Shell Midstream Partners, L.P. (NYSE: SHLX), a growth-oriented
mainstream midstream master limited partnership formed by Royal
Dutch Shell plc (RDS), reported net income attributable to the
partnership of $65.5 million for the second quarter of 2017, which
equated to $0.29 per common limited partner unit. Shell
Midstream Partners also generated adjusted earnings before
interest, income taxes, depreciation and amortization attributable
to the partnership of $82.7 million.
Total cash available for distribution was $88.7 million, about
2% lower than the prior quarter. The financial results of the
quarter were largely impacted by a change in presentation to
include accruals in the maintenance capital adjustment and the cash
impact related to deferred revenue, which in total accounted for
about $10.0 million less cash available for distribution compared
to the first quarter. In addition, the impact of planned
maintenance projects completed during the quarter was about $10.0
million largely driven by Auger and Zydeco. These items were
partially offset by $19.4 million of proceeds from the divestment
of a non-core segment of the Zydeco pipeline.
On August 1, Shell Midstream Partners exercised the option to
purchase 50% equity interest in a Permian gas gathering system for
approximately $47.0 million. The closing of the acquisition is
subject to a due diligence period and customary closing
conditions. Closing of the transaction is expected in the
fourth quarter of 2017. "This is another example of diversifying
our cash flow, building on an already robust onshore portfolio and
linking directly to our Sponsor's footprint" said John Hollowell,
CEO of Shell Midstream Partners. The system, which is operated by
Crestwood Equity Partners LP (NYSE:CEQP), will gather the majority
of Shell's operated Permian Delaware Basin gas under a long-term
tiered, fixed-fee contract. "The Permian Basin is the most
important asset in Shell's Unconventionals portfolio and offers our
unit holders a compelling value proposition given the attractive
purchase price and opportunity for further organic growth.”
The Board of Directors of the general partner previously
declared a cash distribution of $0.3041 per limited partnership
unit for the second quarter of 2017. This distribution represented
an increase of 4.5% over the first quarter 2017 distribution and
21.6% increase over the second quarter 2016 distribution. This
represents the tenth consecutive quarter of distribution growth,
which supports the partnership's intent to increase distributions
by 20% CAGR through 2018. The distribution coverage ratio was 1.3x
for the second quarter.
FINANCIAL HIGHLIGHTS
- Net income attributable to the partnership was $65.5 million,
compared to $70.8 million for the prior quarter.
- Net cash provided by operating activities was $78.6 million,
compared to $96.7 million for the prior quarter.
- Cash available for distribution was $88.7 million, compared to
$90.5 million for the prior quarter.
- Total cash distribution declared was $68.2 million resulting in
a 1.3x coverage ratio.
- Adjusted EBITDA attributable to the partnership was $82.7
million, compared to $86.6 million for the prior quarter.
- As of June 30, 2017, the partnership had $135.4 million of
consolidated cash and cash equivalents on hand.
Cash available for distribution and Adjusted EBITDA are non-GAAP
supplemental financial measures. See reconciliation tables later in
this press release.
ASSET HIGHLIGHTS
Significant Crude Systems and Related Storage
- Zydeco - Mainline volumes were 589 kbpd in the current quarter,
compared to 592 kbpd in the prior quarter. Volumes were lower from
Offshore due to the Caillou Island project partially offset by an
increase of 8 kbpd from committed shippers. Non-mainline volumes
were down from the prior quarter due to the divestment of a
non-core segment of the Zydeco pipeline. Total cash available for
distribution was lower approximately $14.0 million from the prior
quarter due to planned maintenance activity, cash impacts related
to deferred revenue, and the change in presentation to include
accruals in the maintenance capital adjustment.
- Mars - Volumes were 506 kbpd compared to 440 kbpd in the prior
quarter. Increase in volume was driven by the continued ramp up of
the production from the connecting Amberjack pipeline and the
unwinding of inventory positions in the Mars caverns. Total cash
available for distribution was down about $4.0 million from the
prior quarter due to lower storage revenue and cash dividend
payout, partially offset by higher volumes from Amberjack.
- Poseidon - Volumes were 257 kbpd, in line with the prior
quarter of 260 kbpd. Total cash available for distribution was
largely in line with the prior quarter.
- Auger - Volumes were 43 kbpd, lower than the prior quarter of
92 kbpd primarily due to two producer planned turnarounds. Total
cash available for distribution was down about $5.0 million from
the prior quarter due to lower revenue following producer
turnarounds.
Significant Refined Products Systems and Related Storage
- Refinery Gas Pipelines - Volumes were as expected backed by a
long-term take or pay contract.
- Colonial - Dividends were $5.3 million, down $1.2 million from
the prior quarter, which is more in line with historical quarterly
distributions.
ABOUT SHELL MIDSTREAM PARTNERS, L.P.
Shell Midstream Partners, headquartered in Houston, Texas, is a
fee-based, growth-oriented midstream master limited partnership
formed by Royal Dutch Shell to own, operate, develop and acquire
pipelines and other midstream assets. Shell Midstream Partners'
assets consist of interests in entities that own crude oil and
refined products pipelines serving as key infrastructure to
transport onshore and offshore crude oil production to Gulf Coast
and Midwest refining markets and to deliver refined products from
those markets to major demand centers, as well as interests in
entities that own natural gas and refinery gas pipelines which
transport offshore natural gas to market hubs and deliver refinery
gas from refineries and plants to chemical sites along the Gulf
Coast.
For more information on Shell Midstream Partners and the assets
owned by the partnership, please visit
www.shellmidstreampartners.com.
FORTHCOMING EVENTS
Shell Midstream Partners will hold a webcast at 8:30am CT to
discuss the reported results and provide an update on partnership
operations. Interested parties may listen to the conference call on
Shell Midstream Partners’ website at
www.shellmidstreampartners.com by clicking on the “2017
Second-Quarter Financial Results Webcast” link, found under the
"Events and Conferences" section. A replay of the conference
call will be available following the live webcast.
Unaudited Summarized Financial Statement
Information
|
|
For the Three Months Ended |
(in millions of
dollars) |
|
June 30, 2017 |
|
March 31, 2017 (1) |
|
March 31, 2017 (2) |
Revenue (3) |
|
$ |
86.8 |
|
|
$ |
84.4 |
|
|
$ |
70.2 |
|
Costs and expenses |
|
|
|
|
|
|
Operations and
maintenance |
|
30.0 |
|
|
26.7 |
|
|
21.4 |
|
General and
administrative |
|
11.0 |
|
|
10.2 |
|
|
8.0 |
|
Depreciation,
amortization and accretion |
|
9.6 |
|
|
9.5 |
|
|
6.2 |
|
Property and other
taxes |
|
3.4 |
|
|
4.2 |
|
|
2.8 |
|
Total costs and
expenses |
|
54.0 |
|
|
50.6 |
|
|
38.4 |
|
Operating income |
|
32.8 |
|
|
33.8 |
|
|
31.8 |
|
Income from equity
investments |
|
37.2 |
|
|
38.7 |
|
|
38.7 |
|
Dividend income from
cost investments |
|
6.2 |
|
|
7.3 |
|
|
7.3 |
|
Investment and dividend
income |
|
43.4 |
|
|
46.0 |
|
|
46.0 |
|
Interest expense,
net |
|
7.5 |
|
|
4.8 |
|
|
4.8 |
|
Income before income
taxes |
|
68.7 |
|
|
75.0 |
|
|
73.0 |
|
Income tax expense |
|
— |
|
|
— |
|
|
— |
|
Net income |
|
68.7 |
|
|
75.0 |
|
|
73.0 |
|
Net income attributable
to Parent |
|
1.0 |
|
|
2.0 |
|
|
— |
|
Less: Net income
attributable to noncontrolling interests |
|
2.2 |
|
|
2.2 |
|
|
2.2 |
|
Net income attributable
to the Partnership |
|
$ |
65.5 |
|
|
$ |
70.8 |
|
|
$ |
70.8 |
|
Less: general partner's
interest in net income attributable to the Partnership |
|
14.3 |
|
|
12.1 |
|
|
12.1 |
|
Limited Partners'
interest in net income attributable to the Partnership |
|
$ |
51.2 |
|
|
$ |
58.7 |
|
|
$ |
58.7 |
|
|
|
|
|
|
|
|
Net income per Limited
Partner Unit – Basic and Diluted: |
|
|
|
|
|
|
Common |
|
$ |
0.29 |
|
|
$ |
0.33 |
|
|
$ |
0.33 |
|
Subordinated (4) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
Weighted average
Limited Partner Units outstanding – Basic and Diluted (in
millions): |
|
|
|
|
|
|
Common units –
public |
|
88.4 |
|
|
88.4 |
|
|
88.4 |
|
Common units –
SPLC |
|
89.0 |
|
|
88.9 |
|
|
88.9 |
|
Subordinated units –
SPLC (2) |
|
— |
|
|
|
|
|
(1) Prior quarter financial information has been retrospectively
adjusted for the acquisition of the Shell Delta, Na Kika and
Refinery Gas Pipeline Operations.(2) As previously reported in our
Quarterly Report on Form 10-Q for the period ended March 31,
2017.(3) Deferred revenue for the three months ended June 30, 2017
and March 31, 2017, including the impact of overshipments and
expiring credits, was $2.6 million and $1.8 million,
respectively.(4) The subordinated units converted into common units
on February 15, 2017, and were considered outstanding common units
for the entire period with respect to the weighted average number
of units outstanding.
Reconciliation of Adjusted EBITDA and Cash Available for
Distribution to Net Income |
|
|
For the Three Months Ended |
(in millions of
dollars) |
|
June 30, 2017 |
|
March 31, 2017 (1) |
|
March 31, 2017 (2) |
Net income |
|
$ |
68.7 |
|
|
$ |
75.0 |
|
|
$ |
73.0 |
|
Add: |
|
|
|
|
|
|
Allowance
oil reduction to net realizable value |
|
0.3 |
|
|
— |
|
|
— |
|
Depreciation, amortization and accretion |
|
9.6 |
|
|
9.5 |
|
|
6.2 |
|
Interest
expense, net |
|
7.5 |
|
|
4.8 |
|
|
4.8 |
|
Income
tax expense |
|
— |
|
|
— |
|
|
— |
|
Cash
distribution received from equity investments |
|
38.9 |
|
|
43.9 |
|
|
43.9 |
|
Less: |
|
|
|
|
|
|
Income
from equity investments |
|
37.2 |
|
|
38.7 |
|
|
38.7 |
|
Adjusted EBITDA |
|
87.8 |
|
|
94.5 |
|
|
89.2 |
|
Less: |
|
|
|
|
|
|
Adjusted
EBITDA attributable to Parent |
|
2.5 |
|
|
5.3 |
|
|
— |
|
Adjusted
EBITDA attributable to noncontrolling interests |
|
2.6 |
|
|
2.6 |
|
|
2.6 |
|
Adjusted EBITDA
attributable to the Partnership |
|
82.7 |
|
|
86.6 |
|
|
86.6 |
|
Less: |
|
|
|
|
|
|
Net
interest paid attributable to the Partnership (3) |
|
7.5 |
|
|
4.8 |
|
|
4.8 |
|
Maintenance capex attributable to the Partnership (4) |
|
10.4 |
|
|
5.2 |
|
|
5.2 |
|
Add: |
|
|
|
|
|
|
Net
adjustments from volume deficiency payments attributable to the
Partnership |
|
0.4 |
|
|
7.5 |
|
|
7.5 |
|
Reimbursements from Parent included in partners' Capital |
|
4.1 |
|
|
6.4 |
|
|
6.4 |
|
April
2017 divestiture attributable to the Partnership |
|
19.4 |
|
|
— |
|
|
— |
|
Cash Available for
Distribution Attributable to the Partnership |
|
$ |
88.7 |
|
|
$ |
90.5 |
|
|
$ |
90.5 |
|
(1) Prior quarter financial
information has been retrospectively adjusted for the acquisition
of the Shell Delta, Na Kika and Refinery Gas Pipeline
Operations. (2) As previously
reported in our Quarterly Report on Form 10-Q for the period ended
March 31, 2017. (3) Amount represents
both paid and accrued interest attributable to the
period. (4) For the three months
ended June 30, 2017, the amount is inclusive of cash paid during
the period, as well as accruals incurred for work performed during
the period. Prior period amounts have not been changed and
represent cash paid during the period.
See "Non-GAAP Financial Measures" later in this
press release.
Reconciliation of Adjusted EBITDA and Cash Available for
Distribution to Net Cash Provided by Operating
Activities |
|
|
For the Three Months Ended |
(in millions of
dollars) |
|
June 30, 2017 |
|
March 31, 2017 (1) |
|
March 31, 2017 (2) |
Net cash provided by
operating activities |
|
$ |
78.6 |
|
|
$ |
96.7 |
|
|
$ |
93.5 |
|
Add: |
|
|
|
|
|
|
Interest
expense, net |
|
7.5 |
|
|
4.8 |
|
|
4.8 |
|
Income
tax expense |
|
— |
|
|
— |
|
|
— |
|
Return of
investment |
|
2.4 |
|
|
6.0 |
|
|
6.0 |
|
Less: |
|
|
|
|
|
|
Deferred
revenue |
|
1.9 |
|
|
8.5 |
|
|
8.5 |
|
Non-cash
interest expense |
|
0.1 |
|
|
— |
|
|
— |
|
Change in
other assets and liabilities |
|
(1.3 |
) |
|
4.5 |
|
|
6.6 |
|
Adjusted EBITDA |
|
87.8 |
|
|
94.5 |
|
|
89.2 |
|
Less: |
|
|
|
|
|
|
Adjusted
EBITDA attributable to Parent |
|
2.5 |
|
|
5.3 |
|
|
— |
|
Adjusted
EBITDA attributable to noncontrolling interests |
|
2.6 |
|
|
2.6 |
|
|
2.6 |
|
Adjusted EBITDA
attributable to the Partnership |
|
82.7 |
|
|
86.6 |
|
|
86.6 |
|
Less: |
|
|
|
|
|
|
Net
interest paid attributable to the Partnership (3) |
|
7.5 |
|
|
4.8 |
|
|
4.8 |
|
Maintenance capex attributable to the Partnership (4) |
|
10.4 |
|
|
5.2 |
|
|
5.2 |
|
Add: |
|
|
|
|
|
|
Net
adjustments from volume deficiency payments attributable to
the Partnership |
|
0.4 |
|
|
7.5 |
|
|
7.5 |
|
Reimbursements from Parent included in partners' Capital |
|
4.1 |
|
|
6.4 |
|
|
6.4 |
|
April
2017 divestiture attributable to the Partnership |
|
19.4 |
|
|
— |
|
|
— |
|
Cash Available for
Distribution Attributable to the Partnership |
|
$ |
88.7 |
|
|
$ |
90.5 |
|
|
$ |
90.5 |
|
(1) Prior quarter financial
information has been retrospectively adjusted for the acquisition
of the Shell Delta, Na Kika and Refinery Gas Pipeline
Operations. (2) As previously
reported in our Quarterly Report on Form 10-Q for the period ended
March 31, 2017. (3) Amount represents
both paid and accrued interest attributable to the
period. (4) For the three months
ended June 30, 2017, the amount is inclusive of cash paid during
the period, as well as accruals incurred for work performed during
the period. Prior period amounts have not been changed and
represent cash paid during the period.
See "Non-GAAP Financial Measures" later in this
press release.
Distribution Information |
|
|
|
|
|
(in millions of
dollars, except per-unit and ratio data) |
|
For the Three Months Ended |
|
|
June 30, 2017 |
|
March 31, 2017 (1) |
Quarterly distribution
declared per unit |
|
$ |
0.30410 |
|
|
$ |
0.29100 |
|
|
|
|
|
|
Adjusted EBITDA
attributable to the Partnership (2) |
|
$ |
82.7 |
|
|
$ |
86.6 |
|
|
|
|
|
|
Cash available for
distribution attributable to the Partnership (2) |
|
$ |
88.7 |
|
|
$ |
90.5 |
|
|
|
|
|
|
Distribution
declared: |
|
|
|
|
Limited Partner units –
Common |
|
$ |
53.9 |
|
|
$ |
51.6 |
|
Limited Partner units –
Subordinated (3) |
|
— |
|
|
— |
|
General partner
units |
|
14.3 |
|
|
12.0 |
|
Total distribution
declared |
|
$ |
68.2 |
|
|
$ |
63.6 |
|
|
|
|
|
|
Coverage ratio (4) |
|
1.3 |
|
|
1.4 |
|
(1) As previously reported in our Quarterly Report on Form 10-Q
for the period ended March 31, 2017. This financial information was
not affected by retrospective adjustments for the acquisition of
the Shell Delta, Na Kika and Refinery Gas Pipeline Operations.(2)
Non-GAAP measures. See reconciliation tables earlier in this press
release.(3) The subordinated units converted to common units on
February 15, 2017.(4) Coverage ratio is equal to Cash Available for
Distribution attributable to the partnership divided by total
distribution declared.
Capital Expenditures |
(in millions of
dollars) |
|
For the Three Months Ended |
|
|
June 30, 2017 |
|
March 31, 2017 (1) |
|
March 31, 2017 (2) |
Expansion capital
expenditures |
|
$ |
4.3 |
|
|
$ |
1.8 |
|
|
$ |
1.8 |
|
Maintenance capital
expenditures |
|
8.6 |
|
|
6.2 |
|
|
5.5 |
|
Total capital
expenditures paid |
|
$ |
12.9 |
|
|
$ |
8.0 |
|
|
$ |
7.3 |
|
(1) Prior quarter financial information has been retrospectively
adjusted for the acquisition of the Shell Delta, Na Kika and
Refinery Gas Pipeline Operations. (2)
As previously reported in our Quarterly Report on Form 10-Q for the
period ended March 31, 2017.
Condensed Consolidated Balance Sheet
Information |
(in millions of
dollars) |
|
June 30, 2017 |
|
March 31, 2017 (1) |
|
March 31, 2017 (2) |
Cash and cash
equivalents |
|
$ |
135.4 |
|
|
$ |
154.6 |
|
|
$ |
154.6 |
|
Property, plant &
equipment |
|
614.3 |
|
|
613.8 |
|
|
403.8 |
|
Total assets |
|
1,098.7 |
|
|
1,118.0 |
|
|
898.8 |
Total related party
debt |
|
1,265.4 |
|
|
685.3 |
|
685.3 |
Total equity |
|
(252.5 |
) |
|
353.8 |
|
137.5 |
(1) Prior quarter financial
information has been retrospectively adjusted for the acquisition
of the Shell Delta, Na Kika and Refinery Gas Pipeline
Operations. (2) As previously
reported in our Quarterly Report on Form 10-Q for the period ended
March 31, 2017.
Pipeline and Terminal Volumes and Revenue per
Barrel |
|
|
For the Three Months Ended |
|
|
June 30, 2017 |
|
March 31, 2017 |
Pipeline throughput
(thousands of barrels per day) (1) |
|
|
|
|
Zydeco – Mainlines |
|
589 |
|
|
592 |
|
Zydeco – Other
segments |
|
368 |
|
|
555 |
|
Zydeco total
system |
|
957 |
|
|
1,147 |
|
Mars total system |
|
506 |
|
|
440 |
|
Bengal total
system |
|
608 |
|
|
579 |
|
Poseidon total
system |
|
257 |
|
|
260 |
|
Auger total system |
|
43 |
|
|
92 |
|
Delta total system |
|
218 |
|
|
236 |
|
Na Kika total
System |
|
38 |
|
|
45 |
|
Odyssey total
system |
|
115 |
|
|
114 |
|
Other systems |
|
308 |
|
|
337 |
|
|
|
|
|
|
Terminals (2) |
|
|
|
|
Lockport terminaling
throughput and storage volumes |
|
195 |
|
|
209 |
|
|
|
|
|
|
Revenue per barrel ($
per barrel) |
|
|
|
|
Zydeco total system
(3) |
|
$ |
0.65 |
|
|
$ |
0.54 |
|
Mars total system
(3) |
|
1.35 |
|
|
1.46 |
|
Bengal total system
(3) |
|
0.32 |
|
|
0.34 |
|
Auger total system
(3) |
|
1.03 |
|
|
1.14 |
|
Delta total system
(3) |
|
0.53 |
|
|
0.53 |
|
Na Kika total System
(3) |
|
0.71 |
|
|
0.71 |
|
Odyssey total system
(3) |
|
0.95 |
|
|
0.95 |
|
Lockport total system
(4) |
|
0.23 |
|
|
0.24 |
|
(1) Pipeline throughput is defined as the volume of delivered
barrels.(2) Terminaling throughput is defined as the volume of
delivered barrels and storage is defined as the volume of stored
barrels.(3) Based on reported revenues from transportation and
allowance oil divided by delivered barrels over the same time
period. Actual tariffs charged are based on shipping points along
the pipeline system, volume and length of contract.(4) Based on
reported revenues from transportation and storage divided by
delivered and stored barrels over the same time period. Actual
rates are based on contract volume and length.
|
|
Three Months Ended March 31,
2017 |
|
|
Shell Midstream Partners, L.P.
(1) |
|
Delta, Na Kika and Refinery Gas Pipelines
Operations (2) |
|
Consolidated Results |
(in millions of
dollars) |
|
|
|
|
|
|
Revenue |
|
$ |
70.2 |
|
|
$ |
14.2 |
|
|
$ |
84.4 |
|
Costs and expenses |
|
|
|
|
|
|
Operations and
maintenance |
|
21.4 |
|
|
5.3 |
|
|
26.7 |
|
General and
administrative |
|
8.0 |
|
|
2.2 |
|
|
10.2 |
|
Depreciation,
amortization and accretion |
|
6.2 |
|
|
3.3 |
|
|
9.5 |
|
Property and other
taxes |
|
2.8 |
|
|
1.4 |
|
|
4.2 |
|
Total costs and
expenses |
|
38.4 |
|
|
12.2 |
|
|
50.6 |
|
Operating income |
|
31.8 |
|
|
2.0 |
|
|
33.8 |
|
Income from equity
investments |
|
38.7 |
|
|
— |
|
|
38.7 |
|
Dividend income from
cost investments |
|
7.3 |
|
|
— |
|
|
7.3 |
|
Investment and dividend
income |
|
46.0 |
|
|
— |
|
|
46.0 |
|
Interest expense,
net |
|
4.8 |
|
|
— |
|
|
4.8 |
|
Income before income
taxes |
|
73.0 |
|
|
2.0 |
|
|
75.0 |
|
Income tax expense |
|
— |
|
|
— |
|
|
— |
|
Net income |
|
73.0 |
|
|
2.0 |
|
|
75.0 |
|
Net income attributable
to Parent |
|
— |
|
|
2.0 |
|
|
2.0 |
|
Less: Net income
attributable to noncontrolling interests |
|
2.2 |
|
|
— |
|
|
2.2 |
|
Net income attributable
to the Partnership |
|
$ |
70.8 |
|
|
$ |
— |
|
|
$ |
70.8 |
|
Less: general partner's
interest in net income attributable to the Partnership |
|
12.1 |
|
|
— |
|
|
12.1 |
|
Limited Partners'
interest in net income attributable to the Partnership |
|
$ |
58.7 |
|
|
$ |
— |
|
|
$ |
58.7 |
|
(1) As previously reported in our Quarterly Report on Form 10-Q
for the period ended March 31, 2017.(2) Our Parents' results of the
Shell Delta, Na Kika and Refinery Gas Pipeline Operations for the
three months ended March 31, 2017.
FORWARD LOOKING STATEMENTS
This press release includes various “forward-looking
statements.” All statements other than statements of historical
fact are, or may be deemed to be, forward-looking statements.
Forward-looking statements are statements of future expectations
that are based on management’s current expectations and assumptions
and involve known and unknown risks and uncertainties that could
cause actual results, performance or events to differ materially
from those expressed or implied in these statements.
Forward-looking statements include, among other things, statements
expressing management’s expectations, beliefs, estimates,
forecasts, projections and assumptions. You can identify our
forward-looking statements by words such as “anticipate”,
“believe”, “estimate”, “expect”, “forecast”, “goals”, “objectives”,
“outlook”, “intend”, “plan”, “predict”, “project”, “risks”,
“schedule”, “seek”, “target”, “could”, “may”, “should” or “would”
or other similar expressions that convey the uncertainty of future
events or outcomes. These statements are accompanied by cautionary
language identifying important factors, though not necessarily all
such factors, which could cause future outcomes to differ
materially from those set forth in forward-looking statements. In
particular, expressed or implied statements concerning future
growth, future actions, closing and funding of acquisitions, future
drop downs, volumes, capital requirements, conditions or events,
future impact of prior acquisitions, future operating results or
the ability to generate sales, income or cash flow or the amount of
distributions are forward-looking statements. Forward-looking
statements are not guarantees of performance. They involve risks,
uncertainties and assumptions. Future actions, conditions or events
and future results of operations may differ materially from those
expressed in these forward-looking statements. Forward-looking
statements speak only as of the date of this press release, August
3, 2017, and we disclaim any obligation to update such statements
for any reason, except as required by law. All forward-looking
statements contained in this document are expressly qualified in
their entirety by the cautionary statements contained or referred
to in this paragraph. Many of the factors that will determine these
results are beyond our ability to control or predict. These factors
include the risk factors described in Part I, Item 1A. “Risk
Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2016, as updated by the information in our other
filings with the SEC. If any of those risks occur, it could cause
our actual results to differ materially from those contained in any
forward-looking statement. Because of these risks and
uncertainties, you should not place undue reliance on any
forward-looking statement.
NON-GAAP FINANCIAL MEASURES
This press release includes the terms Adjusted EBITDA and cash
available for distribution. 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. Adjusted EBITDA and cash available for
distribution are non-GAAP supplemental financial measures that
management and external users of our condensed consolidated
financial statements, such as industry analysts, investors, lenders
and rating agencies, may use to assess:
• our operating
performance as compared to other publicly traded partnerships in
the midstream energy industry, without regard to historical cost
basis or, in the case of Adjusted EBITDA, financing methods;
• the ability of our
business to generate sufficient cash to support our decision to
make distributions to our unitholders;
• our ability to
incur and service debt and fund capital expenditures; and
• the viability of
acquisitions and other capital expenditure projects and the returns
on investment of various investment opportunities.
The GAAP measures most directly comparable to Adjusted EBITDA
and cash available for distribution are net income and net cash
provided by operating activities. These non-GAAP measures should
not be considered as alternatives 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. They should
not be considered in isolation or as substitutes 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 their utility.
References in this press release to Adjusted EBITDA refer to net
income before income taxes, net interest expense, gain or loss from
disposition of fixed assets, allowance oil reduction to net
realizable value, and depreciation, amortization and accretion,
plus cash distributed to Shell Midstream Partners, L.P. from equity
investments for the applicable period, less income from equity
investments. We define Adjusted EBITDA attributable to Shell
Midstream Partners as Adjusted EBITDA less Adjusted EBITDA
attributable to noncontrolling interests. References to cash
available for distribution refer to Adjusted EBITDA attributable to
Shell Midstream Partners, less maintenance capital expenditures
attributable to Shell Midstream Partners, net interest paid, cash
reserves and income taxes paid, plus net adjustments from volume
deficiency payments attributable to Shell Midstream Partners and
certain one-time payments not reflected in net income. Cash
available for distribution will not reflect changes in working
capital balances.
August 3, 2017
The information in this Report reflects the unaudited
consolidated financial position and results of Shell Midstream
Partners, L.P.
Inquiries:Shell Media RelationsAmericas: +1 832 337 4355
Shell Investor RelationsNorth America: +1 832 337 2034
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