Acquisitions | TEP Acquisition of DCP Douglas, LLC On May 17, 2017, TEP, through its wholly-owned subsidiary Tallgrass Midstream, LLC (“TMID”), entered into a Membership Interest Purchase Agreement with DCP Assets Holding, LP to acquire 100% of the membership interests in DCP Douglas, LLC, which owns the Douglas Gathering System, a natural gas gathering system in the Powder River Basin with approximately 1,500 miles of gathering pipeline connected to TMID's Douglas processing plant, for approximately $128.5 million , subject to working capital adjustments. The acquisition closed on June 5, 2017 and has been accounted for as an asset acquisition, with substantially all of the fair value allocated to the long-lived assets acquired based on their relative fair values. TEP Acquisition of an Additional 24.99% Membership Interest in Rockies Express On March 31, 2017, TEP, TD, and Rockies Express Holdings, LLC, entered into a definitive Purchase and Sale Agreement, pursuant to which TEP acquired an additional 24.99% membership interest in Rockies Express from TD in exchange for cash consideration of $400 million . Together with the 25% membership interest in Rockies Express that TEP acquired from a unit of Sempra U.S. Gas and Power on May 6, 2016, this transaction increases TEP’s aggregate membership interest in Rockies Express to 49.99% . The transfer of the Rockies Express membership interest between TD and TEP is considered a transaction between entities under common control, but does not represent a change in reporting entity. TEP's investment in Rockies Express is recorded under the equity method of accounting and is reported as "Unconsolidated investments" on our condensed consolidated balance sheets. As a result of the common control nature of the transaction, the 24.99% membership interest in Rockies Express was transferred to TEP at TD's historical carrying amount, including the remaining unamortized basis difference driven by the difference between the fair value of the investment and the book value of the underlying assets and liabilities on November 13, 2012, the date of acquisition by TD. For additional information, see Note 8 – Investments in Unconsolidated Affiliates . As of March 31, 2017, the negative basis difference carried over from TD was approximately $386.8 million . The amount of the basis difference allocated to property, plant and equipment is accreted over 35 years , which equates to the 2.86% composite depreciation rate utilized by Rockies Express to depreciate the underlying property, plant and equipment. The amount allocated to long-term debt is amortized over the remaining life of the various debt facilities. The basis difference associated with the recently acquired 24.99% membership interest in Rockies Express at June 30, 2017 was allocated as follows: Basis Difference Amortization Period (in thousands) Long-term debt $ 19,291 2 - 25 years Property, plant and equipment (402,984 ) 35 years Total basis difference $ (383,693 ) TEP Acquisition of Tallgrass Terminals, LLC and Tallgrass NatGas Operator, LLC Effective January 1, 2017, TEP acquired 100% of the issued and outstanding membership interests in Terminals and 100% of the issued and outstanding membership interests in NatGas from TD for total cash consideration of $140 million . These acquisitions are considered transactions between entities under common control, and a change in reporting entity. Terminals owns several fully operational assets providing storage capacity and additional injection points for the Pony Express System, including the Sterling Terminal near Sterling, Colorado, the Buckingham Terminal in northeast Colorado, and a 20% interest in the Deeprock Development Terminal in Cushing, Oklahoma. Our 20% membership interest in Deeprock Development as of June 30, 2017 and December 31, 2016 is recorded under the equity method of accounting and reported as "Unconsolidated investments" on our condensed consolidated balance sheets. As discussed in Note 15 – Subsequent Events , Terminals acquired an additional 49% membership interest in Deeprock Development in July 2017. Terminals also owns acreage in Cushing, Oklahoma and Guernsey, Wyoming, which is under development to provide additional storage capacity, and other potential opportunities. NatGas is the operator of the Rockies Express Pipeline and receives a fee from Rockies Express as compensation for its services. Historical Financial Information The results of our acquisitions of Terminals and NatGas are included in the condensed consolidated balance sheets as of June 30, 2017 and December 31, 2016 . The following table presents our previously reported December 31, 2016 condensed consolidated balance sheet, adjusted for the acquisitions of Terminals and NatGas: December 31, 2016 TEGP (As previously reported) Consolidate Terminals Consolidate NatGas TEGP (As currently reported) (in thousands) ASSETS Current Assets: Cash and cash equivalents $ 2,459 $ — $ — $ 2,459 Accounts receivable, net 59,469 38 29 59,536 Gas imbalances 1,597 — — 1,597 Inventories 12,805 288 — 13,093 Derivative assets 10,967 — — 10,967 Prepayments and other current assets 6,820 808 — 7,628 Total Current Assets 94,117 1,134 29 95,280 Property, plant and equipment, net 2,012,263 66,969 — 2,079,232 Goodwill 343,288 — — 343,288 Intangible asset, net 93,522 — — 93,522 Unconsolidated investments 461,915 13,710 — 475,625 Deferred tax asset 521,454 — — 521,454 Deferred financing costs, net 6,042 — — 6,042 Deferred charges and other assets 9,637 1,400 — 11,037 Total Assets $ 3,542,238 $ 83,213 $ 29 $ 3,625,480 LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 24,403 $ 46 $ — $ 24,449 Accounts payable to related parties 5,768 56 — 5,824 Gas imbalances 1,239 — — 1,239 Derivative liabilities 556 — — 556 Accrued taxes 16,328 668 — 16,996 Accrued liabilities 16,578 177 — 16,755 Deferred revenue 60,757 — — 60,757 Other current liabilities 6,446 — — 6,446 Total Current Liabilities 132,075 947 — 133,022 Long-term debt, net 1,555,981 — — 1,555,981 Other long-term liabilities and deferred credits 7,063 — — 7,063 Total Long-term Liabilities 1,563,044 — — 1,563,044 Equity: Net Equity 1,847,119 82,266 29 1,929,414 Total Equity 1,847,119 82,266 29 1,929,414 Total Liabilities and Equity $ 3,542,238 $ 83,213 $ 29 $ 3,625,480 The results of our acquisitions of Terminals and NatGas are included in the condensed consolidated statements of income for the three and six months ended June 30, 2017 and 2016 . The following tables present the previously reported condensed consolidated statements of income for the three and six months ended June 30, 2016 , adjusted for the acquisitions of Terminals and NatGas: Three Months Ended June 30, 2016 TEGP (As previously reported) Consolidate Terminals Consolidate NatGas Elimination (1) TEGP (As currently reported) (in thousands) Revenues: Crude oil transportation services $ 93,322 $ — $ — $ — $ 93,322 Natural gas transportation services 28,682 — — — 28,682 Sales of natural gas, NGLs, and crude oil 16,830 — — — 16,830 Processing and other revenues 8,097 2,957 1,992 (2,865 ) 10,181 Total Revenues 146,931 2,957 1,992 (2,865 ) 149,015 Operating Costs and Expenses: Cost of sales (exclusive of depreciation and amortization shown below) 15,958 — — — 15,958 Cost of transportation services (exclusive of depreciation and amortization shown below) 14,240 200 — (2,865 ) 11,575 Operations and maintenance 13,864 406 — — 14,270 Depreciation and amortization 21,576 314 — — 21,890 General and administrative 14,458 413 — — 14,871 Taxes, other than income taxes 5,639 144 — — 5,783 Contract termination — 8,061 (2) — — 8,061 Loss on disposal of assets 1,849 — — — 1,849 Total Operating Costs and Expenses 87,584 9,538 — (2,865 ) 94,257 Operating Income (Loss) 59,347 (6,581 ) 1,992 — 54,758 Other Income (Expense): Interest expense, net (10,441 ) — — — (10,441 ) Unrealized gain on derivative instrument 18,953 — — — 18,953 Equity in earnings of unconsolidated investments 23,321 701 — — 24,022 Other income, net 221 — — — 221 Total Other Income 32,054 701 — — 32,755 Net income (loss) before tax 91,401 (5,880 ) 1,992 — 87,513 Deferred income tax expense (6,792 ) — — — (6,792 ) Net income (loss) 84,609 (5,880 ) 1,992 — 80,721 Net income attributable to noncontrolling interests (81,161 ) — — — (81,161 ) Net income (loss) attributable to TEGP $ 3,448 $ (5,880 ) $ 1,992 $ — $ (440 ) Six Months Ended June 30, 2016 TEGP (As previously reported) Consolidate Terminals Consolidate NatGas Elimination (1) TEGP (As currently reported) (in thousands) Revenues: Crude oil transportation services $ 187,894 $ — $ — $ — $ 187,894 Natural gas transportation services 57,962 — — — 57,962 Sales of natural gas, NGLs, and crude oil 30,756 — — — 30,756 Processing and other revenues 15,724 5,866 3,673 (5,692 ) 19,571 Total Revenues 292,336 5,866 3,673 (5,692 ) 296,183 Operating Costs and Expenses: Cost of sales (exclusive of depreciation and amortization shown below) 29,526 — — — 29,526 Cost of transportation services (exclusive of depreciation and amortization shown below) 30,396 400 — (5,692 ) 25,104 Operations and maintenance 26,341 887 — — 27,228 Depreciation and amortization 43,268 629 — — 43,897 General and administrative 27,995 887 — — 28,882 Taxes, other than income taxes 13,145 288 — — 13,433 Contract termination — 8,061 (2) — — 8,061 Loss on disposal of assets 1,849 — — — 1,849 Total Operating Costs and Expenses 172,520 11,152 — (5,692 ) 177,980 Operating Income (Loss) 119,816 (5,286 ) 3,673 — 118,203 Other Income (Expense): Interest expense, net (19,118 ) — — — (19,118 ) Unrealized gain on derivative instrument 10,007 — — — 10,007 Equity in earnings of unconsolidated investments 23,321 1,410 — — 24,731 Other income, net 787 — — — 787 Total Other Income 14,997 1,410 — — 16,407 Net income (loss) before tax 134,813 (3,876 ) 3,673 — 134,610 Deferred income tax expense (9,583 ) — — — (9,583 ) Net income (loss) 125,230 (3,876 ) 3,673 — 125,027 Net income attributable to noncontrolling interests (114,193 ) — — — (114,193 ) Net income (loss) attributable to TEGP $ 11,037 $ (3,876 ) $ 3,673 $ — $ 10,834 (1) Represents the elimination of revenue and cost of transportation services associated with the lease of the Sterling Terminal facilities by Pony Express. (2) Represents a one-time charge related to the termination of an operating agreement at the Sterling Terminal. |