EnLink Midstream(US:ENLC)2023-02-14 16:00Infrastructure and Capacity - As of December 31, 2022, EnLink Midstream, LLC operates approximately 13,600 miles of pipelines and has a processing capacity of approximately 6.0 Bcf/d across 26 natural gas processing plants[17]. - The average throughput for gas pipelines in total is 6,913,600 MMbtu/d, with the Permian assets contributing 1,506,600 MMbtu/d[25]. - The company has a total of 9,747 MMcf/d estimated capacity for gas pipelines, with the Louisiana gas gathering and transmission system having the highest capacity at 3,975 MMcf/d[25]. - EnLink's processing facilities have a total processing capacity of 6,009 MMcf/d, with the Permian assets accounting for 1,546 MMcf/d[30]. - The company operates five reportable segments, including Permian, Louisiana, Oklahoma, North Texas, and Corporate segments, each focusing on specific midstream activities[22]. - The total fractionation capacity across facilities is 316,300 Bbls/d, with an average throughput of 204,900 Bbls/d for the year ended December 31, 2022[34]. - The Plaquemine fractionation facility and Riverside fractionation facility have a combined fractionation capacity of 136,800 Bbls/d[35]. - The Gibson processing plant has a processing capacity of 110 MMcf/d, while the Pelican processing plant complex has a designed capacity of 600 MMcf/d[42]. - The Central Oklahoma processing facilities account for a total processing capacity of 1,280 MMcf/d, with the Carmen processing plant currently not operational[48]. - The company holds a 38.75% ownership interest in the GCF fractionation facility, which is not currently operational[50]. - The Belle Rose gas storage facility has a storage capacity of 7.3 Bcf, while the Sorrento gas storage facility has a capacity of 5.2 Bcf[36]. - The Eunice processing plant has a capacity of 350 MMcf/d but is currently not operational[42]. - The Bridgeport processing facility has a capacity of 25,000 Bbls/d, with an average throughput of 15,400 Bbls/d[34]. - The Silver Creek processing system has a total processing capacity of 1,205 MMcf/d, with several plants currently not operational due to decreased volumes[16]. - The Matterhorn JV is expected to construct a pipeline with a capacity of up to 2.5 Bcf/d, anticipated to be in service in the third quarter of 2024[16]. - GCF, in which the company owns a 38.75% interest, is expected to restart operations in 2024 after being idled since January 2021[16]. - The company owns a 30% interest in the Cedar Cove JV, which operates gathering and compression assets in Oklahoma[16]. Financial Position and Strategy - EnLink aims to strengthen its financial position by generating significant cash flows and maintaining liquidity and balance sheet strength[24]. - The company focuses on operational excellence and innovation to enhance profitability and scalability of its asset platforms for future growth[24]. - Major customers contributing over 10% of consolidated revenues in 2022 include Dow Hydrocarbons and Resources LLC (14.2%) and Marathon Petroleum Corporation (14.7%)[72]. - The company generates adjusted gross margin by selling fractionated NGL products from its Bridgeport processing plant[16]. - The company plans to relocate equipment from the Cowtown processing plant to the Delaware JV in the Permian segment, expected to be completed in Q2 2024[16]. - The company faces strong competition in the midstream industry, impacting acquisition costs and project returns[67]. - The company is evaluating the potential impact of changes to the federal leasing program on its operations and cash flows, which could adversely affect its ability to make cash distributions to unitholders[75]. - The cash flow of ENLC is almost entirely dependent on distributions from ENLK, which can fluctuate based on various operational factors[197][200]. - The Revolving Credit Facility and AR Facility impose restrictions on ENLC's operations and financial flexibility, including maintaining a specified net leverage ratio[202]. - Unitholders may have to repay distributions that were wrongfully distributed under certain circumstances, which could affect their investment returns[194]. - Cost reimbursements to the Managing Member could significantly reduce cash available for distribution to unitholders[192]. Regulatory Compliance and Environmental Impact - The Federal Energy Regulatory Commission (FERC) regulates the rates and terms of service for the company's interstate natural gas pipeline, requiring them to be just and reasonable[76]. - Proposed rate increases for the company's pipeline services are subject to FERC approval and can be challenged, potentially delaying implementation for up to five months[77]. - FERC's regulations require the company to comply with standards of conduct and market transparency, with civil penalties for violations reaching approximately $1.39 million per day[78]. - The company’s intrastate natural gas pipelines are also subject to state agency regulations, which can include rate reviews every five years[79]. - Compliance with environmental laws increases overall business costs, including capital expenditures for maintaining or upgrading facilities[101]. - The company may incur significant costs due to potential future environmental compliance and remediation expenditures, which are difficult to predict[103]. - The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) imposes liability for hazardous substance releases, potentially leading to substantial cleanup costs[104]. - The company generates both hazardous and nonhazardous solid wastes, which may be subject to stricter regulations in the future, increasing management and disposal costs[105]. - The EPA has reclassified the Dallas-Fort Worth area as a severe nonattainment area for ozone, requiring compliance by the end of 2026, which may lead to stricter permitting requirements[109]. - The company is subject to the Clean Air Act, which may necessitate capital expenditures for air pollution control equipment to comply with emission regulations[108]. - The EPA's proposed rules targeting methane and VOC emissions could impose additional compliance costs and operational restrictions if finalized[114]. - The company has previously complied with stringent regulations during the Obama administration and does not expect the reinstatement of these regulations to materially affect operations[114]. - The EPA's aggregation rule could trigger more stringent air permitting processes for small facilities, impacting operational requirements across the industry[115]. Employee Relations and Safety - As of December 31, 2022, the company employed 1,132 full-time employees, with 268 in general and administrative roles and the remainder in operational positions[127]. - The company has maintained an average employee tenure of eight years, with voluntary turnover rates averaging approximately 10% per year over the last three years[128]. - In 2022, the company achieved its best safety year on record, with a Total Recordable Incident Rate (TRIR) of 0.26, the lowest number of employee reportable incidents in its history[129]. - The company offers a competitive total rewards program, including base salary, short-term incentives, comprehensive employee benefits, and a 401(k) program with fully-vested employer matched contributions[128]. - The company is not party to any collective bargaining agreements and has not experienced significant labor disputes in the past, indicating good employee relations[127]. - The company links a portion of short-term incentive compensation for employees to environmental safety standards to promote a culture focused on safety and environmental responsibility[131]. - The Sustainability Committee assists the Board in overseeing environmental, social, and governance initiatives, including health and safety initiatives[132]. Governance and Ownership Structure - GIP owns approximately 46.2% of the outstanding common units and controls the Managing Member, which may lead to conflicts of interest[149]. - The Managing Member may call and purchase all of ENLC's outstanding common units not owned by it if it and its affiliates own more than 90% of the units[163]. - Unitholders owning 20% or more of ENLC's common units have restricted voting rights, further limiting their influence on company decisions[181]. - The operating agreement replaces fiduciary duties owed to unitholders by the Managing Member with contractual standards, allowing the Managing Member to prioritize its interests[167]. - The Managing Member is not obligated to seek approval from unitholders for affiliate transactions, which may lead to conflicts of interest[178]. - GIP has pledged all equity interests in ENLC and the Managing Member to its lenders, which could result in a change of control if GIP defaults on its credit facility[177]. - The Managing Member has the right to acquire all ENLC common units held by unaffiliated persons if it owns more than 90% of the units, potentially forcing unitholders to sell at an undesirable price[191]. - The issuance of additional ENLC common units could dilute existing ownership interests without the approval of common unit holders[183]. Financial Risks and Market Conditions - The market price of ENLC common units may be influenced by factors beyond the company's control, leading to significant price fluctuations[195]. - The company's ability to make scheduled payments or refinance obligations is contingent on its financial and operating performance, which is influenced by economic and industry conditions beyond its control[209]. - Any reductions in credit ratings could lead to increased financing costs and reduced cash available for distribution, with current ratings being BBB-, BB+, and Ba1 from Fitch, S&P, and Moody's respectively[210]. - Impairment of long-lived assets, including intangible assets, could negatively impact earnings and result in immediate non-cash charges to earnings, affecting equity and balance sheet leverage[211]. - The company has recognized impairments on property and equipment in the past, indicating potential future risks to operating results[211]. - A credit rating downgrade could necessitate more restrictive covenants, adversely affecting the company's ability to finance future operations[210]. - Insufficient cash flow and capital resources may force the company to reduce distributions or delay business activities and investments[209]. - The company may face challenges in undertaking actions such as asset sales or restructuring debt on satisfactory terms if liquidity is lacking[209]. - The impairment test for long-lived assets is triggered by events indicating that the carrying amount may not be recoverable, which could lead to significant negative impacts on future results[211]. - The company’s financial health is closely tied to its credit ratings, with potential downgrades posing risks to borrowing costs and operational financing[210]. - The company has a history of recognizing impairments, suggesting ongoing scrutiny of asset values and potential future impacts on financial performance[211].