Company Quick10K Filing
American Midstream Partners
Price1.00 EPS6,980,000
Shares-0 P/E0
MCap-0 P/FCF0
Net Debt451 EBIT91
TEV451 TEV/EBIT5
TTM 2019-03-31, in MM, except price, ratios
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AMID 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 5. Other Information
Item 6. Exhibits
EX-3.15 amidgpresolutions-amendno1.htm
EX-31.1 a2019q1exhibit311302certif.htm
EX-31.2 a2019q1exhibit312302certif.htm
EX-32.1 a2019q1exhibit321906certif.htm
EX-32.2 a2019q1exhibit322906certif.htm

American Midstream Partners Earnings 2019-03-31

Balance SheetIncome StatementCash Flow
2.11.71.30.80.40.02012201420172020
Assets, Equity
0.30.20.1-0.1-0.2-0.32012201420172020
Rev, G Profit, Net Income
0.40.20.1-0.1-0.2-0.42012201420172020
Ops, Inv, Fin

10-Q 1 a2019q1form10-q.htm 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from        to        
Commission File Number: 001-35257
 
 AMERICAN MIDSTREAM PARTNERS, LP
(Exact name of registrant as specified in its charter)

Delaware
27-0855785
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
2103 CityWest Boulevard
 
Building #4, Suite 800
 
Houston, TX 77042
(346) 241-3400
(Address of principal executive offices) (zip code)
(Registrant’s telephone number, including area code)
 


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ý Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ý  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
ý
Non-accelerated filer
¨ 
Smaller reporting company
¨
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ¨  Yes    ý  No
Securities registered pursuant to section 12(b) of the Act
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Units representing Limited Partnership Interests
AMID
New York Stock Exchange





There were 54,451,306 common units, 11,342,197 Series A Units and 9,514,330 Series C Units of American Midstream Partners, LP outstanding as of May 3, 2019.






Glossary of Terms

The following is a list of terms used throughout this report:

ASC        Accounting Standards Codification.

Bbl         Barrels: 42 U.S. gallons measured at 60 degrees Fahrenheit.

Condensate
Liquid hydrocarbons present in casing head gas that condense within the gathering system and are removed prior to delivery to the natural gas plant. This product is generally sold on terms more closely tied to crude oil pricing.

/d
Per day.

FASB         Financial Accounting Standards Board.

FERC         Federal Energy Regulatory Commission.

GAAP        Accounting principles generally accepted in the United States of America.

Gal         Gallons.

Mgal        Thousand gallons.

Mcf         Thousand cubic feet.

MMcf         Million cubic feet.
    
NGL or NGLs
Natural gas liquid(s): The combination of ethane, propane, normal butane, isobutane and natural gasoline that, when removed from natural gas, become liquid under various levels of higher pressure and lower temperature.

Throughput
The volume transported or passing through a pipeline, plant, terminal or other facility during a particular period.

    


2


TABLE OF CONTENTS
 
 
 
Page
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 5.
Item 6.

3


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
American Midstream Partners, LP and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited, In thousands)
 
March 31, 2019
 
December 31, 2018
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
12,273

 
$
9,069

Restricted cash
33,558

 
30,868

Accounts receivable, net of allowance for doubtful accounts of $511 and $591 as of March 31, 2019 and December 31, 2018, respectively
87,355

 
76,632

Inventory
8,924

 
1,186

Other current assets
21,728

 
26,236

Total current assets
163,838

 
143,991

Property, plant and equipment, net
995,755

 
997,708

Goodwill
51,723

 
51,723

Restricted cash-long term
5,281

 
5,083

Intangible assets, net
131,447

 
133,992

Investments in unconsolidated affiliates
321,760

 
337,796

Other assets, net
45,933

 
17,403

Total assets
$
1,715,737

 
$
1,687,696

Liabilities, Equity and Partners’ Capital
 
 
 
Current liabilities
 
 
 
Accounts payable
$
44,789

 
$
36,619

Accrued gas purchases
9,417

 
11,695

Accrued expenses and other current liabilities
68,448

 
78,612

Current portion of long-term debt
542,163

 
522,966

Total current liabilities
664,817

 
649,892

Asset retirement obligations
68,338

 
67,451

Other long-term liabilities
41,876

 
18,491

Long-term debt
501,836

 
500,739

Deferred tax liability
1,421

 
1,421

Total liabilities
1,278,288

 
1,237,994

 


 


Commitments and contingencies (Note 14)


 


 
 
 
 
Convertible preferred units
331,964

 
324,624

Equity and partners’ capital
 
 
 
General Partner interests (981 units issued and outstanding as of March 31, 2019 and December 31, 2018)
(66,528
)
 
(66,591
)
Limited Partner interests (54,212 and 54,017 units issued and outstanding as of March 31, 2019 and December 31, 2018, respectively)
158,122

 
177,861

Accumulated other comprehensive income
68

 
32

Total partners’ capital
91,662

 
111,302

Noncontrolling interests
13,823

 
13,776

Total equity and partners’ capital
105,485

 
125,078

Total liabilities, equity and partners’ capital
$
1,715,737


$
1,687,696


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


American Midstream Partners, LP and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per unit amounts)
 
 
Three months ended March 31,
 
 
2019
 
2018
Revenue:
 
 
 
 
Commodity sales
 
$
137,529

 
$
158,863

Services
 
36,822

 
46,906

     (Loss) gain on commodity derivatives, net
 
(1,521
)
 
60

Total revenue
 
172,830

 
205,829

Operating expenses:
 
 
 
 
Costs of sales
 
128,061

 
150,166

Direct operating expenses
 
17,978

 
23,446

Corporate expenses
 
19,401

 
22,692

Depreciation, amortization and accretion
 
21,180

 
21,997

Loss (gain) on sale of assets, net
 
55

 
(95
)
Impairment of long-lived assets
 
829

 

Total operating expenses
 
187,504

 
218,206

Operating loss
 
(14,674
)
 
(12,377
)
Other income (expense), net
 
 
 
 
     Interest expense, net of capitalized interest
 
(24,363
)
 
(13,876
)
Other income, net
 
8

 
22

Earnings in unconsolidated affiliates
 
26,110

 
12,673

Loss before income taxes
 
(12,919
)
 
(13,558
)
Income tax expense
 
(218
)
 
(280
)
Net loss
 
(13,137
)
 
(13,838
)
Net income attributable to noncontrolling interests
 
(77
)
 
(45
)
Net loss attributable to the Partnership
 
$
(13,214
)
 
$
(13,883
)
 
 
 
 
 
General Partner’s interest in net loss
 
$
(170
)
 
$
(181
)
Limited Partners’ interest in net loss
 
$
(13,044
)
 
$
(13,702
)
 
 
 
 
 
Limited Partners’ net loss per common unit:
Basic and diluted:
 
 
 
 
Net loss per common unit
 
$
(0.38
)
 
$
(0.42
)
 
 
 
 
 
Weighted average number of common units outstanding:
Basic and diluted
 
54,082

 
52,769


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


American Midstream Partners, LP and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited, in thousands)
 
 
Three months ended March 31,
 
 
2019
 
2018
Net loss
 
$
(13,137
)
 
$
(13,838
)
Unrealized (loss) gain related to postretirement benefit plan
 
36

 
(16
)
Comprehensive loss
 
(13,101
)
 
(13,854
)
Comprehensive income attributable to noncontrolling interests
 
(77
)
 
(45
)
Comprehensive loss attributable to the Partnership
 
$
(13,178
)
 
$
(13,899
)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



6


American Midstream Partners, LP and Subsidiaries
Condensed Consolidated Statements of Changes in Equity and Partners’ Capital
(Unaudited, in thousands)

 
General
Partner
Interests
 
Limited
Partner
Interests
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total Partners’ Capital
 
Non-
controlling Interests
 
Total Equity and Partners’ Capital
Balances at December 31, 2017
$
(96,552
)
 
$
273,703

 
$
28

 
$
177,179

 
$
13,761

 
$
190,940

Cumulative effect of accounting change (Note 3)
(139
)
 
(10,552
)
 

 
(10,691
)
 

 
(10,691
)
Balances at January 1, 2018
(96,691
)
 
263,151

 
28

 
166,488

 
13,761

 
180,249

Net loss
(181
)
 
(13,702
)
 

 
(13,883
)
 
45

 
(13,838
)
Contributions
9,870

 

 

 
9,870

 

 
9,870

Distributions
(392
)
 
(29,728
)
 

 
(30,120
)
 

 
(30,120
)
Distributions to NCI owners

 

 

 

 
(20
)
 
(20
)
Distribution for acquisition of Trans-Union
(38
)
 

 

 
(38
)
 

 
(38
)
LTIP vesting
(2,328
)
 
2,328

 

 

 

 

Tax netting repurchase

 
(703
)
 

 
(703
)
 

 
(703
)
Equity compensation expense
1,014

 

 

 
1,014

 

 
1,014

Post-retirement benefit plan


 

 
(16
)
 
(16
)
 

 
(16
)
Balances at March 31, 2018
$
(88,746
)
 
$
221,346

 
$
12

 
$
132,612

 
$
13,786

 
$
146,398

 
 
 
 
 
 
 
 
 
 
 
 
Balances at December 31, 2018
$
(66,591
)
 
$
177,861

 
$
32

 
$
111,302

 
$
13,776

 
$
125,078

Net loss
(170
)
 
(13,044
)
 

 
(13,214
)
 
77

 
(13,137
)
Distributions
(95
)
 
(7,245
)
 

 
(7,340
)
 

 
(7,340
)
LTIP vesting
(698
)
 
698

 

 

 

 

Tax netting repurchase

 
(148
)
 

 
(148
)
 

 
(148
)
Equity compensation expense
1,026

 

 

 
1,026

 

 
1,026

Post-retirement benefit plan


 

 
36

 
36

 

 
36

Distributions to NCI owners

 

 

 

 
(33
)
 
(33
)
Contributions from NCI owners

 

 

 

 
3

 
3

Balances at March 31, 2019
$
(66,528
)
 
$
158,122

 
$
68

 
$
91,662

 
$
13,823

 
$
105,485


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


7


American Midstream Partners, LP and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)

 
Three months ended March 31,

 
2019
 
2018
Cash flows from operating activities
 

 

Net loss
 
$
(13,137
)
 
$
(13,838
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
 

 

Depreciation, amortization and accretion
 
21,180

 
21,997

Amortization of operating leases
 
1,407

 

Amortization of debt issuance costs
 
2,549

 
1,316

Amortization of weather derivative premium
 
247

 
278

Unrealized (gain) loss on derivatives contracts, net
 
3,037

 
(5,112
)
Non-cash compensation expense
 
1,026

 
1,014

Loss (gain) on sale of assets
 
55

 
(95
)
Other non-cash items
 
7

 
(15
)
Impairment of long-lived assets
 
829

 

   Earnings in unconsolidated affiliates
 
(26,110
)
 
(12,673
)
Distributions from unconsolidated affiliates
 
29,866

 
12,673

Bad debt (recovery) expense
 
(80
)
 
87

Deferred tax benefit
 

 
151

Changes in operating assets and liabilities:
 
 
 

Accounts receivable
 
(11,918
)
 
7,251

Inventory
 
(7,738
)
 
(3,399
)
Other current assets
 
1,312

 
(4,174
)
Other assets, net
 
(2,546
)
 

Accounts payable
 
8,170

 
11,200

Accrued gas and crude oil purchases
 
(2,278
)
 
(4,431
)
Accrued expenses and other current liabilities
 
(4,096
)
 
2,623

Asset retirement obligations
 
(569
)
 
(6
)
Other liabilities
 
(5,453
)
 

Net cash (used in) provided by operating activities
 
(4,240
)

14,847

 
 
 
 
 
Cash flows from investing activities
 
 
 

Contributions to unconsolidated affiliates
 

 
(987
)
Additions to property, plant and equipment and other
 
(18,761
)
 
(25,946
)
Proceeds from disposals of assets and business
 

 
8

Distributions from unconsolidated affiliates, return of capital
 
12,280

 
11,181

Net cash used in investing activities
 
(6,481
)
 
(15,744
)

8

 
American Midstream Partners, LP and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited, in thousands)



 
Three months ended March 31,

 
2019
 
2018
Cash flows from financing activities
 
 
 

Contributions
 

 
9,870

Distributions
 

 
(22,035
)
Contribution from noncontrolling interest owners
 
3

 

Distributions to noncontrolling interests owners
 
(33
)
 
(20
)
LTIP tax netting unit repurchase
 
(148
)
 
(703
)
Payments of financing leases
 
(268
)
 

Payment of debt issuance costs
 
(61
)
 
(1,085
)
Payment of long-term debt
 
(559
)
 
(507
)
Payment of 3.97% Senior Notes
 
(451
)
 
(439
)
Payments of other debt
 
(1,576
)
 
(1,893
)
Payments of credit agreement
 
(33,000
)
 
(119,700
)
Borrowings on credit agreement
 
52,500

 
134,400

Other
 
406

 
338

Net cash provided by (used in) financing activities
 
16,813

 
(1,774
)
 
 
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
 
6,092


(2,671
)
Cash, cash equivalents and restricted cash, beginning of period
 
45,020

 
34,179

Cash, cash equivalents and restricted cash, end of period
 
$
51,112

 
$
31,508

 
 
 
 
 
Cash, cash equivalents and restricted cash, beginning of period
 
 
 
 
Cash and cash equivalents
 
$
9,069

 
$
8,782

Restricted cash - current
 
30,868

 
20,352

Restricted cash - non-current
 
5,083

 
5,045

Total cash, cash equivalents and restricted cash, beginning of period
 
$
45,020

 
$
34,179

 
 
 
 
 
Cash, cash equivalents and restricted cash, end of period
 
 
 
 
Cash and cash equivalents
 
$
12,273

 
$
8,191

Restricted cash - current
 
33,558

 
18,269

Restricted cash - non-current
 
5,281

 
5,048

Total cash, cash equivalents and restricted cash, end of period
 
$
51,112

 
$
31,508


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



9

American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)




(1) Organization and Basis of Presentation

Organization

American Midstream Partners, LP (together with its consolidated subsidiaries, the “Partnership,” “we,” “us” or “our”) is a Delaware limited partnership that was formed in August 2009 to own, operate, develop and acquire a diversified portfolio of midstream energy assets. The Partnership’s general partner, American Midstream GP, LLC (the “General Partner”), is 86% directly owned by High Point Infrastructure Partners, LLC (“HPIP”) and 14% indirectly owned by Magnolia Infrastructure Holdings, LLC (“Magnolia”), both of which are affiliates of ArcLight Capital Partners, LLC (“ArcLight”). Our capital accounts consist of notional General Partner units and units representing limited partner interests.

We provide critical midstream infrastructure that links producers of natural gas, crude oil, NGLs, condensate and specialty chemicals to numerous intermediate and end-use markets through our four reportable segments, (1) Gas Gathering and Processing Services, (2) Liquid Pipelines and Services, (3) Natural Gas Transportation Services and (4) Offshore Pipelines and Services.

On March 17, 2019, as recommended by the conflicts committee (the “Conflicts Committee”) of the board of directors (the “Board”) of our General Partner, the Partnership and our General Partner entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Anchor Midstream Acquisition, LLC, a Delaware limited liability company (“Proposed Parent”), Anchor Midstream Merger Sub, LLC, a Delaware limited liability company (“Proposed Merger Sub”), and HPIP, pursuant to which Proposed Merger Sub will merge with and into the Partnership, with the Partnership surviving as a direct wholly owned subsidiary of our General Partner and Proposed Parent (the “Pending Merger”). For further information regarding the Merger Agreement, see our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”).

On June 16, 2018, we entered into a definitive agreement for the sale of our marine liquids terminals (“Marine Products”) which was completed on July 31, 2018. On November 15, 2018, we entered into a definitive agreement for the sale of our refined products terminals (“Refined Products”) which was completed on December 20, 2018. Subsequent to the disposition of Refined Products, we eliminated our Terminalling Services segment. For further discussion of all changes made to our reporting segments in 2018, see our 2018 Form 10-K.

Basis of presentation

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with Article 10 of Regulation S-X for interim financial information. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. In the opinion of our management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement have been included. The results of operations for interim periods are not necessarily indicative of results of operations for a full year. These condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto included in our 2018 Form 10-K.

Going Concern Assessment and Management’s Plans

Pursuant to FASB ASC 205-40, Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern, we are required to assess our ability to continue as a going concern for a period of one year from the date of the issuance of these condensed consolidated financial statements. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The Credit Agreement matures on September 5, 2019 and has not been renewed as of the date of the issuance of these condensed consolidated financial statements.

On September 27, 2018, the Board received a non-binding proposal from Magnolia, an affiliate of ArcLight to acquire the common units that it does not already own. On March 17, 2019, we entered into the Merger Agreement and expect the Pending Merger to close by the outside date under the Merger Agreement of July 31, 2019. As the Merger Agreement is subject to customary closing conditions and because the Pending Merger may affect how, or if, the Partnership elects to obtain a maturity extension, management has deferred addressing the Credit Agreement.

While we intend to renew or extend the terms of the Credit Agreement, until such time as we have executed an agreement to refinance or extend the maturity of the Credit Agreement, we cannot conclude that it is probable we will do so, and accordingly, this raises substantial doubt about our ability to continue as a going concern.

10

American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)




(2) Recent Accounting Pronouncements and Critical Accounting Policies

Standards Adopted in 2019

Leases (Topic 842) - In February 2016, the FASB issued ASU No. 2016-02 (“Topic 842”) Leases , which supersedes the lease recognition requirements in ASC 840, Leases. Under the new guidance, for leases with a term longer than 12 months, a lessee should recognize a lease liability and a right-of-use (“ROU”) asset representing its right to use the underlying asset for the lease term. Topic 842 retains a classification distinction between finance leases and operating leases, with the classification affecting the pattern of expense recognition in the income statement. This ASU also requires enhanced disclosures.

In 2018, the FASB issued ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842 and ASU No. 2018-11, Targeted Improvements. Under these updates, optional transition practical expedients are available (1) whereby existing or expired land easements that were not previously accounted for as leases under ASC 840 are not required to be evaluated under Topic 842 and (2) lease and associated non-lease components are not required to be separated within lessor arrangements if certain criteria are met. The FASB also issued ASUs 2018-10 and 2018-20, Codification Improvements to Topic 842 and Narrow Scope Improvements for Lessors, respectively, to alleviate unintended consequences from applying Topic 842. The amendments do not make substantive changes to the core provisions or principles of Topic 842 and did not significantly impact our implementation process.

We adopted the new standard on its effective date, January 1, 2019 using the modified retrospective approach. We elected the package of practical expedients permitted under the transition guidance within Topic 842 which, among other things, allows us to carry forward the historical lease classification. As such, we did not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment of ROU assets.

Additionally, we elected certain practical expedients on an ongoing basis, including the practical expedient for short-term leases pursuant to which a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize a lease liability and ROU asset for leases (1) with a term of 12 months or less and (2) that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. Instead, we will recognize the lease payments for short-term leases within profit and loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred. Substantially all leases where we are a lessee are classified as operating leases under Topic 842. Topic 842 did not have a material effect on our condensed consolidated financial statements from a lessor perspective.

On adoption, we recognized ROU assets and additional lease liabilities of approximately $29.1 million and $33.4 million, respectively.

Standards Not Yet Adopted

Financial Instruments - In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This guidance will become effective for interim and annual periods beginning after December 15, 2019. We expect to adopt ASU 2016-13 on January 1, 2020, and we are currently evaluating the effect that adopting this guidance will have on our consolidated financial position, results of operations and cash flows.

Fair Value Measurement - In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This guidance eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies certain disclosure requirements. The FASB developed the amendments to Topic 820 as part of its broader disclosure framework project, which aims to improve the effectiveness of disclosures in the notes to financial statements by focusing on requirements that clearly communicate the most important information to users of the financial statements. This guidance will become effective for interim and annual periods beginning after December 15, 2019. We expect to adopt ASU 2018-13 on January 1, 2020, and we are currently evaluating the impact, if any, that adopting this guidance will have on our disclosures.

Cloud Computing Arrangements - In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract ("ASU 2018-15"). The ASU aligns the requirements

11

American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)



for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The capitalized implementation costs of a hosting arrangement that is a service contract will be expensed over the term of the hosting arrangement. ASU 2018-15 is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. The amendments can be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. We expect to adopt ASU 2018-15 on January 1, 2020, and we are currently evaluating the effect that adopting this guidance will have on our consolidated financial position, results of operations and cash flows.


(3) Revenue Recognition

Disaggregated Revenue

The following table presents our segment revenues from contracts with customers disaggregated by type of activity (in thousands):
 
Three months ended March 31, 2019
 
Gas Gathering and Processing Services
 
Liquid Pipelines and Services
 
Natural Gas Transportation Services
 
Offshore Pipelines and Services
 
Terminalling Services
 
Total
Commodity sales:
 
 
 
 
 
 
 
 
 
 
 
     Natural gas
$
1,576

 
$

 
$
6,407

 
$
2,286

 
$

 
$
10,269

     NGLs
13,901

 

 

 

 

 
13,901

     Condensate
8,776

 

 

 
131

 

 
8,907

     Crude oil

 
104,322

 

 

 

 
104,322

     Other sales 
83

 

 
1

 
46

 

 
130

 
24,336

 
104,322

 
6,408

 
2,463

 

 
137,529

Services:
 
 
 
 
 
 
 
 
 
 
 
     Gathering and processing
4,059

 

 

 
300

 

 
4,359

     Transportation
332

 
2,311

 
8,714

 
9,042

 

 
20,399

     Terminalling and storage

 
150

 

 

 

 
150

     Other services (1)
744

 
44

 
65

 
5,041

 

 
5,894

 
5,135

 
2,505

 
8,779

 
14,383

 

 
30,802

 
 
 
 
 
 
 
 
 
 
 
 
Revenues from contracts with customers
$
29,471

 
$
106,827

 
$
15,187

 
$
16,846

 
$

 
$
168,331


12

American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)



 
Three months ended March 31, 2018
 
Gas Gathering and Processing Services
 
Liquid Pipelines and Services
 
Natural Gas Transportation Services
 
Offshore Pipelines and Services
 
Terminalling Services
 
Total
Commodity sales:
 
 
 
 
 
 
 
 
 
 
 
     Natural gas
$
1,906

 
$

 
$
6,637

 
$
2,437

 
$

 
$
10,980

     NGLs
21,150

 

 

 
38

 

 
21,188

     Condensate
5,648

 

 

 
34

 

 
5,682

     Crude oil

 
115,782

 

 

 

 
115,782

     Other sales
184

 

 
4

 
39

 
5,004

 
5,231

 
28,888

 
115,782

 
6,641

 
2,548

 
5,004

 
158,863

Services:
 
 
 
 
 
 
 
 
 
 
 
     Gathering and processing
2,365

 

 

 
866

 

 
3,231

     Transportation
630

 
3,062

 
9,412

 
8,663

 

 
21,767

     Terminalling and storage

 
1,440

 

 

 
10,393

 
11,833

     Other services (1)
434

 
402

 
10

 
4,613

 
562

 
6,021

 
3,429

 
4,904

 
9,422

 
14,142

 
10,955

 
42,852

 
 
 
 
 
 
 
 
 
 
 
 
Revenues from contracts with customers
$
32,317

 
$
120,686

 
$
16,063

 
$
16,690

 
$
15,959

 
$
201,715

_________________________ 
(1) Other services in our Offshore Pipelines and Services segment include asset management services.

Other Items in Revenue

The following table presents the reconciliation of our revenues from contracts with customers to segment revenues and total revenues as disclosed in our Condensed Consolidated Statements of Operations (in thousands):
 
Three months ended March 31, 2019
 
Gas Gathering and Processing Services
 
Liquid Pipelines and Services
 
Natural Gas Transportation Services
 
Offshore Pipelines and Services
 
Terminalling Services
 
Total
Revenues from contracts with customers
$
29,471

 
$
106,827

 
$
15,187

 
$
16,846

 
$

 
$
168,331

Revenues generated through operating lease arrangements(1)(2)
5,738

 

 

 
282

 

 
6,020

Loss on commodity derivatives, net

 
(1,521
)
 

 

 

 
(1,521
)
     Total revenues of reportable segments
$
35,209

 
$
105,306

 
$
15,187

 
$
17,128

 
$

 
$
172,830


 
Three months ended March 31, 2018
 
Gas Gathering and Processing Services
 
Liquid Pipelines and Services
 
Natural Gas Transportation Services
 
Offshore Pipelines and Services
 
Terminalling Services
 
Total
Revenues from contracts with customers
$
32,317

 
$
120,686

 
$
16,063

 
$
16,690

 
$
15,959

 
$
201,715

Revenues generated through operating lease arrangements(1)(2)
3,884

 

 

 
170

 

 
4,054

Gain on commodity derivatives, net
2

 
58

 

 

 

 
60

     Total revenues of reportable segments
$
36,203

 
$
120,744

 
$
16,063

 
$
16,860

 
$
15,959

 
$
205,829

_________________________
(1) When providing gathering or processing services to customers, specific facilities where one customer obtains substantially all of the economic benefits from the asset and has the right to direct the use of the asset are considered leased to the customer. Under the transition guidance with Topic 842, we have carried forward the historical classification of these arrangements as operating leases.

13

American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)



(2) Offshore Pipelines and Services includes approximately $0.2 million in 2019 and $0.1 million in 2018 in leasing revenues related to a platform arrangement with our unconsolidated affiliate, Delta House Oil & Gas Lateral LLC.
    
We may utilize derivative instruments in connection with contracts with customers. We purchase and take title to a portion of the NGLs and crude oil that we sell, which may expose us to changes in the price of these products in our sales markets. We do not take title to the natural gas we transport and therefore have no direct commodity price exposure to natural gas.

Contract Balances

Our contract assets and liabilities primarily relate to contracts where allocations of the transaction prices result in differences to the pattern and timing of revenue recognition as compared to contractual billings. Where payments are received in advance of recognition as revenue, contract liabilities are created. Where we have earned revenue and our right to invoice the customer is conditioned on something other than the passage of time, contract assets are created.

The following table presents the change in the contract assets and liability balances during the three months ended March 31, 2019 (in thousands):
 
Contract Assets
 
Contract Liabilities
Balance at December 31, 2018
$
8,838

 
$
15,614

Amounts recognized as revenue
(109
)
 
(367
)
Additions
2,546

 
883

Balances at March 31, 2019
$
11,275

 
$
16,130

 
 
 
 
Current
$
252

 
$
606

Non-current
11,023

 
15,524

Balances at March 31, 2019
$
11,275

 
$
16,130


Remaining Performance Obligations

The following table as of March 31, 2019, represents only revenue expected to be recognized from contracts with customers where the price and quantity of the product or service are fixed:

 
Remainder of 2019
 
2020
 
2021
 
2022
 
2023
 
Thereafter
 
Total
Gathering and processing based on minimum volume commitments
$
9,299

 
$
12,399

 
$
12,399

 
$
12,399

 
$
12,399

 
$
5,928

 
$
64,823

Transportation agreements
16,796

 
22,141

 
21,140

 
20,912

 
20,912

 
181,737

 
283,638

Other
1,225

 
1,560

 

 

 

 

 
2,785

Total
$
27,320

 
$
36,100

 
$
33,539

 
$
33,311

 
$
33,311

 
$
187,665

 
$
351,246


Due to the application of the practical expedients, the table above represents only a portion of the Partnership’s expected future consolidated revenues and it is not necessarily indicative of the expected trend in total revenues for the Partnership. Certain contracts have not been presented in the table above due to the term being one year or less and due to variability in the amount of performance obligation remaining, variability in the timing of recognition or variability in consideration. Acreage dedications do require us to perform future services but do not contain a minimum level of services and are therefore excluded from this presentation. Long-term supply and logistics arrangements contain variable timing, volumes and/or consideration and are excluded from this presentation. The table above also excludes revenue generated through operating lease arrangements.

(4) Lessee Arrangements

We primarily lease real estate including land and buildings, equipment, and vehicles. Leases of real estate generally require us to pay property taxes, insurance, and maintenance. Substantially all of our leases are classified as operating leases. ROU assets and lease liabilities for operating leases are included in Other assets, net, Accrued expenses and other current liabilities, and Other long-term liabilities in our consolidated balance sheets, depending on timing of settlement. For finance leases, the ROU assets

14

American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)



and lease liabilities are included in Property, plant and equipment, net, Current portion of long-term debt, and Long-term debt in our condensed consolidated balance sheets, depending on timing of settlement.

An ROU asset represents our right to use an underlying asset for the lease term and the corresponding lease liability represents our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The ROU asset also includes any lease prepayments and excludes lease incentives. Our lease contracts may include options to extend or terminate the lease which are included in the measurement of our lease liability when it is reasonably certain that we will exercise the option. Certain vehicle leases provide for guarantees of residual value; therefore, we estimate and include in the determination of lease payments any amount probable of being owed under these residual value guarantees.

We apply a portfolio approach by asset class to apply the provisions of ASC 842. Lease renewal terms vary from 30 days to 5 years for asset classes such as equipment and vehicles, and up to 15 years or more for real estate. Short term leases with an initial term of 12 months or less that do not include a purchase option are not recorded on the balance sheet. Lease expense for short-term leases are recognized on a straight-line basis over the lease term and amounts related to short-term leases are disclosed within our financial statements. We have variable lease payments, including adjustments to lease payments based on an index or rate; such as a consumer price index, fair value adjustments to lease payments, and common area maintenance, real estate taxes, and insurance payments in triple-net real estate leases.

The following table presents the components of lease cost (in thousands):
 
Three months ended March 31, 2019
Finance lease cost
 
Amortization of right-of-use assets
$
206

Interest on lease liabilities
38

      Total finance lease cost
$
244

 
 
Operating lease cost
$
1,780

Short-term and variable lease cost
2

Sublease income
(547
)
      Total operating lease cost
$
1,235


Amounts reported in the Condensed Consolidated Balance Sheets for leases where we are the lessee were as follows (in thousands):

15

American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)



 
March 31, 2019
Operating leases
 
Other assets, net
$
26,628

 
 
Accrued expenses and other current liabilities
$
6,589

Other long-term liabilities
24,974

      Total operating lease liabilities
$
31,563

 
 
Finance leases
 
Property, plant and equipment, net
$
2,428

 
 
Current portion of long-term debt
$
841

Long-term debt
1,629

      Total finance lease liabilities
$
2,470

 
 
Weighted average remaining lease term
 
Operating leases
13.8 years

Finance leases
9.4 years

 
 
Weighted average discount rate
 
Operating leases
5.0
%
Finance leases
6.7
%

16

American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)





Maturity of Lease Liabilities (thousands)
Operating Leases
 
Finance Leases
 
Total
2019
$
6,061

 
$
742

 
$
6,803

2020
6,559

 
844

 
7,403

2021
4,056

 
611

 
4,667

2022
2,451

 
372

 
2,823

2023
1,780

 
163

 
1,943

2024
1,696

 

 
1,696

Thereafter
22,853

 
15

 
22,868

Total lease payments
45,456

 
2,747

 
48,203

Imputed interest (a)
(13,893
)
 
(277
)
 
(14,170
)
Total lease liabilities (b)
$
31,563

 
$
2,470

 
$
34,033

___________________________
 
 
 
 
 
(a) Calculated using the interest rate for each lease.
(b) Includes the current portion of $6.6 million for operating leases and $0.8 million for finance leases

At December 31, 2018, our non-cancelable contractual commitments related to operating lease obligations totaled $36.8 million. Operating lease commitments over the next five years and thereafter were as follows: $7.3 million in 2019, $4.5 million in 2020, $3.0 million in 2021, $1.5 million in 2022, $1.0 million in 2023 and $19.5 million thereafter.
Other Information
 
 
Three months ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Cash paid for operating leases, including interest portion of finance leases
$
1,868

Cash paid for principal portion of finance leases
$
268

Right-of-use assets obtained in exchange for lease obligations:
 
Operating leases
$
2,206

Finance leases
$
82


(5) Inventory

Inventory consists of the following (in thousands):
 
March 31, 2019
 
December 31, 2018
Crude oil
$
8,526

 
$
830

NGLs
278

 
236

Materials, supplies and equipment
120

 
120

   Total inventory
$
8,924

 
$
1,186


(6) Risk Management Activities

We are exposed to certain market risks related to the volatility of commodity prices and changes in interest rates. To monitor and manage these market risks, we have established comprehensive risk management policies and procedures. We do not enter into derivative instruments for any purpose other than hedging commodity price risk, interest rate risk and weather risk. We do not speculate using derivative instruments. For more information regarding our risk management activities, see Note 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies and Note 8. Risk Management Activities in our 2018 Form 10-K.


17

American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)



The following table summarizes the net notional volumes of our outstanding commodity-related derivatives, excluding those contracts that qualified for the NPNS exception as of March 31, 2019 and December 31, 2018, none of which were designated as hedges for accounting purposes.
 
 
March 31, 2019
 
December 31, 2018
Commodity Swaps
 
Volume
 
Maturity
 
Volume
 
Maturity
Crude Oil Basis (barrels)
 
100,000
 
May 2019
 
208,000
 
February 2019


Financial Instruments Measured at Fair Value on a Recurring Basis - The following table summarizes the fair values of our derivative contracts included in the Condensed Consolidated Balance Sheets (in thousands):
 
 
 
Asset Derivatives
 
Liability Derivatives
Type
Balance Sheet Classification
 
March 31,
2019
 
December 31, 2018
 
March 31,
2019
 
December 31, 2018
Commodity derivatives
Accrued expenses and other current liabilities
 

 
 
 
(256
)
 
(2
)
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
Other current assets
 
3,521

 
4,314

 

 

Interest rate swaps
Other assets, net
 
4,027

 
6,017

 

 

 
 
 
 
 
 
 
 
 
 
Weather derivatives
Other current assets
 
206

 
454

 

 

 
Total
 
$
7,754

 
$
10,785

 
$
(256
)
 
$
(2
)

As of March 31, 2019, and December 31, 2018, we had a combined notional principal amount of $450.0 million and $550.0 million, respectively, of variable-to-fixed interest rate swap agreements. As of March 31, 2019, the maximum length of time over which we have hedged a portion of our exposure due to interest rate risk is through December 31, 2022.

The fair value of our interest rate swaps was estimated based upon forward interest rates and volatility curves as well as other relevant economic measures, if necessary. Discount factors may be utilized to extrapolate a forecast of future cash flows associated with long dated transactions. The inputs, which represent Level 2 inputs in the valuation hierarchy, are obtained from independent pricing services and we have made no adjustments to those prices. The carrying value of our weather derivative represents its fair value due to the short term nature of the underlying contract.

The carrying value of all nonderivative financial instruments included in current assets (including cash and cash equivalents, restricted cash and accounts receivable) and current liabilities (excluding current portion of long-term debt) approximates the applicable fair value due to the short maturity of those instruments.

For the three months ended March 31, 2019 and 2018, the realized and unrealized gains (losses) associated with our commodity, interest rate and weather derivative instruments were recorded in our Condensed Consolidated Statements of Operations as follows (in thousands):
 
Three months ended March 31,
 
Realized
 
Unrealized
2019
 
 
 
Loss on commodity derivatives, net
$
(1,267
)
 
$
(254
)
Interest expense, net of capitalized interest
807

 
(2,783
)
Direct operating expenses
(248
)
 

Total
$
(708
)
 
$
(3,037
)
2018
 
 
 
Gain (loss) on commodity derivatives, net
$
119

 
$
(59
)
Interest expense, net of capitalized interest
1,350

 
5,171

Direct operating expenses
(278
)
 

Total
$
1,191

 
$
5,112



18

American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)



(7) Goodwill and Intangible Assets

Goodwill consists of the following (in thousands):
 
March 31, 2019
 
December 31, 2018
Liquid Pipelines and Services
$
46,749

 
$
46,749

Offshore Pipelines and Services
4,974

 
4,974

Total
$
51,723

 
$
51,723


Intangible assets, net, consist of the following (in thousands):
 
March 31, 2019
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Customer relationships
$
64,744

 
$
(17,775
)
 
$
46,969

Customer contracts
94,692

 
(54,402
)
 
40,290

Dedicated acreage
42,547

 
(7,935
)
 
34,612

Collaborative arrangements
11,884

 
(2,476
)
 
9,408

Other
198

 
(30
)
 
168

Total
$
214,065

 
$
(82,618
)
 
$
131,447

 
 
 
 
 
 
 
December 31, 2018
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Customer relationships
$
64,744

 
$
(17,033
)
 
$
47,711

Customer contracts
94,692

 
(53,156
)
 
41,536

Dedicated acreage
42,547

 
(7,592
)
 
34,955

Collaborative arrangements
11,884

 
(2,264
)
 
9,620

Other
198

 
(28
)
 
170

Total
$
214,065

 
$
(80,073
)
 
$
133,992


These intangible assets have definite lives and are subject to amortization on a straight-line basis over their economic lives, currently ranging from approximately 5 years to 30 years.

Amortization expense related to our intangible assets totaled $2.5 million and $2.7 million for the three months ended March 31, 2019 and 2018, respectively. The estimated aggregate amortization expected to be recognized for the remainder of 2019 and each of the four succeeding fiscal years is $7.6 million, $10.2 million, $10.2 million, $9.3 million and $6.6 million, respectively.

(8) Investments in unconsolidated affiliates

The following table presents the activity in our equity method investments in unconsolidated affiliates (in thousands):
 
Delta House (1)
 
 
 
 
 
 
 
FPS(2,4,5)
 
OGL(2,4,5)
 
Destin(4)
 
Tri-States(3)
 
Okeanos(4)
 
Wilprise(3)
 
Cayenne(3)
 
Total
Ownership %
35.7%
 
35.7%
 
66.7%
 
16.7%
 
66.7%
 
25.3%
 
50.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances at January 1, 2019
$
91,466

 
$
41,815

 
$
114,351

 
$
51,329

 
$
20,641

 
$
4,507

 
$
13,687

 
$
337,796

   Earnings in unconsolidated affiliates
10,488

 
4,456

 
5,693

 
1,132

 
2,177

 
200

 
1,964

 
26,110

   Distributions
(15,521
)
 
(6,296
)
 
(10,095
)
 
(2,184
)
 
(5,278
)
 
(272
)
 
(2,500
)
 
(42,146
)
Balances at March 31, 2019
$
86,433

 
$
39,975

 
$
109,949

 
$
50,277

 
$
17,540

 
$
4,435

 
$
13,151

 
$
321,760

___________________________________________________ 
(1) Represents direct and indirect ownership interests in Class A units and common units.

19

American Midstream Partners, LP and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)



(2) FPS denotes Floating Production System LLC whereas OGL denotes Oil & Gas Lateral LLC.
(3) Included in our Liquid Pipelines and Services segment.
(4) Included in our Offshore Pipelines and Services segment.
(5) Reflects a reclassification of investment of approximately $0.4 million between FPS and OGL as of January 1, 2019.
 
The difference between our carrying value and the underlying equity in the net assets of our equity investments are assigned to the investment's assets and liabilities based on an analysis of the factors giving rise to the basis difference. The amortization of the basis difference is included in Earnings from unconsolidated affiliates in our Consolidated Statements of Operations.

The following table represents the basis difference by unconsolidated affiliate (in thousands):
 
 
Delta House
 
 
 
 
 
 
 
 
FPS
 
OGL
 
Destin
 
Tri-States
 
Okeanos
 
Wilprise
 
Cayenne
 
Total
December 31, 2018
$
41,762

 
$
(8,424
)
 
$
826

 
$
30,587

 
$
(57,039
)
 
$
1,374

 
$
(3,666
)
 
$
5,420

March 31, 2019
$
41,343

 
$
(8,338
)
 
$
812

 
$
30,210

 
$
(56,164
)
 
$
1,346

 
$
(3,599
)
 
$
5,610


The following tables present the summarized combined financial information for our equity investments (amounts represent 100% of investee financial information) (in thousands):
Balance Sheets
 
March 31, 2019
 
December 31, 2018
Current assets
 
$
89,964

 
$
96,116

Non-current assets
 
1,233,777

 
1,239,733

Current liabilities
 
74,139

 
14,700

Non-current liabilities
 
486,320

 
542,047

 
 
Three months ended March 31,
Statements of Operations:
 
2019
 
2018
Revenue
 
$
89,756

 
$
56,898

Operating expenses
 
6,905

 
6,292

Net income
 
67,784

 
32,845


(9) Debt Obligations

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