|
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
27‑4151603
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
|
incorporation or organization)
|
Identification No.)
|
|
|
|
|
19100 Ridgewood Pkwy, San Antonio, Texas 78259-1828
|
||
(Address of principal executive offices) (Zip Code)
|
||
|
||
210-626-6000
|
||
(Registrant’s telephone number, including area code)
|
|
Large accelerated filer
|
þ
|
Accelerated filer
|
o
|
|
|
Non-accelerated filer
|
o
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
o
|
|
|
TABLE OF CONTENTS
|
|
|
PART I. FINANCIAL INFORMATION
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PART II. OTHER INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(In millions, except per unit amounts)
|
||||||||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
Affiliate
|
$
|
168
|
|
|
$
|
154
|
|
|
$
|
337
|
|
|
$
|
302
|
|
Third-party
|
125
|
|
|
121
|
|
|
256
|
|
|
236
|
|
||||
Total Revenues
|
293
|
|
|
275
|
|
|
593
|
|
|
538
|
|
||||
Costs and Expenses
|
|
|
|
|
|
|
|
||||||||
Operating and maintenance expenses
|
108
|
|
|
110
|
|
|
220
|
|
|
208
|
|
||||
Imbalance settlement gains and reimbursements
|
(6
|
)
|
|
(11
|
)
|
|
(13
|
)
|
|
(19
|
)
|
||||
General and administrative expenses
|
22
|
|
|
28
|
|
|
46
|
|
|
53
|
|
||||
Depreciation and amortization expenses
|
44
|
|
|
44
|
|
|
88
|
|
|
88
|
|
||||
Net loss on asset disposals and impairments
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Total Costs and Expenses
|
168
|
|
|
171
|
|
|
342
|
|
|
330
|
|
||||
Operating Income
|
125
|
|
|
104
|
|
|
251
|
|
|
208
|
|
||||
Interest and financing costs, net
|
(45
|
)
|
|
(38
|
)
|
|
(89
|
)
|
|
(75
|
)
|
||||
Equity in earnings of unconsolidated affiliates
|
3
|
|
|
1
|
|
|
7
|
|
|
4
|
|
||||
Other income, net
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
||||
Net Earnings
|
$
|
83
|
|
|
$
|
67
|
|
|
$
|
175
|
|
|
$
|
137
|
|
|
|
|
|
|
|
|
|
||||||||
Loss attributable to Predecessor
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
9
|
|
Net earnings attributable to noncontrolling interest
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(16
|
)
|
||||
Net Earnings Attributable to Partners
|
83
|
|
|
66
|
|
|
175
|
|
|
130
|
|
||||
General partner’s interest in net earnings, including incentive distribution rights
|
(36
|
)
|
|
(17
|
)
|
|
(68
|
)
|
|
(31
|
)
|
||||
Limited Partners’ Interest in Net Earnings
|
$
|
47
|
|
|
$
|
49
|
|
|
$
|
107
|
|
|
$
|
99
|
|
|
|
|
|
|
|
|
|
||||||||
Net Earnings per Limited Partner Unit:
|
|
|
|
|
|
|
|
||||||||
Common - basic
|
$
|
0.48
|
|
|
$
|
0.60
|
|
|
$
|
1.12
|
|
|
$
|
1.23
|
|
Common - diluted
|
$
|
0.48
|
|
|
$
|
0.60
|
|
|
$
|
1.12
|
|
|
$
|
1.23
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted Average Limited Partner Units Outstanding:
|
|
|
|
|
|
|
|
||||||||
Common units - basic
|
95.2
|
|
|
80.7
|
|
|
94.4
|
|
|
80.5
|
|
||||
Common units - diluted
|
95.2
|
|
|
80.8
|
|
|
94.4
|
|
|
80.6
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cash Distributions Paid Per Unit
|
$
|
0.8100
|
|
|
$
|
0.6950
|
|
|
$
|
1.5900
|
|
|
$
|
1.3625
|
|
FINANCIAL STATEMENTS
|
|
|
|
June 30,
2016 |
|
December 31,
2015 |
||||
|
(In millions, except unit amounts)
|
||||||
ASSETS
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
682
|
|
|
$
|
16
|
|
Receivables, net
|
|
|
|
||||
Trade
|
115
|
|
|
139
|
|
||
Affiliate
|
91
|
|
|
85
|
|
||
Prepayments and other
|
23
|
|
|
12
|
|
||
Total Current Assets
|
911
|
|
|
252
|
|
||
Net Property, Plant and Equipment
|
3,086
|
|
|
3,450
|
|
||
Acquired Intangibles, net
|
962
|
|
|
976
|
|
||
Goodwill
|
117
|
|
|
130
|
|
||
Investment in Unconsolidated Affiliates
|
345
|
|
|
58
|
|
||
Other Noncurrent Assets
|
29
|
|
|
26
|
|
||
Total Assets
|
$
|
5,450
|
|
|
$
|
4,892
|
|
|
|
|
|
||||
LIABILITIES AND EQUITY
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Accounts payable
|
|
|
|
||||
Trade
|
$
|
57
|
|
|
$
|
83
|
|
Affiliate
|
40
|
|
|
48
|
|
||
Accrued interest and financing costs
|
37
|
|
|
31
|
|
||
Other current liabilities
|
42
|
|
|
59
|
|
||
Total Current Liabilities
|
176
|
|
|
221
|
|
||
Debt, Net of Unamortized Issuance Costs
|
3,218
|
|
|
2,844
|
|
||
Other Noncurrent Liabilities
|
46
|
|
|
49
|
|
||
Total Liabilities
|
3,440
|
|
|
3,114
|
|
||
Commitments and Contingencies (Note 6)
|
|
|
|
|
|
||
Equity
|
|
|
|
||||
Common unitholders;
100,691,105
units issued and outstanding (93,478,326 in 2015)
|
2,006
|
|
|
1,707
|
|
||
General partner;
1,900,515
units issued and outstanding (1,900,515 in 2015)
|
4
|
|
|
(13
|
)
|
||
Noncontrolling interest
|
—
|
|
|
84
|
|
||
Total Equity
|
2,010
|
|
|
1,778
|
|
||
Total Liabilities and Equity
|
$
|
5,450
|
|
|
$
|
4,892
|
|
FINANCIAL STATEMENTS
|
|
|
|
Six Months Ended
June 30, |
||||||
|
2016
|
|
2015
|
||||
|
(In millions)
|
||||||
Cash Flows From (Used In) Operating Activities:
|
|
|
|
||||
Net earnings
|
$
|
175
|
|
|
$
|
137
|
|
Adjustments to reconcile net earnings to net cash from operating activities:
|
|
|
|
||||
Depreciation and amortization expenses
|
88
|
|
|
88
|
|
||
Other non-cash operating activities
|
20
|
|
|
9
|
|
||
Changes in current assets and current liabilities
|
(32
|
)
|
|
(27
|
)
|
||
Changes in noncurrent assets and noncurrent liabilities
|
1
|
|
|
6
|
|
||
Net cash from operating activities
|
252
|
|
|
213
|
|
||
Cash Flows Used In Investing Activities:
|
|
|
|
||||
Capital expenditures
|
(93
|
)
|
|
(163
|
)
|
||
Other investing
|
(4
|
)
|
|
(6
|
)
|
||
Net cash used in investing activities
|
(97
|
)
|
|
(169
|
)
|
||
Cash Flows From (Used In) Financing Activities:
|
|
|
|
||||
Borrowings under revolving credit agreements
|
600
|
|
|
262
|
|
||
Repayments under revolving credit agreement
|
(666
|
)
|
|
(223
|
)
|
||
Proceeds from debt offering
|
701
|
|
|
—
|
|
||
Repayment of term loan facility
|
(250
|
)
|
|
—
|
|
||
Proceeds from issuance of units, net of issuance costs
|
334
|
|
|
45
|
|
||
Quarterly distributions to unitholders
|
(149
|
)
|
|
(110
|
)
|
||
Quarterly distributions to general partner
|
(57
|
)
|
|
(30
|
)
|
||
Distributions to noncontrolling interest
|
—
|
|
|
(18
|
)
|
||
Financing costs
|
(17
|
)
|
|
—
|
|
||
Sponsor contributions of equity to the Predecessor
|
—
|
|
|
12
|
|
||
Capital contributions by affiliate
|
15
|
|
|
12
|
|
||
Net cash from (used in) financing activities
|
511
|
|
|
(50
|
)
|
||
Increase (Decrease) in Cash and Cash Equivalents
|
666
|
|
|
(6
|
)
|
||
Cash and Cash Equivalents, Beginning of Period
|
16
|
|
|
19
|
|
||
Cash and Cash Equivalents, End of Period
|
$
|
682
|
|
|
$
|
13
|
|
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
•
|
the short term duration of the instruments (less than
one percent
of our trade payables and approximately
one percent
of our trade receivables have been outstanding for greater than
90 days
); and
|
•
|
the expected future insignificance of bad debt expense, which includes an evaluation of counterparty credit risk.
|
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues (a)
|
$
|
168
|
|
|
$
|
154
|
|
|
$
|
337
|
|
|
$
|
302
|
|
Operating and maintenance expenses
|
34
|
|
|
29
|
|
|
71
|
|
|
58
|
|
||||
Imbalance settlement gains and reimbursements
from Tesoro (b)
|
5
|
|
|
11
|
|
|
12
|
|
|
19
|
|
||||
General and administrative expenses
|
16
|
|
|
18
|
|
|
33
|
|
|
35
|
|
(a)
|
Tesoro accounted for
57%
of our total revenues for both the
three
and
six
months ended
June 30, 2016
and
56%
of our total revenues for both the
three
and
six
months ended
June 30, 2015
.
|
(b)
|
Includes imbalance settlement gains of
$2 million
for both the
three
months ended
June 30, 2016
and
2015
, and
$3 million
and
$4 million
for the
six
months ended
June 30, 2016
and
2015
, respectively. Also includes reimbursements from Tesoro pursuant predominantly to the Amended Omnibus Agreement and the Carson Assets Indemnity Agreement of
$3 million
and
$9 million
for the
three
months ended
June 30, 2016
and
2015
, respectively, and
$9 million
and
$15 million
for the
six
months ended
June 30, 2016
and
2015
, respectively.
|
|
June 30,
2016 |
|
December 31, 2015
|
||||
Gathering (a)
|
$
|
1,368
|
|
|
$
|
1,700
|
|
Processing
|
571
|
|
|
565
|
|
||
Terminalling and Transportation
|
1,593
|
|
|
1,582
|
|
||
Gross Property, Plant and Equipment
|
3,532
|
|
|
3,847
|
|
||
Accumulated depreciation (a)
|
(446
|
)
|
|
(397
|
)
|
||
Net Property, Plant and Equipment
|
$
|
3,086
|
|
|
$
|
3,450
|
|
(a)
|
We recognized a decrease of
$363 million
to net property, plant and equipment as of January 1, 2016 as a result of the deconsolidation of RGS. See Note 4 for further discussion of the deconsolidation of RGS.
|
•
|
RGS.
We have a
78%
interest in RGS, which owns and operates the infrastructure that transports gas from certain fields to several re-delivery points in southwestern Wyoming, including natural gas processing facilities that are owned by us or a third party. Prior to 2016, we consolidated RGS, however, upon our reassessment performed in conjunction with the adoption of ASU 2015-02 as of January 1, 2016, we determined RGS represents a variable interest entity to us for which we are not the primary beneficiary. Under the limited liability company agreement, we do not have voting rights commensurate with our economic interest due to veto rights available to our partner in RGS. Certain business decisions, including, but not limited to, decisions with respect to significant expenditures or contractual commitments, annual budgets, material financings, dispositions of assets or amending the members’ gas servicing agreements, require unanimous approval of the members. For amounts previously consolidated in our financial statements as of and for the year ended December 31, 2015, refer to the amounts shown in the Non-Guarantor column in the condensed consolidating financial information presented in Note 16 in our annual report on Form 10-K referenced herein.
|
•
|
THREE RIVERS GATHERING, LLC (“TRG”).
We own a
50%
interest in TRG which operates natural gas gathering assets within the southeastern Uinta Basin and is primarily supported by long-term, fee-based gas gathering agreements with minimum volume commitments.
|
•
|
UINTAH BASIN FIELD SERVICES, L.L.C. (“UBFS”).
We own a
38%
interest in UBFS which owns and operates the natural gas gathering infrastructure located in the southeastern Uinta Basin and is supported by long-term, fee-based gas gathering agreements that contain firm throughput commitments, which generate fees whether or not the capacity is used, and is operated by us.
|
|
RGS
|
|
TRG
|
|
UBFS
|
|
Total
|
||||||||
Balance at December 31, 2015
|
$
|
—
|
|
|
$
|
42
|
|
|
$
|
16
|
|
|
$
|
58
|
|
Effect of deconsolidation (a)
|
295
|
|
|
—
|
|
|
—
|
|
|
295
|
|
||||
Equity in earnings
|
4
|
|
|
2
|
|
|
1
|
|
|
7
|
|
||||
Distributions received
|
(10
|
)
|
|
(4
|
)
|
|
(1
|
)
|
|
(15
|
)
|
||||
Balance at June 30, 2016
|
$
|
289
|
|
|
$
|
40
|
|
|
$
|
16
|
|
|
$
|
345
|
|
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
(a)
|
We recognized an increase of
$295 million
to equity method investments as of January 1, 2016 as a result of the deconsolidation of RGS in addition to a cumulative effect reduction to opening equity of
$2 million
related to the difference in earnings under the equity method of accounting in prior periods. The carrying amount of our investment in RGS exceeded the underlying equity in net assets by
$138 million
at
June 30, 2016
.
|
|
June 30,
2016 |
|
December 31, 2015
|
||||
Total debt
|
$
|
3,266
|
|
|
$
|
2,883
|
|
Unamortized issuance costs (a)
|
(48
|
)
|
|
(39
|
)
|
||
Debt, Net of Unamortized Issuance Costs
|
$
|
3,218
|
|
|
$
|
2,844
|
|
(a)
|
Includes unamortized premiums of
$4 million
associated with our senior notes at both
June 30, 2016
and
December 31, 2015
.
|
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
Partnership
|
|
|
|
|
||||||||||
|
Common
|
|
General Partner
|
|
Noncontrolling Interest
|
|
Total
|
||||||||
Balance at December 31, 2015
|
$
|
1,707
|
|
|
$
|
(13
|
)
|
|
$
|
84
|
|
|
$
|
1,778
|
|
Equity offering under ATM Program, net of issuance costs
|
41
|
|
|
—
|
|
|
—
|
|
|
41
|
|
||||
Proceeds from issuance of units, net of issuance costs
|
293
|
|
|
—
|
|
|
—
|
|
|
293
|
|
||||
Effect of deconsolidation of RGS (a)
|
(2
|
)
|
|
—
|
|
|
(84
|
)
|
|
(86
|
)
|
||||
Distributions (b)
|
(149
|
)
|
|
(57
|
)
|
|
—
|
|
|
(206
|
)
|
||||
Net earnings
|
107
|
|
|
68
|
|
|
—
|
|
|
175
|
|
||||
Contributions (c)
|
12
|
|
|
1
|
|
|
—
|
|
|
13
|
|
||||
Other
|
(3
|
)
|
|
5
|
|
|
—
|
|
|
2
|
|
||||
Balance at June 30, 2016
|
$
|
2,006
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
2,010
|
|
(a)
|
As the result of the reassessment performed, we deconsolidated RGS causing the derecognition of noncontrolling interest and an opening equity impact totaling
$86 million
. The cumulative effect to opening equity of
$2 million
related to the difference in earnings under the equity method of accounting in prior periods.
|
(b)
|
Represents cash distributions declared and paid during the
six
months ended
June 30, 2016
relating to the fourth quarter of
2015
and the first quarter of
2016
.
|
(c)
|
Includes Tesoro and TLGP contributions to the Partnership primarily related to reimbursements for capital spending pursuant predominantly to the Amended Omnibus Agreement and the Carson Assets Indemnity Agreement.
|
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net earnings
|
$
|
83
|
|
|
$
|
67
|
|
|
$
|
175
|
|
|
$
|
137
|
|
Net earnings attributable to noncontrolling interest
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(16
|
)
|
||||
Net earnings, excluding noncontrolling interest
|
83
|
|
|
61
|
|
|
175
|
|
|
121
|
|
||||
General partner’s distributions
|
(2
|
)
|
|
(2
|
)
|
|
(4
|
)
|
|
(3
|
)
|
||||
General partner’s IDRs (a)
|
(36
|
)
|
|
(15
|
)
|
|
(66
|
)
|
|
(28
|
)
|
||||
Limited partners’ distributions on common units
|
(85
|
)
|
|
(64
|
)
|
|
(161
|
)
|
|
(120
|
)
|
||||
Distributions greater than earnings
|
$
|
(40
|
)
|
|
$
|
(20
|
)
|
|
$
|
(56
|
)
|
|
$
|
(30
|
)
|
General partner’s earnings:
|
|
|
|
|
|
|
|
||||||||
Distributions
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
3
|
|
General partner’s IDRs (a)
|
36
|
|
|
15
|
|
|
66
|
|
|
28
|
|
||||
Allocation of distributions greater than earnings (b)
|
(1
|
)
|
|
(5
|
)
|
|
(1
|
)
|
|
(9
|
)
|
||||
Total general partner’s earnings
|
$
|
37
|
|
|
$
|
12
|
|
|
$
|
69
|
|
|
$
|
22
|
|
Limited partners’ earnings on common units:
|
|
|
|
|
|
|
|
||||||||
Distributions
|
$
|
85
|
|
|
$
|
64
|
|
|
$
|
161
|
|
|
$
|
120
|
|
Allocation of distributions greater than earnings
|
(39
|
)
|
|
(15
|
)
|
|
(55
|
)
|
|
(21
|
)
|
||||
Total limited partners’ earnings on common units
|
$
|
46
|
|
|
$
|
49
|
|
|
$
|
106
|
|
|
$
|
99
|
|
Weighted average limited partner units outstanding
|
|
|
|
|
|
|
|
||||||||
Common units - basic
|
95.2
|
|
|
80.7
|
|
|
94.4
|
|
|
80.5
|
|
||||
Common units - diluted
|
95.2
|
|
|
80.8
|
|
|
94.4
|
|
|
80.6
|
|
||||
Net earnings per limited partner unit:
|
|
|
|
|
|
|
|
||||||||
Common - basic
|
$
|
0.48
|
|
|
$
|
0.60
|
|
|
$
|
1.12
|
|
|
$
|
1.23
|
|
Common - diluted
|
$
|
0.48
|
|
|
$
|
0.60
|
|
|
$
|
1.12
|
|
|
$
|
1.23
|
|
(a)
|
IDRs entitle the general partner to receive increasing percentages, up to
50%
, of quarterly distributions in excess of
$0.3881
per unit per quarter. The amount above reflects earnings distributed to our general partner net of
$2 million
and
$5 million
of IDRs for the
three
and six months ended
June 30, 2015
, respectively, waived by TLGP. See Note 12 of our Annual Report on Form 10-K for the year ended
December 31, 2015
, for further discussion related to IDRs.
|
(b)
|
We have revised the historical allocation of general partner earnings to include the Predecessor losses of
$5 million
and
$9 million
for the three and six months ended
June 30, 2015
, respectively.
|
Quarter Ended
|
Quarterly Distribution Per Unit
|
|
Total Cash Distribution including general partner IDRs (in millions)
|
|
Date of Distribution
|
|
Unitholders Record Date
|
||||
December 31, 2015
|
$
|
0.780
|
|
|
$
|
98
|
|
|
February 12, 2016
|
|
February 2, 2016
|
March 31, 2016
|
0.810
|
|
|
108
|
|
|
May 13, 2016
|
|
May 2, 2016
|
||
June 30, 2016 (a)
|
0.842
|
|
|
123
|
|
|
August 12, 2016
|
|
August 2, 2016
|
(a)
|
This distribution was declared on
July 20, 2016
and will be paid on the date of distribution.
|
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
Gathering:
|
|
|
|
|
|
|
|
||||||||
Affiliate
|
$
|
18
|
|
|
$
|
27
|
|
|
$
|
40
|
|
|
$
|
53
|
|
Third-party
|
64
|
|
|
62
|
|
|
133
|
|
|
113
|
|
||||
Total Gathering
|
82
|
|
|
89
|
|
|
173
|
|
|
166
|
|
||||
Processing:
|
|
|
|
|
|
|
|
||||||||
Affiliate
|
25
|
|
|
25
|
|
|
51
|
|
|
45
|
|
||||
Third-party
|
43
|
|
|
42
|
|
|
88
|
|
|
89
|
|
||||
Total Processing
|
68
|
|
|
67
|
|
|
139
|
|
|
134
|
|
||||
Terminalling and Transportation:
|
|
|
|
|
|
|
|
||||||||
Affiliate
|
125
|
|
|
102
|
|
|
246
|
|
|
204
|
|
||||
Third-party
|
18
|
|
|
17
|
|
|
35
|
|
|
34
|
|
||||
Total Terminalling and Transportation
|
143
|
|
|
119
|
|
|
281
|
|
|
238
|
|
||||
Total Segment Revenues
|
$
|
293
|
|
|
$
|
275
|
|
|
$
|
593
|
|
|
$
|
538
|
|
|
|
|
|
|
|
|
|
||||||||
Segment Operating Income
|
|
|
|
|
|
|
|
||||||||
Gathering
|
$
|
36
|
|
|
$
|
45
|
|
|
$
|
76
|
|
|
$
|
79
|
|
Processing
|
27
|
|
|
24
|
|
|
56
|
|
|
48
|
|
||||
Terminalling and Transportation
|
75
|
|
|
50
|
|
|
144
|
|
|
108
|
|
||||
Total Segment Operating Income
|
138
|
|
|
119
|
|
|
276
|
|
|
235
|
|
||||
Unallocated general and administrative expenses
|
(13
|
)
|
|
(15
|
)
|
|
(25
|
)
|
|
(27
|
)
|
||||
Interest and financing costs, net
|
(45
|
)
|
|
(38
|
)
|
|
(89
|
)
|
|
(75
|
)
|
||||
Equity in earnings of unconsolidated affiliates
|
3
|
|
|
1
|
|
|
7
|
|
|
4
|
|
||||
Other income, net
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
||||
Net Earnings
|
$
|
83
|
|
|
$
|
67
|
|
|
$
|
175
|
|
|
$
|
137
|
|
|
|
|
|
|
|
|
|
||||||||
Capital Expenditures
|
|
|
|
|
|
|
|
||||||||
Gathering
|
$
|
21
|
|
|
$
|
54
|
|
|
$
|
46
|
|
|
$
|
105
|
|
Processing
|
8
|
|
|
4
|
|
|
13
|
|
|
5
|
|
||||
Terminalling and Transportation
|
13
|
|
|
19
|
|
|
24
|
|
|
34
|
|
||||
Total Capital Expenditures
|
$
|
42
|
|
|
$
|
77
|
|
|
$
|
83
|
|
|
$
|
144
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
•
|
focus on opportunities to provide committed fee-based logistics services to Tesoro and third parties;
|
•
|
evaluate investment opportunities that may arise from the growth of Tesoro’s refining and marketing business or from increased third-party activity to make capital investments to expand our existing asset base;
|
•
|
pursue acquisitions of complementary assets from Tesoro as well as third parties; and
|
•
|
seek to enhance the profitability of our existing assets by pursuing opportunities to add Tesoro and third-party volumes, improve operating efficiencies and increase utilization.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
•
|
expand our assets on our crude oil gathering and transportation system (the “High Plains System”), located in the Bakken Shale/Williston Basin area of North Dakota and Montana (the “Bakken Region”) in support of third-party demand for transportation services and Tesoro’s increased demand for Bakken crude oil in the mid-continent and west coast refining systems, including:
|
◦
|
further expanding crude oil storage and transportation capacity and capabilities of our High Plains Pipeline;
|
◦
|
expanding our gathering footprint in the Bakken Region, including crude oil, natural gas and water, to enhance and improve overall basin logistics efficiencies;
|
◦
|
adding other origin and destination points on the High Plains System to increase volumes; and
|
◦
|
pursuing strategic assets in our footprint including potential acquisitions from Tesoro.
|
•
|
expand and optimize our natural gas gathering and processing assets located in the Green River Basin, Uinta Basin and Vermillion Basin in the states of Utah, Colorado and Wyoming (the “Rockies Region”) including:
|
◦
|
increase compression on our systems in the Green River and Vermillion basins to enhance natural gas volumes recovered from existing wells and support potential new drilling activity; and
|
◦
|
expand our gathering footprint and increase compression capabilities in the Uinta basin to increase volumes on our gathering systems and through our processing assets.
|
•
|
grow our terminalling and transportation business across our Western U.S. footprint through:
|
◦
|
increasing our terminalling volumes by expanding capacity and growing our third-party services at certain of our terminals;
|
◦
|
optimize Tesoro volumes and grow third-party throughput at our terminalling and transportation assets; and
|
◦
|
pursuing strategic assets in our footprint including completing the acquisition of Tesoro's recently acquired terminalling assets from Flint Hills Resources in Alaska.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
•
|
Financial non-GAAP measure of EBITDA, as defined above; and
|
•
|
Liquidity non-GAAP measures:
|
◦
|
Distributable Cash Flow is derived from net cash flow from operating activities plus or minus changes in working capital, amounts spent on maintenance capital net of reimbursements and other adjustments not expected to settle in cash; and
|
◦
|
Pro Forma Distributable Cash Flow is Distributable Cash Flow plus or minus adjustments for the acquisition of noncontrolling interest in connection with the merger of QEP Midstream Partners, LP (“QEPM”) into TLLP completed in July 2015.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
•
|
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’S DISCUSSION AND ANALYSIS
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
||||||
Gathering
|
$
|
82
|
|
|
$
|
89
|
|
|
$
|
173
|
|
|
$
|
166
|
|
Processing
|
68
|
|
|
67
|
|
|
139
|
|
|
134
|
|
||||
Terminalling and Transportation (a)
|
143
|
|
|
119
|
|
|
281
|
|
|
238
|
|
||||
Total Revenues
|
293
|
|
|
275
|
|
|
593
|
|
|
538
|
|
||||
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating and maintenance expenses (b)
|
102
|
|
|
99
|
|
|
207
|
|
|
189
|
|
||||
General and administrative expenses
|
22
|
|
|
28
|
|
|
46
|
|
|
53
|
|
||||
Depreciation and amortization expenses
|
44
|
|
|
44
|
|
|
88
|
|
|
88
|
|
||||
Net loss on asset disposals and impairments
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Total Costs and Expenses
|
168
|
|
|
171
|
|
|
342
|
|
|
330
|
|
||||
Operating Income
|
125
|
|
|
104
|
|
|
251
|
|
|
208
|
|
||||
Interest and financing costs, net
|
(45
|
)
|
|
(38
|
)
|
|
(89
|
)
|
|
(75
|
)
|
||||
Equity in earnings of unconsolidated affiliates
|
3
|
|
|
1
|
|
|
7
|
|
|
4
|
|
||||
Other income, net
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
||||
Net Earnings
|
$
|
83
|
|
|
$
|
67
|
|
|
$
|
175
|
|
|
$
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss attributable to Predecessor
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
9
|
|
Net earnings attributable to noncontrolling interest
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(16
|
)
|
||||
Net Earnings Attributable to Partners
|
83
|
|
|
66
|
|
|
175
|
|
|
130
|
|
||||
General partner’s interest in net earnings, including incentive distribution rights
|
(36
|
)
|
|
(17
|
)
|
|
(68
|
)
|
|
(31
|
)
|
||||
Limited Partners’ Interest in Net Earnings
|
$
|
47
|
|
|
$
|
49
|
|
|
$
|
107
|
|
|
$
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Earnings per Limited Partner Unit:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common - basic
|
$
|
0.48
|
|
|
$
|
0.60
|
|
|
$
|
1.12
|
|
|
$
|
1.23
|
|
Common - diluted
|
$
|
0.48
|
|
|
$
|
0.60
|
|
|
$
|
1.12
|
|
|
$
|
1.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted Average Limited Partner Units Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common units - basic
|
95.2
|
|
|
80.7
|
|
|
94.4
|
|
|
80.5
|
|
||||
Common units - diluted
|
95.2
|
|
|
80.8
|
|
|
94.4
|
|
|
80.6
|
|
(a)
|
Our Predecessor did not record revenue for transactions with Tesoro in the Terminalling and Transportation segment for assets acquired in the acquisitions from Tesoro prior to the effective date of each acquisition.
|
(b)
|
Operating and maintenance expenses include net imbalance settlement gains of
$2 million
for both the
three
months ended
June 30, 2016
and
2015
, and
$3 million
and
$4 million
for the
six
months ended
June 30, 2016
and
2015
, respectively. Also includes reimbursements primarily related to pressure testing and repairs and maintenance costs pursuant to the Amended Omnibus Agreement of
$3 million
and
$9 million
for the
three
months ended
June 30, 2016
and
2015
, respectively, and
$9 million
and
$15 million
for the
six
months ended
June 30, 2016
and
2015
, respectively.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Reconciliation of Net Earnings to EBITDA:
|
|
|
|
|
|
|
|
|
|||||||
Net earnings
|
$
|
83
|
|
|
$
|
67
|
|
|
$
|
175
|
|
|
$
|
137
|
|
Depreciation and amortization expenses
|
44
|
|
|
44
|
|
|
88
|
|
|
88
|
|
||||
Interest and financing costs, net of capitalized interest
|
45
|
|
|
38
|
|
|
89
|
|
|
75
|
|
||||
EBITDA
|
$
|
172
|
|
|
$
|
149
|
|
|
$
|
352
|
|
|
$
|
300
|
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of Net Cash from Operating Activities to Distributable Cash Flow and Pro Forma Distributable Cash Flow:
|
|
|
|
|
|
|
|
||||||||
Net cash from operating activities (a)
|
$
|
91
|
|
|
$
|
65
|
|
|
$
|
252
|
|
|
$
|
213
|
|
Changes in assets and liabilities
|
42
|
|
|
53
|
|
|
31
|
|
|
21
|
|
||||
Predecessor impact
|
—
|
|
|
5
|
|
|
—
|
|
|
11
|
|
||||
Maintenance capital expenditures (b)
|
(14
|
)
|
|
(15
|
)
|
|
(24
|
)
|
|
(25
|
)
|
||||
Reimbursement for maintenance capital expenditures (b)
|
10
|
|
|
2
|
|
|
14
|
|
|
3
|
|
||||
Net earnings attributable to noncontrolling interest (c)
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(16
|
)
|
||||
Other adjustments for noncontrolling interest (c)
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
(20
|
)
|
||||
Adjustments for unconsolidated affiliates (d)
|
(3
|
)
|
|
(3
|
)
|
|
(3
|
)
|
|
(1
|
)
|
||||
Other (e)
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
15
|
|
||||
Distributable Cash Flow
|
126
|
|
|
89
|
|
|
268
|
|
|
201
|
|
||||
Pro forma adjustment for acquisition of noncontrolling interest (f)
|
—
|
|
|
19
|
|
|
—
|
|
|
36
|
|
||||
Pro Forma Distributable Cash Flow
|
$
|
126
|
|
|
$
|
108
|
|
|
$
|
268
|
|
|
$
|
237
|
|
(a)
|
During the second quarter of
2016
, we revised our reconciliation of distributable cash flow and pro forma distributable cash flow by reconciling the liquidity measure from net cash from operating activities. There were no impacts to previously reported amounts as a result of this methodology change.
|
(b)
|
We exclude maintenance capital expenditures including tank restoration costs and expenditures required to ensure the safety, reliability, integrity and regulatory compliance of our assets with an offset for any reimbursements received for such expenditures.
|
(c)
|
Prior to
2016
for noncontrolling interests associated with QEPM and Rendezvous Gas Services, L.L.C. (“RGS”), we excluded earnings along with other adjustments to reflect gross cash available for distribution net of noncontrolling interest impacts.
|
(d)
|
We adjust net cash from operating activities to reflect cash distributions received from unconsolidated affiliates attributed to the period reported for the purposes of calculating distributable cash flow.
|
(e)
|
Other includes items that had a non-cash impact on our operations and should not be considered in distributable cash flow. Non-cash items for the
six
months ended
June 30, 2016
and
2015
include primarily the exclusion of the non-cash gain of
$6 million
recognized relating the settlement of the Questar Gas Company litigation as discussed in Note 6 to our condensed combined consolidated financial statements and the inclusion of
$13 million
for acquired deficiency revenue billings to customers in
2015
.
|
(f)
|
Reflects the adjustment to include the noncontrolling interest in QEPM as controlling interest based on the pro forma assumption that the merger of QEPM with TLLP occurred on January 1, 2015.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
Gas gathering revenues
|
$
|
40
|
|
|
$
|
46
|
|
|
$
|
83
|
|
|
$
|
82
|
|
Crude oil gathering pipeline revenues
|
32
|
|
|
30
|
|
|
67
|
|
|
57
|
|
||||
Crude oil gathering trucking revenues
|
9
|
|
|
13
|
|
|
18
|
|
|
27
|
|
||||
Other revenues
|
1
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
Total Revenues
|
82
|
|
|
89
|
|
|
173
|
|
|
166
|
|
||||
Costs and Expenses
|
|
|
|
|
|
|
|
||||||||
Operating and maintenance expenses (a)
|
30
|
|
|
24
|
|
|
62
|
|
|
47
|
|
||||
General and administrative expenses
|
2
|
|
|
3
|
|
|
5
|
|
|
6
|
|
||||
Depreciation and amortization expenses
|
14
|
|
|
17
|
|
|
29
|
|
|
34
|
|
||||
Loss on asset disposals and impairments
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Total Costs and Expenses
|
46
|
|
|
44
|
|
|
97
|
|
|
87
|
|
||||
Gathering Segment Operating Income
|
$
|
36
|
|
|
$
|
45
|
|
|
$
|
76
|
|
|
$
|
79
|
|
Volumes
|
|
|
|
|
|
|
|
||||||||
Gas gathering throughput (thousands of MMBtu/d) (b)
|
854
|
|
|
1,071
|
|
|
878
|
|
|
1,046
|
|
||||
Average gas gathering revenue per MMBtu (b)
|
$
|
0.51
|
|
|
$
|
0.48
|
|
|
$
|
0.52
|
|
|
$
|
0.43
|
|
Crude oil gathering pipeline throughput (Mbpd)
|
208
|
|
|
187
|
|
|
212
|
|
|
173
|
|
||||
Average crude oil gathering pipeline revenue per barrel
|
$
|
1.72
|
|
|
$
|
1.71
|
|
|
$
|
1.74
|
|
|
$
|
1.80
|
|
Crude oil gathering trucking volume (Mbpd)
|
30
|
|
|
45
|
|
|
29
|
|
|
46
|
|
||||
Average crude oil gathering trucking revenue per barrel
|
$
|
3.30
|
|
|
$
|
3.32
|
|
|
$
|
3.27
|
|
|
$
|
3.28
|
|
(a)
|
Operating and maintenance expenses include imbalance settlement gains of
$1 million
for the both the
three
months ended
June 30, 2016
and
2015
, and
$1 million
and
$2 million
for the
six
months ended
June 30, 2016
and
2015
, respectively.
|
(b)
|
Prior to the deconsolidation of RGS as of January 1, 2016, fees paid by us to RGS were eliminated upon consolidation and third-party transactions, including revenue and throughput volumes, were included in our results of operations. Third party volumes associated with RGS, included in gas gathering volume for the
three
and
six
months ended
June 30, 2015
, were both
146 thousand
MMBtu/d and reduced our average gas gathering revenue per MMBtu by
$0.05
for both periods.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
NGLs processing revenues
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
51
|
|
|
$
|
45
|
|
Fee-based processing revenues
|
25
|
|
|
24
|
|
|
51
|
|
|
53
|
|
||||
Other processing revenues
|
18
|
|
|
18
|
|
|
37
|
|
|
36
|
|
||||
Total Revenues
|
68
|
|
|
67
|
|
|
139
|
|
|
134
|
|
||||
Costs and Expenses
|
|
|
|
|
|
|
|
||||||||
Operating and maintenance expenses
|
29
|
|
|
30
|
|
|
60
|
|
|
60
|
|
||||
General and administrative expenses
|
—
|
|
|
2
|
|
|
—
|
|
|
4
|
|
||||
Depreciation and amortization expenses
|
12
|
|
|
11
|
|
|
23
|
|
|
22
|
|
||||
Total Costs and Expenses
|
41
|
|
|
43
|
|
|
83
|
|
|
86
|
|
||||
Processing Segment Operating Income
|
$
|
27
|
|
|
$
|
24
|
|
|
$
|
56
|
|
|
$
|
48
|
|
Volumes
|
|
|
|
|
|
|
|
||||||||
NGLs processing throughput (Mbpd)
|
7.4
|
|
|
7.8
|
|
|
7.8
|
|
|
7.4
|
|
||||
Average keep-whole fee per barrel of NGLs
|
$
|
36.60
|
|
|
$
|
35.14
|
|
|
$
|
35.81
|
|
|
$
|
33.60
|
|
Fee-based processing throughput (thousands of MMBtu/d)
|
645
|
|
|
768
|
|
|
660
|
|
|
729
|
|
||||
Average fee-based processing revenue per MMBtu
|
$
|
0.43
|
|
|
$
|
0.36
|
|
|
$
|
0.43
|
|
|
$
|
0.40
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues (a)
|
|
|
|
|
|
|
|
||||||||
Terminalling revenues
|
$
|
112
|
|
|
$
|
92
|
|
|
$
|
220
|
|
|
$
|
182
|
|
Pipeline transportation revenues
|
31
|
|
|
27
|
|
|
61
|
|
|
56
|
|
||||
Total Revenues
|
143
|
|
|
119
|
|
|
281
|
|
|
238
|
|
||||
Costs and Expenses
|
|
|
|
|
|
|
|
||||||||
Operating and maintenance expenses (b)
|
43
|
|
|
45
|
|
|
85
|
|
|
82
|
|
||||
General and administrative expenses
|
7
|
|
|
8
|
|
|
16
|
|
|
16
|
|
||||
Depreciation and amortization expenses
|
18
|
|
|
16
|
|
|
36
|
|
|
32
|
|
||||
Total Costs and Expenses
|
68
|
|
|
69
|
|
|
137
|
|
|
130
|
|
||||
Terminalling and Transportation Segment Operating Income
|
$
|
75
|
|
|
$
|
50
|
|
|
$
|
144
|
|
|
$
|
108
|
|
Volumes
|
|
|
|
|
|
|
|
||||||||
Terminalling throughput (Mbpd)
|
994
|
|
|
913
|
|
|
950
|
|
|
916
|
|
||||
Average terminalling revenue per barrel
|
$
|
1.24
|
|
|
$
|
1.10
|
|
|
$
|
1.27
|
|
|
$
|
1.10
|
|
Pipeline transportation throughput (Mbpd)
|
867
|
|
|
801
|
|
|
845
|
|
|
810
|
|
||||
Average pipeline transportation revenue per barrel
|
$
|
0.40
|
|
|
$
|
0.38
|
|
|
$
|
0.40
|
|
|
$
|
0.38
|
|
(a)
|
Our Predecessor did not record revenue for transactions with Tesoro in the Terminalling and Transportation segment prior to the effective date of the acquisition of the LA Storage and Handling Assets.
|
(b)
|
Operating and maintenance expenses include imbalance settlement gains of
$1 million
for both the
three
months ended
June 30, 2016
and
2015
, and
$2 million
for both the
six
months ended
June 30, 2016
and
2015
.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
Debt principal, including current maturities:
|
June 30, 2016
|
|
December 31, 2015
|
||||
Credit Facilities
|
$
|
239
|
|
|
$
|
555
|
|
Senior Notes
|
3,020
|
|
|
2,320
|
|
||
Capital lease obligations
|
7
|
|
|
8
|
|
||
Total Debt
|
3,266
|
|
|
2,883
|
|
||
Unamortized Issuance Costs (a)
|
(48
|
)
|
|
(39
|
)
|
||
Debt, Net of Unamortized Issuance Costs
|
3,218
|
|
|
2,844
|
|
||
Total Equity
|
2,010
|
|
|
1,778
|
|
||
Total Capitalization
|
$
|
5,228
|
|
|
$
|
4,622
|
|
(a)
|
Includes unamortized premiums of
$4 million
associated with our senior notes at both
June 30, 2016
and
December 31, 2015
.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
|
Total
Capacity
|
|
Amount Borrowed as of June 30, 2016
|
|
Available Capacity
|
|
Weighted Average Interest Rate
|
|
Expiration
|
|||||||
Revolving Credit Facility
|
$
|
600
|
|
|
$
|
—
|
|
|
$
|
600
|
|
|
—
|
%
|
|
January 29, 2021
|
Dropdown Credit Facility
|
1,000
|
|
|
239
|
|
|
761
|
|
|
4.51
|
%
|
|
January 29, 2021
|
|||
Total Credit Facilities
|
$
|
1,600
|
|
|
$
|
239
|
|
|
$
|
1,361
|
|
|
|
|
|
Credit Facility
|
30 day Eurodollar (LIBOR) Rate at June 30, 2016
|
|
Eurodollar Margin
|
|
Base Rate
|
|
Base Rate Margin
|
|
Commitment Fee
(unused portion)
|
Revolving Credit Facility (a)
|
0.47%
|
|
2.00%
|
|
3.50%
|
|
1.00%
|
|
0.38%
|
Dropdown Credit Facility (a)
|
0.47%
|
|
2.01%
|
|
3.50%
|
|
1.01%
|
|
0.38%
|
(a)
|
We have the option to elect if the borrowings will bear interest at either a base rate plus the base rate margin, or a Eurodollar rate, for the applicable period, plus the Eurodollar margin at the time of the borrowing. The applicable margin varies based upon a certain leverage ratio, as defined by the Revolving Credit Facility. We also incur commitment fees for the unused portion of the Revolving Credit Facility at an annual rate. Letters of credit outstanding under the Revolving Credit Facility incur fees at the Eurodollar margin rate.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
|
Six Months Ended
June 30, |
||||||
|
2016
|
|
2015
|
||||
Cash Flows From (Used In):
|
|
|
|
||||
Operating Activities
|
$
|
252
|
|
|
$
|
213
|
|
Investing Activities
|
(97
|
)
|
|
(169
|
)
|
||
Financing Activities
|
511
|
|
|
(50
|
)
|
||
Increase (Decrease) in Cash and Cash Equivalents
|
$
|
666
|
|
|
$
|
(6
|
)
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
Major Projects
|
Total Project Expected
Capital Expenditures
|
|
Actual 2016
Capital Expenditures
|
||||
Gathering Segment:
|
|
|
|
||||
Completed:
|
|
|
|
||||
Bakken Area Storage Hub (a)
|
$
|
30
|
|
|
$
|
4
|
|
In Process:
|
|
|
|
||||
High Plains Pipeline Expansion (b)
|
25-30
|
|
|
4
|
|
||
Uinta Compression (c)
|
50-55
|
|
|
28
|
|
||
Terminalling and Transportation Segment:
|
|
|
|
||||
In Process:
|
|
|
|
||||
Terminal Expansions (d)
|
30
|
|
|
5
|
|
||
Under Development:
|
|
|
|
||||
Los Angeles Refinery Interconnect Pipeline System (e)
|
150-200
|
|
|
—
|
|
(a)
|
The construction of the second phase of the Bakken Area Storage Hub provides storage tanks located in two strategic areas of the basin. With its completion, storage capacity has grown to over 1 million barrels.
|
(b)
|
Projects to expand crude oil gathering throughput capacity on the High Plains Pipeline in McKenzie County, North Dakota. The expansion project’s expected capital expenditures may be reduced as a result of Tesoro’s recent acquisition of Great Northern Midstream and associated BakkenLink pipeline.
|
(c)
|
Projects to increase compression for our Uinta natural gas gathering systems and expand our gathering system in the Uinta basin. We expect incremental volumes through our processing system upon the completion of the project.
|
(d)
|
Projects to increase the throughput capacity and service capabilities at our crude oil and refined products terminals.
|
(e)
|
The pipeline interconnect project at the Los Angeles refinery is designed to provide direct connectivity between Tesoro’s refining sites. The proposed project is subject to final Board of Directors approval, project scoping, engineering and regulatory approval.
|
Quarter Ended
|
|
Total Quarterly Distribution Per Unit
|
|
Total Quarterly Distribution Per Unit, Annualized
|
|
Total Cash Distribution including general partner incentive distribution rights
(in millions)
|
|
Date of Distribution
|
|
Unitholders Record Date
|
||||||
December 31, 2015
|
|
$
|
0.780
|
|
|
$
|
3.12
|
|
|
$
|
98
|
|
|
February 12, 2016
|
|
February 2, 2016
|
March 31, 2016
|
|
0.810
|
|
|
3.24
|
|
|
108
|
|
|
May 13, 2016
|
|
May 2, 2016
|
|||
June 30, 2016 (a)
|
|
0.842
|
|
|
3.37
|
|
|
123
|
|
|
August 12, 2016
|
|
August 2, 2016
|
(a)
|
This distribution was declared on
July 20, 2016
and will be paid on the date of distribution.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
•
|
changes in global economic conditions and the effects of a global economic downturn on our business, on the business of our key customers, including Tesoro, and on our customers’ suppliers, customers, business partners and credit lenders;
|
•
|
a material decrease in the crude oil and natural gas produced in the Bakken Shale/Williston Basin area of North Dakota and Montana;
|
•
|
a material decrease in the natural gas and crude oil produced in the Green River Basin, Uinta Basin and Vermillion Basin in the states of Utah, Colorado and Wyoming;
|
•
|
the ability of our key customers, including Tesoro, to remain in compliance with the terms of their outstanding indebtedness;
|
•
|
changes in insurance markets impacting costs and the level and types of coverage available;
|
•
|
changes in the cost or availability of third-party vessels, pipelines and other means of delivering and transporting crude oil, feedstocks, natural gas, natural gas liquids and refined products;
|
•
|
the coverage and ability to recover claims under our insurance policies;
|
•
|
the availability and costs of crude oil, other refinery feedstocks and refined products;
|
•
|
the timing and extent of changes in commodity prices and demand for refined products, natural gas and NGLs;
|
•
|
changes in our cash flow from operations;
|
•
|
impact of QEP Resources’ and Questar Gas Company’s failure to perform under the terms of our gathering agreements as they are our largest customers in TLLP’s natural gas business;
|
•
|
the risk of contract cancellation, non-renewal or failure to perform by those in our supply and distribution chains, including Tesoro and Tesoro’s customers, and the ability to replace such contracts and/or customers;
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
•
|
the suspension, reduction or termination of Tesoro’s obligation under our commercial agreements and our secondment agreement;
|
•
|
a material decrease in profitability among our customers, including Tesoro;
|
•
|
earthquakes or other natural disasters affecting operations;
|
•
|
direct or indirect effects on our business resulting from actual or threatened terrorist incidents, cyber-security breaches or acts of war;
|
•
|
weather conditions affecting operations by us or our key customers, including Tesoro, or the areas in which the customers we serve operate;
|
•
|
disruptions due to equipment interruption or failure at our facilities, Tesoro’s facilities or third-party facilities on which our key customers, including Tesoro, are dependent;
|
•
|
changes in the expected value of and benefits derived from acquisitions;
|
•
|
actions of customers and competitors;
|
•
|
changes in our credit profile;
|
•
|
state and federal environmental, economic, health and safety, energy and other policies and regulations, including those related to climate change and any changes therein and any legal or regulatory investigations, delays, compliance costs or other factors beyond our control;
|
•
|
operational hazards inherent in refining operations and in transporting and storing crude oil, natural gas, NGLs and refined products;
|
•
|
changes in capital requirements or in execution and benefits of planned capital projects;
|
•
|
seasonal variations in demand for natural gas and refined products;
|
•
|
adverse rulings, judgments, or settlements in litigation or other legal or tax matters, including unexpected environmental remediation costs in excess of any accruals, which affect us or Tesoro;
|
•
|
risks related to labor relations and workplace safety; and
|
•
|
political developments.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
|
LEGAL PROCEEDINGS, RISK FACTORS, AND UNREGISTERED SHARES OF EQUITY SECURITIES
|
|
|
OTHER INFORMATION AND EXHIBITS
|
|
|
EXHIBITS
|
|
|
Exhibit Number
|
|
Description of Exhibit
|
*32.2
|
|
Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
**101.INS
|
|
XBRL Instance Document
|
|
|
|
**101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
**101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
**101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
**101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
**101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed herewith
|
**
|
Submitted electronically herewith
|
#
|
Compensatory plan or arrangement
|
|
|
TESORO LOGISTICS LP
|
|
|
|
|
|
|
|
By:
|
Tesoro Logistics GP, LLC
|
|
|
|
Its general partner
|
|
|
|
|
Date:
|
August 4, 2016
|
By:
|
/s/ GREGORY J. GOFF
|
|
|
|
Gregory J. Goff
|
|
|
|
Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
Date:
|
August 4, 2016
|
By:
|
/s/ STEVEN M. STERIN
|
|
|
|
Steven M. Sterin
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|
THE GENERAL PARTNER:
TESORO LOGISTICS GP, LLC
By: _______________________________________
Phillip M. Anderson
President
|
MEMBERS:
TESORO CORPORATION
By: _______________________________________
Gregory J. Goff
President and Chief Executive Officer
|
TESORO ALASKA COMPANY LLC
By: _______________________________________
Gregory J. Goff
President
|
TESORO REFINING & MARKETING COMPANY LLC
By: _______________________________________
Gregory J. Goff
President
|
Member
|
|
Sharing Ratio
|
|
Capital Contribution
|
Tesoro Corporation
|
|
3.6%
|
|
$1,000.00 plus $63 million in assets contributed on April 26, 2011 in connection with the initial public offering of Tesoro Logistics LP.
100% of the equity interests of Tesoro Alaska Pipeline Company LLC, pursuant to the Contribution, Conveyance and Assumption Agreement
dated June 23, 2014
|
Tesoro Alaska Company LLC
|
|
11.5%
|
|
The Nikiski Assets, pursuant to the Contribution, Conveyance and Assumption Agreement
dated June 23, 2014
The Kenai Tankage pursuant to the First Closing under the Contribution, Conveyance and Assumption Agreement dated July 1, 2016
The TAT Units pursuant to the Second Closing under the Contribution, Conveyance and Assumption Agreement dated July 1, 2016
|
1.1
|
“Affiliate”
means each entity that would be considered a single employer with the Company under Section 414(b) or Section 414(c) of the Code, except that the phrase “at least 50%” shall be substituted for the phrase “at least 80%” as used therein.
|
1.2
|
“Aggregated Plan”
means all agreements, methods, programs and other arrangements that are aggregated with this Plan under Section 1.409A-1(c) of the Regulations.
|
1.3
|
“Base Salary”
means the rate of base pay as in effect for a Participant on the effective date of such Participant’s eligibility for a benefit hereunder, as provided in Section II hereof.
|
1.4
|
“Board”
means the Board of Directors of the Company.
|
1.5
|
“Bonus”
means (i) for purposes of determining the amount of a Participant’s Change in Control Benefit, as provided in Section 3.1 hereof, the target bonus applicable to a Participant under the Company’s annual incentive program for the year in which such Participant’s employment terminates under conditions that result in the eligibility of such Participant for a Change in Control Benefit hereunder or (ii) for purposes of determining the amount of the Severance Benefit for each Participant other than the Chief Executive Officer, as provided in Section 3.2 hereof, the average of the actual bonuses paid under the Company’s annual incentive program during the three (3)-year period ending on the date of the Participant’s termination of employment under conditions that result in the eligibility of such Participant for a Severance Benefit hereunder; provided, however, in the event that the Participant has been employed for fewer than three (3) years from the date of his most recent employment to the date of such termination of employment, the Bonus will be calculated by adding the total amount of the annualized actual bonuses paid during the Participant’s most recent period of employment and dividing that amount
|
1.6
|
“Cause”
means the conviction of or a plea of
nolo
contendere
to the charge of a felony (which, through lapse of time or otherwise, is not subject to appeal); a willful refusal without proper legal cause to perform, or gross negligence in performing, the Participant’s duties and responsibilities; a material breach of fiduciary duty to the Company through the misappropriation of Company funds or property; or the unauthorized absence of the Participant from work (other than for sick or approved disability leave or leave under the Family Medical Leave Act) for a period of thirty (30) or more working days out of a consecutive forty-five (45)-working day period.
|
1.7
|
“Change in Control”
means (i) there shall be consummated (A) any consolidation or merger of Company in which Company is not the continuing or surviving corporation or pursuant to which shares of Company’s common stock would be converted into cash, securities or other property, other than a merger of Company where a majority of the board of directors of the surviving corporation are, and for a one-year period after the merger continue to be, persons who were directors of Company immediately prior to the merger or were elected as directors, or nominated for election as director, by a vote of at least two-thirds of the directors then still in office who were directors of Company immediately prior to the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Company, or (ii) the shareholders of Company shall approve any plan or proposal for the liquidation or dissolution of Company, or (iii) (A) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), other than Company or a Subsidiary thereof or any employee benefit plan sponsored by Company or a Subsidiary thereof, shall become the beneficial owner (within the meaning of Rule 13c-3 under the Securities Exchange Act of 1934) of securities of Company representing thirty-five percent (35%) or more of the combined voting power of Company’s then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, and (B) at any time during a period of one-year thereafter, individuals who immediately prior to the beginning of such period constituted the Board shall cease for any reason to constitute at least a majority thereof, unless election or the nomination by the Board for election by Company’s shareholders of each new director during such period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period.
|
1.8
|
“Change in Control Benefit”
means the benefit payable under Section 3.1 hereof in the event of an involuntary termination of employment without Cause or a voluntary termination of employment for Good Reason following a Change in Control.
|
1.9
|
“Chief Executive Officer”
means the Chief Executive Officer of the Company.
|
1.10
|
“Code”
means the Internal Revenue Code of 1986, as amended from time to time.
|
1.11
|
“Committee”
means the Compensation Committee of the Board.
|
1.12
|
“Company”
means Tesoro Corporation, a Delaware corporation, or any successor thereto.
|
1.13
|
“Compensation”
means a Participant’s Base Salary and Bonus.
|
1.14
|
“Death/Disability Benefit”
means the benefit payable under Section 3.3 hereof in the event of the Chief Executive Officer’s termination of employment by reason of death or Total Disability.
|
1.15
|
“Good Reason”
means the occurrence of any of the following:
|
(a)
|
without Participant’s express written consent, the assignment to Participant of any duties inconsistent with the employment of Participant immediately prior to the Change in Control, or a significant diminution of Participant’s positions, duties, responsibilities and status with the Company from those immediately prior to a Change in Control or a diminution in Participant’s titles or offices as in effect immediately prior to a Change in Control, or any removal of Participant from, or any failure to reelect Participant to, any of such positions;
|
(b)
|
a material reduction by the Company in Participant’s Base Salary, as in effect immediately prior to a Change in Control;
|
(c)
|
the failure by the Company to continue benefits, including but not limited to, thrift, pension, life insurance, and health plans, substantially equal in value, in the aggregate, to those in which Participant is participating or is eligible to participate at the time of the Change in Control except as otherwise required by the terms of such plans as in effect at the time of any Change in Control;
|
(d)
|
the failure by the Company to continue in effect any incentive plan or arrangement in which Participant is participating at the time of a Change in Control (or to substitute and continue other plans or arrangements providing the Participant with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any Change in Control;
|
(e)
|
the occurrence of an event that meets the criteria set forth under the Company’s relocation policy, as in effect from time to time, with respect to which either (i) the Participant fails to provide express written consent to the relocation or (ii) the Company fails to provide the relocation benefit set forth in such policy; or
|
(f)
|
any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company;
|
1.16
|
“Participant”
means an individual who, on the date of his or her termination of employment under the circumstances described in Section II hereof, is either: (i) an officer of the Company or a Subsidiary with the title of Senior Vice President or above whose compensation is approved by the Committee or (ii) an officer of the Company or a Subsidiary with the title of Vice President who is approved for participation by the Chief Executive Officer, and, in each case, who is not otherwise entitled to a change in control or severance benefit, as applicable, under an employment agreement, management stability agreement, or similar type of agreement.
|
1.17
|
“Plan”
means the Tesoro Corporation Executive Severance and Change in Control Plan, effective January 12, 2011, as amended from time to time.
|
1.18
|
“Regulations”
means the Treasury Regulations promulgated under the Code.
|
1.19
|
“Separation from Service”
means a termination of employment of a Participant under the circumstances described in Section II hereof that will result in a reasonably anticipated permanent reduction in the level of bona fide services performed by the Participant for the Company and its Affiliates to 20% or less of the average level of bona fide services performed by the Participant for the Company and its Affiliates (whether as an employee or an independent contractor) in the immediately preceding thirty-six (36) months (or the full period of service to the Company and its Affiliates if the Participant has been providing services to the Company and its Affiliates for fewer than thirty-six (36) months). The determination of whether a Separation from Service has occurred shall be made by the Committee in accordance with the provisions of Section 409A of the Code and the Regulations.
|
1.20
|
“Severance Benefit”
means the benefit payable under Section 3.2 hereof in the absence of a Change in Control but in the event of an involuntary termination of employment without Cause.
|
1.21
|
“Subsidiary”
means any entity in which the Company owns or otherwise controls, directly or indirectly, stock or other ownership interests having the voting power to elect a majority of the board of directors, or other governing group having functions similar to a board of directors, as determined by the Committee.
|
1.22
|
“Total Disability”
means the physical or mental incapacity of the Chief Executive Officer so as to render him incapable of performing his material, usual and customary duties, with or without reasonable accommodation as required by law, for six (6) consecutive months (even if such consecutive absence is interrupted by the Chief Executive Officer’s return to service for fewer than ten (10) consecutive business days if absent thereafter for the same illness or disability). Any termination on account of Total Disability shall be upon thirty (30) days written notice given at any time thereafter while the Chief Executive Officer remains Totally Disabled, provided that a termination for Total Disability hereunder shall not be effective if the Chief Executive Officer returns to the full performance of his duties within such thirty (30) day period.
|
2.1
|
Eligibility for Change in Control Benefit
. Each Participant is eligible to receive a Change in Control Benefit if, within the two-year period following a Change in Control, such Participant’s employment with the Company or a Subsidiary is terminated by reason of: (i) involuntary termination other than for Cause or by reason of death, or (ii) voluntary termination by the Participant for Good Reason. The determination of whether a termination of employment shall be for Cause or Good Reason shall be made in the sole and absolute discretion of the Committee. Such benefit shall commence as provided in Section 4.1 hereof, but shall be contingent upon the Committee’s prior receipt of a release executed by the Participant in the form determined by and in the manner prescribed by the Committee.
|
2.2
|
Eligibility for Severance Benefit
.
|
(a)
|
Chief Executive Officer
. Subject to paragraph (d) below, the Chief Executive Officer is eligible to receive a Severance Benefit if his employment with the Company or a Subsidiary is terminated in the absence of a Change in Control by reason of either: (i) involuntary termination other than for Cause or (ii) voluntary termination following the occurrence or failure of any of the following circumstances, without his express written consent: (A) a material adverse change in the governing body to which the Chief Executive Officer regularly reports, including a requirement that the Chief Executive Officer report to another corporate officer rather than to the Board; (B) a material adverse change in the Compensation plans, programs or arrangements in which the Chief Executive Officer is entitled to participate (the “Compensation Plans”) other than a material adverse change in the Compensation Plans that adversely affects other similarly situated executives in a manner proportionate to the material adverse effect of such change on the Chief Executive Officer; (C) Chief Executive Officer’s failure to be elected or reelected to the Board; or (D) the failure of any successor to the Company (whether direct or indirect and whether by merger, acquisition, consolidation or otherwise) to assume in a writing delivered to the Chief Executive Officer upon the successor becoming such, the obligations of the Company hereunder.
|
(b)
|
Executive Vice-Presidents
. Subject to paragraph (d) below, each Participant who is an Executive Vice-President of the Company is eligible to receive a Severance Benefit if such Participant’s employment with the Company or a Subsidiary is terminated in the absence of a Change in Control by reason of either: (i) involuntary termination other than for Cause or by reason of death or (ii) voluntary termination following a material adverse change in the level of executive officer to whom the Executive Vice President regularly reports.
|
(c)
|
Senior Vice Presidents
. Subject to paragraph (d) below, each Participant who is a Senior Vice President of the Company is eligible to receive a Severance Benefit if such Participant’s employment with the Company or a Subsidiary is terminated in the absence of a Change in Control by reason of involuntary termination other than for Cause or by reason of death.
|
(d)
|
Committee Discretion and Executed Release
. The determination of whether a termination of employment shall be for Cause or whether a material adverse change in the reporting relationship has occurred under Section 2.2 (a), (b) or (c) shall be made in the sole and absolute discretion of the Committee. Benefits payable hereunder shall commence as provided in Section 4.1 hereof, but shall be contingent upon the Committee’s prior receipt of a release executed by the Participant in the form determined by and in the manner prescribed by the Committee.
|
2.3
|
Eligibility for Death/Disability Benefit
. The Chief Executive Officer is eligible to receive a Death/Disability Benefit if his employment with the Company or a Subsidiary is terminated in the absence of a Change in Control by reason of his death or Total Disability. Such Death/Disability Benefit is mutually exclusive of any Severance Benefit or Change in Control Benefit hereunder.
|
3.1
|
Change in Control Benefit
. The Change in Control Benefit to which an eligible Participant shall be entitled shall be as follows:
|
(a)
|
Chief Executive Officer
. The Chief Executive Officer shall be entitled to a Change in Control Benefit, payable in cash, equal to three (3) times his Compensation. Furthermore, the Chief Executive Officer and his or her eligible dependents shall be entitled to participate in the Company’s group medical plan (excluding dental and vision benefits) for the thirty (30)-month period commencing on the date of the Chief Executive Officer’s Separation from Service.
|
(b)
|
Executive Vice-Presidents
. Each Executive Vice-President shall be entitled to a Change in Control Benefit, payable in cash, equal to two and one-half (2.5) times his Compensation. Furthermore, the Executive Vice-President and his or her eligible dependents shall be entitled to participate in the Company’s group medical plan (excluding dental and vision benefits) for the thirty (30)-month period commencing on the date of the Executive Vice-President’s Separation from Service.
|
(c)
|
Senior Vice-Presidents
. Each Senior Vice-President shall be entitled to a Change in Control Benefit, payable in cash, equal to two (2) times his Compensation. Furthermore, the Senior Vice-President and his or her eligible dependents shall be
|
(d)
|
Vice-Presidents
. Each Vice-President who is a Participant in this Plan shall be entitled to a Change in Control Benefit, payable in cash, equal to either one (1) times or one and one-half (1.5) times his Compensation, as determined by the Chief Executive Officer in his sole and absolute discretion. Furthermore, the Vice-President and his or her eligible dependents shall be entitled to participate in the Company’s group medical plan (excluding dental and vision benefits) for a period of either twelve (12) or eighteen (18) months (as determined by the Chief Executive Officer in his sole and absolute discretion) commencing on the date of the Vice-President’s Separation from Service.
|
3.2
|
Severance Benefit
. The Severance Benefit to which an eligible Participant shall be entitled shall be as follows:
|
(a)
|
Chief Executive Officer
. The Chief Executive Officer shall be entitled to a Severance Benefit, payable in cash, equal to two (2) times his Compensation, together with the benefits described in Section 3.2(d) (i) and (ii) hereof. Furthermore, except to the extent prohibited by law, and applicable only until May 1, 2015, the Chief Executive Officer shall be deemed vested under the Tesoro Corporation Amended and Restated Executive Security Plan (“ESP”) as of the date of the Chief Executive Officer’s eligibility for a Severance Benefit hereunder and the benefit to which the Chief Executive Officer is entitled under the ESP shall be calculated, to the extent applicable, by granting the Chief Executive Officer deemed years of age and service up to the earliest date on which the Chief Executive Officer would be eligible for an early retirement benefit, as determined under the Tesoro Corporation Retirement Plan.
|
(b)
|
Executive Vice-Presidents
. Each Executive Vice-President shall be entitled to a Severance Benefit, payable in cash, equal to one and three-fourths (1.75) times his Compensation, together with the benefits described in Section 3.2(d) (i) and (ii) hereof.
|
(c)
|
Senior Vice-Presidents
. Each Senior Vice-President shall be entitled to a Severance Benefit, payable in cash, equal to one and one-half (1.5) times his Compensation, together with the benefits described in Section 3.2(d) (i) and (ii) hereof.
|
(d)
|
Additional Benefits
. The foregoing eligible Participants set forth in this Section 3.2 shall be entitled to the following benefits, as applicable, in addition to the benefits described in (a), (b) and (c) above:
|
(i)
|
participation in the Company’s medical plan (excluding dental and vision benefits) for a period of eighteen (18) months commencing on the date of the Participant’s Separation from Service;
|
(ii)
|
receipt of reasonable outplacement services, at no cost to the Participant, for up to twelve (12) months, such twelve (12)-month period to commence on the date of the Participant’s Separation from Service; and
|
(iii)
|
Chief Executive Officer and Chief Executive Officer’s spouse and eligible dependents shall continue to be eligible to participate in, and receive group health coverage under, the Company’s group health plans that provide group health coverage to active employees of the Company from time to time, but only to the extent such plans continue to be available to the Company’s employees and only until the earliest to occur of (A) two and one-half (2½) years after the date of termination of the Chief Executive Officer’s employment, (B) Chief Executive Officer’s death (or in the case of coverage for a qualified beneficiary of Chief Executive Officer, the death of that qualified beneficiary), or (C) the date on which Chief Executive Officer (or in the case of coverage for a qualified beneficiary of Executive, the qualified beneficiary) becomes eligible for coverage under any other group health plan of another employer providing comparable coverage (the “Continuation Coverage Period”); provided that the Company shall pay for one hundred percent (100%) of the premiums for such group health coverage, and the premiums that otherwise would be charged to the Chief Executive Officer for such coverage but for this Section 3.2(d)(iii) shall be included as imputed income; and provided further that the group health plan coverage benefits provided by the Company under this Section 3.2(d)(iii) during any taxable year of the Chief Executive Officer will not affect such benefits provided by the Company in another taxable year during the period of continued coverage and the right to the benefits provided under this Section 3.2(d)(iii) is not subject to liquidation or exchange for another benefit.
|
3.3
|
Death/Disability Benefit
. The Chief Executive Officer or, in the event of the Chief Executive Officer’s death, the estate of the Chief Executive Officer shall be entitled to a Death/Disability Benefit, payable in cash, equal to one (1) times his Base Salary. In the event of the Chief Executive Officer’s termination of employment on account of Total Disability, this benefit shall be reduced by any payments to the Chief Executive Officer under any long-term disability plan or arrangement of the Company.
|
4.1
|
Benefits payable in accordance with Section III as cash payments will be paid in a single lump sum payment on the first day of the seventh (7th) calendar month beginning after the Participant’s Separation from Service. If a Participant who is entitled to continued coverage under the Company’s group medical plan elects to continue such participation, the Company shall pay the applicable premium for such coverage (which amount shall be the employer-subsidized portion of the premium that applies to active employees of the
|
4.2
|
The Company will be liable for all benefits due the Participants under the Plan.
|
4.3
|
The Plan is a general corporate commitment and each Participant must rely upon the general credit of the Company for the fulfillment of its obligations under the Plan. Under all circumstances the rights of Participants to any asset held by the Company shall be no greater than the rights expressed in this Plan. Nothing contained in this Plan shall constitute a guarantee by the Company that the assets of the Company will be sufficient to pay any benefits under the Plan or would place the Participant in a secured position ahead of general creditors and judgment creditors of the Company. Though the Company may establish or become a signatory to a rabbi trust to accumulate assets to help fulfill its obligations, the Plan and any trust created, shall not create any lien, claim, encumbrance, right, title or other interest of any kind in any Participant in any asset held by the Company, contributed to any trust created, or otherwise be designated to be used for payment of any of its obligations created in this agreement. No specific assets of the Company have been or will be set aside, or will be transferred to a trust or will be pledged for the performance of the Company’s obligations under the Plan which would remove those assets from being subject to the general creditors and judgment creditors of the Company.
|
4.4
|
It is intended that this Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA.
|
4.5
|
Notwithstanding any provision of this Section IV to the contrary, the benefits payable hereunder may, to the extent expressly provided in this Section 4.5, be paid prior to or later than the date on which they would otherwise be paid to the Participant.
|
(a)
|
Distribution in the Event of Income Inclusion Under Code Section 409A
. If any portion of a Participant’s benefit hereunder is required to be included in income by the Participant prior to receipt due to a failure of this Plan or any Aggregated Plan to comply with the requirements of Section 409A of the Code or the Regulations, the Committee may determine that such Participant shall receive a distribution from the Plan in an amount equal to the portion of his or her benefit required to be included in income as a result of the failure of the Plan or any Aggregated Plan to comply with the requirements of Section 409A of the Code or the Regulations.
|
(b)
|
Distribution Necessary to Satisfy Applicable Tax Withholding
. If the Company is required to withhold amounts to pay the Participant’s portion of the Federal Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a) or 3121(v)(2) with respect to amounts that are or will be paid to the Participant under the Plan before they otherwise would be paid, the Committee may determine that such Participant shall receive a distribution from the Plan in
|
(c)
|
Delay for Payments in Violation of Federal Securities Laws or Other Applicable Law
. In the event the Company reasonably anticipates that the payment of benefits as specified hereunder would violate Federal securities laws or other applicable law, the Committee may delay the payment of such benefit hereunder until the earliest date at which the Company reasonably anticipates that the making of such payment would not cause such violation.
|
(d)
|
Delay for Insolvency or Compelling Business Reasons.
In the event the Company determines that the making of any payment of benefits on the date specified hereunder would jeopardize the ability of the Company to continue as a going concern, the Committee may delay the payment of such benefits until the first calendar year in which the Company notifies the Committee that the payment of benefits would not have such effect.
|
(e)
|
Administrative Delay in Payment
. The payment of benefits hereunder shall begin at the date specified in accordance with the provisions of the foregoing paragraphs of this Section IV; provided that, in the case of administrative necessity, the payment of such benefits may be delayed up to the later of the last day of the calendar year in which payment would otherwise be made or the 15
th
day of the third calendar month following the date on which payment would otherwise be made. Further, if, as a result of events beyond the control of the Participant, it is not administratively practicable for the Committee to calculate the amount of benefits due to the Participant as of the date on which payment would otherwise be made, the payment may be delayed until the first calendar year in which calculation of the amount is administratively practicable.
|
5.1
|
Claims for Benefits
. The Committee shall determine the rights of any Participant to any benefits hereunder. Any Participant who believes that he has not received the benefits to which he is entitled under the Plan may file a claim in writing with the Committee. The Committee shall, no later than 90 days after the receipt of a claim (plus an additional period of 90 days if required for processing, provided that notice of the extension of time is given to the claimant with the first 90-day period), either allow or deny the claim in writing.
|
(a)
|
the specific reasons for the denial;
|
(b)
|
specific reference to pertinent Plan provisions on which the denial is based;
|
(c)
|
a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and
|
(d)
|
an explanation of the claim review procedure and the time limits applicable to such procedures, including a statement of the claimant’s right, if applicable, to bring a civil action under Section 502(a) of ERISA.
|
5.2
|
Appeal Provisions
. A claimant whose claim is denied (or his duly authorized representative) may within 60 days after receipt of denial of a claim file with the Committee a written request for a review of such claim. If the claimant does not file a request for review of his claim within such 60-day period, the claimant shall be deemed to have acquiesced in the original decision of the Committee on his claim, the decision shall become final and the claimant will not be entitled to bring a civil action under Section 502(a) of ERISA. If such an appeal is so filed within such 60-day period the Committee (or its delegate) shall conduct a full and fair review of such claim. During such review, the claimant (or the claimant’s authorized representative) shall be given the opportunity to review all documents that are pertinent to his claim and to submit issues and comments in writing.
|
6.1
|
The Board, or its delegate, may, in its sole discretion, terminate, suspend or amend this Plan at any time, in whole or in part. However, the termination, amendment or suspension of this Plan will not operate to decrease the benefit to which a Participant has become entitled but which has not yet been paid. Notwithstanding the foregoing, the Plan shall automatically terminate, without further action of the Company, upon Insolvency of the Company. For this purpose, Insolvency shall mean the inability of the Company to continue as a going concern.
|
6.2
|
Notwithstanding any provision of the Plan to the contrary, the Committee may at any time (without the consent of any Participant) modify, amend or terminate any or all of the provisions of this Plan to the extent necessary to conform the provisions of the Plan with Section 409A of the Code, regardless of whether such modification, amendment or termination of this Plan shall adversely affect the rights of a Participant under the Plan.
|
6.3
|
Nothing contained herein will confer upon any Participant the right to be retained in the service of the Company, nor will it interfere with the right of the Company to discharge or otherwise deal with a Participant without regard to the existence of this Plan.
|
6.4
|
No benefit under this Plan shall be assignable or subject to any manner of alienation, sale, transfer, claims of creditors, pledge, attachment or encumbrances of any kind.
|
6.5
|
The Committee may adopt rules and regulations to assist it in the administration of the Plan and may delegate such of its duties hereunder as it may deem advisable.
|
6.6
|
This Plan is established under and will be construed according to the laws of the State of Texas, except to the extent preempted by federal law.
|
6.7
|
This amendment and restatement is signed this 1st day of May, 2013, to be effective as of the date of execution.
|
TESORO CORPORATION
|
||
|
|
|
|
|
|
|
|
|
By:
|
/s/ CRAIG M. LATORRE
|
|
Name:
|
Craig M. LaTorre
|
|
Title:
|
Vice President, Human Resources and Communications
|
Employee:
|
Don J. Sorensen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
|
|
|
|
|
|
|
Company:
|
Tesoro Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Gregory J. Goff
|
|
|
Date
|
|
|
Chairman, President & Chief Executive Officer
|
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Tesoro Logistics LP;
|
2.
|
Based on my knowledge, this quarterly 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 quarterly report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;
|
4.
|
The registrant’s other certifying officer 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)) for the registrant and have:
|
(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 quarterly report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal controls 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 quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
|
(d)
|
Disclosed in this quarterly 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 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
|
5.
|
The registrant’s other certifying officer 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
|
(b)
|
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.
|
Date:
|
August 4, 2016
|
/s/ GREGORY J. GOFF
|
|
|
Gregory J. Goff
|
|
|
Chief Executive Officer of Tesoro Logistics GP, LLC
|
|
|
(the general partner of Tesoro Logistics LP)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Tesoro Logistics LP;
|
2.
|
Based on my knowledge, this quarterly 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 quarterly report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;
|
4.
|
The registrant’s other certifying officer 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)) for the registrant and have:
|
(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 quarterly report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal controls 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 quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
|
(d)
|
Disclosed in this quarterly 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 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
|
5.
|
The registrant’s other certifying officer 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
|
(b)
|
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.
|
Date:
|
August 4, 2016
|
/s/ STEVEN M. STERIN
|
|
|
Steven M. Sterin
|
|
|
Chief Financial Officer of Tesoro Logistics GP, LLC
|
|
|
(the general partner of Tesoro Logistics LP)
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
|
/s/ GREGORY J. GOFF
|
|||
Gregory J. Goff
|
|||
Chief Executive Officer of Tesoro Logistics GP, LLC
(the general partner of Tesoro Logistics LP)
|
|||
August 4, 2016
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
|
/s/ STEVEN M. STERIN
|
|||
Steven M. Sterin
|
|||
Chief Financial Officer of Tesoro Logistics GP, LLC
(the general partner of Tesoro Logistics LP)
|
|||
August 4, 2016
|