2. ACQUISITIONS AND DIVESTITURES

The following table presents the acquisitions completed by WES during 2016, 2015 and 2014, and identifies the funding sources for such acquisitions. See Note 14 for information regarding events occurring subsequent to December 31, 2016.



thousands except unit and percent amounts	Acquisition Date	Percentage Acquired		Deferred Purchase Price Obligation - Anadarko		Borrowings		Cash On Hand		WES Common Units Issued	WES Class C Units Issued to Anadarko	WES Series A Preferred Units Issued
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 ⁽³⁾	03/02/2015	100	%	174,276		—		—		—	—	—
Springfield ⁽⁴⁾	03/14/2016	100	%	—		247,500		—		2,089,602	—	14,030,611

⁽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 issued 6,296 general partner units to WES GP 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 final allocation of the purchase price.

⁽³⁾

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.

⁽⁴⁾

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 under the WGP RCF. See Note 12.

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 year ended December 31, 2016, WES recognized an aggregate $226.4 million decrease in the estimated future payment obligation, resulting in a net present value of $41.4 million for this obligation at December 31, 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 an increase in WES’s estimate of aggregate capital expenditures to be incurred by DBJV through February 29, 2020, partially offset by an increase in WES’s estimate of 2018 and 2019 Net Earnings.

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 revision ⁽²⁾	(7,747		)
Revision to Deferred purchase price obligation – Anadarko ⁽³⁾	(139,487		)
Balance at December 31, 2016	$	41,440		$	56,455


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


⁽²⁾	Financing-related accretion revisions were recorded in Interest expense on the consolidated statements of operations.


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

Hugoton system divestiture. During the fourth quarter of 2016, the Hugoton system, located in Southwest Kansas and Oklahoma, was sold to a third party, resulting in a net loss on sale of $12.0 million recorded as Gain (loss) on divestiture and other, net in the consolidated statements of operations. WES allocated $1.6 million in goodwill to this divestiture.

Dew and Pinnacle systems divestiture. During the third quarter of 2015, the Dew and Pinnacle systems in East Texas were sold to a third party, resulting in a net gain on sale of $77.3 million recorded as Gain (loss) on divestiture and other, net in the consolidated statements of operations. WES allocated $5.1 million in goodwill to this divestiture.