Property, Plant and Equipment

6 Months Ended

Jun. 30, 2020

Property, Plant and Equipment [Abstract]

Property, plant and equipment consists of the following:



	June 30, 2020		December 31, 2019

	(In thousands)
Pipelines	$	534,822	$	523,576
Natural gas processing plants	300,832		296,609
Produced and flowback water facilities	124,655		121,797
Compressor stations	184,607		143,276
Other property and equipment	34,264		34,231
Construction in progress	3,372		36,014
Total property, plant and equipment	1,182,552		1,155,503
Less: accumulated depreciation, amortization and impairment	(222,771)		(98,982)
Total property, plant and equipment, net	$	959,781	$	1,056,521

Long-lived asset impairment. Property, plant and equipment is stated at the lower of historical cost less accumulated depreciation or fair value if impaired. The Partnership routinely evaluates the existence of triggering events which could indicate the carrying amount of its property, plant and equipment may not be recoverable. Impairment indicators include, but are not limited to, sustained decreases in commodity prices, a decline in customer well results and lower throughput forecasts, changes in customer development plans and/or increases in construction or operating costs.

As a result of lower forecasted throughput volumes due to changes in customers’ development plans associated with expected sustained significant decreases in commodity prices, the Partnership reviewed the carrying amounts of its asset groups for recoverability during the first quarter of 2020. The Partnership completed a Step 1 impairment analysis by comparing the undiscounted future cash flows to the carrying amounts for each of its crude oil, natural gas, freshwater and produced and flowback water asset groups in the Williston Basin and the Delaware Basin. During the six months ended June 30, 2020, the Partnership recorded an impairment charge of $101.8 million to reduce the carrying value of its property, plant and equipment to the estimated fair value. In the Williston Basin, the Partnership recorded an impairment charge of $35.8 million related to its crude oil asset group and $33.1 million related to its freshwater asset group. In the Delaware Basin, the Partnership recorded an impairment charge of $17.9 million related to its crude oil asset group and $15.0 million related to its produced and flowback water asset group.

The Partnership determined no impairment indicators existed as of June 30, 2020 and did not record an impairment charge for the three months ended June 30, 2020.

If commodity prices continue to decline or remain at depressed levels for a prolonged period of time, if there are shut-ins of production from customers’ existing producing wells or if there are significant changes in customers’ future development plans, including Oasis Petroleum, to the extent they affect the Partnership’s operations, such circumstances may necessitate assessment of the carrying amount of the Partnership’s affected assets for recoverability and may result in additional impairment charges in the future. In addition, if the United States oil and gas industry continues to experience an imbalance of supply and demand as it endured during the six months ended June 30, 2020, the Partnership’s operations could be adversely affected and future impairment charges could be incurred.

Fair value measurements. Impairment expense was measured as the excess of the asset group’s carrying amount over its estimated fair value. Fair value was measured using a discounted cash flow model using Level 3 inputs. The inputs used are subject to management’s judgment and expertise and include, but are not limited to, estimated throughput volumes, estimated fixed and variable operating costs, estimated capital costs, estimated useful life of the asset group and discount rate. The estimated future cash flows were discounted at a market-based weighted average cost of capital of 10.4%. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the impairment analysis will prove to be an accurate prediction of the future.