Sweeny Fractionator Acquisition

3 Months Ended

Mar. 31, 2016

Retrospective Adjustments For Common Control Transactions [Abstract]

Acquisitions

Sweeny Fractionator Acquisition

On February 17, 2016, we entered into a Contribution, Conveyance and Assumption Agreement (CCAA) with subsidiaries of Phillips 66 to acquire a 25 percent controlling interest in Sweeny Frac LLC for a total consideration of $236 million, consisting of the assumption of a $212 million note payable to a subsidiary of Phillips 66 and the issuance of 412,823 newly issued common units to Phillips 66 Project Development Inc. and 8,425 general partner units to Phillips 66 Partners GP LLC (General Partner) to maintain its 2.0 percent general partner interest. The Sweeny Fractionator Acquisition closed on March 1, 2016, with total transaction costs of $0.9 million expensed as incurred.  In connection with the Sweeny Fractionator Acquisition, we entered into various commercial agreements with Phillips 66 and amended the omnibus agreement and the operational services agreement with Phillips 66.

Sweeny Frac LLC is engaged in the business of fractionating and storing NGL through an NGL fractionator and storage caverns:

• Sweeny NGL Fractionator. A newly constructed NGL fractionator located within Phillips 66's Sweeny refinery complex in Old Ocean, Texas. The Sweeny NGL Fractionator has a processing capacity of 100,000 barrels per day. The NGL fractionator uses distillation to process a raw (Y-grade) NGL stream into its individual purity components, such as propane and butane.

• Clemens Caverns. A newly constructed underground salt dome NGL storage facility located near Brazoria, Texas. The Clemens Caverns facilitate handling of Y-grade NGL for input into the Sweeny NGL Fractionator, as well as storage of purity NGL products produced by the fractionator.

Construction activities on the Sweeny NGL Fractionator and Clemens Caverns began in 2013. Commercial operations at the Sweeny NGL Fractionator commenced in December 2015, and commercial operations at the Clemens Caverns commenced in September 2015.

Operating revenues are generated by charging fees based on contracted throughput volumes in the Sweeny NGL Fractionator and storage of NGL at the Clemens Caverns. We do not own any of the NGL handled and do not engage in the trading of NGL.

After the acquisition, Phillips 66 owns:

• 58,761,865 common units representing an aggregate 69.5 percent limited partner interest.

• 1,691,850 general partner units, representing a 2 percent general partner interest.

• All of the incentive distribution rights (IDRs).

Because the Sweeny Fractionator Acquisition was considered a transfer of businesses between entities under common control, the Acquired Assets were transferred at historical carrying value. The net book value of our 25 percent interest acquired was $283 million at March 1, 2016. Our historical financial statements have been retrospectively adjusted to reflect the results of operations, financial position, and cash flows of the Acquired Assets as if we owned the Acquired Assets for all periods presented.

We consolidate Sweeny Frac LLC as we determined that it is a variable interest entity (VIE) and we are the primary beneficiary. As the general partner of the partnership that owns Sweeny Frac LLC, we have the ability to control its financial interests, as well as the ability to direct the activities of Sweeny Frac LLC that most significantly impact its economic performance. The most significant assets of Sweeny Frac LLC that are available to settle only its obligations are its net PP&E of $1,151.4 million at March 31, 2016.

The following tables present our results of operations and financial position giving effect to the Sweeny Fractionator Acquisition. The combined results of the Acquired Assets prior to the Effective Date are included in “Acquired Assets Predecessor.” The consolidated results of the Acquired Assets after the Effective Date are included in “Phillips 66 Partners LP.” “Net income (loss) attributable to Predecessors” includes earnings of $3.7 million and a loss of $2.0 million attributable to noncontrolling interests in the first quarter of 2016 and 2015, respectively. “Net investment—Predecessors” at December 31, 2015, includes $800.2 million attributable to noncontrolling interests.

	Three Months Ended March 31, 2016
	Millions of Dollars
Consolidated Statement of Income	Phillips 66 Partners LP		Acquired Assets Predecessor	Consolidated Results
Revenues
Operating revenues—related parties	$	76.5	17.7	94.2
Operating revenues—third parties	2.0		—	2.0
Equity in earnings of affiliates	24.8		—	24.8
Other income	—		0.2	0.2
Total revenues and other income	103.3		17.9	121.2
Costs and Expenses
Operating and maintenance expenses	17.6		5.2	22.8
Depreciation	8.4		5.4	13.8
General and administrative expenses	8.1		0.8	8.9
Taxes other than income taxes	3.8		1.6	5.4
Interest and debt expense	9.9		—	9.9
Total costs and expenses	47.8		13.0	60.8
Income before income taxes	55.5		4.9	60.4
Provision for income taxes	0.2		—	0.2
Net Income	55.3		4.9	60.2
Less: Net income attributable to noncontrolling interests	3.0		—	3.0
Less: Net income attributable to Predecessors	—		4.9	4.9
Net Income Attributable to the Partnership	$	52.3	—	52.3

	Three Months Ended March 31, 2015
	Millions of Dollars
Consolidated Statement of Income	Phillips 66 Partners LP (As Previously Reported)		Acquired Assets Predecessor		Phillips 66 Partners LP (As Currently Reported)
Revenues
Operating revenues—related parties	$	62.8	—		62.8
Operating revenues—third parties	1.1		—		1.1
Equity in earnings of affiliates	6.1		—		6.1
Other income	0.1		—		0.1
Total revenues and other income	70.1		—		70.1
Costs and Expenses
Operating and maintenance expenses	14.8		1.2		16.0
Depreciation	5.1		—		5.1
General and administrative expenses	7.4		0.8		8.2
Taxes other than income taxes	1.3		0.6		1.9
Interest and debt expense	5.9		—		5.9
Total costs and expenses	34.5		2.6		37.1
Income before income taxes	35.6		(2.6	)	33.0
Provision for income taxes	0.2		—		0.2
Net Income (Loss)	35.4		(2.6	)	32.8
Less: Net loss attributable to Predecessors	—		(2.6	)	(2.6	)
Net Income Attributable to the Partnership	$	35.4	—		35.4

	Millions of Dollars
	December 31, 2015
Consolidated Balance Sheet	Phillips 66 Partners LP (As Previously Reported)			Acquired Assets Predecessor	Consolidated Results (As Currently Reported)
Assets
Cash and cash equivalents	$	48.0		2.3	50.3
Accounts receivable—related parties	21.4			—	21.4
Accounts receivable—third parties	3.3			—	3.3
Materials and supplies	2.5			2.0	4.5
Other current assets	2.2			2.0	4.2
Total Current Assets	77.4			6.3	83.7
Equity investments	944.9			—	944.9
Net properties, plants and equipment	492.4			1,132.8	1,625.2
Goodwill	2.5			—	2.5
Deferred rentals—related parties	5.6			—	5.6
Deferred tax assets	—			0.1	0.1
Other assets	0.7			—	0.7
Total Assets	$	1,523.5		1,139.2	2,662.7
Liabilities
Accounts payable—related parties	$	3.9		—	3.9
Accounts payable—third parties	8.3			58.6	66.9
Payroll and benefits payable	—			0.7	0.7
Accrued property and other taxes	5.1			2.4	7.5
Accrued interest	15.1			1.8	16.9
Current portion of accrued environmental costs	0.8			—	0.8
Deferred revenues—related parties	4.4			0.2	4.6
Other current liabilities	0.1			—	0.1
Total Current Liabilities	37.7			63.7	101.4
Note payable—related party	—			241.0	241.0
Long-term debt	1,090.7			—	1,090.7
Asset retirement obligations	3.4			—	3.4
Accrued environmental costs	0.8			—	0.8
Deferred income taxes	0.3			—	0.3
Deferred revenues—related parties—long-term	0.5			10.4	10.9
Total Liabilities	1,133.4			315.1	1,448.5
Equity
Net investment—Predecessors	—			824.1	824.1
Common unitholders—public	808.9			—	808.9
Common unitholder—Phillips 66	233.0			—	233.0
General partner—Phillips 66	(650.3		)	—	(650.3	)
Accumulated other comprehensive loss	(1.5		)	—	(1.5	)
Total Equity	390.1			824.1	1,214.2
Total Liabilities and Equity	$	1,523.5		1,139.2	2,662.7