Andeavor Logistics LP Reports Third Quarter 2018 Results
FINDLAY, Ohio, Nov. 7, 2018 /PRNewswire/ --
-- Reported third quarter net earnings of $166 million and EBITDA of $309
million, which provided 1.05x distribution coverage and 3.7x leverage
-- Terminalling and Transportation segment operating income of $140 million
and EBITDA of $180 million benefited by drop downs and strong refined
product demand
-- Gathering and Processing segment operating income of $80 million and
EBITDA of $130 million driven by drop downs and Permian volume growth
-- Successfully completed 2018 Drop Down of Permian, Refining Logistics and
Asphalt Assets
-- General partner now owned by Marathon Petroleum Corporation
Andeavor Logistics LP (NYSE: ANDX) today reported third quarter 2018 net earnings of $166 million, compared with $90 million in the third quarter 2017. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $309 million, compared with $243 million in the third quarter 2017. The year-over-year increase in earnings was primarily driven by the drop down completed in August 2018, in addition to continued strength in the Permian. Third quarter 2018 net earnings and EBITDA also reflected approximately $6 million of transaction costs related to recent acquisitions.
"We are pleased to add Andeavor Logistics to the Marathon Petroleum family," said Gary R. Heminger, chairman and chief executive officer. "The addition of this business deepens our presence in the Permian and Bakken regions and expands our footprint to the West Coast."
During the quarter, Andeavor Logistics expanded its Permian and Bakken footprint through a $1.6 billion drop down from Andeavor (the 2018 Drop Down). The 2018 Drop Down included gathering, storage and transportation assets in the Permian and Bakken regions, the Conan Crude Oil Gathering System, and the Los Angeles Refinery Interconnect Pipeline. The assets contributed net earnings of $16 million and EBITDA of $26 million in the third quarter, and are expected to generate annual net earnings of approximately $110 million and EBITDA of approximately $200 million in 2019.
"As we continue to enhance our understanding of this business, our focus financially will be on meaningfully higher distribution coverage, leverage levels at or below 4.0x debt-to-EBITDA, no planned public equity issuances, and independent sustainability with limited parent support," Heminger added.
Three Months Ended Nine Months Ended
September 30, September 30,
($ in millions) 2018 (a) 2017 (a) 2018 (a) 2017 (a)
---
Net Earnings $
166 $
90 $
429 $
253
Segment Operating Income
Terminalling and
Transportation $
140 $
103 $
351 $
290
Gathering and Processing 80 50 226 158
Wholesale 7 7 22 9
EBITDA (b) $
309 $
243 $
869 $
668
Segment EBITDA (b)
Terminalling and
Transportation $
180 $
142 $
474 $
384
Gathering and Processing 130 103 391 299
Wholesale 11 9 31 12
Net Cash From Operating
Activities $
172 $
225 $
719 $
524
Distributable Cash Flow
Attributable to Common
Unitholders (b) $
251 $
148 $
664 $
477
Total Distributions to be
Paid to Common
Unitholders $
238 $
201 $
652 $
488
Distribution Coverage
Ratio (b) 1.05x 0.74x 1.02x 0.98x
(a) Adjusted to include the historical results of the Predecessors. See "Items Impacting Comparability."
(b) For more information on EBITDA, Segment EBITDA, Distributable Cash Flow Attributable to Common Unitholders and Distribution Coverage Ratio, see "Non-GAAP Measures."
Segment Results
Terminalling and Transportation
Terminalling and Transportation segment operating income was $140 million for the third quarter 2018, an increase of $37 million from the prior year, and segment EBITDA was $180 million, an increase of $38 million from the prior year. The year-over-year increase was primarily attributable to contributions from the 2018 Drop Down, the Western Refining Logistics acquisition, the 2017 Anacortes Logistics Asset drop down and organic growth. The 2018 Drop Down contributed $10 million of segment operating income and $19 million of segment EBITDA in the Terminalling and Transportation segment during the quarter.
Gathering and Processing
Gathering and Processing segment operating income was $80 million for the third quarter 2018, an increase of $30 million from the prior year, and segment EBITDA was $130 million, an increase of $27 million from the prior year. The year-over-year increase was primarily attributable to Permian Basin crude oil volume growth and contributions from the Western Refining Logistics acquisition. The 2018 Drop Down contributed $2 million of segment operating income and $7 million of segment EBITDA in the Gathering and Processing segment during the quarter.
Wholesale
Wholesale segment operating income was $7 million for the third quarters of both 2018 and 2017, and segment EBITDA for the third quarter 2018 was $11 million, an increase of $2 million from the prior year. This year-over-year increase in segment EBITDA was driven by a higher margin environment.
Balance Sheet and Cash Flow
Net cash from operating activities was $172 million in the third quarter 2018, and distributable cash flow attributable to common unitholders for the third quarter was $251 million. Andeavor Logistics ended the third quarter 2018 with $30 million of cash and approximately $1.0 billion of availability under its revolving credit facilities. Total debt, net of unamortized issuance costs was $4.8 billion. The company's leverage ratio was 3.7x at September 30, 2018.
Net capital expenditures for the third quarter 2018 were $175 million, which included $159 million of growth investments and $16 million of net maintenance capital. Andeavor Logistics expects to invest approximately $640 million in growth investments and $80 million in net maintenance capital in 2018. Capital expenditures for 2018 have been retrospectively adjusted to include the historical investments of the assets from the 2018 Drop Down prior to the August 6, 2018 effective date of the acquisition.
On October 26, 2018, Andeavor Logistics announced a quarterly cash distribution of $1.03 per limited partnership unit, or $4.12 on an annualized basis. The distribution coverage ratio was 1.05x for the third quarter 2018. Distributable cash flow attributable to common unitholders of $251 million includes an $18 million benefit related to revenue recognition accounting standards, timing on recognition of minimum volume commitments, and expenses related to recent transactions.
Conference Call
At 9 a.m. EST today, Andeavor Logistics will hold a conference call and webcast to discuss reported results and provide an update on operations. Interested parties may listen by visiting Andeavor Logistics' website at http://www.andeavorlogistics.com and clicking on the "Investors" link. A replay of the webcast will be available on the company's website for two weeks. Financial information, including the earnings release and other investor-related material, will also be available online prior to the conference call and webcast at http://www.ir.andeavorlogistics.com.
2018 Investor Day
Marathon Petroleum Corporation, MPLX LP, and Andeavor Logistics will host their 2018 Investor Day at the Mandarin Oriental Hotel in New York City on December 4, 2018 at 8:30 a.m. EST. Reservations are required to attend. Interested parties can request an invitation by contacting the Investor Relations department via email at investorrelations@marathonpetroleum.com. The presentation will also be webcast live at http://marathonpetroleum.com, http://mplx.com, and http://andeavorlogistics.com.
About Andeavor Logistics LP
Andeavor Logistics LP is a fee-based, full-service, diversified midstream logistics company, with integrated assets across the western and mid-continent regions of the United States. Andeavor Logistics operates through three business segments: Terminalling and Transportation, Gathering and Processing and Wholesale. The Terminalling and Transportation segment consists of marine terminals, refined product truck terminals, rail terminals, dedicated storage facilities and transportation pipelines. The Gathering and Processing segment consists of crude oil gathering systems and pipelines as well as natural gas gathering pipelines, processing facilities and fractionation facilities. The Wholesale segment consists of a fee-based fuel wholesale business. Andeavor Logistics is a Delaware limited partnership headquartered in Findlay, Ohio.
This press release contains "forward-looking" statements within the meaning of federal securities laws regarding ANDX. These forward-looking statements relate to, among other things, expectations, estimates and projections concerning our business strategies. You can identify forward-looking statements by words such as "anticipate," "approach," "believe," "design," "estimate," "expect," "forecast," "goal," "guidance," "imply," "intend," "objective," "opportunity," "outlook," "plan," "position," "pursue," "prospective," "predict," "project," "potential," "seek," "strategy," "target," "could," "may," "should," "would," "will" or other similar expressions that convey the uncertainty of future events or outcomes. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. Factors that could cause ANDX's actual results to differ materially from those implied in the forward-looking statements include without limitation: the amount and timing of future distributions; our ability to achieve coverage improvement and distributable cash growth; our ability to execute a funding model with no additional equity issuances and limited parent support; net earnings and EBITDA run rate; our ability to achieve our financial and strategic targets; negative capital market conditions, including an increase of the current yield on common units; our financial position, liquidity and capital resources, including available capacity under our credit facilities and access to debt on commercially reasonable terms; our financial and operational outlook, and ability to fulfill that outlook; our Permian Basin growth strategy, expected capital investment, and expectations related to increasing customer demand and additional future growth opportunities; the August 2018 drop down from Andeavor, including the expected benefits thereof and the annual net earnings and EBITDA expected to be generated thereby; the status and expected timing of our current projects, including capital investments; the timing and extent of changes in commodity prices and demand for crude oil, refined products, feedstocks or other hydrocarbon-based products; completion of midstream infrastructure by competitors; disruptions due to equipment interruption or failure, including electrical shortages and power grid failures; the suspension, reduction or termination of MPC/Andeavor's obligations under ANDX's commercial agreements; continued/further volatility in and/or degradation of market and industry conditions and their effects on our business; our ability to manage disruptions in credit markets or changes to our credit rating; adverse changes in laws including with respect to tax and regulatory matters; compliance with federal and state environmental, economic, health and safety, energy and other policies and regulations and/or enforcement actions initiated thereunder; adverse results in litigation; changes to ANDX's capital budget; other risk factors inherent to ANDX's industry; and the factors set forth under the heading "Risk Factors" in ANDX's Annual Report on Form 10-K for the year ended Dec. 31, 2017, filed with the Securities and Exchange Commission ("SEC"). Factors that could cause MPC's actual results to differ materially from those implied in the forward-looking statements include: risks related to MPC's acquisition of Andeavor; future levels of revenues, refining and marketing margins, operating costs, retail gasoline and distillate margins, merchandise margins, income from operations, net income or earnings per share; the regional, national and worldwide availability and pricing of refined products, crude oil, natural gas, NGLs and other feedstocks; consumer demand for refined products; MPC's ability to manage disruptions in credit markets or changes to its credit rating; future levels of capital, environmental or maintenance expenditures, general and administrative and other expenses; the success or timing of completion of ongoing or anticipated capital or maintenance projects; the reliability of processing units and other equipment; business strategies, growth opportunities and expected investment; MPC's share repurchase authorizations, including the timing and amounts of any common stock repurchases; the adequacy of capital resources and liquidity, including but not limited to, availability of sufficient cash flow to execute the business plan and to effect any share repurchases, including within the expected timeframe; the effect of restructuring or reorganization of business components; the potential effects of judicial or other proceedings on its business, financial condition, results of operations and cash flows; continued or further volatility in and/or degradation of general economic, market, industry or business conditions; compliance with federal and state environmental, economic, health and safety, energy and other policies and regulations, including the cost of compliance with the Renewable Fuel Standard, and/or enforcement actions initiated thereunder; the anticipated effects of actions of third parties such as competitors, activist investors or federal, foreign, state or local regulatory authorities or plaintiffs in litigation; the impact of adverse market conditions; risks related to Andeavor Logistics described above and similar risks related to MPLX LP; and the factors set forth under the heading "Risk Factors" in MPC's Annual Report on Form 10-K for the year ended Dec. 31, 2017, and in MPC's Form 10-Q for the quarter ended June 30, 2018, filed with Securities and Exchange Commission (SEC). We have based our forward-looking statements on our current expectations, estimates and projections about our industry. We caution that these statements are not guarantees of future performance and you should not rely unduly on them, as they involve risks, uncertainties, and assumptions that we cannot predict. In addition, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. While our management considers these assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, our actual results may differ materially from the future performance that we have expressed or forecast in our forward-looking statements. We undertake no obligation to update any forward-looking statements except to the extent required by applicable law. Copies of ANDX's Form 10-K and Forms 10-Q are available on the SEC website, ANDX's website at http://www.andeavorlogistics.com or by contacting ANDX's Investor Relations office. Copies of MPC's Form 10-K and Forms 10-Q are available on the SEC website, MPC's website at http://ir.marathonpetroleum.com or by contacting MPC's Investor Relations office.
Investor Relations Contact:
Kristina Kazarian (419) 421-2071
Media Contact:
Chuck Rice (419) 421-2521
Non-GAAP Measures
As a supplement to our financial information presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"), our management uses certain "non-GAAP" measures to analyze our results of operations, assess internal performance against budgeted and forecasted amounts and evaluate future impacts to our financial performance as a result of capital investments, acquisitions, divestitures and other strategic projects. These measures are important factors in assessing our operating results and profitability and include:
-- Financial non-GAAP measures:
-- EBITDA - U.S. GAAP-based net earnings before interest, income taxes,
and depreciation and amortization expense;
-- Pro forma LTM EBITDA - Last twelve months ("LTM") of our EBITDA
adjusted for pro forma contributions from acquisitions; and
-- Segment EBITDA - 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 measures:
-- Distributable Cash Flow - 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;
-- Distributable Cash Flow Attributable to Common Unitholders -
Distributable Cash Flow minus distributions associated with the
preferred units;
-- Distribution Coverage Ratio - Distributable Cash Flow Attributable
to Common Unitholders divided by total distributions to be paid to
common unitholders for the reporting period; and
-- Leverage Ratio - Total debt divided by Pro forma LTM EBITDA.
-- Operating performance non-GAAP measure:
-- Average Margin on Natural Gas Liquids ("NGLs") Sales per Barrel -
NGL sales revenues minus amounts recognized as NGL expense divided
by our NGL sales volumes in barrels; and
-- Average Wholesale Fuel Sales Margin per Gallon - Wholesale fuel
revenues minus wholesale's cost of fuel divided by our total
wholesale fuel sales volumes in gallons.
We present these measures because we believe they may help investors, analysts, lenders and ratings agencies analyze our results of operations and liquidity in conjunction with our U.S. GAAP results, including but not limited to:
-- 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.
Management also uses these measures to assess internal performance, and we believe they may provide meaningful supplemental information to the users of our financial statements. Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings, operating income and net cash from operating activities. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures. See "Reconciliation of Amounts Reported Under U.S. GAAP," "Segment Reconciliation of Amounts Reported Under U.S. GAAP," "Average Margin on NGL Sales per Barrel" and "Average Fuel Sales Margin per Gallon" for reconciliations between non-GAAP measures and their most directly comparable U.S. GAAP measures.
Items Impacting Comparability
The Partnership's results of operations may not be comparable to the historical results of operations for the reasons described below.
Acquisitions and Mergers
Other than WNRL and certain assets acquired from the 2018 Drop Down, our Predecessors did not record revenues with Andeavor and our Predecessors recorded general and administrative expenses and financed operations differently than the Partnership. As previously mentioned, on August 6, 2018, we completed the 2018 Drop Down for total consideration of $1.55 billion. As an entity under common control with Andeavor, we accounted for the transfers of businesses as if the transfer occurred at the beginning of the period, and prior periods are retrospectively adjusted to furnish comparative information. Accordingly, the accompanying results of operations have been retrospectively adjusted to include the historical results of the assets acquired prior to the effective date of the acquisition.
On November 8, 2017, we acquired the Anacortes Logistics Assets from a subsidiary of Andeavor for total consideration of $445 million. The Anacortes Logistics Assets include crude oil, feedstock and refined products storage at Andeavor's Anacortes Refinery, the Anacortes marine terminal with feedstock and refined product throughput, a manifest rail facility and crude oil and refined products pipelines.
Effective October 30, 2017, Andeavor Logistics closed its merger with Western Refining Logistics, LP (the "WNRL Merger") exchanging all outstanding common units of WNRL with units of Andeavor Logistics, representing an equity value of $1.7 billion. WNRL's operations included terminalling and storage assets, crude oil and refined product transportation services and a wholesale fuels business. The WNRL Merger was treated as a transaction of entities under common control, thus our results reflect the operations, financial position and cash flows associated with WNRL and their related subsidiaries as of June 1, 2017.
The closing of the WNRL Merger was conditioned upon, among other things, the adoption and effectiveness of the Second Amended and Restated Agreement of Limited Partnership of Andeavor Logistics LP, pursuant to which, simultaneously with the closing of the WNRL Merger: (i) the incentive distribution rights in Andeavor Logistics (the "IDRs") held by Tesoro Logistics GP, LLC ("TLGP"), our general partner, were canceled (the "IDR Exchange"), (ii) the general partner interests in Andeavor Logistics held by TLGP were converted into a non-economic general partner interest in Andeavor Logistics, and (iii) Andeavor and its affiliates, including TLGP, agreed to increase and extend existing waivers on distributions to Andeavor and its affiliates by $60 million to an aggregate of $160 million between 2017 and 2019.
Accounting Standard Adoption
Due to the adoption of Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers" and the associated subsequent amendments (collectively, "ASC 606") on January 1, 2018, the presentation of wholesale fuel sales and cost of fuel and other was impacted by adoption of the new revenue recognition accounting standard 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.
Andeavor Logistics LP
Condensed Consolidated Balance Sheets (Unaudited) (In millions)
September 30, December 31,
2018 2017 (a)
---
Assets
Current Assets
Cash and cash
equivalents $
30 $
75
Receivables, net of
allowance for
doubtful accounts 501 483
Prepayments and
other current
assets 81 27
Total Current Assets 612 585
Property, Plant and
Equipment, Net 6,750 6,249
Other Noncurrent
Assets, Net 2,835 2,671
Total Assets $
10,197 $
9,505
---
Liabilities and Equity
Current Liabilities
Accounts payable $
455 $
393
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
Equity 4,687 4,806
Total Liabilities
and Equity $
10,197 $
9,505
---
Andeavor Logistics LP
Results of Operations (Unaudited) (In millions, except per unit amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2018 (a) 2017 (a) 2018 (a) 2017 (a)
---
Revenues
Terminalling and Transportation $
280 $
230 $
762 $
599
Gathering and Processing 345 295 945 796
Wholesale (c) 20 569 62 740
Intersegment revenues (3) (12)
---
Total Revenues 642 1,094 1,757 2,135
---
Costs and Expenses
Cost of fuel and other (excluding items shown separately - 554 716
below) (c)
NGL expense (excluding items shown separately below) 73 64 166 179
Operating expenses (excluding depreciation and amortization) 236 199 658 512
Depreciation and amortization expenses 86 85 268 222
General and administrative expenses 31 44 91 107
(Gain) loss on asset disposals and impairments 1 1 2 (25)
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
---
Loss attributable to Predecessors $
4 $
7 $
28 $
46
---
Net Earnings Attributable to Partners 170 97 457 299
Preferred unitholders' interest in net earnings (10) (34)
General partner's interest in net earnings, including incentive - (79)
distribution rights
Limited Partners' Interest in Net Earnings $
160 $
97 $
423 $
220
---
Net Earnings per Limited Partner Unit:
Common - basic $
0.68 $
0.90 $
1.91 $
2.05
Common - diluted $
0.68 $
0.90 $
1.91 $
2.05
Weighted Average Limited Partner Units Outstanding:
Common units - basic 234.4 108.0 223.0 107.0
Common units - diluted 234.6 108.1 223.2 107.1
Cash Distributions Paid per Unit $
1.030 $
0.971 $
3.045 $
2.821
(c) The presentation of wholesale fuel sales and cost of fuel and other was impacted by adoption of the new revenue recognition accounting standard 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 presented on a net versus gross basis in prior years.
Andeavor Logistics LP
Selected Operating Segment Data (Unaudited) (In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2018 (a) 2017 (a) 2018 (a) 2017 (a)
---
Earnings Before Income Taxes
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
---
Earnings Before Income Taxes $
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
---
Segment EBITDA (d)
Terminalling and Transportation $
180 $
142 $
474 $
384
Gathering and Processing 130 103 391 299
Wholesale 11 9 31 12
---
Total Segment EBITDA $
321 $
254 $
896 $
695
---
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
---
(d) See "Non-GAAP Reconciliations" section below for further information regarding this non-GAAP measure.
Andeavor Logistics LP
Components of Cash Flows (Unaudited) (In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2018 (a) 2017 (a) 2018 (a) 2017 (a)
---
Cash Flows From (Used In)
Net earnings $
166 $
90 $
429 $
253
Depreciation and amortization expenses 86 85 268 222
Changes in assets and liabilities (96) 45 (7) 51
Other operating activities 16 5 29 (2)
---
Net Cash Flows from Operating Activities 172 225 719 524
Investing Activities (197) (72) (945) (1,404)
Financing Activities 11 (146) 181 230
---
Increase (Decrease) in Cash and Cash Equivalents $
(14) $
7 $
(45) $
(650)
---
Andeavor Logistics LP
Selected Operating Segment Data (Unaudited)
(In millions, except volumes and revenue per barrel)
Three Months Ended Nine Months Ended
September 30, September 30,
2018 (a) 2017 (a) 2018 (a) 2017 (a)
---
Terminalling and Transportation Segment
Revenues
Terminalling $
235 $
189 $
643 $
493
Pipeline transportation 44 34 115 97
Other revenues 1 7 4 9
Total Revenues 280 230 762 599
Costs and Expenses
Operating expenses (e) 99 80 279 216
Depreciation and amortization expenses 35 32 105 85
General and administrative expenses 7 15 27 33
Gain on asset disposals and impairments (1) (25)
Terminalling and Transportation Segment Operating Income $
140 $
103 $
351 $
290
---
Volumes
Terminalling throughput (Mbpd) 1,787 1,739 1,836 1,367
Average terminalling revenue per barrel (f) $
1.43 $
1.18 $
1.28 $
1.32
Pipeline transportation throughput (Mbpd) 1,071 907 995 887
Average pipeline transportation revenue per barrel (f) $
0.45 $
0.40 $
0.42 $
0.40
(e) Operating expenses include an imbalance settlement gain of $1 million and $3 million for the three and nine months ended September 30, 2017, respectively. There was no gain for the three and nine months ended September 30, 2018.
(f) Management uses average margin per barrel, average revenue per Million British thermal units ("MMBtu"), average revenue per barrel and fuel sales per gallon to evaluate performance and compare profitability to other companies in the industry.
- 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 (90 days for both the three months ended
September 30, 2018 and 2017);
- 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 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 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; and
- Wholesale fuel sales per gallon - calculated as wholesale fuel revenues divided by our total wholesale fuel sales volume in gallons.
There are a variety of ways to calculate these measures; other companies may calculate these in a different way. Amounts may not recalculate due to rounding of dollar and volume information.
Andeavor Logistics LP
Selected Operating Segment Data (Unaudited)
(In millions, except volumes, margin per barrel, revenue per barrel and revenue per MMBtu)
Three Months Ended Nine Months Ended
September 30, September 30,
2018 (a) 2017 (a) 2018 (a) 2017 (a)
---
Gathering and Processing Segment
Revenues
NGL sales (g) $
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 (h) 40 44 119 120
---
Total Revenues 345 295 945 796
Costs and Expenses
NGL expense (excluding items shown separately below) (g) (h) 73 64 166 179
Operating expenses (i) 131 113 361 284
Depreciation and amortization expenses 47 51 154 134
General and administrative expenses 12 16 36 41
Loss on asset disposals and impairments 2 1 2
---
Gathering and Processing Segment Operating Income $
80 $
50 $
226 $
158
---
Volumes
NGL sales (Mbpd) (g) 9.5 7.0 10.1 7.3
Average margin on NGL sales per barrel (d)(f)(g)(h) $
71.47 $
38.30 $
61.70 $
38.27
Gas gathering and processing throughput (thousands of 722 961 778 955
MMBtu/d) (j)
Average gas gathering and processing revenue per MMBtu (f) $
1.27 $
0.96 $
1.17 $
0.97
Crude oil and water gathering volume (Mbpd) 461 423 414 365
Average crude oil and water gathering revenue per barrel (f) $
2.03 $
1.95 $
2.13 $
1.71
(g) We had 24.0 Mbpd and 24.4 Mbpd of NGL sales under percent of proceeds ("POP") and keep-whole arrangements, for the three and nine months ended September 30, 2018, respectively, and 21.1 Mbpd and 21.0 Mbpd for the three and nine months ended September 30, 2017, respectively, of
which we retained 9.5 Mbpd, 10.1 Mbpd, 7.0 Mbpd and 7.3 Mbpd, 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. Volumes represent barrels sold under our
keep-whole arrangements, net barrels retained under our POP arrangements and other associated products.
(h) Included in NGL expense for the nine months ended September 30, 2017 were approximately $2 million of crude costs related to crude oil volumes obtained in connection with the acquisition of our North Dakota gathering and processing assets. 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.
(i) Operating expenses include an imbalance settlement gain of $1 million and $4 million for the three and nine months ended September 30, 2017, respectively. There was no gain for the three and nine months ended September 30, 2018.
(j) 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. The impact of the adoption was 184 thousand MMBtu/d and 170 thousand MMBtu/d for the three and nine months ended September 30, 2018, respectively, now being used internally and not reported in the throughput volumes used to calculate our
average gas gathering and processing revenue per MMBtu.
Andeavor Logistics LP
Selected Operating Segment Data (Unaudited)
(In millions, except per gallon)
Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 (a) 2018 2017 (a)
---
Wholesale Segment
Revenues
Fuel sales (c) $
13 $
565 $
37 $
730
Other wholesale 7 4 25 10
Total Revenues 20 569 62 740
Costs and Expenses
Cost of fuel and other (excluding items shown separately below) (c) 554 716
Operating expenses 9 6 30 12
Depreciation and amortization expenses 4 2 9 3
General and administrative expenses 1
Wholesale Operating Income $
7 $
7 $
22 9
---
Volumes
Fuel sales volumes (millions of gallons) 311 329 904 430
Wholesale fuel sales per gallon 4.0 ¢ 4.0 ¢
Average wholesale fuel sales margin per gallon (c)(d) 3.0 ¢ 3.0 ¢
Non-GAAP Reconciliations
Andeavor Logistics LP
Reconciliation of Amounts Reported Under U.S. GAAP (Unaudited)
(In millions, except ratios)
Three Months Ended Nine Months Ended
September 30, September 30,
2018 (a) 2017 (a) 2018 (a) 2017 (a)
---
Reconciliation of Net Earnings to EBITDA
Net earnings $
166 $
90 $
429 $
253
Depreciation and amortization expenses 86 85 268 222
Interest and financing costs, net of capitalized interest 57 68 172 193
EBITDA $
309 $
243 $
869 $
668
---
Reconciliation of Net Cash from Operating Activities to
Distributable Cash Flow
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 (k) (26) (33) (70) (80)
Reimbursement for maintenance capital expenditures (k) 7 7 19 22
Adjustments for equity method investments (6) 4 (3) 5
Proceeds from sale of assets 28
Changes in deferred revenue (l) 13 (2) 8 5
Other (m) 5 3 4
Distributable Cash Flow 262 148 695 477
Less: Preferred unit distributions (n) (11) (31)
---
Distributable Cash Flow Attributable to Common $
251 $
148 $
664 $
477
Unitholders
---
(k) 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.
(l) 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.
(m) Other includes transaction costs related to recent acquisitions and settlement expenses.
(n) 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.
Three Months Ended Nine Months Ended
September 30, September 30,
2018 (a) 2017 (a) 2018 (a) 2017 (a)
Distributions
Limited partner's distributions on common units $
238 $
201 $
652 $
407
General partner's distributions including IDRs 81
Distributions on preferred units 11 31
Total Distributions to be Paid 249 201 683 488
Less: Distributions on preferred units (11) (31)
Total Distributions to be Paid to Common Unitholders $
238 $
201 $
652 $
488
---
Distributable Cash Flow Attributable to Common $
251 $
148 $
664 $
477
Unitholders
Distribution Coverage Ratio 1.05x 0.74x 1.02x 0.98x
Andeavor Logistics LP
Segment Reconciliation of Amounts Reported Under U.S. GAAP (Unaudited)
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
2018 (a) 2017 (a) 2018 (a) 2017 (a)
---
Reconciliation of Terminalling and Transportation Segment
Operating Income to Segment EBITDA
Terminalling and Transportation segment operating income $
140 $
103 $
351 $
290
Depreciation and amortization expenses 35 32 105 85
Equity in earnings of equity method investments 4 4 14 6
Other income, net 1 3 4 3
---
Terminalling and Transportation Segment EBITDA $
180 $
142 $
474 $
384
---
Reconciliation of Gathering and Processing Segment
Operating Income to Segment EBITDA
Gathering and Processing segment operating income $
80 $
50 $
226 $
158
Depreciation and amortization expenses 47 51 154 134
Equity in earnings of equity method investments 3 2 11 7
Gathering and Processing Segment EBITDA $
130 $
103 $
391 $
299
---
Reconciliation of Wholesale Segment Operating Income to
Segment EBITDA
Wholesale segment operating income $
7 $
7 $
22 $
9
Depreciation and amortization expenses 4 2 9 3
Wholesale Segment EBITDA $
11 $
9 $
31 $
12
---
Andeavor Logistics LP
Average Margin on NGL Sales per Barrel (Unaudited)
(In millions, except days and per barrel amounts)
Three Months Ended Nine Months Ended
September 30, 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
Gain on asset disposals and impairments 2 1 2
Other commodity purchases (h) - 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) (o) 874 644 2,757 1,993
---
Average Margin on NGL Sales per Barrel (o) $
71.47 $
38.30 $
61.70 $
38.27
---
(o) Amounts may not recalculate due to rounding of dollar and volume information.
Andeavor Logistics LP
Average Wholesale Fuel Sales Margin per Gallon (Unaudited)
(In millions, except per gallon amounts)
Three Months Nine Months
Ended 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 (o) 3.0 ¢ 3.0 ¢
---
Andeavor Logistics LP
Selected Financial Data (Unaudited) (In millions)
Three Months Ended Nine Months Ended 2018 Expected
September 30, September 30, Capital Spend
2018 (a) 2017 (a) 2018 (a) 2017 (a)
Capital Expenditures
Growth $
164 $
66 $
470 $
144 $
640
Maintenance 22 26 54 68 110
Total Capital Expenditures $
186 $
92 $
524 $
212 $
750
---
Capital Expenditures, Net of Reimbursements
Growth $
159 $
60 $
454 $
127 $
640
Maintenance 16 21 42 59 80
Total Capital Expenditures, Net of Reimbursements $
175 $
81 $
496 $
186 $
720
---
Capital Expenditures, Andeavor Logistics LP (p)
Growth $
144 $
37 $
306 $
100 $
475
Maintenance 22 22 48 53 105
Total Capital Expenditures, Andeavor $
166 $
59 $
354 $
153 $
580
Logistics LP
---
Capital Expenditures, Net of Reimbursements, Andeavor Logistics LP (p)
Growth $
139 $
31 $
290 $
83 $
475
Maintenance 16 17 36 44 75
Total Capital Expenditures, Net of $
155 $
48 $
326 $
127 $
550
Reimbursements, Andeavor
Logistics LP
---
Capital Expenditures, Predecessors
Growth $
20 $
29 $
164 $
44 $
165
Maintenance - 4 6 15 5
Total Capital Expenditures, Predecessors $
20 $
33 $
170 $
59 $
170
---
(p) We believe that this presentation of our results of operations, excluding results of our Predecessors, will provide useful information to investors in assessing our results of operations. This non-GAAP financial measure should not be considered in isolation or as
a substitute for analysis of our results as reported under U.S. GAAP.
Three Months Ended Nine Months Ended
September 30, September 30,
2018 (a) 2017 (a) 2018 (a) 2017 (a)
General and Administrative Expenses
Terminalling and Transportation $
7 $
15 $
27 $
33
Gathering and Processing 12 16 36 41
Wholesale 1
Unallocated 12 13 27 33
Total General and Administrative Expenses $
31 $
44 $
91 $
107
---
Andeavor Logistics LP
Reconciliation of Combined Financial Statements (Unaudited)
(In millions)
Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Combined Andeavor Predecessors Combined Andeavor Predecessors
Logistics LP (p) Logistics LP (p)
---
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 73 73 166 166
shown separately below)
Operating expenses (exclusive of 236 227 9 658 618 40
depreciation and amortization)
Depreciation and amortization 86 83 3 268 246 22
expenses
General and administrative expenses 31 30 1 91 82 9
Loss on asset disposals and 1 1 2 2
impairments
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 7 4 3 25 9 16
investments
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 170 170 457 457
Partners
Preferred unitholders' interest in net (10) (10) (34) (34)
earnings
Limited Partners' Interest in Net $
160 $
160
$ $
423 $
423
$
Earnings
---
Andeavor Logistics LP
Reconciliation of Combined Financial Statements (Unaudited)
(In millions)
Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
Combined Andeavor Predecessors Combined Andeavor Predecessors
Logistics LP (p) Logistics LP (p)
---
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 554 554 716 716
items shown separately below) (a)
NGL expense (exclusive of items 64 64 179 179
shown separately below)
Operating expenses (exclusive of 199 141 58 512 399 113
depreciation and amortization)
Depreciation and amortization 85 60 25 222 178 44
expenses
General and administrative expenses 44 27 17 107 78 29
(Gain) loss on asset disposals and 1 1 (25) (24) (1)
impairments
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 6 2 4 13 7 6
investments
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 97 97 299 299
Partners
General partner's interest in net - (79) (79)
earnings, including incentive
distribution rights
---
Limited Partners' Interest in Net $
97 $
97
$ $
220 $
220
$
Earnings
---
Andeavor Logistics LP
Terminalling and Transportation Segment Reconciliation of Combined Financial Statements
(Unaudited) (In millions)
Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Combined Andeavor Predecessors Combined Andeavor Predecessors
Logistics LP (p) Logistics LP (p)
---
Revenues
Terminalling $
235 $
234 $
1 $
643 $
640 $
3
Pipeline transportation 44 44 115 115
Other revenues 1 1 4 4
Terminalling and Transportation 280 279 1 762 759 3
Revenues
Costs and Expenses
Operating expenses (exclusive of 99 92 7 279 245 34
depreciation and amortization)
Depreciation and amortization expenses 35 34 1 105 95 10
General and administrative expenses 7 7 27 24 3
Gain on asset disposals and impairments (1) (1)
Terminalling and Transportation 140 147 (7) 351 395 (44)
Segment Operating Income (Loss)
Depreciation and amortization expenses 35 34 1 105 95 10
Equity in earnings of unconsolidated affiliates 4 1 3 14 1 13
Other income, net 1 1 4 3 1
---
Terminalling and Transportation Segment $
180 $
183 $
(3) $
474 $
494 $
(20)
EBITDA
---
Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
Combined Andeavor Predecessors Combined Andeavor Predecessors
Logistics LP (p) Logistics LP (p)
Revenues
Terminalling $
189 $
155 $
34 $
493 $
447 $
46
Pipeline transportation 34 34 97 97
Other revenues 7 7 9 9
Terminalling and 230 189 41 599 544 55
Transportation Revenues
Costs and Expenses
Operating expenses (exclusive of 80 47 33 216 149 67
depreciation and amortization)
Depreciation and amortization 32 24 8 85 68 17
expenses
General and administrative 15 8 7 33 23 10
expenses
Gain on asset disposals and (25) (25)
impairments
Terminalling and Transportation 103 110 (7) 290 329 (39)
Segment Operating Income
(Loss)
Depreciation and amortization 32 24 8 85 68 17
expenses
Equity in earnings of 4 4 6 6
unconsolidated affiliates
Other income, net 3 3 3 3
---
Terminalling and Transportation $
142 $
137 $
5 $
384 $
400 $
(16)
Segment EBITDA
---
Andeavor Logistics LP
Gathering and Processing Segment Reconciliation of Combined Financial Statements
(Unaudited) (In millions)
Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Combined Andeavor Predecessors Combined Andeavor Predecessors
Logistics LP (p) Logistics LP (p)
---
Revenues
NGL sales $
137 $
137
$ $
336 $
336
$
Gas gathering and processing 82 82 249 249
Crude oil and water gathering 86 80 6 241 214 27
Pass-thru and other 40 40 119 119
---
Total Revenues 345 339 6 945 918 27
Costs and Expenses
NGL expense (exclusive of items 73 73 166 166
shown separately below)
Operating expenses (exclusive of 131 129 2 361 355 6
depreciation and amortization)
Depreciation and amortization 47 45 2 154 142 12
expenses
General and administrative expenses 12 11 1 36 30 6
Loss on asset disposals and 2 2 2 2
impairments
---
Gathering and Processing 80 79 1 226 223 3
Segment Operating Income
Depreciation and amortization 47 45 2 154 142 12
expenses
Equity in earnings of equity method 3 3 11 8 3
investments
Gathering and Processing $
130 $
127 $
3 $
391 $
373 $
18
Segment EBITDA
---
Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
Combined Andeavor Predecessors Combined Andeavor Predecessors
Logistics LP (p) Logistics LP (p)
Revenues
NGL sales $
90 $
90
$ $
254 $
254
$
Gas gathering and processing 85 85 252 252
Crude oil and water gathering 76 43 33 170 116 54
Pass-thru and other 44 37 7 120 111 9
---
Total Revenues 295 255 40 796 733 63
Costs and Expenses
NGL expense (exclusive of items 64 64 179 179
shown separately below)
Operating expenses (exclusive of 113 94 19 284 249 35
depreciation and amortization)
Depreciation and amortization 51 36 15 134 110 24
expenses
General and administrative expenses 16 13 3 41 33 8
(Gain) loss on asset disposals and 1 1 1 (1)
impairments
---
Gathering and Processing Segment Operating Income 50 47 3 158 161 (3)
Depreciation and amortization 51 36 15 134 110 24
expenses
Equity in earnings of equity method 2 2 7 7
investments
Gathering and Processing $
103 $
85 $
18 $
299 $
278 $
21
Segment EBITDA
---
Andeavor Logistics LP
Wholesale Segment Reconciliation of Combined Financial Statements
(Unaudited) (In millions)
Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
Combined Andeavor Predecessors Combined Andeavor Predecessors
Logistics LP (p) Logistics LP (p)
---
Revenues
Fuel sales $
565
$ $
565 $
730
$ $
730
Other wholesale 4 4 10 10
Total Revenues 569 569 740 740
---
Costs and Expenses
Cost of fuel and other (excluding 554 554 716 716
items shown separately below)
Operating expenses (excluding 6 6 12 12
depreciation and amortization)
Depreciation and amortization 2 2 3 3
expenses
Wholesale Segment Operating 7 7 9 9
Income
Depreciation and amortization 2 2 3 3
expenses
Wholesale Segment EBITDA $
9
$ $
9 $
12
$ $
12
---
Andeavor Logistics LP
Reconciliation of EBITDA to Amounts Under U.S. GAAP (Unaudited) (In millions)
Reconciliation of Projected Annual
EBITDA
Drop Down North Dakota NGL
Logistics Hub
2019E
---
Projected Net
Earnings $
110 $
17
Add: Projected
depreciation
and
amortization
expense 75 4
Add: Projected
interest and
financing
costs, net 15 3
Projected EBITDA $
200 $
24
---
2018 Drop Down EBITDA
Contribution
Three Months Ended
September 30, 2018
Net Earnings (Loss) $
16
Add: Depreciation and amortization expense 9
Add: Interest and financing costs, net 1
---
EBITDA $
26
---
2018 Drop Down Segment EBITDA Contribution
Three Months Ended September 30, 2018
Terminalling and Gathering and Processing
Transportation
Operating Income (Loss) $
10 $
2
Add: Depreciation and amortization expenses 5 4
Add: Equity in earnings of equity method investments 4 1
Segment EBITDA $
19 $
7
---
Andeavor Logistics LP
Reconciliation of EBITDA to Amounts Under U.S. GAAP (Unaudited) (In millions)
Three Months Ended
December 31, March 31, June 30, September 30, Trailing Four
Quarters
2017 2018 2018 2018
---
Net Earnings $
53 $
131 $
132 $
166 $
482
Add: Depreciation and amortization expense 91 89 93 86 359
Add: Interest and financing costs, net 137 55 60 57 309
EBITDA $
281 $
275 $
285 $
309 $
1,150
---
Add: Pro forma adjustment for acquisitions 178
Pro forma LTM EBITDA $
1,328
September 30,
2018
Total debt $
4,878
Pro forma LTM EBITDA 1,328
Leverage ratio 3.7x
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SOURCE Andeavor Logistics LP
