Business Combinations

12 Months Ended

Dec. 31, 2012

Business Combinations

Business Combinations

3. Business Combinations

• Keystone Acquisition

        On May 29, 2012, the Partnership acquired natural gas gathering and processing assets from Keystone for a cash purchase price of approximately $507.3 million, giving effect to the final working capital adjustment. The Partnership paid cash of $509.6 million in May 2012 and has recorded a receivable for the $2.3 million working capital adjustment as of December 31, 2012.

        Keystone's existing assets are located in Butler County, Pennsylvania and include two cryogenic gas processing plants totaling approximately 90 MMcf/d of processing capacity, a gas gathering system and associated field compression. The acquisition is referred to as the "Keystone Acquisition".

        As a result of the Keystone Acquisition, the Partnership became a party to a long-term fee-based agreement to gather and process certain natural gas owned or controlled by Rex Energy, a subsidiary of Rex Energy Corporation, and Summit, a subsidiary of Sumitomo Corporation, at the acquired facilities and in 2013 to exchange the resulting NGLs for fractionated products at facilities already owned and operated by the Partnership. Rex and Summit have dedicated an area of approximately 900 square miles to the Partnership as part of this long-term gathering and processing agreement. As a result of the Keystone Acquisition, the Partnership has expanded its position in the liquids-rich Marcellus Shale area into northwest Pennsylvania.

        The Keystone Acquisition is accounted for as a business combination. The total purchase price is allocated to identifiable assets acquired and liabilities assumed based on the estimated fair values at the acquisition date. The remaining purchase price in excess of the fair value of the identifiable assets and liabilities is recorded as goodwill. The acquired assets and the related results of operations are included in the Partnership's Liberty segment. The following table summarizes the purchase price allocation for the Keystone Acquisition (in thousands):

Assets:
Cash	$	2,837
Accounts receivable		1,756
Inventory		86
Property, plant and equipment		136,593
Goodwill		74,256
Intangible asset		304,708
Liabilities:
Accounts payable		(12,117	)
Other short-term liabilities		(175	)
Other long-term liabilities		(632	)
Total	$	507,312

        The goodwill recognized from the Keystone Acquisition results primarily from synergies created from integrating the Keystone assets with the Partnership's existing Marcellus Shale operations and the Partnership's strengthened competitive position as it plans to expand its business in the newly developing liquids-rich areas of the Marcellus Shale. All of the goodwill is deductible for tax purposes.

        The intangible asset consists of an identifiable contractual customer relationship with Rex and Summit. The acquired intangible asset will be amortized on a straight-line basis over the estimated customer contract useful life of approximately 19 years.

        The results of operations of Keystone are included in the consolidated financial statements from the acquisition date. Revenue and net income related to Keystone are immaterial for the year ended December 31, 2012.

        Pro forma financial results that give effect to the Keystone Acquisition are not presented as any pro forma adjustments would not be material to the Partnership's historical results.

• Langley Acquisition

        On February 1, 2011, the Partnership acquired natural gas processing and NGL pipeline assets from EQT for a cash purchase price of approximately $230.7 million. The assets acquired include natural gas processing facilities located near Langley, Kentucky, consisting of a cryogenic natural gas processing plant with a capacity of approximately 100 MMcf/d and a refrigeration natural gas processing plant with a capacity of approximately 75 MMcf/d, the partially constructed Ranger pipeline that extends through parts of Kentucky and West Virginia, and certain other related assets. The acquired assets do not include certain residue gas compression and transportation facilities at the same location as the Langley Processing Facilities. This acquisition is referred to as the "Langley Acquisition". In connection with the Langley Acquisition, the Partnership completed the construction of the Ranger Pipeline to connect the Langley Processing Facilities to the Partnership's existing pipeline that transports NGLs to its Siloam fractionation facility in South Shore, Kentucky.

        Concurrently with the closing of the Langley Acquisition, the Partnership entered into a long-term agreement to process certain natural gas owned or controlled by EQT at the Langley Processing Facilities. In 2012, the Partnership installed an additional cryogenic natural gas processing plant with a capacity of 150 MMcf/d as required by the processing agreement. The Partnership exchanges the NGLs produced at the Langley Processing Facilities for fractionated products from its Siloam facility and markets the fractionated products on behalf of EQT in accordance with a long-term NGL exchange and marketing agreement. As a result of the acquisition, the Partnership has significantly expanded its midstream operations in the liquids-rich gas areas of the Appalachian Basin.

        The Langley Acquisition is accounted for as a business combination. The total purchase price is allocated to the identifiable assets acquired and liabilities assumed based on the estimated fair values at the acquisition date. The remaining purchase price in excess of the fair value of the identifiable assets and liabilities is recorded as goodwill. The acquired assets and the related results of operations are included in the Partnership's Northeast segment.

        The following table summarizes the purchase price allocation for the Langley Acquisition (in thousands):

Property, plant and equipment	$	136,525
Goodwill		58,497
Intangible asset		33,900
Inventory		1,806
Total	$	230,728

        The goodwill recognized from the Langley Acquisition results primarily from the Partnership's ability to continue to grow its business in the liquids-rich gas areas of the Appalachian Basin and access additional markets in a competitive environment as a result of securing the processing rights for a large area of dedicated acreage and acquiring expanded midstream infrastructure in the acquisition. All of the goodwill is deductible for tax purposes.

        The intangible asset consists of an identifiable customer contract. The acquired intangible will be amortized on a straight-line basis over the estimated remaining customer contract useful life of approximately twelve years.