SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(SPECIAL FINANCIAL REPORT PURSUANT TO SECTION 15(D)(2))
For the fiscal year ended December 31, 1999
Commission file number: 333-93239-01
ENTERPRISE PRODUCTS OPERATING L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0568220
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2727 NORTH LOOP WEST, HOUSTON, TEXAS 77008-1037
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code : (713) 880-6500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE.
This Special Financial Report is being filed pursuant to Section
15(d)(2) of the Securities Act of 1933. This report contains only audited
financial statements for the fiscal year ending December 31, 1999 and other
periods, as applicable, and has been signed in accordance with the requirements
of the annual report form.
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 _X_
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
No common equity securities of Enterprise Products Operating L.P. (the
"Company") are held by non-affiliates of the Company. The Company is owned
98.9899% by its Parent, Enterprise Products Partners L.P. (a publicly-traded
master limited partnership under New York Stock Exchange ("NYSE") symbol "EPD"
(SEC File No. 1-14323)), and 1.0101% by its General Partner, Enterprise Products
GP, LLC.
<PAGE>
ENTERPRISE PRODUCTS
OPERATING L.P. AND
SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
ENTERPRISE PRODUCTS OPERATING L.P.
Independent Auditors' Report ............................................F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999.............F-3
Statements of Consolidated Operations
for the Years Ended December 31, 1997, 1998 and 1999 ................F-4
Statements of Consolidated Cash
Flows for the Years Ended December 31, 1997, 1998 and 1999...........F-5
Statements of Consolidated Partners' Equity
for the Years Ended December 31, 1997, 1998 and 1999 ................F-6
Notes to Consolidated Financial Statements ..............................F-7
SUPPLEMENTAL SCHEDULE:
Schedule II - Valuation and Qualifying Accounts
All schedules, except the one listed above, have been omitted because they are
either not applicable, not required or the information called for therein
appears in the consolidated financial statements or notes thereto.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Enterprise Products Operating L.P.:
We have audited the accompanying consolidated balance sheets of Enterprise
Products Operating L.P. (the "Company") as of December 31, 1998 and 1999, and
the related statements of consolidated operations, consolidated cash flows and
consolidated partners' equity for each of the three years in the period ended
December 31, 1999. Our audits also included the consolidated financial statement
schedule of the Company listed in the Index to Financial Statements. These
consolidated financial statements and schedule are the responsibility of the
management of the Company. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1998
and 1999, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles. Also, in our opinion, such consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Houston, Texas
February 25, 2000
(March 27, 2000, as to Note 15)
F-2
<PAGE>
ENTERPRISE PRODUCTS OPERATING L.P.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
ASSETS 1998 1999
-------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 24,103 $ 5,159
Accounts receivable - trade, net of allowance for doubtful accounts of
$15,871 in 1999 57,288 262,348
Accounts receivable - affiliates 15,546 53,906
Inventories 17,574 39,907
Current maturities of participation in notes receivable from
unconsolidated affiliates 14,737 6,519
Prepaid and other current assets 8,445 14,459
-------------------------------------
Total current assets 137,693 382,298
PROPERTY, PLANT AND EQUIPMENT, NET 499,793 767,069
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES 91,121 280,606
PARTICIPATION IN NOTES RECEIVABLE FROM UNCONSOLIDATED AFFILIATES 11,760
INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $1,343 61,619
OTHER ASSETS 670 1,120
-------------------------------------
TOTAL $ 741,037 $1,492,712
=====================================
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 129,000
Accounts payable - trade $ 36,586 69,294
Accounts payable - affiliate 64,780
Accrued gas payables 27,183 216,348
Accrued expenses 7,540 33,160
Other current liabilities 11,462 18,176
-------------------------------------
Total current liabilities 82,771 530,758
LONG-TERM DEBT 90,000 166,000
OTHER LONG-TERM LIABILITIES 296
MINORITY INTEREST 993 1,032
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY
Limited Partner 561,543 791,279
General Partner 5,730 8,074
Parent's Units acquired by Trust (4,727)
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Total Partners' Equity 567,273 794,626
-------------------------------------
TOTAL $ 741,037 $1,492,712
=====================================
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
ENTERPRISE PRODUCTS OPERATING L.P.
STATEMENTS OF CONSOLIDATED OPERATIONS
(Amounts in Thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
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1997 1998 1999
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<S> <C> <C> <C>
REVENUES
Revenues from consolidated operations $ 1,020,281 $ 738,902 $ 1,332,979
Equity income in unconsolidated affiliates 15,682 15,671 13,477
--------------------------------------------------------
Total 1,035,963 754,573 1,346,456
COST AND EXPENSES
Operating costs and expenses 938,392 685,884 1,201,605
Selling, general and administrative 21,891 18,216 12,500
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Total 960,283 704,100 1,214,105
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OPERATING INCOME 75,680 50,473 132,351
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OTHER INCOME (EXPENSE)
Interest expense (25,717) (15,057) (16,439)
Interest income from unconsolidated affiliates 809 1,625
Dividend income from unconsolidated affiliates 3,435
Interest income - other 1,934 772 1,247
Other, net 793 358 (379)
--------------------------------------------------------
Other income (expense) (22,990) (13,118) (10,511)
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INCOME BEFORE EXTRAORDINARY ITEM
AND MINORITY INTEREST 52,690 37,355 121,840
Extraordinary charge on early extinguishment of debt (27,176)
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INCOME BEFORE MINORITY INTEREST 52,690 10,179 121,840
MINORITY INTEREST (78) (122) (110)
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NET INCOME $ 52,612 $ 10,057 $ 121,730
========================================================
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
ENTERPRISE PRODUCTS OPERATING L.P.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1997 1998 1999
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<S> <C> <C> <C>
Net income $ 52,612 $ 10,057 $121,730
Adjustments to reconcile net income to cash flows provided by (used for)
operating activities:
Extraordinary item - early extinguishment of debt 27,176
Depreciation and amortization 17,684 19,194 25,315
Equity in income of unconsolidated affiliates (15,682) (15,671) (13,477)
Leases paid by EPCO 4,010 10,665
Minority interest 78 122 110
(Gain) loss on sale of assets 155 (276) 123
Net effect of changes in operating accounts 2,948 (64,906) 24,433
------------------------------------------------------
Operating activities cash flows 57,795 (20,294) 168,899
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INVESTING ACTIVITIES
Capital expenditures (33,636) (8,360) (21,235)
Proceeds from sale of assets 1,887 8
Business acquisitions, net of cash acquired (208,095)
Participation in notes receivable from unconsolidated affiliates:
Purchase of notes receivable (33,725)
Collection of notes receivable 7,228 19,978
Unconsolidated affiliates:
Investments in and advances to (4,625) (26,842) (61,887)
Distributions received 7,279 9,117 6,008
------------------------------------------------------
Investing activities cash flows (30,982) (50,695) (265,223)
------------------------------------------------------
FINANCING ACTIVITIES
Long-term debt borrowings 598 90,000 350,000
Long-term debt repayments (25,978) (257,413) (154,923)
Net increase (decrease) in restricted cash (1,171) 4,522
Cash contributions from limited partner 243,296
Cash contributions from minority interest 7
Parent's Units acquired by consolidated Trust (4,727)
Cash distributions to minority interest (78)
Cash distributions to partners (21,865) (112,899)
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Financing activities cash flows (26,551) 58,540 77,380
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CASH CONTRIBUTIONS FROM (TO) EPCO (6,299) 17,611
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NET CHANGE IN CASH AND CASH EQUIVALENTS (6,037) 5,162 (18,944)
CASH AND CASH EQUIVALENTS, JANUARY 1 24,978 18,941 24,103
------------------------------------------------------
CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 18,941 $ 24,103 $ 5,159
======================================================
Excluding restricted cash of $4,522 in 1997)
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
ENTERPRISE PRODUCTS OPERATING L.P.
STATEMENTS OF CONSOLIDATED PARTNERS' EQUITY
(Amounts in Thousands)
<TABLE>
<CAPTION>
LIMITED GENERAL PARENT'S
PARTNER PARTNER UNITS TOTAL
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Consolidated Partners' Equity, December 31, 1996 $ 265,145 $ 2,706 $ 267,851
Net income 52,081 531 52,612
Cash contributions to EPCO (6,235) (64) (6,299)
---------------------------------------------------------------
Consolidated Partners' Equity, December 31, 1997 310,991 3,173 314,164
Net income 9,955 102 10,057
Cash contributions by EPCO 17,433 178 17,611
Leases paid by EPCO 3,969 41 4,010
Cash contributions by partners 240,839 2,457 243,296
Cash distributions to partners (21,644) (221) (21,865)
---------------------------------------------------------------
Consolidated Partners' Equity, December 31, 1998 561,543 5,730 567,273
Net income 120,501 1,229 121,730
Leases paid by EPCO 10,557 108 10,665
Asset contributions by partners related to
business acquistions 210,436 2,148 212,584
Parent's Units acquired by consolidated Trust $ (4,727) (4,727)
Cash distributions to partners (111,758) (1,141) (112,899)
---------------------------------------------------------------
Consolidated Partner's Equity, December 31, 1999 $ 791,279 $ 8,074 $ (4,727) $ 794,626
===============================================================
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
ENTERPRISE PRODUCTS OPERATING L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ENTERPRISE PRODUCTS OPERATING L.P. (the "Company") was formed on April 9,
1998 as a Delaware limited partnership to own and operate the natural gas
liquids ("NGL") business of Enterprise Products Company ("EPCO"). The Company's
limited partner, Enterprise Products Partners L.P. (the "Limited Partner"), owns
98.9899% of the Company. Enterprise Products GP, LLC (the "General Partner") is
the general partner and owns 1.0101% of the Company. Both the Limited Partner
and the General Partner are subsidiaries of EPCO.
Prior to their consolidation, EPCO and its affiliated companies were controlled
by members of a single family, who collectively owned at least 90% of each of
the entities for all periods prior to the formation of the Company. As of April
30, 1998, the owners of all the affiliated companies exchanged their ownership
interests for shares of EPCO. Accordingly, each of the affiliated companies
became a wholly owned subsidiary of EPCO or was merged into EPCO as of April 30,
1998. In accordance with generally accepted accounting principles, the
consolidation of the affiliated companies with EPCO was accounted for as a
reorganization of entities under common control in a manner similar to a pooling
of interests.
Under terms of a contract entered into on May 8, 1998 between EPCO and the
Company, EPCO contributed all of its NGL assets through the Limited Partner and
the General Partner to the Company and the Company assumed certain of EPCO's
debt. As a result, the Company became the successor to the NGL operations of
EPCO.
Effective July 27, 1998, the Limited Partner filed a registration statement
pursuant to an initial public offering ("IPO") of 12,000,000 Common Units. The
Common Units sold for $22 per unit. The Limited Partner contributed the proceeds
of the IPO of approximately $243.3 million after underwriting commissions of
$16.8 million and expenses of approximately $3.9 million to the Company.
The accompanying consolidated financial statements include the historical
accounts and operations of the NGL business of EPCO, including NGL operations
conducted by affiliated companies of EPCO prior to their consolidation with
EPCO. Investments in which the Company owns 20% to 50% and exercises significant
influence over operating and financial policies are accounted for using the
equity method. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Certain reclassifications have been made to the prior years' financial
statements to conform to the presentation of the current period financial
statements.
INVENTORIES, consisting of NGLs and NGL products, are carried at the lower of
average cost or market.
EXCHANGES are movements of NGL products between parties to satisfy timing and
logistical needs of the parties. NGLs and NGL products borrowed from the Company
under such agreements are included in inventories, and NGLs and NGL products
loaned to the Company under such agreements are accrued as a liability in
accrued gas payables.
PROPERTY, PLANT AND EQUIPMENT is recorded at cost and is depreciated using the
straight-line method over the asset's estimated useful life. Maintenance,
repairs and minor renewals are charged to operations as incurred. Additions,
improvements and major renewals are capitalized. The cost of assets retired or
sold, together with the related accumulated depreciation, is removed from the
accounts, and any gain or loss on disposition is included in income.
INTANGIBLE ASSETS include the values assigned to a 20-year natural gas
processing agreement and the excess cost of the purchase price over the fair
market value of the assets acquired from Mont Belvieu Associates. The $54.0
F-7
<PAGE>
million in intangibles related to the natural gas processing agreement is being
amortized over the life of the agreement. For the year 1999, approximately $1.1
million of such amortization was charged to expense. The $8.7 million excess
cost of the purchase price over the fair market value of the assets acquired
from Mont Belvieu Associates is being amortized over 20 years. For the year
1999, approximately $0.2 million of such amortization was charged to expense.
EXCESS COST OVER UNDERLYING EQUITY IN NET ASSETS denotes the excess of the
Company's cost over the underlying equity in net assets of K/D/S Promix, LLC and
is being amortized using the straight-line method over 20 years. Such
amortization is reflected in the equity earnings from unconsolidated affiliates
and aggregated $0.2 million in 1999 and none for prior periods. The unamortized
excess was approximately $7.8 million at December 31, 1999 and is included in
investments in and advances to unconsolidated affiliates.
EXCESS COST AND LONG-LIVED ASSETS held and used by the Company are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company has not
recognized any impairment losses for the periods presented.
REVENUE is recognized when products are shipped or services are rendered.
USE OF ESTIMATES AND ASSUMPTIONS by management that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period are required for the preparation of
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from these estimates.
FEDERAL INCOME TAXES are not provided because the Company and its predecessors
either had elected under provisions of the Internal Revenue Code to be a
Partnership or Subchapter S Corporation or were organized as other types of
pass-through entities for federal income tax purposes. As a result, for federal
income taxes purposes, the owners are individually responsible for the taxes on
their allocable share of the consolidated taxable income of the Company. State
income taxes are not material.
ENVIRONMENTAL COSTS for remediation are accrued based on estimates of known
remediation requirements. Such accruals are based on management's best estimate
of the ultimate costs to remediate the site. Ongoing environmental compliance
costs are charged to expense as incurred, and expenditures to mitigate or
prevent future environmental contamination are capitalized. Environmental costs,
accrued environmental liabilities and expenditures to mitigate or eliminate
future environmental contamination for each of the years in the three-year
period ended December 31, 1999 were not significant to the consolidated
financial statements. The Company's estimated liability for environmental
remediation is not discounted.
CASH FLOWS are computed using the indirect method. For cash flow purposes, the
Company considers all highly liquid debt instruments with an original maturity
of less than three months at the date of purchase to be cash equivalents. All
cash presented as restricted cash in the Company's financial statements was due
to requirements of the Company's debt agreements.
HEDGES, such as swaps, forwards and other contracts to manage the price risks
associated with inventories, commitments and certain anticipated transactions
are occasionally entered into by the Company. The Company defers the impact of
changes in the market value of these contracts until such time as the hedged
transaction is completed. At that time, the impact of the changes in the fair
value of these contracts is recognized. To qualify as a hedge, the item to be
hedged must expose the Company to commodity or interest rate risk and the
hedging instrument reduce that exposure. Any contracts held or issued that did
not meet the requirements of a hedge would be recorded at fair value in the
balance sheet and any changes in that fair value recognized in income. If a
contract designated as a hedge of commodity risk is terminated, the associated
gain or loss is deferred and recognized in income in the same manner as the
hedged item. Also, a contract designated as a hedge of an anticipated
transaction that is no longer likely to occur would be recorded at fair value
and the associated changes in fair value recognized in income.
F-8
<PAGE>
MINORITY INTEREST represents the Limited Partner's 1% ownership interest in
Enterprise Products Texas Operating L.P., HSC Pipeline Partnership L.P. and
Propylene Pipeline Partnership L.P. The Company holds the remaining 99%
ownership interest in these entities.
DOLLAR AMOUNTS presented in the tabulations within the notes to the Company's
financial statements are stated in thousands of dollars, unless otherwise
indicated.
RECENT STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS include the following: On
June 6, 1999, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133-an amendment of FASB Statement No. 133" which effectively
delays the application of SFAS No. 133 "Accounting for Derivative Instruments
and Hedging Activities" for one year, to fiscal years beginning after June 15,
2000. Management is currently studying SFAS No. 133 for possible impact on the
consolidated financial statements when it is adopted in 2001.
2. ACQUISITIONS
ACQUISITION OF TEJAS NATURAL GAS LIQUIDS, LLC
Effective August 1, 1999, the Company acquired Tejas Natural Gas Liquids, LLC
("TNGL") from a subsidiary of Tejas Energy, LLC, an affiliate of Shell Oil
Company. All references hereafter to "Shell", unless the context indicates
otherwise, shall refer collectively to Shell Oil Company, its subsidiaries and
affiliates. TNGL engages in natural gas processing and NGL fractionation,
transportation, storage and marketing in Louisiana and Mississippi. TNGL's
assets include a 20-year natural gas processing agreement with Shell for the
rights to process Shell's current and future natural gas production from the
state and federal waters of the Gulf of Mexico ("Shell Processing Agreement")
and varying interests in eleven natural gas processing plants with a combined
gross capacity of 11.0 billion cubic feet per day (Bcfd) and a net capacity of
3.1 Bcfd; four NGL fractionation facilities with a combined gross capacity of
281,000 barrels per day (BPD) and net capacity of 131,500 BPD; four NGL storage
facilities with approximately 28.8 million barrels of gross capacity and 8.8
million barrels of net capacity; and approximately 1,500 miles of NGL pipelines.
The TNGL acquisition was purchased with a combination of $166 million in cash
and the issuance of 14.5 million non-distribution bearing, convertible Special
Units of the Limited Partner. The $166 million cash portion of the purchase
price was funded with borrowings under the Company's $350 million bank credit
facility. The Limited Partner's Special Units were valued within a range
provided by an independent investment banker using both present value and Black
Scholes Model methodologies. The consideration for the acquisition was
determined by arms-length negotiation among the parties. The value of the
Special Units of $210.4 million was contributed by the Limited Partner to the
Company.
The acquisition was accounted for under the purchase method of accounting and,
accordingly, the purchase price has been allocated to the assets acquired and
liabilities assumed based on their estimated fair value at August 1, 1999 as
follows (in millions):
Current Assets $ 124.3
Investments 128.6
Property 216.9
Intangible asset 54.0
Liabilities (147.4)
----------
Total purchase price $ 376.4
==========
The $54.0 million intangible asset is the value assigned to the Shell Processing
Agreement and is being amortized over the life of the agreement. For the year
ending December 31, 1999, approximately $1.1 million of such amortization was
charged to expense. The assets, liabilities and results of operations of TNGL
F-9
<PAGE>
are included with those of the Company as of August 1, 1999. Historical
information for periods prior to August 1, 1999 do not reflect any impact
associated with the TNGL acquisition.
Shell has the opportunity to earn an additional 6.0 million non-distribution
bearing, convertible special Contingency Units of the Limited Partner over the
next two years upon the achievement of certain gas production thresholds under
the Shell Processing Agreement. If such special Contingency Units are issued,
the purchase price and the value of the natural gas processing agreement will be
adjusted accordingly.
ACQUISITION OF KINDER MORGAN AND EPCO INTEREST IN MONT BELVIEU FRACTIONATION
FACILITY
Effective July 1, 1999, the Company acquired Kinder Morgan Operating LP "A"'s
25% indirect ownership interest and EPCO's 0.5% indirect ownership interest in a
210,000 barrel per day ("BPD") NGL fractionation facility located in Mont
Belvieu, Texas for approximately $42 million in cash and the assumption of
approximately $ 4 million of debt. The $42 million in cash was funded with
borrowings under the Company's $350 million bank credit facility.
The acquisition was accounted for under the purchase method of accounting and,
accordingly, the purchase price has been allocated to the assets purchased and
liabilities assumed based on their estimated fair value at July 1, 1999 as
follows (in millions):
Property $ 36.2
Intangible asset 8.7
Liabilities (3.7)
----------
Total purchase price $ 41.2
==========
The intangible asset represents the excess cost of purchase price over the fair
market value of the net assets acquired and is being amortized over 20 years.
For the year ended December 31, 1999, approximately $0.2 million of such
amortization was charged to expense.
PRO FORMA EFFECT OF ACQUISITIONS
The balances included in the consolidated balance sheets related to the current
year acquisitions are based upon preliminary information and are subject to
change as additional information is obtained. Material changes in the
preliminary allocations are not anticipated by management.
The following table presents unaudited pro forma information for the years ended
December 31, 1997, 1998 and 1999 as if the acquisitions of TNGL and of the Mont
Belvieu fractionator facility from Kinder Morgan and EPCO had been made as of
the beginning of the periods presented:
1997 1998 1999
--------------------------------------------
Revenues $ 1,867,200 $ 1,354,400 $ 1,714,222
============================================
Net income $ 94,699 $ 14,680 $ 136,598
============================================
Allocation of net income to
Limited partners $ 93,742 $ 14,532 $ 135,218
============================================
General Partner $ 957 $ 148 $ 1,380
============================================
F-10
<PAGE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and accumulated depreciation are as follows:
ESTIMATED
USEFUL LIFE
IN YEARS 1998 1999
--------------------------------------
Plants and pipelines 5-35 $ 613,264 $ 875,773
Underground and other storage facilities 5-35 89,064 103,578
Transportation equipment 3-35 1,773 2,117
Land 12,362 14,748
Construction in progress 3,879 32,810
--------------------------
Total 720,342 1,029,026
Less accumulated depreciation 220,549 261,957
--------------------------
Property, plant and equipment, net $ 499,793 $ 767,069
==========================
Depreciation expense for the years ended December 31, 1997, 1998 and 1999 was
$17.7 million, $18.6 million and $22.4 million, respectively.
4. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
At December 31, 1999, the Company's significant unconsolidated affiliates
accounted for by the equity method included the following:
Belvieu Environmental Fuels ("BEF") - a 33.33% economic interest in a Methyl
Tertiary Butyl Ether ("MTBE") production facility located in southeast Texas.
Baton Rouge Fractionators LLC ("BRF") - an approximate 31.25% economic interest
in a natural gas liquid ("NGL") fractionation facility located in southeastern
Louisiana.
Baton Rouge Propylene Concentrator, LLC ("BRPC") - a 30.0% economic interest in
a propylene concentration unit located in southeastern Louisiana which is under
construction and scheduled to become operational in the third quarter of 2000.
EPIK Terminalling L.P. and EPIK Gas Liquids, LLC (collectively, "EPIK") - a 50%
aggregate economic interest in a refrigerated NGL marine terminal loading
facility located in southeast Texas.
Wilprise Pipeline Company, LLC ("Wilprise") - a 33.33% economic interest in a
NGL pipeline system located in southeastern Louisiana.
Tri-States NGL Pipeline LLC ("Tri-States") - an aggregate 33.33% economic
interest in a NGL pipeline system located in Louisiana, Mississippi, and
Alabama.
Belle Rose NGL Pipeline LLC ("Belle Rose") - a 41.7% economic interest in a NGL
pipeline system located in south Louisiana.
K/D/S Promix LLC ("Promix") - a 33.33% economic interest in a NGL fractionation
facility and related storage facilities located in south Louisiana.
The Company's investments in and advances to unconsolidated affiliates also
includes Venice Energy Services Company, LLC ("VESCO") and Dixie Pipeline
Company ("Dixie"). The VESCO investment consists of a 13.1% economic interest in
a LLC owning a natural gas processing plant, fractionation facilities, storage,
F-11
<PAGE>
and gas gathering pipelines in Louisiana. The Dixie investment consists of an
11.5% interest in a corporation owning a 1,301-mile propane pipeline and the
associated facilities extending from Mont Belvieu, Texas to North Carolina.
These investments are accounted for using the cost method.
During 1999, the Company acquired the remaining interest in Mont Belvieu
Associates , 51%, ("MBA") and Entell NGL Services, LLC, 50%, ("Entell").
Accordingly, after the acquisition of the remaining interest, the aforementioned
entities became wholly owned subsidiaries of the Company and are included as a
consolidated entity from that point forward.
Investments in and advances to unconsolidated affiliates at:
AT DECEMBER 31,
-----------------------------------
1998 1999
-----------------------------------
Accounted for on equity basis:
BEF $ 50,079 $ 63,004
Promix 50,496
BRF 17,896 36,789
Tri-States 55 28,887
EPIK 5,667 15,258
Belle Rose 12,064
BRPC 11,825
Wilprise 4,873 9,283
MBA 12,551
Accounted for on cost basis:
VESCO 33,000
Dixie 20,000
-----------------------------------
Total $ 91,121 $ 280,606
===================================
Equity in income (loss) of unconsolidated affiliates for the year ended
December 31:
1997 1998 1999
--------------------------------------------------------
BEF $ 9,305 $ 9,801 $ 8,183
MBA 6,377 5,213 1,256
BRF (91) (336)
BRPC 16
EPIK 748 1,173
Wilprise 160
Tri-States 1,035
Promix 630
Belle Rose (29)
Other 1,389
--------------------------------------------------------
Total $ 15,682 $ 15,671 $ 13,477
========================================================
At December 31, 1999, the Company's share of accumulated earnings of
unconsolidated affiliates that had not been remitted to the Company was
approximately $39.9 million.
F-12
<PAGE>
Following is selected financial data for the most significant investments of the
Company:
BEF
BEF is owned equally (33.33%) by Mitchell Gas Services, L.P. ("Mitchell"),
Sunoco and the Company. Mitchell Energy & Development Corp. is Mitchell's
ultimate parent company, and Sun Company, Inc. ("Sun") is Sunoco's ultimate
parent company.
Following is condensed financial data for BEF:
AT DECEMBER 31,
--------------------------------
1998 1999
--------------------------------
BALANCE SHEET DATA:
Current assets $ 34,268 $ 44,261
Property, plant, and equipment, net 172,281 161,390
Other assets 13,684 8,313
--------------------------------
Total assets $ 220,233 $ 213,964
================================
Current liabilities $ 54,326 $ 41,317
Long-term debt 19,556
Other liabilities 1,798 4,323
Partners' equity 144,553 168,324
--------------------------------
Total liabilities and partners' equity $ 220,233 $ 213,964
================================
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1997 1998 1999
-------------------------------------------------------
INCOME STATEMENT DATA:
Revenues $ 233,218 $ 182,001 $ 193,219
Expenses 205,300 152,600 168,669
-------------------------------------------------------
Net income $ 27,918 $ 29,401 $ 24,550
=======================================================
BEF's owners are required under isobutane supply contracts to provide their pro
rata share of BEF's monthly isobutane requirements. If the MTBE plant's
isobutane requirements exceed 450,000 barrels for any given month, each of the
owners retains the right, but not the obligation, to supply at least one-third
of the additional isobutane needed. The purchase price for the isobutane (which
generally approximates the established market price) is based on contracts
between the owners.
BEF has a ten-year off-take agreement through September 2004 under which Sun is
required to purchase all of the plant's MTBE production. Through May 31, 2000,
Sun pays the higher of a contractual floor price or market price (as defined
within the agreement) for floor production (193,450,000 gallons per year) and
the market price for production in excess of 193,450,000 gallons per year,
subject to quarterly adjustments on certain excess volumes. At floor production
levels, the contractual floor price is a price sufficient to cover essentially
all of BEF's operating costs plus principal and interest payments on its bank
term loan. Market price is (a) toll fee price (cost of feedstock plus
approximately $0.484 per gallon during the first two contract years ended May
31, 1997) and (b) at Sun's option, the toll fee price (cost of feedstock plus
approximately $0.534 per gallon) or the U.S. Gulf Coast Posted Contract Price
for the period from June 1, 1997 through May 31, 2000. For purposes of computing
the toll fee price, the feedstock component is based on the Normal Butane Posted
Price for the month plus the average purchase price paid by BEF to acquire
methanol consumed by the facility during the month. In addition, the floor or
market price determined above will be increased by $0.03 per gallon in the third
and fourth contract years and by about $0.04 per gallon in the fifth contract
year. Beginning June 1, 2000, through the remainder of the agreement, the price
for all production will be based on a market-related negotiated price.
F-13
<PAGE>
The contracted floor price paid by Sun for production in 1997, 1998 and 1999
exceeded the spot market price for MTBE. At December 31, 1999, the floor price
paid for MTBE by Sun was $1.11 per gallon. The average Gulf Coast MTBE spot
market price was $.94 per gallon for December 1999 and $.72 per gallon for all
of 1999.
Substantially all revenues earned by BEF are from the production of MTBE which
is sold to Sun. This concentration could impact BEF's exposure to credit risk;
however, such risk is reduced since Sun has an equity interest in BEF.
Management believes BEF is exposed to minimal credit risk. BEF does not require
collateral for its receivables from Sun.
Long-term debt of BEF consists of a five-year, floating interest rate (London
Interbank Offered Rate ["LIBOR"] plus .0875%) bank term note payable ($19.6
million in current maturities outstanding at December 31, 1999) which is due in
equal quarterly installments of $9.8 million through May 31, 2000. The
weighted-average interest rate on this debt for the year ended December 31, 1999
was 6.20%. The debt is non-recourse debt to the partners.
The bank term loan agreement contains restrictive covenants prohibiting or
limiting certain actions of BEF, including partner distributions, and requiring
certain actions by BEF, including the maintenance of specified levels of
leverage, as defined, and approval by the banks of certain contracts.
Distributions to partners in the amount of $0.8 million were made for the year
ended December 31, 1999. In addition, the loan agreement requires BEF to
restrict a certain portion of cash to pay for the plant's turnaround maintenance
and long-term debt service. At December 31, 1998 and 1999, cash of $11.1 million
and $6.7 million, respectively, was restricted under terms of the loan
agreement. BEF was in compliance with the restrictive covenants at December 31,
1999. The long-term debt is collateralized by substantially all of BEF's assets.
RECENT REGULATORY DEVELOPMENTS
In November 1998, U.S. Environmental Protection Agency ("EPA") Administrator
Carol M. Browner appointed a Blue Ribbon Panel (the "Panel") to investigate the
air quality benefits and water quality concerns associated with oxygenates in
gasoline, and to provide independent advice and recommendations on ways to
maintain air quality while protecting water quality. The Panel issued a report
on their findings and recommendations in July 1999. The Panel urged the
widespread reduction in the use of MTBE due to the growing threat to drinking
water sources despite that fact that use of reformulated gasolines have
contributed to significant air quality improvements. The Panel credited
reformulated gasoline with "substantial reductions" in toxic emissions from
vehicles and recommended that those reductions be maintained by the use of
cleaner-burning fuels that rely on additives other than MTBE and improvements in
refining processes. The Panel stated that the problems associated with MTBE can
be characterized as a low-level, widespread problem that had not reached the
state of being a public health threat. The Panel's recommendations are geared
towards confronting the problems associated with MTBE now rather than letting
the issue grow into a larger and worse problem. The Panel did not call for an
outright ban on MTBE but stated that its use should be curtailed significantly.
The Panel also encouraged a public educational campaign on the potential harm
posed by gasoline when it leaks into ground water from storage tanks or while in
use. Based on the Panel's recommendations, the EPA is expected to support a
revision of the Clean Air Act of 1990 that maintains air quality gains and
allows for the removal of the requirement for oxygenates in gasoline.
Several public advocacy and protest groups active in California and other states
have asserted that MTBE contaminates water supplies, causes health problems and
has not been as beneficial as originally contemplated in reducing air pollution.
In California, state authorities negotiated an agreement with the EPA to
implement a program requiring oxygenated motor gasoline at 2.0% for the whole
state, rather than 2.7% only in selected areas. On March 25, 1999, the Governor
of California ordered the phase-out of MTBE in that state by the end of 2002.
The order also seeks to obtain a waiver of the oxygenate requirement from the
EPA in order to facilitate the phase-out; however, due to increasing concerns
about the viability of alternative fuels, the California legislature on October
10, 1999 passed the Sher Bill (SB 989) stating that MTBE should be banned as
soon as feasible rather than by the end of 2002.
F-14
<PAGE>
Legislation to amend the federal Clean Air Act of 1990 has been introduced in
the U.S. House of Representatives; it would ban the use of MTBE as a fuel
additive within three years. Legislation introduced in the U.S. Senate would
eliminate the Clean Air Act's oxygenate requirement in order to assist the
elimination of MTBE in fuel. No assurance can be given as to whether this or
similar federal legislation ultimately will be adopted or whether Congress or
the EPA might takes steps to override the MTBE ban in California.
ALTERNATIVE USES OF THE BEF FACILITY
In light of these regulatory developments, the Company is formulating a
contingency plan for use of the BEF facility if MTBE were banned or
significantly curtailed. Management is exploring a possible conversion of the
BEF facility from MTBE production to alkylate production. Alkylate is a high
octane, low sulfur, low vapor pressure compound, produced by the reaction of
isobutylene or normal butylene with isobutane, and used by refiners as a
component in gasoline blending. At present the forecast cost of this conversion
would be in the $20 million to $25 million range, with the Company's share being
$6.7 million to $8.3 million. Management anticipates that if MTBE is banned
alkylate demand will rise as producers use it to replace MTBE as an octane
enhancer. Alkylate production would be expected to generate spot market margins
comparable to those of MTBE. Greater alkylate production would be expected to
increase isobutane consumption nationwide and result in improved isomerization
margins for the Company.
PROMIX
Promix is a limited liability company whose owners are Koch Hydrocarbon
Southeast ("KHSE"), a subsidiary of Koch Industries, Inc. ("KII"), Dow
Hydrocarbons and Resources, Inc. ("DHRI"), a subsidiary of Dow Chemical Company,
and the Company. Promix is engaged in the business of transporting,
fractionating, storing and exchanging natural gas liquids in southern Louisiana.
KHSE is the managing member responsible for the daily operations and management
of Promix.
The following is condensed unaudited financial data for Promix for the year
ended and as of December 31, 1999. The Company has included in equity income
from unconsolidated affiliates that portion of earnings related to the period
from August 1, 1999 through December 31, 1999 in proportion to its ownership
interest.
BALANCE SHEET DATA:
Current assets $ 28,890
Property, plant, and equipment, net 117,885
------------------
Total assets $ 146,775
==================
Current liabilities $ 18,121
Members' equity 128,654
------------------
Total liabilities and members' equity $ 146,775
==================
INCOME STATEMENT DATA:
Revenues $ 36,098
Expenses 26,975
------------------
Net income $ 9,123
==================
BRF
BRF is a joint venture among Amoco Louisiana Fractionator Company, Williams
Mid-Stream Natural Gas Liquids, Inc., Exxon Chemical Louisiana LLC ("Exxon") and
the Company. The ownership interests in BRF are based on amounts contributed by
each member to fund certain capital expenditures. Exxon funded a small portion
of the construction costs but has contributed other NGL assets. At December 31,
1999, the Company owned an approximate 31.25% economic interest in BRF.
F-15
<PAGE>
BRF is a NGL fractionation facility near Baton Rouge, Louisiana, which has a
60,000 barrel per day capacity. The Company is the operator of the facility,
which will service NGL production from the Mobile/Pascagoula and Louisiana
areas. Operations commenced in July 1999. Operating losses prior to the
commencement of operations are the result of certain start-up expenses incurred
during the development stage.
Following is the condensed financial data for BRF:
AT DECEMBER 31,
---------------------------------
1998 1999
---------------------------------
BALANCE SHEET DATA:
Current assets $ 2,386 $ 12,617
Property, plant, and equipment, net 58,618 89,035
Other assets 3 854
---------------------------------
Total assets $ 61,007 $ 102,506
=================================
Current liabilities $ 8,222 $ 6,799
Members' equity 52,785 95,707
---------------------------------
Total liabilities and members' equity $ 61,007 $ 102,506
=================================
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1999
---------------------------------
INCOME STATEMENT DATA:
Revenues $ 6,746
Expenses $ 330 7,820
---------------------------------
Net income $ (330) $ (1,074)
=================================
F-16
<PAGE>
TRI-STATES
Tri-States is a limited liability company owning a 80,000 barrel per day
161-mile common-carrier pipeline that will deliver NGLs from three gas
processing plants in Alabama and Mississippi to fractionators in Louisiana. The
owners of Tri-States are Amoco Tri-States NGL Pipeline Company (16.67%), Koch
Pipeline Southeast, Inc. (16.67%), Gulf Coast NGL Pipeline, L.L.C.(16.67%),
WSF-NGL Pipeline Company, Inc. ("Williams")(16.67%) and the Company (33.33%).
Williams is the operator of the Tri-States pipeline.
The following is condensed unaudited financial data for Tri-States:
AT DECEMBER 31,
--------------------------------
1998 1999
--------------------------------
BALANCE SHEET DATA:
Current assets $ 63 $ 8,056
Property, plant, and equipment, net 84,854
--------------------------------
Total assets $ 63 $ 92,910
================================
Current liabilities $ 68 $ 1,430
Members' equity (5) 91,480
--------------------------------
Total liabilities and members' equity $ 63 $ 92,910
================================
YEAR ENDED
DECEMBER 31,
1999
------------------
INCOME STATEMENT DATA:
Revenues $ 8,101
Expenses 4,954
------------------
Net income $ 3,147
==================
F-17
<PAGE>
The following table represents the aggregated unaudited condensed financial data
for the Company's other equity investments in unconsolidated affiliates for the
periods ending:
As of December 31,
-------------------------------------
1998 1999
-------------------------------------
BALANCE SHEET DATA:
Current assets $ 11,355 $ 12,937
Property, plant and equipment, net 69,281 116,030
Other assets 1,687
-------------------------------------
Total assets $ 82,323 $ 128,967
=====================================
Current liabilities $ 5,413 $ 6,525
Long-term debt 11,790
Other liabilities 130
Members' and partners' equity 64,990 122,442
-------------------------------------
Total liabilities and equity $ 82,323 $ 128,967
=====================================
Year Ended December 31,
----------------------------------------------------
1997 1998 1999
----------------------------------------------------
INCOME STATEMENT DATA:
Revenues $ 33,646 $ 35,843 $ 27,897
Expenses 23,034 24,480 21,932
----------------------------------------------------
Net income $ 10,612 $ 11,363 $ 5,965
====================================================
5. NOTES RECEIVABLE FROM UNCONSOLIDATED AFFILIATES
At December 31, 1999, the Company holds a participation interest in the bank
loan of BEF for $6.5 million. The BEF note receivable bears interest at a
floating rate per annum at LIBOR plus 0.0875% and matures on May 31, 2000. The
Company will receive quarterly principal payments of approximately $3.3 million
plus interest from BEF during the term of the loan.
6. LONG-TERM DEBT
In December 1999, the Company and Operating Partnership filed a $800 million
universal shelf registration (the "Registration Statement") covering the
issuance of an unspecified amount of equity or debt securities or a combination
thereof. The Company expects to issue public debt under the shelf registration
statement during fiscal 2000. Management intends to use the proceeds from such
debt offering to repay all outstanding bank credit facilities and for other
general corporate purposes.
$200 MILLION BANK CREDIT FACILITY. In July 1998, the Company entered into a $200
million bank credit facility that includes a $50 million working capital
facility and a $150 million revolving term loan facility. The $150 million
revolving term loan facility includes a sublimit of $30 million for letters of
credit. As of December 31, 1999, the Company has borrowed $129 million under the
bank credit facility which is due in July 2000.
The Company's obligations under this bank credit facility are unsecured general
obligations and are non-recourse to the General Partner. Borrowings under this
bank credit facility will bear interest at either the bank's prime rate or the
Eurodollar rate plus the applicable margin as defined in the facility. This bank
credit facility will expire in July 2000 and all amounts borrowed thereunder
shall be due and payable at that time. There must be no amount outstanding under
F-18
<PAGE>
the working capital facility for at least 15 consecutive days during each fiscal
year. The Company elects the basis for the interest rate at the time of each
borrowing. Interest rates ranged from 5.94% to 8.75% during 1999, and the
weighted-average interest rate at December 31, 1999 was 6.74%.
As amended on July 28, 1999, the credit agreement relating to this facility
contains a prohibition on distributions on, or purchases or redemptions of,
Units of the Limited Partner if any event of default is continuing. In addition,
this bank credit facility contains various affirmative and negative covenants
applicable to the ability of the Company to, among other things, (i) incur
certain additional indebtedness, (ii) grant certain liens, (iii) sell assets in
excess of certain limitations, (iv) make investments, (v) engage in transactions
with affiliates and (vi) enter into a merger, consolidation or sale of assets.
The bank credit facility requires that the Company satisfy the following
financial covenants at the end of each fiscal quarter: (i) maintain Consolidated
Tangible Net Worth (as defined in the bank credit facility) of at least $250
million, (ii) maintain a ratio of EBITDA (as defined in the bank credit
facility) to Consolidated Interest Expense (as defined in the bank credit
facility) for the previous 12-month period of at least 3.5 to 1.0 and (iii)
maintain a ratio of Total Indebtedness (as defined in the bank credit facility)
to EBITDA of no more than 3.0 to 1.0. The Company was in compliance with these
restrictive covenants at December 31, 1999.
A "Change of Control" constitutes an Event of Default under this bank credit
facility. A Change of Control includes any of the following events: (i) Dan L.
Duncan (and/or certain affiliates) cease to own (a) at least 51% (on a fully
converted, fully diluted basis) of the economic interest in the capital stock of
EPCO or (b) an aggregate number of shares of capital stock of EPCO sufficient to
elect a majority of the board of directors of EPCO; (ii) EPCO ceases to own,
through a wholly owned subsidiary, at least 65% of the outstanding membership
interest in the General Partner and at least a majority of the outstanding
Common Units of the Limited Partner; (iii) any person or group beneficially owns
more than 20% of the outstanding Common Units of the Limited Partner (excluding
certain affiliates of EPCO or Shell); (iv) the General Partner ceases to be the
general partner of the Company or the Limited Partner; or (v) the Limited
Partner ceases to be the sole limited partner of the Company.
$350 MILLION BANK CREDIT FACILITY. Also in July 1999, the Company entered into a
$350 million bank credit facility that includes a $50 million working capital
facility and a $300 million revolving term loan facility. The $300 million
revolving term loan facility includes a sublimit of $10 million for letters of
credit. The initial proceeds of this loan were used to finance the acquisition
of TNGL and MBA.
Borrowings under the bank credit facility will bear interest at either the
bank's prime rate or the Eurodollar rate plus the applicable margin as defined
in the facility. The bank credit facility will expire in July 2001 and all
amounts borrowed thereunder shall be due and payable at that time. There must be
no amount outstanding under the working capital facility for at least 15
consecutive days during each fiscal year. The Company elects the basis for the
interest rate at the time of each borrowing. Interest rates ranged from 6.88% to
7.31% during 1999, and the weighted-average interest rate at December 31, 1999
was 7.10%.
Limitations on certain actions by the Company and financial covenant
requirements of this bank credit facility are substantially consistent with
those existing for the $200 Million Bank Credit Facility as described above. The
Company was in compliance with the restrictive covenants at December 31, 1999.
F-19
<PAGE>
Long-term debt consisted of the following:
AT DECEMBER 31,
1998 1999
--------------------------------
Borrowings under:
$200 Million Bank Credit Facility $ 90,000 $ 129,000
$350 Million Bank Credit Facility 166,000
--------------------------------
Total 90,000 295,000
Less current maturities of long-term debt 129,000
--------------------------------
Long-term debt $ 90,000 $ 166,000
================================
At December 31, 1999, the Company had $40 million of standby letters of credit
available of which approximately $24.3 million were outstanding under letter of
credit agreements with the banks.
Extraordinary Item - Early Extinguishment of Debt
On July 31, 1998, the Company used $243.3 million in contributions from the
Limited Partner and $13.3 million of borrowings from the $200 Million Bank
Credit Facility to retire $256.6 million of debt that was assumed from EPCO. In
connection with the repayment of the debt, the Company was required to pay a
"make-whole payment" of $26.3 million to the lenders. The $26.3 million (plus
$0.9 million of unamortized debt costs) is included in the consolidated
statement of operations for the year ended December 31, 1998 as "Extraordinary
item--early extinguishment of debt."
7. CAPITAL STRUCTURE AND DISTRIBUTIONS
The Limited Partner owns 98.9899% of the Company with the General Partner owning
the remaining 1.0101%. For purposes of maintaining partner capital accounts, the
partnership agreement generally specifies that items of income or loss shall be
allocated among the partners in accordance with their respective ownership
percentages. Net losses are first allocated to the partners in accordance with
their respective percentages to the extent that the allocations do not cause the
Limited Partner to have a deficit balance in its capital account. Any net loss
not allocated to the Limited Partner is allocated to the General Partner. Normal
allocations of net income according to percentage interests are done only,
however, after giving effect to any priority income allocations to the General
Partner in an amount equal to any aggregate net losses incurred by the General
Partner for all previous years. For the years ended December 31, 1999, 1998 and
1997, the allocation of earnings has been based solely on the respective
ownership interests of the partners with no priority income allocations being
necessary.
The partnership agreement requires the Company to distribute 100% of the
"Available Cash" (as defined in the partnership agreements) to the partners
within 45 days following the end of each calendar quarter in accordance with
their respective ownership interests. Available Cash consists generally of all
cash receipts of the Company, less all of its cash disbursements, net of changes
in reserves. The Company's distributions to its partners were $21.9 million in
1998 and $112.9 million in 1999.
LIMITED PARTNER UNITS ACQUIRED BY TRUST. During the first quarter of 1999, the
Company established a revocable grantor trust (the "Trust") to fund future
liabilities of a long-term incentive plan. At December 31, 1999, the Trust had
purchased a total of 267,200 Common Units of the Limited Partner (the "Trust
Units") which are accounted for in a manner similar to treasury stock under the
cost method of accounting. The Trust Units receive dividends from the Limited
Partner.
F-20
<PAGE>
8. MAJOR CUSTOMERS
Montell owns a 45.4% undivided interest in a plant and the related pipeline
system and it leases such undivided interest in these facilities to the Company.
The agreement with Montell expires in 2004. There are two successive options to
extend the term for 12 years each remaining under the original agreement.
Revenues from sales to Montell were approximately $147.6 million and $102.2
million in 1997 and 1998, respectively. In addition, the Company had supply,
transportation, and storage contracts with Texas Petrochemicals that generated
$107.3 million in revenues in 1997. No single customer accounted for more than
10% of consolidated revenues during 1999.
9. RELATED PARTY TRANSACTIONS
The Company has no employees. All management, administrative and operating
functions are performed by employees of EPCO. Operating costs and expenses
include charges for EPCO's employees who operate the Company's various
facilities. Such charges are based on EPCO's actual salary costs and related
fringe benefits. Because the Company's operations constitute the most
significant portion of EPCO's consolidated operations, selling, general and
administrative expenses reported in the accompanying statements of consolidated
operations for all periods before the public offering include all such expenses
incurred by EPCO less amounts directly incurred by other subsidiaries or
operating divisions of EPCO.
In connection with the initial public offering, EPCO, the General Partner and
the Company entered into the EPCO Agreement pursuant to which (i) EPCO agreed to
manage the business and affairs of the Company and the Limited Partner; (ii)
EPCO agreed to employ the operating personnel involved in the Company's business
for which EPCO is reimbursed by the Company at cost; (iii) the Company and the
Limited Partner agreed to participate as named insureds in EPCO's current
insurance program, and costs are allocated among the parties on the basis of
formulas set forth in the agreement; (iv) EPCO agreed to grant an irrevocable,
nonexclusive worldwide license to all of the trademarks and trade names used in
its business to the Company; (v) EPCO agreed to indemnify the Company against
any losses resulting from certain lawsuits; and (vi) EPCO agreed to sublease all
of the equipment which it holds pursuant to operating leases relating to an
isomerization unit, a deisobutanizer tower, two cogeneration units and
approximately 100 rail cars to the Company for $1 per year and assigned its
purchase options under such leases to the Company (hereafter referred to as
"Retained Leases".)
Pursuant to the EPCO Agreement, EPCO is reimbursed at cost for all expenses that
it incurs in connection with managing the business and affairs of the Company,
except that EPCO is not entitled to be reimbursed for any selling, general and
administrative expenses. In lieu of reimbursement for such selling, general and
administrative expenses, EPCO receives an annual administrative services fee
which initially equaled $12.0 million. The General Partner, with the approval
and consent of its Audit and Conflicts Committee, can agree to increases in such
administrative services fee of up to 10% each year during the ten-year term of
the EPCO Agreement and may agree to further increases in such fee in connection
with expansions of the Company's operations through the construction of new
facilities or the completion of acquisitions that require additional management
personnel. On July 7, 1999, the Audit and Conflicts Committee of the General
Partner authorized an increase in the administrative services fee to $1.1
million per month from the initial $1.0 million per month. The increased fees
were effective August 1, 1999. Beginning in January 2000, the administrative
services fee will increase to $1.55 million per month plus accrued employee
incentive plan costs to compensate EPCO for the additional selling, general, and
administrative charges related to the additional administrative employees
acquired in the TNGL acquisition.
EPCO also operates most of the plants owned by the unconsolidated affiliates and
charges them for actual salary costs and related fringe benefits. In addition,
EPCO charged the unconsolidated affiliates for management services provided;
such charges aggregated $1.1 million for 1997, $1.7 million for 1998 and $0.8
million for 1999. Since EPCO pays the rental charges for the Retained Leases,
such payments are considered a contribution by EPCO for the benefit of each
partnership interest and are included as such in Partners' Equity, and a
corresponding charge for the rental expense is included in the consolidated
F-21
<PAGE>
statements of operations. Rental expense, included in operating costs and
expenses, for the Retained Leases was $13.3 million, $11.3 million (of which
$4.0 million occurred after the public offering) and $10.6 million for 1997,
1998 and 1999, respectively.
The Company also has transactions in the normal course of business with the
unconsolidated affiliates and other subsidiaries and divisions of EPCO. Such
transactions include the buying and selling of NGL products, loading of NGL
products and transportation of NGL products by truck.
As a result of the TNGL acquisition, Shell acquired an ownership interest in the
Limited Partner and its General Partner. At December 31, 1999, Shell owned
approximately 17.6% of the Limited Partner and 30.0% of the General Partner. The
Company's major customer related to the TNGL assets is Shell. Under the terms of
the Shell Processing Agreement, the Company has the right to process
substantially all of Shell's current and future natural gas production from the
Gulf of Mexico. This includes natural gas production from the developments
currently referred to as deepwater. Generally, the Shell Processing Agreement
grants the Company the exclusive right to process any and all of Shell's Gulf of
Mexico natural gas production from existing and future dedicated leases; plus
the right to all title, interest, and ownership in the raw make extracted by the
Company's gas processing facilities from Shell's natural gas production from
such leases; with the obligation to deliver to Shell the natural gas stream
after the raw make is extracted. In addition to the Shell Processing Agreement,
the Company acquired a short-term lease for 425 rail cars from Shell for
servicing the gas processing business activities.
Following is a summary of significant transactions with related parties:
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------
1997 1998 1999
-----------------------------------
Revenues from NGL products sold to:
Unconsolidated affiliates $44,392 $36,474 $40,439
Shell 56,301
EPCO and its subsidiaries 19,029 19,531 9,148
Cost of NGL products purchased from:
Unconsolidated affiliates 8,453 9,270 14,212
Shell 188,570
EPCO and its subsidiaries 6,495 5,293 29,365
Operating expenses charged for trucking
of NGL products 7,606 4,704 6,282
Administrative service fee charged by EPCO 5,129 12,500
10. COMMITMENTS AND CONTINGENCIES
STORAGE COMMITMENTS
The Company stores NGL products for EPCO and various third parties. Under the
terms of the storage agreements, the Company is generally required to redeliver
to the owner its NGL products upon demand. The Company is insured for any
physical loss of such NGL products due to catastrophic events. At December 31,
1999, NGL products aggregating 230 million gallons were due to be redelivered to
the owners under various storage agreements.
F-22
<PAGE>
LEASE COMMITMENTS
The Company leases certain equipment and processing facilities under
noncancelable operating leases. Minimum future rental payments on such leases
with terms in excess of one year at December 31, 1999 are as follows:
2000 $ 5,629
2001 4,609
2002 4,606
2003 4,606
2004 4,607
Thereafter 4,607
------------
Total minimum obligations $ 28,664
============
Lease expense charged to operations (including Retained Leases) for the years
ended December 31, 1997, 1998 and 1999 was approximately $29.6 million , $18.5
million and $20.2 million, respectively.
GAS PURCHASE COMMITMENTS
The Company has annual renewable gas purchase contracts with four suppliers. As
of December 31, 1999, the Company is required to make daily purchases as
follows: 8,000 million British Thermal Units ("MMBTU") per day through March 31,
2000, 5,000 MMBTU per day through July 31, 2000 and 5,000 MMBTU per day through
October 31, 2000. The cost of these natural gas purchase commitments approximate
market value at the time of delivery.
CAPITAL EXPENDITURE COMMITMENTS
As of December 31, 1999, the Company had capital expenditure commitments
totaling approximately $9.5 million, of which $1.7 million relates to the
construction of projects of unconsolidated affiliates.
LITIGATION
EPCO has indemnified the Company against any litigation pending as of the date
of its formation. The Company is sometimes named as a defendant in litigation
relating to its normal business operations. Although the Company insures itself
against various business risks, to the extent management believes it is prudent,
there is no assurance that the nature and amount of such insurance will be
adequate, in every case, to indemnify the Company against liabilities arising
from future legal proceedings as a result of its ordinary business activity.
Management is aware of no significant litigation, pending or threatened, that
would have a significantly adverse effect on the Company's financial position or
results of operations.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of estimated fair value was determined by the Company,
using available market information and appropriate valuation methodologies.
Considerable judgment, however, is necessary to interpret market data and
develop the related estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize upon disposition of the financial instruments. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
The Company enters into swaps and other contracts to hedge the price risks
associated with inventories, commitments and certain anticipated transactions.
The Company does not currently hold or issue financial instruments for trading
purposes. The swaps and other contracts are with established energy companies
and major financial institutions. The Company believes its credit risk is
F-23
<PAGE>
minimal on these transactions, as the counterparties are required to meet
stringent credit standards. There is continuous day-to-day involvement by senior
management in the hedging decisions, operating under resolutions adopted by the
board of directors of the General Partner.
At December 31, 1999, the Company had open positions covering 24.0 billion cubic
feet of natural gas extending into December 2000 related to the swaps described
above. The fair value of these swap contracts at December 31, 1999 was estimated
at $0.5 million payable by the Company based on quoted market prices of
comparable contracts and approximate the gain or loss that would have been
realized if the contracts had been settled at the balance sheet date.
Cash and Cash Equivalents, Accounts Receivable, Participation in Notes
Receivable from Unconsolidated Affiliates, Accounts Payable and Accrued Expenses
are carried at amounts which reasonably approximate their fair value at year end
due to their short-term nature.
Long-term debt is carried at an amount that reasonably approximates its fair
value at year end due to its variable interest rates.
12. SUPPLEMENTAL CASH FLOWS DISCLOSURE
The net effect of changes in operating assets and liabilities is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1998 1999
-------------------------------------------------------
<S> <C> <C> <C>
(Increase) decrease in:
Accounts receivable $ 29,024 $ 3,699 $ (152,335)
Inventories 7,329 1,361 7,471
Prepaid and other current assets 917 (342) (7,524)
Other assets 127 46 (1,971)
Increase (decrease) in:
Accounts payable (3,320) (40,005) (6,277)
Accrued gas payable (26,955) (18,485 189,165
Accrued expenses (5,526) (1,098) (11,137)
Other current liabilities 1,352 (10,082) 6,745
Other liabilities 296
-------------------------------------------------------
Net effect of changes in operating accounts $ 2,948 $ (64,906) $ 24,433
=======================================================
Cash payments for interest, net of $2,005,
$180 and $153 capitalized in 1997,
1998 and 1999, respectively $ 28,352 $ 6,971 $ 15,780
=======================================================
</TABLE>
During 1998, the Company contributed $1.9 million (at net book value) of plant
equipment to an unconsolidated affiliate as part of its investment therein. On
August 1, 1999, the Company paid $166 million in cash and the Limited Partner
issued 14.5 million non-distribution bearing, convertible special Units in
exchange for the equity interest in TNGL. On July 1, 1999, the Company paid
approximately $42.1 million in cash to Kinder Morgan and EPCO and assumed
approximately $4 million of debt in connection with the acquisition of
additional interest in MBA.
13. CONCENTRATION OF CREDIT RISK
A substantial portion of the Company's revenues are derived from natural gas
processing and the fractionation, isomerization, propylene production,
marketing, storage and transportation of NGLs to various companies in the NGL
industry, located in the United States. Although this concentration could affect
the Company's overall exposure to credit risk since these customers might be
affected by similar economic or other conditions, management believes the
Company is exposed to minimal credit risk, since the majority of its business is
F-24
<PAGE>
conducted with major companies within the industry and much of the business is
conducted with companies with whom the Company has joint operations. The Company
generally does not require collateral for its accounts receivable. The Company
is subject to a number of risks inherent in the industry in which it operates,
primarily fluctuating gas and liquids prices and gas supply. The Company's
financial condition and results of operations will depend significantly on the
prices received for NGLs and the price paid for gas consumed in the NGL
extraction process. These prices are subject to fluctuations in response to
changes in supply, market uncertainty and a variety of additional factors that
are beyond the control of the Company. In addition, the Company must continually
connect new wells through third-party gathering systems which serve the gas
plants in order to maintain or increase throughput levels to offset natural
declines in dedicated volumes. The number of wells drilled by third parties will
depend on, among other factors, the price of gas and oil, the energy policy of
the federal government, and the availability of foreign oil and gas, none of
which is in the Company's control.
14. SEGMENT INFORMATION
Historically, the Company has had only one reportable business segment: NGL
Operations. Due to the broadened scope of the Company's operations with the
third quarter of 1999 acquisition of TNGL, effective for fiscal 1999, the
Company's operations are being managed using five reportable business segments.
The five new segments are: Fractionation, Pipeline, Processing, Octane
Enhancement, and Other.
Operating segments are components of a business about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments.
The management of the Company evaluates segment performance on the basis of
gross operating margin. Gross operating margin reported for each segment
represents earnings before depreciation and amortization, lease expense
obligations retained by the Company's largest Unitholder, EPCO, and general and
administrative expenses. In addition, segment gross operating margin is
exclusive of interest expense, interest income (from unconsolidated affiliates
or others), dividend income from unconsolidated affiliates, minority interest,
extraordinary charges and other income and expense transactions. The Company's
equity earnings from unconsolidated affiliates are included in segment gross
operating margin. Segment assets consists of property, plant and equipment and
the amount of investments in and advances to unconsolidated affiliates.
Segment gross operating margin is inclusive of intersegment revenues. Such
revenues, which have been eliminated from the consolidated totals, are recorded
at arms-length prices which are intended to approximate the prices charged to
external customers.
As noted above, the five new segments are Fractionation, Pipeline, Processing,
Octane Enhancement and Other. Fractionation includes NGL fractionation, polymer
grade propylene fractionation and butane isomerization (converting normal butane
into high purity isobutane) services. Pipeline consists of pipeline, storage and
import/export terminal services. Processing includes the natural gas processing
business and its related NGL merchant activities. Octane Enhancement represents
the Company's 33.33% ownership interest in a facility that produces motor
gasoline additives to enhance octane (currently producing MTBE). The Other
operating segment consists of fee-based marketing services and other plant
support functions.
F-25
<PAGE>
Information by operating segment, together with reconciliations to the
consolidated totals, is presented in the following table:
<TABLE>
<CAPTION>
Operating Segments Adjustments
---------------------------------------------------------------------------
Octane and Consolidated
Fractionation Pipelines Processing Enhancement Other Eliminations Totals
---------------------------------------------------------------------------------------------------------
Revenues from
external customers
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $ 275,646 $ 16,180 $ 1,081,487 $ 8,183 $ 731 $ (35,771) $ 1,346,456
1998 273,781 19,344 506,630 9,801 (54,983) 754,573
1997 339,721 15,924 729,376 9,305 (58,363) 1,035,963
Intersegment revenues
1999 118,103 43,688 216,720 444 (378,955) -
1998 162,379 37,574 90 383 -
1997 129,230 40,202 164 360 -
Total revenues
1999 393,749 59,868 1,298,207 8,183 1,175 (414,726) 1,346,456
1998 436,160 56,918 506,720 9,801 383 (255,409) 754,573
1997 468,951 56,126 729,540 9,305 360 (228,319) 1,035,963
Gross operating margin by segment
1999 106,267 27,038 36,799 8,183 908 179,195
1998 66,627 27,334 (652) 9,801 (3,483) 99,627
1997 100,770 23,909 (3,778) 9,305 (1,496) 128,710
Segment assets
1999 362,198 249,453 122,495 113 32,810 767,069
1998 288,159 207,432 181 142 499,793
Investments in and advances to
Unconsolidated affiliates
1999 99,110 85,492 33,000 63,004 280,606
1998 30,447 10,595 50,079 91,121
</TABLE>
Two customers provided more than 10% of revenues in 1997. Only one customer
provided more than 10% of revenues in 1998. No single customer provided more
than 10% of revenues in 1999.
All consolidated revenues were earned in the United States.
F-26
<PAGE>
A reconciliation of segment gross operating margin to consolidated income before
extraordinary item and minority interest follows:
<TABLE>
<CAPTION>
1997 1998 1999
---------------------------------------------------
<S> <C> <C> <C>
Total segment gross operating margin $ 128,710 $ 99,627 $ 179,195
Depreciation and amortization (17,684) (18,579) (23,664)
Retained lease expense, net (13,300) (12,635) (10,557)
Gain (loss) on sale of assets (155) 276 (123)
Selling, general and administrative (21,891) (18,216) (12,500)
---------------------------------------------------
Consolidated operating income 75,680 50,473 132,351
Interest expense (25,717) (15,057) (16,439)
Interest income from unconsolidated affiliates 809 1,625
Dividend income from unconsolidated affiliates 3,435
Interest income - other 1,934 772 1,247
Other, net 793 358 (379)
---------------------------------------------------
Consolidated income before extraordinary item
and minority interest $ 52,690 $ 37,355 $ 121,840
===================================================
</TABLE>
15. SUBSEQUENT EVENTS
Effective January 1, 2000, the Company's General Partner and Limited Partner,
adopted the 1999 Long-Term Incentive Plan (the "Plan"). Under the Plan,
non-qualified incentive options to purchase a fixed number of Common Units of
the Limited Partner may be granted to key employees of EPCO who perform
management, administrative or operational functions for the Company under the
EPCO Agreement. The exercise price per Unit, vesting and expiration terms, and
rights to receive distributions on Units granted are determined by the Company
for each grant agreement. Upon the exercise of an option, the Company may
deliver the Units of the Limited Partner or pay an amount in cash equal to the
excess of the fair market value of a Unit and the exercise price of the option.
On January 1, 2000, 225,000 options were granted at a weighted average price of
$17.50 per Unit of which none had been exercised at March 27, 2000. The Plan is
primarily funded by the Units purchased by the Trust.
On February 25, 2000, the Company announced the closing, effective March 1,
2000, of its acquisition of certain Louisiana and Texas pipeline assets from
Concha Chemical Pipeline Company ("Concha"), an affiliate of Shell, for
approximately $100 million in cash. The principal asset acquired was the Lou-Tex
Propylene Pipeline which is 263 miles of 10" pipeline from Sorrento, Louisiana
to Mont Belvieu, Texas. The Lou-Tex Propylene Pipeline is currently dedicated to
the transportation of chemical grade propylene from Sorrento to the Mont Belvieu
area. Also acquired in this transaction was 27.5 miles of 6" ethane pipeline
between Sorrento and Norco, Louisiana, and a 0.5 million barrel storage cavern
at Sorrento, Louisiana. The acquisition of the Lou-Tex Propylene Pipeline is the
first step in the Company's development of an approximately $180 million,
160,000 barrel per day Louisiana-to-Texas gas liquids pipeline system. The
second step involves the construction of the 263-mile Lou-Tex NGL Pipeline from
Sorrento, Louisiana to Mont Belvieu, Texas, scheduled for completion in the
third quarter of 2000 at an estimated cost of $82.5 million. This larger system
will link growing supplies of NGLs produced in Louisiana and Mississippi with
the principal NGL markets on the United States Gulf Coast.
On March 13, 2000, in connection with the Registration Statement, the Company
issued $350 million of 5-year public debt securities. The notes are unsecured;
rank equally with all of the Company's existing and future senior debt; are
senior to any future subordinated debt; and are effectively junior to the
Company's secured indebtedness and other liabilities. The Company issued the
notes under an indenture containing certain restrictive covenants restricting
its ability, with certain exceptions, to incur debt secured by liens and engage
in sale/leaseback transactions. The Limited Partner is guarantor of the notes.
Management used the proceeds of approximately $347.8 million from such debt
offering to repay the entire $169 million outstanding under the $200 Million
F-27
<PAGE>
Bank Credit Facility (at the time of the offering) and applied the remaining
proceeds of $178.8 million to the balance outstanding under the $350 Million
Bank Credit Facility.
On March 23, 2000, the Company borrowed $54 million from the Mississippi
Business Finance Corporation ("MBFC") to reimburse the Company's portion of
construction costs of the Pascagoula gas processing plant. MBFC will issue $54
million in taxable industrial development bonds underwritten by First Union
Securities, Inc. and Banc of America Securities, LLC. The Limited Partner will
act as guarantor of the MBFC bonds with the Company making payments of principal
and interest to MBFC. Interest on the bonds will be paid semiannually with final
maturity of the bonds in March 2010.
F-28
<PAGE>
SCHEDULE II
ENTERPRISE PRODUCTS OPERATING L.P.
VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
Additions
-------------------------------------
Balance at Charged to Charged to
beginning of Costs and other Balance at end
Description period expenses accounts Deductions of period
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Reserve for inventory losses $ 1.2 $ 5.0 $ (5.4)(a) $ 0.8
Year ended December 31, 1998:
Reserve for inventory losses 0.8 10.0 (10.1)(a) 0.8
Year ended December 31, 1999:
Allowance for doubtful
Accounts receivable - trade 3.0 12.9(b) 15.9
Reserve for inventory losses 0.8 7.3 (5.2) (a) 2.9
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Generally denotes net underground NGL storage well product losses
(b) As a result of the TNGL acquisition, the Company acquired a $12.9 million
allowance for doubtful accounts from TNGL. Historically, the Company did
not experience any significant losses from bad debts and therefore did not
require an allowance account.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, in the City of Houston,
State of Texas, on the 27th day of March, 2000.
ENTERPRISE PRODUCTS OPERATING L.P.
(A Delaware Limited Partnership)
By: ENTERPRISE PRODUCTS GP, LLC,
as General Partner
By: /s/ O.S. Andras
___________________________________
Name: O.S. Andras
Title: President and Chief Executive Officer
of Enterprise Products GP, LLC
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in their capacities as directors and principal executive officers
of the General Partner as indicated below on the 27th day of March, 2000.
Signature Title
--------- -----
/s/ Dan L. Duncan Chairman of the Board and Director
_________________________
Dan L. Duncan
/s/ O.S. Andras President, Chief Executive Officer and
_________________________ Director
O.S. Andras
/s/ Randa L. Duncan Group Executive Vice President and
_________________________ Director
Randa L. Duncan
/s/ Gary L. Miller Executive Vice President, Chief Financial
_________________________ Officer, Treasurer and Director (Principal
Gary L. Miller Financial and Accounting Officer)
/s/ Charles R. Crisp Director
_________________________
Charles R. Crisp
/s/ Dr. Ralph S. Cunningham Director
_________________________
Dr. Ralph S. Cunningham
/s/ Curtis R. Frasier Director
_________________________
Curtis R. Frasier
/s/ Lee W. Marshall, Sr. Director
_________________________
Lee W. Marshall, Sr.
/s/ Stephen H. McVeigh Director
_________________________
Stephen H. McVeigh
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0001102995
<NAME> ENTERPRISE PRODUCTS OPERATING L.P.
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<CASH> 23,463 24,103 5,159
<SECURITIES> 0 0 0
<RECEIVABLES> 76,533 72,834 332,125
<ALLOWANCES> 0 0 15,871
<INVENTORY> 18,935 17,574 39,907
<CURRENT-ASSETS> 127,034 137,693 382,298
<PP&E> 716,594 720,342 1,029,026
<DEPRECIATION> 202,867 220,549 261,957
<TOTAL-ASSETS> 697,713 741,037 1,492,712
<CURRENT-LIABILITIES> 167,344 82,771 530,758
<BONDS> 215,334 90,000 166,000
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 314,164 567,273 794,626
<TOTAL-LIABILITY-AND-EQUITY> 697,713 741,037 1,492,712
<SALES> 1,020,281 738,902 1,332,979
<TOTAL-REVENUES> 1,035,963 754,573 1,346,456
<CGS> 938,392 685,884 1,201,605
<TOTAL-COSTS> 938,392 685,884 1,201,605
<OTHER-EXPENSES> 21,891 18,216 12,500
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 25,717 15,057 16,439
<INCOME-PRETAX> 49,963 35,416 115,912
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 52,612 37,233 121,730
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 27,176 0
<CHANGES> 0 0 0
<NET-INCOME> 52,612 10,057 121,730
<EPS-BASIC> 0.00 0.00 0.00
<EPS-DILUTED> 0.00 0.00 0.00
</TABLE>
