Exhibit 99.2

 

MIDCOAST ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

 

		For the year ended December 31,
		2015				2014				2013
		(unaudited; in millions, except per unit amounts)
Operating revenues:
Operating revenue		$	2,769.7			$	5,688.2			$	5,380.5
Operating revenue - affiliate			73.0				206.1				213.1
			2,842.7				5,894.3				5,593.6
Operating expenses:
Cost of natural gas and natural gas liquids			2,295.1				5,026.7				4,817.5
Cost of natural gas and natural gas liquids - affiliate			77.8				119.2				119.6
Operating and maintenance			172.9				219.2				242.2
Operating and maintenance - affiliate			100.2				104.7				108.1
General and administrative			7.2				8.7				-
General and administrative - affiliate			75.4				96.1				98.2
Goodwill impairment			226.5				-				-
Asset impairment			12.3				15.6				-
Depreciation and amortization			157.8				151.4				142.9
			3,125.2				5,741.6				5,528.5
Operating income (loss)			(282.5	)			152.7				65.1
Interest expense, net			(29.5	)			(16.7	)			(1.7	)
Equity in earnings (losses) of joint ventures			29.2				13.2				(1.0	)
Other loss			(0.3	)			(0.3	)			(0.2	)
Income (loss) before income tax expense			(283.1	)			148.9				62.2
Income tax expense			(1.4	)			(4.6	)			(8.3	)
Net income (loss)		$	(284.5	)		$	144.3			$	53.9
Less: Predecessor income prior to initial public offering
(from January 1, 2013 through November 12, 2013)											56.3
Net loss subsequent to initial public offering to
Midcoast Energy Partners, L.P. (from November 13, 2013 through
December 31, 2013)											(2.4	)
Less: Net income (loss) attributable to noncontrolling interest			(120.6	)			80.2				(0.6	)
Net income (loss) attributable to general and limited partner ownership
interest in Midcoast Energy Partners, L.P.		$	(163.9	)		$	64.1				(1.8	)
Net income (loss) attributable to limited partner ownership interest		$	(160.5	)		$	62.8			$	19.7
Net income (loss) per limited partner unit (basic and diluted)		$	(3.55	)		$	1.39			$	0.68
Weighted average limited partner units outstanding			45.2				45.2				29.2
Cash distributions paid per limited partner unit outstanding		$	1.40			$	1.14			$	-

 

 

MIDCOAST ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		For the year ended December 31,
		2015				2014				2013
		(unaudited; in millions)
Cash provided by operating activities:
Net income (loss)		$	(284.5	)		$	144.3			$	53.9
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization			157.8				151.4				142.9
Derivative fair value net losses (gains)			58.3				(158.4	)			3.0
Inventory market price adjustments			5.8				11.4				3.4
Asset impairment			12.3				15.6				-
Distributions from investment in joint ventures			29.2				12.2				-
Equity loss (earnings) from investment in joint ventures			(29.2	)			(13.2	)			1.0
Deferred income taxes			0.1				3.1				7.3
Loss on sale of net assets			3.2				-				-
Goodwill impairment			226.5				-				-
Other			0.9				1.2				0.3
Changes in operating assets and liabilities, net of acquisitions:
Receivables, trade and other			2.9				33.2				7.9
Due from General Partner and affiliates			12.1				608.6				(633.9	)
Accrued receivables			173.5				(47.4	)			295.6
Inventory			43.8				(4.9	)			(12.2	)
Current and long-term other assets			10.1				(23.9	)			(14.3	)
Due to General Partner and affiliates			29.6				(468.2	)			522.8
Accounts payable and other			(11.7	)			(21.2	)			34.6
Accrued purchases			(231.4	)			(90.5	)			4.9
Interest payable			0.2				4.7				0.3
Property and other taxes payable			(2.5	)			1.1				3.4
Net cash provided by operating activities			207.0				159.1				420.9
Cash used in investing activities:
Additions to property, plant and equipment			(191.1	)			(237.7	)			(273.4	)
Changes in restricted cash			28.2				18.7				(61.5	)
Acquisitions			(43.8	)			(0.2	)			(0.9	)
Proceeds from the sale of net assets			2.5				-				5.0
Investment in joint ventures			(4.2	)			(36.7	)			(188.6	)
Distributions from investment in joint ventures in excess of cumulative earnings			12.0				27.8				-
Other			(1.0	)			(3.2	)			(2.9	)
Net cash used in investing activities			(197.4	)			(231.3	)			(522.3	)
Cash provided by financing activities:
Proceeds from long-term debt, net of discounts			-				398.1				-
Net borrowings under credit facility			130.0				25.0				335.0
Debt origination fees			-				-				(3.0	)
Net proceeds from unit issuances			-				-				354.9
Acquisition of noncontrolling interest in subsidiary			-				(350.0	)			-
Contributions from Predecessor partner interests			-				-				341.9
Contribution from noncontrolling interest			40.7				142.8				-
Distributions to Predecessor partner interests			-				-				(247.7	)
Distributions to partners			(64.6	)			(52.7	)			-
Distributions to noncontrolling interest			(97.7	)			(95.9	)			-
Distribution to EEP for net assets contributed			-				-				(674.8	)
Net cash provided by financing activities			8.4				67.3				106.3
Net increase (decrease) in cash and cash equivalents			18.0				(4.9	)			4.9
Cash and cash equivalents at beginning of year			-				4.9				-
Cash and cash equivalents at end of period		$	18.0			$	-			$	4.9

 

 

MIDCOAST ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

		December 31,
		2015				2014
		(unaudited; in millions)
ASSETS
Current assets:
Cash and cash equivalents		$	18.0			$	-
Restricted cash			20.6				42.8
Receivables, trade and other, net of allowance for doubtful accounts
of $2.5 million in 2015 and $1.8 million in 2014			13.3				15.6
Due from General Partner and affiliates			47.0				49.7
Accrued receivables			56.1				229.6
Inventory			31.9				81.5
Other current assets			118.5				178.1
			305.4				597.3
Property, plant and equipment, net			4,226.3				4,159.7
Goodwill			-				226.5
Intangible assets, net			272.9				247.7
Equity investment in joint ventures			372.3				380.6
Other assets, net			97.0				142.3
Total assets		$	5,273.9			$	5,754.1
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Due to General Partner and affiliates		$	45.7			$	41.1
Accounts payable and other			92.6				113.8
Accrued purchases			143.8				375.2
Property and other taxes payable			18.4				20.9
Interest payable			5.2				5.0
			305.7				556.0
Long-term debt			890.0				760.0
Other long-term liabilities			45.9				41.5
Total liabilities			1,241.6				1,357.5
Commitments and contingencies
Partners’ capital:
Class A common units (22,610,056 authorized and issued at December 31, 2015 and 2014)			522.2				634.2
Subordinated units (22,610,056 authorized and issued at December 31, 2015 and 2014)			1,062.0				1,174.0
General Partner units (922,859 authorized and issued at December 31, 2015 and 2014)			43.3				47.8
Accumulated other comprehensive income (loss)			(0.9	)			11.6
Total Midcoast Energy Partners, L.P. partners’ capital			1,626.6				1,867.6
Noncontrolling interest			2,405.7				2,529.0
Total partners’ capital			4,032.3				4,396.6
		$	5,273.9			$	5,754.1

  

 

NET INCOME PER LIMITED PARTNER AND GENERAL PARTNER INTEREST

 

We allocate our net income among our General Partner and limited partners using the two-class method. Under the two-class method, we allocate our net income to our limited partners, our General Partner and the holders of our incentive distribution rights, or IDRs, in accordance with the terms of our partnership agreement. We also allocate any earnings in excess of distributions to our limited partners, our General Partner and the holders of the IDRs in accordance with the terms of our partnership agreement. We allocate any distributions in excess of earnings for the period to our General Partner and our limited partners based on their respective proportionate ownership interests in us, after taking into account distributions to be paid with respect to the IDRs, as set forth in our partnership agreement.

 

Distribution Targets		Portion of Quarterly Distribution Per Unit		Percentage Distributed to Limited Partners		Percentage Distributed to General Partner
Minimum Quarterly Distribution		Up to $0.3125		98%		2%
First Target Distribution		> $0.3125 to $0.359375		98%		2%
Second Target Distribution		> $0.359375 to $0.390625		85%		15%
Third Target Distribution		> $0.390625 to $0.468750		75%		25%
Over Third Target Distribution		In excess of $0.468750		50%		50%

 

  We determined basic and diluted net income (loss) per limited partner unit as follows:                       

 

		For the year ended December 31,
		2015				2014				2013(1)
		(unaudited; in millions, except per unit amounts)
Net income (loss)		$	(284.5	)		$	144.3			$	53.9
Less: Net income (loss) attributable to noncontrolling interest			(120.6	)			80.2				33.7
Net income (loss) attributable to general and limited partner interests
in Midcoast Energy Partners, L.P.			(163.9	)			64.1				20.2
Less distributions:
Total distributed earnings to our General Partner			1.2				1.2				0.8
Total distributed earnings to our limited partners			64.1				59.6				36.5
Total distributed earnings			65.3				60.8				37.3
Underdistributed (Overdistributed) earnings		$	(229.2	)		$	3.3			$	(17.1	)
Weighted average limited partner units outstanding			45.2				45.2				29.2
Basic and diluted earnings per unit:
Distributed earnings per limited partner unit (2)		$	1.42			$	1.32			$	1.25
Underdistributed (Overdistributed) earnings per limited partner unit (3)			(4.97	)			0.07				(0.57	)
Net income (loss) per limited partner unit (basic and diluted)		$	(3.55	)		$	1.39			$	0.68

 

(1)

Represents calculation retrospectively reflecting the affiliate capitalization of MEP consisting of 4.1 million MEP Class A common units, 22.6 million MEP subordinated units and MEP general partner interest upon the transfer of a controlling ownership, including limited partner and general partner interest, in Midcoast Operating. The noncontrolling interest reflects the 61% that was retained by EEP.

(2)

Represents the total distributed earnings to limited partners divided by the weighted average number of limited partner interests outstanding for the period.

(3)

Represents the limited partners' share (98%) of distributions in excess of earnings divided by the weighted average number of limited partner interests outstanding for the period and under distributed earnings allocated to the limited partners based on the distribution waterfall that is outlined in our partnership agreement.

 

 

SEGMENT INFORMATION

 

Our business is divided into operating segments, defined as components of the enterprise, about which financial information is available and evaluated regularly by our Chief Operating Decision Maker, collectively comprised of our senior management, in deciding how resources are allocated and performance is assessed.

 

Each of our reportable segments is a business unit that offers different services and products that are managed separately, since each business segment requires different operating strategies. We conduct our business through two distinct reporting segments:

 

•

Gathering, Processing, and Transportation; and

 

•

Logistics and Marketing.

 

The following tables present certain financial information relating to our business segments and corporate activities:

 

		As of and for the year ended December 31, 2015
		Gathering, Processing and Transportation				Logistics and Marketing				Corporate (1)				Total
		(unaudited; in millions)
Total revenue		$	1,445.1			$	2,290.5			$	-			$	3,735.6
Less: Intersegment revenue			856.6				36.3				-				892.9
Operating revenue			588.5				2,254.2				-				2,842.7
Cost of natural gas and natural gas liquids			173.8				2,199.1				-				2,372.9
Segment gross margin			414.7				55.1				-				469.8
Operating and maintenance			216.0				56.0				1.1				273.1
General and administrative			67.3				11.7				3.6				82.6
Goodwill impairment			206.1				20.4				-				226.5
Asset impairment			-				12.3				-				12.3
Depreciation and amortization			149.5				8.3				-				157.8
			638.9				108.7				4.7				752.3
Operating loss			(224.2	)			(53.6	)			(4.7	)			(282.5	)
Other income (expense)			29.3	(2)			-				(0.4	)			28.9
Interest expense, net			-				-				(29.5	)			(29.5	)
Loss before income tax expense			(194.9	)			(53.6	)			(34.6	)			(283.1	)
Income tax expense			-				-				(1.4	)			(1.4	)
Net loss			(194.9	)			(53.6	)			(36.0	)			(284.5	)
Less: Net loss attributable to noncontrolling interest			-				-				(120.6	)			(120.6	)
Net income (loss) attributable to general and limited partner ownership interests in Midcoast Energy Partners, L.P.		$	(194.9	)		$	(53.6	)		$	84.6			$	(163.9	)
Total assets		$	5,004.6	(3)		$	182.6			$	86.7			$	5,273.9
Capital expenditures (excluding acquisitions)		$	162.3			$	11.3			$	4.9			$	178.5

 

(1)

Corporate consists of interest expense, interest income, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments.

(2)

Other income for our Gathering, Processing and Transportation segment includes our equity investment in the Texas Express NGL system.

(3)

Total assets for our Gathering, Processing and Transportation segment includes $372.3 million for our equity investment in the Texas Express NGL system.

 

                               

		As of and for the year ended December 31, 2014
		Gathering, Processing and Transportation				Logistics and Marketing				Corporate (1)				Total
		(unaudited; in millions)
Total revenue		$	2,611.2			$	5,329.8			$	-			$	7,941.0
Less: Intersegment revenue			1,963.9				82.8				-				2,046.7
Operating revenue			647.3				5,247.0				-				5,894.3
Cost of natural gas and natural gas liquids			27.1				5,118.8				-				5,145.9
Segment gross margin			620.2				128.2				-				748.4
Operating and maintenance			260.6				62.9				0.4				323.9
General and administrative			87.1				12.4				5.3				104.8
Asset impairment			15.6				-				-				15.6
Depreciation and amortization			142.0				9.4				-				151.4
			505.3				84.7				5.7				595.7
Operating income (loss)			114.9				43.5				(5.7	)			152.7
Other income			12.9	(2)			-				-				12.9
Interest expense, net			-				-				(16.7	)			(16.7	)
Income (loss) before income tax expense			127.8				43.5				(22.4	)			148.9
Income tax expense			-				-				(4.6	)			(4.6	)
Net income (loss)			127.8				43.5				(27.0	)			144.3
Less: Net income attributable to noncontrolling interest			-				-				80.2				80.2
Net income (loss) attributable to general and limited partner ownership interests in Midcoast Energy Partners, L.P.		$	127.8			$	43.5			$	(107.2	)		$	64.1
Total assets		$	5,205.4	(3)		$	460.3			$	88.4			$	5,754.1
Capital expenditures (excluding acquisitions)		$	213.4			$	16.6			$	6.0			$	236.0

 

(1)

Corporate consists of interest expense, interest income, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments.

(2)

Other income for our Gathering, Processing and Transportation segment includes our equity investment in the Texas Express NGL system.

(3)

Total assets for our Gathering, Processing and Transportation segment includes $380.6 million for our equity investment in the Texas Express NGL system.

 

 

		As of and for the year ended December 31, 2013
		Gathering, Processing and Transportation				Logistics and Marketing				Corporate (1)				Total
		(unaudited; in millions)
Total revenue		$	2,689.8			$	4,963.7			$	-			$	7,653.5
Less: Intersegment revenue			1,960.8				99.1				-				2,059.9
Operating revenue			729.0				4,864.6				-				5,593.6
Cost of natural gas and natural gas liquids			157.6				4,779.5				-				4,937.1
Segment gross margin			571.4				85.1				-				656.5
Operating and maintenance			278.9				71.4				-				350.3
General and administrative			86.6				11.6				-				98.2
Depreciation and amortization			135.7				7.2				-				142.9
			501.2				90.2				-				591.4
Operating income (loss)			70.2				(5.1	)			-				65.1
Other income (expense)			(1.5	)(2)			-				0.3				(1.2	)
Interest expense, net			-				-				(1.7	)			(1.7	)
Income (loss) before income tax expense			68.7				(5.1	)			(1.4	)			62.2
Income tax expense			-				-				(8.3	)			(8.3	)
Net income (loss)			68.7				(5.1	)			(9.7	)			53.9
Less: Net loss attributable to controlling interest			-				-				(0.6	)			(0.6	)
Net income (loss) attributable to general and limited partner ownership interests in Midcoast Energy Partners, L.P.		$	68.7			$	(5.1	)		$	(9.1	)		$	54.5
Total assets		$	4,962.1	(3)		$	591.4			$	482.9			$	6,036.4
Capital expenditures (excluding acquisitions)		$	233.8			$	17.5			$	18.8			$	270.1

 

(1)

Corporate consists of interest expense, interest income, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments.

(2)

Other income (expense) for our Gathering, Processing, and Transportation segment includes our equity investment in the Texas Express NGL system which began recognizing operating costs during the fourth quarter of 2013.

(3)

Total assets for our Gathering, Processing and Transportation segment includes $371.3 million for our equity investment in the Texas Express NGL system.