Enterprise Products Partners L.P.

SEC Filings

10-K
ENTERPRISE PRODUCTS PARTNERS L P filed this Form 10-K on 02/28/2018
Entire Document
 

ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Customer relationship intangible assets.  Customer relationship intangible assets represent the estimated economic value assigned to commercial relationships acquired in connection with business combinations. Our customer relationship intangible assets can be classified as either (i) basin-specific or (ii) general. In certain instances, the acquisition of these intangible assets represents obtaining access to customers in a defined resource basin analogous to having a franchise in a particular area. Efficient operation of the acquired assets (e.g., a natural gas gathering system) helps to support commercial relationships with existing producers and provides us with opportunities to establish new ones within our existing asset footprint.  The duration of such customer relationships is limited by the estimated economic life of the associated resource basin.  In other situations, the acquisition of a customer relationship intangible asset provides us with access to customers whose hydrocarbon volumes are not attributable to specific resource basins.  As with basin-specific customer relationships, efficient operation of the associated assets (e.g., a marine terminal that handles volumes originating from multiple sources) helps to support commercial relationships with existing customers and provides us with opportunities to establish new ones. The duration of these general customer relationships is typically limited to the term of the underlying service contracts, including assumed renewals.

Amortization expense attributable to customer relationships is recorded in a manner that closely resembles the pattern in which we expect to benefit from providing services to customers.

At December 31, 2017, the carrying value of our portfolio of customer relationship intangible assets was $3.4 billion, the principal components of which are as follows:

Weighted
Average
Remaining
Amortization
Period
 
December 31, 2017
 
 
 
Gross
Value
   
Accumulated
Amortization
   
Carrying
Value
 
Basin-specific customer relationships:
                   
   EFS Midstream (1)
24.4 years
 
$
1,409.8
   
$
(88.8
)
 
$
1,321.0
 
   State Line and Fairplay (2)
29.2 years
   
895.0
     
(164.7
)
   
730.3
 
   San Juan Gathering (3)
21.8 years
   
331.3
     
(218.0
)
   
113.3
 
   Encinal (4)
9.0 years
   
132.9
     
(98.4
)
   
34.5
 
General customer relationships:
                         
   Oiltanking (5)
26.0 years
   
1,192.5
     
(57.1
)
   
1,135.4
 
                           
(1)   We acquired these intangible assets in connection with our acquisition of EFS Midstream in July 2015 (see Note 12 for additional information).
(2)   These customer relationships are associated with our State Line and Fairplay Gathering Systems, which we acquired in 2010. The State Line system serves producers in the Haynesville and Bossier Shale supply basins and the Cotton Valley formation in Louisiana and eastern Texas. The Fairplay system serves producers in the Cotton Valley formation within Panola and Rusk counties in East Texas.
(3)   These customer relationships are associated with our San Juan Gathering System, which serves producers in the San Juan Basin of northern New Mexico and southern Colorado. We acquired this intangible asset in 2004.
(4)   These customer relationships are associated with our Encinal Gathering System, which serves producers in the Olmos and Wilcox formations in South Texas. We acquired this intangible asset in 2006.
(5)   We acquired these intangible assets in connection with our acquisition of Oiltanking in October 2014 (see Note 12 for additional information).
 

EFS Midstream customer relationships
The EFS Midstream System serves producers in the Eagle Ford Shale, providing condensate gathering and processing services as well as gathering, treating and compression services for associated natural gas.  The estimated fair value of these customer relationship intangible assets was determined using an income approach, specifically a discounted cash flow analysis.  The EFS Midstream customer relationships provide us with long-term access to the natural gas, NGL and condensate resources served by EFS Midstream.  Infrastructure like that owned by EFS Midstream requires a significant investment, both in terms of initial construction costs and ongoing maintenance, and is generally supported by long-term contracts with producers (e.g., PXD and Reliance) that establish a customer base.  The level of expenditures involved in constructing these asset networks can create significant economic barriers to entry that effectively limit competition.  The long-term nature of the underlying producer contracts and limited risk of competition ensure a long commercial relationship with existing producers.
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