DCP Midstream, LP [DCP] Filings

10-Q 1 dpm-20220331.htm 10-Q dpm-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


ý			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


¨			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: 001-32678

DCP MIDSTREAM, LP

(Exact name of registrant as specified in its charter)


Delaware						03-0567133
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

6900 E. Layton Ave, Suite 900 Denver, Colorado						80237
(Address of principal executive offices)						(Zip Code)

(303) 595-3331

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

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

DCP

New York Stock Exchange

7.875% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

DCP PRB

New York Stock Exchange

7.95% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

DCP PRC

New York Stock Exchange

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. Yes ý 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). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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

Emerging growth company

Non-accelerated filer

Smaller reporting 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 ¨ No ý

As of April 29, 2022, there were 208,383,409 common units representing limited partnership interests outstanding.

DCP MIDSTREAM, LP

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022

TABLE OF CONTENTS



Item		Page
	PART I. FINANCIAL INFORMATION
1	Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	2
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021	3
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021	5
	Condensed Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2022	6
	Condensed Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2021	7
	Notes to the Condensed Consolidated Financial Statements	8
2	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
3	Quantitative and Qualitative Disclosures about Market Risk	42
4	Controls and Procedures	45
	PART II. OTHER INFORMATION
1	Legal Proceedings	45
1A	Risk Factors	45

6	Exhibits	46
	Signatures	47

GLOSSARY OF TERMS

The following is a list of terms used in the industry and throughout this report:



ASU						accounting standards update
Bbl						barrel
Bbls/d						barrels per day
Bcf						billion cubic feet
Bcf/d						billion cubic feet per day
Btu						British thermal unit, a measurement of energy
Credit Agreement						Credit Agreement governing our $1.4 billion unsecured revolving credit facility, maturing March 18, 2027
Fractionation						the process by which natural gas liquids are separated into individual components
GAAP						generally accepted accounting principles in the United States of America


LIBOR						London Interbank Offered Rate
MBbls						thousand barrels
MBbls/d						thousand barrels per day
MMBtu						million Btus
MMBtu/d						million Btus per day
MMcf						million cubic feet
MMcf/d						million cubic feet per day
NGLs						natural gas liquids
OPEC						Organization of the Petroleum Exporting Countries
OPEC+						OPEC members plus ten other oil producing countries
OPIS						Oil Price Information Service

SEC						U.S. Securities and Exchange Commission
Securitization Facility						$350 million Accounts Receivable Securitization Facility, maturing August 12, 2024
SOFR						Secured Overnight Financing Rate
TBtu/d						trillion Btus per day
Throughput						the volume of product transported or passing through a pipeline or other facility

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

Our reports, filings and other public announcements may from time to time contain statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can typically identify forward-looking statements by the use of forward-looking words, such as “may,” “could,” “should,” “intend,” “assume,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “plan,” “forecast” and other similar words.

All statements that are not statements of historical facts, including, but not limited to, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements.

These forward-looking statements reflect our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Known risks and uncertainties include, but are not limited to, the risks set forth in Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and in our Annual Report on Form 10-K for the year ended December 31, 2021, including the following risks and uncertainties:

•the impact resulting from the COVID-19 pandemic and disruption to economies around the world including the oil, gas and NGL industry in which we operate and the resulting adverse impact on our business, liquidity, commodity prices, workforce, third-party and counterparty effects and resulting federal, state and local actions;

•the extent of changes in commodity prices and the demand for our products and services, our ability to effectively limit a portion of the adverse impact of potential changes in commodity prices through derivative financial instruments, and the potential impact of price, and of producers’ access to capital on natural gas drilling, demand for our services, and the volume of NGLs and condensate extracted;

•the demand for crude oil, residue gas and NGL products;

•the level and success of drilling and quality of production volumes around our assets and our ability to connect supplies to our gathering and processing systems, as well as our residue gas and NGL infrastructure;

•new, additions to, and changes in, laws and regulations, particularly with regard to taxes, safety, regulatory and protection of the environment, including, but not limited to, climate change legislation, regulation of over-the-counter derivatives markets and entities, and hydraulic fracturing regulations, or the increased regulation of our industry, including additional local control over such activities, and their impact on producers and customers served by our systems;

•volatility in the price of our common units and preferred units;

•general economic, market and business conditions;

•the amount of natural gas we gather, compress, treat, process, transport, store and sell, or the NGLs we produce, fractionate, transport, store and sell, may be reduced if the pipelines, storage and fractionation facilities to which we deliver the natural gas or NGLs are capacity constrained and cannot, or will not, accept the natural gas or NGLs or we may be required to find alternative markets and arrangements for our natural gas and NGLs;

•our ability to continue the safe and reliable operation of our assets;

•our ability to grow through organic growth projects, or acquisitions, and the successful integration and future performance of such assets;

•our ability to access the debt and equity markets and the resulting cost of capital, which will depend on general market conditions, our financial and operating results, inflation rates, interest rates, our ability to comply with the covenants in our Credit Agreement or other credit facilities, and the indentures governing our notes, as well as our ability to maintain our credit ratings;

•the creditworthiness of our customers and the counterparties to our transactions, including the impact of bankruptcies;

•the amount of collateral we may be required to post from time to time in our transactions;

•industry changes, including consolidations, alternative energy sources, technological advances, infrastructure constraints and changes in competition;

•our ability to construct and start up facilities on budget and in a timely fashion, which is partially dependent on obtaining required construction, environmental and other permits issued by federal, state and municipal governments, or agencies thereof, the availability of specialized contractors and laborers, and the price of and demand for materials;

•our ability to hire, train, and retain qualified personnel and key management to execute our business strategy;

•weather, weather-related conditions and other natural phenomena, including, but not limited to, their potential impact on demand for the commodities we sell and the operation of company-owned and third party-owned infrastructure;

•security threats such as terrorist attacks, and cybersecurity attacks and breaches, against, or otherwise impacting, our facilities and systems; and

•our ability to obtain insurance on commercially reasonable terms, if at all, as well as the adequacy of insurance to cover our losses.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. The forward-looking statements in this report speak as of the filing date of this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.

iii

PART I

Item 1. Financial Statements

DCP MIDSTREAM, LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	March 31, 2022		December 31, 2021
ASSETS	(millions)
Current assets:
Cash and cash equivalents	$	1	$	1


Accounts receivable:
Trade, net of allowance for credit losses of $1 and $2 million, respectively	1,130		1,029
Affiliates	619		389
Other	11		7
Inventories	46		77
Unrealized gains on derivative instruments	94		86

Collateral cash deposits	261		128
Other	18		32
Total current assets	2,180		1,749
Property, plant and equipment, net	7,632		7,701

Intangible assets, net	37		39
Investments in unconsolidated affiliates	3,554		3,578
Unrealized gains on derivative instruments	35		10
Operating lease assets	101		104
Other long-term assets	212		199
Total assets	$	13,751	$	13,380
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade	$	1,237	$	977
Affiliates	263		205
Other	25		16

Current debt	505		355
Unrealized losses on derivative instruments	288		145
Accrued interest	68		79
Accrued taxes	65		51
Accrued wages and benefits	31		60
Capital spending accrual	2		7

Other	96		115
Total current liabilities	2,580		2,010
Long-term debt	4,838		5,078
Unrealized losses on derivative instruments	78		30
Deferred income taxes	34		34
Operating lease liabilities	92		93
Other long-term liabilities	258		259
Total liabilities	7,880		7,504
Commitments and contingent liabilities (see note 12)
Equity:
Series A preferred limited partners (500,000 preferred units authorized, issued and outstanding, respectively)	498		489
Series B preferred limited partners (6,450,000 preferred units authorized, issued and outstanding, respectively)	156		156
Series C preferred limited partners (4,400,000 preferred units authorized, issued and outstanding, respectively)	106		106

Limited partners (208,383,409 and 208,373,672 common units authorized, issued and outstanding, respectively)	5,092		5,106
Accumulated other comprehensive loss	(6)		(6)
Total partners’ equity	5,846		5,851
Noncontrolling interests	25		25
Total equity	5,871		5,876
Total liabilities and equity	$	13,751	$	13,380

See accompanying notes to condensed consolidated financial statements.

DCP MIDSTREAM, LP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three Months Ended March 31,
			2022		2021
		(millions, except per unit amounts)
Operating revenues:
Sales of natural gas, NGLs and condensate			$	2,328	$	2,014
Sales of natural gas, NGLs and condensate to affiliates			1,127		555
Transportation, processing and other			155		118
Trading and marketing losses, net			(235)		(369)

Total operating revenues			3,375		2,318
Operating costs and expenses:
Purchases and related costs			2,719		1,763
Purchases and related costs from affiliates			99		55
Transportation and related costs from affiliates			257		219
Operating and maintenance expense			152		149
Depreciation and amortization expense			90		91
General and administrative expense			55		38



Gain on sale of assets, net			(7)		—

Total operating costs and expenses			3,365		2,315
Operating income			10		3

Earnings from unconsolidated affiliates			143		128
Interest expense, net			(71)		(77)
Income before income taxes			82		54
Income tax expense			(1)		—
Net income			81		54
Net income attributable to noncontrolling interests			(1)		(1)
Net income attributable to partners			80		53

Series A preferred limited partners' interest in net income			(9)		(9)
Series B preferred limited partners' interest in net income			(3)		(3)
Series C preferred limited partners' interest in net income			(2)		(2)

Net income allocable to limited partners			$	66	$	39
Net income per limited partner unit — basic and diluted			$	0.32	$	0.19

Weighted-average limited partner units outstanding — basic			208.4		208.4
Weighted-average limited partner units outstanding — diluted			208.8		208.5

See accompanying notes to condensed consolidated financial statements.

DCP MIDSTREAM, LP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three Months Ended March 31,
			2022		2021
		(millions)
Net income			$	81	$	54
Other comprehensive income:


Total other comprehensive income			—		—
Total comprehensive income			81		54
Total comprehensive income attributable to noncontrolling interests			(1)		(1)
Total comprehensive income attributable to partners			$	80	$	53

See accompanying notes to condensed consolidated financial statements.

DCP MIDSTREAM, LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Three Months Ended March 31,
	2022		2021
	(millions)
OPERATING ACTIVITIES:
Net income	$	81	$	54
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	90		91
Earnings from unconsolidated affiliates	(143)		(128)
Distributions from unconsolidated affiliates	168		129
Net unrealized losses on derivative instruments	176		53


Gain on sale of assets, net	(7)		—

Other, net	2		2
Change in operating assets and liabilities, which (used) provided cash:
Accounts receivable	(334)		(245)
Inventories	31		8
Accounts payable	327		170



Other assets and liabilities	(202)		(138)
Net cash provided by (used in) operating activities	189		(4)
INVESTING ACTIVITIES:
Capital expenditures	(23)		(14)


Investments in unconsolidated affiliates	(1)		—

Proceeds from sale of assets	16		—

Net cash used in investing activities	(8)		(14)
FINANCING ACTIVITIES:
Proceeds from debt	1,542		1,143
Payments of debt	(1,632)		(1,086)






Distributions to preferred limited partners	(5)		(5)

Distributions to limited partners and general partner	(81)		(81)
Distributions to noncontrolling interests	(1)		(1)
Debt issuance costs	(4)		—



Net cash used in financing activities	(181)		(30)
Net change in cash, cash equivalents and restricted cash	—		(48)
Cash, cash equivalents and restricted cash, beginning of period	1		56
Cash, cash equivalents and restricted cash, end of period	$	1	$	8

Reconciliation of cash, cash equivalents, and restricted cash:	March 31, 2022		March 31, 2021
Cash and cash equivalents	$	1	$	5
Restricted cash included in other current assets	—		3

Total cash, cash equivalents, and restricted cash	$	1	$	8

See accompanying notes to condensed consolidated financial statements.

DCP MIDSTREAM, LP

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(unaudited)


	Partners' Equity
		Series A Preferred Limited Partners		Series B Preferred Limited Partners		Series C Preferred Limited Partners		Limited Partners		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity
	(millions)
Balance, January 1, 2022		$	489	$	156	$	106	$	5,106	$	(6)	$	25	$	5,876
Net income		9		3		2		66		—		1		81
Distributions to unitholders		—		(3)		(2)		(81)		—		—		(86)
Distributions to noncontrolling interests		—		—		—		—		—		(1)		(1)
Equity based compensation		—		—		—		1		—		—		1

Balance, March 31, 2022		$	498	$	156	$	106	$	5,092	$	(6)	$	25	$	5,871

See accompanying notes to condensed consolidated financial statements.

DCP MIDSTREAM, LP

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(unaudited)


	Partner's Equity
	Series A Preferred Limited Partners		Series B Preferred Limited Partners		Series C Preferred Limited Partners		Limited Partners		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity
	(millions)
Balance, January 1, 2021	$	489	$	156	$	106	$	5,090	$	(7)	$	27	$	5,861
Net income	9		3		2		39		—		1		54
Distributions to unitholders	—		(3)		(2)		(81)		—		—		(86)
Distributions to noncontrolling interests	—		—		—		—		—		(1)		(1)
Equity based compensation	—		—		—		4		—		—		4
Balance, March 31, 2021	$	498	$	156	$	106	$	5,052	$	(7)	$	27	$	5,832

See accompanying notes to condensed consolidated financial statements.

DCP MIDSTREAM, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31, 2022 and 2021

(unaudited)

1. Description of Business and Basis of Presentation

DCP Midstream, LP, with its consolidated subsidiaries, or “us,” “we,” “our” or the “Partnership” is a Delaware limited partnership formed in 2005 by DCP Midstream, LLC to own, operate, acquire and develop a diversified portfolio of complementary midstream energy assets.

Our Partnership includes our Logistics and Marketing and Gathering and Processing segments. For additional information regarding these segments, see Note 13 - Business Segments.

Our operations and activities are managed by our general partner, DCP Midstream GP, LP, which in turn is managed by its general partner, DCP Midstream GP, LLC, which we refer to as the General Partner, and which is 100% owned by DCP Midstream, LLC. DCP Midstream, LLC and its subsidiaries and affiliates, collectively referred to as DCP Midstream, LLC, is owned 50% by Phillips 66 and 50% by Enbridge Inc. and its affiliates, or Enbridge. DCP Midstream, LLC directs our business operations through its ownership and control of the General Partner. As of March 31, 2022, DCP Midstream, LLC, together with our general partner, owned approximately 57% of us through limited partner interests.

The condensed consolidated financial statements include the accounts of the Partnership and all majority-owned subsidiaries where we have the ability to exercise control. Investments in greater than 20% owned affiliates that are not variable interest entities and where we do not have the ability to exercise control, and investments in less than 20% owned affiliates where we have the ability to exercise significant influence, are accounted for using the equity method.

The condensed consolidated financial statements have been prepared in accordance with GAAP. Conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and notes. Although these estimates are based on management's best available knowledge of current and expected future events, actual results could differ from these estimates, which may be significantly impacted by various factors, including those outside of our control, such as the impact of a sustained deterioration in commodity prices and volumes, which would negatively impact our results of operations, financial condition and cash flows. All intercompany balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q have been prepared pursuant to the rules and regulations of the SEC. Accordingly, these condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the respective interim periods. Certain information and note disclosures normally included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted from these interim financial statements pursuant to such rules and regulations, although we believe that the disclosures made are adequate to make the information presented not misleading. Results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. These unaudited condensed consolidated financial statements and other information included in this Quarterly Report on Form 10-Q should be read in conjunction with the 2021 audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.

2. Revenue Recognition

We disaggregate our revenue from contracts with customers by type of contract for each of our reportable segments, as we believe it best depicts the nature, timing and uncertainty of our revenue and cash flows. The following tables set forth our revenue by those categories:


	Three Months Ended March 31, 2022
	Logistics and Marketing		Gathering and Processing		Eliminations		Total
	(millions)
Sales of natural gas	$	1,063	$	882	$	(821)	$	1,124
Sales of NGLs and condensate (a)	2,122		1,282		(1,073)		2,331
Transportation, processing and other	19		136		—		155
Trading and marketing losses, net (b)	(41)		(194)		—		(235)
Total operating revenues	$	3,163	$	2,106	$	(1,894)	$	3,375

DCP MIDSTREAM, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31, 2022 and 2021

(unaudited)

(a) Includes $676 million of revenues from physical sales contracts and buy-sell exchange transactions in our Logistics and Marketing segment for the three months ended March 31, 2022, which is net of $756 million of buy-sell purchases related to buy-sell revenues of $851 million that are not within the scope of FASB ASC 606 "Revenue from Contractors with Customer" ("Topic 606").

(b) Not within the scope of Topic 606.


	Three Months Ended March 31, 2021
	Logistics and Marketing		Gathering and Processing		Eliminations		Total
	(millions)
Sales of natural gas	$	1,120	$	628	$	(508)	$	1,240
Sales of NGLs and condensate (a)	1,205		710		(586)		1,329
Transportation, processing and other	14		104		—		118
Trading and marketing losses, net (b)	(241)		(128)		—		(369)
Total operating revenues	$	2,098	$	1,314	$	(1,094)	$	2,318

(a) Includes $414 million of revenues from physical sales contracts and buy-sell exchange transactions in our Logistics and Marketing segment for the three months ended March 31, 2021, which is net of $390 million of buy-sell purchases related to buy-sell revenues of $444 million that are not within the scope of Topic 606.

(b) Not within the scope of Topic 606.

The revenue expected to be recognized in the future related to performance obligations that are not satisfied is approximately $419 million as of March 31, 2022. Our remaining performance obligations primarily consist of minimum volume commitment fee arrangements and are expected to be recognized through 2031 with a weighted average remaining life of three years as of March 31, 2022. As a practical expedient permitted by Topic 606, this amount excludes variable consideration as well as remaining performance obligations that have original expected durations of one year or less, as applicable. Our remaining performance obligations also exclude estimates of variable rate escalation clauses in our contracts with customers.

3. Agreements and Transactions with Affiliates

DCP Midstream, LLC

The following table summarizes employee related costs that were charged by DCP Midstream, LLC to the Partnership that are included in the condensed consolidated statements of operations:


	Three Months Ended March 31,
			2022		2021
		(millions)
Employee related costs charged by DCP Midstream, LLC
Operating and maintenance expense			$	40	$	39
General and administrative expense			$	33	$	26

DCP MIDSTREAM, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31, 2022 and 2021

(unaudited)

Summary of Transactions with Affiliates

The following table summarizes our transactions with affiliates:


	Three Months Ended March 31,
			2022		2021
		(millions)
Phillips 66 (including its affiliates):
Sales of natural gas, NGLs and condensate to affiliates			$	1,095	$	527
Purchases and related costs from affiliates			$	62	$	30
Transportation and related costs from affiliates			$	43	$	37
Operating and maintenance and general administrative expenses			$	3	$	2
Enbridge (including its affiliates):
Sales of natural gas, NGLs and condensate to affiliates			$	—	$	4
Purchases and related costs from affiliates			$	13	$	7


Unconsolidated affiliates:
Sales of natural gas, NGLs and condensate to affiliates			$	32	$	24
Transportation, processing, and other to affiliates			$	4	$	5
Purchases and related costs from affiliates			$	24	$	18
Transportation and related costs from affiliates			$	214	$	182

We had balances with affiliates as follows:


	March 31, 2022		December 31, 2021
	(millions)
Phillips 66 (including its affiliates):
Accounts receivable	$	585	$	361
Accounts payable	$	165	$	114
Other assets	$	—	$	1
Enbridge (including its affiliates):

Accounts payable	$	5	$	4


Unconsolidated affiliates:
Accounts receivable	$	34	$	28
Accounts payable	$	93	$	87

4. Inventories

Inventories were as follows:


	March 31, 2022		December 31, 2021
	(millions)
Natural gas	$	26	$	43
NGLs	20		34
Total inventories	$	46	$	77

We recognize lower of cost or net realizable value adjustments when the carrying value of our inventories exceeds their net realizable value. These non-cash charges are a component of purchases and related costs in the condensed consolidated statements of operations. We recognized no lower of cost or net realizable value adjustments for the three months ended March 31, 2022 and 2021.

DCP MIDSTREAM, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31, 2022 and 2021

(unaudited)

5. Property, Plant and Equipment

A summary of property, plant and equipment by classification is as follows:


	Depreciable Life	March 31, 2022		December 31, 2021
		(millions)
Gathering and transmission systems	20 — 50 Years	$	7,657	$	7,645
Processing, storage and terminal facilities	35 — 60 Years	5,064		5,057
Other	3 — 30 Years	557		585
Finance lease assets	2 — 5 Years	29		28
Construction work in progress		101		103
Property, plant and equipment		13,408		13,418
Accumulated depreciation		(5,776)		(5,717)
Property, plant and equipment, net		$	7,632	$	7,701

There were no construction projects with capitalized interest during the three months ended March 31, 2022 and 2021.

Depreciation expense was $89 million and $90 million for the three months ended March 31, 2022 and 2021, respectively.

6. Investments in Unconsolidated Affiliates

The following table summarizes our investments in unconsolidated affiliates:


		Carrying Value as of
	Percentage Ownership	March 31, 2022		December 31, 2021
		(millions)
DCP Sand Hills Pipeline, LLC	66.67%	$	1,692	$	1,703
DCP Southern Hills Pipeline, LLC	66.67%	724		728
Gulf Coast Express LLC	25.00%	418		422
Front Range Pipeline LLC	33.33%	194		195
Texas Express Pipeline LLC	10.00%	93		94
Mont Belvieu 1 Fractionator	20.00%	7		6
Discovery Producer Services LLC	40.00%	229		231
Cheyenne Connector, LLC	50.00%	146		148
Mont Belvieu Enterprise Fractionator	12.50%	28		28


Other	Various	23		23
Total investments in unconsolidated affiliates		$	3,554	$	3,578

DCP MIDSTREAM, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31, 2022 and 2021

(unaudited)

Earnings from investments in unconsolidated affiliates were as follows:


	Three Months Ended March 31,
			2022		2021
		(millions)
DCP Sand Hills Pipeline, LLC			$	71	$	62
DCP Southern Hills Pipeline, LLC			24		24
Gulf Coast Express LLC			16		15
Front Range Pipeline LLC			10		9
Texas Express Pipeline LLC			5		4
Mont Belvieu 1 Fractionator			4		2
Discovery Producer Services LLC			6		8
Cheyenne Connector, LLC			4		3
Mont Belvieu Enterprise Fractionator			2		1

Other			1		—
Total earnings from unconsolidated affiliates			$	143	$	128

The following tables summarize the combined financial information of our investments in unconsolidated affiliates:


	Three Months Ended March 31,
		2022		2021
		(millions)
Statements of operations:
Operating revenue		$	563	$	489
Operating expenses		$	217	$	190
Net income		$	344	$	298

7. Fair Value Measurement

Valuation Hierarchy

Our fair value measurements are grouped into a three-level valuation hierarchy and are categorized in their entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows.

•Level 1 — inputs are unadjusted quoted prices for identical assets or liabilities in active markets.

•Level 2 — inputs include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•Level 3 — inputs are unobservable and considered significant to the fair value measurement.

A financial instrument’s categorization within the hierarchy is based upon the level of judgment involved in the most significant input in the determination of the instrument’s fair value. Following is a description of the valuation methodologies used as well as the general classification of such instruments pursuant to the hierarchy.

Commodity Derivative Assets and Liabilities

We enter into a variety of derivative financial instruments, which may include exchange traded instruments (such as New York Mercantile Exchange, or NYMEX, crude oil or natural gas futures) or over-the-counter, or OTC, instruments (such as natural gas contracts, crude oil or NGL swaps). The exchange traded instruments are generally executed with a highly rated broker dealer serving as the clearinghouse for individual transactions.

DCP MIDSTREAM, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31, 2022 and 2021

(unaudited)

Our activities expose us to varying degrees of commodity price risk. To mitigate a portion of this risk and to manage commodity price risk related primarily to owned natural gas storage and pipeline assets, we engage in natural gas asset based trading and marketing, and we may enter into natural gas and crude oil derivatives to lock in a specific margin when market conditions are favorable. A portion of this may be accomplished through the use of exchange traded derivative contracts. Such instruments are generally classified as Level 1 since the value is equal to the quoted market price of the exchange traded instrument as of our balance sheet date, and no adjustments are required. Depending upon market conditions and our strategy we may enter into exchange traded derivative positions with a significant time horizon to maturity. Although such instruments are exchange traded, market prices may only be readily observable for a portion of the duration of the instrument. In order to calculate the fair value of these instruments, readily observable market information is utilized to the extent it is available; however, in the event that readily observable market data is not available, we may interpolate or extrapolate based upon observable data. In instances where we utilize an interpolated or extrapolated value, and it is considered significant to the valuation of the contract as a whole, we would classify the instrument within Level 3.

We also engage in the business of trading energy related products and services, which exposes us to market variables and commodity price risk. We may enter into physical contracts or financial instruments with the objective of realizing a positive margin from the purchase and sale of these commodity-based instruments. We may enter into derivative instruments for NGLs or other energy related products, primarily using the OTC derivative instrument markets, which are not as active and liquid as exchange traded instruments. Market quotes for such contracts may only be available for short dated positions (up to six months), and an active market itself may not exist beyond such time horizon. Contracts entered into with a relatively short time horizon for which prices are readily observable in the OTC market are generally classified within Level 2. Contracts with a longer time horizon, for which we internally generate a forward curve to value such instruments, are generally classified within Level 3. The internally generated curve may utilize a variety of assumptions including, but not limited to, data obtained from third-party pricing services, historical and future expected relationship of NGL prices to crude oil prices, the knowledge of expected supply sources coming online, expected weather trends within certain regions of the United States, and the future expected demand for NGLs.

Each instrument is assigned to a level within the hierarchy at the end of each financial quarter depending upon the extent to which the valuation inputs are observable. Generally, an instrument will move toward a level within the hierarchy that requires a lower degree of judgment as the time to maturity approaches, and as the markets in which the asset trades will likely become more liquid and prices more readily available in the market, thus reducing the need to rely upon our internally developed assumptions. However, the level of a given instrument may change, in either direction, depending upon market conditions and the availability of market observable data.

The following table presents the financial instruments carried at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, by condensed consolidated balance sheet caption and by valuation hierarchy, as described above:


	March 31, 2022								December 31, 2021
	Level 1		Level 2		Level 3		Total Carrying Value		Level 1		Level 2		Level 3		Total Carrying Value
	(millions)
Current assets:
Commodity derivatives	$	47	$	45	$	2	$	94	$	24	$	62	$	—	$	86
Short-term investments (a)	$	4	$	—	$	—	$	4	$	4	$	1	$	—	$	5

Long-term assets:
Commodity derivatives	$	—	$	31	$	4	$	35	$	—	$	8	$	2	$	10
Investments in marketable securities (a)	$	35	$	—	$	—	$	35	$	28	$	—	$	—	$	28
Current liabilities:
Commodity derivatives	$	(78)	$	(200)	$	(10)	$	(288)	$	(42)	$	(100)	$	(3)	$	(145)

Long-term liabilities:
Commodity derivatives	$	—	$	(73)	$	(5)	$	(

DCP Midstream, LP [DCP] Filings
DCP Midstream, LP [DCP-PB] Filings
DCP Midstream, LP [DCP-PC] Filings
10-Q	[2022-05-05]
10-K	[2022-02-18]
10-Q	[2021-11-03]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-02-19]
10-Q	[2020-11-05]
10-Q	[2020-08-06]
10-Q	[2020-05-07]
10-K	[2020-02-21]
10-Q	[2019-11-07]
10-Q	[2019-08-07]
10-Q	[2019-05-07]
10-K	[2019-02-25]
10-Q	[2018-11-06]
10-Q	[2018-08-08]
10-Q	[2018-05-08]
10-K	[2018-02-26]
10-Q	[2017-11-08]
10-Q	[2017-08-09]
10-Q	[2017-05-10]
10-K	[2017-02-15]
10-Q	[2016-11-03]
10-Q	[2016-08-04]
10-Q	[2016-05-05]
10-K	[2016-02-25]
10-Q	[2015-11-05]
10-Q	[2015-08-06]
10-Q	[2015-05-07]
10-K	[2015-02-25]
10-Q	[2014-11-06]
10-Q	[2014-08-06]
10-Q	[2014-05-07]
10-K	[2014-02-26]
10-Q	[2013-11-06]
10-Q	[2013-08-06]
10-Q	[2013-05-07]
10-K	[2013-02-27]
10-Q	[2012-11-07]
10-Q	[2012-08-08]
10-Q	[2012-05-10]
10-K	[2012-02-29]

DCP Midstream, LP [DCP] Filings

DCP Midstream, LP [DCP-PB] Filings

DCP Midstream, LP [DCP-PC] Filings