ACQUISITION

On March 6, 2014, our subsidiary, Southcross Nueces Pipelines LLC, acquired natural gas pipelines near Corpus Christi, Texas and contracts related to these pipelines from Onyx Midstream, LP and Onyx Pipeline Company (collectively, “Onyx”) for $38.6 million in cash, net of certain adjustments as provided in the purchase agreement.

The pipelines transport natural gas to two power plants in Nueces County, Texas under fixed-fee contracts that extend through 2029 and include an option to extend the agreements by an additional term of up to ten years. The contracts were renegotiated in connection with the acquisition; therefore we consider these contracts to be assumed at fair market value.

The preliminary fair values of the property, plant and equipment are based upon assumptions related to expected future cash flows, discount rates and asset lives using currently available information. We utilized a mix of the cost, income and market approaches to determine the estimated fair values of such assets. The fair value measurements and models have been classified as non-recurring Level 3 measurements.

We are performing our preliminary assessment of the fair value of the assets acquired and liabilities assumed as of March 31, 2014 and we expect that the consideration given will be equal to the fair value of net assets acquired. As a result, no goodwill is expected to be recorded. We have not completed the final purchase price allocation of the assets acquired and liabilities assumed as of March 31, 2014 because we have not completed our determination of the valuation of the property, plant and equipment.

The reconciliation of the preliminary fair value of the assets acquired and liabilities assumed related to the Onyx purchase price was as follows (in thousands):



Purchase Price—Cash	$	38,636
Current assets	730
Property, plant, and equipment	39,413
Total assets acquired	40,143
Current liabilities assumed	(1,407		)
Other liabilities assumed	(100		)
Net identifiable assets acquired	$	38,636

In the first quarter of 2014, we expensed $0.3 million of transaction costs associated with the acquisition. These costs are reported within general and administrative expenses.

The following unaudited pro forma financial information of our periods ended March 31, 2014 and 2013 assumes that the Onyx acquisition occurred on January 1, 2013 and includes adjustments for income from operations, including depreciation and amortization, as well as the effects of financing the acquisition (in thousands, except unit information):



	Three months ended March 31,
	2014			2013
Total revenue	$	214,240		$	145,286
Net loss	(1,397		)	(7,238		)
Net loss attributable to common unitholders	(1,115		)	(3,876		)
Net loss per common unit—(basic and diluted)	(0.06		)	(0.26		)
Net loss attributable to subordinated unitholders	(745		)	(3,231		)
Net loss per subordinated unit—(basic and diluted)	(0.06		)	(0.26		)

The unaudited pro forma information is not necessarily indicative of what our statements of operations would have been if the transaction had occurred on that date, or what the financial position or results from operations will be for any future periods. For the period from March 6, 2014 through March 31, 2014, Onyx contributed $0.3 million in revenues and $0.1 million in net loss to our statements of operations.