proceeds of $597.3 million during the nine months ended September 30, 2017.

During the nine months ended September 30, 2016, we issued 76,113,492 common units under this program for aggregate gross cash proceeds of $1.87 billion, resulting in total net cash proceeds of $1.85 billion.  This includes 3,830,256 common units sold in January 2016 to a privately held affiliate of EPCO, which generated gross proceeds of $100 million.  

After taking into account the aggregate sales price of common units sold under the ATM program through September 30, 2017, we have the capacity to issue additional common units under the ATM program up to an aggregate sales price of $838.6 million.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Distribution reinvestment plan.  We also have registration statements on file with the SEC collectively authorizing the issuance of up to 240,000,000 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 new common units.

We issued a total of 10,345,655 common units under our DRIP during the nine months ended September 30, 2017, which generated net cash proceeds of $269.9 million.  During the nine months ended September 30, 2016, we issued 12,946,724 common units under our DRIP, which generated net cash proceeds of $306.2 million.  Privately held affiliates of EPCO reinvested $100 million through the DRIP during the nine months ended September 30, 2016 (this amount being a component of the net cash proceeds presented).

After taking into account the number of common units issued under the DRIP through September 30, 2017, we have the capacity to issue an additional 88,912,840 common units under this plan.

Employee unit purchase plan.  In addition to the DRIP, we have registration statements on file with the SEC authorizing the issuance of up to 8,000,000 of our common units in connection with our employee unit purchase plan (“EUPP”).  We issued 364,934 common units under our EUPP during the nine months ended September 30, 2017, which generated net cash proceeds of $10.0 million.  During the nine months ended September 30, 2016, we issued 387,834 common units under our EUPP, which generated net cash proceeds of $9.8 million.  After taking into account the number of common units issued under the EUPP through September 30, 2017, we may issue an additional 5,900,541 common units under this plan.

Common units issued in connection with employee compensation.  In February 2017, the dollar value of  discretionary employee bonus payments with respect to the year ended December 31, 2016 (less any retirement plan deductions and withholding taxes) was remitted through the issuance of an equivalent value of newly issued Enterprise common units under EPCO’s 2008 Enterprise Products Long-Term Incentive Plan (Third Amendment and Restatement) (“2008 Plan”).  We issued 1,176,103 common units, which had a value of $33.7 million, in connection with the employee bonus payments.  The compensation expense associated with this issuance of common units was recognized during the year ended December 31, 2016.  See Note 11 for additional information regarding the 2008 Plan.

Noncontrolling Interests
Noncontrolling interests represent third party equity ownership interests in our consolidated subsidiaries (e.g., joint venture partners in entities in which we have a controlling ownership interest).

Accumulated Other Comprehensive Income (Loss)
The following tables present the components of accumulated other comprehensive income (loss) as reported on our Unaudited Condensed Consolidated Balance Sheets at the dates indicated:

 
 
Gains (Losses) on
Cash Flow Hedges
             
 
 
Commodity
Derivative
Instruments
   
Interest Rate
Derivative
Instruments
   
Other
   
Total
 
Balance, January 1, 2017
 
$
(83.8
)
 
$
(199.8
)
 
$
3.6
   
$
(280.0
)
Other comprehensive loss before reclassifications
   
(2.6
)
   
(4.8
)
   
(0.1
)
   
(7.5
)
Amounts reclassified from accumulated other comprehensive loss (income)
   
(49.0
)
   
29.9
     
--
     
(19.1
)
Total other comprehensive income (loss)
   
(51.6
)
   
25.1
     
(0.1
)
   
(26.6
)
Balance, September 30, 2017
 
$
(135.4
)
 
$
(174.7
)
 
$
3.5
   
$
(306.6
)
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 
 
Gains (Losses) on
Cash Flow Hedges
             
 
 
Commodity
Derivative
Instruments
   
Interest Rate
Derivative
Instruments
   
Other
   
Total
 
Balance, January 1, 2016
 
$
56.6
   
$
(279.5
)
 
$
3.7
   
$
(219.2
)
Other comprehensive loss before reclassifications
   
(52.2
)
   
(16.3
)
   
(0.1
)
   
(68.6
)
Amounts reclassified from accumulated other comprehensive loss (income)
   
(48.7
)
   
27.8
     
--
     
(20.9
)
Total other comprehensive income (loss)
   
(100.9
)
   
11.5
     
(0.1
)
   
(89.5
)
Balance, September 30, 2016
 
$
(44.3
)
 
$
(268.0
)
 
$
3.6
   
$
(308.7
)

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

 
  
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
Location  
2017
   
2016
   
2017
   
2016
 
Losses (gains) on cash flow hedges:
                         
Interest rate derivatives
Interest expense
 
$
10.3
   
$
9.4
   
$
29.9
   
$
27.8
 
Commodity derivatives
Revenue
   
(10.6
)
   
(23.0
)
   
(49.1
)
   
(47.6
)
Commodity derivatives
Operating costs and expenses
   
0.5
     
(3.9
)
   
0.1
     
(1.1
)
Total
 
 
$
0.2
   
$
(17.5
)
 
$
(19.1
)
 
$
(20.9
)

For information regarding our interest rate and commodity derivative instruments, see Note 12.

Cash Distributions
The following table presents Enterprise’s declared quarterly cash distribution rates per common unit with respect to the quarter indicated:

 
 
Distribution Per
Common Unit
 
Record
Date
Payment
Date
2016
            
1st Quarter
 
$
0.3950
 
4/29/2016
5/6/2016
2nd Quarter
 
$
0.4000
 
7/29/2016
8/5/2016
3rd Quarter
 
$
0.4050
 
10/31/2016
11/7/2016
2017
       
 
    
1st Quarter
 
$
0.4150
 
4/28/2017
5/8/2017
2nd Quarter
 
$
0.4200
 
7/31/2017
8/7/2017
3rd Quarter
 
$
0.4225
 
10/31/2017
11/7/2017

In October 2017, management announced plans to recommend to the Board cash distribution increases per quarter of $0.0025 per unit with respect to each of the six fiscal quarters beginning with the third quarter of 2017 and ending with the fourth quarter of 2018.  The Board declared a $0.4225 per common unit cash distribution to limited partners with respect to the third quarter of 2017, which will be paid on November 7, 2017.  Management currently expects to recommend to the Board the following quarterly cash distributions through the end of 2018 (with respect to each quarter presented): $0.4250, fourth quarter of 2017; $0.4275, first quarter of 2018; $0.4300, second quarter of 2018; $0.4325, third quarter of 2018; and $0.4350, fourth quarter of 2018.

The payment of any quarterly cash distribution is subject to Board approval and management’s evaluation of our financial condition, results of operations and cash flows in connection with such payment.  Management will propose recommendations to the Board regarding our cash distribution growth rate for 2019 as we consider future investment opportunities and alternatives for returning capital to investors.

22

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

Note 9.  Business Segments

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

Our business segments are generally organized and managed according to the types of services rendered (or technologies employed) and products produced and/or sold.  Financial information regarding these segments is evaluated regularly by our chief operating decision makers in deciding how to allocate resources and in assessing operating and financial performance.

Segment Gross Operating Margin
We evaluate segment performance based on our financial measure of gross operating margin.  Gross operating margin is an important performance measure of the core profitability of our operations and forms the basis of our internal financial reporting.  We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results.  Gross operating margin is exclusive of other income and expense transactions, income taxes, the cumulative effect of changes in accounting principles and extraordinary charges.  Gross operating margin is presented on a 100 percent basis before any allocation of earnings to noncontrolling interests.

The following table presents our measurement of total segment gross operating margin for the periods presented.  The GAAP financial measure most directly comparable to total segment gross operating margin is operating income.

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2017
   
2016
   
2017
   
2016
 
Operating income
 
$
879.2
   
$
905.0
   
$
2,849.5
   
$
2,657.5
 
Adjustments to reconcile operating income to total gross operating margin:
                               
   Add depreciation, amortization and accretion expense in operating costs and expenses
   
383.9
     
367.1
     
1,139.3
     
1,085.6
 
   Add asset impairment and related charges in operating costs and expenses
   
10.0
     
6.8
     
35.2
     
28.7
 
   Add net gains attributable to asset sales in operating costs and expenses
   
(1.1
)
   
(8.9
)
   
(1.1
)
   
(2.3
)
   Add general and administrative costs
   
41.3
     
42.0
     
137.4
     
121.0
 
Adjustments for make-up rights on certain new pipeline projects:
                               
   Add non-refundable payments received from shippers attributable to make-up rights (1)
   
(1.9
)
   
1.2
     
19.7
     
10.1
 
   Subtract the subsequent recognition of revenues attributable to make-up rights (2)
   
(7.0
)
   
(5.6
)
   
(22.9
)
   
(25.1
)
Total segment gross operating margin
 
$
1,304.4
   
$
1,307.6
   
$
4,157.1
   
$
3,875.5
 
                                 
(1) Since make-up rights entail a future performance obligation by the pipeline to the shipper, these receipts are recorded as deferred revenue for GAAP purposes; however, these receipts are included in gross operating margin in the period of receipt since they are nonrefundable to the shipper.
(2) As deferred revenues attributable to make-up rights are subsequently recognized as revenue under GAAP, gross operating margin must be adjusted to remove such amounts to prevent duplication since the associated non-refundable payments were previously included in gross operating margin.
 

Gross operating margin by segment is calculated by subtracting segment operating costs and expenses from segment revenues, with both segment totals reflecting the adjustments noted in the preceding table, as applicable, and before the elimination of intercompany transactions.  The following table presents gross operating margin by segment for the periods indicated:

 
 
For the Three Months
Ended September 30,
   
For the Nine Months
Ended September 30,
 
 
 
2017
   
2016
   
2017
   
2016
 
Gross operating margin by segment:
                       
NGL Pipelines & Services
 
$
770.9
   
$
703.5
   
$
2,386.8
   
$
2,206.3
 
Crude Oil Pipelines & Services
   
190.4
     
254.0
     
691.7
     
633.7
 
Natural Gas Pipelines & Services
   
170.7
     
178.5
     
536.0
     
533.6
 
Petrochemical & Refined Products Services
   
172.4
     
171.6
     
542.6
     
501.9
 
Total segment gross operating margin
 
$
1,304.4
   
$
1,307.6
   
$
4,157.1
   
$
3,875.5
 
23

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

Summarized Segment Financial Information
Information by business segment, together with reconciliations to amounts presented on our Unaudited Condensed Statements of Consolidated Operations, is presented in the following table:

 
 
Reportable Business Segments
             
 
 
NGL
Pipelines
& Services
   
Crude Oil
Pipelines
& Services
   
Natural Gas
Pipelines
& Services
   
Petrochemical
& Refined Products Services
   
Adjustments
and
Eliminations
   
Consolidated
Total
 
Revenues from third parties:
                                   
Three months ended September 30, 2017
 
$
2,911.1
   
$
1,790.7
   
$
793.3
   
$
1,379.3
   
$
--
   
$
6,874.4
 
Three months ended September 30, 2016
   
2,414.2
     
1,712.9
     
711.3
     
1,066.3
     
--
     
5,904.7
 
Nine months ended September 30, 2017
   
8,871.9
     
5,489.1
     
2,334.0
     
4,086.7
     
--
     
20,781.7
 
Nine months ended September 30, 2016
   
7,328.9
     
4,641.8
     
1,792.5
     
2,735.8
     
--
     
16,499.0
 
Revenues from related parties:
                                               
Three months ended September 30, 2017
   
3.2
     
6.0
     
3.3
     
--
     
--
     
12.5
 
Three months ended September 30, 2016
   
2.7
     
10.1
     
2.9
     
--
     
--
     
15.7
 
Nine months ended September 30, 2017
   
8.8
     
14.4
     
10.0
     
--
     
--
     
33.2
 
Nine months ended September 30, 2016
   
7.3
     
29.8
     
7.4
     
--
     
--
     
44.5
 
Intersegment and intrasegment revenues:
                                               
Three months ended September 30, 2017
   
5,055.1
     
2,552.9
     
220.1
     
426.4
     
(8,254.5
)
   
--
 
Three months ended September 30, 2016
   
4,772.4
     
2,445.2
     
201.2
     
315.4
     
(7,734.2
)
   
--
 
Nine months ended September 30, 2017
   
19,572.0
     
9,410.6
     
635.2
     
1,230.8
     
(30,848.6
)
   
--
 
Nine months ended September 30, 2016
   
12,828.0
     
6,390.3
     
472.8
     
865.8
     
(20,556.9
)
   
--
 
Total revenues:
                                               
Three months ended September 30, 2017
   
7,969.4
     
4,349.6
     
1,016.7
     
1,805.7
     
(8,254.5
)
   
6,886.9
 
Three months ended September 30, 2016
   
7,189.3
     
4,168.2
     
915.4
     
1,381.7
     
(7,734.2
)
   
5,920.4
 
Nine months ended September 30, 2017
   
28,452.7
     
14,914.1
     
2,979.2
     
5,317.5
     
(30,848.6
)
   
20,814.9
 
Nine months ended September 30, 2016
   
20,164.2
     
11,061.9
     
2,272.7
     
3,601.6
     
(20,556.9
)
   
16,543.5
 
Equity in income (loss) of unconsolidated affiliates:
                                               
Three months ended September 30, 2017
   
18.8
     
95.9
     
0.9
     
(2.2
)
   
--
     
113.4
 
Three months ended September 30, 2016
   
15.9
     
78.4
     
1.0
     
(3.0
)
   
--
     
92.3
 
Nine months ended September 30, 2017
   
53.3
     
266.3
     
2.8
     
(7.2
)
   
--
     
315.2
 
Nine months ended September 30, 2016
   
45.0
     
234.3
     
2.9
     
(12.4
)
   
--
     
269.8
 

Segment revenues include intersegment and intrasegment transactions, which are generally based on transactions made at market-based rates.  Our consolidated revenues reflect the elimination of intercompany transactions.  Substantially all of our consolidated revenues are earned in the U.S. and derived from a wide customer base.

Information by business segment, together with reconciliations to our Unaudited Condensed Consolidated Balance Sheet totals, is presented in the following table:

 
 
Reportable Business Segments
             
 
 
NGL
Pipelines
& Services
   
Crude Oil
Pipelines
& Services
   
Natural Gas
Pipelines
& Services
   
Petrochemical
& Refined Products Services
   
Adjustments
and
Eli