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Related Party Transactions
6 Months Ended
Jun. 30, 2020
Related Party Transactions [Abstract]  
Related Party Transactions

 


Note 4.  Related Party Transactions

Commercial Agreements

Effective January 1, 2014, we entered into long-term fee-based (i) gas gathering, (ii) crude oil gathering, (iii) gas processing and fractionation, (iv) storage services, and (v) terminal and export services agreements with certain subsidiaries of Hess. Effective January 1, 2019, in connection with the Hess Water Services Acquisition, we entered into long-term fee-based water services agreements with certain subsidiaries of Hess. Under our commercial agreements, we provide gathering, compression, processing, fractionation, storage, terminaling, loading, transportation and produced water disposal services to Hess, for which we receive a fee per barrel of crude oil, barrel of water, Mcf of natural gas, or Mcf equivalent of NGLs, as applicable, delivered during each month, and Hess is obligated to provide us with minimum volumes of crude oil, water, natural gas and NGLs. These agreements also include inflation escalators and fee recalculation mechanisms that allow fees to be adjusted annually.

For the three and six months ended June 30, 2020 and 2019, approximately 100% of our revenues were attributable to our fee‑based commercial agreements with Hess, including revenues from third‑party volumes contracted with Hess and delivered to us under these agreements. We retain control of our assets and the flow of volumes based on available capacity within our integrated gathering, processing and terminaling systems. Together with Hess, we are pursuing strategic relationships with third‑party producers and other midstream companies with operations in the Bakken in order to maximize our utilization rates.

Revenues from contracts with customers on a disaggregated basis are as follows:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and gas gathering services

 

$

113.1

 

 

$

80.2

 

 

$

230.5

 

 

$

159.2

 

Water gathering and disposal services

 

 

23.3

 

 

 

17.5

 

 

 

47.5

 

 

 

32.9

 

Processing and storage services

 

 

86.8

 

 

 

67.5

 

 

 

183.6

 

 

 

133.8

 

Terminaling and export services

 

 

46.6

 

 

 

25.0

 

 

 

98.8

 

 

 

53.7

 

Total revenues from contracts with customers

 

$

269.8

 

 

$

190.2

 

 

$

560.4

 

 

$

379.6

 

Other income

 

 

-

 

 

 

0.1

 

 

 

0.2

 

 

 

0.3

 

Total revenues

 

$

269.8

 

 

$

190.3

 

 

$

560.6

 

 

$

379.9

 

During the three and six months ended June 30, 2020, we earned $3.1 million and $4.1 million, respectively, of minimum volume shortfall fee payments, compared with $0.7 million and $3.5 million for the three and six months ended June 30, 2019, respectively.

The following table presents third-party pass-through costs for which we recognize revenues in an amount equal to the costs. These third-party costs are included in Operating and maintenance expenses in the accompanying unaudited consolidated statements of operations.

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rail transportation costs

 

 

21.1

 

 

 

4.3

 

 

 

44.3

 

 

 

12.1

 

Produced water trucking and disposal costs

 

 

15.0

 

 

 

14.0

 

 

 

31.6

 

 

 

25.7

 

Electricity fees

 

 

9.9

 

 

 

8.1

 

 

 

19.4

 

 

 

14.9

 

Total

 

$

46.0

 

 

$

26.4

 

 

$

95.3

 

 

$

52.7

 

 

Omnibus and Employee Secondment Agreements

Under our omnibus and employee secondment agreements, Hess provides substantial operational and administrative services to us in support of our assets and operations. For the three and six months ended June 30, 2020 and 2019, we had the following charges from Hess. The classification of these charges between operating and maintenance expenses and general and administrative expenses is based on the fundamental nature of the services being performed for our operations.

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating and maintenance expenses

 

$

15.3

 

 

$

12.3

 

 

$

30.8

 

 

$

22.9

 

General and administrative expenses

 

 

3.5

 

 

 

3.2

 

 

 

7.3

 

 

 

6.8

 

Total

 

$

18.8

 

 

$

15.5

 

 

$

38.1

 

 

$

29.7

 

 

LM4 Agreements

Under our gas processing agreement with Little Missouri 4 (“LM4”), a 50/50 joint venture with Targa Resources Corp., we pay a processing fee per Mcf of natural gas and reimburse LM4 for our proportionate share of electricity costs. During the three and six months ended June 30, 2020, we incurred $5.0 million and $11.4 million, respectively, of expenses under the LM4 gas processing agreement, which are included in Operating and maintenance expenses in the accompanying consolidated statements of operations. In addition, during the three and six months ended June 30, 2020, we recognized $0.9 million and $3.6 million, respectively, of earnings from equity investments, based on our ownership interest in LM4, as presented in our accompanying consolidated statements of operations, and received $3.8 million of distributions, as presented in our accompanying consolidated statements of cash flows. We did not incur any expenses under the LM4 gas processing agreement and did not have any earnings from equity investments during the three and six months ended June 30, 2019.