(5) Related Party Transactions

The Partnership engages in various transactions with Devon and other related parties. For the years ended December 31, 2016, 2015 and 2014, Devon was a significant customer to the Partnership. Devon accounted for 18.5%, 16.6% and 30.6% of the Partnership’s revenues for the years ended December 31, 2016, 2015 and 2014, respectively. The Partnership had an accounts receivable balance related to transactions with Devon of $100.2 million and $110.8 million as of December 31, 2016 and 2015, respectively. Additionally, the Partnership had an accounts payable balance related to transactions with Devon of $10.4 million and $14.8 million as of December 31, 2016 and 2015, respectively. Management believes these transactions are executed on terms that are fair and reasonable and are consistent with terms for transactions with unrelated third parties. The amounts related to related party transactions are specified in the accompanying financial statements.

Gathering, Processing and Transportation Agreements Associated with Our Business Combination with Devon

As described in “Note 1—Organization and Summary of Significant Agreements,” Midstream Holdings was previously a wholly-owned subsidiary of Devon, and all of its assets were contributed to it by Devon. On January 1, 2014, in connection with the consummation of the Business Combination, EnLink Midstream Services, LLC, a wholly-owned subsidiary of Midstream Holdings (“EnLink Midstream Services”), entered into 10-year gathering and processing agreements with Devon pursuant to which EnLink Midstream Services provides gathering, treating, compression, dehydration, stabilization, processing and fractionation services, as applicable, for natural gas delivered by Devon Gas Services, L.P., a subsidiary of Devon (“Gas Services”), to Midstream Holdings’ gathering and processing systems in the Barnett, Cana-Woodford and Arkoma-Woodford Shales. On January 1, 2014, SWG Pipeline, L.L.C. (“SWG Pipeline”), another wholly-owned subsidiary of Midstream Holdings, entered into a 10-year gathering agreement with Devon pursuant to which SWG Pipeline provides gathering, treating, compression, dehydration and redelivery services, as applicable, for natural gas delivered by Gas Services to another of the Partnership’s gathering systems in the Barnett Shale.

These agreements provide Midstream Holdings with dedication of all of the natural gas owned or controlled by Devon and produced from or attributable to existing and future wells located on certain oil, natural gas and mineral leases covering land within the acreage dedications, excluding properties previously dedicated to other natural gas gathering systems not owned and operated by Devon. Pursuant to the gathering and processing agreements entered into on January 1, 2014, Devon has committed to deliver specified average minimum daily volumes, referred to as MVCs, of natural gas to Midstream Holdings’ gathering systems in the Barnett, Cana-Woodford and Arkoma-Woodford Shales during each calendar quarter for a five-year period that expires on January 1, 2019. The Partnership recognized revenue from MVCs attributable to Devon of $46.2 million and $24.4 million for the years ended December 31, 2016 and 2015, respectively. Devon is entitled to firm service, meaning that if capacity on a system is curtailed or reduced, or capacity is otherwise insufficient, Midstream Holdings will take delivery of as much Devon natural gas as is permitted in accordance with applicable law.

The gathering and processing agreements are fee-based, and Midstream Holdings is paid a specified fee per MMBtu for natural gas gathered on Midstream Holdings’ gathering systems and a specified fee per MMBtu for natural gas processed. The particular fees, all of which are subject to an automatic annual inflation escalator at the beginning of each year, differ from one system to another and do not contain a fee redetermination clause.

In connection with the closing of the Business Combination, Midstream Holdings entered into an agreement with a wholly-owned subsidiary of Devon pursuant to which Midstream Holdings provides transportation services to Devon on its Acacia pipeline.

EnLink Oklahoma T.O. Gathering and Processing Agreement with Devon

In January 2016, in connection with the acquisition of EnLink Oklahoma T.O., the Partnership acquired a Gas Gathering and Processing Agreement with Devon Energy Production Company, L.P. (“DEPC”) pursuant to which EnLink Oklahoma T.O. provides gathering, treating, compression, dehydration, stabilization, processing and fractionation services, as applicable, for natural gas delivered by DEPC. The agreement has an MVC that will remain in place during each calendar quarter for five years and an overall term of approximately 15 years. Additionally, the agreement provides EnLink Oklahoma T.O. with dedication of all of the natural gas owned or controlled by DEPC and produced from or attributable to existing and future wells located on certain oil, natural gas and mineral leases covering land within the acreage dedications, excluding properties previously dedicated to other natural gas gathering systems not owned and operated by DEPC. DEPC is entitled to firm service, meaning a level of gathering and processing service in which DEPC’s reserved capacity may not be interrupted, except due to force majeure, and may not be displaced by another customer or class of service.

Cedar Cove Joint Venture

On November 9, 2016, the Partnership formed a joint venture (the “Cedar Cove JV”) with Kinder Morgan, Inc. consisting of gathering and compression assets in Blaine County, Oklahoma. Under a fifteen year, fixed-fee agreement, all gas gathered by the Cedar Cove JV will be processed at our central Oklahoma processing system. For the period from November 9, 2016 through December 31, 2016, revenue generated from processing gas from the Cedar Cove JV was classified as “Midstream services – related parties” on the consolidated statements of operations and was immaterial to our overall financial results.

Other Commercial Relationships with Devon

As noted above, the Partnership continues to maintain a customer relationship with Devon originally established prior to the Business Combination pursuant to which the Partnership provides gathering, transportation, processing and gas lift services to Devon in exchange for fee-based compensation under several agreements with Devon. The terms of these agreements vary, but the agreements began to expire in January 2016 and continue to expire through July 2021, renewing automatically for month-to-month or year-to-year periods unless canceled by Devon prior to expiration. In addition, the Partnership has agreements with Devon pursuant to which the Partnership purchases and sells NGLs, gas and crude oil and pays or receives, as applicable, a margin-based fee. These NGL, gas and crude oil purchase and sale agreements have month-to-month terms.

VEX Transportation Agreement

In connection with the VEX acquisition, the Operating Partnership became party to a five year transportation services agreement with Devon pursuant to which the Operating Partnership provides transportation services to Devon on the VEX pipeline. This agreement includes a five-year MVC with Devon. The MVC was executed in June 2014, and the initial term expires July 2019.

Transition Services Agreement with Devon

In connection with the consummation of the Business Combination, the Partnership entered into a transition services agreement with Devon pursuant to which Devon provides certain services to the Partnership with respect to the business and operations of Midstream Holdings and the Partnership provides certain services to Devon. General and administrative expenses related to the transition service agreement were $0.3 million, $0.2 million and $3.0 million for years ended December 31, 2016, 2015 and 2014, respectively. The Partnership received $0.3 million from Devon under the transition services agreement for the years ended December 31, 2016, 2015 and 2014.

Drop Down Transactions

During the fourth quarter of 2014 and the first half of 2015, the Partnership acquired assets from Devon and us through drop down transactions. See “Note 3—Acquisitions” for further discussion.”

Predecessor Affiliate Transactions

Prior to March 7, 2014, affiliate transactions relate to Predecessor transactions consisting of sales to and from affiliates, services provided by affiliates, cost allocations from affiliates and centralized cash management activities performed by affiliates.

The following presents financial information for the Predecessor’s affiliate transactions and other transactions with Devon, all of which are settled through an adjustment to equity prior to March 7, 2014 (in millions):


	Year Ended
	December 31,
	2014
Continuing Operations:
Operating revenues - related parties	$	(436.4)
Operating expenses - related parties		340.0
Net related party transactions		(96.4)
Capital expenditures		16.2
Other third-party transactions, net		58.9
Net third-party transactions		75.1
Net cash distributions to Devon - continuing operations		(21.3)
Non-cash distribution of net assets to Devon		(6.3)
Total net distributions per equity	$	(27.6)

Discontinued operations:
Operating revenues - related parties	$	(10.4)
Operating expenses - related parties		5.0
Net related party transactions		(5.4)
Capital expenditures		0.6
Other third-party transactions, net		0.4
Net third-party transactions		1.0
Net distributions to Devon and non-controlling interests - discontinued operations		(4.4)
Non-cash distribution of net assets to Devon		(39.9)
Total net distributions per equity	$	(44.3)
Total distributions - continuing and discontinued operations	$	(71.9)

Share-based compensation costs included in the management services fee charged to Midstream Holdings by Devon were approximately $2.8 million for the year ended December 31, 2014. Pension, postretirement and employee savings plan costs included in the management services fee charged to the Partnership by Devon were approximately $1.6 million for the year ended December 31, 2014. These amounts are included in general and administrative expenses in the accompanying statements of operations.

Transactions with ENLK

We paid the Partnership $2.3 million, $2.1 million and $1.2 million as reimbursement during the years ended December 31, 2016, 2015, and 2014, respectively, to cover our portion of administrative and compensation costs for officers and employees that perform services for us. This reimbursement is evaluated on an annual basis. Officers and employees that perform services for us provide an estimate of the portion of their time devoted to such services. A portion of their annual compensation (including bonuses, payroll taxes and other benefit costs) is allocated to us for reimbursement based on these estimates. In addition, an administrative burden is added to such costs to reimburse the Partnership for additional support costs, including, but not limited to, consideration for rent, office support and information service support.

On October 29, 2015, the Partnership issued 2,849,100 common units at an offering price of $17.55 per common unit to a subsidiary of ours for aggregate consideration of approximately $50.0 million in a private placement transaction.