Enable Midstream Partners, LP
Annual Report 2017

Plain-text annual report

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________________________________________ FORM 10-K ________________________________________________________________ þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____to_____ Commission File No. 1-36413 _______________________________________________________________ ENABLE MIDSTREAM PARTNERS, LP (Exact name of registrant as specified in its charter) _______________________________________________________________ Delaware (State or jurisdiction of incorporation or organization) 72-1252419 (I.R.S. Employer Identification No.) One Leadership Square, 211 North Robinson Avenue, Suite 150 Oklahoma City, Oklahoma 73102 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (405) 525-7788 ________________________________________________________________ Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Units Representing Limited Partner Interests New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes o No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. o Yes þ No 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. þ Yes ¨ No 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes ¨ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer þ Accelerated filer Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨ ¨ ¨ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes þ No The aggregate market value of the Common Units held by non-affiliates of the registrant, based upon the closing price of $15.94 per common unit on June 30, 2017 , was approximately $1,398 million . As of February 1, 2018 , there were 432,582,714 common units outstanding. Emerging growth company DOCUMENTS INCORPORATED BY REFERENCE None Table of Contents GLOSSARY OF TERMS FORWARD-LOOKING STATEMENTS Item 1. Business Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties Item 3. Legal Proceedings Item 4. Mine Safety Disclosures ENABLE MIDSTREAM PARTNERS, LP FORM 10-K TABLE OF CONTENTS Part I Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Part III Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services Item 15. Exhibits, Financial Statement Schedules Item 16. Form 10-K Summary Signatures Part IV i Page 1 4 5 27 54 55 55 55 55 58 59 80 80 120 121 123 128 142 143 148 148 151 152 Table of Contents GLOSSARY 2011 Pipeline Safety Act. Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011. 2015 Term Loan Agreement. $450 million unsecured term loan agreement dated July 31, 2015. 2019 Notes. 2024 Notes. 2027 Notes. 2044 Notes. Adjusted EBITDA. $500 million 2.400% senior notes due 2019. $600 million 3.900% senior notes due 2024. $700 million 4.400% senior notes due 2027. $550 million 5.000% senior notes due 2044. Please read “Measures We Use to Evaluate Results of Operations” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” for the definition. Adjusted interest expense. Please read “Measures We Use to Evaluate Results of Operations” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” for the definition. ArcLight. ASU. Atoka. ATM Program. Barrel. Bbl. Bbl/d. Bcf. Bcf/d. ArcLight Capital Partners, LLC, a Delaware limited liability company, its affiliated entities ArcLight Energy Partners Fund V, L.P., ArcLight Energy Partners Fund IV, L.P., Bronco Midstream Partners, L.P., Bronco Midstream Infrastructure LLC and Enogex Holdings LLC, and their respective general partners and subsidiaries. Accounting Standards Update. Atoka Midstream LLC, in which the Partnership owns a 50% interest as of December 31, 2017, which provides gathering and processing services to customers in the Arkoma Basin in Oklahoma. ATM Equity Offering Sales Agreement entered into on May 12, 2017 in connection with an at-the-market program, under which the Partnership may issue and sell common units having an aggregate offering price of up to $200 million in quantities, by sales methods and at prices determined by market conditions and other factors at the time of such sales. 42 U.S. gallons of petroleum products. Barrel. Barrels per day. Billion cubic feet. Billion cubic feet per day. Board of Directors. The board of directors of Enable GP, LLC. Btu. CAA. CEA. British thermal unit. When used in terms of volume, Btu refers to the amount of natural gas required to raise the temperature of one pound of water by one degree Fahrenheit at one atmospheric pressure. Clean Air Act, as amended. Commodities Exchange Act. CenterPoint Energy. CenterPoint Energy, Inc., a Texas corporation, and its subsidiaries. CERCLA. CFTC. Code. Condensate. DCF. Delaware Act. DHS. Comprehensive Environmental Response, Compensation and Liability Act of 1980. Commodity Futures Trading Commission. The Internal Revenue Code of 1986, as amended. A natural gas liquid with a low vapor pressure, mainly composed of propane, butane, pentane and heavier hydrocarbon fractions. Please read “Measures We Use to Evaluate Results of Operations” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” for the definition. Delaware Revised Uniform Limited Partnership Act. Department of Homeland Security. Distribution coverage ratio. Please read “Measures We Use to Evaluate Results of Operations” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” for the definition. Dodd-Frank Act. DOT. Dodd-Frank Wall Street Reform and Consumer Protection Act. Department of Transportation. 1 Table of Contents DRIP. EGT. EIA. EIIT. Distribution Reinvestment Plan entered into on June 23, 2016, which offers owners of our common units the ability to purchase additional common units by reinvesting all or a portion of the cash distributions paid to them on their common units. Enable Gas Transmission, LLC, a wholly owned subsidiary of the Partnership that operates a 5,900-mile interstate pipeline that provides natural gas transportation and storage services to customers principally in the Anadarko, Arkoma and Ark-La-Tex Basins in Oklahoma, Texas, Arkansas, Louisiana, Missouri and Kansas. Energy Information Administration. Enable Illinois Intrastate Transmission, LLC, a wholly owned subsidiary of the Partnership as of December 31, 2017 that operates a 20-mile intrastate pipeline that provides natural gas transportation and storage services to customers in Illinois. Enable GP. Enable GP, LLC, a Delaware limited liability company and the general partner of Enable Midstream Partners, LP. Enable Midstream Services. Enable Midstream Services, LLC, a wholly owned subsidiary of Enable Midstream Partners, LP. Enogex. EOIT. Enogex LLC, a Delaware limited liability company, and its subsidiaries. Enable Oklahoma Intrastate Transmission, LLC, formerly Enogex LLC, a wholly owned subsidiary of the Partnership that operates a 2,200-mile intrastate pipeline that provides natural gas transportation and storage services to customers in Oklahoma. EOIT Senior Notes. $250 million 6.25% senior notes due 2020. EPA. EPAct of 2005. ERISA. Exchange Act. FASB. FERC. Fractionation. GAAP. Gas imbalance. General partner. GHG. Gross margin. HLPSA. Hinshaw pipeline. ICA. IPO. IRS. LDC. Lean gas. LIBOR. LNG. MAOP. MBbl. MBbl/d. MFA. Environmental Protection Agency. Energy Policy Act of 2005. Employee Retirement Income Security Act of 1974. Securities Exchange Act of 1934, as amended. Financial Accounting Standards Board. Federal Energy Regulatory Commission. The separation of the heterogeneous mixture of extracted NGLs into individual components for end-use sale. Accounting principles generally accepted in the United States of America. The difference between the actual amounts of natural gas delivered from or received by a pipeline, as compared to the amounts scheduled to be delivered or received. Enable GP, LLC, a Delaware limited liability company, the general partner of Enable Midstream Partners, LP. Greenhouse gas. Please read “Measures We Use to Evaluate Results of Operations” under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” for the definition. Hazardous Liquid Pipeline Safety Act of 1979. A pipeline that is exempt from FERC’s NGA regulation if its operations are within a single state, if any gas received from interstate sources is received within the state and if its service is regulated by the state commission. Interstate Commerce Act. Initial public offering of Enable Midstream Partners, LP. Internal Revenue Service. Local distribution company involved in the delivery of natural gas to consumers within a specific geographic area. Natural gas that is primarily methane. London Interbank Offered Rate. Liquefied natural gas. Maximum allowable operating pressure for gas pipelines. Thousand barrels. Thousand barrels per day. Master Formation Agreement dated as of March 14, 2013. 2 Table of Contents MMcf. MMBtu. MMcf/d. MOP. MRT. NEPA. NGA. NGPA. NGPSA. NGLs. NYMEX. NYSE. OCC. OGE Energy. OPA. OSHA. Partnership. Partnership Agreement. PHMSA. PVIR. Purchase Agreement. Million cubic feet of natural gas. Million British thermal units. Million cubic feet per day. Maximum operating pressure for hazardous liquid pipelines. Enable Mississippi River Transmission, LLC, a wholly owned subsidiary of the Partnership that operates a 1,600-mile interstate pipeline that provides natural gas transportation and storage services principally in Texas, Arkansas, Louisiana, Missouri and Illinois. National Environmental Policy Act. Natural Gas Act of 1938. Natural Gas Policy Act of 1978. Natural Gas Pipeline Safety Act of 1968. Natural gas liquids, which are the hydrocarbon liquids contained within natural gas including condensate. New York Mercantile Exchange. New York Stock Exchange. Oklahoma Corporation Commission. OGE Energy Corp., an Oklahoma corporation, and its subsidiaries. Oil Pollution Act of 1990. Occupational Safety and Health Act of 1970. Enable Midstream Partners, LP, and its subsidiaries. Fifth Amended and Restated Agreement of Limited Partnership of Enable Midstream Partners, LP dated as of November 14, 2017. Pipeline and Hazardous Materials Safety Administration. Preventable Vehicle Incident Rate. Purchase Agreement, dated January 28, 2016, by and between the Partnership and CenterPoint Energy, Inc. for the sale by the Partnership and purchase by CenterPoint Energy, Inc. of Series A Preferred Units. RCRA. Resource Conservation and Recovery Act of 1976. Revolving Credit Facility $1.75 billion senior unsecured revolving credit facility. Rich gas. SCOOP. SDWA. SEC. Securities Act. Series A Preferred Units. SESH. Sponsors. STACK. Superfund. TBtu. TBtu/d. Tcf. TRIR. WTI. Natural gas containing higher concentrations of NGLs. South Central Oklahoma Oil Province. Safe Drinking Water Act. Securities and Exchange Commission. Securities Act of 1933, as amended. 10% Series A Fixed-to-Floating Non-Cumulative Redeemable Perpetual Preferred Units representing limited partner interests in the Partnership. Southeast Supply Header, LLC, in which the Partnership owns a 50% interest as of December 31, 2017, that operates an approximately 290-mile interstate natural gas pipeline from Perryville, Louisiana to southwestern Alabama near the Gulf Coast. CenterPoint Energy and OGE Energy. Sooner Trend Anadarko Basin Canadian and Kingfisher Counties. Comprehensive Environmental Response, Compensation and Liability Act of 1980. Trillion British thermal units. Trillion British thermal units per day. Trillion cubic feet of natural gas. Total Recordable Incident Rate. West Texas Intermediate. 3 Table of Contents FORWARD-LOOKING STATEMENTS Some of the information in this report may contain forward-looking statements. Forward-looking statements give our current expectations, contain projections of results of operations or of financial condition, or forecasts of future events. Words such as “could,” “will,” “should,” “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “project,” “budget,” “potential,” or “continue,” and similar expressions are used to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this report include our expectations of plans, strategies, objectives, growth and anticipated financial and operational performance, including revenue projections, capital expenditures and tax position. Forward-looking statements can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, no forward-looking statements can be guaranteed. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, when considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report. Those risk factors and other factors noted throughout this report could cause our actual results to differ materially from those disclosed in any forward-looking statement. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include: • • • • • • • • • • • • • • • • • • • • • • changes in general economic conditions; competitive conditions in our industry; actions taken by our customers and competitors; the supply and demand for natural gas, NGLs, crude oil and midstream services; our ability to successfully implement our business plan; our ability to complete internal growth projects on time and on budget; the price and availability of debt and equity financing; strategic decisions by CenterPoint Energy and OGE Energy regarding their ownership of us and our General Partner; operating hazards and other risks incidental to transporting, storing, gathering and processing natural gas, NGLs, crude oil and midstream products; natural disasters, weather-related delays, casualty losses and other matters beyond our control; interest rates; labor relations; large customer defaults; changes in the availability and cost of capital; changes in tax status; the effects of existing and future laws and governmental regulations; changes in insurance markets impacting costs and the level and types of coverage available; the timing and extent of changes in commodity prices; the suspension, reduction or termination of our customers’ obligations under our commercial agreements; disruptions due to equipment interruption or failure at our facilities, or third-party facilities on which our business is dependent; the effects of future litigation; and other factors set forth in this report and our other filings with the SEC. Forward-looking statements speak only as of the date on which they are made. We expressly disclaim any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. 4 Table of Contents Item 1. Business Overview PART I Enable Midstream Partners, LP is a Delaware limited partnership formed in May 2013 by CenterPoint Energy, OGE Energy and ArcLight to own, operate and develop midstream energy infrastructure assets strategically located to serve our customers. We completed our IPO in April 2014, and we are traded on the NYSE under the symbol “ENBL.” Our general partner is owned by CenterPoint Energy and OGE Energy. In this report, the terms “Partnership” and “Registrant” as well as the terms “our,” “we,” “us” and “its,” are sometimes used as abbreviated references to Enable Midstream Partners, LP together with its consolidated subsidiaries. Our assets and operations are organized into two reportable segments: (i) gathering and processing and (ii) transportation and storage. Our gathering and processing segment primarily provides natural gas and crude oil gathering and natural gas processing services to our producer customers. Our transportation and storage segment provides interstate and intrastate natural gas pipeline transportation and storage services primarily to our producer, power plant, LDC and industrial end-user customers. Our natural gas gathering and processing assets are primarily located in Oklahoma, Texas, Arkansas and Louisiana and serve natural gas production in the Anadarko, Arkoma and Ark-La-Tex Basins. Our crude oil gathering assets are located in North Dakota and serve crude oil production in the Bakken Shale formation of the Williston Basin. Our natural gas transportation and storage assets consist primarily of an interstate pipeline system extending from western Oklahoma and the Texas Panhandle to Louisiana, an interstate pipeline system extending from Louisiana to Illinois, an intrastate pipeline system in Oklahoma and our investment in SESH, a pipeline extending from Louisiana to Alabama. As of December 31, 2017 , our portfolio of midstream energy infrastructure assets included: • • • • • approximately 13,300 miles of natural gas and crude oil gathering pipelines; 15 major processing plants with 2.6 Bcf/d of processing capacity; approximately 7,800 miles of interstate pipelines (including SESH); approximately 2,200 miles of intrastate pipelines; and eight natural gas storage facilities with 86.0 Bcf of storage capacity. Our website address is www.enablemidstream.com. Documents and information on our website are not incorporated by reference in this report. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed with or furnished to the SEC are available, free of charge, on our website as soon as reasonably practicable after we electronically file or furnish such materials. Our Business Strategies Our primary business objective is to increase the cash available for distribution to our unitholders over time while maintaining our financial flexibility. We strive to meet this objective through the following strategies: • Capitalize on Organic Growth Opportunities Associated with Our Strategically Located Assets: We own and operate assets servicing four of the largest basins in the United States, including some of the most productive shale plays in these basins. We intend to grow our business by utilizing a disciplined approach emphasizing capital efficiency when developing new midstream energy infrastructure projects to support new and existing customers in these areas. • Maintain Strong Customer Relationships to Attract New Volumes and Expand Beyond Our Existing Asset Footprint and Business Lines: Management believes that we have built a strong and loyal customer base through exemplary customer service and reliable project execution. We have invested in organic growth projects in support of our existing and new customers. We work to maintain and build relationships with key producers and suppliers in an effort to attract new volumes and expansion opportunities. • Continue to Minimize Direct Commodity Price Exposure Through Fee-Based Contracts: We continually seek ways to minimize our exposure to commodity price risk. Management believes that focusing on fee-based revenues reduces our direct commodity price exposure. We intend to maintain our focus on increasing the percentage of long-term, fee-based contracts with our customers. 5 Table of Contents • Grow Through Accretive Acquisitions. We continually evaluate potential acquisitions of complementary assets with the potential for attractive returns in new operating areas or midstream business lines. We will continue to analyze acquisition opportunities using disciplined financial and operating practices, including evaluating and managing risks to cash distributions. Our Sponsors CenterPoint Energy and OGE Energy each own a significant interest in us. As of December 31, 2017 , CenterPoint Energy owned 54.1% of our common units and 100% of our Series A Preferred Units, and OGE Energy owned 25.7% of our common units. In addition, our sponsors own Enable GP, our general partner. As of December 31, 2017 , CenterPoint Energy owned a 50% management interest and a 40% economic interest in our general partner, and OGE Energy owned a 50% management interest and a 60% economic interest in our general partner. Enable GP owns the non-economic general partner interest in us and all of our incentive distribution rights. CenterPoint Energy (NYSE: CNP) is a public utility holding company whose operating subsidiaries provide electric transmission and distribution services and natural gas distribution services to customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas. CenterPoint Energy has publicly disclosed that it is evaluating strategic alternatives for its investment in the Partnership. CenterPoint Energy has disclosed that the alternatives may include a sale of all or a portion of the interests that it owns in the Partnership and the General Partner, that if the sale option is not viable it intends to reduce its ownership in the Partnership over time through a sale of the common units it holds in the public equity markets subject to market conditions, and that there can be no assurances that these evaluations will result in any specific action. OGE Energy (NYSE: OGE) is the parent company of Oklahoma Gas & Electric Company (OG&E), a regulated electric utility serving customers in Oklahoma and western Arkansas. Our sponsors are customers of our transportation and storage business. For the year ended December 31, 2017 , approximately 1% of our gross margin was derived from transportation and storage contracts with OG&E. For the year ended December 31, 2017 , approximately 8% of our total gross margin was derived from transportation and storage contracts servicing LDCs owned by CenterPoint Energy. In addition, our sponsors have entered into a number of agreements affecting us. For a more detailed description of our relationship and agreements with CenterPoint Energy and OGE Energy, please read Item 13. “Certain Relationships and Related Party Transactions.” Although management believes our relationships with CenterPoint Energy and OGE Energy are positive attributes, there can be no assurance that we will benefit from these relationships or that these relationships will continue. Our Assets and Operations Our assets and operations are organized into two reportable segments: (i) gathering and processing and (ii) transportation and storage. Gathering and Processing We own and operate substantial natural gas and crude oil gathering and natural gas processing assets in five states. Our gathering and processing operations consist primarily of natural gas gathering and processing assets serving the Anadarko, Arkoma and Ark-La-Tex Basins and crude oil gathering assets serving the Williston Basin. We provide a variety of services to the active producers in our operating areas, including gathering, compressing, treating, and processing natural gas, fractionating NGLs, and gathering crude oil and produced water. We serve shale and other unconventional plays in the basins in which we operate, including the following: • Anadarko Basin (Oklahoma, Texas Panhandle). We have natural gas gathering and processing operations in those portions of the Anadarko Basin located in Oklahoma and the Texas Panhandle where, as of December 31, 2017 , we served over 210 producers. Our operations include gathering and processing natural gas produced from the Granite Wash, Cleveland, Marmaton, Tonkawa, Cana Woodford, SCOOP, STACK and Mississippi Lime plays. The current focus of our Anadarko Basin gathering and processing operations is primarily on rich gas production. • Arkoma Basin (Oklahoma, Arkansas). In the Arkoma Basin, our operations primarily serve the Woodford Shale play located in Oklahoma and the Fayetteville Shale play located in Arkansas. Our Arkoma Basin gathering and processing 6 Table of Contents operations serve both rich and lean gas production. As of December 31, 2017 , we served more than 80 producers in the Arkoma Basin. • Ark-La-Tex Basin (Arkansas, Louisiana and Texas). We have gathering and processing operations in the Ark-La-Tex Basin located in Arkansas, Louisiana and Texas. Our Ark-La-Tex gathering and processing operations primarily serve the Haynesville, Cotton Valley and the lower Bossier plays . As of December 31, 2017 , we served over 100 producers in the Ark-La-Tex Basin where our gathering and processing operations provide service for both rich and lean gas production. • Williston Basin (North Dakota) . In the Williston Basin, we have operations in the Bakken Shale that are located in North Dakota. The focus of our operations in the Williston Basin is the gathering of crude oil and produced water for XTO Energy Inc. (XTO), an affiliate of ExxonMobil Corporation, with pipeline gathering systems in Dunn, McKenzie, Williams and Mountrail Counties of North Dakota. Please see “Note 18. Reportable Business Segments” included in Item 8. “Financial Statements and Supplementary Data—Notes to Audited Consolidated Financial Statements” for gathering and processing segment information related to Total Revenues, Operating Income and Total Assets. Capacity volumes for our transportation and storage facilities are measured based on physical volume and stated in millions or billions of cubic feet (“MMcf” or “Bcf”). Throughput volumes for our gathering and processing facilities are measured based on energy content and stated in millions or trillions of British thermal units (“MMBtu” or “TBtu”). A volume capacity of 100 MMcf of pipeline quality gas generally correlates to an energy content of 100,000 MMBtu. Crude oil and condensate are measured based on physical volume and stated in thousands of barrels (“MBbl”). 7 Table of Contents Natural Gas Gathering and Processing. T he following table sets forth certain information regarding our natural gas gathering and processing assets as of or for the year ended December 31, 2017 : Asset/Basin Anadarko Basin Arkoma Basin Ark-La-Tex Basin (1) Total ____________________ Approximate Length (miles) Approximate Compression (Horsepower) Average Gathered Volume (TBtu/d) Number of Processing Plants Processing Capacity (MMcf/d) NGLs Produced (MBbl/d) 8,200 3,000 1,800 758,000 133,500 160,200 13,000 1,051,700 1.81 0.55 1.20 3.56 11 1 3 15 1,845 60 645 2,550 76.37 4.79 8.95 90.11 (1) Ark-La-Tex Basin assets also include 14,500 Bbl/d of fractionation capacity and 6,300 Bbl/d of ethane pipeline capacity, which are not listed in the table. Our natural gas gathering assets include approximately 13,000 miles of natural gas gathering pipelines as of December 31, 2017 . Our natural gas gathering systems consist of networks of pipelines that collect natural gas from points at or near our customers’ wells for delivery to plants for processing or pipelines for transportation. Natural gas is moved from the receipt points to the delivery points on our gathering systems by the use of compression. Our natural gas processing assets included 15 natural gas processing plants with 2,550 MMcf/d of inlet capacity as of December 31, 2017 . Natural gas is comprised primarily of methane, but at the wellhead natural gas may contain varying amounts of NGLs. Our processing plants recover NGLs from natural gas and primarily deliver NGLs and natural gas to pipelines for transportation. The following table sets forth information with respect to our natural gas processing plants as of or for the year ended December 31, 2017 : Processing Plant Year Installed Type of Plant Average Daily Inlet Volumes (MMcf/d) Inlet Capacity (MMcf/d) NGL Production Capacity (Bbl/d) (1) Anadarko Bradley II Bradley McClure Wheeler South Canadian Clinton Roger Mills Canute Cox City Thomas Calumet Arkoma Wetumka Ark-La-Tex Panola Sligo (2) Waskom Total ____________________ 2016 2015 2013 2012 2011 2009 2008 1996 1994 1981 1969 Cryogenic Cryogenic Cryogenic Cryogenic Cryogenic Cryogenic Refrigeration Cryogenic Cryogenic Cryogenic Lean Oil 173 170 200 154 204 116 22 32 127 92 89 200 200 200 200 200 120 100 60 180 135 250 28,000 28,000 22,000 22,000 26,000 14,000 — 4,300 14,500 9,900 8,000 1983 Cryogenic 35 60 5,000 2007 Cryogenic 2004 1995 (3) Refrigeration Cryogenic 19 42 174 100 225 320 1,649 2,550 8,000 1,400 14,500 205,600 (1) Excludes condensate capacity. (2) Average daily inlet volumes and inlet capacity includes 20 MMcf/d and 25 MMcf/d, respectively, related to a separate cryogenic unit. (3) A processing plant has been in operation on the Waskom plant site since 1940. The Waskom plant was upgraded to cryogenic in 1995. The natural gas gathering and processing assets in the Anadarko Basin include 11 processing plants, 10 of which are interconnected through our super-header system. The super-header system is configured to facilitate the flow of natural gas across 8 Table of Contents our operating areas in western Oklahoma and the Texas Panhandle to the Bradley II, Bradley, McClure, Wheeler, South Canadian, Clinton, Canute, Cox City, Thomas and Calumet processing plants. The super-header system allows us to optimize the utilization of the connected processing plants. Crude Oil Gathering . As of December 31, 2017 , we had approximately 175 miles of crude oil gathering pipelines and approximately 160 miles of produced water gathering pipelines in the Bakken Shale of the Williston Basin. Our crude oil gathering systems have a combined design capacity of 57.9 MBbl/d, and as of December 31, 2017 , we had 0.2 million gross acres dedicated under a crude oil gathering agreement. For the year ended December 31, 2017 , we had an average daily throughput of 25.56 MBbl/d of crude oil and an average daily throughput of 9.7 MBbl/d of produced water on our Williston Basin gathering system. Our Williston Basin crude oil gathering assets are located in Dunn, McKenzie, Williams and Mountrail Counties in North Dakota. These systems were designed and built to serve the crude oil production of XTO in these areas. On our systems, crude oil is received on crude oil gathering pipelines near our customer’s wells for delivery to third party transportation pipelines, and produced water is received by produced water gathering pipelines for delivery to third party disposal wells. We do not take title to crude oil or produced water gathered and we do not own or operate produced water disposal wells. Delivery Points. Natural gas that is gathered, and when applicable, processed, is typically redelivered to our customers at interconnections with transportation pipelines. Our gathering lines interconnect with both our interstate and intrastate pipelines, as well as other interstate and intrastate pipelines, including the Acadian, ANR, ETC Tiger, Gulf Crossing, Gulf South, NGPL, Northern Natural, Panhandle Eastern, Regency, Southern Natural Gas, Tennessee Gas and Texas Eastern Transmission pipelines. These connections provide producers with access to a variety of natural gas market hubs. Crude oil gathered on our Williston Basin gathering systems in Dunn and McKenzie Counties can be redelivered to our customers through interconnections to the BakkenLink Pipeline and the Dakota Access Pipeline. Crude oil gathered on our Williston Basin gathering systems in Williams and Mountrail Counties can be redelivered to our customers through interconnections to the Enbridge North Dakota Pipeline and the Dakota Access Pipeline. We typically purchase the NGLs produced at our processing plants, and most of the NGLs are delivered into third-party pipelines and transported to Conway, Kansas, or Mont Belvieu, Texas, where the NGLs are exchanged for fractionated NGLs that are sold under contract or on the spot market. At our Cox City, Calumet and Wetumka plants, we operate depropanizers that allow us to extract propane from the NGL stream and sell propane to local markets. Additionally, we operate a fractionator at our Waskom plant and sell ethane, propane, butane and natural gasoline to local markets. Customers. We generate revenues from producers in the basins in which we operate. For the year ended December 31, 2017 , our top natural gas gathering and processing customers by gathered volumes were Continental Resources, Inc. (Continental), Vine Oil and Gas (Vine), GeoSouthern Energy Corporation (GeoSouthern), XTO, Tapstone Energy LLC (Tapstone), Apache Corporation (Apache), BP America Production Company (BP), affiliates of Chesapeake Energy Corporation (Chesapeake), Covey Park Energy LLC (Covey Park) and FourPoint Energy, LLC (FourPoint). For the year ended December 31, 2017 , our top ten natural gas producer customers accounted for approximately 70% of our gathered natural gas volumes. Our Williston Basin gathering systems serve XTO. The rates and terms of service on our Williston Basin crude oil gathering systems are regulated by FERC under the Interstate Commerce Act, but our Williston Basin produced water gathering systems are not FERC regulated. As of December 31, 2017 , XTO was our only customer on these systems. Contracts. Our contracts typically provide for natural gas and crude oil gathering services that are fee-based and for natural gas processing arrangements that are fee-based, or percent-of-liquids, percent-of-proceeds or keep-whole based . • • • Under a typical fee-based processing arrangement, we process the raw natural gas to extract the NGLs, purchase the NGLs from the producer less a fee, return the processed natural gas to the producer and sell the NGLs for our own account. Under a typical percent-of-liquids processing arrangement, we process the raw natural gas to extract the NGLs, purchase the NGLs from the producer at a discount, return the processed natural gas to the producer and sell the NGLs for our own account. Under a typical percent-of-proceeds processing arrangement, we process the raw natural gas to extract the NGLs, purchase the NGLs and an agreed upon percentage of the processed natural gas from the producer at a discount, return the remaining processed natural gas to the producer and sell the purchased natural gas and NGLs for our own account. 9 Table of Contents • Under a typical keep-whole arrangement, we process raw natural gas to extract the NGLs, return a quantity of the processed natural gas to the producer that is equivalent to the raw natural gas on a Btu basis and retain and sell the NGLs for our own account. For the year ended December 31, 2017 , 58% , 35% and 7% of our inlet volumes were under processing arrangements that were fee-based, percent-of- proceeds or percent-of-liquids, and keep-whole, respectively. For the year ended December 31, 2017 , 74% of our gathering and processing gross margin was fee- based, and the remaining 26% of our gathering and processing gross margin was primarily from sales of commodities, including natural gas, natural gas liquids and condensate received under percent-of-proceeds, percent-of-liquids and keep-whole arrangements. In lean gas areas, such as the eastern Arkoma Basin and the Haynesville Shale of the Ark-La-Tex Basin, some of our natural gas gathering contracts contain minimum volume commitments from our customers. In addition, a portion of the crude oil gathered by our crude oil gathering system is under a contract with a minimum volume commitment. Under a minimum volume commitment, a customer agrees to either deliver a minimum volume of natural gas or crude oil to our system for service or pay the service fees for the minimum volume of natural gas or crude oil regardless of whether or not the minimum volume of natural gas or crude oil is delivered. We call any payment for the difference between the volume gathered and the minimum volume committed a shortfall payment. Some of our contracts provide our customers the option to elect to pay a higher gathering fee over the remaining term of the contract in lieu of making a shortfall payment. As of December 31, 2017 , the percentage of our gathering and processing gross margin attributable to natural gas gathering contracts with minimum volume commitments, and the volume commitment-weighted average remaining terms of those contracts, were as follows: Percentage of gathering and processing gross margin attributable to gathering contracts with minimum volume commitments Percentage attributable to shortfall payments (1) Volume commitment-weighted average remaining contract term (in years) ____________________ Anadarko Basin Arkoma Basin Ark-La-Tex Basin Williston Basin (2) Total — — — 7% 80% 18% 39% 2% — 5.9 2.1 11.2 27% 47% 3.7 (1) Represents the percentage of gathering and processing gross margin from gathering contracts with minimum volume commitments that were attributable to shortfall payments. (2) Under the Williston Basin contracts, if the customer ships in excess of the minimum volume, this volume commitment could end before the expiration of the contract term. For our gathering and processing contracts that do not have minimum volume commitments, we strive to obtain acreage dedications. Under an acreage dedication, a customer agrees to deliver all of the natural gas or crude oil produced from a given area to our system for gathering, and, if applicable, processing. As of December 31, 2017 , the gross acres dedicated under gathering agreements and the volume-weighted average remaining term for all gathering and processing contracts were as follows: Gross acreage dedication (in millions) Anadarko Basin Arkoma Basin 1.7 5.0 Ark-La-Tex Basin Williston Basin 0.2 0.8 Volume-weighted average remaining contract term (in years) 6.1 2.3 5.4 11.9 Total 7.7 5.5 Construction. Our gathering and processing business involves the construction of natural gas and crude oil gathering assets and natural gas processing assets as needed to serve our existing and new customers. For example, during the year ended December 31, 2017 , we constructed 210 miles of gathering pipelines, added 59,600 horsepower of compression and invested $264 million in the construction of gathering and processing assets. In addition, the Partnership entered into an agreement to deliver approximately 400 MMcf/d of rich natural gas from the Anadarko Basin to north Texas, providing a new market outlet for growing Anadarko Basin production. The project is expected to be in service by the end of the second quarter of 2018. Even with the 400 MMcf/d of processing capacity provided by this project, the Partnership anticipates that there will be a need to resume construction of the previously announced Wildhorse Plant, a cryogenic processing facility we plan to connect to our super-header system in Garvin County Oklahoma, though likely not before 2019. Acquisitions. In the fourth quarter of 2017, we acquired Align Midstream, LLC, a midstream company with natural gas gathering and processing facilities in the Cotton Valley and Haynesville plays of the Ark-La-Tex Basin. The acquisition included approximately 190 miles of natural gas gathering pipelines across Rusk, Panola and Shelby counties in Texas and DeSoto Parish in Louisiana and a cryogenic natural gas processing plant in Panola County, Texas, with a capacity of 100 MMcf/d. 10 Table of Contents Competition. Competition to gather and process natural gas is primarily a function of gathering rate, processing value, system reliability, fuel rate, system run time, construction cycle time and prices at the wellhead. Our gathering and processing systems compete with gatherers and processors of all types and sizes, including those affiliated with various producers, other major pipeline companies and various independent midstream entities. In the process of selling NGLs, we compete against other natural gas processors extracting and selling NGLs. Our primary competitors are other midstream companies who are active in the regions where we operate. Competition to gather crude oil and produced water is primarily a function of rates, terms of service, system reliability and construction cycle time. The rates and terms of service of our crude oil gathering, but not our produced water gathering, are FERC regulated. Our Williston Basin gathering systems compete with other gatherers, including those affiliated with producers and other midstream companies. Seasonality . While the results of our gathering and processing segment are not materially affected by seasonality, from time to time our operations and construction of assets can be impacted by inclement weather. Transportation and Storage We own and operate interstate and intrastate transportation and storage systems across nine states. Our transportation and storage systems consist primarily of our interstate systems, EGT and MRT, our intrastate system, EOIT, and our investment in SESH. Our transportation and storage assets transport natural gas from areas of production and interconnected pipelines to power plants, LDCs and industrial end users as well as interconnected pipelines for delivery to additional markets. Our transportation and storage assets also provide facilities where natural gas can be stored by customers. The following table sets forth certain information regarding our transportation and storage assets as of or for the year ended December 31, 2017 : Asset Length (miles) Compression (Horsepower) Transportation and Storage Average Throughput (TBtu/d) Transportation Capacity (Bcf/d) (1) Transportation Firm Contracted Capacity (Bcf/d) (2) Storage Capacity (Bcf) Storage Firm Contracted Capacity (Bcf/d) EGT MRT EOIT Subtotal SESH Total 5,900 1,600 2,200 9,700 290 9,990 382,600 119,700 218,900 721,200 107,800 829,000 2.4 0.8 1.9 (3) 5.1 — (5) 5.1 6.5 1.7 — (3) 8.2 1.1 (4) 9.3 4.58 1.63 — 6.21 — (5) 6.21 30.5 31.5 24.0 86.0 — (5) 86.0 22.92 28.77 11.50 63.19 — (5) 63.19 __________________________ (1) Actual volumes transported per day may be less than total firm contracted capacity based on demand. (2) Transportation Firm Contracted Capacity includes contracts with affiliates and our subsidiaries. (3) Our EOIT pipeline system is a web-like configuration with multidirectional flow capabilities between numerous receipt and delivery points, which limits our ability to determine an overall system capacity. During the year ended December 31, 2017 , the peak daily throughput was 2.3 TBtu/d or, on a volumetric basis, 2.3 Bcf/d. (4) SESH has 1.09 Bcf/d of transportation capacity from Perryville, Louisiana to its endpoint in Mobile County, Alabama. (5) We own a 50% interest in SESH and as such, do not include certain information regarding its transportation and storage assets in the table set forth above. Our transportation and storage assets were designed and built to primarily serve large natural gas and electric utilities in our areas of operation. In addition, our transportation and storage assets serve natural gas producers, industrial end users and natural gas marketers. For the year ended December 31, 2017 , our top transportation and storage customers by revenue were affiliates of CenterPoint Energy, Spire Inc. (Spire), American Electric Power Co. (AEP), OGE Energy, Continental, XTO, Chesapeake, Midcontinent Express Pipeline LLC (MEP), Entergy Corporation (Entergy) and Shell Energy North America (Shell). From time to time, our transportation and storage business involves the construction of natural gas pipelines as needed to serve our existing and new customers. For example, during the year ended December 31, 2017 , we added 4,500 horsepower of compression and invested $51 million in the construction of transportation pipelines. In April 2017, EGT announced the Cana and STACK Expansion (CaSE) project, a system expansion providing firm transportation service for growing Anadarko Basin 11 Table of Contents production. The project’s foundation shipper, Newfield Exploration Company, entered into a 205,000 Dth/d firm natural gas transportation agreement with EGT. The 10-year contract is expected to start at an initial capacity of 45,000 Dth/d in early 2018 and grow to the full contracted capacity by the fourth quarter of 2018. In addition, we are currently building an approximately 80-mile pipeline to expand the EOIT system in connection with a 228,000 Dth/d firm natural gas transportation agreement with OGE Energy that is expected to be in-service in late 2018. Our transportation assets include approximately 10,000 miles of transportation pipelines in Texas, Oklahoma, Arkansas, Louisiana, Kansas and Missouri, providing access to natural gas supplies from the Anadarko, Arkoma and Ark-La-Tex Basins to natural gas consuming markets in the Southeastern, Northeastern and Midwestern United States. Our storage assets, as of December 31, 2017 , provide a combined capacity of 86.0 Bcf with 2.1 Bcf/d of aggregate maximum withdrawal capacity from our seven storage facilities in Oklahoma, Louisiana and Illinois and from our undivided 1/12th interest in the Bistineau Storage Facility in Louisiana. Boardwalk Pipeline Partners, LP owns an undivided 11/12th interest in, and operates, the Bistineau Storage Facility. In addition, we have contracted for 2.5 Bcf of firm storage capacity in Cardinal’s Perryville salt cavern storage facility. Our transportation and storage assets are comprised of three categories: (1) interstate transportation and storage, (2) intrastate transportation and storage and (3) our investment in SESH. Please see “Note 18. Reportable Business Segments included in Item 8. Financial Statements and Supplementary Data—Notes to Audited Consolidated Financial Statements” for transportation and storage segment information related to Total Revenues, Operating Income and Total Assets. Interstate Transportation and Storage Our interstate transportation and storage business consists of EGT and MRT. As interstate pipelines, EGT and MRT are subject to regulation as natural gas companies by FERC under the NGA. 12 Table of Contents EGT EGT provides natural gas transportation and storage services primarily to customers in Oklahoma, Texas, Arkansas, Louisiana, Missouri and Kansas. In addition to 5,900 miles of interstate pipelines with capacity of 6.5 Bcf/d, EGT has two underground natural gas storage facilities in Oklahoma and one underground natural gas storage facility in Louisiana, which, as of December 31, 2017 , operate at a combined capacity of 30.5 Bcf with 739 MMcf/d of aggregate maximum withdrawal capacity. Interconnections and Delivery Points. In addition to delivering natural gas to utilities and industrial end users in Oklahoma, Louisiana, Texas and Arkansas, EGT receives natural gas from and delivers natural gas to a variety of intrastate and interstate pipelines through its numerous interconnections. Those interconnections include SESH, ANR, Columbia Gulf, EOIT, Gulf South, MEP, MRT, SONAT, Tennessee Gas, Texas Eastern, Texas Gas and Trunkline. Through EGT’s interconnection with SESH, our customers have access to the Southeast power generation market. Through our interconnections with other pipelines, our customers have access to the Midwest and Northeast markets. Many of EGT’s interconnections are at our Perryville Hub, which provides the ability to move natural gas between 11 major interstate pipelines. As a result, EGT provides our customers with access to not only natural gas consuming markets in Oklahoma, Louisiana, Texas and Arkansas, but also most of the major natural gas consuming markets east of the Mississippi River. In addition, EGT provides our customers supplying those markets with access to natural gas from producing basins and shale plays across the Mid-continent, including the Anadarko, Arkoma and Ark-La- Tex basins and the Barnett, Fayetteville, Granite Wash, Haynesville, SCOOP and STACK plays. Customers. EGT primarily serves LDCs owned by CenterPoint Energy, producers in key plays in the Mid-continent, power plants, other LDCs and industrial end-users. EGT’s customers are primarily located in Arkansas, Louisiana, Oklahoma and Texas. For the year ended December 31, 2017 , approximately 28% of EGT’s service revenue was attributable to contracts with LDCs owned by CenterPoint Energy with a volume-weighted average contract life of 3.0 years for transportation contracts and 3.2 years for storage contracts. In addition to CenterPoint Energy’s LDCs, EGT’s other major customers include Continental, AEP, Chesapeake and XTO. Contracts. Although EGT has established maximum rates for interstate transportation and storage services as required by FERC, EGT is authorized to enter into negotiated rate and discounted rate agreements with its customers. EGT’s services are 13 Table of Contents typically provided under firm, fee-based transportation and storage agreements. For the year ended December 31, 2017 , approximately 53% of our transportation and storage gross margin was derived from EGT’s firm contracts, 70% of EGT’s transportation capacity was under firm contracts with a volume-weighted average remaining contract life of 3.2 years, and 75% of EGT’s storage capacity was under firm contracts with a volume-weighted average remaining contract life of 3.2 years. EGT’s firm transportation contracts representing 10% of CenterPoint Energy’s LDCs firm transportation capacity are scheduled to expire in March 2018 and 90% are scheduled to expire in March 2021. All of CenterPoint Energy’s LDCs firm storage contracts with EGT are scheduled to expire in March 2021. Seasonality. EGT provides gas transmission delivery services to LDCs owned by CenterPoint in Arkansas, Louisiana, Oklahoma and Texas. Customer demand for natural gas on EGT is usually greater during the winter, primarily due to LDC demand to serve residential and commercial natural gas requirements. In addition, EGT experiences seasonal impacts associated with storage spreads and basis spreads on interconnected pipelines, as well as power plant demand. Competition. EGT competes with a variety of other interstate and intrastate pipelines across Texas, Oklahoma, Arkansas and Louisiana. Our management views the principal elements of competition among pipelines as rates and terms, flexibility and reliability of service. EGT provides both flexibility and reliability of service with access to multiple sources of supply in the Anadarko, Arkoma and Ark-La-Tex Basins and access to multiple markets in the Midwest, Northeast and Southeast through interconnections with other pipelines. EGT’s interconnections with other pipelines are primarily at our Perryville Hub. MRT MRT provides natural gas transportation and storage services principally in Texas, Arkansas, Louisiana, Missouri and Illinois. In addition to 1,600 miles of interstate pipelines with capacity of 1.7 Bcf/d, MRT has one underground natural gas storage facility in Louisiana and one underground natural gas storage facility in Illinois, which, as of December 31, 2017 , operate at a combined capacity of 31.5 Bcf with 717 MMcf/d of aggregate maximum withdrawal capacity. Interconnections and Delivery Points. MRT receives natural gas from a variety of interstate and intrastate pipelines through its interconnections and delivers natural gas primarily to the St. Louis market. Those interconnections include EGT, Gulf South, 14 Table of Contents NGPL, Ozark Gas Transmission, Texas Eastern, Texas Gas and Trunkline . From MRT’s West Line, we provide our customers with access to supply from East Texas and North Louisiana, including the Haynesville Shale. From MRT’s mainline, we provide our customers with access to supply from the Anadarko, Arkoma and Ark-La-Tex basins and from and the Fayetteville Shale though our interconnection with EGT, Texas Gas and Ozark Gas Transmission. From MRT’s East Line, we provide our customers with access to supply from the Mid-continent and the Marcellus Shale through our interconnections with NGPL and Trunkline. As a result, MRT provides the St. Louis market with access to natural gas from a variety of major producing basins across the U.S. Customers . MRT primarily serves the St. Louis LDC owned by Spire. For the year ended December 31, 2017 , 61% of MRT’s service revenue was attributable to Spire under contracts with a volume-weighted average contract life of 1.3 years for transportation contracts and 1.4 years for storage contracts. MRT’s other customers include utilities and industrial end users. MRT’s customers are primarily located in Arkansas, Missouri and Illinois. Contracts . MRT’s services are typically provided under firm, fee-based transportation and storage agreements, with rates and terms of service regulated by FERC. For the year ended December 31, 2017 , approximately 14% of our transportation and storage gross margin was derived from MRT’s firm contracts, 96% of MRT’s transportation capacity was under firm contracts with a volume-weighted average remaining contract life of 1.9 years and 91% of MRT’s storage capacity was under firm contracts with a volume-weighted average remaining contract life of 1.6 years. MRT’s firm transportation contracts representing 63% of Spire’s firm transportation capacity are scheduled to expire in July 2018 and 37% of Spire’s firm transportation capacity are scheduled to expire in July 2020. All of Spire’s firm storage contracts are scheduled to expire in May 2019. In January 2017, Spire filed an application with FERC to construct the Spire STL Pipeline, which would be an additional interstate pipeline serving the St. Louis market. Subject to receiving approval of the proposed project from FERC, Spire has indicated that it is targeting an early to mid-2019 in-service date for this pipeline. If Spire constructs this pipeline, we anticipate that its need for firm transportation and storage capacity on MRT will decrease. Seasonality. Customer demand for natural gas on MRT is usually greater during the winter, primarily due to LDC demand to serve residential and commercial natural gas requirements. In addition, MRT experiences seasonal impacts associated with storage spreads and basis spreads on market-based pipelines. Competition. MRT competes with various intrastate pipelines providing natural gas to the St. Louis market. In addition, MRT, from time-to-time, competes with potential projects to connect one or more third party interstate pipelines to the St. Louis market, such as the proposed Spire STL Pipeline. Our management views the principal elements of competition among pipelines as rates, terms of service, flexibility and reliability of service. MRT, through its interconnections with a variety of interstate and intrastate pipelines and its access to supply from a variety of producing basins, provides our customers with access to a variety of natural gas supply sources. Intrastate Transportation and Storage Our intrastate transportation and storage assets consist primarily of EOIT. EOIT provides transportation and storage services in Oklahoma. Our EOIT system delivers natural gas from the Arkoma and Anadarko Basins, including growth areas in the Cana Woodford, Granite Wash, Cleveland, Tonkawa, SCOOP, STACK and Mississippi Lime Shale plays in western Oklahoma and the Texas Panhandle, to utilities and industrial end users connected to EOIT and to interstate and intrastate pipelines interconnected with EOIT. EOIT had 1.88 TBtu/d of average daily throughput for the year ended December 31, 2017 . In addition to 2,200 miles of intrastate pipelines, EOIT has two underground natural gas storage facilities in Oklahoma, which, as of December 31, 2017 operate at a combined capacity of 24 Bcf with 605 MMcf/d of aggregate max imum withdrawal capacity. As of December 31, 2017, our intrastate transportation also included a 20-mile intrastate pipeline in Illinois. This 20-mile intrastate pipeline became part of the MRT system on January 1, 2018. 15 Table of Contents Interconnections and Delivery Points. EOIT has 75 interconnections and EOIT interconnects with EGT and 12 third-party interstate and intrastate natural gas pipelines, including ANR Pipeline, El Paso Natural Gas Pipeline, Gulf Crossing Pipeline Company LLC, MEP, Natural Gas Pipeline Company of America, Northern Natural Gas Company, ONEOK Gas Transmission, Ozark Gas Transmission, L.L.C., Panhandle Eastern Pipe Line, Postrock KPC Pipeline, LLC, Southern Star Central Gas Pipeline and ONEOK Western Trails Pipeline, L.L.C. In addition, EOIT connects to 43 end-user customers, including 16 natural gas- fired electric generation facilities in Oklahoma. Customers. EOIT’s customers include Oklahoma’s two largest electric utilities, OG&E and Public Service Company of Oklahoma, an affiliate of AEP (PSO). For the year ended December 31, 2017 , approximately 6% of our total transportation and storage gross margin was attributable to a firm contract with our affiliate OG&E, and approximately 3% of our transportation and storage gross margin was attributable to a firm contract with PSO. Our transportation agreement with OG&E extends through April 30, 2019, and will remain in effect year to year thereafter unless either party provides notice of termination to the other party at least 180 days prior to the commencement of the succeeding annual period. Our transportation agreement with PSO extends through December 31, 2020 and includes the option for a one-year extension. EOIT’s customers also include other electric generators, LDCs, Arkoma and Anadarko Basin producers and industrial end users. Contracts. EOIT provides fee-based firm and interruptible transportation and storage services on both an intrastate basis and, pursuant to Section 311 of the NGPA, on an interstate basis. For the year ended December 31, 2017 , approximately 21% of our transportation and storage gross margin was derived from EOIT’s firm contracts. EOIT’s transportation capacity was under firm contracts with a volume-weighted average remaining contract life of 5.5 years and EOIT’s storage capacity was under firm contracts with a volume-weighted average remaining contract life of 0.9 years. Seasonality. EOIT provides gas transmission delivery services to the majority of OG&E’s and all of PSO’s natural gas-fired electric generation facilities in Oklahoma. Customer demand for natural gas transportation and storage services on EOIT is usually greater during the summer, primarily due to demand by natural gas-fired power plants to serve residential and commercial electricity requirements. 16 Table of Contents Competition . EOIT competes with a variety of interstate and intrastate pipelines in providing transportation and storage services in Oklahoma, including competing against several pipelines with which EOIT interconnects. We view competition in the transportation and storage market as primarily a function of rates, terms of services, flexibility and reliability of service. EOIT’s integrated transportation and storage system allows us to provide load following service to natural gas-fired power plants to allow the power plants the ability to regulate generation and meet the instantaneous changes in customer demand for electricity. Our Investment in SESH SESH is an approximately 290-mile interstate pipeline that provides transportation services in Louisiana, Mississippi and Alabama. We own a 50% interest in SESH and provide field operations for the pipeline. Spectra Energy Partners, LP owns the remaining 50% interest in SESH and provides gas control and commercial operations for the pipeline. As of December 31, 2017 , SESH had 1.09 Bcf/d of transportation capacity from Perryville, Louisiana to its endpoint in Mobile County, Alabama. Interconnections and Delivery Points . SESH runs from the Perryville Hub in northeastern Louisiana to southwestern Alabama near the Gulf Coast. SESH has 20 interconnects with third-party natural gas pipelines and provides access to major Southeast and Northeast markets. Natural gas transported by SESH is primarily transported by the interconnecting pipelines to companies generating electricity for the Florida power market. SESH also interconnects with three high- deliverability storage facilities, Mississippi Hub Storage, Petal Gas Storage and Southern Pines Energy Center. Customers and Contracts . SESH’s customers are primarily companies that generate electricity for the Florida power market. The rates charged by SESH for interstate transportation services are regulated by FERC. SESH’s transportation services are typically provided under firm, fee-based negotiated rate agreements. SESH’s transportation contracts have a volume-weighted average remaining contract life of 4.4 years. Seasonality . SESH is generally not impacted by seasonality. SESH’s load factor generally remains constant throughout the year. 17 Table of Contents Competition. SESH competes with other interstate and intrastate pipelines providing access to the Southeast power generation market. Our management views the principal elements of competition among pipelines as rates and terms, flexibility and reliability of service. Rate and Other Regulation Federal, state and local regulation of pipeline gathering and transportation services may affect certain aspects of our business and the market for our products and services. Interstate Natural Gas Pipeline Regulation EGT, MRT and SESH are subject to regulation by FERC and are considered “natural gas companies” under the Natural Gas Act (“NGA”). Natural gas companies may not charge rates that have been determined to be unjust or unreasonable by FERC. In addition, the NGA prohibits natural gas companies from granting any undue preference or advantage, or unduly discriminating against any person with respect to pipeline rates or terms and conditions of service, including unduly discriminatory or preferential access to information. FERC authority over natural gas companies that provide natural gas pipeline transportation services in interstate commerce includes: • • • rates, terms and conditions of service and service contracts; certification and construction of new facilities or expansion of existing facilities; abandonment of facilities; • maintenance of accounts and records; • • • • acquisition and disposition of facilities; initiation, extension or abandonment of services; accounting, depreciation and amortization policies; conduct and relationship with certain affiliates; • market manipulation in connection with the purchase or sale of natural gas or transportation in interstate commerce; and • various other matters. Under the NGA, the rates for service on interstate facilities must be just and reasonable and not unduly discriminatory. Generally, the maximum recourse rates for interstate pipelines are based on the pipeline’s cost of service including recovery of and a return on the pipeline’s actual prudent investment cost. Key determinants in the ratemaking process are the total costs of providing service, allowed rate of return and throughput projections. Our interstate pipeline operations may be affected by changes in the demand for natural gas, the available supply and relative price of natural gas in the Mid-continent and Gulf Coast natural gas supply regions and general economic conditions. Rate and tariff changes can only be implemented upon approval by FERC. Two primary methods are available for changing the rates, terms and conditions of service of an interstate natural gas pipeline. Under the first method, the pipeline voluntarily seeks a rate or tariff change by making a filing with FERC justifying the proposed change. FERC provides notice of the proposed change to the public through publication on its website and in the Federal Register . If FERC determines that a proposed change is just and reasonable, FERC grants approval of and allows the pipeline to implement the change. If FERC determines that a proposed change may not be just and reasonable, FERC may suspend the proposed change for up to five months. Subsequent to any suspension period ordered by FERC, the proposed change may be placed into effect by the company, pending final FERC approval. In most cases, a proposed rate change is placed into effect before a final FERC determination on such rate change, and the pipeline is permitted to collect the proposed rate subject to refund (plus interest). Under the second method, FERC may, on its own motion or based on a complaint filed by a third party, initiate a proceeding seeking to compel the company to change its rates, terms and/or conditions of service. If FERC determines that the existing rates, terms and/or conditions of service are unjust, unreasonable, unduly discriminatory or preferential, then any rate reduction or change that it orders generally will be effective prospectively from the date of the FERC order requiring this change. Market Behavior Rules; Posting and Reporting Requirements On August 8, 2005, Congress enacted the EPAct of 2005. Among other matters, the EPAct of 2005 amended the NGA to add an anti-manipulation provision that makes it unlawful for any entity to engage in prohibited behavior in contravention of rules and regulation to be prescribed by FERC and, furthermore, provides FERC with additional civil penalty authority. On January 19, 18 Table of Contents 2006, FERC issued Order No. 670, a rule implementing the anti-manipulation provisions of the EPAct of 2005. The rules make it unlawful for any entity, directly or indirectly in connection with the purchase or sale of natural gas subject to the jurisdiction of FERC or the purchase or sale of transportation services subject to the jurisdiction of FERC, to (1) use or employ any device, scheme or artifice to defraud; (2) to make any untrue statement of material fact or omit to make any such statement necessary to make the statements not misleading; or (3) to engage in any act or practice that operates as a fraud or deceit upon any person. The anti- manipulation rules apply to interstate gas pipelines and storage companies and intrastate gas pipelines and storage companies that provide interstate services, such as Section 311 service, as well as otherwise non-jurisdictional entities to the extent the activities are conducted “in connection with” gas sales, purchases or transportation subject to FERC jurisdiction. The anti-manipulation rules do not apply to activities that relate only to intrastate or other non-jurisdictional sales or gathering to the extent such transactions do not have a “nexus” to jurisdictional transactions. The EPAct of 2005 also amends the NGA and the NGPA to give FERC authority to impose civil penalties for violations of these statutes and FERC’s regulations, rules and orders, up to approximately $1.2 million per day per violation for violations occurring after August 8, 2005. This maximum penalty authority established by statute will continue to be adjusted periodically for inflation. In connection with this enhanced civil penalty authority, FERC issued a revised policy statement on enforcement to provide guidance regarding the enforcement of the statutes, orders, rules and regulations it administers, including factors to be considered in determining the appropriate enforcement action to be taken. If we fail to comply with all applicable FERC-administered statutes, rules, regulations and orders, we could be subject to substantial penalties and fines. In addition, the CFTC is directed under the Commodities Exchange Act, or CEA, to prevent price manipulations for the commodity and futures markets, including the energy futures markets. Pursuant to the Dodd-Frank Act and other authority, the CFTC has adopted anti-market manipulation regulations that prohibit fraud and price manipulation in the commodity and futures markets. The CFTC also has statutory authority to seek civil penalties of up to the greater of $1.1 million or triple the monetary gain to the violator for violations of the anti-market manipulation sections of the CEA. The EPAct of 2005 also added Section 23 to the NGA, authorizing FERC to facilitate price transparency in markets for the sale or transportation of physical natural gas in interstate commerce. In 2007, FERC took steps to enhance its market oversight and monitoring of the natural gas industry by issuing several rulemaking orders designed to promote gas price transparency and to prevent market manipulation. In December 2007, FERC issued a final rule on the annual natural gas transaction reporting requirements, as amended by subsequent order on rehearing, or Order No. 704. Order No. 704 requires buyers and sellers of annual quantities of natural gas of 2,200,000 MMBtu or more, including entities not otherwise subject to FERC’s jurisdiction, to provide by May 1 of each year an annual report to FERC describing their aggregate volumes of natural gas purchased or sold at wholesale in the prior calendar year to the extent such transactions utilize, contribute to or may contribute to the formation of price indices. Order No. 704 also requires market participants to indicate whether they report prices to any index publishers and, if so, whether their reporting complies with FERC’s policy statement on price reporting. In June 2010, FERC issued the last of its three orders on rehearing and clarification further clarifying its requirements. Intrastate Natural Gas Pipeline and Storage Regulation Our intrastate natural gas pipeline and Hinshaw pipelines are subject to state regulation of rates and terms of service, but the scope of such regulation varies state to state. In Oklahoma, our intrastate pipeline system (EOIT) is subject to limited regulation by the Oklahoma Corporation Commission, or the OCC. Oklahoma has a non-discriminatory access requirement, which is subject to a complaint-based review. EOIT’s rates and terms of service are not subject to regulation by the OCC. In 2017, our Hinshaw pipeline system in Illinois was subject to regulation by the Illinois Commerce Commission. The Illinois Commerce Commission’s regulation of this asset ended on January 1, 2018, when it became part of MRT. Intrastate natural gas transportation is largely regulated by the state in which the transportation takes place. An intrastate natural gas pipeline system may transport natural gas in interstate commerce provided that the rates, terms and conditions of such transportation service comply with FERC’s regulations under Section 311 of the NGPA and Part 284 of the FERC’s regulations. The NGPA regulates, among other things, the provision of transportation and storage services by an intrastate natural gas pipeline on behalf of an interstate natural gas pipeline or a LDC served by an interstate natural gas pipeline. Under Section 311, rates charged for transportation must be fair and equitable, and amounts collected in excess of fair and equitable rates are subject to refund with interest. The rates under Section 311 are maximum rates and an intrastate pipeline may agree to discount contractual rates at or below such maximum rates. Rates for service pursuant to Section 311 of the NGPA are generally subject to review and approval by FERC at least once every five years. Should the FERC determine not to authorize rates equal to or greater than our currently approved Section 311 rates, our business may be adversely affected. Failure to observe the service limitations applicable to transportation services provided under Section 311, failure to comply with the rates approved by FERC for Section 311 service, or failure to comply with the terms and conditions of service established in the pipeline’s FERC-approved Statement of Operating Conditions could result in the assertion of federal NGA jurisdiction by FERC and/or the imposition of administrative, civil and criminal penalties, as described in the “—Interstate Natural Gas Pipeline Regulation” section above. 19 Table of Contents The transportation rates charged by EOIT for natural gas transportation in interstate commerce on intrastate pipelines are subject to the jurisdiction of FERC under Section 311 of the NGPA. EOIT currently has two zones under its Section 311 transportation rate structure—an East Zone and a West Zone. For Section 311 service, EOIT may charge up to its maximum established zonal East and West interruptible transportation rates for interruptible transportation in one zone or cumulative maximum rates for transportation in both zones. EOIT may charge up to its maximum established firm rate for firm Section 311 transportation in its East and West Zones. Finally, EOIT may charge the applicable fixed zonal fuel percentage(s) for the fuel used in transporting natural gas under Section 311 on our system. The fixed zonal fuel percentages are the same for firm and interruptible Section 311 services. We also had a pipeline in Illinois that was subject to regulation in 2017 by the Illinois Commerce Commission as a “Hinshaw pipeline.” Under Section 1(c) of the NGA, a Hinshaw pipeline is exempt from FERC’s NGA regulation if its operations are within a single state, if any gas received from interstate sources is received within the state and if its service is regulated by the state commission. A Hinshaw pipeline may, and our Illinois pipeline did, provide services in interstate commerce pursuant to limited jurisdiction certificate authority under Section 284.224(c) of FERC’s regulations, thereby subjecting itself to the same type of limited FERC jurisdiction imposed on intrastate pipelines engaged in Section 311 service. This Illinois pipeline became part of the MRT system on January 1, 2018. Under FERC Order No. 735, intrastate pipelines providing transportation services under Section 311 of the NGPA and Hinshaw pipelines operating under Section 1(c) of the NGA are required to report on a quarterly basis via FERC Form 549D more detailed information and storage transaction information, including: rates charged by the pipeline under each contract; receipt and delivery points and zones or segments covered by each contract; the quantity of natural gas the shipper is entitled to transport, store, or deliver; the duration of the contract; and whether there is an affiliate relationship between the pipeline and the shipper. Order No. 735 further requires that such information must be supplied through an electronic reporting system and will be posted on FERC’s website, and that such quarterly reports may not contain information redacted as privileged. FERC promulgated this rule after determining that such transactional information would help shippers make more informed purchasing decisions and would improve the ability of both shippers and FERC to monitor actual transactions for evidence of market power or undue discrimination. Order No. 735 also extends FERC’s periodic review of the rates charged by the subject pipelines from three to five years. In Order No. 735-A, FERC generally reaffirmed Order No. 735 requiring Section 311 and “Hinshaw” pipelines to report on a quarterly basis storage and transportation transactions containing specific information for each transaction, aggregated by contract. Our intrastate storage assets at the Wetumka Storage Field offer both fee- based firm and interruptible storage services under Section 311 of the NGPA pursuant to terms and conditions specified in our statement of operating conditions for gas storage at market-based rates. Our intrastate Stuart Storage Field currently is used exclusively to provide intrastate storage service, even though FERC previously authorized the use of that storage facility for Section 311 interstate service. Natural Gas Gathering and Processing Regulation Section 1(b) of the NGA exempts natural gas gathering and processing facilities from the jurisdiction of the FERC. Although the FERC has not made formal determinations with respect to all of our facilities we consider to be gathering facilities, management believes that our natural gas gathering pipelines meet the traditional tests that the FERC has used to determine that a pipeline is a gathering pipeline and is therefore not subject to FERC’s NGA jurisdiction. The distinction between FERC-regulated transmission services and federally unregulated gathering services, however, has been the subject of substantial litigation, and the FERC determines whether facilities are gathering facilities on a case-by-case basis, so the classification and regulation of our gathering facilities is subject to change based on future determinations by the FERC, the courts or Congress. If the FERC were to consider the status of an individual facility and determine that the facility and/or services provided by it are not exempt from FERC regulation under the NGA and that the facility provides interstate service, the rates for, and terms and conditions of, services provided by such facility would be subject to regulation by the FERC under the NGA or the NGPA. Such regulation could decrease revenue, increase operating costs, and, depending upon the facility in question, could adversely affect our results of operations and cash flows. In addition, if any of our facilities were found to have provided services or otherwise operated in violation of the NGA or NGPA, this could result in the imposition of civil penalties as well as a requirement to disgorge charges collected for such service in excess of the rate established by the FERC. States may regulate gathering pipelines. State regulation of gathering facilities generally includes various safety, environmental and, in some circumstances, requirements prohibiting undue discrimination, and in some instances complaint-based rate regulation. Our gathering operations may be subject to ratable take and common purchaser statutes in the states in which they operate. The ratable take statutes generally require gatherers to take, without undue discrimination, natural gas production that may be tendered to the gatherer for handling. Similarly, common purchaser statutes generally require gatherers to purchase without undue discrimination as to source of supply or producer. These statutes are designed to prohibit discrimination in favor of one 20 Table of Contents producer over another producer or one source of supply over another source of supply. These statutes have the effect of restricting our right as an owner of gathering facilities to decide with whom we contract to purchase or transport natural gas. Our gathering operations could be adversely affected should they be subject in the future to the application of state or federal regulation of rates and services. Our gathering operations could also be subject to additional safety and operational regulations relating to the design, construction, testing, operation, replacement and maintenance of gathering facilities. Additional rules and legislation pertaining to these matters are considered or adopted from time to time. We cannot predict what effect, if any, such changes might have on its operations, but the industry could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes. Sales of Natural Gas The price at which we buy and sell natural gas currently is not subject to federal regulation and, for the most part, is not subject to state regulation. However, as noted above, with regard to our physical purchases and sales of these energy commodities, and any related hedging activities that we undertake, we are required to observe anti-market manipulation laws and related regulations enforced by FERC and/or the CFTC. Should we violate the anti-market manipulation laws and regulations, we could also be subject to related third-party damage claims by, among others, market participants, sellers, royalty owners and taxing authorities. Our sales of natural gas are affected by the availability, terms and cost of pipeline transportation. As noted above, the price and terms of access to pipeline transportation are subject to extensive federal and state regulation. FERC is continually proposing and implementing new rules and regulations affecting those segments of the natural gas industry, most notably interstate natural gas transmission companies that remain subject to FERC jurisdiction. These initiatives also may affect the intrastate transportation of natural gas under certain circumstances. The stated purpose of many of these regulatory changes is to promote competition among the various sectors of the natural gas industry. We cannot predict the ultimate impact of these regulatory changes on our natural gas marketing operations. Crude Oil Gathering Regulation Crude oil gathering pipelines that provide interstate transportation service may be regulated as common carriers by FERC under the ICA, the Energy Policy Act of 1992 and the rules and regulations promulgated under those laws. We have two transportation systems that transport crude oil in interstate commerce and are located in the Bakken producing region of North Dakota. The ICA and FERC regulations require that rates for interstate service pipelines that transport crude oil and refined petroleum products (collectively referred to as “petroleum pipelines”) and certain other liquids, be just and reasonable and are to be non- discriminatory or not confer any undue preference upon any shipper. FERC regulations also require interstate common carrier petroleum pipelines to file with FERC and publicly post tariffs stating their interstate transportation rates and terms and conditions of service. Under the ICA, FERC or interested persons may challenge existing or changed rates or services. The FERC is authorized to investigate such charges and may suspend the effectiveness of a new rate for up to seven months. A successful rate challenge could result in a common carrier paying refunds together with interest for the period that the rate was in effect. FERC may also order a pipeline to change its rates, and may require a common carrier to pay shippers reparations for damages sustained for a period up to two years prior to the filing of a complaint. If our rate levels were investigated by FERC, the inquiry could result in a comparison of our rates to those charged by others or to an investigation of our costs, including: • • • • • • • the overall cost of service, including operating costs and overhead; the allocation of overhead and other administrative and general expenses to the regulated entity; the appropriate capital structure to be utilized in calculating rates; the appropriate rate of return on equity and interest rates on debt; the rate base, including the proper starting rate base; the throughput underlying the rate; and the proper allowance for federal and state income taxes. For some time now, FERC has been issuing regulatory assurances that necessarily balance the anti-discrimination and undue preference requirements of common carriage with the expectations of investors in new and expanding petroleum pipelines. There is an inherent tension between the requirements imposed upon a common carrier and the need for owners of petroleum pipelines to be able to enter into long-term, firm contracts with shippers willing to make the commitments which underpin such large capital investments. For example, FERC has found that shipper contract rates are not per se violations of the duty of non- discrimination, 21 Table of Contents provided that such rates are available to all similarly-situated shippers. In the same vein, FERC has approved varying term commitments with tiered rate discounts on the basis that committed shippers were not similarly situated with uncommitted shippers and further that different types of committed shippers were not similarly situated with each other if their commitment level materially differed. FERC has also found that shippers making certain capacity commitments to the pipeline can take advantage of priority or firm service, which is service that is not subject to typical capacity allocation requirements, so long as any interested shipper has an equal opportunity to make such a commitment to the carrier. FERC’s solution has been to allow carriers to hold an “open season” prior to the in- service date of pipeline, during which time interested shippers can make commitments to the proposed pipeline project. Throughput commitments from interested shippers during an open season can be for firm service or for non-firm service. Typically, such an open season is for a 30-day period, must be publicly announced, and culminates in interested parties entering into transportation agreements with the carrier. Under FERC precedent, a carrier typically may reserve up to 90% of available capacity for the provision of firm or priority service to shippers making a commitment. At least 10% of capacity ordinarily is reserved for uncommitted shippers, i.e., “walk-up” shippers. Under the ICA, FERC does not have authority over the siting of oil transportation assets nor over the abandonment of facilities or services. Accordingly, no approval from FERC is necessary prior to placing a new petroleum pipeline project in operation. However, FERC highly encourages carriers to file a Petition for Declaratory Order to seek regulatory assurances for key terms of service offered during an open season. As long as the shippers on our Bakken crude oil gathering system move oil in interstate commerce, our crude oil gathering system will not be regulated by the North Dakota Public Service Commission. Safety and Health Regulation Pipeline Safety Our pipeline facilities are subject to regulation under federal pipeline safety statutes and comparable state statutes. Federal pipeline safety statutes include the Natural Gas Pipeline Safety Act of 1968, or NGPSA, which provides for safety requirements in the design, construction, operation and maintenance of natural gas pipeline facilities, and the Hazardous Liquid Pipeline Safety Act of 1979, and the HLPSA, which provides for safety requirements for the design, construction, operation and maintenance of hazardous liquids pipelines facilities, including NGL and crude oil pipelines. The NGPSA and the HLPSA have been subject to a number of amendments and supplements including the Pipeline Safety Act of 1992, the Accountable Pipeline Safety and Partnership Act of 1996, the Pipeline Safety Improvement Act of 2002, the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006, or the PIPES Act, and the Pipeline Safety, Regulatory Certainty, Job Creation Act of 2011, or the 2011 Pipeline Safety Act, and the Securing America’s Future Energy Protecting our Infrastructure of Pipelines and Enhancing Safety Act. We are regulated under federal pipeline safety statutes by DOT through PHMSA. PHMSA sets and enforces pipeline safety regulations and standards. PHMSA’s enforcement authority includes the ability to assess civil penalties for violations of pipeline safety regulations. Under the 2011 Pipeline Safety Act, PHMSA has civil penalty authority of up to $200,000 per day per violation, with a maximum of $2 million for any related series of violations. In addition to governing the design, construction, operation and maintenance of natural gas and hazardous liquids pipeline facilities, PHMSA’s regulations require the following for certain pipelines: an inspection and maintenance plan; an integrity management program, which includes the determination of pipeline integrity risks and periodic assessments of pipeline segments in high consequence areas; a drug and alcohol testing program; an operator qualification program, which includes training for personnel performing tasks covered by pipeline safety rules; a public awareness program, which provides relevant information to residents, public officials and emergency responders; and a control room management plan. As part of regulating pipeline safety, PHMSA periodically promulgates pipeline safety regulations. For example, in December 2016, PHMSA published an interim final rule providing pipeline safety regulations for underground natural gas storage, and in April 2017, PHMSA published a final rule increasing the maximum penalties for violating federal safety standards. PHMSA also periodically publishes advisory bulletins. For example, in January 2011, PHMSA published an advisory bulletin stating that operators of natural gas and hazardous liquid pipeline facilities should perform detailed threat and risk analyses that integrate accurate data and information from their entire pipeline system and to utilize these risk analyses in the identification of appropriate assessment methods and preventive and mitigative measures, and in May 2012, PHMSA published an advisory bulletin stating that operators of gas and hazardous liquid pipeline facilities should verify records relating to operating specifications for maximum allowable operating pressure, MAOP, for gas pipelines and maximum operating pressure, or MOP, for hazardous liquid pipelines. Federal pipeline safety regulations contain an exemption that applies to gathering lines in certain rural locations. A substantial portion of our gathering lines qualify for that exemption and are currently not regulated under federal law. However, PHMSA is completing a congressionally-mandated review of the adequacy of the existing federal and state regulations for gathering lines and has indicated that it may apply additional safety standards to rural gas gathering lines in the future. 22 Table of Contents States are largely preempted by federal law from regulating pipeline safety but may assume responsibility for administering and enforcing intrastate pipeline regulations at least as stringent as the federal standards. For example, the OCC administers the intrastate pipeline safety program in Oklahoma, and the Texas Railroad Commission administers the intrastate pipeline safety program in Texas. In practice, states vary in their authority and capacity to address pipeline safety. In complying with current federal and state pipeline safety laws and regulations, we incur significant costs. In 2017, we incurred maintenance capital expenditures and operation and maintenance expenses of $39 million to comply with existing pipeline safety laws and regulations, including costs related to integrity assessments and repairs, threat and risk analyses, implementing preventative and mitigative measures, and conducting activities to support MAOP or MOP. We currently estimate that we will incur maintenance capital expenditures and operation and maintenance expenses of up to $285 million from 2018 through 2022 to comply with existing pipeline safety laws and regulations. While we cannot predict the outcome of legislative or regulatory initiatives, we anticipate that pipeline safety requirements will continue to become more stringent over time. As a result, we may incur significant additional costs to comply with any new pipeline safety laws and regulations associated with our pipeline facilities. Occupational Health and Safety In addition to these pipeline safety requirements, we are subject to a number of federal and state laws and regulations, including the Occupational Safety and Health Act of 1970 (OSHA) and comparable state statutes, whose purpose is to protect the safety and health of workers, both generally and within the pipeline industry. In addition, the OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of the Federal Superfund Amendment and Reauthorization Act and comparable state statutes require that information be maintained concerning hazardous materials used or produced in our operations and that this information be provided to employees, state and local government authorities and citizens. We are also subject to OSHA Process Safety Management regulations, which are designed to prevent or minimize the consequences of catastrophic releases of toxic, reactive, flammable or explosive chemicals. These regulations apply to any process which involves a chemical at or above the specified thresholds or any process which involves flammable liquid or gas, pressurized tanks, caverns and wells in excess of 10,000 pounds at various locations. We have an internal program of inspection designed to monitor and enforce compliance with worker safety and health requirements. Management believes that we are in material compliance with all applicable laws and regulations relating to worker safety and health. Security The Department of Homeland Security Appropriation Act of 2007 requires the Department of Homeland Security, or DHS, to issue regulations establishing risk-based performance standards for the security of chemical and industrial facilities, including oil and gas facilities that are deemed to present “high levels of security risk.” The DHS issued an interim final rule in April 2007 regarding risk-based performance standards to be attained pursuant to this act and, on November 20, 2007, further issued an Appendix A to the interim rules that establish chemicals of interest and their respective threshold quantities that will trigger compliance with these interim rules. Covered facilities that are determined by DHS to pose a high level of security risk will be required to prepare and submit Security Vulnerability Assessments and Site Security Plans as well as comply with other regulatory requirements, including those regarding inspections, audits, recordkeeping, and protection of chemical-terrorism vulnerability information. While we are not currently subject to governmental standards for the protection of computer-based systems and technology from cyber threats and attacks, proposals to establish such standards are being considered by the U.S. Congress and by U.S. Executive Branch departments and agencies, including the Department of Homeland Security, and we may become subject to such standards in the future. We have existing, and continue to develop, systems in place to monitor and address the risk of cyber-security breaches in our business, operations and control environments. We routinely review and update those systems as the nature of that risk requires. We are not aware of any cyber-security breach affecting any of our business, operations or control environments. A significant cyber- attack could have a material effect on our operations and those of our customers. Environmental Regulation General Our operations are subject to extensive federal, state and local environmental laws and regulations. These laws and regulations can restrict or impact our business activities in many ways, such as requiring permits to conduct our activities, limiting our emissions of materials into the environment, requiring emissions control equipment, regulating our construction to mitigate harm to protected species, restricting the way we can handle or dispose of waste, and requiring remediation to mitigate the impact of materials 23 Table of Contents discharged into the environment in connection with our current operations or attributable to former operation. Compliance with these laws and regulations increases our capital expenditures and operating expenses, and any failure to comply with these laws and regulations could result in the assessment of significant administrative, civil and criminal liabilities, injunctions or other penalties. We have adopted policies, procedures, and practices to comply with environmental laws and regulations, and we incur significant costs in connection with compliance. In 2017 , we incurred approximately $7 million in maintenance capital expenditures and operation and maintenance expenses in connection with routine environmental compliance with existing laws and regulations, such as sampling, monitoring, testing, remediation, and permit compliance. We anticipate our expenditures for routine environmental compliance with existing laws and regulations will average $8 million per year for 2018 through 2020 . We also incur, and expect to continue to incur, additional costs in connection with spill response and construction. With respect to construction, existing environmental laws and regulations impact the cost of planning, design, permitting, installation, and start-up. While we cannot predict the outcome of legislative or regulatory initiatives, we anticipate that environmental requirements will continue to become more restrictive over time. As a result, we may incur significant additional costs to comply with any new environmental laws and regulations applicable to our operations. For more information, please read Item 1A. “Risk Factors–Costs of compliance with existing environmental laws and regulations are significant, and the cost of compliance with future environmental laws and regulations may adversely affect our financial position, results of operations and ability to make cash distributions to unitholders.” Air Our operations are subject to the federal Clean Air Act, as amended (CAA), and comparable state laws and regulations. These laws and regulations regulate emissions of air pollutants from various industrial sources, including natural gas processing plants and compressor stations, and also impose various monitoring and reporting requirements. Such laws and regulations may require that we obtain pre-approval for the construction or modification of certain projects or facilities expected to produce air emissions or result in the increase of existing air emissions (including greenhouse gas emissions as discussed below), obtain and strictly comply with air permits containing various emissions and operational limitations or install emission control equipment. We likely will be required to incur certain capital expenditures in the future for air pollution control equipment and technology in connection with obtaining and maintaining operating permits and approvals for air emissions. Climate Change There has been a wide-ranging policy debate, both nationally and internationally, regarding climate change, greenhouse gases (GHG) emissions, and possible means for the regulation of GHG emissions. Examples of GHGs include methane, which is a primary component of natural gas, and carbon dioxide, which is a byproduct of the combustion of natural gas. Various laws and regulations exist or are under development to regulate the emission of GHGs, including EPA programs to control GHGs and state actions to develop statewide or regional programs to control GHGs. In addition, the United States Congress has, from time to time, considered adopting legislation to reduce GHG emissions. The EPA has published findings that certain GHGs may endanger human health, and the EPA has adopted regulations requiring the reporting and permitting of GHG emissions under the CAA. Our operations are subject to those regulations. Those regulations include the “Mandatory Reporting of Greenhouse Gases Rule” that requires the annual calculation and reporting of GHG emissions from natural gas transmission, gathering and processing facilities which emit 25,000 metric tons or more of carbon dioxide equivalent per year and the permitting of large stationary sources of GHG under the CAA’s Prevention of Significant Deterioration and Title V programs. Several states have adopted laws and regulations intended to reduce the emission of GHGs, including through the planned development of GHG emission inventories and/or regional GHG cap and trade programs. However, the states where our operations are currently located (Alabama, Arkansas, Illinois, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, North Dakota, Tennessee, and Texas) are not among them. While we cannot predict the outcome of legislative or regulatory initiatives, we anticipate that initiatives to reduce GHG emissions will continue to develop. The adoption of state or federal legislation or regulatory programs to reduce emissions of GHGs, including methane and carbon dioxide, could require us to incur increased operating costs, such as costs to purchase and operate emissions monitoring and control systems, to acquire emissions allowances or comply with new regulatory or reporting requirements. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the natural gas we gather, treat and transport. Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on our business, financial condition and results of operations. For more information, please read Item 24 Table of Contents 1A. “Risk Factors–Our operations may incur substantial liabilities to comply with climate change legislation and regulatory initiatives.” National Environmental Policy Act (NEPA) NEPA provides for an environmental impact assessment process in connection with certain projects that involve federal lands or require approvals by federal agencies. The NEPA process implicates a number of other environmental laws and regulations, including the Endangered Species Act, Migratory Bird Treaty Act, Rivers and Harbors Act, Clean Water Act, Bald and Golden Eagle Protection Act, Fish and Wildlife Coordination Act, Marine Mammal Protection Act and National Historic Preservation Act. The NEPA review process can be lengthy and subjective and can cause delays in projects. Our projects that are subject to the NEPA can include pipeline construction and pipeline integrity projects that involve federal lands or require approvals by federal agencies. Ineffective implementation of the NEPA process could cause significant impacts to such projects. Protected Species Certain federal laws, including the Bald and Golden Eagle Protection Act, the Migratory Bird Treaty Act and the Endangered Species Act, provide special protection to certain designated species. These laws and any state equivalents provide for significant civil and criminal penalties for unpermitted activities that result in harm to or harassment of certain protected animals and plants, including damage to their habitats. If such species are located in an area in which we conduct operations, or if additional species in those areas become subject to protection, our operations and development projects, particularly pipeline projects, could be restricted or delayed, or we could be required to implement expensive mitigation measures. The designation of previously unprotected species as threatened or endangered in areas where underlying property operations are conducted could cause us to incur increased costs arising from species protection measures or could result in limitations on our customer’s exploration and production activities that could have an adverse impact on demand for our services. Portions of the basins we serve are designated as critical or suitable habitat for threatened and endangered species. If additional portions of the basins we serve were designated as critical or suitable habitat for threatened and endangered species, it could adversely impact the cost of operating our systems and of constructing new facilities. Management believes that we are in material compliance with all applicable laws providing special protection to designated species. Hazardous Substances and Waste Our operations are subject to federal and state environmental laws and regulations relating to the management and release of hazardous substances, solid and hazardous wastes, and petroleum hydrocarbons. For instance, our operations are subject to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA or Superfund) and comparable state cleanup laws that impose liability, without regard to the legality of the original conduct, on certain classes of persons responsible for the release of hazardous substances into the environment. These persons include current and prior owners or operators of the site where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances found at the site. Under CERCLA, these persons may, jointly and severally, be subject to strict liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. CERCLA also authorizes the EPA and, in some instances, third parties to act in response to threats to the public health or the environment and to seek to recover the costs they incur from the responsible classes of persons. It is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances or other pollutants released into the environment. Because we utilize various products and generate wastes that are considered hazardous substances for purposes of CERCLA, we could be subject to liability for the costs of cleaning up and restoring sites where those substances have been released to the environment. Our operations also generate solid and hazardous wastes that are subject to the federal Resource Conservation and Recovery Act of 1976 (RCRA) as well as comparable state laws. While RCRA regulates both solid and hazardous wastes, it imposes detailed requirements for the handling, storage, treatment and disposal of hazardous waste. RCRA currently exempts many natural gas gathering and field processing wastes from classification as hazardous waste. However, it is possible that these wastes, which could include wastes currently generated during our operations, will in the future be designated as “hazardous wastes” and therefore be subject to more rigorous and costly disposal requirements. Such changes to the law could have an impact on our capital expenditures and operating expenses. Further, these RCRA-exempt oil and gas exploration and production wastes may still be regulated under state law or RCRA’s less stringent solid waste requirements. The transportation of natural gas in pipelines may also generate some hazardous wastes that are subject to RCRA or a comparable state law regime. 25 Table of Contents Water Our operations are subject to the federal Clean Water Act and analogous state laws and regulations. These laws and regulations impose detailed requirements and strict controls regarding the discharge of pollutants into state and federal waters. The discharge of pollutants, including discharges resulting from a spill or leak, is prohibited unless authorized by a permit or other agency approval. In addition, the federal Clean Water Act and analogous state laws require individual permits or coverage under general permits for discharges of storm water runoff from certain types of facilities. These permits may require us to monitor and sample the storm water runoff from some of our facilities. The federal Clean Water Act and regulations implemented thereunder also prohibit discharges of dredged and fill material in wetlands and other waters of the United States unless authorized by an appropriately issued permit. Spill prevention, control and countermeasure requirements of federal laws require appropriate containment berms and similar structures to help prevent the contamination of regulated waters in the event of a hydrocarbon tank spill, rupture or leak. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with many of these requirements. Certain of our operations are also subject to the Oil Pollution Act (the OPA) which amends and augments oil spill provisions of the Clean Water Act and imposes certain duties and liabilities on certain “responsible parties” related to the prevention of oil spills and damages resulting from such spills in or threatening United States waters or adjoining shorelines. A liable “responsible party” includes the owner or operator of a facility, vessel or pipeline that is a source of an oil discharge or that poses the substantial threat of discharge, or in the case of offshore facilities, the lessee or permittee of the area in which a discharging facility is located. Under OPA, joint and several liability, without regard to fault, may be assigned for oil removal costs and a variety of public and private damages. Although defenses exist to the liability imposed by OPA, they are limited. In the event of an oil discharge or substantial threat of discharge, we may be liable for costs and damages. Hydraulic Fracturing Hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons from tight formations. The process involves the injection of water, sand and chemicals under pressure into the formation to fracture the surrounding rock and stimulate production. The process is regulated by state agencies, typically the state’s oil and gas commission. A number of federal agencies, including the EPA and the U.S. Department of Energy, are analyzing, or have been requested to review, a variety of environmental issues associated with hydraulic fracturing. In addition, some states have adopted, and other states are considering adopting, regulations that could impose more stringent disclosure and/or well construction requirements on hydraulic fracturing operations. State and federal regulatory agencies also recently focused on a possible connection between the operation of injection wells used for oil and gas wastewater disposal and seismic activity. Similar concerns have been raised that hydraulic fracturing may also contribute to seismic activity. When caused by human activity, such events are called induced seismicity. In March 2016, the United States Geological Survey identified six states with the most significant hazards from induced seismicity: Oklahoma, Kansas, Texas, Colorado, New Mexico, and Arkansas. In light of these concerns, some state regulatory agencies have modified their regulations or issued orders to address induced seismicity. Certain environmental and other groups have also suggested that additional federal, state and local laws and regulations may be needed to more closely regulate the wastewater disposal process. If new laws or regulations that significantly restrict hydraulic fracturing or wastewater disposal wells are adopted, such laws could lead to greater opposition to, and litigation concerning, related oil and gas producing activities and to operational delays or increased operating costs for our customers, which in turn could reduce the demand for our services. For more information, please read Item 1A. “Risk Factors–Increased regulation of hydraulic fracturing could result in reductions or delays in natural gas production by our customers, which could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders.” Our Employees As of December 31, 2017 , we employ approximately 1,630 employees with an additional 139 individuals providing services to us as seconded employees of OGE Energy. Personnel remain seconded to the Partnership, subject to certain termination rights of the Partnership and OGE Energy, in order to continue their participation in OGE Energy’s defined benefit and retiree medical plans. Please read Item 13. “Certain Relationships and Related Party Transactions—Employee Secondment” for a description of the agreements governing these relationships. 26 Table of Contents Item 1A. Risk Factors You should carefully consider each of the following risks and all of the other information contained in this Annual Report on Form 10-K in evaluating us and our common units. Some of these risks relate principally to our business and the industry in which we operate, while others relate principally to tax matters, ownership of our common units, our preferred units and securities markets generally. If any of the following risks were actually to occur, our business, financial position or results of operations could be materially adversely affected. In that case, we might not be able to pay the minimum quarterly distribution on our common units, or the trading price of our common units could decline. Risks Related to Our Business We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner and its affiliates, to enable us to maintain or increase the distributions to holders of our common units. We may not have sufficient available cash each quarter to enable us to maintain or increase the distributions to holders of our common units. The amount of cash we can distribute on our units principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things: • • • • • the fees and gross margins we realize with respect to the volume of natural gas, NGLs and crude oil that we handle; the prices of, levels of production of, and demand for natural gas, NGLs and crude oil; the volume of natural gas, NGLs and crude oil we gather, compress, treat, dehydrate, process, fractionate, transport and store; the relationship among prices for natural gas, NGLs and crude oil; cash calls and settlements of hedging positions; • margin requirements on open price risk management assets and liabilities; • • • • the level of competition from other companies offering midstream services; adverse effects of governmental and environmental regulation; the level of our operation and maintenance expenses and general and administrative costs; and prevailing economic conditions. In addition, the actual amount of cash we will have available for distribution will depend on other factors, including: • • • • • • • • • the level and timing of capital expenditures we make; the cost of acquisitions; our debt service requirements and other liabilities; fluctuations in working capital needs; our ability to borrow funds and access capital markets; restrictions contained in our debt agreements; the amount of cash reserves established by our general partner; distributions paid on our Series A Preferred Units; and other business risks affecting our cash levels. Our contracts are subject to renewal risks. As contracts with our existing suppliers and customers expire, we negotiate extensions or renewals of those contracts or enter into new contracts with other suppliers and customers. We may be unable to extend or renew existing contracts or enter into new contracts on favorable commercial terms, if at all. Depending on prevailing market conditions at the time of an extension or renewal, gathering and processing customers with fee based contracts may desire to enter into contracts under different fee arrangements, and gathering and processing customers with contracts that contain minimum volume commitments may desire to enter into contracts without minimum volume commitments. Likewise, our transportation and storage customers may choose not to extend or renew expiring contracts based on the economics of the related areas of production. To the extent we are unable to renew or replace our expiring contracts on terms that are favorable to us, if at all, or successfully manage our overall contract mix 27 Table of Contents over time, our financial position, results of operations and ability to make cash distributions to unitholders could be adversely affected. We depend on a small number of customers for a significant portion of our gathering and processing revenues and our transportation and storage revenues. The loss of, or reduction in volumes from, these customers could result in a decline in sales of our gathering and processing or transportation and storage services and adversely affect our financial position, results of operations and ability to make cash distributions to our unitholders. For the year ended December 31, 2017 , 57% of our gathered natural gas volumes were attributable to the affiliates of Continental, Vine, GeoSouthern, XTO and Tapstone and 51% of our transportation and storage service revenues were attributable to affiliates of CenterPoint Energy, Spire, AEP, OGE Energy and Continental. The loss of all or even a portion of the gathering and processing or transportation and storage services for any of these customers, the failure to extend or replace these contracts or the extension or replacement of these contracts on less favorable terms, as a result of competition or otherwise, could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. Our businesses are dependent, in part, on the drilling and production decisions of others. Our businesses are dependent on the drilling and production of natural gas and crude oil. We have no control over the level of drilling activity in our areas of operation, or the amount of natural gas, NGL and crude oil reserves associated with wells connected to our systems. In addition, as the rate at which production from wells currently connected to our system naturally declines over time, our gross margin associated with those wells will also decline. To maintain or increase throughput levels on our gathering and transportation systems and the asset utilization rates at our natural gas processing plants, our customers must continually obtain new natural gas, NGL and crude oil supplies. The primary factors affecting our ability to obtain new supplies of natural gas, NGLs and crude oil and attract new customers to our assets are the level of successful drilling activity near our systems, our ability to compete for volumes from successful new wells and our ability to expand our capacity as needed. If we are not able to obtain new supplies of natural gas, NGLs and crude oil to replace the natural decline in volumes from existing wells, throughput on our gathering, processing, transportation and storage facilities would decline, which could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. We have no control over producers or their drilling and production decisions, which are affected by, among other things: • • • • • • • the availability and cost of capital; prevailing and projected commodity prices, including the prices of natural gas, NGLs and crude oil; demand for natural gas, NGLs and crude oil; levels of reserves; geological considerations; environmental or other governmental regulations, including the availability of drilling permits and the regulation of hydraulic fracturing; and the availability of drilling rigs and other costs of production and equipment. Fluctuations in energy prices can also greatly affect the development of new natural gas, NGL and crude oil reserves. Drilling and production activity generally decreases as commodity prices decrease. In general terms, the prices of natural gas, NGLs, crude oil and other hydrocarbon products fluctuate in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control. Because of these and other factors, even if new reserves are known to exist in areas served by our assets, producers may choose not to develop those reserves. Declines in natural gas, NGL or crude oil prices can have a negative impact on exploration, development and production activity and, if sustained, could lead to decreases in such activity. Sustained low natural gas, NGL or crude oil prices could also lead producers to shut in production from their existing wells. Sustained reductions in exploration or production activity in our areas of operation could lead to further reductions in the utilization of our systems, which could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. In addition, it may be more difficult to maintain or increase the current volumes on our gathering systems and in our processing plants, as several of the formations in the unconventional resource plays in which we operate generally have higher initial production rates and steeper production decline curves than wells in more conventional basins. Should we determine that the economics of our gathering assets do not justify the capital expenditures needed to grow or maintain volumes associated therewith, we may reduce such capital expenditures, which could cause revenues associated with these assets to decline over time. 28 Table of Contents Our industry is highly competitive, and increased competitive pressure could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. We compete with similar enterprises in our respective areas of operation. The principal elements of competition are rates, terms of service and flexibility and reliability of service. Our competitors include large energy companies that have greater financial resources and access to supplies of natural gas, NGLs and crude oil than us. Some of these competitors may expand or construct gathering, processing, transportation and storage systems that would create additional competition for the services we provide to our customers. Excess pipeline capacity in the regions served by our interstate pipelines could also increase competition and adversely impact our ability to renew or enter into new contracts with respect to our available capacity when existing contracts expire. In addition, our customers that are significant producers of natural gas or crude oil may develop their own gathering, processing, transportation and storage systems in lieu of using ours. Our ability to renew or replace existing contracts with our customers at rates sufficient to maintain current revenues and cash flows could be adversely affected by the activities of our competitors and customers. Further, natural gas utilized as a fuel competes with other forms of energy available to end-users, including electricity, coal and liquid fuels. Increased demand for such forms of energy at the expense of natural gas could lead to a reduction in demand for natural gas gathering, processing, transportation and storage services. All of these competitive pressures could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. We derive a substantial portion of our gross margin from subsidiaries through which we hold a substantial portion of our assets. We derive a substantial portion of our gross margin from, and hold a substantial portion of our assets through, our subsidiaries. As a result, we depend on distributions from our subsidiaries in order to meet our payment obligations. In general, these subsidiaries are separate and distinct legal entities and have no obligation to provide us with funds for our payment obligations, whether by dividends, distributions, loans or otherwise. In addition, provisions of applicable law, such as those limiting the legal sources of dividends, limit our subsidiaries’ ability to make payments or other distributions to us, and our subsidiaries could agree to contractual restrictions on their ability to make distributions. Our right to receive any assets of any subsidiary, and therefore the right of our creditors to participate in those assets, will be effectively subordinated to the claims of that subsidiary’s creditors, including trade creditors. In addition, even if we were a creditor of any subsidiary, our rights as a creditor would be subordinated to any security interest in the assets of that subsidiary and any indebtedness of the subsidiary senior to that held by us. The amount of cash we have available for distribution to our limited partners depends primarily on our cash flow rather than on our profitability, which may prevent us from making distributions, even during periods in which we record net income. The amount of cash we have available for distribution depends primarily upon our cash flow rather than on profitability. Profitability is affected by non-cash items but cash flow is not. As a result, we may make cash distributions during periods when we record losses for financial accounting purposes and may not make cash distributions during periods when we record net earnings for financial accounting purposes. We may not be able to recover the costs of our substantial planned investment in capital improvements and additions, and the actual cost of such improvements and additions may be significantly higher than we anticipate. Our business plan calls for investment in capital improvements and additions. For the year ending December 31, 2018, we estimate that expansion capital could range from approximately $450 million to $600 million and our maintenance capital could range from approximately $95 million to $125 million. The construction of additions or modifications to our existing systems, and the construction of new midstream assets, involves numerous regulatory, environmental, political and legal uncertainties, many of which are beyond our control and may require the expenditure of significant amounts of capital, which may exceed our estimates. These projects may not be completed at the planned cost, on schedule or at all. The construction of new pipeline, gathering, treating, processing, compression or other facilities is subject to construction cost overruns due to labor costs, costs and availability of equipment and materials such as steel, labor shortages or weather or other delays, inflation or other factors, which could be material. In addition, the construction of these facilities is typically subject to the receipt of approvals and permits from various regulatory agencies. Those agencies may not approve the projects in a timely manner, if at all, or may impose restrictions or conditions on the projects that could potentially prevent a project from proceeding, lengthen its expected completion schedule and/or increase its anticipated cost. Moreover, our revenues and cash flows may not increase immediately upon the expenditure of funds on a particular project. For instance, if we expand an existing pipeline or construct a new pipeline, the construction may occur over an extended period of time, and we may not receive any material increases in revenues or cash flows until the project is completed. In addition, we may construct facilities 29 Table of Contents to capture anticipated future growth in production in a region in which such growth does not materialize. As a result, the new facilities may not be able to achieve our expected investment return, which could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. In connection with our capital investments, we may estimate, or engage a third party to estimate, potential reserves in areas to be developed prior to constructing facilities in those areas. To the extent we rely on estimates of future production in deciding to construct additions to our systems, those estimates may prove to be inaccurate either in volume or timing due to numerous uncertainties inherent in estimating future production. To the extent estimates of the volume of new production are inaccurate, new facilities may not be able to attract sufficient throughput to achieve expected investment return, which could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. To the extent estimates in the timing of new production are inaccurate, new facilities may be constructed in advance of the actual need for capacity or may not be constructed in time to accommodate volume flows, which could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. In addition, the construction of additions to existing gathering and transportation assets may require new rights-of-way prior to construction. Those rights-of-way to connect new natural gas supplies to existing gathering lines may be unavailable and we may not be able to capitalize on attractive expansion opportunities. Additionally, it may become more expensive to obtain new rights-of-way or to renew existing rights-of-way. If the cost of renewing or obtaining new rights-of-way increases, our financial position, results of operations and ability to make cash distributions to unitholders could be adversely affected. Natural gas, NGL and crude oil prices are volatile, and changes in these prices could adversely affect our financial position, results of operations and our ability to make cash distributions to unitholders. Our financial position, results of operations and ability to make cash distributions to unitholders could be negatively affected by adverse changes in the prices of natural gas, NGLs and crude oil depending on factors that are beyond our control. These factors include demand for these commodities, which fluctuates with changes in market and economic conditions and other factors, including the impact of seasonality and weather, general economic conditions, the level of domestic and offshore natural gas production and consumption, the availability of imported natural gas, LNG, NGLs and crude oil, actions taken by foreign natural gas and oil producing nations, the availability of local, intrastate and interstate transportation systems, the availability and marketing of competitive fuels, the impact of energy conservation efforts, technological advances affecting energy consumption and the extent of governmental regulation and taxation. Our natural gas processing arrangements expose us to commodity price fluctuations. In 2017 , 7% , 35% , and 58% of our processing plant inlet volumes consisted of keep-whole arrangements, percent-of-proceeds or percent-of-liquids, and fee-based, respectively. If the price at which we sell natural gas or NGLs is less than the cost at which we purchase natural gas or NGLs under these arrangements, then our financial position, results of operations and ability to make cash distributions to unitholders could be adversely affected. At any given time, our overall portfolio of processing contracts may reflect a net short position in natural gas (meaning that we are a net buyer of natural gas) and a net long position in NGLs (meaning that we are a net seller of NGLs). As a result, our financial position, results of operations and ability to make cash distributions to unitholders could be adversely affected to the extent the price of NGLs decreases in relation to the price of natural gas. We are exposed to credit risks of our customers, and any material nonpayment or nonperformance by our customers could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. Some of our customers may experience financial problems that could have a significant effect on their creditworthiness. Severe financial problems encountered by our customers could limit our ability to collect amounts owed to us, or to enforce performance of obligations under contractual arrangements. In addition, many of our customers finance their activities through cash flow from operations, the incurrence of debt or the issuance of equity. The combination of reduction of cash flow resulting from declines in commodity prices, a reduction in borrowing bases under reserve-based credit facility and the lack of availability of debt or equity financing may result in a significant reduction of our customers’ liquidity and limit their ability to make payment or perform on their obligations to us. Furthermore, some of our customers may be highly leveraged and subject to their own operating and regulatory risks, which increases the risk that they may default on their obligations to us. Financial problems experienced by our customers could result in the impairment of our assets, reduction of our operating cash flows and may also reduce or curtail their future use of our products and services, which could reduce our revenues. 30 Table of Contents We provide certain transportation and storage services under fixed-price “negotiated rate” contracts that are not subject to adjustment, even if our cost to perform such services exceeds the revenues received from such contracts, and, as a result, our costs could exceed our revenues received under such contracts. We have been authorized by the Federal Energy Regulatory Commission, or FERC, to provide transportation and storage services at our facilities at negotiated rates. As of December 31, 2017 , approximately 44% of our aggregate contracted firm transportation capacity on EGT and MRT and 44% of our aggregate contracted firm storage capacity on EGT and MRT, was subscribed under such “negotiated rate” contracts. These contracts generally do not include provisions allowing for adjustment for increased costs due to inflation, pipeline safety activities or other factors that are not tied to an applicable tracking mechanism authorized by FERC. Successful recovery of any shortfall of revenue, representing the difference between “recourse rates” (if higher) and negotiated rates, is not assured under current FERC policies. If our costs increase and we are not able to recover any shortfall of revenue associated with our negotiated rate contracts, the cash flow realized by our systems could decrease and, therefore, the cash we have available for distribution to our unitholders could also decrease. If third-party pipelines and other facilities interconnected to our gathering, processing or transportation facilities become partially or fully unavailable to us for any reason , our financial position, results of operations and ability to make cash distributions to unitholders could be adversely affected. We depend upon third-party pipelines to deliver natural gas to, and take natural gas from, our natural gas transportation systems and upon third-party pipelines to take crude oil from our crude oil gathering systems. We also depend on third-party facilities to transport and fractionate NGLs that are delivered to the third party at the tailgates of our processing plants. Fractionation is the separation of the heterogeneous mixture of extracted NGLs into individual components for end-use sale. For example, an outage or disruption on certain pipelines or fractionators operated by a third party could result in the shutdown of certain of our processing plants and gathering systems, and a prolonged outage or disruption could ultimately result in a reduction in the volume of natural gas we gather and NGLs we are able to produce. Additionally, we depend on third parties to provide electricity for compression at many of our facilities. Since we do not own or operate any of these third-party pipelines or other facilities, their continuing operation is not within our control. If any of these third-party pipelines or other facilities become partially or fully unavailable to us for any reason , our financial position, results of operations and ability to make cash distributions to unitholders could be adversely affected. We do not own all of the land on which our pipelines and facilities are located, which could disrupt our operations. We do not own all of the land on which our pipelines and facilities have been constructed, and we are therefore subject to the possibility of more onerous terms and/or increased costs to retain necessary land use if we do not have valid rights-of-way or if such rights-of-way lapse or terminate. We may obtain the rights to construct and operate our pipelines for a specific period of time on lands owned by governmental agencies, American Indian tribes, or other third parties, including on American Indian allotments, title to which is held in trust by the United States. A loss of these rights, through our inability to renew right-of-way contracts or otherwise, could cause us to cease operations temporarily or permanently on the affected land, increase costs related to the construction and continuing operations elsewhere, and adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. We conduct a portion of our operations through joint ventures, which subject us to additional risks that could adversely affect the success of these operations and our financial position, results of operations and ability to make cash distributions to unitholders. We conduct a portion of our operations through joint ventures with third parties, including Spectra Energy Partners, LP, DCP Midstream Partners, LP, Trans Louisiana Gas Pipeline, Inc. and Pablo Gathering LLC. We may also enter into other joint venture arrangements in the future. These third parties may have obligations that are important to the success of the joint venture, such as the obligation to pay their share of capital and other costs of the joint venture. The performance of these third-party obligations, including the ability of the third parties to satisfy their obligations under these arrangements, is outside our control. If these parties do not satisfy their obligations under these arrangements, our business may be adversely affected. Our joint venture arrangements may involve risks not otherwise present when operating assets directly, including, for example: • • our joint venture partners may share certain approval rights over major decisions; our joint venture partners may not pay their share of the joint venture’s obligations, leaving us liable for their shares of joint venture liabilities; 31 Table of Contents • • • • • • we may be unable to control the amount of cash we will receive from the joint venture; we may incur liabilities as a result of an action taken by our joint venture partners; we may be required to devote significant management time to the requirements of and matters relating to the joint ventures; our insurance policies may not fully cover loss or damage incurred by both us and our joint venture partners in certain circumstances; our joint venture partners may be in a position to take actions contrary to our instructions or requests or contrary to our policies or objectives; and disputes between us and our joint venture partners may result in delays, litigation or operational impasses. The risks described above or the failure to continue our joint ventures or to resolve disagreements with our joint venture partners could adversely affect our ability to transact the business that is the subject of such joint venture, which would in turn adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. The agreements under which we formed certain joint ventures may subject us to various risks, limit the actions we may take with respect to the assets subject to the joint venture and require us to grant rights to our joint venture partners that could limit our ability to benefit fully from future positive developments. Some joint ventures require us to make significant capital expenditures. If we do not timely meet our financial commitments or otherwise do not comply with our joint venture agreements, our rights to participate, exercise operator rights or otherwise influence or benefit from the joint venture may be adversely affected. Certain of our joint venture partners may have substantially greater financial resources than we have and we may not be able to secure the funding necessary to participate in operations our joint venture partners propose, thereby reducing our ability to benefit from the joint venture. Under certain circumstances, Spectra Energy Partners, LP could have the right to purchase an ownership interest in SESH at fair market value. We own a 50% ownership interest in SESH. The remaining 50% ownership interests are held by Spectra Energy Partners, LP. CenterPoint Energy owns 54.1% of our common units, 100% of our Series A Preferred Units and a 40% economic interest in our general partner. Pursuant to the terms of the limited liability company agreement of SESH, as amended (the SESH LLC Agreement), if, at any time, CenterPoint Energy has a right to receive less than 50% of our distributions through its interests in us and in our general partner, or does not have the ability to exercise certain control rights, Spectra Energy Partners, LP could have the right to purchase our interest in SESH at fair market value, subject to certain exceptions. An impairment of long-lived assets, including intangible assets, equity method investments or goodwill could reduce our earnings. Long-lived assets, including intangible assets with finite useful lives and property, plant and equipment, are evaluated for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment of long-lived assets is recognized if the carrying amount is not recoverable and exceeds fair value. For example, we recorded aggregate impairments for our Service Star business line of $38 million during the years ended December 31, 2016, 2015, 2014 and 2013, a $25 million impairment of our Atoka assets in our gathering and processing segment during the year ended December 31, 2015, and a $12 million impairment of jurisdictional pipelines in our transportation and storage segment during the year ended December 31, 2015. Equity method investments are evaluated for impairment when events or circumstances indicate that the carrying value of the investment might not be recoverable. An impairment of an equity method investment is recognized if the fair value of the investment as a whole, and not the underlying assets, has declined and the decline is other than temporary. An example of an investment that we account for under the equity method is our investment in SESH. If we enter into additional joint ventures, we could have additional equity method investments. Goodwill is evaluated for impairment on an annual basis as well as when events or circumstances change that would more likely than not reduce the fair value of a reporting unit is below its carrying amount. An impairment of goodwill is recognized if the carrying value of a reporting unit exceeds its fair value and the carrying amount of that reporting unit’s good will exceeds the implied value of that goodwill. For example, we recorded impairments to goodwill of $1,087 million during the year ended December 31, 2015. As a result, there was no goodwill recorded as of December 31, 2015 and 2016. As of December 31, 2017 , we have goodwill of $12 million as a result of the acquisition of Align Midstream, LLC in the fourth quarter of 2017. 32 Table of Contents We could experience future events or circumstances that result in an impairment of long-lived assets, including intangible assets, equity method investments, or goodwill. If we recognize an impairment, we would take an immediate non-cash charge to earnings with a correlative effect on equity and balance sheet leverage as measured by debt to total capitalization. As a result, an impairment could have an adverse effect on our results of operations and our ability to satisfy the financial ratios or other covenants under our existing or future debt agreements. Our business involves many hazards and operational risks, some of which may not be fully covered by insurance. Insufficient insurance coverage and increased insurance costs could adversely affect our financial position, results of operations and our ability to make cash distributions to unitholders. Our operations are subject to all of the risks and hazards inherent in the gathering, processing, transportation and storage of natural gas and crude oil, including: • • • • • damage to pipelines and plants, related equipment and surrounding properties caused by hurricanes, tornadoes, floods, fires, earthquakes and other natural disasters, acts of terrorism and actions by third parties; inadvertent damage from construction, vehicles, farm and utility equipment; leaks of natural gas, NGLs, crude oil and other hydrocarbons or losses of natural gas, NGLs and crude oil as a result of the malfunction of equipment or facilities; ruptures, fires and explosions; and other hazards that could also result in personal injury and loss of life, pollution and suspension of operations. These risks could result in substantial losses due to personal injury or loss of life, severe damage to and destruction of property, plant and equipment and pollution or other environmental damage. These risks may also result in curtailment or suspension of our operations. A natural disaster or other hazard affecting the areas in which we operate could adversely affect our results of operations. We are not fully insured against all risks inherent in our business. We currently have general liability and property insurance in place to cover certain of our facilities in amounts that we consider appropriate. Such policies are subject to certain limits and deductibles. We have business interruption insurance coverage for some but not all of our operations. Insurance coverage may not be available in the future at current costs or on commercially reasonable terms, and the insurance proceeds received for any loss of, or any damage to, any of our facilities may not be sufficient to restore the loss or damage without adversely affecting our financial position, results of operations and our ability to make cash distributions to unitholders. The use of derivative contracts by us and our subsidiaries in the normal course of business could result in financial losses that could adversely affect our financial position, results of operations and our ability to make cash distributions to unitholders. We and our subsidiaries periodically use derivative instruments, such as swaps, options, futures and forwards, to manage our commodity and financial market risks. We and our subsidiaries could recognize financial losses as a result of volatility in the market values of these contracts, or should a counterparty fail to perform. In the absence of actively quoted market prices and pricing information from external sources, the valuation of these financial instruments can involve management’s judgment or use of estimates. As a result, changes in the underlying assumptions or use of alternative valuation methods could affect the reported fair value of these contracts. Failure to attract and retain an appropriately qualified workforce could adversely impact our results of operations. Our business is dependent on our ability to recruit, retain and motivate employees. Certain circumstances, such as an aging workforce without appropriate replacements, a mismatch of existing skill sets to future needs, competition for skilled labor or the unavailability of contract resources may lead to operating challenges such as a lack of resources, loss of knowledge or a lengthy time period associated with skill development. Our costs, including costs for contractors to replace employees, productivity costs and safety costs, may rise. Failure to hire and adequately train replacement employees, including the transfer of significant internal historical knowledge and expertise to the new employees, or the future availability and cost of contract labor may adversely affect our ability to manage and operate our business. If we are unable to successfully attract and retain an appropriately qualified workforce, our results of operations could be negatively affected. We have 139 employees who are participants under OGE Energy’s defined benefit and retiree medical plans, who are seconded to the Partnership, subject to certain termination rights of the Partnership and OGE Energy. If seconding is terminated, employees of OGE Energy that we determine to hire are under no obligation to accept our offer of employment on the terms we provide, or at all. 33 Table of Contents Our ability to grow is dependent on our ability to access external financing sources. Our operating subsidiaries distribute all of their available cash to us, and we distribute all of our available cash to our unitholders. As a result, we and our operating subsidiaries rely primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund acquisitions and expansion capital expenditures. As a result, to the extent we or our operating subsidiaries are unable to finance growth externally, our and our operating subsidiaries’ cash distribution policy will significantly impair our and our operating subsidiaries’ ability to grow. In addition, because we and our operating subsidiaries distribute all available cash, our and our operating subsidiaries’ growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations. To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level, which in turn may impact the available cash that we have to distribute on each unit. There are no limitations in our Partnership Agreement on our ability to issue additional units, including units ranking senior to the common units. The incurrence of additional commercial borrowings or other debt by us or our operating subsidiaries to finance our growth strategy would result in increased interest expense, which in turn may negatively impact the available cash that our operating subsidiaries have to distribute to us, and that we have to distribute to our unitholders. We depend on access to the capital markets to fund our expansion capital expenditures. Historically, unit prices of midstream master limited partnerships have experienced periods of volatility. In addition, because our common units are yield-based securities, rising market interest rates could impact the relative attractiveness of our common units to investors. As a result of capital market volatility, we may be unable to issue equity or debt on satisfactory terms, or at all, which may limit our ability to expand our operations or make future acquisitions. CenterPoint Energy has publicly disclosed that it is evaluating strategic alternatives for its investment in the Partnership. CenterPoint Energy has disclosed that the alternatives may include a sale of all or a portion of the interests that it owns in the Partnership and the General Partner, that if the sale option is not viable it intends to reduce its ownership in the Partnership over time through a sale of the common units it holds in the public equity markets subject to market conditions, and that there can be no assurances that these evaluations will result in any specific action. CenterPoint Energy’s disclosure, as well as any sales by CenterPoint Energy of the common units it holds in the public equity markets, could have an adverse impact on the market for our common units, including our ability to issue equity on favorable terms to fund our capital needs or at all. Our merger and acquisition activities may not be successful or may result in completed acquisitions that do not perform as anticipated, which could adversely affect our financial position, results of operations or future growth. From time to time, we have made, and we intend to continue to make, acquisitions of businesses and assets. Such acquisitions involve substantial risks, including the following: • • • • • acquired businesses or assets may not produce revenues, earnings or cash flow at anticipated levels; acquired businesses or assets could have environmental, permitting or other problems for which contractual protections prove inadequate; we may assume liabilities that were not disclosed to us, that exceed our estimates, or for which our rights to indemnification from the seller are limited; we may be unable to integrate acquired businesses successfully and realize anticipated economic, operational and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical or financial problems; and acquisitions, or the pursuit of acquisitions, could disrupt our ongoing businesses, distract management, divert resources and make it difficult to maintain our current business standards, controls and procedures. In addition, our growth strategy includes, in part, the ability to make acquisitions on economically acceptable terms. If we are unable to make acquisitions or if our acquisitions do not perform as anticipated, our future growth may be adversely affected. 34 Table of Contents Our and our operating subsidiaries’ debt levels may limit our and their flexibility in obtaining additional financing and in pursuing other business opportunities. As of December 31, 2017 , we had approximately $2.6 billion of long-term debt outstanding, excluding the premiums on senior notes. In addition, as of December 31, 2017 , we had $405 million outstanding under our commercial paper program and $450 million outstanding under the 2015 Term Loan Agreement. We have a $1.75 billion Revolving Credit Facility for working capital, capital expenditures and other partnership purposes, including acquisitions, of which $1.3 billion was available as of February 1, 2018 . We have the ability to incur additional debt, subject to limitations in our credit facilities. The levels of our debt could have important consequences, including the following: • • • • the ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or the financing may not be available on favorable terms, if at all; a portion of cash flows will be required to make interest payments on the debt, reducing the funds that would otherwise be available for operations, future business opportunities and distributions; our debt level will make us more vulnerable to competitive pressures or a downturn in our business or the economy generally; and our debt level may limit our flexibility in responding to changing business and economic conditions. Our and our operating subsidiaries’ ability to service our and their debt will depend upon, among other things, their future financial and operating performance, which will be affected by prevailing economic conditions, commodity prices and financial, business, regulatory and other factors, some of which are beyond our and their control. If operating results are not sufficient to service our or our operating subsidiaries’ current or future indebtedness, we and they may be forced to take actions such as reducing distributions, reducing or delaying business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing debt, or seeking additional equity capital. These actions may not be effected on satisfactory terms, or at all. Please see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Our credit facilities contain operating and financial restrictions, including covenants and restrictions that may be affected by events beyond our control, which could adversely affect our financial condition, results of operations and ability to make cash distributions to our unitholders. Our credit facilities contain customary covenants that, among other things, limit our ability to: • • • permit our subsidiaries to incur or guarantee additional debt; incur or permit to exist certain liens on assets; dispose of assets; • merge or consolidate with another company or engage in a change of control; • • enter into transactions with affiliates on non-arm’s length terms; and change the nature of our business. Our credit facilities also require us to maintain certain financial ratios. Our ability to meet those financial ratios can be affected by events beyond our control, and we cannot assure you that we will meet those ratios. In addition, our credit facilities contain events of default customary for agreements of this nature. Our ability to comply with the covenants and restrictions contained in our credit facilities may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we violate any of the restrictions, covenants, ratios or tests in our credit facilities, a significant portion of our indebtedness may become immediately due and payable. In addition, our lenders’ commitments to make further loans to us under the Revolving Credit Facility may be suspended or terminated. We might not have, or be able to obtain, sufficient funds to make these accelerated payments. Please see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Affiliates of our general partner, including CenterPoint Energy and OGE Energy, may compete with us, and neither our general partner nor its affiliates have any obligation to present business opportunities to us. Under our omnibus agreement, both CenterPoint Energy and OGE Energy are prohibited from, directly or indirectly, owning, operating, acquiring or investing in any business engaged in midstream operations located within the United States, other than 35 Table of Contents through us. This requirement applies to both CenterPoint Energy and OGE Energy for so long as either CenterPoint Energy or OGE Energy holds any interest in our general partner or at least 20% of our common units. However, if CenterPoint Energy or OGE Energy acquires any business with midstream operations assets that have a value in excess of $50 million (or $100 million in the aggregate with such party’s other acquired midstream operations assets that have not been offered to us), the acquiring party will be required to offer to us such assets for such value. If we do not purchase such assets, the acquiring party will be free to retain and operate such midstream assets, so long as the value of the assets does not reach certain thresholds. As a result, under the circumstances described above, CenterPoint Energy and OGE Energy have the ability to construct or acquire assets that directly compete with our assets. Pursuant to the terms of our Partnership Agreement, the doctrine of corporate opportunity, or any analogous doctrine, does not apply to our general partner or any of its affiliates, including its executive officers and directors and CenterPoint Energy and OGE Energy. Any such person or entity that becomes aware of a potential transaction, agreement, arrangement or other matter that may be an opportunity for us will not have any duty to communicate or offer such opportunity to us. Any such person or entity will not be liable to us or to any limited partner for breach of any fiduciary duty or other duty by reason of the fact that such person or entity pursues or acquires such opportunity for itself, directs such opportunity to another person or entity or does not communicate such opportunity or information to us. This may create actual and potential conflicts of interest between us and affiliates of our general partner and result in less than favorable treatment of us and our common unitholders. If we fail to maintain an effective system of internal controls, then we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential unitholders could lose confidence in our financial reporting, which would harm our business and the trading price of our common units. Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. If our efforts to maintain an effective system of internal controls are not successful, we are unable to maintain adequate controls over our financial processes and reporting in the future or we are unable to comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002, our operating results could be harmed or we may fail to meet our reporting obligations. Ineffective internal controls also could cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our common units. Cybersecurity attacks or other disruptions of our systems, networks and technology could adversely impact our financial position, results of operations and ability to make cash distributions to unitholders. We have become increasingly dependent on the systems, networks and technology that we use to conduct almost all aspects of our business, including the operation of our gathering, processing, transportation and storage assets, the recording of commercial transactions, and the reporting of financial information. We depend on both our own systems, networks, and technology as well as the systems, networks and technology of our vendors, customers and other business partners. Any disruption of these systems, networks and technology could disrupt the operation of our business. Disruptions can result from a variety of causes, including natural disasters, the failure of software or equipment, and manmade events, such as cybersecurity attacks or information security breaches. Cybersecurity attacks and information security breaches could result in the unauthorized use of confidential, proprietary or other information and in the disruption of our critical business functions and operations, adversely affecting our reputation, and subjecting us to possible legal claims and liability. In addition, we are not fully insured against all cybersecurity risks . Terrorist attacks or other physical security threats could adversely affect our business. Our gathering, processing, transportation and storage assets may be targets of terrorist activities or other physical security threats that could disrupt our ability to conduct our business. It is possible that any of these occurrences, or a combination of them, could adversely affect our financial position, results of operations, and ability to make cash distributions to unitholders. In addition, any physical damage to our assets resulting from acts of terrorism may not be fully covered by our insurance. We may be unable to obtain or renew permits necessary for our operations, which could inhibit our ability to do business. Performance of our operations require that we obtain and maintain a number of federal and state permits, licenses and approvals with terms and conditions containing a significant number of prescriptive limits and performance standards in order to operate. All of these permits, licenses, approval limits and standards require a significant amount of monitoring, record keeping and reporting in order to demonstrate compliance with the underlying permit, license, approval limit or standard. Noncompliance or incomplete documentation of our compliance status may result in the imposition of fines, penalties and injunctive relief. A decision by a government agency to deny or delay the issuance of a new or existing material permit or other approval, or to revoke or substantially modify an existing permit or other approval, could adversely affect our ability to initiate or continue operations 36 Table of Contents at the affected location or facility and on our financial condition, results of operations and ability to make cash distributions to unitholders. Additionally, in order to obtain permits and renewals of permits and other approvals in the future, we may be required to prepare and present data to governmental authorities pertaining to the potential adverse impact that any proposed pipeline or processing-related activities may have on the environment, individually or in the aggregate, including on public and Indian lands. Certain approval procedures may require preparation of archaeological surveys, endangered species studies and other studies to assess the environmental impact of new sites or the expansion of existing sites. Compliance with these regulatory requirements is expensive and significantly lengthens the time required to prepare applications and to receive authorizations. Costs of compliance with existing environmental laws and regulations are significant, and the cost of compliance with future environmental laws and regulations may adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. We are subject to extensive federal, state and local environmental statutes, rules and regulations relating to air quality, water quality, waste management, wildlife conservation, natural resources and health and safety that could, among other things, delay or increase our costs of construction, restrict or limit the output of certain facilities and/or require additional pollution control equipment and otherwise increase costs. For instance, in May 2016, the EPA issued final New Source Performance Standards governing methane emissions imposing more stringent controls on methane and volatile organic compounds emissions at new and modified oil and natural gas production, processing, storage, and transmission facilities. These rules have required changes to our operations, including the installation of new equipment to control emissions. Additionally, several states are pursuing similar measures to regulate emissions of methane from new and existing sources. There are significant capital, operating and other costs associated with compliance with these environmental statutes, rules and regulations. Future federal and state regulations relating to our gathering and processing, transmission, and storage operations remain a possibility and could result in increased compliance costs on our operations. Furthermore, if new or more stringent federal, state or local legal restrictions are adopted in areas where our oil and natural gas exploration and production customers operate, they could incur potentially significant added costs to comply with such requirements, experience delays or curtailment in the pursuit of exploration, development, or production activities, and perhaps even be precluded from drilling wells, some or all of which could adversely affect demand for our services to those customers. There is inherent risk of the incurrence of environmental costs and liabilities in our operations due to our handling of natural gas, NGLs, crude oil, and produced water, as well as air emissions related to our operations and historical industry operations and waste disposal practices. These matters are subject to stringent and complex federal, state and local laws and regulations governing environmental protection, including the discharge of materials into the environment and the protection of plants, wildlife, and natural and cultural resources. These laws and regulations can restrict or impact our business activities in many ways, such as restricting the way we can handle or dispose of wastes or requiring remedial action to mitigate pollution conditions that may be caused by our operations or that are attributable to former operators. Joint and several strict liability may be incurred, without regard to fault, under certain of these environmental laws and regulations in connection with discharges or releases of wastes on, under or from our properties and facilities, many of which have been used for midstream activities for a number of years, oftentimes by third parties not under our control. Private parties, including the owners of the properties through which our gathering and transportation systems pass and facilities where our wastes are taken for reclamation or disposal, may also have the right to pursue legal actions to enforce compliance, as well as to seek damages for non-compliance, with environmental laws and regulations or for personal injury or property damage. For example, an accidental release from one of our pipelines could subject us to substantial liabilities arising from environmental cleanup and restoration costs, claims made by neighboring landowners and other third parties for personal injury and property damage and fines or penalties for related violations of environmental laws or regulations. We may be unable to recover these costs from insurance. Moreover, the possibility exists that stricter laws, regulations or enforcement policies could significantly increase compliance costs and the cost of any remediation that may become necessary. Further, stricter requirements could negatively impact our customers’ production and operations, resulting in less demand for our services. Increased regulation of hydraulic fracturing and waste water injection wells could result in reductions or delays in natural gas production by our customers, which could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. Hydraulic fracturing is common practice that is used by many of our customers to stimulate production of natural gas and crude oil from dense subsurface rock formations. The hydraulic fracturing process involves the injection of water, sand, and chemicals under pressure into targeted subsurface formations to fracture the surrounding rock and stimulate production. Hydraulic fracturing typically is regulated by state oil and natural gas commissions. In addition, certain federal agencies have proposed additional laws and regulations to more closely regulate the hydraulic fracturing process. In past sessions, Congress has considered, but not passed, legislation to provide for federal regulation of hydraulic fracturing under the Safe Drinking Water Act (SDWA) 37 Table of Contents and to require disclosure of the chemicals used in the hydraulic fracturing process. The EPA has issued SDWA permitting guidance for hydraulic fracturing operations involving the use of diesel fuel in fracturing fluids in those states where the EPA is the permitting authority. Some states have adopted, and other states have considered adopting, legal requirements that could impose more stringent permitting, public disclosure or well construction requirements on hydraulic fracturing activities. Local government also may seek to adopt ordinances within their jurisdictions regulating the time, place and manner of drilling activities in general or hydraulic fracturing activities in particular, in some cases banning hydraulic fracturing entirely. If new or more stringent federal, state or local legal restrictions relating to the hydraulic fracturing process are adopted in areas where our oil and natural gas exploration and production customers operate, they could incur potentially significant added costs to comply with such requirements, experience delays or curtailment in the pursuit of exploration, development, or production activities, and perhaps even be precluded from drilling wells, some or all of which activities could adversely affect demand for our services to those customers. State and federal regulatory agencies recently have focused on a possible connection between the operation of injection wells used for oil and gas waste disposal and seismic activity. Similar concerns have been raised that hydraulic fracturing may also contribute to seismic activity. When caused by human activity, such events are called induced seismicity. In March 2016, the United States Geological Survey identified six states with the most significant hazards from induced seismicity, including Oklahoma, Kansas, Texas, Colorado, New Mexico, and Arkansas. In March 2017, the United States Geological Survey produced an updated seismic hazard survey that forecasted lower earthquake rates in regions of induced activity, but still showed significantly elevated hazards in the central and eastern United States. In light of these concerns, some state regulatory agencies have modified their regulations or issued orders to address induced seismicity. For example, the Oklahoma Corporation Commission (OCC) has implemented volume reduction plans, and at times required shut-ins, for disposal wells injecting wastewater from oil and gas operations into the Arbuckle formation. In December 2016, the OCC also released well completion seismicity guidelines for operators in the SCOOP and STACK that call for hydraulic fracturing operations to be suspended following earthquakes of certain magnitudes in the vicinity. Certain environmental and other groups have also suggested that additional federal, state and local laws and regulations may be needed to more closely regulate the hydraulic fracturing process. We cannot predict whether additional federal, state or local laws or regulations applicable to hydraulic fracturing will be enacted in the future and, if so, what actions any such laws or regulations would require or prohibit. Increased regulation and attention given to induced seismicity could lead to greater opposition to, and litigation concerning, oil and gas activities utilizing hydraulic fracturing or injection wells for waste disposal. Additional legislation or regulation could also lead to operational delays or increased operating costs for our customers, which in turn could reduce the demand for our services. Other governmental agencies, including the U.S. Department of Energy, have evaluated or are evaluating various other aspects of hydraulic fracturing. These ongoing or proposed studies, depending on their degree of pursuit and any meaningful results obtained, could spur initiatives to further regulate hydraulic fracturing under the SDWA or other regulatory mechanisms. Our operations may incur substantial liabilities to comply with climate change legislation and regulatory initiatives. Because our operations emit various types of greenhouse gases, legislation and regulations governing greenhouse gas emissions could increase our costs related to operating and maintaining our facilities, and could delay future permitting. At the federal level, the EPA has adopted regulations under existing provisions of the federal Clean Air Act that, among other things, require the monitoring and reporting of GHG emissions from specified onshore and offshore oil and natural gas production sources in the United States on an annual basis, which include certain of our operations. Additional rules, such as the updates to the oil and gas new source performance standard requirements finalized by the EPA in May 2016 could affect our ability to obtain air permits for new or modified facilities or require our operations to incur additional expenses to control air emissions by installing emissions control technologies and adhering to a variety of work practice and other requirements. These requirements could increase the costs of development and production, reducing the profits available to us and potentially impairing our operator’s ability to economically develop our properties. In addition, the U.S. Congress has in the past and may in the future consider legislation to reduce emissions of greenhouse gases, and there has been a wide- ranging policy debate, both nationally and internationally, regarding the impact of these gases and possible means for their regulation. Efforts have been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global climate change issues. From time to time, the United States Congress has considered adopting legislation to limit GHG emissions. A number of state and regional efforts have also emerged that are aimed at tracking and/or reducing GHG emissions by means of cap and trade programs. These programs typically require major sources of GHG emissions to acquire and surrender emission allowances in return for emitting those GHGs. Any such future laws and regulations imposing reporting obligations on, or limiting emissions of, GHGs could require us to incur costs to reduce emissions of GHGs. Substantial limitations on GHG emissions could also adversely affect demand for oil and natural gas. Depending on the particular program, we could in the future be required to purchase and surrender emission allowances or 38 Table of Contents otherwise undertake measures to reduce greenhouse gas emissions. Any additional costs or operating restrictions associated with new legislation or regulations regarding greenhouse gas emissions could adversely affect the demand for our services and our financial position, results of operations and ability to make cash distributions to unitholders. Increased regulatory-imposed costs may increase the cost of consuming, and thereby reduce demand for, the products that we gather, treat and transport. To the extent financial markets view climate change and emissions of greenhouse gases as a financial risk, this view could negatively affect our ability to access capital markets or cause us to receive less favorable terms and conditions. Consequently, legislation and regulatory initiatives aimed at reducing greenhouse gases could have a material adverse effect on our financial position, results of operations and ability to make cash distributions to unitholders. Finally, some scientists have concluded that increasing concentrations of GHGs in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, floods and other climatic events; if any such effects were to occur, they could adversely affect our results of operations. Our operations are subject to extensive regulation by federal regulatory authorities. Changes or additional regulatory measures adopted by such authorities could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. The rates charged by several of our pipeline systems, including for interstate gas transportation service provided by our intrastate pipelines, are regulated by FERC. FERC and state regulatory agencies also regulate other terms and conditions of the services we may offer. If one of these regulatory agencies, on its own initiative or due to challenges by third parties, were to lower our tariff rates or deny any rate increase or other material changes to the types, or terms and conditions, of service we might propose or offer, the profitability of our pipeline businesses could suffer. If we were permitted to raise our tariff rates for a particular pipeline, there might be significant delay between the time the tariff rate increase is approved and the time that the rate increase actually goes into effect, which could also limit our profitability. Furthermore, competition from other pipeline systems may prevent us from raising our tariff rates even if regulatory agencies permit us to do so. The regulatory agencies that regulate our systems periodically implement new rules, regulations and terms and conditions of services subject to their jurisdiction. New initiatives or orders may adversely affect the rates charged for our services or otherwise adversely affect our financial position, results of operations and ability to make cash distributions to our unitholders. Our natural gas interstate pipelines are regulated by FERC under the Natural Gas Act of 1938, or NGA, the Natural Gas Policy Act of 1978, or the NGPA, and the Energy Policy Act of 2005, or EPAct of 2005. Generally, FERC’s authority over interstate natural gas transportation extends to: • • • rates, operating terms, conditions of service and service contracts; certification and construction of new facilities; extension or abandonment of services and facilities or expansion of existing facilities; • maintenance of accounts and records; • • • • acquisition and disposition of facilities; initiation and discontinuation of services; depreciation and amortization policies; conduct and relationship with certain affiliates; • market manipulation in connection with interstate sales, purchases or natural gas transportation; and • various other matters. Should we fail to comply with all applicable FERC-administered statutes, rules, regulations and orders, we could be subject to substantial penalties and fines. Under EPACT 2005, FERC has civil penalty authority under the NGA and the NGPA to impose penalties for current violations of up to $1 million per day for each violation and possible criminal penalties of up to approximately $1.2 million per violation. FERC’s jurisdiction extends to the certification and construction of interstate transportation and storage facilities, including, but not limited to expansions, lateral and other facilities and abandonment of facilities and services. Prior to commencing construction of significant new interstate transportation and storage facilities, an interstate pipeline must obtain a certificate authorizing the construction, or an order amending its existing certificate, from FERC. Certain minor expansions are authorized by blanket certificates that FERC has issued by rule. Typically, a significant expansion project requires review by a number of governmental agencies, including state and local agencies, whose cooperation is important in completing the regulatory process 39 Table of Contents on schedule. Any failure by an agency to issue sufficient authorizations or permits in a timely manner for one or more of these projects may mean that we will not be able to pursue these projects or that they will be constructed in a manner or with capital requirements that we did not anticipate. Our inability to obtain sufficient permits and authorizations in a timely manner could materially and negatively impact the additional revenues expected from these projects. FERC conducts audits to verify compliance with FERC’s regulations and the terms of its orders, including whether the websites of interstate pipelines accurately provide information on the operations and availability of services. FERC’s regulations require uniform terms and conditions for service, as set forth in agreements for transportation and storage services executed between interstate pipelines and their customers. These service agreements are required to conform, in all material respects, with the standard form of service agreements set forth in the pipeline’s FERC-approved tariff. Non-conforming agreements must be filed with, and accepted by, the FERC. In the event that FERC finds that an agreement, in whole or part, is materially non-conforming, it could reject the agreement or require us to seek modification, or alternatively require us to modify our tariff so that the non-conforming provisions are generally available to all customers. The rates, terms and conditions for transporting natural gas in interstate commerce on certain of our intrastate pipelines and for services offered at certain of our storage facilities are subject to the jurisdiction of FERC under Section 311 of the NGPA. Rates to provide such interstate transportation service must be “fair and equitable” under the NGPA and are subject to review, refund with interest if found not to be fair and equitable, and approval by FERC at least once every five years. Our crude oil gathering pipelines are subject to common carrier regulation by FERC under the Interstate Commerce Act, or ICA. The ICA requires that we maintain tariffs on file with FERC setting forth the rates we charge for providing transportation services, as well as the rules and regulations governing such services. The ICA requires, among other things, that our rates must be “just and reasonable” and that we provide service in a manner that is nondiscriminatory. Shippers on our crude oil gathering pipelines may protest our tariff filings, file complaints against our existing rates, or FERC can investigate our rates on its own initiative. In the event that FERC finds that our existing or proposed rates are unjust and unreasonable, it could deny requested rate increases or could order us to reduce our rates and could require the payment of reparations to complaining shippers for up to two years prior to the complaint. On December 22, 2017, legislation known as the “Tax Cuts and Jobs Act” was enacted, which reduced the highest marginal United States federal corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017. Following the effective date of the law, the FERC orders granting certificates to construct proposed pipeline facilities have directed pipelines proposing new rates for service on those facilities to re-file such rates so that the rates reflect the reduction in the corporate tax rate, the FERC has issued data requests in pending certificate proceedings for proposed pipeline facilities requesting pipelines to explain the impacts of the reduction in the corporate tax rate on the rate proposals in those proceedings and to provide re-calculated initial rates for service on the proposed pipeline facilities, and filings have been made at the FERC requesting that the FERC require pipelines to lower their transportation rates to account for lower corporate taxes. Our current tariff rates on file with FERC incorporate the federal income tax rates that were in effect at the time those tariff rates were established. If FERC requires us to establish new tariff rates that reflect a lower federal corporate income tax rate, it is possible the rates would be reduced, which could adversely affect our financial position, results of operations and ability to make cash distributions to our unitholders. Our operations may also be subject to regulation by state and local regulatory authorities. Changes or additional regulatory measures adopted by such authorities could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. Our pipeline operations that are not regulated by FERC may be subject to state and local regulation applicable to intrastate natural and transportation services. The relevant states in which we operate include North Dakota, Oklahoma, Arkansas, Louisiana, Texas, Missouri, Kansas, Mississippi, Tennessee and Illinois. State and local regulations generally focus on safety, environmental and, in some circumstances, prohibition of undue discrimination among shippers. Additional rules and legislation pertaining to these matters are considered and, in some instances, adopted from time to time. We cannot predict what effect, if any, such changes might have on our operations, but we could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes. Other state and local regulations also may affect our business. Any such state or local regulation could have an adverse effect on our business and our financial position, results of operations and ability to make cash distributions to unitholders. Our gathering lines may be subject to ratable take and common purchaser statutes. Ratable take statutes generally require gatherers to take, without undue discrimination, oil or natural gas production that may be tendered to the gatherer for handling. Similarly, common purchaser statutes generally require gatherers to purchase without undue discrimination as to source of supply or producer. These statutes restrict our right as an owner of gathering facilities to decide with whom we contract to purchase or transport oil or natural gas. Federal law leaves economic regulation of natural gas gathering to the states. The states in which we 40 Table of Contents operate have adopted complaint-based regulation of oil and natural gas gathering activities, which allows oil and natural gas producers and shippers to file complaints with state regulators in an effort to resolve grievances relating to access to oil and natural gas gathering pipelines and rate discrimination. Other state regulations may not directly regulate our business, but may nonetheless affect the availability of natural gas for processing, including state regulation of production rates and maximum daily production allowable from gas wells. While our gathering lines are currently subject to limited state regulation, there is a risk that state laws will be changed, which may give producers a stronger basis to challenge the regulatory status of a line, or the rates, terms and conditions of a gathering line providing transportation service. A change in the jurisdictional characterization of some of our assets by federal, state or local regulatory agencies or a change in policy by those agencies may result in increased regulation of our assets, which may cause our revenues to decline and operating expenses to increase. Our natural gas gathering and intrastate transportation operations are generally exempt from the jurisdiction of FERC under the NGA, but FERC regulation may indirectly impact these businesses and the markets for products derived from these businesses. FERC’s policies and practices across the range of its oil and natural gas regulatory activities, including, for example, its policies on interstate open access transportation, ratemaking, capacity release, and market center promotion may indirectly affect intrastate markets. In recent years, FERC has pursued pro-competitive policies in its regulation of interstate oil and natural gas pipelines. However, we cannot assure you that FERC will continue to pursue this approach as it considers matters such as pipeline rates and rules and policies that may indirectly affect the intrastate natural gas transportation business. Although FERC has not made a formal determination with respect to all of our facilities we consider to be gathering facilities, management believes that our natural gas gathering pipelines meet the traditional tests that FERC has used to determine that a pipeline is a gathering pipeline and are therefore not subject to FERC jurisdiction. The distinction between FERC-regulated transmission services and federally unregulated gathering services, however, has been the subject of substantial litigation, and FERC determines whether facilities are gathering facilities on a case-by- case basis, so the classification and regulation of our gathering facilities is subject to change based on future determinations by FERC, the courts or Congress. If FERC were to consider the status of an individual facility and determine that the facility and/or services provided by it are not exempt from FERC regulation under the NGA and that the facility provides interstate service, the rates for, and terms and conditions of, services provided by such facility would be subject to regulation by FERC under the NGA or the NGPA. Such regulation could decrease revenue, increase operating costs, and, depending upon the facility in question, could adversely affect our financial condition, results of operations and ability to make cash distributions to our unitholders. In addition, if any of our facilities were found to have provided services or otherwise operated in violation of the NGA or NGPA, this could result in the imposition of substantial civil penalties, as well as a requirement to disgorge revenues collected for such services in excess of the maximum rates established by FERC. Natural gas gathering may receive greater regulatory scrutiny at the state level; therefore, our natural gas gathering operations could be adversely affected should they become subject to the application of state regulation of rates and services. Our gathering operations could also be subject to safety and operational regulations relating to the design, construction, testing, operation, replacement and maintenance of gathering facilities. We cannot predict what effect, if any, such changes might have on our operations, but we could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes. We may incur significant costs and liabilities resulting from compliance with pipeline safety laws and regulations, pipeline integrity and other similar programs and related repairs. Certain of our pipeline operations are subject to pipeline safety laws and regulations. The U.S. Department of Transportation’s (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA) regulates safety requirements for the design, construction, maintenance and operation of PHMSA jurisdictional natural gas and hazardous liquids pipeline facilities. All of our interstate and intrastate natural gas transportation pipeline facilities are PHMSA jurisdictional and certain of our natural gas gathering, NGL, and crude oil pipeline facilities are PHMSA jurisdictional. Among other things, these laws and regulations require pipeline operators to develop integrity management programs, including more frequent inspections and other measures for pipelines located in “high consequence areas.” The regulations require operators, including us, to, among other things: • • • • • perform ongoing assessments of pipeline integrity; develop a baseline plan to prioritize the assessment of a covered pipeline segment; identify and characterize applicable threats that could impact a high consequence area; improve data collection, integration, and analysis; repair and remediate pipelines as necessary; and 41 Table of Contents • implement preventive and mitigating action. Failure to comply with PHMSA or comparable state pipeline safety regulations could result in a number of consequences which may have an adverse effect on our operations. We incur significant costs associated with our compliance with existing PHMSA and comparable state pipeline regulations. We currently estimate that we will incur maintenance capital expenditures and operation and maintenance expenses of up to $285 million from 2018 through 2022 to comply with existing pipeline safety laws and regulations related to integrity assessments and repairs. We may incur significant cost associated with repair, remediation, preventive and mitigation measures associated with our integrity management programs for pipelines that are not currently subject to regulation by PHMSA. Changes to pipeline safety laws and regulations that result in more stringent or costly safety standards could have a significant adverse effect on us. For example, in August 2011, PHMSA published an advance notice of proposed rulemaking (ANPRM) in which the agency was seeking public comment on a number of changes to regulations governing the safety of gas transmission pipelines and gathering lines, including, for example, revising the definitions of “high consequence areas” and “gathering lines” and strengthening integrity management requirements as they apply to existing regulated operators and to currently exempt operators should certain exemptions be removed. On April 8, 2016, the Pipeline and Hazardous Materials Safety Administration published a notice of proposed rulemaking (NPRM) responding to several of the integrity management topics raised in the August 2011 ANPRM and proposing new requirements to address safety issues for natural gas transmission and gathering lines that have arisen since the issuance of the ANPRM. The proposed rule would strengthen existing integrity management requirements, expand assessment and repair requirements to pipelines in areas with medium population densities, and extend regulatory requirements to onshore gas gathering lines that are currently exempt. Comments were due July 7, 2016. PHMSA issued, but has yet to publish, a similar rule for hazardous liquids (including oil) pipelines on January 13, 2017. This rule extends regulatory reporting requirements to all liquid gathering lines, require additional event-driven and periodic inspections, require use of leak detection systems on all hazardous liquid pipelines, modify repair criteria, and require certain pipelines to eventually accommodate inline inspection tools. It is unclear when or if this rule will go into effect as, on January 20, 2017, the Trump Administration requested that all regulations that had been sent to the Office of the Federal Register, but not yet published, be immediately withdrawn for further review. We are still monitoring and evaluating the effect of these requirements and proposals on our operations. Proposed rulemakings such as the NPRMs published on October 13, 2015 and April 8, 2016 could expand the scope of the natural gas and hazardous liquids integrity management programs and other related pipeline safety regulations to include additional requirements or previously exempt pipelines. We have not estimated the cost of complying with any proposed changes to the regulations administered by PHMSA or state pipeline safety regulators. Financial reform regulations under the Dodd-Frank Act could adversely affect our ability to use derivative instruments to hedge risks associated with our business. At times, we may hedge all or a portion of our commodity risk and our interest rate risk. The federal government regulates the derivatives markets and entities, including businesses like ours, that participate in those markets through the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd- Frank Act, which requires the Commodity Futures Trading Commission, or the CFTC, and the SEC to promulgate rules and regulations implementing the legislation. Under the CFTC’s regulations, we are subject to reporting and recordkeeping obligations for transactions involving non-financial swap transactions. The CFTC initially adopted regulations to set position limits for certain futures and option contracts in the major energy markets and for swaps that are their economic equivalents, but these rules were successfully challenged in federal district court by the Securities Industry Financial Markets Association and the International Swaps and Derivatives Association and largely vacated by the court. In December 2013, the CFTC published a Notice of Proposed Rulemaking designed to implement new position limits regulation and in December 2016, the CFTC re-proposal position limits regulations. The ultimate form and timing of the implementation of the regulatory regime affecting commodity derivatives remains uncertain. The CFTC has imposed mandatory clearing requirements on certain categories of swaps, including certain interest rate swaps, but has exempted derivatives intended to hedge or mitigate commercial risk from the mandatory swap clearing requirement, where the counterparty such as us has a required identification number, is not a financial entity as defined by the regulations, and meets a minimum asset test. Management believes our hedging transactions qualify for this “commercial end-user” exception. The Dodd-Frank Act may also require us to comply with margin requirements in connection with our hedging activities, although the application of those provisions to us is uncertain at this time. The Dodd-Frank Act may also require the counterparties to our derivative instruments to spin off some of their hedging activities to a separate entity, which may not be as creditworthy as the current counterparty. The Dodd-Frank Act and related regulations could significantly increase the cost of derivatives contracts for our industry (including requirements to post collateral which could adversely affect our available liquidity), materially alter the terms of 42 Table of Contents derivatives contracts, reduce the availability of derivatives to protect against risks we encounter, reduce our ability to monetize or restructure our existing derivatives contracts, and increase our exposure to less creditworthy counterparties, particularly if we are unable to utilize the commercial end user exception with respect to certain of our hedging transactions. If we reduce our use of hedging as a result of the legislation and regulations, our results of operations may become more volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital expenditures and fund unitholder distributions. Finally, the legislation was intended, in part, to reduce the volatility of crude oil and natural gas prices, which some legislators attributed to speculative trading in derivatives and commodity instruments related to crude oil and natural gas. Our revenues could therefore be adversely affected if a consequence of the legislation and regulations is to lower commodity prices. Any of these consequences could adversely affect our financial position, results of operations and our ability to make cash distributions to unitholders. Risks Related to an Investment in Us Our general partner and its affiliates, including CenterPoint Energy and OGE Energy, have conflicts of interest with us and limited duties to us and our unitholders, and they may favor their own interests to the detriment of us and our other common unitholders. Affiliates of CenterPoint Energy and OGE Energy own and control our general partner and appoint all of the directors of our general partner. Some of the directors of our general partner are appointed to represent CenterPoint Energy or OGE Energy and are also officers and/or directors of CenterPoint Energy or OGE Energy, respectively. Although our general partner has a duty to manage us in a manner that is beneficial to us and our unitholders, the directors of our general partner who are appointed to represent CenterPoint Energy or OGE Energy have a fiduciary duty to perform their obligations as directors in a manner that is beneficial to CenterPoint Energy or OGE Energy, respectively. Conflicts of interest will arise between CenterPoint Energy, OGE Energy and our general partner, on the one hand, and us and our unitholders, on the other hand. In resolving these conflicts of interest, our general partner may favor its own interests and the interests of CenterPoint Energy and OGE Energy over our interests and the interests of our unitholders. These conflicts include the following situations, among others: • Neither the Partnership Agreement nor any other agreement requires CenterPoint Energy or OGE Energy to pursue a business strategy that favors us. The directors and officers of CenterPoint Energy and OGE Energy have a fiduciary duty to make decisions in the best interests of the stockholders of their respective companies, which may be contrary to our interests. CenterPoint Energy and OGE Energy may choose to shift the focus of their investment and growth to areas not served by our assets. In addition, CenterPoint Energy is the holder of our Series A Preferred Units and may favor its interests in voting in favor of actions relating to such units, including voting in favor of making distributions on such Series A Preferred Units even if no distributions are made on the common units. • Our general partner is allowed to take into account the interests of parties other than us, such as CenterPoint Energy and OGE Energy, in resolving conflicts of interest. • Some of the directors of our general partner are also officers and/or directors of CenterPoint Energy or OGE Energy and will owe fiduciary duties to their respective companies. These individuals may also devote significant time to the business of CenterPoint Energy and OGE Energy. • The Partnership Agreement replaces the fiduciary duties that would otherwise be owed to us by our general partner with contractual standards governing its duties, limits our general partner’s liabilities and restricts the remedies available to our unitholders for actions that, without such limitations, might constitute breaches of fiduciary duty. • Except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval. • Disputes may arise under our commercial agreements with CenterPoint Energy and OGE Energy. • Our general partner determines the amount and timing of asset purchases and sales, borrowings, issuances of additional partnership units and the creation, reduction or increase of cash reserves, each of which can affect the amount of distributable cash flow. • Our general partner determines the amount and timing of any capital expenditures and whether a capital expenditure is classified as a maintenance capital expenditure, which reduces operating surplus, or an expansion or investment capital expenditure, which does not reduce operating surplus. This determination can affect the amount of cash that is distributed to our unitholders. • Our general partner determines which costs incurred by it and its affiliates are reimbursable by us. • Our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make incentive distributions. 43 Table of Contents • The Partnership Agreement permits us to classify up to $300 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions to our general partner in respect of the incentive distribution rights. • The Partnership Agreement does not prohibit our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf. • Our general partner intends to limit its liability regarding our contractual and other obligations. • Our general partner may exercise its right to call and purchase all of the common units not owned by it and its affiliates if they own more than 90% of the common units. If our general partner and its affiliates reduce their ownership percentage to below 70% of the outstanding units, the ownership threshold to exercise the call right will be permanently reduced to 80% . • Our general partner controls the enforcement of the obligations that it and its affiliates owe to us. • Our general partner decides whether to retain separate counsel, accountants or others to perform services for us. • Our general partner may transfer its incentive distribution rights without unitholder approval. • Our general partner may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to our general partner’s incentive distribution rights without the approval of the conflicts committee of the Board of Directors or our unitholders. This election may result in lower distributions to our common unitholders in certain situations. If a unitholder is not an Eligible Holder, the unitholder’s common units may be subject to redemption. Our Partnership Agreement includes certain requirements regarding those investors who may own our common and preferred units. Eligible Holders are limited partners whose (i) federal income tax status is not reasonably likely to have a material adverse effect on the rates that can be charged by us on assets that are subject to regulation by FERC or an analogous regulatory body and (ii) nationality, citizenship or other related status would not create a substantial risk of cancellation or forfeiture of any property in which we have an interest, in each case as determined by our general partner with the advice of counsel. If the unitholder is not an Eligible Holder, in certain circumstances as set forth in our Partnership Agreement, the unitholder’s units may be redeemed by us at the then- current market price. The redemption price will be paid in cash or by delivery of a promissory note, as determined by our general partner. Our Partnership Agreement requires that we distribute all of our available cash, which could limit our ability to grow and make acquisitions. Our Partnership Agreement requires that we distribute all of our available cash to our unitholders and will rely primarily upon external financing sources, including commercial borrowings and the issuance of debt and equity securities, to fund our acquisitions and expansion capital expenditures. As a result, to the extent we are unable to finance growth externally, our cash distribution policy will significantly impair our ability to grow. In addition, because we are required to distribute all of our available cash, our growth may not be as fast as that of businesses that reinvest their available cash to expand ongoing operations. To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our Partnership Agreement or in our credit facilities that limit our ability to issue additional units, including units ranking senior to the common units. The incurrence of additional commercial borrowings or other debt to finance our growth strategy would result in increased interest expense, which in turn may impact the available cash that we have to distribute to our unitholders. The reimbursements due to our general partner and its affiliates for services provided to us or on our behalf will reduce our distributable cash flow. The amount and timing of such reimbursements will be determined by our general partner. Prior to making any distribution on our common units, we will reimburse our general partner and its affiliates, including CenterPoint Energy and OGE Energy, for costs and expenses they incur and payments they make on our behalf. Pursuant to services agreements we have entered into with each of CenterPoint Energy and OGE Energy, we will reimburse CenterPoint Energy and OGE Energy for the payment of operating expenses related to our operations and for the provision of various general and administrative services performed for our benefit. Payments for these services may be substantial and will reduce the amount of distributable cash flow. Additionally, we will reimburse CenterPoint Energy and OGE Energy for direct or allocated costs and expenses incurred on our behalf, including administrative costs, such as compensation expense for those persons who provide services necessary to run our business, and insurance expenses. Our Partnership Agreement provides that our general partner will 44 Table of Contents determine in good faith the expenses that are allocable to us. The reimbursement of expenses and payment of fees, if any, to our general partner and its affiliates will reduce the amount of available cash to pay cash distributions to our common unitholders. Any reductions in our credit ratings could increase our financing costs and the cost of maintaining certain contractual relationships. We cannot assure you that our credit ratings will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances warrant. If any of our credit ratings are below investment grade, we may have higher future borrowing costs and we or our subsidiaries may be required to post cash collateral or letters of credit under certain contractual agreements. If cash collateral requirements were to occur at a time when we were experiencing significant working capital requirements or otherwise lacked liquidity, our financial position, results of operations and ability to make cash distributions to unitholders could be adversely affected. The credit and business risk profiles and the business plans of our sponsors could adversely affect our credit ratings and profile. The credit and business risk profiles and the business plans of our sponsors may be factors in credit evaluations of us because, through their indirect ownership of our general partner, they can influence our business activities, including our cash distribution strategy, acquisition strategy, and business risk profile. The financial conditions of CenterPoint Energy and OGE Energy, including the degree of their financial leverage and their dependence on cash flows from us, as well as their business plans with respect to their investment in us, may be considered by credit rating agencies in their assessment of our credit ratings and profile. CenterPoint Energy and OGE Energy, which indirectly own our general partner, have indebtedness outstanding and are partially dependent on the cash distributions from their general partner and limited partner interests in us to service such indebtedness and pay dividends on their common stock. Any distributions by us to such entities will be made only after satisfying our then-current obligations to our creditors. Our credit ratings and business risk profile could be adversely affected if the ratings and risk profiles of the entities that control our general partner were viewed as substantially lower or riskier than ours. Our Partnership Agreement replaces our general partner’s fiduciary duties to holders of our common units with contractual standards governing its duties. Our Partnership Agreement contains provisions that eliminate the fiduciary standards to which our general partner would otherwise be held by state fiduciary duty law and replaces those duties with several different contractual standards. For example, our Partnership Agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner, free of any duties to us and our unitholders other than the implied contractual covenant of good faith and fair dealing, which means that a court will enforce the reasonable expectations of the partners where the language in the Partnership Agreement does not provide for a clear course of action. This provision entitles our general partner to consider only the interests and factors that it desires and relieves it of any duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or our limited partners. Examples of decisions that our general partner may make in its individual capacity include: • • • • • • how to allocate corporate opportunities among us and its other affiliates; whether to exercise its limited call right; whether to seek approval of the resolution of a conflict of interest by the conflicts committee of the Board of Directors; whether to elect to reset target distribution levels; whether to transfer the incentive distribution rights to a third party; and whether or not to consent to any merger or consolidation of the Partnership or amendment to the Partnership Agreement. By purchasing a common unit, a common unitholder agrees to become bound by the provisions in the Partnership Agreement, including the provisions discussed above. Our Partnership Agreement restricts the remedies available to holders of our common units for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty. Our Partnership Agreement contains provisions that restrict the remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty under state fiduciary duty law. For example, our Partnership Agreement provides that: 45 Table of Contents • • • • whenever our general partner, the Board of Directors or any committee thereof (including the conflicts committee) makes a determination or takes, or declines to take, any other action in their respective capacities, our general partner, the Board of Directors and any committee thereof (including the conflicts committee), as applicable, is required to make such determination, or take or decline to take such other action, in good faith, meaning that it subjectively believed that the decision was in the best interests of the Partnership, and, except as specifically provided by our Partnership Agreement, will not be subject to any other or different standard imposed by our Partnership Agreement, Delaware law, or any other law, rule or regulation, or at equity; our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as such decisions are made in good faith; our general partner and its officers and directors will not be liable for monetary damages to us or our limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers and directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and our general partner will not be in breach of its obligations under the Partnership Agreement (including any duties to us or our unitholders) if a transaction with an affiliate or the resolution of a conflict of interest is: • • • • approved by the conflicts committee of the Board of Directors, although our general partner is not obligated to seek such approval; approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates; determined by the Board of Directors to be on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or determined by the Board of Directors to be fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us. In connection with a situation involving a transaction with an affiliate or a conflict of interest, any determination by our general partner or the conflicts committee must be made in good faith. If an affiliate transaction or the resolution of a conflict of interest is not approved by our common unitholders or the conflicts committee and the Board of Directors determines that the resolution or course of action taken with respect to the affiliate transaction or conflict of interest satisfies either of the standards set forth in the third and fourth sub-bullets above, then it will be presumed that, in making its decision, the Board of Directors acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the Partnership challenging such determination, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. Our general partner may elect to cause us to issue common units to it in connection with a resetting of the minimum quarterly distribution and the target distribution levels related to our general partner’s incentive distribution rights without the approval of the conflicts committee of our general partner or our unitholders. This may result in lower distributions to our common unitholders in certain situations. Our general partner has the right, if it has received incentive distributions at the highest level to which it is entitled (50%) for each of the prior four consecutive fiscal quarters and the amount of each such distribution did not exceed the adjusted operating surplus for such quarter, respectively, to reset the initial minimum quarterly distribution and cash target distribution levels at higher levels based on the average cash distribution amount per common unit for the two fiscal quarters prior to the exercise of the reset election. Following a reset election by our general partner, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per common unit for the two fiscal quarters immediately preceding the reset election (such amount is referred to as the reset minimum quarterly distribution) and the target distribution levels will be reset to correspondingly higher levels based on percentage increases above the reset minimum quarterly distribution amount. We anticipate that our general partner would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per common unit without such conversion; however, it is possible that our general partner could exercise this reset election at a time when we are experiencing declines in our aggregate cash distributions or at a time when our general partner expects that we will experience declines in our aggregate cash distributions in the foreseeable future. In such situations, our general partner may be experiencing, or may be expected to experience, declines in the cash distributions it receives related to its incentive distribution rights and may therefore desire to be issued our common units, which are entitled to specified priorities with respect to our distributions and which therefore may be more advantageous for the general partner to own in lieu of the right to receive incentive distribution payments based on target distribution levels that 46 Table of Contents are less certain to be achieved in the then-current business environment. This risk could be elevated if our incentive distribution rights have been transferred to a third party. Our general partner has the right to transfer the incentive distribution rights at any time, in whole or in part, and any transferee holding a majority of the incentive distribution rights shall have the same rights as our general partner with respect to resetting target distributions. As a result, a reset election may cause our common unitholders to experience dilution in the amount of cash distributions that they would have otherwise received had we not issued new common units to our general partner in connection with resetting the target distribution levels related to our general partner incentive distribution rights. Holders of our common units have limited voting rights and are not entitled to elect our general partner or its directors. Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business. Unitholders have no right to elect our general partner or its Board of Directors on an annual or other continuing basis. Because CenterPoint Energy and OGE Energy collectively indirectly own 100% of our general partner, the Board of Directors has been, and, as long as CenterPoint Energy and OGE Energy own 100% of our general partner, will continue to be, chosen by CenterPoint Energy and OGE Energy. Furthermore, if the unitholders were dissatisfied with the performance of our general partner, they will have little ability to remove our general partner. Please see “—Even if holders of our common units are dissatisfied, they will not be able to remove our general partner without its consent.” As a result of these limitations, the price at which the common units will trade could be diminished because of the absence or reduction of a takeover premium in the trading price. Our Partnership Agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders’ ability to influence the manner or direction of management. Even if holders of our common units are dissatisfied, they will not be able to remove our general partner without its consent. The unitholders are unable to remove our general partner without its consent because affiliates of our general partner own sufficient units to be able to prevent its removal. The vote of the holders of at least 75% of all outstanding units voting together as a single class is required to remove our general partner. As of February 1, 2018 , affiliates of our general partner owned 79.8% of our aggregate outstanding common units. Our Partnership Agreement restricts the voting rights of unitholders owning 20% or more of our common units. Unitholders’ voting rights are further restricted by a provision of our Partnership Agreement providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees and persons who acquired such units with the prior approval of the Board of Directors, cannot vote on any matter. Our general partner’s interest in us and control of our general partner may be transferred to a third party without unitholder consent. Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of our unitholders. Our Partnership Agreement does not restrict the ability of the owners of our general partner from transferring all or a portion of their respective limited liability company interest in our general partner to a third party. The new owners of our general partner would then be in a position to replace the Board of Directors and officers of our general partner with its own choices and thereby influence the decisions taken by the Board of Directors and officers. The incentive distribution rights of our general partner may be transferred to a third party without unitholder consent. Our general partner may transfer its incentive distribution rights to a third party at any time without the consent of our unitholders. If our general partner transfers its incentive distribution rights to a third party but retains its general partner interest, our general partner may not have the same incentive to grow the Partnership and increase quarterly distributions to unitholders over time as it would if it had retained ownership of its incentive distribution rights. We may issue additional units without your approval, which would dilute your existing ownership interests. The Partnership Agreement does not limit the number of additional limited partner interests, including limited partner interests that rank senior to the common units, that we may issue at any time without the approval of our unitholders. The issuance by us of additional common units or other equity securities of equal or senior rank will have the following effects: • • our existing unitholders’ proportionate ownership interest in us will decrease; the amount of distributable cash flow on each unit may decrease; 47 Table of Contents • • • • because the amount payable to holders of incentive distribution rights is based on a percentage of the total distributable cash flow, the distributions to holders of incentive distribution rights will increase even if the per unit distribution on common units remains the same; the ratio of taxable income to distributions may increase; the relative voting strength of each previously outstanding unit may be diminished; and the market price of the common units may decline. In addition, upon a change of control or certain fundamental transactions, our Series A Preferred Units are convertible into common units at the option of the holders of such units. If a substantial portion of the Series A Preferred Units were converted into common units, common unitholders could experience significant dilution. In addition, if holders of such converted Series A Preferred Units were to dispose of a substantial portion of these common units in the public market, whether in a single transaction or series of transactions, it could adversely affect the market price for our common units. In addition, these sales, or the possibility that these sales may occur, could make it more difficult for us to sell our common units in the future. Affiliates of our general partner may sell common units in the public or private markets, which could have an adverse impact on the trading price of the common units and may sell their interest in our general partner, which may impact our strategic direction. As of February 1, 2018 , CenterPoint Energy held 233,856,623 common units and 14,520,000 Series A Preferred Units, and OGE Energy held 110,982,805 common units. Our Series A Preferred Units are convertible into common units upon a change of control or certain fundamental transactions at the option of the holders of such units. Both our common units held by CenterPoint Energy and OGE Energy, as well as our Series A Preferred Units held by CenterPoint Energy, are subject to certain registration rights. In addition, CenterPoint Energy has publicly disclosed that it is evaluating strategic alternatives for its investment in the Partnership. CenterPoint Energy has disclosed that the alternatives may include a sale of all or a portion of the interests that it owns in the Partnership and the General Partner, that if the sale option is not viable it intends to reduce its ownership in the Partnership over time through a sale of the common units it holds in the public equity markets subject to market conditions, and that there can be no assurances that these evaluations will result in any specific action. CenterPoint Energy’s disclosure, as well as any sales by CenterPoint Energy of the common units it holds in the public equity markets, could have an adverse impact on the market for our common units, including our ability to issue equity on favorable terms to fund our capital needs or at all. Any sale of our general partner by CenterPoint Energy or OGE Energy may impact our strategic direction, business or results of operations. Our general partner has a limited call right that may require our unitholders to sell their units at an undesirable time or price. If at any time our general partner and its affiliates own more than 90% of our common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price not less than their then-current market price, as calculated pursuant to the terms of the Partnership Agreement . If our general partner and its affiliates reduce their ownership percentage to below 70% of the outstanding units, the ownership threshold to exercise the call right will be permanently reduced to 80%. As a result, our unitholders may be required to sell their common units at an undesirable time or price and may not receive any positive return on their investment. Our unitholders may also incur a tax liability upon any such sale of their units. As of February 1, 2018 , affiliates of our general partner owned approximately 79.8% of our outstanding common units. If we assume the conversion of our Series A Preferred Units using the closing price of our units as of February 1, 2018 , affiliates of our general partner will then own 80.8% of our aggregate outstanding common units. Affiliates of our general partner may acquire additional common units from us in connection with future transactions or through open-market or negotiated purchases. Our unitholders’ liability may not be limited if a court finds that unitholder action constitutes control of our business. A general partner of a partnership generally has unlimited liability for the obligations of the partnership, except for those contractual obligations of the partnership that are expressly made without recourse to the general partner. The Partnership is organized under Delaware law, and we conduct business in a number of other states. The limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in some of the other states in which we may do business. Our unitholders could be held liable for any and all of our obligations as if they were general partners if a court or government agency were to determine that: • we were conducting business in a state but had not complied with that particular state’s partnership statute; or 48 Table of Contents • a unitholder’s right to act with other unitholders to remove or replace our general partner, to approve some amendments to our Partnership Agreement or to take other actions under our Partnership Agreement constitutes “control” of our business. Our Partnership Agreement designates the Court of Chancery of the State of Delaware as the exclusive forum for certain types of actions and proceedings that may be initiated by our unitholders, which limits our unitholders’ ability to choose the judicial forum for disputes with us or our general partner’s directors, officers or other employees. Our Partnership Agreement provides, that, with certain limited exceptions, the Court of Chancery of the State of Delaware is the exclusive forum for any claims, suits, actions or proceedings (1) arising out of or relating in any way to our Partnership Agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of our Partnership Agreement or the duties, obligations or liabilities among our partners, or obligations or liabilities of our partners to us, or the rights or powers of, or restrictions on, our partners or us), (2) brought in a derivative manner on our behalf, (3) asserting a claim of breach of a duty (including a fiduciary duty) owed by any of our, or our general partner’s, directors, officers, or other employees, or owed by our general partner, to us or our partners, (4) asserting a claim against us arising pursuant to any provision of the Delaware Revised Uniform Limited Partnership Act or (5) asserting a claim against us governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in our common units is deemed to have received notice of and consented to the foregoing provisions. Although management believes this choice of forum provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against us and our general partner’s directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation or similar governing documents has been challenged in legal proceedings and it is possible that in connection with any action a court could find the choice of forum provisions contained in our Partnership Agreement to be inapplicable or unenforceable in such action. If a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our financial position, results of operations and ability to make cash distributions to our unitholders. The NYSE does not require a publicly traded limited partnership like us to comply with certain of its corporate governance requirements. Our common units are listed on the NYSE. Because we are a publicly traded limited partnership, the NYSE does not require us to have, and we do not intend to have, a majority of independent directors on our Board of Directors, to establish a nominating and corporate governance committee, or to have a compensation committee composed entirely of independent directors. Accordingly, unitholders will not have the same protections afforded to certain corporations that are subject to all of the NYSE corporate governance requirements. Unitholders may have liability to repay distributions that were wrongfully distributed to them. Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, which we refer to herein as the Delaware Act, we may not make a distribution to our unitholders if the distribution would cause our liabilities to exceed the fair value of our assets. Delaware law provides that for a period of three years from the date of the impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. Transferees of common units are liable for both the obligations of the transferor to make contributions to the Partnership that are known to the transferee at the time of transfer and for unknown obligations if the liabilities could have been determined from the Partnership Agreement. Neither liabilities to partners on account of their partnership interest nor liabilities that are non-recourse to the Partnership are counted for purposes of determining whether a distribution is permitted. Our general partner intends to limit its liability regarding our obligations. Our general partner intends to limit its liability under contractual arrangements so that the counterparties to such arrangements have recourse only against our assets and not against our general partner or its assets. Our general partner may therefore cause us to incur indebtedness or other obligations that are non-recourse to our general partner. Our Partnership Agreement permits our general partner to limit its liability, even if we could have obtained more favorable terms without the limitation on liability. In addition, we are obligated to reimburse or indemnify our general partner to the extent that it incurs obligations on our behalf. Any such reimbursement or indemnification payments would reduce the amount of cash otherwise available for distribution to our unitholders. 49 Table of Contents An increase in interest rates could adversely impact the price of our common units, our ability to issue equity or incur debt for acquisitions or other purposes and our ability to make cash distributions at our intended levels. Interest rates on future credit facilities and debt offerings could be higher than current levels, causing our financing costs to increase accordingly. As with other yield-oriented securities, the market price of our common units is impacted by the level of our cash distributions and implied distribution yield. The distribution yield is often used by investors to compare and rank related yield-oriented securities for investment decision purposes. Therefore, changes in interest rates may affect the yield requirements of investors who invest in our units, and a rising interest rate environment could have an adverse impact on the price of our common units, our ability to issue additional equity to make acquisitions or for other purposes, our financial position, results of operations and our ability to make cash distributions at our intended levels. Our Series A Preferred Units have rights, preferences and privileges that are not held by, and are preferential to the rights of, holders of our common units. Our Series A Preferred Units rank senior to all of our other classes or series of equity securities with respect to distribution rights and rights upon liquidation. We cannot declare or pay a distribution to our common unitholders for any quarter unless full distributions have been or contemporaneously are being paid on all outstanding Series A Preferred Units for such quarter. These preferences could adversely affect the market price for our common units, or could make it more difficult for us to sell our common units in the future. Holders of the Series A Preferred Units will receive, on a non-cumulative basis and if and when declared by our general partner, a quarterly cash distribution, subject to certain adjustments, equal to an annual rate of 10% on the stated liquidation preference from the date of original issue to, but not including, the five year anniversary of the original issue date, and an annual rate of LIBOR plus a spread of 850 bps on the stated liquidation preference thereafter. In connection with certain transfers of the Series A Preferred Units, the Series A Preferred Units will automatically convert into one or more new series of preferred units (the “other preferred units”) on the later of the date of transfer or the second anniversary of the date of issue. The other preferred units will have the same terms as our Series A Preferred Units except that unpaid distributions on the other preferred units will accrue from the date of their issuance on a cumulative basis until paid. Our Series A Preferred Units are convertible into common units by the holders of such units in certain circumstances. Payment of distributions on our Series A Preferred Units, or on the common units issued following the conversion of such Series A Preferred Units, could impact our liquidity and reduce the amount of cash flow available for working capital, capital expenditures, growth opportunities, acquisitions, and other general partnership purposes. Our obligations to the holders of Series A Preferred Units could also limit our ability to obtain additional financing or increase our borrowing costs, which could have an adverse effect on our financial condition. Our Series A Preferred Units contain covenants that may limit our business flexibility. Our Series A Preferred Units contain covenants preventing us from taking certain actions without the approval of the holders of 66 2⁄3% of the Series A Preferred Units. The need to obtain the approval of holders of the Series A Preferred Units before taking these actions could impede our ability to take certain actions that management or our board of directors may consider to be in the best interests of our unitholders. The affirmative vote of 66 2⁄3% of the outstanding Series A Preferred Units, voting as a single class, is necessary to amend the Partnership Agreement in any manner that would or could reasonably be expected to have a material adverse effect on the rights, preferences, obligations or privileges of the Series A Preferred Units. The affirmative vote of 66 2⁄3% of the outstanding Series A Preferred Units and any outstanding series of other preferred units, voting as a single class, is necessary to (A) create or issue certain party securities with proceeds in an aggregate amount in excess of $700 million or create or issue any senior securities or (B) subject to our right to redeem the Series A Preferred Units, approve certain fundamental transactions. Our Series A Preferred Units are required to be redeemed in certain circumstances if they are not eligible for trading on the NYSE, and we may not have sufficient funds to redeem our Series A Preferred Units if we are required to do so. The holders of our Series A Preferred Units may request that we list those units for trading on the NYSE. If we are unable to list the Series A Preferred Units in certain circumstances, we will be required to redeem the Series A Preferred Units. There can be no assurance that we would have sufficient financial resources available to satisfy our obligation to redeem the Series A Preferred Units. In addition, mandatory redemption of our Series A Preferred Units could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. 50 Table of Contents Tax Risks to Common Unitholders Our tax treatment depends on our status as a partnership for federal income tax purposes. If the IRS were to treat us as a corporation for federal income tax purposes, which would subject us to entity-level taxation, then our distributable cash flow to our unitholders would be substantially reduced. The anticipated after-tax economic benefit of an investment in the common units depends largely on our being treated as a partnership for federal income tax purposes. We have not requested a ruling from the Internal Revenue Service, or IRS, regarding our qualification as a partnership for tax purposes. Despite the fact that we are a limited partnership under Delaware law, it is possible in certain circumstances for a partnership such as ours to be treated as a corporation for federal income tax purposes. A change in our business or a change in current law could cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to taxation as an entity. If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate, which changed from 35% to 21% for tax years beginning after December 31, 2017, and would likely pay state and local income tax at varying rates. Distributions to our unitholders would generally be taxed again as corporate dividends (to the extent of our current and accumulated earnings and profits), and no income, gains, losses, deductions, or credits would flow through to such unitholders. Because a tax would be imposed upon us as a corporation, our distributable cash flow to our unitholders would be substantially reduced. Therefore, if we were treated as a corporation for federal income tax purposes there would be material reductions in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our common units. This could adversely affect our financial position, results of operations and ability to make cash distributions to unitholders. Our Partnership Agreement provides that, if a law is enacted or existing law is modified or interpreted in a manner that subjects us to taxation as a corporation or otherwise subjects us to entity-level taxation for federal, state or local income tax purposes, the minimum quarterly distribution amount and the target distribution amounts may be adjusted to reflect the impact of that law on us. If we were subjected to a material amount of additional entity-level taxation by individual states, it would reduce our distributable cash flow to our unitholders. Changes in current state law may subject us to additional entity-level taxation by individual states. Because of widespread state budget deficits and other reasons, several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation. Imposition of such additional tax on us by a state will reduce the distributable cash flow. Our Partnership Agreement provides that, if a law is enacted or an existing law is modified or interpreted in a manner that subjects us to entity-level taxation, the minimum quarterly distribution amount and the target distribution amounts may be adjusted to reflect the impact of that law on us. The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations of applicable law, possibly on a retroactive basis. The present federal income tax treatment of publicly traded partnerships, including us, or an investment in our common units may be modified by administrative, legislative or judicial interpretation at any time. From time to time, members of the U.S. Congress propose and consider substantive changes to the existing federal income tax laws that affect publicly traded partnerships. Any modification to the federal income tax laws and interpretations thereof could make it more difficult or impossible to meet the exception for us to be treated as a partnership for U.S. federal income tax purposes. We are unable to predict whether any such changes will ultimately be enacted, but it is possible that a change in law could affect us and may, if enacted, be applied retroactively. Any such changes could negatively impact the value of an investment in our common units. Our unitholders are required to pay income taxes on their share of our taxable income even if they do not receive any cash distributions from us. A unitholder’s share of our taxable income, and its relationship to any distributions we make, may be affected by a variety of factors, including our economic performance, transactions in which we engage or changes in law and may be substantially different from any estimate we make in connection with a unit offering. A unitholder’s allocable share of our taxable income will be taxable to the unitholder, which may require the unitholder to pay federal income taxes and, in some cases, state and local income taxes, even if the unitholder receives cash distributions from us that are less than the actual tax liability that results from that income or no cash distributions at all. 51 Table of Contents A unitholder’s share of our taxable income, and its relationship to any distributions we make, may be affected by a variety of factors, including our economic performance, which may be affected by numerous business, economic, regulatory, legislative, competitive and political uncertainties beyond our control, and certain transactions in which we might engage. For example, we may engage in transactions that produce substantial taxable income allocations to some or all of our unitholders without a corresponding increase in cash distributions to our unitholders, such as a sale or exchange of assets, the proceeds of which are reinvested in our business or used to reduce our debt, or an actual or deemed satisfaction of our indebtedness for an amount less than the adjusted issue price of the debt. A unitholder’s ratio of its share of taxable income to the cash received by it may also be affected by changes in law. For instance, under the recently enacted tax reform law known as the Tax Cuts and Jobs Act, the net interest expense deductions of certain business entities, including us, are limited to 30% of such entity’s “adjusted taxable income,” which is generally taxable income with certain modifications. If the limit applies, a unitholder’s taxable income allocations will be more (or its net loss allocations will be less) than would have been the case absent the limitation. From time to time, in connection with an offering of our units, we may state an estimate of the ratio of federal taxable income to cash distributions that a purchaser of units in that offering may receive in a given period. These estimates depend in part on factors that are unique to the offering with respect to which the estimate is stated, so the expected ratio applicable to other units will be different, and in many cases less favorable, than these estimates. Moreover, even in the case of units purchased in the offering to which the estimate relates, the estimate may be incorrect, due to the uncertainties described above, challenges by the IRS to tax reporting positions which we adopt, or other factors. The actual ratio of taxable income to cash distributions could be higher or lower than expected, and any differences could be material and could materially affect the value of the common units. If the IRS contests the federal income tax positions we take, the market for our common units may be adversely impacted and the cost of any IRS contest would likely reduce our distributable cash flow to unitholders. We have not requested a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes. The IRS may adopt positions that differ from the conclusions of our counsel expressed in a prospectus or from the positions we take, and the IRS’s positions may ultimately be sustained. It may be necessary to resort to administrative or court proceedings to sustain some or all of our counsel’s conclusions or the positions we take and such positions may not ultimately be sustained. A court may not agree with some or all of our counsel’s conclusions or the positions we take. Any contest with the IRS, and the outcome of any IRS contest, may have a materially adverse effect on the market for our common units and the price at which they trade. In addition, our costs of any contest with the IRS would be borne indirectly by our unitholders and our general partner because the costs would likely reduce our distributable cash flow to our unitholders. If the IRS makes audit adjustments to our income tax returns for tax years beginning after 2017, the IRS (and some states) may collect any resulting taxes (including any applicable penalties and interest) directly from us, in which case we may require our unitholders and former unitholders to reimburse us for such taxes (including any applicable penalties or interest) or, if we are required to bear such payment, our cash available for distribution to our unitholders might be substantially reduced. Pursuant to the Bipartisan Budget Act of 2015, if the IRS makes audit adjustments to our income tax returns for tax years beginning after 2017, it may collect any resulting taxes (including any applicable penalties and interest) directly from us. We will generally have the ability to shift any such tax liability to our general partner and our unitholders in accordance with their interests in us during the year under audit, but there can be no assurance that we will be able to do so (and will choose to do so) under all circumstances, or that we will be able to (or choose to) effect corresponding shifts in state income or similar tax liability resulting from the IRS adjustment in states in which we do business in the year under audit or in the adjustment year. If we make payments of taxes, penalties and interest resulting from audit adjustments, we may require our unitholders and former unitholders to reimburse us for such taxes (including any applicable penalties or interest) or, if we are required to bear such payment, our cash available for distribution to our unitholders might be substantially reduced. In addition, because payment would be due during the year in which the audit is completed, unitholders during that year would bear the burden of the adjustment even if they were not unitholders during the audited taxable year. In the event the IRS makes an audit adjustment to our income tax returns and we do not or cannot shift the liability to our unitholders in accordance with their interests in us during the year under audit, we will generally have the ability to request that the IRS reduce the determined underpayment by reducing the suspended passive loss carryovers of our unitholders (without any compensation from us to such unitholders), to the extent such underpayment is attributable to a net decrease in passive activity losses allocable to certain partners. Such reduction, if approved by the IRS, will be binding on any affected unitholders. 52 Table of Contents Tax gain or loss on the disposition of our common units could be more or less than expected. If any of our unitholders sells their common units, such unitholders must recognize a gain or loss for federal income tax purposes equal to the difference between the amount realized and such unitholder’s tax basis in those common units. Because distributions in excess of such unitholder’s allocable share of our net taxable income decrease such unitholder’s tax basis in such unitholder’s common units, the amount, if any, of such prior excess distributions with respect to the common units such unitholder sells will, in effect, become taxable income if such unitholder sells such common units at a price greater than its tax basis in those common units, even if the price such unitholder receives is less than its original cost. Furthermore, a substantial portion of the amount realized on any sale or other disposition of such unitholder’s common units, whether or not representing gain, may be taxed as ordinary income due to potential recapture items, including depreciation recapture. In addition, because the amount realized includes a unitholder’s share of our nonrecourse liabilities, if a unitholder sells its common units, it may incur a tax liability in excess of the amount of cash it receives from the sale. Tax-exempt entities and non-U.S. persons face unique tax issues from owning our common units that may result in adverse tax consequences to them. Investment in our common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (known as IRAs), and non-U.S. persons raises issues unique to them. For example, virtually all of our income allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income (UBTI) and will be taxable to the exempt organization as UBTI on the exempt organization’s tax return in the year the exempt organization is allocated the income. Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective tax rate, and non-U.S. persons will be required to file U.S. federal income tax returns and pay tax on their share of our taxable income. Under the recently enacted tax reform law, if a unitholder sells or otherwise disposes of a common unit, the transferee is required to withhold 10.0% of the amount realized by the transferor unless the transferor certifies that it is not a foreign person, and we are required to deduct and withhold from the transferee amounts that should have been withheld by the transferee but were not withheld. However, the Department of the Treasury and the IRS have determined that this withholding requirement should not apply to any disposition of a publicly traded interest in a publicly traded partnership (such as us) until regulations or other guidance have been issued clarifying the application of this withholding requirement to dispositions of interests in publicly traded partnerships. Accordingly, while this new withholding requirement does not currently apply to interests in us, there can be no assurance that such requirement will not apply in the future. If you are a tax-exempt entity or a non-U.S. person, you should consult a tax advisor before investing in our common units. We treat each holder of our common units as having the same tax benefits without regard to the actual common units held. The IRS may challenge this treatment, which could adversely affect the value of the common units. Because we cannot match transferors and transferees of common units and because of other reasons, we will adopt depreciation and amortization positions that may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to our unitholders. A successful IRS challenge also could affect the timing of these tax benefits or the amount of gain from a unitholder’s sale of common units and could have a negative impact on the value of our common units or result in audit adjustments to such unitholder’s tax returns. We prorate our items of income, gain, loss and deduction for U.S. federal income tax purposes between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders. We prorate our items of income, gain, loss and deduction for U.S. federal income tax purposes between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The U.S. Department of the Treasury adopted final Treasury Regulations allowing a similar monthly simplifying convention for taxable years beginning on or after August 3, 2015. However, such final regulations do not specifically authorize the use of the proration method we have adopted. If the IRS were to challenge our proration method or new Treasury regulations were issued, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders. 53 Table of Contents A unitholder whose common units are loaned to a “short seller” to cover a short sale of common units may be considered as having disposed of those common units. If so, such unitholder would no longer be treated for federal income tax purposes as a partner with respect to those common units during the period of the loan and may recognize gain or loss from the disposition. Because a unitholder whose common units are loaned to a “short seller” to cover a short sale of common units may be considered as having disposed of the loaned common units, such unitholder may no longer be treated for federal income tax purposes as a partner with respect to those common units during the period of the loan to the short seller and may recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller, any of our income, gain, loss or deduction with respect to those common units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those common units could be fully taxable as ordinary income. Therefore, our unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan to a short seller are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from loaning their common units. We have adopted certain valuation methodologies and monthly conventions for U.S. federal income tax purposes that may result in a shift of income, gain, loss and deduction between our general partner and our unitholders. The IRS may challenge this treatment, which could adversely affect the value of the common units. When we issue additional units, or engage in certain other transactions, we will determine the fair market value of our assets and allocate any unrealized gain or loss attributable to our assets to the capital accounts of our unitholders and our general partner. Our methodology may be viewed as understating the value of our assets. In that case, there may be a shift of income, gain, loss and deduction between certain unitholders and our general partner, which may be unfavorable to such unitholders. Moreover, under our valuation methods, subsequent purchasers of common units may have a greater portion of their Internal Revenue Code Section 743(b) adjustment allocated to our tangible assets and a lesser portion allocated to our intangible assets. The IRS may challenge our valuation methods, or our allocation of the Section 743(b) adjustment attributable to our tangible and intangible assets, and allocations of taxable income, gain, loss and deduction between our general partner and certain of our unitholders. A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income or loss being allocated to our unitholders. It also could affect the amount of taxable gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions. As a result of investing in our common units, our unitholders will likely be subject to state and local taxes and return filing requirements in jurisdictions where we operate or own or acquire properties. In addition to federal income taxes, our unitholders will likely be subject to other taxes, including state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we conduct business or own property now or in the future, even if they do not live in any of those jurisdictions. Our unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, our unitholders may be subject to penalties for failure to comply with those requirements. We currently own property and conduct business in a number of states, most of which currently impose a personal income tax on individuals, and most of which also impose an income or similar tax on corporations and certain other entities. As we make acquisitions or expand our business, we may own property or conduct business in additional states that impose an income tax or similar tax. In certain states, tax losses may not produce a tax benefit in the year incurred and also may not be available to offset income in subsequent tax years. Some states may require us, or we may elect, to withhold a percentage of income from amounts to be distributed to a unitholder who is not a resident of the state. Withholding, the amount of which may be greater or less than a particular unitholders’ income tax liability to the state, generally does not relieve a nonresident unitholder from the obligation to file an income tax return. Amounts withheld may be treated as if distributed to unitholders for purposes of determining the amounts distributed by us. Compliance with and changes in tax laws could adversely affect our performance. We are subject to extensive tax laws and regulations, including federal and state income taxes and transactional taxes such as excise, sales/use, payroll, franchise and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations are continuously being enacted that could result in increased tax expenditures in the future. Many of these tax liabilities are subject to audits by the respective taxing authority. These audits may result in additional taxes as well as interest and penalties. Item 1B. Unresolved Staff Comments. None. 54 Table of Contents Item 2. Properties Our material properties consist of our principal executive offices, gathering systems, processing plants, transportation systems and storage facilities. Our principal executive offices are located in approximately 162,053 square feet of leased office space at One Leadership Square, 211 North Robinson Avenue, Suite 150, Oklahoma City, Oklahoma 73102. For descriptions of the location and general character of our other material properties, please see Item 1. “Business—Our Assets and Operations.” Our processing plants are located on fee property, except for our Roger Mills plant which is located on leased property. Our other gathering, processing, transportation, and storage assets are located on property that we have the right to use under easements, leases, licenses, or permits granted by governmental agencies, American Indian tribes, railroads, utilities, and other third parties. In some cases, title to our properties or other land rights may be subject to renewals, require periodic payments, or be subject to revocation at the option of the grantor. For example, certain easements granted across American Indian allotted land to which title is held in trust by the United States are subject to renewal, and certain licenses and permits granted by governmental agencies are subject to revocation at the option of the grantor. In other cases, title to our property or other land rights may be subject to encumbrances, restrictions, or imperfections. For example, our title in certain instances may be subject to liens that are not subordinated to our rights, and our title in certain locations may reflect names of predecessors until we have made the appropriate filings. We believe that we generally have sufficient title to our properties and other land rights necessary to operate our assets and conduct our business, subject to such renewals, period payments, revocation rights, restrictions, encumbrances and imperfections that do not materially either detract from the value of our assets or interfere with the conduct of our business. Item 3. Legal Proceedings In the normal course of business, we are confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other appropriate experts to assess the claim. If, in management’s opinion, we have incurred a probable loss as set forth by GAAP, an estimate is made of the loss and the appropriate accounting entries are reflected in our Consolidated Financial Statements. At the present time, based on currently available information, management believes that any reasonably possible losses in excess of accrued amounts arising out of pending or threatened lawsuits or claims would not be quantitatively material to our financial statements and would not have a material adverse effect on our consolidated financial position, results of operations or cash flows. Item 4. Mine Safety Disclosures Not applicable. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Part II Our common units are listed on the NYSE under the symbol “ENBL.” The following table sets forth the high and low closing prices of the common units as well as the amount of cash distributions declared and paid on the common units for the years ended December 31, 2017 and 2016 . 55 Table of Contents Year ended December 31, 2017 Fourth Quarter Third Quarter Second Quarter First Quarter Year ended December 31, 2016 Fourth Quarter Third Quarter Second Quarter First Quarter Common Units High Low Distribution per common unit $ $ 16.02 $ 16.01 17.05 17.25 16.54 $ 16.03 16.16 8.94 14.20 $ 13.91 13.88 15.57 14.33 $ 12.39 7.72 5.52 0.318 0.318 0.318 0.318 0.318 0.318 0.318 0.318 On February 9, 2018 , the Board of Directors declared a quarterly distribution of $0.318 per common unit, which will be paid on February 27, 2018 , to unitholders of record at the close of business on February 20, 2018 . The last reported sale price of our common units on the NYSE on February 1, 2018 was $15.36. As of February 1, 2018 , there were 432,582,714 common units outstanding and approximately 13 unitholders of record of our common units. This number does not include unitholders whose units are held in trust by other entities. The actual number of unitholders is greater than the number of holders of record. Distributions of Available Cash General Our Partnership Agreement requires that, within 60 days after the end of each quarter, we distribute all of our Available Cash (defined below) to unitholders of record on the applicable record date. Definition of Available Cash Available cash is defined in our Partnership Agreement, which is an exhibit to this Annual Report on Form 10-K. Available cash generally means, for any quarter, all cash and cash equivalents on hand at the end of that quarter: • less , the amount of cash reserves established by our general partner to: • • • provide for the proper conduct of our business (including cash reserves for our future capital expenditures, future acquisitions and anticipated future debt service requirements and refunds of collected rates reasonably likely to be refunded as a result of a settlement or hearing related to FERC rate proceedings or rate proceedings under applicable law subsequent to that quarter); comply with applicable law, any of our debt instruments or other agreements; provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters (provided that our general partner may not establish cash reserves for distributions if the effect of the establishment of such reserves will prevent us from distributing the minimum quarterly distribution on all common units and any cumulative arrearages on such common units for the current quarter); or • provide funds for distributions on our preferred units; • plus , if our general partner so determines, all or any portion of the cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made subsequent to the end of such quarter. Minimum Quarterly Distribution The Minimum Quarterly Distribution, as set forth in the Partnership Agreement, is $0.2875 per unit per quarter, or $1.15 per unit on an annualized basis to the extent we have sufficient cash from our operations after the establishment of cash reserves and the payment of costs and expenses, including reimbursements of expenses to our general partner. Our current quarterly distribution is $0.318 per unit, or $ 1.272 per unit annualized. However, there is no guarantee that we will pay the minimum quarterly distribution 56 Table of Contents on our units in any quarter. Even if our cash distribution policy is not modified or revoked, the amount of distributions paid under our policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our Partnership Agreement. Please read Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for a discussion of the restrictions included in our credit agreement that may restrict our ability to make distributions. General Partner Interest and Incentive Distribution Rights Enable GP owns a non-economic general partner interest in the Partnership and, except as provided below with respect to incentive distribution rights, will not be entitled to distributions that the Partnership makes prior to the liquidation of the Partnership in respect of such general partner interest. Enable GP currently holds incentive distribution rights that entitle it to receive increasing percentages, up to a maximum of 50.0% , of the cash the Partnership distributes from operating surplus (as defined in the Partnership Agreement) in excess of $0.330625 per unit per quarter. The maximum distribution of 50.0% does not include any distributions that Enable GP or its affiliates may receive on common units that they own. Please read Note 5 of the Notes to Consolidated Financial Statements in Item 8. “Financial Statements and Supplementary Data” for additional information. Percentage Allocations of Available Cash from Operating Surplus The following table illustrates the percentage allocations of available cash from operating surplus between the unitholders and our general partner (through the incentive distribution rights) based on the specified target distribution levels. The amounts set forth under “Marginal Percentage Interest in Distributions” are the percentage interests of our general partner and the unitholders in any available cash from operating surplus we distribute up to and including the corresponding amount in the column “Total Quarterly Distribution Per Unit Target Amount.” The percentage interests shown for our unitholders for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below for our general partner assume that our general partner has not transferred its incentive distribution rights and that there are no arrearages on common units. Minimum Quarterly Distribution First Target Distribution Second Target Distribution Third Target Distribution Thereafter Equity Compensation Plans Total Quarterly Distribution Per Unit Target Amount $0.2875 up to $0.330625 above $0.330625 up to $0.359375 above $0.359375 up to $0.431250 above $0.431250 Marginal Percentage Interest in Distributions Unitholders General Partner 100.0% 100.0% 85.0% 75.0% 50.0% —% —% 15.0% 25.0% 50.0% The information relating to our equity compensation plans required by Item 5 is incorporated by reference to such information as set forth in Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters” contained herein. 57 Table of Contents Item 6. Selected Financial Data The following tables set forth, for the periods and as of the dates indicated, the selected historical financial and operating data of Enable Midstream Partners, LP, which is derived from the historical books and records of the Partnership. On May 1, 2013 (formation), OGE Energy and ArcLight indirectly contributed 100% of the equity interests in Enogex to the Partnership in exchange for common units and, for OGE Energy only, interests in our general partner. The transaction was considered a business combination for accounting purposes, with the Partnership considered the acquirer of Enogex. Subsequent to May 1, 2013, the financial and operating data of the Partnership are consolidated to reflect the acquisition of Enogex and the retention of certain assets and liabilities by CenterPoint Energy. T he selected historical financial data should be read together with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes in Item 8. “Financial Statements and Supplementary Data.” Year Ended December 31, 2017 2016 2015 2014 2013 (In millions, except for per unit data) Results of Operations Data: Revenues $ 2,803 $ 2,272 $ 2,418 $ 3,367 $ Cost of natural gas and natural gas liquids, excluding depreciation and amortization 1,381 1,017 1,097 1,914 Operation and maintenance, General and administrative Depreciation and amortization Impairments Taxes other than income Operating income (loss) Interest expense Equity in earnings of equity method affiliates Interest income—affiliated companies Other, net Income (loss) before income taxes Income tax expense (benefit) Net income (loss) Less: Net income (loss) attributable to noncontrolling interest Net income (loss) attributable to limited partners Less: Series A Preferred Unit distributions Net income (loss) attributable to common and subordinated units (1) Basic and diluted (loss) earnings per common limited partner unit (1)(2) Basic and diluted (loss) earnings per subordinated limited partner unit (3) Distributions declared per unit (4) Distributions declared per unit (5) ____________________ 464 366 — 64 528 (120) 28 — — 436 (1) 465 338 9 58 385 (99) 28 — — 314 1 522 318 1,134 59 (712) (90) 29 — 2 (771) — 2,489 1,313 429 212 12 54 469 (67) 15 9 — 426 527 276 8 56 586 (70) 20 — (1) 535 2 (1,192) $ $ $ $ $ $ 437 $ 313 $ (771) $ 533 $ 1,618 1 1 (19) 3 3 436 $ 312 $ (752) $ 530 $ 1,615 36 22 — — 400 $ 290 $ (752) $ 530 $ — 289 0.92 $ 0.69 $ (1.78) $ 1.29 $ 0.74 0.93 $ 0.68 $ (1.78) $ 1.28 $ 0.4534 $ 0.6086 1.2720 $ 1.2720 $ 1.2645 $ 2.1297 (1) Net income (loss) attributable to common and subordinated units and basic and diluted earnings per unit reflect net income (loss) attributable to Enable Midstream Partners, LP subsequent to its formation as a limited partnership on May 1, 2013, as no limited partner units were outstanding prior to this date. (2) Historical basic and diluted earnings per common limited partner unit reflects the 1 for 1.279082616 reverse unit split effected on March 25, 2014. (3) Basic and diluted earnings per subordinated unit reflect net income (loss) attributable to the Partnership for periods subsequent to its IPO, as no subordinated units were outstanding prior to this date. The financial tests required for conversion of all subordinated units were met and the 207,855,430 outstanding subordinated units converted into common units on a one-for-one basis on August 30, 2017. (4) Distributions attributable to periods prior to the IPO are in accordance with the First Amended and Restated Agreement of Limited Partnership. Distributions declared per unit prior to the IPO relate to common units, as no subordinated units were outstanding prior to the date of the IPO. (5) Distributions attributable to periods subsequent to the IPO are in accordance with the Partnership Agreement. Distributions declared per unit relate to common and subordinated units. 58 Table of Contents Balance Sheet Data (at period end): Property, plant and equipment, net Total assets Long-term debt, including current portion Partners’ Equity Cash Flow Data: Net cash flows provided by (used in): Operating activities Investing activities Financing activities Other Financial Data (1) : Gross margin Adjusted EBITDA DCF Operating Data: Gathered volumes—TBtu Gathered volumes—TBtu/d Natural gas processed volumes—TBtu Natural gas processed volumes—TBtu/d NGLs produced—MBbl/d (2) NGLs sold—MBbl/d (2)(3) Condensate sold—MBbl/d Crude Oil - Gathered volumes—MBbl/d (4) Transported volumes—TBtu Transportation volumes—TBtu/d Interstate firm contracted capacity—Bcf/d Intrastate average deliveries—TBtu/d ____________________ 2017 2016 2015 2014 2013 December 31, (In millions) $ 10,355 $ 10,143 $ 10,131 $ 9,582 $ 8,990 11,593 11,212 11,226 11,837 11,232 3,450 7,654 2,993 7,794 3,270 7,531 2,544 8,823 2,483 8,181 Year Ended December 31, 2017 2016 2015 2014 2013 (In millions, except for operating data) $ 834 $ 721 $ 726 $ 769 $ (706) (132) (367) (335) (946) 212 (815) (50) 648 (140) (400) $ 1,422 $ 1,255 $ 1,321 $ 1,453 $ 1,176 924 660 873 639 801 538 881 634 729 494 1,300 1,143 1,148 1,221 1,113 3.56 715 1.96 90.11 92.21 4.79 25.56 1,838 5.04 6.21 1.88 3.13 658 1.80 78.70 78.16 5.27 25.00 1,788 4.88 7.04 1.72 3.14 651 1.78 73.55 75.55 5.13 13.86 1,814 4.97 7.19 1.84 3.34 569 1.56 66.74 68.67 4.38 3.64 1,808 4.95 7.73 1.61 3.05 397 1.09 44.51 44.91 1.88 — 1,608 4.41 8.01 1.58 (1) See “Reconciliation of Non-GAAP Financial Measures ” in Item 7. “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” for a reconciliation of Gross margin, Adjusted EBITDA and DCF to their most directly comparable financial measure calculated and presented in accordance with GAAP. (2) Excludes condensate. (3) NGLs sold includes volumes of NGLs withdrawn from inventory or purchased for system balancing purposes. (4) Initial operation of our crude oil gathering system began on November 1, 2013. 59 Table of Contents Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes included in this report. Overview We are a Delaware limited partnership formed in May 2013 to own, operate and develop strategically located midstream assets. We completed our IPO in April 2014, and we are traded on the NYSE under the symbol “ENBL.” We were formed by CenterPoint Energy, OGE Energy and ArcLight. Our general partner is owned by CenterPoint Energy and OGE Energy. Our Operations Our assets and operations are organized into two reportable segments: (i) gathering and processing and (ii) transportation and storage. Our gathering and processing segment primarily provides natural gas and crude oil gathering and natural gas processing services to our producer customers. Our transportation and storage segment provides interstate and intrastate natural gas pipeline transportation and storage services primarily to our producer, power plant, LDC and industrial end-user customers. Our gathering and processing assets include approximately 13,000 miles of natural gas gathering pipelines, 15 natural gas processing plants with approximately 2.6 Bcf/d of processing capacity and approximately 1,051,700 horsepower of compression as of December 31, 2017 in the Anadarko, Arkoma and Ark-La-Tex Basins. In addition, our gathering and processing assets include approximately 175 miles of crude oil gathering pipelines and 160 miles of produced water gathering pipelines serving the Bakken Shale in the Williston Basin. Our transportation and storage assets include approximately 9,990 miles of natural gas intrastate and interstate transportation pipelines across nine states, eight natural gas storage facilities with approximately 86.0 Bcf of storage capacity and approximately 829,000 horsepower of compression. As part of these transportation and storage assets, we own a 50% interest in, and provide field operations for, SESH, an approximately 290-mile interstate pipeline providing access to the Southeast power generation market. Items Affecting the Comparability of Our Financial Results The comparability of our current financial condition and results of operations with our historical financial conditions and results of operations may be affected by the items described below. Capitalization On February 18, 2016, the Partnership completed the private placement of 14,520,000 Series A Preferred Units for a cash purchase price of $25.00 per Series A Preferred Unit, resulting in proceeds of $362 million, net of issuance costs. The Partnership incurred approximately $1 million of expenses related to the offering, which is accounted for as an offset to the proceeds. In connection with the closing of the private placement, the Partnership redeemed approximately $363 million of notes scheduled to mature in 2017 payable to a wholly-owned subsidiary of CenterPoint Energy. In connection with the private placement, Enable GP adopted the Partnership’s Third Amended and Restated Agreement of Limited Partnership on February 18, 2016, which, among other things, authorized the issuance of Series A Preferred Units. The Series A Preferred Units rank senior to the Partnership’s common units with respect to the payment of distributions and the distribution of assets upon liquidation, dissolution and winding up; have no stated maturity, are not subject to any sinking fund and will remain outstanding indefinitely unless repurchased or redeemed by the Partnership or converted into its common units in connection with a change of control; receive on a non- cumulative basis if and when declared by the general partner, a quarterly cash distribution, subject to certain adjustments, equal to an annual rate of 10% on the stated liquidation preference from the date of original issue to, but not including, the five year anniversary of the original issue date and an annual rate of LIBOR plus 850 bps on the stated liquidation preference thereafter. On November 29, 2016, the Partnership closed a public offering of 10,000,000 common units at a price to the public of $14.00 per common unit. In connection with the offering, the Partnership, the underwriters and an affiliate of ArcLight entered into an underwriting agreement that provided an option for the underwriters to purchase up to an additional 1,500,000 common units, with 75,719 common units to be sold by the Partnership and 1,424,281 to be sold by the affiliate of ArcLight. The underwriters 60 Table of Contents exercised the option to purchase all of the additional common units, and the Partnership received proceeds (net of underwriting discounts, structuring fees and offering expenses) of $137 million from the offering. On May 12, 2017, the Partnership entered into an ATM Equity Offering Sales Agreement in connection with an at-the-market program (the “ATM Program”). Pursuant to the ATM Program, the Partnership may issue and sell common units having an aggregate offering price of up to $200 million , by sales methods and at prices determined by market conditions and other factors at the time of our offerings. The Partnership has no obligation to sell any common units under the ATM Program and the Partnership may suspend sales under the ATM Program at any time. For the year ended December 31, 2017 , the Partnership sold an aggregate of 18,500 common units under the ATM Program, which generated proceeds of approximately $303,000 (net of approximately $3,000 of commissions). The Partnership incurred approximately $345,000 of expenses associated with the filing of the registration statements for the ATM Program. The proceeds were used for general partnership purposes. Financing In January 2014, the Partnership initiated our $1.4 billion commercial paper program. This program is used for general corporate purposes. Commercial paper issuances effectively reduce our borrowing capacity under our current Revolving Credit Facility. The Partnership’s ability to access the commercial paper market is primarily dependent on its credit rating. On February 2, 2016, Standard & Poor’s Ratings Services lowered both the credit rating and the short-term rating of the Partnership from an investment grade to a non-investment grade rating. As a result, our access to the commercial paper program was limited until November 2017, when Standard & Poor’s Ratings Services upgraded the Partnership’s credit rating to investment grade. On June 18, 2015, the Partnership amended and restated its Revolving Credit Facility to, among other things, increase the borrowing capacity thereunder to $1.75 billion and extend its maturity date to June 18, 2020. On July 31, 2015, the Partnership entered into a term loan agreement providing for an unsecured, three - year $450 million term loan agreement (2015 Term Loan Agreement). On March 9, 2017, the Partnership completed the public offering of $700 million 4.400% Senior Notes due 2027 (2027 Notes). The Partnership received net proceeds of approximately $691 million. The proceeds were used for general partnership purposes, including to repay amounts outstanding under the Revolving Credit Facility. Trends and Outlook We expect our business to continue to be impacted by the trends affecting our industry that are discussed below. Our outlook is based on assumptions regarding the impact of these trends that we have developed by interpreting the information currently available to us. If our assumptions or interpretation of available information prove to be incorrect, our future financial condition and results of operations may differ materially from our expectations. Commodity Price Environment Our business is impacted by commodity prices which have declined and otherwise experienced significant volatility in recent years. Commodity prices impact the drilling and production of natural gas and crude oil in the areas served by our systems, and the volumes on our systems are negatively impacted if producers decrease drilling and production in those areas served. Both our gathering and processing segment and our transportation and storage segment can be impacted by drilling and production. Our gathering and processing segment primarily serve producers, and many producers utilize the services provided by our transportation and storage segment. A decrease in volumes will decrease the cash flows from our systems. In addition, our processing arrangements expose us to commodity price fluctuations. For more information regarding the impact of commodity prices, drilling and production on the volumes on our systems as well as our exposure to commodity prices under our processing arrangements, see Part I, Item 1A. “Risk Factors—Risks Related to Our Business.” We have attempted to mitigate the impact of commodity prices on our business by entering into hedges, focusing on contracting fee-based business and converting existing commodity-based contracts to fee-based contracts. For additional information regarding our commodity price risk, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk — Commodity Price Risk.” Commodity Supply and Demand Dynamics Our long-term view is that natural gas and crude oil production in the United States will increase. Over the past several years, there has been a fundamental shift in the United States natural gas and crude oil production towards tight gas formations and shale 61 Table of Contents plays. Advancements in technology have allowed producers to efficiently extract natural gas and crude oil from these formations and plays. As a result, the proven reserves of natural gas and crude oil in the United States have significantly increased. Natural gas continues to be a critical component of energy demand in the United States. Over the long term, management believes that the prospects for continued natural gas demand are favorable and will be driven by population and economic growth, as well as the continued displacement of coal-fired power plants by natural gas-fired power plants due to the price of natural gas and stricter government environmental regulations on the mining and burning of coal. We believe that increasing consumption of natural gas over the long term in these sectors will continue to drive demand for our natural gas gathering, processing, transportation and storage services. Capital Market Volatility We may access the capital markets to fund our expansion capital expenditures. Historically, unit prices of midstream master limited partnerships have experienced periods of volatility. In addition, because our common units are yield-based securities, rising market interest rates could impact the relative attractiveness of our common units to investors. Further, fluctuations in energy and commodity prices can create volatility in our common unit prices, which could impact investor appetite for our common units. Volatility in energy and commodity prices, as well as other macro-economic factors could impact the relative attractiveness of our debt securities to investors. As a result of capital market volatility, we may be unable to issue equity securities or debt on satisfactory terms, or at all, which may limit our ability to expand our operations or make future acquisitions. See Part I, Item 1A. “Risk Factors—Risks Related to Our Business.” Regulatory Compliance The regulation of gathering and transmission pipelines, storage and related facilities by FERC and other federal and state regulatory agencies, including the DOT, has a significant impact on our business. For example, the DOT’s Pipeline and Hazardous Materials Safety Administration, or PHMSA, has established pipeline integrity management programs that require more frequent inspections of pipeline facilities and other preventative measures, which may increase our compliance costs and increase the time it takes to obtain required permits. Additionally, increased regulation of oil and natural gas producers, including regulation associated with hydraulic fracturing, could reduce regional supply of oil and natural gas and therefore throughput on our gathering systems. For more information, see Item 1. “Business — Rate and Other Regulation.” Customer Concentration We rely on certain key natural gas producer customers for a significant portion of our natural gas and NGLs supply. For the year ended December 31, 2017 , our top ten natural gas producer customers accounted for approximately 70% of our gathered volumes. These customers include affiliates of Continental, Vine, GeoSouthern, XTO, Tapstone, Apache, BP, Chesapeake, Covey Park and FourPoint. See Item 1A. “Risk Factors—Risks Related to Our Business.” We rely on certain key utilities and producers for a significant portion of our transportation and storage demand. For the year ended December 31, 2017 , our top transportation and storage customers by revenue were affiliates of CenterPoint Energy, Spire, AEP, OGE Energy, Continental, XTO, Chesapeake, MEP, Entergy and Shell. See Part I, Item 1A. “Risk Factors—Risks Related to Our Business.” Credit Risk We are exposed to certain credit risks relating to our ongoing business operations. Credit risk includes the risk that counterparties that owe us money or commodities will breach their obligations. If the counterparties to these arrangements fail to perform, we may be forced to enter into alternative arrangements. In that event, our financial results could be adversely affected, and we could incur losses. We examine the creditworthiness of third party customers to whom we extend credit and manage our exposure to credit risk through credit analysis, credit approval, credit limits and monitoring procedures, and for certain transactions, we may request letters of credit, prepayments or guarantees, or seek to renegotiate our contract to reduce credit exposure. Measures We Use to Evaluate Results of Operations We use a variety of operational and financial measures to evaluate our results of operations and our financial condition and to manage our business. The measures that we use to analyze our business include: (i) throughput volumes, (ii) operation and maintenance and general and administrative expenses, (iii) Gross margin, (iv) Adjusted EBITDA, (v) Adjusted interest expense, (vi) DCF and (vii) Distribution coverage ratio. 62 Table of Contents Throughput Volumes Throughput volume is operating data. The volume of natural gas that we gather, process, transport and store depends significantly on the level of production from natural gas wells connected to our systems. G athering and processing as well as transportation and storage can be impacted by drilling and production because the customers for our gathering and processing services are primarily producers, and many producers utilize our transportation and storage services. Aggregate production volumes are impacted by the overall amount of drilling and completion activity, as production must be maintained or increased by new drilling or other activity, because the production rate of a well declines over time. Producers’ willingness to engage in new drilling is determined by a number of factors, which include: the prevailing and projected prices of natural gas, NGLs and crude oil; the cost to drill and operate a well; the availability and cost of capital; technological advances in drilling and production techniques; and environmental and other government regulations. We generally expect the level of drilling to positively correlate with long-term trends in commodity prices. Similarly, we generally expect the level of production to positively correlate with drilling activity. To maintain and increase throughput volumes on our gathering and processing systems, we must compete to connect to new wells as production from existing wells declines. We actively monitor drilling activity in the areas served by our gathering and processing systems to pursue new customers and new wells. To maintain and increase the throughput volumes on our transportation and storage systems, we must compete for the business of producers and other customers who have existing and new sources of supply in the areas served by our systems, and we must compete for the business of power plants, LDCs, industrial end users and other customers who have existing and new sources of demand in the areas served by our systems. We actively monitor customer activity in the areas we serve to pursue new supply and demand opportunities. In both gathering and processing and transportation and storage, we compete for customers based on service offerings, operating flexibility, receipt and delivery points, available capacity and price. Operation and Maintenance and General and Administrative Expenses Operation and Maintenance and General and Administrative Expenses is a GAAP financial measure. We seek to maximize the profitability of our operations by effectively managing operation and maintenance and general and administrative expenses. These expenses are comprised primarily of labor expenses, lease costs, utility costs, insurance premiums, repair expenses and maintenance expenses. These labor expenses, lease costs, utility costs and insurance premiums have remained relatively stable across periods in the current low inflation environment, but repair and maintenance expense can fluctuate from period to period based on the activities performed and the timing of expenses. The level of drilling activity impacts competition for personnel, supplies and equipment. Increased competition could place upward pressure on the cost of labor, supplies and miscellaneous equipment. Use of Non-GAAP Financial Measures Gross margin, Adjusted EBITDA, Adjusted interest expense, DCF and Distribution coverage ratio are not financial measures presented in accordance with GAAP. These financial measures are subject to adjustments that have the effect of excluding amounts that are included in the most directly comparable measure calculated and presented in accordance with GAAP. Because these non-GAAP financial measures exclude amounts that are included in the most directly comparable GAAP financial measures, they have important limitations as an analytical tool. We nevertheless believe that the presentation of these non-GAAP financial measures provides useful information to investors regarding our financial condition and results of operations because they are the financial measures used by management to evaluate and manage our business. We have provided definitions for Gross margin, Adjusted EBITDA, Adjusted interest expense, DCF and Distribution coverage ratio. Although the use of non-GAAP financial measures with the same or similar titles is common in our industry, comparability may vary from one company to another. Because Gross margin, Adjusted EBITDA, Adjusted interest expense, DCF and Distribution coverage ratio may be defined differently by other companies in our industry, our presentation of these non-GAAP financial measures may not be directly comparable to non-GAAP financial measures of other companies with the same or similar titles. Gross margin is most directly comparable to the GAAP financial measure revenue. When used as a financial measure, Adjusted EBITDA is most directly comparable to the GAAP financial measure net income attributable to limited partners. When used as a liquidity measure, Adjusted EBITDA is most directly comparable to the GAAP liquidity measure net cash provided by operating activities. Adjusted interest expense is most directly comparable to the GAAP financial measure interest expense. DCF is most directly comparable to the GAAP financial measure net income attributable to limited partners. Distribution coverage ratio is computed utilizing DCF, which is most directly comparable to the GAAP financial measure net income attributable to limited partners. These non-GAAP financial measures should not be considered a substitute for the most directly comparable financial 63 Table of Contents measures. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are provided in “—Reconciliation of non-GAAP Financial Measures” below. Gross Margin We define gross margin as total revenues minus costs of natural gas and natural gas liquids, excluding depreciation and amortization. Total revenues consist of the fees that we charge our customers and the sales price of natural gas and natural liquids that we sell. The cost of natural gas and natural gas liquids consists of the purchase price of natural gas and natural gas liquids that we purchase. We deduct the cost of natural gas and natural gas liquids from total revenue to arrive at a measure of the core profitability of our mix of fee-based and commodity-based customer arrangements. We use gross margin as a performance measure to analyze the core profitability of our customer arrangements. Please read “—Results of Operations” and “—Non-GAAP Financial Measures.” Adjusted EBITDA We define Adjusted EBITDA as net income (loss) attributable to limited partners plus depreciation and amortization expense, interest expense, income tax expense, distributions received from equity method affiliate in excess of equity earnings, non-cash equity-based compensation, impairments, changes in the fair value of derivatives and certain other non-cash losses (including losses on sales of assets and write-downs of materials and supplies), less the noncontrolling interest share of Adjusted EBITDA. We use Adjusted EBITDA to evaluate our operating profitability unburdened by our capital structure. Because Adjusted EBITDA adds back to net income the non-cash accounting charges of depreciation and amortization and disregards interest paid on debt financing and income taxes on earnings, we believe that it is useful for measuring our operating cash flow. However, Adjusted EBITDA does not measure, and should not be confused with, our actual cash flow which accounts for interest paid on debt financing, income taxes and other cash charges. Adjusted Interest Expense We define adjusted interest expense as interest expense plus amortization of premium on long-term debt and capitalized interest, less amortization of debt costs and discount on long-term debt. We use adjusted interest expense to assess the Partnership’s ability to incur and service debt and fund capital expenditures. DCF We define DCF as Adjusted EBITDA, as further adjusted for Series A Preferred Unit distributions, Adjusted interest expense, maintenance capital expenditures, compensation expense for distribution equivalent rights of phantom and performance units and current income taxes. We use DCF as a proxy for measuring cash available for distributions. However, DCF does not reflect the cash reserves set aside for our operations by our Board of Directors prior to determining the amount of our distributions to our limited partners, and should not be confused with our actual cash available for distribution. For more information on the determination of our distributions by our Board of Directors see “Liquidity and Capital Resources—Distributions” below. Distribution Coverage Ratio We define Distribution coverage ratio as DCF divided by distributions related to common and subordinated unitholders. DCF is most directly comparable to net income attributable to limited partners, which is reconciled below. We use Distribution coverage ratio to assess the ability of the Partnership’s assets to generate sufficient cash flow to make distributions to its partners. 64 Table of Contents Results of Operations The following tables summarizes the composition of our results of operations for the years ended December 31, 2017 , 2016 and 2015 . December 31, 2017 Gathering and Processing Transportation and Storage Eliminations Enable Midstream Partners, LP Product sales Service revenue Total Revenues Cost of natural gas and natural gas liquids (excluding depreciation and amortization shown separately) Gross margin (1) Operation and maintenance, General and administrative Depreciation and amortization Taxes other than income tax Operating income Equity in earnings of equity method affiliate December 31, 2016 Product sales Service revenue Total Revenues Cost of natural gas and natural gas liquids (excluding depreciation and amortization shown separately) Gross margin (1) Operation and maintenance, General and administrative Depreciation and amortization Impairments Taxes other than income tax Operating income Equity in earnings of equity method affiliate $ $ $ $ $ $ 1,538 $ 632 2,170 1,285 885 289 232 37 327 $ — $ (In millions) 621 $ 525 1,146 604 542 179 134 27 202 $ 28 $ (506) $ (7) (513) (508) (5) (4) — — (1) $ — $ 1,653 1,150 2,803 1,381 1,422 464 366 64 528 28 Gathering and Processing Transportation and Storage Eliminations Enable Midstream Partners, LP (In millions) 479 $ 545 1,024 492 532 191 126 — 26 189 $ 28 $ (388) $ (4) (392) (390) (2) (2) — — — — $ — $ 1,172 1,100 2,272 1,017 1,255 465 338 9 58 385 28 1,081 $ 559 1,640 915 725 276 212 9 32 196 $ — $ 65 Table of Contents Product sales Service revenue Total Revenues December 31, 2015 Gathering and Processing Transportation and Storage Eliminations Enable Midstream Partners, LP Cost of natural gas and natural gas liquids (excluding depreciation and amortization shown separately) Gross margin (1) Operation and maintenance, General and administrative Depreciation and amortization Impairments Taxes other than income tax Operating loss Equity in earnings of equity method affiliate _____________________ $ 1,118 $ (In millions) 590 $ (374) $ 545 1,663 908 755 293 195 543 30 542 1,132 565 567 230 123 591 29 $ $ (306) $ — $ (406) 29 $ $ (3) (377) (376) (1) (1) — — — — $ — $ 1,334 1,084 2,418 1,097 1,321 522 318 1,134 59 (712) 29 (1) Gross margin is a non-GAAP measure and is defined and reconciled to its most directly comparable financial measures calculated and presented below under the caption Reconciliations of Non-GAAP Financial Measures. Operating Data: Gathered volumes—TBtu Gathered volumes—TBtu/d Natural gas processed volumes—TBtu Natural gas processed volumes—TBtu/d NGLs produced—MBbl/d (1) NGLs sold—MBbl/d (1)(2) Condensate sold—MBbl/d Crude Oil—Gathered volumes—MBbl/d Transported volumes—TBtu Transportation volumes—TBtu/d Interstate firm contracted capacity—Bcf/d Intrastate average deliveries—TBtu/d Year Ended December 31, 2017 2016 2015 1,300 3.56 715 1.96 90.11 92.21 4.79 25.56 1,838 5.04 6.21 1.88 1,143 3.13 658 1.80 78.70 78.16 5.27 25.00 1,788 4.88 7.04 1.72 1,148 3.14 651 1.78 73.55 75.55 5.13 13.86 1,814 4.97 7.19 1.84 66 Table of Contents Operating Data By Basin: Anadarko Gathered volumes—TBtu/d Natural gas processed volumes—TBtu/d NGLs produced—MBbl/d (1) Arkoma Gathered volumes—TBtu/d Natural gas processed volumes—TBtu/d NGLs produced—MBbl/d (1) Ark-La-Tex Gathered volumes—TBtu/d Natural gas processed volumes—TBtu/d NGLs produced—MBbl/d (1) _____________________ Year Ended December 31, 2017 2016 2015 1.81 1.61 76.37 0.55 0.09 4.79 1.20 0.26 8.95 1.65 1.47 65.19 0.62 0.10 4.86 0.86 0.23 8.65 1.59 1.38 58.51 0.67 0.10 4.97 0.88 0.30 10.07 (1) Excludes condensate. (2) NGLs sold includes volumes of NGLs withdrawn from inventory or purchased for system balancing purposes. Gathering and Processing 2017 compared to 2016 . Our gathering and processing segment reported operating income of $327 million for 2017 compared to $196 million for 2016 . The difference of $131 million in operating income between periods was primarily due to a $160 million increase in gross margin and no impairments recognized in 2017 as compared to $9 million of impairments recognized in 2016. This was partially offset by a $20 million increase in depreciation and amortization, a $13 million increase in operation and maintenance and general and administrative expenses and a $5 million increase in taxes other than income tax in 2017 . Our gathering and processing segment revenues increase d $530 million in 2017 . The increase was primarily due to a $315 million increase in revenues from NGL sales resulting from higher average NGL prices and higher processed volumes in the Anadarko Basin, a $116 million increase in revenues from sales of natural gas as a result of higher average natural gas prices and higher gathering volumes in the Anadarko and Ark-La-Tex Basins, a $39 million increase in natural gas gathering revenues due to higher fees and gathering volumes in the Anadarko and Ark-La-Tex Basins and increased billings under minimum volume commitments in the Arkoma Basin, a $28 million increase in processing revenues resulting from higher processed volumes and from a percent-of-proceeds contract that was converted to a fee-based contract in the fourth quarter of 2016, a $27 million increase in revenues from changes in the fair value of condensate and NGL derivatives, a $3 million increase due to increased water transportation revenues, a $2 million increase due to crude oil transportation revenues in the Williston Basin and a $2 million increase due to an increase in intercompany management fees. These increases were partially offset by a $4 million decrease in revenues due to a wind-down of third-party measurement and communication services in 2017. Our gathering and processing segment gross margin increase d $160 million in 2017 . The increase was primarily due to a $62 million increase in gross margin from natural gas sales due to higher average natural gas prices and higher gathering volumes in the Anadarko and Ark-La-Tex Basins, a $40 million increase in processing margins resulting from higher average NGL prices and higher processed volumes in the Anadarko Basin, a $32 million increase in gathering margin due to increased gathering volumes in the Anadarko and Ark-La-Tex Basins and increased billings under minimum volume commitments in the Arkoma Basin, a $27 million increase in gross margin from changes in the fair value of condensate and NGL derivatives, a $3 million increase due to increased water transportation services, a $2 million increase due to crude oil transportation services in the Williston Basin and a $2 million increase due to an increase in intercompany management fees. These increases were partially offset by a $6 million decrease in gross margin associated with our annual fuel rate determination and a $4 million decrease in gross margin due to a wind-down of third-party measurement and communication services in 2017. Our gathering and processing segment operation and maintenance and general and administrative expenses increase d $13 million in 2017 . The increase was primarily due to a $5 million increase in payroll-related costs, a $4 million increase in materials and supplies and contract services, a $3 million increase due to a reduction in capitalized overhead costs, a $2 million increase in acquisition costs associated with the Align acquisition and a $1 million increase in equipment rentals, partially offset by a $1 million decrease in loss on sale of assets. 67 Table of Contents Our gathering and processing segment depreciation and amortization expense increase d $20 million in 2017 due to additional assets placed in service. Our gathering and processing segment recognized no impairments in 2017 and $9 million in 2016 on our Service Star business line. Our gathering and processing segment taxes other than income tax increase d $5 million in 2017 due to higher accrued ad valorem taxes due to additional assets placed in service. 2016 compared to 2015 . Our gathering and processing segment reported operating income of $196 million for 2016 compared to an operating loss of $306 million for 2015. The difference of $502 million in operating income between periods was primarily due to $543 million of impairments recognized in 2015 related to goodwill and long-lived assets, as compared to $9 million of impairments recognized in 2016 related to long-lived assets, and a $17 million decrease in operation and maintenance and general and administrative expenses. These were partially offset by a $30 million decrease in gross margin, a $17 million increase in depreciation and amortization and a $2 million increase in taxes other than income tax in 2016 . Our gathering and processing segment revenues decrease d $23 million in 2016 . The decrease was primarily due to a $43 million reduction in revenues from sales of natural gas as a result of lower average natural gas prices and volumes sold, a $33 million reduction in revenues from changes in the fair value of condensate and NGL derivatives, a $12 million decrease in one-time project reimbursements and a $4 million decrease in third party measurement and communication services. These decreases were partially offset by a $46 million increase in revenues from sales of NGLs as a result of higher volumes sold, a $13 million increase in crude oil gathering revenue due to higher gathered volumes in the Williston Basin and an $11 million increase in natural gas gathering revenue as a result of increased billings under minimum volume commitments and higher fees and gathered volumes in the Anadarko Basin. Our gathering and processing segment gross margin decrease d $30 million in 2016 . The decrease was primarily due to a $33 million reduction in gross margin from changes in the fair value of condensate and NGL derivatives, a $14 million decrease in natural gas sales due to lower average natural gas prices and a $4 million decrease in third party measurement and communication services. Additionally, there was a $12 million decrease in one-time project reimbursements. These decreases were partially offset by a $13 million increase in crude oil gathering margin due to higher gathered volumes in the Williston Basin, an $11 million increase in gross margin from natural gas gathering as a result of increased billings under minimum volume commitments and higher fees and gathered volumes in the Anadarko Basin and a $9 million increase in the imbalance receivable associated with our annual fuel rate determination. Our gathering and processing segment operation and maintenance and general and administrative expenses decrease d $17 million in 2016 . The decrease was primarily due to $11 million of lower integration and other operating costs, a $6 million reduction in equipment rentals, a $4 million reduction in materials and supplies costs and a $1 million decrease in employee expenses. Workforce reductions announced in 2015 resulted in a $5 million reduction in payroll related costs and a $1 million decrease in severance charges. Additionally, there was a reduction in one-time project expenses of $9 million in 2016. These decreases were partially offset by a $12 million increase in payroll-related costs due to increased short-term incentive compensation, a $6 million increase in losses on the disposition of assets and a $2 million increase in allowance for doubtful accounts. Our gathering and processing segment depreciation and amortization expense increase d $17 million in 2016 due to additional assets placed in service. Our gathering and processing segment recognized impairments of $9 million in 2016 and $543 million in 2015 . Our 2016 i mpairments consisted of $9 million in impairments on our Service Star business line. Our 2015 impairments were primarily related to a $508 million impairment on the carrying value of goodwill associated with our gathering and processing segment, a $25 million impairment of our Atoka assets and $10 million of impairments on our Service Star business line. Our gathering and processing segment taxes other than income tax increase d $2 million in 2016 due to higher estimated ad valorem taxes. Transportation and Storage 2017 compared to 2016 . Our transportation and storage segment reported operating income of $202 million for 2017 as compared to $189 million for 2016 . The difference of $13 million in operating income between periods was primarily due to a $10 million increase in gross margin and a $12 million decrease in operation and maintenance and general and administrative 68 Table of Contents expenses in 2017 . This was partially offset by an $8 million increase in depreciation and amortization and a $1 million increase in taxes other than income tax in 2017 . Our transportation and storage segment revenues increase d $122 million in 2017 . The increase was primarily due to a $78 million increase in revenues from higher natural gas sales associated with higher sales volumes and higher average sales prices, a $61 million increase in revenues from changes in the fair value of natural gas derivatives, a $10 million increase in revenues from NGL sales due to an increase in transported volumes and NGL prices and a $5 million increase in revenues from off-system transportation. These increases were partially offset by a $24 million decrease in firm transportation services, which includes a $27 million decrease in firm transportation services between Carthage, Texas, and Perryville, Louisiana. Additionally, we had a $5 million decrease in realized gains on natural gas derivatives and a $1 million decrease in revenues from transportation services for LDCs. Our transportation and storage segment gross margin increase d $10 million in 2017 . The increase was primarily due to a $61 million increase in gross margin from changes in the fair value of natural gas derivatives, a $6 million increase in NGL sales due to an increase in transported volumes and NGL prices, a $5 million increase in off-system transportation margins, and a $3 million increase in firm transportation, other than firm transportation services between Carthage, Texas, and Perryville, Louisiana. These increases were partially offset by a $33 million decrease in system management activities and a decrease of $24 million in firm transportation services, which includes a $27 million decrease in firm transportation services between Carthage, Texas, and Perryville, Louisiana. Additionally, we had a $5 million decrease in realized gains on natural gas derivatives and a $1 million decrease in gross margin from transportation services for LDCs. Our transportation and storage segment operation and maintenance and general and administrative expenses decrease d $12 million in 2017 . The decrease was primarily due to a $10 million decrease in loss on sale of assets, a $5 million decrease in information-technology related costs and a $3 million decrease in materials and supplies and contract services. These decreases were partially offset by a $3 million increase in payroll-related costs, a $2 million increase in intercompany management fees and a $2 million increase due to a reduction in capitalized overhead costs. Our transportation and storage segment depreciation and amortization expense increase d $8 million in 2017 due to additional assets placed in service. Our transportation and storage segment taxes other than income tax increase d by $1 million in 2017 due to higher accrued ad valorem taxes due to additional assets placed in service. 2016 compared to 2015 . Our transportation and storage segment reported operating income of $189 million for 2016 , as compared to an operating loss of $406 million for 2015 . The difference of $595 million in operating income between periods was primarily due to $591 million of impairments recognized in 2015 related to goodwill and long-lived assets, a $39 million decrease in operation and maintenance and general and administrative expenses in 2016 and a $3 million decrease in taxes other than income tax in 2016 . These increases were partially offset by a $35 million decrease in gross margin and a $3 million increase in depreciation and amortization expenses in 2016 . Our transportation and storage segment revenues decrease d by $108 million in 2016 . The decrease was primarily due to an $88 million decrease in revenues from lower natural gas sales associated with lower sales volumes and lower average sales prices and a $19 million decrease in revenues due to changes in the fair value of natural gas derivatives. Our transportation and storage segment gross margin decrease d by $35 million in 2016 . The decrease was primarily due to a $19 million reduction in gross margin due to changes in the fair value of natural gas derivatives, a $17 million decrease in system management activities and a decrease of $5 million in firm transportation margins as a result of a decrease in contracted capacity. These decreases were partially offset by a $5 million increase in gross margin from transportation services for local distribution companies and a $1 million increase in gross margin from off-system transportation. Our transportation and storage segment operation and maintenance and general and administrative expenses decrease d by $39 million in 2016 . The decrease was primarily due to $29 million of lower integration and other contract services costs and a $3 million decrease in materials and supplies costs. Workforce reductions announced in 2015 resulted in a $10 million decrease in payroll related costs as well as $7 million in lower severance charges in 2016 . These decreases were partially offset by a $6 million increase in losses on dispositions of assets and a $4 million increase in payroll-related costs due to increased short-term incentive compensation in 2016 . Our transportation and storage segment depreciation and amortization expense increase d $3 million in 2016 primarily due to the additional assets in service. 69 Table of Contents Our transportation and storage segment recognized no impairments in 2016 as compared to $591 million of impairments in 2015 . In 2015 , we recognized impairments of $579 million on the carrying value of goodwill associated with the transportation and storage segment and impairments of $12 million on jurisdictional pipeline assets. Our transportation and storage segment taxes other than income tax decrease d by $3 million in 2016 due to favorable ad valorem assessments and appeal efforts. Our transportation and storage segment recorded equity in earnings of equity method affiliate of $28 million and $29 million for the years ended December 31, 2016 and 2015 , respectively, from our interest in SESH. The $1 million decrease in equity earnings from equity method affiliate is attributable to lower net income recognized by SESH in 2016 . Consolidated Information Operating Income (Loss) Other Income (Expense): Interest expense Equity in earnings of equity method affiliate Other, net Total Other Income (Expense) Income (Loss) Before Income Taxes Income tax expense (benefit) Net Income (Loss) Less: Net income (loss) attributable to noncontrolling interest Net Income (Loss) attributable to limited partners Less: Series A Preferred Unit distributions Net Income (Loss) attributable to common and subordinated units 2017 compared to 2016 Year Ended December 31, 2017 2016 2015 (In millions) $ 528 $ 385 $ (712) (120) 28 — (92) 436 (1) (99) 28 — (71) 314 1 $ $ $ 437 $ 313 $ 1 1 436 $ 312 $ 36 22 400 $ 290 $ (90) 29 2 (59) (771) — (771) (19) (752) — (752) Net Income attributable to limited partners. We reported net income attributable to limited partners of $436 million in 2017 compared to $312 million in 2016 . The increase in net income attributable to limited partners was primarily due to an increase in operating income of $143 million partially offset by an increase in interest expense of $21 million . Interest Expense. Interest expense increase d by $21 million in 2017 due to higher interest rates on the Partnership’s outstanding debt. 2016 compared to 2015 Net Income (Loss) attributable to limited partners. We reported net income attributable to limited partners of $ 312 million in 2016 compared to net loss attributable to limited partners of $752 million in 2015. The increase in net income attributable to limited partners was primarily due to an increase in operating income of $1,097 million (inclusive of impairments discussed by segment above) partially offset by an increase in interest expense of $9 million and a decrease in equity earnings in equity method affiliate of $1 million (discussed by segment above). Interest Expense. Interest expense increase d $9 million in 2016 due to higher interest rates on the Partnership’s outstanding debt and an increase in the amount of outstanding variable rate debt. 70 Table of Contents Reconciliations of Non-GAAP Financial Measures The Partnership has included the non-GAAP financial measures Gross margin, Adjusted EBITDA, Adjusted interest expense, DCF and Distribution coverage ratio in this report based on information in its Consolidated Financial Statements. Gross margin, Adjusted EBITDA, Adjusted interest expense, DCF and Distribution coverage ratio are part of the performance measures that we use to manage the Partnership. For definitions and a description of management’s use of Gross margin, Adjusted EBITDA, Adjusted interest expense, DCF and Distribution coverage ratio, see “—Measures We Use to Evaluate Results of Operations” above. Provided below are reconciliations of Gross margin to total revenues, Adjusted EBITDA and DCF to net income attributable to limited partners, Adjusted EBITDA to net cash provided by operating activities and Adjusted interest expense to interest expense, the most directly comparable GAAP financial measures, on a historical basis, as applicable, for each of the periods indicated. Gross margin, Adjusted EBITDA, Adjusted interest expense, DCF and Distribution coverage ratio should not be considered as alternatives to net income, operating income, total revenues, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. These non-GAAP financial measures have important limitations as analytical tools because they exclude some but not all items that affect the most directly comparable GAAP financial measures. Additionally, because Gross margin, Adjusted EBITDA, Adjusted interest expense, DCF and Distribution coverage ratio may be defined differently by other companies in the Partnership’s industry, these measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. Reconciliation of Gross Margin to Total Revenues: Consolidated Product sales Service revenue Total Revenues Cost of natural gas and natural gas liquids (excluding depreciation and amortization) Gross margin Reportable Segments Gathering and Processing Product sales Service revenue Total Revenues Cost of natural gas and natural gas liquids (excluding depreciation and amortization) Gross margin Transportation and Storage Product sales Service revenue Total Revenues Cost of natural gas and natural gas liquids (excluding depreciation and amortization) Gross margin 71 Year Ended December 31, 2017 2016 2015 (In millions) $ $ $ $ $ $ 1,653 $ 1,172 $ 1,150 2,803 1,381 1,100 2,272 1,017 1,422 $ 1,255 $ 1,538 $ 1,081 $ 632 2,170 1,285 559 1,640 915 885 $ 725 $ 621 $ 525 1,146 604 479 $ 545 1,024 492 542 $ 532 $ 1,334 1,084 2,418 1,097 1,321 1,118 545 1,663 908 755 590 542 1,132 565 567 Table of Contents The following table shows the components of our gross margin for the year ended December 31, 2017 . Year Ended December 31, 2017 Gathering and Processing Segment Transportation and Storage Segment Partnership Weighted Average Fee-Based Demand/ Commitment/ Guaranteed Return Volume Dependent Commodity- Based Total 27% 88% 50% 46% 8% 32% 27% 4% 18% 100% 100% 100% Year Ended December 31, 2017 2016 2015 (In millions, except Distribution coverage ratio) Reconciliation of Adjusted EBITDA and DCF to net income (loss) attributable to limited partners and calculation of Distribution coverage ratio: Net income (loss) attributable to limited partners Depreciation and amortization expense Interest expense, net of interest income Income tax expense (benefit) Distributions received from equity method affiliate in excess of equity earnings Non-cash equity-based compensation Change in fair value of derivatives Other non-cash losses (1) Impairments Noncontrolling Interest Share of Adjusted EBITDA Adjusted EBITDA Series A Preferred Unit distributions (2) Distributions for phantom and performance units (3) Adjusted interest expense (4) Maintenance capital expenditures Current income taxes DCF Distributions related to common and subordinated unitholders (5) Distribution coverage ratio ____________________ $ $ $ $ 312 $ 338 (752) 318 $ 436 366 120 (1) 5 15 (28) 11 — — 99 1 15 13 60 26 9 — 924 $ 873 $ (36) (2) (123) (101) (2) 660 $ (31) — (103) (101) 1 639 $ 551 $ 539 $ 1.20 1.18 90 — 13 9 8 1 1,134 (20) 801 — — (102) (160) (1) 538 534 1.01 (1) Other non-cash losses includes loss on sale of assets and write-downs of materials and supplies. (2) This amount represents the quarterly cash distributions on the Series A Preferred Units declared for the year ended December 31, 2017. The year ended December 31, 2016 amount includes the prorated quarterly cash distribution on the Series A Preferred Units declared on April 26, 2016. In accordance with the Partnership Agreement, the Series A Preferred Unit distributions are deemed to have been paid out of available cash with respect to the quarter immediately preceding the quarter in which the distribution is made. (3) Distributions for phantom and performance units represent distribution equivalent rights paid in cash. Phantom unit distribution equivalent rights are paid during the vesting period and performance unit distribution equivalent rights are paid at vesting. (4) See below for a reconciliation of Adjusted interest expense to Interest expense. (5) Represents cash distributions declared for common and subordinated units outstanding as of each respective period. Amounts for 2017 reflect estimated cash distributions for common units outstanding for the quarter ended December 31, 2017. 72 Year Ended December 31, 2017 2016 2015 (In millions) $ 834 $ 721 $ 726 120 (1) 2 4 2 28 (54) 12 5 (28) — 99 (1) (1) 12 — (4) 40 (68) 15 60 — $ 924 $ 873 $ 90 19 1 (2) — (15) 29 (43) 8 8 (20) 801 90 5 10 (3) 102 Table of Contents Reconciliation of Adjusted EBITDA to net cash provided by operating activities: Net cash provided by operating activities Interest expense, net of interest income Net (income) loss attributable to noncontrolling interest Current income taxes Other non-cash items (1) Proceeds from insurance Changes in operating working capital which (provided) used cash: Accounts receivable Accounts payable Other, including changes in noncurrent assets and liabilities Return of investment in equity method affiliate Change in fair value of derivatives Noncontrolling Interest Share of Adjusted EBITDA Adjusted EBITDA ____________________ (1) Other non-cash items includes amortization of debt expense, discount and premium on long-term debt and write-downs of materials and supplies. Reconciliation of Adjusted interest expense to Interest expense: Interest Expense Amortization of premium on long-term debt Capitalized interest on expansion capital Amortization of debt expense and discount Adjusted interest expense Liquidity and Capital Resources Year Ended December 31, 2017 2016 2015 (In millions) $ $ 120 $ 6 — (3) 123 $ 99 $ 6 1 (3) 103 $ The Partnership’s principal liquidity requirements are to finance its operations, fund capital expenditures and acquisitions, make cash distributions and satisfy any indebtedness obligations. We expect that our liquidity and capital resource needs will be met by cash on hand, operating cash flow, proceeds from commercial paper issuances, borrowings under our revolving credit facility, debt issuances and the issuance of equity. However, issuances of equity or debt in the capital markets and additional credit facilities may not be available to us on acceptable terms. Access to funds obtained through the equity or debt capital markets, particularly in the energy sector, has been constrained by a variety of market factors that have hindered the ability of energy companies to raise new capital or obtain financing at acceptable terms. Factors that contribute to our ability to raise capital through these channels depend on our financial condition, credit ratings and market conditions. Our ability to generate cash flow is subject to a number of factors, some of which are beyond our control. See Item 1A. “Risk Factors” for further discussion. Working Capital Working capital is the difference in our current assets and our current liabilities. Working capital is an indication of liquidity and potential need for short- term funding. The change in our working capital requirements are driven generally by changes in accounts receivable, accounts payable, commodity prices, credit extended to, and the timing of collections from, customers, and the level and timing of spending for maintenance and expansion activity. As of December 31, 2017 , we had a working capital 73 Table of Contents deficit of $863 million . The deficit is primarily due to the classification of the $450 million 2015 Term Loan Agreement as short-term debt as well as $405 million of commercial paper outstanding as of December 31, 2017 . We utilize our commercial paper program and revolving credit facility to manage the timing of cash flows and fund short-term working capital deficits. Cash Flows The following tables reflect cash flows for the applicable periods: Net cash provided by operating activities Net cash used in investing activities Net cash (used in) provided by financing activities Operating Activities Year Ended December 31, 2017 2016 2015 (In millions) $ $ $ 834 $ 721 $ 726 (706) $ (367) $ (946) (132) $ (335) $ 212 The increase of $113 million , or 16% , in net cash provided by operating activities for the year ended December 31, 2017 as compared to the year ended December 31, 2016 is primarily due to an increase in net income of $124 million as a result of an increase in gathering and processing revenues, partially offset by an increase in cost of natural gas and natural gas liquids. The decrease of $5 million , or 1% , in net cash provided by operating activities for the year ended December 31, 2016 as compared to the year ended December 31, 2015 is primarily due to timing of payments to suppliers, receipts from customers and changes in other working capital assets and liabilities. Investing Activities The increase of $339 million , or 92% , in net cash used in investing activities for the year ended December 31, 2017 as compared to the year ended December 31, 2016 was primarily due to higher capital expenditures of $331 million, including the $298 million acquisition of Align Midstream, LLC in 2017, as well as a decrease in return of investment of equity method affiliate of $10 million. These increases are partially offset by $2 million of proceeds received in 2017 from an insurance settlement. The decrease of $579 million , or 61% , in net cash used in investing activities for the year ended December 31, 2016 as compared to the year ended December 31, 2015 was primarily due to lower capital expenditures of $566 million, including the 2015 acquisition of the Monarch gas gathering system. Financing Activities Net cash used in financing activities decrease d $203 million for the year ended December 31, 2017 as compared to the year ended December 31, 2016 . Net cash used in financing activities increase d $547 million for the year ended December 31, 2016 as compared to the year ended December 31, 2015 . Our primary financing activities consist of the following: Proceeds from 2027 Notes, net of issuance costs Proceeds from 2015 Term Loan Agreement Proceeds from issuance of Series A Preferred Units, net of issuance costs Proceeds from issuance of common units Net (repayments) proceeds of Revolving Credit Facility Net proceeds (repayments) from commercial paper program Repayment of notes payable—affiliated companies Distributions Cash taxes paid for employee equity-based compensation 74 Year Ended December 31, 2017 2016 2015 (In millions) 691 — — — (636) 405 — (590) (2) — — 362 137 326 (236) (363) (561) — — 450 — — 310 (17) — (531) — Table of Contents Sources of Liquidity As of December 31, 2017 , our sources of liquidity included: • • • • cash on hand; cash generated from operations; proceeds from commercial paper issuances and borrowings under our Revolving Credit facility; and capital raised through debt and equity markets. Please see Note 10. “Debt” in the Notes to the Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data” for a description of the Partnership’s debt agreements. ATM Program On May 12, 2017, the Partnership entered into an ATM Equity Offering Sales Agreement in connection with an at-the-market program (the “ATM Program”). Pursuant to the ATM Program, the Partnership may issue and sell common units having an aggregate offering price of up to $200 million , by sales methods and at prices determined by market conditions and other factors at the time of our offerings. The Partnership has no obligation to sell any common units under the ATM Program and the Partnership may suspend sales under the ATM Program at any time. For the year ended December 31, 2017 , the Partnership sold an aggregate of 18,500 common units under the ATM Program, which generated proceeds of approximately $303,000 (net of approximately $3,000 of commissions). The Partnership incurred approximately $345,000 of expenses associated with the filing of the registration statements for the ATM Program. The proceeds were used for general partnership purposes. Distribution Reinvestment Plan In June 2016, the Partnership implemented a Distribution Reinvestment Plan (DRIP), which, beginning with the quarterly distribution for the quarter ended September 30, 2016, offers owners of our common units the ability to purchase additional common units by reinvesting all or a portion of the cash distributions paid to them on their common units. The Partnership will have the sole discretion to determine whether common units purchased under the DRIP will come from our newly issued common units or from common units purchased on the open market. The purchase price for newly issued common units will be the average of the high and low trading prices of the common units on the New York Stock Exchange-Composite Transactions for the five trading days immediately preceding the investment date. The purchase price for common units purchased on the open market will be the weighted average price of all common units purchased for the DRIP for the respective investment date. We can set a discount ranging from 0% to 5% for common units purchased pursuant to the DRIP. The discount is currently set at 0%. Participation in the DRIP is voluntary, and once enrolled, our unitholders may terminate participation at any time. Capital Requirements The midstream business is capital intensive and can require significant investment to maintain and upgrade existing operations, connect new wells to the system, organically grow into new areas and comply with environmental and safety regulations. Going forward, our capital requirements will consist of the following: • maintenance capital expenditures, which are cash expenditures (including expenditures for the construction or development of new capital assets or the replacement, improvement or expansion of existing capital assets) made to maintain, over the long-term, our operating capacity or operating income; and • expansion capital expenditures, which are cash expenditures incurred for acquisitions or capital improvements that we expect will increase our operating income or operating capacity over the long term. For the year ending December 31, 2018, we estimate that expansion capital could range from approximately $450 million to $600 million and our maintenance capital could range from approximately $95 million to $125 million. Our future expansion capital expenditures may vary significantly from period to period based on commodity prices and the investment opportunities available to us. We expect to fund future capital expenditures from cash flow generated from our operations, issuances of commercial paper, borrowings under our Revolving Credit Facility, new debt offerings or the issuance of additional partnership units. Issuances of equity or debt in the capital markets may not, however, be available to us on acceptable terms. 75 Table of Contents Distributions We intend to pay a minimum quarterly distribution of $0.2875 per common unit per quarter. We do not have a legal obligation to pay this distribution. In determining the amount of available cash for distributions to holders of common units, the Board of Directors determines the amount of cash reserves to set aside for our operations, including reserves for future working capital, maintenance capital expenditures, expansion capital expenditures, acquisitions and other matters, which will impact the amount of cash we are able to distribute to our unitholders. However, we expect that we will rely primarily upon external financing sources, including borrowings under our Revolving Credit Facility and issuances of debt and equity securities, as well as cash reserves, to fund our expansion capital expenditures including acquisitions. To the extent we are unable to finance growth externally and are unwilling to establish cash reserves to fund future expansions, our available cash for distributions will not significantly increase. In addition, because we distribute all of our available cash, we may not grow as quickly as businesses that reinvest their available cash to expand ongoing operations. To the extent we issue additional units in connection with any expansion capital expenditures including acquisitions, or to the extent we issue additional units ranking senior to our common units, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our Partnership Agreement or in the terms of our Revolving Credit Facility on our ability to issue additional units, including units ranking senior to the common units. We paid or have authorized payment of the following cash distributions to common and subordinated unitholders, as applicable, during the years ended December 31, 2017 , 2016 and 2015 (in millions, except for per unit amounts): Quarter Ended Record Date Payment Date Per Unit Distribution Total Cash Distribution December 31, 2017 (1) September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016 December 31, 2015 September 30, 2015 June 30, 2015 March 31, 2015 _____________________ February 20, 2018 February 27, 2018 November 14, 2017 November 21, 2017 August 22, 2017 May 23, 2017 August 29, 2017 May 30, 2017 February 21, 2017 February 28, 2017 November 14, 2016 November 22, 2016 August 16, 2016 May 6, 2016 February 2, 2016 August 23, 2016 May 13, 2016 February 12, 2016 November 3, 2015 November 13, 2015 August 3, 2015 May 5, 2015 August 13, 2015 May 15, 2015 $ $ $ $ $ $ $ $ $ $ $ $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.316 $ 0.3125 $ 138 138 138 137 137 134 134 134 134 134 134 132 (1) The board of directors of Enable GP declared this $0.318 per common unit cash distribution on February 9, 2018 , to be paid on February 27, 2018 , to unitholders of record at the close of business on February 20, 2018 . On February 18, 2016, we completed the private placement of 14,520,000 Series A Preferred Units. Holders of the Series A Preferred Units receive a quarterly cash distribution on a non-cumulative basis if and when declared by the General Partner, and subject to certain adjustments, equal to an annual rate of: 10% on the stated liquidation preference of $25.00 from the date of original issue to, but not including, the five year anniversary of the original issue date; and thereafter a percentage of the stated liquidation preference equal to the sum of the three-month LIBOR plus 8.5%. The Series A Preferred Units rank senior to the Partnership’s common units with respect to the payment of distributions and, unless full distributions are paid on the Series A Preferred Units with respect to a quarter, we cannot declare or pay a distribution on common units with respect to that quarter. We intend to pay full distributions on Series A Preferred Units each quarter, however these distributions are not mandatory, and we do not have a legal obligation to pay these distributions. For more information on our Series A Preferred Units, see Note 5. “Enable Midstream Partners, LP Partners’ Equity” included in Item 8. “Financial Statements and Supplementary Data—Notes to Audited Consolidated Financial Statements.” 76 Table of Contents We paid or have authorized payment of the following cash distributions to holders of the Series A Preferred Units during the years ended December 31, 2017 and 2016 (in millions, except for per unit amounts): Quarter Ended December 31, 2017 (1) September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016 (2) _____________________ Record Date Payment Date Per Unit Distribution Total Cash Distribution February 9, 2018 October 31, 2017 July 31, 2017 May 2, 2017 February 10, 2017 November 1, 2016 August 2, 2016 May 6, 2016 February 15, 2018 November 14, 2017 August 14, 2017 May 12, 2017 February 15, 2017 November 14, 2016 August 12, 2016 May 13, 2016 $ $ $ $ $ $ $ $ 0.625 $ 0.625 $ 0.625 $ 0.625 $ 0.625 $ 0.625 $ 0.625 $ 0.2917 $ 9 9 9 9 9 9 9 4 (1) The board of directors of Enable GP declared a $0.625 per Series A Preferred Unit cash distribution on February 9, 2018 , which was paid on February 15, 2018 to Series A Preferred unitholders of record at the close of business on February 9, 2018 . (2) The prorated quarterly distribution for the Series A Preferred Units is for a partial period beginning on February 18, 2016, and ending on March 31, 2016, which equates to $0.625 per unit on a full-quarter basis or $2.50 per unit on an annualized basis. Contractual Obligations In the ordinary course of business, we enter into various contractual obligations for varying terms and amounts. The following table includes our contractual obligations and other commitments as of December 31, 2017 and our best estimate of the period in which the obligation will be settled: Maturities of short-term debt Maturities of long-term debt (1)(2) Noncancellable operating leases Total contractual obligations _____________________ 2018 2019-2020 2021-2022 After 2022 Total $ $ 405 $ — $ — $ — $ 450 10 750 4 — 2 1,850 1 865 $ 754 $ 2 $ 1,851 $ 405 3,050 17 3,472 (1) Contractual interest payments associated with long-term debt are $117 million, $193 million, $163 million and $765 million in 2018, 2019 through 2020, 2021 through 2022 and after 2022, respectively. The 2015 Term Loan Agreement estimated contractual interest payments are calculated utilizing the variable interest rate as of December 31, 2017 . (2) Excludes premium (discount) on long-term debt of $10 million . Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Critical Accounting Policies and Estimates Our financial statements and the related notes thereto contain information that is pertinent to Management’s Discussion and Analysis. In preparing our financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Changes to these assumptions and estimates could have a material effect on the Partnership’s financial statements. However, the Partnership believes it has taken reasonable, but conservative, positions where assumptions and estimates are used in order to minimize the negative financial impact to the Partnership that could result if actual results vary from the assumptions and estimates. In management’s opinion, the areas of the Partnership where the most significant judgment is exercised for all Partnership segments includes the determination of impairment estimates of long-lived assets (including intangible assets) and goodwill, revenue recognition, valuation of assets and depreciable lives of property, plant and equipment and amortization methodologies related to intangible assets. The selection, application and disclosure of the following critical accounting estimates have been discussed with the Partnership’s board of directors. The 77 Table of Contents Partnership discusses its significant accounting policies, including those that do not require management to make difficult, subjective, or complex judgments or estimates, in Note 1 of the Notes to Consolidated Financial Statements. Impairment of Long-lived Assets (including Intangible Assets) The Partnership periodically evaluates long-lived assets, including property, plant and equipment, and specifically identifiable intangibles other than goodwill, when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The determination of whether an impairment has occurred is based on an estimate of undiscounted cash flows attributable to the assets, as compared to the carrying value of the assets. During the years ended December 31, 2016 and 2015, the Partnership recorded impairments of $9 million and $10 million , respectively, on the Service Star business line, a component of our gathering and processing segment. During the year ended December 31, 2015 , in connection with the preparation of the financial statements, the Partnership recorded a $25 million impairment on the Atoka assets in our gathering and processing segment and a $12 million impairment on jurisdictional pipelines in our transportation and storage segment. The Partnership recorded no other material impairments to long-lived assets in the years ended December 31, 2017 , 2016 or 2015 . Based upon review of forecasted undiscounted cash flows as of December 31, 2017 , all of the asset groups were considered recoverable. Future price declines, throughput declines, contracted capacity declines, cost increases, regulatory or political environment changes and other changes in market conditions could reduce forecasted undiscounted cash flows. Impairment of Goodwill The Partnership assesses its goodwill for impairment annually on October 1st, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. Goodwill is assessed for impairment by comparing the fair value of the reporting unit with its book value, including goodwill. The Partnership utilizes the market or income approaches to estimate the fair value of the reporting unit, also giving consideration to the alternative cost approach. Under the market approach, historical and current year forecasted cash flows are multiplied by a market multiple to determine fair value. Under the income approach, anticipated cash flows over a period of years plus a terminal value are discounted to present value using appropriate discount rates. If the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, then a second step must be completed in order to determine the amount of the goodwill impairment that should be recorded. In the second step, the implied fair value of the reporting unit’s goodwill is determined by allocating the reporting unit’s fair value to all of its assets and liabilities other than goodwill (including any unrecognized intangible assets) in a manner similar to a purchase price allocation. The resulting implied fair value of the goodwill that results from the application of this second step is then compared to the carrying amount of the goodwill and an impairment charge is recorded for the difference. The Partnership performs its goodwill impairment testing at the transportation and storage and gathering and processing reportable segment level. Because quoted market prices for the Partnership’s reporting units are not available, management must apply judgment in determining the estimated fair value of reporting units for purposes of performing the goodwill impairment test, when necessary. Management considered observable transactions in the market, as well as trading multiples and cost of capital for peers, to determine appropriate multiples and discount rates to apply against historical and forecasted cash flows. A lower fair value estimate in the future for any of the Partnership’s reporting units could result in a goodwill impairment. Factors that could trigger a lower fair value estimate include sustained price declines, throughput declines, contracted capacity declines, cost increases, regulatory or political environment changes and other changes in market conditions such as decreased prices in market-based transactions for similar assets. The Partnership performed the first step of our annual goodwill impairment analysis as of October 1, 2015, and determined that the carrying value of the gathering and processing and transportation and storage reportable segments exceeded fair value. The Partnership completed the second step of the goodwill impairment analysis by comparing the implied fair value of the reporting unit to the carrying amount of that goodwill and determined that goodwill was completely impaired in the amount of $1,087 million , which is included in Impairments on the Consolidated Statements of Income for the year ended December 31, 2015. As of December 31, 2016, the Partnership had no goodwill recognized on its Consolidated Balance Sheet. During the fourth quarter of the year ended December 31, 2017, the Partnership recognized $12 million of goodwill related to the acquisition of Align Midstream. 78 Table of Contents Revenue Recognition The Partnership generates the majority of its revenues from midstream energy services, including natural gas gathering, processing, transportation and storage and crude oil gathering. The Partnership performs these services under various contractual arrangements, which include fee-based contract arrangements and arrangements pursuant to which it purchases and resells commodities in connection with providing the related service and earns a net margin for its fee. The Partnership reflects revenue as Product sales and Service revenue on the Consolidated Statements of Income as follows: Product sales: Product sales represent the sale of natural gas, NGLs, crude oil and condensate where the product is purchased and used in connection with providing the Partnership’s midstream services. Service revenue: Service revenue represents all other revenue generated as a result of performing the Partnership’s midstream services. Revenues for gathering, processing, transportation and storage services for the Partnership are recorded each month based on the current month’s estimated volumes, contracted prices (considering current commodity prices), historical seasonal fluctuations and any known adjustments. The estimates are reversed in the following month and customers are billed on actual volumes and contracted prices. Gas sales are calculated on current-month nominations and contracted prices. Revenues associated with the production of NGLs are estimated based on current-month estimated production and contracted prices. These amounts are reversed in the following month and the customers are billed on actual production and contracted prices. Estimated revenues are reflected in Accounts receivable, net or Accounts receivable—affiliated companies, as appropriate, on the Consolidated Balance Sheets and in Revenues on the Consolidated Statements of Income. The Partnership recognizes revenue from natural gas gathering, processing, transportation and storage and crude oil gathering services to third parties as services are provided. Revenue associated with NGLs is recognized when the production is sold. The Partnership records deferred revenue when it receives consideration from a third party before achieving certain criteria that must be met for revenue to be recognized in accordance with GAAP. The Partnership had $35 million and $34 million of deferred revenues, including deferred revenue—affiliated companies, included in Other current liabilities and Other long-term liabilities on the Consolidated Balance Sheets at each of December 31, 2017 and 2016 , respectively. Please see Note 2. “New Accounting Pronouncements” in the Notes to the Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data” for a description of ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606). Valuation of Assets The application of business combination and impairment accounting requires the Partnership to use significant estimates and assumptions in determining the fair value of assets and liabilities. The acquisition method of accounting for business combinations requires the Partnership to estimate the fair value of assets acquired and liabilities assumed to allocate the proper amount of the purchase price consideration between goodwill and the assets that are depreciated and amortized. The Partnership records intangible assets separately from goodwill and amortizes intangible assets with finite lives over their estimated useful life as determined by management. The Partnership does not amortize goodwill but instead annually assesses goodwill for impairment. In the years ended December 31, 2017 and 2015, the Partnership completed acquisitions accounted for as business combinations as discussed in Note 3 of the Notes to Consolidated Financial Statements. As part of these acquisitions, the Partnership engaged the services of third-party valuation experts to assist it in determining the fair value of the acquired assets and liabilities, including goodwill; however, the ultimate determination of those values is the responsibility of the Partnership’s management. The Partnership bases its estimates on assumptions believed to be reasonable, but which are inherently uncertain. These valuations require the use of management’s assumptions, which would not reflect unanticipated events and circumstances that may occur. Depreciable Lives of Property, Plant and Equipment and Amortization Methodologies Related to Intangible Assets The computation of depreciation expense requires judgment regarding the estimated useful lives and salvage value of assets at the time the assets are placed in service. As circumstances warrant, useful lives are adjusted when changes in planned use, changes in estimated production lives of affiliated natural gas basins or other factors indicate that a different life would be more appropriate. Such changes could materially impact future depreciation expense. Changes in useful lives that do not result in the impairment of an asset are recognized prospectively. The computation of amortization expense on intangible assets requires judgment regarding the amortization method used. Intangible assets are amortized on a straight-line basis over their useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are consumed. 79 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to various market risks, including volatility in commodity prices and interest rates. Commodity Price Risk While we generate a substantial portion of our gross margin pursuant to fee-based contracts that include minimum volume commitments and/or demand fees, we are also directly and indirectly exposed to changes in the prices of natural gas, condensate and NGLs. The Partnership utilizes derivatives and forward commodity sales to mitigate the effects of price changes. We do not enter into risk management contracts for speculative purposes. For further information regarding our derivatives, see Note 11 of the Notes to Consolidated Financial Statements in Part II, Item 8. “Financial Statements and Supplementary Data.” Based on our forecasted volumes, prices and contractual arrangements, we estimate approximately 13% of our total gross margin for the twelve months ending December 31, 2018 will be directly exposed to changes in commodity prices, excluding the impact of hedges and contractual floors related to commodity prices in certain agreements. Since December 31, 2017 , we have entered into additional derivative contracts to further manage our exposure to commodity price risk for the twelve months ending December 31, 2018 . Commodity price risk is estimated as the potential loss in value resulting from a hypothetical 10% decline in prices over the next 12 months. Based on a sensitivity analysis for the twelve months ending December 31, 2018 , a 10% decrease in prices from forecasted levels would decrease net income by approximately $13 million for natural gas and ethane and $10 million for NGLs (other than ethane) and condensate, excluding the impact of hedges. Interest Rate Risk Our current interest rate risk exposure is related primarily to our debt portfolio. The majority of our debt portfolio is comprised of fixed rate debt, which mitigates the impact of fluctuations in interest rates. Future issuances of long-term debt could be impacted by increases in interest rates, which could result in higher interest costs. Borrowings under our Revolving Credit Facility, 2015 Term Loan Agreement and any issuances under our commercial paper program could be at a variable interest rate and could expose us to the risk of increasing interest rates. Based upon the $855 million outstanding borrowings under the 2015 Term Loan Agreement, Revolving Credit Facility and commercial paper program as of December 31, 2017 , and holding all other variables constant, a 100 basis-point, or 1%, increase in interest rates would increase our annual interest expense by approximately $9 million. 80 Table of Contents Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of Enable GP, LLC and Unitholders of Enable Midstream Partners, LP Oklahoma City, Oklahoma Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Enable Midstream Partners, LP and subsidiaries (the "Partnership") as of December 31, 2017 and 2016, the related consolidated statements of income, cash flows, and partners’ equity for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Partnership's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2018, expressed an unqualified opinion on the Partnership's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the Partnership's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ DELOITTE & TOUCHE LLP Houston, Texas February 20, 2018 We have served as the Partnership’s auditor since 2013. 81 Table of Contents ENABLE MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF INCOME Revenues (including revenues from affiliates (Note 14)): Product sales Service revenue Total Revenues Cost and Expenses (including expenses from affiliates (Note 14)): Cost of natural gas and natural gas liquids (excluding depreciation and amortization shown separately) Operation and maintenance General and administrative Depreciation and amortization Impairments (Note 8, Note 12) Taxes other than income taxes Total Cost and Expenses Operating Income (Loss) Other Income (Expense): Interest expense (including expenses from affiliates (Note 14)) Equity in earnings of equity method affiliate Other, net Total Other Income (Expense) Income (Loss) Before Income Taxes Income tax expense (benefit) Net Income (Loss) Less: Net income (loss) attributable to noncontrolling interest Net Income (Loss) Attributable to Limited Partners Less: Series A Preferred Unit distributions (Note 5) Net Income (Loss) Attributable to Common and Subordinated Units (Note 4) Basic earnings (loss) per unit (Note 4) Common units Subordinated units Diluted earnings (loss) per unit (Note 4) Common units Subordinated units Year Ended December 31, 2017 2016 2015 (In millions, except per unit data) $ 1,653 $ 1,172 $ 1,150 2,803 1,100 2,272 1,381 1,017 369 95 366 — 64 2,275 528 (120) 28 — (92) 436 (1) 437 $ 1 436 $ 36 400 $ 0.92 $ 0.93 $ 0.92 $ 0.93 $ 367 98 338 9 58 1,887 385 (99) 28 — (71) 314 1 313 $ 1 312 $ 22 290 $ 0.69 $ 0.68 $ 0.69 $ 0.68 $ $ $ $ $ $ $ $ 1,334 1,084 2,418 1,097 419 103 318 1,134 59 3,130 (712) (90) 29 2 (59) (771) — (771) (19) (752) — (752) (1.78) (1.78) (1.78) (1.78) See Notes to the Consolidated Financial Statements 82 Table of Contents ENABLE MIDSTREAM PARTNERS, LP CONSOLIDATED BALANCE SHEETS Current Assets: Cash and cash equivalents Restricted cash Accounts receivable, net Accounts receivable—affiliated companies Inventory Gas imbalances Other current assets Total current assets Property, Plant and Equipment: Property, plant and equipment Less accumulated depreciation and amortization Property, plant and equipment, net Other Assets: Intangible assets, net Goodwill Investment in equity method affiliate Other Total other assets Total Assets Current Liabilities: Accounts payable Accounts payable—affiliated companies Short-term debt Current portion of long-term debt Taxes accrued Gas imbalances Accrued compensation Customer deposits Other Total current liabilities Other Liabilities: Accumulated deferred income taxes, net Regulatory liabilities Other Total other liabilities Long-Term Debt Commitments and Contingencies (Note 15) Partners’ Equity: Series A Preferred Units (14,520,000 issued and outstanding at December 31, 2017 and December 31, 2016, respectively) Common units (432,584,080 issued and outstanding at December 31, 2017 and 224,535,454 issued and outstanding at December 31, 2016, respectively) Subordinated units (0 issued and outstanding at December 31, 2017 and 207,855,430 issued and outstanding at December 31, 2016, respectively) Noncontrolling interest Total Partners’ Equity Total Liabilities and Partners’ Equity December 31, 2017 2016 (In millions, except units) $ 5 $ 14 277 18 40 37 25 416 12,079 1,724 10,355 451 12 324 35 822 6 17 249 13 41 41 29 396 11,567 1,424 10,143 306 — 329 38 673 $ $ 11,593 $ 11,212 263 $ 181 3 405 450 32 12 32 34 48 1,279 6 21 38 65 3 — — 30 35 37 31 45 362 10 19 34 63 2,595 2,993 362 7,280 — 12 $ 7,654 11,593 $ 362 3,737 3,683 12 7,794 11,212 See Notes to the Consolidated Financial Statements 83 Table of Contents ENABLE MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF CASH FLOWS Cash Flows from Operating Activities: Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Year Ended December 31, 2017 2016 2015 (In millions) $ 437 $ 313 $ (771) Depreciation and amortization Deferred income taxes Impairments Loss on sale/retirement of assets Equity in earnings of equity method affiliate Return on investment of equity method affiliate Equity-based compensation Amortization of debt costs and discount (premium) Changes in other assets and liabilities: Accounts receivable, net Accounts receivable—affiliated companies Inventory Gas imbalance assets Other current assets Other assets Accounts payable Accounts payable—affiliated companies Gas imbalance liabilities Other current liabilities Other liabilities Net cash provided by operating activities Cash Flows from Investing Activities: Capital expenditures Acquisitions, net of cash acquired Proceeds from sale of assets Proceeds from insurance Return of investment in equity method affiliate Investment in equity method affiliate Net cash used in investing activities Cash Flows from Financing Activities: Proceeds from long-term debt, net of issuance costs Proceeds from revolving credit facility Repayment of revolving credit facility Increase (decrease) in short-term debt Repayment of notes payable—affiliated companies Proceeds from issuance of common units Proceeds from issuance of Series A Preferred Units, net of issuance costs Distributions Cash taxes paid for employee equity-based compensation Net cash provided by (used in) financing activities Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash Cash, Cash Equivalents and Restricted Cash at Beginning of Period Cash, Cash Equivalents and Restricted Cash at End of Period See Notes to the Consolidated Financial Statements 366 (3) — 7 (28) 28 15 (2) (23) (5) 1 4 4 1 54 — (23) (4) 5 834 (416) (298) 1 2 5 — (706) 691 1,200 (1,836) 405 — — — (590) (2) (132) (4) 23 338 2 9 17 (28) 28 13 (3) (4) 8 12 (18) 6 (1) (34) (6) 10 45 14 721 (383) — 1 — 15 — 318 (1) 1,134 5 (29) 34 9 (2) 9 6 10 22 2 (4) — (29) 12 6 (5) 726 (869) (80) 3 — 8 (8) (367) (946) — 1,734 (1,408) (236) (363) 137 362 (561) — (335) 19 4 450 585 (275) (17) — — — (531) — 212 (8) 12 4 $ 19 $ 23 $ 84 Table of Contents ENABLE MIDSTREAM PARTNERS, LP CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY Series A Preferred Units Common Units Subordinated Units Noncontrolling Interest Units Value Units Value Units Value Value Total Partners’ Equity Value Balance as of December 31, 2014 Net loss Issuance of common units upon interest acquisition of SESH Distributions Equity-based compensation, net of units for employee taxes Balance as of December 31, 2015 Net income Issuance of Series A Preferred Units Issuance of common units Distributions Equity-based compensation, net of units for employee taxes Balance as of December 31, 2016 Net income Conversion of subordinated units Distributions Equity-based compensation, net of units for employee taxes Balance as of December 31, 2017 — $ — — — — — $ — 15 — — — 15 $ — — — — 15 $ — — — — — — 22 362 — (22) — 362 36 — (36) — 362 214 $ — — — — 214 $ — — 10 — — 224 $ — 208 — 1 433 $ 4,353 (379) 1 (270) 9 3,714 147 — 137 (274) 13 3,737 266 3,619 (355) 13 7,280 (In millions) 208 $ — 4,439 $ (373) — — — 208 $ — — — — — 208 $ — (208) — — — $ — (261) — 3,805 $ 143 — — (265) — 3,683 $ 134 (3,619) (198) — — $ See Notes to the Consolidated Financial Statements 85 $ 31 (19) — — — 12 $ 1 — — (1) — 12 $ 1 — (1) — 12 $ 8,823 (771) 1 (531) 9 7,531 313 362 137 (562) 13 7,794 437 — (590) 13 7,654 Table of Contents ENABLE MIDSTREAM PARTNERS, LP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies Organization Enable Midstream Partners, LP (Partnership) is a Delaware limited partnership formed on May 1, 2013 by CenterPoint Energy, OGE Energy and ArcLight, pursuant to the terms of the MFA. The Partnership’s assets and operations are organized into two reportable segments: (i) gathering and processing and (ii) transportation and storage. The gathering and processing segment primarily provides natural gas and crude oil gathering and natural gas processing services to our producer customers. The transportation and storage segment provides interstate and intrastate natural gas pipeline transportation and storage services primarily to our producer, power plant, LDC and industrial end-user customers. The Partnership’s natural gas gathering and processing assets are primarily located in Oklahoma, Texas, Arkansas and Louisiana and serve natural gas production in the Anadarko, Arkoma and Ark-La-Tex Basins. Crude oil gathering assets are located in North Dakota and serve crude oil production in the Bakken Shale formation of the Williston Basin. The Partnership’s natural gas transportation and storage assets consist primarily of an interstate pipeline system extending from western Oklahoma and the Texas Panhandle to Louisiana, an interstate pipeline system extending from Louisiana to Illinois, an intrastate pipeline system in Oklahoma, and our investment in SESH, a pipeline extending from Louisiana to Alabama. CenterPoint Energy and OGE Energy each have 50% of the management interests in Enable GP. Enable GP is the general partner of the Partnership and has no other operating activities. Enable GP is governed by a board made up of two representatives designated by each of CenterPoint Energy and OGE Energy, along with the Partnership’s Chief Executive Officer and three independent board members CenterPoint Energy and OGE Energy mutually agreed to appoint. CenterPoint Energy and OGE Energy also own a 40% and 60% interest, respectively, in the incentive distribution rights held by Enable GP. At December 31, 2017 , CenterPoint Energy held approximately 54.1% or 233,856,623 of the Partnership’s common units, and OGE Energy held approximately 25.7% or 110,982,805 of the Partnership’s common units. Additionally, CenterPoint Energy holds 14,520,000 Series A Preferred Units. See Note 5 for further information related to the Series A Preferred Units. The limited partner interests of the Partnership have limited voting rights on matters affecting the business. As such, limited partners do not have rights to elect the Partnership’s General Partner (Enable GP) on an annual or continuing basis and may not remove Enable GP without at least a 75% vote by all unitholders, including all units held by the Partnership’s limited partners, and Enable GP and its affiliates, voting together as a single class. For the period from December 31, 2014 through June 29, 2015, the financial statements reflect a 49.90% interest in SESH. On June 12, 2015, CenterPoint Energy exercised its put right with respect to a 0.1% interest in SESH. Pursuant to the put right, on June 30, 2015, CenterPoint Energy contributed its remaining 0.1% interest in SESH to the Partnership in exchange for 25,341 common units. For the years ended December 31, 2017 and 2016 , the Partnership owned a 50% interest in SESH. See Note 9 for further discussion of SESH. In addition, for the years ended December 31, 2017 , 2016 and 2015 , the Partnership held a 50% ownership interest in Atoka and consolidated Atoka in its Consolidated Financial Statements as EOIT acted as the managing member of Atoka and had control over the operations of Atoka. Basis of Presentation The accompanying consolidated financial statements and related notes of the Partnership have been prepared pursuant to the rules and regulations of the SEC and GAAP. For a description of the Partnership’s reportable segments, see Note 18. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 86 Table of Contents Revenue Recognition The Partnership generates the majority of its revenues from midstream energy services, including natural gas gathering, processing, transportation and storage and crude oil gathering. The Partnership performs these services under various contractual arrangements, which include fee-based contract arrangements and arrangements pursuant to which it purchases and resells commodities in connection with providing the related service and earns a net margin for its fee. The Partnership reflects revenue as Product sales and Service revenue on the Consolidated Statements of Income as follows: Product sales: Product sales represent the sale of natural gas, NGLs, crude oil and condensate where the product is purchased and used in connection with providing the Partnership’s midstream services. Service revenue: Service revenue represents all other revenue generated as a result of performing the Partnership’s midstream services. Revenues for gathering, processing, transportation and storage services for the Partnership are recorded each month based on the current month’s estimated volumes, contracted prices (considering current commodity prices), historical seasonal fluctuations and any known adjustments. The estimates are reversed in the following month and customers are billed on actual volumes and contracted prices. Gas sales are calculated on current-month nominations and contracted prices. Revenues associated with the production of NGLs are estimated based on current-month estimated production and contracted prices. These amounts are reversed in the following month and the customers are billed on actual production and contracted prices. Estimated revenues are reflected in Accounts receivable, net or Accounts receivable—affiliated companies, as appropriate, on the Consolidated Balance Sheets and in Revenues on the Consolidated Statements of Income. The Partnership recognizes revenue from natural gas gathering, processing, transportation and storage and crude oil gathering services to third parties as services are provided. Revenue associated with NGLs is recognized when the production is sold. The Partnership records deferred revenue when it receives consideration from a third party before achieving certain criteria that must be met for revenue to be recognized in accordance with GAAP. The Partnership had $35 million and $34 million of deferred revenues, including deferred revenue—affiliated companies, included in Other current liabilities and Other long-term liabilities on the Consolidated Balance Sheets at December 31, 2017 and 2016 , respectively. The Partnership relies on certain key natural gas producer customers for a significant portion of natural gas and NGLs supply. The Partnership relies on certain key utilities for a significant portion of transportation and storage demand. The Partnership depends on third-party facilities to transport and fractionate NGLs that it delivers to third parties at the inlet of their facilities. Additionally, for the years ended December 31, 2017 , 2016 and 2015 , one third party purchased approximately 13% , 22% and 18% , respectively, of the NGLs delivered off our system, which accounted for approximately $140 million , $129 million and $108 million , or 5% , 6% and 4% , respectively, of total revenues. Additionally, in the year ended December 31, 2017 , another third party purchased 12% of the NGLs delivered off our system, which accounted for $127 million , or 4% of total revenues. Other than revenues from affiliates discussed in Note 14, there are no other revenue concentrations with individual customers in the years ended December 31, 2017 , 2016 and 2015 . Natural Gas and Natural Gas Liquids Purchases Cost of natural gas and natural gas liquids represents cost of our natural gas and natural gas liquids purchased exclusive of depreciation, Operation and maintenance and General and administrative expenses and consists primarily of product and fuel costs. Estimates for gas purchases are based on estimated volumes and contracted purchase prices. Estimated gas purchases are included in Accounts Payable or Accounts Payable-affiliated companies, as appropriate, on the Consolidated Balance Sheets and in Cost of natural gas and natural gas liquids, excluding Depreciation and amortization on the Consolidated Statements of Income. Operation and Maintenance and General and Administrative Expense Operation and maintenance expense represents the cost of our service related revenues and consists primarily of labor expenses, lease costs, utility costs, insurance premiums and repairs and maintenance expenses directly related with the operations of assets. General and administrative expense represents cost incurred to manage the business. This expense includes cost of general corporate services, such as treasury, accounting, legal, information technology and human resources and all other expenses necessary or appropriate to the conduct of business. Any Operation and maintenance expense and General and administrative expense associated with product sales is immaterial. 87 Table of Contents Environmental Costs The Partnership expenses or capitalizes environmental expenditures, as appropriate, depending on their future economic benefit. The Partnership expenses amounts that relate to an existing condition caused by past operations that do not have future economic benefit. The Partnership records undiscounted liabilities related to these future costs when environmental assessments and/or remediation activities are probable and the costs can be reasonably estimated. There are no material amounts accrued at December 31, 2017 or 2016 . Depreciation and Amortization Expense Depreciation is computed using the straight-line method based on economic lives or a regulatory-mandated recovery period. Amortization of intangible assets is computed using the straight-line method over the respective lives of the intangible assets. The computation of depreciation expense requires judgment regarding the estimated useful lives and salvage value of assets at the time the assets are placed in service. As circumstances warrant, useful lives are adjusted when changes in planned use, changes in estimated production lives of affiliated natural gas basins or other factors indicate that a different life would be more appropriate. Such changes could materially impact future depreciation expense. Changes in useful lives that do not result in the impairment of an asset are recognized prospectively. The computation of amortization expense on intangible assets requires judgment regarding the amortization method used. Intangible assets are amortized on a straight-line basis over their useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible asset are consumed. Income Taxes The Partnership’s earnings are not subject to income tax ( other than Texas state margin taxes and taxes associated with the Partnership’s corporate subsidiaries, Enable Midstream Services and Enable Muskogee Intrastate Transmission) and are taxable at the individual partner level. For more information, see Note 16. We account for deferred income taxes related to the federal and state jurisdictions using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future taxes attributable to the difference between financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets are also recognized for the future tax benefits attributable to the expected utilization of tax net operating loss carryforwards. In the event future utilization is determined to be unlikely, a valuation allowance is provided to reduce the tax benefits from such assets. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the period in which the temporary differences and carryforwards are expected to be recovered or settled. The effect of a change in tax rates is recognized in the period which includes the enactment date. The Partnership recognizes interest and penalties as a component of income tax expense. Cash and Cash Equivalents The Partnership considers cash equivalents to be short-term, highly liquid investments with maturities of three months or less from the date of purchase. The Consolidated Balance Sheets have $5 million and $6 million of cash and cash equivalents as of December 31, 2017 and 2016 , respectively. Restricted Cash Restricted cash consists of cash which is restricted by agreements with third parties. The Consolidated Balance Sheets have $14 million and $17 million of restricted cash as of December 31, 2017 and 2016 , respectively. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount and do not typically bear interest. The determination of the allowance for doubtful accounts requires management to make estimates and judgments regarding our customers’ ability to pay. The allowance for doubtful accounts is determined based upon specific identification and estimates of future uncollectable amounts. On an ongoing basis, we evaluate our customers’ financial strength based on aging of accounts receivable, payment history and review of other relevant information, including ratings agency credit ratings and alerts, publicly available reports and news releases, and bank and trade references. It is the policy of management to review the outstanding accounts receivable at least quarterly, giving consideration to historical bad debt write-offs, the aging of receivables and specific customer circumstances that may impact their ability to pay the amounts due. Based on this review, management determined that a $3 million allowance for doubtful accounts was required at each of December 31, 2017 and 2016 . 88 Table of Contents Inventory Materials and supplies inventory is valued at cost and is subsequently recorded at the lower of cost or net realizable value. The Partnership recorded write- downs to net realizable value related to materials and supplies inventory disposed or identified as excess or obsolete of $1 million for each of the years ended December 31, 2017 and 2016 . There were less than $1 million of write-downs related to materials and supplies inventory for the year ended December 31, 2015. Materials and supplies are recorded to inventory when purchased and, as appropriate, subsequently charged to operation and maintenance expense on the Consolidated Statements of Income or capitalized to property, plant and equipment on the Consolidated Balance Sheets when installed. Natural gas inventory is held, through the transportation and storage segment, to provide operational support for the intrastate pipeline deliveries and to manage leased intrastate storage capacity. Natural gas liquids inventory is held, through the gathering and processing segment, due to timing differences between the production of certain natural gas liquids and ultimate sale to third parties. Natural gas and natural gas liquids inventory is valued using moving average cost and is subsequently recorded at the lower of cost or net realizable value. During the years ended December 31, 2017 , 2016 and 2015 , the Partnership recorded write- downs to net realizable value related to natural gas and natural gas liquids inventory of $2 million , $3 million and $13 million , respectively. The cost of gas associated with sales of natural gas and natural gas liquids inventory is presented in Cost of natural gas and natural gas liquids, excluding depreciation and amortization on the Consolidated Statements of Income. Materials and supplies Natural gas and natural gas liquids inventories Total Gas Imbalances December 31, 2017 2016 $ $ (In millions) 29 $ 11 40 $ 30 11 41 Gas imbalances occur when the actual amounts of natural gas delivered from or received by the Partnership’s pipeline systems differ from the amounts scheduled to be delivered or received. Imbalances are due to or due from shippers and operators and can be settled in cash or natural gas depending on contractual terms. The Partnership values all imbalances at individual, or where appropriate an average of, current market indices applicable to the Partnership’s operations, not to exceed net realizable value. Long-Lived Assets (including Intangible Assets) The Partnership records property, plant and equipment and intangible assets at historical cost. Newly constructed plant is added to plant balances at cost which includes contracted services, direct labor, materials, overhead, transportation costs and capitalized interest. Replacements of units of property are capitalized as plant. For assets that belong to a common plant account, the replaced plant is removed from plant balances and charged to Accumulated depreciation. For assets that do not belong to a common plant account, the replaced plant is removed from plant balances with the related accumulated depreciation and the remaining balance net of any salvage proceeds is recorded as a loss in the Consolidated Statements of Income as Operation and maintenance expense. The Partnership expenses repair and maintenance costs as incurred. Repair, removal and maintenance costs are included in the Consolidated Statements of Income as Operation and maintenance expense. Assessing Impairment of Long-lived Assets (including Intangible Assets) and Goodwill The Partnership periodically evaluates long-lived assets, including property, plant and equipment, and specifically identifiable intangibles other than goodwill, when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The determination of whether an impairment has occurred is based on an estimate of undiscounted cash flows attributable to the assets, as compared to the carrying value of the assets. For more information, see Note 12. The Partnership assesses its goodwill for impairment annually on October 1st, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. Goodwill is assessed for impairment by comparing the fair value of the reporting unit with its book value, including goodwill. The Partnership utilizes the market or income approaches to estimate the fair value of the reporting unit, also giving consideration to the alternative cost approach. Under the market approach, historical and current year forecasted cash flows are multiplied by a market multiple to determine fair value. Under the income approach, anticipated cash flows over a period of years plus a terminal value are discounted to present value 89 Table of Contents using appropriate discount rates. If the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, then a second step must be completed in order to determine the amount of the goodwill impairment that should be recorded. In the second step, the implied fair value of the reporting unit’s goodwill is determined by allocating the reporting unit’s fair value to all of its assets and liabilities other than goodwill (including any unrecognized intangible assets) in a manner similar to a purchase price allocation. The resulting implied fair value of the goodwill that results from the application of this second step is then compared to the carrying amount of the goodwill and an impairment charge is recorded for the difference. The Partnership performs its goodwill impairment testing at the transportation and storage and gathering and processing reportable segment level. For more information, see Note 8. Regulatory Assets and Liabilities The Partnership applies the guidance for accounting for regulated operations to portions of the transportation and storage segment. The Partnership’s rate- regulated businesses recognize removal costs as a component of depreciation expense in accordance with regulatory treatment. As of each of December 31, 2017 and 2016 , these removal costs of $21 million and $19 million , respectively, are classified as Regulatory liabilities in the Consolidated Balance Sheets. Capitalization of Interest and Allowance for Funds Used During Construction Allowance for funds used during construction (AFUDC) represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction. Although AFUDC increases both utility plant and earnings, it is realized in cash when the assets are included in rates for entities that apply guidance for accounting for regulated operations. Capitalized interest represents the approximate net composite interest cost of borrowed funds used for construction. Interest and AFUDC are capitalized as a component of projects under construction and will be amortized over the assets’ estimated useful lives. During the years ended December 31, 2017 , 2016 and 2015 , the Partnership capitalized interest and AFUDC of $1 million , $4 million and $10 million , respectively. Derivative Instruments The Partnership is exposed to various market risks. These risks arise from transactions entered into in the normal course of business. At times, the Partnership utilizes derivative instruments such as physical forward contracts, financial futures and swaps to mitigate the impact of changes in commodity prices on its operating results and cash flows. Such derivatives are recognized in the Partnership’s Consolidated Balance Sheets at their fair value unless the Partnership elects hedge accounting or the normal purchase and sales exemption for qualified physical transactions. For derivative instruments not designated as hedging instruments, the gain or loss on the derivative is recognized in Product sales in the Consolidated Statements of Income. A derivative may be designated as a normal purchase or normal sale if the intent is to physically receive or deliver the product for use or sale in the normal course of business. The Partnership’s policies prohibit the use of leveraged financial instruments. A leveraged financial instrument, for this purpose, is a transaction involving a derivative whose financial impact will be based on an amount other than the notional amount or volume of the instrument. Fair Value Measurements The Partnership determines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As required, the Partnership utilizes valuation techniques that maximize the use of observable inputs (levels 1 and 2) and minimize the use of unobservable inputs (level 3) within the fair value hierarchy included in current accounting guidance. The Partnership generally applies the market approach to determine fair value. This method uses pricing and other information generated by market transactions for identical or comparable assets and liabilities. Assets and liabilities are classified within the fair value hierarchy based on the lowest level (least observable) input that is significant to the measurement in its entirety. Equity-Based Compensation The Partnership awards equity-based compensation to officers, directors and employees under the Long-Term Incentive Plan. All equity-based awards to officers, directors and employees under the Long-Term Incentive Plan, including grants of performance units, time-based phantom units (phantom units) and time- based restricted units (restricted units) are recognized in the Consolidated Statements of Income based on their fair values. The fair value of the phantom units and restricted units are based on the closing market price of the Partnership’s common unit on the grant date. The fair value of the performance units is 90 Table of Contents estimated on the grant date using a lattice-based valuation model that factors in information, including the expected distribution yield, expected price volatility, risk-free interest rate and the probable outcome of the market condition, over the expected life of the performance units. Compensation expense for the phantom unit and restricted unit awards is a fixed amount determined at the grant date fair value and is recognized as services are rendered by employees over a vesting period. The vesting of the performance unit awards is also contingent upon the probable outcome of the market condition. Depending on forfeitures and actual vesting, the compensation expense recognized related to the awards could increase or decrease. Fifth Amended and Restated Agreement of Limited Partnership of Enable Midstream Partners, LP On November 14, 2017, the General Partner adopted the Fifth Amended and Restated Agreement of Limited Partnership (the Partnership Agreement), to implement certain changes to the Internal Revenue Code enacted by the Bipartisan Budget Act of 2015 relating to partnership audit and adjustment procedures. The Partnership Agreement also removed references to the subordinated units (all of which previously converted into common units) and related provisions. (2) New Accounting Pronouncements Accounting Standards to be Adopted in Future Periods Revenue from Contracts with Customers In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in “Revenue Recognition (Topic 605).” Topic 606 is based on the core principle that revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. As part of our evaluation of the impact of this standard, we have completed our review of customer contracts across all our business segments. We do not believe the adoption of Topic 606 will have a material impact on Product sales, Operating Income or Net Income. However, we have identified certain contractual arrangements that will materially impact Service revenue and Cost of natural gas and natural gas liquids upon adoption of Topic 606, as follows: • • • • Natural gas and natural gas liquids purchase arrangements - For certain arrangements within our gathering and processing segment, the Partnership purchases and controls the entire hydrocarbon stream at the point of receipt. Under Topic 606, these arrangements are considered supplier contracts rather than contracts with customers. Therefore, upon adoption of Topic 606, the gathering and processing fees for these arrangements that were previously recognized as Service revenue under Topic 605 will now be recognized as reductions to Cost of natural gas and natural gas liquids. Percent-of-proceeds and percent-of-liquids processing arrangements - Under percent-of-proceeds and percent-of-liquids arrangements within our gathering and processing segment, we have recognized the value of natural gas and natural gas liquids received in our purchase cost within Cost of natural gas and natural gas liquids. Under Topic 606, the Partnership will recognize the value of the natural gas and NGLs received as Service revenue and as an increase to Cost of natural gas and natural gas liquids when the natural gas or NGLs are sold and Product sales are recognized. Keep-whole arrangements - Under keep-whole arrangements within our gathering and processing segment, the Partnership recognized the value of NGLs received in Product revenue and the value of the thermally equivalent quantity of natural gas provided in our purchase cost within Cost of natural gas and natural gas liquids. Under Topic 606, the Partnership will recognize the value of the NGLs received less the value of the thermal equivalent volume of natural gas provided as Service revenue and as an increase to Cost of natural gas and natural gas liquids when the NGLs are sold and Product sales are recognized. Fixed fuel arrangements - Under certain gathering arrangements within our gathering and processing segment as well as under certain transportation arrangements within our transportation and storage segment we receive a fixed amount of fuel regardless of actual fuel usage. Historically, revenue for fuel in excess of actual usage was recognized when such fuel was received, and additional revenue was recognized when such fuel was sold. Under Topic 606, fuel in excess of actual usage will be treated as a byproduct obtained through the fulfillment of a contract, and the Partnership will recognize revenue at the time the excess fuel is sold. This will result in a reduction of Product sales and a corresponding reduction in Cost of natural gas and natural gas liquids. 91 Table of Contents We continue to develop the underlying reports, internal controls and disclosures to record activity under Topic 606 upon adoption. The Partnership adopted Topic 606 on January 1, 2018 using the modified retrospective method. Upon adoption, we did not recognize a material cumulative adjustment to Partners’ Equity and we do not expect material changes in the timing of revenue recognition or our accounting policies. Leases In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This standard requires, among other things, that lessees recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Partnership expects to adopt this standard in the first quarter of 2019 and is currently evaluating the impact of this standard on our Consolidated Financial Statements and related disclosures. In connection with our assessment work, we formed an implementation work team and are continuing our review of our contracts relative to the provisions of the lease standard. Financial Instruments—Credit Losses In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard requires entities to measure all expected credit losses of financial assets held at a reporting date based on historical experience, current conditions, and reasonable and supportable forecasts in order to record credit losses in a more timely matter. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The standard is effective for interim and annual reporting periods beginning after December 15, 2019, although early adoption is permitted for interim and annual periods beginning after December 15, 2018. The Partnership does not expect the adoption of this standard to have a material impact on our Consolidated Financial Statements and related disclosures. Income Taxes In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” This standard requires entities to recognize the tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The standard is effective for interim and annual reporting periods beginning after December 15, 2017, although early adoption is permitted as of the beginning of an annual period (i.e., only in the first interim period). The guidance requires application using a modified retrospective approach. The Partnership does not expect the adoption of this standard to have a material impact on our Consolidated Financial Statements and related disclosures. (3) Acquisitions Align Acquisition On October 4, 2017, the Partnership acquired all of the equity interests in Align Midstream, LLC, a midstream service provider with natural gas gathering and processing facilities in the Cotton Valley and Haynesville plays of the Ark-La-Tex Basin, for approximately $298 million in cash. The acquisition includes approximately 190 miles of natural gas gathering pipelines across Rusk, Panola and Shelby counties in Texas and DeSoto Parish in Louisiana and a cryogenic natural gas processing plant in Panola County, Texas, with a capacity of 100 MMcf/d. The acquisition was accounted for as a business combination and funded with borrowings under the Revolving Credit Facility. During the fourth quarter of 2017, the Partnership finalized the purchase price allocation as of October 4, 2017. 92 Table of Contents The following table presents the fair value of the identified assets acquired and liabilities assumed at the acquisition date: Purchase price allocation (in millions): Assets acquired: Accounts receivable Property, plant and equipment Intangibles Goodwill Liabilities assumed: Current liabilities Total identifiable net assets $ $ 5 111 176 12 6 298 The Partnership recognized intangible assets related to customer relationships. The acquired intangible assets will be amortized on a straight-line basis over the estimated customer contract life of approximately 10 years. Goodwill recognized from the acquisition primarily relates to greater operating leverage in the Ark- La-Tex Basin and is allocated to the gathering and processing segment. The Partnership incurred approximately $2 million of acquisition costs associated with this transaction, which are included in General and administrative expense in the Consolidated Statements of Income. The Partnership determined not to include pro forma consolidated financial statements for the periods presented as the impact would not be material. Monarch Acquisition On April 22, 2015, the Partnership entered into an agreement with Monarch Natural Gas, LLC, pursuant to which the Partnership agreed to acquire approximately 106 miles of gathering pipeline, approximately 5,000 horsepower of associated compression, right-of-ways and certain other midstream assets that provide natural gas gathering services in the Greater Granite Wash area of Texas. The transaction closed on May 1, 2015. The aggregate purchase price for this transaction was approximately $80 million , which was funded from cash generated from operations and borrowings under our Revolving Credit Facility. The acquisition was accounted for as a business combination. During the third quarter of 2015, the Partnership finalized the purchase price allocation as of May 1, 2015. Purchase price allocation (in millions): Property, plant and equipment Intangibles Goodwill Total $ $ 51 10 19 80 The Partnership recognized intangible assets related to customer relationships. The acquired intangible assets will be amortized on a straight-line basis over the estimated customer contract life of approximately 15 years. Goodwill recognized from the acquisition primarily relates to the value created from additional growth opportunities and greater operating leverage in the Anadarko Basin. See Note 8 for further information related to the Partnership’s goodwill impairment. The Partnership incurred less than $1 million of acquisition costs associated with this transaction, which are included in General and administrative expense in the Consolidated Statements of Income. (4) Earnings Per Limited Partner Unit Basic and diluted earnings per limited partner unit is calculated by dividing net income (loss) allocable to common and subordinated unitholders by the weighted average number of common and subordinated units outstanding during the period. Any common units issued during the period are included on a weighted average basis for the days in which they were outstanding. The dilutive effect of the unit-based awards discussed in Note 17 was less than $0.01 per unit during the years ended December 31, 2017 , 2016 and 2015 . 93 Table of Contents The following table illustrates the Partnership’s calculation of earnings (loss) per unit for common and subordinated units: Net income (loss) Net income (loss) attributable to noncontrolling interest Series A Preferred Unit distributions General partner interest in net income Net income (loss) available to common and subordinated unitholders Net income (loss) allocable to common units Net income (loss) allocable to subordinated units Net income (loss) available to common and subordinated unitholders Net income (loss) allocable to common units Dilutive effect of Series A Preferred Unit distribution Diluted net income (loss) allocable to common units Diluted net income (loss) allocable to subordinated units Total Basic weighted average number of outstanding Common units (1) Subordinated units Total Basic earnings (loss) per unit Common units Subordinated units Basic weighted average number of outstanding common units Dilutive effect of Series A Preferred Units Dilutive effect of performance units Diluted weighted average number of outstanding common units Diluted weighted average number of outstanding subordinated units Total Diluted earnings (loss) per unit Common units Subordinated units ____________________ Year Ended December 31, 2017 2016 2015 (In millions, except per unit data) 437 $ 313 $ 1 36 — 1 22 — 400 $ 290 $ 273 $ 127 400 $ 148 $ 142 290 $ 273 $ 148 $ — 273 127 — 148 142 400 $ 290 $ 296 137 433 216 208 424 (771) (19) — — (752) (381) (371) (752) (381) — (381) (371) (752) 214 208 422 0.92 $ 0.93 $ 0.69 $ 0.68 $ (1.78) (1.78) 296 — 1 297 137 434 216 — — 216 208 424 214 — — 214 208 422 0.92 $ 0.93 $ 0.69 $ 0.68 $ (1.78) (1.78) $ $ $ $ $ $ $ $ $ $ (1) Basic weighted average number of outstanding common units for the year ended December 31, 2017 includes approximately one million time-based phantom units. See Note 5 for discussion of the expiration of the subordination period. (5) Enable Midstream Partners, LP Partners’ Equity The Partnership Agreement requires that, within 60 days subsequent to the end of each quarter, the Partnership distribute all of its available cash (as defined in the Partnership Agreement) to unitholders of record on the applicable record date. 94 Table of Contents The Partnership paid or has authorized payment of the following cash distributions to common and subordinated unitholders, as applicable, during 2017 , 2016 and 2015 (in millions, except for per unit amounts): Record Date Payment Date Per Unit Distribution Total Cash Distribution Quarter Ended December 31, 2017 (1) February 20, 2018 February 27, 2018 September 30, 2017 November 14, 2017 November 21, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016 December 31, 2015 September 30, 2015 June 30, 2015 March 31, 2015 _____________________ August 22, 2017 May 23, 2017 August 29, 2017 May 30, 2017 February 21, 2017 February 28, 2017 November 14, 2016 November 22, 2016 August 16, 2016 May 6, 2016 August 23, 2016 May 13, 2016 February 2, 2016 February 12, 2016 November 3, 2015 November 13, 2015 August 3, 2015 May 5, 2015 August 13, 2015 May 15, 2015 $ $ $ $ $ $ $ $ $ $ $ $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.318 $ 0.316 $ 0.3125 $ 138 138 138 137 137 134 134 134 134 134 134 132 (1) The board of directors of Enable GP declared this $0.318 per common unit cash distribution on February 9, 2018 , to be paid on February 27, 2018 , to common unitholders of record at the close of business on February 20, 2018 . The Partnership paid or has authorized payment of the following cash distributions to holders of the Series A Preferred Units during 2017 and 2016 (in millions, except for per unit amounts): Quarter Ended December 31, 2017 (1) September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016 (2) _____________________ Record Date Payment Date Per Unit Distribution Total Cash Distribution February 9, 2018 October 31, 2017 July 31, 2017 May 2, 2017 February 10, 2017 November 1, 2016 August 2, 2016 May 6, 2016 February 15, 2018 November 14, 2017 August 14, 2017 May 12, 2017 February 15, 2017 November 14, 2016 August 12, 2016 May 13, 2016 $ $ $ $ $ $ $ $ 0.625 $ 0.625 $ 0.625 $ 0.625 $ 0.625 $ 0.625 $ 0.625 $ 0.2917 $ 9 9 9 9 9 9 9 4 (1) The board of directors of Enable GP declared this $0.625 per Series A Preferred Unit cash distribution on February 9, 2018 , which was paid on February 15, 2018 to Series A Preferred unitholders of record at the close of business on February 9, 2018 . (2) The prorated quarterly distribution for the Series A Preferred Units is for a partial period beginning on February 18, 2016, and ending on March 31, 2016, which equates to $0.625 per unit on a full-quarter basis or $2.50 per unit on an annualized basis. General Partner Interest and Incentive Distribution Rights Enable GP owns a non-economic general partner interest in the Partnership and, except as provided below with respect to incentive distribution rights, will not be entitled to distributions that the Partnership makes prior to the liquidation of the Partnership in respect of such general partner interest. Enable GP currently holds incentive distribution rights that entitle it to receive increasing percentages, up to a maximum of 50.0% , of the cash the Partnership distributes from operating surplus (as defined in the Partnership Agreement) in excess of $0.330625 per unit per quarter. The maximum distribution of 50.0% does not include any distributions that Enable GP or its affiliates may receive on common units that they own. 95 Table of Contents Expiration of Subordination Period Prior to the expiration of the subordination period, CenterPoint Energy and OGE Energy held 139,704,916 and 68,150,514 subordinated units, respectively. The financial tests required for conversion of all subordinated units were met and the 207,855,430 outstanding subordinated units converted into common units on a one -for-one basis on August 30, 2017. The conversion of the subordinated units did not change the aggregate amount of outstanding units, and the conversion of the subordinated units did not impact the amount of cash available for distribution by the Partnership. Series A Preferred Units On February 18, 2016, the Partnership completed the private placement of 14,520,000 Series A Preferred Units representing limited partner interests in the Partnership for a cash purchase price of $25.00 per Series A Preferred Unit, resulting in proceeds of $362 million , net of issuance costs. The Partnership incurred approximately $1 million of expenses related to the offering, which is shown as an offset to the proceeds. In connection with the closing of the private placement, the Partnership redeemed approximately $363 million of notes scheduled to mature in 2017 payable to a wholly-owned subsidiary of CenterPoint Energy. Pursuant to the Partnership Agreement , the Series A Preferred Units: • • • • rank senior to the Partnership’s common units with respect to the payment of distributions and distribution of assets upon liquidation, dissolution and winding up; have no stated maturity; are not subject to any sinking fund; and will remain outstanding indefinitely unless repurchased or redeemed by the Partnership or converted into its common units in connection with a change of control. Holders of the Series A Preferred Units receive a quarterly cash distribution on a non-cumulative basis if and when declared by the General Partner, and subject to certain adjustments, equal to an annual rate of: 10% on the stated liquidation preference of $25.00 from the date of original issue to, but not including, the five year anniversary of the original issue date; and thereafter a percentage of the stated liquidation preference equal to the sum of the three-month LIBOR plus 8.5% . At any time on or after five years after the original issue date, the Partnership may redeem the Series A Preferred Units, in whole or in part, from any source of funds legally available for such purpose, by paying $25.50 per unit plus an amount equal to all accumulated and unpaid distributions thereon to the date of redemption, whether or not declared. In addition, the Partnership (or a third-party with its prior written consent) may redeem the Series A Preferred Units following certain changes in the methodology employed by ratings agencies, changes of control or fundamental transactions as set forth in the Partnership Agreement . If, upon a change of control or certain fundamental transactions, the Partnership (or a third-party with its prior written consent) does not exercise this option, then the holders of the Series A Preferred Units have the option to convert the Series A Preferred Units into a number of common units per Series A Preferred Unit as set forth in the Partnership Agreement . The Series A Preferred Units are also required to be redeemed in certain circumstances if they are not eligible for trading on the New York Stock Exchange. Holders of Series A Preferred Units have no voting rights except for limited voting rights with respect to potential amendments to the Partnership Agreement that have a material adverse effect on the existing terms of the Series A Preferred Units, the issuance by the Partnership of certain securities, approval of certain fundamental transactions and as required by law. Upon the transfer of any Series A Preferred Unit to a non-affiliate of CenterPoint Energy, the Series A Preferred Units will automatically convert into a new series of preferred units (the Series B Preferred Units) on the later of the date of transfer and the second anniversary of the date of issue. The Series B Preferred Units will have the same terms as the Series A Preferred Units except that unpaid distributions on the Series B Preferred Units will accrue on a cumulative basis until paid. On February 18, 2016, the Partnership entered into a registration rights agreement with CenterPoint Energy, pursuant to which, among other things, the Partnership gave CenterPoint Energy certain rights to require the Partnership to file and maintain a registration statement with respect to the resale of the Series A Preferred Units and any other series of preferred units or common units representing limited partner interests in the Partnership that are issuable upon conversion of the Series A Preferred Units. 96 Table of Contents ATM Program On May 12, 2017, the Partnership entered into an ATM Equity Offering Sales Agreement in connection with an at-the-market program (the “ATM Program”). Pursuant to the ATM Program, the Partnership may issue and sell common units having an aggregate offering price of up to $200 million , by sales methods and at prices determined by market conditions and other factors at the time of our offerings. The Partnership has no obligation to sell any common units under the ATM Program and the Partnership may suspend sales under the ATM Program at any time. For the year ended December 31, 2017 , the Partnership sold an aggregate of 18,500 common units under the ATM Program, which generated proceeds of approximately $303,000 (net of approximately $3,000 of commissions). The Partnership incurred approximately $345,000 of expenses associated with the filing of the registration statements for the ATM Program. The proceeds were used for general partnership purposes. 2016 Equity Issuance On November 29, 2016, the Partnership closed a public offering of 10,000,000 common units at a price to the public of $14.00 per common unit. In connection with the offering, the Partnership, the underwriters and an affiliate of ArcLight entered into an underwriting agreement that provided an option for the underwriters to purchase up to an additional 1,500,000 common units, with 75,719 common units to be sold by the Partnership and 1,424,281 to be sold by the affiliate of ArcLight. The underwriters exercised the option to purchase all of the additional common units, and the Partnership received proceeds (net of underwriting discounts, structuring fees and offering expenses) of $137 million from the offering. (6) Property, Plant and Equipment Property, plant and equipment includes the following: Property, plant and equipment, gross: Gathering and Processing Transportation and Storage Construction work-in-progress Total Accumulated depreciation: Gathering and Processing Transportation and Storage Total accumulated depreciation Property, plant and equipment, net Weighted Average Useful Lives (Years) December 31, 2017 2016 36 34 $ $ (In millions) 7,322 $ 4,538 219 12,079 $ 865 859 1,724 $ 10,355 $ 6,987 4,498 82 11,567 681 743 1,424 10,143 The Partnership recorded depreciation expense of $335 million , $311 million and $291 million during the years ended December 31, 2017 , 2016 and 2015 , respectively. 97 Table of Contents (7) Intangible Assets, Net The Partnership has intangible assets associated with customer relationships related to the acquisitions of Enogex, Monarch Natural Gas, LLC and Align Midstream, LLC as follows: Customer relationships: Total intangible assets (1) Accumulated amortization Net intangible assets ____________________ December 31, 2017 2016 (In millions) 581 $ 130 451 $ 405 99 306 $ $ (1) See Note 3 for discussion of the acquisition of Align Midstream, LLC during the year ended December 31, 2017 . Intangible assets related to customer relationships have a weighted average useful life of 13 years. Intangible assets do not have any significant residual value or renewal options of existing terms. There are no intangible assets with indefinite useful lives. The Partnership recorded amortization expense of $31 million , $27 million and $27 million during the years ended December 31, 2017 , 2016 and 2015 , respectively. The following table summarizes the Partnership’s expected amortization of intangible assets for each of the next five years: Expected amortization of intangible assets $ 45 $ 45 $ 45 $ 45 $ 45 2018 2019 2020 2021 2022 (In millions) (8) Goodwill For the periods ended prior to September 30, 2015, the goodwill associated with the gathering and processing reportable segment is primarily related to the acquisitions of Enogex, Waskom and Monarch. The Partnership recognized $438 million of goodwill as a result of the acquisition of Enogex, which occurred at the time of the formation of the Partnership in 2013. The $579 million of goodwill associated with the transportation and storage reportable segment was related to the original acquisitions of EGT and MRT in 1997 by predecessors of the Partnership. Due to the continuing commodity price declines, the resulting decreases in forward commodity prices and forecasted producer activities, and an increase in the weighted average cost of capital, the Partnership determined that the impact on our forecasted discounted cash flows for our gathering and processing and transportation and storage reportable segments would be significantly reduced. As a result, when the Partnership performed our annual goodwill impairment analysis as of October 1, 2015, we determined that goodwill was completely impaired in the amount of $1,087 million , which is included in Impairments on the Consolidated Statements of Income for the year ended December 31, 2015. As a result, the Partnership did not have any goodwill recorded as of December 31, 2016 . In the fourth quarter of 2017, as a result of the acquisition of Align Midstream, LLC, the Partnership recorded $12 million of goodwill, included in the gathering and processing reportable segment. 98 Table of Contents The change in carrying amount of goodwill in each of our reportable segments is as follows: Balance as of December 31, 2014 Monarch Acquisition (1) Goodwill impairment Balance as of December 31, 2015 Balance as of December 31, 2016 Align Acquisition (1) Balance as of December 31, 2017 _____________________ (1) See Note 3 for further discussion. (9) Investment in Equity Method Affiliate Gathering and Processing Transportation and Storage Total (in millions) $ $ $ $ 489 $ 19 (508) — $ — $ 12 12 $ 579 $ — (579) — $ — $ — — $ 1,068 19 (1,087) — — 12 12 The Partnership uses the equity method of accounting for investments in entities in which it has an ownership interest between 20% and 50% and exercises significant influence. For the period from December 31, 2014 through June 29, 2015, the Partnership held a 49.90% interest in SESH. On June 12, 2015, CenterPoint Energy exercised its put right with respect to its remaining 0.1% interest in SESH. Pursuant to the put right, on June 30, 2015, CenterPoint Energy contributed a 0.1% interest in SESH to the Partnership in exchange for 25,341 common units, which had a fair value of $1 million based upon the closing market price of the Partnership’s common units. Spectra Energy Partners, LP owns the remaining 50% interest in SESH. Pursuant to the terms of the SESH LLC Agreement, if, at any time, CenterPoint Energy has a right to receive less than 50% of our distributions through its limited partner interest in the Partnership and its economic interest in Enable GP, or does not have the ability to exercise certain control rights, Spectra Energy Partners, LP may, under certain circumstances, have the right to purchase our interest in SESH at fair market value, subject to certain exceptions. For the years ended December 31, 2017 and 2016 , the Partnership owned a 50% interest in SESH. The Partnership shares operations of SESH with Spectra Energy Partners, LP under service agreements. The Partnership is responsible for the field operations of SESH. SESH reimburses each party for actual costs incurred, which are billed based upon a combination of direct charges and allocations. During the years ended December 31, 2017 , 2016 and 2015 , the Partnership billed SESH $17 million , $13 million and $12 million , respectively, associated with these service agreements. The Partnership includes equity in earnings of equity method affiliate under the Other Income (Expense) caption in the Consolidated Statements of Income for the years ended December 31, 2017 , 2016 and 2015 . 99 Table of Contents Investment in Equity Method Affiliate: Balance as of December 31, 2014 Interest acquisition of SESH Equity in earnings of equity method affiliate Contributions to equity method affiliate Distributions from equity method affiliate (1) Balance as of December 31, 2015 Equity in earnings of equity method affiliate Distributions from equity method affiliate (1) Balance as of December 31, 2016 Equity in earnings of equity method affiliate Distributions from equity method affiliate (1) Balance as of December 31, 2017 ____________________ (In millions) 348 1 29 8 (42) 344 28 (43) 329 28 (33) 324 $ $ $ (1) Distributions from equity method affiliate includes a $28 million , $28 million and $34 million return on investment and a $5 million , $15 million and $8 million return of investment for the years ended December 31, 2017 , 2016 and 2015 , respectively. Equity in Earnings of Equity Method Affiliate: SESH Distributions from Equity Method Affiliate: SESH Summarized financial information of SESH: Balance Sheet Data: Current assets Property, plant and equipment, net Total assets Current liabilities Long-term debt Members’ equity Total liabilities and members’ equity Reconciliation: Investment in SESH Less: Capitalized interest on investment in SESH Add: Basis differential, net of amortization The Partnership’s share of members’ equity 100 Year Ended December 31, 2017 2016 2015 (In millions) $ 28 $ 28 $ 29 Year Ended December 31, 2017 2016 2015 (In millions) $ 33 $ 43 $ 42 December 31, 2017 2016 (In millions) 32 $ 1,093 1,125 $ 14 $ 397 714 31 1,110 1,141 18 397 726 1,125 $ 1,141 324 $ (1) 34 357 $ 329 (1) 35 363 $ $ $ $ $ $ Table of Contents Income Statement Data: Revenues Operating income Net income (10) Debt Year Ended December 31, 2017 2016 2015 (In millions) $ $ $ 113 $ 115 $ 72 $ 54 $ 73 $ 55 $ 115 71 57 The following table presents the Partnership’s outstanding debt as of December 31, 2017 and 2016 . Commercial Paper Revolving Credit Facility 2015 Term Loan Agreement 2019 Notes 2024 Notes 2027 Notes 2044 Notes EOIT Senior Notes Total debt Less: Short-term debt (2) Less: Current portion of long-term debt Less: Unamortized debt expense (3) Total long-term debt ___________________ December 31, 2017 December 31, 2016 Outstanding Principal Premium (Discount) (1) Total Debt Outstanding Principal Premium (Discount) (1) Total Debt 405 — 450 500 600 700 550 250 3,455 — — — — — (3) — 13 10 (In millions) 405 — 450 500 600 697 550 263 — 636 450 500 600 — 550 250 3,465 2,986 405 450 15 — — — — (1) — — 18 17 — 636 450 500 599 — 550 268 3,003 — — 10 $ 2,595 $ 2,993 (1) Unamortized premium (discount) on long-term debt is amortized over the life of the respective debt. (2) Short-term debt includes $405 million of commercial paper as of December 31, 2017 . There was no commercial paper outstanding as of December 31, 2016 . (3) As of December 31, 2017 and 2016 , there was an additional $3 million and $5 million , respectively, of unamortized debt expense related to the Revolving Credit Facility included in Other long-term assets, not included above. Unamortized debt expense is amortized over the life of the respective debt. Maturities of outstanding debt, excluding unamortized premiums (discounts), are as follows (in millions): 2018 2019 2020 2021 2022 Thereafter $ 855 500 250 — — 1,850 Revolving Credit Facility On June 18, 2015, the Partnership entered into the $1.75 billion Revolving Credit Facility, which matures on June 18, 2020, subject to an extension option, which may be exercised two times to extend the term of the Revolving Credit facility, in each case, for an additional one-year term. As of December 31, 2017 , there were no principal advances and $3 million in letters of credit outstanding under the Revolving Credit Facility. 101 Table of Contents The Revolving Credit Facility provides that outstanding borrowings bear interest at LIBOR and/or an alternate base rate, at the Partnership’s election, plus an applicable margin. The applicable margin is based on the Partnership’s applicable credit ratings. As of December 31, 2017 , the applicable margin for LIBOR- based borrowings under the Revolving Credit Facility was 1.50% based on the Partnership’s credit ratings. In addition, the Revolving Credit Facility requires the Partnership to pay a fee on unused commitments. The commitment fee is based on the Partnership’s applicable credit rating from the rating agencies. As of December 31, 2017 , the commitment fee under the Revolving Credit Facility was 0.20% per annum based on the Partnership’s credit ratings. The commitment fee is recorded as interest expense in the Partnership’s Consolidated Statements of Income. The Revolving Credit Facility contains a financial covenant requiring us to maintain a ratio of consolidated funded debt to consolidated EBITDA as defined under the Revolving Credit Facility as of the last day of each fiscal quarter of less than or equal to 5.00 to 1.00; provided that, for any three fiscal quarters including and following any fiscal quarter in which the aggregate value of one or more acquisitions by us or certain of our subsidiaries with a purchase price of at least $25 million in the aggregate, the consolidated funded debt to consolidated EBITDA ratio as of the last day of each such fiscal quarter during such period would be permitted to be up to 5.50 to 1.00. The Revolving Credit Facility also contains covenants that restrict us and certain subsidiaries in respect of, among other things, mergers and consolidations, sales of all or substantially all assets, incurrence of subsidiary indebtedness, incurrence of liens, transactions with affiliates, designation of subsidiaries as Excluded Subsidiaries (as defined in the Revolving Credit Facility), restricted payments, changes in the nature of their respective businesses and entering into certain restrictive agreements. Borrowings under the Revolving Credit Facility are subject to acceleration upon the occurrence of certain defaults, including, among others, payment defaults on such facility, breach of representations, warranties and covenants, acceleration of indebtedness (other than intercompany and non-recourse indebtedness) of $100 million or more in the aggregate, change of control, nonpayment of uninsured money judgments in excess of $100 million and the occurrence of certain ERISA and bankruptcy events, subject where applicable to specified cure periods. Commercial Paper The Partnership has a commercial paper program pursuant to which the Partnership is authorized to issue up to $1.4 billion of commercial paper. The commercial paper program is supported by our Revolving Credit Facility, and outstanding commercial paper effectively reduces our borrowing capacity thereunder. There was $405 million and zero outstanding under our commercial paper program as of December 31, 2017 and 2016 , respectively. The weighted average interest rate for the outstanding commercial paper was 2.42% as of December 31, 2017 . Term Loan Agreement On July 31, 2015, the Partnership entered into a Term Loan Agreement, providing for an unsecured three -year $450 million term loan agreement (2015 Term Loan Agreement). The entire $450 million principal amount of the 2015 Term Loan Agreement was borrowed by the Partnership on July 31, 2015. The 2015 Term Loan Agreement contains an option, which may be exercised up to two times, to extend the term of the 2015 Term Loan Agreement, in each case, for an additional one -year term. The 2015 Term Loan Agreement provides an option to prepay, without penalty or premium, the amount outstanding, or any portion thereof, in a minimum amount of $1 million , or any multiple of $0.5 million in excess thereof. As of December 31, 2017 , there was $450 million outstanding under the 2015 Term Loan Agreement, which is included as Short-term debt in the Partnership’s Consolidated Balance Sheets. The 2015 Term Loan Agreement provides that outstanding borrowings bear interest at LIBOR and/or an alternate base rate, at the Partnership’s election, plus an applicable margin. The applicable margin is based on our applicable credit ratings. As of December 31, 2017 , the applicable margin for LIBOR-based borrowings under the 2015 Term Loan Agreement was 1.375% based on our credit ratings. For the year ended December 31, 2017 , the weighted average interest rate of the 2015 Term Loan Agreement was 2.45% . The 2015 Term Loan Agreement contains substantially the same covenants as the Revolving Credit Facility. Senior Notes On March 9, 2017, the Partnership completed the public offering of $700 million 4.400% Senior Notes due 2027 (2027 Notes). The Partnership received net proceeds of approximately $691 million . The proceeds were used for general partnership purposes, including to repay amounts outstanding under the Revolving Credit Facility. The 2027 Notes had an unamortized discount 102 Table of Contents of $3 million and unamortized debt expense of $6 million at December 31, 2017 , resulting in an effective interest rate of 4.56% during the year ended December 31, 2017 . In addition to the 2027 Notes, as of December 31, 2017 , the Partnership’s debt included the $500 million 2.400% senior notes due 2019 (2019 Notes), $600 million 3.900% senior notes due 2024 (2024 Notes) and $550 million 5.000% senior notes due 2044 (2044 Notes). The 2019 Notes, 2024 Notes and 2044 Notes had $9 million of unamortized debt expense at December 31, 2017 , resulting in effective interest rates of 2.58% , 4.02% and 5.08% , respectively, during the year ended December 31, 2017 . The indenture governing the 2019 Notes, 2024 Notes, 2027 Notes and 2044 Notes contains certain restrictions, including, among others, limitations on our ability and the ability of our principal subsidiaries to: (i) consolidate or merge and sell all or substantially all of our and our subsidiaries’ assets and properties; (ii) create, or permit to be created or to exist, any lien upon any of our or our principal subsidiaries’ principal property, or upon any shares of stock of any principal subsidiary, to secure any debt; and (iii) enter into certain sale-leaseback transactions. These covenants are subject to certain exceptions and qualifications. As of December 31, 2017 , the Partnership’s debt included EOIT’s $250 million 6.25% senior notes due March 2020 (the EOIT Senior Notes). The EOIT Senior Notes had $13 million of unamortized premium at December 31, 2017 , resulting in an effective interest rate of 3.83% during the year ended December 31, 2017 . These senior notes do not contain any financial covenants other than a limitation on liens. This limitation on liens is subject to certain exceptions and qualifications. As of December 31, 2017 , the Partnership and EOIT were in compliance with all of their debt agreements, including financial covenants. (11) Derivative Instruments and Hedging Activities The Partnership is exposed to certain risks relating to its ongoing business operations. The primary risk managed using derivative instruments is commodity price risk. The Partnership is also exposed to credit risk in its business operations. Commodity Price Risk The Partnership has used forward physical contracts, commodity price swap contracts and commodity price option features to manage the Partnership’s commodity price risk exposures in the past. Commodity derivative instruments used by the Partnership are as follows: • • • NGL put options, NGL futures and swaps, and WTI crude oil futures and swaps for condensate sales are used to manage the Partnership’s NGL and condensate exposure associated with its processing agreements; natural gas futures and swaps are used to manage the Partnership’s natural gas exposure associated with its gathering, processing and transportation and storage assets; and natural gas futures and swaps, natural gas options and natural gas commodity purchases and sales are used to manage the Partnership’s natural gas exposure associated with its storage and transportation contracts and asset management activities. Normal purchases and normal sales contracts are not recorded in Other Assets or Liabilities in the Consolidated Balance Sheets and earnings are recognized and recorded in the period in which physical delivery of the commodity occurs. Management applies normal purchases and normal sales treatment to: (i) commodity contracts for the purchase and sale of natural gas used in or produced by the Partnership’s operations and (ii) commodity contracts for the purchase and sale of NGLs produced by the Partnership’s gathering and processing business. The Partnership recognizes its non-exchange traded derivative instruments as Other Assets or Liabilities in the Consolidated Balance Sheets at fair value with such amounts classified as current or long-term based on their anticipated settlement. Exchange traded transactions are settled on a net basis daily through margin accounts with a clearing broker and, therefore, are recorded at fair value on a net basis in Other Current Assets in the Consolidated Balance Sheets. As of December 31, 2017 and 2016 , the Partnership had no derivative instruments that were designated as cash flow or fair value hedges for accounting purposes. Credit Risk The Partnership is exposed to certain credit risks relating to its ongoing business operations. Credit risk includes the risk that counterparties that owe the Partnership money or energy will breach their obligations. If the counterparties to these arrangements 103 Table of Contents fail to perform, the Partnership may seek or be forced to enter into alternative arrangements. In that event, the Partnership’s financial results could be adversely affected, and the Partnership could incur losses. Derivatives Not Designated as Hedging Instruments Derivative instruments not designated as hedging instruments for accounting purposes are utilized in the Partnership’s asset management activities. For derivative instruments not designated as hedging instruments, the gain or loss on the derivative is recognized currently in earnings. Quantitative Disclosures Related to Derivative Instruments The majority of natural gas physical purchases and sales not designated as hedges for accounting purposes are priced based on a monthly or daily index, and the fair value is subject to little or no market price risk. Natural gas physical sales volumes exceed natural gas physical purchase volumes due to the marketing of natural gas volumes purchased via the Partnership’s processing contracts, which are not derivative instruments. As of December 31, 2017 and 2016 , the Partnership had the following derivative instruments that were not designated as hedging instruments for accounting purposes: Natural gas— TBtu (1) Financial fixed futures/swaps Financial basis futures/swaps Physical purchases/sales Crude oil (for condensate)— MBbl (2) Financial futures/swaps Natural gas liquids— MBbl (3) Financial futures/swaps ____________________ December 31, 2017 December 31, 2016 Gross Notional Volume Purchases Sales Purchases Sales 17 17 1 — — 13 17 37 564 1,615 2 2 1 — 60 29 30 25 540 1,133 (1) As of December 31, 2017 , 67.7% of the natural gas contracts have durations of one year or less, 16.1% have durations of more than one year and less than two years and 16.2% have durations of more than two years. As of December 31, 2016 , 100.0% of the natural gas contracts had durations of one year or less. (2) As of December 31, 2017 and 2016 , 100% of the crude oil (for condensate) contracts have durations of one year or less. (3) As of December 31, 2017 and 2016 , 100.0% of the natural gas liquid contracts have durations of one year or less. 104 Table of Contents Balance Sheet Presentation Related to Derivative Instruments The fair value of the derivative instruments that are presented in the Partnership’s Consolidated Balance Sheet at December 31, 2017 and 2016 that were not designated as hedging instruments for accounting purposes are as follows: Instrument Balance Sheet Location Assets Liabilities Assets Liabilities December 31, 2017 December 31, 2016 Fair Value Natural gas Financial futures/swaps Physical purchases/sales Crude oil (for condensate) Financial futures/swaps Natural gas liquids Financial futures/swaps Total gross derivatives (1) _____________________ Other Current Other Current Other Current Other Current $ $ (In millions) 4 $ — 2 $ — 5 $ 3 — 4 — 1 9 $ 5 13 $ — 2 $ 22 1 3 8 34 (1) See Note 12 for a reconciliation of the Partnership’s total derivatives fair value to the Partnership’s Consolidated Balance Sheets as of December 31, 2017 and 2016 . Income Statement Presentation Related to Derivative Instruments The following table presents the effect of derivative instruments on the Partnership’s Consolidated Statements of Income for the years ended December 31, 2017 , 2016 and 2015 : Natural gas financial futures/swaps gains (losses) Natural gas physical purchases/sales gains (losses) Crude oil (for condensate) financial futures/swaps gains (losses) Natural gas liquids financial futures/swaps gains (losses) Total Amounts Recognized in Income Year Ended December 31, 2017 2016 2015 (In millions) 20 $ (19) $ 9 (1) (9) (7) (4) (13) 19 $ (43) $ $ $ 26 (9) 12 10 39 For derivatives not designated as hedges in the tables above, amounts recognized in income for the years ended December 31, 2017 , 2016 and 2015 , if any, are reported in Product sales. The following table presents the components of gain (loss) on derivative activity in the Partnership’s Consolidated Statements of Income for the years ended December 31, 2017 , 2016 and 2015 : Change in fair value of derivatives Realized gain (loss) on derivatives Gain (loss) on derivative activity Year Ended December 31, 2017 2016 2015 (In millions) 28 $ (60) $ (9) 17 19 $ (43) $ $ $ (8) 47 39 Credit-Risk Related Contingent Features in Derivative Instruments In the event Moody’s Investors Services or Standard & Poor’s Ratings Services were to lower the Partnership’s senior unsecured debt rating to a below investment grade rating, at December 31, 2017 , the Partnership would have been required to 105 Table of Contents post $7 million cash collateral to satisfy its obligation under its financial and physical contracts relating to derivative instruments that are in a net liability position at December 31, 2017 . In addition, the Partnership could be required to provide additional credit assurances in future dealings with third parties, which could include letters of credit or cash collateral. (12) Fair Value Measurements Certain assets and liabilities are recorded at fair value in the Consolidated Balance Sheets and are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined below and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities are as follows: Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. Instruments classified as Level 1 include natural gas futures, swaps and options transactions for contracts traded on the NYMEX and settled through a NYMEX clearing broker. Level 2: Inputs, other than quoted prices included in Level 1, are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability. Fair value assets and liabilities that are generally included in this category are derivatives with fair values based on inputs from actively quoted markets. Instruments classified as Level 2 include over-the-counter NYMEX natural gas swaps, natural gas basis swaps and natural gas purchase and sales transactions in markets such that the pricing is closely related to the NYMEX pricing, and over-the-counter WTI crude oil swaps for condensate sales. Level 3: Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Unobservable inputs reflect the Partnership’s judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Partnership develops these inputs based on the best information available, including the Partnership’s own data. The Partnership utilizes the market approach in determining the fair value of its derivative positions by using either NYMEX or WTI published market prices, independent broker pricing data or broker/dealer valuations. The valuations of derivatives with pricing based on NYMEX published market prices may be considered Level 1 if they are settled through a NYMEX clearing broker account with daily margining. Over-the-counter derivatives with NYMEX or WTI based prices are considered Level 2 due to the impact of counterparty credit risk. Valuations based on independent broker pricing or broker/dealer valuations may be classified as Level 2 only to the extent they may be validated by an additional source of independent market data for an identical or closely related active market. In certain less liquid markets or for longer-term contracts, forward prices are not as readily available. In these circumstances, contracts are valued using internally developed methodologies that consider historical relationships among various quoted prices in active markets that result in management’s best estimate of fair value. These contracts are classified as Level 3. The Partnership determines the appropriate level for each financial asset and liability on a quarterly basis and recognizes transfers between levels at the end of the reporting period. For the period ended December 31, 2017 , there were no transfers between Level 2 and Level 3 instruments. The impact to the fair value of derivatives due to credit risk is calculated using the probability of default based on Standard & Poor’s Ratings Services and/or internally generated ratings. The fair value of derivative assets is adjusted for credit risk. The fair value of derivative liabilities is adjusted for credit risk only if the impact is deemed material. Estimated Fair Value of Financial Instruments The fair values of all accounts receivable, notes receivable, accounts payable, commercial paper and other such financial instruments on the Consolidated Balance Sheets are estimated to be approximately equivalent to their carrying amounts and have been excluded from the table below. The following table summarizes the fair value and carrying amount of the Partnership’s financial instruments at December 31, 2017 and 2016 : 106 Table of Contents Debt Revolving Credit Facility (Level 2) (1) 2015 Term Loan Agreement (Level 2) 2019 Notes (Level 2) 2024 Notes (Level 2) 2027 Notes (Level 2) 2044 Notes (Level 2) EOIT Senior Notes (Level 2) ______________________ December 31, 2017 December 31, 2016 Carrying Amount Fair Value Carrying Amount Fair Value (In millions) $ — $ — $ 636 $ 450 500 600 697 550 263 450 497 602 712 550 265 450 500 599 — 550 268 636 450 490 564 — 467 260 (1) Borrowing capacity is effectively reduced by our borrowings outstanding under the commercial paper program. $405 million and zero of commercial paper was outstanding as of December 31, 2017 and 2016 , respectively. The fair value of the Partnership’s Revolving Credit Facility, 2015 Term Loan Agreement, 2019 Notes, 2024 Notes, 2027 Notes, 2044 Notes, and EOIT Senior Notes, is based on quoted market prices and estimates of current rates available for similar issues with similar maturities and is classified as Level 2 in the fair value hierarchy. Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment). During the years ended December 31, 2016 and 2015 , the Partnership remeasured the Service Star assets at fair v alue and reassessed the carrying value of the Service Star business line, a component of the gathering and processing segment that provides measurement and communication services to third parties. The 2016 impairment, which impaired substantially all of the remaining net book value of the Service Star business line, was primarily driven by the impact of planned technology changes affecting Service Star. The 2015 impairment was based upon higher than expected losses of customers. Based on forecasted future undiscounted cash flows management determined that the carrying value of the Service Star assets were not fully recoverable. The Partnership utilized the income approach (generally accepted valuation approach) to estimate the fair value of these assets. The primary inputs are forecasted cash flows and the discount rate. The fair value measurement is based on inputs that are not observable in the market and thus represent level 3 inputs. Applying a discounted cash flow model to the property, plant and equipment and reviewing the associated materials and supplies inventory, during the years ended December 31, 2016 and 2015 , the Partnership recognized a $9 million and $10 million impairment, respectively. The 2016 impairment consisted of an $8 million write-down of property, plant and equipment and a $1 million write-down of materials and supplies inventory considered either excess or obsolete. The 2015 impairment consisted of a $9 million write-down of property, plant and equipment and a $1 million write-down of materials and supplies inventory considered either excess or obsolete. At December 31, 2015, due to decreases of crude oil and natural gas prices during 2015, management reassessed the carrying value of the Partnership’s investment in the Atoka assets, a component of the gathering and processing segment. Based on forecasted future undiscounted cash flows, management determined that the carrying value of the Atoka assets were not fully recoverable. The Partnership utilized the income approach (generally accepted valuation approach) to estimate the fair value of these assets. The primary inputs are forecast cash flows and the discount rate. The fair value measurement is based on inputs that are not observable in the market and thus represent level 3 inputs. Applying a discounted cash flow model to the property, plant and equipment and intangible assets, the Partnership recognized a $25 million impairment during the year ended December 31, 2015 . The $25 million impairment consisted of a $19 million write-down of property, plant and equipment and a $6 million write-down of intangible assets. Additionally, during the year ended December 31, 2015, the Partnership recorded a $12 million impairment on jurisdictional pipelines in our transportation and storage segment. Based upon review of forecasted undiscounted cash flows as of December 31, 2017 , all of the asset groups were considered recoverable. Future price declines, throughput declines, contracted capacity declines, cost increases, regulatory or political 107 Table of Contents environment changes and other changes in market conditions could reduce forecasted undiscounted cash flows. Contracts with Master Netting Arrangements Fair value amounts recognized for forward, interest rate swap, option and other conditional or exchange contracts executed with the same counterparty under a master netting arrangement may be offset. The reporting entity’s choice to offset or not must be applied consistently. A master netting arrangement exists if the reporting entity has multiple contracts, whether for the same type of conditional or exchange contract or for different types of contracts, with a single counterparty that are subject to a contractual agreement that provides for the net settlement of all contracts through a single payment in a single currency in the event of default on or termination of any one contract. Offsetting the fair values recognized for forward, interest rate swap, option and other conditional or exchange contracts outstanding with a single counterparty results in the net fair value of the transactions being reported as an asset or a liability in the Consolidated Balance Sheets. The Partnership has presented the fair values of its derivative contracts under master netting agreements using a net fair value presentation. The following tables summarize the Partnership’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2017 and 2016 : December 31, 2017 Commodity Contracts Gas Imbalances (1) Assets Liabilities Assets (2) Liabilities (3) Quoted market prices in active market for identical assets (Level 1) Significant other observable inputs (Level 2) Unobservable inputs (Level 3) Total fair value Netting adjustments Total December 31, 2016 Quoted market prices in active market for identical assets (Level 1) Significant other observable inputs (Level 2) Unobservable inputs (Level 3) Total fair value Netting adjustments Total ______________________ $ 5 4 — 9 (5) (In millions) 3 $ 5 5 13 (5) — $ 27 — 27 — 4 $ 8 $ 27 $ — 12 — 12 — 12 Commodity Contracts Gas Imbalances (1) Assets Liabilities Assets (2) Liabilities (3) 2 $ — — 2 — (In millions) 22 $ 4 8 34 — — $ 41 — 41 — 2 $ 34 $ 41 $ — 30 — 30 — 30 $ $ $ $ (1) The Partnership uses the market approach to fair value its gas imbalance assets and liabilities at individual, or where appropriate an average of, current market indices applicable to the Partnership’s operations, not to exceed net realizable value. Gas imbalances held by EOIT are valued using an average of the Inside FERC Gas Market Report for Panhandle Eastern Pipe Line Co. (Texas, Oklahoma Mainline), ONEOK (Oklahoma) and ANR Pipeline (Oklahoma) indices. There were no netting adjustments as of December 31, 2017 and 2016 . (2) Gas imbalance assets exclude fuel reserves for under retained fuel due from shippers of $10 million and zero at December 31, 2017 and 2016 , respectively, which fuel reserves are based on the value of natural gas at the time the imbalance was created and which are not subject to revaluation at fair market value. (3) Gas imbalance liabilities exclude fuel reserves for over retained fuel due to shippers of zero and $5 million at December 31, 2017 and 2016 , respectively, which fuel reserves are based on the value of natural gas at the time the imbalance was created and which are not subject to revaluation at fair market value. 108 Table of Contents Changes in Level 3 Fair Value Measurements The following tables provides a reconciliation of changes in the fair value of our Level 3 financial assets between the periods presented. Balance as of December 31, 2015 Losses included in earnings Settlements Transfers out of Level 3 Balance as of December 31, 2016 Losses included in earnings Settlements Transfers out of Level 3 Balance as of December 31, 2017 Commodity Contracts Natural gas liquids financial futures/swaps (In millions) 4 (13) 1 — (8) (9) 12 — (5) $ $ Quantitative Information on Level 3 Fair Value Measurements The Partnership utilizes the market approach to measure the fair value of our commodity contracts. The significant unobservable inputs used in this approach to fair value are longer dated price quotes. Our sensitivity to these longer dated forward curve prices are presented in the table below. Significant changes in any of those inputs in isolation would result in significantly different fair value measurements, depending on our short or long position in contracts. Product Group Natural gas liquids December 31, 2017 Fair Value (In millions) Forward Curve Range (Per gallon) $ (5) $0.267 - $1.090 (13) Supplemental Disclosure of Cash Flow Information The following table provides information regarding supplemental cash flow information: Supplemental Disclosure of Cash Flow Information: Cash Payments: Interest, net of capitalized interest Income taxes, net of refunds Non-cash transactions: Year Ended December 31, 2017 2016 2015 (In millions) $ 114 $ — 105 $ — Accounts payable related to capital expenditures Issuance of common units upon interest acquisition of SESH (Note 9) 39 — 18 — 109 85 1 52 1 Table of Contents The following table reconciles cash and cash equivalents and restricted cash on the Consolidated Balance Sheets to cash, cash equivalents and restricted cash on the Consolidated Statement of Cash Flows: Cash and cash equivalents Restricted cash Cash, cash equivalents and restricted cash shown in the Consolidated Statement of Cash Flows Year Ended December 31, 2017 2016 $ $ (In millions) 5 $ 14 19 $ 6 17 23 (14) Related Party Transactions The material related party transactions with CenterPoint Energy, OGE Energy and their respective subsidiaries are summarized below. There were no material related party transactions with other affiliates. Transportation and Storage Agreements Transportation and Storage Agreements with CenterPoint Energy EGT provides the following services to CenterPoint Energy’s LDCs in Arkansas, Louisiana, Oklahoma and Northeast Texas: (1) firm transportation with seasonal contract demand, (2) firm storage, (3) no notice transportation with associated storage and (4) maximum rate firm transportation. The first three services are in effect through March 31, 2021, and will remain in effect from year to year thereafter unless either party provides 180 days’ written notice prior to the contract termination date. The fourth service is in effect through March 31, 2018 unless extended by the parties. MRT provides firm transportation and firm storage services to CenterPoint Energy’s LDCs under agreements that are in effect through May 15, 2023, but will continue year to year thereafter unless either party provides twelve months’ written notice prior to the contract termination date. The Partnership may agree to reimburse the costs that its customers incur to make required modifications for the repair and maintenance of pipelines that impact customer delivery points. For the years ended December 31, 2017 and 2016 , we reimbursed CenterPoint Energy’s LDCs $1 million and $2 million , respectively, in connection with receipt facility modifications that were necessitated by the repair and maintenance of our pipelines. In 2015, EGT relocated a portion of its pipeline in Arkansas to improve reliability and increase capacity by constructing an approximately 28.5 mile new pipeline segment and abandoning approximately 34.2 miles of existing pipelines segments. In connection with the project, EGT sold an approximately 12.4 mile pipeline segment to CenterPoint Energy’s Arkansas LDC for its remaining book value of $1 million , and EGT reimbursed CenterPoint Energy’s Arkansas LDC approximately $7 million dollars for cost incurred in connecting the LDC to EGT’s new pipeline segment. Transportation and Storage Agreement with OGE Energy EOIT provides no-notice load-following transportation and storage services to OGE Energy under two contracts. The first contract with OGE Energy is in effect through April 30, 2019 and will remain in effect from year to year thereafter unless either party provides notice of termination to the other party at least 180 days prior to the commencement of the succeeding annual period. The second contract with OGE Energy was entered into on December 6, 2016 and has a primary term of 20 years that is expected to begin in late 2018. In connection with this agreement, we are currently building an approximately 80 - mile pipeline to expand the EOIT system. Gas Sales and Purchases Transactions The Partnership sells natural gas volumes to affiliates of CenterPoint Energy and OGE Energy or purchases natural gas volumes from affiliates of CenterPoint Energy through a combination of forward, monthly and daily transactions. The Partnership enters into these physical natural gas transactions in the normal course of business based upon relevant market prices. 110 Table of Contents The Partnership’s revenues from affiliated companies accounted for 5% , 7% and 7% of revenues during the years ended December 31, 2017 , 2016 and 2015 , respectively. Amounts of revenues from affiliated companies included in the Partnership’s Consolidated Statements of Income are summarized as follows: Gas transportation and storage service revenue — CenterPoint Energy Natural gas product sales — CenterPoint Energy Gas transportation and storage service revenue — OGE Energy Natural gas product sales — OGE Energy Total revenues — affiliated companies Year Ended December 31, 2017 2016 2015 (In millions) $ 110 $ 110 $ 110 6 35 2 1 36 12 7 37 8 $ 153 $ 159 $ 162 Amounts of natural gas purchased from affiliated companies included in the Partnership’s Consolidated Statements of Income are summarized as follows: Cost of natural gas purchases — CenterPoint Energy Cost of natural gas purchases — OGE Energy Total cost of natural gas purchases — affiliated companies Seconded employee, corporate services and operating lease expense Year Ended December 31, 2017 2016 2015 (In millions) 1 $ 19 20 $ — $ 14 14 $ $ $ 2 15 17 During the years ended December 31, 2017 , 2016 and 2015 , the Partnership had certain employees who are participants under OGE Energy’s defined benefit and retiree medical plans, who will remain seconded to the Partnership, subject to certain termination rights of the Partnership and OGE Energy. The Partnership’s reimbursement of OGE Energy for seconded employee costs arising out of OGE Energy’s defined benefit and retiree medical plans is fixed at $5 million in 2017 and at actual cost subject to a cap of $5 million in 2018 and thereafter, unless and until secondment is terminated. The Partnership receives services and support functions from each of CenterPoint Energy and OGE Energy under service agreements for an initial term that ended on April 30, 2016. The service agreements automatically extend year-to-year at the end of the initial term, unless terminated by the Partnership with at least 90 days’ notice prior to the end of any extension. Additionally, the Partnership may terminate these service agreements at any time with 180 days’ notice, if approved by the Board of Enable GP. The Partnership reimburses CenterPoint Energy and OGE Energy for these services up to annual caps, which for 2017 are $3 million and $4 million , respectively. The Partnership leases office and data center space from an affiliate of CenterPoint Energy in Shreveport, Louisiana. The term of the lease was effective on October 1, 2016 and extends through December 31, 2019. The Partnership incurred approximately $1 million in rent and maintenance expenses under the lease during the year ended December 31, 2017 and the Partnership expects to incur approximately $1 million in total in rent and maintenance expenses during the remaining term of the lease. Amounts charged to the Partnership by affiliates for seconded employees, corporate services and operating lease expense, included primarily in Operation and maintenance expenses and General and administrative expenses in the Partnership’s Consolidated Statements of Income are as follows: 111 Table of Contents Corporate Services — CenterPoint Energy Operating Lease — CenterPoint Energy Seconded Employee Costs — OGE Energy Corporate Services — OGE Energy Total seconded employee, corporate services and operating lease expense Series A Preferred Units Year Ended December 31, 2017 2016 2015 (In millions) 3 $ 6 $ 1 31 3 — 29 5 38 $ 40 $ $ $ 15 — 35 11 61 On February 18, 2016, the Partnership completed the private placement, with CenterPoint Energy, of 14,520,000 Series A Preferred Units representing limited partner interests in the Partnership for a cash purchase price of $25.00 per Series A Preferred Unit, resulting in proceeds of $362 million , net of issuance costs. See Note 5 for further discussion of the Series A Preferred Units. Notes payable The Partnership had outstanding long-term notes payable—affiliated companies to CenterPoint Energy at December 31, 2015 of $363 million , which were scheduled to mature in 2017 . On February 18, 2016, in connection with the private placement of the Series A Preferred Units, the Partnership redeemed the $363 million of notes payable—affiliated companies payable to a subsidiary of CenterPoint Energy. The Partnership recorded affiliated interest expense to CenterPoint Energy on note payable—affiliated companies of zero , $1 million and $8 million during the years ended December 31, 2017 , 2016 and 2015 , respectively. (15) Commitments and Contingencies Operating Lease Obligations. The Partnership has operating lease obligations expiring at various dates. Future minimum payments for noncancellable operating leases are as follows: 2018 2019 2020 2021 2022 After 2022 Total Year Ended December 31, Noncancellable operating leases $ 10 $ 3 $ 1 $ 1 $ 1 $ 1 $ 17 (In millions) Total rental expense for all operating leases was $27 million , $27 million and $32 million during the years ended December 31, 2017 , 2016 and 2015 , respectively. The Partnership currently occupies 162,053 square feet of office space at its principle executive offices under a lease that expires June 30, 2019 . The lease payments are $19 million over the lease term, which began April 1, 2012. These lease expenses are included in General and administrative expense in the Consolidated Statements of Income. During 2017, the Partnership entered into a lease to occupy 48,642 square feet of office space in Houston, Texas, which ends December 31, 2025. The lease payments are $4 million over the lease term, as well as a proportionate percentage of facility expenses. The Partnership currently has 104 compression service agreements, of which 62 agreements are on a month-to-month basis, 34 agreements will expire in 2018 and 8 agreements will expire in 2019 . The Partnership also has 6 gas treating lease agreements, all of which are on a month-to-month basis. These lease expenses are reflected in Operation and maintenance expense in the Consolidated Statements of Income. Legal, Regulatory and Other Matters The Partnership is involved in legal, environmental, tax and regulatory proceedings before various courts, regulatory 112 Table of Contents commissions and governmental agencies regarding matters arising in the ordinary course of business. Some of these proceedings involve substantial amounts. The Partnership regularly analyzes current information and, as necessary, provides accruals for probable liabilities on the eventual disposition of these matters. The Partnership does not expect the disposition of these matters to have a material adverse effect on its financial condition, results of operations or cash flows. (16) Income Taxes The Partnership’s earnings are generally not subject to income tax ( other than Texas state margin taxes and taxes associated with the Partnership’s corporate subsidiaries, Enable Midstream Services and Enable Muskogee Intrastate Transmission) and are taxable at the individual partner level. The Partnership and its non- corporate subsidiaries are pass-through entities for federal income tax purposes. For these entities, all income, expenses, gains, losses and tax credits generated flow through to their owners and, accordingly, do not result in a provision for income taxes in the consolidated financial statements. Consequently, the Consolidated Statements of Income do not include an income tax provision (other than Texas state margin taxes and taxes associated with the Partnership’s corporate subsidiaries). On December 22, 2017, the act known as the “Tax Cuts and Jobs Act,” was signed into law which lowered the corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017. As a result of this new law, the Partnership’s corporate subsidiaries re-valued their deferred income tax assets and liabilities as of December 31, 2017, which resulted in recording a Federal deferred income tax benefit of $1 million . The items comprising income tax expense are as follows: Provision (benefit) for current income taxes Federal State Total provision (benefit) for current income taxes Provision (benefit) for deferred income taxes, net Federal State Total provision (benefit) for deferred income taxes, net Total income tax expense (benefit) Year Ended December 31, 2017 2016 2015 (In millions) $ $ $ 1 $ 1 2 (2) (1) (3) (1) $ (1) $ — (1) 3 $ (1) 2 1 $ The following schedule reconciles the statutory Federal income tax rate to the effective income tax rate: Income (loss) before income taxes Federal statutory rate Expected federal income tax expense Increase in tax expense (benefit) resulting from: State income taxes, net of federal income tax Total Total income tax expense (benefit) Effective tax rate Year Ended December 31, 2017 2016 2015 (In millions) 436 $ 314 $ — % — (1) (1) (1) $ —% — 1 1 1 $ (0.2)% 0.3% $ $ 113 — 1 1 — (1) (1) — (771) —% — — — — —% Table of Contents The components of Deferred Income Taxes as of December 31, 2017 and 2016 were as follows: Deferred tax assets: Non-current: Accrued bonuses Total non-current deferred tax assets Total deferred tax assets Deferred tax liabilities: Non-current: Depreciation Intercompany management fee Total non-current deferred tax liabilities Accumulated deferred income taxes, net Uncertain Income Tax Positions December 31, 2017 2016 (In millions) $ $ 17 $ 17 17 5 18 23 6 $ — — — 7 3 10 10 There were no unrecognized tax benefits as of December 31, 2017 , 2016 and 2015 . Tax Audits and Settlements The federal income tax return of the Partnership has been audited through the 2013 tax year. (17) Equity-Based Compensation Enable GP has adopted the Enable Midstream Partners, LP Long Term Incentive Plan (LTIP) for officers, directors and employees of the Partnership and its affiliates, including any individual who provides services to the Partnership as a seconded employee . The long-term incentive plan provides for the following types of awards: restricted units, phantom units, appreciations rights, option rights, cash incentive awards, performance units, distribution equivalent rights, and other awards denominated in, payable in, valued in or otherwise based on or related to common units. The long-term incentive plan is administered by the Compensation Committee of the Board of Directors. With respect to any grant of equity as long-term incentive awards to our independent directors and our officers subject to reporting under Section 16 of the Exchange Act, the Compensation Committee makes recommendations to the Board of Directors and any such awards will only be effective upon the approval of the Board of Directors. The long-term incentive plan limits the number of units that may be delivered pursuant to vested awards to 13,100,000 common units, subject to proportionate adjustment in the event of unit splits and similar events. Common units cancelled, forfeited, expired or cash settled are available for delivery pursuant to other awards. The Board of Directors may terminate or amend the long-term incentive plan at any time with respect to any units for which a grant has not yet been made, including amending the long-term incentive plan to increase the number of units that may be granted subject to the requirements of the exchange upon which the common units are listed at that time. However, no change in any outstanding grant may be made that would be adverse to the participant without the consent of the participant. 114 Table of Contents Performance unit, restricted unit and phantom unit awards are classified as equity on the Partnership’s Consolidated Balance Sheet. The following table summarizes the Partnership’s equity-based compensation expense for the years ended December 31, 2017 , 2016 and 2015 related to performance units, restricted units and phantom units for the Partnership’s employees and independent directors: Performance units Restricted units Phantom units Total equity-based compensation expense Performance Units Year Ended December 31, 2017 2016 2015 (In millions) 10 $ 2 3 9 $ 3 1 15 $ 13 $ $ $ 3 7 1 11 Awards of performance based phantom units (performance units) have been made under the LTIP in 2017 , 2016 and 2015 to certain officers and employees providing services to the Partnership. Subject to the achievement of performance goals, the performance unit awards cliff vest three years from the grant date, with distribution equivalent rights paid at vesting. The performance goals for 2017 , 2016 and 2015 awards are based on total unitholder return over a three -calendar year performance cycle. Total unitholder return is based on the relative performance of the Partnership’s common units against a peer group. The performance unit awards have a payout from zero to 200% of the target based on the level of achievement of the performance goal. Performance unit awards are paid out in common units, with distribution equivalent rights paid in cash at vesting. Any unearned performance units are cancelled. Pay out requires the confirmation of the achievement of the performance level by the Compensation Committee. Prior to vesting, performance units are subject to forfeiture if the recipient’s employment with the Partnership is terminated for any reason other than death, disability, retirement or termination other than for cause within two years of a change in control. In the event of retirement, a participant will receive a prorated payment based on the target performance, rather than actual performance, of the performance goals during the award cycle. The fair value of each performance unit award was estimated on the grant date using a lattice-based valuation model. The valuation information factored into the model includes the expected distribution yield, expected price volatility, risk-free interest rate and the probable outcome of the market condition over the expected life of the performance units. Equity-based compensation expense for each performance unit award is a fixed amount determined at the grant date fair value and is recognized over the three -year award cycle regardless of whether performance units are awarded at the end of the award cycle. Distributions are accumulated and paid at vesting and, therefore, are included in the fair value calculation of the performance unit award. The expected price volatility for the awards granted in 2017 is based on three years of daily stock price observations, to determine the total unitholder return ranking. The expected price volatility for the awards granted in 2016 is based on two years of daily stock price observations, combined with the average of the one -year volatility of the applicable peer group companies used to determine the total unitholder return ranking. The expected price volatility for the awards granted in 2015 is based on one year of daily stock price observations, combined with the average of the two -year volatility of the applicable peer group companies used to determine the total unitholder return ranking. The risk-free interest rate for the performance unit grants is based on the three -year U.S. Treasury yield curve in effect at the time of the grant. There are no post-vesting restrictions related to the Partnership’s performance units. The number of performance units granted based on total unitholder return and the assumptions used to calculate the grant date fair value of the performance units based on total unitholder return are shown in the following table. Number of units granted Fair value of units granted Expected price volatility Risk-free interest rate Expected life of units (in years) Phantom Units $ 2017 2016 2015 468,626 19.27 47.3% 1.57% 3 1,235,429 $10.42 - $27.77 $ 43.2% - 46.0% 0.86% - 0.90% 3 501,474 16.59 27.6% 0.99% 3 Awards of phantom units have been made under the LTIP in 2017 , 2016 and 2015 to certain officers and employees providing services to the Partnership and certain directors of Enable GP. Phantom units vest on the first, second or third anniversary of the 115 Table of Contents grant date with distribution equivalent rights paid during the vesting period. Phantom unit awards are paid out in common units, with distributions equivalent rights paid in cash. Phantom units cliff-vest at the end of the vesting period. Any unearned phantom units are cancelled. Prior to vesting, phantom units are subject to forfeiture if the recipient’s employment with the Partnership is terminated for any reason other than death, disability, retirement or termination other than for cause within two years of a change in control. The fair value of the phantom units was based on the closing market price of the Partnership’s common unit on the grant date. Equity-based compensation expense for the phantom unit is a fixed amount determined at the grant date fair value and is recognized as services are rendered by employees over the vesting period. Distributions on phantom units are paid during the vesting period and, therefore, are included in the fair value calculation. The expected life of the phantom unit is based on the applicable vesting period. The number of phantom units granted and the grant date fair value are shown in the following table. Phantom units granted Fair value of phantom units granted Restricted Units 2017 2016 2015 392,338 653,286 $15.44 - $16.93 $8.12 - $15.30 $ 9,817 12.70 Awards of restricted units were made under the LTIP in 2015 to certain officers and employees providing services to the Partnership and certain directors of Enable GP. These restricted unit awards cliff vest on the first, second, third or fourth anniversary of grant date, with distribution equivalent rights paid during the vesting period. Restricted units are outstanding and issued common units that cannot be sold, assigned, transferred or pledged by the recipient prior to vesting. Any unearned restricted units are cancelled. Prior to vesting, restricted units are subject to forfeiture if the recipient ceases to render substantial services to the Partnership for any reason other than death, disability, retirement or termination other than for cause within two years of a change in control. In 2015, restricted units were granted to officers and employees providing services to the Partnership which vest on the first, second, or third anniversary of grant date. Prior to vesting, each share of restricted stock is subject to forfeiture if the recipient ceases to render substantial services to the Partnership for any reason other than death, disability or retirement. During the restriction period these units may not be sold, assigned, transferred or pledged and are subject to a risk of forfeiture. The fair value of the restricted units was based on the closing market price of the Partnership’s common unit on the grant date. Equity-based compensation expense for the restricted units is a fixed amount determined at the grant date fair value and is recognized as services are rendered by employees over a vesting period, as defined in the agreements. Distributions are paid as declared prior to vesting and, therefore, are included in the fair value calculation. After payment, distributions are not subject to forfeiture. The expected life of the restricted units is based on the non-vested period since inception of the award cycle. The number of restricted units granted related to the Partnership’s employees and the grant date fair value are shown in the following table. Restricted units granted to the Partnership’s employees Fair value of restricted units granted Other Awards 2015 279,677 $16.75 - $19.18 In 2017 , 2016 and 2015 , the Board of Directors granted common units to the independent directors of Enable GP, for their service as directors, which vested immediately. The fair value of the common units was based on the closing market price of the Partnership’s common unit on the grant date. Common units granted Fair value of common units granted 2017 2016 2015 16,653 14,914 $ 15.03 $ 15.35 $ 17,384 11.12 116 Table of Contents Units Outstanding A summary of the activity for the Partnership’s performance units, restricted units and phantom units as of December 31, 2017 and changes during 2017 are shown in the following table. Performance Units Restricted Stock Phantom Units Number of Units Weighted Average Grant-Date Fair Value, Per Unit Number of Units Weighted Average Grant-Date Fair Value, Per Unit Number of Units Weighted Average Grant-Date Fair Value, Per Unit (In millions, except unit data) 1,969,107 $ 468,626 (341,507) (55,819) 2,040,407 15.27 19.27 29.29 14.63 13.86 392,995 $ — (160,485) (10,076) 222,434 20.74 — 24.86 18.74 17.87 643,604 $ 392,338 (21,704) (26,858) 987,380 8.49 16.24 13.12 11.45 11.38 Units outstanding at 12/31/2016 Granted (1) Vested (2)(3) Forfeited Units outstanding at 12/31/2017 _____________________ (1) For performance units, this represents the target number of performance units granted. The actual number of performance units earned, if any, is dependent upon performance and may range from 0 percent to 200 percent of the target. (2) Performance units vested as of December 31, 2017 include 334,682 units from the 2014 annual grant, which vested on June 1, 2017 and paid out at 91.5% of target, or 306,170 units, based on the level of achievement of a performance goal established by the Board of Directors over the performance period. (3) Performance units outstanding as of December 31, 2017 include 402,586 units from the 2015 annual grant, which were approved by the Board of Directors in 2015. The results of the performance units were certified by the Compensation Committee in February 2018, at a 200% payout based on the level of achievement of a performance goal established by the Board of Directors over a performance period of January 1, 2015 through December 31, 2017. The increase in outstanding units for a payout percentage of an amount other than 100% is not reflected above until the vesting date. A summary of the Partnership’s performance, restricted and phantom units’ aggregate intrinsic value (market value at vesting date) and fair value of units vested (market value at date of grant) during the year ended December 31, 2017 are shown in the following table. Aggregate intrinsic value of units vested $ Fair value of units vested Unrecognized Compensation Expense Performance Units Restricted Stock Phantom Units December 31, 2017 (In millions) 5 $ 10 2 $ 4 — — A summary of the Partnership’s unrecognized compensation expense for its non-vested performance units, phantom units and restricted units, and the weighted-average periods over which the compensation cost is expected to be recognized are shown in the following table. Performance Units Restricted Units Phantom Units Total December 31, 2017 Unrecognized Compensation Cost (In millions) $ $ 13 1 6 20 Weighted Average to be Recognized (In years) 1.29 0.43 1.58 As of December 31, 2017 , there were 8,662,420 units available for issuance under the long-term incentive plan. 117 Table of Contents (18) Reportable Segments The Partnership’s determination of reportable segments considers the strategic operating units under which it manages sales, allocates resources and assesses performance of various products and services to wholesale or retail customers in differing regulatory environments. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies described in Note 1. The Partnership uses operating income as the measure of profit or loss for its reportable segments. The Partnership’s assets and operations are organized into two reportable segments: (i) gathering and processing, which primarily provides natural gas gathering, processing and fractionation services and crude oil gathering for our producer customers, and (ii) transportation and storage, which provides interstate and intrastate natural gas pipeline transportation and storage service primarily to natural gas producers, utilities and industrial customers. Financial data for reportable segments are as follows: Year Ended December 31, 2017 Gathering and Processing Transportation and Storage (1) Eliminations Total Product sales Service revenue Total Revenues (2) Cost of natural gas and natural gas liquids Operation and maintenance, General and administrative Depreciation and amortization Taxes other than income tax Operating income Total assets Capital expenditures $ 1,538 $ 632 2,170 1,285 289 232 37 327 $ 9,079 $ 601 $ $ $ $ (In millions) 621 $ 525 1,146 604 179 134 27 202 $ 5,616 $ 113 $ (506) $ (7) (513) (508) (4) — — (1) $ (3,102) $ — $ 1,653 1,150 2,803 1,381 464 366 64 528 11,593 714 Year Ended December 31, 2016 Gathering and Processing Transportation and Storage (1) Eliminations Total Product sales Service revenue Total Revenues (2) Cost of natural gas and natural gas liquids Operation and maintenance, General and administrative Depreciation and amortization Impairments Taxes other than income tax Operating income Total assets Capital expenditures (In millions) 479 $ 545 1,024 492 191 126 — 26 189 $ 4,963 $ 71 $ (388) $ (4) (392) (390) (2) — — — — $ (1,204) $ — $ 1,172 1,100 2,272 1,017 465 338 9 58 385 11,212 383 $ 1,081 $ 559 1,640 915 276 212 9 32 196 $ 7,453 $ 312 $ $ $ $ 118 Table of Contents Year Ended December 31, 2015 Gathering and Processing Transportation and Storage (1) Eliminations Total Product sales Service revenue Total Revenues (2) Cost of natural gas and natural gas liquids Operation and maintenance, General and administrative Depreciation and amortization Impairments Taxes other than income tax Operating loss Total Assets Capital expenditures _____________________ $ 1,118 $ (In millions) 590 $ 545 1,663 908 293 195 543 30 542 1,132 565 230 123 591 29 $ $ $ (306) 7,536 839 $ $ $ (406) 4,976 110 $ $ $ (374) $ (3) (377) (376) (1) — — — — $ (1,286) $ — $ 1,334 1,084 2,418 1,097 522 318 1,134 59 (712) 11,226 949 (1) Equity in earnings of equity method affiliate is included in Other Income (Expense) on the Consolidated Statements of Income, and is not included in the table above. See Note 9 for discussion regarding ownership interest in SESH and related equity earnings included in the transportation and storage segment for the years ended December 31, 2017 , 2016 and 2015 . (2) The Partnership had no external customers accounting for 10% or more of revenues in periods shown. See Note 14 for revenues from affiliated companies. 119 Table of Contents (19) Quarterly Financial Data (Unaudited) Summarized unaudited quarterly financial data for 2017 and 2016 are as follows: Total Revenues Cost of natural gas and natural gas liquids Operating income Net income Net income attributable to limited partners Net income attributable to common and subordinated units Basic earnings per unit Common units Subordinated units (1) Diluted earnings per unit Common units Subordinated units (1) Total Revenues Cost of natural gas and natural gas liquids Operating income Net income Net income attributable to limited partners Net income attributable to common and subordinated units Basic earnings per unit Common Units Subordinated units Diluted earnings per unit Common Units Subordinated units _____________________ $ $ $ $ $ $ $ $ $ $ (1) See Note 5 for discussion of the conversion of the subordinated units. March 31, 2017 June 30, 2017 September 30, 2017 December 31, 2017 Quarters Ended (in millions, except per unit data) 666 $ 626 $ 705 $ 308 140 120 120 111 0.26 $ 0.25 $ 0.26 $ 0.25 $ 279 122 96 95 86 0.20 $ 0.20 $ 0.20 $ 0.20 $ 349 137 113 113 104 0.24 $ 0.24 $ 0.24 $ 0.24 $ 806 445 129 108 108 99 0.23 — 0.23 — March 31, 2016 June 30, 2016 September 30, 2016 December 31, 2016 Quarters Ended (in millions, except per unit data) 529 $ 254 57 39 39 35 0.08 $ 0.08 $ 0.08 $ 0.08 $ 620 $ 268 139 119 119 110 0.26 $ 0.26 $ 0.26 $ 0.26 $ 614 300 86 69 68 59 0.14 0.14 0.14 0.14 509 $ 195 103 86 86 86 0.21 $ 0.20 $ 0.19 $ 0.20 $ 120 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2017 . Based on such evaluation, our management has concluded that, as of December 31, 2017 , our disclosure controls and procedures are designed and effective to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and that information is accumulated and communicated to our management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the control system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events and the application of judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions. Management’s Report on Internal Control Over Financial Reporting Management of the Partnership is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f) or 15d-15(f)). The Partnership’s internal control over financial reporting is a process designed under the supervision and with the participation of our principal executive and principal financial officers, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with generally accepted accounting principles. The Partnership’s internal control over financial reporting includes policies and procedures that ( 1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Partnership’s transactions and dispositions of the Partnership’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Partnership are being made only in accordance with authorization of the Partnership’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership’s assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, the Partnership’s internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with our policies or procedures may deteriorate. Management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2017 , with the participation of our principal executive and principal financial officers, based on the framework established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Based on this assessment, management concluded that the Partnership maintained effective internal control over financial reporting as of December 31, 2017 . Our independently registered public accounting firm that audited our financial statements has issued an attestation report on the effectiveness of the Partnership’s internal control over financial reporting. 121 Table of Contents Changes in Internal Controls There were no changes in our internal controls over financial reporting during the quarter ended December 31, 2017 , that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of Enable GP, LLC and Unitholders of Enable Midstream Partners, LP Oklahoma City, Oklahoma Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Enable Midstream Partners, LP and subsidiaries (the “Partnership”) as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO . We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Partnership and our report dated February 20, 2018, expressed an unqualified opinion on those financial statements. Basis for Opinion The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting . Our responsibility is to express an opinion on the Partnership’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ DELOITTE & TOUCHE LLP Houston, Texas February 20, 2018 122 Table of Contents Item 10. Directors, Executive Officers and Corporate Governance Management of the Partnership Part III As a limited partnership, we do not have directors or officers. Our operations and activities are managed by our general partner, Enable GP. Our general partner is not elected by our unitholders and will not be subject to re-election in the future. Our general partner is liable for all of our debts (to the extent not paid from our assets), except for indebtedness or other obligations that are made expressly non-recourse to it. Our general partner may therefore cause us to incur indebtedness or other obligations that are non-recourse to it. The Board of Directors of our general partner oversees the management of our operations. The directors are appointed by CenterPoint Energy and OGE Energy, and our unitholders are not entitled to elect our directors or otherwise participate, directly or indirectly, in our management or operations. The Board of Directors is comprised of eight directors. CenterPoint Energy and OGE Energy have each appointed two of the directors, have jointly appointed three independent directors, and have jointly appointed our President and Chief Executive Officer as a director. The NYSE does not require us to have a majority of independent directors on the Board of Directors. In identifying and evaluating both incumbent and new directors of the Board of Directors, CenterPoint Energy and OGE Energy assess their experience and personal characteristics against the following individual qualifications, which CenterPoint Energy and OGE Energy may modify from time to time: • • • • • • • possesses appropriate skills and professional experience; has a reputation for integrity and other qualities; possesses expertise, including industry knowledge, determined in the context of the needs of the Board of Directors; has experience in positions with a high degree of responsibility; is a leader in the organizations with which he or she is affiliated; is diverse in terms of geography, gender, ethnicity and age; has the time, energy, interest and willingness to serve as a member of the Board of Directors; and • meets such standards of independence and financial knowledge as may be required or desirable. The officers of our general partner provide day-to-day management for our operations and activities. The officers of our general partner are appointed by the Board of Directors. 123 Table of Contents The following table shows information regarding the current directors and executive officers of Enable GP. The business address of each of the directors and officers is listed below. Name Sean Trauschke (2) Stephen E. Merrill (2) Scott M. Prochazka (3) William D. Rogers (3) Alan N. Harris (1) Ronnie K. Irani (1) Peter H. Kind (1) Rodney J. Sailor (1) John P. Laws (1) Paul M. Brewer (1) Deanna J. Farmer (1) Craig S. Harris (1) Mark C. Schroeder (3) _____________________ Age 50 Director and Chairman Title 53 Director 52 Director 57 Director 64 Director 61 Director 61 Director 59 Director, President and Chief Executive Officer 43 Executive Vice President, Chief Financial Officer and Treasurer 59 Executive Vice President—Operations 52 Executive Vice President and Chief Administrative Officer 53 Executive Vice President and Chief Commercial Officer 61 Executive Vice President and General Counsel (1) One Leadership Square, 211 North Robinson Avenue, Suite 150, Oklahoma City, Oklahoma 73102 (2) 321 North Harvey, P.O. Box 321, Oklahoma City, Oklahoma 73101 (3) 1111 Louisiana Street, Houston, Texas 77002 Our directors hold office until the earlier of their death, resignation, removal or disqualification or until their successors have been elected and qualified. Officers serve at the discretion of the Board of Directors. There are no family relationships among any of our directors or executive officers. Alan N. Harris has been a Director of our general partner since February 2015. Mr. A. Harris retired from Spectra Energy Corp in January 2015. Mr. A. Harris joined Spectra Energy Corp in 1982 and served in multiple roles with increasing responsibilities. Most recently, he served as Senior Advisor to the Chairman, President and Chief Executive Officer of Spectra Energy Corp. In his role, Mr. A. Harris provided oversight and focus for Spectra Energy Corp’s project execution efforts. From 2009 through 2013, Mr. A. Harris served as Chief Development and Operations Officer of Spectra Energy Corp. In that dual role, Mr. A. Harris oversaw the company’s strategy, business development, and mergers and acquisitions, as well as project execution, the operations of Spectra Energy Corp’s U.S. pipeline and storage business, environment, health and safety, and the company’s master limited partnership. Mr. A. Harris served as Chief Development Officer of Spectra Energy Corp from 2007 to 2009 and has served as a member of the Board of Directors of the general partner of DCP Midstream Partners, LP from January 2014 through October 2014 and from January 2009 through April 2012. We believe that Mr. A. Harris’ extensive knowledge of the industry provides the Board with valuable experience. Ronnie K. Irani has been a Director of our general partner since March 2016. Mr. Irani is President and Chief Executive Officer of RKI Energy Resources, LLC and NewWoods Petroleum, LLC, which are oil and gas exploration and production companies. Prior to forming RKI Energy Resources in October 2015 and NewWoods Petroleum, LLC in August 2015, Mr. Irani served as President and Chief Executive Officer of RKI Exploration & Production, LLC from 2005 until its acquisition by WPX Energy, Inc. in August 2015. Prior to forming RKI Exploration & Production, Mr. Irani served in executive positions at Dominion Resources, Inc., Louis Dreyfus Natural Gas Corp. and Woods Petroleum Corporation. Mr. Irani also served as a Director of Seventy Seven Energy, Inc. from June 2014 through August 2016. Seventy Seven Energy filed for reorganization under Chapter 11 of the United States Bankruptcy Code in June 2016. We believe that Mr. Irani’s extensive experience in exploration and production provides the Board with valuable insight. Peter H. Kind has been a Director of our general partner since February 2014. Mr. Kind is Executive Director of Energy Infrastructure Advocates LLC, an independent financial and strategic advisory firm. Previously, Mr. Kind was a Senior Managing Director of Macquarie Capital, an investment banking firm from 2009 to 2011 and a Managing Director of Bank of America Securities from 2005 to 2009. Mr. Kind is a director of Southwest Water Company, a privately held company, where he is chairman of the audit committee, and a director of the general partner of NextEra Energy Partners, LP, where he is an audit committee member and chairman of the conflicts committee. We believe Mr. Kind, with more than 30 years of experience providing corporate and investment banking services to the utility and energy industries, provides the Board with valuable experience in financial and capital markets matters. Mr. Kind, a Certified Public Accountant, also has experience in the audit of large public energy companies. 124 Table of Contents Stephen E. Merrill has been a Director of our general partner since February 2016 and previously served as an alternate Director of our general partner from May 2015 to February 2016. Mr. Merrill is Chief Financial Officer of OGE Energy and OG&E. Previously, Mr. Merrill served as Executive Vice President and Chief Administrative Officer of our general partner from April 2014 to August 2014; as Executive Vice President of Finance and Chief Administrative Officer of our general partner from December 2013 to April 2014; Chief Operating Officer of Enogex from 2011 through April 2014; Vice President-Human Resources of OGE Energy from 2009 to 2011; and Vice President and Chief Financial Officer of Enogex from 2008 to 2011. We believe Mr. Merrill’s energy industry provides the Board with valuable experience in overseeing the management of our operation and financial experience provides the Board with valuable experience in our financial and accounting matters. Scott M. Prochazka has been a Director of our general partner since November 2013 and previously served as Chairman of the Board of our general partner from May 2015 to May 2017. Mr. Prochazka is President and Chief Executive Officer of CenterPoint Energy. Previously, Mr. Prochazka served as Executive Vice President and Chief Operating Officer from August 2012 to December 2013; Senior Vice President and Division President, Electric Operations of CenterPoint Energy from May 2011 to July 2012; and as Division Senior Vice President, Electric Operations of CenterPoint Energy’s wholly owned subsidiary, CenterPoint Energy Houston Electric, LLC, from February 2009 to May 2011. Mr. Prochazka has served as a director of CenterPoint Energy since November 2013. We believe Mr. Prochazka’s extensive knowledge of the industry and us, our operations and people, gained in his years of service with CenterPoint Energy in positions of increasing responsibility provides the Board with valuable experience. William D. Rogers has been a Director of our general partner since August 2015 and previously served as an alternate Director of our general partner from May 2015 through July 2015. Mr. Rogers is Executive Vice President and Chief Financial Officer of CenterPoint Energy. Previously, Mr. Rogers served as Executive Vice President, Finance and Accounting of CenterPoint Energy from February 2015 through March 2015; Vice President and Treasurer of American Water Works Company, Inc. from October 2010 to January 2015; and Chief Financial Officer of NV Energy, Inc. from February 2007 through February 2010. We believe Mr. Roger’s financial experience provides the Board with valuable experience in our financial and accounting matters. Sean Trauschke has been a Director of our general partner since May 2013 and has served as Chairman of the Board of our general partner since May 2017. From May 2013 to December 2013, he served as Acting Chief Financial Officer of our general partner. Mr. Trauschke is Chairman, President and Chief Executive Officer of OGE Energy and OG&E. Previously, Mr. Trauschke served as President and Chief Executive Officer of OGE Energy and OG&E from May 29, 2015 to November 30, 2015; as President of OGE Energy and OG&E from September 2014 to May 29, 2015; as Vice President and Chief Financial Officer of OGE Energy from 2009 to September 2014; Vice President and Chief Financial Officer of OG&E from 2009 to July 2013; Chief Financial Officer of Enogex Holdings from 2010 to 2013; Chief Financial Officer of Enogex LLC from 2009 to 2013; and Senior Vice President-Investor Relations and Financial Planning of Duke Energy from 2008 to 2009. We believe Mr. Trauschke’s energy industry and financial experience provides the Board with valuable experience in our financial and accounting matters. Paul M. Brewer has served as Executive Vice President—Operations of our general partner since January 2016. Previously, Mr. Brewer served as Senior Vice President—Field Operations and Environmental, Health & Safety of our general partner from February 2014 to January 2016; Senior Vice President Field Operations and Engineering & Construction of our general partner from December 2013 to February 2014; Senior Vice President Environmental, Health & Safety and Compliance Services of our general partner from October 2013 to December 2013; Senior Vice President—Project Management Office from July 2013 to October 2013; Vice President of Operations of our general partner from May 2013 to July 2013; and Vice President of Operations of Enogex from July 2008 to May 2013. Earlier in his career, Mr. Brewer spent 12 years with DCP Midstream and its predecessor companies and over 13 years with Mobil Oil and its predecessor companies. Deanna J. Farmer has served as Executive Vice President and Chief Administrative Officer of our general partner since September 2014. Previously, Ms. Farmer served as Vice President of Corporate Services and Chief Information Officer of the general partner of Access Midstream Partners, LP from June 2014 to September 2014; Vice President of Corporate Services and Human Resources of the general partner of Access Midstream Partners, LP from September 2012 to June 2014; Director of Finance and Information Management of the general partner of Chesapeake Midstream Partners, LP from February 2010 to September 2012; and Director of Information Technology of Chesapeake Energy, Inc. from 2005 to February 2010. Craig S. Harris has served as Executive Vice President and Chief Commercial Officer of our general partner since September 2016. Previously, Mr. C. Harris served as Senior Vice President-Business Development and Marketing of Columbia Midstream Group from July 2015 through July 2016 and as Vice President-Business Development of Columbia Midstream Group from November 2013 through July 2015. Columbia Midstream Group is a unit of Columbia Pipeline Group, Inc., which became a wholly-owned subsidiary of TransCanada Corporation in July 2016. Prior to joining Columbia Midstream Group, Mr. C. Harris 125 Table of Contents served as Managing Director of Alinda Capital Partners, LLC, an infrastructure investment firm, from February 2011 through November 2013. John P. Laws has served as Executive Vice President and Chief Financial Officer of our general partner since January 2016 and as Treasurer of our general partner since December 2013. Previously, Mr. Laws served as Vice President of our general partner from April 2014 to January 2016; as Vice President of Planning and Development of Enable Oklahoma Intrastate Transmission, LLC from May 2013 to December 2013; as Vice President of Planning and Development of Enogex Holdings, LLC from November 2011 to May 2013; and as Managing Director of Finance of Enogex, LLC from January 2010 through November 2011. Rodney J. Sailor has served as a Director and as President and Chief Executive Officer of our general partner since January 1, 2016. Previously, Mr. Sailor served as Chief Financial Officer of our general partner from March 2014 to December 2015 and Executive Vice President of our general partner from April 2014 to December 2015; Senior Vice President and Chief Financial Officer of WPX Energy, Inc. from December 2011 to March 2014; and as Vice President and Treasurer of the Williams Companies, Inc. from 2005 to 2011. Prior to 2005, Mr. Sailor served in various capacities, including finance, accounting and business development roles for The Williams Companies, Inc. Mr. Sailor served as a Director of Williams Partners GP LLC, the general partner of Williams Partners L.P., from October 2007 to 2010; served as a director of Apco Oil and Gas International Inc. from September 2006 to March 2014; and as Chief Financial Officer of Apco from December 2012 to March 2014. We believe Mr. Sailor’s energy industry and financial experience provides the Board with valuable experience in overseeing the management of our operations. Mark C. Schroeder has served as the General Counsel of our general partner since July 2013 and as Executive Vice President of our general partner since April 2014. Previously, Mr. Schroeder served as Senior Vice President and Deputy General Counsel of CenterPoint Energy from July 2011 to February 2014; and Vice President and General Counsel-Midstream of CenterPoint Energy from August 2003 to July 2011. Board of Directors Chairmanship Under the limited liability company agreement of our general partner, the right to appoint the chairman of the Board of Directors rotates between CenterPoint Energy and OGE Energy every two years. Sean Trauschke currently serves as chairman of the Board of Directors and was appointed by OGE Energy Corp. to serve as chairman on May 29, 2017. Mr. Trauschke’s term will expire on May 29, 2019, at which time CenterPoint Energy will have the right to appoint the next chairman. Although the Board of Directors has no policy with respect to the separation of the offices of chairman of the board and chief executive officer, we do not expect these positions to be occupied by the same individual due to the rotating chairmanship provision in the general partner’s limited liability company agreement. Board Membership Members of the Board of Directors are appointed by CenterPoint Energy and OGE Energy. Accordingly, unlike holders of common stock in a corporation, our unitholders have only limited voting rights on matters affecting our business or governance, subject in all cases to any specific unitholder rights contained in our partnership agreement. CenterPoint Energy and OGE Energy are each entitled to appoint two directors and up to two alternate directors. Directors Scott M. Prochazka and Williams D. Rogers were appointed by CenterPoint Energy. Directors Stephen E. Merrill and Sean Trauschke were appointed by OGE Energy. Currently, neither CenterPoint Energy nor OGE Energy has appointed any alternate directors. Each independent director, who is required to meet the independence standards for audit committee members established by the NYSE and the Exchange Act, and any other directors are appointed by the unanimous agreement of CenterPoint Energy and OGE Energy. Directors Alan N. Harris, Ronnie K. Irani, and Peter H. Kind are independent directors. Board Role in Risk Oversight Our governance guidelines provide that the Board of Directors is responsible for reviewing the process for assessing the major risks facing us and the options for their mitigation. This responsibility is largely satisfied by the audit committee, which is responsible for reviewing and discussing with management and our registered public accounting firm our major risk exposures and the policies management has implemented to monitor such exposures, including our financial risk exposures and risk management policies. 126 Table of Contents Committees of the Board of Directors Audit Committee. Peter H. Kind, Alan N. Harris and Ronnie K. Irani serve as the members of the audit committee. Mr. Kind is the current chairman of the audit committee. The Board of Directors is required to have an audit committee of at least three members who meet the independence and experience standards established by the NYSE and the Exchange Act. All of our members of the audit committee meet these independence and experience standards. In addition, Mr. Kind and Mr. Harris meet the Exchange Act definition of an audit committee financial expert. The audit committee assists the Board of Directors in its oversight of the integrity of our financial statements and our compliance with legal and regulatory requirements and corporate policies and controls. The audit committee has the sole authority to retain and terminate our independent registered public accounting firm, approve all auditing services and related fees and the terms thereof and pre-approve any non-audit services to be rendered by our independent registered public accounting firm. The audit committee is also responsible for confirming the independence and objectivity of our independent registered public accounting firm. Our independent registered public accounting firm has been given unrestricted access to the audit committee. Conflicts Committee. Peter H. Kind, Alan N. Harris and Ronnie K. Irani serve as the members of the conflicts committee. Mr. Kind is the current chairman of the conflicts committee. The members of our conflicts committee may not be officers or employees of our general partner or directors, officers or employees of its affiliates, may not hold an ownership interest in our general partner or its affiliates other than common units or awards under any long-term incentive plan, equity compensation plan, or similar plan implemented by our general partner or the Partnership, and must meet the independence and experience standards established by the NYSE and the Exchange Act for audit committee members . All of the members of the conflicts committee meet these standards. The conflicts committee determines if the resolution of any conflict of interest referred to it by our general partner is in our best interests. There is no requirement that our general partner seek the approval of the conflicts committee for the resolution of any conflict. Any matters approved by the conflicts committee in good faith are deemed to be approved by all of our partners and not a breach by our general partner of any duties it may owe us or our unitholders. Any unitholder challenging any matter approved by the conflicts committee has the burden of proving that the members of the conflicts committee did not believe that the matter was in the best interests of the Partnership. Moreover, any acts taken or omitted to be taken in reliance upon the advice or opinions of experts such as legal counsel, accountants, appraisers, management consultants and investment bankers, where our general partner (or any members of the Board of Directors including any member of the conflicts committee) reasonably believes the advice or opinion to be within such person’s professional or expert competence, are conclusively presumed to have been done or omitted in good faith. Compensation Committee. Alan N. Harris, Scott M. Prochazka and Sean Trauschke serve as the members of the compensation committee. The members of our compensation committee are not required to meet the independence standards established by the NYSE for compensation committee members. Mr. Harris is the current chairman of the compensation committee. The Board of Directors has delegated responsibility and authority to the board’s Compensation Committee for the compensation of our named executive officers and independent directors. For more information on the role of the Compensation Committee and compensation program for our named executive officers and independent directors, see Item 11. “Executive Compensation”. Governance Guidelines We have adopted Governance Guidelines to assist the Board in the exercise of its responsibilities. To promote open discussion among the non-management directors of our Board and among the independent directors of our Board, our Governance Guidelines provide that the non-management directors will meet separately in executive session periodically and that the independent directors will meet separately in executive session at least once a year. Currently, the chairman of the Board of Directors presides at the executive sessions of the non-management directors and the chairman of the audit committee presides at the executive sessions of the independent directors. The Partnership’s definitions of independence are provided in the Partnership’s Governance Guidelines, which are available under the “Governance” subsection of the “Investors” section of our website at www.enablemidstream.com . Communications with the Board Unitholders and other interested parties that wish to communicate with members of our Board of Directors, including the Chairman of the Board, the non- management directors individually or as a group, or the independent directors individually or as a group, may send correspondence to them in care of the General Counsel by mail to PO Box 24300, Oklahoma City, Oklahoma 73124-0300 or by email to gc@enablemidstream.com. 127 Table of Contents Compliance with Section 16(a) of the Exchange Act Section 16(a) of the Exchange Act requires our directors, certain officers, persons who own more than 10 percent of a registered class of our equity securities to file reports with the SEC concerning their holdings of, and certain transactions in, our equity and derivative securities ( e.g. , options, convertible securities and other securities that derive their value from equity securities). Based solely upon our review of copies of filings from reporting persons, we do not believe that any of our directors or officers or any persons who own more than 10 percent of a registered class of our equity securities failed to file on a timely basis all of the report required under Section 16(a) of the Exchange Act. Code of Ethics Our general partner has adopted a Code of Business Conduct and Ethics that applies to the directors, officers of our general partner, the Partnership, and our subsidiaries. Our general partner has also adopted a Code of Ethics for Senior Financial Officers that applies to our chief executive officer, chief financial officer, chief accounting officer, treasurer and other persons performing similar functions. We make available free of charge our Code of Business Conduct and Ethics, and Code of Ethics for Senior Financial Officers, as well as our Governance Guidelines, related party transactions policy, audit committee charter, compensation committee charter and insider trading policy under the “Governance” subsection of the “Investors” section of our website at www.enablemidstream.com . Item 11. Executive Compensation Compensation Discussion and Analysis Overview In this section, we describe and discuss the principles and policies used in setting the compensation of our named executive officers. Our named executive officers for the fiscal year ended December 31, 2017 were: • • • • Rodney J. Sailor, President and Chief Executive Officer, John P. Laws, Executive Vice President, Chief Financial Officer, and Treasurer, Paul M. Brewer, Executive Vice President—Operations, Craig S. Harris, Executive Vice President and Chief Commercial Officer and • Mark C. Schroeder, Executive Vice President and General Counsel. Objective and Design of Executive Compensation Program We strive to provide compensation that is competitive, both on a total level and in individual components, both with our peers and with other likely competitors for executive talent. By competitive, we mean that total compensation and each element of compensation is within what we believe to be an appropriate range of the market level of compensation for similarly situated roles. Our Compensation Committee bases compensation decisions on principles designed to align the interests of our named executive officers with those of our unitholders. Our overall compensation philosophy is pay for performance. We seek to motivate our named executive officers to achieve individual and business performance objectives by designing their compensation packages to align with our values, strategy, and financial results. We believe that our named executive officers should be rewarded for both the short-term and long-term success of the Partnership and, conversely, be subject to a degree of downside risk in the event that the Partnership does not achieve its performance objectives. As a result, actual compensation in a given year will vary based on our performance, and to a lesser extent, on qualitative appraisals of individual performance. We design the compensation packages for our named executive officers to have a significant percentage of their total compensation at risk, thus aligning each of our named executive officers with the short-term and long-term performance objectives of the Partnership and with the interests of our unitholders. We maintain benefit programs for our employees, including our named executive officers, with the objective of retaining their services. Our benefits reflect competitive practices at the time the benefit programs were implemented and, in some cases, 128 Table of Contents reflect our desire to maintain similar benefits treatment for all employees in similar positions. To the extent possible, we structure these programs to deliver benefits in a manner that is tax efficient to both the recipient and the Partnership. The Compensation Committee intends for its compensation design principles to protect and promote our unitholders’ interests. We believe our compensation programs are consistent with best practices for sound governance. Our Executive Compensation Program. The Compensation Committee of our Board of Directors oversees the compensation of our named executive officers, including base salary and short-term and long-term incentive awards. In addition, the Compensation Committee makes any remaining determinations with respect to compensation based upon the previous year’s performance. With respect to any grant of equity as long-term incentive awards to our named executive officers, the Compensation Committee makes recommendations to the Board of Directors, but any such equity grants require the approval of the Board of Directors. Role of Consultant . To provide advice on the form and amount of compensation for our named executive officers in 2017, our Compensation Committee engaged Mercer (US) Inc. (“Mercer”), an independent compensation consulting firm. Mercer’s services included a compensation risk assessment and an analysis of 2017 base salaries, short-term incentive award targets, and long-term incentive award targets. In order to assist with the assessment of the competitiveness of our 2017 named executive officer compensation, Mercer provided market data from the following peer group companies: Company 1. 2. 3. 4. 5. Boardwalk Pipeline Partners, LP Buckeye Partners LP Crestwood Equity Partners LP DCP Midstream, LP EnLink Midstream Partners, LP 6. Magellan Midstream Partners, L.P. 7. ONEOK Partners, L.P. 8. MPLX LP 9. NuStar Energy L.P. 10. Spectra Energy Partners, LP 11. Summit Midstream Partners, LP 12. SemGroup Corporation 13. Targa Resources Corp. 14. Western Gas Partners, LP 15. Williams Partners L.P. Ticker BWP BPL CEQP DCP ENLK MMP OKS MPLX NS SEP SMLP SEMG TRGP WES WPZ The Compensation Committee reviews and assesses the independence and performance of its consultant in accordance with applicable SEC and NYSE rules on an annual basis in order to confirm that the consultant is independent and meets all applicable regulatory requirements. Prior to its engagement for 2017 , the Compensation Committee reviewed the independence of Mercer and determined that it meets all applicable regulatory requirements for independence. Role of Executive Officers. Of our executive officers, our Chief Executive Officer, Chief Financial Officer and Chief Administrative Officer have roles in determining executive compensation policies and programs. Our Chief Executive Officer, Chief Financial Officer and Chief Administrative Officer work with business unit and functional leaders along with our internal compensation staff to provide information to the Board of Directors and the Compensation Committee to help ensure that our compensation programs support our business strategy and goals. Our Chief Executive Officer also makes preliminary recommendations for base salary adjustments and short-term and long-term incentive levels for the named executive officers other than himself. Our Chief Executive Officer and our Chief Administrative Officer also periodically review and recommend specific Partnership performance metrics to be used in awards under our short-term and long-term incentive plans. Our Chief Executive Officer and our Chief Administrative Officer work with the various business units and functional departments to develop these metrics, which are then presented to the Compensation Committee. As noted above, the Compensation Committee makes final decisions regarding executive compensation, except with respect to awards to our executive officers under our long-term incentive plan.With respect to such awards, the Compensation Committee makes recommendations to the Board of Directors, and the Board of Directors makes final award decisions. 129 Table of Contents Elements of Compensation The total annual direct compensation program for our named executive officers consists of three components: (1) base salary; (2) a short-term cash incentive under our short-term incentive plan, which is based on a percentage of annual base salary; and (3) equity-based grants under our long-term incentive plan, which are based on a percentage of annual base salary. Under our compensation structure, the allocation between base salary, short-term incentive and long-term incentive varies depending upon job title and responsibility levels. We consider it generally appropriate for officers with more responsibility to have a larger portion of their compensation at risk. Base Salary. We view base salary as the foundation of total compensation. Base salary recognizes the job being performed and the value of that job in the competitive market. We design base salaries to attract and retain the executive talent necessary for our continued success and provide an element of compensation that is not at risk in order to avoid fluctuations in compensation that could distract our named executive officers from the performance of their responsibilities. Any annual adjustments to the base salaries of our named executive officers are primarily intended to reflect changes in market data or increased experience and individual contribution of the executive. We set and adjust base salaries using market data from the Compensation Committee’s consultant, and we target a range of 80% to 120% of the market median for each position. Short-Term Incentives . The Enable Midstream Partners, LP Short-Term Incentive Plan applies to our officers and employees. Under our short-term incentive plan, we seek to encourage a high level of performance from our named executive officers through the establishment of predetermined Partnership goals, the attainment of which will require a high degree of competence and diligence on the part of those employees selected to participate, and which will be beneficial to us and our unitholders . We also seek to encourage a high level of performance from our named executive officers by providing for discretionary awards under our short-term incentive plan for individual performance. The short-term incentive plan is administered by the Compensation Committee. The Compensation Committee approves the employees who will be participants for each plan year, determines the terms and conditions of awards for such participants, including any goals, determines whether goals are achieved, and whether any awards are paid. The Compensation Committee determines each named executive officer’s short-term incentive target and whether each named executive officer receives any discretionary award. Determinations regarding who will be participants, the terms and conditions of awards, and each named executive officer’s short-term incentive target are made using market data from the Compensation Committee’s consultant. Payment is made in cash no later than March 15 of the year following the plan year and may be subject to any restrictions the Compensation Committee may determine. If eligible, a participant may defer all or a portion of the payment under the deferred compensation plan. The Compensation Committee may amend, modify, suspend or terminate the short-term incentive plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that no amendment or alteration that would adversely affect the rights of any participant under any award previously granted to such participant may be made without the consent of such participant. Long -Term Incentives . The Enable Midstream Partners, LP Long-Term Incentive Plan applies to our officers, independent directors and employees. The purpose of awards to our named executive officers under our long-term incentive plan is to compensate the named executive officers based on the performance of our common units and their continued employment during the vesting period in order to align their long-term interests with those of our unitholders. Compensating our named executive officers for the long-term performance of our common units supports our pay for performance philosophy. The long-term incentive plan provides for the following types of awards: restricted units, phantom units, appreciations rights, option rights, cash incentive awards, performance units, distribution equivalent rights, and other awards denominated in, payable in, valued in or otherwise based on or related to common units. The long-term incentive plan is administered by the Compensation Committee. Generally, the Compensation Committee approves the participants, determines the award types and amounts, sets the terms and conditions for awards, including performance goals, and determines whether awards are paid, including determining whether performance goals have been met. With respect to any grant of equity as long-term incentive awards to our independent directors and our executive officers subject to reporting under Section 16 of the Exchange Act, the Compensation Committee makes recommendations to the Board of Directors and any such awards will only be effective upon the approval of the Board of Directors. The compensation consultant provides market data to assist the Compensation Committee in making decisions related to the administration of the long-term incentive plan, including determinations regarding the award types, amounts, terms and conditions and goals for our named executive officers. The long-term incentive plan limits the number of units that may be delivered pursuant to vested awards to 13,100,000 common 130 Table of Contents units, subject to proportionate adjustment in the event of unit splits and similar events. Common units cancelled, forfeited, expired or cash settled are available for delivery pursuant to other awards. The Board of Directors may terminate or amend the long-term incentive plan at any time with respect to any units for which a grant has not yet been made, including amending the long-term incentive plan to increase the number of units that may be granted subject to the requirements of the exchange upon which the common units are listed at that time. However, no change in any outstanding grant may be made that would be adverse to the participant without the consent of the participant. Upon completion of the IPO, Mr. Sailor received an award of 25,000 restricted units, which will vest on April 16, 2018. The vesting of these awards is contingent upon the executive’s employment with us on the vesting date. Notwithstanding the foregoing: (i) if we terminate his employment, other than for cause, after the first anniversary of his employment date, a portion of this award will vest upon his termination date based upon the number of days during the four-year vesting period that he is employed by us, but in no event less than 50% of the award amount; (ii) if his employment is terminated due to death or disability, the award will vest; (iii) if we terminate his employment for any reason other than cause, or if he terminates his employment for good reason, within 2 years following a change in control, the award will vest and (iv) if his employment is terminated to due to retirement, a portion of this award will vest upon his retirement based on the number of days during the four-year vesting period that he is employed by us. For this award: (i) “good reason” means our failure to maintain him in at least the position he occupied upon his employment with our general partner or its successor entity, a significant adverse change in his authorities, powers, functions, responsibilities or duties, our failure to perform our obligations with respect to his compensation arrangement, or the relocation of his principal office by more than 50 miles within two years following a change in control; and (ii) termination “for cause” means gross negligence in the performance of duties, conviction of a felony, or intentional misconduct that results in substantial injury to the Partnership. In order to compensate them for forfeiting compensation from their previous employers, Mr. Sailor received an award of 137,500 restricted units upon completion of the IPO, and Mr. C. Harris received an award of 19,276 phantom units and a performance unit award with an award target of 26,986 performance units upon his employment with us. For Mr. Sailor’s restricted unit award, 62,508 units vested on March 1, 2015 and 74,992 units vested on March 1, 2016. For Mr. C. Harris’ phantom unit award, 9,638 units vested on September 6, 2017 and 9,638 units will vest on September 6, 2018. Mr. C. Harris’ performance unit award is subject to the same terms and conditions, described below, as the performance unit awards made to our other named executive officers in 2016, and any performance units earned under this award will vest on September 6, 2019. The vesting of Mr. C. Harris’ awards are contingent upon his employment with us on the vesting date. Notwithstanding the foregoing, each award will vest in the event: (i) we terminate the executive’s employment other than for cause within two years following a change in control; (ii) the executive’s employment is terminated due to death or disability; or (iii) the executive terminates his employment for good reason within two years following a change in control. For these awards, (i) “good reason” means a material reduction in the executive’s authority, duties or responsibilities, a decrease in the executive’s base salary by more than 10%, a decrease in the executive’s target award opportunities under our short-term incentive plan or long-term incentive plan by more than 10%; or a relocation of his or her primary office by more than 50 miles, and (ii) termination “for cause” means a material act or willful misconduct that is materially detrimental to the Partnership, an act of dishonesty in the performance of duties, habitual unexcused absence(s) from work, willful failure to perform duties in any material respect, gross negligence in the performance of duties resulting in material damage or injury to the Partnership or any affiliate, any felony conviction, or any other conviction involving dishonesty, fraud or breach of trust. Other Compensation and Benefits. Our named executive officers were also eligible to participate in our employee benefit plans and programs, including a medical benefits plan, a 401(k) plan and a non-qualified deferred compensation plan . Clawback Policy. In May 2016, our Compensation Committee adopted a Clawback Policy for our executive officers. The policy provides that, in the event of an accounting restatement, the Compensation Committee may, within 12 months after the date the Partnership is required to prepare the restatement, require a current or former executive officer to forfeit or return incentive-based compensation they would not have received based on the restatement if the Compensation Committee determines that the restatement was caused, in whole or in part, by a willful act or omission of the current or former executive officer. The policy applies to incentive-based compensation under our short-term incentive plan and long-term incentive plan, and to any other incentive-based compensation, granted on or after January 1, 2016. Unit Ownership Guidelines. In August 2015, our Compensation Committee adopted Unit Ownership Guidelines for our independent directors and officers. We believe that our Unit Ownership Guidelines align the interests of our independent directors and named executive officers with the interests of our unitholders. The guidelines provide that our Chief Executive Officer should own common units of the Partnership having a market value of five times base salary, the other named executive officers should 131 Table of Contents own common units of the Partnership having a market value of three times their respective base salaries, and that our independent directors should own common units of the Partnership equal to their respective annual base retainers. Our Compensation Committee reviews common unit ownership annually, based on the officer’s current base salary or the independent director’s current base retainer, and the average closing price for our common units for the previous calendar year. The guidelines were established with advice from the Compensation Committee’s consultant. In addition to units owned directly, units owned indirectly (such as by a spouse or a trust), restricted units and phantom units granted under our long-term incentive plan, and performance units granted under our long-term incentive plan (at target) count towards the guidelines. The guidelines provide that our existing independent directors and officers should achieve and maintain the minimum ownership levels no later than five years from the adoption of the guidelines. The guidelines also provide that newly appointed independent directors and newly appointed or promoted officers should achieve and maintain the minimum ownership levels no later than five years from the date of appointment, hire or promotion. 2017 Executive Compensation As of December 31, 2017 , the base salary, short-term incentive award targets, and long-term incentive award targets for our named executive officers were Name as follows: Rodney J. Sailor John P. Laws Paul M. Brewer Craig S. Harris Mark C. Schroeder Base Salary $650,000 (increase of 8.33%) $362,250 (increase of 15.00%) $329,175 (increase of 4.50%) $362,250 (increase of 11.46%) $338,813 (increase of 4.25%) Short-Term Incentive Target Long-Term Incentive Target 100% 75% 70% 70% 70% 300% 185% 135% 135% 135% Base Salary . In February 2017, Mr. Sailor, Mr. Laws, Mr. Brewer and Mr. Schroeder received base salary increases of 8.33%, 15.00%, 4.50%, and 4.25% respectively. In August 2017, Mr. C. Harris received a base salary increase of 11.46%. These base salary increases were intended to better align the named executive officers with the market data for their roles. The Compensation Committee typically reviews the base salary of each named executive officer in February; however, the Compensation Committee’s review of Mr. C. Harris’ base salary was postponed until August 2017 because he had been with the Partnership less than one year when the Compensation Committee reviewed the base salaries of the other named executive officers in February 2017. Short-Term Incentives . For 2017 , the target amount of the short-term incentive award for each named executive officer was a percentage of actual base salary paid during 2017 , with a payout ranging from 0% to 150% of the target, subject to straight-line interpolation based on the level of achievement of performance goals established by the Compensation Committee. The award may be increased or decreased at the discretion of the Compensation Committee based on the performance of the named executive officer, but the award may not exceed 200% of the named executive officer’s target. For the 2017 award, the performance goals were based 80% on financial targets and 20% on safety targets. The financial targets consisted of: (i) 30% on operation and maintenance (O&M) and general and administrative (G&A) expense targets, and (ii) 50% on a distributable cash flow (DCF) target. The safety targets consisted of (i) 10% total recordable incident rate (TRIR) targets, which is derived from the Federal Occupational Safety and Health Act of 1970 standards for recordable injuries and illnesses (excluding hearing shifts and any recordable injury resulting from a non-preventable vehicle incident), and (ii) 10% on preventable vehicle incident rate (PVIR) targets, which is defined as one in which the driver failed to exercise every reasonable precaution to prevent the accident. For each performance goal, the Compensation Committee established a minimum level of performance (at which a 50% payout would be made and below which no payout would be made), a target level of performance (at which a 100% payout would be made), and a maximum level of performance (at or above which a 150% payout would be made). The level of payout may range from 0% to 150%, subject to straight-line interpolation based on the actual performance achieved. For the purpose of determining the level of performance achieved, the Compensation Committee reserved the right to adjust DCF for (1) increases or decreases resulting from changes in accounting principles that become effective after December 31, 2016 ; (2) any increases or decreases in DCF attributable to any new federal or state laws or regulations enacted after December 31, 2016 ; and (3) adjustments to reflect the effect of any acquisitions or divestitures occurring during the 2017 plan year as permitted under the plan. The Committee also reserved the right to adjust O&M and G&A for (1) increases or decreases in O&M and G&A attributable to a change in accounting principles effective after December 31, 2016 ; (2) any increases or decreases in O&M and G&A attributable to any new federal or state laws or regulations enacted after December 31, 2016 ; (3) any increases 132 Table of Contents or decreases in O&M and G&A attributable to gains, losses, or impairments, except those attributable to the write down, abandonment or disposition of any assets never placed in service; (4) any other adjustments in O&M and G&A expenses occurring during the 2017 plan year approved by the Committee; and (5) adjustments to reflect the effect of any acquisitions or divestitures occurring during the 2017 plan year as permitted under the plan. The following table shows the minimum, target, and maximum levels of performance for the performance goals set for 2017 , the actual level of performance as calculated pursuant to the terms of the awards, and the percentage payout of the targeted amount based on the actual level of performance and as authorized by the Compensation Committee: DCF O&M and G&A Safety Targets TRIR PVIR Minimum $580 million $470 million Target $605 million $465 million Maximum $640 million $445 million Actual Performance $660 million $458 million 0.685 1.006 0.399 0.885 0.343 0.503 0.795 0.606 Payout % of Target 150% 118% —% 137% The DCF actual performance is the amount reported in our 2017 financial statements, as adjusted for (1) any increases or decreases in O&M and G&A attributable to any new federal or state laws or regulations enacted after December 31, 2016 and (2) adjustments to reflect the effect of any acquisitions or divestitures occurring during the 2017 plan year as permitted under the plan. The O&M and G&A actual performance is the amounts of O&M and G&A reported in our 2017 financial statements, as adjusted for: (1) any increases or decreases in O&M and G&A attributable to any new federal or state laws or regulations enacted after December 31, 2016 ; (2) any increases or decreases in O&M and G&A attributable to gains, losses, or impairments, except those attributable to the write down, abandonment or disposition of any assets never placed in service; and (3) adjustments to reflect the effect of any acquisitions or divestitures occurring during the 2017 plan year as permitted under the plan. Long-Term Incentives . For 2017 , each named executive officer received a long-term incentive award, allocated 65% to performance units and 35% to phantom units, in each case with distribution equivalent rights under the long-term incentive plan that will vest on March 1, 2020, subject to the satisfaction of vesting criteria. Our named executive officers received the following 2017 performance unit and phantom unit awards: Name Performance Award Phantom Award Rodney J. Sailor John P. Laws Paul M. Brewer Craig S. Harris Mark C. Schroeder 77,052 26,481 17,559 17,336 18,074 41,490 14,259 9,456 9,336 9,732 The performance units awarded in 2017 have a payout ranging from 0% to 200% of the target based on the level of achievement of a performance goal established by the Board of Directors over a performance period of January 1, 2017 through December 31, 2019. Performance units earned will be paid in the Partnership’s common units, and distribution equivalent rights will be paid in cash at vesting. 133 Table of Contents For the awards in 2017 , the performance goal was based on the relative total unitholder return (TUR) of our common units over the performance period compared to a peer group. The peer group consists of the following companies, which were in the Alerian Natural Gas Index at the time of selection, which may be adjusted by the Compensation Committee, as necessary, from time to time: Company 1. 2. 3. 4. 5. 6. 7. 8. 9. Antero Midstream Partners LP Boardwalk Pipeline Partners, LP Crestwood Equity Partners LP Cheniere Energy Partners, L.P. DCP Midstream Partners, LP Energy Transfer Partners, L.P. EnLink Midstream Partners, LP Enterprise Products Partners L.P. EQT Midstream Partners LP 10. MPLX LP 11. ONEOK Partners, L.P. 12. Rice Midstream Partners LP 13. 14. Spectra Energy Partners, LP TC PipeLines, LP 15. Western Gas Partners, LP 16. Williams Partners L.P. Ticker AM BWP CEQP CQP DPM ETP ENLK EPD EQM MPLX OKS RMP SEP TCP WES WPZ The payout for the performance units will be determined as follows: TUR Percentile 90th percentile and above Above 75th percentile Above 50th percentile 30th percentile and above Below 30th percentile ______________ Payout (% of Target) (1) 200% 151% - 199% 101% - 150% 50% - 100% —% (1) If our ranking falls between these percentages, vesting will be determined by straight-line interpolation. Phantom units will be paid in the Partnership’s common units, and distribution equivalent rights will be paid in cash during the term of the award. The vesting of both the performance unit and phantom unit awards is contingent upon the executive’s employment with us on the vesting date. Notwithstanding the foregoing: (i) in the event the executive’s employment is terminated due to death or disability, we terminate the executive’s employment other than for cause within two years following a change in control, or the executive terminates his employment with us for good reason within two years following a change in control, the awards will vest; and (ii) in the event the executive’s employment is terminated due to retirement, a portion of the awards will vest upon their retirement based on the number of days during the three-year vesting period that they are employed by us. For both the performance unit and phantom unit awards to our named executive officers: (i) “good reason” means a material reduction in the executive’s authority, duties or responsibilities, a decrease in the executive’s base salary by more than 10%, a decrease in the executive’s target award opportunities under our short-term incentive plan or long-term incentive plan by more than 10%; or a relocation of the executive’s primary office by more than 50 miles, and (ii) termination “for cause” means a material act or willful misconduct that is materially detrimental to the Partnership, an act of dishonesty in the performance of duties, habitual unexcused absence(s) from work, willful failure to perform duties in any material respect, gross negligence in the performance of duties resulting in material damage or injury to the Partnership or any affiliate, any felony conviction, or any other conviction involving dishonesty, fraud or breach of trust. 134 Table of Contents Executive Compensation Tables The following table summarizes the compensation for our named executive officers for the years ended December 31, 2017 , 2016 and 2015 . For all our named executive officers, the table includes all compensation awarded by or paid by us during the periods specified. Summary Compensation Table for 2017 Stock Awards ($) (1) Option Awards ($) Non-Equity Incentive Plan Compensation ($) (2) (e) 2,159,419 2,583,284 882,970 742,140 791,130 492,116 485,868 1,041,432 (5) 506,528 583,038 398,575 (f) — — — — — — — — — — — (g) 789,324 713,769 278,720 336,463 260,297 282,417 302,283 77,700 290,867 273,000 115,278 Bonus ($) (d) — — — — — — — — — — — All Other Compensation ($) (3) (i) Total ($) (j) 394,932 3,980,213 171,997 192,111 124,267 63,588 133,653 4,063,858 1,789,955 1,552,399 1,424,892 1,233,545 105,653 1,230,266 28,655 140,693 63,103 57,695 1,240,287 1,273,182 1,244,141 878,663 Salary ($) (c) 636,538 594,808 436,154 349,529 309,877 325,359 (b) 2017 2016 2015 2017 2016 2017 2017 336,462 2016 2017 2016 2015 92,500 (4) 335,094 325,000 307,115 Name and Principal Position Year (a) Rodney J. Sailor President and Chief Executive Officer John P. Laws Executive Vice President, Chief Financial Officer, and Treasurer Paul M. Brewer Executive Vice President — Operations Craig S. Harris Executive Vice President and Chief Commercial Officer Mark C. Schroeder Executive Vice President and General Counsel ______________________ (1) Amounts in this column reflect the aggregate grant date fair value amount of the Partnership equity-based unit awards granted to each named executive officer. The grant date fair value amount of performance unit awards is computed in accordance with FASB ASC Topic 718 based on the probable achievement level of the underlying performance conditions as of the grant date. Please refer to the Grants of Plan-Based Awards table for 2017 and the accompanying footnotes. Assuming achievement of the performance goals at the maximum level, the grant date fair value of the performance units granted in 2017 and included in this column would be $2,969,584 for Mr. Sailor, $1,020,578 for Mr. Laws, $676,724 for Mr. Brewer, $668,129 for Mr. C. Harris, and $696,572 for Mr. Schroeder. Assuming achievement of the performance goals at the maximum level, the grant date fair value of the performance units granted in 2016 and included in this column would be $4,324,134 for Mr. Sailor, $1,324,256 for Mr. Laws, $1,498,802 for Mr. C. Harris, and $975,938 for Mr. Schroeder. Assuming achievement of the performance goals at the maximum level, the grant date fair value of the performance units granted in 2015 and included in this column would be $1,765,939 for Mr. Sailor and $797,150 for Mr. Schroeder. The grant date fair value amount of phantom unit awards and restricted unit awards are computed in accordance with FASB ASC Topic 718. See Note 17 to the financial statements for a discussion of the valuation assumptions used for these awards. (2) Amounts in this column reflect amounts earned under the Partnership’s Short-Term Incentive Plan. (3) The following table sets forth the elements of All Other Compensation for 2017 , 2016 and 2015 . 135 Table of Contents Name (6) Rodney J. Sailor John P. Laws Paul M. Brewer Craig S. Harris Mark C. Schroeder 401(k) Plan Matching Contributions ($) Non-Qualified Matching Contributions ($) 29,700 29,150 29,150 29,700 29,150 27,217 29,700 4,625 29,700 29,150 29,150 118,834 66,938 60,583 37,381 12,040 37,394 15,858 3,500 37,190 19,281 21,683 2017 2016 2015 2017 2016 2017 2017 2016 2017 2016 2015 Distribution Equivalent Rights ($) 243,824 73,335 99,804 55,998 20,164 66,468 30,361 6,130 70,263 11,169 4,288 Supplemental Life Insurance ($) Long Term Disability ($) Other ($) (7) 1,806 1,806 1,806 420 420 1,806 966 223 2,772 2,735 1,806 768 768 768 768 768 768 768 177 768 768 768 — — — — 1,046 — 28,000 14,000 — — — Total ($) 394,932 171,997 192,111 124,267 63,588 133,653 105,653 28,655 140,693 63,103 57,695 (4) Represents salary from hire date on September 6, 2016 to December 31, 2016. (5) Amounts include an award of 19,276 phantom units Mr. C. Harris received upon employment with the Partnership, of which 9,638 units vested on September 6, 2017 and 9,638 units will vest on September 6, 2018. Awards granted to Mr. C. Harris in 2016 were calculated based on the closing price of the Partnership’s common units, as reported on the NYSE on the grant date. (6) Other than Mr. C. Harris, none of our named executive officers received perquisites valued in excess of $10,000 in 2017. (7) Amounts include $28,000 of travel allowance in 2017 and $14,000 of travel allowance in 2016 for Mr. C. Harris and $1,046 of tax gross up for Mr. Laws in 2016. The following Grants of Plan-Based Awards Table summarizes the grants of plan-based awards made to named executive officers during 2017 . Grants of Plan-Based Awards Table for 2017 Name Grant Date Board Approval Date Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) Estimated Future Payouts Under Equity Incentive Plan Awards (2) All Other Stock Awards: Number of Shares of Stock or Units (#) (3) Grant Date Fair Value of Stock Awards ($) (4) (a) Rodney J. Sailor John P. Laws Paul M. Brewer Craig S. Harris Mark C. Schroeder (b) 02/10/2017 03/01/2017 03/01/2017 02/10/2017 03/01/2017 03/01/2017 02/10/2017 03/01/2017 03/01/2017 02/10/2017 03/01/2017 03/01/2017 02/10/2017 03/01/2017 03/01/2017 Threshold ($) (c) 318,269 — — 131,074 — — 113,876 — — 117,762 — — 117,283 — — 02/10/2017 02/15/2017 02/15/2017 02/10/2017 02/15/2017 02/15/2017 02/10/2017 02/15/2017 02/15/2017 02/10/2017 02/15/2017 02/15/2017 02/10/2017 02/15/2017 02/15/2017 Target ($) (d) Maximum ($) Threshold (#) (e) (f) 636,538 1,273,076 — — — — 262,147 524,294 — — — — 227,751 455,502 — — — — 235,523 471,046 — — — — 234,566 469,132 — — — — — 38,526 — — 13,240 — — 8,779 — — 8,668 — — 9,037 — Target (#) (g) — 77,052 — — 26,481 — — 17,559 — — 17,336 — — 18,074 — Maximum (#) (h) (i) (l) — 154,104 — — 52,962 — — 35,118 — — 34,672 — — 36,148 — — — 41,490 — — 14,259 — — 9,456 — — 9,336 — — 9,732 — 1,484,792 674,627 — 510,289 231,851 — 338,362 153,755 — 334,065 151,803 — 348,286 158,242 ______________________ (1) Amounts in columns (c), (d) and (e) of the Grants of Plan-Based Awards Table for 2017 above represent the threshold, target and maximum amounts that would be payable to named executive officers pursuant to the 2017 annual incentive awards made under the Enable Midstream Partners, LP Short-Term Incentive Plan. The short-term incentive plan was designed with a funding trigger that requires threshold performance for the plan to payout. If threshold performance is not met, no payments will be made. For each performance measure, established thresholds were set (at which 50% payout 136 Table of Contents would be made), a target level of performance (at which a 100% payout would be made) and a maximum level of performance (at or above which a 150% payout would be made) based on eligible earnings. The award may be increased or decreased at the Compensation Committee’s discretion based on the performance of the named executive officer, but the award may not exceed 200% of the named executive officer’s target. As discussed in the Compensation Discussion and Analysis above, the amount that each executive officer will receive is dependent upon Partnership performance against a distributable cash flow target (50%), operations & maintenance and general & administrative expense (30%) and an aggregate safety target (20%). (2) Amounts in columns (f), (g) and (h) above represent awards of performance units under Enable Midstream Partners, LP Long-Term Incentive Plan. All payouts of such performance units will be made in units and any accumulated distribution equivalent rights will be paid in cash. Due to their variable nature, accumulated distribution equivalent rights are not disclosed in the table above. The conditions of the 2017 award provide that the executive officer will receive from 0% to 200% of the performance units awarded depending upon the Partnership’s total unitholder return of a group of 16 peer companies over a performance period from January 1, 2017 through December 31, 2019. Total unit holder return includes both price appreciation and cash distributions over the performance period. Price appreciation is determined by comparing the average closing price of units of the Partnership or any company in the peer group for the 20 trading days preceding the performance period and for the last 20 trading days during the performance period. Cash distributions for the Partnership or any company in the peer group are assumed to have been reinvested in additional units on the date two days prior to the distribution record date. At the end of the performance period, the terms of these performance units provide for payout of 100% of the performance units initially granted if the Partnership’s total unitholder return is at the 50th percentile of the peer group, with higher payouts for performance above the 50th percentile up to 200% of the performance units granted if total unitholder return is at or above the 90th percentile of the peer group. The terms of these performance units provide for payouts of less than 100% of the performance units granted if the Partnership’s total unitholder return is below the 50th percentile of the peer group, with no payout for performance below the 30th percentile. (3) Amounts in column (i) above represent the number of phantom unit awards granted to each of our named executive officers under the Enable Midstream Partners, LP Long-Term Incentive Plan. (4) Amounts reflect the grant date fair value based on a probable value of these awards or target value, of 100% payout. See Note 17 to the financial statements for further information. Outstanding Equity Awards at 2017 Fiscal Year-End Table Name (a) Rodney J. Sailor John P. Laws Paul M. Brewer Craig S. Harris Mark C. Schroeder Unit Awards Number of Units That Have Not Vested (#) Market Value of Units That Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Units or Other Rights That Have Not Vested (#) Equity Incentive Plan Awards: Market Value of Unearned Units or Other Rights That Have Not Vested ($) (g) (h) (i) 41,490 51,874 25,000 14,259 15,887 2,138 9,456 11,348 (1) (2) (3) (1) (2) (4) (1) (2) — 9,336 9,638 9,732 11,708 (1) (5) (1) (2) — 589,988 737,648 355,500 202,763 225,913 30,402 134,464 161,369 — 132,758 137,052 138,389 166,488 — 77,052 (6) 414,984 (7) 106,446 (8) 26,481 (6) 127,088 (7) 12,828 (8) 17,559 (6) 90,778 (7) 34,892 17,336 (6) 53,972 (9) 18,074 (6) 93,660 (7) 48,050 (8) (j) 1,095,679 5,901,072 1,513,662 376,560 1,807,191 182,414 249,689 1,290,863 496,164 246,518 767,482 257,012 1,331,845 683,271 ______________________ (1) This amount represents a time-based phantom unit award under the Enable Midstream Partners long-term incentive plan scheduled to vest on March 1, 2020. Values were calculated based on a $ 14.22 closing price of the Partnership’s common units, as reported on the NYSE at December 31, 2017 . (2) This amount represents a time-based phantom unit award under the Enable Midstream Partners long-term incentive plan scheduled to vest on April 1, 2019. Values were calculated based on a $ 14.22 closing price of the Partnership’s common units, as reported on the NYSE at December 31, 2017 . (3) This amount represents a restricted unit award under the Enable Midstream Partners long-term incentive plan which will vest on April 16, 2018. Values were calculated based on a $ 14.22 closing price of the Partnership’s common units, as reported on the NYSE at December 31, 2017 . (4) This amount represents a restricted unit award under the Enable Midstream Partners long-term incentive plan. On February 14, 2018, our Compensation Committee accelerated the vesting of this award from June 1, 2018 to March 1, 2018. Values were calculated based on a $ 14.22 closing price of the Partnership’s common units, as reported on the NYSE at December 31, 2017 . (5) This amount represents a time-based phantom unit award under the Enable Midstream Partners long-term incentive plan, which will vest on September 6, 2018. Values were calculated based on a $ 14.22 closing price of the Partnership’s common units, as reported on the NYSE at December 31, 2017 . (6) This amount represents a performance unit award under the Enable Midstream Partners long-term incentive plan. The performance cycle began on January 1, 2017 and ends December 31, 2019. The number of units listed reflects the number of units paid at maximum performance. The value of the awards was calculated based on maximum payout of 200% and a $ 14.22 closing price of the Partnership’s common units, as reported on the NYSE on December 31, 2017 . This award will vest on March 1, 2020. (7) This amount represents a performance unit award under the Enable Midstream Partners long-term incentive plan. The performance cycle began on January 1, 2016 and ends December 31, 2018. The number of units listed reflects the number of units paid at maximum performance. The value of the awards was calculated based on maximum payout of 200% and a $ 14.22 closing price of the Partnership’s common units, as reported on the NYSE on 137 Table of Contents December 31, 2017 . This award will vest on April 1, 2019. (8) This amount represents a performance unit award under the Enable Midstream Partners long-term incentive plan. The performance cycle began on January 1, 2015 and ends December 31, 2017. The number of units listed reflects the number of units paid at maximum performance. The value of the awards was calculated based on maximum payout of 200% and a $ 14.22 closing price of the Partnership’s common units, as reported on the NYSE on December 31, 2017 . On February 14, 2018, our Compensation Committee accelerated the vesting of this award from June 1, 2018 to March 1, 2018. (9) This amount represents a performance unit award under the Enable Midstream Partners long-term incentive plan granted on September 6, 2016. The performance cycle began on January 1, 2016 and ends December 31, 2018. The number of units listed reflects the number of units paid at maximum performance. The value of the awards was calculated based on maximum payout of 200% and a $ 14.22 closing price of the Partnership's common units, as reported on the NYSE on December 31, 2017 . This award will vest on September 6, 2019. 2017 Option Exercises and Stock Vested Table Name (a) Stock Awards Number of Shares Acquired on Vesting (#) Value Realized on Vesting ($) (1) (d) 37,245 (2) 4,936 (2) 1,799 (3) 11,587 (2) 9,638 (4) 12,415 (2) (e) 564,634 74,830 27,273 175,659 142,642 188,211 Rodney J. Sailor John P. Laws Paul M. Brewer Craig S. Harris Mark C. Schroeder ______________________ (1) The value of the awards was calculated based on the closing price of the Partnership’s common units, as reported on the NYSE on the date of vesting. (2) These amounts reflect the payout of performance units granted on June 2, 2014. The units vested on June 2, 2017. Performance was based on the Partnership's total unitholder return over a period of April 11, 2014 to December 31, 2016. (3) This amount reflects the distribution of time-based restricted units granted on June 2, 2014. The units vested on June 2, 2017. (4) This amount reflects the distribution of time-based phantom units granted on September 6, 2016. The units vested on September 6, 2017. Name (a) Rodney J. Sailor John P. Laws Paul M. Brewer Craig S. Harris Mark C. Schroeder ______________________ 2017 Nonqualified Deferred Compensation Executive Contributions in Last FY ($) Registrant Contributions in Last FY ($) (1) Aggregate Earnings in Last FY ($) (2) Aggregate Withdrawals/Distributions ($) Aggregate Balance at Last FYE ($) (b) (c) (d) (e) — — 358,759 16,566 — 95,245 25,862 28,278 8,650 29,050 25,621 6,065 127,062 3,001 7,901 — — — — — (f) 224,102 48,978 1,045,676 35,293 71,012 (1) The amounts disclosed in this column also are disclosed in the “All Other Compensation” column of the Summary Compensation Table and are further described in the All Other Compensation Table. (2) Represents earnings on invested funds in each Executive’s individual account. The Enable Midstream Partners Deferred Compensation Plan, a nonqualified deferred compensation plan, was adopted in 2014 and, beginning in 2015, provides a tax-deferred savings plan for certain highly-compensated employees, including our named executive officers, who are selected by the Partnership and whose participation in the partnership sponsored 401(k) plan is restricted due to compensation and contribution limitations of the Internal Revenue Code (Code). Eligible employees may voluntarily defer up to 70% of their base salary and 100% of their bonus earned under the Enable Midstream Partners, LP Short Term Incentive Plan, and nonemployee directors may voluntarily defer up to 100% of their cash director fees. In addition, the Partnership may make company matching and annual contributions on behalf of employees whose compensation is above the Code’s compensation limitation for 401(k) plans. Investment options under the deferred compensation plan mirror those of the Partnership’s 401(k) plan. Distributions under the deferred compensation plan are payable upon a separation of service in either a lump sum or annual installment payments payable over five or ten years at the election of the applicable employee or director. All amounts in a participant’s account are recorded in a notional account. The Partnership has established a “rabbi” trust to hold 138 Table of Contents amounts that are contributed under the deferred compensation plan; however, such amounts contributed to the trust remain assets of the Partnership and subject to the claims of its creditors. Potential Payments Upon Termination or Change-in-Control Change of Control Plan On August 1, 2016, the Compensation Committee of the Board adopted the Enable Midstream Partners, LP Change of Control Plan to help recruit and retain executives. The change of control benefits are “double trigger,” meaning the executive must experience a covered termination during the two years after a change of control. The plan provides that a covered termination occurs if an executive’s employment is terminated for any reason other than death, disability, cause or resignation by the executive other than for good reason. The plan also provides that a change of control occurs if: (i) anyone, other than an affiliate of Enable GP, becomes the beneficial owner of more than 50% of the general partner interest in the Partnership; (ii) a plan of complete liquidation of Enable GP or the Partnership is approved; (iii) Enable GP or the Partnership sell or otherwise dispose of all or substantially all of its assets in one or more transactions to anyone other than an affiliate of Enable GP unless either CenterPoint and its affiliates or OGE Energy and its affiliates own at least 50% of the voting securities of the acquirer; or (iv) anyone other than Enable GP or an affiliate of Enable GP becomes the general partner of the Partnership. The plan provides the following change of control benefits for each of our named executive officers: • • • for the President and Chief Executive Officer, a lump-sum cash payment of 2.99 times his annual base salary and short-term incentive plan award target; for each Executive Vice President, a lump-sum cash payment of 2.0 times his or her annual base salary and short-term incentive plan award target; and for any other officer who is not an Executive Vice President, a lump-sum cash payment of 1.5 times his or her annual base salary and short-term incentive plan award target. For each of our officers, the plan also provides for a lump-sum cash payment in an amount equal to his or her target bonus under the short-term incentive plan based on eligible earnings through the date of termination and cash payments for certain health and welfare and outplacement benefits. The payment of change of control benefits are subject to the executive’s execution, without revocation, of a general waiver and release of claims. The plan also contains standard confidentiality, non-disparagement and non-solicitation provisions. Long Term Incentives Awards to our named executive officers under our long-term incentive plan include change of control benefits. The change of control benefits are “double trigger,” meaning the executive must experience a covered termination during the two years after a change of control. Awards to our named executive officers under long-term incentive plan will vest in the event: (i) we terminate the executive’s employment other than for cause within two years following a change in control; or (ii) the executive terminates his or her employment for good reason within two years following a change in control. In the event of a qualifying termination following a change in control, performance unit awards will vest at the greater of target or actual performance. In addition, a portion of Mr. Sailor’s award of 25,000 restricted units which he received at IPO will vest in the event we terminate his employment, other than for cause. The portion of this award that will vest upon his termination date will be based upon the number of days during the four-year vesting period that he is employed by us, but in no event less than 50% of the award amount. For more information regarding the awards to our named executive officers under our long-term incentive plan, see “Executive Compensation Tables” above. The following table reflects the potential payments that would be made to our named executive officers under our change of control plan and our long-term incentive plan awards, assuming a termination date of December 31, 2017 and using the closing price of the Partnership’s common units of $ 14.22 as reported on the NYSE at December 31, 2017 . 139 Table of Contents Name Rodney J. Sailor John P. Laws Paul M. Brewer Craig S. Harris Mark C. Schroeder ______________________ Cash Severance Payment Upon Change in Control & Covered Termination ($) (1) Short-Term Incentive Plan Payment Upon Change in Control & Covered Termination ($) (2) Health and Welfare Benefit Payment Upon Change in Control & Covered Termination ($) (3) Outplacement Assistance Payment Upon Change in Control & Covered Termination ($) (4) Acceleration of Vesting Under Long-Term Incentive Plans Upon Change in Control & Covered Termination ($) (5) 3,956,381 1,306,887 1,132,490 1,257,203 1,198,875 636,538 262,147 227,751 235,523 234,566 25,492 35,156 35,156 35,156 35,156 25,000 25,000 25,000 25,000 25,000 7,299,435 2,017,537 1,612,266 931,932 1,767,285 Total ($) 11,942,846 3,646,727 3,032,663 2,484,814 3,260,882 (1) Reflects the lump-sum cash payment of the change of control benefit, plus any accrued salary and vacation. The change of control benefit for Mr. Sailor reflects 2.99 times his base salary and short-term incentive target; all other named executive officers change of control benefit reflects 2.00 times their base salary and short-term incentive target. (2) Reflects the lump-sum cash payment of each named executive officers target short-term incentive bonus. (3) Reflects the lump-sum cash payment for health and welfare benefit coverage. The benefit for Mr. Sailor reflects the sum of the Employer’s portion of the annual premium for medical, dental and vision times 2.99; all other named executive officers reflects the sum of the Employer’s portion of the annual premium for medical, dental and vision times 2.00. (4) Reflects the lump-sum cash payment for outplacement assistance. (5) Amounts above include the value of all unvested restricted unit awards and phantom unit awards and, if applicable, the value of any distribution equivalent rights. All performance unit awards will vest and be paid out as if the applicable performance goals had been satisfied at target levels or actual performance, whichever is greater. The amounts above include the value of all unvested performance unit awards, assuming target level payout and, if applicable, the value of any distribution equivalent rights. Potential Severance Payments to Current Chief Executive Officer Mr. Sailor will be offered a severance agreement that will provide a cash payment of 1.0 times his annual base salary and short-term incentive plan award target upon a termination of his employment for any reason other than death, disability, cause, or resignation other than for good reason that is not a “covered termination” under our change of control plan (described above). The following table reflects the potential payments that would be made to Mr. Sailor if his severance agreement was effective as of December 31, 2017 and for accelerated vesting of awards under our long-term incentive plan, assuming a termination date of December 31, 2017 and using the closing price of the Partnership’s common units of $ 14.22 as reported on the NYSE at December 31, 2017 . Name Rodney J. Sailor ______________________ Cash Severance ($) (1) 1,300,000 Acceleration of Vesting Under Long-Term Incentive Plans ($) (2) Total ($) 430,578 1,730,578 (1) Reflects the cash payment of 1.0 times his annual base salary of $650,000 and his short-term incentive plan award target of $650,000 as of December 31, 2017 . (2) Reflects the pro-rata vested amount of a restricted unit award to Mr. Sailor as of December 31, 2017 . Pay Ratio Disclosure As mandated by the Dodd-Frank Act, Item 402(u) of Regulation S-K requires us to disclose the ratio of the compensation of our Chief Executive Officer to the total compensation of our median employee. Mr. Sailor, our Chief Executive Officer, had 2017 annual total compensation of $3,980,214. Our median employee had 2017 annual total compensation of $104,994. As a result, the ratio of Mr. Sailor’s 2017 annual total compensation to our median employee’s 2017 annual total compensation was approximately 38 to 1. Mr. Sailor’s 2017 annual total compensation is reported in the Summary Compensation Table provided in this Form 10-K and includes the dollar value of Mr. Sailor’s base salary and bonus (cash and non-cash). Consistent with the calculation of Mr. Sailor’s 2017 annual total compensation, our median employee’s 2017 annual total compensation includes the dollar value of her or his wages plus overtime and bonus (cash and non-cash). We chose December 31, 2017 as the date to identify our median employee, and we identified our median employee using a cash compensation measure consistently applied to all employees, which included each employee’s cash base salary or wages plus 140 Table of Contents overtime and cash bonus paid under our short-term incentive plan. This measure consistently excluded non-cash compensation, such as non-cash bonus, and also consistently excluded certain cash compensation, such as 401(k) matching contributions. In identifying our median employee, we included both our direct employees and employees of OGE Energy that are seconded to the Partnership because OGE is an affiliated third party. The cash compensation for our direct employees was derived from our payroll records and for employees of OGE that are seconded to the Partnership was derived from OGE Energy’s payroll records, in each case for the period from January 1, 2017 through December 31, 2017. Report of the Compensation Committee The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation Committee recommended that the Compensation Discussion and Analysis be included in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 , as filed with the Securities and Exchange Commission. Alan N. Harris Scott M. Prochazka Sean Trauschke Director Compensation The directors of Enable GP currently are Alan N. Harris, Ronnie K. Irani, Peter H. Kind, Stephen E. Merrill, Scott M. Prochazka, William D. Rogers, Rodney J. Sailor and Sean Trauschke. Mr. Merrill and Mr. Trauschke, who serve as the representatives of OGE Energy on the Board of Directors, and Mr. Prochazka and Mr. Rogers, who serve as the representatives of CenterPoint Energy on the Board of Directors, do not receive compensation for their service as directors. In addition, Mr. Sailor, who serves as President and Chief Executive Officer of Enable GP, does not receive any additional compensation for his service as director. Mr. A. Harris, Mr. Irani and Mr. Kind, our “independent directors”, who are not officers or employees of Enable GP and who are not representatives of either of our sponsors, receive the compensation described below for service in 2017 . In addition, Enable GP’s independent directors are reimbursed for out-of-pocket expenses in connection with attending meetings of the Board of Directors and its committees. Each director is indemnified for his actions associated with being a director to the fullest extent permitted under Delaware law. Under the director compensation program approved by the Compensation Committee for 2017 , each independent director receives an annual retainer of $80,000 per year and a grant of a number of common units equal to $85,000 divided by the average closing price of our common units on the NYSE for the 20 trading days prior to the date of grant. In addition, Mr. Kind receives a fee of $10,000 per transaction referred to the Conflicts Committee as chairman of the Conflicts Committee and all other participating independent directors receive a fee of $5,000 per transaction referred to the Conflicts Committee, although no fees were paid to the Conflicts Committee in 2017. Mr. Kind, as the chairman of the Audit Committee, receives an annual retainer for his service of $15,000, and Mr. A. Harris, as the chairman of the Compensation Committee, receives an annual retainer for his services of $12,500. The following table sets forth the compensation earned by the independent directors of Enable GP in 2017 : Name Alan N. Harris Ronnie K. Irani Peter H. Kind _______________________ Fees Earned or Paid in Cash ($) Stock Awards ($) (1) Option Awards ($) 92,500 80,000 95,000 83,432 83,432 83,432 — — — Non-Equity Incentive Plan Compensation ($) — — — All Other Compensation ($) — — — Total ($) 175,932 163,432 178,432 (1) Reflects the aggregate grant date fair value of 2017 unit awards computed in accordance with FASB ASC Topic 718. Awards granted to independent directors vested immediately. See Note 17 to the financial statements for further information. 141 Table of Contents Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The following table shows the beneficial ownership of units of Enable Midstream Partners, LP as of February 1, 2018 based solely on SEC filings, held by: • • • • each person or group of persons known by us to be a beneficial owner of 5 percent or more of the then outstanding units; each member of our general partner’s board of directors; each named executive officer of our general partner; and all directors and executive officers of our general partner as a group. Percentage of common units is based on 432,582,714 common units outstanding as of February 1, 2018 . Name of beneficial owner CenterPoint Energy, Inc. (1)(5) OGE Energy Corp. (2)(6) ArcLight Capital Partners, LLC (3)(7) Sean Trauschke (2) Stephen E. Merrill (2) Scott M. Prochazka (1) William D. Rogers (1) Alan N. Harris (4) Ronnie K. Irani (4) Peter H. Kind (4) Rodney J. Sailor (4) John P. Laws (4) Paul Brewer (4) Craig S. Harris (4) Mark C. Schroeder (1) Common units beneficially owned Series A Preferred Units beneficially owned Number 233,856,623 110,982,805 43,238,773 Percentage 54.1% 25.7% 10.0% 5,000 560 10,000 — 47,397 9,937 24,768 259,601 42,567 32,935 25,494 30,459 549,059 * * * * * * * * * * * * * Number 14,520,000 Percentage 100% — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — All directors and executive officers as a group (14 people) _________________________ Less than 1% * (1) 1111 Louisiana Street, Houston, Texas 77002 (2) 321 North Harvey, P.O. Box 321, Oklahoma City, OK 73101 (3) 200 Clarendon Street, 55th Floor Boston, MA 02116 (4) One Leadership Square, 211 North Robinson Avenue, Suite 150, Oklahoma City, Oklahoma 73102 (5) Based on a Schedule 13D/A filed with the SEC pursuant to the Exchange Act on August 31, 2017. The common units reported represent the aggregated beneficial ownership by CenterPoint Energy, together with its wholly owned subsidiaries. CenterPoint Energy may be deemed to have sole voting power with respect to 233,856,623 common units. CenterPoint Energy has no shared voting or dispositive power with respect to any of the common units shown. CenterPoint Energy also holds14,520,000 Series A Preferred Units. (6) Based on a Schedule 13G filed with the SEC pursuant to the Exchange Act on February 11, 2015. The common units reported represent the aggregated beneficial ownership by OGE Energy Corp., together with its wholly owned subsidiaries. OGE Energy Corp. may be deemed to have sole voting power with respect to 110,982,805 common units. OGE Energy Corp. has no shared voting or dispositive power with respect to any of the common units shown. (7) Based on a Form 4 filed with the SEC pursuant to the Exchange Act on July 17, 2017, 43,238,773 common units are held by Bronco Midstream Infrastructure, LLC. ArcLight Capital Partners, LLC is the investment advisor for, and ArcLight Capital Holdings, LLC is the managing partner of the general partner of each of ArcLight Energy Partners Fund V, L.P., ArcLight Energy Partners Fund IV, L.P. and Bronco Midstream Partners, LP. Bronco Midstream Infrastructure, LLC is an indirect wholly owned subsidiary of Enogex Holdings LLC. ArcLight Capital Partners, LLC has ultimate voting and investment control over the common units held by Bronco Midstream Infrastructure LLC and thus may be deemed to indirectly beneficially own such securities. Due to certain voting rights granted to Mr. Revers as a member of the investment committee of ArcLight Capital Partners, LLC, Mr. Revers may be deemed to indirectly beneficially own the common units attributable to ArcLight Capital Partners, LLC, but disclaims any such ownership except to the extent of his pecuniary interest therein. 142 Table of Contents Beneficial Ownership of General Partner Interest CenterPoint Energy and OGE Energy collectively own our general partner. Our general partner owns a non-economic general partner interest in us and the incentive distribution rights. Equity Compensation Plan Information Plan Category Equity Compensation Plans Approved By Security Holders (1) Equity Compensation Plans Not Approved By Security Holders (2) _________________________ Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights Weighted-Average Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plan (Excluding Securities Reflected in Column(a)) (a) (b) N/A — N/A — (c) N/A 8,662,420 (1) Our Long-Term Incentive Plan was adopted by our general partner for the benefit of our officers, directors and employees. See Item 11. “Executive Compensation- Compensation Discussion and Analysis.” The plan provides for the issuance of a total of 13,100,000 common units under the plan. (2) The number of securities remaining available for future issuance includes 222,434 restricted units that have been granted under our long-term incentive plan that have not vested. Item 13. Certain Relationships and Related Party Transactions, and Director Independence CenterPoint Energy owns 233,856,623 common units, representing 54.1% of our common units, and 14,520,000 Series A Preferred Units, representing 100% of our Series A Preferred Units. OGE Energy owns 110,982,805 common units, representing 25.7% of our common units. Together, CenterPoint Energy and OGE Energy own an aggregate 79.8% of our common units. In addition, CenterPoint Energy owns a 50% management interest and a 40% economic interest in our general partner, and OGE Energy owns a 50% management interest and a 60% economic interest in our general partner. Enable GP, our general partner, owns the non-economic general partner interest in us and all of the incentive distribution rights from us. Distributions and Payments to Our General Partner and Its Affiliates The following information summarizes the distributions and payments made or to be made by us to our general partner and its affiliates in connection with our ongoing operation and any liquidation. These distributions and payments were determined by and among affiliated entities and, consequently, may not equal the distributions and payments that would result from arm’s-length negotiations. Distributions of Available Cash to Our General Partner and Its Affiliates We generally make cash distributions to unitholders pro rata, including affiliates of our general partner as holders of an aggregate of 344,839,428 common units. In addition, if distributions exceed the minimum quarterly distribution and other higher target levels, our general partner will be entitled to increasing percentages of the distributions, up to 50% of the distributions above the highest target level. Payments to Our General Partner and Its Affiliates Pursuant to the services agreements, we will reimburse CenterPoint Energy and OGE Energy and their respective affiliates for the payment of certain operating expenses and for the provision of various general and administrative services for our benefit. Please see “—Services Agreements.” 143 Table of Contents Our general partner and its affiliates are entitled to reimbursement for any other expenses they incur on our behalf and any other necessary or appropriate expenses allocable to us or reasonably incurred by our general partner and its affiliates in connection with operating our business to the extent not otherwise covered by the services agreements. Our Partnership Agreement provides that our general partner will determine any such expenses that are allocable to us in good faith. Withdrawal or Removal of Our General Partner If our general partner withdraws or is removed, its incentive distribution rights will either be sold to the new general partner for cash or converted into common units, in each case for an amount equal to the fair market value of those interests. Please read “The Partnership Agreement—Withdrawal or Removal of the General Partner.” Liquidation Upon our liquidation, the partners, including our general partner, will be entitled to receive liquidating distributions according to their particular capital account balances. Transactions with CenterPoint Energy, OGE Energy and ArcLight Registration Rights Related to Common Units In connection with our IPO, the Partnership entered into a registration rights agreement with affiliates of CenterPoint Energy, OGE Energy and ArcLight. Affiliates of CenterPoint Energy, OGE Energy and ArcLight each have certain rights to require the Partnership to file and maintain a registration statement with respect to the resale of their common units. We are not obligated to effect more than (i) three such demand registrations for CenterPoint Energy and OGE Energy combined, or (ii) two such demand registrations (and no more than one in any twelve-month period) for ArcLight. Affiliates of CenterPoint Energy, OGE Energy and ArcLight also each have certain rights to request to “piggyback” onto any registration statement filed by the partnership for the sale of common units by the Partnership (other than pursuant to a demand registration discussed above, or other than for an employee benefit plan) to resell their common units. We have agreed to pay certain expenses in connection with such demand and piggyback registrations and associated resales of common units, excluding any underwriting discounts, selling commissions, transfer taxes applicable to the sale of any common units and any fees and disbursements of the selling unitholder’s counsel or any other advisor of the selling unitholder. Registration Rights Related to Preferred Units At the closing of the private placement of Series A Preferred Units, the Partnership entered into a registration rights agreement with CenterPoint Energy, pursuant to which, among other things, CenterPoint Energy has certain rights to require the Partnership to file and maintain a registration statement with respect to the resale of the Series A Preferred Units and any other series of preferred units or common units representing limited partnership interests in the Partnership that are issuable upon conversion of the Series A Preferred Units. Services Agreements In connection with our formation, we entered into services agreements with each of CenterPoint Energy and OGE Energy pursuant to which they have provided certain administrative services to us that are generally consistent with the level and type of services they provided to each of their respective businesses prior to our formation. The initial term of the services agreements ended April 30, 2016, and the services agreements now continue on a year-to-year basis unless terminated by us at the end of any annual period with at least 90 days’ notice. We may also terminate each services agreement, or the provision of any services thereunder, with the approval of our Board of Directors with at least 180 days’ notice; provided, however, that the services agreement with OGE Energy, and the provision of payroll and benefit administration services thereunder, may not be terminated until the transitional seconding agreement between the Partnership and OGE Energy is terminated. Originally, the services provided by CenterPoint Energy and OGE Energy included accounting, finance, legal, risk management, information technology, human resources, and other administrative services. Over time, we have reduced our reliance on administrative services provided by CenterPoint Energy and OGE Energy and, as a result, exercised our option to terminate most of the services provided under the services agreements. As of December 31, 2017 , the services provided by CenterPoint Energy primarily consisted of the provision of certain office space and data center space, and the services provided by OGE Energy primarily consisted of payroll and benefit administration services related to the transitional seconding agreement between the Partnership and OGE Energy. 144 Table of Contents We are required to reimburse CenterPoint Energy and OGE Energy for their direct expenses or, where the direct expenses cannot reasonably be determined, an allocated cost as set forth in the agreements. Unless otherwise approved by the Board of Directors, our reimbursement obligations are capped at amounts set forth in our annual budget. Under the services agreement, we reimbursed $3 million and $3 million to CenterPoint Energy and OGE Energy, respectively, for the year ended December 31, 2017 as compared to $6 million and $5 million , respectively, for the year ended December 31, 2016 and to $15 million and $11 million , respectively, for the year ended December 31, 2015 . Employee Secondment In connection with our formation, we entered into an employee transition agreement with CenterPoint Energy and OGE Energy and a transitional seconding agreement with each of CenterPoint Energy and OGE Energy in May 2013 , pursuant to which they agreed to second certain of their employees to us. The Partnership transitioned seconded employees from CenterPoint Energy and OGE Energy to the Partnership effective January 1, 2015, except for certain employees who are participants under OGE Energy’s defined benefit and retiree medical plans, who remain seconded to the Partnership, subject to certain termination rights of the Partnership and OGE Energy. Each of the seconded employees works full time for us and our subsidiaries but remains employed by OGE Energy . We are required to reimburse OGE Energy for certain employment-related costs, including base salary and short and long-term compensation costs and OGE Energy’s share of costs related to taxes, insurance and other benefit matters under the agreements. The Partnership’s reimbursement of OGE Energy for seconded employee costs arising out of OGE Energy’s defined benefit and retiree medical plans is fixed at $5 million in 2017 and at actual cost subject to a cap of $5 million in 2018 and thereafter, unless and until secondment is terminated. Shreveport Lease The Partnership leases office and data center space from an affiliate of CenterPoint Energy in Shreveport, Louisiana. The term of the lease was effective on October 1, 2016 and extends through December 31, 2019. The Partnership incurred approximately $1 million in rent and maintenance expenses under the lease during the year ended December 31, 2017 and the Partnership expects to incur approximately $1 million in aggregate for rent and maintenance expenses during the remaining term of the lease. Omnibus Agreement In connection with our formation, we entered into an omnibus agreement that primarily addresses completion restrictions on CenterPoint Energy and OGE Energy. Initially, the omnibus agreement also provided us with indemnification for specified breaches of certain representations and warranties in the master formation agreement pursuant to which we were formed, including representations and warranties regarding permits related to the operation of the assets contributed to us and compliance with environmental laws, among other matters; however, the indemnification related to permits expired in 2014, and the indemnification related to environmental matters expired in 2016. With respect to competition, the omnibus agreement provides that both CenterPoint Energy and OGE Energy are prohibited from, directly or indirectly, owning, operating, acquiring or investing in any business engaged in midstream operations located within the United States, other than through us. This requirement applies to both CenterPoint Energy and OGE Energy for so long as either CenterPoint Energy or OGE Energy holds any interest in our general partner or at least 20% of our common units. “Midstream operations” generally means, subject to certain exceptions, the gathering, compression, treatment, processing, blending, transportation, storage, isomerization and fractionation of crude oil and natural gas, its associated production water and enhanced recovery materials such as carbon dioxide, and its respective constituents and the following products: methane, NGLs (Y-grade, ethane, propane, normal butane, isobutane and natural gasoline), condensate, and refined products and distillates (gasoline, refined product blendstocks, olefins, naphtha, aviation fuels, diesel, heating oil, kerosene, jet fuels, fuel oil, residual fuel oil, heavy oil, bunker fuel, cokes, and asphalts). The prohibition on CenterPoint Energy and OGE Energy either directly or indirectly, owning, operating, acquiring or investing in any business engaged in midstream operations, other than through us, is subject to the following exceptions. CenterPoint Energy or OGE Energy may acquire a business engaged in midstream operations if: • Such party intends to cease using the midstream operations assets of the business within 12 months of the acquisition of such business; or • Such party acquires a business with midstream operations having a value in excess of $50 million (or $100 million in the aggregate with any of such party’s other midstream operations assets), and it offers to us the opportunity to acquire the midstream operations assets of such business. 145 Table of Contents Tax Sharing Agreement In connection with our formation, we entered into a tax sharing agreement with CenterPoint Energy, OGE Energy and Enable GP on May 1, 2013 pursuant to which we agreed to reimburse them for state income and franchise taxes attributable to our activities (including the activities of our direct and indirect subsidiaries) that is reported on their state income or franchise tax returns filed on a combined or unitary basis. Our general partner is responsible for determining whether CenterPoint Energy and OGE Energy is required to include our activities on a consolidated, combined or unitary tax return. Reimbursements under the agreement equal the amount of tax that we and our subsidiaries would be required to pay if we were to file a consolidated, combined or unitary tax return separate from CenterPoint Energy or OGE Energy . We are required to pay the reimbursement within 90 days of CenterPoint Energy or OGE Energy filing the combined or unitary tax return on which our activity is included, subject to certain prepayment provisions. Reimbursement of Expenses of Our General Partner Our general partner does not receive any management fee or other compensation for its management of our partnership; however, our general partner is reimbursed by us for (i) all salary, bonus, incentive compensation and other amounts paid to any employee of the general partner that manages our business and (ii) all overhead and general and administrative expenses allocable to us that are incurred by the general partner. Our Partnership Agreement provides that our general partner determines the expenses that are allocable to us. Transportation, Storage and Commodity Transactions with Affiliates of CenterPoint Energy and OGE Energy Transportation and Storage Agreements with CenterPoint Energy EGT provides the following services to CenterPoint Energy’s LDCs in Arkansas, Louisiana, Oklahoma and Northeast Texas: (1) firm transportation with seasonal contract demand, (2) firm storage, (3) no notice transportation with associated storage and (4) maximum rate firm transportation. The first three services are in effect through March 31, 2021, and will remain in effect from year to year thereafter unless either party provides 180 days’ written notice prior to the contract termination date. The fourth service is in effect through March 31, 2018 unless extended by the parties. MRT provides firm transportation and firm storage services to CenterPoint Energy’s LDCs under agreements that are in effect through May 15, 2023, but will continue year to year thereafter unless either party provides twelve months’ written notice prior to the contract termination date. For the year ended December 31, 2017 , we recorded revenues from CenterPoint Energy’s LDCs of $110 million for natural gas and transportation services. We repair and maintain our transportation systems as necessary to continue the safe and reliable operations of our pipelines. From time to time, the repair and maintenance of our pipelines impacts the delivery points where our customers receive natural gas from our transportation systems. On occasion, those impacts require our customers to modify their receipt facilities in order to continue to receive natural gas from our pipelines. Under those circumstances, we may agree to reimburse the costs that our customers incur to make the required modifications. For the year ended December 31, 2017 , we reimbursed CenterPoint Energy’s LDCs $1 million in connection with receipt facility modifications that were necessitated by the repair and maintenance of our pipelines. Transportation and Storage Agreements with OGE Energy EOIT provides no-notice load-following transportation and storage services to OGE Energy under two contracts. The first contract with OGE Energy is in effect through April 30, 2019 and will remain in effect from year to year thereafter unless either party provides notice of termination to the other party at least 180 days prior to the commencement of the succeeding annual period. The second contract with OGE Energy was entered into on December 6, 2016 and has a primary term of 20 years that is expected to begin in late 2018. In connection with this agreement, we are currently building an approximately 80 - mile pipeline to expand the EOIT system. For the year ended December 31, 2017 , we recorded revenues from OGE Energy of $35 million for natural gas transportation and storage services. Gas Sales and Purchases Transactions From time to time, we sell natural gas volumes to affiliates of CenterPoint Energy and OGE Energy or purchase natural gas volumes from affiliates of CenterPoint Energy through a combination of forward, monthly and daily transactions. We enter into 146 Table of Contents these physical natural gas transactions in the normal course of business based upon relevant market prices. In the year ended December 31, 2017 , we recorded revenues of $6 million from gas sales to CenterPoint Energy and revenues of $2 million from gas sales to OGE Energy. In addition, we recorded $1 million and $19 million for costs of natural gas purchases from CenterPoint Energy and OGE Energy in the year ended December 31, 2017 respectively. Review, Approval or Ratification of Transactions with Related Persons The Board of Directors has adopted a related party transactions policy providing that the Board of Directors or its authorized committee will review on at least a quarterly basis all related person transactions that are required to be disclosed under SEC rules and, when appropriate, initially authorize or ratify all such transactions. In the event that the Board of Directors or its authorized committee considers ratification of a related person transaction and determines not to so ratify, the related party transactions policy will provide that our management will make all reasonable efforts to cancel or annul the transaction. The related party transactions policy provides that, in determining whether or not to recommend the initial approval or ratification of a related person transaction, the Board of Directors or its authorized committee should consider all of the relevant facts and circumstances available, including (if applicable) but not limited to: (1) whether there is an appropriate business justification for the transaction; (2) the benefits that accrue to us as a result of the transaction; (3) the terms available to unrelated third parties entering into similar transactions; (4) the impact of the transaction on a director’s independence (in the event the related person is a director, an immediate family member of a director or an entity in which a director or an immediate family member of a director is a partner, shareholder, member or executive officer); (5) the availability of other sources for comparable products or services; (6) whether it is a single transaction or a series of ongoing, related transactions; and (7) whether entering into the transaction would be consistent with the code of business conduct and ethics. Pursuant to our related party transactions policy, the Board of Directors has authorized natural gas transportation and storage agreements with CenterPoint Energy and OGE Energy and their respective affiliates as well as natural gas sale and purchase transactions with CenterPoint Energy and OGE Energy and their respective affiliates. With respect to natural gas transportation and storage agreements, the Board of Directors has determined that because the rates, charges, and other terms for transportation and storage services are subject to regulation, the terms available to CenterPoint Energy and OGE Energy are on terms no less favorable to us than those generally provided to or available from unrelated third parties entering into similar transactions. With respect to natural gas sale and purchase transactions, the Board of Directors has determined that because there is a robust, liquid market for natural gas, with transparent price determination by market conditions with reference to indexes, the terms available to CenterPoint Energy and OGE Energy are on terms no less favorable to us than those generally provided to or available from unrelated third parties entering into similar transactions. Many of the other related party transactions policy described above were entered into prior to the closing of our IPO and, as a result, were not reviewed under our related party transactions policy. These transactions were entered into by and among affiliated entities and, consequently, may not reflect terms that would result from arm’s-length negotiations. Because some of these agreements relate to our formation and, by their nature, would not occur in a third-party situation, it is not possible to determine what the differences would be in the terms of these transactions when compared to the terms of transactions with an unaffiliated third party. We believe the terms of these agreements to be comparable to the terms of agreements used in similarly structured transactions. Director Independence Because we are a publicly traded partnership, the NYSE does not require our Board of Directors to have a majority of independent directors. For a discussion of the independence of our Board of Directors, please see “Item 10. Directors, Executive Officers and Corporate Governance—Management of the Partnership.” 147 Table of Contents Item 14. Principal Accountant Fees and Services We have engaged Deloitte & Touche LLP as our independent registered public accounting firm. The following table summarizes the fees we have paid Deloitte & Touche LLP to audit the Partnership’s annual consolidated financial statements and for other services for each of the last two fiscal years: Audit fees Audit-related fees Tax Total 2017 2016 (In thousands) 1,500 $ 385 455 2,340 $ 1,300 236 315 1,851 $ $ Audit fees are primarily for audit of the Partnership’s consolidated financial statements and reviews of the Partnership’s financial statements included in the Form 10-Qs. Audit-related fees for the years ended December 31, 2017 and 2016 , include fees associated with comfort letters issued in connection with registration statements filed by the Partnership or its affiliates. Tax fees represent amounts we were billed in each of the years presented for professional services rendered in connection with tax compliance, tax advice and tax planning. This category primarily includes services relating to the preparation of unitholder annual K-1 statements and the preparation of U.S. federal and state income tax returns for Enable Midstream Partners, LP. These services primarily relate to the two tax years ended December 31, 2017 and December 31, 2016. Audit Committee Approval of Audit and Non-Audit Services The Audit Committee of the Enable GP Board of Directors is responsible for pre-approving audit and non-audit services performed by Deloitte & Touche LLP . In addition to its approval of the audit engagement, the Audit Committee takes action at least annually to authorize the independent auditor’s performance of several specific types of services within the categories of audit-related services and tax services. Audit-related services include assurance and related services that are reasonably related to the performance of the audit or review of the financial statements or that are traditionally performed by the independent auditor. Tax services include compliance-related services such as services involving tax filings, as well as consulting services such as tax planning, transaction analysis and opinions. Additional services are subject to preapproval if they are outside the specific types of services included in the periodic approvals or if they are in excess of the fee limitations in the periodic approvals. The Audit Committee may delegate preapproval authority to one or more members, provided that the delegated decision must be presented to the Audit Committee at its next scheduled meeting. The Audit Committee has approved the appointment of Deloitte & Touche LLP as our independent registered public accounting firm to conduct the audit of the Partnership’s consolidated financial statements for the year ended December 31, 2017 . Part IV Item 15. Exhibits and Financial Statement Schedules The following exhibits are filed as part of this report: (1) Financial Statements The financial statements required by this Item 15(a)(1) are set forth in Item 8. (2) Financial Statement Schedules No schedules are required to be presented. 148 Table of Contents (3) Exhibits: Exhibits not incorporated by reference to a prior filing are designated by a cross (+); all exhibits not so designated are incorporated by reference to a prior filing as indicated. Management contracts and compensatory plans and arrangements are designated by a star (*). Agreements included as exhibits are included only to provide information to investors regarding their terms. Agreements listed below may contain representations, warranties and other provisions that were made, among other things, to provide the parties thereto with specified rights and obligations and to allocate risk among them, and no such agreement should be relied upon as constituting or providing any factual disclosures about Enable Midstream Partners, LP, any other persons, any state of affairs or other matters. Exhibit Number 2.1 Master Formation Agreement dated as of March 14, 2013 by and among CenterPoint Energy, Inc., OGE Energy Corp., Bronco Midstream Holdings, LLC and Bronco Midstream Holdings II, LLC Registrant’s registration statement on Form S-1, filed on November 26, 2013 Description Report or Registration Statement SEC File or Registration Number File No. 333- 192542 Exhibit Reference Exhibit 2.1 3.1 Certificate of Limited Partnership of CenterPoint Energy Field Services LP, as amended 3.2 4.1 4.2 4.3 4.4 4.5 4.6 10.1 Fifth Amended and Restated Agreement of Limited Partnership of Enable Midstream Partners, LP Specimen Unit Certificate representing common units (included with Second Amended and Restated Agreement of Limited Partnership of Enable Midstream Partners, LP as Exhibit A thereto) Indenture, dated as of May 27, 2014, between Enable Midstream Partners, LP and U.S. Bank National Association, as trustee First Supplemental Indenture, dated as of May 27, 2014, by and among Enable Midstream Partners, LP, CenterPoint Energy Resources Corp., as guarantor, and U.S. Bank National Association, as trustee Registration Rights Agreement, dated as of May 27, 2014, by and among Enable Midstream Partners, LP, CenterPoint Energy Resources Corp., as guarantor, and RBS Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, and RBC Capital Markets, LLC, as representatives of the initial purchasers Registration Rights Agreement, dated as of February 18, 2016, by and between Enable Midstream Partners, LP and CenterPoint Energy, Inc. Second Supplemental Indenture, dated as of March 9, 2017, by and among Enable Midstream Partners, LP, CenterPoint Energy Resources Corp., as guarantor, and U.S. Bank National Association, as trustee Omnibus Agreement dated as of May 1, 2013 among CenterPoint Energy, Inc., OGE Energy Corp., Enogex Holdings LLC and CenterPoint Energy Field Services LP 10.2 Services Agreement, dated as of May 1, 2013 between CenterPoint Energy, Inc. and CenterPoint Energy Field Services LP 10.3 Services Agreement, dated as of May 1, 2013 between OGE Energy Corp. and CenterPoint Energy Field Services LP 10.4 Employee Transition Agreement, dated as of May 1, 2013 among CNP OGE GP LLC, CenterPoint Energy, Inc. and OGE Energy Corp 10.5 CNP Transitional Seconding Agreement, dated as of May 1, 2013 between CenterPoint Energy Field Services LP and CenterPoint Energy, Inc. 10.6 OGE Transitional Seconding Agreement, dated as of May 1, 2013 between CenterPoint Energy Field Services LP and OGE Energy Corp 10.7 10.8* Registration Rights Agreement dated as of May 1, 2013 by and among CenterPoint Energy Field Services LP, CenterPoint Energy Resources Corp., OGE Enogex Holdings LLC, and Enogex Holdings LLC OGE Energy Corp. Involuntary Severance Benefits Plans for Officers (applicable only to officers of Enogex LLC seconded to Enable Midstream Partners, LP or Enable GP, LLC or one of its subsidiaries) Registrant’s registration statement on Form S-1, filed on November 26, 2013 Registrant’s Form 8-K filed November 15, 2017 Registrant’s Form 8-K filed April 22, 2014 File No. 333- 192542 File No. 001- 36413 File No. 001- 36413 Registrant’s Form 8-K filed May 29, 2014 Registrant’s Form 8-K filed May 29, 2014 File No. 001- 36413 File No. 001- 36413 Exhibit 3.1 Exhibit 3.1 Exhibit 3.1 Exhibit 4.1 Exhibit 4.2 Registrant’s Form 8-K filed May 29, 2014 File No. 001- 36413 Exhibit 4.3 Registrant’s Form 8-K filed February 19, 2016 Registrant’s Form 8-K filed March 9, 2017 File No. 001- 36413 File No. 001- 36413 Registrant’s registration statement on Form S-1, filed on November 26, 2013 Registrant’s registration statement on Form S-1, filed on November 26, 2013 Registrant’s registration statement on Form S-1, filed on November 26, 2013 Registrant’s registration statement on Form S-1, filed on November 26, 2013 Registrant’s registration statement on Form S-1, filed on November 26, 2013 Registrant’s registration statement on Form S-1, filed on November 26, 2013 Registrant’s registration statement on Form S-1, filed on November 26, 2013 Registrant’s registration statement on Form S-1, filed on November 26, 2013 File No. 333- 192542 File No. 333- 192542 File No. 333- 192542 File No. 333- 192542 File No. 333- 192542 File No. 333- 192542 File No. 333- 192542 File No. 333- 192542 Exhibit 4.1 Exhibit 4.2 Exhibit 10.6 Exhibit 10.7 Exhibit 10.8 Exhibit 10.9 Exhibit 10.10 Exhibit 10.11 Exhibit 10.12 Exhibit 10.13 149 Table of Contents 10.9* Enable Midstream Partners, LP Long Term Incentive Plan 10.10* Enable Midstream Partners, LP Short Term Incentive Plan 10.11 10.12 10.13 10.14* 10.15* 10.16* 10.17 10.18 First Amendment to Employee Transition Agreement, dated as of October 22, 2014 by and among Enable GP, LLC, CenterPoint Energy, Inc. and OGE Energy Corp First Amendment to OGE Transitional Seconding Agreement, dated as of October 22, 2014, between OGE Energy Corp. and Enable Midstream Partners, LP First Amendment to Services Agreement, dated as of October 22, 2014, between OGE Energy Corp and Enable Midstream Partners, LP First Amendment to Enable Midstream Partners, LP Short Term Incentive Plan Form of Annual Performance Unit Award Agreement for Senior Officers under the Enable Midstream Partners, LP Long Term Incentive Plan Form of Annual Restricted Unit Award Agreement for Senior Officers under the Enable Midstream Partners, LP Long Term Incentive Plan Amended and Restated Revolving Credit Agreement dated June 18, 2015 by and among Enable Midstream Partners, LP and Citibank, N.A., as sole administrative agent, Citigroup Global Markets, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets, The Bank of Tokyo-Mitsubishi UFJ, LTD. and Wells Fargo Securities, as joint lead arrangers and joint bookrunners, Bank of America, N.A. and Wells Fargo Bank, N.A., as co-syndication agents, Royal Bank of Canada and BTM, as co-documentation agents, and the several lenders from time to time party thereto and the letter of credit issuers from time to time party thereto relating to a $1,750,000,000 5-year unsecured revolving credit facility. Term Loan Agreement dated July 31, 2015 by and among Enable Midstream Partners, LP and Bank of America, N.A., as administrative agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and sole bookrunner, Mizuho Bank, Ltd., as syndication agent and as documentation agent, and the several lenders from time to time party thereto relating to a 3-year $450 million unsecured term loan facility. Registrant’s registration statement on Form S-1, filed on March 17, 2014 Registrant’s registration statement on Form S-1, filed on March 17, 2014 Registrant’s Form 10-Q filed November 4, 2014 Registrant’s Form 10-Q filed November 4, 2014 Registrant’s Form 10-Q filed November 4, 2014 Registrant’s Form 10-K filed on February 18, 2015 Registrant’s Form 8-K filed June 3, 2015 File No. 333- 192542 File No. 333- 192542 File No. 001- 36413 File No. 001- 36413 File No. 001- 36413 File No. 001- 36413 File No. 001- 36413 Exhibit 10.18 Exhibit 10.19 Exhibit 10.1 Exhibit 10.2 Exhibit 10.3 Exhibit 10.16 Exhibit 10.1 Registrant’s Form 8-K filed June 3, 2015 File No. 001- 36413 Exhibit 10.2 Registrant’s Form 8-K filed June 19, 2015 File No. 001- 36413 Exhibit 10.1 Registrant’s Form 10-Q filed November 4, 2015 File No. 001- 36413 Exhibit 10.1 10.19* Enable Midstream Partners Deferred Compensation Plan effective January 1, 2015 10.20* 10.21* 10.22* 10.23* 10.24* 10.25 10.26* Enable Midstream Partners Deferred Compensation Plan Adoption Agreement effective January 1, 2015 Second Amendment to Enable Midstream Partners, LP Short Term Incentive Plan Effective February 16, 2016 Enable Midstream Partners, LP Long Term Incentive Plan Annual Performance Unit Award Agreement for Senior Officers Enable Midstream Partners, LP Long Term Incentive Plan Annual Phantom Unit Award Agreement for Senior Officers Special Severance Agreement and General Release by and between Enable Midstream Services, LLC and Paul A. Weissgarber Purchase Agreement by and between Enable Midstream Partners, LP and CenterPoint Energy, Inc. dated January 28, 2016 Enable Midstream Partners, LP Change of Control Plan 10.27 ATM Equity Offering Sales Agreement dated as of May 12, 2017 Registrant’s Form 10-K filed on February 17, 2016 Registrant’s Form 10-K filed on February 17, 2016 Registrant’s Form 10-K filed on February 17, 2016 Registrant’s Form 10-K filed on February 17, 2016 Registrant’s Form 10-K filed on February 17, 2016 Registrant’s Form 10-Q filed May 4, 2016 Registrant’s Form 8-K filed February 1, 2016 Registrant’s Form 10-Q filed August 3, 2016 Registrant’s Form 8-K filed May 12, 2017 File No. 001- 36413 File No. 001- 36413 File No. 001- 36413 File No. 001- 36413 File No. 001- 36413 File No. 001- 36413 File No. 001- 36413 File No. 001- 36413 File No. 001- 36413 Exhibit 10.21 Exhibit 10.22 Exhibit 10.23 Exhibit 10.24 Exhibit 10.25 Exhibit 10.2 Exhibit 10.1 Exhibit 10.1 Exhibit 1.1 10.28* First Amendment to Enable Midstream Partners Deferred Compensation Plan Adoption Agreement effective January 1, 2015 Registrant’s Form 10-Q filed August 1, 2017 File No. 001- 36413 Exhibit 10.2 +12.1 Computation of ratio of earnings to fixed charges +21.1 Subsidiaries of the Partnership +23.1 Consent of Deloitte & Touche, LLP +31.1 Rule 13a-14(a)/15d-14(a) Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Rule 13a-14(a)/15d-14(a) Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 +31.2 +32.1 Section 1350 Certification of principal executive officer +32.2 Section 1350 Certification of principal financial officer +101.INS XBRL Instance Document +101.SCH XBRL Taxonomy Schema Document +101.PRE XBRL Taxonomy Presentation Linkbase Document 150 Table of Contents +101.LAB XBRL Taxonomy Label Linkbase Document +101.CAL XBRL Taxonomy Label Linkbase Document +101.DEF XBRL Definition Linkbase Document Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, Enable Midstream Partners, LP has not filed as exhibits to this Form 10-K certain long-term debt instruments, including indentures, under which the total amount of securities authorized does not exceed 10% of the total assets of Enable Midstream Partners, LP and its subsidiaries on a consolidated basis. Enable Midstream Partners, LP hereby agrees to furnish a copy of any such instrument to the SEC upon request. Item 16. Form 10-K Summary Not applicable. 151 Table of Contents Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIGNATURE Date: February 20, 2018 ENABLE MIDSTREAM PARTNERS, LP (Registrant) By: ENABLE GP, LLC Its general partner By: /s/ Tom Levescy Tom Levescy Senior Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer) 152 Table of Contents Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Signature Title Date /s/ Rodney J. Sailor Rodney J. Sailor /s/ John P. Laws John P. Laws /s/ Tom Levescy Tom Levescy /s/ Sean Trauschke Sean Trauschke /s/ Stephen E. Merrill Stephen E. Merrill /s/ Scott M. Prochazka Scott M. Prochazka /s/ William D. Rogers William D. Rogers /s/ Alan N. Harris Alan N. Harris /s/ Ronnie K. Irani Ronnie K. Irani /s/ Peter H. Kind Peter H. Kind President and Chief Executive Officer and Director (Principal Executive Officer) February 20, 2018 Executive Vice President, Chief Financial Officer, and Treasurer (Principal Financial Officer) Senior Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer) February 20, 2018 February 20, 2018 Chairman of the Board February 20, 2018 Director Director Director Director Director Director 153 February 20, 2018 February 20, 2018 February 20, 2018 February 20, 2018 February 20, 2018 February 20, 2018 Enable Midstream Partners, LP Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed Charges and Preferred Unit Distributions Exhibit 12.1 Earnings: Income (loss) before income taxes (before earnings from equity method affiliates) (1) Add: Fixed charges Amortization of capitalized interest Distributed earnings of equity method affiliates Noncontrolling interest in pre-tax loss of subsidiaries Less: Capitalized interest Noncontrolling interest in pre-tax income of subsidiaries Total earnings Fixed charges: Interest expense, net of capitalized interest Capitalized interest Amortization of premium (discount) on long-term debt Amortization of debt expense Implicit interest in rents Total fixed charges Series A Preferred Unit distributions Total combined fixed charges and preferred unit distributions Year Ended December 31, 2017 2016 2015 2014 2013 (In millions) $ 408 $ 286 $ (800) $ 515 $ 411 132 2 28 — (1) (1) 114 2 28 — (4) (1) 114 2 29 19 (11) — 92 1 20 — (8) (3) 84 1 15 — (5) (3) 568 $ 425 $ (647) $ 617 $ 503 120 $ 99 $ 90 $ 70 $ 1 5 (3) 9 4 5 (3) 9 11 5 (3) 11 8 9 (3) 8 132 $ 114 $ 114 $ 92 $ 36 22 — — 168 $ 136 $ 114 $ 92 $ 67 7 8 (2) 4 84 — 84 $ $ $ $ Ratio of earnings to fixed charges (2) Ratio of earnings to combined fixed charges and preferred unit distributions (3) 4.30 3.38 3.72 3.12 — — 6.73 — 5.99 — ________________________ Includes non-cash impairment on goodwill and long-lived assets of $1,134 million for the year ended December 31, 2015. (1) (2) Earnings were inadequate to cover fixed charges by $761 million for the year ended December 31, 2015. (3) No preferred units were outstanding for the years ended December 31, 2015, 2014, or 2013. No historical ratios of earnings to combined fixed charges and preferred unit distributions are presented for these years. For purposes of determining the ratio of earnings to fixed charges, earnings are defined as pre-tax income or loss from continuing operations before earnings from equity method affiliates, plus fixed charges, plus amortization of capitalized interest, plus distributed earnings from equity method affiliates, plus noncontrolling interest in pre-tax loss of subsidiaries, less capitalized interest, less noncontrolling interest in pre-tax income of subsidiaries. Fixed charges consist of interest expensed, capitalized interest, amortization of deferred loan costs and an estimate of the interest within rental expense. Subsidiaries of Enable Midstream Partners, LP Exhibit 21.1 Subsidiary Enable Gas Gathering, LLC Enable Gas Transmission, LLC Enable Gathering and Processing, LLC Enable Oklahoma Intrastate Transmission, LLC Enable Products, LLC State of Incorporation Oklahoma Delaware Oklahoma Delaware Oklahoma CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement No. 333-215670 on Form S-3, Registration Statement No. 333-212192 on Form S-3D, Registration Statement No. 333-195226 on Form S-8 and Registration Statement No. 333-204002 on Form S-3ASR of our reports dated February 20, 2018 relating to the consolidated financial statements of Enable Midstream Partners, LP and subsidiaries, (collectively the “Partnership”), and the effectiveness of the Partnership’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Partnership for the year ended December 31, 2017. Exhibit 23.1 /s/ DELOITTE & TOUCHE LLP Houston, Texas February 20, 2018 Exhibit 31.1 I, Rodney J. Sailor, certify that: 1. I have reviewed this Annual Report on Form 10-K of Enable Midstream Partners, LP; CERTIFICATIONS 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(s) 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(s) 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 which 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: February 20, 2018 /s/ Rodney J. Sailor Rodney J. Sailor President and Chief Executive Officer, Enable GP, LLC, the General Partner of Enable Midstream Partners, LP (Principal Executive Officer) Exhibit 31.2 I, John P. Laws, certify that: 1. I have reviewed this Annual Report on Form 10-K of Enable Midstream Partners, LP; CERTIFICATIONS 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(s) 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(s) 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 which 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: February 20, 2018 /s/ John P. Laws John P. Laws Executive Vice President, Chief Financial Officer, and Treasurer, Enable GP, LLC, the General Partner of Enable Midstream Partners, LP (Principal Financial Officer) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32.1 In connection with the Annual Report of Enable Midstream Partners, LP (the Partnership) on Form 10-K for the period ended December 31, 2017, as filed with the Securities and Exchange Commission (the Report), I, Rodney J. Sailor, President and Chief Executive Officer of Enable GP, LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) 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 Partnership. Date: February 20, 2018 /s/ Rodney J. Sailor Rodney J. Sailor President and Chief Executive Officer, Enable GP, LLC, the General Partner of Enable Midstream Partners, LP (Principal Executive Officer) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32.2 In connection with the Annual Report of Enable Midstream Partners, LP (the Partnership) on Form 10-K for the period ended December 31, 2017, as filed with the Securities and Exchange Commission (the Report), I, John P. Laws, Executive Vice President, Chief Financial Officer, and Treasurer of Enable GP, LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) 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 Partnership. Date: February 20, 2018 /s/ John P. Laws John P. Laws Executive Vice President, Chief Financial Officer, and Treasurer, Enable GP, LLC, the General Partner of Enable Midstream Partners, LP (Principal Financial Officer) 

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