On February 27, 2020, the Partnership and Triton entered into the Purchase and Sale Agreement with SPLC, SGOM, Shell Chemical, and Equilon Enterprises LLC d/b/a SOPUS to acquire: (i) 79% of the issued and outstanding membership interests in Mattox, from SGOM and (ii) certain logistics assets at Norco, which are comprised of crude, chemicals, intermediate and finished product pipelines, storage tanks, docks, truck and rail racks and supporting infrastructure, from SOPUS and Shell Chemical. The transactions closed pursuant to the Purchase and Sale Agreement on April 1, 2020. See Note 2 — Acquisitions and Other Transactions in this report for additional details.

On November 3, 2014, we entered into an Omnibus Agreement with SPLC and our general partner concerning our payment of an annual general and administrative services fee to SPLC, as well as our reimbursement of certain costs incurred by SPLC on our behalf. On February 19, 2019, we, our general partner, SPLC, the Operating Company and Shell Oil Company terminated the Omnibus Agreement effective as of February 1, 2019, and we, our general partner, SPLC and the Operating Company entered into a new Omnibus Agreement effective February 1, 2019 (the “2019 Omnibus Agreement”). On February 18, 2020, pursuant to the 2019 Omnibus Agreement, the Board of Directors of our general partner (the “Board”) approved a 3% inflationary increase to the annual general and administrative fee for 2020.

•our obligation to reimburse SPLC for all expenses incurred by SPLC as a result of us becoming and continuing as a publicly traded entity; we will reimburse our general partner for these expenses to the extent the fees relating to such services are not included in the general and administrative fee.

Under the 2019 Omnibus Agreement, SPLC agreed to indemnify us against tax liabilities relating to our assets acquired at our initial public offering (our “initial assets”) that are identified prior to the date that is 60 days after the expiration of the statute of limitations applicable to such liabilities. This obligation has no threshold or cap. We in turn agreed to indemnify SPLC against

We, our general partner and SPLC entered into a Trade Marks License Agreement with Shell Trademark Management Inc. effective as of February 1, 2019. The Trade Marks License Agreement grants us the use of certain Shell trademarks and trade names and expires on January 1, 2024 unless earlier terminated by either party upon 360 days’ notice.

We have entered into several other customary agreements with SPLC and Shell. These agreements include pipeline operating agreements, reimbursement agreements and services agreements. See Note 4—Related Party Transactions—Other Agreements in the Notes to Consolidated Financial Statements of our 2019 Annual Report.

Concurrently with the execution of the Partnership Interests Restructuring Agreement, on April 1, 2020, we executed the Second Amended and Restated Partnership Agreement, which amended and restated the Partnership’s First Amended and Restated Agreement of Limited Partnership dated November 3, 2014, (“First Amended and Restated Partnership Agreement” as the same was previously amended) in its entirety. Under the Second Amended and Restated Partnership Agreement, the IDRs were eliminated, the economic general partnership interest was converted into a non-economic general partner interest, and the general partner or its assignee agreed to waive a portion of the distributions that would otherwise be payable on the common units issued to SPLC as part of the April 2020 Transaction, in an amount of $20 million per quarter for four consecutive fiscal quarters, to begin with the distribution made with respect to the second quarter of 2020. The transaction closed simultaneously with the closing of the transactions described in “Acquisition Agreements” above. See Note 2—Acquisitions and Other Transactions for additional details.

Prior to the execution of the Second Amended and Restated Partnership Agreement, on December 21, 2018, we executed Amendment No. 2 (the “Second Amendment”) to the First Amended and Restated Partnership Agreement. Under the Second Amendment, the general partner agreed to waive $50 million of distributions in 2019 by agreeing to reduce distributions to holders of the Partnership’s IDRs by: (1) $17 million for the three months ended March 31, 2019; (2) $17 million for the three months ended June 30, 2019; and (3) $16 million for the three months ended September 30, 2019.

For Zydeco, noncontrolling interest consists of SPLC’s 7.5% retained ownership interest as of both June 30, 2020 and December 31, 2019. For Odyssey, noncontrolling interest consists of GEL Offshore Pipeline LLC’s (“GEL”) 29.0% retained ownership interest as of both June 30, 2020 and December 31, 2019.


	June 30, 2020		December 31, 2019
Accounts receivable	$	36	$	29
Prepaid expenses	6		15
Other assets	2		2
Contract assets ⁽¹⁾	240		—
Accounts payable⁽²⁾	21		10
Deferred revenue	4		—
Accrued liabilities⁽³⁾	20		19
Debt payable ⁽⁴⁾	2,692		2,692
Financing receivables ⁽¹⁾	301		—

⁽¹⁾ Contract assets - related parties and Financing receivables were recognized in connection with the April 2020 Transaction. Refer to the section entitled “Sale Leaseback” below for additional details. Financing receivables were presented as a component of (deficit) equity.

⁽³⁾ As of June 30, 2020, Accrued liabilities reflects $16 million accrued interest, and $4 million other accrued liabilities which are primarily related to the accrued operation and maintenance expenses on the Norco Assets. As of December 31, 2019, Accrued liabilities reflects $18 million of accrued interest and $1 million of other accrued liabilities.

We have entered into five credit facilities with STCW: the Ten Year Fixed Facility, the Seven Year Fixed Facility, the Five Year Revolver due July 2023, the Five Year Revolver due December 2022 and the Five Year Fixed Facility. Zydeco has also entered into the 2019 Zydeco Revolver with STCW. For definitions and additional information regarding these credit facilities, see Note 7 – Related Party Debt in this report and Note 8 – Related Party Debt in the Notes to Consolidated Financial Statements of our 2019 Annual Report.

We provide crude oil transportation, terminaling and storage services to related parties under long-term contracts. We entered into these contracts in the normal course of our business. Our revenue from related parties for the three and six months ended June 30, 2020 and June 30, 2019 is disclosed in Note 10 – Revenue Recognition.

The following table shows related party expenses, including certain personnel costs, incurred by Shell and SPLC on our behalf that are reflected in the accompanying unaudited consolidated statements of income for the indicated periods. Included in these amounts, and disclosed below, is our share of operating and general corporate expenses, as well as the fees paid to SPLC under certain agreements.


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Allocated operating expenses	$	16	$	3	$	20	$	8
Major maintenance costs ⁽¹⁾	3		—		3		—
Insurance expense⁽²⁾	5		5		10		9
Other ⁽³⁾	8		8		13		13
Operations and maintenance – related parties	$	32	$	16	$	46	$	30

Allocated general corporate expenses	$	10	$	8	$	17	$	14
Management Agreement fee	3		2		5		4
Omnibus Agreement fee	2		2		5		5
Other ⁽³⁾	2		$	—	$	2	$	—
General and administrative – related parties	$	17	$	12	$	29	$	23

For a discussion of services performed by Shell on our behalf, see Note 1 – Description of Business and Basis of Presentation – Basis of Presentation in the Notes to Consolidated Financial Statements of our 2019 Annual Report.

Employees who directly or indirectly support our operations participate in the pension, postretirement health and life insurance, and defined contribution benefit plans sponsored by Shell, which include other Shell subsidiaries. Our share of pension and postretirement health and life insurance costs for the three and six months ended June 30, 2020 were $1 million and $3 million, respectively. Our share of pension and postretirement health and life insurance costs for the three and six months ended June 30, 2019 were $2 million and $3 million, respectively. Our share of defined contribution benefit plan costs for the three and six months ended June 30, 2020 were less than $1 million and $1 million, respectively. Our share of defined contribution benefit plan costs for the three months ended June 30, 2019 was less than $1 million and for the six months ended June 30, 2019 was $1 million. Pension and defined contribution benefit plan expenses are included in either General and administrative – related parties or Operations and maintenance – related parties, depending on the nature of the employee’s role in our operations.

Certain SPLC and Shell employees supporting our operations as well as other Shell operations were historically granted awards under the Performance Share Plan, Shell’s incentive compensation program. Share-based compensation expense is included in General and administrative – related parties in the accompanying unaudited consolidated statements of income. These costs for both the three and six months ended June 30, 2020 and June 30, 2019 were not material.

For both the three and six months ended June 30, 2020, we have recorded voluntary and involuntary severance costs of $5 million. Severance expenses are included in either General and administrative – related parties or Operations and maintenance – related parties, depending on the nature of the employee’s role in our operations.

Total reimbursements received for the three and six months ended June 30, 2020 were primarily related to the directional drill project on the Zydeco pipeline system (the “directional drill project”). As the directional drill project was completed at the end of 2019, the amounts incurred by the project and associated claims for reimbursement from our Parent in the three and six months ended June 30, 2020 were not material. For the three and six months ended June 30, 2019 the amounts were $3 million and $10 million, respectively. These reimbursements are included in Other contributions from Parent in the accompanying unaudited consolidated statements of cash flows. For each of these periods, this amount reflects our proportionate share of the directional drill project costs and expenses.

In connection with the April 2020 Transaction (see Note 2—Acquisitions and Other Transactions), SOPUS and Shell Chemical transferred the Norco Assets to Triton, as a designee of the Partnership. The Partnership simultaneously leased the Norco Assets back to SOPUS and Shell Chemical pursuant to the terminaling services agreements entered into among Triton, SOPUS and Shell Chemical related to these logistic assets which included financing components and service components. The Partnership receives an annual net payment of $140 million, which is the total annual payment pursuant to the terminaling service agreements of $151 million, less $11 million, which primarily represents the allocated utility costs from SOPUS related to the Norco Assets. Both annual payments are subject to annual Consumer Price Index adjustments.

The transfer of the Norco Assets, combined with the terminaling services agreements, were accounted for as a failed sale leaseback under ASC Topic 842, Leases. As a result, the transaction was treated as a financing arrangement in which the underlying assets were not recognized in property, plant and equipment of the Partnership as control of the Norco Assets did not transfer to the Partnership, and instead, were recorded as financing receivables from SOPUS and Shell Chemical on April 1, 2020 in the amount of $302 million.

The financing receivables are presented as contra-equity in (deficit) equity because they were transferred in exchange for the Series A Preferred Units and newly issued common units, both of which are fully vested, nonforfeitable equity instruments. We recognize interest income on the financing receivables on the basis of an imputed interest rate of 11.1% related to SOPUS and 7.4% related to Shell Chemical. As of the three and six months ended June 30, 2020, the Partnership recorded $7 million interest income related to the financing receivables in the unaudited consolidated statements of income, and $1 million of reduction in the financing receivables in the unaudited balance sheet, of which $5 million of interest income and $1 million of principal repayment were received in cash payments in the second quarter of 2020.