2. ACQUISITIONS AND DIVESTITURES

The following table presents the acquisitions completed by WES during 2016 and 2015, and identifies the funding sources for such acquisitions:



thousands except unit and percent amounts	Acquisition Date	Percentage Acquired		Deferred Purchase Price Obligation - Anadarko		Borrowings		WES Common Units Issued	WES Series A Preferred Units Issued
DBJV ⁽¹⁾	03/02/2015	100	%	$	174,276	$	—	—	—
Springfield ⁽²⁾	03/14/2016	100	%	—		247,500		2,089,602	14,030,611

⁽¹⁾

WES acquired Delaware Basin JV Gathering LLC (“DBJV”) from Anadarko. DBJV owns a 50% interest in a gathering system and related facilities. The DBJV gathering system and related facilities (the “DBJV system”) are 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. At the acquisition date, WES estimated the future payment would be $282.8 million, the net present value of which was $174.3 million. For further information, including revisions to the estimated future payment, see DBJV acquisition—deferred purchase price obligation - Anadarko below.

⁽²⁾

WES acquired Springfield Pipeline LLC (“Springfield”) from Anadarko for $750.0 million, consisting of $712.5 million in cash and the issuance of 1,253,761 of WES common units. Springfield owns a 50.1% interest in an oil gathering system and a gas gathering system, such interest being referred to in this report as the “Springfield interest.” The Springfield oil and gas gathering systems (collectively, the “Springfield system”) are located in Dimmit, La Salle, Maverick and Webb Counties in South Texas. WES financed the cash portion of the acquisition through: (i) borrowings of $247.5 million on the WES RCF, (ii) the issuance of 835,841 of WES common units to WGP and (iii) the issuance of WES Series A Preferred units to private investors. See Note 4 for further information regarding WES’s Series A Preferred units. WGP financed the purchase of the WES common units by borrowing $25.0 million on the WGP RCF. See Note 9.

Springfield acquisition. Because the acquisition of Springfield was a transfer of net assets between entities under common control, WGP’s historical financial statements and operational data previously filed with the SEC have been recast in this Form 10-Q to include the results attributable to the Springfield interest as if WES owned Springfield for all periods presented. The consolidated financial statements for periods prior to WES’s acquisition of Springfield 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 Springfield during the periods reported.

The following table presents the impact of the Springfield interest on Revenues and other and Net income (loss) as presented in WGP’s historical consolidated statements of operations:



	Three Months Ended September 30, 2015
thousands	WGP Historical		Springfield Interest		Eliminations			Combined
Revenues and other	$	385,101	$	47,431	$	(17	)	$	432,515
Net income (loss)	165,735		19,848		—			185,583

	Nine Months Ended September 30, 2015
thousands	WGP Historical		Springfield Interest		Eliminations			Combined
Revenues and other	$	1,190,082	$	145,482	$	(50	)	$	1,335,514
Net income (loss)	103,991		61,864		—			165,855

2. ACQUISITIONS AND DIVESTITURES (CONTINUED)

DBJV acquisition - 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 (a) eight multiplied by the average of WES’s share in the Net Earnings (see definition below) of DBJV for the calendar years 2018 and 2019, less (b) WES’s share of all capital expenditures incurred for DBJV 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 DBJV on an accrual basis. As of the acquisition date, the estimated future payment obligation (based on management’s estimate of WES’s share of forecasted Net Earnings and capital expenditures for DBJV) was $282.8 million, which had a net present value of $174.3 million, using a discount rate of 10%. During the nine months ended September 30, 2016, WES recognized an aggregate $259.9 million decrease in the estimated future payment obligation, resulting in a net present value of $16.4 million for this obligation at September 30, 2016, calculated using a discounted cash flow model with a 10% discount rate. The reduction in the value of the deferred purchase price obligation is primarily due to revisions reflecting a decrease in WES’s estimate of 2018 and 2019 Net Earnings and an increase in WES’s estimate of aggregate capital expenditures to be incurred by DBJV through February 29, 2020.

The following table summarizes the financial statement impact of the Deferred purchase price obligation - Anadarko:



	Deferred purchase price obligation - Anadarko			Estimated future payment obligation
Balance at March 2, 2015 – Acquisition date	$	174,276		$	282,807
Accretion expense ⁽¹⁾	14,398
Balance at December 31, 2015	188,674			282,807
Accretion expense ⁽¹⁾	4,537
Balance at March 31, 2016	193,211			282,807
Accretion revision ⁽²⁾	(15,461		)
Revision to Deferred purchase price obligation – Anadarko ⁽³⁾	(148,600		)
Balance at June 30, 2016	29,150			41,666
Accretion revision ⁽²⁾	(1,173		)
Revision to Deferred purchase price obligation – Anadarko ⁽³⁾	(11,552		)
Balance at September 30, 2016	$	16,425		$	22,920


⁽¹⁾	Accretion expense was recorded as a charge to Interest expense on the consolidated statements of operations.


⁽²⁾	Interest expense on the consolidated statements of operations includes financing-related accretion revisions of $(1.2) million and $(12.1) million for the three and nine months ended September 30, 2016, respectively.


⁽³⁾	Recorded as revisions within Common units on the consolidated balance sheets and consolidated statement of equity and partners’ capital.

Assets held for sale - Hugoton system. During the third quarter of 2016, the Hugoton system, located in Southwest Kansas and Oklahoma, satisfied criteria to be considered held for sale. The assets were remeasured to their current fair value using a market approach and Level 2 fair-value measurement, resulting in a loss of $6.2 million at September 30, 2016, recorded as Gain (loss) on divestiture and other, net in the consolidated statements of operations. At September 30, 2016, the consolidated balance sheet included long-term assets of $65.6 million and long-term liabilities of $8.4 million associated with assets held for sale. The sale of these assets closed on October 31, 2016.