Acquisitions & Dispositions | Consolidation of BNN Colorado Effective December 1, 2018, we obtained control of BNN Colorado Water, LLC ("BNN Colorado") through an amendment to the voting rights in BNN Colorado's limited liability company agreement. Prior to the amendment, we accounted for our interest in BNN Colorado under the equity method of accounting. The consolidation was accounted for as a business combination under ASC 805. No gain or loss was recognized on the remeasurement of our 63% membership interest as of December 1, 2018, as the carrying value was determined to approximate the fair value. The 37% equity interest in BNN Colorado held by noncontrolling interests was recorded at its acquisition date fair value of $10.1 million . These fair value measurements are based on significant inputs, such as forecasted cash flows and discount rates, that are not observable in the market and thus represent fair value measurements categorized within Level 3 of the fair value hierarchy under ASC 820. The following represents the fair value of assets acquired and liabilities assumed (in thousands): Accounts receivable $ 4,053 Property, plant and equipment 18,535 Intangible asset 7,922 (1) Accounts payable and accrued liabilities (53 ) Deferred revenue (4,053 ) Net identifiable assets acquired (excluding cash) $ 26,404 (1) The $7.9 million intangible asset acquired represents a customer contract. This intangible asset is amortized on a straight-line basis over a period of approximately 3 years, the remaining term of the underlying contract at the time of acquisition. At December 31, 2018, the assets acquired and liabilities assumed were recorded at provisional amounts based on the preliminary purchase price allocation. We are in the process of identifying and measuring all assets acquired and liabilities assumed in the acquisition within the measurement period. Such provisional amounts will be adjusted if necessary to reflect any new information about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of these amounts. Actual revenue and net loss attributable to TGE from BNN Colorado of less than $1.0 million was recognized in the accompanying consolidated statements of income for the period from December 1, 2018 to December 31, 2018 . Acquisitions of BNN North Dakota In January 2018, we acquired 100% of the membership interests in Buckhorn Energy Services, LLC and Buckhorn SWD Solutions, LLC, which were subsequently merged and renamed BNN North Dakota, LLC ("BNN North Dakota"), for approximately $95.0 million , net of cash acquired. BNN North Dakota owns a produced water gathering and disposal system in the Bakken basin with approximately 133,000 acres under dedication. The transaction qualifies as an acquisition of a business and is accounted for as a business combination under ASC 805. The following represents the fair value of assets acquired and liabilities assumed (in thousands): Accounts receivable $ 2,457 Inventory 67 Property, plant and equipment 48,900 Intangible asset 46,800 (1) Accounts payable and accrued liabilities (3,224 ) Net identifiable assets acquired (excluding cash) $ 95,000 (1) The $46.8 million intangible asset acquired represents three major customer contracts. This intangible asset is amortized on a straight-line basis over a period of 8 - 14 years, the remaining terms of the underlying contracts at the time of acquisition. At March 31, 2018, the assets acquired and liabilities assumed in the acquisition were recorded at provisional amounts based on the preliminary purchase price allocation. No adjustments were made to these provisional amounts and the allocation of assets acquired and liabilities assumed in the acquisition was considered final as of June 30, 2018. Actual revenue and net income attributable to TGE from BNN North Dakota of $18.8 million and $4.7 million , respectively, was recognized in the accompanying consolidated statements of income for the period from January 12, 2018 to December 31, 2018 . In November 2018, we acquired 100% of the membership interests in NGL Water Solutions Bakken, LLC ("NGL Water Solutions Bakken"), a produced water disposal system in the Bakken basin, for cash consideration of approximately $91.0 million , subject to working capital adjustments. NGL Water Solutions Bakken was subsequently merged into BNN North Dakota. The transaction qualifies as an acquisition of a business and is accounted for as a business combination under ASC 805. The following represents the fair value of assets acquired and liabilities assumed (in thousands): Accounts receivable $ 3,599 Prepayments and other current assets 5 Property, plant and equipment 17,200 Intangible asset 54,000 (1) Accounts payable and accrued liabilities (949 ) Net identifiable assets acquired 73,855 Goodwill 17,145 Net assets acquired $ 91,000 (1) The $54.0 million intangible asset acquired represents customer relationships and a customer contract. This intangible asset is amortized on a straight-line basis over a period of 3 - 8 years. At December 31, 2018, the assets acquired and liabilities assumed in the acquisition were recorded at provisional amounts based on the preliminary purchase price allocation. We are in the process of identifying and measuring all assets acquired and liabilities assumed in the acquisition within the measurement period. Such provisional amounts will be adjusted if necessary to reflect any new information about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of these amounts. The goodwill recognized of $17.1 million is primarily attributed to synergies expected from combining the operations of TGE and NGL Water Solutions Bakken. All the goodwill was assigned to our Gathering, Processing & Terminalling segment. Actual revenue and net income attributable to TGE from NGL Water Solutions Bakken of $1.4 million and $0.5 million , respectively, was recognized in the accompanying consolidated statements of income for the period from November 30, 2018 to December 31, 2018 . Acquisition of Plaquemines Liquids Terminal, LLC In November 2018, we entered into a joint venture agreement with Drexel Hamilton Infrastructure Fund I, L.P. ("DHIF") to jointly-own Plaquemines Liquids Terminal, LLC ("PLT"). PLT was formed with the intention of entering into agreements to develop a storage and terminalling facility. The facility is expected to offer up to 20 million barrels of storage for both crude oil and refined products and export facilities capable of loading Suezmax and Very Large Crude Carriers ("VLCC") vessels for international delivery. We made an initial cash contribution to PLT of $30.7 million in exchange for a 100% preferred membership interest and a 80% common membership interest in PLT. DHIF contributed any and all assets and rights related to PLT in exchange for a 20% common membership interest and the right to receive certain special distributions. Our preferred and common membership interests are considered to be a controlling financial interest and PLT was consolidated accordingly. The transaction has been accounted for as an asset acquisition, with substantially all the fair value allocated to the assets and liabilities acquired based on their relative fair values. The intangible assets acquired, valued at approximately $35 million , relate to permits, designs, and other work-product related to the development and construction of a crude oil terminal facility in Louisiana. The liabilities recognized relate to DHIF's right to receive special distributions totaling $35 million . The special distributions are contingent upon PLT reaching certain milestones in the development and construction of the project facilities. Also in November 2018, PLT entered into an agreement with the Plaquemines Port & Harbor Terminal District to lease the land site on which PLT will construct the facilities. Acquisition of Pawnee Terminal In January 2018, we entered into an agreement to acquire a 51% membership interest in the Pawnee, Colorado crude oil terminal ("Pawnee Terminal") from Zenith Energy Terminals Holdings, LLC for cash consideration of approximately $30.6 million . The transaction closed on April 1, 2018. As the 51% membership interest does not represent a controlling interest in Pawnee, our investment in Pawnee Terminal is recorded under the equity method of accounting and reported as "Unconsolidated investments" on the consolidated balance sheets. Acquisitions of 75% Membership Interest in Rockies Express and Additional TEP Common Units In May 2016, TD assigned us its right to purchase a 25% membership interest in Rockies Express from a unit of Sempra U.S. Gas and Power ("Sempra") pursuant to the purchase agreement originally entered into between TD's wholly-owned subsidiary and Sempra in March 2016. Subsequently on May 6, 2016, we closed the purchase of a 25% membership interest in Rockies Express from Sempra pursuant to the purchase agreement for cash consideration of approximately $436.0 million , after making the adjustments to the purchase price required by the purchase agreement. In March 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 . The 2017 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. As a result of the common control nature of the transaction, the acquisition resulted in the recognition of a noncash deemed contribution representing the excess carrying value of the 24.99% membership interest in Rockies Express acquired over the fair value of the consideration paid. For further discussion, see Note 11 - Partnership Equity . In February 2018, TD merged into Tallgrass Development Holdings, LLC, a wholly-owned subsidiary of Tallgrass Equity ("Tallgrass Development Holdings"), and as a result of the merger, Tallgrass Equity acquired a 25.01% membership interest in Rockies Express and an additional 5,619,218 TEP common units. As consideration for the acquisition, TGE and Tallgrass Equity issued 27,554,785 unregistered TGE Class B shares and Tallgrass Equity units, valued at approximately $644.8 million based on the closing price on February 6, 2018, to the limited partners of TD. Subsequent to the closing of the transaction, our aggregate membership interest in Rockies Express is 75% . The 2018 transfer of the Rockies Express membership interest between TD and Tallgrass Equity is considered a transaction between entities under common control, but does not represent a change in reporting entity. As a result of the common control nature of the transaction, the acquisition resulted in the recognition of a noncash deemed contribution representing the excess carrying value of the 25.01% membership interest in Rockies Express acquired over the fair value of the consideration paid. For further discussion, see Note 11 - Partnership Equity . As the aggregate 75% membership interest does not represent a controlling interest in Rockies Express, TGE's investment in Rockies Express is recorded under the equity method of accounting and is reported as "Unconsolidated investments" on our consolidated balance sheets. For additional information, see Note 7 - Investments in Unconsolidated Affiliates . The acquisition of an additional 5,619,218 TEP common units is considered an acquisition of noncontrolling interest and resulted in the recognition of a noncash deemed distribution representing the excess purchase price over the $53.8 million carrying value of the 5,619,218 TEP common units acquired as of February 7, 2018. For further discussion, see Note 11 - Partnership Equity . Acquisition and Sale of Outrigger Powder River Operating, LLC In August 2017, we acquired 100% of the membership interests of Outrigger Powder River Operating, LLC (subsequently renamed as Tallgrass Crude Gathering, LLC, "TCG"), which owns the PRB Crude System, a crude oil gathering system in the Powder River Basin with approximately 34 miles of gathering lines as of the acquisition date and approximately 150,000 acres dedicated on a long-term fee-based contract, for approximately $36 million . The transaction qualifies as an acquisition of a business and is accounted for as a business combination under ASC 805. The following represents the fair value of assets acquired and liabilities assumed (in thousands): Accounts receivable $ 117 Property, plant and equipment 29,306 Intangible asset 6,694 (1) Accounts payable and accrued liabilities (87 ) Net identifiable assets acquired $ 36,030 (1) The $6.7 million intangible asset acquired represents a major customer contract. This intangible asset is amortized on a straight-line basis over a period of 8 years, the remaining term of the contract at the time of acquisition. At September 30, 2017, the assets acquired and liabilities assumed in the acquisition were recorded at provisional amounts based on the preliminary purchase price allocation. No adjustments were made to these provisional amounts and the allocation of assets acquired and liabilities assumed in the acquisition was considered final as of December 31, 2017. Actual revenue and net loss attributable to TGE from TCG of less than $1 million was recognized in the accompanying consolidated statements of income for the period from August 3, 2017 to December 31, 2017. In February 2018, we entered into an agreement with an affiliate of Silver Creek Midstream, LLC ("Silver Creek") to sell our 100% membership interest in TCG, for approximately $50.0 million . The sale of TCG closed on February 23, 2018. During the year ended December 31, 2018 , we recognized a gain of $9.4 million on the sale which is presented in the line item "Gain on disposal of assets" in the consolidated statements of income. Joint Venture with Silver Creek In February 2018, we entered into an agreement with Silver Creek to form Iron Horse Pipeline, LLC ("Iron Horse"), which owns a new 80 -mile crude oil pipeline currently under construction that will transport crude oil from the Powder River Basin to Guernsey, Wyoming ("Iron Horse Pipeline"). During the year ended December 31, 2018 , we contributed an initial $3.5 million and committed to funding our proportionate share of the remaining costs of construction in exchange for a 75% membership interest in Iron Horse. As the 75% membership interest does not represent a controlling interest in Iron Horse, our investment in Iron Horse is accounted for under the equity method of accounting and reported as "Unconsolidated investments" on the consolidated balance sheets. In August 2018, we entered into an agreement with Silver Creek to expand the Iron Horse joint venture through the contribution by us and Silver Creek of cash and additional Powder River Basin assets. These additional contributions closed in January 2019. We contributed our 75% membership interest in Iron Horse, $37 million in cash, and various other assets, including terminal facilities currently under construction in Guernsey, Wyoming. Silver Creek contributed the Powder River Express Pipeline ("PRE Pipeline") and their 25% membership interest in Iron Horse. The expanded joint venture operates under the name Powder River Gateway, LLC ("Powder River Gateway"), and owns the Iron Horse Pipeline, the PRE Pipeline, a 70 -mile crude oil pipeline that transports crude oil from the Powder River Basin to Guernsey, Wyoming, and crude oil terminal facilities in Guernsey, Wyoming. Effective January 1, 2019, we own a 51% membership interest in Powder River Gateway and continue to operate the joint venture, while Silver Creek owns a 49% membership interest. Acquisitions of Additional Interests in Deeprock Development, LLC In July 2017, we acquired an additional 40% membership interest in Deeprock Development from Kinder Morgan Cushing, LLC for cash consideration of approximately $57.2 million , net of cash acquired. We subsequently acquired an additional 9% membership interest in Deeprock Development from Deeprock Energy Resources LLC ("DER") on July 21, 2017, as discussed further below. Upon closing of the acquisition of the 40% membership interest on July 20, 2017, we obtained a controlling financial interest in Deeprock Development and accordingly have accounted for the transaction as a step acquisition under ASC 805. On the acquisition date, we remeasured our previously held 20% equity interest in Deeprock Development to its fair value of $22.9 million , recognized a gain of $9.7 million in "Gain on remeasurement of unconsolidated investment" in the consolidated statements of income, and consolidated Deeprock Development in our consolidated financial statements. The 40% equity interest in Deeprock Development held by noncontrolling interests was recorded at its acquisition date fair value of $45.9 million . The fair values of the previously held equity interest and the noncontrolling interest were determined using a discounted cash flow analysis and adjusted for lack of control. These fair value measurements are based on significant inputs, such as forecasted cash flows and discount rates, that are not observable in the market and thus represent fair value measurements categorized within Level 3 of the fair value hierarchy under ASC 820. The following represents the fair value of assets acquired and liabilities assumed (in thousands): Accounts receivable $ 968 Other current assets 598 Property, plant and equipment 70,148 Accounts payable (712 ) Deferred revenue (6,546 ) Net identifiable assets acquired 64,456 Goodwill 61,550 Net assets acquired (excluding cash) $ 126,006 At September 30, 2017, the assets acquired and liabilities assumed in the acquisition were recorded at provisional amounts based on the preliminary purchase price allocation. No adjustments were made to these provisional amounts and the allocation of assets acquired and liabilities assumed in the acquisition was considered final as of December 31, 2017. The goodwill recognized of $61.6 million is primarily attributed to synergies expected from combining our operations with the operations of Deeprock Development. All the goodwill was assigned to our Gathering, Processing & Terminalling segment. Actual revenue and net income attributable to TGE from Deeprock Development of $10.5 million and $0.9 million , respectively, was recognized in the accompanying consolidated statements of income for the period from July 20, 2017 to December 31, 2017. In July 2017, subsequent to the acquisition of an additional 40% membership interest discussed above, we acquired an additional 9% membership interest in Deeprock Development from DER for total consideration valued at approximately $13.1 million , consisting of approximately $6.4 million in cash and the issuance of 128,790 TEP common units (valued at approximately $6.7 million based on the July 20, 2017 closing price of TEP's common units), which was accounted for as an acquisition of noncontrolling interest. Subsequent to the closing of the transaction, our aggregate membership interest in Deeprock Development is 69% . Acquisition of Deeprock North and Merger with Deeprock Development In January 2018, we acquired an approximate 38% membership interest in Deeprock North, LLC ("Deeprock North") from Kinder Morgan Deeprock North Holdco LLC for cash consideration of $19.5 million . Immediately following the acquisition, Deeprock North was merged into Deeprock Development, and the members of Deeprock North and Deeprock Development received adjusted membership interests in the combined entity. As a result, we recognized additional noncontrolling interests in Deeprock Development of $31.8 million . The acquisition of Deeprock North by Deeprock Development 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. After the acquisition and merger, we own an approximate 60% membership interest in the combined entity. Acquisition of DCP Douglas, LLC In June 2017, we acquired 100% of the membership interests in DCP Douglas, LLC (subsequently renamed as Tallgrass Midstream Gathering, 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 the Douglas processing plant, for approximately $128.5 million . The acquisition has been accounted for as an asset acquisition, with substantially all the fair value allocated to the long-lived assets acquired based on their relative fair values. Acquisition of Tallgrass Terminals, LLC and Tallgrass NatGas Operator, LLC In January 2017, we 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. As a result of the common control nature of the transaction, the acquisitions resulted in the recognition of a noncash deemed distribution representing the excess fair value of the consideration paid over the carrying value of Terminals and NatGas net assets acquired. For further discussion, see Note 11 - Partnership Equity . Acquisitions of Pony Express In January 2016, we acquired an additional 31.3% membership interest in Pony Express in exchange for cash consideration of $475 million and 6,518,000 TEP common units (valued at approximately $268.6 million based on the December 31, 2015 closing price of our common units) issued to TD, for total consideration of approximately $743.6 million . The transaction increased our aggregate membership interest in Pony Express to 98% effective January 1, 2016. As part of the transaction, TD granted us an 18 -month call option covering the newly issued 6,518,000 common units at a price of $42.50 . On the effective date of the acquisition, the call option was valued at $46.0 million . As discussed in Note 9 – Risk Management , in July 2016 and October 2016, we partially exercised the option covering 3,563,146 and 1,251,760 of the common units, respectively. In February 2017, we exercised the remainder of the call option covering an additional 1,703,094 common units, leaving no remaining common units subject to the call option as of such date. As a result of the partial exercises in 2016 and 2017, we derecognized a portion of the derivative asset balance, recognizing approximately $34.0 million and $12.6 million through equity for the years ended December 31, 2016 and 2017, respectively, as discussed further in Note 9 – Risk Management . The acquisition of the additional 31.3% membership interest in Pony Express represents a transaction between entities under common control and an acquisition of noncontrolling interests. As a result, financial information for periods prior to the transaction has not been recast to reflect the additional 31.3% membership interest. As a result of the common control nature of the transaction, the acquisition resulted in the recognition of a noncash deemed distribution representing the excess fair value of the consideration paid over the carrying value of the 31.3% membership interest in Pony Express acquired. For further discussion, see Note 11 - Partnership Equity . Cash outflows to acquire an additional noncontrolling interest in Pony Express are classified as an investing activity in the accompanying consolidated statements of cash flows to the extent the consideration paid was used to directly fund the construction of the underlying assets by the noncontrolling member. Cash outflows to acquire an additional noncontrolling interest in excess of the cost to construct the underlying assets are classified as financing activities. For the year ended December 31, 2016, $49.1 million of the $475 million paid to acquire the additional 31.3% membership interest in Pony Express was classified as an investing activity and $425.9 million was classified as a financing activity. In February 2018, we acquired the remaining 2% membership interest in Pony Express, along with administrative assets consisting primarily of information technology assets, from TD for cash consideration of approximately $60 million , bringing our aggregate membership interest in Pony Express to 100% . The acquisition of the remaining 2% membership interest in Pony Express represents a transaction between entities under common control and an acquisition of noncontrolling interests. As a result, financial information for periods prior to the transaction has not been recast to reflect the additional 2% membership interest. As a result of the common control nature of the transaction, the acquisition resulted in the recognition of a noncash deemed distribution representing the excess fair value of the consideration paid over the carrying value of the 2% membership interest in Pony Express acquired. For further discussion, see Note 11 – Partnership Equity . Pro Forma Financial Information Unaudited pro forma revenue and net income (loss) attributable to TGE for the years ended December 31, 2018 and 2017 is presented below as if the acquisitions of BNN North Dakota, NGL Water Solutions Bakken, and BNN Colorado had been completed on January 1, 2017. Unaudited pro forma revenue and net (loss) income attributable to TGE for the years ended December 31, 2017 and 2016 is presented below as if the acquisitions of TCG and Deeprock Development had been completed on January 1, 2016. Year Ended December 31, 2018 2017 2016 (in thousands) Revenue $ 813,286 $ 686,803 $ 632,528 Net income (loss) attributable to TGE $ 140,005 $ (129,155 ) $ 34,311 The pro forma financial information is not necessarily indicative of what the actual results of operations or financial position of TGE would have been if the transactions had in fact occurred on the date or for the period indicated, nor do they purport to project the results of operations or financial position of TGE for any future periods or as of any date. The pro forma financial information does not give effect to any cost savings, operating synergies, or revenue enhancements expected to result from the transactions or the costs to achieve these cost savings, operating synergies, and revenue enhancements. The pro forma revenue and net income (loss) includes adjustments to give effect to the estimated results of operations of BNN North Dakota, NGL Water Solutions Bakken, BNN Colorado, TCG, and Deeprock Development for the periods presented. The pro forma net income (loss) also includes adjustments to eliminate the equity in earnings and gain on remeasurement of unconsolidated investment associated with our previously held 20% membership interest in Deeprock Development and to eliminate the equity in earnings associated with our 63% membership interest in BNN Colorado which was previously accounted for as an equity method investment. Historical Financial Information The results of our acquisitions of Terminals and NatGas are included in the consolidated balance sheets as of December 31, 2018 and December 31, 2017 and in the consolidated statements of income for the years ended December 31, 2018 , 2017 , and 2016 . The following table presents the previously reported consolidated statements of income for the year ended December 31, 2016 adjusted for the acquisitions of Terminals and NatGas: Year Ended December 31, 2016 TGE (As previously reported) Consolidate Terminals Consolidate NatGas Elimination TGE (As currently reported) (in thousands) Revenues: Crude oil transportation services $ 374,949 $ — $ — $ — $ 374,949 Natural gas transportation services 119,962 — — — 119,962 Sales of natural gas, NGLs, and crude oil 77,394 99 — (370 ) (1) 77,123 Processing and other revenues 32,817 12,043 6,228 (11,460 ) (2) 39,628 Total Revenues 605,122 12,142 6,228 (11,830 ) 611,662 Operating Costs and Expenses: Cost of sales 71,920 100 — (370 ) (1) 71,650 Cost of transportation services 58,341 788 — (11,460 ) (2) 47,669 Operations and maintenance 53,386 1,684 — — 55,070 Depreciation and amortization 84,896 1,351 — — 86,247 General and administrative 55,829 1,469 — — 57,298 Taxes, other than income taxes 24,727 673 — — 25,400 Contract termination — 8,061 (3) — — 8,061 Loss on disposal of assets 1,849 — — — 1,849 Total Operating Costs and Expenses 350,948 14,126 — (11,830 ) 353,244 Operating Income (Expense) 254,174 (1,984 ) 6,228 — 258,418 Other Income (Expense): Equity in earnings of unconsolidated investments 51,780 2,751 — — 54,531 Interest expense, net (45,601 ) — — — (45,601 ) Other income, net 432 — — — 432 Total Other Income 6,611 2,751 — — 9,362 Net income before tax 260,785 767 6,228 — 267,780 Deferred income tax expense (17,741 ) — — — (17,741 ) Net income 243,044 767 6,228 — 250,039 Net income attributable to noncontrolling interests (216,250 ) — — — (216,250 ) Net income attributable to TGE $ 26,794 $ 767 $ 6,228 $ — $ 33,789 (1) Represents the elimination of revenue and cost of sales associated with the purchase of crude oil from Pony Express by Terminals. (2) Represents the elimination of revenue and cost of transportation services associated with the lease of the Sterling Terminal facilities by Pony Express. (3) Represents a one-time charge related to the termination of an operating agreement at the Sterling Terminal. |