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Related Party Transactions
9 Months Ended
Sep. 30, 2020
Related Party Transactions [Abstract]  
Related Party Transactions

Note 4.  Related Party Transactions

Commercial Agreements

Effective January 1, 2014, we entered into long-term fee-based (i) gas gathering, (ii) crude oil gathering, (iii) gas processing and fractionation, (iv) storage services, and (v) terminal and export services agreements with certain subsidiaries of Hess. Effective January 1, 2019, in connection with the Hess Water Services Acquisition, we entered into long-term fee-based water services agreements with certain subsidiaries of Hess. Under our commercial agreements, we provide gathering, compression, processing, fractionation, storage, terminaling, loading, transportation and produced water disposal services to Hess, for which we receive a fee per barrel of crude oil, barrel of water, Mcf of natural gas, or Mcf equivalent of NGLs, as applicable, delivered during each month, and Hess is obligated to provide us with minimum volumes of crude oil, water, natural gas and NGLs. These agreements also include inflation escalators and fee recalculation mechanisms that allow fees to be adjusted annually.

For the three and nine months ended September 30, 2020 and 2019, approximately 100% of our revenues were attributable to our fee‑based commercial agreements with Hess, including revenues from third‑party volumes contracted with Hess and delivered to us under these agreements. We retain control of our assets and the flow of volumes based on available capacity within our integrated gathering, processing and terminaling systems. Together with Hess, we are pursuing strategic relationships with third‑party producers and other midstream companies with operations in the Bakken in order to maximize our utilization rates.

Revenues from contracts with customers on a disaggregated basis are as follows:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil and gas gathering services

 

$

118.7

 

 

$

86.4

 

 

$

349.2

 

 

$

245.6

 

Water gathering and disposal services

 

 

24.2

 

 

 

19.5

 

 

 

71.7

 

 

 

52.4

 

Processing and storage services

 

 

90.1

 

 

 

74.0

 

 

 

273.7

 

 

 

207.8

 

Terminaling and export services

 

 

31.7

 

 

 

35.0

 

 

 

130.5

 

 

 

88.7

 

Total revenues from contracts with customers

 

$

264.7

 

 

$

214.9

 

 

$

825.1

 

 

$

594.5

 

Other income

 

 

0.1

 

 

 

-

 

 

 

0.3

 

 

 

0.3

 

Total revenues

 

$

264.8

 

 

$

214.9

 

 

$

825.4

 

 

$

594.8

 

During the three and nine months ended September 30, 2020, we earned $7.8 million and $11.9 million, respectively, of minimum volume shortfall fee payments, compared with $3.0 million and $6.5 million for the three and nine months ended September 30, 2019, respectively.

The following table presents third-party pass-through costs for which we recognize revenues in an amount equal to the costs. These third-party costs are included in Operating and maintenance expenses in the accompanying unaudited consolidated statements of operations.

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rail transportation costs

 

$

5.0

 

 

$

12.0

 

 

$

49.3

 

 

$

24.1

 

Produced water trucking and disposal costs

 

 

14.0

 

 

 

14.5

 

 

 

45.6

 

 

 

40.2

 

Electricity fees

 

 

10.3

 

 

 

8.3

 

 

 

29.7

 

 

 

23.2

 

Total

 

$

29.3

 

 

$

34.8

 

 

$

124.6

 

 

$

87.5

 

 

Omnibus and Employee Secondment Agreements

Under our omnibus and employee secondment agreements, Hess provides substantial operational and administrative services to us in support of our assets and operations. For the three and nine months ended September 30, 2020 and 2019, we had the following charges from Hess. The classification of these charges between operating and maintenance expenses and general and administrative expenses is based on the fundamental nature of the services being performed for our operations.

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating and maintenance expenses

 

$

16.7

 

 

$

13.4

 

 

$

47.5

 

 

$

36.3

 

General and administrative expenses

 

 

3.9

 

 

$

3.7

 

 

 

11.2

 

 

 

10.5

 

Total

 

$

20.6

 

 

$

17.1

 

 

$

58.7

 

 

$

46.8

 

 

LM4 Agreements

Separately from our commercial agreements with Hess, we entered into a gas processing agreement with Little Missouri 4 (“LM4”), a 50/50 joint venture with Targa Resources Corp., under which we pay a processing fee per Mcf of natural gas and reimburse LM4 for our proportionate share of electricity costs. These processing fees are included in Operating and maintenance expenses in the accompanying consolidated statements of operations. In addition, we share profits and losses and receive distributions from LM4 under the LM4 amended and restated limited liability company agreement based on our ownership interest. For the three and nine months ended September 30, 2020 and 2019, we had the following activity related to our agreements with LM4:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Processing fee incurred

 

$

6.8

 

 

$

0.9

 

 

$

18.2

 

 

$

0.9

 

Earnings from equity investments

 

 

3.6

 

 

 

0.5

 

 

 

7.2

 

 

 

0.5

 

Distributions received from equity investments

 

 

3.0

 

 

 

-

 

 

 

6.8

 

 

 

-