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Enterprise Reports Results For The Third Quarter Of 2012

Conference Call to Discuss Third Quarter 2012 Earnings

Today, Enterprise will host a conference call to discuss its third quarter 2012 earnings. The call will be broadcast live over the Internet beginning at 9:00 a.m. CT and may be accessed by visiting the company’s website at www.enterpriseproducts.com.

Use of Non-GAAP Financial Measures

This press release and accompanying schedules include the non-GAAP financial measures of gross operating margin, distributable cash flow and Adjusted EBITDA. The accompanying schedules provide definitions of these non-GAAP financial measures and reconciliations to their most directly comparable financial measure calculated and presented in accordance with GAAP. Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, operating income, net cash flows provided by operating activities or any other measure of financial performance calculated and presented in accordance with GAAP. Our non-GAAP financial measures may not be comparable to similarly-titled measures of other companies because they may not calculate such measures in the same manner as we do.

Company Information and Use of Forward-Looking Statements

Enterprise Products Partners L.P. is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products and petrochemicals. The partnership’s assets include approximately 50,700 miles of onshore and offshore pipelines; 190 million barrels of storage capacity for NGLs, petrochemicals, refined products and crude oil; and 14 billion cubic feet of natural gas storage capacity. Services include: natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage, and import and export terminals; crude oil and refined products transportation, storage and terminals; offshore production platforms; petrochemical transportation and services; and a marine transportation business that operates primarily on the United States inland and Intracoastal Waterway systems and in the Gulf of Mexico. For additional information, visit www.enterpriseproducts.com.

This press release includes forward-looking statements. Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve certain risks and uncertainties, such as the partnership’s expectations regarding future results, capital expenditures, project completions, liquidity and financial market conditions. These risks and uncertainties include, among other things, insufficient cash from operations, adverse market conditions, governmental regulations and other factors discussed in Enterprise’s filings with the U.S. Securities and Exchange Commission. If any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those expected. The partnership disclaims any intention or obligation to update publicly or reverse such statements, whether as a result of new information, future events or otherwise.

     
Enterprise Products Partners L.P. Exhibit A
Condensed Statements of Consolidated Operations – UNAUDITED
($ in millions, except per unit amounts)
    Three Months Ended

September 30,

    Nine Months Ended

September 30,

2012   2011     2012   2011

Revenues

$ 10,468.7 $ 11,327.1 $ 31,511.0   $ 32,727.3

Costs and expenses:

Operating costs and expenses 9,659.8 10,604.6 29,136.5 30,675.0
General and administrative costs  

41.4

      50.0         130.2       138.3  
Total costs and expenses   9,701.2       10,654.6         29,266.7       30,813.3  

Equity in income of unconsolidated affiliates

  21.0       8.6         42.2       35.9  

Operating income

788.5 681.1 2,286.5 1,949.9

Other income (expense):

Interest expense (199.7 ) (189.0 ) (572.8 ) (561.1 )
Other, net   1.5       (1.0 )       73.4       (0.2 )
Total other expense   (198.2 )     (190.0 )       (499.4 )     (561.3 )

Income before income taxes

590.3 491.1 1,787.1 1,388.6
Benefit from (provision for) income taxes   (2.4 )     (11.6 )       23.5       (26.1 )

Net income

587.9 479.5 1,810.6 1,362.5
Net income attributable to noncontrolling interests – Duncan (1) -- (3.6 ) -- (20.9 )
Net income attributable to noncontrolling interests – other   (1.1 )     (4.5 )       (6.2 )     (15.8 )
Total net income attributable to noncontrolling interests   (1.1 )   (8.1 )       (6.2 )   (36.7 )

Net income attributable to limited partners

$ 586.8     $ 471.4       $ 1,804.4     $ 1,325.8  
 

Per unit data (fully diluted):

Earnings per unit $ 0.66 $ 0.55 $ 2.03 $ 1.55
Average limited partner units outstanding (in millions) 891.4 858.2 890.0 853.3

Other financial data:

Net cash flows provided by operating activities $ 277.5 $ 473.7 $ 1,615.8 $ 2,228.2
Cash used in investing activities $ 1,145.2 $ 846.4 $ 1,895.0 $ 2,338.6
Cash provided by financing activities $ 867.7 $ 292.7 $ 273.9 $ 74.0
Gross operating margin (see Exhibit B) $ 1,139.6 $ 972.8 $ 3,225.3 $ 2,770.7
Distributable cash flow (see Exhibit D) $ 742.5 $ 855.9 $ 3,247.4 $ 2,327.1
Adjusted EBITDA (see Exhibit E) $ 1,063.2 $ 955.6 $ 3,197.8 $ 2,762.4
Depreciation, amortization and accretion $ 280.2 $ 254.4 $ 817.9 $ 739.2
Distributions received from unconsolidated affiliates $ 17.0 $ 37.7 $ 67.5 $ 122.5
Total debt principal outstanding at end of period $ 15,917.7 $ 15,052.7 $ 15,917.7 $ 15,052.7

Capital spending:

Capital expenditures, net of contributions in aid of construction costs, for property, plant and equipment $ 894.8 $ 1,070.1 $ 2,697.9 $ 2,779.9
Investments in unconsolidated affiliates, net 225.4 0.1 350.9 11.9
Other investing activities   15.5       3.8         32.1       7.4  
Total capital spending $ 1,135.7     $ 1,074.0       $ 3,080.9     $ 2,799.2  
                                     

(1)

 

Represents consolidated net income attributable to the limited partner interests of Duncan Energy Partners L.P. (“Duncan”) that were owned by parties other than Enterprise prior to completion of the merger of Duncan with a wholly owned subsidiary of Enterprise on September 7, 2011.

       

Enterprise Products Partners L.P.

Exhibit B
Gross Operating Margin – UNAUDITED        
($ in millions)
Three Months Ended

September 30,

    Nine Months Ended

September 30,

2012 2011     2012 2011

Gross operating margin by segment:

NGL Pipelines & Services $ 615.8 $ 547.6 $ 1,836.5 $ 1,549.7
Onshore Natural Gas Pipelines & Services 183.5 156.0 565.5 476.3
Onshore Crude Oil Pipelines & Services 117.6 67.4 252.7 167.0
Offshore Pipelines & Services 40.6 53.9 131.0 168.6
Petrochemical & Refined Products Services 182.1 145.6 437.2 397.8
Other Investments   --     2.3         2.4     11.3  
Total gross operating margin 1,139.6 972.8 3,225.3 2,770.7
Adjustments to reconcile non-GAAP gross operating margin to

GAAP operating income:

Amounts included in operating costs and expenses:
Depreciation, amortization and accretion (269.2 ) (238.3 ) (785.1 ) (702.4 )
Non-cash asset impairment charges (43.1 ) (5.2 ) (57.6 ) (5.2 )
Operating lease expenses paid by EPCO -- -- -- (0.3 )
Gains related to sales of assets and investments 0.3 1.8 4.1 25.4
Gains related to property damage insurance recoveries 2.3 -- 30.0 --
General and administrative costs   (41.4 )   (50.0 )       (130.2 )   (138.3 )
Operating income $ 788.5   $ 681.1       $ 2,286.5   $ 1,949.9  
 
We evaluate segment performance based on the non-GAAP financial measure of gross operating margin. Gross operating margin (either in total or by individual segment) is an important performance measure of the core profitability of our operations. This measure forms the basis of our internal financial reporting and is used by our management in deciding how to allocate capital resources among business segments. We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results. The GAAP financial measure most directly comparable to total segment gross operating margin is operating income.
 
We define total segment gross operating margin as operating income before: (1) depreciation, amortization and accretion expenses; (2) non-cash asset impairment charges; (3) operating lease expenses for which we do not have the payment obligation; (4) gains and losses related to sales of assets and investments; (5) gains and losses related to property damage insurance recoveries; and (6) general and administrative costs. Gross operating margin by segment is calculated by subtracting segment operating costs and expenses (net of the adjustments noted above) from segment revenues, with both segment totals before the elimination of intercompany transactions. In accordance with GAAP, intercompany accounts and transactions are eliminated in consolidation. 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.
 
We include equity earnings from unconsolidated affiliates in our measurement of segment gross operating margin. Equity investments with industry partners are a significant component of our business strategy. They are a means by which we conduct our operations to align our interests with those of our customers and/or suppliers. This method of operation also enables us to achieve favorable economies of scale relative to the level of investment and business risk assumed. Many of these businesses perform supporting or complementary roles to our other midstream business operations.
       

Enterprise Products Partners L.P.

Exhibit C
Selected Operating Data – UNAUDITED                
 
Three Months Ended

September 30,

    Nine Months Ended

September 30,

2012 2011     2012 2011

Selected operating data: (1)

NGL Pipelines & Services, net:
NGL transportation volumes (MBPD) 2,473 2,241 2,440 2,286
NGL fractionation volumes (MBPD) 653 554 643 557
Equity NGL production (MBPD) (2) 99 114 102 117
Fee-based natural gas processing (MMcf/d) (3) 4,462 3,813 4,277 3,733
Onshore Natural Gas Pipelines & Services, net:
Natural gas transportation volumes (BBtus/d) 14,182 12,379 13,703 11,989
Onshore Crude Oil Pipelines & Services, net:
Crude oil transportation volumes (MBPD) 820 725 751 678
Offshore Pipelines & Services, net:
Natural gas transportation volumes (BBtus/d) 760 1,009 876 1,067
Crude oil transportation volumes (MBPD) 293 259 289 279
Platform natural gas processing (MMcf/d) 238 376 306 412
Platform crude oil processing (MBPD) 14 15 17 17
Petrochemical & Refined Products Services, net:
Butane isomerization volumes (MBPD) 104 105 95 99
Propylene fractionation volumes (MBPD) 73 74 73 72
Octane additive and other plant production volumes (MBPD) 19 18 16 17
Transportation volumes, primarily refined products

and petrochemicals (MBPD)

713 825 677 792
Total, net:
NGL, crude oil, refined products and petrochemical

transportation volumes (MBPD)

4,299 4,050 4,157 4,035
Natural gas transportation volumes (BBtus/d) 14,942 13,388 14,579 13,056
Equivalent transportation volumes (MBPD) (4)     8,231 7,573     7,994 7,471
 

(1)

Operating rates are reported on a net basis, which takes into account our ownership interests in certain joint ventures, and include volumes for newly constructed assets from the related in-service dates and for recently purchased assets from the related acquisition dates.

 

(2)

Represents the NGL volumes we earn and take title to in connection with our processing activities.

 

(3)

Volumes reported correspond to the revenue streams earned by our gas plants.

 

(4)

Reflects equivalent energy volumes where 3.8 MMBtus of natural gas are equivalent to one barrel of NGLs.

           
Enterprise Products Partners L.P. Exhibit D
Distributable Cash Flow - UNAUDITED                    
($ in millions)
Three Months Ended

September 30,

    Nine Months Ended

September 30,

2012   2011     2012   2011
Net income attributable to limited partners $ 586.8 $ 471.4 $ 1,804.4 $ 1,325.8
Adjustments to GAAP net income attributable to limited partners to derive non-GAAP distributable cash flow:
Depreciation, amortization and accretion 280.2 254.4 817.9 739.2
Distributions received from unconsolidated affiliates 17.0 37.7 67.5 122.5
Equity in income of unconsolidated affiliates (21.0 ) (8.6 ) (42.2 ) (35.9 )
Sustaining capital expenditures (102.3 ) (81.2 ) (282.7 ) (217.8 )
Gains related to sales of assets and investments (0.3 ) (1.8 ) (72.9 ) (25.4 )
Gains related to property damage insurance recoveries (2.3 ) -- (30.0 ) --
Proceeds from sales of assets and investments 8.4 190.0 1,137.4 440.5
Proceeds from property damage insurance recoveries 2.3 -- 30.0 --
Monetization of interest rate derivative instruments (70.2 ) (17.5 ) (147.8 ) (23.2 )
Deferred income tax expense (benefit) (3.0 ) 3.2 (67.9 ) 5.5
Other miscellaneous non-cash adjustments to derive distributable cash flow   46.9       8.3         33.7       (4.1 )
Distributable cash flow 742.5 855.9 3,247.4 2,327.1
Adjustments to non-GAAP distributable cash flow to derive GAAP net cash flows provided by operating activities:
Sustaining capital expenditures 102.3 81.2 282.7 217.8
Proceeds from sales of assets and investments (8.4 ) (190.0 ) (1,137.4 ) (440.5 )
Proceeds from property damage insurance recoveries (2.3 ) -- (30.0 ) --
Monetization of interest rate derivative instruments 70.2 17.5 147.8 23.2
Net effect of changes in operating accounts (629.9 ) (299.8 ) (910.2 ) 61.6
Miscellaneous non-cash and other amounts to reconcile distributable cash flow with net cash flows provided by operating activities   3.1       8.9         15.5       39.0  
Net cash flows provided by operating activities $ 277.5     $ 473.7       $ 1,615.8     $ 2,228.2  
 
We define distributable cash flow as net income or loss attributable to limited partners adjusted for: (1) the addition of depreciation, amortization and accretion expense; (2) the addition of cash distributions received from unconsolidated affiliates less equity earnings from unconsolidated affiliates; (3) the subtraction of sustaining capital expenditures; (4) the addition of losses or subtraction of gains related to asset and investment sales and property damage insurance recoveries; (5) the addition of cash proceeds from asset and investment sales and property damage insurance recoveries; (6) the addition of losses or subtraction of gains on the monetization of interest rate derivative instruments recorded in accumulated other comprehensive income (loss); and (7) the addition or subtraction of other miscellaneous non-cash amounts (as applicable) that affect net income or loss for the period.
 
Sustaining capital expenditures are capital expenditures (as defined by GAAP) resulting from improvements to and major renewals of existing assets. Such expenditures serve to maintain existing operations but do not generate additional revenues.
 
Our management compares the distributable cash flow we generate to the cash distributions we expect to pay our partners. Using this metric, management computes our distribution coverage ratio. Distributable cash flow is an important non-GAAP financial measure for our limited partners since it serves as an indicator of our success in providing a cash return on investment. Specifically, this financial measure indicates to investors whether or not we are generating cash flows at a level that can sustain or support an increase in our quarterly cash distributions. Distributable cash flow is also a quantitative standard used by the investment community with respect to publicly traded partnerships because the value of a partnership unit is, in part, measured by its yield, which is based on the amount of cash distributions a partnership can pay to a unitholder. The GAAP measure most directly comparable to distributable cash flow is net cash flows provided by operating activities.
       

Enterprise Products Partners L.P.

Exhibit E
Adjusted EBITDA - UNAUDITED                      
($ in millions)    
Three Months Ended

September 30,

    Nine Months Ended

September 30,

Twelve Months Ended September 30,

2012 2011     2012 2011     2012
Net income $ 587.9 $ 479.5 $ 1,810.6 $ 1,362.5 $ 2,536.4
Adjustments to GAAP net income to derive non-GAAP Adjusted EBITDA:
Equity in income of unconsolidated affiliates (21.0 ) (8.6 ) (42.2 ) (35.9 ) (52.7 )
Distributions received from unconsolidated affiliates 17.0 37.7 67.5 122.5 101.4
Interest expense (including related amortization) 199.7 189.0 572.8 561.1 755.8
Provision for (benefit from) income taxes 2.4 11.6 (23.5 ) 26.1 (22.4 )
Depreciation, amortization and accretion in costs and expenses   277.2     246.4         812.6     726.1         1,077.0  
Adjusted EBITDA 1,063.2 955.6 3,197.8 2,762.4 4,395.5
Adjustments to non-GAAP Adjusted EBITDA to derive GAAP net cash flows provided by operating activities:
Interest expense (199.7 ) (189.0 ) (572.8 ) (561.1 ) (755.8 )
Benefit from (provision for) income taxes (2.4 ) (11.6 ) 23.5 (26.1 ) 22.4
Gains related to sales of assets and investments (0.3 ) (1.8 ) (72.9 ) (25.4 ) (203.2 )
Gains related to property damage insurance recoveries (2.3 ) -- (30.0 ) -- (30.0 )
Deferred income tax expense (benefit) (3.0 ) 3.2 (67.9 ) 5.5 (61.3 )
Net effect of changes in operating accounts (629.9 ) (299.8 ) (910.2 ) 61.6 (704.9 )
Miscellaneous non-cash and other amounts to reconcile Adjusted EBITDA to net cash flows provided by operating activities   51.9     17.1         48.3     11.3         55.4  
Net cash flows provided by operating activities $ 277.5   $ 473.7       $ 1,615.8   $ 2,228.2       $ 2,718.1  
 
We define Adjusted EBITDA as net income or loss minus equity earnings from unconsolidated affiliates; plus distributions received from unconsolidated affiliates, interest expense, provision for (or benefit from) income taxes and depreciation, amortization and accretion expense. Adjusted EBITDA is commonly used as a supplemental financial measure by our management and external users of our financial statements, such as investors, commercial banks, research analysts and rating agencies, to assess: (1) the financial performance of our assets without regard to financing methods, capital structures or historical cost basis; (2) the ability of our assets to generate cash sufficient to pay interest and support our indebtedness; and (3) the viability of projects and the overall rates of return on alternative investment opportunities. Since Adjusted EBITDA excludes some, but not all, items that affect net income or loss and because these measures may vary among other companies, the Adjusted EBITDA data presented in this press release may not be comparable to similarly titled measures of other companies. The GAAP measure most directly comparable to Adjusted EBITDA is net cash flows provided by operating activities.




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