NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
1. Description of Business and Basis of Presentation
DCP Midstream, LP, with its consolidated subsidiaries, or "us", "we", "our" or the "Partnership" is a Delaware limited partnership formed in 2005 by DCP Midstream, LLC to own, operate, acquire and develop a diversified portfolio of complementary midstream energy assets.
Our Partnership includes our Gathering and Processing and Logistics and Marketing segments. For additional information regarding these segments, see Note 16 - Business Segments.
Our operations and activities are managed by our general partner, DCP Midstream GP, LP, which in turn is managed by its general partner, DCP Midstream GP, LLC, which we refer to as the General Partner, and is
100%
owned by DCP Midstream, LLC. DCP Midstream, LLC and its subsidiaries and affiliates, collectively referred to as DCP Midstream, LLC, is owned
50%
by Phillips 66 and
50%
by Enbridge, Inc and its affiliates, or Enbridge. Spectra Energy Corp owned
50%
of DCP Midstream, LLC prior to the completion of its merger with Enbridge in the first quarter of 2017. DCP Midstream, LLC directs our business operations through its ownership and control of the General Partner. As of
June 30, 2017
, DCP Midstream, LLC owned approximately
38.1%
of us, including limited partner and general partner interests.
On December 30, 2016, we entered into a Contribution Agreement (the “Contribution Agreement”) with DCP Midstream, LLC and DCP Midstream Operating, LP (the “Operating Partnership”), a
100%
owned subsidiary of the Partnership, which closed effective January 1, 2017. The transactions and documents contemplated by the Contribution Agreement are collectively referred to hereafter as the “Transaction.” Our predecessor results consist of all of the ownership interests of DCP Midstream, LLC in all of its subsidiaries that owned operating assets ("The DCP Midstream Business"), which we acquired from DCP Midstream, LLC on January 1, 2017. This transfer of net assets between entities under common control was accounted for as if the transfer occurred at the beginning of the period, and prior years were retrospectively adjusted to furnish comparative information, similar to the pooling method. Accordingly, our condensed consolidated financial statements include the historical results of The DCP Midstream Business for all periods presented. For additional information regarding the Transaction, see Note 3 - Acquisitions.
The condensed consolidated financial statements include the accounts of the Partnership and all majority-owned subsidiaries where we have the ability to exercise control. Investments in greater than
20%
owned affiliates that are not variable interest entities and where we do not have the ability to exercise control, and investments in less than
20%
owned affiliates where we have the ability to exercise significant influence, are accounted for using the equity method.
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. Conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and notes. Although these estimates are based on management’s best available knowledge of current and expected future events, actual results could differ from those estimates. All intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC. Accordingly, these condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the respective interim periods. Certain information and note disclosures normally included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted from these interim financial statements pursuant to such rules and regulations, although we believe that the disclosures made are adequate to make the information presented not misleading. Results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2017
. These unaudited condensed consolidated financial statements and other information included in this Quarterly Report on Form 10-Q should be read in conjunction with the
2016
audited consolidated financial statements and notes thereto included as Exhibit 99.4 in the May 2017 8-K.
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
2. New Accounting Pronouncements
Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” or ASU 2016-15
- In August 2016, the FASB issued ASU 2016-15, which amends certain cash flow statement classification guidance. This ASU is effective for interim and annual reporting periods beginning after December 15, 2017, with the option to early adopt for financial statements that have not been issued. We are currently evaluating the potential impact this standard will have on our condensed consolidated statement of cash flows.
FASB ASU, 2016-02 “Leases (Topic 842),” or ASU 2016-02
- In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize a lease liability on a discounted basis and the right of use of a specified asset at the commencement date for all leases. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018, with the option to early adopt for financial statements that have not been issued. We are currently evaluating the potential impact this standard will have on our condensed consolidated financial statements and related disclosures.
FASB ASU
2014-09 “Revenue from Contracts with Customers (Topic 606),” or ASU 2014-09
and related interpretations and amendments
- In May 2014, the FASB issued ASU 2014-09, which supersedes the revenue recognition requirements of Accounting Standards Codification Topic 605 “Revenue Recognition.” This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as annual reporting periods beginning after December 15, 2016. We plan to adopt this ASU using the modified retrospective method. The initial cumulative effect will be recognized at the date of adoption. Our evaluation of ASU 2014-09 is ongoing and not complete. The FASB has issued and may issue in the future, interpretative guidance, which may cause our evaluation to change. Accordingly, at this time we cannot estimate the impact upon adoption.
3. Acquisitions
On January 1, 2017
, DCP Midstream, LLC contributed to us: (i) its ownership interests in all of its subsidiaries owning operating assets, and (ii)
$424 million
of cash (together the “Contributions”). In consideration of the Partnership’s receipt of the Contributions, (i) the Partnership issued
28,552,480
common units to DCP Midstream, LLC and
2,550,644
general partner units to the General Partner in a private placement and (ii) the Operating Partnership assumed
$3,150 million
of DCP Midstream, LLC’s debt.
Pursuant to the Contribution Agreement, DCP Midstream, LLC agreed to cause the General Partner to enter into Amendment No. 3 (the “Third Amendment to the Partnership Agreement”) to the Second Amended and Restated Agreement of Limited Partnership of the Partnership, dated November 1, 2006, as amended (the “Partnership Agreement”). The Third Amendment to the Partnership Agreement includes terms that amend the Partnership Agreement to cause the incentive distributions payable to the holders of the Partnership’s incentive distribution rights with respect to the fiscal years 2017, 2018 and 2019 to, in certain circumstances, be reduced in an amount up to
$100 million
per fiscal year as necessary to provide that the distributable cash flow of the Partnership (as adjusted) during such year meets or exceeds the amount of distributions made by the Partnership (as adjusted) to the partners of the Partnership with respect to such year.
4. Dispositions
In May 2017, we entered into a membership interest purchase agreement with Tallgrass Midstream, LLC to sell our
100%
interest in our Douglas gathering system, which primarily consisted of approximately
1,500
miles of gathering lines within our Gathering and Processing segment, for approximately
$129 million
, subject to customary purchase price adjustments. This transaction closed effective June 1, 2017 and we recognized a gain of approximately
$34 million
, net of goodwill allocation, in the second quarter of 2017.
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
5. Agreements and Transactions with Affiliates
DCP Midstream, LLC
Services Agreement and Other General and Administrative Charges
Pursuant to the Contribution Agreement, on January 1, 2017, the Partnership entered into the Services and Employee Secondment Agreement (the “Services Agreement”), which replaced the services agreement between the Partnership and DCP Midstream, LLC, dated February 14, 2013, as amended. Under the Services Agreement, we are required to reimburse DCP Midstream, LLC for costs, expenses, and expenditures incurred or payments made on our behalf for general and administrative functions including, but not limited to, legal, accounting, compliance, treasury, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, benefit plan maintenance and administration, credit, payroll, internal audit, taxes and engineering, as well as salaries and benefits of seconded employees, insurance coverage and claims, capital expenditures, maintenance and repair costs and taxes. There is no limit on the reimbursements we make to DCP Midstream, LLC under the Services Agreement for costs, expenses and expenditures incurred or payments made on our behalf. The condensed consolidated statements of operations include employee related costs that were charged by DCP Midstream, LLC of $
49
million and $
52
million for the
three months ended June 30, 2017
and
2016
, respectively and $
99
million and $
107
million for the
six months ended June 30, 2017
and
2016
, respectively, within operating and maintenance expense. The condensed consolidated statements of operations also include employee related costs of $
39
million and $
48
million for the
three months ended June 30, 2017
and
2016
, respectively, and $
70
million and $
95
million for the
six months ended June 30, 2017
and
2016
, respectively, within general and administrative expense and restructuring costs.
Phillips 66 and its Affiliates
We sell a portion of our residue gas and NGLs to Phillips 66 and Chevron Phillips Chemical LLC, or CPChem. In addition, we purchase NGLs from CPChem. CPChem is owned
50%
by Phillips 66, and is considered a related party
. Approximately
26%
of our NGL production was committed to Phillips 66 and CPChem as of
June 30, 2017
. The primary production commitment on certain contracts began a ratable wind down period in December 2014 and expires in January 2019. We ant
icipate continuing to purchase and sell commodities with Phillips 66 and CPChem in the ordinary course of business.
Enbridge and its Affiliates
We provide services to and purchase NGLs from Enbridge and its affiliates.
We anticipate continuing to provide services to and purchase commodities from Enbridge and its affiliates in the ordinary course of business.
Unconsolidated Affiliates
We have entered into
15
-year transportation agreements, with Sand Hills Pipeline, LLC, or Sand Hills, Southern Hills Pipeline, LLC, or Southern Hills, Front Range Pipeline LLC, or Front Range, and Texas Express Pipeline LLC, or Texas Express. Under the terms of these
15
-year agreements, which commenced at each of the pipelines’ respective in-service dates and expire between 2028 and 2029, we have committed to transport minimum throughput volumes at rates defined in each of the pipelines’ respective tariffs.
We also sell a portion of our residue gas and NGLs to, purchase natural gas and other NGL products from, and provide gathering and transportation services to other unconsolidated affiliates. We anticipate continuing to purchase and sell commodities and provide services to unconsolidated affiliates in the ordinary course of business.
Under the terms of the Sand Hills LLC Agreement and the Southern Hills LLC Agreement, or the Sand Hills and Southern Hills LLC Agreements, Sand Hills and Southern Hills are required to reimburse us for any direct costs or expenses (other than general and administration services) which we incur on behalf of Sand Hills and Southern Hills. Additionally, Sand Hills and Southern Hills each pay us an annual service fee of
$5 million
, for centralized corporate functions provided by us as operator of Sand Hills and Southern Hills, including legal, accounting, cash management, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, credit, payroll, taxes and engineering. Except with respect to the annual service fee, there is no limit on the reimbursements Sand Hills and Southern Hills make to us under the Sand Hills and Southern Hills LLC Agreements for other expenses and expenditures which we incur on behalf of Sand Hills or Southern Hills.
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
Summary of Transactions with Affiliates
The following table summarizes our transactions with affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
(Millions)
|
Phillips 66 (including its affiliates):
|
|
|
|
|
|
|
|
|
Sales of natural gas, NGLs and condensate to affiliates
|
|
$
|
251
|
|
|
$
|
225
|
|
|
$
|
525
|
|
|
$
|
396
|
|
Purchases of natural gas and NGLs from affiliates
|
|
$
|
8
|
|
|
$
|
6
|
|
|
$
|
15
|
|
|
$
|
6
|
|
Operating and maintenance and general administrative expenses
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Enbridge (including its affiliates):
|
|
|
|
|
|
|
|
|
Sales of natural gas, NGLs and condensate to affiliates
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
20
|
|
|
$
|
—
|
|
Purchases of natural gas and NGLs from affiliates
|
|
$
|
11
|
|
|
$
|
8
|
|
|
$
|
19
|
|
|
$
|
18
|
|
Operating and maintenance and general administrative expenses
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
Unconsolidated affiliates:
|
|
|
|
|
|
|
|
|
Sales of natural gas, NGLs and condensate to affiliates
|
|
$
|
12
|
|
|
$
|
13
|
|
|
$
|
22
|
|
|
$
|
17
|
|
Transportation, storage and processing to affiliates
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Purchases of natural gas and NGLs from affiliates
|
|
$
|
119
|
|
|
$
|
113
|
|
|
$
|
232
|
|
|
$
|
206
|
|
We had balances with affiliates as follows:
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
|
(Millions)
|
Phillips 66 (including its affiliates):
|
|
|
|
Accounts receivable
|
$
|
103
|
|
|
$
|
115
|
|
Accounts payable
|
$
|
4
|
|
|
$
|
4
|
|
Other assets
|
$
|
1
|
|
|
$
|
2
|
|
Enbridge (including its affiliates):
|
|
|
|
Accounts receivable
|
$
|
5
|
|
|
$
|
1
|
|
Accounts payable
|
$
|
6
|
|
|
$
|
3
|
|
Other assets
|
$
|
—
|
|
|
$
|
1
|
|
Other liabilities
|
$
|
—
|
|
|
$
|
1
|
|
Unconsolidated affiliates:
|
|
|
|
Accounts receivable
|
$
|
16
|
|
|
$
|
18
|
|
Accounts payable
|
$
|
46
|
|
|
$
|
41
|
|
Other assets
|
$
|
4
|
|
|
$
|
5
|
|
6. Inventories
Inventories were as follows:
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
|
(Millions)
|
Natural gas
|
$
|
32
|
|
|
$
|
28
|
|
NGLs
|
19
|
|
|
44
|
|
Total inventories
|
$
|
51
|
|
|
$
|
72
|
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
We recognize lower of cost or market adjustments when the carrying value of our inventories exceeds their estimated market value. These non-cash charges are a component of purchases of natural gas and NGLs in the condensed consolidated statements of operations. We recognized
no
lower of cost or market adjustments during the
three months ended June 30, 2017
and
June 30, 2016
. We recognized
no
lower of cost or market adjustments during the
six months ended
June 30, 2017
and
$3 million
during the
six months ended
June 30, 2016
.
7. Property, Plant and Equipment
A summary of property, plant and equipment by classification is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciable
Life
|
|
June 30,
2017
|
|
December 31,
2016
|
|
|
|
(Millions)
|
Gathering and transmission systems
|
20 — 50 Years
|
|
$
|
8,477
|
|
|
$
|
8,560
|
|
Processing, storage and terminal facilities
|
35 — 60 Years
|
|
5,142
|
|
|
5,134
|
|
Other
|
3 — 30 Years
|
|
502
|
|
|
502
|
|
Construction work in progress
|
|
|
259
|
|
|
171
|
|
Property, plant and equipment
|
|
|
14,380
|
|
|
14,367
|
|
Accumulated depreciation
|
|
|
(5,430
|
)
|
|
(5,298
|
)
|
Property, plant and equipment, net
|
|
|
$
|
8,950
|
|
|
$
|
9,069
|
|
Interest capitalized on construction projects was $
1 million
and less than
$1 million
for the
three months ended June 30, 2017
and
2016
, respectively, and
$2 million
and less than
$1 million
for the
six months ended
June 30, 2017
and
2016
, respectively.
Depreciation expense was
$90 million
and
$92 million
for the
three months ended June 30, 2017
and
2016
, respectively, and
$182 million
and
$184 million
for the
six months ended
June 30, 2017
and
2016
, respectively.
8. Goodwill
The carrying amount of goodwill in each of our reportable segments was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
(Millions)
|
|
Gathering and Processing
|
|
Logistics and Marketing
|
|
Total
|
Balance, January 1, 2017
|
$
|
164
|
|
|
$
|
72
|
|
|
$
|
236
|
|
Dispositions
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
Balance, June 30, 2017
|
$
|
159
|
|
|
$
|
72
|
|
|
$
|
231
|
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
9. Investments in Unconsolidated Affiliates
The following table summarizes our investments in unconsolidated affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Value as of
|
|
Percentage
Ownership
|
|
June 30,
2017
|
|
December 31,
2016
|
|
|
|
(Millions)
|
DCP Sand Hills Pipeline, LLC
|
66.67%
|
|
$
|
1,543
|
|
|
$
|
1,507
|
|
Discovery Producer Services LLC
|
40.00%
|
|
382
|
|
|
385
|
|
DCP Southern Hills Pipeline, LLC
|
66.67%
|
|
747
|
|
|
754
|
|
Front Range Pipeline LLC
|
33.33%
|
|
166
|
|
|
165
|
|
Texas Express Pipeline LLC
|
10.00%
|
|
92
|
|
|
93
|
|
Panola Pipeline Company, LLC
|
15.00%
|
|
24
|
|
|
25
|
|
Mont Belvieu Enterprise Fractionator
|
12.50%
|
|
23
|
|
|
23
|
|
Mont Belvieu 1 Fractionator
|
20.00%
|
|
10
|
|
|
10
|
|
Other
|
Various
|
|
7
|
|
|
7
|
|
Total investments in unconsolidated affiliates
|
|
|
$
|
2,994
|
|
|
$
|
2,969
|
|
Earnings from investments in unconsolidated affiliates were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(Millions)
|
DCP Sand Hills Pipeline, LLC
|
$
|
37
|
|
|
$
|
31
|
|
|
$
|
68
|
|
|
$
|
56
|
|
Discovery Producer Services LLC
|
25
|
|
|
17
|
|
|
45
|
|
|
32
|
|
DCP Southern Hills Pipeline, LLC
|
13
|
|
|
12
|
|
|
24
|
|
|
24
|
|
Front Range Pipeline LLC
|
3
|
|
|
4
|
|
|
7
|
|
|
9
|
|
Texas Express Pipeline LLC
|
1
|
|
|
2
|
|
|
3
|
|
|
4
|
|
Mont Belvieu Enterprise Fractionator
|
4
|
|
|
4
|
|
|
7
|
|
|
8
|
|
Mont Belvieu 1 Fractionator
|
3
|
|
|
2
|
|
|
4
|
|
|
5
|
|
Other
|
—
|
|
|
1
|
|
|
2
|
|
|
1
|
|
Total earnings from unconsolidated affiliates
|
$
|
86
|
|
|
$
|
73
|
|
|
$
|
160
|
|
|
$
|
139
|
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
The following tables summarize the combined financial information of our investments in unconsolidated affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(Millions)
|
Statements of operations:
|
|
|
|
|
|
|
|
Operating revenue
|
$
|
368
|
|
|
$
|
329
|
|
|
$
|
705
|
|
|
$
|
636
|
|
Operating expenses
|
$
|
152
|
|
|
$
|
135
|
|
|
$
|
300
|
|
|
$
|
254
|
|
Net income
|
$
|
216
|
|
|
$
|
191
|
|
|
$
|
404
|
|
|
$
|
377
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
|
(Millions)
|
Balance sheets:
|
|
|
|
Current assets
|
$
|
207
|
|
|
$
|
232
|
|
Long-term assets
|
5,259
|
|
|
5,274
|
|
Current liabilities
|
(147
|
)
|
|
(156
|
)
|
Long-term liabilities
|
(202
|
)
|
|
(205
|
)
|
Net assets
|
$
|
5,117
|
|
|
$
|
5,145
|
|
10. Fair Value Measurement
Determination of Fair Value
Below is a general description of our valuation methodologies for derivative financial assets and liabilities which are measured at fair value. Fair values are generally based upon quoted market prices or prices obtained through external sources, where available. If listed market prices or quotes are not available, we determine fair value based upon a market quote, adjusted by other market-based or independently sourced market data such as historical commodity volatilities, crude oil future yield curves, and/or counterparty specific considerations. These adjustments result in a fair value for each asset or liability under an “exit price” methodology, in line with how we believe a marketplace participant would value that asset or liability. Fair values are adjusted to reflect the credit risk inherent in the transaction as well as the potential impact of liquidating open positions in an orderly manner over a reasonable time period under current conditions. These adjustments may include amounts to reflect counterparty credit quality, the effect of our own creditworthiness, and/or the liquidity of the market.
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•
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Counterparty credit valuation adjustments are necessary when the market price of an instrument is not indicative of the fair value as a result of the credit quality of the counterparty. Generally, market quotes assume that all counterparties have near zero, or low, default rates and have equal credit quality. Therefore, an adjustment may be necessary to reflect the credit quality of a specific counterparty to determine the fair value of the instrument. We record counterparty credit valuation adjustments on all derivatives that are in a net asset position as of the measurement date in accordance with our established counterparty credit policy, which takes into account any collateral margin that a counterparty may have posted with us as well as any letters of credit that they have provided.
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•
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Entity valuation adjustments are necessary to reflect the effect of our own credit quality on the fair value of our net liability positions with each counterparty. This adjustment takes into account any credit enhancements, such as collateral margin we may have posted with a counterparty, as well as any letters of credit that we have provided. The methodology to determine this adjustment is consistent with how we evaluate counterparty credit risk, taking into account our own credit rating, current credit spreads, as well as any change in such spreads since the last measurement date.
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•
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Liquidity valuation adjustments are necessary when we are not able to observe a recent market price for financial instruments that trade in less active markets for the fair value to reflect the cost of exiting the position. Exchange traded contracts are valued at market value without making any additional valuation adjustments and, therefore, no liquidity reserve is applied. For contracts other than exchange traded instruments, we mark our positions to the midpoint of the bid/ask spread, and record a liquidity reserve based upon our total net position. We believe that such practice results in the most reliable fair value measurement as viewed by a market participant.
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DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
We manage our derivative instruments on a portfolio basis and the valuation adjustments described above are calculated on this basis. We believe that the portfolio level approach represents the highest and best use for these assets as there are benefits inherent in naturally offsetting positions within the portfolio at any given time, and this approach is consistent with how a market participant would view and value the assets and liabilities. Although we take a portfolio approach to managing these assets/liabilities, in order to reflect the fair value of any one individual contract within the portfolio, we allocate all valuation adjustments down to the contract level, to the extent deemed necessary, based upon either the notional contract volume, or the contract value, whichever is more applicable.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While we believe that our valuation methods are appropriate and consistent with other market participants, we recognize that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. We review our fair value policies on a regular basis taking into consideration changes in the marketplace and, if necessary, will adjust our policies accordingly. See Note 12 - Risk Management and Hedging Activities.
Valuation Hierarchy
Our fair value measurements are grouped into a three-level valuation hierarchy and are categorized in their entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows.
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•
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Level 1 — inputs are unadjusted quoted prices for
identical
assets or liabilities in active markets.
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•
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Level 2 — inputs include quoted prices for
similar
assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
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•
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Level 3 — inputs are unobservable and considered significant to the fair value measurement.
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A financial instrument’s categorization within the hierarchy is based upon the level of judgment involved in the most significant input in the determination of the instrument’s fair value. Following is a description of the valuation methodologies used as well as the general classification of such instruments pursuant to the hierarchy.
Commodity Derivative Assets and Liabilities
We enter into a variety of derivative financial instruments, which may include exchange traded instruments (such as New York Mercantile Exchange, or NYMEX, crude oil or natural gas futures) or over-the-counter, or OTC, instruments (such as natural gas contracts, crude oil or NGL swaps). The exchange traded instruments are generally executed with a highly rated broker dealer serving as the clearinghouse for individual transactions.
Our activities expose us to varying degrees of commodity price risk. To mitigate a portion of this risk and to manage commodity price risk related primarily to owned natural gas storage and pipeline assets, we engage in natural gas asset based trading and marketing, and we may enter into natural gas and crude oil derivatives to lock in a specific margin when market conditions are favorable. A portion of this may be accomplished through the use of exchange traded derivative contracts. Such instruments are generally classified as Level 1 since the value is equal to the quoted market price of the exchange traded instrument as of our balance sheet date, and no adjustments are required. Depending upon market conditions and our strategy we may enter into exchange traded derivative positions with a significant time horizon to maturity. Although such instruments are exchange traded, market prices may only be readily observable for a portion of the duration of the instrument. In order to calculate the fair value of these instruments, readily observable market information is utilized to the extent it is available; however, in the event that readily observable market data is not available, we may interpolate or extrapolate based upon observable data. In instances where we utilize an interpolated or extrapolated value, and it is considered significant to the valuation of the contract as a whole, we would classify the instrument within Level 3.
We also engage in the business of trading energy related products and services, which exposes us to market variables and commodity price risk. We may enter into physical contracts or financial instruments with the objective of realizing a positive margin from the purchase and sale of these commodity-based instruments. We may enter into derivative instruments for NGLs
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
or other energy related products, primarily using the OTC derivative instrument markets, which are not as active and liquid as exchange traded instruments. Market quotes for such contracts may only be available for short dated positions (up to six months), and an active market itself may not exist beyond such time horizon. Contracts entered into with a relatively short time horizon for which prices are readily observable in the OTC market are generally classified within Level 2. Contracts entered into with a longer time horizon for which prices are not readily observable in the OTC market are generally classified within Level 3.
Each instrument is assigned to a level within the hierarchy at the end of each financial quarter depending upon the extent to which the valuation inputs are observable. Generally, an instrument will move toward a level within the hierarchy that requires a lower degree of judgment as the time to maturity approaches, and as the markets in which the asset trades will likely become more liquid and prices more readily available in the market, thus reducing the need to rely upon our internally developed assumptions. However, the level of a given instrument may change, in either direction, depending upon market conditions and the availability of market observable data.
Interest Rate Derivative Assets and Liabilities
We periodically use interest rate swap agreements as part of our overall capital strategy. These instruments effectively exchange a portion of our fixed-rate debt for floating rate debt or floating rate debt for fixed-rate debt. The swaps are generally priced based upon a London Interbank Offered Rate, or LIBOR, instrument with similar duration, adjusted by the credit spread between our company and the LIBOR instrument. Given that a portion of the swap value is derived from the credit spread, which may be observed by comparing similar assets in the market, these instruments are classified within Level 2. Default risk on either side of the swap transaction is also considered in the valuation. We record counterparty credit and entity valuation adjustments in the valuation of interest rate swaps; however, these reserves are not considered to be a significant input to the overall valuation.
Nonfinancial Assets and Liabilities
We utilize fair value to perform impairment tests as required on our property, plant and equipment, goodwill, and other long-lived intangible assets. Assets and liabilities acquired in third party business combinations are recorded at their fair value as of the date of acquisition. The inputs used to determine such fair value are primarily based upon internally developed cash flow models and would generally be classified within Level 3 in the event that we were required to measure and record such assets at fair value within our condensed consolidated financial statements. Additionally, we use fair value to determine the inception value of our asset retirement obligations. The inputs used to determine such fair value are primarily based upon costs incurred historically for similar work, as well as estimates from independent third parties for costs that would be incurred to restore leased property to the contractually stipulated condition, and would generally be classified within Level 3.The following table presents the financial instruments carried at fair value as of
June 30, 2017
and
December 31, 2016
, by condensed consolidated balance sheet caption and by valuation hierarchy, as described above:
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June 30, 2017
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December 31, 2016
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Level 1
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Level 2
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Level 3
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Total
Carrying
Value
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Level 1
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Level 2
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Level 3
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Total
Carrying
Value
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(Millions)
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Current assets:
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Commodity derivatives (a)
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$
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18
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$
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21
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$
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7
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$
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46
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$
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5
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$
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28
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$
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9
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$
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42
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Short-term investments (b)
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$
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233
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$
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—
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$
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—
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$
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233
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$
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—
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$
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—
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$
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—
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$
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—
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Long-term assets:
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Commodity derivatives (c)
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$
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2
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$
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1
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$
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2
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$
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5
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$
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—
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$
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—
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$
|
5
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$
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5
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Current liabilities:
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Commodity derivatives (d)
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$
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(12
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)
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$
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(15
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)
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$
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(2
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)
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$
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(29
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)
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$
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(11
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)
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$
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(57
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)
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$
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(23
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)
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$
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(91
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)
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Long-term liabilities:
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Commodity derivatives (e)
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$
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(1
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)
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$
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(3
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)
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$
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(3
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)
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$
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(7
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)
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$
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(1
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)
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$
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—
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$
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—
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$
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(1
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)
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(a)
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Included in current unrealized gains on derivative instruments in our condensed consolidated balance sheets.
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(b)
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Includes short-term money market securities included in cash and cash equivalents in our condensed consolidated balance sheets.
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(c)
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Included in long-term unrealized gains on derivative instruments in our condensed consolidated balance sheets.
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(d)
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Included in current unrealized losses on derivative instruments in our condensed consolidated balance sheets.
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(e)
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Included in long-term unrealized losses on derivative instruments in our condensed consolidated balance sheets.
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DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
Changes in Levels 1 and 2 Fair Value Measurements
The determination to classify a financial instrument within Level 1 or Level 2 is based upon the availability of quoted prices for identical or similar assets and liabilities in active markets. Depending upon the information readily observable in the market, and/or the use of identical or similar quoted prices, which are significant to the overall valuation, the classification of any individual financial instrument may differ from one measurement date to the next. To qualify as a transfer, the asset or liability must have existed in the previous reporting period and moved into a different level during the current period. In the event that there is a movement between the classification of an instrument as Level 1 or 2, the transfer would be reflected in a table as Transfers into or out of Level 1 and Level 2. During the three and
six months ended
June 30, 2017
and
2016
, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
Changes in Level 3 Fair Value Measurements
The tables below illustrate a rollforward of the amounts included in our condensed consolidated balance sheets for derivative financial instruments that we have classified within Level 3. Since financial instruments classified as Level 3 typically include a combination of observable components (that is, components that are actively quoted and can be validated to external sources) and unobservable components, the gains and losses in the table below may include changes in fair value due in part to observable market factors, or changes to our assumptions on the unobservable components. Depending upon the information readily observable in the market, and/or the use of unobservable inputs, which are significant to the overall valuation, the classification of any individual financial instrument may differ from one measurement date to the next. The significant unobservable inputs used in determining fair value include adjustments by other market-based or independently sourced market data such as historical commodity volatilities, crude oil future yield curves, and/or counterparty specific considerations. In the event that there is a movement to/from the classification of an instrument as Level 3, we would reflect such items in the table below within the “Transfers into/out of Level 3” captions.
We manage our overall risk at the portfolio level and in the execution of our strategy, we may use a combination of financial instruments, which may be classified within any level. Since Level 1 and Level 2 risk management instruments are not included in the rollforward below, the gains or losses in the table do not reflect the effect of our total risk management activities.
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
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Commodity Derivative Instruments
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Current
Assets
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Long-Term
Assets
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Current
Liabilities
|
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Long-Term
Liabilities
|
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(Millions)
|
Three months ended June 30, 2017 (a):
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Beginning balance
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$
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8
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|
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$
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2
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$
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(8
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)
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$
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(3
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)
|
Net unrealized gains included in earnings (b)
|
3
|
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—
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|
1
|
|
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—
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Transfers out of Level 3 (c)
|
(3
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)
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—
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3
|
|
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—
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Settlements
|
(1
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)
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|
—
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|
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2
|
|
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—
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Ending balance
|
$
|
7
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|
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$
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2
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$
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(2
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)
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$
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(3
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)
|
Net unrealized gains on derivatives still held included in earnings (b)
|
$
|
4
|
|
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$
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—
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|
|
$
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—
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|
|
$
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—
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|
Three months ended June 30, 2016 (a):
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Beginning balance
|
$
|
9
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|
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$
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2
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$
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(17
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)
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$
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(3
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)
|
Net unrealized (losses) gains included in earnings (b)
|
(2
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)
|
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—
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|
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—
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|
1
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|
Transfers out of Level 3 (c)
|
(2
|
)
|
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—
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|
8
|
|
|
—
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|
Settlements
|
—
|
|
|
—
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|
|
1
|
|
|
—
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|
Ending balance
|
$
|
5
|
|
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$
|
2
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$
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(8
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)
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$
|
(2
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)
|
Net unrealized gains (losses) on derivatives still held included in earnings (b)
|
$
|
1
|
|
|
$
|
—
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|
|
$
|
(5
|
)
|
|
$
|
2
|
|
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|
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|
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|
|
Commodity Derivative Instruments
|
|
Current
Assets
|
|
Long-Term
Assets
|
|
Current
Liabilities
|
|
Long-Term
Liabilities
|
|
(Millions)
|
Six months ended June 30, 2017 (a):
|
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|
|
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|
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Beginning balance
|
$
|
9
|
|
|
$
|
5
|
|
|
$
|
(23
|
)
|
|
$
|
—
|
|
Net unrealized gains (losses) included in earnings (b)
|
1
|
|
|
(3
|
)
|
|
13
|
|
|
(3
|
)
|
Transfers out of Level 3 (c)
|
(2
|
)
|
|
—
|
|
|
3
|
|
|
—
|
|
Settlements
|
(1
|
)
|
|
—
|
|
|
5
|
|
|
—
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|
Ending balance
|
$
|
7
|
|
|
$
|
2
|
|
|
$
|
(2
|
)
|
|
$
|
(3
|
)
|
Net unrealized gains (losses) on derivatives still held included in earnings (b)
|
$
|
6
|
|
|
$
|
(2
|
)
|
|
$
|
3
|
|
|
$
|
(3
|
)
|
Six months ended June 30, 2016 (a):
|
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|
|
|
|
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|
Beginning balance
|
$
|
35
|
|
|
$
|
4
|
|
|
$
|
(23
|
)
|
|
$
|
(6
|
)
|
Net unrealized (losses) gains included in earnings (b)
|
(3
|
)
|
|
(2
|
)
|
|
7
|
|
|
4
|
|
Transfers out of Level 3 (c)
|
(2
|
)
|
|
—
|
|
|
6
|
|
|
—
|
|
Settlements
|
(25
|
)
|
|
—
|
|
|
2
|
|
|
—
|
|
Ending balance
|
$
|
5
|
|
|
$
|
2
|
|
|
$
|
(8
|
)
|
|
$
|
(2
|
)
|
Net unrealized gains (losses) on derivatives still held included in earnings (b)
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
(6
|
)
|
|
$
|
5
|
|
|
|
(a)
|
There were no purchases, issuances or sales of derivatives or transfers into Level 3 for the three and
six months ended
June 30, 2017
and
2016
.
|
|
|
(b)
|
Represents the amount of unrealized gains or losses for the period, included in trading and marketing gains (losses), net.
|
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(c)
|
Amounts transferred out of Level 3 are reflected at fair value at the end of the period.
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
Quantitative Information and Fair Value Sensitivities Related to Level 3 Unobservable Inputs
We utilize 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.
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June 30, 2017
|
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Product Group
|
Fair Value
|
|
Forward
Curve Range
|
|
|
|
(Millions)
|
|
|
Assets
|
|
|
|
|
|
NGLs
|
$
|
8
|
|
|
$0.25-$1.03
|
|
Per gallon
|
Natural gas
|
$
|
1
|
|
|
$2.35-$2.94
|
|
Per MMBtu
|
Liabilities
|
|
|
|
|
|
NGLs
|
$
|
(3
|
)
|
|
$0.20-$1.05
|
|
Per gallon
|
Natural gas
|
$
|
(2
|
)
|
|
$2.35-$2.94
|
|
Per MMBtu
|
Estimated Fair Value of Financial Instruments
Valuation of a contract’s fair value is validated by an internal group independent of the marketing group. While common industry practices are used to develop valuation techniques, changes in pricing methodologies or the underlying assumptions could result in significantly different fair values and income recognition. When available, quoted market prices or prices obtained through external sources are used to determine a contract’s fair value. For contracts with a delivery location or duration for which quoted market prices are not available, fair value is determined based on pricing models developed primarily from historical and expected relationship with quoted market prices.
Values are adjusted to reflect the credit risk inherent in the transaction as well as the potential impact of liquidating open positions in an orderly manner over a reasonable time period under current conditions. Changes in market prices and management estimates directly affect the estimated fair value of these contracts. Accordingly, it is reasonably possible that such estimates may change in the near term.
The fair value of our interest rate swaps, if any, and commodity non-trading derivatives is based on prices supported by quoted market prices and other external sources and prices based on models and other valuation methods. The “prices supported by quoted market prices and other external sources” category includes our interest rate swaps, if any, our NGL and crude oil swaps and our NYMEX positions in natural gas. In addition, this category includes our forward positions in natural gas for which our forward price curves are obtained from a third party pricing service and then validated through an internal process which includes the use of independent broker quotes. This category also includes our forward positions in NGLs at points for which OTC broker quotes for similar assets or liabilities are available for the full term of the instrument. This category also includes “strip” transactions whose pricing inputs are directly or indirectly observable from external sources and then modeled to daily or monthly prices as appropriate. The “prices based on models and other valuation methods” category includes the value of transactions for which inputs to the fair value of the instrument are unobservable in the marketplace and are considered significant to the overall fair value of the instrument. The fair value of these instruments may be based upon an internally developed price curve, which was constructed as a result of the long dated nature of the transaction or the illiquidity of the specific market point.
We have determined fair value amounts using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange. The use of different market assumptions and/or estimation methods may have a material effect on the estimated fair value amounts.
The fair value of accounts receivable, accounts payable and short-term borrowings are not materially different from their carrying amounts because of the short-term nature of these instruments or the stated rates approximating market rates. Derivative instruments are carried at fair value.
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
We determine the fair value of our fixed-rate senior notes and junior subordinated notes based on quotes obtained from bond dealers. We determine the fair value of borrowings under our revolving credit facility based upon the discounted present value of expected future cash flows, taking into account the difference between the contractual borrowing spread and the spread for similar credit facilities available in the marketplace. We classify the fair values of our outstanding debt balances within Level 2 of the valuation hierarchy. As of
June 30, 2017
and
December 31, 2016
, the carrying value and fair value of our total debt, including current maturities, were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
|
Carrying Value (a)
|
|
Fair Value
|
|
Carrying Value (a)
|
|
Fair Value
|
|
(Millions)
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
5,235
|
|
|
$
|
5,360
|
|
|
$
|
5,430
|
|
|
$
|
5,395
|
|
(a) Excludes unamortized issuance costs.
11. Debt
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
December 31,
2016
|
|
(Millions)
|
Senior notes:
|
|
|
|
Issued November 2012, interest at 2.500% payable semi-annually, due December 2017
|
$
|
500
|
|
|
$
|
500
|
|
Issued February 2009, interest at 9.750% payable semiannually, due March 2019 (a)
|
450
|
|
|
450
|
|
Issued March 2014, interest at 2.700% payable semi-annually, due April 2019
|
325
|
|
|
325
|
|
Issued March 2010, interest at 5.350% payable semiannually, due March 2020 (a)
|
600
|
|
|
600
|
|
Issued September 2011, interest at 4.750% payable semiannually, due September 2021
|
500
|
|
|
500
|
|
Issued March 2012, interest at 4.950% payable semi-annually, due April 2022
|
350
|
|
|
350
|
|
Issued March 2013, interest at 3.875% payable semi-annually, due March 2023
|
500
|
|
|
500
|
|
Issued August 2000, interest at 8.125% payable semi-annually, due August 2030 (a)
|
300
|
|
|
300
|
|
Issued October 2006, interest at 6.450% payable semi-annually, due November 2036
|
300
|
|
|
300
|
|
Issued September 2007, interest at 6.750% payable semi-annually, due September 2037
|
450
|
|
|
450
|
|
Issued March 2014, interest at 5.600% payable semi-annually, due April 2044
|
400
|
|
|
400
|
|
Junior subordinated notes:
|
|
|
|
Issued May 2013, interest at 5.850% payable semi-annually, due May 2043
|
550
|
|
|
550
|
|
Credit facility with financial institutions:
|
|
|
|
Revolving credit facility, weighted-average variable interest rate of 2.010%, as of December 31, 2016, due May 2019
|
—
|
|
|
195
|
|
Fair value adjustments related to interest rate swap fair value hedges (a)
|
23
|
|
|
24
|
|
Unamortized issuance costs
|
(25
|
)
|
|
(23
|
)
|
Unamortized discount
|
(13
|
)
|
|
(14
|
)
|
Total debt
|
5,210
|
|
|
5,407
|
|
Current maturities of long-term debt
|
500
|
|
|
500
|
|
Total long-term debt
|
$
|
4,710
|
|
|
$
|
4,907
|
|
(a) The swaps associated with this debt were previously terminated. The remaining long-term fair value of approximately
$23 million
related to the swaps is being amortized as a reduction to interest expense through 2019, 2020 and 2030, the original maturity dates of the debt.
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
Credit Facility with Financial Institutions
In February 2017, we further amended our
$1.25 billion
senior unsecured revolving credit agreement that matures on
May 1, 2019
, or the Credit Agreement, to increase the aggregate commitments under the unsecured revolving credit facility to approximately
$1.4 billion
. The Credit Agreement is used for working capital requirements and other general partnership purposes including acquisitions.
The Credit Agreement allows for unrestricted cash and cash equivalents to be netted against consolidated indebtedness for purposes of calculating the Partnership’s Consolidated Leverage Ratio (as defined in the Credit Agreement). Additionally, under the Credit Agreement, the maximum Consolidated Leverage Ratio of the Partnership as of the end of any fiscal quarter shall not exceed: (a)
5.75
to 1.0 for the quarters ending March 31, 2017 through December 31, 2017, (b)
5.50
to 1.0 for the quarter ending March 31, 2018, (c)
5.25
to 1.0 for the quarter ending June 30, 2018, and (d)
5.00
to
1.0
for the quarters thereafter; provided that, if there is a Qualified Acquisition (as defined in the Credit Agreement) during any fiscal quarter ending June 30, 2018 or thereafter, the maximum Consolidated Leverage Ratio shall not exceed
5.50
to
1.0
at the end of such quarter and at the end of the two fiscal quarters immediately thereafter.
Our cost of borrowing under the Credit Agreement is determined by a ratings-based pricing grid. Indebtedness under the Credit Agreement bears interest at either: (1) LIBOR, plus an applicable margin of
1.45%
based on our current credit rating; or (2) (a) the base rate which shall be the higher of the prime rate, the Federal Funds rate plus
0.50%
or the LIBOR Market Index rate plus
1%
, plus (b) an applicable margin of
0.45%
based on our current credit rating. The Credit Agreement incurs an annual facility fee of
0.3%
based on our current credit rating. This fee is paid on drawn and undrawn portions of the approximately
$1.4 billion
revolving credit facility.
As of
June 30, 2017
, we had unused borrowing capacity of
$1,373 million
, net of
$25 million
of letters of credit, under the Credit Agreement. Our borrowing capacity may be limited by financial covenants set forth in the Credit Agreement. The financial covenants set forth in the Credit Agreement limit the Partnership's ability to incur incremental debt by
$1,187 million
as of
June 30, 2017
. Except in the case of a default, amounts borrowed under our Credit Agreement will not become due prior to the
May 1, 2019
maturity date.
Senior Notes and Junior Subordinated Notes
Our senior notes and junior subordinated notes, collectively referred to as our debt securities, mature and become payable on their respective due dates, and are not subject to any sinking fund or mandatory redemption provisions. The senior notes are senior unsecured obligations that are guaranteed by the Partnership and rank equally in a right of payment with our other senior unsecured indebtedness, including indebtedness under our Credit Agreement, and the junior subordinated notes are unsecured and rank subordinate in right of payment to all of our existing and future senior indebtedness. The debt securities include an optional redemption whereby we may elect to redeem the notes, in whole or in part from time-to-time for a premium. Additionally, we may defer the payment of all or part of the interest on the junior subordinated notes for one or more periods up to
five
consecutive years. The underwriters’ fees and related expenses are recorded in our condensed consolidated balance sheets within the carrying amount of long-term debt and will be amortized over the term of the notes.
The maturities of our long-term debt are as follows:
|
|
|
|
|
|
Debt
Maturities
|
|
(Millions)
|
2018
|
$
|
—
|
|
2019
|
775
|
|
2020
|
600
|
|
2021
|
500
|
|
2022
|
350
|
|
Thereafter
|
2,500
|
|
Total long-term debt
|
$
|
4,725
|
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
12. Risk Management and Hedging Activities
Our day-to-day operations expose us to a variety of risks including but not limited to changes in the prices of commodities that we buy or sell, changes in interest rates, and the creditworthiness of each of our counterparties. We manage certain of these exposures with either physical or financial transactions. We have established a comprehensive risk management policy and a risk management committee, or the Risk Management Committee, to monitor and manage market risks associated with commodity prices and counterparty credit. The Risk Management Committee is composed of senior executives who receive regular briefings on positions and exposures, credit exposures and overall risk management in the context of market activities. The Risk Management Committee is responsible for the overall management of credit risk and commodity price risk, including monitoring exposure limits. The following describes each of the risks that we manage.
Commodity Price Risk
Our portfolio of commodity derivative activity is primarily accounted for using the mark-to-market method of accounting; however, depending upon our risk profile and objectives, in certain limited cases, we may execute transactions that qualify for the hedge method of accounting. The risks, strategies and instruments used to mitigate such risks, as well as the method of accounting are discussed and summarized below.
Natural Gas Asset Based Trading and Marketing
Our natural gas storage and pipeline assets are exposed to certain risks including changes in commodity prices. We manage commodity price risk related to our natural gas storage and pipeline assets through our commodity derivative program. The commercial activities related to our natural gas storage and pipeline assets primarily consist of the purchase and sale of gas and associated time spreads and basis spreads.
A time spread transaction is executed by establishing a long gas position at one point in time and establishing an equal short gas position at a different point in time. Time spread transactions allow us to lock in a margin supported by the injection, withdrawal, and storage capacity of our natural gas storage assets. We may execute basis spread transactions to mitigate the risk of sale and purchase price differentials across our system. A basis spread transaction allows us to lock in a margin on our physical purchases and sales of gas, including injections and withdrawals from storage. We typically use swaps to execute these transactions, which are not designated as hedging instruments and are recorded at fair value with changes in fair value recorded in the current period condensed consolidated statements of operations. While gas held in our storage locations is recorded at the lower of average cost or market, the derivative instruments that are used to manage our storage facilities are recorded at fair value and any changes in fair value are currently recorded in our condensed consolidated statements of operations. Even though we may have economically hedged our exposure and locked in a future margin, the use of lower-of-cost-or-market accounting for our physical inventory and the use of mark-to-market accounting for our derivative instruments may subject our earnings to market volatility.
Commodity Cash Flow Hedges
In order for our natural gas storage facility to remain operational, a minimum level of base gas must be maintained in each storage cavern, which is capitalized on our condensed consolidated balance sheets as a component of property, plant and equipment, net. During construction or expansion of our storage caverns, we may execute a series of derivative financial instruments to mitigate a portion of the risk associated with the forecasted purchase of natural gas when we bring the storage caverns into operation. These derivative financial instruments may be designated as cash flow hedges. While the cash paid upon settlement of these hedges economically fixes the cash required to purchase base gas, the deferred losses or gains would remain in accumulated other comprehensive income, or AOCI, until the cavern is emptied and the base gas is sold. The balance in AOCI of our previously settled base gas cash flow hedges was in a loss position of
$6 million
as of
June 30, 2017
.
Commodity Cash Flow Protection Activities
We are exposed to the impact of market fluctuations in the prices of natural gas, NGLs and condensate as a result of our gathering, processing, sales and storage activities. For gathering, processing and storage services, we may receive cash or commodities as payment for these services, depending on the contract type. We may enter into derivative financial instruments to mitigate a portion of the risk of weakening natural gas, NGL and condensate prices associated with our gathering, processing and sales activities, thereby stabilizing our cash flows. Our derivative financial instruments used to mitigate a portion of the risk of weakening natural gas, NGL and condensate prices extend through the first quarter of 2018. The commodity derivative
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
instruments used for our hedging programs are a combination of direct NGL product, crude oil and natural gas hedges. Due to the limited liquidity and tenor of the NGL derivative market, we may use crude oil swaps to mitigate a portion of the commodity price risk exposure for NGLs. Historically, prices of NGLs have generally been related to crude oil prices; however, there are periods of time when NGL pricing may be at a greater discount to crude oil, resulting in additional exposure to NGL commodity prices. The relationship of NGLs to crude oil continues to be lower than historical relationships. When our crude oil swaps become short-term in nature, certain crude oil derivatives may be converted to NGL derivatives by entering into offsetting crude oil swaps while adding NGL swaps. Crude oil and NGL transactions are primarily accomplished through the use of forward contracts that effectively exchange floating price risk for a fixed price. The type of instrument used to mitigate a portion of the risk may vary depending on our risk management objectives. These transactions are not designated as hedging instruments for accounting purposes and the change in fair value is reflected in the current period within our condensed consolidated statements of operations as trading and marketing gains, net.
NGL Proprietary Trading
Our NGL proprietary trading activity includes trading energy related products and services. We undertake these activities through the use of fixed forward sales and purchases, basis and spread trades, storage opportunities, put/call options, term contracts and spot market trading. These energy trading operations are exposed to market variables and commodity price risk with respect to these products and services, and these operations may enter into physical contracts and financial instruments with the objective of realizing a positive margin from the purchase and sale of commodity-based instruments. These physical and financial instruments are not designated as hedging instruments and are recorded at fair value with changes in fair value recorded in the current period condensed consolidated statements of operations.
We employ established risk limits, policies and procedures to manage risks associated with our natural gas asset based trading and marketing and NGL proprietary trading.
Interest Rate Risk
We enter into debt arrangements that have either fixed or floating rates, therefore we are exposed to market risks related to changes in interest rates. We periodically use interest rate swaps to convert our floating rate debt to fixed-rate debt or to convert our fixed-rate debt to floating rate debt. Our primary goals include: (1) maintaining an appropriate ratio of fixed-rate debt to floating-rate debt; (2) reducing volatility of earnings resulting from interest rate fluctuations; and (3) locking in attractive interest rates.
We previously had interest rate cash flow hedges and fair value hedges in place that were terminated. As the underlying transactions impact earnings, the remaining net loss deferred in AOCI relative to these cash flow hedges will be reclassified to interest expense, net from 2022 through 2030 and the remaining net loss included in long-term debt relative to these fair value hedges will be reclassified to interest expense, net from 2019 through 2030, the original maturity dates of the debt.
Credit Risk
Our principal customers range from large, natural gas marketers to industrial end-users for our natural gas products and services, as well as large multi-national petrochemical and refining companies, to small regional propane distributors for our NGL products and services. Substantially all of our natural gas and NGL sales are made at market-based prices. Approximately
26%
of our NGL production was committed to Phillips 66 and CPChem as of
June 30, 2017
. This concentration of credit risk may affect our overall credit risk, in that these customers may be similarly affected by changes in economic, regulatory or other factors. Where exposed to credit risk, we analyze the counterparties’ financial condition prior to entering into an agreement, establish credit limits and monitor the appropriateness of these limits on an ongoing basis. We may use various master agreements that include language giving us the right to request collateral to mitigate credit exposure. The collateral language provides for a counterparty to po
st cash or letters of credit for exposure in excess of the established threshold. The threshold amount represents an open
credit limit, determined in accordance with o
ur credit policy.
The collateral language also provides that the inability to post collateral is sufficient cause to terminate a contract and liquidate all positions. In addition, our master agreements and our standard gas and NGL sales contracts contain adequate assurance provisions, which allow us to suspend deliveries and cancel agreements, or continue deliveries to the buyer after the buyer provides security for payment in a satisfactory form.
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
Contingent Credit Features
Each of the above risks is managed through the execution of individual contracts with a variety of counterparties. Certain of our derivative contracts may contain credit-risk related contingent provisions that may require us to take certain actions in certain circumstances.
We have International Swaps and Derivatives Association, or ISDA, contracts which are standardized master legal arrangements that establish key terms and conditions which govern certain derivative transactions. These ISDA contracts contain standard credit-risk related contingent provisions. Some of the provisions we are subject to are outlined below.
|
|
•
|
If we were to have an effective event of default under our Credit Agreement that occurs and is continuing, our ISDA counterparties may have the right to request early termination and net settlement of any outstanding derivative liability positions.
|
|
|
•
|
Our ISDA counterparties generally have collateral thresholds of zero, requiring us to fully collateralize any commodity contracts in a net liability position, when our credit rating is below investment grade.
|
|
|
•
|
Additionally, in some cases, our ISDA contracts contain cross-default provisions that could constitute a credit-risk related contingent feature. These provisions apply if we default in making timely payments under other credit arrangements and the amount of the default is above certain predefined thresholds, which are significantly high and are generally consistent with the terms of our Credit Agreement. As of
June 30, 2017
, we were not a party to any agreements that would trigger the cross-default provisions.
|
Our commodity derivative contracts that are not governed by ISDA contracts do not have any credit-risk related contingent features. Depending upon the movement of commodity prices and interest rates, each of our individual contracts with counterparties to our commodity derivative instruments or interest rate swap instruments are in either a net asset or net liability position. As of June 30, 2017, we had less than
$1 million
of individual commodity derivative contracts that contain credit-risk related contingent features that were in a net liability position. If we were required to net settle our position with an individual counterparty, due to a credit-risk related event, our ISDA contracts may permit us to net all outstanding contracts with that counterparty, whether in a net asset or net liability position, as well as any cash collateral already posted. As of June 30, 2017, we have not been required to post additional collateral. Although our commodity derivative contracts that contain credit-risk related contingent features were in a net liability position as of June 30, 2017, the net liability position would be offset by contracts in a net asset position.
Collateral
As of
June 30, 2017
, we had cash deposits of
$9 million
, included in collateral cash deposits in our condensed consolidated balance sheets, and letters of credit of
$13 million
with counterparties to secure our obligations to provide future services or to perform under financial contracts. Additionally, as of
June 30, 2017
, we held cash of
$21 million
, included in other current liabilities in our condensed consolidated balance sheet, related to cash postings by third parties and letters of credit of
$29 million
from counterparties to secure their future performance under financial or physical contracts. Collateral amounts held or posted may be fixed or may vary, depending on the value of the underlying contracts, and could cover normal purchases and sales, services, trading and hedging contracts. In many cases, we and our counterparties have publicly disclosed credit ratings, which may impact the amounts of collateral requirements.
Physical forward contracts and financial derivatives are generally cash settled at the expiration of the contract term. These transactions are generally subject to specific credit provisions within the contracts that would allow the seller, at its discretion, to suspend deliveries, cancel agreements or continue deliveries to the buyer after the buyer provides security for payment satisfactory to the seller.
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
Offsetting
Certain of our derivative instruments are subject to a master netting or similar arrangement, whereby we may elect to settle multiple positions with an individual counterparty through a single net payment. Each of our individual derivative instruments are presented on a gross basis on the condensed consolidated balance sheets, regardless of our ability to net settle our positions. Instruments that are governed by agreements that include net settle provisions allow final settlement, when presented with a termination event, of outstanding amounts by extinguishing the mutual debts owed between the parties in exchange for a net amount due. We have trade receivables and payables associated with derivative instruments, subject to master netting or similar agreements, which are not included in the table below. The following summarizes the gross and net amounts of our derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
Gross Amounts
of Assets and
(Liabilities)
Presented in the
Balance Sheet
|
|
Amounts Not
Offset in the
Balance Sheet -
Financial
Instruments
|
|
Net
Amount
|
|
Gross Amounts
of Assets and
(Liabilities)
Presented in the
Balance Sheet
|
|
Amounts Not
Offset in the
Balance Sheet -
Financial
Instruments
|
|
Net
Amount
|
|
(Millions)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
$
|
51
|
|
|
$
|
—
|
|
|
$
|
51
|
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
47
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
$
|
(36
|
)
|
|
$
|
—
|
|
|
$
|
(36
|
)
|
|
$
|
(92
|
)
|
|
$
|
—
|
|
|
$
|
(92
|
)
|
Summarized Derivative Information
The fair value of our derivative instruments that are marked-to-market each period, as well as the location of each within our condensed consolidated balance sheets, by major category, is summarized below. We have no derivative instruments that are designated as hedging instruments for accounting purposes as of
June 30, 2017
and
December 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Line Item
|
June 30,
2017
|
|
December 31,
2016
|
|
Balance Sheet Line Item
|
|
June 30,
2017
|
|
December 31,
2016
|
|
(Millions)
|
|
|
|
(Millions)
|
Derivative Assets Not Designated as Hedging Instruments:
|
|
Derivative Liabilities Not Designated as Hedging Instruments:
|
Commodity derivatives:
|
|
|
|
|
Commodity derivatives:
|
|
|
|
|
Unrealized gains on derivative instruments — current
|
$
|
46
|
|
|
$
|
42
|
|
|
Unrealized losses on derivative instruments — current
|
|
$
|
(29
|
)
|
|
$
|
(91
|
)
|
Unrealized gains on derivative instruments — long-term
|
5
|
|
|
5
|
|
|
Unrealized losses on derivative instruments — long-term
|
|
(7
|
)
|
|
(1
|
)
|
Total
|
$
|
51
|
|
|
$
|
47
|
|
|
Total
|
|
$
|
(36
|
)
|
|
$
|
(92
|
)
|
The following summarizes the balance and activity within AOCI relative to our interest rate, commodity and foreign currency cash flow hedges as of and for the
three months ended June 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate Cash
Flow
Hedges
|
|
Commodity
Cash Flow
Hedges
|
|
Foreign
Currency
Cash Flow
Hedges (a)
|
|
Total
|
|
(Millions)
|
Net deferred (losses) gains in AOCI (beginning balance)
|
$
|
(4
|
)
|
|
$
|
(6
|
)
|
|
$
|
1
|
|
|
$
|
(9
|
)
|
Net deferred (losses) gains in AOCI (ending balance)
|
$
|
(4
|
)
|
|
$
|
(6
|
)
|
|
$
|
1
|
|
|
$
|
(9
|
)
|
Deferred losses in AOCI expected to be reclassified into earnings over the next 12 months
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
The following summarizes the balance and activity within AOCI relative to our interest rate, commodity and foreign currency cash flow hedges as of and for the
six months ended
June 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate Cash
Flow
Hedges
|
|
Commodity
Cash Flow
Hedges
|
|
Foreign
Currency
Cash Flow
Hedges (a)
|
|
Total
|
|
(Millions)
|
Net deferred (losses) gains in AOCI (beginning balance)
|
$
|
(3
|
)
|
|
$
|
(6
|
)
|
|
$
|
1
|
|
|
$
|
(8
|
)
|
Losses reclassified from AOCI to earnings — effective portion
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Deficit purchase price under carrying value of the Transaction
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
Net deferred (losses) gains in AOCI (ending balance)
|
$
|
(4
|
)
|
|
$
|
(6
|
)
|
|
$
|
1
|
|
|
$
|
(9
|
)
|
|
|
(a)
|
Relates to Discovery, an unconsolidated affiliate.
|
For the three and
six months ended
June 30, 2017
,
no
derivative losses attributable to the ineffective portion or to amounts excluded from effectiveness testing were recognized in trading and marketing gains, net or interest expense in our condensed consolidated statements of operations. For the three and
six months ended
June 30, 2017
,
no
derivative losses were reclassified from AOCI to trading and marketing gains, net or interest expense as a result of the discontinuance of cash flow hedges related to certain forecasted transactions that are not probable of occurring.
The following summarizes the balance and activity within AOCI relative to our interest rate, commodity and foreign currency cash flow hedges as of and for the
three months ended June 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate Cash
Flow
Hedges
|
|
Commodity
Cash Flow
Hedges
|
|
Foreign
Currency
Cash Flow
Hedges (a)
|
|
Total
|
|
(Millions)
|
Net deferred (losses) gains in AOCI (beginning balance)
|
$
|
(3
|
)
|
|
$
|
(6
|
)
|
|
$
|
1
|
|
|
$
|
(8
|
)
|
Net deferred (losses) gains in AOCI (ending balance)
|
$
|
(3
|
)
|
|
$
|
(6
|
)
|
|
$
|
1
|
|
|
$
|
(8
|
)
|
The following summarizes the balance and activity within AOCI relative to our interest rate, commodity and foreign currency cash flow hedges as of and for the
six months ended
June 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate Cash
Flow
Hedges
|
|
Commodity
Cash Flow
Hedges
|
|
Foreign
Currency
Cash Flow
Hedges (a)
|
|
Total
|
|
(Millions)
|
Net deferred (losses) gains in AOCI (beginning balance)
|
$
|
(3
|
)
|
|
$
|
(6
|
)
|
|
$
|
1
|
|
|
$
|
(8
|
)
|
Net deferred (losses) gains in AOCI (ending balance)
|
$
|
(3
|
)
|
|
$
|
(6
|
)
|
|
$
|
1
|
|
|
$
|
(8
|
)
|
|
|
(a)
|
Relates to Discovery, an unconsolidated affiliate.
|
For the three and
six months ended
June 30, 2016
,
no
derivative losses attributable to the ineffective portion or to amounts excluded from effectiveness testing were recognized in trading and marketing gains or losses, net or interest expense in our condensed consolidated statements of operations. For the three and
six months ended
June 30, 2016
,
no
derivative losses
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
were reclassified from AOCI to trading and marketing gains or losses, net or interest expense as a result of the discontinuance of cash flow hedges related to certain forecasted transactions that are not probable of occurring.
Changes in the value of derivative instruments, for which the hedge method of accounting has not been elected from one period to the next, are recorded in the condensed consolidated statements of operations. The following summarizes these amounts and the location within the condensed consolidated statements of operations that such amounts are reflected:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivatives: Statements of Operations Line Item
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(Millions)
|
Realized (losses) gains
|
|
$
|
(2
|
)
|
|
$
|
21
|
|
|
$
|
(7
|
)
|
|
$
|
84
|
|
Unrealized gains (losses)
|
|
24
|
|
|
(44
|
)
|
|
60
|
|
|
(89
|
)
|
Trading and marketing gains (losses), net
|
|
$
|
22
|
|
|
$
|
(23
|
)
|
|
$
|
53
|
|
|
$
|
(5
|
)
|
We do not have any derivative financial instruments that qualify as a hedge of a net investment.
The following tables represent, by commodity type, our net long or short positions that are expected to partially or entirely settle in each respective year. To the extent that we have long dated derivative positions that span multiple calendar years, the contract will appear in more than one line item in the tables below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
Crude Oil
|
|
Natural Gas
|
|
Natural Gas
Liquids
|
|
Natural Gas
Basis Swaps
|
Year of Expiration
|
Net Short
Position
(Bbls)
|
|
Net Short Position
(MMBtu)
|
|
Net (Short) Long
Position
(Bbls)
|
|
Net Long
Position
(MMBtu)
|
2017
|
(282,000
|
)
|
|
(29,043,200
|
)
|
|
(15,547,868
|
)
|
|
2,075,000
|
|
2018
|
(772,000
|
)
|
|
(17,855,000
|
)
|
|
(2,262,338
|
)
|
|
2,350,000
|
|
2019
|
(150,000
|
)
|
|
—
|
|
|
292,700
|
|
|
2,025,000
|
|
2020
|
(50,000
|
)
|
|
—
|
|
|
238,548
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
Crude Oil
|
|
Natural Gas
|
|
Natural Gas
Liquids
|
|
Natural Gas
Basis Swaps
|
Year of Expiration
|
Net Short
Position
(Bbls)
|
|
Net Short
Position
(MMBtu)
|
|
Net (Short) Long
Position
(Bbls)
|
|
Net Long
Position
(MMBtu)
|
2016
|
(951,000
|
)
|
|
(13,980,700
|
)
|
|
(15,180,238
|
)
|
|
507,500
|
|
2017
|
(702,000
|
)
|
|
(24,962,500
|
)
|
|
(5,753,073
|
)
|
|
5,670,000
|
|
2018
|
—
|
|
|
—
|
|
|
253,190
|
|
|
—
|
|
2019
|
(20,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
2020
|
(25,000
|
)
|
|
—
|
|
|
120,000
|
|
|
—
|
|
13
. Partnership Equity and Distributions
As part of the Transaction, Phillips 66 and Enbridge agreed, if required, to provide a reduction to incentive distributions payable to our General Partner under our Partnership Agreement of up to
$100 million
annually through 2019 to target an approximate
1.0
times distribution coverage ratio. Under the terms of our amended partnership agreement, the amount of incentive distributions paid to our General Partner will be evaluated by our General Partner on both a quarterly and annual basis and may be reduced each quarter by an amount determined by our General Partner (the “IDR giveback”). If no determination is made by our General Partner, the quarterly IDR giveback will be
$20 million
. The IDR giveback, of up to
$100 million
annually, will be subject to a true-up at the end of the year by taking our total distributable cash flow (as adjusted under our amended partnership agreement) less the total annual distribution payable to our unitholders, adjusted to target an approximate
1.0
times coverage ratio. Distributions paid to the holders of the Partnership's incentive distribution rights were reduced by
$20 million
during the three month period ended June 30, 2017 in accordance with the Third Amendment to the Partnership Agreement.
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
In January 2017, we issued
28,552,480
common units to DCP Midstream, LLC and
2,550,644
general partner units to the General Partner in a private placement as consideration for the Transaction that closed on January 1, 2017. For additional information regarding the Transaction, see Note 3 - Acquisitions.
During the
six months ended
June 30, 2017
and
2016
, we issued
no
common units pursuant to our 2014 equity distribution agreement.
The following table presents our cash distributions paid in
2017
and
2016
:
|
|
|
|
|
|
|
|
|
Payment Date
|
Per Unit
Distribution
|
|
Total Cash
Distribution
|
|
|
|
|
(Millions)
|
May 15, 2017
|
$
|
0.7800
|
|
|
$
|
135
|
|
February 14, 2017
|
0.7800
|
|
|
121
|
|
November 14, 2016
|
0.7800
|
|
|
120
|
|
August 12, 2016
|
0.7800
|
|
|
121
|
|
May 13, 2016
|
0.7800
|
|
|
121
|
|
February 12, 2016
|
0.7800
|
|
|
121
|
|
14. Net Income or Loss per Limited Partner Unit
Basic and diluted net income or loss per limited partner unit (or "LPU") is calculated by dividing net income or loss allocable to limited partners, by the weighted-average number of outstanding LPUs during the period. Diluted net income or loss per LPU is computed based on the weighted average number of units plus the effect of dilutive potential units outstanding during the period using the two-class method.
15
. Commitments and Contingent Liabilities
Litigation
— We are not a party to any significant legal proceedings, but are a party to various administrative and regulatory proceedings and commercial disputes that have arisen in the ordinary course of our business. Management currently believes that the ultimate resolution of the foregoing matters, taken as a whole, and after consideration of amounts accrued, insurance coverage or other indemnification arrangements, will not have a material adverse effect on our results of operations, financial position, or cash flow.
Insurance
— Our insurance coverage is carried with third-party insurers and with an affiliate of Phillips 66. Our insurance coverage includes: (1) general liability insurance covering third-party exposures; (2) statutory workers’ compensation insurance; (3) automobile liability insurance for all owned, non-owned and hired vehicles; (4) excess liability insurance above the established primary limits for general liability and automobile liability insurance; (5) property insurance, which covers the replacement value of real and personal property and includes business interruption; and (6) insurance covering our directors and officers for acts related to our business activities. All coverage is subject to certain limits and deductibles, the terms and conditions of which are common for companies with similar types of operations.
Environmental
—
The operation of pipelines, plants and other facilities for gathering, transporting, processing, treating, fractionating, or storing natural gas, NGLs and other products is subject to stringent and complex laws and regulations pertaining to health, safety and the environment. As an owner or operator of these facilities, we must comply with laws and regulations at the federal, state and, in some cases, local levels that relate to worker safety, air and water quality, solid and hazardous waste management and disposal, and other environmental matters. The cost of planning, designing, constructing and operating pipelines, plants, and other facilities incorporates compliance with environmental laws and regulations, worker safety standards, and safety standards applicable to our various facilities. In addition, there is increasing focus (i) from city, state and federal regulatory officials and through litigation, on hydraulic fracturing and the real or perceived environmental impacts of this technique, which indirectly presents some risk to our available supply of natural gas and the resulting supply of NGLs, (ii) from federal regulatory agencies regarding pipeline system safety which could impose additional regulatory burdens and increase the cost of our operations, and (iii) from state and federal regulatory officials regarding the emission of greenhouse gases which could impose regulatory burdens and increase the cost of our operations. Failure to comply with these various health, safety and environmental laws and regulations may trigger a variety of administrative, civil and potentially criminal enforcement measures, including citizen suits, which can include the assessment of monetary penalties, the imposition of remedial requirements, and the issuance of injunctions or restrictions on operation. Management believes that, based on
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
currently known information, compliance with these existing laws and regulations will not have a material adverse effect on our results of operations, financial position or cash flows.
16
. Business Segments
Concurrent with the completion of the Transaction in the first quarter of 2017, management reevaluated our reportable segments and determined that our operations are organized into
two
reportable segments: (i) Gathering and Processing and (ii) Logistics and Marketing. Segment information for prior periods has been retrospectively adjusted to furnish comparative information similar to the pooling method to reflect these reportable segments. These segments are monitored separately by management for performance against our internal forecast and are consistent with internal financial reporting. These segments have been identified based on the differing products and services, regulatory environment and the expertise required for these operations. Our Gathering and Processing reportable segment includes operating segments that have been aggregated based on the nature of the products and services provided. Gross margin is a performance measure utilized by management to monitor the operations of each segment. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies included as Exhibit 99.4 in the May 2017 8-K.
Our Gathering and Processing segment consists of gathering, compressing, treating, processing natural gas, producing and fractionating NGLs, and recovering and selling condensate. Our Logistics and Marketing segment includes transporting, trading, marketing, and storing natural gas and NGLs, fractionating NGLs, and wholesale propane logistics. The remainder of our business operations is presented as “Other,” and consists of unallocated corporate costs. Elimination of inter-segment transactions are reflected in the eliminations column. The following tables set forth our segment information:
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
Three Months Ended June 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gathering and Processing
|
|
Logistics and Marketing
|
|
Other
|
|
Eliminations
|
|
Total
|
|
(Millions)
|
Total operating revenue
|
$
|
1,269
|
|
|
$
|
1,756
|
|
|
$
|
—
|
|
|
$
|
(1,076
|
)
|
|
$
|
1,949
|
|
Gross margin (a)
|
$
|
342
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
392
|
|
Operating and maintenance expense
|
(162
|
)
|
|
(13
|
)
|
|
(3
|
)
|
|
—
|
|
|
(178
|
)
|
Depreciation and amortization expense
|
(86
|
)
|
|
(3
|
)
|
|
(5
|
)
|
|
—
|
|
|
(94
|
)
|
General and administrative expense
|
(7
|
)
|
|
(2
|
)
|
|
(62
|
)
|
|
—
|
|
|
(71
|
)
|
Other expense
|
(3
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
Gain on sale of assets, net
|
34
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
Earnings from unconsolidated affiliates
|
24
|
|
|
62
|
|
|
—
|
|
|
—
|
|
|
86
|
|
Interest expense
|
—
|
|
|
—
|
|
|
(73
|
)
|
|
—
|
|
|
(73
|
)
|
Income tax expense
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
Net income (loss)
|
$
|
142
|
|
|
$
|
92
|
|
|
$
|
(145
|
)
|
|
$
|
—
|
|
|
$
|
89
|
|
Net income attributable to noncontrolling interests
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
Net income (loss) attributable to partners
|
$
|
141
|
|
|
$
|
92
|
|
|
$
|
(145
|
)
|
|
$
|
—
|
|
|
$
|
88
|
|
Non-cash derivative mark-to-market (b)
|
$
|
16
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24
|
|
Capital expenditures
|
$
|
103
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
111
|
|
Investments in unconsolidated affiliates, net
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21
|
|
Three Months Ended June 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gathering and Processing
|
|
Logistics and Marketing
|
|
Other
|
|
Eliminations
|
|
Total
|
|
(Millions)
|
Total operating revenue
|
$
|
1,037
|
|
|
$
|
1,457
|
|
|
$
|
—
|
|
|
$
|
(871
|
)
|
|
$
|
1,623
|
|
Gross margin (a)
|
$
|
288
|
|
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
329
|
|
Operating and maintenance expense
|
(151
|
)
|
|
(10
|
)
|
|
(5
|
)
|
|
—
|
|
|
(166
|
)
|
Depreciation and amortization expense
|
(87
|
)
|
|
(4
|
)
|
|
(4
|
)
|
|
—
|
|
|
(95
|
)
|
General and administrative expense
|
(4
|
)
|
|
(2
|
)
|
|
(55
|
)
|
|
—
|
|
|
(61
|
)
|
Other expense
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
Loss on sale of assets, net
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
Restructuring costs
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
Earnings from unconsolidated affiliates
|
17
|
|
|
56
|
|
|
—
|
|
|
—
|
|
|
73
|
|
Interest expense
|
—
|
|
|
—
|
|
|
(79
|
)
|
|
—
|
|
|
(79
|
)
|
Income tax expense
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
Net income (loss)
|
$
|
57
|
|
|
$
|
76
|
|
|
$
|
(154
|
)
|
|
$
|
—
|
|
|
$
|
(21
|
)
|
Net income attributable to noncontrolling interests
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
Net income (loss) attributable to partners
|
$
|
56
|
|
|
$
|
76
|
|
|
$
|
(154
|
)
|
|
$
|
—
|
|
|
$
|
(22
|
)
|
Non-cash derivative mark-to-market (b)
|
$
|
(29
|
)
|
|
$
|
(15
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(44
|
)
|
Capital expenditures
|
$
|
22
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
26
|
|
Investments in unconsolidated affiliates, net
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
Six Months Ended June 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gathering and Processing
|
|
Logistics and Marketing
|
|
Other
|
|
Eliminations
|
|
Total
|
|
(Millions)
|
Total operating revenue
|
$
|
2,628
|
|
|
$
|
3,683
|
|
|
$
|
—
|
|
|
$
|
(2,241
|
)
|
|
$
|
4,070
|
|
Gross margin (a)
|
$
|
718
|
|
|
$
|
108
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
826
|
|
Operating and maintenance expense
|
(315
|
)
|
|
(22
|
)
|
|
(8
|
)
|
|
—
|
|
|
(345
|
)
|
Depreciation and amortization expense
|
(171
|
)
|
|
(7
|
)
|
|
(10
|
)
|
|
—
|
|
|
(188
|
)
|
General and administrative expense
|
(13
|
)
|
|
(5
|
)
|
|
(115
|
)
|
|
—
|
|
|
(133
|
)
|
Other expense
|
(3
|
)
|
|
(11
|
)
|
|
(1
|
)
|
|
—
|
|
|
(15
|
)
|
Gain on sale of assets, net
|
34
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
Earnings from unconsolidated affiliates
|
44
|
|
|
116
|
|
|
—
|
|
|
—
|
|
|
160
|
|
Interest expense
|
—
|
|
|
—
|
|
|
(146
|
)
|
|
—
|
|
|
(146
|
)
|
Income tax expense
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
Net income (loss)
|
$
|
294
|
|
|
$
|
179
|
|
|
$
|
(283
|
)
|
|
$
|
—
|
|
|
$
|
190
|
|
Net income attributable to noncontrolling interests
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
Net income (loss) attributable to partners
|
$
|
293
|
|
|
$
|
179
|
|
|
$
|
(283
|
)
|
|
$
|
—
|
|
|
$
|
189
|
|
Non-cash derivative mark-to-market (b)
|
$
|
47
|
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
60
|
|
Capital expenditures
|
$
|
146
|
|
|
$
|
1
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
159
|
|
Investments in unconsolidated affiliates, net
|
$
|
—
|
|
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
41
|
|
Six Months Ended June 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gathering and Processing
|
|
Logistics and Marketing
|
|
Other
|
|
Eliminations
|
|
Total
|
|
(Millions)
|
Total operating revenue
|
$
|
1,973
|
|
|
$
|
2,721
|
|
|
$
|
—
|
|
|
$
|
(1,607
|
)
|
|
$
|
3,087
|
|
Gross margin (a)
|
$
|
557
|
|
|
$
|
101
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
658
|
|
Operating and maintenance expense
|
(312
|
)
|
|
(20
|
)
|
|
(13
|
)
|
|
—
|
|
|
(345
|
)
|
Depreciation and amortization expense
|
(173
|
)
|
|
(8
|
)
|
|
(9
|
)
|
|
—
|
|
|
(190
|
)
|
General and administrative expense
|
(8
|
)
|
|
(5
|
)
|
|
(110
|
)
|
|
—
|
|
|
(123
|
)
|
Other income (expense)
|
87
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
82
|
|
Loss on sale of assets, net
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
Restructuring costs
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
Earnings from unconsolidated affiliates
|
32
|
|
|
107
|
|
|
—
|
|
|
—
|
|
|
139
|
|
Interest expense
|
—
|
|
|
—
|
|
|
(158
|
)
|
|
—
|
|
|
(158
|
)
|
Income tax expense
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
Net income (loss)
|
$
|
177
|
|
|
$
|
170
|
|
|
$
|
(303
|
)
|
|
$
|
—
|
|
|
$
|
44
|
|
Net income attributable to noncontrolling interests
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
Net income (loss) attributable to partners
|
$
|
176
|
|
|
$
|
170
|
|
|
$
|
(303
|
)
|
|
$
|
—
|
|
|
$
|
43
|
|
Non-cash derivative mark-to-market (b)
|
$
|
(68
|
)
|
|
$
|
(21
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(89
|
)
|
Non-cash lower of cost or market adjustments
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Capital expenditures
|
$
|
72
|
|
|
$
|
3
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
83
|
|
Investments in unconsolidated affiliates, net
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27
|
|
|
|
(a)
|
Gross margin consists of total operating revenues, including trading and marketing gains and losses, less purchases of natural gas and NGLs. Gross margin is viewed as a non-GAAP financial measure under the rules of the SEC, but is included as a supplemental disclosure because it is a primary performance measure used by management as it represents the results of product sales versus product purchases. As an indicator of our operating performance, gross margin should not be considered an alternative to, or more meaningful than, net income or cash flow as determined in accordance with GAAP. Our gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate gross margin in the same manner.
|
|
|
(b)
|
Non-cash commodity derivative mark-to-market is included in gross margin, along with cash settlements for our commodity derivative contracts.
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
2017
|
|
2016
|
|
(Millions)
|
Segment long-term assets:
|
|
|
|
Gathering and Processing
|
$
|
8,937
|
|
|
$
|
9,053
|
|
Logistics and Marketing
|
3,284
|
|
|
3,278
|
|
Other (a)
|
284
|
|
|
286
|
|
Total long-term assets
|
12,505
|
|
|
12,617
|
|
Current assets
|
1,065
|
|
|
994
|
|
Total assets
|
$
|
13,570
|
|
|
$
|
13,611
|
|
|
|
(a)
|
Other long-term assets not allocable to segments consist of unrealized gains on derivative instruments, corporate leasehold improvements and other long-term assets.
|
17. Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
(Millions)
|
Cash paid for interest:
|
|
|
|
Cash paid for interest, net of amounts capitalized
|
$
|
143
|
|
|
$
|
160
|
|
Cash paid for income taxes, net of income tax refunds
|
$
|
2
|
|
|
$
|
2
|
|
Non-cash investing and financing activities:
|
|
|
|
Property, plant and equipment acquired with accounts payable and accrued liabilities
|
$
|
33
|
|
|
$
|
15
|
|
Other non-cash changes in property, plant and equipment
|
$
|
(2
|
)
|
|
$
|
4
|
|
Property, plant and equipment reclassified to assets held for sale, net of accumulated depreciation
|
$
|
—
|
|
|
$
|
(116
|
)
|
Issuance of common and general partner units
|
$
|
1,125
|
|
|
$
|
—
|
|
Deficit purchase price in the Transaction
|
$
|
3,094
|
|
|
$
|
—
|
|
18. Condensed Consolidating Financial Information
The following condensed consolidating financial information presents the results of operations, financial position and cash flows of DCP Midstream, LP, or parent guarantor, DCP Midstream Operating LP, or subsidiary issuer, which is a
100%
owned subsidiary, and non-guarantor subsidiaries, as well as the consolidating adjustments necessary to present DCP Midstream, LP’s results on a consolidated basis. The parent guarantor has agreed to fully and unconditionally guarantee debt securities of the subsidiary issuer. For the purpose of the following financial information, investments in subsidiaries are reflected in accordance with the equity method of accounting. The financial information may not necessarily be indicative of results of operations, cash flows, or financial position had the subsidiaries operated as independent entities.
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet
|
|
June 30, 2017
|
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(Millions)
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
250
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
251
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
690
|
|
|
—
|
|
|
690
|
|
Inventories
|
—
|
|
|
—
|
|
|
51
|
|
|
—
|
|
|
51
|
|
Other
|
—
|
|
|
—
|
|
|
73
|
|
|
—
|
|
|
73
|
|
Total current assets
|
—
|
|
|
250
|
|
|
815
|
|
|
—
|
|
|
1,065
|
|
Property, plant and equipment, net
|
—
|
|
|
—
|
|
|
8,950
|
|
|
—
|
|
|
8,950
|
|
Goodwill and intangible assets, net
|
—
|
|
|
—
|
|
|
363
|
|
|
—
|
|
|
363
|
|
Advances receivable — consolidated subsidiaries
|
2,697
|
|
|
2,165
|
|
|
—
|
|
|
(4,862
|
)
|
|
—
|
|
Investments in consolidated subsidiaries
|
4,473
|
|
|
7,339
|
|
|
—
|
|
|
(11,812
|
)
|
|
—
|
|
Investments in unconsolidated affiliates
|
—
|
|
|
—
|
|
|
2,994
|
|
|
—
|
|
|
2,994
|
|
Other long-term assets
|
—
|
|
|
—
|
|
|
198
|
|
|
—
|
|
|
198
|
|
Total assets
|
$
|
7,170
|
|
|
$
|
9,754
|
|
|
$
|
13,320
|
|
|
$
|
(16,674
|
)
|
|
$
|
13,570
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
Accounts payable and other current liabilities
|
$
|
—
|
|
|
$
|
71
|
|
|
$
|
864
|
|
|
$
|
—
|
|
|
$
|
935
|
|
Current maturities of long-term debt
|
—
|
|
|
500
|
|
|
—
|
|
|
—
|
|
|
500
|
|
Advances payable — consolidated subsidiaries
|
—
|
|
|
—
|
|
|
4,862
|
|
|
(4,862
|
)
|
|
—
|
|
Long-term debt
|
—
|
|
|
4,710
|
|
|
—
|
|
|
—
|
|
|
4,710
|
|
Other long-term liabilities
|
—
|
|
|
—
|
|
|
226
|
|
|
—
|
|
|
226
|
|
Total liabilities
|
—
|
|
|
5,281
|
|
|
5,952
|
|
|
(4,862
|
)
|
|
6,371
|
|
Commitments and contingent liabilities
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
Partners’ equity:
|
|
|
|
|
|
|
|
|
|
Net equity
|
7,170
|
|
|
4,477
|
|
|
7,344
|
|
|
(11,812
|
)
|
|
7,179
|
|
Accumulated other comprehensive loss
|
—
|
|
|
(4
|
)
|
|
(5
|
)
|
|
—
|
|
|
(9
|
)
|
Total partners’ equity
|
7,170
|
|
|
4,473
|
|
|
7,339
|
|
|
(11,812
|
)
|
|
7,170
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
29
|
|
Total equity
|
7,170
|
|
|
4,473
|
|
|
7,368
|
|
|
(11,812
|
)
|
|
7,199
|
|
Total liabilities and equity
|
$
|
7,170
|
|
|
$
|
9,754
|
|
|
$
|
13,320
|
|
|
$
|
(16,674
|
)
|
|
$
|
13,570
|
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet
|
|
December 31, 2016
|
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(Millions)
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Accounts receivable, net
|
—
|
|
|
—
|
|
|
792
|
|
|
—
|
|
|
792
|
|
Inventories
|
—
|
|
|
—
|
|
|
72
|
|
|
—
|
|
|
72
|
|
Other
|
—
|
|
|
—
|
|
|
129
|
|
|
—
|
|
|
129
|
|
Total current assets
|
—
|
|
|
—
|
|
|
994
|
|
|
—
|
|
|
994
|
|
Property, plant and equipment, net
|
—
|
|
|
—
|
|
|
9,069
|
|
|
—
|
|
|
9,069
|
|
Goodwill and intangible assets, net
|
—
|
|
|
—
|
|
|
373
|
|
|
—
|
|
|
373
|
|
Advances receivable — consolidated subsidiaries
|
2,953
|
|
|
2,760
|
|
|
—
|
|
|
(5,713
|
)
|
|
—
|
|
Investments in consolidated subsidiaries
|
3,868
|
|
|
6,587
|
|
|
—
|
|
|
(10,455
|
)
|
|
—
|
|
Investments in unconsolidated affiliates
|
—
|
|
|
—
|
|
|
2,969
|
|
|
—
|
|
|
2,969
|
|
Other long-term assets
|
—
|
|
|
—
|
|
|
206
|
|
|
—
|
|
|
206
|
|
Total assets
|
$
|
6,821
|
|
|
$
|
9,347
|
|
|
$
|
13,611
|
|
|
$
|
(16,168
|
)
|
|
$
|
13,611
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
Accounts payable and other current liabilities
|
$
|
—
|
|
|
$
|
72
|
|
|
$
|
1,051
|
|
|
$
|
—
|
|
|
$
|
1,123
|
|
Current maturities of long-term debt
|
—
|
|
|
500
|
|
|
—
|
|
|
—
|
|
|
500
|
|
Advances payable — consolidated subsidiaries
|
—
|
|
|
—
|
|
|
5,713
|
|
|
(5,713
|
)
|
|
—
|
|
Long-term debt
|
—
|
|
|
4,907
|
|
|
—
|
|
|
—
|
|
|
4,907
|
|
Other long-term liabilities
|
—
|
|
|
—
|
|
|
228
|
|
|
—
|
|
|
228
|
|
Total liabilities
|
—
|
|
|
5,479
|
|
|
6,992
|
|
|
(5,713
|
)
|
|
6,758
|
|
Commitments and contingent liabilities
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
Partners’ equity:
|
|
|
|
|
|
|
|
|
|
Net equity
|
6,821
|
|
|
3,871
|
|
|
6,592
|
|
|
(10,455
|
)
|
|
6,829
|
|
Accumulated other comprehensive loss
|
—
|
|
|
(3
|
)
|
|
(5
|
)
|
|
—
|
|
|
(8
|
)
|
Total partners’ equity
|
6,821
|
|
|
3,868
|
|
|
6,587
|
|
|
(10,455
|
)
|
|
6,821
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
32
|
|
|
—
|
|
|
32
|
|
Total equity
|
6,821
|
|
|
3,868
|
|
|
6,619
|
|
|
(10,455
|
)
|
|
6,853
|
|
Total liabilities and equity
|
$
|
6,821
|
|
|
$
|
9,347
|
|
|
$
|
13,611
|
|
|
$
|
(16,168
|
)
|
|
$
|
13,611
|
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations
|
|
Three Months Ended June 30, 2017
|
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(Millions)
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
Sales of natural gas, NGLs and condensate
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,772
|
|
|
$
|
—
|
|
|
$
|
1,772
|
|
Transportation, processing and other
|
—
|
|
|
—
|
|
|
155
|
|
|
—
|
|
|
155
|
|
Trading and marketing gains, net
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
22
|
|
Total operating revenues
|
—
|
|
|
—
|
|
|
1,949
|
|
|
—
|
|
|
1,949
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
Purchases of natural gas and NGLs
|
—
|
|
|
—
|
|
|
1,557
|
|
|
—
|
|
|
1,557
|
|
Operating and maintenance expense
|
—
|
|
|
—
|
|
|
178
|
|
|
—
|
|
|
178
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
94
|
|
|
—
|
|
|
94
|
|
General and administrative expense
|
—
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
71
|
|
Gain on sale of assets
|
—
|
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
|
(34
|
)
|
Other expense
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Total operating costs and expenses
|
—
|
|
|
—
|
|
|
1,871
|
|
|
—
|
|
|
1,871
|
|
Operating income
|
—
|
|
|
—
|
|
|
78
|
|
|
—
|
|
|
78
|
|
Interest expense
|
—
|
|
|
(73
|
)
|
|
—
|
|
|
—
|
|
|
(73
|
)
|
Income from consolidated subsidiaries
|
88
|
|
|
161
|
|
|
—
|
|
|
(249
|
)
|
|
—
|
|
Earnings from unconsolidated affiliates
|
—
|
|
|
—
|
|
|
86
|
|
|
—
|
|
|
86
|
|
Income before income taxes
|
88
|
|
|
88
|
|
|
164
|
|
|
(249
|
)
|
|
91
|
|
Income tax expense
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
Net income
|
88
|
|
|
88
|
|
|
162
|
|
|
(249
|
)
|
|
89
|
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Net income attributable to partners
|
$
|
88
|
|
|
$
|
88
|
|
|
$
|
161
|
|
|
$
|
(249
|
)
|
|
$
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Comprehensive Income
|
|
Three Months Ended June 30, 2017
|
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(Millions)
|
Net income
|
$
|
88
|
|
|
$
|
88
|
|
|
$
|
162
|
|
|
$
|
(249
|
)
|
|
$
|
89
|
|
Total other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total comprehensive income
|
88
|
|
|
88
|
|
|
162
|
|
|
(249
|
)
|
|
89
|
|
Total comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Total comprehensive income attributable to partners
|
$
|
88
|
|
|
$
|
88
|
|
|
$
|
161
|
|
|
$
|
(249
|
)
|
|
$
|
88
|
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations
|
|
Three Months Ended June 30, 2016
|
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(Millions)
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
Sales of natural gas, NGLs and condensate
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,491
|
|
|
$
|
—
|
|
|
$
|
1,491
|
|
Transportation, processing and other
|
—
|
|
|
—
|
|
|
155
|
|
|
—
|
|
|
155
|
|
Trading and marketing losses, net
|
—
|
|
|
—
|
|
|
(23
|
)
|
|
—
|
|
|
(23
|
)
|
Total operating revenues
|
—
|
|
|
—
|
|
|
1,623
|
|
|
—
|
|
|
1,623
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
Purchases of natural gas and NGLs
|
—
|
|
|
—
|
|
|
1,294
|
|
|
—
|
|
|
1,294
|
|
Operating and maintenance expense
|
—
|
|
|
—
|
|
|
166
|
|
|
—
|
|
|
166
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
95
|
|
|
—
|
|
|
95
|
|
General and administrative expense
|
—
|
|
|
—
|
|
|
61
|
|
|
—
|
|
|
61
|
|
Loss on sale of assets
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
Restructuring costs
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
Other expense
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
Total operating costs and expenses
|
—
|
|
|
—
|
|
|
1,635
|
|
|
—
|
|
|
1,635
|
|
Operating loss
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
(12
|
)
|
Interest expense, net
|
—
|
|
|
(79
|
)
|
|
—
|
|
|
—
|
|
|
(79
|
)
|
(Loss) income from consolidated subsidiaries
|
(22
|
)
|
|
57
|
|
|
—
|
|
|
(35
|
)
|
|
—
|
|
Earnings from unconsolidated affiliates
|
—
|
|
|
—
|
|
|
73
|
|
|
—
|
|
|
73
|
|
(Loss) income before income taxes
|
(22
|
)
|
|
(22
|
)
|
|
61
|
|
|
(35
|
)
|
|
(18
|
)
|
Income tax expense
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
Net (loss) income
|
(22
|
)
|
|
(22
|
)
|
|
58
|
|
|
(35
|
)
|
|
(21
|
)
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Net (loss) income attributable to partners
|
$
|
(22
|
)
|
|
$
|
(22
|
)
|
|
$
|
57
|
|
|
$
|
(35
|
)
|
|
$
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Comprehensive Income
|
|
Three Months Ended June 30, 2016
|
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(Millions)
|
Net (loss) income
|
$
|
(22
|
)
|
|
$
|
(22
|
)
|
|
$
|
58
|
|
|
$
|
(35
|
)
|
|
$
|
(21
|
)
|
Total other comprehensive income
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Total comprehensive (loss) income
|
(22
|
)
|
|
(22
|
)
|
|
58
|
|
|
(35
|
)
|
|
(21
|
)
|
Total comprehensive loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Total comprehensive (loss) income attributable to partners
|
$
|
(22
|
)
|
|
$
|
(22
|
)
|
|
$
|
57
|
|
|
$
|
(35
|
)
|
|
$
|
(22
|
)
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations
|
|
Six Months Ended June 30, 2017
|
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(Millions)
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
Sales of natural gas, NGLs and condensate
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,705
|
|
|
$
|
—
|
|
|
$
|
3,705
|
|
Transportation, processing and other
|
—
|
|
|
—
|
|
|
312
|
|
|
—
|
|
|
312
|
|
Trading and marketing gains, net
|
—
|
|
|
—
|
|
|
53
|
|
|
—
|
|
|
53
|
|
Total operating revenues
|
—
|
|
|
—
|
|
|
4,070
|
|
|
—
|
|
|
4,070
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
Purchases of natural gas and NGLs
|
—
|
|
|
—
|
|
|
3,244
|
|
|
—
|
|
|
3,244
|
|
Operating and maintenance expense
|
—
|
|
|
—
|
|
|
345
|
|
|
—
|
|
|
345
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
188
|
|
|
—
|
|
|
188
|
|
General and administrative expense
|
—
|
|
|
—
|
|
|
133
|
|
|
—
|
|
|
133
|
|
Gain on sale of assets
|
—
|
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
|
(34
|
)
|
Other expense
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
Total operating costs and expenses
|
—
|
|
|
—
|
|
|
3,891
|
|
|
—
|
|
|
3,891
|
|
Operating income
|
—
|
|
|
—
|
|
|
179
|
|
|
—
|
|
|
179
|
|
Interest expense, net
|
—
|
|
|
(146
|
)
|
|
—
|
|
|
—
|
|
|
(146
|
)
|
Income from consolidated subsidiaries
|
189
|
|
|
335
|
|
|
—
|
|
|
(524
|
)
|
|
—
|
|
Earnings from unconsolidated affiliates
|
—
|
|
|
—
|
|
|
160
|
|
|
—
|
|
|
160
|
|
Income before income taxes
|
189
|
|
|
189
|
|
|
339
|
|
|
(524
|
)
|
|
193
|
|
Income tax expense
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
Net income
|
189
|
|
|
189
|
|
|
336
|
|
|
(524
|
)
|
|
190
|
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Net income attributable to partners
|
$
|
189
|
|
|
$
|
189
|
|
|
$
|
335
|
|
|
$
|
(524
|
)
|
|
$
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Comprehensive Income
|
|
Six Months Ended June 30, 2017
|
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(Millions)
|
Net income
|
$
|
189
|
|
|
$
|
189
|
|
|
$
|
336
|
|
|
$
|
(524
|
)
|
|
$
|
190
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
Reclassification of cash flow hedge losses into earnings
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Other comprehensive income from consolidated subsidiaries
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
Total other comprehensive income
|
1
|
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
Total comprehensive income
|
190
|
|
|
190
|
|
|
336
|
|
|
(525
|
)
|
|
191
|
|
Total comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Total comprehensive income attributable to partners
|
$
|
190
|
|
|
$
|
190
|
|
|
$
|
335
|
|
|
$
|
(525
|
)
|
|
$
|
190
|
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Operations
|
|
Six Months Ended June 30, 2016
|
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(Millions)
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
Sales of natural gas, NGLs and condensate
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,785
|
|
|
$
|
—
|
|
|
$
|
2,785
|
|
Transportation, processing and other
|
—
|
|
|
—
|
|
|
307
|
|
|
—
|
|
|
307
|
|
Trading and marketing losses, net
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
Total operating revenues
|
—
|
|
|
—
|
|
|
3,087
|
|
|
—
|
|
|
3,087
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
Purchases of natural gas and NGLs
|
—
|
|
|
—
|
|
|
2,429
|
|
|
—
|
|
|
2,429
|
|
Operating and maintenance expense
|
—
|
|
|
—
|
|
|
345
|
|
|
—
|
|
|
345
|
|
Depreciation and amortization expense
|
—
|
|
|
—
|
|
|
190
|
|
|
—
|
|
|
190
|
|
General and administrative expense
|
—
|
|
|
—
|
|
|
123
|
|
|
—
|
|
|
123
|
|
Loss on sale of assets
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
Restructuring costs
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
Other income, net
|
—
|
|
|
—
|
|
|
(82
|
)
|
|
—
|
|
|
(82
|
)
|
Total operating costs and expenses
|
—
|
|
|
—
|
|
|
3,019
|
|
|
—
|
|
|
3,019
|
|
Operating income
|
—
|
|
|
—
|
|
|
68
|
|
|
—
|
|
|
68
|
|
Interest expense, net
|
—
|
|
|
(158
|
)
|
|
—
|
|
|
—
|
|
|
(158
|
)
|
Income from consolidated subsidiaries
|
43
|
|
|
201
|
|
|
—
|
|
|
(244
|
)
|
|
—
|
|
Earnings from unconsolidated affiliates
|
—
|
|
|
—
|
|
|
139
|
|
|
—
|
|
|
139
|
|
Income before income taxes
|
43
|
|
|
43
|
|
|
207
|
|
|
(244
|
)
|
|
49
|
|
Income tax expense
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
Net income
|
43
|
|
|
43
|
|
|
202
|
|
|
(244
|
)
|
|
44
|
|
Net income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Net income attributable to partners
|
$
|
43
|
|
|
$
|
43
|
|
|
$
|
201
|
|
|
$
|
(244
|
)
|
|
$
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Comprehensive Income
|
|
Six Months Ended June 30, 2016
|
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(Millions)
|
Net income
|
$
|
43
|
|
|
$
|
43
|
|
|
$
|
202
|
|
|
$
|
(244
|
)
|
|
$
|
44
|
|
Total other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total comprehensive income
|
43
|
|
|
43
|
|
|
202
|
|
|
(244
|
)
|
|
44
|
|
Total comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Total comprehensive income attributable to partners
|
$
|
43
|
|
|
$
|
43
|
|
|
$
|
201
|
|
|
$
|
(244
|
)
|
|
$
|
43
|
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statement of Cash Flows
|
|
Six Months Ended June 30, 2017
|
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(Millions)
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
$
|
—
|
|
|
$
|
(143
|
)
|
|
$
|
503
|
|
|
$
|
—
|
|
|
$
|
360
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Intercompany transfers
|
256
|
|
|
590
|
|
|
—
|
|
|
(846
|
)
|
|
—
|
|
Capital expenditures
|
—
|
|
|
—
|
|
|
(159
|
)
|
|
—
|
|
|
(159
|
)
|
Investments in unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(41
|
)
|
|
—
|
|
|
(41
|
)
|
Proceeds from sale of assets
|
—
|
|
|
—
|
|
|
129
|
|
|
—
|
|
|
129
|
|
Net cash provided by (used in) investing activities
|
256
|
|
|
590
|
|
|
(71
|
)
|
|
(846
|
)
|
|
(71
|
)
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Intercompany transfers
|
—
|
|
|
—
|
|
|
(846
|
)
|
|
846
|
|
|
—
|
|
Payments of long-term debt
|
—
|
|
|
(195
|
)
|
|
—
|
|
|
—
|
|
|
(195
|
)
|
Net change in advances to predecessor from DCP Midstream, LLC
|
—
|
|
|
—
|
|
|
418
|
|
|
—
|
|
|
418
|
|
Distributions to limited partners and general partner
|
(256
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(256
|
)
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
Other
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
Net cash (used in) provided by financing activities
|
(256
|
)
|
|
(197
|
)
|
|
(432
|
)
|
|
846
|
|
|
(39
|
)
|
Net change in cash and cash equivalents
|
—
|
|
|
250
|
|
|
—
|
|
|
—
|
|
|
250
|
|
Cash and cash equivalents, beginning of period
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Cash and cash equivalents, end of period
|
$
|
—
|
|
|
$
|
250
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
251
|
|
DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended June 30, 2017 and 2016 - (Continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Statements of Cash Flows
|
|
Six Months Ended June 30, 2016
|
|
Parent
Guarantor
|
|
Subsidiary
Issuer
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(Millions)
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
$
|
—
|
|
|
$
|
(153
|
)
|
|
$
|
457
|
|
|
$
|
—
|
|
|
$
|
304
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Intercompany transfers
|
242
|
|
|
221
|
|
|
—
|
|
|
(463
|
)
|
|
—
|
|
Capital expenditures
|
—
|
|
|
—
|
|
|
(83
|
)
|
|
—
|
|
|
(83
|
)
|
Investments in unconsolidated affiliates
|
—
|
|
|
—
|
|
|
(27
|
)
|
|
—
|
|
|
(27
|
)
|
Change in restricted cash
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
Proceeds from sale of assets
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
Deposits received on assets held for sale
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
16
|
|
Net cash provided by (used in) investing activities
|
242
|
|
|
212
|
|
|
(92
|
)
|
|
(463
|
)
|
|
(101
|
)
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Intercompany transfers
|
—
|
|
|
—
|
|
|
(463
|
)
|
|
463
|
|
|
—
|
|
Proceeds from long-term debt
|
—
|
|
|
2,252
|
|
|
—
|
|
|
—
|
|
|
2,252
|
|
Payments of long-term debt
|
—
|
|
|
(2,301
|
)
|
|
—
|
|
|
—
|
|
|
(2,301
|
)
|
Net change in advances to predecessor from DCP Midstream, LLC
|
—
|
|
|
—
|
|
|
100
|
|
|
—
|
|
|
100
|
|
Distributions to limited partners and general partner
|
(242
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(242
|
)
|
Distributions to noncontrolling interests
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
Other
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
Net cash (used in) provided by financing activities
|
(242
|
)
|
|
(59
|
)
|
|
(366
|
)
|
|
463
|
|
|
(204
|
)
|
Net change in cash and cash equivalents
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
Cash and cash equivalents, beginning of period
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
Cash and cash equivalents, end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
19. Subsequent Events
On
July 24, 2017
, we announced that the board of directors of the General Partner declared a quarterly distribution of
$0.78
per unit. The distribution is payable on
August 14, 2017
to unitholders of record on
August 8, 2017
. Distributions declared reflect
$20 million
of IDR givebacks for the second quarter of 2017.