Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2018 or
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¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-35257
AMERICAN MIDSTREAM PARTNERS, LP
(Exact name of registrant as specified in its charter)
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Delaware | 27-0855785 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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2103 CityWest Boulevard | |
Building #4, Suite 800 | |
Houston, TX 77042 | (346) 241-3400 |
(Address of principal executive offices) | (Registrant’s telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” or an “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer | ¨ | Accelerated filer | ý |
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
| | Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes ý No
There were 52,858,782 common units, 11,009,729 Series A Units, and 9,241,642 Series C Units of American Midstream Partners, LP outstanding as of April 30, 2018. Our common units trade on the New York Stock Exchange under the ticker symbol “AMID.”
Glossary of Terms
As generally used in the energy industry and in this Quarterly Report on Form 10-Q (the “Quarterly Report”), the identified terms have the following meanings:
Bbl Barrels: 42 U.S. gallons measured at 60 degrees Fahrenheit.
Bbl/d Barrels per day.
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Btu | British thermal unit; the approximate amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit. |
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Condensate | Liquid hydrocarbons present in casing head gas that condense within the gathering system and are removed prior to delivery to the natural gas plant. This product is generally sold on terms more closely tied to crude oil pricing. |
FERC Federal Energy Regulatory Commission.
Fractionation Process by which natural gas liquids are separated into individual components.
GAAP Accounting principles generally accepted in the United States of America.
Gal Gallons.
Mgal/d Thousand gallons per day.
MBbl Thousand barrels.
MMBbl Million barrels.
MMBbl/d Million barrels per day.
MMBtu Million British thermal units.
Mcf Thousand cubic feet.
MMcf Million cubic feet.
MMcf/d Million cubic feet per day.
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NGL or NGLs | Natural gas liquid(s): The combination of ethane, propane, normal butane, isobutane and natural gasoline that, when removed from natural gas, becomes liquid under various levels of higher pressure and lower temperature. |
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Throughput | The volume of natural gas and NGL transported or passing through a pipeline, plant, terminal or other facility during a particular period. |
As used in this Quarterly Report, unless the context otherwise requires, “we,” “us,” “our,” the “Partnership” and similar terms refer to American Midstream Partners, LP, together with its consolidated subsidiaries.
TABLE OF CONTENTS
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Item 1. | | |
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Item 2. | | |
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Item 3. | | |
Item 4. | | |
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Item 1. | | |
Item 1A. | | |
Item 6. | | |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
American Midstream Partners, LP and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except unit amounts)
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| March 31, 2018 | | December 31, 2017 |
Assets | | | |
Current assets | | | |
Cash and cash equivalents | $ | 8,191 |
| | $ | 8,782 |
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Restricted cash | 18,269 |
| | 20,352 |
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Accounts receivable, net of allowance for doubtful accounts of $312 and $225 as of March 31, 2018 and December 31, 2017, respectively | 87,418 |
| | 98,132 |
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Inventory | 4,795 |
| | 2,966 |
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Other current assets (Note 6) | 25,265 |
| | 23,420 |
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Assets held for sale (Note 4) | 129,247 |
| | — |
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Total current assets | 273,185 |
| | 153,652 |
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Property, plant and equipment, net | 1,080,897 |
| | 1,095,585 |
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Goodwill | 67,985 |
| | 128,866 |
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Restricted cash-long term | 5,048 |
| | 5,045 |
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Intangible assets, net | 141,627 |
| | 174,010 |
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Investments in unconsolidated affiliates | 339,271 |
| | 348,434 |
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Other assets, net | 25,249 |
| | 17,874 |
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Total assets | $ | 1,933,262 |
| | $ | 1,923,466 |
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Liabilities, Equity and Partners’ Capital | | | |
Current liabilities | | | |
Accounts payable | $ | 52,685 |
| | $ | 41,102 |
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Accrued gas and crude oil purchases | 14,925 |
| | 19,986 |
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Accrued expenses and other current liabilities | 88,123 |
| | 68,854 |
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Current portion of long-term debt | 5,058 |
| | 7,551 |
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Liabilities held for sale (Note 4) | 3,337 |
| | — |
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Total current liabilities | 164,128 |
| | 137,493 |
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Asset retirement obligations | 66,894 |
| | 66,194 |
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Other long-term liabilities | 15,542 |
| | 2,080 |
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3.77% Senior secured notes (Non-recourse) | 54,682 |
| | 55,198 |
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8.50% Senior unsecured notes | 418,078 |
| | 418,421 |
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Revolving credit facility | 712,600 |
| | 697,900 |
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3.97% Trans-Union Secured Senior notes | 29,486 |
| | 29,937 |
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Deferred tax liability | 8,274 |
| | 8,123 |
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Total liabilities | 1,469,684 |
| | 1,415,346 |
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Commitments and contingencies (Note 18) |
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Convertible preferred units | 317,180 |
| | 317,180 |
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Equity and partners’ capital | | | |
General Partner interests (960 thousand and 965 thousand units issued and outstanding as of March 31, 2018 and December 31, 2017, respectively) | (88,746 | ) | | (96,552 | ) |
Limited Partner interests (52,853 thousand and 52,711 thousand units issued and outstanding as of March 31, 2018 and December 31, 2017, respectively) | 221,346 |
| | 273,703 |
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Accumulated other comprehensive income | 12 |
| | 28 |
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Total partners’ capital | 132,612 |
| | 177,179 |
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Noncontrolling interests | 13,786 |
| | 13,761 |
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Total equity and partners’ capital | 146,398 |
| | 190,940 |
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Total liabilities, equity and partners’ capital | $ | 1,933,262 |
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| $ | 1,923,466 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
American Midstream Partners, LP and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per unit amounts) |
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| Three months ended March 31, |
| 2018 | | 2017 |
Revenue: | | | |
Commodity sales | $ | 158,863 |
| | $ | 123,521 |
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Services | 46,906 |
| | 40,192 |
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Gain on commodity derivatives, net | 60 |
| | 365 |
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Total revenue | 205,829 |
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| 164,078 |
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Operating expenses: | | | |
Costs of sales | 150,166 |
| | 115,468 |
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Direct operating expenses | 23,446 |
| | 17,405 |
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Corporate expenses | 22,692 |
| | 30,113 |
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Depreciation, amortization and accretion | 21,997 |
| | 25,570 |
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Gain on sale of assets, net | (95 | ) | | (21 | ) |
Total operating expenses | 218,206 |
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| 188,535 |
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Operating loss | (12,377 | ) |
| (24,457 | ) |
Other income (expense), net | | | |
Interest expense, net of capitalized interest | (13,876 | ) | | (17,956 | ) |
Other income (expense), net | 22 |
| | (37 | ) |
Earnings in unconsolidated affiliates | 12,673 |
| | 15,402 |
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Loss from continuing operations before income taxes | (13,558 | ) |
| (27,048 | ) |
Income tax expense | (280 | ) | | (1,123 | ) |
Loss from continuing operations | (13,838 | ) |
| (28,171 | ) |
Loss from discontinued operations | — |
| | (710 | ) |
Net loss | (13,838 | ) |
| (28,881 | ) |
Less: Net income attributable to noncontrolling interests | 45 |
| | 1,303 |
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Net loss attributable to the Partnership | $ | (13,883 | ) |
| $ | (30,184 | ) |
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General Partner’s interest in net loss | $ | (181 | ) | | $ | (420 | ) |
Limited Partners’ interest in net loss | $ | (13,702 | ) | | $ | (29,764 | ) |
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Distribution declared per common unit | $ | 0.4125 |
| | $ | 0.4125 |
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Limited Partners’ net loss per common unit: | | |
Basic and diluted: | | | |
Loss from continuing operations | $ | (0.42 | ) | | $ | (0.74 | ) |
Loss from discontinued operations | — |
| | (0.01 | ) |
Net loss per common unit | $ | (0.42 | ) |
| $ | (0.75 | ) |
Weighted average number of common units outstanding: |
Basic and diluted | 52,769 |
| | 51,451 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
American Midstream Partners, LP and Subsidiaries
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited, in thousands)
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| Three months ended March 31, |
| 2018 | | 2017 |
Net loss | $ | (13,838 | ) | | $ | (28,881 | ) |
Unrealized gain (loss) related to postretirement benefit plan | (16 | ) | | 18 |
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Comprehensive loss | (13,854 | ) |
| (28,863 | ) |
Less: Comprehensive income attributable to noncontrolling interests | 45 |
| | 1,303 |
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Comprehensive loss attributable to the Partnership | $ | (13,899 | ) |
| $ | (30,166 | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
American Midstream Partners, LP and Subsidiaries
Condensed Consolidated Statements of Changes in Partners’ Capital
and Noncontrolling Interests
(Unaudited, in thousands)
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| | | | | | | | | | | | | | | | | | | | | | | | |
| General Partner Interests | | Limited Partner Interests | | | Accumulated Other Comprehensive Income (Loss) | | Total Partners’ Capital | | Non controlling Interests | | Total Equity and Partners’ Capital |
Balances at December 31, 2016 | $ | (47,645 | ) | | $ | 616,087 |
| | | $ | (40 | ) | | $ | 568,402 |
| | $ | 16,755 |
| | $ | 585,157 |
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Net income (loss) | (420 | ) | | (29,764 | ) | | | — |
| | (30,184 | ) | | 1,303 |
| | (28,881 | ) |
Issuance of common units, net of offering costs | — |
| | (72 | ) | | | — |
| | (72 | ) | | — |
| | (72 | ) |
Contributions | 123 |
| | 4,000 |
| | | — |
| | 4,123 |
| | — |
| | 4,123 |
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Distributions | (282 | ) | | (33,685 | ) | | | — |
| | (33,967 | ) | | — |
| | (33,967 | ) |
Distribution to noncontrolling interests (“NCI”) owners | — |
| | — |
| | | — |
| | — |
| | (868 | ) | | (868 | ) |
Contributions from NCI owners | — |
| | — |
| | | — |
| | — |
| | 280 |
| | 280 |
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LTIP vesting | (2,135 | ) | | 2,135 |
| | | — |
| | — |
| | — |
| | — |
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Tax netting repurchase | — |
| | (971 | ) | | | — |
| | (971 | ) | | — |
| | (971 | ) |
Equity compensation expense | 3,304 |
| | 733 |
| | | — |
| | 4,037 |
| | — |
| | 4,037 |
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Other comprehensive income | — |
| | — |
| | | 18 |
| | 18 |
| | — |
| | 18 |
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Balances at March 31, 2017 | $ | (47,055 | ) |
| $ | 558,463 |
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|
| $ | (22 | ) |
| $ | 511,386 |
|
| $ | 17,470 |
| | $ | 528,856 |
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| | | | | | | | | | | | |
Balances at December 31, 2017 | $ | (96,552 | ) | | $ | 273,703 |
| | | $ | 28 |
| | $ | 177,179 |
| | $ | 13,761 |
| | $ | 190,940 |
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Cumulative effect of accounting change (Note 3) | (139 | ) | | (10,552 | ) | | | — |
| | (10,691 | ) | | — |
| | (10,691 | ) |
Net loss | (181 | ) | | (13,702 | ) | | | — |
| | (13,883 | ) | | 45 |
| | (13,838 | ) |
Contributions | 9,870 |
| | — |
| | | — |
| | 9,870 |
| | — |
| | 9,870 |
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Distributions | (392 | ) | | (29,728 | ) | | | — |
| | (30,120 | ) | | — |
| | (30,120 | ) |
Distributions to NCI owners | — |
| | — |
| | | — |
| | — |
| | (20 | ) | | (20 | ) |
Distribution for acquisition of Trans-Union | (38 | ) | | — |
| | | — |
| | (38 | ) | | — |
| | (38 | ) |
LTIP vesting | (2,328 | ) | | 2,328 |
| | | — |
| | — |
| | — |
| | — |
|
Tax netting repurchase | — |
| | (703 | ) | | | — |
| | (703 | ) | | — |
| | (703 | ) |
Equity compensation expense | 1,014 |
| | — |
| | | — |
| | 1,014 |
| | — |
| | 1,014 |
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Other comprehensive income | — |
| | — |
| | | (16 | ) | | (16 | ) | | — |
| | (16 | ) |
Balances at March 31, 2018 | $ | (88,746 | ) |
| $ | 221,346 |
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|
| $ | 12 |
|
| $ | 132,612 |
|
| $ | 13,786 |
| | $ | 146,398 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
American Midstream Partners, LP and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
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| | | | | | | |
| Three months ended March 31, |
| 2018 | | 2017 |
Cash flows from operating activities |
| |
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Net loss | $ | (13,838 | ) | | $ | (28,881 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities including discontinued operations: |
| |
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Depreciation, amortization and accretion | 21,997 |
| | 29,351 |
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Amortization of deferred financing costs | 1,316 |
| | 1,253 |
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Amortization of weather derivative premium | 278 |
| | 257 |
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Unrealized (gain) loss on derivatives contracts, net | (5,112 | ) | | 1,273 |
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Non-cash compensation expense | 1,014 |
| | 4,037 |
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Gain on sale of assets, net | (95 | ) | | (228 | ) |
Corporate overhead support | — |
| | 4,000 |
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Other non-cash items | (15 | ) | | 1,965 |
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Earnings in unconsolidated affiliates | (12,673 | ) | | (15,402 | ) |
Distributions from unconsolidated affiliates | 12,673 |
| | 15,402 |
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Deferred tax expense | 151 |
| | 678 |
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Bad debt expense | 87 |
| | 830 |
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Changes in operating assets and liabilities, net of effects of acquisitions: | | |
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Accounts receivable | 7,251 |
| | 266 |
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Inventory | (3,399 | ) | | (2,626 | ) |
Other current assets | (4,174 | ) | | 3,114 |
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Other assets, net | — |
| | 168 |
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Accounts payable | 11,200 |
| | (9,716 | ) |
Accrued gas and crude oil purchases | (4,431 | ) | | 2,403 |
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Accrued expenses and other current liabilities | 2,623 |
| | 994 |
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Asset retirement obligations | (6 | ) | | (41 | ) |
Other liabilities | — |
| | (250 | ) |
Net cash provided by operating activities | 14,847 |
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| 8,847 |
|
| | | |
Cash flows from investing activities |
| |
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Contributions to unconsolidated affiliates | (987 | ) | | — |
|
Additions to property, plant and equipment and other | (25,946 | ) | | (20,221 | ) |
Proceeds from disposals of property, plant and equipment | 8 |
| | 51 |
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Insurance proceeds from involuntary conversion of property, plant and equipment | — |
| | 150 |
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Distributions from unconsolidated affiliates, return of capital | 11,181 |
| | 7,092 |
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Net cash used in investing activities | (15,744 | ) | | (12,928 | ) |
| | | |
Cash flows from financing activities |
| |
|
Proceeds from issuance of common units to public, net of offering costs | — |
| | (72 | ) |
Contributions | 9,870 |
| | 123 |
|
Distributions | (22,035 | ) | | (32,198 | ) |
Contribution from noncontrolling interest owners | — |
| | 280 |
|
Distributions to noncontrolling interests owners | (20 | ) | | (868 | ) |
LTIP tax netting unit repurchase | (703 | ) | | (971 | ) |
Payment of deferred financing costs | (1,085 | ) | | (1,402 | ) |
Payment of 3.77% Senior Notes | (507 | ) | | — |
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Payment of 3.97% Senior Notes | (439 | ) | | — |
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Payments of other debt | (1,893 | ) | | (2,363 | ) |
Payments of credit agreement | (119,700 | ) | | (325,908 | ) |
Borrowings on credit agreement | 134,400 |
| | 82,500 |
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| | | | | | | |
| Three months ended March 31, |
| 2018 | | 2017 |
Other | 338 |
| | (20 | ) |
Net cash used in financing activities | (1,774 | ) |
| (280,899 | ) |
| | | |
Net decrease in cash, cash equivalents, and restricted cash | (2,671 | ) |
| (284,980 | ) |
Cash, cash equivalents, and restricted cash, beginning of period | 34,179 |
| | 329,230 |
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Cash, cash equivalents, and restricted cash, end of period | $ | 31,508 |
| | $ | 44,250 |
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| | | |
Cash and cash equivalents, beginning of period | 8,782 |
| | 5,666 |
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Restricted cash, beginning of period | 25,397 |
| | 323,564 |
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Cash, Cash equivalents and Restricted cash, beginning of period | 34,179 |
| | 329,230 |
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| | | |
Cash and cash equivalents, end of period | 8,191 |
| | 16,919 |
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Restricted cash, end of period | 23,317 |
| | 27,331 |
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Cash, Cash equivalents and Restricted cash, end of period | 31,508 |
| | 44,250 |
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| | | |
Net decrease in Cash, Cash equivalents and Restricted cash | $ | (2,671 | ) | | $ | (284,980 | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(1) Organization and Basis of Presentation
Organization
American Midstream Partners, LP (together with its consolidated subsidiaries, the “Partnership”, “we”, “us”, or “our”) is a growth-oriented Delaware limited partnership that was formed in August 2009 to own, operate, develop and acquire a diversified portfolio of midstream energy assets. The Partnership’s general partner, American Midstream GP, LLC (the “General Partner”), is 77% directly owned by High Point Infrastructure Partners, LLC (“HPIP”) and 23% indirectly owned by Magnolia Infrastructure Holdings, LLC (“Magnolia”), both of which are affiliates of ArcLight Capital Partners, LLC ("ArcLight"). Our capital accounts consist of notional General Partner units and units representing limited partner interests.
We provide critical midstream infrastructure that links producers of natural gas, crude oil, NGLs, condensate and specialty chemicals to numerous intermediate and end-use markets. Through our five reportable segments, (1) gas gathering and processing services, (2) liquid pipelines and services, (3) natural gas transportation services, (4) offshore pipelines and services, and (5) terminalling services, we engage in the business of gathering, treating, processing and transporting natural gas; gathering, transporting, storing, treating and fractionating NGLs; gathering, storing and transporting crude oil and condensates and storing specialty chemical products and refined products. Most of our cash flow is generated from fee-based and fixed-margin compensation for gathering, processing, transporting and treating natural gas and crude oil, firm capacity reservation charges, interruptible transportation charges, guaranteed firm storage contracts, throughput fees and other optional charges associated with ancillary services.
Our primary assets are strategically located in some of the most prolific onshore and offshore producing regions and key demand markets in the United States. Our gathering and processing assets are primarily located in (i) the Permian Basin of West Texas, (ii) the Cotton Valley/Haynesville Shale of East Texas, (iii) the Eagle Ford Shale of South Texas, (iv) the Bakken Shale of North Dakota, and (v) offshore in the Gulf of Mexico. Our transmission and terminal assets are in key demand markets in Oklahoma, Alabama, Arkansas, Louisiana, Mississippi and Tennessee and in the Port of New Orleans in Louisiana and the Port of Brunswick in Georgia.
Basis of presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP for interim consolidated financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all of the information and notes required by GAAP for annual consolidated financial statements and should therefore be read in conjunction with our annual consolidated financial statements and notes presented in our Annual Report on Form 10-K for the year ended December 31, 2017. In the opinion of management, the condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to fairly state our financial position, results of operations and cash flows for the interim periods reported.
These condensed consolidated financial statements follow the same significant accounting policies as those included in our annual consolidated financial statements for the year ended December 31, 2017, except for the adoption of new standards. See Notes 2 and 3 for additional information on the adoption of new standards. Certain prior period amounts have been reclassified to conform to the current presentation.
The accompanying condensed consolidated financial statements include accounts of the Partnership and its consolidated subsidiaries. All significant inter-company accounts and transactions have been eliminated in the preparation of the accompanying condensed consolidated financial statements.
We may enter into transactions with ArcLight or its affiliates whereby we receive midstream assets or other businesses in exchange for cash or Partnership's equity. As the transactions are between entities under common control we account for the net assets acquired at the affiliate's historical cost basis, whether the transactions are considered assets or business acquisitions. In certain cases, our historical financial statements will be revised to include the results attributable to the assets acquired from the later of April 15, 2013 (the date ArcLight affiliates obtained control of our General Partner) or the date the ArcLight affiliates obtained control of the assets or business acquired.
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(2) New Accounting Pronouncements
Adopted in 2018
The Partnership adopted Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” issued by the Financial Accounting Standards Board (FASB) on January 1, 2018. See Note 3 - Revenue Recognition for more information on the impact of its adoption.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 provides specific guidance on eight cash flow classification issues, including debt prepayment or debt extinguishment costs, to reduce diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017. There was no impact of the retrospective adoption of this ASU on the Partnership’s condensed consolidated statement of cash flows.
In November 2016, the FASB issued ASU No. 2016-18 (“ASU 2016-18”), “Statement of Cash Flows (Topic 230): Restricted Cash”, which requires amounts described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. A reconciliation between the balance sheet and the statement of cash flows must be disclosed when the balance sheet includes more than one line item for cash, cash equivalents, restricted cash and restricted cash equivalents. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017.
We adopted both ASU 2016-15 and ASU 2016-18 on its effective date of January 1, 2018 using the retrospective transition method. Upon adoption of the standards, the Partnership’s condensed consolidated statement of cash flows for the period ended March 31, 2017 was impacted as follows (in thousands):
|
| | | | | | | | | | | | |
| Three months ended March 31, 2017
|
Condensed Consolidated Statement of Cash Flows | As Previously Reported | | Effect of Adoption | | As Adjusted |
Cash flows from operating activities | | | | | |
Net loss | $ | (28,881 | ) | | $ | — |
| | $ | (28,881 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities including discontinued operations (excluding ‘Other non-cash items’) | 39,416 |
| | — |
| | 39,416 |
|
Restricted cash, short-term | (3,135 | ) | | 3,135 |
| (1 | ) | — |
|
Changes in operating assets and liabilities, net of effects of assets acquired and liabilities assumed (excluding ‘Restricted cash’) | (1,633 | ) | | (55 | ) | (1 | ) | (1,688 | ) |
Net cash provided by (used in) operating activities | 5,767 |
| | 3,080 |
| | 8,847 |
|
| | | | | |
Cash flows from investing activities | | | | | |
Restricted cash | 299,313 |
| | (299,313 | ) | (1 | ) | — |
|
Other investing activities (excluding ‘Restricted cash’) | (12,928 | ) | | | | (12,928 | ) |
Net cash provided by (used in) investing activities | 286,385 |
| | (299,313 | ) | | (12,928 | ) |
| | | | | |
Cash flows from financing activities | | | | | |
Other financing activities | (280,899 | ) | | — |
| | (280,899 | ) |
Net cash used in financing activities | (280,899 | ) | | — |
| | (280,899 | ) |
Net increase (decrease) in cash, cash equivalents, and restricted cash | 11,253 |
| | (296,233 | ) | | (284,980 | ) |
| | | | | |
Cash, cash equivalents and Restricted Cash | | | | | |
Beginning of period | 5,666 |
| | 323,564 |
| | 329,230 |
|
End of period | $ | 16,919 |
| | $ | 27,331 |
| | $ | 44,250 |
|
_____________________________________________
(1) ASU 2016-18 adjustment to move restricted cash to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the condensed consolidated statement of cash flows.
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 was issued with the intent to clarify the scope of modification accounting and when it should be applied to a change to the terms or conditions of a share-based payment award. Under the new guidance, modification accounting is required for all changes to share based payment awards, unless all the following conditions are met: (i) there is no change to the fair value of the award, (ii) the vesting conditions have not changed, and iii) the classification of the award as an equity instrument or a debt instrument has not changed. The accounting update was adopted on its effective date January 1, 2018, on a prospective basis. Based on historical patterns of our unit-based awards, which did not involve material modifications, we do not expect the adoption of this accounting update to have a material impact on our consolidated financial position, cash flows or results of operations.
In March 2018, the FASB issued ASU No. 2018-05, “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SEC Update)”, to provide guidance for companies that have not completed their accounting for the income tax effects of the Tax Cuts and Jobs Act (the “Act”) in the period of enactment. The measurement period begins in the reporting period that includes the Act’s enactment date of December 22, 2017, and ends when a company has obtained, prepared and analyzed the information needed to complete the accounting requirements under ASU No. 2018-05/Topic 740 and should not extend beyond one year from the enactment date. The impact of adopting the new guidance on our consolidated financial position, cash flows or results of operations, as well as on related disclosures was immaterial.
Standards Not Yet Adopted
In February 2016, the FASB issued ASU No. 2016-02 (Topic 842) "Leases", which supersedes the lease recognition requirements in Accounting Standards Codification (“ASC”) Topic 840, "Leases". Under ASU No. 2016-02, lessees are required to recognize assets and liabilities on the balance sheet for most leases and to provide enhanced disclosures. Leases will continue to be classified as either finance or operating. ASU No. 2016-02 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2018. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, and there are certain optional practical expedients that an entity may elect to apply. Full retrospective application is prohibited, and early adoption by public entities is permitted. We are in the process of evaluating the impact of ASU No. 2016-02 on our consolidated financial statements as we will be required to reflect our various lease obligations and associated asset use rights on our consolidated balance sheets. The adoption may also impact our debt covenant compliance and may require us to modify or replace certain of our existing information systems. We are finalizing our selection of a third-party consulting firm to assist us with the adoption of the new guidance and are currently in the Impact Assessment phase. We are not yet able to determine whether the adoption of this standard will have a material impact on our consolidated financial statements and related disclosures, including additional changes, if any, to our accounting system to capture data for disclosure purposes. We will adopt the guidance on its effective date January 1, 2019.
In January 2018, the FASB issued ASU No. 2018-01, “Leases - Land Easement Practical Expedient for Transition to Topic 842” to provide an optional transition practical expedient to forego evaluation under Topic 842 of existing or expired land easements that were not previously accounted for as leases under the current guidance found in Topic 840. An entity that elects this practical expedient should evaluate new or modified land easements under Topic 842 beginning at the date that the entity adopts Topic 842. An entity that does not elect this practical expedient should evaluate all existing or expired land easements in connection with the adoption of the new lease requirements in Topic 842 to assess whether they meet the definition of a lease. As discussed above, we are finalizing our selection of a third-party consulting firm to assist us with the adoption of the new guidance and are currently in the Impact Assessment phase. We are not yet able to determine whether we would elect this practical expedient or whether the adoption of this standard will have a material impact on our consolidated financial position, results of operations and cash flows, as well as related disclosures, including additional changes, if any, to our accounting system to capture data for disclosure purposes. We will adopt this on its effective date January 1, 2019.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This guidance will become effective for interim and annual periods beginning after December 15, 2019. We expect to adopt this ASU on January 1, 2020, and we are currently evaluating the effect that adopting this guidance will have on our consolidated financial position, results of operations and cash flows.
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(3) Revenue Recognition
Adoption of Topic 606
ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, supersedes previous revenue recognition guidance, establishes a principle-based model to be applied to all contracts with customers and introduces enhanced disclosure requirements. It also requires the use of more estimates and judgments than the previous standards. We adopted the new standard and the series of related accounting standard updates that followed (collectively referred to as “Topic 606”) on January 1, 2018, using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018 and any new contracts entered into after January 1, 2018. Under this method, the financial information of previous years has not been adjusted.
While the Partnership does not expect future net earnings to be materially impacted by revenue recognition timing changes, we recognized the cumulative effect of the adoption as a decrease in the opening balance of partners' capital of approximately $10.7 million. The adjustment was primarily related to four contracts where the allocation of the transaction prices resulted in changes to the pattern and timing of revenue recognition for those contracts as compared to the cash received for certain up-front fees for capital recovery as well as contracts with tiered fee structures.
The following tables summarize the impacts of adopting Topic 606 on the Partnership’s condensed consolidated financial statements as of and for the three months ended March 31, 2018, adjusting for the differences between revenue as reported following adoption of Topic 606 and revenue as it would have been reported under previous standards (in thousands):
|
| | | | | | | | | | | |
| Three months ended March 31, 2018 |
Condensed Consolidated Statement of Income | As Reported | | Adjustments | | Amounts without Adoption of Topic 606 |
Revenue | | | | | |
Commodity sales | $ | 158,863 |
| | $ | 5,242 |
| | $ | 164,105 |
|
Services | 46,906 |
| | (2,681 | ) | | 44,225 |
|
Operating expenses | | | | | |
Costs of sales | 150,166 |
| | 3,165 |
| | 153,331 |
|
Direct operating expenses | 23,446 |
| | (456 | ) | | 22,990 |
|
Operating loss | (12,377 | ) | | (148 | ) | | (12,525 | ) |
Net loss attributable to the Partnership | $ | (13,883 | ) | | $ | (148 | ) | | $ | (14,031 | ) |
| | | | | |
General Partner’s interest in net loss | $ | (181 | ) | | $ | (2 | ) | | $ | (183 | ) |
Limited Partners’ interest in net loss | (13,702 | ) | | (146 | ) | | (13,848 | ) |
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
|
| | | | | | | | | | | |
| As of March 31, 2018 |
Condensed Consolidated Balance Sheet (in thousands) | As Reported | | Adjustments | | Amounts without Adoption of Topic 606 |
Assets | | | | | |
Accounts receivable, net | $ | 87,418 |
| | $ | (67,553 | ) | | $ | 19,865 |
|
Unbilled revenue | — |
| | 67,553 |
| | 67,553 |
|
Other current assets | 25,265 |
| | — |
| | 25,265 |
|
Other noncurrent assets | 25,249 |
| | (3,419 | ) | | 21,830 |
|
Liabilities | | | | | |
Accrued expenses and other current liabilities | 88,123 |
| | — |
| | 88,123 |
|
Liabilities held for sale | 3,337 | | (459 | ) | | 2,878 |
|
Other noncurrent liabilities | 15,542 |
| | (13,503 | ) | | 2,039 |
|
Equity and partners’ capital | | |
| | |
General partner interests | $ | (88,746 | ) | | $ | 137 |
| | $ | (88,609 | ) |
Limited partner interests | 221,346 |
| | 10,406 |
| | 231,752 |
|
The majority of the adjustments in the table above were associated with our natural gas gathering, processing and transportation revenues and our terminalling and storage revenues. The magnitude of the future effect of implementing Topic 606 is dependent on future customer volumes, subject to the impacted contracts and commodity prices for those volumes. While reported revenues and expenses can be materially reduced, these presentation changes may not materially impact net earnings.
Revenue from Contracts with Customers
Our revenue is derived from the provision of gathering, processing, transportation, terminalling and storage services and the sale of commodities primarily to marketers and brokers, refiners and chemical manufacturers, utilities and power generation customers, industrial users, and local distribution companies. Beginning on January 1, 2018, we account for revenue from contracts with customers in accordance with Topic 606. The unit of account in Topic 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided over a period of time. Topic 606 requires that a contract’s transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when (point in time) or as (over time) the performance obligation is satisfied.
Under Topic 606, we disaggregate our revenues for disclosure purposes by segment and type of activity. These categories depict how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors. Our business activities are conducted through our five reportable segments, shown below. See Note 21 - Reportable Segments for further discussion of our reportable segments. The following table presents our segment revenues from contracts with customers disaggregated by type of activity (in thousands):
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2018 |
| Gas Gathering and Processing Services | | Liquid Pipelines and Services | | Natural Gas Transportation Services | | Offshore Pipelines and Services | | Terminalling Services | | Total |
Commodity sales: | | | | | | | | | | |
|
|
Natural gas | $ | 1,906 |
| | $ | — |
| | $ | 6,637 |
| | $ | 2,437 |
| | $ | — |
| | $ | 10,980 |
|
NGLs | 21,150 |
| | — |
| | — |
| | 38 |
| | — |
| | 21,188 |
|
Condensate | 5,648 |
| | — |
| | — |
| | 34 |
| | — |
| | 5,682 |
|
Crude oil | — |
| | 115,782 |
| | — |
| | — |
| | — |
| | 115,782 |
|
Other sales (1) | 183 |
| | — |
| | 4 |
| | 40 |
| | 5,004 |
| | 5,231 |
|
| | | | | | | | | | | |
Services: | | | | | | | | | | | |
Gathering and processing | 6,250 |
| | — |
| | — |
| | 866 |
| | — |
| | 7,116 |
|
Transportation | 105 |
| | 3,588 |
| | 9,412 |
| | 8,661 |
| | — |
| | 21,766 |
|
Terminalling and storage | — |
| | — |
| | — |
| | — |
| | 11,833 |
| | 11,833 |
|
Other services (2) | 434 |
| | 403 |
| | 10 |
| | 4,783 |
| | 561 |
| | 6,191 |
|
Revenues from contracts with customers | $ | 35,676 |
| | $ | 119,773 |
| | $ | 16,063 |
| | $ | 16,859 |
| | $ | 17,398 |
| | $ | 205,769 |
|
(1) Other commodity sales for our Terminalling Services segment include sales of refined product. The Partnership is actively marketing for sale all of its assets in the Terminalling Services segment. See Note 4 - Acquisitions and Dispositions.
(2) Other services in our Offshore Pipelines and Services segment include asset management services.
Commodity Sales
The Partnership sells various commodities as shown in the table above. Generally, for the majority of our commodity sales contracts: (i) each unit of product is a separate performance obligation, since our promise is to sell multiple distinct units of product at a point in time; (ii) the transaction price principally consists of variable consideration, which is determinable on commodity index prices for the volume of the product sold to the customer that month; and (iii) the transaction price is allocated to each performance obligation based on the product’s standalone selling price. Revenues from sales of commodities are recognized at the point in time when control of the commodity transfers to the customer, which generally occurs upon delivery of the product to the customer or its designee. Payment is generally received from the customer in the month following delivery. Contracts with customers have varying terms, including spot sales, month-to-month contracts and multi-year agreements.
In our Liquid Pipelines and Services segment, we enter into purchase and sales contracts as well as buy/sell contracts with counterparties, under which contracts we gather and transport different types of crude oil and eventually sell the crude oil to either the same counterparty or different counterparties. For each of these arrangements, the Partnership assesses if control of the underlying commodity volumes transfer to the Partnership. Generally, the Partnership is unable to direct the use of the commodity volumes it purchases from the supplier because the Partnership is contractually required to redeliver an equivalent volume of the commodity back to the supplier or to a specified customer.
Occasionally, we enter into crude oil inventory exchange arrangements with the same counterparty where the purchase and sale of inventory are considered in contemplation of each other. These types of arrangements are accounted for as inventory exchanges and are recorded on a net basis.
Services
The Partnership provides gathering, processing, transportation, terminalling and storage services pursuant to a variety of contracts. Generally, for the majority of these contracts: (i) our promise is to transfer (or stand ready to transfer) a series of distinct integrated services over a period of time, which is a single performance obligation and (ii) the transaction price includes fixed or variable consideration, or both fixed and variable consideration. The amount of consideration is determinable at contract inception or at each month end based on our right to invoice at month end for the value of services provided to the customer that month.
The transaction price is recognized as revenue over the service period specified in the contract as the services are rendered using a time-based (passage of time) or units-based (units of service transferred) method for measuring provision of the services. Progress towards satisfying our performance obligation is based on the firm or interruptible nature of the promised service and
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
the terms and conditions of the contract (such as contracts with or without makeup rights). Payment is generally received from the customer in the month of service or the month following the service. Contracts with customers generally are a combination of month-to-month and multi-year agreements.
Firm Services
Firm services are services that are promised to be available to the customer at all times during the term of the contract, with limited exceptions. These agreements require customers to deliver, transport or throughput a minimum volume over an agreed upon period and substantially all of such agreements are entered into with customers to economically support the return on our capital expenditure necessary to construct the related asset. Our firm service contracts are typically structured with take-or-pay or minimum volume provisions, which specify minimum service quantities a customer will pay for even if it chooses not to receive or use them in the specified service period (referred to as “deficiency quantities”).
Under firm service contracts, we record a receivable from the customer in the period that services are provided or when the transaction occurs, including amounts for deficiency quantities from customers associated with minimum volume commitments. If a customer has a make-up right associated with a deficiency, we defer the revenue attributable to the counterparty’s make-up right and subsequently recognize the revenue at the earlier of when the deficiency volume is delivered or shipped, when the make-up right expires or when it is determined that the customer’s ability to utilize the make-up right is remote. At March 31, 2018, customer deficiencies associated with firm services were immaterial.
Interruptible Services
Interruptible services are the opposite of firm services in that such services are provided to the extent that we have available capacity. Generally, we do not have an obligation to perform these services until we accept a customer’s periodic request for service. For the majority of these contracts, the customer will pay only for the actual quantities of services it chooses to receive or use, and we typically recognize the transaction price as revenue as those units of service are transferred to the customer in the specified service period.
Gathering and Processing
In our Gas Gathering and Processing Services segment, we purchase gas volumes from producers at the wellhead, production facility, or at receipt points on our systems typically at an index price, and charge the producer fees associated with the downstream gathering and processing services. Services can be firm if subject to a minimum volume commitment or acreage dedication or interruptible when offered on an as requested, non-guaranteed basis. Revenue for fee-based gathering and processing services are valued based on the rate in effect for the month of service and is recognized in the month of service based on the volumes of natural gas we gather, process and fractionate. Under these arrangements, we may take control of: (i) none of the commodities we sell (i.e., residue gas or NGLs), (ii) a portion of the commodities we sell, or (iii) all of the commodities we sell.
In those instances where we purchase and obtain control of the entire natural gas stream in our producer arrangements, we have determined these are contracts with suppliers rather than contracts with customers and therefore, these arrangements are not included in the scope of Topic 606. These supplier arrangements are subject to updated guidance in ASC 705, “Cost of Sales and Services,” whereby any embedded fees within such contracts, which historically have been reported as services revenue, are now reported as a reduction to cost of sales upon adoption of Topic 606.
In those instances where we remit all of the cash proceeds received from third parties for selling the extracted commodities to the producer, less the fees attributable to these arrangements, we have determined that the producer has control over these commodities. Upon adoption of Topic 606, we eliminated recording both sales revenue (natural gas and products) and cost of sales amounts and now only record fees attributable to these arrangements as service revenues.
In other instances where we do not obtain control of the extracted commodities we sell, we are acting as an agent for the producer and, upon adoption of Topic 606, we have continued to recognize services revenue for the net amount of consideration we retain in exchange for our service.
The Partnership may charge additional service fees to customers for a portion of the contract term (i.e., for the first year of a contract or until reaching a volume threshold) due to the significant upfront capital investment, and these fees are initially deferred and recognized to revenue over the expected period of customer benefit, generally the lesser of the expected contract term or the life of the related properties.
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Transportation
Our transportation operations generally consist of fee-based activities associated with transporting crude oil, natural gas, and NGL on pipelines, gathering systems and trucks. Revenues from pipeline tariffs and fees are associated with the transportation at a published tariff, as well as revenues associated with agreements for committed capacity on various assets. We primarily recognize pipeline tariff and fee revenues over time based on the volumes delivered and invoiced. The majority of our pipeline tariff and fee revenues are based on actual volumes and rates.
As is common in the pipeline transportation industry, our tariffs incorporate a loss allowance factor. The intent of the allowance in arrangements for the transportation of natural gas is to approximate the natural shrink that occurs when transporting the gas. For crude oil transportation arrangements, loss allowance provisions are immaterial to the Partnership. In the event the Partnership retains excess natural gas and crude oil and subsequently sells the commodity to a third party, the sale is recorded at that point in time as a commodity sale.
Terminalling and Storage
In our Terminalling Services segment, we generally receive fee-based compensation on guaranteed firm storage contracts, throughput fees charged to our customers when their products are either received or disbursed, and other operational charges associated with ancillary services provided to our customers, such as excess throughput, steam heating and truck weighing at our marine terminals. Storage fees resulting from short-term and long-term contracts are typically recognized in revenue ratably over the term of the contract regardless of the actual storage capacity utilized.
Other Items in Revenue
The following table presents the reconciliation of our revenues from contracts with customers to segment revenues and total revenues as disclosed in our condensed consolidated statement of operations (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended March 31, 2018 |
| Gas Gathering and Processing Services | | Liquid Pipelines and Services | | Natural Gas Transportation Services | | Offshore Pipelines and Services | | Terminalling Services | | Total |
Revenues from contracts with customers | $ | 35,676 |
| | $ | 119,773 |
| | $ | 16,063 |
| | $ | 16,859 |
| | $ | 17,398 |
| | $ | 205,769 |
|
Gains (losses) on commodity derivatives, net | 2 |
| | 58 |
| | — |
| | — |
| | — |
| | 60 |
|
Total revenues of reportable segments | $ | 35,678 |
| | $ | 119,831 |
| | $ | 16,063 |
| | $ | 16,859 |
| | $ | 17,398 |
| | $ | 205,829 |
|
We may utilize derivatives in connection with contracts with customers. We purchase and take title to a portion of the NGLs and crude oil that we sell, which may expose us to changes in the price of these products in our sales markets. We do not take title to the natural gas we transport and therefore have no direct commodity price exposure to natural gas. Derivative revenue is not included as a component of revenue from contracts with customers, but is included in other items in revenue.
Contract Balances
Our contract balances primarily consist of customer receivables and contract assets and liabilities. Trade accounts receivable, net consists of the following as presented on our condensed consolidated balance sheet (in thousands):
|
| | | |
| March 31, 2018 |
Receivables arising from revenue contracts | |
Unbilled customer receivables | $ | 67,553 |
|
Billed customer receivables | 20,177 |
|
Allowance for doubtful accounts | (312 | ) |
Accounts receivable, net | $ | 87,418 |
|
Our contract assets and liabilities primarily relate to contracts where allocations of the transaction prices result in differences to the pattern and timing of revenue recognition as compared to contractual billings. Where payments are received in advance of recognition as revenue, contract liabilities are created. Where we have earned revenue and our right to invoice the customer is conditioned on something other than the passage of time, contract assets are created.
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The following table presents the change in the contract assets and liability balances during the three months ended March 31, 2018 (in thousands):
|
| | | | | | | |
| Contract Assets | | Contract Liabilities |
Balance at December 31, 2017 | $ | — |
| | $ | 2,136 |
|
Topic 606 implementation | 2,555 |
| | 13,246 |
|
Amounts recognized as revenue | — |
| | (502 | ) |
Additions | 864 |
| | 1,205 |
|
Total balance at March 31, 2018 | 3,419 |
| | 16,085 |
|
Classified as held for sale | — |
| | (708 | ) |
Balance at March 31, 2018 | $ | 3,419 |
| | $ | 15,377 |
|
| | | |
Current | — |
| | 998 |
|
Noncurrent | 3,419 |
| | 14,379 |
|
Balance at March 31, 2018 | $ | 3,419 |
| | $ | 15,377 |
|
In our condensed consolidated balance sheet as of March 31, 2018, current portions of contract assets are included in other current assets, noncurrent portions of contract assets are included in other (noncurrent) assets, current portions of contract liabilities are included in other current liabilities and noncurrent portions of contract liabilities are included in other long-term liabilities.
Remaining Performance Obligations
The Partnership applies the practical expedients in Topic 606 and does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied (or partially unsatisfied) performance obligations. Therefore, the following table as of March 31, 2018, represents only revenue expected to be recognized from contracts where the price and quantity of the product or service are fixed:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Remainder of 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter | | Total |
Gathering and processing revenues supported by minimum volume commitments | $ | 9,252 |
| | $ | 12,743 |
| | $ | 12,743 |
| | $ | 12,720 |
| | $ | 12,467 |
| | $ | 19,155 |
| | $ | 79,080 |
|
Transportation agreements | 15,921 |
| | 19,233 |
| | 18,475 |
| | 18,207 |
| | 18,100 |
| | 190,416 |
| | 280,352 |
|
Terminalling and storage throughput agreements | 10,821 |
| | 12,823 |
| | 6,220 |
| | 2,715 |
| | 1,593 |
| | — |
| | 34,172 |
|
Other | 1,170 |
| | 1,560 |
| | 1,560 |
| | — |
| | — |
| | — |
| | 4,290 |
|
Total | $ | 37,164 |
| | $ | 46,359 |
| | $ | 38,998 |
| | $ | 33,642 |
| | $ | 32,160 |
| | $ | 209,571 |
| | $ | 397,894 |
|
Due to the application of the practical expedients, the table above represents only a portion of the Partnership’s expected future consolidated revenues and it is not necessarily indicative of the expected trend in total revenues for the Partnership. Certain contracts do not meet the requirements for presentation in the table above due to the term being one year or less and due to variability in the amount of performance obligation remaining, variability in the timing of recognition or variability in consideration. Acreage dedications do require us to perform future services but do not contain a minimum level of services and are therefore excluded from this presentation. Long-term supply and logistics arrangements contain variable timing, volumes and/or consideration and are excluded from this presentation.
(4) Acquisitions and Dispositions
Acquisitions
As more fully described in our Annual Report for the year ended December 31, 2017, during 2017, the Partnership completed various acquisitions, the results of which are fully reflected in the first quarter of 2018, but are not reflected in the comparable period of 2017 due to the closing dates of the acquisitions. The pro forma effects of these acquisitions were immaterial
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
to our condensed consolidated statement of operations for the three months ended March 31, 2017 and, therefore, have not been separately disclosed.
Acquisitions accounted for as business combinations included the following:
| |
• | On June 2, 2017, we acquired 100% of the Viosca Knoll Gathering System (“VKGS”) from Genesis Energy, L.P. for total consideration of approximately $32 million in cash. |
| |
• | On August 8, 2017, we acquired 100% of the interest in Panther Offshore Gathering Systems, LLC (“POGS”), Panther Pipeline, LLC (“PPL”) and Panther Operating Company, LLC (“POC” and, together with POGS and PPL, “Panther”) from Panther Asset Management LLC for approximately $60.9 million. |
| |
• | On November 3, 2017, we completed the acquisition of 100% of the equity interests in Trans-Union Interstate Pipeline, LP (“Trans-Union”) from affiliates of ArcLight, for a total consideration of approximately $49.4 million. |
Additionally, we acquired the following interests in 2017 that are accounted for as investments in unconsolidated affiliates:
| |
• | On August 8, 2017, we entered into a new joint venture agreement with Targa Midstream Services, LLC (“Targa”) by which our previously wholly owned subsidiary Cayenne Pipeline, LLC became the Cayenne joint venture between Targa and us. |
| |
• | On September 29, 2017, we acquired an additional 15.5% equity interest in Class A units of Delta House from affiliates of ArcLight for total cash consideration of approximately $125.4 million. |
| |
• | On October 27, 2017, American Midstream Emerald, LLC, a wholly-owned subsidiary of the Partnership, entered into a purchase and sale agreement with Emerald Midstream, LLC, an ArcLight affiliate, to purchase an additional 17.0% equity interest in Destin for total consideration of $30.0 million. Prior to 2017, we acquired other interests from Emerald, as detailed in Note 10 - Investments in Unconsolidated Affiliates, collectively referred to as the “Emerald Transactions.” |
During the three months ended March 31, 2018, there were no acquisitions.
Planned Dispositions
Business Held for Sale
During 2017, the Partnership began actively marketing for sale all of its assets in the Terminalling Services segment as part of its plan to divest certain non-core assets and utilize the proceeds to fund future acquisitions and growth projects. On February 16, 2018, the Partnership entered into a definitive agreement for the sale of our refined products terminals (the "Refined Products Business") to DKGP Energy Terminals LLC, a joint venture between Delek Logistics Partners, LP and Green Plains Partners LP, for approximately $138.5 million in cash, subject to working capital adjustments. Accordingly, we have presented the assets and liabilities of the Refined Products Business as held for sale. The Refined Products Business is a portion of the Terminalling Services segment consisting of two terminal facilities located in Caddo Mills, Texas and North Little Rock, Arkansas. As such, this planned disposition does not meet the criteria for discontinued operations.
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
In view of the planned sale, which remains subject to customary closing conditions, we have classified our assets and liabilities of the Refined Products Business in current assets and liabilities held for sale on our condensed consolidated balance sheet. On May 11, 2018, we received notification that the Federal Trade Commission had requested additional information and documentary materials with respect to the planned sale. We and the counterparties to this planned transaction are reviewing this request and will be working to coordinate an appropriate response.
Included in the disposal group are the following assets and liabilities (in thousands):
|
| | | |
| March 31, 2018 |
Accounts receivable, net | $ | 3,376 |
|
Inventory | 1,571 |
|
Other current assets | 893 |
|
Property, plant and equipment, net | 32,129 |
|
Goodwill | 61,163 |
|
Intangible assets | 29,403 |
|
Other non-current assets | 712 |
|
Total assets held for sale | $ | 129,247 |
|
| |
Accounts payable | $ | 1,219 |
|
Accrued gas purchases | 630 |
|
Accrued expenses and other current liabilities | 881 |
|
Contract liabilities, long-term | 607 |
|
Total liabilities held for sale | $ | 3,337 |
|
Net income from continuing operations before income taxes for the Refined Products Business was $2.4 million and $1.8 million for the three months ended March 31, 2018 and 2017, respectively.
Discontinued Operations
On September 1, 2017, the Partnership completed the disposition of its propane business (the “Propane Business”) pursuant to the Membership Interest Purchase Agreement dated July 21, 2017, between AMID Merger LP, a wholly owned subsidiary of the Partnership, and SHV Energy N.V. Through the transaction, we divested Pinnacle Propane’s 40 service locations; Pinnacle Propane Express’ cylinder exchange business and related logistics assets; and the Alliant Gas utility system. Prior to the sale, we moved the trucking business from the Propane Marketing Services segment to the Liquid Pipelines and Services segment. With the disposition of the Propane Business, we eliminated the Propane Marketing Services segment.
In connection with the transaction, the Partnership received approximately $170.0 million in cash, net of customary closing adjustments. We recorded a gain of $47.4 million, net of $2.5 million of transaction costs, which was included in (Gains) losses on sale of assets and business line item on the Partnership's consolidated statement of operations in the period ended September 30, 2017. The Partnership has reported the accounts and the results of our Propane Business as discontinued operations in our condensed consolidated statements of operations for the three months ended March 31, 2017.
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Summarized financial information related to the Propane Business is set forth in the tables below (in thousands):
|
| | | |
| Three months ended March 31, 2017 |
Total revenue | $ | 35,554 |
|
Total operating expenses | 36,305 |
|
Operating loss | (751 | ) |
Other income | 41 |
|
Income tax expense | — |
|
Loss from discontinued operations before taxes | $ | (710 | ) |
| |
Partnership’s loss from discontinued operations, net of tax | $ | (710 | ) |
| |
Depreciation and amortization | $ | 3,781 |
|
Capital expenditures | $ | 1,119 |
|
| |
Operating non-cash items | |
Unrealized gain loss on derivative contracts, net | $ | 901 |
|
(5) Inventory
Inventory consists of the following (in thousands):
|
| | | | | | | | |
| | March 31, 2018 | | December 31, 2017 |
Crude oil | | $ | 4,378 |
| | $ | 1,553 |
|
NGLs | | 282 |
| | 347 |
|
Refined products | | — |
| | 934 |
|
Materials, supplies and equipment | | 135 |
| | 132 |
|
Total inventory | | $ | 4,795 |
| | $ | 2,966 |
|
(6) Other Current Assets
Other current assets consist of the following (in thousands):
|
| | | | | | | |
| March 31, 2018 | | December 31, 2017 |
Prepaid insurance | $ | 6,341 |
| | $ | 8,944 |
|
Insurance receivables | 1,741 |
| | 1,741 |
|
Due from related parties | 5,427 |
| | 4,362 |
|
Other receivables | 6,393 |
| | 5,187 |
|
Risk management assets | 5,363 |
| | 3,186 |
|
Total other current assets | $ | 25,265 |
|
| $ | 23,420 |
|
(7) Risk Management Activities
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
We are exposed to certain market risks related to the volatility of commodity prices and changes in interest rates. To monitor and manage these market risks, we have established comprehensive risk management policies and procedures. We do not enter into derivative instruments for any purpose other than hedging commodity price risk, interest rate risk, and weather risk. We do not speculate using derivative instruments.
Commodity Derivatives
To manage the impact of the risks associated with changes in the market price of NGL, crude oil, refined products and natural gas purchases and sales in our day-to-day business, we use a combination of fixed price swap and forward contracts.
Our forward contracts that qualify for the Normal Purchase Normal Sale (“NPNS”) exception under GAAP are recognized when the underlying physical transaction is delivered. In accordance with ASC 815, Derivatives and Hedging, if it is determined that a transaction designated as NPNS no longer meets the scope of the exception, the fair value of the related contract is recorded on the balance sheet (as an asset or liability) and the difference between the fair value and the contract amount is immediately recognized through earnings. We measure our commodity derivatives at fair value using the income approach, which discounts the future net cash settlements expected under the derivative contracts to a present value. These valuations utilize indirectly observable (“Level 2”) inputs, including contractual terms and commodity prices observable at commonly quoted intervals.
The following table summarizes the net notional volumes of our outstanding commodity-related derivatives, excluding those contracts that qualified for the NPNS exception as of March 31, 2018 and December 31, 2017, none of which were designated as hedges for accounting purposes.
|
| | | | | | | | | |
| | March 31, 2018 | | December 31, 2017 |
Commodity Swaps | | Volume | | Maturity | | Volume | | Maturity |
NGLs Fixed Price (gallons) | | 1,407,000 |
| | January 2019 | | — | | — |
Crude Oil Fixed Price (barrels) | | 17,000 |
| | April 2018 | | — | | — |
Interest Rate Swaps
To manage the impact of the interest rate risk associated with our Credit Agreement, as defined in Note 13 - Debt Obligations, we enter into interest rate swaps from time to time, effectively converting a portion of the cash flows related to our long-term variable rate debt into fixed rate cash flows.
As of March 31, 2018, and December 31, 2017, we had a combined notional principal amount of $550.0 million respectively of variable-to-fixed interest rate swap agreements. As of March 31, 2018, the maximum length of time over which we have hedged a portion of our exposure due to interest rate risk is through December 31, 2022.
The fair value of our interest rate swaps was estimated using a valuation methodology based upon forward interest rates and volatility curves as well as other relevant economic measures, if necessary. Discount factors may be utilized to extrapolate a forecast of future cash flows associated with long dated transactions or illiquid market points. The inputs, which represent Level 2 inputs in the valuation hierarchy, are obtained from independent pricing services, and we have made no adjustments to those prices.
Weather Derivative
In the second quarter of 2017, we entered into a yearly weather derivative arrangement to mitigate the impact of potential unfavorable weather on our operations under which we could receive payments totaling up to $30.0 million in the event that a hurricane of certain strength passes through the areas identified in the derivative agreement. The weather derivative, which is accounted for using the intrinsic value method, was entered into with a single counterparty, and we were not required to post collateral.
We paid no premiums during each of the three months ended March 31, 2018 and 2017. Premiums are amortized to Direct operating expenses on a straight-line basis over the one-year term of the contract. Unamortized amounts associated with the weather derivatives were approximately $0.2 million and $0.5 million as of March 31, 2018 and December 31, 2017, respectively, and are included in Other current assets on the condensed consolidated balance sheets.
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The following table summarizes the fair values of our derivative contracts (before netting adjustments) included in the condensed consolidated balance sheets (in thousands):
|
| | | | | | | | | | | | | | | | | |
| | | Asset Derivatives | | Liability Derivatives |
Type | Balance Sheet Classification | | March 31, 2018 | | December 31, 2017 | | March 31, 2018 | | December 31, 2017 |
Commodity derivatives | Other current assets | | $ | 5 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Commodity derivatives | Accrued expenses and other current liabilities | | — |
| | — |
| | (64 | ) | | — |
|
| | | | | | | | | |
Interest rate swaps | Other current assets | | $ | 5,132 |
| | $ | 2,678 |
| | $ | — |
| | $ | — |
|
Interest rate swaps | Other assets net | | 11,524 |
| | 8,807 |
| | — |
| | — |
|
| | | | | | | | | |
Weather derivatives | Other current assets | | $ | 231 |
| | $ | 509 |
| | $ | — |
| | $ | — |
|
| Total | | $ | 16,892 |
| | $ | 11,994 |
| | $ | (64 | ) | | $ | — |
|
The following tables present the fair value of our recognized derivative assets and liabilities on a gross basis and amounts offset in the condensed consolidated balance sheets that are subject to enforceable master netting arrangements (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Gross Risk Management Position | | Netting Adjustments | | Net Risk Management Position |
Balance Sheet Classification | | March 31, 2018 | | December 31, 2017 | | March 31, 2018 | | December 31, 2017 | | March 31, 2018 | | December 31, 2017 |
Other current assets | | $ | 5,368 |
| | $ | 3,187 |
| | $ | (5 | ) | | $ | — |
| | $ | 5,363 |
| | $ | 3,187 |
|
Other (noncurrent) assets, net | | 11,524 |
| | 8,807 |
| | — |
| | — |
| | 11,524 |
| | 8,807 |
|
Total assets | | $ | 16,892 |
| | $ | 11,994 |
| | $ | (5 | ) | | $ | — |
| | $ | 16,887 |
| | $ | 11,994 |
|
| | | | | | | | | | | | |
Accrued expenses and other current liabilities | | $ | (64 | ) | | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | (59 | ) | | $ | — |
|
Total liabilities | | $ | (64 | ) | | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | (59 | ) | | $ | — |
|
For each of the three months ended March 31, 2018 and 2017, the realized and unrealized gains (losses) associated with our commodity, interest rate and weather derivative instruments were recorded in our condensed consolidated statements of operations as follows (in thousands):
|
| | | | | | | |
| Three months ended March 31, |
Statement of Operations Classification | Realized | | Unrealized |
2018 | | | |
Gains (losses) on commodity derivatives, net | $ | 119 |
| | $ | (59 | ) |
Interest expense | 1,350 |
| | 5,171 |
|
Direct operating expenses | (278 | ) | | — |
|
Total | $ | 1,191 |
| | $ | 5,112 |
|
2017 | | | |
Gains (losses) on commodity derivatives, net | $ | 420 |
| | $ | (55 | ) |
Interest expense | (65 | ) | | (317 | ) |
Direct operating expenses | (257 | ) | | — |
|
Total | $ | 98 |
| | $ | (372 | ) |
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(8) Property, Plant and Equipment
Property, plant and equipment, net, consists of the following (in thousands):
|
| | | | | | | | | |
| Useful Life (in years) | | March 31, 2018 | | December 31, 2017 |
Land | Infinite | | $ | 16,366 |
| | $ | 18,145 |
|
Construction in progress | N/A | | 83,013 |
| | 55,622 |
|
Buildings and improvements | 4 to 40 | | 15,476 |
| | 16,235 |
|
Transportation equipment | 5 to 15 | | 22,597 |
| | 22,697 |
|
Processing and treating plants | 8 to 40 | | 123,580 |
| | 123,138 |
|
Pipelines, compressors and right-of-way | 3 to 40 | | 975,213 |
| | 974,301 |
|
Storage | 3 to 40 | | 124,037 |
| | 146,105 |
|
Equipment | 3 to 31 | | 61,935 |
| | 80,220 |
|
Total property, plant and equipment | | | 1,422,217 |
| | 1,436,463 |
|
Accumulated depreciation | | | (341,320 | ) | | (340,878 | ) |
Property, plant and equipment, net | | | $ | 1,080,897 |
| | $ | 1,095,585 |
|
At March 31, 2018 and December 31, 2017, gross property, plant and equipment included $369.5 million and $367.6 million, respectively, related to our FERC regulated interstate and intrastate assets.
Depreciation and amortization expense totaled $18.6 million and $18.5 million for the three months ended March 31, 2018 and 2017, respectively. Capitalized interest was $0.6 million and $1.0 million the three months ended March 31, 2018 and 2017, respectively.
(9) Goodwill and Intangible Assets
Goodwill consists of the following (in thousands):
|
| | | | | | | |
| March 31, 2018 | | December 31, 2017 |
Liquid Pipelines and Services | $ | 35,710 |
| | $ | 35,708 |
|
Terminalling Services | 27,303 |
| | 88,466 |
|
Offshore Pipeline and Services | 4,972 |
| | 4,692 |
|
Total | $ | 67,985 |
| | $ | 128,866 |
|
The change in goodwill in our Terminalling Services segment relates to goodwill on our Refined Products Business that was classified as held for sale at March 31, 2018, see Note 4 - Acquisitions and Dispositions.
Intangible assets, net, consists of customer relationships, dedicated acreage agreements, collaborative arrangements, noncompete agreements and trade names. These intangible assets have definite lives and are subject to amortization on a straight-line basis over their economic lives, currently ranging from approximately 5 years to 30 years.
Intangible assets, net, consist of the following (in thousands):
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
|
| | | | | | | | | | | |
| March 31, 2018 |
| Gross carrying amount | | Accumulated amortization | | Net carrying amount |
Customer relationships | $ | 64,744 |
| | $ | (14,806 | ) | | $ | 49,938 |
|
Customer contracts | 94,692 |
| | (49,420 | ) | | 45,272 |
|
Dedicated acreage | 42,547 |
| | (6,560 | ) | | 35,987 |
|
Collaborative arrangements | 11,884 |
| | (1,627 | ) | | 10,257 |
|
Noncompete agreements | 1,064 |
| | (1,064 | ) | | — |
|
Other | 198 |
| | (25 | ) | | 173 |
|
Total | $ | 215,129 |
| | $ | (73,502 | ) | | $ | 141,627 |
|
| | | | | |
| December 31, 2017 |
| Gross carrying amount | | Accumulated amortization | | Net carrying amount |
Customer relationships | $ | 110,483 |
| | $ | (29,965 | ) | | $ | 80,518 |
|
Customer contracts | 94,692 |
| | (48,173 | ) | | 46,519 |
|
Dedicated acreage | 42,547 |
| | (6,216 | ) | | 36,331 |
|
Collaborative arrangements | 11,884 |
| | (1,415 | ) | | 10,469 |
|
Noncompete agreements | 1,064 |
| | (1,064 | ) | | — |
|
Other | 198 |
| | (25 | ) | | 173 |
|
Total | $ | 260,868 |
| | $ | (86,858 | ) | | $ | 174,010 |
|
Amortization expense related to our intangible assets totaled $2.7 million and $6.6 million for the three months ended March 31, 2018 and 2017, respectively. The estimated aggregate annual amortization expected to be recognized for the remainder of 2018 and each of the four succeeding fiscal years is $7.6 million, $10.2 million, $10.2 million, $10.2 million and $9.3 million, respectively.
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(10) Investments in unconsolidated affiliates
The following table presents the activity in our equity method investments in unconsolidated affiliates (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Delta House (1) | | Emerald Transactions | | | | |
| FPS(3) | | OGL(3) | | Destin(3) | | Tri-States(2) | | Okeanos(3) | | Wilprise(2) | | Cayenne JV(2) | | Total |
Ownership % - 12/31/2017 | 35.7 | % | | 35.7 | % | | 66.7 | % | | 16.7 | % | | 66.7 | % | | 25.3% | | 50.0 | % | | |
Ownership % - 3/31/2018 | 35.7 | % | | 35.7 | % | | 66.7 | % | | 16.7 | % | | 66.7 | % | | 25.3% | | 50.0 | % | | |
| | | | | | | | | | | | | | | |
Balances at December 31, 2017 | $ | 90,412 |
| | $ | 46,932 |
| | $ | 124,245 |
| | $ | 53,057 |
| | $ | 22,445 |
| | $ | 4,689 |
| | $ | 6,654 |
| | $ | 348,434 |
|
Earnings in unconsolidated affiliates | 3,227 |
| | 2,715 |
| | 2,377 |
| | 854 |
| | 2,132 |
| | 258 |
| | 1,110 |
| | 12,673 |
|
Contributions | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,018 |
| | 2,018 |
|
Distributions | (2,247 | ) | | (4,278 | ) | | (10,734 | ) | | (2,034 | ) | | (4,378 | ) | | (183 | ) | | — |
| | (23,854 | ) |
Balances at March 31, 2018 | $ | 91,392 |
| | $ | 45,369 |
| | $ | 115,888 |
| | $ | 51,877 |
|
| $ | 20,199 |
|
| $ | 4,764 |
|
| $ | 9,782 |
|
| $ | 339,271 |
|
___________________________________________________
(1) Represents direct and indirect ownership interests in Class A units and common units. FPS denotes Floating Production System LLC whereas OGL denotes Oil & Gas Lateral LLC.
(2) Included in our Liquid Pipelines and Services segment.
(3) Included in our Offshore Pipelines and Services segment.
The following tables present the summarized combined financial information for our equity investments (amounts represent 100% of investee financial information) (in thousands):
|
| | | | | | | |
Balance Sheets: | March 31, 2018 | | December 31, 2017 |
Current assets | $ | 64,381 |
| | $ | 80,405 |
|
Non-current assets | 1,279,417 |
| | 1,288,862 |
|
Current liabilities | 114,724 |
| | 130,904 |
|
Non-current liabilities | $ | 438,496 |
| | $ | 436,584 |
|
|
| | | | | | | |
| Three months ended March 31, |
Statements of Operations: | 2018 | | 2017 |
Revenue | $ | 56,898 |
| | $ | 93,870 |
|
Operating expenses | 6,292 |
| | 8,436 |
|
Net income | $ | 32,845 |
| | $ | 69,285 |
|
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(11) Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consists of the following (in thousands): |
| | | | | | | | |
| | March 31, 2018 | | December 31, 2017 |
Capital expenditures | | $ | 20,880 |
| | $ | 10,721 |
|
Accrued interest | | 15,590 |
| | 3,190 |
|
Convertible preferred unit distributions | | 8,354 |
| | — |
|
Employee compensation | | 149 |
| | 90 |
|
Current portion of asset retirement obligation | | 6,416 |
| | 6,416 |
|
Additional Blackwater acquisition consideration | | 5,000 |
| | 5,000 |
|
Transaction costs | | 3,732 |
| | 3,408 |
|
Customer deposits | | 1,136 |
| | 1,109 |
|
Taxes payable | | 4,018 |
| | 5,263 |
|
Due to related parties | | 3,212 |
| | 6,609 |
|
Deferred financing costs | | — |
| | 266 |
|
Contingent liabilities associated with VKGS and Panther | | 2,098 |
| | 2,099 |
|
Royalties, gas imbalance and leases payables | | 7,119 |
| | 7,905 |
|
Professional fees | | 2,024 |
| | 1,848 |
|
Accrued corporate expenses | | 1,697 |
| | 2,487 |
|
Accrued operating expenses | | 4,881 |
| | 6,609 |
|
Other | | 1,817 |
| | 5,834 |
|
Total accrued expenses and other current liabilities | | $ | 88,123 |
|
| $ | 68,854 |
|
(12) Asset Retirement Obligations
We record a liability for the fair value of asset retirement obligations and conditional asset retirement obligations (collectively referred to as “AROs”) that we can reasonably estimate, on a discounted basis, in the period in which the liability is incurred. Generally, the fair value of the liability is calculated using discounted cash flow techniques and based on internal estimates and assumptions related to (i) future retirement costs, (ii) future inflation rates, and (iii) credit-adjusted risk-free interest rates. Significant increases or decreases in the assumptions would result in a significant change to the fair value measurement.
Certain assets related to our Offshore Pipelines and Services segment have regulatory obligations to perform remediation, and in some instances dismantlement and removal activities when the assets are abandoned. These AROs include varying levels of activity including disconnecting inactive assets from active assets, cleaning and purging assets, and in some cases, completely removing the assets and returning the land to its original state. These assets have been in existence for many years and with regular maintenance will continue to be in service for many years to come. It is not possible to predict when demand for these transmission services will cease, however, we do not believe that such demand will cease for the foreseeable future. The majority of the current portion of our AROs, which is included in Accrued Expenses and Other Current Liabilities in our condensed consolidated balance sheet, is related to the retirement of the Midla pipeline discussed in Note 13 - Debt Obligations.
American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The following table presents activity in our asset retirement obligations for the three months ended March 31, 2018 (in thousands):
|
| | | |
Non-current balance | $ | 66,194 |
|
Current balance | 6,416 |
|
Balances at December 31, 2017 | $ | 72,610 |
|
Additions | 260 |
|
Expenditures | — |
|
Accretion expense | 440 |
|
Balances at March 31, 2018 | $ | 73,310 |
|
Less: current portion | 6,416 |
|
Noncurrent asset retirement obligation | $ | 66,894 |
|
___________________________________________________
We are required to establish security against potential obligations relating to the abandonment of certain transmission assets that may be imposed on the previous owner by applicable regulatory authorities. We have deposited $5.0 million with a third party to secure our performance on these potential obligations. These deposits are included in Restricted cash-long term in our condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017.
(13) Debt Obligations
Our outstanding debt consists of the following (in thousands):