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

The discounted cash flow analysis used to estimate the fair value of the EFS Midstream customer relationships relied on Level 3 fair value inputs, including long-range cash flow forecasts that extend for the estimated economic life of the hydrocarbon resource base served by the asset network, anticipated service contract renewals and resource base depletion rates. A discount rate of 15% was applied to the resulting cash flows.

Oiltanking customer relationships
These intangible assets represent the estimated value of the expected patronage of Oiltanking’s third party storage and terminal customers.

We valued the customer relationships using an income approach, specifically a discounted cash flow analysis. Our analysis was based on forecasting revenue for the existing terminal customers, including assumed service contract renewals, and then adjusting for expected customer attrition rates. The operating cash flows were then reduced by contributory asset charges. The cash flow projections were based on forecasts used to price the Oiltanking acquisition.

The discounted cash flow analysis used to estimate the fair value of the Oiltanking customer relationships relied on Level 3 fair value inputs, including long-range cash flow forecasts that extend for the estimated economic life of the terminal assets and anticipated service contract renewals.  A discount rate of 6.5% was applied to the resulting cash flows.

Contract-based intangible assets.  Contract-based intangible assets represent specific commercial rights we acquired in connection with business combinations or asset purchases.  At December 31, 2017, the carrying value of our contract-based intangible assets was $285.2 million.  Our most significant contract-based intangible assets are the Oiltanking customer contracts and the Jonah natural gas gathering agreements.

Oiltanking customer contracts
We recorded $297.4 million of contract-based intangible assets in connection with our acquisition of Oiltanking in October 2014.  These intangible assets represent the estimated value of specific commercial rights we acquired in connection with third party customer storage and terminal contracts at the Houston and Beaumont terminals.  We valued the contracts using an income approach.  If a contract was in its renewal period and had not been cancelled, we assumed the contract was renewed on equivalent terms to the prior contract.  We only valued those contracts that specified a minimum monthly fee, excluding contracts with a de minimis fee.

At December 31, 2017, the carrying value of this group of intangible assets was $118.7 million and the weighted average remaining amortization period for the group was 4.2 years.  Amortization expense attributable to these contracts is recorded using a straight-line approach over the terms of the underlying contracts.

Jonah natural gas gathering agreements
These intangible assets represent the value attributed to certain natural gas gathering contracts on the Jonah Gathering System.  At December 31, 2017, the carrying value of this group of intangible assets was $63.9 million and the weighted average remaining amortization period for the group was 24 years. Amortization expense attributable to these intangible assets is recorded using a units-of-production method based on gathering volumes.
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