3. ACQUISITIONS

Eagle Ford Acquisition

On March 31, 2015, we completed an acquisition of wellbore interests in certain producing oil and natural gas properties in Gonzales County, Texas (the “Eagle Ford properties,” and such acquisition, the “Eagle Ford acquisition”) located in the Eagle Ford Shale in Gonzales County, Texas from SN for a purchase price of $85 million, subject to normal and customary closing adjustments. The effective date of the transaction was January 1, 2015. The acquisition included initial conveyed working interests and net revenue interests for each property that escalate on January 1 for each year from 2016 through 2019, at which point, SPP’s interests in the Eagle Ford properties will stay constant for the remainder of the respective lives of the assets.

The adjusted purchase price of $83.4 million was funded at closing with net proceeds from the private placement of 10,625,000 newly created Class A Preferred Units, which were issued for a cash purchase price of $1.60 per unit, resulting in gross proceeds to SPP of $17.0 million, the issuance of 1,052,632 common units (approximately 105,263 common units after adjusting for a reverse unit split) to SN, borrowings under the Partnership’s Credit Agreement (as defined in Note 6, “Long-Term Debt”), and available cash. The total purchase price was allocated to the assets purchased and liabilities assumed based upon their fair values on the date of acquisition as follows (in thousands):


Proved developed reserves	$	72,889
Facilities		8,002
Fair value of hedges assumed		3,408
Fair value of assets acquired		84,299
Asset retirement obligations		(877)
Ad valorem tax liability		(44)
Fair value of net assets acquired	$	83,378

Western Catarina Midstream Acquisition

On October 14, 2015, we completed an acquisition of midstream assets located in Western Catarina, in the Eagle Ford Shale in South Texas from SN for a purchase price of $345.8 million, subject to normal and customary closing adjustments (the “Western Catarina Midstream acquisition”). The purchase price was funded at closing with net proceeds from the sale of Class B Preferred Units to Stonepeak Catarina Holdings LLC, an affiliate of Stonepeak Infrastructure Partners (“Stonepeak”) and available cash. Additionally, as a result of the Western Catarina Midstream acquisition, we repurchased 105,263 common units previously held by a subsidiary of SN.

The total purchase price was allocated to the assets purchased and liabilities assumed based upon their fair values on the date of acquisition as follows (in thousands):


Fixed assets	$	142,887
Contractual customer relationships		201,888
Purchase of SPP common units from SN		1,065
Fair value of assets acquired	$	345,840

Pro Forma Operating Results (Unaudited)

The following unaudited pro forma combined financial information for the six months ended June 30, 2016 and 2015 reflect the consolidated results of operations of the Partnership as if the Western Catarina Midstream and Eagle Ford acquisitions and related financings had occurred on January 1, 2015. The pro forma information includes adjustments primarily for revenues and expenses from the acquired properties, depreciation, depletion, amortization and accretion, interest expense and debt issuance cost amortization for acquisition debt, amortization of customer contract intangible assets acquired and paid-in-kind units issued in connection with the Class A Preferred Units.

The unaudited pro forma combined financial statements give effect to the events set forth below:

The Western Catarina Midstream acquisition completed on October 14, 2015.

Issuance of Class B Preferred Units to finance the Western Catarina Midstream acquisition.

Repurchase of common units issued to finance a portion of the Eagle Ford acquisition as a part of the Western Catarina Midstream acquisition, and the related effect on net income (loss) per common unit.

The Eagle Ford acquisition completed on March 31, 2015.

The increase in borrowings under the Credit Agreement to finance a portion of the Eagle Ford acquisition, and the related adjustments to interest expense.

Issuance of common units to finance a portion of the Eagle Ford acquisition and the related effect on net income (loss) per common unit (in thousands, except per unit amounts).


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Revenues	$	12,346	$	15,375	$	35,515	$	41,121
Net income (loss) attributable to common unitholders	$	(17,630)	$	(23,087)	$	(27,923)	$	(124,982)
Net income (loss) per unit prior to conversion
Class A units - Basic and diluted	$	—	$	—	$	—	$	(23.87)
Class B units - Basic and diluted	$	—	$	—	$	—	$	(18.99)
Net income (loss) per unit after conversion
Common units - Basic and diluted	$	(4.48)	$	(5.39)	$	(7.13)	$	(15.37)

The unaudited pro forma combined financial information is for informational purposes only and is not intended to represent or to be indicative of the combined results of operations that the Partnership would have reported had the Western Catarina Midstream and Eagle Ford acquisitions and related financings been completed as of the date set forth in this unaudited pro forma combined financial information and should not be taken as indicative of the Partnership’s future combined results of operations. The actual results may differ significantly from that reflected in the unaudited pro forma combined financial information for a number of reasons, including, but not limited to, differences in assumptions used to prepare the unaudited pro forma combined financial information and actual results.

Post-Acquisition Operating Results

The amounts of revenue and excess of revenues over direct operating expenses included in the Partnership’s condensed consolidated statements of operations for the three and six months ended June 30, 2016, for the Eagle Ford and Western Catarina Midstream acquisitions are shown in the table that follows. Direct operating expenses include lease operating expenses and production and ad valorem taxes (in thousands):


	Three
	Months Ended		Six Months Ended
	June 30, 2016		June 30, 2016
Revenues	$	16,485	$	32,157
Excess of revenues over direct operating expenses	$	12,324	$	23,822