UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

~~(Mark One)~~ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


☒			~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)~~ OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For the quarterly period ended September 30, 2020~~


☐			~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

Commission file number 1-2921

PANHANDLE EASTERN PIPE LINE COMPANY, LP

(Exact name of registrant as specified in its charter)


Delaware			44-0382470
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

8111 Westchester Drive, Suite 600, Dallas, Texas 75225

(Address of principal executive offices) (zip code)

(214) 981-0700

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company 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

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

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

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

Panhandle Eastern Pipe Line Company, LP meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.

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FORM 10-Q

PANHANDLE EASTERN PIPE LINE COMPANY, LP

TABLE OF CONTENTS

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~~Forward-Looking Statements~~

Certain matters discussed in this report, excluding historical information, as well as some statements by Panhandle Eastern Pipe Line Company, LP and its subsidiaries (“PEPL” or the “Company”) in periodic press releases and some oral statements of Panhandle officials during presentations about the Company, include forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Statements using words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “estimate,” “intend,” “continue,” “believe,” “may,” “will” or similar expressions help identify forward-looking statements. Although the Company believes such forward-looking statements are based on reasonable assumptions and current expectations and projections about future events, no assurance can be given that such assumptions, expectations, or projections will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, the Company’s actual results may vary materially from those anticipated, projected, forecasted, estimated or expressed in forward-looking statements since many of the factors that determine these results are subject to uncertainties and risks that are difficult to predict and beyond management’s control. For additional discussion of risks, uncertainties and assumptions, see “Part I — Item 1A. Risk Factors” in the Company’s Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on February 21, 2020 and “Part II – Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q.

Definitions

The following is a list of certain acronyms and terms used throughout this document:
































			ET						Energy Transfer LP, the parent company of ~~ETO~~PEPL

			ETO						Energy Transfer Operating, L.P., the former parent company of PEPL

			Exchange Act						Securities Exchange Act of 1934

			FERC						Federal Energy Regulatory Commission



			GAAP						~~Accounting~~accounting principles generally accepted in the United States of America































			~~PCBs~~						~~Polychlorinated biphenyls~~













			Sea Robin						Sea Robin Pipeline Company, LLC

			SEC						~~United States~~ Securities and Exchange Commission



			Southwest Gas						Pan Gas Storage LLC (d.b.a. Southwest Gas)



			TBtu						Trillion British thermal units

			Trunkline						Trunkline Gas Company, LLC

Forward-Looking Statements

Certain matters discussed in this report, excluding historical information, as well as some statements by Panhandle Eastern Pipe Line Company, LP and its subsidiaries (“PEPL” or the “Company”) in periodic press releases and some oral statements of PEPL officials during presentations about the Company, include forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Statements using words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “estimate,” “intend,” “continue,” “believe,” “may,” “will” or similar expressions help identify forward-looking statements. Although the Company believes such forward-looking statements are based on reasonable assumptions and current expectations and projections about future events, no assurance can be given that such assumptions, expectations, or projections will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, the Company’s actual results may vary materially from those anticipated, projected, forecasted, estimated or expressed in forward-looking statements since many of the factors that determine these results are subject to uncertainties and risks that are difficult to predict and beyond management’s control. For additional discussion of risks, uncertainties and assumptions, see “Part I — Item 1A. Risk Factors” in the Company’s Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 19, 2021.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(unaudited)


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	0	$	0	Cash and cash equivalents	$	0	$	0
Accounts receivable, net	Accounts receivable, net	38		45		Accounts receivable, net	48		47
Accounts receivable from related companies	Accounts receivable from related companies	8		9		Accounts receivable from related companies	6		8
Exchanges receivable	Exchanges receivable	5		9		Exchanges receivable	8		6
Inventories	Inventories	47		61		Inventories	110		86
Other current assets	Other current assets	7		7		Other current assets	2		6
Total current assets	Total current assets	105		131		Total current assets	174		153

Property, plant and equipment	Property, plant and equipment	3,331		3,281		Property, plant and equipment	3,374		3,349
Accumulated depreciation	Accumulated depreciation	(680)		(607)		Accumulated depreciation	(768)		(717)
		2,651		2,674			2,606		2,632

Operating lease right-of-use assets	Operating lease right-of-use assets	5		5		Operating lease right-of-use assets	4		5
Other non-current assets, net	Other non-current assets, net	164		159		Other non-current assets, net	177		169

Total assets	Total assets	$	2,925	$	2,969	Total assets	$	2,961	$	2,959

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~Table of Contents~~

~~PANHANDLE EASTERN PIPE LINE COMPANY, LP~~

~~CONSOLIDATED BALANCE SHEETS~~

~~(Dollars in millions)~~

~~(unaudited)~~

September 30,
2020 December 31,
2019
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable $ 5 $ 11
Accounts payable to related companies 17 34
Exchanges payable 33 47
Other current liabilities 48 70
Total current liabilities 103 162
Long-term debt, less current maturities 246 247
Note payable to related company 593 732
Non-current operating lease liabilities 5 5
Other non-current liabilities 232 221
Commitments and contingencies
Partners’ capital:
Partners’ capital 1,758 1,626
Accumulated other comprehensive loss (12) (24)
Total partners’ capital 1,746 1,602
Total liabilities and partners’ capital $ 2,925 $ 2,969


LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:

Accounts payable	$	38	$	4
Accounts payable to related companies	17		14
Exchanges payable	84		71

Other current liabilities	48		33
Total current liabilities	187		122

Long-term debt, less current maturities	244		245
Note payable to related company	306		550
Non-current operating lease liabilities	4		5
Other non-current liabilities	268		243
Commitments and contingencies	0		0

Partners’ capital:
Partners’ capital	1,956		1,803
Accumulated other comprehensive loss	(4)		(9)
Total partners’ capital	1,952		1,794

Total liabilities and partners’ capital	$	2,961	$	2,959

The accompanying notes are an integral part of these consolidated financial statements.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Dollars in millions)

(unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
OPERATING REVENUES:	OPERATING REVENUES:									OPERATING REVENUES:
Transportation and storage of natural gas	Transportation and storage of natural gas	$	127	$	130	$	388	$	415	Transportation and storage of natural gas	$	111	$	122	$	317	$	261
Other	Other	5		5		14		17		Other	4		4		9		9
Total operating revenues	Total operating revenues	132		135		402		432		Total operating revenues	115		126		326		270
OPERATING EXPENSES:	OPERATING EXPENSES:									OPERATING EXPENSES:

Operating and maintenance	Operating and maintenance	40		48		129		144		Operating and maintenance	47		39		87		89
General and administrative	General and administrative	10		8		29		22		General and administrative	9		9		18		19
Depreciation and amortization	Depreciation and amortization	27		26		79		85		Depreciation and amortization	26		26		52		52
Impairment losses		0		12		0		12
Total operating expenses	Total operating expenses	77		94		237		263		Total operating expenses	82		74		157		160
OPERATING INCOME	OPERATING INCOME	55		41		165		169		OPERATING INCOME	33		52		169		110
OTHER EXPENSE:
OTHER INCOME (EXPENSE):										OTHER INCOME (EXPENSE):
Interest expense, net	Interest expense, net	(3)		(3)		(10)		(13)		Interest expense, net	(3)		(3)		(7)		(7)
Interest expense — related company	Interest expense — related company	(8)		(6)		(25)		(15)		Interest expense — related company	(4)		(8)		(10)		(17)

Other, net	Other, net	(1)		(2)		(5)		(2)		Other, net	0		3		0		(4)
INCOME BEFORE INCOME TAX BENEFIT		43		30		125		139
Income tax benefit		(1)		(445)		(2)		(417)
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)										INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)	26		44		152		82
Income tax expense (benefit)										Income tax expense (benefit)	0		1		0		(1)
NET INCOME	NET INCOME	44		475		127		556		NET INCOME	26		43		152		83

OTHER COMPREHENSIVE INCOME, NET OF TAX	OTHER COMPREHENSIVE INCOME, NET OF TAX									OTHER COMPREHENSIVE INCOME, NET OF TAX
Actuarial gain relating to postretirement benefit plans	Actuarial gain relating to postretirement benefit plans	4		6		13		15		Actuarial gain relating to postretirement benefit plans	0		4		6		9

COMPREHENSIVE INCOME	COMPREHENSIVE INCOME	$	48	$	481	$	140	$	571	COMPREHENSIVE INCOME	$	26	$	47	$	158	$	92

The accompanying notes are an integral part of these consolidated financial statements.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

FOR THE ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2020~~2021 AND ~~2019~~2020

(Dollars in millions)

(unaudited)


		Partners’ Capital		Accumulated Other Comprehensive Loss		Total			Partners’ Capital		Accumulated Other Comprehensive Loss		Total
Balance, December 31, 2019		$	1,626	$	(24)	$	1,602
Balance, December 31, 2020								Balance, December 31, 2020	$	1,803	$	(9)	$	1,794
Net income	Net income	40		0		40		Net income	126		0		126
Other comprehensive income, net of tax	Other comprehensive income, net of tax	0		5		5		Other comprehensive income, net of tax	0		6		6
Other	Other	4		0		4		Other	1		(1)		0
Balance, March 31, 2020		1,670		(19)		1,651
Balance, March 31, 2021								Balance, March 31, 2021	1,930		(4)		1,926
Net income	Net income	43		0		43		Net income	26		0		26
Other comprehensive income, net of tax		0		4		4
Balance, June 30, 2020		1,713		(15)		1,698
Net income		44		0		44
Other comprehensive income, net of tax		0		4		4
Other		1		(1)		0
Balance, September 30, 2020		$	1,758	$	(12)	$	1,746

Balance, June 30, 2021								Balance, June 30, 2021	$	1,956	$	(4)	$	1,952


		Partners’ Capital		Accumulated Other Comprehensive Loss		Total			Partners’ Capital		Accumulated Other Comprehensive Loss		Total
Balance, December 31, 2018		$	1,409	$	(47)	$	1,362
Net income		50		0		50
Other comprehensive income, net of tax		0		6		6
Balance, March 31, 2019		1,459		(41)		1,418
Balance, December 31, 2019								Balance, December 31, 2019	$	1,626	$	(24)	$	1,602
Net income	Net income	31		0		31		Net income	40		0		40
Other comprehensive income, net of tax	Other comprehensive income, net of tax	0		3		3		Other comprehensive income, net of tax	0		5		5
Other	Other	1		0		1		Other	4		0		4
Balance, June 30, 2019		1,491		(38)		1,453
Balance, March 31, 2020								Balance, March 31, 2020	1,670		(19)		1,651
Net income	Net income	475		0		475		Net income	43		0		43
Distribution to partners		(375)		0		(375)
Other comprehensive income, net of tax	Other comprehensive income, net of tax	0		6		6		Other comprehensive income, net of tax	0		4		4
Other		1		0		1
Balance, September 30, 2019		$	1,592	$	(32)	$	1,560

Balance, June 30, 2020								Balance, June 30, 2020	$	1,713	$	(15)	$	1,698

The accompanying notes are an integral part of these consolidated financial statements.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2020		2019			2021		2020
OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net income	Net income	$	127	$	556	Net income	$	152	$	83
Reconciliation of net income to net cash provided by operating activities:	Reconciliation of net income to net cash provided by operating activities:					Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	79		85		Depreciation and amortization	52		52
Goodwill impairment		0		12

Deferred income taxes	Deferred income taxes	(2)		5		Deferred income taxes	0		(1)
Amortization of deferred financing fees	Amortization of deferred financing fees	(1)		(4)		Amortization of deferred financing fees	(1)		(1)

PEPL Restructuring income tax benefit		0		(445)

Other non-cash	Other non-cash	4		9		Other non-cash	5		3
Changes in operating assets and liabilities	Changes in operating assets and liabilities	(3)		38		Changes in operating assets and liabilities	62		0
Net cash flows provided by operating activities	Net cash flows provided by operating activities	204		256		Net cash flows provided by operating activities	270		136
INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:
Capital expenditures	Capital expenditures	(65)		(64)		Capital expenditures	(26)		(35)

Net cash flows used in investing activities	Net cash flows used in investing activities	(65)		(64)		Net cash flows used in investing activities	(26)		(35)
FINANCING ACTIVITIES:	FINANCING ACTIVITIES:					FINANCING ACTIVITIES:
Distributions to partners		0		(375)
Repayment of long-term debt		0		(150)
Note payable issued from related company		194		602
Repayment of note payable from related company		(333)		(289)

Related company note activity						Related company note activity	(244)		(101)
Net cash flows used in financing activities	Net cash flows used in financing activities	(139)		(212)		Net cash flows used in financing activities	(244)		(101)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	0		(20)		Net change in cash and cash equivalents	0		0
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	0		20		Cash and cash equivalents, beginning of period	0		0
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	0	$	0	Cash and cash equivalents, end of period	$	0	$	0

SUPPLEMENTAL INFORMATION:	SUPPLEMENTAL INFORMATION:					SUPPLEMENTAL INFORMATION:
Non-cash activity - Accrued capital expenditures	Non-cash activity - Accrued capital expenditures	$	4	$	17	Non-cash activity - Accrued capital expenditures	$	4	$	7
Non-cash activity - Settlement of related company payables	Non-cash activity - Settlement of related company payables	$	4	$	0	Non-cash activity - Settlement of related company payables	$	0	$	4
Cash paid for interest	Cash paid for interest	$	14	$	21	Cash paid for interest	$	8	$	8

The accompanying notes are an integral part of these consolidated financial statements.

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PANHANDLE EASTERN PIPE LINE COMPANY, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts are in millions)

(unaudited)

1.ORGANIZATION AND BASIS OF PRESENTATION

Organization

~~Panhandle Eastern Pipe Line Company, LP (“PEPL”)~~PEPL and its subsidiaries ~~(collectively, the “Company”)~~ primarily ~~operate~~operates interstate pipelines that transport natural gas from the Gulf of Mexico, South Texas and the Panhandle region of Texas and Oklahoma to major United States markets in the Midwest and Great Lakes regions, ~~and~~as well as natural gas storage ~~assets and~~assets. These operations are subject to the rules and regulations of the FERC. ~~The Company’s~~PEPL’s subsidiaries ~~include~~are Trunkline, Sea Robin and Southwest Gas.

Southern Union Panhandle LLC, an indirect wholly-owned subsidiary of ~~ETO,~~ET, owns a 1% general ~~partnership~~partner interest in PEPL, and ~~ETO~~ET indirectly owns a 99% limited ~~partnership~~partner interest in PEPL. Prior to April 1, 2021, ETO owned Southern Union Panhandle LLC as well as the 99% limited partner interest in PEPL. On April 1, 2021, ETO merged with and into ET with ET surviving the merger.

Basis of Presentation

The unaudited financial information included in this Form 10-Q has been prepared on the same basis as the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. In the opinion of the Company’s management, such financial information reflects all adjustments necessary for a fair presentation of the financial position and the results of operations for such interim periods in accordance with GAAP. All intercompany items and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the SEC.

Use of Estimates

The unaudited consolidated financial statements have been prepared in conformity with GAAP, which includes the use of estimates and assumptions made by management that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities that exist at the date of the consolidated financial statements. Although these estimates are based on management’s available knowledge of current and expected future events, actual results could be different from those estimates.

2.RELATED PARTY TRANSACTIONS

Accounts receivable from related companies reflected on the consolidated balance sheets primarily relate to services provided to ETO and other affiliates. Accounts payable to related companies reflected on the consolidated balance sheets related to various services provided by ETO and other affiliates.

The following table provides a summary of the related party activity included in our consolidated statements of operations:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Operating revenues	Operating revenues	$	23	$	24	$	67	$	72	Operating revenues	$	22	$	22	$	45	$	44

Operating and maintenance	Operating and maintenance	3		2		8		4		Operating and maintenance	5		2		8		5
General and administrative	General and administrative	5		3		18		12		General and administrative	7		6		13		13

Interest expense — related company	Interest expense — related company	8		6		25		15		Interest expense — related company	4		8		10		17

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~$593~~$306 million and ~~$732~~$550 million, respectively, outstanding under a note payable ~~with ETO.~~to its parent. The note payable accrues interest monthly atwith an annual interest rate of ~~4.83%~~4.96% as of ~~September~~June 30, ~~2020. The note~~2021 and matures on July 31, 2027.

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3.FAIR VALUE MEASURES

~~The Company had $31~~As of June 30, 2021 and December 31, 2020, other non-current assets included $37 million ~~of fair value~~and $34 million, respectively, of available-for-sale securities ~~included in other non-current assets, as of September~~carried at fair value. At June 30, ~~2020 and December 31, 2019. At September 30, 2020 and December 31, 2019, $20~~2021, $24 million in equity securities were valued at Level 1 and ~~$11~~$13 million in fixed income securities were valued at Level 2. At December 31, 2020, $22 million in equity securities were valued at Level 1 and $12 million in fixed income securities were valued at Level 2. During the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized ~~$1.4~~$1 million and ~~$0.1~~$3 million in unrealized gains, respectively, on available-for-sale securities. During the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized ~~$0.4~~$3 million in unrealized ~~losses~~gains and ~~$3.1~~$2 million in unrealized ~~gains,~~losses, respectively, on available-for-sale securities. Unrealized gains and losses on available-for-sale securities are reflected in other, net in our consolidated statements of operations. The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value. Based on the estimated borrowing rates currently available to the Company and its subsidiaries for loans with similar terms and average maturities, the aggregate fair value of the Company’s consolidated debt obligations (excluding related company balances) was ~~$238~~$258 million and ~~$247~~$256 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The fair value of the Company’s consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities. The Company did not have any Level 3 instruments measured at fair value at ~~September~~June 30, ~~2020~~2021 or December 31, ~~2019,~~2020, and there were no transfers between hierarchy levels during the periods presented.

4.REGULATORY MATTERS, COMMITMENTS, CONTINGENCIES AND ENVIRONMENTAL LIABILITIES

Contingent Residual Support Agreement with ~~ETO~~ET

Under a contingent residual support agreement with ~~ETO~~ET (as successor by merger to ETO) and Citrus ~~ETO~~ETP Finance LLC, the Company provides contingent, residual support to Citrus ~~ETO~~ETP Finance LLC (on a non-recourse basis to the Company) with respect to Citrus ~~ETO~~ETP Finance LLC’s obligations to ~~ETO~~ET to support the payment of $2 billion in principal amount of ET senior notes, ~~issued by ETO on January 17, 2012.~~of which $1 billion matures in each of 2022 and 2042.

FERC Proceedings

By order issued January 16, 2019, the FERC initiated a review of Panhandle’s existing rates pursuant to Section 5 of the Natural Gas Act (“NGA”) to determine whether the rates currently charged by Panhandle are just and reasonable and set the matter for hearing. On August 30, 2019, Panhandle filed a general rate proceeding under Section 4 of the ~~Natural Gas Act.~~NGA. The Natural Gas Act Section 5 and Section 4 proceedings were consolidated by order ~~dated~~of the Chief Judge on October 1, 2019. A hearing in the combined proceedings commenced on August 25, 2020 and adjourned on September 15, 2020. AnThe initial decision ~~is expected~~by the administrative law judge was issued on March 26, 2021. On April 26, 2021, Panhandle filed its brief on exceptions to the initial decision. On May 17, 2021, Panhandle filed its brief opposing exceptions in ~~early 2021.~~this proceeding.

Environmental Matters

The Company’s operations are subject to federal, state and local laws, rules and regulations regarding water quality, hazardous and solid waste management, air quality control and other environmental matters. These laws, rules and regulations require the Company to conduct its operations in a specified manner and to obtain and comply with a wide variety of environmental regulations, licenses, permits, inspections and other approvals. Failure to comply with environmental laws, rules and regulations may expose the Company to significant fines, penalties and/or interruptions in operations. The Company’s environmental policies and procedures are designed to achieve compliance with such applicable laws and regulations. These evolving laws and regulations and claims for damages to property, employees, other persons and the environment resulting from current or past operations may result in significant expenditures and liabilities in the future. The Company engages in a process of updating and revising its procedures for the ongoing evaluation of its operations to identify potential environmental exposures and enhance compliance with regulatory requirements.

The Company is responsible for environmental remediation at certain sites on its natural gas transmission systems for contamination resulting from the past use of lubricants containing ~~PCBs~~polychlorinated biphenyls (“PCBs”) in compressed air systems; the past use of paints containing PCBs; and the prior use of wastewater collection facilities and other on-site disposal areas. The Company has implemented a program to remediate such contamination. The primary remaining remediation activity on the Company’s systems is associated with past use of paints containing PCBs or PCB impacts to equipment surfaces and to a building at one location. The PCB assessments are ongoing and the related estimated remediation costs are subject to further change. Other remediation typically involves the management of contaminated soils and may involve remediation of groundwater. Activities vary with site conditions and locations, the extent and nature of the contamination, remedial requirements, complexity and sharing of responsibility. The ultimate liability and total costs associated with these sites will depend upon many factors. If remediation activities involve statutory joint and several ~~liability provisions, strict~~

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liability provisions, strict liability, or cost recovery or contribution actions, the Company could potentially be held responsible for contamination caused by other parties. In some instances, the Company may share liability associated with contamination with other potentially responsible parties. The Company may also benefit from contractual indemnities that cover some or all of the cleanup costs. These sites are generally managed in the normal course of business or operations.

The Company’s environmental remediation activities are undertaken in cooperation with and under the oversight of appropriate regulatory agencies, enabling the Company under certain circumstances to take advantage of various voluntary cleanup programs in order to perform the remediation in the most effective and efficient manner.

The ~~Company’s consolidated balance sheets reflected~~Company had accrued $1 million in non-current liabilities as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 to cover environmental remediation actions where management believes a loss is probable and reasonably estimable. The Company is not able to estimate the possible loss or range of loss in excess of amounts accrued. The Company does not have any material environmental remediation matters assessed as reasonably possible.

Liabilities for Litigation and Other Claims

The Company records accrued liabilities for litigation and other claim costs when management believes a loss is probable and reasonably estimable. When management believes there is at least a reasonable possibility that a material loss or an additional material loss may have been incurred, the Company discloses (i) an estimate of the possible loss or range of loss in excess of the amount accrued; or (ii) a statement that such an estimate cannot be made. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company ~~has~~had accrued liabilities for litigation and other ~~claim-related accrued liabilities~~contingencies of ~~$18~~$56 million and $41 million, respectively, included in other non-current liabilities on the consolidated balance sheets. The Company does not have any material litigation or other claim contingency matters assessed as probable or reasonably possible that would require disclosure in the financial statements.

Other Commitments and Contingencies

The Company is subject to the laws and regulations of states and other jurisdictions concerning the identification, reporting and escheatment (the transfer of property to the state) of unclaimed or abandoned funds, and is subject to audit and examination for compliance with these requirements. The Company is currently being examined by a third party auditor on behalf of nine states for compliance with unclaimed property laws.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(Tabular dollar amounts are in millions)

The information in Item 2 has been prepared pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q. Accordingly, this Item 2 includes only management’s narrative analysis of the results of operations and should be read in conjunction with (i) our historical consolidated financial statements and accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February ~~21, 2020.~~19, 2021.

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RESULTS OF OPERATIONS


		Nine Months Ended September 30,					Six Months Ended June 30,
		2020		2019			2021		2020
OPERATING REVENUES:	OPERATING REVENUES:					OPERATING REVENUES:
Transportation and storage of natural gas	Transportation and storage of natural gas	$	388	$	415	Transportation and storage of natural gas	$	317	$	261

Other	Other	14		17		Other	9		9
Total operating revenues	Total operating revenues	402		432		Total operating revenues	326		270
OPERATING EXPENSES:	OPERATING EXPENSES:					OPERATING EXPENSES:

Operating and maintenance	Operating and maintenance	129		144		Operating and maintenance	87		89
General and administrative	General and administrative	29		22		General and administrative	18		19
Depreciation and amortization	Depreciation and amortization	79		85		Depreciation and amortization	52		52
Impairment losses		—		12

Total operating expenses	Total operating expenses	237		263		Total operating expenses	157		160
OPERATING INCOME	OPERATING INCOME	165		169		OPERATING INCOME	169		110
OTHER EXPENSE:	OTHER EXPENSE:					OTHER EXPENSE:
Interest expense, net	Interest expense, net	(10)		(13)		Interest expense, net	(7)		(7)
Interest expense — related company	Interest expense — related company	(25)		(15)		Interest expense — related company	(10)		(17)

Other, net	Other, net	(5)		(2)		Other, net	—		(4)
INCOME BEFORE INCOME TAX BENEFIT	INCOME BEFORE INCOME TAX BENEFIT	125		139		INCOME BEFORE INCOME TAX BENEFIT	152		82
Income tax benefit	Income tax benefit	(2)		(417)		Income tax benefit	—		(1)

NET INCOME	NET INCOME	$	127	$	556	NET INCOME	$	152	$	83

Panhandle natural gas volumes transported (TBtu):	Panhandle natural gas volumes transported (TBtu):					Panhandle natural gas volumes transported (TBtu):
PEPL	PEPL	569		673		PEPL	363		383
Trunkline	Trunkline	421		556		Trunkline	257		286
Sea Robin	Sea Robin	58		76		Sea Robin	34		42

Operating revenues. Operating revenues increased for the six months ended June 30, 2021 compared to the same period in the prior year primarily due to increased operational gas sale revenues resulting from higher market prices due to the impact of Winter Storm Uri in February 2021 partially offset by lower customer utilization of transportation services.

Interest expense — related company. Interest expense — related company decreased for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to the same period in the prior year primarily due to lower ~~capacity sold at lower rates on~~average borrowings outstanding under a note payable due to the ~~Panhandle and Trunkline pipelines.~~Company’s parent.

~~Operating and maintenance~~Other, net.~~. Operating and maintenance expense~~ Other, net decreased for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to the same period in the prior year primarily due to ~~lower employee costs and lower maintenance project costs.~~

~~General and administrative. General and administrative expenses increased for the nine months ended September 30, 2020 compared to the same period~~unrealized losses on available-for-sale securities in the prior ~~year due to an increase in overhead costs allocated by the parent company.~~

~~Depreciation and amortization. Depreciation and amortization decreased for the nine months ended September 30, 2020 compared to the same period in the prior year due to changes in certain estimates.~~

~~Interest expense — related company~~. Interest expense — related company increased for the nine months ended September 30, 2020 compared to the same period in the prior year primarily due to additional borrowings under a note payable with ETO.

~~Income tax.~~ Income tax benefit decreased for the nine months ended September 30, 2020 compared to the same period in the prior year primarily due to the PEPL restructuring transaction in July 2019. In connection with the restructuring, PEPL’s tax sharing agreement with its former corporate parent was terminated, and PEPL is no longer subject to corporate level income tax. PEPL reversed all of its existing deferred tax assets and liabilities in July 2019, which resulted in the recognition of a $445 million non-cash benefit in the consolidated statement of operations.period.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 3, Quantitative and Qualitative Disclosures About Market Risk, has been omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that information required to be disclosed by us, including our consolidated entities, in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Under the supervision and with the participation of senior management, including the ~~Chief~~Co-Chief Executive ~~Officer~~Officers and the Chief Financial Officer of our General Partner, we evaluated our disclosure controls and procedures, as such term is defined under Rule 13a–15(e) promulgated under the Exchange Act. Based on this evaluation, the ~~Chief~~Co-Chief Executive ~~Officer~~Officers and the

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Chief Financial Officer of our General Partner concluded that our disclosure controls and procedures were effective as of ~~September~~June 30, ~~2020~~2021 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to management, including the ~~Chief~~Co-Chief Executive ~~Officer~~Officers and Chief Financial Officer of our General Partner, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13(a)-15(f) or Rule 15d-15(f) of the Exchange Act) during the three months ended ~~September~~June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is a party to or has property subject to litigation and other proceedings, including matters arising under provisions relating to the protection of the environment, as described in Note 4 in this Quarterly Report on Form 10-Q and in Note 8 in the Company’s Form 10-K for the year ended December 31, ~~2019.~~2020.

The Company is subject to federal and state requirements for the protection of the environment, including those for the discharge of hazardous materials and remediation of contaminated sites. As a result, the Company is a party to or has ~~its~~ property subject to various other lawsuits or proceedings involving environmental protection matters. For information regarding these matters, see Note 4 in this Quarterly Report on Form 10-Q and Note 8 included in the Company’s Form 10-K for the year ended December 31, ~~2019.~~2020.

ITEM 1A. RISK FACTORS

~~There have been no material changes from~~The following risk factor should be read in conjunction with the risk factors described in “Part I - Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on February ~~21, 2020~~19, 2021.

Cybersecurity attacks, data breaches and ~~“Part II - Item 1A. Risk Factors”~~other disruptions affecting us, or our service providers, could materially and adversely affect our business, operations, reputation, and financial results.

The security and integrity of our information technology infrastructure and physical assets is critical to our business and our ability to perform day-to-day operations and deliver services. In addition, in the ~~Company’s Quarterly Report~~ordinary course of our business, we collect, process, transmit and store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, as well as personally identifiable information, in our data centers and on ~~Form 10-Q~~our networks. We also engage third parties, such as service providers and vendors, who provide a broad array of software, technologies, tools, and other products, services and functions (e.g., human resources, finance, data transmission, communications, risk, compliance, among others) that enable us to conduct, monitor and/or protect our business, operations, systems and data assets.

Our information technology and infrastructure, physical assets and data, may be vulnerable to unauthorized access, computer viruses, malicious attacks and other events (e.g., distributed denial of service (“DDoS”) attacks, ransomware attacks) that are beyond our control. These events can result from malfeasance by external parties, such as hackers, or due to human error by our or our service providers’ employees and contractors (e.g., due to social engineering or phishing attacks). In addition, the COVID-19 pandemic has presented additional operational and cybersecurity risks to our information technology infrastructure and physical assets due to our providers’ work-from-home arrangements.

We and certain of our service providers have, from time to time, been subject to cyberattacks and security incidents. The frequency and magnitude of cyberattacks is expected to increase and attackers are becoming more sophisticated. We may be unable to anticipate, detect or prevent future attacks, particularly as the methodologies used by attackers change frequently or are not recognized until launched, and we may be unable to investigate or remediate incidents because attackers are increasingly using techniques and tools designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.

Breaches of our information technology infrastructure or physical assets, or other disruptions, could result in damage to our assets, safety incidents, damage to the environment, potential liability or the loss of contracts, and have a material adverse effect on our operations, financial position and results of operations. A successful cyberattack or other security incident could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or loss could result in legal claims or proceedings, regulatory investigations and enforcement, penalties and fines, increased costs for system remediation and compliance requirements, disruption of our operations, damage to our reputation, or loss of confidence in our products and services, any or all of which could have a material adverse effect on our business and results. We may be required to invest significant additional resources to comply with evolving cybersecurity regulations and to modify and enhance our information security and controls, and to investigate and remediate any security vulnerabilities. Any losses, costs or liabilities may not be covered by, or may exceed the ~~quarter ended March 31, 2020 filed with the SEC on May 11, 2020.~~coverage limits of, any or all of our applicable insurance policies.

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ITEM 6. EXHIBITS

The exhibits listed below are filed or furnished, as indicated, as part of this report:


Exhibit Number						Description


31.1*						Certification of ~~Chief~~Co-Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3*						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**						Certification of ~~Chief~~Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**						Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.3**						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*						Interactive data files pursuant to Rule 405 of Regulation S-T: (i) our Consolidated Balance ~~Sheets as of September 30, 2020 and December 31, 2019;~~Sheets; (ii) our Consolidated Statements of Operations and Comprehensive ~~Income for the nine months ended September 30, 2020 and 2019;~~Income; (iii) our Consolidated Statements of ~~Partners' Capital for the nine months ended September 30, 2020 and 2019;~~Partners’ Capital; (iv) our Consolidated Statements of Cash ~~Flows for the nine months ended September 30, 2020 and 2019;~~Flows; and (v) the notes to our Consolidated Financial Statements.




104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*						Filed herewith.
**						Furnished herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, Panhandle Eastern Pipe Line Company, LP has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PANHANDLE EASTERN PIPE LINE COMPANY, LP

(Registrant)

Date:

~~November~~August 5, ~~2020~~2021

By:

/s/ A. Troy Sturrock

A. Troy Sturrock

Vice President and Controller (duly authorized to sign on behalf of the registrant)

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

Consolidated Balance Sheets			14

Consolidated Statements of Operations and Comprehensive Income			35



Consolidated Statements of Partners’ Capital			46

Consolidated Statements of Cash Flows			57

Notes to Consolidated Financial Statements			68

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			810

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			911

ITEM 4. CONTROLS AND PROCEDURES			1011

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS			1113

ITEM 1A. RISK FACTORS			1113

ITEM 6. EXHIBITS			1114

SIGNATURE			1215