Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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2013 SRS
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the Partnership's shelf registration statement initially filed with the SEC in October 2013 and declared effective in November 2013
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2014 SRS
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the Partnership's shelf registration statement initially filed with the SEC in July 2014 which registered an unlimited amount of common units and debt securities
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2016 Drop Down
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the Partnership's March 3, 2016 acquisition of substantially all of (i) the issued and outstanding membership interests in Summit Utica, Meadowlark Midstream and Tioga Midstream and (ii) SMP Holdings’ 40% ownership interest in Ohio Gathering from SMP Holdings
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2016 SRS
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the Partnership's shelf registration statement initially filed with the SEC in October 2016 and declared effective in November 2016 which registered up to $1.5 billion of equity and debt securities in primary offerings and 36,701,230 common units beneficially owned by Summit Investments and affiliates of the Sponsor
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5.5% Senior Notes
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Summit Holdings' 5.5% senior unsecured notes due August 2022
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7.5% Senior Notes
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Summit Holdings' 7.5% senior unsecured notes due July 2021
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AMI
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area of mutual interest; AMIs require that any production from wells drilled by our customers within the AMI be shipped on and/or processed by our gathering systems
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associated natural gas
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a form of natural gas which is found with deposits of petroleum, either dissolved in the oil or as a free gas cap above the oil in the reservoir
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ASU
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Accounting Standards Update
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Audit Committee
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the audit committee of the board of directors of our General Partner
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Bbl
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one barrel; used for crude oil and produced water and equivalent to 42 U.S. gallons
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Bcf
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one billion cubic feet
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Bcfe/d
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the equivalent of one billion cubic feet per day; generally calculated when liquids are converted into gas; determined using a ratio of six thousand cubic feet of natural gas to one barrel of liquids
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Bison Drop Down
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the Partnership's June 4, 2013 acquisition of all of the issued and outstanding membership interests in Bison Midstream from SMP Holdings
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Bison Midstream
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Bison Midstream, LLC
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Board of Directors
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the board of directors of our General Partner
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CAA
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Clean Air Act
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CEA
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Commodity Exchange Act
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CERCLA
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Comprehensive Environmental Response, Compensation and Liability Act
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CFTC
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Commodity Futures Trading Commission
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Compensation Committee
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the compensation committee of the board of directors of our General Partner
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Compensation Consultant
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BDO USA, L.L.P.
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condensate
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a natural gas liquid with a low vapor pressure, mainly composed of propane, butane, pentane and heavier hydrocarbon fractions
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Conflicts Committee
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the conflicts committee of the board of directors of our General Partner
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conventional resource basin
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a basin where natural gas or crude oil production is developed from a well drilled into a geologic formation in which the reservoir and fluid characteristics permit the crude oil and natural gas to readily flow to the wellbore; also referred to as a conventional resource play
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CWA
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Clean Water Act
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MQD
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minimum quarterly distribution
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MVC
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minimum volume commitment
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NAAQS
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national ambient air quality standard
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NEPA
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National Environmental Policy Act
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NGA
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Natural Gas Act
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NGL
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natural gas liquids; the combination of ethane, propane, normal butane, iso-butane and natural gasolines that when removed from unprocessed natural gas streams become liquid under various levels of higher pressure and lower temperature
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NGPA
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Natural Gas Policy Act of 1978
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Niobrara G&P
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Niobrara Gathering and Processing system
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NYSE
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New York Stock Exchange
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OCC
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Ohio Condensate Company, L.L.C.
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OGC
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Ohio Gathering Company, L.L.C.
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Ohio Gathering
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Ohio Gathering Company, L.L.C. and Ohio Condensate Company, L.L.C.
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OPA
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Oil Pollution Control Act
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OpCo
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Summit Midstream OpCo, LP
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OpCo GP
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Summit Midstream OpCo GP, LLC
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PHMSA
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Pipeline and Hazardous Materials Safety Administration
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play
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a proven geological formation that contains commercial amounts of hydrocarbons
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Polar and Divide
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the Polar and Divide system; collectively Polar Midstream and Epping
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Polar and Divide Drop Down
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the Partnership's May 18, 2015 acquisition of all of the issued and outstanding membership interests in Polar Midstream and Epping from SMP Holdings
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Polar Midstream
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Polar Midstream, LLC
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predecessor
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a person the major portion of the business and assets of which another person acquired the major portion of the business and assets of the acquired person
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Predecessor
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Summit Investments, as the predecessor prior to SMLP's IPO
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produced water
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water from underground geologic formations that is a by-product of natural gas and crude oil production
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PSD
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Prevention of Significant Deterioration
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RCRA
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Resource Conservation and Recovery Act
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receipt point
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the point where hydrocarbons or produced water are received by or into a gathering system, facility or transportation pipeline; also called a central receipt point
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Red Rock Drop Down
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the Partnership's March 18, 2014 acquisition of all of the issued and outstanding membership interests in Red Rock Gathering from SMP Holdings
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Red Rock Gathering
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Red Rock Gathering Company, LLC
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Remaining Consideration
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management's estimate of the consideration to be paid to SMP Holdings in 2020 in connection with the 2016 Drop Down, the present value of which is reflected on our balance sheets as the Deferred Purchase Price Obligation
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residue gas
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the natural gas remaining after being processed and/or treated
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Revolving Credit Facility
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the Second Amended and Restated Credit Agreement dated as of November 1, 2013
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SEC
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Securities and Exchange Commission
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Securities Act
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Securities Act of 1933, as amended
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segment adjusted EBITDA
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total revenues less total costs and expenses; plus (i) other income excluding interest income, (ii) our proportional adjusted EBITDA for equity method investees, (iii) depreciation and amortization, (iv) adjustments related to MVC shortfall payments, (v) unit-based and noncash compensation, (vi) impairments and (vii) other noncash expenses or losses, less other noncash income or gains
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shortfall payment
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the payment received from a counterparty when its volume throughput does not meet its MVC for the applicable period
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SMLP
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Summit Midstream Partners, LP
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SMLP LTIP
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SMLP Long-Term Incentive Plan
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SMP Holdings
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Summit Midstream Partners Holdings, LLC
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SPCC
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Spill Prevention Control and Countermeasure
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Summit Holdings
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Summit Midstream Holdings, LLC
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Summit Investments
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Summit Midstream Partners, LLC
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Summit Utica
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Summit Midstream Utica, LLC
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tailgate
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refers to the point at which processed residue gas and NGLs leave a processing facility for end-use markets
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Tcfe
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the equivalent of one trillion cubic feet; generally calculated when liquids are converted into gas; determined using a ratio of six thousand cubic feet of natural gas to one barrel of liquids
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the Company
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Summit Midstream Partners, LLC and its subsidiaries
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the Partnership
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Summit Midstream Partners, LP and its subsidiaries
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throughput volume
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the volume of natural gas, crude oil or produced water transported or passing through a pipeline, plant or other facility during a particular period; also referred to as volume throughput
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Tioga Midstream
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Tioga Midstream, LLC
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unconventional resource basin
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a basin where natural gas or crude oil production is developed from unconventional sources that require hydraulic fracturing as part of the completion process, for instance, natural gas produced from shale formations and coalbeds; also referred to as an unconventional resource play
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VOC
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volatile organic compound(s)
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wellhead
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the equipment at the surface of a well, used to control the well's pressure; also, the point at which the hydrocarbons and water exit the ground
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•
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•
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•
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•
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•
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Ohio Gathering, a natural gas gathering system and a condensate stabilization facility operating in the Appalachian Basin, which includes the Utica and Point Pleasant shale formations in southeastern Ohio;
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Summit Utica, a natural gas gathering system operating in the Appalachian Basin, which includes the Utica and Point Pleasant shale formations in southeastern Ohio;
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Bison Midstream, an associated natural gas gathering system operating in the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota;
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Polar and Divide, crude oil and produced water gathering systems and transmission pipelines located in the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota;
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Tioga Midstream, crude oil, produced water and associated natural gas gathering systems operating in the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota;
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Grand River, a natural gas gathering and processing system located in 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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Niobrara G&P, an associated natural gas gathering and processing system operating in the DJ Basin, which includes the Niobrara and Codell shale formations in northeastern Colorado;
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DFW Midstream, a natural gas gathering system operating in the Fort Worth Basin, which includes the Barnett Shale formation in north-central Texas; and
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Mountaineer Midstream, a natural gas gathering system operating in the Appalachian Basin, which includes the Marcellus Shale formation in northern West Virginia.
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Gulfport Energy Corporation ("Gulfport") and Ascent Resources - Utica, LLC ("Ascent"), the key customers for Ohio Gathering;
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XTO Energy, Inc. ("XTO") and Ascent, the key customers for Summit Utica;
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Oasis Petroleum, Inc. ("Oasis") and a large U.S. independent crude oil and natural gas company, the key customers for Bison Midstream;
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Whiting Petroleum Corp. ("Whiting") and SM Energy Company ("SM Energy"), the key customers for Polar and Divide;
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Hess Corp. ("Hess"), the key customer for Tioga Midstream;
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Encana Oil & Gas (USA) Inc. ("Encana") and Terra Energy Partners LLC ("Terra"), the key customers for Grand River;
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Fifth Creek Energy Operating Company, LLC ("Fifth Creek") and a large U.S. independent crude oil and natural gas company, the key customers for Niobrara G&P;
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Total Gas & Power North America, Inc. ("Total"), the key customer for DFW Midstream; and
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Antero Resources Corp. ("Antero"), the key customer for Mountaineer Midstream.
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the Utica Shale, which includes our ownership interest in Ohio Gathering as well as Summit Utica;
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the Williston Basin, which includes Bison Midstream, Polar and Divide and Tioga Midstream;
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the Piceance/DJ Basins, which includes Grand River and Niobrara G&P;
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the Barnett Shale, which includes DFW Midstream; and
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the Marcellus Shale, which includes Mountaineer Midstream;
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Year ended December 31,
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2016
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2015
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2014
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(In thousands)
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Property, plant and equipment, net
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$
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1,853,671
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$
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1,812,783
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$
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1,622,640
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Intangible assets, net
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421,452
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461,310
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489,282
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•
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Summit Investments conveyed an interest in Summit Holdings to our General Partner as a capital contribution;
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our General Partner conveyed its interest in Summit Holdings to SMLP in exchange for a continuation of its 2% general partner interest in SMLP and the IDRs;
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Summit Investments conveyed its remaining interest in Summit Holdings to SMLP in exchange for (i)
10,029,850
common units, (ii)
24,409,850
subordinated units and (iii) the right to receive cash reimbursement for certain capital expenditures made with respect to the contributed assets; and
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SMLP issued
14,375,000
common units to the public.
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Maintaining our focus on fee-based revenue with minimal direct commodity price exposure.
As we expand our business, we intend to maintain our focus on providing midstream energy services under fee-based arrangements. Our midstream services are provided under primarily long-term and fee-based contracts with original terms of up to 25 years. We believe that our focus on fee-based revenues with minimal direct commodity price exposure is essential to maintaining stable cash flows.
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Capitalizing on organic growth opportunities to maximize throughput on our existing systems.
We intend to continue to leverage our management team's expertise in constructing, developing and optimizing our midstream assets to grow our business through organic development projects. We believe that our broad and geographically diverse operating footprint provides us with a competitive advantage to pursue organic development projects that are designed to extend our geographic reach, diversify our customer base, expand our midstream service offerings, increase the number of our hydrocarbon receipt points and maximize volume throughput.
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Diversifying our asset base by expanding our midstream service offerings to new geographic areas.
Our gathering operations in the Utica, Bakken, Barnett and Marcellus shale plays and the Piceance and DJ basins currently represent our core business. We intend to pursue opportunities to diversify our operations into other geographic regions through both greenfield development projects and acquisitions from third parties.
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Partnering with producers to provide midstream services for their development projects in high-growth, unconventional resource plays.
We seek to promote commercial relationships with established and well-capitalized producers that are willing to serve as key customers and commit to long-term MVCs and/or AMIs. We will continue to pursue partnership opportunities with established producers to develop new midstream energy infrastructure in unconventional resource basins that we believe will complement our existing assets and/or enhance our overall business by facilitating our entry into new basins. These opportunities generally consist of a strategic acreage position in an unconventional resource play that is well-positioned for accelerated production but has limited existing midstream energy infrastructure to support such growth.
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Strategically located assets in core areas of prolific unconventional resource basins supported by partnerships with large producers.
We believe our assets are strategically positioned within the core areas of five established unconventional resource basins. The geologic formations in the basins served by our assets have either relatively low drilling and completion costs, highly economic production profiles, or a combination of both, which incentivize producers to develop more actively than in more marginal areas.
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Fee-based revenues underpinned by long-term contracts with AMIs and MVCs.
A substantial majority of our revenues for the year ended December 31, 2016 were generated under long-term and fee-based
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Capital structure and financial flexibility.
At December 31, 2016, we had
$1.25 billion
of total indebtedness outstanding (see Notes 1, 2 and 9 to the consolidated financial statements), and the unused portion of our
$1.25 billion
Revolving Credit Facility totaled
$602.0 million
. Under the terms of our Revolving Credit Facility, our total leverage ratio (total net indebtedness to consolidated trailing 12-month EBITDA, as defined in the credit agreement) was approximately 4.21 to 1.0 at December 31, 2016, which compares with the then-existing total leverage ratio upper limit of not more than 5.5 to 1.0 (as defined in the credit agreement).
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Relationship with a large and committed financial sponsor.
Our Sponsor is an experienced energy investor with a proven track record of making substantial, long-term investments in high-quality energy assets. In addition to its direct investment in Summit Investments, Energy Capital Partners began purchasing our common units in open market transactions commencing in December 2015 and concluding in June 2016. We believe that the relationship with and support of our Sponsor is a competitive advantage as it brings not only significant financial and management experience, but also numerous relationships throughout the energy industry that we believe will continue to benefit us as we seek to grow our business.
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Experienced management team with a proven record of asset acquisition, construction, development, operations and integration expertise.
Our board members and senior leadership team have extensive energy experience (see Item 10. Directors, Executive Officers and Corporate Governance—Directors and Executive Officers) and a proven track record of identifying, consummating, financing and integrating significant acquisitions in addition to partnering with major producers to construct and develop midstream energy infrastructure.
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•
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the Utica Shale, which is served by Ohio Gathering and Summit Utica;
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the Williston Basin, which is served by Bison Midstream, Polar and Divide and Tioga Midstream;
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the Piceance/DJ Basins, which is served by Grand River and Niobrara G&P;
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the Barnett Shale, which is served by DFW Midstream; and
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the Marcellus Shale, which is served by Mountaineer Midstream.
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Aggregate
throughput capacity
–
liquids
(Mbbl/d)
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Aggregate throughput capacity – natural gas
(MMcf/d)
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Average daily MVCs through 2021
(MMcfe/d) (1)
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Remaining MVCs
(Bcfe) (1)
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Weighted-average remaining contract life
(Years) (1)(2)
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Williston Basin
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260
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46
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101
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219
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4.8
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Aggregate
throughput capacity (MMcf/d)
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Average daily MVCs through 2021
(MMcf/d)
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Remaining MVCs (Bcf)
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Weighted-average remaining contract life
(Years) (1)
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Piceance/DJ Basins
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1,281
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625
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1,599
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8.4
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Throughput capacity (MMcf/d)
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Average daily MVCs through 2021 (MMcf/d)
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Remaining MVCs
(Bcf)
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Weighted-average remaining contract life
(Years) (1)
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Barnett Shale
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480
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29
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48
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2.9
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Throughput capacity (MMcf/d)
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Marcellus Shale (1)
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1,050
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perform ongoing assessments of pipeline integrity;
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identify and characterize applicable threats to pipeline segments that could impact a high consequence area;
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maintain processes for data collection, integration and analysis;
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repair and remediate pipelines as necessary;
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adopt and maintain procedures, standards and training programs for control room operations; and
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implement preventive and mitigating actions.
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requiring the installation of pollution-control equipment or otherwise restricting the way we operate;
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limiting or prohibiting construction activities in sensitive areas, such as wetlands, coastal regions or areas inhabited by endangered or threatened species;
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delaying system modification or upgrades during permit reviews;
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requiring investigatory and remedial actions to mitigate pollution conditions caused by our operations or attributable to former operations; and
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enjoining the operations of facilities deemed to be in non-compliance with permits or permit requirements issued pursuant to or imposed by such environmental laws and regulations.
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the volumes we gather, treat and process;
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the level of production of natural gas and crude oil (and associated volumes of produced water) from wells connected to our gathering systems, which is dependent in part on the demand for, and the market prices of, crude oil, natural gas and NGLs;
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damage to pipelines, facilities, related equipment and surrounding properties caused by earthquakes, floods, fires, severe weather, explosions and other natural disasters, accidents and acts of terrorism;
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leaks or accidental releases of hazardous materials into the environment;
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weather conditions and seasonal trends;
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changes in the fees we charge for our services;
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the level of competition from other midstream energy companies in our areas of operation;
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changes in the level of our operating, maintenance and general and administrative expenses;
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regulatory action affecting the supply of, or demand for, crude oil, natural gas and NGLs, the fees we can charge, how we contract for services, our existing contracts, our operating and maintenance costs or our operating flexibility; and
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prevailing economic and market conditions.
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the level and timing of capital expenditures we make;
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the level of our operating, maintenance and general and administrative expenses, including reimbursements of expenses incurred on our behalf by our General Partner;
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the cost of acquisitions, if any;
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our debt service requirements and other liabilities, including the Deferred Purchase Price Obligation;
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fluctuations in our working capital needs;
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our ability to borrow funds and access capital markets;
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restrictions contained in our debt agreements;
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the amount of cash reserves established by our General Partner;
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not receiving anticipated shortfall payments from our customers;
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adverse legal judgments, fines and settlements; and
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other business risks affecting our cash levels.
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the availability and cost of capital;
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prevailing and projected hydrocarbon commodity prices;
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demand for crude oil, natural gas and other hydrocarbon products, including NGLs;
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levels of reserves;
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geological considerations;
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environmental or other governmental regulations, including the availability of drilling permits and the regulation of hydraulic fracturing; and
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the availability of drilling rigs and other costs of production and equipment.
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worldwide economic and geopolitical conditions;
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weather conditions and seasonal trends;
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the levels of domestic production and consumer demand;
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the availability of imported LNG;
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the ability to export LNG;
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the availability of transportation and storage systems with adequate capacity;
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the volatility and uncertainty of regional pricing differentials and premiums;
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the price and availability of alternative fuels;
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the effect of energy conservation measures;
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the nature and extent of governmental regulation and taxation; and
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the anticipated future prices of crude oil, natural gas and other hydrocarbon products, including NGLs.
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the level of existing and new competition to provide gathering and/or processing services in our areas of operation;
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the macroeconomic factors affecting gathering, treating and processing economics for our current and potential customers;
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the balance of supply and demand, on a short-term, seasonal and long-term basis, in our markets;
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the extent to which the customers in our areas of operation are willing to contract on a long-term basis; and
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the effects of federal, state or local regulations on the contracting practices of our customers.
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severe weather;
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unscheduled turnarounds or catastrophic events at our physical plants or pipeline facilities;
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restrictions imposed by governmental authorities or court proceedings;
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labor difficulties that result in a work stoppage or slowdown;
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a disruption in the supply of resources necessary to operate our midstream facilities;
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damage to our facilities resulting from production volumes that do not comply with applicable specifications; and
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inadequate transportation and/or market access to support production volumes, including lack of pipeline, rail terminals, produced water disposal facilities and/or third-party processing capacity.
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damage to pipelines, processing plants, compression assets, related equipment and surrounding properties caused by tornadoes, floods, fires and other natural disasters and acts of terrorism;
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inadvertent damage from construction, vehicles, farm and utility equipment;
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leaks or losses resulting from the malfunction of equipment or facilities;
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ruptures, fires and explosions; and
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other hazards that could also result in personal injury and loss of life, pollution and suspension of operations.
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mistaken assumptions about volumes, revenues and costs, including synergies and potential growth;
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an inability to secure adequate customer commitments to use the acquired systems or facilities;
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the risk that natural gas or crude oil reserves expected to support the acquired assets may not be of the anticipated magnitude or may not be developed as anticipated or at all;
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an inability to successfully integrate the assets or businesses we acquire;
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coordinating geographically disparate organizations, systems and facilities;
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the assumption of unknown liabilities for which we are not indemnified or for which our indemnity is inadequate;
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mistaken assumptions about the overall costs of debt or equity capital;
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the diversion of management's and employees' attention from other business concerns;
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unforeseen difficulties operating in new geographic areas and business lines;
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customer or key employee losses at the acquired businesses;
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higher-than-anticipated production declines; and
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improperly constructed facilities.
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limiting our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes and/or obtaining such financing on favorable terms;
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reducing our funds available for operations, future business opportunities and cash distributions to unitholders by that portion of our cash flow required to make interest payments on our debt;
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increasing our vulnerability to competitive pressures or a downturn in our business or the economy generally; and
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limiting our flexibility in responding to changing business and economic conditions.
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incur or guarantee certain additional debt;
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make certain cash distributions on or redeem or repurchase certain units;
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make certain investments and acquisitions;
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make certain capital expenditures;
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incur certain liens or permit them to exist;
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enter into certain types of transactions with affiliates;
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merge or consolidate with another company or otherwise engage in a change of control transaction; and
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transfer, sell or otherwise dispose of certain assets.
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perform ongoing assessments of pipeline integrity;
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identify and characterize applicable threats to pipeline segments that could impact a high consequence area;
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maintain processes for data collection, integration and analysis;
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repair and remediate pipelines as necessary;
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•
|
adopt and maintain procedures, standards and training programs for control room operations; and
|
•
|
implement preventive and mitigating actions.
|
•
|
Neither our Partnership Agreement nor any other agreement requires Summit Investments or its owners to pursue a business strategy that favors us, and the directors and officers of Summit Investments have a fiduciary duty to make these decisions in the best interests of the owners of Summit Investments, which may be contrary to our interests. Summit Investments may choose to shift the focus of their investment and growth to areas not served by our assets.
|
•
|
Summit Investments is not limited in its ability to compete with us and in the future may offer business opportunities or sell midstream assets to third parties without first offering us the right to bid for them.
|
•
|
Our General Partner is allowed to take into account the interests of parties other than us, such as Summit Investments and its owners, in resolving conflicts of interest.
|
•
|
Our Partnership Agreement replaces the fiduciary duties that would otherwise be owed by our General Partner to us and our unitholders with contractual standards governing its duties to us and our unitholders. These contractual standards limit our General Partner's liabilities and the rights of our unitholders with respect to actions that, without the limitations, might constitute breaches of fiduciary duty.
|
•
|
Except in limited circumstances, our General Partner has the power and authority to conduct our business without unitholder approval.
|
•
|
Our General Partner determines the amount and timing of asset purchases and sales, borrowings, issuance of additional partnership interests and the creation, reduction or increase of reserves, each of which can affect the amount of cash that is distributed to our unitholders.
|
•
|
Our General Partner determines the amount and timing of any capital expenditures and whether a capital expenditure is classified as a maintenance capital expenditure, which reduces operating surplus, or an expansion capital expenditure, which does not reduce operating surplus. This determination can affect the amount of cash that is distributed to our unitholders and to our General Partner.
|
•
|
Our General Partner determines which costs incurred by it are reimbursable by us.
|
•
|
Our General Partner may cause us to borrow funds to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make incentive distribution payments.
|
•
|
Our Partnership Agreement permits us to classify up to $50.0 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions on our common units or to our General Partner in respect of the general partner interest or the IDRs.
|
•
|
Our Partnership Agreement does not restrict our General Partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf.
|
•
|
Our General Partner intends to limit its liability regarding our contractual and other obligations.
|
•
|
Our General Partner may exercise its right to call and purchase all of the common units not owned by it and its affiliates if they own more than 80% of the common units.
|
•
|
Our General Partner controls the enforcement of the obligations that it and its affiliates owe to us.
|
•
|
Our General Partner decides whether to retain separate counsel, accountants or others to perform services for us.
|
•
|
Our General Partner may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to our General Partner's IDRs without the approval of the Conflicts Committee or our unitholders. This election may result in lower distributions to our other unitholders in certain situations.
|
•
|
our quarterly distributions;
|
•
|
our quarterly or annual earnings or those of other companies in our industry;
|
•
|
the loss of a large customer;
|
•
|
announcements by our customers or others regarding our customers or changes in our customers’ credit ratings, liquidity position, leverage profile and/or other financial or credit-related metrics;
|
•
|
announcements by our competitors of significant contracts or acquisitions;
|
•
|
changes in accounting standards, policies, guidance, interpretations or principles;
|
•
|
general economic and geopolitical conditions;
|
•
|
the failure of securities analysts to cover our common units or changes in financial estimates by analysts;
|
•
|
future sales of our common units, including those held by Summit Investments and its subsidiaries and Energy Capital Partners; and
|
•
|
other factors described in these Risk Factors.
|
•
|
how to allocate corporate opportunities among us and its affiliates;
|
•
|
whether to exercise its limited call right;
|
•
|
whether to seek approval of the resolution of a conflict of interest by the Conflicts Committee;
|
•
|
how to exercise its voting rights with respect to the units it owns;
|
•
|
whether to exercise its registration rights;
|
•
|
whether to elect to reset target distribution levels;
|
•
|
whether to transfer the IDRs or any units it owns to a third party; and
|
•
|
whether or not to consent to any merger or consolidation of the partnership or amendment to the Partnership Agreement.
|
•
|
whenever our General Partner makes a determination or takes, or declines to take, any other action in its capacity as our General Partner, our General Partner is required to make such determination, or take or decline to take such other action, in good faith, meaning that it subjectively believed that the decision was in our best interests, and will not be subject to any other or different standard imposed by our Partnership Agreement, Delaware law, or any other law, rule or regulation, or at equity;
|
•
|
our General Partner will not have any liability to us or our unitholders for decisions made in its capacity as a General Partner so long as such decisions are made in good faith;
|
•
|
our General Partner and its officers and directors will not be liable for monetary damages to us, our limited partners or their assignees resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our General Partner or its officers and directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and
|
•
|
our General Partner will not be in breach of its obligations under the Partnership Agreement or its duties to us or our unitholders if a transaction with an affiliate or the resolution of a conflict of interest is:
|
i.
|
approved by the Conflicts Committee, although our General Partner is not obligated to seek such approval;
|
ii.
|
approved by the vote of a majority of the outstanding common units, excluding any common units owned by our General Partner and its affiliates;
|
iii.
|
on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or
|
iv.
|
fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us.
|
•
|
decreasing our existing unitholders' proportionate ownership interest in us and
|
•
|
because the amount payable to holders of IDRs is based on a percentage of the total cash available for distribution, the distributions to holders of IDRs will increase even if the per-unit distribution on common units remains the same.
|
•
|
decreasing the amount of cash available for distribution on each unit;
|
•
|
increasing the ratio of taxable income to distributions;
|
•
|
diminishing the relative voting strength of each previously outstanding unit; and
|
•
|
causing the market price of the common units to decline.
|
•
|
we were conducting business in a state but had not complied with that particular state's partnership statute or
|
•
|
an investor's right to act with other unitholders to remove or replace our General Partner, to approve some amendments to our Partnership Agreement or to take other actions under our Partnership Agreement constitute control of our business.
|
•
|
Summit Utica, a natural gas gathering system operating in the Appalachian Basin, which includes the Utica and Point Pleasant shale formations in southeastern Ohio, is included in the Utica Shale reportable segment;
|
•
|
Bison Midstream, an associated natural gas gathering system operating in the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota, is included in the Williston Basin reportable segment;
|
•
|
Polar and Divide, crude oil and produced water gathering systems and transmission pipelines operating in the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota, is included in the Williston Basin reportable segment;
|
•
|
Tioga Midstream, crude oil, produced water and associated natural gas gathering systems operating in the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota, is included in the Williston Basin reportable segment;
|
•
|
Grand River, a natural gas gathering and processing system operating in the Piceance Basin, which includes the Mesaverde formation and the Mancos and Niobrara shale formations in western Colorado and eastern Utah, is included in the Piceance/DJ Basins reportable segment;
|
•
|
Niobrara G&P, an associated natural gas gathering and processing system operating in the DJ Basin, which includes the Niobrara and Codell shale formations in northeastern Colorado, is included in the Piceance/DJ Basins reportable segment;
|
•
|
DFW Midstream, a natural gas gathering system operating in the Fort Worth Basin, which includes the Barnett Shale formation in north-central Texas, is included in the Barnett Shale reportable segment; and
|
•
|
Mountaineer Midstream, a natural gas gathering system operating in the Appalachian Basin, which includes the Marcellus Shale formation in northern West Virginia, is included in the Marcellus Shale reportable segment.
|
|
Common unit price range
|
|
Cash distribution paid per common unit (1)
|
||
|
High
|
|
Low
|
|
|
4th Quarter 2016
|
$25.50
|
|
$19.95
|
|
$0.575
|
3rd Quarter 2016
|
$25.10
|
|
$20.88
|
|
$0.575
|
2nd Quarter 2016
|
$23.85
|
|
$15.05
|
|
$0.575
|
1st Quarter 2016
|
$19.65
|
|
$11.06
|
|
$0.575
|
|
|
|
|
|
|
4th Quarter 2015
|
$21.18
|
|
$12.82
|
|
$0.575
|
3rd Quarter 2015
|
$33.74
|
|
$14.60
|
|
$0.570
|
2nd Quarter 2015
|
$36.82
|
|
$30.05
|
|
$0.565
|
1st Quarter 2015
|
$41.17
|
|
$30.31
|
|
$0.560
|
•
|
Our cash distribution policy is subject to restrictions on distributions under our Revolving Credit Facility. Our Revolving Credit Facility contains financial tests and covenants that we must satisfy. Should we be unable to satisfy these restrictions, we may be prohibited from making cash distributions notwithstanding our stated cash distribution policy.
|
•
|
Our General Partner has the authority to establish cash reserves for the prudent conduct of our business and for future cash distributions to our unitholders, and the establishment or increase of those cash reserves could result in a reduction in cash distributions to our unitholders from the levels we currently anticipate pursuant to our stated distribution policy. Any determination to establish cash reserves made by our General Partner in good faith will be binding on our unitholders.
|
•
|
Although our Partnership Agreement requires us to distribute all of our available cash, our Partnership Agreement, including the provisions requiring us to distribute all of our available cash, may be amended. We can amend our Partnership Agreement with the consent of our General Partner and the approval of a majority of the outstanding common units (including common units beneficially owned by Summit Investments). As of
December 31, 2016
, Summit Investments, which is the ultimate owner of our General Partner, beneficially owned
29,854,581
common units. In addition, in connection with the Purchase Program, a subsidiary of Energy Capital Partners owned
5,915,827
common units as of
December 31, 2016
.
|
•
|
Even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by our General Partner, taking into consideration the terms of our Partnership Agreement.
|
•
|
Under Delaware law, we may not make a distribution if the distribution would cause our liabilities to exceed the fair value of our assets.
|
•
|
We may lack sufficient cash to pay distributions to our unitholders due to cash flow shortfalls attributable to a number of operational, commercial or other factors as well as increases in our operating or general and administrative expenses, principal and interest payments on our debt, tax expenses, working capital requirements and anticipated cash needs. Our cash available for distribution to unitholders is directly impacted by our cash expenses necessary to run our business and will be reduced dollar-for-dollar to the extent such uses of cash increase.
|
•
|
If and to the extent our cash available for distribution materially declines, we may elect to reduce our quarterly distribution rate to service or repay our debt or fund expansion capital expenditures.
|
|
December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
(In thousands, except per-unit amounts)
|
||||||||||||||||||
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
$
|
3,115,179
|
|
|
$
|
3,164,672
|
|
|
$
|
3,242,462
|
|
|
$
|
2,282,046
|
|
|
$
|
1,280,939
|
|
Total long-term debt
|
1,240,301
|
|
|
1,267,270
|
|
|
1,232,207
|
|
|
772,140
|
|
|
199,230
|
|
|||||
Deferred Purchase Price Obligation
|
563,281
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Partners' capital
|
1,169,673
|
|
|
1,747,299
|
|
|
1,830,678
|
|
|
1,395,806
|
|
|
1,028,355
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Market price per common unit
|
$
|
25.15
|
|
|
$
|
18.73
|
|
|
$
|
38.00
|
|
|
$
|
36.65
|
|
|
$
|
19.83
|
|
|
Year ended December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012 (1)
|
||||||||||
|
(In thousands, except per-unit amounts)
|
||||||||||||||||||
Statements of operations data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenues
|
$
|
402,362
|
|
|
$
|
400,557
|
|
|
$
|
387,169
|
|
|
$
|
326,160
|
|
|
$
|
174,423
|
|
Total costs and expenses (2)
|
290,582
|
|
|
557,735
|
|
|
369,574
|
|
|
257,114
|
|
|
117,987
|
|
|||||
Interest expense
|
63,810
|
|
|
59,092
|
|
|
48,586
|
|
|
21,314
|
|
|
7,340
|
|
|||||
Deferred Purchase Price Obligation expense
|
55,854
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Affiliated interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,426
|
|
|||||
Loss from equity method investee (3)
|
(30,344
|
)
|
|
(6,563
|
)
|
|
(16,712
|
)
|
|
—
|
|
|
—
|
|
|||||
Net (loss) income
|
(38,187
|
)
|
|
(222,228
|
)
|
|
(47,368
|
)
|
|
47,008
|
|
|
42,997
|
|
|||||
(Loss) earnings per limited partner unit:
|
|
|
|
|
|
|
|
|
|
||||||||||
Common unit – basic
|
$
|
(0.71
|
)
|
|
$
|
(3.20
|
)
|
|
$
|
(0.49
|
)
|
|
$
|
0.86
|
|
|
$
|
0.35
|
|
Common unit – diluted
|
(0.71
|
)
|
|
(3.20
|
)
|
|
(0.49
|
)
|
|
0.86
|
|
|
0.35
|
|
|||||
Subordinated unit – basic and
diluted (4)
|
|
|
|
(2.88
|
)
|
|
(0.44
|
)
|
|
0.79
|
|
|
0.35
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Statements of cash flows data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures
|
$
|
142,719
|
|
|
$
|
272,225
|
|
|
$
|
343,380
|
|
|
$
|
249,626
|
|
|
$
|
77,296
|
|
Acquisition capital expenditures (5)
|
866,858
|
|
|
288,618
|
|
|
315,872
|
|
|
458,914
|
|
|
—
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Other financial data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Distributions declared per unit (6)
|
$
|
2.300
|
|
|
$
|
2.270
|
|
|
$
|
2.040
|
|
|
$
|
1.725
|
|
|
$
|
—
|
|
•
|
•
|
•
|
•
|
•
|
•
|
•
|
•
|
Ohio Gathering, a natural gas gathering system and a condensate stabilization facility operating in the Appalachian Basin, which includes the Utica and Point Pleasant shale formations in southeastern Ohio;
|
•
|
Summit Utica, a natural gas gathering system operating in the Appalachian Basin, which includes the Utica and Point Pleasant shale formations in southeastern Ohio;
|
•
|
Bison Midstream, an associated natural gas gathering system operating in the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota;
|
•
|
Polar and Divide, crude oil and produced water gathering systems and transmission pipelines located in the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota;
|
•
|
Tioga Midstream, crude oil, produced water and associated natural gas gathering systems operating in the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota;
|
•
|
Grand River, a natural gas gathering and processing system located in the Piceance Basin, which includes the Mesaverde formation and the Mancos and Niobrara shale formations in western Colorado and eastern Utah;
|
•
|
Niobrara G&P, an associated natural gas gathering and processing system operating in the DJ Basin, which includes the Niobrara and Codell shale formations in northeastern Colorado;
|
•
|
DFW Midstream, a natural gas gathering system operating in the Fort Worth Basin, which includes the Barnett Shale formation in north-central Texas; and
|
•
|
Mountaineer Midstream, a natural gas gathering system operating in the Appalachian Basin, which includes the Marcellus Shale formation in northern West Virginia.
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Net loss
|
$
|
(38,187
|
)
|
|
$
|
(222,228
|
)
|
|
$
|
(47,368
|
)
|
Reportable segment adjusted EBITDA:
|
|
|
|
|
|
||||||
Utica Shale (1)
|
66,637
|
|
|
35,873
|
|
|
6,176
|
|
|||
Williston Basin
|
79,475
|
|
|
34,008
|
|
|
30,009
|
|
|||
Piceance/DJ Basins
|
109,241
|
|
|
110,222
|
|
|
110,763
|
|
|||
Barnett Shale
|
54,634
|
|
|
59,526
|
|
|
60,528
|
|
|||
Marcellus Shale
|
19,203
|
|
|
23,214
|
|
|
15,940
|
|
|||
|
|
|
|
|
|
||||||
Net cash provided by operating activities
|
$
|
230,495
|
|
|
$
|
191,375
|
|
|
$
|
152,953
|
|
Acquisitions of gathering systems (2)
|
866,858
|
|
|
288,618
|
|
|
315,872
|
|
|||
Capital expenditures (3)
|
142,719
|
|
|
272,225
|
|
|
343,380
|
|
|||
Contributions to equity method investees
|
31,582
|
|
|
86,200
|
|
|
145,131
|
|
|||
|
|
|
|
|
|
||||||
Distributions to unitholders
|
$
|
167,504
|
|
|
$
|
152,074
|
|
|
$
|
122,224
|
|
Issuance of senior notes
|
—
|
|
|
—
|
|
|
300,000
|
|
|||
Borrowings (repayments) under Revolving Credit Facility, net
|
316,000
|
|
|
216,000
|
|
|
(136,000
|
)
|
|||
Proceeds from issuance of common units, net (4)
|
125,233
|
|
|
221,977
|
|
|
197,806
|
|
•
|
In March 2016, we acquired the 2016 Drop Down Assets from a subsidiary of Summit Investments. We funded the drop down with borrowings under our Revolving Credit Facility and the execution of the Deferred Purchase Price Obligation with Summit Investments (see Notes 9, 11 and 16 to the consolidated financial statements).
|
•
|
In June 2016, an impairment loss was recognized by OCC. We recorded our
40%
share of the impairment loss, or
$37.8 million
, in loss from equity method investees in the consolidated statements of operations. We exclude income or loss from equity method investees from our definition of segment adjusted EBITDA. As such, Utica Shale segment adjusted EBITDA was not impacted by the impairment loss (see Note 7 to the consolidated financial statements).
|
•
|
In September 2016, we completed an underwritten public offering of
5,500,000
common units at a price of
$23.20
per unit and used the net proceeds to pay down our Revolving Credit Facility. Following the offering, our General Partner made a capital contribution to us to maintain its approximate 2% general partner interest (see Note 11 to the consolidated financial statements).
|
•
|
In May 2015, we acquired Polar and Divide from a subsidiary of Summit Investments. We funded the drop down with the issuance of common units, borrowings under our Revolving Credit Facility and a General Partner contribution (see Notes 11 and 16 to the consolidated financial statements).
|
•
|
In May 2015, we completed an underwritten public offering of
7,475,000
common units at a price of
$30.75
per unit and used a portion of the net proceeds to partially fund the Polar and Divide Drop Down. Following the offering, our General Partner made a capital contribution to us to maintain its approximate 2% general partner interest (see Note 11 to the consolidated financial statements).
|
•
|
In September 2015, we recognized
$34.4 million
of gathering services and related fees revenue that had been previously deferred in connection with an MVC arrangement with a certain Piceance/DJ Basins customer, which was determined to no longer be recoverable by the customer. We include the effect of adjustments related to MVC shortfall payments in our definition of segment adjusted EBITDA. As such, Piceance/DJ Basins segment adjusted EBITDA was not impacted because the revenue recognition was offset by the associated adjustments related to MVC shortfall payments for this customer (see Note 8 to the consolidated financial statements).
|
•
|
In September and December 2015, we recognized additional accruals for environmental remediation expenses totaling
$21.8 million
associated with the rupture of a produced water gathering pipeline in the Williston Basin reportable segment (see Note 15 to the consolidated financial statements).
|
•
|
After a slight pause mid-year 2015, crude oil and NGL prices continued to decline in response to the global supply surplus. As a result, several of the producers in our areas of operations announced plans to cancel, delay and/or reduce drilling plans, which in turn negatively impacted the margins that we earn, slowing the growth in net income. In addition to impacting the margins that we earn and net income, the goodwill that we had previously recognized in connection with our acquisitions of Polar and Divide and Grand River was determined to be fully impaired, resulting in a write-off of
$248.9 million
(see Note 6 to the consolidated financial statements).
|
•
|
In the second half of 2014, crude oil and NGL prices began to decline, negatively impacting producers in each of our areas of operation. The impact of these declines were most evident in our North Dakota operations where our percentage of fee-based gathering agreements is less than that of our other systems. In addition to impacting the margins that we earned, the goodwill that we had previously recognized in connection with our acquisition of Bison Midstream was determined to be fully impaired, resulting in a write-off of
$54.2 million
(see Note 6 to the consolidated financial statements).
|
•
|
In March 2014, we acquired Red Rock Gathering from a subsidiary of Summit Investments in a drop down transaction (see Notes 11 and 16 to the consolidated financial statements). We also completed several system expansion projects across all systems.
|
•
|
In March 2014, we completed an underwritten public offering of
5,300,000
common units at a price of $38.75 per unit and used a portion of the net proceeds to partially fund the Red Rock Drop Down.
|
•
|
In July 2014, we issued $300.0 million of 5.5% Senior Notes and used the proceeds to repay a portion of our outstanding Revolving Credit Facility balance (see Note 9 to the consolidated financial statements).
|
•
|
Natural gas, NGL and crude oil supply and demand dynamics;
|
•
|
Growth in production from U.S. shale plays;
|
•
|
Capital markets activity and cost of capital; and
|
•
|
Shifts in operating costs and inflation.
|
•
|
the Utica Shale, which includes our ownership interest in Ohio Gathering and is served by Summit Utica;
|
•
|
the Williston Basin, which is served by Bison Midstream, Polar and Divide and Tioga Midstream;
|
•
|
the Piceance/DJ Basins, which is served by Grand River and Niobrara G&P;
|
•
|
the Barnett Shale, which is served by DFW Midstream; and
|
•
|
the Marcellus Shale, which is served by Mountaineer Midstream.
|
•
|
throughput volume,
|
•
|
revenues,
|
•
|
operation and maintenance expenses and
|
•
|
segment adjusted EBITDA.
|
•
|
successful drilling activity within our AMIs;
|
•
|
the level of work-overs and recompletions of wells on existing pad sites to which our gathering systems are connected;
|
•
|
the number of new pad sites in our AMIs awaiting connections;
|
•
|
our ability to compete for volumes from successful new wells in the areas in which we operate outside of our existing AMIs; and
|
•
|
our ability to gather, treat and/or process production that has been released from commitments with our competitors.
|
•
|
the ability of our assets to generate cash sufficient to make cash distributions and support our indebtedness;
|
•
|
the financial performance of our assets without regard to financing methods, capital structure or historical cost basis;
|
•
|
our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing or capital structure;
|
•
|
the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities; and
|
•
|
the financial performance of our assets without regard to (i) income or loss from equity method investees, (ii) the impact of the timing of minimum volume commitment shortfall payments under our gathering agreements or (iii) the timing of impairments or other noncash income or expense items.
|
•
|
The consolidated financial statements reflect the results of operations of Summit Utica since December 2014. We accounted for the drop down of these assets on an "as-if pooled" basis because the transactions were executed by entities under common control.
|
•
|
The consolidated financial statements reflect the results of operations of Tioga Midstream since April 2014. We accounted for the drop down of these assets on an "as-if pooled" basis because the transactions were executed by entities under common control.
|
•
|
The consolidated financial statements reflect the results of operations of Ohio Gathering since January 2014. We accounted for the drop down of these assets on an "as-if pooled" basis because the transactions were executed by entities under common control.
|
|
Year ended December 31,
|
|
Percentage Change
|
||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 v. 2015
|
|
2015 v. 2014
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||
Gathering services and related fees
|
$
|
345,961
|
|
|
$
|
337,819
|
|
|
$
|
267,478
|
|
|
2
|
%
|
|
26
|
%
|
Natural gas, NGLs and condensate sales
|
35,833
|
|
|
42,079
|
|
|
97,094
|
|
|
(15
|
)%
|
|
(57
|
)%
|
|||
Other revenues
|
20,568
|
|
|
20,659
|
|
|
22,597
|
|
|
—
|
%
|
|
(9
|
)%
|
|||
Total revenues
|
402,362
|
|
|
400,557
|
|
|
387,169
|
|
|
—
|
%
|
|
3
|
%
|
|||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of natural gas and NGLs
|
27,421
|
|
|
31,398
|
|
|
72,415
|
|
|
(13
|
)%
|
|
(57
|
)%
|
|||
Operation and maintenance
|
95,334
|
|
|
94,986
|
|
|
94,869
|
|
|
—
|
%
|
|
—
|
%
|
|||
General and administrative
|
52,410
|
|
|
45,108
|
|
|
43,281
|
|
|
16
|
%
|
|
4
|
%
|
|||
Depreciation and amortization
|
112,239
|
|
|
105,117
|
|
|
90,878
|
|
|
7
|
%
|
|
16
|
%
|
|||
Transaction costs
|
1,321
|
|
|
1,342
|
|
|
2,985
|
|
|
(2
|
)%
|
|
(55
|
)%
|
|||
Environmental remediation
|
—
|
|
|
21,800
|
|
|
5,000
|
|
|
*
|
|
|
*
|
|
|||
Loss (gain) on asset sales, net
|
93
|
|
|
(172
|
)
|
|
442
|
|
|
*
|
|
|
*
|
|
|||
Long-lived asset impairment
|
1,764
|
|
|
9,305
|
|
|
5,505
|
|
|
*
|
|
|
*
|
|
|||
Goodwill impairment
|
—
|
|
|
248,851
|
|
|
54,199
|
|
|
*
|
|
|
*
|
|
|||
Total costs and expenses
|
290,582
|
|
|
557,735
|
|
|
369,574
|
|
|
(48
|
)%
|
|
51
|
%
|
|||
Other income
|
116
|
|
|
2
|
|
|
1,189
|
|
|
*
|
|
|
*
|
|
|||
Interest expense
|
(63,810
|
)
|
|
(59,092
|
)
|
|
(48,586
|
)
|
|
8
|
%
|
|
22
|
%
|
|||
Deferred Purchase Price Obligation expense
|
(55,854
|
)
|
|
—
|
|
|
—
|
|
|
*
|
|
|
—
|
%
|
|||
Loss before income taxes and loss from equity method investees
|
(7,768
|
)
|
|
(216,268
|
)
|
|
(29,802
|
)
|
|
*
|
|
|
*
|
|
|||
Income tax (expense) benefit
|
(75
|
)
|
|
603
|
|
|
(854
|
)
|
|
*
|
|
|
*
|
|
|||
Loss from equity method investees
|
(30,344
|
)
|
|
(6,563
|
)
|
|
(16,712
|
)
|
|
*
|
|
|
(61
|
)%
|
|||
Net loss
|
$
|
(38,187
|
)
|
|
$
|
(222,228
|
)
|
|
$
|
(47,368
|
)
|
|
(83
|
)%
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating Data:
|
|
|
|
|
|
|
|
|
|
||||||||
Aggregate average daily throughput – natural gas (MMcf/d)
|
1,528
|
|
|
1,499
|
|
|
1,423
|
|
|
2
|
%
|
|
5
|
%
|
|||
Aggregate average daily throughput – liquids (Mbbl/d)
|
88.9
|
|
|
67.7
|
|
|
40.7
|
|
|
31
|
%
|
|
66
|
%
|
•
|
a volume throughput increase of 149 MMcf/d for the Utica Shale segment.
|
•
|
a volume throughput decrease of 63 MMcf/d for the Marcellus Shale segment.
|
•
|
a volume throughput decrease of 33 MMcf/d for the Barnett Shale segment.
|
•
|
a volume throughput decrease of 23 MMcf/d for the Piceance/DJ Basins segment.
|
•
|
a volume throughput increase of 96 MMcf/d for the Marcellus Shale segment.
|
•
|
a volume throughput increase of 36 MMcf/d for the Utica Shale segment.
|
•
|
a volume throughput decrease of 54 MMcf/d for the Piceance/DJ Basins segment.
|
•
|
an
$8.1 million
increase
in gathering services and related fees primarily as a result of increases for the Utica Shale and Williston Basin segments, partially offset by decreases for the Piceance/DJ Basins, Barnett Shale and Marcellus Shale segments.
|
•
|
a
$6.2 million
decline in natural gas, NGLs and condensate sales due to decreases for the Williston Basin, Piceance/DJ Basins and Barnett Shale segments.
|
•
|
a
$70.3 million
increase in gathering services and related fees primarily as a result of the recognition in 2015 of $34.4 million of previously deferred revenue at Grand River (see Note 8 to the consolidated financial statements) and general growth across all segments.
|
•
|
a
$55.0 million
decrease in natural gas, NGLs and condensate sales for the Williston Basin, Piceance/DJ Basins and Barnett Shale segments primarily as a result of the impact of commodity price declines.
|
•
|
an increase of $27.1 million for the Williston Basin segment primarily due to higher volume throughput on the Polar and Divide system as well as the growth of the Tioga Midstream system.
|
•
|
an increase of $19.6 million for the Utica Shale segment due to the development of the Summit Utica system.
|
•
|
a $27.9 million decrease in gathering services and related fees for the Piceance/DJ Basins segment primarily as a result of the 2015 recognition of $34.4 million of deferred revenue for the Grand River system.
|
•
|
an $8.2 million decrease for the Barnett Shale segment primarily due to lower volume throughput on the DFW Midstream system.
|
•
|
the above-mentioned $34.4 million recognition of previously deferred revenue for the Grand River system.
|
•
|
higher volume throughput for the Polar and Divide, Tioga Midstream, Mountaineer Midstream and Summit Utica systems.
|
•
|
the 2015 recognition of $248.9 million of goodwill impairments for the Williston Basin and Piceance/DJ Basins segments.
|
•
|
the 2015 recognition of a $21.8 million environmental remediation accrual for assets contributed to Polar and Divide in connection with the 2016 Drop Down.
|
•
|
a
$7.5 million
decrease in long-lived asset impairments, primarily for the Williston Basin segment.
|
•
|
a
$4.0 million
decrease in cost of natural gas and NGLs for the Bison Midstream and Grand River systems primarily due the impact of declining commodity prices on their percent-of-proceeds and condensate sales activity during the first half of 2016.
|
•
|
a
$7.3 million
increase in general and administrative expense primarily due to an increase in salaries, benefits and incentive compensation.
|
•
|
a
$7.1 million
increase in depreciation and amortization for all segments.
|
•
|
the 2015 recognition of $248.9 million of goodwill impairments for the Williston Basin and Piceance/DJ Basins segments.
|
•
|
the 2015 recognition of a $21.8 million environmental remediation accrual for assets contributed to Polar and Divide in connection with the 2016 Drop Down.
|
•
|
a
$14.2 million
increase in depreciation and amortization expense for all systems, except DFW Midstream.
|
•
|
the 2014 recognition of a
$54.2 million
goodwill impairment for the Williston Basin segment.
|
•
|
a
$41.0 million
decrease resulting from lower cost of natural gas and NGLs for the Bison Midstream and Grand River systems.
|
•
|
the 2014 recognition of a
$5.0 million
environmental remediation accrual for assets contributed to Polar and Divide in connection with the 2016 Drop Down.
|
|
Utica Shale
|
|||||||||||||
|
Year ended December 31,
|
|
Percentage Change
|
|||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 v. 2015
|
|
2015 v. 2014
|
|||||
Average daily throughput (MMcf/d) (1)
|
186
|
|
|
37
|
|
|
1
|
|
|
*
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Ohio Gathering average daily throughput (MMcf/d) (2)
|
865
|
|
|
645
|
|
|
270
|
|
|
34
|
%
|
|
139
|
%
|
|
Utica Shale
|
|||||||||||||||
|
Year ended December 31,
|
|
Percentage Change
|
|||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 v. 2015
|
|
2015 v. 2014
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|||||||
Gathering services and related fees
|
$
|
24,263
|
|
|
$
|
4,700
|
|
|
$
|
190
|
|
|
*
|
|
|
*
|
Total revenues
|
24,263
|
|
|
4,700
|
|
|
190
|
|
|
*
|
|
|
*
|
|||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|||||||
Operation and maintenance
|
2,280
|
|
|
1,017
|
|
|
—
|
|
|
124
|
%
|
|
*
|
|||
General and administrative
|
948
|
|
|
1,477
|
|
|
20
|
|
|
(36
|
)%
|
|
*
|
|||
Depreciation and amortization
|
4,331
|
|
|
1,417
|
|
|
—
|
|
|
*
|
|
|
*
|
|||
Loss (gain) on asset sales, net
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
*
|
|
|
*
|
|||
Total costs and expenses
|
7,555
|
|
|
3,911
|
|
|
20
|
|
|
93
|
%
|
|
*
|
|||
Add:
|
|
|
|
|
|
|
|
|
|
|||||||
Proportional adjusted EBITDA for equity method investees (1)
|
45,602
|
|
|
33,667
|
|
|
6,006
|
|
|
|
|
|
||||
Depreciation and amortization
|
4,331
|
|
|
1,417
|
|
|
—
|
|
|
|
|
|
||||
Loss (gain) on asset sales, net
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
||||
Segment adjusted EBITDA
|
$
|
66,637
|
|
|
$
|
35,873
|
|
|
$
|
6,176
|
|
|
86
|
%
|
|
*
|
•
|
the growth and development of the Summit Utica system.
|
•
|
an $11.9 million increase in our proportional share of Ohio Gathering's adjusted EBITDA primarily due to growth and development in the first half of 2016. Volume growth decelerated for both OGC and OCC beginning in the third quarter of 2016 thereby slowing the year-over-year overall increase.
|
•
|
a $27.7 million increase in our proportional share of Ohio Gathering's adjusted EBITDA due to ongoing growth and development.
|
•
|
a full year of operations in 2015 as well as the growth and development of the Summit Utica system.
|
|
Williston Basin
|
|||||||||||||
|
Year ended December 31,
|
|
Percentage Change
|
|||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 v. 2015
|
|
2015 v. 2014
|
|||||
Aggregate average daily throughput – liquids (Mbbl/d)
|
88.9
|
|
|
67.7
|
|
|
40.7
|
|
|
31
|
%
|
|
66
|
%
|
Aggregate average daily throughput – natural gas (MMcf/d)
|
22
|
|
|
23
|
|
|
18
|
|
|
(4
|
)%
|
|
28
|
%
|
|
Williston Basin
|
||||||||||||||||
|
Year ended December 31,
|
|
Percentage Change
|
||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 v. 2015
|
|
2015 v. 2014
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||
Gathering services and related fees
|
$
|
89,962
|
|
|
$
|
62,899
|
|
|
$
|
41,766
|
|
|
43
|
%
|
|
51
|
%
|
Natural gas, NGLs and condensate sales
|
20,158
|
|
|
23,525
|
|
|
56,040
|
|
|
(14
|
)%
|
|
(58
|
)%
|
|||
Other revenues
|
12,054
|
|
|
12,505
|
|
|
12,001
|
|
|
(4
|
)%
|
|
4
|
%
|
|||
Total revenues
|
122,174
|
|
|
98,929
|
|
|
109,807
|
|
|
23
|
%
|
|
(10
|
)%
|
|||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of natural gas and NGLs
|
20,384
|
|
|
23,090
|
|
|
54,481
|
|
|
(12
|
)%
|
|
(58
|
)%
|
|||
Operation and maintenance
|
28,430
|
|
|
26,586
|
|
|
22,926
|
|
|
7
|
%
|
|
16
|
%
|
|||
General and administrative
|
2,576
|
|
|
5,400
|
|
|
8,474
|
|
|
(52
|
)%
|
|
(36
|
)%
|
|||
Depreciation and amortization
|
33,676
|
|
|
31,376
|
|
|
24,027
|
|
|
7
|
%
|
|
31
|
%
|
|||
Environmental remediation
|
—
|
|
|
21,800
|
|
|
5,000
|
|
|
*
|
|
|
*
|
|
|||
Loss (gain) on asset sales, net
|
88
|
|
|
5
|
|
|
296
|
|
|
*
|
|
|
*
|
|
|||
Long-lived asset impairment
|
569
|
|
|
7,554
|
|
|
—
|
|
|
*
|
|
|
*
|
|
|||
Goodwill impairment
|
—
|
|
|
203,373
|
|
|
54,199
|
|
|
*
|
|
|
*
|
|
|||
Total costs and expenses
|
85,723
|
|
|
319,184
|
|
|
169,403
|
|
|
(73
|
)%
|
|
88
|
%
|
|||
Add:
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization
|
33,676
|
|
|
31,376
|
|
|
24,027
|
|
|
|
|
|
|||||
Adjustments related to MVC shortfall payments
|
8,691
|
|
|
11,870
|
|
|
10,743
|
|
|
|
|
|
|||||
Unit-based compensation
|
—
|
|
|
85
|
|
|
340
|
|
|
|
|
|
|||||
Loss (gain) on asset sales, net
|
88
|
|
|
5
|
|
|
296
|
|
|
|
|
|
|||||
Long-lived asset impairment
|
569
|
|
|
7,554
|
|
|
—
|
|
|
|
|
|
|||||
Goodwill impairment
|
—
|
|
|
203,373
|
|
|
54,199
|
|
|
|
|
|
|||||
Segment adjusted EBITDA
|
$
|
79,475
|
|
|
$
|
34,008
|
|
|
$
|
30,009
|
|
|
134
|
%
|
|
13
|
%
|
•
|
a $23.9 million increase, after taking into account the adjustments related to MVC shortfall payments, in gathering services and related fees primarily due to (i) the development of the Polar and Divide and Tioga Midstream systems, (ii) higher gathering rates associated with a rate redetermination, which was in effect in the first and second quarters of 2016 and (iii) the prior-year impact of an early-January 2015 shut in of certain produced water and crude oil gathering pipelines.
|
•
|
the 2015 recognition of an additional accrual of $21.8 million for environmental remediation costs associated with a produced water pipeline that became part of the Polar and Divide system in connection with the 2016 Drop Down.
|
•
|
a $2.8 million decrease in general and administrative expense largely as a result of a higher allocation of certain corporate general and administrative expenses in 2015 for both the Polar and Divide and Tioga Midstream systems (see the "Corporate and Other Overview of the Years Ended December 31, 2016, 2015 and 2014—General and Administrative" section herein).
|
•
|
Depreciation and amortization increased during 2016 largely as a result of assets placed into service.
|
•
|
In September 2015, we impaired certain property, plant and equipment balances associated with terminated projects. These impairments had no impact on segment adjusted EBITDA for the year ended December 31, 2015.
|
•
|
In the fourth quarter of 2015, we recognized a goodwill impairment for the Polar and Divide system. This impairment had no impact on segment adjusted EBITDA for the year ended December 31, 2015.
|
•
|
a $22.3 million increase, after taking into account the adjustments related to MVC shortfall payments, in gathering services and related fees primarily due to the impact of higher volume throughput and higher gathering rates associated with amendments to liquids contracts in 2014 generated by the Polar and Divide system.
|
•
|
a $3.1 million decline in general and administrative expenses primarily as a result of our decision to discontinue allocating certain corporate general and administrative expenses to our reportable segments beginning in the first quarter of 2015.
|
•
|
a $16.8 million increase in environmental remediation accruals associated with assets contributed to Polar and Divide in connection with the 2016 Drop Down.
|
•
|
a $3.7 million increase in operation and maintenance expense largely as a result of system buildout on the Polar and Divide and Tioga Midstream systems.
|
•
|
Depreciation and amortization increased during 2015 largely as a result of assets placed into service that were acquired in connection with the Polar and Divide Drop Down and the 2016 Drop Down.
|
•
|
In September 2015, we impaired certain property, plant and equipment balances associated with terminated projects. These impairments had no impact on segment adjusted EBITDA for the year ended December 31, 2015.
|
•
|
In the fourth quarter of 2015, we recognized a goodwill impairment for the Polar and Divide system. In the fourth quarter of 2014, we recognized a goodwill impairment for the Bison Midstream system. These impairments had no impact on segment adjusted EBITDA for the year ended December 31, 2015 or 2014.
|
|
Piceance/DJ Basins
|
|||||||||||||
|
Year ended December 31,
|
|
Percentage Change
|
|||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 v. 2015
|
|
2015 v. 2014
|
|||||
Aggregate average daily throughput (MMcf/d)
|
586
|
|
|
609
|
|
|
663
|
|
|
(4
|
)%
|
|
(8
|
)%
|
|
Piceance/DJ Basins
|
||||||||||||||||
|
Year ended December 31,
|
|
Percentage Change
|
||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 v. 2015
|
|
2015 v. 2014
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||
Gathering services and related fees
|
$
|
133,436
|
|
|
$
|
161,291
|
|
|
$
|
122,852
|
|
|
(17
|
)%
|
|
31
|
%
|
Natural gas, NGLs and condensate sales
|
9,808
|
|
|
11,854
|
|
|
27,606
|
|
|
(17
|
)%
|
|
(57
|
)%
|
|||
Other revenues
|
6,659
|
|
|
7,273
|
|
|
11,019
|
|
|
(8
|
)%
|
|
(34
|
)%
|
|||
Total revenues
|
149,903
|
|
|
180,418
|
|
|
161,477
|
|
|
(17
|
)%
|
|
12
|
%
|
|||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of natural gas and NGLs
|
7,082
|
|
|
8,308
|
|
|
17,934
|
|
|
(15
|
)%
|
|
(54
|
)%
|
|||
Operation and maintenance
|
33,524
|
|
|
36,674
|
|
|
37,945
|
|
|
(9
|
)%
|
|
(3
|
)%
|
|||
General and administrative
|
3,027
|
|
|
3,624
|
|
|
10,029
|
|
|
(16
|
)%
|
|
(64
|
)%
|
|||
Depreciation and amortization
|
49,140
|
|
|
47,433
|
|
|
42,959
|
|
|
4
|
%
|
|
10
|
%
|
|||
Loss (gain) on asset sales, net
|
9
|
|
|
(190
|
)
|
|
146
|
|
|
*
|
|
|
*
|
|
|||
Long-lived asset impairment
|
—
|
|
|
1,220
|
|
|
—
|
|
|
*
|
|
|
*
|
|
|||
Goodwill impairment
|
—
|
|
|
45,478
|
|
|
—
|
|
|
*
|
|
|
*
|
|
|||
Total costs and expenses
|
92,782
|
|
|
142,547
|
|
|
109,013
|
|
|
(35
|
)%
|
|
31
|
%
|
|||
Other income
|
—
|
|
|
—
|
|
|
1,185
|
|
|
*
|
|
|
*
|
|
|||
Add:
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization
|
49,140
|
|
|
47,433
|
|
|
42,959
|
|
|
|
|
|
|||||
Adjustments related to MVC shortfall payments
|
2,971
|
|
|
(21,590
|
)
|
|
15,194
|
|
|
|
|
|
|||||
Loss (gain) on asset sales, net
|
9
|
|
|
(190
|
)
|
|
146
|
|
|
|
|
|
|||||
Long-lived asset impairment
|
—
|
|
|
1,220
|
|
|
—
|
|
|
|
|
|
|||||
Goodwill impairment
|
—
|
|
|
45,478
|
|
|
—
|
|
|
|
|
|
|||||
Less:
|
|
|
|
|
|
|
|
|
|
||||||||
Impact of purchase price adjustment
|
—
|
|
|
—
|
|
|
1,185
|
|
|
|
|
|
|||||
Segment adjusted EBITDA
|
$
|
109,241
|
|
|
$
|
110,222
|
|
|
$
|
110,763
|
|
|
(1
|
)%
|
|
—
|
%
|
•
|
a $3.3 million decrease in gathering services and related fees, after taking into account the adjustments related to MVC shortfall payments, primarily as a result of declining volumes from one of Grand River's key customers. This impact was partially offset by higher average volume throughput and rates due to a shift in customer mix.
|
•
|
a $3.2 million decrease in operation and maintenance primarily due to lower general repairs and maintenance expenses.
|
•
|
Depreciation and amortization increased during 2016 largely as a result of an increase in contract amortization for one of Grand River's key customers.
|
•
|
A portion of the change in adjustments for MVC shortfall payments is associated with our September 2015 decision to no longer defer $34.4 million of MVC shortfall payments from a certain Grand River customer. As a result, the decrease in gathering services and related fees compared with 2015 was offset by the change in adjustments related to MVC shortfall payments, with no impact on segment adjusted EBITDA (see Note 8 to the consolidated financial statements).
|
•
|
a $6.1 million decrease in margin primarily due to the impact on price and throughput of declining commodity prices which negatively impacted the margins that we earn from our percent-of-proceeds contracts.
|
•
|
a $2.0 million increase in operation and maintenance, net of the decrease in pass-through expenses which are also included in other revenues, primarily as a result of compression-related expenses and higher property tax expense.
|
•
|
a $6.4 million decrease in general and administrative primarily as a result of the previously mentioned decision to discontinue allocating certain corporate general and administrative expenses to our reportable segments.
|
•
|
a $1.7 million increase in gathering services and related fees, after taking into account the adjustments related to MVC shortfall payments, primarily as a result of the contribution from Niobrara G&P, partially offset by declining volumes from one of Grand River's key customers.
|
•
|
The decrease in other revenues was primarily a result of a decline in certain electricity expense reimbursements, which due to their pass-through nature, had no impact on segment adjusted EBITDA
|
•
|
Depreciation and amortization increased during 2015 largely as a result of an increase in contract amortization for Grand River's key customer, the March 2014 commissioning of a cryogenic processing plant and the development of Niobrara G&P.
|
•
|
A portion of the change in adjustments for MVC shortfall payments is associated with our September 2015 decision to no longer defer MVC shortfall payments from a certain Grand River customer. As a result, the increase in gathering services and related fees compared with 2014 was offset by the change in adjustments related to MVC shortfall payments, with no impact on segment adjusted EBITDA (see Note 8 to the consolidated financial statements).
|
•
|
During 2015, we identified certain events, facts and circumstances which indicated that certain of our property, plant and equipment was impaired. As such, we recognized a long-lived asset impairment. This impairment had no impact on segment adjusted EBITDA for the year ended December 31, 2015.
|
•
|
The goodwill impairment recognized in 2015 relates to our determination that all of the goodwill associated with the Grand River reporting unit had been impaired. This impairment had no impact on segment adjusted EBITDA for the year ended December 31, 2015.
|
|
Barnett Shale
|
|||||||||||||
|
Year ended December 31,
|
|
Percentage Change
|
|||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 v. 2015
|
|
2015 v. 2014
|
|||||
Average daily throughput (MMcf/d)
|
319
|
|
|
352
|
|
|
358
|
|
|
(9
|
)%
|
|
(2
|
)%
|
|
Barnett Shale
|
||||||||||||||||
|
Year ended December 31,
|
|
Percentage Change
|
||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 v. 2015
|
|
2015 v. 2014
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||
Gathering services and related fees
|
$
|
72,234
|
|
|
$
|
80,461
|
|
|
$
|
79,976
|
|
|
(10
|
)%
|
|
1
|
%
|
Natural gas, NGLs and condensate sales
|
5,867
|
|
|
6,700
|
|
|
13,448
|
|
|
(12
|
)%
|
|
(50
|
)%
|
|||
Other revenues
|
1,855
|
|
|
881
|
|
|
(423
|
)
|
|
111
|
%
|
|
*
|
|
|||
Total revenues
|
79,956
|
|
|
88,042
|
|
|
93,001
|
|
|
(9
|
)%
|
|
(5
|
)%
|
|||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
||||||||
Operation and maintenance
|
24,594
|
|
|
25,823
|
|
|
29,438
|
|
|
(5
|
)%
|
|
(12
|
)%
|
|||
General and administrative
|
1,088
|
|
|
1,297
|
|
|
4,607
|
|
|
(16
|
)%
|
|
(72
|
)%
|
|||
Depreciation and amortization
|
15,671
|
|
|
15,606
|
|
|
15,657
|
|
|
—
|
%
|
|
—
|
%
|
|||
Loss (gain) on asset sales, net
|
—
|
|
|
13
|
|
|
—
|
|
|
*
|
|
|
*
|
|
|||
Long-lived asset impairment
|
1,195
|
|
|
531
|
|
|
5,505
|
|
|
*
|
|
|
*
|
|
|||
Total costs and expenses
|
42,548
|
|
|
43,270
|
|
|
55,207
|
|
|
(2
|
)%
|
|
(22
|
)%
|
|||
Add:
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization
|
16,093
|
|
|
16,392
|
|
|
16,601
|
|
|
|
|
|
|||||
Adjustments related to MVC shortfall payments
|
(62
|
)
|
|
(2,182
|
)
|
|
628
|
|
|
|
|
|
|||||
Loss (gain) on asset sales, net
|
—
|
|
|
13
|
|
|
—
|
|
|
|
|
|
|||||
Long-lived asset impairment
|
1,195
|
|
|
531
|
|
|
5,505
|
|
|
|
|
|
|||||
Segment adjusted EBITDA
|
$
|
54,634
|
|
|
$
|
59,526
|
|
|
$
|
60,528
|
|
|
(8
|
)%
|
|
(2
|
)%
|
•
|
a $6.1 million decrease, after taking into account the adjustments related to MVC shortfall payments, in gathering services and related fees largely as a result of reduced volume throughput.
|
•
|
a $1.2 million decrease in operation and maintenance expense largely as a result of lower electricity expense. The decline in electricity expense was largely the result of (i) lower volumes not requiring as much compression as the prior-year period and (ii) the impact of lower natural gas prices on our cost of electricity.
|
•
|
Other revenues also reflect the effect of a
$0.8 million
increase in electricity expense reimbursements that we began passing through to certain customers beginning in the fourth quarter of 2016. Previously we had retained a portion of the gathered natural gas which was then sold to offset the electricity expense necessary to operate our electric-drive compression assets. Due to their pass-through nature, these revenues had no impact on segment adjusted EBITDA.
|
•
|
The long-lived asset impairments in 2016 and 2015 reflect our decisions to impair certain property, plant and equipment balances associated with the decommissioning of certain assets. These impairments had no impact on segment adjusted EBITDA for the years ended December 31, 2016 or 2015.
|
•
|
a $6.7 million decrease in natural gas, NGLs and condensate sales primarily due to the impact of declining natural gas prices on the fuel retainage fee that is paid in-kind by certain of our customers to offset the costs we incur to operate DFW Midstream's electric-drive compression assets.
|
•
|
a $3.6 million decrease in operation and maintenance primarily due to lower electricity expense. The decline in electricity expense was largely the result of the impact of lower natural gas prices on our cost of electricity. This decline was partially offset by an increase in compression expense.
|
•
|
a $3.3 million decline in general and administrative expenses primarily as a result of our decision to discontinue allocating certain corporate general and administrative expenses to our reportable segments beginning in the first quarter of 2015.
|
|
Marcellus Shale
|
|||||||||||||
|
Year ended December 31,
|
|
Percentage Change
|
|||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 v. 2015
|
|
2015 v. 2014
|
|||||
Average daily throughput (MMcf/d)
|
415
|
|
|
478
|
|
|
382
|
|
|
(13
|
)%
|
|
25
|
%
|
|
Marcellus Shale
|
||||||||||||||||
|
Year ended December 31,
|
|
Percentage Change
|
||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 v. 2015
|
|
2015 v. 2014
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||
Gathering services and related fees
|
$
|
26,111
|
|
|
$
|
28,468
|
|
|
$
|
22,694
|
|
|
(8
|
)%
|
|
25
|
%
|
Total revenues
|
26,111
|
|
|
28,468
|
|
|
22,694
|
|
|
(8
|
)%
|
|
25
|
%
|
|||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
||||||||
Operation and maintenance
|
6,506
|
|
|
4,886
|
|
|
4,560
|
|
|
33
|
%
|
|
7
|
%
|
|||
General and administrative
|
402
|
|
|
368
|
|
|
2,194
|
|
|
9
|
%
|
|
(83
|
)%
|
|||
Depreciation and amortization
|
8,841
|
|
|
8,682
|
|
|
7,648
|
|
|
2
|
%
|
|
14
|
%
|
|||
Total costs and expenses
|
15,749
|
|
|
13,936
|
|
|
14,402
|
|
|
13
|
%
|
|
(3
|
)%
|
|||
Add:
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization
|
8,841
|
|
|
8,682
|
|
|
7,648
|
|
|
|
|
|
|||||
Segment adjusted EBITDA
|
$
|
19,203
|
|
|
$
|
23,214
|
|
|
$
|
15,940
|
|
|
(17
|
)%
|
|
46
|
%
|
•
|
a $2.4 million decrease in gathering services and related fees primarily as a result of lower volume throughput and lower compression revenues due to a shift in volume mix. These declines were partially offset by an increase in minimum revenue commitment payments.
|
•
|
a $1.6 million increase in operation and maintenance primarily as a result of expenses associated with repairs to rights-of-way.
|
•
|
a $5.8 million increase in gathering services and related fees primarily as a result of an increase in volume throughput and minimum revenue commitment payments related to the Zinnia Loop project, beginning in the first quarter of 2015.
|
•
|
a $1.8 million decrease in general and administrative primarily as a result of the previously mentioned decision to discontinue allocating certain corporate general and administrative expenses to our reportable segments.
|
|
Corporate and Other
|
||||||||||||||||
|
Year ended December 31,
|
|
Percentage Change
|
||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2016 v. 2015
|
|
2015 v. 2014
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
||||||||
General and administrative
|
$
|
44,369
|
|
|
$
|
32,942
|
|
|
$
|
17,957
|
|
|
35
|
%
|
|
83
|
%
|
Transaction costs
|
1,321
|
|
|
1,342
|
|
|
2,985
|
|
|
(2
|
)%
|
|
(55
|
)%
|
|||
Interest expense (1)
|
63,810
|
|
|
59,092
|
|
|
48,586
|
|
|
8
|
%
|
|
22
|
%
|
|||
Deferred Purchase Price Obligation expense
|
55,854
|
|
|
—
|
|
|
—
|
|
|
*
|
|
|
*
|
|
•
|
In January 2017, we completed a secondary public offering of 4,000,000 SMLP common units held by a subsidiary of Summit Investments in accordance with our obligations under several registration rights agreements. We did not receive any proceeds from this secondary offering.
|
•
|
In March 2014, we completed an underwritten public offering of 10,350,000 common units at a price of $38.75 per unit, of which 5,300,000 common units were offered by the Partnership and 5,050,000 common units were offered by a subsidiary of Summit Investments. Concurrent with the offering, our General
|
•
|
In September 2014, we completed a secondary public offering of 4,347,826 SMLP common units held by a subsidiary of Summit Investments in accordance with our obligations under several registration rights agreements. We did not receive any proceeds from this secondary offering.
|
•
|
On May 13, 2015, we completed an underwritten public offering of 6,500,000 common units at a price of $30.75 per unit. On May 22, 2015, the underwriters exercised in full their option to purchase an additional 975,000 common units from us at a price of $30.75 per unit. Concurrent with both transactions, our General Partner made a capital contribution to us to maintain its approximate 2% general partner interest. We used the proceeds from the May 13, 2015 offering to partially fund the Polar and Divide Drop Down. We used $25.0 million of the $29.0 million of proceeds from the exercise of the underwriters' option to pay down our Revolving Credit Facility.
|
•
|
In June 2015, we executed an equity distribution agreement and filed a prospectus and a prospectus supplement with the SEC for the issuance and sale from time to time of SMLP common units having an aggregate offering price of up to $150.0 million (the "2015 ATM Program"). These sales will be made (i) pursuant to the terms of the equity distribution agreement between us and the sales agents named therein and (ii) by means of ordinary brokers' transactions at market prices, in block transactions or as otherwise agreed between us and the sales agents. Sales of our common units may be made in negotiated transactions or transactions that are deemed to be at-the-market offerings as defined by SEC Rules. There were no transactions under the 2015 ATM Program.
|
•
|
In September 2016, we completed an underwritten public offering of 5,500,000 common units at a price of $23.20 per unit. Following the offering, our General Partner made a capital contribution to us to maintain its approximate 2% general partner interest. We used the net proceeds therefrom to pay down our Revolving Credit Facility.
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Net cash provided by operating activities
|
$
|
230,495
|
|
|
$
|
191,375
|
|
|
$
|
152,953
|
|
Net cash used in investing activities
|
(534,126
|
)
|
|
(646,720
|
)
|
|
(1,384,803
|
)
|
|||
Net cash provided by financing activities
|
289,266
|
|
|
449,327
|
|
|
1,233,877
|
|
|||
Net change in cash and cash equivalents
|
$
|
(14,365
|
)
|
|
$
|
(6,018
|
)
|
|
$
|
2,027
|
|
•
|
a
$10.4 million
increase in distributions from Ohio Gathering;
|
•
|
the prior-year impact of net cash paid for environmental remediation expenses; and
|
•
|
cash received as a result of MVCs.
|
•
|
a
$31.6 million
increase in distributions from Ohio Gathering and
|
•
|
cash received as a result of MVCs.
|
•
|
$359.4 million
for our acquisition of the assets acquired in the 2016 Drop Down;
|
•
|
$142.7 million
of capital expenditures primarily attributable to the ongoing expansion of the 2016 Drop Down Assets and the Polar and Divide system; and
|
•
|
$31.6 million
of capital contributions to Ohio Gathering.
|
•
|
$288.6 million
for our acquisition of the Polar and Divide system;
|
•
|
$272.2 million
of capital expenditures primarily attributable to the buildout of the gathering systems acquired in the 2016 Drop Down and the ongoing expansion of the Polar and Divide and Bison Midstream systems; and
|
•
|
$86.2 million
of capital contributions to Ohio Gathering.
|
•
|
$580.7 million
of total cash flows for the acquisition of our initial investment in Ohio Gathering and the subsequent option exercise which increased our ownership interest to 40%;
|
•
|
$343.4 million
of capital expenditures primarily attributable to the build out of the Summit Utica, Tioga Midstream, Niobrara G&P and Polar and Divide systems as well as expenditures to expand existing systems;
|
•
|
$305.0 million
for our acquisition of Red Rock Gathering; and
|
•
|
$145.1 million
of capital contributions to Ohio Gathering.
|
•
|
$316.0 million
of net borrowings under our Revolving Credit Facility, which included $360.0 million of borrowings to fund the 2016 Drop Down and reflected a repayment in September 2016 with funds from the issuance of common units noted below;
|
•
|
$167.5 million
of distributions paid in 2016; and
|
•
|
$125.2 million of net proceeds from the issuance of common units in September 2016.
|
•
|
$320.5 million
of cash advances from Summit Investments to fund the development of the 2016 Drop Down Assets;
|
•
|
$222.0 million of net proceeds from the issuance of common units in May 2015, of which $193.4 million was used to partially fund the Polar and Divide Drop Down;
|
•
|
$216.0 million
of net borrowings under our Revolving Credit Facility, of which $92.0 million was used to partially fund the Polar and Divide Drop Down;
|
•
|
a $182.5 million repayment under Summit Investments' term loan; and
|
•
|
$152.1 million
of distributions paid in 2015.
|
•
|
$674.4 million
of cash advances to fund the acquisition of Ohio Gathering, to support the buildout of the systems acquired in the 2016 Drop Down and to support the buildout of the Polar and Divide system;
|
•
|
$300.0 million
of proceeds from the 5.5% Senior Notes issuance, the net of which was used to pay down our Revolving Credit Facility. We incurred loan costs of $5.1 million in connection with their issuance which are being amortized over the life of the notes;
|
•
|
$197.8 million
of net proceeds from an offering of common units in March 2014, which were used to partially fund the Red Rock Drop Down;
|
•
|
$164.0 million
of net borrowings under our Revolving Credit Facility and Summit Investments revolving credit facility to partially fund the Red Rock Drop Down and the buildout of the systems acquired in the 2016 Drop Down; and
|
•
|
$122.2 million
of distributions paid in 2014.
|
|
Total
|
|
Less than 1 year
|
|
1-3
years
|
|
3-5
years
|
|
More than 5 years
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Long-term debt and interest payments (1)
|
$
|
1,505,883
|
|
|
$
|
63,200
|
|
|
$
|
748,183
|
|
|
$
|
378,000
|
|
|
$
|
316,500
|
|
Deferred Purchase Price Obligation (2)
|
830,345
|
|
|
—
|
|
|
—
|
|
|
830,345
|
|
|
—
|
|
|||||
Purchase obligations (3)
|
6,278
|
|
|
6,278
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Operating leases (4)
|
9,686
|
|
|
3,512
|
|
|
5,698
|
|
|
476
|
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
2,352,192
|
|
|
$
|
72,990
|
|
|
$
|
753,881
|
|
|
$
|
1,208,821
|
|
|
$
|
316,500
|
|
•
|
maintenance capital expenditures, which are cash expenditures (including expenditures for the addition or improvement to, or the replacement of, our capital assets or for the acquisition of existing, or the construction or development of new, capital assets) made to maintain our long-term operating income or operating capacity; or
|
•
|
expansion capital expenditures, which are cash expenditures incurred for acquisitions or capital improvements that we expect will increase our operating income or operating capacity over the long term.
|
•
|
actual capital expenditures and Business Adjusted EBITDA for the period from March 3, 2016 through the respective balance sheet date and
|
•
|
estimates of (i) capital expenditures made between the respective balance sheet date and December 31, 2019 and (ii) Business Adjusted EBITDA, an income-based measure, during the period from the respective balance sheet date to December 31, 2019. The calculation of the prospective component of Remaining Consideration represents management's best estimate of these two financial measures.
|
|
Year ended December 31, 2016
|
|||||||||||
|
MVC billings
|
|
|
Gathering revenue
|
|
Adjustments
to MVC shortfall payments
|
||||||
|
(In thousands)
|
|||||||||||
Net change in deferred revenue:
|
|
|
|
|
|
|
||||||
Williston Basin
|
$
|
8,691
|
|
|
|
$
|
—
|
|
|
$
|
8,691
|
|
Piceance/DJ Basins
|
15,926
|
|
|
|
12,638
|
|
|
3,288
|
|
|||
Barnett Shale
|
—
|
|
|
|
677
|
|
|
(677
|
)
|
|||
Marcellus Shale
|
—
|
|
|
|
—
|
|
|
—
|
|
|||
Total change in deferred revenue
|
$
|
24,617
|
|
|
|
$
|
13,315
|
|
|
$
|
11,302
|
|
|
|
|
|
|
|
|
||||||
MVC shortfall payment adjustments:
|
|
|
|
|
|
|
||||||
Williston Basin
|
$
|
7,536
|
|
|
|
$
|
7,536
|
|
|
$
|
—
|
|
Piceance/DJ Basins
|
27,183
|
|
|
|
27,183
|
|
|
(317
|
)
|
|||
Barnett Shale
|
1,373
|
|
|
|
1,373
|
|
|
615
|
|
|||
Marcellus Shale
|
3,895
|
|
|
|
3,895
|
|
|
—
|
|
|||
Total MVC shortfall payment adjustments
|
$
|
39,987
|
|
|
|
$
|
39,987
|
|
|
$
|
298
|
|
|
|
|
|
|
|
|
||||||
Total
|
$
|
64,604
|
|
|
|
$
|
53,302
|
|
|
$
|
11,600
|
|
•
|
the net increases or decreases in deferred revenue for MVC shortfall payments and
|
•
|
our inclusion of expected annual MVC shortfall payments. We include a proportional amount of these historical or expected MVC shortfall payments in our calculation of segment adjusted EBITDA each quarter until we actually recognize the shortfall payment. These adjustments have not been billed to our customers and are not recognized in our consolidated financial statements.
|
•
|
fluctuations in natural gas, NGLs and crude oil prices;
|
•
|
the extent and success of our customers' drilling efforts, as well as the quantity of natural gas and crude oil volumes produced within proximity of our assets;
|
•
|
failure or delays by our customers in achieving expected production in their natural gas, crude oil and produced water projects;
|
•
|
competitive conditions in our industry and their impact on our ability to connect hydrocarbon supplies to our gathering and processing assets or systems;
|
•
|
actions or inactions taken or nonperformance by third parties, including suppliers, contractors, operators, processors, transporters and customers, including the inability or failure of our shipper customers to meet their financial obligations under our gathering agreements and our ability to enforce the terms and conditions of certain of our gathering agreements in the event of a bankruptcy of one or more of our customers;
|
•
|
our ability to acquire assets owned by third parties, which is subject to a number of factors, including prevailing conditions and outlook in the natural gas, NGL and crude oil industries and markets and our ability to obtain financing on acceptable terms;
|
•
|
our ability to consummate acquisitions, successfully integrate the acquired businesses, realize any cost savings and other synergies from any acquisition;
|
•
|
the ability to attract and retain key management personnel;
|
•
|
commercial bank and capital market conditions and the potential impact of changes or disruptions in the credit and/or capital markets;
|
•
|
changes in the availability and cost of capital and the results of our financing efforts, including availability of funds in the credit and/or capital markets;
|
•
|
restrictions placed on us by the agreements governing our debt instruments;
|
•
|
the availability, terms and cost of downstream transportation and processing services;
|
•
|
natural disasters, accidents, weather-related delays, casualty losses and other matters beyond our control;
|
•
|
operational risks and hazards inherent in the gathering, treating and/or processing of natural gas, crude oil and produced water;
|
•
|
weather conditions and terrain in certain areas in which we operate;
|
•
|
any other issues that can result in deficiencies in the design, installation or operation of our gathering, treating and processing facilities;
|
•
|
timely receipt of necessary government approvals and permits, our ability to control the costs of construction, including costs of materials, labor and rights-of-way and other factors that may impact our ability to complete projects within budget and on schedule;
|
•
|
the effects of existing and future laws and governmental regulations, including environmental, safety and climate change requirements;
|
•
|
the effects of litigation;
|
•
|
changes in general economic conditions; and
|
•
|
certain factors discussed elsewhere in this report.
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(In thousands)
|
||||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
7,428
|
|
|
$
|
21,793
|
|
Accounts receivable
|
97,364
|
|
|
89,581
|
|
||
Other current assets
|
4,309
|
|
|
3,573
|
|
||
Total current assets
|
109,101
|
|
|
114,947
|
|
||
Property, plant and equipment, net
|
1,853,671
|
|
|
1,812,783
|
|
||
Intangible assets, net
|
421,452
|
|
|
461,310
|
|
||
Goodwill
|
16,211
|
|
|
16,211
|
|
||
Investment in equity method investees
|
707,415
|
|
|
751,168
|
|
||
Other noncurrent assets
|
7,329
|
|
|
8,253
|
|
||
Total assets
|
$
|
3,115,179
|
|
|
$
|
3,164,672
|
|
|
|
|
|
||||
Liabilities and Partners' Capital
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Trade accounts payable
|
$
|
16,251
|
|
|
$
|
40,808
|
|
Accrued expenses
|
11,389
|
|
|
6,776
|
|
||
Due to affiliate
|
258
|
|
|
1,149
|
|
||
Deferred revenue
|
—
|
|
|
677
|
|
||
Ad valorem taxes payable
|
10,588
|
|
|
10,271
|
|
||
Accrued interest
|
17,483
|
|
|
17,483
|
|
||
Accrued environmental remediation
|
4,301
|
|
|
7,900
|
|
||
Other current liabilities
|
11,471
|
|
|
6,521
|
|
||
Total current liabilities
|
71,741
|
|
|
91,585
|
|
||
Long-term debt
|
1,240,301
|
|
|
1,267,270
|
|
||
Deferred Purchase Price Obligation
|
563,281
|
|
|
—
|
|
||
Deferred revenue
|
57,465
|
|
|
45,486
|
|
||
Noncurrent accrued environmental remediation
|
5,152
|
|
|
5,764
|
|
||
Other noncurrent liabilities
|
7,566
|
|
|
7,268
|
|
||
Total liabilities
|
1,945,506
|
|
|
1,417,373
|
|
||
Commitments and contingencies (Note 15)
|
|
|
|
||||
|
|
|
|
||||
Common limited partner capital (72,111 units issued and outstanding at December 31, 2016 and 42,063 units issued and outstanding at December 31, 2015)
|
1,129,132
|
|
|
744,977
|
|
||
Subordinated limited partner capital (0 units issued and outstanding at December 31, 2016 and 24,410 units issued and outstanding at December 31, 2015)
|
—
|
|
|
213,631
|
|
||
General partner interests (1,471 units issued and outstanding at December 31, 2016 and 1,355 units issued and outstanding at December 31, 2015)
|
29,294
|
|
|
25,634
|
|
||
Noncontrolling interest
|
11,247
|
|
|
—
|
|
||
Summit Investments' equity in contributed subsidiaries
|
—
|
|
|
763,057
|
|
||
Total partners' capital
|
1,169,673
|
|
|
1,747,299
|
|
||
Total liabilities and partners' capital
|
$
|
3,115,179
|
|
|
$
|
3,164,672
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands, except per-unit amounts)
|
||||||||||
Revenues:
|
|
|
|
|
|
||||||
Gathering services and related fees
|
$
|
345,961
|
|
|
$
|
337,819
|
|
|
$
|
267,478
|
|
Natural gas, NGLs and condensate sales
|
35,833
|
|
|
42,079
|
|
|
97,094
|
|
|||
Other revenues
|
20,568
|
|
|
20,659
|
|
|
22,597
|
|
|||
Total revenues
|
402,362
|
|
|
400,557
|
|
|
387,169
|
|
|||
Costs and expenses:
|
|
|
|
|
|
||||||
Cost of natural gas and NGLs
|
27,421
|
|
|
31,398
|
|
|
72,415
|
|
|||
Operation and maintenance
|
95,334
|
|
|
94,986
|
|
|
94,869
|
|
|||
General and administrative
|
52,410
|
|
|
45,108
|
|
|
43,281
|
|
|||
Depreciation and amortization
|
112,239
|
|
|
105,117
|
|
|
90,878
|
|
|||
Transaction costs
|
1,321
|
|
|
1,342
|
|
|
2,985
|
|
|||
Environmental remediation
|
—
|
|
|
21,800
|
|
|
5,000
|
|
|||
Loss (gain) on asset sales, net
|
93
|
|
|
(172
|
)
|
|
442
|
|
|||
Long-lived asset impairment
|
1,764
|
|
|
9,305
|
|
|
5,505
|
|
|||
Goodwill impairment
|
—
|
|
|
248,851
|
|
|
54,199
|
|
|||
Total costs and expenses
|
290,582
|
|
|
557,735
|
|
|
369,574
|
|
|||
Other income
|
116
|
|
|
2
|
|
|
1,189
|
|
|||
Interest expense
|
(63,810
|
)
|
|
(59,092
|
)
|
|
(48,586
|
)
|
|||
Deferred Purchase Price Obligation expense
|
(55,854
|
)
|
|
—
|
|
|
—
|
|
|||
Loss before income taxes and loss from equity method investees
|
(7,768
|
)
|
|
(216,268
|
)
|
|
(29,802
|
)
|
|||
Income tax (expense) benefit
|
(75
|
)
|
|
603
|
|
|
(854
|
)
|
|||
Loss from equity method investees
|
(30,344
|
)
|
|
(6,563
|
)
|
|
(16,712
|
)
|
|||
Net loss
|
$
|
(38,187
|
)
|
|
$
|
(222,228
|
)
|
|
$
|
(47,368
|
)
|
Less:
|
|
|
|
|
|
||||||
Net income (loss) attributable to Summit Investments
|
2,745
|
|
|
(30,016
|
)
|
|
(23,376
|
)
|
|||
Net loss attributable to noncontrolling interest
|
(14
|
)
|
|
—
|
|
|
—
|
|
|||
Net loss attributable to SMLP
|
(40,918
|
)
|
|
(192,212
|
)
|
|
(23,992
|
)
|
|||
Less net loss and IDRs attributable to General Partner
|
7,261
|
|
|
3,398
|
|
|
3,125
|
|
|||
Net loss attributable to limited partners
|
$
|
(48,179
|
)
|
|
$
|
(195,610
|
)
|
|
$
|
(27,117
|
)
|
|
|
|
|
|
|
||||||
Loss per limited partner unit:
|
|
|
|
|
|
||||||
Common unit – basic
|
$
|
(0.71
|
)
|
|
$
|
(3.20
|
)
|
|
$
|
(0.49
|
)
|
Common unit – diluted
|
$
|
(0.71
|
)
|
|
$
|
(3.20
|
)
|
|
$
|
(0.49
|
)
|
Subordinated unit – basic and diluted
|
|
|
$
|
(2.88
|
)
|
|
$
|
(0.44
|
)
|
||
|
|
|
|
|
|
||||||
Weighted-average limited partner units outstanding:
|
|
|
|
|
|
||||||
Common units – basic
|
68,264
|
|
|
39,217
|
|
|
33,311
|
|
|||
Common units – diluted
|
68,264
|
|
|
39,217
|
|
|
33,311
|
|
|||
Subordinated units – basic and diluted
|
|
|
24,410
|
|
|
24,410
|
|
|
Partners' capital
|
|
Summit Investments' equity in contributed subsidiaries
|
|
|
||||||||||||||
|
Limited partners
|
|
General Partner
|
|
|
|
|||||||||||||
|
Common
|
|
Subordinated
|
|
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||
Partners' capital, January 1, 2014
|
$
|
566,532
|
|
|
$
|
379,287
|
|
|
$
|
23,324
|
|
|
$
|
426,663
|
|
|
$
|
1,395,806
|
|
Net (loss) income
|
(15,948
|
)
|
|
(11,169
|
)
|
|
3,125
|
|
|
(23,376
|
)
|
|
(47,368
|
)
|
|||||
Distributions to unitholders
|
(67,658
|
)
|
|
(49,796
|
)
|
|
(4,770
|
)
|
|
—
|
|
|
(122,224
|
)
|
|||||
Unit-based compensation
|
4,696
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,696
|
|
|||||
Tax withholdings on vested SMLP LTIP awards
|
(656
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(656
|
)
|
|||||
Issuance of common units, net of offering costs
|
197,806
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
197,806
|
|
|||||
Contribution from General Partner
|
—
|
|
|
—
|
|
|
4,235
|
|
|
—
|
|
|
4,235
|
|
|||||
Purchase of Red Rock Gathering
|
—
|
|
|
—
|
|
|
—
|
|
|
(307,941
|
)
|
|
(307,941
|
)
|
|||||
Excess of purchase price over acquired carrying value of Red Rock Gathering
|
(37,910
|
)
|
|
(26,891
|
)
|
|
(1,323
|
)
|
|
66,124
|
|
|
—
|
|
|||||
Assets contributed to Red Rock Gathering from Summit Investments
|
2,426
|
|
|
1,722
|
|
|
85
|
|
|
—
|
|
|
4,233
|
|
|||||
Cash advance from Summit Investments to contributed subsidiaries, net
|
—
|
|
|
—
|
|
|
—
|
|
|
674,383
|
|
|
674,383
|
|
|||||
Expenses paid by Summit Investments on behalf of contributed subsidiaries
|
—
|
|
|
—
|
|
|
—
|
|
|
24,884
|
|
|
24,884
|
|
|||||
Capitalized interest allocated to contributed subsidiaries from Summit Investments
|
—
|
|
|
—
|
|
|
—
|
|
|
1,310
|
|
|
1,310
|
|
|||||
Capital expenditures paid by Summit Investments on behalf of contributed subsidiaries
|
—
|
|
|
—
|
|
|
—
|
|
|
597
|
|
|
597
|
|
|||||
Class B membership interest noncash compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
1,145
|
|
|
1,145
|
|
|||||
Repurchase of SMLP LTIP units
|
(228
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(228
|
)
|
|||||
Partners' capital, December 31, 2014
|
$
|
649,060
|
|
|
$
|
293,153
|
|
|
$
|
24,676
|
|
|
$
|
863,789
|
|
|
$
|
1,830,678
|
|
|
Partners' capital
|
|
Summit Investments' equity in contributed subsidiaries
|
|
|
||||||||||||||
|
Limited partners
|
|
General Partner
|
|
|
|
|||||||||||||
|
Common
|
|
Subordinated
|
|
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||
Partners' capital, December 31, 2014
|
$
|
649,060
|
|
|
$
|
293,153
|
|
|
$
|
24,676
|
|
|
$
|
863,789
|
|
|
$
|
1,830,678
|
|
Net (loss) income
|
(123,817
|
)
|
|
(71,793
|
)
|
|
3,398
|
|
|
(30,016
|
)
|
|
(222,228
|
)
|
|||||
Distributions to unitholders
|
(86,880
|
)
|
|
(55,410
|
)
|
|
(9,784
|
)
|
|
—
|
|
|
(152,074
|
)
|
|||||
Unit-based compensation
|
6,174
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,174
|
|
|||||
Tax withholdings on vested SMLP LTIP awards
|
(1,616
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,616
|
)
|
|||||
Issuance of common units, net of offering costs
|
221,977
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
221,977
|
|
|||||
Contribution from General Partner
|
—
|
|
|
—
|
|
|
4,737
|
|
|
—
|
|
|
4,737
|
|
|||||
Purchase of Polar and Divide
|
—
|
|
|
—
|
|
|
—
|
|
|
(285,677
|
)
|
|
(285,677
|
)
|
|||||
Excess of acquired carrying value over consideration paid for Polar and Divide
|
80,079
|
|
|
47,681
|
|
|
2,607
|
|
|
(130,367
|
)
|
|
—
|
|
|||||
Cash advance from Summit Investments to contributed subsidiaries, net
|
—
|
|
|
—
|
|
|
—
|
|
|
320,527
|
|
|
320,527
|
|
|||||
Expenses paid by Summit Investments on behalf of contributed subsidiaries
|
—
|
|
|
—
|
|
|
—
|
|
|
22,879
|
|
|
22,879
|
|
|||||
Capitalized interest allocated to contributed subsidiaries from Summit Investments
|
—
|
|
|
—
|
|
|
—
|
|
|
1,079
|
|
|
1,079
|
|
|||||
Class B membership interest noncash compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
843
|
|
|
843
|
|
|||||
Partners' capital, December 31, 2015
|
$
|
744,977
|
|
|
$
|
213,631
|
|
|
$
|
25,634
|
|
|
$
|
763,057
|
|
|
$
|
1,747,299
|
|
|
Partners' capital
|
|
Noncontrolling interest
|
|
Summit Investments' equity in contributed subsidiaries
|
|
|
||||||||||||||||
|
Limited partners
|
|
General Partner
|
|
|
|
|
||||||||||||||||
|
Common
|
|
Subordinated
|
|
|
|
|
Total
|
|||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Partners' capital, December 31, 2015
|
$
|
744,977
|
|
|
$
|
213,631
|
|
|
$
|
25,634
|
|
|
$
|
—
|
|
|
$
|
763,057
|
|
|
$
|
1,747,299
|
|
Net (loss) income
|
(49,219
|
)
|
|
1,040
|
|
|
7,261
|
|
|
(14
|
)
|
|
2,745
|
|
|
(38,187
|
)
|
||||||
Distributions to unitholders
|
(142,214
|
)
|
|
(14,034
|
)
|
|
(11,256
|
)
|
|
—
|
|
|
—
|
|
|
(167,504
|
)
|
||||||
Unit-based compensation
|
7,550
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,550
|
|
||||||
Tax withholdings on vested SMLP LTIP awards
|
(1,181
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,181
|
)
|
||||||
Issuance of common units, net of offering costs
|
125,233
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
125,233
|
|
||||||
Contribution from General Partner
|
—
|
|
|
—
|
|
|
2,702
|
|
|
—
|
|
|
—
|
|
|
2,702
|
|
||||||
Subordinated units conversion
|
200,637
|
|
|
(200,637
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Purchase of 2016 Drop Down Assets
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(866,858
|
)
|
|
(866,858
|
)
|
||||||
Establishment of noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
11,261
|
|
|
(11,261
|
)
|
|
—
|
|
||||||
Distribution of debt related to Carve-Out Financial Statements of Summit Investments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
342,926
|
|
|
342,926
|
|
||||||
Excess of acquired carrying value over consideration paid for 2016 Drop Down Assets
|
243,044
|
|
|
—
|
|
|
4,953
|
|
|
—
|
|
|
(247,997
|
)
|
|
—
|
|
||||||
Cash advance from Summit Investments to contributed subsidiaries, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,214
|
|
|
12,214
|
|
||||||
Expenses paid by Summit Investments on behalf of contributed subsidiaries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,821
|
|
|
4,821
|
|
||||||
Capitalized interest allocated to contributed subsidiaries from Summit Investments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
223
|
|
|
223
|
|
||||||
Class B membership interest noncash compensation
|
305
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
130
|
|
|
435
|
|
||||||
Partners' capital, December 31, 2016
|
$
|
1,129,132
|
|
|
$
|
—
|
|
|
$
|
29,294
|
|
|
$
|
11,247
|
|
|
$
|
—
|
|
|
$
|
1,169,673
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net loss
|
$
|
(38,187
|
)
|
|
$
|
(222,228
|
)
|
|
$
|
(47,368
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
112,661
|
|
|
105,903
|
|
|
91,822
|
|
|||
Amortization of debt issuance costs
|
3,976
|
|
|
4,309
|
|
|
3,836
|
|
|||
Deferred Purchase Price Obligation expense
|
55,854
|
|
|
—
|
|
|
—
|
|
|||
Unit-based and noncash compensation
|
7,985
|
|
|
7,017
|
|
|
5,841
|
|
|||
Loss from equity method investees
|
30,344
|
|
|
6,563
|
|
|
16,712
|
|
|||
Distributions from equity method investees
|
44,991
|
|
|
34,641
|
|
|
2,992
|
|
|||
Loss (gain) on asset sales, net
|
93
|
|
|
(172
|
)
|
|
442
|
|
|||
Long-lived asset impairment
|
1,764
|
|
|
9,305
|
|
|
5,505
|
|
|||
Goodwill impairment
|
—
|
|
|
248,851
|
|
|
54,199
|
|
|||
Write-off of debt issuance costs
|
—
|
|
|
727
|
|
|
1,554
|
|
|||
Purchase accounting adjustment
|
—
|
|
|
—
|
|
|
(1,185
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable
|
(7,783
|
)
|
|
3,328
|
|
|
(21,503
|
)
|
|||
Insurance receivable
|
—
|
|
|
25,000
|
|
|
(25,000
|
)
|
|||
Trade accounts payable
|
2,001
|
|
|
(1,450
|
)
|
|
(420
|
)
|
|||
Accrued expenses
|
4,613
|
|
|
(1,967
|
)
|
|
509
|
|
|||
Due to affiliate
|
(891
|
)
|
|
1,377
|
|
|
(883
|
)
|
|||
Change in deferred revenue
|
11,302
|
|
|
(11,453
|
)
|
|
26,378
|
|
|||
Ad valorem taxes payable
|
317
|
|
|
1,092
|
|
|
804
|
|
|||
Accrued interest
|
—
|
|
|
(1,375
|
)
|
|
6,714
|
|
|||
Accrued environmental remediation, net
|
(4,211
|
)
|
|
(16,336
|
)
|
|
30,000
|
|
|||
Other, net
|
5,666
|
|
|
(1,757
|
)
|
|
2,004
|
|
|||
Net cash provided by operating activities
|
230,495
|
|
|
191,375
|
|
|
152,953
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Capital expenditures
|
(142,719
|
)
|
|
(272,225
|
)
|
|
(343,380
|
)
|
|||
Initial contribution to Ohio Gathering
|
—
|
|
|
—
|
|
|
(8,360
|
)
|
|||
Acquisition of Ohio Gathering Option
|
—
|
|
|
—
|
|
|
(190,000
|
)
|
|||
Option Exercise
|
—
|
|
|
—
|
|
|
(382,385
|
)
|
|||
Contributions to equity method investees
|
(31,582
|
)
|
|
(86,200
|
)
|
|
(145,131
|
)
|
|||
Acquisition of gathering systems
|
—
|
|
|
—
|
|
|
(10,872
|
)
|
|||
Acquisitions of gathering systems from affiliate, net of acquired cash
|
(359,431
|
)
|
|
(288,618
|
)
|
|
(305,000
|
)
|
|||
Other, net
|
(394
|
)
|
|
323
|
|
|
325
|
|
|||
Net cash used in investing activities
|
(534,126
|
)
|
|
(646,720
|
)
|
|
(1,384,803
|
)
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Distributions to unitholders
|
(167,504
|
)
|
|
(152,074
|
)
|
|
(122,224
|
)
|
|||
Borrowings under Revolving Credit Facility
|
520,300
|
|
|
367,000
|
|
|
294,295
|
|
|||
Repayments under Revolving Credit Facility
|
(204,300
|
)
|
|
(151,000
|
)
|
|
(430,295
|
)
|
|||
Borrowings under term loan
|
—
|
|
|
—
|
|
|
400,000
|
|
|||
Repayments under term loan
|
—
|
|
|
(182,500
|
)
|
|
(100,000
|
)
|
|||
Debt issuance costs
|
(3,032
|
)
|
|
(412
|
)
|
|
(8,323
|
)
|
|||
Proceeds from issuance of common units, net
|
125,233
|
|
|
221,977
|
|
|
197,806
|
|
|||
Contribution from General Partner
|
2,702
|
|
|
4,737
|
|
|
4,235
|
|
|||
Cash advance from Summit Investments to contributed subsidiaries, net
|
12,214
|
|
|
320,527
|
|
|
674,383
|
|
|||
Expenses paid by Summit Investments on behalf of contributed subsidiaries
|
4,821
|
|
|
22,879
|
|
|
24,884
|
|
|||
Issuance of senior notes
|
—
|
|
|
—
|
|
|
300,000
|
|
|||
Repurchase of equity-based compensation awards
|
—
|
|
|
—
|
|
|
(228
|
)
|
|||
Other, net
|
(1,168
|
)
|
|
(1,807
|
)
|
|
(656
|
)
|
|||
Net cash provided by financing activities
|
289,266
|
|
|
449,327
|
|
|
1,233,877
|
|
|||
Net change in cash and cash equivalents
|
(14,365
|
)
|
|
(6,018
|
)
|
|
2,027
|
|
|||
Cash and cash equivalents, beginning of period
|
21,793
|
|
|
27,811
|
|
|
25,784
|
|
|||
Cash and cash equivalents, end of period
|
$
|
7,428
|
|
|
$
|
21,793
|
|
|
$
|
27,811
|
|
|
|
|
|
|
|
||||||
Supplemental cash flow disclosures:
|
|
|
|
|
|
||||||
Cash interest paid
|
$
|
63,000
|
|
|
$
|
59,302
|
|
|
$
|
38,453
|
|
Less capitalized interest
|
3,709
|
|
|
3,372
|
|
|
4,646
|
|
|||
Interest paid (net of capitalized interest)
|
$
|
59,291
|
|
|
$
|
55,930
|
|
|
$
|
33,807
|
|
|
|
|
|
|
|
||||||
Cash paid for taxes
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Noncash investing and financing activities:
|
|
|
|
|
|
||||||
Capital expenditures in trade accounts payable (period-end accruals)
|
$
|
8,422
|
|
|
$
|
34,977
|
|
|
$
|
31,110
|
|
Issuance of Deferred Purchase Price Obligation to affiliate to partially fund the 2016 Drop Down
|
507,427
|
|
|
—
|
|
|
—
|
|
|||
Excess of acquired carrying value over consideration paid and recognized for 2016 Drop Down Assets
|
247,997
|
|
|
—
|
|
|
—
|
|
|||
Distribution of debt related to Carve-Out Financial Statements of Summit Investments
|
342,926
|
|
|
—
|
|
|
—
|
|
|||
Excess of acquired carrying value over consideration paid for Polar and Divide
|
—
|
|
|
130,367
|
|
|
—
|
|
|||
Capitalized interest allocated to contributed subsidiaries from Summit Investments
|
223
|
|
|
1,079
|
|
|
1,310
|
|
|||
Capital expenditures paid by Summit Investments on behalf of contributed subsidiaries
|
—
|
|
|
—
|
|
|
597
|
|
|||
Excess of consideration paid over acquired carrying value of Red Rock Gathering
|
—
|
|
|
—
|
|
|
(66,124
|
)
|
|||
Assets contributed to Red Rock Gathering from Summit Investments
|
—
|
|
|
—
|
|
|
4,233
|
|
•
|
Ohio Gathering, a natural gas gathering system and a condensate stabilization facility operating in the Appalachian Basin, which includes the Utica and Point Pleasant shale formations in southeastern Ohio;
|
•
|
Summit Utica, a natural gas gathering system operating in the Appalachian Basin, which includes the Utica and Point Pleasant shale formations in southeastern Ohio;
|
•
|
Bison Midstream, an associated natural gas gathering system operating in the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota;
|
•
|
Polar and Divide, crude oil and produced water gathering systems and transmission pipelines located in the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota;
|
•
|
Tioga Midstream, crude oil, produced water and associated natural gas gathering systems, operating in the Williston Basin, which includes the Bakken and Three Forks shale formations in northwestern North Dakota;
|
•
|
Grand River, a natural gas gathering and processing system located in the Piceance Basin, which includes the Mesaverde formation and the Mancos and Niobrara shale formations in western Colorado and eastern Utah;
|
•
|
Niobrara G&P, an associated natural gas gathering and processing system operating in the DJ Basin, which includes the Niobrara and Codell shale formations in northeastern Colorado;
|
•
|
DFW Midstream, a natural gas gathering system operating in the Fort Worth Basin, which includes the Barnett Shale formation in north-central Texas; and
|
•
|
Mountaineer Midstream, a natural gas gathering system operating in the Appalachian Basin, which includes the Marcellus Shale formation in northern West Virginia.
|
|
Useful lives
(In years)
|
Gathering and processing systems and related equipment
|
30
|
Other
|
4-15
|
•
|
Level 1. Inputs represent quoted prices in active markets for identical assets or liabilities;
|
•
|
Level 2. Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (for example, quoted market prices for similar assets or liabilities in active markets or quoted market prices for identical assets or liabilities in markets not considered to be active, inputs other than quoted prices that are observable for the asset or liability, or market-corroborated inputs); and
|
•
|
Level 3. Inputs that are not observable from objective sources, such as management’s internally developed assumptions used in pricing an asset or liability (for example, an internally developed present value of future cash flows model that underlies management's fair value measurement).
|
•
|
Fee-based arrangements.
Under fee-based arrangements, we receive a fee or fees for one or more of the following services (i) natural gas gathering, treating and/or processing and (ii) crude oil and/or produced water gathering.
|
•
|
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 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.
|
•
|
ASU No. 2015-03 Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"). Under ASU 2015-03, entities that have historically presented debt issuance costs as an asset, related to a recognized debt liability, will be required to present those costs as a direct deduction from the carrying amount of that debt liability. In August 2015, the FASB amended ASU 2015-03 to address the presentation and subsequent measurement of debt issuance costs related to line of credit (“LOC”) arrangements. The amendment permits an entity to defer and present debt issuance costs as an asset and subsequently amortize debt issuance costs ratably over the term of a LOC arrangement, regardless of whether there are outstanding borrowings under that LOC arrangement. This new standard became effective for fiscal years and interim periods within those years, beginning after December 15, 2015. The January 2016 adoption of this update resulted in a reclassification from other noncurrent assets to long-term debt of the debt issuance costs associated with our Senior Notes (see Note 9). Debt issuance costs associated with the Revolving Credit Facility will remain in other noncurrent assets. This standard had no impact on interest expense, net income or loss, EPU or partners' capital.
|
•
|
ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) ("ASU 2016-15"). ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statements of cash flows. The applicable provisions relate to distributions received from equity method investees. ASU 2016-15 prescribes a method for differentiating between returns of investment (which should be classified as inflows from investing activities) and returns on investment (which should be classified as inflows from operating activities). With respect to distributions from equity method investees, entities make this determination by applying a cumulative-earnings approach or a nature of the distribution approach. The ASU formalizes each of these methods and allows an entity to choose either one as an accounting policy election. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017. Early adoption is permitted. The amendments in ASU 2016-15 are to be applied using a retrospective transition method to each period presented. We have adopted the provisions of ASU 2016-15 as of December 31, 2016 and have elected the nature of the distribution approach. The adoption of this standard had no impact on our financial statements.
|
•
|
ASU No. 2014-09 Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). Under ASU 2014-09, revenue will be recognized under a five-step model: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to performance obligations; and (v) recognize revenue when (or as) the performance obligation is satisfied. ASU 2014-09 is effective for fiscal years and interim periods within those years, beginning after December 15, 2017 and allows for early adoption. We expect to adopt the provisions of ASU 2014-09 effective January 1, 2018 using the modified retrospective method.
|
•
|
ASU No. 2016-02 Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 requires that lessees recognize all leases on the balance sheet, with the exception of short-term leases. A lease liability will be recorded for
|
•
|
ASU No. 2016-08 Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) ("ASU 2016-08"). ASU 2016-08 does not change the core principle of Topic 606, rather it clarifies the implementation guidance on principal versus agent considerations. We expect to adopt the provisions of ASU 2016-08 effective January 1, 2018. Our position regarding the impact of and transition method for this update is the same as for ASU 2014-09.
|
•
|
ASU No. 2016-09 Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects for share-based payment award transactions, including income tax consequences, the liability or equity classification of awards and classification on the statements of cash flows. ASU 2016-09 is effective for public companies for fiscal years beginning after December 15, 2016. It does not specify a single transition approach, rather it specifies retrospective, modified retrospective and/or prospective transition approaches based on the aspect being applied. As a partnership that is generally not subject to taxes, the primary impact of adopting ASU 2016-09 will be to change our classification of certain share-based payment awards activity in the statements of cash flows.
|
•
|
ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing ("ASU 2016-10"). ASU 2016-10 clarifies the following two aspects of Topic 606 (i) identifying performance obligations and (ii) the licensing implementation guidance, while retaining the related principles for those areas. We expect to adopt the provisions of ASU 2016-10 effective January 1, 2018. Our position regarding the impact of and transition method for this update is the same as for ASU 2014-09.
|
•
|
ASU No. 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients ("ASU 2016-12"). ASU 2016-12 does not change the core principle of the guidance in Topic 606. Rather, the amendments therein affect only the narrow aspects of Topic 606 including assessing the collectability criterion and issues related to contract modification at transition and completed contracts at transition. We expect to adopt the provisions of ASU 2016-12 effective January 1, 2018. Our position regarding the impact of and transition method for this update is the same as for ASU 2014-09.
|
•
|
|
•
|
the Utica Shale, which includes our ownership interest in Ohio Gathering and is served by Summit Utica;
|
•
|
the Williston Basin, which is served by Bison Midstream, Polar and Divide and Tioga Midstream;
|
•
|
the Piceance/DJ Basins, which is served by Grand River and Niobrara G&P;
|
•
|
the Barnett Shale, which is served by DFW Midstream; and
|
•
|
the Marcellus Shale, which is served by Mountaineer Midstream.
|
|
December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Assets:
|
|
|
|
|
|
||||||
Utica Shale (1)
|
$
|
906,807
|
|
|
$
|
886,224
|
|
|
$
|
735,587
|
|
Williston Basin
|
724,084
|
|
|
740,361
|
|
|
861,461
|
|
|||
Piceance/DJ Basins
|
843,440
|
|
|
866,095
|
|
|
941,382
|
|
|||
Barnett Shale
|
404,314
|
|
|
416,586
|
|
|
428,935
|
|
|||
Marcellus Shale
|
224,709
|
|
|
233,116
|
|
|
243,884
|
|
|||
Total reportable segment assets
|
3,103,354
|
|
|
3,142,382
|
|
|
3,211,249
|
|
|||
Corporate and other
|
12,294
|
|
|
22,290
|
|
|
31,213
|
|
|||
Eliminations
|
(469
|
)
|
|
—
|
|
|
—
|
|
|||
Total assets
|
$
|
3,115,179
|
|
|
$
|
3,164,672
|
|
|
$
|
3,242,462
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Revenues:
|
|
|
|
|
|
||||||
Utica Shale (1)
|
$
|
24,263
|
|
|
$
|
4,700
|
|
|
$
|
190
|
|
Williston Basin
|
122,174
|
|
|
98,929
|
|
|
109,807
|
|
|||
Piceance/DJ Basins
|
149,903
|
|
|
180,418
|
|
|
161,477
|
|
|||
Barnett Shale
|
79,956
|
|
|
88,042
|
|
|
93,001
|
|
|||
Marcellus Shale
|
26,111
|
|
|
28,468
|
|
|
22,694
|
|
|||
Total reportable segments revenue
|
402,407
|
|
|
400,557
|
|
|
387,169
|
|
|||
Corporate and other
|
412
|
|
|
—
|
|
|
—
|
|
|||
Eliminations
|
(457
|
)
|
|
—
|
|
|
—
|
|
|||
Total revenues
|
$
|
402,362
|
|
|
$
|
400,557
|
|
|
$
|
387,169
|
|
|
Year ended December 31,
|
|||||||
|
2016
|
|
2015
|
|
2014
|
|||
Percentage of total revenues (1):
|
|
|
|
|
|
|||
Counterparty A - Piceance/DJ Basins
|
14
|
%
|
|
16
|
%
|
|
18
|
%
|
Counterparty B - Piceance/DJ Basins
|
*
|
|
|
14
|
%
|
|
*
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Depreciation and amortization:
|
|
|
|
|
|
||||||
Utica Shale (1)
|
$
|
4,331
|
|
|
$
|
1,417
|
|
|
$
|
—
|
|
Williston Basin
|
33,676
|
|
|
31,376
|
|
|
24,027
|
|
|||
Piceance/DJ Basins
|
49,140
|
|
|
47,433
|
|
|
42,959
|
|
|||
Barnett Shale (2)
|
16,093
|
|
|
16,392
|
|
|
16,601
|
|
|||
Marcellus Shale
|
8,841
|
|
|
8,682
|
|
|
7,648
|
|
|||
Total reportable segment depreciation and amortization
|
112,081
|
|
|
105,300
|
|
|
91,235
|
|
|||
Corporate and other
|
580
|
|
|
603
|
|
|
587
|
|
|||
Total depreciation and amortization
|
$
|
112,661
|
|
|
$
|
105,903
|
|
|
$
|
91,822
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Cash paid for capital expenditures:
|
|
|
|
|
|
||||||
Utica Shale (1)
|
$
|
78,708
|
|
|
$
|
94,994
|
|
|
$
|
24,787
|
|
Williston Basin
|
31,541
|
|
|
147,477
|
|
|
227,283
|
|
|||
Piceance/DJ Basins
|
25,719
|
|
|
21,144
|
|
|
42,417
|
|
|||
Barnett Shale
|
3,910
|
|
|
6,875
|
|
|
14,567
|
|
|||
Marcellus Shale
|
1,173
|
|
|
1,306
|
|
|
33,866
|
|
|||
Total reportable segment capital expenditures
|
141,051
|
|
|
271,796
|
|
|
342,920
|
|
|||
Corporate and other
|
1,668
|
|
|
429
|
|
|
460
|
|
|||
Total cash paid for capital expenditures
|
$
|
142,719
|
|
|
$
|
272,225
|
|
|
$
|
343,380
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Reportable segment adjusted EBITDA:
|
|
|
|
|
|
||||||
Utica Shale (1)
|
$
|
66,637
|
|
|
$
|
35,873
|
|
|
$
|
6,176
|
|
Williston Basin
|
79,475
|
|
|
34,008
|
|
|
30,009
|
|
|||
Piceance/DJ Basins
|
109,241
|
|
|
110,222
|
|
|
110,763
|
|
|||
Barnett Shale
|
54,634
|
|
|
59,526
|
|
|
60,528
|
|
|||
Marcellus Shale
|
19,203
|
|
|
23,214
|
|
|
15,940
|
|
|||
Total of reportable segments’ measures of profit or loss
|
$
|
329,190
|
|
|
$
|
262,843
|
|
|
$
|
223,416
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Reconciliation of loss before income taxes and loss from equity method investees to total of reportable segments' measures of profit or loss:
|
|
|
|
|
|
||||||
Loss before income taxes and loss from equity method investees
|
$
|
(7,768
|
)
|
|
$
|
(216,268
|
)
|
|
$
|
(29,802
|
)
|
Add:
|
|
|
|
|
|
||||||
Corporate and other
|
37,589
|
|
|
27,352
|
|
|
15,441
|
|
|||
Interest expense
|
63,810
|
|
|
59,092
|
|
|
48,586
|
|
|||
Deferred Purchase Price Obligation expense
|
55,854
|
|
|
—
|
|
|
—
|
|
|||
Depreciation and amortization
|
112,661
|
|
|
105,903
|
|
|
91,822
|
|
|||
Proportional adjusted EBITDA for equity method investees
|
45,602
|
|
|
33,667
|
|
|
6,006
|
|
|||
Adjustments related to MVC shortfall payments
|
11,600
|
|
|
(11,902
|
)
|
|
26,565
|
|
|||
Unit-based and noncash compensation
|
7,985
|
|
|
7,017
|
|
|
5,841
|
|
|||
Loss (gain) on asset sales, net
|
93
|
|
|
(172
|
)
|
|
442
|
|
|||
Long-lived asset impairment
|
1,764
|
|
|
9,305
|
|
|
5,505
|
|
|||
Goodwill impairment
|
—
|
|
|
248,851
|
|
|
54,199
|
|
|||
Less:
|
|
|
|
|
|
||||||
Interest income
|
—
|
|
|
2
|
|
|
4
|
|
|||
Impact of purchase price adjustment
|
—
|
|
|
—
|
|
|
1,185
|
|
|||
Total of reportable segments' measures of profit or loss
|
$
|
329,190
|
|
|
$
|
262,843
|
|
|
$
|
223,416
|
|
|
Year ended December 31, 2016
|
||||||||||||||
|
Williston Basin
|
|
Piceance/DJ
Basins
|
|
Barnett
Shale
|
|
Total
|
||||||||
|
(In thousands)
|
||||||||||||||
Adjustments related to MVC shortfall payments:
|
|
|
|
|
|
|
|
||||||||
Net change in deferred revenue for MVC shortfall payments
|
$
|
8,691
|
|
|
$
|
3,288
|
|
|
$
|
(677
|
)
|
|
$
|
11,302
|
|
Expected MVC shortfall payments
|
—
|
|
|
(317
|
)
|
|
615
|
|
|
298
|
|
||||
Total adjustments related to MVC shortfall payments
|
$
|
8,691
|
|
|
$
|
2,971
|
|
|
$
|
(62
|
)
|
|
$
|
11,600
|
|
|
Year ended December 31, 2015
|
||||||||||||||
|
Williston Basin
|
|
Piceance/DJ
Basins
|
|
Barnett
Shale
|
|
Total
|
||||||||
|
(In thousands)
|
||||||||||||||
Adjustments related to MVC shortfall payments:
|
|
|
|
|
|
|
|
||||||||
Net change in deferred revenue for MVC shortfall payments
|
$
|
11,870
|
|
|
$
|
(21,623
|
)
|
|
$
|
(1,700
|
)
|
|
$
|
(11,453
|
)
|
Expected MVC shortfall payments
|
—
|
|
|
33
|
|
|
(482
|
)
|
|
(449
|
)
|
||||
Total adjustments related to MVC shortfall payments
|
$
|
11,870
|
|
|
$
|
(21,590
|
)
|
|
$
|
(2,182
|
)
|
|
$
|
(11,902
|
)
|
|
Year ended December 31, 2014
|
||||||||||||||
|
Williston Basin
|
|
Piceance/DJ
Basins
|
|
Barnett
Shale
|
|
Total
|
||||||||
|
(In thousands)
|
||||||||||||||
Adjustments related to MVC shortfall payments:
|
|
|
|
|
|
|
|
||||||||
Net change in deferred revenue for MVC shortfall payments
|
$
|
10,743
|
|
|
$
|
14,813
|
|
|
$
|
821
|
|
|
$
|
26,377
|
|
Expected MVC shortfall payments
|
—
|
|
|
381
|
|
|
(193
|
)
|
|
188
|
|
||||
Total adjustments related to MVC shortfall payments
|
$
|
10,743
|
|
|
$
|
15,194
|
|
|
$
|
628
|
|
|
$
|
26,565
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(In thousands)
|
||||||
Gathering and processing systems and related equipment
|
$
|
2,026,363
|
|
|
$
|
1,883,139
|
|
Construction in progress
|
39,954
|
|
|
75,132
|
|
||
Land and line fill
|
11,442
|
|
|
11,055
|
|
||
Other
|
35,227
|
|
|
32,427
|
|
||
Total
|
2,112,986
|
|
|
2,001,753
|
|
||
Less accumulated depreciation
|
259,315
|
|
|
188,970
|
|
||
Property, plant and equipment, net
|
$
|
1,853,671
|
|
|
$
|
1,812,783
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Long-lived asset impairment:
|
|
|
|
|
|
||||||
Williston Basin
|
$
|
569
|
|
|
$
|
7,554
|
|
|
$
|
—
|
|
Piceance/DJ Basins
|
—
|
|
|
1,220
|
|
|
—
|
|
|||
Barnett Shale
|
1,195
|
|
|
531
|
|
|
5,505
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Depreciation expense
|
$
|
70,770
|
|
|
$
|
63,915
|
|
|
$
|
53,064
|
|
Capitalized interest
|
3,709
|
|
|
3,372
|
|
|
4,646
|
|
|
December 31, 2016
|
||||||||||||
|
Useful lives
(In years)
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net
|
||||||
|
|
|
(Dollars in thousands)
|
||||||||||
Favorable gas gathering contracts
|
18.7
|
|
$
|
24,195
|
|
|
$
|
(10,795
|
)
|
|
$
|
13,400
|
|
Contract intangibles
|
12.5
|
|
426,464
|
|
|
(146,468
|
)
|
|
279,996
|
|
|||
Rights-of-way
|
26.1
|
|
153,015
|
|
|
(24,959
|
)
|
|
128,056
|
|
|||
Total intangible assets
|
|
|
$
|
603,674
|
|
|
$
|
(182,222
|
)
|
|
$
|
421,452
|
|
|
|
|
|
|
|
|
|
||||||
Unfavorable gas gathering contract
|
10.0
|
|
$
|
10,962
|
|
|
$
|
(6,916
|
)
|
|
$
|
4,046
|
|
|
December 31, 2015
|
||||||||||||
|
Useful lives
(In years)
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net
|
||||||
|
|
|
(Dollars in thousands)
|
||||||||||
Favorable gas gathering contracts
|
18.7
|
|
$
|
24,195
|
|
|
$
|
(9,534
|
)
|
|
$
|
14,661
|
|
Contract intangibles
|
12.5
|
|
426,464
|
|
|
(111,052
|
)
|
|
315,412
|
|
|||
Rights-of-way
|
26.3
|
|
150,143
|
|
|
(18,906
|
)
|
|
131,237
|
|
|||
Total intangible assets
|
|
|
$
|
600,802
|
|
|
$
|
(139,492
|
)
|
|
$
|
461,310
|
|
|
|
|
|
|
|
|
|
||||||
Unfavorable gas gathering contract
|
10.0
|
|
$
|
10,962
|
|
|
$
|
(6,077
|
)
|
|
$
|
4,885
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Amortization expense – favorable gas gathering contracts
|
$
|
(1,261
|
)
|
|
$
|
(1,478
|
)
|
|
$
|
(1,741
|
)
|
Amortization expense – unfavorable gas gathering contract
|
839
|
|
|
692
|
|
|
797
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Amortization expense – contract intangibles
|
$
|
35,416
|
|
|
$
|
35,339
|
|
|
$
|
32,554
|
|
Amortization expense – rights-of-way
|
6,053
|
|
|
5,863
|
|
|
5,260
|
|
|
Intangible assets
|
|
Unfavorable gas gathering contract
|
||||
|
(In thousands)
|
||||||
2017
|
$
|
41,854
|
|
|
$
|
2,158
|
|
2018
|
41,323
|
|
|
1,888
|
|
||
2019
|
41,154
|
|
|
—
|
|
||
2020
|
43,403
|
|
|
—
|
|
||
2021
|
41,630
|
|
|
—
|
|
|
Piceance/DJ Basins
|
|
Williston Basin
|
|
Marcellus Shale
|
|
Total
|
||||||||
|
(In thousands)
|
||||||||||||||
Goodwill, January 1, 2015
|
$
|
45,478
|
|
|
$
|
203,373
|
|
|
$
|
16,211
|
|
|
$
|
265,062
|
|
Goodwill impairment
|
(45,478
|
)
|
|
(203,373
|
)
|
|
—
|
|
|
(248,851
|
)
|
||||
Goodwill, December 31, 2015
|
—
|
|
|
—
|
|
|
16,211
|
|
|
16,211
|
|
||||
Goodwill impairment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Goodwill, December 31, 2016
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,211
|
|
|
$
|
16,211
|
|
|
December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Accumulated goodwill impairment:
|
|
|
|
|
|
||||||
Piceance/DJ Basins
|
$
|
45,478
|
|
|
$
|
45,478
|
|
|
$
|
—
|
|
Williston Basin
|
257,572
|
|
|
257,572
|
|
|
54,199
|
|
|||
Total accumulated goodwill impairment
|
$
|
303,050
|
|
|
$
|
303,050
|
|
|
$
|
54,199
|
|
|
2016
|
|
2015
|
||||
|
(In thousands)
|
||||||
Investment in equity method investees, December 31
|
$
|
707,415
|
|
|
$
|
751,168
|
|
December cash distributions
|
3,172
|
|
|
3,472
|
|
||
December cash contributions
|
(5,318
|
)
|
|
—
|
|
||
Basis difference
|
(143,536
|
)
|
|
(156,888
|
)
|
||
Investment in equity method investees, net of basis difference, November 30
|
$
|
561,733
|
|
|
$
|
597,752
|
|
|
November 30, 2016
|
|
November 30, 2015
|
||||||||||||
|
OGC
|
|
OCC
|
|
OGC
|
|
OCC
|
||||||||
|
(In thousands)
|
||||||||||||||
Current assets
|
$
|
43,797
|
|
|
$
|
2,546
|
|
|
$
|
42,053
|
|
|
$
|
6,633
|
|
Noncurrent assets
|
1,330,199
|
|
|
31,195
|
|
|
1,333,726
|
|
|
127,663
|
|
||||
Total assets
|
$
|
1,373,996
|
|
|
$
|
33,741
|
|
|
$
|
1,375,779
|
|
|
$
|
134,296
|
|
|
|
|
|
|
|
|
|
||||||||
Current liabilities
|
$
|
22,067
|
|
|
$
|
3,448
|
|
|
$
|
34,996
|
|
|
$
|
6,234
|
|
Noncurrent liabilities
|
8,396
|
|
|
13,111
|
|
|
5,538
|
|
|
12,545
|
|
||||
Total liabilities
|
$
|
30,463
|
|
|
$
|
16,559
|
|
|
$
|
40,534
|
|
|
$
|
18,779
|
|
|
Twelve months ended
November 30, 2016
|
|
Twelve months ended
November 30, 2015
|
|
Ten months ended
November 30, 2014
|
||||||||||||||||||
|
OGC
|
|
OCC
|
|
OGC
|
|
OCC
|
|
OGC
|
|
OCC
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Total revenues
|
$
|
148,662
|
|
|
$
|
15,791
|
|
|
$
|
120,623
|
|
|
$
|
9,467
|
|
|
$
|
45,313
|
|
|
$
|
—
|
|
Total operating expenses
|
96,647
|
|
|
111,528
|
|
|
96,948
|
|
|
15,633
|
|
|
64,166
|
|
|
2,208
|
|
||||||
Net income (loss)
|
52,009
|
|
|
(94,230
|
)
|
|
23,655
|
|
|
(6,852
|
)
|
|
(18,853
|
)
|
|
(2,208
|
)
|
•
|
To the extent that a customer's throughput volumes are less than its MVC for the applicable period and the customer makes a shortfall payment, it may be entitled to an offset in one or more subsequent periods to the extent that its throughput volumes in subsequent periods exceed its MVC for those periods. In such a situation, we would not receive gathering fees on throughput in excess of that customer's MVC (depending on the terms of the specific gas gathering agreement) to the extent that the customer had made a shortfall payment with respect to one or more preceding measurement periods (as applicable).
|
•
|
To the extent that a customer's throughput volumes exceed its MVC in the applicable contracted measurement period, it may be entitled to apply the excess throughput against its aggregate MVC, thereby reducing the period for which its annual MVC applies. As a result of this mechanism, the weighted-average remaining period for which our MVCs apply will be less than the weighted-average of the original stated contract terms of our MVCs.
|
•
|
To the extent that certain of our customers' throughput volumes exceed its MVC for the applicable period, there is a crediting mechanism that allows the customer to build a bank of credits that it can utilize in the future to reduce shortfall payments owed in subsequent periods, subject to expiration if there is no shortfall in subsequent periods. The period over which this credit bank can be applied to future shortfall payments varies, depending on the particular gas gathering agreement.
|
|
Williston Basin
|
|
Piceance/DJ
Basins
|
|
Barnett
Shale
|
|
Total
current
|
||||||||
|
(In thousands)
|
||||||||||||||
Current deferred revenue, December 31, 2014
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,377
|
|
|
$
|
2,377
|
|
Additions
|
—
|
|
|
2,743
|
|
|
677
|
|
|
3,420
|
|
||||
Less revenue recognized
|
—
|
|
|
2,743
|
|
|
2,377
|
|
|
5,120
|
|
||||
Current deferred revenue, December 31, 2015
|
—
|
|
|
—
|
|
|
677
|
|
|
677
|
|
||||
Additions
|
—
|
|
|
11,672
|
|
|
—
|
|
|
11,672
|
|
||||
Less revenue recognized
|
—
|
|
|
11,672
|
|
|
677
|
|
|
12,349
|
|
||||
Current deferred revenue, December 31, 2016
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Williston Basin
|
|
Piceance/DJ
Basins
|
|
Barnett
Shale
|
|
Total noncurrent
|
||||||||
|
(In thousands)
|
||||||||||||||
Noncurrent deferred revenue, December 31, 2014
|
$
|
17,132
|
|
|
$
|
38,107
|
|
|
$
|
—
|
|
|
$
|
55,239
|
|
Additions
|
11,897
|
|
|
12,765
|
|
|
—
|
|
|
24,662
|
|
||||
Less revenue recognized
|
27
|
|
|
34,388
|
|
|
—
|
|
|
34,415
|
|
||||
Noncurrent deferred revenue, December 31, 2015
|
29,002
|
|
|
16,484
|
|
|
—
|
|
|
45,486
|
|
||||
Additions
|
8,691
|
|
|
3,700
|
|
|
—
|
|
|
12,391
|
|
||||
Less revenue recognized
|
—
|
|
|
412
|
|
|
—
|
|
|
412
|
|
||||
Noncurrent deferred revenue, December 31, 2016
|
$
|
37,693
|
|
|
$
|
19,772
|
|
|
$
|
—
|
|
|
$
|
57,465
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(In thousands)
|
||||||
Summit Holdings variable rate senior secured Revolving Credit Facility (3.27% at December 31, 2016 and 2.93% at December 31, 2015) due November 2018
|
$
|
648,000
|
|
|
$
|
344,000
|
|
Summit Holdings 5.5% senior unsecured notes due August 2022
|
300,000
|
|
|
300,000
|
|
||
Less unamortized debt issuance costs (1)
|
(3,516
|
)
|
|
(4,139
|
)
|
||
Summit Holdings 7.5% senior unsecured notes due July 2021
|
300,000
|
|
|
300,000
|
|
||
Less unamortized debt issuance costs (1)
|
(4,183
|
)
|
|
(5,091
|
)
|
||
SMP Holdings variable rate senior secured revolving credit facility (2.43% at December 31, 2015) (2)
|
—
|
|
|
115,000
|
|
||
SMP Holdings variable rate senior secured term loan (2.43% at December 31, 2015) (2)
|
—
|
|
|
217,500
|
|
||
Total long-term debt
|
$
|
1,240,301
|
|
|
$
|
1,267,270
|
|
2017
|
$
|
—
|
|
2018
|
648,000
|
|
|
2019
|
—
|
|
|
2020
|
—
|
|
|
2021
|
300,000
|
|
|
Thereafter
|
300,000
|
|
|
Total long-term debt
|
$
|
1,248,000
|
|
|
Year ended December 31, 2016
|
||
|
(In thousands)
|
||
Level 3 liability, beginning of period
|
$
|
—
|
|
Addition
|
507,427
|
|
|
Change in fair value
|
55,854
|
|
|
Level 3 liability, end of period
|
$
|
563,281
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||
|
Carrying
value
|
|
Estimated
fair value
(Level 2)
|
|
Carrying
value
|
|
Estimated
fair value
(Level 2)
|
||||||||
|
(In thousands)
|
||||||||||||||
Summit Holdings Revolving Credit Facility
|
$
|
648,000
|
|
|
$
|
648,000
|
|
|
$
|
344,000
|
|
|
$
|
344,000
|
|
Summit Holdings 5.5% Senior Notes ($300.0 million principal)
|
296,484
|
|
|
294,500
|
|
|
295,861
|
|
|
224,000
|
|
||||
Summit Holdings 7.5% Senior Notes ($300.0 million principal)
|
295,817
|
|
|
316,000
|
|
|
294,909
|
|
|
257,000
|
|
||||
SMP Holdings revolving credit facility (1)
|
—
|
|
|
—
|
|
|
115,000
|
|
|
115,000
|
|
||||
SMP Holdings term loan (1)
|
—
|
|
|
—
|
|
|
217,500
|
|
|
217,500
|
|
|
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 Equity 2014 Offering
|
5,300,000
|
|
|
—
|
|
|
—
|
|
|
5,408,337
|
|
Contribution from General Partner
|
—
|
|
|
—
|
|
|
108,337
|
|
|
108,337
|
|
Net units issued under SMLP LTIP
|
46,647
|
|
|
—
|
|
|
861
|
|
|
47,508
|
|
Units, December 31, 2014
|
34,426,513
|
|
|
24,409,850
|
|
|
1,200,651
|
|
|
60,037,014
|
|
Units issued in connection with the May 2015 Equity Offering
|
7,475,000
|
|
|
—
|
|
|
—
|
|
|
7,475,000
|
|
Contribution from General Partner
|
—
|
|
|
—
|
|
|
152,551
|
|
|
152,551
|
|
Net units issued under SMLP LTIP
|
161,131
|
|
|
—
|
|
|
1,498
|
|
|
162,629
|
|
Units, December 31, 2015
|
42,062,644
|
|
|
24,409,850
|
|
|
1,354,700
|
|
|
67,827,194
|
|
Subordinated units conversion
|
24,409,850
|
|
|
(24,409,850
|
)
|
|
—
|
|
|
—
|
|
Units issued in connection with the September 2016 Equity Offering
|
5,500,000
|
|
|
—
|
|
|
—
|
|
|
5,500,000
|
|
Contribution from General Partner
|
—
|
|
|
—
|
|
|
112,245
|
|
|
112,245
|
|
Net units issued under SMLP LTIP
|
138,627
|
|
|
—
|
|
|
4,242
|
|
|
142,869
|
|
Units, December 31, 2016
|
72,111,121
|
|
|
—
|
|
|
1,471,187
|
|
|
73,582,308
|
|
•
|
the 2016 Drop Down Assets for the period from January 1, 2014 to March 3, 2016;
|
•
|
Polar and Divide for the period from January 1, 2014 to May 18, 2015; and
|
•
|
Red Rock Gathering for the period from January 1, 2014 to March 18, 2014.
|
Summit Investments' net investment in the 2016 Drop Down Assets
|
$
|
771,929
|
|
|
|
||
SMP Holdings borrowings allocated to 2016 Drop Down Assets and retained by Summit Investments
|
342,926
|
|
|
|
|||
Acquired carrying value of 2016 Drop Down Assets
|
|
|
$
|
1,114,855
|
|
||
|
|
|
|
||||
Deferred Purchase Price Obligation
|
$
|
507,427
|
|
|
|
||
Borrowings under Revolving Credit Facility
|
360,000
|
|
|
|
|||
Working capital adjustment received from a subsidiary of Summit Investments
|
(569
|
)
|
|
|
|||
Total consideration paid and recognized by SMLP
|
|
|
866,858
|
|
|||
Excess of acquired carrying value over consideration paid and recognized
|
|
|
$
|
247,997
|
|
||
|
|
|
|
||||
Allocation of capital contribution:
|
|
|
|
||||
General partner interest
|
$
|
4,953
|
|
|
|
||
Common limited partner interest
|
243,044
|
|
|
|
|||
Partners' capital contribution – excess of acquired carrying value over consideration paid and recognized
|
|
|
$
|
247,997
|
|
Summit Investments' net investment in Polar Midstream and Epping
|
|
|
$
|
416,044
|
|
||
Total net cash consideration paid to a subsidiary of Summit Investments
|
|
|
285,677
|
|
|||
Excess of acquired carrying value over consideration paid
|
|
|
$
|
130,367
|
|
||
|
|
|
|
||||
Allocation of capital contribution:
|
|
|
|
||||
General partner interest
|
$
|
2,607
|
|
|
|
||
Common limited partner interest
|
80,079
|
|
|
|
|||
Subordinated limited partner interest
|
47,681
|
|
|
|
|||
Partners' capital contribution – excess of acquired carrying value over consideration paid
|
|
|
$
|
130,367
|
|
Summit Investments' net investment in Red Rock Gathering
|
|
|
$
|
241,817
|
|
||
Total net cash consideration paid to a subsidiary of Summit Investments
|
|
|
307,941
|
|
|||
Excess of consideration paid over acquired carrying value
|
|
|
$
|
(66,124
|
)
|
||
|
|
|
|
||||
Allocation of capital distribution:
|
|
|
|
||||
General partner interest
|
$
|
(1,323
|
)
|
|
|
||
Common limited partner interest
|
(37,910
|
)
|
|
|
|||
Subordinated limited partner interest
|
(26,891
|
)
|
|
|
|||
Partners' capital distribution – excess of consideration paid over acquired carrying value
|
|
|
$
|
(66,124
|
)
|
•
|
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.
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Per-unit annual distributions to unitholders
|
$
|
2.300
|
|
|
$
|
2.270
|
|
|
$
|
2.040
|
|
|
Total quarterly distribution per unit target amount
|
|
Marginal percentage interest in distributions
|
||
|
|
Unitholders
|
|
General Partner
|
|
Minimum quarterly distribution
|
$0.40
|
|
98%
|
|
2%
|
First target distribution
|
$0.40 up to $0.46
|
|
98%
|
|
2%
|
Second target distribution
|
above $0.46 up to $0.50
|
|
85%
|
|
15%
|
Third target distribution
|
above $0.50 up to $0.60
|
|
75%
|
|
25%
|
Thereafter
|
above $0.60
|
|
50%
|
|
50%
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
IDR payments
|
$
|
7,912
|
|
|
$
|
6,743
|
|
|
$
|
2,326
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands, except per-unit amounts)
|
||||||||||
Numerator for basic and diluted EPU:
|
|
|
|
|
|
||||||
Allocation of net loss among limited partner interests:
|
|
|
|
|
|
||||||
Net loss attributable to common units
|
$
|
(48,179
|
)
|
|
$
|
(125,437
|
)
|
|
$
|
(16,324
|
)
|
Net loss attributable to subordinated units
|
|
|
(70,173
|
)
|
|
(10,793
|
)
|
||||
Net loss attributable to limited partners
|
$
|
(48,179
|
)
|
|
$
|
(195,610
|
)
|
|
$
|
(27,117
|
)
|
|
|
|
|
|
|
||||||
Denominator for basic and diluted EPU:
|
|
|
|
|
|
||||||
Weighted-average common units outstanding – basic
|
68,264
|
|
|
39,217
|
|
|
33,311
|
|
|||
Effect of nonvested phantom units
|
—
|
|
|
—
|
|
|
—
|
|
|||
Weighted-average common units outstanding – diluted
|
68,264
|
|
|
39,217
|
|
|
33,311
|
|
|||
|
|
|
|
|
|
||||||
Weighted-average subordinated units outstanding – basic and diluted
|
|
|
24,410
|
|
|
24,410
|
|
||||
|
|
|
|
|
|
||||||
Loss per limited partner unit:
|
|
|
|
|
|
||||||
Common unit – basic
|
$
|
(0.71
|
)
|
|
$
|
(3.20
|
)
|
|
$
|
(0.49
|
)
|
Common unit – diluted
|
$
|
(0.71
|
)
|
|
$
|
(3.20
|
)
|
|
$
|
(0.49
|
)
|
Subordinated unit – basic and diluted (1)
|
|
|
$
|
(2.88
|
)
|
|
$
|
(0.44
|
)
|
||
|
|
|
|
|
|
||||||
Nonvested anti-dilutive phantom units excluded from the calculation of diluted EPU
|
125
|
|
|
109
|
|
|
232
|
|
|
Units
|
|
Weighted-average grant date
fair value
|
|||
Nonvested phantom and restricted units, January 1, 2014
|
283,682
|
|
|
$
|
23.41
|
|
Phantom units granted
|
136,867
|
|
|
42.32
|
|
|
Phantom and restricted units vested
|
(61,917
|
)
|
|
25.33
|
|
|
Phantom units forfeited
|
(22,430
|
)
|
|
25.56
|
|
|
Nonvested phantom units, December 31, 2014
|
336,202
|
|
|
30.61
|
|
|
Phantom units granted
|
289,735
|
|
|
29.21
|
|
|
Phantom units vested
|
(229,497
|
)
|
|
27.66
|
|
|
Phantom units forfeited
|
(16,529
|
)
|
|
35.09
|
|
|
Nonvested phantom units, December 31, 2015
|
379,911
|
|
|
31.13
|
|
|
Phantom units granted
|
495,535
|
|
|
14.91
|
|
|
Phantom units vested
|
(178,953
|
)
|
|
33.80
|
|
|
Phantom units forfeited
|
(4,538
|
)
|
|
16.89
|
|
|
Nonvested phantom units, December 31, 2016
|
691,955
|
|
|
$
|
19.59
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Intrinsic value of vested LTIP awards
|
$
|
2,957
|
|
|
$
|
5,362
|
|
|
$
|
2,631
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
SMLP LTIP unit-based compensation
|
$
|
7,550
|
|
|
$
|
6,174
|
|
|
$
|
4,696
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Operation and maintenance expense
|
$
|
26,485
|
|
|
$
|
25,050
|
|
|
$
|
22,004
|
|
General and administrative expense
|
31,947
|
|
|
26,193
|
|
|
24,993
|
|
•
|
certain support expenses and capital expenditures on behalf of the contributed subsidiaries. These transactions were settled periodically through membership interests prior to the respective drop down;
|
•
|
interest expense that was related to capital projects for the contributed subsidiaries. As such, the associated interest expense was allocated to the respective contributed subsidiary's capital projects as a noncash contribution and capitalized into the basis of the asset; and
|
•
|
noncash compensation expense for the SMP Net Profits Interests, which were accounted for as compensatory awards. As such, the annual expense associated with the SMP Net Profits was allocated to the respective contributed subsidiary and is reflected in general and administrative expenses in the statements of operations.
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Rent expense
|
$
|
2,861
|
|
|
$
|
2,395
|
|
|
$
|
1,881
|
|
2017
|
$
|
3,512
|
|
2018
|
3,178
|
|
|
2019
|
2,520
|
|
|
2020
|
442
|
|
|
2021
|
34
|
|
|
Thereafter
|
—
|
|
|
Total future minimum lease payments
|
$
|
9,686
|
|
|
Total
|
||
|
(In thousands)
|
||
Accrued environmental remediation, January 1, 2015
|
$
|
30,000
|
|
Payments made by affiliates
|
(13,136
|
)
|
|
Payments made with proceeds from insurance policies
|
(25,000
|
)
|
|
Additional accruals
|
21,800
|
|
|
Accrued environmental remediation, December 31, 2015
|
13,664
|
|
|
Payments made, including those by affiliates
|
(4,211
|
)
|
|
Accrued environmental remediation, December 31, 2016
|
$
|
9,453
|
|
•
|
six-and-one-half (
6.5
) multiplied by the average Business Adjusted EBITDA, as defined below and in the Contribution Agreement, of the 2016 Drop Down Assets for 2018 and 2019, less the G&A Adjuster, as defined in the Contribution Agreement;
|
•
|
less the Initial Payment;
|
•
|
less all capital expenditures incurred for the 2016 Drop Down Assets between the March 3, 2016 and December 31, 2019;
|
•
|
plus all Business Adjusted EBITDA from the 2016 Drop Down Assets between March 3, 2016 and December 31, 2019, less the Cumulative G&A Adjuster, as defined in the Contribution Agreement.
|
•
|
plus interest expense, income tax expense and depreciation and amortization of the 2016 Drop Down Assets for such period;
|
•
|
plus any adjustments related to MVC shortfall payments, impairments and other noncash expenses or losses with respect to the 2016 Drop Down Assets for such period;
|
•
|
plus any Special Liability Expenses, as defined below and in the Contribution Agreement, for such period;
|
•
|
less interest income and income tax benefit of the 2016 Drop Down Assets for such period;
|
•
|
less adjustments related to any other noncash income or gains with respect to the 2016 Drop Down Assets for such period.
|
Purchase price assigned to Meadowlark Midstream
|
|
|
$
|
25,376
|
|
||
Current assets
|
$
|
2,227
|
|
|
|
||
Property, plant and equipment
|
18,795
|
|
|
|
|||
Other noncurrent assets
|
4,354
|
|
|
|
|||
Total assets acquired
|
25,376
|
|
|
|
|||
Total liabilities assumed
|
$
|
—
|
|
|
|
||
Net identifiable assets acquired
|
|
|
$
|
25,376
|
|
Purchase price assigned to Polar Midstream
|
|
|
$
|
216,105
|
|
||
Current assets
|
$
|
368
|
|
|
|
||
Property, plant and equipment
|
9,755
|
|
|
|
|||
Other noncurrent assets
|
7,201
|
|
|
|
|||
Total assets acquired
|
17,324
|
|
|
|
|||
Current liabilities
|
4,592
|
|
|
|
|||
Total liabilities assumed
|
$
|
4,592
|
|
|
|
||
Net identifiable assets acquired
|
|
|
12,732
|
|
|||
Goodwill
|
|
|
$
|
203,373
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
SMLP revenues
|
$
|
393,495
|
|
|
$
|
358,046
|
|
|
$
|
338,941
|
|
2016 Drop Down Assets revenues (1)
|
8,867
|
|
|
29,238
|
|
|
14,466
|
|
|||
Polar and Divide revenues (1)
|
—
|
|
|
13,273
|
|
|
22,449
|
|
|||
Red Rock Gathering revenues (1)
|
—
|
|
|
—
|
|
|
11,313
|
|
|||
Combined revenues
|
$
|
402,362
|
|
|
$
|
400,557
|
|
|
$
|
387,169
|
|
|
|
|
|
|
|
||||||
SMLP net loss
|
$
|
(40,932
|
)
|
|
$
|
(192,212
|
)
|
|
$
|
(23,992
|
)
|
2016 Drop Down Assets net income (loss) (1)
|
2,745
|
|
|
(35,419
|
)
|
|
(32,634
|
)
|
|||
Polar and Divide net income (1)
|
—
|
|
|
5,403
|
|
|
6,430
|
|
|||
Red Rock Gathering net income (1)
|
—
|
|
|
—
|
|
|
2,828
|
|
|||
Combined net loss
|
$
|
(38,187
|
)
|
|
$
|
(222,228
|
)
|
|
$
|
(47,368
|
)
|
•
|
each of SMLP and the Co-Issuers account for their subsidiary investments, if any, under the equity method of accounting and
|
•
|
the balances and results of operations associated with the assets, liabilities and expenses that were carved out of Summit Investments and allocated to SMLP in connection with the 2016 Drop Down have been attributed to SMLP during the common control period.
|
|
December 31, 2016
|
||||||||||||||||||||||
|
SMLP
|
|
Co-Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating adjustments
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash equivalents
|
$
|
698
|
|
|
$
|
51
|
|
|
$
|
5,647
|
|
|
$
|
1,032
|
|
|
$
|
—
|
|
|
$
|
7,428
|
|
Accounts receivable
|
53
|
|
|
—
|
|
|
89,584
|
|
|
7,727
|
|
|
—
|
|
|
97,364
|
|
||||||
Other current assets
|
1,526
|
|
|
—
|
|
|
2,328
|
|
|
455
|
|
|
—
|
|
|
4,309
|
|
||||||
Due from affiliate
|
14,896
|
|
|
38,013
|
|
|
369,995
|
|
|
—
|
|
|
(422,904
|
)
|
|
—
|
|
||||||
Total current assets
|
17,173
|
|
|
38,064
|
|
|
467,554
|
|
|
9,214
|
|
|
(422,904
|
)
|
|
109,101
|
|
||||||
Property, plant and equipment, net
|
2,266
|
|
|
—
|
|
|
1,440,180
|
|
|
411,225
|
|
|
—
|
|
|
1,853,671
|
|
||||||
Intangible assets, net
|
—
|
|
|
—
|
|
|
396,930
|
|
|
24,522
|
|
|
—
|
|
|
421,452
|
|
||||||
Goodwill
|
—
|
|
|
—
|
|
|
16,211
|
|
|
—
|
|
|
—
|
|
|
16,211
|
|
||||||
Investment in equity method investees
|
—
|
|
|
—
|
|
|
—
|
|
|
707,415
|
|
|
—
|
|
|
707,415
|
|
||||||
Other noncurrent assets
|
1,993
|
|
|
5,198
|
|
|
138
|
|
|
—
|
|
|
—
|
|
|
7,329
|
|
||||||
Investment in subsidiaries
|
2,132,757
|
|
|
3,347,393
|
|
|
—
|
|
|
—
|
|
|
(5,480,150
|
)
|
|
—
|
|
||||||
Total assets
|
$
|
2,154,189
|
|
|
$
|
3,390,655
|
|
|
$
|
2,321,013
|
|
|
$
|
1,152,376
|
|
|
$
|
(5,903,054
|
)
|
|
$
|
3,115,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities and Partners' Capital
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trade accounts payable
|
$
|
978
|
|
|
$
|
—
|
|
|
$
|
9,901
|
|
|
$
|
5,372
|
|
|
$
|
—
|
|
|
$
|
16,251
|
|
Accrued expenses
|
2,399
|
|
|
114
|
|
|
6,069
|
|
|
2,807
|
|
|
—
|
|
|
11,389
|
|
||||||
Due to affiliate
|
408,266
|
|
|
—
|
|
|
—
|
|
|
14,896
|
|
|
(422,904
|
)
|
|
258
|
|
||||||
Ad valorem taxes payable
|
16
|
|
|
—
|
|
|
9,717
|
|
|
855
|
|
|
—
|
|
|
10,588
|
|
||||||
Accrued interest
|
—
|
|
|
17,483
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,483
|
|
||||||
Accrued environmental remediation
|
—
|
|
|
—
|
|
|
—
|
|
|
4,301
|
|
|
—
|
|
|
4,301
|
|
||||||
Other current liabilities
|
6,718
|
|
|
—
|
|
|
3,798
|
|
|
955
|
|
|
—
|
|
|
11,471
|
|
||||||
Total current liabilities
|
418,377
|
|
|
17,597
|
|
|
29,485
|
|
|
29,186
|
|
|
(422,904
|
)
|
|
71,741
|
|
||||||
Long-term debt
|
—
|
|
|
1,240,301
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,240,301
|
|
||||||
Deferred Purchase Price Obligation
|
563,281
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
563,281
|
|
||||||
Deferred revenue
|
—
|
|
|
—
|
|
|
57,465
|
|
|
—
|
|
|
—
|
|
|
57,465
|
|
||||||
Noncurrent accrued environmental remediation
|
—
|
|
|
—
|
|
|
—
|
|
|
5,152
|
|
|
—
|
|
|
5,152
|
|
||||||
Other noncurrent liabilities
|
2,858
|
|
|
—
|
|
|
4,602
|
|
|
106
|
|
|
—
|
|
|
7,566
|
|
||||||
Total liabilities
|
984,516
|
|
|
1,257,898
|
|
|
91,552
|
|
|
34,444
|
|
|
(422,904
|
)
|
|
1,945,506
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total partners' capital
|
1,169,673
|
|
|
2,132,757
|
|
|
2,229,461
|
|
|
1,117,932
|
|
|
(5,480,150
|
)
|
|
1,169,673
|
|
||||||
Total liabilities and partners' capital
|
$
|
2,154,189
|
|
|
$
|
3,390,655
|
|
|
$
|
2,321,013
|
|
|
$
|
1,152,376
|
|
|
$
|
(5,903,054
|
)
|
|
$
|
3,115,179
|
|
|
December 31, 2015
|
||||||||||||||||||||||
|
SMLP
|
|
Co-Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating adjustments
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash equivalents
|
$
|
73
|
|
|
$
|
12,407
|
|
|
$
|
6,930
|
|
|
$
|
2,383
|
|
|
$
|
—
|
|
|
$
|
21,793
|
|
Accounts receivable
|
—
|
|
|
—
|
|
|
84,021
|
|
|
5,560
|
|
|
—
|
|
|
89,581
|
|
||||||
Other current assets
|
540
|
|
|
—
|
|
|
2,672
|
|
|
361
|
|
|
—
|
|
|
3,573
|
|
||||||
Due from affiliate
|
3,168
|
|
|
151,443
|
|
|
207,651
|
|
|
—
|
|
|
(362,262
|
)
|
|
—
|
|
||||||
Total current assets
|
3,781
|
|
|
163,850
|
|
|
301,274
|
|
|
8,304
|
|
|
(362,262
|
)
|
|
114,947
|
|
||||||
Property, plant and equipment, net
|
1,178
|
|
|
—
|
|
|
1,462,623
|
|
|
348,982
|
|
|
—
|
|
|
1,812,783
|
|
||||||
Intangible assets, net
|
—
|
|
|
—
|
|
|
438,093
|
|
|
23,217
|
|
|
—
|
|
|
461,310
|
|
||||||
Goodwill
|
—
|
|
|
—
|
|
|
16,211
|
|
|
—
|
|
|
—
|
|
|
16,211
|
|
||||||
Investment in equity method investees
|
—
|
|
|
—
|
|
|
—
|
|
|
751,168
|
|
|
—
|
|
|
751,168
|
|
||||||
Other noncurrent assets
|
3,480
|
|
|
4,611
|
|
|
162
|
|
|
—
|
|
|
—
|
|
|
8,253
|
|
||||||
Investment in subsidiaries
|
2,438,395
|
|
|
3,222,187
|
|
|
—
|
|
|
—
|
|
|
(5,660,582
|
)
|
|
—
|
|
||||||
Total assets
|
$
|
2,446,834
|
|
|
$
|
3,390,648
|
|
|
$
|
2,218,363
|
|
|
$
|
1,131,671
|
|
|
$
|
(6,022,844
|
)
|
|
$
|
3,164,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Liabilities and Partners' Capital
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trade accounts payable
|
$
|
482
|
|
|
$
|
—
|
|
|
$
|
18,489
|
|
|
$
|
21,837
|
|
|
$
|
—
|
|
|
$
|
40,808
|
|
Accrued expenses
|
1,478
|
|
|
—
|
|
|
4,832
|
|
|
466
|
|
|
—
|
|
|
6,776
|
|
||||||
Due to affiliate
|
360,243
|
|
|
—
|
|
|
—
|
|
|
3,168
|
|
|
(362,262
|
)
|
|
1,149
|
|
||||||
Deferred revenue
|
—
|
|
|
—
|
|
|
677
|
|
|
—
|
|
|
—
|
|
|
677
|
|
||||||
Ad valorem taxes payable
|
9
|
|
|
—
|
|
|
9,881
|
|
|
381
|
|
|
—
|
|
|
10,271
|
|
||||||
Accrued interest
|
—
|
|
|
17,483
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,483
|
|
||||||
Accrued environmental remediation
|
—
|
|
|
—
|
|
|
—
|
|
|
7,900
|
|
|
—
|
|
|
7,900
|
|
||||||
Other current liabilities
|
3,080
|
|
|
—
|
|
|
2,573
|
|
|
868
|
|
|
—
|
|
|
6,521
|
|
||||||
Total current liabilities
|
365,292
|
|
|
17,483
|
|
|
36,452
|
|
|
34,620
|
|
|
(362,262
|
)
|
|
91,585
|
|
||||||
Long-term debt
|
332,500
|
|
|
934,770
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,267,270
|
|
||||||
Deferred revenue
|
—
|
|
|
—
|
|
|
45,486
|
|
|
—
|
|
|
—
|
|
|
45,486
|
|
||||||
Noncurrent accrued environmental remediation
|
—
|
|
|
—
|
|
|
—
|
|
|
5,764
|
|
|
—
|
|
|
5,764
|
|
||||||
Other noncurrent liabilities
|
1,743
|
|
|
—
|
|
|
5,503
|
|
|
22
|
|
|
—
|
|
|
7,268
|
|
||||||
Total liabilities
|
699,535
|
|
|
952,253
|
|
|
87,441
|
|
|
40,406
|
|
|
(362,262
|
)
|
|
1,417,373
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total partners' capital
|
1,747,299
|
|
|
2,438,395
|
|
|
2,130,922
|
|
|
1,091,265
|
|
|
(5,660,582
|
)
|
|
1,747,299
|
|
||||||
Total liabilities and partners' capital
|
$
|
2,446,834
|
|
|
$
|
3,390,648
|
|
|
$
|
2,218,363
|
|
|
$
|
1,131,671
|
|
|
$
|
(6,022,844
|
)
|
|
$
|
3,164,672
|
|
|
Year ended December 31, 2016
|
||||||||||||||||||||||
|
SMLP
|
|
Co-Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating adjustments
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gathering services and related fees
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
288,399
|
|
|
$
|
57,562
|
|
|
$
|
—
|
|
|
$
|
345,961
|
|
Natural gas, NGLs and condensate sales
|
—
|
|
|
—
|
|
|
35,833
|
|
|
—
|
|
|
—
|
|
|
35,833
|
|
||||||
Other revenues
|
—
|
|
|
—
|
|
|
18,225
|
|
|
2,343
|
|
|
—
|
|
|
20,568
|
|
||||||
Total revenues
|
—
|
|
|
—
|
|
|
342,457
|
|
|
59,905
|
|
|
—
|
|
|
402,362
|
|
||||||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of natural gas and NGLs
|
—
|
|
|
—
|
|
|
27,421
|
|
|
—
|
|
|
—
|
|
|
27,421
|
|
||||||
Operation and maintenance
|
—
|
|
|
—
|
|
|
84,632
|
|
|
10,702
|
|
|
—
|
|
|
95,334
|
|
||||||
General and administrative
|
—
|
|
|
—
|
|
|
43,612
|
|
|
8,798
|
|
|
—
|
|
|
52,410
|
|
||||||
Depreciation and amortization
|
580
|
|
|
—
|
|
|
98,891
|
|
|
12,768
|
|
|
—
|
|
|
112,239
|
|
||||||
Transaction costs
|
1,321
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,321
|
|
||||||
Loss (gain) on asset sales, net
|
—
|
|
|
—
|
|
|
99
|
|
|
(6
|
)
|
|
—
|
|
|
93
|
|
||||||
Long-lived asset impairment
|
—
|
|
|
—
|
|
|
1,235
|
|
|
529
|
|
|
—
|
|
|
1,764
|
|
||||||
Total costs and expenses
|
1,901
|
|
|
—
|
|
|
255,890
|
|
|
32,791
|
|
|
—
|
|
|
290,582
|
|
||||||
Other income
|
116
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
116
|
|
||||||
Interest expense
|
(1,441
|
)
|
|
(62,369
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(63,810
|
)
|
||||||
Deferred Purchase Price Obligation expense
|
(55,854
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(55,854
|
)
|
||||||
(Loss) income before income taxes and loss from equity method investees
|
(59,080
|
)
|
|
(62,369
|
)
|
|
86,567
|
|
|
27,114
|
|
|
—
|
|
|
(7,768
|
)
|
||||||
Income tax expense
|
(75
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75
|
)
|
||||||
Loss from equity method investees
|
—
|
|
|
—
|
|
|
—
|
|
|
(30,344
|
)
|
|
—
|
|
|
(30,344
|
)
|
||||||
Equity in earnings of consolidated subsidiaries
|
20,968
|
|
|
83,337
|
|
|
—
|
|
|
—
|
|
|
(104,305
|
)
|
|
—
|
|
||||||
Net (loss) income
|
$
|
(38,187
|
)
|
|
$
|
20,968
|
|
|
$
|
86,567
|
|
|
$
|
(3,230
|
)
|
|
$
|
(104,305
|
)
|
|
$
|
(38,187
|
)
|
|
Year ended December 31, 2015
|
||||||||||||||||||||||
|
SMLP
|
|
Co-Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating adjustments
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gathering services and related fees
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
310,830
|
|
|
$
|
26,989
|
|
|
$
|
—
|
|
|
$
|
337,819
|
|
Natural gas, NGLs and condensate sales
|
—
|
|
|
—
|
|
|
42,079
|
|
|
—
|
|
|
—
|
|
|
42,079
|
|
||||||
Other revenues
|
—
|
|
|
—
|
|
|
18,411
|
|
|
2,248
|
|
|
—
|
|
|
20,659
|
|
||||||
Total revenues
|
—
|
|
|
—
|
|
|
371,320
|
|
|
29,237
|
|
|
—
|
|
|
400,557
|
|
||||||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of natural gas and NGLs
|
—
|
|
|
—
|
|
|
31,398
|
|
|
—
|
|
|
—
|
|
|
31,398
|
|
||||||
Operation and maintenance
|
—
|
|
|
—
|
|
|
87,286
|
|
|
7,700
|
|
|
—
|
|
|
94,986
|
|
||||||
General and administrative
|
—
|
|
|
—
|
|
|
37,926
|
|
|
7,182
|
|
|
—
|
|
|
45,108
|
|
||||||
Depreciation and amortization
|
603
|
|
|
—
|
|
|
95,586
|
|
|
8,928
|
|
|
—
|
|
|
105,117
|
|
||||||
Transaction costs
|
1,342
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,342
|
|
||||||
Environmental remediation
|
—
|
|
|
—
|
|
|
—
|
|
|
21,800
|
|
|
—
|
|
|
21,800
|
|
||||||
Gain on asset sales, net
|
—
|
|
|
—
|
|
|
(172
|
)
|
|
—
|
|
|
—
|
|
|
(172
|
)
|
||||||
Long-lived asset impairment
|
—
|
|
|
—
|
|
|
9,305
|
|
|
—
|
|
|
—
|
|
|
9,305
|
|
||||||
Goodwill impairment
|
—
|
|
|
—
|
|
|
248,851
|
|
|
—
|
|
|
—
|
|
|
248,851
|
|
||||||
Total costs and expenses
|
1,945
|
|
|
—
|
|
|
510,180
|
|
|
45,610
|
|
|
—
|
|
|
557,735
|
|
||||||
Other income
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
Interest expense
|
(10,494
|
)
|
|
(48,598
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(59,092
|
)
|
||||||
Loss before income taxes and loss from equity method investees
|
(12,437
|
)
|
|
(48,598
|
)
|
|
(138,860
|
)
|
|
(16,373
|
)
|
|
—
|
|
|
(216,268
|
)
|
||||||
Income tax benefit
|
603
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
603
|
|
||||||
Loss from equity method investees
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,563
|
)
|
|
—
|
|
|
(6,563
|
)
|
||||||
Equity in earnings of consolidated subsidiaries
|
(210,394
|
)
|
|
(161,796
|
)
|
|
—
|
|
|
—
|
|
|
372,190
|
|
|
—
|
|
||||||
Net loss
|
$
|
(222,228
|
)
|
|
$
|
(210,394
|
)
|
|
$
|
(138,860
|
)
|
|
$
|
(22,936
|
)
|
|
$
|
372,190
|
|
|
$
|
(222,228
|
)
|
|
Year ended December 31, 2014
|
||||||||||||||||||||||
|
SMLP
|
|
Co-Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating adjustments
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gathering services and related fees
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
255,211
|
|
|
$
|
12,267
|
|
|
$
|
—
|
|
|
$
|
267,478
|
|
Natural gas, NGLs and condensate sales
|
—
|
|
|
—
|
|
|
97,094
|
|
|
—
|
|
|
—
|
|
|
97,094
|
|
||||||
Other revenues
|
—
|
|
|
—
|
|
|
20,398
|
|
|
2,199
|
|
|
—
|
|
|
22,597
|
|
||||||
Total revenues
|
—
|
|
|
—
|
|
|
372,703
|
|
|
14,466
|
|
|
—
|
|
|
387,169
|
|
||||||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of natural gas and NGLs
|
—
|
|
|
—
|
|
|
72,415
|
|
|
—
|
|
|
—
|
|
|
72,415
|
|
||||||
Operation and maintenance
|
—
|
|
|
—
|
|
|
88,927
|
|
|
5,942
|
|
|
—
|
|
|
94,869
|
|
||||||
General and administrative
|
—
|
|
|
—
|
|
|
40,447
|
|
|
2,834
|
|
|
—
|
|
|
43,281
|
|
||||||
Depreciation and amortization
|
588
|
|
|
—
|
|
|
86,762
|
|
|
3,528
|
|
|
—
|
|
|
90,878
|
|
||||||
Transaction costs
|
2,985
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,985
|
|
||||||
Environmental remediation
|
—
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
|
—
|
|
|
5,000
|
|
||||||
Loss on asset sales, net
|
—
|
|
|
—
|
|
|
442
|
|
|
—
|
|
|
—
|
|
|
442
|
|
||||||
Long-lived asset impairment
|
—
|
|
|
—
|
|
|
5,505
|
|
|
—
|
|
|
—
|
|
|
5,505
|
|
||||||
Goodwill impairment
|
—
|
|
|
—
|
|
|
54,199
|
|
|
—
|
|
|
—
|
|
|
54,199
|
|
||||||
Total costs and expenses
|
3,573
|
|
|
—
|
|
|
348,697
|
|
|
17,304
|
|
|
—
|
|
|
369,574
|
|
||||||
Other income
|
—
|
|
|
—
|
|
|
1,189
|
|
|
—
|
|
|
—
|
|
|
1,189
|
|
||||||
Interest expense
|
(8,417
|
)
|
|
(40,169
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(48,586
|
)
|
||||||
(Loss) income before income taxes and loss from equity method investees
|
(11,990
|
)
|
|
(40,169
|
)
|
|
25,195
|
|
|
(2,838
|
)
|
|
—
|
|
|
(29,802
|
)
|
||||||
Income tax (expense) benefit
|
(1,680
|
)
|
|
—
|
|
|
826
|
|
|
—
|
|
|
—
|
|
|
(854
|
)
|
||||||
Loss from equity method investees
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,712
|
)
|
|
—
|
|
|
(16,712
|
)
|
||||||
Equity in earnings of consolidated subsidiaries
|
(33,698
|
)
|
|
6,471
|
|
|
—
|
|
|
—
|
|
|
27,227
|
|
|
—
|
|
||||||
Net (loss) income
|
$
|
(47,368
|
)
|
|
$
|
(33,698
|
)
|
|
$
|
26,021
|
|
|
$
|
(19,550
|
)
|
|
$
|
27,227
|
|
|
$
|
(47,368
|
)
|
|
Year ended December 31, 2016
|
||||||||||||||||||||||
|
SMLP
|
|
Co-Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating adjustments
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net cash provided by (used in) operating activities
|
$
|
9,691
|
|
|
$
|
(58,254
|
)
|
|
$
|
198,991
|
|
|
$
|
80,067
|
|
|
$
|
—
|
|
|
$
|
230,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Capital expenditures
|
(1,668
|
)
|
|
—
|
|
|
(49,378
|
)
|
|
(91,673
|
)
|
|
—
|
|
|
(142,719
|
)
|
||||||
Contributions to equity method investees
|
—
|
|
|
—
|
|
|
—
|
|
|
(31,582
|
)
|
|
—
|
|
|
(31,582
|
)
|
||||||
Acquisitions of gathering systems from affiliate, net of acquired cash
|
(359,431
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(359,431
|
)
|
||||||
Other, net
|
(394
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(394
|
)
|
||||||
Advances to affiliates
|
(15,697
|
)
|
|
(255,070
|
)
|
|
(150,775
|
)
|
|
—
|
|
|
421,542
|
|
|
—
|
|
||||||
Net cash used in investing activities
|
(377,190
|
)
|
|
(255,070
|
)
|
|
(200,153
|
)
|
|
(123,255
|
)
|
|
421,542
|
|
|
(534,126
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Distributions to unitholders
|
(167,504
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(167,504
|
)
|
||||||
Borrowings under Revolving Credit Facility
|
12,000
|
|
|
508,300
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
520,300
|
|
||||||
Repayments under Revolving Credit Facility
|
—
|
|
|
(204,300
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(204,300
|
)
|
||||||
Debt issuance costs
|
—
|
|
|
(3,032
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,032
|
)
|
||||||
Proceeds from issuance of common units, net
|
125,233
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
125,233
|
|
||||||
Contribution from General Partner
|
2,702
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,702
|
|
||||||
Cash advance (to) from Summit Investments (from) to contributed subsidiaries, net
|
(12,000
|
)
|
|
—
|
|
|
—
|
|
|
24,214
|
|
|
—
|
|
|
12,214
|
|
||||||
Expenses paid by Summit Investments on behalf of contributed subsidiaries
|
3,030
|
|
|
—
|
|
|
—
|
|
|
1,791
|
|
|
—
|
|
|
4,821
|
|
||||||
Other, net
|
(1,182
|
)
|
|
—
|
|
|
(121
|
)
|
|
135
|
|
|
—
|
|
|
(1,168
|
)
|
||||||
Advances from affiliates
|
405,845
|
|
|
—
|
|
|
—
|
|
|
15,697
|
|
|
(421,542
|
)
|
|
—
|
|
||||||
Net cash provided by (used in) financing activities
|
368,124
|
|
|
300,968
|
|
|
(121
|
)
|
|
41,837
|
|
|
(421,542
|
)
|
|
289,266
|
|
||||||
Net change in cash and cash equivalents
|
625
|
|
|
(12,356
|
)
|
|
(1,283
|
)
|
|
(1,351
|
)
|
|
—
|
|
|
(14,365
|
)
|
||||||
Cash and cash equivalents, beginning of period
|
73
|
|
|
12,407
|
|
|
6,930
|
|
|
2,383
|
|
|
—
|
|
|
21,793
|
|
||||||
Cash and cash equivalents, end of period
|
$
|
698
|
|
|
$
|
51
|
|
|
$
|
5,647
|
|
|
$
|
1,032
|
|
|
$
|
—
|
|
|
$
|
7,428
|
|
|
Year ended December 31, 2015
|
||||||||||||||||||||||
|
SMLP
|
|
Co-Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating adjustments
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net cash provided by (used in) operating activities
|
$
|
409
|
|
|
$
|
(46,716
|
)
|
|
$
|
202,324
|
|
|
$
|
35,358
|
|
|
$
|
—
|
|
|
$
|
191,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Capital expenditures
|
(429
|
)
|
|
—
|
|
|
(118,458
|
)
|
|
(153,338
|
)
|
|
—
|
|
|
(272,225
|
)
|
||||||
Contributions to equity method investees
|
—
|
|
|
—
|
|
|
—
|
|
|
(86,200
|
)
|
|
—
|
|
|
(86,200
|
)
|
||||||
Acquisitions of gathering systems from affiliate, net of acquired cash
|
(288,618
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(288,618
|
)
|
||||||
Other, net
|
—
|
|
|
—
|
|
|
323
|
|
|
—
|
|
|
—
|
|
|
323
|
|
||||||
Advances to affiliates
|
(2,589
|
)
|
|
(88,221
|
)
|
|
(110,003
|
)
|
|
—
|
|
|
200,813
|
|
|
—
|
|
||||||
Net cash used in investing activities
|
(291,636
|
)
|
|
(88,221
|
)
|
|
(228,138
|
)
|
|
(239,538
|
)
|
|
200,813
|
|
|
(646,720
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Distributions to unitholders
|
(152,074
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(152,074
|
)
|
||||||
Borrowings under Revolving Credit Facility
|
180,000
|
|
|
187,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
367,000
|
|
||||||
Repayments under Revolving Credit Facility
|
(100,000
|
)
|
|
(51,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(151,000
|
)
|
||||||
Repayments under term loan
|
(182,500
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(182,500
|
)
|
||||||
Debt issuance costs
|
(135
|
)
|
|
(277
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(412
|
)
|
||||||
Proceeds from issuance of common units, net
|
221,977
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
221,977
|
|
||||||
Contribution from General Partner
|
4,737
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,737
|
|
||||||
Cash advance from Summit Investments to contributed subsidiaries, net
|
102,500
|
|
|
—
|
|
|
21,719
|
|
|
196,308
|
|
|
—
|
|
|
320,527
|
|
||||||
Expenses paid by Summit Investments on behalf of contributed subsidiaries
|
12,655
|
|
|
—
|
|
|
3,864
|
|
|
6,360
|
|
|
—
|
|
|
22,879
|
|
||||||
Other, net
|
(1,615
|
)
|
|
—
|
|
|
(192
|
)
|
|
—
|
|
|
—
|
|
|
(1,807
|
)
|
||||||
Advances from affiliates
|
198,224
|
|
|
—
|
|
|
—
|
|
|
2,589
|
|
|
(200,813
|
)
|
|
—
|
|
||||||
Net cash provided by financing activities
|
283,769
|
|
|
135,723
|
|
|
25,391
|
|
|
205,257
|
|
|
(200,813
|
)
|
|
449,327
|
|
||||||
Net change in cash and cash equivalents
|
(7,458
|
)
|
|
786
|
|
|
(423
|
)
|
|
1,077
|
|
|
—
|
|
|
(6,018
|
)
|
||||||
Cash and cash equivalents, beginning of period
|
7,531
|
|
|
11,621
|
|
|
7,353
|
|
|
1,306
|
|
|
—
|
|
|
27,811
|
|
||||||
Cash and cash equivalents, end of period
|
$
|
73
|
|
|
$
|
12,407
|
|
|
$
|
6,930
|
|
|
$
|
2,383
|
|
|
$
|
—
|
|
|
$
|
21,793
|
|
|
Year ended December 31, 2014
|
||||||||||||||||||||||
|
SMLP
|
|
Co-Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating adjustments
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net cash (used in) provided by operating activities
|
$
|
(3,658
|
)
|
|
$
|
(30,689
|
)
|
|
$
|
179,685
|
|
|
$
|
7,615
|
|
|
$
|
—
|
|
|
$
|
152,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Capital expenditures
|
(460
|
)
|
|
—
|
|
|
(220,360
|
)
|
|
(122,560
|
)
|
|
—
|
|
|
(343,380
|
)
|
||||||
Initial contribution to Ohio Gathering
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,360
|
)
|
|
—
|
|
|
(8,360
|
)
|
||||||
Acquisition of Ohio Gathering Option
|
—
|
|
|
—
|
|
|
—
|
|
|
(190,000
|
)
|
|
—
|
|
|
(190,000
|
)
|
||||||
Option Exercise
|
—
|
|
|
—
|
|
|
—
|
|
|
(382,385
|
)
|
|
—
|
|
|
(382,385
|
)
|
||||||
Contributions to equity method investees
|
—
|
|
|
—
|
|
|
—
|
|
|
(145,131
|
)
|
|
—
|
|
|
(145,131
|
)
|
||||||
Acquisition of gathering systems
|
—
|
|
|
—
|
|
|
(10,872
|
)
|
|
—
|
|
|
—
|
|
|
(10,872
|
)
|
||||||
Acquisitions of gathering systems from affiliate, net of acquired cash
|
(305,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(305,000
|
)
|
||||||
Other, net
|
—
|
|
|
—
|
|
|
325
|
|
|
—
|
|
|
—
|
|
|
325
|
|
||||||
Advances to affiliates
|
(183
|
)
|
|
(174,495
|
)
|
|
(47,271
|
)
|
|
—
|
|
|
221,949
|
|
|
—
|
|
||||||
Net cash used in investing activities
|
(305,643
|
)
|
|
(174,495
|
)
|
|
(278,178
|
)
|
|
(848,436
|
)
|
|
221,949
|
|
|
(1,384,803
|
)
|
|
Year ended December 31, 2014
|
||||||||||||||||||||||
|
SMLP
|
|
Co-Issuers
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating adjustments
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Distributions to unitholders
|
(122,224
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(122,224
|
)
|
||||||
Borrowings under Revolving Credit Facility
|
57,000
|
|
|
237,295
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
294,295
|
|
||||||
Repayments under Revolving Credit Facility
|
(115,000
|
)
|
|
(315,295
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(430,295
|
)
|
||||||
Borrowings under term loan
|
400,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400,000
|
|
||||||
Repayments under term loan
|
(100,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(100,000
|
)
|
||||||
Debt issuance costs
|
(3,003
|
)
|
|
(5,320
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,323
|
)
|
||||||
Proceeds from issuance of common units, net
|
197,806
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
197,806
|
|
||||||
Contribution from General Partner
|
4,235
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,235
|
|
||||||
Cash advance (to) from Summit Investments (from) to contributed subsidiaries, net
|
(242,000
|
)
|
|
—
|
|
|
81,421
|
|
|
834,962
|
|
|
—
|
|
|
674,383
|
|
||||||
Expenses paid by Summit Investments on behalf of contributed subsidiaries
|
12,845
|
|
|
—
|
|
|
10,483
|
|
|
1,556
|
|
|
—
|
|
|
24,884
|
|
||||||
Issuance of senior notes
|
—
|
|
|
300,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
300,000
|
|
||||||
Repurchase of equity-based compensation awards
|
(228
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(228
|
)
|
||||||
Other, net
|
(656
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(656
|
)
|
||||||
Advances from affiliates
|
221,766
|
|
|
—
|
|
|
—
|
|
|
183
|
|
|
(221,949
|
)
|
|
—
|
|
||||||
Net cash provided by financing activities
|
310,541
|
|
|
216,680
|
|
|
91,904
|
|
|
836,701
|
|
|
(221,949
|
)
|
|
1,233,877
|
|
||||||
Net change in cash and cash equivalents
|
1,240
|
|
|
11,496
|
|
|
(6,589
|
)
|
|
(4,120
|
)
|
|
—
|
|
|
2,027
|
|
||||||
Cash and cash equivalents, beginning of period
|
6,291
|
|
|
125
|
|
|
13,942
|
|
|
5,426
|
|
|
—
|
|
|
25,784
|
|
||||||
Cash and cash equivalents, end of period
|
$
|
7,531
|
|
|
$
|
11,621
|
|
|
$
|
7,353
|
|
|
$
|
1,306
|
|
|
$
|
—
|
|
|
$
|
27,811
|
|
|
Quarter ended
December 31,
2016
|
|
Quarter ended
September 30,
2016
|
|
Quarter ended
June 30,
2016
|
|
Quarter ended
March 31,
2016
|
||||||||
|
(In thousands, except per-unit amounts)
|
||||||||||||||
Total revenues
|
$
|
127,083
|
|
|
$
|
95,073
|
|
|
$
|
89,635
|
|
|
$
|
90,571
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to SMLP
|
$
|
13,901
|
|
|
$
|
1,922
|
|
|
$
|
(50,287
|
)
|
|
$
|
(6,454
|
)
|
Less net income (loss) and IDRs attributable to General Partner
|
2,379
|
|
|
2,137
|
|
|
935
|
|
|
1,810
|
|
||||
Net income (loss) attributable to limited partners
|
$
|
11,522
|
|
|
$
|
(215
|
)
|
|
$
|
(51,222
|
)
|
|
$
|
(8,264
|
)
|
|
|
|
|
|
|
|
|
||||||||
Earnings (loss) per limited partner unit:
|
|
|
|
|
|
|
|
||||||||
Common unit – basic
|
$
|
0.16
|
|
|
$
|
0.00
|
|
|
$
|
(0.77
|
)
|
|
$
|
(0.12
|
)
|
Common unit – diluted
|
$
|
0.16
|
|
|
$
|
0.00
|
|
|
$
|
(0.77
|
)
|
|
$
|
(0.12
|
)
|
|
Quarter ended
December 31,
2015
|
|
Quarter ended
September 30,
2015
|
|
Quarter ended
June 30,
2015
|
|
Quarter ended
March 31,
2015
|
||||||||
|
(In thousands, except per-unit amounts)
|
||||||||||||||
Total revenues (1)
|
$
|
112,414
|
|
|
$
|
115,201
|
|
|
$
|
86,855
|
|
|
$
|
86,087
|
|
|
|
|
|
|
|
|
|
||||||||
Net (loss) income attributable to SMLP (2)(3)
|
$
|
(220,468
|
)
|
|
$
|
23,604
|
|
|
$
|
2,985
|
|
|
$
|
1,667
|
|
Less net (loss) income and IDRs attributable to General Partner
|
(2,469
|
)
|
|
2,408
|
|
|
1,891
|
|
|
1,568
|
|
||||
Net (loss) income attributable to limited partners
|
$
|
(217,999
|
)
|
|
$
|
21,196
|
|
|
$
|
1,094
|
|
|
$
|
99
|
|
|
|
|
|
|
|
|
|
||||||||
(Loss) earnings per limited partner unit:
|
|
|
|
|
|
|
|
||||||||
Common unit – basic
|
$
|
(3.28
|
)
|
|
$
|
0.32
|
|
|
$
|
0.05
|
|
|
$
|
0.00
|
|
Common unit – diluted
|
$
|
(3.28
|
)
|
|
$
|
0.32
|
|
|
$
|
0.05
|
|
|
$
|
0.00
|
|
Subordinated unit – basic and diluted
|
$
|
(3.28
|
)
|
|
$
|
0.32
|
|
|
$
|
(0.03
|
)
|
|
$
|
0.00
|
|
|
Quarter ended
September 30,
2015
|
|
Quarter ended
June 30,
2015
|
|
Quarter ended
March 31,
2015
|
||||||
|
(In thousands)
|
||||||||||
Total revenues as originally reported
|
$
|
103,249
|
|
|
$
|
77,274
|
|
|
$
|
68,579
|
|
2016 Drop Down
|
8,644
|
|
|
5,911
|
|
|
4,870
|
|
|||
Polar and Divide Drop Down
|
—
|
|
|
—
|
|
|
8,582
|
|
|||
Bison revenue reclass
|
3,308
|
|
|
3,670
|
|
|
4,056
|
|
|||
Total revenues
|
$
|
115,201
|
|
|
$
|
86,855
|
|
|
$
|
86,087
|
|
/s/ Steven J. Newby
|
Steven J. Newby
|
President and Chief Executive Officer, Summit Midstream GP, LLC (the General Partner of SMLP)
|
|
/s/ Matthew S. Harrison
|
Matthew S. Harrison
|
Executive Vice President and Chief Financial Officer, Summit Midstream GP, LLC (the General Partner of SMLP)
|
•
|
transactions with affiliates;
|
•
|
entering into any hedging transactions that are not in compliance with GAAP;
|
•
|
the voluntary liquidation, wind-up or dissolution of us or any of our subsidiaries;
|
•
|
making any election that would result in us being classified as other than a partnership or a disregarded entity for U.S. federal income tax purposes;
|
•
|
filing or consenting to the filing of any bankruptcy, insolvency or reorganization petition for relief from debtors or protection from creditors naming us or any of our subsidiaries; and
|
•
|
effecting a material amendment to our General Partner's limited liability company agreement.
|
Name
|
|
Audit
Committee
|
|
Conflicts
Committee
|
|
Compensation Committee
|
|
Independent
Director
|
Matthew F. Delaney
|
|
|
|
|
|
|
|
No
|
Peter Labbat
|
|
|
|
|
|
|
|
No
|
Thomas K. Lane
|
|
|
|
|
|
Chair
|
|
No
|
Steven J. Newby
|
|
|
|
|
|
|
|
No
|
Jerry L. Peters
|
|
Chair
|
|
Member
|
|
|
|
Yes
|
Scott A. Rogan
|
|
|
|
|
|
|
|
No
|
Jeffrey R. Spinner
|
|
|
|
|
|
Member
|
|
No
|
Susan Tomasky
|
|
Member
|
|
Chair
|
|
|
|
Yes
|
Robert M. Wohleber
|
|
Member
|
|
Member
|
|
Member
|
|
Yes
|
Name
|
|
Age
|
|
Position with Summit Midstream GP, LLC
|
Steven J. Newby
|
|
44
|
|
President, Chief Executive Officer and Director
|
Matthew S. Harrison
|
|
46
|
|
Executive Vice President and Chief Financial Officer
|
Brock M. Degeyter
|
|
40
|
|
Executive Vice President, General Counsel, Chief Compliance Officer and Secretary
|
Brad N. Graves
|
|
50
|
|
Executive Vice President, Corporate Development and Chief Commercial Officer
|
Leonard W. Mallett
|
|
60
|
|
Executive Vice President and Chief Operations Officer
|
Louise E. Matthews
|
|
47
|
|
Senior Vice President, Human Resources and Corporate Communications
|
Matthew F. Delaney (1)
|
|
31
|
|
Director
|
Peter Labbat (2)
|
|
50
|
|
Director
|
Thomas K. Lane
|
|
60
|
|
Director
|
Jerry L. Peters
|
|
59
|
|
Director
|
Scott A. Rogan
|
|
46
|
|
Director
|
Jeffrey R. Spinner
|
|
35
|
|
Director
|
Susan Tomasky
|
|
63
|
|
Director
|
Robert M. Wohleber
|
|
66
|
|
Director
|
•
|
Leonard W. Mallett, Executive Vice President and Chief Operations Officer
|
American Midstream Partners, LP
|
|
MidCoast Energy Partners, L.P.
|
Boardwalk Pipeline Partners, LP
|
|
NuStar Energy L.P.
|
Crestwood Equity Partners LP
|
|
SemGroup Corporation
|
DCP Midstream, LP
|
|
Southcross Energy Partners, L.P.
|
Enable Midstream Partners, LP
|
|
Tallgrass Energy Partners LP
|
EnLink Midstream Partners, LP
|
|
Targa Resources Corp.
|
Genesis Energy, L.P.
|
|
|
Name and Principal Position
|
|
Base
Salary ($)
|
|
2016 Target Annual Bonus: Percent of Base Salary (%)
|
|
2016 Target LTIP Award: % of Base Salary (%)
|
|
2016 LTIP Target Award Value ($)
|
|
2016 Target Total Direct Compensation ($)
|
|||
Steven J. Newby
President and Chief Executive Officer
|
|
575,000
|
|
|
150
|
|
250
|
|
1,437,500
|
|
|
2,875,000
|
|
Matthew S. Harrison
Executive Vice President and Chief Financial Officer
|
|
400,000
|
|
|
100
|
|
150
|
|
600,000
|
|
|
1,400,000
|
|
Brock M. Degeyter
Executive Vice President, General Counsel, Chief Compliance Officer and Secretary
|
|
350,000
|
|
|
100
|
|
150
|
|
525,000
|
|
|
1,225,000
|
|
Brad N. Graves
Executive Vice President, Corporate Development and Chief Commercial Officer
|
|
375,000
|
|
|
100
|
|
150
|
|
562,500
|
|
|
1,312,500
|
|
Leonard W. Mallett
Executive Vice President and Chief Operations Officer
|
|
350,000
|
|
|
100
|
|
150
|
|
525,000
|
|
|
1,225,000
|
|
Name and Principal Position
|
|
2016 Base
Salary ($)
|
|
Steven J. Newby (1)
President and Chief Executive Officer
|
|
575,000
|
|
Matthew S. Harrison (2)
Executive Vice President and Chief Financial Officer
|
|
400,000
|
|
Brock M. Degeyter (3)
Executive Vice President, General Counsel, Chief Compliance Officer and Secretary
|
|
350,000
|
|
Brad N. Graves (4)
Executive Vice President, Corporate Development and Chief Commercial Officer
|
|
375,000
|
|
Leonard W. Mallett
Executive Vice President and Chief Operations Officer |
|
350,000
|
|
Name and Principal Position
|
2016 Target Annual Bonus: Percent of Base Salary (%)
|
|
2016 Target Bonus: Dollar Value ($)
|
|
Steven J. Newby
President and Chief Executive Officer
|
150
|
|
862,500
|
|
Matthew S. Harrison
Executive Vice President and Chief Financial Officer
|
100
|
|
400,000
|
|
Brock M. Degeyter
Executive Vice President, General Counsel, Chief Compliance Officer and Secretary
|
100
|
|
350,000
|
|
Brad N. Graves
Executive Vice President, Corporate Development and Chief Commercial Officer
|
100
|
|
375,000
|
|
Leonard W. Mallett
Executive Vice President and Chief Operations Officer
|
100
|
|
350,000
|
|
Name and Principal Position
|
2016 Annual Bonus Payout ($)
|
|
Steven J. Newby
President and Chief Executive Officer
|
1,000,000
|
|
Matthew S. Harrison
Executive Vice President and Chief Financial Officer
|
440,000
|
|
Brock M. Degeyter
Executive Vice President, General Counsel, Chief Compliance Officer and Secretary
|
406,000
|
|
Brad N. Graves
Executive Vice President, Corporate Development and Chief Commercial Officer
|
412,000
|
|
Leonard W. Mallett
Executive Vice President and Chief Operations Officer |
420,000
|
|
Name and Principal Position
|
|
2016 Target
SMLP LTIP Award: % of
Base Salary (%)
|
|
2016
Phantom Units Awarded (#)
|
|
2016 SMLP LTIP
Award Value ($)
|
|
Steven J. Newby
President and Chief Executive Officer
|
|
250
|
|
118,083
|
|
1,750,000
|
|
Matthew S. Harrison
Executive Vice President and Chief Financial Officer
|
|
150
|
|
43,859
|
|
650,000
|
|
Brock M. Degeyter
Executive Vice President, General Counsel, Chief Compliance Officer and Secretary
|
|
150
|
|
43,859
|
|
650,000
|
|
Brad N. Graves
Executive Vice President, Corporate Development and Chief Commercial Officer
|
|
150
|
|
43,859
|
|
650,000
|
|
Leonard W. Mallett
Executive Vice President and Chief Operations Officer |
|
150
|
|
40,485
|
|
600,000
|
|
Name and Principal Position
|
|
Year
|
|
Salary ($) (1)
|
|
Bonus ($)
|
|
Equity Awards ($) (2)
|
|
Non-Equity Incentive Plan Compen-sation($)
(3)
|
|
All Other Compen-sation ($) (4)
|
|
Total ($)
|
||||||
Steven J. Newby
President and Chief Executive Officer
|
|
2016
|
|
517,500
|
|
|
—
|
|
|
1,750,000
|
|
|
900,000
|
|
|
37,020
|
|
|
3,204,520
|
|
|
2015
|
|
237,500
|
|
|
—
|
|
|
1,925,000
|
|
|
267,500
|
|
|
20,619
|
|
|
2,450,619
|
|
|
|
2014
|
|
237,500
|
|
|
—
|
|
|
1,200,000
|
|
|
237,500
|
|
|
16,490
|
|
|
1,691,490
|
|
|
Matthew S. Harrison
Executive Vice President and Chief Financial Officer
|
|
2016
|
|
380,000
|
|
|
—
|
|
|
650,000
|
|
|
418,000
|
|
|
33,249
|
|
|
1,481,249
|
|
|
2015
|
|
251,600
|
|
|
—
|
|
|
630,000
|
|
|
188,700
|
|
|
25,336
|
|
|
1,095,636
|
|
|
|
2014
|
|
238,000
|
|
|
—
|
|
|
625,000
|
|
|
185,500
|
|
|
21,965
|
|
|
1,070,465
|
|
|
Brock M. Degeyter
Executive Vice President, General Counsel, Chief Compliance Officer and Secretary
|
|
2016
|
|
315,000
|
|
|
—
|
|
|
650,000
|
|
|
365,400
|
|
|
29,467
|
|
|
1,359,867
|
|
|
2015
|
|
173,850
|
|
|
—
|
|
|
629,000
|
|
|
139,650
|
|
|
19,450
|
|
|
961,950
|
|
|
|
2014
|
|
213,500
|
|
|
—
|
|
|
600,000
|
|
|
171,500
|
|
|
21,965
|
|
|
1,006,965
|
|
|
Brad N. Graves
Executive Vice President, Corporate Development and Chief Commercial Officer
|
|
2016
|
|
375,000
|
|
|
—
|
|
|
650,000
|
|
|
412,000
|
|
|
31,918
|
|
|
1,468,918
|
|
|
2015
|
|
97,500
|
|
|
—
|
|
|
612,500
|
|
|
70,500
|
|
|
12,071
|
|
|
792,571
|
|
|
|
2014
|
|
227,500
|
|
|
—
|
|
|
650,000
|
|
|
171,500
|
|
|
21,695
|
|
|
1,070,695
|
|
|
Leonard W. Mallett
Executive Vice President and Chief Operations Officer (5) |
|
2016
|
|
350,000
|
|
|
350,000
|
|
|
600,000
|
|
|
420,000
|
|
|
12,643
|
|
|
1,732,643
|
|
|
2015
|
|
20,417
|
|
|
—
|
|
|
1,600,000
|
|
|
—
|
|
|
—
|
|
|
1,620,417
|
|
|
|
2014
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Name
|
|
Medical Insurance Premium ($)
|
|
Individual Tax Preparation and Annual Medical Examination ($)
|
|
Health Savings Account (HSA) Employer Contributions ($)
|
|
401(k) Plan Employer Contributions ($)
|
|
Total ($)
|
|||||
Steven J. Newby
|
|
14,354
|
|
|
9,121
|
|
|
1,620
|
|
|
11,925
|
|
|
37,020
|
|
Matthew S. Harrison
|
|
15,151
|
|
|
3,800
|
|
|
1,710
|
|
|
12,588
|
|
|
33,249
|
|
Brock M. Degeyter
|
|
16,124
|
|
|
1,418
|
|
|
—
|
|
|
11,925
|
|
|
29,467
|
|
Brad N. Graves
|
|
15,488
|
|
|
1,380
|
|
|
1,800
|
|
|
13,250
|
|
|
31,918
|
|
Leonard W. Mallett
|
|
12,643
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,643
|
|
|
|
|
|
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1)
|
|
All Other Stock Awards: Number of Shares of Stocks or Units (2)
|
|
Grant Date Fair Value of Stock and Options Awards (3)
|
||||||||
Name
|
|
Grant Date
|
|
Threshold ($)
|
|
Target ($)
|
|
Maximum ($)
|
|
(#)
|
|
($)
|
||||
Steven J. Newby
|
|
N/A
|
|
N/A
|
|
862,500
|
|
|
1,725,000
|
|
|
|
|
|
||
|
3/15/2016
|
|
|
|
|
|
|
|
118,083
|
|
|
1,750,000
|
|
|||
Matthew S. Harrison
|
|
N/A
|
|
N/A
|
|
400,000
|
|
|
800,000
|
|
|
|
|
|
||
|
3/15/2016
|
|
|
|
|
|
|
|
43,859
|
|
|
650,000
|
|
|||
Brock M. Degeyter
|
|
N/A
|
|
N/A
|
|
350,000
|
|
|
700,000
|
|
|
|
|
|
||
|
3/15/2016
|
|
|
|
|
|
|
|
43,859
|
|
|
650,000
|
|
|||
Brad N. Graves
|
|
N/A
|
|
N/A
|
|
375,000
|
|
|
750,000
|
|
|
|
|
|
||
|
3/15/2016
|
|
|
|
|
|
|
|
43,859
|
|
|
650,000
|
|
|||
Leonard W. Mallett
|
|
N/A
|
|
N/A
|
|
350,000
|
|
|
700,000
|
|
|
|
|
|
||
|
3/15/2016
|
|
|
|
|
|
|
|
40,485
|
|
|
600,000
|
|
|
|
|
|
Unit Awards
|
||||
Name
|
|
Grant Date
|
|
Number of Unearned Phantom Units That Have Not Vested (#) (1)
|
|
Market Value of Unearned Phantom Units That Have Not Vested ($) (2)
|
||
Steven J. Newby
|
|
3/15/2016
|
|
118,083
|
|
|
2,969,787
|
|
|
3/15/2015
|
|
37,812
|
|
|
950,972
|
|
|
|
3/15/2014
|
|
9,456
|
|
|
237,818
|
|
|
Matthew S. Harrison
|
|
3/15/2016
|
|
43,859
|
|
|
1,103,054
|
|
|
3/15/2015
|
|
12,375
|
|
|
311,231
|
|
|
|
3/15/2014
|
|
4,925
|
|
|
123,864
|
|
|
Brock M. Degeyter
|
|
3/15/2016
|
|
43,859
|
|
|
1,103,054
|
|
|
3/15/2015
|
|
12,355
|
|
|
310,728
|
|
|
|
3/15/2014
|
|
4,728
|
|
|
118,909
|
|
|
Brad N. Graves
|
|
3/16/2016
|
|
43,859
|
|
|
1,103,054
|
|
|
3/15/2015
|
|
12,031
|
|
|
302,580
|
|
|
|
3/15/2014
|
|
5,122
|
|
|
128,818
|
|
|
Leonard W. Mallett
|
|
3/15/2016
|
|
40,485
|
|
|
1,018,198
|
|
|
12/1/2015
|
|
57,317
|
|
|
1,441,523
|
|
|
|
Phantom Unit Awards
|
||||
Name
|
|
Number of Phantom
Units Vested (#)
|
|
Value Realized on Vesting
($) (1)
|
||
Steven J. Newby (1)
|
|
26,736
|
|
|
501,032
|
|
Matthew S. Harrison (1)
|
|
16,242
|
|
|
308,340
|
|
Brock M. Degeyter (1)
|
|
15,715
|
|
|
297,656
|
|
Brad N. Graves (1)
|
|
15,466
|
|
|
292,349
|
|
Leonard W. Mallett (2)
|
|
28,659
|
|
|
709,310
|
|
Name
|
|
Executive Contributions in Last Fiscal Year ($) (1)
|
|
Registrant Contributions in Last Fiscal Year ($)
|
|
Aggregate Earnings in Last Fiscal Year ($)
|
|
Aggregate Withdrawals/Distributions ($)
|
|
Aggregate Balance at Last Fiscal Year-End ($)
|
|||||
Steven J. Newby
|
|
327,515
|
|
|
—
|
|
|
298,260
|
|
|
—
|
|
|
1,222,172
|
|
Matthew S. Harrison
|
|
33,925
|
|
|
—
|
|
|
107,148
|
|
|
—
|
|
|
507,178
|
|
Brad N. Graves
|
|
16,139
|
|
|
—
|
|
|
31,126
|
|
|
—
|
|
|
261,594
|
|
Name and Principal Position
|
|
Triggering Event
|
|
Salary ($)
|
|
Bonus ($)
|
|
Pro-Rata Bonus ($)
|
|
Health Benefits ($)
|
|
Acceleration of Unvested Equity ($) (1)
|
|
Total ($)
|
||||||
Steven J. Newby
President and Chief Executive Officer (2)
|
|
Termination by Reason of Death or Disability
|
|
—
|
|
|
—
|
|
|
862,500
|
|
|
17,809
|
|
|
4,571,862
|
|
|
5,452,171
|
|
|
Termination Without Cause
|
|
1,437,500
|
|
|
1,337,500
|
|
|
862,500
|
|
|
17,809
|
|
|
4,571,862
|
|
|
8,227,171
|
|
|
|
Resignation for Good Reason
|
|
1,437,500
|
|
|
1,337,500
|
|
|
862,500
|
|
|
17,809
|
|
|
4,571,862
|
|
|
8,227,171
|
|
|
|
Nonextension of Term by Company
|
|
1,437,500
|
|
|
1,337,500
|
|
|
862,500
|
|
|
17,809
|
|
|
4,571,862
|
|
|
8,227,171
|
|
|
|
Nonextension of Term by Executive, Company Exercises Noncompete
|
|
575,000
|
|
|
535,000
|
|
|
—
|
|
|
17,809
|
|
|
—
|
|
|
1,127,809
|
|
|
|
Change in Control (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,571,862
|
|
|
4,571,862
|
|
|
Matthew S. Harrison
Executive Vice President and Chief Financial Officer (4)
|
|
Termination by Reason of Death or Disability
|
|
—
|
|
|
—
|
|
|
400,000
|
|
|
17,809
|
|
|
1,693,620
|
|
|
2,111,429
|
|
|
Termination Without Cause
|
|
600,000
|
|
|
382,500
|
|
|
400,000
|
|
|
17,809
|
|
|
1,693,620
|
|
|
3,093,929
|
|
|
|
Resignation for Good Reason
|
|
600,000
|
|
|
382,500
|
|
|
400,000
|
|
|
17,809
|
|
|
1,693,620
|
|
|
3,093,929
|
|
|
|
Nonextension of Term by Company
|
|
600,000
|
|
|
382,500
|
|
|
400,000
|
|
|
17,809
|
|
|
1,693,620
|
|
|
3,093,929
|
|
|
|
Nonextension of Term by Executive, Company Exercises Noncompete
|
|
400,000
|
|
|
255,000
|
|
|
—
|
|
|
17,809
|
|
|
—
|
|
|
672,809
|
|
|
|
Change in Control (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,693,620
|
|
|
1,693,620
|
|
Brock M. Degeyter
Executive Vice President, General Counsel, Chief Compliance Officer and Secretary (5)
|
|
Termination by Reason of Death or Disability
|
|
—
|
|
|
—
|
|
|
350,000
|
|
|
17,809
|
|
|
1,686,874
|
|
|
2,054,683
|
|
|
Termination Without Cause
|
|
525,000
|
|
|
367,500
|
|
|
350,000
|
|
|
17,809
|
|
|
1,686,874
|
|
|
2,947,183
|
|
|
|
Resignation for Good Reason
|
|
525,000
|
|
|
367,500
|
|
|
350,000
|
|
|
17,809
|
|
|
1,686,874
|
|
|
2,947,183
|
|
|
|
Nonextension of Term by Company
|
|
525,000
|
|
|
367,500
|
|
|
350,000
|
|
|
17,809
|
|
|
1,686,874
|
|
|
2,947,183
|
|
|
|
Change in Control (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,686,874
|
|
|
1,686,874
|
|
|
|
Nonextension of Term, Company Exercises Noncompete
|
|
350,000
|
|
|
245,000
|
|
|
—
|
|
|
17,809
|
|
|
—
|
|
|
612,809
|
|
|
Brad N. Graves
Executive Vice President, Corporate Development and Chief Commercial Officer (6)
|
|
Termination by Reason of Death or Disability
|
|
—
|
|
|
—
|
|
|
375,000
|
|
|
17,809
|
|
|
1,689,751
|
|
|
2,082,560
|
|
|
Termination Without Cause
|
|
375,000
|
|
|
235,000
|
|
|
375,000
|
|
|
17,809
|
|
|
1,689,751
|
|
|
2,692,560
|
|
|
|
Resignation for Good Reason
|
|
375,000
|
|
|
235,000
|
|
|
—
|
|
|
17,809
|
|
|
1,689,751
|
|
|
2,317,560
|
|
|
|
Termination Without Cause during Change In Control Period
|
|
562,500
|
|
|
352,500
|
|
|
375,000
|
|
|
17,809
|
|
|
1,689,751
|
|
|
2,997,560
|
|
|
|
Resignation for Good Reason during Change in Control Period
|
|
562,500
|
|
|
352,500
|
|
|
—
|
|
|
17,809
|
|
|
1,689,751
|
|
|
2,622,560
|
|
|
|
Change in Control (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,689,751
|
|
|
1,689,751
|
|
|
|
Nonextension of Term by Company
|
|
375,000
|
|
|
235,000
|
|
|
—
|
|
|
17,809
|
|
|
1,689,751
|
|
|
2,317,560
|
|
|
|
Nonextension of Term, Company Exercises Noncompete
|
|
375,000
|
|
|
235,000
|
|
|
—
|
|
|
17,809
|
|
|
—
|
|
|
627,809
|
|
|
Leonard W. Mallett
Executive Vice President and Chief Operations Officer (7) |
|
Termination by Reason of Death or Disability
|
|
—
|
|
|
—
|
|
|
350,000
|
|
|
17,809
|
|
|
2,661,386
|
|
|
3,029,195
|
|
|
Termination Without Cause
|
|
525,000
|
|
|
525,000
|
|
|
350,000
|
|
|
17,809
|
|
|
2,661,386
|
|
|
4,079,195
|
|
|
|
Resignation for Good Reason
|
|
525,000
|
|
|
525,000
|
|
|
350,000
|
|
|
17,809
|
|
|
2,661,386
|
|
|
4,079,195
|
|
|
|
Nonextension of Term by Company
|
|
525,000
|
|
|
525,000
|
|
|
350,000
|
|
|
17,809
|
|
|
2,661,386
|
|
|
4,079,195
|
|
|
|
Change in Control (3)
|
|
—
|
|
|
630,000
|
|
|
—
|
|
|
—
|
|
|
2,661,386
|
|
|
3,291,386
|
|
|
|
Nonextension of Term by Executive, Company Exercises Noncompete
|
|
350,000
|
|
|
350,000
|
|
|
—
|
|
|
17,809
|
|
|
—
|
|
|
717,809
|
|
Members of the Compensation Committee of Summit Midstream GP, LLC
|
||||
Thomas K. Lane
|
|
Jeffrey R. Spinner
|
|
Robert M. Wohleber
|
•
|
an annual cash retainer of $70,000, and
|
•
|
an annual award of common units with a grant date fair value of approximately $80,000.
|
•
|
the chairman of the Audit Committee receives an additional annual retainer of $15,000;
|
•
|
the chairman of the Conflicts Committee receives an additional annual retainer of $10,000;
|
•
|
each independent member of any committee (other than the chairman) received an additional annual retainer of $5,000; and
|
•
|
in connection with the 2016 Drop Down, in March 2016, we paid the members, other than the chairman, of the Conflicts Committee fees of $15,000 and the chairman of the Conflicts Committee fees of $20,000 each for the increased time and effort that they expended in connection with their service on the Conflicts Committee, which reviewed the transaction for fairness to the Partnership and its unitholders.
|
Name
|
|
Fees earned or paid in cash ($)
|
|
Other fees ($)
|
|
Unit awards (1) ($)
|
|
Compensation deferred ($)
|
|
Total ($)
|
|||||
Matthew F. Delaney
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Peter Labbat
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Thomas K. Lane
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Christopher M. Leininger (2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Curtis A. Morgan (3)
|
|
82,765
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
82,765
|
|
Steven J. Newby
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Jerry L. Peters
|
|
70,000
|
|
|
35,000
|
|
|
80,000
|
|
|
170,000
|
|
|
15,000
|
|
Jeffrey R. Spinner
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Susan Tomasky
|
|
70,000
|
|
|
35,000
|
|
|
80,000
|
|
|
—
|
|
|
185,000
|
|
Robert M. Wohleber
|
|
70,000
|
|
|
30,000
|
|
|
80,000
|
|
|
—
|
|
|
180,000
|
|
•
|
each person who is known to us to beneficially own 5% or more of such units to be outstanding (based solely on Schedules 13D and 13G filed with the SEC subsequent to December 31, 2016 and prior to
February 16, 2017
);
|
•
|
our General Partner;
|
•
|
each of the directors and NEOs of our General Partner; and
|
•
|
all of the directors and executive officers of our General Partner as a group.
|
Name Of Beneficial Owner
|
|
Common Units Beneficially Owned
|
|
Percentage of Common Units Beneficially Owned
|
||
Summit Midstream Partners, LLC (1) (2) (3)
|
|
25,854,581
|
|
|
35.9
|
%
|
SMP Holdings (2) (3) (4)
|
|
25,854,581
|
|
|
35.9
|
%
|
Energy Capital Partners II, LLC (1) (3) (5) (6)
|
|
31,770,408
|
|
|
44.1
|
%
|
SMLP Holdings, LLC (5) (6)
|
|
5,915,827
|
|
|
8.2
|
%
|
OppenheimerFunds, Inc. (8)
|
|
7,870,134
|
|
|
10.9
|
%
|
OppenheimerFunds SteelPath, MLP Income Fund (14)
|
|
5,618,169
|
|
|
7.8
|
%
|
HMI Capital, LLC (7)
|
|
4,479,516
|
|
|
6.2
|
%
|
HMI Capital Partners, L.P. (7)
|
|
3,814,421
|
|
|
5.3
|
%
|
Steven J. Newby (2) (10) (11)
|
|
63,172
|
|
|
*
|
|
Matthew S. Harrison (2) (10) (11)
|
|
41,901
|
|
|
*
|
|
Brock M. Degeyter (2) (10)
|
|
46,496
|
|
|
*
|
|
Brad N. Graves (2) (10) (11)
|
|
50,156
|
|
|
*
|
|
Leonard W. Mallett (2) (10)
|
|
36,448
|
|
|
*
|
|
Matthew F. Delaney (9)
|
|
—
|
|
|
*
|
|
Peter Labbat (9)
|
|
20,000
|
|
|
*
|
|
Thomas K. Lane (9) (12)
|
|
40,000
|
|
|
*
|
|
Jerry L. Peters (2) (11)
|
|
7,433
|
|
|
*
|
|
Scott A. Rogan (13)
|
|
—
|
|
|
*
|
|
Jeffrey R. Spinner (13)
|
|
—
|
|
|
*
|
|
Susan Tomasky (2)
|
|
12,908
|
|
|
*
|
|
Robert M. Wohleber (2)
|
|
10,331
|
|
|
*
|
|
All directors and executive officers as a group (consisting of 14 persons)
|
|
339,341
|
|
|
*
|
|
Plan category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a) (1)
|
|
Weighted-average exercise price of outstanding options, warrants and rights
(b)
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
|
||
Equity compensation plans approved by security holders
|
|
691,955
|
|
|
n/a
|
|
3,884,728
|
|
Equity compensation plans not approved by security holders
|
|
n/a
|
|
|
n/a
|
|
n/a
|
|
Total
|
|
691,955
|
|
|
n/a
|
|
3,884,728
|
|
•
|
The audited balance sheet of OGC as of December 31, 2016 and the related statements of operations, members' equity and cash flows for the year ended December 31, 2016 and the related notes to the financial statements, are filed as Exhibit 99.1 to this Report.
|
•
|
The audited balance sheets of OGC as of December 31, 2015 and 2014 and the related statements of operations, members' equity and cash flows for the years ended December 31, 2015 and 2014 and the related notes to the financial statements, are filed as Exhibit 99.3 to this Report.
|
•
|
The audited balance sheet of OCC as of December 31, 2016 and the related statements of operations, members' equity and cash flows for the year ended December 31, 2016 and the related notes to the financial statements, are filed as Exhibit 99.2 to this Report.
|
•
|
The audited balance sheets of OCC as of December 31, 2015 and 2014 and the related statements of operations, members' equity and cash flows for the years ended December 31, 2015 and 2014 and the related notes to the financial statements, are filed as Exhibit 99.4 to this Report.
|
•
|
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
|
•
|
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
|
•
|
may apply standards of materiality in a way that is different from what may be viewed as material by others; and
|
•
|
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
|
Exhibit number
|
|
Description
|
3.1
|
|
First Amended and Restated Agreement of Limited Partnership of Summit Midstream Partners, LP, dated as of October 3, 2012 (Incorporated herein by reference to Exhibit 3.1 to SMLP's Current Report on Form 8-K dated October 4, 2012 (Commission File No. 001-35666))
|
3.2
|
|
Amended and Restated Limited Liability Company Agreement of Summit Midstream GP, LLC, dated as of October 3, 2012 (Incorporated herein by reference to Exhibit 3.2 to SMLP's Current Report on Form 8-K dated October 4, 2012 (Commission File No. 001-35666))
|
3.3
|
|
Certificate of Limited Partnership of Summit Midstream Partners, LP (Incorporated herein by reference to Exhibit 3.1 to SMLP's Form S-1 Registration Statement dated August 21, 2012 (Commission File No. 333-183466))
|
3.4
|
|
Certificate of Formation of Summit Midstream GP, LLC (Incorporated herein by reference to Exhibit 3.4 to SMLP's Form S-1 Registration Statement dated August 21, 2012 (Commission File No. 333-183466))
|
4.1
|
|
Investor Rights Agreement, dated as of October 3, 2012, by and among EFS-S, LLC, Summit Midstream GP, LLC and Summit Midstream Partners, LLC (Incorporated herein by reference to Exhibit 4.1 to SMLP's Current Report on Form 8-K dated October 4, 2012 (Commission File No. 001-35666))
|
10.1
|
|
Unit Purchase Agreement, dated as of June 4, 2013, by and between, Summit Midstream Partners, LP and Summit Midstream Partners Holdings, LLC (Incorporated herein by reference to Exhibit 10.3 to SMLP's Current Report on Form 8-K dated June 5, 2013 (Commission File No. 001-35666))
|
10.2
|
|
Purchase Agreement, dated as of June 12, 2013, by and among Summit Midstream Holdings, LLC, Summit Midstream Finance Corp., Summit Midstream GP, LLC, the Guarantors named therein and the Initial Purchasers named therein (Incorporated herein by reference to Exhibit 1.1 to SMLP's Current Report on Form 8-K dated June 17, 2013 (Commission File No. 001-35666))
|
10.3
|
|
Indenture, dated as of June 17, 2013, by and among Summit Midstream Holdings, LLC, Summit Midstream Finance Corp., the Guarantors party thereto and U.S. Bank National Association (including form of the 7½% senior notes due 2021) (Incorporated herein by reference to Exhibit 4.1 to SMLP's Current Report on Form 8-K dated June 17, 2013 (Commission File No. 001-35666))
|
10.4
|
|
Registration Rights Agreement, dated as of June 17, 2013, by and among Summit Midstream Holdings, LLC, Summit Midstream Finance Corp., the Guarantors named therein and the Initial Purchasers named therein (Incorporated herein by reference to Exhibit 4.2 to SMLP's Current Report on Form 8-K dated June 17, 2013 (Commission File No. 001-35666))
|
10.5
|
|
Joinder Agreement, dated as of June 4, 2013, by and among Summit Midstream Holdings, LLC, The Royal Bank of Scotland plc, as Administrative Agent, and the lenders party thereto (Incorporated herein by reference to Exhibit 10.2 to SMLP's Current Report on Form 8-K dated June 5, 2013 (Commission File No. 001-35666))
|
10.6
|
|
Second Amended and Restated Credit Agreement dated as of November 1, 2013 (Incorporated herein by reference to Exhibit 10.6 to SMLP's 2013 Annual Report on Form 10-K dated March 10, 2014 (Commission File No. 001-35666))
|
10.7
|
|
Second Amendment to Second Amended and Restated Credit Agreement dated as of February 25, 2016 (Incorporated herein by reference to Exhibit 10.2 to SMLP's Form 8-K filed March 1, 2016 (Commission File No. 001-35666))
|
10.8
|
|
Amended and Restated Guarantee and Collateral Agreement dated as of November 1, 2013 (Incorporated herein by reference to Exhibit 10.7 to SMLP's 2013 Annual Report on Form 10-K dated March 10, 2014 (Commission File No. 001-35666))
|
10.9
|
|
First Amendment to the Second Amended and Restated Credit Agreement and Amended and Restated Guarantee and Collateral Agreement dated as of October 15, 2015 by and between Summit Midstream Holdings, LLC, each of the guarantors parties thereto, Wells Fargo Bank, National Association and the Lenders party thereto.
|
10.10
|
|
Base Indenture, dated as of July 15, 2014, by and among Summit Midstream Holdings, LLC, Summit Midstream Finance Corp. and U.S. Bank National Association (Incorporated herein by reference to Exhibit 4.1 to SMLP's Current Report on Form 8-K dated July 15, 2014 (Commission File No. 001-35666))
|
10.11
|
|
First Supplemental Indenture, dated as of July 15, 2014, by and among Summit Midstream Holdings, LLC, Summit Midstream Finance Corp., the Guarantors party thereto and U.S. Bank National Association (including form of the 5½% senior notes due 2022) (Incorporated herein by reference to Exhibit 4.2 to SMLP's Current Report on Form 8-K dated July 15, 2014 (Commission File No. 001-35666))
|
10.12
|
|
Equity Distribution Agreement, dated June 12, 2015, among the Partnership, the General Partner, the Operating Company, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and RBC Capital Markets, LLC. (Incorporated herein by reference to Exhibit 1.1 to SMLP's Current Report on Form 8-K dated June 12, 2015 (Commission File No. 001-35666))
|
10.13
|
|
Contribution, Conveyance and Assumption Agreement, dated as of October 3, 2012, by and among Summit Midstream GP, LLC, Summit Midstream Partners, LP, Summit Midstream Holdings, LLC and Summit Midstream Partners, LLC (Incorporated herein by reference to Exhibit 10.1 to SMLP's Current Report on Form 8-K dated October 4, 2012 (Commission File No. 001-35666))
|
10.14
|
|
Contribution, Conveyance and Assumption Agreement, dated as of June 4, 2013, by and among Summit Midstream Partners Holdings, LLC, Bison Midstream, LLC and Summit Midstream Partners, LP (Incorporated herein by reference to Exhibit 10.1 to SMLP's Current Report on Form 8-K dated June 5, 2013 (Commission File No. 001-35666))
|
10.15
|
†
|
Purchase and Sale Agreement dated as of June 4, 2013 by and between MarkWest Liberty Midstream & Resources, L.L.C. and Summit Midstream Partners, LP (Incorporated herein by reference to Exhibit 10.3 to SMLP's Amendment No. 1 to its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013 dated October 4, 2013 (Commission File No. 333-183466))
|
10.16
|
|
Purchase and Sale Agreement among Summit Midstream Partners Holdings, LLC, Red Rock Gathering Company, LLC and Summit Midstream Partners, LP dated as of March 8, 2014 (Incorporated herein by reference to Exhibit 10.1 to SMLP's Current Report on Form 8-K filed March 10, 2014 (Commission File No. 001-35666))
|
10.17
|
|
Contribution Agreement among Summit Midstream Partners Holdings, LLC, Polar Midstream, LLC, Epping Transmission Company, LLC and Summit Midstream Partners, LP dated as of May 6, 2015 (Incorporated herein by reference to Exhibit 10.1 to SMLP's Current Report on Form 8-K dated May 6, 2015 (Commission File No. 001-35666))
|
10.18
|
|
Contribution Agreement between Summit Midstream Partners Holdings, LLC and Summit Midstream Partners, LP dated as of February 25, 2016 (Incorporated herein by reference to Exhibit 10.1 to SMLP's Form 8-K filed March 1, 2016 (Commission File No. 001-35666))
|
10.19
|
†
|
Future Development Gas Gathering Agreement, dated October 1, 2011, by and between Encana Oil & Gas (USA) Inc., Grand River Gathering, LLC, and Summit Midstream Partners, LLC (Incorporated herein by reference to Exhibit 10.9 to SMLP's Amendment No. 1 to its Form S-1 Registration Statement dated September 14, 2012 (Commission File No. 333-183466))
|
10.20
|
†
|
Mamm Creek Gas Gathering Agreement, dated October 1, 2011, by and between Encana Oil & Gas (USA) Inc., Grand River Gathering, LLC, and Summit Midstream Partners, LLC (Incorporated herein by reference to Exhibit 10.10 to SMLP's Amendment No. 1 to its Form S-1 Registration Statement dated September 14, 2012 (Commission File No. 333-183466))
|
10.21
|
*
|
Second Amended and Restated Employment Agreement, dated July 20, 2015, and effective August 13, 2015, by and between Summit Midstream Partners, LLC and Steve Newby (Incorporated herein by reference to Exhibit 10.1 to SMLP's Form 8-K dated July 24, 2015 (Commission File No. 001-35666))
|
10.22
|
*
|
Third Amended and Restated Employment Agreement, dated February 23, 2017 and effective March 1, 2017, by and between Summit Midstream Partners, LLC and Matthew S. Harrison
|
10.23
|
*
|
Second Amended and Restated Employment Agreement, dated February 1, 2016, and effective February 1, 2016, by and between Summit Midstream Partners, LLC and Brock Degeyter (Incorporated herein by reference to Exhibit 10.1 to SMLP's Form 8-K filed February 2, 2016 (Commission File No. 001-35666))
|
10.24
|
*
|
Second Amended and Restated Employment Agreement, dated February 23, 2017 and effective March 1, 2017, by and between Summit Midstream Partners, LLC and Brad N. Graves
|
10.25
|
*
|
Employment Agreement, effective December 1, 2015, by and between Summit Midstream Partners, LLC and Leonard Mallett (Incorporated herein by reference to Exhibit 10.1 to SMLP's Current Report on Form 8-K filed November 17, 2015 (Commission File No. 001-35666))
|
10.26
|
*
|
Summit Midstream Partners, LP 2012 Long-Term Incentive Plan (Incorporated herein by reference to Exhibit 10.2 to SMLP's Current Report on Form 8-K dated October 4, 2012 (Commission File No. 001-35666))
|
10.27
|
*
|
Summit Midstream Partners, LP 2012 Long-Term Incentive Plan Phantom Unit Agreement (Incorporated herein by reference to Exhibit 10.1 to SMLP's Current Report on Form 8-K dated March 17, 2014 (Commission File No. 001-35666))
|
10.28
|
*
|
Form of Director Unit Award Agreement (Incorporated herein by reference to Exhibit 10.3 to SMLP's Current Report on Form 8-K dated October 4, 2012 (Commission File No. 001-35666))
|
10.29
|
*
|
Award Agreement by and between Summit Midstream GP, LLC, Summit Midstream Partners, LP and Leonard Mallett (Incorporated herein by reference to Exhibit 10.2 to SMLP's Current Report on Form 8-K filed November 17, 2015 (Commission File No. 001-35666))
|
10.30
|
*
|
Summit Midstream Partners, LLC Deferred Compensation Plan dated as of July 1, 2013 (Incorporated herein by reference to Exhibit 4.3 to SMLP's Form S-8 Registration Statement dated June 28, 2013 (Commission File No. 333-189684))
|
12.1
|
|
Ratio of Earnings to Fixed Charges
|
21.1
|
|
List of Subsidiaries
|
23.1
|
|
Consent of Deloitte & Touche LLP
-
Summit Midstream Partners, LP
|
23.2
|
|
Consent of Deloitte & Touche LLP - Ohio Gathering Company, L.L.C.
|
23.3
|
|
Consent of Deloitte & Touche LLP - Ohio Condensate Company, L.L.C.
|
23.4
|
|
Consent of PricewaterhouseCoopers LLP - Ohio Gathering Company, L.L.C.
|
23.5
|
|
Consent of PricewaterhouseCoopers LLP - Ohio Condensate Company, L.L.C.
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification, executed by Steven J. Newby, President, Chief Executive Officer and Director
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification, executed by Matthew S. Harrison, Executive Vice President and Chief Financial Officer
|
32.1
|
|
Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350), executed by Steven J. Newby, President, Chief Executive Officer and Director, and Matthew S. Harrison, Executive Vice President and Chief Financial Officer
|
99.1
|
|
Ohio Gathering Company, L.L.C. Financial Statements as of and for the year ended December 31, 2016
|
99.2
|
|
Ohio Condensate Company, L.L.C. Financial Statements as of and for the year ended December 31, 2016
|
99.3
|
|
Ohio Gathering Company, L.L.C. Financial Statements as of and for the years ended December 31, 2015 and 2014 (Incorporated herein by reference to Exhibit 99.3 to SMLP's Amendment No. 1 to Current Report on Form 8-K dated May 13, 2016 (Commission File No. 001-35666))
|
99.4
|
|
Ohio Condensate Company, L.L.C. Financial Statements as of and for the years ended December 31, 2015 and 2014
|
101.INS
|
**
|
XBRL Instance Document (1)
|
101.SCH
|
**
|
XBRL Taxonomy Extension Schema
|
101.CAL
|
**
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF
|
**
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB
|
**
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE
|
**
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
Summit Midstream Partners, LP
|
|
(Registrant)
|
|
|
|
By: Summit Midstream GP, LLC (its General Partner)
|
|
|
February 27, 2017
|
/s/ Matthew S. Harrison
|
|
Matthew S. Harrison, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
|
Signature
|
|
Title
|
|
Date
|
/s/ Steven J. Newby
|
|
Director, President and Chief Executive Officer (Principal Executive Officer)
|
|
February 27, 2017
|
Steven J. Newby
|
|
|
|
|
|
|
|
|
|
/s/ Matthew S. Harrison
|
|
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
February 27, 2017
|
Matthew S. Harrison
|
|
|
|
|
|
|
|
|
|
/s/ Matthew F. Delaney
|
|
Director
|
|
February 27, 2017
|
Matthew F. Delaney
|
|
|
|
|
|
|
|
|
|
/s/ Peter Labbat
|
|
Director
|
|
February 27, 2017
|
Peter Labbat
|
|
|
|
|
|
|
|
|
|
/s/ Thomas K. Lane
|
|
Director
|
|
February 27, 2017
|
Thomas K. Lane
|
|
|
|
|
|
|
|
|
|
/s/ Jerry L. Peters
|
|
Director
|
|
February 27, 2017
|
Jerry L. Peters
|
|
|
|
|
|
|
|
|
|
/s/ Scott A. Rogan
|
|
Director
|
|
February 27, 2017
|
Scott A. Rogan
|
|
|
|
|
|
|
|
|
|
/s/ Jeffrey R. Spinner
|
|
Director
|
|
February 27, 2017
|
Jeffrey R. Spinner
|
|
|
|
|
|
|
|
|
|
/s/ Susan Tomasky
|
|
Director
|
|
February 27, 2017
|
Susan Tomasky
|
|
|
|
|
|
|
|
|
|
/s/ Robert M. Wohleber
|
|
Director
|
|
February 27, 2017
|
Robert M. Wohleber
|
|
|
|
|
Exhibit 10.22
EXECUTION VERSION
Amended and Restated Employment Agreement
This Amended and Restated Employment Agreement (the Agreement ), effective as of March 1, 2017 (the Effective Date ), is made by and between Matthew S. Harrison (the Executive ) and Summit Midstream Partners, LLC, a Delaware limited liability company (together with any of its subsidiaries and affiliates as may employ the Executive from time to time, and any successor(s) thereto, the Company ).
RECITALS
A. The Company and the Executive are parties to an employment agreement, dated September 13, 2013, which was subsequently amended and restated on September 14, 2015 (together, the Original Employment Agreement ).
B. The Company and the Executive desire to amend and restate the Original Employment Agreement in the form hereof.
C. The Company desires to assure itself of the continued services of the Executive by engaging the Executive to perform services under the terms hereof.
D. The Executive desires to continue to provide services to the Company on the terms herein provided.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows:
1. Certain Definitions
(a) AAA shall have the meaning set forth in Section 19.
(b) Affiliate shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person where control shall have the meaning given such term under Rule 405 of the Securities Act of 1933, as amended from time to time.
(c) Agreement shall have the meaning set forth in the preamble hereto.
(d) Annual Base Salary shall have the meaning set forth in Section 3(a).
(e) Annual Bonus shall have the meaning set forth in Section 3(b).
(f) Board shall mean the Board of Managers of the Company or any successor governing body.
(g) The Company shall have Cause to terminate the Executives employment hereunder upon: (i) the Executives willful failure to substantially perform the duties set forth herein (other than any such failure resulting from the Executives Disability); (ii) the Executives willful failure to carry out, or comply with, in any material respect any lawful directive of the Board; (iii) the Executives commission at any time of any act or omission that results in, or may reasonably be expected to result in, a conviction, plea of no contest, plea of nolo contendere , or imposition of unadjudicated probation for any felony or crime involving moral turpitude; (iv) the Executives unlawful use (including being under the influence) or possession of illegal drugs on the Companys premises or while performing the Executives duties and responsibilities hereunder; (v) the Executives commission at any time of any act of fraud, embezzlement, misappropriation, material misconduct, conversion of assets of the Company or breach of fiduciary duty against the Company (or any predecessor thereto or successor thereof); or (vi) the Executives material breach of this Agreement, the SMM LLC Agreement or other agreements with the Company (including, without limitation, any breach of the restrictive covenants of any such agreement); and which, in the case of clauses (i), (ii) and (vi), continues beyond thirty (30) days after the Company has provided the Executive written notice of such failure or breach (to the extent that, in the reasonable judgment of the Board, such failure or breach can be cured by the Executive), so long as such notice is provided within ninety (90) days after the Company knew or should have known of such condition.
(h) Change in Control shall mean: (i) any person or group within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act, other than the Company, Energy Capital Partners II, LP or any of their respective Affiliates (as determined immediately prior to such event, but excluding Energy Capital Partners III, LP and any Affiliates controlled by Energy Capital Partners III, LP and any other Affiliates of Energy Capital Partners II, LP formed after the Effective Date, collectively the Excluded Affiliates ), shall become the beneficial owners, by way of merger, acquisition, consolidation, recapitalization, reorganization or otherwise, of fifty percent (50%) or more of the combined voting power of the equity interests in the General Partner or the Partnership; (ii) the limited partners of the Partnership approve, in one or a series of transactions, a plan of complete liquidation of the Partnership, (iii) the sale or other disposition by the General Partner or the Partnership of all or substantially all of its assets in one or more transactions to any Person other than the Company, the General Partner, the Partnership or Energy Capital Partners II, LP or any of their respective Affiliates (but excluding the Excluded Affiliates); or (iv) a transaction resulting in a Person other than the Company, the General Partner or Energy Capital Partners II or any of their respective Affiliates (as determined immediately prior to such event, but excluding the Excluded Affiliates) being the sole general partner of the Partnership.
(i) Code shall mean the Internal Revenue Code of 1986, as amended.
(j) Company shall, except as otherwise provided in Section 7(j), have the meaning set forth in the preamble hereto.
(k) Compensation Committee shall mean the Compensation Committee of the Board, or if no such committee exists, the Board.
(l) Date of Termination shall mean (i) if the Executives employment is terminated due to the Executives death, the date of the Executives death; (ii) if the Executives employment is terminated due to the Executives Disability, the date determined pursuant to Section 4(a)(ii); (iii) if the Executives employment is terminated pursuant to Section 4(a)(iii)-(vi) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b), whichever is earlier; or (iv) if the Executives employment is terminated pursuant to Section 4(a)(vii)-(viii), the date immediately following the expiration of the then-current Term.
(m) Disability shall mean the Executives inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that can be expected to last for a continuous period of not less than twelve (12) months as determined by a physician jointly selected by the Company and the Executive.
(n) Effective Date shall have the meaning set forth in the preamble hereto.
(o) Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
(p) Excise Tax shall have the meaning set forth in Section 6(b).
(q) Executive shall have the meaning set forth in the preamble hereto.
(r) Extension Term shall have the meaning set forth in Section 2(b).
(s) First Payment Date shall have the meaning set forth in Section 5(b)(ii).
(t) General Partner means Summit Midstream GP, LLC, a Delaware limited liability company.
(u) The Executive shall have Good Reason to terminate the Executives employment hereunder within two (2) years after the occurrence of one or more of the following conditions without the Executives written consent: (i) a material diminution in the Executives authority, duties, or responsibilities, as described herein; (ii) a material diminution in the Executives Annual Base Salary, target Annual Bonus (as a percentage of Annual Base Salary) or Annual Bonus range (as a percentage of Annual Base Salary), in each case as described herein; (iii) a material change in the geographic location at which the Executive must perform the Executives services hereunder that requires the Executive to relocate his residence to a location more than fifty (50) miles from Atlanta, Georgia; or (iv) any other action or inaction that constitutes a material breach of this Agreement
by the Company; and which, in the case of any of the foregoing, continues beyond thirty (30) days after the Executive has provided the Company written notice that the Executive believes in good faith that such condition giving rise to such claim of Good Reason has occurred, so long as such notice is provided within ninety (90) days after the initial existence of such condition.
(v) Initial Term shall have the meaning set forth in Section 2(b).
(w) Installment Payments shall have the meaning set forth in Section 5(b)(ii).
(x) LTIP shall mean the Summit Midstream Partners, LP 2012 Long-Term Incentive Plan adopted by the Partnership in connection with Registration Statement 333-184214, filed by the Partnership with the Securities and Exchange Commission on October 1, 2012, and any additional long-term incentive plan adopted in the future and identified by the Company or the Partnership, in the adopting resolution or otherwise, as an LTIP pursuant hereto.
(y) Noncompete Option shall mean the Companys option, in its sole discretion, in the event of a termination of employment pursuant to Section 4(a)(vii) ( Non-Extension of Term by the Company ) or Section 4(a)(viii) ( Non-Extension of Term by the Executive ), to extend the Restricted Period through a date on or prior to the first (1st) anniversary of the Date of Termination, upon advance written notice to the Executive not less than thirty (30) days prior to the end of the then-current Term in the case of termination pursuant to Section 4(a)(vii) ( Non-Extension of Term by the Company ), or not less than thirty (30) days following such Notice of Non-Extension by Executive in case of termination pursuant to Section 4(a)(viii) ( Non-Extension of Term by the Executive ).
(z) Notice of Termination shall have the meaning set forth in Section 4(b).
(aa) Original Employment Agreement shall have the meaning set forth in the recitals hereto.
(bb) Partnership means Summit Midstream Partners, LP, a Delaware limited partnership.
(cc) Performance Targets shall have the meaning set forth in Section 3(b).
(dd) Person shall mean any individual, natural person, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any company limited by shares, limited liability company or joint stock company), incorporated or unincorporated association, governmental authority, firm, society or other enterprise, organization or other entity of any nature.
(ee) Proprietary Information shall have the meaning set forth in Section 7(d).
(ff) Prorated Termination Bonus shall have the meaning set forth in Section 3(b).
(gg) Release shall have the meaning set forth in Section 5(b)(ii).
(hh) Restricted Period shall mean the period from the Effective Date through (i) with respect to any termination of employment (other than a termination of employment pursuant to Section 4(a)(vii) ( Non-Extension of Term by the Company ) or Section 4(a)(viii) ( Non-Extension of Term by the Executive )), the first (1st) anniversary of the Date of Termination, and (ii) with respect to a termination of employment pursuant to Section 4(a)(vii) ( Non-Extension of Term by the Company ) or Section 4(a)(viii) ( Non-Extension of Term by the Executive ), the Date of Termination or, in the event that the Company exercises its Noncompete Option, the date elected by the Company thereunder.
(ii) Section 409A shall mean Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date.
(jj) Severance Payment shall have the meaning set forth in Section 5(b)(i).
(kk) Severance Period shall mean: (A) if the Executives employment shall be terminated by the Company without Cause pursuant to Section 4(a)(iv) or by the Executives resignation for Good Reason pursuant to Section 4(a)(v), the period beginning on the Date of Termination and ending on the first (1 st ) anniversary of the Date of Termination, and (B) if the Executives employment shall be terminated due to non-extension of the Initial Term or any Extension Term by the Company pursuant to Section 4(a)(vii) or by the Executive pursuant to Section 4(a)(viii), but only if the Company exercises its Noncompete Option in connection with such termination, the period beginning on the Date of Termination and ending on the expiration date of the Restricted Period (as elected by the Company pursuant to its Noncompete Option).
(ll) SMM LLC Agreement shall mean that certain Limited Liability Company Agreement of Summit Midstream Management, LLC, a Delaware limited liability company, as it may be amended, modified or supplemented from time to time.
(mm) Term shall have the meaning set forth in Section 2(b).
(nn) Total Payments shall have the meaning set forth in Section 6(b).
2. Employment
(a) In General . The Company shall employ the Executive and the Executive shall enter the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.
(b)
Term of Employment
. The initial term of employment under this Agreement (the
Initial Term
) shall be for the period beginning on the Effective Date and ending on March 1, 2019, unless earlier terminated as provided in Section 4. The Initial Term shall automatically be
extended for successive one (1) year periods (each, an Extension Term and, collectively with the Initial Term, the Term ), unless either party hereto gives notice of non-extension to the other no later than thirty (30) days prior to the expiration of the then-applicable Term.
(c) Position and Duties . During the Term, the Executive: (i) shall serve as Executive Vice President - Chief Financial Officer of the Company, with responsibilities, duties and authority customary for such position, subject to direction by the Board; (ii) shall report directly to the Chief Executive Officer of the Company; (iii) shall devote substantially all the Executives working time and efforts to the business and affairs of the Company and its subsidiaries, provided that the Executive may (1) serve on corporate, civic, charitable, industry or professional association boards or committees, subject to the Boards prior written consent in the case of any such board or committee that relates directly or indirectly to the business of the Company or its subsidiaries (which consent shall not unreasonably be withheld), (2) deliver lectures, fulfill speaking engagements or teach at educational institutions and (3) manage his personal investments, so long as none of such activities meaningfully interferes with the performance of the Executives duties and responsibilities hereunder, or involves a conflict of interest with the Executives duties or responsibilities hereunder or a breach of the covenants contained in Section 7; and (iv) agrees to observe and comply with the Companys rules and policies as adopted by the Company from time to time, which have been made available to the Executive.
3. Compensation and Related Matters
(a) Annual Base Salary . During the Term, the Executive shall receive a base salary at a rate of $415,000.00 per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to review and upward, but not downward, adjustment by the Board in its sole discretion (the Annual Base Salary ).
(b) Annual Bonus . With respect to each calendar year that ends during the Term, commencing with calendar year 2017, the Executive shall be eligible to receive an annual cash bonus (the Annual Bonus ) ranging from zero to two hundred percent (200%) of the Annual Base Salary, with a target Annual Bonus equal to one hundred percent (100%) of the Annual Base Salary, based upon annual performance targets (the Performance Targets ) established by the Board in its sole discretion. The amount of the Annual Bonus shall be based upon attainment of the Performance Targets, as determined by the Board (or any authorized committee of the Board) in its sole discretion. Each such Annual Bonus shall be payable on such date as is determined by the Board, but in any event on or prior to March 15 of the calendar year immediately following the calendar year with respect to which such Annual Bonus relates. Notwithstanding the foregoing, no bonus shall be payable with respect to any calendar year unless the Executive remains continuously employed with the Company during the period beginning on the Effective Date and ending on December 31 of such year; provided that if the Executives employment is terminated pursuant to Section 4(a)(i), (ii), (iv), (v) or (vii), the Company shall pay to the Executive a prorated Annual Bonus with respect to the calendar year in which the Date of Termination occurs equal to the target Annual Bonus for such calendar year multiplied by a fraction, the numerator of which is the number of calendar days during such calendar year that the Executive was continuously employed by the Company and the denominator of which is 365 (the Prorated Termination Bonus ); provided further that, in the case of a termination pursuant to Section 4(a)(iv), no portion of the Prorated Termination Bonus
shall be paid unless the Executive timely executes the Release and does not revoke the Release within the time periods set forth in Section 5(b)(ii).
(c) Benefits . The Executive shall be eligible to participate in all benefit plans, programs and other arrangements of the Company that may be offered by the Company to its executives as a group (including, without limitation, medical and dental insurance and a 401(k) plan). During the lesser of the period during which Executive or a qualifying beneficiary (as defined in Section 607 of ERISA) has in effect an election for post-termination continuation coverage or conversion rights to medical and dental benefits under applicable law, including Section 4980 of the Code (COBRA), or the period ending on the 18-month anniversary of the Date of Termination, Executive (or, if applicable, the qualifying beneficiary) shall be entitled to such coverage at an out-of-pocket premium cost that does not exceed the out-of-pocket premium cost applicable to similarly situated active employees (and their eligible dependents).
(d) Vacation; Paid Time Off; Holidays . During the Term, the Executive shall be entitled to four (4) weeks of paid time off ( PTO ) each full calendar year. The PTO shall be used for vacation and sick days. Any vacation shall be taken at the reasonable and mutual convenience of the Company and the Executive. Any PTO that the Executive is entitled to in any calendar year that is not used by the end of such calendar year shall be forfeited, except for up to five days of PTO each year that may be carried forward to the following year. Holidays shall be provided in accordance with Company policy, as in effect from time to time.
(e) Business Expenses . During the Term, the Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executives duties to the Company in accordance with the Companys applicable expense reimbursement policies and procedures.
(f) Tax Reimbursement . During the Term, the Company shall reimburse the Executive for annual tax preparation services and ongoing tax advice of up to $12,000 per year, beginning with such expenses incurred in 2015.
4. Termination
The Executives employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:
(a) Circumstances
(i) Death . The Executives employment hereunder shall terminate upon the Executives death.
(ii) Disability . If the Executive incurs a Disability, the Company may give the Executive written notice of its intention to terminate the Executives employment. In that event, the Executives employment with the Company shall terminate, effective on the later of the thirtieth (30 th ) day after receipt of such notice by the Executive or the date specified in such notice; provided that within the thirty (30)
day period following receipt of such notice, the Executive shall not have returned to full-time performance of the Executives duties hereunder.
(iii) Termination for Cause . The Company may terminate the Executives employment for Cause.
(iv) Termination without Cause . The Company may terminate the Executives employment without Cause.
(v) Resignation for Good Reason . The Executive may resign from the Executives employment for Good Reason.
(vi) Resignation without Good Reason . The Executive may resign from the Executives employment without Good Reason.
(vii) Non-Extension of Term by the Company . The Company may give notice of non-extension to the Executive pursuant to Section 2(b). For the avoidance of doubt, non-extension of the Term by the Company shall not constitute termination by the Company without Cause.
(viii) Non-Extension of Term by the Executive . The Executive may give notice of non-extension to the Company pursuant to Section 2(b). For the avoidance of doubt, non-extension of the Term by the Executive shall not constitute resignation for Good Reason.
(b) Notice of Termination . Any termination of the Executives employment by the Company or by the Executive under this Section 4 (other than a termination pursuant to Section 4(a)(i) above) shall be communicated by a written notice to the other party hereto: (i) indicating the specific termination provision in this Agreement relied upon, (ii) except with respect to a termination pursuant to Sections 4(a)(iv), (vi), (vii) or (viii), setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executives employment under the provision so indicated, and (iii) specifying a Date of Termination which, if submitted by the Executive (or, in the case of a termination described in Section 4(a)(ii), by the Company), shall be at least thirty (30) days following the date of such notice (a Notice of Termination ); provided , however , that a Notice of Termination delivered by the Company pursuant to Section 4(a)(ii) shall not be required to specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii); and provided , further , that in the event that the Executive delivers a Notice of Termination (other than a notice of non-extension under Section 4(a)(viii) above) to the Company, the Company may, in its sole discretion, accelerate the Date of Termination to any date that occurs following the date of Companys receipt of such Notice of Termination (even if such date is prior to the date specified in such Notice of Termination). A Notice of Termination submitted by the Company may provide for a Date of Termination on the date the Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion. The failure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Company or
the Executive hereunder or preclude the Company or the Executive from asserting such fact or circumstance in enforcing the Companys or the Executives rights hereunder.
5. Company Obligations Upon Termination of Employment
(a) In General . Upon a termination of the Executives employment for any reason, the Executive (or the Executives estate) shall be entitled to receive: (i) any portion of the Executives Annual Base Salary through the Date of Termination not theretofore paid, (ii) any expenses owed to the Executive under Section 3(e), (iii) any accrued PTO owed to the Executive pursuant to Section 3(d), and (iv) any amount arising from the Executives participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3(c), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements. Any Annual Bonus earned for any calendar year completed prior to the Date of Termination, but unpaid prior to such date, and any Prorated Termination Bonus owed pursuant to the last sentence of Section 3(b), shall be paid within thirty (30) days after the Date of Termination (but in any event on or prior to March 15 of the calendar year immediately following such completed calendar year with respect to which such Annual Bonus or Prorated Termination Bonus was earned). Except as otherwise set forth in Section 5(b) below, the payments and benefits described in this Section 5(a) shall be the only payments and benefits payable in the event of the Executives termination of employment for any reason.
(b) Severance Payment
(i) In the event of the Executives termination of employment under the circumstances described below, then, in addition to the payments and benefits described in Section 5(a) above, the Company shall, during the Severance Period, pay to the Executive an amount (the Severance Payment ) calculated as described below:
(A) If the Executives employment shall be terminated by the Company without Cause pursuant to Section 4(a)(iv) or by the Executives resignation for Good Reason pursuant to Section 4(a)(v), or due to non-extension of the Initial Term or any Extension Term by the Company pursuant to Section 4(a)(vii), then the Severance Payment shall be an amount equal to one and one-half (1.5) times the sum of (1) the Annual Base Salary for the year in which the Date of Termination occurs, and (2) the Annual Bonus paid to the Executive in respect of the calendar year immediately preceding the year in which the Date of Termination occurs.
(B) If the Executives employment shall be terminated due to non-extension of the Initial Term or any Extension Term by the Executive pursuant to Section 4(a)(viii), but only if the Company exercises its Noncompete Option in connection with such termination, then the Severance Payment shall be an amount equal to (1) the sum of (x) the Annual Base Salary for the year in which the Date of Termination occurs, and (y) the Annual Bonus paid to the Executive in respect of the calendar year immediately preceding the year in which the Date of Termination
occurs, multiplied by (2) a fraction, the numerator of which is equal to the number of days from the Date of Termination through the expiration date of the Restricted Period (as elected by the Company pursuant to its Noncompete Option), and the denominator of which is 365.
(ii) The Severance Payment shall be in lieu of notice or any other severance benefits to which the Executive might otherwise be entitled. Notwithstanding anything herein to the contrary, (A) no portion of the Severance Payment shall be paid unless, on or prior to the thirtieth (30th) day following the Date of Termination, the Executive timely executes a general waiver and release of claims agreement substantially in the form attached hereto as Exhibit A (the Release ), which Release shall not have been revoked by the Executive prior to the expiration of the period (if any) during which any portion of such Release is revocable under applicable law, and (B) as of the first date on which the Executive violates any covenant contained in Section 7, any remaining unpaid portion of the Severance Payment shall thereupon be forfeited. Subject to the provisions of Section 9, the Severance Payment shall be paid in equal installments during the Severance Period, at the same time and in the same manner as the Annual Base Salary would have been paid had the Executive remained in active employment during the Severance Period, in accordance with the Companys normal payroll practices in effect on the Date of Termination; provided that any installment that would otherwise have been paid prior to the first normal payroll payment date occurring on or after the thirtieth (30th) day following the Date of Termination (such payroll date, the First Payment Date ) shall instead be paid on the First Payment Date. For purposes of Section 409A (including, without limitation, for purposes of Section 1.409A-2(b)(2)(iii) of the Department of Treasury Regulations), the Executives right to receive the Severance Payment in the form of installment payments (the Installment Payments ) shall be treated as a right to receive a series of separate payments and, accordingly, each Installment Payment shall at all times be considered a separate and distinct payment.
(c) The provisions of this Section 5 shall supersede in their entirety any severance payment provisions in any severance plan, policy, program or other arrangement maintained by the Company.
6. Change in Control
(a) Equity Awards . Notwithstanding anything to the contrary in this Agreement or any other agreement, including the LTIP and any award agreement thereunder, all equity awards granted to the Executive under the LTIP and held by the Executive as of immediately prior to a Change in Control, to the extent unvested, shall become fully vested immediately prior to the Change in Control.
(b) Golden Parachute Excise Tax Protection . Notwithstanding any provision of this Agreement, if any portion of the payments or benefits provided to the Executive hereunder, or under any other agreement with the Executive or any plan, policy or arrangement of the Company or any of its Affiliates (in the aggregate, Total Payments ), would constitute an
excess parachute payment and would, but for this Section 6(b), result in the imposition on the Executive of an excise tax under Section 4999 of the Code (the Excise Tax ), then the Total Payments to be made to the Executive shall either be (i) delivered in full, or (ii) reduced by such amount such that no portion of the Total Payments would be subject to the Excise Tax, whichever of the foregoing results in the receipt by the Executive of the greatest benefit on an after-tax basis (taking into account the applicable federal, state and local income taxes and the Excise Tax). The determination of whether a reduction in Total Payments is necessary and the amount of any such reduction shall be made by the Company in its reasonable discretion and in reliance on its tax advisors. If the Company so determines that a reduction in Total Payments is required, such reduction shall apply first pro rata to (A) cash payments subject to Section 409A of the Code as deferred compensation and (B) cash payments not subject to Section 409A of the Code (in each case with the cash payments otherwise scheduled to be paid latest in time reduced first), and then pro rata to (C) equity-based compensation subject to Section 409A of the Code as deferred compensation and (D) equity-based compensation not subject to Section 409A of the Code.
7. Restrictive Covenants
(a) The Executive shall not, at any time during the Restricted Period, directly or indirectly engage in, have any equity interest in, or manage or operate any person, firm, corporation, partnership, business or entity (whether as director, officer, employee, agent, representative, partner, security holder, consultant or otherwise) that engages in (either directly or through any subsidiary or Affiliate thereof) any business or activity (i) relating to midstream assets (including, without limitation, the gathering, processing and transportation of natural gas and crude oil) in North America, which competes with the business of the Company or any entity owned by the Company, or (ii) which the Company or any of its Affiliates has taken active steps to engage in or acquire, but only if the Executive directly or indirectly engages in, has any equity interest in, or manages or operates, such business or activity (whether as director, officer, employee, agent, representative, partner, security holder, consultant or otherwise). Notwithstanding the foregoing, the Executive shall be permitted to acquire a passive stock or equity interest in such a business; provided that such stock or other equity interest acquired is not more than five percent (5%) of the outstanding interest in such business.
(b) The Executive shall not, at any time during the Term or during the twelve (12)-month period immediately following the Date of Termination, directly or indirectly, either for himself or on behalf of any other entity, (i) recruit or otherwise solicit or induce any employee, customer, subscriber or supplier of the Company to terminate its employment or arrangement with the Company, or otherwise change its relationship with the Company, or (ii) hire, or cause to be hired, any person who was employed by the Company and served in a capacity of vice president (or any person serving in a capacity senior to vice president) at any time during the twelve (12)-month period immediately prior to the Date of Termination, to terminate his or her employment with the Company.
(c) The provisions contained in Sections 7(a) and (b) may be altered and/or waived to be made less restrictive on the Executive with the prior written consent of the Board or the Compensation Committee.
(d) Except as the Executive reasonably and in good faith determines to be required in the faithful performance of the Executives duties hereunder or in accordance with Section 7(f), the Executive shall, during the Term and after the Date of Termination, maintain in confidence and shall not directly or indirectly, use, disseminate, disclose or publish, or use for the Executives benefit or the benefit of any person, firm, corporation or other entity, any confidential or proprietary information or trade secrets of or relating to the Company, including, without limitation, information with respect to the Companys operations, processes, protocols, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment ( Proprietary Information ), or deliver to any person, firm, corporation or other entity, any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information. The Executives obligation to maintain and not use, disseminate, disclose or publish, or use for the Executives benefit or the benefit of any person, firm, corporation or other entity, any Proprietary Information after the Date of Termination will continue so long as such Proprietary Information is not, or has not by legitimate means become, generally known and in the public domain (other than by means of the Executives direct or indirect disclosure of such Proprietary Information) and continues to be maintained as Proprietary Information by the Company. The parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Company (and any successor or assignee of the Company).
(e) Upon termination of the Executives employment with the Company for any reason, the Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning the Companys customers, business plans, marketing strategies, products or processes.
(f) The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company (if lawfully permitted to do so) the earliest possible notice thereof, and shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought, and shall assist such counsel in resisting or otherwise responding to such process. Upon notification from Executive of such subpoena or other legal process, but only to the extent that such notification is provided during the Restricted Period, the Company shall, at its reasonable expense, retain mutually acceptable legal counsel to represent Executive in connection with Executives response to any such subpoena or other legal process. The Executive may also disclose Proprietary Information if: (i) in the reasonable written opinion of counsel for the Executive furnished to the Company, such information is required to be disclosed for the Executive not to be in violation of any applicable law or regulation or (ii) the Executive is required to disclose such information in connection with the enforcement of any rights under this Agreement or any other agreements between the Executive and the Company.
(g) The Executive agrees not to disparage the Company, any of its products or practices, or any of its directors, officers, agents, representatives, equity holders or Affiliates, either orally or in writing, at any time; provided that the Executive may confer in confidence with the Executives legal representatives, make truthful statements to any government agency in
sworn testimony, or make truthful statements as otherwise required by law. The Company agrees that, upon the termination of the Executives employment hereunder, it shall advise its directors and executive officers not to disparage the Executive, either orally or in writing, at any time; provided that they may confer in confidence with the Companys and their legal representatives and make truthful statements as required by law.
(h) Prior to accepting other employment or any other service relationship during the Restricted Period, the Executive shall provide a copy of this Section 7 to any recruiter who assists the Executive in obtaining other employment or any other service relationship and to any employer or person with which the Executive discusses potential employment or any other service relationship.
(i) In the event the terms of this Section 7 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.
(j) As used in this Section 7, the term Company shall include the Company, its parent, related entities, and any of its direct or indirect subsidiaries.
8. Injunctive Relief
The Executive recognizes and acknowledges that a breach of the covenants contained in Section 7 will cause irreparable damage to the Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in Section 7, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief.
9. Section 409A
(a) General . The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that any amounts payable hereunder will be immediately taxable to the Executive under Section 409A, the Company reserves the right to (without any obligation to do so or to indemnify the Executive for failure to do so) (i) adopt such amendments to this Agreement or adopt such other policies and procedures (including amendments, policies and procedures with retroactive effect) that it determines to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for the Company and/or (ii) take such other actions it determines to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder. Notwithstanding
anything herein to the contrary, no provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A from the Executive or any other individual to the Company or any of its Affiliates, employees or agents.
(b) Separation from Service under Section 409A; Section 409A Compliance . Notwithstanding anything herein to the contrary: (i) no termination or other similar payments and benefits hereunder shall be payable unless the Executives termination of employment constitutes a separation from service within the meaning of Section 1.409A-1(h) of the Department of Treasury Regulations; (ii) if the Executive is deemed at the time of the Executives separation from service to be a specified employee for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of any termination or other similar payments and benefits to which the Executive may be entitled hereunder (after taking into account all exclusions applicable to such payments or benefits under Section 409A) is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of such payments and benefits shall not be provided to the Executive prior to the earlier of (x) the expiration of the six (6)-month period measured from the date of the Executives separation from service with the Company (as such term is defined in the Department of Treasury Regulations issued under Section 409A) or (y) the date of the Executives death; provided that upon the earlier of such dates, all payments and benefits deferred pursuant to this Section 9(b)(ii) shall be paid in a lump sum to the Executive, and any remaining payments and benefits due hereunder shall be provided as otherwise specified herein; (iii) the determination of whether the Executive is a specified employee for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of the Executives separation from service shall be made by the Company in accordance with the terms of Section 409A (including, without limitation, Section 1.409A-1(i) of the Department of Treasury Regulations and any successor provision thereto); (iv) to the extent that any Installment Payments under this Agreement are deemed to constitute nonqualified deferred compensation within the meaning of Section 409A, for purposes of Section 409A (including, without limitation, for purposes of Section 1.409A-2(b)(2)(iii) of the Department of Treasury Regulations), each such payment that the Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment; (v) to the extent that any reimbursements or corresponding in-kind benefits provided to the Executive under this Agreement are deemed to constitute deferred compensation under Section 409A, such reimbursements or benefits shall be provided reasonably promptly, but in no event later than December 31 of the year following the year in which the expense was incurred, and in any event in accordance with Section 1.409A-3(i)(1)(iv) of the Department of Treasury Regulations; and (vi) the amount of any such payments or expense reimbursements in one calendar year shall not affect the expenses or in-kind benefits eligible for payment or reimbursement in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and the Executives right to such payments or reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit.
10. Assignment and Successors
The Company may assign its rights and obligations under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise, and may assign or encumber this Agreement and its rights hereunder as security for
indebtedness of the Company and its Affiliates. The Executive may not assign the Executives rights or obligations under this Agreement to any individual or entity. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.
11. Governing Law
This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Delaware, without reference to the principles of conflicts of law of Delaware or any other jurisdiction, and where applicable, the laws of the United States.
12. Validity
The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
13. Notices
Any notice, request, claim, demand, document and other communication hereunder to any party hereto shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, to the following address (or at any other address as any party hereto shall have specified by notice in writing to the other party hereto):
(a) If to the Company:
Summit Midstream Partners, LLC
Attn: General Counsel
5910 N. Central Expressway
Suite 350
Dallas, Texas 75206
Facsimile: (214) 306-8047
with copies to:
Energy Capital Partners
51 John F. Kennedy Parkway, Suite 200
Short Hills, New Jersey 07078
Attn: Tom Lane
Facsimile: (973) 671-6101
and:
Energy Capital Partners
11943 El Camino Real, Suite 220
San Diego, California 92130
Attn: Andrew D. Singer
Facsimile: (858) 703-4401
and:
Latham & Watkins LLP
885 Third Avenue
New York, New York 10022-4802
Attn: Jed W. Brickner
Facsimile: (212) 751-4864
(b) If to the Executive, at the address set forth on the signature page hereto.
14. Counterparts
This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.
15. Entire Agreement
This Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) is intended by the parties hereto to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement (including, without limitation, any term sheet or offer letter). The parties hereto further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement. This Agreement expressly supersedes the Original Employment Agreement.
16. Amendments; Waivers
This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and a duly authorized officer of the Company and approved by the Board, which expressly identifies the amended provision of this Agreement. By an instrument in writing similarly executed and approved by the Board, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties hereto with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided , however , that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure to comply or perform. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.
17. No Inconsistent Actions
The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.
18. Construction
This Agreement shall be deemed drafted equally by both of the parties hereto. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party hereto shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) and and or are each used both conjunctively and disjunctively; (c) any, all, each, or every means any and all, and each and every; (d) includes and including are each without limitation; (e) herein, hereof, hereunder and other similar compounds of the word here refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.
19. Arbitration
Any dispute or controversy based on, arising under or relating to this Agreement shall be settled exclusively by final and binding arbitration, conducted before a single neutral arbitrator in Dallas, Texas in accordance with the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association (the AAA ) then in effect. Arbitration may be compelled, and judgment may be entered on the arbitration award in any court having jurisdiction; provided , however , that the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Section 7, and the Executive hereby consents that such restraining order or injunction may be granted without requiring the Company to post a bond. Only individuals who are (a) lawyers engaged full-time in the practice of law and (b) on the AAA roster of arbitrators shall be selected as an arbitrator. Within twenty (20) days of the conclusion of the arbitration hearing, the arbitrator shall prepare written findings of fact and conclusions of law. The arbitrator shall be entitled to award any relief available in a court of law. Each party shall bear its own costs and attorneys fees in connection with an arbitration; provided that the Company shall bear the cost of the arbitrator and the AAAs administrative fees.
20. Enforcement
If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.
21. Withholding
The Company shall be entitled to withhold from any amounts payable under this Agreement, any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.
22. Absence of Conflicts; Executive Acknowledgement
The Executive hereby represents that from and after the Effective Date the performance of the Executives duties hereunder will not breach any other agreement to which the Executive is a party. The Executive acknowledges that the Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on the Executives own judgment.
23. Survival
The expiration or termination of the Term shall not impair the rights or obligations of any party hereto which shall have accrued prior to such expiration or termination.
[Signature pages follow]
EXECUTION VERSION
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written.
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By: |
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Name: Steven J. Newby |
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Title: President and Chief Executive Officer |
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EXECUTIVE |
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By: |
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Matthew S. Harrison |
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Residence Address: |
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45 Old Stratton Chase |
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Atlanta, Georgia 30328 |
Signature Page to the
Employment Agreement for Matthew Harrison Final
EXHIBIT A
FORM OF RELEASE
Matthew Harrison (the Executive ) agrees for the Executive, the Executives spouse and child or children (if any), the Executives heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns, hereby forever to release, discharge, and covenant not to sue Summit Midstream Partners, LLC, a Delaware limited liability company (the Company ), and any of its past, present, or future parent, affiliated, related, and/or subsidiary entities, and all of the past and present directors, shareholders, officers, general or limited partners, employees, agents, and attorneys, and agents and representatives of such entities, and employee benefit plans in which the Executive is or has been a participant by virtue of his employment with the Company (collectively, the Releasees ), from any and all claims, debts, demands, accounts, judgments, rights, causes of action, equitable relief, damages, costs, charges, complaints, obligations, promises, agreements, controversies, suits, expenses, compensation, responsibility and liability of every kind and character whatsoever (including attorneys fees and costs), whether in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected, which the Executive has or may have had against such Releasees based on any events or circumstances arising or occurring on or prior to the date this release (the Release ) is executed, arising directly or indirectly out of, relating to, or in any other way involving in any manner whatsoever, (a) the Executives employment with the Company or its subsidiaries or the termination thereof or (b) the Executives status at any time as a holder of any securities of the Company, and any and all claims arising under federal, state, or local laws relating to employment, or securities, including without limitation claims of wrongful discharge, breach of express or implied contract, fraud, misrepresentation, defamation, or liability in tort, claims of any kind that may be brought in any court or administrative agency, any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Family and Medical Leave Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act, and similar state or local statutes, ordinances, and regulations; provided , however , notwithstanding anything to the contrary set forth herein, that this Release shall not extend to (i) benefit claims under employee pension or welfare benefit plans in which the Executive is a participant by virtue of his employment with the Company or its subsidiaries, (ii) any rights under that certain Amended and Restated Employment Agreement, dated as of March 1, 2017, by and between the Company and the Executive, (iii) any rights of indemnification the Executive may have under any written agreement between the Executive and the Company (or its affiliates), the Companys Certificate of Incorporation, the Partnerships LP Agreement, the General Corporation Law of the State of Delaware, any applicable statute or common law, or pursuant to any applicable insurance policy, (iv) unemployment compensation, (v) contractual rights to vested equity awards, (vi) COBRA benefits and (viii) any rights that may not be waived as a matter of law.
The Executive understands that this Release includes a release of claims arising under the Age Discrimination in Employment Act (ADEA). The Executive understands and warrants that he has been given a period of 21 days to review and consider this Release. The Executive further warrants that he understands that he may use as much or all of his 21-day period as he wishes before signing, and warrants that he has done so. The Executive further warrants that he understands that, with respect to the release of age discrimination claims only, he has a period of
seven days after executing on the second signature line below to revoke the release of age discrimination claims by notice in writing to the Company.
The Executive is hereby advised to consult with an attorney prior to executing this Release. By his signature below, the Executive warrants that he has had the opportunity to do so and to be fully and fairly advised by that legal counsel as to the terms of this Release.
ACKNOWLEDGEMENT (AS TO ALL CLAIMS
OTHER THAN AGE DISCRIMINATION CLAIMS)
The undersigned, having had full opportunity to review this Release with counsel of his choosing, signifies his agreement to the terms of this Release (other than as it relates to age discrimination claims) by his signature below.
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Matthew Harrison |
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ACKNOWLEDGEMENT (AGE DISCRIMINATION CLAIMS)
The undersigned, having had full opportunity to review this Release with counsel of his choosing, signifies his agreement to the terms of this Release (as it relates to age discrimination claims) by his signature below.
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Exhibit 10.24
EXECUTION VERSION
Amended and Restated Employment Agreement
This Amended and Restated Employment Agreement (the Agreement ), effective as of March 1, 2017 (the Effective Date ), is made by and between Brad N. Graves (the Executive ) and Summit Midstream Partners, LLC, a Delaware limited liability company (together with any of its subsidiaries and affiliates as may employ the Executive from time to time, and any successor(s) thereto, the Company ).
RECITALS
A. The Company and the Executive are parties to an employment agreement, dated March 8, 2012, which was subsequently amended and restated on March 1, 2015 (together, the Original Employment Agreement ).
B. The Company and the Executive desire to amend and restate the Original Employment Agreement in the form hereof.
C. The Company desires to assure itself of the continued services of the Executive by engaging the Executive to perform services under the terms hereof.
D. The Executive desires to continue to provide services to the Company on the terms herein provided.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below the parties hereto agree as follows:
1. Certain Definitions
(a) AAA shall have the meaning set forth in Section 19.
(b) Affiliate shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person where control shall have the meaning given such term under Rule 405 of the Securities Act of 1933, as amended from time to time.
(c) Agreement shall have the meaning set forth in the preamble hereto.
(d) Annual Base Salary shall have the meaning set forth in Section 3(a).
(e) Annual Bonus shall have the meaning set forth in Section 3(b).
(f) Board shall mean the Board of Managers of the Company or any successor governing body.
(g) The Company shall have Cause to terminate the Executives employment hereunder upon: (i) the Executives willful failure to substantially perform the duties set forth herein (other than any such failure resulting from the Executives Disability); (ii) the Executives willful failure to carry out, or comply with, in any material respect any lawful directive of the Board; (iii) the Executives commission at any time of any act or omission that results in, or may reasonably be expected to result in, a conviction, plea of no contest, plea of nolo contendere , or imposition of unadjudicated probation for any felony or crime involving moral turpitude; (iv) the Executives unlawful use (including being under the influence) or possession of illegal drugs on the Companys premises or while performing the Executives duties and responsibilities hereunder; (v) the Executives commission at any time of any act of fraud, embezzlement, misappropriation, material misconduct, conversion of assets of the Company or breach of fiduciary duty against the Company (or any predecessor thereto or successor thereof); or (vi) the Executives material breach of this Agreement, the SMM LLC Agreement or other agreements with the Company (including, without limitation, any breach of the restrictive covenants of any such agreement); and which, in the case of clauses (i), (ii) and (vi), continues beyond thirty (30) days after the Company has provided the Executive written notice of such failure or breach (to the extent that, in the reasonable judgment of the Board, such failure or breach can be cured by the Executive), so long as such notice is provided within ninety (90) days after the Company knew or should have known of such condition.
(h) Change in Control shall mean: (i) any person or group within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act, other than the Company, Energy Capital Partners II, LP or any of their respective Affiliates (as determined immediately prior to such event, but excluding Energy Capital Partners III, LP and any Affiliates controlled by Energy Capital Partners III, LP and any other Affiliates of Energy Capital Partners II, LP formed after the Effective Date, collectively the Excluded Affiliates ), shall become the beneficial owners, by way of merger, acquisition, consolidation, recapitalization, reorganization or otherwise, of fifty percent (50%) or more of the combined voting power of the equity interests in the General Partner or the Partnership; (ii) the limited partners of the Partnership approve, in one or a series of transactions, a plan of complete liquidation of the Partnership, (iii) the sale or other disposition by the General Partner or the Partnership of all or substantially all of its assets in one or more transactions to any Person other than the Company, the General Partner, the Partnership or Energy Capital Partners II, LP or any of their respective Affiliates (but excluding the Excluded Affiliates); or (iv) a transaction resulting in a Person other than the Company, the General Partner or Energy Capital Partners II or any of their respective Affiliates (as determined immediately prior to such event, but excluding the Excluded Affiliates) being the sole general partner of the Partnership.
(i) Code shall mean the Internal Revenue Code of 1986, as amended.
(j) Company shall, except as otherwise provided in Section 7(j), have the meaning set forth in the preamble hereto.
(k) Compensation Committee shall mean the Compensation Committee of the Board, or if no such committee exists, the Board.
(l) Date of Termination shall mean (i) if the Executives employment is terminated due to the Executives death, the date of the Executives death; (ii) if the Executives employment is terminated due to the Executives Disability, the date determined pursuant to Section 4(a)(ii); (iii) if the Executives employment is terminated pursuant to Section 4(a)(iii)-(vi) either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4(b), whichever is earlier; or (iv) if the Executives employment is terminated pursuant to Section 4(a)(vii)-(viii), the date immediately following the expiration of the then-current Term.
(m) Disability shall mean the Executives inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that can be expected to last for a continuous period of not less than twelve (12) months as determined by a physician jointly selected by the Company and the Executive.
(n) Effective Date shall have the meaning set forth in the preamble hereto.
(o) Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
(p) Excise Tax shall have the meaning set forth in Section 6(b).
(q) Executive shall have the meaning set forth in the preamble hereto.
(r) Extension Term shall have the meaning set forth in Section 2(b).
(s) First Payment Date shall have the meaning set forth in Section 5(b)(ii).
(t) General Partner means Summit Midstream GP, LLC, a Delaware limited liability company.
(u) The Executive shall have Good Reason to terminate the Executives employment hereunder within two (2) years after the occurrence of one or more of the following conditions without the Executives written consent: (i) a material diminution in the Executives authority, duties, or responsibilities, as described herein; (ii) a material diminution in the Executives Annual Base Salary, target Annual Bonus (as a percentage of Annual Base Salary) or Annual Bonus range (as a percentage of Annual Base Salary), in each case as described herein; (iii) a material change in the geographic location at which the Executive must perform the Executives services hereunder that requires the Executive to relocate his residence to a location more than fifty (50) miles from Houston, Texas; or (iv) any other action or inaction that constitutes a material breach of this Agreement
by the Company; and which, in the case of any of the foregoing, continues beyond thirty (30) days after the Executive has provided the Company written notice that the Executive believes in good faith that such condition giving rise to such claim of Good Reason has occurred, so long as such notice is provided within ninety (90) days after the initial existence of such condition.
(v) Initial Term shall have the meaning set forth in Section 2(b).
(w) Installment Payments shall have the meaning set forth in Section 5(b)(ii).
(x) LTIP shall mean the Summit Midstream Partners, LP 2012 Long-Term Incentive Plan adopted by the Partnership in connection with Registration Statement 333-184214, filed by the Partnership with the Securities and Exchange Commission on October 1, 2012, and any additional long-term incentive plan adopted in the future and identified by the Company or the Partnership, in the adopting resolution or otherwise, as an LTIP pursuant hereto.
(y) Noncompete Option shall mean the Companys option, in its sole discretion, in the event of a termination of employment pursuant to Section 4(a)(vii) ( Non-Extension of Term by the Company ) or Section 4(a)(viii) ( Non-Extension of Term by the Executive ), to extend the Restricted Period through a date on or prior to the first (1st) anniversary of the Date of Termination, upon advance written notice to the Executive not less than thirty (30) days prior to the end of the then-current Term in the case of termination pursuant to Section 4(a)(vii) ( Non-Extension of Term by the Company ), or not less than thirty (30) days following such Notice of Non-Extension by Executive in case of termination pursuant to Section 4(a)(viii) ( Non-Extension of Term by the Executive ).
(z) Notice of Termination shall have the meaning set forth in Section 4(b).
(aa) Original Employment Agreement shall have the meaning set forth in the recitals hereto.
(bb) Partnership means Summit Midstream Partners, LP, a Delaware limited partnership.
(cc) Performance Targets shall have the meaning set forth in Section 3(b).
(dd) Person shall mean any individual, natural person, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any company limited by shares, limited liability company or joint stock company), incorporated or unincorporated association, governmental authority, firm, society or other enterprise, organization or other entity of any nature.
(ee) Proprietary Information shall have the meaning set forth in Section 7(d).
(ff) Prorated Termination Bonus shall have the meaning set forth in Section 3(b).
(gg) Release shall have the meaning set forth in Section 5(b)(ii).
(hh) Restricted Period shall mean the period from the Effective Date through (i) with respect to any termination of employment (other than a termination of employment pursuant to Section 4(a)(vii) ( Non-Extension of Term by the Company ) or Section 4(a)(viii) ( Non-Extension of Term by the Executive )), the first (1st) anniversary of the Date of Termination, and (ii) with respect to a termination of employment pursuant to Section 4(a)(vii) ( Non-Extension of Term by the Company ) or Section 4(a)(viii) ( Non-Extension of Term by the Executive ), the Date of Termination or, in the event that the Company exercises its Noncompete Option, the date elected by the Company thereunder.
(ii) Section 409A shall mean Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date.
(jj) Severance Payment shall have the meaning set forth in Section 5(b)(i).
(kk) Severance Period shall mean: (A) if the Executives employment shall be terminated by the Company without Cause pursuant to Section 4(a)(iv) or by the Executives resignation for Good Reason pursuant to Section 4(a)(v), the period beginning on the Date of Termination and ending on the first (1 st ) anniversary of the Date of Termination, and (B) if the Executives employment shall be terminated due to non-extension of the Initial Term or any Extension Term by the Company pursuant to Section 4(a)(vii) or by the Executive pursuant to Section 4(a)(viii), but only if the Company exercises its Noncompete Option in connection with such termination, the period beginning on the Date of Termination and ending on the expiration date of the Restricted Period (as elected by the Company pursuant to its Noncompete Option).
(ll) SMM LLC Agreement shall mean that certain Limited Liability Company Agreement of Summit Midstream Management, LLC, a Delaware limited liability company, as it may be amended, modified or supplemented from time to time.
(mm) SMP LLC Agreement shall mean that certain Fourth Amended and Restated Limited Liability Operating Agreement of the Company, as it may be amended, modified or supplemented from time to time.
(nn) Term shall have the meaning set forth in Section 2(b).
(oo) Total Payments shall have the meaning set forth in Section 6(b).
2. Employment
(a) In General . The Company shall employ the Executive and the Executive shall enter the employ of the Company, for the period set forth in Section 2(b), in the position set forth in Section 2(c), and upon the other terms and conditions herein provided.
(b) Term of Employment . The initial term of employment under this Agreement (the Initial Term ) shall be for the period beginning on the Effective Date and ending on March 1, 2019, unless earlier terminated as provided in Section 4. The Initial Term shall automatically be extended for successive one (1) year periods (each, an Extension Term and, collectively with the Initial Term, the Term ), unless either party hereto gives notice of non-extension to the other no later than thirty (30) days prior to the expiration of the then-applicable Term.
(c) Position and Duties . During the Term, the Executive: (i) shall serve as Executive Vice President Chief Commercial Officer of the Company, with responsibilities, duties and authority customary for such position, subject to direction by the Chief Executive Officer of the Company; (ii) shall report directly to the Chief Executive Officer of the Company; (iii) shall devote substantially all the Executives working time and efforts to the business and affairs of the Company and its subsidiaries, provided that the Executive may (1) serve on corporate, civic, charitable, industry or professional association boards or committees, subject to the Boards prior written consent in the case of any such board or committee that relates directly or indirectly to the business of the Company or its subsidiaries (which consent shall not unreasonably be withheld), (2) deliver lectures, fulfill speaking engagements or teach at educational institutions and (3) manage his personal investments, so long as none of such activities meaningfully interferes with the performance of the Executives duties and responsibilities hereunder, or involves a conflict of interest with the Executives duties or responsibilities hereunder or a breach of the covenants contained in Section 7; and (iv) agrees to observe and comply with the Companys rules and policies as adopted by the Company from time to time, which have been made available to the Executive.
3. Compensation and Related Matters
(a) Annual Base Salary . During the Term, the Executive shall receive a base salary at a rate of $390,000.00 per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to review and upward, but not downward, adjustment by the Board in its sole discretion (the Annual Base Salary ).
(b) Annual Bonus . With respect to each calendar year that ends during the Term, commencing with calendar year 2017, the Executive shall be eligible to receive an annual cash bonus (the Annual Bonus ) ranging from zero to two hundred percent (200%) of the Annual Base Salary, with a target Annual Bonus equal to one hundred percent (100%) of the Annual Base Salary, based upon annual performance targets (the Performance Targets ) established by the Board in its sole discretion. The amount of the Annual Bonus shall be based upon attainment of the Performance Targets, as determined by the Board (or any authorized committee of the Board) in its sole discretion. Each such Annual Bonus shall be payable on such date as is determined by the Board, but in any event on or prior to March 15 of the calendar year immediately following the calendar year with respect to which such Annual Bonus relates.
Notwithstanding the foregoing, no bonus shall be payable with respect to any calendar year unless the Executive remains continuously employed with the Company during the period beginning on the Effective Date and ending on December 31 of such year; provided that if the Executives employment is terminated pursuant to Section 4(a)(i), (ii), (iv), (v) or (vii), the Company shall pay to the Executive a prorated Annual Bonus with respect to the calendar year in which the Date of Termination occurs equal to the target Annual Bonus for such calendar year multiplied by a fraction, the numerator of which is the number of calendar days during such calendar year that the Executive was continuously employed by the Company and the denominator of which is 365 (the Prorated Termination Bonus ); provided further that, in the case of a termination pursuant to Section 4(a)(iv), no portion of the Prorated Termination Bonus shall be paid unless the Executive timely executes the Release and does not revoke the Release within the time periods set forth in Section 5(b)(ii).
(c) Benefits . The Executive shall be eligible to participate in all benefit plans, programs and other arrangements of the Company that may be offered by the Company to its executives as a group (including, without limitation, medical and dental insurance and a 401(k) plan). During the lesser of the period during which Executive or a qualifying beneficiary (as defined in Section 607 of ERISA) has in effect an election for post-termination continuation coverage or conversion rights to medical and dental benefits under applicable law, including Section 4980 of the Code (COBRA), or the period ending on the 18-month anniversary of the Date of Termination, Executive (or, if applicable, the qualifying beneficiary) shall be entitled to such coverage at an out-of-pocket premium cost that does not exceed the out-of-pocket premium cost applicable to similarly situated active employees (and their eligible dependents).
(d) Vacation; Paid Time Off; Holidays . During the Term, the Executive shall be entitled to four (4) weeks of paid time off ( PTO ) each full calendar year. The PTO shall be used for vacation and sick days. Any vacation shall be taken at the reasonable and mutual convenience of the Company and the Executive. Any PTO that the Executive is entitled to in any calendar year that is not used by the end of such calendar year shall be forfeited, except for up to five days of PTO each year that may be carried forward to the following year. Holidays shall be provided in accordance with Company policy, as in effect from time to time.
(e) Business Expenses . During the Term, the Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executives duties to the Company in accordance with the Companys applicable expense reimbursement policies and procedures.
(f) Tax Reimbursement . During the Term, the Company shall reimburse the Executive for annual tax preparation services and ongoing tax advice of up to $12,000 per year, beginning with such expenses incurred in 2016.
4. Termination
The Executives employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:
(a) Circumstances
(i) Death . The Executives employment hereunder shall terminate upon the Executives death.
(ii) Disability . If the Executive incurs a Disability, the Company may give the Executive written notice of its intention to terminate the Executives employment. In that event, the Executives employment with the Company shall terminate, effective on the later of the thirtieth (30 th ) day after receipt of such notice by the Executive or the date specified in such notice; provided that within the thirty (30) day period following receipt of such notice, the Executive shall not have returned to full-time performance of the Executives duties hereunder.
(iii) Termination for Cause . The Company may terminate the Executives employment for Cause.
(iv) Termination without Cause . The Company may terminate the Executives employment without Cause.
(v) Resignation for Good Reason . The Executive may resign from the Executives employment for Good Reason.
(vi) Resignation without Good Reason . The Executive may resign from the Executives employment without Good Reason.
(vii) Non-Extension of Term by the Company . The Company may give notice of non-extension to the Executive pursuant to Section 2(b). For the avoidance of doubt, non-extension of the Term by the Company shall not constitute termination by the Company without Cause.
(viii) Non-Extension of Term by the Executive . The Executive may give notice of non-extension to the Company pursuant to Section 2(b). For the avoidance of doubt, non-extension of the Term by the Executive shall not constitute resignation for Good Reason.
(b) Notice of Termination . Any termination of the Executives employment by the Company or by the Executive under this Section 4 (other than a termination pursuant to Section 4(a)(i) above) shall be communicated by a written notice to the other party hereto: (i) indicating the specific termination provision in this Agreement relied upon, (ii) except with respect to a termination pursuant to Sections 4(a)(iv), (vi), (vii) or (viii), setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executives employment under the provision so indicated, and (iii) specifying a Date of Termination which, if submitted by the Executive (or, in the case of a termination described in Section 4(a)(ii), by the Company), shall be at least thirty (30) days following the date of such notice (a Notice of Termination ); provided , however , that a Notice of Termination delivered by the Company pursuant to Section 4(a)(ii) shall not be required to specify a Date of Termination, in which case the Date of Termination shall be determined pursuant to Section 4(a)(ii); and provided , further , that in the event that the Executive delivers a Notice of Termination (other than a notice of non-
extension under Section 4(a)(viii) above) to the Company, the Company may, in its sole discretion, accelerate the Date of Termination to any date that occurs following the date of Companys receipt of such Notice of Termination (even if such date is prior to the date specified in such Notice of Termination). A Notice of Termination submitted by the Company may provide for a Date of Termination on the date the Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion. The failure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause or Good Reason shall not waive any right of the Company or the Executive hereunder or preclude the Company or the Executive from asserting such fact or circumstance in enforcing the Companys or the Executives rights hereunder.
5. Company Obligations Upon Termination of Employment
(a) In General . Upon a termination of the Executives employment for any reason, the Executive (or the Executives estate) shall be entitled to receive: (i) any portion of the Executives Annual Base Salary through the Date of Termination not theretofore paid, (ii) any expenses owed to the Executive under Section 3(e), (iii) any accrued PTO owed to the Executive pursuant to Section 3(d), and (iv) any amount arising from the Executives participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3(c), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements. Any Annual Bonus earned for any calendar year completed prior to the Date of Termination, but unpaid prior to such date, and any Prorated Termination Bonus owed pursuant to the last sentence of Section 3(b), shall be paid within thirty (30) days after the Date of Termination (but in any event on or prior to March 15 of the calendar year immediately following such completed calendar year with respect to which such Annual Bonus or Prorated Termination Bonus was earned). Except as otherwise set forth in Section 5(b) below, the payments and benefits described in this Section 5(a) shall be the only payments and benefits payable in the event of the Executives termination of employment for any reason.
(b) Severance Payment
(i) In the event of the Executives termination of employment under the circumstances described below, then, in addition to the payments and benefits described in Section 5(a) above, the Company shall, during the Severance Period, pay to the Executive an amount (the Severance Payment ) calculated as described below:
(A) If the Executives employment shall be terminated by the Company without Cause pursuant to Section 4(a)(iv) or by the Executives resignation for Good Reason pursuant to Section 4(a)(v), or due to non-extension of the Initial Term or any Extension Term by the Company pursuant to Section 4(a)(vii), then the Severance Payment shall be an amount equal to one and one-half (1.5) times the sum of (1) the Annual Base Salary for the year in which the Date of Termination occurs, and (2) the Annual Bonus paid to the Executive in respect of the calendar year immediately preceding the year in which the Date of Termination occurs.
(B) If the Executives employment shall be terminated due to non-extension of the Initial Term or any Extension Term by the Executive pursuant to Section 4(a)(viii), but only if the Company exercises its Noncompete Option in connection with such termination, then the Severance Payment shall be an amount equal to (1) the sum of (x) the Annual Base Salary for the year in which the Date of Termination occurs, and (y) the Annual Bonus paid to the Executive in respect of the calendar year immediately preceding the year in which the Date of Termination occurs, multiplied by (2) a fraction, the numerator of which is equal to the number of days from the Date of Termination through the expiration date of the Restricted Period (as elected by the Company pursuant to its Noncompete Option), and the denominator of which is 365.
(ii) The Severance Payment shall be in lieu of notice or any other severance benefits to which the Executive might otherwise be entitled. Notwithstanding anything herein to the contrary, (A) no portion of the Severance Payment shall be paid unless, on or prior to the thirtieth (30th) day following the Date of Termination, the Executive timely executes a general waiver and release of claims agreement substantially in the form attached hereto as Exhibit A (the Release ), which Release shall not have been revoked by the Executive prior to the expiration of the period (if any) during which any portion of such Release is revocable under applicable law, and (B) as of the first date on which the Executive violates any covenant contained in Section 7, any remaining unpaid portion of the Severance Payment shall thereupon be forfeited. Subject to the provisions of Section 9, the Severance Payment shall be paid in equal installments during the Severance Period, at the same time and in the same manner as the Annual Base Salary would have been paid had the Executive remained in active employment during the Severance Period, in accordance with the Companys normal payroll practices in effect on the Date of Termination; provided that any installment that would otherwise have been paid prior to the first normal payroll payment date occurring on or after the thirtieth (30th) day following the Date of Termination (such payroll date, the First Payment Date ) shall instead be paid on the First Payment Date. For purposes of Section 409A (including, without limitation, for purposes of Section 1.409A-2(b)(2)(iii) of the Department of Treasury Regulations), the Executives right to receive the Severance Payment in the form of installment payments (the Installment Payments ) shall be treated as a right to receive a series of separate payments and, accordingly, each Installment Payment shall at all times be considered a separate and distinct payment.
(c) The provisions of this Section 5 shall supersede in their entirety any severance payment provisions in any severance plan, policy, program or other arrangement maintained by the Company.
6. Change in Control
(a) Equity Awards . Notwithstanding anything to the contrary in this Agreement or any other agreement, including the LTIP and any award agreement thereunder, all equity awards
granted to the Executive under the LTIP and held by the Executive as of immediately prior to a Change in Control, to the extent unvested, shall become fully vested immediately prior to the Change in Control.
(b) Golden Parachute Excise Tax Protection . Notwithstanding any provision of this Agreement, if any portion of the payments or benefits provided to the Executive hereunder, or under any other agreement with the Executive or any plan, policy or arrangement of the Company or any of its Affiliates (in the aggregate, Total Payments ), would constitute an excess parachute payment and would, but for this Section 6(b), result in the imposition on the Executive of an excise tax under Section 4999 of the Code (the Excise Tax ), then the Total Payments to be made to the Executive shall either be (i) delivered in full, or (ii) reduced by such amount such that no portion of the Total Payments would be subject to the Excise Tax, whichever of the foregoing results in the receipt by the Executive of the greatest benefit on an after-tax basis (taking into account the applicable federal, state and local income taxes and the Excise Tax). The determination of whether a reduction in Total Payments is necessary and the amount of any such reduction shall be made by the Company in its reasonable discretion and in reliance on its tax advisors. If the Company so determines that a reduction in Total Payments is required, such reduction shall apply first pro rata to (A) cash payments subject to Section 409A of the Code as deferred compensation and (B) cash payments not subject to Section 409A of the Code (in each case with the cash payments otherwise scheduled to be paid latest in time reduced first), and then pro rata to (C) equity-based compensation subject to Section 409A of the Code as deferred compensation and (D) equity-based compensation not subject to Section 409A of the Code.
7. Restrictive Covenants
(a) The Executive shall not, at any time during the Restricted Period, directly or indirectly engage in, have any equity interest in, or manage or operate any person, firm, corporation, partnership, business or entity (whether as director, officer, employee, agent, representative, partner, security holder, consultant or otherwise) that engages in (either directly or through any subsidiary or Affiliate thereof) any business or activity (i) relating to midstream assets (including, without limitation, the gathering, processing and transportation of natural gas and crude oil) in North America, which competes with the business of the Company or any entity owned by the Company, or (ii) which the Company or any of its Affiliates has taken active steps to engage in or acquire, but only if the Executive directly or indirectly engages in, has any equity interest in, or manages or operates, such business or activity (whether as director, officer, employee, agent, representative, partner, security holder, consultant or otherwise). Notwithstanding the foregoing, the Executive shall be permitted to acquire a passive stock or equity interest in such a business; provided that such stock or other equity interest acquired is not more than five percent (5%) of the outstanding interest in such business.
(b) The Executive shall not, at any time during the Term or during the twelve (12)-month period immediately following the Date of Termination, directly or indirectly, either for himself or on behalf of any other entity, (i) recruit or otherwise solicit or induce any employee, customer, subscriber or supplier of the Company to terminate its employment or arrangement with the Company, or otherwise change its relationship with the Company, or (ii) hire, or cause to be hired, any person who was employed by the Company and served in a capacity of vice
president (or any person serving in a capacity senior to vice president) at any time during the twelve (12)-month period immediately prior to the Date of Termination.
(c) The provisions contained in Sections 7(a) and (b) may be altered and/or waived to be made less restrictive on the Executive with the prior written consent of the Board or the Compensation Committee.
(d) Except as the Executive reasonably and in good faith determines to be required in the faithful performance of the Executives duties hereunder or in accordance with Section 7(f), the Executive shall, during the Term and after the Date of Termination, maintain in confidence and shall not directly or indirectly, use, disseminate, disclose or publish, or use for the Executives benefit or the benefit of any person, firm, corporation or other entity, any confidential or proprietary information or trade secrets of or relating to the Company, including, without limitation, information with respect to the Companys operations, processes, protocols, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment ( Proprietary Information ), or deliver to any person, firm, corporation or other entity, any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information. The Executives obligation to maintain and not use, disseminate, disclose or publish, or use for the Executives benefit or the benefit of any person, firm, corporation or other entity, any Proprietary Information after the Date of Termination will continue so long as such Proprietary Information is not, or has not by legitimate means become, generally known and in the public domain (other than by means of the Executives direct or indirect disclosure of such Proprietary Information) and continues to be maintained as Proprietary Information by the Company. The parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Company (and any successor or assignee of the Company).
(e) Upon termination of the Executives employment with the Company for any reason, the Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning the Companys customers, business plans, marketing strategies, products or processes.
(f) The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company (if lawfully permitted to do so) the earliest possible notice thereof, and shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought, and shall assist such counsel in resisting or otherwise responding to such process. Upon notification from Executive of such subpoena or other legal process, but only to the extent that such notification is provided during the Restricted Period, the Company shall, at its reasonable expense, retain mutually acceptable legal counsel to represent Executive in connection with Executives response to any such subpoena or other legal process. The Executive may also disclose Proprietary Information if: (i) in the reasonable written opinion of counsel for the Executive furnished to the Company, such information is required to be disclosed for the Executive not to be in violation of any applicable law or regulation or (ii) the Executive is required to disclose such information in connection with the
enforcement of any rights under this Agreement or any other agreements between the Executive and the Company.
(g) The Executive agrees not to disparage the Company, any of its products or practices, or any of its directors, officers, agents, representatives, equity holders or Affiliates, either orally or in writing, at any time; provided that the Executive may confer in confidence with the Executives legal representatives, make truthful statements to any government agency in sworn testimony, or make truthful statements as otherwise required by law. The Company agrees that, upon the termination of the Executives employment hereunder, it shall advise its directors and executive officers not to disparage the Executive, either orally or in writing, at any time; provided that they may confer in confidence with the Companys and their legal representatives and make truthful statements as required by law.
(h) Prior to accepting other employment or any other service relationship during the Restricted Period, the Executive shall provide a copy of this Section 7 to any recruiter who assists the Executive in obtaining other employment or any other service relationship and to any employer or person with which the Executive discusses potential employment or any other service relationship.
(i) In the event the terms of this Section 7 shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.
(j) As used in this Section 7, the term Company shall include the Company, its parent, related entities, and any of its direct or indirect subsidiaries.
8. Injunctive Relief
The Executive recognizes and acknowledges that a breach of the covenants contained in Section 7 will cause irreparable damage to the Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in Section 7, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief.
9. Section 409A
(a) General . The parties hereto acknowledge and agree that, to the extent applicable, this Agreement shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event that the Company determines that any amounts payable hereunder will be immediately taxable to the Executive under Section 409A, the Company reserves the right to (without any obligation to do so or to indemnify the Executive for failure to do so) (i) adopt such amendments to this Agreement or adopt such other policies and procedures (including amendments, policies
and procedures with retroactive effect) that it determines to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for the Company and/or (ii) take such other actions it determines to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder. Notwithstanding anything herein to the contrary, no provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A from the Executive or any other individual to the Company or any of its Affiliates, employees or agents.
(b) Separation from Service under Section 409A; Section 409A Compliance . Notwithstanding anything herein to the contrary: (i) no termination or other similar payments and benefits hereunder shall be payable unless the Executives termination of employment constitutes a separation from service within the meaning of Section 1.409A-1(h) of the Department of Treasury Regulations; (ii) if the Executive is deemed at the time of the Executives separation from service to be a specified employee for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of any termination or other similar payments and benefits to which the Executive may be entitled hereunder (after taking into account all exclusions applicable to such payments or benefits under Section 409A) is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of such payments and benefits shall not be provided to the Executive prior to the earlier of (x) the expiration of the six (6)-month period measured from the date of the Executives separation from service with the Company (as such term is defined in the Department of Treasury Regulations issued under Section 409A) or (y) the date of the Executives death; provided that upon the earlier of such dates, all payments and benefits deferred pursuant to this Section 9(b)(ii) shall be paid in a lump sum to the Executive, and any remaining payments and benefits due hereunder shall be provided as otherwise specified herein; (iii) the determination of whether the Executive is a specified employee for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of the Executives separation from service shall be made by the Company in accordance with the terms of Section 409A (including, without limitation, Section 1.409A-1(i) of the Department of Treasury Regulations and any successor provision thereto); (iv) to the extent that any Installment Payments under this Agreement are deemed to constitute nonqualified deferred compensation within the meaning of Section 409A, for purposes of Section 409A (including, without limitation, for purposes of Section 1.409A-2(b)(2)(iii) of the Department of Treasury Regulations), each such payment that the Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment; (v) to the extent that any reimbursements or corresponding in-kind benefits provided to the Executive under this Agreement are deemed to constitute deferred compensation under Section 409A, such reimbursements or benefits shall be provided reasonably promptly, but in no event later than December 31 of the year following the year in which the expense was incurred, and in any event in accordance with Section 1.409A-3(i)(1)(iv) of the Department of Treasury Regulations; and (vi) the amount of any such payments or expense reimbursements in one calendar year shall not affect the expenses or in-kind benefits eligible for payment or reimbursement in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and the Executives right to such payments or reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit.
10. Assignment and Successors
The Company may assign its rights and obligations under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its Affiliates. The Executive may not assign the Executives rights or obligations under this Agreement to any individual or entity. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.
11. Governing Law
This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of Delaware, without reference to the principles of conflicts of law of Delaware or any other jurisdiction, and where applicable, the laws of the United States.
12. Validity
The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
13. Notices
Any notice, request, claim, demand, document and other communication hereunder to any party hereto shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, to the following address (or at any other address as any party hereto shall have specified by notice in writing to the other party hereto):
(a) If to the Company:
Summit Midstream Partners, LLC
5910 North Central Expressway
Suite 350
Dallas, Texas 75206
Attn: Brock M. Degeyter
Facsimile: (214) 462-7716
with copies to:
Energy Capital Partners
51 John F. Kennedy Parkway, Suite 200
Short Hills, New Jersey 07078
Attn: Tom Lane
Facsimile: (973) 671-6101
and:
Energy Capital Partners
11943 El Camino Real, Suite 220
San Diego, California 92130
Attn: Andrew D. Singer
Facsimile: (858) 703-4401
and:
Latham & Watkins LLP
885 Third Avenue
New York, New York 10022-4802
Attn: Jed W. Brickner
Facsimile: (212) 751-4864
(b) If to the Executive, at the address set forth on the signature page hereto.
14. Counterparts
This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.
15. Entire Agreement
This Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) is intended by the parties hereto to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement (including, without limitation, any term sheet or offer letter). The parties hereto further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement. This Agreement expressly supersedes the Original Employment Agreement.
16. Amendments; Waivers
This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and a duly authorized officer of the Company and approved by the Board, which expressly identifies the amended provision of this Agreement. By an instrument in writing similarly executed and approved by the Board, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties hereto with any provision of this Agreement that such other party was or is obligated to comply with or perform; provided , however , that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure to comply or perform. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.
17. No Inconsistent Actions
The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.
18. Construction
This Agreement shall be deemed drafted equally by both of the parties hereto. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party hereto shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary, (a) the plural includes the singular and the singular includes the plural; (b) and and or are each used both conjunctively and disjunctively; (c) any, all, each, or every means any and all, and each and every; (d) includes and including are each without limitation; (e) herein, hereof, hereunder and other similar compounds of the word here refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.
19. Arbitration
Any dispute or controversy based on, arising under or relating to this Agreement shall be settled exclusively by final and binding arbitration, conducted before a single neutral arbitrator in Dallas, Texas in accordance with the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association (the AAA ) then in effect. Arbitration may be compelled, and judgment may be entered on the arbitration award in any court having jurisdiction; provided , however , that the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Section 7, and the Executive hereby consents that such restraining order or injunction may be granted without requiring the Company to post a bond. Only individuals who are (a) lawyers engaged full-time in the practice of law and (b) on the AAA roster of arbitrators shall be selected as an arbitrator. Within twenty (20) days of the conclusion of the arbitration hearing, the arbitrator shall prepare written findings of fact and conclusions of law. The arbitrator shall be entitled to award any relief available in a court of law. Each party shall bear its own costs and attorneys fees in connection with an arbitration; provided that the Company shall bear the cost of the arbitrator and the AAAs administrative fees.
20. Enforcement
If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.
21. Withholding
The Company shall be entitled to withhold from any amounts payable under this Agreement, any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.
22. Absence of Conflicts; Executive Acknowledgement
The Executive hereby represents that from and after the Effective Date the performance of the Executives duties hereunder will not breach any other agreement to which the Executive is a party. The Executive acknowledges that the Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on the Executives own judgment.
23. Survival
The expiration or termination of the Term shall not impair the rights or obligations of any party hereto which shall have accrued prior to such expiration or termination.
[Signature pages follow]
EXECUTION VERSION
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written.
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By: |
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Name: |
Steven J. Newby |
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Title: |
President and Chief Executive Officer |
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EXECUTIVE |
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By: |
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Brad N. Graves |
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Residential Address: |
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23014 Barrister Creek Drive |
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Tomball, TX 77377 |
Signature Page to the
Employment Agreement for Brad N. Graves Execution Version
EXHIBIT A
FORM OF RELEASE
Brad N. Graves (the Executive ) agrees for the Executive, the Executives spouse and child or children (if any), the Executives heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns, hereby forever to release, discharge, and covenant not to sue Summit Midstream Partners, LLC, a Delaware limited liability company (the Company ), and any of its past, present, or future parent, affiliated, related, and/or subsidiary entities, and all of the past and present directors, shareholders, officers, general or limited partners, employees, agents, and attorneys, and agents and representatives of such entities, and employee benefit plans in which the Executive is or has been a participant by virtue of his employment with the Company (collectively, the Releasees ), from any and all claims, debts, demands, accounts, judgments, rights, causes of action, equitable relief, damages, costs, charges, complaints, obligations, promises, agreements, controversies, suits, expenses, compensation, responsibility and liability of every kind and character whatsoever (including attorneys fees and costs), whether in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected, which the Executive has or may have had against such Releasees based on any events or circumstances arising or occurring on or prior to the date this release (the Release ) is executed, arising directly or indirectly out of, relating to, or in any other way involving in any manner whatsoever, (a) the Executives employment with the Company or its subsidiaries or the termination thereof or (b) the Executives status at any time as a holder of any securities of the Company, and any and all claims arising under federal, state, or local laws relating to employment, or securities, including without limitation claims of wrongful discharge, breach of express or implied contract, fraud, misrepresentation, defamation, or liability in tort, claims of any kind that may be brought in any court or administrative agency, any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Family and Medical Leave Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act, and similar state or local statutes, ordinances, and regulations; provided , however , notwithstanding anything to the contrary set forth herein, that this Release shall not extend to (i) benefit claims under employee pension or welfare benefit plans in which the Executive is a participant by virtue of his employment with the Company or its subsidiaries, (ii) any rights under that certain Amended and Restated Employment Agreement, dated as of March 1, 2017, by and between the Company and the Executive, (iii) any rights of indemnification the Executive may have under any written agreement between the Executive and the Company (or its affiliates), the Companys Certificate of Incorporation, the Partnerships LP Agreement, the General Corporation Law of the State of Delaware, any applicable statute or common law, or pursuant to any applicable insurance policy, (iv) unemployment compensation, (v) contractual rights to vested equity awards, (vi) COBRA benefits and (viii) any rights that may not be waived as a matter of law.
The Executive understands that this Release includes a release of claims arising under the Age Discrimination in Employment Act (ADEA). The Executive understands and warrants that he has been given a period of 21 days to review and consider this Release. The Executive further warrants that he understands that he may use as much or all of his 21-day period as he wishes before signing, and warrants that he has done so. The Executive further warrants that he understands that, with respect to the release of age discrimination claims only, he has a period of
seven days after executing on the second signature line below to revoke the release of age discrimination claims by notice in writing to the Company.
The Executive is hereby advised to consult with an attorney prior to executing this Release. By his signature below, the Executive warrants that he has had the opportunity to do so and to be fully and fairly advised by that legal counsel as to the terms of this Release.
ACKNOWLEDGEMENT (AS TO ALL CLAIMS
OTHER THAN AGE DISCRIMINATION CLAIMS)
The undersigned, having had full opportunity to review this Release with counsel of his choosing, signifies his agreement to the terms of this Release (other than as it relates to age discrimination claims) by his signature below.
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Brad N. Graves |
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Date |
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ACKNOWLEDGEMENT (AGE DISCRIMINATION CLAIMS) |
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The undersigned, having had full opportunity to review this Release with counsel of his choosing, signifies his agreement to the terms of this Release (as it relates to age discrimination claims) by his signature below. |
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Brad N. Graves |
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Date |
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Year ended December 31,
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2016
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2015 (1)
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2014 (2)
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2013
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2012
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(Dollars in thousands)
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Earnings:
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Loss before income taxes and loss from equity method investees
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$
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(7,768
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)
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$
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(216,268
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)
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$
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(29,802
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)
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$
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47,737
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$
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43,679
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Add (deduct):
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Fixed charges
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68,473
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63,262
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53,859
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28,543
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15,794
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Distributions from equity method investees
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44,991
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34,641
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2,992
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—
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—
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Capitalized interest
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(3,709
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)
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(3,372
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)
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(4,646
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)
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(6,690
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)
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(2,784
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)
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Total earnings
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$
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101,987
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$
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(121,737
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)
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$
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22,403
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$
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69,590
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$
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56,689
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Fixed Charges (3):
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Interest expense
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$
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63,810
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$
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59,092
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$
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48,586
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$
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21,314
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$
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12,766
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Capitalized interest
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3,709
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3,372
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4,646
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6,690
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2,784
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Estimate of interest within rent expense
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954
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798
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627
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539
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244
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Total fixed charges
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$
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68,473
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$
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63,262
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$
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53,859
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$
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28,543
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$
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15,794
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Ratio of earnings to fixed charges
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1.49
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x
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—
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0.42
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x
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2.44
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x
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3.59
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x
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Name
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State or other jurisdiction of incorporation or organization
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Summit Midstream Holdings, LLC
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Delaware
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Grand River Gathering, LLC
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Delaware
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DFW Midstream Services LLC
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Delaware
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Bison Midstream, LLC
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Delaware
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Summit Midstream Finance Corp.
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Delaware
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Red Rock Gathering Company, LLC
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Delaware
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Polar Midstream, LLC
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Delaware
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Epping Transmission Company, LLC
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Delaware
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Summit Midstream Utica, LLC
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Delaware
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Meadowlark Midstream Company, LLC
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Delaware
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Tioga Midstream, LLC
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Delaware
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Summit Midstream OpCo, LP
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Delaware
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Summit Midstream OpCo GP, LLC
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Delaware
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Date:
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February 27, 2017
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/s/ Steven J. Newby
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Steven J. Newby
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President, Chief Executive Officer and Director of Summit Midstream GP, LLC (the general partner of Summit Midstream Partners, LP)
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Date:
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February 27, 2017
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/s/ Matthew S. Harrison
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Matthew S. Harrison
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Executive Vice President and Chief Financial Officer of Summit Midstream GP, LLC (the general partner of Summit Midstream Partners, LP)
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
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/s/ Steven J. Newby
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Name:
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Steven J. Newby
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Title:
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President, Chief Executive Officer and Director of Summit Midstream GP, LLC (the general partner of Summit Midstream Partners, LP)
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Date:
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February 27, 2017
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/s/ Matthew S. Harrison
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Name:
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Matthew S. Harrison
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Title:
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Executive Vice President and Chief Financial Officer of Summit Midstream GP, LLC (the general partner of Summit Midstream Partners, LP)
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Date:
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February 27, 2017
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Exhibit 99.1
Ohio Gathering Company, L.L.C.
Financial Statements for the year ended December 31, 2016 and Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Board of Managers of Ohio Gathering Company, L.L.C.
In our opinion, the accompanying balance sheet as of December 31, 2016 and the related statements of operations, of changes in members equity, and of cash flows for the year then ended present fairly, in all material respects, the financial position of Ohio Gathering Company, L.L.C. as of December 31, 2016 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Denver, Colorado
February 24, 2017
Ohio Gathering Company, L.L.C.
Balance Sheet
($ in thousands)
The accompanying notes are an integral part of these financial statements.
Ohio Gathering Company, L.L.C.
Statement of Operations
($ in thousands)
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Year ended |
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December 31, 2016 |
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Revenue: |
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Gathering fees |
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$ |
117,150 |
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Compression fees |
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29,828 |
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Other revenue |
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2,207 |
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Total revenue |
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149,185 |
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Operating expenses: |
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Facility expenses |
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37,154 |
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Selling, general and administrative expenses |
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4,433 |
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Depreciation and accretion |
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56,613 |
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Total operating expenses |
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98,200 |
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Income from operations |
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50,985 |
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Miscellaneous income |
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15 |
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Income before provision for income tax |
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51,000 |
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Provision for deferred income tax expense |
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11 |
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Net income |
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$ |
50,989 |
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The accompanying notes are an integral part of these financial statements.
Ohio Gathering Company, L.L.C.
Statement of Changes in Members Equity
($ in thousands)
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MarkWest Utica
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Summit
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Total |
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Balance at December 31, 2015 |
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$ |
781,245 |
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$ |
548,467 |
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$ |
1,329,712 |
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Contributions from members |
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47,162 |
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31,443 |
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78,605 |
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Distributions to members |
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(64,971 |
) |
(43,311 |
) |
(108,282 |
) |
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Net income |
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30,593 |
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20,396 |
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50,989 |
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Balance at December 31, 2016 |
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$ |
794,029 |
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$ |
556,995 |
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$ |
1,351,024 |
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The accompanying notes are an integral part of these financial statements.
Ohio Gathering Company, L.L.C.
Statement of Cash Flows
($ in thousands)
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Year ended |
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December 31, 2016 |
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Cash flows from operating activities: |
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Net income |
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$ |
50,989 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and accretion |
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56,613 |
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Amortization of deferred contract costs |
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435 |
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Deferred revenue |
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(2,205 |
) |
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Construction in progress and inventories write-off |
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1,229 |
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Provision for deferred income tax expense |
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11 |
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Changes in operating assets and liabilities: |
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Trade receivables |
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(1,898 |
) |
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Affiliate receivables |
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(10,361 |
) |
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Inventories |
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(397 |
) |
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Other current assets |
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(365 |
) |
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Accounts payable and accrued liabilities |
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523 |
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Affiliate payables |
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(4,149 |
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All other, net |
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375 |
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Net cash provided by operating activities |
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90,800 |
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Cash flows from investing activities: |
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Capital expenditures |
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(62,821 |
) |
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Proceeds from sale of property and equipment |
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8,952 |
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Net cash used in investing activities |
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(53,869 |
) |
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Cash flows from financing activities: |
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Contributions from members |
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78,605 |
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Distributions to members |
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(108,282 |
) |
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Net cash used in financing activities |
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(29,677 |
) |
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Net increase in cash |
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7,254 |
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Cash at beginning of year |
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12,232 |
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Cash at end of year |
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$ |
19,486 |
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Supplemental schedule of non-cash investing and financing activities: |
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Decrease in accrued property and equipment |
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$ |
(9,684 |
) |
Decrease in affiliate payables for purchases of property and equipment |
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(872 |
) |
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Decrease in affiliate receivables for sales of property and equipment |
|
78 |
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The accompanying notes are an integral part of these financial statements.
Ohio Gathering Company, L.L.C.
Notes to Financial Statements
($ in thousands, unless otherwise indicated)
1. Organization and Business
Effective May 31, 2012, MarkWest Utica EMG, L.L.C. (MarkWest Utica) entered into the Limited Liability Company Agreement (the Original LLC Agreement) with Blackhawk Midstream LLC (Blackhawk), in order to form Ohio Gathering Company, L.L.C. (the Company or Ohio Gathering). The Company provides natural gas gathering and compression services in the Utica Shale region of Ohio. Under the terms of the Original LLC Agreement, MarkWest Utica and Blackhawk each made initial nominal contributions to the Company in exchange for a 99% and 1% ownership interest, respectively. All operational and administrative services are provided through contractual arrangements with affiliates of MarkWest Utica Operating Company, L.L.C. (MarkWest Utica Operating). See Note 3 for more information regarding affiliate transactions.
After the initial contributions, MarkWest Utica was obligated to contribute all of the capital required by the Company for the development, construction and operation of certain natural gas gathering and compression assets pursued by the Company. MarkWest Uticas and Blackhawks membership interests were adjusted to equal their respective share of the capital contributed. Therefore, as of December 31, 2013, MarkWest Utica owned more than a 99% interest and Blackhawk owned less than a 1% interest. Blackhawk also had an option to acquire a 40% equity interest in Ohio Gathering (the Ohio Gathering Option). See Note 2, Deferred Contract Costs , for further discussion.
In January 2014, Blackhawk sold its interest and the Ohio Gathering Option to Summit Midstream Partners, LLC (Summit). Effective June 1, 2014 (Summit Investment Date), Summit exercised the Ohio Gathering Option and increased its equity ownership (Summit Equity Ownership) from less than 1% to approximately 40% through a net cash investment of $341.4 million.
In August 2014, MarkWest Utica and Summit entered into the Third Amended and Restated Limited Liability Company Agreement of Ohio Gathering Company, L.L.C. (the Third Amended LLC Agreement) which replaced the Second Amended and Restated Limited Liability Company Agreement of Ohio Gathering Company, L.L.C. In accordance with the Third Amended LLC Agreement, Summit has the right, but not the obligation, to make additional capital contributions subject to certain limitations. If Summit elects to contribute capital in response to a particular capital call then the aggregate amount of capital that MarkWest Utica is required to contribute pursuant to such capital call will be decreased, dollar for dollar, by the amount of capital Summit elects to contribute. If a member fails to contribute any capital to the Company that is committed to be contributed or fails to timely wire the True-Up Amount (as defined in the Third Amended LLC Agreement) such member will be considered in default but will remain fully obligated to contribute such capital to the Company. The Company will be entitled to pursue all remedies available at law or in equity against the defaulting member. Effective March 3, 2016, Summit contributed substantially all of its limited partner interest in the Company to Summit Midstream Partners, LP (SMLP). Summit and SMLP are under common control and this contribution did not change their overall ownership in the Company; therefore, activity is presented combined on the accompanying Statement of Changes in Members Equity. Through December 31, 2016, SMLP has elected to contribute 40% of all capital calls and in total MarkWest Utica has contributed $1.2 billion and SMLP has contributed $823 million to the Company.
The business and affairs of the Company are overseen by a board of managers which currently consists of three managers designated by MarkWest Utica and two managers designated by SMLP. The composition of the board of managers could change in accordance with changes in investment balances. The board of managers has delegated to MarkWest Utica Operating the authority to manage the day-to-day operations of the Company, subject to certain approval rights retained by the board. Pursuant to a services agreement between the Company and MarkWest Utica Operating, an affiliate of MarkWest Utica Operating will provide all employees and services necessary for the daily operations and management of the Companys business. The Company is required to distribute all available cash to the Members within 45 days of the end of each calendar month.
2. Significant Accounting Policies
Basis of Presentation
The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the respective reporting periods. Estimates affect, among other items, valuing inventory; evaluating impairments of long-lived assets; establishing estimated useful lives for long-lived assets;
estimating revenues, expense accruals and capital expenditures; valuing asset retirement obligations; establishing inputs when determining fair value of options; evaluating forecasts when determining income tax valuation allowances; and determining liabilities, if any, for environmental and legal contingencies. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, secured deposits and investments in highly liquid debt instruments with initial maturities of three months or less. The Company had no cash equivalents at December 31, 2016.
Trade Receivables
Trade receivables primarily consist of customer accounts receivable, which are recorded at the invoiced amount and generally do not bear interest. Past-due balances over 90 days and other higher risk amounts are reviewed individually for collectability. Balances that remain outstanding after reasonable collection efforts have been unsuccessful are written off through a charge to the valuation allowance and a credit to accounts receivable. Management reviews the allowance quarterly. The Company did not record a valuation allowance at December 31, 2016.
Inventories
Inventories consist primarily of materials and supplies to be used in operations and are stated at the lower of cost or net realizable value. Cost for materials and supplies is determined primarily using the weighted-average cost method.
Property and Equipment
Property and equipment consists primarily of natural gas gathering assets, other pipeline assets, compressors and related facilities that are recorded at cost. Expenditures that extend the useful lives of assets are capitalized. Repairs, maintenance and renewals that do not extend the useful lives of assets are expensed as incurred. Depreciation is provided principally on a straight-line method over a period of 20 to 30 years, with the exception of miscellaneous equipment and vehicles, which are depreciated over a period ranging from 3 to 20 years.
When items of property and equipment are sold or otherwise disposed of, any gains or losses are reported in the Statement of Operations. Gains on the disposal of property and equipment are recognized when they occur, which is generally at the time of closing. If a loss on disposal is expected, such losses are recognized when the assets are classified as held for sale.
Asset Retirement Obligations
An asset retirement obligation (ARO) is a legal obligation associated with the retirement of tangible long-lived assets that generally result from the acquisition, construction, development or normal operation of the asset. AROs are recorded at fair value in the period in which they are incurred, if a reasonable estimate of fair value can be made, and added to the carrying amount of the associated asset. This additional carrying amount is then depreciated over the life of the asset. The liability is determined using a credit adjusted risk-free interest rate and increases due to the passage of time based on the time value of money until the obligation is settled. The Company routinely reviews and reassesses its estimates to determine if adjustments to the value of AROs are required. The Company recognizes a liability of a conditional ARO as soon as the fair value of the liability can be reasonably estimated. A conditional ARO is defined as an unconditional legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. AROs have not been recognized for certain assets because the fair value cannot be reasonably estimated since the settlement dates of the obligations are indeterminate. Such obligations will be recognized in the period when sufficient information becomes available to estimate a range of potential settlement dates. In addition to the conditional AROs, the Company may have AROs related to certain gathering and compression assets as a result of environmental and other legal requirements. The Company is not required to perform such work until it permanently ceases operations of the respective assets. As the Company considers the operational life of these assets to be indeterminable, an associated ARO cannot be calculated and is not recorded.
Impairment of Long-Lived Assets
The Companys policy is to evaluate whether there has been an impairment in the value of long-lived assets when certain events indicate that the remaining balance may not be recoverable. Qualitative and quantitative information is reviewed in order to determine if a triggering event has occurred or if an impairment indicator exists. If we determine that a triggering event has occurred we would complete a full impairment analysis. If we determine that the carrying value is not recoverable, a loss is recorded for the difference between the fair value and the carrying value of the related asset group. Management considers the volume of producer customers reserves and future natural gas and natural gas liquids product prices to estimate cash flows. The amount of additional producer customer reserves developed by future drilling activity depends, in part, on expected commodity prices. Projections of producer customers reserves, drilling activity and future commodity prices are inherently subjective and contingent upon a number of variable factors, many of which are difficult to forecast. Any significant variance in any of these assumptions or factors could materially affect future cash flows, which could result in the impairment of an asset. The Company did not record an impairment for the year ended December 31, 2016.
For assets identified to be disposed of in the future, the carrying value of these assets is compared to the estimated fair value, less the cost to sell, to determine if impairment is required. Until the assets are disposed of, an estimate of the fair value is re-determined for each reporting period when related events or circumstances change.
Deferred Contract Costs
Deferred contract costs represent the asset created by the fair value of the Ohio Gathering Option that was recorded as permanent equity. This cost is amortized over the term of the arrangement into Facility expenses on the accompanying Statement of Operations. As of December 31, 2016, the amortization of deferred contract costs is $435 for each of the next five years and $2,426 thereafter.
Revenue Recognition
The Company generates its revenue by providing natural gas gathering and compression services. The Company receives a fee for the gathering and compression of natural gas. The revenue the Company earns under these arrangements is related to the volume of natural gas that flows through its facilities and is not directly dependent on commodity prices. The Companys assessment of each of the revenue recognition criteria as they relate to its revenue producing activities are as follows: persuasive evidence of an arrangement exists; delivery; the fee is fixed or determinable and collectability is reasonably assured. It is upon completion of services provided that the Company meets all four criteria and it is at such time that the Company recognizes revenue. Amounts billed in advance of the period in which the revenue recognition criteria are met are recorded as Deferred revenue in the accompanying Balance Sheet.
Revenue and Expense Accruals
The Company routinely makes accruals based on estimates for both revenues and expenses due to the timing of compiling billing information, receiving certain third-party information and reconciling the Companys records with those of third parties. The delayed information from third parties includes, among other things, actual volumes transported and other operating expenses. The Company makes accruals to reflect estimates for these items based on its internal records and information from third parties. Estimated accruals are adjusted when actual information is received from third parties and the Companys internal records have been reconciled.
Income Taxes
The Company is treated as a partnership for tax purposes under the provisions of the Internal Revenue Code. Accordingly, the accompanying financial statements do not reflect a provision for federal income taxes since the Companys results of operations and related credits and deductions will be passed through and taken into account by its members in computing their respective tax liabilities. The Company is, however, subject to an income tax at the Cadiz, Ohio jurisdictional level.
The Company accounts for income taxes under the asset and liability method. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of any tax rate change on deferred taxes is recognized as tax expense (benefit) from continuing operations in the period that includes the enactment date of the tax rate change. Realizability of deferred tax assets is assessed and, if not more likely than not, a valuation allowance is recorded to reflect the deferred tax assets at net realizable value as determined by management. All deferred tax balances are classified as long-term in the accompanying Balance Sheet.
Environmental Costs
Environmental expenditures are capitalized if the costs mitigate or prevent future contamination or if the costs improve environmental safety or efficiency of the existing assets. The Company recognizes remediation costs and penalties when the responsibility to remediate is probable and the amount of associated costs can be reasonably estimated. The timing of remediation accruals coincides with completion of a feasibility study or the commitment to a formal plan of action. Remediation liabilities are accrued based on estimates of known environmental exposure.
Fair Value of Financial Instruments
Management believes the carrying amounts of financial instruments, including trade receivables, affiliate receivables and payables, accounts payable, and accrued liabilities approximate fair value because of the short-term maturity of these instruments.
Accounting Standards
Recently Adopted
In August 2014, the Financial Accounting Standards Board (FASB) issued an accounting standard update requiring management to assess an entitys ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Management is required to assess if there is substantial doubt about an entitys ability to continue as a going concern
within one year after the issuance of the financial statements. Disclosures are required if conditions give rise to substantial doubt and the type of disclosure is determined based on whether managements plans will be able to alleviate the substantial doubt. The change was effective for the first fiscal period ending after December 15, 2016. The adoption of this accounting standard update in 2016 did not have a material impact on the Companys disclosures.
Not Yet Adopted
In February 2016, the FASB issued an accounting standard update requiring lessees to record virtually all leases on their balance sheets. The accounting standard update also requires expanded disclosures to help financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. For lessors, this amended guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The change will be effective on a modified retrospective basis for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this on our financial statements and disclosures, and accounting policies. This evaluation process includes reviewing all forms of leases, performing a completeness assessment over the lease population and analyzing the practical expedients in order to determine the best path to implementation. The Company plans to adopt the standard for the fiscal year ended December 31, 2019.
In May 2014, the FASB issued an initial accounting standard update for revenue recognition for contracts with customers. The guidance in the accounting standard update states that revenue is recognized when a customer obtains control of a good or service. Recognition of the revenue will involve a multiple step approach including identifying the contract, identifying the separate performance obligations, determining the transaction price, allocating the price to the performance obligations and then recognizing the revenue as the obligations are satisfied. Additional disclosures will be required to provide adequate information to understand the nature, amount, timing and uncertainty of reported revenues and revenues expected to be recognized. The change will be effective on a retrospective or modified retrospective basis for fiscal years beginning after December 15, 2018, and interim periods within those years. The Company plans to adopt the standard for fiscal year ended December 31, 2018.
The Company is currently evaluating the impact of the revenue recognition standard on our financial statements and disclosures, and accounting policies. This evaluation process includes a phased approach, the first phase of which includes reviewing a sample of our contracts and transaction types. The Company is currently in the process of completing this first phase and evaluating the methods of adoption.
Based on the results of the first phase assessment to date, the Company has reached tentative conclusions for our primary contract type and does not believe revenue recognition patterns for fee-based contracts will change materially. The Company is currently working to understand the accounting impact on fuel retainage and system loss under the new standard, specifically related to the accounting for noncash consideration received in the form of a commodity product. As a result of implementation, the Company does expect certain amounts to be grossed up in revenue related to third-party reimbursements and changes in accounting for fuel and deemed system loss. The Company continues to work through implementation efforts.
3. Affiliate Transactions
The Company has no employees. Operating, maintenance and general and administrative services, including insurance, are provided to the Company under a service agreement with MarkWest Utica Operating. In addition, the Company has an office lease agreement with an affiliate. From time to time, the Company may also sell to or purchase from affiliates, assets and inventory at the lesser of average unit cost or fair value. The Company has incurred the following amounts with affiliates related to the service agreement, lease and assets sales:
|
|
Year ended |
|
|
|
|
December 31, 2016 |
|
|
Facility expenses |
|
|
|
|
Labor and benefits |
|
$ |
12,456 |
|
Less: amounts capitalized in property and equipment |
|
(1,198 |
) |
|
Labor and benefits, net |
|
11,258 |
|
|
|
|
|
|
|
Rent expense |
|
427 |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
General and administrative expenses |
|
1,522 |
|
|
Insurance expense |
|
984 |
|
|
|
|
|
|
|
Property and equipment sold to affiliates |
|
8,051 |
|
|
Property and equipment purchased from affiliates |
|
2,118 |
|
|
At December 31, 2016, the Company had affiliate payables of $1.7 million, and affiliate receivables of $10.5 million related to these transactions and the service agreement. During 2016, the Company capitalized $1.0 million related to engineering and construction management services provided under the affiliate service agreement in Property and equipment, net on the accompanying Balance Sheet.
4. Significant Customers and Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of trade receivables, which are generally unsecured. At December 31, 2016, three customers, each of who accounted for more than 10% of the Companys trade receivables, accounted for 89% of total trade receivables in aggregate.
In 2016, one producer customer accounted for 73% of the Companys revenue, and a second producer customer accounted for 15% of the Companys revenue.
The Company maintains cash deposits with a major bank, which, from time-to-time, may exceed federally insured limits.
5. Property and Equipment
Property and equipment with associated accumulated depreciation is shown below:
|
|
December 31, 2016 |
|
|
|
|
|
|
|
Gas gathering and compression equipment |
|
$ |
1,225,856 |
|
Pipeline right of way |
|
150,891 |
|
|
Land |
|
2,078 |
|
|
Construction in progress |
|
119,910 |
|
|
Property and equipment |
|
1,498,735 |
|
|
Less: accumulated depreciation |
|
178,517 |
|
|
Property and equipment, net |
|
$ |
1,320,218 |
|
In conjunction with the acquisition of MarkWest Uticas parent by MPLX, LP in December 2015, the Company changed its estimate of the useful lives of certain gas gathering and compression plant assets. The gas gathering plants asset depreciation lives that were previously 20 years were increased to 30 years. The Company made these changes to better reflect the estimated periods during which such assets will remain in service. This change had the effect of reducing 2016 depreciation expense, increasing income from operations and increasing net income by approximately $14.7 million.
Depreciation expense of $56.5 million is included in Depreciation and accretion on the Statement of Operations for the year ended December 31, 2016.
6. Asset Retirement Obligations
The Companys assets subject to AROs are primarily gas-gathering pipelines and compression equipment. The Company also has land leases that require the Company to return the land to its original condition upon termination of the lease. The Company reviews current laws and regulations governing obligations associated with asset retirements and leases.
The following is a reconciliation of the changes in the ARO liability for the year ended:
|
|
December 31, 2016 |
|
|
Beginning asset retirement obligations |
|
$ |
5,369 |
|
Liabilities incurred |
|
606 |
|
|
Accretion expense |
|
64 |
|
|
Adjustments to AROs |
|
(4,209 |
) |
|
Ending asset retirement obligations |
|
$ |
1,830 |
|
At December 31, 2016, there were no assets legally restricted for purposes of settling AROs.
7. Income Tax
The deferred tax assets and liabilities resulting from temporary book-tax differences are comprised of the following:
|
|
December 31, 2016 |
|
|
Deferred tax assets: |
|
|
|
|
Net operating loss carryforward |
|
$ |
71 |
|
Valuation allowance |
|
(61 |
) |
|
Total deferred tax assets |
|
10 |
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
Property and equipment |
|
(40 |
) |
|
Total deferred tax liabilities |
|
(40 |
) |
|
|
|
|
|
|
Net long-term deferred tax liabilities |
|
$ |
(30 |
) |
Significant judgment is required in evaluating the Companys tax positions. During the ordinary course of business, there may be transactions and calculations for which the ultimate tax determination is uncertain. However, the Company did not have any material uncertain tax positions for the year ended December 31, 2016. The state NOL carryforwards begin to expire in 2017. The Company does not anticipate utilizing the entire NOL and has provided a valuation allowance against this deferred tax asset.
Activity in the Companys allowance for deferred tax asset valuation allowance is as follows:
|
|
December 31, 2016 |
|
|
Deferred tax asset valuation allowance: |
|
|
|
|
Balance at beginning of period |
|
$ |
40 |
|
Charged to costs and expenses |
|
21 |
|
|
Balance at end of period |
|
$ |
61 |
|
8. Commitments and Contingencies
Environmental Matters
The Company is subject to federal, state and local laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for non-compliance.
In 2015, representatives from the United States Environmental Protection Agency (EPA) and the United States Department of Justice conducted a raid on a pipeline launcher/receiver site owned by an affiliate of MarkWest Utica, which site was utilized for pipeline maintenance operations. That MarkWest Utica affiliate continues to discuss with the EPA and other jurisdictions alleged omissions associated with permits or related regulatory obligations for its launcher/receiver and compressor station facilities. It is possible that in connection with any potential or asserted enforcement action associated with this matter, that the MarkWest Utica affiliate will incur material assessments, penalties or fines, incur material defense costs and expenses, be required to modify operations or construction activities which could increase operating costs and capital expenditures, or be subject to other obligations or restrictions that could restrict or prohibit their activities, any or all of which could adversely affect their results of operations, financial position or cash flows. Due to the similar nature of operations, the Company is evaluating its potential exposure with respect to the foregoing in connection with these activities. At December 31, 2016, accrued liabilities for potential penalties totaled $100. However, the ultimate amount of any potential assessments, penalties, fines, restrictions, requirements, modifications, costs or expenses, if any, that may be incurred in connection with any potential enforcement action cannot be reasonably estimated or determined at this time.
Legal
The Company is subject to a variety of risks and disputes, and is a party to various legal proceedings in the normal course of its business. The Company maintains insurance policies with coverage and deductibles that it believes are reasonable and prudent. However, the Company cannot assure that the insurance companies will promptly honor their policy obligations, or that the coverage
or levels of insurance will be adequate to protect the Company from all material expenses related to future claims for property loss or business interruption to the Company, or for third-party claims of personal injury and property damage, or that the coverage or levels of insurance it currently has will be available in the future at economical prices. While it is not possible to predict the outcome of the legal actions with certainty, management is of the opinion that appropriate provisions and accruals for potential losses associated with all legal actions have been made in the financial statements and that none of these actions, either individually or in the aggregate, will have a material adverse effect on the Companys financial condition, liquidity or results of operations.
Lease and Other Contractual Obligations
The Company has non-cancellable operating lease agreements for the lease of vehicles expiring at various times through fiscal year 2018. Annual rent expense under these operating leases was $11 for the year ended December 31, 2016. Future minimum commitments as of December 31, 2016 for operating lease obligations are as follows:
Year ending December 31, |
|
|
|
|
2017 |
|
$ |
360 |
|
2018 |
|
110 |
|
|
Total |
|
$ |
470 |
|
The Company also has contractual commitments to acquire property and equipment totaling $3.6 million at December 31, 2016.
9. Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through February 24, 2017, the date the financial statements were issued, and determined that there are no material subsequent events that required additional disclosure.
Exhibit 99.2
Ohio Condensate Company, L.L.C.
Financial Statements for the year ended December 31, 2016 and Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Board of Managers of Ohio Condensate Company, L.L.C.
In our opinion, the accompanying balance sheet as of December 31, 2016 and the related statements of operations, of changes in members equity, and of cash flows for the year then ended present fairly, in all material respects, the financial position of Ohio Condensate Company, L.L.C. as of December 31, 2016 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP |
|
|
|
Denver, Colorado |
|
February 24, 2017 |
|
|
|
Ohio Condensate Company, L.L.C.
Balance Sheet
($ in thousands)
The accompanying notes are an integral part of these financial statements.
Ohio Condensate Company, L.L.C.
Statement of Operations
($ in thousands)
|
|
Year ended |
|
|
|
|
December 31, 2016 |
|
|
|
|
|
|
|
Revenue |
|
$ |
14,584 |
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Impairment expense (see Note 2) |
|
95,026 |
|
|
Facility expenses |
|
9,415 |
|
|
Selling, general and administrative expenses |
|
1,865 |
|
|
Depreciation |
|
3,458 |
|
|
Total operating expenses |
|
109,764 |
|
|
|
|
|
|
|
Loss from operations |
|
(95,180 |
) |
|
|
|
|
|
|
Interest expense |
|
628 |
|
|
Miscellaneous income |
|
(151 |
) |
|
|
|
|
|
|
Loss before provision for income tax |
|
(95,657 |
) |
|
|
|
|
|
|
Benefit for deferred income tax expense |
|
(110 |
) |
|
|
|
|
|
|
Net loss |
|
$ |
(95,547 |
) |
The accompanying notes are an integral part of these financial statements.
Ohio Condensate Company, L.L.C.
Statement of Changes in Members Equity
($ in thousands)
|
|
MarkWest Utica
|
|
Summit
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|||
Balance at December 31, 2015 |
|
$ |
68,383 |
|
$ |
47,026 |
|
$ |
115,409 |
|
|
|
|
|
|
|
|
|
|||
Contributions from members |
|
210 |
|
140 |
|
350 |
|
|||
|
|
|
|
|
|
|
|
|||
Distributions to members |
|
(2,519 |
) |
(1,679 |
) |
(4,198 |
) |
|||
|
|
|
|
|
|
|
|
|||
Net loss |
|
(57,328 |
) |
(38,219 |
) |
(95,547 |
) |
|||
|
|
|
|
|
|
|
|
|||
Balance at December 31, 2016 |
|
$ |
8,746 |
|
$ |
7,268 |
|
$ |
16,014 |
|
The accompanying notes are an integral part of these financial statements.
Ohio Condensate Company, L.L.C.
Statement of Cash Flows
($ in thousands)
|
|
Year ended |
|
|
|
|
December 31, 2016 |
|
|
Cash flows from operating activities: |
|
|
|
|
Net loss |
|
$ |
(95,547 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
Impairment expense |
|
95,026 |
|
|
Depreciation |
|
3,458 |
|
|
Amortization of deferred contract costs |
|
29 |
|
|
Deferred revenue |
|
(1,190 |
) |
|
Benefit for deferred income taxes |
|
(110 |
) |
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
Trade receivables |
|
2,662 |
|
|
Affiliate receivables |
|
437 |
|
|
Other current assets |
|
583 |
|
|
Affiliate payables |
|
(241 |
) |
|
Accounts payable |
|
(180 |
) |
|
Accrued liabilities |
|
12 |
|
|
Other long-term liabilities |
|
672 |
|
|
Net cash provided by operating activities |
|
5,611 |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
Capital expenditures |
|
(774 |
) |
|
Proceeds from sale of property, plant and equipment |
|
16 |
|
|
Net cash used in investing activities |
|
(758 |
) |
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
Payment of capital lease obligations |
|
(1,599 |
) |
|
Contributions from members |
|
350 |
|
|
Distributions to members |
|
(4,198 |
) |
|
Net cash used in financing activities |
|
(5,447 |
) |
|
|
|
|
|
|
Net decrease in cash |
|
(594 |
) |
|
Cash at beginning of year |
|
666 |
|
|
Cash at end of year |
|
$ |
72 |
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
Cash paid for interest |
|
$ |
628 |
|
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
Decrease in accrued property, plant and equipment |
|
$ |
(866 |
) |
Decrease in affiliate payables for purchases of property, plant and equipment |
|
(4 |
) |
|
Decrease in affiliate receivables for property, plant and equipment |
|
11 |
|
|
Assets acquired through capital lease obligations |
|
2,565 |
|
The accompanying notes are an integral part of these financial statements.
Ohio Condensate Company, L.L.C.
Notes to Financial Statements
($ in thousands, unless otherwise indicated)
1. Organization and Business
Effective December 19, 2013, MarkWest Utica EMG Condensate, L.L.C. (MarkWest Utica Condensate), a partially owned subsidiary of MarkWest Liberty Midstream & Resources, L.L.C. (MarkWest Liberty), which is a wholly-owned subsidiary of MarkWest Energy Partners, L.P. (MarkWest), entered into the Limited Liability Company Agreement (the Original LLC Agreement) with Blackhawk Midstream LLC (Blackhawk) (together the Members), in order to form Ohio Condensate Company, L.L.C. (the Company or Ohio Condensate). The Company was formed for the purpose of gathering (by pipeline), stabilizing, terminalling, transportation and storage of wellhead condensate within certain defined areas in the state of Ohio. Operations commenced in February 2015. Under the terms of the Original LLC Agreement, MarkWest Utica Condensate and Blackhawk each made initial nominal contributions to the Company in exchange for a 99% and 1% ownership interest, respectively. All operational and administrative services are provided through contractual arrangements with affiliates of MarkWest. See Note 3 for more information regarding affiliate transactions.
After the initial nominal contributions in 2013, MarkWest Utica Condensate was obligated to contribute all of the capital required by the Company. MarkWest Utica Condensates and Blackhawks membership interests were adjusted to equal their respective share of the capital contributed. Therefore, as of December 31, 2013, MarkWest Utica Condensate owned more than a 99% interest and Blackhawk owned less than a 1% interest. Blackhawk also had an option to acquire a 40% equity interest in Ohio Condensate (the Ohio Condensate Option). See Note 2, Deferred Contract Costs , for further discussion. In January 2014, Blackhawk sold its interest in the Company and the Ohio Condensate Option to Summit Midstream Partners, LLC (Summit). Effective June 1, 2014 (Summit Investment Date), Summit exercised the Ohio Condensate Option and increased its equity ownership from less than 1% to 40% through a net cash investment of approximately $8.6 million.
In August 2014, MarkWest Utica Condensate and Summit entered into the Second Amended and Restated Limited Liability Company Agreement of Ohio Condensate Company, L.L.C. (the Amended LLC Agreement) which replaced the Original LLC Agreement. In accordance with the Amended LLC Agreement, MarkWest Utica Condensate is required to fund, as needed, all capital required by the Company. Summit has the right, but not the obligation, to make additional capital contributions subject to certain limitations. If Summit elects to contribute capital in response to a particular capital call then the aggregate amount of capital that MarkWest Utica Condensate is required to contribute pursuant to such capital call will be decreased, dollar for dollar, by the amount of capital that Summit elects to contribute. If either member fails to contribute any capital to the Company that is committed to be contributed such member will be considered in default but will remain fully obligated to contribute such capital to the Company. The Company will be entitled to pursue all remedies available at law or in equity against the defaulting member.
In December 2015, MarkWest Utica Condensate became a wholly-owned subsidiary of MarkWest Liberty. The purchase of the partners interest coincided with MarkWests merger with MPLX LP, a wholly-owned subsidiary of Marathon Petroleum Company (Marathon).
Effective March 3, 2016, Summit contributed substantially all of its limited partner interest in the Company to Summit Midstream Partners, LP (SMLP). Summit and SMLP are under common control and this contribution did not change their overall ownership in the Company; therefore, activity is presented combined on the accompanying Statement of Changes in Members Equity. Through December 31, 2016, SMLP elected to contribute 40% of all capital calls and in total MarkWest Utica Condensate has contributed $82.6 million and SMLP has contributed $55.0 million to the Company.
The business and affairs of the Company are overseen by a board of managers, currently consisting of three managers designated by MarkWest Utica Condensate and two managers designated by SMLP. The composition of the board of managers could change in accordance with changes in investment balances. The board of managers has delegated to MarkWest Utica Condensate the authority to manage the day-to-day operations of the Company, subject to certain approval rights retained by the board. Pursuant to a services agreement between the Company and MarkWest Utica Condensate, an affiliate of MarkWest Utica Condensate will provide all employees and services necessary for the daily operations and management of the Companys business. The Company is required to distribute all available cash to the Members, as determined in accordance with the Amended LLC Agreement, within 45 days of the end of each calendar month.
2. Significant Accounting Policies
Basis of Presentation
The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the respective reporting periods. Estimates affect, among other items, evaluating impairments of long-lived assets; establishing estimated useful lives for long-lived assets; estimating expense accruals and capital expenditures; establishing inputs when determining fair value of options; evaluating forecasts when determining income tax valuation allowances; and determining liabilities, if any, for environmental and legal contingencies. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, secured deposits and investments in highly liquid debt instruments with initial maturities of three months or less. The Company had no cash equivalents at December 31, 2016.
Trade Receivables
Trade receivables primarily consist of customer accounts receivable, which are recorded at the invoiced amount and generally do not bear interest. Past-due balances over 90 days and other higher risk amounts are reviewed individually for collectability. Balances that remain outstanding after reasonable collection efforts have been unsuccessful are written off through a charge to the valuation allowance and a credit to accounts receivable. Management reviews the allowance quarterly. The Company did not record a valuation allowance at December 31, 2016
Property, Plant and Equipment
Property, plant and equipment consists primarily of condensate stabilization facilities, other pipeline assets, truck and railcar loading equipment and related facilities that are recorded at cost. Expenditures that extend the useful lives of assets are capitalized. Repairs, maintenance and renewals that do not extend the useful lives of assets are expensed as incurred. Depreciation is provided on a straight-line method over a period of 20 to 30 years, with the exception of miscellaneous equipment and vehicles, which are depreciated over a period of 3 to 20 years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.
When items of property and equipment are sold or otherwise disposed of, any gains or losses are reported in the Statement of Operations. Gains on the disposal of property, plant and equipment are recognized when they occur, which is generally at the time of closing. If a loss on disposal is expected, such losses are recognized when the assets are classified as held for sale.
Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset. Depreciation expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease.
Impairment of Long-Lived Assets
The Companys policy is to evaluate whether there has been an impairment in the value of long-lived assets when certain events indicate that the remaining balance may not be recoverable. Qualitative and quantitative information is reviewed in order to determine if a triggering event has occurred or if an impairment indicator exists. If we determine that a triggering event has occurred we would complete a full impairment analysis. If we determine that the carrying value is not recoverable, a loss is recorded for the difference between the fair value and the carrying value of the related asset group. Management considers the volume of producer customers reserves and future condensate and natural gas liquids product prices to estimate cash flows. The amount of additional producer customers reserves developed by future drilling activity depends, in part, on expected commodity prices. Projections of producer customer reserves, drilling activity and future commodity prices are inherently subjective and contingent upon a number of variable factors, many of which are difficult to forecast. Any significant variance in any of these assumptions or factors could materially affect future cash flows, which could result in the impairment of an asset.
During 2016, forecasts for the Company were reduced to align with updated forecasts for customer requirements. As a result, the Company completed a long-lived asset impairment analysis in accordance with Accounting Standards Codification (ASC) Topic 360, Property, Plant and Equipment , to determine the potential long-lived asset impairment charge. The fair value of the long-lived assets was determined based upon applying the discounted cash flow method, which is an income approach, and the guideline public company method, which is a market approach. The discounted cash flow fair value estimate is based on known or knowable information at the interim measurement date. The significant assumptions that were used to develop the estimate of the fair value under the discounted cash flow method include managements best estimates of the expected future results using a probability weighted average set of cash flow forecasts and a discount rate of 11.2 percent. An increase to the discount rate of 50 basis points would have resulted in an additional charge of $1 million on the Statement of Operations. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As such, the fair value of the Companys long-lived assets represents a Level 3 measurement. As a result, there can be no assurance that the estimates and assumptions made for
purposes of this impairment test will prove to be an accurate prediction of the future. During 2016, impairment charges of approximately $95 million were recorded.
For assets identified to be disposed of in the future, the carrying value of these assets is compared to the estimated fair value, less the cost to sell, to determine if impairment is required. Until the assets are disposed of, an estimate of the fair value is re-determined for each reporting period when related events or circumstances change.
Deferred Contract Costs
Deferred contract costs represent the asset created by the fair value of the Ohio Condensate Option that was recorded as permanent equity. This cost was amortized over the term of the arrangement into Facility expenses on the Statement of Operations until June 30, 2016 when the remaining net balance of $684 was impaired, as discussed in Impairment of Long-Lived Assets above.
Revenue Recognition
The Company generates its revenue by providing condensate stabilization and terminalling services. The Company earns a fee under these arrangements related to the volume of condensate that flows through its facility and is not directly dependent on commodity prices. The Companys assessment of each of the revenue recognition criteria as they relate to its revenue producing activities are as follows: persuasive evidence of an arrangement exists; delivery; the fee is fixed or determinable and collectability is reasonably assured. It is upon completion of services provided that the Company meets all four criteria and it is at such time that the Company recognizes revenue. Amounts billed in advance of the period in which the revenue recognition criteria are met are recorded as Deferred revenue and Other long-term liabilities in the accompanying Balance Sheet.
Expense Accruals
The Company routinely makes accruals based on estimates for expenses due to the timing of receiving certain third-party information and reconciling the Companys records with those of third parties. The delayed information from third parties includes, among other things, volumetric charges and other operating expenses. The Company makes accruals to reflect estimates for these items based on its internal records and information from third parties. Estimated accruals are adjusted when actual information is received from third parties and the Companys internal records have been reconciled.
Income Taxes
The Company is treated as a partnership for tax purposes under the provisions of the Internal Revenue Code. Accordingly, the accompanying financial statements do not reflect a provision for federal income taxes since the Companys results of operations and related credits and deductions will be passed through and taken into account by its Members in computing their respective tax liabilities. The Company is, however, subject to an income tax at the Cadiz, Ohio jurisdictional level.
The Company accounts for income taxes under the asset and liability method. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of any tax rate change on deferred taxes is recognized as tax expense (benefit) from continuing operations in the period that includes the enactment date of the tax rate change. Realizability of deferred tax assets is assessed and, if not more likely than not, a valuation allowance is recorded to reflect the deferred tax assets at net realizable value as determined by management. All deferred tax balances are classified as long-term in the accompanying Balance Sheet.
Environmental Costs
Environmental expenditures are capitalized if the costs mitigate or prevent future contamination or if the costs improve environmental safety or efficiency of the existing assets. The Company recognizes remediation costs and penalties when the responsibility to remediate is probable and the amount of associated costs can be reasonably estimated. The timing of remediation accruals coincides with completion of a feasibility study or the commitment to a formal plan of action. Remediation liabilities are accrued based on estimates of known environmental exposure. As of December 31, 2016, the Company has recorded $30 for environmental liabilities.
Fair Value of Financial Instruments
Management believes the carrying amounts of financial instruments, including trade receivables, other receivables, affiliate receivables and payables, accounts payable, and accrued liabilities approximate fair value because of the short-term maturity of these instruments.
Accounting Standards
Recently Adopted
In August 2014, the Financial Accounting Standards Board (FASB) issued an accounting standard update requiring management to assess an entitys ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Management is required to assess if there is substantial doubt about an entitys ability to continue as a going concern within one year after the issuance of the financial statements. Disclosures are required if conditions give rise to substantial doubt and the type of disclosure is determined based on whether managements plans will be able to alleviate the substantial doubt. The change was effective for the fiscal period ending after December 15, 2016. The Company adopted this accounting standard update in 2016 and has made the appropriate disclosures in Note 9.
Not Yet Adopted
In February 2016, the FASB issued an accounting standard update requiring lessees to record virtually all leases on their balance sheets. The accounting standard update also requires expanded disclosures to help financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. For lessors, this amended guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The change will be effective on a modified retrospective basis for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this standard on our financial statements and disclosures, capital lease obligations and accounting policies. This evaluation process includes reviewing all forms of leases, performing a completeness assessment over the lease population and analyzing the practical expedients in order to determine the best path to implementation. The Company plans to adopt the standard for the fiscal year ended December 31, 2019.
In May 2014, the FASB issued an initial accounting standard update for revenue recognition for contracts with customers. The guidance in the accounting standard update states that revenue is recognized when a customer obtains control of a good or service. Recognition of the revenue will involve a multiple step approach including identifying the contract, identifying the separate performance obligations, determining the transaction price, allocating the price to the performance obligations and then recognizing the revenue as the obligations are satisfied. Additional disclosures will be required to provide adequate information to understand the nature, amount, timing and uncertainty of reported revenues and revenues expected to be recognized. The change will be effective on a retrospective or modified retrospective basis for fiscal years beginning after December 15, 2018. The Company plans to adopt the standard for fiscal year ended December 31, 2018.
The Company is currently evaluating the impact of the revenue recognition standard on our financial statements, disclosures and accounting policies. This evaluation process includes a phased approach, the first phase of which includes reviewing a sample of our contracts and transaction types. The Company is currently in the process of completing this first phase and evaluating the methods of adoption.
Based on the results of the first phase assessment to date, the Company has reached tentative conclusions and does not believe revenue recognition patterns for our fee-based contracts will change materially. As a result of implementation, the Company does expect certain amounts to be grossed up in revenue related to third-party reimbursements. The Company continues to work through implementation efforts.
3. Affiliate Transactions
The Company has no employees. Operating, maintenance and general and administrative services, including insurance, are provided to the Company under a service agreement with an affiliate of MarkWest. From time to time, the Company may also sell to or purchase from MarkWest affiliates, assets and inventory at the lesser of average unit cost or fair value. The Company also provides condensate stabilization and terminalling services to Marathon, an affiliate as of December 2015. See discussion of merger transaction in Note 1. The Company has incurred the following amounts with affiliates related to the service agreement, asset purchases and sales, and fee based revenue agreements:
|
|
Year ended |
|
|
|
|
December 31, 2016 |
|
|
Revenue |
|
$ |
9,113 |
|
|
|
|
|
|
Facility expenses |
|
|
|
|
Labor and benefits |
|
2,683 |
|
|
Less: amounts capitalized in property, plant and equipment |
|
(19 |
) |
|
Labor and benefits, net |
|
2,664 |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
General and administrative expenses |
|
1,522 |
|
|
Insurance |
|
71 |
|
|
|
|
|
|
|
Deferred revenue related to Marathon |
|
147 |
|
|
|
|
|
|
|
Property, plant and equipment sold to affiliates |
|
16 |
|
|
Property, plant and equipment purchased from affiliates |
|
30 |
|
|
At December 31, 2016, the Company had affiliate payables of $327 and affiliate receivables of $1.4 million related to these transactions and the service agreement. During 2016, the Company capitalized $18 related to engineering and construction management services in Property, plant and equipment, net on the accompanying Balance Sheet.
4. Significant Customers and Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of trade and other current receivables, which are generally unsecured. At December 31, 2016, two customers, each of who accounted for more than 10% of the Companys trade receivables, accounted for 95% of total Trade receivables in aggregate.
In 2016, one affiliated producer customer accounted for 63% of the Companys revenue, and one unaffiliated producer customer accounted for 30% of the Companys revenue.
The Company maintains cash deposits with a major bank, which, from time-to-time, may exceed federally insured limits.
5. Property, Plant and Equipment
Property, plant and equipment with associated accumulated depreciation is shown below:
|
|
December 31, 2016 |
|
|
|
|
|
|
|
Condensate and stabilization plant and equipment |
|
$ |
26,434 |
|
Land |
|
4,161 |
|
|
Construction in progress |
|
612 |
|
|
Property, plant and equipment |
|
31,207 |
|
|
Less: accumulated depreciation |
|
695 |
|
|
Property, plant and equipment, net |
|
$ |
30,512 |
|
In conjunction with the acquisition of MarkWest Utica Condensates parent by MPLX, LP in December 2015, the Company changed its estimate of the useful lives of certain condensate and stabilization plant assets. The condensate and stabilization plants asset depreciation lives that were previously 20 years were increased to 30 years. The Company made these changes to better reflect the estimated periods during which such assets will remain in service. Not inclusive of the impairment charge, this change had the effect of reducing 2016 depreciation expense, decreasing loss from operations and decreasing net loss by approximately $1.4 million, on an annualized basis.
See Note 2 for a discussion of the impairment charge recorded at during the year ended December 31, 2016.
6. Commercial Agreements
Midwest Terminal Agreement
Effective December 1, 2014, the Company executed a Terminal Services Agreement (the Terminal Agreement) with Midwest Terminals-Utica LLC (Midwest). Under the agreement, the Company engaged Midwest to construct and operate a condensate terminal (the Terminal) adjacent to the Companys condensate stabilization facility (the Facility). The Terminal includes holding tanks, a truck loadout facility, a rail loadout facility, and pipelines necessary for the operation of the Terminal. The Terminal Agreement continues for an initial term of 15 years and will automatically renew for successive 5-year terms, unless either party elects not to renew by 12-month advance notice.
Midwest obtained a loan to finance the construction of the Terminal (the Terminal Loan). The Terminal Loan is payable within 10 years and allows the Company to settle any default on the Terminal Loan on behalf of Midwest, and further permits the Company to enter the Terminal property and assume its operations upon termination of the Terminal Agreement. In conjunction with the Terminal Loan, Midwest executed an interest rate swap (the Interest Swap) to fix a portion of the interest paid on the Terminal Loan. Ohio Condensate agreed to reimburse Midwest for Midwests expected costs incurred to build out the Terminal (the Capital Recovery Fee). The Capital Recovery Fee is paid monthly over 10 years and initially could not exceed a total cost of $13.5 million. Midwest will maintain ownership of the Terminal. The Terminal Agreement is classified as a Capital lease obligations on the accompanying Balance Sheet.
In August 2015, the Company and Midwest entered into Amendment No. 2 to Terminal Services Agreement (the Second Amendment). Under the Second Amendment, the Company engaged Midwest to enhance the railroad loadout facility to allow dual-use truck and rail functionality for an additional $0.9 million. In addition, the Company increased the Capital Recovery Fee over the remaining term to cover the costs of the railroad loadout modifications.
As of December 31, 2016, the assets necessary for the operation of the Terminal under the capital lease are $2.8 million. The Terminal commenced operations in February 2015 and recorded accumulated amortization of the leased assets of $103 for the year ended December 31, 2016. The change in the cost basis of the assets and accumulated amortization is attributable to the impairment charge discussed in Note 2. Amortization of assets under capital leases is included in depreciation expense.
Ohio Condensate pays Midwest service fees for its operation and maintenance of the Terminal. The service fees are comprised of two components: (1) an operating expense fee dependent on the average daily volume of product delivered to the Terminal; and (2) a per barrel fee. Service fees of $3.0 million were incurred during the year ended December 31, 2016 and are included in Facility expenses in the accompanying Statement of Operations.
Beginning in 2015, the Company is required to reimburse Midwest $120 per year for fifteen years, or the life of the lease, for rental fees owed under the ground lease on which the Terminal resides. The Company incurred $120 in 2016, which has been recorded in Facility expenses . Under the terms of the ground lease, which Midwest entered into directly with Harrison County, OH, the Company can settle Midwests breaches and allows the Company to operate the Terminal upon satisfaction of certain conditions.
For the benefit of the Facility and the Terminal, the Company constructed and maintains tanks, pumps, and related components at the Facility for fire suppression. The cost of the shared portions of the fire suppression systems were paid equally by both Midwest and the Company. Midwest reimbursed the Company $419 for 50% of the upfront construction and installation costs of
the fire suppression system. The reimbursements will be deferred and recognized as income over the term of the Terminal Agreement. Additionally, Midwest will reimburse the Company 50% of the ongoing costs incurred by the Company to operate and maintain the shared system. The Company constructed a fuel pipe that is not part of the fire suppression systems. During 2016 Midwest reimbursed the Company for 100% of the construction costs of $173. The Company has a receivable from Midwest of $34 as of December 31, 2016 related to these agreements which is recorded as Other receivables on the accompany Balance Sheet.
In the event of expiration or any termination of the Terminal Agreement by either Midwest or Ohio Condensate for any reason, Ohio Condensate will have the right, but not the obligation, to immediately enter and take over operations of the Terminal. If Ohio Condensate elects to take over operations of the Terminal, it must obtain Midwests release under the Terminal Loan, either by paying off the Terminal Loan and Interest Swap or, with the lenders consent, assuming or restructuring the Terminal Loan directly with the lender. Following the Companys pay off or assumption (with the lenders consent) of the Terminal Loan and Interest Swap and reimbursement of Midwests costs incurred in performing services under the Terminal Agreement prior to the termination date, Ohio Condensate will receive title to all equipment, facilities, and other assets comprising the Terminal. Further, Ohio Condensate has the right at any time during the term of the Terminal Loan to satisfy and extinguish its obligation to pay the Capital Recovery Fee by remitting either to Midwest or the Terminal Loan lender the entire amount of principal and interest then outstanding on the Terminal Loan and Interest Swap obligation.
Midwest has been identified as a variable interest entity (VIE) because the Company leases the Terminal from Midwest and the lease includes a bargain purchase option. The Companys involvement with this VIE is limited to the Terminal Agreement. Management has determined that although the above transactions created a variable interest in Midwest, the Company is not the primary beneficiary and, as such, the Company is not required to consolidate the financial statements of Midwest. In determining that it is not the primary beneficiary, the Company considered the fact the Company does not have any voting interest, does not have the power to direct the activities of Midwest that most significantly impact its economic performance and only has the right, but not the obligation, to exercise its option to pay down the Terminal Loan.
The maximum exposure to loss from this variable interest is limited to the amount of our payments at December 31, 2016, as discussed above. The Companys variable interest in Midwest was $12.0 million at December 31, 2016.
AEP Onsite Partners Agreement
Effective October 28, 2015, the Company executed an Electric Transformation Services Agreement (the Transformation Agreement) with AEP Energy, Inc. (AEP Energy). During 2015, AEP Energy assigned its interest in the Transformation Agreement to its wholly-owned subsidiary, AEP Onsite Partners, LLC (AEP). Under the agreement, the Company engaged AEP to perform transformation services for electric energy received by the Company and to construct and operate a transformer substation and certain related facilities (the Transformer Substation) adjacent to the Facility. The Transformation Agreement continues for an initial term of approximately 5.5 years including the construction, service (which may be renewed for successive terms upon agreement of both parties) and removal periods. The service period and operations commenced in March 2016. Prior to that date the Transformer Substation was not in service and no asset or capital lease obligation was recorded.
The Transformation Agreement provides for payments based on transformation capacity to AEP. The fee is paid monthly and cannot exceed a total cost of $2.6 million over the service period. The fee is passed back to the Companys producers as part of electric reimbursements and is recorded net in Facility Expenses on the accompanying Statement of Operations. AEP will maintain ownership of the Transformer Substation. The Transformation Agreement is classified as a Capital lease obligations on the accompanying Balance Sheet.
As of December 31, 2016, the assets necessary for the operation of the Transformer Substation is $522. The Transformer Substation commenced operations in March 2016 at a cost of $2.6 million and recorded accumulated amortization of the leased assets of $58 for the year ended December 31, 2016. The cost basis of the assets and accumulated amortization was impacted by the impairment charge discussed in Note 2.
The future minimum lease payments required under the Companys capital leases and the present value of the net minimum lease payments at December 31, 2016 are as follows:
Year ending December 31, |
|
|
|
|
2017 |
|
$ |
2,459 |
|
2018 |
|
2,458 |
|
|
2019 |
|
2,457 |
|
|
2020 |
|
2,457 |
|
|
2021 |
|
1,834 |
|
|
Thereafter |
|
5,331 |
|
|
Total net minimum lease payments |
|
16,996 |
|
|
Less: amounts representing interest |
|
(2,850 |
) |
|
Present value of net minimum lease payments |
|
14,146 |
|
|
Less: Current portion of capital lease obligations |
|
(1,765 |
) |
|
Capital lease obligations |
|
$ |
12,381 |
|
7. Income Tax
The deferred tax assets resulting from temporary book-tax differences are comprised of the following:
|
|
December 31, 2016 |
|
|
Deferred tax assets: |
|
|
|
|
Net operating loss carryforward |
|
$ |
405 |
|
Property, plant and equipment |
|
534 |
|
|
Other |
|
8 |
|
|
Valuation allowance |
|
(947 |
) |
|
Total deferred tax assets |
|
$ |
|
|
Significant judgment is required in evaluating the Companys tax positions. During the ordinary course of business, there may be transactions and calculations for which the ultimate tax determination is uncertain. However, the Company did not have any material uncertain tax positions for the year ended December 31, 2016. Additionally, as of December 31, 2016 the Company had deferred tax assets of $405 related to net operating loss carryforwards for local jurisdictional level tax purposes which begin to expire in 2019 and $542 related to other deferred tax assets. The Company believes it is more likely than not that all deferred assets will not be realized in the future. Accordingly, the Company has provided a valuation allowance of $947 on those assets at December 31, 2016. The Company intends to maintain a valuation allowance against all deferred tax assets until it determines that it is more likely than not that the deferred tax assets will be realized.
Activity in the Companys allowance for deferred tax asset valuation allowance is as follows:
|
|
December 31, 2016 |
|
|
Deferred tax asset valuation allowance: |
|
|
|
|
Balance at beginning of period |
|
$ |
149 |
|
Charged to costs and expenses |
|
798 |
|
|
Balance at end of period |
|
$ |
947 |
|
8. Commitments and Contingencies
Legal
The Company is subject to a variety of risks and disputes, and is a party to various legal proceedings in the normal course of its business. The Company maintains insurance policies with coverage and deductibles that it believes are reasonable and prudent. However, the Company cannot assure that the insurance companies will promptly honor their policy obligations, or that the coverage or levels of insurance will be adequate to protect the Company from all material expenses related to future claims for property loss or business interruption to the Company, or for third-party claims of personal injury and property damage, or that the coverage or levels of insurance it currently has will be available in the future at economical prices. While it is not possible to predict the outcome of the legal actions with certainty, management is of the opinion that appropriate provisions and accruals for potential losses associated with all legal actions have been made in the financial statements and that none of these actions, either individually or in the aggregate, will have a material adverse effect on the Companys financial condition, liquidity or results of operations.
Lease and Other Contractual Obligations
The Company has non-cancellable operating lease agreements for the lease of vehicles expiring at various times through fiscal year 2018. The minimum future payments under these agreements as of December 31, 2016 are $35 and $20 for the years ended December 31, 2017 and 2018, respectively.
Effective June 2014, the Company entered into an agreement with Columbus & Ohio River Rail Road Company (the CUOH). Under this agreement, the Company is obligated to ship a minimum of 7,500 loaded rail carloads of stabilized condensate within a three year period beginning on the date that the first rail carload of stabilized condensate is shipped by CUOH from the Terminal (Volume Commitment). If the Company does not meet this Volume Commitment then it is contractually obligated to pay liquidated damages to CUOH of $200 per rail carload below the 7,500 minimum. The three year minimum commitment period commenced in July 2015. The Company deems it probable the Volume Commitment will not be met during the three year period. Therefore, the Company has recorded a liability of $672 for this commitment as of December 31, 2016, which is included in the accompanying Balance Sheet as Other long-term liabilities .
9. Liquidity
The Company experienced a net loss of $95.5 million which, as described in Note 2, included a $95.0 million impairment write-down of property, plant and equipment due to the expected downturn in market conditions over the remaining life of the assets. Additionally, the Company expects to incur a net operating loss and net cash outflow from operations in 2017. In order to fund the Companys operations for the next twelve months, management has implemented a variety of cost control measures and has obtained commitments from its Members to provide any required financial support through February 28, 2018.
10. Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through February 24, 2017, the date the financial statements were issued, and determined that there are no material subsequent events that required additional disclosure.
Exhibit 99.4
Ohio Condensate Company, L.L. C.
December 31, 2015 and 2014 Financial Statements and Independent Auditors Report
|
Deloitte & Touche LLP Suite 3600 555 Seventeenth Street Denver, CO 80202-3942 USA
Tel: +1 303 292 5400 Fax: +1 303 312-4000 www.deloitte.com |
INDEPENDENT AUDITORS REPORT
To the Audit Committee of
MPLX LP
Findlay, OH
We have audited the accompanying financial statements of Ohio Condensate Company, L.L.C. (the Company), which comprise the balance sheets as of December 31, 2015 and 2014, and the related statements of operations, changes in members equity, and cash flows for the years then ended, and the related notes to the financial statements.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Companys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ohio Condensate Company, L.L.C. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
March 11, 2016 |
Member of Deloitte Touche Tohmatsu Limited |
Ohio Condensate Company, L.L.C.
Balance Sheets
($ in thousands)
|
|
December 31, 2015 |
|
December 31, 2014 |
|
||
ASSETS |
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
||
Cash |
|
$ |
666 |
|
$ |
15,711 |
|
Trade receivables |
|
2,621 |
|
|
|
||
Other receivables |
|
492 |
|
|
|
||
Affiliate receivables |
|
1,923 |
|
86 |
|
||
Other current assets |
|
320 |
|
110 |
|
||
Total current assets |
|
6,022 |
|
15,907 |
|
||
|
|
|
|
|
|
||
Property, plant and equipment |
|
132,806 |
|
119,855 |
|
||
Less: accumulated depreciation |
|
(6,682 |
) |
(170 |
) |
||
Total property, plant and equipment, net |
|
126,124 |
|
119,685 |
|
||
|
|
|
|
|
|
||
Other long-term assets: |
|
|
|
|
|
||
Deferred contract costs |
|
928 |
|
928 |
|
||
Less: amortization of deferred contract costs |
|
(216 |
) |
(158 |
) |
||
Total assets |
|
$ |
132,858 |
|
$ |
136,362 |
|
|
|
|
|
|
|
||
LIABILITIES AND MEMBERS EQUITY |
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
||
Accounts payable |
|
$ |
722 |
|
$ |
5,306 |
|
Affiliate payables |
|
571 |
|
1,223 |
|
||
Deferred revenue |
|
1,190 |
|
|
|
||
Accrued liabilities |
|
1,311 |
|
11,716 |
|
||
Current portion of capital lease obligation |
|
1,208 |
|
1,042 |
|
||
Total current liabilities |
|
5,002 |
|
19,287 |
|
||
|
|
|
|
|
|
||
Capital lease obligation |
|
11,972 |
|
12,372 |
|
||
Other long-term liabilities |
|
475 |
|
|
|
||
|
|
|
|
|
|
||
Members equity |
|
115,409 |
|
104,703 |
|
||
Total liabilities and members equity |
|
$ |
132,858 |
|
$ |
136,362 |
|
The accompanying notes are an integral part of these financial statements.
Ohio Condensate Company, L.L.C.
Statements of Operations
($ in thousands)
|
|
Year ended December 31, |
|
||||
|
|
2015 |
|
2014 |
|
||
|
|
|
|
|
|
||
Revenue |
|
$ |
11,240 |
|
$ |
|
|
|
|
|
|
|
|
||
Operating expenses: |
|
|
|
|
|
||
Facility expenses |
|
8,577 |
|
931 |
|
||
Selling, general and administrative expenses |
|
1,806 |
|
1,864 |
|
||
Depreciation |
|
6,512 |
|
170 |
|
||
Total operating expenses |
|
16,895 |
|
2,965 |
|
||
|
|
|
|
|
|
||
Loss from operations |
|
(5,655 |
) |
(2,965 |
) |
||
|
|
|
|
|
|
||
Interest expense |
|
647 |
|
|
|
||
|
|
|
|
|
|
||
Loss before provision for income tax |
|
(6,302 |
) |
(2,965 |
) |
||
|
|
|
|
|
|
||
Provision for deferred income tax expense |
|
110 |
|
|
|
||
|
|
|
|
|
|
||
Net loss |
|
$ |
(6,412 |
) |
$ |
(2,965 |
) |
The accompanying notes are an integral part of these financial statements.
Ohio Condensate Company, L.L.C.
Statements of Changes in Members Equity
($ in thousands)
|
|
MarkWest Utica
|
|
Blackhawk
|
|
Summit
|
|
Total |
|
||||
January 1, 2014 |
|
$ |
(30 |
) |
$ |
928 |
|
$ |
|
|
$ |
898 |
|
|
|
|
|
|
|
|
|
|
|
||||
Assignment of interest in Ohio Condensate Option
|
|
|
|
(928 |
) |
928 |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Contributions from members
|
|
72,392 |
|
|
|
48,186 |
|
120,578 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Distributions to members
|
|
(8,285 |
) |
|
|
(5,523 |
) |
(13,808 |
) |
||||
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
(2,118 |
) |
|
|
(847 |
) |
(2,965 |
) |
||||
|
|
|
|
|
|
|
|
|
|
||||
December 31, 2014 |
|
61,959 |
|
|
|
42,744 |
|
104,703 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Contributions from members
|
|
10,271 |
|
|
|
6,847 |
|
17,118 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
(3,847 |
) |
|
|
(2,565 |
) |
(6,412 |
) |
||||
|
|
|
|
|
|
|
|
|
|
||||
December 31, 2015 |
|
$ |
68,383 |
|
$ |
|
|
$ |
47,026 |
|
$ |
115,409 |
|
The accompanying notes are an integral part of these financial statements.
Ohio Condensate Company, L.L.C.
Statements of Cash Flows
($ in thousands)
|
|
Year ended December 31, |
|
||||
|
|
2015 |
|
2014 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
||
Net loss |
|
$ |
(6,412 |
) |
$ |
(2,965 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
||
Depreciation |
|
6,512 |
|
170 |
|
||
Amortization of deferred contract costs |
|
57 |
|
158 |
|
||
Deferred revenue |
|
(26 |
) |
|
|
||
Provision for deferred income taxes |
|
110 |
|
|
|
||
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
||
Trade receivables |
|
(2,621 |
) |
|
|
||
Affiliate receivables |
|
(1,830 |
) |
(82 |
) |
||
Other current assets |
|
(110 |
) |
(110 |
) |
||
Affiliate payables |
|
227 |
|
341 |
|
||
Deferred revenue |
|
1,190 |
|
|
|
||
Accounts payable and accrued liabilities |
|
954 |
|
140 |
|
||
Net cash used in operating activities |
|
(1,949 |
) |
(2,348 |
) |
||
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
||
Capital expenditures |
|
(29,113 |
) |
(71,247 |
) |
||
Proceeds from sale of property, plant and equipment |
|
|
|
58 |
|
||
Net cash used in investing activities |
|
(29,113 |
) |
(71,189 |
) |
||
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
||
Payment of capital lease obligation |
|
(1,101 |
) |
(86 |
) |
||
Contributions from members |
|
17,118 |
|
103,142 |
|
||
Distributions to members |
|
|
|
(13,808 |
) |
||
Net cash provided by financing activities |
|
16,017 |
|
89,248 |
|
||
|
|
|
|
|
|
||
Net (decrease) increase in cash |
|
(15,045 |
) |
15,711 |
|
||
Cash at beginning of year |
|
15,711 |
|
|
|
||
Cash at end of year |
|
$ |
666 |
|
$ |
15,711 |
|
|
|
|
|
|
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
||
Cash paid for interest |
|
$ |
652 |
|
$ |
51 |
|
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
||
Accrued property, plant and equipment |
|
975 |
|
16,852 |
|
||
Affiliate payables for purchases of property, plant and equipment |
|
4 |
|
882 |
|
||
Affiliate receivables for property, plant and equipment |
|
11 |
|
4 |
|
||
Assets acquired through capital lease obligation |
|
866 |
|
13,500 |
|
||
Contribution of assets and fee by members |
|
|
|
17,436 |
|
The accompanying notes are an integral part of these financial statements.
Ohio Condensate Company, L.L.C.
Notes to Financial Statements
($ in thousands, unless otherwise indicated)
1. Organization and Business
Effective December 19, 2013, MarkWest Utica EMG Condensate, L.L.C. (MarkWest Utica Condensate), a partially owned subsidiary of MarkWest Liberty Midstream & Resources, L.L.C. which is a wholly-owned subsidiary of MarkWest Energy Partners, L.P. (MarkWest) entered into the Limited Liability Company Agreement (the Original LLC Agreement) with Blackhawk Midstream LLC (Blackhawk) (together the Members), in order to form Ohio Condensate Company, L.L.C. (the Company or Ohio Condensate). The Company was formed for the purpose of gathering (by pipeline), stabilization, terminalling, transportation and storage of wellhead condensate within certain defined areas in the state of Ohio. Operations commenced in February 2015. Under the terms of the Original LLC Agreement, MarkWest Utica Condensate and Blackhawk each made initial nominal contributions to the Company in exchange for a 99% and 1% ownership interest, respectively. In addition, the Original LLC Agreement designates MarkWest Utica Condensate as the operator of the Company with the authority to manage the day-to-day operations of the Company, subject to certain approval rights retained by the board of managers. All operational and administrative services are provided through contractual arrangements with affiliates of MarkWest. See Note 3 for more information regarding affiliate transactions.
After the initial nominal contributions in 2013, MarkWest Utica Condensate was obligated to contribute all of the capital required by the Company. MarkWest Utica Condensates and Blackhawks membership interests were adjusted to equal their respective share of the capital contributed. Therefore, as of December 31, 2013, MarkWest Utica Condensate owned more than a 99% interest and Blackhawk owned less than a 1% interest. Blackhawk also had an option to acquire a 40% equity interest in Ohio Condensate (the Ohio Condensate Option). See Note 2, in Deferred Contract Costs, for further discussion. In January 2014, Blackhawk sold its interest in the Company and the Ohio Condensate Option to Summit Midstream Partners, LLC (Summit). Effective June 1, 2014 (Summit Investment Date), Summit exercised the Ohio Condensate Option and increased its equity ownership from less than 1% to 40% through a net cash investment of approximately $8.6 million.
In August 2014, MarkWest Utica Condensate and Summit entered into the Second Amended and Restated Limited Liability Company Agreement of Ohio Condensate Company, L.L.C. (the Second Amended LLC Agreement) which replaced the Original LLC Agreement. In accordance with the Second Amended LLC Agreement, MarkWest Utica Condensate is required to fund, as needed, all capital required by the Company. Summit has the right, but not the obligation, to make additional capital contributions subject to certain limitations. If Summit elects to contribute capital in response to a particular capital call then the aggregate amount of capital that MarkWest Utica Condensate is required to contribute pursuant to such capital call will be decreased, dollar for dollar, by the amount of capital that Summit elects to contribute. Through December 31, 2015, Summit elected to contribute 40% of all capital calls and in total MarkWest Utica Condensate has contributed $82 million and Summit has contributed $55 million to the Company.
If either member fails to contribute any capital to the Company that is required to be so contributed such member will be considered in default but will remain fully obligated to contribute such capital to the Company. The Company will be entitled to pursue all remedies available at law or in equity against the defaulting member.
The business and affairs of the Company are overseen by a board of managers which currently consists of three managers from MarkWest Utica Condensate and two managers from Summit. Board managers are determined by investment balances and Members will have one board manager for every 20% interest that it holds in the Company. Ownership is also determined based on investment balances in the Company. If Summit elects to not contribute capital in response to capital calls and its investment percentage decreases such that it is greater than 20% but less than their current 40%, Summit will lose a manager on the board of managers. If their investment percentage decreases below 20% but more than 10%, Summit will lose a manager, but will have the right to designate a non-voting observer to the board of managers. At any time that they hold less than a 10% interest, Summit will lose all managers on the board of managers. The Company is required to distribute all available cash to the Members, as determined in accordance with the Second Amended LLC Agreement, within 45 days of the end of each calendar month.
In December 2015, MarkWest Utica Condensate became a wholly-owned subsidiary of MarkWest Liberty Midstream & Resources, L.L.C. The purchase of the partners interest coincided with MarkWests merger with MPLX LP, a wholly-owned subsidiary of Marathon Petroleum Company (Marathon).
2. Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates affect, among other items, evaluating impairments of long-lived assets; establishing estimated useful lives for long-lived assets; estimating revenue and expense accruals and capital expenditure accruals; establishing inputs when determining fair value of options; and in determining liabilities, if any, for environmental and legal contingencies. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers investments in highly liquid financial instruments purchased with a remaining maturity at date of acquisition of 90 days or less to be cash equivalents. Such investments would include money market accounts. The Company had no cash equivalents at December 31, 2015 and 2014.
Property, Plant and Equipment
Property, plant and equipment consists primarily of condensate stabilization facilities, gathering assets, other pipeline assets, truck and railcar loading equipment and related facilities that are recorded at historical cost. Expenditures that extend the useful lives of assets are capitalized. Routine maintenance and repair costs that do not extend the useful lives of assets are expensed as incurred. Depreciation is provided on a straight-line method over a period of 10 to 20 years, with the exception of miscellaneous equipment and vehicles, which are depreciated over a period of 3 to 9 years. Amortization of leasehold improvements is computed using the straight- line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.
Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair value of the leased asset at the inception of the lease. Amortization expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease.
Impairment of Long-Lived Assets
The Companys policy is to evaluate whether there has been an impairment in the value of long-lived assets when certain events indicate that the remaining balance may not be recoverable. Long-lived assets are considered impaired when the estimated undiscounted cash flows from such assets are less than the assets carrying value. In that event, a loss is recognized in the amount that the carrying value exceeds the fair value of the long-lived assets. Fair value is determined using either the income or market approach as appropriate. Management considers the volume of producer customer reserves behind the asset and future natural gas liquids and natural gas prices to estimate cash flows. The amount of additional producer customer reserves developed by future drilling activity depends, in part, on expected natural gas liquids and natural gas prices. Projections of producer customer reserves, drilling activity and future commodity prices are inherently subjective and contingent upon a number of variable factors, many of which are difficult to forecast. Any significant variance in any of these assumptions or factors could materially affect future cash flows, which could result in the impairment of an asset or assets. The Company did not record any impairments for the years ended December 31, 2015 or 2014.
For assets identified to be disposed of in the future, the carrying value of these assets is compared to the estimated fair value, less the cost to sell, to determine if impairment is required. Until the assets are disposed of, an estimate of the fair value is redetermined when related events or circumstances change.
Deferred Contract Costs
Deferred contract costs represent the asset created by the fair value of the Ohio Condensate Option that was recorded as permanent equity. This cost is amortized over the term of the arrangement into Facility expenses on the Statements of Operations.
Revenue Recognition
The Company generates its revenue by providing condensate stabilization and terminalling services. The Company earns a fee or fees under these arrangements related to the volume of condensate that flows through its facility and is not directly dependent on commodity prices. The Companys assessment of each of the revenue recognition criteria as they relate to its revenue producing activities are as follows: persuasive evidence of an arrangement exists; delivery; the fee is fixed or determinable and collectability is reasonably assured. It is upon completion of services provided that the Company has met all four criteria and it is at such time that the Company recognizes revenue. Amounts billed in advance of the period in which the revenue recognition criteria are not met are recorded as a liability under Deferred revenue in the accompanying Balance Sheets.
Expense Accruals
The Company routinely makes accruals based on estimates for expenses due to the timing of receiving certain third-party information and reconciling the Companys records with those of third parties. The delayed information from third parties includes, among other things, volumetric charges and other operating expenses. The Company makes accruals to reflect estimates for these
items based on its internal records and information from third parties. Estimated accruals are adjusted when actual information is received from third parties and the Companys internal records have been reconciled.
Income Taxes
The Company is treated as a partnership for tax purposes under the provisions of the Internal Revenue Code. Accordingly, the accompanying financial statements do not reflect a provision for federal income taxes since the Companys results of operations and related credits and deductions will be passed through and taken into account by its Members in computing their respective tax liabilities. The Company is, however, subject to an income tax at the Cadiz, Ohio jurisdictional level.
The Company accounts for income taxes under the asset and liability method. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of any tax rate change on deferred taxes is recognized as tax expense (benefit) from continuing operations in the period that includes the enactment date of the tax rate change. Realizability of deferred tax assets is assessed and, if not more likely than not, a valuation allowance is recorded to reflect the deferred tax assets at net realizable value as determined by management. All deferred tax balances are classified as long-term in the accompanying Balance Sheets.
The net deferred tax liability of $110 at December 31, 2015 resulting from temporary book-tax differences is comprised of net operating loss carryforwards for state jurisdictional level tax purposes of $159, a valuation allowance of ($149), and property, plant and equipment of ($120). This net deferred tax liability has been recorded as part of Other long-term liabilities in the accompanying Balance Sheets.
Significant judgment is required in evaluating the Companys tax positions. During the ordinary course of business, there may be transactions and calculations for which the ultimate tax determination is uncertain. However, the Company did not have any material uncertain tax positions for the years ended December 31, 2015 or 2014. The state net operating loss carryforwards begin to expire in 2019. The Company does not anticipate utilizing the entire net operating loss carryforwards and has provided a 94% valuation allowance against this deferred tax asset.
Environmental Costs
The Company records environmental liabilities at their undiscounted amounts when environmental assessments indicate that remediation efforts are probable and the costs can be reasonably estimated. Estimates of the liabilities are based on currently available facts, existing technology and presently enacted laws and regulations, and include estimates of associated legal costs. As of December 31, 2015 and 2014, the Company has not recognized any environmental liabilities.
Fair Value of Financial Instruments
The carrying amounts of financial instruments, including trade receivables, other receivables, affiliate receivables and payables, accounts payable, and accrued liabilities approximate fair value because of the short-term maturity of these instruments. The fair value of the capital lease approximates carrying value as the lease was amended at the end of 2015.
Recent Accounting Pronouncements
In February 2016, the FASB issued an accounting standards update on lease accounting. This update requires lessees to put most leases on their balance sheets. The new standard also requires new disclosures to help financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. The accounting standards update will be effective on a retrospective or modified retrospective basis for annual reporting periods beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. The Company is in the process of determining the impact of the new standard on the financial statements.
In November 2015, the FASB issued an accounting standards update to simplify the balance sheet classification of deferred taxes. The update requires that deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The update does not change the existing requirement that only permits offsetting within a jurisdiction. The change is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2016. The guidance may be applied either prospectively or retrospectively with early adoption permitted. Our adoption of this standard in the fourth quarter of 2015 did not have a material impact on our results of operations, financial position or cash flows. We have elected to apply this standard prospectively, therefore, prior periods have not been retrospectively adjusted.
In August 2014, the FASB issued an accounting standards update requiring management to assess an entitys ability to continue as a going concern and to provide related footnote disclosures in certain circumstances. Management will be required to assess if there is substantial doubt about an entitys ability to continue as a going concern for one year after the date that the financial statements are issued. Disclosures will be required if conditions give rise to substantial doubt and the type of disclosure will be determined based on whether managements plans will be able to alleviate the substantial doubt. The accounting standards update will
be effective for the first annual period ending after December 15, 2016, and for annual periods and interim periods thereafter with early application permitted. We do not expect application of this standard to have an impact on our financial reporting.
In May 2014, the FASB issued an accounting standards update for revenue recognition that is aligned with the International Accounting Standards Boards revenue recognition standard. The guidance in the update states that revenue is recognized when a customer obtains control of a good or service. Recognition of the revenue will involve a multiple step approach including identifying the contract, identifying the separate performance obligations, determining the transaction price, allocating the price to the performance obligations and then recognizing the revenue as the obligations are satisfied. Additional disclosures will be required to provide adequate information to understand the nature, amount, timing and uncertainty of reported revenues and revenues expected to be recognized. The accounting standards update will be effective on a retrospective or modified retrospective basis for annual reporting periods beginning after December 15, 2017, and interim periods within those years, with early adoption permitted no earlier than January 1, 2017. The Company is in the process of determining the impact of the new standard on the financial statements.
3. Affiliate Transactions
The Company has no employees. Operating, maintenance and general and administrative services, including insurance, are provided to the Company under a service agreement with an affiliate of MarkWest. From time to time, the Company may also sell property, plant or equipment to or purchase property, plant and equipment from MarkWest affiliates. The Company also provides condensate stabilization and terminalling services to Marathon, an affiliate as of December 2015. See discussion of merger transaction in Note 1. The Company has incurred the following amounts with affiliates related to the service agreement, asset purchases and sales, and fee based revenue agreements:
|
|
Year ended December 31, |
|
||||
|
|
2015 |
|
2014 |
|
||
Revenue |
|
$ |
930 |
|
$ |
|
|
|
|
|
|
|
|
||
Facility expenses |
|
|
|
|
|
||
Labor and benefits |
|
2,039 |
|
425 |
|
||
|
|
|
|
|
|
||
Selling, general and administrative expenses |
|
|
|
|
|
||
General and administrative expenses |
|
1,511 |
|
1,500 |
|
||
Insurance |
|
67 |
|
|
|
||
|
|
|
|
|
|
||
Deferred revenue related to Marathon |
|
1,163 |
|
|
|
||
|
|
|
|
|
|
||
Property, plant and equipment sold to affiliates |
|
|
|
61 |
|
||
Property, plant and equipment purchased from affiliates |
|
86 |
|
5,437 |
|
||
At December 31, 2015 and 2014, the Company had affiliate payables of $571 and $1.2 million, respectively, and affiliate receivables of $930 and $86, respectively, related to these transactions and the service agreement. During 2015, the Company capitalized $33 of labor and benefits and $533 related to engineering and construction management services in Property, plant and equipment on the accompanying Balance Sheets. During 2014, the Company capitalized $45 of labor and benefits and $1.8 million related to engineering and construction management services in Property, plant and equipment . During 2014 MarkWest Utica Condensate paid $453 of these engineering and construction management fees to an affiliate on behalf of the Company which was a deemed capital contribution by MarkWest Utica Condensate at December 31, 2014. The Company was partially reimbursed for the deemed contributions by Summit through a contribution to the Company at the Summit Investment Date and a corresponding distribution to MarkWest Utica Condensate. Additionally, MarkWest Utica Condensate made a non-cash contribution of $17.0 million in Property, plant and equipment to the Company in 2014.
4. Significant Customers and Concentration of Credit Risk
Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of trade and other current receivables, which are generally unsecured. During 2015, one affiliated and one unaffiliated producer customer accounted for
85.3% of the Companys revenue. These customers accounted for 93.7% of Trade receivables and related Affiliate receivables on the accompanying Balance Sheets as of December 31, 2015.
The Company maintains cash deposits with a major bank, which, from time-to-time, may exceed federally insured limits.
5. Property, Plant and Equipment
Property, plant and equipment is comprised of the following:
|
|
December 31, 2015 |
|
December 31, 2014 |
|
||
|
|
|
|
|
|
||
Condensate, gathering and stabilization plant and equipment |
|
$ |
127,819 |
|
$ |
10,665 |
|
Land |
|
4,156 |
|
210 |
|
||
Construction in progress |
|
831 |
|
108,980 |
|
||
Property, plant and equipment |
|
132,806 |
|
119,855 |
|
||
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
(6,682 |
) |
(170 |
) |
||
|
|
|
|
|
|
||
Total property, plant and equipment, net |
|
$ |
126,124 |
|
$ |
119,685 |
|
6. Midwest Terminal Agreement
Effective December 1, 2014, the Company executed a Terminal Services Agreement (the Terminal Agreement) with Midwest Terminals-Utica LLC (Midwest). Under the agreement, the Company engaged Midwest to construct and operate a condensate terminal (the Terminal) adjacent to the Companys condensate stabilization facility (the Facility). The Terminal includes holding tanks, a truck loadout facility, a rail loadout facility, and pipelines necessary for the operation of the Terminal. Midwest also acted as the Companys subcontractor to perform certain upgrades and restoration with respect to rail tracks owned by the Columbus & Ohio River Rail Road Company (the CUOH). The Terminal Agreement continues for an initial term of 15 years and will automatically renew for successive 5-year terms, unless either party elects not to renew by 12-month advance notice.
Midwest obtained a loan to finance the construction of the Terminal (the Terminal Loan). The Terminal Loan is payable within 10 years and allows the Company to cure any default on the Terminal Loan by Midwest, and further permits the Company to enter the Terminal property and assume its operations upon termination of the Terminal Agreement. In conjunction with the Terminal Loan, Midwest executed an interest rate swap (the Interest Swap) to fix a portion of the interest paid on the Terminal Loan. Ohio Condensate agreed to reimburse Midwest for Midwests expected costs incurred to build out the Terminal (the Capital Recovery Fee). The Capital Recovery Fee is paid monthly over 10 years and initially could not exceed a total cost of $13.5 million. Midwest will maintain ownership of the Terminal. The Terminal Agreement is classified as a Capital lease obligation on the accompanying Balance Sheets.
In August 2015, the Company and Midwest entered into Amendment No. 2 to Terminal Services Agreement (the Second Amendment). Under the Second Amendment, the Company engaged Midwest to enhance the railroad loadout facility to allow dual use truck and rail functionality for an additional $0.9 million. In addition the Company increased the Capital Recovery Fee over the remaining term to cover the costs of the railroad loadout modifications.
The cost of the assets necessary for the operation of the Terminal under the capital lease is included in the accompanying Balance Sheets as Property, plant and equipment and is $14.4 million and $13.5 million at December 31, 2015 and 2014, respectively. The Terminal commenced operations in February 2015 and recorded accumulated amortization of the leased assets of $959 for the year ended December 31, 2015. Amortization of assets under capital leases is included in depreciation expense.
The future minimum lease payments required under the capital lease and the present value of the net minimum lease payments at December 31, 2015 are as follows:
Year ending December 31, |
|
|
|
|
2016 |
|
$ |
1,841 |
|
2017 |
|
1,838 |
|
|
2018 |
|
1,837 |
|
|
2019 |
|
1,836 |
|
|
2020 |
|
1,836 |
|
|
2021 and thereafter |
|
7,166 |
|
|
Total net minimum lease payments |
|
16,354 |
|
|
Less: amounts representing interest |
|
(3,174 |
) |
|
Present value of net minimum lease payments |
|
13,180 |
|
|
Less: Current portion of capital lease obligation |
|
(1,208 |
) |
|
Capital lease obligation |
|
$ |
11,972 |
|
Ohio Condensate pays Midwest service fees for its operation and maintenance of the Terminal. The service fees are comprised of two components: (1) an operating expense fee dependent on the average daily volume of product delivered to the Terminal; and (2) a per barrel fee. Service fees of $3.1 million were incurred during the year ended December 31, 2015 and are included in Facility expenses in the accompanying Statements of Operations.
The Company agreed to reimburse Midwest for actual costs incurred in restoring and upgrading CUOHs rail tracks. As of December 31, 2015 and 2014, $6.0 million and $5.8 million, respectively, have been incurred and are recorded as a leasehold improvement in Property, plant and equipment in the accompanying Balance Sheets.
The Company paid Midwest a one-time expense recovery fee of $48 during the year ended December 31, 2014, which has been included in Facility expenses . Beginning in 2015, the Company is required to reimburse Midwest $120 per year for fifteen years, or the life of the lease, for rental fees owed under the ground lease on which the Terminal resides. The Company incurred $120 in 2015 which has been recorded in Facility expenses . Under the terms of the ground lease, which Midwest entered into directly with Harrison County, OH, the Company can cure Midwests breaches and allows the Company to enter the leased property to operate the Terminal upon satisfaction of certain conditions.
Ohio Condensate has agreed to construct and maintain tanks, pumps, and related components at the Facility for fire suppression to service both the Facility and the Terminal. The cost of the shared portions of the fire suppression systems will be paid equally by both Midwest and the Company. Midwest will reimburse the Company 50% of the upfront construction and installation costs of the fire suppression system, and 50% of the ongoing costs incurred by the Company to operate and maintain the shared system. The reimbursements will be deferred and recognized as income over the term of the Terminal Agreement. Midwest reimbursed the Company $100 and $0 as of December 31, 2015 and 2014, respectively.
The Company has also agreed to construct a fuel pipe that is not part of the fire suppression systems. Midwest will reimburse the Company for 100% of the construction costs. Midwest has not reimbursed the Company as of December 31, 2015. The Company has a receivable from Midwest of $173 as of December 31, 2015 which is recorded as Other receivables on the accompanying Balance Sheets.
In the event of expiration or any termination of the Terminal Agreement by either Midwest or Ohio Condensate for any reason, except for termination by the Company for persistent default events that are out of the control of the Company and defined in the Terminal Agreement, Ohio Condensate will have the right, but not the obligation, to immediately enter and take over operations of the Terminal. If Ohio Condensate so elects to take over operations of the Terminal, it must obtain Midwests release under the Terminal Loan, either by paying off the Terminal Loan and Interest Swap or, with the lenders consent, assuming or restructuring the Terminal Loan directly with the lender. The Company must also assume the ground lease. If Ohio Condensate terminates the Terminal Agreement for a persistent default event noted above, it will be required to pay off or assume the Terminal Loan and Interest Swap (the latter with the lenders consent), and to assume the ground lease. If Midwest terminates the Terminal Agreement for the Companys dissolution, insolvency, bankruptcy or uncured breach of the Terminal Agreement, whether or not the Company elects to take over operations of the Terminal, the Company must reimburse Midwest for all out-of-pocket costs Midwest has incurred in performing under the Terminal Agreement up to the date of termination. Following the Companys pay off or assumption (with the lenders consent) of the Terminal Loan and Interest Swap (with the Capital Recovery Fee during the term of the Terminal Agreement being applied to paying down the Terminal Loan) and reimbursement of Midwests costs incurred in performing under the Terminal Agreement, Ohio Condensate will receive title to all equipment, facilities, and other assets comprising the Terminal. Further, Ohio
Condensate has the right at any time during the term of the Terminal Loan to satisfy and extinguish its obligation to pay the Capital Recovery Fee by remitting either to Midwest or the Terminal Loan lender the entire amount of principal and interest then outstanding on the Terminal Loan and Interest Swap obligation, and thereby extinguish the Terminal Loan. However, Ohio Condensates right to extinguish the Terminal Loan does not entitle Ohio Condensate to take over operations of the Terminal or to acquire title to the Terminal or the Midwest equipment unless done so in connection with a termination of the Terminal Agreement.
Midwest has been identified as a variable interest entity (VIE) because the Company leases the Terminal from Midwest and the lease includes a bargain purchase option. The Companys involvement with this VIE is limited to the Terminal Agreement. Management has determined that although the above transactions created a variable interest in Midwest, the Company is not the primary beneficiary and, as such, the Company is not required to consolidate the financial statements of Midwest. In determining that it is not the primary beneficiary, the Company considered the fact the Company does not have any voting interest, does not have the power to direct the activities of Midwest that most significantly impact its economic performance and only has the right, but not the obligation, to exercise its option to pay down the Terminal Loan.
The maximum exposure to loss from this variable interest is limited to the amount of our payments at December 31, 2015, as discussed above. The Companys variable interest in Midwest was $13.2 million at December 31, 2015.
7. Commitments and Contingencies
Effective June 2014, the Company entered into an agreement with CUOH. Under this agreement, the Company is obligated to ship a minimum of 7,500 loaded rail carloads of stabilized condensate within a three year period beginning on the date that the first rail carload of stabilized condensate is shipped by CUOH from the Terminal (Volume Commitment). If the Company does not meet this Volume Commitment then it is contractually obligated to pay liquidated damages to CUOH of $200 per rail carload below the 7,500 minimum. The three year minimum commitment period commenced in July 2015 and the Company shipped 2,059 carloads in the six months ended December 31, 2015. The Company deems it probable the Volume Commitment will be met during the three year period. Therefore, the Company has not recorded any liability for this commitment as of December 31, 2015. In addition, once the Volume Commitment is met, the Company is eligible for reimbursement payments of $200 per rail car shipped over the life of the agreement but not to exceed $5.1 million. Such reimbursement payments are considered a gain contingency and will not be recognized until collectability is reasonably assured, after the Volume Commitment is met.
Effective October 2015, the Company entered into a five-year arrangement that will result in a capital lease for a transformer substation. There are no minimum lease payments due until the transformer substation is put into service, which is expected in the first quarter of 2016. The substation is not in service as of the date these financial statements were issued. Therefore, the net present value of the required minimum lease payments will be capitalized and an obligation will be recorded in the amount of approximately $2.6 million at the in-service date of the transformer substation. Future annual minimum lease payments under the capital lease are $518 for 2016 and $621 for each of the years 2017 through 2020.
In the ordinary course of business, the Company is subject to various legal actions, laws and regulations. In the opinion of Management, compliance with existing laws and regulations and resolution of any pending legal actions will not materially affect the Companys financial position or results of operations.
8. Subsequent Events
On March 3, 2016, Summit Midstream Partners, LP acquired Summits interest in Ohio Condensate. The Company evaluated subsequent events through March 11, 2016, the date the financial statements were issued.