Enlink Midstream, Llc (ENLC) 10-Q Quarterly Report Fri May 08 2020

DALLAS, May 7 — EnLink Midstream, LLC (NYSE: ENLC) (EnLink) reported financial results for the first quarter of 2020, announced a further 14% reduction in 2020 capital expenditures, net to EnLink, and provided revisions to the company's 2020 outlook.

Highlights:

·	$260 million net loss reported for first quarter of 2020, which includes non-cash impairment charges of $353 million. Net loss for full-year 2020 projected to range from $123 million to $222 million.

·	$260 million of adjusted EBITDA achieved for first quarter of 2020, which includes approximately $6 million of severance expense. Full-year 2020 adjusted EBITDA projected to range from $950 million to $1.025 billion.

·	$182 million of net cash provided by operating activities reported for first quarter of 2020.

·	$44 million of excess free cash flow generated for first quarter of 2020. Excess free cash flow projected to range from $260 million to $280 million for full-year 2020.

·	14% additional reduction in 2020 capital expenditures (midpoint) to bring 2020 capital expenditures down by approximately 40% relative to original 2020 guidance range. Updated 2020 total capital expenditures guidance range, net to EnLink, is $190 million to $250 million.

·	~67% reduction in common unit distribution payout, as previously announced, since the third quarter of 2019 distribution.

·	$50 million of incremental expense savings, announced on March 24, 2020, being targeted across cost structure during 2020. Full-year 2020 cost savings compared to 2019 are projected to be $100 million.

“EnLink's first quarter results and updated 2020 outlook demonstrate the strength of our large-scale diversified platform, and the flexibility and resiliency of our people and operations in the midst of unprecedented market volatility,” said Barry E. Davis, EnLink Chairman and Chief Executive Officer.

“We have acted swiftly and decisively in response to the evolving business climate and have taken steps to retain roughly $600 million of cash flow in 2020 to manage liquidity, sustain balance sheet strength, and maintain leverage below our covenant.

“We continue to prioritize the health and safety of our employees and stakeholders while remaining focused on operating reliably and responsibly and providing exceptional service to our customers. Everything that we are doing is positioning us for what will become the new normal, and I am confident we will be stronger as a result of our team’s incredibly hard work through these challenging times.”

Adjusted EBITDA and excess free cash flow used in this press release are non-GAAP measures and are explained in greater detail under "Non-GAAP Financial Information and Other Definitions" below.

The following information was filed by Enlink Midstream, Llc (ENLC) on Thursday, May 7, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2020

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number: 001-36336

ENLINK MIDSTREAM, LLC

(Exact name of registrant as specified in its charter)


Delaware			46-4108528
(State of organization)			(I.R.S. Employer Identification No.)

1722 Routh St., Suite 1300
Dallas,	Texas	75201
(Address of principal executive offices)			(Zip Code)

(214) 953-9500

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE SECURITIES EXCHANGE ACT OF 1934:

Title of Each Class

Trading Symbol

Name of Exchange on which Registered

Common Units Representing Limited

ENLC

The New York Stock Exchange

Liability Company Interests

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act. (Check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of April 30, 2020, the Registrant had 489,259,906 common units outstanding.

Table of Contents

TABLE OF CONTENTS


Item	Description	Page

	PART I—FINANCIAL INFORMATION

1.	Financial Statements	5

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

3.	Quantitative and Qualitative Disclosures About Market Risk	46

4.	Controls and Procedures	49

	PART II—OTHER INFORMATION

1.	Legal Proceedings	50

1A.	Risk Factors	50

2.	Unregistered Sales of Equity Securities and Use of Proceeds	51

6.	Exhibits	52

Table of Contents

DEFINITIONS

The following terms as defined are used in this document:


Defined Term						Definition
/d						Per day.
2014 Plan						ENLC’s 2014 Long-Term Incentive Plan.

ASC						The FASB Accounting Standards Codification.
ASC 350						ASC 350, Intangibles—Goodwill and Other.
ASC 842						ASC 842, Leases.
Ascension JV						Ascension Pipeline Company, LLC, a joint venture between a subsidiary of ENLK and a subsidiary of Marathon Petroleum Corporation in which ENLK owns a 50% interest and Marathon Petroleum Corporation owns a 50% interest. The Ascension JV, which began operations in April 2017, owns an NGL pipeline that connects ENLK’s Riverside fractionator to Marathon Petroleum Corporation’s Garyville refinery.
ASU						The FASB Accounting Standards Update.
Avenger						Avenger crude oil gathering system, a crude oil gathering system in the northern Delaware Basin.
Bbls						Barrels.
Bcf						Billion cubic feet.
Cedar Cove JV						Cedar Cove Midstream LLC, a joint venture between a subsidiary of ENLK and a subsidiary of Kinder Morgan, Inc. in which ENLK owns a 30% interest and Kinder Morgan, Inc. owns a 70% interest. The Cedar Cove JV, which was formed in November 2016, owns gathering and compression assets in Blaine County, Oklahoma, located in the STACK play.
CFTC						U.S. Commodity Futures Trading Commission.
CNOW						Central Northern Oklahoma Woodford Shale.
Commission						U.S. Securities and Exchange Commission.
Consolidated Credit Facility						A $1.75 billion unsecured revolving credit facility entered into by ENLC that matures on January 25, 2024, which includes a $500.0 million letter of credit subfacility.
Delaware Basin						A large sedimentary basin in West Texas and New Mexico.
Delaware Basin JV						Delaware G&P LLC, a joint venture between a subsidiary of ENLK and an affiliate of NGP in which ENLK owns a 50.1% interest and NGP owns a 49.9% interest. The Delaware Basin JV, which was formed in August 2016, owns the Lobo processing facilities and the Tiger Plant located in the Delaware Basin in Texas.
Devon						Devon Energy Corporation.

ENLC						EnLink Midstream, LLC.

ENLC Credit Facility						A $250.0 million secured revolving credit facility entered into by ENLC that would have matured on March 7, 2019, which included a $125.0 million letter of credit subfacility. The ENLC Credit Facility was terminated on January 25, 2019 in connection with the consummation of the Merger.

ENLK						EnLink Midstream Partners, LP or, when applicable, EnLink Midstream Partners, LP together with its consolidated subsidiaries. Also referred to as the “Partnership.”
ENLK Credit Facility						A $1.5 billion unsecured revolving credit facility entered into by ENLK that would have matured on March 6, 2020, which included a $500.0 million letter of credit subfacility. The ENLK Credit Facility was terminated on January 25, 2019 in connection with the consummation of the Merger.
EOGP						EnLink Oklahoma Gas Processing, LP or EnLink Oklahoma Gas Processing, LP together with, when applicable, its consolidated subsidiaries. As of January 31, 2019, EOGP became a wholly-owned subsidiary of the Operating Partnership.
FASB						Financial Accounting Standards Board.
GAAP						Generally accepted accounting principles in the United States of America.
Gal						Gallons.
GCF						Gulf Coast Fractionators, which owns an NGL fractionator in Mont Belvieu, Texas. ENLK owns 38.75% of GCF.
General Partner						EnLink Midstream GP, LLC, the general partner of ENLK.
GIP						Global Infrastructure Management, LLC, an independent infrastructure fund manager, itself, its affiliates, or managed fund vehicles, including GIP III Stetson I, L.P., GIP III Stetson II, L.P., and their affiliates.

GP Plan						The General Partner’s Long-Term Incentive Plan.

Gross Operating Margin						Revenue less cost of sales. Gross Operating Margin is a non-GAAP financial measure. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for additional information.
ISDAs						International Swaps and Derivatives Association Agreements.

Table of Contents


Legacy ENLK Awards						Unit-based awards granted under the GP Plan prior to the Merger. As of the closing of the Merger, Legacy ENLK Awards converted into ENLC unit-based awards using the 1.15 exchange ratio from the Merger Agreement as the conversion rate. No additional awards will be granted under the GP Plan.

Managing Member						EnLink Midstream Manager, LLC, the managing member of ENLC.
Merger						On January 25, 2019, NOLA Merger Sub merged with and into ENLK with ENLK continuing as the surviving entity and a subsidiary of ENLC.
Merger Agreement						The Agreement and Plan of Merger, dated as of October 21, 2018, by and among ENLK, the General Partner, ENLC, the Managing Member, and NOLA Merger Sub related to the Merger.
MMbbls						Million barrels.
MMbtu						Million British thermal units.
MMcf						Million cubic feet.
MVC						Minimum volume commitment.
NGL						Natural gas liquid.
NGP						NGP Natural Resources XI, LP.
NOLA Merger Sub						NOLA Merger Sub, LLC, previously a wholly-owned subsidiary of ENLC prior to the Merger.
OPEC+						Organization of the Petroleum Exporting Countries and its broader partners.
Operating Partnership						EnLink Midstream Operating, LP, a Delaware limited partnership and wholly owned subsidiary of ENLK.
ORV						ENLK’s Ohio River Valley crude oil, condensate stabilization, natural gas compression, and brine disposal assets in the Utica and Marcellus shales.
OTC						Over-the-counter.

POL contracts						Percentage-of-liquids contracts.
POP contracts						Percentage-of-proceeds contracts.
Series B Preferred Units						ENLK’s Series B Cumulative Convertible Preferred Units.
Series C Preferred Units						ENLK’s Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units.
STACK						Sooner Trend Anadarko Basin Canadian and Kingfisher Counties in Oklahoma.
Term Loan						An $850.0 million term loan entered into by ENLK on December 11, 2018 with Bank of America, N.A., as Administrative Agent, Bank of Montreal and Royal Bank of Canada, as Co-Syndication Agents, Citibank, N.A. and Wells Fargo Bank, National Association, as Co-Documentation Agents, and the lenders party thereto, which ENLC assumed in connection with the Merger and the obligations of which ENLK guarantees.
Thunderbird Plant						A gas processing plant in Central Oklahoma.
Tiger Plant						A gas processing plant that is under construction in the Delaware Basin and is owned by the Delaware Basin JV.

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Balance Sheets

(In millions, except unit data)


	March 31, 2020		December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	258.1	$	77.4
Accounts receivable:
Trade, net of allowance for bad debt of $0.6 and $0.5, respectively	34.2		36.2
Accrued revenue and other	337.4		460.1

Fair value of derivative assets	75.0		12.9
Other current assets	19.0		57.8
Total current assets	723.7		644.4
Property and equipment, net of accumulated depreciation of $3,545.2 and $3,418.6, respectively	6,896.3		7,081.3
Intangible assets, net of accumulated amortization of $576.8 and $545.9, respectively	1,219.0		1,249.9
Goodwill	—		184.6
Investment in unconsolidated affiliates	43.0		43.1
Fair value of derivative assets	8.2		4.3
Other assets, net	164.9		128.2
Total assets	$	9,055.1	$	9,335.8
LIABILITIES AND MEMBERS’ EQUITY
Current liabilities:
Accounts payable and drafts payable	$	51.2	$	70.6
Accounts payable to related party	0.5		1.1
Accrued gas, NGLs, condensate, and crude oil purchases	176.1		354.8
Fair value of derivative liabilities	77.9		14.4

Other current liabilities	216.8		206.2
Total current liabilities	522.5		647.1
Long-term debt	4,954.8		4,764.3
Asset retirement obligations	15.7		15.5
Other long-term liabilities	87.7		90.8

Fair value of derivative liabilities	13.4		6.8

Redeemable non-controlling interest	—		5.2

Members’ equity:
Members’ equity (489,137,038 and 487,791,612 units issued and outstanding, respectively)	1,764.4		2,135.5
Accumulated other comprehensive loss	(24.1)		(11.0)
Non-controlling interest	1,720.7		1,681.6
Total members’ equity	3,461.0		3,806.1
Total liabilities and members’ equity	$	9,055.1	$	9,335.8

See accompanying notes to consolidated financial statements.

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Statements of Operations

(In millions, except per unit data)


	Three Months Ended March 31,
	2020		2019
	(Unaudited)
Revenues:
Product sales	$	892.9	$	1,530.9

Midstream services	244.0		246.5

Gain on derivative activity	19.2		1.8
Total revenues	1,156.1		1,779.2
Operating costs and expenses:
Cost of sales	755.3		1,363.4
Operating expenses	100.7		114.5
General and administrative	30.4		51.4
Gain on disposition of assets	(0.6)		—
Depreciation and amortization	162.8		152.1
Impairments	353.0		186.5


Total operating costs and expenses	1,401.6		1,867.9
Operating loss	(245.5)		(88.7)
Other income (expense):
Interest expense, net of interest income	(55.6)		(49.6)
Gain on extinguishment of debt	5.3		—
Income from unconsolidated affiliates	1.7		5.3

Total other expense	(48.6)		(44.3)
Loss before non-controlling interest and income taxes	(294.1)		(133.0)
Income tax benefit (expense)	33.7		(1.8)
Net loss	(260.4)		(134.8)
Net income attributable to non-controlling interest	26.4		41.5
Net loss attributable to ENLC	$	(286.8)	$	(176.3)
Net loss attributable to ENLC per unit:
Basic common unit	$	(0.59)	$	(0.45)
Diluted common unit	$	(0.59)	$	(0.45)

See accompanying notes to consolidated financial statements.

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss

(In millions)


	Three Months Ended March 31,
	2020		2019
	(Unaudited)
Net loss	$	(260.4)	$	(134.8)
Loss on designated cash flow hedge (1)	(13.1)		—
Comprehensive loss	(273.5)		(134.8)
Comprehensive income attributable to non-controlling interest	26.4		41.5
Comprehensive loss attributable to ENLC	$	(299.9)	$	(176.3)

____________________________

(1)Includes a tax benefit of $4.0 million for the three months ended March 31, 2020.

See accompanying notes to consolidated financial statements.

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Statements of Changes in Members’ Equity

(In millions)


	Common Units					Accumulated Other Comprehensive Loss		Non-Controlling Interest		Total		Redeemable Non-controlling interest (Temporary Equity)
	$		Units	$		$		$		$
	(Unaudited)
Balance, December 31, 2019	$	2,135.5	487.8	$	(11.0)	$	1,681.6	$	3,806.1	$	5.2
Conversion of restricted units for common units, net of units withheld for taxes	(4.0)		1.3	—		—		(4.0)		—
Unit-based compensation	12.3		—	—		—		12.3		—
Contributions from non-controlling interests	—		—	—		37.1		37.1		—
Distributions	(93.3)		—	—		(24.4)		(117.7)		(0.3)
Loss on designated cash flow hedge (1)	—		—	(13.1)		—		(13.1)		—
Redemption of non-controlling interest	—		—	—		—		—		(4.0)
Fair value adjustment related to redeemable non-controlling interest	0.7		—	—		—		0.7		(0.9)
Net income (loss)	(286.8)		—	—		26.4		(260.4)		—
Balance, March 31, 2020	$	1,764.4	489.1	$	(24.1)	$	1,720.7	$	3,461.0	$	—

____________________________

(1)Includes a tax benefit of $4.0 million.

See accompanying notes to consolidated financial statements.

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Statements of Changes in Members’ Equity (Continued)

(In millions)


	Common Units					Accumulated Other Comprehensive Loss		Non-Controlling Interest		Total		Redeemable Non-Controlling Interest (Temporary Equity)
	$		Units	$		$		$		$
	(Unaudited)
Balance, December 31, 2018	$	1,730.9	181.3	$	(2.0)	$	3,245.3	$	4,974.2	$	9.3
Adoption of ASC 842	0.3		—	—		—		0.3		—
Balance, January 1, 2019	1,731.2		181.3	(2.0)		3,245.3		4,974.5		9.3
Conversion of restricted units for common units, net of units withheld for taxes	(5.6)		1.0	—		(2.8)		(8.4)		—
Unit-based compensation	12.2		—	—		1.4		13.6		—
Contributions from non-controlling interests	—		—	—		15.7		15.7		—
Distributions	(51.0)		—	—		(127.6)		(178.6)		—

Fair value adjustment related to redeemable non-controlling interest	2.5		—	—		—		2.5		(2.1)
Net income (loss)	(176.3)		—	—		41.5		(134.8)		—
Issuance of common units for ENLK public common units related to the Merger	1,958.1		304.9	—		(1,559.1)		399.0		—
Balance, March 31, 2019	$	3,471.1	487.2	$	(2.0)	$	1,614.4	$	5,083.5	$	7.2

See accompanying notes to consolidated financial statements.

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In millions)


	Three Months Ended March 31,
	2020		2019
	(Unaudited)
Cash flows from operating activities:
Net loss	$	(260.4)	$	(134.8)
Adjustments to reconcile net loss to net cash provided by operating activities:
Impairments	353.0		186.5
Depreciation and amortization	162.8		152.1
Deferred income tax (benefit) expense	(34.0)		0.8


Non-cash unit-based compensation	8.8		11.1
Gain on derivatives recognized in net loss	(19.2)		(1.8)
Cash settlements on derivatives	1.2		4.6
Gain on extinguishment of debt	(5.3)		—
Amortization of debt issue costs, net discount (premium) of notes	1.0		1.8

Distribution of earnings from unconsolidated affiliates	1.6		2.2
Income from unconsolidated affiliates	(1.7)		(5.3)

Other operating activities	(1.2)		(0.4)
Changes in assets and liabilities:
Accounts receivable, accrued revenue, and other	124.8		93.8
Natural gas and NGLs inventory, prepaid expenses, and other	44.5		3.6
Accounts payable, accrued product purchases, and other accrued liabilities	(193.9)		(50.2)
Net cash provided by operating activities	182.0		264.0
Cash flows from investing activities:
Additions to property and equipment	(112.0)		(241.5)



Other investing activities	(3.5)		0.5
Net cash used in investing activities	(115.5)		(241.0)
Cash flows from financing activities:
Proceeds from borrowings	440.0		630.0
Payments on borrowings	(241.0)		(581.4)
Debt financing costs	—		(5.6)
Conversion of restricted units, net of units withheld for taxes	(4.0)		(8.4)
Distribution to members	(93.3)		(51.0)
Distributions to non-controlling interests	(24.7)		(127.6)
Contributions by non-controlling interests	37.1		15.7
Other financing activities	0.1		5.6
Net cash provided by (used in) financing activities	114.2		(122.7)
Net increase (decrease) in cash and cash equivalents	180.7		(99.7)
Cash and cash equivalents, beginning of period	77.4		100.4
Cash and cash equivalents, end of period	$	258.1	$	0.7

Supplemental disclosures of cash flow information:
Cash paid for interest	$	22.3	$	23.8

Non-cash investing activities:
Non-cash accrual of property and equipment	$	2.8	$	9.5
Non-cash financing activities:
Redemption of non-controlling interest	$	(4.0)	$	—

See accompanying notes to consolidated financial statements.

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2020

(Unaudited)

(1) General

In this report, the terms “Company” or “Registrant,” as well as the terms “ENLC,” “our,” “we,” “us,” or like terms, are sometimes used as abbreviated references to EnLink Midstream, LLC itself or EnLink Midstream, LLC together with its consolidated subsidiaries, including ENLK and its consolidated subsidiaries. References in this report to “EnLink Midstream Partners, LP,” the “Partnership,” “ENLK,” or like terms refer to EnLink Midstream Partners, LP itself or EnLink Midstream Partners, LP together with its consolidated subsidiaries.

Please read the notes to the consolidated financial statements in conjunction with the Definitions page set forth in this report prior to Part I—Financial Information.

a.Organization of Business

ENLC is a Delaware limited liability company formed in October 2013. The Company’s common units are traded on the New York Stock Exchange under the symbol “ENLC.” ENLC owns all of the common units of ENLK, a Delaware limited partnership formed in 2002. EnLink Midstream GP, LLC, a Delaware limited liability company and our wholly-owned subsidiary, is ENLK’s general partner. The General Partner manages ENLK’s operations and activities.

b.Nature of Business

We primarily focus on providing midstream energy services, including:

•gathering, compressing, treating, processing, transporting, storing, and selling natural gas;

•fractionating, transporting, storing, and selling NGLs; and

•gathering, transporting, stabilizing, storing, trans-loading, and selling crude oil and condensate, in addition to brine disposal services.

Our natural gas business includes connecting the wells of producers in our market areas to our gathering systems. Our gathering systems consist of networks of pipelines that collect natural gas from points at or near producing wells and transport it to our processing plants or to larger pipelines for further transmission. We operate processing plants that remove NGLs from the natural gas stream that is transported to the processing plants by our own gathering systems or by third-party pipelines. In conjunction with our gathering and processing business, we may purchase natural gas and NGLs from producers and other supply sources and sell that natural gas or NGLs to utilities, industrial consumers, marketers, and pipelines. Our transmission pipelines receive natural gas from our gathering systems and from third-party gathering and transmission systems and deliver natural gas to industrial end-users, utilities, and other pipelines.

Our fractionators separate NGLs into separate purity products, including ethane, propane, iso-butane, normal butane, and natural gasoline. Our fractionators receive NGLs primarily through our transmission lines that transport NGLs from East Texas and from our South Louisiana processing plants. Our fractionators also have the capability to receive NGLs by truck or rail terminals. We also have agreements pursuant to which third parties transport NGLs from our West Texas and Central Oklahoma operations to our NGL transmission lines that then transport the NGLs to our fractionators. In addition, we have NGL storage capacity to provide storage for customers.

Our crude oil and condensate business includes the gathering and transmission of crude oil and condensate via pipelines, barges, rail, and trucks, in addition to condensate stabilization and brine disposal. We also purchase crude oil and condensate from producers and other supply sources and sell that crude oil and condensate through our terminal facilities to various markets.

Across our businesses, we primarily earn our fees through various fee-based contractual arrangements, which include stated fee-only contract arrangements or arrangements with fee-based components where we purchase and resell commodities in connection with providing the related service and earn a net margin as our fee. We earn our net margin under our purchase and resell contract arrangements primarily as a result of stated service-related fees that are deducted from the price of the commodities purchased. While our transactions vary in form, the essential element of most of our transactions is the use of our

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

assets to transport a product or provide a processed product to an end-user or marketer at the tailgate of the plant, pipeline, or barge, truck, or rail terminal.

(2) Significant Accounting Policies

a.Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q, are unaudited, and do not include all the information and disclosures required by GAAP for complete financial statements. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019. Certain reclassifications were made to the financial statements for the prior period to conform to current period presentation. The effect of these reclassifications had no impact on previously reported members’ equity or net loss. All significant intercompany balances and transactions have been eliminated in consolidation.

b.Revenue Recognition

Minimum Volume Commitments and Firm Transportation Contracts

Certain of our gathering and processing agreements provide for quarterly or annual MVCs. Under these agreements, our customers or suppliers agree to ship and/or process a minimum volume of product on our systems over an agreed time period. If a customer or supplier under such an agreement fails to meet its MVC for a specified period, the customer is obligated to pay a contractually-determined fee based upon the shortfall between actual product volumes and the MVC for that period. Some of these agreements also contain make-up right provisions that allow a customer or supplier to utilize gathering or processing fees in excess of the MVC in subsequent periods to offset shortfall amounts in previous periods. We record revenue under MVC contracts during periods of shortfall when it is known that the customer cannot, or will not, make up the deficiency in subsequent periods. Deficiency fee revenue is included in midstream services revenue.

For our firm transportation contracts, we transport commodities owned by others for a stated monthly fee for a specified monthly quantity with an additional fee based on actual volumes. We include transportation fees from firm transportation contracts in our midstream services revenue.

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The following table summarizes the contractually committed fees that we expect to recognize in our consolidated statements of operations, in either revenue or reductions to cost of sales, from MVC and firm transportation contractual provisions. All amounts in the table below are determined using the contractually-stated MVC or firm transportation volumes specified for each period multiplied by the relevant deficiency or reservation fee. Actual amounts could differ due to the timing of revenue recognition or reductions to cost of sales resulting from make-up right provisions included in our agreements, as well as due to nonpayment or nonperformance by our customers. These fees do not represent the shortfall amounts we expect to collect under our MVC contracts, as we generally do not expect volume shortfalls to equal the full amount of the contractual MVCs during these periods. For example, for the three months ended March 31, 2020, we had contractual commitments of $41.8 million under our MVC contracts and recorded $11.8 million of revenue due to volume shortfalls.


MVC and Firm Transportation Commitments (in millions) (1)
2020 (remaining)	$	199.5
2021	116.7
2022	103.3
2023	94.8
2024	81.3
Thereafter	158.2
Total	$	753.8

____________________________

(1)Amounts do not represent expected shortfall under these commitments.

c.Property and Equipment

Impairment Review. In accordance with ASC 360, Property, Plant, and Equipment, we evaluate long-lived assets of identifiable business activities for potential impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. The carrying amount of a long-lived asset is not recoverable when it exceeds the undiscounted sum of the future cash flows expected to result from the use and eventual disposition of the asset. Estimates of expected future cash flows represent management’s best estimate based on reasonable and supportable assumptions. When the carrying amount of a long-lived asset is not recoverable, an impairment is recognized equal to the excess of the asset’s carrying value over its fair value, which is based on inputs that are not observable in the market, and thus represent Level 3 inputs.

For the three months ended March 31, 2020, we recognized a $168.0 million impairment on property and equipment related to a portion of our Louisiana reporting segment because the carrying amounts were not recoverable based on our expected future cash flows. Additionally, we recorded a $0.4 million impairment related to certain cancelled projects.

d.Redeemable Non-Controlling Interest

Non-controlling interests that contain an option for the non-controlling interest holder to require us to purchase such interests for cash are considered to be redeemable non-controlling interests because the redemption feature is not deemed to be a freestanding financial instrument and because the redemption is not solely within our control. Redeemable non-controlling interests are not considered to be a component of members’ equity and are reported as temporary equity in the mezzanine section on the consolidated balance sheets. The amount recorded as a redeemable non-controlling interest at each balance sheet date is the greater of the redemption value and the carrying value of the redeemable non-controlling interest (the initial carrying value increased or decreased for the non-controlling interest holder’s share of net income or loss and distributions). When the redemption feature is exercised the redemption value of the non-controlling interest is reclassified to a liability on the consolidated balance sheets.

During the first quarter of 2020, a non-controlling interest holder in one of our non-wholly owned subsidiaries exercised its option to require us to purchase its remaining interest. We have recorded an estimated liability of $4.0 million related to the redemption of the non-controlling interest on the consolidated balance sheet as of March 31, 2020, but we have not yet agreed to a redemption value with the non-controlling interest holder.

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

e.Adopted Accounting Standards

Effective January 1, 2020, we adopted ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Topic 350): Internal-Use Software. ASU 2018-15 aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. Specifically, the ASU amends ASC 350-40 to include in its scope implementation costs of a cloud computing arrangement that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in a cloud computing arrangement that is considered a service contract. For the three months ended March 31, 2020, we did not capitalize any cloud computing costs. However, to the extent future costs incurred in a cloud computing arrangement are capitalizable, the corresponding amortization will be included in “Operating expenses” or “General and administrative” in the consolidated statements of operations, rather than “Depreciation and amortization.”

Effective January 1, 2020, we adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326). The updates in ASU 2016-13 provide financial statement users with more information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Following the adoption of ASU 2016-13, we record an allowance for doubtful accounts based on our expectation of future losses. Because our receivables are typically paid within 30 days, and because we closely monitor the credit-worthiness of all our counterparties, adopting ASU 2016-13 did not have a material effect on our financial statements. However, in the event we foresee further or sustained deterioration in the current market environment, or other factors indicating an increased likelihood of defaults by our customers, we may recognize additional losses.

(3) Goodwill and Intangible Assets

Goodwill

We perform our goodwill assessments at the reporting unit level for all reporting units. We use a discounted cash flow analysis to perform the assessments. Key assumptions in the analysis include the use of an appropriate discount rate, terminal year cash flow multiples, and estimated future cash flows, including volume and price forecasts, capital expenditures, and estimated operating and general and administrative costs. In estimating cash flows, we incorporate current and historical market and financial information, among other factors. Impairment determinations involve significant assumptions and judgments, and differing assumptions regarding any of these inputs could have a significant effect on the various valuations.

The following table represents our change in carrying value of goodwill by segment (in millions):


	Permian		North Texas		Oklahoma		Louisiana		Corporate		Totals
Three Months Ended March 31, 2020
Balance, beginning of period	$	184.6	$	—	$	—	$	—	$	—	$	184.6

Impairment	(184.6)		—		—		—		—		(184.6)
Balance, end of period	$	—	$	—	$	—	$	—	$	—	$	—

Goodwill Impairment Analysis for the three months ended March 31, 2020

During March 2020, we determined that a sustained decline in our unit price and weakness in the overall energy sector, driven by low commodity prices and lower consumer demand due to the COVID-19 pandemic, caused a change in circumstances warranting an interim impairment test. Based on these triggering events, we performed a quantitative goodwill impairment analysis on the remaining goodwill in the Permian reporting unit. Based on this analysis, a goodwill impairment loss for our Permian reporting unit in the amount of $184.6 million was recognized as an impairment loss on the consolidated statement of operations for the three months ended March 31, 2020.

Goodwill Impairment Analysis for the three months ended March 31, 2019

During the first quarter of 2019, we recognized a $186.5 million goodwill impairment in our Louisiana reporting unit.

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Intangible Assets

The following table represents our change in carrying value of intangible assets (in millions):


	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Three Months Ended March 31, 2020
Customer relationships, beginning of period	$	1,795.8	$	(545.9)	$	1,249.9

Amortization expense	—		(30.9)		(30.9)
Customer relationships, end of period	$	1,795.8	$	(576.8)	$	1,219.0

Intangible assets associated with customer relationships are amortized on a straight-line basis over the expected period of benefits of the customer relationships, which range from 5 to 20 years.

The weighted average amortization period is 15.0 years. Amortization expense was $30.9 million for each of the three months ended March 31, 2020 and 2019, respectively.

The following table summarizes our estimated aggregate amortization expense for the next five years and thereafter (in millions):


2020 (remaining)	$	92.8
2021	123.7
2022	123.7
2023	123.6
2024	123.4
Thereafter	631.8

Total	$	1,219.0

(4) Related Party Transactions

Transactions with Cedar Cove JV. For the three months ended March 31, 2020 and 2019, we recorded cost of sales of $2.9 million and $8.1 million, respectively, related to our purchase of residue gas and NGLs from the Cedar Cove JV subsequent to processing at its Central Oklahoma processing facilities. Additionally, we had accounts payable balances related to transactions with the Cedar Cove JV of $0.5 million and $1.1 million at March 31, 2020 and December 31, 2019, respectively.

Management believes the foregoing transactions with related parties were executed on terms that are fair and reasonable to us. The amounts related to related party transactions are specified in the accompanying consolidated financial statements.

(5) Leases

Lease balances are recorded on the consolidated balance sheets as follows (in millions):


	March 31, 2020			December 31, 2019







Operating leases:
Other assets, net	$	74.5		$	80.4
Other current liabilities	$	17.6		$	21.1
Other long-term liabilities	$	78.8		$	81.9

Other lease information

Weighted-average remaining lease term—Operating leases	11.0 years			10.6 years

Weighted-average discount rate—Operating leases	5.2		%	5.1		%

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Certain of our lease agreements have options to extend the lease for a certain period after the expiration of the initial term. We recognize the cost of a lease over the expected total term of the lease, including optional renewal periods that we can reasonably expect to exercise. We do not have material obligations whereby we guarantee a residual value on assets we lease, nor do our lease agreements impose restrictions or covenants that could affect our ability to make distributions.

Lease expense is recognized on the consolidated statements of operations as “Operating expenses” and “General and administrative” depending on the nature of the leased asset. The components of total lease expense are as follows (in millions):


	Three Months Ended March 31,
	2020		2019
Finance lease expense:
Amortization of right-of-use asset	$	—	$	0.7

Operating lease expense:
Long-term operating lease expense	6.4		6.3
Short-term lease expense	5.5		6.9
Variable lease expense	2.8		1.6
Total lease expense	$	14.7	$	15.5

Other information about our leases is presented below (in millions):


	Three Months Ended March 31,
	2020		2019
Supplemental cash flow information:
Cash payments for finance leases included in cash flows from financing activities	$	—	$	0.4
Cash payments for operating leases included in cash flows from operating activities	$	7.2	$	7.0
Right-of-use assets obtained in exchange for operating lease liabilities	$	4.8	$	80.6

The following table summarizes the maturity of our lease liability as of March 31, 2020 (in millions):


	Total		2020 (remaining)		2021		2022		2023		2024		Thereafter



Undiscounted operating lease liability	$	133.9	$	16.3	$	17.0	$	12.2	$	10.2	$	9.5	$	68.7
Reduction due to present value	(37.5)		(3.5)		(4.0)		(3.6)		(3.2)		(2.8)		(20.4)
Operating lease liability	$	96.4	$	12.8	$	13.0	$	8.6	$	7.0	$	6.7	$	48.3

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(6) Long-Term Debt

As of March 31, 2020 and December 31, 2019, long-term debt consisted of the following (in millions):


	March 31, 2020										December 31, 2019
	Outstanding Principal		Premium (Discount)		Long-Term Debt		Outstanding Principal		Premium (Discount)		Long-Term Debt
Consolidated Credit Facility due 2024 (1)	$	550.0	$	—	$	550.0	$	350.0	$	—	$	350.0
Term Loan due 2021 (2)	850.0		—		850.0		850.0		—		850.0
ENLK’s 4.40% Senior unsecured notes due 2024	545.0		1.4		546.4		550.0		1.5		551.5
ENLK’s 4.15% Senior unsecured notes due 2025	747.5		(0.7)		746.8		750.0		(0.7)		749.3
ENLK’s 4.85% Senior unsecured notes due 2026	497.0		(0.4)		496.6		500.0		(0.5)		499.5
ENLC’s 5.375% Senior unsecured notes due 2029	500.0		—		500.0		500.0		—		500.0
ENLK’s 5.60% Senior unsecured notes due 2044	350.0		(0.2)		349.8		350.0		(0.2)		349.8
ENLK’s 5.05% Senior unsecured notes due 2045	450.0		(5.9)		444.1		450.0		(5.9)		444.1
ENLK’s 5.45% Senior unsecured notes due 2047	500.0		(0.1)		499.9		500.0		(0.1)		499.9
Debt classified as long-term, including current maturities of long-term debt	$	4,989.5	$	(5.9)	4,983.6		$	4,800.0	$	(5.9)	4,794.1
Debt issuance cost (3)					(28.8)						(29.8)
Long-term debt, net of unamortized issuance cost					$	4,954.8					$	4,764.3

____________________________

(1)Bears interest based on Prime and/or LIBOR plus an applicable margin. The effective interest rate was 2.4% and 3.3% at March 31, 2020 and December 31, 2019, respectively.

(2)Bears interest based on Prime and/or LIBOR plus an applicable margin. The effective interest rate was 2.2% and 3.2% at March 31, 2020 and December 31, 2019, respectively.

(3)Net of amortization of $11.9 million and $10.9 million at March 31, 2020 and December 31, 2019, respectively.

Consolidated Credit Facility

The Consolidated Credit Facility permits ENLC to borrow up to $1.75 billion on a revolving credit basis and includes a $500.0 million letter of credit subfacility. The Consolidated Credit Facility became available for borrowings and letters of credit upon closing of the Merger. In addition, ENLK became a guarantor under the Consolidated Credit Facility upon the closing of the Merger. In the event that ENLC defaults on the Consolidated Credit Facility, ENLK will be liable for the entire outstanding balance ($550.0 million as of March 31, 2020), and 105% of the outstanding letters of credit under the Consolidated Credit Facility ($18.8 million as of March 31, 2020). The obligations under the Consolidated Credit Facility are unsecured.

The Consolidated Credit Facility includes provisions for additional financial institutions to become lenders, or for any existing lender to increase its revolving commitment thereunder, subject to an aggregate maximum of $2.25 billion for all commitments under the Consolidated Credit Facility.

The Consolidated Credit Facility will mature on January 25, 2024, unless ENLC requests, and the requisite lenders agree, to extend it pursuant to its terms. The Consolidated Credit Facility contains certain financial, operational, and legal covenants. The financial covenants are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The financial covenants include (i) maintaining a ratio of consolidated EBITDA (as defined in the Consolidated Credit Facility, which term includes projected EBITDA from certain capital expansion projects) to consolidated interest charges of no less than 2.5 to 1.0 at all times prior to the occurrence of an investment grade event (as defined in the Consolidated Credit Facility) and (ii) maintaining a ratio of consolidated indebtedness to consolidated EBITDA of no more than 5.0 to 1.0. If ENLC consummates one or more acquisitions in which the aggregate purchase price is $50.0 million or more, ENLC can elect to increase the maximum allowed ratio of consolidated indebtedness to consolidated EBITDA to 5.5 to 1.0 for the quarter in which the acquisition occurs and the three subsequent quarters.

Borrowings under the Consolidated Credit Facility bear interest at ENLC’s option at the Eurodollar Rate (LIBOR) plus an applicable margin (ranging from 1.125% to 2.00%) or the Base Rate (the highest of the Federal Funds Rate plus 0.50%, the 30-day Eurodollar Rate plus 1.0% or the administrative agent’s prime rate) plus an applicable margin (ranging from 0.125% to

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

1.00%). The applicable margins vary depending on ENLC’s debt rating. Upon breach by ENLC of certain covenants governing the Consolidated Credit Facility, amounts outstanding under the Consolidated Credit Facility, if any, may become due and payable immediately.

At March 31, 2020, we were in compliance with and expect to be in compliance with the financial covenants of the Consolidated Credit Facility for at least the next twelve months.

Term Loan

On December 11, 2018, ENLK entered into the Term Loan with Bank of America, N.A., as Administrative Agent, Bank of Montreal and Royal Bank of Canada, as Co-Syndication Agents, Citibank, N.A. and Wells Fargo Bank, National Association, as Co-Documentation Agents, and the lenders party thereto. Upon the closing of the Merger, ENLC assumed ENLK’s obligations under the Term Loan, and ENLK became a guarantor of the Term Loan. In the event that ENLC defaults on the Term Loan and the outstanding balance becomes due, ENLK will be liable for any amount owed on the Term Loan not paid by ENLC. The outstanding balance of the Term Loan was $850.0 million as of March 31, 2020. The obligations under the Term Loan are unsecured.

The Term Loan will mature on December 10, 2021. The Term Loan contains certain financial, operational, and legal covenants. The financial covenants are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The financial covenants include (i) maintaining a ratio of consolidated EBITDA (as defined in the Term Loan, which term includes projected EBITDA from certain capital expansion projects) to consolidated interest charges of no less than 2.5 to 1.0 at all times prior to the occurrence of an investment grade event (as defined in the Term Loan) and (ii) maintaining a ratio of consolidated indebtedness to consolidated EBITDA of no more than 5.0 to 1.0. If ENLC consummates one or more acquisitions in which the aggregate purchase price is $50.0 million or more, ENLC can elect to increase the maximum allowed ratio of consolidated indebtedness to consolidated EBITDA to 5.5 to 1.0 for the quarter in which the acquisition occurs and the three subsequent quarters.

Borrowings under the Term Loan bear interest at ENLC’s option at LIBOR plus an applicable margin (ranging from 1.0% to 1.75%) or the Base Rate (the highest of the Federal Funds Rate plus 0.5%, the 30-day Eurodollar Rate plus 1.0% or the administrative agent’s prime rate) plus an applicable margin (ranging from 0.0% to 0.75%). The applicable margins vary depending on ENLC’s debt rating. Upon breach by ENLC of certain covenants included in the Term Loan, amounts outstanding under the Term Loan may become due and payable immediately.

At March 31, 2020, we were in compliance with and expect to be in compliance with the financial covenants of the Term Loan for at least the next twelve months.

Senior Unsecured Notes Repurchases

For the three months ended March 31, 2020, ENLK made aggregate payments of $5.2 million to repurchase $10.5 million of the 2024, 2025, and 2026 Notes in open market transactions, which resulted in a $5.3 million gain on extinguishment of debt.

(7) Income Taxes

The components of our income tax benefit (expense) are as follows (in millions):


	Three Months Ended March 31,
	2020		2019
Current income tax expense	$	(0.3)	$	(1.0)
Deferred income tax benefit (expense)	34.0		(0.8)
Income tax benefit (expense)	$	33.7	$	(1.8)

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

The following schedule reconciles total income tax benefit (expense) and the amount calculated by applying the statutory U.S. federal tax rate to loss before income taxes (in millions):


	Three Months Ended March 31,
	2020		2019
Expected income tax benefit based on federal statutory rate	$	67.3	$	36.7
State income tax benefit, net of federal benefit	8.0		4.4


Non-deductible expense related to goodwill impairment	(43.4)		(43.8)
Other	1.8		0.9
Income tax benefit (expense)	$	33.7	$	(1.8)

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred tax assets, net of deferred tax liabilities, are included in “Other assets, net” in the consolidated balance sheets. As of March 31, 2020, we had $70.1 million of deferred tax assets, net of $354.8 million of deferred tax liabilities. As of December 31, 2019, we had $32.2 million of deferred tax assets, net of $354.0 million of deferred tax liabilities.

(8) Certain Provisions of the ENLK Partnership Agreement

a.ENLK Series B Preferred Units

A summary of the distribution activity relating to the Series B Preferred Units during the three months ended March 31, 2020 and 2019 is provided below:


Declaration period	Distribution paid as additional Series B Preferred Units	Cash Distribution (in millions)		Date paid/payable
2020
Fourth Quarter of 2019	148,999	$	16.8	February 13, 2020
First Quarter of 2020	149,371	$	16.8	May 13, 2020



2019
Fourth Quarter of 2018	425,785	$	16.5	February 13, 2019
First Quarter of 2019	147,887	$	16.7	May 14, 2019

b.ENLK Series C Preferred Units

There was no distribution activity relating to the Series C Preferred Units during the three months ended March 31, 2020 and 2019.

c.ENLK Common Unit Distributions

On February 13, 2019, ENLK paid $0.39 per ENLK common unit related to the fourth quarter of 2018.

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

(9) Members’ Equity

a.Earnings Per Unit and Dilution Computations

As required under ASC 260, Earnings Per Share, unvested share-based payments that entitle employees to receive non-forfeitable distributions are considered participating securities for earnings per unit calculations. The following table reflects the computation of basic and diluted earnings per unit for the periods presented (in millions, except per unit amounts):


	Three Months Ended March 31,
	2020		2019
Distributed earnings allocated to:
Common units (1)	$	45.8	$	109.4
Unvested restricted units (1)	0.8		1.2
Total distributed earnings	$	46.6	$	110.6
Undistributed loss allocated to:
Common units	$	(327.4)	$	(283.8)
Unvested restricted units	(6.0)		(3.1)
Total undistributed loss	$	(333.4)	$	(286.9)
Net loss allocated to:
Common units	$	(281.6)	$	(174.4)
Unvested restricted units	(5.2)		(1.9)
Total net loss	$	(286.8)	$	(176.3)
Basic and diluted net loss per unit:
Basic	$	(0.59)	$	(0.45)
Diluted	$	(0.59)	$	(0.45)

____________________________

(1)For the three months ended March 31, 2020 and 2019, distributed earnings represent a declared distribution of $0.09375 per unit payable on May 13, 2020 and a distribution of $0.279 per unit paid on May 14, 2019, respectively.

The following are the unit amounts used to compute the basic and diluted earnings per unit for the periods presented (in millions):


	Three Months Ended March 31,
	2020	2019
Basic and diluted weighted average units outstanding:
Weighted average common units outstanding (1)	488.7	392.0

____________________________

(1)All common unit equivalents were antidilutive for the three months ended March 31, 2020 and 2019 since a net loss existed for those periods.

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

b.Distributions

A summary of our distribution activity relating to the ENLC common units for the three months ended March 31, 2020 and 2019, respectively, is provided below:


Declaration period	Distribution/unit		Date paid/payable
2020
Fourth Quarter of 2019	$	0.1875	February 13, 2020
First Quarter of 2020	$	0.09375	May 13, 2020



2019
Fourth Quarter of 2018	$	0.275	February 14, 2019
First Quarter of 2019	$	0.279	May 14, 2019

(10) Investment in Unconsolidated Affiliates

As of March 31, 2020, our unconsolidated investments consisted of a 38.75% ownership in GCF and a 30% ownership in the Cedar Cove JV. The following table shows the activity related to our investment in unconsolidated affiliates for the periods indicated (in millions):


	Three Months Ended March 31,
	2020		2019
GCF

Distributions	$	1.6	$	2.2
Equity in income	$	1.8	$	5.7

Cedar Cove JV

Distributions	$	0.2	$	0.3
Equity in loss	$	(0.1)	$	(0.4)

Total

Distributions	$	1.8	$	2.5
Equity in income	$	1.7	$	5.3

The following table shows the balances related to our investment in unconsolidated affiliates as of March 31, 2020 and December 31, 2019 (in millions):


	March 31, 2020		December 31, 2019
GCF	$	39.4	$	39.2
Cedar Cove JV	3.6		3.9
Total investment in unconsolidated affiliates	$	43.0	$	43.1

(11) Employee Incentive Plans

a.Long-Term Incentive Plans

We account for unit-based compensation in accordance with ASC 718, which requires that compensation related to all unit-based awards be recognized in the consolidated financial statements. Unit-based compensation cost is valued at fair value at the date of grant, and that grant date fair value is recognized as expense over each award’s requisite service period with a corresponding increase to equity or liability based on the terms of each award and the appropriate accounting treatment under ASC 718. Unit-based compensation associated with ENLC’s unit-based compensation plan awarded to directors, officers, and

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

employees of the General Partner is recorded by ENLK since ENLC has no substantial or managed operating activities other than its interests in ENLK.

Amounts recognized on the consolidated financial statements with respect to these plans are as follows (in millions):


	Three Months Ended March 31,
	2020		2019
Cost of unit-based compensation charged to operating expense	$	2.2	$	0.3
Cost of unit-based compensation charged to general and administrative expense	6.6		10.8
Total unit-based compensation expense	$	8.8	$	11.1
Non-controlling interest in unit-based compensation	$	—	$	0.5
Amount of related income tax benefit recognized in net loss	$	2.1	$	2.5

b.ENLC Restricted Incentive Units

ENLC restricted incentive units were valued at their fair value at the date of grant, which is equal to the market value of ENLC common units on such date. A summary of the restricted incentive unit activity for the three months ended March 31, 2020 is provided below:


	Three Months Ended March 31, 2020
ENLC Restricted Incentive Units:	Number of Units		Weighted Average Grant-Date Fair Value
Non-vested, beginning of period	4,063,605		$	13.85
Granted (1)	4,554,493		5.66
Vested (1)(2)	(1,978,817)		9.56
Forfeited	(53,105)		11.34
Non-vested, end of period	6,586,176		$	9.50
Aggregate intrinsic value, end of period (in millions)	$	7.2

____________________________

(1)Restricted incentive units typically vest at the end of three years. In February 2020, ENLC granted 1,144,842 restricted incentive units with a fair value of $5.2 million to officers and certain employees as bonus payments for 2019, and these restricted incentive units vested immediately and are included in the restricted incentive units granted and vested line items.

(2)Vested units included 732,473 units withheld for payroll taxes paid on behalf of employees.

A summary of the restricted incentive units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) for the three months ended March 31, 2020 and 2019 is provided below (in millions):


	Three Months Ended March 31,
ENLC Restricted Incentive Units:	2020		2019
Aggregate intrinsic value of units vested	$	10.1	$	12.4
Fair value of units vested	$	18.9	$	12.6

As of March 31, 2020, there was $37.3 million of unrecognized compensation cost related to non-vested ENLC restricted incentive units. This cost is expected to be recognized over a weighted-average period of 1.9 years.

Table of Contents

ENLINK MIDSTREAM, LLC AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

c.ENLC Performance Units

ENLC grants performance awards under the 2014 Plan. The performance award agreements provide that the vesting of performance units (i.e., performance-based restricted incentive units) granted thereunder is dependent on the achievement of certain performance goals over the applicable performance period. At the end of the vesting period, recipients receive distribution equivalents, if any, with respect to the number of performance units vested. The vesting of such units ranges from zero to 200% of the units granted depending on the extent to which the related performance goals are achieved over the relevant performance period.

The following table presents a summary of the performance units:


	Three Months Ended March 31, 2020
ENLC Performance Units:	Number of Units		Weighted Average Grant-Date Fair Value
Non-vested, beginning of period	1,317,856		$	14.22
Granted	1,161,986		7.32
Vested (1)	(160,002)		31.13

Non-vested, end of period	2,319,840		$	9.60
Aggregate intrinsic value, end of period (in millions)	$	2.6

____________________________

(1)Vested units included 60,920 units withheld for payroll taxes paid on behalf of employees.

A summary of the performance units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) for the three months ended March 31, 2020 and 2019 is provided below (in millions).


	Three Months Ended March 31,
ENLC Performance Units:	2020		2019
Aggregate intrinsic value of units vested	$	0.9	$	1.8
Fair value of units vested	$	5.0	$	1.9

As of March 31, 2020, there was $16.8 million of unrecognized compensation cost that related to non-vested ENLC performance units. That cost is expected to be recognized over a weighted-average period of 1.8 years.

The following table presents a summary of the grant-date fair value assumptions by performance unit grant date:

ENLC Performance Units:

Janu

Enlink Midstream, Llc (ENLC) SEC Filing 10-Q Quarterly report for the period ending Tuesday, March 31, 2020

SEC Filings

ENLC Valuations

ENLC Annual Reports

ENLC Quarterly Reports

ENLC Corporate News