false--12-31Q22019000150761524549318424563044460000010000000 0001507615 2019-01-01 2019-06-30 0001507615 2019-07-30 0001507615 2018-04-01 2018-06-30 0001507615 2019-04-01 2019-06-30 0001507615 srt:AffiliatedEntityMember 2018-01-01 2018-06-30 0001507615 2018-01-01 2018-06-30 0001507615 srt:AffiliatedEntityMember 2019-04-01 2019-06-30 0001507615 andx:ThirdPartyMember 2018-01-01 2018-06-30 0001507615 andx:ThirdPartyMember 2019-01-01 2019-06-30 0001507615 andx:ThirdPartyMember 2019-04-01 2019-06-30 0001507615 srt:AffiliatedEntityMember 2019-01-01 2019-06-30 0001507615 srt:AffiliatedEntityMember 2018-04-01 2018-06-30 0001507615 andx:ThirdPartyMember 2018-04-01 2018-06-30 0001507615 2018-12-31 0001507615 us-gaap:LimitedPartnerMember 2018-12-31 0001507615 2019-06-30 0001507615 us-gaap:PreferredPartnerMember 2018-12-31 0001507615 2017-12-31 0001507615 2018-06-30 0001507615 andx:MPLXMergerMember andx:LimitedPartnerUnitsPublicMember us-gaap:SubsequentEventMember 2019-07-01 2019-09-30 0001507615 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 0001507615 2018-01-01 2018-09-30 0001507615 andx:LimitedPartnerUnitsAffiliateMember 2018-09-30 0001507615 2018-09-30 0001507615 andx:PredecessorsMember 2018-01-01 2018-06-30 0001507615 us-gaap:AccountingStandardsUpdate201602Member 2019-01-01 2019-01-02 0001507615 andx:MPLXMergerMember andx:LimitedPartnerUnitsAffiliateMember us-gaap:SubsequentEventMember 2019-07-01 2019-09-30 0001507615 andx:LogisticsAssetsDropDownandAssetTransferMember 2018-08-06 2018-08-06 0001507615 andx:WamsutterPipelineSystemMember 2018-05-01 2018-05-01 0001507615 andx:PredecessorsMember 2018-04-01 2018-06-30 0001507615 andx:SuccessorsMember 2018-04-01 2018-06-30 0001507615 andx:PredecessorsMember andx:ThirdPartyMember 2018-01-01 2018-06-30 0001507615 andx:SuccessorsMember 2018-01-01 2018-06-30 0001507615 andx:PredecessorsMember srt:AffiliatedEntityMember 2018-04-01 2018-06-30 0001507615 andx:SuccessorsMember srt:AffiliatedEntityMember 2018-01-01 2018-06-30 0001507615 andx:SuccessorsMember andx:ThirdPartyMember 2018-04-01 2018-06-30 0001507615 andx:PredecessorsMember srt:AffiliatedEntityMember 2018-01-01 2018-06-30 0001507615 andx:PredecessorsMember andx:ThirdPartyMember 2018-04-01 2018-06-30 0001507615 andx:SuccessorsMember andx:ThirdPartyMember 2018-01-01 2018-06-30 0001507615 andx:SuccessorsMember srt:AffiliatedEntityMember 2018-04-01 2018-06-30 0001507615 andx:OmnibusAgreementMember andx:PartnertoTesoroMember 2019-01-01 2019-06-30 0001507615 andx:SecondmentandLogisticsServicesAgreementMember 2019-01-01 2019-06-30 0001507615 2019-01-01 2019-03-31 0001507615 andx:SecondmentandLogisticsServicesAgreementMember andx:TesorotoPartnerMember 2019-04-01 2019-06-30 0001507615 andx:SecondmentandLogisticsServicesAgreementMember andx:TesorotoPartnerMember 2018-01-01 2018-06-30 0001507615 andx:SecondmentandLogisticsServicesAgreementMember andx:TesorotoPartnerMember 2019-01-01 2019-06-30 0001507615 andx:SecondmentandLogisticsServicesAgreementMember andx:TesorotoPartnerMember 2018-04-01 2018-06-30 0001507615 us-gaap:ConstructionInProgressMember 2018-12-31 0001507615 us-gaap:ConstructionInProgressMember 2019-06-30 0001507615 us-gaap:PipelinesMember 2019-06-30 0001507615 us-gaap:DownstreamEquipmentMember 2019-06-30 0001507615 us-gaap:PipelinesMember 2018-12-31 0001507615 us-gaap:DownstreamEquipmentMember 2018-12-31 0001507615 us-gaap:LandAndLandImprovementsMember 2019-06-30 0001507615 us-gaap:LandAndLandImprovementsMember 2018-12-31 0001507615 srt:MaximumMember 2019-06-30 0001507615 srt:MinimumMember 2019-06-30 0001507615 us-gaap:EnergyEquipmentMember 2019-06-30 0001507615 andx:MPCLoanAgreementMember us-gaap:RevolvingCreditFacilityMember 2019-06-30 0001507615 andx:DropdownCreditFacilityMember us-gaap:RevolvingCreditFacilityMember 2019-06-30 0001507615 us-gaap:RevolvingCreditFacilityMember 2019-01-01 2019-06-30 0001507615 us-gaap:RevolvingCreditFacilityMember us-gaap:RevolvingCreditFacilityMember 2019-06-30 0001507615 andx:DropdownCreditFacilityMember 2019-06-30 0001507615 us-gaap:RevolvingCreditFacilityMember 2019-06-30 0001507615 andx:DropdownCreditFacilityMember 2019-01-01 2019-06-30 0001507615 andx:MPCLoanAgreementMember us-gaap:RevolvingCreditFacilityMember 2019-01-01 2019-06-30 0001507615 us-gaap:LimitedPartnerMember 2019-04-01 2019-06-30 0001507615 us-gaap:GeneralPartnerMember 2018-04-01 2018-06-30 0001507615 us-gaap:LimitedPartnerMember 2018-04-01 2018-06-30 0001507615 us-gaap:GeneralPartnerMember 2018-01-01 2018-06-30 0001507615 us-gaap:LimitedPartnerMember 2019-01-01 2019-06-30 0001507615 us-gaap:GeneralPartnerMember 2019-01-01 2019-06-30 0001507615 us-gaap:LimitedPartnerMember 2018-01-01 2018-06-30 0001507615 us-gaap:GeneralPartnerMember 2019-04-01 2019-06-30 0001507615 2018-01-01 2018-03-31 0001507615 us-gaap:PreferredPartnerMember 2018-04-01 2018-06-30 0001507615 andx:PredecessorEquityMember 2018-01-01 2018-03-31 0001507615 andx:PredecessorEquityMember 2018-03-31 0001507615 andx:PredecessorEquityMember 2018-06-30 0001507615 us-gaap:LimitedPartnerMember 2018-01-01 2018-03-31 0001507615 andx:PredecessorEquityMember 2018-04-01 2018-06-30 0001507615 us-gaap:PreferredPartnerMember 2018-06-30 0001507615 us-gaap:PreferredPartnerMember 2018-01-01 2018-03-31 0001507615 us-gaap:LimitedPartnerMember 2018-03-31 0001507615 us-gaap:PreferredPartnerMember 2018-03-31 0001507615 2018-03-31 0001507615 us-gaap:PreferredPartnerMember 2017-12-31 0001507615 us-gaap:LimitedPartnerMember 2018-06-30 0001507615 us-gaap:LimitedPartnerMember 2017-12-31 0001507615 andx:PredecessorEquityMember 2017-12-31 0001507615 us-gaap:PreferredPartnerMember 2019-03-31 0001507615 us-gaap:LimitedPartnerMember 2019-03-31 0001507615 2019-03-31 0001507615 us-gaap:PreferredPartnerMember 2019-01-01 2019-03-31 0001507615 us-gaap:PreferredPartnerMember 2019-04-01 2019-06-30 0001507615 us-gaap:LimitedPartnerMember 2019-01-01 2019-03-31 0001507615 andx:TexNewMexUnitsMember 2019-06-30 0001507615 andx:LimitedPartnerUnitsPublicMember 2019-06-30 0001507615 2018-10-01 2018-12-31 0001507615 andx:LimitedPartnerUnitsAffiliateMember 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:TerminallingandTransportationSegmentMember 2018-04-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:GatheringandProcessingMember 2018-04-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:SalesofnaturalgasNGLSandcondensateMember andx:GatheringandProcessingMember 2019-01-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:TerminallingandTransportationSegmentMember 2018-01-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:GatheringandProcessingMember 2019-04-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:CrudeoilandwatergatheringMember andx:GatheringandProcessingMember 2019-01-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:PassthruandotherrevenueMember andx:GatheringandProcessingMember 2018-04-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:GatheringandProcessingMember 2018-01-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:TerminallingrevenuesMember andx:TerminallingandTransportationSegmentMember 2019-04-01 2019-06-30 0001507615 us-gaap:IntersegmentEliminationMember 2019-01-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:PipelinetransportationrevenuesMember andx:TerminallingandTransportationSegmentMember 2019-01-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:PassthruandotherrevenueMember andx:GatheringandProcessingMember 2019-01-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:OtherTerminallingandTransportationRevenueMember andx:TerminallingandTransportationSegmentMember 2018-01-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:OtherNonfuelMember andx:WholesaleSegmentMember 2018-01-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:PipelinetransportationrevenuesMember andx:TerminallingandTransportationSegmentMember 2019-04-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:CrudeoilandwatergatheringMember andx:GatheringandProcessingMember 2018-01-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:WholesaleSegmentMember 2018-04-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:OtherTerminallingandTransportationRevenueMember andx:TerminallingandTransportationSegmentMember 2018-04-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:GasgatheringandprocessingMember andx:GatheringandProcessingMember 2018-01-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:OtherNonfuelMember andx:WholesaleSegmentMember 2019-04-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:FuelSalesMember andx:WholesaleSegmentMember 2018-01-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:TerminallingandTransportationSegmentMember 2019-04-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:WholesaleSegmentMember 2019-01-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:SalesofnaturalgasNGLSandcondensateMember andx:GatheringandProcessingMember 2019-04-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:GasgatheringandprocessingMember andx:GatheringandProcessingMember 2018-04-01 2018-06-30 0001507615 us-gaap:IntersegmentEliminationMember 2019-04-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:PipelinetransportationrevenuesMember andx:TerminallingandTransportationSegmentMember 2018-01-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:FuelSalesMember andx:WholesaleSegmentMember 2019-01-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:OtherTerminallingandTransportationRevenueMember andx:TerminallingandTransportationSegmentMember 2019-04-01 2019-06-30 0001507615 us-gaap:IntersegmentEliminationMember 2018-01-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:PassthruandotherrevenueMember andx:GatheringandProcessingMember 2019-04-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:TerminallingrevenuesMember andx:TerminallingandTransportationSegmentMember 2018-04-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:GasgatheringandprocessingMember andx:GatheringandProcessingMember 2019-01-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:GatheringandProcessingMember 2019-01-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:PipelinetransportationrevenuesMember andx:TerminallingandTransportationSegmentMember 2018-04-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:SalesofnaturalgasNGLSandcondensateMember andx:GatheringandProcessingMember 2018-04-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:PassthruandotherrevenueMember andx:GatheringandProcessingMember 2018-01-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:FuelSalesMember andx:WholesaleSegmentMember 2019-04-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:WholesaleSegmentMember 2019-04-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:OtherNonfuelMember andx:WholesaleSegmentMember 2018-04-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:CrudeoilandwatergatheringMember andx:GatheringandProcessingMember 2018-04-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:GasgatheringandprocessingMember andx:GatheringandProcessingMember 2019-04-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:WholesaleSegmentMember 2018-01-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:CrudeoilandwatergatheringMember andx:GatheringandProcessingMember 2019-04-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:FuelSalesMember andx:WholesaleSegmentMember 2018-04-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:SalesofnaturalgasNGLSandcondensateMember andx:GatheringandProcessingMember 2018-01-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:OtherTerminallingandTransportationRevenueMember andx:TerminallingandTransportationSegmentMember 2019-01-01 2019-06-30 0001507615 us-gaap:IntersegmentEliminationMember 2018-04-01 2018-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:TerminallingandTransportationSegmentMember 2019-01-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:TerminallingrevenuesMember andx:TerminallingandTransportationSegmentMember 2019-01-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:OtherNonfuelMember andx:WholesaleSegmentMember 2019-01-01 2019-06-30 0001507615 us-gaap:OperatingSegmentsMember andx:TerminallingrevenuesMember andx:TerminallingandTransportationSegmentMember 2018-01-01 2018-06-30 0001507615 andx:PNACMember 2019-06-30 xbrli:shares iso4217:USD xbrli:shares xbrli:pure iso4217:USD andx:segments

 
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 June 30, 2019
or
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
001-35143
ANDEAVOR LOGISTICS LP
(Exact name of registrant as specified in its charter)
Delaware
andxlogo.jpg
27-4151603
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
 
 
200 East Hardin Street, Findlay, OH 45840
(Address of principal executive offices) (Zip Code)
419-421-2414
(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 Partnership Interests
-
NONE
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 þ No o

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes þ No o

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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
 
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

There is no public market for the registrant’s common units. All of the registrant’s common units are owned by MPLX LP.
 


Table of Contents

Andeavor Logistics LP
Quarterly Report on Form 10-Q
For the Quarterly Period Ended June 30, 2019

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 










andxlogoa24.jpg

















This Quarterly Report on Form 10-Q (including documents incorporated by reference herein) contains statements with respect to our expectations or beliefs as to future events. These types of statements are “forward-looking” and subject to uncertainties. See “Important Information Regarding Forward-Looking Statements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2.

2 |
 andxlogohighresa13.jpg
 
 

 
 
Financial Statements
 


Part I - Financial Information

Item 1. Financial Statements

Andeavor Logistics LP
Condensed Statements of Consolidated Operations
(Unaudited)

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018 (a)
 
2019
 
2018 (a)
 
(In millions, except per unit amounts)
Revenues:
 
 
 
 
 
 
 
Affiliate
$
424

 
$
389

 
$
868

 
$
716

Third-party
177

 
180

 
363

 
399

Total Revenues
601

 
569

 
1,231

 
1,115

Costs and Expenses:
 
 
 
 
 
 
 
NGL expense (excluding items shown separately below)
33

 
45

 
92

 
93

Operating expenses (excluding depreciation and amortization)
237

 
221

 
476

 
422

Depreciation and amortization expenses
104

 
93

 
205

 
182

General and administrative expenses
18

 
29

 
38

 
60

Loss on asset disposals and impairments
2

 
1

 
2

 
1

Operating Income
207

 
180

 
418

 
357

Interest and financing costs, net
(63
)
 
(60
)
 
(124
)
 
(115
)
Equity in earnings of equity method investments
9

 
10

 
16

 
18

Other income, net
7

 
2

 
7

 
3

Net Earnings
$
160

 
$
132

 
$
317

 
$
263

 
 
 
 
 
 
 
 
Loss attributable to Predecessors
$

 
$
16

 
$

 
$
24

Net Earnings Attributable to Partners
160

 
148

 
317

 
287

Preferred unitholders’ interest in net earnings
(10
)
 
(10
)
 
(20
)
 
(24
)
Limited Partners’ Interest in Net Earnings
$
150

 
$
138

 
$
297

 
$
263

 
 
 
 
 
 
 
 
Net earnings per limited partner unit:
 
 
 
 
 
 
 
Common - basic
$
0.65

 
$
0.63

 
$
1.29

 
$
1.23

Common - diluted
$
0.65

 
$
0.63

 
$
1.29

 
$
1.23

 
 
 
 
 
 
 
 
Weighted average limited partner units outstanding:
 
 
 
 
 
 
 
Common units - basic
245.6

 
217.2

 
245.6

 
217.2

Common units - diluted
245.7

 
217.3

 
245.7

 
217.3



(a)
Adjusted to include the historical results of the Predecessors. See Note 1 for further discussion.


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

 
 
June 30, 2019 | 3

Financial Statements


Andeavor Logistics LP
Condensed Consolidated Balance Sheets
(Unaudited)

 
June 30,
2019
 
December 31,
2018
 
(In millions, except unit amounts)
Assets
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
25

 
$
10

Receivables, net of allowance for doubtful accounts
 
 
 
Trade and other
202

 
195

Affiliate
323

 
279

Prepayments and other current assets
65

 
79

Total Current Assets
615

 
563

Property, Plant and Equipment, Net
 
 
 
Property, plant and equipment, at cost
8,409

 
8,145

Accumulated depreciation
(1,480
)
 
(1,300
)
Property, Plant and Equipment, Net
6,929

 
6,845

Acquired Intangibles, Net
1,079

 
1,104

Goodwill
1,051

 
1,051

Equity Method Investments
605

 
602

Other Noncurrent Assets, Net
271

 
130

Total Assets
$
10,550

 
$
10,295

 
 
 
 
Liabilities and Equity
 
 
 
Current Liabilities
 
 
 
Accounts payable
 
 
 
Trade and other
$
196

 
$
214

Affiliate
277

 
252

Accrued interest and financing costs
41

 
41

Current maturities of debt
503

 
504

Other current liabilities
93

 
81

Total Current Liabilities
1,110

 
1,092

Debt, Net of Unamortized Issuance Costs
4,720

 
4,460

Other Noncurrent Liabilities
186

 
69

Total Liabilities
6,016

 
5,621

Commitments and Contingencies (Note 6)


 


Equity
 
 
 
Preferred unitholders; 600,000 units issued and outstanding in 2019 and 2018
603

 
604

Common unitholders; 245,630,444 units issued and outstanding (245,493,184 in 2018)
3,931

 
4,070

Total Equity
4,534

 
4,674

Total Liabilities and Equity
$
10,550

 
$
10,295




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

4 |
 andxlogohighresa13.jpg
 
 

 
 
Financial Statements
 


Andeavor Logistics LP
Condensed Statements of Consolidated Cash Flows
(Unaudited)

 
Six Months Ended
June 30,
 
2019
 
2018 (a)
 
(In millions)
Cash Flows From (Used In) Operating Activities:
 
 
 
Net earnings
$
317

 
$
263

Adjustments to reconcile net earnings to net cash from operating activities:
 
 
 
Depreciation and amortization expenses
205

 
182

Loss on asset disposals and impairments
2

 
1

Other operating activities
18

 
12

Changes in current assets and liabilities
(45
)
 
100

Changes in noncurrent assets and liabilities
(14
)
 
(11
)
Net cash from operating activities
483

 
547

Cash Flows Used In Investing Activities:
 
 
 
Capital expenditures
(252
)
 
(370
)
Acquisitions, net of cash

 
(378
)
Contributions to equity method investments
(13
)
 

Net cash used in investing activities
(265
)
 
(748
)
Cash Flows From (Used In) Financing Activities:
 
 
 
Borrowings under revolving credit agreements
1,631

 
520

Repayments under revolving credit agreements
(1,376
)
 
(278
)
Distributions to common unitholders
(480
)
 
(411
)
Distributions to preferred unitholders
(21
)
 
(8
)
Sponsor contributions of equity to the Predecessors

 
336

Capital contributions by affiliate
45

 
14

Other financing activities
(2
)
 
(3
)
Net cash (used in) from financing activities
(203
)
 
170

Increase (Decrease) in Cash and Cash Equivalents
15

 
(31
)
Cash and Cash Equivalents, Beginning of Period
10

 
75

Cash and Cash Equivalents, End of Period
$
25

 
$
44



(a)    Adjusted to include the historical results of the Predecessors. See Note 1 for further discussion.

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

 
 
June 30, 2019 | 5

Notes to Condensed Consolidated Financial Statements (Unaudited)


Note 1 - Organization and Basis of Presentation

Organization

Andeavor Logistics LP (“Andeavor Logistics”) is a fee-based, full-service, diversified Delaware limited partnership formed in December 2010 by Andeavor and its wholly-owned subsidiary, Tesoro Logistics GP, LLC (“TLGP”), to own, operate, develop and acquire logistics and related assets and businesses. TLGP served as our general partner until the closing of the MPLX Merger on July 30, 2019, as described below. Effective upon the closing of the MPLX Merger, our general partner is Andeavor Logistics GP LLC (“ALGP”), a wholly-owned subsidiary of MPLX LP (“MPLX”). Unless the context otherwise requires, references in this report to our general partner refer to TLGP for all activity through the closing of the MPLX Merger and to ALGP for all activity thereafter. Unless the context otherwise requires, references in this report to “we,” “us,” “our,” or “ours” refer to Andeavor Logistics, one or more of its consolidated subsidiaries or all of them taken as a whole. Unless the context otherwise requires, references in this report to “Andeavor” or our “Sponsor” refer collectively to Andeavor for all activity through September 30, 2018, or Andeavor LLC, successor-by-merger to Andeavor effective October 1, 2018 and a wholly owned subsidiary of Marathon Petroleum Corporation, and any of Andeavor’s or Andeavor LLC’s subsidiaries, as applicable, other than Andeavor Logistics, its subsidiaries and its general partner. References in this report to “Marathon” or “MPC” refer to Marathon Petroleum Corporation, one or more of its consolidated subsidiaries, including Andeavor LLC, or all of them taken as a whole.

MPLX LP Merger
As previously disclosed, on May 7, 2019, Andeavor Logistics, TLGP, MPLX, MPLX GP LLC, and MPLX MAX LLC, a wholly-owned subsidiary of MPLX (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) that provided for, among other things, the merger of Merger Sub with and into Andeavor Logistics (the “MPLX Merger”). On July 30, 2019, the MPLX Merger was completed, and Andeavor Logistics survived the MPLX Merger as a wholly-owned subsidiary of MPLX. At the effective time of the MPLX Merger, each common unit held by our public unitholders was converted into the right to receive 1.135 common units representing limited partner interests in MPLX (“MPLX Common Units”). Andeavor Logistics common units held by TLGP and Western Refining Southwest, Inc. (“WR Southwest”) were converted into the right to receive 1.0328 MPLX Common Units.

In connection with the completion of the MPLX Merger, we notified the New York Stock Exchange (“NYSE”) that each of our outstanding common units was converted into the right to receive MPLX Common Units in an amount determined by reference to the applicable exchange ratio. Upon our request, the NYSE filed a notification of removal from listing on Form 25 with the Securities and Exchange Commission (the “SEC”) with respect to our common units. Our common units ceased being traded prior to the opening of the market on July 30, 2019, and will no longer be listed on the NYSE. We continue to file with the SEC current and period reports that would be required by be filed with the SEC pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

MPC Merger
On October 1, 2018, MPC completed its acquisition of Andeavor (the “MPC Merger”) in accordance with the Agreement and Plan of Merger, dated as of April 29, 2018, as amended. Following the MPC Merger, MPC became the beneficial owner of 156 million common units out of 245 million common units outstanding as of October 1, 2018, which represented a 64% limited partner interest. MPC also acquired 100% of the equity interests of our general partner.

Principles of Consolidation and Basis of Presentation

Principles of Consolidation
Assets acquired from our Sponsor, and the associated liabilities and results of operations, are collectively referred to as the “Predecessors.” See Note 1 of our Annual Report on Form 10-K for the year ended December 31, 2018 and Note 2 for additional information regarding the assets acquired from our Sponsor.

Transfers of businesses between entities under common control are accounted for as if the transfer occurred at the beginning of the period, and prior periods are retrospectively adjusted to furnish comparative information. On August 6, 2018, we acquired assets from our Sponsor (the “2018 Drop Down”). See Note 2 for additional information. As an entity under common control with our Sponsor, we record the assets that we acquire from our Sponsor on our condensed consolidated balance sheet at our Sponsor’s historical basis instead of fair value. Accordingly, the accompanying financial statements and related notes of Andeavor Logistics have been retrospectively adjusted to include the historical results of the assets acquired prior to the effective date of the acquisition.

The financial statements of our Predecessors have been prepared from the separate records maintained by our Sponsor and may not necessarily be indicative of the conditions that would have existed or the results of operations if our Predecessors had been operated as an unaffiliated entity. For the six months ended June 30, 2018, our condensed statement of cash flows includes net cash from operating activities of $86 million and net cash used in investing activities of $422 million from our Predecessors, offset by sponsor contributions of equity to the Predecessors in net cash from financing activities.


6 |
 andxlogohighresa13.jpg
 
 

Notes to Condensed Consolidated Financial Statements (Unaudited)
 

The interim condensed consolidated financial statements and notes thereto have been prepared by management without audit according to the rules and regulations of the SEC and reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of results for the periods presented. Such adjustments are of a normal recurring nature, unless otherwise disclosed.

Basis of Presentation
We prepare our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). However, certain information and notes normally included in financial statements prepared under U.S. GAAP have been condensed or omitted pursuant to the SEC’s rules and regulations. Management believes that the disclosures presented herein are adequate to present the information fairly. The accompanying interim condensed consolidated financial statements and notes should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018. Certain prior year balances have been aggregated or disaggregated in order to conform to the current year presentation.

We are required under U.S. GAAP to make estimates and assumptions that affect the amounts of assets and liabilities and revenues and expenses reported as of and during the periods presented. We review our estimates on an ongoing basis using currently available information. Changes in facts and circumstances may result in revised estimates, and actual results could differ from those estimates. Our results of operations for any interim period are not necessarily indicative of results for the full year.

Cost Classifications
Natural gas liquids (“NGL”) expense results from the cost of NGL purchases under our percent of proceeds (“POP”) arrangements as well as the non-cash acquisition of replacement dry gas under our keep-whole arrangements.

Operating expenses are comprised of direct operating costs, including costs incurred for direct labor, repairs and maintenance, outside services, chemicals and catalysts, utility costs, including the purchase of electricity and natural gas used by our facilities, property taxes, environmental compliance costs related to current period operations, rent expense and other direct operating expenses incurred in the provision of services.

Depreciation and amortization expenses consist of the depreciation and amortization of property, plant and equipment, deferred charges and intangible assets related to our operating segments along with our corporate operations. General and administrative expenses represent costs that are not directly or indirectly related to or otherwise are not allocated to our operations. NGL expense, direct operating expenses, and depreciation and amortization expenses recognized by our Terminalling and Transportation, Gathering and Processing, and Wholesale segments (refer to amounts disclosed in Note 10) constitute costs of revenue as defined by U.S. GAAP.

Financial Instruments

The fair value of our senior notes is based on prices from recent trade activity and is categorized in level 2 of the fair value hierarchy. The borrowings under our amended revolving credit facility (the “Revolving Credit Facility”), our dropdown credit facility (“Dropdown Credit Facility”) and our loan agreement with MPC (the “MPC Loan Agreement”), which include a variable interest rate, approximate fair value. The carrying value and fair value of our debt were $5.3 billion and $5.4 billion as of June 30, 2019, respectively, and were $5.0 billion and $4.9 billion at December 31, 2018, respectively. These carrying and fair values of our debt exclude unamortized issuance costs, which are netted against our total debt.

We believe the carrying value of our other financial instruments, including cash and cash equivalents, receivables, accounts payable and certain accrued liabilities, approximate fair value. Our fair value assessment incorporates a variety of considerations, including the short-term duration of the instruments and the expected future insignificance of bad debt expense, which includes an evaluation of counterparty credit risk.

New Accounting Standards and Disclosures

Leases
We adopted Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” (“ASC 842”), as of January 1, 2019, using the optional transition method. The optional transition method permits entities to adopt the provisions of ASC 842 prospectively without adjusting comparative periods, which we have elected. As part of the adoption of ASC 842, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to grandfather the historical accounting conclusions until a reassessment event is present. We have also elected the practical expedient to not recognize short-term leases on the balance sheet, and the practical expedient related to right of way permits and land easements, allowing us to carry forward our accounting treatment for those existing agreements. Further, we have elected the practical expedient to not separate lease and non-lease components for the majority of our underlying classes of assets except for our third-party contractor service and equipment agreements in which we are the lessee. We did not elect the practical expedient to combine lease and non-lease components for arrangements in which we are the lessor. In instances where the practical expedient was not elected, lease and non-lease consideration is allocated based on relative standalone selling price.


 
 
June 30, 2019 | 7

Notes to Condensed Consolidated Financial Statements (Unaudited)

Right of use assets represent our right to use an underlying asset in which we obtain substantially all of the economic benefits and convey the right to control during the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right of use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Payments that are not fixed at the commencement date are considered variable and are excluded from the right of use asset and lease liability calculated. We recognized right of use assets and lease liabilities on the balance sheet for leases with a lease term of greater than one year. In the measurement of our right of use assets and lease liabilities, the fixed minimum lease payments in the agreement are discounted using a secured incremental borrowing rate provided by our financial service providers, as most of our leases do not provide an implicit rate, for a term similar to the duration of the lease. Operating lease expense is recognized on a straight-line basis over the lease term.

Adoption of the new standard resulted in the recording of additional right of use lease assets and lease liabilities of $131 million and $133 million, respectively, as of January 1, 2019, as further described in Note 4. The standard did not materially impact our condensed statements of consolidated operations or condensed statements of consolidated cash flows.

As a lessor under ASC 842, we may be required to re-classify existing contracts or operating leases to sales-type leases upon modification and reassessment of the contract. If such a modification were to occur, it may result in the de-recognition of existing assets, recognition of a receivable in the amount of the present value of fixed payments expected to be received by us under the contract, and recognition of a corresponding gain or loss in the period of change. We will evaluate the impact of a reassessment as modifications occur.

Stock Compensation
In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting”, which expanded the scope of Topic 718 to include share-based payment awards to nonemployees and eliminated the classification differences for employee and nonemployee share-based payment awards. This guidance was effective for interim and annual periods beginning after December 15, 2018. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

Credit Losses
In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which amends guidance on the impairment of financial instruments. The ASU requires the estimation of credit losses based on expected losses and provides for a simplified accounting model for purchased financial assets with credit deterioration. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses” that clarifies the scope of ASU 2016-13. In May 2019, the FASB issued ASU 2019-05, “Financial Instruments - Credit Losses (Topic 326) Targeted Transition Relief” to allow companies to irrevocably elect the fair value option on financial instruments that were previously recorded at amortized cost for eligible instruments. These ASUs are effective for annual reporting periods beginning after December 15, 2019, and interim reporting periods within those annual reporting periods. Early adoption is permitted for annual reporting periods beginning after December 15, 2018. While we are still evaluating the impact of ASU 2016-13, we do not expect to early adopt ASU 2016-13 nor expect the adoption of this standard to have a material impact on our consolidated financial statements.

Note 2 - Acquisitions

2018 Drop Down
On August 6, 2018, we completed the 2018 Drop Down for total consideration of $1.55 billion. These assets include gathering, storage and transportation assets in the Permian Basin; legacy Western Refining, Inc. assets and associated crude terminals; the majority of Andeavor’s remaining refining terminalling, transportation and storage assets; and equity method investments in Andeavor Logistics Rio Pipeline LLC (“ALRP”), Minnesota Pipe Line Company, LLC, and PNAC, LLC (“PNAC”). In addition, the Conan Crude Oil Gathering System and the Los Angeles Refinery Interconnect Pipeline (“LARIP”) were transferred at cost plus incurred interest.

SLC Core Pipeline System
On May 1, 2018, we completed our acquisition of the SLC Core Pipeline System from Plains All American Pipeline, L.P. for total consideration of $180 million. The system consists of pipelines that transport crude oil to another third-party pipeline system that supplies Salt Lake City area refineries, including Marathon’s Salt Lake City refinery. We financed the acquisition using our Revolving Credit Facility. This acquisition is not material to our condensed consolidated financial statements and its operating results are reported in our Terminalling and Transportation segment.


8 |
 andxlogohighresa13.jpg
 
 

Notes to Condensed Consolidated Financial Statements (Unaudited)
 

Combined Consolidated Financial Information

As discussed further in Note 1, we refer to the historical results of the assets acquired from our Sponsor in the 2018 Drop Down (prior to August 6, 2018) as our “Predecessors.” The following table presents our results of operations disaggregated to present results relating to us and the Predecessors for the assets acquired from our Sponsor and the total amounts included in our combined financial statements for the three and six months ended June 30, 2018.

Reconciliation of Combined Financial Statements (in millions)

 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2018
 
Combined
 
Andeavor Logistics
 
Predecessors
 
Combined
 
Andeavor Logistics
 
Predecessors
Revenues
 
 
 
 
 
 
 
 
 
 
 
Affiliate
$
389

 
$
381

 
$
8

 
$
716

 
$
699

 
$
17

Third-party
180

 
176

 
4

 
399

 
393

 
6

Total Revenues
569

 
557

 
12

 
1,115

 
1,092

 
23

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
NGL expense (exclusive of items shown separately below)
45

 
45

 

 
93

 
93

 

Operating expenses (exclusive of depreciation and amortization)
221

 
201

 
20

 
422

 
391

 
31

Depreciation and amortization expenses
93

 
83

 
10

 
182

 
163

 
19

General and administrative expenses
29

 
25

 
4

 
60

 
52

 
8

Loss on asset disposals and impairments
1

 
1

 

 
1

 
1

 

Operating Income (Loss)
180

 
202

 
(22
)
 
357

 
392

 
(35
)
Interest and financing costs, net
(60
)
 
(58
)
 
(2
)
 
(115
)
 
(112
)
 
(3
)
Equity in earnings of equity method investments
10

 
3

 
7

 
18

 
5

 
13

Other income, net
2

 
1

 
1

 
3

 
2

 
1

Net Earnings (Loss)
$
132

 
$
148

 
$
(16
)
 
$
263

 
$
287

 
$
(24
)
 
 
 
 
 
 
 
 
 
 
 
 
Loss attributable to Predecessors
$
16

 
$

 
$
16

 
$
24

 
$

 
$
24

Net Earnings Attributable to Partners
148

 
148

 

 
287

 
287

 

Preferred unitholders’ interest in net earnings
(10
)
 
(10
)
 

 
(24
)
 
(24
)
 

Limited Partners’ Interest in Net Earnings
$
138

 
$
138

 
$

 
$
263

 
$
263

 
$



Note 3 - Related-Party Transactions

Affiliate Agreements

We have various long-term, fee-based commercial agreements with our Sponsor, under which we provide terminal distribution, storage services, pipeline transportation, crude oil, natural gas and produced water gathering and processing, wholesale, and trucking services to Marathon, and Marathon commits to provide us with minimum monthly throughput volumes of crude oil, refined products and other products. If, in any calendar month, Marathon fails to meet its minimum volume commitments under these agreements, it will be required to pay us a shortfall payment. For the NGLs that we handle under keep-whole agreements, we transfer the commodity price risk exposure associated with these keep-whole agreements to Marathon pursuant to the Keep-Whole Commodity Fee Agreement, as amended (the “Keep-Whole Commodity Agreement”). Under the Keep-Whole Commodity Agreement, Marathon pays us a processing fee for NGLs related to the keep-whole agreements and delivers replacement dry gas to the producers on our behalf. We then pay Marathon a marketing fee in exchange for assuming the commodity price risk. The terms and pricing of this agreement are subject to revision each year.

We have agreements for the provision of various general and administrative services by our Sponsor. Under our partnership agreement, we are required to reimburse our general partner and its affiliates for all costs and expenses they incur on our behalf for managing and controlling our business and operations.


 
 
June 30, 2019 | 9

Notes to Condensed Consolidated Financial Statements (Unaudited)

On January 30, 2019, TLGP and certain of its indirect subsidiaries entered into a secondment agreement between us and certain of our subsidiaries and Marathon Petroleum Logistics Services LLC (“MPLS”) and a secondment agreement between us and certain of our subsidiaries and Marathon Refining Logistics Services LLC (“MRLS”) (collectively, the “2019 Secondment Agreements”). Under the 2019 Secondment Agreements, MPLS and MRLS second certain employees to occupy positions within our business and organization and to conduct business on our behalf.

While seconded by MPLS and MRLS to us, seconded employees remain on the payroll of MPLS or MRLS, as the case may be, and are eligible to participate in all MPLS or MRLS benefit plans that they would be eligible to participate in absent the secondment, but work for and are under our general direction, supervision and control. We reimburse MPLS or MRLS, as the case may be, for the payroll costs of the seconded employees, including base pay, bonuses and other incentive compensation plus a burden rate associated with benefits and other payroll costs for the portion of the employee’s time that is allocated to us. The 2019 Secondment Agreements are for a term of 10 years, but may be sooner terminated by us, MPLS or MRLS upon 60 days written notice. In connection with the entry into the 2019 Secondment Agreements, on January 30, 2019, our Sponsor entered into an agreement (the “Termination Agreement”) that terminated the Andeavor Secondment Agreement. The Termination Agreement had an effective date of January 1, 2019.

Except to the extent specified under our amended omnibus agreement (the “Amended Omnibus Agreement”) or the 2019 Secondment Agreements, TLGP determines the amount of these expenses. Under the terms of the Amended Omnibus Agreement in effect as of June 30, 2019, we are required to pay our Sponsor an annual corporate services fee of $17 million for the provision of various centralized corporate services, including executive management, legal, accounting, treasury, human resources, health, safety and environmental, information technology, certain insurance coverage, administration and other corporate services.

Pursuant to the applicable secondment agreements in effect, our Sponsor charged us $24 million and $4 million during the three months ended June 30, 2019 and 2018, respectively, and $47 million and $10 million during the six months ended June 30, 2019 and 2018, respectively, reflecting increased services provided in conjunction with the assets acquired in the 2018 Drop Down. Additionally, pursuant to the Amended Omnibus Agreement and 2019 Secondment Agreements, we reimburse our Sponsor for any direct costs incurred by our Sponsor in providing other operational services with respect to certain of our other assets and operations.

Summary of Affiliate Transactions

Summary of Revenue and Expense Transactions with our Sponsor (in millions)

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018 (a)
 
2019
 
2018 (a)
Revenues (b)
$
424

 
$
389

 
$
868

 
$
716

Operating expenses (c)
113

 
72

 
217

 
134

General and administrative expenses
15

 
22

 
29

 
46


(a)
Adjusted to include the historical results of the Predecessors. See Note 1 for further discussion.
(b)
Represents 71% and 68% of our total revenues for the three months ended June 30, 2019 and 2018, respectively, and 71% and 64% of our total revenues for the six months ended June 30, 2019 and 2018, respectively.
(c)
Excludes reimbursements from our Sponsor pursuant to the Amended Omnibus Agreement, the Carson Assets Indemnity Agreement and other affiliate agreements of $7 million and $3 million for the three months ended June 30, 2019 and 2018, respectively, and $10 million for both the six months ended June 30, 2019 and 2018.

Distributions
During the six months ended June 30, 2019, we paid quarterly cash distributions of $294 million to our Sponsor. See Note 7 for further information regarding distributions.

Note 4 - Leases

For further information regarding the adoption of ASC 842, including the method of adoption and practical expedients elected,
see Note 1.

Lessee

We lease a wide variety of facilities and equipment under operating leases, including land and building space, office and field equipment, storage facilities and transportation equipment with remaining lease terms ranging from less than 1 year to 25 years. Some of our long-term leases include renewal options. Renewal options and termination options were not included in the

10 |
 andxlogohighresa13.jpg
 
 

Notes to Condensed Consolidated Financial Statements (Unaudited)
 

measurement of right of use assets and lease liabilities since it was determined they were not reasonably certain to be exercised. The decision to renew or terminate the lease is at our sole discretion. Our lease agreements do not include any material residual value guarantees or restrictive covenants.

Maturities of lease liabilities for operating lease obligations and finance lease obligations having initial or remaining noncancellable lease terms in excess of one year as of June 30, 2019 as well as the components of lease expense under ASC 842 are as follows:

Lease Liabilities Maturities (in millions)

 
Lease Obligations
 
Operating
 
Finance
2019
$
6

 
$
2

2020
18

 
3

2021
15

 
2

2022
12

 
2

2023
12

 
2

2024 and thereafter
102

 
4

Gross lease payments
165

 
15

Less: imputed interest
(45
)
 
(2
)
Total Lease Payments
$
120

 
$
13



Components of Lease Expense (in millions)

 
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
Operating lease cost
$
5

 
$
8

 
 
 
 
Finance lease cost:
 
 
 
Amortization of right-of-use assets
1

 
2

Interest on lease liabilities
1

 
1

Total finance lease cost
2

 
3

 
 
 
 
Variable lease cost
2

 
3

Short-term lease cost
9

 
15

Total Lease Cost
$
18

 
$
29




 
 
June 30, 2019 | 11

Notes to Condensed Consolidated Financial Statements (Unaudited)

Supplemental Balance Sheet Data (in millions, except lease term and discount rates)

 
June 30, 2019
Operating Leases
 
Right of use assets included in other noncurrent assets, net
$
121

 
 
Operating lease liabilities included in other current liabilities
$
12

Long-term operating lease liabilities included in other noncurrent liabilities
108

Total Operating Lease Liabilities
$
120

 
 
Weighted average remaining lease term
13 years

Weighted average discount rate
4.83
%
 
 
Finance Leases
 
Property, plant and equipment, gross
$
25

Accumulated depreciation
(14
)
Property, Plant and Equipment, Net
$
11

 
 
Debt due within one year
$
3

Long-term debt
10

Total Finance Lease Liabilities
$
13

 
 
Weighted average remaining lease term
5 years

Weighted average discount rate
5.88
%


Lessor

We provide storage at several of our terminals as well as certain other services to our Sponsor in which we are considered to be the lessor in accordance with U.S. GAAP. We charge fixed fees based on the total storage capacity of our tanks under those agreements. During the three and six months ended June 30, 2019, we did not receive any material contingent lease payments. The term of the majority of the storage agreements is a primary term of ten years with two renewal option periods of five years, with the primary term scheduled to expire from 2021 to 2028. Our revenue from implicit lease arrangements, excluding executory costs, totaled $132 million and $91 million for the three months ended June 30, 2019 and 2018, respectively, and $268 million and $178 million for the six months ended June 30, 2019 and 2018, respectively.

Based on the changes presented in ASC 842, we, as a lessor, may be required to reclassify contracts or existing operating leases to sales-type leases upon modification and related reassessment of the contract. If such a modification were to occur, it may result in the derecognition of existing assets, recognition of a receivable in the amount of the present value of fixed payments expected to be received by us under the contract, and recognition of a corresponding gain or loss in the period of change. We will evaluate the impact of a reassessment as modifications occur.

Minimum Future Lease Revenue on Non-Cancellable Operating Leases (in millions)

 
June 30, 2019 (a)
2019
$
268

2020
535

2021
533

2022
533

2023
532

2024 and thereafter
6,292

Total Minimum Lease Revenue
$
8,693



(a)
Includes minimum future lease revenue assuming all renewal option periods for each agreement are exercised.


12 |
 andxlogohighresa13.jpg
 
 

Notes to Condensed Consolidated Financial Statements (Unaudited)
 

Investment in Assets Held for Operating Leases (in millions)

 
June 30,
2019
 
December 31, 2018
Terminals and related assets
$
847

 
$
778

Pipelines
110

 
110

Land and leasehold improvements
29

 
28

Construction in progress
21

 
15

Property, plant and equipment, at cost
1,007

 
931

Accumulated depreciation
(262
)
 
(238
)
Property, Plant and Equipment, Net
$
745

 
$
693



Note 5 - Debt

Debt Balance, Net of Unamortized Issuance Costs (in millions)

 
June 30,
2019
 
December 31,
2018
Total debt
$
5,263

 
$
5,010

Unamortized issuance costs
(40
)
 
(46
)
Current maturities
(503
)
 
(504
)
Debt, Net of Current Maturities and Unamortized Issuance Costs
$
4,720

 
$
4,460



Our debt is non-recourse to Marathon, except for TLGP and, with respect to borrowings under our Dropdown Credit Facility, WR Southwest.

Available Capacity Under Credit Facilities (in millions) (a)

 
Total Capacity
 
Amount Borrowed as of June 30, 2019
 
Outstanding
Letters of Credit
 
Available Capacity as of June 30, 2019
 
Weighted Average Interest Rate
 
Expiration
Revolving Credit Facility
$
1,100

 
$
1,070

 
$

 
$
30

 
3.90
%
 
January 29, 2021
Dropdown Credit Facility
1,000

 
430

 

 
570

 
3.92
%
 
January 29, 2021
MPC Loan Agreement
500

 

 

 
500

 
%
 
December 21, 2023
Total Credit Facilities
$
2,600

 
$
1,500

 
$

 
$
1,100

 
 
 
 


(a)
In conjunction with the MPLX Merger, on July 30, 2019, all outstanding borrowings and unpaid fees on our credit facilities were repaid and the agreements were terminated, including the MPC Loan Agreement.

Note 6 - Commitments and Contingencies

In the ordinary course of business, we may become party to lawsuits, disputes, administrative proceedings and governmental investigations, including environmental, regulatory and other matters. The outcome of these matters cannot always be predicted accurately, but we will accrue liabilities for these matters if the amount is probable and can be reasonably estimated. While it is not possible to predict the outcome of such proceedings, if one or more of them were decided against us, we believe there would be no material impact on our condensed consolidated financial statements.

Note 7 - Equity and Net Earnings per Unit

We had 89,457,316 common public units and 600,000 6.875% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the “Preferred Units”) outstanding as of June 30, 2019. Additionally, Marathon owned 156,173,128 of our common units, constituting 64% ownership interest in us. Marathon also held 80,000 TexNew Mex units and all of the outstanding non-economic general partner units as of June 30, 2019. See Note 1 for further discussion of the treatment of our common units in connection with the MPLX Merger. In addition, in connection with the MPLX Merger, our Preferred Units were exchanged for Series B Preferred Units of MPLX and our TexNew Mex units were converted into a new class of units of MPLX with substantially equivalent rights, powers, duties and obligations as our TexNew Mex Units.


 
 
June 30, 2019 | 13

Notes to Condensed Consolidated Financial Statements (Unaudited)

Changes to Equity (in millions)

 
Three and Six Months Ended June 30, 2019
 
Common
 
Preferred
 
Total
Balance at December 31, 2018
$
4,070

 
$
604

 
$
4,674

Distributions to common and preferred unitholders (a)
(240
)
 
(21
)
 
(261
)
Net earnings attributable to partners
147

 
10

 
157

Contributions (b)
19

 

 
19

Other
1

 

 
1

Balance at March 31, 2019
3,997

 
593

 
4,590

Distributions to common unitholders (a)
(241
)
 

 
(241
)
Net earnings attributable to partners
150

 
10

 
160

Contributions (b)
25

 

 
25

Balance at June 30, 2019
$
3,931

 
$
603

 
$
4,534


 
Three and Six Months Ended June 30, 2018
 
Equity of Predecessors (c)
 
Andeavor Logistics
 
Total
 
 
Common
 
Preferred
 
Balance at December 31, 2017
$
1,292

 
$
2,925

 
$
589

 
$
4,806

Sponsor contributions of assets to the Predecessors
197

 

 

 
197

Loss attributable to the Predecessors
(8
)
 

 

 
(8
)
Distributions to common and preferred unitholders (a)

 
(205
)
 
(8
)
 
(213
)
Net earnings attributable to partners

 
125

 
14

 
139

Contributions (b)

 
16

 

 
16

Cumulative effect of accounting standard adoption

 
(22
)
 

 
(22
)
Other

 

 
(1
)
 
(1
)
Balance at March 31, 2018
1,481

 
2,839

 
594

 
4,914

Sponsor contributions of assets to the Predecessors
139

 

 

 
139

Loss attributable to the Predecessors
(16
)
 

 

 
(16
)
Distributions to common unitholders (a)

 
(206
)
 

 
(206
)
Net earnings attributable to partners

 
138

 
10

 
148

Contributions (b)

 
7

 

 
7

Other

 
1

 

 
1

Balance at June 30, 2018
$
1,604

 
$
2,779

 
$
604

 
$
4,987


(a)
Represents cash distributions declared and paid during the period.
(b)
Includes Marathon and TLGP contributions to us primarily related to reimbursements for capital spending pursuant predominantly to the Amended Omnibus Agreement and the Carson Assets Indemnity Agreement.
(c)
Adjusted to include the historical results of the Predecessors. See Note 1 for further discussion.

Cash Distributions

Our partnership agreement, as amended, sets forth the calculation to be used to determine the amount and priority of cash distributions that the limited partner unitholders will receive.

Quarterly Distributions on Common Units

Quarter Ended
Quarterly Distribution Per Common Unit
 
Total Cash Distribution
(in millions)
 
Date of Distribution
 
Unitholders Record Date
December 31, 2018 (a)
$
1.03

 
$
238

 
February 14, 2019
 
February 5, 2019
March 31, 2019 (a)
1.03

 
240

 
May 15, 2019
 
May 9, 2019

(a)
This distribution is net of $12.5 million waived with respect to units held by our Sponsor and its affiliates for the three months ended March 31, 2019 and $15 million for the three months ended December 31, 2018. These distribution waivers were instituted in 2017 under the terms of our partnership agreement.

14 |
 andxlogohighresa13.jpg
 
 

Notes to Condensed Consolidated Financial Statements (Unaudited)
 

During the period from the execution of the MPLX Merger Agreement to the date that the MPLX Merger was consummated, we coordinated the record dates of our quarterly distributions with MPLX so that no holder of our common units received distributions from both us and MPLX or failed to receive one distribution. As a result of the record date of the MPLX distribution occurring after the MPLX Merger, we did not declare a distribution for the second quarter of 2019.

During the six months ended June 30, 2019 and 2018, we paid distributions of $21 million and $8 million, respectively, to holders of our Preferred Units. Distributions on the Preferred Units are payable semi-annually in arrears on the 15th day of February and August of each year. Due to the timing of the MPLX Merger, exchange of Preferred Units and the record dates discussed above, we did not declare a distribution associated with the Preferred Units for the first half of 2019.

Net Earnings per Unit

We use the two-class method when calculating the net earnings per unit applicable to limited partners, because we have more than one participating security. At June 30, 2019, our participating securities consisted of common units, Preferred Units and TexNew Mex units. Net earnings is allocated between the partners in accordance with our partnership agreement. We base our calculation of net earnings per unit on the weighted average number of common limited partner units outstanding during the period.

Diluted net earnings per unit include the effects of potentially dilutive units on our common units, which consist of unvested phantom units. Distributions less than or greater than earnings are allocated in accordance with our partnership agreement.

Net Earnings per Unit (in millions, except per unit amounts)

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018 (a)
 
2019
 
2018 (a)
Net earnings
$
160

 
$
132

 
$
317

 
$
263

Distributions on Preferred Units (b)

 
(10
)
 

 
(20
)
Net earnings attributable to common units
160

 
122

 
317

 
243

Limited partners’ distributions on common units (c)

 
(209
)
 
(240
)
 
(414
)
Distributions on common units less (greater) than earnings
$
160

 
$
(87
)
 
$
77

 
$
(171
)
General partner’s earnings:
 
 
 
 
 
 
 
Allocation of distributions greater than earnings (d)
$

 
$
(16
)
 
$

 
$
(24
)
Total general partner’s loss
$

 
$
(16
)
 
$

 
$
(24
)
Limited partners’ earnings on common units:
 
 
 
 
 
 
 
Distributions (c)(e)
$

 
$
209

 
$
240

 
$
414

Allocation of distributions less (greater) than earnings
160

 
(71
)
 
77

 
(147
)
Total limited partners’ earnings on common units
$
160

 
$
138

 
$
317

 
$
267

 
 
 
 
 
 
 
 
Weighted average limited partner units outstanding:
 
 
 
 
 
 
 
Common units - basic
245.6

 
217.2

 
245.6

 
217.2

Common units - diluted (f)
245.7

 
217.3

 
245.7

 
217.3

Net earnings per limited partner unit: (g)
 
 
 
 
 
 
 
Common - basic
$
0.65

 
$
0.63

 
$
1.29

 
$
1.23

Common - diluted
$
0.65

 
$
0.63

 
$
1.29

 
$
1.23


(a)
Adjusted to include the historical results of the Predecessors. See Note 1 for further discussion.
(b)
The Preferred Units entitle unitholders to receive preferred distributions on a semi-annual basis. Due to the MPLX Merger, we did not declare a distribution for the first half of 2019.
(c)
We did not declare a distribution for the second quarter of 2019 due to the MPLX Merger.
(d)
We have revised the historical allocation of general partner earnings to include the Predecessors’ losses of $16 million and $24 million for the three and six months ended June 30, 2018, respectively.
(e)
Distributions of earnings for limited partners’ common units for the three months ended June 30, 2018 is net of a $15 million waiver and the six months ended June 30, 2019 and 2018 are net of a $12.5 million and $30 million waiver, respectively, from our Sponsor. There was no waiver for the three months ended June 30, 2019 because we did not declare a distribution for the second quarter of 2019 due to the MPLX Merger.
(f)
Diluted net earnings per unit include the effects of potentially dilutive units on our common units, which consist of unvested phantom units.
(g)
Amounts may not recalculate due to rounding of dollar and unit information.

<