Significant Accounting Policies

6 Months Ended

Jun. 30, 2021

(2) Significant Accounting Policies

a.Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q, are unaudited, and do not include all the information and disclosures required by GAAP for complete financial statements. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2020. Certain reclassifications were made to the financial statements for the prior period to conform to current period presentation. The effect of these reclassifications had no impact on previously reported members’ equity or net income (loss). All significant intercompany balances and transactions have been eliminated in consolidation.

b.Revenue Recognition

The following table summarizes the contractually committed fees that we expect to recognize in our consolidated statements of operations, in either revenue or reductions to cost of sales, from MVC and firm transportation contractual provisions. All amounts in the table below are determined using the contractually-stated MVC or firm transportation volumes specified for each period multiplied by the relevant deficiency or reservation fee. Actual amounts could differ due to the timing of revenue recognition or reductions to cost of sales resulting from make-up right provisions included in our agreements, as well as due to nonpayment or nonperformance by our customers. We record revenue under MVC contracts during periods of shortfall when it is known that the customer cannot, or will not, make up the deficiency. These fees do not represent the shortfall amounts we expect to collect under our MVC contracts, as we generally do not expect volume shortfalls to equal the full amount of the contractual MVCs during these periods. For example, for the three and six months ended June 30, 2021, we had contractual commitments of $10.9 million and $24.4 million under our MVC contracts, respectively, and recorded $0.3 million of revenue due to volume shortfalls for the six months ended June 30, 2021. No revenue due to volume shortfalls was recorded for the three months ended June 30, 2021.


MVC and Firm Transportation Commitments (in millions) (1)
2021 (remaining)	$	75.1
2022	134.1
2023	121.6
2024	105.8
2025	62.2
Thereafter	342.1
Total	$	840.9

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(1)Amounts do not represent expected shortfall under these commitments.

c.Acquisition of Business

On April 30, 2021, we completed the acquisition of Amarillo Rattler, LLC, the owner of a gathering and processing system located in the Midland Basin. In connection with the purchase, we entered into an amended and restated gas gathering and processing agreement with Diamondback Energy, strengthening our dedicated acreage position with Diamondback Energy. We acquired the system with an upfront payment of $50.0 million, which was paid with cash-on-hand, with an additional $10 million to be paid on April 30, 2022, and contingent consideration capped at $15 million based on Diamondback Energy’s drilling activity above historical levels.

Under the acquisition method of accounting, the acquired assets of Amarillo Rattler, LLC have been recorded at their respective fair values as of the date of the acquisition. We have prepared a preliminary purchase price allocation, which is subject to change upon finalization. Determining the fair value of the assets of Amarillo Ratter, LLC requires judgment and certain assumptions to be made, particularly related to the valuation of acquired customer relationships. The inputs and assumptions related to the customer relationships are categorized as level 3 in the fair value hierarchy. On a historical pro forma basis, our consolidated revenues, net income (loss), total assets, and earnings per unit amounts would not have differed materially had the acquisition been completed on January 1, 2021 rather than April 30, 2021.