UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

OR

o   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:  1-14323

ENTERPRISE PRODUCTS PARTNERS L.P.
(Exact name of Registrant as Specified in Its Charter)

Delaware
76-0568219
(State or Other Jurisdiction of
(I.R.S. Employer Identification No.)
Incorporation or Organization)
 
     
 
1100 Louisiana Street, 10th Floor
 
 
Houston, Texas 77002
 
 
    (Address of Principal Executive Offices, Including Zip Code)
 
     
 
(713) 381-6500
 
 
(Registrant’s Telephone Number, Including Area Code)
 
     

Indicate by check mark whether the 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 þ    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  þ    No ¨

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

Large accelerated filer þ
Accelerated filer o
Non-accelerated filer    o (Do not check if a smaller reporting company)
Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o    No þ

There were 883,776,574 common units and 4,520,431 Class B units (which generally vote together with the common units) of Enterprise Products Partners L.P. outstanding at April 30, 2012.  Our common units trade on the New York Stock Exchange under the ticker symbol “EPD.”
 


 
ENTERPRISE PRODUCTS PARTNERS L.P.
TABLE OF CONTENTS

   
Page No.
 
 
 
 
 
 
   
 
 
 
 
 
        5.  Inventories
 
 
 
 
 
 
 
 
 
 
 
     
     














PART I.  FINANCIAL INFORMATION.

Item 1.   Financial Statements .

ENTERPRIS E PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)

   
March 31,
   
December 31,
 
ASSETS
 
2012
   
2011
 
Current assets:
           
Cash and cash equivalents
  $ 88.3     $ 19.8  
Restricted cash
    81.8       38.5  
Accounts receivable – trade, net of allowance for doubtful accounts
of $13.0 at March 31, 2012 and $13.4 at December 31, 2011
    4,526.7       4,501.8  
Accounts receivable – related parties
    13.4       43.5  
Inventories
    934.1       1,111.7  
Prepaid and other current assets
    452.9       353.4  
Total current assets
    6,097.2       6,068.7  
Property, plant and equipment, net
    22,910.3       22,191.6  
Investments in unconsolidated affiliates
    895.3       1,859.6  
Intangible assets, net of accumulated amortization of $987.9 at
March 31, 2012 and $990.4 at December 31, 2011
    1,644.2       1,656.2  
Goodwill
    2,092.3       2,092.3  
Other assets
    253.4       256.7  
Total assets
  $ 33,892.7     $ 34,125.1  
                 
LIABILITIES AND EQUITY
               
Current liabilities:
               
Current maturities of debt
  $ 1,050.0     $ 500.0  
Accounts payable – trade
    872.0       773.0  
Accounts payable – related parties
    79.3       211.6  
Accrued product payables
    4,830.4       5,047.1  
Accrued interest
    184.5       288.1  
Other current liabilities
    680.4       612.6  
Total current liabilities
    7,696.6       7,432.4  
Long-term debt (see Note 9)
    13,570.8       14,029.4  
Deferred tax liabilities
    22.0       91.2  
Other long-term liabilities
    215.0       352.8  
Commitments and contingencies (see Note 14)
               
Equity: (see Note 10)
               
Partners’ equity:
               
Limited partners:
               
Common units (883,831,574 units outstanding at March 31, 2012
and 881,620,418 units outstanding at December 31, 2011)
    12,502.1       12,346.3  
Class B units (4,520,431 units outstanding at March 31, 2012
and December 31, 2011)
    118.5       118.5  
Accumulated other comprehensive loss
    (341.8 )     (351.4 )
Total  partners’ equity
    12,278.8       12,113.4  
Noncontrolling interests
    109.5       105.9  
Total equity
    12,388.3       12,219.3  
Total liabilities and equity
  $ 33,892.7     $ 34,125.1  







See Notes to Unaudited Condensed Consolidated Financial Statements.


ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
 (Dollars in millions, except per unit amounts)

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
Revenues:
           
Third parties
  $ 11,221.7     $ 9,933.6  
Related parties
    30.8       250.1  
Total revenues (see Note 11)
    11,252.5       10,183.7  
Costs and expenses:
               
Operating costs and expenses:
               
Third parties
    10,318.8       9,111.5  
Related parties
    148.4       425.6  
Total operating costs and expenses
    10,467.2       9,537.1  
General and administrative costs:
               
Third parties
    23.6       12.9  
Related parties
    22.7       25.0  
Total general and administrative costs
    46.3       37.9  
Total costs and expenses (see Note 11)
    10,513.5       9,575.0  
Equity in income of unconsolidated affiliates
    9.9       16.2  
Operating income
    748.9       624.9  
Other income (expense):
               
Interest expense
    (186.5 )     (183.8 )
Interest income
    0.3       0.3  
Other, net (see Note 2)
    58.4       0.2  
Total other expense, net
    (127.8 )     (183.3 )
Income before income taxes
    621.1       441.6  
Benefit from (provision for) income taxes (see Note 2)
    34.4       (7.1 )
Net income
    655.5       434.5  
Net income attributable to noncontrolling interests (see Note 10)
    (4.2 )     (13.8 )
Net income attributable to limited partners
  $ 651.3     $ 420.7  
                 
Earnings per unit: (see Note 13)
               
Basic earnings per unit
  $ 0.76     $ 0.52  
Diluted earnings per unit
  $ 0.73     $ 0.49  




















See Notes to Unaudited Condensed Consolidated Financial Statements.


ENTERPRI SE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED
COMPREHENSIVE INCOME
(Dollars in millions)

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
             
Net income
  $ 655.5     $ 434.5  
Other comprehensive income (loss):
               
Cash flow hedges:
               
Commodity derivative instruments:
               
Changes in fair value of cash flow hedges
    (59.6 )     (151.4 )
Reclassification of gains and losses to net income
    22.0       68.9  
Interest rate derivative instruments:
               
Changes in fair value of cash flow hedges
    28.9       14.1  
Reclassification of gains and losses to net income
    2.7       1.5  
Total cash flow hedges
    (6.0 )     (66.9 )
Change in funded status of pension and postretirement plans, net of tax
    (1.2 )     0.3  
Proportionate share of other comprehensive income (loss) of unconsolidated affiliate
    1.0       (1.0 )
Change in fair value of available-for-sale equity securities
    15.8       --  
Total other comprehensive income (loss)
    9.6       (67.6 )
Comprehensive income
    665.1       366.9  
Comprehensive income attributable to noncontrolling interests
    (4.2 )     (13.8 )
Comprehensive income attributable to limited partners
  $ 660.9     $ 353.1  






























See Notes to Unaudited Condensed Consolidated Financial Statements.


ENTERP RISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
Operating activities:
           
Net income
  $ 655.5     $ 434.5  
Reconciliation of net income to net cash flows provided by operating activities:
               
Depreciation, amortization and accretion
    266.1       241.1  
Non-cash asset impairment charges
    5.4       --  
Equity in income of unconsolidated affiliates
    (9.9 )     (16.2 )
Distributions received from unconsolidated affiliates
    27.0       42.5  
Gains from asset sales and related transactions
    (55.2 )     (18.4 )
Deferred income tax expense (benefit)
    (67.2 )     0.8  
Changes in fair market value of derivative instruments
    (15.4 )     (1.3 )
Net effect of changes in operating accounts (see Note 15)
    (201.1 )     120.0  
Other operating activities
    (0.3 )     (0.3 )
Net cash flows provided by operating activities
    604.9       802.7  
Investing activities:
               
Capital expenditures
    (973.1 )     (713.5 )
Contributions in aid of construction costs
    5.0       3.2  
Increase in restricted cash
    (15.0 )     (92.9 )
Investments in unconsolidated affiliates
    (50.6 )     (3.8 )
Proceeds from asset sales (see Note 15)
    998.2       84.2  
Other investing activities
    --       (3.6 )
Cash used in investing activities
    (35.5 )     (726.4 )
Financing activities:
               
Borrowings under debt agreements
    1,396.6       2,821.6  
Repayments of debt
    (1,300.0 )     (2,316.0 )
Debt issuance costs
    (7.1 )     (12.8 )
Monetization of interest rate derivative instruments (see Note 4)
    (77.6 )     (5.7 )
Cash distributions paid to limited partners (see Note 10)
    (530.4 )     (479.7 )
Cash distributions paid to noncontrolling interests (see Note 10)
    (6.6 )     (17.2 )
Cash contributions from noncontrolling interests (see Note 10)
    4.9       1.3  
Net cash proceeds from issuance of common units
    29.0       21.0  
Other financing activities
    (9.7 )     (3.9 )
Cash provided by (used in) financing activities
    (500.9 )     8.6  
Net change in cash and cash equivalents
    68.5       84.9  
Cash and cash equivalents, January 1
    19.8       65.5  
Cash and cash equivalents, March 31
  $ 88.3     $ 150.4  








 
 







See Notes to Unaudited Condensed Consolidated Financial Statements.


ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EQUITY
(See Note 10 for Unit History, Accumulated Other Comprehensive
Income (Loss) and Noncontrolling Interests)
(Dollars in millions)

   
Partners’ Equity
             
   
Limited
 Partners
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Noncontrolling
Interests
   
Total
 
Balance, December 31, 2011
  $ 12,464.8     $ (351.4 )   $ 105.9     $ 12,219.3  
Net income
    651.3       --       4.2       655.5  
Cash distributions paid to limited partners
    (530.4 )     --       --       (530.4 )
Cash distributions paid to noncontrolling interests
    --       --       (6.6 )     (6.6 )
Cash contributions from noncontrolling interests
    --       --       4.9       4.9  
Net cash proceeds from issuance of common units
    29.0       --       --       29.0  
Amortization of fair value of equity-based awards
    15.6       --       --       15.6  
Cash flow hedges
    --       (6.0 )     --       (6.0 )
Change in fair value of available-for-sale equity securities
    --       15.8       --       15.8  
Other
    (9.7 )     (0.2 )     1.1       (8.8 )
Balance, March 31, 2012
  $ 12,620.6     $ (341.8 )   $ 109.5     $ 12,388.3  


   
Partners’ Equity
             
   
Limited
 Partners
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Noncontrolling
Interests
   
Total
 
Balance, December 31, 2010
  $ 11,406.7     $ (32.5 )   $ 526.6     $ 11,900.8  
Net income
    420.7       --       13.8       434.5  
Cash distributions paid to limited partners
    (479.7 )     --       --       (479.7 )
Cash distributions paid to noncontrolling interests
    --       --       (17.2 )     (17.2 )
Cash contributions from noncontrolling interests
    --       --       1.3       1.3  
Net cash proceeds from issuance of common units
    21.0       --       --       21.0  
Amortization of fair value of equity-based awards
    12.0       --       0.1       12.1  
Cash flow hedges
    --       (66.9 )     --       (66.9 )
Other
    (3.7 )     (0.7 )     (1.5 )     (5.9 )
Balance, March 31, 2011
  $ 11,377.0     $ (100.1 )   $ 523.1     $ 11,800.0  
















See Notes to Unaudited Condensed Consolidated Financial Statements.

 
6

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

With the exception of per unit amounts, or as noted within the context of each footnote disclosure,
 the dollar amounts presented in the tabular data within these footnote disclosures are
stated in millions of dollars.

KEY REFERENCES USED IN THESE
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unless the context requires otherwise, references to “we,” “us,” “our,” “Enterprise” or “Enterprise Products Partners” are intended to mean the business and operations of Enterprise Products Partners L.P. and its consolidated subsidiaries.  References to “EPO” mean Enterprise Products Operating LLC, which is a wholly owned subsidiary of Enterprise, and its consolidated subsidiaries, through which Enterprise Products Partners L.P. conducts its business.  Enterprise is managed by its general partner, Enterprise Products Holdings LLC (“Enterprise GP”), which is a wholly owned subsidiary of Dan Duncan LLC, a Delaware limited liability company.

The membership interests of Dan Duncan LLC are owned of record by a voting trust, the current trustees (“DD LLC Trustees”) of which are: (i) Randa Duncan Williams, who is also a director of Enterprise GP; (ii) Dr. Ralph S. Cunningham, who is also a director and the Chairman of Enterprise GP; and (iii) Richard H. Bachmann, who is also a director of Enterprise GP.  Each of the DD LLC Trustees also currently serves as one of the three managers of Dan Duncan LLC.

References to “EPCO” mean Enterprise Products Company and its privately held affiliates.  A majority of the outstanding voting capital stock of EPCO is owned of record by a voting trust, the current trustees (“EPCO Trustees”) of which are:  (i) Ms. Williams, who also serves as Chairman of EPCO; (ii) Dr. Cunningham, who also serves as a Vice Chairman of EPCO; and (iii) Mr. Bachmann, who also serves as the President and Chief Executive Officer (“CEO”) of EPCO.  Each of the EPCO Trustees is also a director of EPCO. 

On April 28, 2011, we, our general partner, EPD MergerCo LLC (“Duncan MergerCo,” a Delaware limited liability company and our wholly owned subsidiary), Duncan Energy Partners L.P. (“Duncan Energy Partners”) and DEP Holdings, LLC (“DEP GP,” the general partner of Duncan Energy Partners) entered into a definitive merger agreement (the “Duncan Merger Agreement”).  On September 7, 2011, the Duncan Merger Agreement was approved by the unitholders of Duncan Energy Partners and the merger of Duncan MergerCo with and into Duncan Energy Partners and related transactions were completed, with Duncan Energy Partners surviving such merger as our wholly owned subsidiary (collectively, we refer to these transactions as the “Duncan Merger”).  See Note 1 for additional information regarding the Duncan Merger.

References to “TEPPCO” mean TEPPCO Partners, L.P. prior to its merger with one of our subsidiaries on October 26, 2009.

References to “Energy Transfer Equity” mean the business and operations of Energy Transfer Equity, L.P. and its consolidated subsidiaries. 


Note 1 .  Partnership Operations, Organization and Basis of Presentation

General

We are a publicly traded Delaware limited partnership, the common units of which are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “EPD.”  We were formed in April 1998 to own and operate certain natural gas liquids (“NGLs”) related businesses of EPCO and are now a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products and certain petrochemicals.  Our midstream energy asset network links producers of natural gas, NGLs and crude oil from some of the largest supply basins in the United States (“U.S.”), Canada and the Gulf of Mexico with domestic consumers and international markets.  Our assets

 
7

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

include approximately 50,600 miles of onshore and offshore pipelines; 190 million barrels (“MMBbls”) of storage capacity for NGLs, crude oil, refined products and certain petrochemicals; and 14 billion cubic feet (“Bcf”) of natural gas storage capacity. 

Our midstream energy operations include: natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage, and import and export terminaling; crude oil and refined products transportation, storage, and terminaling; offshore production platforms; petrochemical transportation and services; and a marine transportation business that operates primarily on the U.S. inland and Intracoastal Waterway systems and in the Gulf of Mexico.   We have six reportable business segments: (i) NGL Pipelines & Services; (ii) Onshore Natural Gas Pipelines & Services; (iii) Onshore Crude Oil Pipelines & Services; (iv) Offshore Pipelines & Services; (v) Petrochemical & Refined Products Services; and (vi) Other Investments.

We are 100% owned by our limited partners from an economic perspective.  We are managed and controlled by Enterprise GP, which has a non-economic general partner interest in us.  We, Enterprise GP, EPCO and Dan Duncan LLC are affiliates and under the collective common control of the DD LLC Trustees and the EPCO Trustees.  We have no employees.  All of our operating functions and general and administrative support services are provided by employees of EPCO pursuant to an administrative services agreement (the “ASA”) or by other service providers.  See Note 12 for information regarding the ASA and other related party matters.

Completion of Duncan Merger

On September 7, 2011, the Duncan Merger Agreement was approved by the unitholders of Duncan Energy Partners and the merger of Duncan MergerCo and Duncan Energy Partners and related transactions were completed, with Duncan Energy Partners surviving such merger as our wholly owned subsidiary.  Each issued and outstanding common unit of Duncan Energy Partners was cancelled and converted into the right to receive common units representing limited partner interests in Enterprise based on an exchange ratio of 1.01 Enterprise common units for each Duncan Energy Partners common unit.  Enterprise issued 24,277,310 of its common units (net of fractional common units cashed out) as consideration in the Duncan Merger.  No Enterprise common units were issued to Enterprise or its subsidiaries as merger consideration.  Since we historically consolidated Duncan Energy Partners for financial reporting purposes, the Duncan Merger did not change the basis of presentation of our historical financial statements.


Note 2.   General Accounting Matters

Our results of operations for the three months ended March 31, 2012 are not necessarily indicative of results expected for the full year of 2012.  In our opinion, the accompanying Unaudited Condensed Consolidated Financial Statements include all adjustments consisting of normal recurring accruals necessary for fair presentation.  Although we believe the disclosures in these financial statements are adequate and make the information presented not misleading, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

These Unaudited Condensed Consolidated Financial Statements and the Notes thereto should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto included in our annual report on Form 10-K for the year ended December 31, 2011 (the “2011 Form 10-K”) filed with the SEC on February 29, 2012.





 
8

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

Allowance for Doubtful Accounts

Our allowance for doubtful accounts is determined based on specific identification and estimates of future uncollectible accounts.  The following table presents our allowance for doubtful accounts activity for the periods presented:

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
Balance at beginning of period
  $ 13.4     $ 18.4  
Charged to costs and expenses
    0.1       0.2  
Deductions (1)
    (0.5 )     (5.1 )
Balance at end of period
  $ 13.0     $ 13.5  
                 
(1)   The 2011 deduction is primarily due to our reassessment of the allowance for doubtful accounts as a result of improved credit ratings of a significant customer, which reduced our exposure to potential uncollectibility.
 

Contingencies

Certain conditions may exist as of the date our consolidated financial statements are issued, which may result in a loss to us but which will only be resolved when one or more future events occur or fail to occur.   Management has regular quarterly litigation reviews, including updates from legal counsel, to assess the need for accounting recognition or disclosure of these contingencies, and such assessment inherently involves an exercise in judgment.  In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, our management and legal counsel evaluate the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

We accrue an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated.  If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued.  We do not record a contingent liability when the likelihood of loss is probable but the amount cannot be reasonably estimated or when it is believed to be only reasonably possible or remote.

For contingencies where an unfavorable outcome is reasonably possible and the impact would be material, we disclose the nature of the contingency and, if feasible, an estimate of the possible loss or range of loss.  

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  See Note 14 for additional information regarding our contingencies.

Derivative Instruments

We use derivative instruments such as futures, swaps, options, forward contracts and other arrangements to manage price risks associated with inventories, firm commitments, interest rates, foreign currencies and certain anticipated future transactions.  To qualify for hedge accounting, the hedged item must expose us to risk and the related derivative instrument must reduce that exposure and meet specific hedge documentation requirements related to designation dates, expectations for hedge effectiveness and the probability that hedged future transactions will occur as forecasted.  We formally designate derivative instruments as hedges and document and assess their effectiveness at inception of the hedge and on a monthly or quarterly basis thereafter.  Forecasted transactions are evaluated for the probability of occurrence and are periodically back-tested once the forecasted period has passed to determine whether similarly forecasted transactions are probable of occurring in the future.

 
9

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

For certain of our physical forward derivative contracts, we apply the normal purchase/normal sale exception, whereby changes in the mark-to-market values of such contracts are not recognized in income. As a result, the revenues and expenses associated with the physical contract transactions are recognized during the period when volumes are physically delivered or received.  Physical derivative contracts are evaluated for the probability of future delivery and are periodically back-tested once the forecasted period has passed to determine whether similar contracts are probable of physically delivering in the future.

See Note 4 for additional information regarding our derivative instruments and related interest rate and commodity hedging activities.

Estimates

Preparing our consolidated financial statements in conformity with GAAP requires us to make estimates that affect amounts presented in the financial statements.  Our most significant estimates relate to (i) the useful lives and depreciation/amortization methods used for fixed and identifiable intangible assets; (ii) measurement of fair value and projections used in impairment testing of fixed and intangible assets (including goodwill); (iii) contingencies; and (iv) revenue and expense accruals.

Actual results could differ materially from our estimates.  On an ongoing basis, we review our estimates based on currently available information.  Any changes in the facts and circumstances underlying our estimates may require us to update such estimates, which could have a material impact on our consolidated financial statements.

Income Tax Benefit

During the first quarter of 2012, we recognized a net income tax benefit of $34.4 million, which was primarily due to a $46.5 million net income tax benefit related to the conversion of certain of our subsidiaries to limited liability companies partially offset by accruals for the Texas Margin Tax.  The $46.5 million benefit is attributable to the difference between deferred income taxes accrued by the applicable subsidiaries through the date of conversion and any current income tax due in connection with the conversion.

Other Non-Operating Income

The following table presents the components of “Other, net” income for the periods presented:

   
For the Three Months
 Ended March 31,
 
   
2012
   
2011
 
Gain on sales of available-for-sale securities (1)
  $ 53.3     $ --  
Distribution income from available-for-sale securities
    4.1       --  
Other
    1.0       0.2  
    $ 58.4     $ 0.2  
                 
(1)   Represents gains on the sale of Energy Transfer Equity common units. See Note 7 for information regarding our investment in Energy Transfer Equity.
 

Recent Accounting Developments

Accounting standard setting organizations have been very active in recent years.  Recently, they issued new and revised accounting guidance on a number of topics, including balance sheet offsetting.  We do not believe that adoption of this new guidance will have a material impact on our consolidated financial statements.




 
10

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

Note 3.    Equity-based Awards

An allocated portion of the fair value of EPCO’s equity-based awards is charged to us under the ASA.  The following table summarizes the expense we recognized in connection with equity-based awards for the periods presented:

   
For the Three Months
 Ended March 31,
 
   
2012
   
2011
 
Restricted common unit awards
  $ 14.8     $ 11.4  
Unit option awards
    0.7       0.9  
Other (1)
    0.9       (0.5 )
Total compensation expense
  $ 16.4     $ 11.8  
                 
(1)   Primarily consists of unit appreciation rights (“UARs”), phantom units and similar awards.
 

The fair value of equity-classified awards (e.g., restricted common unit and unit option awards) is amortized to earnings over the requisite service or vesting period.  Compensation expense for liability-classified awards (e.g., UARs and phantom units) is recognized over the requisite service or vesting period based on the fair value of the award remeasured at each reporting period.  Liability-classified awards are settled in cash upon vesting.

At March 31, 2012, EPCO’s significant long-term incentive plans applicable to us were the Enterprise Products 1998 Long-Term Incentive Plan (“1998 Plan”) and the Amended and Restated 2008 Enterprise Products Long-Term Incentive Plan (“2008 Plan”).  In addition, there were unvested awards outstanding under an inactive plan, the Enterprise Products 2006 TPP Long-Term Incentive Plan (“2006 Plan”).  After giving effect to awards granted under the 1998 Plan and 2008 Plan through March 31, 2012, a total of 531,669 and 4,885,394 additional common units could be issued under these plans, respectively.
 
Restricted Common Unit Awards

Restricted common unit awards allow recipients to acquire our common units (at no cost to the recipient apart from service or other conditions) once a defined vesting period expires, subject to customary forfeiture provisions.  Restricted common unit awards issued in 2012 generally vest at a rate of 25% per year beginning one year after the grant date.  As used in the context of EPCO’s long-term incentive plans, the term “restricted common unit” represents a time-vested unit.  Such awards are non-vested until the required service period expires.  Restricted common units are included in the number of common units presented on our Unaudited Condensed Consolidated Balance Sheets.

The fair value of a restricted common unit award is based on the market price per unit of the underlying security on the date of grant.  Compensation expense is recognized based on the grant date fair value, net of an allowance for estimated forfeitures, over the requisite service or vesting period.














 
11

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

The following table presents information regarding restricted common unit awards for the period presented:

   
Number of
Units
   
Weighted-
Average Grant
Date Fair Value
per Unit (1)
 
Restricted common units at December 31, 2011
    3,868,216     $ 34.22  
Granted (2)
    1,529,438     $ 51.92  
Vested (3)
    (632,298 )   $ 38.31  
Forfeited
    (24,800 )   $ 36.33  
Restricted common units at March 31, 2012
    4,740,556     $ 39.37  
                 
(1)   Determined by dividing the aggregate grant date fair value of awards (before an allowance for forfeitures) by the number of awards issued.
(2)   The aggregate grant date fair value of restricted common unit awards issued in 2012 was $79.4 million based on a grant date market price of $51.92 per unit. An estimated annual forfeiture rate of 3.25% was applied to these awards.
(3)   Includes awards granted to the independent directors of the board of directors of Enterprise GP as part of their annual compensation for 2012. A total of 10,038 restricted common units were issued in February 2012 to the independent directors of Enterprise GP that immediately vested upon issuance.
 

Typically, each recipient is also entitled to nonforfeitable cash distributions equal to the product of the number of restricted common units outstanding for the participant and the cash distribution per unit paid to limited partners.  Since these restricted common units are participating securities, such distributions are included in “Cash distributions paid to limited partners” as presented on our Unaudited Condensed Statements of Consolidated Cash Flows.

The following table presents supplemental information regarding our restricted common unit awards for the periods presented:

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
Cash distributions paid to restricted common unit holders
  $ 2.4     $ 2.1  
Total intrinsic value of our restricted common unit awards
   vesting during period
    32.6       14.7  

For the EPCO group of companies, the unrecognized compensation cost associated with restricted common unit awards was an aggregate $107.5 million at March 31, 2012, of which our allocated share of the cost is currently estimated to be $102.2 million.  We expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 2.2 years.

Unit Option Awards

EPCO’s long-term incentive plans provide for the issuance of non-qualified incentive options.  These unit option awards are denominated in our common units.  When issued, the exercise price of each unit option grant may be no less than the market price of our common units on the date of grant.  In general, option grants have a vesting period of four years from the date of grant and expire at the end of the calendar year following the year of vesting (e.g., an option vesting on May 29, 2011 will expire on December 31, 2012).  However, unit options only become exercisable at certain times during the calendar year following the year in which they vest (typically the months of February, May, August and November).








 
12

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

The fair value of each unit option is estimated on the date of grant using a Black-Scholes option pricing model.  Compensation expense recorded in connection with unit options is based on the grant date fair value of such awards, net of an allowance for estimated forfeitures, over the requisite service or vesting period.  The following table presents unit option activity for the period presented:

   
Number of
Units
   
Weighted-
Average
 Strike Price
(dollars/unit)
   
Weighted-
Average
Remaining
Contractual
Term
(in years)
   
Aggregate
Intrinsic
Value (1)
 
Unit options at December 31, 2011
    3,753,420     $ 28.08       2.6     $ 11.1  
Exercised
    (712,280 )   $ 30.76                  
Unit options at March 31, 2012
    3,041,140     $ 27.45       2.8     $ --  
Options exercisable at March 31, 2012
    --               --       --  
                                 
(1)   Aggregate intrinsic value reflects fully vested unit options at the date indicated.
 

In order to fund its unit option-related obligations, EPCO may purchase common units at fair value either in the open market or directly from us.  When employees exercise unit options, we reimburse EPCO for the cash difference between the strike price paid by the employee and the actual purchase price paid by EPCO for the units issued to the employee.

The following table presents supplemental information regarding our unit options during the periods presented:

   
For the Three Months
Ended March 31,
 
   
2012
   
2011
 
Total intrinsic value of unit option awards exercised during period
  $ 14.0     $ --  
Cash received from EPCO in connection with the
exercise of unit option awards
    10.2       --  
Unit option-related reimbursements to EPCO
    14.0       --  

For the EPCO group of companies, the unrecognized compensation cost associated with unit option awards was an aggregate $3.0 million at March 31, 2012, of which our allocated share of the cost is currently estimated to be $2.7 million.  We expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 1.3 years.

Unit Appreciation Rights

UARs entitle the recipient to receive a cash payment on the vesting date of the award equal to the excess, if any, of the then current fair market value of our common units over the grant date fair value of the award.  UARs are accounted for as liability awards.

At March 31, 2012 and December 31, 2011, there were 107,328 UARs outstanding that had been granted under the 2006 Plan.  The accrued liability for UARs at March 31, 2012 and December 31, 2011 was $1.1 million and $0.5 million, respectively.


Note 4.   Derivative Instruments, Hedging Activities and Fair Value Measurements

In the normal course of our business operations, we are exposed to certain risks, including changes in interest rates and commodity prices.  In order to manage risks associated with certain anticipated future transactions, we use derivative instruments.  Substantially all of our derivatives are used for non-trading activities.

 
13

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

We are required to recognize derivative instruments at fair value as either assets or liabilities on our balance sheet unless such instruments meet certain normal purchase/normal sale criteria.  While all derivatives are required to be reported at fair value on the balance sheet, changes in fair value of the derivative instruments are reported in different ways, depending on the nature and effectiveness of the hedging activities to which they relate.  An effective hedge relationship is one in which the change in fair value of a derivative instrument can be expected to offset 80% to 125% of the changes in fair value of a hedged item at inception and throughout the life of the hedging relationship.  Any ineffectiveness associated with a hedge relationship is recognized in earnings immediately.  Ineffectiveness can be caused by, among other things, changes in the timing of forecasted transactions or a mismatch of terms between the derivative instrument and the hedged item.

A contract designated as a cash flow hedge of an anticipated transaction that is not probable of occurring is immediately recognized in earnings.

Certain of our derivative instruments do not qualify for hedge accounting treatment; therefore, they are accounted for using mark-to-market accounting.

Interest Rate Derivative Instruments

We may utilize interest rate swaps, forward starting swaps and similar derivative instruments to manage our exposure to changes in interest rates charged on borrowings under certain consolidated debt agreements.  The following table summarizes our portfolio of interest rate swaps at March 31, 2012:

Hedged Transaction
Number and Type
of Derivatives
Outstanding
Notional
Amount
Period of
Hedge
Rate
Swap
Accounting
Treatment
   Senior Notes AA
10 fixed-to-floating swaps
$750.0
1/11 to 2/16
3.2% to 1.5%
Fair value hedge
   Undesignated swaps
6 floating-to-fixed swaps
$600.0
5/10 to 7/14
0.6% to 2.0%
Mark-to-market

Interest expense for the three months ended March 31, 2012 and 2011 reflects a benefit of $2.8 million and $9.7 million, respectively, attributable to interest rate swaps.

In February 2012, we settled 11 fixed-to-floating interest rate swaps having an aggregate notional amount of $800.0 million, resulting in gains totaling $37.7 million.  These gains will be amortized to earnings (as a decrease in interest expense) using the effective interest method over the forecasted hedged period of approximately three years.

The following table summarizes our portfolio of forward starting swaps outstanding at March 31, 2012.  Forward starting swaps hedge the expected underlying benchmark interest rates related to future issuances of debt.

Hedged Transaction
Number and Type
 of Derivatives
 Outstanding
Notional
Amount
Expected Termination
Date
Average Rate
Locked
Accounting
Treatment
Future debt offering
7 forward starting swaps
$350.0
8/12
3.7%
Cash flow hedge
Future debt offering
16 forward starting swaps
$1,000.0
3/13
3.7%
Cash flow hedge

In connection with the issuance of Senior Notes EE in February 2012 (see Note 9), we settled ten forward starting swaps having an aggregate notional value of $500.0 million, resulting in losses totaling $115.3 million. These losses are reflected in other comprehensive income for the three months ended March 31, 2012 and amortized to earnings (as an increase in interest expense) using the effective interest method over the forecasted hedge period of ten years.





 
14

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

Commodity Derivative Instruments

The prices of natural gas, NGLs, crude oil, refined products and certain petrochemical products are subject to fluctuations in response to changes in supply and demand, market conditions and a variety of additional factors that are beyond our control.  In order to manage such price risks, we enter into commodity derivative instruments such as physical forward contracts, futures contracts, fixed-for-float swaps, basis swaps and options contracts.  The following table summarizes our commodity derivative instruments outstanding at March 31, 2012:

 
Volume (1)
Accounting
Derivative Purpose
Current (2)
Long-Term (2)
Treatment
Derivatives designated as hedging instruments:
     
Natural gas processing:
     
Forecasted natural gas purchases for plant thermal reduction (“PTR”) (3)
27.7 Bcf
n/a
Cash flow hedge
Forecasted sales of NGLs (4)
2.4 MMBbls
n/a
Cash flow hedge
Octane enhancement:
     
Forecasted purchases of NGLs
0.3 MMBbls
n/a
Cash flow hedge
Forecasted sales of octane enhancement products
3.2 MMBbls
n/a
Cash flow hedge
Natural gas marketing:
     
Natural gas storage inventory management activities
10.5 Bcf
n/a
Fair value hedge
NGL marketing:
     
Forecasted purchases of NGLs and related hydrocarbon products
3.7 MMBbls
n/a
Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products
3.6 MMBbls
0.2 MMBbls
Cash flow hedge
Refined products marketing:
     
Forecasted purchases of refined products
0.4 MMBbls
n/a
Cash flow hedge
Forecasted sales of refined products
0.4 MMBbls
n/a
Cash flow hedge
Refined products inventory management activities
0.1 MMBbls
n/a
Fair value hedge
Crude oil marketing:
     
Forecasted purchases of crude oil
1.6 MMBbls
n/a
Cash flow hedge
Forecasted sales of crude oil
2.6 MMBbls
n/a
Cash flow hedge
Derivatives not designated as hedging instruments:
     
Natural gas risk management activities (5,6)
416.9 Bcf
69.6 Bcf
Mark-to-market
Refined products risk management activities (6)
0.4 MMBbls
n/a
Mark-to-market
Crude oil risk management activities (6)
6.1 MMBbls
n/a
Mark-to-market
(1)   Volume for derivatives designated as hedging instruments reflects the total amount of volumes hedged whereas volume for derivatives not designated as hedging instruments reflects the absolute value of derivative notional volumes.
(2)   The maximum term for derivatives designated as cash flow hedges, derivatives designated as fair value hedges and derivatives not designated as hedging instruments is December 2013, May 2012 and October 2015, respectively.
(3)   PTR represents the British thermal unit (“Btu”) equivalent of the NGLs extracted from natural gas by a processing plant, and includes the natural gas used as plant fuel to extract those liquids, plant flare and other shortages.
(4)   Forecasted sales of NGL volumes under natural gas processing exclude 4.9 MMBbls of additional hedges executed under contracts that have been designated as normal sales agreements.
(5)   Current volumes include approximately 104.2 Bcf of physical derivative instruments that are predominantly priced at an index plus a premium or minus a discount related to location differences.
(6)   Reflects the use of derivative instruments to manage risks associated with transportation, processing and storage assets.

Our predominant hedging strategies are: (i) hedging natural gas processing margins; (ii) hedging anticipated future contracted sales of NGLs, refined products and crude oil associated with volumes held in inventory; and (iii) hedging the fair value of natural gas in inventory.  The following information summarizes these hedging strategies:

§  
The objective of our natural gas processing strategy is to hedge an amount of gross margin associated with our natural gas processing activities.  We achieve this objective by using physical and financial instruments to lock in the purchase prices of natural gas consumed as PTR and the sales prices of the related NGL products.  This program consists of (i) the forward sale of a portion

 
15

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

  
of our expected equity NGL production at fixed prices through December 2012, which is achieved through the use of forward physical sales contracts and commodity derivative instruments and (ii) the purchase of commodity derivative instruments having a notional amount based on the volume of natural gas expected to be consumed as PTR in the production of such equity NGL production.

§  
The objective of our NGL, refined products and crude oil sales hedging program is to hedge the margins of anticipated future sales of inventory by locking in sales prices through the use of forward physical sales contracts and commodity derivative instruments.

§  
The objective of our natural gas inventory hedging program is to hedge the fair value of natural gas currently held in inventory by locking in the sales price of the inventory through the use of commodity derivative instruments.

Tabular Presentation of Fair Value Amounts, and Gains and Losses on
Derivative Instruments and Related Hedged Items

The following table provides a balance sheet overview of our derivative assets and liabilities at the dates indicated:

 
Asset Derivatives
 
Liability Derivatives
 
 
March 31, 2012
 
December 31, 2011
 
March 31, 2012
 
December 31, 2011
 
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Balance
Sheet
Location
 
Fair
Value
 
Derivatives designated as hedging instruments
 
Interest rate derivatives
Other current
assets
  $ 14.7  
Other current
assets
  $ 43.7  
Other current
liabilities
  $ 146.5  
Other current
liabilities
  $ 163.6  
Interest rate derivatives
Other assets
    22.7  
Other assets
    44.2  
Other liabilities
    --  
Other liabilities
    127.1  
Total interest rate derivatives
      37.4         87.9         146.5         290.7  
Commodity derivatives
Other current
assets
    47.0  
Other current
assets
    20.3  
Other current
liabilities
    100.1  
Other current
liabilities
    30.3  
Commodity derivatives
Other assets
    0.4  
Other assets
    --  
Other liabilities
    --  
Other liabilities
    0.2  
Total commodity derivatives (1)
      47.4         20.3         100.1         30.5  
Total derivatives designated as
   hedging instruments
    $ 84.8       $ 108.2       $ 246.6       $ 321.2  
                                         
Derivatives not designated as hedging instruments
 
Interest rate derivatives
Other current
assets
  $ --  
Other current
assets
  $ --  
Other current
liabilities
  $ 10.9  
Other current
liabilities
  $ 10.1  
Interest rate derivatives
Other assets
    --  
Other assets
    --  
Other liabilities
    9.7  
Other liabilities
    10.6  
Total interest rate derivatives
      --         --         20.6         20.7  
Commodity derivatives
Other current
assets
    37.2  
Other current
assets
    34.4  
Other current
liabilities
    16.9  
Other current
liabilities
    32.5  
Commodity derivatives
Other assets
    5.3  
Other assets
    12.6  
Other liabilities
    2.4  
Other liabilities
    2.0  
Total commodity derivatives
      42.5         47.0         19.3         34.5  
Total derivatives not designated as
   hedging instruments
    $ 42.5       $ 47.0       $ 39.9       $ 55.2  
                                         
(1)   Represents commodity derivative instrument transactions that have either not settled or have settled and not been invoiced. Settled and invoiced transactions are reflected in either accounts receivable or accounts payable depending on the outcome of the transaction.
 










 
16

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

The following tables present the effect of our derivative instruments designated as fair value hedges on our Unaudited Condensed Statements of Consolidated Operations for the periods presented:

Derivatives in Fair Value
Hedging Relationships
Location
 
Gain/(Loss) Recognized in
Income on Derivative
 
     
For the Three Months
Ended March 31,
 
     
2012
   
2011
 
Interest rate derivatives
Interest expense
  $ (1.5 )   $ (12.3 )
Commodity derivatives
Revenue
    0.7       0.3  
   Total
    $ (0.8 )   $ (12.0 )

Derivatives in Fair Value
Hedging Relationships
Location
 
Gain/(Loss) Recognized in
Income on Hedged Item
 
     
For the Three Months
Ended March 31,
 
     
2012
   
2011
 
Interest rate derivatives
Interest expense
  $ 1.1     $ 11.3  
Commodity derivatives
Revenue
    0.4       (1.3 )
   Total
    $ 1.5     $ 10.0  

The following tables present the effect of our derivative instruments designated as cash flow hedges on our Unaudited Condensed Statements of Consolidated Operations and Unaudited Condensed Statements of Consolidated Comprehensive Income for the periods presented:

Derivatives in Cash Flow
Hedging Relationships
 
Change in Value
Recognized in Other
Comprehensive
Income/(Loss)
on Derivative
(Effective Portion)
 
   
For the Three Months
Ended March 31,
 
   
2012
   
2011
 
Interest rate derivatives
  $ 28.9     $ 14.1  
Commodity derivatives – Revenue
    (39.6 )     (155.4 )
Commodity derivatives – Operating costs and expenses
    (20.0 )     4.0  
   Total
  $ (30.7 )   $ (137.3 )

Derivatives in Cash Flow
Hedging Relationships
Location
 
Gain/(Loss) Reclassified
 from Accumulated Other
Comprehensive
Income/(Loss) to Income
(Effective Portion)
 
     
For the Three Months
 
     
Ended March 31,
 
     
2012
   
2011
 
Interest rate derivatives
Interest expense
  $ (2.7 )   $ (1.5 )
Commodity derivatives
Revenue
    (10.0 )     (69.2 )
Commodity derivatives
Operating costs and expenses
    (12.0 )     0.3  
   Total
    $ (24.7 )   $ (70.4 )

Derivatives in Cash Flow
Hedging Relationships
Location
 
Gain/(Loss) Recognized
 in Income on Derivative
(Ineffective Portion)
 
     
For the Three Months
 
     
Ended March 31,
 
     
2012
   
2011
 
Commodity derivatives
Revenue
  $ --     $ (0.1 )
Commodity derivatives
Operating costs and expenses
    0.3       --  
   Total
    $ 0.3     $ (0.1 )


 
17

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

Over the next twelve months, we expect to reclassify $19.1 million of losses attributable to interest rate derivative instruments from accumulated other comprehensive loss to earnings as an increase in interest expense.  Likewise, we expect to reclassify $59.3 million of losses attributable to commodity derivative instruments from accumulated other comprehensive loss to earnings, $18.2 million as an increase in operating costs and expenses and $41.1 million as a decrease in revenue.

The following table presents the effect of our derivative instruments not designated as hedging instruments on our Unaudited Condensed Statements of Consolidated Operations for the periods presented:

Derivatives Not Designated
as Hedging Instruments
Location
 
Gain/(Loss) Recognized in
Income on Derivative
 
     
For the Three Months
 
     
Ended March 31,
 
     
2012
   
2011
 
Interest rate derivatives
Interest expense
  $ (2.2 )   $ (2.1 )
Commodity derivatives
Revenue
    20.8       3.8  
Commodity derivatives
Operating costs and expenses
    (2.8 )     --  
   Total
    $ 15.8     $ 1.7  

Fair Value Measurements

Our fair value estimates are based on either (i) actual market data or (ii) assumptions that other market participants would use in pricing an asset or liability, including estimates of risk, in the principal market of the asset or liability at a specified measure date.  Recognized valuation techniques employ inputs such as contractual prices, quoted market prices or rates, operating costs, discount factors and business growth rates.  These inputs may be either readily observable, corroborated by market data or generally unobservable.  In developing our estimates of fair value, we endeavor to utilize the best information available and apply market-based data to the extent possible.  Accordingly, we utilize valuation techniques (such as the market approach) that maximize the use of observable inputs and minimize the use of unobservable inputs.

A three-tier hierarchy has been established that classifies fair value amounts recognized or disclosed in the financial statements based on the observability of inputs used to estimate such fair values.  The hierarchy considers fair value amounts based on observable inputs (Levels 1 and 2) to be more reliable and predictable than those based primarily on unobservable inputs (Level 3).  At each balance sheet reporting date, we categorize our financial assets and liabilities using this hierarchy.




















 
18

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

The following table sets forth, by level within the fair value hierarchy, the carrying values of our financial assets and liabilities at March 31, 2012.  These assets and liabilities are measured on a recurring basis and are classified based on the lowest level of input that is significant to their respective fair value.  Our assessment of the relative significance of such inputs requires judgment.

   
At March 31, 2012
 
   
Quoted Prices
                   
   
in Active
                   
   
Markets for
   
Significant
   
Significant
       
   
Identical Assets
   
Observable
   
Unobservable
       
   
and Liabilities
   
Inputs
   
Inputs
       
   
(Level 1)
   
(Level 2)
   
(Level 3)
   
Total
 
Financial assets:
                       
Investment in equity securities – available-for-sale (1)
  $ 119.8     $ --     $ --     $ 119.8  
Interest rate derivatives
    --       37.4       --       37.4  
Commodity derivatives
    34.8       50.5       4.6       89.9  
Total
  $ 154.6     $ 87.9     $ 4.6     $ 247.1  
                                 
Financial liabilities:
                               
Interest rate derivatives
  $ --     $ 167.1     $ --     $ 167.1  
Commodity derivatives
    89.9       25.8       3.7       119.4  
Total
  $ 89.9     $ 192.9     $ 3.7     $ 286.5  
                                 
(1)   See Note 7 for information related to our investment in Energy Transfer Equity common units, which trade on the NYSE under ticker symbol “ETE.”
 

The following table sets forth a reconciliation of changes in the overall fair values of our Level 3 financial assets and liabilities for the periods presented:

     
For the Three Months
 
     
Ended March 31,
 
 
Location
 
2012
   
2011
 
Balance, January 1
    $ 0.4     $ (25.9 )
Total gains (losses) included in:
                 
Net income (1)
Revenue
    0.5       (0.5 )
Other comprehensive income (loss)
 
Commodity  derivative instruments – changes in
   fair value of cash flow hedges
    0.5       16.2  
Settlements
      (0.5 )     0.8  
Transfers out of Level 3 (2)
      --       9.8  
Balance, March 31
    $ 0.9     $ 0.4  
                   
(1)   There were unrealized gains of $0.1 million and losses of $0.2 million included in these amounts for the three months ended March 31, 2012 and 2011, respectively.
(2)   Transfers out of Level 3 into Level 2 during 2011 were primarily due to the change in observability of forward NGL prices.
 

The following   table provides quantitative information about our Level 3 fair value measurements at March 31, 2012:

   
Fair Value
       
   
Financial
Assets
   
Financial
Liabilities
 
Valuation
Techniques
Unobservable
Input
Range
Commodity derivatives – Propane
  $ 0.6     $ --  
Discounted cash flow
Forward commodity price
$1.27 – $1.33 /gallon
Commodity derivatives – Crude Oil
    3.9       3.6  
Discounted cash flow
Forward commodity price
$103.02 – $104.66 /barrel
Commodity derivatives – Natural gas
    0.1       0.1  
Discounted cash flow
Forward commodity price
$2.11 – $2.22 /MMBtu
    Total
  $ 4.6     $ 3.7        

We believe certain forward commodity prices are the most significant unobservable inputs in determining our recurring Level 3 fair value measurements at March 31, 2012.  In general, changes in the price of the underlying commodity increases or decreases the fair value of a commodity derivative

 
19

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

depending on whether the derivative was purchased or sold.  We generally expect changes in the fair value of our derivative instruments to be offset by corresponding changes in the fair value of our hedged exposures.

We have a risk management policy that covers our Level 3 commodity derivatives.  Governance and oversight of risk management activities for these commodities are provided by our CEO with guidance and support from a risk management committee (“RMC”), which meets quarterly (or on a more frequent basis if needed).  Members of executive management attend the RMC meetings, which are chaired by the head of our commodities risk control group.  This group is responsible for preparing and distributing daily reports and risk analysis to members of the RMC and other appropriate members of management.  These reports include mark-to-market valuations with the one-day and month-to-date changes in fair values.  This group also develops and validates forward curves used to determine the fair values of our Level 3 commodity derivatives.  These forward curves are based on published indexes, market quotes or are derived from other available inputs.

Nonfinancial Assets and Liabilities

Using appropriate valuation techniques, we reduced the carrying value of certain assets recorded as property, plant and equipment to an estimated fair value of $0.5 million based on the present value of expected future cash flows (Level 3), resulting in nonrecurring fair value adjustments (i.e., non-cash asset impairment charges) totaling $5.4 million during the three months ended March 31, 2012.  These impairment charges recorded during the first quarter 2012 were recorded to reflect assets that are no longer in use or to reduce the fair value to what we can expect to receive from anticipated sales.  We did not record any non-cash asset impairment charges during the three months ended March 31, 2011.

The following table summarizes our non-cash impairment charges, which are a component of operating costs and expenses, by business segment during the three months ended March 31, 2012:

NGL Pipelines & Services
  $ 5.1  
Petrochemical & Refined Products Services
    0.3  
Total non-cash impairment charges
  $ 5.4  

Forecast data and other assumptions supporting the fair value of fixed assets being tested for impairment are based on the nonfinancial assets’ highest and best use, which includes estimated probabilities where multiple outcomes are possible.  Such probability weights are generally obtained from business management personnel having oversight responsibilities for the assets in question.  Key commercial assumptions (e.g., anticipated operating margins, growth rates and timing of cash flows) and test results are certified by members of senior management.

Other Fair Value Information

The carrying amounts of cash and cash equivalents (including restricted cash), accounts receivable and accounts payable approximate their fair values based on their short-term nature.  The estimated total fair value of our fixed-rate long-term debt obligations was approximately $16.19 billion and $15.76 billion at March 31, 2012 and December 31, 2011, respectively.  The aggregate carrying value of these debt obligations was $14.58 billion and $14.33 billion at March 31, 2012 and December 31, 2011, respectively.  These values are based on quoted market prices for such debt or debt of similar terms and maturities (Level 2), our credit standing and the credit standing of our counterparties.  Changes in market rates of interest affect the fair value of our fixed-rate debt. The carrying values of our variable-rate long-term debt obligations approximate their fair values since the associated interest rates are market-based.  We do not have any long-term investments in debt or equity securities recorded at fair value.





 
20

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

Note 5.   Inventories

Our inventory amounts by product type were as follows at the dates indicated:

   
March 31,
2012
   
December 31,
2011
 
NGLs
  $ 402.7     $ 563.6  
Petrochemicals and refined products
    433.4       443.4  
Crude oil
    58.7       39.2  
Natural gas
    39.3       65.5  
Total
  $ 934.1     $ 1,111.7  

In those instances where we take ownership of inventory volumes through percent-of-liquids contracts and similar arrangements (as opposed to actually purchasing volumes for cash from third parties), these volumes are valued at market-based prices during the month in which they are acquired.

Due to fluctuating commodity prices, we recognize lower of cost or market adjustments when the carrying value of our inventories exceeds their net realizable value.  These non-cash charges are a component of cost of sales in the period they are recognized.  To the extent our commodity hedging strategies address inventory-related price risks and are successful, these inventory valuation adjustments are mitigated or offset.  See Note 4 for a description of our commodity hedging activities.

The following table summarizes our cost of sales and lower of cost or market adjustments for the periods presented:

   
For the Three Months
Ended March 31,
 
   
2012
   
2011
 
Cost of sales (1)
  $ 9,665.8     $ 8,819.3  
Lower of cost or market adjustments
    5.9       1.2  
(1)   Cost of sales is a component of “Operating costs and expenses,” as presented on our Unaudited Condensed Statements of Consolidated Operations. Quarter-to-quarter fluctuations in these amounts are primarily due to changes in energy commodity prices and sales volumes associated with our marketing activities.
 























 
21

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

Note 6.   Property, Plant and Equipment

The historical costs of our property, plant and equipment and related accumulated depreciation balances were as follows at the dates indicated:

   
Estimated
Useful Life
in Years
   
March 31,
2012
   
December 31,
2011
 
Plants, pipelines and facilities (1)
  3-45 (6)     $ 22,567.2     $ 22,354.4  
Underground and other storage facilities (2)
  5-40 (7)       1,416.0       1,388.6  
Platforms and facilities (3)
  20-31       637.5       637.5  
Transportation equipment (4)
  3-10       153.1       151.5  
Marine vessels (5)
  15-30       633.5       615.9  
Land
          141.3       136.1  
Construction in progress
          2,810.8       2,145.6  
Total
          28,359.4       27,429.6  
Less accumulated depreciation
          5,449.1       5,238.0  
Property, plant and equipment, net
        $ 22,910.3     $ 22,191.6  
                       
(1)   Plants and pipelines include processing plants; NGL, natural gas, crude oil and petrochemical and refined products pipelines; terminal loading and unloading facilities; office furniture and equipment; buildings; laboratory and shop equipment and related assets.
(2)   Underground and other storage facilities include underground product storage caverns; above ground storage tanks; water wells and related assets.
(3)   Platforms and facilities include offshore platforms and related facilities and other associated assets located in the Gulf of Mexico.
(4)   Transportation equipment includes tractor-trailer tank trucks and other vehicles and similar assets used in our operations.
(5)   Marine vessels include tow boats, barges and related equipment used in our marine transportation business.
(6)   In general, the estimated useful lives of major assets within this category are: processing plants, 20-35 years; pipelines and related equipment, 5-45 years; terminal facilities, 10-35 years; office furniture and equipment, 3-20 years; buildings, 20-40 years; and laboratory and shop equipment, 5-35 years.
(7)   In general, the estimated useful lives of assets within this category are: underground storage facilities, 5-35 years; storage tanks, 10-40 years; and water wells, 5-35 years.
 

The following table summarizes our depreciation expense and capitalized interest amounts for the periods presented:

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
Depreciation expense (1)
  $ 212.0     $ 186.5  
Capitalized interest (2)
    30.6       17.2  
(1)   Depreciation expense is a component of “Costs and expenses” as presented on our Unaudited Condensed Statements of Consolidated Operations.
(2)   Capitalized interest reduces interest expense during the period it is recorded and increases the carrying value of the associated asset, which will subsequently increase depreciation expense once the asset is placed in service.
 

Asset Retirement Obligations

We record asset retirement obligations (“AROs”) related to legal requirements to perform retirement activities as specified in contractual arrangements and/or governmental regulations.  The following table presents information regarding our AROs since December 31, 2011:

ARO liability balance, December 31, 2011
  $ 112.0  
Liabilities incurred during period
    0.8  
Liabilities settled during period
    (1.6 )
Revisions in estimated cash flows
    3.4  
Accretion expense
    1.4  
ARO liability balance, March 31, 2012
  $ 116.0  


 
22

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

Property, plant and equipment at March 31, 2012 and December 31, 2011 includes $37.2 million and $37.7 million, respectively, of asset retirement costs capitalized as an increase in the associated long-lived asset.  The following table presents our accretion expense forecasts for AROs for the periods presented:

Remainder of
2012
   
2013
   
2014
   
2015
   
2016
 
$ 4.0     $ 5.6     $ 6.0     $ 5.8     $ 6.1  

Certain of our unconsolidated affiliates have AROs recorded at March 31, 2012 and December 31, 2011 relating to contractual agreements and regulatory requirements.  These amounts are immaterial to our consolidated financial statements.


Note 7.   Investments in Unconsolidated Affiliates

The following table presents our investments in unconsolidated affiliates by business segment at the dates indicated.  Unless noted otherwise, we account for these investments using the equity method.

   
Ownership
Interest at
March 31,
2012
   
March 31,
2012
   
December 31,
2011
 
NGL Pipelines & Services:
                 
Venice Energy Service Company, L.L.C.
  13.1%     $ 34.8     $ 35.5  
K/D/S Promix, L.L.C.
  50%       41.6       40.7  
Baton Rouge Fractionators LLC
  32.2%       20.9       21.0  
Skelly-Belvieu Pipeline Company, L.L.C.
  50%       39.6       35.0  
Texas Express Pipeline LLC
  45%       49.8       13.9  
Onshore Natural Gas Pipelines & Services:
                     
Evangeline (1)
  49.5%       3.9       4.4  
White River Hub, LLC
  50%       25.4       25.7  
Onshore Crude Oil Pipelines & Services:
                     
Seaway Crude Pipeline LLC
  50%       164.6       170.7  
Offshore Pipelines & Services:
                     
Poseidon Oil Pipeline Company, L.L.C. (“Poseidon”)
  36%       52.7       55.4  
Cameron Highway Oil Pipeline Company
  50%       220.8       222.8  
Deepwater Gateway, L.L.C.
  50%       93.8       94.6  
Neptune Pipeline Company, L.L.C.
  25.7%       50.0       51.1  
Southeast Keathley Canyon Pipeline Company L.L.C.
  50%       33.7       1.0  
Petrochemical & Refined Products Services:
                     
Baton Rouge Propylene Concentrator, LLC
  30%       9.0       9.5  
Centennial Pipeline LLC (“Centennial”)
  50%       51.4       51.8  
Other (2)
 
Various
      3.3       3.4  
Other Investments:
                     
Energy Transfer Equity (3)
  1.3%       --       1,023.1  
Total
        $ 895.3     $ 1,859.6  
  
                     
(1)   Evangeline refers to our ownership interests in Evangeline Gas Pipeline Company, L.P. and Evangeline Gas Corp., collectively.
(2)   Other unconsolidated affiliates include a 50% interest in a propylene pipeline extending from Mont Belvieu, Texas to La Porte, Texas and a 25% interest in a company that provides logistics communications solutions between petroleum pipelines and their customers.
(3)   Effective January 18, 2012, our investment in Energy Transfer Equity common units is no longer accounted for using the equity method (see below).
 

At December 31, 2011, we owned 29,303,514 common units of Energy Transfer Equity.  On January 18, 2012, we sold 22,762,636 of these common units in a private transaction, which generated cash proceeds of approximately $825.1 million and a gain on the sale of $27.5 million.  Following the completion of the January 18 transaction, our ownership percentage in Energy Transfer Equity was below 3%, and we discontinued using the equity method to account for this investment and began accounting for the remaining units as an investment in available-for-sale equity securities.  For the period January 1, 2012 to January 18, 2012, we recorded an estimated $2.4 million of equity earnings from Energy Transfer

 
23

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

Equity, which is presented as a component of “Operating income.”  Following the January 18 transaction, we sold an additional 3,569,232 Energy Transfer Equity common units through March 31, which generated cash proceeds of approximately $150.8 million and aggregate gains on these sales of $25.8 million.  Gains on the first quarter of 2012 sales are presented as a component of “Other income.”  Proceeds from these sales were used for general company purposes, including funding capital expenditures.

At March 31, 2012, we owned 2,971,646 common units of Energy Transfer Equity, which represented approximately 1.3% of its common units outstanding on April 3, 2012.  The $119.8 million carrying value of these available-for-sale equity securities is a component of “Prepaid and other current assets” as presented on our Unaudited Condensed Consolidated Balance Sheet at March 31, 2012.   Accumulated other comprehensive income (loss) at March 31, 2012 includes $15.8 million of unrealized gains related to these available-for-sale equity securities.  We sold the remainder of our investment in Energy Transfer Equity in April 2012.

The following table presents our equity in income (loss) of unconsolidated affiliates by business segment for the periods presented:
 
   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
NGL Pipelines & Services
  $ 5.2     $ 5.9  
Onshore Natural Gas Pipelines & Services
    1.4       1.2  
Onshore Crude Oil Pipelines & Services
    0.5       (0.5 )
Offshore Pipelines & Services
    6.9       8.3  
Petrochemical & Refined Products Services
    (6.5 )     (5.0 )
Other Investments (1)
    2.4       6.3  
Total
  $ 9.9     $ 16.2  
   
(1)   With respect to the first quarter of 2012, amount presented reflects our estimated equity in the income of Energy Transfer Equity from January 1, 2012 to January 18, 2012.
 

The following table presents unamortized excess cost amounts by business segment at the dates indicated:

   
March 31,
2012
   
December 31,
2011
 
NGL Pipelines & Services
  $ 24.5     $ 24.7  
Onshore Crude Oil Pipelines & Services
    19.0       19.2  
Offshore Pipelines & Services
    14.5       14.8  
Petrochemical & Refined Products Services
    2.8       2.9  
Other Investments (1)
    --       1,119.0  
Total
  $ 60.8     $ 1,180.6  
                 
(1)   On January 18, 2012, we discontinued using the equity method to account for our investment in Energy Transfer Equity common units and began accounting for them as available-for-sale equity securities. As a result, we no longer have any excess cost amounts associated with this investment.
 











 
24

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

The following table presents our amortization of excess cost amounts by business segment for the periods presented:

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
NGL Pipelines & Services
  $ 0.2     $ 0.3  
Onshore Crude Oil Pipelines & Services
    0.2       0.2  
Offshore Pipelines & Services
    0.3       0.3  
Petrochemical & Refined Products Services
    0.1       --  
Other Investments (1)
    0.3       9.1  
Total
  $ 1.1     $ 9.9  
                 
(1)   Reflects amortization of excess cost amounts related to our investment in Energy Transfer Equity through January 18, 2012. We ceased using the equity method to account for this investment on January 18, 2012.
 

In April 2012, we, along with Anadarko Petroleum Corporation and DCP Midstream, LLC formed a new joint venture, Front Range Pipeline LLC (“Front Range”), to design and construct a new NGL pipeline that will originate in the Denver-Julesburg Basin (the “DJ Basin”) in Weld County, Colorado and extend approximately 435 miles to Skellytown in Carson County, Texas.   Each party holds a one-third ownership interest in the joint venture.  The Front Range Pipeline, with connections to our Mid-America Pipeline System and the Texas Express Pipeline, is expected to provide producers in the DJ Basin with access to the Gulf Coast, the largest NGL market in the U.S.  Depending on shipper interest in a binding open commitment period that commenced in April 2012, initial capacity on the Front Range Pipeline is expected to be approximately 150 MBPD, which can be readily expanded to approximately 230 MBPD.  We will construct and operate the pipeline, which is expected to begin service in the fourth quarter of 2013.

Summarized Income Statement Information of Unconsolidated Affiliates

The following table presents unaudited income statement information (on a 100% basis) of our unconsolidated affiliates, aggregated by the business segments to which they relate, for the periods presented:

   
Summarized Income Statement Information for the Three Months Ended
 
   
March 31, 2012
   
March 31, 2011
 
         
Operating
   
Net
         
Operating
   
Net
 
   
Revenues
   
Income (Loss)
   
Income (Loss)
   
Revenues
   
Income (Loss)
   
Income (Loss)
 
NGL Pipelines & Services
  $ 110.9     $ 27.0     $ 27.0     $ 100.1     $ 23.4     $ 23.4  
Onshore Natural Gas Pipelines & Services
    30.9       2.6       2.6       35.5       2.6       2.6  
Onshore Crude Oil Pipelines & Services
    12.3       0.8       0.8       11.2       0.5       0.5  
Offshore Pipelines & Services
    41.1       19.1       18.4       46.3       18.9       18.7  
Petrochemical & Refined Products Services
    5.4       (9.4 )     (11.4 )     10.1       (7.0 )     (9.2 )
Other Investments (1)
    --       --       --       1,989.1       364.2       88.6  
(1)   On January 18, 2012, we discontinued using the equity method to account for our investment in Energy Transfer Equity common units. As such, income statement data for Energy Transfer Equity is not presented for the three months ended March 31, 2012. For the three months ended March 31, 2011, net income for Energy Transfer Equity represents net income attributable to their partners.
 

The credit agreements of Poseidon and Centennial restrict their ability to pay cash dividends if a default or event of default (as defined in each credit agreement) has occurred and is continuing at the time such payments are scheduled to be paid.  These businesses were in compliance with the terms of their credit agreements at March 31, 2012.







 
25

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

Note 8.   Intangible Assets and Goodwill

Identifiable Intangible Assets

The following table summarizes our intangible assets by business segment at the dates indicated:

   
March 31, 2012
   
December 31, 2011
 
   
Gross
Value
   
Accum.
Amort.
   
Carrying
Value
   
Gross
Value
   
Accum.
Amort.
   
Carrying
Value
 
NGL Pipelines & Services:
                                   
Customer relationship intangibles
  $ 340.8     $ (133.0 )   $ 207.8     $ 340.8     $ (128.2 )   $ 212.6  
Contract-based intangibles
    284.7       (142.4 )     142.3       298.4       (169.7 )     128.7  
Segment total
    625.5       (275.4 )     350.1       639.2       (297.9 )     341.3  
Onshore Natural Gas Pipelines & Services:
                                               
Customer relationship intangibles
    1,163.6       (220.2 )     943.4       1,163.6       (209.7 )     953.9  
Contract-based intangibles
    466.1       (296.2 )     169.9       464.8       (290.9 )     173.9  
Segment total
    1,629.7       (516.4 )     1,113.3       1,628.4       (500.6 )     1,127.8  
Onshore Crude Oil Pipelines & Services:
                                               
Customer relationship intangibles
    9.7       (4.3 )     5.4       9.7       (4.1 )     5.6  
Contract-based intangibles
    0.4       (0.2 )     0.2       0.4       (0.2 )     0.2  
Segment total
    10.1       (4.5 )     5.6       10.1       (4.3 )     5.8  
Offshore Pipelines & Services:
                                               
Customer relationship intangibles
    205.8       (131.8 )     74.0       205.8       (129.2 )     76.6  
Contract-based intangibles
    1.2       (0.3 )     0.9       1.2       (0.3 )     0.9  
Segment total
    207.0       (132.1 )     74.9       207.0       (129.5 )     77.5  
Petrochemical & Refined Products Services:
                                               
Customer relationship intangibles
    104.3       (29.6 )     74.7       104.3       (28.4 )     75.9  
Contract-based intangibles
    55.5       (29.9 )     25.6       57.6       (29.7 )     27.9  
Segment total
    159.8       (59.5 )     100.3       161.9       (58.1 )     103.8  
Total all segments
  $ 2,632.1     $ (987.9 )   $ 1,644.2     $ 2,646.6     $ (990.4 )   $ 1,656.2  

The following table presents the amortization expense of our intangible assets by business segment for the periods presented:

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
NGL Pipelines & Services
  $ 10.2     $ 10.4  
Onshore Natural Gas Pipelines & Services
    15.8       19.9  
Onshore Crude Oil Pipelines & Services
    0.2       0.1  
Offshore Pipelines & Services
    2.6       3.0  
Petrochemical & Refined Products Services
    3.5       4.3  
Total
  $ 32.3     $ 37.7  

The following table presents forecasted amortization expense associated with existing intangible assets for the years presented:

Remainder
of 2012
   
2013
   
2014
   
2015
   
2016
 
$ 89.8     $ 110.7     $ 107.0     $ 106.5     $ 107.6  

Goodwill

Goodwill represents the excess of the purchase price of an acquired business over the amounts assigned to assets acquired and liabilities assumed in the transaction.  There have been no changes to our goodwill amounts since those reported in our 2011 Form 10-K.



 
26

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

Note 9.   Debt Obligations

The following table presents our consolidated debt obligations (arranged by company and maturity date) at the dates indicated:

   
March 31,
2012
   
December 31,
2011
 
EPO senior debt obligations:
           
Senior Notes S, 7.625% fixed-rate, due February 2012
  $ --     $ 490.5  
Senior Notes P, 4.60% fixed-rate, due August 2012
    500.0       500.0  
Senior Notes C, 6.375% fixed-rate, due February 2013
    350.0       350.0  
Senior Notes T, 6.125% fixed-rate, due February 2013
    182.5       182.5  
Senior Notes M, 5.65% fixed-rate, due April 2013
    400.0       400.0  
Senior Notes U, 5.90% fixed-rate, due April 2013
    237.6       237.6  
Senior Notes O, 9.75% fixed-rate, due January 2014
    500.0       500.0  
Senior Notes G, 5.60% fixed-rate, due October 2014
    650.0       650.0  
Senior Notes I, 5.00% fixed-rate, due March 2015
    250.0       250.0  
Senior Notes X, 3.70% fixed-rate, due June 2015
    400.0       400.0  
Senior Notes AA, 3.20% fixed-rate, due February 2016
    750.0       750.0  
$3.5 Billion Multi-Year Revolving Credit Facility, variable-rate, due September 2016
    --       150.0  
Senior Notes L, 6.30% fixed-rate, due September 2017
    800.0       800.0  
Senior Notes V, 6.65% fixed-rate, due April 2018
    349.7       349.7  
Senior Notes N, 6.50% fixed-rate, due January 2019
    700.0       700.0  
Senior Notes Q, 5.25% fixed-rate, due January 2020
    500.0       500.0  
Senior Notes Y, 5.20% fixed-rate, due September 2020
    1,000.0       1,000.0  
Senior Notes CC, 4.05% fixed-rate, due February 2022
    650.0       650.0  
Senior Notes D, 6.875% fixed-rate, due March 2033
    500.0       500.0  
Senior Notes H, 6.65% fixed-rate, due October 2034
    350.0       350.0  
Senior Notes J, 5.75% fixed-rate, due March 2035
    250.0       250.0  
Senior Notes W, 7.55% fixed-rate, due April 2038
    399.6       399.6  
Senior Notes R, 6.125% fixed-rate, due October 2039
    600.0       600.0  
Senior Notes Z, 6.45% fixed-rate, due September 2040
    600.0       600.0  
Senior Notes BB, 5.95% fixed-rate, due February 2041
    750.0       750.0  
Senior Notes DD, 5.70% fixed-rate, due February 2042
    600.0       600.0  
Senior Notes EE, 4.85% fixed-rate, due August 2042
    750.0       --  
TEPPCO senior debt obligations:
               
TEPPCO Senior Notes, 7.625% fixed-rate, due February 2012
    --       9.5  
TEPPCO Senior Notes, 6.125% fixed-rate, due February 2013
    17.5       17.5  
TEPPCO Senior Notes, 5.90% fixed-rate, due April 2013
    12.4       12.4  
TEPPCO Senior Notes, 6.65% fixed-rate, due April 2018
    0.3       0.3  
TEPPCO Senior Notes, 7.55% fixed-rate, due April 2038
    0.4       0.4  
Total principal amount of senior debt obligations
    13,050.0       12,950.0  
EPO Junior Subordinated Notes A, fixed/variable-rate, due August 2066
    550.0       550.0  
EPO Junior Subordinated Notes C, fixed/variable-rate, due June 2067
    285.8       285.8  
EPO Junior Subordinated Notes B, fixed/variable-rate, due January 2068
    682.7       682.7  
TEPPCO Junior Subordinated Notes, fixed/variable-rate, due June 2067
    14.2       14.2  
Total principal amount of senior and junior debt obligations
    14,582.7       14,482.7  
Other, non-principal amounts:
               
Change in fair value of debt hedged in fair value hedging relationship (1)
    35.2       73.8  
Unamortized discounts, net of premiums
    (33.0 )     (30.0 )
Unamortized deferred net gains related to terminated interest rate swaps (1)
    35.9       2.9  
Total other, non-principal amounts
    38.1       46.7  
Less current maturities of debt (2)
    (1,050.0 )     (500.0 )
Total long-term debt
  $ 13,570.8     $ 14,029.4  
                 
(1)   See Note 4 for information regarding our interest rate hedging activities.
(2)   We expect to refinance the current maturities of our debt obligations prior to their maturity.
 





 
27

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

The following table presents contractually scheduled maturities of our consolidated debt obligations outstanding at March 31, 2012 for the next five years, and in total thereafter:

         
Scheduled Maturities of Debt
 
   
Total
   
Remainder
of 2012
   
2013
   
2014
   
2015
   
2016
   
After
2016
 
Revolving Credit Facility
  $ --     $ --     $ --     $ --     $ --     $ --     $ --  
Senior Notes
    13,050.0       500.0       1,200.0       1,150.0       650.0       750.0       8,800.0  
Junior Subordinated Notes
    1,532.7       --       --       --       --       --       1,532.7  
   Total
  $ 14,582.7     $ 500.0     $ 1,200.0     $ 1,150.0     $ 650.0     $ 750.0     $ 10,332.7  

Apart from that discussed below and routine fluctuations in the balance of our revolving credit facility, there have been no significant changes in the terms or amounts of our consolidated debt obligations since those reported in our 2011 Form 10-K.

Issuance of Senior Notes EE .

In February 2012, EPO issued $750.0 million in principal amount of 30-year unsecured Senior Notes EE at 99.542% of their principal amount.  Senior Notes EE have a fixed interest rate of 4.85% and mature on August 15, 2042.  Enterprise guarantees the notes through an unconditional guarantee on an unsecured and unsubordinated basis.  Net proceeds from the issuance of Senior Notes EE were used to repay outstanding amounts on the maturity of our $490.5 million principal amount of Senior Notes S due February 2012 and our $9.5 million principal amount of TEPPCO Senior Notes due February 2012 and for general company purposes.

Senior Notes EE rank equal with EPO’s existing and future unsecured and unsubordinated indebtedness.  They are senior to any existing and future subordinated indebtedness of EPO.  Senior Notes EE are subject to make-whole redemption rights and were issued under indentures containing certain covenants, which generally restrict EPO’s ability, with certain exceptions, to incur debt secured by liens and engage in sale and leaseback transactions.

Letters of Credit

At March 31, 2012, EPO had $77.5 million in letters of credit outstanding related to its commodity derivative instruments.  These letters of credit do not reduce the amount available for borrowing under EPO’s $3.5 Billion Multi-Year Revolving Credit Facility.

Parent-Subsidiary Guarantor Relationships

Enterprise Products Partners L.P. acts as guarantor of the consolidated debt obligations of EPO with the exception of the remaining debt obligations of TEPPCO.  If EPO were to default on any of its guaranteed debt, Enterprise Products Partners L.P. would be responsible for full and unconditional repayment of that obligation.

Covenants

We were in compliance with the financial covenants of our consolidated debt agreements at March 31, 2012.








 
28

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

Information Regarding Variable Interest Rates Paid

The following table presents the range of interest rates and weighted-average interest rates paid on our consolidated variable-rate debt obligation during the three months ended March 31, 2012:

 
Range of
Interest Rates
Paid
Weighted-Average
Interest Rate
Paid
EPO $3.5 Billion Multi-Year Revolving Credit Facility
1.62% to 1.67%
1.66%


Note 10.   Equity and Distributions

Our partners’ equity reflects the various classes of limited partner interests of Enterprise (e.g., common units (including restricted common units) and Class B units).  The following table summarizes changes in the number of Enterprise’s outstanding units since December 31, 2011:

   
Common
 Units
   
Class B
 Units
   
Treasury
Units
 
Balance, December 31, 2011
    881,620,418       4,520,431       --  
Common units issued in connection with DRIP and EUPP
    691,936       --       --  
Common units issued in connection with equity-based awards
    201,925       --       --  
Restricted common units issued
    1,529,438       --       --  
Forfeiture of restricted common units
    (24,800 )     --       --  
Acquisition of treasury units in connection with equity-based awards
    (187,343 )     --       187,343  
Cancellation of treasury units
    --       --       (187,343 )
Balance, March 31, 2012
    883,831,574       4,520,431       --  

During the three months ended March 31, 2012, 632,298 restricted common units vested and converted to common units.  Of this amount, 187,343 were sold back to us by employees to cover related withholding tax requirements.  We cancelled such treasury units immediately upon acquisition.

We may issue additional equity or debt securities to assist us in meeting our future liquidity and capital spending requirements.  We have filed a universal shelf registration statement (the “2010 Shelf”) with the SEC.  The 2010 Shelf allows Enterprise and EPO (on a standalone basis) to issue an unlimited amount of equity and debt securities, respectively.  EPO utilized the 2010 Shelf to issue its Senior Notes EE in February 2012 (see Note 9).

In March 2012, we filed a registration statement with the SEC authorizing the issuance of up to $1.0 billion in our common units in amounts, at prices and on terms to be determined by market conditions and other factors at the time of our offerings.  As of March 31, 2012, we have not issued any common units under this registration statement.

We have also filed registration statements with the SEC authorizing the issuance of up to an aggregate of 70,000,000 of our common units in connection with a distribution reinvestment plan (“DRIP”).  The DRIP provides unitholders of record and beneficial owners of our common units a voluntary means by which they can increase the number of common units they own by reinvesting the quarterly cash distributions they would otherwise receive into the purchase of additional common units.  After taking into account the number of common units issued under these registration statements through March 31, 2012, Enterprise may issue an additional 25,506,188 common units under its DRIP.  A total of 667,095 common units were issued during the first quarter of 2012 under our DRIP, which generated net cash proceeds of $31.8 million.

Enterprise has a registration statement on file with the SEC authorizing the issuance of 440,879 common units under the Enterprise employee unit purchase plan (“EUPP”).  After taking into account the number of common units issued under this registration statement through March 31, 2012, Enterprise may issue an additional 405,864 common units under its EUPP.  During the first quarter of 2012, Enterprise

 
29

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

issued 24,841 common units under the Enterprise EUPP, which generated net cash proceeds of $1.2 million.

The net cash proceeds received during the first quarter of 2012 from Enterprise’s DRIP and EUPP were used to temporarily reduce borrowings outstanding under EPO’s revolving credit facility and for general company purposes.

Accumulated Other Comprehensive Income (Loss)

Our accumulated other comprehensive income (loss) primarily include the effective portion of the gain or loss on derivative instruments designated and qualified as cash flow hedges.  Amounts accumulated in other comprehensive income (loss) related to cash flow hedges are reclassified into earnings in the same period(s) in which the underlying hedged forecasted transactions affect earnings.  If it becomes probable that a forecasted transaction will not occur, the related net gain or loss in accumulated other comprehensive income (loss) must be immediately reclassified into earnings.

The following table presents the components of accumulated other comprehensive income (loss) as reported on our Unaudited Condensed Consolidated Balance Sheets at the dates indicated:

   
March 31,
2012
   
December 31,
2011
 
Commodity derivative instruments (1)
  $ (59.0 )   $ (21.4 )
Interest rate derivative instruments (1)
    (297.4 )     (329.0 )
Foreign currency translation adjustment (2)
    1.7       1.7  
Pension and postretirement benefit plans
    (2.9 )     (1.7 )
Proportionate share of other comprehensive loss of
     Energy Transfer Equity
    --       (1.0 )
Unrealized gain on investment in available-for-sale equity securities (3)
    15.8       --  
Total accumulated other comprehensive loss in partners’ equity
  $ (341.8 )   $ (351.4 )
                 
(1)   See Note 4 for additional information regarding these components of accumulated other comprehensive income (loss).
(2)   Relates to transactions of our Canadian NGL marketing subsidiary.
(3)   Relates to our investment in Energy Transfer Equity common units, which is accounted for as available-for-sale at March 31, 2012. This investment was accounted for using the equity method at December 31, 2011 through January 18, 2012.
 

Noncontrolling Interests

Prior to the completion of the Duncan Merger, effective September 6, 2011, we accounted for the former owners’ interest in Duncan Energy Partners as noncontrolling interest.  Under this method of presentation, all pre-Duncan Merger revenues and expenses of Duncan Energy Partners are included in net income, and the former owners’ share of the income of Duncan Energy Partners is a component of “Net income attributable to noncontrolling interests” as reflected on our Unaudited Condensed Statements of Consolidated Operations.

Additionally, cash distributions paid to and cash contributions received from the former owners of Duncan Energy Partners are reflected as a component of cash distributions paid to and cash contributions received from noncontrolling interests.

The following table presents additional information regarding noncontrolling interests as presented on our Unaudited Condensed Consolidated Balance Sheets at the dates indicated:

   
March 31,
2012
   
December 31,
2011
 
Joint venture partners (1)
  $ 109.5     $ 105.9  
(1)   Represents third party ownership interests in joint ventures that we consolidate, including Tri-States NGL Pipeline L.L.C., Independence Hub LLC, Rio Grande Pipeline Company and Wilprise Pipeline Company LLC.
 


 
30

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

The following table presents the components of net income attributable to noncontrolling interests as presented on our Unaudited Condensed Statements of Consolidated Operations for the periods presented:

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
Former owners of Duncan Energy Partners
  $ --     $ 7.9  
Joint venture partners
    4.2       5.9  
     Total
  $ 4.2     $ 13.8  

The following table presents cash distributions paid to and cash contributions received from noncontrolling interests as presented on our Unaudited Condensed Statements of Consolidated Cash Flows and Statements of Consolidated Equity for the periods presented:

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
Cash distributions paid to noncontrolling interests:
           
Former owners of Duncan Energy Partners
  $ --     $ 10.9  
Joint venture partners
    6.6       6.3  
Total cash distributions paid to noncontrolling interests
  $ 6.6     $ 17.2  
                 
Cash contributions from noncontrolling interests:
               
Former owners of Duncan Energy Partners
  $ --     $ 0.6  
Joint venture partners
    4.9       0.7  
Total cash contributions from noncontrolling interests
  $ 4.9     $ 1.3  

Cash distributions paid to the limited partners of Duncan Energy Partners (prior to the Duncan Merger) represent the quarterly cash distributions paid to its unitholders.  Similarly, cash contributions received from the limited partners of Duncan Energy Partners (prior to the Duncan Merger) represent net cash proceeds received from the issuance of limited partner units.

Cash Distributions

The following table presents our declared quarterly cash distribution rates with respect to the quarter indicated:

   
Distribution Per Common Unit
 
Record
Date
Payment
Date
2012
         
1st Quarter
  $ 0.6275  
04/30/12
05/09/12

In connection with the merger of Enterprise and Enterprise GP Holdings L.P. during 2010, a privately held affiliate of EPCO agreed to temporarily waive the regular quarterly cash distributions it would otherwise receive from us with respect to a certain number of our common units (the “Designated Units”) it owned over a five-year period after the merger closing date of November 22, 2010.  The number of Designated Units to which the temporary distribution waiver applies is as follows for distributions paid or to be paid, if any, during the following calendar years: 30,610,000 during 2011; 26,130,000 during 2012; 23,700,000 during 2013; 22,560,000 during 2014; and 17,690,000 during 2015.  Accordingly, distributions paid to partners during calendar year 2012 exclude 26,130,000 Designated Units.


Note 11.   Business Segments

We have six reportable business segments: (i) NGL Pipelines & Services; (ii) Onshore Natural Gas Pipelines & Services; (iii) Onshore Crude Oil Pipelines & Services; (iv) Offshore Pipelines & Services; (v) Petrochemical & Refined Products Services; and (vi) Other Investments.  Our business

 
31

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

segments are generally organized and managed according to the type of services rendered (or technologies employed) and products produced and/or sold.

We evaluate segment performance based on the non-GAAP financial measure of gross operating margin.  Gross operating margin (either in total or by individual segment) is an important performance measure of the core profitability of our operations.  This measure forms the basis of our internal financial reporting and is used by our management in deciding how to allocate capital resources among business segments.  We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results.  The GAAP financial measure most directly comparable to total segment gross operating margin is operating income.  Our non-GAAP financial measure of total segment gross operating margin should not be considered an alternative to GAAP operating income.

We define total segment gross operating margin as operating income before: (i) depreciation, amortization and accretion expenses; (ii) non-cash asset impairment charges; (iii) operating lease expenses for which we did not have the payment obligation; (iv) gains and losses from asset sales and related transactions; and (v) general and administrative costs.  Gross operating margin by segment is calculated by subtracting segment operating costs and expenses (net of the adjustments noted above) from segment revenues, with both segment totals before the elimination of intercompany transactions.  In accordance with GAAP, intercompany accounts and transactions are eliminated in the preparation of our consolidated financial statements.  Gross operating margin is exclusive of other income and expense transactions, income taxes, the cumulative effect of changes in accounting principles and extraordinary charges.  Gross operating margin is presented on a 100% basis before any allocation of earnings to noncontrolling interests.

We include equity in income of unconsolidated affiliates in our measurement of segment gross operating margin and operating income.  Equity investments with industry partners are a vital component of our business strategy.  They are a means by which we conduct operations to align our interests with those of customers and/or suppliers.  This method of operation enables us to achieve favorable economies of scale relative to the level of investment and business risk assumed versus what we could accomplish on a standalone basis.  Many of these businesses perform supporting or complementary roles to our other business operations.

The following table shows our measurement of total segment gross operating margin for the periods presented:

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
Revenues
  $ 11,252.5     $ 10,183.7  
Less:   Operating costs and expenses
    (10,467.2 )     (9,537.1 )
Add:    Equity in income of unconsolidated affiliates
    9.9       16.2  
Depreciation, amortization and accretion in operating costs and expenses (1)
    254.6       230.8  
Non-cash asset impairment charges
    5.4       --  
Operating lease expenses paid by EPCO
    --       0.2  
Gains from asset sales and related transactions in operating costs and expenses (2)
    (2.5 )     (18.4 )
Total segment gross operating margin
  $ 1,052.7     $ 875.4  
                 
(1)   Amount is a component of “Depreciation, amortization and accretion” as presented on the Unaudited Condensed Statements of Consolidated Cash Flows.
(2)   Amount is a component of “Gains from asset sales and related transactions” as presented on the Unaudited Condensed Statements of Consolidated Cash Flows.
 







 
32

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

The following table presents a reconciliation of total segment gross operating margin to operating income and further to income before income taxes for the periods presented:

   
For the Three Months
Ended March 31,
 
   
2012
   
2011
 
Total segment gross operating margin
  $ 1,052.7     $ 875.4  
Adjustments to reconcile total segment gross operating margin to operating income:
               
Depreciation, amortization and accretion in operating costs and expenses
    (254.6 )     (230.8 )
Non-cash asset impairment charges
    (5.4 )     --  
Operating lease expenses paid by EPCO
    --       (0.2 )
Gains from asset sales and related transactions in operating costs and expenses
    2.5       18.4  
General and administrative costs
    (46.3 )     (37.9 )
Operating income
    748.9       624.9  
Other expense, net
    (127.8 )     (183.3 )
Income before income taxes
  $ 621.1     $ 441.6  

Information by business segment, together with reconciliations to our consolidated totals, is presented in the following table:

   
Reportable Business Segments
             
         
Onshore
   
Onshore
Crude Oil
         
Petrochemical
 & Refined
                   
   
NGL
   
Natural Gas
       
Offshore
             
Adjustments
       
   
Pipelines
   
Pipelines
   
Pipelines
   
Pipelines
   
Products
   
Other
   
and
   
Consolidated
 
   
& Services
   
& Services
   
& Services
   
& Services
   
Services
   
Investments
   
Eliminations
   
Totals
 
Revenues from third parties:
                                               
  Three months ended March 31, 2012
  $ 4,354.1     $ 804.9     $ 4,473.6     $ 54.4     $ 1,534.7     $ --     $ --     $ 11,221.7  
  Three months ended March 31, 2011
    4,055.4       871.7       3,370.6       60.6       1,575.3       --       --       9,933.6  
Revenues from related parties:
                                                               
  Three months ended March 31, 2012
    0.4       28.7       --       1.7       --       --       --       30.8  
  Three months ended March 31, 2011
    201.4       44.9       --       3.8       --       --       --       250.1  
Intersegment and intrasegment
   revenues:
                                                               
  Three months ended March 31, 2012
    2,818.2       223.7       1,730.9       3.3       439.9       --       (5,216.0 )     --  
  Three months ended March 31, 2011
    3,474.6       270.9       707.1       1.7       473.1       --       (4,927.4 )     --  
Total revenues:
                                                               
  Three months ended March 31, 2012
    7,172.7       1,057.3       6,204.5       59.4       1,974.6       --       (5,216.0 )     11,252.5  
  Three months ended March 31, 2011
    7,731.4       1,187.5       4,077.7       66.1       2,048.4       --       (4,927.4 )     10,183.7  
Equity in income (loss) of
   unconsolidated affiliates:
                                                               
  Three months ended March 31, 2012
    5.2       1.4       0.5       6.9       (6.5 )     2.4       --       9.9  
  Three months ended March 31, 2011
    5.9       1.2       (0.5 )     8.3       (5.0 )     6.3       --       16.2  
Gross operating margin:
                                                               
  Three months ended March 31, 2012
    654.9       206.2       39.3       52.1       97.8       2.4       --       1,052.7  
  Three months ended March 31, 2011
    504.4       159.2       31.8       61.3       112.4       6.3       --       875.4  
Segment assets:
                                                               
  At March 31, 2012
    8,014.1       9,984.9       960.1       2,007.7       3,764.5       --       2,810.8       27,542.1  
  At December 31, 2011
    7,966.4       9,949.6       944.6       2,000.9       3,769.5       1,023.1       2,145.6       27,799.7  
Property, plant and equipment, net:
   (see Note 6)
                                                               
  At March 31, 2012
    7,136.1       8,546.0       478.7       1,399.7       2,539.0       --       2,810.8       22,910.3  
  At December 31, 2011
    7,137.8       8,495.4       456.9       1,416.4       2,539.5       --       2,145.6       22,191.6  
Investments in unconsolidated
   affiliates: (see Note 7)
                                                               
  At March 31, 2012
    186.7       29.3       164.6       451.0       63.7       --       --       895.3  
  At December 31, 2011
    146.1       30.1       170.7       424.9       64.7       1,023.1       --       1,859.6  
Intangible assets, net: (see Note 8)
                                                               
  At March 31, 2012
    350.1       1,113.3       5.6       74.9       100.3       --       --       1,644.2  
  At December 31, 2011
    341.3       1,127.8       5.8       77.5       103.8       --       --       1,656.2  
Goodwill: (see Note 8)
                                                               
  At March 31, 2012
    341.2       296.3       311.2       82.1       1,061.5       --       --       2,092.3  
  At December 31, 2011
    341.2       296.3       311.2       82.1       1,061.5       --       --       2,092.3  


 
33

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

During the first quarter of 2012, we sold 26,331,868 of the common units we owned of Energy Transfer Equity and sold the remaining units in April 2012.  Our reporting for the Other Investments segment ceased on January 18, 2012, when we discontinued using the equity method to account for this investment and began accounting for the remaining units as available-for-sale securities.   See Note 7 for additional information regarding our investment in Energy Transfer Equity and related sales.

The following table provides additional information regarding our consolidated revenues and costs and expenses for the periods presented:

   
For the Three Months
Ended March 31,
 
   
2012
   
2011
 
NGL Pipelines & Services:
           
Sales of NGLs and related products
  $ 4,115.3     $ 4,057.7  
Midstream services
    239.2       199.1  
Total
    4,354.5       4,256.8  
Onshore Natural Gas Pipelines & Services:
               
Sales of natural gas
    572.6       712.7  
Midstream services
    261.0       203.9  
Total
    833.6       916.6  
Onshore Crude Oil Pipelines & Services:
               
Sales of crude oil
    4,447.6       3,348.2  
Midstream services
    26.0       22.4  
Total
    4,473.6       3,370.6  
Offshore Pipelines & Services:
               
Sales of natural gas
    0.1       0.3  
Sales of crude oil
    1.4       3.3  
Midstream services
    54.6       60.8  
Total
    56.1       64.4  
Petrochemical & Refined Products Services:
               
Sales of petrochemicals and refined products
    1,351.2       1,382.8  
Midstream services
    183.5       192.5  
Total
    1,534.7       1,575.3  
Total consolidated revenues
  $ 11,252.5     $ 10,183.7  
                 
Consolidated costs and expenses
               
Operating costs and expenses:
               
Cost of sales related to our marketing activities
  $ 8,688.5     $ 7,930.1  
Depreciation, amortization and accretion
    254.6       230.8  
Gains from asset sales and related transactions
    (2.5 )     (18.4 )
Non-cash asset impairment charges
    5.4       --  
Other operating costs and expenses
    1,521.2       1,394.6  
General and administrative costs
    46.3       37.9  
Total consolidated costs and expenses
  $ 10,513.5     $ 9,575.0  

Changes in our revenues and operating costs and expenses quarter-to-quarter are explained in part by changes in energy commodity prices.  In general, higher energy commodity prices result in an increase in our revenues attributable to the sale of NGLs, natural gas, crude oil, petrochemicals and refined products; however, these higher commodity prices also increase the associated cost of sales as purchase costs rise.






 
34

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

Note 12.   Related Party Transactions

The following table summarizes our related party transactions for the periods presented:

   
For the Three Months
 Ended March 31,
 
   
2012
   
2011
 
Revenues – related parties:
           
Energy Transfer Equity and subsidiaries
  $ --     $ 210.2  
Other unconsolidated affiliates
    30.8       39.9  
Total revenue – related parties
  $ 30.8     $ 250.1  
Costs and expenses – related parties:
               
EPCO and affiliates
  $ 166.0     $ 173.0  
Energy Transfer Equity and subsidiaries
    --       267.4  
Other unconsolidated affiliates
    5.1       10.2  
Total costs and expenses – related parties
  $ 171.1     $ 450.6  

Effective with the first quarter of 2012, we no longer report Energy Transfer Equity and its subsidiaries as related parties.  See Note 7 for information related to the sale of Energy Transfer Equity common units.

The following table summarizes our related party accounts receivable and accounts payable amounts at the dates indicated:

   
March 31,
2012
   
December 31,
2011
 
Accounts receivable - related parties:
           
Energy Transfer Equity and subsidiaries
  $ --     $ 28.4  
Other unconsolidated affiliates
    13.4       15.1  
Total accounts receivable – related parties
  $ 13.4     $ 43.5  
                 
Accounts payable - related parties:
               
EPCO and affiliates
  $ 53.2     $ 108.3  
Energy Transfer Equity and subsidiaries
    --       92.6  
Other unconsolidated affiliates
    26.1       10.7  
Total accounts payable – related parties
  $ 79.3     $ 211.6  

We believe that the terms and provisions of our related party agreements are fair to us; however, such agreements and transactions may not be as favorable to us as we could have obtained from unaffiliated third parties.

Relationship with EPCO and Affiliates

We have an extensive and ongoing relationship with EPCO and its privately held affiliates (including Enterprise GP, our sole general partner), which entities are not a part of our consolidated group of companies.

EPCO is a privately held company controlled collectively by the EPCO Trustees.  At March 31, 2012, EPCO and its affiliates (including Dan Duncan LLC and two Duncan family trusts, the beneficiaries of which include the estate of Mr. Duncan) beneficially owned the following limited partner interests in us:

Number of Units
Percentage of
Outstanding Units
338,930,881 (1)
38.2%
(1)   Includes 4,520,431 Class B units.

Dan Duncan LLC owns 100% of our general partner, Enterprise GP.

 
35

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

We and Enterprise GP are both separate legal entities apart from each other and apart from EPCO and its other affiliates, with assets and liabilities that are separate from those of EPCO and its other affiliates.  EPCO and its privately held affiliates depend on the cash distributions they receive from us and other investments to fund their other operations and to meet their debt obligations.  During the three months ended March 31, 2012 and 2011, we paid EPCO and its privately held affiliates cash distributions of $183.7 million and $172.1 million, respectively.

We have no employees.  All of our operating functions and general and administrative support services are provided by employees of EPCO pursuant to the ASA or by other service providers.  The following table presents a breakout of costs and expenses related to the ASA and other EPCO transactions for the periods presented:

   
For the Three Months
 Ended March 31,
 
   
2012
   
2011
 
Operating costs and expenses
  $ 142.7     $ 147.4  
General and administrative expenses
    23.3       25.6  
 Total costs and expenses
  $ 166.0     $ 173.0  


Note 13.   Earnings Per Unit

Basic earnings per unit is computed by dividing net income or loss attributable to our limited partners by the weighted-average number of our distribution-bearing units outstanding during a period, which excludes the Designated Units (see Note 10) to the extent that such units do not participate in the distributions to be paid with respect to such period.

Diluted earnings per unit is computed by dividing net income or loss attributable to our limited partners by the sum of (i) the weighted-average number of our distribution-bearing units outstanding during a period (as used in determining basic earnings per unit), (ii) the weighted-average number of our Class B units outstanding during a period, (iii) the weighted-average number of Designated Units outstanding during a period and (iv) the number of incremental common units resulting from the assumed exercise of dilutive unit options outstanding during a period (the “incremental option units”).






















 
36

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

The following table presents our calculation of basic and diluted earnings per unit for the periods presented:

   
For the Three Months
Ended March 31,
 
   
2012
   
2011
 
BASIC EARNINGS PER UNIT
           
Numerator:
           
Net income attributable to limited partners
  $ 651.3     $ 420.7  
Denominator:
               
Common units
    852.3       809.9  
Time-vested restricted common units
    4.3       4.0  
Total
    856.6       813.9  
Basic earnings per unit:
               
Net income attributable to limited partners
  $ 0.76     $ 0.52  
DILUTED EARNINGS PER UNIT
               
Numerator:
               
Net income attributable to limited partners
  $ 651.3     $ 420.7  
 Denominator:
               
Common units
    852.3       809.9  
Time-vested restricted common units
    4.3       4.0  
Class B units
    4.5       4.5  
Designated Units
    26.1       30.6  
Incremental option units
    1.5       1.3  
Total
    888.7       850.3  
Diluted earnings per unit:
               
Net income attributable to limited partners
  $ 0.73     $ 0.49  


Note 14.   Commitments and Contingencies

As part of our normal business activities, we may be named as defendants in legal proceedings, including those arising from regulatory and environmental matters.  Although we are insured against various risks to the extent we believe it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to fully indemnify us against losses arising from future legal proceedings. We will vigorously defend the partnership in litigation matters.  

Management has regular quarterly litigation reviews, including updates from legal counsel, to assess the possible need for accounting recognition and disclosure of these contingencies.  We accrue an undiscounted liability for those contingencies where the loss is probable and the amount can be reasonably estimated.  If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum amount in the range is accrued.  

We do not record a contingent liability when the likelihood of loss is probable but the amount cannot be reasonably estimated or when the likelihood of loss is believed to be only reasonably possible or remote.  For contingencies where an unfavorable outcome is reasonably possible and the impact would be material, we disclose the nature of the contingency and, where feasible, an estimate of the possible loss or range of loss.  Based on a consideration of all relevant known facts and circumstances (including the availability of insurance coverage), we do not believe the ultimate outcome of any currently pending lawsuit against us will have a material impact on our financial statements individually or in the aggregate.  

At March 31, 2012 and December 31, 2011, litigation accruals on an undiscounted basis of $16.3 million and $16.5 million, respectively, were recorded in our Unaudited Condensed Consolidated Balance Sheets as a component of “Other current liabilities.”  Our evaluation of litigation contingencies is based on the facts and circumstances of each case and predicting the outcome of these matters involves substantial uncertainties.  In the event the assumptions we use to evaluate these matters change in future periods or new information becomes available, we may be required to record additional accruals.  In an effort to mitigate expenses associated with litigation, we may settle legal proceedings out of court.

 
37

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

Contractual Obligations

Scheduled Maturities of Long-Term Debt .     With the exception of (i) routine fluctuations in the balance of our revolving credit facility, (ii) the issuance of Senior Notes EE in February 2012 and (iii) the repayment of Senior Notes S and TEPPCO Senior Notes in February 2012, there have been no significant changes in our consolidated debt obligations since those reported in our 2011 Form 10-K.  See Note 9 for additional information regarding our consolidated debt obligations.

Operating Lease Obligations .   Consolidated lease and rental expense was $22.4 million and $20.5 million during the three months ended March 31, 2012 and 2011, respectively.  There have been no material changes in our operating lease commitments since those reported in our 2011 Form 10-K.

Purchase Obligations .   There have been no material changes in our consolidated purchase obligations since those reported in our 2011 Form 10-K. 

Other Claims

As part of our normal business activities with joint venture partners and certain customers and suppliers, we occasionally make claims against such parties or have claims made against us as a result of disputes related to contractual agreements or similar arrangements.  As of March 31, 2012, our contingent claims against such parties were approximately $38.3 million and claims against us were approximately $41.4 million.  These matters are in various stages of assessment and the ultimate outcome of such disputes cannot be reasonably estimated at this time; however, in our opinion, the likelihood of a material impact on our Unaudited Condensed Consolidated Financial Statements from such disputes is remote.  Accordingly, accruals for loss contingencies related to these matters have not been reflected in our Unaudited Condensed Consolidated Financial Statements.


Note 15.   Supplemental Cash Flow Information

The following table provides information regarding the net effect of changes in our operating accounts for the periods presented:

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
Decrease (increase) in:
           
Accounts receivable – trade
  $ (25.6 )   $ (81.2 )
Accounts receivable – related parties
    30.0       (8.1 )
Inventories
    135.6       357.2  
Prepaid and other current assets
    14.1       25.8  
Other assets
    (16.4 )     (11.8 )
Increase (decrease) in:
               
Accounts payable – trade
    63.4       28.0  
Accounts payable – related parties
    (132.2 )     5.7  
Accrued product payables
    (195.7 )     (114.8 )
Accrued interest
    (103.6 )     (71.6 )
Other current liabilities
    40.7       (9.3 )
Other liabilities
    (11.4 )     0.1  
Net effect of changes in operating accounts
  $ (201.1 )   $ 120.0  

We incurred liabilities for construction in progress that had not been paid at March 31, 2012 and December 31, 2011 of $273.0 million and $286.9 million, respectively.  Such amounts are not included under the caption “Capital expenditures” on the Unaudited Condensed Statements of Consolidated Cash Flows.

              On certain of our capital projects, third parties are obligated to reimburse us for all or a portion of project expenditures.  The majority of such arrangements are associated with projects related to pipeline

 
38

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

construction and production well tie-ins.  These cash receipts are presented as “Contributions in aid of construction costs” within the investing activities section of our Unaudited Condensed Statements of Consolidated Cash Flows.

Proceeds from asset sales and related transactions increased $914.0 million quarter-to-quarter, primarily from the sale of 26,331,868 common units of Energy Transfer Equity during the first quarter of 2012.  See Note 7 for information regarding our investment in Energy Transfer Equity.

See Note 10 for information regarding cash amounts attributable to noncontrolling interests.


Note 16 .  Condensed Consolidating Financial Information

EPO conducts substantially all of our business. Currently, we have no independent operations and no material assets outside those of EPO.

EPO has issued publicly traded debt securities.  Enterprise Products Partners L.P., as the parent company of EPO, guarantees the debt obligations of EPO, with the exception of the remaining debt obligations of TEPPCO.  If EPO were to default on any of its guaranteed debt, Enterprise Products Partners L.P. would be responsible for full repayment of that obligation.  EPO’s consolidated subsidiaries have no significant restrictions on their ability to pay distributions or make loans to Enterprise Products Partners L.P.  See Note 9 for additional information regarding our consolidated debt obligations.


































 
39

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

Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Balance Sheet
March 31, 2012

   
EPO and Subsidiaries
                   
   
Subsidiary
Issuer
(EPO)
   
Other
Subsidiaries
(Non-guarantor)
   
EPO and
Subsidiaries
Eliminations
and
Adjustments
   
Consolidated
EPO and
Subsidiaries
   
Enterprise
Products
Partners
L.P.
(Guarantor)
   
Eliminations
and
Adjustments
   
Consolidated
Total
 
ASSETS
                                         
Current assets:
                                         
Cash and cash equivalents and restricted cash
  $ 144.1     $ 31.8     $ (5.5 )   $ 170.4     $ --     $ (0.3 )   $ 170.1  
Accounts receivable – trade, net
    1,517.4       3,018.1       (8.8 )     4,526.7       --       --       4,526.7  
Accounts receivable – related parties
    221.4       1,557.2       (1,752.5 )     26.1       (12.7 )     --       13.4  
Inventories
    788.6       147.6       (2.1 )     934.1       --       --       934.1  
Prepaid and other current assets
    147.5       309.1       (4.1 )     452.5       0.4       --       452.9  
Total current assets
    2,819.0       5,063.8       (1,773.0 )     6,109.8       (12.3 )     (0.3 )     6,097.2  
Property, plant and equipment, net
    1,504.0       21,415.8       (9.5 )     22,910.3       --       --       22,910.3  
Investments in unconsolidated affiliates
    26,410.1       7,485.5       (33,000.3 )     895.3       12,291.4       (12,291.4 )     895.3  
Intangible assets, net
    158.5       1,499.1       (13.4 )     1,644.2       --       --       1,644.2  
Goodwill
    458.9       1,633.4       --       2,092.3       --       --       2,092.3  
Other assets
    122.7       128.5       2.1       253.3       0.1       --       253.4  
Total assets
  $ 31,473.2     $ 37,226.1     $ (34,794.1 )   $ 33,905.2     $ 12,279.2     $ (12,291.7 )   $ 33,892.7  
                                                         
LIABILITIES AND EQUITY
                                                       
Current liabilities:
                                                       
Current maturities of debt
  $ 1,032.6     $ 17.4     $ --     $ 1,050.0     $ --     $ --     $ 1,050.0  
Accounts payable – trade
    312.2       565.2       (5.5 )     871.9       0.4       (0.3 )     872.0  
Accounts payable – related parties
    1,683.8       147.8       (1,752.3 )     79.3       --       --       79.3  
Accrued product payables
    1,911.6       2,929.9       (11.1 )     4,830.4       --       --       4,830.4  
Accrued interest
    183.6       0.9       --       184.5       --       --       184.5  
Other current liabilities
    332.6       351.9       (4.1 )     680.4       --       --       680.4  
Total current liabilities
    5,456.4       4,013.1       (1,773.0 )     7,696.5       0.4       (0.3 )     7,696.6  
Long-term debt
    13,543.5       27.3       --       13,570.8       --       --       13,570.8  
Deferred tax liabilities
    5.7       15.1       2.1       22.9       --       (0.9 )     22.0  
Other long-term liabilities
    26.8       188.2       --       215.0       --       --       215.0  
Commitments and contingencies
                                                       
Equity:
                                                       
Partners’ and other owners’ equity
    12,440.8       28,208.1       (28,374.0 )     12,274.9       12,278.8       (12,274.9 )     12,278.8  
Noncontrolling interests
    --       4,774.3       (4,649.2 )     125.1       --       (15.6 )     109.5  
Total equity
    12,440.8       32,982.4       (33,023.2 )     12,400.0       12,278.8       (12,290.5 )     12,388.3  
Total liabilities and equity
  $ 31,473.2     $ 37,226.1     $ (34,794.1 )   $ 33,905.2     $ 12,279.2     $ (12,291.7 )   $ 33,892.7  

















 
40

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

Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Balance Sheet
December 31, 2011

   
EPO and Subsidiaries
                   
   
Subsidiary
Issuer
(EPO)
   
Other
Subsidiaries
(Non-guarantor)
   
EPO and
Subsidiaries
Eliminations
and
Adjustments
   
Consolidated
EPO and
Subsidiaries
   
Enterprise
Products
Partners
L.P.
(Guarantor)
   
Eliminations
and
Adjustments
   
Consolidated
Total
 
ASSETS
                                         
Current assets:
                                         
Cash and cash equivalents and restricted cash
  $ 48.2     $ 21.3     $ (11.2 )   $ 58.3     $ --     $ --     $ 58.3  
Accounts receivable – trade, net
    1,599.4       2,913.2       (10.8 )     4,501.8       --       --       4,501.8  
Accounts receivable – related parties
    141.1       2,155.5       (2,252.0 )     44.6       (1.1 )     --       43.5  
Inventories
    943.6       170.5       (2.4 )     1,111.7       --       --       1,111.7  
Prepaid and other current assets
    216.8       152.6       (16.0 )     353.4       --       --       353.4  
Total current assets
    2,949.1       5,413.1       (2,292.4 )     6,069.8       (1.1 )     --       6,068.7  
Property, plant and equipment, net
    1,477.5       20,723.7       (9.6 )     22,191.6       --       --       22,191.6  
Investments in unconsolidated affiliates
    27,060.0       8,266.7       (33,467.1 )     1,859.6       12,114.5       (12,114.5 )     1,859.6  
Intangible assets, net
    142.4       1,527.4       (13.6 )     1,656.2       --       --       1,656.2  
Goodwill
    458.9       1,633.4       --       2,092.3       --       --       2,092.3  
Other assets
    146.4       107.5       2.8       256.7       --       --       256.7  
Total assets
  $ 32,234.3     $ 37,671.8     $ (35,779.9 )   $ 34,126.2     $ 12,113.4     $ (12,114.5 )   $ 34,125.1  
                                                         
LIABILITIES AND EQUITY
                                                       
Current liabilities:
                                                       
Current maturities of debt
  $ 500.0     $ --     $ --     $ 500.0     $ --     $ --     $ 500.0  
Accounts payable – trade
    205.6       578.6       (11.2 )     773.0       --       --       773.0  
Accounts payable – related parties
    2,407.2       71.9       (2,267.5 )     211.6       --       --       211.6  
Accrued product payables
    2,141.0       2,912.4       (6.3 )     5,047.1       --       --       5,047.1  
Accrued interest
    287.1       1.0       --       288.1       --       --       288.1  
Other current liabilities
    298.1       321.8       (7.4 )     612.5       --       0.1       612.6  
Total current liabilities
    5,839.0       3,885.7       (2,292.4 )     7,432.3       --       0.1       7,432.4  
Long-term debt
    13,975.1       54.3       --       14,029.4       --       --       14,029.4  
Deferred tax liabilities
    22.2       67.1       2.8       92.1       --       (0.9 )     91.2  
Other long-term liabilities
    155.3       197.5       --       352.8       --       --       352.8  
Commitments and contingencies
                                                       
Equity:
                                                       
Partners’ and other owners’ equity
    12,242.7       28,799.8       (28,946.4 )     12,096.1       12,113.4       (12,096.1 )     12,113.4  
Noncontrolling interests
    --       4,667.4       (4,543.9 )     123.5       --       (17.6 )     105.9  
Total equity
    12,242.7       33,467.2       (33,490.3 )     12,219.6       12,113.4       (12,113.7 )     12,219.3  
Total liabilities and equity
  $ 32,234.3     $ 37,671.8     $ (35,779.9 )   $ 34,126.2     $ 12,113.4     $ (12,114.5 )   $ 34,125.1  

















 
41

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

Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2012

   
EPO and Subsidiaries
                   
   
Subsidiary
 Issuer
(EPO)
   
Other Subsidiaries (Non-guarantor)
   
EPO and Subsidiaries Eliminations and Adjustments
   
Consolidated EPO and Subsidiaries
   
Enterprise Products Partners L.P. (Guarantor)
   
Eliminations and Adjustments
   
Consolidated Total
 
Revenues
  $ 7,639.8     $ 7,158.5     $ (3,545.8 )   $ 11,252.5     $ --     $ --     $ 11,252.5  
Costs and expenses:
                                                       
Operating costs and expenses
    7,409.8       6,603.6       (3,546.2 )     10,467.2       --       --       10,467.2  
General and administrative costs
    15.4       30.7       --       46.1       0.2       --       46.3  
Total costs and expenses
    7,425.2       6,634.3       (3,546.2 )     10,513.3       0.2       --       10,513.5  
Equity in income of unconsolidated affiliates
    594.5       78.4       (663.0 )     9.9       651.5       (651.5 )     9.9  
Operating income
    809.1       602.6       (662.6 )     749.1       651.3       (651.5 )     748.9  
Other income (expense):
                                                       
Interest expense
    (185.6 )     (0.9 )     --       (186.5 )     --       --       (186.5 )
Other, net
    0.1       58.6       --       58.7       --       --       58.7  
Total other expense, net
    (185.5 )     57.7       --       (127.8 )     --       --       (127.8 )
Income before income taxes
    623.6       660.3       (662.6 )     621.3       651.3       (651.5 )     621.1  
Benefit from income taxes
    27.0       7.4       --       34.4       --       --       34.4  
Net income
    650.6       667.7       (662.6 )     655.7       651.3       (651.5 )     655.5  
Net loss (income) attributable to noncontrolling
interests
    --       (44.4 )     39.7       (4.7 )     --       0.5       (4.2 )
Net income attributable to entity
  $ 650.6     $ 623.3     $ (622.9 )   $ 651.0     $ 651.3     $ (651.0 )   $ 651.3  

Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Operations
Three Months Ended March 31, 2011

   
EPO and Subsidiaries
                   
   
Subsidiary
Issuer
(EPO)
   
Other Subsidiaries (Non-guarantor)
   
EPO and Subsidiaries Eliminations and Adjustments
   
Consolidated EPO and Subsidiaries
   
Enterprise Products Partners L.P. (Guarantor)
   
Eliminations and Adjustments
   
Consolidated Total
 
Revenues
  $ 8,324.8     $ 6,078.7     $ (4,219.8 )   $ 10,183.7     $ --     $ --     $ 10,183.7  
Costs and expenses:
                                                       
Operating costs and expenses
    8,178.2       5,578.6       (4,219.7 )     9,537.1       --       --       9,537.1  
General and administrative costs
    0.9       33.7       --       34.6       3.3       --       37.9  
Total costs and expenses
    8,179.1       5,612.3       (4,219.7 )     9,571.7       3.3       --       9,575.0  
Equity in income of unconsolidated affiliates
    458.0       31.8       (473.6 )     16.2       424.0       (424.0 )     16.2  
Operating income
    603.7       498.2       (473.7 )     628.2       420.7       (424.0 )     624.9  
Other income (expense):
                                                       
Interest expense
    (179.0 )     (6.7 )     1.9       (183.8 )     --       --       (183.8 )
Other, net
    2.0       0.4       (1.9 )     0.5       --       --       0.5  
Total other expense, net
    (177.0 )     (6.3 )     --       (183.3 )     --       --       (183.3 )
Income before income taxes
    426.7       491.9       (473.7 )     444.9       420.7       (424.0 )     441.6  
Provision for income taxes
    (2.8 )     (4.3 )     --       (7.1 )     --       --       (7.1 )
Net income
    423.9       487.6       (473.7 )     437.8       420.7       (424.0 )     434.5  
Net loss (income) attributable to noncontrolling
interests
    --       (3.4 )     (10.7 )     (14.1 )     --       0.3       (13.8 )
Net income attributable to entity
  $ 423.9     $ 484.2     $ (484.4 )   $ 423.7     $ 420.7     $ (423.7 )   $ 420.7  






 
42

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

Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Comprehensive Income
Three Months Ended March 31, 2012

   
EPO and Subsidiaries
                   
   
Subsidiary
Issuer
(EPO)
   
Other Subsidiaries (Non-guarantor)
   
EPO and Subsidiaries Eliminations and Adjustments
   
Consolidated EPO and Subsidiaries
   
Enterprise Products Partners L.P. (Guarantor)
   
Eliminations and Adjustments
   
Consolidated Total
 
Comprehensive income
  $ 679.8     $ 648.1     $ (662.6 )   $ 665.3     $ 651.3     $ (651.5 )   $ 665.1  
Comprehensive income attributable to
   noncontrolling interests
    --       (44.4 )     39.7       (4.7 )     --       0.5       (4.2 )
Comprehensive income attributable
   to entity
  $ 679.8     $ 603.7     $ (622.9 )   $ 660.6     $ 651.3     $ (651.0 )   $ 660.9  

Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Comprehensive Income
Three Months Ended March 31, 2011

   
EPO and Subsidiaries
                   
   
Subsidiary
Issuer
(EPO)
   
Other Subsidiaries (Non-guarantor)
   
EPO and Subsidiaries Eliminations and Adjustments
   
Consolidated EPO and Subsidiaries
   
Enterprise Products Partners L.P. (Guarantor)
   
Eliminations and Adjustments
   
Consolidated Total
 
Comprehensive income
  $ 435.1     $ 408.8     $ (473.7 )   $ 370.2     $ 420.7     $ (424.0 )   $ 366.9  
Comprehensive income attributable to
   noncontrolling interests
    --       (3.4 )     (10.7 )     (14.1 )     --       0.3       (13.8 )
Comprehensive income attributable
   to entity
  $ 435.1     $ 405.4     $ (484.4 )   $ 356.1     $ 420.7     $ (423.7 )   $ 353.1  




























 
43

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

Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2012

   
EPO and Subsidiaries
                   
   
Subsidiary
 Issuer
(EPO)
   
Other Subsidiaries (Non-guarantor)
   
EPO and Subsidiaries Eliminations and Adjustments
   
Consolidated EPO and Subsidiaries
   
Enterprise Products Partners L.P. (Guarantor)
   
Eliminations and Adjustments
   
Consolidated Total
 
Operating activities:
                                         
Net income
  $ 650.6     $ 667.7     $ (662.6 )   $ 655.7     $ 651.3     $ (651.5 )   $ 655.5  
Reconciliation of net income to net cash flows provided by operating activities:
                                                       
Depreciation, amortization and accretion
    33.0       233.4       (0.3 )     266.1       --       --       266.1  
Equity in income of unconsolidated affiliates
    (594.5 )     (78.4 )     663.0       (9.9 )     (651.5 )     651.5       (9.9 )
Distributions received from unconsolidated affiliates
    10.0       25.8       (8.8 )     27.0       531.6       (531.6 )     27.0  
Net effect of changes in operating accounts and other operating activities
    (489.4 )     335.8       (191.4 )     (345.0 )     11.5       (0.3 )     (333.8 )
Net cash flows provided by operating activities
    (390.3 )     1,184.3       (200.1 )     593.9       542.9       (531.9 )     604.9  
Investing activities:
                                                       
Capital expenditures, net of contributions in aid of construction costs
    (16.0 )     (952.1 )     --       (968.1 )     --       --       (968.1 )
Proceeds from asset sales
    976.1       22.1       --       998.2       --       --       998.2  
Other investing activities
    (38.9 )     (39.2 )     12.5       (65.6 )     (31.8 )     31.8       (65.6 )
Cash used in investing activities
    921.2       (969.2 )     12.5       (35.5 )     (31.8 )     31.8       (35.5 )
Financing activities:
                                                       
Borrowings under debt agreements
    1,396.6       --       --       1,396.6       --       --       1,396.6  
Repayments of debt
    (1,290.5 )     (9.5 )     --       (1,300.0 )     --       --       (1,300.0 )
Cash distributions paid to partners
    (531.6 )     (208.0 )     208.0       (531.6 )     (530.4 )     531.6       (530.4 )
Cash distributions paid to noncontrolling interests
    --       (4.4 )     (2.2 )     (6.6 )     --       --       (6.6 )
Cash contributions from noncontrolling interests
    --       --       4.9       4.9       --       --       4.9  
Net cash proceeds from issuance of common units
    --       --       --       --       29.0       --       29.0  
Cash contributions from owners
    31.8       17.3       (17.3 )     31.8       --       (31.8 )     --  
Other financing activities
    (84.6 )     --       (0.1 )     (84.7 )     (9.7 )     --       (94.4 )
Cash provided by (used in) financing activities
    (478.3 )     (204.6 )     193.3       (489.6 )     (511.1 )     499.8       (500.9 )
Net change in cash and cash equivalents
    52.6       10.5       5.7       68.8       --       (0.3 )     68.5  
Cash and cash equivalents, January 1
    9.7       21.3       (11.2 )     19.8       --       --       19.8  
Cash and cash equivalents, March 31
  $ 62.3     $ 31.8     $ (5.5 )   $ 88.6     $ --     $ (0.3 )   $ 88.3  





















 
44

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

Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2011

   
EPO and Subsidiaries
                   
   
Subsidiary
Issuer
(EPO)
   
Other Subsidiaries (Non-guarantor)
   
EPO and Subsidiaries Eliminations and Adjustments
   
Consolidated EPO and Subsidiaries
   
Enterprise Products Partners L.P. (Guarantor)
   
Eliminations and Adjustments
   
Consolidated Total
 
Operating activities:
                                         
Net income
  $ 423.9     $ 487.6     $ (473.7 )   $ 437.8     $ 420.7     $ (424.0 )   $ 434.5  
Reconciliation of net income to net cash flows provided by operating activities:
                                                       
Depreciation, amortization and accretion
    27.8       213.6       (0.3 )     241.1       --       --       241.1  
Equity in income of unconsolidated affiliates
    (458.0 )     (31.8 )     473.6       (16.2 )     (424.0 )     424.0       (16.2 )
Distributions received from unconsolidated affiliates
    65.5       56.1       (79.1 )     42.5       481.7       (481.7 )     42.5  
Net effect of changes in operating accounts and other operating activities
    455.1       (275.3 )     (85.3 )     94.5       6.3       --       100.8  
Net cash flows provided by operating activities
    514.3       450.2       (164.8 )     799.7       484.7       (481.7 )     802.7  
Investing activities:
                                                       
Capital expenditures, net of contributions in aid of construction costs
    (24.9 )     (685.4 )     --       (710.3 )     --       --       (710.3 )
Other investing activities
    (309.5 )     79.0       214.4       (16.1 )     (22.1 )     22.1       (16.1 )
Cash used in investing activities
    (334.4 )     (606.4 )     214.4       (726.4 )     (22.1 )     22.1       (726.4 )
Financing activities:
                                                       
Borrowings under debt agreements
    2,662.1       159.5       --       2,821.6       --       --       2,821.6  
Repayments of debt
    (2,266.0 )     (50.0 )     --       (2,316.0 )     --       --       (2,316.0 )
Cash distributions paid to partners
    (481.7 )     (132.8 )     132.8       (481.7 )     (479.7 )     481.7       (479.7 )
Cash distributions paid to noncontrolling interests
    --       (41.7 )     24.5       (17.2 )     --       --       (17.2 )
Cash contributions from noncontrolling interests
    --       214.3       (213.0 )     1.3       --       --       1.3  
Net cash proceeds from issuance of common units
    --       --       --       --       21.0       --       21.0  
Cash contributions from owners
    22.1       1.4       (1.4 )     22.1       --       (22.1 )     --  
Other financing activities
    (18.5 )     --       --       (18.5 )     (3.9 )     --       (22.4 )
Cash provided by (used in) financing activities
    (82.0 )     150.7       (57.1 )     11.6       (462.6 )     459.6       8.6  
Net change in cash and cash equivalents
    97.9       (5.5 )     (7.5 )     84.9       --       --       84.9  
Cash and cash equivalents, January 1
    0.5       67.9       (2.9 )     65.5       --       --       65.5  
Cash and cash equivalents, March 31
  $ 98.4     $ 62.4     $ (10.4 )   $ 150.4     $ --     $ --     $ 150.4  



 
 

 
45


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

For the three months ended March 31, 2012 and 2011.

The following information should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and accompanying Notes included in this quarterly report on Form 10-Q and the Audited Consolidated Financial Statements and related Notes, together with our discussion and analysis of financial position and results of operations, included in our annual report on Form 10-K for the year ended December 31, 2011, as filed on February 29, 2012 (the “2011 Form 10-K”).  Our financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”).

Key References Used in this Quarterly Report

Unless the context requires otherwise, references to “we,” “us,” “our,” “Enterprise” or “Enterprise Products Partners” are intended to mean the business and operations of Enterprise Products Partners L.P. and its consolidated subsidiaries.  References to “EPO” mean Enterprise Products Operating LLC, which is a wholly owned subsidiary of Enterprise, and its consolidated subsidiaries, through which Enterprise Products Partners L.P. conducts its business.  Enterprise is managed by its general partner, Enterprise Products Holdings LLC (“Enterprise GP”), which is a wholly owned subsidiary of Dan Duncan LLC, a Delaware limited liability company.

The membership interests of Dan Duncan LLC are owned of record by a voting trust, the current trustees (“DD LLC Trustees”) of which are: (i) Randa Duncan Williams, who is also a director of Enterprise GP; (ii) Dr. Ralph S. Cunningham, who is also a director and the Chairman of Enterprise GP; and (iii) Richard H. Bachmann, who is also a director of Enterprise GP.  Each of the DD LLC Trustees also currently serves as one of the three managers of Dan Duncan LLC.

References to “EPCO” mean Enterprise Products Company and its privately held affiliates.  A majority of the outstanding voting capital stock of EPCO is owned of record by a voting trust, the current trustees (“EPCO Trustees”) of which are:  (i) Ms. Williams, who also serves as Chairman of EPCO; (ii) Dr. Cunningham, who also serves as a Vice Chairman of EPCO; and (iii) Mr. Bachmann, who also serves as the President and Chief Executive Officer (“CEO”) of EPCO.  Each of the EPCO Trustees is also a director of EPCO. 

On April 28, 2011, we, our general partner, EPD MergerCo LLC (“Duncan MergerCo,” a Delaware limited liability company and our wholly owned subsidiary), Duncan Energy Partners L.P. (“Duncan Energy Partners”) and DEP Holdings, LLC (“DEP GP,” the general partner of Duncan Energy Partners) entered into a definitive merger agreement (the “Duncan Merger Agreement”).  On September 7, 2011, the Duncan Merger Agreement was approved by the unitholders of Duncan Energy Partners and the merger of Duncan MergerCo with and into Duncan Energy Partners and related transactions were completed, with Duncan Energy Partners surviving such merger as our wholly owned subsidiary (collectively, we refer to these transactions as the “Duncan Merger”).  Since we historically consolidated Duncan Energy Partners for financial reporting purposes, the Duncan Merger did not change the basis of presentation of our historical financial statements. For additional information regarding the Duncan Merger, see Note 1 of the Notes to Unaudited Condensed Consolidated Financial Statements included under Part I, Item 1 of this quarterly report.

References to “TEPPCO” mean TEPPCO Partners, L.P. prior to its merger with one of our subsidiaries on October 26, 2009.

References to “Energy Transfer Equity” mean the business and operations of Energy Transfer Equity, L.P. and its consolidated subsidiaries. 



As generally used in the energy industry and in this quarterly report, the acronyms below have the following meanings:

/d
 
= per day
MMBbls
 
= million barrels
BBtus
 
= billion British thermal units
MMBPD
 
= million barrels per day
Bcf
 
= billion cubic feet
MMBtus
 
= million British thermal units
BPD
 
= barrels per day
MMcf
 
= million cubic feet
MBPD
 
= thousand barrels per day
TBtus
 
= trillion British thermal units

Cautionary Statement Regarding Forward-Looking Information

This discussion contains various forward-looking statements and information that are based on our beliefs and those of our general partner, as well as assumptions made by us and information currently available to us.  When used in this document, words such as “anticipate,” “project,” “expect,” “plan,” “seek,” “goal,” “estimate,” “forecast,” “intend,” “could,” “should,” “would,” “will,” “believe,” “may,” “potential” and similar expressions and statements regarding our plans and objectives for future operations are intended to identify forward-looking statements.  Although we and our general partner believe that our expectations reflected in such forward-looking statements are reasonable, neither we nor our general partner can give any assurances that such expectations will prove to be correct.  Forward-looking statements are subject to a variety of risks, uncertainties and assumptions as described in more detail under Part I, Item 1A “Risk Factors” included in our 2011 Form 10-K.  If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or expected.  You should not put undue reliance on any forward-looking statements.  The forward-looking statements in this quarterly report speak only as of the date hereof.  Except as required by federal and state securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason.

Overview of Business

We are a publicly traded Delaware limited partnership, the common units of which are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “EPD.”  We were formed in April 1998 to own and operate certain natural gas liquids (“NGLs”) related businesses of EPCO and are now a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products and certain petrochemicals.  Our midstream energy asset network links producers of natural gas, NGLs and crude oil from some of the largest supply basins in the U.S., Canada and the Gulf of Mexico with domestic consumers and international markets.  Our assets include approximately 50,600 miles of onshore and offshore pipelines; 190 MMBbls of storage capacity for NGLs, crude oil, refined products and certain petrochemicals; and 14 Bcf of working natural gas storage capacity. 

Our midstream energy operations include: natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage, and import and export terminaling; crude oil and refined products transportation, storage, and terminaling; offshore production platforms; petrochemical transportation and services; and a marine transportation business that operates primarily on the U.S. inland and Intracoastal Waterway systems and in the Gulf of Mexico.   We have six reportable business segments: (i) NGL Pipelines & Services; (ii) Onshore Natural Gas Pipelines & Services; (iii) Onshore Crude Oil Pipelines & Services; (iv) Offshore Pipelines & Services; (v) Petrochemical & Refined Products Services; and (vi) Other Investments.  For information regarding our business segments, see Note 11 of the Notes to Unaudited Condensed Consolidated Financial Statements included under Part I, Item 1 of this quarterly report.

We conduct substantially all of our business through EPO and are owned 100% by our limited partners from an economic perspective.  Enterprise GP owns a non-economic general partner interest in us.




Significant Recent Developments

The following information highlights significant developments since January 1, 2012 through the date of this filing (May 10, 2012), including (i) information relevant to an understanding of our financial condition, changes in financial condition or results of operation; and (ii) certain unusual or infrequent events or transactions and known trends or uncertainties that have had or that we reasonably expect may have a material impact on our revenues or income from continuing operations.

 
Plans to Construct Front Range Pipeline

In April 2012, we, along with Anadarko Petroleum Corporation and DCP Midstream, LLC formed a new joint venture, Front Range Pipeline LLC, to design and construct a new NGL pipeline that will originate in the Denver-Julesburg Basin (the “DJ Basin”) in Weld County, Colorado and extend approximately 435 miles to Skellytown in Carson County, Texas.   Each party holds a one-third ownership interest in the joint venture. The Front Range Pipeline, with connections to our Mid-America Pipeline System and the Texas Express Pipeline, is expected to provide producers in the DJ Basin with access to the Gulf Coast, the largest NGL market in the U.S.  Depending on shipper interest in a binding open commitment period that commenced in April 2012, initial capacity on the Front Range Pipeline is expected to be approximately 150 MBPD, which can be readily expanded to approximately 230 MBPD.  We will construct and operate the pipeline, which is expected to begin service in the fourth quarter of 2013.

 
Expansion of Seaway Crude Oil Pipeline

We and Enbridge Inc. (“Enbridge”) are nearing completion of the first phase of the reversal of the Seaway Crude Pipeline System (the “Seaway Pipeline”), which will provide 150 MBPD of southbound takeaway capacity from the Cushing, Oklahoma hub to the Gulf Coast as early as May 17, 2012.  Following pump station additions and modifications, which are expected to be completed by the first quarter of 2013, throughput capacity on the Seaway Pipeline would increase to 400 MBPD, assuming a mix of light and heavy grades of crude oil.

In March 2012, we and Enbridge announced that we had secured capacity commitments from shippers to proceed with an expansion of the Seaway Pipeline.  During the supplemental binding open commitment period, additional commitments were made with terms ranging from five to 20 years that support construction of a 512-mile, 30-inch diameter parallel pipeline along the existing route of the Seaway Pipeline, which would add 450 MBPD of throughput capacity to the system and bring total southbound throughput capacity up to 850 MBPD by mid-2014.

The reversed Seaway Pipeline will deliver crude oil from Cushing into the Houston, Texas market by utilizing affiliate and third party pipelines.  Seaway plans to build a 65-mile pipeline that will link its pipeline to our Enterprise Crude Houston (“ECHO”) crude oil storage terminal, which is being constructed southeast of Houston.  Completion of this pipeline segment is expected in 2013.  In addition, Seaway plans to build an 85-mile pipeline from our ECHO facility to the Port Arthur/Beaumont, Texas refining center that would provide shippers access to the region’s heavy oil refining capabilities.  Completion of this pipeline segment is expected in early 2014.

 
Plans to Construct NGL Fractionators Seven and Eight at Our Mont Belvieu Complex

In March 2012, we announced plans to construct two additional NGL fractionators at our Mont Belvieu, Texas complex that would provide us with 150 MBPD of incremental NGL fractionation capacity.  The two new fractionation units (each with 75 MBPD of design capacity) are projected to begin service in the fourth quarter of 2013 and would facilitate the continued growth of NGL production from expanding production basins such as the Eagle Ford Shale in South Texas and various Rocky Mountain production basins.  Once these two new units are constructed and placed in service, the NGL fractionation capacity of our Mont Belvieu units (eight fractionators in total) would be 610 MBPD in the aggregate.



Development of Our ATEX Express Long-Haul Ethane Pipeline

In January 2012, we announced the receipt of sufficient transportation commitments to support development of our 1,230-mile Appalachia to Texas pipeline (the “ATEX Express”) that will transport growing ethane production from the Marcellus and Utica Shale producing areas of Pennsylvania, West Virginia and Ohio to the U.S. Gulf Coast.  Demand for ethane feedstock over more expensive crude oil-based derivatives within the Gulf Coast petrochemical market has reached over 1 MMBPD and continues to increase given current pricing differentials.  Several petrochemical companies have made announcements to modify, expand or build new facilities that would use ethane as a feedstock.  As currently designed, the ATEX Express will have the capacity to transport up to 190 MBPD of ethane from the Appalachian production areas to our storage and distribution assets in southeast Texas.

The project would utilize a combination of new and existing infrastructure.  The northern portion of the ATEX Express involves construction of a pipeline that would originate in Pennsylvania and extend west, then southwest, to Indiana following existing pipeline corridors in order to minimize the footprint of the project.  The southern portion of ATEX Express would utilize a significant portion of our existing Products Pipeline System, which would be reversed to accommodate southbound delivery of ethane to the U.S. Gulf Coast.  At the southern terminus of the ATEX Express in Beaumont, we plan to construct a 55-mile pipeline to provide shippers with access to our NGL storage complex at Mont Belvieu, which would provide them with direct and indirect access to every ethylene plant in the U.S.   We expect that the ATEX Express will begin commercial operations in the first quarter of 2014.

Plans to Construct a Crude Oil Pipeline in the Gulf of Mexico with Genesis

In January 2012, we announced the execution of crude oil transportation agreements with a consortium of six Gulf of Mexico producers that will provide the necessary support for construction of a crude oil gathering pipeline serving the Lucius oil and gas field located in the southern Keathley Canyon area of the deepwater central Gulf of Mexico.  The pipeline will be constructed and owned by Southeast Keathley Canyon Pipeline Company, L.L.C. (“SEKCO”), which is a 50/50 joint venture owned by us and Genesis Energy, L.P. (“Genesis”).  We will serve as construction manager and operator of the new deepwater pipeline (the “SEKCO Oil Pipeline”).  The SEKCO Oil Pipeline is expected to begin service by mid-2014.

Sales of Energy Transfer Equity Common Units

At December 31, 2011, we owned 29,303,514 common units of Energy Transfer Equity.  On January 18, 2012, we sold 22,762,636 of these common units in a private transaction, which generated cash proceeds of approximately $825.1 million and a gain on the sale of $27.5 million.  Following the January 18 transaction, we sold an additional 3,569,232 Energy Transfer Equity common units through March 31, which generated cash proceeds of approximately $150.8 million and aggregate gains on these sales of $25.8 million.  Proceeds from these sales were used for general company purposes, including funding capital expenditures.

Following completion of the January 18 transaction, our ownership percentage in Energy Transfer Equity was below 3% and we discontinued using the equity method to account for this investment and began accounting for the remaining units as an investment in available-for-sale equity securities.  At March 31, 2012, we owned 2,971,646 common units of Energy Transfer Equity, which represented approximately 1.3% of its common units outstanding on April 3, 2012.  We sold the remainder of our investment in Energy Transfer Equity in April 2012.   See Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements under Part I, Item 1 of this quarterly report for information regarding our investment in Energy Transfer Equity and related sales.






Results of Operations

The following table summarizes the key components of our results of operations for the periods presented (dollars in millions):

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
Revenues
  $ 11,252.5     $ 10,183.7  
Operating costs and expenses
    10,467.2       9,537.1  
General and administrative costs
    46.3       37.9  
Equity in income of unconsolidated affiliates
    9.9       16.2  
Operating income
    748.9       624.9  
Interest expense
    186.5       183.8  
Benefit from (provision for) income taxes
    34.4       (7.1 )
Net income
    655.5       434.5  
Net income attributable to noncontrolling interests
    4.2       13.8  
Net income attributable to limited partners
    651.3       420.7  

We evaluate segment performance based on the non-GAAP financial measure of gross operating margin.  Gross operating margin (either in total or by individual segment) is an important performance measure of the core profitability of our operations.  This measure forms the basis of our internal financial reporting and is used by our management in deciding how to allocate capital resources among business segments.  We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results.  The GAAP financial measure most directly comparable to total segment gross operating margin is operating income.  Our non-GAAP financial measure of total segment gross operating margin should not be considered an alternative to GAAP operating income.

Our non-GAAP gross operating margin by business segment and in total is as follows for the periods presented (dollars in millions):

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
NGL Pipelines & Services
  $ 654.9     $ 504.4  
Onshore Natural Gas Pipelines & Services
    206.2       159.2  
Onshore Crude Oil  Pipelines & Services
    39.3       31.8  
Offshore Pipelines & Services
    52.1       61.3  
Petrochemical & Refined Products Services
    97.8       112.4  
Other Investments (1)
    2.4       6.3  
Total segment gross operating margin
  $ 1,052.7     $ 875.4  
                 
(1)   Represents the equity earnings we recorded from our investment in Energy Transfer Equity. Our reporting for this segment ceased on January 18, 2012 when we stopped using the equity method to account for this investment. See Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements included under Part I, Item 1 of this quarterly report for additional information regarding our investment in Energy Transfer Equity.
 













The following table presents a reconciliation of total segment gross operating margin to GAAP operating income and further to income before income taxes for the periods indicated (dollars in millions):

   
For the Three Months
Ended March 31,
 
   
2012
   
2011
 
Total segment gross operating margin
  $ 1,052.7     $ 875.4  
Adjustments to reconcile total segment gross operating margin to operating income:
               
Depreciation, amortization and accretion in operating costs and expenses
    (254.6 )     (230.8 )
Non-cash asset impairment charges
    (5.4 )     --  
Operating lease expenses paid by EPCO
    --       (0.2 )
Gains from asset sales and related transactions in operating costs and expenses
    2.5       18.4  
General and administrative costs
    (46.3 )     (37.9 )
Operating income
    748.9       624.9  
Other expense, net
    (127.8 )     (183.3 )
Income before income taxes
  $ 621.1     $ 441.6  

The following table summarizes each business segment’s contribution to revenues (net of eliminations and adjustments) for the periods presented (dollars in millions):

   
For the Three Months
Ended March 31,
 
   
2012
   
2011
 
NGL Pipelines & Services:
           
Sales of NGLs and related products
  $ 4,115.3     $ 4,057.7  
Midstream services
    239.2       199.1  
Total
    4,354.5       4,256.8  
Onshore Natural Gas Pipelines & Services:
               
Sales of natural gas
    572.6       712.7  
Midstream services
    261.0       203.9  
Total
    833.6       916.6  
Onshore Crude Oil Pipelines & Services:
               
Sales of crude oil
    4,447.6       3,348.2  
Midstream services
    26.0       22.4  
Total
    4,473.6       3,370.6  
Offshore Pipelines & Services:
               
Sales of natural gas
    0.1       0.3  
Sales of crude oil
    1.4       3.3  
Midstream services
    54.6       60.8  
Total
    56.1       64.4  
Petrochemical & Refined Products Services:
               
Sales of petrochemicals and refined products
    1,351.2       1,382.8  
Midstream services
    183.5       192.5  
Total
    1,534.7       1,575.3  
Total consolidated revenues
  $ 11,252.5     $ 10,183.7  













Selected Price and Volumetric Data

The following table presents selected annual and quarterly industry index prices for natural gas, crude oil and selected NGL and petrochemical products for the periods presented:

                                       
Polymer
   
Refinery
       
   
Natural
               
Normal
         
Natural
   
Grade
   
Grade
       
   
Gas,
   
Ethane,
   
Propane,
   
Butane,
   
Isobutane,
   
Gasoline,
   
Propylene,
   
Propylene,
   
Crude Oil,
 
   
$/MMBtu
   
$/gallon
   
$/gallon
   
$/gallon
   
$/gallon
   
$/gallon
   
$/pound
   
$/pound
   
$/barrel
 
    (1)     (2)     (2)     (2)     (2)     (2)     (3)     (3)     (4)  
2011
                                                                       
1st Quarter
  $ 4.11     $ 0.66     $ 1.37     $ 1.75     $ 1.85     $ 2.27     $ 0.76     $ 0.68     $ 94.10  
2nd Quarter
  $ 4.32     $ 0.78     $ 1.49     $ 1.87     $ 2.02     $ 2.48     $ 0.89     $ 0.79     $ 102.56  
3rd Quarter
  $ 4.20     $ 0.78     $ 1.54     $ 1.88     $ 2.09     $ 2.37     $ 0.78     $ 0.67     $ 89.76  
4th Quarter
  $ 3.54     $ 0.86     $ 1.44     $ 1.89     $ 2.26     $ 2.24     $ 0.59     $ 0.44     $ 94.06  
2011 Averages
  $ 4.04     $ 0.77     $ 1.46     $ 1.85     $ 2.06     $ 2.34     $ 0.76     $ 0.64     $ 95.12  
                                                                         
2012
                                                                       
1st Quarter
  $ 2.72     $ 0.56     $ 1.26     $ 1.93     $ 2.04     $ 2.39     $ 0.69     $ 0.60     $ 102.93  
                   
(1)   Natural gas prices are based on Henry-Hub I-FERC commercial index prices.
(2)   NGL prices for ethane, propane, normal butane, isobutane and natural gasoline are based on Mont Belvieu Non-TET commercial index prices as reported by Oil Price Information Service.
(3)   Polymer-grade propylene prices represent average contract pricing for such product as reported by Chemical Market Associates, Inc. (“CMAI”). Refinery grade propylene prices represent weighted-average spot prices for such product as reported by CMAI.
(4)   Crude oil prices are based on commercial index prices for West Texas Intermediate as measured on the New York Mercantile Exchange (“NYMEX”).
 
































The following table presents our significant average throughput, production and processing volumetric data for the periods presented.  These statistics are reported on a net basis, taking into account our ownership interests in certain joint ventures, and reflect the periods in which we owned an interest in such operations.  These statistics reflect volumes for newly constructed assets from the dates such assets were placed into service and for recently purchased assets from the date of acquisition.

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
NGL Pipelines & Services, net:
           
NGL transportation volumes (MBPD)
    2,340       2,366  
NGL fractionation volumes (MBPD)
    623       549  
Equity NGL production (MBPD)   (1)
    112       119  
Fee-based natural gas processing (MMcf/d) (2)
    4,134       3,698  
Onshore Natural Gas Pipelines & Services, net:
               
Natural gas transportation volumes (BBtus/d)
    13,081       11,678  
Onshore Crude Oil Pipelines & Services, net:
               
Crude oil transportation volumes (MBPD)
    706       666  
Offshore Pipelines & Services, net:
               
Natural gas transportation volumes (BBtus/d)
    962       1,155  
Crude oil transportation volumes (MBPD)
    288       299  
Platform natural gas processing (MMcf/d)
    356       445  
Platform crude oil processing (MBPD)
    21       16  
Petrochemical & Refined Products Services, net:
               
Butane isomerization volumes (MBPD)
    82       88  
Propylene fractionation volumes (MBPD)
    72       73  
Octane additive and associated plant production volumes (MBPD)
    4       13  
Transportation volumes, primarily refined products
and petrochemicals (MBPD)
    659       743  
Total, net:
               
NGL, crude oil, refined products and petrochemical transportation
volumes (MBPD)
    3,993       4,074  
Natural gas transportation volumes (BBtus/d)
    14,043       12,833  
Equivalent transportation volumes (MBPD)   (3)
    7,689       7,451  
(1)   Represents the NGL volumes we earn and take title to in connection with our processing activities.
(2)   Volumes reported correspond to the revenue streams earned by our gas plants.
(3)   Reflects equivalent energy volumes where 3.8 MMBtus of natural gas are equivalent to one barrel of NGLs.
 

Comparison of Three Months Ended March 31, 2012 with Three Months Ended March 31, 2011

Revenues for the first quarter of 2012 were $11.25 billion compared to $10.18 billion for the first quarter of 2011, a $1.07 billion quarter-to-quarter increase primarily due to a $1.10 billion increase in crude oil sales revenues attributable to higher sales volumes and prices (more than 80% of the increase in crude oil sales revenues is due to higher sales volumes).  Operating costs and expenses were $10.47 billion for the first quarter of 2012 compared to $9.54 billion for the first quarter of 2011, a $930.1 million quarter-to-quarter increase.  Cost of sales related to our marketing activities increased $758.4 million quarter-to-quarter primarily due to higher crude oil sales volumes and prices.
 
Changes in our revenues and operating costs and expenses quarter-to-quarter are explained in part by changes in energy commodity prices.  The weighted-average indicative market price for NGLs was $1.35 per gallon during the first quarter of 2012 versus $1.36 per gallon during the first quarter of 2011. Our determination of the weighted-average indicative market price for NGLs is based on U.S. Gulf Coast prices for such products at Mont Belvieu, Texas, which is the primary industry hub for domestic NGL production.  The market price of natural gas (as measured at Henry Hub in Louisiana) averaged $2.72 per MMBtu during the first quarter of 2012 versus $4.11 per MMBtu during the first quarter of 2011 – a 34% quarter-to-quarter decrease.  The market price of crude oil (as measured on the NYMEX) averaged $102.93 per barrel during the first quarter of 2012 compared to $94.10 per barrel during the first quarter of 2011 – a 9% quarter-to-quarter increase.  See “Selected Price and Volumetric Data” included within this Item 2 for additional historical energy commodity pricing information.


General and administrative costs were $46.3 million for the first quarter of 2012 compared to $37.9 million for the first quarter of 2011.  The $8.4 million quarter-to-quarter increase is primarily due to higher employee compensation, professional services and depreciation expenses for the first quarter of 2012 compared to the first quarter of 2011.

Consolidated interest expense was $186.5 million in the first quarter of 2012 compared to $183.8 million in the first quarter of 2011, a $2.7 million quarter-to-quarter increase.  Although our average debt principal balances increased to $14.5 billion in the first quarter of 2012 from $14.11 billion in the first quarter of 2011, a substantial portion of the costs associated with the new borrowings was capitalized in connection with our capital spending program.  Capitalized interest increased $13.4 million quarter-to-quarter to $30.6 million for the first quarter of 2012 from $17.2 million for the first quarter of 2011.

We recognized $53.3 million of gains during the first quarter of 2012 in connection with our sales of 26,331,868 common units of Energy Transfer Equity.  These gains are a component of “Other, net” as presented on our Unaudited Condensed Statements of Consolidated Operations.  See Note 7 of the Notes to Unaudited Condensed Consolidated Financial Statements under Part I, Item 1 of this quarterly report for information regarding our investment in Energy Transfer Equity and related sales.

We recognized a net income tax benefit of $34.4 million during the first quarter of 2012 compared to a $7.1 million provision for income taxes recognized for the first quarter of 2011.  The $41.5 million quarter-to-quarter change in income taxes is primarily due to a $46.5 million benefit related to the conversion of certain of our subsidiaries to limited liability companies in the first quarter of 2012.

The following information highlights significant quarter-to-quarter variances in gross operating margin by business segment and the primary drivers of these variances:

NGL Pipelines & Services .  Gross operating margin from this business segment was $654.9 million for the first quarter of 2012 compared to $504.4 million for the first quarter of 2011, a $150.5 million quarter-to-quarter increase.  Gross operating margin from our natural gas processing and related NGL marketing business was $421.7 million for the first quarter of 2012 compared to $277.7 million for the first quarter of 2011, a $144.0 million quarter-to-quarter increase.  Gross operating margin from our NGL marketing activities increased $64.8 million quarter-to-quarter due to higher sales margins.  Collectively, gross operating margin from our natural gas processing plants located in southern Louisiana, the Rocky Mountains and Permian Basin increased $72.2 million quarter-to-quarter primarily due to higher natural gas processing margins during the first quarter of 2012 compared to the first quarter of 2011 and a benefit of $20.0 million from a vendor settlement in the first quarter of 2012.

Gross operating margin from our NGL pipelines and related storage business was $168.4 million for the first quarter of 2012 compared to $179.9 million for the first quarter of 2011, an $11.5 million quarter-to-quarter decrease.  Gross operating margin from our Dixie Pipeline and related NGL terminals decreased $8.5 million quarter-to-quarter primarily due to higher pipeline integrity expenses during the first quarter of 2012 and a 52 MBPD decrease in transportation volumes attributable to warmer weather and project-related downtime.  Gross operating margin from our NGL pipelines in southern Louisiana decreased $7.3 million quarter-to-quarter primarily due to a 107 MBPD decrease in transportation volumes attributable to lower production volumes from the Gulf of Mexico and decreased volumes transported from Mont Belvieu to NGL fractionators in southern Louisiana.  Gross operating margin from our Mid-America Pipeline System, Seminole Pipeline and related NGL terminals increased $14.1 million quarter-to-quarter primarily due to an 84 MBPD increase in transportation volumes and an increase in system-wide tariffs in July 2011.  Collectively, gross operating margin from the remainder of our NGL pipelines and related storage business decreased $9.8 million primarily due to higher operating expenses during the first quarter of 2012 compared to the first quarter of 2011.  Gross operating margin from net operational measurement gains during the first quarter of 2011 that did not reoccur during the first quarter of 2012, higher maintenance expenses and expense accruals for sales and use taxes all contributed to the quarter-to-quarter increase in operating expenses.


Gross operating margin from our NGL fractionation business was $64.8 million for the first quarter of 2012 compared to $46.8 million for the first quarter of 2011, an $18.0 million quarter-to-quarter increase.  Gross operating margin from our Mont Belvieu NGL fractionators increased $14.0 million quarter-to-quarter primarily due to higher NGL fractionation volumes.  During the fourth quarter of 2011, we placed into service a fifth NGL fractionator at our complex in Mont Belvieu, Texas, which added more than 75 MBPD of NGL fractionation capacity at this key industry hub.

Onshore Natural Gas Pipelines & Services .  Gross operating margin from this business segment was $206.2 million for the first quarter of 2012 compared to $159.2 million for the first quarter of 2011, a $47.0 million quarter-to-quarter increase.  Gross operating margin from our Acadian Gas System increased $40.8 million quarter-to-quarter primarily due to revenues earned by our Haynesville Extension pipeline.  The Haynesville Extension of our Acadian Gas System commenced operations in November 2011 and transported 1.18 TBtus/d of natural gas during the first quarter of 2012.  Gross operating margin from our Texas Intrastate System increased $29.0 million quarter-to-quarter primarily due to higher firm capacity reservation revenues and a 428 BBtus/d quarter-to-quarter increase in natural gas throughput volumes.  Increased natural gas production volumes from the Eagle Ford Shale supply basin resulted in stronger demand for our natural gas transportation services during the first quarter of 2012 compared to the first quarter of 2011. Gross operating margin from our natural gas marketing activities decreased $5.8 million quarter-to-quarter primarily due to lower sales margins.  Gross operating margin from our natural gas storage business was $1.8 million for the first quarter of 2012 compared to $13.2 million for the first quarter of 2011, an $11.4 million quarter-to-quarter decrease primarily due to the sale of our Mississippi natural gas storage facilities in December 2011.

Onshore Crude Oil Pipelines & Services .  Gross operating margin from this business segment was $39.3 million for the first quarter of 2012 compared to $31.8 million for the first quarter of 2011, a $7.5 million quarter-to-quarter increase.  Gross operating margin from our crude oil marketing and related activities increased $2.8 million quarter-to-quarter primarily due to higher sales volumes.  Our crude oil marketing activities benefited from increased crude oil production volumes from supply basins in the Eagle Ford Shale, Barnett Shale, West Texas and Rocky Mountains.  Collectively, gross operating margin from our South Texas Crude Oil Pipeline System, West Texas System, Red River System and Basin Pipeline System increased $5.8 million quarter-to-quarter due to a 41 MBPD increase in throughput volumes and higher average fees during the first quarter of 2012.

Offshore Pipelines & Services .  Gross operating margin from this business segment was $52.1 million for the first quarter of 2012 compared to $61.3 million for the first quarter of 2011, a $9.2 million quarter-to-quarter decrease.  Collectively, gross operating margin from our Independence Hub platform and Trail pipeline decreased $8.8 million quarter-to-quarter primarily due to lower throughput volumes and platform demand fee revenues during the first quarter of 2012 compared to the first quarter of 2011.  Producers connected to our Independence Hub platform paid us approximately $54.6 million of demand fees annually for five years beginning in March 2007 until that period expired in March 2012.  Expiration of the contractual demand fees during the first quarter of 2012 resulted in a $4.0 million quarter-to-quarter decrease in gross operating margin.  Net to our interest, natural gas processing volumes on the Independence Hub platform decreased 95 MMcf/d quarter-to-quarter as a result of depletion at existing production wells and the watering-out of certain wells, which volumes have not been replaced by new production.

Petrochemical & Refined Products Services .  Gross operating margin from this business segment was $97.8 million for the first quarter of 2012 compared to $112.4 million for the first quarter of 2011, a $14.6 million quarter-to-quarter decrease.

Gross operating margin from propylene fractionation and related activities was $61.1 million for the first quarter of 2012 compared to $48.8 million for the first quarter of 2011, a $12.3 million quarter-to-quarter increase.  The quarter-to-quarter increase in gross operating margin is primarily due to higher propylene sales volumes and margins during the first quarter of 2012 compared to the first quarter of 2011.


Gross operating margin from butane isomerization was $20.6 million for the first quarter of 2012 compared to $25.7 million for the first quarter of 2011, a $5.1 million quarter-to-quarter decrease.  The quarter-to-quarter decrease in gross operating margin is primarily due to lower isomerization volumes and decreased by-product sales.  The decrease in isomerization volumes was attributable to downtime at our octane enhancement facility during the first quarter of 2012, which reduced the demand for isobutane used as feedstock.

Gross operating margin from octane enhancement and HPIB production was a loss of $13.1 million for the first quarter of 2012 compared to income of $6.1 million for the first quarter of 2011, a $19.2 million quarter-to-quarter decrease.  The quarter-to-quarter decrease in gross operating margin is primarily due to lower volumes and higher operating expenses at our octane enhancement facility in Mont Belvieu, Texas as a result of unscheduled maintenance during the first quarter of 2012.

Gross operating margin from refined products pipelines and related activities was $12.1 million for the first quarter of 2012 compared to $18.3 million for the first quarter of 2011, a $6.2 million quarter-to-quarter decrease.  The quarter-to-quarter decrease in gross operating margin is primarily due to a 59 MBPD quarter-to-quarter decrease in propane and butane volumes delivered to Northeast U.S. markets and a 59 MBPD quarter-to-quarter decrease in refined products volumes delivered to Midwest U.S. markets.  Warmer weather during the first quarter of 2012 compared to the same period in 2011 resulted in lower demand for propane used as heating fuel, while shipments of refined products from the Gulf Coast to Midwest markets decreased as a result of low prices for such products.

Liquidity and Capital Resources

At March 31, 2012, we had $3.59 billion of consolidated liquidity, which is defined as unrestricted cash on hand plus borrowing capacity available under EPO’s $3.5 Billion Multi-Year Revolving Credit Facility.  Based on current market conditions, we believe we will have sufficient liquidity, cash flow from operations and access to capital markets to fund our capital expenditures and working capital needs.

Long-Term Debt

We had approximately $14.58 billion of principal amounts outstanding under consolidated debt agreements at March 31, 2012.  In February 2012, EPO issued $750.0 million in principal amount of 30-year unsecured Senior Notes EE.  These notes were issued at 99.542% of their principal amount, have a fixed-rate of interest of 4.85% and mature on August 15, 2042.  Net proceeds from the issuance of Senior Notes EE were used to temporarily reduce borrowings outstanding under EPO’s $3.5 Billion Multi-Year Revolving Credit Facility (which was used to repay at maturity its $490.5 million principal amount of Senior Notes S due February 2012 and $9.5 million principal amount of TEPPCO Senior Notes due February 2012 prior to the delivery of Senior Notes EE) and for general company purposes.

For additional information regarding our consolidated debt obligations, see Note 9 of the Notes to Unaudited Condensed Consolidated Financial Statements included under Part I, Item 1 of this quarterly report.

Registration Statements

We may issue additional equity or debt securities to assist us in meeting our future liquidity and capital spending requirements.  We have filed a universal shelf registration statement (the “2010 Shelf”) with the SEC.  The 2010 Shelf allows Enterprise and EPO (on a standalone basis) to issue an unlimited amount of equity and debt securities, respectively.  EPO utilized the 2010 Shelf to issue its Senior Notes EE in February 2012.

In March 2012, we filed a registration statement with the SEC authorizing the issuance of up to $1.0 billion in our common units in amounts, at prices and on terms to be determined by market conditions and other factors at the time of our offerings.  As of March 31, 2012, we have not issued any common units under this registration statement.


For information regarding our registration statements, see Note 10 of the Notes to Unaudited Condensed Consolidated Financial Statements included under Part I, Item 1 of this quarterly report.

Credit Ratings

As of May 1, 2012, the investment-grade credit ratings of EPO’s senior unsecured debt securities were: BBB from Standard and Poor’s; Baa2 from Moody’s; and BBB from Fitch Ratings.  EPO’s credit ratings reflect only the view of a rating agency and should not be interpreted as a recommendation to buy, sell or hold any of our securities.  A credit rating can be revised upward or downward or withdrawn at any time by a rating agency, if it determines that circumstances warrant such a change.  A credit rating from one rating agency should be evaluated independently of credit ratings from other rating agencies.

Cash Flows from Operating, Investing and Financing Activities

The following table summarizes our consolidated cash flows from operating, investing and financing activities for the periods indicated (dollars in millions).  For additional information regarding our cash flow amounts, please refer to the Unaudited Condensed Statements of Consolidated Cash Flows included under Part I, Item 1 of this quarterly report.

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
Net cash flows provided by operating activities
  $ 604.9     $ 802.7  
Cash used in investing activities
    35.5       726.4  
Cash provided by (used in) financing activities
    (500.9 )     8.6  

Net cash flows provided by operating activities are largely dependent on earnings from our consolidated business activities.  As a result, these cash flows are exposed to certain risks.  We operate predominantly in the midstream energy industry.  We provide products and services to producers and consumers of natural gas, NGLs, crude oil, refined products and certain petrochemicals.  The products that we process, sell, transport or store are principally used as fuel for residential, agricultural and commercial heating; as feedstocks in petrochemical manufacturing; and in the production of motor gasoline.  Reduced demand for our services or products by industrial customers, whether because of a decline in general economic conditions, reduced demand for the end products made with our products, or increased competition from other service providers or producers due to pricing differences or other reasons, could have a negative impact on our earnings and operating cash flows.  For a more complete discussion of these and other risk factors pertinent to our business, see “Risk Factors” under Part I, Item 1A of our 2011 Form 10-K.

The following information highlights significant quarter-to-quarter variances in our cash flow amounts and the primary drivers of these variances:

Comparison of Three Months Ended March 31, 2012 with Three Months Ended March 31, 2011

Operating Activities .   The $197.8 million quarter-to-quarter decrease in net cash flows provided by operating activities was primarily due to the timing of related cash receipts and disbursements partially offset by increased earnings (e.g., our gross operating margin increased $177.3 million quarter-to-quarter).

Investing Activities .   The $690.9 million decrease in cash used for investing activities was primarily due to proceeds from asset sales, which increased $914.0 million quarter-to-quarter due to the sale of 26,331,868 Energy Transfer Equity common units for $975.9 million during the first quarter of 2012 partially offset by a $257.8 million increase in capital spending for property, plant and equipment primarily for Eagle Ford Shale growth capital projects.


Financing Activities .   Cash used in financing activities was $500.9 million during the first quarter of 2012 compared to cash provided by financing activities of $8.6 million during the first quarter of 2011.  The $509.5 million change was primarily due to the following:

§  
Net borrowings under our consolidated debt agreements decreased $409.0 million quarter-to-quarter.  EPO issued $750.0 million and repaid $500.0 million in principal amount of senior notes during the first quarter of 2012, compared to the issuance of $1.5 billion and repayment of $450.0 million in principal amount of senior notes during the first quarter of 2011.  In addition, net repayments under our consolidated revolving bank credit facilities and term loans decreased approximately $388.5 million quarter-to-quarter.

§  
Monetization of interest rate derivative instruments during the first quarter of 2012 resulted in a net cash outflow of $77.6 million compared to a $5.7 million outflow for similar activities during the first quarter of 2011.  For information regarding our interest rate hedging activities, see Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements included under Part I, Item 1 of this quarterly report.

§  
Cash distributions paid to limited partners increased $50.7 million quarter-to-quarter primarily due to a higher number of distribution-bearing common units outstanding and the associated quarterly distribution rates.

Capital Spending

An integral part of our business strategy involves expansion through growth capital projects, business combinations and investments in joint ventures.  We believe that we are positioned to continue to expand our system of assets through the construction of new facilities and to capitalize on expected increases in natural gas, NGL and crude oil production resulting from development activities in the Rocky Mountains, Midcontinent, Northeast and U.S. Gulf Coast regions, including the Barnett, Eagle Ford, Haynesville, Marcellus and Utica Shale plays and deepwater Gulf of Mexico producing regions.

Although our current focus is on expansion through growth capital projects, management continues to analyze potential business combinations, joint ventures and similar transactions with businesses that operate in complementary markets or geographic regions.  In past years, major oil and gas companies have sold non-strategic assets in the midstream energy sector in which we operate.  We believe this trend will continue and we expect independent oil and natural gas companies to consider similar divestitures.

The following table summarizes our capital spending for the periods presented (dollars in millions):

   
For the Three Months
Ended March 31,
 
   
2012
   
2011
 
Capital spending for property, plant and equipment, net of contributions in aid of construction costs
  $ 968.1     $ 710.3  
Capital spending for investments in unconsolidated affiliates
    50.6       3.8  
Other investing activities
    --       3.6  
Total capital spending
  $ 1,018.7     $ 717.7  

For the three months ended March 31, 2012, we spent $910 million on growth capital projects, of which approximately $449 million was for Eagle Ford Shale projects.

Based on information currently available, we estimate our consolidated capital spending for 2012 will approximate $4.0 billion, which includes estimated expenditures of $3.7 billion for growth capital projects and $0.3 billion for sustaining capital expenditures.  Our forecast of consolidated capital expenditures for 2012 is based on our announced strategic operating and growth plans, which are dependent upon our ability to generate the required funds from either operating cash flows or other means,


including borrowings under debt agreements, issuance of additional debt and equity securities, and potential divestitures.  We may revise our forecast of capital spending due to factors beyond our control, such as weather related issues, changes in supplier prices or adverse economic conditions.  Furthermore, our forecast of capital spending may change as a result of decisions made by management at a later date, which may include the addition of costs associated with unforeseen acquisition opportunities.

Our success in raising capital, including the formation of joint ventures to share costs and risks, continues to be a principal factor in determining how much capital we can invest.  We believe our access to capital resources is sufficient to meet the demands of our current and future growth needs and, although we currently intend to make the forecast capital expenditures noted above, we may adjust the timing and amounts of projected expenditures in response to changes in capital markets.

At March 31, 2012, we had approximately $958.2 million in purchase commitments outstanding that relate to our capital spending for property, plant and equipment.  These commitments primarily relate to construction projects in Texas, including those in the Eagle Ford Shale and at our Mont Belvieu facility.

Pipeline Integrity Costs

Our pipelines are subject to safety programs administered by the U.S. Department of Transportation (“DOT”).  This federal agency has issued safety regulations containing requirements for the development of integrity management programs for hazardous liquid pipelines (e.g., NGL, crude oil, refined products and petrochemical pipelines) and natural gas pipelines.  In general, these regulations require companies to assess the condition of their pipelines in certain high consequence areas (as defined by the regulation) and to perform any necessary repairs.  The following table summarizes our pipeline integrity costs, including those attributable to DOT regulations, for the periods presented (dollars in millions):

   
For the Three Months
 
   
Ended March 31,
 
   
2012
   
2011
 
Expensed
  $ 19.0     $ 7.7  
Capitalized
    12.9       10.7  
    Total
  $ 31.9     $ 18.4  

We expect the cost of our pipeline integrity program, irrespective of whether such costs are capitalized or expensed, to approximate $85.0 million for the remainder of 2012.  The cost of our pipeline integrity program was $117.3 million for the year ended December 31, 2011.

Critical Accounting Policies and Estimates

A discussion of our critical accounting policies and estimates is included in our 2011 Form 10-K.  The following estimates, in our opinion, are subjective in nature, require the exercise of professional judgment and involve complex analysis:

§  
depreciation methods and estimated useful lives of property, plant and equipment;
§  
measuring recoverability of long-lived assets and equity method investments;
§  
amortization methods and estimated useful lives of qualifying intangible assets;
§  
methods we employ to measure the fair value of goodwill;
§  
revenue recognition policies and the use of estimates when recording revenue and expense accruals;
§  
reserves for environmental matters and litigation contingencies; and
§  
natural gas imbalances.

When used in the preparation of our Unaudited Condensed Consolidated Financial Statements, such estimates are based on our current knowledge and understanding of the underlying facts and circumstances and may be revised as a result of actions we take in the future.  Changes in these estimates


will occur as a result of the passage of time and the occurrence of future events.  Subsequent changes in these estimates may have a significant impact on our consolidated financial position, results of operations and cash flows.

Recent Accounting Developments

Accounting standard setting organizations have been very active in recent years.  Recently, they issued new and revised accounting guidance on a number of topics, including balance sheet offsetting.  We do not believe that adoption of this new guidance will have a material impact on our consolidated financial statements.

Other Items

Contractual Obligations

Since January 1, 2012, we (i) issued Senior Notes EE in February 2012 and (ii) repaid our Senior Notes S and $9.5 million principal amount of TEPPCO Senior Notes in February 2012.  See Note 9 of the Notes to Unaudited Condensed Consolidated Financial Statements under Part I, Item 1 of this quarterly report for information regarding our consolidated debt obligations.  There were no material changes in our operating lease or purchase obligations since those reported in our 2011 Form 10-K.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably expected to have a material current or future effect on our financial position, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

Related Party Transactions

For information regarding our related party transactions, see Note 12 of the Notes to Unaudited Condensed Consolidated Financial Statements included under Part I, Item 1 of this quarterly report.


Item 3.    Quantitative and Qualitative Disclosures about Market Risk.

In the normal course of our business operations, we are exposed to certain risks, including changes in interest rates and commodity prices.  In order to manage risks associated with certain anticipated future transactions, we use derivative instruments.  Substantially all of our derivatives are used for non-trading activities.

Our exposures to market risk have not changed materially since those reported under Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” included in our 2011 Form 10-K.

We assess the risk of each of our derivative instrument portfolios using a sensitivity analysis model.  The sensitivity analysis applied to each portfolio measures the potential income or loss (i.e., the change in fair value of the derivative instrument portfolio) based upon a hypothetical 10% movement in the underlying interest rates or quoted market prices (as applicable) at the dates indicated.  In addition to these variables, the fair value of each portfolio is influenced by fluctuations in the notional amounts of the instruments and the discount rates used to determine the present values.  The calculated results of the sensitivity analysis model do not reflect the impact that the same hypothetical price movement would have on the hedged exposures to which they relate.

We routinely review the effectiveness of our derivative instrument portfolios in light of current market conditions.  If changes in market conditions or exposures warrant, the nature and volume of derivative instruments may change depending on the specific exposures being managed.


See Note 4 of the Notes to Unaudited Condensed Consolidated Financial Statements included under Part I, Item 1 of this quarterly report for additional information regarding our derivative instruments and hedging activities.

Interest Rate Derivative Instruments

We may utilize interest rate swaps, forward starting swaps and similar derivative instruments to manage our exposure to changes in interest rates charged on borrowings under certain consolidated debt agreements.  This strategy is a component in controlling our overall cost of capital associated with such borrowings.  The composition of our derivative instrument portfolios may change from period-to-period depending on our hedging requirements.   As presented in the tabular data below, each portfolio’s estimated fair value at a given date is based on a number of factors, including the number and types of derivatives outstanding at that date, the notional value of the swaps and associated interest rates.

The following table shows the effect of hypothetical price movements (a sensitivity analysis) on the estimated fair value (“FV”) of our interest rate swap portfolio at the dates presented (dollars in millions):

     
Interest Rate Swap Portfolio
Aggregate Fair Value at
 
 
Resulting
 
December 31,
   
March 31,
   
April 17,
 
Scenario
Classification
 
2011
   
2012
   
2012
 
FV assuming no change in underlying interest rates
Asset
  $ 67.2     $ 16.8     $ 21.8  
FV assuming 10% increase in underlying interest rates
Asset
    64.4       15.0       20.1  
FV assuming 10% decrease in underlying interest rates
Asset
    70.0       18.8       23.5  

The following table shows the effect of hypothetical price movements (a sensitivity analysis) on the estimated fair value (“FV”) of our forward starting swap portfolio at the dates presented (dollars in millions):

     
Forward Starting Swap Portfolio
Aggregate Fair Value at
 
 
Resulting
 
December 31,
   
March 31,
   
April 17,
 
Scenario
Classification
 
2011
   
2012
   
2012
 
FV assuming no change in underlying interest rates
Liability
  $ (290.7 )   $ (146.5 )   $ (174.6 )
FV assuming 10% increase in underlying interest rates
Liability
    (251.8 )     (115.4 )     (145.6 )
FV assuming 10% decrease in underlying interest rates
Liability
    (330.6 )     (178.5 )     (204.4 )

Due to a decrease in forward London Interbank Offered Rates in 2011, the fair value of our forward starting swap portfolio was a liability of $290.7 million at December 31, 2011.  In connection with the issuance of Senior Notes EE in February 2012, we settled ten forward starting swaps having an aggregate notional value of $500.0 million, resulting in our making cash payments totaling $115.3 million.   The fair value of the remaining forward starting swaps was a liability of $146.5 million at March 31, 2012 and $174.6 million at April 17, 2012.  The $28.1 million increase in the liability between March 31 and April 17 is attributable to further decreases in forward London Interbank Offered Rates during April.

Commodity Derivative Instruments

The prices of natural gas, NGLs, crude oil, refined products and certain petrochemical products are subject to fluctuations in response to changes in supply and demand, market conditions and a variety of additional factors that are beyond our control.  In order to manage such price risks, we enter into commodity derivative instruments such as physical forward contracts, futures contracts, fixed-for-float swaps, basis swaps and options contracts.





Our predominant hedging strategies are: (i) hedging natural gas processing margins; (ii) hedging anticipated future contracted sales of NGLs, refined products and crude oil associated with volumes held in inventory; and (iii) hedging the fair value of natural gas in inventory.  The following information summarizes these hedging strategies:

§  
The objective of our natural gas processing strategy is to hedge an amount of gross margin associated with our natural gas processing activities.  We achieve this objective by using physical and financial instruments to lock in the purchase prices of natural gas consumed as plant thermal reduction (“PTR”) and the sales prices of the related NGL products.  This program consists of (i) the forward sale of a portion of our expected equity NGL production at fixed prices through December 2012, which is achieved through the use of forward physical sales contracts and commodity derivative instruments and (ii) the purchase of commodity derivative instruments having a notional amount based on the volume of natural gas expected to be consumed as PTR in the production of such equity NGL production.

At March 31, 2012, the program had hedged future remaining estimated gross margins (before plant operating expenses) of $591.8 million on 12.2 MMBbls of forecasted NGL sales transactions and equivalent PTR volumes extending through December 2012.  Our estimates of future gross margins are subject to various business risks, including unforeseen outages or declines, counterparty risk, or similar events or developments that are outside of our control.

§  
The objective of our NGL, refined products and crude oil sales hedging program is to hedge the margins of anticipated future sales of inventory by locking in sales prices through the use of forward physical sales contracts and commodity derivative instruments.

§  
The objective of our natural gas inventory hedging program is to hedge the fair value of natural gas currently held in inventory by locking in the sales price of the inventory through the use of commodity derivative instruments.

Certain basis swaps, basis spread options and other derivative instruments not designated as hedging instruments are used to manage market risks associated with anticipated purchases and sales of natural gas necessary to optimize our owned and contractually committed transportation and storage capacity.  There is some uncertainty involved in the timing of these transactions often due to the development of more favorable profit opportunities or when spreads are insufficient to cover variable costs thus reducing the likelihood that the transactions will occur as originally forecasted.  As a result of this timing uncertainty, these derivative instruments do not qualify for hedge accounting even though they are effective at managing the risk exposures of these assets.  The earnings volatility caused by fluctuations in non-cash, mark-to-market earnings cannot be predicted and the impact to earnings could be material.

The following table shows the effect of hypothetical price movements (a sensitivity analysis) on the estimated fair value of our natural gas marketing portfolio at the dates presented (dollars in millions):

     
Portfolio Fair Value at
 
 
Resulting
 
December 31,
   
March 31,
   
April 17,
 
Scenario
Classification
 
2011
   
2012
   
2012
 
FV assuming no change in underlying commodity prices
Asset
  $ 22.2     $ 26.6     $ 27.8  
FV assuming 10% increase in underlying commodity prices
Asset
    14.9       22.0       24.2  
FV assuming 10% decrease in underlying commodity prices
Asset
    29.5       31.3       31.5  









The following table shows the effect of hypothetical price movements (a sensitivity analysis) on the estimated fair value of our NGL, refined products and petrochemical operations portfolio at the dates presented (dollars in millions):

     
Portfolio Fair Value at
 
 
Resulting
 
December 31,
   
March 31,
   
April 17,
 
Scenario
Classification
 
2011
   
2012
   
2012
 
FV assuming no change in underlying commodity prices
Liability
  $ (12.3 )   $ (50.2 )   $ (45.9 )
FV assuming 10% increase in underlying commodity prices
Liability
    (32.2 )     (99.7 )     (97.8 )
FV assuming 10% decrease in underlying commodity prices
Asset (Liability)
    7.6       (0.8 )     6.0  

The following table shows the effect of hypothetical price movements (a sensitivity analysis) on the estimated fair value of our crude oil marketing portfolio at the dates presented (dollars in millions):

     
Portfolio Fair Value at
 
 
Resulting
 
December 31,
   
March 31,
   
April 17,
 
Scenario
Classification
 
2011
   
2012
   
2012
 
FV assuming no change in underlying commodity prices
Liability
  $ (7.6 )   $ (5.9 )   $ (4.5 )
FV assuming 10% increase in underlying commodity prices
Liability
    (10.0 )     (12.5 )     (7.8 )
FV assuming 10% decrease in underlying commodity prices
Asset (Liability)
    (5.0 )     0.7       (1.2 )


Item 4.    Controls and Procedures .

Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, our management carried out an evaluation, with the participation of our general partner’s chief executive officer (Michael A. Creel, who is our principal executive officer) and chief financial officer (W. Randall Fowler, our principal financial officer), of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934.  Based on this evaluation, as of the end of the period covered by this quarterly report, Mr. Creel and Mr. Fowler concluded:

(i)  
that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow for timely decisions regarding required disclosures; and

(ii)  
that our disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the first quarter of 2012, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. 

The required certifications of Mr. Creel and Mr. Fowler under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included as exhibits to this quarterly report (see Exhibits 31 and 32 under Part II, Item 6 of this quarterly report).







PART II .  OTHER INFORMATION

Item 1.   Legal Proceedings .

For information regarding litigation matters, see Note 14, “Commitments and Contingencies,” of the Notes to Unaudited Condensed Consolidated Financial Statements included under Part I, Item 1 of this quarterly report, which is incorporated herein by reference.


Item 1A .   Risk Factors .

Security holders and potential investors in our securities should carefully consider the risk factors set forth in our 2011 Form 10-K, in addition to other information in such annual report.  The risk factors set forth in our 2011 Form 10-K are important factors that could cause our actual results to differ materially from those contained in any written or oral forward-looking statements made by us or on our behalf.


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

The following table summarizes our repurchase activity during the first quarter of 2012:

       
Maximum
     
Total Number of
Number of Units
   
Average
Units Purchased
That May Yet
 
Total Number of
Price Paid
as Part of Publicly
Be Purchased
Period
Units Purchased
per Unit
Announced Plans
Under the Plans
February 2012 (1)
187,343
$51.55
--
--
(1)   Of the 632,298 restricted common units that vested in February 2012 and converted to common units, 187,343 units were sold back to us by employees to cover related withholding tax requirements.


Item 3.   Defaults Upon Senior Securities.

None.


Item 4.    Mine Safety Disclosures .

Not applicable.


Item 5.   Other Information.

None.


Item 6.   Exhibits.
 
Exhibit
Number
Exhibit*
2.1
Merger Agreement, dated as of December 15, 2003, by and among Enterprise Products Partners L.P., Enterprise Products GP, LLC, Enterprise Products Management LLC, GulfTerra Energy Partners, L.P. and GulfTerra Energy Company, L.L.C. (incorporated by reference to Exhibit 2.1 to Form 8-K filed December 15, 2003).
 
 
 
2.2
Amendment No. 1 to Merger Agreement, dated as of August 31, 2004, by and among Enterprise Products Partners L.P., Enterprise Products GP, LLC, Enterprise Products Management LLC, GulfTerra Energy Partners, L.P. and GulfTerra Energy Company, L.L.C. (incorporated by reference to Exhibit 2.1 to Form 8-K filed September 7, 2004).
2.3
Parent Company Agreement, dated as of December 15, 2003, by and among Enterprise Products Partners L.P., Enterprise Products GP, LLC, Enterprise Products GTM, LLC, El Paso Corporation, Sabine River Investors I, L.L.C., Sabine River Investors II, L.L.C., El Paso EPN Investments, L.L.C. and GulfTerra GP Holding Company (incorporated by reference to Exhibit 2.2 to Form 8-K filed December 15, 2003).
2.4
Amendment No. 1 to Parent Company Agreement, dated as of April 19, 2004, by and among Enterprise Products Partners L.P., Enterprise Products GP, LLC, Enterprise Products GTM, LLC, El Paso Corporation, Sabine River Investors I, L.L.C., Sabine River Investors II, L.L.C., El Paso EPN Investments, L.L.C. and GulfTerra GP Holding Company (incorporated by reference to Exhibit 2.1 to Form 8-K filed April 21, 2004).
2.5
Purchase and Sale Agreement (Gas Plants), dated as of December 15, 2003, by and between El Paso Corporation, El Paso Field Services Management, Inc., El Paso Transmission, L.L.C., El Paso Field Services Holding Company and Enterprise Products Operating L.P. (incorporated by reference to Exhibit 2.4 to Form 8-K filed December 15, 2003). 
2.6
Agreement and Plan of Merger, dated as of June 28, 2009, by and among Enterprise Products Partners L.P., Enterprise Products GP, LLC, Enterprise Sub B LLC, TEPPCO Partners, L.P. and Texas Eastern Products Pipeline Company, LLC (incorporated by reference to Exhibit 2.1 to Form 8-K filed June 29, 2009).
2.7
Agreement and Plan of Merger, dated as of June 28, 2009, by and among Enterprise Products Partners L.P., Enterprise Products GP, LLC, Enterprise Sub A LLC, TEPPCO Partners, L.P. and Texas Eastern Products Pipeline Company, LLC (incorporated by reference to Exhibit 2.2 to Form 8-K filed June 29, 2009).
2.8
Agreement and Plan of Merger, dated as of September 3, 2010, by and among Enterprise Products Partners L.P., Enterprise Products GP, LLC, Enterprise ETE LLC, Enterprise GP Holdings L.P. and EPE Holdings, LLC (incorporated by reference to Exhibit 2.1 to Form 8-K filed September 7, 2010).
2.9
Agreement and Plan of Merger, dated as of September 3, 2010, by and among Enterprise Products GP, LLC, Enterprise GP Holdings L.P. and EPE Holdings, LLC (incorporated by reference to Exhibit 2.2 to Form 8-K filed September 7, 2010).
2.10
Contribution Agreement, dated as of September 30, 2010, by and between Enterprise Products Company and Enterprise Products Partners L.P. (incorporated by reference to Exhibit 2.1 to Form 8-K filed October 1, 2010).
2.11
Agreement and Plan of Merger, dated as of April 28, 2011, by and among Enterprise Products Partners L.P., Enterprise Products Holdings LLC, EPD MergerCo LLC, Duncan Energy Partners L.P. and DEP Holdings, LLC (incorporated by reference to Exhibit 2.1 to Form 8-K filed April 29, 2011).
3.1
Certificate of Limited Partnership of Enterprise Products Partners L.P. (incorporated by reference to Exhibit 3.6 to Form 10-Q filed November 9, 2007).
3.2
Certificate of Amendment to Certificate of Limited Partnership of Enterprise Products Partners L.P., filed on November 22, 2010 with the Delaware Secretary of State (incorporated by reference to Exhibit 3.6 to Form 8-K filed November 23, 2010).
3.3
Sixth Amended and Restated Agreement of Limited Partnership of Enterprise Products Partners L.P., dated November 22, 2010 (incorporated by reference to Exhibit 3.2 to Form 8-K filed November 23, 2010).
3.4
Amendment No. 1 to Sixth Amended and Restated Agreement of Limited Partnership of Enterprise Products Partners L.P., dated effective as of August 11, 2011 (incorporated by reference to Exhibit 3.1 to Form 8-K filed August 16, 2011).
3.5
Certificate of Formation of Enterprise Products Holdings LLC (formerly named EPE Holdings, LLC) (incorporated by reference to Exhibit 3.3 to Form S-1/A Registration Statement, Reg. No. 333-124320, filed by Enterprise GP Holdings L.P. on July 22, 2005).
3.6
Certificate of Amendment to Certificate of Formation of Enterprise Products Holdings LLC (formerly named EPE Holdings, LLC), filed on November 22, 2010 with the Delaware Secretary of State (incorporated by reference to Exhibit 3.5 to Form 8-K filed November 23, 2010).
 
 
 
3.7
Fifth Amended and Restated Limited Liability Company Agreement of Enterprise Products Holdings LLC dated effective as of September 7, 2011 (incorporated by reference to Exhibit 3.1 to Form 8-K filed September 8, 2011).
3.8
Company Agreement of Enterprise Products Operating LLC dated June 30, 2007 (incorporated by reference to Exhibit 3.3 to Form 10-Q filed August 8, 2007).
3.9
Certificate of Incorporation of Enterprise Products OLPGP, Inc., dated December 3, 2003 (incorporated by reference to Exhibit 3.5 to Form S-4 Registration Statement, Reg. No. 333-121665, filed December 27, 2004).
3.10
Bylaws of Enterprise Products OLPGP, Inc., dated December 8, 2003 (incorporated by reference to Exhibit 3.6 to Form S-4 Registration Statement, Reg. No. 333-121665, filed December 27, 2004).
4.1
Form of Common Unit certificate (incorporated by reference to Exhibit A to Exhibit 3.1 to Form 8-K filed August 16, 2011).
4.2
Indenture, dated as of March 15, 2000, among Enterprise Products Operating L.P., as Issuer, Enterprise Products Partners L.P., as Guarantor, and First Union National Bank, as Trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed March 10, 2000).
4.3
First Supplemental Indenture, dated as of January 22, 2003, among Enterprise Products Operating L.P., as Issuer, Enterprise Products Partners L.P., as Guarantor, and Wachovia Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to Registration Statement on Form S-4, Reg. No. 333-102776, filed January 28, 2003).
4.4
Second Supplemental Indenture, dated as of February 14, 2003, among Enterprise Products Operating L.P., as Issuer, Enterprise Products Partners L.P., as Guarantor, and Wachovia Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to Form 10-K filed March 31, 2003).
4.5
Third Supplemental Indenture, dated as of June 30, 2007, among Enterprise Products Operating L.P., as Original Issuer, Enterprise Products Partners L.P., as Parent Guarantor, Enterprise Products Operating LLC, as New Issuer, and U.S. Bank National Association, as successor Trustee (incorporated by reference to Exhibit 4.55 to Form 10-Q filed August 8, 2007).
4.6
Indenture, dated as of October 4, 2004, among Enterprise Products Operating L.P., as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed October 6, 2004).
4.7
Third Supplemental Indenture, dated as of October 4, 2004, among Enterprise Products Operating L.P., as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.4 to Form 8-K filed October 6, 2004).
4.8
Fourth Supplemental Indenture, dated as of October 4, 2004, among Enterprise Products Operating L.P., as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.5 to Form 8-K filed October 6, 2004).
4.9
Fifth Supplemental Indenture, dated as of March 2, 2005, among Enterprise Products Operating L.P., as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to Form 8-K filed March 3, 2005).
4.10
Sixth Supplemental Indenture, dated as of March 2, 2005, among Enterprise Products Operating L.P., as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to Form 8-K filed March 3, 2005).
4.11
Eighth Supplemental Indenture, dated as of July 18, 2006, among Enterprise Products Operating L.P., as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to Form 8-K filed July 19, 2006).
4.12
Ninth Supplemental Indenture, dated as of May 24, 2007, among Enterprise Products Operating L.P., as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to Form 8-K filed May 24, 2007).
 
 
 
4.13
Tenth Supplemental Indenture, dated as of June 30, 2007, among Enterprise Products Operating L.P., as Original Issuer, Enterprise Products Partners L.P., as Parent Guarantor, Enterprise Products Operating LLC, as New Issuer, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.54 to Form 10-Q filed August 8, 2007).
4.14
Eleventh Supplemental Indenture, dated as of September 4, 2007, among Enterprise Products Operating LLC, as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to Form 8-K filed September 5, 2007).
4.15
Twelfth Supplemental Indenture, dated as of April 3, 2008, among Enterprise Products Operating LLC, as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to Form 8-K filed April 3, 2008).
4.16
Thirteenth Supplemental Indenture, dated as of April 3, 2008, among Enterprise Products Operating LLC, as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.4 to Form 8-K filed April 3, 2008).
4.17
Fourteenth Supplemental Indenture, dated as of December 8, 2008, among Enterprise Products Operating LLC, as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to Form 8-K filed December 8, 2008).
4.18
Fifteenth Supplemental Indenture, dated as of June 10, 2009, among Enterprise Products Operating LLC, as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to Form 8-K filed June 10, 2009).
4.19
Sixteenth Supplemental Indenture, dated as of October 5, 2009, among Enterprise Products Operating LLC, as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to Form 8-K filed October 5, 2009).
4.20
Seventeenth Supplemental Indenture, dated as of October 27, 2009, among Enterprise Products Operating LLC, as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed October 28, 2009).
4.21
 
Eighteenth Supplemental Indenture, dated as of October 27, 2009, among Enterprise Products Operating LLC, as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to Form 8-K filed October 28, 2009).
4.22
Nineteenth Supplemental Indenture, dated as of May 20, 2010, among Enterprise Products Operating LLC, as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to Form 8-K filed May 20, 2010).
4.23
Twentieth Supplemental Indenture, dated as of January 13, 2011, among Enterprise Products Operating LLC, as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to Form 8-K filed January 13, 2011).
4.24
Twenty-First Supplemental Indenture, dated as of August 24, 2011, among Enterprise Products Operating LLC, as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to Form 8-K filed August 24, 2011).
4.25#
Twenty-Second Supplemental Indenture, dated as of February 15, 2012, among Enterprise Products Operating LLC, as Issuer, Enterprise Products Partners L.P., as Parent Guarantor, and Wells Fargo Bank, National Association, as Trustee.
4.26
Global Note representing $350.0 million principal amount of 6.375% Series B Senior Notes due 2013 with attached Guarantee (incorporated by reference to Exhibit 4.3 to Registration Statement on Form S-4, Reg. No. 333-102776, filed January 28, 2003).
4.27
Global Note representing $499.2 million principal amount of 6.875% Series B Senior Notes due 2033 with attached Guarantee (incorporated by reference to Exhibit 4.5 to Form 10-K filed March 31, 2003).
 
 
 
4.28
Global Notes representing $450.0 million principal amount of 7.50% Senior Notes due 2011 (incorporated by reference to Exhibit 4.1 to Form 8-K filed January 25, 2001).
4.29
Global Note representing $500.0 million principal amount of 5.60% Series B Senior Notes due 2014 with attached Guarantee (incorporated by reference to Exhibit 4.17 to Form S-3 Registration Statement, Reg. No. 333-123150, filed March 4, 2005).
4.30
Global Note representing $150.0 million principal amount of 5.60% Series B Senior Notes due 2014 with attached Guarantee (incorporated by reference to Exhibit 4.18 to Form S-3 Registration Statement, Reg. No. 333-123150, filed March 4, 2005).
4.31
Global Note representing $350.0 million principal amount of 6.65% Series B Senior Notes due 2034 with attached Guarantee (incorporated by reference to Exhibit 4.19 to Form S-3 Registration Statement, Reg. No. 333-123150, filed March 4, 2005).
4.32
Global Note representing $250.0 million principal amount of 5.00% Series B Senior Notes due 2015 with attached Guarantee (incorporated by reference to Exhibit 4.31 to Form 10-Q filed November 4, 2005).
4.33
Global Note representing $250.0 million principal amount of 5.75% Series B Senior Notes due 2035 with attached Guarantee (incorporated by reference to Exhibit 4.32 to Form 10-Q filed November 4, 2005).
4.34
Form of Junior Subordinated Note, including Guarantee (incorporated by reference to Exhibit 4.2 to Form 8-K filed July 19, 2006).
4.35
Global Note representing $800.0 million principal amount of 6.30% Senior Notes due 2017 with attached Guarantee (incorporated by reference to Exhibit 4.38 to Form 10-Q filed November 9, 2007).
4.36
Form of Global Note representing $400.0 million principal amount of 5.65% Senior Notes due 2013 with attached Guarantee (incorporated by reference to Exhibit 4.3 to Form 8-K filed April 3, 2008).
4.37
Form of Global Note representing $700.0 million principal amount of 6.50% Senior Notes due 2019 with attached Guarantee (incorporated by reference to Exhibit 4.4 to Form 8-K filed April 3, 2008).
4.38
Form of Global Note representing $500.0 million principal amount of 9.75% Senior Notes due 2014 with attached Guarantee (incorporated by reference to Exhibit 4.3 to Form 8-K filed December 8, 2008).
4.39
Form of Global Note representing $500.0 million principal amount of 4.60% Senior Notes due 2012 with attached Guarantee (incorporated by reference to Exhibit 4.3 to Form 8-K filed June 10, 2009).
4.40
Form of Global Note representing $500.0 million principal amount of 5.25% Senior Notes due 2020 with attached Guarantee (incorporated by reference to Exhibit 4.3 to Form 8-K filed October 5, 2009).
4.41
Form of Global Note representing $600.0 million principal amount of 6.125% Senior Notes due 2039 with attached Guarantee (incorporated by reference to Exhibit 4.3 to Form 8-K filed October 5, 2009).
4.42
Form of Global Note representing $490.5 million principal amount of 7.625% Senior Notes due 2012 with attached Guarantee (incorporated by reference to Exhibit 4.3 to Form 8-K filed October 28, 2009).
4.43
Form of Global Note representing $182.6 million principal amount of 6.125% Senior Notes due 2013 with attached Guarantee (incorporated by reference to Exhibit 4.4 to Form 8-K filed October 28, 2009).
4.44
Form of Global Note representing $237.6 million principal amount of 5.90% Senior Notes due 2013 with attached Guarantee (incorporated by reference to Exhibit 4.5 to Form 8-K filed October 28, 2009).
4.45
Form of Global Note representing $349.7 million principal amount of 6.65% Senior Notes due 2018 with attached Guarantee (incorporated by reference to Exhibit 4.6 to Form 8-K filed October 28, 2009).
4.46
Form of Global Note representing $399.6 million principal amount of 7.55% Senior Notes due 2038 with attached Guarantee (incorporated by reference to Exhibit 4.7 to Form 8-K filed October 28, 2009).
 
 
 
4.47
Form of Global Note representing $285.8 million principal amount of 7.000% Junior Subordinated Notes due 2067 with attached Guarantee (incorporated by reference to Exhibit 4.8 to Form 8-K filed October 28, 2009).
4.48
Form of Global Note representing $400.0 million principal amount of 3.70% Senior Notes due 2015 with attached Guarantee (incorporated by reference to Exhibit 4.4 to Form 8-K filed May 20, 2010).
4.49
Form of Global Note representing $1.0 billion principal amount of 5.20% Senior Notes due 2020 with attached Guarantee (incorporated by reference to Exhibit 4.4 to Form 8-K filed May 20, 2010).
4.50
Form of Global Note representing $600.0 million principal amount of 6.45% Senior Notes due 2040 with attached Guarantee (incorporated by reference to Exhibit 4.4 to Form 8-K filed May 20, 2010).
4.51
Form of Global Note representing $750.0 million principal amount of 3.20% Senior Notes due 2016 with attached Guarantee (incorporated by reference to Exhibit 4.4 to Form 8-K filed January 13, 2011).
4.52
Form of Global Note representing $750.0 million principal amount of 5.95% Senior Notes due 2041 with attached Guarantee (incorporated by reference to Exhibit 4.4 to Form 8-K filed January 13, 2011).
4.53
Form of Global Note representing $650.0 million principal amount of 4.05% Senior Notes due 2022 with attached Guarantee (incorporated by reference to Exhibit 4.4 to Form 8-K filed August 24, 2011).
4.54
Form of Global Note representing $600.0 million principal amount of 5.70% Senior Notes due 2042 with attached Guarantee (incorporated by reference to Exhibit 4.4 to Form 8-K filed August 24, 2011).
4.55
Form of Global Note representing $750.0 million principal amount of 4.85% Senior Notes due 2042 with attached Guarantee (included in Exhibit 4.25 above).
4.56
Replacement Capital Covenant, dated May 24, 2007, executed by Enterprise Products Operating L.P. and Enterprise Products Partners L.P. in favor of the covered debtholders described therein (incorporated by reference to Exhibit 99.1 to Form 8-K filed May 24, 2007).
4.57
First Amendment to Replacement Capital Covenant dated August 25, 2006, executed by Enterprise Products Operating L.P. in favor of the covered debtholders described therein (incorporated by reference to Exhibit 99.2 to Form 8-K filed August 25, 2006).
4.58
Replacement Capital Covenant, dated October 27, 2009, among Enterprise Products Operating LLC and Enterprise Products Partners L.P. in favor of the covered debtholders described therein (incorporated by reference to Exhibit 4.9 to Form 8-K filed October 28, 2009).
4.59
Indenture, dated February 20, 2002, by and among TEPPCO Partners, L.P., as Issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as Subsidiary Guarantors, and First Union National Bank, NA, as Trustee (incorporated by reference to Exhibit 99.2 to the Form 8-K filed by TEPPCO Partners, L.P. on February 20, 2002).
4.60
First Supplemental Indenture, dated February 20, 2002, by and among TEPPCO Partners, L.P., as Issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as Subsidiary Guarantors, and First Union National Bank, NA, as Trustee (incorporated by reference to Exhibit 99.3 to the Form 8-K filed by TEPPCO Partners, L.P. on February 20, 2002).
4.61
Second Supplemental Indenture, dated June 27, 2002, by and among TEPPCO Partners, L.P., as Issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as Initial Subsidiary Guarantors, Val Verde Gas Gathering Company, L.P., as New Subsidiary Guarantor, and Wachovia Bank, National Association, formerly known as First Union National Bank, as Trustee (incorporated by reference to Exhibit 4.6 to the Form 10-Q filed by TEPPCO Partners, L.P. on August 14, 2002).
4.62
Third Supplemental Indenture, dated January 20, 2003, by and among TEPPCO Partners, L.P. as Issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P., Jonah Gas Gathering Company and Val Verde Gas Gathering Company, L.P. as Subsidiary Guarantors, and Wachovia Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.7 to the Form 10-K filed by TEPPCO Partners, L.P. on March 21, 2003).
 
 
 
4.63
Full Release of Guarantee, dated July 31, 2006, by Wachovia Bank, National Association, as Trustee, in favor of Jonah Gas Gathering Company (incorporated by reference to Exhibit 4.8 to the Form 10-Q filed by TEPPCO Partners, L.P. on November 7, 2006).
4.64
Fourth Supplemental Indenture, dated June 30, 2007, by and among TEPPCO Partners, L.P., as Issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P., Val Verde Gas Gathering Company, L.P., TE Products Pipeline Company, LLC and TEPPCO Midstream Companies, LLC, as Subsidiary Guarantors, and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.3 to the Form 8-K filed by TE Products Pipeline Company, LLC on July 6, 2007).
4.65
Fifth Supplemental Indenture, dated March 27, 2008, by and among TEPPCO Partners, L.P., as Issuer, TE Products Pipeline Company, LLC, TCTM, L.P., TEPPCO Midstream Companies, LLC and Val Verde Gathering Company, L.P., as Subsidiary Guarantors, and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.11 to the Form 10-Q filed by TEPPCO Partners, L.P. on May 8, 2008).
4.66
Sixth Supplemental Indenture, dated March 27, 2008, by and among TEPPCO Partners, L.P., as Issuer, TE Products Pipeline Company, LLC, TCTM, L.P., TEPPCO Midstream Companies, LLC and Val Verde Gas Gathering Company, L.P., as Subsidiary Guarantors, and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.12 to the Form 10-Q filed by TEPPCO Partners, L.P. on May 8, 2008).
4.67
Seventh Supplemental Indenture, dated March 27, 2008, by and among TEPPCO Partners, L.P., as Issuer, TE Products Pipeline Company, LLC, TCTM, L.P., TEPPCO Midstream Companies, LLC and Val Verde Gas Gathering Company, L.P., as Subsidiary Guarantors, and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.13 to the Form 10-Q filed by TEPPCO Partners, L.P. on May 8, 2008).
4.68
Eighth Supplemental Indenture, dated October 27, 2009, by and among TEPPCO Partners, L.P., as Issuer, TE Products Pipeline Company, LLC, TCTM, L.P., TEPPCO Midstream Companies, LLC and Val Verde Gas Gathering Company, L.P., as Subsidiary Guarantors, and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed by TEPPCO Partners, L.P. on October 28, 2009).
4.69
Full Release of Guarantee, dated November 23, 2009, of TE Products Pipeline Company, LLC, TCTM, L.P., TEPPCO Midstream Companies, LLC and Val Verde Gas Gathering Company, L.P. by U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.64 to Form 10-K filed on March 1, 2010).
4.70
Indenture, dated May 14, 2007, by and among TEPPCO Partners, L.P., as Issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Val Verde Gas Gathering Company, L.P., as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 99.1 of the Form 8-K filed by TEPPCO Partners, L.P. on May 15, 2007).
4.71
First Supplemental Indenture, dated May 18, 2007, by and among TEPPCO Partners, L.P., as Issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Val Verde Gas Gathering Company, L.P., as Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 to the Form 8-K filed by TEPPCO Partners, L.P. on May 18, 2007).
4.72
Replacement of Capital Covenant, dated May 18, 2007, executed by TEPPCO Partners, L.P., TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Val Verde Gas Gathering Company, L.P. in favor of the covered debt holders described therein (incorporated by reference to Exhibit 99.1 to the Form 8-K of TEPPCO Partners, L.P. on May 18, 2007).
4.73
Second Supplemental Indenture, dated as of June 30, 2007, by and among TEPPCO Partners, L.P., as Issuer, TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Val Verde Gas Gathering Company, L.P., as Existing Subsidiary Guarantors, TE Products Pipeline Company, LLC and TEPPCO Midstream Companies, LLC, as New Subsidiary Guarantors, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 to the Form 8-K filed by TE Products Pipeline Company, LLC on July 6, 2007).
 
 
 
4.74
Third Supplemental Indenture, dated as of October 27, 2009, by and among TEPPCO Partners, L.P., as Issuer, TE Products Pipeline Company, LLC, TCTM, L.P., TEPPCO Midstream Companies, LLC and Val Verde Gas Gathering Company, L.P., as Subsidiary Guarantors, and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 to the Form 8-K filed by TEPPCO Partners, L.P. on October 28, 2009).
4.75
Full Release of Guarantee, dated as of November 23, 2009, of TE Products Pipeline Company, LLC, TCTM, L.P., TEPPCO Midstream Companies, LLC and Val Verde Gas Gathering Company, L.P. by The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.70 to Form 10-K filed on March 1, 2010).
12.1#
Computation of ratio of earnings to fixed charges for the three months ended March 31, 2012 and for each of the five years ended December 31, 2011, 2010, 2009, 2008 and 2007.
31.1#
Sarbanes-Oxley Section 302 certification of Michael A. Creel for Enterprise Products Partners L.P.’s for the March 31, 2012 quarterly report on Form 10-Q.
31.2#
Sarbanes-Oxley Section 302 certification of W. Randall Fowler for Enterprise Products Partners L.P.’s for the March 31, 2012 quarterly report on Form 10-Q.
32.1#
Sarbanes-Oxley Section 906 certification of Michael A. Creel for Enterprise Products Partners L.P.’s for the March 31, 2012 quarterly report on Form 10-Q.
32.2#
Sarbanes-Oxley Section 906 certification of W. Randall Fowler for Enterprise Products Partners L.P.’s for the March 31, 2012 quarterly report on Form 10-Q.
101.CAL#
XBRL Calculation Linkbase Document
101.DEF#
XBRL Definition Linkbase Document
101.INS#
XBRL Instance Document
101.LAB#
XBRL Labels Linkbase Document
101.PRE#
XBRL Presentation Linkbase Document
101.SCH#
XBRL Schema Document


*
With respect to any exhibits incorporated by reference to any Exchange Act filings, the Commission file numbers for Enterprise Products Partners L.P., Enterprise GP Holdings L.P., TEPPCO Partners, L.P. and TE Products Pipeline Company, LLC are 1-14323, 1-32610, 1-10403 and 1-13603, respectively.
***
Identifies management contract and compensatory plan arrangements.
#
Filed with this report.

 
 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on May 10, 2012.

ENTERPRISE PRODUCTS PARTNERS L.P.
(A Delaware Limited Partnership)
   
By:
Enterprise Products Holdings LLC, as General Partner
 
 
By:
      /s/ Michael J. Knesek
Name:
Michael J. Knesek
Title:
Senior Vice President, Controller and Principal Accounting
Officer of the General Partner


 
 
 
 
 

 
 
72


Exhibit 4.25
 
 
 
 
 
ENTERPRISE PRODUCTS OPERATING LLC
 
AS ISSUER,
 
ENTERPRISE PRODUCTS PARTNERS L.P.
 
AS PARENT GUARANTOR,
 
and
 
WELLS FARGO BANK,
NATIONAL ASSOCIATION,
 
AS TRUSTEE
 
_____________________
 
 
TWENTY-SECOND SUPPLEMENTAL INDENTURE
 
Dated as of February 15, 2012
 
to
 
Indenture dated as of October 4, 2004
 
_____________________
 
4.85% Senior Notes due 2042
 
 
 
 
 

 

 
 

 

TABLE OF CONTENTS
 
 
 
 
 
 
 
Page
     
 
ARTICLE I
THE NOTES
 
     
SECTION 1.1
Form
2
SECTION 1.2
Title, Amount and Payment of Principal and Interest
SECTION 1.3
Registrar and Paying Agent
SECTION 1.4
Transfer and Exchange
3
SECTION 1.5
Guarantee of the Notes
3
SECTION 1.6
Defeasance and Discharge
3
SECTION 1.7
Amendment to Section 4.12 of the Original Indenture
3
SECTION 1.8
Amendment to Section 4.13 of the Original Indenture
4
 
ARTICLE II
REDEMPTION
 
 
SECTION 2.1
Redemption
 
ARTICLE III
MISCELLANEOUS PROVISIONS
 
 
SECTION 3.1
Table of Contents, Headings, etc.
SECTION 3.2
Counterpart Originals
5
SECTION 3.3
Governing Law
5
SECTION 3.4
Certain Trustee Matters
5
     
     
Exhibit A
Form of Note for the 4.85% Senior Notes due 2042
 
     
 


 
 
  i

 

THIS TWENTY-SECOND SUPPLEMENTAL INDENTURE dated as of February 15, 2012, is among Enterprise Products Operating LLC, a Texas limited liability company (the “Issuer”), Enterprise Products Partners L.P., a Delaware limited partnership (the “Parent Guarantor”), and Wells Fargo Bank, National Association, a national banking association, as trustee (the “Trustee”).  Each capitalized term used but not defined in this Twenty-Second Supplemental Indenture shall have the meaning assigned to such term in the Original Indenture (as defined below).
 
RECITALS:
 
WHEREAS, Enterprise Products Operating L.P. and the Parent Guarantor have executed and delivered to the Trustee an Indenture, dated as of October 4, 2004 (the “Original Indenture”), providing for the issuance by Enterprise Products Operating L.P. from time to time of its debentures, notes, bonds or other evidences of indebtedness, issued and to be issued in one or more series unlimited as to principal amount (the “Debt Securities”), and the guarantee by each Guarantor of the Debt Securities (the “Guarantee”); and
 
WHEREAS, the Issuer and the Parent Guarantor have executed and delivered to the Trustee a Tenth Supplemental Indenture, dated as of June 30, 2007, providing for the Issuer as the successor issuer (the Original Indenture together with the Tenth Supplemental Indenture, the “Base Indenture”); and
 
WHEREAS, on or before the date hereof the Issuer has issued several series of Debt Securities pursuant to previous supplements to the Base Indenture; and
 
WHEREAS, the Issuer has duly authorized and desires to cause to be issued pursuant to the Base Indenture and this Twenty-Second Supplemental Indenture a series of Debt Securities in the initial aggregate principal amount of $750,000,000, which series shall be designated as the 4.85% Senior Notes due 2042 (the “Notes”).
 
WHEREAS, all of such Notes will be guaranteed by the Parent Guarantor as provided in Article XIV of the Original Indenture; and
 
WHEREAS, the Issuer desires to cause the issuance of the Notes pursuant to Sections 2.01 and 2.03 of the Original Indenture, which sections permit the execution of indentures supplemental thereto to establish the form and terms of Debt Securities of any series; and
 
WHEREAS, pursuant to Section 9.01 of the Original Indenture, the Issuer and the Parent Guarantor have requested that the Trustee join in the execution of this Twenty-Second Supplemental Indenture to establish the form and terms of the Notes; and
 
WHEREAS, all things necessary have been done to make the Notes, when executed by the Issuer and authenticated and delivered hereunder and under the Base Indenture and duly issued by the Issuer, and the Guarantee of the Parent Guarantor, when the Notes are duly issued by the Issuer, the valid obligations of the Issuer and the Parent Guarantor, respectively, and to make this Twenty-Second Supplemental Indenture a valid agreement of the Issuer and the Parent Guarantor enforceable in accordance with its terms.
 


 
1

 

NOW, THEREFORE, the Issuer, the Parent Guarantor and the Trustee hereby agree that the following provisions shall supplement the Base Indenture:
 
ARTICLE I
THE NOTES
 
SECTION 1.1   Form.
 
The 4.85% Senior Notes due 2042 and the related Trustee’s certificate of authentication shall be substantially in the form of Exhibit A to this Twenty-Second Supplemental Indenture.
 
Exhibit A is hereby incorporated into this Twenty-Second Supplemental Indenture.  The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Twenty-Second Supplemental Indenture and to the extent applicable, the Issuer, the Parent Guarantor and the Trustee, by their execution and delivery of this Twenty-Second Supplemental Indenture, expressly agree to such terms and provisions and to be bound thereby.
 
The Notes shall be issued only as Registered Securities.  The Notes shall be issued upon original issuance in whole in the form of one or more Global Securities (the “Book-Entry Notes”).  Each Book-Entry Note shall represent such of the Outstanding Notes as shall be specified therein and shall provide that it shall represent the aggregate amount of Outstanding Notes from time to time endorsed thereon and that the aggregate amount of Outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions.  Any endorsement of a Book-Entry Note to reflect the amount, or any increase or decrease in the amount, of Outstanding Notes represented thereby shall be made by the Trustee in accordance with written instructions or such other written form of instructions as is customary for the Depositary, from the Depositary or its nominee on behalf of any Person having a beneficial interest in the Book-Entry Note.
 
The Issuer initially appoints The Depository Trust Company (“DTC”) to act as Depositary with respect to the Book-Entry Notes.
 
SECTION 1.2   Title, Amount and Payment of Principal and Interest.
 
4.85% Senior Notes due 2042 .  The 4.85% Senior Notes due 2042 shall be entitled the “4.85% Senior Notes due 2042.” The Trustee shall authenticate and deliver (i) the 4.85% Senior Notes due 2042 for original issue on the date hereof (the “4.85% Original Notes”) in the aggregate principal amount of $750,000,000 and (ii) additional 4.85% Senior Notes due 2042 for original issue from time to time after the date hereof in such principal amounts as may be specified in the Company Order described in this sentence, provided that no such additional 4.85% Senior Notes due 2042 may be issued at a price that would cause such 4.85% Senior Notes due 2042 to have “original issue discount” within the meaning of the Internal Revenue Code of 1986, as amended, in each case upon a Company Order for the authentication and delivery thereof and satisfaction of the other provisions of Section 2.05 of the Original Indenture.  Such order shall specify the amount of the 4.85% Senior Notes due 2042 to be authenticated, the date on which the original issue of 4.85% Senior Notes due 2042 is to be authenticated, and the name or names of the initial Holder or Holders.  The aggregate principal amount of 4.85% Senior Notes due 2042 that may be outstanding at any time may not exceed $750,000,000 plus such
 

 
 
2

 

additional principal amounts as may be issued and authenticated pursuant to clause (ii) of this paragraph (except as provided in Section 2.09 of the Original Indenture).
 
The principal amount of each 4.85% Senior Note due 2042 shall be payable on August 15, 2042.  Each 4.85% Senior Note due 2042 shall bear interest from and including February 15, 2012, or from and including the most recent date to which interest has been paid, at the fixed rate of 4.85% per annum.  The dates on which interest on the 4.85% Senior Notes due 2042 shall be payable shall be February 15 and August 15 of each year, commencing August 15, 2012, in the case of the 4.85% Original Notes (the “4.85% Interest Payment Dates”).  The regular record date for interest payable on the 4.85% Senior Notes due 2042 on any 4.85% Interest Payment Date shall be February 1 or August 1 (the “4.85% Regular Record Date”), as the case may be, preceding such 4.85% Interest Payment Date.
 
Payments of principal of, premium, if any, and interest due on the 4.85% Senior Notes due 2042 representing Book-Entry Notes on any 4.85% Interest Payment Date or at maturity will be made available to the Trustee by 11:00 a.m., New York City time, on such date, unless such date falls on a day which is not a Business Day, in which case such payments will be made available to the Trustee by 11:00 a.m., New York City time, on the next Business Day.  As soon as possible thereafter, the Trustee will make such payments to the Depositary.
 
SECTION 1.3   Registrar and Paying Agent.
 
The Issuer initially appoints the Trustee as Registrar and paying agent with respect to the Notes.  The office or agency in the City and State of New York where Notes may be presented for registration of transfer or exchange and the Place of Payment for the Notes shall initially be the corporate trust office of the Trustee located at 45 Broadway, 14th Floor, New York, New York 10006.
 
SECTION 1.4   Transfer and Exchange.
 
The transfer and exchange of Book-Entry Notes or beneficial interests therein shall be effected through the Depositary, in accordance with Section 2.15 of the Original Indenture and the rules and procedures of the Depositary therefor.
 
SECTION 1.5   Guarantee of the Notes.
 
In accordance with Article XIV of the Original Indenture, the Notes will be fully, unconditionally and absolutely guaranteed on an unsecured, unsubordinated basis by the Parent Guarantor.  Initially, there will be no Subsidiary Guarantors.
 
SECTION 1.6   Defeasance and Discharge.
 
The Notes shall be subject to satisfaction and discharge and to both legal defeasance and covenant defeasance as contemplated by Article XI of the Original Indenture.
 
SECTION 1.7   Amendment to Section 4.12 of the Original Indenture.
 

 
 
3

 

The last paragraph of Section 4.12 of the Original Indenture is hereby amended and restated in relation solely to the Notes to read as follows:
 
“Notwithstanding the foregoing provisions of this Section, the Parent Guarantor may, and may permit any Subsidiary to, effect any Sale/Leaseback Transaction that is not excepted by clauses (a) through (d), inclusive, of this Section, provided that the Attributable Indebtedness from such Sale/Leaseback Transaction, together with the aggregate principal amount of all other such Attributable Indebtedness deemed to be outstanding and all outstanding Indebtedness (other than the Debt Securities) secured by liens, other than Permitted Liens, upon Principal Properties or upon any capital stock of any Restricted Subsidiary, do not exceed 10% of Consolidated Net Tangible Assets.”
 
SECTION 1.8   Amendment to Section 4.13 of the Original Indenture.
 
The last sentence of Section 4.13 of the Original Indenture is hereby amended and restated in relation solely to the Notes to read as follows:
 
“Notwithstanding the foregoing, the Parent Guarantor may, and may permit any Subsidiary to, create, assume, incur or suffer to exist any lien, other than a Permitted Lien, upon any Principal Property or upon any capital stock of any Restricted Subsidiary to secure Indebtedness of the Parent Guarantor, the Company or any other Person (other than the Debt Securities), without in any such case making effective provision whereby all the Debt Securities Outstanding under this Indenture are secured equally and ratably with, or prior to, such Indebtedness so long as such Indebtedness is secured; provided that the aggregate principal amount of all Indebtedness then outstanding secured by such lien and all similar liens, together with the aggregate amount of Attributable Indebtedness deemed to be outstanding in respect of all Sale/Leaseback Transactions (exclusive of any such Sale/Leaseback Transactions otherwise permitted under clauses (a) through (d) of Section 4.12), does not exceed 10% of Consolidated Net Tangible Assets.”
 
ARTICLE II
REDEMPTION
 
SECTION 2.1   Redemption.
 
The Issuer shall have no obligation to redeem, purchase or repay the Notes pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a Holder thereof.  The Issuer, at its option, may redeem the Notes in accordance with the provisions of paragraph 5 of the Notes and Article III of the Original Indenture.
 
ARTICLE III
MISCELLANEOUS PROVISIONS
 
SECTION 3.1   Table of Contents, Headings, etc.
 
The table of contents and headings of the Articles and Sections of this Twenty-Second Supplemental Indenture have been inserted for convenience of reference only, are not to be
 

 
 
4

 

considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof.
 
SECTION 3.2   Counterpart Originals.
 
The parties may sign any number of copies of this Twenty-Second Supplemental Indenture.  Each signed copy shall be an original, but all of them together represent the same agreement.
 
SECTION 3.3   Governing Law.
 
THIS TWENTY-SECOND SUPPLEMENTAL INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
 
SECTION 3.4   Certain Trustee Matters
 
The recitals contained herein shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for their correctness.  The Trustee makes no representations as to the validity or sufficiency of this Twenty-Second Supplemental Indenture or the Notes or the proper authorization or the due execution hereof or thereof by the Issuer.
 
*  *  *
 

 

 
 
5

 

IN WITNESS WHEREOF, the parties hereto have caused this Twenty-Second Supplemental Indenture to be duly executed as of the day and year first above written.
 
 
ENTERPRISE PRODUCTS OPERATING LLC,
as Issuer
 
By:
Enterprise Products OLPGP, Inc.,
its Sole Manager
 
 
By:
           /s/ W. Randall Fowler
 
Name:
W. Randall Fowler
 
Title:
Executive Vice President and Chief
Financial Officer
 
 
 
 
ENTERPRISE PRODUCTS PARTNERS L.P.,
as Parent Guarantor
 
By:
Enterprise Products Holdings LLC,
its General Partner
 
 
By:
           /s/ W. Randall Fowler
 
Name:
W. Randall Fowler
 
Title:
Executive Vice President and Chief
Financial Officer
 
 
 
 
WELLS FARGO BANK,
NATIONAL ASSOCIATION,
as Trustee
 
 
By:
           /s/ Patrick T. Giordano
 
Name:
Patrick T. Giordano
 
Title:
Vice President
 
 
 

 
 

Twenty-Second Supplemental Indenture Signature Page
 
 

 

Exhibit A
 
 
FORM OF NOTE
 
[FACE OF SECURITY]
 
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (“DTC”) (55 WATER STREET, NEW YORK, NEW YORK 10041) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] *
 
[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO HEREIN.] *
 
Principal Amount
No. _____
 
$                   [which amount may be
increased or decreased by the Schedule
of Increases and Decreases in Global Security attached hereto.] *
 
 
ENTERPRISE PRODUCTS OPERATING LLC
 
4.85% SENIOR NOTE DUE 2042
 
CUSIP 29379V AW3
 
ENTERPRISE PRODUCTS OPERATING LLC, a Texas limited liability company (the “Company,” which term includes any successor under the Indenture hereinafter referred to), for value received, hereby promises to pay to [Cede & Co.] * or its registered assigns, the principal sum of __________________ ($__________) U.S. dollars, [or such greater or lesser principal sum as is shown on the attached Schedule of Increases and Decreases in Global Security] * , on August 15, 2042 in such coin and currency of the United States of America as at the time of
 
 

 
*  To be included in a Book-Entry Note.
 


 
A-1

 

payment shall be legal tender for the payment of public and private debts, and to pay interest at an annual rate of 4.85% payable on February 15 and August 15 of each year, to the person in whose name the Security (as defined on the reverse side of this security) is registered at the close of business on the record date for such interest, which shall be the preceding February 1 and August 1 (each, a “Regular Record Date”), respectively, payable commencing on August 15, 2012, with interest accruing from and including February 15, 2012, or from and including the most recent date to which interest shall have been paid.
 
Reference is made to the further provisions of this Security set forth on the reverse hereof.  Such further provisions shall for all purposes have the same effect as though fully set forth at this place.
 
The statements in the legends set forth in this Security are an integral part of the terms of this Security and by acceptance hereof the Holder of this Security agrees to be subject to, and bound by, the terms and provisions set forth in each such legend.
 
This Security is issued in respect of a series of Debt Securities of an initial aggregate of $750,000,000 in principal amount designated as the 4.85% Senior Notes due 2042 of the Company and is governed by the Indenture dated as of October 4, 2004 (the “Original Indenture”), duly executed and delivered by the Company, as issuer, and Enterprise Products Partners L.P., as parent guarantor (the “Parent Guarantor”), to Wells Fargo Bank, National Association, as trustee (the “Trustee”), as amended by the Tenth Supplemental Indenture, dated as of June 30, 2007, providing for the Company as the successor issuer (the “Tenth Supplemental Indenture”), and the Twenty-Second Supplemental Indenture dated as of February 15, 2012, duly executed by the Company, the Parent Guarantor and the Trustee (the “Twenty-Second Supplemental Indenture,” and together with the Original Indenture and the Tenth Supplemental Indenture, the “Indenture”).  The terms of the Indenture are incorporated herein by reference.  This Security shall in all respects be entitled to the same benefits as definitive Debt Securities under the Indenture.
 
If and to the extent any provision of the Indenture limits, qualifies or conflicts with any other provision of the Indenture that is required to be included in the Indenture or is deemed applicable to the Indenture by virtue of the provisions of the Trust Indenture Act of 1939, as amended (the “TIA”), such required provision shall control.
 
The Company hereby irrevocably undertakes to the Holder hereof to exchange this Security in accordance with the terms of the Indenture without charge.
 
This Security shall not be valid or become obligatory for any purpose until the Trustee’s Certificate of Authentication hereon shall have been manually signed by the Trustee under the Indenture.
 

 
 
A-2

 

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by its sole manager.
 
Dated:  February 15, 2012
 
 
ENTERPRISE PRODUCTS OPERATING LLC
 
By:
Enterprise Products OLPGP, Inc.,
its sole manager
 
 
By:
           
 
Name:
W. Randall Fowler
 
Title:
Executive Vice President and Chief
Financial Officer
 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION:
 
This is one of the Debt Securities of the series designated herein referred to in the within-mentioned Indenture.
 
 
 
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
 
 
By:
 
 
Authorized Signatory
     
 

 
 
A-3

 

[REVERSE OF SECURITY]
ENTERPRISE PRODUCTS OPERATING LLC
 
4.85% SENIOR NOTE DUE 2042
 
This Security is one of a duly authorized issue of debentures, notes or other evidences of indebtedness of the Company (the “Debt Securities”) of the series hereinafter specified, all issued or to be issued under and pursuant to the Indenture, to which Indenture reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company, the Parent Guarantor and the Holders of the Debt Securities.  The Debt Securities may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest (if any) at different rates, may be subject to different sinking, purchase or analogous funds (if any) and may otherwise vary as provided in the Indenture.  This Security is one of a series designated as the 4.85% Senior Notes due 2042 of the Company, in initial aggregate principal amount of $750,000,000 (the “Securities”).
 
1.      Interest.
 
The Company promises to pay interest on the principal amount of this Security at the rate of 4.85% per annum.
 
The Company will pay interest semi-annually on February 15 and August 15 of each year (each an “Interest Payment Date”), commencing August 15, 2012.  Interest on the Securities will accrue from and including the most recent date to which interest has been paid or, if no interest has been paid on the Securities, from and including February 15, 2012.  Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months.  The Company shall pay interest (including post-petition interest in any proceeding under any applicable bankruptcy laws) on overdue installments of interest (without regard to any applicable grace period) and on overdue principal and premium, if any, from time to time on demand at the same rate per annum, in each case to the extent lawful.
 
2.      Method of Payment.
 
The Company shall pay interest on the Securities (except Defaulted Interest) to the persons who are the registered Holders at the close of business on the Regular Record Date immediately preceding the Interest Payment Date.  Any such interest not so punctually paid or duly provided for (“Defaulted Interest”) may be paid to the persons who are registered Holders at the close of business on a special record date for the payment of such Defaulted Interest, or in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may then be listed if such manner of payment shall be deemed practicable by the Trustee, as more fully provided in the Indenture.  The Company shall pay principal, premium, if any, and interest in such coin or currency of the United States of America as at the time of payment shall be legal tender for payment of public and private debts.  Payments in respect of a Global Security (including principal, premium, if any, and interest) will be made by wire transfer of immediately available funds to the accounts specified by the Depositary.  Payments in respect of Securities in definitive form (including principal, premium, if any, and
 

 
 
A-4

 

interest) will be made at the office or agency of the Company maintained for such purpose within The City of New York, which initially will be the corporate trust office of Wells Fargo Bank, National Association at 45 Broadway, 14th Floor, New York, New York 10006, or, at the option of the Company, payment of interest may be made by check mailed to the Holders on the relevant record date at their addresses set forth in the Debt Security Register of Holders or at the option of the Holder, payment of interest on Securities in definitive form will be made by wire transfer of immediately available funds to any account maintained in the United States, provided such Holder has requested such method of payment and provided timely wire transfer instructions to the paying agent.  The Holder must surrender this Security to a paying agent to collect payment of principal.
 
3.      Paying Agent and Registrar.
 
Initially, Wells Fargo Bank, National Association will act as paying agent and Registrar.  The Company may change any paying agent or Registrar at any time upon notice to the Trustee and the Holders.  The Company may act as paying agent.
 
4.      Indenture.
 
This Security is one of a duly authorized issue of Debt Securities of the Company issued and to be issued in one or more series under the Indenture.
 
Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein.  The terms of the Securities include those stated in the Original Indenture, those made part of the Indenture by reference to the TIA, as in effect on the date of the Original Indenture, and those terms stated in the Twenty-Second Supplemental Indenture.  The Securities are subject to all such terms, and Holders of Securities are referred to the Original Indenture, the Twenty-Second Supplemental Indenture and the TIA for a statement of them.  The Securities of this series are general unsecured obligations of the Company limited to an initial aggregate principal amount of $750,000,000; provided, however, that the authorized aggregate principal amount of such series may be increased from time to time as provided in the Twenty-Second Supplemental Indenture.
 
5.      Optional Redemption.
 
At any time prior to February 15, 2042, the Securities are redeemable, at the option of the Company, at any time in whole, or from time to time in part, at a redemption price (the “Make-Whole Price”) equal to the greater of: (i) 100% of the principal amount of the Securities to be redeemed; or (ii) the sum of the present values of the remaining scheduled payments of principal and interest (at the rate in effect on the date of calculation of the redemption price) on the Securities to be redeemed (exclusive of interest accrued to the Redemption Date) discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable Treasury Yield plus 30 basis points; plus, in either case, accrued interest to the Redemption Date.
 
At any time on or after February 15, 2042, the Securities are redeemable, at the option of the Company, at any time in whole, or from time to time in part, at a redemption price equal to
 

 
 
A-5

 

100% of the principal amount of the Securities to be redeemed, plus, in either case, accrued interest to the Redemption Date.
 
The actual Make-Whole Price, calculated as provided above, shall be calculated and certified to the Trustee and the Company by the Independent Investment Banker.  For purposes of determining the Make-Whole Price, the following definitions are applicable:
 
“Treasury Yield” means, with respect to any Redemption Date applicable to the Securities, the rate per annum equal to the semi-annual equivalent yield to maturity (computed as of the third Business Day immediately preceding such Redemption Date) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the applicable Comparable Treasury Price for such Redemption Date.
 
“Comparable Treasury Issue” means the United States Treasury security selected by the Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities to be redeemed; provided, however, that if no maturity is within three months before or after the maturity date for such Securities, yields for the two published maturities most closely corresponding to such United States Treasury security will be determined and the treasury rate will be interpolated or extrapolated from those yields on a straight line basis rounding to the nearest month.
 
“Independent Investment Banker” means any of J.P. Morgan Securities LLC, RBS Securities Inc. and Wells Fargo Securities, LLC, and their respective successors or, if no such firm is willing and able to select the applicable Comparable Treasury Issue, an independent investment banking institution of national standing appointed by the Trustee and reasonably acceptable to the Company.
 
“Comparable Treasury Price” means, with respect to any Redemption Date, (a) the average of the Reference Treasury Dealer Quotations for the Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (b) if the Independent Investment Banker obtains fewer than four Reference Treasury Dealer Quotations, the average of all such quotations.
 
“Reference Treasury Dealer” means each of J.P. Morgan Securities LLC, RBS Securities Inc. and Wells Fargo Securities, LLC, so long as it is a Primary Treasury Dealer at the relevant time and, if it is not then a Primary Treasury Dealer, then a Primary Treasury Dealer selected by it, and in each case their respective successors (each, a “Primary Treasury Dealer”); provided, however , that if any of the foregoing shall not be a Primary Treasury Dealer at such time and shall fail to select a Primary Treasury Dealer, then the Issuer will substitute therefor another Primary Treasury Dealer.
 
“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date for the Securities, an average, as determined by an Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue for the
 

 
 
A-6

 

Securities (expressed in each case as a percentage of its principal amount) quoted in writing to an Independent Investment Banker by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date.
 
Except as set forth above, the Securities will not be redeemable prior to their Stated Maturity and will not be entitled to the benefit of any sinking fund.
 
Securities called for optional redemption become due on the Redemption Date.  Notices of optional redemption will be mailed at least 30 but not more than 60 days before the Redemption Date to each Holder of the Securities to be redeemed at its registered address.  The notice of optional redemption for the Securities will state, among other things, the amount of Securities to be redeemed, the Redemption Date, the method of calculating such redemption price and the place(s) that payment will be made upon presentation and surrender of Securities to be redeemed.  Unless the Company defaults in payment of the redemption price, interest will cease to accrue on the Redemption Date with respect to any Securities that have been called for optional redemption.  If less than all the Securities are redeemed at any time, the Trustee will select the Securities to be redeemed on a pro rata basis, by lot, or by such other method the Trustee deems fair and appropriate.
 
The Securities may be redeemed in part in multiplies of $1,000 only.  Any such redemption will also comply with Article III of the Indenture.
 
6.      Denominations; Transfer; Exchange.
 
The Securities are to be issued in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000 in excess thereof.  A Holder may register the transfer of, or exchange, Securities in accordance with the Indenture.  The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture.
 
7.      Person Deemed Owners.
 
The registered Holder of a Security may be treated as the owner of it for all purposes.
 
8.      Amendment; Supplement; Waiver.
 
Subject to certain exceptions, the Indenture may be amended or supplemented, and any existing Event of Default or compliance with any provision may be waived, with the consent of the Holders of a majority in principal amount of the Outstanding Debt Securities of each series affected.  Without consent of any Holder of a Security, the parties thereto may amend or supplement the Indenture to, among other things, cure any ambiguity or omission, to correct any defect or inconsistency, or to make any other change that does not adversely affect the rights of any Holder of a Security.  Any such consent or waiver by the Holder of this Security (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Security and any Securities which may be issued in exchange or substitution herefor, irrespective of whether or not any notation thereof is made upon this Security or such other Securities.
 

 
 
A-7

 

9.      Defaults and Remedies.
 
Certain events of bankruptcy or insolvency are Events of Default that will result in the principal amount of the Securities, together with premium, if any, and accrued and unpaid interest thereon, becoming due and payable immediately upon the occurrence of such Events of Default.  If any other Event of Default with respect to the Securities occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities then Outstanding may declare the principal amount of all the Securities, together with premium, if any, and accrued and unpaid interest thereon, to be due and payable immediately in the manner and with the effect provided in the Indenture.  Notwithstanding the preceding sentence, however, if at any time after such a declaration of acceleration has been made, the Holders of a majority in principal amount of the Outstanding Securities, by written notice to the Trustee, may rescind such declaration and annul its consequences if the rescission would not conflict with any judgment or decree of a court already rendered and if all Events of Default with respect to the Securities, other than the nonpayment of the principal, premium, if any, or interest which has become due solely by such declaration acceleration, shall have been cured or shall have been waived.  No such rescission shall affect any subsequent default or shall impair any right consequent thereon.  Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture.  The Trustee may require indemnity or security satisfactory to it before it enforces the Indenture or the Securities.  Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities then Outstanding may direct the Trustee in its exercise of any trust or power with respect to the Securities.
 
10.    Trustee Dealings with Company.
 
The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates or any subsidiary of the Company’s Affiliates, and may otherwise deal with the Company or its Affiliates as if it were not the Trustee.
 
11.      Authentication.
 
This Security shall not be valid until the Trustee signs the certificate of authentication on the other side of this Security.
 
12.    Abbreviations and Defined Terms.
 
Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (tenant in common), TEN ENT (tenants by the entireties), JT TEN (joint tenants with right of survivorship and not as tenants in common), CUST (Custodian), and U/G/M/A (Uniform Gifts to Minors Act).
 
13.      CUSIP Numbers.
 
Pursuant to a recommendation promulgated by the Committee on Uniform Note Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities.  No representation is made as to the
 

 
 
A-8

 

accuracy of such number as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon.
 
14.      Absolute Obligation.
 
No reference herein to the Indenture and no provision of this Security or the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Security in the manner, at the respective times, at the rate and in the coin or currency herein prescribed.
 
15.      No Recourse.
 
The general partner of the Parent Guarantor and its directors, officers, employees and members, as such, shall have no liability for any obligations of any Guarantor or the Issuer under the Securities, the Indenture or any Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation.  Each Holder by accepting the Securities waives and releases all such liability.  The waiver and release are part of the consideration for issuance of the Securities.
 
16.    Governing Law.
 
This Security shall be construed in accordance with and governed by the laws of the State of New York.
 
17.      Guarantee.
 
The Securities are fully and unconditionally guaranteed on an unsecured, unsubordinated basis by the Parent Guarantor as set forth in Article XIV of the Indenture, as noted in the Notation of Guarantee to this Security, and under certain circumstances set forth in the Original Indenture one or more Subsidiaries of the Parent Guarantor may be required to join in such guarantee.
 
18.    Reliance.
 
The Holder, by accepting this Security, acknowledges and affirms that (i) it has purchased the Security in reliance upon the separateness of Parent Guarantor and the general partner of Parent Guarantor from each other and from any other Persons, including Enterprise Products Company (formerly EPCO, Inc.), and (ii) Parent Guarantor and the general partner of Parent Guarantor have assets and liabilities that are separate from those of other Persons, including Enterprise Products Company.
 

 
 
A-9

 

NOTATION OF GUARANTEE
 
The Parent Guarantor (which term includes any successor Person under the Indenture), has fully, unconditionally and absolutely guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture, the due and punctual payment of the principal of, and premium, if any, and interest on the Securities and all other amounts due and payable under the Indenture and the Securities by the Company.
 
The obligations of the Parent Guarantor to the Holders of Securities and to the Trustee pursuant to its Guarantee and the Indenture are expressly set forth in Article XIV of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee.
 
 
 
ENTERPRISE PRODUCTS PARTNERS L.P.
 
By:
Enterprise Products Holdings LLC,
its General Partner
 
 
By:
 
 
Name:
W. Randall Fowler
 
Title:
Executive Vice President and Chief
Financial Officer
 
 
 
 
 

 
 
A-10

 

ABBREVIATIONS
 
The following abbreviations, when used in the inscription on the face of this instrument, shall be construed as though they were written out in full according to applicable laws or regulations:
 
TEN COM
–as tenants in common
UNIF GIFT MIN ACT –                                                                   
(Cust.)
TEN ENT
–as tenants by entireties
Custodian for:                                 
(Minor)
under Uniform Gifts to
JT TEN
–as joint tenants with right of
survivorship and not as
tenants in common
Minors Act of                                      
(State)
 
Additional abbreviations may also be used though not in the above list.
 
________________________
 
ASSIGNMENT
 
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto
 
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
 
 
 


Please print or type name and address including postal zip code of assignee
 

 

the within Security and all rights thereunder, hereby irrevocably constituting and appointing
 


to transfer said Security on the books of the Company, with full power of substitution in the premises.
 
 
 
Dated                                                                                                    
 
 
 
                                                  
Registered Holder
 
 
 
 
A-11

 
 
 
SCHEDULE OF INCREASES OR DECREASES
IN GLOBAL SECURITY
 
The following increases or decreases in this Global Security have been made:
 
Date of Exchange
Amount of
Decrease in
Principal
Amount of this
Global Security
Amount of
Increase in
Principal Amount
of this
Global Security
Principal Amount
of this Global
Security following
such decrease
(or increase)
Signature of
authorized officer
of Trustee or
 Depositary
         
         
         
         
         
         
 

 
 

 
To be included in a Book-Entry Note.
 
 
 
 
 
 
 
 A-12

EXHIBIT 12.1

ENTERPRISE PRODUCTS PARTNERS L.P.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)

   
For the Three
Months Ended
March 31, 2012
   
For the Year Ended December 31,
 
       
2011
   
2010
   
2009
   
2008
   
2007
 
Consolidated income
  $ 655.5     $ 2,088.3     $ 1,383.7     $ 1,140.3     $ 1,145.1     $ 762.0  
Add:
Provision for (benefit from) taxes
    (34.4 )     27.2       26.1       25.3       31.0       15.8  
Less:
 
Equity in earnings from unconsolidated affiliates
    (9.9 )     (46.4 )     (62.0 )     (92.3 )     (66.2 )     (13.6 )
Consolidated pre-tax income before equity in earnings from unconsolidated affiliates
    611.2       2,069.1       1,347.8       1,073.3       1,109.9       764.2  
Add:
Fixed charges
    224.6       879.5       813.4       760.6       717.9       594.4  
 
Amortization of capitalized interest
    4.8       17.5       16.8       15.3       13.4       11.6  
 
Distributed income of equity investees
    27.0       156.4       191.9       169.3       157.2       116.9  
Subtotal
    867.6       3,122.5       2,369.9       2,018.5       1,998.4       1,487.1  
Less:
Capitalized interest
    (30.6 )     (106.7 )     (47.2 )     (53.1 )     (90.7 )     (86.5 )
 
Net income attributable to noncontrolling interest
    (4.2 )     (20.5 )     (25.5 )     (26.4 )     (23.0 )     (14.8 )
Total earnings
  $ 832.8     $ 2,995.3     $ 2,297.2     $ 1,939.0     $ 1,884.7     $ 1,385.8  
Fixed charges:
                                               
 
Interest expense
  $ 186.5     $ 744.1     $ 741.9     $ 687.3     $ 608.3     $ 487.4  
 
Capitalized interest
    30.6       106.7       47.2       53.1       90.7       86.5  
 
Interest portion of rental expense
    7.5       28.7       24.3       20.2       18.9       20.5  
 
Total
  $ 224.6     $ 879.5     $ 813.4     $ 760.6     $ 717.9     $ 594.4  
Ratio of earnings to fixed charges
    3.7x       3.4x       2.8x       2.6x       2.6x       2.3x  
 
These computations take into account our consolidated operations and the distributed income from our equity method investees.  For purposes of these calculations, “earnings” is the amount resulting from adding and subtracting the following items:

Add the following, as applicable:

·  
consolidated pre-tax income from continuing operations before adjustment for income or loss from equity investees;
·  
fixed charges;
·  
amortization of capitalized interest;
·  
distributed income of equity investees; and
·  
our share of pre-tax losses of equity investees for which charges arising from guarantees are included in fixed charges.

From the subtotal of the added items, subtract the following, as applicable:

·  
interest capitalized;
·  
preference security dividend requirements of consolidated subsidiaries; and
·  
the noncontrolling interest in pre-tax income of subsidiaries that have not incurred fixed charges.

The term “fixed charges” means the sum of the following:  interest expensed and capitalized; amortized premiums, discounts and capitalized expenses related to indebtedness; an estimate of the interest within rental expense; and preference security dividend requirements of consolidated subsidiaries.



EXHIBIT 31.1

SARBANES-OXLEY SECTION 302 CERTIFICATION

I, Michael A. Creel, certify that:

1.  
I have reviewed this quarterly report on Form 10-Q of Enterprise Products Partners L.P.;

2.  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)  
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)  
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:   May 10, 2012

 
       /s/ Michael A. Creel
 
Name:   
Michael A. Creel
 
Title:   
Chief Executive Officer of Enterprise Products Holdings
LLC, the General Partner of Enterprise Products Partners
L.P.

EXHIBIT 31.2

SARBANES-OXLEY SECTION 302 CERTIFICATION

I, W. Randall Fowler, certify that:

1.  
I have reviewed this quarterly report on Form 10-Q of Enterprise Products Partners L.P.;

2.  
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)  
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)  
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)  
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)  
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)  
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)  
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:   May 10, 2012
   
       /s/ W. Randall Fowler
   
Name:   
W. Randall Fowler
   
Title:   
Chief Financial Officer of Enterprise Products Holdings
LLC, the General Partner of Enterprise Products
Partners L.P.

EXHIBIT 32.1

SARBANES-OXLEY SECTION 906 CERTIFICATION

CERTIFICATION OF MICHAEL A. CREEL, CHIEF EXECUTIVE OFFICER
OF ENTERPRISE PRODUCTS HOLDINGS LLC, THE GENERAL PARTNER OF
ENTERPRISE PRODUCTS PARTNERS L.P.

In connection with this quarterly report of Enterprise Products Partners L.P. (the “Registrant”) on Form 10-Q for the three months ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael A. Creel, Chief Executive Officer of Enterprise Products Holdings LLC, the General Partner of the Registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  
The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2)  
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.


       /s/ Michael A. Creel
Name:
Michael A. Creel
Title:
Chief Executive Officer of Enterprise Products Holdings LLC,
 
the General Partner of Enterprise Products Partners L.P.

Date:           May 10, 2012







EXHIBIT 32.2

SARBANES-OXLEY SECTION 906 CERTIFICATION

CERTIFICATION OF W. RANDALL FOWLER, CHIEF FINANCIAL OFFICER
OF ENTERPRISE PRODUCTS HOLDINGS LLC, THE GENERAL PARTNER OF
ENTERPRISE PRODUCTS PARTNERS L.P.

In connection with this quarterly report of Enterprise Products Partners L.P. (the “Registrant”) on Form 10-Q for the three months ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, W. Randall Fowler, Chief Financial Officer of Enterprise Products Holdings LLC, the General Partner of the Registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  
The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2)  
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.


       /s/ W. Randall Fowler
Name:
W. Randall Fowler
Title:
Chief Financial Officer of Enterprise Products Holdings LLC,
 
the General Partner of Enterprise Products Partners L.P.

Date:           May 10, 2012