2. ACQUISITIONS AND DIVESTITURES

The following table presents the acquisitions completed by WES during 2015 and 2014, and identifies the funding sources for such acquisitions:



thousands except unit and percent amounts	Acquisition Date	Percentage Acquired		Deferred Purchase Price Obligation - Anadarko		Borrowings		Cash On Hand		WES Common Units Issued to Anadarko	WES Class C Units Issued to Anadarko
TEFR Interests ⁽¹⁾	03/03/2014	Various ⁽¹⁾		$	—	$	350,000	$	6,250	308,490	—
DBM ⁽²⁾	11/25/2014	100	%	—		475,000		298,327		—	10,913,853
DBJV system ⁽³⁾	03/02/2015	50	%	174,276		—		—		—	—

⁽¹⁾

WES acquired a 20% interest in each of TEG and TEP and a 33.33% interest in FRP from Anadarko. These assets gather and transport NGLs primarily from the Anadarko and Denver-Julesburg (“DJ”) Basins. The interests in these entities are accounted for under the equity method of accounting. In connection with the issuance of WES common units, WES GP purchased 6,296 general partner units in exchange for WES GP’s proportionate capital contribution of $0.4 million.

⁽²⁾

WES acquired Nuevo Midstream, LLC (“Nuevo”) from a third party. Following the acquisition, WES changed the name of Nuevo to Delaware Basin Midstream, LLC (“DBM”). The assets acquired include cryogenic processing plants, a gas gathering system, and related facilities and equipment, which are collectively referred to as the “DBM complex” and serve production from Reeves, Loving and Culberson Counties, Texas and Eddy and Lea Counties, New Mexico. See DBM acquisition below for further information, including the preliminary allocation of the purchase price.

⁽³⁾

WES acquired Anadarko’s interest in Delaware Basin JV Gathering LLC (“DBJV”), which owns a 50% interest in a gathering system and related facilities (the “DBJV system”). The DBJV system is located in the Delaware Basin in Loving, Ward, Winkler and Reeves Counties, Texas. WES will make a cash payment on March 31, 2020, to Anadarko as consideration for the acquisition of DBJV. WES currently estimates the future payment will be $282.8 million, the net present value of which was $174.3 million as of the acquisition date. See DBJV acquisition—Deferred purchase price obligation - Anadarko below.

DBJV acquisition. Because the acquisition of DBJV was a transfer of net assets between entities under common control, WGP’s historical financial statements previously filed with the SEC have been recast in this Form 10-Q/A to include the results attributable to the DBJV system as if WES owned DBJV for all periods presented. The consolidated financial statements for periods prior to WES’s acquisition of DBJV have been prepared from Anadarko’s historical cost-basis accounts and may not necessarily be indicative of the actual results of operations that would have occurred if WES had owned DBJV during the periods reported.

The following table presents the impact of the DBJV system on revenues, equity income, net and net income (loss) as presented in WGP’s historical consolidated statements of income:



	Three Months Ended June 30, 2014
thousands	WGP Historical ⁽¹⁾		DBJV System		Combined
Revenues	$	341,756	$	15,625	$	357,381
Equity income, net	13,008		—		13,008
Net income (loss)	97,746		4,135		101,881

	Six Months Ended June 30, 2014
thousands	WGP Historical ⁽¹⁾		DBJV System		Combined
Revenues	$	628,745	$	29,885	$	658,630
Equity income, net	22,259		—		22,259
Net income (loss)	187,921		7,756		195,677


⁽¹⁾	See Adjustments to Previously Issued Financial Statements in Note 1.

2. ACQUISITIONS AND DIVESTITURES (CONTINUED)

Deferred purchase price obligation - Anadarko. The consideration to be paid by WES for the acquisition of DBJV consists of a cash payment to Anadarko due on March 31, 2020. The cash payment will be equal to eight multiplied by (a) the average of WES’s share in the Net Earnings (see definition below) of the DBJV system for the calendar years 2018 and 2019, less (b) WES’s share of all capital expenditures incurred for the DBJV system between March 1, 2015, and February 29, 2020. Net Earnings is defined as all revenues less cost of product, operating expenses and property taxes, in each case attributable to the DBJV system on an accrual basis. As of the acquisition date, the estimated future payment obligation was $282.8 million, which had a net present value of $174.3 million, using a discount rate of 10%. As of June 30, 2015, the net present value of this obligation was $179.9 million and has been recorded on the consolidated balance sheet under Deferred purchase price obligation - Anadarko. Accretion expense for the three and six months ended June 30, 2015, was $4.2 million and $5.6 million, respectively, and has been recorded as a charge to interest expense. The fair value measurement was calculated using Level 3 inputs, which consisted of management’s estimate of WES’s share of forecasted Net Earnings and capital expenditures for the DBJV system.

DBM acquisition. The DBM acquisition has been accounted for under the acquisition method of accounting. The assets acquired and liabilities assumed in the DBM acquisition were recorded in the consolidated balance sheet at their estimated fair values as of the acquisition date. Results of operations attributable to the DBM acquisition were included in the consolidated statement of income beginning on the acquisition date in the fourth quarter of 2014.

The following is the preliminary allocation of the purchase price as of June 30, 2015, including $3.5 million of post-closing purchase price adjustments, to the assets acquired and liabilities assumed in the DBM acquisition as of the acquisition date, pending final review of certain support related to the acquired entity’s assets and liabilities:



thousands
Current assets	$	63,020
Property, plant and equipment	467,171
Goodwill	282,999
Other intangible assets	811,048
Accounts payables	(17,679		)
Accrued liabilities	(38,684		)
Deferred income taxes	(1,342		)
Asset retirement obligations and other	(9,060		)
Total purchase price	$	1,557,473

The purchase price allocation is based on an assessment of the fair value of the assets acquired and liabilities assumed in the DBM acquisition using inputs that are not observable in the market and thus represent Level 3 inputs. The fair values of the processing plants, gathering system, and related facilities and equipment are based on market and cost approaches. The fair value of the intangible assets was determined using an income approach. Deferred taxes represent the tax effects of differences in the tax basis and acquisition-date fair value of the assets acquired and liabilities assumed.

Assets held for sale - Dew and Pinnacle systems. During the second quarter of 2015, the Dew and Pinnacle systems in East Texas satisfied criteria to be considered held for sale. At June 30, 2015, WES’s consolidated balance sheet included current assets of $2.2 million, long-term assets of $71.9 million, current liabilities of $4.2 million and long-term liabilities of $3.0 million associated with assets held for sale. The sale of these assets is expected to close on July 31, 2015.