Net Income Per Unit

3 Months Ended

Mar. 31, 2021

Basic net income per unit applicable to limited partners is computed by dividing limited partners' interest in net income by the weighted-average number of outstanding common units. Prior to August 13, 2020, we had more than one class of participating securities and used the two class method to calculate the net income per unit applicable to the limited partners. The classes of participating units prior to August 13, 2020 consisted of limited partner units, general partner units and IDRs. Pursuant to the IDR Restructuring Transaction, the IDRs were eliminated and the 2% general partner economic interest was converted to a non-economic general partner interest. Effective August 13, 2020, the common limited partner units are the only participating security for cash distributions. Refer to Note 8 - Equity for a discussion of the elimination of the IDRs and conversion of the 2% general partner economic interest effective August 13, 2020.

The two-class method was based on the weighted-average number of common units outstanding during the period. Basic net income per unit applicable to limited partners was computed by dividing limited partners’ interest in net income, after deducting our general partner’s 2% interest and IDRs, by the weighted-average number of outstanding common units. Our net income was allocated to our general partner and limited partners in accordance with their respective partnership percentages after giving effect to priority income allocations for IDRs, which were held by our general partner pursuant to our Prior Partnership Agreement. Earnings in excess of distributions were allocated to our general partner and limited partners based on their respective ownership interests. The IDRs were paid following the close of each quarter.

As discussed in Note 3 - Related Party Transactions, pursuant to Amendment No. 2 to the Prior Partnership Agreement, an agreement was reached for a waiver of distributions in respect of the IDRs for the GP Additional Units associated with the 5.0 million Additional Units issued in connection with the Big Spring Gathering Assets Acquisition for at least two years, through at least the distribution for the quarter ending March 31, 2022. The IDR Waiver essentially reduced the distribution made to the holders of the IDRs during this period, as the holders would not receive a share of the distribution made on the GP Additional Units. An additional waiver letter was signed that waived all of the distributions for the first quarter of 2020 on the Additional Units with respect to base distributions and the IDRs. Refer to Note 3 for additional details. Subsequently, the IDRs were eliminated in the IDR Restructuring Transaction on August 13, 2020.

Diluted net income per unit applicable to common limited partners includes the effects of potentially dilutive units on our common units. As of March 31, 2021, the only potentially dilutive units outstanding consist of unvested phantom units.

Our distributions earned with respect to a given period are declared subsequent to quarter end. Therefore, the table below represents total cash distributions applicable to the period in which the distributions are earned. The expected date of distribution for the distributions earned during the period ended March 31, 2021 is May 14, 2021. Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of net income per unit. The calculation of net income per unit is as follows (dollars in thousands, except units and per unit amounts):


	Three Months Ended March 31,
		2021		2020
Net income attributable to partners		$	36,267	$	27,796
Less: General partner's distribution (including IDRs) (1)		—		9,139
Less: Limited partners' distribution		39,968		21,739
Earnings in excess (deficit) of distributions		$	(3,701)	$	(3,082)

General partner's earnings:
Distributions (including IDRs) (1)		$	—	$	9,139
Allocation of earnings in excess (deficit) of distributions		—		(62)
Total general partner's earnings		$	—	$	9,077

Limited partners' earnings on common units:
Distributions		$	39,968	$	21,739
Allocation of earnings in excess (deficit) of distributions		(3,701)		(3,020)
Total limited partners' earnings on common units		$	36,267	$	18,719

Weighted average limited partner units outstanding:
Common units - basic		43,443,336		24,480,570
Common units - diluted		43,449,059		24,485,336

Net income per limited partner unit:
Common units - basic		$	0.83	$	0.76
Common units - diluted (2)		$	0.83	$	0.76

(1) Prior to August 13, 2020, general partner distributions (including IDRs) consisted of the 2.0% general partner interest and IDRs, which represented the right of the general partner to receive increasing percentages of quarterly distributions of available cash from operating surplus in excess of 0.43125 per unit per quarter. In connection with the IDR Restructuring Transaction on August 13, 2020, the IDRs were eliminated and the general partner interest became a non-economic general partner interest. See Note 8 for further discussion related to IDRs.

(2) There were no outstanding common units excluded from the diluted earnings per unit calculation for the three months ended March 31, 2021 and 2020.