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TRANSACTIONS WITH AFFILIATES | 3 Months Ended
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Mar. 31, 2016
TRANSACTIONS WITH AFFILIATES |
TRANSACTIONS WITH AFFILIATES | 1 1. TRANSACTIONS WITH AFFILIATES From time to time, we enter into transactions with affiliated entities that are deemed affiliated entities because of common ownership. These affiliated entities include: (i) Azure and its owners, affiliates and subsidiaries, including our General Partner; and (ii) NuDevco and its affiliates and subsidiaries, including AES. Revenues and cost of natural gas and NGLs The Partnership gathering and processing segment sells natural gas to its affiliates throughout the course of business. These sales accounted for $1.0 million for the three months ended March 31, 201 6. F or the three months ended March 31, 201 5, affiliate natural gas sales resulted in a gas imbalance owed to our customers of $18,000. The Partnership’s results of operations also included the related cost of natural gas, NGLs and condensate in the amount of $0.5 million for the three months ended March 3 1, 2015. All of these costs were attributable to AES. There were no related affiliate cost of natural gas for the three months ended March 31, 2016. The Partnership provides gathering, transportation, and processing services to its affiliates. Specifically, the Partnership ha d a fee-based commercial agreement with AES, requiring a minimum monthly volume commitment of 80 MMcf/d. This agreement, w hich was terminated in the first quarter of 2016, contributed to gathering, processing, transloading, and other fee revenue of $2.1 million for the period March 1, 2015 to March 31, 2015. See Note 1 “Associated Energy Services (“AES”) Contract Terminations”. The Partnership’s gathering and processing segment provided gathering, transportation, and processing services to its other affiliates in the amount of $0.3 million for the three months ended March 31, 2016 and $0.1 million for the three months ended March 31, 201 5. Also included in gathering, processing, transloading and other fee revenue are transloading services provided to AES. These services accounted for $1.4 million in revenue for the period March 1, 2015 to March 31, 2015. These contracts were terminated in the first quarter of 2016. See Note 1 “Associated Energy Services (“AES”) Contract Terminations”. Accounts receivable from and accounts payable to affiliates The Partnership had receivables due from these affiliates in the amount of $0.4 million and $5.1 million at March 31, 2015 and December 31, 201 5. Receivables due from affiliates primarily related to the Partnership’s fee-based gathering and processing agreements and, for the three months ended March 31, 2015, the Partnership's fee-based transloading services agreement with AES. Payables to affiliates were $0.3 million at March 31, 2016 and $0.1 million at December 31, 2015. Payables to affiliates primarily related to settlements under the Partnership's gathering and processing agreements and reimbursement to an affiliate of NuDevco for certain general and administrative and operating costs under the Existing Omnibus Agreement with NuDevco. Cost Allocations and Termination of Existing Omnibus Agreement and Entering into New Omnibus Agreement In connection with the Transactions, the Partnership terminated its Original Omnibus Agreement, dated July 31, 2013, by and between NuDevco and its affiliates, the General Partner and the Partnership, together with the General Partner, the (“Partnership Parties”). NuDevco and its affiliates released each of the Partnership Parties, and each of the Partnership Parties released NuDevco and its affiliates, from any claims or liabilities arising from or under the terms of the Original Omnibus Agreement other than any obligations under the Transaction Agreement. Also in connection with the Transactions, the Partnership entered into the New Omnibus Agreement with the General Partner and Azure, pursuant to which, among other things:
| · |  | Azure will provide Services on behalf of the General Partner for the benefit of the Partnership and its subsidiaries;
| · |  | The Partnership is obligated to reimburse Azure and its affiliates for costs and expenses incurred by Azure and its affiliates in providing the Services on behalf of the Partnership;
| · |  | The General Partner or Azure may at any time temporarily or permanently exclude any particular Service from the scope of the New Omnibus Agreement upon 90 days’ notice;
| · |  | The Partnership or Azure may terminate the New Omnibus Agreement in the event that Azure ceases to control the General Partner. Azure may also terminate the New Omnibus Agreement if the General Partner is removed without cause and the units held by the General Partner were not voted in favor of the removal; and
| · |  | The Partnership will have a right of first offer on any proposed transfer of any assets owned by Azure or its subsidiaries.
Expenses under the New Omnibus Agreement, which are included within general and administrative expenses within the condensed consolidated statements of operations, were $1.3 million for the three months ended March 31, 2016 and $0.4 million for the period March 1, 2015 to March 31, 2015. These expenses are reimbursed by the Partnership to Azure and its affiliates. In addition, Azure and its affiliates plan to allocate certain overhead costs associated with general and administrative services, including facilities, information services, human resources and other support departments to the Partnership. Where costs incurred on the Partnership’s behalf could not be determined by specific identification, the costs were primarily allocated to the Partnership based on percentage of departmental usage, wages or headcount. The Partnership believes these allocations are a reasonable reflection of the utilization of services provided. However, the allocations may not fully reflect the expenses that would have been incurred had the Partnership been a stand-alone company during the periods presented. Substantially all of the Partnership’s senior management are employed by Azure. As a result, Azure's consolidated general and administrative expenses have been allocated to the Azure System for the period from November 15, 2013 up to the Transaction Date. The allocated general and administrative expenses from Azure were $1.7 million for the period January 1, 2015 to March 1, 2015. The allocated general and administrative expenses from the Azure ETG System were $0.2 million for the period March 1, 2015 to March 3 1, 2015. This allocation represents Azure’s best estimate of the general and administrative expenses incurred on behalf of the Azure System and was determined after consideration of multiple operating metrics, including dedicated operating personnel, pipeline mileage and system throughput as a percentage of each total consolidated Azure’s operating metric. Management believes these allocations reasonably reflect the utilization of services provided and benefits received. The allocated costs are included within general and administrative expense in the statements of operations. See Note 8 for further discussion of the long-term debt and interest expense allocated to the Azure System.

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39603-107864 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39622-107864 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39678-107864 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39691-107864 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(k)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Paragraph b -Article 3A + Details
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