Martin Midstream Partners (MMLP) 10-K/A 2016 FY Annual report (amended)

Exhibit 99.1

West Texas LPG Pipeline Limited Partnership

Financial Statements

The years ended December 31, 2016 (unaudited) and 2015,

the period May 14, 2014 through

November 28, 2014, (unaudited),

and the period from November 29, 2014

through December 31, 2014 (unaudited)

Independent Auditor’s Report

To the Partnership Committee of West Texas LPG Pipeline Limited Partnership:

We have audited the accompanying financial statements of West Texas LPG Pipeline Limited Partnership, which comprise the balance sheet as of December 31, 2015, and the related statements of operations, changes in partners’ capital and cash flows for the year then ended.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Partnership’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of West Texas LPG Pipeline Limited Partnership as of December 31, 2015, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ PricewaterhouseCoopers LLP

Tulsa, Oklahoma

March 30, 2016

West Texas LPG Pipeline Limited Partnership

Balance Sheets

(Dollars in thousands)

	December 31,
	2016			2015
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	3,157		$	5,298
Trade accounts receivable	13,039			8,870
Materials and supplies inventories	1,947			2,006
Other current assets	42			—
Total current assets	18,185			16,174
Property and equipment	822,380			817,948
Accumulated depreciation	(28,466		)	(14,780		)
Property, plant and equipment, net	793,914			803,168
Other assets	365			—
Total assets	$	812,464		$	819,342
Liabilities and Partners' Capital
Current liabilities
Accounts payable	$	12,956		$	4,673
Taxes payable	2,170			2,082
Other current liabilities	91			310
Total current liabilities	15,217			7,065
Environmental reserve	6,841			8,254
Total liabilities	22,058			15,319
Commitments and contingencies
Partners' capital	790,406			804,023
Total liabilities and partners' capital	$	812,464		$	819,342

See accompanying notes to the financial statements.

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West Texas LPG Pipeline Limited Partnership

Statements of Operations

(Dollars in thousands)

	Successor								Predecessor
	Year Ended December 31, 2016			Year Ended December 31, 2015			Period from November 29, 2014 through December 31, 2014		Period from May 14, 2014 through November 28, 2014
	(unaudited)						(unaudited)		(unaudited)
Revenue	$	88,467		$	100,708		$	8,629	$	52,692
Costs and expenses
Cost of services (exclusive of items shown separately below)	11,401			10,036			823		7,242
Operations and maintenance	36,824			28,217			2,291		21,399
Depreciation	13,686			13,573			1,207		2,965
Taxes other than income	2,651			2,579			179		1,497
Total costs and expenses	64,562			54,405			4,500		33,103
Other income (expense), net	(22		)	(9		)	—		—
Net income	23,883			46,294			4,129		19,589

See accompanying notes to the financial statements.

4

West Texas LPG Pipeline Limited Partnership

Statements of Changes in Partners' Capital

(Dollars in thousands)

	Chevron Pipeline Company			Raven Ridge Pipe Line Company			Martin Midstream Holdings II, LLC			Martin Midstream Holdings, LLC			Total
Predecessor
Balances - May 14, 2014 (unaudited)	$	151,228		$	1,527		$	37,807		$	382		$	190,944
Net income (unaudited)	15,514			157			3,879			39			19,589
Distributions to partners (unaudited)	(11,088		)	(112		)	(2,772		)	(28		)	(14,000		)
Balances - November 28, 2014 (unaudited)	$	155,654		$	1,572		$	38,914		$	393		$	196,533
	ONEOK Permian NGL Pipeline LP, LLC			ONEOK Permian NGL Pipeline GP, LLC			Martin Midstream Holdings II, LLC			Martin Midstream Holdings, LLC			Total
Successor
Balances - November 29, 2014 (unaudited)	$	649,123		$	6,556		$	162,281		$	1,640		$	819,600
Net income (unaudited)	3,270			33			818			8			4,129
Distributions to partners (unaudited)	(7,920		)	(80		)	(1,980		)	(20		)	(10,000		)
Balances - December 31, 2014 (unaudited)	644,473			6,509			161,119			1,628			813,729
Net income	36,665			371			9,166			92			46,294
Distributions to partners	(44,352		)	(448		)	(11,088		)	(112		)	(56,000		)
Balances - December 31, 2015	$	636,786		$	6,432		$	159,197		$	1,608		$	804,023
Net income (unaudited)	18,915			191			4,729			48			23,883
Distributions to partners (unaudited)	(29,700		)	(300		)	(7,425		)	(75		)	(37,500		)
Balances - December 31, 2016 (unaudited)	$	626,001		$	6,323		$	156,501		$	1,581		$	790,406

See accompanying notes to the financial statements.

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West Texas LPG Pipeline Limited Partnership

Statements of Cash Flows

(Dollars in thousands)

	Successor									Predecessor
	Year Ended December 31, 2016			Year Ended December 31, 2015			November 29, 2014 through December 31, 2014			Period from May 14, 2014 through November 28, 2014
	(unaudited)						(unaudited)			(unaudited)
Cash flows from operating activities:
Net income	$	23,883		$	46,294		$	4,129		$	19,589
Adjustments to reconcile net income and net cash provided by operating activities
Depreciation	13,686			13,573			1,207			2,965
Change in assets and liabilities
Accounts receivable	(4,169		)	2,394			(1,685		)	(4,934		)
Materials and supplies inventories	59			147			—			19
Other current assets	(42		)	1,046			112			(348		)
Other assets	(365		)	—			—			—
Accounts payable	7,797			(5,845		)	(817		)	(245		)
Taxes other than income	88			191			34			1,083
Other current liabilities	(219		)	310			—			—
Environmental reserve	(1,413		)	(581		)	—			—
Net cash provided by operating activities	39,305			57,529			2,980			18,129
Cash flows from investing activities:
Payments for property and equipment	(3,946		)	(2,370		)	(627		)	(3,160		)
Net cash used in investing activities	(3,946		)	(2,370		)	(627		)	(3,160		)
Cash flows from financing activities:
Distributions to partners	(37,500		)	(56,000		)	(10,000		)	(14,000		)
Net cash used in financing activities	(37,500		)	(56,000		)	(10,000		)	(14,000		)
Net increase (decrease) in cash and cash equivalents	(2,141		)	(841		)	(7,647		)	969
Cash and cash equivalents at beginning of period	5,298			6,139			13,786			12,817
Cash and cash equivalents at end of period	$	3,157		$	5,298		$	6,139		$	13,786

See accompanying notes to the financial statements.

6

West Texas LPG Pipeline Limited Partnership

Notes to Financial Statements

(Dollars in thousands, except where otherwise indicated)

(1) Organization and Basis of Presentation

West Texas LPG Pipeline Limited Partnership (the “Partnership” or “WTLPG”) is a Texas limited partnership. The Partnership was formed in 1999 and owns an approximately 2,300 mile common-carrier pipeline system that transports natural gas liquids (NGLs) from New Mexico and Texas to Mont Belvieu, Texas for fractionation. As of December 31, 2016, the partners’ capital interests were owned by the following:

Owner	Interest		Interest Type
ONEOK Permian NGL Pipeline GP, L.L.C	0.8	%	General Partner
ONEOK Permian NGL Pipeline LP, L.L.C.	79.2	%	Limited Partner
Martin Midstream NGL Holdings, LLC	0.2	%	General Partner
Martin Midstream NGL Holdings II, LLC	19.8	%	Limited Partner
	100	%

ONEOK Permian NGL Pipeline GP, L.L.C. and ONEOK Permian NGL Pipeline LP, L.L.C. are wholly owned subsidiaries of ONEOK Partners, L.P. (“ONEOK Partners”). A subsidiary of ONEOK Partners is also the pipeline operator (“Operator”). Martin Midstream NGL Holdings, LLC and Martin Midstream NGL Holdings II, LLC are wholly owned subsidiaries of Martin Midstream Partners, L.P. (“Martin”).

The operating agreement among the partners provides that net income and distributions are to be allocated among the partner interests in proportion to their respective capital interests. Partners’ liabilities are limited to the amount of capital contributed.

The limited partnership agreement of WTLPG provides that distributions to the partners are to be made on a pro rata basis according to each partner’s ownership interest. Cash distributions to the partners are currently declared and paid by WTLPG each calendar quarter. Any changes to, or suspension of, the cash distributions from WTLPG requires the approval of a minimum of 90 percent of the ownership interest and a minimum of two general partners of WTLPG. Cash distributions are equal to 100 percent of distributable cash as defined in the limited partnership agreement of WTLPG.

On May 14, 2014, Martin acquired its 20% interest in the Partnership from a subsidiary of Atlas Pipeline Partners L.P. On November 29, 2014, ONEOK Partners acquired its 80% interest in the Partnership from affiliates of Chevron Pipe Line Company (“Chevron”). As a result of the acquisition by ONEOK Partners, we elected to apply “push-down” accounting which required the Partnership's assets and liabilities to be adjusted to fair value on the acquisition closing date. The Partnership’s assets and liabilities were recorded using a different basis than what was previously recorded which impacts the comparability of the financial statements of Partnership after the acquisition with the financial statements prior to the acquisition. As a result, the fiscal year 2014 is presented as the predecessor period from May 14, 2014 to November 28, 2014, and the successor period from November 29, 2014 through December 31, 2014.

If the acquisition by ONEOK Partners had occurred as of May 14, 2014, depreciation expense would have increased by $4,369 for the 2014 period presented. No other adjustments would be needed in order for all periods presented to be comparable.

The Partnership determined the fair values of its assets and liabilities with the assistance of a third-party valuation firm. The fair values of the Partnership's current assets and current liabilities were assumed to approximate their carrying values. The fair values of the Partnership's long-lived tangible assets were determined utilizing observable market inputs where available, discounted future projected net cash flows to present value, or estimated replacement cost adjusted for a usage or obsolescence factor. The fair values of the Partnership's long-term liabilities were determined utilizing observable market inputs where available or estimated based on their current carrying values. The Partnership used the most applicable valuation approach for each asset category based upon availability of comparative market information as well as the nature of the asset.

The following table summarizes the allocation of the fair value of the partners’ capital balances to the assets and liabilities of the Partnership as of the acquisition date:

7

West Texas LPG Pipeline Limited Partnership

Notes to Financial Statements

(Dollars in thousands, except where otherwise indicated)

	November 29, 2014
	(unaudited)
Cash	$	13,786
Accounts receivable	9,579
Other current assets	3,311
Property and equipment	814,540
Total assets	841,216
Accounts payable	10,924
Other current liabilities	1,857
Environmental reserve	8,835
Total liabilities	21,616
Net assets	$	819,600

(2) Significant Accounting Policies

(a)Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with accounting principles generally accepted in the United States.  Actual results could differ from those estimates.

(b)Revenue Recognition

The Partnership’s revenue is derived from fees collected for transporting NGLs. Transportation fees charged to shippers are based on either tariffs regulated by governmental agencies, including the Federal Energy Regulatory Commission ("FERC") and the Railroad Commission of Texas (“RRC”), or contractual arrangements.  Our tariffs specify the maximum rates we may charge our customers and the general terms and conditions for NGL transportation service on our pipelines. Revenue is recognized when transportation services are provided.

(c)Cash and Cash Equivalents

The Partnership considers all highly liquid cash investments with maturities of three months or less at the time of purchase to be cash equivalents.

(d)Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation.  Our property and equipment are depreciated using the straight-line method over their estimated useful lives. We periodically conduct depreciation studies to assess the economic lives of our assets.  These depreciation studies are completed as a part of our rate proceedings, and the changes in economic lives, if applicable, are implemented prospectively.  

Property and equipment on our Balance Sheets includes construction work in process for capital projects that have not yet been placed in service and therefore are not being depreciated. Assets are transferred out of construction work in process when they are substantially complete and ready for their intended use.

Maintenance and repairs are charged directly to expense. When an asset is retired or sold, its cost and related accumulated depreciation are removed from the accounts and the difference between the net book value of the asset and proceeds from the disposition is recognized as a gain or loss.

8

West Texas LPG Pipeline Limited Partnership

Notes to Financial Statements

(Dollars in thousands, except where otherwise indicated)

Property and equipment consists of the following:

		As of December 31,
	Useful Life	2016			2015
		(Unaudited)
Gathering lines and related equipment	20-88	$	808,519		$	806,725
General plant and other	71-80	7,811			7,815
Construction work in process		6,050			3,408
Property and equipment		822,380			817,948
Accumulated depreciation		(28,466		)	(14,780		)
Property and equipment, net		$	793,914		$	803,168

Additions to property and equipment included in accounts payable at December 31, 2016 and 2015 were $486 (unaudited) and $0, respectively.

(e)Impairment of Long-Lived Assets

In accordance with ASC 360-10, long-lived assets, such as property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.  Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and would no longer be depreciated.  The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. We determined that there were no asset impairments in 2016, 2015 or 2014.

(f)Asset Retirement Obligations

Asset retirement obligations represent legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the asset.  We are not able to estimate reasonably the fair value of the asset retirement obligations for our assets because the settlement dates are indeterminable given the expected continued use of the assets with proper maintenance. We expect our pipeline assets, for which we are unable to estimate reasonably the fair value of the asset retirement obligation, will continue in operation as long as supply and demand for NGLs exists. Based on the widespread use of NGLs by the petrochemical industry, we expect supply and demand to exist for the foreseeable future.

(g)Fair Value Measurements and Financial Instruments

We use a valuation framework based upon inputs that market participants use in pricing certain assets and liabilities. These inputs are classified into two categories: observable inputs and unobservable inputs. Observable inputs represent market data obtained from independent sources. Unobservable inputs represent our own market assumptions. Unobservable inputs are used only if observable inputs are unavailable or not reasonably available without undue cost and effort. The two types of inputs are further prioritized into the following hierarchy:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that reflect the entity's own assumptions and are not corroborated by market data.

We classify the fair value of an asset or liability based on the lowest level of input significant to its measurement. A fair value initially reported as Level 3 will be subsequently reported as Level 2 if the unobservable inputs become

9

West Texas LPG Pipeline Limited Partnership

Notes to Financial Statements

(Dollars in thousands, except where otherwise indicated)

inconsequential to its measurement, or corroborating market data becomes available. Asset and liability fair values initially reported as Level 2 will be subsequently reported as Level 3 if corroborating market data becomes unavailable.

Our financial instruments consist of cash and cash equivalents, accounts receivable, and accounts payable. The carrying amounts of financial instruments approximate fair value due to their short maturities. Our cash and cash equivalents are comprised of bank and money market accounts and are classified as Level 1.

(h)Operating and Maintenance Expenses

Operating and maintenance expenses are incurred by the Operator and charged to us for the cost of personnel that operate the pipeline and other operating costs.  Where costs are incurred specifically on our behalf, the costs are billed directly to us by the Operator. In other situations, the costs may be allocated to us through a variety of methods, depending upon the nature of the expense and activities. Under our operating agreement, we are required to reimburse the Operator for such operating expenses.

(i)Environmental Reserves

Our policy is to accrue for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable.  We routinely conduct reviews of potential environmental issues and claims that could impact our assets or operations. These reviews assist us in identifying environmental issues and estimating the costs and timing of remediation efforts. In making environmental liability estimations, we consider the material effect of environmental compliance, pending legal actions against us and potential third-party liability claims. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change.  These revisions are reflected in our income in the period in which they are probable and can be reasonably estimated. Estimated future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.

(j)Accounts Receivable and Allowance for Doubtful Accounts.

Trade accounts receivable are recorded at the invoiced amount and do not bear interest.  We assess collectability at the inception of an arrangement based upon credit ratings and prior collections history. In general, we conduct business with customers with whom we have a long collection history. As a result, we have not experienced significant credit losses nor has our revenue recognition been impacted due to assessments of collectability. We have not recorded an allowance for doubtful accounts as of December 31, 2016 or 2015, as all accounts receivable were determined to be collectible.

(k)Transportation Imbalances

In the course of transporting NGLs for others, we may receive for redelivery different quantities of NGLs than the quantities we ultimately redeliver. Due to changes in our tariff in 2016, we record these differences as transportation and exchange imbalance receivables or payables that are subject to cash-out provisions. Imbalance receivables are included in accounts receivable, and imbalance payables are included in accounts payable on the consolidated balance sheets at current market prices in effect for the reporting period of the outstanding imbalances. As of December 31 2016, we had imbalance receivables and payables totaling $6,066, respectively (unaudited).

(l)Concentration of Credit Risk

Substantially all of our accounts receivable at December 31, 2016 and 2015, results from transportation fees earned from companies in the oil and gas industry and transportation imbalances. This concentration of customers may impact our overall credit risk, either positively or negatively, in that these entities may be similarly affected by industry-wide changes in economic or other conditions. Such receivables are generally not collateralized. However, we perform credit evaluations on all our customers to minimize exposure to credit risk. During the years ended December 31, 2016 (unaudited) and 2015, the period May 14, 2014 through November 28, 2014(unaudited), and the period from November 29, 2014 through December 31, 2014 (unaudited), credit losses were not significant.

10

West Texas LPG Pipeline Limited Partnership

Notes to Financial Statements

(Dollars in thousands, except where otherwise indicated)

As of December 31, 2016, accounts receivable includes receivables from two customers representing 45.1% (unaudited) and 15.1% (unaudited) of total accounts receivable. As of December 31, 2015, accounts receivable includes receivables from two customers representing 27.4% and 12.4% of total accounts receivable.

For the year ended December 31, 2016, revenue includes transportation fees received from two customers representing 17.7% (unaudited) and 12.2% (unaudited) of total revenue, respectively. For the year ended December 31, 2015, revenue includes transportation fees received from two customers representing 32.0% and 12.7% of total revenue, respectively. For the period from May 14, 2014 through November 28, 2014, revenue includes transportation fees received from three customers representing 29.2% (unaudited), 13.0% (unaudited) and 13.0% (unaudited) of total revenue, respectively. For the period from November 29, 2014 through December 31, 2014, revenue includes transportation fees received from two customers representing 31.3% (unaudited) and 14.0% (unaudited) of total revenue, respectively.

(m) Income Taxes

We are a limited partnership for federal and state income taxes. Income taxes are the responsibility of our members and, with the exception of the Texas franchise tax, are not reflected in our financial statements. 

(n)Materials and Supplies Inventory

The cost of materials, supplies and other inventories is principally determined using the average-cost method.

(o)Subsequent Events

We have evaluated subsequent events through March 31, 2017, the date our financial statements were available, and we believe all required subsequent events disclosures have been made.

(p)Recent Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. This ASU is intended to clarify the presentation of cash receipts and payments in specific situations. The amendments in this ASU are effective for financial statements issued for annual periods beginning after December 15, 2017. We do not anticipate that ASU 2016-15 will have a material effect on our financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases.  This ASU amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief.  We are evaluating the effect that ASU 2016-02 will have on our financial statements and related disclosures.

In July 2015, the FASB issued ASU No. 2015-11, Inventory: Simplifying the Measurement of Inventory, which applies only to inventory for which cost is determined by methods other than last-in, first-out and the retail inventory method. This includes inventory that is measured using first-in, first-out or average cost. Inventory within the scope of this standard is required to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The new standard was effective on January 1, 2017. ASU 2015-11 did not have a material effect on our financial statements and related disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The standard outlines the principles an entity must apply to measure and recognize revenue for entities that enter into contracts to provide goods or services to their customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for WTLPG on January 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method. We are currently determining the overall impacts that ASU 2014-09 will have on our tariffs, contract portfolio and financial statements, and anticipate testing new controls and processes designed to comply with ASU 2014-09 throughout 2017 to permit adoption by January 1, 2018. Our approach will include performing a detailed review of all tariffs and other contracts and comparing historical accounting policies and practices to the new standard.

11

West Texas LPG Pipeline Limited Partnership

Notes to Financial Statements

(Dollars in thousands, except where otherwise indicated)

(3) Related Party Transactions

We provide transportation services to affiliates of our partners. Affiliate services are recorded on the same basis as services to unaffiliated customers.

We do not have any employees; therefore, the Operator’s employees support, and maintain our assets as provided by the terms of the operating agreement. We reimburse the Operator for direct costs of all compensation, benefits expenses, employer taxes and other employer expenses for these employees. We also reimburse the Operator for direct third party costs incurred on our behalf such as costs for materials, supplies, and other charges. Pursuant to the operating agreement, we pay a management fee, which is reflected in operations and maintenance expenses in our Statements of Operations, to the Operator for administrative costs associated with operating our pipelines.

We also lease an approximate 300 mile pipeline, the Mesquite Pipeline, from affiliates of ONEOK Partners (previously affiliates of Chevron).

The following table sets forth the transactions with related parties for the periods indicated:

	Successor						Predecessor
	Year ended December 31, 2016		Year ended December 31, 2015		Period from November 29, 2014 to December 31, 2014		Period from May 14, 2014 to November 28, 2014
	(unaudited)				(unaudited)		(unaudited)
Revenues	$	7,606	$	6,400	$	374	$	5,192
Expenses:
Operating costs	$	11,476	$	11,687	$	758	$	4,657
Administrative costs	5,546		5,454		433		2,651
Total Expenses	$	17,022	$	17,141	$	1,191	$	7,308

As of December 31, 2016 and 2015, we had accounts payable to the Operator of $11,038 (unaudited) and $4,417, respectively, related to management fees and reimbursements of expenses. As of December 31, 2016 and 2015, we had accounts receivable from affiliates of ONEOK Partners of $5,886 (unaudited) and $715, respectively, related to amounts due for transportation services provided and imbalance receivables.

(4) Operating Leases

We have numerous non-cancelable operating leases primarily for the Mesquite Pipeline and other equipment. The leases generally provide that all expenses related to the equipment are to be paid by the lessee. We expect to renew or enter into similar leasing arrangements for similar equipment upon the expiration of the current lease agreements.

12

West Texas LPG Pipeline Limited Partnership

Notes to Financial Statements

(Dollars in thousands, except where otherwise indicated)

Our future minimum lease obligations as of December 31, 2016 (unaudited) consist of the following:

2017	$	2,575
2018	2,539
2019	2,525
2020	2,212
2021	881
Thereafter	—
Total	$	10,732

Lease expense for operating leases for the years ended December 31, 2016 and 2015, and the periods from May 14, 2014 through November 28, 2014 and November 29, 2014, through December 31, 2014 was $7,683 (unaudited), $2,828, $1,423 (unaudited) and $241 (unaudited), respectively.

(5) Commitments and Contingencies

2015 Rate Complaints - Certain shippers filed complaints with the RRC challenging the increased rates West Texas LPG implemented effective July 1, 2015. Complaints request that the rate increase be suspended until the RRC has determined appropriate new rates. On March 8, 2016, the RRC issued an order directing that WTLPG’s rates “in effect prior to July 1, 2015, are the lawful rates for the duration of this docket unless changed by Commission order.”

The RRC indicated that WTLPG’s rates should be reviewed on a market basis, without consideration of cost of service, if market information is available. However, the RRC has also directed that the presentation of market evidence and any cost of service evidence should be heard in a single proceeding and not in a bifurcated proceeding. The hearing is scheduled to commence on March 27, 2017.

Navarro County, TX Landowner Claims Against WTLPG - In December 2015, ONEOK Permian NGL Operating Company, L.L.C. as Operator received a letter on behalf of five landowners in Navarro County, TX. The letter, which was also addressed to another pipeline operator, claims that the copper piping in the landowners’ homes was damaged by anodic corrosion caused by rectifiers owned and operated by WTLPG and the other pipeline operator, respectively. In November 2016, we settled the claims alleged against WTLPG. The amount we paid to settle these cases is not material to our results of operations, financial position or cash flows and was paid with cash on hand.

Occidental Energy Marketing, Inc. v. WTLPG - On December 19, 2014, Occidental Energy Marketing, Inc. (Oxy) filed a lawsuit against WTLPG in state court in Houston, Texas asserting breach of contract and related claims arising from allegations that during a period from 2010 through 2014, WTLPG failed to redeliver approximately 11.7 million gallons of product received by WTLPG from Oxy. Oxy asserts approximately $11,000 in damages. In August 2016, the Court granted summary judgment in favor of WTLPG on all of Oxy’s claims. In January 2017, the Court entered Final Judgment in favor of WTLPG, including an award of $257 in attorneys’ fees.  Oxy filed a Notice of Appeal in January 2017. 

Because of the uncertainty surrounding the Oxy litigation, we cannot reasonably estimate a range of potential exposure at this time. However, it is reasonably possible that the ultimate resolution of this matter could result in future charges that may be material to our results of operations.

Toyce Atkinson v. WTLPG - In November 2015, an action was brought against Chevron, the former operator of WTLPG, by 55 individual plaintiffs asserting personal injuries and property damages allegedly arising from the Milford, Texas pipeline incident that occurred on November 14, 2013. The plaintiffs are seeking monetary relief in the amount of up to $1,000, exclusive of costs, prejudgment interest, and attorneys’ fees. In January 2016, the plaintiffs filed an amended petition naming WTLPG as the defendant. In June 2016, we agreed in principle to settle all of the plaintiffs’ claims for an immaterial amount.  In January 2017, all plaintiffs signed releases, and we expect the case to be formally dismissed in 2017.

Other Legal Proceedings - From time to time, we are involved in legal or administrative proceedings or claims, which arise in the ordinary course of business. While such matters always contain an element of uncertainty, we believe that matters of

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West Texas LPG Pipeline Limited Partnership

Notes to Financial Statements

(Dollars in thousands, except where otherwise indicated)

which we are aware will not individually or in the aggregate have a material adverse effect on our financial position, results of operations or cash flows.

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