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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Shell Midstream Partners LP | NYSE:SHLX | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 15.82 | 0 | 01:00:00 |
|
ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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Delaware
|
|
46-5223743
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
Large accelerated filer
ý
|
|
Accelerated filer
¨
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Non-accelerated filer
¨
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|
Smaller reporting company
¨
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Emerging growth company
o
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Page
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Three Months Ended
March 31, |
|
|||||||
|
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2017
|
|
2016
|
|
|||||
|
|
(in millions of dollars, except per unit data)
|
|
|||||||
Revenue
|
|
|
|
|
|
|
||||
Third parties
|
|
$
|
47.3
|
|
|
$
|
51.3
|
|
|
|
Related parties
|
|
22.9
|
|
—
|
|
25.4
|
|
|
||
Total revenue
|
|
70.2
|
|
—
|
|
76.7
|
|
|
||
Costs and expenses
|
|
|
|
|
|
|
|
|
||
Operations and maintenance – third parties
|
|
12.9
|
|
—
|
|
9.4
|
|
|
||
Operations and maintenance – related parties
|
|
8.5
|
|
—
|
|
5.4
|
|
|
||
General and administrative – third parties
|
|
1.6
|
|
—
|
|
2.1
|
|
|
||
General and administrative – related parties
|
|
6.4
|
|
—
|
|
5.7
|
|
|
||
Depreciation, amortization and accretion
|
|
6.2
|
|
—
|
|
5.9
|
|
|
||
Property and other taxes
|
|
2.8
|
|
—
|
|
3.2
|
|
|
||
Total costs and expenses
|
|
38.4
|
|
—
|
|
31.7
|
|
|
||
Operating income
|
|
31.8
|
|
—
|
|
45.0
|
|
|
||
Income from equity investments
|
|
38.7
|
|
—
|
|
23.2
|
|
|
||
Dividend income from cost investments
|
|
7.3
|
|
—
|
|
2.8
|
|
|
||
Investment and dividend income
|
|
46.0
|
|
—
|
|
26.0
|
|
|
||
Interest expense, net
|
|
4.8
|
|
—
|
|
3.0
|
|
|
||
Income before income taxes
|
|
73.0
|
|
—
|
|
68.0
|
|
|
||
Income tax expense
|
|
—
|
|
—
|
|
—
|
|
|
||
Net income
|
|
73.0
|
|
—
|
|
68.0
|
|
|
||
Less: Net income attributable to noncontrolling interests
|
|
2.2
|
|
—
|
|
12.7
|
|
|
||
Net income attributable to the Partnership
|
|
$
|
70.8
|
|
|
$
|
55.3
|
|
|
|
General partner's interest in net income attributable to the Partnership
|
|
$
|
12.1
|
|
|
$
|
3.1
|
|
|
|
Limited Partners' interest in net income attributable to the Partnership
|
|
$
|
58.7
|
|
|
$
|
52.2
|
|
|
|
|
|
|
|
|
|
|||||
Net income per Limited Partner Unit - Basic and Diluted:
|
|
|
|
|
|
|
|
|||
Common
|
|
$
|
0.33
|
|
|
$
|
0.36
|
|
|
|
Subordinated
|
|
$
|
—
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
|||||
Distributions per Limited Partner Unit
|
|
$
|
0.2910
|
|
|
$
|
0.2350
|
|
|
|
|
|
|
|
|
|
|||||
Weighted average Limited Partner Units outstanding - Basic and Diluted (in millions):
|
|
|
|
|
|
|
|
|||
Common units – public
|
|
88.4
|
|
|
63.4
|
|
|
|||
Common units – SPLC
|
|
88.9
|
|
|
21.5
|
|
|
|||
Subordinated units – SPLC
|
|
—
|
|
|
67.5
|
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
|
|
(in millions of dollars)
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
|
||
Net income
|
|
$
|
73.0
|
|
|
$
|
68.0
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
|
|
|
||
Depreciation, amortization and accretion
|
|
6.2
|
|
|
5.9
|
|
||
Non-cash interest expense
|
|
—
|
|
|
0.1
|
|
||
Undistributed equity earnings
|
|
(0.8
|
)
|
|
(1.0
|
)
|
||
Changes in operating assets and liabilities
|
|
|
|
|
|
|
||
Accounts receivable
|
|
2.7
|
|
|
0.3
|
|
||
Allowance oil
|
|
1.1
|
|
|
(0.4
|
)
|
||
Prepaid expenses
|
|
(0.5
|
)
|
|
1.6
|
|
||
Accounts payable
|
|
(0.1
|
)
|
|
(0.2
|
)
|
||
Deferred revenue
|
|
8.5
|
|
|
(1.8
|
)
|
||
Accrued liabilities
|
|
3.4
|
|
|
(0.1
|
)
|
||
Net cash provided by operating activities
|
|
93.5
|
|
|
72.4
|
|
||
Cash flows from investing activities
|
|
|
|
|
|
|
||
Capital expenditures
|
|
(7.3
|
)
|
|
(4.7
|
)
|
||
Purchase price adjustment
|
|
0.4
|
|
|
—
|
|
||
Return of investment
|
|
6.0
|
|
|
4.1
|
|
||
Net cash used in investing activities
|
|
(0.9
|
)
|
|
(0.6
|
)
|
||
Cash flows from financing activities
|
|
|
|
|
|
|
||
Net proceeds from public offerings
|
|
—
|
|
|
420.4
|
|
||
Contributions from general partner
|
|
—
|
|
|
8.7
|
|
||
Repayment of credit facilities
|
|
—
|
|
|
(410.0
|
)
|
||
Distributions to noncontrolling interest
|
|
(3.2
|
)
|
|
(12.4
|
)
|
||
Distributions to unitholders and general partner
|
|
(58.6
|
)
|
|
(35.3
|
)
|
||
Other contribution from parent
|
|
2.8
|
|
|
1.8
|
|
||
Capital lease payments
|
|
(0.2
|
)
|
|
—
|
|
||
Credit facilities issuance costs
|
|
(0.7
|
)
|
|
—
|
|
||
Net cash used in financing activities
|
|
(59.9
|
)
|
|
(26.8
|
)
|
||
Net increase in cash and cash equivalents
|
|
32.7
|
|
|
45.0
|
|
||
Cash and cash equivalents at beginning of the period
|
|
121.9
|
|
|
93.0
|
|
||
Cash and cash equivalents at end of the period
|
|
$
|
154.6
|
|
|
$
|
138.0
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
||
Non-cash investing and financing transactions
|
|
|
|
|
|
|
||
Change in accrued capital expenditures
|
|
4.7
|
|
|
0.4
|
|
||
Other non-cash contributions from Parent
|
|
3.8
|
|
|
0.1
|
|
|
Partnership
|
|
|
|
|
||||||||||||||||||
(in millions of dollars)
|
Common Unitholders Public
|
|
Common Unitholder SPLC
|
|
Subordinated Unitholder SPLC
|
|
General Partner SPLC
|
|
Non- controlling Interest
|
|
Total
|
||||||||||||
Balance as of December 31, 2016
|
$
|
2,485.7
|
|
|
$
|
(124.1
|
)
|
|
$
|
(389.6
|
)
|
|
$
|
(1,873.7
|
)
|
|
$
|
21.6
|
|
|
$
|
119.9
|
|
Net income
|
29.3
|
|
|
29.4
|
|
|
—
|
|
|
12.1
|
|
|
2.2
|
|
|
73.0
|
|
||||||
Other contribution from parent
|
—
|
|
|
—
|
|
|
—
|
|
|
6.4
|
|
|
—
|
|
|
6.4
|
|
||||||
Distributions to unitholders and general partner
|
(24.5
|
)
|
|
(5.9
|
)
|
|
(18.7
|
)
|
|
(9.5
|
)
|
|
—
|
|
|
(58.6
|
)
|
||||||
Distribution to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.2
|
)
|
|
(3.2
|
)
|
||||||
Expiration of subordinated period
|
—
|
|
|
(408.3
|
)
|
|
408.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Balance as of March 31, 2017
|
$
|
2,490.5
|
|
|
$
|
(508.9
|
)
|
|
$
|
—
|
|
|
$
|
(1,864.7
|
)
|
|
$
|
20.6
|
|
|
$
|
137.5
|
|
•
|
our payment of an annual general and administrative fee of
$8.5 million
for the provision of certain services by SPLC;
|
•
|
our obligation to reimburse SPLC for certain direct or allocated costs and expenses incurred by SPLC on our behalf;
|
•
|
our obligation to reimburse SPLC for all expenses incurred by SPLC as a result of us becoming and continuing as a publicly traded entity; we will reimburse our general partner for these expenses to the extent the fees relating to such services are not included in the general and administrative fee; and
|
•
|
the granting of a license from Shell to us with respect to using certain Shell trademarks and trade names.
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
Accounts receivable
|
|
$
|
13.3
|
|
|
$
|
10.1
|
|
Prepaid expenses
|
|
3.6
|
|
|
2.7
|
|
||
Accounts payable
(1)
|
|
5.7
|
|
|
5.2
|
|
||
Deferred revenue
|
|
14.2
|
|
|
7.9
|
|
||
Accrued liabilities
(2)
|
|
6.2
|
|
|
5.1
|
|
||
Debt payable
(3)
|
|
685.3
|
|
|
686.0
|
|
||
Lease liability – related party
|
|
24.7
|
|
|
24.9
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Operations and maintenance - related parties
|
|
$
|
8.5
|
|
|
$
|
5.4
|
|
General and administrative - related parties
(1)
|
|
6.4
|
|
|
5.7
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||||||
|
|
Ownership
|
|
Investment Amount
|
|
Ownership
|
|
Investment Amount
|
||||
Bengal
|
|
50.0%
|
|
$
|
76.7
|
|
|
50.0%
|
|
$
|
76.1
|
|
Odyssey
|
|
49.0%
|
|
3.1
|
|
|
49.0%
|
|
3.0
|
|
||
Mars
|
|
48.6%
|
|
128.4
|
|
|
48.6%
|
|
130.2
|
|
||
Poseidon
|
|
36.0%
|
|
9.9
|
|
|
36.0%
|
|
13.2
|
|
||
Proteus
|
|
10.0%
|
|
18.3
|
|
|
10.0%
|
|
19.1
|
|
||
Endymion
|
|
10.0%
|
|
20.4
|
|
|
10.0%
|
|
20.8
|
|
||
|
|
|
|
$
|
256.8
|
|
|
|
|
$
|
262.4
|
|
|
|
Three Months Ended March 31, 2017
|
||||||||||
|
|
Distributions Received
|
|
Income from Equity Investments
|
|
Purchase Price Adjustment
|
||||||
Bengal
|
|
$
|
4.7
|
|
|
$
|
5.3
|
|
|
$
|
—
|
|
Odyssey
|
|
4.2
|
|
|
4.3
|
|
|
—
|
|
|||
Mars
|
|
23.3
|
|
|
21.5
|
|
|
—
|
|
|||
Poseidon
|
|
10.1
|
|
|
6.8
|
|
|
—
|
|
|||
Proteus
|
|
0.9
|
|
|
0.4
|
|
|
0.3
|
|
|||
Endymion
|
|
0.7
|
|
|
0.4
|
|
|
0.1
|
|
|||
|
|
$
|
43.9
|
|
|
$
|
38.7
|
|
|
$
|
0.4
|
|
|
|
Three Months Ended March 31, 2016
|
||||||
|
|
Distributions Received
|
|
Income from Equity Investments
|
||||
Bengal
|
|
$
|
6.3
|
|
|
$
|
5.4
|
|
Mars
|
|
9.9
|
|
|
10.9
|
|
||
Poseidon
|
|
10.1
|
|
|
6.9
|
|
||
|
|
$
|
26.3
|
|
|
$
|
23.2
|
|
|
|
Three Months Ended March 31, 2017
|
||||||||||||||
|
|
Total Revenues
|
|
Total Operating Expenses
|
|
Operating Income
|
|
Net Income
|
||||||||
Statements of Income
|
|
|
|
|
|
|
|
|
||||||||
Bengal
|
|
$
|
17.8
|
|
|
$
|
7.2
|
|
|
$
|
10.6
|
|
|
$
|
10.6
|
|
Odyssey
|
|
9.8
|
|
|
1.0
|
|
|
8.8
|
|
|
8.8
|
|
||||
Mars
|
|
64.9
|
|
|
19.9
|
|
|
45.0
|
|
|
45.0
|
|
||||
Poseidon
|
|
28.9
|
|
|
8.1
|
|
|
20.8
|
|
|
19.4
|
|
||||
Proteus
|
|
7.9
|
|
|
3.1
|
|
|
4.8
|
|
|
4.5
|
|
||||
Endymion
|
|
8.6
|
|
|
3.1
|
|
|
5.5
|
|
|
5.2
|
|
|
|
Three Months Ended March 31, 2016
|
||||||||||||||
|
|
Total Revenues
|
|
Total Operating Expenses
|
|
Operating Income
|
|
Net Income
|
||||||||
Statements of Income
|
|
|
|
|
|
|
|
|
||||||||
Bengal
|
|
$
|
17.4
|
|
|
$
|
6.4
|
|
|
$
|
11.0
|
|
|
$
|
11.0
|
|
Mars
|
|
57.3
|
|
|
18.5
|
|
|
38.8
|
|
|
38.8
|
|
||||
Poseidon
|
|
27.4
|
|
|
6.6
|
|
|
20.8
|
|
|
19.7
|
|
|
|
Depreciable
Life
|
|
March 31, 2017
|
|
December 31, 2016
|
|||||
Land
|
|
—
|
|
|
$
|
1.4
|
|
|
$
|
1.4
|
|
Building and improvements
|
|
10 - 40 years
|
|
|
20.7
|
|
|
20.2
|
|
||
Pipeline and equipment
(1)
|
|
10 - 30 years
|
|
|
591.4
|
|
|
589.7
|
|
||
Other
|
|
5 - 25 years
|
|
|
6.7
|
|
|
6.0
|
|
||
|
|
|
|
620.2
|
|
|
617.3
|
|
|||
Accumulated depreciation and amortization
(2)
|
|
|
|
(245.7
|
)
|
|
(239.5
|
)
|
|||
|
|
|
|
374.5
|
|
|
377.8
|
|
|||
Construction in progress
|
|
|
|
29.3
|
|
|
20.2
|
|
|||
Property, plant and equipment, net
|
|
|
|
$
|
403.8
|
|
|
$
|
398.0
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
Transportation, project engineering
|
|
$
|
9.5
|
|
|
$
|
3.5
|
|
Property taxes
|
|
2.1
|
|
|
0.6
|
|
||
Professional fees
|
|
0.4
|
|
|
0.3
|
|
||
Other accrued liabilities
|
|
0.7
|
|
|
1.2
|
|
||
Accrued liabilities - third parties
|
|
$
|
12.7
|
|
|
$
|
5.6
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
Five Year Fixed Facility, fixed rate, due March 1, 2022
(1)
|
|
$
|
—
|
|
|
$
|
—
|
|
Five Year Revolver, variable rate, due October 31, 2019
(2)
|
|
686.9
|
|
|
686.9
|
|
||
Zydeco Revolver, variable rate, due August 6, 2019
(3)
|
|
—
|
|
|
—
|
|
||
364-Day Revolver, variable rate, expired March 1, 2017
(4)
|
|
—
|
|
|
—
|
|
||
Unamortized debt issuance costs
|
|
(1.6
|
)
|
|
(0.9
|
)
|
||
Debt payable – related party
|
|
$
|
685.3
|
|
|
$
|
686.0
|
|
(1)
|
As of
March 31, 2017
, the entire
$600.0 million
capacity was available under the
Five
Year Fixed Facility.
|
|
|
Public
|
|
SPLC
|
|
SPLC
|
|
General
|
|
|
|||||
(in units)
|
|
Common
|
|
Common
|
|
Subordinated
|
|
Partner
|
|
Total
|
|||||
Balance as of December 31, 2016
|
|
88,367,308
|
|
|
21,475,068
|
|
|
67,475,068
|
|
|
3,618,723
|
|
|
180,936,167
|
|
Expiration of subordination period
|
|
—
|
|
|
67,475,068
|
|
|
(67,475,068
|
)
|
|
—
|
|
|
—
|
|
Balance as of March 31, 2017
|
|
88,367,308
|
|
|
88,950,136
|
|
|
—
|
|
|
3,618,723
|
|
|
180,936,167
|
|
Date Paid or
|
|
|
|
Public
|
|
SPLC
|
|
SPLC
|
|
General Partner
|
|
|
|
Distributions
per Limited Partner Unit |
||||||||||||||||
to be Paid
|
|
Three Months Ended
|
|
Common
|
|
Common
|
|
Subordinated
|
|
IDR's
|
|
2%
|
|
Total
|
|
|||||||||||||||
|
|
|
|
(in millions, except per unit amounts)
|
||||||||||||||||||||||||||
February 11, 2016
|
|
December 31, 2015
|
|
$
|
13.8
|
|
|
$
|
4.7
|
|
|
$
|
14.9
|
|
|
$
|
1.2
|
|
|
$
|
0.7
|
|
|
$
|
35.3
|
|
|
$
|
0.22000
|
|
May 12, 2016
|
|
March 31, 2016
|
|
17.9
|
|
|
5.1
|
|
|
15.8
|
|
|
2.0
|
|
|
0.9
|
|
|
41.7
|
|
|
0.23500
|
|
|||||||
August 12, 2016
|
|
June 30, 2016
|
|
22.0
|
|
|
5.4
|
|
|
16.9
|
|
|
3.7
|
|
|
1.0
|
|
|
49.0
|
|
|
0.25000
|
|
|||||||
November 14, 2016
|
|
September 30, 2016
|
|
23.3
|
|
|
5.7
|
|
|
17.8
|
|
|
6.0
|
|
|
1.1
|
|
|
53.9
|
|
|
0.26375
|
|
|||||||
February 14, 2017
|
|
December 31, 2016
|
|
24.5
|
|
|
5.9
|
|
|
18.7
|
|
|
8.3
|
|
|
1.2
|
|
|
58.6
|
|
|
0.27700
|
|
|||||||
May 12, 2017
|
|
March 31, 2017
(1)
|
|
25.7
|
|
|
25.9
|
|
|
—
|
|
|
10.7
|
|
|
1.3
|
|
|
63.6
|
|
|
0.29100
|
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2017
|
|
2016
|
||||
Net income
|
|
$
|
73.0
|
|
|
$
|
68.0
|
|
Less:
|
|
|
|
|
||||
Net income attributable to noncontrolling interests
|
|
2.2
|
|
|
12.7
|
|
||
Net income attributable to the Partnership
|
|
70.8
|
|
|
55.3
|
|
||
Less:
|
|
|
|
|
|
|
||
General Partner's distribution declared
|
|
12.0
|
|
|
2.9
|
|
||
Limited Partners' distribution declared on common units
|
|
51.6
|
|
|
23.0
|
|
||
Limited Partners' distribution declared on subordinated units
|
|
—
|
|
|
15.8
|
|
||
Income in excess of distributions
|
|
$
|
7.2
|
|
|
$
|
13.6
|
|
|
|
Three Months Ended March 31, 2017
|
||||||||||
|
|
General
|
|
Limited Partners'
|
|
|
||||||
|
|
Partner
|
|
Common Units
|
|
Total
|
||||||
|
|
(in millions of dollars, except per unit data)
|
||||||||||
Distributions declared
|
|
$
|
12.0
|
|
|
$
|
51.6
|
|
|
$
|
63.6
|
|
Income in excess of distributions
|
|
0.1
|
|
|
7.1
|
|
|
7.2
|
|
|||
Net income attributable to the Partnership
|
|
$
|
12.1
|
|
|
$
|
58.7
|
|
|
$
|
70.8
|
|
Weighted average units outstanding (in millions)
(1)
:
|
|
|
|
|
|
|
|
|
|
|||
Basic and diluted
|
|
|
|
177.3
|
|
|
|
|
||||
Net income per Limited Partner Unit (in dollars):
|
|
|
|
|
|
|
|
|
|
|||
Basic and diluted
|
|
|
|
|
$
|
0.33
|
|
|
|
|
|
|
Three Months Ended March 31, 2016
|
||||||||||||||
|
|
General
|
|
Limited Partners'
|
|
Limited Partners'
|
|
|
||||||||
|
|
Partner
|
|
Common Units
|
|
Subordinated Units
|
|
Total
|
||||||||
|
|
(in millions of dollars, except per unit data)
|
||||||||||||||
Distributions declared
|
|
$
|
2.9
|
|
|
$
|
23.0
|
|
|
$
|
15.8
|
|
|
$
|
41.7
|
|
Distributions in excess of income
|
|
0.2
|
|
|
7.5
|
|
|
5.9
|
|
|
13.6
|
|
||||
Net income attributable to the Partnership
|
|
$
|
3.1
|
|
|
$
|
30.5
|
|
|
$
|
21.7
|
|
|
$
|
55.3
|
|
Weighted average units outstanding (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted
|
|
|
|
|
84.9
|
|
|
67.5
|
|
|
|
|
||||
Net income per Limited Partner Unit (in dollars):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted
|
|
|
|
|
$
|
0.36
|
|
|
$
|
0.32
|
|
|
|
|
•
|
Increase in Borrowing Capacity.
We had a net increase in our borrowing capacity of $420.0 million. On March 1, 2017, we entered into a loan facility agreement with Shell Treasury Centre (West), Inc (
“
STCW
”
) with a borrowing capacity of $600.0 million (the
“
Five Year Fixed Facility
”
). On March 1, 2017, our 364-day revolving credit facility with STCW with a borrowing capacity of $180.0 million (
“
364-Day Revolver
”
) expired.
|
•
|
Expiration of Subordination Period.
On February 15, 2017, all of the subordinated units converted into common units following the payment of the cash distribution for the fourth quarter of 2016. Each of our 67,475,068 outstanding subordinated units converted into one common unit. The converted units will participate pro rata with the other common units in distributions of available cash. The conversion of the subordinated units does not impact the amount of cash distributions paid by us or the total number of outstanding units. The allocation of net income and cash distributions during the period were effected in accordance with terms of our partnership agreement.
|
•
|
Operational Excellence
.
Our first priority is the safety, reliability and efficiency of our operations. SPLC, the operator of our Shell-operated assets, is an industry-recognized operator with over 100 years’ experience in the pipeline business. We benefit from Shell’s leadership in operational excellence and leverage Shell’s industry leading operating and asset integrity processes.
|
•
|
Fee-based businesses supported by long-term contracts with creditworthy counterparties.
We are focused on generating stable and predictable cash flows by providing fee-based transportation and midstream services to Shell and
|
•
|
Growth through strategic acquisitions in key geographies.
We plan to continue to pursue strategic acquisitions of assets from Shell and third parties. We believe our sponsor, Shell, will offer us opportunities to purchase additional midstream assets that it currently owns or that it may acquire or develop in the future. We also may have opportunities to pursue the acquisition or development of additional assets jointly with Shell.
|
•
|
Optimize existing assets and pursue organic growth opportunities.
We will seek to enhance the profitability of our existing assets by pursuing opportunities to increase throughput and storage volumes, by expanding our midstream service offerings and by managing costs and improving operating efficiencies. We also intend to consider opportunities to increase our revenues by evaluating and capitalizing on organic expansion projects. We pursue a corridor strategy in the offshore, owning the trunk pipelines that aggregate and transport produced volumes to major onshore markets. These corridors are designed to maintain relatively constant to growing volumes despite individual well and field declines by attracting new Gulf of Mexico production. Producers in new fields seek to reduce their costs and improve their market access by connecting to existing corridors.
|
•
|
maintain utilization of and rates charged for our pipelines and storage facilities;
|
•
|
utilize the remaining uncommitted capacity on, or add additional capacity to, our pipeline systems;
|
•
|
increase throughput volumes on our pipeline systems by making connections to existing or new third party pipelines or other facilities, primarily driven by the anticipated supply of, and demand for, crude oil and refined products; and
|
•
|
identify and execute organic expansion projects.
|
•
|
our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods;
|
•
|
the ability of our business to generate sufficient cash to support our decision 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.
|
1)
|
Deny index increases for any pipeline whose Form No. 6, Page 700 revenues exceed costs by 15% for both of the prior two years;
|
2)
|
Deny index increases that exceed by 5% the cost changes reported on Page 700; and
|
3)
|
Apply the new criteria to costs more closely associated with the pipeline’s proposed rates than with total company-wide costs and revenues now reported on Page 700.
|
Results of Operations
|
|
|
|
|
||||
|
|
|
|
|
||||
|
Three Months Ended
March 31, |
|
||||||
|
2017
|
|
2016
|
|
||||
(in millions of dollars)
|
|
|
|
|
||||
Revenue
|
$
|
70.2
|
|
|
$
|
76.7
|
|
|
Costs and expenses
|
|
|
|
|
||||
Operations and maintenance
|
21.4
|
|
|
14.8
|
|
|
||
General and administrative
|
8.0
|
|
|
7.8
|
|
|
||
Depreciation, amortization and accretion
|
6.2
|
|
|
5.9
|
|
|
||
Property and other taxes
|
2.8
|
|
|
3.2
|
|
|
||
Total costs and expenses
|
38.4
|
|
|
31.7
|
|
|
||
Operating income
|
31.8
|
|
|
45.0
|
|
|
||
Income from equity investments
|
38.7
|
|
|
23.2
|
|
|
||
Dividend income from cost investments
|
7.3
|
|
|
2.8
|
|
|
||
Investment and dividend income
|
46.0
|
|
|
26.0
|
|
|
||
Interest expense, net
|
4.8
|
|
|
3.0
|
|
|
||
Income before income taxes
|
73.0
|
|
|
68.0
|
|
|
||
Income tax expense
|
—
|
|
|
—
|
|
|
||
Net income
|
73.0
|
|
|
68.0
|
|
|
||
Less: Net income attributable to noncontrolling interests
|
2.2
|
|
|
12.7
|
|
|
||
Net income attributable to the Partnership
|
$
|
70.8
|
|
|
$
|
55.3
|
|
|
General partner's interest in net income attributable to the Partnership
|
$
|
12.1
|
|
|
$
|
3.1
|
|
|
Limited Partners' interest in net income attributable to the Partnership
|
$
|
58.7
|
|
|
$
|
52.2
|
|
|
Adjusted EBITDA attributable to the Partnership
(1)
|
$
|
86.6
|
|
|
$
|
65.5
|
|
|
Cash available for distribution
(1)
|
$
|
90.5
|
|
|
$
|
59.7
|
|
|
|
Three Months Ended
March 31, |
||||||
Pipeline throughput (thousands of barrels per day)
(1)
|
2017
|
|
2016
|
||||
Zydeco – Mainlines
|
592
|
|
|
559
|
|
||
Zydeco – Other segments
|
555
|
|
|
361
|
|
||
Zydeco total system
|
1,147
|
|
|
920
|
|
||
Mars total system
|
440
|
|
|
295
|
|
||
Bengal total system
|
579
|
|
|
567
|
|
||
Poseidon total system
|
260
|
|
|
250
|
|
||
Auger total system
|
92
|
|
|
136
|
|
||
Odyssey total system
|
114
|
|
|
108
|
|
||
Other systems
|
337
|
|
|
—
|
|
||
|
|
|
|
||||
Terminals
(2)
|
|
|
|
||||
Lockport terminaling throughput and storage volumes
|
209
|
|
|
218
|
|
||
|
|
|
|
||||
Revenue per barrel ($ per barrel)
|
|
|
|
||||
Zydeco total system
(3)
|
$
|
0.54
|
|
|
$
|
0.64
|
|
Mars total system
(3)
|
1.46
|
|
|
1.78
|
|
||
Bengal total system
(3)
|
0.34
|
|
|
0.33
|
|
||
Auger total system
(3)
|
1.14
|
|
|
1.30
|
|
||
Odyssey total system
(3)
|
0.95
|
|
|
0.96
|
|
||
Lockport total system
(4)
|
0.24
|
|
|
0.23
|
|
|
Three Months Ended
March 31, |
|
||||||
(in millions of dollars)
|
2017
|
|
2016
|
|
||||
Reconciliation of Adjusted EBITDA and Cash Available for Distribution to Net Income
|
|
|
|
|
||||
Net income
|
$
|
73.0
|
|
|
$
|
68.0
|
|
|
Add:
|
|
|
|
|
||||
Depreciation, amortization and accretion
|
6.2
|
|
|
5.9
|
|
|
||
Interest expense, net
|
4.8
|
|
|
3.0
|
|
|
||
Income tax expense
|
—
|
|
|
—
|
|
|
||
Cash distribution received from equity investments
|
43.9
|
|
|
26.3
|
|
|
||
Less:
|
|
|
|
|
||||
Income from equity investments
|
38.7
|
|
|
23.2
|
|
|
||
Adjusted EBITDA
|
89.2
|
|
|
80.0
|
|
|
||
Less:
|
|
|
|
|
||||
Adjusted EBITDA attributable to noncontrolling interests
|
2.6
|
|
|
14.5
|
|
|
||
Adjusted EBITDA attributable to the Partnership
|
86.6
|
|
|
65.5
|
|
|
||
Less:
|
|
|
|
|
||||
Net interest paid attributable to the Partnership
|
4.8
|
|
|
2.1
|
|
|
||
Income taxes paid attributable to the Partnership
|
—
|
|
|
—
|
|
|
||
Maintenance capex attributable to the Partnership
|
5.2
|
|
|
2.7
|
|
|
||
Add:
|
|
|
|
|
||||
Net adjustments from volume deficiency payments attributable to the Partnership
|
7.5
|
|
|
(1.1
|
)
|
|
||
Reimbursements from Parent included in partners' capital
|
6.4
|
|
|
0.1
|
|
|
||
Cash available for distribution attributable to the Partnership
(1)
|
$
|
90.5
|
|
|
$
|
59.7
|
|
|
|
Three Months Ended
March 31, 2017 |
||||||
|
2017
|
|
2016
|
||||
(in millions of dollars)
|
|
|
|
||||
Reconciliation of Adjusted EBITDA and Cash Available for Distribution to Net Cash Provided by Operating Activities
|
|
|
|
||||
Net cash provided by operating activities
|
$
|
93.5
|
|
|
$
|
72.4
|
|
Add:
|
|
|
|
||||
Interest expense, net
|
4.8
|
|
|
3.0
|
|
||
Income tax expense
|
—
|
|
|
—
|
|
||
Return of investment
|
6.0
|
|
|
4.1
|
|
||
Less:
|
|
|
|
||||
Deferred revenue
|
8.5
|
|
|
(1.8
|
)
|
||
Non-cash interest expense
|
—
|
|
|
0.1
|
|
||
Change in other assets and liabilities
|
6.6
|
|
|
1.2
|
|
||
Adjusted EBITDA
|
89.2
|
|
|
80.0
|
|
||
Less:
|
|
|
|
||||
Adjusted EBITDA attributable to noncontrolling interests
|
2.6
|
|
|
14.5
|
|
||
Adjusted EBITDA attributable to the Partnership
|
86.6
|
|
|
65.5
|
|
||
Less:
|
|
|
|
||||
Net interest paid attributable to the Partnership
|
4.8
|
|
|
2.1
|
|
||
Income taxes paid attributable to the Partnership
|
—
|
|
|
—
|
|
||
Maintenance capex attributable to the Partnership
|
5.2
|
|
|
2.7
|
|
||
Add:
|
|
|
|
||||
Net adjustments from volume deficiency payments attributable to the Partnership
|
7.5
|
|
|
(1.1
|
)
|
||
Reimbursements from Parent included in partners' capital
|
6.4
|
|
|
0.1
|
|
||
Cash Available for Distribution attributable to the Partnership
(1)
|
$
|
90.5
|
|
|
$
|
59.7
|
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2017
|
|
2016
|
||||
(in millions of dollars)
|
|
|
|
|
||||
Expansion capital expenditures
|
|
$
|
1.8
|
|
|
$
|
1.3
|
|
Maintenance capital expenditures
|
|
5.5
|
|
|
3.4
|
|
||
Total capital expenditures paid
|
|
7.3
|
|
|
4.7
|
|
||
Increase in accrued capital expenditures
|
|
4.7
|
|
|
0.4
|
|
||
Total capital expenditures incurred
|
|
$
|
12.0
|
|
|
$
|
5.1
|
|
|
|
Actual Capital Expenditures
|
|
Expected Capital Expenditures
|
|
|
||||||
|
|
Three Months Ended March 31, 2017
|
|
Nine Months Ended December 31, 2017
|
|
Total Expected 2017 Capital Expenditures
|
||||||
(in millions of dollars)
|
|
|
|
|
|
|
||||||
Expansion capital expenditures
|
|
|
|
|
|
|
||||||
Zydeco
|
|
$
|
3.6
|
|
|
$
|
15.7
|
|
|
$
|
19.3
|
|
Lockport
|
|
—
|
|
|
2.5
|
|
|
2.5
|
|
|||
Total expansion capital expenditures
|
|
3.6
|
|
|
18.2
|
|
|
21.8
|
|
|||
Maintenance capital expenditures
|
|
|
|
|
|
|
||||||
Zydeco
|
|
7.2
|
|
|
21.8
|
|
|
29.0
|
|
|||
Lockport
|
|
1.1
|
|
|
2.7
|
|
|
3.8
|
|
|||
Auger
|
|
0.1
|
|
|
0.5
|
|
|
0.6
|
|
|||
Total maintenance capital expenditures
|
|
8.4
|
|
|
25.0
|
|
|
33.4
|
|
|||
Total capital expenditures
|
|
$
|
12.0
|
|
|
$
|
43.2
|
|
|
$
|
55.2
|
|
|
Total
|
|
Less than 1 year
|
|
Years 2 to 3
|
|
Years 4 to 5
|
|
More than 5 years
|
||||||||||
Operating lease for land
|
$
|
0.6
|
|
|
$
|
0.5
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Capital lease for Port Neches storage tanks
(1)
|
72.8
|
|
|
5.0
|
|
|
10.1
|
|
|
10.1
|
|
|
47.6
|
|
|||||
Joint tariff agreement
|
48.4
|
|
|
5.1
|
|
|
10.3
|
|
|
10.3
|
|
|
22.7
|
|
|||||
Debt obligation
(2)
|
686.9
|
|
|
—
|
|
|
686.9
|
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
808.7
|
|
|
$
|
10.6
|
|
|
$
|
707.4
|
|
|
$
|
20.4
|
|
|
$
|
70.3
|
|
•
|
The continued ability of Shell and our non-affiliate customers to satisfy their obligations under our commercial and other agreements and the impact of lower market prices for oil, and refined products.
|
•
|
The volume of crude oil and refined petroleum products we transport or store and the prices that we can charge our customers.
|
•
|
The tariff rates with respect to volumes that we transport through our regulated assets, which rates are subject to review and possible adjustment imposed by federal and state regulators.
|
•
|
Changes in revenue we realize under the loss allowance provisions of our fees and tariffs resulting from changes in underlying commodity prices.
|
•
|
Fluctuations in the prices for crude oil and refined petroleum products.
|
•
|
The level of onshore and offshore (including deepwater) production and demand for crude by U.S. refiners.
|
•
|
Changes in global economic conditions and the effects of a global economic downturn on the business of Shell and the business of its suppliers, customers, business partners and credit lenders.
|
•
|
Liabilities associated with the risks and operational hazards inherent in transporting and storing crude oil and refined petroleum products.
|
•
|
Curtailment of operations or expansion projects due to unexpected leaks or spills, severe weather disruption; riots, strikes, lockouts or other industrial disturbances; or failure of information technology systems due to various causes, including unauthorized access or attack.
|
•
|
Costs or liabilities associated with federal, state and local laws and regulations relating to environmental protection and safety, including spills, releases and pipeline integrity.
|
•
|
Costs associated with compliance with evolving environmental laws and regulations on climate change.
|
•
|
Costs associated with compliance with safety regulations and system maintenance programs, including pipeline integrity management program testing and related repairs.
|
•
|
Changes in tax status.
|
•
|
Changes in the cost or availability of third-party vessels, pipelines, rail cars and other means of delivering and transporting crude oil and refined petroleum products.
|
•
|
Direct or indirect effects on our business resulting from actual or threatened terrorist incidents or acts of war.
|
•
|
Availability of acquisitions and financing for acquisitions on our expected timing and acceptable terms.
|
•
|
Changes in, and availability to us, of the equity and debt capital markets.
|
•
|
The factors generally described in
Part I, Item 1A. Risk Factors
of our 2016 Annual Report.
|
Exhibit
Number |
|
Exhibit Description
|
|
Incorporated by Reference
|
|
Filed
Herewith |
|
Furnished
Herewith |
||||||
Form
|
|
Exhibit
|
|
Filing Date
|
|
SEC
File No. |
|
|||||||
10.1
|
|
Shell Midstream Partners Loan Facility Agreement, dated as of March 1, 2017, between Shell Midstream Partners, L.P., as the Borrower, and Shell Treasury Centre (West) Inc., as the Lender
|
|
8-K
|
|
10.1
|
|
2/28/2017
|
|
001-36710
|
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934
|
|
|
|
|
|
|
|
|
|
X
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934
|
|
|
|
|
|
|
|
|
|
X
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
|
|
|
|
|
|
|
|
|
|
|
|
X
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
|
|
|
|
|
|
|
|
|
|
|
|
X
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
|
X
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
|
|
|
|
|
|
X
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
|
|
|
|
|
|
X
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
|
|
|
|
|
|
X
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
|
|
|
|
|
|
X
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
Date: May 5, 2017
|
SHELL MIDSTREAM PARTNERS, L.P.
|
|
|
|
By:
|
SHELL MIDSTREAM PARTNERS GP LLC
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Shawn J. Carsten
|
|
|
|
Shawn J. Carsten
|
|
|
|
Vice President and Chief Financial Officer
|
|
|
|
(principal financial officer and principal accounting officer)
|
Exhibit
Number |
|
Exhibit Description
|
|
Incorporated by Reference
|
|
Filed
Herewith |
|
Furnished
Herewith |
||||||
Form
|
|
Exhibit
|
|
Filing Date
|
|
SEC
File No. |
|
|||||||
10.1
|
|
Shell Midstream Partners Loan Facility Agreement, dated as of March 1, 2017, between Shell Midstream Partners, L.P., as the Borrower, and Shell Treasury Centre (West) Inc., as the Lender
|
|
8-K
|
|
10.1
|
|
2/28/2017
|
|
001-36710
|
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934
|
|
|
|
|
|
|
|
|
|
X
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934
|
|
|
|
|
|
|
|
|
|
X
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
|
|
|
|
|
|
|
|
|
|
|
|
X
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
|
|
|
|
|
|
|
|
|
|
|
|
X
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
|
X
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
|
|
|
|
|
|
X
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
|
|
|
|
|
|
X
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
|
|
|
|
|
|
X
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
|
|
|
|
|
|
X
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
|
|
|
|
|
|
X
|
|
|
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