Related Party Transactions | 3. Related Party Transactions We are a party to an omnibus agreement with Exterran Holdings, our general partner and others (as amended and/or restated, the “Omnibus Agreement”), which includes, among other things: • certain agreements not to compete between Exterran Holdings and its affiliates, on the one hand, and us and our affiliates, on the other hand; • Exterran Holdings’ obligation to provide all operational staff, corporate staff and support services reasonably necessary to operate our business and our obligation to reimburse Exterran Holdings for such services; • the terms under which we, Exterran Holdings, and our respective affiliates may transfer, exchange or lease compression equipment among one another; • the terms under which we may purchase newly-fabricated contract operations equipment from Exterran Holdings; • Exterran Holdings’ grant to us of a license to use certain intellectual property, including our logo; and • Exterran Holdings’ and our obligations to indemnify each other for certain liabilities. The Omnibus Agreement will terminate upon a change of control of Exterran GP LLC, our general partner or us, and certain provisions of the Omnibus Agreement will terminate upon a change of control of Exterran Holdings. Provisions such as non-competition and transfers of compression equipment will terminate on December 31, 2015, or on the date on which a change of control of Exterran Holdings occurs, whichever event occurs first. Provisions in the Omnibus Agreement that provided caps on our obligation to reimburse Exterran Holdings for operating and selling, general and administrative (“SG&A”) expenses terminated on December 31, 2014. Pursuant to the Omnibus Agreement, we may purchase newly-fabricated compression equipment from Exterran Holdings or its affiliates at Exterran Holdings’ cost to fabricate such equipment plus a fixed margin, which may be modified with the approval of Exterran Holdings and the conflicts committee of our board of directors. During the nine months ended September 30, 2015 and 2014 , we purchased $146.3 million and $152.6 million , respectively, of newly-fabricated compression equipment from Exterran Holdings. Transactions between us and Exterran Holdings and its affiliates are transactions between entities under common control. Under GAAP, transfers of assets and liabilities between entities under common control are to be initially recorded on the books of the receiving entity at the carrying value of the transferor. Any difference between consideration given and the carrying value of the assets or liabilities is treated as a capital distribution or contribution. As a result, the newly-fabricated compression equipment purchased during the nine months ended September 30, 2015 and 2014 was recorded in our condensed consolidated balance sheets as property, plant and equipment of $134.6 million and $138.3 million , respectively, which represents the carrying value of the Exterran Holdings’ affiliates that sold it to us, and as a distribution of equity of $11.7 million and $14.3 million , respectively, which represents the fixed margin we paid above the carrying value in accordance with the Omnibus Agreement. During the nine months ended September 30, 2015 and 2014 , Exterran Holdings contributed to us $8.1 million and $4.6 million , respectively, primarily related to the completion of overhauls on compression equipment that was exchanged with us or contributed to us and where overhauls were in progress on the date of exchange or contribution. If Exterran Holdings determines in good faith that we or Exterran Holdings’ contract operations services business need to transfer, exchange or lease compression equipment between Exterran Holdings and us, the Omnibus Agreement permits such equipment to be transferred, exchanged or leased if it will not cause us to breach any existing contracts, suffer a loss of revenue under an existing compression services contract or incur any unreimbursed costs. In consideration for such transfer, exchange or lease of compression equipment, the transferee will either (1) transfer to the transferor compression equipment equal in value to the appraised value of the compression equipment transferred to it, (2) agree to lease such compression equipment from the transferor or (3) pay the transferor an amount in cash equal to the appraised value of the compression equipment transferred to it. During the nine months ended September 30, 2015 , pursuant to the terms of the Omnibus Agreement, we transferred ownership of 349 compressor units, totaling approximately 112,800 horsepower with a net book value of approximately $54.7 million , to Exterran Holdings. In exchange, Exterran Holdings transferred ownership of 260 compressor units, totaling approximately 99,600 horsepower with a net book value of approximately $46.8 million , to us. During the nine months ended September 30, 2014 , pursuant to the terms of the Omnibus Agreement, we transferred ownership of 349 compressor units, totaling approximately 176,300 horsepower with a net book value of approximately $74.4 million , to Exterran Holdings. In exchange, Exterran Holdings transferred ownership of 354 compressor units, totaling approximately 128,800 horsepower with a net book value of approximately $63.0 million , to us. During the nine months ended September 30, 2015 and 2014 , we recorded capital distributions of approximately $7.9 million and $11.4 million , respectively, related to the differences in net book value on the exchanged compression equipment. No customer contracts were included in the transfers. Under the terms of the Omnibus Agreement, such transfers must be of equal appraised value, as defined in the Omnibus Agreement, with any difference being settled in cash. At September 30, 2015 , we had equipment on lease to Exterran Holdings. with an aggregate cost and accumulated depreciation of $0.6 million and $0.3 million , respectively. During the nine months ended September 30, 2015 and 2014 , we had revenue of $0.1 million and $0.3 million , respectively, from Exterran Holdings related to the lease of our compression equipment. During the nine months ended September 30, 2015 and 2014 , we had cost of sales of $1.5 million and $3.8 million , respectively, with Exterran Holdings related to the lease of Exterran Holdings’ compression equipment. Exterran Holdings provides all operational staff, corporate staff and support services reasonably necessary to run our business. These services may include, without limitation, operations, marketing, maintenance and repair, periodic overhauls of compression equipment, inventory management, legal, accounting, treasury, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit, taxes, facilities management, investor relations, enterprise resource planning system, training, executive, sales, business development and engineering. Exterran Holdings charges us for costs that are directly attributable to us. Costs that are indirectly attributable to us and Exterran Holdings’ other operations are allocated among Exterran Holdings’ other operations and us. The allocation methodologies vary based on the nature of the charge and have historically included, among other things, revenue and horsepower. Effective January 1, 2015, the approach has been modified to eliminate revenue as a component and to include, among other things, headcount and horsepower. The change in allocation methodologies did not have a material impact on the amount of costs allocated to us during the nine months ended September 30, 2015 . We believe that the allocation methodologies used to allocate indirect costs to us are reasonable. Under the Omnibus Agreement, our obligation to reimburse Exterran Holdings for any cost of sales that it incurred in the operation of our business and any cash SG&A expense allocated to us was capped (after taking into account any such costs we incurred and paid directly) through December 31, 2014. Cost of sales was capped at $22.50 per operating horsepower per quarter from January 1, 2014 through December 31, 2014. SG&A costs were capped at $15.0 million per quarter from January 1, 2014 through April 9, 2014 and $17.7 million per quarter from April 10, 2014 through December 31, 2014. The cost caps provided in the Omnibus Agreement terminated on December 31, 2014. Our cost of sales exceeded the cap provided in the Omnibus Agreement by $2.5 million during the nine months ended September 30, 2014 . During the three months ended September 30, 2014 , our cost of sales did not exceed the cap provided in the Omnibus Agreement. Our SG&A expenses exceeded the cap provided in the Omnibus Agreement by $2.7 million during the three months ended September 30, 2014 and by $7.7 million during the nine months ended September 30, 2014 . The excess amounts over the caps are included in the condensed consolidated statements of operations as cost of sales or SG&A expense. The cash received for the amounts over the caps has been accounted for as a capital contribution in our condensed consolidated balance sheets and condensed consolidated statements of cash flows. |