BP Midstream Partners LP (Form: 10-Q, Received: 11/05/2020 08:04:56)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-38260

BP Midstream Partners LP

(Exact name of registrant as specified in its charter)


Delaware						82-1646447
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

501 Westlake Park Boulevard, Houston, Texas 77079

(Address of principal executive offices) (Zip Code)

(281) 366-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Units, Representing Limited Partner Interests	BPMP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 4, 2020, the registrant had 52,402,967 common units and 52,375,535 subordinated units outstanding.

BP MIDSTREAM PARTNERS LP

TABLE OF CONTENTS


Item			Page

PART I - Financial Information			3

1. Financial Statements (Unaudited)			3
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Operations			4
Condensed Consolidated Statements of Changes in Equity			5
Condensed Consolidated Statements of Cash Flows			7
Notes to Condensed Consolidated Financial Statements (Unaudited)			8
2. Management's Discussion and Analysis of Financial Condition and Results of Operations			21
3. Quantitative and Qualitative Disclosures about Market Risk			34
4. Controls and Procedures			34

PART II - Other Information

1. Legal Proceedings			35
1A. Risk Factors			35
5. Other Information			36
6. Exhibits			39
Signature			39

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (UNAUDITED)

BP MIDSTREAM PARTNERS LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	September 30, 2020		December 31, 2019
	(in millions of dollars)
ASSETS
Current assets
Cash and cash equivalents	$	123.8	$	98.8
Accounts receivable – third parties	0.2		0.6
Accounts receivable – related parties	10.7		11.3
Prepaid expenses	—		5.1
Other current assets	4.4		5.0
Total current assets	139.1		120.8
Equity method investments (Note 3)	526.9		534.4
Property, plant and equipment, net (Note 4)	64.0		62.7
Other assets	3.6		4.2
Total assets	$	733.6	$	722.1

LIABILITIES
Current liabilities
Accounts payable – third parties	$	0.5	$	0.6
Accounts payable – related parties	1.7		1.7
Deferred revenue and credits	1.6		1.5
Other current liabilities (Note 5)	5.2		6.6
Total current liabilities	9.0		10.4
Long-term debt (Note 6)	468.0		468.0
Other liabilities	3.6		3.5
Total liabilities	480.6		481.9

Commitments and contingencies (Note 10)

EQUITY
Common unitholders – public (2020 – 47,821,790 issued and outstanding; 2019 – 47,806,563 units issued and outstanding)	858.6		851.6
Common unitholders – BP Holdco (2020 and 2019 – 4,581,177 units issued and outstanding)	(59.7)		(60.3)
Subordinated unitholders – BP Holdco (2020 and 2019 – 52,375,535 units issued and outstanding)	(681.8)		(689.2)
General partner	1.2		1.2
Total partners' capital	118.3		103.3
Non-controlling interests	134.7		136.9
Total equity	253.0		240.2
Total liabilities and equity	$	733.6	$	722.1

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

BP MIDSTREAM PARTNERS LP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions of dollars, unless otherwise indicated)
Revenue
Third parties	$	0.6	$	0.7	$	2.4	$	2.2
Related parties	33.1		33.9		93.5		91.2
Total revenue	33.7		34.6		95.9		93.4
Costs and expenses
Operating expenses – third parties	3.6		3.9		10.4		10.6
Operating expenses – related parties	1.3		1.4		4.1		4.3
Maintenance expenses – third parties	0.3		0.3		1.9		1.2
Maintenance expenses – related parties	0.1		—		0.3		0.1
General and administrative – third parties	0.4		0.6		2.0		2.0
General and administrative – related parties	3.5		3.5		11.0		10.6
Depreciation	0.7		0.7		2.0		2.0
Impairment and other, net	—		—		—		1.0
Property and other taxes	0.2		0.1		0.5		0.4
Total costs and expenses	10.1		10.5		32.2		32.2
Operating income	23.6		24.1		63.7		61.2
Income from equity method investments	27.6		30.1		85.7		83.3

Interest expense, net	1.5		3.8		6.8		11.3


Net income	49.7		50.4		142.6		133.2
Less: Net income attributable to non-controlling interests	4.4		4.7		15.0		13.0
Net income attributable to the Partnership	$	45.3	$	45.7	$	127.6	$	120.2

Net income attributable to the Partnership per limited partner unit – basic and diluted (in dollars):
Common units	$	0.42	$	0.43	$	1.19	$	1.13
Subordinated units	$	0.42	$	0.43	$	1.19	$	1.13

Weighted average number of limited partner units outstanding - basic and diluted (in millions):
Common units – public	47.8		47.8		47.8		47.8
Common units – BP Holdco	4.6		4.6		4.6		4.6
Subordinated units – BP Holdco	52.4		52.4		52.4		52.4

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

BP MIDSTREAM PARTNERS LP

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)


		Nine Month Period Ended September 30, 2020
		Partners' Capital
(in millions of dollars)		Common Unitholders – Public		Common Unitholders – BP Holdco		Subordinated Unitholders – BP Holdco		General Partner		Non-controlling Interests		Total
Balance at December 31, 2019		$	851.6	$	(60.3)	$	(689.2)	$	1.2	$	136.9	$	240.2
	Net income	18.5		1.8		20.2		1.2		5.8		47.5
	Distributions to unitholders ($0.3475 per unit) and general partner	(16.6)		(1.6)		(18.2)		(1.2)		—		(37.6)
	Unit-based compensation	0.1		—		—		—		—		0.1
	Distributions to non-controlling interests	—		—		—		—		(6.7)		(6.7)
Balance at March 31, 2020		853.6		(60.1)		(687.2)		1.2		136.0		243.5
	Net income	18.0		1.7		19.7		1.2		4.8		45.4
	Distributions to unitholders ($0.3475 per unit) and general partner	(16.6)		(1.6)		(18.2)		(1.2)		—		(37.6)

	Distributions to non-controlling interests	—		—		—		—		(5.5)		(5.5)
Balance at June 30, 2020		855.0		(60.0)		(685.7)		1.2		135.3		245.8
	Net income	20.1		1.9		22.1		1.2		4.4		49.7
	Distributions to unitholders ($0.3475 per unit) and general partner	(16.6)		(1.6)		(18.2)		(1.2)		—		(37.6)
	Unit-based compensation	0.1		—		—		—		—		0.1
	Distributions to non-controlling interests	—		—		—		—		(5.0)		(5.0)
Balance at September 30, 2020		$	858.6	$	(59.7)	$	(681.8)	$	1.2	$	134.7	$	253.0

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

BP MIDSTREAM PARTNERS LP

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)


		Nine Month Period Ended September 30, 2019
		Partners' Capital
(in millions of dollars)		Common Unitholders – Public		Common Unitholders – BP Holdco		Subordinated Unitholders – BP Holdco		General Partner		Non-controlling Interests		Total
Balance at December 31, 2018		$	836.8	$	(61.7)	$	(705.2)	$	—	$	141.0	$	210.9

	Net income	16.9		1.6		18.5		0.2		3.5		40.7
	Distributions to unitholders ($0.3015 per unit) and general partner	(14.4)		(1.4)		(15.8)		—		—		(31.6)

	Distributions to non-controlling interests	—		—		—		—		(4.6)		(4.6)
Balance at March 31, 2019		839.3		(61.5)		(702.5)		0.2		139.9		215.4
	Net income	16.9		1.6		18.4		0.4		4.8		42.1
	Distributions to unitholders ($0.3126 per unit) and general partner	(15.0)		(1.4)		(16.4)		(0.2)		—		(33.0)
	Unit-based compensation	0.1		—		—		—		—		0.1
	Distributions to non-controlling interests	—		—		—		—		(6.0)		(6.0)
Balance at June 30, 2019		841.3		(61.3)		(700.5)		0.4		138.7		218.6
	Net income	20.5		2.0		22.5		0.7		4.7		50.4
	Distributions to unitholders ($0.3237 per unit) and general partner	(15.5)		(1.5)		(16.9)		(0.4)		—		(34.3)
	Unit-based compensation	0.1		—		—		—		—		0.1
	Distributions to non-controlling interests	—		—		—		—		(5.3)		(5.3)
Balance at September 30, 2019		$	846.4	$	(60.8)	$	(694.9)	$	0.7	$	138.1	$	229.5

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

BP MIDSTREAM PARTNERS LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended September 30,
	2020		2019
	(in millions of dollars)
Cash flows from operating activities
Net income	$	142.6	$	133.2
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	2.0		2.0
Impairment and other, net	—		1.0
Non-cash expenses	0.2		0.2

Income from equity method investments	(85.7)		(83.3)
Distributions of earnings received from equity method investments	85.8		86.5
Changes in operating assets and liabilities
Accounts receivable	1.0		(1.2)
Prepaid expenses and other current assets	5.3		4.5
Accounts payable	(0.1)		(1.9)
Deferred revenue and credits	0.1		1.9
Other	(2.9)		(0.6)
Net cash provided by operating activities	148.3		142.3
Cash flows from investing activities
Capital expenditures	(2.0)		(0.4)
Proceeds from insurance claims	1.3		—
Distributions in excess of earnings from equity method investments	7.4		8.3
Net cash provided by investing activities	6.7		7.9
Cash flows from financing activities
Proceeds from issuance of term loan	468.0		—
Repayment of credit facility	(468.0)		—
Distributions to unitholders and general partner	(112.8)		(98.9)
Distributions to non-controlling interests	(17.2)		(15.9)
Net cash used in financing activities	(130.0)		(114.8)
Net change in cash and cash equivalents	25.0		35.4
Cash and cash equivalents at beginning of the period	98.8		57.0
Cash and cash equivalents at end of the period	$	123.8	$	92.4
Supplemental cash flow information
Cash paid for interest	10.4		12.3
Non-cash investing transactions
Accrued capital expenditures	1.6		0.3

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

BP MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions of dollars, unless otherwise indicated)

1. Business and Basis of Presentation

BP Midstream Partners LP (either individually or together with its subsidiaries, as the context requires, the “Partnership”) is a Delaware limited partnership formed on May 22, 2017 by BP Pipelines (North America) Inc. (“BP Pipelines”), an indirect wholly owned subsidiary of BP p.l.c. (“BP”), a “foreign private issuer” within the meaning of the Securities Exchange Act of 1934, as amended.

Unless otherwise stated or the context otherwise indicates, all references to “we,” “our,” “us,” or similar expressions refer to the legal entity BP Midstream Partners LP. The term “our Parent” refers to BP Pipelines; any entity that wholly owns BP Pipelines, indirectly or directly, including BP and BP America Inc. (“BPA”), an indirect wholly owned subsidiary of BP; and any entity that is wholly owned by the aforementioned entities, excluding BP Midstream Partners LP.

Business

BP Midstream Partners LP is a master limited partnership formed by BP Pipelines to own, operate, develop and acquire pipelines and other midstream assets. The Partnership's assets consist of interests in entities that own crude oil, natural gas, refined products and diluent pipelines and refined product terminals serving as key infrastructure for BP and other customers to transport onshore crude oil production to BP’s refinery in Whiting, Indiana (the “Whiting Refinery”) and offshore crude oil and natural gas production to key refining markets and trading and distribution hubs. Certain assets deliver refined products and diluent from the Whiting Refinery and other U.S. supply hubs to major demand centers.

As of September 30, 2020, the Partnership's assets consisted of the following:

•BP Two Pipeline Company LLC, which owns the BP#2 crude oil pipeline system (“BP2”).

•BP River Rouge Pipeline Company LLC, which owns the Whiting to River Rouge refined products pipeline system (“River Rouge”).

•BP D-B Pipeline Company LLC, which owns the Diamondback diluent pipeline system (“Diamondback”). BP2, River Rouge, and Diamondback, together, are referred to as the "Wholly Owned Assets".

•28.5% ownership interest in Mars Oil Pipeline Company, LLC (“Mars”), which owns a major corridor crude oil pipeline system in the Gulf of Mexico.

•65% ownership interest and 100% managing member interest in Mardi Gras Transportation System Company, LLC ("Mardi Gras"), which holds the following investments in joint ventures located in the Gulf of Mexico:

•56% ownership interest in Caesar Oil Pipeline Company, LLC (“Caesar”),

•53% ownership interest in Cleopatra Gas Gathering Company, LLC (“Cleopatra”),

•65% ownership interest in Proteus Oil Pipeline Company, LLC (“Proteus”), and,

•65% ownership interest in Endymion Oil Pipeline Company, LLC (“Endymion”).

•Together Endymion, Caesar, Cleopatra and Proteus are referred to as the “Mardi Gras Joint Ventures.”

•22.7% ownership interest in Ursa Oil Pipeline Company, LLC ("Ursa").

•25% ownership interest in KM Phoenix Holdings, LLC ("KM Phoenix").

We generate a majority of revenue by charging fees for the transportation of crude oil, refined products and diluent through our pipelines under agreements with minimum volume commitments ("MVC"). We do not engage in the marketing and trading of any commodities. All operations are conducted in the United States, and all long-lived assets are located in the United States. Partnership operations consist of one reportable segment.

Certain Partnership businesses are subject to regulation by various authorities including, but not limited to the Federal Energy Regulatory Commission ("FERC"). Regulatory bodies exercise statutory authority over matters such as common carrier tariffs, construction, rates and ratemaking and agreements with customers.

Basis of Presentation

Condensed consolidated financial statements have been prepared under the rules and regulations of the Securities and Exchange Commission (“SEC”). These rules and regulations conform to the accounting principles contained in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification, the single source of accounting principles generally accepted in the United States (“GAAP”).

BP MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions of dollars, unless otherwise indicated)

Certain information and footnote disclosures normally included in the annual consolidated financial statements have been condensed or omitted from these condensed consolidated financial statements. The condensed consolidated financial statements as of September 30, 2020, and for the three and nine months ended September 30, 2020 and 2019, included herein, are unaudited. These financial statements include all known accruals and adjustments necessary, in the opinion of management, for a fair presentation of our condensed consolidated financial position, results of operations and cash flows. Unless otherwise specified, all such adjustments are of a normal and recurring nature. The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019 (the "Partnership's 2019 10-K").

Partnership financial position, results of operations and cash flows consist of consolidated BP Midstream Partners LP activities and balances. All intercompany accounts and transactions within the financial statements have been eliminated for all periods presented.

Summary of Significant Accounting Policies

There have been no significant changes to accounting policies as disclosed in Note 2 - Summary of Significant Accounting Policies in the Partnership's 2019 10-K.

2. Revenue Recognition

We recognize revenue over time or at a point in time, depending on the nature of the performance obligations contained in the respective contract with customers. A performance obligation is our unit of account and it represents a promise in a contract to transfer goods or services to the customer. The contract transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is allocated to each performance obligation and recognized as revenue when or as the performance obligation is satisfied. The following is an overview of our significant revenue stream, including a description of the respective performance obligations and related methods of revenue recognition.

Pipeline Transportation

Revenue from pipeline transportation is comprised of tariffs and fees associated with the transportation of liquid petroleum products, generally at published tariffs and in certain instances, revenue from MVC contracts at negotiated rates. Tariff revenue is recognized either at the point of delivery or at the point of receipt, pursuant to specifications outlined in the respective tariffs. We record revenue for crude oil, refined products and diluent transportation during the period in which they are earned (i.e., either physical delivery of product has taken place or the services designated in the contract have been performed). Partnership services are typically billed on a monthly basis, and we generally do not offer extended payment terms. We accrue revenue based on services rendered but not billed for that accounting month.

Billings to BP Products North America Inc. ("BP Products") for deficiency volumes under its MVCs, if any, are recorded as deferred revenue and credits, a contract liability, on the condensed consolidated balance sheets, as BP Products has the right to make up the deficiency volumes within the measurement period specified by the agreements. Deferred revenue under these arrangements is recognized into revenue once it is deemed remote that the customer will meet its required annual MVC. If the customer does satisfy its minimum volume commitment by shipping the deficiency volumes within the same calendar year, it may receive a refund of excess payments.

We recognized $5.1 million and $11.1 million of deficiency revenue under the throughput and deficiency agreements with BP Products for the three and nine months ended September 30, 2020, respectively. We recognized $2.4 million of deficiency revenue under the throughput and deficiency agreements with BP Products for the three and nine months ended September 30, 2019.

Allowance Oil

The tariff for crude oil transportation at BP2 includes a fixed loss allowance (“FLA”). An FLA factor per barrel, a fixed percentage, is a separate fee that is considered a part of the transaction price under the applicable crude oil tariff to cover

BP MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions of dollars, unless otherwise indicated)

evaporation and other losses in transit. The amount of revenue recognized is a product of the quantity transported, the applicable FLA factor and the settlement price during the month the product is transported.

We recognized revenue of $1.6 million and $3.9 million in the three and nine months ended September 30, 2020, respectively, related to the FLA arrangements with our Parent. In the three and nine months ended September 30, 2019, we recognized revenue of $2.7 million and $7.8 million, respectively, related to FLA arrangements with our Parent.

Disaggregation of Revenue

The following table provides information about disaggregated revenue:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Transportation services revenue - third parties	$	0.6	$	0.7	$	2.4	$	2.2
Transportation services revenue - related parties	33.1		33.9		93.5		91.2
Total revenue	$	33.7	$	34.6	$	95.9	$	93.4

Future Performance Obligations

The values in the table below represent the fixed portion of the MVC arrangements with our existing customer contracts, summarized as future performance obligations as of September 30, 2020. The unfulfilled performance obligations included in the table below are expected to be recognized in revenue in the specified periods:


	As of September 30, 2020
Remainder of 2020	$	28.9
2021	1.7
Total	$	30.6

See Note 13 - Subsequent Events for additional information on new MVC arrangements.

Contract Balances

Contract assets and contract liabilities are the result of timing differences between revenue recognition, billings and cash collections. Contract liabilities or deferred revenue and credits primarily relate to consideration received from customers for temporary deficiency quantities under minimum volume contracts that the customer has the right to make up in a future period, which we subsequently recognize as revenue or amounts we credit back to the customer in a future period.

The following table provides information about receivables from contracts with customers, contract assets and contract liabilities:


	September 30, 2020		December 31, 2019
Receivables from contracts with customers - third parties	$	0.2	$	0.6
Receivables from contracts with customers - related parties	10.7		11.3
Deferred revenue and credits - related parties	1.6		1.5

3. Equity Method Investments

We account for ownership interests in Mars, the Mardi Gras Joint Ventures, Ursa, and KM Phoenix using the equity method for financial reporting purposes. Financial results include the Partnership's proportionate share of Mars, the Mardi Gras Joint Ventures, Ursa and KM Phoenix, which is reflected in Income from equity method investments on the condensed consolidated statements of operations. We did not record any impairment loss on equity method investments during the three and nine months ended September 30, 2020 and 2019.

BP MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions of dollars, unless otherwise indicated)

The table below summarizes the balances and activities related for each equity method investment ("EMI") recorded as of and for the three and nine months ended September 30, 2020 and 2019:


	Three Months Ended September 30, 2020							Three Months Ended September 30, 2019
	Percentage Ownership	Distributions Received		Income from EMI		Carrying Value		Percentage Ownership	Distributions Received		Income from EMI		Carrying Value
Mars	28.5%	$	(12.0)	$	13.0	$	55.3	28.5%	$	(14.2)	$	14.0	$	56.9
Caesar	56.0%	(3.9)		3.5		116.9		56.0%	(4.9)		3.7		118.4
Cleopatra	53.0%	(1.6)		1.2		115.1		53.0%	(2.4)		1.7		117.6
Proteus	65.0%	(3.9)		2.6		71.0		65.0%	(4.3)		3.2		76.5
Endymion	65.0%	(4.9)		5.3		81.9		65.0%	(3.5)		4.8		82.0
Others(1)	Various	(0.9)		2.0		86.7		Various	(3.2)		2.7		86.2
Total Equity Investments		$	(27.2)	$	27.6	$	526.9		$	(32.5)	$	30.1	$	537.6


	Nine Months Ended September 30, 2020							Nine Months Ended September 30, 2019
	Percentage Ownership	Distributions Received		Income from EMI		Carrying Value		Percentage Ownership	Distributions Received		Income from EMI		Carrying Value
Mars	28.5%	$	(38.7)	$	37.1	$	55.3	28.5%	$	(40.1)	$	37.8	$	56.9
Caesar	56.0%	(12.2)		11.7		116.9		56.0%	(14.4)		13.5		118.4
Cleopatra	53.0%	(6.9)		4.4		115.1		53.0%	(9.1)		7.1		117.6
Proteus	65.0%	(14.6)		10.3		71.0		65.0%	(11.9)		7.1		76.5
Endymion	65.0%	(15.6)		16.5		81.9		65.0%	(9.9)		9.4		82.0
Others(1)	Various	(5.2)		5.7		86.7		Various	(9.4)		8.4		86.2
Total Equity Investments		$	(93.2)	$	85.7	$	526.9		$	(94.8)	$	83.3	$	537.6

(1) Includes ownership in Ursa (22.7%) and KM Phoenix (25%).

The following table presents aggregated selected income statement data for equity method investments on a 100% basis for the three and nine months ended September 30, 2020 and 2019:


	Three Months Ended September 30,
	2020		2019
Statement of operations
Revenue	$	132.7	$	146.1
Operating expenses	58.5		63.3
Net income	74.2		83.0


	Nine Months Ended September 30,
	2020		2019
Statement of operations
Revenue	$	404.3	$	410.2
Operating expenses	179.9		180.3
Net income	224.7		231.4

BP MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions of dollars, unless otherwise indicated)

4. Property, Plant and Equipment

Property, plant and equipment consisted of the following:


	September 30, 2020		December 31, 2019
Land	$	0.2	$	0.2
Right-of-way assets	1.4		1.4
Buildings and improvements	6.9		6.9
Pipelines and equipment	95.1		94.4
Other	0.5		0.5
Construction in progress	3.2		0.6
Property, plant and equipment	107.3		104.0
Less: Accumulated depreciation	(43.3)		(41.3)
Property, plant and equipment, net	$	64.0	$	62.7

There were no impairments on property, plant and equipment for the three and nine months ended September 30, 2020. During the three and nine months ended September 30, 2019, an impairment charge of $2.3 million was recorded under "Impairment and other, net" on our condensed consolidated statements of operations. See Note 10 - Commitments and Contingencies.

5. Other Current Liabilities

Other current liabilities consisted of the following:


	September 30, 2020		December 31, 2019
Current portion of environmental remediation obligation	$	0.4	$	0.6
Current portion of lease liabilities	0.1		0.1
Accrued interest payable - related parties	0.9		4.2
Accrued liabilities	3.8		1.7
Other current liabilities	$	5.2	$	6.6

6. Debt

On February 24, 2020, we entered into a $468 million Term Loan Facility Agreement ("term loan") with an affiliate of BP. On March 13, 2020, proceeds were used to repay outstanding borrowings under the existing credit facility ("credit facility"). Please refer to Note 9 - Debt in the Partnership's 2019 10-K for further details. The term loan has a final repayment date of February 24, 2025, and provides for certain covenants, including the requirement to maintain a consolidated leverage ratio, which is calculated as total indebtedness to consolidated EBITDA, not to exceed 5.0 to 1.0, subject to a temporary increase in such ratio to 5.5 to 1.0 in connection with certain material acquisitions. Simultaneous with this transaction, we entered into the First Amendment to Short Term Credit Facility Agreement whereby the lender added a provision that indebtedness under both the term loan and the credit facility shall not exceed $600 million. All other terms of the credit facility remain the same. As of September 30, 2020, the Partnership was in compliance with the covenants contained in the term loan facility and the credit facility.

There were $468 million of outstanding borrowings under the term loan at September 30, 2020, and $468 million under the credit facility at December 31, 2019. Interest charges and fees were $1.5 million and $7.1 million for the three and nine months ended September 30, 2020, respectively. Interest charges and fees related to the credit facility were $4.1 million and $12.3 million for the three and nine months ended September 30, 2019, respectively.

Indebtedness under the term loan bears interest at the 3-month LIBOR plus 0.73%. For the three and nine months ended September 30, 2020, the weighted average interest rate for the term loan and the credit facility was 1.18% and 1.91%, respectively.

For the year ended December 31, 2019, the weighted average interest rate for the credit facility was 3.25%. The credit facility includes customary fees, including a commitment fee of 0.10% and a utilization fee of 0.20% per annum.

BP MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions of dollars, unless otherwise indicated)

7. Related Party Transactions

Related party transactions include transactions with our Parent and its affiliates, including those entities in which our Parent has an ownership interest but over which it does not have control. In addition to the MVC and FLA arrangements discussed in Note 2 - Revenue Recognition and the credit facility and term loan in Note 6 - Debt, we have entered into the following transactions with related parties:

Omnibus Agreement

The Partnership has entered into an omnibus agreement with BP Pipelines and certain of its affiliates, including BP Midstream Partners GP LLC (our "General Partner"). This agreement addresses, among other things, (i) the Partnership's obligation to pay an annual fee for general and administrative services provided by BP Pipelines and its affiliates, (ii) the Partnership's obligation to reimburse BP Pipelines for personnel and other costs related to the direct operation, management and maintenance of the assets and (iii) the Partnership's obligation to reimburse BP Pipelines for services and certain direct or allocated costs and expenses incurred by BP Pipelines or its affiliates on behalf of the Partnership.

BP Pipelines will indemnify us for all known and certain unknown environmental liabilities that are associated with the ownership or operation of Partnership assets and due to occurrences on or before October 30, 2017, subject to certain limitations. Specifically, under our omnibus agreement, indemnification for any unknown environmental liabilities was limited to liabilities due to occurrences on or before October 30, 2017, which were identified prior to October 30, 2020. We continue to maintain indemnification by our general partner for matters previously discovered. To the extent that unknown environmental liabilities arise relating to prior ownership, the Partnership will be liable.

Further, the omnibus agreement addresses the granting of a license from BPA to the Partnership with respect to use of certain BP trademarks and trade name.

Related Party Revenue

We provide crude oil, refined products and diluent transportation services to related parties and generate revenue through published tariffs. We have commercial arrangements with BP Products that include MVCs. See Note 10 - Related Party Transactions in the Partnership's 2019 10-K for further discussion regarding these agreements.

Revenue from related parties was $33.1 million and $93.5 million for the three and nine months ended September 30, 2020, respectively, and $33.9 million and $91.2 million for the three and nine months ended September 30, 2019, respectively.

We recognized $5.1 million and $11.1 million of deficiency revenue under the throughput and deficiency agreements with BP Products for the three and nine months ended September 30, 2020, respectively. We recognized $2.4 million of deficiency revenue for the three and nine months ended September 30, 2019. The Partnership recorded $1.6 million and $1.5 million in Deferred revenue and credits on the condensed consolidated balance sheets at September 30, 2020 and December 31, 2019, respectively.

Related Party Expenses

All employees performing services on behalf of Partnership operations are employees of our Parent. Our Parent also procures insurance policies on our behalf and performs certain general corporate functions for us related to finance, accounting, treasury, legal, information technology, human resources, shared services, government affairs, insurance, health, safety, security, employee benefits, incentives, severance and environmental functional support. Personnel and operating costs incurred by our Parent on our behalf are included in either Operating expenses – related parties or General and administrative – related parties in the condensed consolidated statements of operations, depending on the nature of the service provided.

We paid our Parent an annual fee of $13.6 million in 2019 in the form of monthly installments under the omnibus agreement for general and administrative services provided by our Parent and its affiliates. The annual fee was adjusted to $15.2 million per year, payable in equal monthly installments, beginning on January 1, 2020. During the second quarter of 2020, our Parent agreed to adjust the fee payable under the Omnibus Agreement back to the 2019 annual fee, beginning in the second quarter, prorated for the remainder of 2020 due to the ongoing economic effects of the global COVID-19 pandemic. A new fee will be in place for 2021. We also reimburse our Parent for personnel and other costs related to the direct operation, management and

BP MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions of dollars, unless otherwise indicated)

maintenance of the assets and services and certain direct or allocated costs and expenses incurred by our Parent or its affiliates on our behalf pursuant to the terms in the omnibus agreement.

For the three and nine months ended September 30, 2020 and 2019, we recorded the following amounts for related party expenses, which also included the expenses related to share-based compensation discussed below:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Operating expenses—related parties	$	1.3	$	1.4	$	4.1	$	4.3
Maintenance expenses—related parties	0.1		—		0.3		0.1
General and administrative—related parties	3.5		3.5		11.0		10.6
Total costs and expenses—related parties	$	4.9	$	4.9	$	15.4	$	15.0

Share-based Compensation

Our Parent operates share option plans and equity-settled employee share plans. These plans typically have a three-year performance or restricted period during which the units accrue net notional dividends, which are treated as having been reinvested. Leaving employment will normally preclude the conversion of units into shares, but special arrangements apply for participants that leave for qualifying reasons.

Share-based compensation related to the employees of our Parent who provide services to us is charged to the Partnership pursuant to the terms of the omnibus agreement. The Partnership also issued its own unit-based compensation under a long-term incentive plan. See Note 11 - Unit-Based Compensation.

Non-controlling Interests

Non-controlling interests consist of the 35% ownership interest in Mardi Gras held by our Parent at September 30, 2020 and 2019. Net income attributable to non-controlling interests is the product of the non-controlling interests ownership percentage and the net income of Mardi Gras. We report Non-controlling interests as a separate component of equity on the condensed consolidated balance sheets and Net income attributable to non-controlling interests on the condensed consolidated statements of operations.

8. Net Income Per Limited Partner Unit

The following table details the distributions declared and/or paid for the periods presented:


Three Months Ended	Date Paid or to be Paid	General Partner		Limited Partners' Common Units		Limited Partners' Subordinated Units		Total		Distributions per Limited Partner Unit (in dollars)
December 31, 2018	February 14, 2019	$	—	$	15.8	$	15.8	$	31.6	$	0.3015
March 31, 2019	May 15, 2019	0.2		16.4		16.4		33.0		0.3126
June 30, 2019	August 14, 2019	0.4		17.0		17.0		34.4		0.3237
September 30, 2019	November 14, 2019	0.7		17.6		17.6		35.9		0.3355
December 31, 2019	February 13, 2020	1.2		18.2		18.2		37.6		0.3475
March 31, 2020	May 14, 2020	1.2		18.2		18.2		37.6		0.3475
June 30, 2020	August 13, 2020	1.2		18.2		18.2		37.6		0.3475
September 30, 2020	November 12, 2020	1.2		18.2		18.2		37.6		0.3475

Earnings in excess of distributions are allocated to the limited partners based on their respective percentage interests. Payments made to the Partnership’s unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of net income per unit.

In addition to the common and subordinated units, the Partnership also identified the incentive distribution rights ("IDRs") currently held by the General Partner as a participating security and uses the two-class method when calculating the net income

BP MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions of dollars, unless otherwise indicated)

per unit applicable to limited partners that is based on the weighted-average number of common units outstanding during the period.

When calculating basic earnings per unit under the two-class method for a master limited partnership, net income for the current reporting period is reduced by the amount of available cash that will be distributed to the General Partner and limited partners for that reporting period. The following tables show the allocation of net income to arrive at net income per limited partner unit for the three and nine months ended September 30, 2020 and 2019:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net income attributable to the Partnership	$	45.3	$	45.7	$	127.6	$	120.2
Less:
Incentive distribution rights currently held by the General Partner	1.2		0.7		3.6		1.3
Limited partners' distribution declared on common units	18.2		17.6		54.6		50.9
Limited partners' distribution declared on subordinated units	18.2		17.6		54.6		50.9
Net income attributable to the Partnership in excess of distributions	$	7.7	$	9.8	$	14.8	$	17.1


	Three Months Ended September 30, 2020
	General Partner		Limited Partners' Common Units		Limited Partners' Subordinated Units		Total
Distributions declared	$	1.2	$	18.2	$	18.2	$	37.6
Net income attributable to the Partnership in excess of distributions	—		3.8		3.9		7.7
Net income attributable to the Partnership	$	1.2	$	22.0	$	22.1	$	45.3
Weighted average units outstanding:
Basic and Diluted			52.4		52.4		104.8
Net income per limited partner unit (in dollars):
Basic and Diluted			$	0.42	$	0.42


	Nine Months Ended September 30, 2020
	General Partner		Limited Partners' Common Units		Limited Partners' Subordinated Units		Total
Distributions declared	$	3.6	$	54.6	$	54.6	$	112.8
Net income attributable to the Partnership in excess of distributions	—		7.4		7.4		14.8
Net income attributable to the Partnership	$	3.6	$	62.0	$	62.0	$	127.6
Weighted average units outstanding:
Basic and Diluted			52.4		52.4		104.8
Net income per limited partner unit (in dollars):
Basic and Diluted			$	1.19	$	1.19

BP MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions of dollars, unless otherwise indicated)


	Three Months Ended September 30, 2019
	General Partner		Limited Partners' Common Units		Limited Partners' Subordinated Units		Total
Distributions declared	$	0.7	$	17.6	$	17.6	$	35.9
Net income attributable to the Partnership in excess of distributions	—		4.9		4.9		9.8
Net income attributable to the Partnership	$	0.7	$	22.5	$	22.5	$	45.7
Weighted average units outstanding:
Basic and Diluted			52.4		52.4		104.8
Net income per limited partner unit (in dollars):
Basic and Diluted			$	0.43	$	0.43


	Nine Months Ended September 30, 2019
	General Partner		Limited Partners' Common Units		Limited Partners' Subordinated Units		Total
Distributions declared	$	1.3	$	50.9	$	50.9	$	103.1
Net income attributable to the Partnership in excess of distributions	—		8.6		8.5		17.1
Net income attributable to the Partnership	$	1.3	$	59.5	$	59.4	$	120.2
Weighted average units outstanding:
Basic and Diluted			52.4		52.4		104.8
Net income per limited partner unit (in dollars):
Basic and Diluted			$	1.13	$	1.13

9. Fair Value Measurements

The carrying amounts of accounts receivable, other current assets, accounts payable, and other current liabilities approximate their fair values due to their short-term nature.

The carrying value of borrowings under the term loan as of September 30, 2020, and the credit facility as of December 31, 2019, approximate fair value as the interest rates are reflective of market rates.

10. Commitments and Contingencies

Legal Proceedings

The Partnership is a party to ongoing legal proceedings in the ordinary course of business. For each outstanding legal matter, if any, we will evaluate the merits of the case, exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. While the outcome of these proceedings cannot be predicted with certainty, we do not believe the results of these proceedings, individually or in the aggregate, will have a material adverse effect on the Partnership's business, financial condition, results of operations or liquidity.

Indemnification

Under an omnibus agreement, our Parent will indemnify us for certain environmental liabilities, litigation and other matters attributable to the ownership or operation of assets prior to Partnership ownership. For the purposes of determining the indemnified amount of any loss suffered or incurred by the Partnership, the Partnership’s ownership of 28.5% in Mars, and 65% in Mardi Gras, and Mardi Gras’ 56% ownership in Caesar, 53% ownership in Cleopatra, 65% ownership in Endymion and 65% ownership in Proteus will be considered. Indemnification for certain identified environmental liabilities is subject to a cap of $25 million without any deductible. Other matters covered by the omnibus agreement are subject to a cap of $15 million and an aggregate deductible of $0.5 million before we are entitled to indemnification. Indemnification for any unknown environmental

BP MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions of dollars, unless otherwise indicated)

liabilities is limited to liabilities due to occurrences prior to the closing of the Initial Public Offering ("IPO") and that are identified before the third anniversary of the closing of the IPO.

The Interest Purchase Agreement contains customary representations, warranties and covenants of our Parent and the Partnership. Our Parent, on the one hand, and the Partnership, on the other hand, have agreed to indemnify each other and their respective affiliates, officers, directors and other representatives against certain losses, including those resulting from any breach of their representations, warranties or covenants contained in the Interest Purchase Agreement, subject to certain limitations and survival periods. This agreement covers the Partnership’s ownership of 22.7% in Ursa and 25% in KM Phoenix.

Environmental Matters

We are subject to federal, state, and local environmental laws and regulations. We record provisions for environmental liabilities based on management’s best estimates, using all information that is available at the time. In making environmental liability estimations, we consider the material effect of environmental compliance, pending legal actions against us and potential third-party liability claims. Often, as the remediation evaluation and effort progress, additional information is obtained, requiring revisions to estimated costs. We are indemnified by our Parent under the omnibus agreement against environmental cleanup costs for incidents that occurred prior to Partnership ownership. Revisions to the estimated environmental liability for conditions that are not indemnified under the omnibus agreement with our Parent are reflected in the Partnership's condensed consolidated statements of operations in the year in which they are probable and reasonably estimable.

We accrued $3.6 million and $3.7 million for environmental liabilities at September 30, 2020 and December 31, 2019, respectively. These balances are broken down on the condensed consolidated balance sheets as follows:


	Balance sheet location	September 30, 2020		December 31, 2019
Current portion of environmental remediation obligations	Other current liabilities	$	0.4	$	0.6
Long-term portion of environmental remediation obligations	Other liabilities	3.2		3.1
Total		$	3.6	$	3.7

The balances are related to incidents that occurred prior to our ownership and are entirely indemnified by our Parent. As a result, we recorded corresponding indemnification assets $3.6 million and $3.7 million at September 30, 2020 and December 31, 2019, respectively. These balances are broken down on the condensed consolidated balance sheets as follows:


	Balance sheet location	September 30, 2020		December 31, 2019
Current portion of indemnification assets	Other current assets	$	0.4	$	0.6
Non-current portion of indemnification assets	Other assets	3.2		3.1
Total		$	3.6	$	3.7

Griffith Station Incident

On June 13, 2019, a building fire occurred at the Griffith Station on BP2. At June 30, 2020 we recorded $5.2 million under "Other current assets" on our condensed consolidated balance sheet. We have received $1.3 million of insurance proceeds, leaving a balance of $3.9 million under "Other current assets" on our condensed consolidated balance sheet at September 30, 2020. The insurance receivable was recorded as $4.3 million under "Other current assets" and $0.7 million under "Other assets" on our consolidated balance sheet as of December 31, 2019. See Note 14 - Commitments and Contingencies in the Partnership's 2019 10-K for additional information.

11. Unit-Based Compensation

Long-Term Incentive Plan

On October 26, 2017, the General Partner adopted the BP Midstream Partners LP 2017 Long Term Incentive Plan (the “LTIP”). Awards under the LTIP are available for eligible officers, directors, employees and consultants of the General Partner and its affiliates, who perform services for the Partnership. The LTIP allows the Partnership to grant unit options, unit appreciation rights, restricted units, phantom units, unit awards, cash awards, performance awards, distribution equivalent rights, substitute awards and other unit-based awards. The maximum aggregate number of common units that may be issued

BP MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions of dollars, unless otherwise indicated)

pursuant to the awards granted under the LTIP shall not exceed 5,502,271, subject to proportionate adjustment in the event of unit splits and similar events.

Unit-Based Awards under the LTIP

The following is a summary of phantom unit award activities of the Partnership’s common units for the nine months ended September 30, 2020:


	Phantom Units
	Number of Units (in units)	Weighted Average Grant Date Fair Value per Unit (in dollars)
Outstanding at December 31, 2019	15,227	$	16.64
Granted	16,038	14.03
Vested	(15,227)	16.64

Outstanding at September 30, 2020	16,038	$	14.03

For the three and nine months ended September 30, 2020, total compensation expense recognized for phantom unit awards were approximately $57 thousand and $176 thousand, respectively. For the three and nine months ended September 30, 2019, total compensation expense recognized for phantom unit awards was approximately $64 thousand and $175 thousand, respectively. The unrecognized compensation cost related to phantom unit awards was approximately $90 thousand at September 30, 2020, which is expected to be recognized over a weighted average period of 0.4 years.

12. Variable Interest Entity

Mardi Gras is a Delaware limited liability company and a pass-through entity for U.S. federal and state income tax purposes. Mardi Gras holds equity interests in the Mardi Gras Joint Ventures and accounts for them as equity method investments. Mardi Gras does not have any other operations or activities. The remaining interests in each of the Mardi Gras Joint Ventures are owned by unaffiliated third-party investors. Each of the Mardi Gras Joint Ventures is managed by its respective management committee, and decisions made by these management committees require approval of two or more members that are not affiliates with equity interest holdings meeting certain thresholds.

We have 65% ownership interest and 100% managing member interest in Mardi Gras. The remainder of the economic interest in Mardi Gras was held 34% by BP Pipelines and 1% by an affiliate of BP. Through our managing member interest in Mardi Gras, we have the right to vote 100% of Mardi Gras’ interest in each of the Mardi Gras Joint Ventures. We determined that Mardi Gras is a variable interest entity because (i) we hold disproportional voting rights as compared to our economic interest in Mardi Gras, and (ii) substantially all of Mardi Gras’ activities involve or are conducted on behalf of our Parent, which holds disproportionately few voting rights.

The managing member interest in Mardi Gras provides us with the unilateral power to direct the activities of Mardi Gras that most significantly impact its economic performance including the right to exercise the voting rights of BP for each of the Mardi Gras Joint Ventures. In addition, our obligations to absorb the expected losses of and the right to receive the residual returns from Mardi Gras relative to our economic ownership is significant to Mardi Gras. As a result, we are the primary beneficiary of Mardi Gras and consolidate Mardi Gras.

We have the obligation to provide financial support to Mardi Gras if all members unanimously determine that additional capital contributions are necessary to fund Mardi Gras’ operations. The assets of Mardi Gras can only be used to satisfy its own obligations, which were zero at September 30, 2020 and December 31, 2019. Under the current limited liability company agreement of Mardi Gras, creditors of Mardi Gras, if any, do not have any recourse to the general credit of the Partnership.

The financial position of Mardi Gras at September 30, 2020 and December 31, 2019, its financial performance for the three and nine months ended September 30, 2020 and 2019 and cash flows for the nine months ended September 30, 2020 and 2019, as reflected in the condensed consolidated financial statements, are as follows:

BP MIDSTREAM PARTNERS LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in millions of dollars, unless otherwise indicated)


	September 30, 2020		December 31, 2019
Balance sheet
Equity method investments	$	384.9	$	391.3
Non-controlling interests	134.7		136.9


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Statement of operations
Income from equity method investments	$	12.6	$	13.4	$	42.9	$	37.1
Less: Net income attributable to non-controlling interests	4.4		4.7		15.0		13.0
Net impact on Net income attributable to the Partnership	$	8.2	$	8.7	$	27.9	$	24.1


	Nine Months Ended September 30,
	2020		2019
Statement of cash flows
Cash flows from operating activities
Distributions of earnings received from equity method investments	$	41.9	$	37.0
Cash flows from investing activities
Distribution in excess of earnings from equity method investments	7.4		8.3
Cash flows from financing activities
Distributions to non-controlling interests	(17.2)		(15.9)
Net change on the Partnership's cash and cash equivalents	$	32.1	$	29.4

13. Subsequent Events

We have evaluated subsequent events through the issuance of these condensed consolidated financial statements. Based on this evaluation, it was determined that no subsequent events occurred, other than the items noted below, that require recognition or disclosure in the condensed consolidated financial statements.

Distribution

On October 15, 2020, we declared a cash distribution of $0.3475 per limited partner unit to unitholders of record on October 29, 2020, for the three months ended September 30, 2020. The distribution, combined with distributions to our General Partner, will be paid on November 12, 2020, and will total $37.6 million, with $16.6 million distributed to our non-affiliated common unitholders, and $21.0 million, including $1.2 million for IDRs distributed to our Parent in respect of its ownership of our common units, subordinated units and IDRs.

Throughput and Deficiency Agreements

On November 3, 2020, the Partnership entered into throughput and deficiency agreements with BP Products with respect to volumes transported on the following lines (i) BP2 crude oil pipeline system and related assets; (ii) River Rouge refined products pipeline system and related assets; and (iii) Diamondback diluent pipeline system and related assets. These new agreements have a term of three years beginning January 1, 2021 and expiring December 31, 2023. The Partnership has existing agreements on the same pipelines with BP Products that expire on December 31, 2020.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (the “Quarterly Report”) includes various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements other than statements of historical fact included in this Quarterly Report, regarding Partnership's strategy, future growth, future operations, future actions, the continued effects of the global COVID-19 pandemic on demand, the effects of the continued volatility of commodity prices and the related macroeconomic and political environment, volumes, capital requirements, conditions or events, future operating results or the ability to generate sales, our potential exposure to market risks, statements relating to the expected amount of cash available for distribution and level of distributions, financial position, estimated revenues and losses, projected cost, prospects, plans and objectives of management, are forward-looking statements.

When used in this Quarterly Report, you can identify forward-looking statements by words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “plan,” “predict,” “project,” “seek,” “target,” “could,” “may,” “should,” “would” or other similar expressions that convey the uncertainty of future events or outcomes, although not all forward-looking statements contain such identifying words. When considering forward-looking statements, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2019, under Part II, Item 1A of our Quarterly Reports and other cautionary statements contained in this filing.

We based forward-looking statements on current expectations and assumptions about future events and currently available information as to the outcome and timing of future events. We caution you that these statements are not guarantees of future performance as they involved assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. Accordingly, actual outcomes and results may differ materially from what the Partnership has expressed or forecast in the forward-looking statements.

Forward-looking statements may include statements about:

•The decline in global crude oil demand and crude oil prices for an uncertain period of time that may lead to a significant reduction of domestic crude oil and natural gas production, which in turn could result in significant declines in the actual or expected volumes transported through our pipelines and/or the reduction of commercial opportunities that might otherwise be available to us.

•Uncertainty regarding the easing of restrictions on various commercial and economic activities by applicable authorities, as well as the potential reinstatement of such restrictions, in response to the spread of COVID-19; such restrictions are designed to protect public health but also have the effect of significantly reducing demand for crude oil, natural gas, refined products and diluent.

•Uncertainty regarding the future actions of foreign oil producers such as Saudi Arabia and Russia and the risk that they take actions that will prolong or exacerbate the current over-supply of crude oil.

•Uncertainty regarding the timing, pace and extent of an economic recovery in the United States and elsewhere, which in turn will likely affect demand for crude oil and therefore the demand for the midstream services we provide and the commercial opportunities available to us.

•The effect of an overhang of significant amounts of crude oil inventory stored in the United States and elsewhere and the impact that such inventory overhang ultimately has on our customers' operations as well as the timing of a return to market conditions that support increased drilling and production activities in the United States.

•Our inability to perform our obligations under our contracts, whether due to non-performance by third parties, including our customers or counterparties, market constraints, third-party constraints, legal constraints (including governmental orders or guidance), or other factors.

•The continued ability of BP and any non-affiliate customers to satisfy their obligations under commercial and other agreements and the impact of lower market prices for crude oil, natural gas, refined products and diluent including the ability to satisfy such obligations as they may be impacted by the effects of COVID-19.

•The volume of crude oil, natural gas, refined products and diluent we transport or store and the prices that we can charge our customers.

•The tariff rates with respect to volumes that we transport through our regulated assets, which rates are subject to review and possible adjustment imposed by federal and state regulators.

•Changes in revenue that we realized under the fixed loss allowance provisions fees and tariffs resulting from changes in underlying commodity prices.

•Fluctuations in the prices for crude oil, natural gas, refined products and diluent.

•The level of onshore and offshore production and demand for crude oil, natural gas, refined products and diluent.

•Our ability to successfully integrate recently acquired assets and realize the anticipated benefits of such acquisitions.

•Changes in global economic conditions and the effects of a global economic downturn on the business of BP and the business of its suppliers, customers, business partners and credit lenders.

•Liabilities associated with the risks and operational hazards inherent in transporting and/or storing crude oil, natural gas, refined products and diluent.

•The impact of hurricanes and other severe weather disruptions to our offshore pipelines in the Gulf of Mexico.

•Curtailment of operations or expansion projects due to unexpected leaks or spills; severe weather disruption; riots, strikes, lockouts or other industrial disturbances; or failure of information technology systems due to various causes, including unauthorized access or attack.

•The impact of current and future laws, rulings, governmental regulations, accounting standards and statements, and related interpretations.

•Costs or liabilities associated with federal, state and local laws and regulations relating to environmental protection and safety, including spills, releases and pipeline integrity.

•Costs associated with compliance with evolving environmental laws and regulations on climate change.

•Costs associated with compliance with safety regulations and system maintenance programs, including pipeline integrity management program testing and related repairs.

•Changes in tax status.

•Changes in the cost or availability of third-party vessels, pipelines, rail cars and other means of delivering and transporting crude oil, natural gas, refined products and diluent.

•Direct or indirect effects on our operations resulting from actual or threatened terrorist incidents or acts of war.

•Changes in, and availability to us of the equity and debt capital markets.

Many of the foregoing risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any consequent worsening of the global business and economic environment. New factors emerge from time to time, and it is not possible for us to predict all such factors. Should one or more of the risks or uncertainties described in this Quarterly Report occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that the Partnership or persons acting on the Partnership's behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Unless otherwise stated or the context otherwise indicates, all references to “we,” “our,” “us,” refer to the legal entity BP Midstream Partners LP (the "Partnership"). The term “our Parent” refers to BP Pipelines (North America), Inc. (“BP Pipelines”), any entity that wholly owns BP Pipelines, indirectly or directly, including BP America Inc. and BP p.l.c. (“BP”), and any entity that is wholly owned by the aforementioned entities, excluding BP Midstream Partners LP.

The following management discussion and analysis of financial conditions and results of operations should be read in conjunction with the unaudited financial statements and accompanying notes in this quarterly report and our Annual Report on Form 10-K for the year ended December 31, 2019 (the "Partnership's 2019 10-K"). All amounts are in millions of dollars, unless otherwise indicated.

Partnership Overview

We are a fee-based, growth-oriented master limited partnership formed by BP Pipelines, an indirect wholly owned subsidiary of BP, to own, operate, develop and acquire pipelines and other midstream assets. Partnership assets consist of interests in entities that own crude oil, natural gas, refined products and diluent pipelines and refined product terminals serving as key infrastructure for BP and other customers to transport onshore crude oil production to BP’s Whiting Refinery and offshore crude oil and natural gas production to key refining markets and trading and distribution hubs. Certain Partnership assets deliver refined products and diluent from the Whiting Refinery and other U.S. supply hubs to major demand centers.

As of September 30, 2020, the Partnership's assets consisted of the following:

•BP Two Pipeline Company LLC, which owns the BP#2 crude oil pipeline system (“BP2”).

•BP River Rouge Pipeline Company LLC, which owns the Whiting to River Rouge refined products pipeline system (“River Rouge”).

•BP D-B Pipeline Company LLC, which owns the Diamondback diluent pipeline system (“Diamondback”). BP2, River Rouge, and Diamondback together are referred to as the "Wholly Owned Assets".

•28.5% ownership interest in Mars Oil Pipeline Company, LLC (“Mars”), which owns a major corridor crude oil pipeline system in the Gulf of Mexico.

•65% ownership interest and 100% managing member interest in Mardi Gras Transportation System Company, LLC (“Mardi Gras”), which holds the following investments in joint ventures located in the Gulf of Mexico:

•56% ownership interest in Caesar Oil Pipeline Company, LLC (“Caesar”),

•53% ownership interest in Cleopatra Gas Gathering Company, LLC (“Cleopatra”),

•65% ownership interest in Proteus Oil Pipeline Company, LLC (“Proteus”), and,

•65% ownership interest in Endymion Oil Pipeline Company, LLC (“Endymion”). Together Endymion, Caesar, Cleopatra and Proteus are referred to as the “Mardi Gras Joint Ventures.”

•22.7% ownership interest in Ursa Oil Pipeline Company, LLC ("Ursa").

•25% ownership interest in KM Phoenix Holdings, LLC ("KM Phoenix").

The Partnership generates a majority of revenue by charging fees for the transportation of crude oil, refined products and diluent through pipelines under long-term agreements with minimum volume commitments (“MVC”). We do not engage in the marketing and trading of any commodities. All operations are conducted in the United States, and all long-lived assets are located in the United States. Partnership operations consist of one reportable segment.

Business Environment, Market Conditions and Outlook

The impact to the energy industry from both the recent swift and material decline in commodity prices and the global outbreak of COVID-19 have been unprecedented. Additionally, the operations of Mars, Ursa, Caesar, Proteus and Endymion, our offshore crude oil pipeline systems, and Cleopatra, our offshore natural gas pipeline (“Offshore Pipelines”), have been impacted by an elevated number of storms in the Gulf of Mexico during the third quarter. During 2020, there have been six named storms in the region, one in the second quarter and five in the third quarter. Although our assets have remained operational, the active storm season has negatively impacted our third quarter results, which we expect to continue into the fourth quarter. Management continues to monitor the challenging macro environment. For risks associated with these and other factors, see “Item 1A. Risk Factors” in this Quarterly Report.

Management continues to work closely with BP Pipelines, as operator of our assets under the Omnibus Agreement, to ensure appropriate practices are adopted for continued functioning of our assets as well as mitigation strategies for any office or worksite where COVID-19 may be detected.

COVID-19

In the first quarter of 2020, the COVID-19 outbreak spread across the globe. Federal, state and local governments mobilized to implement containment mechanisms and minimize impacts to their populations and economies. Various containment measures, which included the quarantining of cities, regions and countries, have resulted in a significant drop in general economic activity and a resulting decrease in demand for petroleum and petroleum-based products.

In the second and third quarters of 2020, as COVID-19 appeared to decrease or stabilize in certain areas, certain local, regional and national authorities began to loosen such containment measures and restrictions in various locations in an effort to begin economic recovery, among other purposes. While this relaxation of containment measures initially led to an increased demand for petroleum and petroleum-based products through improved general economic conditions, there has also been a resurgence of COVID-19 cases in the third quarter and continuing into October 2020 that resulted in the reinstatement of containment measures and restrictions, which could lower demand for petroleum and petroleum-based products.

Decline in Demand and Potential Impact to Our Operations

The unprecedented supply and demand dynamics created by demand decreases resulting from COVID-19 and supply increases resulting from recent periods of increased production by members of the Organization of Petroleum Exporting Countries and other countries, including Russia ("OPEC+"), beginning in March 2020, have resulted in severe declines in commodity prices and created volatility, uncertainty, and turmoil in the oil and gas industry. Despite OPEC+ agreeing to cut production in April 2020, such production cuts have yet to offset the decrease in demand resulting from the COVID-19 pandemic and related economic repercussions. As a result, the price of oil has remained depressed, and available storage and transportation capacity for production have been limited. It is uncertain whether capital and production cuts will continue and, if so, whether they will be sufficient to offset the continued low demand resulting from the COVID-19 pandemic. Demand and prices may again decline due to the resurgence of the outbreak across the U.S. and other locations across the world and the related social distancing guidelines, travel restrictions, and stay-at-home orders, although the extent of the additional impact on our industry and our business cannot be reasonably predicted at this time.

In the nine months ended September 30, 2020, we experienced a negative financial impact on our onshore pipelines as a result of reduced demand. The impacts of this as well as other operational drivers are offset by $11.1 million of deficiency revenue recorded under our MVCs on all onshore pipelines, which extend through December 31, 2020 (and for certain volumes on Diamondback through June 30, 2021). We could continue to experience a negative financial impact if volumes shipped on our pipelines remain below such minimum commitments beyond 2020 as a result of reduced consumer demand due to the response to the COVID-19 pandemic. As discussed in greater detail below under “Item 5—Throughput and Deficiency Agreements,” BP Products has executed new MVC agreements for an additional three years which continue to provide downside protection to the Partnership.

For our offshore joint ventures, we expect demand to be resilient, as offshore projects are larger capital projects planned over many years and less impacted by temporary changes in capital investment. We experienced a decline in volumes on our offshore pipelines during the second and third quarters; and such decline was primarily due to the short term weather impacts in the Gulf of Mexico and planned maintenance activities. To limit the impact of COVID-19, BP and our other customers, as well as third-party operators of our pipelines, have implemented various protocols for both onshore and offshore personnel; however, these may not prove to be successful. There is risk of decreased volumes with respect to our offshore operations if operators take actions to reduce operations in response to demand declines or increasingly limited storage availability or are unable to control COVID-19 infections on platforms and are required to shut-in. Additionally, we expect the shippers on our offshore pipelines to continue to find buyers for their production; however, they may not be successful.

We have taken steps and continue to actively work to mitigate the evolving challenges and continuing impact of both the COVID-19 pandemic and the industry downturn on our operations and our financial condition. We have also worked with BP Pipelines and the third-party operators of our assets to ensure that COVID-19 response and business continuity plans have been implemented across all of our assets and operations. BP employees, including BP Pipelines personnel, have been working from home since March 16, 2020, except those deemed critical to the functioning of owned and managed assets. For those that are critical and are required to be on-site, protocols have been implemented to protect those employees. Thus far, the need for BP employees to work remotely has not significantly impacted our operations, including use of financial reporting systems, nor has it significantly impacted our internal control environment. We have not incurred, and in the future do not expect to incur, significant expenses related to business continuity. However, our continuing operations and the management of the immediate and contingent safety measures would likely become increasingly difficult if a significant number of BP employees are infected by COVID-19 and the practical difficulties of social distancing impact productivity.

We also continue to monitor our liquidity position. As of September 30, 2020, we had available capacity of $132 million under our unsecured revolving credit facility with an affiliate of BP and $123.8 million cash; our only outstanding indebtedness is $468 million under the term loan, with no principal payments due until 2025. We experienced a decline in the price of our common units over the first nine months of 2020, a condition that is consistent across our sector and may impact our ability to access capital markets. We do not have any debt covenants or other lending arrangements that depend upon our unit price. We are in compliance with the covenants contained in both our revolving credit facility and term loan, both of which include the requirement to maintain a consolidated leverage ratio, which is calculated as total indebtedness to consolidated EBITDA, not to exceed 5.0 to 1.0, subject to a temporary increase in such ratio to 5.5 to 1.0 in connection with certain material acquisitions. Please see “Capital Resources and Liquidity” and Note 6 - Debt for additional information.

We are unable to reasonably predict when, or to what extent, demand for petroleum and petroleum-based products and the overall markets and global economy will stabilize, and the pace of any subsequent recovery for the oil and gas industry. Further, to what extent these events do ultimately impact our business, liquidity, financial condition, and results of operations is highly uncertain and dependent on numerous evolving factors that cannot be predicted, including the duration of the pandemic.

As noted above, BP Pipelines and the third-party operators of our assets have taken steps and continue to actively work to mitigate the evolving challenges and continuing impact of both the COVID-19 pandemic and the industry downturn on our operations and financial condition. However, given the tremendous uncertainty and turmoil, there is no certainty that the measures we take will be ultimately sufficient.

Weather Impacts

The Atlantic hurricane season this year is nearing an all-time record in terms of the number of storms in a single season, and during the third quarter of 2020, the operations of our Offshore Pipelines were disrupted by multiple weather events in the Gulf of Mexico, including Hurricanes Laura and Sally. We estimate the quarterly gross impact on operations was in the range of 150,000 to 200,000 barrels of oil equivalent per day or $4 million to $5 million to our cash available for distribution, driven primarily by these weather events. Hurricanes Delta and Zeta in October 2020 are also expected to impact throughput on our Offshore Pipelines. Such events have been, and may in the future be material and may cause a serious business disruption or serious damage to our pipeline systems which could affect such systems’ ability to transport crude oil and natural gas.

How We Evaluate Our Operations

Partnership management uses a variety of financial and operating metrics to analyze performance. These metrics are significant factors in assessing operating results and profitability and include: (i) safety and environmental metrics, (ii) revenue (including FLA) from throughput and utilization; (iii) operating expenses and maintenance spend; (iv) Adjusted EBITDA (as defined below); and (v) cash available for distribution (as defined below).

Preventative Safety and Environmental Metrics

We are committed to maintaining and improving the safety, reliability and efficiency of Partnership operations. As noted above, we have worked with BP Pipelines and the third-party operators of our assets to ensure that COVID-19 response and business continuity plans have been implemented across all of our assets and operations. We have implemented reporting programs requiring all employees and contractors of our Parent who provide services to us to record environmental and safety related incidents. The Partnership's management team uses these existing programs and data to evaluate trends and potential interventions to deliver on performance targets. We integrate health, occupational safety, process safety and environmental principles throughout Partnership operations to reduce and eliminate environmental and safety related incidents.

Throughput

We have historically generated substantially all of our revenue under long-term agreements or FERC-regulated generally applicable tariffs by charging fees for the transportation of products through our pipelines. The amount of revenue we generate under these agreements depends in part on the volumes of crude oil, natural gas, refined products and diluent on our pipelines.

Volumes on pipelines are primarily affected by the supply of, and demand for, crude oil, natural gas, refined products and diluent in the markets served directly or indirectly by Partnership assets. Results of operations are impacted by our ability to:

•utilize any remaining unused capacity on, or add additional capacity to, Partnership pipeline systems;

•increase throughput volumes on Partnership pipeline systems by making connections to existing or new third-party pipelines or other facilities, primarily driven by the anticipated supply of and demand for crude oil, natural gas, refined products and diluent;

•identify and execute organic expansion projects; and

•increase throughput volumes via acquisitions.

In addition, substantially all of our aggregate revenue on BP2, River Rouge and Diamondback is supported by commercial agreements with BP Products. As described in further detail in “Item 5—Throughput and Deficiency Agreements,” on November 3, 2020, the Partnership entered into throughput and deficiency agreements with BP Products with respect to volumes transported on the following lines (i) BP2 crude oil pipeline system and related assets; (ii) River Rouge refined products pipeline system and related assets; and (iii) Diamondback diluent pipeline system and related assets. These new agreements have a term of three years beginning January 1, 2021 and expiring December 31, 2023. The Partnership has existing agreements on the same pipelines with BP Products that expire on December 31, 2020.

Storage Utilization

Storage utilization is a metric that we use to evaluate the performance of our storage and terminalling assets. We define storage utilization as the percentage of the contracted capacity in barrels compared to the design capacity of the tank.

Operating Expenses and Total Maintenance Spend

Operating Expenses

Management seeks to maximize profitability by effectively managing operating expenses. These expenses are comprised primarily of labor expenses (including contractor services), general materials, supplies, minor maintenance, utility costs (including electricity and fuel) and insurance premiums. Utility costs fluctuate based on throughput volumes and the grades of crude oil and types of refined products we handle. Other operating expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities performed during that period.

Total Maintenance Spend - Wholly Owned Assets

We calculate Total Maintenance Spend as the sum of maintenance expenses and maintenance capital expenditures, excluding any reimbursable maintenance capital expenditures. We track these expenses on a combined basis because it is useful to understanding total maintenance requirements. Total Maintenance Spend for the nine months ended September 30, 2020 and 2019, respectively, is shown in the table below:


	Nine Months Ended September 30,
	2020		2019
	(in millions of dollars)
Wholly Owned Assets
Maintenance expenses	$	2.2	$	1.3
Maintenance capital expenditures	1.5		0.4
Maintenance capital recovery(1)	(0.7)		—
Total Maintenance Spend - Wholly Owned Assets	$	3.0	$	1.7
(1) Relates to the portion of maintenance capital for the Griffith Station Incident reimbursable by insurance.

The Partnership seeks to maximize profitability by effectively managing maintenance expenses, which consist primarily of safety and environmental integrity programs. We seek to manage maintenance expenses on owned and operated pipelines by scheduling maintenance over time to avoid significant variability in maintenance expenses and minimize impact on cash flows, without compromising our commitment to safety and environmental stewardship.

Maintenance expenses represent the costs we incur that do not significantly extend the useful life or increase the expected output of property, plant and equipment. These expenses include pipeline repairs, replacements of immaterial sections of pipelines, inspections, equipment rentals and costs incurred to maintain compliance with existing safety and environmental standards, irrespective of the magnitude of such compliance expenses. Maintenance expenses may vary significantly from period to period because certain expenses are the result of scheduled safety and environmental integrity programs, which occur on a multi-year cycle and require substantial outlays.

Maintenance capital expenditures represent expenditures to sustain operating capacity or operating income over the long term. Examples of maintenance capital expenditures include expenditures made to purchase new or replacement assets or extend the useful life of existing assets. These expenditures includes repairs and replacements of storage tanks, replacements of significant sections of pipelines and improvements to an asset’s safety and environmental standards.

Adjusted EBITDA and Cash Available for Distribution

The Partnership defines Adjusted EBITDA as net income before net interest expense, income taxes, gain or loss from disposition of property, plant and equipment, and depreciation and amortization, plus cash distributed to the Partnership from equity method investments for the applicable period, less income from equity method investments. The Partnership defines Adjusted EBITDA attributable to the Partnership as Adjusted EBITDA less Adjusted EBITDA attributable to non-controlling interests. We present these financial measures because we believe replacing our proportionate share of equity method investments’ net income with the cash received from such equity method investments more accurately reflects the cash flow from our business, which is meaningful to our investors.

We compute and present cash available for distribution and define it as Adjusted EBITDA attributable to the Partnership less maintenance capital expenditures attributable to the Partnership, net interest paid/received, cash reserves, income taxes paid and net adjustments from volume deficiency payments attributable to the Partnership. Cash available for distribution does not reflect changes in working capital balances.

Adjusted EBITDA and cash available for distribution are non-GAAP supplemental financial measures, which are metrics that management and external users of Partnership condensed consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

•operating performance as compared to other publicly traded Partnerships in the midstream energy industry, without regard to historical cost basis or financing methods;

•ability to generate sufficient cash to support decisions to make distributions to our unitholders;

•ability to incur and service debt and fund capital expenditures; and

•viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

We believe that the presentation of Adjusted EBITDA and cash available for distribution provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and cash available for distribution are net income and net cash provided by operating activities, respectively. Adjusted EBITDA and cash available for distribution should not be considered as an alternative to GAAP net income or net cash provided by operating activities.

Adjusted EBITDA and cash available for distribution have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. You should not consider Adjusted EBITDA or cash available for distribution in isolation or as a substitute for analysis of our results as reported under GAAP. Additionally, because Adjusted EBITDA and cash available for distribution may be defined differently by other companies in our industry, our definition of Adjusted EBITDA and cash available for distribution may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. Please read “Reconciliation of Non-GAAP Measures” section below for the reconciliation of net income and cash provided by operating activities to Adjusted EBITDA and cash available for distribution.

Factors Affecting Our Business

Partnership business can be negatively affected by sustained downturns or slow growth in the economy in general and is impacted by shifts in supply and demand dynamics, the mix of services requested by the customers of our pipelines, competition and changes in regulatory requirements affecting our customers’ operations. For example, as discussed earlier, in March of 2020, the spot price of West Texas Intermediate (“WTI”) crude declined over 50% in response to reductions in global demand due to the COVID-19 pandemic and announcements by Saudi Arabia and Russia of plans to increase crude oil production. In addition to the collapse and current volatility in oil prices, demand for many refined petroleum products has also declined sharply causing refineries to curtail output. The ultimate magnitude and duration of the COVID-19 pandemic, resulting governmental restrictions on the mobility of consumers and the related impact on crude oil prices and the U.S. and global economy and capital markets is uncertain. The uncertain future impacts of COVID-19 and swift shifts in the demand for oil may negatively impact our financial position, particularly our cash flows and liquidity. As of the date of this Quarterly Report, all of our assets remain operational. We did experience some negative financial impact through the third quarter which we expect to continue.

Customers

BP is our primary customer. Total revenue from BP represented 98.2% and 97.5% of our revenues for the three and nine months ended September 30, 2020, respectively. Total revenue from BP represented 98.0% and 97.6% of our revenues for the

three and nine months ended September 30, 2019, respectively. BP’s volumes represented approximately 96.1% and 94.6% of the aggregate total volumes transported on the Wholly Owned Assets for the three and nine months ended September 30, 2020, respectively. BP’s volumes represented approximately 95.6% and 95.1% of the aggregate total volumes transported on the Wholly Owned Assets for the three and nine months ended September 30, 2019, respectively.

In addition, we transport and store crude oil, natural gas and diluent for a mix of third-party customers, including crude oil producers, refiners, marketers and traders, and Partnership assets are connected to other crude oil, natural gas and diluent pipeline systems. In addition to serving directly connected Midwestern U.S. and Gulf Coast markets, our pipelines have access to customers in various regions of the United States and Canada through interconnections with other major pipelines. Customers use our transportation and terminalling services for a variety of reasons. Producers of crude oil require the ability to deliver their product to market and frequently enter into firm transportation contracts to ensure that they will have sufficient capacity available to deliver their product to delivery points with greatest market liquidity. Marketers and traders generate income from buying and selling crude oil, natural gas, refined products and diluent to capitalize on price differentials over time or between markets. Our customer mix can vary over time and largely depends on the crude oil, natural gas, refined products and diluent supply and demand dynamics in our markets.

Regulation

Interstate common carrier pipelines are subject to regulation by various federal, state and local agencies including the FERC, the Environmental Protection Agency and the Department of Transportation. On June 18, 2020, FERC issued a Notice of Inquiry requesting comments on a proposed oil pipeline index using the Producer Price Index for Finished Goods (PPI-FG) plus 0.09% as the index level, and requested comments on whether and how the index should reflect changes to FERC’s policies regarding income tax costs and return on equity. The Notice of Inquiry is subject to a comment period, after which FERC will issue a final oil pipeline index for the five-year period commencing July 1, 2021. FERC’s final application of its indexing rate methodology for the next five-year term of index rates may impact our revenues associated with any transportation services we may provide pursuant to rates adjusted by the FERC oil pipeline index. For more information on federal, state and local regulations affecting our business, see Part I, Item 1 and 2. Business and Properties in the Partnership's 2019 10-K.

Acquisition Opportunities

The Partnership plans to pursue acquisitions of complementary assets from BP as well as third parties subject to market conditions (including the ongoing effects of COVID-19) and our ability to obtain attractive financing. We may also pursue acquisitions jointly with BP Pipelines. BP Pipelines has granted us a right of first offer with respect to its retained ownership interest in Mardi Gras and all of its interests in midstream pipeline systems and assets related thereto in the contiguous United States and offshore Gulf of Mexico that were owned by BP Pipelines when we were established. Neither BP nor any of its affiliates are under any obligation, however, to sell or offer to sell us additional assets or to pursue acquisitions jointly with us, and we are under no obligation to buy any additional assets from them or to pursue any joint acquisitions with them. We will focus our acquisition strategy on transportation and midstream assets within the crude oil, natural gas and refined products sectors. We believe that we are well positioned to acquire midstream assets from BP, and particularly BP Pipelines, as well as third parties, should such opportunities arise. Identifying and executing acquisitions will be a key part of our strategy. However, if we do not make acquisitions on economically acceptable terms, our future growth will be limited, and the acquisitions we do make may reduce, rather than increase, our available cash.

Financing

We expect to fund future capital expenditures primarily from external sources, including borrowings under our credit facility and potential future issuances of equity and debt securities.

We intend to make cash distributions to unitholders at a minimum distribution rate of $0.2625 per unit per quarter ($1.05 per unit on an annualized basis). Based on the terms of our cash distribution policy, we expect that we will distribute to unitholders and the General Partner, as the holder of IDRs, most of the cash generated by operations.

Griffith Station Incident

on our consolidated balance sheet as of December 31, 2019. See Part II, Item 8, Note 14 - Commitments and Contingencies in the Partnership's 2019 10-K for additional information.

Results of Operations

The following tables and discussion contain a summary of condensed consolidated results of operations for the three and nine months ended September 30, 2020 and 2019.

As mentioned above in Item 2 - COVID-19, through the third quarter of 2020, our financial condition and results of operations have been negatively impacted by the COVID-19 pandemic and the current volatility and decline in commodity prices.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions of dollars)
Revenue	$	33.7	$	34.6	$	95.9	$	93.4
Costs and expenses
Operating expenses	4.9		5.3		14.5		14.9
Maintenance expenses	0.4		0.3		2.2		1.3

General and administrative	3.9		4.1		13.0		12.6

Depreciation	0.7		0.7		2.0		2.0
Impairment and other, net	—		—		—		1.0
Property and other taxes	0.2		0.1		0.5		0.4
Total costs and expenses	10.1		10.5		32.2		32.2
Operating income	23.6		24.1		63.7		61.2
Income from equity method investments	27.6		30.1		85.7		83.3

Interest expense, net	1.5		3.8		6.8		11.3
Net income	49.7		50.4		142.6		133.2
Less: Net income attributable to non-controlling interests	4.4		4.7		15.0		13.0
Net income attributable to the Partnership	$	45.3	$	45.7	$	127.6	$	120.2

Adjusted EBITDA*	$	51.5	$	57.3	$	158.9	$	158.0
Less: Adjusted EBITDA attributable to non-controlling interests	5.0		5.3		17.2		15.9
Adjusted EBITDA attributable to the Partnership	$	46.5	$	52.0	$	141.7	$	142.1
* See Reconciliation of Non-GAAP Measures below.


	Three Months Ended September 30,				Nine Months Ended September 30,
Pipeline throughput (thousands of barrels per day)(1)	2020		2019		2020		2019
BP2	253		316		266		299
Diamondback	59		59		67		65
River Rouge	75		72		69		71
Total Wholly Owned Assets	387		447		402		435

Mars	479		519		506		548

Caesar	143		176		162		198
Cleopatra(2)	15		21		18		24
Proteus	200		191		211		158
Endymion	200		191		211		158
Mardi Gras Joint Ventures	558		579		602		538

Ursa	57		104		80		112

Average revenue per barrel ($ per barrel)(3)
Total Wholly Owned Assets	$	0.80	$	0.78	$	0.77	$	0.77
Mars	1.17		1.36		1.31		1.24
Mardi Gras Joint Ventures	0.59		0.63		0.59		0.67
Ursa	0.93		0.89		0.90		0.87
(1) Pipeline throughput is defined as the volume of delivered barrels.
(2) Natural gas is converted to oil equivalent at 5.8 million cubic feet per one thousand barrels.
(3) Based on reported revenues from transportation and allowance oil divided by delivered barrels over the same time period.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

Total revenue from wholly owned assets decreased by approximately $0.9 million or 2.6% for the three months ended September 30, 2020, compared to the three months ended September 30, 2019, due to the following factors:

•Increase of $2.7 million from the recognition of deficiency revenue in current period.

•Increase of $0.7 million or 6.9% in throughput revenue attributable to a 3.2% increase in throughput volume and a 3.6% increase in weighted average tariff rate from River Rouge.

•Decrease of $3.2 million or 18.6% in throughput revenue attributable to a 20.2% decrease in throughput volume and a 2.0% increase in the weighted average tariff rate from BP2.

•Decrease of $1.1 million or 41.9% in revenues from allowance oil primarily due to lower volume on BP2 and a lower realized price per barrel.

•Throughput revenue, volume and average tariff rate were virtually flat on Diamondback.

Operating expenses decreased by $0.4 million or 7.5% for the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily attributable to decrease in energy costs due to lower volumes.

Income from equity method investments decreased by $2.5 million or 8.3% for the three months ended September 30, 2020, compared to the three months ended September 30, 2019, primarily due to a decrease in throughput volume and revenue originating from the Gulf of Mexico due to shut downs attributable to the hurricanes during the quarter. In addition, due to lower customer demand from COVID-19 impacts, income from KM Phoenix was lower for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

Interest expense decreased by $2.3 million or 60.5% in the three months ended September 30, 2020, compared to the three months ended September 30, 2019, due to lower interest rates in the quarter from the term loan arrangement compared to the credit facility we had outstanding for the three months ended September 30, 2019.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Total revenue from wholly owned assets increased by approximately $2.5 million or 2.7% for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, due to the following factors:

•Increase of $8.7 million from the recognition of deficiency revenue in current period.

•Increase of $0.7 million or 7.9% in throughput revenue attributable to a 4.9% increase in throughput volume and a 2.9% increase in the weighted average tariff rate from Diamondback.

•Increase of $0.6 million or 2.1% in throughput revenue attributable to a 3.1% decrease in throughput volume that was partially offset by 5.4% increase in weighted average tariff rate from River Rouge.

•Decrease of $3.9 million or 50.3% in revenue from allowance oil primarily due to lower volume on BP2 and a lower realized price per barrel.

•Decrease of $3.6 million or 7.6% in throughput revenue attributable to a 10.7% decrease in throughput volume that was partially offset by 3.5% increase in the weighted average tariff rate from BP2.

Maintenance expenses increased by $0.9 million or 69.2% for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019 due to pipeline repairs completed in 2020.

General and administrative expenses increased by $0.4 million or 3.2% for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019. For the nine months ended September 30, 2020, the increase was primarily from the increase in omnibus fee in first quarter.

Impairment expense decreased by $1.0 million in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, as no impairment expenses were recognized in the current period.

Income from equity method investments increased by $2.4 million or 2.9% for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 due to incremental throughput volume from Appomattox beginning in the first quarter of 2020, which transports volume through Proteus and Endymion.

Interest expense, net decreased by $4.5 million or 39.8% in the nine months ended September 30, 2020 primarily due to lower interest rates from the term loan arrangement compared to the credit facility we had outstanding for the nine months ended September 30, 2019.

Net income attributable to non-controlling interests increased by $2.0 million or 15.4% for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019 due to the increase in earnings from the Mardi Gras investments in the period.

Reconciliation of Non-GAAP Measures

The following tables present a reconciliation of Adjusted EBITDA to net income and to net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in millions of dollars)

Reconciliation of Adjusted EBITDA and Cash Available for Distribution to Net Income
Net income	$	49.7	$	50.4	$	142.6	$	133.2
Add:
Depreciation	0.7		0.7		2.0		2.0


Interest expense, net	1.5		3.8		6.8		11.3
Cash distributions received from equity method investments	27.2		32.5		93.2		94.8
Less:
Income from equity method investments	27.6		30.1		85.7		83.3
Adjusted EBITDA	51.5		57.3		158.9		158.0
Less:
Adjusted EBITDA attributable to non-controlling interests	5.0		5.3		17.2		15.9
Adjusted EBITDA attributable to the Partnership	46.5		52.0		141.7		142.1
Add:
Net adjustments from volume deficiency agreements	(2.1)		(3.1)		(3.7)		(2.8)
Maintenance capital recovery(1)	0.1		—		0.7		—
Less:
Net interest paid/(received)	2.1		(0.1)		10.1		11.3
Maintenance capital expenditures	0.3		0.1		1.5		0.4
Cash reserves(2)	(0.7)		3.9		(3.0)		—
Cash available for distribution attributable to the Partnership	$	42.8	$	45.0	$	130.1	$	127.6

(1) Relates to the portion of maintenance capital for the Griffith Station Incident reimbursable by insurance.

(2) Reflects cash reserved due to timing of interest payment(s).


	Nine Months Ended September 30,
	2020		2019
	(in millions of dollars)
Reconciliation of Adjusted EBITDA and Cash Available for Distribution to Net Cash Provided by Operating Activities
Net cash provided by operating activities	$	148.3	$	142.3
Add:

Interest expense, net	6.8		11.3
Distribution in excess of earnings from equity method investments	7.4		8.3
Less:
Changes in other assets and liabilities	3.4		2.7
Non-cash adjustments	0.2		0.2
Impairment and other, net*	—		1.0
Adjusted EBITDA	158.9		158.0
Less:
Adjusted EBITDA attributable to non-controlling interests	17.2		15.9
Adjusted EBITDA attributable to the Partnership	141.7		142.1
Add:
Net adjustments from volume deficiency agreements	(3.7)		(2.8)
Maintenance capital recovery(1)	0.7		—
Less:
Net interest paid/(received)	10.1		11.3
Maintenance capital expenditures	1.5		0.4
Cash reserves(2)	(3.0)		—
Cash available for distribution attributable to the Partnership	$	130.1	$	127.6

* Includes $3.1 million of costs related to the Griffith Station Incident (impairment charge of $2.3 million and $0.8 million for the response expense), net of $(2.1) million in offsetting insurance receivable. The net charge of $1.0 million reflects our insurance deductible.

(1) Relates to the portion of maintenance capital for the Griffith Station Incident reimbursable by insurance.

(2) Reflects cash reserved due to timing of interest payment(s).

Capital Resources and Liquidity

Currently, we expect our primary ongoing sources of liquidity to be cash generated from operations (including distribution from equity method investments), and, as needed, borrowings under our existing credit facility. The entities in which we own an interest may also incur debt. We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements and long-term capital expenditure requirements and to make quarterly cash distributions. As of September 30, 2020, our liquidity was $255.8 million, consisting of $123.8 million of cash and $132 million available under our existing credit facility with BP. Our only debt outstanding is our $468 million borrowed under our term loan with an affiliate of BP, and there are no principal payments required with respect to that facility until 2025.

Through the third quarter of 2020, our financial condition and results of operations have been negatively impacted by the COVID-19 pandemic and the current volatility and decline in commodity prices. The MVC agreements executed on November 3, 2020 provide downside protection to the Partnership albeit at a lower level than in prior years on BP2 and Diamondback. Additionally, there is risk of decreased volumes with respect to the offshore operations if operators take actions to reduce operations in response to demand declines or increasingly limited storage availability or are unable to control COVID-19 infections on platforms and are required to shut-in. In the longer term, if reduced demand were to persist through 2021 or longer, we may not be able to continue to generate similar levels of operating cash flow and our liquidity and capital resources may not be sufficient to make our current levels of cash distributions to unitholders or even meet our minimum quarterly distribution. Although we continue to actively work to mitigate the evolving challenges and growing impact of both the COVID-19 pandemic and the industry downturn on our operations and our financial condition, there is no certainty that the measures we take will be ultimately sufficient.

Cash Distributions

The board of directors of our General Partner has adopted a cash distribution policy pursuant to which we intend to pay a minimum quarterly distribution of $0.2625 per unit per quarter, which equates to approximately $27.5 million per quarter, or approximately $110 million per year in the aggregate, based on the number of common and subordinated units outstanding as of September 30, 2020. We intend to pay such distributions to the extent we have sufficient cash after the establishment of cash reserves and the payment of expenses, including payments to our General Partner and its affiliates.

Revolving Credit Facility

On October 30, 2017, the Partnership entered into the $600 million unsecured credit facility with an affiliate of BP. The credit facility terminates on October 30, 2022, and provides for certain covenants, including the requirement to maintain a consolidated leverage ratio, which is calculated as total indebtedness to consolidated EBITDA (as defined in the credit facility), not to exceed 5.0 to 1.0, subject to a temporary increase in such ratio to 5.5 to 1.0 in connection with certain material acquisitions. In addition, the limited liability company agreement of our General Partner requires the approval of BP Holdco prior to the incurrence of any indebtedness that would cause our leverage ratio to exceed 4.5 to 1.0.

The credit facility also contains customary events of default, such as (i) nonpayment of principal when due, (ii) nonpayment of interest, fees or other amounts, (iii) breach of covenants, (iv) misrepresentation, (v) cross-payment default and cross-acceleration (in each case, to indebtedness in excess of $75 million) and (vi) insolvency. Additionally, the credit facility limits our ability to, among other things: (i) incur or guarantee additional debt, (ii) redeem or repurchase units or make distributions under certain circumstances; and (iii) incur certain liens or permit them to exist. Indebtedness under this facility bears interest at the 3-month London Interbank Offered Rate ("LIBOR") plus 0.85%. This facility includes customary fees, including a commitment fee of 0.10% and a utilization fee of 0.20%.

In connection with our acquisition in the fourth quarter of 2018, we borrowed $468 million from the credit facility. This amount was outstanding at December 31, 2019, and repaid as of March 31, 2020.

Term Loan Facility Agreement

On February 24, 2020, the Partnership entered into a $468 million term loan with an affiliate of BP. On March 13, 2020, proceeds were used to repay outstanding borrowings under our existing credit facility. Please refer to Note 9 - Debt in the Partnership's 2019 10-K for further details. The term loan has a final repayment date of February 24, 2025 and provides for certain covenants, including the requirement to maintain a consolidated leverage ratio, which is calculated as total indebtedness to consolidated EBITDA, not to exceed 5.0 to 1.0, subject to a temporary increase in such ratio to 5.5 to 1.0 in connection with certain material acquisitions. Simultaneous with this transaction, we entered into a First Amendment to Short Term Credit Facility Agreement whereby the lender added a provision that indebtedness under both the term loan and credit facility shall not exceed $600 million. All other terms of the credit facility remain the same. As of September 30, 2020, the Partnership was in compliance with the covenants contained in the term loan facility and the credit facility.

Cash Flows from Operations

Operating Activities. We generated $148.3 million and $142.3 million in cash flow from operating activities in the nine months ended September 30, 2020 and 2019, respectively. The $6.0 million increase in cash flows from operating activities resulted primarily from a $9.4 million increase due to an increase in operating income and a reduction in interest expense, a $0.7 million increase in working capital, partially offset by a net decrease of $3.1 million from equity method investments and the absence of a $1.0 million deductible from the Griffith Station Incident.

Investing Activities. Cash flow generated by investing activities was $6.7 million and $7.9 million in the nine months ended September 30, 2020 and 2019, respectively. The $1.2 million decrease in cash flow generated by investing activities was primarily due to a $0.9 million decrease in excess distributions from equity method investments and a $1.6 million increase in funds used for capital expenditures partially offset by a $1.3 million increase in proceeds from insurance claims from the Griffith Station Incident during the nine months ended September 30, 2020.

Financing Activities. Cash flow used in financing activities was $130.0 million and $114.8 million in the nine months ended September 30, 2020 and 2019, respectively. The $15.2 million increase in the usage of cash for financing activities was due to increases related to distributions to unitholders and our General Partner of $13.9 million and to non-controlling interest of $1.3 million.

Capital Expenditures

Our operations can be capital intensive, requiring investment to expand, upgrade or enhance existing operations and to meet environmental and operational regulations. Capital requirements consist of maintenance capital expenditures and expansion capital expenditures, both as defined in our Partnership agreement. We are required to distinguish between maintenance capital expenditures and expansion capital expenditures in accordance with our Partnership agreement.

A summary of capital expenditures associated with ongoing projects related to the Wholly Owned Assets, for the nine months ended September 30, 2020 and 2019, is shown in the table below:


	Nine Months Ended September 30,
	2020		2019
	(in millions of dollars)
Cash spent on expansion capital expenditures	$	0.5	$	—
Cash spent on maintenance capital expenditures	1.5		0.4
Increase in accrued capital expenditures	1.3		0.2
Total capital expenditures incurred	$	3.3	$	0.6

Contractual Obligations

There were no material changes to contractual obligations as disclosed in the Partnership's 2019 10-K.

Off-Balance Sheet Arrangements

The Partnership has not entered into any transactions, agreements or other contractual arrangements that would result in off-balance sheet liabilities.

Critical Accounting Policies and Estimates

There have been no material changes to critical accounting policies as disclosed in the Partnership's 2019 10-K.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information about market risks for the three and nine months ended September 30, 2020, does not differ materially from that discussed under Item 7A of the Partnership's 2019 10-K.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Partnership's management, with the participation of the principal executive officer and principal financial officer, evaluated the effectiveness of disclosure controls and procedures as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in the reports that are filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. Based upon that evaluation, the Partnership's principal executive officer and principal financial officer concluded that our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended), were effective at a reasonable assurance level as of September 30, 2020.

Changes in Internal Control Over Financial Reporting

There were no changes in the Partnership's system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarterly period ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The Partnership is a party to ongoing legal proceedings in the ordinary course of business. While the outcome of these proceedings cannot be predicted with certainty, we do not believe the results of these proceedings, individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations or liquidity.

In addition, pursuant to the terms of the various agreements under which we acquired assets from BP since the IPO, BP will indemnify us for certain liabilities relating to litigation and environmental matters attributable to the ownership or operation of the acquired assets prior to our acquisition of those assets. Specifically, under our omnibus agreement, indemnification for any unknown environmental liabilities was limited to liabilities due to occurrences on or before October 30, 2017, which were identified prior to October 30, 2020. We continue to maintain indemnification by our general partner for matters previously discovered. To the extent that unknown environmental liabilities arise relating to prior ownership, the Partnership will be liable.

Item 1A. RISK FACTORS

The Partnership is subject to various risks and uncertainties in the course of business. Security holders and potential investors in the Partnership's securities should carefully consider the risk factors set forth below and set forth under “Risk Factors” in the Partnership's 2019 10-K.

Events outside of our control, including a pandemic such as the global outbreak of COVID-19, and the potential global recession could have a material adverse impact on our financial position, results of operations and cash flows.

In the first quarter of 2020, the COVID-19 outbreak began to spread quickly across the globe. Federal, state and local governments mobilized to implement containment mechanisms and minimize impacts to their populations and economies. Various containment measures, which included the quarantining of cities, regions and countries have resulted in a severe drop in general economic activity and a decrease in energy demand. The risks associated with COVID-19 have also impacted the BP Pipelines workforce and the way we meet our business objectives.

The impacts of a global recession would likely extend the time for the current oil markets to absorb excess supplies and rebalance inventory resulting in decreased demand for our midstream services for a number of future quarters.

The current commodity price environment may remain depressed based on over-supply, decreasing demand and a potential global economic recession, as is evidenced by the current historically low prices in the forward curve for oil, for several years. With decreased demand and the storage and transportation constraints further adding to the pressure on commodities prices, refiners have curtailed output, and producers all over the world – including in the United States – have significantly decreased their capital programs and shut-in production. If these conditions persist beyond 2020, we could continue to see a significant decline in demand for our services with respect to our onshore pipelines if volumes shipped on such pipelines remain below the existing MVCs. The MVC agreements executed on November 3, 2020 provide downside protection to the Partnership albeit at a lower level than in prior years on BP2 and Diamondback.

In addition, it is possible that volumes may be reduced on our offshore pipelines as well, which are not covered by any MVCs. In the short term, there is risk of decreased volumes with respect to the offshore operations if operators take actions to reduce operations in response to demand declines or increasingly limited storage availability or are unable to control COVID-19 infections on platforms and are required to shut-in. In the longer term, there is risk that our customers cease investing in additional offshore projects in a protracted low commodity price environment, which would harm our growth. Our profitability may be significantly affected by this decreased demand and these factors could lead to reductions in our distributions to unitholders.

In addition, the outbreak of COVID-19 could potentially further impact the BP Pipelines workforce. The infection of key personnel, and/or the infection of a significant amount of the BP Pipelines workforce, could have a material adverse impact on our business, financial condition and results of operations. BP employees have been working from home since March 16, 2020,

except those deemed critical to the functioning of owned and managed assets. A remote workforce could introduce risks to achieving business objectives and/or the ability to maintain our controls and procedures. For example, the technology required for the transition to remote work increases our vulnerability to cybersecurity threats, including threats of unauthorized access to sensitive information or to render data or systems unusable, the impact of which may have material adverse effects on our business and operations. See “Item 1A. Risk Factors - Terrorist or cyber-attacks and threats, or escalation of military activity in response to these attacks, could have a material adverse effect on our business, financial condition or results of operations” in the Partnership's 2019 10-K.

In addition to the risks stated above, our operations are subject to additional risks related to the current economic environment caused by the factors discussed above, including:

•our debt service requirements and other liabilities, and restrictions contained in our debt agreements;

•our ability to maintain sufficient cash available for distribution following the establishment of cash reserves and payment of fees and expenses, to enable us to pay minimum quarterly distributions to unitholders;

•unavailability of third-party pipelines, production platforms, refineries, caverns and other facilities interconnected to our pipelines to transport, produce, refine or store crude oil, natural gas, refined products or diluent;

•demand for refined products or diluent, continues to decrease; and

•the risk of further adverse changes to BP’s production or development plans, which we are dependent on for a majority of the crude oil, natural gas, refined products and diluent that we transport

The impacts of COVID-19 and the significant drop in consumer demand has had an unprecedented impact on the global economy and our business. We are unable to predict all potential impacts to our business, the severity of such impacts or the duration.

Our environmental indemnification notification period has expired with our general partner.

Under our omnibus agreement, indemnification for any unknown environmental liabilities was limited to liabilities due to occurrences on or before October 30, 2017, which were identified prior to October 30, 2020. We continue to maintain indemnification by our general partner for matters previously discovered. To the extent that unknown environmental liabilities arise relating to prior ownership, the Partnership will be liable. Any such event could have a material adverse effect on our business, financial condition and results of operations.

Hurricanes and other severe weather conditions, natural disasters or other adverse events or conditions could damage our pipeline systems or disrupt the operations of our customers, which could adversely affect our operations and financial condition.

The operations of our Offshore Pipelines could be impacted by severe weather conditions or natural disasters, including hurricanes, or other adverse events or conditions. Additionally, such adverse events or conditions could impact our customers, and they may be unable to utilize our pipeline systems. The susceptibility of our assets to storm damage could be aggravated by wetland and barrier island erosion. In addition, neither we nor the entities in which we own an interest that own these offshore pipeline systems carry named windstorm insurance for any of our offshore pipeline systems. Weather-related risks could have a material adverse effect on our ability to continue operations and on our financial condition, results of operations and cash flows.

For example, during the third quarter of 2020, the operations of our Offshore Pipelines were disrupted by multiple weather events in the Gulf of Mexico, including Hurricanes Laura and Sally. We estimate the quarterly gross impact on operations was in the range of 150,000 to 200,000 barrels of oil equivalent per day or $4 million to $5 million to our cash available for distribution, driven primarily by these weather events. Hurricanes Delta and Zeta in October 2020 are also expected to impact throughput on our Offshore Pipelines. Such events have been, and may in the future be material and may cause a serious business disruption or serious damage to our pipeline systems which could affect such systems’ ability to transport crude oil and natural gas.

Item 5. OTHER INFORMATION

Throughput and Deficiency Agreements

products pipeline system and related assets; and (iii) Diamondback diluent pipeline system and related assets (each a “Throughput and Deficiency Agreement” and collectively, the “Throughput and Deficiency Agreements”).

Pursuant to the Throughput and Deficiency Agreements, the Partnership will provide transportation services to BP Products, and BP Products will commit to pay the Partnership for minimum volumes of crude oil, refined products and diluent, regardless of whether such volumes are physically shipped by BP Products through the Partnership’s pipelines during the term of the agreements. BP Products will have the right to terminate these agreements if the Partnership fails to perform any of its material obligations and fails to correct such non-performance within specified periods, or in the event of a change of control of the Partnership’s general partner. A detailed description of each agreement is below:

BP2 Throughput and Deficiency Agreement. Under this agreement, if BP Products fails to transport its minimum throughput volume on our BP2 pipeline from Griffith, Indiana to the Whiting Refinery during any month through December 31, 2023, then BP Products will pay us a deficiency payment equal to the volume of the deficiency multiplied by the contractual rate, which is calculated based on the applicable tariff rate then in effect. The amount of any deficiency payment paid by BP Products under this agreement may be applied as a credit for any volumes transported on our BP2 pipeline in excess of BP Products’ minimum volume commitment during the calendar year in which such credits arose, after which time any unused credits will expire.

River Rouge Throughput and Deficiency Agreement. Under this agreement, if BP Products fails to transport its minimum throughput volume on River Rouge from Whiting, Indiana to various terminals along the pipeline during any month through December 31, 2023, then BP Products will pay us a deficiency payment equal to the volume of the deficiency multiplied by the contractual deficiency rate which is calculated based on the applicable tariff rates then in effect. The amount of any deficiency payment paid by BP Products under this agreement may be applied as a credit for any volumes transported on River Rouge in excess of BP Products’ minimum volume commitment during the calendar year in which such credits arose, after which time any unused credits will expire.

Diamondback Throughput and Deficiency Agreement. Under this Agreement, if BP Products fails to transport its minimum throughput volume on our Diamondback pipeline from Gary, Indiana to Manhattan, Illinois during any month through December 31, 2023, then BP Products will pay us, during such period, a deficiency payment equal to the volume of the deficiency multiplied by the contractual deficiency rate, which is calculated based on the applicable tariff rate then in effect. The amount of any deficiency payment paid by BP Products under this agreement may be applied as a credit for any volumes transported on our Diamondback pipeline in excess of BP Products’ minimum volume commitment during the calendar year in which such credits arose, after which time any unused credits will expire.

In addition, we currently are a party to two throughput and deficiency agreements with BP Products and one dedication agreement with a third-party for Diamondback. The dedication agreement with a third-party on Diamondback automatically renewed in 2020 and will now expire in June 2021. The throughput and deficiency agreement for Diamondback renewed in 2020 and will now expire in June 2021.

The foregoing description is not complete and is qualified in its entirety by reference to the full text of the Throughput and Deficiency Agreements, which are filed as Exhibits 10.1, 10.2 and 10.3 to this Quarterly Report on Form 10-Q.

Disclosures Required Pursuant to Section 13(r) of the Securities Exchange Act of 1934

In accordance with our General Business Principles and Code of Conduct, we seek to comply with all applicable international trade laws including applicable sanctions and embargoes.

Under the Iran Threat Reduction and Syria Human Rights Act of 2012, and Section 13(r) of the Exchange Act, we are required to include certain disclosures in our periodic reports if we or any of our “affiliates” (as defined in Rule 12b-2 under the Exchange Act) knowingly engaged in certain specified activities during the period covered by the report. Because the SEC defines the term “affiliate” broadly, it includes any entity controlled by us as well as any person or entity that controls us or is under common control with us.

The disclosure below relates solely to activities conducted by non-U.S. affiliates of BP p.l.c. that may be deemed to be under common control with us. The disclosure does not relate to any activities conducted directly by us (including our subsidiaries and equity investments), or our general partner and does not involve our or the general partner’s management.

For purposes of this disclosure, we refer to BP p.l.c. and its subsidiaries other than us, the general partner and BP Midstream Partners Holdings LLC as the “BP Group.” References to actions taken by the BP Group mean actions taken by the applicable BP Group company. None of the payments disclosed below were made in U.S. dollars, however, for disclosure purposes, all

have been converted into U.S. dollars at the appropriate exchange rate. We do not believe that any of the transactions or activities listed below violated U.S. sanctions:

•BP p.l.c. indirectly owns a 29.3% interest in Middle East Lubricants Company LLC (“Melubco”), a non-operated joint venture, manufacturing lubricants in the United Arab Emirates.

•In November 2018, an Iranian shipping company brought a claim in Iran against a third party for non-payment of shipping fees and obtained a judgment in absentia with a US dollar equivalent value of approximately $60,000.

•In November 2019, the Consulate General of The Islamic Republic of Iran in Dubai formally notified Melubco that the case had been filed against Melubco.

•In May 2020, Melubco paid court filing fees to the Tehran Judicial Services Office with a US dollar equivalent value of approximately $2,694. The payment was required to appeal the judgment obtained in absentia, purportedly against Melubco.

•Melubco refutes the claim on the basis that it has never contracted with or received any services from this shipping company.

•In September 2020, the Division 15th Legal Court of Tehran held that the judgment in absentia had not been obtained against Melubco but against a different company (with a similar name), and therefore it could not be enforced against Melubco.

Item 6. EXHIBITS

BP MIDSTREAM PARTNERS LP

INDEX TO EXHIBITS

Exhibit

No.

Exhibit Description

Incorporated by Reference

Filed

Herewith

Furnished

Herewith

Form

Exhibit

Filing Date

SEC

File No.

3.1

Certificate of Limited Partnership of BP Midstream Partners LP.

S-1

3.1

9/11/2017

333-220407

3.2

Amended and Restated Agreement of Limited Partnership of BP Midstream Partners LP dated October 30, 2017.

10-Q

3.2

12/6/2017

001-38260

3.3

Certificate of Formation of BP Midstream Partners GP LLC.

S-1

3.3

9/11/2017

333-220407

3.4

First Amended and Restated Limited Liability Company Agreement of BP Midstream Partners GP LLC.

S-1

3.4

9/11/2017

333-220407

10.1

BP Two Pipeline Company LLC Throughput and Deficiency Agreement, dated November 3, 2020, between BP Midstream Partners LP and BP Products North America Inc.

10.2

BP River Rouge Pipeline Company LLC Throughput and Deficiency Agreement, dated November 3, 2020, between BP Midstream Partners LP and BP Products North America Inc.

10.3

BP D-B Pipeline Company LLC Throughput and Deficiency Agreement, dated November 3, 2020, between BP Midstream Partners LP and BP Products North America Inc.

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32*

Certifications pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101

The following financial information from BP Midstream Partners LP’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in iXBRL (Inline Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Changes in Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements.

104

The cover page from BP Midstream Partners LP’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in iXBRL.

* Pursuant to SEC Release No. 33-8212, this certification will be treated as “accompanying” this Quarterly Report on Form 10-Q and not “filed” as part of such report for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of Section 18 of the Exchange Act, and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act, except to the extent that the registrant specifically incorporates it by reference.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Date: November 5, 2020	BP MIDSTREAM PARTNERS LP
	By:	BP MIDSTREAM PARTNERS GP LLC,
		its general partner

	By:	/s/ Craig W. Coburn
		Craig W. Coburn
		Chief Financial Officer and Director

Exhibit 10.1

Execution Version

THROUGHPUT AND DEFICIENCY AGREEMENT

This Throughput and Deficiency Agreement (hereinafter referred to as the “Agreement”) is effective as of January 1, 2021 (the “Effective Date”), by and between BP Midstream Partners LP, (“CARRIER”), with offices at 150 W. Warrenville Road, Naperville, Illinois 60563, and BP Products North America Inc. (“SHIPPER”) with offices at 30 South Wacker Dr., Suite 900, Chicago, Illinois 60606, both sometimes referred to individually as a “Party” and collectively as the “Parties.”

RECITALS:

WHEREAS, CARRIER’s wholly owned subsidiary, BP Two Pipeline Company LLC, is the owner of the BP2 Pipeline System, which is currently used to transport crude petroleum from a station in Griffith, Indiana to SHIPPER’s refinery in Whiting, Indiana; and

WHEREAS, SHIPPER and CARRIER desire to enter into an arrangement under the terms of which SHIPPER will agree to utilize the BP2 Pipeline System to transport and guarantee a minimum volume of Product throughput according to CARRIER’s tariff specifications and to make a Deficiency Payment each Month that the Minimum Monthly Volume Requirement is not satisfied.

NOW THEREFORE, in consideration of the premises, and the benefits to be derived therefrom by both Parties, it is agreed as follows:

1. Definitions

1.1 For purposes of this Agreement, the following terms shall have the meanings indicated below:

Actual Shipments: means the actual volume of Product tendered by SHIPPER and transported on the BP2 Pipeline System.

Affiliate: means with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question. As used in this Agreement, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person (which, for the avoidance of doubt, includes a general partner of a partnership), whether through ownership of voting securities, by contract or otherwise. For the avoidance of doubt, for purposes of this Agreement, and only so long as BP Products North America Inc. (or one of its Affiliates) is the SHIPPER and BP Midstream Partners LP (or one of its Affiliates) is the CARRIER, SHIPPER shall not be considered an “Affiliate” of CARRIER and CARRIER shall not be considered an “Affiliate” of SHIPPER.

Agreement: has the meaning set forth in the preamble hereto.

Anti-Bribery Laws: has the meaning set forth in Section 28.1.

Anti-Corruption Obligation: has the meaning set forth in Section 28.1.

Barrel: means 42 United States standard gallons of Product at 60 degrees Fahrenheit.

BP2 Pipeline System: means the pipeline system owned by CARRIER’s wholly owned subsidiary, BP Two Pipeline Company LLC, which is used to transport Product from the Origin Point to the Delivery Point.

CARRIER: has the meaning set forth in the preamble hereto.

CARRIER Event of Default: has the meaning set forth in Section 9.2.

Exhibit 10.1

Execution Version

Contract Rate: means the applicable Tariff rate set forth in the Tariff for Product movements on the BP2 Pipeline System as filed in the Tariff, and as accepted by FERC from time to time.

Deficiency Payment: means the payment by SHIPPER for a shortfall during any Month in meeting the Minimum Monthly Volume Requirement, which payment shall be calculated based upon the Actual Shipments during such Month and shall be equal to the product of:

(a) The volume amount by which the Actual Shipments during a Month are less than the Minimum Monthly Volume Requirement for such Month; and

(b) The Contract Rate.

Delivery Point: means the delivery point of the BP2 Pipeline System at Whiting, Indiana.

Effective Date: has the meaning set forth in the preamble hereto.

FERC: means the United States Federal Energy Regulatory Commission and any successor to its power, duties or jurisdiction.

Force Majeure: has the meaning set forth in Section 11.1.

General Partner: means the general partner of BP Midstream Partners LP.

Governmental Authority: means any federal, state or local government, or any agency, bureau, board, commission, court, department, tribunal or instrumentality thereof, including any legislative, administrative or judicial body or supervisory authority having appropriate jurisdiction.

Laws: means any statute, code, rule, regulation, order, ordinance, judgment, writ, injunction, requirement, decree or other pronouncement of any Governmental Authority having the effect of law.

Minimum Daily Volume Commitment: means 300,000 Barrels per day for the time period January 1, 2021 through December 31, 2021; 290,000 Barrels per day for the time period January 1, 2022 through December 31, 2022; and 280,000 Barrels per day for the time period January 1, 2023 through December 31, 2023.

Minimum Monthly Volume Requirement: means a minimum monthly throughput during each Month equal to the product of (a) the Minimum Daily Volume Commitment and (b) the number of calendar days in the applicable Month; provided that if shipments on the BP2 Pipeline System are subject to prorationing under the Tariff in a Month then the Minimum Monthly Volume Requirement for such Month shall be reduced by the number of SHIPPER’s Barrels prorated when such proration is in effect; provided further that if SHIPPER’s obligations are suspended for all or any portion of a Month pursuant to Section 11, item (b) in the calculation of Minimum Monthly Volume Requirement for any such Month shall be reduced by the number of calendar days during which such suspension is in effect; and provided further that, if the Startup Date occurs on a date other than the first calendar day of a Month, item (b) in the calculation of Minimum Monthly Volume Requirement for such Month shall be calculated according to the number of calendar days between, and including, the Startup Date and the last calendar day of the Month in which the Startup Date occurs.

Month: means the period beginning at 7:00 a.m. local Tulsa, Oklahoma time on the first day of a calendar month and ending at 7:00 a.m. local Tulsa, Oklahoma time on the first day of the next calendar month.

Origin Point: means the origination point of the BP2 Pipeline System at Griffith, Indiana.

Partnership Change of Control: means BP Pipelines (North America) Inc. ceases to control (directly or indirectly) the General Partner.

Party and Parties: have the meanings set forth in the preamble hereto.

Exhibit 10.1

Execution Version

Person: means an individual or a corporation, firm, limited liability company, partnership, joint venture, trust, unincorporated organization, association, government agency or political subdivision thereof or other entity.

Prepaid Shipments: has the meaning set forth in Section 3.3.

Product: means “Crude Petroleum” as defined and set forth in the Tariff.

Reference Rate: means 2% (two percent) per annum.

SHIPPER: has the meaning set forth in the preamble hereto.

SHIPPER Cure Period: has the meaning set forth in Section 9.1.2.

SHIPPER Event of Default: has the meaning set forth in Section 9.1.

Startup Date: means January 1, 2021.

Tariff: means CARRIER’s FERC Tariff No. 274.10.0 for shipments of Product from the Origin Point to the Delivery Point, as filed by CARRIER and accepted by FERC, together with the published rules and regulations applicable to such shipments, and as further adopted, amended, modified and superseded from time to time (subject to acceptance by FERC).

Term: has the meaning set forth in Section 4.1.

True-Up: means the lesser of (a) or (b) will be credited back to the SHIPPER within sixty (60) days after the end of each calendar year during the Term:

(a) the total dollar amount paid to CARRIER by SHIPPER of the monthly Deficiency Payments during the calendar year

(b) the total dollar amount paid to CARRIER by SHIPPER for Actual Shipments shipped by SHIPPER in excess of the applicable Minimum Monthly Volume Requirement during the calendar year.

2. BP2 Pipeline System

2.1 CARRIER, at its sole cost and expense, shall operate and maintain, or cause to be operated and maintained, the BP2 Pipeline System in a safe, efficient and economical manner and in accordance with the Tariff and all applicable Laws.

3. Monthly Volume Requirements

3.1 For each Month during the Term, as compensation for transportation of the Product along the BP2 Pipeline System, SHIPPER agrees either to (a) ship at least the Minimum Monthly Volume Requirement through the BP2 Pipeline System and to pay CARRIER for such shipments at a rate equal to the Contract Rate or (b) make the appropriate Deficiency Payment to the extent that SHIPPER’s Actual Shipments for any such Month do not equal or exceed the Minimum Monthly Volume Requirement. If, during any Month during the Term, CARRIER is unable to accept for transportation and delivery, within a reasonable period of time during such Month, reasonable bona fide tenders of Product by SHIPPER, or caused to be made by SHIPPER, due to lack of space in the BP2 Pipeline System or any other cause, the volume of Product actually tendered by SHIPPER during such Month but which CARRIER is unable to accept shall be credited hereunder to SHIPPER’s Actual Shipments for purposes of determining any Deficiency Payments.

Exhibit 10.1

Execution Version

that supports any invoice for a Deficiency Payment. SHIPPER shall make the Deficiency Payment pursuant to the same payment terms as set forth in the Tariff with respect to payment of transportation fees. SHIPPER’s failure to make the required payment as set forth herein will be subject to the non-payment terms set forth in the Tariff.

3.3 Any Deficiency Payment paid by SHIPPER pursuant to the provisions of this Section 3 shall be considered by CARRIER as “Prepaid Shipments” during the calendar year the Deficiency Payment is made, such that at the end of each calendar year, such Prepaid Shipments shall be subject to True-Up by CARRIER. This Section 3.3 shall survive the expiration or termination of this Agreement.

4. Term

4.1 Subject to Section 11, SHIPPER’s and CARRIER’s rights and obligations under this Agreement shall commence on the Startup Date and shall continue until 11:59 p.m. on December 31, 2023 (the “Term”).

5. Tariffs

5.1 In consideration for SHIPPER committing to the Minimum Daily Volume Commitment for the Term, CARRIER, subject to this Section 5, will maintain the Tariff in effect during the Term.

(a) On the Startup Date, the Contract Rate will be set at 60.46 cents per Barrel.

(b) CARRIER intends to operate the BP2 Pipeline System as a FERC-regulated pipeline, and notwithstanding anything contained herein, each Party shall continue to have any and all legal rights granted to it with respect to FERC rules and regulations as in effect from time to time. The rates set forth in the Tariff, including the Contract Rate, will be subject to adjustments in accordance with any FERC methodology then in effect, and in the event FERC ceases to be the adjusting authority or the methodology is changed, such adjustments, if any, shall be made under the successor entity or methodology.

6. Monthly Billings

6.1 CARRIER shall invoice SHIPPER monthly, and SHIPPER shall pay, for all Actual Shipments at the Contract Rate in accordance with the terms of the Tariff and this Agreement; provided that any invoicing and payment for any Deficiency Payment shall be as set forth in Section 3 hereof.

7. Audit Rights

7.1 SHIPPER shall, upon giving reasonable advance notice, have the right to audit, at its cost and expense and during ordinary business hours, the accounting records and other pertinent documents which relate to receipts or delivery of SHIPPER’s volumes, the calculation of any Deficiency Payments, and the determination of any Prepaid Shipments credited to SHIPPER hereunder. CARRIER shall retain these records and documents for a period of at least one year following expiration of the Term or such longer period as required by law.

8. Liability

8.1 Liability for any loss of or damage to the Product, or delay in transportation of the Product, shall be as set forth in and subject to the terms of the Tariff.

9. Events of Default

9.1 Events of Default by SHIPPER. The occurrence of any of the following events shall constitute a “SHIPPER Event of Default”:

Exhibit 10.1

Execution Version

SHIPPER, reasonably exercised, to contest any such payment. In the event SHIPPER withholds any such payment, and it is determined that such withholding was wrongful, SHIPPER shall pay interest to the CARRIER on such monies wrongfully withheld at the Reference Rate; and

9.1.2 A failure by SHIPPER to observe and perform any material provision or covenant of this Agreement (other than the obligation to pay amounts when due as the result of same being covered by clause 9.1.1 above) to be observed or performed by SHIPPER where such failure continues unremedied for a period of thirty (30) days after receipt of written notice thereof from the CARRIER to SHIPPER (the “SHIPPER Cure Period”).

9.2 Events of Default by CARRIER. The occurrence of any of the following shall constitute a “CARRIER Event of Default”:

9.2.1 A failure by CARRIER to observe and perform any material provision or covenant of this Agreement to be observed or performed by the CARRIER where such failure continues unremedied for a period of thirty (30) days after receipt of written notice thereof from SHIPPER to the CARRIER; and

9.2.2 The making by CARRIER of any general assignment for the benefit of creditors, the filing by or against CARRIER of a petition to have CARRIER adjudged bankrupt, or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against CARRIER, the same is dismissed within 60 days), or the appointment of a trustee or receiver to take possession that is not restored to CARRIER within 30 days.

10. Remedies

10.1 In the case of a SHIPPER Event of Default, CARRIER shall have the right to terminate this Agreement and pursue any and all remedies available to it, whether at law or in equity, against SHIPPER, including without limitation, SHIPPER shall be liable for all prior and current shipments of Product during any period of default at the Contract Rate.

10.2 In the case of a CARRIER Event of Default or any Partnership Change of Control, SHIPPER shall have the right to terminate this Agreement and, in the case of a CARRIER Event of Default, pursue any and all remedies available to it, whether in law or in equity, against CARRIER.

11. Force Majeure

11.1 “Force Majeure” for purposes of this Agreement means (in each case, other than any payment obligations due and owing for any services previously rendered): (a) compliance with acts, orders, regulations, or requests of any federal, state, or local civilian or military authority, or any Person purporting to act therefor; (b) insurrections, wars, rebellion, riots, strikes, or labor difficulties; (c) action of the elements or accidental disruption or breakdown of production or transportation facilities; and (d) any other cause, whether or not of the same class or kind, beyond the reasonable control of a Party with the exercise of reasonable diligence and not resulting from the claiming Party’s negligence. It is understood and agreed the settlement of strikes or differences with workers shall be entirely within the discretion of the Party affected by the Force Majeure event.

11.2 In the event CARRIER is rendered unable by reason of Force Majeure to provide the transportation services contemplated hereunder, such obligations of CARRIER, insofar as they are prevented or curtailed by such Force Majeure, and SHIPPER’s obligations pursuant to Section 3.1 to either ship the Minimum Monthly Volume Requirement or make the appropriate Deficiency Payment, shall be suspended during the continuance of any inability so caused, but for no longer period, and such cause shall so far as practicable be remedied with all reasonable dispatch and exigency. For the avoidance of doubt, in any event where the BP2 Pipeline System is no longer available for use, CARRIER shall not be required to furnish additional or alternate facilities, in which case SHIPPER shall not be obligated to make any further payments hereunder except for payments due and owing for transportation on the BP2 Pipeline System previously rendered.

Exhibit 10.1

Execution Version

11.3 Except for the payment of money due and payable hereunder, a delay in or failure of performance by any Party due to Force Majeure shall not constitute default, nor shall any Party to this Agreement be held liable for losses arising from such delay or failure to the extent such losses are due to Force Majeure. In the event CARRIER or SHIPPER is prevented or delayed in its performance obligations hereunder due to Force Majeure, then any such obligation deadline under this Agreement shall be extended by the period of any such Force Majeure, provided that the cause of the Force Majeure event is remedied with all reasonable dispatch and exigency.

11.4 It is the Parties’ intent that any delay in CARRIER or SHIPPER’s performance hereunder due to Force Majeure shall not exceed 365 consecutive days, and should a Party be rendered unable due to Force Majeure to perform its obligations contemplated hereunder for more than 365 consecutive days, then the other Party not so claiming non-performance due to Force Majeure may at its sole option terminate this Agreement upon thirty (30) days’ prior written notice to the other Party following 365 consecutive days of non-performance by such other Party due to Force Majeure, and both Parties shall be relieved of any further obligations or liabilities under this Agreement except for payment obligations due and owing for any services previously rendered.

12. Apportionment

12.1 Any prorationing of shipments for transportation on the BP2 Pipeline System shall be as set forth in the Tariff, as may be further amended, modified, and superseded by CARRIER from time to time.

13. Sampling, Testing and Metering

13.1 All gauging, sampling, testing and metering of receipts from and deliveries to SHIPPER will be made in accordance with the Tariff. All Product delivered to CARRIER’s, or wholly owned subsidiary of CARRIER’s, receiving facilities on behalf of SHIPPER shall meet and be subject to the Tariff and CARRIER’s then-current operating requirements.

14. Common Carrier; Compliance with Laws

14.1 It is understood that the BP2 Pipeline System will be operated as an interstate common carrier pipeline, and the Parties’ rights and obligations hereunder shall be subject to (a) all applicable and valid Laws related to common carrier pipelines and (b) the terms and provisions of the Tariff applicable to the transportation services provided hereunder. If SHIPPER’s right under this Agreement to ship on the BP2 Pipeline System during any Month is prorated under the terms and conditions of the applicable and valid Laws related to common carrier pipelines or the terms and provisions of the Tariff, then the Minimum Monthly Volume Requirement used in calculating any Deficiency Payment obligations for such Month shall be reduced by the number of Barrels prorated when such proration was in effect during the Month.

14.2 Notwithstanding anything to the contrary contained herein, each Party shall continue to have any and all legal rights granted to it under applicable Law and FERC’s rules and regulations as in effect from time to time.

14.3 Both Parties shall, in carrying out the terms and provisions hereof, abide by all present and future applicable and valid Laws of any Governmental Authority having jurisdiction.

14.4 If any part of this Agreement is found invalid by a court of competent jurisdiction or is in conflict with any such valid and applicable Law, the Parties shall negotiate in good faith to appropriately amend this Agreement so that the revised Agreement accomplishes as nearly as possible the terms and conditions that existed under this Agreement upon the date of execution or most recent amendment without regard to the existence of said court order or legal conflict.

15. Accurate Reporting

Exhibit 10.1

Execution Version

which data may be relied upon as being complete and accurate in any further recording and reporting made by such other Party for whatever purpose. Each Party shall promptly notify the other Party at any time it has reason to believe that the above-mentioned data is no longer accurate and complete.

16. Enforceable Right

16.1 It is expressly understood that this Agreement is for the sole benefit of CARRIER and SHIPPER and their permitted successors and assigns, and nothing in this Agreement will provide any benefit to any third party or entitle any third party to any claim, cause of action, remedy or right of any kind, it being the intent of the Parties that this Agreement will not be construed as a third-party beneficiary contract.

17. Assignment and Succession

17.1 The terms, provisions and conditions of this Agreement shall extend to be binding upon, and inure to the benefit of the Parties, their respective successors, permitted assigns and legal representatives. No Party may make any assignment or other transfer of the rights and/or obligations under this Agreement without the prior written consent of the other Party hereto, such approval to not be unreasonably withheld, except that such consent is not required in the event of an assignment: (i) by any Party, to the successor of such Party when such succession results by way of merger, consolidation, sale or transfer of all or substantially all of the assets and business of such Party related to this Agreement (whether directly or indirectly), (ii) by SHIPPER, to an Affiliate of SHIPPER or (iii) by CARRIER, to an Affiliate of CARRIER. In the instance of any assignment permitted hereunder, the assignor shall be released of further liability hereunder only upon the execution of an assignment and assumption document reasonably acceptable to the other Parties. Any assignment or other transfer in contravention of the terms and provisions of this Agreement shall be void and of no force or effect.

18. Waiver

18.1 Any rights of either Party to require strict performance by the other Party of any and/or all obligations imposed on such Party by this Agreement shall not in any way be affected by previous waiver, forbearance or course of dealing.

19. Entire Agreement; Amendment

19.1 This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and there are no agreements, understandings, representations, or warranties between the Parties other than those expressly set forth or referred to herein. This Agreement may be modified or amended only in a writing executed by both Parties.

20. Independent Contractor Status

20.1 Should either Party perform work for the other pursuant to this Agreement, it shall perform such work as an independent contractor and shall not be deemed to be an agent or employee of the other.

21. Headings

21.1 The headings in this Agreement are for the purpose of reference only and shall not limit or define the meaning hereof.

22. Dispute Resolution

22.1 When a dispute has arisen and negotiations between regularly responsible Persons have reached an impasse, either Party may give the other Party written notice of the dispute. In the event such notice is given, the Parties shall attempt to resolve the dispute promptly by negotiation between executives who have authority to settle the controversy and who are at a higher level of management than the Persons with direct responsibility for the matter. Within 30 days after delivery of the notice, the receiving Party shall submit to the other a written response. Thereafter, the executives shall confer in Person or by telephone promptly to attempt to resolve the dispute. All reasonable requests for information made by one Party to the other shall be honored.

Exhibit 10.1

Execution Version

22.2 In the event the executives cannot resolve the dispute within 60 days after the receiving Party submits its written response pursuant to Section 22.1, the Parties may exercise any rights they have at law or in equity to resolve such claim, dispute or controversy, including bringing a claim in a court of competent jurisdiction. Any action brought in connection with this Agreement shall be brought in the U.S. federal district court sitting in Chicago, Illinois, and the Parties hereto hereby irrevocably consent to the jurisdiction and venue of such courts. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

23. DAMAGES

23.1 NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, NO PARTY SHALL BE LIABLE TO THE OTHER PARTY HERETO FOR CONSEQUENTIAL, INCIDENTAL, EXEMPLARY, SPECIAL, INDIRECT OR PUNITIVE DAMAGES (INCLUDING LOST PROFITS, LOSS OF PRODUCTION OR OTHER DAMAGES ATTRIBUTABLE TO BUSINESS INTERRUPTION) ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT.

24. Governing Law

24.1 This Agreement is subject to all laws, rules and regulations of any federal, state or local Government Authority having jurisdiction thereof. This Agreement and the rights and duties of the Parties arising out of this Agreement shall be governed by and construed, enforced, and performed in accordance with the laws of the State of Illinois, as the same may be amended from time to time, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State of Illinois.

25. Notice

25.1 Any notice, request, instruction, waiver or other communication to be given hereunder by any Party shall be in writing and shall be considered duly delivered if personally delivered, sent overnight by first class mail (postage prepaid) or by reputable courier service (charges prepaid) or sent by facsimile to the addresses of the Parties as follows:

SHIPPER: BP Products North America Inc.

Address 30 South Wacker Dr., Suite 900

Chicago, IL 60606

Attn: Contracts Manager

Fax: 1-866-546-0664

CARRIER: BP Midstream Partners LP

Address 30 South Wacker Dr., Suite 9S

Chicago, IL 60606

Attn: Chief Development Officer

Fax: 1-312-594-2133

or at such other address as either Party may designate by written notice.

26. Counterparts

Exhibit 10.1

Execution Version

26.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, provided that identical counterparts of same are executed by SHIPPER and CARRIER.

27. Severability

27.1 Subject to Section 14.4, the invalidity of any one or more covenants or provisions of this Agreement shall not affect the validity of any other provisions hereof or of this Agreement as a whole, and in case of any such invalidity, this Agreement shall be construed to the maximum extent possible as if such invalid provision had not been included herein.

28. Anti-Corruption Obligation

28.1 Notwithstanding anything to the contrary herein, both Parties agree to comply with, and use reasonable efforts to ensure that any third parties used by them to fulfill the Parties’ respective obligations under the Agreement will comply with all applicable Laws relating to anti-bribery, anti-corruption, and anti-money laundering applicable to any of the Parties or their Affiliates, including the US Foreign Corrupt Practices Act, the UK Bribery Act, the Corruption of Foreign Public Officials Act, and any other applicable country legislation implementing the Organisation for Economic Co-operation and Development’s Convention for Combating Bribery of Foreign Public Officials in International Business Transactions (collectively, the “Anti-Bribery Laws”). No director, officer, employee or agent of either Party shall give or receive any commission, fee, rebate, kickback, lavish gift or entertainment, or other things of significant cost or value to any director, officer, employee, or agent of the other Party in connection with the Agreement. Each Party’s financial settlements, billings and reports made in connection with the Agreement shall accurately, fairly and in reasonable detail reflect the relevant transactions in each Party’s books and accounts. In connection with the performance of the Agreement, neither Party shall, directly or indirectly, pay, offer, give, promise, or authorize the payment of, any monies or other things of value to any government official or an officer or employee of a government or any department, agency or instrumentality of any government; an officer or employee of a public international organization; any Person acting in an official capacity for or on behalf of any government or department, agency, or instrumentality of such government or of any public international organization; any political party or official thereof or any candidate for political office; or any other Person at the suggestion, request or direction or for the benefit of any of the above-described Persons, or engage in acts or transactions otherwise in violation of the Anti-Bribery Laws. If either Party fails to comply with any of the provisions of this Section 28 (or gives the other Party reasonable grounds to believe it is in breach of the provisions of this Section 28), the other Party (without prejudice to any other rights and remedies it may have under the Agreement) shall be entitled to terminate the Agreement.

29. Not to be Construed Against Drafter

29.1 THE PARTIES ACKNOWLEDGE THAT THEY EACH HAVE HAD AN ADEQUATE OPPORTUNITY TO REVIEW EACH AND EVERY PROVISION CONTAINED IN THIS AGREEMENT AND TO SUBMIT THE SAME TO LEGAL COUNSEL FOR REVIEW AND COMMENT, INCLUDING EXPRESSLY BUT WITHOUT LIMITATION THE WAIVERS AND INDEMNITIES CONTAINED IN THIS AGREEMENT. BASED ON SAID REVIEW AND CONSULTATION, THE PARTIES AGREE WITH EACH AND EVERY TERM CONTAINED IN THIS AGREEMENT AND THAT EACH AND EVERY TERM IS CONSPICUOUS. BASED ON THE FOREGOING, THE PARTIES AGREE THAT THE RULE OF CONSTRUCTION THAT A CONTRACT BE CONSTRUED AGAINST THE DRAFTER, IF ANY, SHALL NOT BE APPLIED IN THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT.

30. Interpretive Provisions

Exhibit 10.1

Execution Version

which reference is made to that agreement or instrument or performance is required under that agreement or instrument; (c) “includes”, “including” or any other variant thereof means “including, without limitation,”; (d) the phrase “and/or” shall be deemed to mean the words both preceding and following such phrase, or either of them; (e) reference to a Person includes its heirs, executors, administrators, successors and permitted assigns; (f) unless otherwise indicated, whenever this Agreement refers to a number of days, such number shall refer to calendar days; and (g) any pronoun includes the corresponding masculine, feminine or neuter forms. The words “will” and “shall” are used interchangeably throughout this Agreement; the use of either connotes a mandatory requirement; and the use of one or the other will not mean a different degree of right or obligation for either Party.

IN WITNESS WHEREOF, this Agreement is executed on the date set forth below the respective execution lines, but effective as of the Effective Date.


			SHIPPER:
			BP Products North America Inc.

			/s/ Daniel J. Filo
			Name: Daniel J. Filo
			Title: Head of Refining Supply
			Date: November 3, 2020


			CARRIER:
			BP Midstream Partners LP,
			By: BP Midstream Partners GP LLC, its general partner

			/s/ Gerald J. Maret
			Name: Gerald J. Maret
			Title: COO
			Date: November 3, 2020

Signature Page to the Throughput and Deficiency Agreement

Exhibit 10.2

Execution Version

THROUGHPUT AND DEFICIENCY AGREEMENT

RECITALS:

WHEREAS, CARRIER’s wholly owned subsidiary, BP River Rouge Pipeline Company LLC, is the owner of the River Rouge Pipeline System, which is currently used to transport petroleum products from SHIPPER’s refinery in Whiting, Indiana to various third-party owned terminals along the River Rouge Pipeline System and terminating at River Rouge, Michigan; and

WHEREAS, SHIPPER and CARRIER desire to enter into an arrangement under the terms of which SHIPPER will agree to utilize the River Rouge Pipeline System to transport and guarantee a minimum volume of Product throughput according to CARRIER’s tariff specifications and to make a Deficiency Payment each Month that the Minimum Monthly Volume Requirement is not satisfied.

NOW THEREFORE, in consideration of the premises, and the benefits to be derived therefrom by both Parties, it is agreed as follows:

1. Definitions

1.1 For purposes of this Agreement, the following terms shall have the meanings indicated below:

Actual Shipments: means the actual volume of Product tendered by SHIPPER and transported on the River Rouge Pipeline System.

Agreement: has the meaning set forth in the preamble hereto.

Anti-Bribery Laws: has the meaning set forth in Section 28.1.

Anti-Corruption Obligation: has the meaning set forth in Section 28.1.

Barrel: means 42 United States standard gallons of Product at 60 degrees Fahrenheit.

CARRIER: has the meaning set forth in the preamble hereto.

CARRIER Event of Default” has the meaning set forth in Section 9.2.

Exhibit 10.2

Execution Version

Contract Rate: means the applicable Tariff rate set forth in the Tariff for Product movements on the River Rouge Pipeline System as filed in the Tariff, and as accepted by FERC from time to time.

(a) The volume amount by which the Actual Shipments during a Month are less than the Minimum Monthly Volume Requirement for such Month; and

(b) The Deficiency Rate.

Deficiency Rate: means 131.23 cents per Barrel as of the Startup Date, and will be subject to the equivalent adjustments of the Contract Rate, which includes, but not limited to, adjustments in accordance with any FERC methodology then in effect, and in the event FERC ceases to be the adjusting authority or the methodology is changed, such adjustments, if any, made under the successor entity or methodology.

Delivery Point: means the applicable delivery points to various third-party owned terminals along the River Rouge Pipeline System.

Effective Date: has the meaning set forth in the preamble hereto.

FERC: means the United States Federal Energy Regulatory Commission and any successor to its power, duties or jurisdiction.

Force Majeure: has the meaning set forth in Section 11.1.

General Partner: means the general partner of BP Midstream Partners LP.

Laws: means any statute, code, rule, regulation, order, ordinance, judgment, writ, injunction, requirement, decree or other pronouncement of any Governmental Authority having the effect of law.

Minimum Daily Volume Commitment: means 60,000 Barrels per day.

Minimum Monthly Volume Requirement: means a minimum monthly throughput during each Month equal to the product of (a) the Minimum Daily Volume Commitment and (b) the number of calendar days in the applicable Month; provided that if shipments on the River Rouge Pipeline System are subject to prorationing under the Tariff in a Month then the Minimum Monthly Volume Requirement for such Month shall be reduced by the number of SHIPPER’s Barrels prorated when such proration is in effect; provided further that if SHIPPER’s obligations are suspended for all or any portion of a Month pursuant to Section 11, item (b) in the calculation of Minimum Monthly Volume Requirement for any such Month shall be reduced by the number of calendar days during which such suspension is in effect; and provided further that, if the Startup Date occurs on a date other than the first calendar day of a Month, item (b) in the calculation of Minimum Monthly Volume Requirement for such Month shall be calculated according to the number of calendar days between, and including, the Startup Date and the last calendar day of the Month in which the Startup Date occurs.

Origin Point: means the origination point of the River Rouge Pipeline System at Whiting, Indiana.

Exhibit 10.2

Execution Version

Partnership Change of Control: means BP Pipelines (North America) Inc. ceases to control (directly or indirectly) the General Partner.

Party and Parties: have the meanings set forth in the preamble hereto.

Prepaid Shipments: has the meaning set forth in Section 3.3.

Product: means “Petroleum Products” as defined and set forth in the Tariff.

Reference Rate: means 2% (two percent) per annum.

River Rouge Pipeline System: means the pipeline system owned by CARRIER’s wholly owned subsidiary, BP River Rouge Pipeline Company LLC, which is used to transport Product from the Origin Point to the applicable Delivery Points along the pipeline and terminating at River Rouge, Michigan.

SHIPPER: has the meaning set forth in the preamble hereto.

SHIPPER Cure Period: has the meaning set forth in Section 9.1.2.

SHIPPER Event of Default: has the meaning set forth in Section 9.1.

Startup Date: means January 1, 2021.

Tariff: means CARRIER’s FERC Tariff No. 282.11.0 for shipments of Product from the Origin Point to the applicable Delivery Point, as filed by CARRIER and accepted by FERC, together with the published rules and regulations applicable to such shipments, and as further adopted, amended, modified and superseded from time to time (subject to acceptance by FERC).

Term: has the meaning set forth in Section 4.1.

True-Up: means the lesser of (a) or (b) will be credited back to the SHIPPER within sixty (60) days after the end of each calendar year during the Term:

(a) the total dollar amount paid to CARRIER by SHIPPER of the monthly Deficiency Payments during the calendar year

(b) the total dollar amount paid to CARRIER by SHIPPER for Actual Shipments shipped by SHIPPER in excess of the applicable Minimum Monthly Volume Requirement during the calendar year.

2. River Rouge Pipeline System

2.1 CARRIER, at its sole cost and expense, shall operate and maintain, or cause to be operated and maintained, the River Rouge Pipeline System in a safe, efficient and economical manner and in accordance with the Tariff and all applicable Laws.

3. Monthly Volume Requirements

3.1 For each Month during the Term, as compensation for transportation of the Product along the River Rouge Pipeline System, SHIPPER agrees either to (a) ship at least the Minimum Monthly Volume Requirement through the River Rouge Pipeline System and to pay CARRIER for such shipments at a rate equal to the applicable Contract Rate or (b) make the appropriate Deficiency Payment to the extent that SHIPPER’s Actual Shipments for any such Month do not equal or exceed the Minimum Monthly Volume Requirement. If, during any Month during the Term, CARRIER is unable to accept for transportation and delivery, within a reasonable period of time during

Exhibit 10.2

Execution Version

such Month, reasonable bona fide tenders of Product by SHIPPER, or caused to be made by SHIPPER, due to lack of space in the River Rouge Pipeline System or any other cause, the volume of Product actually tendered by SHIPPER during such Month but which CARRIER is unable to accept shall be credited hereunder to SHIPPER’s Actual Shipments for purposes of determining any Deficiency Payments.

3.2 CARRIER shall invoice SHIPPER for any Deficiency Payment following the end of each Month that generated the Deficiency Payment. At the same time, CARRIER shall provide SHIPPER a written accounting that supports any invoice for a Deficiency Payment. SHIPPER shall make the Deficiency Payment pursuant to the same payment terms as set forth in the Tariff with respect to payment of transportation fees. SHIPPER’s failure to make the required payment as set forth herein will be subject to the non-payment terms set forth in the Tariff.

4. Term

5. Tariffs

5.1 In consideration for SHIPPER committing to the Minimum Daily Volume Commitment for the Term, CARRIER, subject to this Section 5, will maintain the Tariff in effect during the Term.

(a) The Contract Rate will be the applicable Tariff rate in effect as of the Startup Date.

(b) CARRIER intends to operate the River Rouge Pipeline System as a FERC-regulated pipeline, and notwithstanding anything contained herein, each Party shall continue to have any and all legal rights granted to it with respect to FERC rules and regulations as in effect from time to time. The rates set forth in the Tariff, including the Contract Rate, will be subject to adjustments in accordance with any FERC methodology then in effect, and in the event FERC ceases to be the adjusting authority or the methodology is changed, such adjustments, if any, shall be made under the successor entity or methodology.

6. Monthly Billings

6.1 CARRIER shall invoice SHIPPER monthly, and SHIPPER shall pay, for all Actual Shipments at the applicable Contract Rate in accordance with the terms of the Tariff and this Agreement; provided that any invoicing and payment for any Deficiency Payment shall be as set forth in Section 3 hereof.

7. Audit Rights

8. Liability

8.1 Liability for any loss of or damage to the Product, or delay in transportation of the Product, shall be as set forth in and subject to the terms of the Tariff.

9. Events of Default

Exhibit 10.2

Execution Version

9.1 Events of Default by SHIPPER. The occurrence of any of the following events shall constitute a “SHIPPER Event of Default”:

9.1.1 Any failure to make any payment required to be made by SHIPPER hereunder, where such failure continues for fifteen (15) days after receipt of written notice from the CARRIER, subject to the right of SHIPPER, reasonably exercised, to contest any such payment. In the event SHIPPER withholds any such payment, and it is determined that such withholding was wrongful, SHIPPER shall pay interest to the CARRIER on such monies wrongfully withheld at the Reference Rate; and

9.2 Events of Default by CARRIER. The occurrence of any of the following shall constitute a “CARRIER Event of Default”:

10. Remedies

11. Force Majeure

Exhibit 10.2

Execution Version

is no longer available for use, CARRIER shall not be required to furnish additional or alternate facilities, in which case SHIPPER shall not be obligated to make any further payments hereunder except for payments due and owing for transportation on the River Rouge Pipeline System previously rendered.

12. Apportionment

12.1 Any prorationing of shipments for transportation on the River Rouge Pipeline System shall be as set forth in the Tariff, as may be further amended, modified, and superseded by CARRIER from time to time.

13. Sampling, Testing and Metering

14. Common Carrier; Compliance with Laws

14.1 It is understood that the River Rouge Pipeline System will be operated as an interstate common carrier pipeline, and the Parties’ rights and obligations hereunder shall be subject to (a) all applicable and valid Laws related to common carrier pipelines and (b) the terms and provisions of the Tariff applicable to the transportation services provided hereunder. If SHIPPER’s right under this Agreement to ship on the River Rouge Pipeline System during any Month is prorated under the terms and conditions of the applicable and valid Laws related to common carrier pipelines or the terms and provisions of the Tariff, then the Minimum Monthly Volume Requirement used in calculating any Deficiency Payment obligations for such Month shall be reduced by the number of Barrels prorated when such proration was in effect during the Month.

14.3 Both Parties shall, in carrying out the terms and provisions hereof, abide by all present and future applicable and valid Laws of any Governmental Authority having jurisdiction.

Exhibit 10.2

Execution Version

15. Accurate Reporting

15.1 All financial settlements, billings, or reports rendered by either Party to the other under the terms of this Agreement and any amendments thereto will, to the best of the knowledge and belief of the Party rendering such settlement, billing, or report, properly reflect the facts about all activities and transactions related to this Agreement, which data may be relied upon as being complete and accurate in any further recording and reporting made by such other Party for whatever purpose. Each Party shall promptly notify the other Party at any time it has reason to believe that the above-mentioned data is no longer accurate and complete.

16. Enforceable Right

17. Assignment and Succession

18. Waiver

19. Entire Agreement; Amendment

20. Independent Contractor Status

21. Headings

21.1 The headings in this Agreement are for the purpose of reference only and shall not limit or define the meaning hereof.

22. Dispute Resolution

Exhibit 10.2

Execution Version

the controversy and who are at a higher level of management than the Persons with direct responsibility for the matter. Within 30 days after delivery of the notice, the receiving Party shall submit to the other a written response. Thereafter, the executives shall confer in Person or by telephone promptly to attempt to resolve the dispute. All reasonable requests for information made by one Party to the other shall be honored.

23. DAMAGES

24. Governing Law

25. Notice

SHIPPER: BP Products North America Inc.

Address 30 South Wacker Dr., Suite 900

Chicago, IL 60606

Attn: Contracts Manager

Fax: 1-866-546-0664

CARRIER: BP Midstream Partners LP

Address 30 South Wacker Dr., Suite 9S

Chicago, IL 60606

Attn: Chief Development Officer

Fax: 1-312-594-2133

or at such other address as either Party may designate by written notice.

26. Counterparts

Exhibit 10.2

Execution Version

27. Severability

28. Anti-Corruption Obligation

29. Not to be Construed Against Drafter

30. Interpretive Provisions

Exhibit 10.2

Execution Version

IN WITNESS WHEREOF, this Agreement is executed on the date set forth below the respective execution lines, but effective as of the Effective Date.


			SHIPPER:
			BP Products North America Inc.

			/s/ Daniel J. Filo
			Name: Daniel J. Filo
			Title: Head of Refining Supply
			Date: November 3, 2020


			CARRIER:
			BP Midstream Partners LP,
			By: BP Midstream Partners GP LLC, its general partner

			/s/ Gerald J. Maret
			Name: Gerald J. Maret
			Title: COO
			Date: November 3, 2020

Signature Page to the Throughput and Deficiency Agreement

Exhibit 10.3

Execution Version

THROUGHPUT AND DEFICIENCY AGREEMENT

RECITALS:

WHEREAS, CARRIER’s wholly owned subsidiary, BP D-B Pipeline Company LLC, is the owner of the D-B Pipeline System, which is currently used to transport diluent from Black Oak Junction in Gary, Indiana to a third-party owned pipeline in Manhattan, Illinois; and

WHEREAS, SHIPPER and CARRIER desire to enter into an arrangement under the terms of which SHIPPER will agree to utilize the D-B Pipeline System to transport and guarantee a minimum volume of Product throughput according to CARRIER’s tariff specifications and to make a Deficiency Payment each Month that the Minimum Monthly Volume Requirement is not satisfied.

NOW THEREFORE, in consideration of the premises, and the benefits to be derived therefrom by both Parties, it is agreed as follows:

1. Definitions

1.1 For purposes of this Agreement, the following terms shall have the meanings indicated below:

Actual Shipments: means the actual volume of Product tendered by SHIPPER and transported on the D-B Pipeline System.

Agreement: has the meaning set forth in the preamble hereto.

Anti-Bribery Laws: has the meaning set forth in Section 28.1.

Anti-Corruption Obligation: has the meaning set forth in Section 28.1.

Barrel: means 42 United States standard gallons of Product at 60 degrees Fahrenheit.

CARRIER: has the meaning set forth in the preamble hereto.

CARRIER Event of Default” has the meaning set forth in Section 9.2.

Contract Rate: means the applicable Tariff rate set forth in the Tariff for Product movements on the D-B Pipeline System as filed in the Tariff, and as accepted by FERC from time to time.

Exhibit 10.3

Execution Version

D-B Pipeline System: means the pipeline system owned by CARRIER’s wholly owned subsidiary, BP D-B Pipeline Company LLC, which is used to transport Product from the Origin Point to the Delivery Point.

(a) The volume amount by which the Actual Shipments during a Month are less than the Minimum Monthly Volume Requirement for such Month; and

(b) The Contract Rate.

Delivery Point: means the delivery point of the D-B Pipeline System at Manhattan, Illinois.

Effective Date: has the meaning set forth in the preamble hereto.

FERC: means the United States Federal Energy Regulatory Commission and any successor to its power, duties or jurisdiction.

Force Majeure: has the meaning set forth in Section 11.1.

General Partner: means the general partner of BP Midstream Partners LP.

Laws: means any statute, code, rule, regulation, order, ordinance, judgment, writ, injunction, requirement, decree or other pronouncement of any Governmental Authority having the effect of law.

Minimum Daily Volume Commitment: means 10,000 Barrels per day.

Minimum Monthly Volume Requirement: means a minimum monthly throughput during each Month equal to the product of (a) the Minimum Daily Volume Commitment and (b) the number of calendar days in the applicable Month; provided that if shipments on the D-B Pipeline System are subject to prorationing under the Tariff in a Month then the Minimum Monthly Volume Requirement for such Month shall be reduced by the number of SHIPPER’s Barrels prorated when such proration is in effect; provided further that if SHIPPER’s obligations are suspended for all or any portion of a Month pursuant to Section 11, item (b) in the calculation of Minimum Monthly Volume Requirement for any such Month shall be reduced by the number of calendar days during which such suspension is in effect; and provided further that, if the Startup Date occurs on a date other than the first calendar day of a Month, item (b) in the calculation of Minimum Monthly Volume Requirement for such Month shall be calculated according to the number of calendar days between, and including, the Startup Date and the last calendar day of the Month in which the Startup Date occurs.

Origin Point: means the origination point of the D-B Pipeline System at Gary, Indiana.

Partnership Change of Control: means BP Pipelines (North America) Inc. ceases to control (directly or indirectly) the General Partner.

Party and Parties: have the meanings set forth in the preamble hereto.

Exhibit 10.3

Execution Version

Prepaid Shipments: has the meaning set forth in Section 3.3.

Product: means “Diluent” as defined and set forth in the Tariff .

Reference Rate: means 2% (two percent) per annum.

SHIPPER: has the meaning set forth in the preamble hereto.

SHIPPER Cure Period: has the meaning set forth in Section 9.1.2.

SHIPPER Event of Default: has the meaning set forth in Section 9.1.

Startup Date: means January 1, 2021.

Tariff: means CARRIER’s FERC Tariff No. 280.9.0 for shipments of Product from the Origin Point to the Delivery Point, as filed by CARRIER and accepted by FERC, together with the published rules and regulations applicable to such shipments, and as further adopted, amended, modified and superseded from time to time (subject to acceptance by FERC).

Term: has the meaning set forth in Section 4.1.

True-Up: means the lesser of (a) or (b) will be credited back to the SHIPPER within sixty (60) days after the end of each calendar year during the Term:

(a) the total dollar amount paid to CARRIER by SHIPPER of the monthly Deficiency Payments during the calendar year

(b) the total dollar amount paid to CARRIER by SHIPPER for Actual Shipments shipped by SHIPPER in excess of the applicable Minimum Monthly Volume Requirement during the calendar year.

2. D-B Pipeline System

2.1 CARRIER, at its sole cost and expense, shall operate and maintain, or cause to be operated and maintained, the D-B Pipeline System in a safe, efficient and economical manner and in accordance with the Tariff and all applicable Laws.

3. Monthly Volume Requirements

3.1 For each Month during the Term, as compensation for transportation of the Product along the D-B Pipeline System, SHIPPER agrees either to (a) ship at least the Minimum Monthly Volume Requirement through the D-B Pipeline System and to pay CARRIER for such shipments at a rate equal to the Contract Rate or (b) make the appropriate Deficiency Payment to the extent that SHIPPER’s Actual Shipments for any such Month do not equal or exceed the Minimum Monthly Volume Requirement. If, during any Month during the Term, CARRIER is unable to accept for transportation and delivery, within a reasonable period of time during such Month, reasonable bona fide tenders of Product by SHIPPER, or caused to be made by SHIPPER, due to lack of space in the D-B Pipeline System or any other cause, the volume of Product actually tendered by SHIPPER during such Month but which CARRIER is unable to accept shall be credited hereunder to SHIPPER’s Actual Shipments for purposes of determining any Deficiency Payments.

Exhibit 10.3

Execution Version

same payment terms as set forth in the Tariff with respect to payment of transportation fees. SHIPPER’s failure to make the required payment as set forth herein will be subject to the non-payment terms set forth in the Tariff.

4. Term

5. Tariffs

5.1 In consideration for SHIPPER committing to the Minimum Daily Volume Commitment for the Term, CARRIER, subject to this Section 5, will maintain the Tariff in effect during the Term.

(a) On the Startup Date, the Contract Rate will be set at 113.59 cents per Barrel.

(b) CARRIER intends to operate the D-B Pipeline System as a FERC-regulated pipeline, and notwithstanding anything contained herein, each Party shall continue to have any and all legal rights granted to it with respect to FERC rules and regulations as in effect from time to time. The rates set forth in the Tariff, including the Contract Rate, will be subject to adjustments in accordance with any FERC methodology then in effect, and in the event FERC ceases to be the adjusting authority or the methodology is changed, such adjustments, if any, shall be made under the successor entity or methodology.

6. Monthly Billings

7. Audit Rights

8. Liability

8.1 Liability for any loss of or damage to the Product, or delay in transportation of the Product, shall be as set forth in and subject to the terms of the Tariff.

9. Events of Default

9.1 Events of Default by SHIPPER. The occurrence of any of the following events shall constitute a “SHIPPER Event of Default”:

Exhibit 10.3

Execution Version

9.2 Events of Default by CARRIER. The occurrence of any of the following shall constitute a “CARRIER Event of Default”:

10. Remedies

11. Force Majeure

11.2 In the event CARRIER is rendered unable by reason of Force Majeure to provide the transportation services contemplated hereunder, such obligations of CARRIER, insofar as they are prevented or curtailed by such Force Majeure, and SHIPPER’s obligations pursuant to Section 3.1 to either ship the Minimum Monthly Volume Requirement or make the appropriate Deficiency Payment, shall be suspended during the continuance of any inability so caused, but for no longer period, and such cause shall so far as practicable be remedied with all reasonable dispatch and exigency. For the avoidance of doubt, in any event where the D-B Pipeline System is no longer available for use, CARRIER shall not be required to furnish additional or alternate facilities, in which case SHIPPER shall not be obligated to make any further payments hereunder except for payments due and owing for transportation on the D-B Pipeline System previously rendered.

Exhibit 10.3

Execution Version

any such obligation deadline under this Agreement shall be extended by the period of any such Force Majeure, provided that the cause of the Force Majeure event is remedied with all reasonable dispatch and exigency.

12. Apportionment

12.1 Any prorationing of shipments for transportation on the D-B Pipeline System shall be as set forth in the Tariff, as may be further amended, modified, and superseded by CARRIER from time to time.

13. Sampling, Testing and Metering

14. Common Carrier; Compliance with Laws

14.1 It is understood that the D-B Pipeline System will be operated as an interstate common carrier pipeline, and the Parties’ rights and obligations hereunder shall be subject to (a) all applicable and valid Laws related to common carrier pipelines and (b) the terms and provisions of the Tariff applicable to the transportation services provided hereunder. If SHIPPER’s right under this Agreement to ship on the D-B Pipeline System during any Month is prorated under the terms and conditions of the applicable and valid Laws related to common carrier pipelines or the terms and provisions of the Tariff, then the Minimum Monthly Volume Requirement used in calculating any Deficiency Payment obligations for such Month shall be reduced by the number of Barrels prorated when such proration was in effect during the Month.

14.3 Both Parties shall, in carrying out the terms and provisions hereof, abide by all present and future applicable and valid Laws of any Governmental Authority having jurisdiction.

15. Accurate Reporting

Exhibit 10.3

Execution Version

16. Enforceable Right

17. Assignment and Succession

18. Waiver

19. Entire Agreement; Amendment

20. Independent Contractor Status

21. Headings

21.1 The headings in this Agreement are for the purpose of reference only and shall not limit or define the meaning hereof.

22. Dispute Resolution

Exhibit 10.3

Execution Version

Chicago, Illinois, and the Parties hereto hereby irrevocably consent to the jurisdiction and venue of such courts. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

23. DAMAGES

24. Governing Law

25. Notice

SHIPPER: BP Products North America Inc.

Address 30 South Wacker Dr., Suite 900

Chicago, IL 60606

Attn: Contracts Manager

Fax: 1-866-546-0664

CARRIER: BP Midstream Partners LP

Address 30 South Wacker Dr., Suite 9S

Chicago, IL 60606

Attn: Chief Development Officer

Fax: 1-312-594-2133

or at such other address as either Party may designate by written notice.

26. Counterparts

27. Severability

Exhibit 10.3

Execution Version

any such invalidity, this Agreement shall be construed to the maximum extent possible as if such invalid provision had not been included herein.

28. Anti-Corruption Obligation

29. Not to be Construed Against Drafter

30. Interpretive Provisions

30.1 In this Agreement, words importing the singular include the plural and vice versa. Except where otherwise expressly provided or unless the context otherwise necessarily requires: (a) reference to Laws shall mean such Laws as in effect as amended or modified as of the date on which the reference is made, or performance and/or compliance is required; (b) reference to a given agreement or instrument is a reference to that agreement or instrument as originally executed, and as modified, amended, supplemented and restated through the date as of which reference is made to that agreement or instrument or performance is required under that agreement or instrument; (c) “includes”, “including” or any other variant thereof means “including, without limitation,”; (d) the phrase “and/or” shall be deemed to mean the words both preceding and following such phrase, or either of them; (e) reference to a Person includes its heirs, executors, administrators, successors and permitted assigns; (f) unless otherwise indicated, whenever this Agreement refers to a number of days, such number shall refer to calendar days; and (g) any pronoun includes the corresponding masculine, feminine or neuter forms. The words “will” and “shall”

Exhibit 10.3

Execution Version

are used interchangeably throughout this Agreement; the use of either connotes a mandatory requirement; and the use of one or the other will not mean a different degree of right or obligation for either Party.

IN WITNESS WHEREOF, this Agreement is executed on the date set forth below the respective execution lines, but effective as of the Effective Date.


			SHIPPER:
			BP Products North America Inc.

			/s/ Daniel J. Filo
			Name: Daniel J. Filo
			Title: Head of Refining Supply
			Date: November 3, 2020


			CARRIER:
			BP Midstream Partners LP,
			By: BP Midstream Partners GP LLC, its general partner

			/s/ Gerald J. Maret
			Name: Gerald J. Maret
			Title: COO
			Date: November 3, 2020

Signature Page to the Throughput and Deficiency Agreement

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Robert P. Zinsmeister, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of BP Midstream Partners LP;

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;

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;

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

1.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;

2.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;

3.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

4.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

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):

1.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

2.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: November 5, 2020			/s/ Robert P. Zinsmeister
			Robert P. Zinsmeister
			Chief Executive Officer and Director
			BP Midstream Partners GP LLC
			(the general partner of BP Midstream Partners LP)

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Craig W. Coburn, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of BP Midstream Partners LP;

2.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: November 5, 2020			/s/ Craig W. Coburn
			Craig W. Coburn
			Chief Financial Officer and Director
			BP Midstream Partners GP LLC
			(the general partner of BP Midstream Partners LP)

Exhibit 32

CERTIFICATIONS PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of BP Midstream Partners LP (the “Partnership”) on Form 10-Q for the period ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.


Date: November 5, 2020			/s/ Robert P. Zinsmeister
			Robert P. Zinsmeister
			Chief Executive Officer and Director
			BP Midstream Partners GP LLC
			(the general partner of BP Midstream Partners LP)


			/s/ Craig W. Coburn
			Craig W. Coburn
			Chief Financial Officer and Director
			BP Midstream Partners GP LLC
			(the general partner of BP Midstream Partners LP)