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ACQUISITIONS | 12 Months Ended
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Dec. 31, 2015
ACQUISITIONS |
ACQUISITIONS | 6. ACQUISITIONS Effective as of the Transaction Date, Azure contributed the Azure System Predecessor to the Partnership in exchange for aggregate consideration of $162.5 million, which was paid to Azure in the form of: (i) $99.5 million in cash; and (ii) the issuance of 90 of our IDR Units. The cash portion of the contribution was funded through borrowings under the Partnership's senior secured revolving credit facility (see Note 9). The Azure System Predecessor has been deemed to be the accounting acquirer of the Partnership in the business combination because its parent company, Azure, obtained control of the Partnership through the indirect control of the General Partner. Consequently, the Azure System Predecessor's assets and liabilities retained their historical carrying values. The Partnership's assets acquired and liabilities assumed by the Azure System Predecessor have been recorded at their fair values measured as of the Transaction Date. The excess of the assumed purchase price over the estimated fair values of the Partnership's net assets acquired were recorded as goodwill. The assumed purchase price and fair value of the Partnership has been determined by using a combination of an income, market and cost valuation methodology and considered the evaluation of comparable company transactions, the Partnership's discounted future cash flows, the fair value of the Partnership's common units as of the Transaction Date and the consideration paid by Azure for the general partner interest and IDR Units. The purchase price allocation has been prepared based on a valuation report prepared with the assistance of the Partnership’s fair value specialists and represents management’s best estimate of the enterprise and fair values of the Partnership. The property, plant and equipment of the Azure System Predecessor has been reflected at its historical net carrying value, which is greater than the consideration paid for the business. The excess of the historical carrying value over the consideration paid was $51.7 million and is reflected as an increase to Partners' Capital in the consolidated statement of partners' capital and parent company net investment. Additionally, the Partnership did not assume certain liabilities of the Azure System Predecessor as part of the Contribution, and, as a result, the amount of such liabilities not assumed is considered a deemed contribution within the statement of partners' capital. The Partnership incurred $2.6 million in transaction related expenses prior to the Transaction Date as a result of the Transactions. These transaction related expenses were recognized by the Partnership when incurred in the periods prior to the Transaction Date, and therefore are not included within the results of operations presented within the consolidated financial statements for the year ended December 31, 2015. For the period from March 1, 2015 to December 31, 2015, we recognized $42.5 million in revenues and $14.8 million in operating income attributable to the Partnership's historical midstream assets. The following tables summarize the assumed purchase price, fair value and the allocation to the assets acquired and liabilities assumed as of February 28, 2015 (in thousands):
Total assumed purchase price and fair value of Azure Midstream Partners, LP |  | $ | 393,171 |
The allocation of the assumed purchase price is as follows (in thousands):
Assumed purchase price allocation to Azure Midstream Partners, LP: |  |  |  |
Current assets |  | $ | 123,022 |
Property, plant and equipment |  |  | 193,316 |
Identifiable intangible assets |  |  | 65,000 |
Goodwill |  |  | 215,758 |
Other assets |  |  | 3,418 |
Current liabilities |  |  | (11,161) |
Long-term debt |  |  | (195,771) |
Deferred income tax liability |  |  | (411) |
Total assumed consideration and fair value of Azure Midstream Partners, LP |  | $ | 393,171 |
Goodwill recognized from the business combination primarily related to the value attributed to additional growth opportunities, synergies and operating leverage within the Partnership's areas of operation. Goodwill was allocated to our gathering and processing segment and our logistics segment. Goodwill was fully impaired in September 2015 (see Note 8). The assumed purchase price and fair values have been prepared with the assistance of our external fair value specialists, and represent management's best estimate of the enterprise value and fair values of the Partnership as of this date. Amendment to Transloading Services Agreements Upon the closing of the Transactions, we entered into amendments to our: (i) Wildcat transloading services agreement associated with our transloading facility located in Carbon County, Utah; (ii) Big Horn transloading services agreement associated with our transloading facility located in Big Horn County, Wyoming; (iii) East New Mexico transloading services agreement associated with our transloading facilty located in Sandoval County, New Mexico; and (vi) our Ladder transloading services agreement, all of which are transloading services agreements with AES. The amendments extend the MVCs associated with these services agreements until February 27, 2020, or an additional five years from the date of the amendment. Transition Services Agreement In connection with the closing of the Transactions, we entered into an agreement with NuDevco and its affiliates pursuant to which NuDevco has and will provide certain services to us with respect to the business and operations of the Partnership's existing midstream assets, including information technology, accounting, asset integrity, compliance management, and procurement services, for a period of two months following the closing of the Transactions. Expenses associated with the transition services agreement were $0.8 million for the period March 1, 2015 to December 31, 2015. Unaudited Pro Forma Financial Information The following unaudited pro forma financial information for the years ended December 31, 2015 and 2014, gives effect to the Transactions as if they had occurred on January 1, 2013. The unaudited pro forma financial information has been included for comparative purposes only and is not necessary indicative of the results that might have occurred had the Transactions taken place on the dates indicated and is not intended to be a projection of future events. The pro forma adjustments for the periods presented consist of: (i) adjustments to combine the Azure System, Azure System Predecessor and the Partnership's historical results of operations for the periods; (ii) adjustments to interest expense to remove the previously recognized interest expense and include the interest expense associated with our Credit Agreement (see Note 9); and (iii) adjustments to depreciation and amortization expense attributable to adjustments recorded as a result of the purchase price allocation to the Partnership's assets and liabilities. The following table presents the unaudited pro forma revenues, net income (loss) and basic and diluted net income (loss) per unit information for each period:
|  | Year Ended December 31, |
In thousands, except per-unit amounts |  | 2015 |  | 2014 |
Pro forma operating revenues |  | $ | 90,453 |  | $ | 149,949 |
Pro forma net income (loss) |  | $ | (228,401) |  | $ | 18,082 |
Pro forma net income (loss) attributable to limited partners |  | $ | (220,273) |  | $ | 17,438 |
Pro forma net income (loss) per limited partner common and subordinated units - basic and diluted |  | $ | (10.85) |  | $ | 0.86 |
The pro forma net loss for the year ended December 31, 2015 includes expenses that were a direct result of the Transactions, including $4.2 million in compensation expense associated with the vesting of phantom unit awards issued under our LTIP (see Note 13), $3.9 million in employee severance related expenses attributable to those employees who were not retained by the Partnership subsequent to the Transactions and $2.6 million in transaction expenses, including advisory, audit and legal fees. These expenses were recognized by the Partnership as they were incurred during the period from January 1, 2015 to February 27, 2015 and, as a result, the consolidated financial statements presented in accordance with GAAP for the year ended December 31, 2015 do not reflect such expenses incurred as a direct result of the Transactions. In addition, the pro forma net loss for the year ended December 31, 2015 includes the full impairment of goodwill of $215.8 million (see Note 8). Contribution of the ETG System On August 6, 2015, in connection with the execution of the Contribution Agreement, Azure contributed the ETG System to the Partnership in consideration for $80.0 million in cash and the issuance of 255,319 common units. In connection with the Contribution Agreement, we entered into a Gas Gathering Agreement with TGG. The Contribution Agreement contains customary representations and warranties, indemnification obligations and covenants by the parties, and provides that the Partnership’s acquisition of the ETG System was effective on July 1, 2015. The contribution of the ETG System by Azure to the Partnership was determined to be a transaction between entities under common control for financial reporting purposes. Because the contribution of the ETG System is considered to be a transaction amongst entities under common control, the ETG System is reflected at Azure's historical cost and the difference between that historical cost and the purchase price is recorded as an adjustment to partners' capital. The assets acquired and liabilities assumed of the ETG System have been reflected at their historical net carrying value, which is less than the consideration paid for the business. The excess of the consideration paid over the historical carrying value was $6.8 million and is reflected as a decrease to Partners' Capital in the consolidated statement of partners' capital. Additionally, the Partnership did not assume certain liabilities of the ETG System as part of the Contribution Agreement and, as a result, the amount of such liabilities not assumed is considered a deemed contribution within the consolidated statement of partners' capital. The Partnership incurred $0.7 million in transaction related expenses associated with the contribution of the ETG System for the year ended December 31, 2015. The following table summarizes the excess of consideration over the historical net carrying value of the assets acquired and liabilities assumed and net decrease to the statement of partners' capital at August 6, 2015 (in thousands):
Consideration for the ETG System: |  |  |  |
Cash |  | $ | 80,000 |
Issuance of 255,319 common units |  |  | 3,000 |
Total consideration |  |  | 83,000 |
Assets acquired and liabilities assumed: |  |  |  |
Current assets |  |  | 11 |
Property, plant and equipment, net |  |  | 87,594 |
Deferred tax asset |  |  | 211 |
Other long-term liabilities |  |  | (11,625) |
Net assets acquired |  |  | 76,191 |
Excess of consideration over net assets acquired |  | $ | 6,809 |
Gas Gathering Agreement Pursuant to the terms of the Gas Gathering Agreement, the Partnership has agreed to provide gathering services to TGG on a priority basis for quantities of gas designated by TGG. AME, which is the sole member of the General Partner, has guaranteed TGG's obligations under the Gas Gathering Agreement.

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