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|
|
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
£
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
73-1599053
|
(State or other jurisdiction of
incorporation or organization)
|
|
(IRS Employer
Identification No.)
|
|
|
|
|
|
ITEM 1.
|
CONSOLIDATED FINANCIAL STATEMENTS
|
|
||
|
||||
|
||||
|
||||
|
||||
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
|
|
||
|
1.
|
|
||
|
2.
|
|
||
|
3.
|
|
||
|
4.
|
|
||
|
5.
|
|
||
|
6.
|
|
||
|
7.
|
|
||
|
8.
|
|
||
|
9.
|
|
||
|
10.
|
|
||
|
11.
|
|
||
|
12.
|
|
||
|
13.
|
|
||
|
14.
|
|
||
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|||
ITEM 4.
|
CONTROLS AND PROCEDURES
|
|||
PART II
OTHER INFORMATION
|
||||
ITEM 1.
|
||||
ITEM 1A.
|
||||
ITEM 2.
|
||||
ITEM 3.
|
||||
ITEM 4.
|
||||
ITEM 5.
|
||||
ITEM 6.
|
ITEM 1.
|
CONSOLIDATED FINANCIAL STATEMENTS
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2014
|
|
2015
|
|
2014
|
|
2015
|
||||||||
Transportation and terminals revenue
|
$
|
360,517
|
|
|
$
|
400,944
|
|
|
$
|
1,031,722
|
|
|
$
|
1,120,560
|
|
Product sales revenue
|
155,865
|
|
|
172,731
|
|
|
589,585
|
|
|
455,827
|
|
||||
Affiliate management fee revenue
|
5,219
|
|
|
3,557
|
|
|
15,346
|
|
|
10,478
|
|
||||
Total revenue
|
521,601
|
|
|
577,232
|
|
|
1,636,653
|
|
|
1,586,865
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Operating
|
132,387
|
|
|
137,906
|
|
|
330,758
|
|
|
367,834
|
|
||||
Cost of product sales
|
91,591
|
|
|
85,522
|
|
|
398,734
|
|
|
316,208
|
|
||||
Depreciation and amortization
|
38,054
|
|
|
42,043
|
|
|
122,462
|
|
|
124,180
|
|
||||
General and administrative
|
35,377
|
|
|
37,612
|
|
|
109,621
|
|
|
111,052
|
|
||||
Total costs and expenses
|
297,409
|
|
|
303,083
|
|
|
961,575
|
|
|
919,274
|
|
||||
Earnings of non-controlled entities
|
1,645
|
|
|
15,521
|
|
|
4,066
|
|
|
49,653
|
|
||||
Operating profit
|
225,837
|
|
|
289,670
|
|
|
679,144
|
|
|
717,244
|
|
||||
Interest expense
|
34,993
|
|
|
39,779
|
|
|
108,674
|
|
|
116,142
|
|
||||
Interest income
|
(374
|
)
|
|
(310
|
)
|
|
(1,171
|
)
|
|
(993
|
)
|
||||
Interest capitalized
|
(9,205
|
)
|
|
(3,984
|
)
|
|
(21,358
|
)
|
|
(9,037
|
)
|
||||
Debt placement fee amortization expense
|
566
|
|
|
640
|
|
|
1,767
|
|
|
1,867
|
|
||||
Other expense (income)
|
—
|
|
|
1,706
|
|
|
—
|
|
|
(4,554
|
)
|
||||
Income before provision for income taxes
|
199,857
|
|
|
251,839
|
|
|
591,232
|
|
|
613,819
|
|
||||
Provision for income taxes
|
1,237
|
|
|
867
|
|
|
3,798
|
|
|
1,820
|
|
||||
Net income
|
$
|
198,620
|
|
|
$
|
250,972
|
|
|
$
|
587,434
|
|
|
$
|
611,999
|
|
Basic net income per limited partner unit
|
$
|
0.87
|
|
|
$
|
1.10
|
|
|
$
|
2.59
|
|
|
$
|
2.69
|
|
Diluted net income per limited partner unit
|
$
|
0.87
|
|
|
$
|
1.10
|
|
|
$
|
2.58
|
|
|
$
|
2.69
|
|
Weighted average number of limited partner units outstanding used for basic net income per unit calculation
(1)
|
227,294
|
|
|
227,580
|
|
|
227,242
|
|
|
227,540
|
|
||||
Weighted average number of limited partner units outstanding used for diluted net income per unit calculation
(1)
|
227,830
|
|
|
227,945
|
|
|
227,422
|
|
|
227,702
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2015
|
|
2014
|
|
2015
|
||||||||
Net income
|
$
|
198,620
|
|
|
$
|
250,972
|
|
|
$
|
587,434
|
|
|
$
|
611,999
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
||||||||
Derivative activity:
|
|
|
|
|
|
|
|
||||||||
Net loss on cash flow hedges
(1)
|
(1,830
|
)
|
|
(3,410
|
)
|
|
(5,443
|
)
|
|
(16,939
|
)
|
||||
Reclassification of net loss (gain) on cash flow hedges to income
(1)
|
119
|
|
|
388
|
|
|
(60
|
)
|
|
976
|
|
||||
Changes in employee benefit plan assets and benefit obligations recognized in other comprehensive income:
|
|
|
|
|
|
|
|
||||||||
Amortization of prior service credit
(2)
|
(928
|
)
|
|
(928
|
)
|
|
(2,751
|
)
|
|
(2,784
|
)
|
||||
Amortization of actuarial loss
(2)
|
985
|
|
|
1,798
|
|
|
3,001
|
|
|
5,393
|
|
||||
Settlement cost
(2)
|
30
|
|
|
—
|
|
|
1,599
|
|
|
—
|
|
||||
Total other comprehensive loss
|
(1,624
|
)
|
|
(2,152
|
)
|
|
(3,654
|
)
|
|
(13,354
|
)
|
||||
Comprehensive income
|
$
|
196,996
|
|
|
$
|
248,820
|
|
|
$
|
583,780
|
|
|
$
|
598,645
|
|
|
December 31,
2014 |
|
September 30,
2015 |
||||
ASSETS
|
|
|
(Unaudited)
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
17,063
|
|
|
$
|
9,007
|
|
Trade accounts receivable
|
84,465
|
|
|
113,760
|
|
||
Other accounts receivable
|
15,711
|
|
|
11,099
|
|
||
Inventory
|
157,762
|
|
|
135,181
|
|
||
Energy commodity derivatives contracts, net
|
87,151
|
|
|
49,172
|
|
||
Energy commodity derivatives deposits
|
6,184
|
|
|
—
|
|
||
Other current assets
|
34,331
|
|
|
39,937
|
|
||
Total current assets
|
402,667
|
|
|
358,156
|
|
||
Property, plant and equipment
|
5,533,935
|
|
|
5,998,280
|
|
||
Less: Accumulated depreciation
|
1,204,601
|
|
|
1,317,630
|
|
||
Net property, plant and equipment
|
4,329,334
|
|
|
4,680,650
|
|
||
Investments in non-controlled entities
|
613,867
|
|
|
753,568
|
|
||
Long-term receivables
|
28,611
|
|
|
22,055
|
|
||
Goodwill
|
53,260
|
|
|
53,260
|
|
||
Other intangibles (less accumulated amortization of $11,526 and $13,029 at December 31, 2014 and September 30, 2015, respectively)
|
4,573
|
|
|
2,535
|
|
||
Debt placement costs (less accumulated amortization of $8,952 and $10,819 at December 31, 2014 and September 30, 2015, respectively)
|
18,084
|
|
|
20,971
|
|
||
Tank bottoms and linefill
|
42,585
|
|
|
36,491
|
|
||
Other noncurrent assets
|
24,304
|
|
|
38,497
|
|
||
Total assets
|
$
|
5,517,285
|
|
|
$
|
5,966,183
|
|
LIABILITIES AND PARTNERS' CAPITAL
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
97,131
|
|
|
$
|
123,813
|
|
Accrued payroll and benefits
|
48,298
|
|
|
48,750
|
|
||
Accrued interest payable
|
45,973
|
|
|
45,132
|
|
||
Accrued taxes other than income
|
47,888
|
|
|
54,222
|
|
||
Environmental liabilities
|
10,564
|
|
|
16,575
|
|
||
Deferred revenue
|
71,142
|
|
|
75,283
|
|
||
Accrued product purchases
|
44,355
|
|
|
20,408
|
|
||
Energy commodity derivatives contracts, net
|
5,413
|
|
|
—
|
|
||
Energy commodity derivatives deposits
|
84,463
|
|
|
49,447
|
|
||
Other current liabilities
|
80,928
|
|
|
34,932
|
|
||
Total current liabilities
|
536,155
|
|
|
468,562
|
|
||
Long-term debt
|
2,982,895
|
|
|
3,407,114
|
|
||
Long-term pension and benefits
|
75,155
|
|
|
68,681
|
|
||
Other noncurrent liabilities
|
29,069
|
|
|
24,846
|
|
||
Environmental liabilities
|
25,778
|
|
|
14,903
|
|
||
Commitments and contingencies
|
|
|
|
||||
Partners’ capital:
|
|
|
|
||||
Limited partner unitholders (227,068 units and 227,427 units outstanding at December 31, 2014 and September 30, 2015, respectively)
|
1,949,773
|
|
|
2,076,971
|
|
||
Accumulated other comprehensive loss
|
(81,540
|
)
|
|
(94,894
|
)
|
||
Total partners’ capital
|
1,868,233
|
|
|
1,982,077
|
|
||
Total liabilities and partners' capital
|
$
|
5,517,285
|
|
|
$
|
5,966,183
|
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
|
2014
|
|
2015
|
||||
Operating Activities:
|
|
|
|
||||
Net income
|
$
|
587,434
|
|
|
$
|
611,999
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization expense
|
122,462
|
|
|
124,180
|
|
||
Debt placement fee amortization expense
|
1,767
|
|
|
1,867
|
|
||
Loss on sale and retirement of assets
|
4,830
|
|
|
4,378
|
|
||
Earnings of non-controlled entities
|
(4,066
|
)
|
|
(49,653
|
)
|
||
Distributions from investments in non-controlled entities
|
2,398
|
|
|
47,236
|
|
||
Equity-based incentive compensation expense
|
17,731
|
|
|
15,226
|
|
||
Amortization of prior service credit, actuarial loss and pension settlement
|
1,849
|
|
|
2,609
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Trade accounts receivable and other accounts receivable
|
10,929
|
|
|
(24,601
|
)
|
||
Inventory
|
(15,251
|
)
|
|
22,581
|
|
||
Energy commodity derivatives contracts, net of derivatives deposits
|
(17,540
|
)
|
|
(11,402
|
)
|
||
Accounts payable
|
6,483
|
|
|
12,226
|
|
||
Accrued payroll and benefits
|
(669
|
)
|
|
452
|
|
||
Accrued interest payable
|
(574
|
)
|
|
(841
|
)
|
||
Accrued taxes other than income
|
6,596
|
|
|
6,334
|
|
||
Accrued product purchases
|
(8,584
|
)
|
|
(23,947
|
)
|
||
Deferred revenue
|
7,484
|
|
|
4,141
|
|
||
Current and noncurrent environmental liabilities
|
(1,172
|
)
|
|
(4,864
|
)
|
||
Other current and noncurrent assets and liabilities
|
(8,792
|
)
|
|
(13,817
|
)
|
||
Net cash provided by operating activities
|
713,315
|
|
|
724,104
|
|
||
Investing Activities:
|
|
|
|
||||
Additions to property, plant and equipment, net
(1)
|
(234,763
|
)
|
|
(431,260
|
)
|
||
Proceeds from sale and disposition of assets
|
264
|
|
|
3,178
|
|
||
Acquisition of business
|
—
|
|
|
(54,678
|
)
|
||
Investments in non-controlled entities
|
(378,220
|
)
|
|
(133,373
|
)
|
||
Distributions in excess of earnings of non-controlled entities
|
3,918
|
|
|
9,341
|
|
||
Net cash used by investing activities
|
(608,801
|
)
|
|
(606,792
|
)
|
||
Financing Activities:
|
|
|
|
||||
Distributions paid
|
(417,238
|
)
|
|
(489,535
|
)
|
||
Net commercial paper borrowings (repayments)
|
315,967
|
|
|
(69,976
|
)
|
||
Borrowings under long-term notes
|
257,713
|
|
|
499,589
|
|
||
Payments on notes
|
(250,000
|
)
|
|
—
|
|
||
Debt placement costs
|
(2,912
|
)
|
|
(4,754
|
)
|
||
Net payment on financial derivatives
|
(3,613
|
)
|
|
(42,908
|
)
|
||
Settlement of tax withholdings on long-term incentive compensation
|
(14,813
|
)
|
|
(17,784
|
)
|
||
Net cash used by financing activities
|
(114,896
|
)
|
|
(125,368
|
)
|
||
Change in cash and cash equivalents
|
(10,382
|
)
|
|
(8,056
|
)
|
||
Cash and cash equivalents at beginning of period
|
25,235
|
|
|
17,063
|
|
||
Cash and cash equivalents at end of period
|
$
|
14,853
|
|
|
$
|
9,007
|
|
|
|
|
|
||||
Supplemental non-cash investing and financing activities:
|
|
|
|
||||
Contribution of property, plant and equipment to a non-controlled entity
|
$
|
—
|
|
|
$
|
13,252
|
|
Issuance of limited partner units in settlement of equity-based incentive plan awards
|
$
|
7,315
|
|
|
$
|
8,045
|
|
|
|
|
|
||||
(1)
Additions to property, plant and equipment
|
$
|
(237,240
|
)
|
|
$
|
(439,721
|
)
|
Changes in accounts payable and other current liabilities related to capital expenditures
|
2,477
|
|
|
8,461
|
|
||
Additions to property, plant and equipment, net
|
$
|
(234,763
|
)
|
|
$
|
(431,260
|
)
|
1.
|
Organization, Description of Business and Basis of Presentation
|
•
|
our refined products segment, comprised of our
9,500
-mile refined products pipeline system with
52
terminals as well as
28
independent terminals not connected to our pipeline system and our
1,100
-mile ammonia pipeline system;
|
•
|
our crude oil segment, comprised of approximately
1,600
miles of crude oil pipelines and storage facilities with an aggregate storage capacity of approximately
21 million
barrels, of which
13 million
barrels are used for leased storage; and
|
•
|
our marine storage segment, consisting of
five
marine terminals located along coastal waterways with an aggregate storage capacity of approximately
26 million
barrels.
|
•
|
refined products
are the output from refineries and are primarily used as fuels by consumers. Refined products include gasoline, diesel fuel, aviation fuel, kerosene and heating oil. Collectively, diesel fuel and heating oil are referred to as distillates;
|
•
|
liquefied petroleum gases, or LPGs,
are produced as by-products of the crude oil refining process and in connection with natural gas production. LPGs include butane and propane;
|
•
|
blendstocks
are blended with refined products to change or enhance their characteristics such as increasing a gasoline's octane or oxygen content. Blendstocks include alkylates, oxygenates and natural gasoline;
|
•
|
heavy oils and feedstocks
are used as burner fuels or feedstocks for further processing by refineries and petrochemical facilities. Heavy oils and feedstocks include No. 6 fuel oil and vacuum gas oil;
|
•
|
crude oil and condensate
are used as feedstocks by refineries and petrochemical facilities;
|
•
|
biofuels
, such as ethanol and biodiesel, are increasingly required by government mandates; and
|
•
|
ammonia
is primarily used as a nitrogen fertilizer.
|
2.
|
Product Sales Revenue
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2014
|
|
2015
|
|
2014
|
|
2015
|
||||||||
Physical sale of petroleum products
|
$
|
108,320
|
|
|
$
|
100,829
|
|
|
$
|
555,870
|
|
|
$
|
403,395
|
|
NYMEX contract adjustments:
|
|
|
|
|
|
|
|
||||||||
Change in value of NYMEX contracts that were not designated as hedging instruments associated with our butane blending and fractionation activities
|
47,546
|
|
|
71,902
|
|
|
33,703
|
|
|
52,432
|
|
||||
Other
|
(1
|
)
|
|
—
|
|
|
12
|
|
|
—
|
|
||||
Total NYMEX contract adjustments
|
47,545
|
|
|
71,902
|
|
|
33,715
|
|
|
52,432
|
|
||||
Total product sales revenue
|
$
|
155,865
|
|
|
$
|
172,731
|
|
|
$
|
589,585
|
|
|
$
|
455,827
|
|
3.
|
Segment Disclosures
|
|
Three Months Ended September 30, 2014
|
||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||
|
Refined Products
|
|
Crude Oil
|
|
Marine Storage
|
|
Intersegment
Eliminations
|
|
Total
|
||||||||||
Transportation and terminals revenue
|
$
|
237,972
|
|
|
$
|
78,839
|
|
|
$
|
43,706
|
|
|
$
|
—
|
|
|
$
|
360,517
|
|
Product sales revenue
|
155,134
|
|
|
—
|
|
|
731
|
|
|
—
|
|
|
155,865
|
|
|||||
Affiliate management fee revenue
|
—
|
|
|
4,902
|
|
|
317
|
|
|
—
|
|
|
5,219
|
|
|||||
Total revenue
|
393,106
|
|
|
83,741
|
|
|
44,754
|
|
|
—
|
|
|
521,601
|
|
|||||
Operating expenses
|
101,206
|
|
|
14,375
|
|
|
17,691
|
|
|
(885
|
)
|
|
132,387
|
|
|||||
Cost of product sales
|
91,407
|
|
|
—
|
|
|
184
|
|
|
—
|
|
|
91,591
|
|
|||||
Earnings of non-controlled entities
|
—
|
|
|
(959
|
)
|
|
(686
|
)
|
|
—
|
|
|
(1,645
|
)
|
|||||
Operating margin
|
200,493
|
|
|
70,325
|
|
|
27,565
|
|
|
885
|
|
|
299,268
|
|
|||||
Depreciation and amortization expense
|
23,050
|
|
|
6,918
|
|
|
7,201
|
|
|
885
|
|
|
38,054
|
|
|||||
G&A expenses
|
22,600
|
|
|
7,635
|
|
|
5,142
|
|
|
—
|
|
|
35,377
|
|
|||||
Operating profit
|
$
|
154,843
|
|
|
$
|
55,772
|
|
|
$
|
15,222
|
|
|
$
|
—
|
|
|
$
|
225,837
|
|
|
Three Months Ended September 30, 2015
|
||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||
|
Refined Products
|
|
Crude Oil
|
|
Marine Storage
|
|
Intersegment
Eliminations
|
|
Total
|
||||||||||
Transportation and terminals revenue
|
$
|
259,806
|
|
|
$
|
96,029
|
|
|
$
|
45,109
|
|
|
$
|
—
|
|
|
$
|
400,944
|
|
Product sales revenue
|
171,775
|
|
|
—
|
|
|
956
|
|
|
—
|
|
|
172,731
|
|
|||||
Affiliate management fee revenue
|
—
|
|
|
3,211
|
|
|
346
|
|
|
—
|
|
|
3,557
|
|
|||||
Total revenue
|
431,581
|
|
|
99,240
|
|
|
46,411
|
|
|
—
|
|
|
577,232
|
|
|||||
Operating expenses
|
104,622
|
|
|
19,479
|
|
|
14,700
|
|
|
(895
|
)
|
|
137,906
|
|
|||||
Cost of product sales
|
85,341
|
|
|
—
|
|
|
181
|
|
|
—
|
|
|
85,522
|
|
|||||
Losses (earnings) of non-controlled entities
|
48
|
|
|
(14,906
|
)
|
|
(663
|
)
|
|
—
|
|
|
(15,521
|
)
|
|||||
Operating margin
|
241,570
|
|
|
94,667
|
|
|
32,193
|
|
|
895
|
|
|
369,325
|
|
|||||
Depreciation and amortization expense
|
24,333
|
|
|
9,502
|
|
|
7,313
|
|
|
895
|
|
|
42,043
|
|
|||||
G&A expenses
|
22,238
|
|
|
9,818
|
|
|
5,556
|
|
|
—
|
|
|
37,612
|
|
|||||
Operating profit
|
$
|
194,999
|
|
|
$
|
75,347
|
|
|
$
|
19,324
|
|
|
$
|
—
|
|
|
$
|
289,670
|
|
|
Nine Months Ended September 30, 2014
|
||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||
|
Refined Products
|
|
Crude Oil
|
|
Marine Storage
|
|
Intersegment
Eliminations
|
|
Total
|
||||||||||
Transportation and terminals revenue
|
$
|
680,697
|
|
|
$
|
226,298
|
|
|
$
|
124,727
|
|
|
$
|
—
|
|
|
$
|
1,031,722
|
|
Product sales revenue
|
585,178
|
|
|
—
|
|
|
4,407
|
|
|
—
|
|
|
589,585
|
|
|||||
Affiliate management fee revenue
|
—
|
|
|
14,399
|
|
|
947
|
|
|
—
|
|
|
15,346
|
|
|||||
Total revenue
|
1,265,875
|
|
|
240,697
|
|
|
130,081
|
|
|
—
|
|
|
1,636,653
|
|
|||||
Operating expenses
|
249,665
|
|
|
35,300
|
|
|
48,321
|
|
|
(2,528
|
)
|
|
330,758
|
|
|||||
Cost of product sales
|
397,980
|
|
|
—
|
|
|
754
|
|
|
—
|
|
|
398,734
|
|
|||||
Earnings of non-controlled entities
|
—
|
|
|
(1,667
|
)
|
|
(2,399
|
)
|
|
—
|
|
|
(4,066
|
)
|
|||||
Operating margin
|
618,230
|
|
|
207,064
|
|
|
83,405
|
|
|
2,528
|
|
|
911,227
|
|
|||||
Depreciation and amortization expense
|
78,305
|
|
|
20,106
|
|
|
21,523
|
|
|
2,528
|
|
|
122,462
|
|
|||||
G&A expenses
|
70,993
|
|
|
21,326
|
|
|
17,302
|
|
|
—
|
|
|
109,621
|
|
|||||
Operating profit
|
$
|
468,932
|
|
|
$
|
165,632
|
|
|
$
|
44,580
|
|
|
$
|
—
|
|
|
$
|
679,144
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||
|
Refined Products
|
|
Crude Oil
|
|
Marine Storage
|
|
Intersegment
Eliminations
|
|
Total
|
||||||||||
Transportation and terminals revenue
|
$
|
710,294
|
|
|
$
|
278,345
|
|
|
$
|
131,921
|
|
|
$
|
—
|
|
|
$
|
1,120,560
|
|
Product sales revenue
|
453,737
|
|
|
—
|
|
|
2,090
|
|
|
—
|
|
|
455,827
|
|
|||||
Affiliate management fee revenue
|
—
|
|
|
9,449
|
|
|
1,029
|
|
|
—
|
|
|
10,478
|
|
|||||
Total revenue
|
1,164,031
|
|
|
287,794
|
|
|
135,040
|
|
|
—
|
|
|
1,586,865
|
|
|||||
Operating expenses
|
275,403
|
|
|
49,354
|
|
|
45,916
|
|
|
(2,839
|
)
|
|
367,834
|
|
|||||
Cost of product sales
|
315,301
|
|
|
—
|
|
|
907
|
|
|
—
|
|
|
316,208
|
|
|||||
Losses (earnings) of non-controlled entities
|
146
|
|
|
(47,735
|
)
|
|
(2,064
|
)
|
|
—
|
|
|
(49,653
|
)
|
|||||
Operating margin
|
573,181
|
|
|
286,175
|
|
|
90,281
|
|
|
2,839
|
|
|
952,476
|
|
|||||
Depreciation and amortization expense
|
71,742
|
|
|
25,995
|
|
|
23,604
|
|
|
2,839
|
|
|
124,180
|
|
|||||
G&A expenses
|
68,730
|
|
|
26,935
|
|
|
15,387
|
|
|
—
|
|
|
111,052
|
|
|||||
Operating profit
|
$
|
432,709
|
|
|
$
|
233,245
|
|
|
$
|
51,290
|
|
|
$
|
—
|
|
|
$
|
717,244
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
Investments in Non-Controlled Entities
|
Entity
|
|
Ownership Interest
|
BridgeTex Pipeline Company, LLC ("BridgeTex")
|
|
50%
|
Double Eagle Pipeline LLC ("Double Eagle")
|
|
50%
|
Osage Pipe Line Company, LLC ("Osage")
|
|
50%
|
Powder Springs Logistics, LLC ("Powder Springs")
|
|
50%
|
Saddlehorn Pipeline Company, LLC ("Saddlehorn")
|
|
40%
|
Seabrook Logistics, LLC ("Seabrook")
|
|
50%
|
Texas Frontera, LLC ("Texas Frontera")
|
|
50%
|
|
|
BridgeTex
|
|
All Others
|
|
Consolidated
|
||||||
Investments at December 31, 2014
|
|
$
|
489,348
|
|
|
$
|
124,519
|
|
|
$
|
613,867
|
|
Additional investment
|
|
16,608
|
|
|
130,017
|
|
|
146,625
|
|
|||
Earnings of non-controlled entities:
|
|
|
|
|
|
|
||||||
Proportionate share of earnings
|
|
45,903
|
|
|
5,842
|
|
|
51,745
|
|
|||
Amortization of excess investment and capitalized interest
|
|
(1,529
|
)
|
|
(563
|
)
|
|
(2,092
|
)
|
|||
Earnings of non-controlled entities
|
|
44,374
|
|
|
5,279
|
|
|
49,653
|
|
|||
Less:
|
|
|
|
|
|
|
||||||
Distributions of earnings from investments in non-controlled entities
|
|
44,374
|
|
|
2,862
|
|
|
47,236
|
|
|||
Distributions in excess of earnings of non-controlled entities
|
|
9,341
|
|
|
—
|
|
|
9,341
|
|
|||
Investments at September 30, 2015
|
|
$
|
496,615
|
|
|
$
|
256,953
|
|
|
$
|
753,568
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2014
|
|
Three Months Ended September 30, 2015
|
||||||||||||||||||||
|
|
BridgeTex
|
|
All Others
|
|
Consolidated
|
|
BridgeTex
|
|
All Others
|
|
Consolidated
|
||||||||||||
Revenue
|
|
$
|
428
|
|
|
$
|
8,882
|
|
|
$
|
9,310
|
|
|
$
|
47,555
|
|
|
$
|
12,530
|
|
|
$
|
60,085
|
|
Net income
|
|
$
|
297
|
|
|
$
|
3,370
|
|
|
$
|
3,667
|
|
|
$
|
28,150
|
|
|
$
|
4,151
|
|
|
$
|
32,301
|
|
|
|
Nine Months Ended September 30, 2014
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||||
|
|
BridgeTex
|
|
All Others
|
|
Consolidated
|
|
BridgeTex
|
|
All Others
|
|
Consolidated
|
||||||||||||
Revenue
|
|
$
|
428
|
|
|
$
|
27,346
|
|
|
$
|
27,774
|
|
|
$
|
146,320
|
|
|
$
|
33,677
|
|
|
$
|
179,997
|
|
Net income
|
|
$
|
17
|
|
|
$
|
9,241
|
|
|
$
|
9,258
|
|
|
$
|
91,806
|
|
|
$
|
11,525
|
|
|
$
|
103,331
|
|
5.
|
Inventory
|
|
December 31, 2014
|
|
September 30,
2015 |
||||
Refined products
|
$
|
67,055
|
|
|
$
|
27,864
|
|
Liquefied petroleum gases
|
37,642
|
|
|
42,984
|
|
||
Transmix
|
36,867
|
|
|
28,608
|
|
||
Crude oil
|
10,015
|
|
|
29,626
|
|
||
Additives
|
6,183
|
|
|
6,099
|
|
||
Total inventory
|
$
|
157,762
|
|
|
$
|
135,181
|
|
6.
|
Employee Benefit Plans
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||
|
September 30, 2014
|
|
September 30, 2015
|
||||||||||||
|
Pension
Benefits
|
|
Other Postretirement
Benefits
|
|
Pension
Benefits
|
|
Other Postretirement
Benefits
|
||||||||
Components of net periodic benefit costs:
|
|
|
|
|
|
|
|
||||||||
Service cost
|
$
|
3,348
|
|
|
$
|
57
|
|
|
$
|
4,723
|
|
|
$
|
61
|
|
Interest cost
|
1,332
|
|
|
126
|
|
|
1,938
|
|
|
109
|
|
||||
Expected return on plan assets
|
(1,588
|
)
|
|
—
|
|
|
(2,009
|
)
|
|
—
|
|
||||
Amortization of prior service credit
|
—
|
|
|
(928
|
)
|
|
—
|
|
|
(928
|
)
|
||||
Amortization of actuarial loss
|
756
|
|
|
229
|
|
|
1,577
|
|
|
221
|
|
||||
Settlement cost
|
30
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net periodic benefit cost (credit)
|
$
|
3,878
|
|
|
$
|
(516
|
)
|
|
$
|
6,229
|
|
|
$
|
(537
|
)
|
|
Nine Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30, 2014
|
|
September 30, 2015
|
||||||||||||
|
Pension
Benefits
|
|
Other Postretirement
Benefits
|
|
Pension
Benefits
|
|
Other Postretirement
Benefits
|
||||||||
Components of net periodic benefit costs:
|
|
|
|
|
|
|
|
||||||||
Service cost
|
$
|
10,052
|
|
|
$
|
171
|
|
|
$
|
14,168
|
|
|
$
|
183
|
|
Interest cost
|
5,021
|
|
|
379
|
|
|
5,815
|
|
|
328
|
|
||||
Expected return on plan assets
|
(4,775
|
)
|
|
—
|
|
|
(6,028
|
)
|
|
—
|
|
||||
Amortization of prior service cost (credit)
|
33
|
|
|
(2,784
|
)
|
|
—
|
|
|
(2,784
|
)
|
||||
Amortization of actuarial loss
|
2,315
|
|
|
686
|
|
|
4,730
|
|
|
663
|
|
||||
Settlement cost
|
1,599
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net periodic benefit cost (credit)
|
$
|
14,245
|
|
|
$
|
(1,548
|
)
|
|
$
|
18,685
|
|
|
$
|
(1,610
|
)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||
|
|
September 30, 2014
|
|
September 30, 2015
|
||||||||||||
Gains (Losses) Included in AOCL
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||
Beginning balance
|
|
$
|
(33,023
|
)
|
|
$
|
1,654
|
|
|
$
|
(60,104
|
)
|
|
$
|
(3,110
|
)
|
Amortization of prior service credit
|
|
—
|
|
|
(928
|
)
|
|
—
|
|
|
(928
|
)
|
||||
Amortization of actuarial loss
|
|
756
|
|
|
229
|
|
|
1,577
|
|
|
221
|
|
||||
Settlement cost
|
|
30
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Ending balance
|
|
$
|
(32,237
|
)
|
|
$
|
955
|
|
|
$
|
(58,527
|
)
|
|
$
|
(3,817
|
)
|
|
|
Nine Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30, 2014
|
|
September 30, 2015
|
||||||||||||
Gains (Losses) Included in AOCL
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||
Beginning balance
|
|
$
|
(36,184
|
)
|
|
$
|
3,053
|
|
|
$
|
(63,257
|
)
|
|
$
|
(1,696
|
)
|
Amortization of prior service cost (credit)
|
|
33
|
|
|
(2,784
|
)
|
|
—
|
|
|
(2,784
|
)
|
||||
Amortization of actuarial loss
|
|
2,315
|
|
|
686
|
|
|
4,730
|
|
|
663
|
|
||||
Settlement cost
|
|
1,599
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Ending balance
|
|
$
|
(32,237
|
)
|
|
$
|
955
|
|
|
$
|
(58,527
|
)
|
|
$
|
(3,817
|
)
|
7.
|
Debt
|
|
|
December 31, 2014
|
|
September 30,
2015 |
|
Weighted-Average
Interest Rate for the Nine Months Ended September 30, 2015
(1)
|
||||
Commercial paper
(2)
|
|
$
|
296,942
|
|
|
$
|
226,966
|
|
|
0.5%
|
$250.0 million of 5.65% Notes due 2016
|
|
250,758
|
|
|
250,440
|
|
|
5.7%
|
||
$250.0 million of 6.40% Notes due 2018
|
|
257,280
|
|
|
255,731
|
|
|
5.4%
|
||
$550.0 million of 6.55% Notes due 2019
|
|
567,868
|
|
|
565,064
|
|
|
5.7%
|
||
$550.0 million of 4.25% Notes due 2021
|
|
556,304
|
|
|
555,601
|
|
|
4.0%
|
||
$250.0 million of 3.20% Notes due 2025
(2)
|
|
—
|
|
|
249,694
|
|
|
3.2%
|
||
$250.0 million of 6.40% Notes due 2037
|
|
249,017
|
|
|
249,031
|
|
|
6.4%
|
||
$250.0 million of 4.20% Notes due 2042
|
|
248,406
|
|
|
248,429
|
|
|
4.2%
|
||
$550.0 million of 5.15% Notes due 2043
|
|
556,320
|
|
|
556,245
|
|
|
5.1%
|
||
$250.0 million of 4.20% Notes due 2045
(2)
|
|
—
|
|
|
249,913
|
|
|
4.6%
|
||
Total debt
|
|
$
|
2,982,895
|
|
|
$
|
3,407,114
|
|
|
4.7%
|
|
|
|
|
|
|
|
(1)
|
Weighted-average interest rate includes the amortization/accretion of discounts, premiums and gains/losses realized on historical cash flow and fair value hedges recognized as interest expense.
|
(2)
|
These borrowings were outstanding for only a portion of the
nine
-month period ending
September 30, 2015
. The weighted-average interest rate for these borrowings was calculated based on the number of days the borrowings were outstanding during the noted period.
|
8.
|
Derivative Financial Instruments
|
|
Notional Value
|
|
Barrels
|
||
Forward purchase contracts
|
$
|
137.5
|
|
|
3.9
|
Forward sale contracts
|
$
|
0.3
|
|
|
—
|
Type of Contract/Accounting Methodology
|
|
Product Represented by the Contract and Associated Barrels
|
|
Maturity Dates
|
NYMEX - Fair Value Hedges
|
|
0.7 million barrels of crude oil
|
|
Between December 2015 and November 2016
|
NYMEX - Economic Hedges
|
|
5.4 million barrels of refined products and crude oil
(1)
|
|
Between October 2015 and December 2016
|
NYMEX - Economic Hedges
|
|
1.2 million barrels of future purchases of butane
|
|
Between October 2015 and December 2016
|
|
|
December 31, 2014
|
||||||||||||||||||
Description
|
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts of Liabilities Offset in the Consolidated Balance Sheet
|
|
Net Amounts of Assets Presented in the Consolidated Balance Sheet
(1)
|
|
Margin Deposit Amounts Not Offset in the Consolidated Balance Sheet
|
|
Net Asset Amount
(3)
|
||||||||||
Energy commodity derivatives
|
|
$
|
106,764
|
|
|
$
|
(10,622
|
)
|
|
$
|
96,142
|
|
|
$
|
(78,279
|
)
|
|
$
|
17,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2015
|
||||||||||||||||||
Description
|
|
Gross Amounts of Recognized Assets
|
|
Gross Amounts of Liabilities Offset in the Consolidated Balance Sheet
|
|
Net Amounts of Assets Presented in the Consolidated Balance Sheet
(2)
|
|
Margin Deposit Amounts Not Offset in the Consolidated Balance Sheet
|
|
Net Asset Amount
(3)
|
||||||||||
Energy commodity derivatives
|
|
$
|
89,138
|
|
|
$
|
(10,695
|
)
|
|
$
|
78,443
|
|
|
$
|
(49,447
|
)
|
|
$
|
28,996
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Net amount includes energy commodity derivative contracts classified as current assets, net, of
$87,151
, current liabilities of
$5,413
and noncurrent assets of
$14,404
.
|
(2)
|
Net amount includes energy commodity derivative contracts classified as current assets, net, of
$49,172
and noncurrent assets of
$29,271
.
|
(3)
|
This represents the maximum amount of loss we would incur if all of our counterparties failed to perform on their derivative contracts.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
Derivative Gains (Losses) Included in AOCL
|
2014
|
|
2015
|
|
2014
|
|
2015
|
||||||||
Beginning balance
|
$
|
9,835
|
|
|
$
|
(29,528
|
)
|
|
$
|
13,627
|
|
|
$
|
(16,587
|
)
|
Net loss on interest rate contract cash flow hedges
|
(1,830
|
)
|
|
(3,410
|
)
|
|
(5,443
|
)
|
|
(16,939
|
)
|
||||
Reclassification of net loss (gain) on cash flow hedges to income
|
119
|
|
|
388
|
|
|
(60
|
)
|
|
976
|
|
||||
Ending balance
|
$
|
8,124
|
|
|
$
|
(32,550
|
)
|
|
$
|
8,124
|
|
|
$
|
(32,550
|
)
|
|
|
Three Months Ended September 30, 2014
|
||||||||||||||||||
|
|
Amount of Loss Recognized in AOCL on Derivative
|
|
Location of Loss Reclassified from AOCL into Income
|
|
Amount of Loss Reclassified from AOCL into Income
|
||||||||||||||
Derivative Instrument
|
|
|
|
Effective Portion
|
|
Ineffective Portion
|
||||||||||||||
Interest rate contracts
|
|
|
$
|
(1,830
|
)
|
|
|
Interest expense
|
|
|
$
|
(119
|
)
|
|
|
|
$
|
—
|
|
|
|
|
Three Months Ended September 30, 2015
|
||||||||||||||||||
|
|
Amount of Loss Recognized in AOCL on Derivative
|
|
Location of Loss Reclassified from AOCL into Income
|
|
Amount of Loss Reclassified from AOCL into Income
|
||||||||||||||
Derivative Instrument
|
|
|
|
Effective Portion
|
|
Ineffective Portion
|
||||||||||||||
Interest rate contracts
|
|
|
$
|
(3,410
|
)
|
|
|
Interest expense
|
|
|
$
|
(388
|
)
|
|
|
|
$
|
—
|
|
|
|
|
Nine Months Ended September 30, 2014
|
||||||||||||||||||
|
|
Amount of Loss Recognized in AOCL on Derivative
|
|
Location of Gain (Loss) Reclassified from AOCL into Income
|
|
Amount of Gain (Loss) Reclassified from AOCL into Income
|
||||||||||||||
Derivative Instrument
|
|
|
|
Effective Portion
|
|
Ineffective Portion
|
||||||||||||||
Interest rate contracts
|
|
|
$
|
(5,443
|
)
|
|
|
Interest expense
|
|
|
$
|
(123
|
)
|
|
|
|
$
|
183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||
|
|
Amount of Loss Recognized in AOCL on Derivative
|
|
Location of Loss Reclassified from AOCL into Income
|
|
Amount of Loss Reclassified from AOCL into Income
|
||||||||||||||
Derivative Instrument
|
|
|
|
Effective Portion
|
|
Ineffective Portion
|
||||||||||||||
Interest rate contracts
|
|
|
$
|
(16,939
|
)
|
|
|
Interest expense
|
|
|
$
|
(976
|
)
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss) Recognized on Derivatives
|
||||||||||||||
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
Location of Gain (Loss)
Recognized on Derivatives
|
|
September 30,
|
|
September 30,
|
||||||||||||
Derivative Instruments
|
|
|
2014
|
|
2015
|
|
2014
|
|
2015
|
|||||||||
NYMEX commodity contracts
|
|
Product sales revenue
|
|
$
|
47,545
|
|
|
$
|
71,902
|
|
|
$
|
33,715
|
|
|
$
|
52,432
|
|
NYMEX commodity contracts
|
|
Operating expenses
|
|
4,350
|
|
|
14,761
|
|
|
447
|
|
|
7,181
|
|
||||
NYMEX commodity contracts
|
|
Cost of product sales
|
|
(3,913
|
)
|
|
(3,767
|
)
|
|
(3,137
|
)
|
|
(5,847
|
)
|
||||
|
|
Total
|
|
$
|
47,982
|
|
|
$
|
82,896
|
|
|
$
|
31,025
|
|
|
$
|
53,766
|
|
|
|
December 31, 2014
|
||||||||||
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||
Derivative Instrument
|
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
||||
NYMEX commodity contracts
|
|
Energy commodity derivatives contracts, net
|
|
$
|
360
|
|
|
Energy commodity derivatives contracts, net
|
|
$
|
—
|
|
NYMEX commodity contracts
|
|
Other noncurrent assets
|
|
14,404
|
|
|
Other noncurrent liabilities
|
|
—
|
|
||
Interest rate contracts
|
|
Other current assets
|
|
—
|
|
|
Other current liabilities
|
|
26,478
|
|
||
|
|
Total
|
|
$
|
14,764
|
|
|
Total
|
|
$
|
26,478
|
|
|
|
September 30, 2015
|
||||||||||
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||
Derivative Instrument
|
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
||||
NYMEX commodity contracts
|
|
Energy commodity derivatives contracts, net
|
|
$
|
913
|
|
|
Energy commodity derivatives contracts, net
|
|
$
|
—
|
|
NYMEX commodity contracts
|
|
Other noncurrent assets
|
|
24,499
|
|
|
Other noncurrent liabilities
|
|
—
|
|
||
Interest rate contracts
|
|
Other noncurrent assets
|
|
574
|
|
|
Other noncurrent liabilities
|
|
1,082
|
|
||
|
|
Total
|
|
$
|
25,986
|
|
|
Total
|
|
$
|
1,082
|
|
|
|
December 31, 2014
|
||||||||||
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||
Derivative Instrument
|
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
||||
NYMEX commodity contracts
|
|
Energy commodity derivatives contracts, net
|
|
$
|
92,000
|
|
|
Energy commodity derivatives contracts, net
|
|
$
|
10,622
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
September 30, 2015
|
||||||||||
|
|
Asset Derivatives
|
|
Liability Derivatives
|
||||||||
Derivative Instrument
|
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
||||
NYMEX commodity contracts
|
|
Energy commodity derivatives contracts, net
|
|
$
|
58,685
|
|
|
Energy commodity derivatives contracts, net
|
|
$
|
10,426
|
|
NYMEX commodity contracts
|
|
Other noncurrent assets
|
|
5,041
|
|
|
Other noncurrent liabilities
|
|
269
|
|
||
|
|
Total
|
|
$
|
63,726
|
|
|
Total
|
|
$
|
10,695
|
|
9.
|
Commitments and Contingencies
|
10.
|
Long-Term Incentive Plan
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||
|
September 30, 2014
|
|
September 30, 2014
|
||||||||||||||||||||
|
Equity
Method
|
|
Liability
Method
|
|
Total
|
|
Equity
Method
|
|
Liability
Method
|
|
Total
|
||||||||||||
Performance/market-based awards:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2012 awards
|
$
|
1,022
|
|
|
$
|
651
|
|
|
$
|
1,673
|
|
|
$
|
3,066
|
|
|
$
|
3,192
|
|
|
$
|
6,258
|
|
2013 awards
|
1,350
|
|
|
558
|
|
|
1,908
|
|
|
4,726
|
|
|
2,411
|
|
|
7,137
|
|
||||||
2014 awards
|
1,101
|
|
|
—
|
|
|
1,101
|
|
|
3,233
|
|
|
—
|
|
|
3,233
|
|
||||||
Retention awards
|
296
|
|
|
—
|
|
|
296
|
|
|
1,103
|
|
|
—
|
|
|
1,103
|
|
||||||
Total
|
$
|
3,769
|
|
|
$
|
1,209
|
|
|
$
|
4,978
|
|
|
$
|
12,128
|
|
|
$
|
5,603
|
|
|
$
|
17,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Allocation of LTIP expense on our consolidated statements of income:
|
|||||||||||||||||||||||
G&A expense
|
|
|
|
|
$
|
4,862
|
|
|
|
|
|
|
$
|
17,322
|
|
||||||||
Operating expense
|
|
|
|
|
116
|
|
|
|
|
|
|
409
|
|
||||||||||
Total
|
|
|
|
|
$
|
4,978
|
|
|
|
|
|
|
$
|
17,731
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||
|
September 30, 2015
|
|
September 30, 2015
|
||||||||||||||||||||
|
Equity
Method
|
|
Liability
Method
|
|
Total
|
|
Equity
Method
|
|
Liability
Method
|
|
Total
|
||||||||||||
Performance/market-based awards:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2013 awards
|
$
|
1,673
|
|
|
$
|
(590
|
)
|
|
$
|
1,083
|
|
|
$
|
6,246
|
|
|
$
|
501
|
|
|
$
|
6,747
|
|
2014 awards
|
1,497
|
|
|
—
|
|
|
1,497
|
|
|
3,980
|
|
|
—
|
|
|
3,980
|
|
||||||
2015 awards
|
1,727
|
|
|
—
|
|
|
1,727
|
|
|
3,687
|
|
|
—
|
|
|
3,687
|
|
||||||
Retention awards
|
380
|
|
|
—
|
|
|
380
|
|
|
812
|
|
|
—
|
|
|
812
|
|
||||||
Total
|
$
|
5,277
|
|
|
$
|
(590
|
)
|
|
$
|
4,687
|
|
|
$
|
14,725
|
|
|
$
|
501
|
|
|
$
|
15,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Allocation of LTIP expense on our consolidated statements of income:
|
|||||||||||||||||||||||
G&A expense
|
|
|
|
|
$
|
4,643
|
|
|
|
|
|
|
$
|
15,016
|
|
||||||||
Operating expense
|
|
|
|
|
44
|
|
|
|
|
|
|
210
|
|
||||||||||
Total
|
|
|
|
|
$
|
4,687
|
|
|
|
|
|
|
$
|
15,226
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
11.
|
Distributions
|
Payment Date
|
|
Per Unit Cash
Distribution
Amount
|
|
Total Cash Distribution to Limited Partners
|
||||||||
02/14/2014
|
|
|
$
|
0.5850
|
|
|
|
|
$
|
132,835
|
|
|
05/15/2014
|
|
|
0.6125
|
|
|
|
|
139,079
|
|
|
||
08/14/2014
|
|
|
0.6400
|
|
|
|
|
145,324
|
|
|
||
Through 09/30/2014
|
|
|
1.8375
|
|
|
|
|
417,238
|
|
|
||
11/14/2014
|
|
|
0.6675
|
|
|
|
|
151,568
|
|
|
||
Total
|
|
|
$
|
2.5050
|
|
|
|
|
$
|
568,806
|
|
|
|
|
|
|
|
|
|
|
|
||||
02/13/2015
|
|
|
$
|
0.6950
|
|
|
|
|
$
|
158,061
|
|
|
05/15/2015
|
|
|
0.7175
|
|
|
|
|
163,178
|
|
|
||
08/14/2015
|
|
|
0.7400
|
|
|
|
|
168,296
|
|
|
||
Through 09/30/2015
|
|
|
2.1525
|
|
|
|
|
489,535
|
|
|
||
11/13/2015
(1)
|
|
|
0.7625
|
|
|
|
|
173,413
|
|
|
||
Total
|
|
|
$
|
2.9150
|
|
|
|
|
$
|
662,948
|
|
|
12.
|
Fair Value
|
•
|
Energy commodity derivatives contracts
. These include NYMEX futures agreements related to petroleum products. These contracts are carried at fair value on our consolidated balance sheets and are valued based on quoted prices in active markets. See Note 8 –
Derivative Financial Instruments
for further disclosures regarding these contracts.
|
•
|
Interest rate contracts.
These include forward-starting interest rate swap agreements to hedge against the risk of variability of interest payments on future debt. These contracts are carried at fair value on our consolidated balance sheets and are valued based on an assumed exchange, at the end of each period, in an orderly transaction with a market participant in the market in which the financial instrument is traded. The exchange value was calculated using present value techniques
|
•
|
Long-term receivables.
These include lease payments receivable under a direct-financing leasing arrangement and insurance receivables. Fair value was determined by estimating the present value of future cash flows using current market rates.
|
•
|
Debt.
The fair value of our publicly traded notes was based on the prices of those notes at
December 31, 2014
and
September 30, 2015
; however, where recent observable market trades were not available, prices were determined using adjustments to the last traded value for that debt issuance or by adjustments to the prices of similar debt instruments of peer entities that are actively traded. The carrying amount of borrowings, if any, under our revolving credit facility and our commercial paper program approximates fair value due to the frequent repricing of these obligations.
|
|
|
As of December 31, 2014
|
||||||||||||||||||
Assets (Liabilities)
|
|
|
|
|
|
Fair Value Measurements using:
|
||||||||||||||
|
Carrying Amount
|
|
Fair Value
|
|
Quoted Prices in Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||
Energy commodity derivatives contracts – assets
|
|
$
|
96,142
|
|
|
$
|
96,142
|
|
|
$
|
96,142
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest rate contracts – liabilities
|
|
$
|
(26,478
|
)
|
|
$
|
(26,478
|
)
|
|
$
|
—
|
|
|
$
|
(26,478
|
)
|
|
$
|
—
|
|
Long-term receivables
|
|
$
|
28,611
|
|
|
$
|
30,200
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,200
|
|
Debt
|
|
$
|
(2,982,895
|
)
|
|
$
|
(3,212,462
|
)
|
|
$
|
—
|
|
|
$
|
(3,212,462
|
)
|
|
$
|
—
|
|
|
|
As of September 30, 2015
|
||||||||||||||||||
Assets (Liabilities)
|
|
|
|
|
|
Fair Value Measurements using:
|
||||||||||||||
|
Carrying Amount
|
|
Fair Value
|
|
Quoted Prices in Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||||
Energy commodity derivatives contracts – assets
|
|
$
|
78,443
|
|
|
$
|
78,443
|
|
|
$
|
78,443
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest rate contracts – liabilities
|
|
$
|
(508
|
)
|
|
$
|
(508
|
)
|
|
$
|
—
|
|
|
$
|
(508
|
)
|
|
$
|
—
|
|
Long-term receivables
|
|
$
|
22,055
|
|
|
$
|
21,681
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,681
|
|
Debt
|
|
$
|
(3,407,114
|
)
|
|
$
|
(3,420,351
|
)
|
|
$
|
—
|
|
|
$
|
(3,420,351
|
)
|
|
$
|
—
|
|
13.
|
Related Party Transactions
|
14.
|
Subsequent Events
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
our refined products segment, comprised of our
9,500
-mile refined products pipeline system with
52
terminals as well as
28
independent terminals not connected to our pipeline system and our
1,100
-mile ammonia pipeline system;
|
•
|
our crude oil segment, comprised of approximately
1,600
miles of crude oil pipelines and storage facilities with an aggregate storage capacity of approximately
21 million
barrels, of which
13 million
barrels are used for leased storage; and
|
•
|
our marine storage segment, consisting of
five
marine terminals located along coastal waterways with an aggregate storage capacity of approximately
26 million
barrels.
|
|
Three Months Ended September 30,
|
|
Variance
Favorable (Unfavorable)
|
||||||||||
|
2014
|
|
2015
|
|
$ Change
|
|
% Change
|
||||||
Financial Highlights ($ in millions, except operating statistics)
|
|
|
|
|
|
|
|
||||||
Transportation and terminals revenue:
|
|
|
|
|
|
|
|
||||||
Refined products
|
$
|
238.0
|
|
|
$
|
259.8
|
|
|
$
|
21.8
|
|
|
9
|
Crude oil
|
78.8
|
|
|
96.1
|
|
|
17.3
|
|
|
22
|
|||
Marine storage
|
43.7
|
|
|
45.1
|
|
|
1.4
|
|
|
3
|
|||
Total transportation and terminals revenue
|
360.5
|
|
|
401.0
|
|
|
40.5
|
|
|
11
|
|||
Affiliate management fee revenue
|
5.2
|
|
|
3.6
|
|
|
(1.6
|
)
|
|
(31)
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
||||||
Refined products
|
101.2
|
|
|
104.6
|
|
|
(3.4
|
)
|
|
(3)
|
|||
Crude oil
|
14.4
|
|
|
19.4
|
|
|
(5.0
|
)
|
|
(35)
|
|||
Marine storage
|
17.7
|
|
|
14.7
|
|
|
3.0
|
|
|
17
|
|||
Intersegment eliminations
|
(0.9
|
)
|
|
(0.8
|
)
|
|
(0.1
|
)
|
|
(11)
|
|||
Total operating expenses
|
132.4
|
|
|
137.9
|
|
|
(5.5
|
)
|
|
(4)
|
|||
Product margin:
|
|
|
|
|
|
|
|
||||||
Product sales revenue
|
155.9
|
|
|
172.7
|
|
|
16.8
|
|
|
11
|
|||
Cost of product sales
|
91.6
|
|
|
85.5
|
|
|
6.1
|
|
|
7
|
|||
Product margin
(1)
|
64.3
|
|
|
87.2
|
|
|
22.9
|
|
|
36
|
|||
Earnings of non-controlled entities
|
1.7
|
|
|
15.5
|
|
|
13.8
|
|
|
812
|
|||
Operating margin
|
299.3
|
|
|
369.4
|
|
|
70.1
|
|
|
23
|
|||
Depreciation and amortization expense
|
38.1
|
|
|
42.1
|
|
|
(4.0
|
)
|
|
(10)
|
|||
G&A expense
|
35.4
|
|
|
37.7
|
|
|
(2.3
|
)
|
|
(6)
|
|||
Operating profit
|
225.8
|
|
|
289.6
|
|
|
63.8
|
|
|
28
|
|||
Interest expense (net of interest income and interest capitalized)
|
25.4
|
|
|
35.4
|
|
|
(10.0
|
)
|
|
(39)
|
|||
Debt placement fee amortization expense
|
0.6
|
|
|
0.7
|
|
|
(0.1
|
)
|
|
(17)
|
|||
Other expense
|
—
|
|
|
1.7
|
|
|
(1.7
|
)
|
|
n/a
|
|||
Income before provision for income taxes
|
199.8
|
|
|
251.8
|
|
|
52.0
|
|
|
26
|
|||
Provision for income taxes
|
1.2
|
|
|
0.8
|
|
|
0.4
|
|
|
33
|
|||
Net income
|
$
|
198.6
|
|
|
$
|
251.0
|
|
|
$
|
52.4
|
|
|
26
|
Operating Statistics:
|
|
|
|
|
|
|
|
||||||
Refined products:
|
|
|
|
|
|
|
|
||||||
Transportation revenue per barrel shipped
|
$
|
1.408
|
|
|
$
|
1.476
|
|
|
|
|
|
||
Volume shipped (million barrels):
|
|
|
|
|
|
|
|
||||||
Gasoline
|
66.2
|
|
|
73.9
|
|
|
|
|
|
||||
Distillates
|
41.6
|
|
|
38.8
|
|
|
|
|
|
||||
Aviation fuel
|
6.4
|
|
|
5.6
|
|
|
|
|
|
||||
Liquefied petroleum gases
|
4.3
|
|
|
3.5
|
|
|
|
|
|
||||
Total volume shipped
|
118.5
|
|
|
121.8
|
|
|
|
|
|
||||
Crude oil:
|
|
|
|
|
|
|
|
||||||
Magellan 100%-owned assets:
|
|
|
|
|
|
|
|
||||||
Transportation revenue per barrel shipped
|
$
|
1.304
|
|
|
$
|
1.148
|
|
|
|
|
|
||
Volume shipped (million barrels)
|
44.0
|
|
|
53.6
|
|
|
|
|
|
||||
Crude oil terminal average utilization (million barrels per month)
|
12.3
|
|
|
13.5
|
|
|
|
|
|
||||
Select joint venture pipelines:
|
|
|
|
|
|
|
|
||||||
BridgeTex - volume shipped (million barrels)
(2)
|
0.2
|
|
|
18.5
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||||
Marine storage:
|
|
|
|
|
|
|
|
||||||
Marine terminal average utilization (million barrels per month)
|
22.9
|
|
|
24.3
|
|
|
|
|
|
•
|
an increase in refined products revenue of
$21.8
million primarily attributable to higher transportation and related ancillary revenue. Transportation revenue was favorably impacted by both higher rates and a 3% increase in volumes. The average rate per barrel in the current period was impacted by the mid-year 2015 tariff rate increase of 4.6% on virtually all of our tariffs. Volumes were higher primarily due to a 12% increase in shipments of gasoline resulting from refinery turnarounds that increased demand on our system and lower prices that increased overall demand for gasoline, partially offset by 7% lower shipments of distillates principally due to reduced demand from drilling activities in the markets we serve. Additionally, revenue from our ammonia pipeline, independent terminals and leased storage increased;
|
•
|
an increase in crude oil revenue of
$17.3
million primarily due to revenue received in third quarter 2015 from BridgeTex Pipeline Company, LLC ("BridgeTex") for capacity on our Houston area crude oil distribution system, higher transportation revenue due to increased shipments on our Longhorn pipeline and Houston-area crude oil distribution system, as well as higher terminalling revenue resulting from new leased storage contracts. Transportation revenue per barrel shipped was lower in the current period due to reduced average tariffs resulting from a lower volume of spot shipments on the Longhorn pipeline system, which ship at a higher rate, and more short-haul movements on our Houston-area crude oil distribution system in 2015; and
|
•
|
an increase in marine storage revenue of
$1.4
million primarily due to higher ancillary fees due to increased customer activity.
|
•
|
an increase in refined products expenses of
$3.4
million primarily due to higher asset integrity spending and personnel costs, partially offset by more favorable product overages (which reduce operating expense);
|
•
|
an increase in crude oil expenses of
$5.0
million primarily due to less favorable product overages (which reduce operating expense), higher pipeline capacity rental fees and higher personnel costs; and
|
•
|
a decrease in marine storage expenses of
$3.0
million primarily due to lower asset integrity spending and environmental costs.
|
|
Nine Months Ended September 30,
|
|
Variance
Favorable (Unfavorable)
|
||||||||||
|
2014
|
|
2015
|
|
$ Change
|
|
% Change
|
||||||
Financial Highlights ($ in millions, except operating statistics)
|
|
|
|
|
|
|
|
||||||
Transportation and terminals revenue:
|
|
|
|
|
|
|
|
||||||
Refined products
|
$
|
680.7
|
|
|
$
|
710.3
|
|
|
$
|
29.6
|
|
|
4
|
Crude oil
|
226.3
|
|
|
278.4
|
|
|
52.1
|
|
|
23
|
|||
Marine storage
|
124.7
|
|
|
131.9
|
|
|
7.2
|
|
|
6
|
|||
Total transportation and terminals revenue
|
1,031.7
|
|
|
1,120.6
|
|
|
88.9
|
|
|
9
|
|||
Affiliate management fee revenue
|
15.3
|
|
|
10.5
|
|
|
(4.8
|
)
|
|
(31)
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
||||||
Refined products
|
249.7
|
|
|
275.4
|
|
|
(25.7
|
)
|
|
(10)
|
|||
Crude oil
|
35.3
|
|
|
49.3
|
|
|
(14.0
|
)
|
|
(40)
|
|||
Marine storage
|
48.3
|
|
|
45.9
|
|
|
2.4
|
|
|
5
|
|||
Intersegment eliminations
|
(2.5
|
)
|
|
(2.8
|
)
|
|
0.3
|
|
|
12
|
|||
Total operating expenses
|
330.8
|
|
|
367.8
|
|
|
(37.0
|
)
|
|
(11)
|
|||
Product margin:
|
|
|
|
|
|
|
|
||||||
Product sales revenue
|
589.6
|
|
|
455.8
|
|
|
(133.8
|
)
|
|
(23)
|
|||
Cost of product sales
|
398.7
|
|
|
316.2
|
|
|
82.5
|
|
|
21
|
|||
Product margin
(1)
|
190.9
|
|
|
139.6
|
|
|
(51.3
|
)
|
|
(27)
|
|||
Earnings of non-controlled entities
|
4.1
|
|
|
49.6
|
|
|
45.5
|
|
|
1,110
|
|||
Operating margin
|
911.2
|
|
|
952.5
|
|
|
41.3
|
|
|
5
|
|||
Depreciation and amortization expense
|
122.5
|
|
|
124.2
|
|
|
(1.7
|
)
|
|
(1)
|
|||
G&A expense
|
109.6
|
|
|
111.1
|
|
|
(1.5
|
)
|
|
(1)
|
|||
Operating profit
|
679.1
|
|
|
717.2
|
|
|
38.1
|
|
|
6
|
|||
Interest expense (net of interest income and interest capitalized)
|
86.1
|
|
|
106.1
|
|
|
(20.0
|
)
|
|
(23)
|
|||
Debt placement fee amortization expense
|
1.8
|
|
|
1.9
|
|
|
(0.1
|
)
|
|
(6)
|
|||
Other income
|
—
|
|
|
(4.6
|
)
|
|
4.6
|
|
|
n/a
|
|||
Income before provision for income taxes
|
591.2
|
|
|
613.8
|
|
|
22.6
|
|
|
4
|
|||
Provision for income taxes
|
3.8
|
|
|
1.8
|
|
|
2.0
|
|
|
53
|
|||
Net income
|
$
|
587.4
|
|
|
$
|
612.0
|
|
|
$
|
24.6
|
|
|
4
|
Operating Statistics:
|
|
|
|
|
|
|
|
||||||
Refined products:
|
|
|
|
|
|
|
|
||||||
Transportation revenue per barrel shipped
|
$
|
1.392
|
|
|
$
|
1.417
|
|
|
|
|
|
||
Volume shipped (million barrels):
|
|
|
|
|
|
|
|
||||||
Gasoline
|
189.7
|
|
|
203.3
|
|
|
|
|
|
||||
Distillates
|
119.6
|
|
|
112.0
|
|
|
|
|
|
||||
Aviation fuel
|
17.5
|
|
|
16.1
|
|
|
|
|
|
||||
Liquefied petroleum gases
|
9.5
|
|
|
9.3
|
|
|
|
|
|
||||
Total volume shipped
|
336.3
|
|
|
340.7
|
|
|
|
|
|
||||
Crude oil:
|
|
|
|
|
|
|
|
||||||
Magellan 100%-owned assets:
|
|
|
|
|
|
|
|
||||||
Transportation revenue per barrel shipped
|
$
|
1.222
|
|
|
$
|
1.104
|
|
|
|
|
|
||
Volume shipped (million barrels)
|
132.7
|
|
|
157.4
|
|
|
|
|
|
||||
Crude oil terminal average utilization (million barrels per month)
|
12.2
|
|
|
13.0
|
|
|
|
|
|
||||
Select joint venture pipelines:
|
|
|
|
|
|
|
|
||||||
BridgeTex - volume shipped (million barrels)
(2)
|
0.2
|
|
|
57.2
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||||
Marine storage:
|
|
|
|
|
|
|
|
||||||
Marine terminal average utilization (million barrels per month)
|
22.8
|
|
|
24.1
|
|
|
|
|
|
•
|
an increase in refined products revenue of
$29.6
million primarily attributable to higher transportation and related ancillary revenue. Transportation revenue was favorably impacted by both higher rates and volumes. The average rate per barrel in the current period was favorably impacted by the mid-year 2014 and 2015 tariff rate increases of 3.9% and 4.6%, respectively, on virtually all of our tariffs and more long-haul shipments at higher rates. Volumes were higher primarily due to 7% higher shipments of gasoline resulting from refinery turnarounds that increased demand on our system and lower gasoline prices that increased overall demand for gasoline, partially offset by 6% lower shipments of distillates due to reduced demand from drilling activities and wet agricultural conditions in the areas served by our assets earlier in the year. Additionally, revenue from our independent terminals increased primarily from two terminal acquisitions during the last twelve months, and revenue from leased storage and our ammonia pipeline increased;
|
•
|
an increase in crude oil revenue of
$52.1
million primarily due to revenue received in 2015 from BridgeTex for capacity on our Houston area crude oil distribution system and higher crude oil deliveries on our Longhorn pipeline. Shipments on our Longhorn pipeline averaged approximately 255,000 barrels per day in 2015, an increase of approximately 25,000 barrels per day over the same period in 2014. Additionally, terminalling revenue was higher resulting from new leased storage contracts and from a customer buying out of its remaining storage agreement in 2015. Transportation revenue per barrel shipped was lower in the current period due to reduced average tariffs resulting from a lower volume of spot shipments on the Longhorn pipeline system, which ship at a higher rate, and more short-haul movements on our Houston-area crude oil distribution system in 2015; and
|
•
|
an increase in marine storage revenue of
$7.2
million primarily due to improved storage utilization and higher ancillary fees reflecting increased activities at our marine facilities.
|
•
|
an increase in refined products expenses of
$25.7
million primarily due to higher asset integrity spending and higher personnel costs; and
|
•
|
an increase in crude oil expenses of
$14.0
million primarily due to less favorable product overages (which reduce operating expense), higher pipeline capacity rental fees, higher power costs associated with moving additional volume in 2015 and higher personnel costs; and
|
•
|
a decrease in marine storage expenses of
$2.4
million primarily attributable to lower asset integrity costs.
|
|
|
Nine Months Ended September 30,
|
|
Increase (Decrease)
|
||||||||
|
|
2014
|
|
2015
|
|
|||||||
Net income
|
|
$
|
587.4
|
|
|
$
|
612.0
|
|
|
$
|
24.6
|
|
Interest expense, net, and provision for income taxes
|
|
89.9
|
|
|
107.9
|
|
|
18.0
|
|
|||
Depreciation and amortization expense
(1)
|
|
124.2
|
|
|
126.0
|
|
|
1.8
|
|
|||
Equity-based incentive compensation expense
(2)
|
|
2.9
|
|
|
(2.6
|
)
|
|
(5.5
|
)
|
|||
Asset retirements
|
|
4.8
|
|
|
4.4
|
|
|
(0.4
|
)
|
|||
Commodity-related adjustments:
|
|
|
|
|
|
|
||||||
Derivative gains recognized in the period associated with future product transactions
(3)
|
|
(28.7
|
)
|
|
(54.2
|
)
|
|
(25.5
|
)
|
|||
Derivative gains (losses) recognized in previous periods associated with product sales completed in the period
(4)
|
|
(8.1
|
)
|
|
96.1
|
|
|
104.2
|
|
|||
Lower-of-cost-or-market adjustments
(5)
|
|
2.5
|
|
|
(38.7
|
)
|
|
(41.2
|
)
|
|||
Total commodity-related adjustments
|
|
(34.3
|
)
|
|
3.2
|
|
|
37.5
|
|
|||
Cash distributions of non-controlled entities in excess of earnings
|
|
3.6
|
|
|
7.7
|
|
|
4.1
|
|
|||
Adjusted EBITDA
|
|
778.5
|
|
|
858.6
|
|
|
80.1
|
|
|||
Interest expense, net, and provision for income taxes
|
|
(89.9
|
)
|
|
(107.9
|
)
|
|
(18.0
|
)
|
|||
Maintenance capital
(6)
|
|
(56.2
|
)
|
|
(64.7
|
)
|
|
(8.5
|
)
|
|||
DCF
|
|
$
|
632.4
|
|
|
$
|
686.0
|
|
|
$
|
53.6
|
|
|
|
|
|
|
|
|
(1)
|
Depreciation and amortization expense includes debt placement fee amortization.
|
(2)
|
Because we intend to satisfy vesting of units under our equity-based incentive compensation program with the issuance of limited partner units, expenses related to this program generally are deemed non-cash and added back for DCF purposes. Total equity-based incentive compensation expense for the nine months ended September 30, 2014 and 2015 was $17.7 million and $15.2 million, respectively. However, the figures above include an adjustment for minimum statutory tax withholdings we paid in 2014 and 2015 of $14.8 million and $17.8 million, respectively, for equity-based incentive compensation units that vested on the previous year end, which reduce DCF.
|
(3)
|
Certain derivatives we use as economic hedges have not been designated as hedges for accounting purposes and the mark-to-market changes of these derivatives are recognized currently in earnings. In addition, we have designated certain derivatives we use to hedge our crude oil tank bottoms and linefill assets as fair value hedges, and the change in the differential between the current spot price and forward price on these hedges is recognized currently in earnings. We exclude the net impact of both of these adjustments from our determination of DCF until the hedged products are physically sold. In the period in which these hedged products are physically sold, the net impact of the associated hedges is included in our determination of DCF.
|
(4)
|
When we physically sell products that we have economically hedged (but were not designated as hedges for accounting purposes), we include in our DCF calculations the full amount of the gain or loss realized on the economic hedges in the period that the underlying product sales occur.
|
(5)
|
We add the amount of lower-of-cost-or-market (“LCM”) adjustments on inventory and firm purchase commitments we recognize in each applicable period to determine DCF as these are non-cash charges against income. In subsequent periods when we physically sell or purchase the related products, we deduct the LCM adjustments previously recognized to determine DCF.
|
(6)
|
Maintenance capital expenditure projects maintain our existing assets and do not generate incremental DCF (i.e. incremental returns to our unitholders). For this reason, we deduct maintenance capital expenditures to determine DCF.
|
•
|
Maintenance capital expenditures. These expenditures include costs required to maintain equipment reliability and safety and to address environmental or other regulatory requirements rather than to generate incremental distributable cash flow; and
|
•
|
Expansion capital expenditures. These expenditures are undertaken primarily to generate incremental distributable cash flow and include costs to acquire additional assets to grow our business and to expand or upgrade our existing facilities, which we refer to as organic growth projects. Organic growth projects include capital expenditures that increase storage or throughput volumes or develop pipeline connections to new supply sources.
|
|
|
December 31, 2014
|
|
September 30,
2015 |
|
Weighted-Average
Interest Rate for the Nine Months Ended September 30, 2015
(1)
|
||||
Commercial paper
(2)
|
|
$
|
296,942
|
|
|
$
|
226,966
|
|
|
0.5%
|
$250.0 million of 5.65% Notes due 2016
|
|
250,758
|
|
|
250,440
|
|
|
5.7%
|
||
$250.0 million of 6.40% Notes due 2018
|
|
257,280
|
|
|
255,731
|
|
|
5.4%
|
||
$550.0 million of 6.55% Notes due 2019
|
|
567,868
|
|
|
565,064
|
|
|
5.7%
|
||
$550.0 million of 4.25% Notes due 2021
|
|
556,304
|
|
|
555,601
|
|
|
4.0%
|
||
$250.0 million of 3.20% Notes due 2025
(2)
|
|
—
|
|
|
249,694
|
|
|
3.2%
|
||
$250.0 million of 6.40% Notes due 2037
|
|
249,017
|
|
|
249,031
|
|
|
6.4%
|
||
$250.0 million of 4.20% Notes due 2042
|
|
248,406
|
|
|
248,429
|
|
|
4.2%
|
||
$550.0 million of 5.15% Notes due 2043
|
|
556,320
|
|
|
556,245
|
|
|
5.1%
|
||
$250.0 million of 4.20% Notes due 2045
(2)
|
|
—
|
|
|
249,913
|
|
|
4.6%
|
||
Total debt
|
|
$
|
2,982,895
|
|
|
$
|
3,407,114
|
|
|
4.7%
|
|
|
|
|
|
|
|
(1)
|
Weighted-average interest rate includes the amortization/accretion of discounts, premiums and gains/losses realized on historical cash flow and fair value hedges recognized as interest expense.
|
(2)
|
These borrowings were outstanding for only a portion of the
nine
-month period ending
September 30, 2015
. The weighted-average interest rate for these borrowings was calculated based on the number of days the borrowings were outstanding during the noted period.
|
•
|
NYMEX contracts covering 0.7 million barrels of crude oil to hedge against future price changes of crude oil tank bottoms and linefill. These contracts, which we are accounting for as fair value hedges, mature between December 2015 and November 2016. Through
September 30, 2015
, the cumulative amount of gains from these agreements was $19.4 million. The cumulative gains from these fair value hedges were recorded as adjustments to the asset being hedged, and there has been no ineffectiveness recognized for these hedges. We exclude the differential between the current spot price and forward price from our assessment of hedge effectiveness for these fair value hedges. The net change in the amounts excluded from our assessment of hedge effectiveness during the nine months ended September 30, 2015 was a gain of $4.6 million, which we recognized as other income on our consolidated statement of income.
|
•
|
NYMEX contracts covering 4.4 million barrels of refined products related to our butane blending and fractionation activities. These contracts mature between October 2015 and December 2016 and are being accounted for as economic hedges. Through
September 30, 2015
, the cumulative amount of net unrealized gains associated with these agreements was $52.2 million. We recorded these gains as an adjustment to product sales revenue, all of which was recognized in 2015.
|
•
|
NYMEX contracts covering 1.0 million barrels of refined products and crude oil related to inventory we carry that resulted from pipeline product overages. These contracts, which mature between October and February 2016, are being accounted for as economic hedges. Through
September 30, 2015
, the cumulative amount of net unrealized gains associated with these agreements was $5.9 million. We recorded these gains as an adjustment to operating expense, of which $5.3 million of net gains was recognized in 2014 and $0.6 million of net gains was recognized in 2015.
|
•
|
NYMEX contracts covering 1.2 million barrels of butane purchases that mature between October 2015 and December 2016, which are being accounted for as economic hedges. Through
September 30, 2015
, the cumulative amount of net unrealized losses associated with these agreements was $5.1 million. We recorded these losses as an adjustment to cost of product sales, all of which was recognized in 2015.
|
•
|
We settled NYMEX contracts covering 6.1 million barrels of refined products related to economic hedges of products from our butane blending and fractionation activities that we sold during
2015
. We recognized a gain of $0.2 million in 2015 related to these contracts, which we recorded as an adjustment to product sales revenue.
|
•
|
We settled NYMEX contracts covering 4.5 million barrels of refined products and crude oil related to economic hedges of product inventories from product overages on our pipeline system that we sold during
2015
. We recognized a gain of $6.6 million in 2015 on the settlement of these contracts, which we recorded as an adjustment to operating expense.
|
•
|
We settled NYMEX contracts covering 0.6 million barrels related to economic hedges of butane purchases we made during
2015
associated with our butane blending activities. We recognized a loss of $0.7 million in 2015 on the settlement of these contracts, which we recorded as an adjustment to cost of product sales.
|
|
Nine Months Ended September 30, 2014
|
||||||||||||||||||
|
Product Sales Revenue
|
|
Cost of Product Sales
|
|
Operating Expense
|
|
Other Income
|
|
Net Impact on Net Income
|
||||||||||
NYMEX gains (losses) recognized during the period that were associated with economic hedges of physical product sales or purchases during the period
|
$
|
3.8
|
|
|
$
|
0.1
|
|
|
$
|
(0.6
|
)
|
|
$
|
—
|
|
|
$
|
3.3
|
|
NYMEX gains (losses) recorded during the period that were associated with products that will be or were sold or purchased in future periods
|
29.9
|
|
|
(3.2
|
)
|
|
1.0
|
|
|
—
|
|
|
27.7
|
|
|||||
Net impact of NYMEX contracts
|
$
|
33.7
|
|
|
$
|
(3.1
|
)
|
|
$
|
0.4
|
|
|
$
|
—
|
|
|
$
|
31.0
|
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||
|
Product Sales Revenue
|
|
Cost of Product Sales
|
|
Operating Expense
|
|
Other Income
|
|
Net Impact on Net Income
|
||||||||||
NYMEX gains (losses) recognized during the period that were associated with economic hedges of physical product sales or purchases during the period
|
$
|
0.2
|
|
|
$
|
(0.7
|
)
|
|
$
|
6.6
|
|
|
$
|
—
|
|
|
$
|
6.1
|
|
NYMEX gains (losses) recorded during the period that were associated with products that will be sold or purchased in future periods
|
52.2
|
|
|
(5.1
|
)
|
|
0.6
|
|
|
4.6
|
|
|
52.3
|
|
|||||
Net impact of NYMEX contracts
|
$
|
52.4
|
|
|
$
|
(5.8
|
)
|
|
$
|
7.2
|
|
|
$
|
4.6
|
|
|
$
|
58.4
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
Notional Value
|
|
Barrels
|
||
Forward purchase contracts
|
$
|
137.5
|
|
|
3.9
|
Forward sale contracts
|
$
|
0.3
|
|
|
—
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
•
|
overall demand for refined products, crude oil, liquefied petroleum gases and ammonia in the U.S.;
|
•
|
price fluctuations for refined products, crude oil, liquefied petroleum gases and ammonia and expectations about future prices for these products;
|
•
|
decreases in the production of crude oil in the basins served by our pipelines;
|
•
|
changes in general economic conditions, interest rates and price levels;
|
•
|
changes in the financial condition of our customers, vendors, derivatives counterparties, joint venture co-owners or lenders;
|
•
|
our ability to secure financing in the credit and capital markets in amounts and on terms that will allow us to execute our growth strategy, refinance our existing obligations when due and maintain adequate liquidity;
|
•
|
development of alternative energy sources, including but not limited to natural gas, solar power, wind power and geothermal energy, increased use of biofuels such as ethanol and biodiesel, increased conservation or fuel efficiency, as well as regulatory developments or other trends that could affect demand for our services;
|
•
|
changes in the throughput or interruption in service on refined products or crude oil pipelines owned and operated by third parties and connected to our assets;
|
•
|
changes in demand for storage in our refined products, crude oil or marine terminals;
|
•
|
changes in supply patterns for our facilities due to geopolitical events, the activities of the Organization of the Petroleum Exporting Countries, changes in U.S. trade policies, technological developments or other factors;
|
•
|
our ability to manage interest rate and commodity price exposures;
|
•
|
changes in our tariff rates implemented by the Federal Energy Regulatory Commission, the U.S. Surface Transportation Board or state regulatory agencies;
|
•
|
shut-downs or cutbacks at refineries, oil wells, petrochemical plants, ammonia production facilities or other customers or businesses that use or supply our services;
|
•
|
the effect of weather patterns and other natural phenomena, including climate change, on our operations and demand for our services;
|
•
|
an increase in the competition our operations encounter;
|
•
|
the occurrence of natural disasters, terrorism, operational hazards, equipment failures, system failures or unforeseen interruptions;
|
•
|
not being adequately insured or having losses that exceed our insurance coverage;
|
•
|
our ability to obtain insurance and to manage the increased cost of available insurance;
|
•
|
the treatment of us as a corporation for federal or state income tax purposes or if we become subject to significant forms of other taxation or more aggressive enforcement or increased assessments under existing forms of taxation;
|
•
|
our ability to identify expansion projects or to complete identified expansion projects on time and at projected costs;
|
•
|
our ability to make and integrate accretive acquisitions and joint ventures and successfully execute our business strategy;
|
•
|
uncertainty of estimates, including accruals and costs of environmental remediation;
|
•
|
our ability to cooperate with and rely on our joint venture co-owners;
|
•
|
actions by rating agencies concerning our credit ratings;
|
•
|
our ability to timely obtain and maintain all necessary approvals, consents and permits required to operate our existing assets and any new or modified assets;
|
•
|
our ability to promptly obtain all necessary services, materials, labor, supplies and rights-of-way required for construction of our growth projects, and to complete construction without significant delays, disputes or cost overruns;
|
•
|
risks inherent in the use and security of information systems in our business and implementation of new software and hardware;
|
•
|
changes in laws and regulations that govern product quality specifications or renewable fuel obligations that could impact our ability to produce gasoline volumes through our blending activities or that could require significant capital outlays for compliance;
|
•
|
changes in laws and regulations to which we or our customers are or become subject, including tax withholding requirements, safety, security, employment, hydraulic fracturing, derivatives transactions and environmental laws and regulations, including laws and regulations designed to address climate change;
|
•
|
the cost and effects of legal and administrative claims and proceedings against us or our subsidiaries;
|
•
|
the amount of our indebtedness, which could make us vulnerable to general adverse economic and industry conditions, limit our ability to borrow additional funds, place us at competitive disadvantages compared to our competitors that have less debt or have other adverse consequences;
|
•
|
the effect of changes in accounting policies;
|
•
|
the potential that our internal controls may not be adequate, weaknesses may be discovered or remediation of any identified weaknesses may not be successful;
|
•
|
the ability of third parties to perform on their contractual obligations to us;
|
•
|
petroleum product supply disruptions;
|
•
|
global and domestic repercussions from terrorist activities, including cyber attacks, and the government's response thereto; and
|
•
|
other factors and uncertainties inherent in the transportation, storage and distribution of petroleum products and ammonia.
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
Exhibit Number
|
|
Description
|
|
|
|
Exhibit 10.1
|
—
|
Form of Indemnification Agreement by and among Magellan Midstream Partners, L.P., Magellan GP, LLC and the directors and officers of Magellan GP, LLC.
|
|
|
|
*Exhibit 10.2
|
—
|
$1,000,000,000 Amended and Restated Credit Agreement dated as of October 27, 2015 among Magellan Midstream Partners, L.P., the Lenders party thereto, Wells Fargo Bank, National Association, as Administrative Agent and an Issuing Bank, JPMorgan Chase Bank, N.A., as Co-Syndication Agent and an Issuing Bank, and SunTrust Bank, as Co-Syndication Agent and an Issuing Bank (filed as Exhibit 10.1 to Form 8-K filed October 28, 2015).
|
|
|
|
*Exhibit 10.3
|
—
|
$250,000,000 364-Day Credit Agreement dated as of October 27, 2015 among Magellan Midstream Partners, L.P., the Lenders party thereto, Wells Fargo Bank, National Association, as Administrative Agent, JPMorgan Chase Bank, N.A., as Co-Syndication Agent, and SunTrust Bank, as Co-Syndication Agent (filed as Exhibit 10.2 to Form 8-K filed October 28, 2015).
|
|
|
|
Exhibit 12
|
—
|
Ratio of earnings to fixed charges.
|
|
|
|
Exhibit 31.1
|
—
|
Certification of Michael N. Mears, principal executive officer.
|
|
|
|
Exhibit 31.2
|
—
|
Certification of Aaron L. Milford, principal financial officer.
|
|
|
|
Exhibit 32.1
|
—
|
Section 1350 Certification of Michael N. Mears, Chief Executive Officer.
|
|
|
|
Exhibit 32.2
|
—
|
Section 1350 Certification of Aaron L. Milford, Chief Financial Officer.
|
|
|
|
Exhibit 101.INS
|
—
|
XBRL Instance Document.
|
|
|
|
Exhibit 101.SCH
|
—
|
XBRL Taxonomy Extension Schema.
|
|
|
|
Exhibit 101.CAL
|
—
|
XBRL Taxonomy Extension Calculation Linkbase.
|
|
|
|
Exhibit 101.DEF
|
—
|
XBRL Taxonomy Extension Definition Linkbase.
|
|
|
|
Exhibit 101.LAB
|
—
|
XBRL Taxonomy Extension Label Linkbase.
|
|
|
|
Exhibit 101.PRE
|
—
|
XBRL Taxonomy Extension Presentation Linkbase.
|
|
|
*
|
Each such exhibit has heretofore been filed with the Securities and Exchange Commission as part of the filing indicated and is incorporated herein by reference.
|
MAGELLAN MIDSTREAM PARTNERS, L.P.
|
||
|
|
|
By:
|
|
Magellan GP, LLC,
|
|
|
its general partner
|
|
|
|
/s/ Aaron L. Milford
|
||
Aaron L. Milford
|
||
Chief Financial Officer
|
||
(Principal Accounting and Financial Officer)
|
|
|
|
Exhibit Number
|
|
Description
|
|
|
|
Exhibit 10.1
|
—
|
Form of Indemnification Agreement by and among Magellan Midstream Partners, L.P., Magellan GP, LLC and the directors and officers of Magellan GP, LLC.
|
|
|
|
*Exhibit 10.2
|
—
|
$1,000,000,000 Amended and Restated Credit Agreement dated as of October 27, 2015 among Magellan Midstream Partners, L.P., the Lenders party thereto, Wells Fargo Bank, National Association, as Administrative Agent and an Issuing Bank, JPMorgan Chase Bank, N.A., as Co-Syndication Agent and an Issuing Bank, and SunTrust Bank, as Co-Syndication Agent and an Issuing Bank (filed as Exhibit 10.1 to Form 8-K filed October 28, 2015).
|
|
|
|
*Exhibit 10.3
|
—
|
$250,000,000 364-Day Credit Agreement dated as of October 27, 2015 among Magellan Midstream Partners, L.P., the Lenders party thereto, Wells Fargo Bank, National Association, as Administrative Agent, JPMorgan Chase Bank, N.A., as Co-Syndication Agent, and SunTrust Bank, as Co-Syndication Agent (filed as Exhibit 10.2 to Form 8-K filed October 28, 2015).
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Exhibit 12
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Ratio of earnings to fixed charges.
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Exhibit 31.1
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—
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Certification of Michael N. Mears, principal executive officer.
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Exhibit 31.2
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—
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Certification of Aaron L. Milford, principal financial officer.
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Exhibit 32.1
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—
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Section 1350 Certification of Michael N. Mears, Chief Executive Officer.
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Exhibit 32.2
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—
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Section 1350 Certification of Aaron L. Milford, Chief Financial Officer.
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Exhibit 101.INS
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—
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XBRL Instance Document.
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Exhibit 101.SCH
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—
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XBRL Taxonomy Extension Schema.
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Exhibit 101.CAL
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—
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XBRL Taxonomy Extension Calculation Linkbase.
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Exhibit 101.DEF
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—
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XBRL Taxonomy Extension Definition Linkbase.
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Exhibit 101.LAB
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—
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XBRL Taxonomy Extension Label Linkbase.
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Exhibit 101.PRE
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—
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XBRL Taxonomy Extension Presentation Linkbase.
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*
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Each such exhibit has heretofore been filed with the Securities and Exchange Commission as part of the filing indicated and is incorporated herein by reference.
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Section 8.
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Presumptions and Effect of Certain Proceedings; Construction of Certain Phrases.
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Year Ended December 31,
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Year-to-Date Period Ending
September 30, 2015 |
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2010
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2011
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2012
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2013
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2014
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|||||||||||||
EARNINGS:
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||||||||||||
Income from continuing operations before income taxes, extraordinary gain (loss) and cumulative effect of change in accounting principle*
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$
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307,219
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|
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$
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408,669
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|
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$
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435,331
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|
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$
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580,575
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|
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$
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824,745
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|
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$
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564,166
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Add: Fixed charges
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97,991
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|
|
110,946
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|
|
120,321
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|
|
133,511
|
|
|
146,835
|
|
|
118,866
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|
||||||
Amortization of interest capitalized
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729
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|
|
739
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|
|
755
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|
|
816
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|
|
900
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|
|
739
|
|
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Distributed income of equity investees
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4,853
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|
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5,598
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|
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7,793
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|
|
3,274
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|
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3,086
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|
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47,236
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||||||
Less: Interest capitalized
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(2,943
|
)
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(3,174
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)
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(6,195
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)
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(14,339
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)
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(22,803
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)
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(9,037
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)
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Total earnings
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$
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407,849
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$
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522,778
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$
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558,005
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|
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$
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703,837
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|
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$
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952,763
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|
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$
|
721,970
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FIXED CHARGES:
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Interest expense
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$
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96,379
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|
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$
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108,869
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|
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$
|
117,981
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$
|
130,463
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|
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$
|
143,529
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|
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$
|
116,142
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Debt amortization expense
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1,401
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|
|
1,831
|
|
|
2,087
|
|
|
2,424
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|
|
2,333
|
|
|
1,867
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|
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Rent expense representative of interest factor
|
211
|
|
|
246
|
|
|
253
|
|
|
624
|
|
|
973
|
|
|
857
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Total fixed charges
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$
|
97,991
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|
|
$
|
110,946
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|
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$
|
120,321
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|
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$
|
133,511
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|
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$
|
146,835
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|
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$
|
118,866
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Ratio of earnings to fixed charges
|
4.2
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|
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4.7
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4.6
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5.3
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|
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6.5
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|
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6.1
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1.
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I have reviewed this Quarterly Report on Form 10-Q for the quarter ending
September 30, 2015
(this “report”) of Magellan Midstream Partners, L.P. (the “registrant”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ Michael N. Mears
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Michael N. Mears, principal executive officer
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1.
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I have reviewed this Quarterly Report on Form 10-Q for the quarter ending
September 30, 2015
(this “report”) of Magellan Midstream Partners, L.P. (the “registrant”);
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2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ Aaron L. Milford
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Aaron L. Milford, principal financial and accounting officer
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
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/s/ Michael N. Mears
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Michael N. Mears, Chief Executive Officer
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Date: November 3, 2015
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
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/s/ Aaron L. Milford
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Aaron L. Milford, Chief Financial Officer
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Date: November 3, 2015
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