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Andeavor Logistics LP Reports First-Quarter 2019 Results

FINDLAY, Ohio, May 8, 2019 /PRNewswire/ --

  • Reported first-quarter net earnings of $157 million and EBITDA of $319 million, which provided 1.06x distribution coverage and resulted in 3.9x leverage
  • Terminalling and Transportation segment operating income of $152 million and EBITDA of $191 million driven by drop downs and strong pipeline transportation volumes
  • Gathering and Processing segment operating income of $63 million and EBITDA of $129 million impacted by lower Rockies volumes, offset by Permian crude oil and Bakken natural gas volume growth
  • Reported net cash from operating activities of $219 million and DCF attributable to common unitholders of $255 million
  • Announced agreement to be acquired by MPLX

Andeavor Logistics LP (ANDX) today reported first-quarter 2019 net earnings of $157 million, compared with $131 million in 2018. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $319 million, compared with $275 million in first-quarter 2018. The increase in earnings and EBITDA was driven by the 2018 Drop Down completed in August 2018, which contributed $33 million of net earnings and $47 million of EBITDA in 2019, and the SLC Core Pipeline System acquisition completed in May 2018. Terminalling and Transportation reported segment operating income of $152 million and segment EBITDA of $191 million for the quarter, up $48 million for both, respectively, on a year-over-year basis. Gathering and Processing reported segment operating income of $63 million and segment EBITDA of $129 million for the quarter, down $14 million and $4 million, respectively, versus the first-quarter of last year.

The company also announced that MPLX LP (MPLX) and Andeavor Logistics have entered into a definitive merger agreement whereby MPLX will acquire ANDX in a unit-for-unit exchange. "This merger creates a leading, large-scale, diversified midstream company anchored by fee-based cash flows," said Gary R. Heminger, chairman and chief executive officer. "The combined entity will have an expanded geographic footprint with enhanced long-term growth opportunities. We are confident about the midstream growth and value-creation opportunities that exist across this combined platform in the best basins in the U.S.

"Andeavor Logistics' first-quarter results increased year-over-year, driven by the 2018 Drop Down, higher pipeline transportation volumes, and increased crude oil volumes in the Permian," added Heminger. "The positives in first quarter offset headwinds associated with lower Rockies natural gas gathering and processing volumes, lower NGL sales from ethane rejection, and extreme winter weather impacting Bakken crude oil gathering volumes.

"Looking forward, we expect solid results in the Terminalling and Transportation segment, driven by the 2018 Drop Down and seasonally strong demand through our terminal and pipeline assets," Heminger continued. "We also expect strong results in the Gathering and Processing segment from continued growth in Permian crude, Bakken gas, and full operations on our NGL Logistics Hub project."

The company generated $219 million in net cash from operating activities and distributable cash flow (DCF) attributable to common unitholders of $255 million during the quarter. On April 29, 2019, Andeavor Logistics announced a quarterly cash distribution of $1.03 per limited partnership unit, or $4.12 on an annualized basis, which was flat with the prior quarter, and finished the quarter with coverage of 1.06x and leverage of 3.9x.

First-Quarter Results


Three Months Ended

March 31,

($ in millions)

2019


2018 (a)

Net Earnings

$

157


$

131

Segment Operating Income




Terminalling and Transportation

$

152


$

104

Gathering and Processing

63


77

Wholesale

5


4





EBITDA (b)

$

319


$

275

Segment EBITDA (b)




Terminalling and Transportation

$

191


$

143

Gathering and Processing

129


133

Wholesale

8


7





Net Cash From Operating Activities

$

219


$

266

Distributable Cash Flow Attributable to Common Unitholders (b)

$

255


$

199





Total Distributions to be Paid to Common Unitholders

$

240


$

205

Distribution Coverage Ratio (b)

1.06x


0.97x



(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 $152 million for the first-quarter 2019, an increase of $48 million from the prior year, and segment EBITDA was $191 million, an increase of $48 million from the prior year. The year-over-year increase was primarily attributable to contributions from the 2018 Drop Down, stronger year-over-year pipeline transportation volumes associated with lower refinery turnaround activity, and the SLC Core Pipeline System acquisition. During the quarter, the 2018 Drop Down contributed $19 million of segment operating income and $26 million of segment EBITDA.

Gathering and Processing
Gathering and Processing segment operating income was $63 million for the first-quarter 2019, a decrease of $14 million from the prior year, and segment EBITDA was $129 million, a decrease of $4 million from the prior year. The decrease was primarily attributable to lower natural gas gathering, processing, and NGL sales volumes in the Rockies as well as an expiration of a natural gas gathering contract in the Rockies. This was partially offset by Permian Basin crude oil volume growth and higher natural gas gathering and processing volumes in the Bakken from the expanded capacity at the Robinson Lake processing facility. Results were also impacted by a non-cash accrual due to a legal reserve associated with an ongoing contract dispute. During the quarter, the 2018 Drop Down contributed $17 million of segment operating income and $21 million of segment EBITDA.

Wholesale
Wholesale segment operating income was $5 million for the first-quarter 2019, an increase of $1 million from the prior year, and segment EBITDA for the first-quarter 2019 was $8 million, an increase of $1 million from the prior year. The slight year-over-year increase was driven by higher volumes and a favorable wholesale margin environment.

Balance Sheet and Cash Flow
Net cash from operating activities was $219 million in the first-quarter 2019, and distributable cash flow attributable to common unitholders for the first-quarter was $255 million. As of March 31, 2019, Andeavor Logistics had $29 million of cash and $1.2 billion of availability under its credit facilities and intercompany loan with Marathon Petroleum Corporation (MPC). Total debt of $5.2 billion resulted in a leverage ratio of 3.9x at March 31, 2019.

Net capital expenditures for the first-quarter 2019 were $106 million, which included $100 million of net growth investments and $6 million of net maintenance capital.

Conference Call
Andeavor Logistics' previously announced first-quarter 2019 earnings conference call and webcast, which had been scheduled for Wednesday, May 8, at 1 p.m. EDT has been canceled. MPLX and ANDX will hold a conference call and webcast at 8:30 a.m. EDT today to discuss the transaction. Interested parties may listen to the conference call by dialing 1-888-455-2707 (confirmation number 2634753) or by visiting MPLX's website at http://www.mplx.com and clicking on the "Events and Presentations" link in the "Investor Center" tab or ANDX's website at http://www.andeavorlogistics.com and clicking on the "Events and Presentations" link in the "Investor" tab. A replay of the webcast will be available on MPLX's and ANDX's websites for two weeks. An investor presentation will also be available online prior to the conference call and webcast at http://ir.mplx.com or http://ir.andeavorlogistics.com. 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.

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.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of federal securities laws regarding Andeavor Logistics LP (ANDX). These forward-looking statements relate to, among other things, the proposed acquisition of ANDX by MPLX LP (MPLX) and include expectations, estimates and projections concerning the business and operations, financial priorities and strategic plans of the combined entity. In accordance with "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements. You can identify forward-looking statements by words such as "anticipate," "believe," "could," "design," "estimate," "expect," "forecast," "goal," "guidance," "imply," "intend," "may," "objective," "opportunity," "outlook," "plan," "position," "potential," "predict," "project," "prospective," "pursue," "seek," "should," "strategy," "target," "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 the company's 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: the ability to complete the proposed transaction between MPLX and ANDX on the proposed terms and timetable; the ability to satisfy various conditions to the closing of the transaction contemplated by the merger agreement; the ability to obtain regulatory approvals for the proposed transaction on the proposed terms and schedule, and any conditions imposed on the combined entity in connection with the consummation of the proposed transaction; the risk that anticipated opportunities and any other synergies from or anticipated benefits of the proposed transaction may not be fully realized or may take longer to realize than expected, including whether the proposed transaction will be accretive within the expected timeframe or at all; disruption from the proposed transaction making it more difficult to maintain relationships with customers, employees or suppliers; risks relating to any unforeseen liabilities of MPLX; the amount and timing of future distributions; negative capital market conditions, including an increase of the current yield on common units; the ability to achieve strategic and financial objectives, including with respect to distribution coverage, future distribution levels, proposed projects and completed transactions; adverse changes in laws including with respect to tax and regulatory matters; the adequacy of capital resources and liquidity, including, but not limited to, availability of sufficient cash flow to pay distributions and access to debt on commercially reasonable terms, and the ability to successfully execute business plans, growth strategies and self-funding models; the timing and extent of changes in commodity prices and demand for crude oil, refined products, feedstocks or other hydrocarbon-based products; continued/further volatility in and/or degradation of market and industry conditions; changes to the expected construction costs and timing of projects and planned investments, and the ability to obtain regulatory and other approvals with respect thereto; 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 Marathon Petroleum Corporation's (MPC) obligations under MPLX's and ANDX's commercial agreements; modifications to financial policies, capital budgets, and earnings and distributions; the ability to manage disruptions in credit markets or changes to credit ratings; 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; other risk factors inherent to MPLX's and ANDX's industry; risks related to MPC; 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, 2018, filed with 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: the risk that the cost savings and any other synergies from the Andeavor transaction may not be fully realized or may take longer to realize than expected; disruption from the Andeavor transaction making it more difficult to maintain relationships with customers, employees or suppliers; risks relating to any unforeseen liabilities of Andeavor; risks as set forth above related to the acquisition of ANDX by MPLX; 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; the ability to manage disruptions in credit markets or changes to credit ratings; 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; 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 business plans and to effect any share repurchases or dividend increases, including within the expected timeframe; the effect of restructuring or reorganization of business components; the potential effects of judicial or other proceedings on the 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 or other similar risks to those identified herein affecting MPLX or ANDX; 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, 2018, filed with the 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 respective 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.

Additional Information and Where to Find It
In connection with the proposed transaction, a registration statement on Form S-4 will be filed with the SEC. INVESTORS AND SECURITY HOLDERS ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE CONSENT STATEMENT/PROSPECTUS THAT WILL BE PART OF THE REGISTRATION STATEMENT, WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The final consent statement/prospectus will be sent to unitholders of Andeavor Logistics LP ("ANDX"). Investors and security holders will be able to obtain the documents free of charge at the SEC's website, www.sec.gov, from ANDX at its website, http://ir.andeavorlogistics.com, or by contacting ANDX's Investor Relations at (419) 421-2414, or from MPLX at its website, http://ir.mplx.com, or by contacting MPLX's Investor Relations at (419) 421-2414.

Participants in Solicitation
MPLX, ANDX, MPC and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of consents in respect of the proposed transaction. Information concerning MPLX's directors and executive officers is set forth in its Annual Report on Form 10-K for the year ended Dec. 31, 2018, filed Feb. 28, 2019. Information concerning ANDX's directors and executive officers is set forth in its Annual Report on Form 10-K for the year ended Dec. 31, 2018, filed Feb. 28, 2019. Information concerning MPC's executive officers is set forth in MPC's Annual Report on Form 10-K for the year ended Dec. 31, 2018, filed Feb. 28, 2019. Information about MPC's directors is set forth in MPC's Definitive Proxy Statement on Schedule 14A for its 2019 Annual Meeting of Shareholders, which was filed with the SEC on March 14, 2019. Investors and security holders will be able to obtain the documents free of charge from the sources indicated above, and with respect to MPC, from its website, https://www.marathonpetroleum.com/Investors, or by contacting MPC's Investor Relations at (419) 421-2414. Additional information regarding the interests of such participants in the solicitation of consents in respect of the proposed transaction will be included in the registration statement and consent statement/prospectus and other relevant materials to be filed with the SEC when they become available.

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:
  • Liquidity non-GAAP measures:
  • Operating performance non-GAAP measure:

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," and "Average Margin on NGL Sales per Barrel" 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 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, who merged with and became a wholly-owned subsidiary of MPC effective October 1, 2018, 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.

Andeavor Logistics LP

Condensed Consolidated Balance Sheets (Unaudited) (In millions)



March 31,

 2019


December 31,
2018

Assets




Current Assets




Cash and cash equivalents

$

29


$

10

Receivables, net of allowance for doubtful accounts

561


474

Prepayments and other current assets

58


79

Total Current Assets

648


563

Property, Plant and Equipment, Net

6,882


6,845

Other Noncurrent Assets, Net

3,004


2,887

Total Assets

$

10,534


$

10,295





Liabilities and Equity




Current Liabilities




Accounts payable

$

482


$

466

Accrued interest and financing costs

69


41

Current maturities of debt

503


504

Other current liabilities

91


81

Total Current Liabilities

1,145


1,092

Debt, Net of Unamortized Issuance Costs

4,622


4,460

Other Noncurrent Liabilities

177


69

Equity

4,590


4,674

Total Liabilities and Equity

$

10,534


$

10,295

 

 

Andeavor Logistics LP

Results of Operations (Unaudited) (In millions, except per unit amounts)



Three Months Ended

March 31,


2019


2018 (a)

Revenues




Terminalling and Transportation

$

293


$

232

Gathering and Processing

321


299

Wholesale

22


17

Intersegment revenues

(6)


(2)

Total Revenues

630


546

Costs and Expenses




NGL expense (excluding items shown separately below)

59


48

Operating expenses (excluding depreciation and amortization)

239


201

Depreciation and amortization expenses

101


89

General and administrative expenses

20


31

Operating Income

211


177

Interest and financing costs, net

(61)


(55)

Equity in earnings of equity method investments

7


8

Other income, net


1

Net Earnings

$

157


$

131





Loss attributable to Predecessors

$


$

8

Net Earnings Attributable to Partners

157


139

Preferred unitholders' interest in net earnings

(10)


(14)

Limited Partners' Interest in Net Earnings

$

147


$

125





Net Earnings per Limited Partner Unit:




Common - basic

$

0.60


$

0.59

Common - diluted

$

0.60


$

0.59





Weighted Average Limited Partner Units Outstanding:




Common units - basic

245.5


217.2

Common units - diluted

245.7


217.4

 

 

Andeavor Logistics LP

Selected Operating Segment Data (Unaudited) (In millions)



Three Months Ended

March 31,


2019


2018 (a)

Earnings Before Income Taxes




Terminalling and Transportation

$

152


$

104

Gathering and Processing

63


77

Wholesale

5


4

Total Segment Operating Income

220


185

Unallocated general and administrative expenses

(9)


(8)

Operating Income

211


177

Interest and financing costs, net

(61)


(55)

Equity in earnings of equity method investments

7


8

Other income, net


1

Earnings Before Income Taxes

$

157


$

131

Depreciation and Amortization Expenses




Terminalling and Transportation

$

36


$

33

Gathering and Processing

62


53

Wholesale

3


3

Total Depreciation and Amortization Expenses

$

101


$

89

Segment EBITDA (c)




Terminalling and Transportation

$

191


$

143

Gathering and Processing

129


133

Wholesale

8


7

Total Segment EBITDA

$

328


$

283

Capital Expenditures




Terminalling and Transportation

$

25


$

46

Gathering and Processing

97


110

Wholesale


1

Total Capital Expenditures

$

122


$

157



(c)

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

March 31,


2019


2018 (a)

Cash Flows From (Used In)




Net earnings

$

157


$

131

Depreciation and amortization expenses

101


89

Changes in assets and liabilities

(43)


38

Other operating activities

4


8

Net Cash Flows from Operating Activities

219


266

Investing Activities

(119)


(324)

Financing Activities

(81)


10

Increase (Decrease) in Cash and Cash Equivalents

$

19


$

(48)

 

 

Andeavor Logistics LP

Selected Operating Segment Data (Unaudited)

(In millions, except volumes and revenue per barrel)



Three Months Ended

March 31,


2019


2018 (a)

Terminalling and Transportation Segment




Revenues




Terminalling

$

245


$

199

Pipeline transportation

46


31

Other revenues

2


2

Total Revenues

293


232

Costs and Expenses




Operating expenses

101


85

Depreciation and amortization expenses

36


33

General and administrative expenses

4


10

Terminalling and Transportation Segment Operating Income

$

152


$

104

Volumes




Terminalling throughput (Mbpd)

1,789


1,751

Average terminalling revenue per barrel (d)

$

1.53


$

1.26

Pipeline transportation throughput (Mbpd)

1,067


877

Average pipeline transportation revenue per barrel (d)

$

0.47


$

0.39



(d)  

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 March 31, 2019 and 2018);
  • 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

March 31,


2019


2018 (a)

Gathering and Processing Segment




Revenues




NGL sales (e)

$

122


$

104

Gas gathering and processing

70


85

Crude oil and water gathering

97


75

Pass-thru and other

32


35

Total Revenues

321


299

Costs and Expenses




NGL expense (excluding items shown separately below)

59


48

Operating expenses

131


108

Depreciation and amortization expenses

62


53

General and administrative expenses

6


13

Gathering and Processing Segment Operating Income

$

63


$

77

Volumes




NGL sales (Mbpd) (e)

6.8


11.8

Average margin on NGL sales per barrel (c)(d)(e)

$

103.76


$

53.22

Gas gathering and processing throughput (thousands of MMBtu/d)

699


831

Average gas gathering and processing revenue per MMBtu (d)

$

1.11


$

1.13

Crude oil and water gathering volume (Mbpd)

528


400

Average crude oil and water gathering revenue per barrel (d)

$

2.03


$

2.08



(e) 

We had 29.7 Mbpd and 26.7 Mbpd of NGL sales under percent of proceeds ("POP") and keep-whole arrangements, for the three months ended March 31, 2019 and March 31, 2018, respectively, of which we retained 6.8 Mbpd and 11.8 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.

 

 

Andeavor Logistics LP

Selected Operating Segment Data (Unaudited)

(In millions, except per gallon)



Three Months Ended

March 31,


2019


2018 (a)

Wholesale Segment




Revenues




Fuel sales

$

12



$

9


Other wholesale

10



8


Total Revenues

22



17


Costs and Expenses




Operating expenses

13



10


Depreciation and amortization expenses

3



3


General and administrative expenses

1




Wholesale Operating Income

$

5



$

4


Volumes




Fuel sales volumes (millions of gallons)

326



286


Wholesale fuel sales per gallon (d)

3.6

¢


3.1

¢

 

 

Non-GAAP Reconciliations

Andeavor Logistics LP

Reconciliation of Amounts Reported Under U.S. GAAP (Unaudited)

(In millions, except ratios)



Three Months Ended

March 31,


2019


2018 (a)

Reconciliation of Net Earnings to EBITDA




Net earnings

$

157


$

131

Depreciation and amortization expenses

101


89

Interest and financing costs, net of capitalized interest

61


55

EBITDA

319


275

Predecessor impact


2

Maintenance capital expenditures (f)

(29)


(22)

Reimbursement for maintenance capital expenditures (f)

15


6

Changes in deferred revenue (g)

1


(3)

Interest and financing costs, net

(61)


(55)

Amortized debt costs

2


3

Adjustments for equity method investments

7


3

Other (h)

11


Distributable Cash Flow

265


209

Less: Preferred unit distributions (i)

(10)


(10)

Distributable Cash Flow Attributable to Common Unitholders

$

255


$

199



(f)

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.

(g)

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.

(h)

Other includes transaction costs related to recent acquisitions, non-cash legal reserves and unit-based compensation expense.

(i)

Represents the cash distributions earned by the Preferred Units for the three months ended March 31, 2019 assuming a distribution is declared by the Board of Directors. Cash distributions to be paid to holders of the Preferred Units are not available to common unitholders.

 


Three Months Ended

March 31,


2019


2018 (a)

Reconciliation of Net Cash from Operating Activities to Distributable Cash Flow




Net cash from operating activities

$

219


$

266

Changes in assets and liabilities

43


(38)

Predecessors impact


2

Maintenance capital expenditures (f)

(29)


(22)

Reimbursement for maintenance capital expenditures (f)

15


6

Adjustments for equity method investments

7


(1)

Changes in deferred revenue (g)

1


(3)

Other (j)

9


(1)

Distributable Cash Flow

265


209

Less: Preferred unit distributions (i)

(10)


(10)

Distributable Cash Flow Attributable to Common Unitholders

$

255


$

199



(j)    

Other includes transaction costs related to recent acquisitions and non-cash legal reserves.

 


Three Months Ended

March 31,


2019


2018 (a)

Distributions




Limited partner's distributions on common units

$

240


$

205

Distributions on preferred units

10


10

Total Distributions to be Paid

250


215

Less: Distributions on preferred units

(10)


(10)

Total Distributions to be Paid to Common Unitholders

$

240


$

205





Distributable Cash Flow Attributable to Common Unitholders

$

255


$

199





Distribution Coverage Ratio

1.06x


0.97x

 

 

Andeavor Logistics LP

Segment Reconciliation of Amounts Reported Under U.S. GAAP (Unaudited)

(In millions)



Three Months Ended

March 31,


2019


2018 (a)

Reconciliation of Segment Operating Income to Segment EBITDA




Terminalling and Transportation segment operating income

$

152


$

104

Depreciation and amortization expenses

36


33

Equity in earnings of equity method investments

3


5

Other income, net


1

Terminalling and Transportation Segment EBITDA

$

191


$

143





Gathering and Processing segment operating income

$

63


$

77

Depreciation and amortization expenses

62


53

Equity in earnings of equity method investments

4


3

Gathering and Processing Segment EBITDA

$

129


$

133





Wholesale segment operating income

$

5


$

4

Depreciation and amortization expenses

3


3

Wholesale Segment EBITDA

$

8


$

7

 

 

Andeavor Logistics LP

Average Margin on NGL Sales per Barrel (Unaudited)

(In millions, except days and per barrel amounts)



Three Months Ended

March 31,


2019


2018 (a)

Segment Operating Income

$

63


$

77

Add back:




Operating expenses (excluding depreciation and amortization)

131


108

General and administrative expenses

6


13

Depreciation and amortization expenses

62


53

Subtract:




Gas gathering and processing revenues

(70)


(85)

Crude oil gathering revenues

(97)


(75)

Pass-thru and other revenues

(32)


(35)

Margin on NGL Sales

$

63


$

56

Divided by Total Volumes for the Period:




NGLs sales volumes (Mbpd)

6.8


11.8

Number of days in the period

90


90

Total volumes for the period (thousands of barrels) (k)

612


1,062

Average Margin on NGL Sales per Barrel (k)

$

103.76


$

53.22



(k)

Amounts may not recalculate due to rounding of dollar and volume information.

 

 

Andeavor Logistics LP

Selected Financial Data (Unaudited) (In millions)



Three Months Ended

March 31,


2019


2018 (a)

Capital Expenditures




Growth

$

104


$

142

Maintenance

18


15

Total Capital Expenditures

$

122


$

157





Capital Expenditures, Net of Reimbursements




Growth

$

100


$

132

Maintenance

6


13

Total Capital Expenditures, Net of Reimbursements

$

106


$

145





Capital Expenditures, Andeavor Logistics LP (l)




Growth

$

104


$

71

Maintenance

18


12

Total Capital Expenditures, Andeavor Logistics LP

$

122


$

83





Capital Expenditures, Net of Reimbursements, Andeavor Logistics LP (l)




Growth

$

100


$

61

Maintenance

6


10

Total Capital Expenditures, Net of Reimbursements, Andeavor Logistics LP

$

106


$

71





Capital Expenditures, Predecessors




Growth

$


$

71

Maintenance


3

Total Capital Expenditures, Predecessors

$


$

74





Deferred Costs




Turnarounds & Catalysts

$

1


$

7

Tank Restoration

10


6

Total Deferred Costs

$

11


$

13



(l)

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

March 31,


2019



2018 (a)

General and Administrative Expenses




Terminalling and Transportation

$

4


$

10

Gathering and Processing

6


13

Wholesale

1


Unallocated

9


8

Total General and Administrative Expenses

$

20


$

31

 

 

Andeavor Logistics LP

Reconciliation of Combined Financial Statements (Unaudited)

(In millions)




Three Months Ended March 31, 2018


Combined


Andeavor
Logistics LP (q)


Predecessors







Revenues






Affiliate

$

327


$

318


$

9

Third-party

219


217


2

Total Revenues

546


535


11

Costs and Expenses






NGL expense (exclusive of items shown separately below)

48


48


Operating expenses (exclusive of depreciation and amortization)

201


190


11

Depreciation and amortization expenses

89


80


9

General and administrative expenses

31


27


4

Operating Income (Loss)

177


190


(13)

Interest and financing costs, net

(55)


(54)


(1)

Equity in earnings of equity method investments

8


2


6

Other income, net

1


1


Net Earnings (Loss)

$

131


$

139


$

(8)

Loss attributable to Predecessors

8



8

Net Earnings Attributable to Partners

139


139


Preferred unitholders' interest in net earnings

(14)


(14)


Limited Partners' Interest in Net Earnings

$

125


$

125


$

 

 

Andeavor Logistics LP

Terminalling and Transportation Segment Reconciliation of Combined Financial Statements

(Unaudited) (In millions)



Three Months Ended March 31, 2018


Combined


Andeavor
Logistics LP (q)


Predecessors

Revenues






Terminalling

$

199


$

198


$

1

Pipeline transportation

31


31


Other revenues

2


2


Terminalling and Transportation Revenues

232


231


1

Costs and Expenses






Operating expenses (exclusive of depreciation and amortization)

85


74


11

Depreciation and amortization expenses

33


29


4

General and administrative expenses

10


8


2

Terminalling and Transportation Segment Operating Income (Loss)

104


120


(16)

Depreciation and amortization expenses

33


29


4

Equity in earnings of unconsolidated affiliates

5



5

Other income, net

1


1


Terminalling and Transportation Segment EBITDA

$

143


$

150


$

(7)

 

 

Andeavor Logistics LP

Gathering and Processing Segment Reconciliation of Combined Financial Statements

(Unaudited) (In millions)



Three Months Ended March 31, 2018


Combined


Andeavor
Logistics LP (q)


Predecessors

Revenues






NGL sales

$

104


$

104


$

Gas gathering and processing

85


85


Crude oil and water gathering

75


65


10

Pass-thru and other

35


35


Total Revenues

299


289


10

Costs and Expenses






NGL expense (exclusive of items shown separately below)

48


48


Operating expenses (exclusive of depreciation and amortization)

108


108


Depreciation and amortization expenses

53


48


5

General and administrative expenses

13


11


2

Gathering and Processing Segment Operating Income

77


74


3

Depreciation and amortization expenses

53


48


5

Equity in earnings of equity method investments

3


2


1

Gathering and Processing Segment EBITDA

$

133


$

124


$

9

 

 

Andeavor Logistics LP

Reconciliation of EBITDA to Amounts Under U.S. GAAP (Unaudited) (In millions)







2018 Drop Down
EBITDA
Contribution

Three Months
Ended March 31,
2019

Net Earnings





$

33

Add: Depreciation and amortization expense





7

Add: Interest and financing costs, net





7

EBITDA





$

47








2018 Drop Down Segment EBITDA Contribution

Three Months Ended March 31, 2019


Terminalling and
Transportation


Gathering and
Processing


Total

Operating Income

$

19


$

17


$

36

Add: Depreciation and amortization expenses

4


3


7

Add: Equity in earnings of equity method investments

3


1


4

Segment EBITDA

$

26


$

21


$

47

 

 

Andeavor Logistics LP

Reconciliation of EBIToDA to Amounts Under U.S. GAAP (Unaudited) (In millions)



Three Months Ended




June 30,
2018


September
30, 2018


December
31, 2018


March 31,
2019


Trailing Four
Quarters

Net Earnings

$

132


$

166


$

171


$

157


$

626

Add: Depreciation and amortization expense

93


85


101


101


380

Add: Interest and financing costs, net

60


57


61


61


239

EBITDA

$

285


$

308


$

333


$

319


1,245

Add: Pro forma adjustment for acquisitions









75

Pro forma LTM EBITDA









$

1,320

 


March 31,

 2019

Total debt

$

5,167

Pro forma LTM EBITDA

1,320

Leverage ratio

3.9x

 

Cision

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