Partners' Capital | Partners' Capital and Convertible Preferred Units Our capital accounts are comprised of approximately 1.3% general partner interest and 98.7% limited partner interests as of December 31, 2015 . Our limited partners have limited rights of ownership as provided for under our Partnership Agreement and the right to participate in our distributions. Our General Partner manages our operations and participates in our distributions, including certain incentive distributions pursuant to the incentive distribution rights that are non-voting limited partner interests held by our General Partner. Pursuant to our Partnership Agreement, our General Partner participates in losses and distributions based on its interest. The General Partner's participation in the allocation of losses and distributions are not limited and therefore, such participation can result in a deficit to its respective capital account. As such, allocation of losses and distributions for previous transactions between entities under common control have resulted in a deficit to the General Partner's capital account included in our consolidated balance sheets. Prior to the conversion of the Series B Units into common units on February 1, 2016, our General Partner held and participated in the distribution on Series B Units with such distributions being made in cash or with paid-in-kind Series B Units at the election of the Partnership. The holders of Series B Units were entitled to vote along with the holders of Limited Partner common units prior to conversion. HPIP holds and participates on the distributions of Series A-1 Units with such distributions being made in paid-in-kind Series A-1 Units, cash or a combination thereof, at the election of the Board of Directors of our General Partner through the distribution for the earlier of (a) the quarter ended March 31, 2016 or (b) the time in which the Series A-1 Units are converted into common units. The Series A-1 Units are entitled to vote along with Limited Partner common unitholders and such units are currently convertible to Limited Partner common units. Series A-1 Convertible Preferred Units On April 15, 2013, the Partnership, our General Partner and AIM Midstream Holdings entered into agreements with HPIP, pursuant to which HPIP i) acquired 90% of our General Partner and all of our subordinated units from AIM Midstream Holdings and ii) contributed the High Point System and $15.0 million in cash to us in exchange for 5,142,857 Series A-1 Units issued by the Partnership as described in Note 2 "Acquisitions and Divestitures". Of the cash consideration paid by HPIP, approximately $2.5 million was used to pay certain transaction expenses of HPIP, and the remaining approximately $12.5 million was used to repay borrowings outstanding under the Partnership's former credit facility. As a result of these transactions, which were also consummated on April 15, 2013, HPIP acquired both control of our General Partner and a majority of our outstanding limited partnership interests. On April 15, 2013, our General Partner entered into the Third Amended & Restated Agreement of Limited Partnership (the "Third Amendment") of the Partnership providing for the creation and designation of the rights, preferences, terms and conditions of the Series A-1 Units. The Series A-1 Units receive distributions prior to distributions to Partnership common unitholders. The distributions to the Series A-1 Unitholders are equal to the greater of $0.50 per unit or the declared distribution to common unitholders. The Series A-1 Units may be converted into common units on a one-to-one basis, subject to customary anti-dilutive adjustments, at the option of the unitholders on or any time after January 1, 2014. As a result of the equity offering that closed on September 15, 2015, discussed below, the conversion price of the Series A Units were adjusted from $17.50 to $15.94 in accordance with the terms of the Partnership Agreement so that the holders of those units would maintain their ownership interest on an as-converted basis. Upon any liquidation and winding up of the Partnership or the sale of substantially all of the assets of the Partnership, the holders of Series A-1 Units generally will be entitled to receive, in preference to the holders of any of the Partnership's other securities, an amount equal to the sum of $15.94 multiplied by the number of Series A-1 Units owned by such holders, plus all accrued but unpaid distributions on such Series A Units. Prior to the consummation of any recapitalization, reorganization, consolidation, merger, spin-off or other business combination in which the holders of common units are to receive securities, cash or other assets (a "Partnership Event"), we are obligated to make an irrevocable written offer, subject to consummation of the Partnership Event, to each holder of Series A Units to redeem all (but not less than all) of such holder's Series A Units for a price per Series A Unit payable in cash equal to the greater of: • the sum of $15.94 and all accrued and accumulated but unpaid distributions for each Series A-1 Unit; or • an amount equal to the product of: i) the number of common units into which each Series A-1 Unit is convertible; and ii) the sum of: (A) the cash consideration per common unit to be paid to the holders of common units pursuant to the Partnership Event, plus (B) the fair market value per common unit of the securities or other assets to be distributed to the holders of the common units pursuant to the Partnership Event. Upon receipt of such a redemption offer from us, each holder of Series A-1 Units may elect to receive such cash amount or a preferred security issued by the person surviving or resulting from such Partnership Event and containing provisions substantially equivalent to the provisions set forth in the Third Amendment with respect to the Series A-1 Units without material abridgement. Except as provided in the Third Amendment, the Series A-1 Units have voting rights that are identical to the voting rights of the common units and will vote with the common units as a single class, with each Series A-1 Unit entitled to one vote for each common unit into which such Series A-1 Unit is convertible. As conversion is at the option of the holder and redemption is contingent upon a future event which is outside the control of the Partnership, the Series A-1 Units have been classified as mezzanine equity in the consolidated balance sheets. The Partnership executed the Fourth Amendment (the "Fourth Amendment") to the Partnership Agreement related to its outstanding Series A-1 Units which became effective July 24, 2014. As a result of the Fourth Amendment, distributions on Series A-1 Units will be made with paid-in-kind Series A-1 Units, cash or a combination thereof, at the discretion of the Board of Directors, which began with the distribution for the three months ended June 30, 2014 and will continue through the distribution for the quarter ended March 31, 2016. Prior to the Fourth Amendment, the Partnership was required to pay distributions on the Series A-1 Units with a combination of paid-in-kind units and cash. Series A-2 Convertible Preferred Units On March 30, 2015 and June 30, 2015, we entered into two Series A-2 Convertible Preferred Unit Purchase Agreements with Magnolia Infrastructure Partners, LLC (an affiliate of HPIP) pursuant to which the Partnership issued, in separate private placements, newly-designated Series A-2 Units (the “Series A-2 Units”) representing limited partnership interests in the Partnership. As a result, the Partnership issued a total of 2,571,430 Series A-2 Units for approximately $45.0 million in aggregate proceeds during the year ended December 31, 2015. The Series A-2 Units will participate in distributions of the Partnership along with common units in a manner identical to the existing Series A-1 Units (together with the Series A-2 Units, the "Series A Units"), with such distributions being made in cash or with paid-in-kind Series A Units at the election of the Board of Directors of our General Partner. To date, the Board of Directors of our General Partner has elected to pay Series A distributions using paid-in-kind Series A Units. On July 27, 2015, we entered into the Fifth Amendment (the “Fifth Amendment”) to our Partnership Agreement. The Fifth Amendment grants us the right (the “Call Right”) to require the holders of the Series A-2 Units (the “Series A-2 Holders”) to sell, assign and transfer all or a portion of the then outstanding Series A-2 Units to us for a purchase price of $17.50 per Series A-2 Unit (subject to appropriate adjustment for any equity distribution, subdivision or combination of equity interests in the Partnership). We may exercise the Call Right at any time, in connection with our or our affiliate’s acquisition of assets or equity from ArcLightEnergy Partners Fund V, L.P., or one of its affiliates, for a purchase price in excess of $100 million . We may not exercise the Call Right with respect to any Series A-2 Units that a Series A-2 Holder has elected to convert into common units on or prior to the date we have provided notice of our intent to exercise the Call Right, and may not exercise the Call Right if doing so would result in a default under any of our or our affiliates’ financing agreements or obligations. As a result of the equity offering that closed on September 15, 2015, discussed below, the conversion price of the Series A Units was adjusted to $15.94 in accordance with the terms of the Partnership Agreement so that the holders of those units would maintain their ownership interest on an as-converted basis. Series B Units Effective January 31, 2014, the Partnership created and issued 1,168,225 Series B Units to its General Partner in exchange for approximately $30.0 million . The Series B Units participate in distributions of the Board of Directors of our General Partner along with common units, with such distributions being made in cash distributions or with paid-in-kind Series B Units at the election of the Partnership. The Series B Units are entitled to vote along with common unitholders and such units will automatically convert to common units two years after the issuance date. Proceeds from the issuance of the Series B Units were used to partially fund the Lavaca Acquisition. During 2014, the Board of Directors of our General Partner elected to pay the Series B distributions using paid-in-kind Series B Units. The number of paid-in-kind Series B Units is determined by the quotient of: i) the number of Series B Units outstanding at the record date multiplied by the distribution amount declared to common unit holders ("Series B Unit Distribution Amount"), and ii) the Series B Unit Distribution Amount divided by the original issue price of the Series B Units. The Partnership records the paid-in-kind Series B Units at fair value at the time of issuance. The fair value measurement uses our unit price as a significant input in the determination of the fair value and thus represents a Level 2 measurement as defined by ASC 820. For the year ended December 31, 2015 , the Partnership issued 94,923 of paid-in-kind Series B Units with a fair value of $1.4 million . For the year ended December 31, 2014 , the Partnership issued 86,461 of paid-in-kind Series B Units with a fair value of $2.2 million . The Series B Units automatically converted to common units on February 1, 2016. Equity Restructuring Effective August 9, 2013, we executed an equity restructuring agreement ("Equity Restructuring") with our General Partner and HPIP. As part of the Equity Restructuring, the Partnership's 4,526,066 subordinated units and previous incentive distribution rights (the "former IDRs," all of which were owned by our General Partner, which is controlled by HPIP) were combined into and restructured as a new class of incentive distribution rights (the "new IDRs"). Upon the issuance of the new IDRs, the subordinated units and former IDRs were canceled. The new IDRs were allocated 85.02% to HPIP and 14.98% to our General Partner. The new IDRs entitle the holders of our incentive distribution rights to receive 48% of any quarterly cash distributions from available cash after the Partnership's common unitholders have received the full minimum quarterly distribution ( $0.4125 per unit) for each quarter plus any arrearages from prior quarters. On February 5, 2014, further amendments were made as a result of a settlement such that: • HPIP and AIM Midstream Holdings amended the LLC Agreement to, among other things, amend the Sharing Percentages (as defined therein) such that HPIP's sharing percentage thereafter is 95% and AIM Midstream Holdings's Sharing Percentage is 5% ; • HPIP transferred all of the 85.02% of our outstanding new IDRs held by HPIP to our General Partner such that our General Partner owns 100% of the outstanding new IDRs; and • we issued to AIM Midstream Holdings a warrant to purchase up to 300,000 common units of the Partnership at an exercise price of $0.01 per common unit (the "Warrant"), which Warrant, among other terms, i) is exercisable at any time on or after February 8, 2014 until the tenth anniversary of February 5, 2014, ii) contains cashless exercise provisions and iii) contains customary anti-dilution and other protections. The Warrant was exercised on February 21, 2014. Equity Offerings On October 13, 2015, the Partnership and certain of its affiliates entered into an ATM Equity Offering Sales Agreement (the “Sales Agreement”) with Merrill Lynch, Pierce, Fenner & Smith Incorporated and SunTrust Robinson Humphrey, Inc (each, a "Sales Agent"). Pursuant to the Sales Agreement, the Partnership may issue and sell from time to time, through the Sales Agents, common units having an aggregate offering price of up to $100,000,000 . On September 10, 2015, the Partnership and certain of its affiliates entered into an underwriting agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative for the underwriters named therein, providing for the issuance and sale by the Partnership of 7,500,000 common units at a price to the public of $11.31 per common unit. The offering closed on September 15, 2015 and the Partnership used the net proceeds of approximately $81.0 million to fund a portion of the Delta House Investment. In connection with this offering, we completed the issuance of an additional 151,937 common units at a price of $11.31 per unit pursuant to the partial exercise of the underwriters' overallotment option on October 8, 2015 for net proceeds of approximately $1.7 million . On October 14, 2014, the Partnership acquired Costar from Energy Spectrum Partners VI LP and Costar Midstream Energy, LLC which was funded, in part, with 6,900,000 of common units issued directly to Energy Spectrum and Costar Midstream Energy LLC, which are subject to customary lock-up provisions. In February 2016, the Partnership reached a settlement of certain indemnification claims with the Costar sellers whereby approximately 1,034,483 common units held in escrow were returned to the Partnership. On July 14, 2014, the Partnership entered into a common unit purchase agreement with certain institutional investors, which was subsequently amended on August 15, 2014, to provide for the sale of 4,622,352 common units representing limited partner interests in the Partnership in a private placement at a price of $25.8075 per common unit (reflecting an adjustment for the Partnership's second quarter distribution of $0.4625 per unit), for cash consideration of $119.3 million . On January 29, 2014, the Partnership and certain of its affiliates entered into an underwriting agreement (the "Underwriting Agreement") with Barclays Capital Inc. and UBS Securities LLC (the "Underwriters"), providing for the issuance and sale by the Partnership, and the purchase by the Underwriters, of 3,400,000 common units representing limited partner interests in the Partnership at a price to the public of $26.75 per common unit. The Partnership used the net proceeds of $86.9 million to fund a portion of the Lavaca Acquisition. On December 11, 2013, the Partnership and certain of its affiliates entered into an underwriting agreement (the "Underwriting Agreement") with Barclays Capital Inc. (the "Underwriter"), providing for the issuance and sale by the Partnership, and the purchase by the Underwriter, of 2,568,712 common units representing limited partner interests in the Partnership at a price to the public of $22.47 per common unit. The Partnership used the net proceeds of $54.9 million to fund a portion of the purchase price for the Blackwater Acquisition. General Partner Units In connection with the equity offerings discussed above and to maintain its ownership percentage, we received proceeds of $1.9 million from our General Partner as consideration for the issuance of 143,517 additional notional general partner units for the year ended December 31, 2015 and proceeds of $5.7 million for the issuance of 206,810 additional notional general partner units for the year ended December 31, 2014 . There were no such contributions in 2013. Outstanding Units The numbers of units outstanding were as follows (in thousands): December 31, 2015 2014 2013 Series A convertible preferred units 9,210 5,745 5,279 Series B convertible units 1,350 1,255 — Limited Partner common units 30,427 22,670 7,414 General Partner units 536 392 185 Distributions We made cash distributions as follows (in thousands): Years Ended December 31, 2015 2014 2013 Series A convertible preferred units $ — $ 2,658 $ 2,375 Limited Partner common units 46,597 22,656 8,207 Limited Partner subordinated units — — 5,073 General Partner units 1,187 333 284 General Partners' incentive distribution rights 5,602 2,362 181 $ 53,386 $ 28,009 $ 16,120 On January 25, 2016, we announced that the Board of Directors of our General Partner declared a quarterly cash distribution of $0.4725 per unit for the fourth quarter ended December 31, 2015, or $1.89 per unit on an annualized basis. The cash distribution was paid on February 12, 2016, to unitholders of record as of the close of business on February 3, 2016. At December 31, 2015 , we had accrued $4.4 million for the paid-in-kind Series A Units that were issued in February 2016 . The fair value of the paid-in-kind Series A Unit distributions for all years presented was determined primarily using the market and income approach utilizing significant inputs not observable in the market and thus represent a Level 3 measurement as defined by ASC 820. Primarily using the income approach the fair value estimates for all three years presented were based on i) present value of estimated future contracted distributions, ii) option values ranging from $0.07 per unit to $9.68 per unit using a Black-Scholes model, iii) assumed discount rates of 10.0% , and iv) assumed distribution growth rates of 1.0% . For the year ended December 31, 2015 , the Partnership issued 893,830 of paid-in-kind Series A Units and recorded accrued and paid-in-kind unitholder distributions for Series A Units with a fair value of $17.0 million . For the year ended December 31, 2014 , the Partnership issued 466,638 of paid-in-kind Series A Units and recorded accrued and paid-in-kind unitholder distributions for Series A Units with a fair value of $13.2 million . For the year ended December 31, 2013 , the Partnership issued 135,705 of paid-in-kind Series A Units and recorded accrued and paid-in-kind unitholder distributions for Series A Units with a fair value of $4.8 million . |