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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
(Mark One)
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
or 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission File Number: 001-32678 
 
DCP MIDSTREAM, LP
(Exact name of registrant as specified in its charter) 

Delaware 03-0567133
(State or other jurisdiction
of incorporation or organization)
 (I.R.S. Employer
Identification No.)
370 17th Street, Suite 2500
Denver, Colorado
 80202
(Address of principal executive offices) (Zip Code)
(303) 595-3331
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common units representing limited partnership interestsDCPNew York Stock Exchange
7.875% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred UnitsDCP PRBNew York Stock Exchange
7.95% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred UnitsDCP PRCNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerýAccelerated filer¨Emerging growth company¨
Non-accelerated filer¨Smaller reporting company¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨    No  ý

As of April 30, 2021, there were 208,362,572 common units representing limited partnership interests outstanding.
1


DCP MIDSTREAM, LP
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2021
TABLE OF CONTENTS
 
Item Page
PART I. FINANCIAL INFORMATION
1Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2021 and 2020
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020
Condensed Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2021
Condensed Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2020
Notes to the Condensed Consolidated Financial Statements
2Management's Discussion and Analysis of Financial Condition and Results of Operations
3Quantitative and Qualitative Disclosures about Market Risk
4Controls and Procedures
PART II. OTHER INFORMATION
1Legal Proceedings
1A.Risk Factors
6Exhibits
Signatures



 

i


GLOSSARY OF TERMS
The following is a list of terms used in the industry and throughout this report:
 
ASUaccounting standards update
Bblbarrel
Bbls/dbarrels per day
Bcfbillion cubic feet
Bcf/dbillion cubic feet per day
BtuBritish thermal unit, a measurement of energy
Credit AgreementCredit Agreement governing our $1.4 billion unsecured revolving credit facility, maturing December 9, 2024
Fractionationthe process by which natural gas liquids are separated
    into individual components
GAAPgenerally accepted accounting principles in the United States of America
MBblsthousand barrels
MBbls/dthousand barrels per day
MMBtumillion Btus
MMBtu/dmillion Btus per day
MMcfmillion cubic feet
MMcf/dmillion cubic feet per day
NGLsnatural gas liquids
OPECOrganization of the Petroleum Exporting Countries
OPEC+OPEC members plus ten other oil producing countries
Railroad Commissionthe Railroad Commission of Texas
SECU.S. Securities and Exchange Commission
Securitization Facility$350 million Accounts Receivable Securitization
    Facility, maturing August 12, 2022
TBtu/dtrillion Btus per day
Throughputthe volume of product transported or passing through a
    pipeline or other facility
 

ii


CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

Our reports, filings and other public announcements may from time to time contain statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can typically identify forward-looking statements by the use of forward-looking words, such as “may,” “could,” “should,” “intend,” “assume,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “potential,” “plan,” “forecast” and other similar words.

All statements that are not statements of historical facts, including, but not limited to, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements.

These forward-looking statements reflect our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Known risks and uncertainties include, but are not limited to, the risks set forth in Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, and in our Annual Report on Form 10-K for the year ended December 31, 2020, including the following risks and uncertainties:

the impact resulting from the COVID-19 pandemic and disruption to economies around the world including the oil, gas and NGL industry in which we operate and the resulting adverse impact on our business, liquidity, commodity prices, workforce, third-party and counterparty effects and resulting federal, state and local actions;
the extent of changes in commodity prices and the demand for our products and services, our ability to effectively limit a portion of the adverse impact of potential changes in commodity prices through derivative financial instruments, and the potential impact of price, and of producers’ access to capital on natural gas drilling, demand for our services, and the volume of NGLs and condensate extracted;
the demand for crude oil, residue gas and NGL products;
the level and success of drilling and quality of production volumes around our assets and our ability to connect supplies to our gathering and processing systems, as well as our residue gas and NGL infrastructure;
new, additions to, and changes in, laws and regulations, particularly with regard to taxes, safety, regulatory and protection of the environment, including, but not limited to, climate change legislation, regulation of over-the-counter derivatives markets and entities, and hydraulic fracturing regulations, or the increased regulation of our industry, including additional local control over such activities, and their impact on producers and customers served by our systems;
volatility in the price of our common units and preferred units;
general economic, market and business conditions;
the amount of natural gas we gather, compress, treat, process, transport, store and sell, or the NGLs we produce, fractionate, transport, store and sell, may be reduced if the pipelines, storage and fractionation facilities to which we deliver the natural gas or NGLs are capacity constrained and cannot, or will not, accept the natural gas or NGLs or we may be required to find alternative markets and arrangements for our natural gas and NGLs;
our ability to continue the safe and reliable operation of our assets;
our ability to grow through organic growth projects, or acquisitions, and the successful integration and future performance of such assets;
our ability to access the debt and equity markets and the resulting cost of capital, which will depend on general market conditions, our financial and operating results, inflation rates, interest rates, our ability to comply with the covenants in our Credit Agreement or other credit facilities, and the indentures governing our notes, as well as our ability to maintain our credit ratings;
the creditworthiness of our customers and the counterparties to our transactions, including the impact of bankruptcies;
the amount of collateral we may be required to post from time to time in our transactions;
industry changes, including consolidations, alternative energy sources, technological advances, infrastructure constraints and changes in competition;
our ability to construct and start up facilities on budget and in a timely fashion, which is partially dependent on obtaining required construction, environmental and other permits issued by federal, state and municipal governments, or agencies thereof, the availability of specialized contractors and laborers, and the price of and demand for materials;
our ability to hire, train, and retain qualified personnel and key management to execute our business strategy;
weather, weather-related conditions and other natural phenomena, including, but not limited to, their potential impact on demand for the commodities we sell and the operation of company-owned and third party-owned infrastructure;
security threats such as terrorist attacks, and cybersecurity attacks and breaches, against, or otherwise impacting, our facilities and systems; and
our ability to obtain insurance on commercially reasonable terms, if at all, as well as the adequacy of insurance to cover our losses.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. The forward-looking statements in this report speak as of the filing date of this report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws.
iii


PART I
Item 1. Financial Statements
1


DCP MIDSTREAM, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

March 31, 2021December 31, 2020
ASSETS(millions)
Current assets:
Cash and cash equivalents$5 $52 
Accounts receivable:
Trade, net of allowance for credit losses of $2 and $2 million, respectively
725 572 
Affiliates321 238 
Other18 10 
Inventories30 38 
Unrealized gains on derivative instruments58 63 
Collateral cash deposits58 14 
Other16 21 
Total current assets1,231 1,008 
Property, plant and equipment, net7,913 7,993 
Intangible assets, net43 44 
Investments in unconsolidated affiliates3,640 3,641 
Unrealized gains on derivative instruments17 16 
Operating lease assets79 85 
Other long-term assets188 170 
Total assets$13,111 $12,957 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable:
Trade$669 $536 
Affiliates199 161 
Other
19 23 
Current debt504 505 
Unrealized losses on derivative instruments77 56 
Accrued interest71 85 
Accrued taxes68 59 
Accrued wages and benefits28 70 
Capital spending accrual2 4 
Other107 122 
Total current liabilities1,744 1,621 
Long-term debt5,178 5,119 
Unrealized losses on derivative instruments13 7 
Deferred income taxes30 30 
Operating lease liabilities71 76 
Other long-term liabilities243 243 
Total liabilities7,279 7,096 
Commitments and contingent liabilities (see note 14)
Equity:
Series A preferred limited partners (500,000 preferred units authorized, issued and outstanding, respectively)
498 489 
Series B preferred limited partners (6,450,000 preferred units authorized, issued and outstanding, respectively)
156 156 
Series C preferred limited partners (4,400,000 preferred units authorized, issued and outstanding, respectively)
106 106 
Limited partners (208,361,929 and 208,351,528 common units authorized, issued and outstanding, respectively)
5,052 5,090 
Accumulated other comprehensive loss(7)(7)
Total partners’ equity5,805 5,834 
Noncontrolling interests27 27 
Total equity5,832 5,861 
Total liabilities and equity$13,111 $12,957 
See accompanying notes to condensed consolidated financial statements.
2


DCP MIDSTREAM, LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

 Three Months Ended March 31,
 20212020
 (millions, except per unit amounts)
Operating revenues:
Sales of natural gas, NGLs and condensate$2,014 $1,171 
Sales of natural gas, NGLs and condensate to affiliates555 222 
Transportation, processing and other118 112 
Trading and marketing (losses) gains, net(369)152 
Total operating revenues2,318 1,657 
Operating costs and expenses:
Purchases and related costs1,763 872 
Purchases and related costs from affiliates55 36 
Transportation and related costs from affiliates219 238 
Operating and maintenance expense149 153 
Depreciation and amortization expense91 99 
General and administrative expense38 56 
Asset impairments 746 
Other expense, net 3 
Total operating costs and expenses2,315 2,203 
Operating income (loss)3 (546)
Earnings from unconsolidated affiliates128 76 
Interest expense, net(77)(78)
Income (loss) before income taxes54 (548)
Income tax expense (1)
Net income (loss)54 (549)
Net income attributable to noncontrolling interests(1)(1)
Net income (loss) attributable to partners53 (550)
Series A preferred limited partners' interest in net income
(9)(9)
Series B preferred limited partners' interest in net income(3)(3)
Series C preferred limited partners' interest in net income(2)(2)
Net income (loss) allocable to limited partners$39 $(564)
Net income (loss) per limited partner unit — basic and diluted $0.19 $(2.71)
Weighted-average limited partner units outstanding — basic208.4 208.3 
Weighted-average limited partner units outstanding — diluted208.5 208.3 
See accompanying notes to condensed consolidated financial statements.

3


DCP MIDSTREAM, LP
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)

 Three Months Ended March 31,
 20212020
 (millions)
Net income (loss)$54 $(549)
Other comprehensive income:
Total other comprehensive income  
Total comprehensive income (loss)54 (549)
Total comprehensive income attributable to noncontrolling interests(1)(1)
Total comprehensive income (loss) attributable to partners$53 $(550)
See accompanying notes to condensed consolidated financial statements.

4


DCP MIDSTREAM, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

 Three Months Ended March 31,
 20212020
 (millions)
OPERATING ACTIVITIES:
Net income (loss)$54 $(549)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense91 99 
Earnings from unconsolidated affiliates(128)(76)
Distributions from unconsolidated affiliates129 153 
Net unrealized losses (gains) on derivative instruments53 (134)
Asset impairments 746 
Other, net2 17 
Change in operating assets and liabilities, which (used) provided cash:
Accounts receivable(245)282 
Inventories8 16 
Accounts payable170 (310)
Other assets and liabilities(138)70 
Net cash (used in) provided by operating activities(4)314 
INVESTING ACTIVITIES:
Capital expenditures(14)(69)
Investments in unconsolidated affiliates (34)
Net cash used in investing activities(14)(103)
FINANCING ACTIVITIES:
Proceeds from debt1,143 2,151 
Payments of debt(1,086)(2,152)
Distributions to preferred limited partners(5)(5)
Distributions to limited partners and general partner(81)(162)
Distributions to noncontrolling interests(1)(1)
Other (2)
Net cash used in financing activities(30)(171)
Net change in cash, cash equivalents and restricted cash(48)40 
Cash, cash equivalents and restricted cash, beginning of period56 1 
Cash, cash equivalents and restricted cash, end of period$8 $41 
Reconciliation of cash, cash equivalents, and restricted cash:March 31, 2021March 31, 2020
Cash and cash equivalents$5 $18 
Restricted cash included in other current assets3 12 
Restricted cash included in other long-term assets 11 
Total cash, cash equivalents, and restricted cash$8 $41 
See accompanying notes to condensed consolidated financial statements.
5


DCP MIDSTREAM, LP
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)

 
 Partners' Equity  
 Series A Preferred Limited PartnersSeries B Preferred Limited PartnersSeries C Preferred Limited PartnersLimited 
Partners
Accumulated 
Other
Comprehensive
Loss
Noncontrolling
Interests
Total
Equity
 (millions)
Balance, January 1, 2021$489 $156 $106 $5,090 $(7)$27 $5,861 
Net income9 3 2 39  1 54 
Distributions to unitholders (3)(2)(81)  (86)
Distributions to noncontrolling interests     (1)(1)
Equity based compensation   4   4 
Balance, March 31, 2021$498 $156 $106 $5,052 $(7)$27 $5,832 
See accompanying notes to condensed consolidated financial statements.

6


DCP MIDSTREAM, LP
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)

 Partner's Equity  
 Series A Preferred Limited PartnersSeries B Preferred Limited PartnersSeries C Preferred Limited PartnersLimited 
Partners
Accumulated 
Other
Comprehensive
Loss
Noncontrolling
Interests
Total
Equity
 (millions)
Balance, January 1, 2020$489 $156 $106 $5,861 $(7)$28 $6,633 
Net income (loss)9 3 2 (564)1 (549)
Distributions to unitholders (3)(2)(162)  (167)
Distributions to noncontrolling interests     (1)(1)
Balance, March 31, 2020$498 $156 $106 $5,135 $(7)$28 $5,916 
See accompanying notes to condensed consolidated financial statements.



7

DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2021 and 2020
(unaudited)
1. Description of Business and Basis of Presentation

DCP Midstream, LP, with its consolidated subsidiaries, or us, we, our or the Partnership is a Delaware limited partnership formed in 2005 by DCP Midstream, LLC to own, operate, acquire and develop a diversified portfolio of complementary midstream energy assets.
Our Partnership includes our Logistics and Marketing and Gathering and Processing segments. For additional information regarding these segments, see Note 15 - Business Segments.
Our operations and activities are managed by our general partner, DCP Midstream GP, LP, which in turn is managed by its general partner, DCP Midstream GP, LLC, which we refer to as the General Partner, and which is 100% owned by DCP Midstream, LLC. DCP Midstream, LLC and its subsidiaries and affiliates, collectively referred to as DCP Midstream, LLC, is owned 50% by Phillips 66 and 50% by Enbridge Inc. and its affiliates, or Enbridge. DCP Midstream, LLC directs our business operations through its ownership and control of the General Partner. As of March 31, 2021, DCP Midstream, LLC, together with our general partner, owned approximately 57% of us through limited partner interests.
The condensed consolidated financial statements include the accounts of the Partnership and all majority-owned subsidiaries where we have the ability to exercise control. Investments in greater than 20% owned affiliates that are not variable interest entities and where we do not have the ability to exercise control, and investments in less than 20% owned affiliates where we have the ability to exercise significant influence, are accounted for using the equity method.
The condensed consolidated financial statements have been prepared in accordance with GAAP. Conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and notes. Although these estimates are based on management's best available knowledge of current and expected future events, actual results could differ from these estimates, which may be significantly impacted by various factors, including those outside of our control, such as the impact of a sustained deterioration in commodity prices and volumes, which would negatively impact our results of operations, financial condition and cash flows. All intercompany balances and transactions have been eliminated in consolidation.
These unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q have been prepared pursuant to the rules and regulations of the SEC. Accordingly, these condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the respective interim periods. Certain information and note disclosures normally included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted from these interim financial statements pursuant to such rules and regulations, although we believe that the disclosures made are adequate to make the information presented not misleading. Results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These unaudited condensed consolidated financial statements and other information included in this Quarterly Report on Form 10-Q should be read in conjunction with the 2020 audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.

2. Revenue Recognition
We disaggregate our revenue from contracts with customers by type of contract for each of our reportable segments, as we believe it best depicts the nature, timing and uncertainty of our revenue and cash flows. The following tables set forth our revenue by those categories:

Three Months Ended March 31, 2021
Logistics and MarketingGathering and ProcessingEliminationsTotal
(millions)
Sales of natural gas$1,120 $628 $(508)$1,240 
Sales of NGLs and condensate (a)1,205 710 (586)1,329 
Transportation, processing and other14 104 — 118 
Trading and marketing losses, net (b)(241)(128) (369)
     Total operating revenues$2,098 $1,314 $(1,094)$2,318 
8

DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2021 and 2020
(unaudited)
(a) Includes $414 million of revenues for the three months ended March 31, 2021, from physical sales contracts and buy-sell exchange transactions in our Logistics and Marketing segment, which is net of $390 million of buy-sell purchases related to buy-sell revenues of $444 million which are not within the scope of FASB ASU 2014-09 "Revenue from Contractors with Customer" ("Topic 606").
(b)   Not within the scope of Topic 606.

Three Months Ended March 31, 2020
Logistics and MarketingGathering and ProcessingEliminationsTotal
(millions)
Sales of natural gas$411 $326 $(290)$447 
Sales of NGLs and condensate (a)883 387 (324)946 
Transportation, processing and other13 99  112 
Trading and marketing gains, net (b)51 101  152 
     Total operating revenues$1,358 $913 $(614)$1,657 
(a) Includes $591 million for the three months ended March 31, 2020 of revenues from physical sales contracts and buy-sell exchange transactions in our Logistics and Marketing segment, which are not within the scope of Topic 606.
(b)   Not within the scope of Topic 606.
The revenue expected to be recognized in the future related to performance obligations that are not satisfied is approximately $338 million as of March 31, 2021. Our remaining performance obligations primarily consist of minimum volume commitment fee arrangements and are expected to be recognized through 2030 with a weighted average remaining life of four years as of March 31, 2021. As a practical expedient permitted by Topic 606, this amount excludes variable consideration as well as remaining performance obligations that have original expected durations of one year or less, as applicable. Our remaining performance obligations also exclude estimates of variable rate escalation clauses in our contracts with customers.

3. Contract Liabilities
Our contract liabilities consist of deferred revenue received from reimbursable projects. The noncurrent portion of deferred revenue is included in other long-term liabilities on our condensed consolidated balance sheets.
The following table summarizes changes in contract liabilities included in our condensed consolidated balance sheets:
March 31,
2021
(millions)
Balance, beginning of period$35 
Revenue recognized (a)(1)
Balance, end of period$34 
(a) Deferred revenue recognized is included in transportation, processing and other on the condensed consolidated statement of operations.
The contract liabilities disclosed in the table above will be recognized as revenue as the obligations are satisfied over their average remaining contract life, which is 35 years as of March 31, 2021.

4. Agreements and Transactions with Affiliates
DCP Midstream, LLC
Services Agreement and Other General and Administrative Charges
Under the Services and Employee Secondment Agreement (the “Services Agreement), we are required to reimburse DCP Midstream, LLC for costs, expenses, and expenditures incurred or payments made on our behalf for general and administrative functions including, but not limited to, legal, accounting, compliance, treasury, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, benefit plan maintenance and
9

DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2021 and 2020
(unaudited)
administration, credit, payroll, internal audit, taxes and engineering, as well as salaries and benefits of seconded employees, insurance coverage and claims, capital expenditures, maintenance and repair costs and taxes. There is no limit on the reimbursements we make to DCP Midstream, LLC under the Services Agreement for costs, expenses and expenditures incurred or payments made on our behalf. The following table summarizes employee related costs that were charged by DCP Midstream, LLC to the Partnership that are included in the condensed consolidated statements of operations:
Three Months Ended March 31,
20212020
(millions)
Employee related costs charged by DCP Midstream, LLC
Operating and maintenance expense$39 $44 
General and administrative expense$26 $35 
Phillips 66 and its Affiliates
We sell a portion of our residue gas and NGLs to and purchase NGLs from Phillips 66 and its respective affiliates. We anticipate continuing to sell commodities to and purchase commodities from Phillips 66 and its affiliates in the ordinary course of business.
Enbridge and its Affiliates
We purchase NGLs from Enbridge and its affiliates. We anticipate continuing to purchase commodities from Enbridge and its affiliates in the ordinary course of business.
Unconsolidated Affiliates
We sell a portion of our residue gas and NGLs to, purchase natural gas and other NGL products from, provide gathering and transportation services to, and receive transportation services from unconsolidated affiliates. We anticipate continuing to purchase and sell commodities and receive and provide services to unconsolidated affiliates in the ordinary course of business.
Summary of Transactions with Affiliates
The following table summarizes our transactions with affiliates:
 Three Months Ended March 31,
 20212020
(millions)
Phillips 66 (including its affiliates):
Sales of natural gas, NGLs and condensate to affiliates$527 $212 
Purchases and related costs from affiliates$30 $27 
Transportation and related costs from affiliates$37 $23 
Operating and maintenance and general administrative expenses$2 $4 
Enbridge (including its affiliates):
Sales of natural gas, NGLs and condensate to affiliates$4 $1 
Purchases and related costs from affiliates$7 $ 
Unconsolidated affiliates:
Sales of natural gas, NGLs and condensate to affiliates$24 $9 
Transportation, processing, and other to affiliates$5 $3 
Purchases and related costs from affiliates$18 $9 
Transportation and related costs from affiliates$182 $215 

10

DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2021 and 2020
(unaudited)
 We had balances with affiliates as follows:
March 31, 2021December 31, 2020
 (millions)
Phillips 66 (including its affiliates):
Accounts receivable$297 $217 
Accounts payable$116 $89 
Other assets$ $1 
Enbridge (including its affiliates):
Accounts receivable$4 $ 
Accounts payable$3 $2 
Unconsolidated affiliates:
Accounts receivable$20 $21 
Accounts payable$80 $70 

5. Inventories
Inventories were as follows: 
March 31, 2021December 31, 2020
 (millions)
Natural gas$12 $18 
NGLs18 20 
Total inventories$30 $38 
We recognize lower of cost or net realizable value adjustments when the carrying value of our inventories exceeds their net realizable value. These non-cash charges are a component of purchases and related costs in the condensed consolidated statements of operations. We recognized no lower of cost or net realizable value adjustments during the three months ended March 31, 2021. We recognized $4 million of lower of cost or net realizable value adjustments for the three months ended March 31, 2020.


6. Property, Plant and Equipment
A summary of property, plant and equipment by classification is as follows:
Depreciable
Life
March 31, 2021December 31, 2020
  (millions)
Gathering and transmission systems
20 — 50 Years
$7,689 $7,680 
Processing, storage and terminal facilities
35 — 60 Years
4,992 4,986 
Other
330 Years
582 585 
Finance lease assets
36 Years
25 25 
Construction work in progress137 144 
Property, plant and equipment13,425 13,420 
Accumulated depreciation(5,512)(5,427)
Property, plant and equipment, net$7,913 $7,993 
We had no capitalized interest on construction projects for the three months ended March 31, 2021. Capitalized interest on construction projects was $2 million for the three months ended March 31, 2020.
Depreciation expense was $90 million and $97 million for the three months ended March 31, 2021 and 2020, respectively.
11

DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2021 and 2020
(unaudited)
7. Investments in Unconsolidated Affiliates
The following table summarizes our investments in unconsolidated affiliates:
  Carrying Value as of
 Percentage
Ownership
March 31,
2021
December 31, 2020
  (millions)
DCP Sand Hills Pipeline, LLC66.67%$1,733 $1,723 
DCP Southern Hills Pipeline, LLC66.67%733 734 
Gulf Coast Express LLC25.00%432 436 
Front Range Pipeline LLC33.33%195 198 
Texas Express Pipeline LLC10.00%96 97 
Discovery Producer Services LLC40.00%243 244 
Mont Belvieu 1 Fractionator20.00%6 7 
Mont Belvieu Enterprise Fractionator12.50%27 26 
Cheyenne Connector, LLC50.00%151 152 
Panola Pipeline Company, LLC15.00%21 21 
OtherVarious3 3 
Total investments in unconsolidated affiliates$3,640 $3,641 

Earnings from investments in unconsolidated affiliates were as follows:
 Three Months Ended March 31,
 20212020
 (millions)
DCP Sand Hills Pipeline, LLC$62 $78 
DCP Southern Hills Pipeline, LLC24 20 
Gulf Coast Express LLC15 16 
Front Range Pipeline LLC9 11 
Texas Express Pipeline LLC4 4 
Discovery Producer Services LLC (a)8 (61)
Mont Belvieu 1 Fractionator2 3 
Mont Belvieu Enterprise Fractionator1 3 
Cheyenne Connector, LLC3  
Other 2 
Total earnings from unconsolidated affiliates$128 $76 
(a) In 2020, we recognized an impairment of $61 million on our equity investment in Discovery Producer Services LLC.
The following tables summarize the combined financial information of our investments in unconsolidated affiliates:
 Three Months Ended March 31,
 20212020
 (millions)
Statements of operations:
Operating revenue$489 $527 
Operating expenses$190 $185 
Net income$298 $341 
12

DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2021 and 2020
(unaudited)
 
 March 31,
2021
December 31,
2020
 (millions)
Balance sheets:
Current assets$368 $355 
Long-term assets7,446 7,510 
Current liabilities(163)(177)
Long-term liabilities(260)(258)
Net assets$7,391 $7,430 

8. Fair Value Measurement
Valuation Hierarchy
Our fair value measurements are grouped into a three-level valuation hierarchy and are categorized in their entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows.
Level 1 — inputs are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 — inputs include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 — inputs are unobservable and considered significant to the fair value measurement.
A financial instrument’s categorization within the hierarchy is based upon the level of judgment involved in the most significant input in the determination of the instrument’s fair value. Following is a description of the valuation methodologies used as well as the general classification of such instruments pursuant to the hierarchy.
Commodity Derivative Assets and Liabilities
We enter into a variety of derivative financial instruments, which may include exchange traded instruments (such as New York Mercantile Exchange, or NYMEX, crude oil or natural gas futures) or over-the-counter, or OTC, instruments (such as natural gas contracts, crude oil or NGL swaps). The exchange traded instruments are generally executed with a highly rated broker dealer serving as the clearinghouse for individual transactions.
Our activities expose us to varying degrees of commodity price risk. To mitigate a portion of this risk and to manage commodity price risk related primarily to owned natural gas storage and pipeline assets, we engage in natural gas asset based trading and marketing, and we may enter into natural gas and crude oil derivatives to lock in a specific margin when market conditions are favorable. A portion of this may be accomplished through the use of exchange traded derivative contracts. Such instruments are generally classified as Level 1 since the value is equal to the quoted market price of the exchange traded instrument as of our balance sheet date, and no adjustments are required. Depending upon market conditions and our strategy we may enter into exchange traded derivative positions with a significant time horizon to maturity. Although such instruments are exchange traded, market prices may only be readily observable for a portion of the duration of the instrument. In order to calculate the fair value of these instruments, readily observable market information is utilized to the extent it is available; however, in the event that readily observable market data is not available, we may interpolate or extrapolate based upon observable data. In instances where we utilize an interpolated or extrapolated value, and it is considered significant to the valuation of the contract as a whole, we would classify the instrument within Level 3.
We also engage in the business of trading energy related products and services, which exposes us to market variables and commodity price risk. We may enter into physical contracts or financial instruments with the objective of realizing a positive margin from the purchase and sale of these commodity-based instruments. We may enter into derivative instruments for NGLs or other energy related products, primarily using the OTC derivative instrument markets, which are not as active and liquid as exchange traded instruments. Market quotes for such contracts may only be available for short dated positions (up to six months), and an active market itself may not exist beyond such time horizon. Contracts entered into with a relatively short time
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DCP MIDSTREAM, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2021 and 2020
(unaudited)
horizon for which prices are readily observable in the OTC market are generally classified within Level 2. Contracts with a longer time horizon, for which we internally generate a forward curve to value such instruments, are generally classified within Level 3. The internally generated curve may utilize a variety of assumptions including, but not limited to, data obtained from third-party pricing services, historical and future expected relationship of NGL prices to crude oil prices, the knowledge of expected supply sources coming online, expected weather trends within certain regions of the United States, and the future expected demand for NGLs.
Each instrument is assigned to a level within the hierarchy at the end of each financial quarter depending upon the extent to which the valuation inputs are observable. Generally, an instrument will move toward a level within the hierarchy that requires a lower degree of judgment as the time to maturity approaches, and as the markets in which the asset trades will likely become more liquid and prices more readily available in the market, thus reducing the need to rely upon our internally developed assumptions. However, the level of a given instrument may change, in either direction, depending upon market conditions and the availability of market observable data.
Nonfinancial Assets and Liabilities
We utilize fair value to perform impairment tests as required on our property, plant and equipment, goodwill, equity investments in unconsolidated affiliates, and intangible assets. The inputs used to determine such fair value are primarily based upon internally developed cash flow models and would generally be classified within Level 3 in the event that we were required to measure and record such assets at fair value within our condensed consolidated financial statements. Additionally, we use fair value to determine the inception value of our asset retirement obligations. The inputs used to determine such fair value are primarily based upon costs incurred historically for similar work, as well as estimates from independent third parties for costs that would be incurred to restore leased property to the contractually stipulated condition, and would generally be classified within Level 3.
During the three months ended March 31, 2021 we determined there were no impairments associated with any of our asset groups. During the three months ended March 31, 2020, we recognized a $587 million impairment loss associated with certain asset groups in the Permian and South regions of our Gathering and Processing segment and an impairment of $61 million of our equity investment in Discovery Producer Services LLC (“Discovery”).
The following table presents the financial instruments carried at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, by condensed consolidated balance sheet caption and by valuation hierarchy, as described above:

 March 31, 2021December 31, 2020
 Level 1Level 2Level 3Total
Carrying
Value
Level 1Level 2Level 3Total
Carrying
Value
 (millions)
Current assets:
Commodity derivatives$21 $37 $ $58 $21 $42 $