Related Party Transactions | 6 Months Ended |
Jun. 30, 2014 |
Related Party Transaction [Line Items] | ' |
Related Party Transactions Disclosure [Text Block] | ' |
Related Party Transactions |
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The following table summarizes the related party income statement transactions of the Partnership and Predecessor with QEP: |
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| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2014 | | 2013 | | 2014 | | 2013 |
| | Successor | | Predecessor | | Successor | | Predecessor |
| | (in millions) |
Revenues from affiliate | | $ | 20.8 | | | $ | 20.6 | | | $ | 42.5 | | | $ | 41.3 | |
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General and administrative to affiliate | | (3.4 | ) | | (4.7 | ) | | (6.9 | ) | | (10.4 | ) |
Interest expense to affiliate | | — | | | (1.0 | ) | | — | | | (2.1 | ) |
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The Partnership |
Our General Partner is owned by QEP Field Services, which is a subsidiary of QEP. As of June 30, 2014, QEP Field Services owns 3,701,750 common units and 26,705,000 subordinated units representing a 55.8% limited partner interest in us. In addition, the General Partner owns 1,090,286 general partner units representing a 2.0% general partner interest in us, as well as incentive distribution rights. Transactions with our General Partner, QEP Field Services and QEP are considered to be related party transactions, because our General Partner and its affiliates own more than 5% of our equity interests. In addition to the agreements discussed in Note 3 - Initial Public Offering, the Partnership entered into the following agreements with QEP. |
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Omnibus Agreement |
In connection with the IPO, the Partnership entered into an Omnibus Agreement (the Omnibus Agreement) with QEP Field Services, the General Partner, the Operating Company and QEP, which addresses the following matters: |
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• | the Partnership's payment of an annual amount to QEP, initially in the amount of $13.8 million, for the provision of certain general and administrative services by QEP to the Partnership, including a fixed annual fee of approximately $1.4 million for executive management services provided by certain officers of the General Partner, who are also executives of QEP. The remaining portion of this annual amount reflects an estimate of the costs QEP will incur in providing the services; | | | | | | | | | | | | | | | |
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• | the Partnership's obligation to reimburse QEP for any out-of-pocket costs and expenses incurred by QEP in providing general and administrative services (which reimbursement is in addition to certain expenses of the General Partner and its affiliates that are reimbursed under the Partnership's partnership agreement), as well as any other out-of-pocket expenses incurred by QEP on the Partnership's behalf; and | | | | | | | | | | | | | | | |
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• | an indemnity by QEP for certain environmental and other liabilities, and the Partnership's obligation to indemnify QEP and its subsidiaries for events and conditions associated with the operation of the Partnership's assets that occur after the closing of the IPO. | | | | | | | | | | | | | | | |
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As long as QEP controls the General Partner, the Omnibus Agreement will remain in full force and effect. If QEP ceases to control the General Partner, either party may terminate the Omnibus Agreement, but the indemnification obligations will remain in full force and effect in accordance with their terms. |
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For the three and six months ended June 30, 2014, the Partnership was charged $3.4 million and $6.9 million, respectively, under the Omnibus Agreement by QEP. |
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Service Agreements |
In connection with the IPO, the Partnership entered into various midstream agreements with QEP including, but not limited to, natural gas, crude oil, water and condensate gathering and transportation agreements, a fixed-price condensate purchase agreement, operating agreements and other service agreements. The Partnership believes that the terms and conditions under these agreements are generally no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services in the ordinary course of its business. |
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The Predecessor |
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Prior to the IPO, the Predecessor had the following agreements in place with QEP resulting in affiliate transactions. |
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Centralized Cash Management |
QEP operated a cash management system whereby excess cash from its various subsidiaries, held in separate bank accounts, was consolidated into a centralized account. Sales and purchases related to third-party transactions were settled in cash but were received or paid by QEP within the centralized cash management system. |
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Affiliated Debt |
The Predecessor's long-term debt consisted of an allocation from QEP Field Services of its total long-term debt related to QEP Field Services' debt agreements with QEP. During 2013, QEP Field Services had a $250.0 million promissory note with QEP, which matured at the end of the first quarter of 2013 with a fixed interest rate of 6.05%. The promissory note was renewed on April 1, 2013, and matured on April 1, 2014. In addition, QEP Field Services entered into a $1.0 billion revolving credit type promissory note with QEP, with a maturity date of April 1, 2017, to assist with funding of capital expenditures. Interest allocated to the Predecessor under these notes in the first quarter of 2013 was based on the fixed-rate due to QEP and was settled in cash. QEP Field Services was in compliance with its covenants under the agreements for all periods prior to the IPO, and there were no letters of credit outstanding. In connection with the IPO, $95.5 million of affiliated debt was assumed by the Partnership and was repaid in full on August 14, 2013, with proceeds of the IPO extinguishing all affiliated debt of the Partnership. |
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Allocation of Costs |
The employees supporting the Predecessor's operations were employees of QEP. General and administrative expenses allocated to the Predecessor was $4.7 million and $10.4 million for the three and six months ended June 30, 2013. The consolidated financial statements of the Predecessor include direct charges for operations of our assets and costs allocated by QEP. These costs were reimbursed and related to: (i) various business services, including, but not limited to, payroll, accounts payable and facilities management, (ii) various corporate services, including, but not limited to, legal, accounting, treasury, information technology and human resources and (iii) compensation, equity-based compensation, benefits and pension and post-retirement costs. These expenses were charged or allocated to the Predecessor based on the nature of the expenses and its proportionate share of QEP's gross property, plant and equipment, operating income and direct labor costs. Management believes these allocation methodologies were reasonable. |