CenterPoint Energy 2014 Annual Report Download - page 31

Enable depends on a small number of customers for a significant portion of its firm transportation and storage services revenues. The loss
of, or reduction in volumes from, these customers could result in a decline in sales of its transportation and storage services and its
consolidated financial position, results of operations and its ability to make cash distributions.
Enable provides firm transportation and storage services to certain key customers on its system. Its major transportation customers are
affiliates of CenterPoint Energy, Laclede Group (Laclede), OGE, American Electric Power Company, Inc. (AEP) and XTO Energy Inc., an
affiliate of Exxon Mobil Corporation.
The loss of all or even a portion of the interstate or intrastate 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 Enable’
s combined and consolidated financial position, results of operations and its ability to make cash
distributions.
Enable’s businesses are dependent, in part, on the drilling and production decisions of others.
Enable’
s businesses are dependent on the continued availability of natural gas and crude oil production. Enable has no control over the level
of drilling activity in its areas of operation, the amount of reserves associated with wells connected to its systems or the rate at which production
from a well declines. In addition, Enable’
s cash flows associated with wells currently connected to its systems will decline over time. To
maintain or increase throughput levels on its gathering and transportation systems and the asset utilization rates at its natural gas processing
plants, Enable’s customers must continually obtain new natural gas and crude oil supplies. The primary factors affecting Enable’
s ability to
obtain new supplies of natural gas and crude oil and attract new customers to its assets are the level of successful drilling activity near these
systems, its ability to compete for volumes from successful new wells and its ability to expand capacity as needed. If Enable is not able to obtain
new supplies of natural gas and crude oil to replace the natural decline in volumes from existing wells, throughput on its gathering, processing,
transportation and storage facilities will decline, which could have a material adverse effect on its results of operations and distributable cash
flow. Enable has no control over producers or their drilling and production decisions, which are affected by, among other things:
Fluctuations in energy prices can also greatly affect the development of new natural gas and crude oil reserves. Drilling and production
activity generally decreases as commodity prices decrease. In general terms, the prices of natural gas, 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 Enable’
s control.
Because of these factors, even if new natural gas or crude oil reserves are known to exist in areas served by Enable’
s assets, producers may
choose not to develop those reserves. Declines in natural gas 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. A sustained decline could also lead producers to shut in production
from their existing wells. Sustained reductions in exploration or production activity in Enable’
s areas of operation could lead to further
reductions in the utilization of its systems, which could have a material adverse effect on its business, financial condition, results of operations
and ability to make cash distributions.
In addition, it may be more difficult to maintain or increase the current volumes on Enable’
s gathering systems, as several of the formations
in the unconventional resource plays in which it operates generally have higher initial production rates and steeper production decline curves
than wells in more conventional basins. Should Enable determine that the economics of its gathering assets do not justify the capital expenditures
needed to grow or maintain volumes associated therewith, Enable may reduce such capital expenditures, which could cause revenues associated
with these assets to decline over time. In addition to capital expenditures
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the availability and cost of capital;
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prevailing and projected commodity prices, including the prices of natural gas, NGLs and crude oil;
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demand for natural gas, NGLs and crude oil;
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levels of reserves;
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geological considerations;
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environmental or other governmental regulations, including the availability of drilling permits and the regulation of hydraulic
fracturing; and
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the availability of drilling rigs and other costs of production and equipment.