2. Business Acquisitions

August 2014 MidCon Acquisition

On August 8, 2014, we completed an acquisition of natural gas compression assets, including a fleet of 162 compressor units, comprising approximately 110,000 horsepower from MidCon Compression, L.L.C. (“MidCon”) for $130.1 million (the “August 2014 MidCon Acquisition”). The purchase price was funded with borrowings under our revolving credit facility. The majority of the horsepower we acquired is utilized under a five-year contract operations services agreement with BHP Billiton Petroleum (“BHP Billiton”) to provide compression services. In connection with the acquisition, the contract operations services agreement with BHP Billiton was assigned to us effective as of the closing. During the year ended December 31, 2014, we incurred transaction costs of approximately $1.0 million related to the August 2014 MidCon Acquisition, which is reflected in other (income) expense, net, in our consolidated statements of operations.

In accordance with the terms of the Purchase and Sale Agreement relating to this acquisition, we directed MidCon to sell a tract of real property and the facility located thereon, a fleet of vehicles, personal property and parts inventory to a wholly-owned subsidiary of Exterran Holdings that is our indirect parent company for $4.1 million.

We accounted for the August 2014 MidCon Acquisition using the acquisition method, which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair value on the acquisition date. The excess of the consideration transferred over those fair values is recorded as goodwill. The following table summarizes the purchase price allocation based on estimated fair values of the acquired assets and liabilities as of the acquisition date (in thousands):

	Fair Value
Property, plant and equipment	$	78,356
Goodwill	3,738
Intangible assets	48,373
Current liabilities	(372		)
Purchase price	$	130,095

Property, Plant and Equipment, Goodwill and Intangible Assets Acquired

Property, plant and equipment is comprised of compression equipment that will be depreciated on a straight-line basis over an estimated average remaining useful life of 24 years.

Goodwill of $3.7 million resulting from the acquisition is attributable to the expansion of our services in the region. The goodwill recorded is considered to have an indefinite life and will be reviewed annually for impairment or more frequently if indicators of impairment exist.

The amount of finite life intangible assets, and their associated average useful lives, was determined based on the period which the assets are expected to contribute directly or indirectly to our future cash flows, consisting of the following:

	Amount (In thousands)		Average Useful Life
Customer related	$	21,590	25 years
Contract based	26,783		5 years
Total acquired identifiable intangible assets	$	48,373

The results of operations attributable to the assets acquired in the August 2014 MidCon Acquisition have been included in our consolidated financial statements since the date of acquisition. Revenue attributable to the assets acquired in the August 2014 MidCon Acquisition was $9.2 million from the date of acquisition through December 31, 2014. We are unable to provide earnings attributable to the assets acquired in the August 2014 MidCon Acquisition since the date of acquisition as we do not prepare full stand-alone earnings reports for those assets.

April 2014 MidCon Acquisition

On April 10, 2014, we completed an acquisition of natural gas compression assets, including a fleet of 337 compressor units, comprising approximately 444,000 horsepower from MidCon for $352.9 million (the “April 2014 MidCon Acquisition”). The purchase price was funded with the net proceeds from the sale, pursuant to a public underwritten offering, of 6.2 million common units and a portion of the net proceeds from the issuance of $350.0 million aggregate principal amount of 6% senior notes due October 2022 (the “2014 Notes”). The compressor units were previously used by MidCon to provide compression services to a subsidiary of Access. Effective as of the closing of the acquisition, we and Access entered into a seven-year contract operations services agreement under which we provide compression services to Williams (formerly Access). During the year ended December 31, 2014, we incurred transaction costs of approximately $1.5 million related to the April 2014 MidCon Acquisition, which is reflected in other (income) expense, net, in our consolidated statements of operations.

We accounted for the April 2014 MidCon Acquisition using the acquisition method, which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair value on the acquisition date. The following table summarizes the purchase price allocation based on estimated fair values of the acquired assets and liabilities as of the acquisition date (in thousands):

	Fair Value
Property, plant and equipment	$	311,270
Intangible assets	42,474
Current liabilities	(827		)
Purchase price	$	352,917

Property, Plant and Equipment and Intangible Assets Acquired

Property, plant and equipment is comprised of compression equipment that will be depreciated on a straight-line basis over an estimated average remaining useful life of 25 years.

	Amount (In thousands)		Average Useful Life
Customer related	$	4,701	25 years
Contract based	37,773		7 years
Total acquired identifiable intangible assets	$	42,474

The results of operations attributable to the assets acquired in the April 2014 MidCon Acquisition have been included in our consolidated financial statements since the date of acquisition. Revenue attributable to the assets acquired in the April 2014 MidCon Acquisition was $64.5 million from the date of acquisition through December 31, 2014. We are unable to provide earnings attributable to the assets acquired in the April 2014 MidCon Acquisition since the date of acquisition as we do not prepare full stand-alone earnings reports for those assets.

March 2013 Contract Operations Acquisition

In March 2013, we acquired from Exterran Holdings contract operations customer service agreements with 50 customers and a fleet of 363 compressor units used to provide compression services under those agreements, comprising approximately 256,000 horsepower, or 8% (by then available horsepower) of the combined U.S. contract operations business of Exterran Holdings and us (the “March 2013 Contract Operations Acquisition”). The acquired assets also included 204 compressor units, comprising approximately 99,000 horsepower, previously leased from Exterran Holdings to us and contracts relating to approximately 6,000 horsepower of compressor units we already owned and previously leased to Exterran Holdings. At the acquisition date, the acquired fleet assets had a net book value of $158.5 million, net of accumulated depreciation of $94.9 million. Total consideration for the transaction was approximately $174.0 million, excluding transaction costs. In connection with this acquisition, we issued approximately 7.1 million common units to Exterran Holdings and approximately 145,000 general partner units to our general partner.

In connection with this acquisition, we were allocated $3.1 million finite life intangible assets associated with customer relationships of Exterran Holdings’ North America contract operations segment. The amounts allocated were based on the ratio of fair value of the net assets transferred to us to the total fair value of Exterran Holdings’ North America contract operations segment. These intangible assets are being amortized through 2024, based on the present value of income expected to be realized from these intangible assets.

March 2012 Contract Operations Acquisition

In March 2012, we acquired from Exterran Holdings contract operations customer service agreements with 39 customers and a fleet of 406 compressor units used to provide compression services under those agreements, comprising approximately 188,000 horsepower, or 5% (by then available horsepower) of the combined U.S. contract operations business of Exterran Holdings and us (the “March 2012 Contract Operations Acquisition”). The acquired assets also included 139 compressor units, comprising approximately 75,000 horsepower, previously leased from Exterran Holdings to us, and a natural gas processing plant with a capacity of 10 million cubic feet per day that we used to provide processing services. At the acquisition date, the acquired fleet assets had a net book value of $149.5 million, net of accumulated depreciation of $67.0 million. Total consideration for the transaction was approximately $182.8 million, excluding transaction costs. In connection with this acquisition, we assumed $105.4 million of Exterran Holdings’ long-term debt and paid $77.4 million in cash to Exterran Holdings.

In connection with this acquisition, we were allocated $5.0 million finite life intangible assets associated with customer relationships of Exterran Holdings’ North America contract operations segment. The amounts allocated were based on the ratio of fair value of the net assets transferred to us to the total fair value of Exterran Holdings’ North America contract operations segment. These intangible assets are being amortized through 2024, based on the present value of income expected to be realized from these intangible assets.

Because Exterran Holdings and we are considered entities under common control, GAAP requires that we record the assets acquired and liabilities assumed from Exterran Holdings in connection with the March 2013 Contract Operations Acquisition and the March 2012 Contract Operations Acquisition using Exterran Holdings’ historical cost basis in the assets and liabilities. The difference between the historical cost basis of the assets acquired and liabilities assumed and the purchase price is treated as either a capital contribution or distribution. As a result, we recorded capital distributions of $12.4 million and $28.2 million for the March 2013 Contract Operations Acquisition and the March 2012 Contract Operations Acquisition, respectively, during the years ended December 31, 2013 and 2012, respectively.

An acquisition of a business from an entity under common control is generally accounted for under GAAP by the acquirer with retroactive application as if the acquisition date was the beginning of the earliest period included in the financial statements. Retroactive effect to the March 2013 Contract Operations Acquisition and the March 2012 Contract Operations Acquisition was impracticable because such retroactive application would have required significant assumptions in a prior period that cannot be substantiated. Accordingly, our financial statements include the assets acquired, liabilities assumed, revenue and direct operating expenses associated with the acquisition beginning on the date of such acquisition. However, the preparation of pro forma financial information allows for certain assumptions that do not meet the standards of financial statements prepared in accordance with GAAP.

Unaudited Pro Forma Financial Information

The unaudited pro forma financial information for the years ended December 31, 2014, 2013 and 2012 has been included to give effect to the additional assets acquired in the August 2014 MidCon Acquisition, the April 2014 MidCon Acquisition, the March 2013 Contract Operations Acquisition and the March 2012 Contract Operations Acquisition. The August 2014 MidCon Acquisition and the April 2014 MidCon Acquisition are presented in the unaudited pro forma financial information as though these transactions occurred as of January 1, 2013. The March 2013 Contract Operations Acquisition and the March 2012 Contract Operations Acquisition are presented in the pro forma financial information as though these transactions occurred as of January 1, 2012. The unaudited pro forma financial information reflects the following transactions:

As related to the August 2014 MidCon Acquisition:

our acquisition in August 2014 of natural gas compression assets and identifiable intangible assets from MidCon; and

our borrowings under our revolving credit facility to pay $130.1 million to MidCon for the August 2014 MidCon Acquisition.

As related to the April 2014 MidCon Acquisition:

our acquisition in April 2014 of natural gas compression assets and identifiable intangible assets from MidCon;

our issuance of 6.2 million common units to the public and approximately 126,000 general partner units to our general partner;

our issuance of $350.0 million aggregate principal amount of the 2014 Notes; and

our use of proceeds from the issuance of common units, general partner units and the 2014 Notes to pay $352.9 million to MidCon for the April 2014 MidCon Acquisition and to pay down $157.5 million on our revolving credit facility.

As related to the March 2013 Contract Operations Acquisition:

our acquisition in March 2013 of certain contract operations customer service agreements, compression equipment and identifiable intangible assets from Exterran Holdings; and

our issuance of approximately 7.1 million common units to Exterran Holdings and approximately 145,000 general partner units to our general partner.

As related to the March 2012 Contract Operations Acquisition:

our acquisition in March 2012 of certain contract operations customer service agreements, compression equipment, a natural gas processing plant and identifiable intangible assets from Exterran Holdings;

our assumption of $105.4 million of Exterran Holdings’ long-term debt; and

our payment of $77.4 million in cash to Exterran Holdings.

The unaudited pro forma financial information below is presented for informational purposes only and is not necessarily indicative of our results of operations that would have occurred had each transaction been consummated at the beginning of the period presented, nor is it necessarily indicative of future results. The unaudited pro forma financial information below was derived by adjusting our historical financial statements.

The following table shows unaudited pro forma financial information for the years ended December 31, 2014, 2013 and 2012 (in thousands, except per unit amounts):

	Years Ended December 31,
	2014		2013		2012
Revenue	$	618,843	$	589,286	$	442,774
Net income	$	64,290	$	79,693	$	25,792
Basic earnings per common unit	$	0.91	$	1.27	$	0.42
Diluted earnings per common unit	$	0.91	$	1.27	$	0.42

Pro forma net income (loss) per common unit is determined by dividing the pro forma net income (loss) that would have been allocated to our common unitholders by the weighted average number of common units outstanding after the completion of the transactions included in the pro forma financial information. Pursuant to our partnership agreement, to the extent that the quarterly distributions exceed certain targets, our general partner is entitled to receive certain incentive distributions that will result in more net income (loss) proportionately being allocated to our general partner than to our common unitholders. The pro forma net income per limited partner unit calculations include pro forma incentive distributions to our general partner and a reduction of net income allocable to our limited partners of $0.9 million and $0.7 million for the years ended December 31, 2013 and 2012, respectively, which reflects the amount of additional incentive distributions that would have occurred during the period. There was no additional pro forma reduction of net income allocable to our limited partners, including the amount of additional incentive distributions to our general partner that would have occurred, for the year ended December 31, 2014.