EnLink Midstream(ENLC) - 2022 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements The company presents its unaudited consolidated balance sheets, statements of operations, and cash flows | | June 30, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Total current assets | $1,288.2 million | $920.4 million | | Total assets | $8,678.8 million | $8,483.2 million | | Total current liabilities | $1,219.6 million | $898.9 million | | Long-term debt, net | $4,320.0 million | $4,363.7 million | | Total members' equity | $2,906.0 million | $2,987.0 million | | Total liabilities and members' equity | $8,678.8 million | $8,483.2 million | | (In millions, except per unit data) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $2,600.6 | $1,406.7 | $4,828.3 | $2,655.1 | | Operating income | $179.6 | $77.1 | $304.9 | $157.5 | | Net income | $123.9 | $9.4 | $189.9 | $22.0 | | Net income (loss) attributable to ENLC | $85.3 | $(21.6) | $120.5 | $(34.3) | | Basic EPS | $0.18 | $(0.04) | $0.25 | $(0.07) | | Diluted EPS | $0.17 | $(0.04) | $0.25 | $(0.07) | | (In millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $482.6 | $402.2 | | Net cash used in investing activities | $(149.3) | $(112.2) | | Net cash used in financing activities | $(341.4) | $(296.8) | | Net decrease in cash and cash equivalents | $(8.1) | $(6.8) | | Cash and cash equivalents, end of period | $18.1 | $32.8 | Note 1: General The company details its midstream energy services and extensive network of pipelines and processing plants - EnLink's core business is providing midstream energy services for natural gas, NGLs, and crude oil, including gathering, compressing, treating, processing, transporting, storing, and selling these commodities[36] - As of June 30, 2022, the company's asset base includes approximately 12,100 miles of pipelines, 22 natural gas processing plants with 5.5 Bcf/d capacity, and seven fractionators with 320,000 Bbls/d capacity[37] Note 2: Significant Accounting Policies The company outlines its revenue recognition policies and future committed fees from long-term contracts | Period | Expected Fees (in millions) | | :--- | :--- | | 2022 (remaining) | $69.6 | | 2023 | $119.7 | | 2024 | $99.9 | | 2025 | $67.0 | | 2026 | $59.9 | | Thereafter | $290.9 | | Total | $707.0 | Note 5: Long-Term Debt The company details its $4.32 billion long-term debt structure and recent credit facility amendments | Debt Instrument | June 30, 2022 (in millions) | December 31, 2021 (in millions) | | :--- | :--- | :--- | | Revolving Credit Facility due 2027 | $— | $15.0 | | AR Facility due 2025 | $325.0 | $350.0 | | Senior unsecured notes (various) | $4,024.9 | $4,026.5 | | Total Long-term debt, net | $4,320.0 | $4,363.7 | - On June 3, 2022, the company amended its revolving credit facility, decreasing commitments from $1.75 billion to $1.40 billion, extending the maturity to June 3, 2027, and removing the interest coverage ratio covenant[55] - During the first six months of 2022, the company repurchased $2.0 million of its outstanding senior unsecured notes due 2024 in open market transactions[61] Note 8: Members' Equity The company details its common unit repurchase program and changes in members' equity - The Board reauthorized the common unit repurchase program for up to $100.0 million effective January 1, 2022, and subsequently increased the authorization to $200.0 million in July 2022[71] - An agreement was made with GIP on February 15, 2022, to repurchase a pro rata portion of its ENLC common units quarterly to maintain GIP's economic ownership percentage[72] | Repurchase Activity (in millions, except unit count) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total ENLC common units repurchased | 5,690,307 | 317,751 | | Total aggregate cost | $50.7 | $2.0 | Note 9: Investment in Unconsolidated Affiliates The company discusses its investments in unconsolidated affiliates, including the new Matterhorn JV - On May 16, 2022, EnLink formed the Matterhorn JV with partners to construct the Matterhorn Express Pipeline, a 2.5 Bcf/d natural gas pipeline from the Waha Hub to Katy, Texas[81] | Activity (in millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total Contributions | $26.6 | $— | | Total Distributions | $(0.4) | $(3.7) | | Total Equity in loss | $(2.3) | $(7.6) | Note 13: Segment Information The company reports financial performance across its five operating segments, led by strong Permian growth | Segment Profit (in millions) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Permian | $112.1 | $44.0 | | Louisiana | $89.0 | $67.3 | | Oklahoma | $98.6 | $85.6 | | North Texas | $66.9 | $57.9 | | Total Segment Profit | $366.6 | $254.8 | | Adjusted Gross Margin (in millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Permian | $280.7 | $102.4 | | Louisiana | $247.3 | $210.4 | | Oklahoma | $228.5 | $178.6 | | North Texas | $172.2 | $173.9 | | Total Adjusted Gross Margin | $928.7 | $665.3 | Note 15: Commitments and Contingencies The company discloses ongoing litigation, including a $53.9 million dispute from Winter Storm Uri - The company is in litigation with Koch Energy Services, LLC over a dispute from Winter Storm Uri. Koch has invoiced EnLink for approximately $53.9 million, while EnLink contests the claim based on a force majeure declaration[119] Note 16: Subsequent Event The company reports the $275.0 million acquisition of Barnett Shale assets after the reporting period - On July 1, 2022, EnLink acquired Barnett Shale assets from Crestwood Equity Partners LP for a cash purchase price of approximately $275.0 million, plus working capital adjustments[123] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial results, segment performance, and strategic developments like CCS initiatives Recent Developments The company highlights strategic progress in CCS, acquisitions, and capital structure optimizations - The company is developing a Carbon Capture, Transportation, and Sequestration (CCS) business, leveraging its existing pipeline network in Louisiana and recently signed an agreement with BKV in the Barnett Shale[142][158] - On May 19, 2022, EnLink agreed to acquire North Texas gathering and processing assets from Crestwood Equity Partners LP for approximately $275.0 million, a deal that closed on July 1, 2022[154] - In January 2022, the company redeemed 3,333,334 Series B Preferred Units for $50.5 million plus accrued distributions[163] Non-GAAP Financial Measures The company provides definitions and reconciliations for key non-GAAP metrics like Adjusted EBITDA | (In millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Adjusted Gross Margin | $928.7 | $665.3 | | Adjusted EBITDA, net to ENLC | $604.0 | $506.9 | | Free Cash Flow After Distributions | $172.4 | $165.7 | Results of Operations The company reports a $104.7 million quarterly gross margin increase, driven by the Permian segment - For Q2 2022 vs Q2 2021, gross margin increased by $104.7 million, with the Permian segment contributing a $65.6 million increase due to higher producer activity and commodity prices[186] - For the six months ended June 30, 2022 vs 2021, gross margin increased by $157.7 million, with the Permian segment contributing a $92.6 million increase[204] | Midstream Volumes (Average Daily) | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Permian Gathering & Transportation (MMbtu/d) | 1,494,400 | 1,025,900 | | Permian Processing (MMbtu/d) | 1,432,200 | 958,400 | | Louisiana Gathering & Transportation (MMbtu/d) | 2,696,500 | 2,139,300 | Liquidity and Capital Resources The company details its liquidity position, cash flows, and remaining $251 million in 2022 capital needs | Expected Remaining Capital Requirements for 2022 (in millions) | Amount | | :--- | :--- | | Capital expenditures, net to ENLC | $185 | | Operating expenses for processing facilities relocation | $23 | | Contributions to unconsolidated affiliate investments | $43 | | Total | $251 | | Contractual Obligations (in millions) | Total | Remainder 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total | $7,013.8 | $155.5 | $278.5 | $766.0 | $1,261.6 | $682.3 | $3,869.9 | Quantitative and Qualitative Disclosures About Market Risk The company discusses its exposure to commodity price and interest rate risks and its hedging strategies - Approximately 90% of the company's adjusted gross margin for the first six months of 2022 was generated from fee-based structures with minimal direct commodity price exposure[252] - A hypothetical 10% change in commodity prices would result in a change of approximately $21.0 million in the net fair value of the company's derivative contracts as of June 30, 2022[266] - The company is exposed to interest rate risk on its Revolving Credit Facility and AR Facility. As of June 30, 2022, there were $325.0 million in outstanding borrowings under the AR Facility. A 1.0% change in interest rates would alter annualized interest expense by approximately $3.3 million[267] Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures as of the reporting date - Management, including the CEO and CFO, concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[270] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[271] PART II—OTHER INFORMATION Legal Proceedings The company references Note 15 for details on legal matters, including Winter Storm Uri litigation - For discussion of legal proceedings, the report refers to Note 15, "Commitments and Contingencies," which details litigation arising from the normal course of business, including matters related to Winter Storm Uri[274] Risk Factors The company reports no material changes to its previously disclosed risk factors - There are no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[275] Unregistered Sales of Equity Securities and Use of Proceeds The company details its Q2 common unit repurchase activity and an increased program authorization | Period (2022) | Total Units Purchased | Average Price Paid Per Unit | | :--- | :--- | :--- | | April | 430,416 | $9.92 | | May | 1,656,301 | $9.53 | | June | 1,527,335 | $9.08 | | Total Q2 | 3,614,052 | $9.39 | - In July 2022, the Board increased the amount available for the common unit repurchase program to $200.0 million from the $100.0 million authorized at the start of the year[277] Other Information The company discloses a post-period amendment increasing its AR Securitization Facility to $500.0 million - On August 1, 2022, the company amended its AR Facility to increase the facility limit to $500.0 million from $350.0 million and extend the maturity to August 1, 2025[279][280] Exhibits The company lists all exhibits filed with the report, including material contracts and certifications