NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION, BUSINESS OPERATIONS AND BASIS OF PRESENTATION
Organization.
Summit Midstream Partners, LP ("SMLP" or the "Partnership"), a Delaware limited partnership, was formed in May 2012 and began operations in October 2012 in connection with its initial public offering ("IPO") of common limited partner units. SMLP is a growth-oriented limited partnership focused on developing, owning and operating midstream energy infrastructure assets that are strategically located in the core producing areas of unconventional resource basins, primarily shale formations, in North America.
Effective with the completion of its IPO on October 3, 2012, SMLP had a
100%
ownership interest in Summit Midstream Holdings, LLC ("Summit Holdings") which had a
100%
ownership interest in both DFW Midstream Services LLC ("DFW Midstream") and Grand River Gathering, LLC ("Grand River Gathering").
On June 4, 2013, the Partnership acquired all of the membership interests of Bison Midstream, LLC ("Bison Midstream") from a wholly owned subsidiary of Summit Midstream Partners, LLC ("Summit Investments") (the "Bison Drop Down"), and thereby acquired certain associated natural gas gathering pipeline, dehydration and compression assets in the Bakken Shale Play in Mountrail and Burke counties in North Dakota (the "Bison Gas Gathering system").
Prior to the Bison Drop Down, on February 15, 2013, Summit Investments acquired Bear Tracker Energy, LLC ("BTE"). The Bison Gas Gathering system was carved out from BTE in connection with the Bison Drop Down. As such, it was deemed a transaction among entities under common control.
On June 21, 2013, Mountaineer Midstream Company, LLC ("Mountaineer Midstream"), a newly formed, wholly owned subsidiary of the Partnership, acquired certain natural gas gathering pipeline and compression assets in the Marcellus Shale Play in Doddridge County, West Virginia from an affiliate of MarkWest Energy Partners, L.P. ("MarkWest") (the "Mountaineer Acquisition").
In October 2012, Summit Investments acquired ETC Canyon Pipeline, LLC ("Canyon") from a subsidiary of Energy Transfer Partners, L.P. ("Energy Transfer Partners"). The Canyon gathering and processing assets were contributed to Red Rock Gathering Company, LLC ("Red Rock Gathering"), a newly formed, wholly owned subsidiary of Summit Investments. Red Rock Gathering gathers and processes natural gas and natural gas liquids in the Piceance Basin in western Colorado and eastern Utah. On March 18, 2014, SMLP acquired all of the membership interests of Red Rock Gathering from a subsidiary of Summit Investments (the "Red Rock Drop Down"). Concurrent with the closing of the Red Rock Drop Down, SMLP contributed its interest in Red Rock Gathering to Grand River Gathering. For additional information, see Notes 6 and 12.
Summit Investments is a Delaware limited liability company and the predecessor for accounting purposes (the "Predecessor") of SMLP. Summit Investments was formed and began operations in September 2009. Through August 2011, Summit Investments was wholly owned by Energy Capital Partners II, LLC and its parallel and co-investment funds (collectively, "Energy Capital Partners"). In August 2011, Energy Capital Partners sold an interest in Summit Investments to a subsidiary of GE Energy Financial Services, Inc. ("GE Energy Financial Services", and collectively with Energy Capital Partners, the "Sponsors"). As of
March 31, 2014
, Summit Investments, through a wholly owned subsidiary, held
9,641,397
SMLP common units,
24,409,850
SMLP subordinated units and
1,200,651
general partner units representing a
2%
general partner interest in SMLP.
SMLP is managed and operated by the board of directors and executive officers of Summit Midstream GP, LLC (the "general partner"). Summit Investments, as the ultimate owner of our general partner, controls SMLP and has the right to appoint the entire board of directors of our general partner, including our independent directors. SMLP's operations are conducted through, and our operating assets are owned by, various operating subsidiaries. However, neither SMLP nor its subsidiaries has any employees. The general partner has the sole responsibility for providing the personnel necessary to conduct SMLP's operations, whether through directly hiring employees or by obtaining the services of personnel employed by others, including Summit Investments. All of the personnel that conduct SMLP's business are employed by the general partner and its affiliates, but these individuals are sometimes referred to as our employees.
References to the "Company," "we," or "our," when used for dates or periods ended on or after the IPO, refer collectively to SMLP and its subsidiaries. References to the "Company," "we," or "our," when used for dates or periods ended prior to the IPO, refer collectively to Summit Investments and its subsidiaries.
Business Operations.
We provide natural gas gathering, treating and processing services pursuant to long-term, primarily fee-based, natural gas gathering agreements with our customers. Our results are driven primarily by the
volumes of natural gas that we gather, treat and process across our systems. Our gathering and processing systems and the unconventional resource basins in which they operate as of March 31, 2014 were as follows:
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•
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Mountaineer Midstream – the Appalachian Basin, which includes the Marcellus Shale formation in northern West Virginia;
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•
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Bison Midstream – the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota;
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•
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DFW Midstream – the Fort Worth Basin, which includes the Barnett Shale formation in north-central Texas; and
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•
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Grand River Gathering – the Piceance Basin, which includes the Mesaverde formation and the Mancos and Niobrara shale formations in western Colorado and eastern Utah.
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Our operating subsidiaries are DFW Midstream (which includes the Mountaineer Midstream gathering system), Bison Midstream and Grand River Gathering. All of our operating subsidiaries are midstream energy companies focused on the development, construction and operation of natural gas gathering and processing systems.
Basis of Presentation and Principles of Consolidation.
We prepare our unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"). These principles are established by the Financial Accounting Standards Board. We make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet dates, including fair value measurements, the reported amounts of revenue and expense, and the disclosure of contingencies. Although management believes these estimates are reasonable, actual results could differ from its estimates.
These unaudited condensed consolidated financial statements reflect the results of operations of: (i) Red Rock Gathering for all periods presented, (ii) Bison Midstream since February 16, 2013, and (iii) Mountaineer Midstream since June 22, 2013. SMLP recognized its acquisitions of Red Rock Gathering and Bison Midstream at Summit Investments' historical cost because the acquisitions were executed by entities under common control. The excess of the purchase price paid by SMLP over Summit Investments' net investment in Red Rock Gathering was recognized as a reduction to partners' capital. The excess of Summit Investments' net investment in Bison Midstream over the purchase price paid by SMLP was recognized as an addition to partners' capital. Due to the common control aspect, the Red Rock Drop Down and the Bison Drop Down were accounted for by the Partnership on an “as if pooled” basis for the periods during which common control existed. The unaudited condensed consolidated financial statements include the assets, liabilities, and results of operations of SMLP and its respective wholly owned subsidiaries. All intercompany transactions among the consolidated entities have been eliminated in consolidation.
These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and the regulations of the Securities and Exchange Commission (the "SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Partnership believes that the disclosures made are adequate to make the information not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto that are included in our annual report on Form 10-K for the year ended December 31, 2013 (the "2013 Annual Report"). The results of operations for an interim period are not necessarily indicative of results expected for a full year.
We conduct our operations in the midstream sector with
four
operating segments: Mountaineer Midstream, Bison Midstream, DFW Midstream and Grand River Gathering. However, due to their similar characteristics and how we manage our business, we have aggregated these segments into
one
reportable segment for disclosure purposes. The assets of our reportable segment consist of natural gas gathering and processing systems and related plant and equipment. Our operating segments reflect the way in which we internally report the financial information used to make decisions and allocate resources in connection with our operations.
Reclassifications.
Certain reclassifications have been made to prior-year amounts to conform to current-year presentation. These reclassifications had no impact on net income or total partners' capital.
For additional information, see Note 1 to the audited consolidated financial statements included in the 2013 Annual Report.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Other Assets.
Other assets primarily consist of prepaid expenses that are charged to expense over the period of benefit or the life of the related contract.
Fair Value of Financial Instruments.
The carrying amount of cash and cash equivalents, accounts receivable, and accounts payable reported on the balance sheet approximates fair value due to their short-term maturities. Nonfinancial assets and liabilities initially measured at fair value include those acquired and assumed in connection with third-party business combinations.
A summary of the estimated fair value for financial instruments follows.
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March 31, 2014
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December 31, 2013
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Carrying value
|
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Estimated
fair value (Level 2)
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Carrying value
|
|
Estimated
fair value (Level 2)
|
|
(In thousands)
|
Revolving credit facility
|
$
|
391,000
|
|
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$
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391,000
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|
|
$
|
286,000
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|
|
$
|
286,000
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Senior notes
|
300,000
|
|
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321,500
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300,000
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|
314,625
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The revolving credit facility’s carrying value on the balance sheet is its fair value due to its floating interest rate. The fair value for the senior notes is based on an average of nonbinding broker quotes as of March 31, 2014 and December 31, 2013. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value of the senior notes.
Commitments and Contingencies.
We record accruals for loss contingencies when we determine that it is probable that a liability has been incurred and that such economic loss can be reasonably estimated. Such determinations are subject to interpretations of current facts and circumstances, forecasts of future events, and estimates of the financial impacts of such events.
Revenue Recognition.
We generate the majority of our revenue from the natural gas gathering, treating and processing services that we provide to our natural gas producer customers. We also generate revenue from our marketing of natural gas and natural gas liquids ("NGLs"). We realize revenues by receiving fees from our producer customers or by selling the residue natural gas and NGLs.
We recognize revenue earned from fee-based gathering, treating and processing services in gathering services and other fees revenue. We also earn revenue from the sale of physical natural gas purchased from our customers under percentage-of-proceeds and keep-whole arrangements. These revenues are recognized in natural gas, NGLs and condensate sales and other with corresponding expense recognition in cost of natural gas and NGLs. We sell the natural gas that we retain from our DFW Midstream customers to offset the power expenses of the electric-driven compression on the DFW Midstream system. We also sell condensate retained from our gathering services at Grand River Gathering. Revenues from the retainage of natural gas and condensate are recognized in natural gas, NGLs and condensate sales and other; the associated expense is included in operation and maintenance expense. Certain customers reimburse us for costs we incur on their behalf. We record costs incurred and reimbursed by our customers on a gross basis.
We recognize revenue when all of the following criteria are met: (i) persuasive evidence of an exchange arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) collectability is reasonably assured.
We obtain access to natural gas and provide services principally under contracts that contain one or more of the following arrangements:
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•
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Fee-based arrangements.
Under fee-based arrangements, we receive a fee or fees for one or more of the following services: natural gas gathering, treating, and/or processing. Fee-based arrangements include natural gas purchase arrangements pursuant to which we purchase natural gas at the wellhead, or other receipt points, at a settled price at the delivery point less a specified amount, generally the same as the fees we would otherwise charge for gathering of natural gas from the wellhead location to the delivery point. The margins earned are directly related to the volume of natural gas that flows through the system.
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•
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Percent-of-proceeds arrangements.
Under percent-of-proceeds arrangements, we generally purchase natural gas from producers at the wellhead, or other receipt points, gather the wellhead natural gas through our gathering system, treat the natural gas, process the natural gas and/or sell the natural gas to a third party for processing. We then remit to our producers an agreed-upon percentage of the actual proceeds
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received from sales of the residue natural gas and NGLs. Certain of these arrangements may also result in returning all or a portion of the residue natural gas and/or the NGLs to the producer, in lieu of returning sales proceeds. The margins earned are directly related to the volume of natural gas that flows through the system and the price at which we are able to sell the residue natural gas and NGLs.
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•
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Keep-Whole.
Under keep-whole arrangements, after processing we keep 100% of the NGLs produced, and the processed natural gas, or value of the natural gas, is returned to the producer. Since some of the natural gas is used and removed during processing, we compensate the producer for the amount of natural gas used and removed in processing by supplying additional natural gas or by paying an agreed-upon value for the natural gas utilized. These arrangements have commodity price exposure for us because the costs are dependent on the price of natural gas and the revenues are based on the price of NGLs.
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Certain of our natural gas gathering or processing agreements provide for a monthly, quarterly or annual minimum volume commitment ("MVC") from certain of our customers. Under these MVCs, our customers agree to ship a minimum volume of natural gas on our gathering systems or to pay a minimum monetary amount over certain periods during the term of the MVC. A customer must make a shortfall payment to us at the end of the contract period if its actual throughput volumes are less than its MVC for that period. Certain customers are entitled to utilize shortfall payments to offset gathering or processing fees in one or more subsequent periods to the extent that such customer's throughput volumes in subsequent periods exceed its MVC for that period.
We record customer billings for obligations under their MVCs as deferred revenue when the customer has the right to utilize shortfall payments to offset gathering or processing fees in subsequent periods. We recognize deferred revenue under these arrangements in revenue once all contingencies or potential performance obligations associated with the related volumes have either (i) been satisfied through the gathering or processing of future excess volumes of natural gas, or (ii) expired (or lapsed) through the passage of time pursuant to the terms of the applicable natural gas gathering agreement. We classify deferred revenue as current for arrangements where the expiration of a customer's right to utilize shortfall payments is twelve months or less. A rollforward of current and noncurrent deferred revenue follows.
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Three months ended March 31, 2014
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Three months ended March 31, 2013
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Current
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Noncurrent
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Current
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Noncurrent
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(In thousands)
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Deferred revenue, beginning of period
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$
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1,555
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$
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29,683
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$
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865
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$
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10,899
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Additions (1)
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—
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3,727
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—
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5,470
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Deferred revenue, end of period
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$
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1,555
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$
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33,410
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$
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865
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$
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16,369
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__________
(1) Noncurrent for the three months ended March 31, 2013 includes amounts recognized in connection with the Bison Drop Down.
As of
March 31, 2014
, accounts receivable included
$2.3 million
of shortfall payments related to MVC arrangements that can be utilized to offset gathering fees in subsequent periods. Current and noncurrent deferred revenue at March 31, 2014 represent amounts that provide the customer the ability to offset its gathering fees over the next
8
years to the extent that the customer's throughput volumes exceeds its MVC.
Income Taxes.
We are not subject to federal and state income taxes, except as noted below, because we are structured as a partnership. As a result, our unitholders or members are individually responsible for paying federal and state income taxes on their share of our taxable income.
In general, legal entities that are chartered, organized or conducting business in the state of Texas are subject to the Revised Texas Franchise Tax (the "Texas Margin Tax"). The Texas Margin Tax has the characteristics of an income tax because it is determined by applying a tax rate to a tax base that considers both revenues and expenses. Our financial statements reflect provisions for these tax obligations.
Earnings Per Unit ("EPU").
We determine EPU by dividing the net income that is attributed, in accordance with the net income and loss allocation provisions of the partnership agreement, to the common and subordinated unitholders under the two-class method, after deducting the general partner's
2%
interest in net income and any payments to the general partner in connection with their incentive distribution rights ("IDRs"), by the weighted-average number of common and subordinated units outstanding during the
three months ended March 31, 2014
and 2013. Diluted earnings per limited partner unit reflects the potential dilution that could occur if securities or other agreements to issue common units, such as unit-based compensation, were exercised, settled or converted
into common units. When it is determined that potential common units resulting from an award subject to performance or market conditions should be included in the diluted earnings per limited partner unit calculation, the impact is reflected by applying the treasury stock method.
Comprehensive Income.
Comprehensive income is the same as net income for all periods presented.
Environmental Matters.
We are subject to various federal, state and local laws and regulations relating to the protection of the environment. Although we believe that we are in material compliance with applicable environmental regulations, the risk of costs and liabilities are inherent in pipeline ownership and operation. Liabilities for loss contingencies, including environmental remediation costs, arising from claims, assessments, litigation, fines, and penalties and other sources are charged to expense when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. There are no such liabilities reflected in the accompanying financial statements at
March 31, 2014
or December 31, 2013. However, we can provide no assurances that significant costs and liabilities will not be incurred by the Partnership in the future. We are currently not aware of any material contingent liabilities that exist with respect to environmental matters.
Other Significant Accounting Policies.
For information on our other significant accounting policies, see Note 2 of the audited consolidated financial statements included in the 2013 Annual Report.
Recent Accounting Pronouncements.
Accounting standard setters frequently issue new or revised accounting rules. We review new pronouncements to determine the impact, if any, on our financial statements. There are currently no recent pronouncements that have been issued that we believe will materially affect our financial statements.
3. PROPERTY, PLANT, AND EQUIPMENT, NET
Details on property, plant, and equipment, net were as follows:
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Useful lives (In years)
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March 31,
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December 31,
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2014
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2013
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(Dollars in thousands)
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Natural gas gathering and processing systems
|
30
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$
|
782,250
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$
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744,359
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Compressor stations and compression equipment
|
30
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393,587
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|
380,000
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Construction in progress
|
n/a
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|
49,535
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|
83,765
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Other
|
4-15
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33,652
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|
21,304
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Total
|
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1,259,024
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|
1,229,428
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Accumulated depreciation
|
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(81,868
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)
|
|
(71,347
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)
|
Property, plant, and equipment, net
|
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|
$
|
1,177,156
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|
$
|
1,158,081
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Construction in progress is depreciated consistent with its applicable asset class once it is placed in service. Depreciation expense related to property, plant, and equipment and capitalized interest were as follows:
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Three months ended March 31,
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|
2014
|
|
2013
|
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(In thousands)
|
Depreciation expense
|
$
|
10,521
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|
$
|
7,817
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Capitalized interest
|
1,358
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|
493
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4. IDENTIFIABLE INTANGIBLE ASSETS, NONCURRENT LIABILITY AND GOODWILL
Identifiable Intangible Assets and Noncurrent Liability.
Identifiable intangible assets and the noncurrent liability, which are subject to amortization, were as follows:
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|
March 31, 2014
|
|
Useful lives
(In years)
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Gross carrying amount
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Accumulated amortization
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Net
|
|
(Dollars in thousands)
|
Favorable gas gathering contracts
|
18.7
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$
|
24,195
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$
|
(6,749
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)
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$
|
17,446
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Contract intangibles
|
12.5
|
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426,464
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(51,120
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)
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375,344
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Rights-of-way
|
24.2
|
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110,909
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(8,874
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)
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|
102,035
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Total amortizable intangible assets
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|
$
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561,568
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$
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(66,743
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)
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$
|
494,825
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|
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Unfavorable gas gathering contract
|
10.0
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|
$
|
10,962
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|
$
|
(4,796
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)
|
|
$
|
6,166
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|
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|
|
|
|
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|
December 31, 2013
|
|
Useful lives
(In years)
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|
Gross carrying amount
|
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Accumulated amortization
|
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Net
|
|
(Dollars in thousands)
|
Favorable gas gathering contracts
|
18.7
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$
|
24,195
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|
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$
|
(6,315
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)
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$
|
17,880
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Contract intangibles
|
12.4
|
|
426,464
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|
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(43,158
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)
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|
383,306
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Rights-of-way
|
24.3
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108,706
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|
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(7,715
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)
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|
100,991
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Total amortizable intangible assets
|
|
|
$
|
559,365
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|
$
|
(57,188
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)
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$
|
502,177
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|
|
|
|
|
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Unfavorable gas gathering contract
|
10.0
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|
$
|
10,962
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$
|
(4,588
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)
|
|
$
|
6,374
|
|
We recognized amortization expense as follows:
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|
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|
Three months ended March 31,
|
|
2014
|
|
2013
|
|
(In thousands)
|
Amortization expense – favorable gas gathering contracts
|
$
|
434
|
|
|
$
|
572
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|
Amortization expense – contract intangibles
|
7,962
|
|
|
5,287
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|
Amortization expense – rights-of-way
|
1,159
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|
|
808
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|
Amortization expense – unfavorable gas gathering contract
|
(208
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)
|
|
(292
|
)
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The estimated aggregate annual amortization of intangible assets and noncurrent liability expected to be recognized for the remainder of 2014 and each of the four succeeding fiscal years follows.
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Assets
|
|
Liabilities
|
|
(In thousands)
|
2014
|
$
|
30,821
|
|
|
$
|
1,179
|
|
2015
|
43,836
|
|
|
1,649
|
|
2016
|
44,079
|
|
|
1,571
|
|
2017
|
42,811
|
|
|
1,767
|
|
2018
|
42,352
|
|
|
—
|
|
Goodwill.
We evaluate goodwill for impairment annually on September 30. We also evaluate goodwill whenever events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. There have been no impairments of goodwill.
5. LONG-TERM DEBT
Long-term debt consisted of the following:
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|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
2014
|
|
2013
|
|
(In thousands)
|
Variable rate senior secured revolving credit facility (2.42% at March 31, 2014 and December 31, 2013) due November 2018
|
$
|
391,000
|
|
|
$
|
286,000
|
|
7.50% Senior unsecured notes due July 2021
|
300,000
|
|
|
300,000
|
|
Total long-term debt
|
$
|
691,000
|
|
|
$
|
586,000
|
|
Revolving Credit Facility.
We have a senior secured revolving credit facility. The revolving credit facility is secured by the membership interests of Summit Holdings and those of its subsidiaries. Substantially all of Summit Holdings' and its subsidiaries' assets are pledged as collateral under the revolving credit facility. The revolving credit facility, and Summit Holdings' obligations, are guaranteed by SMLP and each of its subsidiaries and allows for revolving loans, letters of credit and swingline loans.
Borrowings under the revolving credit facility bear interest at the London Interbank Offered Rate ("LIBOR") or an Alternate Base Rate ("ABR") plus an applicable margin, as defined in the credit agreement. At
March 31, 2014
, the applicable margin under
LIBOR
borrowings was
2.25%
, the interest rate was
2.42%
and the unused portion of the revolving credit facility totaled
$309.0 million
(subject to a commitment fee of
0.375%
).
As of
March 31, 2014
, we were in compliance with the covenants in the revolving credit facility. There were
no
defaults or events of default during the
three months ended March 31, 2014
.
Senior Notes.
In June 2013, Summit Holdings and its
100%
owned finance subsidiary, Summit Midstream Finance Corp. ("Finance Corp.") (together with Summit Holdings, the "Co-Issuers"), issued
$300.0 million
of
7.50%
senior unsecured notes maturing July 1, 2021 (the "senior notes").
We pay interest on the senior notes semi-annually in cash in arrears on January 1 and July 1 of each year. The senior notes are senior, unsecured obligations and rank equally in right of payment with all of our existing and future senior obligations. The senior notes are effectively subordinated in right of payment to all of our secured indebtedness, to the extent of the collateral securing such indebtedness.
SMLP and all of its subsidiaries other than the Co-Issuers (the "Guarantors") have fully and unconditionally and jointly and severally guaranteed the senior notes. SMLP has no independent assets or operations. Summit Holdings has no assets or operations other than its ownership of its wholly owned subsidiaries and activities associated with its borrowings under the revolving credit facility and the senior notes. Finance Corp. has no independent assets or operations and was formed for the sole purpose of being a co-issuer of certain of Summit Holdings' indebtedness, including the senior notes. There are no significant restrictions on the ability of SMLP or Summit Holdings to obtain funds from its subsidiaries by dividend or loan.
Effective as of April 7, 2014, all of the holders of our senior notes exchanged their unregistered senior notes and the guarantees of those notes for registered notes and guarantees. The terms of the registered senior notes are substantially identical to the terms of the unregistered senior notes, except that the transfer restrictions, registration rights and provisions for additional interest relating to the unregistered senior notes do not apply to the registered senior notes.
As of
March 31, 2014
, we were in compliance with the covenants for the senior notes. There were no defaults or events of default during the
three months ended March 31, 2014
.
6. PARTNERS' CAPITAL
Partners' Capital
In March 2014, we completed an underwritten public offering of
10,350,000
common units at a price of
$38.75
per unit (the "March 2014 Offering"), of which
5,300,000
common units were offered by the Partnership and
5,050,000
common units were offered by Summit Investments, pursuant to an effective shelf registration statement on Form S-3 previously filed with the SEC. Concurrent with the March 2014 Offering, Summit Investments made a capital contribution to maintain its
2%
general partner interest in SMLP. We used the proceeds from the primary offering to fund a portion of the purchase of Red Rock Gathering. See Notes 1 and 12 for additional information.
A rollforward of the number of common limited partner, subordinated limited partner and general partner units follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Subordinated
|
|
General partner
|
|
Total
|
Units, January 1, 2014
|
29,079,866
|
|
|
24,409,850
|
|
|
1,091,453
|
|
|
54,581,169
|
|
Units issued in connection with the March 2014 Offering (1)
|
5,300,000
|
|
|
—
|
|
|
108,337
|
|
|
5,408,337
|
|
Units issued under LTIP (1)(2)
|
41,393
|
|
|
—
|
|
|
861
|
|
|
42,254
|
|
Units, March 31, 2014
|
34,421,259
|
|
|
24,409,850
|
|
|
1,200,651
|
|
|
60,031,760
|
|
__________
(1) Including issuance to general partner in connection with contributions made to maintain
2%
general partner interest.
(2) Units issued to common unitholders is net of
13,170
units withheld to meet the minimum statutory tax withholding requirement.
There was no unit activity during the three months ended March 31, 2013.
Summit Investments' Equity in Contributed Subsidiaries.
Summit Investments' equity in contributed subsidiaries represents its position in the net assets of Red Rock Gathering and Bison Midstream that have been acquired by SMLP. The balance also reflects net income attributable to Summit Investments for Red Rock Gathering and Bison Midstream for the periods beginning on their respective acquisition dates by Summit Investments and ending on the dates they were acquired by the Partnership. For the three months ended March 31, 2014 and 2013, net income was attributed to Summit Investments for (i) Red Rock Gathering for the period from January 1, 2014 to March 18, 2014 and the three months ended March 31, 2013 and (ii) Bison Midstream for the period from February 16, 2013 to March 31, 2013. Although included in partners' capital, these net income amounts have been excluded from the calculation of EPU for the three months ended March 31, 2014 and 2013. For additional information, see Notes 1, 7 and 12.
Subordination.
The principal difference between our common units and subordinated units is that in any quarter during the subordination period, holders of the subordinated units are not entitled to receive any distribution of available cash until the common units have received the minimum quarterly distribution plus any arrearages in the payment of the minimum quarterly distribution from prior quarters. Subordinated units will not accrue arrearages for unpaid quarterly distributions or quarterly distributions less than the minimum quarterly distribution. If we do not pay the minimum quarterly distribution on our common units, our common unitholders will not be entitled to receive such payments in the future except during the subordination period. To the extent we have available cash in any future quarter during the subordination period in excess of the amount necessary to pay the minimum quarterly distribution to holders of our common units, we will use this excess available cash to pay any distribution arrearages related to prior quarters before any cash distribution is made to holders of subordinated units. When the subordination period ends, all subordinated units will convert into common units on a
one
-for-one basis, and thereafter no common units will be entitled to arrearages.
The subordination period will end on the first business day after we have earned and paid at least (1)
$1.60
(the minimum quarterly distribution on an annualized basis) on each outstanding common unit and subordinated unit and the corresponding distribution on the general partner's
2.0%
interest for each of
three
consecutive, non-overlapping four-quarter periods ending on or after December 31, 2015 or (2)
$2.40
(
150.0%
of the annualized minimum quarterly distribution) on each outstanding common unit and subordinated unit and the corresponding distributions on the general partner's
2.0%
interest and the related distribution on the incentive distribution rights for the four-quarter period immediately preceding that date, in each case provided there are no arrearages on the common units at that time.
Cash Distribution Policy
Our partnership agreement requires that we distribute all of our available cash (as defined below) within
45
days after the end of each quarter to unitholders of record on the applicable record date. Our policy is to distribute to our unitholders an amount of cash each quarter that is equal to or greater than the minimum quarterly distribution stated in our partnership agreement.
Minimum Quarterly Distribution.
Our partnership agreement generally requires that we make a minimum quarterly distribution to the holders of our common units and subordinated units of
$0.40
per unit, or
$1.60
on an annualized basis, to the extent we have sufficient cash from our operations after the establishment of cash reserves and the payment of costs and expenses, including reimbursements of expenses to our general partner. The amount
of distributions paid under our policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our partnership agreement.
Definition of Available Cash.
Available cash generally means, for any quarter, all cash on hand at the end of that quarter:
|
|
•
|
less the amount of cash reserves established by our general partner at the date of determination of available cash for that quarter to:
|
|
|
•
|
provide for the proper conduct of our business (including reserves for our future capital expenditures and anticipated future debt service requirements);
|
|
|
•
|
comply with applicable law, any of our debt instruments or other agreements; or
|
|
|
•
|
provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters (provided that our general partner may not establish cash reserves for distributions unless it determines that the establishment of reserves will not prevent us from distributing the minimum quarterly distribution on all common units and any cumulative arrearages on such common units for the current quarter);
|
|
|
•
|
plus, if our general partner so determines, all or any portion of the cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made subsequent to the end of such quarter.
|
General Partner Interest and Incentive Distribution Rights.
Our general partner is entitled to
2.0%
of all distributions that we make prior to our liquidation. Our general partner has the right, but not the obligation, to contribute a proportionate amount of capital to us to maintain its current general partner interest. Our general partner's initial
2.0%
interest in our distributions will be reduced if we issue additional units in the future and our general partner does not contribute a proportionate amount of capital to us to maintain its
2.0%
general partner interest.
Our general partner also currently holds incentive distribution rights that entitle it to receive increasing percentage allocations, up to a maximum of
50.0%
(as set forth in the chart below), of the cash we distribute from operating surplus in excess of
$0.46
per unit per quarter. The maximum distribution includes distributions paid to our general partner on its
2.0%
general partner interest and assumes that our general partner maintains its general partner interest at
2.0%
. The maximum distribution does not include any distributions that our general partner may receive on any common or subordinated units that it owns.
Percentage Allocations of Available Cash.
The following table illustrates the percentage allocations of available cash between the unitholders and our general partner based on the specified target distribution levels. The amounts set forth in the column Marginal Percentage Interest in Distributions are the percentage interests of our general partner and the unitholders in any available cash we distribute up to and including the corresponding amount in the column Total Quarterly Distribution Per Unit Target Amount. The percentage interests shown for our unitholders and our general partner for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below for our general partner include its
2.0%
general partner interest and assume that our general partner has contributed any additional capital necessary to maintain its
2.0%
general partner interest, our general partner has not transferred its incentive distribution rights and that there are no arrearages on common units.
|
|
|
|
|
|
|
|
Total quarterly distribution per unit target amount
|
|
Marginal percentage interest in distributions
|
|
|
Unitholders
|
|
General partner
|
Minimum quarterly distribution
|
$0.40
|
|
98.0%
|
|
2.0%
|
First target distribution
|
$0.40 up to $0.46
|
|
98.0%
|
|
2.0%
|
Second target distribution
|
above $0.46 up to $0.50
|
|
85.0%
|
|
15.0%
|
Third target distribution
|
above $0.50 up to $0.60
|
|
75.0%
|
|
25.0%
|
Thereafter
|
above $0.60
|
|
50.0%
|
|
50.0%
|
SMLP allocated its distribution in accordance with the second target distribution level for distributions attributable to the quarter ended March 31, 2014. Details of cash distributions declared to date follow.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to the
quarter ended
|
|
Payment date
|
|
Per-unit distribution
|
|
Cash paid (or payable) to common unitholders
|
|
Cash paid (or payable) to subordinated unitholders
|
|
Cash paid (or payable) to general partner interest
|
|
Cash paid (or payable) for IDRs
|
|
Total distribution
|
|
|
|
|
(Dollars in thousands, except per-unit amounts)
|
December 31, 2012
|
|
February 14, 2013
|
|
$
|
0.4100
|
|
|
$
|
10,009
|
|
|
$
|
10,008
|
|
|
$
|
408
|
|
|
$
|
—
|
|
|
$
|
20,425
|
|
March 31, 2013
|
|
May 15, 2013
|
|
0.4200
|
|
|
10,253
|
|
|
10,252
|
|
|
418
|
|
|
—
|
|
|
20,923
|
|
June 30, 2013
|
|
August 14, 2013
|
|
0.4350
|
|
|
12,647
|
|
|
10,618
|
|
|
475
|
|
|
—
|
|
|
23,740
|
|
September 30, 2013
|
|
November 14, 2013
|
|
0.4600
|
|
|
13,377
|
|
|
11,229
|
|
|
502
|
|
|
—
|
|
|
25,108
|
|
December 31, 2013
|
|
February 14, 2014
|
|
0.4800
|
|
|
13,958
|
|
|
11,717
|
|
|
528
|
|
|
163
|
|
|
26,366
|
|
March 31, 2014
|
|
May 15, 2014
|
|
0.5000
|
|
|
17,211
|
|
|
12,205
|
|
|
608
|
|
|
360
|
|
|
30,384
|
|
7. EARNINGS PER UNIT
The following table presents details on EPU.
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
2014
|
|
2013
|
|
|
(Dollars in thousands, except
per-unit amounts)
|
Net income
|
|
$
|
6,373
|
|
|
$
|
13,864
|
|
Less: net income attributable to Summit Investments
|
|
2,828
|
|
|
1,384
|
|
Net income attributable to SMLP
|
|
3,545
|
|
|
12,480
|
|
Less: net income attributable to general partner, including IDRs
|
|
431
|
|
|
250
|
|
Net income attributable to limited partners
|
|
$
|
3,114
|
|
|
$
|
12,230
|
|
|
|
|
|
|
Numerator for basic and diluted EPU:
|
|
|
|
|
Allocation of net income among limited partner interests:
|
|
|
|
|
Net income attributable to common units
|
|
$
|
2,508
|
|
|
$
|
6,115
|
|
Net income attributable to subordinated units
|
|
606
|
|
|
6,115
|
|
Net income attributable to limited partners
|
|
$
|
3,114
|
|
|
$
|
12,230
|
|
|
|
|
|
|
Denominator for basic and diluted EPU:
|
|
|
|
|
Weighted-average common units outstanding – basic
|
|
29,911,669
|
|
|
24,412,427
|
|
Effect of non-vested phantom units and non-vested restricted units
|
|
155,989
|
|
|
43,176
|
|
Weighted-average common units outstanding – diluted
|
|
30,067,658
|
|
|
24,455,603
|
|
|
|
|
|
|
Weighted-average subordinated units outstanding – basic and diluted
|
|
24,409,850
|
|
|
24,409,850
|
|
|
|
|
|
|
Net income per limited partner unit:
|
|
|
|
|
Common unit – basic
|
|
$
|
0.08
|
|
|
$
|
0.25
|
|
Common unit – diluted
|
|
$
|
0.08
|
|
|
$
|
0.25
|
|
Subordinated unit – basic and diluted
|
|
$
|
0.02
|
|
|
$
|
0.25
|
|
There were no units excluded from diluted earnings per unit as we do not have any anti-dilutive units for the
three months ended March 31,
2014
or
2013
. See Notes 6 and 8 for additional information.
8. UNIT-BASED COMPENSATION
Long-Term Incentive Plan.
SMLP’s 2012 Long-Term Incentive Plan (the "LTIP") provides for the granting of unit-based awards, including common units, restricted units and phantom units to eligible officers, employees, consultants and directors of our general partner and its affiliates, thereby linking the recipients' compensation directly to SMLP’s performance. The LTIP is administered by the compensation committee of our general partner. A total of
5.0 million
common units was reserved for issuance pursuant to and in accordance with the LTIP. As of
March 31, 2014
, approximately
4.6 million
common units remained available for future issuance.
A rollfoward of phantom and restricted unit activity follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2014
|
|
Three months ended March 31, 2013
|
|
Units
|
|
Weighted-average grant date
fair value
|
|
Units
|
|
Weighted-average grant date
fair value
|
Nonvested phantom and restricted units, beginning of period
|
283,682
|
|
|
$
|
23.41
|
|
|
131,558
|
|
|
$
|
20.00
|
|
Phantom units granted
|
134,557
|
|
|
$
|
42.30
|
|
|
146,231
|
|
|
$
|
25.99
|
|
Phantom and restricted units vested
|
(58,049
|
)
|
|
$
|
24.95
|
|
|
—
|
|
|
—
|
|
Phantom units forfeited
|
(2,347
|
)
|
|
$
|
23.32
|
|
|
(962
|
)
|
|
$
|
25.99
|
|
Nonvested phantom and restricted units, end of period
|
357,843
|
|
|
$
|
30.26
|
|
|
276,827
|
|
|
$
|
23.15
|
|
A phantom unit is a notional unit that entitles the grantee to receive a common unit upon the vesting of the phantom unit or on a deferred basis upon specified future dates or events or, in the discretion of the administrator, cash equal to the fair market value of a common unit. A restricted unit is a common limited partner unit that is subject to a restricted period during which the unit remains subject to forfeiture.
The phantom units granted in connection with the IPO vest on the third anniversary of the IPO. All other phantom units granted to date vest ratably over a
three
-year period. Grant date fair value is determined based on the closing price our common units on the date of grant multiplied by the number of phantom units awarded to the grantee. Holders of all phantom units granted to date are entitled to receive distribution equivalent rights for each phantom unit, providing for a lump sum cash amount equal to the accrued distributions from the grant date of the phantom units to be paid in cash upon the vesting date. Upon vesting, phantom unit awards may be settled, at our discretion, in cash and/or common units, but the current intention is to settle all phantom unit awards with common units.
As of
March 31, 2014
, the unrecognized unit-based compensation related to the LTIP was
$8.3 million
. Incremental unit-based compensation will be recorded over the remaining vesting period of
2.96 years
. Due to the limited and immaterial forfeiture history associated with the grants under the LTIP,
no
forfeitures were assumed in the determination of estimated compensation expense.
Unit-based compensation recognized in general and administrative expense related to awards under the LTIP was as follows:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2014
|
|
2013
|
|
(In thousands)
|
SMLP unit-based compensation
|
$
|
1,063
|
|
|
$
|
327
|
|
DFW Net Profits Interests
. Class B membership interests in DFW Midstream (the "DFW Net Profits Interests") participated in distributions upon time vesting and the achievement of certain distribution targets to Class A members or higher priority vested DFW Net Profits Interests. The DFW Net Profits Interests were accounted for as compensatory awards. All grants vested ratably and provided for accelerated vesting in certain limited circumstances, including a qualifying termination following a change in control (as defined in the underlying agreements). In April 2013, we repurchased all of the then-outstanding DFW Net Profits Interests from the five remaining holders. Upon the conclusion of these repurchase transactions, there were no remaining or outstanding DFW Net Profits Interests as of April 30, 2013.
9. CONCENTRATIONS OF RISK
Financial instruments that potentially subject us to concentrations of credit risk consist of cash and accounts receivable. We maintain our cash in bank deposit accounts that, at times, may exceed federally insured limits. We have not experienced any losses in such accounts and do not believe we are exposed to any significant risk.
Accounts receivable primarily comprise natural gas gathering, treating and processing services we provide to our customers. This industry concentration has the potential to impact our overall exposure to credit risk, either positively or negatively, in that our customers may be similarly affected by changes in economic, industry or other conditions. We monitor the creditworthiness of our counterparties and generally require letters of credit for receivables from counterparties that are judged to have sub-standard credit, unless the credit risk can otherwise be mitigated.
Counterparties accounting for more than
10%
of total revenues were as follows:
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2014
|
|
2013
|
Revenue:
|
|
|
|
Counterparty A
|
17
|
%
|
|
18
|
%
|
Counterparty B
|
11
|
%
|
|
19
|
%
|
Counterparty C
|
10
|
%
|
|
*
|
|
__________
* Less than 10%
Counterparties accounting for more than
10%
of total accounts receivable were as follows:
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
2014
|
|
2013
|
Accounts receivable:
|
|
|
|
Counterparty A
|
17
|
%
|
|
37
|
%
|
Counterparty B
|
12
|
%
|
|
11
|
%
|
Counterparty C
|
*
|
|
|
*
|
|
__________
* Less than 10%
10. RELATED-PARTY TRANSACTIONS
Recent Acquisition.
See Notes 1, 6 and 12 for disclosure of the purchase of Red Rock Gathering from Summit Investments and the primary offering of common units to fund the Red Rock Drop Down.
Reimbursement of Expenses from General Partner.
Our general partner and its affiliates do not receive a management fee or other compensation in connection with the management of our business, but will be reimbursed for expenses incurred on our behalf. Under our partnership agreement, we reimburse our general partner and its affiliates for certain expenses incurred on our behalf, including, without limitation, salary, bonus, incentive compensation and other amounts paid to our general partner's employees and executive officers who perform services necessary to run our business. In addition, we reimburse our general partner for compensation, travel and entertainment expenses for the directors serving on the board of directors of our general partner and the cost of director and officer liability insurance. Our partnership agreement provides that our general partner will determine in good faith the expenses that are allocable to us.
The payables to our general partner for expenses that were paid on our behalf were as follows:
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
2014
|
|
2013
|
|
(In thousands)
|
Due to affiliate
|
$
|
1,043
|
|
|
$
|
653
|
|
Expenses incurred by the general partner and reimbursed by us under our partnership agreement were as follows:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2014
|
|
2013
|
|
(In thousands)
|
Operation and maintenance expense
|
$
|
3,892
|
|
|
$
|
2,903
|
|
General and administrative expense
|
4,906
|
|
|
4,416
|
|
General and administrative expense for the three months ended March 31, 2013 includes $1.2 million of expenses allocated by the general partner.
Expense Allocations.
During the three months ended March 31, 2014 and 2013, Summit Investments incurred interest expense which was related to capital projects at Red Rock Gathering. As such, the associated interest expense was allocated to Red Rock Gathering as a noncash contribution and capitalized into the basis of the asset.
Certain of Summit Investments’ current and former employees received Class B membership interests, classified as net profits interests, in Summit Investments (the “Net Profits Interests”). The Net Profits Interests participate in distributions upon time vesting and the achievement of certain distribution targets to Class A members or higher priority vested Net Profits Interests. The Net Profits Interests were accounted for as compensatory awards.
Summit Investments allocated a portion of the annual expense associated with the Net Profits Interests to Red Rock Gathering during the three months ended March 31, 2013. This amount is reflected in general and administrative expenses in the statement of operations.
Expenses Paid by Summit Investments on Behalf of Red Rock Gathering.
Prior to the Red Rock Drop Down, Summit Investments incurred certain support expenses and capital expenditures on behalf of Red Rock Gathering during the three months ended March 31, 2014 and 2013. These transactions were settled through membership interests prior to the Red Rock Drop Down.
Electricity Management Services Agreement.
We entered into a consulting arrangement with EquiPower Resources Corp. to assist with managing DFW Midstream's electricity price risk. EquiPower Resources Corp. is an affiliate of Energy Capital Partners and is also the employer of a director of our general partner. Amounts paid for such services were as follows:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2014
|
|
2013
|
|
(In thousands)
|
Payments for electricity management consulting services
|
$
|
72
|
|
|
$
|
55
|
|
Engineering Services Agreement.
We entered into an engineering services arrangement with IPS Engineering/EPC. IPS Engineering/EPC is an affiliate of Energy Capital Partners. We paid
$0.2 million
for such services during the
three months ended March 31, 2014
.
11. COMMITMENTS AND CONTINGENCIES
Operating Leases.
We lease various office space to support our operations and have determined that our leases are operating leases. Total rent expense related to operating leases, which is recognized in general and administrative expenses, was as follows:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2014
|
|
2013
|
|
(In thousands)
|
Total rent expense
|
$
|
354
|
|
|
$
|
260
|
|
Legal Proceedings.
The Partnership is involved in various litigation and administrative proceedings arising in the normal course of business. In the opinion of management, any liabilities that may result from these claims would not individually or in the aggregate have a material adverse effect on its financial position or results of operations.
12. ACQUISITIONS
Red Rock Gathering System.
On March 18, 2014, Summit Investments offered
100%
of its interests in Red Rock Gathering to the Partnership in exchange for total cash consideration of
$305.0 million
, subject to customary working capital adjustments. Because of the common control aspects in the drop down transaction, the Red Rock Gathering acquisition was deemed a transaction between entities under common control and, as such, was accounted for on an “as if pooled” basis for all periods in which common control existed. SMLP’s financial results retrospectively include Red Rock’s financial results for all periods ending after October 23, 2012, the date Summit Investments acquired its interests, and before March 18, 2014.
Bison Gas Gathering System.
On February 15, 2013, Summit Investments acquired BTE. On June 4, 2013, a subsidiary of Summit Investments entered into a purchase and sale agreement with SMLP whereby SMLP acquired the Bison Gas Gathering system. The Bison Gas Gathering system was carved out from BTE and primarily gathers associated natural gas production from customers operating in Mountrail and Burke counties in North Dakota under long-term contracts ranging from
five years
to
15 years
. The weighted-average life of the acquired contracts was
12
years upon acquisition. For additional information, see Note 1.
Summit Investments accounted for its purchase of BTE (the "BTE Transaction") under the acquisition method of accounting, whereby the various gathering systems' identifiable tangible and intangible assets acquired and liabilities assumed were recorded based on their fair values as of February 15, 2013. The intangible assets that were acquired are composed of gas gathering agreement contract values and right-of-way easements. Their fair values were determined based upon assumptions related to future cash flows, discount rates, asset lives, and projected capital expenditures to complete the system.
Because the Bison Drop Down was executed between entities under common control, SMLP recognized the acquisition of the Bison Gas Gathering system at historical cost which reflected Summit Investments recent fair value accounting for the BTE Transaction. Furthermore, due to the common control aspect, the Bison Drop Down was accounted for by SMLP on an “as if pooled” basis for all periods in which common control existed. Common control began on February 15, 2013 concurrent with Summit Investments' acquisition of BTE.
The fair values of the assets acquired and liabilities assumed as of February 15, 2013, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
Purchase price assigned to Bison Gas Gathering system
|
|
|
$
|
303,168
|
|
Current assets
|
$
|
5,705
|
|
|
|
Property, plant, and equipment
|
85,477
|
|
|
|
Intangible assets
|
164,502
|
|
|
|
Other noncurrent assets
|
2,187
|
|
|
|
Total assets acquired
|
257,871
|
|
|
|
Current liabilities
|
6,112
|
|
|
|
Other noncurrent liabilities
|
2,790
|
|
|
|
Total liabilities assumed
|
$
|
8,902
|
|
|
|
Net identifiable assets acquired
|
|
|
248,969
|
|
Goodwill
|
|
|
$
|
54,199
|
|
We believe that the goodwill recorded represents the incremental value of future cash flow potential attributed to estimated future gathering services within the Williston Basin.
The Bison Drop Down closed on June 4, 2013. The total acquisition purchase price of
$248.9 million
was funded with
$200.0 million
of borrowings under SMLP’s revolving credit facility and the issuance of
$47.9 million
of SMLP common units to Summit Investments and
$1.0 million
of general partner interests to SMLP’s general partner. Summit Investments had a net investment in the Bison Gas Gathering system of
$303.2 million
.
Supplemental Disclosures.
As noted above, SMLP's acquisition of the Red Rock Gathering and Bison Gas Gathering systems were transactions between commonly controlled entities which required that SMLP account for the acquisitions in a manner similar to a pooling of interests. As a result, the historical financial statements of the Partnership and the Red Rock Gathering and Bison Gas Gathering systems have been combined to reflect the historical operations, financial position and cash flows from the date common control began. Revenues and net income for the previously separate entities and the combined amounts for the
three months ended March 31,
2014 and 2013, as presented in these unaudited condensed consolidated financial statements follow.
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
2014
|
|
2013
|
|
(In thousands)
|
SMLP revenues
|
$
|
64,889
|
|
|
$
|
43,595
|
|
Red Rock Gathering system revenues
|
11,313
|
|
|
10,858
|
|
Bison Gas Gathering system revenues (1)
|
—
|
|
|
7,531
|
|
Combined revenues
|
$
|
76,202
|
|
|
$
|
61,984
|
|
|
|
|
|
SMLP net income
|
$
|
3,545
|
|
|
$
|
12,480
|
|
Red Rock Gathering system net income
|
2,828
|
|
|
797
|
|
Bison Gas Gathering system net income (1)
|
—
|
|
|
587
|
|
Combined net income
|
$
|
6,373
|
|
|
$
|
13,864
|
|
__________
(1) Results are fully reflected in SMLP's results of operations for the
three months ended March 31, 2014
.
See Notes 1, 5 and 6 for additional information.
Unaudited Pro Forma Financial Information.
The following unaudited pro forma financial information assumes that the acquisition of Bison Midstream occurred on January 1, 2012. The pro forma results for Bison Midstream were derived from revenues and net income in 2013. The pro forma adjustments to the
three months ended March 31, 2013
for Bison Midstream also reflect the impact of
$200.0 million
of incremental borrowings on our revolving credit facility and incremental depreciation and amortization expense associated with the acquired property, plant and equipment and contract intangibles as a result of the application of fair value accounting. Nonrecurring transaction costs incurred during the
three months ended March 31, 2013
were immaterial.
|
|
|
|
|
|
Three months ended March 31, 2013
|
|
(In thousands)
|
Total Bison Midstream revenues included in consolidated revenues
|
$
|
7,531
|
|
Total Bison Midstream net income included in consolidated net income
|
587
|
|
|
|
Pro forma total revenues
|
$
|
70,013
|
|
Pro forma net income
|
12,650
|
|
|
|
Pro forma common EPU - basic and diluted
|
$
|
0.25
|
|
Pro forma subordinated EPU - basic and diluted
|
0.25
|
|
The unaudited pro forma financial information presented above is not necessarily indicative of (i) what our financial position or results of operations would have been if the acquisition of Bison Midstream had occurred on January 1, 2012, or (ii) what SMLP’s financial position or results of operations will be for any future periods.