EnLink Midstream(ENLC) - 2021 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements This section presents EnLink Midstream, LLC's unaudited consolidated financial statements for Q2 and H1 2021, including balance sheets, income, and cash flow statements, with detailed notes Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $808.1 | $651.4 | | Total Assets | $8,566.5 | $8,550.9 | | Total Current Liabilities | $1,039.5 | $888.0 | | Long-Term Debt | $4,206.4 | $4,244.0 | | Total Liabilities | $5,468.5 | $5,337.9 | | Total Members' Equity | $3,098.0 | $3,213.0 | | Total Liabilities and Members' Equity | $8,566.5 | $8,550.9 | Consolidated Statement of Operations Highlights (in millions, except per unit data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,406.7 | $744.9 | $2,655.1 | $1,901.0 | | Operating Income (Loss) | $77.1 | $70.7 | $157.5 | $(174.8) | | Net Income (Loss) | $9.4 | $29.8 | $22.0 | $(230.6) | | Net Income (Loss) Attributable to ENLC | $(21.6) | $4.1 | $(34.3) | $(282.7) | | Basic EPS | $(0.04) | $0.01 | $(0.07) | $(0.58) | | Diluted EPS | $(0.04) | $0.01 | $(0.07) | $(0.58) | Consolidated Statement of Cash Flows Highlights (in millions) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $402.2 | $316.8 | | Net Cash Used in Investing Activities | $(112.2) | $(202.0) | | Net Cash Used in Financing Activities | $(296.8) | $(140.2) | | Net Decrease in Cash | $(6.8) | $(25.4) | | Cash at End of Period | $32.8 | $52.0 | Notes to Consolidated Financial Statements Detailed notes explain the company's accounting policies and financial results, including the Amarillo Rattler acquisition, long-term debt, and segment data - On April 30, 2021, the company acquired Amarillo Rattler, LLC, a gathering and processing system in the Midland Basin, for an upfront payment of $50.0 million in cash, with an additional $10 million due in 2022 and up to $15 million in contingent consideration[50] Long-Term Debt Summary (in millions) | Debt Instrument | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Term Loan due 2021 | $250.0 | $350.0 | | AR Facility due 2023 | $210.0 | $250.0 | | ENLK's Senior unsecured notes (various) | $3,047.8 | $3,050.8 | | ENLC's Senior unsecured notes (various) | $998.7 | $998.7 | | Total Long-term debt, net | $4,206.4 | $4,244.0 | - In November 2020, the company authorized a common unit repurchase program of up to $100.0 million; for the six months ended June 30, 2021, ENLC repurchased 317,751 common units for an aggregate cost of $2.0 million[81][82] Segment Profit (in millions) | Segment | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Permian | $44.0 | $86.8 | | Louisiana | $67.3 | $149.5 | | Oklahoma | $85.6 | $141.1 | | North Texas | $57.9 | $134.8 | | Total Segment Profit | $254.8 | $512.2 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes the company's Q2 and H1 2021 financial performance, covering market conditions, segment results, liquidity, and capital resources Overview ENLC operates a fee-based midstream energy services business with extensive infrastructure, deriving 87% of its adjusted gross margin from stable contracts - The company's midstream asset network includes approximately 12,000 miles of pipelines, 23 natural gas processing plants, and seven fractionators[129] - Approximately 87% of the company's adjusted gross margin for the six months ended June 30, 2021, was derived from fee-based contractual arrangements, minimizing direct commodity price exposure[133] Significant Customer Revenue Concentration (Six Months Ended June 30) | Customer | 2021 | 2020 | | :--- | :--- | :--- | | Devon | 7.3% | 15.0% | | Dow Hydrocarbons and Resources LLC | 14.9% | 12.3% | | Marathon Petroleum Corporation | 13.8% | 14.8% | Recent Developments Recent developments include Winter Storm Uri impacts, yielding $49 million in utility credits, regulatory monitoring, and the Amarillo Rattler acquisition - Winter Storm Uri in February 2021 significantly reduced gathering and processing volumes, with peak declines ranging from 44% to 92% by region, but the company earned approximately $49 million in utility credits for unused electricity[150][151] - The Biden Administration's executive orders on climate change could affect operations, though only about 4% of the company's 2021 segment profit is expected from customers on public land[158][159] - On April 30, 2021, the company acquired Amarillo Rattler, LLC, strengthening its position in the Midland Basin[162] Results of Operations Q2 2021 gross margin increased by $2.0 million to $102.9 million, while H1 2021 gross margin decreased by $28.9 million to $209.3 million Gross Margin Comparison by Segment - Q2 2021 vs Q2 2020 (in millions) | Segment | Q2 2021 | Q2 2020 | Change | | :--- | :--- | :--- | :--- | | Permian | $9.4 | $3.4 | $6.0 | | Louisiana | $31.2 | $29.2 | $2.0 | | Oklahoma | $35.0 | $38.5 | $(3.5) | | North Texas | $29.1 | $31.9 | $(2.8) | | Total | $102.9 | $100.9 | $2.0 | Gross Margin Comparison by Segment - H1 2021 vs H1 2020 (in millions) | Segment | H1 2021 | H1 2020 | Change | | :--- | :--- | :--- | :--- | | Permian | $18.7 | $16.8 | $1.9 | | Louisiana | $77.3 | $66.7 | $10.6 | | Oklahoma | $39.8 | $89.9 | $(50.1) | | North Texas | $77.3 | $68.9 | $8.4 | | Total | $209.3 | $238.2 | $(28.9) | - The Oklahoma segment's adjusted gross margin decreased by $64.3 million in H1 2021, primarily due to lower volumes and the expiration of an MVC provision in a key gathering and processing contract at the end of 2020[214] Liquidity and Capital Resources Net cash from operations increased to $402.2 million in H1 2021, while capital expenditures decreased to $62.5 million, with further spending anticipated - Net cash provided by operating activities increased by $85.4 million to $402.2 million for the six months ended June 30, 2021, compared to the same period in 2020[228] - Capital expenditures decreased significantly to $62.5 million for H1 2021 from $203.6 million in H1 2020, primarily due to the completion of major projects in 2020[230] - The company expects remaining 2021 capital expenditures to be approximately $72 million to $102 million, net to ENLC[234] Contractual Obligations Summary (in millions) | Obligation Type | Total | Remainder 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Senior unsecured notes | $4,032.3 | $0 | $0 | $0 | $521.8 | $720.8 | $2,789.7 | | Term Loan | $250.0 | $250.0 | $0 | $0 | $0 | $0 | $0 | | AR Facility | $210.0 | $0 | $0 | $210.0 | $0 | $0 | $0 | | Interest on fixed debt | $2,436.7 | $101.7 | $201.2 | $201.2 | $189.7 | $163.3 | $1,579.6 | | Total | $7,266.7 | $401.0 | $274.8 | $461.5 | $753.1 | $921.0 | $4,455.3 | Quantitative and Qualitative Disclosures About Market Risk The company manages commodity price and interest rate risks through 87% fee-based contracts and derivative instruments - Approximately 87% of the company's adjusted gross margin for the six months ended June 30, 2021, was generated from fee-based structures with minimal direct commodity price exposure[257] Outstanding Derivative Instruments at June 30, 2021 | Period | Underlying | Notional Volume | We Pay | We Receive | Net Fair Value (in millions) | | :--- | :--- | :--- | :--- | :--- | :--- | | Jul 21 - Jun 22 | Propane | 2,510 (MBbls) | Index | $1.0587/Gal | $(28.7) | | Jul 21 - Dec 21 | Natural gasoline | 915 (MBbls) | Index | $1.5912/Gal | $(11.0) | | Jul 21 - Jan 22 | Crude and condensate | 6,635 (MBbls) | Index | $71.66/Bbl | $10.0 | | Total | | | | | $(33.8) | - A 1.0% change in floating interest rates on the $250.0 million Term Loan and $210.0 million AR Facility would alter annualized interest expense by approximately $2.5 million and $2.1 million, respectively, partially offset by a $2.5 million change from an interest rate swap hedge[274][276] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting - Management concluded that as of June 30, 2021, the company's disclosure controls and procedures were effective to provide reasonable assurance that required information is recorded, processed, summarized, and reported in a timely manner[278] - No changes in internal control over financial reporting occurred in Q2 2021 that materially affected, or are reasonably likely to materially affect, internal controls[279] PART II—OTHER INFORMATION Legal Proceedings The company is involved in various litigation, but management does not anticipate any material adverse effects on its financial position or operations - The company is involved in various litigation arising in the normal course of business, but management does not expect any resulting liabilities to have a material adverse effect on its financial condition[124][282] Risk Factors There have been no material changes to the company's risk factors since its 2020 Annual Report on Form 10-K - The company's risk factors have not materially changed from those disclosed in its 2020 Annual Report on Form 10-K[283] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 357,636 common units in Q2 2021, with $96.9 million remaining in the $100 million repurchase program Issuer Purchases of Equity Securities (Q2 2021) | Period | Total Units Purchased | Average Price Paid Per Unit | Units Purchased as Part of Program | Max Value Remaining in Program (millions) | | :--- | :--- | :--- | :--- | :--- | | April 2021 | 227 | $4.29 | — | $98.8 | | May 2021 | 1,602 | $4.63 | — | $98.8 | | June 2021 | 355,807 | $6.16 | 317,751 | $96.9 | | Total | 357,636 | $6.15 | 317,751 | $96.9 | Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, debt agreements, and required certifications - The report includes a list of filed exhibits, such as the company's operating agreement, debt indentures, and required certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1)[287]