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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Andeavor Logistics LP | NYSE:ANDX | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 32.17 | 0 | 01:00:00 |
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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27‑4151603
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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200 East Hardin Street, Findlay, Ohio 45840
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(Address of principal executive offices) (Zip Code)
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419-421-2414
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(Registrant’s telephone number, including area code)
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Large accelerated filer
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þ
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting company
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o
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Emerging growth company
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o
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Table of Contents
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Note 2 - Acquisitions
and Divestitures
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2
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Financial Statements
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
||||||||||||
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2018 (a)
|
|
2017 (a)
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|
2018 (a)
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|
2017 (a)
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||||||||
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(In millions, except per unit amounts)
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||||||||||||||
Revenues: (b)
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||||||||
Affiliate
|
$
|
415
|
|
|
$
|
468
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|
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$
|
1,131
|
|
|
$
|
951
|
|
Third-party
|
227
|
|
|
626
|
|
|
626
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1,184
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||||
Total Revenues
|
642
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|
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1,094
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1,757
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|
2,135
|
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||||
Costs and Expenses:
|
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Cost of fuel and other (excluding items shown separately below) (b)
|
—
|
|
|
554
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|
|
—
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|
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716
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||||
NGL expense (excluding items shown separately below)
|
73
|
|
|
64
|
|
|
166
|
|
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179
|
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||||
Operating expenses (excluding depreciation and amortization)
|
236
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|
|
199
|
|
|
658
|
|
|
512
|
|
||||
Depreciation and amortization expenses
|
86
|
|
|
85
|
|
|
268
|
|
|
222
|
|
||||
General and administrative expenses
|
31
|
|
|
44
|
|
|
91
|
|
|
107
|
|
||||
Loss (gain) on asset disposals and impairments
|
1
|
|
|
1
|
|
|
2
|
|
|
(25
|
)
|
||||
Operating Income
|
215
|
|
|
147
|
|
|
572
|
|
|
424
|
|
||||
Interest and financing costs, net
|
(57
|
)
|
|
(68
|
)
|
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(172
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)
|
|
(193
|
)
|
||||
Equity in earnings of equity method investments
|
7
|
|
|
6
|
|
|
25
|
|
|
13
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||||
Other income, net
|
1
|
|
|
5
|
|
|
4
|
|
|
9
|
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||||
Net Earnings
|
$
|
166
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|
|
$
|
90
|
|
|
$
|
429
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$
|
253
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|
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||||||||
Loss attributable to Predecessors
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$
|
4
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$
|
7
|
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|
$
|
28
|
|
|
$
|
46
|
|
Net Earnings Attributable to Partners
|
170
|
|
|
97
|
|
|
457
|
|
|
299
|
|
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Preferred unitholders’ interest in net earnings
|
(10
|
)
|
|
—
|
|
|
(34
|
)
|
|
—
|
|
||||
General partner’s interest in net earnings, including incentive distribution rights
|
—
|
|
|
—
|
|
|
—
|
|
|
(79
|
)
|
||||
Limited Partners’ Interest in Net Earnings
|
$
|
160
|
|
|
$
|
97
|
|
|
$
|
423
|
|
|
$
|
220
|
|
|
|
|
|
|
|
|
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||||||||
Net earnings per limited partner unit
|
|
|
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|
|
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||||||||
Common - basic
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$
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0.68
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|
$
|
0.90
|
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$
|
1.91
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$
|
2.05
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Common - diluted
|
$
|
0.68
|
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|
$
|
0.90
|
|
|
$
|
1.91
|
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$
|
2.05
|
|
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||||||||
Weighted average limited partner units outstanding
|
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||||||||
Common units - basic
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234.4
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|
108.0
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223.0
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107.0
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Common units - diluted
|
234.6
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108.1
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223.2
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107.1
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Cash distributions paid per unit
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$
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1.030
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$
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0.971
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$
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3.045
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$
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2.821
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(a)
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Adjusted to include the historical results of the Predecessors. See Note 1 for further discussion.
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(b)
|
Due to the adoption of the revenue recognition standard effective January 1, 2018, the revenues and costs associated with our fuel purchase and supply arrangements with Andeavor for the three and nine months ended September 30, 2018 were netted. See Note 1 for further discussion.
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September 30, 2018
|
3
|
Financial Statements
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|
September 30,
2018 |
|
December 31, 2017 (a)
|
||||
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(In millions, except unit amounts)
|
||||||
Assets
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
30
|
|
|
$
|
75
|
|
Receivables, net of allowance for doubtful accounts
|
|
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||||
Trade and other
|
250
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219
|
|
||
Affiliate
|
251
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264
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Prepayments and other current assets
|
81
|
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27
|
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Total Current Assets
|
612
|
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585
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Property, Plant and Equipment, Net
|
|
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Property, plant and equipment, at cost
|
7,965
|
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|
7,243
|
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Accumulated depreciation
|
(1,215
|
)
|
|
(994
|
)
|
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Property, Plant and Equipment, Net
|
6,750
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6,249
|
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||
Acquired Intangibles, Net
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1,116
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|
1,154
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Goodwill
|
988
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956
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Equity Method Investments
|
607
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440
|
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Other Noncurrent Assets, Net
|
124
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|
|
121
|
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||
Total Assets
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$
|
10,197
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$
|
9,505
|
|
|
|
|
|
||||
Liabilities and Equity
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Accounts payable
|
|
|
|
||||
Trade and other
|
$
|
201
|
|
|
$
|
186
|
|
Affiliate
|
254
|
|
|
207
|
|
||
Accrued interest and financing costs
|
68
|
|
|
40
|
|
||
Other current liabilities
|
81
|
|
|
85
|
|
||
Total Current Liabilities
|
604
|
|
|
518
|
|
||
Debt, Net of Unamortized Issuance Costs
|
4,829
|
|
|
4,127
|
|
||
Other Noncurrent Liabilities
|
77
|
|
|
54
|
|
||
Total Liabilities
|
5,510
|
|
|
4,699
|
|
||
Commitments and Contingencies (Note 8)
|
|
|
|
|
|
||
Equity
|
|
|
|
||||
Equity of Predecessors
|
—
|
|
|
1,292
|
|
||
Preferred unitholders;
600,000
units issued and outstanding in 2018 and 2017
|
594
|
|
|
589
|
|
||
Common unitholders;
245,472,743
units issued and outstanding (217,097,057 in 2017)
|
4,093
|
|
|
2,925
|
|
||
Total Equity
|
4,687
|
|
|
4,806
|
|
||
Total Liabilities and Equity
|
$
|
10,197
|
|
|
$
|
9,505
|
|
(a)
|
Adjusted to include the historical results of the Predecessors. See Note 1 for further discussion.
|
4
|
|
|
|
|
|
|
Financial Statements
|
|
|
Nine Months Ended
September 30, |
||||||
|
2018 (a)
|
|
2017 (a)
|
||||
|
(In millions)
|
||||||
Cash Flows From (Used In) Operating Activities
|
|
|
|
||||
Net earnings
|
$
|
429
|
|
|
$
|
253
|
|
Adjustments to reconcile net earnings to net cash from operating activities:
|
|
|
|
||||
Depreciation and amortization expenses
|
268
|
|
|
222
|
|
||
Loss (gain) on asset disposals and impairments
|
2
|
|
|
(25
|
)
|
||
Other operating activities
|
27
|
|
|
23
|
|
||
Changes in current assets and liabilities
|
4
|
|
|
62
|
|
||
Changes in noncurrent assets and liabilities
|
(11
|
)
|
|
(11
|
)
|
||
Net cash from operating activities
|
719
|
|
|
524
|
|
||
Cash Flows From (Used In) Investing Activities
|
|
|
|
||||
Capital expenditures
|
(566
|
)
|
|
(220
|
)
|
||
Acquisitions, net of cash
|
(379
|
)
|
|
(1,230
|
)
|
||
Proceeds from sales of assets
|
—
|
|
|
46
|
|
||
Net cash used in investing activities
|
(945
|
)
|
|
(1,404
|
)
|
||
Cash Flows From (Used In) Financing Activities
|
|
|
|
||||
Borrowings under revolving credit agreements
|
1,030
|
|
|
319
|
|
||
Repayments under revolving credit agreements
|
(333
|
)
|
|
(614
|
)
|
||
Proceeds from issuance of common units, net of issuance costs
|
—
|
|
|
284
|
|
||
Proceeds from issuance of general partner units, net of issuance costs
|
—
|
|
|
6
|
|
||
Quarterly distributions to common unitholders
|
(620
|
)
|
|
(329
|
)
|
||
Quarterly distributions to general partner
|
—
|
|
|
(131
|
)
|
||
Distributions to preferred unitholders
|
(29
|
)
|
|
—
|
|
||
Distributions in connection with acquisitions
|
(300
|
)
|
|
(5
|
)
|
||
Sponsor contributions of equity to the Predecessors
|
406
|
|
|
678
|
|
||
Capital contributions by affiliate
|
27
|
|
|
24
|
|
||
Other financing activities
|
—
|
|
|
(2
|
)
|
||
Net cash from financing activities
|
181
|
|
|
230
|
|
||
Decrease in Cash and Cash Equivalents
|
(45
|
)
|
|
(650
|
)
|
||
Cash and Cash Equivalents, Beginning of Period
|
75
|
|
|
688
|
|
||
Cash and Cash Equivalents, End of Period
|
$
|
30
|
|
|
$
|
38
|
|
|
|
September 30, 2018
|
5
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
6
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
September 30, 2018
|
7
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
8
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
•
|
Crude oil and other feedstock storage tankage and refined product storage tankage at Andeavor’s Mandan, Salt Lake City and Los Angeles refineries;
|
•
|
Rail terminals and truck racks at Andeavor’s Mandan, Salt Lake City and Los Angeles refineries for the loading and unloading of various refined products from manifest and other railcars and trucks, respectively;
|
•
|
Interconnecting pipeline facilities in the Los Angeles area as well as other railroad tracks and adjoining lands;
|
•
|
Mesquite and Yucca truck unloading stations in New Mexico for the unloading of crude trucks and injection of crude into the TexNewMex pipeline;
|
•
|
Mason East and Jackrabbit (“Wink”) truck unloading and injection stations in Texas that receive crude via the T-Station line and trucks for injection into the Kinder Morgan and Bobcat Pipeline;
|
•
|
The Jal storage, injection and rail unloading facility in New Mexico that stores and supplies natural gas liquids for use in Andeavor’s El Paso refinery;
|
•
|
Natural gas liquid storage tankage, a rail and truck terminal for the loading and unloading of natural gas liquids from railcars and trucks as well as from the waterline at the Wingate facility in New Mexico;
|
•
|
Crude oil and other feedstock storage tankage at the Clearbrook terminal in Minnesota;
|
•
|
Bobcat Pipeline that transports crude oil between the Mason East Station and the Wink Station;
|
•
|
Benny Pipeline that delivers crude oil from the Conan terminal in Texas to a connection with gathering lines in New Mexico;
|
•
|
All of the issued and outstanding limited liability company interests in: (i) Tesoro Great Plains Midstream LLC, which owns BakkenLink Pipeline LLC, (ii) Andeavor MPL Holdings LLC, which holds the investment in MPL, (iii) Andeavor Logistics CD LLC, (iv) Western Refining Conan Gathering, LLC, which owns the Conan Crude Oil Gathering System (v) Western Refining Delaware Basin Storage, LLC, (vi) Asphalt Terminals LLC, which holds the investment in PNAC, and (vii)
67%
of all of the issued and outstanding limited liability company interests in ALRP; and
|
•
|
Certain related real property interests.
|
|
|
September 30, 2018
|
9
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
Cash
|
$
|
22
|
|
Receivables
|
112
|
|
|
Inventories
|
11
|
|
|
Prepayments and Other Current Assets
|
25
|
|
|
Property, Plant and Equipment (a)
|
1,357
|
|
|
Goodwill
|
558
|
|
|
Acquired Intangibles
|
130
|
|
|
Other Noncurrent Assets
|
2
|
|
|
Accounts Payable
|
(167
|
)
|
|
Accrued Liabilities
|
(41
|
)
|
|
Debt
|
(347
|
)
|
|
Total purchase price
|
$
|
1,662
|
|
(a)
|
Estimated useful lives ranging from
3
to
22
years have been assumed based on the valuation.
|
10
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
|
September 30, 2017
|
|
September 30, 2017
|
||||
Revenues
|
$
|
1,094
|
|
|
$
|
3,172
|
|
Net earnings (a)
|
90
|
|
|
258
|
|
(a)
|
While many recurring adjustments impact the pro forma figures presented, the pro forma condensed statements of consolidated operations for the
three and nine
months ended
September 30, 2017
includes a significant non-recurring adjustment to recognize the WNRL Merger acquisition and integration costs and reflects these costs in the first quarter of 2017, the period the acquisition was assumed to be completed for pro forma purposes. For the
nine
months ended
September 30, 2017
, we recognized acquisition costs related to the WNRL Merger of
$17 million
as well as
$3 million
of severance costs.
|
|
Three Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||||||||
|
Combined
|
|
Andeavor Logistics LP
|
|
Predecessors
|
|
Combined
|
|
Andeavor Logistics LP
|
|
Predecessors
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Affiliate
|
$
|
415
|
|
|
$
|
411
|
|
|
$
|
4
|
|
|
$
|
1,131
|
|
|
$
|
1,110
|
|
|
$
|
21
|
|
Third-party
|
227
|
|
|
224
|
|
|
3
|
|
|
626
|
|
|
617
|
|
|
9
|
|
||||||
Total Revenues
|
642
|
|
|
635
|
|
|
7
|
|
|
1,757
|
|
|
1,727
|
|
|
30
|
|
||||||
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
NGL expense (exclusive of items shown separately below)
|
73
|
|
|
73
|
|
|
—
|
|
|
166
|
|
|
166
|
|
|
—
|
|
||||||
Operating expenses (exclusive of depreciation and amortization)
|
236
|
|
|
227
|
|
|
9
|
|
|
658
|
|
|
618
|
|
|
40
|
|
||||||
Depreciation and amortization expenses
|
86
|
|
|
83
|
|
|
3
|
|
|
268
|
|
|
246
|
|
|
22
|
|
||||||
General and administrative expenses
|
31
|
|
|
30
|
|
|
1
|
|
|
91
|
|
|
82
|
|
|
9
|
|
||||||
Loss on asset disposals and impairments
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
—
|
|
||||||
Operating Income (Loss)
|
215
|
|
|
221
|
|
|
(6
|
)
|
|
572
|
|
|
613
|
|
|
(41
|
)
|
||||||
Interest and financing costs, net
|
(57
|
)
|
|
(56
|
)
|
|
(1
|
)
|
|
(172
|
)
|
|
(168
|
)
|
|
(4
|
)
|
||||||
Equity in earnings of equity method investments
|
7
|
|
|
4
|
|
|
3
|
|
|
25
|
|
|
9
|
|
|
16
|
|
||||||
Other income, net
|
1
|
|
|
1
|
|
|
—
|
|
|
4
|
|
|
3
|
|
|
1
|
|
||||||
Net Earnings (Loss)
|
$
|
166
|
|
|
$
|
170
|
|
|
$
|
(4
|
)
|
|
$
|
429
|
|
|
$
|
457
|
|
|
$
|
(28
|
)
|
Loss attributable to Predecessors
|
4
|
|
|
—
|
|
|
4
|
|
|
28
|
|
|
—
|
|
|
28
|
|
||||||
Net Earnings Attributable to Partners
|
170
|
|
|
170
|
|
|
—
|
|
|
457
|
|
|
457
|
|
|
—
|
|
||||||
Preferred unitholders’ interest in net earnings
|
(10
|
)
|
|
(10
|
)
|
|
—
|
|
|
(34
|
)
|
|
(34
|
)
|
|
—
|
|
||||||
Limited Partners’ Interest in Net Earnings
|
$
|
160
|
|
|
$
|
160
|
|
|
$
|
—
|
|
|
$
|
423
|
|
|
$
|
423
|
|
|
$
|
—
|
|
|
|
September 30, 2018
|
11
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
Three Months Ended September 30, 2017
|
|
Nine Months Ended September 30, 2017
|
||||||||||||||||||||
|
Combined
|
|
Andeavor Logistics LP
|
|
Predecessors
|
|
Combined
|
|
Andeavor Logistics LP
|
|
Predecessors
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Affiliate
|
$
|
468
|
|
|
$
|
219
|
|
|
$
|
249
|
|
|
$
|
951
|
|
|
$
|
624
|
|
|
$
|
327
|
|
Third-party
|
626
|
|
|
225
|
|
|
401
|
|
|
1,184
|
|
|
653
|
|
|
531
|
|
||||||
Total Revenues
|
1,094
|
|
|
444
|
|
|
650
|
|
|
2,135
|
|
|
1,277
|
|
|
858
|
|
||||||
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of fuel and other (exclusive of items shown separately below) (a)
|
554
|
|
|
—
|
|
|
554
|
|
|
716
|
|
|
—
|
|
|
716
|
|
||||||
NGL expense (exclusive of items shown separately below)
|
64
|
|
|
64
|
|
|
—
|
|
|
179
|
|
|
179
|
|
|
—
|
|
||||||
Operating expenses (exclusive of depreciation and amortization)
|
199
|
|
|
141
|
|
|
58
|
|
|
512
|
|
|
399
|
|
|
113
|
|
||||||
Depreciation and amortization expenses
|
85
|
|
|
60
|
|
|
25
|
|
|
222
|
|
|
178
|
|
|
44
|
|
||||||
General and administrative expenses
|
44
|
|
|
27
|
|
|
17
|
|
|
107
|
|
|
78
|
|
|
29
|
|
||||||
(Gain) loss on asset disposals and impairments
|
1
|
|
|
1
|
|
|
—
|
|
|
(25
|
)
|
|
(24
|
)
|
|
(1
|
)
|
||||||
Operating Income (Loss)
|
147
|
|
|
151
|
|
|
(4
|
)
|
|
424
|
|
|
467
|
|
|
(43
|
)
|
||||||
Interest and financing costs, net
|
(68
|
)
|
|
(61
|
)
|
|
(7
|
)
|
|
(193
|
)
|
|
(184
|
)
|
|
(9
|
)
|
||||||
Equity in earnings of equity method investments
|
6
|
|
|
2
|
|
|
4
|
|
|
13
|
|
|
7
|
|
|
6
|
|
||||||
Other income, net
|
5
|
|
|
5
|
|
|
—
|
|
|
9
|
|
|
9
|
|
|
—
|
|
||||||
Net Earnings (Loss)
|
$
|
90
|
|
|
$
|
97
|
|
|
$
|
(7
|
)
|
|
$
|
253
|
|
|
$
|
299
|
|
|
$
|
(46
|
)
|
Loss attributable to Predecessors
|
7
|
|
|
—
|
|
|
7
|
|
|
46
|
|
|
—
|
|
|
46
|
|
||||||
Net Earnings Attributable to Partners
|
97
|
|
|
97
|
|
|
—
|
|
|
299
|
|
|
299
|
|
|
—
|
|
||||||
General partner’s interest in net earnings, including incentive distribution rights
|
—
|
|
|
—
|
|
|
—
|
|
|
(79
|
)
|
|
(79
|
)
|
|
—
|
|
||||||
Limited Partners’ Interest in Net Earnings
|
$
|
97
|
|
|
$
|
97
|
|
|
$
|
—
|
|
|
$
|
220
|
|
|
$
|
220
|
|
|
$
|
—
|
|
12
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
|
|
Termination Provisions
|
|
Commercial Agreement
|
Initiation Date
|
Term
|
Renewals
|
Refinery Shutdown Notice Period (a)
|
Force Majeure
|
Transportation Services Agreement (LAR Interconnecting Pipelines)
|
August 2018
|
10 years
|
2 x 5 years
|
12 months
|
Andeavor Logistics can declare (unilateral)
|
Master Terminalling Services Agreement
|
August 2018
|
10 years
|
2 x 5 years
|
||
Master Unloading and Storage Agreement (WNRL)
|
August 2018
|
10 years
|
2 x 5 years
|
N/A
|
|
Asphalt Terminalling, Transportation and Storage Services Agreement
|
August 2018
|
10 years
|
2 x 5 years
|
(a)
|
Fixed minimum volumes remain in effect during routine turnarounds.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenues (a)
|
$
|
415
|
|
|
$
|
468
|
|
|
$
|
1,131
|
|
|
$
|
951
|
|
Operating expenses (b)
|
82
|
|
|
67
|
|
|
216
|
|
|
185
|
|
||||
General and administrative expenses
|
31
|
|
|
30
|
|
|
77
|
|
|
77
|
|
|
|
September 30, 2018
|
13
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
(a)
|
Andeavor accounted for
65%
and
43%
of our total revenues for the
three
months ended
September 30, 2018
and
2017
, respectively, and
64%
and
45%
for the
nine
months ended
September 30, 2018
and
2017
, respectively.
|
(b)
|
Net of reimbursements from Andeavor pursuant to the Amended Omnibus Agreement, the Carson Assets Indemnity Agreement and other affiliate agreements of
$2 million
and
$7 million
for the
three
months ended
September 30, 2018
and
2017
respectively, and
$12 million
for both the
nine
months ended
September 30, 2018
and
2017
.
|
|
September 30,
2018 |
|
December 31, 2017 (a)
|
||||
Terminals and tankage
|
$
|
3,595
|
|
|
$
|
3,557
|
|
Pipelines
|
3,344
|
|
|
2,825
|
|
||
Land and leasehold improvements
|
289
|
|
|
282
|
|
||
Buildings and improvements
|
94
|
|
|
91
|
|
||
Other
|
142
|
|
|
142
|
|
||
Construction in progress
|
501
|
|
|
346
|
|
||
Property, Plant and Equipment, at Cost
|
7,965
|
|
|
7,243
|
|
||
Accumulated Depreciation
|
(1,215
|
)
|
|
(994
|
)
|
||
Property, Plant and Equipment, Net
|
$
|
6,750
|
|
|
$
|
6,249
|
|
(a)
|
Property, plant and equipment transferred to the Partnership in the 2018 Drop Down was recorded at historical costs. The Partnership recorded property, plant and equipment of
$948 million
and accumulated depreciation of
$112 million
as of December 31, 2017 in connection with the 2018 Drop Down.
|
|
September 30,
2018 |
|
December 31, 2017 (a)
|
||||
Terminalling and Transportation (b)
|
$
|
231
|
|
|
$
|
260
|
|
Gathering and Processing (b)
|
695
|
|
|
607
|
|
||
Wholesale
|
62
|
|
|
89
|
|
||
Goodwill
|
$
|
988
|
|
|
$
|
956
|
|
(a)
|
Adjusted to include the historical results of the Predecessors. See Note 1 for further discussion.
|
(b)
|
Goodwill transferred to the Partnership in the 2018 Drop Down was recorded at historical cost. We recorded goodwill of
$39 million
and
$225 million
in our Terminalling and Transportation and Gathering and Processing segments, respectively, as of December 31, 2017 as a result of the 2018 Drop Down.
|
14
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
•
|
ALRP -
We own a
67%
interest in ALRP, a recently constructed crude oil pipeline located in the Delaware and Midland basins in west Texas.
|
•
|
MPL
-
We have a
17%
interest in MPL, which owns and operates a crude oil pipeline in Minnesota.
|
•
|
PNAC -
We own a
50%
interest in PNAC, which owns and operates an asphalt terminal in Nevada.
|
•
|
RGS -
We have a
78%
interest in Rendezvous Gas Services, L.L.C. (“RGS”), which owns and operates the infrastructure that transports gas from certain fields to several re-delivery points in southwestern Wyoming, including natural gas processing facilities that are owned by us or a third party.
|
•
|
TRG -
We own a
50%
interest in Three Rivers Gathering, L.L.C. (“TRG”) located in the southeastern Uinta Basin. TRG was formed with Ute Energy to transport natural gas gathered by Uintah Basin Field Services, L.L.C. (“UBFS”) and other third-party volumes to gas processing facilities.
|
•
|
UBFS -
We own a
38%
interest in UBFS, which owns and operates the natural gas gathering infrastructure located in the southeastern Uinta Basin.
|
|
ALRP (a)
|
|
MPL
(a)
|
|
PNAC (a)
|
|
RGS
|
|
TRG
|
|
UBFS
|
|
Total
|
||||||||||||||
Balance at December 31, 2017 (b)
|
$
|
—
|
|
|
$
|
120
|
|
|
$
|
—
|
|
|
$
|
268
|
|
|
$
|
37
|
|
|
$
|
15
|
|
|
$
|
440
|
|
Acquired interests
|
159
|
|
|
—
|
|
|
27
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
186
|
|
|||||||
Equity in earnings
|
4
|
|
|
14
|
|
|
—
|
|
|
4
|
|
|
2
|
|
|
1
|
|
|
25
|
|
|||||||
Cumulative effect of accounting standard adoption
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|||||||
Distributions received
|
(4
|
)
|
|
(14
|
)
|
|
—
|
|
|
(16
|
)
|
|
(5
|
)
|
|
(2
|
)
|
|
(41
|
)
|
|||||||
Balance at September 30, 2018 (b)
|
$
|
159
|
|
|
$
|
120
|
|
|
$
|
27
|
|
|
$
|
256
|
|
|
$
|
31
|
|
|
$
|
14
|
|
|
$
|
607
|
|
(a)
|
These equity method investments were included in the 2018 Drop Down. Amounts were adjusted to include the historical results of the Predecessors. See Note 1 for further discussion.
|
(b)
|
The carrying amount of our investments in ALRP, MPL, PNAC, RGS, TRG and UBFS exceeded the underlying equity in net assets by
$75 million
,
$34 million
,
$17 million
,
$127 million
,
$14 million
and
$6 million
, respectively, at
September 30, 2018
. The carrying amount of our investments in MPL, RGS, TRG and UBFS exceeded the underlying equity in net assets by
$35 million
,
$130 million
,
$15 million
and
$6 million
, respectively, at December 31, 2017. The carrying amounts of our investments that exceed the underlying equity in net assets are amortized over the useful life of the underlying fixed assets and included in equity in earnings (loss).
|
|
September 30,
2018 |
|
December 31, 2017
|
||||
Total debt
|
$
|
4,878
|
|
|
$
|
4,182
|
|
Unamortized issuance costs
|
(48
|
)
|
|
(54
|
)
|
||
Current maturities
|
(1
|
)
|
|
(1
|
)
|
||
Debt, Net of Current Maturities and Unamortized Issuance Costs
|
$
|
4,829
|
|
|
$
|
4,127
|
|
|
|
September 30, 2018
|
15
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
Total
Capacity
|
|
Amount Borrowed as of September 30, 2018
|
|
Outstanding
Letters of Credit
|
|
Available Capacity as of September 30, 2018
|
|
Weighted Average Interest Rate
|
|
Expiration
|
|||||||||
Revolving Credit Facility (a)
|
$
|
1,100
|
|
|
$
|
820
|
|
|
$
|
—
|
|
|
$
|
280
|
|
|
3.95
|
%
|
|
January 29, 2021
|
Dropdown Credit Facility
|
1,000
|
|
|
300
|
|
|
—
|
|
|
700
|
|
|
3.86
|
%
|
|
January 29, 2021
|
||||
Total Credit Facilities (a)
|
$
|
2,100
|
|
|
$
|
1,120
|
|
|
$
|
—
|
|
|
$
|
980
|
|
|
|
|
|
(a)
|
On January 5, 2018, we amended our Revolving Credit Facility to increase the aggregate commitments from
$600 million
to
$1.1 billion
and to permit the incurrence of incremental loans. We are allowed to request that the loan availability be increased up to an aggregate of
$2.1 billion
, subject to receiving increased commitments from the lenders.
|
|
Equity of Predecessors (a)
|
|
Partnership
|
|
Total
|
||||||||||
|
|
Common
|
|
Preferred
|
|
||||||||||
Balance at December 31, 2017
|
$
|
1,292
|
|
|
$
|
2,925
|
|
|
$
|
589
|
|
|
$
|
4,806
|
|
Sponsor contributions of assets to the Predecessors
|
406
|
|
|
—
|
|
|
—
|
|
|
406
|
|
||||
Loss attributable to the Predecessors
|
(28
|
)
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
||||
Net assets not assumed by Andeavor Logistics
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
||||
Allocation of net assets acquired by the unitholders
|
(1,651
|
)
|
|
1,651
|
|
|
—
|
|
|
—
|
|
||||
Distributions to common and preferred unitholders (b)
|
—
|
|
|
(620
|
)
|
|
(29
|
)
|
|
(649
|
)
|
||||
Distributions to common unitholders related to acquisitions (c)
|
—
|
|
|
(300
|
)
|
|
—
|
|
|
(300
|
)
|
||||
Net earnings attributable to partners
|
—
|
|
|
423
|
|
|
34
|
|
|
457
|
|
||||
Cumulative effect of accounting standard adoption
|
—
|
|
|
(22
|
)
|
|
—
|
|
|
(22
|
)
|
||||
Contributions (d)
|
—
|
|
|
34
|
|
|
—
|
|
|
34
|
|
||||
Other
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||
Balance at September 30, 2018
|
$
|
—
|
|
|
$
|
4,093
|
|
|
$
|
594
|
|
|
$
|
4,687
|
|
(a)
|
Adjusted to include the historical results of the Predecessors. See Notes 1 and 2 for further discussion.
|
(b)
|
Represents cash distributions declared and paid during the
nine
months ended
September 30, 2018
.
|
(c)
|
Distributions to common unitholders include
$300 million
in cash payments for the 2018 Drop Down. As an entity under common control with Andeavor, we record the assets that we acquire from Andeavor in our consolidated balance sheets at Andeavor’s historical book value instead of fair value, and any excess of cash paid over the historical book value of the assets acquired from Andeavor is recorded within equity. As a result of this accounting treatment, this transaction resulted in a net increase of
$1.4 billion
in our equity balance during the
nine
months ended
September 30, 2018
.
|
(d)
|
Includes Andeavor and TLGP contributions to the Partnership primarily related to reimbursements for capital spending pursuant predominantly to the Amended Omnibus Agreement and the Carson Assets Indemnity Agreement.
|
16
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
Quarter Ended
|
Quarterly Distribution Per Common Unit
|
|
Total Cash Distribution
(in millions)
|
|
Date of Distribution
|
|
Unitholders Record Date
|
||||
December 31, 2017 (a)
|
$
|
1.000
|
|
|
$
|
205
|
|
|
February 14, 2018
|
|
January 31, 2018
|
March 31, 2018 (a)
|
1.015
|
|
|
205
|
|
|
May 15, 2018
|
|
May 1, 2018
|
||
June 30, 2018 (a)
|
1.030
|
|
|
209
|
|
|
August 14, 2018
|
|
August 3, 2018
|
||
September 30, 2018 (a)(b)
|
1.030
|
|
|
238
|
|
|
November 14, 2018
|
|
November 5, 2018
|
(a)
|
This distribution is net of
$15 million
waived by TLGP for each of the
three
months ended
September 30, 2018
, June 30, 2018 and March 31, 2018, as well as
$12.5 million
for the three months ended December 31, 2017. TLGP’s distribution waivers for 2018 and 2019 remain in effect as instituted in 2017 under the terms of our partnership agreement.
|
(b)
|
This distribution was declared on
October 26, 2018
and will be paid on the date of distribution.
|
|
|
September 30, 2018
|
17
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net earnings
|
$
|
166
|
|
|
$
|
90
|
|
|
$
|
429
|
|
|
$
|
253
|
|
Special allocations of net earnings (“Special Allocations”) (a)
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Net earnings, including Special Allocations
|
166
|
|
|
90
|
|
|
429
|
|
|
254
|
|
||||
Distributions on Preferred Units (b)
|
(11
|
)
|
|
—
|
|
|
(31
|
)
|
|
—
|
|
||||
Net earnings attributable to common units
|
155
|
|
|
90
|
|
|
398
|
|
|
254
|
|
||||
General partner’s distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
||||
General partner’s IDRs (c)
|
—
|
|
|
—
|
|
|
—
|
|
|
(75
|
)
|
||||
Limited partners’ distributions on common units
|
(238
|
)
|
|
(201
|
)
|
|
(652
|
)
|
|
(407
|
)
|
||||
Distributions on common units greater than earnings
|
$
|
(83
|
)
|
|
$
|
(111
|
)
|
|
$
|
(254
|
)
|
|
$
|
(234
|
)
|
General partner’s earnings:
|
|
|
|
|
|
|
|
||||||||
Distributions
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
General partner’s IDRs (c)
|
—
|
|
|
—
|
|
|
—
|
|
|
75
|
|
||||
Allocation of distributions greater than earnings (d)
|
(4
|
)
|
|
(8
|
)
|
|
(28
|
)
|
|
(48
|
)
|
||||
Total general partner’s earnings
|
$
|
(4
|
)
|
|
$
|
(8
|
)
|
|
$
|
(28
|
)
|
|
$
|
33
|
|
Limited partners’ earnings on common units:
|
|
|
|
|
|
|
|
||||||||
Distributions (e)
|
$
|
238
|
|
|
$
|
201
|
|
|
$
|
652
|
|
|
$
|
407
|
|
Special Allocations (a)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||
Allocation of distributions greater than earnings
|
(79
|
)
|
|
(103
|
)
|
|
(226
|
)
|
|
(186
|
)
|
||||
Total limited partners’ earnings on common units
|
$
|
159
|
|
|
$
|
98
|
|
|
$
|
426
|
|
|
$
|
220
|
|
Weighted average limited partner units outstanding:
|
|
|
|
|
|
|
|
||||||||
Common units - basic
|
234.4
|
|
|
108.0
|
|
|
223.0
|
|
|
107.0
|
|
||||
Common units - diluted (f)
|
234.6
|
|
|
108.1
|
|
|
223.2
|
|
|
107.1
|
|
||||
Net earnings per limited partner unit: (g)
|
|
|
|
|
|
|
|
||||||||
Common - basic
|
$
|
0.68
|
|
|
$
|
0.90
|
|
|
$
|
1.91
|
|
|
$
|
2.05
|
|
Common - diluted
|
$
|
0.68
|
|
|
$
|
0.90
|
|
|
$
|
1.91
|
|
|
$
|
2.05
|
|
(a)
|
Normal allocations according to percentage interests are made after giving effect, if any, to priority income allocations in an amount equal to incentive cash distributions fully allocated to the general partner and any special allocations. The adjustment reflects the special allocation to common units held by TLGP for the interest incurred in connection with borrowings on the Revolving Credit Facility in lieu of using all cash on hand to fund the acquisition of crude oil, natural gas and produced water gathering systems and two natural gas processing facilities from Whiting Oil and Gas Corporation, GBK Investments, LLC and WBI Energy Midstream, LLC (the “North Dakota Gathering and Processing Assets”) during the
nine
months ended
September 30, 2017
.
|
(b)
|
The Preferred Units entitle unitholders to receive preferred distributions on a semi-annually basis.
|
(c)
|
IDRs entitled the general partner to receive increasing percentages, up to
50%
, of quarterly distributions in excess of
$0.3881
per unit per quarter. The amount above reflects earnings distributed to our general partner net of
$38 million
of IDRs waived by TLGP for the
nine
months ended
September 30, 2017
, respectively. Our general partner no longer holds IDRs as a result of the IDR/GP Transaction.
|
(d)
|
We have revised the historical allocation of general partner earnings to include the Predecessors’ losses of
$4 million
and
$28 million
for the three and nine months ended
September 30, 2018
, respectively, and losses of
$7 million
and
$46 million
for the three and nine months ended
September 30, 2017
, respectively.
|
(e)
|
Distributions of earnings for limited partners’ common units for the
three
and
nine
months ended
September 30, 2018
is net of a
$15 million
and
$45 million
waiver, respectively, from Andeavor in connection with the WNRL Merger.
|
(f)
|
Diluted net earnings per unit include the effects of potentially dilutive units on our common units, which consist of unvested service and performance phantom units.
|
(g)
|
Amounts may not recalculate due to rounding of dollar and unit information.
|
18
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
|
September 30, 2018
|
19
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
December 31, 2017 (a)
|
|
Adjustments for ASC 606 (b)
|
|
Balance at January 1, 2018
|
|
September 30,
2018 |
||||||||
Receivables from contracts with customers
|
$
|
443
|
|
|
$
|
(34
|
)
|
|
$
|
409
|
|
|
$
|
437
|
|
Other contract assets
|
—
|
|
|
34
|
|
|
34
|
|
|
31
|
|
||||
Deferred income, current
|
23
|
|
|
—
|
|
|
23
|
|
|
22
|
|
||||
Deferred income, noncurrent
|
43
|
|
|
19
|
|
|
62
|
|
|
64
|
|
(a)
|
Adjusted to include the historical results of the Predecessors. See Notes 1 and 2 for further discussion.
|
(b)
|
These amounts exclude balances associated with equity method investments. We recognized a cumulative adjustment of
$3 million
as a decrease to Equity Method Investments in our condensed consolidated balance sheets as of January 1, 2018 for the impacts related to our equity method investment in Three Rivers Gathering, LLC. There were
no
material impacts to this balance during the
nine
months ended
September 30, 2018
due to the adoption.
|
20
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
Three Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||||||||
|
Terminalling and Transportation
|
|
Gathering and Processing
|
|
Wholesale
|
|
Terminalling and Transportation
|
|
Gathering and Processing
|
|
Wholesale
|
||||||||||||
Service Revenues (a)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Refined products
|
$
|
240
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
650
|
|
|
$
|
—
|
|
|
$
|
13
|
|
Crude oil and water
|
39
|
|
|
108
|
|
|
—
|
|
|
108
|
|
|
313
|
|
|
—
|
|
||||||
Natural gas
|
—
|
|
|
100
|
|
|
—
|
|
|
—
|
|
|
296
|
|
|
—
|
|
||||||
Other
|
1
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
||||||
Total Service Revenues
|
280
|
|
|
208
|
|
|
4
|
|
|
762
|
|
|
609
|
|
|
13
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Product Revenues
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
NGL products
|
—
|
|
|
137
|
|
|
—
|
|
|
—
|
|
|
336
|
|
|
—
|
|
||||||
Refined products
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
37
|
|
||||||
Total Product Revenues
|
—
|
|
|
137
|
|
|
13
|
|
|
—
|
|
|
336
|
|
|
37
|
|
||||||
Total Revenues
|
$
|
280
|
|
|
$
|
345
|
|
|
$
|
17
|
|
|
$
|
762
|
|
|
$
|
945
|
|
|
$
|
50
|
|
(a)
|
Includes
$114 million
and
$292 million
of lease revenues for the
three
and
nine
months ended
September 30, 2018
, respectively.
|
|
|
September 30, 2018
|
21
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018 (a)
|
|
2017 (a)
|
|
2018 (a)
|
|
2017 (a)
|
||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
Terminalling and Transportation:
|
|
|
|
|
|
|
|
||||||||
Terminalling
|
$
|
235
|
|
|
$
|
189
|
|
|
$
|
643
|
|
|
$
|
493
|
|
Pipeline transportation
|
44
|
|
|
34
|
|
|
115
|
|
|
97
|
|
||||
Other revenues
|
1
|
|
|
7
|
|
|
4
|
|
|
9
|
|
||||
Total Terminalling and Transportation
|
280
|
|
|
230
|
|
|
762
|
|
|
599
|
|
||||
Gathering and Processing:
|
|
|
|
|
|
|
|
||||||||
NGL sales
|
137
|
|
|
90
|
|
|
336
|
|
|
254
|
|
||||
Gas gathering and processing
|
82
|
|
|
85
|
|
|
249
|
|
|
252
|
|
||||
Crude oil and water gathering
|
86
|
|
|
76
|
|
|
241
|
|
|
170
|
|
||||
Pass-thru and other
|
40
|
|
|
44
|
|
|
119
|
|
|
120
|
|
||||
Total Gathering and Processing
|
345
|
|
|
295
|
|
|
945
|
|
|
796
|
|
||||
Wholesale:
|
|
|
|
|
|
|
|
||||||||
Fuel sales (b)
|
13
|
|
|
565
|
|
|
37
|
|
|
730
|
|
||||
Other wholesale
|
7
|
|
|
4
|
|
|
25
|
|
|
10
|
|
||||
Total Wholesale
|
20
|
|
|
569
|
|
|
62
|
|
|
740
|
|
||||
Intersegment wholesale revenues
|
(3
|
)
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
||||
Total Revenues
|
$
|
642
|
|
|
$
|
1,094
|
|
|
$
|
1,757
|
|
|
$
|
2,135
|
|
|
|
|
|
|
|
|
|
||||||||
Segment Operating Income
|
|
|
|
|
|
|
|
||||||||
Terminalling and Transportation
|
$
|
140
|
|
|
$
|
103
|
|
|
$
|
351
|
|
|
$
|
290
|
|
Gathering and Processing
|
80
|
|
|
50
|
|
|
226
|
|
|
158
|
|
||||
Wholesale
|
7
|
|
|
7
|
|
|
22
|
|
|
9
|
|
||||
Total Segment Operating Income
|
227
|
|
|
160
|
|
|
599
|
|
|
457
|
|
||||
Unallocated general and administrative expenses
|
(12
|
)
|
|
(13
|
)
|
|
(27
|
)
|
|
(33
|
)
|
||||
Operating Income
|
215
|
|
|
147
|
|
|
572
|
|
|
424
|
|
||||
Interest and financing costs, net
|
(57
|
)
|
|
(68
|
)
|
|
(172
|
)
|
|
(193
|
)
|
||||
Equity in earnings of equity method investments
|
7
|
|
|
6
|
|
|
25
|
|
|
13
|
|
||||
Other income, net
|
1
|
|
|
5
|
|
|
4
|
|
|
9
|
|
||||
Net Earnings
|
$
|
166
|
|
|
$
|
90
|
|
|
$
|
429
|
|
|
$
|
253
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and Amortization Expenses
|
|
|
|
|
|
|
|
||||||||
Terminalling and Transportation
|
$
|
35
|
|
|
$
|
32
|
|
|
$
|
105
|
|
|
$
|
85
|
|
Gathering and Processing
|
47
|
|
|
51
|
|
|
154
|
|
|
134
|
|
||||
Wholesale
|
4
|
|
|
2
|
|
|
9
|
|
|
3
|
|
||||
Total Depreciation and Amortization Expenses
|
$
|
86
|
|
|
$
|
85
|
|
|
$
|
268
|
|
|
$
|
222
|
|
|
|
|
|
|
|
|
|
||||||||
Capital Expenditures
|
|
|
|
|
|
|
|
||||||||
Terminalling and Transportation
|
$
|
76
|
|
|
$
|
51
|
|
|
$
|
155
|
|
|
$
|
127
|
|
Gathering and Processing
|
110
|
|
|
41
|
|
|
368
|
|
|
85
|
|
||||
Wholesale
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Total Capital Expenditures
|
$
|
186
|
|
|
$
|
92
|
|
|
$
|
524
|
|
|
$
|
212
|
|
(a)
|
Adjusted to include the historical results of the Predecessors. See Notes 1 and 2 for further discussion.
|
(b)
|
The presentation of wholesale fuel sales was impacted by adoption of ASC 606 on January 1, 2018. Beginning January 1, 2018 in connection with the adoption, the revenues and costs associated with our fuel purchase and supply arrangements with Andeavor were netted.
|
22
|
|
|
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
|
September 30,
2018 |
|
December 31, 2017 (a)
|
||||
Terminalling and Transportation
|
$
|
3,408
|
|
|
$
|
3,045
|
|
Gathering and Processing
|
6,378
|
|
|
6,006
|
|
||
Wholesale
|
354
|
|
|
342
|
|
||
Other
|
57
|
|
|
112
|
|
||
Total Identifiable Assets
|
$
|
10,197
|
|
|
$
|
9,505
|
|
(a)
|
Adjusted to include the historical results of the Predecessors. See Notes 1 and 2 for further discussion.
|
|
|
September 30, 2018
|
23
|
Management’s Discussion and Analysis
|
24
|
|
|
|
|
Management’s Discussion and Analysis
|
|
•
|
increasing our terminalling volumes by expanding capacity and growing our third-party services at certain terminals;
|
•
|
optimizing volumes and growing third-party throughput at our Terminalling and Transportation assets; and
|
•
|
pursuing strategic assets in the western and inland U.S.
|
•
|
further expanding capacity and capabilities as well as adding new origin and destination points for our common carrier pipelines in North Dakota and Montana;
|
•
|
expanding our crude oil, natural gas and water gathering and associated gas processing footprint in the Bakken region to enhance and improve overall basin logistics efficiencies;
|
•
|
expanding our crude oil gathering footprint in the Permian Basin; and
|
•
|
pursuing strategic assets across the western and inland U.S.
|
|
|
September 30, 2018
|
25
|
Management’s Discussion and Analysis
|
•
|
Average terminalling revenue per barrel - calculated as total terminalling revenue divided by terminalling throughput presented in thousands of barrels per day (“Mbpd”) multiplied by 1,000 and multiplied by the number of days in the period, (
92
days for both the
three
months ended
September 30, 2018
(the “
2018
Quarter”) and
2017
(the “
2017
Quarter”) and
273
days for both the
nine
months ended
September 30, 2018
(the “
2018
Period”) and
2017
(the “
2017
Period”);
|
•
|
Average pipeline transportation revenue per barrel - calculated as total pipeline transportation revenue divided by pipeline transportation throughput presented in Mbpd multiplied by 1,000 and multiplied by the number of days in the period as outlined above;
|
•
|
Average margin on NGL sales per barrel - calculated as the difference between the NGL sales revenues and the amounts recognized as NGL expense divided by our NGL sales volumes in barrels presented in Mbpd multiplied by 1,000 and multiplied by the number of days in the period as outlined above;
|
•
|
Average gas gathering and processing revenue per Million British thermal units (“MMBtu”) - calculated as total gathering and processing fee-based revenue divided by gas gathering throughput presented in thousands of MMBtu per day (“MMBtu/d”) multiplied by 1,000 and multiplied by the number of days in the period as outlined above;
|
•
|
Average crude oil and water gathering revenue per barrel - calculated as total crude oil and water gathering fee-based revenue divided by crude oil and water gathering throughput presented in Mbpd multiplied by 1,000 and multiplied by the number of days in the period as outlined above;
|
•
|
Wholesale fuel sales per gallon - calculated as wholesale fuel revenues divided by our total wholesale fuel sales volume in gallons; and
|
•
|
Average wholesale fuel sales margin per gallon - calculated as the difference between total wholesale fuel revenues and wholesale cost of fuel and other divided by our total wholesale fuel sales volume in gallons.
|
26
|
|
|
|
|
Management’s Discussion and Analysis
|
|
•
|
Financial non-GAAP measure of EBITDA - calculated as U.S. GAAP-based net earnings before interest, income taxes and depreciation and amortization expense;
|
•
|
Financial non-GAAP measure of Segment EBITDA - calculated as a segment’s U.S. GAAP-based operating income before depreciation and amortization expense plus equity in earnings (loss) of equity method investments and other income (expense), net;
|
•
|
Liquidity non-GAAP measure of distributable cash flow - calculated as U.S. GAAP-based net cash flow from operating activities adjusted for changes in working capital, amounts spent on maintenance capital net of reimbursements and other adjustments not expected to settle in cash;
|
•
|
Liquidity non-GAAP measure of distributable cash flow attributable to common unitholders - calculated as distributable cash flow minus distributions associated with the Preferred Units;
|
•
|
Operating performance measure of average margin on NGL sales per barrel - calculated as the difference between the NGL sales revenues and the amounts recognized as NGL expense divided by our NGL sales volumes in barrels presented in Mbpd multiplied by 1,000 and multiplied by the number of days in the period as previously outlined; and
|
•
|
Operating performance measure of average wholesale fuel sales margin per gallon - calculated as the difference between total wholesale fuel revenues and wholesale’s cost of fuel divided by our total wholesale fuel sales volumes in gallons.
|
•
|
our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or financing methods;
|
•
|
the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;
|
•
|
our ability to incur and service debt and fund capital expenditures; and
|
•
|
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
|
|
|
September 30, 2018
|
27
|
Management’s Discussion and Analysis
|
(a)
|
See “Non-GAAP Reconciliations” section for further information regarding these non-GAAP measures.
|
28
|
|
|
|
|
Management’s Discussion and Analysis
|
|
|
|
September 30, 2018
|
29
|
Management’s Discussion and Analysis
|
(a)
|
See “Non-GAAP Reconciliations” section for further information regarding these non-GAAP measures.
|
30
|
|
|
|
|
Management’s Discussion and Analysis
|
|
|
|
September 30, 2018
|
31
|
Management’s Discussion and Analysis
|
32
|
|
|
|
|
Management’s Discussion and Analysis
|
|
(a)
|
See “Non-GAAP Reconciliations” section for further information regarding this non-GAAP measure.
|
(a)
|
Adjusted to include the historical results of the Predecessors.
|
|
|
September 30, 2018
|
33
|
Management’s Discussion and Analysis
|
|
Three Months Ended September 30,
|
||||||
|
2018 (a)
|
|
2017 (a)
|
||||
Revenues
|
|
|
|
||||
Terminalling
|
$
|
235
|
|
|
$
|
189
|
|
Pipeline transportation
|
44
|
|
|
34
|
|
||
Other revenues
|
1
|
|
|
7
|
|
||
Total Revenues
|
280
|
|
|
230
|
|
||
Costs and Expenses
|
|
|
|
||||
Operating expenses (b)
|
99
|
|
|
80
|
|
||
Depreciation and amortization expenses
|
35
|
|
|
32
|
|
||
General and administrative expenses
|
7
|
|
|
15
|
|
||
Gain on asset disposals and impairments
|
(1
|
)
|
|
—
|
|
||
Operating Income
|
$
|
140
|
|
|
$
|
103
|
|
Segment EBITDA (c)
|
$
|
180
|
|
|
$
|
142
|
|
Rates (d)
|
|
|
|
||||
Average terminalling revenue per barrel
|
$
|
1.43
|
|
|
$
|
1.18
|
|
Average pipeline transportation revenue per barrel
|
$
|
0.45
|
|
|
$
|
0.40
|
|
(a)
|
Adjusted to include the historical results of the Predecessors.
|
(b)
|
Operating expenses included an imbalance settlement gain of
$1 million
for the
2017
Quarter. There was
no
gain for the 2018 Quarter.
|
(c)
|
See “Non-GAAP Reconciliations” section for further information regarding this non-GAAP measure.
|
(d)
|
Amounts may not recalculate due to rounding of dollar and volume information.
|
(a)
|
See “Non-GAAP Reconciliations” section for further information regarding this non-GAAP measure.
|
34
|
|
|
|
|
Management’s Discussion and Analysis
|
|
(a)
|
Adjusted to include the historical results of the Predecessors.
|
|
Nine Months Ended
September 30, |
||||||
|
2018 (a)
|
|
2017 (a)
|
||||
Revenues
|
|
|
|
||||
Terminalling
|
$
|
643
|
|
|
$
|
493
|
|
Pipeline transportation
|
115
|
|
|
97
|
|
||
Other revenues
|
4
|
|
|
9
|
|
||
Total Revenues
|
762
|
|
|
599
|
|
||
Costs and Expenses
|
|
|
|
||||
Operating expenses (b)
|
279
|
|
|
216
|
|
||
Depreciation and amortization expenses
|
105
|
|
|
85
|
|
||
General and administrative expenses
|
27
|
|
|
33
|
|
||
Gain on asset disposals and impairments
|
—
|
|
|
(25
|
)
|
||
Operating Income
|
$
|
351
|
|
|
$
|
290
|
|
Segment EBITDA (c)
|
$
|
474
|
|
|
$
|
384
|
|
Rates (d)
|
|
|
|
||||
Average terminalling revenue per barrel
|
$
|
1.28
|
|
|
$
|
1.32
|
|
Average pipeline transportation revenue per barrel
|
$
|
0.42
|
|
|
$
|
0.40
|
|
(a)
|
Adjusted to include the historical results of the Predecessors.
|
(b)
|
Operating expenses included an imbalance settlement gain of
$3 million
for the
2017
Period. There was
no
gain for the 2018 Period.
|
(c)
|
See “Non-GAAP Reconciliations” section for further information regarding this non-GAAP measure.
|
(d)
|
Amounts may not recalculate due to rounding of dollar and volume information.
|
|
|
September 30, 2018
|
35
|
Management’s Discussion and Analysis
|
(a)
|
See “Non-GAAP Reconciliations” section for further information regarding this non-GAAP measure.
|
(a)
|
Volumes represent barrels sold in keep-whole arrangements, net barrels retained in POP arrangements and other associated products.
|
(b)
|
The adoption of ASC 606 changed the presentation of our gas gathering and processing throughput volumes. Volumes processed internally to enhance our NGL sales are no longer reported in our throughput volumes as certain fees contained within our commodity contracts are now reported as a reduction of “NGL expense”. The impact of the adoption during the
2018
Quarter was
184
thousand MMBtu/d now being used internally and not reported in the throughput volumes used to calculate our average gas gathering and processing revenue per MMBtu.
|
(c)
|
Adjusted to include the historical results of the Predecessors.
|
36
|
|
|
|
|
Management’s Discussion and Analysis
|
|
|
Three Months Ended
September 30, |
||||||
|
2018 (a)
|
|
2017 (a)
|
||||
Revenues
|
|
|
|
||||
NGL sales (b)
|
$
|
137
|
|
|
$
|
90
|
|
Gas gathering and processing
|
82
|
|
|
85
|
|
||
Crude oil and water gathering
|
86
|
|
|
76
|
|
||
Pass-thru and other
|
40
|
|
|
44
|
|
||
Total Revenues
|
345
|
|
|
295
|
|
||
Costs and Expenses
|
|
|
|
||||
NGL expense (excluding items shown separately below) (b)
|
73
|
|
|
64
|
|
||
Operating expenses (c)
|
131
|
|
|
113
|
|
||
Depreciation and amortization expenses
|
47
|
|
|
51
|
|
||
General and administrative expenses
|
12
|
|
|
16
|
|
||
Loss on asset disposals and impairments
|
2
|
|
|
1
|
|
||
Operating Income
|
$
|
80
|
|
|
$
|
50
|
|
Segment EBITDA (d)
|
$
|
130
|
|
|
$
|
103
|
|
Rates (e)
|
|
|
|
||||
Average margin on NGL sales per barrel (b)(d)(f)
|
$
|
71.47
|
|
|
$
|
38.30
|
|
Average gas gathering and processing revenue per MMBtu (f)
|
$
|
1.27
|
|
|
$
|
0.96
|
|
Average crude oil and water gathering revenue per barrel
|
$
|
2.03
|
|
|
$
|
1.95
|
|
(a)
|
Adjusted to include the historical results of the Predecessors.
|
(b)
|
We had
24.0
Mbpd and
21.1
Mbpd of gross NGL sales under our agreements for POP and keep-whole arrangements for the
2018
Quarter and
2017
Quarter, respectively. We retained
9.5
Mbpd and
7.0
Mbpd under these arrangements, respectively. The difference between gross sales barrels and barrels retained is reflected in NGL expense resulting from the gross presentation required for the POP arrangements associated with the North Dakota Gathering and Processing Assets.
|
(c)
|
Operating expenses include an imbalance settlement gain of
$1 million
for the
2017
Quarter. There was
no
gain for the
2018
Quarter.
|
(d)
|
See “Non-GAAP Reconciliations” section for further information regarding this non-GAAP measure.
|
(e)
|
Amounts may not recalculate due to rounding of dollar and volume information.
|
(f)
|
Due to the adoption of ASC 606, certain cost recoveries previously presented as service revenues are now reflected as reductions to NGL expense, resulting in an increase to the average margin on NGL sales per barrel. In addition, volumes processed internally to enhance our NGL sales are no longer reported in our throughput volumes used to calculate our average gas gathering and processing revenue per MMBtu as certain fees contained within our commodity contracts are now reported as a reduction of NGL expense. The mix of remaining volumes resulted in a higher recognized gas gathering and processing rate.
|
|
|
September 30, 2018
|
37
|
Management’s Discussion and Analysis
|
(a)
|
See “Non-GAAP Reconciliations” section for further information regarding this non-GAAP measure.
|
(a)
|
Volumes represent barrels sold in keep-whole arrangements, net barrels retained in POP arrangements and other associated products.
|
(b)
|
The adoption of ASC 606 changed the presentation of our gas gathering and processing throughput volumes. Volumes processed internally to enhance our NGL sales are no longer reported in our throughput volumes as certain fees contained within our commodity contracts are now reported as a reduction of “NGL expense”. The impact of the adoption during the
2018
Period was
170
thousand MMBtu/d now being used internally and not reported in our throughput volumes used to calculate our average gas gathering and processing revenue per MMBtu.
|
(c)
|
Adjusted to include the historical results of the Predecessors.
|
38
|
|
|
|
|
Management’s Discussion and Analysis
|
|
|
Nine Months Ended
September 30, |
||||||
|
2018 (a)
|
|
2017 (a)
|
||||
Revenues
|
|
|
|
||||
NGL sales (b)
|
$
|
336
|
|
|
$
|
254
|
|
Gas gathering and processing
|
249
|
|
|
252
|
|
||
Crude oil and water gathering
|
241
|
|
|
170
|
|
||
Pass-thru and other (c)
|
119
|
|
|
120
|
|
||
Total Revenues
|
945
|
|
|
796
|
|
||
Costs and Expenses
|
|
|
|
||||
NGL expense (excluding items shown separately below) (b)(c)
|
166
|
|
|
179
|
|
||
Operating expenses (d)
|
361
|
|
|
284
|
|
||
Depreciation and amortization expenses
|
154
|
|
|
134
|
|
||
General and administrative expenses
|
36
|
|
|
41
|
|
||
Loss on asset disposals and impairments
|
2
|
|
|
—
|
|
||
Operating Income
|
$
|
226
|
|
|
$
|
158
|
|
Segment EBITDA (e)
|
$
|
391
|
|
|
$
|
299
|
|
Rates (f)
|
|
|
|
||||
Average margin on NGL sales per barrel (b)(c)(e)(g)
|
$
|
61.70
|
|
|
$
|
38.27
|
|
Average gas gathering and processing revenue per MMBtu (g)
|
$
|
1.17
|
|
|
$
|
0.97
|
|
Average crude oil and water gathering revenue per barrel
|
$
|
2.13
|
|
|
$
|
1.71
|
|
(a)
|
Adjusted to include the historical results of the Predecessors.
|
(b)
|
We had
24.4
Mbpd and
21.0
Mbpd of gross NGL sales under our agreements for POP and keep-whole arrangements for the
2018
Period and
2017
Period, respectively. We retained
10.1
Mbpd and
7.3
Mbpd under these arrangements, respectively. The difference between gross sales barrels and barrels retained is reflected in NGL expense resulting from the gross presentation required for the POP arrangements associated with the North Dakota Gathering and Processing Assets.
|
(c)
|
Included in the NGL expense for the
2017
Period was approximately
$2 million
of costs related to crude oil volumes obtained in connection with the North Dakota Gathering and Processing Assets acquisition. The corresponding revenues were recognized in pass-thru and other revenue. As such, the calculation of the average margin on NGL sales per barrel excludes this amount.
|
(d)
|
Operating expenses include an imbalance settlement gain of
$4 million
for the
2017
Period. There was
no
gain for the
2018
Period.
|
(e)
|
See “Non-GAAP Reconciliations” section for further information regarding this non-GAAP measure.
|
(f)
|
Amounts may not recalculate due to rounding of dollar and volume information.
|
(g)
|
Due to the adoption of ASC 606, certain cost recoveries previously presented as service revenues are now reflected as reductions to NGL expense, resulting in an increase to the average margin on NGL sales per barrel. In addition, volumes processed internally to enhance our NGL sales are no longer reported in our throughput volumes used to calculate our average gas gathering and processing revenue per MMBtu as certain fees contained within our commodity contracts are now reported as a reduction of NGL expense. The mix of remaining volumes resulted in a higher recognized gas gathering and processing rate.
|
|
|
September 30, 2018
|
39
|
Management’s Discussion and Analysis
|
(a)
|
See “Non-GAAP Reconciliations” section for further information regarding this non-GAAP measure.
|
40
|
|
|
|
|
Management’s Discussion and Analysis
|
|
|
Three Months Ended
September 30, |
||||||
|
2018
|
|
2017 (a)
|
||||
Revenues
|
|
|
|
||||
Fuel sales (b)
|
$
|
13
|
|
|
$
|
565
|
|
Other wholesale
|
7
|
|
|
4
|
|
||
Total Revenues
|
20
|
|
|
569
|
|
||
Costs and Expenses
|
|
|
|
||||
Cost of fuel and other (excluding items shown separately below) (b)
|
—
|
|
|
554
|
|
||
Operating expenses (excluding depreciation and amortization)
|
9
|
|
|
6
|
|
||
Depreciation and amortization expenses
|
4
|
|
|
2
|
|
||
General and administrative expenses
|
—
|
|
|
—
|
|
||
Operating Income
|
$
|
7
|
|
|
$
|
7
|
|
Segment EBITDA (c)
|
$
|
11
|
|
|
$
|
9
|
|
Volumes and Rates (d)
|
|
|
|
||||
Fuel sales volumes (millions of gallons)
|
311
|
|
|
329
|
|
||
Wholesale fuel sales per gallon (b)
|
|
4.0
|
¢
|
|
|
||
Average wholesale fuel sales margin per gallon (b)(c)
|
|
|
|
3.0
|
¢
|
(a)
|
Adjusted to include the historical results of the Predecessors. The Wholesale business was acquired in the WNRL Merger and only represents operations since June 1, 2017, the date the business was originally acquired by Andeavor.
|
(b)
|
Due to the adoption of ASC 606 effective January 1, 2018, the revenues and costs associated with our fuel purchase and supply arrangements with Andeavor for the 2018 Quarter were netted. Therefore, we no longer present cost of fuel and other or average margin on fuel sales per gallon. Instead, we now present wholesale fuel sales per gallon, which is not a direct comparison of the previous metric.
|
(c)
|
See “Non-GAAP Reconciliations” section for further information regarding this non-GAAP measure.
|
(d)
|
Amounts may not recalculate due to rounding of dollar and volume information.
|
(a)
|
See “Non-GAAP Reconciliations” section for further information regarding this non-GAAP measure.
|
|
|
September 30, 2018
|
41
|
Management’s Discussion and Analysis
|
|
Nine Months Ended
September 30, |
||||||
|
2018
|
|
2017 (a)
|
||||
Revenues
|
|
|
|
||||
Fuel sales (b)
|
$
|
37
|
|
|
$
|
730
|
|
Other wholesale
|
25
|
|
|
10
|
|
||
Total Revenues
|
62
|
|
|
740
|
|
||
Costs and Expenses
|
|
|
|
||||
Cost of fuel and other (excluding items shown separately below) (b)
|
—
|
|
|
716
|
|
||
Operating expenses (excluding depreciation and amortization)
|
30
|
|
|
12
|
|
||
Depreciation and amortization expenses
|
9
|
|
|
3
|
|
||
General and administrative expenses
|
1
|
|
|
—
|
|
||
Operating Income
|
$
|
22
|
|
|
$
|
9
|
|
|
|
|
|
||||
Segment EBITDA (c)
|
$
|
31
|
|
|
$
|
12
|
|
|
|
|
|
||||
Volumes and Rates (d)
|
|
|
|
||||
Fuel sales volumes (millions of gallons)
|
904
|
|
|
430
|
|
||
Wholesale fuel sales per gallon (b)
|
|
4.0
|
¢
|
|
|
||
Average wholesale fuel sales margin per gallon (b)(c)
|
|
|
|
3.0
|
¢
|
(a)
|
Adjusted to include the historical results of the Predecessors. The Wholesale business was acquired in the WNRL Merger and only represents operations since June 1, 2017, the date the business was originally acquired by Andeavor.
|
(b)
|
Due to the adoption of ASC 606 effective January 1, 2018, the revenues and costs associated with our fuel purchase and supply arrangements with Andeavor for the 2018 Period were netted. Therefore, we no longer present cost of fuel and other or average margin on fuel sales per gallon. Instead, we now present wholesale fuel sales per gallon, which is not a direct comparison of the previous metric.
|
(c)
|
See “Non-GAAP Reconciliations” section for further information regarding this non-GAAP measure.
|
(d)
|
Amounts may not recalculate due to rounding of dollar and volume information.
|
42
|
|
|
|
|
Management’s Discussion and Analysis
|
|
Debt, including current maturities:
|
September 30, 2018
|
|
December 31, 2017
|
||||
Credit facilities
|
$
|
1,120
|
|
|
$
|
423
|
|
Senior notes
|
3,750
|
|
|
3,750
|
|
||
Capital lease obligations
|
8
|
|
|
9
|
|
||
Total Debt
|
4,878
|
|
|
4,182
|
|
||
Unamortized Issuance Costs
|
(48
|
)
|
|
(54
|
)
|
||
Debt, Net of Unamortized Issuance Costs
|
4,830
|
|
|
4,128
|
|
||
Total Equity
|
4,687
|
|
|
4,806
|
|
||
Total Capitalization
|
$
|
9,517
|
|
|
$
|
8,934
|
|
Credit Facility
|
Total
Capacity
|
|
Amount Borrowed as of September 30, 2018
|
|
Available Capacity as of September 30, 2018
|
|
Weighted Average Interest Rate
|
|
Expiration
|
|||||||
Revolving Credit Facility
|
$
|
1,100
|
|
|
$
|
820
|
|
|
$
|
280
|
|
|
3.95
|
%
|
|
January 29, 2021
|
Dropdown Credit Facility
|
1,000
|
|
|
300
|
|
|
700
|
|
|
3.86
|
%
|
|
January 29, 2021
|
|||
Total Credit Facilities
|
$
|
2,100
|
|
|
$
|
1,120
|
|
|
$
|
980
|
|
|
|
|
|
Credit Facility
|
30 Day Eurodollar (LIBOR) Rate at September 30, 2018
|
|
Eurodollar Margin
|
|
Base Rate
|
|
Base Rate Margin
|
|
Commitment Fee
(unused portion)
|
Revolving Credit Facility (a)
|
2.26%
|
|
1.75%
|
|
5.25%
|
|
0.75%
|
|
0.300%
|
Dropdown Credit Facility (a)
|
2.26%
|
|
1.76%
|
|
5.25%
|
|
0.76%
|
|
0.300%
|
(a)
|
We have the option to elect whether our borrowings will bear interest at a base rate plus the base rate margin, or a Eurodollar rate, for the applicable period, plus the Eurodollar margin at the time of the borrowing. The applicable margin varies based upon a certain leverage ratio, as defined by the Revolving Credit Facility. We also incur commitment fees for the unused portion of the Revolving Credit Facility at an annual rate. Letters of credit outstanding under the Revolving Credit Facility incur fees at the Eurodollar margin rate.
|
|
|
September 30, 2018
|
43
|
Management’s Discussion and Analysis
|
|
Nine Months Ended
September 30, |
||||||
|
2018 (a)
|
|
2017 (a)
|
||||
Cash Flows From (Used in):
|
|
|
|
||||
Operating activities
|
$
|
719
|
|
|
$
|
524
|
|
Investing activities
|
(945
|
)
|
|
(1,404
|
)
|
||
Financing activities
|
181
|
|
|
230
|
|
||
Decrease in Cash and Cash Equivalents
|
$
|
(45
|
)
|
|
$
|
(650
|
)
|
(a)
|
Adjusted to include the historical results of the Predecessors.
|
44
|
|
|
|
|
Management’s Discussion and Analysis
|
|
|
|
September 30, 2018
|
45
|
Management’s Discussion and Analysis
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||
|
2018 (a)
|
|
2017 (a)
|
|
2018 (a)
|
|
2017 (a)
|
|
2018
|
|
2017 (a)
|
||||||||||||
|
Terminalling and Transportation
|
|
Gathering and Processing
|
|
Wholesale
|
||||||||||||||||||
Segment Operating Income
|
$
|
140
|
|
|
$
|
103
|
|
|
$
|
80
|
|
|
$
|
50
|
|
|
$
|
7
|
|
|
$
|
7
|
|
Depreciation and amortization expenses
|
35
|
|
|
32
|
|
|
47
|
|
|
51
|
|
|
4
|
|
|
2
|
|
||||||
Equity in earnings of equity method investments
|
4
|
|
|
4
|
|
|
3
|
|
|
2
|
|
|
—
|
|
|
—
|
|
||||||
Other income, net
|
1
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Segment EBITDA
|
$
|
180
|
|
|
$
|
142
|
|
|
$
|
130
|
|
|
$
|
103
|
|
|
$
|
11
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
2018 (a)
|
|
2017 (a)
|
|
2018 (a)
|
|
2017 (a)
|
|
2018
|
|
2017 (a)
|
||||||||||||
|
Terminalling and Transportation
|
|
Gathering and Processing
|
|
Wholesale
|
||||||||||||||||||
Segment Operating Income
|
$
|
351
|
|
|
$
|
290
|
|
|
$
|
226
|
|
|
$
|
158
|
|
|
$
|
22
|
|
|
$
|
9
|
|
Depreciation and amortization expenses
|
105
|
|
|
85
|
|
|
154
|
|
|
134
|
|
|
9
|
|
|
3
|
|
||||||
Equity in earnings of equity method investments
|
14
|
|
|
6
|
|
|
11
|
|
|
7
|
|
|
—
|
|
|
—
|
|
||||||
Other income, net
|
4
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Segment EBITDA
|
$
|
474
|
|
|
$
|
384
|
|
|
$
|
391
|
|
|
$
|
299
|
|
|
$
|
31
|
|
|
$
|
12
|
|
(a)
|
Adjusted to include the historical results of the Predecessors.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018 (a)
|
|
2017 (a)
|
|
2018 (a)
|
|
2017 (a)
|
||||||||
Net Cash from Operating Activities
|
$
|
172
|
|
|
$
|
225
|
|
|
$
|
719
|
|
|
$
|
524
|
|
Changes in assets and liabilities
|
96
|
|
|
(45
|
)
|
|
7
|
|
|
(51
|
)
|
||||
Predecessors impact
|
1
|
|
|
(8
|
)
|
|
12
|
|
|
20
|
|
||||
Maintenance capital expenditures (b)
|
(26
|
)
|
|
(33
|
)
|
|
(70
|
)
|
|
(80
|
)
|
||||
Reimbursement for maintenance capital expenditures (b)
|
7
|
|
|
7
|
|
|
19
|
|
|
22
|
|
||||
Proceeds from sale of assets
|
—
|
|
|
—
|
|
|
—
|
|
|
28
|
|
||||
Adjustments for equity method investments
|
(6
|
)
|
|
4
|
|
|
(3
|
)
|
|
5
|
|
||||
Changes in deferred revenue (c)
|
13
|
|
|
(2
|
)
|
|
8
|
|
|
5
|
|
||||
Other (d)
|
5
|
|
|
—
|
|
|
3
|
|
|
4
|
|
||||
Distributable Cash Flow
|
262
|
|
|
148
|
|
|
695
|
|
|
477
|
|
||||
Less: Preferred unit distributions (e)
|
(11
|
)
|
|
—
|
|
|
(31
|
)
|
|
—
|
|
||||
Distributable Cash Flow Attributable to Common Unitholders
|
$
|
251
|
|
|
$
|
148
|
|
|
$
|
664
|
|
|
$
|
477
|
|
(a)
|
Adjusted to include the historical results of the Predecessors.
|
(b)
|
We adjust our reconciliation of distributable cash flows for maintenance capital expenditures, tank restoration costs and expenditures required to ensure the safety, reliability, integrity and regulatory compliance of our assets with an offset for any reimbursements received for such expenditures.
|
(c)
|
Included in changes in deferred revenue are adjustments to remove the impact of the adoption of the new revenue recognition accounting standard on January 1, 2018 as well as the impact from the timing of recognition with certain of our contracts that contain minimum volume commitment with clawback provisions, which are predominantly recognized annually in the third quarter based on current contract terms.
|
(d)
|
Other includes transaction costs related to recent acquisitions and settlement expenses.
|
(e)
|
Represents the cash distributions earned by the Preferred Units for the three and
nine
months ended
September 30, 2018
assuming a distribution is declared by the Board. Cash distributions to be paid to holders of the Preferred Units are not available to common unitholders.
|
46
|
|
|
|
|
Management’s Discussion and Analysis
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2018 (a)
|
|
2017 (a)
|
|
2018 (a)
|
|
2017 (a)
|
||||||||
Segment Operating Income
|
$
|
80
|
|
|
$
|
50
|
|
|
$
|
226
|
|
|
$
|
158
|
|
Add back:
|
|
|
|
|
|
|
|
||||||||
Operating expenses
|
131
|
|
|
113
|
|
|
361
|
|
|
284
|
|
||||
General and administrative expenses
|
12
|
|
|
16
|
|
|
36
|
|
|
41
|
|
||||
Depreciation and amortization expenses
|
47
|
|
|
51
|
|
|
154
|
|
|
134
|
|
||||
Loss on asset disposals and impairments
|
2
|
|
|
1
|
|
|
2
|
|
|
—
|
|
||||
Other commodity purchases (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
Subtract:
|
|
|
|
|
|
|
|
||||||||
Gas gathering and processing revenues
|
(82
|
)
|
|
(85
|
)
|
|
(249
|
)
|
|
(252
|
)
|
||||
Crude oil gathering revenues
|
(86
|
)
|
|
(76
|
)
|
|
(241
|
)
|
|
(170
|
)
|
||||
Pass-thru and other revenues
|
(40
|
)
|
|
(44
|
)
|
|
(119
|
)
|
|
(120
|
)
|
||||
Margin on NGL Sales
|
$
|
64
|
|
|
$
|
26
|
|
|
$
|
170
|
|
|
$
|
77
|
|
Divided by Total Volumes for the Period:
|
|
|
|
|
|
|
|
||||||||
NGLs sales volumes (Mbpd)
|
9.5
|
|
|
7.0
|
|
|
10.1
|
|
|
7.3
|
|
||||
Number of days in the period
|
92
|
|
|
92
|
|
|
273
|
|
|
273
|
|
||||
Total volumes for the period (thousands of barrels) (c)
|
874
|
|
|
644
|
|
|
2,757
|
|
|
1,993
|
|
||||
Average Margin on NGL Sales per Barrel (c)
|
$
|
71.47
|
|
|
$
|
38.30
|
|
|
$
|
61.70
|
|
|
$
|
38.27
|
|
(a)
|
Adjusted to include the historical results of the Predecessors.
|
(b)
|
Included in NGL expense for the
nine
months ended
September 30, 2017
was approximately
$2 million
of costs related to crude oil volumes obtained and immediately sold in connection with the North Dakota Gathering and Processing Assets acquisition.
|
(c)
|
Amounts may not recalculate due to rounding of dollar and volume information.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
|
September 30, 2017 (a)
|
||||||
Segment Operating Income
|
$
|
7
|
|
|
$
|
9
|
|
Add back:
|
|
|
|
||||
Operating expenses (excluding depreciation and amortization)
|
6
|
|
|
12
|
|
||
Depreciation and amortization expenses
|
2
|
|
|
3
|
|
||
Subtract:
|
|
|
|
||||
Other wholesale revenues
|
(4
|
)
|
|
(10
|
)
|
||
Wholesale Fuel Sales Margin
|
$
|
11
|
|
|
$
|
14
|
|
Divided by Total Volumes for the Period:
|
|
|
|
||||
Fuel sales volumes (millions of gallons)
|
329
|
|
|
430
|
|
||
Average Wholesale Fuel Sales Margin per Gallon (b)
|
|
3.0
|
¢
|
|
|
3.0
|
¢
|
(a)
|
Adjusted to include the historical results of the Predecessors. The Wholesale business was acquired in the WNRL Merger and only represent operations since June 1, 2017, the date the business was originally acquired by Andeavor.
|
(b)
|
Amounts may not recalculate due to rounding of dollar and volume information.
|
|
|
September 30, 2018
|
47
|
Management’s Discussion and Analysis
|
•
|
changes in the expected value of and benefits derived from acquisitions, including any inability to successfully integrate acquisitions, realize expected synergies or achieve operational efficiency and effectiveness;
|
•
|
changes in global economic conditions on our business, on the business of our key customers, and on our customers’ suppliers, business partners and credit lenders;
|
•
|
a material change in the crude oil and natural gas produced in the basins where we operate;
|
•
|
the ability of our key customers to remain in compliance with the terms of their outstanding indebtedness;
|
•
|
changes in insurance markets impacting costs and the level and types of coverage available;
|
•
|
regulatory and other requirements concerning the transportation of crude oil, natural gas, NGLs and refined products, particularly in the areas where we operate;
|
•
|
changes in the cost or availability of third-party vessels, pipelines and other means of delivering and transporting crude oil, feedstocks, natural gas, NGLs and refined products;
|
•
|
the coverage and ability to recover claims under our insurance policies;
|
•
|
the availability and costs of crude oil, other refinery feedstocks and refined products;
|
•
|
the timing and extent of changes in commodity prices and demand for refined products, natural gas and NGLs;
|
•
|
changes in our cash flow from operations;
|
•
|
changes in our tax status;
|
•
|
the ability of our largest customers to perform under the terms of our gathering agreements;
|
•
|
the risk of contract cancellation, non-renewal or failure to perform by those in our supply and distribution chains, and the ability to replace such contracts and/or customers;
|
•
|
the suspension, reduction or termination of Andeavor’s obligations under our commercial agreements and our secondment agreement;
|
•
|
a material change in profitability among our customers;
|
•
|
direct or indirect effects on our business resulting from actual or threatened terrorist or activist incidents, cyber-security breaches or acts of war;
|
•
|
weather conditions, earthquakes or other natural disasters affecting operations by us or our key customers or the areas in which our customers operate;
|
•
|
disruptions due to equipment interruption or failure at our facilities, MPC’s or Andeavor’s facilities or third-party facilities on which our key customers are dependent;
|
•
|
our inability to complete acquisitions on economically acceptable terms or within anticipated timeframes;
|
•
|
actions of customers and competitors;
|
•
|
changes in our credit profile;
|
•
|
state and federal environmental, economic, health and safety, energy and other policies and regulations, including those related to climate change, and any changes therein and any legal or regulatory investigations, delays in obtaining necessary approvals and permits, compliance costs or other factors beyond our control;
|
•
|
operational hazards inherent in refining and natural gas processing operations and in transporting and storing crude oil, natural gas, NGLs and refined products;
|
•
|
changes in capital requirements or in expected timing, execution and benefits of planned capital projects;
|
•
|
seasonal variations in demand for natural gas and refined products;
|
•
|
adverse rulings, judgments, or settlements in litigation or other legal or tax matters, including unexpected environmental remediation costs in excess of any accruals, which affect us or MPC;
|
•
|
risks related to labor relations and workplace safety;
|
•
|
political developments; and
|
•
|
the factors described in greater detail under “Competition” and “Risk Factors” in Items 1 and 1A of our Annual Report on Form 10-K for the year ended
December 31, 2017
, in “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, and our other filings with the SEC.
|
48
|
|
|
|
|
Quantitative and Qualitative Disclosures about Market Risk
|
|
|
|
September 30, 2018
|
49
|
Legal Proceedings, Risk Factors and Unregistered Sales of Equity Securities
|
50
|
|
|
|
|
Exhibits
|
Exhibit Number
|
|
|
|
Incorporated by Reference (File No. 1-35143, unless otherwise indicated)
|
||||
|
Description of Exhibit
|
|
Form
|
|
Exhibit
|
|
Filing Date
|
|
‡
2.1
|
|
|
8-K
|
|
2.1
|
|
8/14/2017
|
|
|
|
|
|
|
|
|
|
|
‡
2.2
|
|
|
8-K
|
|
2.1
|
|
11/8/2017
|
|
|
|
|
|
|
|
|
|
|
‡ 2.3
|
|
|
10-Q
|
|
2.3
|
|
5/7/2018
|
|
|
|
|
|
|
|
|
|
|
2.4
|
|
|
8-K
|
|
2.1
|
|
8/7/2018
|
|
|
|
|
|
|
|
|
|
|
*2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
8-K
|
|
3.1
|
|
10/29/2018
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
|
8-K
|
|
3.1
|
|
12/1/2017
|
|
|
|
|
|
|
|
|
|
|
3.3
|
|
|
8-K
|
|
3.2
|
|
10/2/2018
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
|
8-K
|
|
10.1
|
|
8/7/2018
|
|
|
|
|
|
|
|
|
|
|
*10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.3
|
|
|
8-K
|
|
10.2
|
|
8/7/2018
|
|
|
|
|
|
|
|
|
|
|
*10.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
51
|
Exhibits
|
Exhibit Number
|
|
|
|
Incorporated by Reference (File No. 1-35143, unless otherwise indicated)
|
||||
|
Description of Exhibit
|
|
Form
|
|
Exhibit
|
|
Filing Date
|
|
10.5
|
|
|
8-K
|
|
10.3
|
|
8/7/2018
|
|
|
|
|
|
|
|
|
|
|
10.6
|
|
|
8-K
|
|
10.4
|
|
8/7/2018
|
|
|
|
|
|
|
|
|
|
|
10.7
|
|
|
8-K
|
|
10.5
|
|
8/7/2018
|
|
|
|
|
|
|
|
|
|
|
10.8
|
|
|
8-K
|
|
10.6
|
|
8/7/2018
|
|
|
|
|
|
|
|
|
|
|
*10.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*10.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*10.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*31.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*31.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*32.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*32.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
**101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
**101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
**101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
**101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
**101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
‡
|
Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC on request.
|
*
|
Filed herewith
|
**
|
Submitted electronically herewith
|
52
|
|
|
|
|
|
|
Andeavor Logistics LP
|
|
|
|
|
|
|
|
By:
|
Tesoro Logistics GP, LLC
|
|
|
|
Its general partner
|
|
|
|
|
Date:
|
November 7, 2018
|
By:
|
/s/ D. ANDREW WOODWARD
|
|
|
|
D. Andrew Woodward
|
|
|
|
Vice President, Finance
|
|
|
|
(Principal Financial Officer and Duly Authorized Signatory)
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September 30, 2018
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53
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