Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

(3) Goodwill and Intangible Assets

Goodwill

Goodwill is the cost of an acquisition less the fair value of the net identifiable assets of the acquired business. The fair value of goodwill is based on inputs that are not observable in the market and thus represent Level 3 inputs. We evaluate goodwill for impairment annually as of October 31 and whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We first assess qualitative factors to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as the basis for determining whether it is necessary to perform a goodwill impairment test. We may elect to perform a goodwill impairment test without completing a qualitative assessment.

We perform our goodwill assessments at the reporting unit level for all reporting units. We use a discounted cash flow analysis to perform the assessments. Key assumptions in the analysis include the use of an appropriate discount rate, terminal year cash flow multiples, and estimated future cash flows, including volume and price forecasts, capital expenditures, and estimated operating and general and administrative costs. In estimating cash flows, we incorporate current and historical market and financial information, among other factors. Impairment determinations involve significant assumptions and judgments, and differing assumptions regarding any of these inputs could have a significant effect on the various valuations. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to goodwill impairment charges, which would be recognized in the period in which the carrying value exceeds fair value. We may also incur future goodwill impairment charges due to lower commodity prices, which may adversely affect our estimate of future cash flows or our unit price.

In March 2014, at the time of our transactions with Devon, we recorded goodwill in our corporate reporting unit at ENLC that was associated with the General Partner’s incentive distribution rights in ENLK. Prior to the completion of the Merger in January 2019, ENLC’s aggregate fair value of its reporting units was in excess of the consolidated book value of its assets, including all goodwill, which did not result in a goodwill impairment on a consolidated basis. Upon the completion of the Merger, in accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the portion of goodwill in our corporate reporting unit that was previously associated with the General Partner’s incentive distribution rights in ENLK was required to be reallocated to the four remaining reporting units based on the relative fair value of each of the reporting units. As a result, we allocated goodwill to reporting units at which goodwill had previously been impaired due to book value being in excess of fair value.

The table below provides a summary of our change in carrying amount of goodwill by segment (in millions) for the years ended December 31, 2019 and 2018, by assigned reporting unit. For the year ended December 31, 2017, there were no changes to the carrying amounts of goodwill.

	Permian		North Texas			Oklahoma			Louisiana			Corporate			Totals
Year Ended December 31, 2019
Balance, beginning of period	$	—	$	—		$	190.3		$	—		$	1,119.9		$	1,310.2
Goodwill allocation	184.6		125.7			623.1			186.5			(1,119.9		)	—
Impairment	—		(125.7		)	(813.4		)	(186.5		)	—			(1,125.6		)
Balance, end of period	$	184.6	$	—		$	—		$	—		$	—		$	184.6

	Permian			North Texas			Oklahoma		Louisiana		Corporate		Totals
Year Ended December 31, 2018
Balance, beginning of period	$	29.3		$	202.7		$	190.3	$	—	$	1,119.9	$	1,542.2
Impairment	(29.3		)	(202.7		)	—		—		—		(232.0		)
Balance, end of period	$	—		$	—		$	190.3	$	—	$	1,119.9	$	1,310.2

Goodwill Impairment Analysis for the Year Ended December 31, 2019

During the first quarter of 2019, we recognized a $186.5 million goodwill impairment related to goodwill that had been reallocated from our Corporate reporting unit to our Louisiana reporting unit as a result of the Merger.

During the fourth quarter of 2019, we performed a quantitative analysis as of October 31, 2019 for our annual goodwill impairment test. Subsequent to October 31, 2019, we determined that due to a significant decline in our common unit price and the expected reduction in our cash distribution paid to common unitholders, which was announced in January 2020, a change in circumstances had occurred that warranted an additional quantitative impairment test. We recorded a goodwill impairment loss of $125.7 million and $813.4 million in our North Texas and Oklahoma reporting units, respectively. These amounts are included in impairments in the consolidated statement of operations for the year ended December 31, 2019. The goodwill for our North Texas and Oklahoma reporting units primarily related to the goodwill reallocated from our Corporate reporting unit as a result of the Merger in January 2019.

Goodwill Impairment Analysis for the Year Ended December 31, 2018

During our annual goodwill impairment test for 2018, which was performed as of October 31, 2018, we determined, based upon our qualitative assessment, that no impairments of goodwill were required as of that date. However, subsequent to October 31, 2018, we determined that due to a significant decline in our unit price, a change in circumstances had occurred that warranted a quantitative impairment test. Based on this triggering event, we performed a quantitative goodwill impairment analysis as of December 31, 2018. Based on this analysis, a goodwill impairment loss for our Permian and North Texas reporting units in the amounts of $29.3 million and $202.7 million, respectively, was recognized in the fourth quarter of 2018 and is included in impairments in the consolidated statement of operations for the year ended December 31, 2018.

We concluded that the fair value of our Oklahoma and Corporate reporting units exceeded their carrying values, and the amounts of goodwill disclosed on the consolidated balance sheet associated with these reporting units were recoverable. Therefore, no goodwill impairment was identified or recorded for these reporting units as a result of our quantitative impairment test.

Goodwill Impairment Analysis for the Year Ended December 31, 2017

During our annual impairment test for 2017, performed as of October 31, 2017, we determined that no impairments were required for the year ended December 31, 2017.

Intangible Assets

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

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

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Year Ended December 31, 2019
Customer relationships, beginning of period	$	1,795.8	$	(422.2	)	$	1,373.6
Amortization expense	—		(123.7		)	(123.7		)
Customer relationships, end of period	$	1,795.8	$	(545.9	)	$	1,249.9
Year Ended December 31, 2018
Customer relationships, beginning of period	$	1,795.8	$	(298.7	)	$	1,497.1
Amortization expense	—		(123.5		)	(123.5		)
Customer relationships, end of period	$	1,795.8	$	(422.2	)	$	1,373.6
Year Ended December 31, 2017
Customer relationships, beginning of period	$	1,795.8	$	(171.6	)	$	1,624.2
Amortization expense	—		(127.1		)	(127.1		)
Customer relationships, end of period	$	1,795.8	$	(298.7	)	$	1,497.1

For the years ended December 31, 2019, 2018, and 2017, we reviewed our various assets groups for impairment during our annual impairment review process and determined that no impairment of our intangible assets occurred. We utilized Level 3 fair value measurements in our impairment analysis, which included cash flow assumptions consistent with those utilized in our goodwill impairment analysis.

The weighted average amortization period for intangible assets is 15.0 years. Amortization expense was $123.7 million, $123.5 million, and $127.1 million for the years ended December 31, 2019, 2018, and 2017, respectively.

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

2020	$	123.7
2021	123.7
2022	123.7
2023	123.6
2024	123.4
Thereafter	631.8
Total	$	1,249.9